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Chapter 08 – Environmental and Disposal Liabilities

Volume VI - Liabilities

Date Approved: April 10, 2023

Financial Documents

Volume VI - Liabilities

Chapter 08 – Environmental and Disposal Liabilities

Questions concerning this policy chapter should be directed to:

0801 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) policies for identifying, recognizing, estimating, recording, and reporting environmental and disposal liabilities (EDLs).

Key points covered in this chapter:

  • VA is subject to environmental laws and regulations regarding air, water, and land use, the storage and disposal of hazardous materials, and the operations and closure of facilities where environmental contamination may be present;
  • VA’s facility engineers and environmental managers will exercise professional due diligence to identify the presence or likely presence of contamination for potential EDLs;
  • In general, EDLs result from Environmental Protection Agency (EPA) regulations contained in 40 C.F.R. Part 300, National Oil and Hazardous Substances Pollution Contingency Plan, and Part 307, Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Claims Procedures; and
  • VA will recognize, estimate, and report EDLs in accordance with Office of Management and Budget (OMB) Circular A-136 and Federal Accounting Standards Advisory Board (FASAB) authoritative guidance.

0802 Revisions

SectionRevisionOfficeReason for ChangeEffective Date
080501D, 080503A, 080505B and 0806Add asbestos cleanup GAAP resourcesOFP (047G)FASAB Technical Release 21April 2023
080503 and 0806Remove provisions on pro-rata recognition over the life of the asset and related Treasury referenceOFAFASAB SFFAS 6 supports the alternate practice.April 2023
0806 Authorities and ReferencesConsolidate FASAB items under one link; add detail for referencesOFP (047G) & OGCFull update reviewApril 2023
See changelog for previous policy revisions.

0803 Definitions

Asbestos – A widely used, mineral-based material that is resistant to heat and corrosive chemicals. Typically, commercial asbestos appears as a whitish, fibrous material which may release fibers that range in texture from course to silky; however, airborne fibers that can cause health damage may be too small to see with the naked eye.

Asbestos-related Cleanup Costs – Costs of removing, containing, and/or disposing of asbestos-containing materials from property, or material.

Cleanup Costs – Costs of removing, containing, and/or disposing of non-operational hazardous waste/material, contamination and/or property.

Location of Concern (LOC) – An area within the jurisdiction, custody or control of a VA office that is suspected to be contaminated based on known past activities or observed and reported physical indicators, where due diligence has not yet been completed.

Non-friable Asbestos – Any material containing more than one percent asbestos that, when dry, cannot be crumbled, pulverized, or reduced to powder by hand pressure.

Operational Cleanup Costs – Costs associated with spills and hazardous waste disposal that are part of operations, are handled immediately, and do not result in future liabilities/EDLs.

Professional Due Diligence – Performing required functions in accordance with a profession’s technical or ethical standards.

Probable – That which can reasonably be expected or is believed based upon existing evidence to be more likely to occur than not to occur.

Property, Plant, and Equipment (PP&E) – Tangible assets that have an estimated useful life of two or more years, are not intended for sale in the ordinary course of business and are intended to be used or available for use by the entity.

Reasonably Estimable – Describes the ability to reliably quantify in monetary terms the outflow of resources that will be required

Recognize – To formally record or incorporate an item into an entity’s financial statements as an asset, liability, revenue, expense, etc.

Sites/Facilities – Refers to the specific locations where VA must remedy negative and harmful environmental conditions.

0804 Roles and Responsibilities

Under Secretaries, Assistant Secretaries, and Other Key Officials are responsible for ensuring compliance with the policies outlined in this chapter.

Administration/Staff Office Chief Financial Officers (CFOs) and Fiscal Staff are responsible for appropriately identifying, estimating, recognizing, recording and maintaining documentation for EDLs. Quarterly, Administration/Staff Office CFOs are responsible for certifying the accuracy of financial statement balances including EDLs.

Office of Asset Enterprise Management (OAEM) is responsible for overseeing the development and implementation of procedures, processes, and reporting related to environmental programs, working with counterparts in other VA organizations to ensure environmental issues are addressed in all programs, and resolving differences among organizations regarding environmental issues, strategies, or procedures.

Office of Construction and Facilities Management (CFM) is responsible for working with facility directors, environmental representatives, and facility engineers to ensure appropriate environmental cleanup costs are reported for major construction projects.

Facility Engineering Service and Environmental Managers are responsible for providing and maintaining environmental cost and liability estimates.

0805 Policies

080501 General Policies

  1. In accordance with applicable environmental protection laws, VA will identify and remedy environmental conditions that require cleanup and formal closure.
  2. A list of laws that VA may be subject to are contained in Appendix A, Relevant Environmental Laws.
  3. VA will recognize an EDL in accordance with FASAB Statements of Federal Financial Accounting Standards (SFFAS) 5 and 6 and Technical Release (TR) 2, when a future cost or other sacrifice of resources is probable and reasonably estimable.
  4. VA will recognize the cost of deferred maintenance and repair (DM&R) for asbestos cleanup in accordance with SFFAS 40 and 42, as well as Interpretation 9, Technical Bulletins (TB) 2006-1 and 2017-2, and asset impairment consideration in SFFAS 44, along with applicable TRs.

080502 Identification of EDLs

  1. Facility engineers in consultation with environmental managers will exercise due diligence in identifying the presence or likely presence of contamination at a facility.
  2. Facility engineers and environmental managers will document the date and results of surveys conducted, and any actions performed, and retain them for audit purposes.
  3. VA will identify a site as having an EDL if the survey results indicate that further action (e.g., study, formal closure, or cleanup) is warranted.
  4. Facility engineers at VA local facilities will ensure that appropriate environmental cleanup costs for identified EDL sites/facilities are reported to the facility finance office.
  5. In order to determine if a site/facility must report an EDL the facility engineer must evaluate the site considering potential areas of concern. Examples of the questions that should be asked are contained in Appendix B.

080503 Estimation and Recognition of the Cleanup Cost

  1. VA will estimate cleanup costs, liability and related expense for those costs that are both probable and reasonably estimable in accordance with SFFAS 5, 6 (chapter 4), 40, 42 and 44, Interpretation 9, TB 2006-1 and 2017-2 and related TRs.
  2. Fiscal Staff from the Administrations and Staff Offices will work with the facility engineers or environmental managers to prepare liability estimates.
    1. Facility engineers or environmental managers make the probability determination and written cost estimate.
    2. Local facility engineers and environmental managers will quantify EDLs based on the written estimates.
    3. Local facility engineers and environmental managers will send cost estimate information to Administration/Staff Office Fiscal Staff.
    4. Administration/Staff Office Fiscal Staff will update the cost estimate in accordance with FASAB Technical Bulletin 2006-1: Recognition and Measurement of Asbestos-Related Cleanup Costs.
  3. VA will include costs of investigations in estimating the cleanup cost.
  4. Administration/Staff Office Fiscal Staff, in coordination with the facility engineers or environmental managers, will update environmental cleanup cost estimates on a quarterly basis.
  5. Updated cost estimates will be documented in writing by the station engineers and financial staffs and maintained with EDL files. Documentation should also be retained related to decisions that result in the estimate not being adjusted.

080504 Recording/Adjusting the EDLs

  1. Fiscal Staff in the Administrations and Staff Offices will record, in full at the beginning of each fiscal year, estimated future costs for EDL cleanup activities for which VA is responsible or has acknowledged responsibility and the EDLs are both probable and reasonably estimable. These amounts must be recorded in full as the Financial Services Center (FSC) eliminates amounts from prior years at the beginning of each fiscal year.
  2. Fiscal Staff will record EDL cost estimates in the appropriate Assets and Miscellaneous Accounts Fund (AMAF) or another fund as appropriate at the start of each fiscal year. Documentation to support entries must be retained.
  3. As the estimated cleanup costs fluctuate over time, VA will adjust the liability for re-estimates (i.e., estimates shall be revised quarterly to account for material changes due to changes in regulations, plans and/or technology, and at least annually regarding inflation or deflation) in the period of the change in estimate.
  4. VA will recognize payments as a reduction in the liability for cleanup costs as cleanup costs are paid. These include the cost of PP&E or other assets acquired for use in cleanup activities.
  5. Fiscal Staff will, in accordance with the results from quarterly reviews adjust the estimated cumulative liability for any changes in the estimated environmental clean-up costs. Adjustments will be made without reversing the original entry. Supporting documentation will be retained in accordance with National Archives and Records Administration requirement for PP&E and other asset accounting (GRS 1.1, item 030).
  6. FSC fiscal staff will reverse the year-end balance in the accrued unfunded clean-up costs general ledger account in November of each year to clear estimated clean-up costs for the current fiscal period.

080505 Reporting and Disclosure of the EDLs

  1. VA will report EDLs in its financial statements and related disclosures, in accordance with the requirements contained in OMB Circular A-136.
  2. VA will disclose, in a note to the financial statements, information related to EDLs, consistent with the requirements of FASAB SFFAS 5, 6, 40, 42, 44 and TR 2.
  3. Contingent liabilities related to EDL litigation will be reported in the Other Liabilities note of the financial statements.

0806 Authorities and References

0807 Rescissions

VA Financial Policy, Volume VI, Liabilities, Chapter 8 – Environmental and Disposal Liabilities dated August 2020

0808 Policy Approval

This policy was approved by the VA Chief Financial Officer’s Council on April 10, 2023.

Appendix A: Relevant Environmental Laws

  1. Principal Environmental Cleanup Laws
    • Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA or Superfund)
    • Resource Conservation and Recovery Act (RCRA)
    • Clean Air Act (CAA)
    • Clean Water Act (CWA), and Federal Water Pollution Control Act
  2. Other Environmental Laws (Adding to laws cited in FASAB TR 2 Appendix I, and replacing the Nuclear Regulatory Act cited in that source)
    • Safe Drinking Water Act, and Public Health Service Act
    • Toxic Substances Control Act
    • Federal Insecticide, Fungicide, and Rodenticide Act
    • Pollution Prevention Act 1990
    • Federal Facilities Compliance Act, and Solid Waste Disposal Act
    • Atomic Energy Act of 1954 and Low-Level Radioactive Waste Policy Act
    • Emergency Planning and Community Right-to-Know Act
    • National Environmental Policy Act
  3. State Laws
    • For Federal cleanup activities, state standards may apply, which are at least as stringent as Federal laws.
  4. Foreign Laws
    • As applicable.

Appendix B: Identification of Potential EDLs

The following questions identify potential Locations of Concern (LOCs) that will require evaluation. Facility engineers and environmental managers are responsible for taking appropriate measures to assess LOCs and identify EDLs. Other legal or local requirements may take precedence over these potential liabilities and LOCs. Each question identifies facility property or equipment that should be a LOC and require review. The review will determine if a potential contamination will be reported as an EDL and estimate cleanup costs.

  • Do any of the buildings on facility property contain regulated asbestos containing material (RACM) as defined by 40 CFR Part 61 Subpart M – National Emission Standards for Hazardous Air Pollutants? Note: RACM means (a) Friable asbestos material, (b) Category I non-friable asbestos containing material (ACM) that has become friable, (c) Category I non-friable ACM that will be or has been subjected to sanding, grinding, cutting, or abrading, or (d) Category II non-friable ACM that has a high probability of becoming or has become crumbled, pulverized, or reduced to powder by the forces expected to act on the material in the course of demolition or renovation operations regulated by 40 CFR Part 61 Subpart M.
  • Has the facility been named a responsible party for an offsite Superfund (CERCLA) site in a legally executed document such as a consent decree where payment of a specified amount of funds will have to be paid out of VA appropriated funds?
  • Is the facility legally required under Federal, state or local requirements, including those related to CERCLA, CAA, CWA, and RCRA, to clean up or affect closure of on-site hazardous or non-hazardous solid waste management units or utilities such as a landfill, incinerator, permitted waste treatment entity, air emission source, or regulated underground storage tank? Note: This would not include cleanup resulting from a release of hazardous material where cleanup is affected in the short term, as those are operational costs (i.e., as soon as feasible after the release is discovered.). Additionally, is the facility legally required under Federal, state or local requirements to participate in long-term cleanup of any on-site or off-site hazardous material releases?
  • Does the facility have any equipment or property that has an environmental permit or registration that requires formal closure or costs associated with obtaining clean closure?

Does the facility have any other situation that would require cleanup of hazardous waste or material that is not related to routine operation and maintenance? If so, please describe:____________________________.

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