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SOUTH AUSTRALIAN COUNTRY FIRE SERVICE

 

 

FUNCTIONAL RESPONSIBILITY AND STRUCTURE

 

Establishment and Legislative Changes

 

The Country Fire Service Board (the Board) was established pursuant to the Country Fires Act 1989 and was responsible to the Minister for Emergency Services for the administration of that Act.  On 1 October 2005 the Fire and Emergency Services Act 2005 (the FES Act) came into operation.  The Act repealed the Country Fires Act 1989 and dissolved the Board.  The Country Fire Service which was the operating entity under the repealed legislation continues in existence as the South Australian Country Fire Service (SACFS).

 

The FES Act also established the South Australian Fire and Emergency Services Commission (SAFECOM) which is responsible for the operation of the emergency services sector.  SAFECOM, in performing its functions, may give directions to the SACFS, except in matters relating to the handling of emergency situations.

 

Functions

 

The SACFS has the following functions:

 

·                     To provide services with a view to preventing the outbreak of fires, or reducing the impact of fires in the country.

·                     To provide efficient and responsive services in the country for the purpose of fighting fires, dealing with other emergencies or undertaking any rescue.

·                     To protect life, property and environmental assets from fire and other emergencies occurring in the country.

·                     To develop and maintain plans to cope with the effects of fires or emergencies in the country.

·                     To provide services or support to assist with recovery in the event of a fire or other emergency in the country.

 

Structure

 

The Chief Officer of the SACFS is responsible for the management, administration and operational activities of the SACFS and is also a Board member of SAFECOM.

 

 

 

The SACFS is a decentralised organisation supporting six regions.


SAFECOM provides various services in support of the SACFS’s primary functions, including strategic risk management, financial management and accounting services.

 

The SACFS‘s financial management is heavily reliant on information and reporting provided by SAFECOM.

 

 

AUDIT MANDATE AND COVERAGE

 

Audit Authority

 

Audit of the Financial Report

 

Subsection 31(1)(b) of the Public Finance and Audit Act 1987 and subsection 100(2) of the Fire and Emergency Services Act 2005 provide for the Auditor-General to audit the accounts of the South Australian Country Fire Service in respect of each financial year.

 

Assessment of Controls

 

Subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987 provides for the Auditor-General to assess the controls exercised by the South Australian Country Fire Service in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.

 

This assessment also considers whether those controls are consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 Financial Management Policies.

 

Scope of Audit

 

The audit program covered major financial systems and was directed primarily to obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal controls. 

 

The audit of the SACFS during 2005-06 required Audit to direct much of its focus to the audit of the ‘centralised accounting’ structure maintained by SAFECOM and to test transactions at this level.

 

During 2005-06, specific areas of audit attention included:

 

·                     expenditure, including procurement of supplies and services, accounts payable and salaries and wages

·                     plant and equipment, including the adequacy of asset register maintenance

·                     revenue, debtors, receipting and banking

·                     general ledger.

 

 

AUDIT FINDINGS AND COMMENTS

 

Audit Opinions

 

Audit of the Financial Report

 

In my opinion, the financial report presents fairly in accordance with the Treasurer’s Instructions promulgated under the provisions of the Public Finance and Audit Act 1987, applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of the South Australian Country Fire Service as at 30 June 2006, the results of its operations and its cash flows for the year then ended.

 

Assessment of Controls

 

In my opinion, the controls exercised by the South Australian Country Fire Service in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities are sufficient to provide reasonable assurance that the financial transactions of the South Australian Country Fire Service have been conducted properly and in accordance with law.

 

Audit Communications to Management

 

Matters arising during the course of the audit were detailed in a management letter to the Chief Executive Officer.  The response to the management letter was considered to be satisfactory.  Major matters raised and the related responses are considered herein.

 


Payroll

 

The audit of payroll revealed the need to actively manage excessive annual leave balances which have been accumulated by some staff.  This issue was raised last year and while some improvements had been made during the year in relation to the management of excessive leave balances there was still room for further improvement.

 

In response, SACFS informed Audit that a range of steps would be taken to address the leave management issue.

 

 

INTERPRETATION AND ANALYSIS OF FINANCIAL REPORT

 

Highlights of the Consolidated Financial Report

 

 

2006

2005

Percentage

 

$’million

$’million

Change

INCOME

 

 

 

Contributions from Government

51

51

-

Other

4

4

-

Total Income

55

55

-

EXPENSES

 

 

 

Employee benefits costs

8

6

33

Depreciation

11

10

10

Government Radio Network costs

9

9

-

Other expenses

26

27

(4)

Total Expenses

54

53

2

Net Result

1

2

(50)

 

 

 

 

Net Cash Flows from Operations

12

10

20

 

 

 

 

ASSETS

 

 

 

Current assets

8

6

33

Non-current assets

109

111

(2)

Total Assets

117

117

-

LIABILITIES

 

 

 

Current liabilities

4

3

33

Non-current liabilities

4

4

-

Total Liabilities

8

7

14

EQUITY

109

110

(1)

 

Income Statement

 

Income

 

SACFS is essentially funded from the Contributions from the Community Emergency Services Fund.  In 2006 the amounts received from the Fund remained at the same level as the previous year, $50.9 million which represents 92 percent (93 percent) of total income.

 

Over the period under review the fluctuation in other income is due mainly to the movement in assets received from local government and other sources.  In 2006 the value of assets received was $1.1 million, a decrease of $412 000, as the transfer program nears completion.  In 2006 fundraising monies totalling $492 000, held by CFS groups and brigades, were received following recognition of funds totalling $3.2 million for the first time in 2003-04.  The Contribution from the Community Emergency Services Fund over the five year period has increased by $10 million (24 percent) to $50.9 million.

 


A structural analysis of income for the five years to 2006 is presented in the following chart.

 

 

Expenses

 

During 2006, total expenses rose by $701 000 to $53.7 million compared with a $5.2 million increase the previous year.  The primary reason for the rise was an increase in supplies and services of $3.2 million  and employee benefits costs of $1.4 million, offset by a decrease in the Emergency Services Administrative Unit (ESAU) recharge of $4.3 million.  The ESAU recharge decreased as a result of changed administrative and funding arrangements following the establishment of SAFECOM.

 

The increase in supplies and services costs was due mainly to increases in uniforms and protective clothing (up $1.9 million), aerial support costs (up $554 000), and consumables and minor purchases (up $634 000) offset by a decrease in other sundry expenses of $1.1 million.

 

Over the period under review expenses have increased by $12 million or 29 percent.  Depreciation increased significantly in 2004 due mainly to the transfer of assets from local government but this has since stabilised with the majority of assets now transferred.  The other significant increase over the period related to the 2006 increase in supplies and services (included in the table under ‘Other Expenses’)  which is explained above.

 

For the five years to 2006, a structural analysis of the main expense items for the SACFS is shown in the following chart.

 

 

 


Operating Result

 

SACFS’s surplus has continued to fall over the past three years as revenue has stabilised following the impact of asset transfers and the initial recognition of amounts held by brigades and groups in the 2003 and 2004 years.  Expenses have also continued to increase, although only slightly in 2006.

 

The following chart shows the income, expenses and surpluses for the five years to 2006.

 

 

Balance Sheet

 

Current assets increased by $1.7 million over the previous year primarily as a result of an increase in cash of $1.3 million.  This increase in cash reflects the timing of capital expenditure.

 

SAFCS’s financial position is dominated by the value of the non-current asset ‘Property, plant and equipment’.  The written down current cost of these assets totalled $109 million as at 30 June 2006, a decrease of $1.7 million from the previous year which is due primarily to a valuation decrement in relation to vehicles ($4.7 million) and depreciation expense ($10.8 million) offset by asset additions ($11 million) and a revaluation increment for land and buildings ($2.5 million).

 

For the five years to 2006, a structural analysis of property, plant and equipment assets is shown in the following chart.

 


As already mentioned, the major reason for the growth has been the transfer of responsibilities from local government entities to the SACFS for appliance, fire station, fire fighting and rescue equipment maintenance and the resultant transfer of related assets.  The value of those transfers since 2002 is $30.2 million.  The transfer process is now substantially complete.

 

Cash Flow Statement

 

The following table summarises the net cash flows for the five years to 2006.

 

 

2006

2005

2004

2003

2002

 

$’million

$’million

$’million

$’million

$’million

Net Cash Flows

 

 

 

 

 

 

 

 

 

 

 

Operations

12

10

14

9

8

Investing

(10)

(12)

(10)

(8)

(7)

Change in Cash

2

(2)

4

1

1

Cash at 30 June

7

5

7

3

2

 

 

The analysis of cash flows shows that in most years SACFS’s operating cash flows have been sufficient to fund its investing activities.  The level of cash held has, however, been relatively small and is dependent on the funding provided by the Community Emergency Services Fund as SACFS has little capacity to generate funds from other sources.  The balance of cash at 30 June 2006 increased due the timing of payments for investing activities.  As can be seen from Note 22 to the financial statement, SACFS has capital commitments of $6.6 million which are expected to be paid within the next year.

 

Cash flows from operations increased by $5 million in 2004 and then decreased by $4 million in 2005 due mainly to the inclusion in 2004 of cash held by CFS groups and brigades for the first time.

 

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