This means that  for some programs the current cash- and obligation-based budget does not  recognize the full costs up front when decisions are made or provide  policymakers the information to compare the full costs of a proposal with  their judgment of its benefits. Because these cleanup costs are not  usually paid until many years after the government has committed to the  operation creating the waste, policymakers have not been provided  complete cost information when making decisions about undertaking the  waste-creating operation. Objectives, Scope, and Methodology

To examine ways that budgeting might be improved for environmental  liabilities, we focused on three key questions: (1) What are the federal  government’s reported environmental liabilities? With respect to primary budget data, agencies do not  reflect associated cleanup costs in their budget requests for new waste- producing assets. Alternative Approaches to Consider Environmental Liabilities

Alternative approaches to promote more complete consideration of the full  costs of environmental cleanup and disposal associated with the  acquisition of new assets fall along a continuum from provision of  supplemental information to accrual of those costs in budget authority up  front, as assets are acquired. Each Approach Has Potential Benefits and Challenges

Each of the three approaches described offer both potential benefits and  challenges to consider. Although agencies are required to develop these  estimates for financial statement purposes, they are not developed until  after the asset is purchased. The third approach, accruing budget authority over the life of the asset,  represents the largest departure from current budgeting practices. Agencies generally do not yet have experience in estimating future  cleanup/disposal costs up front, before the decision to purchase the waste- producing asset is made. Ultimately, accruing budget authority for the tail-end  cleanup/disposal costs along with the front-end purchase costs of assets  would best ensure that the cleanup/disposal costs are considered before  the government incurs the liability, but raises significant implementation  challenges.
Why GAO Did This Study

Although environmental liabilities resulting from federal programs and activities represent the third largest category of the federal government's liabilities, the current cash- and obligation-based budget does not provide information on estimated cleanup costs before waste-producing assets are purchased. As a result, policymakers do not have the opportunity to weigh the full costs of a proposal with their judgment of its benefits. The Chairman of the House Committee on the Budget asked GAO to examine and report on various ways budgeting might be improved for environmental cleanup costs, including some of the benefits, limitations, and challenges associated with each.

What GAO Found

The federal government is legally required to clean up hazardous wastes that result from its operations. Agencies are currently required to report these environmental liabilities in their financial statements, but these estimates are not recognized until after a waste-producing asset is placed into service. Although agencies are supposed to consider cleanup and disposal costs associated with these assets as part of the acquisition process, they typically do not request the related budget authority until many years after the government has committed to the operation creating the waste, when cleanup is imminent. Alternative approaches to promote up-front consideration of the full costs of environmental cleanup and disposal for assets being proposed for purchase fall along a continuum ranging from supplemental information to enactment of additional budget authority. While each approach has potential benefits and challenges, agencies' lack of experience in estimating future cleanup/disposal costs up front suggest starting at the more modest end of the continuum--providing supplemental information to decision makers. Eventually, however, accruing budget authority for the tail-end cleanup/disposal cost along with the front-end purchase cost estimates would do the most to ensure that these costs are considered before the government incurs the liability.