Defense Environmental Issues: Improved Guidance Needed for	 
Reporting on Recovered Cleanup Costs (26-OCT-01, GAO-02-103).	 
								 
The cleanup of contaminated Department of Defense (DOD) sites	 
could cost billions of dollars. Private contractors or lessees	 
that may have contributed to such contamination may also be	 
responsible for cleanup costs. DOD and other responsible parties 
either agree to a cost sharing arrangement with the responsible  
parties conducting the cleanup or DOD conducts the cleanup and	 
attempts to recover the other parties' share after the cleanup.  
On the basis of a GAO study, the DOD issued guidance requiring	 
its components to identify, investigate, and pursue cost	 
recoveries and to report on them in the Defense Environmental	 
Restoration Program Annual Report to Congress. The data on cost  
recoveries from non-Defense parties included in the Department's 
report for fiscal year 1999 were inaccurate, inconsistent, and	 
incomplete. As a result,  neither Congress nor DOD can determine 
the extent of progress made in recovering costs or the extent to 
which cost recoveries may offset cleanup costs. Data on cost	 
recoveries included throughout the annual report were also	 
missing from the appendix. Thus, DOD may not know whether all	 
potential cost recoveries have been actively pursued and	 
reported.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-103 					        
    ACCNO:   A02373						        
  TITLE:     Defense Environmental Issues: Improved Guidance Needed   
for Reporting on Recovered Cleanup Costs			 
     DATE:   10/26/2001 
  SUBJECT:   Hazardous substances				 
	     Cost sharing (finance)				 
	     Land management					 
	     Data integrity					 
	     Reporting requirements				 
	     Accountability					 
	     DOD Environmental Restoration Program		 

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GAO-02-103
     
Report to the Chairman and Ranking Minority Member, Committee on Armed
Services, U. S. Senate

United States General Accounting Office

GAO

October 2001 DEFENSE ENVIRONMENTAL ISSUES

Improved Guidance Needed for Reporting on Recovered Cleanup Costs

GAO- 02- 103

Page 1 GAO- 02- 103 Environmental Cleanup

October 26, 2001 The Honorable Carl Levin Chairman The Honorable John W.
Warner Ranking Minority Member Committee on Armed Services United States
Senate

The U. S. government could pay billions of dollars to clean up hazardous
waste contamination resulting from past activities at Department of Defense
(DOD) sites. 1 Non- DOD parties such as private contractors or lessees that
may have contributed to such contamination may also be responsible for the
costs of cleanup at these sites. The Department and other responsible
parties either agree to a cost sharing arrangement with the responsible
parties conducting the cleanup or the Department conducts the cleanup and
attempts to recover the other parties? share after the cleanup. In previous
reports, we identified wide variations in practices within the Department
concerning attempts to recover non- DOD parties? share of the costs of
cleanups and recommended that the Department resolve these inconsistencies.
2 Section 348 of the National Defense Authorization Act for Fiscal Year 1998
required the Department to issue guidance and collect data on cost
recoveries. In response, the Department issued guidance that requires its
components (the Army, Navy, Air Force, and Defense Logistics Agency) to
identify, investigate, and pursue cost recoveries and to report on them in
its Defense Environmental Restoration Program Annual Report to the Congress.

In fiscal year 1998, the Senate Committee on Armed Services directed that we
continue to review the Department?s efforts to recover the costs of cleanups
from non- DOD parties. 3 In August 2000 and May 2001, we briefed

1 A site is a place on an installation where hazardous materials were
released into the environment. 2 See Environmental Cleanup at DOD: Better
Cost- Sharing Guidance Needed at Government- Owned, Contractor- Operated
Sites (GAO/ NSIAD- 97- 32, Mar. 27, 1997),

Environmental Cleanup: Inconsistent Cost Sharing Arrangements May Increase
Defense Costs (GAO/ NSIAD- 94- 231, July 7, 1994), and Environmental
Cleanup: Observations on Consistency of Reimbursements to DOD Contractors
(GAO/ NSIAD- 93- 77, Oct. 22, 1992).

3 See Senate Report 105- 29 accompanying the National Defense Authorization
Act for Fiscal Year 1998 (P. L. 105- 85).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 103 Environmental Cleanup

your offices on the status of the Department?s cost recovery efforts. As
agreed with your offices, for this report, we determined whether the cost
recovery data included in the Department?s fiscal year 1999 report, the
latest issued, are accurate, consistent, and complete and how the data
changed from those reported in fiscal year 1998.

The Department?s annual report is the primary vehicle for reporting on
environmental cleanups. DOD components provide data on the costs recovered
from non- DOD parties, which are included in an appendix to the report. The
components use the Department?s 1998 guidance for reporting on cleanups and
cost recoveries. The guidance requires that the components attempt to
recover the costs of cleanups that exceed $50,000 and report the cleanup
sites? name and location, the amounts recovered, and the costs of pursuing
the recovery (for example, attorneys? fees). For our report, we reviewed the
Department?s guidance and the fiscal year 1999 report, including the cost
recovery appendix. The details of our scope and methodology are in appendix
I.

The data on cost recoveries from non- Defense parties included in the
Department?s report for fiscal year 1999 were not accurate, consistent, or
complete. As a result, the data are not useful for management and oversight
because neither the Congress nor the Department can determine the extent of
progress being made in recovering costs or the extent to which cost
recoveries may offset environmental cleanup costs. The data reported in
fiscal year 1999 were more extensive than in the 1998 report primarily
because the Army reported cost recovery activities at 88 more sites. (See
table 1.) The other components reported essentially the same number of sites
and recovered amounts for both years. The lack of sufficient Defense
guidance resulted in the following reporting deficiencies:

 Because the guidance did not define ?cost sharing,? the Department
inaccurately reported $421 million in recoveries, when only $171 million
should have been reported. The remaining $250 million was the amount the
Department paid for its share of costs for cleanups conducted by other
parties and not the amount it recovered from other responsible parties.

 Because the guidance did not specify how the DOD components were to report
data, they inconsistently reported recoveries and the costs to pursue the
recoveries- some reported cumulative data, others reported fiscal year data,
and one reported both. Results in Brief

Page 3 GAO- 02- 103 Environmental Cleanup

Additionally, data on cost recoveries included throughout the 816- page
annual report were missing from the appendix. Thus, the Department may not
know whether all potential cost recoveries have been actively pursued and
reported.

We are making recommendations to improve DOD?s guidance for reporting cost
recoveries and to enhance the accuracy, consistency, and completeness of the
cost recovery data contained in the Department?s Environmental Restoration
Program Annual Report to the Congress. The Department concurred with our
recommendations and cited a number of actions to address them.

Having nearly 28,000 potentially contaminated sites, the Department of
Defense manages one of the world?s largest environmental cleanup programs.
Under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, contractors and other private parties may share liability for
the cleanup costs at these sites. Two major types of sites that may involve
such liability are government- owned, contractor- operated facilities (whose
operators may be liable) and formerly used Defense sites (whose current and
past owners and operators may be liable). The Defense Environmental
Restoration Program Annual Report to the Congress is the primary reporting
vehicle for the status of cleanup at the many sites for which DOD is either
solely or partly responsible for the contamination. The report contains
information on the status of cleanup at the sites, such as the amounts spent
to date; future costs; and the stage of completion, among other data.

In 1992, 1994, and 1997, we reported that the Department had inconsistent
policies and practices for cleanup cost reimbursements to and/ or recovery
of cleanup costs from non- DOD parties responsible for contamination. 4 We
recommended that the Secretary of Defense provide guidance to resolve the
inconsistencies. The guidance issued by the Department requires the
components to pursue the recovery of cleanup costs of $50,000 or more and to
include in the annual report to the Congress each site?s name and location,
the recovery status, the amount recovered, and the cost of pursuing the
recovery. Under the guidance, if a component determines that it is not in
the best interests of the government to pursue a cost recovery, it must
inform the Deputy Under Secretary of Defense for

4 See GAO/ NSIAD- 97- 32, Mar. 27, 1997; GAO/ NSIAD- 94- 231, July 7, 1994;
and GAO/ NSIAD- 93- 77, Oct. 22, 1992. Background

Page 4 GAO- 02- 103 Environmental Cleanup

Environmental Security (now, the Deputy Under Secretary for Installations
and Environment), who is responsible for compiling the annual report to
Congress. The guidance does not define ?cost recovery? or ?cost sharing,?
and does not address (1) how the costs of pursuing recovery should be
determined; (2) whether data on cost recoveries should be reported by fiscal
year, cumulatively, or both; and (3) what the procedures are for ensuring
that the data are accurate, consistent, and complete.

Because the Department?s management guidance is silent or unclear on key
aspects of reporting necessary to collect, verify, and report data on
cleanup cost recoveries, its report to Congress for fiscal year 1999 does
not provide accurate, consistent, or complete data. Sound management
practices require that organizations have clear and specific guidance
regarding what data are to be collected and how they are to be reported, and
the controls to ensure the accuracy and completeness of the reports. The
reports should be useful to managers for controlling operations and to
auditors and others for analyzing operations. 5 While we note that the data
reported in fiscal year 1999 were more extensive than those reported in
1998, the guidance issued by DOD does not provide sufficient detail to
ensure the effective collection, verification, and reporting of data on cost
recoveries.

From fiscal year 1998 through fiscal year 1999, DOD reported that cost
recoveries increased from $125.3 million to $421.5 million. (See table 1.)

5 See Standards for Internal Control in the Federal Government (GAO/ AIMD-
00- 21. 3.1, Nov. 1999). Data in DOD?s Fiscal

Year 1999 Report Are Not Accurate, Consistent, or Complete

Reported Data Are Not Accurate

Page 5 GAO- 02- 103 Environmental Cleanup

Table 1: Cost Sharing and Recoveries for Environmental Cleanups Reported in
Fiscal Years 1998- 99

Dollars in millions

Defense component 1998 Sites 1999 Sites

Army $3.9 24 $299.8 112 a Air Force 108.4 7 108.4 b 7 Navy 12.2 9 12.2 10
Defense Logistics Agency 0.8 1 1.1 1

Total $125.3 41 $421.5 130

Note: Army figures include formerly used Defense sites.

a Field data indicated there were two more sites for which cost sharing was
reported but that were not identified as separate sites. The number of sites
reflects an adjustment for this omission.

b This amount does not include $6.7 million that the Air Force reported it
transferred to another federal agency for the Air Force?s share of cleanup
costs. Source: Defense Environmental Restoration Program Annual Reports to
the Congress for Fiscal Years 1998 and 1999.

The reported increase in recoveries is incorrect because $250.4 million,
over half of the $421.5 million reported as cost recoveries in 1999, was not
the amount DOD recovered but the amount it spent on environmental cleanups
conducted by other parties. For example, the Army Corps of Engineers
reported that at Weldon Spring, Missouri, it had recovered $180.6 million.
Supporting records, however, show the amount as the Corps? share of costs
for cleanup the Department of Energy is performing at the site. Corps
officials told us they reported only the Corps? share of cleanup costs at
these sites because the guidance did not define ?cost sharing.? In addition,
these officials said they did not know what others spend on cleanup at the
sites. (This is further discussed in the section on the data?s
completeness.) The Corps of Engineers also incorrectly reported recoveries
totaling about $70 million at other sites that were also its share of
cleanup costs rather than recovered amounts.

Additionally, there were other reporting inaccuracies. For example, two
sites with ongoing recoveries- the Rocky Mountain Arsenal and the
Massachusetts Military Reservation- that should have been reported by the
Army in the fiscal year 1998 report were not reported until the following
year. The reported recoveries at these two sites were $17.3 million and $28.
2 million, respectively, and were not reported because the Army did not
report cost sharing arrangements in fiscal year 1998.

Page 6 GAO- 02- 103 Environmental Cleanup

DOD?s guidance did not specify how to calculate the costs of pursuing
recovery or whether components should report fiscal year data, cumulative
data, or both. Consequently, the components? reported data for both cost
recoveries and the costs of pursuing recoveries were not consistent.

Calculating the costs of pursuing recoveries has been particularly
problematic. For example, although some costs, such as certain legal costs,
are obviously related to efforts to recover costs, other legal costs, such
as those incurred in defense against charges brought by states or counties,
are not. Reported costs to pursue recovery for fiscal years 1998 and 1999
were $6.2 million and $37.3 million, respectively. 6

In the absence of sufficient guidance, Defense components have varied in
their reporting of cost recoveries and the costs to pursue recoveries:

 The Air Force estimated the costs of pursuing recoveries at one site and
applied these same costs to other sites. It was also the only component that
reported cost sharing arrangements with other federal agencies.

 The Navy said it did not keep records to allow it to capture the costs of
pursuing recoveries in fiscal year 1998 and reported ?unknown? or ?to be
determined? in fiscal year 1999.

 The Defense Logistics Agency reported $3.6 million in costs to pursue
recoveries and $1.1 million in recovered amounts. Officials later determined
that some of the reported costs, such as contract costs for investigating
and cleaning up the site, should not have been included.

 Reporting entities have also been inconsistent in reporting data by fiscal
year and cumulatively. For example, in the 1998 report, the Army used fiscal
year data for cost recoveries and cumulative data for costs to pursue
recoveries. The following year, it used fiscal year data for both. The Air
Force and Defense Logistics Agency used cumulative data for recoveries and
costs to pursue recoveries. The Navy used cumulative data for recoveries.

6 See Defense Environmental Restoration Program Annual Report to the
Congress for Fiscal Years 1998 and 1999.

Reported Data Are Not Consistent

Page 7 GAO- 02- 103 Environmental Cleanup

Each of the methods for presenting data- cumulatively or by fiscal year- has
certain drawbacks. Showing data cumulatively shows the long term progress
that DOD has made in recovering costs, but it can also obscure instances in
which no recoveries occurred in a given fiscal year. Conversely, data for
the fiscal year do not show total recoveries at a given site.

The environmental cleanup cost recovery data reported to Congress for fiscal
year 1999 were more extensive than that reported in the previous fiscal
year?s report primarily because the Corps of Engineers reported on cost
sharing arrangements at 86 sites that it did not report in fiscal year 1998.
The Army also reported on two additional sites in the report for fiscal year
1999. The Navy reported on one additional site, and the Air Force added one
site but eliminated another. Despite the improvement, the Department still
did not report all cost recoveries in the cost recovery appendix.

In the absence of sufficient guidance, the Defense components have not
reported all cost recoveries or costs to pursue recoveries:

The body of the Department?s report includes a field for additional program
information pertaining to each site. This field includes information such as
progress in conducting investigations and contracts awarded for cleanup.
Comments in the additional information field and other sections of the
report indicated that cost recovery activities were occurring at sites that
were not included in the cost recovery appendix. We identified 138 sites
where cleanup costs exceeded the Department?s threshold for pursuing
recoveries, and where there were indications that either cost recovery was
being considered or that non- DOD parties were involved in cleanup. None of
these sites were reported in the cost recovery appendix. Fifty- five of
these sites were from the fiscal years 1998 and 1999 reports. For example,
the groundwater cleanup at Bethpage Naval Weapons Industrial Reserve Plant,
New York, involved Northrop/ Grumman and the Occidental Chemical Company.
Also, comments listed under the Army Tarheel Missile Plant, North Carolina,
indicated that cost recovery would be requested from Lucent Technologies, a
caretaker contractor at the installation. Neither, however, was included in
the report?s cost recovery appendix. Failure to include these and other
sites at which components may be recovering costs requires decisionmakers
and others to search through over 800 pages of reported cleanup data to
obtain a complete picture of cost recovery activities. Reported Data Are Not

Complete

Page 8 GAO- 02- 103 Environmental Cleanup

The Defense components are required to report both the costs shared with
non- DOD parties at the time of cleanup and the costs that they recovered
from non- DOD parties after cleanup. However, the components did not report
the amounts for some recoveries because they did not know how much money the
non- DOD parties had contributed to cleanups resulting from cost sharing
arrangements. The Department?s guidance does not include directions for
obtaining, calculating, or estimating these amounts; and the components do
not have adequate procedures to gather this information. As a result, for 88
sites listed in the fiscal year 1999 report, the amounts spent by nonDOD
parties under cost sharing arrangements were not shown. (See table 1.)

Although it is required, none of the DOD components provided the reasons for
deciding not to pursue cost recoveries. According to DOD officials, some
reasons for not pursuing recoveries include circumstances where there is
insufficient evidence that non- DOD parties caused the problems at the site,
where the other responsible party is no longer in business, or where pursuit
of the recovery would cost more than the expected amounts recovered. The
pursuit of recovery actions is a complex and lengthy process, and decisions
to pursue cost recovery at some locations may take a long time.

The cost recovery data in the Department?s annual environmental cleanup
report for fiscal year 1999 are not useful to the Congress or the Department
for management or oversight because they are inaccurate, inconsistent, and
incomplete. The lack of sufficient guidance resulted in the Department?s
overstating reported cost recoveries by $250 million, inconsistent reporting
among the Defense components, and the failure to include all recoveries in
the cost recovery appendix of the report. These problems limit the ability
of the Congress and the Department to determine the extent to which
recoveries may offset environmental cleanup costs.

To ensure that the Congress and the Department of Defense have accurate,
consistent, and complete information on cost recovery efforts, we recommend
that the Secretary of Defense direct the Deputy Under Secretary of Defense
for Installations and Environment to modify existing guidance in areas where
it is silent or unclear and provide specific guidance for (1) defining the
types of cost sharing arrangements that should be reported, (2) calculating
the costs of pursuing recovery, (3) reporting both cumulative and fiscal
year data, and (4) capturing and Conclusions

Recommendations for Executive Action

Page 9 GAO- 02- 103 Environmental Cleanup

reporting amounts spent by non- DOD parties under cost sharing arrangements.
The guidance should include control procedures for ensuring that the data
reported by the Department?s components are accurate, consistent, and
complete; identify all responsible parties; and include reasons for not
pursuing recoveries.

In official oral comments on a draft of this report from the Office of the
Deputy Under Secretary of Defense (Installations and Environment), the
Department concurred with our recommendations and plans to develop more
accurate, consistent, and complete information on cost recovery data. In
September 2001, after our report was submitted to the Department for
comments, DOD issued revised management guidance that cited a number of
actions that address our recommendations. If effectively implemented, the
guidance should improve overall reporting of cost recovery data. The
Department also noted that it was unable to verify the numbers in our report
because we had obtained data that were not included in the fiscal year 1999
annual report. As noted in our report, we visited or obtained data directly
from selected sites in order to validate the annual report data and found
the data to be inaccurate, inconsistent, and incomplete. Accordingly, the
noted discrepancies are part of the basis for our recommendations.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days after its issue date. At that
time, we will send copies to the appropriate congressional committees; the
Secretaries of Defense, the Army, the Air Force, and the Navy; the Director
of the Defense Logistics Agency; and the Director, Office of Management and
Budget. We will also make copies available to others upon request.

Please contact me on (202) 512- 4412 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix II.

Charles I. Patton, Jr. Director, Defense Capabilities and

Management Agency Comments

and Our Evaluation

Appendix I: Scope and Methodology Page 10 GAO- 02- 103 Environmental Cleanup

To determine whether the Department of Defense?s reporting of cost sharing
and recovery data was accurate, consistent, and complete, we examined the
relevant sections of the Department?s annual reports to Congress for fiscal
years 1998 (Appendix F) and 1999 (Appendix E) and documentation on the
Department?s and components? reporting criteria and other policies. We
compared reported data with data from other sources, including, for example,
comments in other sections of DOD?s annual reports, supporting documents
from selected locations, and our previous reports. We selectively reviewed
supporting information for 100 of the 130 sites listed in DOD?s cost
recovery report for fiscal year 1999. We selected the sites because reported
recoveries exceeded $1 million, because we had identified cost recovery at
those sites during earlier work and/ or because our prior work revealed
potential problems with data for these sites.

We discussed the data with headquarters officials at the Departments of
Defense, the Army, the Navy, and the Air Force and with the Defense
Logistics Agency. In addition, we visited and/ or obtained information
directly from the following 12 cleanup sites:

 Rocky Mountain Arsenal, Colorado.  Twin Cities Army Ammunition Plant,
Arden Hills, Minnesota.  Former Weldon Spring Ordnance Works, Weldon
Spring, Missouri.  Former Fort Devens, Massachusetts.  Air Force Materiel
Command and Wright- Patterson Air Force Base, Ohio.  Naval Air Station,
Whidbey Island, Washington.  Navy Facilities Engineering Command, Poulsbo,
Washington.  Defense Supply Centers, Richmond, Virginia, and Philadelphia,

Pennsylvania.  Army Corps of Engineers, Kansas City, Missouri, and Omaha,
Nebraska,

Districts. To identify indications of possible responsible parties or cost
recovery agreements, we reviewed the ?additional program information?
columns in printed annual reports for several fiscal years, including fiscal
years 1998 and 1999. We used the latest available cost data from these
reports to determine which sites had past and/ or estimated costs of
$50,000, the threshold level for DOD?s cost recovery requirements, and
determined whether they had been reported in the cost recovery appendixes in
fiscal years 1998 and 1999. There were 55 comments in other parts of the
reports for fiscal years 1998 and 1999 that indicated the presence of
potential responsible parties or that cost recovery was being considered or
pursued. Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 11 GAO- 02- 103 Environmental Cleanup

We conducted our review from August 2000 to August 2001 in accordance with
generally accepted government auditing standards.

Appendix II: GAO Contacts and Staff Acknowledgments

Page 12 GAO- 02- 103 Environmental Cleanup

Uldis Adamsons (202) 512- 4289 Yolanda ElSerwy (202) 512- 8476

In addition to those above, Robert Ackley, Arturo Holguin, and Tony Padilla
made key contributions to this report. Appendix II: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

(709316)

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