The Environment Protection (Scheduled Premises) Regulations 2017 specify which scheduled activities are required to submit financial assurance.

Scheduled activities required to have financial assurance as part of licences are landfills, PIW management (including PIW composting), container washing, and bulk storage facilities.

Additionally, financial assurance can be a requirement of a works approval or pollution abatement notice associated with any of these activities, as well as for contaminated sites requiring long-term management or onsite soil containment.

All sites that have a licence condition to maintain a financial assurance will be required to provide one.

EPA will prioritise this work based on risk and will contact duty holders individually to advise of the required timeframes for submitting a financial assurance. The time permitted will allow sufficient time for the administrative tasks involved in providing the financial assurance.

Financial assurance proposals should be prepared using the new guidelines and be in a letter style addressing the following components at a minimum:

• amount (including supporting calculations)
• type/s – if the proposed type is not a bank guarantee, the proposal should include a justification and how risks to EPA are managed through use of the proposed type
• an overview of the premises and operations
• an overview of the company
• any information supporting the environmental track record of the company.

Financial assurance proposals should be sent to financial.assurance@epa.vic.gov.au

The new calculation guidelines encourage duty holders to minimise risk through providing means to reduce the amount. This can be achieved for PIW management facilities by any combination of the following:

• reducing the amount of waste permitted to be stored on their site
• including licence sub-limits for wastes that are expensive or difficult to treat or dispose
• nominating amounts of waste or containers that will have storage agreements in place and therefore would be returned to the waste owners if required.

Landfill operators can reduce their financial assurance amount through progressive rehabilitation of the landfill.

For local councils operating landfills, EPA accepts internal financial provisioning to comply with financial assurance requirements. This is to ensure that adequate funds are set aside for closure, rehabilitation, and aftercare costs.

If EPA has requested a calculation of landfill closure, rehabilitation, and aftercare costs, local councils must prepare the requested calculation using EPA guideline 1596 and submit it as evidence that anticipated costs have been appropriately evaluated.

Further, they must follow the Local Government Victoria guideline Accounting for landfills that sets out principles-based guidance to comply with the accounting standard and financial reporting requirements for internal provisioning.

EPA expects that it will continue to require bank guarantees as the form of financial assurance in most cases, however other types of financial assurance may occasionally be appropriate. The final Types of FA guideline provides guidance on circumstances where alternative types of financial assurance may be acceptable.

EPA advises duty holders to prepare a proposal describing the proposed financial assurance amount and type/s. If the proposed type of financial assurance is not a bank guarantee, the duty holder must substantiate why the alternative type is justified and how risk to EPA would be mitigated. This should include an overview of premises operations, reference to the criteria in the guideline, financial position of the duty holder, duty holder environmental track record and how the duty holder intends to fund any remedial or rehabilitation works required at the site.

Holding insurance for sudden and accidental events and gradual pollution is prudent for any duty holder; this applies to a range of duty holders beyond those that are required to provide financial assurance.

Insurance is not generally available for anticipated costs such as landfill rehabilitation or disposal of stockpiles of waste, which are required to be addressed under financial assurance requirements. No policies have yet been presented that provide this coverage.

At this stage there are no operating mutual funds available for duty holders to join. EPA is most likely to accept mutual funds as a form of financial assurance when proposed by an industry association.

The estimate is to be prepared by the duty holder or their consultant, then assessed by the auditor.

EPA is responsible for deciding the financial assurance amount. The auditor assessment is a key input to EPA’s decision-making process, however EPA owns this process.

EPA issues the letter to the duty holder determining the amount and type of the financial assurance.

No. The auditor declaration has been deliberately drafted to have a very narrow focus on the appropriateness of the closure and aftercare activities. Assumptions and uncertainties highlighted by the auditor will have less reliance placed on them. Any activity where the auditor does not agree with the method or parameters is excluded from the scope of the auditor’s declaration. EPA understands that unit costs are not a core competency of environmental auditors and so unit cost assessments made by the auditor are also excluded from the scope of the declaration.

An auditor may rely on the most recent versions of rehabilitation plans for financial assurance purposes in the following instances:

• licensed landfills 
• rehabilitation plans developed to fulfil the requirements of a closed landfill’s monitoring, rehabilitation and aftercare pollution abatement notice.

Auditors may rely on the most recent aftercare management plan as long as it meets the minimum requirements set out in Closed landfill guidelines (publication 1490) or sufficiently justifies deviations.

If the auditor believes existing plans are inadequate, this would be useful information for EPA to receive. However, auditors are not required to re-assess plans for financial assurance purposes in the circumstances described above.

No. Financial assurance calculation assessments are not intended to identify further regulatory requirements at a landfill. They are about costing known requirements.

If there is no known need for additional work or investigation on an existing cap, such work or investigations need not be included in financial assurance calculations.

The costing can be based on rates the duty holder can secure, so long as they can provide verifiable evidence that such rates are achievable.

If the licence specified a capping standard at the date of cell completion, this standard will apply. Otherwise, the standard at the time of closure applies.

For closures after 2001, a cap design that complies with the version of the best practice environmental management (BPEM) from that time is the standard that applies.

For cells closing in future, the cap design needs to be prepared and approved in accordance with licence conditions L22, L25 and L26 (refer to Landfill licensing guideline (publication 1323)).

Where the duty holder believes a cap standard applies other than what is stated in this guidance, it should be confirmed with EPA before the auditor completes their assessment.

Auditors need to use their own discretion to decide whether performing an assessment would be a conflict of interest with other work they have conducted at a site.

EPA does not consider there to be an inherent conflict between the performance of audits and financial assurance assessments at a site.

Instead of an accuracy standard, EPA is seeking the auditor’s opinion on the quality of the estimate. The auditor should form an opinion as to whether costs and other assumptions in the calculation are reasonable and justified. Professional cost estimation expertise may be beneficial in preparing or assessing costs in calculations but is not required by EPA.

The auditor should form their view on unit costs for each activity based on:

1. evidence from the duty holder that unit costs are realistic (e.g. because similar costs/rates have been achieved on previous rehabilitation works on that or similar sites)

2. their understanding of industry rates (relying on various sources of information, e.g. landfill rehabilitation tender documentation, Rawlinsons Construction Cost Guide).

The auditor’s assessment comments on each activity should describe the basis of their view.

EPA’s general principle of independence that applies across all auditor activities is that auditors must not review or audit their own work or work prepared by their employing company.

The estimate should be based on present-day cost rates. Future costs are difficult to predict. Financial assurance estimates are intended to be reviewed on a regular basis to keep pace with cost changes.