Critical analysis of current quantum models to calculate closure costs for municipal waste sites in the North West Province
Smith, Frederick Hendrik
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In South Africa (SA) Waste landfill sites are known polluters and cause negative impacts on the receiving environments. They need to be rehabilitated and closed upon reaching capacity or reaching the end of their operational lifespan. It is also a legal and financial requirement to make financial provision for these final rehabilitation and closure costs. The lack of a standardised basis or guidelines complicates the accurate determination of the provision amounts reflected in the Annual Financial Statements (AFS) of municipalities. Consultants or determiners of these amounts currently use different bases, methods and means for the annual valuations and this has resulted in discrepancies or uncertainties in determining the correctness (over- or understatement) thereof. Godschalk et al. (2015:27) referred to the lack of a standardised methodology as a limiting factor for municipalities in calculating the provision disclosure. Auditing the AFS and notes particular to the waste landfill and closure provisions supported and collaborated with the aforementioned. Although there is a serious lack of a proper framework or guidelines in the financial provision cost determination, there are some comprehensive specifications or legislative requirements for the actual rehabilitation and closure of the waste landfill sites. Most waste landfill site licences include or impose an obligation to rehabilitate, repair and close these sites in conformance with Section 12 of the Minimum Requirements for Waste Disposal by Landfill, further referred to as Minimum Requirements (DWAF, 1998:1-8). Section 12 is specific to rehabilitation, closure and end-use and emphasises the environmentally acceptable rehabilitation or reparation of the landfill site as a prerequisite for proper closure (DWAF, 1998:1-8). The fact is that legislation in South Africa is more focused on ascertaining rehabilitation and closure of waste landfill sites and to prevent further pollution after closure, with an obvious absence of specific guidelines or criteria to ensure uniform, accurate and reliable determination of these provision amounts. In the 2013/14 financial period the nineteen local municipalities in the North West Province of South Africa used nine different consultants or external specialists to determine their waste landfill rehabilitation and closure provisions. Only two of the local municipalities performed their own determinations, based and elaborated onprevious external calculation models. By scrutinising the various quantum calculations and basis for determination as well as physical visits to the applicable waste landfill sites, a critical evaluation of the determination basis or criteria used in determining the waste landfill financial provision was done. The research methodology also included a questionnaire completed and submitted by the consultants or specialists as well as the AFS and waste landfill specifics (status quo). The expectation or outcome perceived was that the basis used to determine the waste landfill rehabilitation and provision costs might differ per calculator or costing model. The research results emphasized the fact that some of the determiners of waste landfill rehabilitation and closure costs used different bases or criteria for calculating the provision disclosures as well as some significant discrepancies in calculating the provisions for similar types of facilities or operations. Comparisons between the waste landfill site specifics, AFS figures and notes (2014 and 2015) as well as the quantum models used for determination, however, also reflected some basic similarities in the parameters used for valuation. Although there is no obligation to use or follow a particular base or guideline in the provision determination process, there is a pressing need to establish standardised guidelines or specific criteria to align or be used in costing models. This will ensure a more consistent, comparable and reliable determination of the final provisions reflected in the AFS and would also be in line with the processes established and followed in developed countries. The different bases, variables or parameters used in South Africa ensure confusion and uncertainty in determining the accuracy of waste landfill provision calculations.