United States

Cleaning Up the Federal Government’s Accounting for Environmental Liabilities

Jun 30, 2014
From the Government Institute

During the 20th century, the scope of federal government defense-related activities increased dramatically as a result of World War II and the Cold War. These activities resulted in the creation of federally-owned plants and factories, including hundreds of nuclear facilities, large volumes of waste and nuclear materials requiring treatment, stabilization and disposal, and the world’s largest fleet of aircraft and ships.

The growth of the federal government also resulted in its ownership of hundreds of buildings, many of which have been in service for decades.

The past 20 years have seen the government begin a massive effort to clean up the legacy of contamination from its past activities, and this cleanup effort has coincided with the effort to establish federal financial reporting capability, including measurement and reporting of environmental liabilities. These endeavors have made great progress, but have yet to reach their goals.

This Issue Brief highlights the nature and types of environmental and disposal liabilities and the drivers of the federal government’s liability; discusses the accounting for environmental liabilities, including complicating factors; and illustrates common pitfalls that give rise to problems in accounting for environmental liabilities, the related accounting guidance and how to avoid the common pitfalls.