[CPEO-MEF] Defense and Energy Departments environmental liabilities

[Lenny Siegel <lsiegel@cpeo.org>]

Environmental Liabilities: Long-Term Fiscal Planning Hampered by Control 
Weaknesses and Uncertainties in the Federal Government's Estimates

Government Accountability Office
GAO-06-427
March 31, 2006

The nation's military installations and nuclear weapons production 
facilities have accumulated many types of waste and contamination over 
the years. The federal government estimated its environmental liability 
to clean up this waste at $249 billion in fiscal year 2004, representing 
the federal government's third largest reported liability. It represents 
a significant future outflow of funds at the same time as many other 
competing demands for federal dollars, but is currently not auditable. 
GAO was asked to address (1) the nature and extent of the government's 
environmental liabilities, (2) the extent to which Energy's and 
Defense's processes and controls were designed to estimate and report 
environmental liabilities in accordance with federal accounting 
standards, and (3) the nature and types of uncertainties that are 
currently not estimable but could affect the cost of cleanup.

The federal government's environmental liability reflects the estimated 
cost to clean up and dispose of environmental contamination in every 
state in the nation. The Departments of Energy and Defense report about 
99 percent of this liability. Energy's reported liability of $182 
billion relates primarily to the cleanup and disposal of nuclear waste, 
contamination, and by-products that resulted from decades of nuclear 
weapons production. Defense's reported liability of $64 billion is 
primarily for the cleanup of hazardous wastes at training ranges, 
military bases, and former defense sites; disposal of nuclear ships and 
submarines; and disposal of chemical weapons. While the design of 
Energy's internal controls have enabled its auditors to determine that 
Energy's financial statements were presented fairly and in accordance 
with federal accounting principles, significant weaknesses in Defense's 
controls have hindered it from producing auditable environmental 
liability estimates. Specifically, Defense's outdated and incomplete 
accounting guidance for developing and reporting its environmental 
liability estimates led to errors in financial reporting; its policies 
and procedures for determining, reporting, and documenting environmental 
liability estimates were not consistently followed; and none of the 
military services had adequate controls in place to help ensure that all 
identified contaminated sites were included in their environmental 
liability cost estimates. These weaknesses not only affected the 
reliability of Defense's environmental liability estimate, but also that 
of the federal government as a whole. Even if Defense resolved its 
internal control weaknesses, uncertainties exist for both Energy and 
Defense--the effect of which cannot currently be estimated--that could 
increase the government's environmental liabilities beyond the currently 
recorded amounts. These uncertainties involve the lack of feasible or 
proven remediation technologies, regulatory impediments and legal 
challenges, and uncertainties with the agencies' abilities to meet their 
current cost and schedule targets. It is important to understand the 
nature and extent of these uncertainties because they have the potential 
to materially impact the ultimate cost and timing of cleanup activities.



For the original abstract and a link to the full report, see
http://www.gao.gov/docdblite/summary.php?rptno=GAO-06-427&accno=A50560

--


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org


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