FOREST SERVICE

Status of Efforts to

Improve Accountability

Statement of Barry T. Hill,

Associate Director,

Energy, Resources, and Science Issues,

Resources, Community, and Economic

Development Division

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Interior and Related Agencies,

Committee on Appropriations, House of Representatives

For Release on Delivery

Expected at

10 a.m. EST

Wednesday

February 16, 2000

GAO/T-RCED/AIMD-00-93
1

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss the status of efforts by the Department of

Agriculture’s Forest Service to achieve accountability for the tax dollars appropriated to

it to carry out its mission. Our statement will summarize (1) actions the agency has

taken to improve its financial and performance accountability, (2) remaining hurdles to

those improvements, and (3) strategies the agency is developing to address these

hurdles. Our comments are based primarily on two reports issued within the last 15

months,1as well as on our ongoing work for this Subcommittee.

In summary, Mr. Chairman:

• The Forest Service is taking actions to address known problems with its financial

management and reporting, as well as with its performance-related data,

measurement, and reporting. For example, the agency implemented its new

accounting system—the Foundation Financial Information System (FFIS)—

agencywide on October 1, 1999, as scheduled, and has made significant progress in

completing a physical inventory of its real and personal property, as well as

developing a methodology for valuing its road assets. To improve its performance

accountability, the agency is revising the strategic plan that it prepared under the

Government Performance and Results Act of 1993 (the Results Act) to better focus on

outcomes to be achieved over time. Such outcomes include the health of the land,

the quality of water, and the satisfaction of customers. In addition to goals and

objectives, the revised strategic plan sets out performance measures and milestones

as indicators of progress. Moreover, as we have previously recommended, the

agency has proposed significant changes in its budget structure for fiscal year 2001.

These changes are intended to better link its largest discretionary appropriation—for

1

Forest Service: A Framework for Improving Accountability (GAO/RCED/AIMD-00-2, Oct. 13, 1999) and

Forest Service Management: Little Has Changed as a Result of the Fiscal Year 1995 Budget Reforms

(GAO/RCED-99-2, Dec. 2, 1998).
2

the National Forest System—with the goals and objectives in its strategic plan and

with the integrated way that work activities are conducted in the field.

• Despite these efforts, major hurdles to achieving financial and performance

accountability remain. For instance, according to the Department of Agriculture’s

Office of Inspector General and a consultant for the Department, computer systems

that preprocess data entered into FFIS are often deficient. These deficiencies reduce

assurance that the new accounting system will provide timely, accurate, reliable, and

consistent financial information. In addition, preliminary audit results of the Forest

Service’s fiscal year 1999 financial statements indicate that significant accounting

deficiencies continue to exist. In terms of performance, the Forest Service’s

proposed fiscal year 2001 budget justification continues to rely on annual

performance measures that do not always encourage progress toward the agency’s

strategic objectives. Furthermore, despite the changes to its budget structure that it

has proposed to better link the National Forest System appropriation to its strategic

goals, the agency has not yet developed criteria for allocating funds to its regions and

forests on the basis of its strategic objectives or performance measures. The

proposed budget structure would create larger pools of money, giving greater

discretion to field and program managers in deciding where to spend the funds.

However, until the agency better links annual performance measures and budget

allocation criteria to its strategic goals and objectives and corrects deficiencies in its

financial management and reporting systems, it will not be able to provide the

Congress or the public with a clear understanding of how taxpayer dollars are being

spent on each of its strategic goals and objectives and what is being accomplished

with the money.

• To address the remaining hurdles to attaining financial accountability, the Forest

Service has devised a strategy with goals, objectives, time frames, and measures and

is redesigning the organizational structure of its financial management functions.

The agency is also beginning to develop a strategy for improving the links between its

strategic objectives and its annual performance measures and budget allocation
3

criteria. The Forest Service also plans to develop as yet unspecified changes to the

organizational structure of the National Forest System to better accomplish its

strategic goals and objectives. While progress has been made to improve financial

accountability, this represents the third time in 13 years that the Forest Service is

promising greater accountability for its performance in exchange for greater

discretion over larger pools of money. In the two previous instances, the agency did

not fulfill its promises to improve its performance-related data, measurement, and

reporting. Therefore, while we believe that the proposed changes to the Forest

Service’s budget structure could facilitate the agency’s management of the 155

national forests, we also believe that sustained oversight by the Congress should now

be focused on ensuring that the agency (1) continues to make progress on its

financial management and (2) follows through on its strategies to improve its

performance accountability in a timely manner.

The Forest Service Has Completed Several Actions and Begun Others to

Improve Accountability

The Forest Service has taken several actions to improve its financial management and

reporting systems. For example, the agency implemented the FFIS accounting system

agencywide on October 1, 1999, as scheduled. This system will enable the Forest Service

to track its obligations, assets, liabilities, revenues, and costs. Despite some start-up

problems, such as rejected transactions and system down time, Forest Service staff are

now entering fiscal year 2000 transactions into the system. In addition, the agency has

made significant progress in completing a physical inventory of its real and personal

property, as well as developing a methodology for valuing its road assets. Furthermore,

the Forest Service and the Department of Agriculture’s National Finance Center (NFC)—

which processes much of the Forest Service’s accounting data—signed a Memorandum

of Understanding (MOU) that will transfer responsibility for several key accounting

functions from NFC to the Forest Service. For example, the MOU will transfer

responsibility for preparing certain critical budgetary and accounting reports to the

Forest Service.
4

The Forest Service is also taking actions to improve its performance accountability. In

particular, it is revising its strategic plan, prepared under the Results Act, to better focus

on outcomes and results to be achieved over time, such as the health of the land, the

quality of water, and the satisfaction of customers.2 The draft plan refines the agency’s

strategic goals and objectives and links them to long-term performance measures and 5-

year milestones. In addition, the Forest Service has begun to develop strategies and

plans to achieve its objectives. For example, the agency has drafted a strategy to address

the increasing incidence of uncontrollable and often catastrophic wildfires. This

strategy can serve as a basis for establishing funding priorities and developing more

meaningful performance measures. In addition, according to the Forest Service’s draft

strategic plan, annual performance plans will address specific management actions and

investments needed to ensure progress toward the goals and objectives of the strategic

plan, and annual budget proposals will seek the funding needed to deliver these annual

actions and investments.

Moreover, as we recommended in December 1998,3

the Forest Service has proposed

significant changes to its budget structure for fiscal year 2001. The revised budget

structure would reduce 21 existing budget line items and extended budget line items

within the National Forest System appropriation—the agency’s largest discretionary

appropriation—to 3 budget line items. These changes are intended to better link the $1.3

billion requested to manage the National Forest System with two goals in the agency’s

strategic plan and with the integrated way that work activities are conducted in the field.

(See fig. 1.)

2

Draft USDA Forest Service Strategic Plan (2000 Revision), U.S. Department of Agriculture, Forest

Service (Nov. 1999).

3

Forest Service Management: Little Has Changed as a Result of the Fiscal Year 1995 Budget Reforms

(GAO/RCED-99-2, Dec. 2, 1998).
5

Source: U.S. Department of Agriculture Forest Service, Overview of FY 2001 President’s Budget and Draft USDA

Forest Service Strategic Plan (2000 Revision).

The simplified budget structure would also better support the agency’s integrated

approach to land management. This approach recognizes that a full range of tools—

including timber sales, thinning, watershed improvement projects, wildlife habitat

treatments, prescribed fires, and mechanical treatments—are often necessary to restore

and protect land health and forest resources. Finally, the agency proposes to justify its

future fiscal year budgets on the basis of annual performance measures linked to

mission-oriented outcomes, outputs, and financial information rather than on the basis

of resource-specific programs that no longer reflect the integrated way that work

activities are conducted in the field.

Major Hurdles to Financial and Performance Accountability Remain

While the Forest Service has made considerable progress toward improved

accountability, much difficult work remains. The agency still faces several major hurdles

before it can provide accurate and timely information on how much of its funds are

spent on specific strategic goals and objectives and what is accomplished with the

money.

Figure 1: National Forest System’s Proposed Fiscal Year 2001 Budget Structure and Related

Strategic Goals

National Forest System budget line item Strategic goal

Ecosystem assessment and planning

Ecosystem conservation

Ecosystem

health

Public services and uses

Multiple

benefits to

people
6

Hurdles to Financial Accountability

The Forest Service’s existing accounting structure uses computer systems—referred to

by the Department of Agriculture as feeder systems—to preprocess data, which are

subsequently sent to FFIS. The Department’s Office of Inspector General and Logistics

Management Institute—a consultant for the Department—have criticized these feeder

systems. Specifically, the Office of Inspector General reported that the feeder systems

are poorly documented, operationally complex, deficient in appropriate control

processes, and costly to maintain. The Office of Inspector General has concluded that

the feeder systems reduce assurance that FFIS will be able to provide timely, accurate,

reliable, and consistent financial information. The Department’s Chief Financial Officer

has agreed with the Office of Inspector General’s recommendation to develop a longrange plan to consolidate, integrate, and/or reengineer the feeder systems.

Another hurdle that the Forest Service must address is the lack of information needed to

transfer to FFIS over $100 million in unreconciled or unsupported transactions remaining

from its old accounting system. The agency faces a major effort in trying to (1)

document and validate these transactions so they can be transferred to FFIS or (2) reach

agreement with the Office of Inspector General on a policy to write off or otherwise

resolve the differences.

Preliminary audit results of the Forest Service’s fiscal year 1999 financial statements

indicate that significant accounting deficiencies still exist. For example, the Office of

Inspector General found reporting errors in the Forest Service’s supporting accounting

records for individual property, plant, and equipment assets included in the agency’s

physical inventory. The Office of Inspector General’s audit also disclosed that the Forest

Service’s internal controls over its Fund Balance with Treasury account were not

sufficient to ensure that these assets were adequately safeguarded. This account, which

is similar in nature to a checking account with the U.S. Treasury, contained $2.6 billion

as of September 30, 1999. Since insufficient internal controls over Fund Balance with

Treasury accounts is also a Department-wide problem, Agriculture formed a task force

representing the Forest Service, NFC, the Department’s Office of the Chief Financial
7

Officer, and an outside consultant—PricewaterhouseCoopers LLP—to resolve this issue.

The task force anticipates the problem will be corrected sometime next month.

In January 1999, when we designated the Forest Service’s financial management as a

high-risk area vulnerable to waste, fraud, abuse, and mismanagement, we noted that an

unqualified audit opinion on financial statements, on which the agency is primarily

focused, while certainly important, is not an end in itself.4 Efforts to obtain reliable yearend data that are not backed up by fundamental improvements in underlying financial

management systems and operations that enable the routine production of accurate,

relevant, and timely data to support ongoing program management will not achieve

financial accountability. In addition, the National Academy of Public Administration

(NAPA)—an independent, nonpartisan, nonprofit organization chartered by the Congress

to help federal, state, and local governments improve their performance—reported that

attaining an unqualified audit opinion would not, by itself, restore the Forest Service’s

credibility and trust with the Congress and other external groups.5

Hurdles to Performance Accountability

The Forest Service’s proposed budget structure for fiscal year 2001 moves the agency

toward performance-based budgeting by linking each budget line item to specific annual

performance measures for which the agency believes it can be held accountable. These

measures are intended to gauge the Forest Service’s annual progress toward achieving

its long-term strategic goals and objectives. However, the annual performance measures

often do not adequately indicate the outcomes the agency intends to achieve. As a

result, they do not always encourage progress toward the agency’s strategic goals and

objectives and are not clearly linked to the long-term performance measures or the 5-

year milestones set out under each objective in the agency’s draft strategic plan.

4

High-Risk Series: An Update (GAO/HR-99-1, Jan. 1999). 5

Restoring Managerial Accountability to the United States Forest Service, Report by a Panel of the

National Academy of Public Administration for the United States Forest Service (Aug. 1999).
8

For example, to gauge its annual progress toward achieving one strategic objective—

improving the capability of the national forests and rangelands to provide diverse, highquality outdoor recreation opportunities—the Forest Service proposes to annually tally

the total number of special-use permits (permits for private recreational cabins, special

group events, and other noncommercial special uses) in existence at the end of the fiscal

year without consideration of the quality of facilities provided. Thus, special-use permits

for substandard facilities are counted as an accomplishment toward improving the

capability of the national forests to provide high-quality outdoor recreation

opportunities. Such an annual performance measure confuses quantity with quality. In

addition, in our opinion, a substandard recreational cabin or special group event would

detract from, rather than contribute to, the long-term measure and 5-year milestone in

the agency’s draft strategic plan of increasing user satisfaction with recreation programs

and facilities.

Similarly, the Forest Service’s annual measure of progress toward reducing hazardous

fuels on the national forests and its basis for justifying each future fiscal years’ funding—

the number of acres treated—encourages a focus on quantity without reference to

difficulty or safety. Thus, the agency’s field offices have an incentive to focus on the

easiest and least costly areas, rather than on those that present the highest risks but are

often costlier to treat.6

Moreover, an annual performance measure focused on the total

acreage treated rather than on nearby communities, watersheds, and species at risk is

not clearly linked to the long-term measure and 5-year milestone in the Forest Service’s

draft strategic plan of decreasing the number of acres at extreme risk from wildfire.

Hurdles to Linking Budget Allocation Criteria to Strategic Goals and Objectives and

Annual Performance Measures

The budget structure for the Forest Service’s proposed fiscal year 2001 National Forest

System appropriation is generally linked to the agency’s strategic goals and to the

integrated way that work activities are conducted in the field. However, the current

6

Western National Forests: A Cohesive Strategy Is Needed to Address Catastrophic Wildfire Threats

(GAO/RCED-99-65, Apr. 2, 1999).
9

criteria that the agency uses under its existing budget structure to allocate funds to its

regions and forests are based on its resource-specific programs rather than on the

objectives in its draft strategic plan or on the annual performance measures in its budget

justification.

Since fiscal year 1996, the Forest Service has used criteria developed at its Washington

Office to allocate appropriated funds to its field offices. Like many of the agency’s

annual performance measures, many of the Forest Service’s budget allocation criteria

are based on quantity and outputs rather than on quality and outcomes. For example,

the agency allocates funds appropriated for recreation facilities on the basis of the

quantity, rather than the quality, of recreational experiences on the national forests.

Funds for recreational facilities are allocated on the basis of how many people the

developed sites can accommodate at one time rather than on the quality of visitors’

recreational experiences. Continuing to allocate funds for recreation management solely

on this basis could work counter to the agency’s strategic objective of improving the

capability of the national forests and rangelands to provide diverse, high-quality outdoor

recreational opportunities, because this allocation criterion gives forests an incentive to

maintain substandard facilities and sites. Specifically, we have found that because forest

managers fear their future years’ funding could be reduced, they are reluctant to close

substandard facilities.

According to NAPA, using a criteria-based approach for allocating funds does not result in

budgets that reflect the Forest Service’s changing priorities, nor does it allow the agency

to hold its field organization and employees fully accountable for expenditures or

performance. NAPA observed that distributing budget resources on the basis of allocation

criteria “is a poor substitute for making hard choices among alternatives given limited

resources.” It recommended replacing the Forest Service’s criteria-based approach with

one based on the agency’s strategic plan and the level of resources needed to accomplish

stated goals and objectives.
10

The Forest Service Has Devised or Is Beginning to Develop Strategies to

Address the Remaining Hurdles to Accountability

The Forest Service has developed strategies and undertaken various organizational

initiatives to help it achieve a clean opinion on its fiscal year 2000 financial statements

and address the remaining hurdles to financial accountability. Specifically, the Forest

Service retained a consultant—Grant Thornton LLP—whose final report has enabled the

agency to prioritize its efforts and develop a realistic time line for achieving a clean

opinion. In addition, the Forest Service has devised a strategy with goals, objectives,

time frames, and measures that it believes will eventually allow it to obtain not only a

clean opinion on its year-end financial statements but also accurate and timely

information for decision-making throughout the year. Moreover, it is redesigning the

organizational structure of its financial management functions to provide the leadership

needed to correct its long-standing financial management and reporting deficiencies.

This new structure will also serve as a nucleus around which financial accountability can

be built. Moreover, the Forest Service plans to establish a team this year to study the

financial management structure of its highly decentralized and autonomous field offices.

The Forest Service is also working to refine its annual performance measures to better

link them with the objectives, long-term performance measures, and 5-year milestones in

its draft strategic plan. However, the agency has not determined how long it will take to

gather and analyze the data needed to evaluate and refine annual and long-term

performance measures. In addition, the Forest Service plans to revise its budget

allocation criteria to, among other things, reflect its strategic priorities and integrate its

resource-specific programs with its strategic plan before allocating the funds

appropriated for fiscal year 2001 to its regions and forests. Furthermore, in a December

22, 1999, letter to this Subcommittee, the Secretary of Agriculture stated that by March

31, 2000, the Forest Service will propose changes to the National Forest System’s

organizational structure to better align it with the agency’s proposed fiscal year 2001

budget structure and, thus, with its strategic goals.

***
11

In conclusion, Mr. Chairman, we commend the Forest Service for the progress it has

made to date and its commitment to overcome the remaining hurdles to financial and

performance accountability. We are optimistic that the agency will continue to improve

its financial management. However, given its history, continued vigilance and oversight

seems appropriate. As we have reported previously, the Forest Service also promised in

1987 and 1995 to improve its performance accountability in exchange for a simplified

budget structure. The Appropriations Committees, on both occasions, gave the agency

more flexibility in managing its budget, but the Forest Service did not improve its

performance-related data, measurement, and reporting. Therefore, while we believe that

the proposed changes to the Forest Service’s budget structure could facilitate the

agency’s management of the 155 national forests, we also believe that sustained

oversight by the Congress should now be focused on ensuring that the agency (1)

continues to make progress on its financial management and (2) follows through on its

strategies to improve its performance accountability in a timely manner.

This concludes my formal statement. If you or other Members of the Subcommittee have

any questions, we will be pleased to respond to them.

Contact and Acknowledgment

For future contacts regarding this testimony, please contact Barry T. Hill on (202) 512-

3841. Individuals making key contributions to this testimony included Ryan T. Coles,

Charles S. Cotton, Dena M. Owens, Louis J. Schuster, and McCoy Williams.

(141406)
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