An environmental liability exists when there is a requirement, based on statute, regulation, or legal agreement to perform cleanup (i.e., removal, containment, disposal) from federal operations that resulted in hazardous waste. Environmental liabilities must be recognized on the financial statement for probable and measurable future outflows or expenditure of resources for environmental cleanup, closure, and/or disposal actions, in accordance with Technical Release Number 2. A probable environmental liability exists when it is more likely than not that hazardous waste resulted from operations where the Department of Defense (DoD) was likely involved. A measurable environmental liability exists when a dollar value can be estimated for the cleanup costs or study needed to define further cleanup parameters.
Accounting definitions for common environmental terms are established by the Federal Accounting Standards Advisory Board (FASAB) based on Generally Accepted Accounting Principles. The following definitions from the FASAB Standards and the DoD Financial Management Regulations (FMR) must be followed to correctly report environmental liabilities:
DoD accounting policy for environmental liability is contained in the DoD FMR Volume 4, Chapter 13. This guidance must be used in conjunction with the Army's accounting policy.
The 1990 Chief Financial Officers (CFO) Act requires DoD to report liabilities, including environmental liabilities, in financial statements as is done in the private sector. These requirements were expanded through subsequent legislation including the Government Performance and Results Act (GPRA), the Government Management Reform Act (GMRA), and the Federal Financial Management Improvement Act (FFMIA). These statutes require the federal government to make financial management more effective, improve financial management systems, and provide accurate, complete, reliable, timely, and auditable information for managerial and congressional reporting.
In addition to meeting legal requirements, the Federal Accounting Standards Advisory Board states the objectives of federal financial reporting to be budgetary integrity, operating performance, stewardship, and systems and control. As in the private sector, financial statements provide readers, such as Congress and the public, with a picture of the financial position of the federal government. In addition, environmental liabilities associated with life-cycle cleanup and disposals provide input to programmatic decision-making.
All DoD Components must report their environmental liabilities. At Joint Bases and other cases on host/tenant arrangements, environmental restoration liabilities should be estimated and reported by the Component with responsibility for management and reporting of the associated property, plant and equipment, normally the supporting Component. Exceptions may occur and are defined in the Financial Management Regulations and other DoD policy.
Once the environmental liabilities for restoration, corrective actions and closures are identified, association with a real property asset must be completed. Efforts are underway to meet this requirement.
Cleanup and Closure Environmental Liabilities related to environmental sites and permitted activities
The U.S. Army Environmental Command (USAEC) established and maintains databases, Army Environmental Data Base – Restoration (AEDB-R) and Army Environmental Data Base – Compliance-related Cleanup (AEDB-CC) for use by Army Commands and Direct Reporting Units to track cleanup program requirements used for reporting environmental liabilities as well as other reporting. The AEDB-R is used by USAEC and ACSIM BRAC Division to track and report environmental liabilities associated with the Defense Environmental Restoration Program. The AEDB-CC is used by Army Commands and Direct Reporting Units to track and report environmental liabilities associated with the Compliance-related Cleanup Program. No current data collection system is available for tracking and reporting closure costs that are reported as environmental liabilities.
Environmental Liabilities associated with Property, Plant, and Equipment
The Assistant Secretary of the Army, Acquisition, Logistics, and Technology is the lead agency for providing guidance for the tracking and reporting of environmental liabilities associated with general and military equipment, chemical weapons disposal, and weapons systems disposal.