Executive summary

	The focus of our audit
	The Department of Primary Industries (DPI) aims to foster profitable and sustainable development of primary industries. One significant way it works to achieve this is through assisting agricultural industries to use water more efficiently and productively. While DPI offers advice and support to farmers on how to grow crops, it is not its role to tell them what they must grow.
	Similarly, in conducting this audit it is not our role to decide whether or not certain crops should be grown.
	The audit examines the effectiveness of DPI in assisting farmers to adopt on-farm improvements in irrigation water use.
	This report answers the following questions: § does the Department of Primary Industries have effective approaches for improving the efficiency of water use on irrigation farms? § have the expected outcomes of the Department’s initiatives for improving agricultural water use efficiency been achieved?
	Introduction
	Over 70 per cent of water extracted in NSW is used in irrigated agriculture. While accounting for less than one per cent of total agricultural area, irrigation contributes more than half of the profit earned by agriculture in NSW.
	The 2006 NSW State Plan has a goal for improving the efficiency of water use. Underlying documents include objectives for DPI on adoption of water-efficient technologies. The State Plan also has a goal for stronger rural and regional economies, with DPI responsible for expanding its training programs, including those for water efficiency improvement in rural and regional areas.
	DPI is also responsible for leading the development of a regional innovation plan which relates to the NSW Government’s Statement on Innovation. This plan will have a strong emphasis on improving productivity and is expected to encompass future water use efficiency initiatives.
	Australian governments have agreed that action is required to more efficiently allocate water among competing uses. The recently-announced National Plan for Water Security will place further demands on the irrigated farm sector to adjust water management practices. Through its research and development (R&D) activities and its programs to build the skills and capacity of farmers, DPI has employed a twofold strategy to achieve this: development of science-based practices to improve efficiency of water use, and initiatives to assist irrigators to adopt them.
Science-based solutions	DPI works extensively with agricultural industries and research organisations to develop improved management methods and irrigation technologies. Its R&D initiatives include techniques for identifying ‘leaky’ soils, breeding of cold tolerant rice varieties to reduce water requirements, and innovations which have improved water use efficiency in grapegrowing by 50 per cent. DPI attracts nearly half of its research funding from its external partners.
Key initiatives to ensure change	Central to DPI’s strategy for the adoption of these improved water use practices and technologies was the WaterWise on the Farm education and training program. WaterWise provided grower awareness, education and training, advice and support for farmers to change the way they manage water on-farm. This included planning assistance to move from older methods such as flood and furrow irrigation to potentially more efficient methods such as drip irrigation. It also included techniques for minimising water losses and for scheduling of irrigation to deliver water in the ‘right amount, right place and right time’.
	The NSW Government provided $7 million between 1996 and 2005 for DPI’s WaterWise program to educate and train irrigators in efficiency improvements. Between 1998 and 2005 WaterWise was also supported by $25 million in incentive funding to encourage irrigators to participate in the program and adopt improvements.
	Around 5,000 of the state’s 12,000 irrigators attended WaterWise courses. DPI evaluations show a high rate of adoption of improvements by farmers, and numerous case studies show improvements in water use efficiency across cotton, rice, wine grapes and vegetables.
	WaterWise funding ceased in June 2005. Although DPI still delivers the WaterWise course under its PROfarm training initiative, the number of staff engaged in WaterWise and similar programs has reduced. Farmers also believe that DPI has lost many staff in recent years.
	Audit opinion
	DPI has a crucial role in assisting the irrigation industry to respond to the conflicting demands placed upon the state’s water resources.
	The State Plan emphasises the importance of water to agriculture, and gives DPI responsibility to use its training programs to help farmers continue to increase water use efficiency.
	However the National Plan for Water Security and the National Water Initiative (NWI) require that water be provided for the environment. This has increased the need for DPI to assist farmers to adjust to reduced availability of water.
	Water use efficiency investments produce a mix of benefits for growers and benefits for the public and the community. DPI’s strategy of working with agriculture industry bodies therefore has the potential to facilitate more efficient investment in R&D by providing a framework for industry and government to fund projects in accordance with the industry and public benefits they generate.
	Representatives from DPI’s partner research organisations praised the constructive relationships which they share.
	While DPI has developed project funding principles to assist in determining the appropriate mix of industry and government funding, it is appropriate that these continue to be improved. This should involve DPI working closely with key stakeholders, such as NSW Treasury, to make its approach increasingly transparent and to ensure opportunities for innovative approaches to water use efficiency continue to be developed.
	DPI’s WaterWise on the Farm education and training program was effective in increasing awareness of water use efficiency practices and technologies, in educating and training irrigators in farm water resources planning and management, and in encouraging them to change practices.
	DPI needs to work closely with agencies with which it shares responsibilities in the State Plan to ensure that its water use efficiency activities contribute to the State Plan goals. It needs to work closely with Treasury to document the services it will require to do this, the resources which will be needed, and how its success will be measured.
	This will ensure that DPI is well placed to continue to assist the NSW farming industry to adapt and survive periods of reduced water availability. It will keep as many farmers as possible in business and so preserve rural and regional communities which depend heavily on agriculture.
	Key audit findings
Does the Department of Primary Industries have effective approaches for improving the efficiency of use of water in irrigation on-farm?	DPI has developed a number of effective approaches to improve efficiency of water use in irrigation.
	DPI has sufficient information on the main uses of water to identify priorities. It has developed close partnerships with industry research organisations and community bodies to identify opportunities for improving water use practices and technologies. It has attracted investment by agriculture bodies in R&D projects helping irrigators to adapt to reduced availability of water.
	Programs such as WaterWise on the Farm were effective in increasing grower awareness of water use efficiency options and technologies and in educating and training irrigators in farm water resources planning and management.
	But DPI has been unable to fully maintain programs such as WaterWise as Government funding has ceased.
Have the expected outcomes of the Department’s initiatives for improving efficiency of agricultural water use been achieved?	DPI has contributed significantly to developing improved irrigation practices and having them widely adopted. But there is still more that can be done.
	WaterWise delivered benefits of around $88 million on an investment of $20 million by accelerating adoption of improved irrigation practices and technologies. It also delivered direct public benefits in the order of $160 to $240 million through water savings to the environment. Other benefits were reduced stream and ground water salinity and increased community capacity to respond to future challenges.
	DPI is responsible under the State Plan for expanding training and for reporting on the adoption of on-farm technologies that improve water use efficiency.
	DPI’s achievements have depended on its R&D partnerships and on programs such as WaterWise to encourage and facilitate the adoption of improvements. To ensure that DPI’s research, education and training activities maximise benefits to the community its criteria and processes for selecting R&D projects need to be made increasingly transparent to both stakeholders and clients.
	DPI also needs to improve inter-agency planning with NSW Treasury to enable the efficient implementation of such programs in future.
	Recommendations
	DPI should work closely with agencies with which it shares responsibilities to ensure that its water use efficiency activities contribute to the State Plan goals (page 34).
	DPI and its key stakeholders should maintain their close relationships to ensure that they identify opportunities for new technologies and practices with the highest potential benefit (page 34).
	DPI should further develop the transparency of its R&D selection principles to demonstrate that projects and activities are funded in accordance with the mix of industry and public benefits they will generate (page 34).
	DPI should negotiate with NSW Treasury the resources it will require to meet its commitments to the State Plan, the future demands of the Commonwealth (including the NWI) and the effects of climate change. In doing so it should review best practice models in other jurisdictions for assisting and encouraging growers to adopt improvements (page 34).

	Response from the Department of Primary Industries
	I am writing in response to your invitation of 23 October 2007 for me to provide a formal response to your final report which will be incorporated verbatim into the published report.
	I would like to accept your invitation and therefore provide the attached response for inclusion in your final report.
	I would like to take this opportunity to thank you and your staff for the constructive manner in which this performance audit was undertaken and the helpful recommendations that have resulted. (signed) B D BUFFIER DIRECTOR-GENERAL Date: 2 November 2007
ATTACHMENT	Thank you for providing the Department of Primary Industries (DPI) with the opportunity to comment on the findings and recommendations of the performance audit report Improving efficiency of irrigation water use on farms.
	The report confirms the importance of DPI’s role in working with irrigated industries in NSW to cope with dramatically reduced water supplies. Irrigated agriculture underpins many of our rural communities, injecting many millions of dollars into regional economies and providing crucial employment opportunities. DPI’s role in working with industry to enhance its water use efficiency therefore provides far reaching social benefits to the broader NSW community.
	There is a tendency to negatively portray agriculture as a major low value user of the state’s water resources. The more appropriate representation of the situation is that cities, towns and the environment are generally given priority access to water, with much of the residual amounts flowing to agriculture as it provides the next most profitable use of the resource.
	This perspective highlights the importance of irrigated agriculture as the industry most capable of generating substantial direct and indirect benefits from the state’s remaining water resources. Indeed the ability to trade water means that it will be allocated to its best use.
	The report identifies that an important part of DPI’s core business is to work with rural industries and other stakeholders in NSW to develop and increase the adoption of land use systems and practices that are both profitable and environmentally sustainable. The report also confirms that DPI’s strategy of doing this through (i) its R&D partnerships to develop technologies and practices to improve water use efficiency, and (ii) through its education and training activities which encourage and assist irrigators to adopt them, have not only been effective, but will be fundamentally important in addressing the state’s future water use challenges.
	The key audit findings are that DPI has developed effective approaches to improve the efficiency of water use in irrigation and that DPI has contributed significantly to developing improved irrigation practices and having them widely adopted. Nevertheless, the Audit Office has made a number of helpful suggestions as to how DPI can further enhance its role in these areas. I welcome those suggestions and take the opportunity to thank the AO team for the constructive and helpful manner in which they undertook this important performance audit. I would also like to thank those DPI staff who assisted with the audit.
	Key recommendations
	The report’s recommendations will enhance DPI’s future capacity to help irrigators respond to drought and reduced water availability. I have made specific comments on the three key recommendations.
Recommendation 1	DPI should work closely with agencies with which it shares responsibilities to ensure that its water use efficiency activities contribute to the State Plan goals.
DPI comment	In the State Plan, DPI shares responsibility with the Department of Water and Energy for reporting on water use efficiency training programs and on the adoption of on-farm technologies to improve water use efficiency. With the Department of Education and Training it shares responsibility for expanding the provision of relevant training in rural and regional areas.
	These shared responsibilities will be reflected in future versions of DPI’s Corporate Plan and its Results and Services Plan.
Recommendation 2	DPI and its key stakeholders should maintain their close relationships to ensure that they identify opportunities for new technologies and practices with the highest potential benefit.
	DPI should further develop the transparency of its R&D selection principles to demonstrate that projects and activities are funded in accordance with the mix of industry and public benefits they will generate.
DPI comment	The Audit Office’s findings and recommendations provide strong support for DPI continuing to work in partnership with key stakeholders, such as industry based R&D corporations, to ensure that the full range of research opportunities to increase water use efficiency are fully explored and to ensure industry and public funds are used in a manner that maximises the development of new technologies and practices. The Catchment Management Authorities are also key partners in this process, given the significant Catchment level natural resource management benefits of these activities.
	DPI has been successful in developing jointly funded projects with a mix of ‘public’ and ‘industry’ benefit outcomes, and consequently, the Department’s research division attracts significant partnership funding from industry. DPI will commit to maintaining this partnership approach and to further developing our investment guidelines to ensure projects are funded in accordance with the industry and public benefits they generate.
Recommendation 3	DPI should negotiate with NSW Treasury the resources it will require to meet its commitments to the State Plan, the future demands of the Commonwealth (including the NWI) and the effects of climate change. In doing so it should review best practice models in other jurisdictions for assisting and encouraging growers to adopt improvements.
DPI comment	DPI’s Results and Services Plan is the main vehicle by which this will be achieved and DPI has been, and will continue to, liaise closely with Treasury in demonstrating the benefits of its activities. The review of best practice models in other jurisdictions for assisting and encouraging growers to adopt improvements will be undertaken by DPI in 2008.