Benefits of Full Cost Accounting (FCA)
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
FCA can help you:
- Identify the costs of Municipal Solid Waste (MSW) management
- See through the peaks and valleys in MSW cash expenditures
- Explain MSW costs to citizens more clearly
- Adopt a businesslike approach to MSW management
- Develop a stronger position in negotiating with vendors
- Evaluate the appropriate mix of MSW services
- Fine-tune MSW programs
Identify the costs of Municipal Solid Waste (MSW) management
When municipalities handle MSW services through general tax funds, the costs of MSW management can get lost among other expenditures. With FCA, managers can have more control over MSW costs because they know what the costs are.
See through the peaks and valleys in MSW cash expenditures
Using techniques such as depreciation and amortization, FCA produces a more accurate picture of the costs of MSW programs, without the distortions that can result from focusing solely on a given year's cash expenditures.
Explain MSW costs to citizens more clearly
FCA helps you collect and compile the information needed to explain to citizens what solid waste management actually costs. Although some people might think that solid waste management is free (because they are not billed specifically for MSW services), others might overestimate its cost. FCA can result in "bottom line" numbers that speak directly to residents. In addition, public officials can use FCA results to respond to specific public concerns.
Adopt a businesslike approach to MSW management
By focusing attention on costs, FCA fosters a more businesslike approach to MSW management. Consumers of goods and services increasingly expect value, which means an appropriate balance between quality and cost of service. FCA can help identify opportunities for streamlining services, eliminating inefficiencies, and facilitating cost-saving efforts through informed planning and decision-making.
Develop a stronger position in negotiating
When considering privatization of MSW services, solid waste managers can use FCA to learn what it costs (or would cost) to do the work. As a result, FCA better positions public agencies for negotiations and decision-making. FCA also can help communities with publicly run operations determine whether their costs are competitive with the private sector.
Evaluate the appropriate mix of MSW services
FCA gives managers the ability to evaluate the cost of each element of their solid waste system, such as recycling, composting, waste-to-energy, and landfilling. FCA can help managers avoid common mistakes in thinking about solid waste management, notably the error of treating avoided costs as revenues.
Fine-tune MSW programs
As more communities use FCA and report the results, managers might be able to "benchmark" their operations to similar communities or norms. This comparison can suggest options for "re-engineering" current operations. Furthermore, when cities, counties, and towns know what it costs to manage MSW independently, they can better identify any savings that might come from working together.