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

(AFR) for fiscal year 2009. 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 2009 Annual Performance Report (APR) and FY 

2011 performance plan with its Congressional Budget Justification, and the FY 2009 Summary of Performance 

and Financial Information, both in February 2010.

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.

Cover photos: The background photo was taken on the Sawtooth National Forest on top of Mount Harrison. The 

other photo is of the trail to Ben Lomond Peak on the Uinta-Wasatch-Cache National Forest. Both photographs 

were taken by Teresa Prendusi, Forest Service, Intermountain Region.

i
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

ii
Message From the Chief

As Chief of the U.S. Forest Service, I am proud to present the Fiscal Year 

(FY) 2009 results for the stewardship and management of public funds 

entrusted to the Forest Service. The Agency Financial Report (AFR) reports 

high-level accomplishments toward the strategic goals as the Forest Service 

works “to sustain the health, diversity and productivity of the Nation’s forests 

and grasslands to meet the needs of present and future generations.” Forest 

Service chooses to publish the AFR as an alternative to the Performance and 

Accountability Report pursuant to the Office of Management and Budget 

Circular A-136, Financial Reporting Requirements. 

In 2009, the United States faced an unparalleled financial crisis. To meet this challenge, the American Recovery 

and Reinvestment Act of 2009 (ARRA) was signed into law by the President on February 17, 2009. ARRA is an 

unprecedented effort to jumpstart our economy, create or save millions of jobs, and address critical maintenance 

to the Nation’s infrastructure. The Forest Service worked with the United States Department of Agriculture, 

partners, and collaborators to create jobs that sustain the Nation’s forests and grasslands and to improve or 

maintain capital assets such as roads, buildings, trails, and other infrastructure. For more information on the 

Forest Service’s ARRA projects, go to http://www.usda.gov/wps/portal/arra?navid=USDA_ARRA .

The Forest Service FY 2009 AFR is on the agency’s financial management, analysis of the results of the 

financial audit, and compliance with the Federal Managers’ Financial Integrity Act (FMFIA) and the Federal 

Financial Management Improvement Act (FFMIA). In 2009, the Forest Service has no reported material 

weaknesses and closed 21 audit recommendations. The agency continues its commitment to improving internal 

control systems, operational processes and the quality of our financial information. 

In closing, I am proud to present the efforts of Forest Service employees, our partners, and volunteers toward 

achieving the mission of the Forest Service. The financial information presented herein is complete and 

accurate, and in accordance with law and Office of Management and Budget guidance.

In February 2010, the Forest Service will report actual programmatic results toward the strategic goals in the FY 

2009 Annual Performance Report (APR) and the Summary of Financial and Performance Information. 

Thomas Tidwell

Chief of the Forest Service

iii
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

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends................................ A‐6

Performance Summary and Highlights........................................................................................ A‐7

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

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

A‐7

Strategic Goal 2: Provide and Sustain Benefits to the American People........................... A‐8

Strategic Goal 3: Conserve Open Space.................................................................................. A‐8

Strategic Goal 4: Sustain and Enhance Outdoor Recreation Opportunities...................... A‐9

Strategic Goal 5: Maintain Basic Management Capabilities of the Forest Service........... A‐9

Strategic Goal 6: Engage Urban America in Forest Service Programs................................ A‐9

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

Resources Management........................................................................................................... A‐10

Summary Analysis of Financial Statements and Stewardship Information........................... A‐11

Consolidated Balance Sheets................................................................................................... A‐11

Consolidated Statements of Net Cost.................................................................................... A‐13

Consolidated Statements of Changes in Net Position......................................................... A‐14

Combined Statements of Budgetary Resources.................................................................... A‐14

Analysis of Systems, Controls, and Compliance With Laws....................................................... A‐15

Management Assurances........................................................................................................ A‐15

     Federal Managers’ Financial Integrity Act Assertions (FMFIA)................................ A‐15

     Federal Financial Management Improvement Act (FFMIA).................................... A‐15

     Federal Information Security Management Act (FISMA)........................................ A‐16

Internal Controls Over Financial Reporting Assertions (Circular A‐123,

Appendix A)................................................................................................................... A‐16

                     Management Initiatives: American Recovery and Reinvestment Act of 2009....  A‐17

Limitations of Financial Statements.............................................................................................. A‐18

PART B: FINANCIAL SECTION.......................................................................................................... B‐1

Message from the Chief Financial Officer....................................................................................  B‐2

Report of the Office of Inspector General................................................................................... B‐3

Independent Auditors’ Report................................................................................................. B‐5

Management’s Response to Audit Report............................................................................. B‐44

iv
Consolidated Balance Sheets................................................................................................... B‐45

Consolidated Statements of Net Cost...................................................................................... B‐46

Consolidated Statements of Changes in Net Position............................................................ B‐47

Combined Statements of Budgetary Resources...................................................................... B‐48

Notes to the Consolidated and Combined Financial Statements......................................... B‐49

PART C: REQUIRED SUPPLEMENTARY INFORMATION (Unaudited).......................................... C‐1

Deferred Maintenance...................................................................................................................... C‐2

Estimated Deferred Maintenance............................................................................................. C‐2

Condition of Heritage and Stewardship Lands.............................................................................. C‐4

Heritage Assets............................................................................................................................ C‐4

Stewardship Lands...................................................................................................................... C‐4

Combined Statement of Budgetary Resources by Major Budget Account......................... C‐6

PART D: REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (Unaudited) ............ D‐1

Stewardship Investments................................................................................................................ D‐2

Research and Development—Forest and Rangeland Research .......................................... D‐2

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

Management Challenges................................................................................................................. E‐2

Improper Payments Improvement (IPIA) Reporting Details....................................................... E‐3

The Criteria for the Risk Assessment........................................................................................ E‐3

The Description of the Statistical Sampling Process.............................................................. E‐3

The Description of the Corrective Action Plan(s)................................................................... E‐3

Improper Payments Reduction Outlook................................................................................. E‐3

Recovery of Improper Payment................................................................................................ E‐4

Risk Assessment and Oversight Benefits.................................................................................. E‐4

Summary of Financial Statement Audit and Management Assurances.................................... E‐5

Summary of Financial Statement Audit................................................................................... E‐5

Summary of Management Assurances.................................................................................... E‐5

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

v
Part A

MANAGEMENT’S DISCUSSION

AND ANALYSIS

Unaudited

A-1
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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.  As a  result of  the pilots in  fiscal years 

(FY)  2007  and  2008, OMB  has  concluded  that  there  are  advantages  in  separating  the  APR  from  the  AFR  and  to 

producing a Summary of Performance and Financial Information.    

The AFR provides an overview of the agency’s  financial performance and results to help Congress, the President, 

and the public assess our stewardship over the financial resources entrusted to us. 

The  Forest  Service  will  include  its  FY  2009  annual  performance  report  and  FY  2011  performance  plan  with  its 

Congressional  Budget  Justification  and  will  post  it  on  the  Forest  Service  Web  site  at  http://www.fs.fed.us  in 

February 2010. 

In addition, the Forest Service will produce a Summary of Performance and Financial Information and post it on the 

Forest Service Web site at http://www.fs.fed.us by February 15, 2010.  

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 2009 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. 

A-2
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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 is organized into nine regions to fulfill its mission and manage the national forests. Seven 

research stations, including the International Institute of Tropical Forestry and Forest Products Laboratory, provide 

the latest science for sound stewardship decisions. The Forest Service also provides funding and technical 

assistance to fulfill its role on non‐Federal forest lands. In addition, the Forest Service provides international 

assistance on land stewardship and has its own law enforcement and Investigations unit responsible for 

enforcement of Federal laws and regulations governing national forest lands and resources. 

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 (NRE). 

There  are  four  deputy  chiefs  for  the  following  areas:  National  Forest  System  (NFS);  State  and  Private  Forestry 

(S&PF); Research and Development (R&D); and Business Operations. 

The  Forest  Service  organization  includes  the  NFS  regions,  national  forests  and  grasslands,  and  ranger  districts; 

R&D’s  research  stations  and  strategic  planning  areas;  and  S&PF’s  Northeastern  Area  Office.  Each  level  has 

responsibility for a variety of functions. 

Region: The Forest Service has nine regions, each encompassing a broad geographic area and headed by a regional 

forester who reports directly to the Chief of the Forest Service. The regional forester has broad responsibility for 

coordinating  activities  among  the  various  forests  within  the  region,  for  providing  overall  leadership  for  regional 

natural resource and social programs, and for coordinating regional land use planning. 

A-3
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

National  Forest: The  Forest  Service  oversees  155  national  forests  and  20  grasslands. Each  administrative  unit  is 

typically  comprised  of  several  ranger  districts,  under  the  overall  direction  of  a  forest  supervisor.  Within  the 

supervisor's  office,  the  staff  coordinates  activities  among  districts,  allocates  the  budget,  and  provides  technical 

support to each district. Forest supervisors are line officers and report to regional foresters. 

Ranger  District:  The  Forest  Service  has  more  than  600  ranger  districts,  each  with  a  staff  of  10  to  100  people 

reporting to the district ranger. Districts vary in size from 50,000 acres to more than 1 million acres. Most on‐the‐

ground  activities  occur  on  ranger  districts,  including  trail  construction  and  maintenance,  operation  of 

campgrounds, and management of vegetation and wildlife habitat. 

Research: The Forest Service research organization is comprised of seven research stations—the Northern, Pacific 

Northwest, Pacific Southwest, Rocky Mountain, Southern, Forest Products Laboratory (FPL), and the International 

Institute of Tropical Forestry. Station directors, like regional foresters, report to the Chief of the Forest Service. 

Northeastern  Area:  The  S&PF  Area  Office  includes  three  field  offices  and  Grey  Towers  Historic  Site.  The  area 

director, like regional foresters, reports directly to the Chief of the Forest Service. The area director leads and helps 

support sustainable forest management and use across the landscape to provide benefits to the people of the 20 

Northeastern and Midwestern States and the District of Columbia. 

Centralized  Business  Services:  The  Forest  Service  continues  to  implement  centralization  of  administrative 

functions.   

 Budget and Finance (B&F) 

 Information Resource Management 

 Human Resource Management (HRM) 

The majority of employees in centralized business services are located at the Albuquerque Service Center (ASC) but 

some employees are sited in various other locations across the country.  

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, as well as cooperation with States, tribes, and private forest owners, the 

agency strives to meet the needs of our Nation. 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  35.5 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  responsible  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 1.6 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-4
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Some  of  the  responsibility  segment  names are  the  same as  those  used  for  deputy areas,  but  the  terms are  not 

synonymous. 

Locations of Forest Service Administrative Units 

The map illustrates  the 155 national  forests and 20 national grasslands  that collectively make up  the NFS of  the 

Forest Service. 

A-5
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends 

In the past several decades, drought, a change in climate, catastrophic wildland fires, and insects and disease have 

led  to declining  forest health across  the country. To counter  this decline,  the Secretary of Agriculture  shared his 

vision in August 2009 for the restoration, conservation, and collaborative management efforts needed to protect 

our Nation's forests and municipal watersheds. 

The Chief of the Forest Service committed to the Secretary’s vision of an “all lands” approach that restores forest 

health  on  NFS  land  and  on  private  lands.  Ensuring  the  resiliency  of  forest  and  grassland  ecosystems  across  the 

landscape allows all natural systems  to adapt  to changes in climate or stress  from drought, insects, and disease. 

Since the NFS and private  forestlands are a primary source  for much of the country's water supply, restoring the 

healthy  functioning  of  watersheds  will  be  critical  for  abundant,  high‐quality  water  sources  needed  by  future 

generations. 

The Forest Service cannot achieve the expanded mission without its partnerships with local communities, Federal 

and State agencies, and tribes. In collaboration with other USDA agencies, Forest Service will provide support and 

assistance to State and private landowners for restoration efforts, primarily through the S&PF programs. 

As  part  of  our  priority  to  conserve  lands,  the  agency  will  seek  to  acquire  easements  of  forested  lands  under 

significant  development  pressure,  to  protect air and water  quality,  to  provide access  to  national  forests, and  to 

provide habitat  for  fish and wildlife. Current projections indicate 10 percent of privately owned land will convert 

from rural to urban land use in coming decades. 

Reversing  the  decline  in  forest  health  will  decrease  the  risk  of  catastrophic  wildland  fire  to  communities  in  the 

wildland‐urban interface  (WUI). The Secretary’s support in addressing  fire suppression  funding should lessen  the 

risk that dollars and resources are shifted from programs during the busy field season to fire suppression efforts.  

Forest Service leadership recognizes it must focus on the highest priority goals in order to achieve success.  Key to 

that success is employee morale. In a recent survey of the best places to work in the Federal Government, Forest 

Service  morale  further  declined  to  206  of  216  Federal  agencies  surveyed  in  the  2009  rankings.  To  address  this 

challenge,  the  Chief  of  the  Forest  Service  instituted  an  informal  sensing  group  to  gather  candid  feedback  from 

employees on a regular basis. The group is comprised of members from across the agency, ensuring a diverse and 

well‐informed  approach  to  designing  a  solution.  Feedback  from  the  sensing  group  sessions  will  be  incorporated 

with that from other sources, such as civil rights, the union, and partnership councils, before presenting results to 

leadership.  

In  testimony  before  the  Subcommittee  on  Interior,  Environment,  and  Related  Agencies,  the  Government 

Accountability Office (GAO) reported that several emerging issues—climate change, increased development in the 

WUI,  the  agency’s  aging  workforce,  and  the  Nation’s  long‐term  fiscal  outlook—underscore  the  importance  of 

addressing the agency’s current management challenges so it is well positioned to meet new challenges. For more 

information, see Forest Service: Emerging Issues Highlight the Need to Address Persistent Management Challenges 

(GAO‐09‐443T)  or  read  the  summary  at  http://www.gao.gov/products/GAO‐09‐443T.  The  Secretary  tasked  the 

Forest Service with developing a planning rule that follows a collaborative model to address current and emerging 

issues.  

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Performance Summary and Highlights 

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

promote greater accountability.  Performance management is  used  to establish  strategic goals; monitor  program 

activities; measure progress toward goals; and to influence program and resource allocation decisionmaking. 

The high‐level projections of key performance measures within agency goals presented here are based on planned 

yearend amounts. Detailed discussion and analysis of actual performance will be provided in the APR as required 

at http://www.fs.fed.us in February 2010. 

STRATEGIC GOAL 1—Restore, Sustain, and Enhance the Nation’s Forests and Grasslands 

Performance Measure FY 2009 Target FY 2009 Results

Number of acres treated to restore fire‐adapted ecosystems 2,400,000 Projected to 

exceed

Strategic Outcome: Forests and grasslands with the capacity to maintain their health, productivity, diversity, and 

resistance to unnaturally severe disturbance. 

Over 100 years ago, the national forests and grasslands were established to protect the headwaters of municipal 

watersheds  to  secure  favorable  waterflows  and  provide  a  sustainable  supply  of  goods  and  services.  The  Forest 

Service strives to balance stewardship  for the national  forests and grasslands with meeting the public’s demands 

for myriad uses.   

Despite  past  successes,  challenges  persist.  Population  growth  and  expanding  urban  centers  raise  demand  for 

goods, services, and amenities from the Nation’s private and public forests and rangelands at the same time that 

natural  disturbances  and  nonnatural  changes  increase  stress  and  risk  of  catastrophic  wildfire  for  forest  and 

rangeland  ecosystems.  Disturbance  is  a  natural  process,  which  is  often  required  to  maintain  or  restore  desired 

ecological  components  and  relationships.  However,  the  Forest  Service  and  partners  are  challenged  to  manage 

disturbance to sustain healthy ecosystems while avoiding intolerable impacts to the goods and services provided 

to the public by these wildlands.  

Fire  is  a  natural  component  of  most  forest  ecosystems.  But,  when  fire  occurs  in  uncharacteristically  heavy  fuel 

conditions during periods of prolonged drought and high winds, or within the WUI, it threatens both communities 

and the environment.   

Invasive  species,  including  insects,  pathogens,  plants,  and  aquatic  pests,  pose  a  long‐term  risk  to  forest  and 

rangeland health. Over‐crowded forest stands and drought have also increased the extent and frequency of insect 

and disease outbreaks.  

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

produced  from public and private  forests and  rangelands and improve  terrestrial and aquatic habitat  for wildlife 

and  fish.  Through  management  actions  on  national  forests  and  grasslands  and  through  support  for  State  and 

private management of non‐Federal lands, the Nation’s wildland ecosystems will be restored, more resilient, and 

better able to respond to future climate change and other disturbances. 

A-7
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

STRATEGIC GOAL 2—Provide and Sustain Benefits to the American People 

Performance Measure FY 2009 Target FY 2009 Results

Number of green tons and/or volume of woody biomass from 

hazardous fuel reduction and restoration treatments on Federal 

lands

2,700,000 Projected as 

unmet

Strategic Outcome: Forests and grasslands with sufficient long‐term multiple socioeconomic benefits to meet the 

needs of society. 

The Nation’s  forests and grasslands contain abundant natural resources with  the potential  to meet  the demands 

and needs of the American people for generations to come. Sustainable management of these resources ensures 

that  the  availability  of  goods  and  services  continues  into  the  future  and  that  sustainable  land  productivity  is 

maintained.  Sustainable  management  provides  wildlife  habitat  and  diversity,  forest  and  wood  products,  energy 

sources and  transmission infrastructure, wildlife and  domestic livestock  forage, water  supplies, and  other goods 

and services.  

Primarily  through  its  S&PF  programs,  the  Forest  Service  provides  technical  and  financial  assistance  for  natural 

resource management and the sustainable use of resources on non‐Federal lands.  

R&D’s research provides the framework for this sustainable management of forests and grasslands and for the use 

and marketing of forest products and services. 

Challenges that contribute to shortfalls in woody biomass produced include the economic downturn which led to 

many timber sales and contracts receiving no bids and continuing high levels of appeals and litigation. The need for 

development  and  refinement  of  the  technology  necessary  to  effectively  utilize  woody  biomass  for  bioenergy 

production also may contribute to a lack of demand for available biomass resources. 

STRATEGIC GOAL 3—Conserve Open Space 

Performance Measure FY 2009  Target FY 2009 Results

Number of acres of nonindustrial private forest land that are being 

managed sustainably under forest stewardship management plans 3,000,000 Projected to meet

Strategic Outcome: Maintain the environmental, social, and economic benefits of forests and grasslands by 

reducing and mitigating their conversion to other uses. 

Rural  and  urban  communities  benefit  from  the  environmental,  social,  and  economic  values  inherent  in 

undeveloped forests and grasslands. These areas of open space protect water quality; conserve native wildlife; and 

provide renewable timber and forest products, places to recreate, and scenic beauty. These green spaces generate 

jobs and economic vitality for nearby communities. 

In  partnership  with  State  forestry  agencies,  the  Forest  Service  assists  communities  as  they  develop  sustainable 

urban  forest  management  plans  and  community  forestry  programs.  These  urban  forest  management  plans, 

derived  from urban  tree and  forest  resource inventories, include protection and management  recommendations 

that become key components of community development and open‐space planning. 

This  measure  is  based  on  an  inventory  of  acres  that  are  covered  by  all  current  (active)  management  plans  as 

confirmed through a newly established field monitoring program.  

A-8
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

STRATEGIC GOAL 4—Sustain and Enhance Outdoor Recreation Opportunities 

Performance Measure FY 2009  Target FY 2009 Results

Percentage of customers satisfied with recreational facilities, 

services, and settings

90% Projected to meet

Strategic Outcome: A variety of high‐quality outdoor recreational opportunities on the Nation’s forests and 

grasslands are available to the public. 

As managers  for approximately 193 million acres of national  forests and grasslands, Forest Service must balance 

multiple  priorities.  Recreation  and  land  managers  across  the  country  struggle  with  sustaining  the  ecological 

integrity  of  national  forests  and  grasslands,  while  providing  high‐quality  outdoor  recreational  experiences  for  a 

growing  population.  America’s  population  is  projected  to  increase  by  nearly  50  percent  by  the  middle  of  this 

century. Increasing population demands and declining public access to privately owned forest land place extensive 

pressure on public lands to provide recreational opportunities.   

The Forest Service works in partnership with volunteers, nongovernmental organizations, other agencies, and the 

private sector to sustain and enhance outdoor recreation opportunities for all. 

STRATEGIC GOAL 5—Maintain Basic Management Capabilities of the Forest Service 

Performance Measure FY 2009 Target FY 2009 Results

Percentage of administrative facilities maintained to standard 66% Projected as unmet

Strategic Outcome: Administrative facilities, information systems, and land ownership management with the 

capacity to support a wide range of natural resource challenges. 

The Forest Service workforce minimizes the impact of natural events or the unintended consequences of human‐

caused  events  with  competencies  and  leadership  necessary  to  provide  effective  decisionmaking.  Reliable 

corporate information about the agency’s facilities and infrastructure, as well as the stewardship of the flora and 

fauna found in hundreds of watersheds, is a critical factor in the agency’s decisionmaking. 

The rising cost of construction, materials, and fuels have impacted the ability to increase the percent of buildings 

maintained  to  standard.  The  current  inventory  is  larger  than  needed  and  many  facilities  are  in  disrepair,  as 

evidenced  by  a  large  deferred  maintenance  backlog.  It  has  been  difficult  to  properly  maintain  facilities  with 

available  resources.  Better  planning  and  assessment  supports  the  agency’s  effort  to  determine  an  optimal 

infrastructure  level,  keeping  only  what  is  necessary  to  implement  the  agency’s  mission  and  meet  public 

expectations. To further inform infrastructure maintenance, the agency has adopted the industry standards for the 

Facility Condition Index for buildings. 

STRATEGIC GOAL 6—Engage Urban America with Forest Service Programs 

Performance Measure FY 2009 Target FY 2009 Results

Number of communities with urban and community forestry 

programs resulting from Forest Service assistance 5,890 Projected to meet

Strategic Outcome: Broader access by Americans to the long‐term environmental, social, economic, and other 

types of benefits provided by the Forest Service. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Three  Forest  Service  branches—NFS,  S&PF,  and  R&D—contribute  to  an  integrated  program  of  natural  resource 

stewardship  to benefit America’s urban  forests. The Forest Service  supports conservation education, community 

greening efforts, and programs that provide youth with volunteer opportunities to plant trees, participate in urban 

forest inventory activities in their neighborhoods, or visit national forests and grasslands.  

The Forest Service works closely with Federal, State, or local government partners to learn what America’s urban 

residents  want  from  their  neighborhood  parks,  nearby  woodlands,  and  national  forests.  It  is  through  these 

partnerships that Forest Service builds connections with the Nation’s rural and urban communities. 

 

To accomplish success, the Forest Service will work towards increasing awareness of urban populations and urban 

natural  resources  through  training  and  information  sharing  and  developing  partnerships  with  nontraditional 

partners to engage urban and underserved audiences. 

STRATEGIC  GOAL  7—Provide  Science‐Based  Applications  and  Tools  for  Sustainable  Natural  Resources 

Management 

Performance Measure FY 2009 Target FY 2009 Results

Customer satisfaction1 with R&D products and services 73 Projected to meet

Strategic Outcome: Management decisions are informed by the best available science‐based knowledge and tools. 

   

The Forest Service’s R&D stations and the technology and development centers provide sustainable management 

solutions for issues affecting the Nation’s forests and grasslands. To address existing and emerging issues, such as 

global climate change and energy demand, this work focuses on the organizational effectiveness of applications in 

the realms of social science, organizational behavior, decision science, and effective fire management. 

To  achieve  the  American  Customer  Satisfaction  Index  target  score,  Forest  Service  provided  information  and 

science‐based  tools  for  managers  and  policymakers  to  develop  and  implement  effective  processes  that  engage 

users in all phases of R&D study development. 

                                                                 

1

 The American Customer Satisfaction Index assesses the satisfaction of private and other external customers with the relevance, usefulness, 

and accessibility of Research and Development products and services. 

A-10
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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. The four principal statements are as follows: 

Consolidated Balance Sheets 

Consolidated Statements of Net Cost 

Consolidated Statements of Changes in Net Position 

Combined Statements of Budgetary Resources 

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, 2009, financial statements provides 

the following highlights. The exhibits below reflect the comparative amounts for FY 2009 and FY 2008. 

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, 2009, Forest Service reports $6.8 billion in assets, representing an increase of 17 percent from 

FY 2008 amounts.  

ASSETS (in millions)

Differences

Asset

FY 

2009

FY 

2008 Dollars Percentages

Fund Balance with Treasury $5,146 $4,066 $1,080 27%

General Property and Equipment 1,359 1,375 (16) (1%)

Receivables, Net 210 303 (93) (31%)

Total of Major Categories $6,715 $5,744 $971 17%

Other Asset Categories 47 31 16 52%

Grand Total Assets $6,762 $5,775 $987 17%

Fund Balance with Treasury

Fund  Balance  with  Treasury  is  the  amount 

in  the  Forest  Service’s  accounts  with  the 

U.S.  Department  of  Treasury  that  are 

available  only  for  the  purposes  for  which 

the  funds  were  appropriated.  These 

accounts  include  general  funds,  revolving 

funds,  special  funds,  trust  funds,  deposit 

funds, clearing accounts, and miscellaneous 

receipt  accounts.  The  majority  of  Forest 

Service’s  assets  are  Fund  Balance  with 

Treasury (76 percent of assets), reflecting a 

$1.1  billion  increase  (27  percent)  from  FY 

2008  due  to  the  American  Recovery  and 

Reinvestment  Act  (ARRA)  of  2009 

appropriations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

General Property, Plant, and Equipment (PP&E)

General  PP&E  (20  percent  of  assets)  consists  primarily  of  forest  road‐surface  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.   

Stewardship PP&E

Stewardship PP&E assets do not have a readily identifiable financial value as do the general PP&E assets, so 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  6–Stewardship 

PP&E and the Required Supplementary Information (RSI) section. 

Receivables, Net

Accounts Receivable, Net  (3 percent of assets) decreased $93 million  (31 percent)  from FY 2008 primarily due to 

the  combination  of  receiving  payment  from  a  settled  claim,  an  increase  in  account  receivable  write  offs,  and  a 

decrease in estimated revenue accruals for the FY 2009 fire season. 

LIABILITIES

As of September 30, 2009, the Forest Service reports $2.1 billion in liabilities, representing an increase of 3 percent 

from FY 2008 amounts. 

LIABILITIES (in millions)

Differences Liability FY

2009

FY

2008 Dollars Percentages

Federal Employee Benefits $421 $406 $15 4%

Other Liabilities

     Accrued Liabilities 721      567 154 27%

     Payments to States 442 531 (89) (17%)

Other Categories 554 579 (25) (4%)

Grand Total Liabilities $2,138 $2,083 $55 3%

Federal Employee Benefits

Federal  Benefits  (20  percent  of  liabilities)  had 

an increase of $15 million  (4 percent)  from FY 

2008.  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.  

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Accrued Liabilities

Accrued  Liabilities  (34  percent  of liabilities)  had an increase  of  $154 million  (27  percent)  from FY  2008. Accrued 

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

Payments to States

The liability for Payments to States (20 percent of liabilities) decreased  $89 million (17 percent) from FY 2008 due 

primarily 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.  In  the  following  fiscal  year,  the  U.S.  Department  of  Treasury  apportions,  or  reimburses,  the  agency  for 

payments made to the States.  

NET POSITION

As reported in the Statement of Changes in Net Position, the Forest Service reported unexpended appropriations 

of $2.9 billion and cumulative results of operations of $1.7 billion, an increase of $932 million (25 percent) in net 

position from FY 2008.  The increase from FY 2008 amounts is due to the ARRA appropriations. 

 

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  $5.9  billion,  representing an increase  of  1 

percent from FY 2008 amounts.  

Expenses

Forest Service program costs are $6.6 billion for FY 2009, representing a decrease of 2 percent from FY 2008.  

GROSS EXPENSES (in millions)

Differences Responsibility Segments FY

2009

FY

2008 Dollars Percentages

National Forests and Grasslands $3,434 $3,309 $125 4%

Wildland Fire Management 2,385 2,661 (276) (10%)

State and Private Forestry 412 407 5 1%

Forest and Rangeland Research 358 334 24 7%

Total Program Costs $6,589 $6,711 ($122) (2%)

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 Strategic Goal 7. State and Private 

Forestry  is  a  principle  contributor  to 

accomplishing  Strategic  Goals  3  and  6.  Wildland 

Fire  Management  is  a  principle  contributor  to 

accomplishing Strategic Goal 1.  

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Wildland Fire Management (36 percent of program costs) decreased $276 million (10 percent) due to a decrease in 

FY 2009 fire accruals in combination with current‐year reversals of large FY 2008 fire accruals. 

Revenue

Forest  Service  earned  revenue  from  both  the  public  and  intragovernmental  is  $679  million  for  FY  2009  and 

$865 million  for  FY  2008.  Due  to  decreasing  timber  sale  receipts  and  estimated  revenue  accruals  for  the 

reimbursable cooperative fire agreements, earned revenue decreased by 22 percent from FY 2008. 

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,  such  as  work  completed  mainly  for  other  Federal  agencies,  in  accordance  with  the 

Economy Act and other authorities. 

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

The  Statements  of  Changes  in  Net  Position  reports  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)

Differences

Net Position

FY

2009

FY

2008 Dollars Percentages

Unexpended Appropriations $2,966 $1,970 $996 51%

Cumulative Results of Operations 1,658 1,722 (64) (4%)

Total Net Position $4,624 $3,692 $932 25%

Unexpended Appropriations

The increase in  unexpended appropriations  for FY  2009 is  primarily attributed  to ARRA appropriations  received.  

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  12: 

Earmarked Funds. 

 

 

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 $9.8 billion in FY 2009 and $8.6 billion in FY 2008, representing an 

increase of 14 percent from FY 2008. The increase is primarily due to receipt of ARRA appropriations for FY 2009. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Analysis of Systems, Controls, and Compliance with Laws 

MANAGEMENT’S ASSURANCES 

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT (FMFIA) 

The management control objectives under FMFIA, or the Integrity Act of 1982, are to reasonably assure that: 

 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. 

 Financial management systems are in compliance with Federal financial systems standards. 

Deficiencies  that  seriously  affect  an  agency’s  ability  to  meet  these  management  control  objectives  are  deemed 

“material weaknesses.” 

FMFIA Assertions

Forest Service management conducted its annual evaluations of internal control (Section 2) and financial systems 

(Section 4), effective for the period ending September 30, 2009.  

Based  on  the  results  of  the  evaluations,  Forest  Service  can  provide  qualified  reasonable  assurance  that  internal 

controls are operating effectively. No new material weaknesses were identified in FY 2009 and none remain from 

prior years. 

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA) 

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 United States Standard General Ledger (USSGL) 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  for  the  period  ending 

September 30, 2009.  

1.  Federal financial management system requirements. 

2.  Applicable Federal Accounting Standards. 

3.  The U.S. Standard General Ledger (SGL) at the transaction level. 

FY 2009 Results 

As  of  September  30,  2009,  the  Forest  Service was  in  substantial  compliance with  the  FFMIA, except  for  specific 

instances related to the requirement that the SGL be at the transaction level.  Specifically: 

 Depreciation is computed correctly in the subsidiary ledger, but recorded in the primary USDA accounting 

system at a summary level due to a system limitation. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

 Capitalized  leases  records  are  maintained  in  subsidiary  ledgers  and  recorded  quarterly  in  the  primary 

USDA accounting system. 

 Real  Property  asset  dispositions  resulting  in  a  loss  are  recorded  as  negative  gains  because  of  a  posting 

logic problem in primary USDA accounting system. 

 Nonappropriated monies are incorrectly transferred to a fund used solely for appropriated funds, causing 

a variance in several high‐priority accounts.  The variance(s) is corrected with a manual adjustment, once 

spending occurs, that “reverses” the transfer by using an inappropriate posting logic for nonappropriated 

monies. 

Remediation  for  these  items  is  anticipated  to  be  complete  upon  final  implementation  of  the  USDA  Federal 

Management Modernization Initiative (FMMI) to replace the current primary accounting system. 

FEDERAL INFORMATION SECURITY MANAGEMENT ACT (FISMA)

The  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.  

In  FY  2009,  the  Forest  Service’s  financial  management  systems  did  not  fully  comply  with  Federal  financial 

management  systems  requirements  of  the  Federal  Information  Systems  Management  Act  of  2002.  The  Forest 

Service is aware of the vulnerability of its assets and financial data due to error or fraud and has made great strides 

to correct the information security controls deficiencies.   

Security  audit  findings,  security  deficiencies  identified  in  systems’  certification  and  accreditation  (C&A)  process, 

and  security  deficiencies  identified  in  self‐assessments  are  listed  and  tracked  in  the  FISMA  Plan  of  Actions  and 

Milestones, updated monthly and reported to USDA quarterly for inclusion in its FISMA Report to OMB. 

FY 2009 Results 

No IT material weaknesses were noted for Assurance Year 2009. 

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 2009 Assurance Year (ending June 30, 2009), in accordance with USDA's Implementation 

Guide for OMB Circular A‐123, Internal Control over Financial Reporting, Appendix A. 

To assess the level of internal control at the agency level, the Forest Service prepares risk assessments to evaluate 

program vulnerabilities for internal controls and then tests the controls. 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. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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

over the financial reporting area are operating effectively. 

For FY 2009, Forest Service identified no new material weaknesses or significant deficiencies; only two significant 

deficiencies  remain.  The  Forest  Service  documented  the  corrective  actions  in  USDA’s  A‐123  Document  Tracking 

System for the Assurance Year 2009. 

MANAGEMENT INITIATIVES

American Recovery and Reinvestment Act of 2009

The  ARRA  included  $1.15  billion  in  funds  for  the  Forest  Service  to  implement  projects  that  sustain  the Nation’s 

forests and grasslands, create jobs, and promote U.S. economic recovery.  In passing the law, Congress emphasized 

accountability  for  and  transparency  of  funds  spent,  and  OMB  issued  guidance  to  establish  internal  controls, 

oversight mechanisms, and other approaches to meet ARRA’s accountability objectives.  

USDA Office  of  Inspector General  (OIG)  provides  oversight  to  ensure  funds  are  spent  by  the  Forest  Service  in  a 

manner  that  minimizes  the  risk  of  improper  use.  In  its  initial  report,  OIG  concluded  that  the  agency  should 

implement  a  process  to  ensure  that  both  contractors  and  Forest  Service  contracting  officials  are  aware  of  and 

follow the Buy American Act’s provisions related to ARRA.  

To  strengthen  the  management  and  oversight  of  acquisitions,  the  Forest  Service  established  four  specialized 

Economic  Recovery  Operations  Centers  (EROCs).  These  EROCs  will  also  provide  a  pool  of  highly  trained 

professionals  available  to  provide  guidance  and  consultation  to  partners  and  contractors.  The  EROCs  are 

centralized in four locations: Denver, CO; Vallejo, CA; Sandy, OR; and Atlanta, GA. 

To reduce the risk of improper use of ARRA funding, Forest Service will— 

 Increase  training  for partners and contractors  receiving ARRA  funds and  their  subcontractors  so  that all 

are aware of the full scope of this legislation. 

 Follow the Buy American clauses and other clauses within the ARRA. 

Go  to http://usda.gov/wps/portal/arra?navid=USDA_ARRA_PLAN  to  see USDA’s Recovery Act  Plans and Reports, 

the latest news in ARRA efforts, or Forest Service successes in the ARRA implementation. 

A-17
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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 31 U.S.C. 3515 (b).  

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

Accepted Accounting Principles  (GAAP)  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-18
Part B

FINANCIAL SECTION

B-1
Message from the Chief Financial Officer 

The U.S. Forest Service, an agency of the United States Department of Agriculture (USDA), continues with its 

high standard of financial management and reporting for the past fiscal year. As Chief Financial Officer for the 

Forest Service, I am proud to present the Fiscal Year (FY) 2009 results for the stewardship and management of 

public funds entrusted to the Forest Service. 

For the eighth consecutive year, the Forest Service has received an unqualified opinion and, for the second 

consecutive year, no material weaknesses. Seven deficiencies remain and as of the date of this letter, we know 

of no major impediments impacting our ability to correct any identified significant deficiencies and areas of 

noncompliance.

Donna M. Carmical

Chief Financial Officer

B-2
B-3
B-4
Independent Auditors’ Report 

B-5
Independent Auditors’ Report 

Chief, U.S. Forest Service and 

Inspector General, United States Department of Agriculture: 

We have audited the accompanying consolidated balance sheets of the United States (U.S.) Forest Service 

(an agency of the United States Department of Agriculture) as of September 30, 2009 and 2008 and the 

related consolidated statements of net cost, and changes in net position, and the combined statements of 

budgetary resources (hereinafter referred to as the “financial statements”) for the years then ended. The 

objective of our audits was to express an opinion on the fair presentation of these financial statements. In 

connection with our Fiscal Year (FY) 2009 audit, we also considered the U.S. Forest Service’s internal 

control over financial reporting and tested the U.S. Forest Service’s compliance with certain provisions of 

applicable laws, regulations, contracts, and grant agreements, noncompliance with which could have a 

direct and material effect on these financial statements. 

Summary 

As stated in our opinion on the financial statements, we concluded that the U.S. Forest Service’s financial 

statements as of and for the years ended September 30, 2009 and 2008, are presented fairly, in all material 

respects, in conformity with U.S. Generally Accepted Accounting Principles (GAAP). 

As stated in our opinion on the financial statements, we concluded that the U.S. Forest Service’s Required 

Supplementary Information related to deferred maintenance is lacking internal controls to ensure the 

accuracy and completeness of the reported information. 

Our consideration of internal control over financial reporting resulted in identifying certain deficiencies 

that we consider to be significant deficiencies, as follows: 

• The U.S. Forest Service Needs to Continue to Improve its Information Technology Internal Control 

Environment

• The U.S. Forest Service Needs to Refine its Period-end Expense Accrual Processes 

• The U.S. Forest Service Needs to Develop Comprehensive Procedures and Analysis to Document and 

Support Management’s Assumptions Regarding Revenue Accruals 

• The U.S. Forest Service Needs to Develop a Coordinated Intra-Agency Effort to Address 

Implementation of New Accounting Standards and Financial Reporting Requirements

• Management Review Procedures of Credit Card Transactions and Controls Over the Programs Need 

Continued Improvement

• The U.S. Forest Service Needs to Improve Internal Controls for Revenue Related Transactions

• Physical Inventory Policies and Procedures of Pooled Real Property Need to be Developed 

B-6
We did not identify any deficiencies in internal control over financial reporting that we consider to be 

material weaknesses as defined in the Internal Control Over Financial Reporting section of this report. 

The results of our tests of compliance with certain provisions of laws, regulations, contracts, and grant 

agreements, exclusive of those referred to in the Federal Financial Management Improvement Act of 1996 

(FFMIA), disclosed no instances of noncompliance or other matters that are required to be reported herein 

under 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. 

The results of our tests of FFMIA disclosed instances where the U.S. Forest Service’s financial 

management systems did not substantially comply with Federal Financial Management System 

Requirements and the U.S. Standard General Ledger (USSGL). The results of our tests of FFMIA 

disclosed no instances in which the U.S. Forest Service’s financial management systems did not 

substantially comply with applicable Federal Accounting Standards. 

The following sections discuss our opinion on the U.S. Forest Service’s financial statements, our 

consideration of the U.S. Forest Service’s internal controls over financial reporting; our tests of the U.S. 

Forest Service’s compliance with certain provisions of applicable laws, regulations, contracts, and grant 

agreements, and management’s and our responsibilities. 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of the U.S. Forest Service as of 

September 30, 2009 and 2008 and the related consolidated statements of net costs, and changes in net 

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

statements”) for the years then ended. 

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

financial position of the U.S. Forest Service as of September 30, 2009 and 2008, and its net costs, changes 

in net position, and budgetary resources for the years then ended, in conformity with U.S. GAAP. 

The information in the Management’s Discussion and Analysis, Required Supplementary Information, and 

Required Supplementary Stewardship Information sections is not a required part of the financial 

statements, but is supplementary information required by U.S. GAAP. We have applied certain limited 

procedures, which consisted principally of inquiries of management regarding the methods of measurement 

and presentation of this information. However, we did not audit this information and accordingly, we 

express no opinion on it. As a result of our performing these limited procedures, we believe that the 

Required Supplementary Information related to deferred maintenance is lacking internal controls to ensure 

the accuracy and completeness of the reported information. 

The information in the Other Accompanying Information section is presented for purposes of additional 

analysis and is not required as part of the financial statements. This information has not been subjected to 

auditing procedures and, accordingly, we express no opinion on it. 

Internal Control Over Financial Reporting 

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

the Responsibilities section of this report and would not necessarily identify all deficiencies in the internal 

control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. 

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 misstatements on a timely basis. A significant deficiency is a deficiency, or combination of 

B-7
deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit 

attention by those charged with governance. A material weakness is a deficiency, or combination of 

deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of 

the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. 

In our FY 2009 audit, 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 over financial reporting that we consider to be significant deficiencies and that are 

described in Exhibit I. Exhibit II presents the status of prior year significant deficiencies, including those 

open conditions on which we are making no further recommendations in this report. 

We noted certain additional matters that we have reported to management of the U.S. Forest Service in a 

separate letter dated November 12, 2009. 

Compliance and Other Matters 

The results of certain of our tests of compliance as described in the Responsibilities section of this report, 

exclusive of those referred to in the FFMIA, disclosed no instances of noncompliance or other matters that 

are required to be reported herein under Government Auditing Standards or OMB Bulletin No. 07-04.

The results of our tests of FFMIA disclosed instances, described in Exhibit III, where the U.S. Forest 

Service’s financial management systems did not substantially comply with Federal Financial Management 

System Requirements and the USSGL at the transaction level. Exhibit IV provides the status of prior year’s 

non-compliance findings and other matters, including those open conditions on which we are making no 

further recommendations in this report. 

The results of our tests of FFMIA disclosed no instances in which the U.S. Forest Service’s financial 

management systems did not substantially comply with applicable Federal Accounting Standards. 

We noted certain additional matters that we have reported to management of the U.S. Forest Service in a 

separate letter dated November 12, 2009. 

* * * * * * * 

Responsibilities 

Management’s Responsibilities. Management is responsible for the financial statements; establishing and 

maintaining effective internal control; and complying with laws, regulations, contracts, and grant 

agreements applicable to the U.S. Forest Service. 

Auditors’ Responsibilities. Our responsibility is to express an opinion on the FY 2009 and 2008 financial 

statements of the U.S. Forest Service 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 OMB Bulletin No. 07-04. Those standards and OMB Bulletin No. 07-04 require that we plan 

and perform the audits to obtain reasonable assurance about whether the financial statements are free of 

material misstatement. An audit includes consideration of internal control over financial reporting as a 

basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of 

expressing an opinion on the effectiveness of the U.S. Forest Service’s internal control over financial 

reporting. Accordingly, we express no such opinion. 

B-8
An audit also includes: 

• Examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements; 

• Assessing the accounting principles used and significant estimates made by management; and 

• Evaluating the overall financial statement presentation. 

We believe that our audits provide a reasonable basis for our opinion. 

In planning and performing our FY 2009 audit, we considered the U.S. Forest Service’s internal control 

over financial reporting by obtaining an understanding of the U.S. Forest Service’s internal control, 

determining whether internal controls had been placed in operation, assessing control risk, and performing 

tests of controls as a basis for designing our audit procedures for the purpose of expressing our opinion on 

the financial statements. We did not test all controls relevant to operating objectives as broadly defined by 

the Federal Managers’ Financial Integrity Act of 1982. The objective of our audit was not to express an 

opinion on the effectiveness of the U.S. Forest Service’s internal control over financial reporting. 

Accordingly, we do not express an opinion on the effectiveness of the U.S. Forest Service’s internal 

control over financial reporting. 

As part of obtaining reasonable assurance about whether the U.S. Forest Service’s FY 2009 financial 

statements are free of material misstatement, we performed tests of the U.S. Forest Service’s compliance 

with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which 

could have a direct and material effect on the determination of financial statement amounts, and certain 

provisions of other laws and regulations specified in OMB Bulletin No. 07-04, including certain provisions 

referred to in Section 803(a) of FFMIA. We limited our tests of compliance to the provisions described in 

the preceding sentence, and we did not test compliance with all laws, regulations, contracts, and grant 

agreements applicable to the U.S. Forest Service. However, providing an opinion on compliance with laws, 

regulations, contracts, and grant agreements was not an objective of our audit and, accordingly, we do not 

express such an opinion. 

______________________________

The U.S. Forest Service’s response to the findings identified in our audit is presented in Exhibit V. We did 

not audit the U.S. Forest Service’s response and, accordingly, we express no opinion on it. 

This report is intended for the information and use of the U.S. Forest Service’s management, the United 

States Department of Agriculture (USDA) Office of the Inspector General (OIG), OMB, the U.S. 

Government Accountability Office (GAO), and the U.S. Congress and is not intended to be and should not 

be used by anyone other than these specified parties. 

November 12, 2009 

B-9
INTRODUCTION TO EXHIBITS 

The U.S. Forest Service continues to make progress in closing out its prior year audit recommendations and 

minimizing new audit recommendations. During the FY 2008 audit, the U.S. Forest Service information 

technology (IT) control weakness was downgraded to a significant deficiency from a prior year’s material 

weakness. During the FY 2009 audit, the U.S. Forest Service continues to remediate its IT control 

weaknesses. While the U.S. Forest Service has taken significant strides in its efforts to centralize and improve 

its IT functions, more actions are necessary to fully address the deficiencies identified as well as to ensure an 

appropriate level of confidentiality, integrity, and availability of critical information systems and resources. 

We continue to recognize that certain recommended IT control enhancements pertaining to the U.S. Forest 

Service’s operations cannot be implemented solely by the U.S. Forest Service, because the U.S. Forest 

Service’s applications are in many cases hosted on USDA managed systems. As a result, several IT control 

deficiencies identified in this report will continue to require the combined effort of USDA and the U.S. Forest 

Service management. 

During FY 2009 the U.S. Forest Service made progress on downgrading or closing several of its non-IT 

significant deficiencies. The significant deficiencies on which the U.S. Forest Service took corrective action 

include: environmental and disposal liabilities, unliquidated obligations, accounting for wildland fire activity, 

and the statistical component of its expenditure accrual estimate. 

Although improvement was noted in the U.S. Forest Service’s internal control over financial reporting, we 

identified new significant deficiencies relating to: validating and refining its management assumptions in the 

expense accrual estimate, developing procedures and documenting support for management’s assumptions 

regarding revenue accruals, and developing a coordinated intra-agency effort to address new accounting 

standards and financial reporting requirements. 

With regard to compliance and other matters, the U.S. Forest Service closed one of its noncompliance matters 

relating to timely obligations by implementing a new travel system called GovTrip. Noncompliance with two 

of the three components of the FFMIA remains open. 

Exhibit I presents the significant deficiencies as of and for the year ended September 30, 2009. Exhibit II of 

this report summarizes the current year status of prior year recommendations. Exhibit III provides an update 

of those instances of noncompliance with laws and regulations and other matters and applicable new instances 

of noncompliance. Exhibit IV summarizes the status of prior year recommendations for noncompliance with 

laws and regulations and other matters. The U.S. Forest Service management’s response is presented in 

Exhibit V. 

B-10
Exhibit I 

 (Continued) 

SIGNIFICANT DEFICIENCIES 

Number 1: The U.S. Forest Service Needs to Continue to Improve its Information Technology Internal 

Control Environment (Repeat Condition)

Segregation of Duties Needs Continued Improvement

Segregation of duties controls are not in place to ensure that the Human Resource Management (HRM) 

personnel with access to the Entry, Processing, Inquiry, and Correction (EPIC) system did not also have the 

pay administrator role within Paycheck7. 

Incident Business Database (IBDB) users were able to access the My WebMethods Server (MWS) workflow 

system to assign documents to themselves, bypassing Application/segregation of duties (SOD) controls. 

Specifically, a level 2 processor was able to create, modify, and approve a payment in IBDB without having 

any secondary review or approval. Level 2 processors should not have access to approve a payment. An 

employee can reassign a payment multiple times enabling the individual to be the sole processor/approver on 

an invoice. Note this condition was corrected as of June 11, 2009. 

Also in the Oracle password database, which is a central repository that contains all of the administrativelevel passwords for U.S. Forest Service-managed servers and databases, the following SOD issues existed: 

• Two users had access to both the Legacy Server and Oracle groups, which granted them administrator 

access to Paycheck7 on both the operating system and database level. U.S. Forest Service management 

implemented corrective actions for this issue during September 2009 by removing access for the 

individuals in question. 

• 17 Application Hosting Environment (AHE) System Administrators who manage the Incident Business 

System (IBS) had access to both the Data Center and Oracle groups. This granted them administrator 

access to IBS on both the operating system and database level. This issue was remediated by the U.S. 

Forest Service in September by assigning users to either the Data Center or Oracle group, not both. 

• U.S. Forest Service management indicated that HRM resources and personnel are limited at many U.S. 

Forest Service field units. The U.S. Forest Service implemented EmpowHR, which would have addressed 

this SOD issue by replacing EPIC; however, U.S. Forest Service rolled back the implementation due to 

performance issues with EmpowHR. 

The breakdown in controls appears to have resulted from a lack of SOD in the roles established in the IT 

system controls matrix in the IBDB system, further affected by a lack of controls over access to the MWS 

system; which allowed the user to manipulate approval assignments. 

U.S. Forest Service management granted access to these individuals in the Oracle Password Database based 

upon their job responsibilities. Additionally, management stated that access to Oracle databases requires 

administrative operating system level access as well. 

Forest Service Manual (FSM) 6600, Chapter 6680, Security of Information, Information Systems, and 

Information Technology, Section 6684.23, Least Privilege, states: “Configure the information system to 

enforce the most restrictive set of rights/privileges or accesses needed by users (or processes acting on behalf 

of users) for the performance of specified tasks.” Additionally Section 6683.11, Separation of Duties, states: 

“Different individuals should perform each of the following actions for critical operational control functions: 

authorization/approval, system management, and monitoring or auditing.” 

B-11
Exhibit I 

 (Continued) 

The National Institute of Standards and Technology (NIST) Special Publication (SP) 800-12, An Introduction 

to Computer Security, states: “Logical access controls can help protect operating systems and other system 

software from unauthorized modification or manipulation (and thereby help ensure the system's integrity and 

availability). While it is obvious that users must have access to the information they need to do their jobs, it 

may also be required to deny access to non-job-related information.” 

NIST SP 800-53, Recommended Security Controls for Federal Information Systems, Control SI-9, 

Information Input Restrictions, states: “Control: The organization restricts the capability to input information 

to the information system to authorized personnel. Supplemental Guidance: Restrictions on personnel 

authorized to input information to the information system may extend beyond the typical access controls 

employed by the system and include limitations based on specific operational/project responsibilities.” 

Without proper SOD controls, there is increased risk that fraudulent data could be entered into EPIC and 

Paycheck7 and processed by the National Finance Center (NFC). 

The ability to both create or modify and approve a payment without a secondary review could lead to the 

misappropriation or incorrect recording of assets. The U.S. Forest Service has performed an analysis of IBDB 

payments to ascertain any inappropriate exploitation of the weakness in the system and found no 

exploitations. Subsequently, we re-performed the analysis of IBDB payments and did not identify 

inappropriate usage of the segregation of duties weakness. 

Finally, individuals with privileged access to both the operating system and database can make unauthorized 

changes to application data and tamper with any audit trail that would track such an incident. 

Recommendation Number 1:

We recommend that U.S. Forest Service management: 

A. Establish, communicate, and document the enforcement of policies and procedures which require 

quarterly management review of EPIC access listings to verify that access is appropriate and in 

compliance with policy. 

B. Implement periodic reviews of IBDB user role access to ensure that individuals with MWS workflow 

access do not have (Level 1 or Level 2 processor) access to enter payments. 

In addition, we continue to recognize the need for the U.S. Forest Service management to implement 

segregation of duties principles as reported in prior year Recommendation 3B and 3D of Audit Report 08401-

8-FM. 

Finally, we continue to recognize the need for the U.S. Forest Service management to implement access 

controls for Paycheck 7 and EPIC as reported in prior year Recommendation 3A of Audit Report 08401-8-

FM. 

Change Control Continues to Need Improvement

During our fieldwork, the following control weaknesses were identified regarding change control: 

• Change Management Board (CMB) meeting minutes were not retained for four of five selected meetings. 

Meeting minutes were not consistently maintained on the repository, meeting minutes were stored on 

individual employee computers during certain weeks, and the U.S. Forest Service was unable to 

determine whether change control board meetings were cancelled for any given week. The U.S. Forest 

Service implemented corrective action in June 2009 by updating the CMB team room to track actions of 

the board. 

B-12
Exhibit I 

 (Continued) 

• The Change Management Coordinator (CMC) or Change Advisory Board approvals for U.S. Forest 

Service Computer Base (FSCB) network configuration changes were not documented for five of eight 

network device changes. U.S. Forest Service did not require CMC approvals to be consistently 

documented within change control tickets. 

• For I-Web, Database Administrators (DBAs) had access to migrate changes into production and also have 

modified access to Polytron Version Control System (PVCS) where changes are developed and tested. 

This condition occurred because the U.S. Forest Service did not require the I-Web DBAs to have readonly access to PVCS. The U.S. Forest Service management implemented corrective action on July 17, 

2009 by creating a database administrator group with read-only access in the development environment. 

KPMG inspected evidence of corrective action and determined that one IBS DBA still retained 

inappropriate access to the Developer group. 

KPMG questioned the appropriateness of PVCS Developer access and were informed by the U.S. Forest 

Service that 20 user accounts had inappropriate access as follows: 

• Seven were identified as no longer with the project; 

• Six were identified as not being team members; 

• Five were identified as generic accounts; and 

• Two were identified as DBA team members no longer requiring developer access. 

In addition, we also noted that change implementation tickets were not consistently identified in code change 

entries in the PVCS software library. U.S. Forest Service management did not require change implementation 

tickets to be identified in code change entries in the PVCS software library until April 2009, when the 

weakness was corrected. 

Finally, the following configuration / change control exceptions were identified regarding Foundation 

Financial Information System (FFIS), IBS, and Paycheck7 applications: 

• An FFIS user with PEND1 access can modify and approve a transaction in FFIS. The system should 

require the approver to return the document to the person that entered the transaction for modification. An 

approver should only have approval rights and not modification rights. FFIS configuration does not 

prevent an approver from modifying and approving a transaction.

• Testing was not documented for one of four IBS change requests. This was due to an inadvertent error. 

• Until September 2009, the U.S. Forest Service did not have a mechanism to accurately track applications 

affected by program changes for Paycheck7 and IBS (i.e., no column in the change management database 

identifying affected application). 

• The U.S. Forest Service does not utilize or manage a software library for Paycheck7 and IBS to maintain 

previous versions and audit trails of changes in development and in the production environments. 

Although U.S. Forest Service management is in process of implementing a Change Control Configuration 

Management Database (CCMDB) solution to replace the manual change control tracking in the Lotus 

Notes database and monitor changes implemented into production for all applications on the U.S. Forest 

Service infrastructure, U.S. Forest Service did not identify the necessity for such a solution when the 

applications were initially implemented. 

B-13
Exhibit I 

 (Continued) 

FSM 6600, Chapter 6680 – Security of Information, Information Systems, and Information Technology,

Section 6682.6 - Configuration Management states:

1 “Place [U.S.] Forest Service information systems reported under the Federal Information Security 

Management Act (FISMA) inventory requirements under configuration management (CM). 

2 Implement an effective CM program that provides overall guidance and procedures for those information 

systems. 

3 Incorporate general CM requirements in all statements of work and procurement requests for all IT 

contracts that involve [U.S.] Forest Service systems. 

4 Establish the scope of authority of the CMB through a charter approved by the [U.S.] Forest Service Chief 

Information Officer.” 

Section 6682.63 - Monitoring Configuration Changes states: 

1 “Assess potential impact of proposed configuration changes. 

2 Monitor implemented changes for unexpected security impacts and for opportunities to improve the 

effectiveness of security controls. 

3 Ensure that any changes to be made to [U.S.] Forest Service information systems are reviewed and 

approved.” 

Section 6682.64 - Access Restrictions for Change states: 

1 “Harden operating systems to the maximum extent and configure to prevent circumvention of IT security 

application controls. 

2 Provide access to application configurations only to the system administrator to prevent unauthorized 

access. 

3 Store and control the contents of software code and system technical documentation in a centralized, 

agency-wide system software repository. 

a. Appoint an administrator to maintain and manage the repository. 

b. Keep in the repository, official master copies (or pointers to their location) of all configuration item 

baselines, including item code and object module baselines. 

c. Restrict and control access to repository.” 

NIST SP 800-53, Information System, Revision 2, Recommended Security Controls for Federal Information 

Systems, Appendix F-CM, Control CM-3 Configuration Change Control states: “The organization manages 

configuration changes to the information system using an organizationally approved process (e.g., a chartered 

Configuration Control Board). Configuration change control involves the systematic proposal, justification, 

implementation, test/evaluation, review, and disposition of changes to the information system, including 

upgrades and modifications. Configuration change control includes changes to the configuration settings for 

IT products (e.g., operating systems, firewalls, routers). The organization includes emergency changes in the 

configuration change control process, including changes resulting from the remediation of flaws. The 

approvals to implement a change to the information system include successful results from the security 

analysis of the change. The organization audits activities associated with configuration changes to the 

information system. Control CM-5 Access Restrictions for Change. Planned or unplanned changes to the 

B-14
Exhibit I 

 (Continued) 

hardware, software, and/or firmware components of the information system can have significant effects on the 

overall security of the system. Accordingly, only qualified and authorized individuals obtain access to 

information system components for purposes of initiating changes, including upgrades, and modifications. 

Control SI-9, “Information Input Restrictions,” states that “restrictions on personnel authorized to input 

information to the information system may extend beyond the typical access controls employed by the system 

and include limitations based on specific operational/project responsibilities.” 

OMB Circular No. A-130, Management of Federal Information Resources, Section 8a-4, states: “Each stage 

of the information life cycle carries with it records of management responsibilities. Agencies need to record 

their plans, carefully document the content and procedures of information collection, ensure proper 

documentation as a feature of every information system, keep records of dissemination programs, and, finally, 

ensure that records of permanent value are preserved.” 

OMB Circular No. A-130, Appendix III, states: “SOD is the practice of dividing the steps in a critical 

function among different individuals. For example, one system programmer can create a critical piece of 

operating system code, while another authorizes its implementation. Such a control keeps a single individual 

from subverting a critical process.” 

When the Business Application Service Environment change management system was developed, the U.S. 

Forest Service did not implement functionality to capture approvals for migration to the testing environment, 

approvals for migration to production, and results of end-user testing. 

By not consistently updating a central repository of change control board meeting minutes, the U.S. Forest 

Service is unable to consistently provide evidence of approvals for changes requiring board approval. This 

weakness could result in unapproved changes being implemented into production. 

With a lack of functionality to capture approvals for migration to test and production environments and the 

result of end-user testing, the U.S. Forest Service is exposed to the risk of program changes implemented in 

production that have not been approved or adequately tested. 

Having code changes in the software library tied to change implementation tickets helps to ensure that each 

code change is part of an approve change request. Without this functionality, the U.S. Forest Service is unable 

to determine if a code change in PVCS was authorized, increasing the risk of unauthorized program changes 

remaining undetected. 

By not having functionality to monitor changes implemented into production environments, the U.S. Forest 

Service is unable to provide a complete population of program changes, and risks unauthorized program 

changes remaining undetected. 

Recommendation Number 2:

We recommend that U.S. Forest Service management: 

A. Review existing FFIS controls and determine a cost effective approach to correct or mitigate the control 

design weakness and work with the USDA to ensure that the new General Ledger (GL) system limits the 

PEND1 approver to only approve a transaction and not make modifications to that transaction. 

B. Ensure that change control board meeting minutes are consistently maintained in a central repository for 

those systems that are in-scope for the CMB. 

C. Implement a change management solution to monitor changes implemented into production in order to 

provide a complete population of program changes and detect unauthorized program changes for 

Paycheck7, IBS, and I-Web. 

B-15
Exhibit I 

 (Continued) 

D. For Paycheck7 and IBS, update the change request database to include a column for the affected 

application to aide in the identification of a population of program changes. 

Monitoring of Audit Logs Needs Improvement 

During our audit testwork, the following control weaknesses were identified regarding audit log monitoring: 

• U.S. Forest Service has not documented detailed procedures to provide guidance over the Net Forensics 

audit logging software tool review process. The Net Forensics tool is not used on I-Web and Paycheck8 

systems as they are outside the U.S. Forest Service domain; however, the tool is used on Paycheck7 and 

IBS. 

• U.S. Forest Service does not retain evidence of formal review of IBS, I-Web, and Paycheck7 operating 

system and database audit logs. 

• U.S. Forest Service does not effectively monitor the auditing of privileged users. U.S. Forest Service 

stated that there are controls to track the “SUDO” command in Unix, but that no periodic review is 

conducted. The “SUDO” command is used for I-Web, IBS, and Paycheck7 servers. 

• The Windows Group Policy Object (GPO) is not configured to audit actions of users with privileged 

authority. 

• Audit logging for the Paycheck7 Oracle database does not track privileged users’ activity. 

• GDC Integration (GDCI) has not enabled audit logging for privileged users on the Windows operating 

system supporting Paycheck8. U.S. Forest Service remedied this issue during fieldwork by updating the 

GDCI GPO setting to audit privileged use in August 2009. 

The U.S. Forest Service is currently formulating detailed procedures; however, they have not yet been 

completed. The U.S. Forest Service does not have a formalized process for review of Net Forensics audit 

logs. This is caused by the lack of procedures for the use of the Net Forensics software tool. U.S. Forest 

Service is currently capturing the use of the root account via the Switch User (SU) logs; however, there is no 

periodic review of this activity due to resource constraints and a lack of an automated process to summarize 

and report events. The Windows GPO, U.S. Forest Service Paycheck7 Oracle audit logs, and GDCI 

Paycheck8 operating system do not currently track actions of privileged users due to hard drive space 

constraints. 

FSM 6600, Chapter 6680, Section 6684.31, Auditable Events, states that for systems that materially affect the 

ability of the agency to perform its mission to automatically generate audit records, at a minimum, for the 

following events: 

a. Unsuccessful logons, 

b. Unsuccessful password change attempts, 

c. Security policy changes, 

d. System shutdowns and restarts, 

e. System maintenance, 

f. All administrative / system actions of users with privileged authority (for example, system operators, 

administrators, security personnel), 

g. Remote access to network devices, and 

B-16
Exhibit I 

 (Continued) 

h. Other auditable events as determined by the Information System Security Program Manager based on a 

risk-based assessment of the security category of the information system such as: 

 (1) Creation, deletion and opening of files containing sensitive information, and 

 (2) Initiation of programs processing sensitive information. 

FSM 6600, Chapter 6680, Section 6684.33 – Audit Monitoring, Analysis, and Reporting states the following 

requirements: 

1. Review and analyze information system audit records, at least quarterly (or more frequently if 

otherwise specified in the [System Security Plan] SSP), for indications of inappropriate or unusual 

activity. 

2. Investigate suspicious activity or suspected violations and report findings in accordance with agency 

mandated incident reporting procedures. 

3. For auditable events, as described in FSM 6684.31, employ automated mechanisms to alert security 

personnel of inappropriate or unusual activities with security implications. 

4. Maintain subscription for automated alert mechanisms to keep the lists of inappropriate or unusual 

activities updated. 

5. Maintain evidence of audit log reviews and changes to the list (or subscription) of auditable events. 

NIST SP 800-53, Revision 2: Audit and Accountability, AU-1 states that: “(i) a formal, documented, audit 

and accountability policy that addresses purpose, scope, roles, responsibilities, management commitment, 

coordination among organizational entities, and compliance; and (ii) formal, documented procedures to 

facilitate the implementation of the audit and accountability policy and associated audit and accountability 

controls.” 

NIST 800-53, Revision 2: AU-6 states that: “The organization regularly reviews/analyzes information system 

audit records for indications of inappropriate or unusual activity, investigates suspicious activity or suspected 

violations, reports findings to appropriate officials, and takes necessary actions.”

NIST 800-53, Revision 2: Access Control, AC-13 states that: “The organization reviews audit records (e.g., 

user activity logs) for inappropriate activities in accordance with organizational procedures.” 

NIST 800-53, Revision 2: AC-2 states that: “The organization requires proper identification for requests to 

establish information system accounts and approves all such requests.” 

Without formal documented and implemented procedures for audit logging, unauthorized and damaging 

activities may take place on the U.S. Forest Service systems, U.S. Forest Service personnel may not be aware 

of what activity needs to be monitored, how to identify harmful activities, or the proper response to these 

activities. Overall, there is an increased risk that harmful activity could go undetected, and that proper actions 

will not be taken when harmful activities occur. 

By not retaining documentation of audit log reviews, there is a risk that incidents may go undetected or not 

given the proper response. 

By not monitoring the activity of privileged users, there is a higher risk of individuals performing harmful 

activities going undetected. 

B-17
Exhibit I 

 (Continued) 

Recommendation Number 3:

We recommend that U.S. Forest Service management:

A. Augment current audit procedures to include a process for documenting the Net Forensics software tool 

suspicious activity log reviews. 

B. Begin logging the activities of privileged users for the Windows GPO, U.S. Forest Service Paycheck7 

Oracle audit logs, and GDCI Paycheck8 operating systems. 

C. Perform periodic reviews of audit logs for the IT systems in this finding. 

In addition, we continue to recognize the need for the U.S. Forest Service management to implement the audit 

logging capabilities and management review of such reports as reported in prior year Recommendation 3A 

and 3B of Audit Report 08401-9-FM. 

Access Controls Need Continued Improvement 

During our testwork over access controls, the following weaknesses were noted: 

• One IBS user had roles that were marked to be deactivated during the second quarter 2009 review dated 

June 17, 2009. However, the user still had these roles as of the IBS user list dated July 6, 2009. U.S. 

Forest Service remedied this issue during fieldwork by removing the user in August 2009. 

In addition, terminated employees are removed from the network every two weeks as opposed to 24 hours, 

and terminated users maintained access in Lotus Notes, IBS, Paycheck8, and I-Web as follows: 

• In Lotus Notes, 1,557 users have retained access 60+ days, 97 users have retained access for 30-60 days, 

55 users have retained access for 15-30 days, and 99 users have retained access for 0-15 days. 

• In Paycheck8, 544 users have retained access 60+ days, 127 users have retained access for 30-60 days, 50 

users have retained access for 15-30 days, and 6 users have retained access for 0-15 days. 

• In I-Web, 39 users have retained access 60+ days. In addition, the User Management Application does not 

provide the ability to separate between employees and contractors. 

• In IBS, 66 users have retained access for 60+ days, 6 have retained access for 30-60 days, one user 

retained access for 15-30 days, and one user retained access for 0-15 days. 

FSM 6600, Chapter 6680 – Security of Information, Information Systems and Information Technology, dated 

September 17, 2008, Section 6684.2c states “User accounts must be disabled after a period of inactivity to be 

determined by [U.S.] Forest Service officials and documented in the SSP. User identifiers must be disabled if 

the user no longer requires access to [U.S.] Forest Service systems for reasons including but not limited to: a 

change in job responsibility where the user no longer requires access to the system, resignation from [U.S.] 

Forest Service, and termination, unless an extension is requested by the supervisor. An account must be 

disabled within 24 hours for voluntary termination, reassignment, or change in job role.” 

U.S. Forest Service did not comply with its policy to remove separated employee access within 24 hours. 

Terminated users retained access in Lotus Notes, IBS, Paycheck8, and I-Web because removal of access of 

terminated employees heavily relies on manual controls as an automated process is not in place. 

By not removing terminated employee access in a timely manner, the U.S. Forest Service is at risk of 

terminated employees accessing network resources. 

B-18
Exhibit I 

 (Continued) 

Recommendation Number 4:

We recommend that U.S. Forest Service management review its policy for account termination 

appropriateness and update policy or alter account termination process accordingly. 

Vulnerability Scanning and Remediation Needs Continued Improvement

Not all in-scope Internet Protocol (IP) addresses were scanned for all applications, including Paycheck7, 

Paycheck8, IBS, and I-Web. This is due to oversight by the U.S. Forest Service. Specifically: 

• One network infrastructure server, which was identified as an in-scope IP for IBS, was not scanned in 

January, March, and May. This IP was described as a primary Domain Name Server (DNS) for IBS in the 

IP survey that was administered by U.S. Forest Service management. 

• For Paycheck7, two of 28 in-scope IP’s were not scanned in January; 18 of 28 were not scanned in 

February; and 20 of 28 were not scanned in March. 

• For Paycheck8, eight of 12 in-scope IP’s were not scanned in April and June. 

Not all found vulnerabilities have been remedied for IBS and Paycheck7. Specifically, the following 

vulnerabilities were discovered in January 2009 and have not been remedied as of September 2009: 

• For IBS, the OSTicket and Apache vulnerabilities have not yet been remedied. 

• For Paycheck7, Apache vulnerabilities have not yet been remedied. The U.S. Forest Service implemented 

corrective action in September 2009 by remedying the Apache vulnerability. 

Although corrective actions have been planned to remediate identified vulnerabilities, the vulnerabilities are 

not remedied to date and have therefore not been remedied in a timely manner. The timeliness of remediation 

is a result of U.S. Forest Service prioritizing known vulnerabilities and implementing patches or updates 

within an appropriate time frame that the U.S. Forest Service has not definitively established. 

NIST, SP 800-42: Guideline on Network Security Testing states: “Organizations should conduct vulnerability 

scanning to validate that operating systems and major applications are up to date on security patches and 

software version. Vulnerability scanning is a somewhat labor-intensive activity that requires a high degree of 

human involvement in interpreting the results. It may also disrupt network operations by taking up bandwidth 

and slowing response times. However, vulnerability scanning is extremely important for ensuring that 

vulnerabilities are mitigated before they are discovered and exploited by adversaries. Vulnerability scanning 

should be conducted at least quarterly to semi-annually. Highly critical systems such as firewalls, public web 

servers, and other perimeter points of entry should be scanned nearly continuously. It is also recommended 

that since no vulnerability scanner can detect all vulnerabilities, more than one should be used. A common 

practice is to use a commercially available scanner and a freeware scanner.” 

NIST, SP 800-40: Creating a Patch and Vulnerability Management Program states: “The risk of delaying 

remediation must be weighed carefully. Consider the following: 

• Threat Level. Does the organization or systems requiring remediation face numerous and/or significant 

threats? For example, public Web servers and most Federal government organizations may face high 

threat levels. In general, timely remediation is critical for these systems. In contrast, for an intranet site 

that is inaccessible from the Internet, remediation can often be delayed because such a site usually faces a 

lower threat level. 

• Risk of Compromise. What is the likelihood that a compromise will occur? If the vulnerability is easy to 

exploit, then remediation should be applied swiftly. 

B-19
Exhibit I 

 (Continued) 

• Consequences of Compromise. What are the consequences of compromise? If the system is critical or 

contains sensitive data, then the remediation should be performed immediately. This holds true even for 

non-critical systems if a successful exploitation would lead to an attacker gaining full control of the 

system.” 

By not scanning all of the IP addresses that were indicated as “In-Scope” from the vulnerability survey, the 

U.S. Forest Service is unable to obtain assurance that vulnerabilities within in-scope applications, which 

include Paycheck7, Paycheck8, IBS, and I-Web, are discovered and remedied. Vulnerabilities within in-scope 

IP addresses are more pertinent since financial data may be affected. 

Vulnerabilities that are not remedied in a timely manner may result in information leaks or system threats. 

These vulnerabilities may also disrupt normal system processes, allow inappropriate access, or prevent 

updates from being implemented. 

Recommendation Number 5:

We recommend that U.S. Forest Service management: 

A. Establish goals to scan all in-scope IP address (or financially related IP addresses) during its monthly 

scans of all in-scope applications; including Paycheck7, Paycheck8, IBS, and I-Web commensurate with 

risk. 

B. Remedy discovered vulnerabilities from monthly scans within required timeframes; and include creating a 

time table to remedy vulnerabilities based on their threat categorization. 

In addition, we continue to recognize the need for the U.S. Forest Service management to improve patch 

management practices and ensure that unpatched systems or improper configurations are identified and issues 

are remedied as reported in prior year Recommendation 1A and 1B of Audit Report 08401-9-FM. 

Number 2: The U.S. Forest Service Needs to Refine its Period-end Expense Accrual Processes (Partial 

Repeat Finding)

Mathematical Expense Accrual Process Assumptions Need Continued Validation and Adjustment

During FY 2009 the U.S. Forest Service developed a single integrated accrual process named the 

Mathematical Accrual Process II (MAP II). MAP II directly estimates unrecorded liabilities, without regard to 

when they might be paid, based on multiple independent variables (i.e., the database). The process is run 

using a statistical software package called Stata. 

The MAP II database includes the transaction history for all applicable obligations beginning with March 

2005 and are segregated into five defined categories [i.e., Construction, Grants & Agreements, (temporary 

assignments) TDY Travel, (permanent transfers) TOS Travel, and Operations]. The MAP II utilizes two data 

sets: 1) the time-series history of the obligations, and 2) the open obligations at the accrual date. 

The MAP II is executed in the following order. First, the time-series history of the obligations is run to 

calculate parameter estimates for each category for the independent variables (i.e., days elapsed between 

payments, work percentage left to be completed, etc.). Second, the resulting parameter estimates are applied 

to the characteristics of each individual obligation open as of the accrual date. This step provides a unique 

estimate of the incremental work completion as of the cutoff date for each obligation. Third, the estimated 

work completion percentage is applied to each individual obligation’s original contract amount to determine 

an estimate of the dollar amount of the current liability for each obligation. The individual obligation 

estimates are summed, by category, to provide an overall liability estimate to be recorded in the agency’s 

financial statements. 

B-20
Exhibit I 

 (Continued) 

When management develops an estimate to record an amount in its GL and financial statements at a point in 

time, the development of sound, reliable and proven management assumptions are critical to an accurate 

estimate. The following assumptions are some of the significant assumptions underlying the premise of MAP 

II for FY 2009 and represent management’s judgment of the most likely circumstances and events. 

• Groups of obligations with similar attributes and characteristics can be identified to focus accruals into 

consistent defined groups. We have defined five accrual categories with such similar attributes and 

characteristics: Construction, Grants & Agreements, TDY Travel, TOS Travel, and Operations. Each 

category definition is mutually exclusive from the others and also from all other existing accrual 

processes. The TDY and TOS transactions are identified through the data compilation process; however, 

the associated liability is estimated outside the statistical model. 

• Some obligation documents contain multiple budget lines which, individually, could meet the definition 

criteria of more than one accrual category. As a result, all accrual calculations are performed at the budget 

line (rather than document) level to assure mutual exclusivity of categories. 

• For each defined category, there exists a “typical” performance or lapsing curve. Among such “typical” 

characteristics are: life (i.e., length of time the obligation remains open), number of days between 

payments, seasonal activity levels, and a ratio of payment to original obligation amount at a given point of 

contract completion. These “typical” characteristics remain reasonably consistent over a period of years.

When the Stata process develops the estimation, it takes into account the variability of these 

characteristics in computing the width of the statistical confidence interval. 

• Not every data point within the database is relevant to the best estimate of unrecorded liabilities. A 

minority of data points that are not relevant are excluded from the estimation universe so they do not 

distort the calculated result, either upward or downward. Examples of these excluded data points include: 

documents with uncorrected errors, documents with incomplete data due to the arbitrary inception point, 

etc. The exclusions from the process include: 1) eliminations made to exclude items subject to other 

accrual process, and 2) adjustments made for statistical relevance and accuracy. Examples of adjustments 

made for statistical relevance and accuracy are: inactive obligations, positive obligations, obligations 

equal to zero, any obligations falling outside completion boundaries (e.g., work remaining cannot be more 

than 100% or less than 0%). The remaining majority of data points are sufficient to calculate an estimate 

of unrecorded liabilities at the accrual date. 

• A large data set reflecting as closely as possible the entire categorical obligation creation and performance 

history will allow for an estimation of current liabilities utilizing a percentage of completion methodology 

at a 95% confidence interval. 

• An obligation may lie dormant at some point during its life when no delivery is being made. In this case, 

no current performance liability should be recognized for this obligation until there is evidence (usually a 

payment) that it is once again active and should rejoin the accrual base. The trigger for determining the 

dormancy period for exclusion is related to the accrual category characteristics. 

• Payments are not made on the same day as vendor invoice preparation, even if submitted electronically. 

Therefore, a processing delay period must be added to the accrual period, which runs from the latest 

payment date to the accrual month end. Such a processing period is common to all categories. 

As this estimate is based on subjective as well as objective factors, includes many management assumptions, 

and because the estimate is material to the U.S. Forest Service’s financial statements, KPMG evaluated both 

the quantitative as well qualitative attributes related to the estimate. 

B-21
Exhibit I 

 (Continued) 

During FY 2009 the U.S. Forest Service focused its efforts, and closed its related prior year recommendations 

on developing and enhancing the statistical code and identifying management’s assumptions inherent in MAP 

II. However, the U.S. Forest Service did not equally focus its efforts on validating the reasonableness of 

management’s assumptions used to derive the accrued liability estimate produced by MAP II for the June 30, 

and September 30, 2009 accrual estimates. 

U.S. Forest Service did not have a plan to perform validation tests (i.e., subsequent payment analysis) of all 

MAP II assumptions prior to implementing MAP II for its June 30, or September 30, 2009 accrual in its 

financial statements. 

According to AU Section 342, Auditing Accounting Estimates, Paragraph .03: “Management is responsible 

for making the accounting estimates included in the financial statements. Estimates are based on subjective as 

well as objective factors and, as a result, judgment is required to estimate an amount at the date of the 

financial statements. Management's judgment is normally based on its knowledge and experience about past 

and current events and its assumptions about conditions it expects to exist and courses of action it expects to 

take. 

Paragraph .05: Management is responsible for establishing a process for preparing accounting estimates. 

Although the process may not be documented or formally applied, it normally consists of: 

a. Identifying situations for which accounting estimates are required. 

b. Identifying the relevant factors that may affect the accounting estimate. 

c. Accumulating relevant, sufficient, and reliable data on which to base the estimate. 

d. Developing assumptions that represent management's judgment of the most likely circumstances and 

events with respect to the relevant factors. 

e. Determining the estimated amount based on the assumptions and other relevant factors. 

f. Determining that the accounting estimate is presented in conformity with applicable accounting 

principles and that disclosure is adequate. 

Paragraph .06: An entity's internal control may reduce the likelihood of material misstatements of accounting 

estimates. Specific relevant aspects of internal control include the following: 

a. Management communication of the need for proper accounting estimates. 

b. Accumulation of relevant, sufficient, and reliable data on which to base an accounting estimate. 

c. Preparation of the accounting estimate by qualified personnel. 

d. Adequate review and approval of the accounting estimates by appropriate levels of authority, 

including: 

1. Review of sources of relevant factors, 

2. Review of development of assumptions, 

3. Review of reasonableness of assumptions and resulting estimates, 

4. Consideration of the need to use the work of specialists, and 

5. Consideration of changes in previously established methods to arrive at accounting estimates. 

e. Comparison of prior accounting estimates with subsequent results to assess the reliability of the 

process used to develop estimates.” 

B-22
Exhibit I 

 (Continued) 

KPMG requested that U.S. Forest Service validate the MAP II accrual estimate using a retrospective look at 

historical payments. During October 2009, U.S. Forest Service performed a comparison of the MAP II 

September 30, 2008 accrued liability to subsequent payments and applied the results to the September 30, 

2009 MAP II accrued liability based on comparability of the FYs. As a result of the validation analysis, the 

U.S. Forest Service identified process weaknesses as well as required adjustments to management’s 

assumptions. 

1) For the last month of the quarter, (i.e., September for the FY end) transactions such as current month 

payments and the related obligations, new obligations, and modification to obligations should be 

excluded from the accrual calculation due to the period of performance for such transactions 

predominantly falling to the next FY. This resulted in a $69.3 million over accrual of the September 

30, 2009 accrued liability. 

2) For the September 30, 2009 accrual, U.S. Forest Service did not properly exclude the entire 

population of federal transactions, which are accrued through a different process outside of MAP II. 

This resulted in an additional $2.7 million over accrual for the September 30, 2009 accrued liability. 

3) The subsequent payment testing resulted in an under accrual of the September 30, 2009 accrued 

liability of $14.4 million. 

The overall conclusion of the above testwork is that the September 30, 2009 accrued liability is overstated by 

$57.6 million. This amount was proposed and passed as an audit adjustment. 

Recommendation Number 6:

We recommend that U.S. Forest Service management: 

A. Develop policies and procedures to obtain subsequent payment data on a monthly basis to validate the 

reasonableness of the MAP II quarterly expense accrual estimate. 

B. Develop a robust review process to ensure all data input and exclusions from the MAP II expense accrual 

process are complete and accurate. 

C. Document and retain validation testing and results as substantiation of the recorded estimate. 

D. Determine if any changes to U.S. Forest Service operations, information systems or business process have 

an effect on any management assumptions used in the MAP II expense accrual. 

E. Based on the above, make any adjustments to the methodology and/or assumptions to the MAP II expense 

accrual. 

Accrual of Real Property Needs Improvement (Repeat Finding)

During FY 2009 substantive testwork, we noted that real property was not being accrued properly at year-end. 

Specifically, we identified 33 out of 196 real property samples which should have been recorded (i.e., 

accrued) in the prior FY. These errors amounted to approximately $20 million. 

These exceptions resulted from a lack of adherence to established accrual policies and procedures to record 

into service, in the proper FY, completed assets that have been placed into operation. 

B-23
Exhibit I 

 (Continued) 

Forest Service Handbook (FSH) 6509.19 – Asset Financial Management Handbook, Chapter 20 – Real 

Property, Section 20.41f - Albuquerque Service Center, Branch Chief of the Property and Working Capital 

Branch, “It is the responsibility of the Albuquerque Service Center (ASC-B&F), Branch Chief of the Property 

and Working Capital Branch or equivalent to: 

1. Verify that funds are appropriately used for the acquisition and maintenance of real property assets based 

on requests submitted from the field to establish job codes and approved by both the Budget Officer and 

the Real Property Specialist.... 

2. Establish in FFIS the real property job codes with the proper accounting data to capture the capitalized 

costs correctly based on coordination with other staffs.... 

7. Coordinate with Acquisition Management (AQM), Engineering, Recreation, or other Forest Service staffs 

to review acquisition actions to determine proper capitalization or expense treatment....” 

Section 22.23 Work-in-Process [WIP], “Costs are not depreciated while coded as WIP. An asset is put into 

service when it has been completed and accepted by [U.S.] Forest Service. When the Asset is put into service, 

the in-service date is entered in the [Corporate Property Asset Information System] CPAIS sub ledger. At that 

time, CPAIS generates accounting transactions to move the capitalized value to the appropriate GL account.” 

Construction in progress in the notes to the financial statements as of September 30, 2008 was overstated by 

approximately $20 million and buildings/structures account was understated by the same amount, due to the 

capitalization of assets in FY 2009 that were placed in service prior to October 1, 2008. This had no impact on 

the FY 2009 real property balance since these assets were properly capitalized as of September 30, 2009. 

However, depreciation expense in the current year was overstated by approximately $7.2 million due to the 

catch-up in depreciation from the date the property was actually placed into service. The prior period 

depreciation amount was proposed and passed as an audit adjustment. 

Recommendation Number 7:

We recommend that the U.S. Forest Service management: 

A. Devote the necessary resources to address the remaining backlog of real property assets that are placed 

into service but still remain in the accounting system as WIP. 

B. Create escalation procedures to ensure that real property assets that are placed into service are recorded in 

the proper FY. 

Period-end Analytical Procedures Need Development (Repeat Finding)

In the FY 2008 audit report, it was recommended the U.S. Forest Service develop period-end analytical 

procedures. During our 2009 audit, it was noted that those procedures have not yet been developed. 

If U.S. Forest Service develops a comprehensive analytical procedure to review the reasonableness of periodend financial statement amounts, the variance such as the depreciation expense error that occurred in FY 2008 

would have been identified, researched, and resolved. 

OMB Circular No. A-123, Management’s Responsibility for Internal Control states: “Reliability for financial 

reporting means that management can reasonably make the following assertions: 

1...All assets and liabilities exist as of the reporting date. 

2...All assets, liabilities, and transactions that should be reported have been included and no unauthorized 

transactions or balances are included....”

We continue to recognize the need for the U.S. Forest Service management to develop and perform a robust 

analytical as noted in prior year Recommendation 15 of Audit Report No. 08401-9-FM. 

B-24
Exhibit I 

 (Continued) 

Number 3: The U.S. Forest Service Needs to Develop Comprehensive Procedures and Analysis to 

Document and Support Management’s Assumptions Regarding Revenue Accruals 

U.S. Forest Service’s internal control and review procedures over general revenue transactions did not ensure 

that it has accurately and consistently accounted for general revenue transactions in accordance with U.S. 

GAAP. Specifically, we identified 24 out of 270 samples in which the U.S. Forest Service recorded general 

revenue transactions that were either not partially or completely recorded in the correct accounting period. 

Further, comprehensive analysis was not performed and documented by U.S. Forest Service management to 

ensure that all material sources of revenue were properly accrued and accounted for in the correct accounting 

period. Additionally, there was no documented analysis to validate management’s assumption that revenue 

which is not accrued is not material to the financial statements in any given year, or to quantify such amounts. 

U.S. Forest Service’s policy for accruing general revenue does not ensure that all general revenue transactions 

are recorded in the proper period. There is also a lack of formal management review in place to ensure all 

material sources of revenue are considered for accrual and management’s assumptions of materiality are 

substantiated. 

The Federal Accounting Standards Advisory Board, Statement of Federal Financial Accounting Standard 

(SFFAS) No. 7, Accounting For Revenue and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting, Paragraph 3 identifies the following: “These accounting standards 

recognize exchange revenue at the time that a Government entity provides goods or services to the public or 

to another Government entity. The revenue is measured at the price likely to be received. Thus, with some 

differences that are explained in the standard, the accounting for earned revenue is comparable to the private 

sector's accrual accounting for earned revenue. Exchange revenue includes most user charges other than taxes. 

Such user charges include regulatory user charges, in which the exchange is not wholly voluntary but the 

revenue is generally, but not always, related to the cost of providing service to identifiable groups.”

Paragraph 27 and 28 identifies the following: “Except as otherwise noted, the provisions of the accounting 

standards in this statement need not be applied to items that are qualitatively and quantitatively immaterial. 

The determination of whether an item is material depends on the degree to which omitting or misstating 

information about the item makes it probable that the judgment of a reasonable person relying on the 

information would have been changed or influenced by the omission or the misstatement.” 

Paragraph 37 identifies the following: “When advance fees or payments are received, such as for large-scale, 

long-term projects, revenue should not be recognized until costs are incurred from providing the goods and 

services (regardless of whether the fee or payment is refundable). An increase in cash and an increase in 

liabilities, such as ‘unearned revenue,’ should be recorded when the cash is received. ‘Unearned revenue’ 

should also be recorded if an agency requests advances or progress payments prior to the receipt of cash and 

records the amount.” 

Not accruing for revenue in the year earned can cause a material understatement or overstatement of revenue 

in any given year causing inconsistent reporting of operating results. For the FY ending September 30, 2009, 

the sample results were extrapolated to a likely overstatement of approximately $50.8 million for general 

revenue. This amount was proposed and passed as an audit adjustment. 

Recommendation Number 8:

We recommend that Forest Service management: 

A. Enhance its testing procedures, including a quarterly robust analysis of subsequent receipts and the related 

period of performance, to ensure that general revenue transactions are properly recorded in the correct 

period. 

B-25
Exhibit I 

 (Continued) 

B. Enhance its review and documentation to include a more comprehensive analysis of materiality to 

consider revenues from certain business processes for accrual. 

C. Enhance its policies and procedures to include an evaluation of the materiality of any revenues not 

recorded in accordance with U.S. GAAP, both individually by business process and in the aggregate. 

Number 4: The U.S. Forest Service Needs to Develop A Coordinated Intra-Agency Effort to Address 

Implementation of New Accounting Standards and Financial Reporting Requirements 

Stewardship Property Plant and Equipment Accountability and Reporting Needs Improvement 

As of September 30, 2009, U.S. Forest Service personnel did not complete the data entry of heritage asset 

information into the Infrastructure Management System (INFRA) database module. In addition, there was not 

a complete listing available for financial reporting purposes. 

Additionally, U.S. Forest Service does not have effective monitoring procedures in place to ensure the timely 

reporting of all “Non-Forest Service” heritage asset sites in its financial statements. 

These control weaknesses existed because U.S. Forest Service has not issued directives to field personnel to 

correctly upload the heritage assets information to INFRA module. In addition, U.S. Forest Service 

management has not ensured that the heritage assets module in INFRA is completely populated to produce 

accurate financial statement information. 

SFFAS 29, Heritage Assets and Stewardship Land, requires that entities adopt their physical unit for 

disclosing stewardship land and heritage assets and report the information as a note disclosure to the financial 

statements. The U.S. Forest Service adopted the physical unit of reporting their heritage assets as: Forests, 

Grasslands, and Non-Forest Service locations. 

The disclosure of “Non-Forest Service” heritage asset sites in the U.S. Forest Service’s financial statements is 

not complete and accurate. An INFRA report and information gathered through a data call of Forest Service’s 

“Non-Forest Service” heritage asset sites as of September 30, 2009 indicates the number of “Non-Forest 

Service” heritage asset sites as of September 30, 2009 is 135. This number is an increase of 113 sites from the 

22 sites reported as of September 30, 2008. Many of these sites existed as of September 30, 2008. In addition 

to the increase in the number of sites, the U.S. Forest Service still has a number of undisclosed sites that have 

yet to be accounted for in the financial statements. 

Recommendation Number 9:

We recommend that U.S. Forest Service management: 

A. Issue directions to field personnel to ensure that the heritage assets are completely and accurately recorded in 

INFRA in a timely fashion. 

B. Develop monitoring policies and procedures to ensure that all heritage assets are recorded in INFRA and if 

necessary, updated through additions or deletions in a timely fashion. 

The Impact of Full Costing of Inter-Agency Activity Was Not Fully Documented by the U.S. Forest 

Service 

The U.S. Forest Service did not utilize a comprehensive team (including policy, financial reporting, 

acquisition management, and grants and agreements specialists) to identify, assess, and document the impact 

of implementing SFFAS No. 30 Inter-Entity Cost Implementation, on the U.S. Forest Service’s operations and 

reporting of such information in the U.S. Forest Service’s financial statements. 

B-26
Exhibit I 

 (Continued) 

SFFAS 30 and the SFFAS Technical Release No. 8 Clarification of Standards Relating to Inter-Entity Costs, 

state that for the reporting periods beginning after September 30, 2008, the entities will fully implement the 

inter-entity cost provision in SFFAS 4, Managerial Cost Accounting Standards and Concepts. By fully 

implementing the provisions in SFFAS 4 (issued in July 1996) this standard will require the following for 

inter-entity cost: 

• 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 or 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. 

• The receiving entity should recognize in its accounting records the full cost of the goods or services it 

receives as an expense or, if appropriate, as an asset (such as WIP or inventory). The information on costs 

of non-reimbursed or under-reimbursed goods or services should be available from the providing entity. 

However, if such cost information is not provided, or is partially provided, a reasonable estimate may be 

used by the receiving entity, therefore the receiving entity is not exempt from imputing the cost if the 

providing entity is unable to provide the information. The estimate should be of the cost of the goods or 

services received (the estimate may be based on the market value of the goods or services received if an 

estimate of the cost cannot be made). 

• 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. 

The U.S. Forest Service relied on its policy department to consider the impact of this standard and never 

documented a formal analysis to determine if the standard would not have a material impact to the financial 

statements until requested to do so during the FY 2009 audit. 

Although the impact of SSFAS 30 did not have a material effect on the September 30, 2009 financial 

statements, the effect could be material in future years depending on the volume of agreements and payments 

made in those years. By not performing a comprehensive analysis both at inception as well as annually, the 

U.S. Forest Service could understate the costs associated with inter-entity agreements. 

Recommendation Number 10:

We recommend that U.S. Forest Service management develop procedures that would require a comprehensive 

team across all necessary functions/departments to fully assess the impact of this and future Federal 

accounting standards and that the analysis be documented, maintained, and periodically re-evaluated. 

Comprehensive Linking of Strategic Goals and Reporting of Program Costs Needs Improvement 

During our testwork we noted the major U.S. Forest Service programs identified in the FY 2009 financial 

statement note entitled Sub-organization Program Costs/Program Costs by Segment do not fully relate to the 

U.S. Forest Service’s major goals and outputs described in the U.S. Forest Service’s strategic and 

performance plan. Per the U.S. Forest Service’s Strategic Plan FY 2007–2012 the following are its seven 

main goals: 

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

2. Provide and Sustain Benefits to the American People 

3. Conserve Open Space 

4. Sustain and Enhance Outdoor Recreation Opportunities 

B-27
Exhibit I 

 (Continued) 

5. Maintain Basic Management Capabilities of the Forest Service 

6. Engage Urban America With Forest Service Programs 

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

The major goals described above do not fully relate with the following responsibility segments as reported on 

the U.S. Forest Service’s financial statements: 

1. National Forests and Grasslands 

2. Forest and Rangeland Research 

3. State and Private Forestry 

4. Wildland Fire Management 

When the FFIS was implemented, the U.S. Forest Service did not have a strategic plan in place. As a result, 

account mapping in FFIS was not established to match the strategic plan. U.S. Forest Service does not believe 

it is cost beneficial to change its account mapping in FFIS, since a new GL system is scheduled for 

implementation in FY 2011. 

OMB Circular No. A-136, Financial Reporting Requirements, Section II.4.4.1 “The SNC [Statement of Net 

Costs] should show the net cost of operations for the reporting entity, as a whole, by major program, which 

should relate to the major goal(s) and output(s) described in the entity’s strategic and performance plans, 

required by GPRA [Government Performance and Results Act].”

Currently the U.S. Forest Service’s costs in its financial statements are not presented in a level of detail that 

provides a meaningful comparison of costs to outputs and/or performance measures.

Recommendation Number 11:

We recommend that the U.S. Forest Service management: 

A. Work with the USDA to develop system configurations/account mapping, in the new GL system, which 

will allow the U.S. Forest Service to show the net cost of operations for the reporting entity, as a whole, 

by major programs, which relate to the major goals and outputs described in the U.S. Forest Service’s 

strategic and performance plan. 

B. Work with Strategic Planning Budget and Accountability to align the U.S. Forest Service’s FY 2010-

2015 Strategic Plan strategic goals to the U.S. Forest Service’s presentation of its major responsibility 

segments in the statement of net cost (at a minimum make a connection from significant goals to major 

responsibility segments). 

Number 5: Management Review Procedures of Credit Card Transactions and Controls Over the 

Programs Need Continued Improvement (Repeat Condition)

During the FY 2009 audit, the U.S. Forest Service migrated to a new purchase and fleet card system called 

SmartPay, which is administered by U.S. Bank. However, we continued to note control weakness in the 

purchase and fleet card program. 

The U.S. Forest Service uses purchase cards to reduce administrative costs and allow its employees to procure 

supplies and services faster than through traditional government procurement regulations. During FY 2009, 

the U.S. Forest Service incurred expenses of approximately $205 million through the use of purchase cards. 

In addition, the U.S. Forest Service uses fleet cards to purchase automotive related services without going 

B-28
Exhibit I 

 (Continued) 

through traditional government procurement regulations. During FY 2009, the U.S. Forest Service incurred 

expenses of approximately $47 million through the use of fleet cards. 

Purchase Card Monitoring Needs Continued Improvement

During FY 2009 field site test work, we noted four of ten samples where U.S. Forest Service cardholders had 

not approved transactions within 30 days of appearing in the Access Online (AXOL) system and two of ten 

samples where U.S. Forest Service supervisors had not approved transactions within 60 days (30-day limit for 

cardholder approval and 30-day limit for manager approval) of appearing in the AXOL system. 

FSH 6309.32 Part 4G13 (f) states that, “The cardholder’s first line supervisor or detailed acting is responsible 

for monitoring purchase card activities”. 

The USDA Office of Procurement and Property Management, Charge Card Service Center issued a Quick 

Guide to Proper Use of the Card and Convenience Checks for Approving Officials. The guide details the 

monitoring responsibilities that an Approving Official (AO) is given over authorized cardholders. 

Specifically: 

• The AO Responsibilities sections states “[An AO] Reviews cardholder transaction reports on a monthly 

basis and maintains the reports per instructions in DR (Departmental Regulations) 5013-6.” 

• The Transaction Approval Policy section states “AOs are responsible for ensuring that cardholders 

approve purchase card transactions within 30 days after appearing in AXOL. AO’s must final approve 

transactions within 30 days after transactions appear in their ‘Manager Approval Queue’ in AXOL.” [60 

days noted in condition.] 

The SmartPay policies are relatively new and are not fully implemented at most U.S. Forest Service locations. 

In addition, the policies set forth by FSH 6309.32 Part 4G13 were effective as of February 2009 and further 

updates from the Quick Guide to Proper Use of the Card and Convenience Checks for Approving Officials

were effective as of May 2009. The U.S. Forest Service has continued to distribute additional updates 

regarding SmartPay procedures, the latest being issued during July 2009. 

Timely approvals of purchase card transactions ensure that government purchase cards are properly utilized 

for official government business only. These approvals also help to detect questionable transactions or 

possible misuse of purchase cards. There is a possibility that inappropriate expenses could go undetected if 

cardholder reconciliations and supervisor reviews are not conducted in a consistent and timely manner. 

Recommendation Number 12:

We recommend that U.S. Forest Service management: 

A. Ensure through policy reminders and training that cardholders complete the 30 day reconciliation and that 

supervisors complete the 60 day supervisor review on a timely basis. 

B. Monitor compliance with the policy which requires supervisors to complete reviews of cardholder 

transaction reports on a monthly basis and maintain the evidence of such reviews. 

Controls Over Fleet Cards Need Improvement

During our FY 2009 internal control test of design and substantive testwork we noted that the U.S. Forest 

Service did not have reasonable supporting documentation to demonstrate evidence of the operating 

effectiveness/management review of the fleet card controls implemented. 

B-29
Exhibit I 

 (Continued) 

On December 1, 2008 the USDA switched from Bank of America to US Bank as the provider of purchase 

card and fleet card transactions. The new provider has been unable to provide the data necessary for the U.S. 

Forest Service fleet administrators to generate the statistical sampling and review reports that were utilized 

under the prior provider. Therefore, fleet managers currently have no consistent documented and auditable 

process for reviewing monthly non-gas purchases and gas purchase listings. 

OMB Circular A-123 defines management’s responsibility for internal controls over Government agencies, 

page 6 – 7 states, “Internal control includes processes for planning, organizing, directing, controlling, and 

reporting on agency operations.” Page 11 states “Internal controls should be designed to provide reasonable 

assurance regarding prevention of or prompt detection of unauthorized acquisition, use or disposition of 

assets.” 

According to DR 5400-6 (10) (j) (1): “OMB Circular A-123 Appendix B, dated April 28, 2006, requires 

agencies to implement management controls, policies, and practices for ensuring appropriate charge card 

usage. USDA’s [Department Program Manager] DPM and [Agency Fleet Program Coordinator] AFPC’s 

monitor fleet charge card transactions through the [Electronic Access System] EAS and statistical sampling. 

[Local Fleet Program Coordinator] LFPCs, [Regional/Area Fleet Program Coordinator] R/AFPCs, and 

AFPCs are expected to routinely monitor (e.g., monthly, at a minimum quarterly) fleet charge card 

transactions within their agencies to identify questionable transactions. When questionable transactions are 

flagged, the coordinators will investigate these transactions and determine if there are any fraud, waste, or 

abuse issues that must be addressed.” 

There is a possibility that inappropriate expenses could go undetected if management reviews are not 

conducted in a consistent and timely manner. 

Recommendation Number 13:

We recommend that U.S. Forest Service management, once US Bank is able to generate reports, implement a 

standardized process to evidence review of fleet card charge transactions in an effort to detect any unusual 

transactions or improper use of the fleet cards. 

In addition, we continue to recognize the need for the U.S. Forest Service management to implement the 

Washington Office (WO) Directive 7130/1430 and to require receipts for purchases, where feasible, as 

reported in prior year Recommendation 10B of Audit Report No. 08401-8-FM. 

Number 6: The U.S. Forest Service Needs to Improve Internal Controls for Revenue Related 

Transactions (Repeat Condition) 

Residual Deposits in the Liability for Deposit Funds, Clearing Accounts, and Undeposited Collections 

Need to be Identified and Properly Posted (Repeat Condition)

During our FY 2009 audit we noted prior year transactions that resided in GL account 2400, Liability for 

Deposit Funds, Clearing Accounts and Undeposited Collections. These transactions resided in GL account 

2400 because the final destination of the transaction has not been determined. Specifically, we identified 22 

exceptions out of 120 sample items as of September 30, 2009. For all 22 exceptions there was a lack of 

support to prove the transactions are still valid in the account. 

In addition, the U.S. Forest Service has misclassified Federal funds in fund SDFG as non-Federal. Fund 

SDFG is a fund specifically for Federal transactions and therefore, only Federal funds should be included. 

B-30
Exhibit I 

 (Continued) 

According to the U.S. Forest Service personnel, there is a lack of dedicated resources available to review and 

assess the accuracy of transactions flowing through the liability for deposit funds, clearing and un-deposited 

collections account. 

SFFAS 1, Accounting for Selected Assets and Liabilities, paragraph 85 states, “Federal entities may receive 

advances and prepayments from other entities for goods to be delivered or services to be performed. Before 

revenues are earned, the current portion of the advances and prepayments should be recorded as other current 

liabilities. After the revenue is earned (goods or services delivered, or performance progress is made 

according to engineering evaluations), the entity should record the appropriate amount as a revenue or 

financing source and should reduce the liability accordingly. Other current liabilities due to federal entities are 

intra-governmental liabilities that should be reported separately from those due to employees and the public.” 

The U.S. Treasury and U.S. Forest Service definition of funds defines fund SDFG as an undistributed 

intergovernmental payment. 

The U.S. Forest Service could be overstating its liability for deposit funds, clearing accounts and undeposited 

collections (GL 2400). There is a known overstatement of approximately $25.9 million and a known 

understatement of approximately $9.1 million, causing a net known overstatement of approximately $16.8 

million. In addition, there is a likely overstatement of $30.8 million and a likely understatement of 

approximately $12.9 with a net likely overstatement of $17.9 million. These amounts were proposed and 

passed as audit adjustments. 

In addition, there is a known misclassification of $3.2 million of federal funds classified as non-federal in 

fund SDFG. This amount was proposed and passed as an audit adjustment. 

We continue to recognize the need for the U.S. Forest Service management to devote the necessary resources 

to identify, research, and resolve prior year residual deposits in GL 2400 as noted in prior year 

Recommendation 5 of Audit Report No. 08401-8-FM. 

Internal Controls over the Reimbursable Agreement Close-out Process Need Improvement (Repeat 

Condition)

During our FY 2009 substantive testing over balances as of March 31, 2009 and activity for the period of 

April 1 through September 30, 2009 over liability for advances and prepayments (GL account 2310), we 

noted 22 exceptions out of 104 sample items. For all 22 exceptions the period of performance had expired but 

unfilled customer orders with advance remain recorded in U.S. Forest Service’s GL. 

In addition, during our substantive testing over balances as of March 31, 2009 and activity for the period of 

April 1, 2009 through September 30, 2009 for unfilled customer orders without advance (GL 4221), we noted 

23 exceptions out of 126 sample items. For all 23 exceptions the period of performance had expired but 

unfilled customer orders without advance remain recorded in Forest Service’s GL. 

The U.S. Forest Service did not comply with its policy requiring agreements to be closed out within 90 days 

of the last activity/expiration date of the agreement. 

FSH 6509.11k Chapter 50, Paragraph 56.82i, Reimbursable Agreements states that “The Reimbursable and 

Advance Collection Agreements (RACA) Branch, [ASC - B&F] ASC, is responsible for: Closing out 

agreements within 90 days of last activity.” 

The U.S. Forest Service is overstating its unfilled customer orders with advance (GL 4222) and advances 

from others (GL 2310). The errors identified in the sample were extrapolated to the population and an 

overstatement was estimated at $11.7 million. This amount was proposed and passed as an audit adjustment. 

B-31
Exhibit I 

 

As a result of our GL 4221 testwork as of March 31, 2009, the U.S. Forest Service performed a high level 

analysis and adjusted its GL account 4221 downward by $15.3 million. Taking into account the U.S. Forest 

Service’s high level adjustment and the extrapolation of our testwork results, it was projected that GL account 

4221 has a remaining overstatement of $2.7 million. This amount was proposed and passed as an audit 

adjustment. 

We continue to recognize the need for the U.S. Forest Service management to periodically monitor the age 

and activity of agreements within FFIS and comply with the FSH Section 6509.11k as noted in prior year 

Recommendation 12A & 12B of Audit Report No. 08401-9-FM. 

Cash Collection Officer Audit Internal Control Needs Improvement

During our internal control test of design over the annual Cash Collection Officer (CCO) audit, one CCO was 

selected at the Arapaho National Forest for review. The CCO had not received an annual audit within the past 

year as required by the FSH. 

FSH 6509.11k, Chapter 30 – Collections, Para 31.11 – Audit of Collection Officer Activities, Frequency by 

type of Collection, Sub-para g. states: “All other. ... One audit per year, and upon termination of collection 

officer designation.” 

The U.S. Forest Service has not effectively implemented its policy requiring annual audits of its CCOs. 

The U.S. Forest Service may be misstating the cash collected by CCO. In addition, the risk of loss or 

misappropriation of assets is increased without a control in place to monitor its execution. 

Recommendation Number 14:

We recommend that U.S. Forest Service management review and assess the efficiency of the control 

environment for the audits of cash collected by CCO and where necessary revise and train personnel on new 

policies and procedures. 

Number 7: Physical Inventory Policies and Procedures of Pooled Real Property Need to be Developed 

(Repeat Condition) 

The U.S. Forest Service agreed to develop and implement a plan to improve the quality of the 5-year pooled real 

property physical inventories. We determined that no plan has yet been developed to inventory pooled assets 

during the 5-year period FY 2008-2012.

Agriculture Property Management Regulations, Chapter 110-84 Annual Real Property Inventories 

Supplementing PART 102-84; and PART 104-51 Property Accountability and Control- 104-51.106 (a) (2) 

states: “Real Property. Physical inventories of all real property, except land, shall be taken by each agency 

every five years.” 

The pooled real property assets records may not be accurate and could be misstated in the financial 

statements. 

We continue to recognize the need for the U.S. Forest Service management to develop and implement a plan 

to improve the quality of the 5-year pooled real property physical inventories as noted in prior year 

Recommendation 7 of Audit Report No. 08401-9-FM. 

B-32
Exhibit II 

 (Continued) 

STATUS OF PRIOR YEAR’S SIGNIFICANT DEFICIENCIES/MATERIAL WEAKNESSES

As required by Government Auditing Standards and OMB Bulletin No. 07-04, Audit Requirements for 

Federal Financial Statements, as amended, we have reviewed the status of the prior year’s significant 

deficiencies. The following table summarizes these issues and provides our assessment of the progress U.S. 

Forest Service made in correcting these significant deficiencies. We have also provided the OIG report where 

the issue is monitored for audit follow-up. In the status column of the table a recommendation will be note as 

either: 

• Open, which means corrective action has not been completed by the U.S. Forest Service, and the 

comment has been repeated in Exhibit 1. 

• Closed, which means corrective action has been completed by the U.S. Forest Service, and the comment 

has not been repeated in Exhibit 1. 

• Reissued- Closed, which means a new recommendation has been issued in Exhibit 1 because there were 

changes in the business processes making the prior year recommendation not practical. 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-9-FM November 2008 

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Continue to Improve its 

General Controls Environment

[2009 Significant Deficiency;

2008 Significant Deficiency]

1. We recommend that the U.S. Forest Service 

management:

A. Improve patch management practices to establish a set 

frequency for reviewing system patch levels for 

security weaknesses.

B. Determine if vulnerability scanning procedures need to 

be refined in order to ensure future issues related to 

unpatched systems or improper configurations are 

identified and issues are remedied.

2. We recommend that U.S. Forest Service management 

initiate the [Certification and Accreditation] C&A 

process for all major applications in a timely enough 

manner in order to avoid having systems in production 

that are not appropriately certified.

3. We recommend that U.S. Forest Service management:

A. Ensure that all required audit logging capabilities are 

turned on as required by FSM 6684.31.

B. Establish procedures to periodically review these audit 

logs for unauthorized activity.

4. We recommend that U.S. Forest Service management:

A. List and document all known weaknesses in their 

[Plans of Action and Milestones] POA&Ms, including 

[Security Test and Evaluation] ST&E results. Each 

POA&M documented should be checked for 

completeness and accuracy to verify that all issues are 

Open

Open

Closed

Open

Open

ReissuedClosed

B-33
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-9-FM November 2008 

Material Weakness/ 

Significant Deficiency

Recommendation Status

assigned an official due date and task number to allow 

for the effective tracking of issues.

B. Document the rationale behind all assigned due date 

extensions so that the root causes can be easily 

identified and addressed.

C. Develop POA&M-related metrics that can be updated 

and reviewed on a quarterly basis. These metrics would 

highlight inefficiencies so that they can be addressed 

immediately to help prevent date slippage from 

becoming a pervasive issue for numerous POA&M 

items.

ReissuedClosed

ReissuedClosed

The U.S. Forest Service Needs 

to Develop Comprehensive 

Policy and Procedures for 

Financial Management and

Reporting of Wildland Fire 

Activity

[2009 Control Deficiency;

2008 Significant Deficiency]

5. We recommend that U.S. Forest Service management 

develop and implement comprehensive accounting 

policy and procedures related to:

A. Expenditure and non-expenditure transfers-in of funds 

to Wildland Fire fund (i.e., [Treasury Appropriation 

Fund Symbol] TAFS 12X1115) for wildfire 

suppression;

B. Utilization of expended appropriations posting logic of 

transferred funds (both expenditure and nonexpenditure) in Wildland Fire Fund (i.e., TAFS 

12X1115) based upon management’s intent to obtain 

appropriations to repay borrowed funds, and;

C. Record the repayment of these funds to the originating 

federal or non-federal funds treasury symbols.

6. We recommend that U.S. Forest Service management 

develop and implement formal policies and procedures 

to credit principal appropriations and offset costs 

incurred by the U.S. Forest Service on behalf of other 

governmental entities when expenditure refund 

receivables are collected in compliance with the 

Intergovermental Cooperation Act.

Closed

Closed

Closed

Closed

Physical Inventory Policies 

and Procedures of Pooled Real 

Property Need to be 

Developed

[2009 Significant Deficiency;

2008 Significant Deficiency]

7. We recommend that U.S. Forest Service management 

develop and implement in FY 2009 a plan to improve 

the quality of the 5-year pooled real property physical 

inventories. 

Open

Accountability for 

Unliquidated Obligations 

(ULOs) Needs Continued 

8. We recommend that U.S. Forest Service management:

A. Strengthen the ULO review process and monitor the 

validity and accuracy of outstanding ULO balances at Closed

B-34
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-9-FM November 2008 

Material Weakness/ 

Significant Deficiency

Recommendation Status

Improvement

[2009 Control Deficiency

2008 Significant Deficiency]

the local and national levels,

B. Perform additional review of ULO activity occurring 

between 8/1/08 and 9/30/08 for validity and accuracy; 

and

C. Perform review of all Non-Routine ULOs to determine 

validity and accuracy as of year-end.

Closed

Closed

The U.S. Forest Service Needs 

to Improve Internal Controls 

and Management Oversight 

for Environmental and 

Disposal Liabilities (EDL)

[2009 Control Deficiency

2008 Significant Deficiency]

9. We recommend that U.S. Forest Service management:

A. Implement a process whereby both the environmental 

engineers and ASC – B&F review the EDL 

transactions recorded in CEE for compliance with 

SFFAS No. 5 on a quarterly basis. This review would 

be to determine the validity of recorded balances as 

well as the proper classification of such liability.

B. Develop a standard for documentation for all EDL 

estimates to ensure compliance with documentary 

evidence requirements.

C. Revise and implement the FSH policy to comply with 

applicable technical accounting literature cited above to 

ensure accurate reporting.

D. Revise, implement, and assess the efficiency of the 

control environment for developing the EDL accrual.

E. Require regional engineers to fully document and 

support all EDL accrual estimates and to provide this 

supporting documentation to both WO Engineering and 

ASC-B&F for review of reasonableness and 

compliance with technical accounting literature. The 

review by both WO Engineering and ASC-B&F should 

take place on at least a quarterly basis and evidence of 

such review should be documented and maintained.

10. We recommend that U.S. Forest Service management:

A. Ensure that future note disclosures relating to EDL 

comply with OMB Circular A-136.

B. Identify an individual within the [Financial Reporting 

and Reconciliation] FR&R Branch that would be 

responsible for completing the following tasks in a 

timely manner:

• Identifying and researching new and existing 

financial reporting standards, and OMB policies;

• Determining if existing accounting policies and 

procedures are in compliance with promulgated 

Closed

Closed

Closed

Closed

Closed

Closed

Closed

B-35
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-9-FM November 2008 

Material Weakness/ 

Significant Deficiency

Recommendation Status

standards.

The U.S. Forest Service Needs 

to Improve Internal Controls 

for Revenue Related 

Transactions

[2009 Significant Deficiency

2008 Significant Deficiency]

11. We recommend that U.S. Forest Service management 

record mineral royalty revenues obtained from [Mineral 

Management Service] MMS as non-Federal and ensure 

that deposits held in GL 2400 are properly classified 

between federal and non-federal.

12. We recommend that U.S. Forest Service management:

A. Comply with the FSH Section 6509.11k, and 

B. Periodically monitor the age and activity of agreements 

within FFIS.

Closed

Open

Open

The U.S. Forest Service Needs 

to Refine its Period-end 

Accrual Processes

[2009 Significant Deficiency

2008 Significant Deficiency]

13. We recommend that the U.S. Forest Service 

management:

A. Expand the number of variables to form multiple 

regression models and/or the types of analysis to 

include the use of seasonal indexes in order to account 

for the various changes in the payment patterns by 

fiscal quarter; 

B. Test models with specific additional independent 

variables in some of the models which may help 

substantiate and better expose the true nature of the 

relationships between ULOs and payments in the 

various types of obligations; 

C. Test the adequacy of a 30 day tail and attempt a 90 day

tail;

D. Use Box – Jenkins technique to reduce out (and further 

explain) some of the model variability that may be due 

to temporal effects [see text by G&P, Box and Gulliam 

Jenkins]; and

E. Stratify plot data – ULOs greater than $500,000 vs. 

ULOs less than or equal to $500,000.

14. We recommend that U.S. Forest Service management 

establish formal policies and procedures to accrue for 

property at period-end and train personnel on those 

policies and procedures.

15. We recommend that U.S. Forest Service management 

develop and perform a robust analytical whereby 

depreciation expense would be analytically reviewed 

for reasonableness and consistency with management 

expectations on at least a quarterly basis. We believe 

this review would help identify unusual or unexpected 

Closed

Closed

Closed

Closed

Closed

ReissuedClosed

Open

B-36
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-9-FM November 2008 

Material Weakness/ 

Significant Deficiency

Recommendation Status

variances such that any necessary correcting 

adjustments could be processed in a timely manner.

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-8-FM November 2007

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Continue to Improve its 

General Controls Environment

[2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Material Weakness]

1. We recommend that U.S. Forest Service management: 

A. Document and finalize a risk assessment in accordance 

with the FSM 6682.1 and NIST SP 800-30 for IBS.

D. Ensure that a formalized [Authority To Operate] ATO 

[or an interim ATO] is in place for all major 

applications prior to implementation in accordance 

with FSM 6682.4.

3. We recommend that U.S. Forest Service management:

A. Establish, communicate, and document the 

enforcement of policies and procedures which require 

quarterly management review of Paycheck7 access 

listings and EPIC access listings to verify that access is 

appropriate and in compliance with policy.

B. Ensure that proper SOD principles are adhered to when 

assigning roles in EmpowHR (the new Human Capital 

Management [HRM] personnel system), since this 

system will ultimately replace EPIC.

C. Update the “Identifying and Establishing a Separation 

of Duties and Maintaining Least Privilege for Users” 

document to include specific segregation of duties 

guidelines for system administrators and DBAs.

D. Update the level of user access for all personnel based 

on the appropriate segregation of duties principles. If 

this current level of access is warranted, then mitigating 

controls must be implemented to appropriately track 

user actions.

4. We recommend that U.S. Forest Service management:

A. Update its system configuration management baselines, 

as necessary, to reflect the most recent software 

versions and patch levels to ensure consistency within 

the environment, when implementing new systems.

B. Improve system configuration management practices 

Closed

Closed

Open

Open

Closed

Open

ReissuedClosed

B-37
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-8-FM November 2007

Material Weakness/ 

Significant Deficiency

Recommendation Status

by raising system administrator awareness of the 

requirements for maintaining secure system 

configurations, including software versions, patches, 

and changing vendor default settings as necessary.

ReissuedClosed

The U.S. Forest Service Needs 

to Continue to Improve its 

Financial Management and 

Reporting Process

[2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Significant Deficiency]

5. We recommend that the U.S. Forest Service 

management devote the necessary resources to 

identify, research, and resolve prior year residual 

deposits in GL 2400.

Open

The U.S. Forest Service Needs 

to Refine and Monitor its 

Expense Accrual

[2008 Significant Deficiency; 

2007 Significant Deficiency]

7. We recommend that U.S. Forest Service management:

A. Expand the number of variables to form multiple 

regression models and/or the types of analysis to 

include the use of the obligation paid, duration, 

percentage of time remaining in the obligation and 

percentage of time passed indexes in order to account 

for the various changes in the payment patterns by 

fiscal quarter.

Closed

Accountability for 

Unliquidated Obligations 

(ULOs) Needs Continued 

Improvement

[2009 Control Deficiency; 

2008 Significant Deficiency;

2007 Significant Deficiency]

9. We recommend that U.S. Forest Service management:

A. Continue to train its personnel on performing and 

approving ULO certifications, and

B. Consider removing option #4 from Part II of the ULO 

certification, or

C. Follow up on any option #4 responses provided by the 

administrative units and regions. 

Closed

Closed

Closed

Review of Credit Card 

Transactions and Controls 

Over the Programs Need 

Continued Improvement

[2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Significant Deficiency]

10. We recommend that U.S. Forest Service management:

A. Implement the WO Directive 7130/1430 by providing 

detailed policies and procedures, adequate training on 

those policies and procedures, and monitor compliance 

to ensure appropriate use of the U.S. Forest Service 

funds.

B. Require receipts for all purchases, where feasible, and 

ensure that they are maintained and reviewed by the 

Local Fleet Program Coordinator or Area Fleet 

Program Coordinator.

ReissuedClosed

Open

B-38
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-7-FM November 2006

Material Weakness/ 

Significant Deficiency

Recommendation Status

U.S. Forest Service Needs to 

Refine and Monitor Its 

Expense Accrual

[2008 Significant Deficiency;

2007 Significant Deficiency;

2006 Significant Deficiency]

4. We recommend that U.S. Forest Service management:

• Test models with specific additional independent 

variables in some of the models may help to 

substantiate and better expose the true nature of the 

relationships between ULOs and payments in the 

various types of obligations.

Closed

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-6-FM December 2005

(Replaced prior Audit Report: USDA OIG Audit Report No. 08401-5-FM)

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Improve its General 

Controls Environment

[2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Material Weakness;

2006 Material Weakness; 

2005 Material Weakness]

5. We recommend that U.S. Forest Service network audit 

functions be configured to maintain a history of 

successful and unsuccessful login attempts and user 

activity for the U.S. Forest Service network as 

required by U.S. Forest Service Interim Directive 

6680-2005-3, “Technical Controls.”

7. We recommend that U.S. Forest Service management 

establish controls to facilitate entity-wide adherence to 

the U.S. Forest Service Interim Directive 6680-2005-

3; including the application of strong passwords to all 

user accounts identified as having a weak password 

during the vulnerability assessment, and the removal 

or disabling of all default, temporary, and guest user 

accounts; and

8. We recommend that U.S. Forest Service system 

owners, in cooperation with the [Office of the Chief 

Information Officer] USDA OCIO and in compliance 

with USDA and U.S. Forest Service information 

security requirements:

• Install the latest software versions, service packs, 

and security patches (and remove out-dated 

versions).

Closed

Closed

ReissuedClosed

B-39
Exhibit II 

 (Continued) 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-4-FM November 2004

Material Weakness/ 

Significant Deficiency

Recommendation Status

Accountability for 

Undelivered Orders is Lacking 

[2008 Significant Deficiency; 

2007 Significant Deficiency;

2006 Reportable Condition; 

2005 Material Weakness; 

2004 Material Weakness]

1. We recommend that U.S. Forest Service management:

• Require all locations to fully comply with review 

and certification requirements and follow up to 

resolve questionable items.

ReissuedClosed

The Review of Purchase Card 

Transactions Needs 

Improvement

[2009 Significant Deficiency;

2008 Significant Deficiency; 

2007 Significant Deficiency; 

2006 Reportable Condition; 

2005 Reportable Condition; 

2004 Reportable Condition]

4. We recommend that U.S. Forest Service management 

reinforce its policies in this area and incorporate 

procedures to test the reviews of purchased 

transactions in its AQM reviews.

ReissuedClosed

B-40
Exhibit II 

 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-3-FM January 2004

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Improve Its General 

Controls Environment

[2009 Significant Deficiency; 

2008 Significant Deficiency;

2007 Material Weakness;

2006 Material Weakness; 

2005 Material Weakness; 

2004 Material Weakness; 

2003 Material Weakness]

19. [Additionally,] U.S. Forest Service management 

should review all systems for the presence of 

outdated software or services, missing critical patches 

and/or updates, and improperly configured servers or 

systems. Forest Service should then proceed to 

update or delete any identified outdated software, test 

and install applicable patches or updates, configure 

servers and systems in accordance with Forest 

Service technical bulletins and federal criteria, and 

remove any unneeded services.

ReissuedClosed

The Design and/or 

Implementation of Controls 

Related to the Accurate 

Recording of Personal 

Property Transactions Need 

Improvement

[2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Significant Deficiency;

2006 Reportable Condition; 

2005 Reportable Condition; 

2004 Reportable Condition; 

2003 Reportable Condition]

30. We recommend that the U.S. Forest Service WO 

improve its monitoring of reporting units for 

compliance with the U.S. Forest Service property 

transaction recording policies. 

ReissuedClosed

B-41
Exhibit III 

 

COMPLIANCE AND OTHER MATTERS 

The U.S. Forest Service’s Systems Do Not Comply with FFMIA of 1996 (Repeat Condition) 

During our testwork over the FFMIA, we noted that U.S. Forest Service was not compliant with two of three 

requirements: (1) Financial Management Systems and (2) the USSGL. 

Financial Management Systems

As noted in our internal control significant deficiency on the IT controls environment, the U.S. Forest Service 

had several systems that did not have: 

• Adequate SOD, including FFIS PEND1/PEND 2 approvals, 

• Access control weakness, 

• Change Controls, 

• Vulnerability scanning, and 

• Proper audit log settings. 

We continue to recognize the need for the U.S. Forest Service to address the IT significant deficiency 

recommendations noted in this report. 

Compliance with the USSGL

During our FY 2009 audit, we noted the following deficiencies in the U.S. Forest Service’s USSGL posting: 

• EMIS is used to manage working capital fund equipment which consists of aircraft and vehicles. The 

system does not record depreciation at the equipment transaction level using the USSGL. It records 

depreciation by unit monthly at the summary level in the U.S. Forest Service GL. 

• U.S. Forest Service capitalized lease transactions are not recorded in the GL at the transaction level. 

Instead, they are maintained in off-line spreadsheets and then recorded in the GL quarterly. 

• The U.S. Forest Service does not use proper posting logic to record losses on the disposition of real 

property assets. Losses are not appropriately recorded in account 7210, Losses on Disposition of Assets – 

Other. Instead they are recorded as negative gains in account 7110, Gains on Disposition of Assets – 

Other. 

• U.S. Forest Service transfers non-appropriated monies into appropriated funds, fund category “G.” This 

causes a variance in several of the high priority account relationship tests. This variance is corrected when 

spending occurs and U.S. Forest Service posts a manual adjustment to reverse the unexpended 

appropriations–used/ expended appropriations (3107/5700) posting. These spending posting models, 

which contain a 3107/5700 posting, are driven by the appropriated fund category “G.” This is 

inappropriate posting logic for non-appropriated monies. Instead, U.S. Forest Service should transfer the 

non-appropriated monies into a non fund category “G” fund, so that the related posting logic will not be 

processed using 3107/5700. 

We continue to recognize the need for the U.S. Forest Service to implement a new financial management system 

in 2011 that would ensure compliance with the USSGL at the transaction level as noted in prior year 

Recommendation 12 of Audit Report No. 08401-6-FM. 

B-42
Exhibit IV 

 

STATUS OF PRIOR YEAR’S NONCOMPLIANCE FINDINGS AND OTHER MATTERS 

Open Conditions In this Table are Referenced In Exhibit III

USDA OIG Audit Report No. 08401-6-FM December 2005

(Replaced prior Audit Report: USDA OIG Audit Report No. 08401-5-FM)

Reported Condition Recommendation Status

The U.S. Forest Service’s 

Systems Do Not Comply with 

the Federal Financial 

Management Improvement Act 

(FFMIA)

(2009 Non-compliance;

2008 Non-compliance;

2007 Non-compliance; 

2006 Non-compliance)

12. We recommend that the U.S. Forest Service comply 

with Recommendation 1 of this report as well as 

develop systems and methodologies that comply with 

the SGL at the transactional level.

Open

Open Conditions In this Table are Referenced In Exhibit III

USDA OIG Audit Report No. 08401-4-FM November 2004

Reported Condition Recommendation Status

The U.S. Forest Service Does 

not Obligate All Transactions 

as Required by Appropriation 

Law

(2009 control deficiency;

2008 non-compliance;

2007 non-compliance; 

2006 non-compliance; 

2005 non-compliance; 

2004 non-compliance)

8. We recommend that the U.S. Forest Service 

management develop policies and procedures to 

obligate funds for transactions as required by 

Appropriations Law.

Closed

B-43
Caring for the Land and Serving People Printed on Recycled Paper

B-44
2009 2008

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 2) $ 5,146 $ 4,066

Investments (Note 3) 6 9

Accounts Receivable, Net (Note 4) 45 59

Total Intragovernmental 5,197 4,134

Cash and Other Monetary Assets 1 1

Accounts Receivable, Net (Note 4) 165 244

General Property, Plant, and Equipment (PP&E), Net (Note 5) 1,359 1,375

Other (Note 1D) 40 21

Total Assets $ 6,762 $ 5,775

 Stewardship PP&E (Note 6)

 Federal Employee Benefits (Notes 7 & 8) 72$ 67$ 

Other (Note 10) 107 85 

Total Intragovernmental 179 152

Accounts Payable 64 52

Federal Employee Benefits (Notes 7 & 8) 349 339

Environmental and Disposal Liabilities (Notes 7 & 9) 1 18

Other (Note 10) 1,545 1,522

Total Liabilities (Note 7) 2,138 2,083

Commitments and Contingencies (Note 10)

Unexpended Appropriations - earmarked funds (Note 12) - 1

Unexpended Appropriations - other funds 2,966 1,969

Cumulative Results of Operations - earmarked funds (Note 12) 907 1,179

Cumulative Results of Operations - other funds 751 543

Total Net Position 4,624 3,692

Total Liabilities and Net Position $ 6,762 $ 5,775

The accompanying notes are an integral part of these statements.

Liabilities:

Intragovernmental:

Net Position:

(in millions)

U.S. Department of Agriculture

Forest Service

As of September 30, 2009 and 2008

CONSOLIDATED BALANCE SHEETS

B-45
The accompanying notes are an integral part of these statements.

2009 2008

Total Gross Costs $ 6,589 $ 6,711

Total Earned Revenue 679 865

Net Cost of Operations $ 5,910 $ 5,846

Program Costs (Note 13):

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF NET COST

For the years ended September 30, 2009 and 2008

(in millions)

B-46
The accompanying notes are an integral part of these statements.

Earmarked Earmarked

Funds All Other Consolidated Funds All Other Consolidated

(Note 12) Funds Total (Note 12) Funds Total

Cumulative Results of Operations:

 Beginning Balance $ 1,179 543$ $ 1,722 $ 1,111 775$ $ 1,886

Budgetary Financing Sources:

 Appropriations Used 5,391 1 5,392 - 5,172 5,172

 Non-Exchange Revenue - 1 1 - - -

 Donations and Forfeitures of Cash 1 - 1 1 - 1

 Transfers - In/Out without Reimbursement 259 (130) 129 160 (36) 124

Other Financing Sources (Non-Exchange):

 Transfers without Reimbursement (70) 71 1 (32) 33 1

 Imputed Financing 344 344 - 331 331

 Other 48 (70) (22) 85 (32) 53

 Total Financing Sources 239 5,607 5,846 5,468 214 5,682

 Net Cost of Operations (511) (5,399) (5,910) (146) (5,700) (5,846)

 Net Change (272) 208 (64) (232) 68 (164)

 Cumulative Results of Operations 907 751 1,658 1,179 543 1,722

Unexpended Appropriations:

 Beginning Balance 1,969 1 1,970 - 1,307 1,307

Budgetary Financing Sources:

 Appropriations Received - 6,405 6,405 - 5,790 5,790

 Appropriations Transferred - In/Out - (1) (1) 1 (3) (2)

 Other Adjustments (rescissions, etc.) - (16) (16) - 47 47

 Appropriations Used (5,391) (1) (5,392) - (5,172) (5,172)

 Total Budgetary Financing Sources (1) 997 996 662 1 663

 Total Unexpended Appropriations - 2,966 2,966 1 1,969 1,970

 Net Position 907$ 3,717$ $ 4,624 1,180$ 2,512$ $ 3,692

(in millions)

FY 2009 FY 2008

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION

For the years ended September 30, 2009 and 2008

B-47
2009 2008

Budgetary Resources:

Unobligated Balance, Brought Forward, October 1 $ 2,170 $ 1,671 

Recoveries of Prior Year Unpaid Obligations 38 78 

Budget Authority:

Appropriations 7,107 6,310 

Spending Authority from Offsetting Collections:

Earned:

Collected 535 561 

Change in Receivables from Federal Sources (23) 38 

Change in Unfilled Customer Orders:

Advance Received 1 (7)

Without Advance from Federal Sources (51) 3 

Expenditure Transfers from Trust Funds - 4 

Subtotal 7,569 6,909

Nonexpenditure Transfers, net - (2)

Permanently Not Available (5) (71)

Total Budgetary Resources (Note 16) $ 9,772 $ 8,585

Status of Budgetary Resources:

Obligations Incurred: (Note 15)

Direct $ 6,545 $ 6,055 

Reimbursable 482 360 

Subtotal 7,027 6,415

Unobligated Balance-Apportioned (Note 2) 2,031 982 

Unobligated Balance Not Available (Note 2) 714 1,188 

Total Status of Budgetary Resources (Note 16) $ 9,772 $ 8,585

Change in Obligated Balance:

Obligated Balance, net

Unpaid Obligations, Brought Forward, October 1 $ 2,132 $ 2,243 

Less: Uncollected Customer Payments from Federal Sources,

Brought Forward, October 1 (425) (384)

Total Unpaid Obligated Balance, net 1,707 1,859

Obligations Incurred, net 7,027 6,415

Less: Gross Outlays (6,480) (6,448)

Less: Recoveries of Prior Year Unpaid Obligations, actual (38) (78)

Change in Uncollected Customer Payments from Federal Sources 74 (41)

Obligated Balance, net, End of Period

Unpaid Obligations (Note 17) 2,641 2,132 

Less: Uncollected Customer Payments from Federal Sources (351) (425)

Total, Unpaid Obligated Balance, net, End of Period (Note 2) $ 2,290 $ 1,707

Net Outlays:

Net Outlays:

Gross Outlays $ 6,480 $ 6,448

Less: Offsetting Collections (536) (558)

Less: Distributed Offsetting Receipts (574) (514)

Net Outlays $ 5,370 $ 5,376

The accompanying notes are an integral part of these statements.

U. S. Department of Agriculture

Forest Service

 COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the years ended September 30, 2009 and 2008

(in millions)

B-48
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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 Department of Agriculture, 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 (R&D) 

offices, the Forest Products Laboratory (FPL) and the International Institute of Tropical Forestry (IITF), 

functioning in nearly all States, Puerto Rico, and the 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 35.5 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 1.6 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; and 

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 and in accordance with the Office of Management and Budget (OMB) Circular A-136, 

Financial Reporting Requirements, revised June 10, 2009. 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 

B-49
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

the obligation of funds according to legal requirements, which in many cases is prior to the occurrence of an 

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 Treasury) is made 

available through the U.S. Department of the Treasury (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 THE U.S. TREASURY 

The Treasury processes cash receipts and disbursements on behalf of the Forest Service. Funds on deposit with 

the 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 

thousand or more. Internal use software is capitalized in accordance with Statement of Federal Financial 

Accounting Standard (SFFAS) No. 10, Accounting for Internal Use Software, if the fair value meets or exceeds 

$100 thousand. The Forest Service recognizes liabilities for capital leases in accordance with SFFAS No. 6 

Accounting for Property, Plant and Equipment. Under SFFAS No. 6 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 6 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 SFFAS No. 29, Heritage Asset and Stewardship Land, 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 6 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 

B-50
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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. 

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 9 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 currently indeterminable. 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 nonvested. 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 

nonvested 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 to remain in CSRS. FERS offers a savings plan to which the 

B-51
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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 

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 Federal Government accounting guidance, the Forest Service classifies revenue as either 

“exchange revenue” or “non-exchange 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 the 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 SFFAS No.7, Accounting for Revenue and Other Financing Sources, 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 13 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, the 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, 2009 and 2008 was $344 million and $331 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 

B-52
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

account) is created in the U.S. 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. Effective October 1, 2006, in accordance with OMB Circular A-136, all financial activity 

related to these allocation transfers (e.g., budget authority, obligations, 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 

Transportation, Department of the Interior, Department of the Army, Department of the Navy, Department of the 

Air Force, and the Corps of Engineers, Civil. The Forest Service receives allocation transfers, as the child, from 

the Department of Labor, Department of Transportation, and Department of the Interior. 

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; and 

 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. 

 

 

B-53
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 2: FUND BALANCE WITH TREASURY 

Funds with the 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 known discrepancies with Treasury in FBWT, suspense accounts 12F3875 and 12F3885, 

as of September 30, 2009. These accounts were discontinued effective July 31, 2008. The USDA has elected not 

to obtain a waiver, which would permit the Forest Service to continue using suspense accounts. In addition, 

Treasury has stopped accepting new activity in these suspense accounts from entities without the required 

waiver, but certain intragovernmental activity is still mapped to 12F3875 and 12F3885, resulting in balances 

recorded to the general ledger. Per Treasury guidance the balances are not reported to Treasury. The difference 

between the FBWT balance and Treasury as of September 30, 2009, is approximately $6 million. 

Fund Balance with Treasury as of September 30, 2009 and 2008 consisted of the following: 

 

B-54
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 3: INVESTMENTS 

Investments are associated with earmarked funds. The Federal Government does not set aside assets to pay 

future expenditures associated with earmarked funds. The cash generated from earmarked funds is used by the 

U.S. Treasury for general Government purposes. Treasury securities are issued to the earmarked fund as 

evidence of earmarked receipts. These securities are an asset to the earmarked fund and are presented as 

Investments in Note 12 – Earmarked Funds. Treasury securities are a liability of the U.S. Treasury and are 

eliminated in the consolidation of the U.S. Government-wide financial statements. Treasury will finance any future 

redemption of the securities by an earmarked fund in the same manner that all other Government expenditures 

are financed. 

 

B-55
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 4: 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, 2009 and 2008, the Intragovernmental Accounts Receivable balances were $45 million and $59

million, respectively. 

Non-Intragovernmental Accounts Receivable are 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 GL 1318 (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, 2009 and 2008 consisted of the following: 

 

B-56
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 5: 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, 2009 and 2008 the Forest Service’s General PP&E consisted of the following: 

B-57
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

B-58
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 6: STEWARDSHIP PP&E 

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 SFFAS No. 29, Heritage 

Assets and Stewardship Land on the Forest Service’s Balance Sheet. 

Stewardship Property, Plant, and Equipment (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 its physical units of Stewardship PP&E by site. Sites 

include National Forests, National Grasslands, other Forest Service-managed sites, and non Forest Servicemanaged 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 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 in SFFAS 29, 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 

B-59
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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. Physical 

units of multi-use heritage assets are reported as Stewardship PP&E. 

Heritage Asset categories can include the following:

Priority Heritage Assets (PHA): 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 as 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 (OHA): 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. This would include 

materials donated to the Forest Service; artifact or archival materials collected from a single site, Forest Service 

administrative unit, or event; or any combination thereof. 

Acquisition and Withdrawal 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 acquired through the procurement process, but this 

rarely occurs. Normally, heritage assets are part of the land acquisition and inventory process. Withdrawal occurs 

through land exchange or natural disasters. Most additions occur through inventory activities where previously 

undocumented sites are discovered and added to the total. Although not technically additions—they already 

existed on NFS lands—they do represent an increased management responsibility commensurate with the spirit 

of “additions.” The non Forest Service area sites increased in FY 2009 by 113; the increase is due to 

comprehensive site inventories. 

B-60
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

The Heritage Asset Sites (Units) reported by management area as of September 30, 2009, are as follows: 

 

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. 

B-61
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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: 

 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 

National Grassland. 

National Preserves and Other Areas 

National preserves are units 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. 

Acquisition and Withdrawal 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. 

B-62
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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 (LMPs) and enhancing 

recreational opportunities for areas with high demand for recreation. The program focuses acquisitions on 

inholdings and areas adjacent to existing NFS lands. 

The NFS sites reported by major category as of September 30, 2009, are as follows: 

B-63
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 7: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

Liabilities not covered by budgetary resources as of September 30, 2009 and 2008 consisted of the following: 

Other Unfunded Employment Related Liability consists of the Forest Service portion of the unemployment 

compensation unfunded liability as established in § 909 of the Social Security Act, approved, August 14, 1935. 

B-64
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 8: 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, 2009 and 2008 consisted of the following: 

 

B-65
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 9: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

 

Forest Service discloses information related to cleanup costs for environmental hazards, in accordance with 

SFFAS No. 5, Accounting for Liabilities of the Federal Government, and SFFAS No. 6, Accounting for Property, 

Plant and Equipment. SFFAS No. 5 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. Clean 

up 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. 

B-66
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 10: OTHER LIABILITIES 

As of September 30, 2009 and 2008, 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. 

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, (P.L. 106-393) as amended by § 601 of The Emergency 

Economic Stabilization Act of 2008, (H.R. 1424) (P.L. 110-343) 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 25.0 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-67
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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, 2009, the Forest Service had several legal 

actions pending. Based on information provided by legal counsel, management has accrued 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. 

The accrued and potential contingent liabilities as of September 30, 2009, and 2008 are summarized as follows: 

B-68
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 11: 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, 2009 and 2008 and future capital and operating lease agreement 

payments as of September 30, 2009 consisted of the following: 

 

B-69
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 12: EARMARKED FUNDS 

In accordance with SFFAS 27, Identifying and Reporting Earmarked Funds, 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. 

 

B-70
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

Financial information for all earmarked funds is included, and significant funds are specifically identified as shown 

below: 

B-71
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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. 

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, 

B-72
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

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. 

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 25.0 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. 

The Secure Rural Schools and Community Self-Determination Act of 2000 (P.L. 106-393) as amended by § 601 

of The Emergency Economic Stabilization Act of 2008, (H.R. 1424) (P.L. 110-343), provides stabilized education 

and road maintenance funding through predictable payments to counties, job creation in those counties, and other 

opportunities associated with the restoration, maintenance, and stewardship of Federal lands. 

Recreation Fee Demonstration Program 

The Recreation Fee Demonstration Program Treasury account 12X5268 receives deposits of recreation fees 

collected from projects that are part of the Recreation Fee Demonstration program. These monies are retained 

and used for backlog repair and maintenance of recreation areas, sites or projects. These funds are also used for 

interpretation, signage, habitat or facility enhancement, resource preservation, annual operation, maintenance, 

and law enforcement related to public use of recreation areas and sites. The Recreation Fee Demonstration 

Program is authorized by § 315 of Title III General Provisions of Public Law 104-134: Recreation Fee 

Demonstration Program 16 U.S.C. 4601-6a.

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-73
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 13: 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, 2009 and 2008. 

 

Program Costs by Segment 

For the year ended September 30, 2009 

(in millions) 

B-74
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

Program Costs by Segment

For the year ended September 30, 2008 

(in millions) 

B-75
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 14: COST OF STEWARDSHIP PP&E 

Stewardship PP&E acquired in FYs 2009 and 2008 amounted to $63 and $42 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 is excluded from General PP&E. Examples of stewardship land 

include land used for forests, grazing, and wildlife. 

Costs for stewardship land include all costs to acquire and prepare the land for its intended use. 

B-76
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 15: 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 is the amount of direct and reimbursable obligations 

incurred by apportionment category for FY 2009 and 2008. 

 

B-77
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 16: EXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF 

 BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES 

 GOVERNMENT 

The differences between the fiscal 2008 Statement of Budgetary Resources (SBR) and the fiscal 2008 actual 

numbers presented in the fiscal 2010 Budget of the United States Government (Budget) are summarized in the 

table below. No further explanation is included, as the variances do not exceed the Departmental threshold of $25 

million and 10%. 

B-78
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 17: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

The unpaid obligations of $2,641 and $2,132 million as of September 30, 2009 and 2008 included undelivered 

orders of $1,825 and $1,458 million, respectively. 

B-79
U. S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2009 and 2008 

NOTE 18: 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, 2009 and 2008, the amount of marijuana on hand was 32,382 (kg) and 32,627 (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-80
U. S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2009 and 2008

NOTE 19: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

 BUDGET (FORMERLY THE STATEMENT OF FINANCING)

B-81
U. S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2009 and 2008

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-82
Part C

REQUIRED SUPPLEMENTARY

INFORMATION

Unaudited

C-1
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Deferred Maintenance 

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.  

 

ESTIMATED DEFERRED MAINTENANCE 

The Forest Service began reporting deferred maintenance in 2000.  Estimates of deferred maintenance for 

all major  classes  of  PP&E,  heritage  assets,  and  stewardship  assets  are  based  on  condition  surveys.  The 

agency has completed two rounds of condition surveys providing a comprehensive national assessment of 

Forest Service property.    

For roads, deferred maintenance is determined from surveys of an annual random sample of a sufficient 

number of  roads  to achieve estimates of 95‐percent accuracy and 95‐percent confidence.  Validation of 

this process is ongoing.  

Deferred  maintenance  needs  for  all  other  asset  groups  are  determined  from  surveys  of  all  individual 

assets on a revolving schedule where the interval between visits does not exceed 5 years. 

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 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. 

C-2
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Exhibit 1: Deferred Maintenance Totals by Asset Class as of September 30, 2009 (in millions) 

Asset Class

Overall 

Condition

Critical

Maintenance

Noncritical 

Maintenance

Cost To Return 

To Acceptable 

Condition

Bridge Varies  $29   $127  $ 156 

Building Varies  144   879   1,023 

Dam Varies 10   19   29 

Fence Varies  298   1   299 

Handling Facility Varies  22  ‐  22 

Heritage Varies  9   16   25 

Minor Constructed Features Varies ‐  106   106 

Roads1 Varies 318   2,860   3,178 

Trail Varies 5 289 294

Trail Bridge Varies  4   7   11 

Wastewater System Varies 23  16   39 

Water System Varies  67   51   118 

Wildlife, Fish, and TES  Varies  5   2   7 

Grand Total $934  $ 4,373   $5,307 

 

The overall condition of major asset classes range 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  National  Forest  System  (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  the  U.S. 

Environmental Protection Agency and States;  

3. Road  management  objectives  developed  through  the  National  Forest Management  Act  forest  planning 

process; and 

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 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 37 percent needing major repairs or renovations, approximately 14 

percent in fair condition, and 49 percent of the facilities in good condition.   

                                                                 

1

  Deferred maintenance  amount  for  Roads  is  for  passenger‐car  roads  (maintenance  levels  3‐5)  only.    Total  deferred maintenance,  including 

high‐clearance roads (maintenance levels 1 and 2), is $4,540 (in millions).  All road beds are considered stewardship assets. 

C-3
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

The  agency  is  currently  developing  an  integrated  strategy  to  realign  our  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. All 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.  

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 

The  Statement  of  Federal  Financial  Accounting  Standard  No.  29,  Heritage  Assets  and  Stewardship  Lands, 

reclassified  information  on  heritage and  stewardship  land assets  from  “supplementary”  to  “basic.”   This  change 

moves  the  acquisitions  and  withdrawals  of  these  assets  to  the  financial  notes,  accompanying  the  financial 

statements. This information is referenced in Note 6, Stewardship PP&E and Note 14, Cost of Stewardship PP&E. 

The condition information for these assets remains supplementary.  

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 (FIA) and Forest Health Monitoring (FHM).  

C-4
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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  forest lands at risk to  future mortality  from insects and diseases, based on the 

2006 publication of 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 projected accomplishments on NFS lands include treatment of 42,337 acres for invasives and 57,058 for native 

pests.  These  numbers  should  be  considered  preliminary,  with  final  amounts  of  acres  treated  for  invasives  and 

native pests on NFS lands available at http://www.fs.fed.us in February 2010. 

C-5
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

C-6
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

C-7
Part D

REQUIRED SUPPLEMENTARY

STEWARDSHIP INFORMATION

Unaudited

D-1
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Stewardship Investments 

The stewardship objective of Federal financial reporting includes accountability for stewardship investments.  

Stewardship investments are expenses and investments incurred  for education and  training  of  the  public  that is 

intended  to increase  national economic  productive  capacity  (investment in  human  resources), and  research and 

development intended to produce future benefits.  

 

RESEARCH AND DEVELOPMENT—FOREST AND RANGELAND RESEARCH 

FY 2009 Net Cost of Operations: $322 Million  

Of the $322 million— 

$301 million was an investment of Research and Development (R&D) funding; 

$  21 million was an investment of National Fire Plan funding and Joint Fire Science Program funding.1

Forest Service R&D has an integrated portfolio that supports achievement of the agency’s strategic goals with an 

emphasis in seven strategic program areas (SPAs). 

Wildland Fire and Fuels

Wildland Fire and Fuels R&D provides managers with the knowledge and tools to reduce the negative impacts of 

fire  and  enhance  the  beneficial  effects  of  fire,  as  a  natural  process,  and  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  environment,  social  and  economic  aspects  of  fire,  evaluation  of  integrated management  strategies  and 

disturbance interactions at multiple scales, and 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  plants,  animals,  fish,  insects,  diseases,  invertebrates,  and  other  species  not  native  to  an 

ecosystem whose introduction is likely to cause economic or environmental harm.  

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 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.  

                                                                 

1

 The Joint Fire Science Program is appropriated to the Forest Service in the Wildland Fire Treasury Symbol 12X1115.  FY 2008 was the first year 

the Forest Service transferred these funds over to the Research and Development Treasury Symbol 12X1104, as specified in the Appropriations 

Act, P.L. 110‐161.   

D-2
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

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 scientific 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. 

Inventory and Monitoring

Inventory  and  Monitoring  R&D  provides  the  resource  data,  analysis,  and  tools  needed  to  monitor  forest 

ecosystems  at  greatest  risk  from  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. 

A  representative  summary  of  FY  2009  and  prior‐year  accomplishments  using  Forest  Service  appropriated  funds 

includes the following: 

R&D Stewardship Investments 2009 2008 2007 2006 2005

Net Cost of Operations (in millions) $322 $304 $262 $318 $296

New interagency agreements and contracts  57  40 41 54 63

Interagency agreements and contracts continued  12  12 17 15 93

Articles published in journals  2,294  1,903 1,336 1,691 1,320

Articles published in all other publications  886  1,487 1,846 1,817 1,779

Patent(s) granted  3  6 3 7 7

Patent licenses executed 0  1 0 1 16

The  Forest  Service  renamed  the  measure  “Right(s)  to  inventions  established”  from  previous  years,  to  “Patent 

licenses executed” to be more clear and consistent with the Technology Transfer Report, however, the definition 

remains the same.  

D-3
Part E

OTHER ACCOMPANYING INFORMATION

Unaudited

E-1
OTHER ACCOMPANYING INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Management Challenges 

The  Reports  Consolidation Act  of  2000  requires USDA’s OIG  to identify and  report annually  on  the most  serious 

management  challenges  the  Department  faces.    For  the  two  management  challenges  that  are  relevant  to  the 

Forest Service, the FY 2009 accomplishments and FY 2010 planned actions are listed below. 

Implementation of Strong, Integrated Internal Control Systems Still Needed

Improve internal controls and management accountability in order to effectively manage resources, 

measure progress towards goals and objectives, and accurately report accomplishments

FY 2009 ACCOMPLISHMENTS

Obtain closure on remaining OIG audit recommendations on performance reporting 

Ref: OIG Audit No. 08401‐8‐FM/Recommendation # 16

Completed 

11/20/08

Provide better oversight of national firefighting contract crews by implementing controls to monitor and ensure adequate 

training and ensure preseason language assessments/ certifications 

Ref: OIG Audit No. 08601‐42‐SF; Recommendations # 4, 6, and 8

Completed 

9/30/09

Conduct annual systems self‐assessment for all financial/mixed‐financial systems Completed 

6/26/09

PLANNED ACTIONS FOR FY 2010

Conduct Washington Office oversight reviews on performance accountability in the Regions, and issue report

Close 70 percent of open OIG and GAO audits and audit recommendations

Implement corrective actions to close the remaining open audit recommendations related to the American Recovery and Reinvestment Act of 

2009

Conduct annual systems self‐assessment for all financial/mixed‐financial systems

Conduct annual internal control risk assessment throughout the agency and develop plans to address identified risks

Implement corrective actions identified through the A‐123, Appendix A (Internal Controls over Financial Reporting) process

Improve monitoring and management of critical firefighter positions

Strengthen the justifications for acquisition of capital assets (specifically aircraft)

Develop a risk mitigation plan for the American Recovery and Reinvestment Act of 2009

Better Forest Service Management and Community Action Needed 

to Improve the Health of the National Forests and Reduce the Cost of Fighting Fires

Develop methods to improve forest health

FY 2009 ACCOMPLISHMENTS

Assess the effectiveness of hazardous fuels treatments and restoration projects

 Ref: OIG Audit Report  08601‐6‐AT/#1 Ongoing

Conduct large fire cost reviews and implement corrective actions, as applicable Ongoing

Develop partnerships with States and counties to facilitate development of fire prevention ordinances for use in planning and 

zoning in Wildland Urban Interface (WUI) areas: Partnerships are developed and some counties and municipalities have 

planning and zoning that meet wildland fire standards in WUI areas. Continue to encourage this standard but cannot enforce it.  

Ongoing

PLANNED ACTIONS FOR FY 2010

Obtain clarification on both the Forest Service and the States protection responsibilities in the WUI and on other private properties that are 

threatened by wildfires.  If States are responsible, provide direction and begin renegotiation of WUI protection responsibilities in large fire 

suppression management in WUI.

Ref: OIG Audit No. 08601‐44‐SF.  Awaiting OGC decision.  FAM will provide direction after decision.

Develop partnerships with States and counties to facilitate development of fire prevention ordinances for use in planning and zoning in WUI 

areas. Partnerships are developed and some counties/municipalities have planning and zoning that meet wildland fire standards in WUI areas.

Continue to develop tools for Regions to use in assessing the risks from wildfires as part of the Continuous Improvement in Decision Making

program.

Continue to conduct large fire cost reviews in and implement corrective actions, as applicable.

Using output from the improved Hazardous Fuels Prioritization and Allocation System, continue to work with other land management agencies 

and State and local governments to conduct hazardous fuels reduction projects in those areas where they will have the greatest impact on 

reducing risk.

Direct human and physical resources to effectively address the changing environment of forest health and the expanding WUI.

 

E-2
OTHER ACCOMPANYING INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Improper Payments Improvement (IPIA) Reporting Details 

The Improper Payments Information Act  (IPIA) requires each agency to assess its programs and identify which, if 

any, may be subject to high risk with respect to improper payments, and take corrective measures, as necessary.  

THE CRITERIA FOR THE RISK ASSESSMENT 

Risk  assessments  are  generally  performed  on  a  3‐year  rotation;  however,  a  risk  assessment  may  be  required 

annually  by  the  Office  of  the  Chief  Financial  Officer  (OCFO)  for  a  particular  program.  All  risk  assessments  are 

reviewed by the OCFO. 

USDA identified two funds to audit: Wildland Fire Suppression Fund (WFSU) and National Forest System Fund for 

FY 2009 IPIA Reporting. WFSU is and has been a high‐risk program, and therefore required statistical sampling. No 

new high‐risk programs were identified for FY 2009. 

THE DESCRIPTION OF THE STATISTICAL SAMPLING PROCESS 

For FY 2009 IPIA Reporting, the Forest Service used Monetary Unit Sampling (MUS) to systematically analyze and 

review WFSU transactions for FY 2008—the period of 10/01/2007 through 9/30/2008.

THE DESCRIPTION OF THE CORRECTIVE ACTION PLAN(S) 

The result of the sampling was an error rate of zero percent  for FY 2009 IPIA Reporting; therefore, no corrective 

action plans were needed to reduce improper payments.  

Population 

Insufficient Documentation

Population 

Fund Improper Payment Error Population 

Outlays

Tested Outlay 

Amount

Dollars Rate Dollars Rate

WFSU $1,015,581,981 $ 19,705,330 $0.00 0.0% $0.00 0.0%

Consequently,  the  Forest  Service  does  not  need  new  information  systems  or  infrastructure  improvements  to 

detect errors, nor have statutory or  regulatory barriers been identified  that would limit any corrective actions in 

reducing improper payments. 

IMPROPER PAYMENT REDUCTION OUTLOOK 

The  following  tables  for  the  Improper  Payment  Reduction Outlook  are  limited  to  the Wildland  Fire  Suppression 

Program. 

Improper Payment Reduction Outlook (in thousands)

FY 2008 FY 2009 FY 2010

Program Outlays IP % IP $ Outlays IP % IP $ Outlays IP % IP $

WFSU $1,411,907 0.95% $13,353 $1,370,029 0.02% $232 $1,470,059 0.00% $0.00

Improper Payment Reduction Outlook (in thousands)

FY 2011 FY 2012

Program Estimated 

Outlays1 IP % IP $ Estimated Outlays IP % IP $

WFSU $1,009,000 0.00% $0.00 $1,094,000 0.00% $0.00

                                                                 

1

  Beginning  in  FY  2009,  all  credit  card  transactions  and  salaries  and  expenses  were  excluded  from  the WFSU  population  and  considered  as 

separate funds. 

E-3
OTHER ACCOMPANYING INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

RECOVERY OF IMPROPER PAYMENT 

In accordance with the Recovery Auditing Act, and as part of a governmentwide OMB initiative, the Forest Service 

used the audit recovery services of PRG Schultz, LLC to identify and recover erroneous payments made to various 

vendors starting with FY 2006 through FY 2009.  Improved monitoring and tighter controls with regard to payment 

review  processes,  centralization  of  accounting  functions,  and  improved  communications  and  followup  prior  to 

payment authorization have significantly reduced the potential for errors and amounts recovered by the recovery 

auditors. 

Recovery of Improper Payments

Actual Dollars Recovered

FY 2006 FY 2007 FY 2008 FY 2009

$ 311,961 $ 85,658 $ 99,361 $  1,720

The reduction target rates for future years based on the agency financial reporting year are as follows.  

Future Targets for Improvement (in billions)

Target FY 2010 FY 2011 FY 2012

Estimated Outlays $2.09 $2.3 $2.4

Improper Payment Rate 0.0%  0.0% 0.0%

RISK ASSESSMENT AND OVERSIGHT BENEFITS 

The Forest Service assessments resulted in a FY 2009 IPIA reporting error rate of zero, demonstrating that overall, 

Forest Service has strong internal controls over disbursement processes. The amount of improper payments by the 

Forest Service is immaterial, and the risk of improper payment is low.   

E-4
OTHER ACCOMPANYING INFORMATION—UNAUDITED FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 

 

Summary of Financial Statement Audit and Management Assurances 

 

SUMMARY OF FINANCIAL STATEMENT AUDIT 

 

Summary of Financial Statement Audit

Audit Opinion Unqualified, qualified, disclaimer, or adverse

Restatement Yes or No

Material Weaknesses Beginning  New Resolved Consolidated Reassessed Ending 

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  New Resolved Consolidated Reassessed Balance 

Material Weaknesses 0 0 0 ‐ ‐ 0

Total Material Weaknesses 0 0 0 ‐ 0 0

Effectiveness of Internal Control over Operations ( FMFIA §2)

Statement of Assurance Beginning  New Resolved Consolidated Reassessed Balance

Material Weaknesses 0 0 0 ‐ ‐ 0

Total Material Weaknesses 0 0 0 0 0 0

Conformance with Financial Management System Requirements ( FMFIA §4)

Statement of Assurance Beginning  New Resolved Consolidated Reassessed Balance

Non‐Conformances 0 0 0 0 0 0

Total Non‐Conformances 0 0 0 0 0 0

Conformance with Federal Financial Management Improvement Act ( FFMIA)

Agency Auditor

Overall Substantial Compliance Yes No

       System Requirements Yes No

       Accounting Standards Yes Yes

       USSGL at Transaction Level Yes No

E-5
AP P E NDIX 1: Acronyms and Abbreviations 

Explanation

AFR Agency Financial Report

APR Annual Performance Report

ARRA American Recovery and Reinvestment Act of 2009

AQM Acquisition Management

ASC Albuquerque Service Center

B&F Budget and Finance

BLM Bureau of Land Management

BS Balance sheet(s)

C&A certification and accreditation

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act of 1980

CFO Chief Financial Officer

CFR Code of Federal Regulations

CIO Chief Information Officer

CSRS Civil Service Retirement System

DOI Department of the Interior

DOL U.S. Department of Labor

ECD estimated completion date

EDL Environmental and Disposal Liabilities

EEO Equal Employment Opportunity

ELT Executive Leadership Team

EPA U.S. Environmental Protection Agency

EROC Economic Recovery Operations Center

FACTS II Federal Agencies' Centralized Trial‐Balance System II

FAM Fire and Aviation Management

FBWT fund balance with treasury

FCI Facility Condition Index

FECA Federal Employees’ Compensation Act

FERS Federal Employees’ Retirement System

FFIS Foundation Financial Information System

FFMIA Federal Financial Management Improvement Act

FHM Forest Health Monitoring

FIA Forest Inventory and Analysis

FISMA Federal Information Security Management Act

FMFIA Federal Managers’ Financial Integrity Act

FMMI USDA Federal Management Modernization Initiative

FPL Forest Products Laboratory

FS Forest Service

FSH Forest Service handbook

FSM Forest Service manual

FTBU funds to be put to better use

FTE full‐time equivalent

FY fiscal year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GL General ledger

GS General Schedule (pay plan)

GSA General Services Administration

HRM Human Resource Management

IBDB Incident Business Database

IG Inspector General

IITF International Institute of Tropical Forestry

Appendix-1
INFRA Infrastructure application, one of the FSNRA corporate applications

IP International Programs (Program Staff)

IPIA Improper Payment Information Act

IRM Information Resources Management (Program Staff)

IT information technology

K‐V Knutson‐Vandenberg, a trust fund for timber sale area improvements

Kg kilogram

KPMG an independent auditor

L&WCF Land and Water Conservation Fund

LEI Law Enforcement and Investigations (Program Staff)

MAP II Mathematical Accrual Process

MD&A Management’s Discussion and Analysis, a section of the AFR

MOU Memorandum of Understanding

MUS monetary unit sampling

MW Material Weakness

NEPA National Environmental Policy Act

NFC National Finance Center

NFP National Fire Plan

NFR notice of finding and recommendation

NFS National Forest System (Deputy Area)

NIPF non‐industrial private forest

NIST National Institute of Standards and Technology

NITC National Information Technology Center

NLC National Leadership Council

NRS Northern Research Station

NRE Natural Resources and Environment (USDA)

O&M Operations and Maintenance

OAI Other Accompanying Information, a section of the AFR

OCFO Office of the Chief Financial Officer (USDA)

OCIO Office of the Chief Information Officer (USDA)

OIG Office of Inspector General (USDA)

OGC Office of General Counsel

OHA Other heritage assets

OMB Office of Management and Budget

OPM Office of Personnel Management

OSHA Occupational Safety Health Administration

OSOH Office of Safety and Occupational Health

PAS Performance Accountability System

PHA Priority heritage assets

PIA Privacy Impact Assessment

PII personally identifiable information

PL Public Law

PP&E Property, Plant, and Equipment

PRCH Purchase Order System

PROP Personal Property System

R&D Research and Development (Deputy Area)

RCRA Resource Conservation and Recovery Act

RSA regions, stations, and area

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)

SES Senior Executive Service

SFFAS Statement of Federal Financial Accounting Standards

SGL Standard General Ledger

SCNP Statement(s) of Change(s) in Net Position

Appendix-2
SPA R&D’s strategic program areas

SNC Statement of(s) Net Cost

TAFS Treasury Appropriation Fund Symbol

TES threatened and endangered species

TSP Thrift Savings Plan

UDO undelivered order

ULO unliquidated obligation

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

WO Washington Office

WUI wildland‐urban interface

Appendix-3
Forest Service Agency Financial Report—Fiscal Year 2009