Australia's National Local Government Newspaper Online

Environmental accounting for local government: new system begins to show the full picture

New research has shown that local government is spending far more on environmental management than has been previously acknowledged, as accounting systems are unable to measure the full extent of local government expenditure on environmental management. Masking resource allocation inhibits good management of and accountability for local environments.

To promote better environmental performance in local government, the National Office of Local Government is working closely with researchers and local governments on an environmental accounting framework for local government. This work positions Australia as a leader in the field of environmental accounting.

A conference to be held in April is the culmination of an environmental accounting project funded by the National Office of Local Government's Local Government Development Program (LGDP). The Australian Bureau of Statistics and the University of Canberra have also contributed significant resources and funding to the project.

A new accounting system based on United Nations guidelines

Much of what is now known as 'environmental accounting' comes from various professions working together over the last decade. In place of one well-defined system, there are many environmental accounting frameworks being tested, based on sets of either physical or financial measures, or combinations of both.

Based on environmental accounting guidelines set down by the United Nations, the new environmental accounting framework aims to provide local government with a more accurate measure of expenditure on environmental management than existing systems. Unlike most frameworks based primarily on physical measures, the new framework takes into account the subtle interplay between human activity&emdash;particularly economic activity&emdash;and ecological processes.

During this project, funded under the National Office of Local Government's Local Government Development Program, local government will have compiled over 200 estimates of environmental expenditures and revenues, based on the UN guidelines.

Conference to establish an international standard in April

The further development and adoption of UN guidelines to meet the specific needs of local governments will be discussed in April at a major international conference on the Gold Coast. The conference will gather representatives from the European Union, North America and the Asia-Pacific region to discuss the adoption of a code of practice, and potentially, an international standard for environmental accounting.

If adopted as an international standard, the new framework promises to significantly improve councils' capacity to accurately measure expenditure on the environment, and as a result, more effectively assess their overall progress towards sustainable development.

Local government expenditure on the environment is high

Local government expenditures on household and industrial waste, drainage systems, flood mitigation, pollution abatement and the protection of natural landscapes are all forms of environmental protection. These kinds of activities are generally the responsibility of local government and the costs of undertaking these activities are high, much higher than previously acknowledged.

When this form of spending is measured against spending on all functions, the incidence of environmental protection systems in local government is typically sixteen times greater than in industry and four times greater than in central governments.

New system estimates environmental expenditure as even higher

During a series of pilot studies, involving over sixty councils and based on the System of Integrated Environmental and Economic Accounting guidelines, data collected by the Australian Bureau of Statistics indicated that the outlay on environmental protection per head of the Australian population is around $200.

Under the present System of National Accounts (SNA), the estimate was around $50 per head. Further research with 200 councils has supported this finding and will be presented at the conference in April. The work to date is beginning to suggest that local government is spending $2-3 billion per year on environmental management, far more than previously thought.

An accurate assessment of expenditure and progress towards sustainable development

With much of the responsibility for achieving sustainable development now resting with local government, it is important that councils use environmental accounting frameworks and systems that can accurately track all forms of environmental expenditure.

The evidence from studies of over 250 councils throughout Australia suggests that a shift from the old SNA accounting system to the new framework will impact on councils' capacity to accurately measure the extent of their spending on the environment. With more accurate measures of environmental expenditure, councils will also be better positioned to measure the role of this expenditure in achieving sustainable development.

For more information about

• the development of training in environmental accounting contact Dick Osborn, Research Fellow, Centre for Research in Public Sector Management Ph 02 6201 2559 or Fax 02 6201 5237 or Email rco@management.canberra.edu.au
• publications and advice on technical aspects of the UN's System of Integrated Environmental and Economic Accounting (SEEA) contact Graeme Oakley, Director, Environment and Statistics Section Australian Bureau of Statistics Ph 02 6252 7369 or Fax 02 6252 5335 or Email graeme.oakley@abs.gov.au

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