Financial Management

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) implementation of the requirement to disclose the liability associated with the disposal of federal agencies' property, plant, and equipment, focusing on missiles.

GAO noted that: (1) DOD has not yet implemented the federal accounting standard that requires recognizing and reporting liabilities, such as those associated with missile disposal; (2) because missile disposal is an ongoing process whose cost can be reasonably estimated, these activities meet the criteria for a reportable liability; (3) information on missile disassembly processes and hazardous material removal and disposal is available to estimate a disposal liability for missiles; (4) in developing the missile disposal liability, various factors need to be addressed as DOD develops its policy and specific guidance for the military services; (5) these factors include consideration of the accounting treatment of facilities needed for the disposal process, the cost of removing missiles from silos as well as disposing of the silos themselves, the cost to dispose of spare missile components, reductions in inventory due to foreign military sales and reutilization, the cost of military personnel that perform missile disposal processes, and storage and surveillance costs prior to disposal; (6) in response to previous reports on the disposal liability, DOD concurred with GAO recommendations that the Statements of Federal Financial Accounting Standards (SFFAS) No. 5 be incorporated in DOD's Financial Management Regulation and that joint implementing guidance be issued promptly on the SFFAS No. 5 requirements for recognition of the disposal liability; and (7) however, DOD stated that it would be necessary to delay the reporting of the disposal liability for ships and submarines, aircraft, and ammunition until fiscal year 1998 because the development and coordination of procedures and reporting guidance would take time to complete.