Freshwater quality is at risk from political interference with local councillors too involved in prosecuting polluters, the Auditor-General's office says.
In an report that has upset the farming lobby, the investigation found New Zealand freshwater quality was deteriorating and action was needed to halt the trend.
Of serious concern was the frequency of elected councillors becoming involved in deciding whether to prosecute those who breached the Resource Management Act.
"In central government, enforcement decisions are made by staff rather than elected representatives, so that decisions are independent of political influence," the report said.
"In our view, councillors should not be involved in investigating breaches, or deciding whether to prosecute."
The report was based on an independent investigation into water quality in areas covered by Waikato Regional Council, Taranaki Regional Council, Horizons Regional Council and Environment Southland, all important dairy farming areas, covering about a third of New Zealand.
At all of those councils, elected members were involved in prosecutions to some level. The report recommended the system be changed.
Although water quality in New Zealand was good by international standards, it was deteriorating, the report found.
"We have reason to be concerned about freshwater quality in some parts of the country, particularly in lowland areas that are mainly used for farming," it said.
Regional and unitary authorities had to standardise methods of reporting water quality so they knew whether it was getting better or worse, why that was, and whether policies to maintain and enhance water quality were working, the report said.
Federated Farmers has questioned the value of the report. President Bruce Wills said it did not give enough credit to the enormous amount of work being put in by farmers and others to improve water quality. "I am concerned the [Auditor-General's Office] didn't look at central government policies, didn't look at Canterbury, didn't look at point-source issues, but above all, didn't look at regional council monitoring of urban water quality or stormwater.
"There's no argument from farmers that farm run-off impacts the environment and being aware of that, there's a lot being done about it.
"What frustrates me is this report doesn't give the complete picture on the effects of point-source pollution or stormwater."
Environment Minister Nick Smith agreed that was of concern, and needed addressing.
"That's why we have put in place a national policy statement for freshwater management, established the 62-strong Land and Water Forum, doubled fines for farmers who don't comply with consents, introduced regulations for metering water takes and provided a fivefold increase in funding to clean up our lakes and rivers," Dr Smith said.
The Government would move on the report's recommendations and urged regional councils to pick up on its recommendations for improvements.
DairyNZ chief executive Tim Mackle welcomed any move to standardise water quality reporting. He said it must start with a clear definition of the values that water quality was being managed for.
"We often see technical reports covering a range of physical and chemical indicators, including those presented in the auditor-general's report. Some indicators may be going up, others down and some are unchanged."
That meant building an overall water quality picture often came down to individual interpretation, he said.
The Green Party said the report highlighted the need for strong national direction to clean up fresh water, which the Government had failed to provide.
"Looking after our natural environment, including our rivers and lakes, is the best thing we can do to build a stronger economy that in turn looks after all our people," said co-leader Russel Norman.
Horizons Regional Council welcomed the report, which described the council's compliance monitoring as "robust" and "fair". It found Horizons to be maintaining and enhancing water quality in the Rangitikei and Whanganui catchments, though issues remained in Manawatu.
Which would you prefer?Related story: Natural burials the way to go
The cost of losing nature