CIF launches new toolkit that simplifies full cost accounting for Ontario recycling programs

As existing diversion programs in Ontario begin transitioning to Individual Producer Responsibility (IPR), the importance of understanding the financial impact of these changes to municipalities is becoming increasingly clear. When Blue Box Program transition occurs, municipal staff will need to be prepared to inform their council of the service level and budgetary implications of turning over their recycling programs to producers or staying on as a service provider.

This week’s blog provides a high-level overview of how small (and potentially large) municipalities can answer three of the most common questions being asked in preparation for IPR:

  • What are the full costs of providing Blue Box (PPP) services?
  • How do we account for an uncertain IPR framework?
  • What are appropriate Key Performance Indicators (KPIs)?

The answers to these questions provide a solid foundation through which municipal staff can identify the potential impacts of individual producer schemes on their municipality and be able to present informed recommendations to council and other decision makers.

New toolkit allows for easy completion, clear reference, and easy updating

If asked to identify the full cost of providing recycling services, many of us would point to the most recent RPRA Datacall as many of the costs in providing service are included and aggregated to complete the annual report. However, some costs (like actual administrative overhead) are not included in the bottom line. What’s more, because municipalities aggregate and allocate internal costs differently it is often easy to under estimate actual operating costs.

Debbie Tonneli, Clerk Administrator Municipality of Huron Shores

To bridge these gaps, the CIF with assistance from the Municipality of Huron Shores developed and tested a Small Municipality Full Cost Accounting Toolkit.  The toolkit uses information extracted from a municipality’s general ledger year end trial balances to allocate specific accounts and their balances towards the costs of providing Blue Box (PPP) services. This approach allows for:

  • Easy reference to the accounts, balances and allocation methodology used for each subtotal cost,
  • Ensuring accounts are not left off the bottom line, and
  • Quick and easy updates year after year simply by copy and pasting over last year’s balances

Huron Shores originally completed a test of the toolkit last spring, prior to submission of the 2017 Blue Box costs for the Datacall.  This year, in preparation again for the Datacall, staff updated the model with 2018 balances. The municipality’s new treasurer, who was unfamiliar with the Datacall, was able to identify, review the applied accounting policies, and aggregate the costs for submission with minimal effort.

What can be done in interpreting today’s data vs. tomorrow’s IPR?

A common concern for staff tasked with interpreting the financial impacts of an IPR scheme is that the program itself has not yet been established. With this in mind, the toolkit supports easily updating the assumptions that have gone in to determining the bottom line.

For example, should the costs to transfer materials from the waste collection/transfer site no longer be a responsibility under IPR, the municipality can select not to allocate that account’s balance against the bottom line.

Municipalities can use the tool to compare the impact of single variables on your bottom line (such as the basket of PPP goods) or even the impact of offers from different IPR schemes. As such, it’s a simple but powerful tool to support informed decision-making.

Understanding and applying Key Performance Indicators (KPIs)

Regularly compiling and reviewing KPIs related to Blue Box operations is an effective way to evaluate the efficiency of your program and detect, and address, potential issues early.  Commonly, ‘cost per tonne’ has been used by municipalities in comparing their operations to others using similar, or not so similar, equipment, lists of solicited materials, P&E plans and other factors.

These metrics are also likely to prove useful in evaluating the financial impact of IPR schemes. In British Columbia (BC), a market clearing price (MCP) was established as the financial formula used in calculating the fee paid to municipalities who opted to continue to act as service providers.  The MCP was set at a base dollar amount per household plus an incentive amount for the tonnage of materials that were collected from the service area.

In the event a similar program to BC’s is introduced in Ontario, these KPIs will likely prove useful for a municipality evaluating whether to act as a service provider.  They can also be used to establish a basis for determining the financial impact to the municipality of a specific basket of PPP goods, diversion target, and other important factors.

John Stenger, Treasurer, Municipality of Huron Shores

Lessons learned

Completing a full cost accounting (FCA) analysis of services enables programs to identify, catalog and aggregate all the elements of a program and their required balances.

This project demonstrates that an objective FCA analysis can be completed using approximately one to two days of staff time and financial resources that are readily available and easily updated in future periods to ensure relevance to decision making and changing criteria.

All Ontario municipalities can use this tool to undertake this analysis to prepare for transition to IPR programs.

For more information


For more about this project work, please contact CIF Staff.