Sunteți pe pagina 1din 53

F

ULL

COST ACCOUNTING GUIDEBOOK (FOR SOLID WASTE MANAGEMENT)

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

2. Cost Components of FCA - Direct, External and Other Costs ....................................6


What Are the Direct Costs? ................................................................................................ 6 What are external costs? .................................................................................................... 8 What Other Costs are Considered?.................................................................................. 10

3. FCA Data Sources Records, Reports, Research ...................................................11


How are FCA Data Generated? What are Important Sources? ....................................... 11

4. Some Basic Computation Procedures .......................................................................17


What are the basic computations that are used in FCA? ................................................. 17

5. Identifying and Valuing External Costs.......................................................................26


How are external costs identified, quantified and valued? ............................................... 26

6. Basic Steps in FCA ....................................................................................................32 References ......................................................................................................................41

Full Cost Accounting Guidebook (For Solid Waste Management)

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

ii

Full Cost Accounting Guidebook (For Solid Waste Management)

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

Full Cost Accounting Guidebook (For Solid Waste Management)

iii

iv

Full Cost Accounting Guidebook (For Solid Waste Management)

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

Full Cost Accounting Guidebook (For Solid Waste Management)

vi

Full Cost Accounting Guidebook (For Solid Waste Management)

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

vii

viii

Full Cost Accounting Guidebook (For Solid Waste Management)

FULL COST ACCOUNTING GUIDEBOOK*


(FOR SOLID WASTE MANAGEMENT)

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
*

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

1. FULL COST ACCOUNTING DEFINITION, BENEFITS, KEY PRINCIPLES


WHAT IS FCA?
Full Cost Accounting (FCA), as adopted in Solid Waste Management (SWM), is a process of collecting and presenting all costs incurred in implementing a SWM program. It is essentially an accounting procedure, but differs from conventional or regular accounting in several respects. Foremost is its expanded concept of cost. FCA cost accounts include not only the direct costs associated with a particular SWM program but also hidden costs, past and future outlays, and externalities (e.g., environmental impacts) resulting from SWM activities. FCA is thus able to cover the full costs associated with a mix of SWM interventions. FCA therefore enhances SWM managers appreciation of the various cost components of a current or planned SWM program. SWM managers are provided with a reference cost estimate against which they can compare other SWM options under consideration. It is thus not only a cost accounting procedure, but more importantly, a decision-making tool. (Alberta Canadian EPA, 1995).

WHAT ARE THE BENEFITS OF FCA? WHO BENEFITS?


LGUs, which are mandated under Republic Act 9003 to implement SWM programs will benefit the most from FCA. First, FCA will in some way increase the cost-effectiveness of their SWM programs. FCA can be used to evaluate various SWM options, in order to select the most cost-effective program. Through FCA, LGUs, for example, can make comparisons between options for managing the operation of Materials Recovery Facilities (MRFs): a) by the LGU itself, b) by a service Nongovernmental Organization (NGO), c) by a community cooperative, or d) by a private business entity. It can also make a cost comparison between an LGU-operated and a completely privatized solid waste collection system. Second, FCA provides data for developing cost-recovery programs. The cost data will be useful to LGUs in establishing SWM fees. It will generate information on the average cost of providing SWM services to a household or the cost per bag of waste generated. The LGU may use these to decide if it will fully or partially recover such costs by charging households and establishments with fees for the services. Third, FCA will improve the capacity of LGUs in transacting with the private sector on contracts for SWM services. The data generated through FCA will give the LGU better estimates of the costs for example, of the collection and disposal of a ton of solid waste, of operating an MRF, and of managing a disposal site. With these information, the LGU possesses a good basis to evaluate cost proposals from private contractors and will be in a better position to negotiate with them. Fourth, FCA will increase awareness of the LGU on the negative impacts of improper SWM practices. These adverse impacts are referred to as negative externalities, and these are borne largely by society rather than the source of waste. FCA includes the calculation of the cost or at least a qualitative assessment of these externalities, so the LGU will have an appreciation of both the financial costs and the cost to society of various SWM options. The latter dimension will have to be factored into the decision-making of LGUs.

Full Cost Accounting Guidebook (For Solid Waste Management)

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.

WHAT ARE THE UNDERLYING PRINCIPLES OF FCA?


There are some basic principles of FCA that differentiate it from the regular cash flow accounting system used by the government. These principles are: Box 1: Example of Accounting for Costs rather than Cash Outlays A dump truck is bought for P1,150,000 and it is estimated to have a useful life of 5 years. The annual cost of the services of the truck that will be used in FCA will be P230,000 (i.e., P1,150,000/5 yrs). In cash flow accounting, the P1,150,000 will be reflected as cost at the time of the purchase of the truck. Box 2: Examples of Hidden Costs to be Included in SWM Costs. Government owned land used as disposal site. In the traditional accounting system, the land will not be recorded as a cost since there was no cash outflow. In FCA, this will be recorded as one of the direct costs in the delivery of SWM services. Garbage collection vehicle donated by a foreign government. Again, this will not be considered as cost in the traditional cash flow accounting. In FCA, the annual depreciated value of the vehicle will represent the yearly cost of using the vehicle in SWM collection. Account for costs rather than cash outlays. FCA accounts for the cost or the monetary value of a resource or asset when such asset is used, not necessarily when the cash outlay or expenditure is made. This particularly applies to capital assets (e.g., vehicles and equipment) that provide services over an extended period of time, usually more than one year. In FCA, the cost of such assets is distributed over its useful life. The total cash expense is not credited as cost at the time of purchase, which is the practice in conventional cash flow accounting. Box 1 provides a calculation procedure. Account for hidden costs. FCA includes all activities or resources that are necessary and contributory to the SWM program, including those that do not entail a cash disbursement by the LGU, and therefore are not recorded as expenses. In FCA, these hidden costs, which appear to be free, should be properly accounted for (EPA, 1997). Account for shared overhead costs. An LGU incurs management and support costs for implementing its SWM program on a daily basis. Included in this category of costs are labor costs or personal services, employee benefits and operating costs such as rent, utilities and supplies that are connected with implementing solid waste management activities (EPA, 1997). These are generally identified as overhead costs. The overhead costs of an LGU are usually recorded as shared costs, i.e., they cover the whole LGU operations. The usual accounting practice is to reflect these as general operational costs and they need not be allocated among the different operating units or programs of the LGU. In FCA, it is necessary that the share of the SWM program in the overhead costs of an LGU is computed. In the LGUs financial records, all operating and maintenance costs are not reflected as shared

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

Full Cost Accounting Guidebook (For Solid Waste Management)

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

2. COST COMPONENTS OF FCA DIRECT, EXTERNAL AND OTHER COSTS


WHAT ARE THE DIRECT COSTS?
One must know the different components of FCA to fully understand the computations involved. FCA has three major types of direct costs. These are the upfront costs, the operating costs and the back-end costs. Upfront costs. These are the initial investments and expenses necessary to start up the implementation of the SWM program (EPA, 1997). Table 1. Checklist of Upfront Costs Facility construction Detailed engineering design Earthwork and roads Site grading and landscaping Building construction and modification Liner and leachate management system Utility extensions and connections Groundwater monitoring system Surface water management system Furnishings and office supplies Site security system Owned structures and office equipment Office buildings Maintenance building Composting sheds Storage buildings for recyclables Warehouses Office furniture and equipment Computer hardware and software Upfront costs in expanding/ developing new SWM programs Studies/waste assessments/waste characterization Program planning Community education and information campaigns Significant improvements, upgrades or additions to existing structures, property or equipment

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

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.

Full Cost Accounting Guidebook (For Solid Waste Management)

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

WHAT ARE EXTERNAL COSTS?


FCA, as mentioned earlier, also includes mostly negative externalities of SWM processes or activities. Externalities arise when an economic or social activity of an individual or group results in positive or negative impact on another, yet none of the affected parties are made to pay or account for these impacts. Positive externality improves the welfare of affected party while negative externality reduces the welfare of the affected party. Without compensation, there is a discrepancy between private costs/benefits and the social costs/benefits. Negative externalities are considered losses to society because they reduce overall human welfare. An example of this is air pollution from unmanaged dumpsites that could bring about health problems to the neighboring community. In spite of the fact that negative externalities are difficult to value because of absence of markets, nonetheless economic valuation techniques are available to approximate these costs. If measurement and valuation proves difficult or highly subjective, qualitative description or evaluation is the least that can be undertaken. Three types of negative externalities are explained below: environmental costs, social impacts and health impacts. Tables below show the negative environmental, social and health impacts in each SWM stage. Environmental Costs. The term environment as used in this manual includes humans and other living organisms, public infrastructure, private property and natural resources. The environmental costs of SWM activities are primarily in the form of pollution and resource degradation. Table 4 lists various forms of externalities categorized by SWM activity that can be subjected to valuation.

Full Cost Accounting Guidebook (For Solid Waste Management)

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

ISWM Stage Segregation and Reduction at Source Collection and Transport

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

Full Cost Accounting Guidebook (For Solid Waste Management)

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

ISWM Stage Segregation and Reduction at Source Collection and Transport

Material Recovery Facility

Disposal

WHAT OTHER COSTS ARE CONSIDERED?


Contingent Costs. Contingent costs are estimates of future expenses that may be incurred for damages (resulting from improper waste disposal methods) that have the potential to occur in the future. Estimates of contingent costs rely heavily on approximating the probability of the event actually occurring. A Case in Point: Despite being lined, a sanitary landfill could still bring about groundwater contamination as a result of leachate. The expenses for pollution abatement technology that will control the leachate should be estimated and included in FCA. This includes the estimated probability that such event will occur. Contingent costs should also consider compensation for damages to lives and property.

10

Full Cost Accounting Guidebook (For Solid Waste Management)

Remediation Costs. Remediation costs are brought about by inactive waste facilities that continue to generate negative environmental impacts. The cost of corrective actions that will be undertaken should be included in FCA. (EPA, 1997). A Case in Point: A certain LGU has an open dump that currently is not in use. Since there was no proper closure, the LGU must take remedial actions for the protection of nearby communities. Expenditures will include the cost of mitigating technologies to contain water contamination, converting the dumpsite into other land use, etc.

3. FCA DATA SOURCES RECORDS, REPORTS, RESEARCH


HOW ARE FCA DATA GENERATED? WHAT ARE IMPORTANT SOURCES?
Five basic information sets need to be compiled for the generation of FCA data, particularly on the direct costs. These are: (a) descriptive information on the LGUs SWM program that includes costs of ISWM related pre-operation activities, (b) inventory of assets, (c) organizational review, (d) review of financial records and reports and (e) available resource economics/accounting studies and impact assessments (EPA, 1997). SWM Program Description. This describes the history and scope of the current SWM program of the LGU and its future SWM plans. This provides useful inputs on the past and future costs included in the computation of program costs (EPA, 1997). Program History. The chronological listing of SWM activities help in identify the upfront costs incurred as well as the current operating costs. Review of program history is typically conducted in consultation with local planners and accountants. Example of an SWM program history of an LGU Event or Activity Approval of an Embassy grant providing three compactor trucks. Obtained donation of 1.0 ha (private property) for use as open dumpsite; wire fencing Hiring of drivers and garbage collectors; delivery of compactor trucks to LGU Installation of garbage bins/waste collection boxes in market and commercial center Start of daily collection of solid waste from market and 5 poblacion barangays Creation of Municipal Environment and Natural Resources Office (MENRO); appointment of MENRO staff ; transfer of SWM program from Gen Services to MENRO Launching of a Cleanest Barangay Contest Creation of ESWM Board per RA 9003 through an Executive Order Training and orientation of Board, MENRO staff and representatives from each barangay on recycling and composting methods Preparation and submission of the grant proposal for the preparation of an comprehensive ISWM plan and for the establishment of an Ecology Center/Materials Recovery Facility

Table 7.

Period July 1999 Nov 1999 Jan 2000 Jan 2000 Feb 2000 June 2000

Dec 2000 Dec 2000 Jan 2001 Feb-Mar 2001

Full Cost Accounting Guidebook (For Solid Waste Management)

11

SWM Waste Flow. This presents in graphical form the waste flows in an LGU, from the source to final destination. The waste flow guides analysts in identifying activities and corresponding costs involved in moving or processing. Figure 1 illustrates the general flow of waste from source to a number of destinations. The diagram demonstrates that from the source, solid waste ends up in five general destinations namely: converted to energy or recycled or composted or transported directly to a disposal facility or it may pass through processing before residuals of processing are finally disposed. Thus, waste may follow several pathways by which costs may be estimated (e.g. estimate total cost for each solid waste path).

Solid Waste Generators

Waste Processing Services Materials Recovery

Conversion to Energy

Conversion to Energy

Recycling/ Re-use

Collection
Marketing

Recycling

Residual Disposal

Composting

Composting

Disposal

Figure 1. Solid waste pathways

Box 5. Solid Waste Management Pathways 1. 2. 3. 4. 5. Source Reduction and Segregation Collection Conversion to Energy Source Reduction and Segregation Collection Recycling Source Reduction and Segregation Collection Composting Source Reduction and Segregation Collection Disposal Source Reduction and Segregation Collection Materials Recovery - Disposal

Box 5 list 5 examples of pathways from source to various destinations. These pathways serve as guide in estimating per unit cost at each end point or final destination. Another approach in tracing the flow of solid waste for purposed estimating cost is to divided SWM into four stages (see Box 6): (a) Waste segregation and reduction at source, (2) collection and transport, (3) materials recovery, and (4) disposal management. Cost maybe estimated for each stage. Alternatively, analysts may opt to estimate costs by following the solid waste path originating from various sectors such as households and food establishments or generally commercial establishments. Further, cost may be estimated by major technical components (see Box 7 below) of solid waste management namely: engineering, economic enterprise, policy support and

12

Full Cost Accounting Guidebook (For Solid Waste Management)

enforcement, information education and communication. Box 8 shows pre-plan or traditional flow of waste from various sector-sources (i.e households, commercial establishments, institutions and generators of special wastes) in an LGU. The analyst will estimate costs of this flow. Changes in waste management from the traditional method will potentially increase cost to the implementers of the plan.

Box 6. Four Stages in Solid Waste Management Waste Segregation and Reduction at Source. This covers SWM activities at the level of the waste generator (e.g., household, establishment) focused mainly on reducing wastes generated and/or waste disposed and segregation prior to disposal. Samples of interventions include the provision of appropriate receptacles for segregated waste, IEC, incentives and ordinances. Collection and Transport. This covers the collection of wastes from sources (households, business establishments, institutions, etc.) and transporting them either to a materials recovery facility (if recyclable or biodegradable) or to a disposal site (if residual or special waste). Materials Recovery. This refers to the conversion to other forms or re-use or recycling or composting. This stage includes the trading or marketing of the sorted, semi-processed or processed materials. Disposal Management. This covers all activities related to management of waste disposed at the dumpsite or landfill.

Box 7. Four Technical Components of an ISWM plan (Create separate box) Engineering Component. This encompasses the hardware and system elements in each of the four SWM stages. Among the important engineering concerns in each stage are: 1) for segregation and reduction at source - design of segregators and receptacles, 2) on collection and transport - collection schedules and route, types and number of trucks, size of collection crew, maintenance of collection fleet; 3) on materials recovery - facility location and design, technology and equipment, and 4) disposal management - closure and rehabilitation of existing dumpsite, conversion/establishment and eventual closure of controlled dumpsite, selection of SLF site, design and establishment of SLF, operation and maintenance of SLF, closure and post-closure care of SLF. Economic Enterprise Development.. This component identifies the potential public and private enterprises that can be developed in SWM. It establishes guidelines for private sector participation in SWM as well as mechanisms, policies and incentive systems to institutionalize private sector investment in SWM. Policy Support and Enforcement Component. This component provides support for the formulation of policy and ordinance in the implementation of the plan and the corresponding enforcement mechanisms. Information, Education and Communication (IEC) Component. This includes defining the IEC strategies that will increase awareness of target sectors on the need for SWM and on the SWM plan and programs of the LGU, including SWM ordinances.

The choice of flow analysis to adopt in estimating costs depends on the goals of the LGU and the quantity of component wastes. A large quantity of potential compost or recyclable materials will prompt analysts to establish the cost per unit of composting or recycling. On the other hand any plan to enhance the technology of solid waste management from collection to disposal management will convince the analysis to estimate engineering cost per unit or collection, materials recovery or disposal management. If the LGU is considering charging fees for various waste generators, estimates of cost of managing waste from different sectors would be helpful.

Full Cost Accounting Guidebook (For Solid Waste Management)

13

Box 8. Example of a traditional solid waste flow from generators to disposal facility (Municipality of Jagna, Bohol)

Waste Generators

Segregation and Reduction-at-Source

Collection and Transport

Material Recovery

Disposal

Re-usable and saleable materials

Suki, botet dyaryo buyers

Junkshops

Burned in open areas


Creeks and rivers
Compost pits

Other wastes

Households

LGU collection trucks

Dumpsite
Suki botet dyaryo buyers
Junkshops

Re-usable and saleable materials


LGU collection trucks

Dumpsite

Other wastes
Bulky and construction wastes

Burning in open areas


Compost pits

Commercial establishments

Dumpsite

Garden wastes
Other wastes
Institutions and service centers

Burned in open areas


LGU collection trucks
Dumpsite

2 hospitals, electric company warehouse and glass suppliers


Other special waste generators

Special wastes
Municipal wastes

Stored in septic tanks, sold to junkshops


LGU collection trucks
LGU collection trucks

Dumpsite
Dumpsite

Special waste generators

Plans. These should include expansion plans, the projected capital investments to support current operations and/or to replace/expand existing facilities and equipment, and the anticipated dates of closure of currently operating facilities. In compliance with RA 9003, the plan should reflect the conversion of open dumpsites into controlled dumpsites, their eventual closure and the establishment of sanitary landfills. Future plans are useful in identifying the back-end costs.

Future plans should span at least 10 years (RA 9003 requires LGUs to prepare 10 year plans) and should be based on a sound assessment of the solid waste generation and management practices of households and establishments. Asset inventory. Assets should be inventoried to identify the physical assets acquired through purchase or donation during a specific period covered. The inventory (see table below for an example) should indicate if the asset is owned or leased, the date the asset was acquired, the acquisition cost, useful life, capacity, quantity and location. The same data are necessary even if the asset was donated. The inventory should also indicate current use of the assets, particularly if they are not dedicated to solid waste management. These data are useful for developing depreciation schedules and identification of operation costs (EPA, 1997)

14

Full Cost Accounting Guidebook (For Solid Waste Management)

Table 8.

Sample Inventory of Assets within a Local Government Unit Unit Value at the time of Purchase (P) 360,000

Item Isuzu Elf Dump Truck

Description Capacity: 6 cu m

Qty 1

Date Acquired Jan 1999

How Acquired Procured

Useful Life (Yrs) 7

Isuzu Elf Dump Truck Mazda Pickup Shovels

Capacity: 6 cum

2 1

360,000 340,000 300

June 1999 Dec 2000 July 1999

Donated Procured Procured

7 7 2

Current Use Collection of market waste; occasionally used in other LGU projects Collection of household waste Exclusive for MENROs use

Location MENRO

MENRO MENRO 2 units each assigned to each dump truck Dumpsite MRF MRF MENRO Office MENRO Office 1 in MENRO; 1 in MRF, 1 in dumpsite mini office; 1 mobile MENRO Office

Lapad

Rake Weighing scale Sorting Tables Computer Printer Radio

Intel Pentium III 650 MHz HP Handheld GP 68 Motorola 1.5 HP National split type wall mounted Stand fans

4 2 2 1 1 4

330

July 2000

35,000

Sept 2001 Sept 2001

Procured Procured Procured Donated Donated Procured

3 3

Air Conditioner

57,000

Dec 2000

Procured

Electric fans

Dec 2000

Procured

Office tables

Junior executive Swivel

1,000

Dec 2000

Procured

Office chairs

Dec 2000

Procured

1 in MENRO; 1 in MRF; 1 in dumpsite mini office 4 in MENRO; 1 in MRF; 1in dumpsite mini office 6 in MENRO; 2 in MRF

Organizational review. This will include an inventory of human resources in the SWM program (including those from outside the LGU SWM organization), the review of the organizational structure and the relationships of the program with other groups or organizations within and outside the LGU. This is useful in computing maintenance and operating costs associated with SWM (especially if some activities are being undertaken by certain personnel who are shared with other departments). (EPA, 1997).

Full Cost Accounting Guidebook (For Solid Waste Management)

15

MAYOR
ESWM

SWM Task Force

MENRO
Clerk (1)/Driver(1) (Shared personnel)

IEC Section Section Head (Shared personnel)

Collection & Disposal Section Section Head

MRF/Processing Section

Industry Inspection Section* Section Head

IEC Assistant

Clerk (1)

Collection Supervisor (1) Garbage Collectors (6) Dump Truck Drivers (3) Utility Workers (4)

Dumpsite Supervisor (1) Recording Clerk (1) Utility Workers (2) Watchmen (2)

Foreman (Sorting) (1) Foreman (Composting) (1) Recording Clerk (1) Utility Workers (4) Watchmen (2)

Environment Inspectors (3)

Figure 2. An example of an LGU structure for SWM is shown below. Financial records. This will include the examination of book of accounts, journals, periodic financial statements and budget proposals of the LGU and of specific SWM facilities that are currently operational. This activity helps in tracking the actual costs incurred through time, in determining the full range of costs associated with SWM program implementation, and in providing the basis for estimating future costs. Available resource economics/accounting studies and impact assessments. Assigning peso values to externalities would perhaps be the most difficult part of undertaking FCA as the needed data are not usually readily available. Moreover, the cost estimation process requires some level of expertise and the LGU may require some technical assistance to do this. A review of previous studies similar to the condition in the LGU can be made part of the data collection effort. The LGU can make use of data used in these economics studies and environmental impact assessments to estimate the cost of expected externalities in its areas. This approach is commonly called benefits transfer.

16

Full Cost Accounting Guidebook (For Solid Waste Management)

4. SOME BASIC COMPUTATION PROCEDURES


WHAT ARE THE BASIC COMPUTATIONS THAT ARE USED IN FCA?
Most of the data on direct costs can be generated from existing records of the LGU. However, some costs will require some adjustments before they can be used in FCA. The computational procedures that apply to these particular expense items are illustrated in this section. Estimating annual cost of upfront capital outlays through depreciation method. Capital outlays, as mentioned earlier, are spent for assets or resource that will be used for over a period usually exceeding one year. In FCA, the cost of these capital assets is spread over its useful life and the resulting annual costs are computed through the depreciation method (EPA, 1997). The annual depreciation cost represents the annual value of the services these capital assets provide to the SWM program. It is important to note that the use of depreciation cost only applies to those owned assets that have useful lives of more than one year (e.g., vehicles, various equipment, buildings, other support infrastructure) regardless of whether these were bought by the LGU or donated by private individuals or organizations. The procedure is not relevant for leased facilities since the rentals or leases are considered as operating costs. Significant upfront outlays for information and education programs may also be treated as capital outlays and may be depreciated over time. In estimating the depreciation, the cost or value of the capital asset is simply divided by its useful life to get the actual annual costs. For pedagogic purposes the straight-line method, the simplest depreciation method is used in the examples that follow.

Depreciation Cost =

Capital Outlay Useful life of the Asset

Other depreciation methods (i.e., double digit, sum of years, and rate of diminishing returns methods) may also be used to allocate the annual cost of capital resources.
Example #1.

In January 1999, the LGU bought (as opposed to leasing) a truck costing P150, 000 which has a useful life of 5 years. How much is the annual depreciation cost?

Depreciation Cost =

Capital Outlay Useful life of the Asset


150,000 5

= P30,000

Full Cost Accounting Guidebook (For Solid Waste Management)

17

In FCA, the amount of P30, 000 will be reflected as the annual cost of the services of the truck from 1999 to 2003.
Example #2:

The 10,000 sq m land on which an SWM facility was constructed has a MARKET VALUE of P100, 000 and an ASSESSED VALUE of P40, 000. It is estimated that this land will be used for this purpose for a period of 60 years. In computing the annual cost of this piece of land, the MARKET VALUE of the land will be used. Using the straight-line method, this would amount to: Annual cost of the land = =
Example #3:

P100, 000/60 P1, 667

A Materials Recovery Facility is constructed and the major infrastructure works are as follows: Construction of storage and sorting building Electrical works Painting of building and roof Construction and concreting of composting area Tile works for comfort room Perimeter fence Installation of water supply system Total P 300,000 89,000 18,500 189,300 47,000 50,400 54,200 P 748, 400

The facility is expected to have a useful life of 25 years. Using the same computation method illustrated above, the per annum depreciation cost would be P64,399. This is derived as follows: Annual Depreciation Cost of the Facility = = P748, 400/25 P 29,936

Example #4:

Suppose the truck mentioned in Example 1 was bought in early April 1999. This means that the truck was used for 9 months only in year 1999. The depreciation cost for 1999 would not be P30, 000. It should be computed as: Depreciation cost for 1999 = Per annum depreciation cost X (No. of months truck was used in 1999/12) P30, 000 X (9/12) P30, 000 X 0.75 P22,500

= = =

18

Full Cost Accounting Guidebook (For Solid Waste Management)

With a useful life of 5 years, the truck will be good until March 2004. On this year, what would be accounted for would be the last 3 months of the asset. The calculations will then be Depreciation cost for 2004 = Per annum depreciation cost X (No. of months truck will be used in 2004/12) P30,000 X (3/12) P30,000 X 0.25 P7,500

= = =

Allocating shared overhead. This procedure is important because it is common for overhead costs of SWM programs to be shared among various units or offices of the LGU. FCA requires that the annual overhead costs associated with SWM program implementation are computed.

The suggested method is to use an allocation factor. The two commonly used methods are: a) budget share method, and b) personnel share method. Both are illustrated below. Method #1. Budget Share Allocation The budget share method uses a budget share allocation factor to estimate the share of the SWM program from the total overhead cost (shared overhead or centralized services) of the LGU. The formula for determining this particular allocation factor is:

Budget share allocation factor =

____________SWM annual budget___________ (Total annual budget of the LGU - Shared overhead)

Example:

The total LGU budget amounts to P20 million out of which, P5 million is spent for centralized services, which cover the SWM program. Given that the SWM budget is P4 million, the allocation of the SWM program from the overhead cost (centralized services) would be computed as follows: Budget share allocation factor = _____________SWM annual budget____________ (Total annual budget of the LGU Shared overhead) _____P4,000,000_______ (P20,000,000 P5,000,000) 0.27

This factor (0.27) will then be multiplied by P5,000,000 to get the SWMs portion of the shared costs. Thus, 0.27 X P5,000,000 = P1,333,333 Effectively, the total annual budget of the SWM program that includes a share of the overhead cost is: 4,000,000 + P1,333,333 = P5,333,333

Full Cost Accounting Guidebook (For Solid Waste Management)

19

Method #2: Personnel share method. In this method, the allocation factor is based on the ratio of full-time employees rather than budgets. The applicable formula would be:

Personnel share allocation factor

No. of full time employees engaged in SWM (Total no. of full-time employees in LGU No.of employees providing centralized services)

Example:
The LGU has a total of 1,500 full-time employees. Only 50 of these are engaged on a full time basis with the SWM program. There are 200 full-time employees in the various LGU units which are providing centralized administrative and financial management support to all LGU programs. Applying the personnel share allocation factor formula, the computation would be as follows: Personnel share allocation factor

No. of full time employees engaged in SWM (Total no. of full-time employees in LGU No.of full-time employees providing centralized services) 50 (1,500 200) 0.04

Multiplying this factor (0.04) by 200 will yield the equivalent number of centralized employees (8 personnel) which are directly delivering services to the SWM program. When the factor is applied to the total cost of full time personnel providing centralized services, the estimated share of SWM in the cost of centralized personnel services will be determined. This factor can also be used for allocating other non-personnel costs. There are other shared cost line items that should be included in FCA and therefore should be allocated (EPA, 1997). These allocation multipliers may be used, following the pattern set in the two examples above: Building maintenance -share of SWM floor-space in square feet (to total floor space of LGU excluding area used by building maintenance) personnel share share of SWM vehicles (to total LGU vehicles) share of km driven of SWM vehicles (to total km driven by all LGU vehicles) share of fuel use of SWM vehicles (to total fuel used by all LGU vehicles)

- Vehicle maintenance ---

Utilities -- share of SWM bills for utilities (to total amount of LGU bills) Computer/office equipment services -- share of computers/printers/equipment (to total computers/printers/equipment of LGU)

20

Full Cost Accounting Guidebook (For Solid Waste Management)

Legal services --Payroll services -Purchases ---

personnel share budget share personnel share personnel share share in number of transactions (to total number of transactions)

Accounting and General Services personnel share Management Services (e.g., ffice of the Mayor performing tasks for SWM) personnel share

Allocating cost of shared upfront investments. There will be cases when capital assets used in SWM programs are not used exclusively for SWM such as land, buildings, vehicles and equipment that are shared with other programs. FCA requires that these costs be apportioned to get the value that will be credited to SWM. The procedure for allocating the cost combines the use of the depreciation and the multiplier methods. The relevant formula would be:

Upfront Costs = Annual Depreciation Cost X Share Allocation Multiplier

Example #1:

A set of office equipment and furniture is available for common use by several LGU programs. These are valued at P500,000 with a useful life of 4 years. To compute the corresponding upfront cost for the SWM program, it is first necessary to determine the annual depreciation cost. The formula for estimating the cost of upfront outlays using the depreciation method (see page x) is:
Annual Depreciation Cost = Capital Outlay Useful Life of the Asset

The per annum depreciation cost of the office equipment and furniture would then be: Annual Depreciation Cost = = P500,000/4 P125,000

To compute the annual cost of these shared office equipment and furniture that will be attributed to SWM, the personnel allocation multiplier may be applied. The procedure for deriving the personnel allocation multiplier is found in page x. The formula for computing the upfront cost in this particular case would then be: Upfront Costs for Office Equipment and Furniture = Annual Depreciation X Personnel Share Allocation Cost Multiplier

Full Cost Accounting Guidebook (For Solid Waste Management)

21

Suppose the computed share allocation multiplier is 0.4. Then the annual cost for office equipment and furniture to be included in SWM cost would then be: Upfront Costs for Office Equipment and Furniture

= =

P125,000 X 0.4 P50,000

Example #2.

A Materials Recovery Facility is constructed in a complex which also has a storage building for the LGUs agricultural program and a small workshop for the LGUs Engineering Office. The major infrastructure works are as listed below. The facility is expected to have a useful life of 25 years. Construction of sorting and storage buildings and workshop Electrical works Painting of building and roof Construction and concreting of composting area Tile works for common comfort rooms Perimeter fence Installation of water supply system Total P600,000 119,000 28,500 189,300 87,000 80,400 84,000 P1,188,200 This is

Using the depreciation method, the per annum depreciation cost would be P47,528. derived as follows: Annual Depreciation Cost of the Facility = = P1,188,200/25 P 47,528

The complex however is a shared facility thus it is necessary to determine the cost that will be allocated to the SWM program. This requires the use of an allocation factor. In this particular case, the allocation factor can be based on the area (in sq m or sq ft) of the building that is being used for SWM activities. Suppose the total area of the building is 250 sq m. and that assigned to SWM is 120 sq m. The share allocation factor would be: = = 120/250 0.48

The annual upfront cost for the MRF can be computed using the formula:

Upfront Costs of MRF = Annual Depreciation X Area Share Allocation Cost Multiplier

= =

P47,528 X 0.48 P22,813

22

Full Cost Accounting Guidebook (For Solid Waste Management)

Estimating annual cost of future outlays through amortization. Just like upfront costs, which are allocated annually (using the depreciation method) over the useful life of the asset, back-end costs or future outlays, such as those for closure and post-closure care of disposal facilities, will also be amortized annually. Amortization is an approach that is used to compute the portion of the total cost (estimated at current prices) to be obligated or set aside annually for a future expenditure (EPA, 1997). It brings forward the cost of a future activity and allocates it within the period that the SWM facility is in use in order to reflect the true cost of such facility.

The formula used to estimate the costs for closure and post-closure care is shown below:
Annual Amortization Cost = Estimated Cost of Activity x Cumulative Capacity Used Total Estimated Capacity Cumulative Amortization

The estimated total cost of the activity refers to the expenses related to closure and closure care that will be incurred in the future, in current prices. The cumulative capacity used divided by the total estimated capacity is the utilization rate of the facility over a certain period (i.e., also cumulative). The total estimated capacity is usually established during the feasibility study stage. The utilization rate is not expected to grow by an even increment every year; it will depend on how fast the full capacity of the facility is being reached. When the utilization rate is applied against total cost, the resulting value represents the cumulative amortization cost or the amount that should have been set aside at the start for the future closure and care of the facility. Since the objective is to get the annual amortization cost, the cumulative amortization cost for the period prior to the current year will have to be deducted from it.
Example:

It is estimated that the closure and post-closure care of a 2-hectare controlled dumpsite, which is programmed for 2006, would require the amount of P5 million. When it was opened in 2002, the controlled dumpsite was estimated to have a capacity of 100,000 tons of solid waste. To estimate the annual amortization cost, the following projections are made for its utilization rate and annual amortization cost:
Cumulative Capacity Used Cumulative Amortization Cost (current year) Annual Amortization Cost (e) = [(d) of current year)-(d) of previous year] 500,000 1,250,000 1,650,000 850,000 750,000

Year

Utilization Rate

(a) 2002 2003 2004 2005 2006

(b) 10,000 35,000 68,000 85,000 100,000

(c) =(b)/100,000 0.10 0.35 0.68 0.85 1.00

(d) = (c) x P5M 500,000 1,750,000 3,400,000 4,250,000 5,000,000

Calculating costs per volume of waste or household serviced. When all cost computations are completed, it will be useful to undertake some cost analyses. Three types of waste management cost analyses (the cost per ton, cost per household and cost per bag) to determine cost of solid waste managed, which may be used to measure cost-effectiveness and for setting waste collection fees, are discussed below. Alternatively, the analysis may estimate total costs by SWM stage, by technical component, by pathways and by sector-source.

The cost components that are included in the computation may be varied, depending on the analysis that one wants to make. It can cover a) the full costs of the overall SWM program, b) the SWM direct costs only, c) the maintenance and operating costs only, d) the annual costs or e) fixed

Full Cost Accounting Guidebook (For Solid Waste Management)

23

and variables costs. If the LGU is generating income from the sale of recyclable or composted materials and collection of service fees, net costs (i.e., deduct SWM related income from costs) may also be used. The important thing to bear in mind is that the volume of wastes that is used in the computation is for the same period that is covered by the cost. Cost per ton to determine the cost of managing one ton of waste. It is calculated by dividing the total cost by the volume of tons managed within a specific period. Cost Per Ton = Total Cost/Tons Managed
Example:

Given that the annual cost of an SWM program is Php 3 million and the volume of tons collected and disposed is 3,000 tons per year, what is the cost per ton per year? Cost Per Ton = = = Total Cost/Tons Managed P3,000,000/3,000 tons P1,000/ton per year

Data on cost per ton can be used by LGUs for different purposes, such as assessing costeffectiveness. The LGU can compare unit costs of different management options or compare its unit cost with other LGUs. The data may also be used as benchmark in the evaluation of bids from private contractors. Knowing the actual annual cost per ton will allow the LGU to assess changes in its efficiency through time. If the management of solid waste generates revenue, the said revenue will be subtracted from the total cost, and the same computation applies. The resulting unit value is net cost per ton. Cost per household to determine the cost incurred in delivering SWM services to each household in the residential sector. (EPA, 1997). This unit cost is useful in computing for fees which may be collected from the households service. This provides the initial basis for developing the LGUs cost recovery program. Cost Per Household = Cost of SWM Services/Total No. of Households

Example:

If a LGU spends P3 M to service a total of 6,000 households, how much is the net cost per household? Cost Per Household = = = Cost of SWM Services/Total No. of Households P3,000,000/6,000 P500 per year

Given the above cost per household, what is the maximum service charge that can be collected each month from each household?

24

Full Cost Accounting Guidebook (For Solid Waste Management)

Service Charge per Month = = =

Net Cost Per Household (if income were subtracted from total cost) P500/12 months P42 per month

Cost per bag to develop a volume-based pricing of garbage as an alternative to charging fixed fees. Volume-based pricing is a scheme for setting prices based on the volume of wastes disposed by the generator. The more waste he disposes, the higher the fee he pays. Computation for the cost per bag requires that there be data on number of bags disposed per collection and number of collection per week. It is assumed that the LGU has a standard volume for each bag. Cost Per Bag = Cost Per Household/No. of Bags Disposed

Example:

If a household disposes 2 bags per collection, how many bags does this household dispose monthly given that collection is done twice a week? Total No. of Bags Disposed = Per Month No. of bags disposed per collection X Frequency of collection per week X 4 weeks in a month 2 bags X 2/wk X 4 weeks 16 bags/month

= =

Given that the net cost per household is P42 (from the total cost of P3M and 6,000 households), how much is the net cost per bag? Cost Per Bag = = = Cost Per Household/Total No. of Bags Disposed per Month P42/16 P2.62 per bag

Thus, the LGU can charge P2.62 for every bag collected from the households.

Full Cost Accounting Guidebook (For Solid Waste Management)

25

5. IDENTIFYING AND VALUING EXTERNAL COSTS


HOW ARE EXTERNAL COSTS IDENTIFIED, QUANTIFIED AND VALUED?

Externalities maybe measured quantitatively or simply evaluated qualitatively. The types of externalities identified and availability of technical experts to estimate will determine the extent to which of these externalities can be included in the cost estimates. The process for evaluating externalities will involve the following steps: 1. Define the coverage of the solid waste management program including sectors affected. This coverage will define the boundaries of the externality that will be measured e.g. product, processes or activities or solid waste management option that will create negative or positive externality. In economics, the boundaries of the consumption or production activity that produces the externality must be defined. 2. Identify the externalities. From among the list of activities in the SWM, identify where negative externalities are likely to occur or the specific externalities which are expected to happen in the future. For example in Collection and Transport trucks can create road traffic delay or congestion. Table 10 provides a sample listing of external costs.
Table 9, Examples of Externalities at Each Stage of Solid Waste Management
ISWM Activities with Potential Externalities 1. Backyard composting 1. Curbside collection Associated Negative Externalities 1. Microbial emissions 2. Build-up of toxic substances in soil 1. Litter along collection route 2. Back and joint injuries from lifting heavy waste-filled containers and driving collection trucks 3. Puncture wounds causing tetanus, hepatitis and HIV infection 1. Air quality degradation, e.g. odors 1. Back and joint injuries from driving heavy landfill and loading equipment 1. Odor 2. Dust 3. Noise 1. Skin problems 2. Respiratory diseases 3. Visual impacts 1. Air quality degradation, e.g., odors 2. Headaches and nausea 3. Respiratory diseases 1. Disturbance of surface water regime (pollution and contamination)

ISWM Stage Segregation and Reduction at Source Collection and Transport

2. Transport to MRF 3. Transport to dumpsite Materials Recovery 1. Sorting

2. Recycling Facilities

Disposal Management

1. Open dumpsite

2. Sanitary landfill

3. Identify stakeholders who are likely to be affected. Also, identify how these stakeholders will be affected and the frequency of occurrences of such externalities. Table 11 below extends Table 10 above in order to relate externalities with affected parties.

26

Full Cost Accounting Guidebook (For Solid Waste Management)

Table 10. Columns c and d appended from previous box provides examples of identified stakeholder affected How Stakeholders Will be Affected (extent and frequency)

ISWM Stage Segregation and Reduction at Source

Expected Externalities

1. 2. 3.

Collection and Transport Materials Recovery

Disposal Management

1. 2. 3. 1. 2. 3. 4. 5. 1. 2. 3.

Potential Stakeholders to be Affected 1. Pets 2. Allergens sensitive individuals 3. 1. 2. 3. 1. 2. 3. 4. 5. 1. 2. 3.

1. 2. 3.

1. 2. 3. 1. 2. 3. 4. 5. 1. 2. 3.

4. Determine if the externality is tangible (i.e., visible physically and measurable) or intangible (i.e., not physically visible, not measurable). The purpose is to determine which externalities can possibly be given peso values. In some cases it may not be possible or necessary to measure. Establish these externalities and determine which ones are quantifiable. Note that the value of the externalities must be estimated on an annual basis. An example of a tangible externality is poor health caused by pollution. This can be quantified by determining the number of workers with illnesses due to pollution and the days per year they are unable to work due to sickness. This externality can then be valued by estimating annual wages forgone due to illness. An example of intangibles is the discomfort and suffering experienced by communities living near dumpsites. The valuation of such types of externalities is not easily measured since there are no market values that can be used to translate discomfort and suffering into monetary terms. 5. Estimate the value of the externality and or describe those where no measurement or valuation method is possible at present. 6. Estimate to what extent the cost of externality can be included in the cost of the provider or generator of such externality. There are several valuation methods that are most useful to FCA. These are generally categorized into the surrogate market and revealed preference methods. Hence, besides the standard market pricing (which estimates economic values for products or services that are bought and sold in commercial markets) to value externalities other methods are possible depending on the externality under consideration. Box 9 provides a listing of valuation methods and the effects they measure which are useful for SWM. These are described briefly below. The most common methods that are applicable for solid waste management include contingent valuation (CV), dose-response method, restoration cost method, productivity method (production function method), and hedonic pricing. Related references on these valuation methods are provided in a separate section under References.

Full Cost Accounting Guidebook (For Solid Waste Management)

27

Box 9. Methods useful for valuing externalities brought about by solid waste management
Valuation Methods Change in productivity Cost of illness (COI) Human capital Replacement costs Preventive/mitigation expenditure Hedonic approaches Property/land values (Change in Productivity Wage differentials Travel cost Contingent valuation Benefits transfer Productivity Health (morbidity) Health (mortality) Capital or natural resources Health, productivity of capital or natural resources Environmental quality Productivity Health Natural resources assets Health, natural resources All effects Effects Valued

Contingent Valuation Method is used in identifying the willingness of communities to pay for an improvement in SWM practices that have bearing on the environment and peoples health. This method is also used in determining the amount of money communities are willing to accept as payments for exposure to negative environmental and health impacts of SWM practices.

Some examples of negative externalities which can be valued through Contingent Valuation Method are: a. Collection and Transport Traffic congestion Air quality degradation, e.g., odors and dust Reduced public safety along collection route b. Material Recovery Visual impacts Noise of delivery trucks and equipment in facility c. Disposal Loss of wildlife habitat Disturbance of wildlife Loss of ecologically significant flora and fauna Disturbance of socio-cultural significant areas Visual impacts Air quality impacts Reduced public safety Nose from collection trucks and equipment Reduced public safety

28

Full Cost Accounting Guidebook (For Solid Waste Management)

Box 10. Summary of valuation methods applicable to solid waste management a. b. Productivity Methods (Change in Productivity) - Estimates economic values for products or services that contribute to the production of commercially marketed goods. Cost-of-Illness (COI) - A variant on 'burden of disease' is originally described using population health measures such as mortality, incidence, prevalence and composite measures. COI includes medical costs, and sometimes indirect costs of production loss. Some include into this concept the monetary valuation of reduced quality of life and premature mortality ('human costs'). Human capital valuation - involves capitalized costs of living, costs of professional education and the value of experience measured by a slightly modified learning curve. The measure of human capital is determined with the formula: H = (K + E)(1 + Q(t)) where H is human capital embodied in an individual, K is the capitalized cost of living, E is the capitalized cost of education, Q(t) is the learning curve, and t is the years of employment. (Dobija, 1998) Damage Cost Avoided, Replacement Cost, and Substitute Cost Methods - Estimate economic values based on costs of avoided damages resulting from lost environmental services, costs of replacing environmental services, or costs of providing substitute services. Preventive or defensive expenditures - To prevent losses arising from environmental problems or to mitigate adverse environmental effects, individuals may spend money on appropriate preventive/mitigation measures. Common examples are physical structures such as artificial gullies to avoid erosion, flood control technology to replace natural services, double glazing of windows to prevent harmful effects of the sun, and treated water to replace natural clean water. Hedonic pricing method - Estimates economic values of environmental services that directly affect market prices of some other goods; most commonly applied to variations in housing prices that reflect the value of local environmental attributes. Travel cost method - Estimates economic values associated with ecosystems or sites that are used for recreation; assumes that the value of a site is reflected in how much people are willing to pay to travel to visit the site. Contingent Valuation Methods - Estimates economic values for virtually any ecosystem or environmental service. The most widely used method for estimating non-use, or passive use values; asks people to directly state their willingness to pay for specific environmental services, based on a hypothetical scenario. This method applies where no market exists by creating a contingent market. Contingent Choice Method - Estimates economic values for virtually any ecosystem or environmental service; based on asking people to make tradeoffs among sets of ecosystem or environmental services or characteristics. Does not directly ask for willingness to paythis is inferred from tradeoffs that include cost as an attribute. Benefits transfer method - Estimates economic values by transferring existing benefit estimates from studies already completed for another location or issue.

c.

d. e.

f. g. h.

i. j.

Dose-Response Method, on the other hand, is often used for valuation of SWM health impacts. It is computing for costs incurred for illnesses or decrease in productivity brought about by SWM activities. Thus, examples of health impacts enumerated in section 1 of this manual can be valued using the Dose-Response Method. For example, impacts of disposal activities on respiratory health of residents can be quantitatively valued by summing-up expenses incurred by parties affected with respiratory problems. Another example is the treatment expenses of residents who have been affected with cancer. All chemotherapy expenses can be aggregated to compute for health impacts of SWM activity. Restoration Cost Method is used in accounting for property damages caused by SWM external costs. This is applied by estimating costs necessary to repair damages resulting from SWM activities on properties and environment. For example, when residents are relocated due to LGU plan of constructing a sanitary landfill, the costs which will be spent in relocating concerned residents can be used to quantify environmental impacts of sanitary landfill.

Full Cost Accounting Guidebook (For Solid Waste Management)

29

Negative externalities caused by SWM activities which can be valued through this method are usually disposal activities such as the following: Disturbance of surface water regime (pollution and contamination) Disturbance of groundwater regime (pollution and contamination) Disturbance of socio-cultural significant areas Expropriation of property Decreased enjoyment of property Relocation of homes Decrease of property values

Productivity Method is used in quantifying goods or services which could have been produced if it were not for negative externalities caused by SWM activities. This can be computed by adding all the decreases in amounts of goods or services affected by SWM activities as well as lost income or salaries from not being able to use lands allotted for SWM activities or being physically impaired for work due to diseases from SWM activities. This can be applied in the following negative externalities:

a. Collection and Transport Reduced source of livelihood (if scavenging by collection crew is not allowed) Back and joint injuries from lifting heavy waste-filled containers and driving collection trucks Respiratory diseases from ingesting particulates, bio-aerosols and volatile organics Puncture wounds causing tetanus, hepatitis and HIV infection b. Material Recovery Reduced source of livelihood of itinerant scrap buyers and junkshops Respiratory diseases Injuries from operating heavy equipment c. Disposal Loss of use of agricultural lands Land use changes Displacement of scavengers/loss of livelihood (if scavenging is stopped) Back and joint injuries from driving heavy landfill and loading equipment Respiratory diseases Cancer

7. For negative externalities which are intangible (i.e., cannot be quantified), evaluate the magnitude of the externalities by using qualitative ratings. This can be done by using scales (e.g., 1, 2, and 3) or negative signs. For example: externality has indirect negative impacts on stakeholders or externality is almost not felt externality has direct negative impacts on stakeholders but are manageable externality has significant direct negative impacts on stakeholders with possible long-term unmanageable effects

8. Summarize both the quantitative and qualitative results of the evaluation in a matrix. An example of the matrix is shown below. In a separate table, derive the annual values for those costs which have been quantified.

30

Full Cost Accounting Guidebook (For Solid Waste Management)

9. To ensure that the FCA includes all costs, review the externalities with significant direct negative impacts and check if upfront, maintenance or back-end costs provide for the necessary mitigating measures.
Table 11. Sample Matrix to Evaluating SWM Externalities
Segregation and Reduction-atSource Externalities

Impacts Environmental Impacts 1. Aesthetics 2. Noise 3. Odor 4. Dust 5. Ecological diversity 6. Soil quality 7. Properties Health Impacts 1. Occupational hazards/Injuries 2. Respiratory diseases 3. Skin diseases 4. Digestive diseases 5. Birth defects 6. Cancer Social Impacts 1. Lifestyle 2. Livelihood/employment status 3. Enjoyment of properties 4. Noise 5. Odor 6. Dust 7. Property values 8. Land changes 9. Public safety 10. Social stigma

Collection and Transport Externalities

Recycling Externalities

Composting Externalities

Disposal Externalities

Full Cost Accounting Guidebook (For Solid Waste Management)

31

6. BASIC STEPS IN FCA


FCA involves ten basic steps beginning with evaluating records to the analysis of costs. Each of these are described below, with illustrations provided where they apply.
Step 1: Collect all the necessary records and reports that could provide information on the past, current and the planned SWM program. As suggested in Section 3 of this Guidebook, this step includes listing of SWM activities in chronological order, developing the SWM flowcharts, review of future plans, inventory of assets, conduct of organization assessment, and review of financial records. The output of this step is a description of the whole SWM program including the whole range of costs associated with its implementation. The description covers initial activities prior to the implementation of the new SWM program and future program implementation usually programmed for 10 years. If the LGU decides to use the output of FCA to help evaluate its management options, the alternatives that it is considering should be clearly laid out so that cost requirements of each option can be compared. Step 2: Using the data generated above, conduct an inventory of past, current and likely future costs involved in the implementation of the program. The checklist provided in Section 2 of this Guidebook can serve as handy reference to identify gaps. The outputs of this step are listings of cost items classified into upfront costs, operating and maintenance costs, and back-end costs. These listings need to be carefully reviewed to check for existing expense items not covered by the checklist but which should be included. Step 3: Compute for the annual allocation of the upfront cost using the depreciation method and allocation multipliers. In order to do this, the necessary information must be completed: (a) actual costs of each upfront investment (b) the final year of each units useful life, (c) to which activity of the SWM each expense item belong. At this point the analyst should carefully review expense items so that hidden costs are also included. It is also important to identify which items are shared with other programs since a different procedure would be used for the annual allocation of their costs.

The computational procedures for depreciating upfront cost (using the straight line method) are explained in Section 4. Tables 1 and 2 below are samples of expected outputs of the cost allocation process for equipment. The allocation tables should include the cost of all capital investments, including land, buildings and facilities, vehicles, and equipment. Shared upfront cost items require additional computations prior to annualizing its costs. After identifying upfront costs shared with other departments or sections of the LGU, compute for the allocation multipliers in order to account for the costs solely for SWM activities. The resulting value will be used in computing for the depreciation (annualized) costs of the identified shared upfront costs items. Step 5 provides more details to allocate shared upfront costs.

32

Full Cost Accounting Guidebook (For Solid Waste Management)

Table 12. Sample Inventory of Equipment/Assets and Their Useful Life for the SWM Program
# of months End used in yr Useful Year of Year of life, Useful Acquired acquisition Years Life 2002 2000 1998 2001 2000 2000 2000 2000 2000 2000 2000 2000 1999 2000 1998 1999 2000 2000 2000 1998 1998 3 4 1 10 6 6 6 6 6 7 7 8 3 8 3 10 8 8 11 1 1 3 3 5 5 5 5 5 5 5 5 5 5 5 5 5 5 4 4 4 5 5 2005 2003 2003 2006 2005 2005 2005 2005 2005 2005 2005 2005 2004 2004 2002 2003 2004 2005 2005 2003 2003

Item Computer

Description Ice Intel Pentium 4.1Ghz Intel Pentium III 650Mhz

Unit Value 53,000 92,000 670 14,500 1,400 1,850 330 570 960 20,000 1,000 65,000 4,500 130 3,800 1,650 1,100 3,500 4,800 6,700 55,800

Qty 1 1 2 3 2 1 1 1 1 1 20 1 1 50 1 3 4 1 1 1 1

Total Value

Date Acquired

53,000 25-Sep-02 92,000 11-Aug-00 1,340 6-Nov-98

Calculator Radio Electric fan

Aurora Calculator Handled GP 68 Motorola Standard Electric Fan Industrial Fan

43,500 15-Feb-01 2,800 16-Jun-00 1,850 16-Jun-00 330 16-Jun-00 570 16-Jun-00 960 16-Jun-00 20,000 25-May-00 20,000 24-May-00 65,000 23-Apr-00 4,500 23-Sep-99 6,500 18-Apr-00 3,800 22-Sep-98 4,950 16-Feb-99 4,400 18-Apr-00 3,500 3-Apr-00

Rake Shovel

Rake Shovel (eagle) Shovel (Lapad) Canon camera with complete accessories Steelbeds Vermi-composter Happy Soil Composter Happy Soil Composter

Camera Vermicomposter Composter

Chairs

Chairs Sr. Exec. Chair with Glass Life Visitor's Chair

Table

Oval Table

Weighing scale Weighing Scale White board Cabinet White Board 4" x 8"

4,800 12-Jan-00 6,700 55,800 6-Nov-98 3-Nov-98

Steel Filing Cabinet 1.5 HP National Split-type Wall Air Conditioner Mounted Model CS 120

Table 13. Sample Annual Depreciation Cost of Equipment/Assets of the Municipal Environment and Natural Resources Office - SWM Program Item Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total Computer Ice Intel Pentium 4.1Ghz 4,417 17,667 17,667 13,250 53,000 Intel Pentium III 650Mhz 10,222 30,667 30,667 20,444 92,000 Calculator Aurora Calculator 22 268 268 268 268 246 1,340 Radio Handled GP 68 Motorola 7,250 8,700 8,700 8,700 8,700 1,450 43,500 Electric Fan Standard Electric Fan 280 560 560 560 560 280 2,800 Industrial Fan 185 370 370 370 370 185 1,850 Rake 66 66 66 66 33 330 Rake 33 Shovel Shovel (eagle) 57 114 114 114 114 57 570 Shovel (lapad) 96 192 192 192 192 96 960 PA System PA System with accessories 1,650 3,300 3,300 3,300 3,300 1,650 16,500 Camera Canon camera with complete 2,333 4,000 4,000 4,000 4,000 1,667 20,000 accessories Vermicomputer Steelbeds Vermicomputer 2,333 4,000 4,000 4,000 4,000 1,667 20,000

Full Cost Accounting Guidebook (For Solid Waste Management)

33

Item Composter

Description Happy Soil Composter Happy Soil Composter Chairs Chairs Sr. Exec. Chair with Glass Life Visitor's Chair Table Oval Table Weighing Scales Weighing Scale White Board White Board 4" x 8" Cabinet Steel Filing Cabinet Air Conditioner 1.5 HP National Split-type Wall Mounted Model CS 120 TOTAL

1998 1999 225 238 950 1,031

112 1,340

2000 8,667 900 1,083 950 1,238 733 467 880 1,340

2001 2002 13,000 13,000 900 900 1,625 1,625 950 713 1,238 1,238 1,100 1,100 700 700 960 960 1,340 1,340

2003 2004 2005 2006 Total 13,000 13,000 4,333 65,000 900 675 4,500 1,625 542 6,500 3,800 206 4,950 1,100 367 4,400 700 700 233 3,500 960 960 80 4,800 1,228 6,700

930 11,160 11,160 11,160 11,160 10,230 55,800 1,302 14,974 44,875 83,760 89,390 89,608 55,213 32,231 1,450 412,800

Table 14. Salary Computation and Benefits of Solid Waste Collection and Disposal Services Personnel in 2001 for the Municipal Environment and Natural Resources Office SW Utility MRF Processor Worker Guards (MRF) MRF Head MRF Bgy. EcoAide

Items Clerk Basic Annual 23,854 277,872 161,465 104,828 Salary GSIS Premium 18,562 28,728 16,429 11,814 PAG_IBIG 2,400 2,400 1,200 1,200 Contribution Medicare 1,500 3,000 2,250 1,425 PERA 6,000 12,000 12,000 6,000 Bonus 5,000 10,000 10,000 5,000 Cash Gift 5,000 10,000 10,000 5,000 RATA 31,860 Clothing 4,000 8,000 8,000 4,000 Allowance Productivity Pay 2,000 4,000 4,000 2,000 TOTAL 309,976 356,000 226,544 141,267

MENRO Section Head 4Head

Grand Garbage Collectors Driver Foreman Total 712,824 59,235 71,526 5,940 43,544 2,432,807 4,366 246,399 8,400

43,559 123,290 156,458 514,878 9,406 1,200 1,275 6,000 5,000 5,000 4,000 1,575 2,100 6,825 18,000 24,000 78,000 15,000 20,000 65,000 15,000 20,000 65,000 12,000 16,000 52,000 12,349 15,682 51,597

9,450 84,000 70,000 70,000 56,000

825 6,000 5,000 5,000 4,000

600 30,825 6,000 258,000 5,000 215,000 5,000 215,000 31,860 4,000 172,000 2,000 86,000 70,510 3,696,291

2,000 6,000 8,000 26,000 28,000 2,000 77,440 203,214 262,240 859,300 1,101,800 88,000

Step 4: Compute for the annual operating and maintenance costs identified in Step 2. Identify which of these costs are exclusive to SWM and which are shared costs. To facilitate computations, it will be useful to make a separate list for the shared costs.

For operating and maintenance costs that are exclusive to SWM, directly add annual costs. Use actual costs for past years. For future years, project the requirements of any proposed expansion of coverage and facilities in the SWM plan. Table 15 summarizes the salary and benefits of personnel assigned full-time to the SWM program for 2001. Computation should take into account changes in the number of personnel, salary rates and benefits within the program period. Similar summaries will be done for utilities, supplies and materials, travel expenses, communications, other services, and other operating and maintenance cost items.

34

Full Cost Accounting Guidebook (For Solid Waste Management)

Step 5: For shared upfront, operating and maintenance, and back-end costs, allocation multipliers will be applied to determine the annual costs share of SWM programs. The method for computing and using various share allocation multipliers are discussed in Section 4. It is useful to review these before deciding on what share allocation factor to use for each type of shared cost. Table 16 provides a guide to organize the computation of shared operating and maintenance costs. It should be noted that the shared costs will differ from one LGU to another; Table 16 list examples of shared allocation factors to use. Table 15. Shared Overhead Costs and Proposed Allocation Factors of the Municipal Environment and Natural Resources Office SWM Program
Shared Costs (P) Suggested Share Computed Share for 2002 Allocation Factor Factor Personnel Share 21,271,886 10,000 12,000 37,000 60,000 Budget Share Budget Share Share in office space (sq m) Budget Share 8.9% 33% 33% 33% 33% Cost Share of SWM Program in 2002 1,890,834 3,333 4,000 12,333 20,000

Shared Cost Items Administrative and Finance Staff Support Utilities Repair and Maintenance of Office Equipment Building maintenance Supplies and Materials

The computed allocation for shared costs will be used for the current year. It will be necessary to do similar computations for previous years. For future years, some assumptions will be made on how much the current allocated shared costs will increase annually within the program period. Table 17 provides the suggested format of the final result/output of this step. Again, it is to be noted that the shared costs listed are examples only and do not apply to all LGUs.
Table 16. Annual Operating and Maintenance Costs of the Municipal Environment and Natural Resources Office - SWM Program
Cost Item Personnel Expenses* Traveling Expenses Repair and Maintenance of SWM Vehicles Training and seminars Operations of Redemption Center Operation of Composting Center Shared costs: Admin and Finance staff support Communications expenses Utilities Repair and maintenance of office equipment Building maintenance Supplies and materials TOTAL 1998 1999 2000 2001 2002 2003 2004 2014 Total

* Includes insurance and other benefits

Full Cost Accounting Guidebook (For Solid Waste Management)

35

Step 6: Compute for the back-end costs and their annual amortization. The initial step is to estimate the cost of closure and post-closure care for the SWM facilities that will occur after the program period. This will include existing open dumpsites and eventually controlled dumpsites (which are to be phased out by end of 2005 and 2007, per RA 9003, respectively.).

As explained in Section 4, back-end costs are to be amortized annually. The important data requirements are the estimated capacity of the facilities (per studies undertaken prior to their establishment) and the annual utilization rates (actual for past years and projected for future years). Once these are known or estimated, one can proceed with the computation of the annual amortization, following the example shown in Section 4 and using the table below.
Table 17. Sample format for Estimating Annual Amortization Costs for Back-End Costs. Annual Amortization Cost e = ((d) of current year ((d) of previous year)

Year (i =1,2.. n)

Cumulative Capacity Used

Utilization Rate

Cumulative Amortization Cost (current year) (d) = ( c) X total estimated cost

(b) (a) 1998 1999 : 2007

(c ) = (b)/100,000

Date of closure: ______ Cost of closure and post-closure care: P____________ Estimated capacity of facility: ___________ tons

Step 7: Consolidate all the direct costs (upfront, operating and maintenance, and back-end) and their annual costs. Tables 19-22 are examples of a consolidated table showing all direct costs and indirect costs Step 8: Identify external costs and other costs. Evaluate the extent of the external costs and find ways to value of these costs. Some external costs can only be described qualitatively. The same processing of annualizing direct costs also applies to externalities that can be measured, i.e., (a) determine the start year where the externality will occur, (2) estimate value the potential externality on an annual basis, (3) determine the year where externality will cease to exist. Table 23 shows an example of annualized external costs. Step 9: Append the external costs that have been quantified into the annual cost accounts. If the external costs cannot be quantified or annualized, simply attach the summary matrix to the analysis. Include notations on which valuation method were used to value externalities, e.g., Contingent Valuation, Dose-Response, Restoration Cost or Productivity Method. When externalities are unquantifiable, attach results of Summary Matrix of Valuation of Externalities. All these are discussed in Section 5. Step 10: Analyze the results using variables that are useful for LGU decision-making (e.g., cost per ton, cost per household, cost per bag).

When FCA is used to decide on various SWM alternatives, this step should point to the most costefficient option. When used to estimate fees, this step should provide the basis for the LGUs cost recovery scheme. The resulting information at this step could likewise be used as benchmark for LGU as a basis for negotiating with private contractors and investors. A summary table of all costs will guide analysts in the analysis of costs Table 24 show a sample summary table of annualized costs.

36

Full Cost Accounting Guidebook (For Solid Waste Management)

Table 18. Consolidated Annualized Upfront Costs for the SWM program Years, Covering Expenditures of Years prior to program implementation
Cost Items Pre-Development Activities 1 : n Buildings/Offices 1 : Equipment, Machines and Tools 1 : Site Development, Land Acquisition and or Improvement 1 : 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL

Total Upfront Costs


Table 19. Annual Operation and Maintenance Costs for the SWM Program Years
Cost Items Salaries and Wages 1 : n Supplies and Materials 1 : Travel 1 : Buildings, Structures and Vehicles Maintenance 1 : Tool and Equipment Maintenance 1 : Trainings and Seminars 1 : Utilities 1 : Others Total Operation and Maintenance Expenses 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL

Full Cost Accounting Guidebook (For Solid Waste Management)

37

Table 20. Annual Amortization for the SWM Program Years of the SWM Back-End Costs
Closure Year _____ Costs

Amortization Year
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 TOTAL

Cost Items

Site Closure 1 : n Buildings, Equipment, Machinery Decommissioning 1 : n Post -closure care 1 : n Retirement, Health Benefits at Post Closure etc. 1 : n Oversight costs for postclosure 1 : n Total Back-end Costs

Table 21. Annualized Probabilistic Estimates of Contingent Costs for the SWM Program Years
Cost Items Potential for chemical contamination 1 : n Compensation of potential damages 1 : n Insurance coverages 1 : 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL

38

Full Cost Accounting Guidebook (For Solid Waste Management)

Cost Items n Others 1 : n TOTAL Contingent/Remediation Costs

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

TOTAL

Table 22. Annualized Estimates of Potential Externalities for Implementation of the SWM Program
Cost Items
Valuation Method Used

Annual Values of Externalities 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TOTAL

Air/Water pollution 1 : n Deterioration of Aesthetic Values 1 : n Health Impacts 1 : n Impacts on property values 1 : n Social Values 1. Community image 2. Noise, odor 3. Congestion 4. Others :

Total External Costs

Full Cost Accounting Guidebook (For Solid Waste Management)

39

Table 23. Summary of annualized SWM costs for the plan period.
Cost Items Upfront Costs Operation and Maintenance Costs Backend Costs Contingent Costs External Costs Grand Total SWM Costs 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL

The following costs summary is proposed: 1. Summary for the LGU 2. Summary by source fund 3. Summary by SWM stage 4. Summary by SWM activity

40

Full Cost Accounting Guidebook (For Solid Waste Management)

REFERENCES
Bebbinton, J., R. Gray, C. Hibbitt, E. Greg, 2001. Full Cost Accounting: An Agenda for Action. ACCA Research Report No. 73 London, United Kingdom http://www.accaglobal.com/ members/publications/ (downloaded April 2004) South West Public Health Observatory and Centre for Research in Environmental Systems, Pollution and Remediation, 2002. Waste Management and Public Health: The State of the Evidence, A Review of the Epidemiological Research on the Impact of Waste Management Activities on Health. (Prepared by D. Pheby, M. Grey, L. Giusti, and L. Saffron. University of the West of England, UWE, Bristol. http://www.swpho.org.uk/waste/pdfs/PDFwaste.pdf (Downloaded April 2004) Dixon, J. 1998. The Economic Valuation of Health Impacts, World Bank Publications. http://lnweb18.worldbank.org/ESSD/envext.nsf/44ByDocName/EconomicValuationofHealthI mpacts1998PDF118KB/$FILE/EconomicValuationofHealthImpacts1998.pdf (Downloaded April 2004) Environmental Resources Management, 2003. Final Report of the Warwickshire Waste Management Forum Annex D. Environmental and Human Health Impacts. Warwickshire County Council Shire Hall, Warwick. http://www.warwickshire.gov.uk/Web/corporate/ pages.nsf/Links/3CAF4CAB3FF3B5AD80256A96002EA60A (Downloaded April 2004) The Environment Agency, (Undated). Environmental Facts and Figures: Resources and wastes, and landfill sites. The Environment Agency (UK) http://www.environment-agency.gov.uk/ yourenv/eff/resources_waste/213982/207743/?lang=_e (Downloaded April 2004) South West Public Health Observatory and the Centre for Research in Environmental Systems, Pollution and Remediation Waste management and public health: the state of the evidence A review of the epidemiological research into the impact of waste management activities on health South West Public Health Observatory (Prepared by D. Pheby, M. Grey, L. Giusti, and L. Saffron). Centre for Research in Environmental Systems, Pollution and Remediation University of the West of England, UWE http://www.swpho.org.uk/waste/ and http://www. swpho.org.uk/waste/images_html/tab9waste.htm (Downloaded April 2004) European Commission, DG Environment. 2000. A Study on the Economic Valuation of Environmental Externalities from Landfill Disposal and Incineration of Waste. European http://europa.eu.int/comm/environment/enveco/waste/cowi_ext_from_landfill. Commission, pdf Vrijheid, M.2000. Health Effects of Residence Near Hazardous Waste Residence Sites. Environmental Health Perspectives Supplements Volume 108, Number S1 March 2000 http://ehp.niehs.nih.gov/members/2000/suppl-1/101-112vrijheid/vrijheid-full.html (Downloaded April 2004) Hester, R.E.; Harrison, R.M, editors. 2002. Environmental and Health Impact of Solid Waste Management Activities. Royal Society of Chemistry, http://www.knovel.com/knovel2/ Toc.jsp?BookID=749 (Revisited November 2004) P. Beukering, M. Drunen, K. Dorland and H. Jansen, 1998. External Economic Benefits and Costs in Water and Solid Waste Investments: Methodology, Guidelines and Case Studies. Report number R98/11, 20 October 1998. Institute for Environmental Studies, Economics for the Environment Consultancy Ltd. Amsterdam and London,

Full Cost Accounting Guidebook (For Solid Waste Management)

41

Metro Manila Solid Waste Management Project. 2003. Waste Characterization Study-Methodology. Department of Environment and Natural Resources, Quezon City Pacific Consultants International Kokusai Kogyo Co., Ltd. 1999. The Study on Solid Waste Management for Metro Manila in the Republic of the Philippines. Japan International Cooperation Agency, Manila Pugh, M. and P. Rushbrook, 1999. Solid Waste Landfills in Middle and Lower Income Countries: A Guide to Planning, Design and Operation. Technical Paper No. 426. World Bank, Washington D.C., Enviros Consulting Ltd and University of Birmingham with Risk and Policy Analysts Ltd, Review of Environmental and Health Effects of Waste Management: Municipal Solid Waste and Similar Wastes: Topic 5 - Quantification of the Environmental Consequences of Emissions. Open University and Maggie Thurgood. Department for Environment, Food and Rural Affairs http://www.defra.gov.uk/environment/waste/research/health/ (Downloaded May 2004) Roberts, D., A. Redfearn, J. Dockerty, J. Greenacre, M. Morgan, D. Tucker, 2000. Health effects of landfill sites - Statistical Data Included. British Medical Journal. British Medical Association. http://www.findarticles.com/p/articles/mi_m0999/is_7248_320/ai_62918853 (Downloaded April 2004) Furedy, C. Undated. Reducing Health risks of Urban Organic Solid Waste Use. York University / University of Toronto. http://www.ruaf.org/1-3/23-25.html (Downloaded April 2004) Idaho Department of Environmental Quality, Undated. Air Quality: Residential Backyard Burning http://www.deq.state.id.us/air/prog_issues/burning/residential.cfm (Revisited November 2004) Themelis N. J., Undated. The Environmental Impacts, Assessing Waste to Energy and Landfilling Waste Management World. ISWA, July-August 2002, p. 35-41 http://www.seas. columbia.edu/earth/wtert/wmwpapernjt.pdf (Downloaded April 2004). United States Environmental Protection Agency. 1997. Full Cost Accounting for Municipal Solid Waste Management: A Handbook. United States Environmental Protection Agency. USA, http://www.epa.gov/epaoswer/non-hw/muncpl/fullcost/docs/fca-hanb.pdf Williams, Paul. 2002. Emissions from Solid Waste Management Activities. In: Environmental and Health Impact of Solid Waste Management Activities Edited by: Hester, R.E.; Harrison, R.M. Royal Society of Chemistry http://www.knovel.com/knovel2/Toc.jsp?BookID=749 (Revisited November 2004) Food and Agriculture Organizaion, 2000. Applications of the Contingent Valuation Method in Developing Countries: A Survey. FAO Economics and Social Department Papers 146. http://www.fao.org/DOCREP/003/X8955E/x8955e00.htm Commonwealth Department of the Environment, Sport and Territories and Commonwealth Department of Finance Commonwealth, and the Resource Asssessment Commission. 1995. Common Techniques to Value Environmental Resources: an Introductory Handbook. Australian Government Publishing Sercice. Australia, http://www.deh.gov.au/pcepd/ economics/value/ King, D. M. and M. Mazzotta,Undated. Contingent Valuation Method. In: Ecosystem Valuation: A Website: http://www.ecosystemvaluation.org/contingent_valuation.htm. Website funded by US Department of Agriculture Natural Resources Conservation Service and National Oceanographic and Atmospheric Administration

42

Full Cost Accounting Guidebook (For Solid Waste Management)

King, D. M. and M. Mazzotta,Undated. Damage Cost Avoided, Replacement Cost and Substitute Cost Methods. In: Ecosystem Valuation: A Website: http://www.ecosystemvaluation.org/ cost_avoided.htm. Website funded by US Department of Agriculture Natural Resources Conservation Service and National Oceanographic and Atmospheric Administration Holl, K. and R. Howarth, 2000. Paying for Restoration. Restoration Ecology Vol 8 No. 3 pp 263267. http://www.ioe.ucla.edu/academic/Fall2003/Reading_100303.pdf (Downloaded April 2004) Mishra, S.K. Undated. Valuation of Environmental Goods and Services: An Institutional Assessment, http://www.msu.edu/user/schmid/mishra.htm (Posted on the Web by A. Schmid) (Visited April 2004) Moons, Ellen. 2003. The Development and Application of Economic Valuation Techniques and Their Use in Environmental Policy A Survey. Energy, Transport and Environment Center for Economic Studies.Belgium, http://www.econ.kuleuven.be/ete/downloads/ETE-WP-200307.PDF King, D. M. and M. Mazzotta,Undated. Productivity Methods In: Ecosystem Valuation: A Website: http://www.ecosystemvaluation.org/productivity.htm. Website funded by US Department of Agriculture Natural Resources Conservation Service and National Oceanographic and Atmospheric Administration Strand, Ivar and Dharmarante, Gerard. 1999. Approach and Methodology for Natural Resources and Environmental Valuation, http://www.cpacc.org/download/valuation.pdf (Downloaded April 2004) United States Environmental Protection Agency. 2000. Guidelines for Preparing Economic Analyses. Chris Dockins Guidelines Project Leader. United States Environmental Protection http://yosemite.epa.gov/ee/epa/eed.nsf/ webpages/Guidelines.html Agency. USA. (Downloaded April 2004) London Group on Environmental Accounting 2002 Valuation Techniques for Measuring Degradation Draft of the Statistical Commission http://www4.statcan.ca/citygrp/london/ publicrev/scchap09.pdf Willies, K.G., editor. 1995. Environmental Valuation: New Perspectives. University of Newcastle up on Tyne. J T Corkindale

Full Cost Accounting Guidebook (For Solid Waste Management)

43

S-ar putea să vă placă și