Transformation of the Australian Public Sector and Environmental Accounting Practices: the Case of Water in 2001

This paper analyses a case study undertaken in 2001 of a Victorian public sector water utility to examine theimplications of public sector ‘modernisation’ reforms of the 1980s and 1990s for the adoption ofenvironmental accounting (EA) procedures within the Victorian water industry. Legislative reforms haveresulted in the allocation of overhead costs for the purpose of segmented reporting and to measure the ‘fullcost’ of departments. This was consistent with the “managerialist”, “marketization” and “strategic” phases ofpublic sector ‘modernisation’ reforms, but did not measure the full economic (environmental) cost. Theapplication of full cost recovery for the purpose of efficiency was further evidence of the impact of publicsector modernisation reforms but did not extend to the recovery of externalities. Private environmental costswere traced and integrated into direct cost categories, consistent with the philosophy of managerialism. Costswere measured for the purposes of promoting the contracting out of selected services and functions. Therewas limited adoption of environmental accounting practices, due to the absence of environmental accountingmeasurement guidelines. Staff interviewed recognized the importance of environmental issues, but were yetto appreciate the benefits of adopting EA practices. Subsequent to the case study, the Victorian governmentintroduced legislation that required water authorities to make provisions for environmental contributions, astep towards accounting for environmental externalities. This was the beginning of the “sustainability” phaseof public sector ‘modernisation’ reforms.