1

ENVIRONMENTAL CLEAN UP COST

The entries illustrated in this case study are to address environmental clean up cost as

promulgated by the FASAB Statements of Federal Financial Accounting Standard

Numbers Five and Six, Accounting for Liabilities of the Federal Government and

Accounting for Property, Plant, and Equipment. This is not authoritative guidance but an

illustration of clean up cost transactions using US Standard General Ledger accounts. This

case study does not include all situations.

Clean up cost is defined in the FASAB Statement of Federal Financial Accounting Standards, Number 6, Accounting for Property,

Plant and Equipment, paragraph 85 as “costs of removing, containing, and/or disposing of 1) hazardous waste from property, or 2)

material and/or property that consists of hazardous waste at permanent or temporary closure or shutdown of associated PPE”.
2

TABLE OF CONTENT:

Case study I . . . . . . . . . . . . . . . . . . . Deferred Clean up cost

Case study II . . . . . . . . . . . . . . . . . . Clean up associated with purchasing storage facility

Case study III . . . . . . . . . . . . . . . . . Government Related Event - Accidents

Case study IV . . . . . . . . . . . . . . . . . Government Related Event - On going part of operations

Case study V . . . . . . . . . . . . . . . . . . Government Acknowledged Event

Liability attributes:

• NC Not Covered by Budgetary Resources

• C Covered by Budgetary Resources

Please note that Funded liabilities and Unfunded liabilities are not the same as Liabilities Covered by

Budgetary Resources and Liabilities Not Covered by Budgetary Resources (Statement of Financing vs.

Balance Sheet). For more information on the Liabilities Covered/Not Covered by Budgetary Resources,

refer to OMB 97-01 and AAPC draft definition of Liabilities Covered by Budgetary Resources.
3

I - DEFERRED CLEAN UP COST

This section illustrates clean up cost that is deferred until the end of the useful life of PPE. It is divided

into two categories of PPE, general PPE and stewardship PPE. The clean up cost associated with general

PPE should be recognized over its useful life, similar to how the depreciation expense is recorded. The

clean up cost associated with stewardship PPE is expensed in the period the stewardship PPE is placed in

service, similar to how the acquisition cost is recorded.

In addition, if the PPE was used to produce goods and service, the associated clean up cost should be

recognized as production cost. Otherwise, the cost is recorded as non-production. 

Please NOTE that in some agencies’ systems, the Estimated Cleanup cost Liability is recorded at the

end of the year and reversed in the beginning of the subsequent year. The net financial impact of

reversing the cleanup liability will be the same as what is presented on the Deferred Cleanup Cost case

study.
1

 REF - Represents reference from FASAB Standad. The Roman numerals represents the standard numbers

4

EVENT DESCRIPTION Y

R

GENERAL PPE REF1 STEWARDSHIP PPE REF

1) Assume a PPE with a

useful life of 3 years is

acquired and it is known to

produce hazardous waste. 

The estimated clean up cost is

$120,000. Assume clean up

will start when PPE cease its

operation.

1 Proprietary

6800 Future funded cost 40,000

2995 Est cleanup cost liab- NC 40,000

Budgetary

None

VI

 ¶97

Proprietary

6800 Future funded cost 120,000

2995 Est cleanup cost liab - NC 120,000

Budgetary

None

VI

¶101

2) Reestimate of the cleanup

cost indicated that the cost

will be more that what was

originally estimated by

$60,000.

$60,000/3=20,000x2=40,000

40,000 + 40,000 = 80,000

2 Proprietary

6800 Future funded cost 80,000

2995 Est cleanup cost liab - NC 80,000

Budgetary

None

VI

¶99

Proprietary

6800 Future funded cost 60,000

2995 Est cleanup cost liab - NC 60,000

Budgetary

None

VI

¶102

3) To record estimated clean

up cost.

3 Proprietary

6800 Future funded cost 60,000

2995 Est cleanup cost liab - NC 60,000

Budgetary

None

Proprietary

None

Budgetary

None
5

4) Assume the agency

receives funding for the clean

up cost in year 4.

4 Proprietary

1010 FBWT 50,000

3100 Unexp appropriation 50,000

2995 Est cleanup cost liab - NC 50,000

2995 Est cleanup cost liab - C 50,000

Budgetary

4119 Approp Realized 50,000

4450 Unapportioned auth 50,000

4450 Unapportioned auth 50,000

4510 Apportionments 50,000

4510 Apportionments 50,000

4610 Allotment 50,000

Proprietary

1010 FBWT 50,000

3100 Unexp appropriation 50,000

2995 Est cleanup cost liab - NC 50,000

2995 Est cleanup cost liab - C 50,000

Budgetary

4119 Approp Realized 50,000

4450 Unapportioned auth 50,000

4450 Unapportioned auth 50,000

4510 Apportionments 50,000

4510 Apportionments 50,000

4610 Allotment 50,000

5) Contractor A started and

completed his portion of the

clean up and billed the agency

for $20,000.

4 Proprietary

2995 Est cleanup cost liab - C 20,000

2110 Accounts payable 20,000

6100 Operation expense 20,000

6800 Future funded cost 20,000

3100 Unexp appropriation 20,000

5700 Appropriation used 20,000

Budgetary

4610 Allotment 20,000

4901 Expended auth - unpd 20,000

VI

¶100

Proprietary

2995 Est cleanup cost liab -C 20,000

2110 Accounts payable 20,000

6900 Nonproduction cost 20,000

6800 Future funded cost 20,000

3100 Unexp appropriation 20,000

5700 Appropriation used 20,000

Budgetary

4610 Allotment 20,000

4901 Expended auth - unpd 20,000

VI

¶103
6

6) The agency makes a partial

payment of $10,000 to

contractor A.

4 Proprietary

2110 Accounts payable 10,000

1010 FBWT 10,000

Budgetary

4901 Expended auth - unpd 10,000

4902 Expended auth - pd 10,000

VI

¶100

Proprietary

2110 Accounts payable 10,000

1010 FBWT 10,000

Budgetary

4901 Expended auth - unpd 10,000

4902 Expended auth - pd 10,000

VI

¶103

7) Contractor B was hired to

perform additional clean up

for $5,000.

4 Proprietary

None

Budgetary

4610 Allotment 5,000

4801 Unexpended oblig - unpd 5,000

Proprietary

None

Budgetary

4610 Allotment 5,000

4801 Unexpended oblig - unpd 5,000
7

STATEMENTS FOR YEAR 4

Note: GENERAL PPE and Stewardship PPE will have same

financial information in year 4, except for an account 6100 -

operating cost, Stewardship PPE will have a debit balance of

6900 - Nonproduction cost.

STATEMENT OF FINANCING

Proprietary pre-closing trial balance

1010 Fund balance with Treasury 40,000

2110 Accounts payable 10,000

2995 Est cleanup cost liab - NC 130,000

2995 Est cleanup cost liab - C 30,0

00

3100 Unexpended appropriation 30,000

3310 Cumulative results 180,000

5700 Appropriations used 20,000

6100 Operating cost 20,000

6800 Future funded expense 20,000

Budgetary pre-closing trial balance

4119 Other appropriation realized 50,000

4610 Allotments - realized resources 25,000

4801 Unexpended obligations - unpd 5,000

4901 Expended authority - unpd 10,000

4902 Expended authority - pd 10,000

Line 1 Obligation incurred

4801 E-B 5,000

4901 E-B 10,000

4902 E-B 10,000

25,000

Line 2A

4801 E-B (5,000)

Line 2D

2995E-B*, (160,000-180,000) (20,000)

“OR”

6800, credit account balance 

Net Cost - 0 -

STATEMENT OF NET COST

6100 Operating cost 20,000

6800 Future funded expense (20,000)

Net Cost - 0 -
8

CLOSING ENTRIES BALANCE SHEET

Proprietary

5700 Appropriations used 20,000

6800 Future funded expense 20,000

3310 Cumulative results 40,000

3310 Cumulative results 20,000

6100 Operating cost 20,000

Budgetary

4201 Total actual resources collected 50,000

4119 Other appropriation realized 50,000

4902 Expended authority - pd 10,000

4201 Total actual resources collected 10,000

4610 Allotments - realized resources 25,000

4450 Unapportioned authority 25,000

Assets:

1010 Fund balance with Treasury 40,000

Liabilities:

2110 Accounts payable 10,000

2995 Est cleanup cost liab 160,000

Net Position:

3100 Unexpended appropriations 30,000

3310 Cumulative results 160,000
9

II. CLEAN UP ASSOCIATED WITH PURCHASING A STORAGE FACILITY.

This section illustrates the recognition of clean up cost related to purchasing a storage facility

for hazardous waste from past operations. The guidance from Financial Accounting Standards

Board (FASB) Emerging Issues Task Force Issue 90-8, Capitalization of Costs to treat

Environmental Contamination was used as generally accepted accounting principles since the

FASAB and OMB did not address this specific issue. The FASB Emerging Issues Task Force

Issue 90-8 requires the expensing of facilities that treat, store, or dispose of existing waste

generated by past operations. Agencies may elect to record these facilities at a net book value

of zero (fully depreciated) for purposes of tracking their historical cost. 
10

EVENT DESCRIPTION YR

1) To record estimated cleanup cost for the

hazardous waste that was accumulated from a

past operation. A special container will be

purchased to store the waste.

1 Proprietary

6800 Future funded cost 100,000

2995 Est cleanup cost liab - NC 100,000

Budgetary

None

VI

¶85

2) To record the appropriation received to

purchase a storage tank

1 Proprietary

1010 FBWT 70,000

3100 Unexp appropriation 70,000

2995 Est cleanup cost liab - NC 70,000

2995 Est cleanup cost liab - C 70,000

Budgetary

4119 Approp Realized 70,000

4450 Unapportioned auth 70,000

4450 Unapportioned auth 70,000

4510 Apportionments 70,000

4510 Apportionments 70,000

4610 Allotment 70,000
2 The Financial Accounting Standards Board (FASB) Emerging Issues Task Force Issue 90-8, Capitalization of costs to treat

environmental contamination, requires the expensing of facilities that treat, store or dispose of exiting wastes generated by past operations. 

Agencies may elect to record these facilities at a net book value of zero (fully depreciated) for purposes of tracking their historical cost.

11

3) A storage tank was purchased and expensed2

immediately

2 Proprietary

1740 Other structures and facilities 70,000

2110 Accounts payable 70,000

6900 Nonproduction cost 70,000

6800 Future Funded cost 70,000

2995 Est cleanup cost liab - C 70,000

1740 Other structures and facilities 70,000

1749 Accumulated Dep - Othr Struc and facilties

3100 Unexpended appropriation 70,000

5700 Appropriation used 70,000

Budgetary

4610 Allotment 70,000

4901 Exp4ended authority - pd 70,000

FASB

EITSI

#90-8

4) The agency made the payment for the PPE it

purchased

2 Proprietary

2110 Accounts payable 70,000

1010 FBWT 70,000

Budgetary

4901 Expended auth - unpd 70,000

4902 Expended auth - pd 70,000
12

YEAR 2

PRE-CLOSING TRIAL BALANCE CLOSING ENTRIES

Proprietary

2995 Est cleanup cost liab - C 30,000

3310 Cumulative result 100,000

5700 Appropriations used 70,000

6800 Future funded cost 70,000

6900 Nonproduction cost 70,000

Budgetary

4119 Appropriations realized 70,000

4902 Expended Authority - pd 70,000

Proprietary

5700 Appropriations used 70,000

6800 Future funded cost 70,000

3310 Cumulative result 140,000

3310 Cumulative results 70,000

6900 Nonproduction cost 70,000

Budgetary

4201 Total actual resources collected 70,000

4119 Appropriations realized 70,000

STATEMENT OF FINANCING NET COST

Line 1 Obligations incurred

4902 70,000

Line 2D

2995E-B*, 30,000-100,000 (70,000)

“OR”

6800, credit account balance 

Net Cost - 0 -

6800 Future funded cost (70,000)

6900 Nonproduction cost 70,000

Net Cost - 0 -

BALANCE SHEET

Liabilities:

2995 Est cleanup cost liab 30,000

Net Position:

3310 Cumulative results 30,000
13

IIII. GOVERNMENT RELATED EVENT - ACCIDENTS

This section illustrates how to record and recognize cleanup cost that is caused by federal

government operations. The cleanup of hazardous material can be caused by accidents from

federal operations or from natural disasters on Federal property. (See FASAB Liability

Standard)
14

EVENT DESCRIPTION YEAR ALL OTHER ENVIRONMENTAL CLEANUP COST REF

1) An accident involving hazardous material has

occurred which is caused by the government operations. 

The estimated clean up cost was determined to be

$100,000. However, the funding is not available until the

following year.

1 Proprietary

6800 Future funded cost 100,000

2995 Est cleanup cost liab - NC 100,000

Budgetary

None

V

¶27,

¶28,

¶29

VI

¶93

2) the agency receives funding to clean up in year 2 2 Proprietary

1010 FBWT 50,000

3100 Unexp appropriation 50,000

2995 Est cleanup cost liab - NC 50,000

2995 Est cleanup cost liab - C 50,000

Budgetary

4119 Approp Realized 50,000

4450 Unapportioned auth 50,000

4450 Unapportioned auth 50,000

4510 Apportionments 50,000

4510 Apportionments 50,000

4610 Allotment 50,000
15

3) Contractor C started and completed his portion of the

clean up and billed the agency for $30,000

2 Proprietary

6100 Operating expense 30,000

6900 Nonproduction cost xx,xxx

6800 Future funded cost 30,000

2995 Est cleanup cost liab - C 30,000

2110 Accounts payable 30,000

3100 Unexpended appropriation 30,000

5700 Appropriations used 30,000

Budgetary

4610 Allotment 30,000

4901 Expended Authority - unpd 30,000

4) The agency makes a partial payment of $20,000 to

contractor C.

2 Proprietary

2110 Accounts payable 20,000

1010 Fund balance with Treasury 20,000

Budgetary

4901 Expended Authority - pd 20,000

4902 Expended Authority - unpd 20,000
16

YEAR 2

CLOSING ENTRIES TRIAL BALANCE

proprietary

5700 Appropriations used 30,000

6800 Future funded expense 30,000

3310 Cumulative results 60,000

3310 Cumulative results 30,000

6100 Operating expense 30,000

budgetary

4201 Total actual resources collected 50,000

4119 Other appropriations realized 50,000

4902 Expended authority - pd 20,000

4201 Total actual resources collected 20,000

4610 Allotments - realized resources 20,000

4450 Unapportioned authority 20,000

Proprietary pre-closing trial balance

1010 Fund balance with Treasury 30,000

2110 Accounts payable 10,000

2995 Est cleanup cost liab - NC 50,000

2995 Est cleanup cost liab - C 20,000

3100 Unexpended appropriation 20,000

3310 Cumulative results 100,000

5700 Appropriations used 30,000

6100 Operating expense 30,000

6800 Future funded expense 30,000

Budgetary pre-closing trial balance

4119 Other appropriations realized 50,000

4610 Allotments - realized resources 20,000

4901 Expended authority - unpd 10,000

4902 Expended authority - pd 20,000

STATEMENT OF NET COST STATEMENT OF FINANCING

6100 Operating expense 30,000

6800 Future funded expense (30,000)

Net cost - 0 -

Line 1, Obligation incurred

4901E-B 10,000

4902 20,000

30,000

Line 2D

2995E-B, 70,000-100,000 (30,000)

“OR”

6800, Credit account balance 

Net Cost - 0 -
17

BALANCE SHEET

Assets:

1010 Fund Balance with Treasury 30,000

Liabilities:

2110 Accounts payable 10,000

2995 Est cleanup cost liab 70,000

Net Position:

3100 Unexpended appropriation 20,000

3310 Cumulative results 70,000
18

IV. GOVERNMENT RELATED EVENTS - ON GOING PART OF

OPERATIONS

This section illustrates how to record and recognize clean up cost that is related to on going federal

government operations. The hazardous waste is cleaned up as soon as it is created. As a result, the

estimated future cleanup liability will not be reported. 
19

EVENT DESCRIPTION YEAR ALL OTHER ENVIRONMENTAL CLEAN UP COSTS REF

1) The agency receives funding for $60,000 for clean up cost

that will be used for the year. Assume hazardous waste is

cleaned up as it is created.

1 Proprietary

1010 FBWT 60,000

3100 Unexpended appropriation 60,000

budgetary

4119 Approp Realized 60,000

4450 Unapportioned auth 60,000

4450 Unapportioned auth 60,000

4510 Apportionments 60,000

4510 Apportionments 60,000

4610 Allotment 60,000

2) The clean up is an on going part of the agency’s operation

and the cost incurred during the year was $50,000 of which

partial payment of $40,000 was made to the contractor.

1 Proprietary

6100 Operating expense 50,000

1010 FBWT 40,000

2110 Accounts payable 10,000

3100 Unexpended appropriation 50,000

5700 Appropriation used 50,000

Budgetary

4610 Allotment 50,000

4901 Expended authority -un pd 10,000

4902 Expended authority - pd 40,000

V

¶28
20

PRE-CLOSING TRIAL BALANCE CLOSING ENTRIES

Proprietary pre-closing trial balance

1010 Fund balance with Treasury 20,000

2110 Accounts payable 10,000

3100 Unexpended appropriation 10,000

5700 Appropriations used 50,000

6100 Operating expense 50,000

Budgetary pre-closing trial balance

4119 Other appropriations realized 60,000

4610 Allotments - realized resources 10,000

4901 Expended authority - unpd 10,000

4902 Expended authority - pd 40,000

proprietary

5700 Appropriations used 50,000

3310 Cumulative results 50,000

3310 Cumulative results 50,000

6100 Operating expense 50,000

budgetary

4201 Total actual resources collected 60,000

4119 Other appropriations realized 60,000

4902 Expended authority - pd 40,000

4201 Total actual resources collected 40,000

4610 Allotments - realized resources 10,000

4450 Unapportioned authority 10,000

STATEMENT OF NET COST STATEMENT OF FINANCING

6100 Operating expense 50,000

Net Cost 50,000

Line 1, Obligation incurred

4901 E-B 10,000

4902 40,000

Net cost 50,000
21

BALANCE SHEET

Assets:

1010 Fund Balance with Treasury 20,000

Liabilities:

2110 Accounts payable 10,000

Net Position:

3100 Unexpended appropriation 10,000
22

V. GOVERNMENT ACKNOWLEDGED EVENTS

This section illustrates clean up cost due to government acknowledged events where hazardous waste was

caused by a nonfederal entity or from a natural disaster but due to the federal government’s responsibility

to provide public welfare, the government assumes financial responsibility for cleaning up the waste.

The FASAB Liability Standard, paragraph 31, “ . . . the federal entity should recognize the liability and

expense when both of the following two criteria have been met (1) the Congress has appropriated or

authorized (i.e. through authorization legislation) resources and (2) an exchange occurs (e.g. when a

contractor performs repairs) or nonexchange amounts are unpaid as of the reporting date (e.g. direct

payments to disaster victims), whichever applies.”
23

EVENT DESCRIPTION YEAR ALL OTHER ENVIRONMENTAL CLEAN UP COSTS REF

1) Toxic waste damage was caused by nonfederal

entities (or from a natural disaster) and the federal

government assumed the clean up responsibility

proprietary

None

budgetary

None

2) The Congress appropriated money for the clean up

cost.

Proprietary

1010 FBWT 40,000

3100 Unexpended appropriation 40,000

budgetary

4119 Approp Realized 40,000

4450 Unapportioned auth 40,000

4450 Unapportioned auth 40,000

4510 Apportionments 40,000

4510 Apportionments 40,000

4610 Allotment 40,000

V

¶31

3) The contractor started and completed the clean up and

billed the agency for $40,000

Proprietary

6100 Operating expense 40,000

6900 Nonproduction cost xxxx

2110 Accounts payable 40,000

3100 Unexpended appropriation 40,000

5700 Appropriation used 40,000

Budgetary

4610 Allotment 40,000

4901 Expended authority -un pd 40,000

V

¶31
24

4) The agency made a partial payment of $20,000 1 proprietary

2110 Accounts payable 20,000

1010 FBWT 20,000

Budgetary

4901 Expended authority -un pd 20,000

4902 Expended authority - pd 20,000
25

PRE-CLOSING TRIAL BALANCE CLOSING ENTRIES

Proprietary pre-closing trial balance

1010 Fund balance with Treasury 20,000

2110 Accounts payable 20,000

3100 Unexpended appropriation 0 

5700 Appropriations used 40,000

6100 Operating expense 40,000

Budgetary pre-closing trial balance

4119 Other appropriations realized 40,000

4610 Allotments - realized resources 0

4901 Expended authority - unpd 20,000

4902 Expended authority - pd 20,000

proprietary

5700 Appropriations used 40,000

3310 Cumulative results 40,000

3310 Cumulative results 40,000

6100 Operating expense 40,000

budgetary

4201 Total actual resources collected 40,000

4119 Other appropriations realized 40,000

4902 Expended authority - pd 20,000

4201 Total actual resources collected 20,000

STATEMENT OF NET COST STATEMENT OF FINANCING

6100 Operating expense 40,000

Net Cost 40,000

Line 1, Obligation incurred

4901 E-B 20,000

4902 20,000

Net cost 40,000

BALANCE SHEET

Assets:

1010 Fund Balance with Treasury 20,000

Liabilities:

2110 Accounts payable 20,000
26

PROPOSED Changes to SGL Accounts and Definitions

Account Title: Estimated Cleanup Cost Liability

Account Number: 2995

Normal Balance: Credit

Definition: The estimated liability for projected future cleanup costs (not yet due and payable) associated with the

removing, containing and/or disposing of 1) hazardous waste from property, or 2) material and /or property that

consists of hazardous waste at permanent or temporary closure or shut down of associated PPE. 

Justification: To tighten up definition of accrued clean up cost.