Grasslands are types of native vegetation, which in Victoria include Natural Temperate Grasslands and Grassy Eucalypt Woodlands. They help the state’s ecosystem by storing carbon, improving water infiltration, reducing soil erosion, and providing habitat to animals. This supports land productivity.
Natural Temperate Grasslands and Grassy Eucalypt Woodlands used to be widespread across the Victorian Volcanic Plain, in the state’s south west.
The Melbourne Strategic Assessment program
The Melbourne Strategic Assessment (MSA) examined threatened ecological communities and species—including native grasslands—affected by the expansion of Melbourne’s urban growth boundary (UGB).
In June 2008 and June 2009, the Australian Government listed Natural Temperate Grasslands and Grassy Eucalypt Woodlands respectively as critically endangered under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act).
On 2 February 2010, the Australian Government endorsed the Delivering Melbourne’s Newest Sustainable Communities program report (the MSA program). This commits Victoria to streamline environmental approvals under both state and federal legislation. The MSA program manages the environmental impact of urban development in Melbourne’s growth areas.
Under the MSA program, the Victorian Government made commitments to improve conservation outcomes, including to establish a 15 000 hectare Western Grassland Reserve (WGR) and a 1 200-hectare Grassy Eucalypt Woodlands Reserve (GEWR) by 2020.
This audit focused on the grassland reserves because:
- conservation measures in these areas also help protect inhabiting species listed under the MSA program
- these are the most important measures to offset losses from urban development
- the government committed to establishing both reserves by 2020.
Why this audit is important
Two of Victoria’s most important and biodiverse ecological communities—the Natural Temperate Grasslands and Grassy Eucalypt Woodlands of the Victorian Volcanic Plain—are under serious threat. While they once covered over a third of the state, they are now small and fragmented. Their protection is vital to ensure their future existence.
Objective and scope
Our objective was to determine whether the management of native vegetation clearing is protecting state and nationally significant native vegetation in the extended UGB areas.
We examined the Department of Environment, Land, Water and Planning’s (DELWP) implementation of the MSA program, focusing on the key commitments to establish two reserves.
- progress made toward establishing the reserves
- monitoring, evaluation and reporting processes by DELWP and its predecessors to support the delivery of these commitments
- program governance and risk management practices.
DELWP has not met its commitments to deliver the WGR and GEWR by 2020.
DELWP intended these reserves to offset native vegetation loss from urban development within the extended UGB. However, delays in acquiring land, and continuing threats of degradation, pose significant risks to the ecological values of native vegetation within the reserves.
The delays in acquiring these reserves also mean they will likely require a significantly greater investment to restore and retain these ecological values than if they had been purchased within the intended 10-year timeframe.
Significant changes by government to the funding model for the WGR and GEWR, made only shortly after the 2020 commitment was made, meant DELWP have had limited ability to purchase the necessary land. Recent changes to the regulatory framework supporting the MSA program are likely to help DELWP deliver Victoria’s commitment to establish these reserves and provide it with better information about its progress in achieving its conservation outcomes.
However, current governance arrangements are not adequate to effectively oversee the MSA program’s future delivery and manage risks because they do not include all delivery partners nor separate oversight from management.
Establishing the reserves
The reserves as offsets
The Victorian Government is relying on the WGR to offset the destruction of Natural Temperate Grasslands within the UGB. The planned 15 000-hectare reserve will be the largest consolidated area of Natural Temperate Grasslands in Australia and will increase the amount in secure conservation reserves from 2 per cent to 20 per cent.
To date, land acquisition and management is keeping pace with vegetation cleared due to urban developments. However, DELWP has not provided evidence to demonstrate that the quality of land purchased in the WGR matches the quality of land cleared in the UGB.
Areas of Grassy Eucalypt Woodlands within the UGB are protected from destruction and therefore only a small amount required offsetting outside the UGB. To do this, the government committed to a 1 200-hectare GEWR in Melbourne’s north. However, DELWP did not identify parcels of land to be protected in the MSA program. It has identified an investigation area for the GEWR but has not progressed beyond this.
Importance of early acquisition
The MSA was established and conservation commitments were developed on the basis of early acquisition of land for the WGR and GEWR. However, DELWP has not met the 2020 acquisition target set by the MSA program.
A PAO signals that land is reserved for a public purpose. Land under a PAO can be compulsorily acquired.
Modelling by DELWP shows the significant ecological benefit gained from buying land early. The longer the period between the state applying a public acquisition overlay (PAO) and purchasing land, the greater the risk that affected landowners may not manage their land for invasive weeds and animals.
As at December 2019, DELWP had acquired around 10 per cent of land in the WGR, or 1 568.6 hectares. It has not yet acquired any land for the GEWR.
Condition of land in the reserves
Nutrient-enriched grassland includes areas that have not been de-rocked but have elevated nutrient levels because of grazing and fertiliser application. Higher nutrient levels can lead to non-native species—usually noxious weeds—dominating these landscapes.
DELWP designed the WGR to offset losses of Natural Temperate Grasslands in the UGB. However, the extended acquisition timelines and limited interim management activities risk the ecological value of the WGR because of degradation that may have been prevented. Early acquisition, as predicted by DELWP’s modelling in its 2009 report, may have better preserved the ecological value of the sites.
As at December 2019, DELWP has surveyed 1 268 hectares in the WGR. Approximately 1 000 hectares constitute Natural Temperate Grasslands. DELWP has assessed much of these grasslands as nutrient-enriched, and therefore low quality. However, they still contain important ecological communities requiring protection under the EPBC Act to prevent further degradation.
Condition of private land
DELWP does not have the power to enter and inspect private property without landowner consent. This means DELWP is not fully aware of the condition of private land under the PAO, since it has not conducted a condition assessment of private land or mapped native vegetation within it since 2011.
Without up-to-date, comprehensive ecological data, DELWP cannot effectively prioritise management actions or acquisition of private land in the WGR.
Grassy Eucalypt Woodlands Reserve
DELWP has a poor understanding of the ecological condition of land containing Grassy Eucalypt Woodlands earmarked for protection. It still lists the area identified for the GEWR as an ‘investigation area’.
Despite the state committing to this action under the MSA program, DELWP advised us that it has not prioritised protection of the GEWR because:
- it is not subject to a PAO
- there is no legal mechanism to enter into purchasing arrangements with landowners
- there is limited funding available to purchase and protect land across both reserves.
The government has used two funding models to generate funds to implement the MSA program. These are the:
- native vegetation credits funding model
- habitat compensation fee model.
These are both based on the ‘polluter pays’ principle, through which the party responsible for pollution pays for ecological damage.
Native vegetation credits funding model
DELWP used a native vegetation credits funding model for the first three years of implementation. This approach required upfront government funding for initial land purchases.
The 2010–11 state budget reported a total estimated investment of $190 million.
DELWP received $10 million in 2009–10 and expected to receive $20 million each year through to 2013–14. An additional $100 million was committed beyond the forward estimates. The government recognised it would require upfront funding to fund land purchases in the WGR.
In 2010, the government reduced funding. The $10 million provided in 2009–10 is, to date, the only funding DELWP has received from the Victorian Government for the MSA program.
Habitat compensation fee model
Since 2013, DELWP has used a habitat compensation fee model, based on full cost recovery, to fund the MSA program’s implementation. Cost recovery is the process of setting and collecting charges to cover the costs incurred in undertaking activities.
DELWP aims to achieve cost recovery over the life of the MSA program, to 2062. This means that the fees collected from land developers will fund all aspects of program delivery, including administration.
Under the habitat compensation fee model, DELWP collected $117 million from developers to 30 June 2019. DELWP has used this money to administer and deliver the MSA program.
However, current habitat compensation fees will not achieve full cost recovery, as they have not been indexed or raised since 2013, during which time land value has increased. DELWP has therefore not had enough funds to purchase land in the WGR.
Legal and financial risks of the habitat compensation fee model
In 2013, DELWP identified the need for legal clarity about its powers to increase fees through the habitat compensation model. Under this model, fees were established under Australian government legislation and there was a risk that DELWP was not able to independently impose or control them.
For the last seven years, DELWP has not increased fees because of these limitations. As a result, revenue generated has not kept pace with increasing land and maintenance costs. DELWP estimates the current fees only cover approximately 43 per cent of the estimated MSA program delivery costs.
To address this, in 2014 DELWP began work on creating legal certainty through a new legislative framework.
The Melbourne Strategic Assessment (Environment Protection Mitigation Levy) Act 2020
The Melbourne Strategic Assessment (Environment Protection Mitigation Levy) Act 2020 (MSA Act) will come into effect on 1 July 2020. It establishes measures to ensure that the MSA program fully recovers costs over its life.
Two indices will operate in parallel in the first five years of the MSA Act. One is a composite index of the Consumer Price Index and wages used to adjust fees annually for the life of the MSA program.
The second index will increase levies by around 20 per cent per year over the first five years of the MSA Act, to ensure that the MSA program achieves full cost recovery.
DELWP will review the cost base for the MSA Act every five years.
While the MSA Act appears to address the above revenue risks, the financial risks associated with increased land values and landowners’ willingness to sell will continue to affect program delivery.
Protecting land before and after acquisition
Managing land before acquisition
In August 2010, the government placed a PAO over land in the WGR. A PAO signals to landowners that their land is reserved for a public purpose. The longer the state takes to acquire the land under the PAO, the greater the risk that its ecological value declines.
DELWP cannot demonstrate that interim management to date, to preserve the ecological value of the WGR, has been and will be cost effective.
DELWP developed an interim management strategy in 2011 to guide management of the WGR land. The strategy assumed it would acquire all land by 2020 and was based on land conditions at the time.
Since then, DELWP has tried a range of interim management activities to preserve the ecological value of land under a PAO. For example, DELWP and Wyndham City Council are finalising a three-year funding agreement for a WGR weed control program. This includes funding for a fixed-term environment officer at the council to provide administrative support and handle engagement and education activities.
However, managing WGR land before acquiring it has been challenging. DELWP advised us that many landowners have refused property access to contractors. While DELWP consider modelling of biodiversity values, site data, council information and expert opinion to guide priorities and target weed control, DELWP can only undertake this work where landholders permit it. As a result, DELWP’s weed control has focused on properties were landowners were willing to participate.
DELWP advise that it will develop an interim management plan, to complement the 2011 strategy, by December 2020. The plan will include an analysis of works it funds under its grant program compared to what landowners should be doing to fulfil their land management obligations under the Catchment and Land Protection Act 1994 (CaLP Act).
From 2012–13 to 2018–19, DELWP spent $695 695 on activities associated with managing land before acquisition. This represents less than 1 per cent of the total MSA program expenditure to date.
Communications with landowners
In August 2010, DELWP informed landowners that it would place a PAO on their land to establish the WGR. It sent them fact sheets, a map and a landowner survey. DELWP employed a staff member to liaise with affected landowners directly, and produced and circulated progress update newsletters.
However, beyond this, DELWP’s communication approach has been reactive. It has responded to landowner’s correspondence and individual enquiries, rather than use a communications plan. Given that initial communications indicated it would acquire properties over the last 10 years and this has not occurred, and given recent legislative changes, it is now timely for DELWP to more proactively engage with stakeholders.
Managing land after acquisition
DELWP transfers the land it buys to Parks Victoria to manage in perpetuity. As at February 2020, Parks Victoria has 1 198.6 hectares of WGR land to manage, mostly comprising unconnected parcels.
Parks Victoria faces key management challenges due to the slow and piecemeal nature of land acquisition. It needs a critical land mass for cost-effective management actions. Without this, management is restricted to small, isolated blocks rather than across a large area. This has a flow-on effect for capacity and budget planning.
DELWP funds Parks Victoria’s management of land in the WGR for the first 10 years. Following this, Parks Victoria’s management costs come out of its recurrent funding.
Funding responsibility for at least one land parcel has transferred to Parks Victoria. Parks Victoria will progressively fund the remaining parcels from 2024. When DELWP transfers the full 15 000 hectares, the WGR will increase Parks Victoria’s managed estate in the western Melbourne district by 451 per cent—from 3 329 hectares to 18 329 hectares.
Management activities for grasslands cost more per hectare than for some other ecosystems, such as forests. Grasslands require annual active management for actions such as weed control and burning regimes.
Parks Victoria advised us that it is more difficult to get a recurrent funding bid for small, disconnected parcels approved, compared to large, contiguous areas, which can provide greater benefits from the expenditure.
Future park planning
Parks Victoria does not have certainty on future management of the WGR. Currently, the WGR is being managed as a nature reserve. DELWP and Parks Victoria agree that it will eventually be managed as a national park. However, Parks Victoria does not know when this will happen. Certainty about the timeframe is important, as it guides Parks Victoria’s management actions and requires planning.
The governance structure for the MSA program has changed several times. Both the Victorian and Australian governments endorsed the program in 2010. When established, the governance structure included an interdepartmental committee (IDC), project control board and a project management group. However, formal governance structures were not fully in place until 2013.
The IDC was the peak governance body for MSA program oversight and was accountable to the then Minister for Energy, Environment and Climate Change (the Minister). It comprised multi-agency representatives who provided direction for resolving cross portfolio policy and implementation issues, ensuring risks were managed and that progress was communicated to stakeholders. However, this group met only twice, in 2013.
Since 2013, DELWP used several stakeholder and internal working and advisory groups to inform planning and implementation requirements of the MSA program.
Then from 2016, as DELWP focused on addressing the legal and financial issues that were affecting program outcomes, it has managed the MSA program internally. The current governance structure has no external stakeholder involvement, such as through an IDC.
Once DELWP has established the administrative instruments under the new regulatory framework, it will need to review governance arrangements to ensure they provide sufficient oversight, stakeholder involvement and transparency to support program delivery.
The MSA program did not have a risk management framework when it began. DELWP developed a risk register in 2013. However, it did not include the assessment and treatments for identified risks.
Since 2015, DELWP has had a risk framework, including a register to record and maintain MSA program risks. DELWP regularly reviews its risks through:
- annual risk workshops
- six-monthly meetings of the Biodiversity Executive Team
- business planning meetings.
DELWP did not maintain records of potential risks or issues it considered during risk workshops. This would have provided insight into DELWP’s process to identify risks and issues and shown whether its approach met DELWP’s risk management guidelines.
Monitoring and reporting
DELWP has a Monitoring and Reporting Framework (MRF) for how the Victorian Government will assure the Australian Government that it is meeting the MSA program’s outcomes of protecting endangered ecological communities.
Although public reporting has not been a program commitment, DELWP has published three progress reports on outcomes and outputs, in 2014–15, 2015–16 and 2016–17. This improved transparency and accountability. However, DELWP is yet to publish reports for 2017–18 and 2018–19.
The MSA Act legislates the requirement to make the reporting and review of conservation outcomes public.
Monitoring program outcomes and outputs
Monitoring of MSA program outcomes is robust and backed by strong, scientific rigour. DELWP assesses key performance indicators (KPI) against a baseline, which sets the target that the relevant attribute must remain above (such as for populations of threatened species) or below (such as for weeds).
KPIs for MSA program outcomes are comprehensive and clear. KPIs logically relate to the relevant output and are clear and measurable.
DELWP uses flora and fauna inventory reports to thoroughly assess sites once it has purchased properties. These reports detail the quality and quantity of vegetation and the species present on each site.
However, DELWP has not assessed land not yet acquired. This means there is limited data to monitor KPIs. Five of the seven KPIs cannot be assessed, with the other two assessed as ‘met’.
DELWP has not developed meaningful KPIs with associated targets to support MSA program outputs. The KPIs do not give insight into how well DELWP is performing. For example, the KPI ‘number of parcels under interim management’ does not provide insights into whether the figure is good or bad.
The MRF states that DELWP will engage auditors in two phases during the first 10 years of the MSA program to:
- audit the implementation of the program
- provide reasonable assurance to the Australian Government that the program is being implemented in accordance with the program report.
The auditors were to prepare reports on the results for the Victorian and Australian governments. DELWP was to also publicly release these reports.
Independent monitoring has not occurred in line with the MSA program or the MRF. DELWP published one independent monitor report in 2014–15. This report did not address issues or give any insights into possible changes to the MSA program’s implementation or risks.
The schedule of independent monitoring also included further reviews in 2016–17 and 2017–18. These did not occur.
The MRF states that the Victorian Government will evaluate the MSA program’s implementation every five years to:
- determine the effectiveness of program activities and processes to deliver program outputs
- test assumptions made as part of the program logic
- inform a review of the habitat compensation cost-recovery model and prices
- inform any necessary adaptive improvements to the implementation of the MSA program.
The Australian Government agreed with the MRF’s commitment for the first evaluation to occur in 2015. However, DELWP has not yet evaluated the MSA program’s implementation.
We recommend that the Department of Environment, Land, Water and Planning:
1. finalises a strategy to progress the Grassy Eucalypt Woodlands Reserve that sets how land for the reserve will be acquired and the funding strategy for delivering this commitment (see Section 2.2)
2. undertakes an up-to-date condition assessment of the conservation and ecological values contained in the private land designated for the Western Grassland Reserve to inform priority land acquisitions, future interim management and ongoing management planning (see Section 2.5)
3. reviews and updates its Western Grassland Reserve interim management strategy in line with the extended acquisition timeline and in collaboration with relevant stakeholders and delivery partners (see Section 3.2)
4. evaluates the effectiveness of its interim land management agreement and shares learnings with relevant councils and/or land groups (see Section 3.2)
5. improves its landowner communications approach by finalising a communications strategy that identifies all relevant stakeholders, communication methods, timing and responsibilities for actions (see Section 3.4)
6. strengthens its governance arrangements by including delivery partners in the governance structure for the Melbourne Strategic Assessment program (see Section 4.2)
7. reviews key performance indicators for Delivering Melbourne’s Newest Sustainable Communities program outputs and outcomes to:
- improve program reporting and transparency through more meaningful performance information
- include output targets that align to outcome measures and Melbourne Strategic Assessment program objectives
- guide management actions in both reserves (see Section 4.4).
Responses to recommendations
We have consulted with DELWP and Parks Victoria and we considered their views when reaching our audit conclusions. As required by the Audit Act 1994, we gave a draft copy of this report to those agencies and asked for their submissions or comments.
We also provided a copy of the report to the Department of Treasury and Finance (DTF).
The following is a summary of those responses. We include the full responses in Appendix A.
DELWP supports all of the recommendations and provided an action plan detailing how it will address them.
Parks Victoria did not have any recommendations directed to it. However, Parks Victoria looks forward to working with DELWP to achieve conservation outcomes.