The Forest Service, U.S. Department of Agriculture (USDA), has chosen to produce an Agency Financial Report 

(AFR) for fiscal year 2012. This AFR was produced in accordance with the Office of Management and Budget 

(OMB) Circular A-136 Financial Reporting Requirements.

The AFR provides–

	An overview of the Forest Service’s financial and performance results in the Management’s Discussion 

and Analysis (MD&A);

	The Financial Section, comprised of the audited financial statements and notes, and required supplementary information, the independent auditors’ report, and the USDA Office of Inspector General’s 

(OIG) transmittal letter;

	Other Accompanying Information (OAI), such as Management Challenges, Management’s Assurances, 

and recovery audit results for erroneous and improper payments, in accordance with the Improper 

Payments Information Act (IPIA).

	In addition to the AFR, the Forest Service will include its FY 2012 Annual Performance Report (APR) 

and FY 2014 performance plan with its Congressional Budget Justification in February 2013.

All of these documents will be available on the Forest Service Web site at http://www.fs.fed.us.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the 

basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, 

parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or part 

of an individual’s income is derived from any public assistance program. (Not all prohibited bases apply to all 

programs.) Persons with disabilities who require alternative means for communication of program information 

(Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, 

S.W., Washington, D.C. 20250-9410, or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal 

opportunity provider and employer.
	 	 	 	

	 	 	 	 	 	

 

 

http://www.thinkstock.com

Our Mission... 

Sustain the health, diversity, and 

productivity of the Nation’s forests and 

grasslands to meet the needs of present and 

future generations. 

Our Values... 

•	 Care for the Nation’s forest and 

grassland ecosystems 

•	 Value the varied skills and contributions 

of a diverse workforce 

•	 Strive for accountability by every

employee for the efficient management

of the capital resources he or she uses 

•	 Be responsive to national and local

interests 

•	 Be focused on the needs of future 

generations 

The Strategic Goals... 

•	 Restore, Sustain, and Enhance the

Nation’s Forests and Grasslands 

•	 Provide and Sustain Benefits to the

American People 

•	 Conserve Open Space 

•	 Sustain and Enhance Outdoor 

Recreation Opportunities 

•	 Maintain Basic Management

Capabilities of the Forest Service 

•	 Engage Urban America With Forest

Service Programs 

•	 Provide Science-Based Applications and

Tools for Sustainable Natural Resources 

Management 
http://www.thinkstock.com
Message From the Chief 

As Chief of the Forest Service, U.S. Department of Agriculture, I am proud to 

present our fiscal year (FY) 2012 Agency Financial Report (AFR), which updates 

the public and Congress on the agency’s financial statements, the external 

auditor’s report, and the agency’s performance. 

I am particularly proud to report our 11th consecutive unqualified audit opinion, 

meaning that the external auditor found our financial statements to be true 

and fair. This opinion is a reflection of the agency’s continuing commitment to 

sound financial management. Also, the audit reported no material weaknesses. 

Effective management is vital to carrying out our complex and multi-faceted 

mission— “to sustain the health, diversity, and productivity of the Nation’s forests and grasslands to meet the 

needs of present and future generations.” 

Our programs and budget are aligned with the goals and objectives in the Forest Service Strategic Plan for FYs 

2007–2012. The seven strategic goals in the Strategic Plan are (1) to restore, sustain, and enhance the Nation’s 

forests and grasslands; (2) to provide and sustain benefits to the American people; (3) to conserve open space; 

(4) to sustain and enhance outdoor recreation opportunities; (5) to maintain basic management capabilities of 

the Forest Service; (6) to engage urban America with Forest Service programs; and (7) to provide science-based 

applications and tools for sustainable natural resource management. A new strategic plan for the next 5 years 

will begin in FY 2013. 

Today’s challenges to the health and resilience of the Nation’s forests and grasslands are daunting. Drought, 

invasive species, loss of open space, uncharacteristically severe wildfires, severe outbreaks of insects and 

disease, and other stresses and disturbances are affecting our forests on an unprecedented scale. Partly, they 

are driven by the overarching challenge of climate change. To address these challenges, the Forest Service has 

five major focus areas. 

Wildland fire. On average, the Forest Service and its partners respond to about 75,000 wildfires per year. The 

size, severity, and duration of wildfires and fire seasons have been growing; since 2000, more than twice as 

many acres have burned each year than during the preceding 30-year period, and at least 10 States have had 

record-breaking fires. 

The Forest Service has responded aggressively to protect lives and property. Despite growing fire severity, we 

suppressed 98 percent of the fires we fought at very small sizes. Building on that success, we worked with our 

State, Federal, local, and tribal partners to develop a cohesive strategy for responding even more effectively to 

wildfires. To help reduce the risk of wildfire, we exceeded our target for hazardous fuels treatments, treating 

2.62 million acres, 1.87 million of which are in the wildland-urban interface. 

Restoration. Our hazardous fuels treatments are part of restoring healthy, resilient forest and grassland 

ecosystems—ecosystems capable of resisting such climate-related stressors as drought, wildfire, insects, and 

disease. Restoration work is vital to the future of our citizens. Our national forests provide drinking water for 

60 million Americans in more than 3,400 communities across the Nation. In FY 2012, we exceeded our targets 

in watershed restoration, habitat restoration, and more. 

iii
Communities. In FY 2012, the Forest Service focused on cultivating partnerships and increasing volunteerism 

in conservation through our public-private partnerships. We provided for safe and accessible outdoor 

recreation by maintaining thousands of facilities, roads, and bridges. Working with the States and private forest 

landowners, we added critical habitat to the lands we protect through the Forest Legacy Program, amounting 

to more than 2 million acres in 53 States and territories. Through our Urban and Community Forest Program, 

we have served over 7,400 communities across the Nation, home to more than 194 million Americans, 

helping them plant trees and restore forests in their neighborhoods. Through our partnerships with States, 

communities, tribes, and others, we are committed to restoring our forests and grasslands and stepping up 

our efforts to safeguard our country’s natural resources. The lands we manage helped to sustain 224,000 fulland part-time jobs in rural areas, contributing more than $13 billion to the economy through visitor spending 

alone. 

Safety. Forest Service employees are passionate about their work and make an incredible difference in caring 

for the land and serving people. The work we do often entails risk, and we are striving to manage it safely. 

We engaged every one of our 30,000 employees in a learning journey toward safety by integrating safety into 

Forest Service culture—into how we think about and perform our work. 

Inclusiveness. Our safety journey is only part of the way we are transforming our culture. Cultural 

transformation for the Forest Service is also about embracing what we do well and developing ways to keep it 

as a valuable part of our future. It is about creating a work environment that embraces inclusiveness, learning, 

and adaptation. We are striving to create a workplace where all employees and customers are treated with 

dignity and respect and provided with the opportunity for success. To that end, the Forest Service is developing 

action, communication, education, and training plans in five focus areas: leadership, employee development, 

talent management, recruitment and retention, and customer focus and community outreach. 

I am proud of this AFR and of the progress we are making at the agency. We are dedicated to upholding the 

trust of the American people, improving our stewardship of the Nation’s resources, and strengthening our 

delivery of programs and services in the years ahead. I hope you will review this report and recognize our 

efforts to continue improving financial management, performance accountability, and transparency 

during the year, thereby significantly improving agency internal controls. 

THOMAS L. TIDWELL 

Chief, Forest Service 

iv
MESSAGE FROM THE CHIEF............................................................................................................ iii 

PART A: MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)....................................... A-1 

About This Report.............................................................................................................................. A-2 

About the Agency............................................................................................................................... A-3 

Mission ........................................................................................................................................ A-3

Organization................................................................................................................................ A-3

Forest Service Chief Financial Office and Deputy Areas....................................................... A-3 

Responsibility Segments............................................................................................................ A-9 

Demands, Risks, Conditions, and Trends....................................................................................... A-11 

Safety .......................................................................................................................................... A-11

Restoration ................................................................................................................................. A-11

Wildfire Management................................................................................................................ A-12

Inclusiveness................................................................................................................................ A-13

Performance Goals, Objectives, and Results................................................................................. A-14 

 Forest Service Strategic Goals and Program Performance................................................... A-14 

Strategic Goal 1: Restore, Sustain, and Enhance the Nation’s Forests and 

Grasslands.......................................................................................................................... 

 

A-14

Strategic Goal 2: Provide and Sustain Benefits to the American People..................... A-18

Strategic Goal 3: Conserve Open Space........................................................................... A-20

Strategic Goal 4: Sustain and Enhance Outdoor Recreation Opportunities............... A-20

Strategic Goal 5: Maintain Basic Management Capabilities of the Forest Service... A-22

Strategic Goal 6: Engage Urban America With Forest Service Programs.................... A-22 

Strategic Goal 7: Provide Science-Based Applications and Tools for Sustainable 

Natural Resources Management...................................................................................... A-23 

 Forest Service Contributions to the USDA Strategic Plan...................................................... A-25 

Summary Analysis of Financial Statements and Stewardship Information........................... A-26 

Consolidated Balance Sheets.................................................................................................... A-26

Consolidated Statements of Net Cost.................................................................................... A-29

Consolidated Statements of Changes in Net Position............................................................ A-31

Combined Statements of Budgetary Resources..................................................................... A-31

Analysis of Systems, Controls, and Legal Compliance ................................................................ A-33 

Management Assurances......................................................................................................... A-33

Federal Managers’ Financial Integrity Act ...................................................................... A-33

Federal Managers’ Financial Integrity Act Assertions.................................................... A-33

Federal Financial Management Improvement Act......................................................... A-33

Federal Information Security Management Act............................................................. 

Internal Controls Over Financial Reporting (Circular A-123, Appendix A)................... 

A-34

A-34

Other Management Initiatives.......................................................................................... A-35

Limitations of Financial Statements................................................................................................ A-35 

v
PART B: FINANCIAL SECTION.......................................................................................................... B-1 

Message From the Chief Financial Officer.................................................................................... B-2

USDA Office of Inspector General Transmittal Letter................................................................. B-4

Independent Auditor’s Report....................................................................................................... B-6

Audit Opinion............................................................................................................................. B-7

Report on Internal Controls..................................................................................................... B-9

Report on Compliance and Other Matters.............................................................................. B-17

Management’s Response to Audit Report.................................................................................... B-19

Consolidated Balance Sheets................................................................................................... B-20

Consolidated Statements of Net Cost...................................................................................... B-21

Consolidated Statements of Changes in Net Position............................................................ B-22

Combined Statements of Budgetary Resources...................................................................... B-23

Notes to the Consolidated and Combined Financial Statements......................................... B-24

PART C: REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (Unaudited).............. C-1 

Research and Development—Forest and Rangeland Research ................................................ C-2 

PART D: REQUIRED SUPPLEMENTARY INFORMATION (Unaudited) ....................................... D-1 

Deferred Maintenance and Repairs............................................................................................... D-2

Condition of Heritage and Stewardship Lands.............................................................................. D-5

Combined Statement of Budgetary Resources by Major Budget Account.............................. D-6 

PART E: OTHER ACCOMPANYING INFORMATION (Unaudited).................................................. E-1 

Schedule of Spending........................................................................................................................ E-2

Management Challenges.................................................................................................................. E-3 

Net Cost of Operations by Strategic Goal.................................................................................... E-5

Summary of Financial Statement Audit and Management Assurances.................................... E-7

Summary of Financial Statement Audit................................................................................... E-7 

Summary of Management Assurances.................................................................................... E-7 

Improper Payments Improvement Act Reporting ....................................................................... E-8

The Criteria for the Risk Assessment........................................................................................ E-8 

The Description of the Statistical Sampling Process.............................................................. E-8 

The Description of the Corrective Action Plan(s)................................................................... E-8 

Improper Payments Reduction Outlook................................................................................. E-9 

Recovery of Improper Payment................................................................................................ E-10 

Risk Assessment and Oversight Benefits.................................................................................. E-10 

APPENDIX: ACRONYMS AND ABBREVIATIONS............................................................................ Appendix-1 

vi

 


 


 


 

Part A

MANAGEMENT’S DISCUSSION
 

AND ANALYSIS
 

Unaudited
 

A-1
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

ABOUT THIS REPORT 

The Forest Service, an agency of the U.S. Department of Agriculture (USDA), has chosen to produce a 

separate Agency Financial Report (AFR) 

and Annual Performance Report (APR) in 

accordance with the Office of 

Management and Budget (OMB) Circulars 

A-136 and A-11, Section 200.4. 

The AFR provides an overview of the 

agency’s financial performance and results 

to help Congress, the President, and the 

public assess the Forest Service’s 

stewardship over the financial resources 

entrusted to it. The Forest Service’s APR 

will be published with the fiscal year (FY) 

2014 Congressional Budget Justification in 

February 2013 at http://www.fs.fed.us. 

The Forest Service anticipates that this 

approach will improve its performance 

reporting in the following ways: 

 Eliminating redundancy, especially 

where actual data can be used in 

lieu of estimates due to the timing 

of the report. 

 Making the information more 

meaningful and transparent to the public. 

 Providing a more succinct and easily understood analysis of the Forest Service’s accountability 

over its resources. 

The FY 2012 Management’s Discussion and Analysis (MD&A) serves as a high-level overview of the 

Forest Service’s financial reporting, programmatic performance, and compliance with legal and 

regulatory requirements. The content of the MD&A is the responsibility of Forest Service management. 

A-2
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

ABOUT THE AGENCY 

MISSION 

Sustain the health, diversity, and productivity of the 

Nation’s forests and grasslands to 

meet the needs of present and future generations. 

ORGANIZATION 

The Forest Service fulfills its mission through the following organizational structure. 

The Chief of the Forest Service is a career Federal employee of the Forest Service who reports to the 

Under Secretary for Natural Resources and Environment. 

The Chief Financial Officer (CFO) and four deputy chiefs report to the Chief. The deputy areas are 

Business Operations, National Forest System (NFS), Research and Development (R&D), and State and 

Private Forestry (S&PF). 

FOREST SERVICE CHIEF FINANCIAL OFFICER AND DEPUTY AREAS 

The CFO and deputy areas enable the Forest Service to accomplish its mission. The next several pages 

highlight the programs from the CFO and each deputy area. Several FY 2012 accomplishments are 

included. 

A-3
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Chief Financial Officer

The CFO supports the agency's mission by providing timely, accurate, 

and reliable financial and program performance information in 

compliance with the Chief Financial Officers Act of 1990. 

 

FY 2012 Chief Financial Officer Accomplishments 

 Received no notices of significant findings to warrant a new 

material weakness from the independent auditor and received 

an 11th consecutive “clean” audit opinion on the FY 2012 

financial statements. 

 Broadened and improved CFO outreach efforts, resulting in 

hiring 50 percent of new hires from veterans and a diverse pool 

of recruits. 

 Provided revenue to rural communities. Approximately $308 

million in payments were provided to States for roads and 

schools, and an additional $6.1 billion was provided in contracts, 

grants, agreements, and salaries and to purchase materials, 

supplies, and services. 

 Implemented the Point-of-Sale System (POSS), allowing walk-in 

customers to use credit cards for over-the-counter purchases, 

eliminating the need for the agency to prepare bills for 

collection. This year’s implementation at 30 sites increased the 

total implementation to 44 national forests1. The POSS resulted 

in expeditiously collecting $17.7 million in revenue for the 

agency. 

 Provided customers with the ability to pay their bills online, 

collecting $6.2 million more efficiently. 

 Prepared the agency for migration to a new accounting system, 

the Financial Management Modernization Initiative (FMMI). 

FMMI deployed November 1, 2012. 

 

1

The 44 national forests represent 230 ranger districts, visitor centers, and supervisor’s offices. 

A-4
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Business Operations

The Business Operations Deputy Area provides the tools that Forest

Service employees rely on to accomplish the agency’s mission. From 

modernizing an outdated radio system to hiring tomorrow’s workforce, 

Business Operations staff provides critical services to the agency and its 

employees. 

FY 2012 Business Operations Accomplishments 

 Implemented a new recruiting and hiring system, eRecruit, to 

ease the process of recruiting and hiring. 

 Exceeded USDA goals for hiring veterans, persons with 

disabilities, and minority students with an increase of 18.7 

percent total minority representation in the permanent 

workforce. 

 Completed 8-hour safety training for 100 percent of Forest 

Service personnel and developed a second round of training for 

all employees to be completed by calendar yearend 2012. 

 Significantly reduced energy costs by replacing 210 network 

devices (goal was 50), 7,060 personal computers (goal was 500), 

and 721 aging printers or plotters (goal was 600) with new 

Energy Star-compliant devices, saving a total of 755,160 

kilowatts a year. 

 Saved over $10 million through innovative procurement 

practices and negotiations, including combining or separating 

requirements, negotiating claims, transitioning from sole source 

to competed awards, and transitioning from labor hours to firm 

fixed-price contracts. 

 Procured and deployed 6,000 one-way satellite emergency 

notification devices (SEND) to help ensure the safety of fieldgoing employees across the agency. 

A-5
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

National Forest System

The NFS provides stewardship and management of the 193 million acres 

of national forests and grasslands. Following Agriculture Secretary Tom 

Vilsack's vision, the Forest Service has placed a focus on improving the 

health of its watersheds, restoring ecosystem functions, increasing 

forest resilience to climate change, and contributing to vibrant local 

economies. 

FY 2012 National Forest System Accomplishments 

 Treated 2,570,800 acres to sustain or restore watershed 

function and resilience. These acres represent accomplishments 

achieved through Integrated Resource Restoration (IRR)-type 

activities that sustain or restore watershed function and 

resilience and include treatments that contribute significantly to 

improvement of watershed conditions. 

 Accomplished 310,000 acres of high-impact targeted (HIT) 

practices within the USDA Landscapes of National Importance. 

These HIT practices are actions that contribute to the USDA 

Priority Goal, formerly identified as the High-Priority 

Performance Goal (HPPG) for water. These HIT actions are 

implemented in priority landscapes that accelerate the 

protection of clean, abundant water. 

 Restored 3,700 miles of stream habitat for native fishes with 

commercial and non-commercial value, as well as for desired 

non-native species important to recreational fishing. A portion 

of the restoration was to remove invasive species. 

 Prepared and sold 5.08 billion CCF (hundred cubic feet) or 2.6 

billion board feet (MMBF) of timber. This harvest is an important 

tool to achieve the agency-wide goal of increasing watershed 

health and improving resilience at the landscape level. 

A-6
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Research and Development

The R&D Deputy Area is comprised of five research stations, the

Forest Products Laboratory, and the International Institute of Tropical 

Forestry. Directors, like regional foresters, report to the Chief of the 

Forest Service. The R&D Deputy Area has integrated Washington Office 

programs that support achievement of the agency’s strategic goals with 

an emphasis in seven strategic program areas. 

FY 2012 Research and Development Accomplishments 

 Developed a free software application that helps people identify 

and control destructive invasive plants in southern forests and 

grasslands. The software provides photographs and information 

that allow users to identify the 56 nonnative plants and plant 

groups currently invading the forests of the 13 Southern States 

and recommendations for their control. 

 Installed smoke chemistry measurement instruments on a 

Forest Service aircraft, measuring fresh emissions and smoke 

dispersion from 25 wildfires in the Western United States. This 

research improves wildfire emission inventories and the air 

quality models used by land managers and air quality regulators, 

enhancing their ability to minimize and mitigate the impacts of 

wildfire emissions on human health, economic activity, and 

scenic integrity. 

 Developed ForWarn, a forest monitoring Web-based tool that 

uses satellite imagery to produce weekly snapshots of 

vegetation conditions across the lower 48 States. Forest and 

natural resource managers can use ForWarn to rapidly detect, 

identify, and respond to unexpected changes in the Nation’s 

forests impacted by insects, diseases, wildfires, severe weather, 

or other natural or human-caused events. ForWarn is the first 

national-scale system of its kind developed specifically for forest 

disturbances. 

 Developed technology where cellulose fibers can be formed into 

structural and three-dimensional engineered fiberboard panels. 

Noble Environmental Technologies, Inc., of San Diego, CA, has 

signed an exclusive license agreement with USDA to use jointly 

patent-pending technology and structures for office furniture 

and packaging applications. 

A-7
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

State and Private Forestry

America’s forests, grasslands, and other open spaces are integral to the 

social, ecological, and economic well-being of the Nation. More than 50 

percent of our Nation’s forests are privately owned and supply almost 

30 percent of the surface drinking water to cities and rural communities. 

S&PF programs help protect these forests, providing support to keep 

them intact. Partnerships—so critical in implementing and delivering 

S&PF programs—help facilitate sound stewardship of lands across all 

ownerships on a landscape scale, while maintaining flexibility for 

individual forest landowners to pursue their objectives. 

FY 2012 State and Private Forestry Accomplishments 

 Assisted forest landowners in sustainably managing more than 

20 million acres under forest stewardship plans that address 

multiple resource concerns, including wildlife, recreation, forest 

health, water quality, and the threat of wildfire. The forest 

stewardship plans help protect the fresh water that flows from 

and is filtered by private forest lands. 

 Treated 1,867,202, or 156 percent, of targeted acres of 

hazardous fuels in the wildland-urban interface (WUI) to reduce 

fuel accumulation, decrease fire behavior, and increase 

community protection. 

 Treated 106,920 acres for invasive species on Federal lands and 

578,083 acres on cooperative lands. These efforts will provide 

for public safety and help ensure resilient forests today and for 

the future. 

 Developed agreements with 29 States to help private forest 

landowners’ market ecosystem services (2006-2012). These 

efforts will generate new sources of revenue to conserve, 

restore, and maintain private forest lands by developing tools to 

quantify ecosystem services and their values, developing 

environmental markets or payment systems, and creating 

partnerships around ecosystem services. 

 Played a critical role in the management, protection, and wise 

use of the nearly 100 million acres of the Nation’s urban and 

community forests by assisting 7,441 communities in which 194 

million people enjoy improved water quality, cleaner air, and 

effective energy conservation. 

A-8
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

RESPONSIBILITY SEGMENTS 

The Forest Service's mission is dedicated to the principle of multiple-use management of the Nation’s 

forest resources for sustained yields of wood, water, forage, wildlife, and recreation. Through 

management of the national forests and grasslands; research; and cooperation with States, tribes, and 

private forest owners, the agency strives to meet the needs of the Nation. Some of the responsibility 

segment names are the same as those used for deputy areas, but the terms are not necessarily 

synonymous for financial management reporting purposes. The mission is divided into four major 

responsibility segments. 

National Forests and Grasslands: This responsibility 

segment includes protection and management of an 

estimated 193 million acres of NFS land, which includes 

36.6 million acres of designated wilderness areas. In 

addition, the Forest Service partners with other agencies, 

nations, and organizations to foster global natural resource 

conservation and sustainable development of the world’s 

forest resources. 

Forest and Rangeland Research: This responsibility 

segment is accountable for research and development of 

forestry and rangeland management practices to develop 

and deliver scientific and technical knowledge for 

enhancing and protecting the economic productivity and 

environmental quality of the estimated 1.3 billion acres of 

forests and associated rangelands in the United States. 

State and Private Forestry: This responsibility segment 

reaches across the boundaries of national forests and uses 

cooperative agreements with State and local governments, 

tribal governments, forest industries, and private landowners to provide technical and financial 

assistance that helps protect and manage non-Federal forests and associated rangeland and watershed 

areas. 

Wildland Fire Management: This responsibility segment is responsible for protection of life, property, 

and natural resources on an estimated 193 million acres of NFS lands and the estimated 20 million acres 

of adjacent State and private lands. 

A-9
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Locations of Forest Service Administrative Units 

The map illustrates the 154 national forests and 20 national grasslands that collectively make up the NFS 

of the Forest Service. 

A-10
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

DEMANDS, RISKS, CONDITIONS, AND TRENDS 

The mission of the Forest Service has always revolved around delivering the benefits that people want 

from their forests and grasslands. Through the years, the focus has broadened and shifted to include a 

full range of goods and services, benefits, and values that people derive from their forests and 

grasslands. Today, the agency’s focus is on sustaining the ability of America’s forests and grasslands, 

both public and private, to deliver a full range of benefits—the full range of multiple uses—for 

generations to come. That ability is now at risk. Drought, invasive species, loss of open space, 

uncharacteristically severe wildfires, severe outbreaks of insects and disease—all of these stresses and 

disturbances are affecting America’s forests and grasslands on an unprecedented scale. Partly, they are 

driven by the overarching challenge of climate change. 

Safety 

As the Forest Service prepares for these events, safety must continue to be the first priority. Over the 

last 20 years, the number of fatalities in the Federal fire community has fluctuated, but averages about 

17 fatalities per year. The agency has increased its emphasis on safety with a goal to become a zerofatality organization. For several years, employees of the agency have been making a learning journey to 

become a safer organization. Forest Service leadership has been exploring its culture and history, 

comparing the agency to high-reliability organizations that also work in high-risk environments and 

working to change the safety culture by designing and building a learning-based safety system. 

 

Restoration 

Healthy, resilient forests and grasslands provide a whole range of benefits to Americans—clean air and 

water, carbon sequestration, habitat for native fish and wildlife, erosion control and soil renewal, 

opportunities for outdoor recreation, and more. 

The Forest Service is striving to 

sustain and restore ecosystems 

that can deliver the services that 

Americans want and need in this 

era of change and challenges. The 

agency estimates that up to 42 

percent of the NFS is in need of 

restoration. The Forest Service is 

taking a series of steps and 

developing strategies to accelerate 

restoration efforts, even with flat 

or declining budgets. The series of 

management actions the Forest 

Service is taking include expanding 

collaborative partnerships, 

restoration of degraded 

watersheds, and expanding 

markets for the byproducts of 

restoration treatments. 

A-11
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

The Forest Service is working with partners across boundaries and ownerships to address ecosystem 

issues on a landscape scale. Under the Collaborative Forest Landscape Restoration Program, for 

example, the agency selects large-scale projects for long-term funding, mostly on national forest land, 

but also on adjacent private and other lands. These projects are public and private partnerships for highpriority ecological restoration on a landscape scale. Forest Service leverages funding from its partners, 

who help design and implement each project. 

More than half of the water Americans consume originates on forested landscapes; almost a fifth comes 

from the national forests alone. To protect this resource, the Forest Service implemented a watershed 

condition framework that tracks the condition of 15,000 watersheds on NFS lands, accelerating 

watershed restoration efforts. Working with partners, Forest Service staff are developing watershed 

action plans for each of these watersheds, along with a schedule of actions. 

Struggling markets for timber are an obstacle to restoration. The Forest Service is taking steps to 

develop new markets for wood and is promoting the use of wood as a green building material. Lumber 

for construction is less fossil-fuel-intensive than cement or steel. Agency leadership has directed its units 

to increase the use of domestically harvested wood in new Forest Service buildings and facilities. 

Restoration delivers benefits that people want and need, such as clean water, fire protection, habitat for 

wildlife, recreational opportunities, and jobs. 

Wildfire Management 

The Forest Service is 

challenged with balancing 

the goals to improve forest 

health and reduce costs. 

Given the danger to public 

safety, Forest Service 

spends significant funds to 

protect people and 

property from wildfires, 

drawing resources away 

from efforts to manage the 

forests. Although the Forest 

Service 2012 budget 

dedicated more than $300 

million to reducing 

hazardous fuels in forests, 

these fuels are still 

accumulating faster than 

the agency can reduce them. 

Wildland fire management remains one of the agency’s biggest challenges. Although the Forest Service 

suppresses roughly 98 percent of the fires during initial attack, the remaining 2 percent of fires escape 

initial attack and become record-breaking fires. The WUI is expanding with substantial increases in 

housing density expected on 57 million acres of private forest land nationwide in the next 15 years. 

Almost 70,000 communities are now at risk from wildfire, and less than 6,000 have a community wildfire 

protection plan (CWPP). To tackle these challenges, the Forest Service, in partnership with the U.S. 

A-12
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Department of the Interior, has developed three goals in its National Cohesive Wildland Fire 

Management Strategy. 

The first goal is to create fire-adapted natural communities. The key is ecological restoration—restoring 

healthy, resilient ecosystems capable of withstanding stresses and disturbances, including those 

associated with climate change. An equally important goal is to create fire-adapted human communities

by treating fuels in the WUI and by helping people adopt planning and building practices that keep 

communities safer from wildfire. The third goal is to make safe, effective, risk-based wildfire 

management decisions. Many of America’s landscapes evolved with fire; sooner or later, they will burn. 

Fire protection requires an appropriate response to wildfire—not only suppression, but also, where safe 

and beneficial, the use of fire for management purposes. 

Inclusiveness 

The national forests are based on a notion that the Nation’s resources belong to everyone, that 

everyone should benefit and everyone should participate in their management. Part of the agency’s job 

is to reach out and give more people opportunities to get outdoors and up close and personal with 

nature. The Forest Service accomplished this through its Conservation Education programs. Last year, 

these programs reached more than 4 million people, mostly children. 

The culture of the Forest Service is deliberately transforming to become an employer of choice for all 

Americans. The agency wants to broaden the circle of conservation—to build a workforce that truly 

reflects the face of America. 

Inclusiveness is key to any successful organization. Inclusiveness comes from hiring people from 

different backgrounds: rural and urban; male and female; and with ethnicities, professions, and 

perspectives of all kinds. Today, more than 35 percent of top leadership comes from ethnic minorities, 

and almost 60 percent of top leadership represents either racial or gender diversity. There are still areas 

of underrepresentation, so the agency is broadening the connection to underserved communities, 

especially in urban areas. The Forest Service is committed to building a workforce that truly reflects the 

face of America and is tailoring recruitment and retention policies to the needs of young Americans from 

every background. 

A-13
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

PERFORMANCE GOALS, OBJECTIVES, AND RESULTS 

The Forest Service is committed to using performance management to ensure effective policy outcomes 

and promote greater accountability. Performance management is used to develop strategic goals, 

monitor program activities, measure progress toward goals, and to influence program and resource 

allocation decisionmaking. 

Performance accountability is integral to Forest Service operating standards. Senior management 

assigns accomplishment targets to Washington Office staff, regions, stations, and the Northeastern Area 

based on Forest Service strategic goals and objectives and input from executive leaders as to on-theground capability. Each unit within the agency develops a program of work consisting of specific projects 

to achieve objectives based on congressional direction, the departmental and agency strategic plans, 

resource management plans, and budget allocations. Project plans are reviewed and updated 

throughout the fiscal year to reflect changed conditions. 

FOREST SERVICE STRATEGIC GOALS AND PROGRAM PERFORMANCE 

The USDA Forest Service Strategic Plan 2007–2012 has seven strategic goals to which the agency aligns 

its efforts in support of the mission: 

Goal 1: Restore, Sustain, and Enhance the Nation’s Forests and Grasslands. 

Goal 2: Provide and Sustain Benefits to the American People. 

Goal 3: Conserve Open Space. 

Goal 4: Sustain and Enhance Outdoor Recreation Opportunities. 

Goal 5: Maintain Basic Management Capabilities of the Forest Service. 

Goal 6: Engage Urban America With Forest Service Programs. 

Goal 7: Provide Science-Based Applications and Tools for Sustainable Natural Resources Management. 

Forest Service performance results reported in the MD&A are FY 2012 year-to-date (YTD) actual 

performance reported as of November 1, 2012. Final performance accomplishments for these strategic 

measures will be published in the FY 2012 APR in February 2013. Final resources2 by strategic goal—

identified as “Estimated”—will also be available in the APR. To provide a consistent link between annual 

appropriated dollars and accomplishments, the Forest Service records accomplishments performed 

under contract at the time the contract is issued. Other accomplishments are recorded at the time the 

work is completed. 

Strategic Goal 1: Restore, Sustain, and Enhance the Nation’s Forests and Grasslands 

This strategic goal focuses on sustaining the health and diversity of the 

Nation’s forests and grasslands to “meet the needs of present and 

future generations.” 

Our Nation depends on the vitality of our forests and grasslands. These 

natural resources contribute a variety of essential elements to our well-being, including clean air and 

water. Stewardship of this land involves a complex integration of programs that foster recreation, 

energy, forest products, and resource sustainability. 

 

2

“Resources” encompasses appropriated and mandatory accounts. 

Goal 1 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$4,240 $4,218 $3,932 

A-14
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Following Secretary Vilsack’s vision, the Forest Service is focusing on improving the health of forest and 

grassland watersheds, restoring ecosystem function, and increasing forest resilience. Along with internal 

and external partners, the Forest Service has demonstrated many accomplishments in this area, 

including the improvement of millions of acres of terrestrial habitat and thousands of miles of streams 

and acres of lake habitats for imperiled, common, and economically significant aquatic species 

throughout the Nation. 

The threats that face forests and grasslands can sometimes be a natural part of the ecosystem cycle. 

Fire, for instance, when strategically managed, can help forests grow stronger and more resilient in the 

long run. However, natural threats may also include invasive and native pests, including certain insects, 

pathogens, plants, and aquatic pests, that pose a long-term risk to forest and rangeland health. 

Trend information indicates that over-crowded forest stands and drought conditions have increased the 

extent and frequency of insect and disease outbreaks. In response, the Forest Service programs prevent, 

detect, monitor, evaluate, and suppress insects and disease to restore and protect Federal forest lands 

and lands owned by States, local governments, private organizations, and individual land owners. 

Forest Service efforts to restore and enhance ecosystem health also address the quantity and quality of 

water produced from public and private forests and rangelands and improves terrestrial and aquatic 

habitat for wildlife and fish. The agency manages national forests and grasslands and supports State and 

private management of non-Federal and tribal lands in order to make the Nation’s wildland ecosystems 

better able to respond to future threats and risks. 

Reduce the risk to communities and natural resources from wildfire

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Moved toward desired 

conditions 

(acres and percentage) 

991,000 

39% 

693,957 

24% 

787,478 

35% 

640,000 

40% 

475,265 

31% 

74% 

78% 

540,000 

40% 

Maintained in desired 

conditions

(acres and percentage)

830,000 

33%

1,231,800 

42% 

1,028,611 

45% 

800,000 

50% 

776,473 

39% 

97% 

78% 

675,000 

50% 

Brought into stewardship 

contracts

(acres)

57,500 152,834 100,577 300,000 134,258 45% 300,000 

A-15
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Build community capacity to suppress and reduce losses from wildfires 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Acres treated in the WUI 

that have been identified 

in CWPPs or equivalent 

plans (percentage of 

acres)

17% 45% 61% 75% 89%3 119% 75% 

The Watershed Condition Framework 

The USDA Strategic Plan for FY 2010–2015 targets the restoration of watersheds and forest health as a 

core management objective of the Forest Service national forests and grasslands. To achieve this goal, 

the Forest Service restored degraded watersheds with the Watershed Condition Framework (below) to 

guide the improvement of watershed health on national forests and grasslands. 

The framework is a comprehensive approach that evaluates the condition of watersheds, prioritizes 

work in areas important to the public and results in noticeable differences in overall watershed 

condition, strategically integrates restoration, and tracks and monitors outcomes. For more 

information, go to the Forest Service Watershed Condition Class and Prioritization Information 

interactive map viewer at http://apps.fs.usda.gov/WCFmapviewer/. 

 

3

 This accomplishment is based on treatments in the western regions of the United States. 

Classify 

Watershed 

Condition

Prioritize 

Watersheds for 

Restoration

Develop 

Watershed Action 

Plans

Implement 

Integrated 

Projects

Track Restoration 

Accomplishments 

Monitor and 

Verify

A-16
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Based on the FY 2011 classification of 15,000 subwatersheds and the identification of more than 200 

priority watersheds, the Forest Service completed the development of the watershed action plans to 

move priority watersheds to an improved condition class4 in FY 2012. These watershed condition 

assessments determined that the proposed IRR performance measures “Number of Watersheds in 

Condition Class 1, in Class 2, and in Class 3“ would not adequately address declines in watershed 

condition due to natural disturbances such as large fires, floods, or other landscape-altering events. 

In FY 2012, the Forest Service proposed a more valid performance measure for FY 2013 that identifies 

watersheds that moved to an “improved condition class” from active watershed management. This 

measure is part of the foundation measures for the Watershed Condition Framework, a critical 

component to validate the success of the IRR approach. 

For FY 2012, however, the watershed performance measure reported in the AFR remained “Watersheds 

in condition class 1.” 

Restore and maintain healthy watersheds and diverse habitats 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Watersheds in condition 

class 1 

(percentage of all) 

30% 26% 52% 52% 52% 100% 52% 

Terrestrial habitat 

restored

(acres, in thousands)

642 2,037 2,629 1,980 2,718 137% 1,960 

Stream habitat restored 

(miles) 4,600 3,577 3,878 2,670 3,703 139% 2,750 

Lake habitat restored 

(acres) 18,000 27,779 26,832 24,000 32,069 134% 24,000 

Acres needing 

reforestation or timber 

stand improvement that 

were treated 

(percentage)

13% 23% 16% 16% 14% 88% 16% 

 

4 Watershed condition classification is the process of describing watershed condition in terms of discrete 

categories (or classes) that reflect the level of watershed health or integrity. The Forest Service Manual uses three 

classes to describe watershed condition relative to its natural potential condition in terms of geomorphic, 

hydrologic, and biotic integrity: Class 1 watersheds exhibit high integrity; Class 2 watersheds exhibit moderate 

integrity; and Class 3 watersheds exhibit low integrity relative to their natural potential condition. 

A-17
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Strategic Goal 2: Provide and Sustain Benefits to the American People 

This strategic goal focuses on sustaining the productivity of the 

Nation’s forests and grasslands to “meet the needs of present and 

future generations.” 

The Forest Service manages 193 

million acres of NFS lands, providing essential goods and services 

that help meet the American people’s need for wood fiber, 

protein, energy, water, and other benefits. Sustainable 

management of these resources ensures that the availability of 

goods and services and land productivity is maintained for both 

current and future generations. 

The Forest Service actively manages forest vegetation through the 

IRR program, providing renewable energy through the Woody 

Biomass Utilization Strategy. Other renewable energy activities 

include hydropower licensing, wind energy development, and 

geothermal operations on NFS lands. 

Rangeland resources are managed through the Grazing 

Management Program, maintaining habitat connectivity by linking 

NFS grazing authorizations to privately owned lands that are 

managed for agricultural production and by helping sustain the 

rural-based ranching and farming lifestyle. 

Within NFS, the Minerals and Geology program supports socioeconomic benefits by ensuring that 

minerals operations provide adequate protection of surface resources and meet objectives of the 

Energy Policy Act of 2005. 

Provide a reliable supply of forest products over time that (1) is consistent with 

achieving desired conditions on NFS lands and (2) helps maintain or create processing 

capacity and infrastructure in local communities 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Wood fiber 

provided to meet 

demand5

(CCF6) 

5,400,000 5,020,841 4,854,059 5,232,000 5,084,308 97% 5,600,000 

 

5

 Actual measure is “Wood fiber provided to meet the Nation’s demand for forest products in an environmentally 

sustainable manner.” 

6

 CCF=Hundred cubic feet 

Goal 2 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$394 $234 $335 

A-18
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Green tons 

and/or volume of 

woody biomass 

available through 

permits, 

contracts, grants, 

agreements, or 

the equivalent7

(number)

N/A 3,306,138 2,954,842 2,700,000 2,813,403 104% 3,000,000 

Provide a reliable supply of rangeland products over time that (1) is consistent with 

achieving desired conditions on NFS lands and (2) helps support ranching in local 

communities 

Help meet energy resource needs 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Land Special Use Permit 

applications for energyrelated facilities that are 

completed within 

prescribed timeframes 

(percentage) 

50% 100% 100% 100% 100% 100% 100% 

Energy-mineral 

applications that are 

processed within 

prescribed timeframes 

(percentage)

45% 5% 44% 43% 32% 74% 40% 

 

7

Actual measure is “Number of green tons and/or volume of woody biomass from hazardous fuel reduction and 

restoration treatments on Federal land that are made available through permits, contracts, grants, agreements, or 

the equivalent.” 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

National forests and 

grasslands under grazing 

permit that are 

sustainably managed for 

all rangeland products 

(acres, in thousands) 

81,560 76,154 75,387 73,820 75,067 102% 72,284 

A-19
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Strategic Goal 3: Conserve Open Space 

Undeveloped forests and grasslands, including working farms, ranches, 

and timber lands, help protect water quality; conserve native wildlife; 

and provide renewable timber and nontimber products, recreation 

opportunities, and scenic beauty. 

Conservation of these open spaces is essential to maintain the multitude of public benefits, ecosystem 

services, and products we all need and enjoy. Cooperation across boundaries, including Federal, State, 

private, and tribal lands, is essential to address large-scale conservation issues such as conservation of 

water resources and drinking water supply, reduction of wildfire risk, and protection of at-risk species 

while providing for jobs creation. Under this goal, the Forest Service works with its partners to conserve 

environmentally important forests and grasslands, ensuring their value and use for “current and future 

generations.” 

Protect forests and grasslands from conversion to other uses. 

Strategic Goal 4: Sustain and Enhance Outdoor Recreation Opportunities 

The Forest Service is challenged with sustaining adequate high-quality 

outdoor recreational experiences to meet the Nation’s needs while 

maintaining the ecological integrity of national forests and grasslands. 

The Nation’s population is projected to increase by nearly 50 percent 

by the middle of this century, placing increased demands and extensive 

pressure on public lands to provide recreational opportunities. 

The Forest Service explores and implements 

scientifically verified management solutions that 

support recreation needs without incurring 

adverse resource impacts. Researchers examine 

anticipated future recreation management 

problems, opportunities, and needs, applying 

social science research to analyze the American 

public’s perceptions of the value and importance 

of outdoor recreation opportunities. With this 

understanding of public opinion and need, the 

Forest Service can best inform and develop policies 

and decisions on national forest and grasslands. 

Goal 3 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$210 $293 $168 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Environmentally 

important forests and 

grasslands protected 

from conversion 

(acres, cumulative) 

1,360,000 2,056,107 2,210,563 2,392,278 2,265,716 95% 2,479,278 

Goal 4 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$677 $527 $614 

A-20
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Preserving high-quality recreation opportunities requires maintaining lands, recreation facilities, roads, 

and trails. This infrastructure enables the Forest Service to provide opportunities to interact with 

wildlife, explore wilderness and heritage resources, engage in educational activities, and access offhighway vehicle trails. Forest Service partners also contribute significant resources supporting tourism, 

interpretive services, recreation special uses, congressionally designated areas, and national forest 

scenic by-ways. 

Improve the quality and availability of outdoor recreation experiences 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Recreation sites 

maintained to standard 

(percentage) 

65% 68% 71% 70% 73% 104% 70% 

Total recreation capacity 

at developed recreation 

sites that meets 

accessibility standards 

(percentage)

10% 19% 23% 25% 24% 96% 25% 

Trails that meet national 

quality standards 

(percentage)

60% 41% 25% 30% 26% 87% 30% 

Customers who are 

satisfied with recreation 

facilities, services, and 

settings

(percentage)

80% 94% 94% 90% 94% 104% 85% 

Road system intended for 

passenger-car use that is 

suitable for passenger-car 

use

(percentage)

29% 90% 90% 90% 90% 100% 88% 

Secure legal entry to national forest lands and waters 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

High-priority access rightsof-way acquired 

(percentage) 

90% 106% 15% 85% 90% 106% 85% 

Improve the management of off-highway vehicle use 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

NFS lands covered by new 

motor vehicle use maps 

reflecting a designated-use 

system of roads, trails, and 

areas 

(percentage) 

0% 67% 77% 100% 79% 79% 100% 

A-21
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Strategic Goal 5: Maintain Basic Management Capabilities of the Forest Service 

Natural resources are affected by a wide range of forces, including 

natural events, overuse, and various management and law 

enforcement activities. The Forest Service maintains a workforce with 

the skills and capabilities to deal with the impacts of these events and 

assist other countries in managing their natural resources. 

Effectively managing its natural resources and ensuring the safety of the land and its users requires: 

 Land management plans, required of each unit in the NFS, to facilitate the implementation of 

governing laws and regulations 

 Collaboration with the public to ensure that Forest Service units continually address changing 

conditions and public needs 

 Inventory and monitoring activities to provide verifiable data and spatial resource information 

to support land management planning, assessments, and other program management needs 

 International forestry to maintain its expertise to promote sustainable forestry management 

and address climate change issues globally 

The Forest Service also maintains and manages dams, fire and administrative facilities, and supporting 

infrastructure critical to achieving resource management goals and objectives. 

Improve the administration of national forest lands and facilities in support of the 

agency’s mission 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Selected 

data in information 

systems that is current 

to standard 

(percentage) 

44% 77% 77% 80% 85% 106% 80% 

Administrative facilities 

that are being 

maintained to standard 

(percentage)

64% 64% 63% 60% 58% 97% 63% 

Strategic Goal 6: Engage Urban America With Forest Service Programs 

One of the goals of the America’s Great Outdoors (AGO) Initiative is to 

empower citizens, community groups, and local governments to share 

the responsibility for protecting natural areas and leaving a healthy, 

vibrant outdoor legacy for future generations. 

In support of the AGO, the Forest Service’s NFS, S&PF, and R&D deputy 

areas promote understanding and professional management of the Nation’s forests, including its urban 

forests. The Forest Service uses its institutional capacity, expertise, and extensive partnerships to engage 

and benefit urban America by:

Goal 5 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$440 $410 $391 

Goal 6 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$37 $59 $132 

A-22
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

 Providing all Americans broader access to the benefits trees and forests provide, such as clean 

air, clean and abundant water, reduced energy costs, reduced greenhouse gas emissions, 

recreation, improved human health, and jobs

 Providing conservation education and meaningful outdoor experiences

 Developing future natural resource leaders and providing outdoor recreational opportunities

 Providing urban residents increased opportunities to participate in natural resources 

stewardship and management—including green jobs—and enhancing sustainable management 

of urban natural resources for the benefit and well-being of all 

Improve the management of urban and community forests to provide a wide range of 

public benefits 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Communities with 

developing or 

established urban and 

community forestry 

programs resulting from 

Forest Service 

assistance (number) 

6,564 7,102 7,172 7,200 7,441 103% 7,200 

Strategic Goal 7: Provide Science-Based Applications and Tools for Sustainable Natural Resources 

Management 

The Forest Service provides science and technology solutions for clients 

and partners to sustainably manage forests and grasslands. 

Science-based applications and tools inform policy and resource 

management decisions to help achieve desired outcomes. 

To accomplish this goal, Forest Service R&D and Technology and 

Development Centers focus on organizational effectiveness as applied to natural resources management 

by public and private organizations. This includes applications of social sciences, organizational behavior, 

decision science and implementing effective fire management, response to global climate change, 

inventory and monitoring activities, landscape alteration, watershed management, energy demand, 

technology management, and policy analysis. 

Important components of this work include developing and testing innovative methods of synthesizing 

available science, transforming science and technology into usable technologies and tools, and creating 

and disseminating science applications to users. Partnerships with educational institutions and others 

are critical to program success and effectiveness. 

Goal 7 Resources by Fiscal Year 

(in millions)

2010 2011 Estimated 

2012 

$127 $117 $112 

A-23
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Increase the use of applications and tools developed by Forest Service R&D and 

Technology and Development Centers 

PERFORMANCE 

MEASURE BASELINE FY 2010 

FY 

2011 

FY 2012 2013 

TARGET YTD YTD % TARGET 

Customer satisfaction with 

R&D products and services 

(American Customer 

Satisfaction Index score) 

72 72 75 75 79 105% 75 

Patent applications filed 

(number) 10 6 13 8 8 100% 8 

Funding by Strategic Goal 

The following pie chart reports the estimated amount and percentage of funding by strategic goal. Final 

data will be available in the FY 2014 Budget Justification, available in February 2013 at 

http://www.fs.fed.us. 

A-24
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

FOREST SERVICE CONTRIBUTIONS TO THE USDA STRATEGIC PLAN 

The Forest Service contributes to USDA’s accomplishments for the following strategic and high-priority 

performance measures. 

USDA PERFORMANCE MEASURE FY 2010 

ACTUAL 

FY 2011 

ACTUAL 

FY 2012 

FY 2013 

TARGET 

FY 2015 

TARGET TARGET YEAR-END 

PROJECTION 

Acres on which high-impact 

targeted practices are 

implemented on National Forest 

System (NFS) and private lands in 

priority landscapes to accelerate 

the protection of clean, abundant 

water 

(millions of acres) 

.410 .305 .300 .310 103% N/A 

Annual economic contribution of 

recreation on national forests and 

grasslands 

238,000 237,800 237,800 237,800 100% 247,000 

Percentage of acres treated in the 

wildland-urban interface that have 

been identified in Community 

Wildfire Protection Plans

45% 61% 75% 89%8 119% 55% 

Cumulative acres in NFS that are in 

a desired condition relative to fire 

regime 

(millions of acres)

59 59 60 59 98% 62 

 

8

 This accomplishment is based on treatments in the western regions of the United States. 

A-25
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

SUMMARY ANALYSIS OF FINANCIAL STATEMENTS AND STEWARDSHIP INFORMATION 

The Forest Service produces a series of financial statements on a quarterly basis to summarize the 

activity and associated financial position of the agency. In producing these statements, the agency seeks 

to provide relevant, reliable, and 

accurate financial information related 

to Forest Service activities. An analysis 

of the agency’s September 30, 2012, 

financial statements provides the 

following highlights and exhibits, 

reflecting the comparative amounts for 

FY 2012 and FY 2011. 

CONSOLIDATED BALANCE SHEETS 

The Balance Sheet is a presentation of 

the Forest Service’s financial condition 

at the end of the fiscal year. It shows 

the resources Forest Service holds to 

meet its statutory requirements (Assets), the amounts it owes that will require payment from these 

resources (Liabilities), and the difference between them (Net Position). 

Assets 

As of September 30, 2012, Forest Service reports $5.4 billion in assets, representing a decrease of 11 

percent from FY 2011 amounts. 

ASSETS (in millions)

ASSET FY 

2012 

FY 

2011 

DIFFERENCES

DOLLARS PERCENTAGES

Fund Balance with Treasury $3,684 $4,379 ($695) (16%) 

General Property and 

Equipment 1,392 1,400 (8) (1%) 

Receivables, Net 296 276 20 7% 

Total of Major Categories $5,372 $6,055 ($683) (11%) 

Other Asset Categories 26 24 2 8% 

Grand Total Assets $5,398 $6,079 ($681) (11%) 

Consolidated 

Balance 

Sheets

Consolidated 

Statements 

of Net Cost

Consolidated 

Statements 

of Changes in 

Net Position

Combined 

Statements 

of Budgetary 

Resources

A-26
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Fund Balance With Treasury 

The Fund Balance With Treasury (68 percent of assets) decreased $695 million (16 percent) from FY 

2011, primarily due to decreases in appropriations. 

General Property, Plant, and Equipment 

General Property, Plant, and Equipment (PP&E) (26 percent of assets) consists primarily of forest roadsurface improvements, bridges, campgrounds, administrative buildings, other structures, and 

equipment. General PP&E also includes assets acquired by the Forest Service for conducting business 

activities, such as providing goods or services. General PP&E does not include the value of heritage 

assets or stewardship assets, which are categorized as Stewardship PP&E. 

Stewardship PP&E 

Stewardship PP&E assets—both heritage and stewardship assets—do not have a readily identifiable 

financial value as do the general PP&E assets, so they are not recorded within the Forest Service 

financial statements. 

Heritage assets are assets that are historical or significant for their natural, cultural, aesthetic, or other 

important attributes and that are expected to be preserved indefinitely. Stewardship assets are 

primarily land, held by the Forest Service as part of the NFS, and not acquired for, or in connection with, 

other general PP&E. 

For an in-depth discussion of heritage and stewardship assets, see the Financial Statement Note 5–

Stewardship PP&E and the Required Supplementary Information section. 

Receivables, Net 

Accounts Receivable, Net (5 percent of assets) increased $20 million (7 percent) from FY 2011, primarily 

due to fire billings in FY 2012 to the State of Texas, for the FY 2011 fire season, with associated 

reimbursable revenue to be paid by the State. 

Other Assets 

Other Assets (1 percent of assets) represent advances and prepayments for goods and services provided 

to the Forest Service. 

A-27
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Liabilities 

As of September 30, 2012, the Forest Service reports $2.4 billion in liabilities, representing an increase of 

6 percent from FY 2011 amounts. 

LIABILITIES (in millions)

LIABILITY FY 

2012 

FY 

2011 

DIFFERENCES

DOLLARS PERCENTAGES

Federal Employee Benefits $470 $454 $16 4% 

Other Liabilities (non-Federal)

 Accrued Liabilities 906 782 124 16% 

 Payments to States 346 357 (11) (3%) 

Other Categories 673 669 4 1% 

Grand Total Liabilities $2,395 $2,262 $133 6% 

Federal Employee Benefits 

Federal Employee Benefits (20 percent of liabilities) had an increase of $16 million (4 percent) from FY 

2011. The Federal Employees’ Compensation Act (FECA) liability is accrued workers' compensation 

benefits, not yet paid by the Forest Service. FECA benefits include the current and expected future 

liability for death, disability, medical, and other approved workers’ compensation costs. By law, Federal 

agencies cannot make these payments until Congress appropriates and OMB apportions the funds, and 

they are liabilities on the balance sheet. 

Accrued Liabilities 

Accrued Liabilities (38 percent of liabilities) had an increase of $124 million (16 percent) from FY 2011. 

Accrued Liabilities consist primarily of accruals for payroll and for receipt of goods and services. Accrued 

liabilities for occupancy agreements between U.S. General Services Administration (GSA) and the Forest 

Service are also included. A portion of the accrued liabilities total is calculated by a mathematical model 

based on a regression between open obligation balances and subsequent payments. 

A-28
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Payments to States 

The liability for Payments to States (14 percent of liabilities) decreased $11 million (3 percent) from 

FY 2011 primarily due to legislative mandates calling for a declining scale in payment calculation of 

approximately 90 percent of the full funding amount for the preceding fiscal year. 

The Payments to States legislation authorizes annual revenue-sharing payments to States in which 

national forests are located. The intent of the program is to offset the property taxes not collected on 

Federal lands by providing funding to counties for their public schools and roads. A portion of funding 

comes from agency receipts; the balance is an unfunded liability on the Forest Service’s balance sheet. 

The Secure Rural School and Community Self Determination Act of 2000, reauthorized on July 6, 2012, 

also provides for roads and schools, Forest Service projects, and emergency services. 

In addition, the Payments to Counties9 requires that 25 percent of the net revenues from each national 

grassland or land utilization project be paid to the counties in which such lands are located. 

Other Categories 

Other Categories (28 percent of liabilities) increased $4 million (1 percent) from FY 2011. Other 

categories of liabilities include deposit liabilities and annual leave liabilities. Deposit liabilities consist of 

collections deposited in clearing accounts awaiting disposition or reclassification. 

Net Position 

As reported in the Consolidated Statements of Changes in Net Position section, the Forest Service 

reported $1.5 billion for both unexpended appropriations and cumulative results of operations. The 

total net position decreased by $814 million (21 percent) from FY 2011. See the Consolidated 

Statements of Changes in Net Position section for further information on the changes in net position. 

CONSOLIDATED STATEMENTS OF NET COST 

The Consolidated Statements of Net Cost report the difference of two amounts: total gross costs minus 

total gross revenue for the year. The Forest Service’s net cost of operations was $6.1 billion, 

representing a decrease of 4 percent from FY 2011 amounts. 

 

9

Payments to Counties was authorized with the Bankhead-Jones Farm Tenant Act of 1937. 

A-29
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

NET COST OF OPERATIONS (in millions)

DESCRIPTION FY 

2012 

FY 

2011 

DIFFERENCES 

DOLLARS PERCENTAGES

Program Cost by Segment: 

 National Forests and Grasslands $3,377 $3,603 ($226) (6%) 

 Wildland Fire Management 2,833 2,817 16 1% 

 State and Private Forestry 388 390 (2) (<1%) 

 Forest and Rangeland Research 342 350 (8) (2%) 

Total Program Costs 6,940 7,160 (220) (3%) 

Less: Total Earned Revenue 839 833 6 1% 

Net Cost of Operations $6,101 $6,327 ($226) (4%) 

Expenses 

Forest Service program costs are $6.9 billion for FY 2012, representing a decrease of 3 percent from FY 

2011. 

Revenue 

The Forest Service’s earned revenue—from both public and intragovernmental sources—is $839 million 

for FY 2012 and $833 million for FY 2011, resulting in an increase of $6 million. 

Earned revenue from the public includes such items as the sale of forest products (timber and 

firewood); recreational opportunities (campgrounds); mineral resources; livestock grazing; and special 

land use fees for power generation, resorts, and other business activities conducted on NFS lands. 

The Forest Service also performs reimbursable activities for fire and other activities completed for other 

Federal agencies, in accordance with the Economy Act and other authorities. 

A-30
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

The Statements of Changes in Net Position report the change in net position during the reporting period. 

Net position is affected by changes to its two components: Unexpended Appropriations and Cumulative 

Results of Operations. 

NET POSITION (in millions)

NET POSITION FY 

2012

FY 

2011 

DIFFERENCES

DOLLARS PERCENTAGES

Unexpended Appropriations 

$1,510 $2,056 ($546) (27%) 

Cumulative Results of 

Operations 1,493 1,761 (268) (15%) 

Total Net Position $3,003 $3,817 ($814) (21%) 

Unexpended Appropriations 

The Unexpended Appropriations balance is $1.5 billion for FY 2012, representing a decrease of 27 

percent from FY 2011. The decrease is primarily due to reductions in appropriations, and accompanying 

decreases in appropriations used in FY 2012, which caused the unexpended appropriations balance to 

decrease. Unexpended Appropriations reflect the spending authority made available by congressional 

appropriation, but not used. 

Cumulative Results of Operations 

The Cumulative Results of Operations amount reflects the cumulative effect of financing in excess of 

expenditures and includes earmarked funds. It is the earmarked funds that predominately finance the 

enhancement and maintenance of NFS lands, including reforestation. Earmarked funds are presented 

separately on the Statements of Changes in Net Position, in accordance with the Statement of Federal 

Financial Accounting Standard 27–Identifying and Reporting Earmarked Funds. For a detailed description 

of each earmarked fund, see Note 11: Earmarked Funds in Part B. Financial Section of this AFR. 

COMBINED STATEMENTS OF BUDGETARY RESOURCES 

In accordance with Federal statutes and implementing guidance from OMB, the Forest Service may incur 

obligations and make payments to the extent it has budgetary resources to cover such items. The 

Combined Statements of Budgetary Resources presents the sources of these budgetary resources, the 

status of the funds at yearend, and the relationship between its budgetary resources and the outlays 

made against them. Forest Service's total budgetary resources were $8.1 billion in FY 2012 and $8.6 

billion in FY 2011, representing a decrease of 6 percent from FY 2011. 

STATEMENT OF BUDGETARY RESOURCES (in millions)

STATEMENT OF BUDGETARY 

RESOURCES 

FY 

2012 

FY 

2011 

DIFFERENCES 

DOLLARS PERCENTAGES 

Total Budgetary Resources $8,090 $8,585 ($495) (6%) 

Status of Budgetary Resources

 Obligations Incurred 6,698 6,678 20 <1% 

 Unobligated Balance–Apportioned 800 1,194 (394) (33%) 

 Unobligated Balance–Unapportioned 592 713 (121) (17%) 

Total Status of Budgetary Resources $8,090 $8,585 ($495) (6%) 

A-31
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Unobligated Balance–Apportioned 

The Unobligated Balance—Apportioned decreased $394 million (33 percent) in FY 2012. 

Unobligated Balance–Unapportioned 

The Unobligated Balance—Unapportioned decreased $121 million (17 percent) in FY 2012. 

The decreases are primarily due to a decrease in appropriations in the past 2 fiscal years along with an 

increase in fire activity. 

A-32
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

ANALYSIS OF SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE 

MANAGEMENT ASSURANCES 

Federal Managers’ Financial Integrity Act 

The Federal Managers’ Financial Integrity Act (FMFIA) management control objectives (below) identify 

those deficiencies that seriously affect an agency’s ability to meet these management control objectives 

as “material weaknesses.” 

The FMFIA requires agency managers to reasonably assure Congress and the American public that all 

financial information meets the following control objectives: 

Federal Managers’ Financial Integrity Act Assertions

Forest Service management conducted its annual evaluations of internal control (FMFIA, Section 2) and 

financial systems (FMFIA, Section 4), effective for the period ending September 30, 2012. 

Federal Financial Management Improvement Act 

The Federal Financial Management Improvement Act (FFMIA) mandates that agencies “...implement and 

maintain financial management systems that comply substantially with Federal financial management 

systems requirements, applicable Federal accounting standards, and the U.S. Standard General Ledger 

Programs achieve 

their intended 

results

Resources are 

used consistent 

with overall 

mission

Programs and 

resources are free 

from waste, 

fraud, and 

mismanagement

Laws and 

regulations are 

followed Controls are 

sufficient to 

minimize any 

improper or 

erroneous 

payments

Performance 

information is 

reliable

System security is 

in substantial 

compliance with 

all relevant 

requirements

Continuity of 

operations 

planning in critical 

areas is sufficient 

to reduce risk to 

reasonable levels

A-33
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

at the transaction level.” FFMIA also requires any agency unable to report substantial compliance with 

these requirements to develop remediation plans. 

FFMIA Assertions 

Forest Service management evaluated its financial management systems under FFMIA as referenced 

above for the period ending September 30, 2012. 

FY 2012 Results 

Based on the results of its evaluation, the Forest Service is substantially compliant with the sections 

referenced above. 

Federal Information Security Management Act 

The Federal Information Security Management Act (FISMA) provides the framework for securing the 

Federal Government's information technology (IT). Departments covered by the Paperwork Reduction 

Act must implement the requirements of FISMA, reporting annually to OMB and Congress on the 

effectiveness of the agency's security programs and independent OIG evaluations. 

FY 2012 Results 

No IT material weaknesses were noted for Assurance Year 2012. 

Internal Control Over Financial Reporting (Circular A-123, Appendix A) 

Forest Service management recognizes its responsibility for monitoring and correcting all internal 

control deficiencies. 

To identify potential deficiencies, the agency conducted an assessment of the effectiveness of internal 

control over financial reporting for the 2012 Assurance Year (ending June 30, 2012), in accordance with 

USDA's Implementation Guide for OMB Circular A-123, Internal Control over Financial Reporting, 

Appendix A. 

The Forest Service prepares risk assessments to evaluate program vulnerabilities for internal controls 

and then tests the controls to assess the level of internal control at the agency level. The agency uses 

the following procedures in this process: 

 Process descriptions and flowcharts are used to evaluate workflow and internal control from 

beginning to end of program responsibility. 

 Documentation and design of key controls are reviewed with management and key staff. 

 The operating effectiveness of properly designed controls is tested by recalculating and verifying 

compliance with policy and procedures. 

 Corrective action plans are developed for control and significant deficiencies. 

Based on the results of the assessment, the Forest Service can provide qualified assurance that controls 

over the financial reporting area are operating effectively. 

A-34
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Other Management Initiatives 

American Recovery and Reinvestment Act of 2009 

In FY 2012, Recovery Act funds enabled the Forest Service to continue to address natural resource 

priorities on the Nation’s forests and grasslands while creating or retaining approximately 1,375 jobs 

each quarter in economically distressed areas. For more information, go to 

http://usda.gov/wps/portal/arra?navid=USDA_ARRA_PLAN. 

LIMITATIONS OF FINANCIAL STATEMENTS 

The Forest Service’s principal financial statements have been prepared to report the financial position 

and results of operations of the agency, pursuant to the requirements of Title 31 of the United States 

Code, Section 3515(b). 

The Forest Service statements have been prepared from its books and records in accordance with 

Generally Accepted Accounting Principles for Federal entities and the formats prescribed by OMB. The 

statements, however, are in addition to the financial reports used to monitor and control budgetary 

resources that are prepared from the same books and records. 

These statements should be read with the realization that they are for a component of the 

U.S. Government, a sovereign entity. 

A-35

 


 

Part B

FINANCIAL SECTION

B-1
Message From the 

Chief Financial Officer 

As Chief Financial Officer for the Forest Service, an agency of the U.S. 

Department of Agriculture (USDA), I am proud to present the Forest Service’s 

fiscal year (FY) 2012 financial information. For the 11th consecutive year, the 

Forest Service received an unqualified audit opinion on the agency’s financial 

statements. Also, for the 5th consecutive year, the independent auditors 

reported no area of material weakness. The “clean” opinion demonstrates our 

continued commitment for our stewardship and management of the public 

funds entrusted to the agency. 

During FY 2012, the Forest Service conducted its assessment of the effectiveness of internal control over 

financial reporting. We conducted the assessment in accordance with USDA’s Implementation Guide and as 

required by the Office of Management and Budget Circular A-123, Appendix A. This examination provided a 

valuable opportunity to review and improve internal controls and ensure integrity in financial management 

and reporting. Based on the outcome of the assessment, the Forest Service provided USDA with a qualified 

assurance that internal controls over financial reporting are operating effectively. 

In order to improve efficiency, the Forest Service provided new tools to customers. We escalated installation of 

a new Point-of-Sale System (POSS) by implementing the system at 30 additional sites and increasing the total 

implementation to 44 national forests. The POSS allows walk-in customers to use credit cards for over-thecounter purchases. We also provided customers with the ability to pay their bills online. POSS and online pay 

provides efficient and effective services to our customers and resulted in expeditiously collecting $23.9 million 

for the agency with less delay. Additionally, we continue to improve service to our customers by processing 

payments on time. 

The Forest Service continued to have a strong economic tie to rural communities across the United States. 

In FY 2012, the Forest Service provided the States with approximately $308 million in payments to rural 

communities and to States for roads and schools and with an additional $6.1 billion in contracts, grants, 

agreements, and salaries and to purchase materials, supplies, and services. 

I wish to recognize the valuable contributions of the dedicated staff and collaboration between the finance, 

budget, and program areas, as well as the various partnerships within each of these areas. It is due to our 

collective efforts that we can report the above successes. The joint efforts of Forest Service managers, 

employees, and partners are key as the Forest Service sustains quality financial management and promotes 

transparent decisionmaking. 

While we have had many successes, we also realize that we have areas in which we can improve and strive 

to promote efficiency and continuous improvement. The Forest Service continues to improve its financial 

management and keep with USDA’s commitment to modernize the current financial processes and systems. 

Considerable progress was made in FY 2012 in finalizing the deployment plans for the replacement of the 

Forest Service’s accounting system with the Financial Management Modernization Initiative (FMMI). FMMI was 

deployed in November 2012. 

B-2

	

This Agency Financial Report provides timely information that the American public can use to better 

understand Forest Service programs. We hope that you find it useful and that you will follow our progress 

in advancing the agency’s and USDA’s strategic and high-priority performance goals and efforts to improve 

accountability. We carry out our responsibilities over the $8.1 billion in Federal funds with pride and are 

committed to the sound management of resources under our stewardship and look forward to more financial 

management improvements in FY 2013. 

THELMA STRONG 

Chief Financial Officer
	

B-3
USDA 

AWN 

United States Department of Agriculture 

Office of Inspector General 

Washington, D.C. 20250 

DATE: November 9, 2012 

AUDIT 

NUMBER: 0840 1-0002-1 1 

TO: Thomas Tidwell 

Chief 

Forest Service 

ATTN: Thelma Strong 

Chief Financial Officer 

Jennifer McGuire 

Director, Audit and Assurance 

Sandy Coleman 

Agency Liaison Officer 

FROM: Gil H. Harden 

Assistant Inspector General for Audit 

SUBJECT: Forest Service's Financial Statements for Fiscal Years 2012 and 2011 

This report presents the results of the audit of Forest Service's (FS) financial statements for the 

fiscal years ending September 30, 2012 and 2011. The report contains an unqualified opinion on 

the financial statements, as well as an assessment of FS' internal controls over financial reporting 

and compliance with laws and regulations. 

Kearney & Company, P.C. (Kearney), an independent certified public accounting firm, was 

engaged to conduct the audit. In connection with the contract, we reviewed Kearney's report and 

related documentation and inquired of its representatives. Our review, as differentiated from an 

audit in accordance with government auditing standards (issued by the Comptroller General of 

the United States), was not intended to enable us to express, and we do not express, opinions on 

FS' financial statements, internal control, or on whether FS' financial management systems 

substantially complied with the Federal Financial Management Improvement Act (FFMIA); or 

conclusions on compliance with laws and regulations. Kearney is responsible for the attached 

auditor's report, dated November 6, 2012, and the conclusions expressed in the report. However, 

B-4
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

our review disclosed no instances where Kearney did not comply, in all material respects, with 

government auditing standards, and the Office of Management and Budget (OMB) Bulletin 

07-04, Audit Requirements for Federal Financial Statements, as amended. 

It is the opinion of Kearney, that the financial statements present fairly, in all material aspects, 

FS’ financial position as of September 30, 2012 and 2011, and its net costs, changes in net 

position, and budgetary resources for the years then ended, in conformity with accounting 

principles generally accepted in the United States of America. 

As discussed in Note 1 to the financial statements, FS reclassified certain amounts in the prior 

year’s combined Statement of Budgetary Resources (SBR), to conform to the current year’s realigned presentation of the new Standard Form 133, Report on Budget Execution and Budgetary 

Resources. These reclassifications had no effect on the previously reported SBR balances. 

The Kearney report identified two significant deficiencies. Specifically, Kearney identified 

weaknesses in FS’s internal controls over: 

• information technology, and 

• property, plant and equipment. 

Kearney did not consider either of the above significant deficiencies to be material weaknesses. 

Kearney reported that FS substantially complied with FFMIA, and did not report any 

noncompliance with laws and regulations. The results of the Forest Service’s tests of 

compliance disclosed two instances of noncompliance or other matters concerning grants 

management that are required to be reported upon under Government Auditing Standards and 

OMB Bulletin No. 07-04, as amended. 

In accordance with Departmental Regulation 1720-1, please furnish a reply within 60 days 

describing the corrective actions taken or planned, and timeframes for implementing the 

recommendations for which management decisions have not been reached. Please note that the 

regulation requires management decision to be reached on all recommendations within 6 months 

from report issuance, and final action to be taken within 1 year of each management decision to 

prevent being listed in the Department’s annual Agency Financial Report. For agencies other than 

Office of Chief Financial Officer (OCFO), please follow your internal agency procedures in 

forwarding final action correspondence to OCFO. 

B-5
Independent Auditorʼs Report
 

B-6
 

 

1701 Duke Street, Suite 500, Alexandria, VA 22314 

PH: 703.931.5600, FX: 703.931.3655, www.kearneyco.com 

INDEPENDENT AUDITOR’S REPORT 

To the Chief of the United States Forest Service and the Inspector General of the United States 

Department of Agriculture 

We have audited the accompanying consolidated balance sheets of the United States Forest 

Service (Forest Service), an agency of the United States Department of Agriculture (USDA), as 

of September 30, 2012 and 2011, and the related consolidated statements of net cost, changes in 

net position, and combined statements of budgetary resources (hereinafter referred to as the 

“consolidated financial statements”) for the years then ended. These consolidated financial 

statements are the responsibility of the Forest Service’s management. Our responsibility is to 

express an opinion on these consolidated financial statements based on our audits. 

We conducted our audits in accordance with auditing standards generally accepted in the United 

States of America; the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States; and Office of Management 

and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as 

amended. Those standards require that we plan and perform the audit to obtain reasonable 

assurance about whether the financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the 

financial statements. An audit also includes assessing the accounting principles used and the 

significant estimates made by management, as well as evaluating the overall financial statement 

presentation. We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements referred to above, present fairly, in all 

material respects, the financial position of the Forest Service as of September 30, 2012 and 2011, 

and its net cost of operations, changes in net position, and budgetary resources for the years then 

ended, in conformity with accounting principles generally accepted in the United States of 

America. 

As discussed in Note 1 to the consolidated financial statements, the Forest Service reclassified 

certain amounts in the prior year’s combined Statement of Budgetary Resources to conform to 

the current year’s re-aligned presentation of the new Standard Form 133, Report on Budget 

Execution and Budgetary Resources. These reclassifications had no effect on the previously 

reported Statement of Budgetary Resources balances. 

Accounting principles generally accepted in the United States of America require that the 

Management’s Discussion and Analysis, Required Supplementary Information, and Required 

Supplementary Stewardship Information be presented to supplement the basic financial 

statements. Such information, although not a part of the basic financial statements, is required 

by OMB Circular A-136, Financial Reporting Requirements, and the Federal Accounting 

Standards Advisory Board, who considers it to be an essential part of the financial reporting for 

placing the basic financial statements in an appropriate operational, economic, or historical 

B-7
context. We have applied certain limited procedures to the required supplementary information 

in accordance with auditing standards generally accepted in the United States of America, which 

consisted of inquiries of management about the methods of preparing the information and 

comparing the information for consistency with management’s responses to our inquiries, the 

basic financial statements, and other knowledge we obtained during our audit of the basic 

financial statements. We do not express an opinion or provide any assurance on the information 

because the limited procedures do not provide us with sufficient evidence to express an opinion 

or provide any assurance. 

Our audits were conducted for the purpose of forming an opinion on the consolidated financial 

statements taken as a whole. Other Accompanying Information is presented for purposes of 

additional analysis and is not a required part of the basic financial statements. Such information 

has not been subjected to the auditing procedures applied in the audits of the basic financial 

statements, and accordingly, we do not express an opinion or provide any assurance on it. 

In accordance with Government Auditing Standards and OMB Bulletin No. 07-04, as amended, 

we have also issued reports, dated November 6, 2012, on our consideration of the Forest 

Service’s internal control over financial reporting and on our tests of the Forest Service’s 

compliance with certain provisions of laws, regulations, and other matters for the year ended 

September 30, 2012. The purpose of those reports is to describe the scope of our testing of 

internal control over financial reporting and compliance as well as the results of that testing, and 

not to provide an opinion on the internal control over financial reporting or on compliance and 

other matters. Those reports are an integral part of an audit performed in accordance with 

Government Auditing Standards and OMB Bulletin No. 07-04, as amended, and should be 

considered in assessing the results of our audits. 

Alexandria, Virginia 

November 6, 2012 

B-8
 

 

1701 Duke Street, Suite 500, Alexandria, VA 22314 

PH: 703.931.5600, FX: 703.931.3655, www.kearneyco.com 

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL 

To the Chief of the United States Forest Service and the Inspector General of the United States 

Department of Agriculture 

We have audited the financial statements of the United States Forest Service (Forest Service) as 

of and for the year ended September 30, 2012, and have issued our report thereon dated 

November 6, 2012. We conducted our audit in accordance with auditing standards generally 

accepted in the United States of America; standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United States; and 

Office of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal 

Financial Statements, as amended. The management of the Forest Service is responsible for 

establishing, maintaining, and assessing internal control related to financial reporting and 

compliance, and assessing internal control to provide reasonable assurance that the broad control 

objectives of the Federal Managers’ Financial Integrity Act of 1982 (FMFIA) are met. 

In planning and performing our work, we considered the Forest Service’s internal control over 

financial reporting and compliance by obtaining an understanding of the design effectiveness of 

the Forest Service’s internal control, determining whether controls had been placed in operation, 

assessing control risk, and performing tests of the Forest Service’s controls as a basis for 

designing our auditing procedures for the purpose of expressing our opinion on the financial 

statements and not to provide an opinion on the internal controls. Accordingly, we do not express 

an opinion on the effectiveness of the Forest Service’s internal control over financial reporting 

and compliance or on management’s assertion on internal control included in Management’s 

Discussion and Analysis. 

We limited our internal control testing to those controls necessary to achieve the OMB Bulletin 

No. 07-04, as amended, control objectives that provide reasonable, but not absolute assurance, 

that: (1) transactions are properly recorded, processed, and summarized to permit the preparation 

of the financial statements in accordance with accounting principles generally accepted in the 

United States of America (GAAP), and assets are safeguarded against loss from unauthorized 

acquisition, use, or disposition; and (2) transactions are executed in compliance with laws 

governing the use of budget authority, Government-wide policies and laws identified in 

Appendix E of OMB Bulletin No. 07-04, as amended, and other laws and regulations that could 

have a direct and material effect on the financial statements. We did not test all internal controls 

relevant to operating objectives, as broadly defined by FMFIA, such as those controls relevant to 

ensuring efficient operations. 

A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to 

prevent, or detect and correct misstatements on a timely basis. A material weakness is a 

deficiency, or combination of deficiencies, in internal control, such that there is a reasonable 

B-9
 

	 

possibility that a material misstatement of the entity’s financial statements will not be prevented, 

or detected and corrected on a timely basis. 

Our consideration of internal control over financial reporting was for the limited purpose 

described in the preceding paragraphs and was not designed to identify all deficiencies in internal 

control that might be significant deficiencies or material weaknesses. We did not identify any 

deficiencies in internal control over financial reporting that we consider to be material 

weaknesses, as defined above. However, we identified certain deficiencies in internal control that 

we consider to be significant deficiencies in internal control over financial reporting. A 

significant deficiency is a deficiency, or combination of deficiencies, in internal control that is 

less severe than a material weakness yet important enough to merit attention by those charged 

with governance. We consider the following deficiencies in the Forest Service’s internal control 

to be significant deficiencies. 

Significant Deficiencies 

I. Information Technology (Repeat Condition) 

The Forest Service’s information technology (IT) internal control structure, both for the general 

support systems and critical financial reporting applications, did not include a comprehensive 

risk analysis, effective monitoring of design and performance, and an ability to identify and 

respond to changing risk profiles. The National Institute of Standards and Technology (NIST) 

and Government Accountability Office (GAO) (in its Federal Information System Controls 

Audit Manual [FISCAM]) provide control objectives and evaluation techniques for IT internal 

control structures, which we utilized during the course of our audit. 

The Forest Service’s IT control environment included design and operation weaknesses that, 

when combined, are considered to be a significant deficiency, as summarized below. 

•	 The Forest Service’s control structure contains four weaknesses related to segregation of 

duties and principles of least privilege, as follows: 

- The Forest Service did not adequately review the access of Automated Timber Sale 

Accounting (ATSA) users. Kearney’s audit procedures indicated that two users 

retained access to ATSA although they had expired security access requests (issue 

was remediated on August 16, 2012), one inactive user’s access ID was not removed, 

and one user’s access ID was not reviewed on the quarterly report 

- The ATSA System Manager did not review and approve the ATSA Segregation of 

Duties Matrix timely. The review and approval occurred in May 2012, six months 

after the Matrix was updated 

- The Forest Service assigned conflicting roles to the Natural Resource Manager 

(NRM) applications. There were 16 Grants and Agreements (G&A) conflicts of 

permissions granted to users based on the Segregation of Duties Matrix provided by 

the Forest Service. This issue was remediated in September 2012 after Kearney’s 

audit procedures identified it 

B-10
 

	 

	 

	 

	 

- Similarly, there were 27 NRM Infrastructure (INFRA) and over 500 NRM Special 

Uses (SUDS) and NRM Timber Information Manager (TIM) users identified with 

violations to the principles of least privilege due to having more privileges assigned 

to their accounts than necessary for their job functions. These violations of least 

privilege do not pose a risk of segregation of duties per the agency role definitions; 

however, they are a violation of Forest Service information systems security policy 

and introduce unnecessary risk to data access and integrity. 

Recommendation Number 1: Kearney recommends that the Forest Service implement a process 

to ensure that no individual has complete control over incompatible functions. 

•	 The Forest Service’s control structure contains five weaknesses related to system security 

and assurance of system applications, as follows: 

- The Forest Service did not review and approve the ATSA Contingency Plan timely. 

Management did not approve the plan until May 2012, six months after it was 

updated 

- The Forest Service failed to update the NRM Configuration Management Plan, dated 

July 2010, on an annual basis 

- The Forest Service had inconsistent classification for the audit log events. NRM 

Audit Logs classified “privileged user” as a “major” event, but “super user” as a 

“minor” event. According to the Forest Service Manual, “super user” is a component 

of the “privileged user,” which indicates that their classifications should be consistent 

- The Forest Service did not identify the Application Hosting Environment (AHE) as a 

financial system. The Forest Service remediated this exception in August 2012 after 

it was identified by Kearney’s audit procedures 

- The Forest Service failed to provide the requested test plan and supporting 

documentation for one of 45 NRM configuration management samples. 

Recommendation Number 2: Kearney recommends that the Forest Service take the following 

actions to remediate this issue: 

•	 Ensure all required system security planning and management documents are reviewed in 

a timely manner and located in the repository Cyber Security Assessment and 

Management System (CSAM), where stakeholders can expect to retrieve the most 

current, approved version 

•	 Ensure events are being flagged in security logs consistent with the magnitude of the 

potential harm the event may cause. 

•	 The Forest Service’s control structure contains four weaknesses related to the user access 

administration process, as follows: 

- The Forest Service did not deactivate 15 Incident Business System (IBS) and 16 eCollections accounts within one business day subsequent to separation, in accordance 

with the Forest Service Manual 

- The Forest Service did not properly review the access for IBS users. The 

Albuquerque Service Center (ASC) Security Group did not review access for four of 

B-11
 

	 

	 

	 

	 

	 

	 

45 users, and an incorrect supervisor signed six of 45 Financial Information Security 

Request Forms 

- Kearney’s review of NRM user account access requests indicated that it was not 

possible to determine who approved access for two users 

- The Forest Service failed to identify and remove six duplicate user accounts timely. 

The Forest Service remediated the NRM users with more than one login credential in 

July 2012 after it was identified by Kearney’s audit procedures. 

Recommendation Number 3: Kearney recommends that the Forest Service perform the following 

corrective actions to address this issue: 

•	 Implement a process to ensure that accounts for separated employees are disabled or 

removed from Forest Service information systems in a timely manner 

•	 Reengineer, enhance, or otherwise better enforce the existing processes to ensure 

notifications of separated employee actions from Human Resources (HR) are closely and 

effectively coupled with timely deactivation of user accounts in all systems 

•	 Ensure, through review and communications, that established procedures for the 

completion and accuracy of Financial Information Security Request Forms are followed 

before establishing new or modified information system accounts 

•	 Routinely confirm, through investigation or review, that users have a single login 

credential for financial systems. 

•	 In fiscal year (FY) 2011, the Forest Service was not able to provide documentation 

supporting the status of background re-investigations, as required by Office of Personnel 

Management (OPM) and United States Department of Agriculture (USDA) policy. The 

Forest Service did not provide documentation required by policy to support the status of 

three out of 45 initial background investigations. Employees and contractors who have 

not been screened by the background investigation process prior to gaining access to 

Forest Service information system(s) and/or have not been re-investigated according to 

OPM guidance may have access to Forest Service information systems that exceeds their 

need-to-know. This may lead to users compromising sensitive financial data or 

introducing unauthorized transactions. For the current FY, Kearney noted that the Forest 

Service’s management began corrective actions; however, the original forecasted date of 

completion, August 15, 2012, was not met. 

Recommendation Number 4: Kearney recommends that the Forest Service’s management unify 

the background investigations and re-investigations process to integrate all stakeholders and 

applicable policies, and define roles and responsibilities across the agency to ensure that all 

required investigations and re-investigations are performed. 

•	 The Forest Service’s control structure contains one weakness related to remote access. 

The Forest Service uses single factor authentication for remote access (i.e., user name and 

password), which is insufficient for a moderate to high sensitivity system according to 

Federal Information Processing Standard (FIPS) Publication (PUB) 199. The Forest 

Service has a plan of action in place to remediate this condition; however, mitigating 

controls have not yet been implemented in FY 2012. 

B-12
	 

	 

Recommendation Number 5: Kearney recommends that the Forest Service implement a process 

to ensure that authentication methods are appropriate, based on risk. Kearney also recommends 

that the Forest Service implement multi-factor authentication for remote access. Since the Forest 

Service network can be accessed remotely, it is imperative that multi-factor authentication, rather 

than single-factor authentication, be used to protect sensitive financial data. Furthermore, 

Kearney recommends that the Forest Service implement an effective mitigating control to 

address the risks identified. 

II. Property, Plant, and Equipment (Repeat Condition) 

The Forest Service reported approximately $1.4 billion in net property, plant, and equipment 

(PP&E) on its FY 2012 balance sheet, which is about 26% of its total assets. Kearney’s audit 

procedures identified several internal control deficiencies that negatively impact the Forest 

Service’s ability to record real and personal property transactions in a complete, accurate, and 

timely manner. These deficiencies are discussed below. 

•	 The Forest Service’s control structure does not identify Work in Progress (WIP) projects 

that are substantially complete. Kearney identified 88 WIP projects that had no financial 

activity in the last four months. Kearney’s procedures revealed that six out of 25 

projects, a 24% error rate, were substantially complete and should have been placed into 

service, totaling approximately $7.3 million of projects costs. Delays in the WIP transfer 

caused an understatement of depreciation of approximately $600,000. In addition, 

Kearney identified a $1.1 million WIP project that was placed into service on August 17, 

2012, but was completed in July 2010. 

Recommendation Number 6: Kearney recommends that the Forest Service ASC, Budget and 

Finance (B&F) institute quarterly reviews with senior management on high dollar WIP projects 

that may cross over FYs, and record an accrual if deemed material at any FY end. 

•	 The Forest Service reported approximately $45 million of repairs and maintenance 

expenses. Kearney evaluated 50 repairs and maintenance expenses and identified four 

transactions that should have been capitalized rather than expensed. These transactions 

were for improvements of assets, including remodels, renovations, upgrades, or 

replacements. These improvements either improved the assets’ capacities or extended the 

assets’ useful lives. The four errors account for approximately $259,000 of the total $5 

million in costs tested. 

Kearney identified two transactions, totaling approximately $612,000, that should have 

been capitalized as property additions. These two errors also produced an understatement 

of depreciation expense of $54,000. Kearney identified four additional transactions, 

which, while they were properly classified as expenses, were improperly charged to 

repairs and maintenance Budget Object Codes (BOC). 

B-13
 

	 

Recommendation Number 7: Kearney recommends that the Forest Service Acquisition 

Management (AQM) community issue a reminder to the Field Budget Approvers of the 

appropriate requisition process for the acquisition of capitalized, accountable, and/or sensitive 

personal property through the Integrated Acquisition System (IAS) by properly classifying the 

acquisition of property through correct BOCs. 

•	 The Forest Service’s control structure contains two weaknesses related to operating lease 

disclosure, as follows: 

- The Forest Service does not accurately update future minimum payment amounts 

resulting from lease modifications and amendments. Kearney’s audit procedures 

identified 10 errors over the evaluated 25 operating leases, consisting of a 40% error 

rate, and extrapolated the error results to the annual disclosure amounts. The total 

non-statistically projected overstatement was $49 million over the cumulative fiveyear disclosure period; the largest annual overstatement was approximately $15.9 

million in Year 5 and later 

- The Forest Service included all lease option periods in the disclosure instead of just 

fixed, non-cancelable lease payments. Kearney evaluated the overstatement by year 

and projected the results to the annual disclosure amount. The total non-statistically 

projected overstatement was approximately $17 million over the cumulative five-year 

disclosure period; the largest annual overstatement was approximately $11.8 million 

in Year 5 and later. The Forest Service corrected the disclosure overstatement related 

to incorrectly including cancelable option periods in the future minimum payment 

disclosure. After the correction, Kearney identified an additional three leases, with 

total future payments of $126,000, that incorrectly included option years in the future 

minimum payment disclosure. 

Recommendation Number 8: Kearney recommends that the Forest Service review the current 

process for updating lease payment information to reflect the most recent lease modifications and 

amendments. Kearney also recommends that the Forest Service increase the frequency of 

updating the lease payment information. 

During the audit, we noted certain other matters that we will report to the Forest Service’s 

management in a separate letter. 

The Forest Service’s management has provided its response to our findings in a separate 

memorandum attached to this report. We did not audit management’s response and, accordingly, 

we do not express an opinion on it. 

* * * * * 

B-14
This report is intended solely for the information and use of the Forest Service’s management, 

those charged with governance and others within the Forest Service, USDA Office of the 

Inspector General, GAO, OMB, the Department of the Treasury, and Congress, and is not 

intended to be and should not be used by anyone other than these specified parties. 

Alexandria, Virginia 

November 6, 2012 

B-15
 

 
 

APPENDIX A: Status of Prior Year Deficiencies 

In the Independent Auditor’s Report on Internal Control included in the United States Forest 

Service’s (Forest Service) fiscal year (FY) 2011 financial statements,1 several issues were noted 

related to internal control over financial reporting. The table below presents a summary of the 

current year status of these issues. 

Prior Year Internal Control Significant Deficiencies 

Control Deficiency 2011 Status 2012 Status 

Information Technology Internal 

Control Environment 

Significant Deficiency Significant Deficiency 

Property, Plant, and Equipment Significant Deficiency Significant Deficiency 

* * * * * 

This report is intended solely for the information and use of the Forest Service’s management, 

those charged with governance and others within the Forest Service, the United States 

Department of Agriculture’s Office of the Inspector General, the Government Accountability 

Office, the Office of Management and Budget, the Department of the Treasury, and Congress, 

and is not intended to be and should not be used by anyone other than these specified parties. 

1 Independent Auditor’s Report on the U.S. Forest Service 2011 and 2010 Financial Statements. 

B-16
 

 

	 

	 

1701 Duke Street, Suite 500, Alexandria, VA 22314 

PH: 703.931.5600, FX: 703.931.3655, www.kearneyco.com 

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE AND OTHER MATTERS 

To the Chief of the United States Forest Service and the Inspector General of the United States 

Department of Agriculture 

We have audited the financial statements of the United States Forest Service (Forest Service) as 

of and for the year ended September 30, 2012, and have issued our report thereon dated 

November 6, 2012. We conducted our audit in accordance with auditing standards generally 

accepted in the United States of America; the standards applicable to financial audits contained 

in Government Auditing Standards, issued by the Comptroller General of the United States; and 

Office of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal 

Financial Statements, as amended. The management of the Forest Service is responsible for 

compliance with laws and regulations. 

As part of obtaining reasonable assurance about whether the Forest Service’s financial 

statements are free of material misstatement, we performed tests of the Forest Service’s 

compliance with certain provisions of laws and regulations, noncompliance with which could 

have a direct and material effect on the determination of financial statement amounts, and certain 

other laws and regulations specified in OMB Bulletin No. 07-04, as amended, that we 

determined were applicable. As part of our work, we performed tests of compliance with the 

Federal Financial Management Improvement Act of 1996 (FFMIA), Section 803(a) 

requirements. We limited our tests of compliance to these provisions; we did not test compliance 

with all laws and regulations applicable to the Forest Service. Providing an opinion on 

compliance with those provisions was not an objective of our audit, and accordingly, we do not 

express such an opinion. 

The results of our tests of compliance described in the preceding paragraph disclosed no 

instances of noncompliance or other matters that are required to be reported under Government 

Auditing Standards and OMB Bulletin No. 07-04, as amended. The results of the Forest 

Service’s tests of compliance described in the preceding paragraph disclosed two instances of 

noncompliance or other matters that are required to be reported upon under Government Auditing 

Standards and OMB Bulletin No. 07-04, as amended, and are summarized in the following 

paragraph. 

•	 The Forest Service was not in compliance with grants management pre-award 

requirements of 2 Code of Federal Regulations (CFR) 225.35, which states: “Agencies 

responsible for administering programs that involve cost reimbursement contracts, grants, 

and other agreements with governmental units shall issue regulations to implement the 

provisions of this part and its appendices” 

•	 The Forest Service was not in compliance with grants management pre-award 

requirements of7 CFR 3016.20 (b), which states: “The financial management systems of 

other grantees and subgrantees must meet the following standards: (1) Financial 

B-17
 

	 

reporting; (2) Accounting records; (3) Internal control; (4) Budget control; (5) Allowable 

cost; (6) Source documentation; and (7) Cash management.” 

Under FFMIA, we are required to report whether the Forest Service’s financial management 

systems substantially comply with Federal financial management systems requirements, 

applicable Federal accounting standards, and the United States Standard General Ledger 

(USSGL) at the transaction level. Our audit procedures indicated that the Forest Service 

substantially complies with FFMIA; however, we noted a certain instance, described below, in 

which the Forest Service’s financial management systems and related controls did not 

substantially comply with certain Federal systems requirements. 

Federal Financial Management Systems Requirements 

•	 User access and authorization controls were not in compliance with Forest Service policy 

and Federal Financial Management Systems Requirements in some cases. Adequate 

segregation of duties was not maintained in one financial system. 

The Forest Service’s management provided its response to our findings in a separate 

memorandum attached to this report. We did not audit management’s response and, accordingly, 

we do not express an opinion on it. 

* * * * * 

This report is intended solely for the information and use of the Forest Service’s management, 

those charged with governance and others within the Forest Service, the United States 

Department of Agriculture’s Office of the Inspector General, the Government Accountability 

Office, OMB, the Department of the Treasury, and Congress, and is not intended to be and 

should not be used by anyone other than these specified parties. 

Alexandria, Virginia 

November 6, 2012 

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U.S. Department of Agriculture 

Forest Service 

CONSOLIDATED BALANCE SHEETS 

As of September 30, 2012 and 2011 

(in millions) 

2012 2011 

Assets: 

Intragovernmental: 

Fund Balance with Treasury (Note 2) $ 3,684 $ 4,379 

Accounts Receivable, net (Note 3) 16 20 

Total Intragovernmental 3,700 4,399 

Cash and Other Monetary Assets 1 1 

Accounts Receivable, net (Note 3) 280 256 

General Property, Plant, and Equipment (PP&E), net (Note 4) 1,392 1,400 

Other (Note 1D) 25 23 

Total Assets $ 5,398 $ 6,079 

Stewardship PP&E (Note 5) 

Liabilities: 

Intragovernmental: 

Federal Employee Benefits (Notes 6 & 7) $ 71 $ 73 

Other (Note 9) 159 188 

Total Intragovernmental 230 261 

Accounts Payable 32 36 

Federal Employee Benefits (Notes 6 & 7) 399 381 

Environmental and Disposal Liabilities (Note 8) 2 1 

Other (Note 9) 1,732 1,583 

Total Liabilities (Note 6) 2,395 2,262 

Commitments and Contingencies (Note 9) 

Net Position: 

Unexpended Appropriations - All Other funds 1,510 2,056 

Cumulative Results of Operations - Earmarked Funds (Note 11) 803 1,002 

Cumulative Results of Operations - All Other funds 690 759 

Total Net Position 3,003 3,817 

Total Liabilities and Net Position $ 5,398 $ 6,079 

The accompanying notes are an integral part of these statements. 

B-20
 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 
 

Forest Service
 

CONSOLIDATED STATEMENTS OF NET COST
 

For the years ended September 30, 2012 and 2011
 

(in millions)
 

2012 2011 

Program Costs (Note 12): 

Total Gross Costs $ 6,940 $ 7,160 

Less: Total Earned Revenue 839 833 

Net Cost of Operations $ 6,101 $ 6,327 

The accompanying notes are an integral part of these statements. 

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U.S. Department of Agriculture
 

Forest Service
 

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION
 

For the years ended September 30, 2012 and 2011
 

(in millions)
 

2012 2011 

Earmarked Earmarked 

Funds Consolidated Funds All Other Consolidated 

(Note 11) All Other Funds Total (Note 11) Funds Total 

Cumulative Results of Operations: 

Beginning Balance $ 1,002 $ 759 $ 1,761 $ 933 $ 764 $ 1,697

Budgetary Financing Sources: 

Appropriations Used - 5,264 5,264 - 5,849 5,849 

Non-Exchange Revenue - 1 1 - 2 2 

Donations and Forfeitures of Cash 1 - 1 1 - 1 

Transfers - In/Out without Reimbursement (219) 355 136 116 - 116 

Other Financing Sources (Non-Exchange): 

Transfers without Reimbursement (18) 18 - (68) 68 -

Imputed Financing - 372 372 - 425 425 

Other 76 (17) 59 66 (68) (2) 

Total Financing Sources (160) 5,993 5,833 115 6,276 6,391 

Net Cost of Operations (39) (6,062) (6,101) (46) (6,281) (6,327) 

Net Change (199) (69) (268) 69 (5) 64 

Cumulative Results of Operations 803 690 1,493 1,002 759 1,761 

Unexpended Appropriations: 

Beginning Balance - 2,056 2,056 - 2,991 2,991 

Budgetary Financing Sources: 

Appropriations Received - 4,728 4,728 - 5,327 5,327 

Appropriation Transfers - In/Out - (1) (1) - (3) (3) 

Other Adjustments - (9) (9) - (410) (410) 

Appropriations Used - (5,264) (5,264) - (5,849) (5,849) 

Total Budgetary Financing Sources - (546) (546) - (935) (935) 

Total Unexpended Appropriations - 1,510 1,510 - 2,056 2,056

 Net Position $ 803 $ 2,200 $ 3,003 $ 1,002 $ 2,815 $ 3,817

The accompanying notes are an integral part of these statements. 

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U.S. Department of Agriculture
 

Forest Service
 

COMBINED STATEMENTS OF BUDGETARY RESOURCES
 

For the years ended September 30, 2012 and 2011
 

(in millions)
 

2012 2011 

Budgetary Resources: 

Unobligated Balance, Brought Forward, October 1 $ 1,907 $ 2,359 

Unobligated Balance Brought Forward, October 1, as Adjusted 1,907 2,359 

Recoveries of Prior Year Unpaid Obligations 131 94 

Other Changes in Unobligated Balance (+ or -) (2) -

Unobligated Balance from Prior Year Budget Authority, net 2,036 2,453 

Appropriations (Discretionary & Mandatory) 5,296 5,412 

Spending Authority from Offsetting Collections (Discretionary & Mandatory) 758 720 

Total Budgetary Resources (Note 15) $ 8,090 $ 8,585 

Status of Budgetary Resources: 

Obligations Incurred (Note 14) $ 6,698 $ 6,678 

Unobligated Balance, End of Period: 

Apportioned (Note 2) 800 1,194 

Unapportioned (Note 2) 592 713 

Total Unobligated Balance, End of Period 1,392 1,907 

Total Status of Budgetary Resources (Note 15) $ 8,090 $ 8,585 

Change in Obligated Balance: 

Unpaid Obligations, Brought Forward, October 1 (Gross) $ 2,771 $ 3,072 

Uncollected Customer Payments from 

Federal Sources, Brought Forward, October 1 (-) (485) (310) 

Obligated Balance, Start of the Year (net), Before Adjustments (+ or -) 2,286 2,762 

Obligated Balance, Start of Year (net), as Adjusted 2,286 2,762 

Obligations Incurred 6,698 6,678 

Outlays (Gross) (-) (6,781) (6,885) 

Change in Uncollected Customer Payments from Federal Sources (+ or -) (46) (175) 

Recoveries of Prior Year Unpaid Obligations (-) Obligated Balance, End of Period (131) (94) 

Unpaid Obligations, End of Period (Gross) (Note 16) 2,557 2,771 

Uncollected Customer Payments from Federal Sources, End of Period (531) (485) 

Obligated Balance, End of Period (net) $ 2,026 $ 2,286 

Budget Authority and Outlays, Net: 

Budget Authority, Gross (Discretionary and Mandatory) $ 6,054 $ 6,132 

Actual Offsetting Collections (Discretionary and Mandatory) (712) (545) 

Change in Uncollected Customer Payments from Federal sources 

(Discretionary and Mandatory) (+ or -) (46) (175) 

Budget Authority, net (Discretionary and Mandatory) $ 5,296 $ 5,412 

Outlays. Gross (Discretionary and Mandatory) $ 6,781 $ 6,885 

Actual Offsetting Collections (Discretionary and Mandatory) (712) (545) 

Outlays, net (Discretionary and Mandatory) 6,069 6,340 

Distributed Offsetting Receipts (-) (530) (467) 

Agency Outlays, net (Discretionary and Mandatory) $ 5,539 $ 5,873 

The accompanying notes are an integral part of these statements. 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES 

A: REPORTING ENTITY 

The U.S. Department of Agriculture (USDA) Forest Service (Forest Service) was established on February 1, 

1905, as an agency of the United States Federal Government within the USDA, for the purpose of maintaining 

and managing the Nation's forest reserves. It operates under the guidance of the Under Secretary for Natural 

Resources and Environment. Forest Service policy is implemented through nine regional National Forest System 

(NFS) offices, one State and Private Forestry (S&PF) area office, five Research and Development (R&D) stations, 

the Forest Products Laboratory (FPL) and the International Institute of Tropical Forestry (IITF), functioning in 

nearly all States, Puerto Rico, and the U.S. Virgin Islands. 

The Forest Service's mission includes the following four major segments: 

National Forests and Grasslands – Protection and management of an estimated 193 million acres (unaudited) 

of NFS land that includes 36.6 million acres (unaudited) of designated wilderness areas. In addition, the Forest 

Service partners with other nations and organizations to foster global natural resource conservation and 

sustainable development of the world’s forest resources. 

Forest and Rangeland Research – Research and development of forest and rangeland management practices 

to provide scientific and technical knowledge for enhancing and protecting the economic productivity and 

environmental quality of the 1.3 billion acres (unaudited) of forests and associated rangelands in the United 

States. 

State and Private Forestry – Cooperation with and assistance to State and Local governments, Tribal 

governments, forest industries, and private landowners to help protect and manage non-Federal forests and 

associated rangeland and watershed areas. 

Wildland Fire Management – Protection of life, property, and natural resources on NFS lands, extending to an 

estimated additional 20 million acres (unaudited) of adjacent State and private lands. 

The accompanying consolidated and combined financial statements of the Forest Service account for all funds 

under the Forest Service's control. Substantially all assets are considered “entity assets” and are available for use 

in the Forest Service’s operations. 

B: BASIS OF PRESENTATION AND ACCOUNTING 

The Consolidated Balance Sheets (BS), Consolidated Statements of Net Cost (SNC), Consolidated Statements of 

Changes in Net Position (SCNP), and the Combined Statements of Budgetary Resources (SBR) (hereinafter 

referred to as the “financial statements”) were prepared to report the financial position, net costs, changes in net 

position, and budgetary resources of the Forest Service. The financial statements have been prepared from the 

books and records of the Forest Service in accordance with accounting principles generally accepted in the 

United States of America as promulgated by the Federal Accounting Standards Advisory Board (U.S. GAAP) and 

in accordance with the Office of Management and Budget (OMB) Circular A-136, Financial Reporting 

Requirements, revised August 3, 2012. All material intra-agency transactions and balances have been eliminated 

for presentation on a consolidated basis. However, the SBR is presented on a combined basis in accordance with 

OMB Circular A-136. 

These financial statements present proprietary and budgetary information. The accounting structure of Federal 

agencies is designed to reflect both accrual and budgetary accounting transactions. Under the accrual method of 

accounting, revenues are recognized when earned and expenses are recognized when incurred without regard to 

receipt or payment of cash. The budgetary accounting principles, on the other hand, are designed to recognize 

the obligation of funds according to legal requirements, which in many cases is prior to the occurrence of an 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

accrual-based transaction. The recognition of budgetary accounting transactions is essential for compliance with 

legal constraints and controls over the use of Federal funds. 

The Forest Service recognizes budgetary resources as assets when cash funds held by U.S. Department of 

Treasury (Treasury) is made available through the Treasury General Fund warrants and other transfers. In 

addition to appropriated funds, the Forest Service is authorized by law to retain specific earned revenues primarily 

from sales of forest products and services and to spend these monies on resource management activities 

identified in the governing legislation. Some examples of the Forest Service’s earned revenues are monies 

collected from timber sales or recreation fees. 

C: FUND BALANCE WITH TREASURY 

Treasury processes cash receipts and disbursements on behalf of the Forest Service. Funds on deposit with 

Treasury are primarily appropriated, trust and other fund types such as special funds that are available to pay 

current liabilities and finance authorized purchase commitments. 

D: OTHER ASSETS 

Payments made by the Forest Service in advance of the receipt of goods and services are recorded as advances 

at the time of payment and recognized as expenditures/expenses when the related goods and services are 

received. 

E: GENERAL PROPERTY, PLANT, AND EQUIPMENT 

General property, plant, and equipment (PP&E) includes real and personal property used in normal business 

operations. Real and personal property is recorded at cost or estimated fair value and must have an estimated 

useful life of 2 years or more. The Forest Service capitalization threshold for real and personal property is $25,000 

or more. Internal use software is capitalized in accordance with U.S. GAAP if the fair value meets or exceeds 

$100,000. The Forest Service recognizes liabilities for capital leases in accordance with U.S. GAAP. Under U.S. 

GAAP the cost of general PP&E acquired under a capital lease is equal to the amount recognized as a liability for 

the capital lease at its inception (net present value of the lease payments) unless the net present value exceeds 

the fair value of the asset. There are no restrictions on the use or convertibility of general PP&E. 

See Note 5 for specific disclosures related to multi-use Heritage Assets. 

F: STEWARDSHIP PP&E 

Stewardship PP&E includes assets such as heritage assets and stewardship land, which due to their unique 

nature would be difficult to value. In accordance with U.S. GAAP, all heritage assets and stewardship land 

information has been reclassified as basic, except for condition information, which is reclassified as required 

supplementary information (RSI). 

See Note 5 for specific disclosures related to Stewardship PP&E. 

G: LIABILITIES 

Liabilities represent the amount of monies or other resources that are likely to be paid by the Forest Service as a 

result of a transaction or event that has occurred. However, the Forest Service cannot satisfy a liability without an 

appropriation. Liabilities for which there is no appropriation and for which there is no certainty that an 

appropriation will be enacted, are classified as unfunded liabilities. The U.S. Government, acting in its sovereign 

capacity, can abrogate liabilities. 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

H: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

The Forest Service’s estimated Government-related and Government-acknowledged environmental liabilities are 

principally associated with the future remediation of certain landfills, buildings, and other related sites in 

accordance with all applicable Federal, State and local laws. 

See Note 8 for specific disclosures related to cleanup costs for ongoing operations. 

I: COMMITMENTS AND CONTINGENCIES 

The Forest Service is a party in various administrative proceedings, legal actions, environmental lawsuits, and 

claims. In the opinion of the Forest Service management and its legal counsel, the ultimate resolution of most of 

these proceedings is remote. Where probable and reasonably estimable, the full value of amounts related to 

unsettled litigation and other claims against the Forest Service is recognized as a liability and expense. Expected 

amounts related to litigation and other claims include amounts to be paid by Treasury on behalf of the Forest 

Service from a permanent appropriation for judgments and from other appropriations. 

J: WORKERS’ COMPENSATION LIABILITY 

The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to Federal 

civilian employees injured on the job, employees who have incurred a work related occupational disease and 

beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Benefit 

claims incurred for the Forest Service’s employees under FECA are administered by the U.S. Department of 

Labor (DOL). The USDA uses Forest Service funds to reimburse the DOL for FECA claims. Consequently, the 

Forest Service recognizes a liability for this compensation comprised of: (1) an accrued liability that represents 

money owed for claims paid by the DOL through the current fiscal year and (2) an actuarial liability that represents 

the expected liability for Forest Service approved compensation cases to be paid beyond the current fiscal year. 

K: EMPLOYEE ANNUAL, SICK, AND OTHER LEAVE 

Annual and other vested leave such as compensatory, credit hours, and restored leave is accrued as it is earned, 

and the accrual is reduced as leave is taken. Each quarter, the balance in the accrued annual leave account is 

adjusted to reflect the latest pay rates and unused hours of leave. Sick leave is generally non-vested. Funding will 

be obtained from future financing sources to the extent that current or prior year appropriations are not available 

to fund annual and other types of vested leave earned but not taken. Sick leave and other types of non-vested 

leave are expensed when used. 

L: PENSION AND OTHER RETIREMENT BENEFITS 

Forest Service employees participate in either the Civil Service Retirement System (CSRS) or the Federal 

Employees Retirement System (FERS). The employees who participate in CSRS are beneficiaries of the Forest 

Service’s matching contribution, equal to 7.0 percent of pay, distributed to their annuity account in the Civil 

Service Retirement and Disability Fund. 

FERS went into effect on January 1, 1987, pursuant to Public Law 99-335. FERS and Social Security 

automatically cover most employees hired after December 31, 1983. Employees hired prior to January 1, 1984 

could elect to join FERS and Social Security, or choose to remain in CSRS. FERS offers a savings plan to which 

the Forest Service automatically contributes 1.0 percent of pay and matches any employee contribution up to an 

additional 4.0 percent of pay. For FERS participants, the Forest Service also contributes the employer’s matching 

share for Social Security. 

The Forest Service recognizes the imputed cost of pension and other health and life insurance retirement benefits 

during the employees’ active years of service. Office of Personnel Management (OPM) actuaries determine 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

pension cost factors by calculating the value of pension benefits expected to be paid in the future and 

communicate these factors and information regarding the full cost of health and life insurance benefits to the 

Forest Service for current period expense reporting. 

M: REVENUES AND OTHER FINANCING SOURCES 

The Forest Service is funded principally through Congressional appropriations and other authorizations in the 

Budget of the United States. The Forest Service receives annual, multi-year, and no-year appropriations that are 

used, within statutory limits, for operating and capital expenditures. Other funding sources are derived through 

reimbursements for services performed for other Federal and non-Federal entities, sale of goods to the public, 

gifts from donors, cost-share contributions and interest on invested amounts. 

Appropriations are used at the time the related program or administrative expenses are incurred or when the 

appropriations are expended for capital property and equipment. Other revenues are recognized as earned when 

goods have been delivered or services rendered. 

In accordance with U.S. GAAP, the Forest Service classifies revenue as either “exchange revenue” or “nonexchange revenue.” Exchange revenue arises from transactions that occur when each party to the transaction 

sacrifices value and receives value in return. An example of exchange revenue is the income from the sale of 

forest products. In some cases, the Forest Service is required to remit exchange revenue receipts to Treasury. In 

other instances, the Forest Service is authorized to use all, or a portion of its exchange revenues for specific 

purposes. Non-exchange revenue is revenue the Federal Government is able to demand or receive because of its 

sovereign powers. Penalties and cash donations received from private citizens and organizations are examples of 

non-exchange revenue. 

The Forest Service reports the full cost of products and services generated from the consumption of resources. 

Full cost is the total amount of resources used to produce a product or provide a service unless otherwise noted. 

In accordance with U.S. GAAP, the Forest Service’s pricing policies are set to recover full cost except where 

mandated by law or for the public good, such as in the case of grazing fees. Also, costs and exchange revenue 

are disclosed in Note 12 as intragovernmental or with the public based on the related source or customer, 

respectively. 

N: IMPUTED FINANCING 

The Forest Service recognizes as imputed financing the amount of accrued pension and post-retirement benefit 

expenses for current employees. The assets and liabilities associated with such benefits are the responsibility of 

the administering agency, OPM. Amounts paid from the Treasury Judgment Fund in settlement of claims or court 

assessments against the Forest Service are also recognized as imputed financing. Imputed financing for the 

years ended September 30, 2012 and 2011 was $372 million and $425 million, respectively. 

O: PARENT/CHILD REPORTING REQUIREMENTS 

The Forest Service is a party to allocation transfers with other federal agencies as both a transferring (parent) 

entity and/or a receiving (child) entity. Allocation transfers are legal delegations by one department of its authority 

to obligate budget authority and outlay funds to another department. A separate fund account (allocation account) 

is created in the Treasury as a subset of the parent fund account for tracking and reporting purposes. All 

allocation transfers of balances are credited to this account, and subsequent obligations and outlays incurred by 

the child entity are charged to this allocation account as they execute the delegated activity on behalf of the 

parent entity. In accordance with OMB Circular A-136, all financial activity related to these allocation transfers 

(e.g., budget authority, obligations, and outlays) is reported in the financial statements of the parent entity, from 

which the underlying legislative authority, appropriations and budget apportionments are derived. The Forest 

Service allocates funds as the parent to the Department of Interior (DOI), Department of the Army, Department of 

the Navy, Department of the Air Force, and the Corps of Engineers, Civil. The Forest Service receives allocation 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

transfers, as the child, from the DOL, Department of Transportation (DOT), and DOI. 

P: USE OF ESTIMATES 

Management has made certain estimates and assumptions when reporting assets, liabilities, revenue, and 

expenses. Actual results could differ from these estimates. Significant estimates underlying the accompanying 

financial statements include the majority of accrued liabilities and federal employee benefits liabilities. 

Q: EARMARKED FUNDS 

The Forest Service reports the earmarked funds for which it has program management responsibility, using the 

following three criteria: 

 A statute committing the Federal Government to use specifically identified revenues and other financing 

sources only for designated activities, benefits, or purposes. 

 Explicit authority for the earmarked fund to retain revenues and other financing sources not used in the 

current period for future use to finance the designated activities, benefits, or purposes. 

 A requirement to account for and report on the receipt, use, and retention of the revenues and other 

financing sources that distinguishes the earmarked fund from the Federal Government’s general revenues. 

R: INTER-ENTITY COST IMPLEMENTATION 

In accordance with U.S. GAAP, each entity’s full cost should incorporate the full cost of goods and services that it 

receives from other entities. The entity providing the goods and services has the responsibility to provide the 

receiving entity with information on the full cost of such goods or services either through billing or other advice. 

Recognition of inter-entity costs that are not fully reimbursed is limited to material items that (1) are significant to 

the receiving entity, (2) form an integral or necessary part of the receiving entity’s output, and (3) can be identified 

or matched to the receiving entity with reasonable precision. Broad and general support services provided by an 

entity to all or most other entities should not be recognized unless such services form a vital and integral part of 

the operations or output of the receiving entity. 

S: RECLASSIFICATIONS 

Certain amounts in the prior year’s SBR have been reclassified to conform to the current year’s presentation. 

These reclassifications had no effect on the previously reported SBR. 

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(in millions) 

A. Fund Balances: 2012 2011 

(1) Trust Funds $ 236 $ 397 

(2) Special Funds 909 964 

(3) Revolving Funds 185 178 

(4) General Funds 2,235 2,726 

(5) Other Fund Types 119 114
 
 

Total $ 3,684 $ 4,379
 
 

B. Status of Funds: 

(1) Unobligated Balance 

(a) Available $ 800 $ 1,194 

(b) Unavailable 592 713 

(2) Obligated Balance not yet Disbursed 2,026 2,286 

(3) Non-Budgetary FBWT Accounts 266 186
 
 

Total $ 3,684 $ 4,379
 
 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 2: FUND BALANCE WITH TREASURY 

Funds with Treasury are primarily appropriated (general and special funds), revolving (working capital fund), and 

trust funds that are available to pay current liabilities and finance authorized purchase commitments. The 

category of other fund types includes deposit and suspense accounts. It is the Forest Service’s policy to ensure 

the Fund Balance with Treasury (FBWT) reported on the balance sheets is consistent with the records of the 

Treasury. 

The Forest Service has a known discrepancy with Treasury in FBWT, suspense account 12F3885, as of 

September 30, 2012. Suspense account 12F3885 was discontinued effective July 31, 2008. USDA elected not to 

obtain a waiver, which would have permitted the Forest Service to continue to use the suspense account. 

Treasury has reactivated suspense account 12F3885 for certain activities with an accomplished date of 

December 1, 2011 and beyond. The balance of activity with an accomplished date prior to December 1, 2011 is 

not reported by Treasury. The difference between the FBWT balance and Treasury as of September 30, 2012 is, 

$13,120. 

Fund Balance with Treasury as of September 30, 2012 and 2011 consisted of the following: 

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(in millions) 

2012 2011 

Accounts Receivable $ 300 $ 264 

Allowance for Uncollectible Accounts (20) (8) 

Accounts Receivable, Net $ 280 $ 256 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 3: ACCOUNTS RECEIVABLE, NET 

Intragovernmental Accounts Receivable represent amounts due under reimbursable and cooperative agreements 

with Federal entities for services provided by the Forest Service. An Allowance for Uncollectible Accounts is not 

established for these amounts because monies due from other Federal entities are considered fully collectible. As 

of September 30, 2012 and 2011, the Intragovernmental Accounts Receivable balances were $16 million and $20 

million, respectively. 

Non-Intragovernmental Accounts Receivable is comprised primarily of timber harvest and reimbursements and 

refunds owed to the Forest Service for fire prevention and suppression activities. An Allowance for Uncollectible 

Accounts is established against outstanding non-Federal accounts receivable based on historical experience. The 

historical percentage is calculated by comparing the ending fiscal year balance in the write-off account against the 

previous ending fiscal year balance of open accounts receivable. The historical percentage is then applied to the 

ending balance of open accounts receivable. This approach is used to estimate the allowance for uncollectible 

accounts and recording receivables at net realizable value. 

Non-Intragovernmental Accounts Receivable as of September 30, 2012 and 2011 consisted of the following: 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2012 and 2011 

NOTE 4: GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET 

Depreciation of General PP&E for the Forest Service is recorded on the straight-line method based on the 

estimated useful lives listed below. Capitalization thresholds are provided in Note 1, Section E. 

As of September 30, 2012 and 2011 the Forest Service’s General PP&E consisted of the following: 

September 30, 2012 

(in millions) 

Estimated Useful Accumulated 

Property Class Life (Years) Cost Depreciation Book Value 

Personal Property 

Equipment 5 - 20 $ 686 $ (438) $ 248 

Internal Use Software 5 107 (91) 16 

Internal Use Software in Development n/a 68 - 68 

Total Personal Property 861 (529) 332 

Real Property 

Land and Land Rights n/a 52 - 52 

Improvements to Land 10 745 (662) 83 

Construction in Progress n/a 138 - 138 

Buildings, 

Improvements, and 

Renovations 15 - 30 1,058 (631) 427 

Other Structures and Facilities 15 - 50 1,720 (1,382) 338 

Assets Under Capital Lease 5 - 30 58 (39) 19 

Leasehold Improvements 10 12 (9) 3 

Total Real Property 3,783 (2,723) 1,060 

Total $ 4,644 $ (3,252) $ 1,392 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

September 30, 2011 

(in millions) 

Estimated Useful Accumulated 

Property Class Life (Years) Cost Depreciation Book Value 

Personal Property 

Equipment 5 - 20 $ 702 $ (462) $ 240 

Internal Use Software 5 94 (84) 10 

Internal Use Software in Development n/a 73 - 73 

Total Personal Property 869 (546) 323 

Real Property 

Land and Land Rights n/a 52 - 52 

Improvements to Land 10 732 (644) 88 

Construction in Progress n/a 187 - 187 

Buildings, 

Improvements, and 

Renovations 15 - 30 993 (615) 378 

Other Structures and Facilities 15 - 50 1,692 (1,346) 346 

Assets Under Capital Lease 5 - 30 61 (39) 22 

Leasehold Improvements 10 11 (7) 4 

Total Real Property 3,728 (2,651) 1,077 

Total $ 4,597 $ (3,197) $ 1,400 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 5: STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT
 

This note provides information on certain resources entrusted to and stewardship responsibilities assumed by the 

Forest Service. These resources and responsibilities are referenced in accordance with U.S. GAAP on the Forest 

Service’s Balance Sheets. 

Stewardship PP&E 

Stewardship PP&E are assets whose physical properties resemble those of the General PP&E that are 

traditionally capitalized in the financial statements. Due to the nature of these assets, however, valuation would be 

difficult and matching costs with specific periods would not be meaningful. Stewardship PP&E includes heritage 

assets and stewardship land. The Forest Service reports Stewardship PP&E by site. Sites include National 

Forests, National Grasslands, other Forest Service-managed sites, and non Forest Service-managed sites such 

as museums and university laboratories. The protection of these lands and resources is a fundamental Forest 

Service responsibility. 

The mission of the Forest Service is to sustain the health, diversity, and productivity of the Nation’s forests and 

grasslands to meet the needs of present and future generations. The Forest Service strives to achieve quality 

land management under the sustainable multiple-use management concept to deliver the necessary products and 

services that are essential for enhancing natural resource stewardship and to meet the diverse needs of people. 

The preservation and management of heritage assets is guided through the enactment of many laws and 

regulations including the Organic Administration Act of 1897 (16 U.S.C. 473-478, 479-482, 551), the Antiquities 

Act of 1906 (16 U.S.C. 431), the National Historic Preservation Act of 1966 (16 U.S.C. 470), the Archaeological 

Resources Protection Act of 1979 (16 U.S.C. 470aa et seq.), the Native American Graves Protection and 

Repatriation Act of 1990 (25 U.S.C. 3001), Executive Order 13287 – Preserve America, issued March 3, 2003, 

National Register of Historic Places (36 CFR, part 60), Protection of Archaeological Resources Uniform 

Regulations (36 CFR part 296), and the Curation of Federally-owned and Administered Archaeological 

Collections (36 CFR part 79), as well as many others. 

The predominant laws governing the management of stewardship land are the Transfer Act of 1905 (16 U.S.C. 

472, 478, 495, 551, 554a, 615b, 554, 524), the Multiple Use-Sustained Yield Act of 1960 (16 U.S.C. 528-531, 528 

note), the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1600 note, 1600-1614), 

and the National Forest Management Act of 1976 (16 U.S.C. 472a). 

These laws and regulations are implemented through Forest Service policy and guidance. Program management 

evaluations and technical reviews are performed to ensure compliance. 

Heritage Assets 

Heritage assets, as defined by U.S. GAAP, are PP&E that are unique for one or more of the following reasons: 

 Historical or natural significance 

 Cultural, educational, or artistic (e.g. aesthetic) importance 

 Significant architectural characteristics 

Heritage assets can include non-collection type assets, such as historic or prehistoric sites, monuments, and 

buildings, or collection type assets, such as objects gathered and maintained for exhibition. 

Some heritage assets may also be classified as multi-use heritage assets if they serve two purposes—a heritage 

function and a general government operations function, such as a forest guard station building. The building may 

be listed on the National Register of Historic Places, but it serves primarily as an administrative site, hence, it is 

considered a “multi-use” heritage asset. Multi-use heritage assets are capitalized as General PP&E. Multi-use 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

heritage assets are reported as Stewardship PP&E. 

Heritage Asset categories can include the following: 

Priority Heritage Assets: Heritage assets of distinct public value that are, or should be, actively maintained, and 

meet one or more of the following criteria: 

 The property is recognized through an official designation, such as a listing on the National Register of 

Historic Places, State register, etc. 

 The property is recognized through prior investment in preservation, interpretation, and use. Any
 

improvement to a PHA that meets real property designation criteria is considered real property.
 

 The property is recognized in an agency-approved management plan. 

 The property exhibits critical deferred maintenance needs and those needs have been documented. 

Other Heritage Assets: Assets that may have potential important historical or cultural significance, but lack formal 

listing and the demonstrated need for active maintenance. 

Assemblage Assets: Any grouping of artifacts or archival materials aggregated through donation, agency events, 

site-specific or other field collection, other acquisition method, or combination therein. 

Addition and Deletion of Heritage Assets 

The Forest Service generally does not construct heritage assets, although in some circumstances important sitestructural components may be rehabilitated or reconstructed into viable historic properties to provide forest 

visitors with use and interpretation. Heritage assets may be added through the procurement process, but this 

rarely occurs. Normally, heritage assets are part of the land acquisition and inventory process. Deletion occurs 

through land exchange or natural disasters. Most additions occur through inventory activities where previously 

undocumented sites are discovered and added to the total. 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

The Heritage Asset Sites reported by management area as of September 30, 2012, are as follows: 

HERITAGE ASSET SITES BY 2011 2012 

MANAGEMENT AREA Final Sites Additions Deletions Final Sites 

National Forests 

Region 1 - Northern Region 15 - - 15 

Region 2 - Rocky Mountain Region 17 - - 17 

Region 3 - Southw estern Region 12 - - 12 

Region 4 - Intermountain Region 18 - - 18 

Region 5 - Pacific Southw est Region 18 - - 18 

Region 6 - Pacific Northw est Region 21 - - 21 

Region 8 - Southern Region 35 - (1) * 34 

Region 9 - Eastern Region 17 - - 17 

Region 10 - Alaska Region 2 - - 2 

Subtotal 155 (1) 154 

National Grasslands 

Region 1 - Northern Region 4 - - 4 

Region 2 - Rocky Mountain Region 7 - - 7 

Region 3 - Southw estern Region 4 - 4 

Region 4 - Intermountain Region 1 - - 1 

Region 5 - Pacific Southw est Region 1 - - 1 

Region 6 - Pacific Northw est Region 1 - - 1 

Region 8 - Southern Region 2 - - 2 

Subtotal 20 20 

Non Forest Service Sites 167 19 (18) 168 

TOTAL SITES 342 19 (19) 342 

Region 1 - Montana, North Dakota, Northern Idaho, and Northwestern South Dakota 

Region 2 - Colorado, Kansas, Nebraska, South Dakota, and Wyoming 

Region 3 - Arizona and New Mexico 

Region 4 - Southern Idaho, Nevada, Utah, and Western Wyoming 

Region 5 - California, Hawaii, Guam, and Trust Territories of the Pacific Islands 

Region 6 - Oregon and Washington 

Region 8 - Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, 

Puerto Rico, South Carolina, Tennessee, Texas, Virgin Islands, and Virginia 

Region 9 - Delaware, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, 

New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, West Virginia, 

and Wisconsin 

Region 10 - Alaska 

Stewardship Land 

Stewardship land consists primarily of the national forests and grasslands owned by the Forest Service. 

Stewardship land is valued for its environmental resources, recreational and scenic value, cultural and 

paleontological resources, vast open spaces, and resource commodities and revenue provided to the Federal 

Government, States, and counties. 

National Forests 

The national forests are formally established and permanently set aside and reserved for national forest 

purposes. The following categories of NFS lands have been set aside for specific purposes in designated areas: 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

 National Wilderness Areas - Areas designated by Congress as part of the National Wilderness
 

Preservation System.
 

 National Primitive Areas - Areas designated by the Chief of the Forest Service as primitive areas. They 

are administered in the same manner as wilderness areas, pending studies to determine sustainability as 

a component of the National Wilderness Preservation System. 

 National Wild and Scenic River Areas - Areas designated by Congress as part of the National Wild and 

Scenic River System. 

 National Recreation Areas - Areas established by Congress for the purpose of assuring and
 

implementing the protection and management of public outdoor recreation opportunities.
 

 National Scenic Research Areas - Areas established by Congress to provide use and enjoyment of 

certain ocean headlands and to ensure protection and encourage the study of the areas for research and 

scientific purposes. 

 National Game Refuges and Wildlife Preserve Areas - Areas designated by Presidential proclamation 

or Congress for the protection of wildlife. 

 National Monument Areas - Areas including historic landmarks, historic and prehistoric structures, and 

other objects for historic or scientific interest, declared by Presidential proclamation or Congress. 

National Grasslands 

National grasslands are designated by the Secretary of Agriculture and permanently held by the USDA under Title 

III of the Bankhead-Jones Farm Tenant Act. 

Research and Experimental Areas 

Research and experimental areas are reserved and dedicated by the Secretary of Agriculture for forest and range 

research experimentation. Areas reported are located outside the exterior boundaries of a national forest or 

grassland. 

National Preserves and Other Areas 

National preserves is established to protect and preserve scientific, scenic, geologic, watershed, fish, wildlife, 

historic, cultural, and recreational values; and provide for multiple use and sustained yield of its renewable 

resources. Other areas include areas administered by the Forest Service that are not included in one of the above 

groups. 

Addition and Deletion of Stewardship Lands 

The Land and Water Conservation Fund (L&WCF) Land Acquisition Program acquires land for the Forest Service 

NFS. The program coordinates with a variety of partners, including State, local, and Tribal governments, and 

private landowners through statewide planning for development of a land-adjustment strategy. 

The Land Acquisition Program preserves, develops, and maintains access to NFS lands and waters for the public 

and provides permanent access to public lands for recreation, commodity production, resource management, 

public safety, and community economic viability. 

The L&WCF statutory authority specifically defines the purpose to also include protecting the quality of scientific, 

scenic, historical, ecological, environmental, air and atmospheric, water resource, archeological values, as well as 

food and habitat for fish and wildlife, and managing the public lands for minerals, food, timber and fiber. 

From these several allowable uses of program funding, the program concentrates on protecting habitat for priority 

species identified in the national forest and grassland’s Land Management Plans and enhancing recreational 

opportunities for areas with high demand for recreation. The program focuses acquisitions on inholdings and 

areas adjacent to existing NFS lands. 

B-36
 

 

 

 

2011 2012 

STEWARDSHIP LAND ASSET SITES Final Sites Additions Deletions Final Sites 

National Forests 155 - (1) * 154 

National Grasslands 20 - - 20 

Research and Experiment Areas 3 - - 3 

National Preserves and Other Areas 3 - - 3 

TOTAL SITES 181 - (1) 180 

 

 

 

 

 

U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2012 and 2011 

The NFS sites reported by major category as of September 30, 2012, are as follows: 

*It has been determined that the Choctawhatchee National Forest no longer exists and should no longer be 

included when calculating the number of administrative areas under its jurisdiction. This Forest was not previously 

removed from our calculation because the Forest Service still managed a very small number of acres that were 

once part of the Choctawhatchee. An OGC decision has determined there is not a reversionary clause and the 

Forest Service cannot regain title to these lands. 

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 7: FEDERAL EMPLOYEE BENEFITS
 

Liabilities under the Federal Employees’ Compensation Act (FECA) are incurred as a result of accrued workers' 

compensation benefits not yet paid by the Forest Service. 

Workers' compensation benefits include the current and expected future liability for death, disability, medical, and 

other approved costs. The U.S. Department of Labor (DOL) actuarially determines the expected future liability for 

the USDA as a whole, including the Forest Service. The Forest Service is billed annually as its claims are paid by 

the DOL. Payments to the DOL are deferred for two years so that the bills may be funded through the budget. The 

amounts of unpaid FECA billings constitute the accrued FECA payable. 

The total components of accrued FECA payable as of September 30, 2012 and 2011 consisted of the following: 

(in millions)

2012 2011

Intragovernmental F ederal E mployee B enefits (Note 6) $ 71 $ 73

F ederal E mployee B enefits (Note 6) 399 381

Total $ 470 $ 454

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U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 8: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

Forest Service discloses information related to cleanup costs for environmental hazards, in accordance with U.S. 

GAAP, which addresses liabilities associated with Government-related events and Government-acknowledged 

events. 

Government-related events are non-transaction based events that involve interaction between the Forest Service 

and the environment; damages caused by such factors as ongoing operations or natural forces. The resulting 

liability is considered probable based on Forest Service’s responsibility for cleanup of Government-related events 

and is recognized in the period the event occurs or as soon as it becomes measurable. 

Government-acknowledged events are non-transaction events that are of financial consequence to the Forest 

Service because it chooses to respond to the event, and the primary responsible party cannot be located. 

Cleanup costs associated with events such as toxic waste damage caused by non-Federal entities or natural 

disasters, may ultimately become the responsibility of the Forest Service. However these costs do not meet the 

definition of a “liability” until, and to the extent that financial responsibility is acknowledged by the Forest Service, 

Congress has appropriated resources, and an exchange or non-exchange transaction has occurred. 

The Forest Service is subject to environmental laws and regulations regarding air, water, and land use, the 

storage and disposal of hazardous materials, and the operation and closure of facilities at which environmental 

contamination may be present. Forest Service project managers confer with the appropriate States, the Office of 

General Counsel (OGC), and occasionally, Environmental Protection Agency (EPA) and local governments. The 

agency follows cleanup requirements from the legislative sources in Appendix I of Federal Financial Accounting 

and Auditing, Technical Release No. 2, including the Comprehensive Environmental Response Compensation 

and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), other Federal or 

State regulations and USDA or Forest Service policy, as necessary. Estimated environmental and disposal 

liabilities include expected future cleanup costs, and the cost of studies necessary to evaluate response 

requirements for those sites where future liability is unknown. 

PP&E cleanup cost estimates—usually immaterial to the total project cost for the majority of demolitions, 

deconstructions, or renovations—are included in PP&E operations and maintenance costs (O&M). When 

contamination occurs that is not addressed under regular O&M, the agency develops a cost estimate for the total 

cleanup and, to the extent it is probable and reasonable to estimate, records the cost to cleanup any 

contaminated PP&E. Professional judgment and prior experience is often the basis for cost estimates. If the 

agency has no previous similar experience, the staff performs other comparable technical reviews or derives 

estimates using standard cost estimating guides. 

Exceptions occur when a previous activity results in release or potential release of a hazardous substance, and if 

contamination migrates offsite from a current operation. In these instances, the total reasonably estimable costs 

are recognized when the exception is discovered. 

Forest Service cleanup cost estimates are based on the current total cost for a contaminated site according to 

laws, technology, and inflation/deflation. Forest Service updates cost estimates, including changes relating to 

prior period operations, for Government-related liabilities at least annually, to reflect changes in laws or 

regulations, technology, and inflation or deflation. 

The Forest Service estimated liability for government related events as of September 30, 2012 and 2011 was $2 

and $1 million respectively. 

B-40
 

 

 

 

(in millions)
 
 

2012 2011
 
 

Non-Current Current Total Non-Current Current Total 

Intragovernmental 

Employer Contr butions & Payroll Tax $ - 37 $ 37 $ - 36 $ 36 

Accrued Liabilities 21 34 55 20 67 87 

Advances from Others - 44 44 - 42 42 

Deposit Liabilities - 1 1 - 2 2 

Other (Note 6) - 22 22 - 21 21 

Total Intragovernmental $ 21 138 $ 159 $ 20 168 $ 188 

Other 

Accrued Liabilities - 906 906 - 782 782 

Advances from Others - 86 86 - 83 83 

Deposit Liabilities - 119 119 - 108 108 

Purchaser Road Credits - 1 1 - 1 1 

Accrued Liability for Payments to States & Counties (Not e6) - 346 346 - 357 357 

Annual Leave Liability (Note 6) - 209 209 - 214 214 

Contingent Liabilities (Note 6) - 43 43 - 12 12 

Custodial Liabilities - 1 1 - 1 1 

Capital Leases (Note 10) 16 3 19 19 3 22 

Other - 2 2 - 3 3 

Total Other $ 16 1,716 $ 1,732 $ 19 1,564 $ 1,583 

Total Other and Intragovernmental Liabilities $ 37 1,854 $ 1,891 $ 39 1,732 $ 1,771 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 9: OTHER LIABILITIES
 

As of September 30, 2012 and 2011, the Forest Service’s major components of other liabilities are as follows: 

Accrued Liabilities: Accrued liabilities consist primarily of accruals for payroll and for receipt of goods and 

services. Accrued liabilities for occupancy agreements between U.S. General Services Administration (GSA) and 

the Forest Service are also included. A portion of the accrued liabilities total is calculated by a mathematical 

model based on a regression between open obligation balances and subsequent payments. 

Deposit Liabilities: Deposit liabilities consist of collections deposited in deposit funds or clearing accounts 

awaiting disposition or reclassification. 

Accrued Liability for Payments to States and Counties: The Twenty-Five Percent Fund Act of May 23, 1908, 

as amended (16 U.S.C. 500), authorized the Payments to States Program. This program requires revenue 

generated by the sale of goods and services on the national forests to be shared with the States for public 

schools and public roads in the county or counties in which the national forests are located. The Secure Rural 

School and Community Self Determination Act of 2000, reauthorized on July 6, 2012, for FY 2012 as part of 

Public Law 112-141, also provides for roads and schools, Forest Service projects and emergency services. In 

addition, the Payments to Counties, Bankhead-Jones Farm Tenant Act of 1937 requires 25 percent of the net 

revenues from each national grassland or land utilization project to be paid to the counties in which such lands 

are located. 

B-41
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions) 

2012 

Accrued 

Estimated Range of Loss 

(in millions) 

Contingent Liabilities 

Probable 

Liabil

$ 

ities 

43

Lower End 

$ 43

Upper End 

$ 567

Reasonably Possible $ 41 $ 185

2011 

Accrued 

Estimated Range of Loss 

(in millions) 

Contingent Liabilities 

Probable 

Liabilities 

$ 12

Lower End Upper End 

$ 12 $ 199

Reasonably Possible $ 33 $ 125


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

Annual Leave Liability: Annual and other vested leave such as compensatory, credit hours, and restored leave 

is accrued as it is earned, and the accrual is reduced as leave is taken. Each quarter, the balance in the accrued 

annual leave account is adjusted to reflect the latest pay rates and unused hours of leave. Funding will be 

obtained from future financing sources to the extent that current or prior year appropriations are not available to 

fund annual and other types of vested leave earned but not taken. 

Contingent Liabilities and Commitments: As of September 30, 2012 the Forest Service contingent liabilities

and commitments increased by $31 million from cases that are now reported as probable (Refer to Note 1I) from

OGC. Based on information provided by legal counsel, management accrues liabilities for some adverse actions

determined to be probable in occurrence and reasonably estimable. The Forest Service discloses potential

liabilities related to claims where the probability of occurrence is at least reasonably possible. There are no 

estimated obligations related to cancelled appropriations for which there is a contractual commitment for payment. 

In addition, there are no contractual arrangements which may require future financial obligations. 

These liabilities typically relate to Federal Tort Claims Act administrative and judicial claims, contract-related 

actions, personnel and employment-related matters, and various land and resource related claims and 

adjudications. Most of the cash settlements are expected to be paid out of the Judgment Fund, which is 

maintained by Treasury, rather than the operating resources of the Forest Service. 

The accrued and potential contingent liabilities as of September 30, 2012 and 2011 are summarized as follows: 

B-42
 

 

 

 

 

 

 

 

 

 

(in millions)
 
 

Capital Leases: 2012 2011
 
 

Summary of Assets Under Capital Leases 

Land, Buildings, Machinery, and 

Equipment $ 58 $ 61 

Accumulated Amortization (39) (39) 

Total $ 19 $ 22 

Future Payments Due: 

Land & Buildings, 

Machinery, and 

Equipment 

Year 1 (2013) 9 

Year 2 (2014) 9 

Year 3 (2015) 8 

Year 4 (2016) 7 

Year 5 (2017) 5 

After 5 Years 20 

Total Future Lease Payments $ 58 

Less: Imputed Interest (29) 

Less: Executory Costs (10) 

 Subtotal 19 

Lease Liabilities Covered by Budgetary Resources $ 19 

Operating Leases: (in millions) 

Future Payments Due: 

Land & Buildings, 

Machinery, and 

Fiscal Year Equipment 

Year 1 (2013) $ 51

Year 2 (2014) 44 

Year 3 (2015) 38 

Year 4 (2016) 33 

Year 5 (2017) 29 

After 5 Years 160 

Total Future Lease Payments $ 355


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 10: LEASE LIABILITIES 

The Forest Service enters into leasing agreements through leasing authority delegated by GSA for general 

facilities (buildings and office space), equipment, and land. Leases may include renewal options for periods of one 

or more years. Most leases are subject to cancellation upon certain funding conditions. The Forest Service’s 

assets under capital leases as of September 30, 2012 and 2011 and future capital and operating lease agreement 

payments as of September 30, 2012 consisted of the following: 

B-43
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 11: EARMARKED FUNDS
 

In accordance with U.S. GAAP, the Forest Service administers certain earmarked funds, which are specifically 

identified revenues, often supplemented by other financing sources that remain available over time. These funds 

predominately finance the enhancement and maintenance of NFS lands, including reforestation. Donations are 

handled on a cash basis and all other collections are accounted for on an accrual basis. The following is a list of 

earmarked funds and their base Treasury symbols for which the Forest Service has program management 

responsibility. Those with an asterisk are authorized by specific legislative acts as permanent indefinite 

appropriations. 

Treasury Account Symbols and Titles 

5004 Land Acquisition
 

5008 National Forest Fund Receipts
 

5010 Recreation Fees for Collection Costs
 

5072 Fees, Operation and Maintenance of Recreation Facilities
 

5201 Payments to States, National Forest Fund
 

*5202 Timber Roads Purchaser Election
 

*5203 Roads and Trails for States, National Forest Funds
 

*5204 Timber Salvage Sales
 

*5206 Expenses, Brush Disposal
 

5207 Range Betterment Fund
 

5208 Acquisition of Lands for National Forests, Special Acts
 

5212 Construction of Facilities or Land Acquisition
 

*5213 Payments to Minnesota (Cook, Lake and St. Louis Counties), National Forest Funds
 

*5214 Licensee Program
 

*5215 Restoration of Forest Lands and Improvements
 

5216 Acquisition of Lands to Complete Land Exchanges (Funds EXSL and EXSC) 

5217 Tongass Timber Supply Fund
 

*5219 Operation and Maintenance of Quarters
 

*5220 Resource Management Timber Receipts
 

*5223 Quinault Special Management Area
 

*5264 Timber Sales Pipeline Restoration Fund
 

*5268 Recreation Fee Demonstration Program
 

*5277 MNP Rental Fee Account
 

*5278 Midewin National Tallgrass Prairie Restoration Fund
 

*5360 Land Between the Lakes Management Fund
 

*5361 Administration of Rights-of-Way and Other Land Uses Fund
 

*5363 Valles Caldera Fund
 

5367 State, Private and International Forestry Land and Water Conservation Fund
 

*5462 Hardwood Technology Transfer and Applied Research Fund
 

*5540 Stewardship Contracting Product Sales, Funds Retained
 

*5896 Payments to Counties, National Grasslands
 

*8028 Cooperative Work, Forest Service
 

8029 Mount Saint Helens Highway
 

8034 Gifts, Donations, and Bequests for Forest and Rangeland Research
 

8039 Land Between the Lakes Trust Fund
 

8046 Reforestation Trust Fund
 

*8203 Gifts and Bequests, Department of Agriculture 

B-44
B-45
 

 

 

 

 State, Private, & 

International
 
 

Forestry Land & 

 Payments to Restoration of Water 

Cooperative States National Forest Lands and Conservation Other 

Work* Forests Fund* Improvements* Fund* Funds Total 

ASSETS 

Fund Balance wi th Treasury $ 376 $ 206 $ 170 $ 123 $ 487 $ 1,362 

Accounts Receivable, Net 2 - 2 - 13 17 

Advances To Others - 1 - - - 1 

General Property, Plant & Equipment, Net 16 3 - - 99 118 

TOTAL ASSETS $ 394 $ 210 $ 172 $ 123 $ 599 $ 1,498 

LIABILITIES 

Accounts Payable $ 1 $ 1 $ - $ - $ 2 $ 4 

O her Liabilities 80 332 2 29 49 492 

TOTAL LIABILITIES 81 333 2 29 51 496
 
 

Total Net Position 313 (123) 170 94 548 1,002
 
 
 

TOTAL LIABILITIES AND NET POSITION $ 394 $ 210 $ 172 $ 123 $ 599 $ 1,498 

CHANGE IN NET POSITION 

Beginning Balances, as adjusted $ 326 $ (191) $ 170 $ 83 $ 545 $ 933 

Budgetary Financing Sources: 

 Donations and Forfeitures of Cash - - - - 1 1 

 Transfers -in/out without Reimbursemen - - - 53 63 116 

O her Financing Sources: 

 Transfers-in/out without Reimbursemen - - - - (68) (68)

 O her - - - - 66 66 

Total Financing Sources - - - 53 62 115 

Revenue 88 116 19 - 212 435 

Expenses (101) (48) (19) (42) (271) (481) 

Net Cost of Operations (13) 68 - (42) (59) (46)
 
 

ENDING BALANCES $ 313 $ (123) $ 170 $ 94 $ 548 $ 1,002
 
 
 

* Treasury symbols wi th total asset values greater than or equal to $100M are reported individually. 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

Earmarked Funds 

As of and for the year ended September 30, 2011 

(in millions) 

B-46
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

Descriptions of the significant earmarked funds are as follows: 

Cooperative Work 

Cooperative contributions are deposited into Treasury account 12X8028 for disbursement in compliance with the 

terms and provisions of the agreement between the cooperator and the Forest Service. Cooperators include 

timber purchasers, not-for-profit organizations, and local hunting and fishing clubs. The governing authorities are 

the Cooperative Funds Act of June 30, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act. 

Payments to States, National Forests Fund 

The Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as “Payments to States”, requires with 

a few exceptions, that 25 percent of all monies received from the national forests and deposited into the National 

Forest Fund (Treasury Symbol 125008) during a fiscal year from timber, grazing, special-use permits, power and 

mineral leases, and admission and user fees be paid to the States in which the national forests are located, for 

public schools and public roads in the county or counties in which the national forests are situated. 

Payments to Counties, National Grasslands 

Credit receipts from Title III, Bankhead-Jones Farm Tenant Act lands designated as either national grasslands or 

land utilization projects to a special account (sec.60.1,para.3). When the status of such lands is changed to that of 

a national forest, credit such receipts to the National Forest Fund (125008). At the end of each calendar year, 25 

percent of the net revenues from each national grassland or land utilization project are paid to the counties in 

which such lands are located. The Albuquerque Service Center, Budget and Finance, processes these payments 

(sec.60.1, para.3). These payments are not payments in lieu of taxes (PILT); instead, they are national grassland 

or land utilization project receipts to be shared through grants with local governments for the purposes stated in 

the Act. 

Restoration of Forest Lands and Improvements 

The Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579c) states any monies received by the 

United States with respect to lands under the administration of the Forest Service (a) as a result of the forfeiture 

of a bond or deposit by a permittee or timber purchaser for failure to complete performance of improvement, 

protection, or rehabilitation work required under the permit or timber sale contract or (b) as a result of a judgment, 

compromise, or settlement of any claim, involving present or potential damage to lands or improvements, shall be 

deposited into the Restoration of Forest Lands and Improvements Account – 12X5215 and made available until 

expended to cover the cost of any improvement, protection, or rehabilitation work on lands under the 

administration of the Forest Service rendered necessary by the action which led to the forfeiture, judgment, 

compromise, or settlement, provided that any portion of the monies so received in excess of the amount 

expended in performing the work necessitated by the action which led to their receipt shall be transferred to 

miscellaneous receipts. 

State, Private, and International Forestry, Land and Water Conservation Fund 

The Fiscal Year 2004 Department of Interior and Related Agencies Appropriation Act (Public Law 108-108) 

authorizes the Forest Service to receive a transfer of receipts from Department of Interior’s Land and Water 

Conservation Fund to finance the existing Forest Legacy Program, funded previously by State and Private 

Forestry general appropriation, 12X1105. To accommodate the new financing arrangement and at OMB’s 

request, the Department of Treasury established a new special fund, 12X5367, “State, Private and International 

Forestry Land and Water Conservation Fund”. The program expenditures include grants and an occasional land 

purchase but no real property will be procured or constructed. 

B-47
 

 

 

 

 

 

 

 

 

 

 

 

National 

Forests Forest and State and Wildland 

and Rangeland Private Fire 

Grasslands Research Forestry Management Total

 Intragovernmental Gross Costs: 

Benefit Program Costs $ 350 $ 42 $ 15 $ 240 $ 647 

Imputed Costs 372 - - - 372 

Reimbursable Costs 175 23 13 180 391 

Total Intragovernmental Gross Costs 897 65 28 420 1,410

 Less: Intragovernmental Earned Revenue 47 19 56 10 132

 Intragovernmental Net Costs 850 46 (28) 410 1,278 

Gross Costs With the Public : 

Grants and Indemnities 368 6 231 90 695 

Stewardship Land Acquisition (Note 13) 51 - - - 51 

Other: 

Operating Costs 1,798 246 97 2,105 4,246 

Depreciation Expense 117 2 - 27 146 

Reimbursable Costs 146 23 32 191 392

 Total Other 2,061 271 129 2,323 4,784 

Total Gross Costs with the Public 2,480 277 360 2,413 5,530 

Less: Earned Revenues from the Public 559 4 - 144 707 

Net Costs with the Public 1,921 273 360 2,269 4,823 

Net Cost of Operations $ 2,771 $ 319 $ 332 $ 2,679 $ 6,101 


 


 


 


 


 


 


 


 


 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 12: SUBORGANIZATION PROGRAM COSTS/PROGRAM COSTS BY SEGMENT 

The Forest Service reflects costs through four primary responsibility segments: National Forests and Grasslands, 

Forest and Rangeland Research, State and Private Forestry, and Wildland Fire Management. National Forests 

and Grasslands is a principle contributor to accomplishing Forest Service Strategic Goals 2, 4, and 5; Forest and 

Rangeland Research is a principle contributor to accomplishing Goal 7; State and Private Forestry is a principle 

contributor to accomplishing Goals 3 and 6; and Wildland Fire Management is a principle contributor to 

accomplishing Goal 1. 

The following tables illustrate program costs by segment for the years ended September 30, 2012 and 2011. 

Program Costs by Segment
 

For the year ended September 30, 2012
 

(in millions)
 

B-48
 

 

 

 

 

National 

Forests Forest and State and Wildland 

and 

Grasslands 

Rangeland 

Research 

Private 

Forestry 

Fire 

Management Total

 Intragovernmental Gross Costs: 

Benefit Program Costs 

Imputed Costs 

Reimbursable Costs 

$ 

 

 

 345

425 

146 

$ 

 

 

 43

-

19 

$ 

 

 

 15

-

13 

$ 

 

 

 

 240

-

194 

$ 

 

 

 643

425 

372 

Total Intragovernmental Gross Costs 

 Less: Intragovernmental Earned Revenue 

 Intragovernmental Net Costs 

Gross Costs With the Public : 

 

 

 

916 

53 

863 

 

 

 

62 

19 

43 

 

 

 

28 

42 

(14) 

 

 

 

434 

9 

425 

 

 

 

1,440

123

1,317 

Grants and Indemnities 381 10 233 162 786 

Stewardship Land Acquisition (Note 13) 

Other: 

 44 - - - 44 

Operating Costs 

Depreciation Expense 

Reimbursable Costs 

 

 

 

1,988 

119 

155 

 

 

 

255 

2 

21 

 

 

 

104 

-

25 

 

 

 

1,929 

24 

268 

 

 

 

4,276 

145 

469

 Total Other 2,262 278 129 2,221 4,890 

Total Gross Costs with the Public 2,687 288 362 2,383 5,720 

Less: Earned Revenues from the Public 503 4 - 203 710 

Net Costs with the Public 2,184 284 362 2,180 5,010 

Net Cost of Operations $ 3,047 $ 327 $ 348 $ 2,605 $ 6,327 


 


 


 


 


 


 


 

U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2012 and 2011 

Program Costs by Segment 

For the year ended September 30, 2011 

(in millions) 

B-49
 

 

 

 

 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 13: COST OF STEWARDSHIP PP&E 

Stewardship PP&E acquired in FYs 2012 and 2011 amounted to $51 and $44 million, respectively. Cost of 

Stewardship PP&E includes purchases of lands, easements, and rights-of-way. Stewardship land is land and land 

rights owned by the Federal Government and are excluded from General PP&E. Examples of stewardship land 

includes land used for forests, grazing, and wildlife. 

Costs for stewardship land include all costs to acquire and prepare the land for its intended use. The acquired 

land was adjacent to existing forest/grassland sites, thus the number of sites reported in Note 5 remains 

unchanged. 

B-50
 

 

 

 

 

 

 

 

 

 

 

For the year ended September 30, 2012 

(in millions) 

Apportionment Apportionment 

Category A Category B Total 

Obligations Incurred - Direct $ 4,233 $ 1,914 $ 6,147 

Obligations Incurred - Reimbursable 175 376 551 

Total Obligations Incurred $ 4,408 $ 2,290 $ 6,698 

For the year ended September 30, 2011 

(in millions) 

Apportionment Apportionment 

Category A Category B Total 

Obligations Incurred - Direct $ 4,014 $ 2,050 $ 6,064 

Obligations Incurred - Reimbursable 260 354 614 

Total Obligations Incurred $ 4,274 $ 2,404 $ 6,678 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 14: APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED
 

The Office of Management and Budget (OMB) usually distributes budgetary resources in an account or fund by 

specific time periods, activities, projects, objects or a combination of these categories by a process called 

apportionments. Apportionments by fiscal quarters are classified as category A and all other apportionments are 

classified as category B. The funds on quarterly apportionment are National Forest System (12X1106) and 

Wildland Fire Management (12X1115). Presented below are the amounts of direct and reimbursable obligations 

incurred by apportionment category for FY 2012 and 2011. 

B-51
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2012 and 2011 

NOTE 15: EXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF 

BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES 

GOVERNMENT 

The differences between the FY 2011 Statement of Budgetary Resources (SBR) and the FY 2011 actual numbers 

presented in the FY 2013 Budget of the United States Government (Budget) are summarized in the table below. 

The President’s Budget with actual numbers for 2012 has not yet been published, and is expected to be published 

in February of 2013, and to be made available at http://www.whitehouse.gov. OMB Circular A-136 states that the 

note should “identify and explain material differences between amounts reported in the SBR and actual amounts 

reported in the Budget of the United States Government as required by U.S. GAAP.” The Department’s threshold 

for explaining material variances is $25 million and 10%. No variances meet this threshold. 

SBR Budget Dollar Percentage

SBR Line Description Amount Amount Variance Variance

Total Budgetary Resources/Status of Resources 8,585 8,562 23 0%

Total Status of Resources 8,585 8,562 23 0%

Unobligated Balance-Beginning of Year 2,359 2,354 5 0%

Recoveries of Prior Year Obligations 94 78 16 21%

New Budget Authority - Appropriations 5,824 5,824 - 0%

Spending Authority from Offsetting Collections 720 719 1 0%

Non Expenditure Transfers (2) (2) - 0%

Permanently not Available (410) (411) 1

Total New Obligations 6,678 6,667 11 0%

Unobligated Balance & Unobligated Balance not Available 1,907 1,895 12 1%

Obligated Balance - Beginning of Year 2,762 2,760 2 0%

Obligated Balance - End of Year 2,286 2,289 (3) 0%

Gross Outlays 6,885 6,883 2 0%

Less: Offsetting Collections (545) (544) (1) 0%

Less: Distributed Offsetting Receipts (467) (467) - 0%

Net Outlays 5,873 6,339 (466) -7%

(in millions)

 

B-52
 

 

 

 

 

(in millions) 

2012 2011 

Unpaid Obligations $ 2,557 $ 2,771 

Undelivered Orders $ 1,559 $ 1,860 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 16: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Unpaid obligations and undelivered orders as of September 30, 2012 and 2011 were as follows: 

B-53
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

NOTE 17: SEIZED PROPERTY 

A seizure is the act of taking possession of goods in consequence of a violation of public law. Seized property 

may consist of monetary instruments, real property, tangible personal property and evidence. Until judicially or 

administratively forfeited, the Forest Service does not legally own such property. Seized evidence includes cash, 

weapons, illegal drugs and non-monetary valuables. 

Pursuant to Federal Financial Accounting and Auditing Technical Release No. 4, Reporting on Non-Valued 

Seized and Forfeited Property (Release No. 4), property that is seized but not forfeited (e.g., weapons, chemicals, 

drug paraphernalia, gambling devices) is not included on the balance sheet. 

The Forest Service has custody of illegal drugs and weapons seized as evidence for legal proceedings. Illegal 

drugs and weapons have no saleable value to the Federal Government and are destroyed upon resolution of 

legal proceedings. Marijuana represents the most significant seized drug for the Forest Service. As of September 

30, 2012 and 2011, the amount of marijuana on hand was 31,807 (kg) and 28,205 (kg), respectively. Since the 

amount of seized property is deemed to be immaterial, a schedule of brought forward balances, additions, 

deletions and adjustments is not presented. 

B-54
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2012 and 2011 

NOTE 18: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

BUDGET (FORMERLY THE STATEMENT OF FINANCING) 

2012 2011

Resources Used to Finance Activities:

Budgetary Resources Obligated:

Obligations Incurred $ 6,698 $ 6,678

Less: Spending Authority from Offsetting Collections and Recoveries 889 814

Obligations Net of Offsetting Collections and Recoveries 5,809 5,864

Less: Offsetting Receipts 530 467

Net Obligations 5,279 5,397

Other Resources:

Imputed Financing from Costs Absorbed by Others 372 425

Other 59 (2)

Net Other Resources Used to Finance Activities 431 423

Total resources used to finance activities 5,710 5,820

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in Budgetary Resources Obligated for Goods, 

Services, and Benefits Ordered But not Yet Provided 297 380

Resources that Fund Expenses Recognized in Prior Periods (4) (20)

Budgetary Offsetting Collections and Receipts that do not Affect 

Net Cost of Operations

Change in Unfilled Orders 23 89

Other - (1)

Resources that Finance the Acquisition of Assets (133) (184)

Other Resources or Adjustments to Net Obligated Resources that do not 

Affect the Net Cost of Operations 15 66

Total Resources Used to Finance Items not Part of the Net Cost of Operations 198 330

Total Resources Used to Finance the Net Cost of Operations 5,908 6,150

Components of the Net Cost of Operations that will not Require or Generate 

Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods:

Increase in Environmental and Disposal Liability 1 -

Increase in Exchange Revenue Receivable from the Public (2) (7)

Other 37 -

Total Components of Net Cost of Operations that will Require or Generate

Resources in Future Periods 36 (7)

Components not Requiring or Generating Resources:

Depreciation and Amortization 146 145

Revaluation of Assets or Liabilities 2 34

Other Components not Requiring or Generating Resources:

Bad Debt Expense 13 6

Other (4) (1)

Total Components of Net Cost of Operations that will not Require or

Generate Resources 157 184

Total Components of Net Cost of Operations that will not Require or 

Generate Resources in the Current Period 193 177

Net Cost of Operations $ 6,101 $ 6,327

(in millions)

B-55
 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 


 


 


 

U.S. Department of Agriculture
 

Forest Service
 

Notes to the Consolidated and Combined Financial Statements
 

For the years ended September 30, 2012 and 2011
 

This note is intended to be a bridge between the entity’s budgetary and financial (proprietary) accounting. This 

reconciliation first identifies total resources used by an entity during the period (budgetary and other) and then 

makes adjustments to the resources based upon how they were used to finance net obligations or cost. The 

budgetary information used to calculate net obligations (the first four lines) must be presented on a combined 

basis to enable a direct tie to the Statement of Budgetary Resources. The reconciliation then explains the 

difference between the budgetary net obligations and the proprietary net cost of operations by setting forth the 

items that reconcile the two amounts. The budgetary net obligations and the proprietary net cost of operations are 

different in that (1) the net cost of operations may be financed by non-budgetary resources; (2) the budgetary and 

non-budgetary resources used by an agency may finance activities which are not components of the net cost of 

operations; and (3) the net cost of operations may contain components which do not use or generate resources in 

the period. 

B-56

 


 

Part C 

REQUIRED SUPPLEMENTARY
 

STEWARDSHIP INFORMATION 

Unaudited
 

C-1
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

The stewardship objective of Federal financial reporting includes accountability for Stewardship 

Investments. 

RESEARCH AND DEVELOPMENT—FOREST AND RANGELAND RESEARCH 

Fiscal year (FY) 2012 Net Cost of Operations: $319 million. Of the $319 million— 

$291 million was an investment of Research and Development (R&D) funding, and 

$28 million was an investment of National Fire Plan funding and Joint Fire Science Program 

funding. 

Forest Service R&D has an integrated portfolio that supports achievement of the agency’s strategic 

goals. The Forest Service R&D structure has two components: Priority Research Areas and Strategic 

Program Areas (SPAs). 

The Priority Research Areas address urgent needs in seven areas: Forest Disturbances, Forest Inventory 

and Analysis, Watershed Management and Restoration, Bioenergy and Biobased Products, Urban 

Natural Resources Stewardship, Nanotechnology, and Localized Needs Research. 

The SPAs are the long-term programs from which Priority Research Areas are funded. The following are 

the SPAs. 

Wildland Fire and Fuels 

Wildland Fire and Fuels R&D provides managers with the knowledge and tools to reduce negative 

impacts, while enhancing the beneficial effects, of wildland fire as a natural process. This knowledge and 

these tools are critical to understanding the human process of fire and fuels management on society and 

the environment. 

Research focuses on understanding and modeling fundamental fire processes; interactions of fire with 

ecosystems; and the environmental, social, and economic aspects of fire, as well as evaluating the 

integrated management strategies and disturbance interactions at multiple scales and the application of 

fire research to address management problems. 

Invasive Species 

Invasive Species R&D provides the scientific information, methods, and technology to reduce or 

eliminate the introduction, spread, and impact of invasive species and to restore or improve the 

functionality of ecosystems affected by invasives species. 

Research focuses on nonnative plants, animals, fish, insects, diseases, invertebrates, and other species 

whose introduction is likely to cause economic or environmental harm to an ecosystem. 

C-2
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Water, Air, and Soil 

Water, Air, and Soil R&D enables the sustainable management of these essential resources by providing 

clear air and safe drinking water, by protecting lives and property from wildlife fire and smoke, and 

through adapting to climate variability and change. 

The program features ecosystem services with a high level of integration between water, air, and soil 

research, such as the effects of climate variability and change on water budgets or carbon sequestration 

metrics from an ecosystem perspective. 

Wildlife and Fish 

Wildlife and Fish R&D relies upon 

interdisciplinary research to inform 

policy initiatives affecting wildlife and 

fish habitat on private and public lands 

and the recovery of threatened or 

endangered species. 

Scientists investigate the complex 

interactions among species, ecosystem 

dynamics and processes, land use and 

management, and any emerging 

broadscale threats, including global 

climate change, loss of open space, 

invasive species, and disease. 

Resource Management and Use 

Resource Management and Use R&D provides the science and technology base to sustainably manage 

and use forest resources and forest fiber-based products. 

Research focuses on the plant sciences, soil sciences, social sciences, silviculture, productivity, forest and 

range ecology management, harvesting and operations, forest and biomass products and utilization, 

economics, urban forestry, and climate change. 

Outdoor Recreation 

Outdoor Recreation R&D promotes human and ecological sustainability by researching environmental 

management, activities, and experiences that connect people with the natural world. 

Research in outdoor recreation is interdisciplinary, focusing on nature-based recreation and the 

changing trends in American society; connections between recreation visitors, communities, and the 

environment; human benefits and consequences of recreation and nature contact; the effectiveness of 

recreation management and decisionmaking; and sustaining ecosystems affected by recreational use. 

C-3
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Inventory and Monitoring 

Inventory and Monitoring R&D provides the resource data, analysis, and tools needed to monitor 

vulnerable forest ecosystems to rapid change due to threats from fire, insects, disease, natural 

processes, or management actions. From their research, scientists determine the status and trend of the 

health of the Nation’s forests and grasslands and the potential impact from climate change. 

Their research integrates the development and use of science, technology, and remotely sensed data to 

better understand the incidences of forest fragmentation over time from changes in land use or from 

insects, disease, fire, and extreme weather events. 

Research Categories 

Each of the seven SPAs has stewardship investments in the following three categories: basic research, 

applied research, and development. 

Basic research is the systematic study directed toward new or improved knowledge and understanding. 

Applied research is the systematic study intended to gain knowledge or understanding necessary to 

meet a specific need. Development is the systematic application of knowledge or understanding, 

directed toward the production of useful materials, devices, systems, or methods. The following exhibit 

reports net cost of R&D operations by these categories and by the FY 2012 stewardship investment. 

R&D Stewardship Investments 2012 2011 2010 2009 2008 

Net Cost of Operations (in millions) $319 $327 $338 $323 $304 

Basic Research 80 91 94 87 82 

Applied Research 207 220 227 220 207 

Development 32 16 17 16 15 

 

New interagency agreements and contracts 32 32 38 57 40 

Continued interagency agreements and contracts 12 12 12 12 12 

Articles published in journals 3,049 3,083 1,790 2,294 1,903 

Articles published in all other publications 650 1,178 1,481 886 1,487 

Patent(s) granted 8 3 2 3 6 

C-4

 


 

Part D 

REQUIRED SUPPLEMENTARY
 

INFORMATION 

Unaudited
 

D-1
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

REQUIRED SUPPLEMENTARY INFORMATION 

DEFERRED MAINTENANCE AND REPAIRS 

Deferred maintenance is maintenance that was scheduled to be performed but was delayed until a 

future period. Deferred maintenance represents a cost that the Federal Government has elected not to 

fund and, therefore, the costs are not reflected in the financial statements. 

Maintenance is defined to include preventive maintenance, normal repairs, replacement of parts and 

structural components, and other activities needed to preserve the asset so that it continues to provide 

acceptable service and achieve its expected life. Maintenance excludes activities aimed at expanding the 

capacity of an asset or otherwise upgrading it to service needs different from, or significantly greater 

than, those originally intended. 

Deferred maintenance is reported for general Property, Plant, and Equipment (PP&E); heritage assets; 

and stewardship assets. It is also reported separately for critical and noncritical amounts of maintenance 

needed to return each class of assets to its acceptable operating condition. 

Critical maintenance is defined as a serious threat to public health or safety, a natural resource, or the 

ability to carry out the mission of the organization. 

Noncritical maintenance is defined as a potential risk to the public or employee safety or health (e.g., 

compliance with codes, standards, or regulations) and potential adverse consequences to natural 

resources or mission accomplishment. 

The Forest Service uses condition surveys to estimate deferred maintenance on all major classes of its 

PP&E. Over the past decade, the Forest Service has implemented a national effort to collect detailed 

data on infrastructure condition and maintenance and improvement needs. No deferred maintenance 

exists for fleet vehicles as they are managed through the agency’s working capital fund. Each fleet 

vehicle is maintained according to schedule. The cost of maintaining the remaining classes of equipment 

is expensed. 

The agency is committed to sustaining a manageable level of infrastructure—disinvesting in 

infrastructure that can no longer be managed to appropriate standards, rightsizing its asset portfolio, 

and eliminating the substantial backlog of deferred maintenance. 

Estimated Deferred Maintenance and Repairs 

Deferred maintenance estimates for most assets—except bridges—are based on condition surveys 

performed on a 5-year maximum revolving schedule. The bridge class is on a 2-year maximum revolving 

schedule. To date, surveys of all administrative buildings, dams, bridges, roads open to passenger cars, 

and recreation sites have been accomplished. The agency’s deferred maintenance for National Forest 

System (NFS) roads is determined annually from random sample surveys, providing an 80-percent level 

of confidence. 

D-2
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

The dollar amounts in Exhibit 1, Deferred Maintenance Totals by Asset Class, include: 

 A Forest Service standard factor that includes design, contracting, and overhead costs 

 A remoteness factor that includes the estimated travel time to the asset 

 A heritage factor 

Exhibit 1: Deferred Maintenance and Repairs Totals by Asset Class as of September 30, 2012 (in 

millions) 

Asset Class 

Overall 

Condition 

Critical 

Maintenance 

Noncritical 

Maintenance 

Cost To Return 

to Acceptable 

Condition 

Bridge Varies $35 $155 $190 

Building Varies 84 1,090 1,174 

Dam Varies 8 14 22 

Fence Varies 268 0 268 

Handling Facility Varies 22 0 22 

Heritage Varies 3 17 20 

Minor Constructed Features Varies 0 103 103 

Roads1

Varies 376 3,385 3,761 

Trail Varies 6 308 314 

Trail Bridge Varies 3 6 9 

Wastewater System Varies 16 17 33 

Water System Varies 56 46 102 

Wildlife, Fish, and Threatened and 

Endangered Species Varies 5 2 7 

Grand Total $882 $5,143 $6,025 

The overall condition of major asset classes ranges from poor to good depending on the location, age, 

and type of property. The standards for acceptable operating condition for various classes of general 

PP&E, stewardship, and heritage assets are as follows. 

Conditions of roads and bridges within the NFS road system are measured by various standards: 

1. Federal Highway Administration regulations for the Federal Highway Safety Act. 

2. Best management practices for the nonpoint source provisions of the Clean Water Act from U.S. 

Environmental Protection Agency and States. 

3. Road management objectives developed through the National Forest Management Act forest 

planning process. 

4. Forest Service directives—Forest Service Manual (FSM) 7730, Operation and Maintenance 

(August 25, 2005, amendment was superseded with October 1, 2008, revision); Forest Service 

Handbook (FSH) 7709.56a, Road Preconstruction, and FSH 7709.56b, Transportation Structures 

Handbook. 

Dams shall be managed according to FSM 7500, Water Storage and Transmission, and FSH 7509.11, 

Dams Management Handbook. The condition of a dam is acceptable when the dam meets current 

 

1

Deferred maintenance amount for Roads is for passenger-car roads (maintenance levels 3-5) only. 

D-3
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

design standards and does not have any deficiencies that threaten the safety of the structure or public. 

For dams to be rated in acceptable condition, the agency needs to restore the dams to the original 

functional purpose, correct unsightly conditions, or prevent more costly repairs. 

Buildings shall comply with the National Life Safety Code, the Forest Service Health and Safety 

Handbook, and the Occupational Safety Health Administration as determined by condition surveys. 

These requirements are found in FSM 7310, Buildings and Related Facilities, revised November 19, 2004. 

The condition of administrative facilities ranges from poor to good, with approximately 35 percent 

needing major repairs or renovations, approximately 14 percent in fair condition, and 51 percent of the 

facilities in good condition. 

The agency is currently developing an integrated strategy to realign its administrative facility 

infrastructure to meet current organizational structure and to reduce the maintenance liability for 

unneeded buildings, free up land for use by local 

communities and private enterprise, and provide 

added funds for infrastructure maintenance and 

development. Forest Service anticipates maximum 

benefits from a combination of appropriations, 

facility conveyance receipts, and decommissioning 

of unneeded facilities. 

Recreation facilities include developed recreation 

sites, general forest areas, campgrounds, 

trailheads, trails, water and wastewater systems, 

interpretive facilities, and visitor centers. These 

components are included in several asset classes 

of the deferred maintenance exhibit. Developed 

sites are managed in accordance with Federal 

laws and regulations (Code of Federal Regulations (CFR) 36). 

Detailed management guidelines are contained in FSM 2330, Publicly Managed Recreation 

Opportunities, and forest- and regional-level user guides. Quality standards for developed recreation 

sites were established as Meaningful Measures for health and cleanliness, settings, safety and security, 

responsiveness, and the condition of the facility. 

The condition assessment for range structures (fences and stock handling facilities) is based on (1) a 

determination by knowledgeable range specialists or other district personnel of whether the structure 

would perform the originally intended function and (2) a determination through the use of a protocol 

system to assess conditions based on age. A long-standing range methodology is used to gather this 

data. 

Heritage assets include archaeological sites that require determinations of National Register of Historic 

Places status, National Historic Landmarks, and significant historic properties. Some heritage assets may 

have historical significance, but their primary function in the agency is as visitation or recreation sites 

and, therefore, may not fall under the management responsibility of the heritage program. 

D-4
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Trails and trail bridges are managed according to Federal law and regulations (CFR 36). More specific 

direction is contained in FSM 2350, Trail, River, and Similar Recreation Opportunities, and the FSH 

2309.18, Trails Management Handbook. 

Deferred maintenance of structures for wildlife, fish, and threatened and endangered species is 

determined by field biologists using their professional judgment. The deferred maintenance is 

considered critical if resource damage or species endangerment would likely occur if maintenance were 

deferred much longer. 

CONDITION OF HERITAGE ASSETS AND STEWARDSHIP LANDS 

Heritage Assets 

Heritage professionals are responsible for documenting and maintaining cultural resource condition 

assessments to standard. Periodic monitoring and condition assessments are the basis for applying 

protective measures and treatments to vulnerable, deteriorating, or threatened cultural resources. The 

condition of heritage assets depends on the type of asset and varies from poor to fair. 

Stewardship Land 

The condition of NFS lands varies by purpose and location. The Forest Service monitors the condition of 

its stewardship lands based on information compiled by two national inventory and monitoring 

programs—Forest Inventory and Analysis and Forest Health Monitoring. 

Although most of the estimated 193 million acres of stewardship lands continue to produce valuable 

benefits—clean air and water, habitat for wildlife, and products for human use—significant portions are 

at risk to pest outbreaks or catastrophic fires. 

There are 25 million acres of NFS lands at risk to future mortality from insects and diseases, based on 

the publication Mapping Risk From Forest Insects and Diseases. Invasive species of insects, diseases, and 

plants continue to affect our native ecosystems by causing mortality to, or displacement of, native 

vegetation. 

The FY 2012 year-to-date2 accomplishments on NFS and State and Private Forestry lands include 

treatment of 925,475 acres for invasives and 282,071 acres for native pests. These numbers should be 

considered preliminary, with final amounts of acres treated for invasives and native pests on NFS lands 

available in February 2013 at http://www.fs.fed.us.

 

2

Actual accomplishments for FY 2012 will be published in the FY 2014 Budget Justification in February 2013 at 

http://www.fs.fed.us. 

D-5
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Na tiona l Forest Forest a nd Sta te a nd Ca pital ImprovementWildland Fire Perma nent an

a nd Gra sslands Rangeland Resea rch Priva te Forestry and Maintena nce Ma na gement Trust Funds 

Budgetary Resources: Unobligated Ba lance Brought Forward, October 1 $ 207 $ 42 $ 91 $ 102 $ 377 $ 9 Unobligated Ba lance Brought Forward, October 1, as Adjusted 207 42 91 102 377 9

 Recoveries of Prior Year Unpa id Obliga tions 7 2 7 11 100 

 Other Changes in Unobligated Balance (+ or -) - - (2) - 175 (1 Unobligated Ba lance from Prior Year Budget Authority, net 214 44 96 113 652 7 Appropria tions (Discretionary & Mandatory) 1,588 321 334 353 2,023 6 Spending Authority from Offsetting Collections (Discretiona ry & Ma ndatory) 57 21 78 28 300  Total Budgetary Resources $ 1,859 $ 386 $ 508 $ 494 $ 2,975 $ 1,4

Status of Budgetary Resources: Obligations Incurred $ 1,679 $ 342 $ 404 $ 432 $ 2,793 $ 8

Unobligated Bala nce, End of Year: Apportioned (Note 2) 160 34 96 55 115 3 Una pportioned (Note 2) 20 10 8 7 67 3 Total Unobliga ted Ba lance, End of Year 180 44 104 62 182 6 Total Status of Budgetary Resources $ 1,859 $ 386 $ 508 $ 494 $ 2,975 $ 1,4

Change in Obligated Balance:Unpaid Obligations, Brought Forward, October 1 (Gross) $ 467 $ 157 $ 610 $ 383 $ 984 $ 1

Uncollected Customer Payments fromFedera l Sources, Brought Forwa rd, October 1 (-) (102) (40) (52) (61) (229)  Obliga ted Ba lance, Start of the Yea r (net), Before Adjustments (+ or -) 365 117 558 322 755 1

Obliga ted Ba lance, Start of Yea r (net), a s Adjusted 365 117 558 322 755 1

Obliga tions Incurred 1,679 342 404 432 2,793 8Outlays (Gross) (-) (1,731) (354) (395) (589) (2,661) (8

Change in Uncollected Customer Pa yments from Federa l Sources (+ or -) 10 (1) (19) (2) (33) 

Recoveries of Prior Year Unpaid Obligations (-) Obliga ted Ba lance, End of Year (7) (2) (7) (11) (100) 

 Unpaid Obligations, End of Yea r (Gross) 408 143 612 215 1,016 1

 Uncollected Customer Payments from Federal Sources, End of Yea r (92) (41) (71) (63) (262) Obliga ted Ba lance, End of Year (net) $ 102 316 $ $ 541 $ 152 $ 754 $ 1

Budget Authority and Outlays, Net:Budget Authority, Gross (Discretionary and Ma nda tory) $ 1,645 $ 342 $ 412 $ 381 $ 2,323 $ 7

Actual Offsetting Collections (Discretiona ry a nd Mandatory) (67) (19) (60) (26) (268) 

Change in Uncollected Customer Pa yments from Federa l sources (Discretionary and Mandatory) (+ or -) 10 (1) (19) (2) (33) 

Budget Authority, net (Discretionary and Mandatory) $ 1,588 $ 322 $ 333 $ 353 $ 2,022 $ 6

Outlays. Gross (Discretiona ry a nd Mandatory) $ 1,731 $ 354 $ 395 $ 589 $ 2,661 $ 8

Actual Offsetting Collections (Discretiona ry a nd Mandatory) (67) (19) (60) (26) (268) 

Outlays, net (Discretionary and Ma ndatory) 1,664 335 335 563 2,393 7Distributed Offsetting Receipts (-) (31) - - - - (4Agency Outlays, net (Discretionary and Manda tory) $ 1,633 $ 335 $ 335 $ 563 $ 2,393 $ 2

Combined Statement of Budgetary Resources by Major Budget Account

For the year ended September 30, 2012

(in millions)

D-6
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

National Forest Forest and State and Capital ImprovementWildland Fire Permanent an

and Grassla nds Ra ngeland Research Priva te Forestry and Maintenance Ma nagement Trust Funds 

Budgetary Resources: Unobligated Ba lance Brought Forward, October 1 $ 221 $ 47 $ 65 $ 106 $ 862 $ 9 Unobligated Ba lance Brought Forwa rd, October 1, a s Adjusted 221 47 65 106 862 9 Recoveries of Prior Year Unpaid Obligations 7 1 9 13 59 

 Unobligated Ba lance from Prior Year Budget Authority, net 228 48 74 119 921 9

 Appropriations (Discretionary & Mandatory) 1,610 333 383 472 1,914 7 Spending Authority from Offsetting Collections (Di scretionary & Manda tory) 52 25 87 38 207  Total Budgetary Resources $ 1,890 $ 406 $ 544 $ 629 $ 3,042 $ 1,6Status of Budgetary Resources: Obliga tions Incurred $ 1,683 $ 364 $ 453 $ 527 $ 2,665 $ 7Unobligated Bala nce, End of Year: Apportioned (Note 2) 161 34 81 96 135 5 Unapportioned (Note 2) 46 8 10 6 242 3 Total Unobligated Balance, End of Year 207 42 91 102 377 9 Total Status of Budgetary Resources $ 1,890 $ 406 $ 544 $ 629 $ 3,042 $ 1,6Change in Obligated Balance:Unpaid Obliga tions, Brought Forward, October 1 (Gross) $ 469 $ 147 $ 567 $ 728 $ 999 $ 1Uncollected Customer Payments fromFederal Sources, Brought Forwa rd, October 1 (-) (124) (40) (22) (43) (81)  Obligated Ba lance, Sta rt of the Yea r (net), Before Adjustments (+ or -) 345 107 545 685 918 1

Obligated Balance, Sta rt of Year (net), as Adjusted 345 107 545 685 918 1

Obligations Incurred 1,683 364 453 527 2,665 7Outla ys (Gross) (-) (1,678) (353) (401) (859) (2,620) (7

Change in Uncollected Customer Pa yments from Federal Sources (+ or -) 22 - (30) (18) (149) 

Recoveries of Prior Yea r Unpa id Obligations (-) Obliga ted Balance, End of Yea r (7) (1) (9) (13) (59) 

 Unpa id Obligations, End of Yea r (Gross) 467 157 610 383 984 1 Uncollected Customer Payments from Federal Sources, End of Yea r (102) (40) (52) (61) (229) Obligated Balance, End of Year (net) $ 365 $ 117 $ 558 $ 322 $ 755 $ 1Budget Authority and Outlays, Net:Budget Authority, Gross (Discretionary and Manda tory) $ 1,662 $ 358 $ 470 $ 510 $ 2,121 $ 7Actua l Offsetting Collections (Discretionary and Mandatory) (74) (25) (57) (21) (58) Change in Uncollected Customer Pa yments from Federal sources (Discretionary and Manda tory) (+ or -) 22 - (30) (18) (149) 

Budget Authority, net (Discretionary a nd Ma nda tory) $ 1,610 $ 333 $ 383 $ 471 $ 1,914 $ 7

Outla ys. Gross (Discretionary and Manda tory) $ 1,678 $ 353 $ 401 $ 859 $ 2,620 $ 7Actua l Offsetting Collections (Discretionary and Mandatory) (74) (25) (57) (21) (58) 

Outla ys, net (Discretionary a nd Ma nda tory) 1,604 328 344 838 2,562 6

Distributed Offsetting Receipts (-) (86) - - - - (3

Agency Outlays, net (Discretionary and Manda tory) $ 1,518 $ 328 $ 344 $ 838 $ 2,562 $ 2

Combined Statement of Budgetary Resources by Major Budget Account

For the year ended September 30, 2011

(in millions)

D-7

 


 


 

Part E

OTHER ACCOMPANYING INFORMATION

Unaudited
 

E-1
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

OTHER ACCOMPANYING INFORMATION 

SCHEDULE OF SPENDING 

The Schedule of Spending (SOS) presents an overview of how and where the Forest Service is spending 

money. The data used to populate this schedule are the same underlying data used to populate the 

Statement of Budgetary Resources (SBR). The following SOS presents total budgetary resources, gross 

outlays, and total obligations incurred for the year ending September 30, 2012. The SOS is new for fiscal 

year (FY) 2012, so comparative schedules will begin in FY 2013. 

Forest Service

Schedule of Spending

For the year ended September 30, 2012

(in millions)

2012

Budgetary

What Money Is Available To Spend?

Total Resources 8,090$ 

Less Amount Available But Not Agreed To Be Spent 800 

Less Amount Not Available To Be Spent 592 

Total Amounts Agreed To Be Spent 6,698$ 

How Was The Money Spent?

Ensure Our National Forests And Private Working Lands Are Conserved,

Restored, And Made More Resilient To Climate Change, While

Enhancing Our Water Resources:

10 - Personnel Compensation And Benefits 2,943$ 

20- Contractual Services And Supplies 2,754 

30- Acquisitions Of Assets 187 

40 - Grants And Fixed Charges 654 

90 - Other 243 

Total Spending 6,781$ 

Unpaid Obligations, End Of Year (gross) 2,557$ 

Unpaid Obligations, Brought Forward, October 1 (gross) 2,771 

Recoveries Of Prior Year Unpaid Obligations 131 

Amounts Remaining To Be Spent (83)$ 

Total Amounts Agreed To Be Spent 6,698$ 

U.S. Department of Agriculture

E-2
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

MANAGEMENT CHALLENGES 

The Reports Consolidation Act of 2000 requires the U.S. Department of Agriculture (USDA), Office of 

Inspector General (OIG) to identify and report annually on the most serious management challenges the 

Department faces. The following table lists the Forest Service responses to address the management 

challenges identified in August 2012. 

Forest Service Management and Community Action Needed To Improve Forest Health and Reduce 

Firefighting Costs (USDA Management Challenge 6) 

Forest Service Administration of Special Use Program—OIG Audit Report No. 08601-55-SF

Completed FY 2012 Accomplishments/Action(s) 

To improve the Special Use Program, the Forest Service developed a legislative proposal for the FY 2014 

budget that would allow the Forest Service to retain a portion of special use fees to fund administration 

of the Special Uses Program. The agency recommended a joint revision of cost recovery rates with the 

U.S. Department of the Interior’s Bureau of Land Management (BLM), a process that must be published 

for notice and comment. Additionally, the Forest Service regions evaluated staffing, recommended 

program efficiencies, assessed the funding gap for special use administrative costs, and developed 

action plans for resolving deficiencies. 

The Forest Service issued a letter to regional foresters regarding annual adjustment of the minimum use 

fees for inflation and proposed a revision to the Forest Service Manual to clarify that the regional 

foresters must maintain minimum fees annually by applying IPD-GDP1 and conduct market surveys to 

review the basis of minimum fees at least every 10 years. The agency awarded a multiyear contract for 

market surveys to establish the basis for minimum fees. 

Planned FY 2013 Actions 

To improve administration of the Forest Service Special Use Program, the agency will continue to work 

with the Department on inclusion of fee retention in the FY 2014 budget and continue to pursue a joint 

update of cost recovery rates with BLM. 

The agency will administer Phase 1 of the contract for a market survey to establish minimum fees and 

seek funds for Phase 2. 

The agency will establish automatic indexing of minimum fees in conjunction with implementation of 

the market surveys. The Forest Service will establish data entry controls within the Special Uses Data 

System (SUDS) and issue guidance to notify regions of the need to verify and validate all SUDS data. The 

agency plans to implement these actions by September 2013. 

 

1

IPD is the Implicit Price Deflator. GDP stands for gross domestic product, the total value of all final goods and 

services produced within that economy during a specified period. 

E-3
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Evaluation of Forest Service Processes To Obtain and Grant Rights-of-Way and Easements—OIG Audit 

Report No. 08601-1-CH2

Completed FY 2012 Accomplishments/Action(s) 

In April 2012, the Forest Service released the Planning Rule, “National Forest System Land Management 

Planning,” Title 36, Code of Federal Regulations, Part 219. The planning rule describes the process to 

assess existing conditions including ecological, economic, social conditions, trends, and sustainability, 

which would include the potential extent of changing land use impacting the NFS. 

Planned FY 2013 Actions 

To enhance the methods by which Forest Service obtains and grants rights-of-way and easements, the 

Forest Service will establish or re-establish specific goals, strategies, and timeframes for addressing the 

impacts of changing land use. 

The Forest Service plans to clarify the process for analyzing and addressing the issues of whether (1) the 

negotiations with timber cooperators for a Forest Roads and Trails Act of 1969 (FRTA) easement 

amendment should be a public process, and (2) whether an Environmental Impact Statement needs to 

be completed under the National Environmental Policy Act before an easement amendment can be 

finalized. 

The Forest Service will develop a standard road use agreement specifically for use with homeowners 

associations and implement the standard agreement whenever circumstances warrant. The Forest 

Service will also develop consistent guidelines for field staffs to follow regarding residential successors 

to FRTA easements. The agency plans to implement these actions by March 2013.

 

2

Note this report does not address OIG Audit Report No. 08601-44-SF, “Forest Service Large Fire Suppression 

Costs,” that closed in its entirety on March 22, 2011. The Forest Service requested OIG remove reference to this 

audit in its final report. 

E-4
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

NET COST OF OPERATIONS BY STRATEGIC GOAL 

The USDA Forest Service Strategic Plan FY 2007–2012 has seven strategic goals: 

Goal 1: Restore, Sustain, and Enhance the Nation’s Forests and Grasslands 

Goal 2: Provide and Sustain Benefits to the American People 

Goal 3: Conserve Open Space 

Goal 4: Sustain and Enhance Outdoor Recreation Opportunities 

Goal 5: Maintain Basic Management Capabilities of the Forest Service 

Goal 6: Engage Urban America With Forest Service Programs 

Goal 7: Provide Science-Based Applications and Tools for Sustainable Natural Resources 

Management 

The Forest Service Strategic Goals align to Strategic Goal 2 (of four) from the USDA 2010–2015 Strategic 

Plan. 

USDA STRATEGIC GOAL FOREST SERVICE STRATEGIC GOAL 

Goal 2: Ensure our national 

forests and private working 

lands are conserved, 

restored, and made more 

resilient to climate change, 

while enhancing our water 

resources 

Goal 1: Restore, Sustain, and Enhance the Nation’s Forests and Grasslands

Goal 2: Provide and Sustain Benefits to the American People

Goal 3: Conserve Open Space

Goal 4: Sustain and Enhance Outdoor Recreation Opportunities

Goal 5: Maintain Basic Management Capabilities of the Forest Service 

Goal 6: Engage Urban America With Forest Service Programs 

Goal 7: Provide Science-Based Applications and Tools for Sustainable Natural Resources 

Management 

The following schedule aligning net costs to strategic goals is an estimate and is presented for 

informational purposes. Allocation of actual gross costs and earned revenue is based on applying a 

percentage of the enacted budget for each of the respective strategic goals to the total enacted budget. 

E-5
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Strategic Goals: 2012 2011

1. Restore, Sustain, and Enhance the Nation's Forests and Grasslands:

1A. Gross Costs $ 4,997 $ 4,897

1B. Less: Earned Revenue 604 570

1C. Net Goal Cost 4,393 4,327

2. Provide and Sustain Benefits to the American People:

2A. Gross Costs 278 478

2B. Less: Earned Revenue 34 56

2C. Net Goal Cost 244 422

3. Conserve Open Space:

3A. Gross Costs 347 235

3B. Less: Earned Revenue 42 28

3C. Net Goal Cost 305 207

4. Sustain and Enhance Outdoor Recreation Opportunities:

4A. Gross Costs 624 816

4B. Less: Earned Revenue 75 95

4C. Net Goal Cost 549 721

5. Maintain Basic Management Capabilities of the Forest Service:

5A. Gross Costs 486 543

5B. Less: Earned Revenue 59 63

5C. Net Goal Cost 427 480

6. Engage Urban America with Forest Service Programs:

6A. Gross Costs 69 43

6B. Less: Earned Revenue 8 4

6C. Net Goal Cost 61 39

7A. Gross Costs 139 148

7B. Less: Earned Revenue 17 17

7C. Net Goal Cost 122 131

8A. Gross Costs not assigned to programs - -

8B. Less: Earned Revenue not attributed to programs - -

8C. Net Costs not assigned to programs - -

9A. Total Gross Costs $ 6,940 $ 7,160

9B. Total Earned Revenue 839 833

9C. Net Cost of Operations $ 6,101 $ 6,327

7. Provide Science-Based Applications and Tools for Sustainable Natural Resource 

Management:

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF NET COST

For the years ended September 30, 2012 and 2011

(in millions)

E-6
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES 

Exhibit 1. Definitions for terms used in this section 

Beginning 

Balance The FY 2012 beginning balance agrees with the FY 2011 ending balance of material weaknesses. 

New The total number of material weaknesses that have been identified during FY 2012. 

Resolved The total number of material weaknesses that dropped below the level of materiality in FY 2011. 

Consolidated The combining of two or more findings. 

Reassessed 

The removal of any finding not attributable to corrective actions. For example, management 

may have re-evaluated and determined a material weakness does not meet the criteria for 

materiality or is reclassified under another heading, such as the Federal Managers’ Financial 

Integrity Act (FMFIA), Section 2 Effectiveness of Internal Control over Financial Reporting to a 

FMFIA, Section 4 Conformance with Financial Management System Requirements. 

Ending 

Balance The Forest Service’s FY 2012 ending balance for material weaknesses at yearend. 

Summary of Financial Statement Audit 

Summary of Financial Statement Audit 

Audit Opinion Unqualified

Restatement No

Material Weaknesses 

Beginning 

Balance 

New Resolved Consolidated Reassessed 

Ending 

Balance 

0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Summary of Management Assurances 

Effectiveness of Internal Control Over Financial Reporting ( FMFIA § 2) 

Statement of Assurance

Beginning 

Balance 

New Resolved Consolidated Reassessed 

Ending 

Balance 

Material Weaknesses 0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Effectiveness of Internal Control Over Operations ( FMFIA §2) 

Statement of Assurance

Beginning 

Balance 

New Resolved Consolidated Reassessed 

Ending 

Balance 

Material Weaknesses 0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Conformance With Financial Management System Requirements ( FMFIA §4) 

Statement of Assurance 

Systems conform, conform except for the below nonconformance(s), or do not conform to 

financial management system requirements (Office of Management and Budget Circular A136, Section 4 Other Accompanying Information) 

Beginning 

Balance 

New Resolved Consolidated Reassessed 

Ending 

Balance 

Nonconformances 0 0 0 0 0 0

Total Nonconformances 0 0 0 0 0 0

E-7
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

IMPROPER PAYMENTS IMPROVEMENT ACT REPORTING 

As required by the Improper Payments Information Act of 2002 (IPIA) and Office of Management and 

Budget Circular A-123, Appendix C, agencies are to measure high-risk programs annually, estimate the 

amount of improper payments, and report the estimate in the Performance and Accountability Report 

(PAR) or Agency Financial Report. 

The Criteria for the Risk Assessment 

USDA programs have been divided into two categories for the purpose of performing risk assessments: 

management certification and risk assessments. 

Risk assessments are performed on all programs at least once every 3 years or more frequently if the 

USDA Office of the Chief Financial Officer (OCFO) deems necessary. In addition to risk assessments, 

agencies are required to provide a management certification that asserts among other things that: 

1. The program is still determined to be at low risk of improper payments. 

2. There have been no significant program changes since the last risk assessment. 

3. There have been no significant internal control changes since the last risk assessment. 

4. There have been no new audit reports describing significant improper payments or internal 

control issues. 

The OCFO may ask that the agency perform a risk assessment on that program for the current fiscal 

year. 

Wildland Fire Suppression Fund (WFSU) has been identified as a high-risk program for Forest Service 

since FY 2004. No new high-risk programs were identified for FY 2012. 

The Description of the Statistical Sampling Process 

The IPIA requires statistical sampling for high-risk programs only. The Forest Service used Monetary Unit 

Sampling (MUS) to systematically analyze and review WFSU transactions (the IPIA reporting period of 

10/01/2010 through 9/30/2011). 

The Description of the Corrective Action Plan(s) 

The result of Forest Service sampling over the WFSU program resulted in a testing error rate of 0.0 

percent for FY 2012. In addition, the enhanced analytics conducted over the WFSU program resulted in 

$0 of improper payments or 0.0 percent of total outlays. 

Conformance with Federal Financial Management Improvement Act ( FFMIA) 

Agency Auditor

Overall Substantial Compliance

 System Requirements Yes Yes

 Accounting Standards Yes Yes

 U.S. Standard General Ledger at the Transaction Level Yes Yes

E-8
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Below is a table of the statistical sampling results of the WFSU assessment. 

Fund Population 

Outlays 

Tested Outlay 

Amount 

Population 

Insufficient Documentation 

Population 

Improper Payment Error 

Dollars Rate Dollars Rate 

WFSU $693,553,109.00 $48,534,651.29 $0.00 0.0% $0.00 0.0% 

The Forest Service continues to improve internal controls with continuous internal monitoring and 

analytics of possible improper payments. The centralization of accounting functions has improved 

communication and follow-up prior to payment authorization, which has reduced the potential for 

errors. 

In FY 2013, the Forest Service is continuing to enhance its risk assessment process and use monitoring 

and analytics to assess the root cause of improper payments and conduct additional corrective action to 

improve the effectiveness of internal controls. The Forest Service is also researching automated tools 

that will serve as effective preventative internal controls to reduce improper payments. In addition to 

the annual risk assessments, quarterly reviews will also be conducted to identify potential duplicate 

payments using automated statistical software. Statistical sampling will also be performed over all 

payments to identify the areas where erroneous payments are more prevalent. 

Improper Payment Reduction Outlook 

The following tables for the Improper Payment (IP) Reduction Outlook are limited to the WFSU. 

Improper Payment Reduction Outlook (in thousands)

IPIA REPORTING YEAR FY 2011 FY 2012 FY 2013 

Actual Fiscal Year FY 2010 FY 2011 FY 2012 

Program Outlays IP % IP $ Outlays IP % IP $ Outlays IP % IP $

WFSU3

$491,100 0.00% $0.00 $693,553 0.00% $0.00 $885,500 0.00% $0.00 

Improper Payment Reduction Outlook (in thousands)

IPIA REPORTING YEAR FY 2014 FY 2015 

Actual Fiscal Year FY 2013 FY 2014 

Program Estimated 

Outlays IP % IP $ Estimated Outlays IP % IP $ 

WFSU3

$992,700 0.00% $0.00 $1,015,563 0.00% $0.00 

 

3

Credit card transactions and salaries and expenses were excluded from the WFSU population and considered as 

separate funds. 

E-9
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

Recovery of Improper Payment 

The Improper Payments Elimination and Recovery Act of 2010 requires Federal agencies to enhance 

their efforts in preventing, detecting, and recovering improper payments. The Forest Service conducted 

a retroactive review of FYs 2011 and 2012 billings to enhance its ability to identify and report recovery 

of improper payments. Internal reviews were also conducted periodically and reported to OCFO through 

the quarterly High Dollar Report for the high-risk WFSU fund. 

Recovery of Improper Payments 

Actual Dollars Recovered 

FY 2008 FY 2009 FY 20104FY 2011 FY 2012 

$99,361 $1,720 $1,700,000 $2,115,003 $7,309,194 

Risk Assessment and Oversight Benefits 

The benefits of enhanced risk assessments and oversight have enlightened Forest Service management 

with information regarding the payment processes that have higher inherent risk. This will allow 

management to identify the root causes and improve and enhance internal controls and dedicate 

additional resources to reduce the risk of improper payments. 

 

4

The methodology for reporting improper payments changed for FY 2010. The Forest Service previously reported 

FY 2010 dollars recovered as $584,994 in the FY 2010 Forest Service Agency Financial Report. 

E-10

 


 

Appendix:
 

ACRONYMS AND ABBREVIATIONS 

Unaudited
 

Appendix-1
	 	

Appendix-2

ACRONYM OR

ABBREVIATION EXPLANATION

ACSI American	Customer Satisfaction	Index

AFR Agency Financial Report

APR Annual Performance Report

ARRA American	Recovery and	Reinvestment Act of 2009

BS balance	sheet(s)

CCF hundred	cubic feet

CERCLA Comprehensive Environmental Response, Compensation, and	Liability Act of 1980

CFO Chief Financial Officer

CFR Code of Federal Regulations

CSRS Civil Service Retirement System

CWPP Community Wildfire Protection	Plan

DOI U.S. Department of the Interior

DOL U.S. Department of Labor

DOT U.S. Department of Transportation

EPA U.S. Environmental Protection Agency

FBWT fund balance with treasury

FECA Federal Employees’ Compensation Act

FERS Federal Employees’ Retirement System

FFIS Foundation Financial Information System

FFMIA Federal Financial Management Improvement Act

FISMA Federal Information Security Management Act

FMFIA Federal Managers’ Financial Integrity Act

FMMI USDA Federal Management Modernization Initiative

FPL Forest Products Laboratory

FSH Forest Service	handbook

FSM Forest Service	manual

FY fiscal year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GS General Schedule

GSA General Services Administration

HPPG high-priority performance goal

HIT high-impact targeted

IITF International	Institute of Tropical	Forestry

IRR integrated resource restoration

IP improper payment

IPERA Improper Payment Elimination and Recovery Act

IPIA Improper Payment Information Act

IT information technology

Kg kilogram

L&WCF Land and Water Conservation Fund

MD&A Management’s Discussion and Analysis, a section of the AFR

MMBF billion	board	feet

MUS monetary unit sampling

NFS National Forest System (Deputy Area)

NRE Natural Resources and Environment (USDA)

O&M Operations and Maintenance

OAI Other Accompanying Information, a section of the AFR
Appendix-3

OCFO Office of the Chief Financial Officer (USDA)

OIG Office of Inspector General (USDA)

OGC Office of the General Counsel

OMB Office of Management and Budget

OPM Office of Personnel Management

PAR Performance	and Accountability Report

PHA priority heritage assets

POSS Point-of-Sale-System

PP&E Property, Plant, and Equipment

R&D Research	and	Development (Deputy Area)

RCRA Resource Conservation	and	Recovery Act

RSI Required	Supplementary Information, a section	of the AFR

RSSI Required	Supplementary Stewardship	Information, a section	of the AFR

S&PF State	and Private	Forestry (Deputy Area)

SBR Statement(s) of Budgetary Resource(s)

SCNP Statement(s)	of	Change(s)	in Net	Position

SEND Satellite	emergency notification devices

SNC Statement of Net Cost

SNP Statement of Net Position

SOF Statement of Financing

SPA strategic	planning area

U.S.C. United States Code

USDA United States Department of Agriculture

USSGL U.S. Standard General Ledger

WCF working capital fund

WFSU Wildland Fire Suppression

WUI wildland-urban	interface

YTD year-to-date
Forest Service Fiscal Year 2012 Agency Financial Report