Comptroller Fiscal Year Memo Letter Head


To:Legislative Leadership, Judicial Branch Administrators, Elected Officials, Secretariats, Department Heads, and Chief Fiscal Officers
From:Martin J. Benison, Comptroller
Date:April 15, 2009
Re:GASB Statement No. 49 Implementation - Accounting and Financial Reporting for Pollution Remediation Obligations

Comptroller Memo Y#2009-28

Executive Summary

The Office of the State Comptroller is distributing a questionnaire for state agencies and institutions of higher education relating to the implementation of the Governmental Accounting Standards Board Statement No. 49 (GASB 49).

Beginning in fiscal 2009 (as of July 1, 2008), the Commonwealth is required to implement the requirements of GASB 49. To prepare for this implementation, the Financial Reporting and Analysis Bureau is surveying agencies and institutions of higher education to identify pollution remediation obligations that will be included in their annual financial reports and the 2009 Comprehensive Annual Financial Report (CAFR).

Please make sure the information in this memo is conveyed to relevant staff in your department.

Reporting Requirements
All agencies and institutions must complete the electronic questionnaire online by Thursday, April 30, 2009. The questionnaire must be submitted electronically.

Your submission of the questionnaire is an acknowledgment that you have reviewed your agency's operations for potential pollution remediation obligations.

Summary of the Requirements of the Statement
GASB issued Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , in November 2006. GASB 49 addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups.

The scope of the document excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset, such as landfill closure and post-closure care and nuclear power plant decommissioning.

For the Commonwealth, the requirements of GASB 49 are effective for financial statements of fiscal year 2009. Pollution remediation liabilities should be measured as of July 1, 2008 so that beginning net assets of the CAFR can be restated.

Recognition and Measurement of Pollution Remediation Liabilities
GASB 49 establishes a framework for the recognition and measurement of pollution remediation liabilities that incorporates the following:

  • When an agency knows or reasonably believes that a site is polluted, the agency should determine whether one or more components of a pollution remediation obligation are recognizable as a liability. This may include any of the following events:
  1. The agency or the Commonwealth is compelled to take remediation action because pollution creates an imminent endangerment of public health or welfare of the environment, leaving it little or no discretion to avoid remediation action.
  1. The agency or the Commonwealth is in violation of a pollution prevention-related permit or license, such as a federal Resource Conservation and Recovery Act (RCRA) permit or similar permits under general laws.
  2. The agency or the Commonwealth is named, or evidence indicates that it will be named by a regulator, (such as the Department of Environmental Protection) as a responsible party or potential responsible party (PRP) for remediation, or as a government responsible for sharing costs.
  3. The agency or the Commonwealth is named, or evidence indicates that it will be named, in a lawsuit to compel the agency or the Commonwealth, or the Commonwealth as a whole, to participate in remediation.
  4. The agency or the Commonwealth commences, or legally obligates itself to commence, cleanup activities or monitoring or operation and maintenance of the remediation effort. If these activities are voluntarily commenced and none of the obligating events have occurred relative to the entire site, the amount recognized should be based on the portion of the remediation project that the agency or the Commonwealth has initiated and is legally required to complete.

The Commonwealth will calculate the components of the liability (for example, legal services, site investigation, or required post-remediation monitoring) as they should be recognized as they become reasonably estimable. The estimate of a pollution remediation liability will be evaluated as each of the following benchmarks occurs:

  • Receipt of an administrative order;
  • Participation, as a responsible party or a potential responsible party (PRP), in the site assessment or investigation;
  • Completion of a corrective measures feasibility study;
  • Issuance of an authorization to proceed; and
  • Remediation design and implementation, through and including operation and maintenance, and post-remediation monitoring.

The Office of the State Comptroller will contact you for the above information should your agency answer the attached questionnaire with a "yes" answer. We will measure the Commonwealth's liability based on the current value of cash flow outlays expected to be incurred for the life of the project.

If the underlying parcel that is subject to these provisions is expected to be sold upon remediation, please also indicate as such.

Contacts and References
Any questions concerning the contents of this memorandum should be directed to BJ Trivedi, Office of the Comptroller, (617) 973-2663.

Enc: Survey

cc:MMARS Liaisons
Payroll Directors
General Counsels
Internal Distribution