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Mistakes Australia made

Water Accounting An Australian perspective Mike Young Executive Director, The Environment Institute. Mistakes Australia made. Massive water accounting errors in allocation system Left lots of uses out of the allocation system

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Mistakes Australia made

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  1. Water AccountingAn Australian perspective Mike Young Executive Director, The Environment Institute

  2. Mistakes Australia made • Massive water accounting errors in allocation system • Left lots of uses out of the allocation system • Forgot about ground – surface and overland flow connectivity • Forgot about return flows • Political drive for water use efficiency caused massive over-allocation problems • Markets increased productivity faster than any one thought possible • But dramatically increased water use • Allocation systems must have hydrological integrity

  3. Rainfall Rainfall Stream inflows to dams Stream inflows to dams

  4. With 10% less rainfall Users Users Environment Environment River Flow River Flow

  5. Stuff farmers hate • Every use, every off-take should be metered and you should have to pay for the water you take • Only allocate water that exists • As water efficiency increases, plan for allocations to go down • Allow water to move to industry and to the environment • Plan for supply infrastructure redundancy

  6. Robust design Water accounting • The world does not have “a coherent, co-ordinated, consistent body of doctrine” Paton and Littleton • Purpose of accounts • Improved decision making • Facilitate understanding • Enable evaluation and review • Beneficiaries • Those who depend upon the performance of the described system

  7. Financial accounting insights • Aim to maximise the probability that the company will continue to operate for ever • Focus on honest disclosure • Focus on outcomes not inputs • Terminology • Exchange rates • Consolidated accounts (No double counting) • Liabilities • Disclosure • Performance ratios • Account types • Management • Reporting

  8. The Great Depression • => Misleading accounts • lead, in turn, • to unreasonable optimism; and ultimately • a crash worse than expected • Profession started to • Codify principles • Increase consistency • Reduce diversity in approaches

  9. History of Accounting • Structures used in financial accounting began in Italy in C13 & C14 • 1936 USA produced a terminology bulletin • 1959 reorganised to identify • Basic postulates • Broad principles • Rules to guide application • 1970s objectives and concepts developed • 1990s lowest common denominator international standards • 2000s outcome-focused standards set internationally • Consensus approach abandoned

  10. Key concepts • Types of accounts • Management information • Reporting to stakeholders • Reporting responsibilities • Obligation to communicate to those with • limited access to information; and • limited ability to interpret it • A single investment decision is more significant for a small investor • Timeliness • Commitment to report by a set date • Control axiom – rule off books at a date

  11. Ideas from Accounting • Doctrines – Disclosure doctrine • Principles – The Accounts must balance • Conventions – Objectivity (the truth) • Standards – Accrual v’s cost • Assumptions - • Materiality (Only record contracted activity not MOU’s, announced intentions, etc) • Ongoing concern

  12. Robust design Account Consolidation • Difficult Tasks • Elimination of inter-entity transactions • Isolation of links to other entities • Reclassification of data • Protocols • Two types standardised statements critical • Assets and liabilities (stock accounts) • Transactions (Flow accounts)

  13. Management Zone Management Zone Aquifer Regulated Surface Water Consolidated (Nested) Water Accounts General SecurityPool General SecurityPool High SecurityPool High SecurityPool Basin/Catchment

  14. Robust design International Accounting Standards Committee National Accounting Standards Board Accounting Bulletins IAS Standards National Standards Accounting Interpretations Standards Interpretation Committee Urgent Issues Group UIG Abstracts 15 Day DisallowanceFederal Parliament Sources of Authority

  15. Robust design 1 Water accounting definition A Water Accounting Protocol? 2 Reporting entity definition Scope Conceptual Framework 3 Objectives 4 Structure 5 Elements Account preparation 6 Basis of recognition 7 Basis of measurement 8 Techniques of measurement 11 Water use & Flow Account( – Inflows – outflows –extractions) Account Presentation 9 Allocation Balance (Over-allocated Solvent?) 10 Storage Account Reserves 12 Compliancereporting (NWI Protocols) 13 Applicability 14 Evaluation Principle v’s detail) 15 Research Methodology(due process) 16 Audit requirements 17 Transition policies Policy change Enforcement 18 Monitoring compliance 19 Prosecution for non-compliance Adapted from AARF

  16. www.adelaide.edu.au/environment www.myoung.net.au

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