Financial Management

DOD's Liability for Aircraft Disposal Can Be Estimated Gao ID: AIMD-98-9 November 20, 1997

Recent legislation requires government agencies to provide policymakers and agency managers with more reliable financial information with which to formulate budgets, manage government programs, and make difficult policy choices. However, the Defense Department (DOD) has yet to implement the federal accounting standard that requires recognizing and reporting liabilities, such as those associated with aircraft disposal, nor has DOD provided guidance to the military services. Aircraft disposal is an ongoing process, and the cost can be reasonably estimated. Accordingly, these activities meet the criteria for a reportable liability. Information on the three major disposal processes--demilitarization, storage and maintenance, and hazardous materials removal and disposal--is available to develop cost estimates. Congress, recognizing the importance of gathering and considering disposal cost information, has required DOD to develop life-cycle environmental costs, including demilitarization and disposal costs, for major defense acquisition programs.

GAO noted that: (1) DOD has not implemented the federal accounting standard that requires recognizing and reporting liabilities such as those associated with aircraft disposal, nor has DOD provided guidance to the military services; (2) aircraft disposal is an ongoing process and the cost can be reasonably estimated; (3) accordingly, these activities meet the criteria for a reportable liability; (4) information on the three major disposal processes--demilitarization, storage and maintenance, and hazardous materials removal and disposal--is available to develop cost estimates; (5) Congress has recognized the importance of accumulating and considering disposal cost information; and (6) in the National Defense Authorization Act for Fiscal Year 1995, Congress required DOD to develop life-cycle environmental costs, including demilitarization and disposal costs, for major defense acquisition programs.

Recommendations

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