Shorn of context, many direct quotations will be difficult to render into reported speech. "It's broken!" said John. What shall we suggest? "John said that something was broken"?
Some more excellent points regarding context, C. Context is important.
But, having said that, not all speech has to be transparent to all that come across it. Most speakers are aware of their listeners background knowledge and they include the necessary components within the reported speech.
"It's broken!", said John.
what you and I know about what it is isn't crucial to a report for someone who has a greater grasp of the situation.
Having heard nothing more than the above, I can faithfully report,
John said that it's broken.
John said that it was broken.
As a native speaker, my "duty" to others when it comes to reported speech is that I reflect that I am not directly quoting him. I am saying that I'm paraphrasing him and if there is further clarification needed, then it should garnered from John himself.
That is what the backshift in reported speech means to native speakers. It has nothing to do with matching tenses with a reporting verb, in this case, 'said'.
A: I'm going to go to the store.
B: [slightly out of earshot of A, to C] What did A say, C?
C: She said that she was going to go to the store.
I can choose to use either "was" or "is" in my report. But A is still standing there. There's no past action to report because no past action has taken place.
Again, the use of the past tense FORM has nothing whatsoever to do with denoting a real past action.
The only thing it signals is "I'm putting you the listener on notice that I am not offering these words as the exact words that came from the mouth of the speaker".