United States General Accounting Office

GAO Report to the Secretary of Defense

December 1997 FINANCIAL

MANAGEMENT

DOD’s Liability for the

Disposal of

Conventional

Ammunition Can Be

Estimated

GAO/AIMD-98-32

GAO United States

General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-273004 

December 19, 1997

The Honorable William S. Cohen

The Secretary of Defense

Dear Mr. Secretary:

Recent laws have enhanced the legislative requirements to provide

policymakers and agency program managers with more reliable financial

information to formulate budgets, manage government programs, and

make difficult policy choices.1

 Recognizing the extent of incomplete and

unreliable information on the cost and consequences of government

programs and activities, these laws have made implementation of new

accounting standards and audited financial statements a priority. New

federal accounting standards have been adopted to enhance financial

statements by requiring that government agencies show the financial

results of their entire operations and provide relevant information on

agencies’ true financial status. The third in a planned series of reports,2

this report discusses the Department of Defense’s (DOD) implementation of

the requirement to disclose the liability associated with the disposal of

various types of assets, specifically conventional ammunition,3

 hereafter

referred to as ammunition.

Background In October 1990, the Federal Accounting Standards Advisory Board

(FASAB) was established by the Secretary of the Treasury, the Director of

the Office of Management and Budget (OMB), and the Comptroller General

of the United States to consider and recommend accounting standards to

address the financial and budgetary information needs of the Congress,

executive agencies, and other users of federal financial information. Using

a due process and consensus building approach, the nine-member Board,

1

The Chief Financial Officers (CFO) Act of 1990, the Government Management Reform Act of 1994,

and the Federal Financial Management Improvement Act of 1996.

2

Financial Management: Factors to Consider in Estimating Environmental Liabilities for Removing

Hazardous Materials in Nuclear Submarines and Ships (GAO/AIMD-97-135R, August 7, 1997) and

Financial Management: DOD’s Liability for Aircraft Disposal Can Be Estimated (GAO/AIMD-98-9,

November 20, 1997).

3

DOD Directive 5160.65, “Single Manager for Ammunition” defines ammunition to include small arms,

mortars, automatic cannons, artillery, ship gun ammunition, bombs, unguided rockets, land mines,

grenades, flares and pyrotechnics, incendiaries, projectiles, high explosives, and fuzes. The directive’s

definition includes chemical ammunition, which is excluded from this report because estimated costs

for disposal of chemical weapons are discussed in Chemical Weapons and Materiels: Key Factors

Affecting Disposal Costs and Schedule (GAO/NSIAD-97-18, February 10, 1997). Both the directive and

this report exclude nuclear weapons and guided rockets (missiles).

Page 1 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
B-273004 

which has since its formation included a member from DOD, recommends

accounting standards for the federal government. Once FASAB recommends

accounting standards, the Secretary of the Treasury, the Director of OMB,

and the Comptroller General decide whether to adopt the recommended

standards. If they are adopted, the standards are published as Statements

of Federal Financial Accounting Standards (SFFAS) by OMB and by GAO. In

addition, the Federal Financial Management Improvement Act of 1996, as

well as the Federal Managers’ Financial Integrity Act, require federal

agencies to implement and maintain financial management systems that

will permit the preparation of financial statements that substantially

comply with applicable federal accounting standards.

Issued in December 1995 and effective beginning with fiscal year 1997,

SFFAS No. 5, Accounting for Liabilities of the Federal Government, requires

the recognition of a liability for any probable and measurable future

outflow of resources arising from past transactions.4

 The statement

defines probable as that which is likely to occur based on current facts

and circumstances. It also states that a future outflow is measurable if it

can be reasonably estimated. The statement recognizes that this estimate

may not be precise and, in such cases, it provides for recording the lowest

estimate and disclosing in the financial statements the full range of

estimated outflows that are likely to occur.

The liability disclosure requirements stated in SFFAS No. 5 apply to several

types of assets, including property, plant, and equipment (PP&E) and

operating materials and supplies. SFFAS No. 3, Accounting for Inventory

and Related Property, defines operating materials and supplies as

consisting of tangible personal property to be consumed in normal

operations. SFFAS No. 6, Accounting for Property, Plant, and Equipment,

which is effective beginning in fiscal year 1998, deals with various

accounting issues pertaining to PP&E. This statement establishes several

new accounting categories of PP&E, collectively called stewardship PP&E.

Other PP&E is referred to as general PP&E. One of the new stewardship

categories—federal mission PP&E—is defined as tangible items owned by a

federal government entity, principally DOD, that have no expected

nongovernmental use, are held for use in the event of emergency, war, or

natural disaster, and have an unpredictable useful life. Federal mission

PP&E, which includes ships, submarines, aircraft, and combat vehicles, is a

major part of DOD’s total PP&E.

4

These requirements generally mirror those of the Statement of Financial Accounting Standard No. 5,

Accounting for Contingencies (FASB No. 5), which was effective prior to the development of SFFAS

No. 5.

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Recently, FASAB reviewed the asset category for ammunition and reiterated

its position that ammunition should be classified as operating materials

and supplies rather than federal mission PP&E. Although the asset

categories for financial reporting may be different, the SFFAS No. 5

requirements for recording the disposal liability are the same for operating

materials and supplies and mission assets.

Results in Brief DOD has not yet implemented the federal accounting standard that requires

recognizing and reporting liabilities such as those associated with

ammunition disposal, nor has it provided guidance to the military services.

In commenting on our recent report on the aircraft disposal liability, DOD

agreed with our recommendation to incorporate SFFAS No. 5 in its

Financial Management Regulation. Ammunition disposal is an ongoing

process that results from materials with a limited shelf-life or that

otherwise will not be used in operations, and the cost can be reasonably

estimated. Accordingly, these activities meet the criteria for a reportable

liability. The cost information that DOD developed in response to requests

from congressional committees can be used as a starting point to estimate

the ammunition disposal liability. A number of additional factors will have

to be addressed, including data reliability, data completeness, and the

need for periodic updates.

Objectives, Scope,

and Methodology

We undertook this review to assist DOD in its efforts to meet the new

federal accounting standard, SFFAS No. 5, and because of our responsibility

to audit the federal government’s consolidated financial statements

beginning with fiscal year 1997. Our objectives were to determine (1) the

status of DOD’s efforts to implement the new federal accounting standard

for disclosure of liabilities, such as ammunition disposal costs, and

(2) whether the ammunition disposal liability was probable and whether a

reasonable estimate of the minimum disposal liability for ammunition

could be made.

To determine if the liability is probable, we reviewed financial accounting

standards, environmental laws and regulations, and DOD manuals that

address the handling and disposal of hazardous material. We also reviewed

congressional committee reports that requested ammunition disposal cost

information. We also interviewed DOD officials responsible for financial

reporting and those at the service level responsible for program

management, ammunition demilitarization, and disposal.

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To determine if a disposal liability was reasonably estimable, we obtained

information on ammunition inventories, as of September 30, 1996, the

most recent data available at the time of our review, and what it costs to

demilitarize and dispose of ammunition. To determine the availability of

ammunition inventory information, we interviewed service officials

responsible for inventory management and obtained information on the

services’ ammunition inventory systems as well as their ammunition

inventories as of September 30, 1996.

To determine the availability of ammunition demilitarization and disposal

cost information, we obtained information on the volume, nature, and cost

of the Army Industrial Operation Command’s (DOD’s single manager for

ammunition) disposal activities, as well as information on the Joint

Ordnance Commanders Group’s munitions demilitarization studies. We

also obtained information on the Navy’s ammunition disposal activities

because the Navy disposes of certain Navy-specific items, such as

underwater torpedoes and depth charges. In addition, we interviewed

service officials responsible for the accounting and reporting of

demilitarization and disposal costs.

We analyzed the DOD Joint Ordnance Commanders Group, Munitions

Demil/Disposal Subgroup’s 1995 and 1996 reports on demilitarization and

disposal cost information. The Subgroup’s 1996 Munitions Demilitarization

Study identified disposal costs for 23 munition5 categories, referred to as

Munition Items Disposition Action System (MIDAS) families. We did not

independently verify the inventory and cost data furnished to us.

We conducted our review between November 1996 and November 1997 in

accordance with generally accepted government auditing standards.

Appendix I lists the primary locations where we performed our review. We

provided a draft of this report to the Secretary of Defense for review and

comment. We received oral comments which are discussed in the “Agency

Comments and Our Evaluation” section.

DOD Has Not

Implemented SFFAS

No. 5

As we recently stated in our report on DOD’s aircraft disposal liability, as of

the end of the fiscal year on September 30, 1997, DOD had not established a

policy to implement SFFAS No. 5. On September 30, 1997, the DOD

Comptroller’s office posted revisions to the electronic version of DOD’s

Financial Management Regulation (FMR) to include SFFAS No. 1 through 4,

but SFFAS No. 5 was not included. In commenting on a draft of our aircraft

5

Munitions includes ammunition as well as tactical missiles.

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disposal liability report, DOD agreed with our recommendation that SFFAS

No. 5 be incorporated in the FMR.

6

 In addition, the DOD Comptroller, who is

responsible for developing and issuing guidance on accounting standards,

and the Under Secretary of Defense (Acquisition and Technology), who is

responsible for the operational activities associated with ammunition

disposal, have not provided implementation guidance to the services to

assist them in estimating the disposal costs for ammunition. Service

officials stated that they are reluctant to estimate a liability for their

ammunition disposal until they receive DOD-wide guidance. Unless prompt

action to implement this standard is taken, it is unlikely that DOD’s or the

military services’ fiscal year 1997 financial statements will include an

estimate of ammunition disposal costs as required.

Ammunition Disposal

Liability Has Been

Incurred

One of the key criteria cited in SFFAS No. 5 for a liability to be reported is

that a future payment is probable—that is, the future outflow of resources

is likely to occur. Although, in some cases, the likelihood of a future

outflow may be difficult to determine and an entity may have difficulty

deciding whether to record a liability for certain events, this is not the case

for DOD. DOD continually disposes of ammunition and has an amount for

disposal costs in its annual budget. According to the Industrial Operations

Command’s Associate Director for Demilitarization, during the last 5

years, DOD has spent over $370 million to dispose of ammunition. Thus,

because it is known at the time of acquisition that costs will be incurred

for ammunition disposal, the probability criterion for recording a liability

is met.

The Congress has also recognized that disposal will occur and has

emphasized the importance of accumulating these costs and considering

this information. In the past 3 years, congressional committees have

specifically asked for information related to ammunition disposal costs.

The Senate Committee on Appropriations, in its report on the fiscal year

1995 Defense Appropriations bill, directed DOD to develop a plan for the

disposal of rocket motors, ammunition, and other explosives, including

information on alternative ammunition disposal methods and related

costs. The next year, the House Committee on Appropriations, in its report

on the fiscal year 1996 Defense Appropriations bill, expressed concern

about the Army’s continuing practice of demilitarizing ammunition by

open-air burning and detonation. The committee requested an analysis

that included the costs and savings of recycle and reuse technologies, the

6

See Financial Management: DOD’s Liability for Aircraft Disposal Can Be Estimated (GAO/AIMD-98-9,

November 20, 1997).

Page 5 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
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revenue that could be derived from the sale of recycled and reusable

products, and the ultimate clean-up costs for open-air burning and

detonation sites. Most recently, the Fiscal Year 1997 National Defense

Authorization Act required the establishment of a 5-year program for the

development and demonstration of environmentally compliant

technologies for the disposal of ammunition, explosives, and rockets.

Ammunition Disposal

Process

The Army Industrial Operations Command (IOC), DOD’s single manager for

ammunition, has an ongoing program to dispose of ammunition from all

services. While each service maintains its own ammunition inventory

management systems and technically owns the ammunition, IOC manages

procurement and disposal of ammunition items for all services. IOC

supplies or ships ammunition from production and storage sites to field

installations and units; manages ammunition disposal programs; oversees

efforts to upgrade ammunition already in service; and manages the Army’s

worldwide ammunition stockpile.

IOC is responsible for the disposal of about 96 percent of all ammunition.

The exceptions are generally service-unique ammunition items, like Navy

torpedoes, or items that are more practical to dispose of at their current

installation or depot or by a contractor. The reasons for disposal of

ammunition are obsolescence, deterioration, and excess supply.

Obsolescence occurs when the weapons systems that use the ammunition

are phased out, thus eliminating the need for the ammunition. Ammunition

becomes excess when the quantities on hand exceed what is needed due

to factors such as downsizing of the military forces. Deterioration can

result from age and long-term storage conditions that render the

ammunition unusable.

The two overall types of ammunition disposal methods are (1) destructive

processes that either explode or incinerate the ammunition and

(2) resource recovery and recycling processes that remove the explosive

components through a variety of methods and allow their reuse.

Ammunition Inventory Ammunition under IOC’s control is tracked by the Commodity Command

Standard System. This system accounts for ammunition in depots, but

does not include ammunition issued to military field units. Army field

ammunition stocks are accounted for by the World-wide Ammunition

Reporting System. Systems used by the other services are the Air Force’s

Combat Ammunition System, the Navy’s Conventional Ammunition

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Information Management System, and the Marine Corps Ammunition and

Accounting Reporting System.7

 We requested a detailed listing of the

year-end ammunition inventory from each of the services and obtained the

inventory balance from the information they provided to us. The

September 30, 1996, ammunition inventory balance is shown in table 1,

which contains the most recent data available.

Table 1: Service Inventory of

Ammunition as of September 30, 1996 Service Inventory balance (tons)

Army 2,159,667

Air Force 2,102,988

Navy 644,424

Marine Corps 107,797

Total 5,014,876

The ammunition inventory serves as the basis for estimating the disposal

liability because ammunition used in training and operations is generally

replaced to maintain the inventory at certain levels. As a result, training

and operational usage may not reduce the total liability for ammunition

disposal.

Ammunition Disposal

Liability Could Be

Estimated

The second key criterion in SFFAS No. 5 for reporting of a liability is that an

amount be reasonably estimable. In the past, DOD has reported its

estimated ammunition disposal costs using several methodologies that

range from a “rule of thumb” figure to more detailed cost analyses based

on specific types of ammunition. Achieving a reasonable estimate is

possible using the existing detailed analyses as a starting point. A number

of key factors would have to be considered to ensure that the development

of the ammunition disposal cost estimate is as accurate as possible.

DOD’s Estimates Based on

Analysis by Ammunition

Type

DOD has used $1,000 per ton as a “rule of thumb” for ammunition disposal

costs. For example, in May 1995 congressional testimony, the Deputy for

Ammunition, U.S. Army, stated that “rule of thumb is that it costs about

$1,000 a ton, hopefully a little less, to get rid of unserviceable

7

We as well as the DOD Inspector General and service auditors have reported problems with the

reliability of information in DOD’s accounting and logistical systems. While there are limitations in the

data, DOD is working to improve the systems that should, over time, increase the accuracy of the

information and improve the disposal liability estimates. See our report Defense Financial

Management (GAO/HR-97-3, February 1997).

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ammunition.”8 According to officials in the Army’s Office of the Deputy for

Ammunition, the $1,000 estimate was calculated for the Army’s

Conventional Ammunition Demilitarization Master Plan issued in

May 1993. They stated that the $1,000 estimate was an average cost based

on actual disposals during the 2 years preceding the master plan’s

issuance.

As part of its response to Senate and House requests for more detailed

disposal cost information in 1995 and 1996, DOD compiled historical cost

information that could be used as a starting point for developing a

reasonable estimate of the ammunition disposal cost liability. In response

to the fiscal year 1995 Senate Committee on Appropriations report

requesting information on alternative disposal procedures and costs for

ammunition and other explosives, the Joint Ordnance Commanders Group

(JOCG),9

 Munitions Demil/Disposal Subgroup, analyzed the ammunition

stockpile in 1995 using “families” of items for disposal. The MIDAS families

are based on the materials contained in the ammunition, methods of

assembly/disassembly, preferred demilitarization methods, and any unique

features. In its September 1995 report, JOCG provided an estimate of the

tonnage requiring disposal for each MIDAS family of ammunition.

In response to the 1996 House Committee on Appropriations report that

requested additional information, the JOCG subgroup formed an ad hoc

working group10 to study the comparative benefits and costs of different

disposal methods using the MIDAS families as the basis for collecting and

summarizing the cost per ton for the various alternative disposal

procedures. The cost information was collected for both government

installations and contractor facilities that had performed ammunition

disposal during fiscal years 1994 to 1996. For the 1996 study, the JOCG

working group collected historical cost information on the ammunition

disposed of during fiscal years 1994 through 1996. It grouped11 the disposal

actions by MIDAS family and calculated an average disposal cost per ton

based on the facility type—government-owned and operated facilities,

government-owned facilities operated by a contractor, and

8

Testimony of the Deputy for Ammunition, U.S. Army, before the Subcommittee on National Security,

House Committee on Appropriations, May 2, 1995.

9

JOCG consists of representatives from each of the four military services. It was established to

coordinate and consolidate programs for the development, production, and support of military

ammunition systems within DOD.

10Participants included the Army Defense Ammunition Center and School, Industrial Operations

Command, Argonne National Laboratory, Army Corps of Engineers, as well as subject matter experts

from the military services, industry, and academia.

11Other groupings showing average costs were included in the working group’s analysis.

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contractor-owned and contractor-operated facilities. For 14 of the MIDAS

families for which costs were available, the demilitarization was

performed by a single category of facility and thus yielded a single average

cost. The other eight MIDAS families involved demilitarization at more than

one type of facility, thus yielding a range of average costs. See appendix II

for a listing of the MIDAS families and the average disposal costs that were

developed based on the working group’s report.

Although a number of critical factors would have to be considered,

including the reliability of the historical data as discussed in the following

section, the cost estimates developed for the MIDAS families can be used as

a starting point to estimate the ammunition disposal liability. The national

stock numbers (NSNs) of ammunition items throughout DOD have been

associated with the MIDAS families. For example, for the Army, the U.S.

Army Defense Ammunition Center and School staff provided us with a

data file that translated the specific Army ammunition NSN line items into

their respective MIDAS families. Using Army’s fiscal year 1996 inventory

amount of 2,144,995 tons (which excludes 14,672 tons of ammunition for

which MIDAS cost information was not available) and the average disposal

cost data developed by the JOCG working group for the MIDAS families, we

estimated that the Army’s ammunition disposal liability could range from

about $1.3 billion to $2.1 billion.

Marine Corps, Navy, and Air Force officials verified that information was

available to perform a similar analysis of their respective ammunition

inventories using NSNs and the MIDAS cost families.

Key Estimation Factors to

Be Considered

In using the MIDAS analysis to estimate the disposal liability, several

additional factors would have to be considered to refine the estimate.

Although SFFAS No. 5 is clear that the disposal liability is to be a reasonable

estimate and that the disclosure may be presented as a range, the accuracy

and precision of the range will affect its usefulness to decisionmakers. Key

estimation factors to be considered include the following.

Data reliability - Although we did not verify the underlying data supporting

the historical cost data developed for the MIDAS families, a limited review

yielded a number of discrepancies. For example, one schedule indicated

that a contractor had destroyed 1,512 tons of small caliber ammunition in

fiscal year 1996 for $1,512, or $1 per ton. The same schedule showed that

the same contractor had destroyed the same type of ammunition in fiscal

year 1995 for $728 per ton. In addition, the schedule showed that two

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government-owned, government-operated facilities had destroyed small

caliber ammunition with costs of $0.10 per ton at one facility and $3,327

per ton at the other facility. Such anomalies would have to be addressed

before relying on these data as a basis for estimating the total disposal

liability.

In addition, the appropriateness of averaging the actual disposal costs by

type of facility would have to be considered. For example, the study

concluded that the disposal cost for white phosphorus was $1,231 per ton.

The underlying data show that white phosphorus was destroyed by one

government-owned, government-operated facility in six separate batches

in fiscal years 1994 through 1996. The reported costs per ton for each

batch ranged from $646 to $14,208 and were averaged to arrive at the

$1,231 figure. If it is determined that averaging does not appropriately

reflect the true range of these costs, alternatives may include calculating a

disposal liability range for each MIDAS family based on factors such as type

of facility or disposal method.

Data completeness - As stated in appendix II, data were not available for

six of the MIDAS families because (1) the types of ammunition were not

disposed of during the period studied or (2) the ammunition was disposed

of by a specific service and the cost data were not available to the working

group. DOD would have to consider the significance of these costs and

determine whether cost data were collected by individual services. In

addition, the MIDAS costs did not include an amount for packaging, crating,

handling, and transportation, nor do they reflect the value of any scrap

recovered from the demilitarization process. JOCG determined that

packaging, crating, handling, and transportation costs ranged from $66 per

ton to $228 per ton. Also, although the working group’s 1996 report

indicated that storage costs were part of the disposal costs, the group did

not develop any storage cost estimates.

Updated information - Finally, estimates using the MIDAS costs would have

to be updated periodically to take into account the use of different

disposal methods and locations, current costs, and other factors that

would affect costs. Such factors would have to be considered by DOD as it

develops its policy for determining its ammunition disposal liability.

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Reporting Total

Disposal Liability by

Future Time Periods

Would Be Useful

DOD has pointed out that the total disposal liability estimate for

ammunition will result in a significant liability—much of which would not

require budget authority in the current year. Thus, one way to provide a

proper context for this reported liability and make it more meaningful to

decisionmakers would be to provide a breakdown of the liability in a

footnote to the financial statements showing the liability based on the

services’ estimates of the ammunition scheduled to be taken out of

service.

Table 2 is a simplified illustration of how the ammunition disposal liability

for ammunition managed by the single manager could be related to the

time period in which it is taken out of service. For the purposes of this

illustration, we used $1,000 per ton as the basis for estimating the disposal

liability. As discussed previously, in actual practice, the services should

refine this figure to reflect the expected cost experience within the time

period. We applied the $1,000 per ton disposal liability to (1) tonnage

estimates reported in the JOCG September 1995 study that projected the

quantity of ammunition that would be turned over to the single manager

for disposal in fiscal years 1995 through 2001 and (2) the remaining

inventory after subtracting these quantities.

Table 2: Example of How the Liability Could Be Related to the Disposal Schedule

Liability associated with ammunition expected to be transferred for

disposal during fiscal year

Dollars in millions

Total ammunition

disposal liability

as of 9/30/96

Liability

associated with

ammunition

awaiting disposal

as of 9/30/96 1997 1998 1999 2000 2001 Thereafter

$5,015 $393 $107 $93 $85 $74 $72 $4,191

Such information could provide important context for congressional and

other budget decisionmakers on the total liability by showing the annual

impact of potentially needed budget authority for ammunition expected to

be transferred for disposal. Furthermore, using time periods to present

data consistent with budget justification documents, such as DOD’s Future

Years Defense Program, provides a link between budgetary and

accounting information, one of the key objectives of the CFO Act.

Conclusions Ammunition disposal costs are both probable and estimable and,

therefore, meet the criteria stated in SFFAS No. 5 for reportable liabilities.

In commenting on our recent report on the aircraft disposal liability, DOD

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agreed to implement SFFAS No. 5 and to record the disposal liability related

to aircraft, which are categorized as federal mission assets. DOD also

agreed that the DOD Comptroller and Under Secretary of Defense

(Acquisition and Technology) should promptly issue implementing

guidance to assist the services in estimating the aircraft disposal liability.

Because the same requirements apply to ammunition, which is considered

part of the operating material and supply asset category, similar action is

necessary to ensure that the ammunition disposal liability is properly

recorded. Development of a reasonable estimate of the ammunition

disposal liability, which addresses the key factors identified in this report,

will help ensure not only that the financial statement disclosure

requirements are met, but will also provide important information to the

Congress and other decisionmakers as they continue to assess

ammunition disposal methods and related costs.

Recommendations We recommend that you ensure that

• the DOD Comptroller and the Under Secretary of Defense (Acquisition and

Technology) promptly issue joint implementing guidance for the services

on the SFFAS No. 5 requirements for recognition of a liability for

ammunition disposal costs. This guidance should address the key liability

estimation factors identified in this report, including data reliability, data

completeness, and the need for updated information.

• the DOD and military service comptrollers include the estimated

ammunition disposal liability in DOD’s fiscal year 1997 financial statements.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, Department of Defense officials

concurred with our recommendations that joint implementing guidance be

issued promptly on the SFFAS No. 5 requirements for recognition of a

liability for ammunition disposal costs. In addition, DOD officials stated

that current disposal cost estimates can be reasonably determined for

ammunition types that have been in the active inventory for some period

of time. However, DOD officials stated that the development of disposal

cost estimates for all types in the inventory and the development and

coordination of standard application procedures and reporting guidance

would take time to complete. For this reason, Defense officials stated that

it will not be feasible to report the estimated ammunition disposal liability

in the DOD’s financial statements prior to fiscal year 1998.

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SFFAS No. 5 was issued almost 2 years ago to allow agencies ample time to

develop implementing policies and procedures prior to its fiscal year 1997

effective date. As stated in this report, information is available on all types

of ammunition disposal processes to develop a reasonable estimate of

these costs. Such cost information can be applied to all types of

ammunition, regardless of the length of time the ammunition has been in

the active inventory. Such an estimate need not be precise—SFFAS No. 5

permits the reporting of a range. Accordingly, DOD, with a concentrated

effort, can develop an estimate of ammunition disposal costs for its fiscal

year 1997 financial statements.

This report contains recommendations to you. The head of a federal

agency is required by 31 U.S.C. 720 to submit a written statement on

actions taken on these recommendations to the Senate Committee on

Governmental Affairs and the House Committee on Government Reform

and Oversight not later than 60 days after the date of this report. A written

statement also must be sent to the House and Senate Committees on

Appropriations with the agency’s first request for appropriations made

more than 60 days after the date of this report.

We are sending copies of this report to the Chairmen and Ranking

Minority Members of the Senate Committee on Armed Services, the House

Committee on National Security, the Senate Committee on Governmental

Affairs, the House Committee on Government Reform and Oversight, and

the Subcommittee on Management, Information and Technology, and to

the Director of the Office of Management and Budget. We are also sending

copies to the Under Secretary of Defense (Comptroller), the Air Force

Assistant Secretary for Financial Management and Comptroller, the Army

Assistant Secretary for Financial Management and Comptroller, the Navy

Assistant Secretary for Financial Management and Comptroller, the Under

Secretary of Defense (Acquisition and Technology), the Deputy Under

Secretary of Defense for Environmental Security, and the Acting Director,

Defense Finance and Accounting Service. Copies will be made available to

others upon request.

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Please contact me at (202) 512-9095 if you have any questions concerning

this letter. Major contributors to this letter are listed in appendix III.

Sincerely yours,

Lisa G. Jacobson

Director, Defense Audits

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Contents

Letter 1

Appendix I 

Activities/Locations

Contacted or Visited

18

Appendix II 

Reported Average

Ammunition Disposal

Costs by MIDAS

Family

19

Appendix III 

Major Contributors to

This Report

20

Tables Table 1: Service Inventory of Ammunition as of September 30,

1996

7

Table 2: Example of How the Liability Could Be Related to the

Disposal Schedule

11

Abbreviations

CFO Chief Financial Officer

DOD Department of Defense

FASAB Federal Accounting Standards Advisory Board

FMR Financial Management Regulation

IOC Industrial Operations Command

JOCG Joint Ordnance Commanders Group

MIDAS Munition Items Disposition Action System

NSN national stock number

OMB Office of Management and Budget

PP&E property, plant, and equipment

SFFAS Statement of Federal Financial Accounting Standards

Page 16 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
Page 17 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
Appendix I 

Activities/Locations Contacted or Visited

We contacted personnel and conducted work at the following locations.

Department of

Defense

DOD Headquarters, Pentagon, Washington, D.C.

Defense Finance and

Accounting Service

Defense Finance and Accounting Service, Denver, Colorado

Air Force Air Force Combat Support Division, Air Force Headquarters, Pentagon,

Washington, D.C.

Ogden Air Force Logistics Center, Commodities Directorate, Hill Air Force

Base, Ogden, Utah

Army Army Industrial Operations Command, Rock Island Arsenal, Rock Island,

Illinois

Army Materiel Command, Alexandria, Virginia

Army Missile Command, Redstone Arsenal, Huntsville, Alabama

U.S. Army Defense Ammunition Center and School, Savanna, Illinois

Marine Corps Marine Corps Systems Command, Arlington, Virginia

Navy Navy Ordnance Center, Inventory Management Systems Division,

Mechanicsburg, Pennsylvania

Naval Ordnance Center, Indianhead, Maryland

Naval Surface Warfare Center, Crane Division, Crane, Indiana

Page 18 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
Appendix II 

Reported Average Ammunition Disposal

Costs by MIDAS Family

Dollars in millions

Type of ammunition (MIDAS family)

Reported average costs

per ton of ammunition

White phosphorus $1,231

Riot control 1,601

Smokes, HC/colored/RP 1,010

Depleted uranium 1,895

High explosive components/devices 1,557

High explosive bombs 298

High explosive cartridges 430 to 776

High explosive “D” (ammunition that contains ammonium

picrate)

648 to 906

High explosives for improved ammunition/cluster bomb

units (ICM/CBUs) and submunitions

221 to 1,264

High explosive grenades 3,735

High explosive projectiles and warheads 578 to 626

High explosive rockets 844

Demolition material 976

High explosive land mines 1,578

Bulk propellants and black powder 878

Propellant charges and increments 873

Propellant munitions/components 745 to 765

Small caliber ammunition 104 to 542

Fuzes 243 to 1,065

Pyrotechnics 1,696

Inert (training material) 463

No family 748

Note: The study included missiles as a MIDAS family, but missiles were excluded from our

analysis because they are not included in DOD’s definition of ammunition. In addition, the study

did not identify costs for six MIDAS families of ammunition: dyes, incendiary/themite, bulk high

explosives, high explosive depth charges and underwater mines, torpedoes, and incinerable

munitions and components. Data were not available for these families because (1) these types of

ammunition were not disposed of during the period studied or (2) the ammunition was disposed

of by a specific service and the cost data were not available to the working group.

Source: JOCG Munitions Demilitarization Study (June 1996). We did not verify these data.

Page 19 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
Appendix III 

Major Contributors to This Report

Accounting and

Information

Management Division,

Washington, D.C.

Jacob W. Sprouse, Jr., Audit Manager

Linda J. Brigham, Auditor

Kansas City Office Dieter M. Kiefer, Assistant Director

Chicago Office John R. Richter, Auditor-in-charge

Stewart O. Seman, Evaluator

Lynn M. Filla-Clark, Auditor

Frederick P. Schmidt, Evaluator

(918867) Page 20 GAO/AIMD-98-32 DOD’s Liability for Ammunition Disposal
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