Documente Academic
Documente Profesional
Documente Cultură
ULL
April 2004
This project is implemented by Development Alternatives, Inc. with the support of its subcontractors: Orient Integrated Development Consultants, Inc. n Resources, Environment and Economics Center for Studies, Inc. n Winrock International n Abt Associates, Inc. n Management Systems International n Michigan State University n
Produced by the Department of Environment and Natural Resources-United States Agency for International Developments (DENR-USAID) Philippine Environmental Governance (EcoGov) Project through the assistance of the USAID under USAID PCE-1-00-99-00002-00. The views expressed and opinions contained in this publication are those of the authors and are not intended as statements of policy of USAID or the authors parent organization.
TABLE OF CONTENTS
List of Boxes...................................................................................................................... ii List of Tables ..................................................................................................................... ii List of Figures................................................................................................................... iii Acronyms .......................................................................................................................... v Foreword ......................................................................................................................... vii Introduction .......................................................................................................................1 1. Full Cost Accounting Definition, Benefits, Key Principles.........................................3
What is FCA?...................................................................................................................... 3 What are the benefits of FCA? Who benefits? ................................................................... 3 What are the underlying principles of FCA? ....................................................................... 4
LIST OF BOXES
Box 1. Accounting for Costs Rather than Cash Outlays ............................................................... 4 Box 2: Examples of Hidden Costs to be Included in SWM Costs ................................................. 4 Box 3. SWM Program Overhead Costs ......................................................................................... 4 Box 4. Examples of Shared Overhead Costs ............................................................................... 5 Box 5. Solid Waste Management Pathways ............................................................................... 12 Box 6. Four Stages in Solid Waste Management ....................................................................... 13 Box 7. Four Technical Components of An ISWM Plan ............................................................... 13 Box 8. Example of a Traditional Solid Waste Flow from Generators to Disposal Facility (Municipality of Jagna, Bohol) .......................................................................................... 14 Box 9. Methods Useful for Valuing Externalities Brought About by Solid Waste Management .................................................................................................................... 28 Box 10. Summary of Valuation Methods Applicable to Solid Waste Management ...................... 29
LIST OF TABLES
Table 1. Table 2. Table 3. Table 4. Table 5. Table 6. Table 7. Table 8. Table 9, Checklist of Upfront Costs ............................................................................................. 6 Checklist of Operating and Maintenance Costs ............................................................ 7 Checklist of Back-End Costs ......................................................................................... 8 Various Types of Environmental Externalities Categorized by SWM Activities ............ 9 Examples of Social External Costs Categorized by SWM Activity ................................ 9 Examples of Health-Related Externalities Categorized by SWM Activity ................... 10 Example of an SWM program history of an LGU ........................................................ 11 Sample Inventory of Assets within a Local Government Unit ..................................... 15 Examples of Externalities at Each Stage of Solid Waste Management ...................... 26
Table 10. Columns c and d appended from previous box provides examples of identified stakeholder affected .................................................................................................... 27 Table 11. Sample Matrix to Evaluating SWM Externalities ......................................................... 31 Table 12. Sample Inventory of Equipment/Assets and Their Useful Life for the SWM Program ....................................................................................................................... 33 Table 13. Sample Annual Depreciation Cost of Equipment/Assets of the Municipal Environment and Natural Resources Office - SWM Program ..................................... 33 Table 14. Salary Computation and Benefits of Solid Waste Collection and Disposal Services Personnel in 2001 for the Municipal Environment and Natural Resources Office ......................................................................................................... 34 Table 15. Shared Overhead Costs and Proposed Allocation Factors of the Municipal Environment and Natural Resources Office SWM Program ....................................... 35 Table 16. Annual Operating and Maintenance Costs of the Municipal Environment and Natural Resources Office - SWM Program ................................................................. 35
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Table 17. Sample format for Estimating Annual Amortization Costs for Back-End Costs. ......... 36 Table 18. Consolidated Annualized Upfront Costs for the SWM program Years, Covering Expenditures of Years prior to program implementation ............................................. 37 Table 19. Annual Operation and Maintenance Costs for the SWM Program Years ................... 37 Table 20. Annual Amortization for the SWM Program Years of the SWM Back-End Costs ....... 38 Table 21. Annualized Probabilistic Estimates of Contingent Costs for the SWM Program Years ........................................................................................................................... 38 Table 22. Annualized Estimates of Potential Externalities for Implementation of the SWM Program ....................................................................................................................... 39 Table 23. Summary of annualized SWM costs for the plan period. ............................................ 40
LIST OF FIGURES
Figure 1. Figure 2. Solid waste pathways .................................................................................................. 12 An example of an LGU structure for SWM is shown below......................................... 16
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ACRONYMS
COI CV DENR ECC EcoGov ESWM FCA ISWM LGU MENRO MRF NGO SWM TCA USAID Cost of Illness Contingent Valuation Department of Environment and Natural Resources Environmental Compliance Certificate Philippine Environmental Governance Project Ecological Solid Waste Management Act Full Cost Accounting Integrated Solid Waste Management Local Government Unit Municipal Environment and Natural Resources Office Materials Recovery Facilities Non-governmental Organization Solid Waste Management Total Cost Accounting United States Agency for International Development
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FOREWORD
This Full Cost Accounting (FCA) Guidebook is part of a series of guides and sourcebooks developed by the Philippine Environmental Governance (EcoGov) Project to enhance the knowledge and capability of local government units (LGUs), especially those at the municipal and city level, in planning and implementing Solid Waste Management (SWM) initiatives. Mandated by law (RA 9003 or the Ecological Solid waste Management Act) to prepare and carry out 10-year SWM plans, LGUs need to know the costs involved in performing the task. How much is needed to implement a 10-year SWM plan? What are the costs that have to be included? How can an LGU finance the SWM activities? How much fees should be charged to recover investments? This FCA Guidebook shall help answer these questions. FCA goes beyond the conventional accounting procedures which cover only the direct costs or cash outflows that project or plan implementation entails. FCA takes into account all the costs involved in SWM work, including hidden costs (such as the LGU-owned land to be used as disposal site or garbage collection vehicle donated by a foreign organization) as well as the peso value of the potential environmental impact that may be caused by a disposal site or any SWM strategy or activity that is under consideration. Knowing all these costs will certainly help the LGUs make informed decisions. Through this Guidebook, LGUs are expected to learn how to increase the cost-effectiveness of their SWM programs, obtain data required to develop cost-recovery programs, improve their capacity in transacting with the private sector, increase their awareness on the negative impacts of SWM practices, and ensure that the principle of transparency is applied in all SWM transactions. While intended for LGU readers, this Guidebook, which is yet to be fully tested, will also be useful to the Department of Environment and Natural Resources personnel and other SWM practitioners.
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INTRODUCTION
The environment is traditionally used as waste sink for byproducts of human consumption and production activities yet little effort or resources are spent to minimize the damage caused. Waste disposal is treated as free (rarely priced or valued) input in production or consumption (activities). Local government investments to repair or mitigate further damage are miniscule relative to the damage caused. Thus, the ability of the environment to repair itself in order to support human life is gradually reduced, potentially threatening human welfare. The proposed solution to this threatening trend is to internalize the cost of environmental damage to production and consumption activities in order to reduce disposal into the environment. Two substantive policy instruments by which this can be internalized are command-and-control and the economic approaches. Given the urgency of waste management problem in urban centers in the country the command-and-control is the most favored method. In the Philippines, Republic Act No. 9003 or the Ecological Solid Waste Management Act of 2000 (ESWM), the regulatory or command and control instrument, calls for a systematic and comprehensive and ecological solid waste management program by Local Government Units (LGUs), that implicitly aims to internalize cost of environmental damage of waste disposal. The Act requires LGUs to (a) formulate a 10-year integrated SWM plan, (b) reduce their waste stream by at least 25% by year 2005 through recycling and other materials recovery options, and (c) shift from open dumpsites to controlled dumpsites by year 2005 and to sanitary landfills by year 2007, and (d) impose fees to implement the solid waste management plan. Given these mandates, LGUs are obliged to allocate more resources to SWM. The scope of waste management goes beyond the usual garbage collection and disposal activities. Given this mandate, the four most basic questions faced by LGU managers and planners as they prepare an integrated SWM plans are: 1. 2. 3. 4. How much will it cost to undertake the whole set of activities in the plan? What costs will be included in solid waste management? How to finance the implementation of the plan? Who should bear the cost of solid waste management?
To answer all four questions, LGUs will need a tool that will account for all costs involved, both to the implementers (i.e., LGU) and the public-at-large, and to make the necessary cost analysis for use in decision-making. Local analysts have a choice of employing conventional accounting, total cost accounting (TCA) or full cost accounting (FCA) methods. Conventional accounting includes only costs covered by the market and does not account for hidden cost as well as externalities. TCA, a financial tool used to provide a more complete assessment of the true profitability of business investments and operations, do not cover externalities. FCA, similar in some respects to conventional and TCA, accounts for hidden costs, externalities, past and future outlays and to some extent opportunity costs. The FCA that is being introduced in the Philippines through the USAID-DENR EcoGovernance Project was first developed and adopted in the US, Canada and Europe. FCA is recommended as one stage in the ISWM planning process, especially in the evaluating SWM options. As a calculating and accounting tool, FCA will allow LGUs to view their SWM-related investments in its entirety and over a longer termfrom the start of the program to closure of SWM facilities and even to their post-closure care. It will give them an
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Prepared by Gem Castillo, Rebecca Paz, Theresa Espino with contributions from Eugene Bennagen and Victor Luis. The City ENRO of Tacurong City provided the data and examples used in this guidebook.
appreciation of the full costs involved, that includes not only the cash outflows but also the externalities and negative impacts that an LGU has to contend with now and in the future. FCA will provide a basis for decision-making on resource allocationdeciding on how much to invest, making choices among various options, deciding on who should bear the cost, and how costs can be recovered. It is deemed important in promoting good governance in the SWM sector as it provides information support to the decision-making process. Making informed decisions is a key element of good environmental governance. The approach in this guidebook focuses on full cost accounting at the city or municipal level. This FCA Guidebook is designed to aid local managers improve their cost assessment capabilities. FCA is being introduced as part of Integrated Solid Waste Management (ISWM) planning process, particularly in the evaluation of options that will serve as inputs to the formulation of 10 year ISWM plan. Although it is designed mainly for LGUs (thus the LGU perspective), it is useful as well for the Department of Environment and Natural Resources (DENR) and other ISWM practitioners in promoting cost-effective planning and management of solid waste by LGUs. The approach and methods were patterned mainly from existing US and Canada guidelines, but these were adapted to local conditions to make it user-friendly and tractable by those who do not have accounting backgrounds. This was developed after a considerable analysis of the experiences of selected LGUs in SWM implementation to determine applicability of approach. This Guidebook deals only with the how-tos in FCA. It does not cover the whole gamut of preparing a SWM plan. It is assumed that the user has familiarity with the provisions of RA 9003 and has a good grasp of the basic concepts and processes related to SWM. The Guidebook is divided into six parts. Part 1 explains the definition, basic concepts and major uses to LGUs and SW managers. Part 2 lists and describes the scope of FCA particularly its cost components. It enumerates and defines direct, external and other related costs of SWM. Part 3 gives readers a background on FCA data sources. It shows how the data inputs to FCA computations are generated or gathered. Part 4 explains the basic computation procedures in FCA and demonstrates the step-by-step calculation of weight or factors necessary in accounting for the full-cost of an SWM program. Part 5 introduces the concept of externalities, other costs, and the intricacies in establishing their costs, in quantitative terms. Finally, Part 6 outlines the whole process of FCA with illustrations and examples.
Fifth, FCA promotes transparency. Since FCA makes possible the computation of the various SWM costs, the LGUs should be able to present to various groups the full costs that will be incurred to implement its SWM program. Providing the public access to such information is an effective way to get their cooperation and support.
Box 3. SWM Program Overhead Costs. Management Executive oversight Advisory committees and coordinating bodies Clerical support Data management Human resources and Legal Maintenance Payroll and accounting Personnel and Records Management Purchasing Training expenses
costs. For its FCA, the LGU will have to use allocation factors to determine the share of SWM from these various costs. Suggested methods are discussed in Section 4. The salaries and wages of the personnel assigned directly to and working full-time with the SWM program however, can be easily separated from the total personnel cost of the LGU. Account for past and future costs. FCA covers the whole SWM program, from start-up Box 4: Examples of Shared Overhead Costs to current operations to the closure and postclosure care of SWM facilities. It includes the An LGU created a Municipal Environment cost of preparing the ISWM plan and and Natural Resources Office (MENRO) to investments to initiate the SWM program. For take charge of the environmental programs example, the cost of planning includes: (a) of the municipality. The oversight of the SWM organization and training of the LGU Technical program is exercised by the MENRO who is Working Group and ESWM Board, (b) also responsible for other environmental assessment of SWM practices and wastes sectors such as the devolved integrated generated by various waste generators in the social forestry and fishery management. LGU, and (c) initial information/educational Support services to the SWM are provided by campaigns. Initial investments would include the Finance and the Administrative Offices of land acquisition and site development; the LGU. acquisition of garbage trucks, equipment and SWM vehicles and the SWM office are being tools; and construction of SWM centers. Future maintained by the Municipal Engineering costs that will be incurred will be the cost of Office and General Services Office, closure and post-closure care of disposal respectively. facilities. Start-up costs are called upfront costs while the closure costs are referred to as back-end costs. For purposes of the FCA, upfront costs will be depreciated while back-end costs are amortized to get the annual costs of the program. Account for external costs. FCA considers as part of costs the negative impacts caused by SWM practices and technologies on the environment and society. These environmental impacts may include disturbance of groundwater and surface water regime, loss or disturbance of wildlife habitat, loss of significant flora and fauna, and degradation of agricultural lands. Examples of impacts on society, specifically on human health and private property, are surface and groundwater contamination, air quality degradation, noise and odor impacts, depressed property values, relocation or resettlement, and congestion. These adverse impacts are called negative externalities. The direct cost of implementing the SWM program plus the negative externalities provide a complete account of the SWM cost to society. The measurement or assessment of externalities will give the LGU an idea as to which sector(s) in society will bear the added costs of SWM besides direct costs.
Facility pre-development Site investigations Public hearings and consultation Feasibility and pre-feasibility studies Survey and pre-design studies Land acquisition (for use as disposal facility, other SWM facilities) Land titles transfers and fees Permits, Environmental Compliance Certificate (ECC) Legal services Administrative services
Owned vehicles and equipment Collection vehicles (e.g. dump trucks, mobile compactors) General purpose vehicles Bulldozers, backhoes, front-end loaders, scrapers, other heavy equipment Furnishings and office equipment Field equipment and tools, scales Stationary waste compactors and other compaction equipment Solid waste containers (e.g., waste bins, drop-off containers for recyclables) Recycling equipment such as magnetic separators and air classifiers
Operating and Maintenance Costs. Operating and maintenance costs are for the day-to-day conduct of SWM operations. These costs are either fixed or variable. Fixed operating costs (or overhead costs) are those costs incurred independent of the volume of solid waste managed. Examples of such costs are salaries and benefits of regular government personnel who provide support to the SWM program, building maintenance, and some basic utilities. Variable costs depend on the volume of wastes collected and disposed. Examples are leased trucks and dailywage laborers/garbage collectors.
Table 2.
Checklist of Operating and Maintenance Costs Purchase of non-capital goods Office supplies, uniforms, hand tools, other small items Computer software and small parts Fertilizer and other landscaping supplies Reference materials and periodicals Disposable field equipment Cover and fill materials Clay, sand, gravel and top soil Geotextiles and geomembranes Public participation programs Public advisory committees Advertising and communications Public education programs Public notices, public meetings/hearings Response to community concerns Regulatory compliance costs Sampling and analysis of groundwater Licenses and permits, fines and penalties Leachate collection, treatment and disposal Surface water collection, treatment and disposal Bird and animal control Implementation of FCA program Contracted services Consultants fees Services performed under contract Solicitation, evaluation and award of contract bids Other operational and administrative costs Insurance premiums and interests Travel, shipping and freight Training and conferences Printing and publications Legal defense and site security
Annual wages and salaries and benefits Wages and salaries for full time and part time employees Medical and healthcare insurance Life insurance, workers compensation/disability insurance Bonuses and service awards Paid holidays, vacation and sick leave Other legal benefits Vehicle and equipment operating expenses Parts and Supplies Fuel, oil and tires, fluids and lubricants Labor for maintenance and repair (if not included in wages and salaries) Maintenance expenses for buildings, grounds and office equipment Cleaning, upkeep and minor repairs of buildings, and painting Road maintenance/repairs Maintenance of utilities (light, water) Landscaping Regular maintenance and minor repair of office equipment Payments for rents and leases (excluding capital leases) Rented or leased vehicles Rented or leased equipment Rented or leased office space Rented or leased furniture or office equipment Rented or leased buildings or structures Payments for utilities Electricity and Water Telephone and other communications
Back-end Costs. Back-end costs are expenses associated with the closure of SWM facilities at the end of their useful lives. They include post-closure activities to ensure proper care and use of closed SWM facilities.
Table 3.
Checklist of Back-End Costs Long-term care Site security Removal of leachate Maintenance of vegetative cover Maintenance of integrity of final cover Operation of leachate collection and removal systems Maintenance and monitoring of leak detection system Maintenance and monitoring of groundwater monitoring system Prevention of erosion or damage to the final cover from run on/run off Protection and maintenance of surveyed benchmarks Certification of post-closure care Post-employment benefits Monetized leave credits Separation pay Other benefits (pensions, health care)
Closure Costs Demolition and reclamation Clay liner Geomembrane Drainage layer Top soil Vegetative cover Survey plat (maps) Deed notation Landscaping Disconnection and abandonment of utilities Installation of monitoring wells Installation of leachate management facilities Gas recovery systems Inspection and certification of closure Closure or decommissioning of buildings, equipment and SWM facilities other than landfills
Table 4.
Various Types of Environmental Externalities Categorized by SWM Activities Environmental Impacts Increased quantity of waste disposal increases waste disposal size requirements thereby reducing area of natural habitat Traffic congestion Air quality degradation, e.g., odors Litter along the collection route Air quality degradation, e.g. odors and dust Visual impacts Noise of delivery trucks and equipment in facility Loss of wildlife habitat Disturbance of wildlife Loss of ecologically significant flora and fauna Loss of use of agricultural lands Disturbance of surface water regime (including pollution/contamination) Disturbance of groundwater regime(including pollution/contamination) Disturbance of socio-cultural significant areas Visual impacts Noise from collection trucks and equipment in facility Air quality degradation, e.g., odors, dust
Material Recovery
Disposal
Social Impacts. Social impacts are determined from the point of view of the individual, the immediate community and the larger public. The assessment of social impacts must consider the number of people affected. (Alberta Canadian EPA, 1995). Table 5. Examples of Social External Costs Categorized by SWM Activity Social Impacts Disruption of lifestyle Disruption of lifestyle and schedules Reduced public safety along collection route Reduced source of livelihood (if scavenging by collection crew is not allowed) Expropriation of property Decreased enjoyment of property Reduced public safety along route to facility Air quality degradation, e.g., odors and dust Visual impacts Noise of delivery trucks and equipment in facility Reduced source of livelihood of itinerant scrap buyers and junkshops) Legal and other transaction costs Expropriation of property Relocation of homes or Decrease of property values Decreased enjoyment of property Land use changes Noise and visual quality reduction Psychological impact of reduced air quality e.g., odor, dust Social stigma of living near dumpsite Displacement of scavengers/loss of livelihood (if scavenging is stopped)
ISWM Stage Segregation and Reduction at Source Collection and Transport Material Recovery
Disposal
Health Impacts. Health impacts include both the effects of particular SWM practices/activities on humans and animals within the influence area of a waste management facility. (Alberta Canadian EPA, 1995). The health impacts should take into account individual and cumulative effects. Table 6. Examples of Health-Related Externalities Categorized by SWM Activity Health Effects Infections from eating waste-fed animals Infections from contact with special/toxic and hazardous waste Back and joint injuries from lifting heavy waste-filled containers and driving collection trucks Respiratory diseases from ingesting particulates, bioaerosols and volatile organics Skin problems (itchiness and skin rashes) Infections from direct contact with contaminated material, from dog and rodent bites Puncture wounds causing tetanus, hepatitis and HIV infection Skin problems (itchiness and skin rashes) Respiratory diseases Infections from direct contact with contaminated materials Injuries from operating heavy equipment Headaches and nausea Back and joint injuries from driving heavy landfill and loading equipment Infections from rodent bites Injuries at dumps caused by surface subsidence, underground fires and slides Skin problems (itchiness and skin rashes) Respiratory diseases Infections from direct contact with contaminated materials Birth defects Cancer