Victoria has the most native vegetation cleared proportional to land mass of any Australian state and it is failing to offset the damage caused, the state's auditor-general says.
About 10,380 habitat hectares of native vegetation is removed from Victorian private properties each year, the auditor-general estimates.
Victorian landowners are already required to avoid or minimise the amount of land they clear, but if that is not possible they should support native vegetation in other parts of their property or on a third-party offset site.
Illegal practices were partly to blame for the large amount of clearing, a report tabled to the state parliament on Wednesday said, but councils and the Department of Environment, Land, Water and Planning also had a role to play.
A 2021 parliamentary inquiry found land clearing and other factors like climate change were threatening about 2000 native animals, plants and ecological communities in Victoria.
The audit took issue with DELWP's data collection, with the department's habitat distribution models failing to account for 25 per cent of Victoria's threatened species.
DELWP also had incomplete reports on the number of council-approved permits and established offset sites across the state.
"There are also no quality assurance processes to ensure that recorded information is accurate," the auditor-general said.
The report noted councils were also not ensuring land clearing was either permitted or exempt because of a lack of staff resourcing, budget constraints, and insufficient staff knowledge.
The auditor-general made five recommendations to DELWP, saying it needed to improve its reporting on the no net-loss objective, the currency and completeness of its data sets, its monitoring of clearing across the state, its management of offset sites, and its support to councils.
DELWP has either accepted or accepted in principle all of the recommendations, but department secretary John Bradley said there were some scientific and practical limitations to the findings.
In a letter to the auditor-general, Mr Bradley said it was not feasible to have habitat distribution models for all of the state's threatened species because some species were cryptic and difficult to observe.
DELWP also denied there was any confusion around the number of offset sites recorded on the credit register, Mr Bradley said.
But the department secretary acknowledged DELWP needed to engage further with local governments and other relevant stakeholders.