Environmental Liabilities

Environmental and Disposal Liabilities (E&DL) are expected, probable and measurable future costs for environmental cleanup, closure or disposal of past Army-related activities included on the Army’s financial statement. Army E&DL exists when:

• Contamination is or is likely to be present;
• The contamination is Army-related or Army formally accepts financial responsibility for cleanup, closure and/or disposal; and
• Environmental cleanup, closure, or disposal is required by lease contracts, federal, state, or local statute, regulation, or other legal agreement.

The two basic types of E&DL are:

• Event-driven liabilities: caused by a release to the environment that requires cleanup and has the potential to cause harm to humans and the environment (ex. groundwater contamination)
• Asset-driven liabilities: the costs for environmental-related disposals or closure of an asset that is non-routine (e.g., landfill closure costs).

A probable E&DL exists when it is more likely than not contamination resulted from Department of Defense (DoD) operations. A measurable E&DL exists when a cost for cleanup or the study to define further cleanup parameters can be estimated.

The Army tracks and reports quarterly environmental and disposal liabilities for Army restoration sites including Installation Restoration Program, Military Munitions Response Program and Building Demolition and Debris Removal for active and Base Realignment and Closure (BRAC) installations and Formerly Used Defense Sites (FUDS). The Army also reports other accrued environmental liabilities caused by corrective actions, closure requirements, response at operational ranges, asbestos, environmental disposal for military equipment weapons programs and chemical weapons disposal programs.

The Army performs ongoing testing of Cost to Complete packages, which provide the E&DL projections for environmental cleanup, closure or disposal at Army restoration and compliance related cleanup sites, in addition to testing internal controls, and develops and implements corrective actions for both. They also perform quantitative drill down analysis of posting to the Balance Sheet and will perform both internal and external validation for added assurance of audit readiness.

Tracking of environmental and disposal liabilities is a vital and necessary requisite for producing a complete and auditable financial statement. To appropriately budget and look for efficiencies in addressing environmental cleanup and compliance handling, the Army must know the cost of these actions both now and into the future.