United States General Accounting Office

GAO Report to Congressional Committees

October 1998 FOREST SERVICE

Barriers to Financial

Accountability Remain

GAO/AIMD-99-1

GAO United States

General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-281061 

October 2, 1998

Congressional Committees

Since December 1996, we have periodically reported1

 on the financial

management problems of the Forest Service identified in the U.S.

Department of Agriculture (USDA) Inspector General’s (IG) audit report on

the Forest Service’s fiscal year 1995 financial statements. Specifically, our

past reports have (1) discussed how the IG’s adverse opinion raised

concerns about the level of stewardship over taxpayer money

appropriated to the Forest Service and (2) assessed the Forest Service’s

progress toward correcting its accounting and financial reporting

problems. This, our fourth report, responds to your requests that we

continue monitoring the Forest Service’s progress in correcting its

accounting and financial reporting weaknesses.

Background Since its first audit of the Forest Service’s financial statements, which

covered fiscal year 1991, the USDA IG has found serious accounting and

financial reporting weaknesses. The IG issued an adverse opinion on the

1991 financial statements and also on the fiscal year 1992 financial

statements, due to the overall unreliability of the financial statements. For

fiscal years 1993 and 1994, the IG issued qualified audit opinions and

reported that the Forest Service’s financial statements were unreliable due

to pervasive errors in the field-level data supporting the land, buildings,

equipment, accounts receivable, and accounts payable accounts. Thus,

when the IG issued an adverse audit opinion in July 1996, concluding that

the Forest Service’s financial statements for fiscal year 1995 were

unreliable, the findings represented a continuing pattern of unfavorable

conclusions about the Forest Service’s financial statements. Due to the

severity of the accounting and reporting deficiencies, the Forest Service

did not prepare financial statements for fiscal year 1996, but chose instead

to focus on resolving these problems.

The Forest Service’s goal was to correct some of the deficiencies during

fiscal year 1997 and to achieve financial accountability—which the agency

defines as an unqualified audit opinion—by the end of fiscal year 1999. In

1

Forest Service: Status of Progress Toward Financial Accountability (GAO/AIMD-98-84, February 27,

1998); Financial Management: Forest Service’s Progress Toward Financial Accountability

(GAO/AIMD-97-151R, August 29, 1997); Letter dated December 20, 1996, to the Chairman, House

Committee on the Budget (GAO/AIMD-97-11R).

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August 1997, we reported2 that it was doubtful that the Forest Service

could achieve financial accountability by the end of fiscal year 1999 if

management and staff commitment wavered, planned tasks were not

accomplished, and sufficient resources were not provided. Our most

recent report in February 1998 concluded that while corrective measures

were under way, few of the problems reported by the IG in the fiscal year

1995 audit report had been fully resolved. In addition, new hurdles with

implementing the Forest Service’s new accounting system had to be

addressed. Thus, we reported, it was not yet clear whether the Forest

Service would be successful in its efforts to resolve these problems by the

end of fiscal year 1999. Much work still remained to be done before this

goal could be achieved.

Many of the Forest Service’s long-standing accounting problems are the

result of outdated accounting systems—a problem that exists USDA-wide.

USDA’s current financial accounting system, the Central Accounting System

(CAS), is not U.S. Government Standard General Ledger compliant,3

 not

well integrated, and is generally outdated. On December 23, 1994, the

Office of the Chief Financial Officer (OCFO) purchased a new accounting

system, the Foundation Financial Information System (FFIS), to replace CAS

USDA-wide. The basic FFIS system is a commercial off-the-shelf package

developed by American Management Systems and was acquired through

the General Services Administration’s Financial Management System

Software Multiple Award Schedule. This system has been implemented in

and is being used by a number of federal agencies. Because of the reported

financial deficiencies at the Forest Service, it was decided that the Forest

Service would be one of the first USDA agencies to implement FFIS.

The Forest Service implemented FFIS in three units, representing about

one-third of all Forest Service transactions, on October 1, 1997. While the

overall responsibility and oversight for implementing FFIS rests with the

USDA OCFO, implementation at the Forest Service is a joint effort between

the Forest Service and the USDA OCFO. In addition, OCFO uses Agriculture’s

National Finance Center (NFC) to help carry out its FFIS responsibilities. As

a result of serious implementation problems, in January 1998, USDA

retained an outside consultant4 to independently review and assess FFIS

2

Financial Management: Forest Service’s Progress Toward Financial Accountability

(GAO/AIMD-97-151R, August 29, 1997).

3

The U.S. Government Standard General Ledger provides a standard chart of accounts and

standardized transactions that agencies are to use in all their financial systems.

4

Logistics Management Institute, Independent Assessment of USDA’s Foundation Financial

Information System (AG801R1, March 1998).

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management and implementation and to report its findings to the Office of

the Chief Information Officer and the Office of the Chief Financial Officer.

In addition, the Forest Service acquired a consultant to evaluate its

financial management structure and workload requirements. Such an

evaluation was needed to determine if its organizational structure and

resources were sufficient to accomplish the remaining tasks required to

achieve financial accountability.

Results in Brief Major weaknesses in the Forest Service’s accounting and financial

reporting persist. While the Forest Service has made some progress in

addressing financial management deficiencies, its ability to produce

financial reports has deteriorated because of problems implementing FFIS.

Until the agency is able to (1) correct its basic accounting records and

(2) successfully implement FFIS to account for and report on its activities,

it will not be in a position to achieve financial accountability. Moreover,

the Forest Service’s current autonomous field structure may further

hamper those efforts.

The IG’s recently completed audit of Forest Service fiscal year 1997

financial statements disclosed continuing major weaknesses in accounting

and reporting, particularly for real property (land, buildings, and roads),

accounts receivable, and accounts payable. Errors were also detected in

the Forest Service’s failure to reconcile its fund balance with the

Department of the Treasury. As a result, the IG was unable to determine

the reliability of the Forest Service’s fiscal year 1997 financial statements

and therefore issued a disclaimer of opinion.

For example, the IG could not verify the balance for the Forest Service’s

reported $8.2 billion in real property because inventories and valuations of

these assets had not been completed at the time of the audit. The IG also

could not verify the accuracy of the reported $119 million in accounts

receivable because the Forest Service did not maintain centralized records

of individual accounts. Additionally, the IG reported that adjustments to

accounts receivable totaling about $166 million could not be verified

because the automated data files documenting the adjustments had been

recorded over and therefore were no longer available. Similarly, the Forest

Service continued to lack a system that provided detailed accounts

payable balances, and relied instead on its obligations system to estimate

accounts payable at year-end. This precluded the agency from knowing

costs it had incurred and amounts owed to others at any given point

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throughout the year. These weaknesses mean that Forest Service

managers’ ability to effectively manage operations, monitor revenue and

spending levels, and make informed decisions about future funding needs

will continue to be hampered until corrective measures are completed.

The aforementioned problems are exacerbated by the Forest Service’s

new financial accounting system’s inability to produce certain critical

budgetary and accounting reports that track obligations, assets, liabilities,

revenues, and costs for the units that converted to the new system. Since

January of this year, we, the IG, and USDA’s outside consultant have

identified serious problems with the FFIS implementation process. These

problems were caused by, among other things, not simplifying the Forest

Service’s business processes before FFIS was implemented, adding feeder

systems to FFIS, implementing the system before it was fully tested, and

inadequate oversight and management control over the project.

As a result of these problems, the outside consultant recommended that

implementation of the system in the rest of the Forest Service not proceed

on October 1, 1998, as planned. Instead, the consultant advised USDA to

reexamine some of the key decisions that have caused problems

experienced to date. In addition, the Forest Service and OCFO will face

additional challenges to ensure that FFIS and related feeder systems

comply with Year 2000 requirements. As a result, the Forest Service has

decided to defer full implementation of the system until October 1, 1999.

We believe this action is reasonable under the circumstances.

In order to address concerns about its autonomous structure, the Forest

Service restructured its national office management team in April 1998 by

creating functional lines for accountability for financial management that

report directly to the Chief of the Forest Service. However, the agency has

not mirrored this structure throughout its field organization, thus raising

concerns about whether a sufficient linkage exists between the national

office and field units for financial accounting responsibilities.

Although major barriers to financial accountability still remain, the Forest

Service has begun and/or completed several actions that, if successfully

carried through, represent important steps towards achieving financial

accountability. For example, the Forest Service has substantially

completed equipment inventories and is in the process of correcting the

erroneous data recorded in its old accounting system. In addition, the

Forest Service has issued an accounting desk guide for all staff that

provides uniform accounting instructions. This guide, if consistently used,

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should help improve the accuracy of data entered into the new system.

Further, Forest Service management continues to emphasize the

importance of financial accountability to its line managers, has established

a team to improve selected financial processes, and has obtained advice

from outside consultants on how to improve its financial operations.

While the Forest Service has committed considerable resources and

progressed in addressing some of its long-standing financial management

deficiencies, much work remains. Also, the problems encountered in

implementing FFIS have been a major setback. Thus, the Forest Service’s

current goal of achieving financial accountability by fiscal year 1999 does

not appear feasible.

Objectives, Scope,

and Methodology

Our objectives were to monitor and report on the Forest Service’s efforts

to achieve financial accountability, including any barriers to successfully

resolving its financial and reporting weaknesses, and to analyze the USDA

IG’s audit report on the Forest Service’s fiscal year 1997 financial

statements. We focused on the critical tasks that we previously reported

were necessary for the Forest Service to achieve financial accountability.

Specifically, we examined the agency’s progress in (1) correcting certain

accounting deficiencies, (2) implementing its new financial accounting

system, and (3) improving its financial management structure since we last

reported on these issues on February 27, 1998.

To assess the agency’s progress in correcting certain accounting

deficiencies, we analyzed the IG’s fiscal year 1997 financial statement audit

of the Forest Service to identify accounting problems and their effect on

the users of the financial statements; namely, the Congress, agency

decisionmakers, and taxpayers. Further, we reviewed the IG’s working

papers from the fiscal year 1997 financial statement audit and determined

the specific nature and cause of the cited accounting deficiencies. In

addition, we interviewed the cognizant IG personnel responsible for

monitoring the Forest Service’s improvement efforts and obtained their

perspective on the Forest Service’s progress in correcting its accounting

weaknesses. We also reviewed the IG’s monitoring plan for assessing the

Forest Service’s progress in implementing its corrective action plan, and

we interviewed Forest Service personnel about the status of the Forest

Service’s corrective actions.

To ascertain the Forest Service’s progress in implementing its new

financial accounting system, we reviewed a USDA consultant

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report—Independent Assessment of USDA’s Foundation Financial

Information System, Logistics Management Institute (AG801R1,

March 1998)—which evaluated the management and implementation of

FFIS. Further, we reviewed two IG audit reports—Material Control

Weaknesses Will Continue to Impact Departmental Financial Operations

Because of Delayed FFIS Implementation (50801-5-FM, June 1998) and

Implementation of the Foundation Financial Information System -

Changes Need to be Made (50801-4-FM, March 1998)—which evaluated

implementation of FFIS. In addition, we interviewed Forest Service, OCFO,

NFC, and IG personnel in the region, at headquarters, and at NFC about FFIS

implementation problems and the project plan to implement FFIS.

To evaluate the Forest Service’s progress in improving its financial

management structure, we reviewed a consultant report—Modernizing

Financial Management at the Forest Service-Financial Management &

Organizational Analysis, Coopers & Lybrand L.L.P. (#43-3187-7-0325,

March 18, 1998)—and discussed pertinent findings and recommendations

with Forest Service and IG officials.

We performed our review from May through September 1998 in

accordance with generally accepted government auditing standards. We

requested comments on a draft of this report from the Secretary of

Agriculture and the Chief of the Forest Service. The Chief Financial

Officer, USDA, and the Chief Financial Officer, Forest Service, provided us

with oral comments on September 21, 1998, and September 18, 1998,

respectively.

Major Accounting and

Reporting

Deficiencies Remain

The IG recently concluded that because of continuing accounting and

financial reporting weaknesses, he was unable to determine the reliability

of the Forest Service’s fiscal year 1997 financial statements—the first

statements the Forest Service has prepared since those covering fiscal

year 1995. As a result, the IG issued a disclaimer of opinion on these

statements. The primary reasons for the IG’s disclaimer were that the

Forest Service

• lacked an integrated general ledger and supporting records (subsidiary

records) without which a financial system is not readily auditable and

• had significant reporting errors in its financial statements and the

supporting records involving its asset, liability, equity, revenue, and

expense accounts.

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These weaknesses mean that Forest Service managers’ ability to

effectively manage operations, monitor revenue and spending levels, and

make informed decisions about future funding needs will continue to be

hampered until corrective measures are completed.

The IG’s report and the notes to the financial statements identified

numerous financial reporting errors, including the following examples.

• Reliable account balances for the reported $8.2 billion in land, buildings,

and roads (real property) could not be established. This reported

deficiency means that the Forest Service did not fully know what property

it owned or its value. The inventory and valuation of these real property

assets, which represent approximately 94 percent of the reported

$8.7 billion in total property, plant, and equipment and 69 percent of the

Forest Service’s reported $11.8 billion in total assets, were scheduled for

completion by July 31, 1998—past the July 13, 1998, completion date of the

IG’s audit. The Forest Service provided us with confirmation that 8 of 16

units5

 had completed the inventories and the valuations by the scheduled

date. Two additional units subsequently completed these tasks. The Forest

Service could not provide us with confirmation of completion for the

remaining 6 units. Forest Service units had until September 30, 1998, to

reaffirm the accuracy, completeness, and consistency of the inventory

information. This information will then be reviewed by the IG as part of the

audit of the fiscal year 1998 financial statements.

• The Forest Service’s Fund Balance accounts with the U.S. Treasury,

maintained by NFC, were not in balance with the amounts reported by

Treasury. The Forest Service records its budget spending authority in

asset accounts called Fund Balance with Treasury, and increases or

decreases these accounts as it collects or disburses funds. A net

adjustment of approximately $826 million to Fund Balance with Treasury

was made by NFC to balance these accounts for all of USDA, of which a

portion pertains to the Forest Service. This net adjustment consisted of

approximately $1 billion in gross disbursements and $174 million in gross

receipts. Because USDA’s true balances were not known, NFC adjusted its

records for the difference without establishing or analyzing the causes of

the difference or determining which one was correct.6

 Because most

assets, liabilities, revenues, and expenses stem from or result in cash

5

The 16 units are comprised of 9 regions and 7 research stations.

6

USDA has informed us that it recently determined that a large portion of the difference related to the

misclassification of certain receipts as “negative disbursements.” This misclassification has now been

corrected, according to USDA officials.

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transactions, errors in the receipt or disbursement data affect the accuracy

of various Forest Service financial reports, including budget execution

reports and information reported to the Congress.

• The IG could not verify the accuracy of the reported $119 million in

accounts receivable because the Forest Service did not maintain

centralized records of individual accounts. Also, the IG reported that

adjustments to accounts receivable totaling about $166 million could not

be verified because the automated data files documenting the adjustments

had been recorded over and therefore were no longer available.

Inaccuracies in accounts receivable mean the Forest Service (1) may not

collect all monies due the agency or (2) may anticipate receipt of funds

that are not legitimately owed.

• Similar to its lack of an adequate system for accounts receivables, the

Forest Service also continues to lack a system that provides detailed

records of the reported $263 million in accounts payable. The Forest

Service relies on its obligations system as a basis to estimate accounts

payable. However, there were numerous errors throughout the year in

classifying obligations as accounts payable. As a result, Forest Service

managers estimated the year-end accounts payable balance based on a

statistical sample of year-end unliquidated obligations. Based on this

testing, the Forest Service concluded that accounts payable were

understated by about $25 million and adjusted its records accordingly. As

we have reported in the past, while this system deficiency is not indicative

of whether or not the Forest Service overobligated funds, it precludes the

agency from readily knowing costs it has incurred and amounts it owes on

projects at any given point.

Serious Problems

Plague FFIS

Implementation

In reports issued since January of this year, we, the IG, and the USDA’s

outside consultant have identified serious problems with the FFIS

implementation process. Specifically, problems have been encountered

transferring data between FFIS and related feeder systems, maintaining

oversight and management control, simplifying business processes prior to

implementation, and fully testing the system before implementation. As a

result of these problems, the outside consultant recommended that

implementation of the system in the rest of the Forest Service not proceed

on October 1, 1998, as planned. The consultant advised USDA to reexamine

some of the key decisions that have caused problems. In addition, as

discussed below, the Forest Service and OCFO will face additional

challenges to ensure that FFIS and all feeder systems comply with Year

2000 requirements. The Forest Service has decided to defer

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implementation of the system in the remaining Forest Service units until

October 1, 1999.

Implementation Process

Has Been Flawed

In our February 1998 report, we noted problems with FFIS processing data

and transferring data between FFIS and its feeder systems that raised

questions about the FFIS implementation process. In that report, we also

noted that the three units where FFIS was implemented were unable to

produce certain critical budgetary and accounting reports that track the

Forest Service’s obligations, assets, liabilities, revenues, and costs, in part,

because ending balances could not be converted from the old accounting

system, which is no longer functional for the implementation units, to the

new accounting system.

The USDA consultant also identified numerous problems with the FFIS

implementation process. For example the consultant reported that:

• The program has suffered from insufficient oversight, undisciplined

management control, conflicting goals, and a lack of clear lines of

authority and accountability. This fragmentation of responsibility among

OCFO, the Forest Service, and NFC left no one with an overall view of all the

efforts needed to make the program succeed. The recent consolidation of

NFC FFIS project staff under one senior executive in NFC is a good first step

to regaining control of project cost, schedule, and performance, but it is

occurring 3 years into implementation.

• Failure of the Forest Service to simplify its business processes had a

significant negative impact on the successful implementation of FFIS.

Although USDA is now modernizing or replacing many of its administrative

processes and systems, the development of FFIS would have been markedly

simpler if this process had taken place earlier. One major problem is the

onerous process the agency uses to classify and allocate costs in its

accounting records for work performed, which has led to greater

operational costs.7

 Further, the process is virtually impossible to perform

because of its demands on computer capacity.

7

The Forest Service uses a process called distribution/redistribution to change accounting codes,

object classes, and other accounting data after the data have been initially entered and processed. The

agency uses over 100,000 management codes agencywide, most unique to the local levels. Each

management code may consist of up to 99 lines of accounting data and may be changed at any time

without specific authorization, approval, or justification.

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Based on a consultant’s8 recommendation, the USDA OCFO subsequently

established an FFIS Project Management Office that is responsible for

managing the full implementation of FFIS across all USDA agencies. This

office, which reports directly to OCFO, has FFIS implementation as its only

objective and has been charged with developing a strategic plan for

implementing FFIS and managing the execution of the plan. These actions,

if accomplished, should provide the focused attention and independence

that is needed to help successfully implement FFIS.

The Forest Service also established a team to review its budget and

accounting activities and to recommend how to simplify and improve its

business operations. This team submitted a report to the Chief of the

Forest Service in July 1998 and made recommendations that were

included in the agency’s Financial Management and Accountability Plan.

These recommendations included

• designing a new budget structure,

• designing a new structure for management and work codes,

• designing specific replacement procedures for retroactive redistribution,

• designing a specific set of financial management reports, and

• creating numerous other proposals to simplify business management.

The Forest Service has completed work on the design of a proposed new

budget structure. According to the Forest Service, this proposed structure

would reduce the number of budget line items (which contain funding

specified for particular uses) and would allow for better tracking of

expenditures and reporting on performance. With regard to the structure

of management and work codes, the Forest Service proposes reducing the

number of codes by more than 50 percent. The Forest Service believes this

reduction would simplify the tracking of expenditures and would

standardize codes throughout the agency.

Insufficient System Testing

Contributed to FFIS

Implementation Problems

As we reported in February 1998, the overall problems with the system

implementation are due in large part to the lack of complete integrated

testing of the system prior to implementation. The IG and a USDA consultant

have similarly concluded that inadequate integrated system testing

8

PricewaterhouseCoopers, USDA Framework for the FFIS Project Management Office (Draft, July 29,

1998).

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contributed to extensive problems. Our prior work9 at other agencies has

shown that lack of adequate testing of systems before implementation is

one of the primary causes of new system implementation failures.

The three units where the system has been implemented are continuing to

encounter problems with the new system. For example, the units are

experiencing reporting problems, data rejects, duplicate accounting

entries, and poor internal controls over access to FFIS. In particular, the

inability to produce certain critical budgetary and accounting reports for

units that implemented FFIS erodes the integrity of the Forest Service’s

financial data. The units currently under FFIS represent about one-third of

all Forest Service transactions. These reports, which have not been

generated for fiscal year 1998, are essential to tracking the Forest Service’s

obligations, assets, liabilities, revenues, and costs.10 Without them, the

Forest Service increases the risk of over-obligation of budgetary funds and

lacks accountability for funds spent to carry out these units’ operations

during fiscal year 1998. Also, the agency’s ability to manage and track its

financial activities in these units is seriously impaired, further

complicating the existing problems in these areas.

As we noted in our February report,11 the Forest Service revised the

scheduled completion of FFIS implementation in the three initial units,

including correction of identified reporting deficiencies, from February 23,

1998, to March 30, 1998. The scheduled completion was further revised

such that the Forest Service expected the reports to be available by

mid-June. However, as of September 23, 1998, the Forest Service was still

unable to produce such reports. According to a Forest Service official, the

agency recently provided the units currently under FFIS with some

examples of internal reports showing how the financial data would be

formatted. These reports, which were generated by the new system, did

not contain complete accounting data because the Forest Service was not

able to bring balances forward from the old accounting system, which is

no longer functional for the units where FFIS has been implemented. On

September 23, 1998, a Forest Service official told us that the agency

9

Defense IRM: Critical Risks Facing New Material Management Strategy (GAO/AIMD-96-109,

September 6, 1996); Department of Energy: Poor Management of Nuclear Materials Tracking System

Makes Success Unlikely (GAO/AIMD-95-165, August 3, 1995); and Executive Guide: Improving Mission

Performance Through Strategic Information Management and Technology (GAO/AIMD-94-115,

May 1994).

10Forest Service officials told us that informal records for these units were maintained at the field level

during fiscal year 1998 in order to monitor spending levels.

11Forest Service: Status of Progress Toward Financial Accountability (GAO/AIMD-98-84, February 27,

1998).

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expected to have the needed balances and reports that contain complete

accounting data by September 30, 1998.

USDA’s consultant concluded that the rush to implement FFIS at the Forest

Service in October 1997 resulted in bringing the system on line before

adequate integrated testing of the system was completed. The consultant

also concluded that most of the additional work required to bring the

system on-line has come from the decision to add more feeder systems to

FFIS, the underestimation of the complexity of this process, and the

magnitude of work needed to transfer the data from the old system to FFIS.

Ensuring Year 2000

Compliance Is an

Additional Challenge

Another critical issue that needs to be addressed is ensuring that FFIS and

its feeder systems, as well as all the Forest Service’s other mission-critical

computer systems, are Year 2000 compliant. The Year 2000 problem is

rooted in the way dates are recorded and calculated in many computer

systems. For the past several decades, systems have typically used two

digits to represent the year in order to conserve electronic data storage

and reduce operating costs. With this two-digit format, however, the year

2000 is indistinguishable from the year 1900. As a result, system or

application programs that use dates to perform calculations, comparisons,

or sorting may generate incorrect results when working with years after

1999.

The version of FFIS purchased in 1994 and implemented in the three units

in October 1997 was not Year 2000 compliant.12 OCFO/NFC recently

installed a Year 2000 compliant version of FFIS and is renovating related

feeder systems that reside within NFC. OCFO is currently testing these

systems to make sure they function as intended. A Forest Service official

told us that the agency plans to have all FFIS feeder systems that reside

within the Forest Service Year 2000 compliant by March 1999. Complete

and thorough Year 2000 testing is essential to provide reasonable

assurance that new or modified systems process dates correctly and will

not jeopardize an organization’s ability to perform core business

operations after the millennium.

FFIS Is Not Ready to Be

Implemented Agencywide

Given the nature and magnitude of the aforementioned problems, the IG

and USDA’s consultant opposed implementation of FFIS in additional Forest

Service units until system implementation issues are resolved and

12According to USDA’s Acting CFO, at the time the system was purchased from the General Services

Administration’s Financial Management Software Multiple Award Schedule, no Year 2000 compliant

version was available.

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recommended that implementation of FFIS throughout the Forest Service

be postponed from October 1, 1998. The consultant advised USDA to

reexamine some of the key decisions that have caused problems.

According to the consultant, to correct fundamental flaws in its current

implementation strategy for FFIS, USDA must establish a plan for

modernizing its computer operations, make certain business process

improvements, and improve its methods for setting schedules, testing

systems, and collecting cost data. In spite of the identified flaws, however,

the consultant agreed that FFIS is the key to an effective financial

management system.

In April 1998, the Forest Service announced that FFIS implementation in

the remainder of the Forest Service had been delayed another year to

October 1, 1999. FFIS operations for the units where the system has been

implemented will continue, with emphasis on correcting implementation

problems and getting the system running smoothly. We concur that this

delay is necessary to ensure that implementation issues are adequately

addressed before proceeding further. However, this delay represents a

serious setback in the Forest Service’s efforts to achieve financial

accountability by the end of fiscal year 1999.

Current Field

Structure Hampers

Accountability

In our February 1998 report, we stated that the Forest Service’s

autonomous organization may hinder top management’s ability to gain full

participation of all regional fiscal directors in efforts to achieve financial

accountability. An independent contractor’s report issued in March 1998,

which addressed financial management and organizational analysis at the

Forest Service, also raised the issue of the agency’s autonomous

structure.13 Specifically, the contractor noted that the Forest Service

lacked a consistent structure for financial management practices. Further,

the contractor reported that whether the subject is budget execution,

financial plan development, accounting for reimbursable agreements, or

creating management codes, each unit operates independently. The

consultant characterized it as a “chaotic financial environment” and stated

that it creates inconsistent practices and credibility problems.

The contractor recommended that the Forest Service establish a new

position of Deputy Chief, Chief Financial Officer, at the national office in

Washington, D.C. In addition, the contractor stated that the creation of a

Chief Financial Officer and a consolidated financial management

13Coopers & Lybrand L.L.P., Modernizing Financial Management at the Forest Service - Financial

Management & Organizational Analysis (Job Order #43-3187-7-0325, March 18, 1998).

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organization in the Washington, D.C., office needed to be mirrored

throughout the field organization and recommended that a Deputy

Regional Forester for Financial Management/Chief Financial Officer be

established within each region. The contractor based this recommendation

on the need to ensure clear lines of responsibility and accountability by

having a single executive within each region who is in charge of financial

management, including all accounting, budgeting, financial planning and

analysis, and strategic planning.

The Forest Service restructured its national office management team in

April 1998 to create functional lines of accountability for fiscal

management that report directly to the Chief of the Forest Service. Three

new management positions were created: a Chief Operating Officer,

Deputy Chief/Chief Financial Officer, and Deputy Chief for Business

Operations. A Forest Service official told us that a decision about hiring

chief financial officers at the regional level will be made in fiscal year 1999.

The national office restructuring addresses some of the concerns we have

previously raised regarding management structure. However, the key issue

regarding the autonomous field structure, as it relates to financial

management, remains unresolved.

Corrective Measures

Are Underway

While several of the conditions discussed in this report pose a major

challenge to achieving financial accountability, the Forest Service has

taken some positive steps toward resolving some of its long-standing

financial management problems. For example, the agency has

substantially completed its equipment inventories and is correcting the

erroneous data recorded in its old accounting system in all units, such as

amounts other agencies owe the Forest Service for work performed on a

reimbursable basis. Further, the Forest Service issued an accounting desk

guide for all staff that provides uniform accounting instructions for

accounts receivable, accounts payable, real and personal property, and

various other types of transactions. The Forest Service has also continued

to emphasize the importance of financial accountability to its line

managers. However, until functional lines of accountability are established

in the regional as well as in the field units, where most of the transactions

originate, there is no assurance that these new procedures and the desk

guide will be consistently followed.

In addition to those actions mentioned above, the Forest Service and OCFO

have used consultants to help the agency address some of the barriers it

Page 14 GAO/AIMD-99-1 Forest Service Financial Accountability Barriers
B-281061 

must overcome before it can achieve financial accountability and has

implemented some of the consultants’ recommendations. Revising the

national office’s financial management organizational structure, delaying

full implementation of the new accounting system, and establishing an FFIS

project management structure are three examples of consultants’

recommendations that have been adopted by the Forest Service or USDA.

Further, the Forest Service and USDA are developing a strategic plan to

complete FFIS implementation in the Forest Service, which addresses the

deficiencies reported by a contractor. Moreover, the Forest Service has

decided to discontinue its practice of retroactively redistributing costs

from one fund code to another in the three units where FFIS has been

implemented. The agency has also instructed units using CAS to curtail this

practice.

Conclusions The Forest Service has committed considerable resources, including

extensive use of consultants, to resolving its long-standing financial

management deficiencies. However, while progress has been made, the

Forest Service’s financial management problems are deep seated, and

therefore require significant time and effort to resolve. Also, the problems

encountered in implementing FFIS have been a major setback. Thus, the

Forest Service’s current goal of achieving financial accountability by the

end of fiscal year 1999 does not appear feasible.

Agency Comments We requested comments on a draft of this report from the Secretary of

Agriculture and the Chief of the Forest Service. On September 21, 1998,

and September 18, 1998, respectively, we received oral comments from the

Chief Financial Officer, USDA, and the Chief Financial Officer, Forest

Service. They generally agreed with the findings and conclusions in this

report. They also provided clarifying comments that we have incorporated

into our report as appropriate.

We are sending copies of this report to the Secretary of Agriculture; the

Chief of the Forest Service; USDA’s Chief Financial Officer; the Director of

the Office of Management and Budget; and other interested parties. Copies

Page 15 GAO/AIMD-99-1 Forest Service Financial Accountability Barriers
B-281061 

will also be made available to others upon request. Major contributors to

this report are listed in appendix I. If you or your staffs need further

information, please contact me at (202) 512-8341.

Linda M. Calbom

Director, Resources, Community,

 and Economic Development, Accounting

 and Financial Management Issues

Page 16 GAO/AIMD-99-1 Forest Service Financial Accountability Barriers
B-281061 

List of Requesters

The Honorable John R. Kasich

Chairman

The Honorable John M. Spratt, Jr.

Ranking Minority Member

Committee on the Budget

House of Representatives

The Honorable Robert F. Smith

Chairman

The Honorable Charles W. Stenholm

Ranking Minority Member

Committee on Agriculture

House of Representatives

The Honorable Ralph Regula

Chairman

The Honorable Sidney R. Yates

Ranking Minority Member

 Subcommittee on Interior and

 Related Agencies

Committee on Appropriations

House of Representatives

Page 17 GAO/AIMD-99-1 Forest Service Financial Accountability Barriers
Appendix I 

Major Contributors to This Report

Accounting and

Information

Management Division,

Washington, D.C.

McCoy Williams, Assistant Director

Meg Mills, Communications Analyst

Carol Langelier, Assistant Director/EDP Specialist

Kansas City Regional

Office

Anita Lenoir, Auditor-in-Charge

Maria Rodriguez, Auditor

Dallas Regional Office Shannon Cross, Systems Auditor

(913838) Page 18 GAO/AIMD-99-1 Forest Service Financial Accountability Barriers
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