Financial Management

DOD's Liability for the Disposal of Conventional Ammunition Can Be Estimated Gao ID: AIMD-98-32 December 19, 1997

The Defense Department (DOD) has yet to implement the federal accounting standard that requires recognizing and reporting liabilities, such as those associated with ammunition disposal, nor has it provided the military services with guidance. DOD agrees with GAO's recommendation to incorporate Statements of Federal Financial Accounting Standards No. 5 in its Financial Management Regulation. Ammunition disposal is an ongoing process that results from materials with a limited shelf-life or that otherwise will not be used in operations, and the cost can be reasonably estimated. Accordingly, these activities meet the criteria for a reportable liability. The cost information that DOD developed in response to requests from Congress can be used as a starting point to estimate the ammunition disposal liability. Several additional factors will have to be addressed, including the reliability of data, the completeness of data, and the need for periodic updates.

GAO noted that: (1) DOD has not yet implemented the federal accounting standard that requires recognizing and reporting liabilities such as those associated with ammunition disposal, nor has it provided guidance to the military services; (2) in commenting on GAO's recent report on the aircraft disposal liability, DOD agreed with GAO's recommendation to incorporate statements of federal financial accounting standard (SFFAS) No. 5 in its Financial Management Regulation; (3) ammunition disposal is an ongoing process that results from materials with a limited shelf-life or that otherwise will not be used in operations, and the cost can be reasonably estimated; (4) accordingly, these activities meet the criteria for a reportable liability; (5) the cost information that DOD developed in response to requests from congressional committees can be used as a starting point to estimate the ammunition disposal liability; and (6) a number of additional factors will have to be addressed, including data reliability, data completeness, and the need for periodic updates.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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