We've had a few member enquiries regarding the valuation of volunteer firefighters annual contribution we quoted in the media last week.
The valuation represents an economists view as opposed to a pure financial accounting view and factors in variables and differences to account for the fact not all firefighters nor stations are the same.
The valuation ascribes an economic annual value to the contribution gifted to NZ communities by 11,801 volunteer firefighters as at December 2019.
The valuation process took a 2 limbed approach.
The first limb looks at the time these 11,801 volunteers spend on the job. This limb aggregates, fire station by fire station, how much time volunteers spend in training, on callouts and what those callouts are, on maintaining equipment, on administration and reporting. The ascribed value to the 1.94m hours the volunteers provide in this way at the same hourly rate as the average paid firefighter receives based upon their current CEA. This value is assessed at $87.5m.
The valuers opted for a conservative approach to their valuation. For example, the costs to employers of volunteers is not considered, or the costs of lost production, nor is the intrinsic value that volunteers contribute to the social cohesion, security and resilience of small NZ communities. The valuation does not consider the time volunteer brigades spend on risk reduction activity and community events each year.
This valuation may be compared to the report prepared by PricewaterhouseCoopers in 2009 that described the economic and social value of volunteer fire brigades in small remote communities within NZ. The paper demonstrated three key reasons why volunteer fire brigades contributed to the ongoing sustainability of small remote towns only. The economic benefit was conservatively estimated at $79 million annually.
The valuers recognised the reimbursement payment available to volunteers of $300 per annum and take this as a deduction from the value. They recognised that many volunteers would likely not avail themselves of this as it runs counter to their volunteer ethos. In total this deducts $3.5m from the value.
The second limb captures the latent potential of having 11,801 highly capable, trained and available volunteers ready to respond to the fire and emergency needs of their communities. The valuers ascribed a value to this latent potential by reference to observed premiums paid to professionals on call in other industries in New Zealand. They determined that a premium of up to 40% of the accepted hourly rate is reasonable which is then applied using the average paid firefighter hourly rate to the hours the volunteers are on call.
However, not all volunteers are equal as some are extremely busy and some considerably less so. The valuation adopts a methodology that the busier a volunteer is the more value they represent. The workload of the stations is grouped into bands based upon the number of incident response data. The busiest stations latent potential is valued at the full 40% premium falling in 5% bands until the least busy receive a premium of only 5%. Ten stations with 417 volunteers between them sit in the top most valuable groups and 278 stations in the least valuable group. This is the Activity Premium.
The report refines this limb further by also assessing whether busy fire stations also suffer from some measure of having a smaller than required volunteer complement. The assessment is that a busy fire station that has less firefighters than the average has firefighters who are even more valuable. However, accepting that there is overlap between stations this has been refined to only ascribe this premium where the next two nearest stations to a busy station are further away than the average distance between stations. 29 stations earn this extra Under Crewing Premium. In all, this limb determines that the latent potential of the volunteers is $575.8m
In summary, the actual workload undertaken by volunteers and at each level within the brigade is costed. The latent potential of the volunteer fire force has economic value due to the intrinsic value each volunteer has in terms of training / skill / team work built up over time and volunteer input and in summary, preparedness.
In total, the value of the annual contribution of the men and women of the volunteer force is $659.8m.
That's an incredible figure we should all be proud to be a part of and I congratulate each and every volunteer for their contribution.
Bill Butzbach, UFBA CEO
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