xvEPA
United States
Environmental Protection
Agency
Solid Waste
and Emergency Response
(5306W)
EPA530-R-95-077
August 1996
1
Full Cost Accounting
Resource Guide
@ Printed on paper that contains at least 20 percent recycled fiber.
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About This Guide 2
Full Cost Accounting Articles and Reports 3
Full Cost Accounting Handbooks 9
Related Documents 11
State and Local Contacts 14
Note: The information in this resource guide was obtained from
government and association sources believed to be reliable. Neither the
analyses nor the content of the resources necessarily reflect EPA's views.
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Fall Cost Accounting Fact Sheet, National Recycling Coalition, Alexandria, VA,
1996. (No cost; 703 683-9025)
This fact sheet was developed to provide general guidance to local government
officials on the principles of FCA and how it can benefit their community's pro-
grams. Developed by the National Recycling Coalition's Full Cost Accounting
Subcommittee, the fact sheet covers how FCA works, cost components to include,
barriers to its implementation, case study information and resources, and how FCA
can help a community achieve increased reduction through more informed planning
and management decisions.
"Full Cost Accounting in Texas," Dave S. Yanke, Texas Town and City, February 1995, pp.
12-15,24,28. Texas Municipal League, Austin, TX. ($2; phone: 512 719-6300)
This 6-page article describes two FCA methods: a modified cash basis and an
accrual basis. The difference between the systems is that principal payments and
cash capital outlays are used to recover capital costs instead of depreciation expenses.
The author explains that Texas has chosen to use the modified cash basis because it
can help cities prepare and evaluate solid waste rates by recovering the cash costs
associated with these services. Establishing the cost of such service-based rates can
help cities avoid potential revenue shortfalls and examine different scenarios of ser-
vices, capital expenditures, and increased capital costs. Through examples and
exhibits, the author also addresses the cost components involved when developing
cost-based rates, allocating costs among programs, allocating program costs among
customer types, and developing user fees.
"Full Cost Accounting: What Is It? Will It Help Or Hurt Recycling?", Norm Crampton,
Resource Recycling, September 1993, pp. 57-61. Resource Recycling, Inc., Portland, OR.
($4; phone 503 227-1319)
This 4-page article discusses FCA legislation in three states: Indiana, Florida, and
Georgia. The states' approaches to FCA are explained, with examples from select
cities. Many of the benefits and barriers to various methodologies are presented. A
major benefit of FCA is providing cities, towns, and waste districts with a new
financial management tool to defend their programs on a cost basis. In Indiana,
FCA has allowed the City of Franklin to show the cost relationships between dispos-
al and recycling. Subsequently, a private contractor was hired to provide solid waste
services that now include recycling at a lower cost than before. Florida has shown
little success in implementing its FCA law due to a lack of resources and enforce-
ment personnel. Many communities in Georgia comply with the law; however, it
appears as though few truly understand the methodology or have sufficient records
to complete the report adequately.
Full Cost Accounting Articles and Reports
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Putt Cast of Providing Garbage Collection and Disposal, Recycling and Yard Waste
Services in Indiana Cities and Towns During 1993: Special Report No. 5 to the Indiana
GeneralAssembfy, Indiana Institute on Recycling, Indiana State University, School of
Education, Terre Haute, IN, 1994. (No cost in-state, $10 out-of-state; phone:
812237-3000)
This special report outlines the 1993 findings of Indiana's statewide law requiring
all cities and towns that provide solid waste services to calculate the full cost of ser-
vice annually. The cost reports are received at the Indiana Institute of Recycling,
where the information is analyzed and used to produce summary documents. Some
of the findings contained in this report are as follows: 211 Indiana cities and towns
indicate they avoided $3.3 million in dumping costs through yard waste and recy-
cling programs; yard waste diversion programs were found to be the least costly solid
waste management program provided by cities and towns; and the percentage of
costs associated with specific services are: 41 percent for garbage collection, 23 per-
cent for garbage disposal, 22 percent for recyclables collection, and 14 percent for
yard waste programs. A series of 11 charts are included for 1993 and illustrate the
summary statistics for solid waste services in Indiana.
"How to Calculate Waste Disposal Costs," Leonard E. Joyce Jr., Government Finance
Review, August 1990, pp. 20-21,48. Government Finance Officers Association, Chicago,
IL. ($6; phone: 312 977-9700)
This article discusses the costs associated with setting up a landfill facility, includ-
ing development, initial construction, operation, and closure/postclosure. A work-
sheet is provided to demonstrate the components and cost categories involved. A
cost estimate for a hypothetical landfill also is provided.
How to Compare Costs Between In-House and Contracted Services, Lawrence Martin:
Reason Foundation, Los Angeles, CA, March 1993. ($11; phone: 310 391-2245)
Many considerations enter into the decision to contract out MSW services,
including cost. This document provides a step-by-step approach for local govern-
ments to assess the full cost of these services. Because government activities are typi-
cally funded through several departments, officials may be unaware of the full cost
of providing a given service. For example, they may not consider indirect costs such
as pension plans and administration. This document identifies costs that are often
ignored and those that should be considered when comparing service options.
Full Cost Accounting Articles and Reports
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r
Issue Paper, Subcommittee on Economics/full Cost Accounting NRC Policy Research
Cmmnittee, National Recycling Coalition, Inc., Alexandria, VA, September 1995. (No cost;
phone: 703 683-9025)
This paper describes the rationale for encouraging FCA, the issues surrounding
FCA, and the historical relationship that FCA has in the National Recycling
Coalition. Topics discussed include planning issues, financing, evaluation criteria for
FCA models, implementation methodologies, and barriers to implementation.
Implementing FCA on the local level will require that significant and diverse barri-
ers be overcome. NRC recommendations include identifying barriers; developing
tools, guidance documents, and a standardized methodology; and incorporating the
research currently being done on life-cycle assessment for MSW management
options into FCA studies. An appendix provides an overview of the existing pro-
grams in four states (Florida, Georgia, Indiana, and North Carolina). A table com-
paring the cost centers (collection, contracting, processing, etc.) in each state also is
provided.
Modeling University City's Integrated Waste Management System, in WastePlan, 1994-
1998, Paul Ugon, September 1995; Modeling Park Hills'Integrated Waste Management
System in WastePlan, Paul Ugpn and Robert Graff, December 1995; Existing and Future
Solid Waste Management Systems in the Regional Plan Association Region, November
1992, Tellus Institute, Boston, MA. (No cost; 617 266-5400)
These diree documents profile three cities' waste management systems and plans
using WastePlan, a user-friendly computer modeling tool developed by Tellus
Institute. WastePlan creates a model of current solid waste systems that is used to
investigate how changes to the system would affect system costs and revenues. It
presents outcomes in terms of waste flows, diversion rates, collection truck and labor
requirements, processing and disposal capacity needs, total costs, and costs per ton.
In essence, WastePlan simulates a full cost accounting approach to solid waste plan-
ning. In University City, WastePlan projected the additional equipment and labor
costs that would be incurred from expanding the recycling program, as well as the
cost reduction realized for each ton of recyclables handled. The Park Hills analysis
shows that changing from a flat fee system to a pay-as-you-throw system would
meet several of the city's goals, including reducing waste generation, increasing recy-
cling rates and balancing waste disposal costs and revenues. In 1992, WastePlan
found that if New York City implemented recycling, composting, and waste preven-
tion education programs, overall solid waste management system costs would
decline significantly in the New York Metropolitan Area and would be no more
expensive than alternative programs that would rely exclusively on landfilling and
incineration.
Full Cost Accounting Articles and Reports
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"Public/Private Competition in the City of Phoenix, Arizona," Jim Flanagan and Susan
Perkins, Government Finance Review, June 1995, pp. 7-12. Government Finance Officers
Association, Chicago, IL. ($6; phone 312 977-9700)
By initiating a competitive process for all city services, Phoenix, Arizona, created
a system that provides the best service for the least cost. By involving city depart-
ments in competition with private contractors in a public-bid situation, and by
using FCA, it has been able to compare 13 service areas and save a total of more
than $27 million. The competitive process demands that efficiency and customer
satisfaction be established as the most important values. The attention paid to these
factors also leads to creative approaches to equipment design, staffing, and costs.
Because of this approach, solid waste programs in particular have benefitted—better
equipment has been purchased, the life of a landfill was extended by providing a
contractor with monetary incentives to compact materials,,and a transfer station was
developed.
"Solid Waste Forum-Full Cost Accounting," Abraham Michaels, RE, Public Works,
November 1995, pp. 60,62. Public Works Publications, Osterville, MA. (No cost; phone:
508428-9282)
This editorial provides an overview of FCA principles and explains that it is a
practice that has been used for many years. Many communities may be using FCA
without being aware that the term "FCA" is applicable to their practices. The
American Public Works Association has been promoting FCA in its documents
since the 1960s. The author reviews two of these documents. In addition, the
author suggests that the recent interest in FCA might be due to recycling. He sug-
gests that while in the past, the financial factors that influenced costs and manage-
ment of solid waste services were under the control of local governments, these gov-
ernments have no control over the value of recyclables. He also believes that the
recent movement to encourage local governments to take into consideration the clo-
sure and postciosure costs in their budgets encouraged the use of FCA. The author
also mentions EPA's efforts to promote FCA by working with a workgroup and
preparing outreach and technical materials, and reviews some of the communities
and states that are promoting FCA as well.
Full Cost Accounting Articles and Reports
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m •m Integrated Municipal Solid"Vffcste Management, Solid Waste Association of Norm America
„ J (SV5ANA), 1995, Silver Spring, MD. (For full report, $255 for SW\NA members; $300
for nonmembers. For summary report, $42.50 for SVK&NA members; $50 for nonmem-
bers; phone 301 585-2898 ext 239)
This 1,000-page report presents principal findings from case studies on six inte-
grated solid waste management systems: Minneapolis, Minnesota; Palm Beach
County, Florida; Scottsdale, Arizona; Seattle, Washington; Sevierville, Tennessee;
and Springfield, Massachusetts. The purpose of the case studies was to develop and
present consistent cost, resource use, and environmental regulation information on
each system. A full cost accounting approach was used for the cost analysis in each
of the six case studies. Major findings include: (1) examining program costs on an
incremental basis proved to be extremely useful for decision-making; (2) collection
of MSW, recyclables, or yard trimmings represents the most significant system cost;
(3) additional energy consumed to collect and process recyclables and yard trim-
mings is relatively small. Detailed descriptions are provided for all findings. A sum-
mary report is also available.
Full Cost Accounting Articles and Reports
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The following handbooks and guidance manuals are produced by or for local
communities that are implementing FCA. They can be obtained directly from the
federal, state, or local entity, as listed.
Component Cost Summary, Solid Waste Authority of Palm Beach County, 'West
Palm Beach, FL, March 1995. ($7.20; phones 407 640-4000, ext 4220)
This document summarizes the cost components of the Solid Waste Authority's inte-
grated solid waste management system in fiscal year 1994. The focus of the report is on
the direct costs of operating the solid waste facilities and programs, including upfront and
Backend expenditures (e.g., acquisition of land and materials and postclosure care of the
landfill). Palm Beach County uses the FCA data to improve decision-making. The report
presents a comprehensive flow chart of the county's waste flow and tables showing landfill
tonnage per year, recyclables revenues per ton, cost of landfilling per ton, etc. It describes
many of the Authority's programs and its methodology for finding the full costs.
Full Cost Accounting for Municipal Solid Waste: A Handbook, Office of Solid Waste,
U.S. Environmental Protection Agency, EPA530-R-95-041, October 1995. (RCRA
Hotline, phone: Washington Metro Area; 703 412-9810, or TDD: 703 412-3323;
Long Distance: 800 424-9346, or TDD: 800 553-7672)
This handbook is a comprehensive source of information on FCA for MSW pro-
grams. The key concepts and benefits of FCA are explained. Some of these principles
include clarifying what and whose costs to cover, identifying activities to be costed and
resources involved, supplementing available financial data, allocating overhead costs to
solid waste services, and reporting cost information to different audiences. The benefits of
FCA include determining the actual MSW management costs, explaining MSW costs
more clearly to citizens, adopting a businesslike approach to providing MSW services,
and increasing cost-effectiveness through fine-tuning MSW management. While the
handbook is not a step-by-step "how-to" document, it does describe the steps involved
with implementing FCA for solid waste management. References and a glossary of terms
are included.
Full Cost Accounting Handbooks
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SERA
United States Environmental Protection Agency
(5306W)
Washington, DC 20460
Official Business
Penalty for Private Use
$300
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