Determining the Presence of Environmental Liabilities
in Department of Defense (DoD) Equipment

If you have made it to this page, you are probably an acquisition or financial management professional working in a program management office (PMO) that is engaged in the acquisition of Department of Defense (DoD) Equipment, in particular, general and/or military equipment.

And why are you here?

First, DoD Instruction (DoDI) 5000.02 requires that the Program Manager “shall document hazardous materials (HAZMAT) contained in the system (or equipment) and shall estimate and plan for the system’s demilitarization and safe disposal”.

Second, the DoD Financial Management Regulation (FMR) Volume 4, Chapter 13, prescribes the policy for identifying and recording environmental liabilities associated with HAZMAT on the financial statements. An environmental liability, as defined by the FMR, is “a probable and measurable future outflow of resources that exists as of the financial reporting date for environmental cleanup costs resulting from past transactions or events.” The FMR also says that “placing an item in service” is an example of a “past event”…and placing an item in service is a simplified way of saying what a PMO does.

Environmental Liabilities Quick Reference Tool

The Environmental Liabilities Quick Reference Tool makes it easier to identify environmental liabilities in DoD Equipment and shows the correct way of reporting those liabilities on financial statements. The tool asks a series of questions that guide the end user to determine the "Proper Financial Accounting Treatment for Environmental Liabilities in DoD Equipment.”

This tool must be used even if you believe the cleanup costs for HAZMAT are immaterial costs.

Instructions for using the Environmental Liabilities Quick Reference Tool

  1. Locate your program’s HAZMAT analysis and answer questions 3 through 10 on the Quick Reference Tool to determine if HAZMAT are in use on your program.
  1. If no HAZMAT is present, no further action is required.

  2. If HAZMAT is present, question 11 will help to determine if we have a probable environmental liability or if we have HAZMAT resulting from routine operations that will be recognized as a current operating expense.

  3. Determine if your HAZMAT analysis provides the data required to estimate disposal costs.
  1. Further guidance for completing a disposal analysis can be found on the Under Secretary of Defense (USD) Installations and Environment website in the Environmental Liabilities Recognition, Valuation, and Reporting Requirements document.

  2. Program Managers should refer to DoD FMR Volume 4, Chapter 13 to familiarize themselves with relevant policy guidelines for identifying, estimating, and recording Environmental Liabilities.

  3. Financial Managers should also refer to DoD FMR Volume 4, Chapter 13 to confirm that all necessary information about Environmental Liabilities is recorded on financial statements and included in financial statement notes disclosures.

Use the Quick Reference Tool for Environmental Liabilities in DoD Equipment

Download a Printer-Friendly Version (pdf) of the instructions and Tools

If you need assistance at any time, contact the Property and Equipment Policy office for support.


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