Ok, time for my two cents worth....
But first a disclaimer, I have been out of Perth for a 3 years now and I don't know what has happened to the 'Beach Patrol' that I once flew for two consecutive years.
CFI: You refer to it being a 'contract'. A contract it is not. The government made a grant. Please note the difference. It is like the money that goes from the govt to the RFDS. It is not payment for services rendered (ie for a contract) but rather a grant to support a community service provided. It seems you are looking at it from a purely commercial perspective when it is not a commercial venture.
You own/operate a flying school. Your motives are commercially driven. ECU has the ability to claim a number of things from the provision of this patrol. Education of students, exposure to a quasi-commercial operation, provision of a community service etc etc.
I know your passion for your job and your company. Thus I picture this reply angering you
But...I think we must draw a distinction between the two.