prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The Federal Housing Administration (FHA) is an agency of the Department of Housing and Urban Development (HUD) that insures private mortgage lenders against the possibility of borrowers defaulting on certain mortgage loans  If a mortgage borrower defaults on a mortgage—that is, does not repay the mortgage as promised—and the home goes to foreclosure, FHA is to pay the lender the remaining amount that the borrower owes  FHA insurance protects the lender, rather than the borrower, in the event of borrower default; a borrower who defaults on an FHA-insured mortgage will still experience the consequences of foreclosure  To be eligible for FHA insurance, the mortgage must be originated by a lender that has been approved by FHA, and the mortgage and the borrower must meet certain criteria  FHA is one of three government agencies that provide insurance or guarantees on certain home mortgages made by private lenders, along with the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA)  Of these federal mortgage insurance programs, FHA is the most broadly targeted  Unlike VA- and USDA-insured mortgages, the availability of FHA-insured mortgages is not limited by factors such as veteran status, income, or whether the property is located in a rural area  However, the availability or attractiveness of FHA-insured mortgages may be limited by other factors, such as the maximum mortgage amount that FHA will insure, the fees that it charges for insurance, and its eligibility standards  This report provides background on FHA's history and market role and an overview of the basic eligibility and underwriting criteria for FHA-insured home loans  It also provides data on the number and dollar volume of mortgages that FHA insures, along with data on FHA's market share in recent years  It does not go into detail on the financial status of the FHA mortgage insurance fund  For information on FHA's financial position, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund)   The Federal Housing Administration was created by the National Housing Act of 1934, during the Great Depression, to encourage lending for housing and to stimulate the construction industry  Prior to the creation of FHA, few mortgages exceeded 50% of the property's value and most mortgages were written for terms of five years or less  Furthermore, mortgages were typically not structured to be fully repaid by the end of the loan term; rather, at the end of the five-year term, the remaining loan balance had to be paid in a lump sum or the mortgage had to be renegotiated  During the Great Depression, lenders were unable or unwilling to refinance many of the loans that became due  Thus, many borrowers lost their homes through foreclosure, and lenders lost money because property values were falling  Lenders became wary of the mortgage market  FHA institutionalized a new idea: 20-year mortgages on which the loan would be completely repaid at the end of the loan term  If borrowers defaulted, FHA insured that the lender would be fully repaid  By standardizing mortgage instruments and setting certain standards for mortgages, the creation of FHA was meant to instill confidence in the mortgage market and, in turn, help to stimulate investment in housing and the overall economy  Eventually, lenders began to make long-term mortgages without FHA insurance if borrowers made significant down payments  Over time, 15- and 30-year mortgages have become standard mortgage products  When the Department of Housing and Urban Development (HUD) was created in 1965, FHA became part of HUD  Today, FHA is intended to facilitate access to affordable mortgages for some households who otherwise might not be well-served by the private market  Furthermore, it facilitates access to mortgages during economic or mortgage market downturns by continuing to insure mortgages when the availability of mortgage credit has otherwise tightened  For this reason, it is said to play a "countercyclical" role in the mortgage market—that is, it tends to insure more mortgages when the mortgage market or overall economy is weak, and fewer mortgages when the economy is strong and other types of mortgages are more readily available  Some prospective homebuyers may have the income to sustain monthly mortgage payments but lack the funds to make a large down payment or otherwise have difficulty obtaining a mortgage  Borrowers with small down payments, weaker credit histories, or other characteristics that increase their credit risk might find it difficult to obtain a mortgage at an affordable interest rate or to qualify for a mortgage at all  This has raised a policy concern that some borrowers with the income to repay a mortgage might be unable to obtain affordable mortgages  FHA mortgage insurance is intended to make lenders more willing to offer affordable mortgages to these borrowers by insuring the lender against the possibility of borrower default  FHA-insured loans have lower down payment requirements than most conventional mortgages  (Conventional mortgages are mortgages that are not insured by FHA or guaranteed by another government agency, such as VA or USDA  ) Because saving for a down payment is often the biggest barrier to homeownership for first-time homebuyers and lower- or moderate-income homebuyers, the smaller down payment requirement for FHA-insured loans may allow some households to obtain a mortgage earlier than they otherwise could  (Borrowers with down payments of less than 20% could also obtain non-FHA mortgages with private mortgage insurance  See the nearby text box on "FHA and Private Mortgage Insurance ") FHA-insured mortgages also have less stringent requirements related to credit history than many conventional loans  This might make FHA-insured mortgages attractive to borrowers without traditional credit histories or with weaker credit histories, who would either find it difficult to take out a mortgage absent FHA insurance or may find it more expensive to do so  FHA-insured mortgages play a particularly large role for first-time homebuyers, low- and moderate-income households, and minorities  For example, 83% of FHA-insured mortgages made to purchase a home (rather than to refinance an existing mortgage) in FY2018 were obtained by first-time homebuyers  Over one-third of all FHA loans (both purchase and refinance loans) were obtained by minority households, and FHA-insured mortgages accounted for about 57% of all forward mortgages made to low- or moderate-income borrowers during the year  Since FHA-insured mortgages are often obtained by borrowers who cannot make large down payments or those with weaker credit histories, some have questioned whether FHA-insured mortgages are similar to subprime mortgages  Like subprime mortgages, FHA-insured mortgages are often obtained by borrowers with lower credit scores, though some borrowers with higher credit scores also obtain FHA-insured mortgages  However, FHA-insured mortgages are prohibited from carrying the full range of features that many subprime mortgages could carry  For example, FHA-insured loans must be fully documented, and they cannot include features such as negative amortization  (FHA mortgages can include adjustable interest rates ) Some of these types of features appear to have contributed to high default and foreclosure rates on subprime mortgages  Nevertheless, some have suggested that FHA-insured mortgages are too risky, and that they can harm borrowers by providing mortgages that often have a higher likelihood of default than other mortgages due to combinations of risk factors such as low down payments and lower credit scores  Traditionally, FHA plays a countercyclical role in the mortgage market, meaning that it tends to insure more mortgages when mortgage credit markets are tight and fewer mortgages when mortgage credit is more widely available  A major reason for this is that FHA continues to insure mortgages that meet its standards even during market downturns or in regions experiencing economic turmoil  When the economy is weak and lenders and private mortgage insurers tighten credit standards and reduce lending activity, FHA-insured mortgages may be the only mortgages available to some borrowers, or may have more favorable terms than mortgages that lenders are willing to make without FHA insurance  When the economy is strong and mortgage credit is more widely available, many borrowers may find it easier to qualify for affordable conventional mortgages  This section briefly describes some of the major features of FHA-insured mortgages for purchasing or refinancing a single-family home  Single-family homes are defined as properties with one to four separate dwelling units  FHA-insured loans are available to borrowers who intend to be owner-occupants and who can demonstrate the ability to repay the loan according to the terms of the contract  FHA-insured loans must be underwritten in accordance with accepted practices of prudent lending institutions and FHA requirements  Lenders must examine factors such as the applicant's credit, financial status, monthly shelter expenses, funds required for closing expenses, effective monthly income, and debts and obligations  In general, individuals who have previously been subject to a mortgage foreclosure are not eligible for FHA-insured loans for at least three years after the foreclosure  As a general rule, the applicant's prospective mortgage payment should not exceed 31% of gross effective monthly income  The applicant's total obligations, including the proposed housing expenses, should not exceed 43% of gross effective monthly income  If these ratios are not met, the borrower may be able to present the presence of certain compensating factors, such as cash reserves, in order to qualify for an FHA-insured loan  Since October 4, 2010, FHA has required a minimum credit score of 500, and has required higher down payments from borrowers with credit scores below 580 than from borrowers with credit scores above that threshold  See the " Down Payment " section for more information on down payment requirements for FHA-insured loans  In general, borrowers must intend to occupy the property as a principal residence  FHA-insured loans may be used to purchase one-family detached homes, townhomes, rowhouses, two- to four-unit buildings, manufactured homes and lots, and condominiums in developments approved by FHA  FHA-insured loans may also be obtained to build a home; to repair, alter, or improve a home; to refinance an existing home loan; to simultaneously purchase and improve a home; or to make certain energy efficiency or weatherization improvements in conjunction with a home purchase or mortgage refinance  FHA-insured mortgages may be obtained with loan terms of up to 30 years  The interest rate on an FHA-insured loan is negotiated between the borrower and lender  The borrower has the option of selecting a loan with an interest rate that is fixed for the life of the loan or one on which the rate may be adjusted annually  FHA requires a lower down payment than many other types of mortgages  Under changes made by the Housing and Economic Recovery Act of 2008 (HERA, P L  110-289 ), borrowers are required to contribute at least 3 5% in cash or its equivalent to the cost of acquiring a property with an FHA-insured mortgage  (Prior law had required borrowers to contribute at least 3% in cash or its equivalent ) Prohibited sources of the required funds include the home seller, any entity that financially benefits from the transaction, and any third party that is directly or indirectly reimbursed by the seller or by anyone that would financially benefit from the transaction  HUD has interpreted the 3 5% cash contribution as a down payment requirement and has specified that contributions toward closing costs cannot be counted toward it  Since October 4, 2010, FHA has required a 10% down payment from borrowers with credit scores between 500 and 579, while borrowers with credit scores of 580 or above are still required to make a down payment of at least 3 5%  FHA no longer insures loans made to borrowers with credit scores below 500  There is no income limit for borrowers seeking FHA-insured loans  However, FHA-insured mortgages cannot exceed a maximum mortgage amount set by law  The maximum mortgage amounts allowed for FHA-insured loans vary by area, based on a percentage of area median home prices  Different limits are in effect for one-unit, two-unit, three-unit, and four-unit properties  The limits are subject to a statutory floor and ceiling; that is, the maximum mortgage amount that FHA will insure in a given area cannot be lower than the floor, nor can it be higher than the ceiling  In 2008, Congress temporarily increased the maximum mortgage amounts in response to turmoil in the housing and mortgage markets, with the intention of allowing more households to qualify for FHA-insured mortgages during a period of tighter credit availability  New permanent maximum mortgage amounts were later established by the Housing and Economic Recovery Act of 2008  The maximum mortgage amounts established by HERA were higher than the previous permanent limits, but in many cases lower than the temporarily increased limits  However, the higher temporary limits were extended for several years, until they expired at the end of calendar year 2013  Since January 1, 2014, the maximum mortgage amounts have been set at the permanent HERA levels  For a one-unit home, HERA established the maximum mortgage amounts at 115% of area median home prices, with a floor set at 65% of the Freddie Mac conforming loan limit and a ceiling set at 150% of the Freddie Mac conforming loan limit  For calendar year 2019, the floor is $314,827 and the ceiling is $726,525  (That is, FHA will insure mortgages with principal balances up to $314,827 in all areas of the country  In higher-cost areas, it will insure mortgages with principal balances up to 115% of the area median home price, up to a cap of $726,525 in the highest-cost areas ) These maximum mortgage amounts, and the maximum mortgage amounts for 2-4 unit homes, are shown in Table 1   Borrowers of FHA-insured loans pay an up-front mortgage insurance premium (MIP) and annual mortgage insurance premiums in exchange for FHA insurance  These premiums are set as a percentage of the loan amount  The maximum amounts that FHA is allowed to charge for the annual and the upfront premiums are set in statute  However, since these are maximum amounts, HUD has the discretion to set the premiums at lower levels  The maximum up-front premium that FHA may charge is 3% of the mortgage amount, or 2 75% of the mortgage amount for a first-time homebuyer who has received homeownership counseling  Currently, FHA is charging the same up-front premiums to first-time homebuyers who receive homeownership counseling and all other borrowers  Since April 9, 2012, HUD has set the up-front premium at 1 75% of the loan amount, whether or not the borrower is a first-time homebuyer who received homeownership counseling  This premium applies to most single-family mortgages  The amount of the maximum annual premium varies based on the loan's initial loan-to-value ratio  For most loans, (1) if the loan-to-value ratio is above 95%, the maximum annual premium is 1 55% of the loan balance, and (2) if the loan-to-value ratio is 95% or below, the maximum annual premium is 1 5% of the loan balance  FHA increased the actual annual premiums that it charges several times in recent years in order to bring more money into the FHA insurance fund and ensure that it has sufficient funds to pay for defaulted loans  However, in January 2015, FHA announced a decrease in the annual premium for most single-family loans  For most FHA case numbers assigned on or after January 26, 2015, the annual premiums are 0 85% of the outstanding loan balance if the initial loan-to-value ratio is above 95% and 0 80% of the outstanding loan balance if the initial loan-to-value ratio is 95% or below  This is a decrease from 1 35% and 1 30%, respectively, which is what FHA had been charging from April 1, 2013, until January 26, 2015  These premiums apply to most single-family mortgages; FHA charges different annual premiums in certain circumstances, including for loans with shorter loan terms or higher principal balances  Table 2 shows the up-front and annual mortgage insurance premiums that have been in effect for most loans since January 26, 2015  In the past, if borrowers prepaid their loans, they may have been due refunds of part of the up-front insurance premium that was not "earned" by FHA  The refund amount depended on when the mortgage closed and declined as the loan matured  The Consolidated Appropriations Act 2005 ( P L  108-447 ) amended the National Housing Act to provide that, for mortgages insured on or after December 8, 2004, borrowers are not eligible for refunds of up-front mortgage insurance premiums except when borrowers are refinancing existing FHA-insured loans with new FHA-insured loans  After three years, the entire up-front insurance premium paid by borrowers who refinance existing FHA-insured loans with new FHA-insured loans is considered "earned" by FHA, and these borrowers are not eligible for any refunds  The annual mortgage insurance premiums are not refundable  However, beginning with loans closed on or after January 1, 2001, FHA had followed a policy of automatically cancelling the annual mortgage insurance premium when, based on the initial amortization schedule, the loan balance reached 78% of the initial property value  However, for loans with FHA case numbers assigned on or after June 3, 2013, FHA will continue to charge the annual mortgage insurance premium for the life of the loan for most mortgages  This change responded to concerns about the financial status of the FHA insurance fund  FHA has stated that, since it continues to insure the entire remaining mortgage amount for the life of the loan, and since premiums were cancelled on the basis of the loan amortizing to a percentage of the initial property value rather than the current value of the home, FHA has at times had to pay insurance claims on defaulted mortgages where the borrowers were no longer paying annual mortgage insurance premiums  An FHA-insured mortgage is considered delinquent any time a payment is due and not paid  Once the borrower is 30 days late in making a payment, the mortgage is considered to be in default  In general, mortgage servicers may initiate foreclosure on an FHA-insured loan when three monthly installments are due and unpaid, and they must initiate foreclosure when six monthly installments are due and unpaid, except when prohibited by law  A program of loss mitigation strategies was authorized by Congress in 1996 to minimize the number of FHA loans entering foreclosure, and has since been revised and expanded to include additional loss mitigation options  Prior to initiating foreclosure, mortgage servicers must attempt to make contact with borrowers and evaluate whether they qualify for any of these loss mitigation options  The options must be considered in a specific order, and specific eligibility criteria apply to each option  Some loss mitigation options, referred to as home retention options, are intended to help borrowers remain in their homes  Other loss mitigation options, referred to as home disposition options, will result in the borrower losing his or her home, but avoiding some of the costs of foreclosure  The loss mitigation options that servicers are instructed to pursue on FHA-insured loans are summarized in Table 3   Additional loss mitigation options are available for certain populations of borrowers  For example, defaulted borrowers in military service may be eligible to suspend the principal portion of monthly payments and pay only interest for the period of military service, plus three months  On resumption of payment, loan payments are adjusted so that the loan will be paid in full according to the original amortization  Certain loss mitigation options are also available in areas affected by presidentially declared major disasters  FHA's single-family mortgage insurance program is funded through FHA's Mutual Mortgage Insurance Fund (MMI Fund)  Cash flows into the MMI Fund primarily from insurance premiums and proceeds from the sale of foreclosed homes  Cash flows out of the MMI Fund primarily to pay claims to lenders for mortgages that have defaulted  This section provides a brief overview of (1) how the FHA-insured mortgages insured under the MMI Fund are accounted for in the federal budget and (2) the MMI Fund's compliance with a statutory capital ratio requirement  For more detailed information on the financial status of the MMI Fund, see CRS Report R42875, FHA Single-Family Mortgage Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI Fund)   The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal loan guarantees, including FHA-insured loans, are recorded in the federal budget  The FCRA requires that the estimated lifetime cost of guaranteed loans (in net present value terms) be recorded in the federal budget in the year that the loans are insured  When the present value of the lifetime cash flows associated with the guaranteed loans is expected to result in more money coming into the account than flowing out of it, the program is said to generate negative credit subsidy  When the present value of the lifetime cash flows associated with the guaranteed loans is expected to result in less money coming into the account than flowing out of it, the program is said to generate positive credit subsidy  Programs that generate negative credit subsidy result in offsetting receipts for the federal government, while programs that generate positive credit subsidy require an appropriation to cover the cost of new loan guarantees  The MMI Fund has historically been estimated to generate negative credit subsidy in the year that the loans are insured and therefore has not required appropriations to cover the expected costs of loans to be insured  The MMI Fund does receive appropriations to cover salaries and administrative contract expenses  The amount of money that loans insured in a given year actually earn for or cost the government over the course of their lifetime is likely to be different from the original credit subsidy estimates  Therefore, each year as part of the annual budget process, each prior year's credit subsidy rates are re-estimated based on the actual performance of the loans and other factors, such as updated economic projections  These re-estimates affect the way in which funds are held in the MMI Fund's two primary accounts: the Financing Account and the Capital Reserve Account  The Financing Account holds funds to cover  expected  future costs of FHA-insured loans  The Capital Reserve Account holds additional funds to cover any additional unexpected future costs  Funds are transferred between the two accounts each year on the basis of the re-estimated credit subsidy rates to ensure that enough is held in the Financing Account to cover updated projections of expected costs of insured loans   If FHA ever needs to transfer more funds to the Financing Account than it has in the Capital Reserve Account, it can receive funds from Treasury to make this transfer under existing authority and without any additional congressional action  This occurred for the first time at the end of FY2013, when FHA received $1 7 billion from Treasury to make a required transfer of funds between the accounts  The funds that FHA received from Treasury did not need to be spent immediately, but were to be held in the Financing Account and used to pay insurance claims, if necessary, only after the remaining funds in the Financing Account were spent  The MMI Fund has not needed any additional funds from Treasury to make required transfers of funds between the two accounts since that time  The MMI Fund is also required by statute to maintain a capital ratio of at least 2%, which is intended to ensure that the fund is able to withstand some increases in the costs of loans guaranteed under the insurance fund  The capital ratio measures the amount of funds that the MMI Fund currently has on hand, plus the net present value of the expected future cash flows associated with the mortgages that FHA currently insures (e g , the amounts it expects to earn through premiums and lose through claims paid)  It then expresses this amount as a percentage of the total dollar volume of mortgages that FHA currently insures  In other words, the capital ratio is a measure of the amount of funds that would remain in the MMI Fund after all expected future cash flows on the loans that it currently insures have been realized, assuming that FHA did not insure any more loans going forward  Beginning in FY2009, and for several years thereafter, the capital ratio was estimated to be below this mandated 2% level  The capital ratio again exceeded the 2% threshold in FY2015, when it was estimated to be 2 07%  This represented an improvement from an estimated capital ratio of 0 41% at the end of FY2014, and from negative estimated capital ratios at the ends of FY2013 and FY2012  The capital ratio has remained above 2% since that time, and was estimated to be 2 76% in FY2018  A low or negative capital ratio does not in itself trigger any special assistance from Treasury, but it raises concerns that FHA could need assistance in order to continue to hold enough funds in the Financing Account to cover expected future losses  In the years since the housing market turmoil that began around 2007, FHA has taken a number of steps designed to strengthen the insurance fund  These steps have included increasing the mortgage insurance premiums charged to borrowers; strengthening underwriting requirements, such as by instituting higher down payment requirements for borrowers with the lowest credit scores; and increasing oversight of FHA-approved lenders  The number of new mortgages insured by FHA in a given year depends on a variety of factors  In general, the number of new mortgages insured by FHA increased during the housing market turmoil (and resulting contraction of mortgage credit) that began around 2007, reaching a peak of 1 8 million mortgages in FY2009 before beginning to decrease somewhat  FY2014 was the only year since FY2007 that FHA insured fewer than 1 million new mortgages  As shown in Table 4 , FHA insured just over 1 million new single-family purchase and refinance mortgages in FY2018  Together, these mortgages had an initial loan balance of $209 billion  About 77% (776,284) of the mortgages were for home purchases, while about 23% (238,325) were for refinancing an existing mortgage  The overall number of mortgages insured by FHA in FY2018 represented a decrease from FY2017, when it insured 1 25 million mortgages  Many FHA-insured mortgages are obtained by first-time homebuyers, lower-and moderate-income homebuyers, and minority homebuyers  Of the home purchase mortgages insured by FHA in FY2018, about 83% were made to first-time homebuyers  Over a third of all mortgages (both for home purchases and refinances) insured by FHA in FY2018 were made to minority borrowers  As shown in Table 5 , at the end of FY2018 FHA was insuring a total of over 8 million single-family loans that together had an outstanding balance of nearly $1 2 trillion  Since it was first established in 1934, FHA has insured a total of over 47 5 million home loans  FHA's share of the mortgage market is the amount of mortgages that are insured by FHA compared to the total amount of mortgages originated or outstanding in a given time period  FHA's market share can be measured in a number of different ways  Therefore, when evaluating FHA's market share, it is important to recognize which of several different figures is being reported  First, FHA's share of the mortgage market can be computed as the number of FHA-insured mortgages divided by the total number of mortgages, or as the dollar volume of FHA-insured mortgages divided by the total dollar volume of mortgages  Furthermore, FHA's market share is sometimes reported as a share of all mortgages , and sometimes only as a share of home purchase mortgages (as opposed to both mortgages made to purchase a home and mortgages made to refinance an existing mortgage)  A market share figure can be reported as a share of all mortgages originated within a specific time period , such as a given year, or as a share of all mortgages outstanding at a point in time , regardless of when they were originated  Finally, FHA's market share is sometimes also reported as a share of the total number of mortgages that have some kind of mortgage insurance (including mortgages with private mortgage insurance and mortgages insured by another government agency) rather than as a share of all mortgages regardless of whether or not they have mortgage insurance  FHA's market share tends to fluctuate in response to economic conditions and other factors  Between calendar years 1996 and 2002, FHA's market share averaged about 14% of the home purchase mortgage market and about 11% of the overall mortgage market (both home purchase mortgages and refinance mortgages), as measured by number of mortgages  However, by 2005 FHA's market share had fallen to less than 5% of home-purchase mortgages and about 3% of the overall mortgage market  Subsequently, as economic conditions worsened and mortgage credit tightened in response to housing market turmoil that began around 2007, FHA's market share rose sharply, peaking at over 30% of home-purchase mortgages in 2009 and 2010, and over 20% of all mortgages (including both home purchases and refinances) in 2009  In 2017, FHA insured 19 5% of new home purchase mortgages and about 16 7% of new mortgages overall, a small decrease compared to its market share in 2016  Figure 1 shows FHA's market share as a percentage of the total number of new mortgages originated for each calendar year between 1996 and 2017  As described, FHA's market share can be measured in a number of different ways  The figure shows FHA's share of (1) all newly originated mortgages, (2) just newly originated purchase mortgages, and (3) just newly originated refinance mortgages  FHA's share of home purchase mortgages tends to be the highest, largely because borrowers who refinance are more likely to have built up a greater amount of equity in their homes and, therefore, might be more likely to obtain conventional mortgages  For the number of mortgages insured by FHA in each year calendar since 1996, see the Appendix   The increase in FHA's market share after 2007 was due to a variety of factors related to the housing market turmoil and broader economic instability that was taking place at the time  Housing and economic conditions led many banks to limit their lending activities, including lending for mortgages  Similarly, private mortgage insurance companies, facing steep losses from past mortgages, began tightening the underwriting criteria for mortgages that they would insure  Furthermore, in 2008 Congress increased the maximum mortgage amounts that FHA can insure, which may have made FHA-insured mortgages a more viable option for some borrowers in certain areas  More recently, FHA's market share has decreased somewhat from its peak during the housing market turmoil, although it generally remains somewhat higher than it was in the late 1990s and early 2000s  A number of factors may have contributed to this decrease, including lower loan limits in some high-cost areas, higher mortgage insurance premiums, and greater availability of non-FHA-insured mortgages  While not the focus of this report, the appropriate market share for FHA has been a subject of ongoing debate among policymakers  It is likely to continue to be a topic of debate, both in the context of policies specifically related to FHA as well as part of broader debate about the future of the U S  housing finance system  Table A-1 provides data on the number of mortgages insured by FHA in each calendar year since 1996, along with FHA's overall market share in each calendar year 


Report 2: The Forest Service’s mission includes sustaining the nation’s forests and grasslands; managing the productivity of those lands for the benefit of citizens; conserving open space; enhancing outdoor recreation opportunities; and conducting research and development in the biological, physical, and social sciences  The agency carries out its responsibilities in three main program areas: (1) managing public lands, known collectively as the National Forest System, through nine regional offices, 154 national forests, 20 national grasslands, and over 600 ranger districts; (2) conducting research through its network of seven research stations, multiple associated research laboratories, and 81 experimental forests and ranges; and (3) working with state and local governments, forest industries, and private landowners and forest users in the management, protection, and development of forest land in nonfederal ownership, largely through its nine regional offices  According to the Forest Service, it employs a workforce of over 30,000 employees across the country  However, this number grows by thousands in the summer months, when the agency hires seasonal employees to conduct fieldwork, respond to wildland fires, and meet the visiting public’s needs  The Office of the Chief of the Forest Service is located in Washington, D C , with 27 offices reporting directly to the Office of the Chief, as illustrated in figure 1  The nine national forest regions, each led by a regional forester, oversee the national forests and grasslands located in their respective regions  Each national forest or grassland is headed by a supervisor, the seven research stations are each led by a station director, and a state and private forestry area is headed by an area director  The Forest Service collectively refers to its forest regions, research stations, and area as RSAs  The RSAs are organized differently according to their operations, and comparable operations within the RSAs, such as collections from reimbursable agreements, may be processed differently in the various regions and stations, resulting in highly decentralized operations  In addition, the offices of the Chief Financial Officer (CFO); Deputy Chief of Business Operations (includes the budget office); and eight other offices located in the Washington, D C , headquarters also report directly to the Office of the Chief of the Forest Service  The Forest Service receives appropriations for its various programs and for specific purposes to meet its mission goals  Prior to fiscal year 2017, the Forest Service’s budgetary resources consisted primarily of no-year funds  Its budget office in Washington, D C , initiates apportionment requests and monitors the receipt of Department of the Treasury (Treasury) warrants  Upon receipt of the warrant, the apportionment is recorded in the financial system and then the budget office develops an allocation summary detailing the allocation of its budget authority by fund, programs within the funds, and distribution of funds at the regional, station, and area levels  The Forest Service may also transfer funds from other appropriations to the appropriations account that funds its fire suppression activities when available funds appropriated for fire suppression and the Federal Land Assistance, Management, and Enhancement (FLAME) fund will be exhausted within 30 days  The Forest Service’s administrative policies, practices, and procedures are issued in its Directive System, which provides a unified system for issuing, storing, and retrieving internal direction that governs Forest Service programs and activities  The Directive System consists of the Forest Service’s manuals and handbooks  The manuals contain management objectives, policies, and responsibilities and provide general direction to Forest Service line officers and staff directors for planning and executing their assigned programs and activities  The handbooks provide detailed direction to employees and are the principal source of specialized guidance and instruction for carrying out directions issued in the manuals  Line officers at the national and RSA levels have authority to issue directives in the manuals and handbooks under their respective jurisdictions  The Forest Service’s policy states that the Directive System is the only place where Forest Service policy and procedures are issued  In addition to the Directive System, Forest Service staff have also developed standard operating procedures (SOP) and desk guides to supplement guidance provided in directives  However, the SOPs and desk guides are not part of the Forest Service Directive System and therefore are not official policy and procedures  While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities for reasonably assuring that (1) amounts designated in appropriations acts for specific purposes are used as designated and (2) unobligated no-year appropriation balances from prior years were reviewed for their continuing need  In addition, the Forest Service did not have a properly designed and documented system for administrative control of funds  Finally, the Forest Service had not properly designed control activities for fund transfers for fire suppression activities under its Wildland Fire Management program  While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are used as designated—as required by the purpose statute, which states that “appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law ” We reviewed Forest Service documents about its budget authority processes, which included control objectives, related control activities, and processes over the allotment of its budgetary resources  We found that these documents, including manuals and handbooks, did not include an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated  For example, such a process would include the Forest Service allotting appropriated funds for specific programs or objects as provided in the applicable appropriation act, by either using specific budget line items already defined in the Forest Service’s financial system or creating new budget line items, as needed  Standards for Internal Control in the Federal Government states that management should define objectives clearly to enable the identification of risks and design appropriate control activities to achieve objectives and respond to the risks identified  As a result of the Forest Service not having an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated, the Forest Service did not properly allocate certain funds for specific purposes detailed in the appropriations acts for fiscal years 2015 and 2016  For example, in fiscal year 2015, the Forest Service did not set aside in its financial system the $65 million specified in the fiscal year 2015 appropriations act for acquiring aircraft for the next- generation airtanker fleet  According to Forest Service documents, as of January 6, 2016, $35 million of the designated funds was used for other purposes  In February 2017, we issued a legal opinion, related to the Forest Service’s use of the $65 million, which concluded that the Forest Service had failed to comply with the purpose statute  According to USDA’s Office of General Counsel, “this lack of any separate apportionment or account for the next-generation airtanker fleet was due to the fact that it was a new item, not included in the agency’s budget request, and added late in the appropriations process ” Similarly, in fiscal year 2016, the Forest Service did not create new budget line items to reserve in its financial system $75 million for the Forest Inventory and Analysis Program specified in the fiscal year 2016 appropriations act  Rather than creating a new budget line item for the program specified in the appropriations act, the funds were combined with an existing budget line item, making it difficult to track related budget amounts and actual expenditures  The lack of an adequate process and related control activities to reasonably assure that appropriated amounts are used for the purpose designated also increases the risk that the Forest Service may violate the Antideficiency Act  The Forest Service did not have a process and related control activities to reasonably assure that unobligated, no-year funds from prior years were reviewed for continuing need  We reviewed the Forest Service’s budget authority process document and related manuals and handbooks, which documented control objectives and procedures over its budgetary resources and the guidance for administrative control of funds  We found that these documents did not include a process for reviewing the Forest Service’s unobligated, no-year funds from prior years and related control activities to reasonably assure that such funds were reviewed for continuing need  Such reviews, if performed, may identify unneeded funds that could be reallocated to other programs needing additional budgetary resources, if consistent with the purposes designated in appropriations acts  The USDA Budget Manual states as a department policy that “agencies of the Department have a responsibility to review their programs continually and recommend, when appropriate, deferrals or rescissions ” The USDA Budget Manual further states the following: “Agency officials should remain alert to this responsibility since the establishment of reserves is an important phase of budgetary administration  If it becomes evident during the fiscal year that any amount of funds available will not be needed to carry out foreseeable program requirements, it is in the interest of good management to recommend appropriate actions, thereby maintaining a realistic relationship between apportionments, allotments, and obligations ” However, the Forest Service did not develop a directive addressing the control objectives, related risks, and control activities for implementing this USDA policy  Up until fiscal year 2017, Forest Service budgetary resources consisted primarily of no-year funds  At the beginning of each fiscal year, unobligated balances of no-year funds are carried forward and reapportioned to become part of budget authority available for obligation in the new fiscal year  Unobligated balances can increase during the fiscal year due to deobligation of prior years’ unliquidated obligations that the Forest Service determines it no longer needs  These resources are immediately available to the Forest Service to the extent authorized by law without further legislation or action from Office of Management and Budget (OMB) unless the apportionment states otherwise  According to Forest Service officials, unobligated funds reported in the Forest Service’s September 30, 2016, Statement of Budgetary Resources included $351 million in discretionary unobligated no-year funds, appropriated as far back as fiscal year 1999  The Forest Service did not identify and define a process and control objectives related to its review of unobligated no-year funds from prior years for continuing need  As a result, the Forest Service did not have reasonable assurance that prior no-year unobligated balances were properly managed and considered in its annual budget requests  This increased the risk that the Forest Service may make budget requests in excess of its needs  Additionally, the Forest Service could miss opportunities to use its prior year unobligated no-year funds more timely and effectively, for example, using these funds for other Forest Service program needs, if consistent with the purposes designated in appropriations acts  During our work, we brought this issue to management’s attention, and in response, Forest Service officials stated that the Forest Service is planning to develop a quarterly process to review available balances and, as needed, redirect funds to agency priorities  However, as of July 2017, the Forest Service had not yet developed this review process  Further, Congress rescinded about $18 million of the Forest Service’s prior year unobligated balances and required it to report unobligated balances quarterly within 30 days after the close of each quarter and appropriated multi-year funds instead of no- year funds to the Forest Service for fiscal year 2017  The Forest Service issued guidance related to administrative control of funds in manuals and handbooks, which USDA did not review and approve prior to their issuance  Based on our review of these documents, we found that the processes and related control activities over the administrative control of funds were dispersed in numerous manuals and handbooks, which may hamper a clear understanding of the overall system  Further, the system lacked key elements that would allow it to serve as an adequate system of administrative control of funds  For example, in its manuals and handbooks the Forest Service did not identify, by title or office, those officials with the authority and responsibility for obligating the service’s appropriated funds, such as funds for contracts, travel, and training  As a result, the responsibility for obligating funds was not clearly described and properly assigned in Forest Service policy as required by the USDA Budget Manual and OMB Circular No  A-11  OMB Circular No  A-11 states that the Antideficiency Act requires that the agency head prescribe, by regulation, a system of administrative control of funds, and OMB provided a checklist in appendix H to the circular that agencies can use for drafting their fund control regulations  This requirement is consistent with those in the USDA Budget Manual, which prescribes budgetary administration through a system of administrative controls for its component agencies, including the Forest Service  The USDA Budget Manual states that to the extent necessary for effective administration, (1) the heads of USDA component agencies may delegate to subordinate officials responsibilities in connection with the administrative distribution of funds within apportionments and allotments and the monitoring, control, and reporting of the occurrence of obligations and expenditures under apportionments and allotments and (2) the chain of such responsibility shall be clearly defined  In addition, USDA requires its component agencies to promulgate and maintain administrative control of funds regulation and to send such regulation to USDA’s Office of Program and Budget Analysis for review and approval prior to issuance  Because the Forest Service has not developed and issued a comprehensive system for administrative control of funds that considers all aspects of the budget execution processes, it cannot reasonably assure that (1) programs will achieve their intended results; (2) the use of resources is consistent with the agency’s mission; (3) programs and resources are protected from waste, fraud, and mismanagement; and (4) laws and regulations are followed  We also found that the Forest Service had not reviewed and updated most of its administrative control of funds guidance in the manuals and handbooks for over 5 years  The USDA Budget Manual requires each component to periodically review its funds control system for overall effectiveness and to assure that it is consistent with its agency programs and organizational structures  Further, Forest Service policy also requires routine review, every 5 years, of policies and procedures in its Directive System  According to Forest Service officials, when directives are up for review and update, a staff from the Office of Regulatory and Management Services (ORMS) sends an e-mail reminder to notify responsible personnel that updates to applicable directives are needed  However, we found that the Forest Service does not have adequate controls in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System to reasonably assure that their efforts resulted in timely updates  As a result, the Forest Service is at risk that guidance for its system for administrative control of funds may lose relevance as processes change over time and control activities may become inadequate  The Forest Service did not have properly designed control activities over its process for fund transfers related to wildland fire suppression activities  The Forest Service receives appropriations for necessary expenses for (1) fire suppression activities on National Forest System lands, (2) emergency fire suppression on or adjacent to such lands or other lands under fire protection agreement, (3) hazardous fuels management on or adjacent to such lands, and (4) state and volunteer fire assistance  Transfer of funds from other Forest Service programs to its fire suppression activities occurs when the Forest Service has exhausted all available funds appropriated for the purpose of fire suppression and the FLAME fund  A key aspect of this process is assessing the FLAME forecast, which the Forest Service uses to predict the costs of fighting wildland fires for a given season, and developing a strategy to identify specific programs and the amounts that may be transferred to pay for fire suppression activities when needed  The process for reviewing the FLAME forecast and strategizing the fund transfers was documented in the Basic Budget Desk Guide created by staff in the Forest Service’s Strategic Planning and Budget Analysis Office  However, the desk guide did not contain evidence of review by responsible officials  As a result, the Forest Service lacked reasonable assurance that the desk guide was complete and appropriate for its use  The Basic Budget Desk Guide included a listing of actions to be performed by the analyst for reviewing the FLAME forecast report and developing a strategy for fund transfer from other programs  However, the desk guide did not specify the factors to be considered when developing the strategy  For example, it did not call for documentation addressing the rationale for the strategy or an assessment of the risk that the fund transfer could have on the programs from which the funds would be transferred  The desk guide also did not describe the review and approval of the strategy by a responsible official(s) prior to the fund transfer request sent to the Chief of the Forest Service  According to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks and that such control activities should be designed at the appropriate levels in the organizational structure  Further, management may design a variety of transaction control activities for operational processes, which may include verifications, authorizations and approvals, and supervisory control activities  The lack of properly designed control activities for supervisory review of the desk guide and strategy to identify the amounts for fund transfers does not provide the Forest Service reasonable assurance that the objectives of the fund transfers—including mitigating the risk of a shortfall of funding for other critical Forest Service program activities, such as payroll or other day-to-day operating costs—will be efficiently and effectively achieved  The Forest Service enters into various reimbursable agreements with agencies within USDA, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for public benefit  The reimbursable agreements may be for the Forest Service to provide goods and services to a third party or to receive goods and services from a third party, or may be a partnership agreement with a third party for a common goal  According to Forest Service officials, the two distinct types of Forest Service reimbursable agreements are (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements (RACA)  The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations  In addition, processes and related control activities applicable to RACAs were not adequately described in applicable manuals and handbooks in the Directive System, to reasonably assure that control activities could be performed consistently and effectively  Further, certain RACA processes in the Directive System had not been timely reviewed by management and did not reflect current processes  Moreover, as previously discussed, SOPs and desk guides developed in field offices related to RACA processes were not in the Forest Service’s Directive System  Finally, the Forest Service lacked control activities segregating incompatible duties performed by line officers and program managers in creating reimbursable agreements and the final disposition of related receivables  The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations and reliable reporting internally and externally  As part of the service’s mission objective to suppress wildland fires, Forest Service officials stated that they enter into 5-year agreements referred to as master cooperative agreements with federal, state, and other entities  These agreements document the framework for commitment and support efficient and effective coordination and cooperation among the parties in suppressing fires, when they occur  The master cooperative agreements do not require specific funding commitments as amounts are not yet known  These agreements vary from region to region because of the differing laws and regulations pertaining to the participating states and other entities  These variations can also result in different billing and collection processes between regions  When a fire occurs, supplemental agreements, which are based on the framework established in the applicable master cooperative agreements, are signed by relevant parties for each fire incident  These agreements establish the share of fire suppression costs incurred by the Forest Service and amounts related to entities that benefitted from those fire suppression efforts  These supplemental agreements require commitment and obligation of funds  As indicated in figure 2, the Forest Service’s obligations for fire suppression activities ranged from $412 million to $1 4 billion over the 10-year period from fiscal years 2007 through 2016  In response to our request for documentation of processes and related control activities over its fire incident cooperative agreements, Forest Service officials stated that processes and related control activities over reimbursable agreements were applicable to both fire incident cooperative agreements and RACAs  However, based on our review of the Forest Service’s processes and related control activities over its reimbursable agreements, we found that the unique features of fire incident cooperative agreements (as compared to features of RACAs) were not addressed in the processes and related controls for reimbursable agreements  For example, there was no process and related control activities over the negotiation and review of (1) a fire incident master cooperative agreement, which is developed before a fire occurs, and (2) supplemental agreements, which are signed by all relevant parties after the start of a fire incident  These supplemental agreements detail, among other things, the terms for (1) fire department resource use, (2) financial arrangements, and (3) specific cost-sharing agreements  Another unique feature of fire incident cooperative agreements, which was not covered in process documents for its reimbursable agreements, was the preparation of the Cost Settlement Package  The preparation of this package does not start until after the fire has ended and the Forest Service has received and paid all bills  According to Forest Service officials, a fire incident is deemed to have ended when there are no more resources (firefighters and equipment) on the ground putting out the fire  However, this definition was not documented in the Forest Service’s manuals and handbooks in the Directive System  Based on our review of documentation that the Forest Service provided for four fire incidents, we found that for these incidents the Cost Settlement Packages and the billings took several months to years to complete after the fire incident  According to Forest Service officials, delays in preparing the Cost Settlement Package in many cases were due to parties involved in suppressing the fires taking a long time to submit their invoices to the Forest Service for payment  Because the preparation of Cost Settlement Packages was not included in the process documents, the Forest Service did not have a defined time frame for when, in relation to the end of the fire, the Cost Settlement Package must be completed  For example, in one case we reviewed, the bill for a cost settlement was sent 9 months after the fire occurred, and in another case, settlement occurred approximately 2 years after the fire occurred  For both fire incidents, based on the reports we reviewed, the fires were contained within a week or two, but the Forest Service does not have a policy for documenting the date when the fire incident is deemed to have ended  Because of the complexity of the process for negotiating and determining the reimbursable amounts from all the costs that the Forest Service pays for a fire incident, the reimbursable amounts may take time to negotiate, and subsequent billing to and collection from parties may take much longer  Forest Service officials stated that some receivables that were not going to be collected until after its financial system’s aging process for receivables deemed such receivables uncollectible and a bad debt are tracked in a spreadsheet outside its financial system  We found that the Forest Service did not have a documented process and related control activities to reasonably assure that its Budget Office was informed of these older receivables being tracked in a spreadsheet and the related progress of collection activities that local program managers and line officers perform, which could affect the reliability of the reported reimbursable receivable amounts  According to Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve the entity’s objectives  Without proper communication, important information, such as amounts that the Forest Service will receive from fire incident cost settlement negotiations, may not be considered in the Forest Service’s strategy for the effective and efficient management of fund transfers for fire suppression activities  Processes and related control activities applicable to RACAs were not adequately described in Forest Service manuals and handbooks in its Directive System  RACAs, which may be for research or other nonemergency purposes, are billed and collected based on previously agreed upon billing and collection terms  In accordance with the Forest Service’s Directive System, policies related to business processes, such as RACAs, are documented in its manuals while procedures for performing specialized activities are documented in its handbooks  We found that the manuals and handbooks in the Directive System did not adequately describe the processes and related control activities over the RACA processes to enable efficient and effective performance of the work by appropriate and responsible personnel  The manuals and handbooks related to RACAs state that a manager review the documentation to ensure that the funding supports the objective of the agreement, the agreement is the correct instrument for funding the project, all relevant terms and conditions have been included in the agreement, the entity’s financial strength and capability are acceptable, and all applicable regulations and OMB circulars have been addressed  However, there was no discussion in the manuals and handbooks about when the manager needs to perform the reviews and how these reviews were to be documented  Further, in response to our inquiry regarding procedures performed to assess the entity’s financial strength and capability are acceptable before a RACA is signed, Forest Service officials stated that there is currently no formal process for determining financial capability for RACAs  For reimbursable agreements, the Forest Service’s process documented in its handbook consisted of completing a creditworthiness checklist  However, the handbook did not describe procedures for (1) completing the checklist and (2) documenting responsible personnel’s review and approval of an entity’s acceptable financial capability  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks  Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel  Further, the standards also explain that management clearly document internal control in a manner that allows the documentation to be readily available and properly managed and maintained  In addition, the manuals and handbooks applicable to the RACAs have not been timely reviewed by management, and had not been updated to reflect current processes

ground_truth: The Federal Housing Administration (FHA), an agency of the Department of Housing and Urban Development (HUD), was created by the National Housing Act of 1934. FHA insures private lenders against the possibility of borrowers defaulting on mortgages that meet certain criteria, thereby expanding the availability of mortgage credit beyond what may be available otherwise. If the borrower defaults on the mortgage, FHA is to repay the lender the remaining amount owed. A household that obtains an FHA-insured mortgage must meet FHA's eligibility and underwriting standards, including showing that it has sufficient income to repay a mortgage. FHA requires a minimum down payment of 3.5% from most borrowers, which is lower than the down payment required for many other types of mortgages. FHA-insured mortgages cannot exceed a statutory maximum mortgage amount, which varies by area and is based on area median house prices but cannot exceed a specified ceiling in high-cost areas. (The ceiling is set at $726,525 in high-cost areas in calendar year 2019.) Borrowers are charged fees, called mortgage insurance premiums, in exchange for the insurance. In FY2018, FHA insured over 1 million new mortgages (including both home purchase and refinance mortgages) with a combined principal balance of $209 billion. FHA's share of the mortgage market tends to vary with economic conditions and other factors. In the aftermath of the housing market turmoil that began around 2007 and a related contraction of mortgage lending, FHA insured a larger share of mortgages than it had in the preceding years. Its overall share of the mortgage market increased from about 3% in calendar year 2005 to a peak of 21% in 2009. Since that time, FHA's share of the mortgage market has decreased somewhat, though it remains higher than it was in the early 2000s. In calendar year 2017, FHA's overall share of the mortgage market was about 17%. FHA-insured mortgages, like all mortgages, experienced increased default rates during the housing downturn that began around 2007, leading to concerns about the stability of the FHA insurance fund for single-family mortgages, the Mutual Mortgage Insurance Fund (MMI Fund). In response to these concerns, FHA adopted a number of policy changes in an attempt to limit risk to the MMI Fund. These changes have included raising the fees that it charges and making changes to certain eligibility criteria for FHA-insured loans.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2:  For example, the document that serves as direction for Forest Service personnel on how to enter into RACAs referred to an outdated financial system that was replaced in fiscal year 2013  Further, the manuals and handbooks for the RACA processes had no indication that they had been reviewed within the past 5 years  Forest Service policy requires routine review, every 5 years, of policies and procedures in its Directive System  According to Forest Service officials, a staff member from ORMS sends an e-mail to officials responsible for updating these policies and procedures  However, appropriate control activities have not been designed to reasonably assure that updates were made, reviewed, approved, and issued as needed for continued relevance and effectiveness  Without adequate descriptions of processes and related control activities in its manuals and handbooks over RACAs, the Forest Service is at risk that processes and related control activities may not be properly, consistently, and timely performed  Further, because it lacks a process and related controls for monitoring and reviewing the updates of the guidance and various process documents in the Directive System, the Forest Service is at risk that its policies and procedures may not provide appropriate agency-wide direction in achieving control objectives, particularly when financial systems change and old processes may no longer be applicable  SOPs and desk guides related to RACA processes were not in the Directive System and are not considered official Forest Service policy and procedures  Forest Service field staff responsible for various processes generally developed SOPs and desk guides to document day-to-day procedures for employees in carrying out RACA processes to supplement the manuals and handbooks  However, the SOPs and desk guides did not reference the applicable manuals and handbooks they supplemented  Further, the SOPs and desk guides did not provide descriptions of (1) review procedures for authorization, completeness, and validity of RACAs and related receivables; (2) detailed review procedures to be performed and by whom; (3) timing of review procedures; and (4) how to document the completion of the review procedures  Finally, SOPs and desk guides did not have evidence that responsible officials reviewed and approved them to authorize their use  These SOPs and desk guides are only available in the field office where these were developed, and if similar SOPs and desk guides were developed in other field offices, control activities and how they are performed could vary  We also noted that these SOPs and desk guides were not timely updated to reflect processes and systems currently in use  For example, there were many instances where the SOPs and desk guides referred to systems that the Forest Service no longer used  Standards for Internal Control in the Federal Government states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives  Effective documentation assists in management’s design of internal control by establishing and communicating the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel and to achieve the entity’s objectives  Management assigns responsibility and delegates authority to key roles throughout the entity  As a result of the issues discussed above, the Forest Service is at risk that control activities may not be properly and consistently performed and its related control objectives may not be achieved efficiently and effectively  In addition, the Forest Service is at risk that knowledge for performing the control activities may be limited to a few personnel or lost altogether in the event of employee turnover  The Forest Service lacked control activities over the segregation of incompatible duties performed by line officers and program managers for reimbursable agreements and any adjustments affecting the final disposition of related receivables  Field offices manage the majority of Forest Service projects, including authorizing the agreements and monitoring related collection  The Forest Service line officer for fire incident cooperative agreements and program managers for RACA at the RSA, unit, or field levels initiate and develop the terms of the agreements and are also responsible for any subsequent negotiation of the agreements  In the process of negotiating and settling costs, the line officer or program manager has the authority to cancel or change related receivables that they deemed uncollectible  For example, in a fire incident, the line officer at the region or field level is involved in both developing a Cost Share Agreement and after the fire incident has ended, negotiating the Cost Settlement Package with parties involved in the agreement to determine the final settlement amount that the Forest Service will be reimbursed for expenses paid in suppressing the fire incident  Therefore, the line officer is responsible for initiating the Cost Share Agreement, modifying the Cost Settlement Package, and changing or canceling the related receivable, which represent conflicting duties  We also found that the Forest Service did not have any mitigating controls, such as independent approval of any adjustments affecting the final disposition of receivables, to mitigate the risk of these incompatible duties  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks  Segregation of duties contributes to the design, implementation, and operating effectiveness of control activities  To achieve segregation of key functions, management can divide responsibilities among different people to reduce the risk of error, misuse, or fraud  This may include separating the responsibilities for authorizing or approving transactions, processing and recording them, and reviewing the transactions so that no one individual controls all key aspects of a transaction or event  Forest Service officials stated they did not consider segregating the conflicting duties related to reimbursable agreements because these line officers and program managers were most familiar with the terms of the agreement and the activities performed  However, a lack of adequate segregation of conflicting duties or proper monitoring and review of conflicting duties for receivables from reimbursable agreements could result in receivables not being collected, and an increased risk of fraud  The Forest Service’s processes and related control activities over review of unliquidated obligations were not properly designed to reasonably assure optimum utilization of funds and were inconsistent with USDA and Forest Service policy  Further, Forest Service manuals and handbooks related to the review of unliquidated obligations did not clearly describe control activities and were not timely reviewed by management  The Forest Service reported unliquidated obligations of approximately $2 6 billion and $2 5 billion in its financial statements as of September 30, 2015, and 2016, respectively  In fiscal year 2016, the Forest Service deobligated about $319 million of its unliquidated obligations from prior years  The Forest Service’s procedures related to the review of unliquidated obligations were not properly designed and were inconsistent with USDA and Forest Service policy  In accordance with USDA Departmental Regulation (Regulation 2230-001) and related Forest Service policy, the Forest Service identifies and reviews unliquidated obligations that have been inactive for at least 12 months to determine whether delivery or performance of goods or services is still expected to occur  Once a determination has been made that an unliquidated obligation can be deobligated, program or procurement personnel are to notify finance personnel, in writing, within 5 days of the determination to process the deobligation  Within 15 days of receipt of the written notification, the unliquidated obligations are to be adjusted in the financial management system  The Forest Service CFO is then to be notified in writing that the deobligation was processed  Within 1 month of the close of each quarter, the Forest Service CFO is to submit to USDA’s Associate CFO for Financial Operations a certification stating that the Forest Service has performed reviews of its unliquidated obligations and taken appropriate actions, such as promptly deobligating an unliquidated obligation that is no longer needed  However, the Forest Service’s quarterly certifications are inconsistent with USDA and Forest Service policy because the months included in each quarterly review do not line up with the months outlined in policy  For example, as shown in table 1, based on policy the certification due on October 31, covers the months July through September  However in practice, the certification that the Forest Service prepared for October 31 covers May through July  As a result, the review and certification for August and September would be delayed an entire quarter  According to Forest Service officials, it takes considerable time to produce accurate unliquidated obligations reports from USDA’s financial system and then distribute them to field offices  Therefore, there is not sufficient time for the field offices to review and deobligate amounts not needed from the unliquidated obligations balances to meet USDA’s certification timing and requirements  However, the Forest Service has not developed other processes and control activities that could help meet USDA and Forest Service policy and reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken  As a result, there is an increased risk that the Forest Service may not achieve its control objectives of optimum utilization of funds and timely adjustments of obligated balances  The Forest Service’s process and related control activities over its review of unliquidated obligations and resulting certifications were not adequately described in manuals and handbooks in its Directive System  Further, the manuals and handbooks were not timely reviewed and updated to reflect processes and systems currently in use  In accordance with the Forest Service’s Directive System, policies are documented in its manuals while procedures for performing specialized activities are documented in its handbooks  However, we found that the Forest Service’s processes and related control activities for reviewing unliquidated obligations were not adequately described and documented in such manuals and handbooks  Although parts of the applicable section of the handbook referred to procedures, there were no detailed descriptions of the processes, and only references to objectives of the procedures for reviewing unliquidated obligations were listed  For example, in identifying unliquidated obligations for review, the narrative description of the procedures in the handbook states that the responsible obligating official must review each selected unliquidated obligation to determine whether (1) delivery or performance of goods or services has occurred or is expected to occur and (2) accounting corrections to the obligation data in the accounting system are necessary  The handbook also refers to an unliquidated obligations report listing the unliquidated obligations that must be reviewed  The narrative does not provide any detailed procedures that obligating officials or responsible personnel need to perform, how to perform those procedures, and how those control activities are to be documented  The guidance in the handbook was supplemented by two desk guides  However, the desk guides are outside the Forest Service’s Directive System and, as previously noted, the Directive System is the only place where the Forest Service’s policy and procedures are issued  In addition, these desk guides did not reference the applicable guidance in the Directive System that they were supplementing  Further, the process and related control activities for adjusting unliquidated obligations within 15 days of receipt of written notification, as stated in USDA’s policy, were not described in either the handbooks or the desk guides  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks to achieve an effective internal control system  Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel  Further, the standards also explain that management clearly document internal control in a manner that allows documentation to be readily available and that documentation be properly managed and maintained  In addition, manuals and handbooks for processes related to review and certification of unliquidated obligations had no evidence that they had been reviewed within the past 5 years for ongoing relevance and effectiveness  According to a Forest Service manual, all service-wide directives, except interim directives, shall be reviewed at least once every 5 years  The Forest Service does not have an effective process in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System  As previously discussed, while ORMS sends an e- mail requesting that the applicable officials review and update the guidance in the manuals and handbooks, there is no follow-up process to help ensure that documents were reviewed and updated as needed  Because the Forest Service’s process and related control activities over its review and certification of unliquidated obligations were not adequately described in its manuals and handbooks, the Forest Service is at risk that its control activities may not reasonably assure that control objectives provide (1) optimum utilization of funds and (2) for unliquidated obligations that are no longer needed to be efficiently and effectively deobligated and made available for other program needs  Adequate processes and related control activities over the Forest Service’s budgetary resources are critical in reasonably assuring that these resources are timely and effectively available for its mission operations, including fire suppression  However, we identified deficiencies in the Forest Service’s processes and related controls over allotments, unobligated no-year funds from prior years, administrative control of funds, fund transfers, reimbursable agreements, and available funds from deobligation of unliquidated obligations  Deficiencies ranged from a lack of processes to control activities that were not properly designed, resulting in an increased risk that Forest Service funds may not be effectively and efficiently monitored and used  In addition, the Forest Service’s manuals and handbooks, which provide the directives for the areas we reviewed, had not been reviewed by management in accordance with the Forest Service’s 5-year review policy  Further, Forest Service staff prepared SOPs and desk guides that documented control activities, but they were not issued as official policy and had not been reviewed and approved by responsible officials  As a result, the Forest Service is at increased risk that the control activities may not be consistently performed across the agency and that the guidance in the SOPs and desk guides may not comply with agency policy in the Directive System  To improve internal controls over the Forest Service’s budget execution processes, we are making the following 11 recommendations: The Chief of the Forest Service should (1) revise its process and (2) design, document, and implement related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are properly used for the purposes specifically designated  (Recommendation 1) The Chief of the Forest Service should (1) develop a process and (2) design, document, and implement related control activities to reasonably assure that unobligated no-year funds from prior years are reviewed for continuing need  (Recommendation 2) The Chief of the Forest Service should (1) design, document, and implement a comprehensive system for administrative control of funds and (2) submit it for review and approval by USDA before issuance, as required by the USDA Budget Manual  (Recommendation 3) The Chief of the Forest Service should design, document, and implement control activities over the preparation and approval of a fire suppression fund transfers strategy, to specify all appropriate factors to be considered in developing and documenting the strategy, and incorporate these control activities into the Directive System  (Recommendation 4) The Chief of the Forest Service should design, document, and implement processes and related control activities for its fire incident cooperative agreements to reasonably assure efficient and effective operations and timely and reliable reporting of reimbursable receivables related to fire incident cooperative agreements, and incorporate them in the Directive System  (Recommendation 5) The Chief of the Forest Service should update the RACA manuals and handbooks to adequately describe the processes and related control activities applicable to RACAs to reasonably assure that staff will know (1) how and when to perform processes and control activities and (2) how to document their performance  (Recommendation 6) The Chief of the Forest Service should design, document, and implement segregation of duties or mitigating control activities over reimbursable agreements and any adjustments affecting the final disposition of related receivables  (Recommendation 7) The Chief of the Forest Service should modify, document, and implement control activities consistent with USDA and Forest Service policy to reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken  (Recommendation 8) The Chief of the Forest Service should adequately describe the processes and related control activities for unliquidated obligations review and certification processes in manuals and handbooks within the Directive System  (Recommendation 9) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that manuals and handbooks for allotments, reimbursable agreements, and review of unliquidated obligations are reviewed and updated every 5 years, consistent with Forest Service policy  (Recommendation 10) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that SOPs and desk guides (1) clearly refer to guidance in the Directive System for allotments, reimbursable agreements, and review of unliquidated obligations and (2) are reviewed and approved by responsible officials prior to use  (Recommendation 11) We provided a draft of this report to USDA for comment  In its comments, reproduced in appendix III, the Forest Service stated that it generally agreed with the report and that it has made significant progress to address the report’s findings  Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No  A-11  Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement  We are sending copies of this report to the appropriate congressional committees and to the Secretary of Agriculture and the Chief of the Forest Service  In addition, this report is available at no charge on the GAO website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-9869 or khana@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff members who made key contributions to this report are listed in appendix IV  Our objectives were to determine the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) unliquidated obligations  We reviewed the Forest Service’s process documents and control activities, policies and procedures from its manual and handbooks in its Directive System, and other guidance in the form of standard operating procedures (SOP) and desk guides to obtain an understanding of internal controls at the Forest Service related to our three objectives  We reviewed the control activities that the Forest Service identified to determine whether the activities would achieve the control objectives that the service identified and whether the activities were consistent with Standards for Internal Control in the Federal Government  We also reviewed recent relevant GAO and U S  Department of Agriculture (USDA) Office of Inspector General reports to obtain background information related to the Forest Service’s budget execution processes  We evaluated the design of the Forest Service’s control activities based on data for fiscal year 2016  To address our first objective, we reviewed Forest Service process documents related to allotments and budget authority to obtain an understanding of control activities over the allotments of budgetary resources, its system for administrative control of funds, and any related fund transfers between Forest Service appropriations  The process documents included a list of control objectives and related control activities that the Forest Service had used to assess its internal controls  We also reviewed the related guidance in appendix H to Office of Management and Budget Circular No  A-11, Preparation, Submission, and Execution of the Budget for Administrative Control of Funds, to identify requirements that agencies must meet to ascertain whether their controls over funds management are properly designed  We interviewed key officials from the Forest Service’s Strategic Planning, Budget and Accountability Office to gain an understanding of their processes for allotments of budgetary resources, its system for administrative control of funds, and fund transfers between Forest Service appropriations for wildland fire suppression activities, including how each of their risk assessments were performed and their plans to mitigate the risks  We reviewed and analyzed the processes documented in the manuals and handbooks collectively referred to as directives to determine whether the processes and control activities were designed to achieve the Forest Service’s stated objectives  Specifically, we examined the Forest Service’s control activities to determine whether these sufficiently communicated the procedures to be performed and the documentation to be prepared  We also reviewed USDA Budget Manual to determine whether Forest Service guidance was consistent with USDA’s requirements for all of its component agencies, specifically requirements related to the administrative control of funds  To address our second objective, we reviewed the Forest Service’s policies, procedures, and other documentation and interviewed agency officials to develop an understanding of its processes related to reimbursable agreements and related collection activities  We first identified, through interviews with Forest Service officials, the different kinds of reimbursable agreements that the Forest Service enters into with other USDA components, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for the benefit of the public  Two distinct types of reimbursable agreements include (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements  We reviewed Forest Service process documents and templates related to these two types of reimbursable agreements provided to obtain an understanding of control activities over reimbursable processes  We reviewed the list of control objectives and related control activities that the Forest Service identified to determine whether the control activities were designed to achieve the applicable control objectives  To address our third objective, we reviewed the Forest Service’s policies, procedures, and other documentation related to and interviewed agency officials about unliquidated obligations to develop an understanding of the Forest Service’s review and certification processes for unliquidated obligations balances  We reviewed the Forest Service’s control activities related to its process for reviewing unliquidated obligations to obtain an understanding of control activities around its process and to determine whether the control activities were designed to achieve the applicable control objectives  Based on the results of our evaluation of the Forest Service’s design of internal control activities over the budget execution processes, we did not evaluate the implementation of the control activities or whether they were operating as designed  While our audit objectives focused on certain control activities related to (1) allotments of budgetary resources, the Forest Service’s system for administrative control of funds, and related fund transfers; (2) reimbursables and related collections for reimbursable agreements; and (3) unliquidated obligations, we did not evaluate all control activities and other components of internal control  If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit  We conducted this performance audit from August 2016 to January 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control  Internal control represents an agency’s plans, methods, policies, and procedures used to fulfill its mission, strategic plan, goals, and objectives  Internal control is a process by an entity’s oversight body, management, and other personnel to provide reasonable assurance that the objectives of the entity will be achieved  When properly designed, implemented, and operating effectively, it provides reasonable assurance that the following objectives are achieved: (1) effectiveness and efficiency of operations, (2) reliability of internal and external reporting, and (3) compliance with applicable laws and regulations  Internal control is not one event, but a series of actions that occur throughout an entity’s operations  The five components of internal control are as follows: Control Environment - The foundation for an internal control system that provides the discipline and structure to help an entity achieve its objectives  Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives and provides the basis for developing appropriate risk responses  Control Activities - The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system  Information and Communication - The quality information management and personnel communicate and use to support the internal control system  Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews  An effective internal control system has each of the five components of internal control effectively designed, implemented, and operating with the components operating together in an integrated manner  In this audit, we assessed the design of control activities at the Forest Service related to its (1) allotments of budgetary resources and any related fund transfers between Forest Service appropriations, (2) reimbursables and related collections, and (3) review of unliquidated obligations  In addition to the contact named above, the following individuals made key contributions to this report: Roger Stoltz (Assistant Director), Meafelia P  Gusukuma (Auditor-in-Charge), Tulsi Bhojwani, Cory Mazer, Sabrina Rivera, and Randy Voorhees 
Report 2:  Attracting teens can be particularly challenging, in part because of meal service time periods, a lack of age- appropriate activities, and stigma, according to national organizations and providers we interviewed  For example, early morning meal sites generally attract younger kids as teens may be apt to sleep later in the summer, and teens may also perceive a stigma in participating in a free meal program and may face peer pressure not to eat  In addition, meal offerings at SFSP sites may also present challenges to teen participation  Specifically, because FNS bases minimum portion size requirements for meals on the needs of younger children, meals are not always adequate to meet the nutritional needs of teens, according to one sponsor we interviewed  Across the 30 meal sites in the 3 states we visited in summer 2016, we observed variety in the meals served during different meal services  (see fig  8 ) States and SFSP providers have collaborated with others and sought specific types of sites to help provide enrichment activities and attract certain age groups—efforts that FNS has supported through information sharing and related grant funding  Sponsors in the selected states said they have focused on partnerships with groups such as those focused on youth development, churches, libraries, and police or fire departments, to offer age-appropriate activities for children (see fig  9)  For example, programs with local police departments, such as Cops N Kids in one selected state, or libraries in two selected states, provided meal services in combination with youth development or other enrichment activities  (See sidebar for highlights on the Cops N Kids program ) One national organization official said activities at SFSP sites can help take away the stigma around the program because children are not just there for the meal  Efforts to rebrand the SFSP as a community event where entire families can participate at the meal site also can have this effect, which is why some sponsors in the selected states said they partnered with foodbanks to donate meals for adults  In addition, a sponsor in one selected state told us they adjusted their meal offerings to match the needs of children of different age groups, for example, by serving meals to younger children earlier in the day and meals to teens later in the day  To support participation from children of all ages, FNS has shared information on age-appropriate activities through its SFSP toolkit and provided related grant funding  For example, in 2010, FNS funded the Activity Incentive demonstration project, in which sponsors in Mississippi were provided with mini-grants to increase enrichment and recreational activities, such as education, tutoring, sports and games, arts and other activities, to draw children to meal sites  More than half the states reported in our survey that they faced a moderate to extreme challenge with limited state agency staffing (27), a limited amount of federal funding for SFSP administration (27), as well as ensuring sponsor participation to meet needs (28)  In addition, 28 states reported in our survey that they faced a moderate to extreme challenge with sponsors not following program requirements  Limited staffing can affect a state agency’s ability to conduct efforts aimed at increasing participation, identifying potential sponsors, and reviewing and monitoring sponsors, according to national organization and state officials we interviewed  For example, increases in sponsors and sites requires additional staff and time to conduct pre-approval visits, sponsor and site reviews, vendor reviews, and technical assistance visits, which directly affects the amount of funding needed to support staff salaries and travel reimbursement, according to one state in our survey  However, because the SFSP administrative funds FNS provides to states are based on the number of meals served in the previous year, increasing the number of staff to help increase SFSP participation is difficult, according to a national organization official we interviewed  States reported a moderate to extreme challenge with the following issues related to ensuring sponsor participation: a lack of sponsors to meet summer meal needs, a lack of awareness of the summer meal program among potential sponsors or sites, completing federal requirements for monitoring of SFSP sponsors, and identifying potential sponsors  State agencies responsible for administering the SFSP reported relying on other resources and partners to help with program administration— strategies that FNS has supported through information sharing and its online tools  As discussed earlier, all three selected state agencies we interviewed told us they partner with advocacy groups to help expand and conduct outreach on the SFSP  Additionally, more than half the states in our survey reported several factors—which may ease the administrative burden on states—as critical to the success of the SFSP, including partnerships with SFSP sponsors (49) and retaining sponsors and sites over multiple summers (51)  To support states’ use of alternative funding sources to help administer the SFSP, FNS has shared information on federal, state, and private funding and grant opportunities  FNS also developed the online Capacity Builder tool, which 35 states reported in our survey was moderately to extremely useful in identifying or confirming meal site eligibility in fiscal year 2017  Seventeen states reported in our survey that ensuring summer meal sites are in safe locations was moderately to very challenging, a challenge that some states and SFSP providers have taken steps to help address  State officials and SFSP providers in the selected states reported that when crime has occurred near a site, there are concerns about ensuring children’s safety while they are consuming meals at the site, as well as the safety of site staff delivering meals  Some sponsors noted, in particular, parents’ concerns for the safety of their children at meal sites in light of criminal activities in the surrounding area  To ensure children continue to have access to meals, some sponsors noted that in the event of an immediate threat at an outdoor meal site, site staff are sometimes able to bring children to a nearby indoor space instead  States and SFSP provider officials in two selected states told us they have also used other strategies, including partnerships with local law enforcement agencies, to help address safety concerns during the meal service and ensure children have access to meals  For example, national organizations involved in summer meals and sponsor officials in the selected states said they encourage partnerships with local police departments to use police escorts at meal sites or to follow mobile meal routes in situations where safety at the meal site is a concern  When violence or crime has occurred near a site, some states and SFSP sponsors have also sought flexibility from FNS with respect to the federal requirement that children consume summer meals on site, according to state and local officials  FNS has used its available authorities to grant some states and sponsors flexibility with respect to the requirement that children consume summer meals on site, such as when safety at the site is a concern; however, FNS has not clearly communicated to all states and sponsors the circumstances it considers when deciding whether to grant this flexibility  According to our review of letters FNS sent to multiple states approving their requests for this type of flexibility, the agency identified a consistent set of circumstances that needed to be met for it to grant this flexibility  These circumstances were described in the letters the agency sent to states and generally included verification that violent crime activities occurred within both a 6-block radius of the meal site and 72 hours prior to the meal service  FNS’s letters to states indicate that when documentation was provided to the agency showing that these circumstances existed at a summer meals site on a particular day or days, meals consumed by children off site on those days were eligible for federal reimbursement  Although FNS has issued guidance on the general processes for requesting flexibility from program requirements under its waiver and demonstration authorities, these guidance documents do not detail the specific circumstances that the agency considers when deciding whether to grant flexibility from the on-site requirement due to safety concerns  FNS has communicated this information only in its responses to specific state and sponsor requests, and it has not communicated these circumstances more broadly to all states and sponsors  FNS officials explained that they review state and sponsor requests for flexibility due to safety concerns on a case-by-case basis  However, they also acknowledged that the set of circumstances used for approval of state and sponsor requests for flexibility, which we identified in their letters to states, has been used repeatedly  Further, states and sponsors reported challenges obtaining the specific data needed for approval of a site for this type of flexibility, hampering some providers’ efforts to ensure safe delivery of meals  For example, state agency and sponsor officials in one selected state said obtaining the crime data needed to qualify for the flexibility can be an administrative burden on sponsors, and these data are not consistently available in a timely manner  According to state agency and sponsor officials in one of the selected states, daily crime statistics are not available in all areas, and while a sponsor can sometimes access current data on crime in a city, the most recent available data on crime in suburban areas are sometimes one year old  FNS is aware of state and local challenges obtaining the necessary crime data, according to our discussions with FNS officials  FNS officials acknowledged that while they have granted some state and sponsor requests to allow children to consume meals off site in certain areas where violence or crime has occurred, some sponsors were unable to implement the flexibility because they could not obtain the necessary crime data  To help achieve agency objectives and address related risks, the Standards for Internal Control in the Federal Government state that agencies should communicate key information to their internal and external stakeholders  Although FNS officials told us they do not have one set of circumstances under which they approve these requests, our review found only one set of circumstances under which this type of flexibility has been approved  However, FNS has not broadly communicated the circumstances it considers in deciding whether to approve requests for flexibility with respect to the requirement that children consume summer meals on site in areas with violence or crime  Unless FNS shares this information with all states and sponsors, states and sponsors will likely continue to be challenged to use this flexibility, hindering its usefulness in ensuring safe summer meal delivery to children  In addition, FNS has issued reports to Congress evaluating some of its demonstration projects, as required under its statutory authorities, but the agency has not issued any such reports to Congress specifically on the use of flexibilities with respect to the on-site requirement in areas where safety is a concern  As previously discussed, the agency is required to annually submit certain reports to Congress regarding the use of waivers and evaluations of projects carried out under its demonstration authority  Furthermore, Standards for Internal Control in the Federal Government state that management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks  Yet, FNS has not evaluated nor reported on the use of waivers and demonstration projects in cases where safety was a concern  Although FNS requests reports from state agencies or sponsors that have received flexibility with summer meals delivery under FNS’s demonstration and waiver authorities, FNS officials told us they have not assessed whether their use of these flexibilities to address safety issues has been effective in ensuring safe meal delivery  FNS officials told us that they have not evaluated or reported on these flexibilities, in part, because they have limited information on their outcomes  Without understanding the impact of its use of these flexibilities, neither FNS nor Congress knows whether these flexibilities are helping provide meals to children  In addition to the challenges with safety at meal sites, sponsors also sometimes face administrative challenges when participating in multiple child nutrition programs that are operated by different state agencies or divisions within the same agency, according to officials from national and regional organizations and sponsors we interviewed  For example, officials from national organizations involved in summer meals told us the management of each child nutrition program and processes related to applications, funding, and oversight are fragmented in many states  For example, a sponsor in one of the selected states told us aspects of the SFSP and CACFP sponsor applications are highly duplicative and estimated it took 42 hours last year to complete duplicative paperwork  Another sponsor that provides school meals during the school year told us they had to fill out 60 additional pages of paperwork to provide summer meals, which coupled with having a state contact for the SFSP that was different from the one they worked with for the NSLP, was a significant burden for them  Officials from one national organization told us a lack of interoperability of some state agencies’ data systems has caused challenges and administrative burden for some sponsors  For example, in some states, different agencies oversee child nutrition programs, yet are unable to share data on sponsor approval, and therefore, sponsors are required to submit similar information to both, according to these officials  Duplicative paperwork can be particularly burdensome for some SFSP providers, as national organization officials and SFSP providers in the selected states said completing SFSP application paperwork can be especially challenging when a sponsor has staff shortages or no dedicated SFSP staff  Some selected states have worked with SFSP sponsors to help minimize the administrative burden  For example, state agency officials from one of the selected states said they have connected less-experienced sponsors to more-experienced sponsors in the community to help them with program administration  In one case, an experienced SFSP sponsor partnered with a small sponsor new to the program to help with SFSP administration, including helping them understand program rules and paperwork requirements  One SFSP sponsor also noted that their state agency took additional steps to ease administrative burden, such as making the forms for the CACFP more consistent with those for the SFSP and streamlining certain requirements for large and experienced sponsors, which the sponsor found helpful  At the federal level, FNS has established program and policy simplifications to help lessen the administrative burden on sponsors participating in multiple child nutrition programs, though the persistence of these challenges indicate that information about these simplifications has not reached all relevant state agencies  While FNS officials told us that some of the duplicative requirements may be a function of differences in statute, FNS provided guidance to states in 2011 and 2014 on simplified application procedures for institutions participating in CACFP that also wish to apply for SFSP  FNS noted in its guidance that in states where CACFP and SFSP are administered by different state agencies, state agencies are encouraged to work together to share information and streamline the application and agreement process as much as possible  FNS also addressed these simplifications in a state agency meeting in November 2017  Additionally, FNS provided guidance to states in 2012 on simplified application and review procedures for school food authorities participating in the NSLP that wish to also participate in the SFSP  Although FNS has shared this information with states in an attempt to make them aware of streamlining options, FNS officials noted that some states may choose not to implement them  Standards for Internal Control in the Federal Government state that management should externally communicate the necessary quality information to achieve the entity’s objectives, as well as periodically evaluate the methods of communication to ensure communication is effective and appropriate  FNS’s existing guidance addresses options for streamlining administrative requirements for sponsors participating in multiple child nutrition programs  However, information on program and policy simplifications available for sponsors participating in both NSLP and SFSP has not been shared with states recently, and challenges in this area persist, indicating this information has not reached all relevant state agencies  Without further efforts from FNS to disseminate information on current options for streamlining administrative requirements across child nutrition programs, overlapping and duplicative administrative requirements may limit children’s access to meals by discouraging sponsor participation in child nutrition programs  The purpose of the SFSP is to continue to provide children in low-income areas with nutritious meals over the summer when school is no longer in session, and to that end, the program provided 149 million SFSP meals to children in fiscal year 2016  Although meals served are one indicator of participation, FNS’s current estimates of children participating in SFSP are unreliable  Without additional understanding of children’s participation in the SFSP, FNS lacks information critical for informing program implementation, strategic planning, and outreach  The majority of states nationwide and SFSP providers in the three states we visited reported experiencing a number of challenges with the SFSP, and FNS has taken important steps to address these challenges  Two key challenges identified by officials in the selected states and national organizations we interviewed are ensuring summer meal sites are in safe locations, and meeting administrative requirements when participating in multiple child nutrition programs  FNS has taken steps to address these challenges by providing flexibilities in how meals are delivered to children and streamlining options for those providers participating in more than one child nutrition program  However, a lack of clarity concerning the circumstances under which FNS grants flexibilities in areas of violence and crime, and a lack of information on its use of these flexibilities and their impact on program administration, hinder efforts to ensure program goals are met  Furthermore, absent a reminder to states regarding existing options for streamlining administration across multiple nutrition programs, some providers may continue to be discouraged from participating in these programs due to duplicative and burdensome administrative requirements, which may ultimately limit the provision of nutritious meals to children  We are making the following four recommendations to FNS: The Administrator of FNS should improve its estimate of children’s participation in the SFSP by focusing on addressing, at a minimum, data reliability issues caused by variations in the number of operating days of meal sites and in the months in which states see the greatest number of meals served  (Recommendation 1) The Administrator of FNS should communicate to all SFSP stakeholders the circumstances it considers in approving requests for flexibility with respect to the requirement that children consume SFSP meals on-site in areas that have experienced crime and violence, taking into account the feasibility of accessing data needed for approval, to ensure safe delivery of meals to children  (Recommendation 2) The Administrator of FNS should evaluate and annually report to Congress, as required by statute, on its use of waivers and demonstration projects to grant states and sponsors flexibility with respect to the requirement that children consume SFSP meals on-site in areas experiencing crime or violence, to improve its understanding of the use and impact of granting these flexibilities on meeting program goals  (Recommendation 3) The Administrator of FNS should disseminate information about existing flexibilities available to state agencies to streamline administrative requirements for sponsors participating in the SFSP and other child nutrition programs to help lessen the administrative burden  For example, FNS could re-distribute existing guidance to state agencies that explains available flexibilities and encourage information sharing  (Recommendation 4) We provided a draft of this report to the Secretary of the USDA for review and comment  FNS officials provided technical comments, which we incorporated as appropriate  In addition, in oral comments, FNS officials, including the Deputy Administrator for Child Nutrition Programs, generally agreed with the recommendations in the report  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the Secretary of the USDA and interested congressional committees  The report will also be available at no charge on the GAO website at www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  This appendix discusses in detail our methodology for addressing three research objectives: (1) What is known about participation in the Summer Food Service Program (SFSP) and how has it changed in the last 10 years? (2) What other programs help feed low-income children over the summer? and (3) What challenges exist, if any, in providing summer meals to children, and to what extent does the U S  Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) provide assistance to states and sponsors to address these challenges? In addition to the methods we discuss below, to address all three research objectives, we reviewed relevant federal laws, regulations, and guidance; interviewed FNS officials in its headquarters and seven regional offices; and interviewed a broad range of regional and nationwide organizations involved in the SFSP  In addition, we coordinated with officials in USDA’s Office of Inspector General on their ongoing work in this area  To address our first objective about participation in the SFSP, we analyzed FNS data on meals served for fiscal years 2007 through 2016  Specifically, we analyzed the total number of meals served nationwide through the SFSP from fiscal year 2007 through fiscal year 2016  Each month, states report to FNS the number of meals served by meal type (breakfast, lunch, snack, and supper) and the number of meals served by meal and sponsor type (e g , government, nonprofit, etc ) using the FNS- 418 form  To add context on these trends, we also analyzed and compared the number of SFSP lunches served in July with the number of free and reduced-price lunches served to children in March through the National School Lunch Program (NSLP), the largest child nutrition assistance program, from fiscal year 2007 through fiscal year 2016  Each month, states report to FNS the number of meals served through the NSLP using the FNS-10 form  To assess the reliability of SFSP and NSLP data, we (1) performed electronic testing of relevant data elements, (2) reviewed existing information about the data and the system that produced them, and (3) interviewed agency officials knowledgeable about the data  Electronic testing included, but was not limited to, checks for missing data elements, duplicative records, and values outside a designated range or valid time period  We determined that these data were sufficiently reliable to identify the number of SFSP meals served and assess change over time  To further examine what is known about participation in the SFSP, we also reviewed FNS’s data on estimates of children’s participation in the program and determined that these estimates have been calculated inconsistently and are unreliable  To assess the reliability of these data, we reviewed documentation about the estimates, interviewed FNS officials, and asked states about the estimate calculation in our survey  As described in our findings, FNS does not collect data on the number of children participating in the SFSP  Instead, FNS relies on states’ estimates of children’s participation, which are based on other data reported by sponsors, such as the number of meals served and meal service days in July  To address our second objective about other programs that help feed children in the summer, we reviewed FNS’s estimate of the number of meals served through the NSLP’s Seamless Summer Option in fiscal year 2016  FNS does not collect data on the number of meals served through the Seamless Summer Option  Instead, FNS annually estimates the number of Seamless Summer Option meals served nationally by aggregating the number of free and reduced-price breakfasts, lunches, and snacks served through the School Breakfast Program (SBP) and NSLP in July  As previously noted, states report these data monthly to FNS  Although FNS does not know the actual number of meals served through the Seamless Summer Option, agency officials told us they believe the number of summer meals provided through the NSLP is small relative to the number of meals served through the Seamless Summer Option during the summer months  They noted that their use of July NSLP data to estimate the Seamless Summer Option meals likely overestimates the number of these meals for July and underestimates the number of these meals for the entire summer  To assess the reliability of the July NSLP data, we (1) performed electronic testing of relevant data elements, (2) reviewed existing information about the data and the system that produced them, and (3) interviewed agency officials knowledgeable about the data  Electronic testing included, but was not limited to, checking for missing data and data that fell outside of a reasonable range or date for the specific time period (July)  We determined that these data were sufficiently reliable to describe the number of meals served  In addition to the data FNS requires states to report, some states collect summer meals data at the meal site level and we used such data from the three selected states to address all three objectives  For objective one, to examine the number of meals served and days of operation at each summer meals site, we analyzed site-level data for 2 months from summer 2016, including the month with the largest number of SFSP meals served in each selected state: Arizona (June and July 2016), Illinois (July and August 2016), and Massachusetts (July and August 2016)  Each state also provided us with data on the number and types of meals served at each SFSP site, the site location, and the duration of time each site operated over the summer  Using the data provided by the states, we calculated the average daily attendance (ADA) for each meal site based on FNS’s instructions and examined the variation in ADA across sites and months  For our second objective on other programs, these selected states provided similar site level data for the state’s Seamless Summer Option sites, if applicable  We assessed the reliability of these data by (1) performing electronic testing of relevant data elements, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data  We determined that the data were sufficiently reliable for the purposes of this report  For both our second objective on other programs and third objective about challenges in providing summer meals to children, we also examined meal site availability in the three selected states by mapping the locations of meal sites  On the maps, we included fiscal year 2016 area eligibility data from FNS’s Capacity Builder mapping tool, as provided by FNS  The site area eligibility data from FNS’s Capacity Builder is based on the U S  Census Bureau’s 5-Year American Community Survey (ACS) estimates of children ages 0-12 and 0-18 eligible for free and reduced-price meals by Census block group and tract  According to FNS officials, FNS obtains 5-Year ACS estimates annually from the U S  Census Bureau and updates its site area eligibility in the Capacity Builder accordingly  For fiscal year 2016, FNS used 2009- 2013 ACS data to identify and include site area eligibility in its Capacity Builder  To help inform all of our research objectives, we conducted a survey of the state agencies that oversee the SFSP in the 50 states and the District of Columbia  We administered our web-based survey between August and October 2017 and received 100 percent response rate  The survey included questions about participation in the SFSP, factors critical to the overall success of the SFSP, outreach efforts, federal technical assistance, barriers and challenges in providing summer meals, alternative summer feeding models, the NSLP’s Seamless Summer Option and the federal Summer Electronic Benefit Transfer for Children demonstration, and nonfederal programs that provide children of low- income households with meals during the summer months  The survey also requested data on SFSP sites participating in the program in fiscal year 2016 and the method state agencies used to calculate ADA in SFSP on the FNS-418 form in fiscal year 2016  Because this was not a sample survey, there are no sampling errors  However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as variations in how respondents interpret questions and their willingness to offer accurate responses  We took steps to minimize nonsampling errors, including pretesting draft instruments and using a web-based administration system  Specifically, during survey development, we pretested draft instruments with SFSP staff from four states (Michigan, New Mexico, North Carolina, and South Dakota) in May 2017  We selected the pretest states based on information provided by officials from FNS’s regional offices and national organizations involved in summer meals about state administration of summer meals programs, with the goal of selecting a group of states with varied experiences  In the pretests, we were generally interested in the clarity, precision, and objectivity of the questions, as well as the flow and layout of the survey  For example, we wanted to ensure definitions used in the surveys were clear and known to the respondents, categories provided in close-ended questions were complete and exclusive, and the ordering of survey sections and the questions within each section were appropriate  We revised the final survey based on pretest results  Another step we took to minimize nonsampling errors was using a web-based survey  Allowing respondents to enter their responses directly into an electronic instrument created a record for each respondent in a data file and eliminated the need for and the errors associated with a manual data entry process  We did not fully validate specific information that states reported through our survey  To help inform all of our objectives and gather information about the SFSP directly at the local-level, we conducted 30 site visits in three states: Arizona (12 sites), Illinois (8 sites), and Massachusetts (10 sites) between June and July 2017, and interviewed organizations involved with the SFSP in each site visit state  We used U S  Census Bureau data to select states and local areas within those states based on a high proportion of children in poverty, a mix of urban and rural locations, as well as a mix of sponsor and site type and diverse locations  We visited a wide variety of site locations including, but not limited to, schools, parks, community recreation areas, and libraries  At each SFSP site, we gathered information on local level factors related to SFSP participation and administration by interviewing the organization sponsoring the site, the site operators and staff, and those participating at the site using semi-structured questions  While interviewing SFSP sponsor organizations, we collected information on the sponsors’ roles in the SFSP, characteristics of the sites the organizations sponsored, outreach efforts, any challenges or barriers to SFSP administration and any efforts to address such challenges, relationships with the state agencies that administer the SFSP, relationships with FNS (national and regional offices), and the availability of nonfederally funded programs that provide meals to low-income children over the summer  During the interviews with site operators and staff, we collected information about site operation (e g , site operating days, meals offered, etc ), any challenges to providing SFSP meals to children and any efforts to address such challenges, outreach efforts, and the proximity of the next closest meal site  The information we collected from those participating at the sites included their perspectives on the SFSP food, site food consumption habits, ease of travel to the site, and access to other SFSP sites  At each site, we made observations as to how the food was provided to the children, food consumption and waste, the approximate age range of the children being served, and availability of programs or activities (e g , recreational sports)  Using semi-structured questions, we also interviewed the state agencies responsible for administering the SFSP in the site visit states to gather further information on how the SFSP is administered in each state, statewide participation in the program, related data collection activities, any challenges to administering the program and any efforts to address such challenges, related outreach efforts, alternative meal delivery models being employed by SFSP sponsors, FNS guidance or technical assistance, and the availability of nonfederally funded programs that provide meals to low-income children over the summer  For states that indicated there were other challenge(s), we provided an open-ended question that requested a description of the challenge(s) and 14 states provided descriptions of other challenges, not shown here  For states that indicated there were other challenge(s), we provided an open-ended question that requested a description of the challenge(s) and 8 states provided descriptions of other challenges, not shown here  In addition to the contact named above, Rachel Frisk (Assistant Director), Claudine Pauselli (Analyst-in-Charge), Melissa Jaynes, and Matthew Nattinger made key contributions to this report  Also contributing to this report were Susan Aschoff, Sarah Cornetto, Ying Long, Jean McSween, Mimi Nguyen, Almeta Spencer, and Ashanta Williams 

ground_truth: The Forest Service, an agency within USDA, performs a variety of tasks as steward of 193 million acres of public forests and grasslands. Its budget execution process for carrying out its mission includes (1) allotments, which are authorizations by an agency to incur obligations within a specified amount, and (2) unliquidated obligations, which represent budgetary resources that have been committed but not yet paid. Deobligation refers to an agency's cancellation or downward adjustments of previously incurred obligations, which may result in funds that may be available for reobligation. GAO was asked to review the Forest Service's internal controls over its budget execution processes. This report examines the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) review and certification of unliquidated obligations. GAO reviewed the Forest Service's policies, procedures, and other documentation and interviewed agency officials. In fiscal years 2015 and 2016, the Forest Service received discretionary no-year appropriations of $5.1 billion and $5.7 billion, respectively. It is critical for the Forest Service to manage its budgetary resources efficiently and effectively. While the Forest Service had processes over certain of its budget execution activities, GAO found the following internal control deficiencies: Budgetary resources . The purpose statute requires that amounts designated in appropriations acts for specific purposes are used as designated. The Forest Service did not have an adequate process and related control activities to reasonably assure that amounts were used as designated. In fiscal year 2017, GAO issued a legal opinion that the Forest Service had failed to comply with the purpose statute with regard to a $65 million line-item appropriation specifically provided for the purpose of acquiring aircraft for the next-generation airtanker fleet. Further, the Forest Service lacked a process and related control activities to reasonably assure that unobligated no-year appropriation balances from prior years were reviewed for their continuing need; did not have a properly designed system for administrative control of funds, which keeps obligations and expenditures from exceeding limits authorized by law; and had not properly designed control activities for fund transfers to its Wildland Fire Management program. These deficiencies increase the risk that the Forest Service may make budget requests in excess of its needs. Reimbursable agreements . To carry out its mission, the Forest Service enters into reimbursable agreements with agencies within the U.S. Department of Agriculture (USDA), other federal agencies, state and local government agencies, and nongovernment entities. The Forest Service (1) did not have adequately described processes and related control activities in manuals and handbooks for its reimbursable agreement processes and (2) lacked control activities related to segregating incompatible duties performed by line officers and program managers. For example, line officers may be responsible for initiating cost sharing agreements, modifying cost settlement packages, and changing or canceling the related receivable, which represent incompatible duties. As a result, programs and resources may not be protected from waste, fraud, and mismanagement. Unliquidated obligations . The Forest Service's processes and control activities over the review and certification of unliquidated obligations were not properly designed to reasonably assure the best use of funds and that unliquidated obligations would be efficiently and effectively deobligated and made available for other program needs. Further, the current process, as designed, was inconsistent with USDA and Forest Service policy. In addition, the Forest Service's manuals and handbooks, which provide directives for the areas that GAO reviewed, had not been reviewed by management in accordance with the Forest Service's 5-year review policy. Further, standard operating procedures and desk guides prepared by staff to supplement the manuals and handbooks were not issued as directives and therefore were not considered official policy. This increases the risk that control activities may not be consistently performed across the agency. GAO is making 11 recommendations to improve processes and related internal control activities over the management of the Forest Service's budgetary resources, reimbursable receivables and collections, and its process for reviewing unliquidated obligations. The Forest Service generally agreed with the report and stated that it has made significant progress to address the report findings.