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

Financial Report (AFR) for fiscal year 2010. 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). 

 Required Supplementary Information and Required Supplementary Stewardship 

Information. 

In addition to the AFR, the Forest Service will include its FY 2010 Annual Performance Report 

(APR) and FY 2011 performance plan with its Congressional Budget Justification and the FY 2011 

Summary of Performance and Financial Information, both in February 2011. 

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. 

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

present our fiscal year (FY) 2010 Agency Financial Report (AFR). This report 

describes the stewardship and management of the public funds entrusted to our 

agency for FY 2010. 

Founded in 1905, the Forest Service has a long tradition of caring for the land 

and serving people. For more than a hundred years, our mission focus has 

evolved to meet emerging challenges. The seven goals outlined in our strategic 

plan for FY 2007–2012 are to (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; (5) maintain basic management capabilities of the Forest 

Service; (6) engage urban America in Forest Service programs; and (7) provide science-based applications and 

tools for sustainable natural resource management.

Our goals are designed to meet such 21st-century challenges as the degradation of forested watersheds, partly 

through the conversion of working forests and ranches to developed uses, and uncharacteristically severe 

wildfires and outbreaks of insects and disease, exacerbated by the overarching challenge of climate change. 

The solution is ecological restoration—restoring the functions and processes characteristic of healthy, resilient 

forest and grassland ecosystems—and the key is collaboration. Climate change highlights the need for broadscale approaches, for conservation on a landscape scale. Landscape-scale conservation brings people together 

to collaborate across ownerships, to address shared issues and common concerns, and to pursue common 

restoration goals based on mutual respect.

To reach shared restoration goals, the American people have entrusted substantial resources to the Forest 

Service. This AFR, in lieu of a Performance and Accountability Report, complies with Office of Management 

and Budget (OMB) Circular A–136, Financial Reporting Requirements, and demonstrates our accountability to 

the American people.

I am pleased to announce that the Forest Service received an “unqualified audit opinion” for FY 2010, meaning 

that the auditor found our financial statements to be true and fair. The audit reported no material weaknesses. 

We also completed several corrective actions, closing 8 audits by the USDA Office of Inspector General (OIG) 

and over 80 audit recommendations. However, OIG has identified two emerging issues that either directly or 

indirectly apply to the Forest Service: (1) workforce planning for fire suppression activities and (2) eliminating 

improper payments.

This AFR is reliable and complete in accordance with law and OMB guidance. The Management’s Discussion 

and Analysis section presents reliable year-to-date performance results for selected strategic measures. The 

Forest Service will report actual year-end progress toward achieving our strategic goals in our FY 2010 Annual 

Performance Report and our FY 2010 Summary of Financial and Performance Information. Both reports will be 

available in February 2011 at http://www.fs.fed.us.

iii
In FY 2010, the Forest Service was also accountable for more than our usual budget. In response to the worst 

economic downturn since the Great Depression, Congress passed the American Recovery and Reinvestment Act 

of 2009 (ARRA). Under ARRA, the Forest Service is spending $1.15 billion over 2 years to put Americans back 

to work. In FY 2010, we finished obligating all of our ARRA funds, for a total of 705 projects in all 50 States, 

the District of Columbia, Puerto Rico, and the Virgin Islands, creating about 20,000 jobs. The ARRA projects 

not only bring jobs and economic opportunities to rural communities hit hard by recession; they also address 

high-priority forestry needs, such as overdue maintenance of roads and other infrastructure and desperately 

needed fuels and forest health treatments. Information about the Forest Service’s ARRA projects can be found at 

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

In FY 2011, partly through our ARRA projects, the Forest Service will use our Job Corps, Youth Conservation 

Corps, and Public Land Corps programs as training opportunities. We will develop partnerships for placing 

corps graduates in jobs, connecting nontraditional partners with Forest Service program areas to better reach 

underserved communities in urban areas with high unemployment rates. Information about the Forest Service’s 

ARRA projects can be found at http://www.usda.gov/wps/portal/arra?navid=USDA_ARRA.

Gifford Pinchot, the first Forest Service Chief, founded an agency that was a model of financial accountability 

for its time. Since then, the Forest Service has grown into an organization with operations in every part of the 

country and all over the world. Nevertheless, we are still following in our founder’s footsteps. Our continued 

success is due to the hard work of our Forest Service employees and their steadfast dedication—together with 

our partners and volunteers—to fulfilling our motto of caring for the land and serving people. 

Thomas Tidwell

Chief of the Forest Service

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

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

About This Report............................................................................................................................ A‐2

About the Agency............................................................................................................................. A‐3

Mission ....................................................................................................................................... A‐3

Organization............................................................................................................................... A‐3

Performance and Financial Demands, Events, Conditions, and Trends................................... A‐6

Performance Goals, Objectives, and Results................................................................................ A‐8

Strategic Goals and Program Performance............................................................................ A‐8

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

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

      

A‐8

Strategic Goal 2: Provide and Sustain Benefits to the American People..................... A‐10

Strategic Goal 3: Conserve Open Space......................................................................... A‐11

Strategic Goal 4: Sustain and Enhance Outdoor Recreation Opportunities................ A‐12

Strategic Goal 5: Maintain Basic Management Capabilities of the Forest Service..... A‐14

Strategic Goal 6: Engage Urban America in Forest Service Programs.......................... A‐14

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

Natural Resources Management....................................................................................... A‐15

Summary Analysis of Financial Statements and Stewardship Information........................... A‐16

Consolidated Balance Sheets................................................................................................... A‐16

Consolidated Statements of Net Cost.................................................................................... A‐19

Consolidated Statements of Changes in Net Position......................................................... A‐20

Combined Statements of Budgetary Resources.................................................................... A‐21

Analysis of Systems, Controls, and Legal Compliance .............................................................. A‐22

Management Assurances........................................................................................................ A‐22

Federal Managers’ Financial Integrity Act Assertions (FMFIA)................................ A‐22

 Federal Financial Management Improvement Act (FFMIA).................................... A‐22

Federal Information Security Management Act (FISMA)........................................ A‐22

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

Appendix A)................................................................................................................... A‐23

Other Management Information, Initiatives, and Issues  A‐23

Limitations of Financial Statements.............................................................................................. A‐24

v
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‐39

Consolidated Balance Sheets................................................................................................... B‐40

Consolidated Statements of Net Cost...................................................................................... B‐41

Consolidated Statements of Changes in Net Position............................................................ B‐42

Combined Statements of Budgetary Resources...................................................................... B‐43

Notes to the Consolidated and Combined Financial Statements......................................... B‐44

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

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

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

Deferred Maintenance...................................................................................................................... D‐2

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

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

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

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

Consolidated Statements of Net Cost.......................................................................................... E‐4

Improper Payments Improvement (IPIA) Reporting ................................................................. E‐5

The Criteria for the Risk Assessment........................................................................................ E‐5

The Description of the Statistical Sampling Process.............................................................. E‐5

The Description of the Corrective Action Plan(s)................................................................... E‐5

Improper Payments Reduction Outlook................................................................................. E‐5

Recovery of Improper Payment................................................................................................ E‐6

Risk Assessment and Oversight Benefits.................................................................................. E‐6

Summary of Financial Statement Audit and Management Assurances.................................... E‐6

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

Summary of Management Assurances.................................................................................... E‐7

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

vi
Part A

MANAGEMENT’S DISCUSSION

AND ANALYSIS

Unaudited

A-1
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

ABOUT THIS REPORT 

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

separate Agency Financial Report  (AFR) and Annual  Performance Report  (APR) in accordance with  the 

Office of Management and Budget (OMB) Circulars A‐136 and A‐11, Section 200.4.

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

President, and the public assess our stewardship over the financial resources entrusted to us. The Forest 

Service’s  APR  will  be  published  with the  FY  2012  Congressional  Budget  Justification  and  the  FY 2010 

Summary of Performance and Financial Information (SPFI) in February 2011 at http://www.fs.fed.us.

The Forest Service anticipates that this approach will improve its performance reporting in the following 

ways:

 Eliminating redundancy, especially where actual data can be used in lieu of estimates due to the 

timing of the report.

 Making the information more meaningful and transparent to the public. 

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

over its resources.

The  FY  2010  Management’s  Discussion  and  Analysis  (MD&A)  serves  as  a  high‐level  overview  of  the 

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

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

A-2
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

 

ABOUT THE AGENCY 

MISSION

Sustain the health, diversity, and productivity of the 

Nation’s forests and grasslands to 

meet the needs of present and future generations.

ORGANIZATION

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

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

Under Secretary for Natural Resources and Environment (NRE).

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

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

Private Forestry (S&PF).

Within the NFS deputy area are nine NFS regions, national  forests and grasslands, and ranger districts.

Within  the  R&D  deputy  area  are  five  research  stations,  the  Forest  Products  Lab  (FPL),  and  the 

International Institute of Tropical Forestry (IITF). Within the S&PF deputy area is the Northeastern Area 

Office.  Each  deputy  area  contributes  to  the  agency’s  mission  with  responsibility  for  a  variety  of 

functions.

Region:  The  Forest  Service  has  nine  regions.  Each  region  is  a  broad  geographic  area,  comprised  of 

national forest and grasslands. Each region is led by a regional forester who reports directly to the Chief 

A-3
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

of  the Forest Service and has broad responsibility  for coordinating activities among  the various  forests 

and grasslands within the region, for providing overall leadership for regional natural resource and social 

programs, and for coordinating regional landuse planning.

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 five research stations—the Northern, 

Pacific  Northwest,  Pacific  Southwest,  Rocky  Mountain,  Southern—and  the  FPL  and  the  IITF.  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)

 Chief Information Office

 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; and cooperation with States, tribes, and 

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

segment names are  the same as  those used  for deputy areas, but  the  terms are not synonymous. The 

mission is divided into four major responsibility segments:

National Forests and Grasslands: This responsibility segment includes protection and management of an 

estimated  193  million  acres  of  NFS  land,  which  includes  36.6  million  acres  of  designated  wilderness 

areas. In addition, the Forest Service partners with other agencies, nations, and organizations to foster 

global natural resource conservation and sustainable development of the world’s forest resources.

A-4
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

Forest  and  Rangeland  Research:  This  responsibility  segment  is  accountable  for  research  and 

development  of  forestry  and  rangeland  management  practices  to  develop  and  deliver  scientific  and 

technical knowledge for enhancing and protecting the economic productivity and environmental quality 

of the estimated 1.3 billion acres of forests and associated rangelands in the United States.

State and Private Forestry: This responsibility segment reaches across the boundaries of national forests 

and  uses  cooperative  agreements  with  State  and  local  governments,  tribal  governments,  forest 

industries, and private landowners  to provide  technical and  financial assistance  that helps protect and 

manage non‐Federal forests and associated rangeland and watershed areas.

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

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

of adjacent State and private lands.

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.

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PERFORMANCE AND FINANCIAL DEMANDS, EVENTS, CONDITIONS, 

AND TRENDS 

Responding to climate change is an agencywide challenge for the Forest Service. In fact, the new USDA 

Strategic  Plan  for  2010—2015  sets  a  departmental  goal  to  “Ensure  our  national  forests  and  private 

working lands are conserved, restored, and made more resilient to climate change, while enhancing our 

water resources.”

Drought‐stressed forests, invasive weeds, outbreaks of insects such as the pine beetle, and the resulting 

catastrophic  wildfires  are  symptoms  of  a  changing  climate.  Changes  in  temperature  and  precipitation 

and the timing and magnitude of weather events are altering ecosystems through increased frequency 

and intensity of wildfires. All of this leads to devastating consequences for watershed health.

The Forest Service‘s National Roadmap for Responding to Climate Change will focus on: 

 Assessing current risks, vulnerabilities, policies, and gaps in knowledge.

 Managing through adaptation, mitigation, and sustainable consumption strategies.

 Engaging employees and stakeholders to seek solutions.

The National Roadmap is vitally important, because the Nation’s forests are compromised, not only from 

climate  change,  but  also  from  land  use  conversion  from  growth  and  development. An  estimated  57 

million acres—the size of the State of Utah—could experience a substantial increase in housing density 

in  the  next  20  years.  The  Forest  Service  will  focus  efforts  on  areas  identified  in  Community  Wildfire 

Protection Plans (CWPP) to build resilience in the ecosystems found in or near the expanding wildland‐

urban  interface  (WUI).  This  strategy  of  focusing  on  high‐priority  fuels  within  the  WUI  will  help  deter 

destructive and costly wildfires.

The  Forest  Service  is  taking  an  all‐lands  approach,  developing  cross‐boundary  partnerships  for 

landscape‐scale conservation. The Forest Service is writing a new planning rule, based on an open and 

collaborative  process  with  a  broad  range  of  stakeholders  for  this  landscape  approach  to  ecosystem 

restoration. 

The  Forest  Service  will  collaborate  with  communities  and  partners  to  achieve  multiple  restoration 

objectives  through  stewardship  contracting.  The  removal  of  forest  products  in  these  projects  meets 

restoration  objectives  identified  through  forest  planning  and  National  Environmental  Policy  Act 

processes. The bundling of stewardship contracts into a single Integrated Resource Contract provides a 

continuing source of income and employment for local communities. For those projects where the value 

of the goods is greater than the costs of the service, the Forest Service retains the excess receipts and 

uses  them  to  implement  other  stewardship  contracts  or  agreements.  Stewardship  contracting  will  be 

the primary means of implementing watershed and ecosystem  restoration projects in  the near  future. 

The focus will be on new and emerging markets for wood products removed in the restoration projects, 

including the use of woody biomass for energy.

Congress passed the Federal Land Assistance, Management, and Enhancement (FLAME) Act to cover the 

costs  of  large  or  complex  wildfire  events  and  as  a  reserve  when  funds  are  exhausted,  creating  the 

Wildland Fire Suppression Reserve Fund. Creation of the Fund, together with amounts provided through 

regular wildland fire accounts, will provide the Forest Service a more stable funding source for major fire 

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suppression. Amounts  provided  through  the  Flame  Act  will  reduce  the  need  to  borrow  from  non‐fire 

accounts and help preserve agency funding that is designated for improving forest health and reducing 

hazardous fuels.

The  FLAME  Act also  directed  the  Forest  Service and  the U.S. Department  of the Interior  to  develop a 

Cohesive Wildfire Management Strategy. Our Cohesive Strategy will restore ecosystems on a landscape 

scale,  build  fire‐adapted  human  communities,  and  respond  appropriately  to  wildfire,  putting  out 

wildfires that threaten lives, homes, and critical natural resources.

In  the  FY  2010 USDA Management  Challenges, USDA Office  of  Inspector General  (OIG)  identified  two 

emerging management challenges that pose a potential of risk to the Forest Service mission, specifically: 

eliminating improper payments and workforce planning for fire‐suppression activities. 

Forest Service and other USDA agencies made progress in meeting the goals of the Improper Payments 

Information  Act  (IPIA)  of  2002  and  OIG  removed  the  issue  from  the  list  of  USDA  management 

challenges. However, in FY 2010, new legislation and an executive order expanded the requirements for 

identifying programs and activities susceptible to improper payments to improve agency accountability.

A  second  USDA  emerging  management  challenge  is  that  the  Forest  Service  does  not  have  a  national 

firefighting  workforce  plan.  This  is  a  significant  risk  as  a  proportion  of  employees,  especially  those 

involved  with  fire‐suppression  activities,  are  currently  eligible  to  retire  or  will  be  eligible  in  the  near 

future. This becomes a critical issue as the demand for trained fire‐suppression personnel has increased 

and the agency already relies on employing retired personnel to perform many needed tasks. 

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PERFORMANCE GOALS, OBJECTIVES, AND RESULTS 

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

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

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

allocation decisionmaking. 

Forest Service performance results reported in the MD&A are year‐to‐date (YTD) actual performance as 

of  September  27,  2010. Actual  performance  for  these  strategic  measures  will  be  published  in  the 

FY 2010 APR in February 2011.

STRATEGIC GOALS AND PROGRAM PERFORMANCE

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

its efforts in support of the mission:

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

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

Goal 3: Conserve Open Space.

Goal 4: Sustain and Enhance Outdoor Recreation Opportunities.

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

Goal 6: Engage Urban America with Forest Service Programs.

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

STRATEGIC GOAL 1: RESTORE, SUSTAIN, AND ENHANCE THE NATION’S FORESTS AND GRASSLANDS

The  national  forests  and  grasslands  were  established  to  protect  land, 

secure favorable waterflows, and provide a sustainable supply of goods 

and  services  to  the  American  people.  In  addition  to  managing  these 

lands,  the Forest Service provides  technical and  financial assistance  to 

the States and private forest landowners. During the past century, the 

agency  has  achieved  a  balance  between  providing  land  stewardship  services  and  meeting  public 

demands for various uses of the NFS. Despite past successes, challenges persist. In recent years, people 

have  become  more  aware  of  forest  disturbance.  The  increasing  extent  and  frequency  of 

uncharacteristically  severe  wildland  fires  and  insect  and  disease  outbreaks  have  caused  particular 

concern.  The  Forest  Service  works  to  restore,  sustain,  and  enhance  the  land  through  an  integrated 

approach that includes programs such as Watershed Management, Invasive Species, and Management 

of Aquatic and Terrestrial Habitats.

Goal 1 Resources by Fiscal Year

(in millions)

2008 2009 2010

$4,896 $4,620 $4,281

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Reduce the risk to communities and natural resources  from wild fire.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Moved toward desired 

conditions

(acres and percentage)

991,000

39%

699,062

23%

799,215

27%

1,180,000

49% N/A1 N/A 1,600,00040%

Maintained in desired 

conditions

(acres and percentage)

830,000

33%

986,507

32%

1,146,720

38%

1,128,000

47% N/A N/A 2,000,00050%

Acres brought into 

stewardship contracts

(number)

57,500 65,890 88,304 121,000 102,782 85% 520,000

Build community capacity to suppress and reduce losses  from wild fires.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Acres treated in the WUI 

that have been identified 

in CWPP or equivalent 

plans (%)

17% 36% 41% 41% 38% 93% 75%

Restore and maintain healthy watersheds and diverse habitats.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Watersheds in class 1 

condition  (% of all) 30% 30% 30% 30% 25% 82% 30%

Terrestrial habitat 

restored (acres, in 

thousands)

642 1,963 2,154 1,608 1,517 94% 1,725

Stream habitat restored

(miles) 4,600 2,346 3,498 2,600 2,526 97% 2,312

Lake habitat restored

(acres) 18,000 18,290 23,570 19,061 27,267 143% 16,437

Acres needing 

reforestation or timber 

stand improvement that 

were treated (%)

13% 15% 18% 17% 17% 100% 15.5%

                                                             1

 N/A is not available. The YTD accomplishments are not available at this time.

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STRATEGIC GOAL 2: PROVIDE AND SUSTAIN BENEFITS TO THE AMERICAN PEOPLE

America’s  forests  and  grasslands  contain  abundant  natural  resources 

and  opportunities  that  help  meet  the  demands  and  needs  of  the 

American people. Sustainable management of these resources ensures 

that the availability of goods and services continues into the future and 

that  land  productivity  is  maintained.  National  forest  management 

provides  a  variety  of  opportunities  for  use  and  maintains  wildlife 

diversity,  supplies  of  wood  products,  energy  sources  and  transmission  infrastructure,  wildlife  and 

domestic  livestock  forage,  water  supplies,  and  other  goods  and  services.  Primarily  through  State  and 

Private  Forestry  programs,  the  Forest  Service  provides  technical  and  financial  assistance  for  natural 

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

The  Forest  Service  also  provides  international  technical  assistance,  which  not  only  advances  the 

sustainability  of  forest  resources  abroad  but  also  improves  conditions  here  at  home.  Our  research 

provides  a  solid  scientific  foundation  for  the  sustainable  management  of  forests  and  grasslands  and 

improvements in the use and marketing of forest products and services. 

Provide  a  reliable  supply  o f  forest  products  over  time  that  (1 )  is  consistent  with  achieving 

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

in frastructure in local communities. 

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Wood fiber provided to 

meet demand2 (CCF3) 5,400,000 4,753,979 4,829,254 5,093,411 4,369,028 86% 4,344,417

Green tons and/or 

volume of woody 

biomass available 

through permits, 

contracts, grants, 

agreements, or the 

equivalent4 (number)

N/A 2,768,000 2,331,989 2,700,000 2,363,406 88% 2,700,000

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

3 CCF=Hundred cubic feet

4

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

Federal land that are made available through permits, contracts, grants, agreements, or the equivalent.”

Goal 2 Resources by Fiscal Year

(in millions)

2008 2009 2010

$400 $572 $398

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

on NFS lands and (2) helps support ranching in local communities.

Help meet energy resource needs.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Land Special Use Permit 

applications for energy‐

related facilities that are 

completed within 

prescribed timeframes

(%)

50% 100% 100% 95% 100% 105% 100%

Energy‐mineral 

applications that are 

processed within 

prescribed timeframes

(%)

45% 8% 8% 50% 5% 11% 45%

STRATEGIC GOAL 3: CONSERVE OPEN SPACE

Open  space  provides  many  environmental,  social,  and  economic 

benefits  to  rural  and  urban  communities.  Undeveloped  forests  and 

grasslands—including working  farms,  ranches, and  timber lands—help 

protect water quality, conserve native wildlife, and provide renewable 

timber  and  nontimber  products,  recreation  opportunities,  and  scenic 

beauty. Conservation of these open spaces is essential to maintain the multitude of public benefits we 

all  need and enjoy. These  “green  spaces” also increase  home values and generate jobs and economic 

vitality. Current population growth trends show a steady loss of vital open spaces to developed uses. 

The Forest Service addresses the issue of open space by acquiring land and collaborating with States and 

private  landowners  to  protect  these  areas.  For  example,  the  Forest  Legacy  Program  protects 

environmentally important forest areas that are threatened by development and other nonforest uses. 

The Forest Stewardship Program develops and delivers appropriate technical and planning assistance to 

enable active, informed, long‐term forest management. Forest Stewardship management plans provide 

landowners  with  practical  guidance  for  achieving  their  own  unique  objectives  in  a  way  that  also 

maximizes public goods and services provided by those forests, such as clean drinking water, clean air, 

carbon  sequestration, wood  fiber,  recreation, and  scenic landscapes. Forest Stewardship management 

plans  place  landowners  in  a  much  better  position  to  participate  in  certification  programs  and  access 

emerging markets, such as those for ecosystem services and carbon credits. 

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

National forests and 

grasslands under grazing 

permit that are 

sustainably managed for 

all rangeland products 

(acres, in thousands)

81,560 79,473 79,097 81,560 76,183 93% 81,560

Goal 3 Resources by Fiscal Year

(in millions)

2008 2009 2010

$162 $165 $211

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

Protect  forests and grasslands  from conversion to other uses.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Environmentally 

important forests and 

grasslands protected 

from conversion 

(acres, cumulative and 

annual)

1,360,000

(0)

1,643,078

(194,987)

1,897,809

(176,471)

2,085,809

(188,000)

N/A5

(105,232) 56% 2,219,041(100,000)

STRATEGIC GOAL 4: SUSTAIN AND ENHANCE OUTDOOR RECREATION OPPORTUNITIES

The Forest Service is challenged with sustaining adequate high‐quality 

outdoor  recreation  opportunities  to  meet  the  Nation’s  needs  while

maintaining  the ecological integrity of national  forests and grasslands. 

The  combination  of  increasing  populations  and  the  continued  decline 

of  public  access  to  privately  owned  forest  land  creates  extensive 

pressure on public lands  to supply more recreation opportunities. The 

Forest Service’s recreation programs provide jobs not only for the maintenance of infrastructure such as 

trails and lodges, but also by attracting tourism that supports rural businesses.

If  public  lands  are  to  provide  additional  recreational  benefits  without  damaging  the  landscape, 

management must be based on a strong scientific foundation, which is provided in part by Forest Service 

researchers.  Preserving  high‐quality  recreation  opportunities  also  requires  maintaining  the  lands  and 

the buildings, roads, and  trails on  those lands. This infrastructure makes it possible  for visitors  to view

wildlife, explore wilderness and cultural heritage areas, participate in educational activities, and access 

off‐highway vehicle  trails. The agency continues  to work with its partner volunteers, nongovernmental 

organizations, other agencies, and the private sector to achieve acceptable results.

Improve the quality and availability o f outdoor recreation experiences. 

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Recreation sites 

maintained to standard

(%)

65% 65% 67% 67% 68% 102% 70%

Total recreation capacity 

at developed recreation 

sites that meets 

accessibility standards (%)

10% 22% 23% 24% 19% 81% 27%

Trails that meet national 

quality standards (%) 60% N/A 26% 40% 14% 36% 35%

Customers who are 

satisfied with recreation 

facilities, services, and 

settings (%)

80% 89% 91% 90% 94% 104% 90%

                                                             5 This measure is reported annually, but the baseline and 2011 numbers are cumulative. The bracketed numbers represent the cumulative 

accomplishments through the end of the fiscal year.

Goal 4 Resources by Fiscal Year

(in millions)

2008 2009 2010

$602 $851 $694

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Road system intended for 

passenger‐car use that is 

suitable for passenger‐car 

use (%)

29% 89% 89% 89% 90% 101% 89%

Secure legal entry to national  forest lands and waters.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

High‐priority access rights‐

of‐way acquired (%) 90% 78% 74% 85% 0% 0% 85%

Improve the management o f o f f‐highway vehicle use.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

NFS lands covered by new 

motor vehicle use maps 

reflecting a designated‐use 

system of roads, trails, and 

areas (%)

0% 27% 44% 98% 57% 58% 100%

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

STRATEGIC GOAL 5: MAINTAIN BASIC MANAGEMENT CAPABILITIES OF THE FOREST SERVICE

The Forest Service maintains a workforce with the skills and capabilities 

to  deal  with  the  natural  and  human‐caused  forces  that  affect  our 

forests  and  grasslands.  Effective  management  requires  good‐quality 

data, strategic planning, law enforcement, and facility maintenance.

Improve the administration of national forest lands and facilities in support of the agency’s mission. 

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Administrative facilities 

that are being 

maintained to standard 

(%)

64% 63% 66% 68% 64% 94% 63%

Newly reported 

encroachments and title 

claims administered to 

standard6 (%)

60% 3% 5% N/A N/A N/A N/A

STRATEGIC GOAL 6: ENGAGE URBAN AMERICA WITH FOREST SERVICE PROGRAMS

The  Forest  Service  has  an  integrated  program  of  natural  resources 

stewardship  to  better  connect  urban  residents  to  public  and  private 

forested lands as a way of improving quality of life. The agency works 

to  promote  understanding  and  beneficial  management  of  the  urban 

forest  through conservation education, community “greening” efforts, 

and  youth  programs.  Partners  at  the  Federal,  State,  and  local  levels  improve  the  Forest  Service’s 

understanding of what urban residents think of their local parks, nearby woodlands, and national forests 

and  what  they  want  from  them.  Through  these  partnerships,  the  agency  builds  connections  between 

rural and urban communities.

Improve the management o f urban and community  forests to provide a wide range o f public 

bene fits.

FY 2010

Performance

Measure Baseline FY2008

FY

2009 Target YTD

%  of Target 

Accomplished 

YTD

2011

Target

Communities with 

developing or 

established urban and 

community forestry 

programs resulting from 

Forest Service 

assistance (number)

6,564 7,139 6,853 7,200 2,963 41% 7,200

                                                             6 This performance measure was discontinued; efforts are under way to develop a new performance measure and associated targets.

Goal 5 Resources by Fiscal Year

(in millions)

2008 2009 2010

$429 $663 $473

Goal 6 Resources by Fiscal Year

(in millions)

2008 2009 2010

$33 $35 $36

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

STRATEGIC GOAL 7: PROVIDE SCIENCE‐BASED APPLICATIONS AND TOOLS FOR SUSTAINABLE NATURAL 

RESOURCES MANAGEMENT

The  Forest  Service  conducts  research  and  produces  technologies  to 

improve  the  health  and  use  of  our  Nation’s  forests  and  grasslands. 

Science informs policy and land management decisions to help achieve 

desired outcomes. Science and the knowledge generated by the Forest 

Service are  transferred  to many organizations, including policymakers, 

wildland fire managers, and communities.

Increase  the use o f applications and  tools developed by Forest Service R&D and Technology and 

Development Centers.

FY 2010

Performance Measure Baseline FY

2008

FY 

2009 Target YTD

%  of Target 

Accomplished 

YTD

FY 2011

Target

Customer satisfaction 

with R&D products and 

services (ACSI score7)

72 72 75 75 75 100% 75

Patent applications filed

(number) 10 6 6 6 6 100% 6

                                                             7 ACSI=The American Customer Satisfaction Index, which assesses the satisfaction of private and other external customers with 

the relevance, usefulness, and accessibility of R&D products and services.

Goal 7 Resources by Fiscal Year

(in millions)

2008 2009 2010

$102 $99 $127

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

SUMMARY ANALYSIS OF FINANCIAL STATEMENTS AND 

STEWARDSHIP INFORMATION 

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

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

to provide  relevant,  reliable, and accurate  financial information  related  to Forest Service activities. An 

analysis of the agency’s September 30, 2010, financial statements 

provides  the  following  highlights.  The  exhibits  below  reflect  the 

comparative amounts for FY 2010 and FY 2009.

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,  2010,  Forest  Service  reports  $6.8  billion in 

assets,  representing  an  increase  of  1  percent  from  FY  2009 

amounts. 

Fund Balance with Treasury

Fund Balance with Treasury (77 percent of assets) is  the amount in  the Forest Service’s accounts with 

the  U.S.  Department  of  Treasury  that  is  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.

ASSETS (in millions)

Differences

Asset

FY 

2010

FY 

2009 Dollars Percentages

Fund Balance with Treasury $5,252 $5,146 $106 2%

General Property and Equipment 1,383 1,359 24 2%

Receivables, Net 139 210 (71) (34%)

Total of Major Categories $6,774 $6,715 59 1%

Other Asset Categories 51 47 4 9%

Grand Total Assets $6,825 $6,762 $63 1%

The Forest Service’s 

Principal Statements:

Consolidated Balance Sheets

Consolidated Statements of 

Net Cost

Consolidated Statements of 

Changes in Net Position

Combined Statements of 

Budgetary Resources

A-16
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

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—both  heritage  and  stewardship  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  (2  percent  of  assets)  decreased  $71  million  (34  percent)  from  FY  2009 

primarily due to decreased fire activity and  reduction in reimbursable  fire‐related activity. Decrease in 

fire activity is related to successful suppression of almost 98 percent of wildfires on initial attack and the 

agency reducing flammable fuels through ecological restoration to foster fire‐adapted communities and 

employing multiple strategies on all parts of fire activities.

A-17
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

LIABILITIES

As  of  September  30,  2010,  the  Forest  Service  reports  $2.1 billion  in  liabilities,  representing  minimal 

change from FY 2009 amounts.

LIABILITIES (in millions)

Differences

Liability

FY

2010

FY

2009 Dollars Percentages

Federal Employee Benefits $443 $421 $22 5%

Other Liabilities (non‐Federal)

     Accrued Liabilities 734      721 13 2%

     Payments to States 409 442 (33) (7%)

Other Categories 551 554 (3) (1%)

Grand Total Liabilities $2,137 $2,138 ($1) 0%

Federal Employee Benefits

Federal Benefits (21 percent of liabilities) had an increase of $22 million (5 percent) from FY 2009. The 

Federal  Employees’  Compensation  Act  (FECA)  liability  is  accrued  workers'  compensation  benefits,  not 

yet paid by the Forest Service. FECA benefits include the current and expected future liability for death, 

disability, medical, and  other approved workers’  compensation  costs. By law, Federal agencies  cannot 

make these payments until Congress appropriates and OMB apportions the funds, and they are liabilities 

on the balance sheet. 

Accrued Liabilities

Accrued  Liabilities  (34 percent  of  liabilities)  had  an  increase  of  $13 million  (2 percent)  from  FY  2009. 

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

Payments to States

The  liability  for  Payments  to  States  (19 percent  of  liabilities)  decreased  $33 million  (7 percent)  from 

FY 2009  primarily  due  to  legislative  mandates  calling  for  a  declining  scale  in  payment  calculation  of 

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

A-18
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

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 OMB apportions  and  the U.S.  Department  of  Treasury  makes  funds  available  to  the  Forest 

Service 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  $3.0 billion  and  cumulative  results  of  operations  of  $1.7 billion,  an  increase of 

$64 million (1 percent) in net position from FY 2009.

CONSOLIDATED STATEMENTS OF NET COST

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

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

representing an increase of 3 percent from FY 2009 amounts.

Expenses

Forest  Service  program  costs  are $6.7 billion  for  FY 2010,  representing  an increase  of 2 percent  from 

FY 2009. 

GROSS EXPENSES (in millions)

Differences

Responsibility Segments Strategic 

Goal(s)

FY

2010

FY

2009 Dollars Percentages

National Forests and Grasslands 2,4,5 $3,808 $3,434 $374 10%

Wildland Fire Management 1 2,078 2,385 (307) (13%)

State and Private Forestry 3,6 448 412 36 9%

Forest and Rangeland Research 7 368 358 10 3%

Total Program Costs $6,702 $6,589 $113 2%

Although total gross expenses have increased, Wildland Fire Management (31 percent of program costs) 

decreased $307 million (13 percent) due to a decrease in FY 2010 fire payments and fire expenses, as a 

result of reduced wildland fire activity.

A-19
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

Revenue

The Forest Service’s earned revenue—from both the public and intragovernmental—is $623 million for 

FY  2010  and  was  $679 million  for  FY  2009,  resulting  in  a  decrease  of  $56  million.  The  decrease  of 

revenue is primarily attributed to a decrease in reimbursable fire billings, due to a fairly light fire season. 

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  reimbursable  activities  for  fire  and 

work completed 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 report the change in net position during the reporting period. 

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

Results of Operations.

NET POSITION (in millions)

Differences

Net Position

FY

2010

FY

2009 Dollars Percentages

Unexpended Appropriations $2991 $2,966 $25 1%

Cumulative Results of Operations 1,697 1,658 39 2%

Total Net Position $4,688 $4,624 $64 1%

Unexpended Appropriations

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  in  Part  B.  Financial  Section  of  this  AFR.

A-20
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

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  $9.3  billion  in  FY 2010  and  $9.8  billion  in  FY 2009, 

representing a decrease 5 percent from FY 2009.

STATEMENT OF BUDGETARY RESOURCES (in millions)

Differences

Statement of Budgetary Resources FY 

2010

FY 

2009 Dollars Percentages

Total Budgetary Resources $9,339 $9,772 ($433) (4%)

Status of Budgetary Resources

    Obligations Incurred 6,980 7,027              (47) (1%)

    Unobligated Balance–Apportioned 1,361 2,031           (670) (33%)

    Unobligated Balance–Not Available 998 714              284  40%

Total Status of Budgetary Resources $9,339 $9,772 ($433) (4%)

Unobligated Balance–Apportioned

The Unobligated Balance–Apportioned decreased $670 million (33 percent) in FY 2010, primarily due to 

American  Recovery  and  Reinvestment  Act  of  2009  (ARRA)  funds  that  were  mainly  apportioned  in 

FY 2009.

Unobligated Balance–Not Available

The Unobligated Balance–Not Available increased $284 million (40 percent) in FY 2010, primarily due to 

the receipt of FLAME Act funds.

A-21
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

ANALYSIS OF SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE 

MANAGEMENT ASSURANCES

FEDERAL  MANAGERS’  FINANCIAL  INTEGRITY  ACT 

(FMFIA)

The management control objectives under FMFIA, or the 

Integrity Act of 1982, are listed in  the “What’s FMFIA?” 

box,  to  the  right.  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  (FMFIA,  Section  2)  and 

financial  systems  (FMFIA,  Section  4),  effective  for  the 

period ending September 30, 2010. 

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  U.S.  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, 2010. 

1. Federal financial management system requirements.

2. Applicable Federal Accounting Standards.

3. The USSGL at the transaction level.

FY 2010 Results

Based on the results of our evaluation, Forest Service is substantially compliant with the Sections listed 

above.

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, 

What is FMFIA?

The Federal Managers’ Financial Integrity Act, or 

FMFIA, requires agency managers to reasonably 

assure Congress and the American public that all 

financial information meets the following control 

objectives:

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.

A-22
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

reporting  annually  to  OMB  and  Congress  on  the  effectiveness  of the  agency's  security  programs  and 

independent OIG evaluations. 

FY 2010 Results

No IT material weaknesses were noted for Assurance Year 2010.

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 2010 Assurance Year (ending June 30, 2010), 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.

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.

OTHER MANAGEMENT INFORMATION, INITIATIVES, AND ISSUES

ARRA

The ARRA included $1.15 billion in  funds  for the Forest Service to implement 705 projects that sustain 

the Nation’s  forests and grasslands,  create jobs, and  promote U.S. economic  recovery. In  the  spirit  of 

landscape‐scale  conservation, many  of  the  Forest  Service  projects  were  collaborative  efforts  with  the 

States.

The Forest Service will use its Job Corps, Youth Conservation Corps, and Public Lands Corps Programs as 

training opportunities and will develop partnerships to facilitate the placement of graduates from these 

programs,  including  new,  non‐traditional  partners,  within  the  agency’s  programs  to  better  reach 

underserved communities in urban areas with high unemployment rates.

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

specialized  Economic  Recovery  Operations  Centers  (EROCs).  These  EROCs  provided  a  pool  of  highly 

trained  professionals available  to  serve  the  singular  purpose  of awarding and administering  contracts, 

grants,  and  agreements  for  Forest  Service  recovery  projects.  The  EROCs  were  centralized  in  four 

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

A-23
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

As of September 30, 2010, the EROCs awarded 3,160 contracts and 598 grants and agreements.

The  ARRA  funding  expired  at  the  conclusion  of  FY  2010;  therefore,  the  contracts,  grants,  and 

agreements awarded by  the EROCs will be  transitioned  to  the  respective  region,  station, or area in FY 

2011.

The USDA OIG has provided oversight to ensure funds are spent by the Forest Service in a manner that 

minimizes the risk of improper use. Since April 2009, OIG conducted 168 site visits throughout the field 

operations,  resulting  in  11  audit  fast  reports  and  12  contract  compliance  referral  reviews  for  projects 

issued throughout the Forest Service.

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

 Released  additional  guidance  on  the  monitoring  and  management  of  contracts  and  grants 

awarded to ARRA recipients.

 Implemented  a  robust  management  and  oversight  team  to  execute  the  ARRA  program  and 

monitor performance.

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.

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  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-24
Part B

FINANCIAL SECTION

B-1
Message From the Chief Financial Officer 

The Forest Service, an agency of the U.S. Department of Agriculture, continued its high standard of financial 

management and reporting during the past fiscal year (FY). As Chief Financial Officer, I am proud to present the 

FY 2010 results for stewardship and management of the public funds entrusted to the Forest Service.

During FY 2010, the Forest Service took the necessary steps to continue to ensure that—

• programs operate efficiently and effectively;

• obligations and costs comply with applicable laws and regulations;

• funds, property, and other assets are safeguarded against waste, loss, or mismanagement; and

• revenues and expenditures are properly recorded and accounted for to permit the preparation of reliable

financial and statistical reports and to maintain accountability over assets.

The Forest Service’s annual evaluation, conducted at all levels throughout the agency, indicated that agency 

controls are achieving these intended objectives, and internal controls provide reasonable assurance that the 

objectives have been met.

FY 2010 highlights included an unqualified opinion on the principal financial statements, no material 

weaknesses for the third consecutive year, and continued compliance with the Office of Management and 

Budget’s circular A–123, Management’s Responsibility for Internal Control, for the fifth consecutive year. 

The agency’s success has been a joint effort of Forest Service managers, employees, and partners as the Forest 

Service strives for excellence in financial accountability. 

Donna M. Carmical

Chief Financial Officer

B-2
USDA

:z::==;

NOV - 8 2010

UNITED STATES DEPARTMENT OF AGRICULTURE

OFFICE OF INSPECTOR GENERAL

Washington D.C. 20250

REPLY TO

ATTN OF: 08401-II-FM

TO:

ATTN:

FROM:

Thomas Tidwell

Chief

Forest Service

Donna Carmical

Chief Financial Officer

Forest Service

Jennifer McGuire

Director, Audit and Assurance

Forest Service

Sandy Coleman

Agency Liaison Officer

Forest Service l'/].~~

Gil H. Harden {tJft;cYYc.

Assistant Inspector General

for Audit

SUBJECT: Forest Service's Financial Statements for Fiscal Years 2010 and 2009

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

fiscal years ending September 30,2010 and 2009. The report contains an unqualified opinion on

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

reporting and compliance with laws and regulations.

KPMG LLP, an independent certified public accounting firm, conducted the audit. In

connection with the contract, we reviewed KPMG LLP's report and related documentation and

inquired oftheir representatives. Our review, as differentiated from an audit, in accordance with

Government Auditing Standards (issued by the Comptroller General ofthe United States), was

not intended to enable us to express, and we do not express, opinions on FS' financial

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

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

compliance with laws and regulations. KPMG LLP is responsible for the attached auditor's

report, dated November 5,2010, and the conclusions expressed in the report. However, our

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 [USDA]) as of September 30, 2010 and 2009 

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

budgetary resources (hereinafter referred to as “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) 2010 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 that 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, 2010 and 2009, are presented fairly, in all material 

respects, in conformity with U.S. Generally Accepted Accounting Principles (U.S. 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 sufficient 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 defined in the Internal Control Over Financial Reporting 

section of this report, as follows: 

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

Control Environment (Repeat Condition) 

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

Condition) 

• Number 3: The U.S. Forest Service Needs to Develop a Coordinated Intra-Agency Effort to Address 

Financial Reporting Requirements (Partial Repeat Finding) 

• Number 4: Management Review Procedures of Credit Card Transactions and Controls Over the 

Programs Need Continued Improvement (Repeat Condition) 

• Number 5: The U.S. Forest Service Needs to Improve Internal Controls for Revenue Related 

Transactions (Repeat Condition) 

• Number 6: Procedures for Reviewing 3rd Party Processed Transactions 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 disclosed no instances of noncompliance or other matters that are required to be reported herein 

under Government Auditing Standards and Office of Management and Budget (OMB) Bulletin No. 07-04, 

Audit Requirements for Federal Financial Statements, as amended. 

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, 2010 and 2009 and the related consolidated statements of net costs, changes in net position, 

and the combined statements of budgetary resources (hereinafter referred to as “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, 2010 and 2009, 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 performing these limited procedures, we believe that the Required 

Supplementary Information related to deferred maintenance is lacking sufficient 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 

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

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

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

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. 

In our FY 2010 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 described in Exhibit I that we consider to be significant 

deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a 

B-7
combination of deficiencies, in internal control that is less severe than a material weakness, yet important 

enough to merit attention by those charged with governance. 

Exhibit II presents the status of prior year significant deficiencies, including those open repeat 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 5, 2010. 

Compliance and Other Matters 

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

agreements disclosed no instances of noncompliance or other matters that are required to be reported herein 

under Government Auditing Standards and OMB Bulletin No. 07-04, Audit Requirements for Federal 

Financial Statements, as amended. 

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

separate letter dated November 5, 2010 

* * * * * * * 

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 2010 and 2009 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. These 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. 

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 2010 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, but not for the purpose of expressing an opinion on the effectiveness of the U.S. 

B-8
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. We did not test all 

controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity 

Act of 1982. 

As part of obtaining reasonable assurance about whether the U.S. Forest Service’s FY 2010 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 the provisions 

referred to in Section 803(a) of Federal Financial Management Improvement Act (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 IV. We did 

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

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

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 5, 2010 

B-9
 

INTRODUCTION TO EXHIBITS 

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

improve its control structure, and related policies and procedures in an attempt to strengthen its overall control 

environment. During the FY 2010 audit, the U.S. Forest Service continued to remediate its information 

technology (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 2010 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 

on and closed, include period-end accrual processes and physical inventory policies and procedures of pooled 

real property. 

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

identified new significant deficiencies relating to variability in the expense accrual and review of 3rd party 

processed transactions. 

With regard to compliance and other matters, including FFMIA, the U.S. Forest Service closed or 

downgraded all existing matters and no new significant deficiencies relating to compliance and other matters 

were identified. 

Exhibit I presents the significant deficiencies as of and for the year ended September 30, 2010. Exhibit II of 

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

status of prior year recommendations regarding noncompliance with laws and regulations. The U.S. Forest 

Service management’s response is presented in Exhibit IV. 

B-10
 (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

During our fieldwork, the following segregation of duties weaknesses were identified: 

• A user account had access to conflicting functions in I-Web. Specifically, a user had access to the 

Accounting Technician, Program Approver, and Accounting Approver roles in I-Web which allows these 

accounts to enter a payment and apply both required levels of approval. In addition a periodic review of 

payments processed by these accounts is not performed. However, the account has not been used in FY 

2010 to enter and apply both levels of approval to a payment. 

• Two users had access to both the ‘Data Center’ and ‘Oracle’ groups in the Password Database which 

grants system administrator access to the Incident Business System (IBS) Operating System and 

Database. U.S. Forest Service remediated this issue for one user by limiting their access in September 

2010. 

• One Polytron Version Control System (PVCS) user had PVCS developer access and I-Web production 

server access. U.S. Forest Service remediated this issue during fieldwork by limiting the users PVCS 

access in September 2010. 

U.S. Forest Service management provided the following explanations for the segregation of duties exceptions: 

• The I-Web user has the Accounting Technician role because of the understanding that this role was 

needed to have the Financial Approver role. In addition, this user has the Program Approver role because 

Grants and Agreements has an agreement with Health and Human Services and Acquisition Management 

to designate a Program Manager as subject matter expert. Also, the user has the Financial Approver role 

so that he/she is able to assist when necessary due to workload resource issues. 

• Access was granted to this individual in the Password Database based upon their job responsibilities. 

Additionally, management stated that access to Oracle databases requires administrative operating system 

level access. 

• The users were inadvertently granted inappropriate access in PVCS and U.S. Forest Service management 

did not identify the inappropriate access during the quarterly review process. 

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.” 

The National Institute of Standards and Technology (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.” 

B-11
 (Continued) 

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 nonjob-related information.” 

The GAO’s, Standards for Internal Control in the Federal Government, states: “Key duties and 

responsibilities need to be divided or segregated among different people to reduce the risk of error or fraud. 

This should include separating the responsibilities for authorizing transactions, processing and recording 

them, reviewing the transactions, and handling any related assets. No one individual should control all key 

aspects of a transaction or event.” 

Without proper segregation of duties controls, there is increased risk that fraudulent data could be entered into 

I-Web. Payments may be entered and approved by the same individual. This could result in payments being 

inappropriately approved within I-Web. 

Individuals with privileged access to both the operating system and database can make unauthorized changes 

to application data and alter the audit trail that would track such an incident. Additionally, individuals with 

developer access and production access can make unauthorized coding changes to the application. 

Recommendation Number 1:

We recommend that U.S. Forest Service management establish, communicate, and document the enforcement 

of policies and procedures which require quarterly management review of I-Web access listings to verify that 

access is appropriate and in compliance with policy. Remove roles if the user does not perform actions for 

that role within the FY. 

Recommendation Number 2:

We recommend that U.S. Forest Service management update the level of user access within the Password 

Database and PVCS for all personnel associated with this finding based on the appropriate segregation of 

duties principles. If this current level of access is warranted, then identify and implement mitigating controls 

such as monitoring of actions to track user actions. 

Change Control Continues to Need Improvement 

During our fieldwork, the following change control weaknesses were identified for Paycheck8: 

• Three of eight changes did not have the versions tracked; 

• Six of eight changes did not have evidence of testing documented; and 

• Four of eight changes did not have evidence of approval. 

In addition, we also noted that no standard documentation was provided for each change. 

The U.S. Forest Service and the contractor responsible for Paycheck8 changes do not have a standard change 

control process for the Paycheck8 application. 

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

Section 6682.62.3, Configuration Management, states:

“Maintain a configuration management plan, track and document information system changes, and ensure that 

all changes are properly tested prior to implementation of change.” 

B-12
 (Continued) 

In addition, Section 6682.63.3, Monitoring Configuration Changes states: 

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

approved.” 

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 that “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.” 

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.” 

By not having a systematic process by which to track versions, testing, and approvals, the U.S. Forest Service 

is exposed to the risk of program changes implemented in production that have not been approved or 

adequately tested. 

Recommendation Number 3:

We recommend that the U.S. Forest Service management establish a standard process to track authorization of 

changes, document versioning, and document evidence of testing for Paycheck8. 

Monitoring of Audit Logs Needs Improvement 

From October 1, 2009 through March 1, 2010 no formal policy or procedures existed over the monitoring of 

Net Forensics logs. The U.S. Forest Service was unable to formalize procedures for the use of the Net 

Forensics software tool until March, 2010. U.S. Forest Service remediated this issue during fieldwork by 

publishing policy guidance on this subject matter. 

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. 

B-13
 (Continued) 

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.” 

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 activities need 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. 

Recommendation Number 4:

We recommend that U.S. Forest Service management ensure that the procedures defined for the use of the Net 

Forensics tool are properly implemented and adequately documented for review. 

Access Controls Need Continued Improvement 

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

• Periodic reviews of Paycheck8 privileged access are not performed and Paycheck8 Administrators do not 

have documentation of their access approvals. 

• Periodic reviews for JIRA access are not performed; access request forms are not retained. As a result of 

our inquiry seven users had access removed from JIRA. U.S. Forest Service remediated this item during 

fieldwork by implementing a new process to perform reviews and retain access request forms. 

• Individuals who do not complete security awareness training were not listed as having deactivated Lotus 

Notes accounts. U.S. Forest Service remediated this item during fieldwork by providing documentation 

that the users had successfully completed their Security Awareness training. 

• I-Web users scheduled to be deactivated as a result of the Quarter 1 re-certification process did not have 

their access removed. 

• Quarterly reviews of the Password Database are not performed consistently. 

In addition, terminated employees are removed from Lotus Notes and Paycheck8 every two weeks as opposed 

to one business day, and terminated users maintained access in Lotus Notes, Paycheck8, I-Web and Incident 

Business System (IBS) as follows: 

• In Lotus Notes, 127 terminated users retained access for 60+ days, 41 users retained access for 30-60 

days, 29 users retained access for 15-30 days, and 6 users retained access for up to 15 days. U.S. Forest 

Service has remediated this issue by removing access during fieldwork. 

• In Paycheck8, 150 terminated users retained access for 60+ days, 42 users retained access for 30-60 days, 

36 users retained access for 15-30 days, and eight users retained access for up to 15 days. U.S. Forest 

Service has remediated this issue by removing access during fieldwork. 

• In I-Web, seven terminated users retained access for 60+ days. U.S. Forest Service has partially 

remediated this issue by removing access for 1 user. 

• In IBS, five terminated users retained access for 60+ days and one retained access for 30-60 days. U.S. 

Forest Service has remediated this issue by removing access during fieldwork. 

B-14
 (Continued) 

U.S. Forest Service management stated the following reasons for the access control weaknesses: 

• Reviews of Paycheck8 privileged users were not performed due to management oversight. 

• JIRA was not subject to normal U.S. Forest Service account management procedures due to management 

oversight. 

• The individuals who did not complete security awareness training had joined the U.S. Forest Service after 

the account cutoff date for completing the security awareness training. 

• A defect was found in the access management system for I-Web which is in the process of being 

corrected. 

• The 2nd quarter review of the Password Database was not performed due to management oversight. 

• 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. The 

U.S. Forest Service’s quarterly review process did not discover inappropriate access. 

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

March 29, 2010, Section 6684.2c states “Deactivate user accounts after the period of inactivity documented in 

FSM 6684.21. Unless an extension has been granted by the [Information Systems Security Officer] ISSO, 

deactivate user identifiers if the user no longer requires access to the system due to a change in job 

responsibility or termination of employment. Deactivate accounts no later than close of business on the next 

business day following the date of departure. Archive information associated with inactive user identifiers 

until the account is finally deleted.” 

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

March 25, 2010, Section 6684.21 states “Manage all information system accounts, including establishing, 

activating, modifying, reviewing, disabling, and removing accounts. Review all information system accounts 

annually at a minimum.” 

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

Security Training Records, dated March 25, 2010, Section 6683.51states: 

• “Document and monitor individual information system security training activities including basic security 

awareness training and specific (role-based) information system security training. 

• Verify and document completion of security awareness and role-based security training courses by each 

trainee. 

• Monitor and document each individual’s information technology IT security training record to include 

specialized information system security training activities for personnel with significant IT security roles 

and responsibilities. 

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

Systems, Control AC-2 Account Management states: “The organization manages information system 

accounts, including establishing, activating, modifying, reviewing, disabling, and removing accounts. The 

organization reviews information system accounts at least annually.” 

The lack of review increases the risk of users having inappropriate access. 

B-15
 (Continued) 

By not removing Lotus Notes user accounts of individuals that have not complied with security awareness 

training deadlines, the U.S. Forest Service is exposed to the risk of individuals accessing the network without 

adequate knowledge of security requirements and controls. 

By not removing terminated/inappropriate employee access in a timely manner, U.S. Forest Service is 

exposed to a violation of the U.S. Forest Service policy and a risk of terminated employees accessing IT 

systems over the network. 

Recommendation Number 5:

We recommend that U.S. Forest Service management develop a formal access control process and retain 

evidence of access authorizations for Paycheck8 privileged users. 

Recommendation Number 6:

We recommend that U.S. Forest Service management develop periodic controls to ensure Lotus Notes user 

accounts are deactivated if users do not complete security awareness training on a timely basis. 

Recommendation Number 7:

We recommend that U.S. Forest Service management ensure periodic reviews of the Password Database are 

performed in accordance with U.S. Forest Service policy and users who are flagged to be removed have their 

access from the system terminated. 

Recommendation Number 8:

We recommend that U.S. Forest Service management ensure terminated users are removed from IT systems 

within one business day per U.S. Forest Service policy. 

Recommendation Number 9:

Ensure appropriate training is provided to supervisors who are required to notify IT resources to remove users 

based upon a separation from the U.S. Forest Service. 

Vulnerability Scanning and Remediation Needs Continued Improvement

Not all Paycheck8 devices were scanned on a monthly basis prior to April 2010. Specifically, the U.S. Forest 

Service scanned all of the content and application servers, but did not have permission to scan the network 

devices. U.S. Forest Service remediated this issue by scanning all devices in April 2010. 

Additionally, there is no process to address medium and low risk vulnerabilities for Paycheck8. U.S. Forest 

Service has remediated this issue by developing a vulnerability processing policy with GDC Integration, Inc. 

(GDCI), for addressing high, medium, and low risk vulnerabilities in September 2010. 

For IBS, 12 medium risk and eight low risk vulnerabilities out of 191 total vulnerabilities did not have a Plan 

of Action and Milestones (POA&Ms) identified. U.S. Forest Service remediated this issue by updating 

POA&Ms in September 2010. 

The U.S. Forest Service did not have the correct configuration information to perform scanning of the 

Paycheck8 network devices until April 2010. Subsequent to this date, the U.S. Forest Service is performing 

the scanning required. 

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 

B-16
 (Continued) 

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. 

• 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.” 

The U.S. Forest Service did not have approved vulnerability processing procedures at the start of the fiscal 

year for Paycheck8. 

The POA&Ms were not completed for 20 of 191 vulnerabilities due to a lack of management oversight. 

By not scanning all Internet Protocol (IP) addresses, the U.S. Forest Service is unable to obtain assurance that 

vulnerabilities, within in-scope applications are discovered and remediated. Vulnerabilities within in-scope IP 

addresses are more pertinent as they may affect financial data. 

By not having a vulnerability remediation strategy or creating PO&AMs for identified vulnerabilities the U.S. 

Forest Service runs the risk of not patching vulnerabilities in a timely or consistent manner raising the risk of 

exploitation. 

We continue to recognize the need for the U.S. Forest Service management to scan all in-scope IP addresses 

on a monthly basis and remedy discovered vulnerabilities from monthly scans within required timeframes as 

noted in prior year Recommendation 5A&B of Audit Report No. 08401-10-FM, November 2009. 

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

Condition)

The Mathematical Expense Accrual Process Continues to Have Variability in the Derived Estimates 

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

Mathematical Accrual Program 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 program is run 

using a statistical software package called STATA. The accruals are made on a quarterly basis and are subject 

to a validation (look-back) test to determine the reasonableness of the model results and assumptions used by 

U.S. Forest Service management. 

B-17
 (Continued) 

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

2005. The MAP II program utilizes two datasets: 1) the time-series history of the obligations, and 2) the open 

obligations at the accrual date to produce a predicted value that represents the accrual amount. Accrual 

amounts are separated into three categories: Construction, Grants & Agreements, and Operations. 

Since this estimate is based on subjective as well as objective factors, it includes several management 

assumptions, and because the estimate is material to the U.S. Forest Service’s financial statements, KPMG 

evaluated both the quantitative, as well as qualitative attributes related to the estimate. 

During FY 2010, the U.S. Forest Service focused its efforts on validating the reasonableness of the 

assumptions made and accrued liability estimate produced by the MAP II model for the accrual estimates. The 

test is performed by comparing a quarter’s calculated accrual amount by document number to subsequent 

payments data obtained for that quarter of the prior fiscal year (i.e. a look-back of 12 months). This testwork 

is performed on a statistical sample of transactions. The results of the validation testing showed variation 

between the MAP II calculated accruals and the results of the subsequent payment analysis. The variation is 

both within each category from quarter to quarter and in total for all three categories from quarter to quarter. 

See summaries of the validation test data performed by the U.S. Forest Service in the tables that follow. 

Variances by Category for FY 2009 

Accrual Category/Fiscal 

Year Quarter

Test Variances – over/(under) 

Accrual

Percentage Variances –

(over)/under Accrual

Operations

Quarter 1 38,930,721 (32.80%)

Quarter 2 22,146,309 (21.84%)

Quarter 3 4,310,748 (3.70%)

Quarter 4 (44,296,838) 30.31%

Grants & Agreements

Quarter 1 (36,202,498) 36.90%

Quarter 2 29,615,328 (35.54%)

Quarter 3 (24,201,713) 30.00%

Quarter 4 33,758,049 (25.91%)

Construction

Quarter 1 6,223,779 (20.70%)

Quarter 2 8,736,613 (32.88%)

Quarter 3 (15,319,120) 49.80%

Quarter 4 (5,677,409) 14.16%

Variances by FY 2009 Quarter (categories combined) 

Quarter Test Variances – over/(under)

Accrual

Percentage Variances –

(over)/under Accrual

1st 8,952,002 (3.60%)

2nd 60,498,250 (28.63%)

3rd (35,210,086) 15.50%

4th (16,216,197) 5.12%

Since the development of the accrual model, the passage of time has not been sufficient to identify possible 

modifications to the methodology or underlying assumptions or the addition of new assumptions to the model. 

These modifications can only be identified through the analysis of the accrual data over a period of time that 

B-18
 (Continued) 

will allow the U.S. Forest Service the opportunity to identify trends in the data from quarter to quarter and 

year to year. 

According to Generally Accepted Auditing Standards, AU Section 340, Auditing Accounting Estimates: 

• “.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.” 

• “.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.” 

• “.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. 

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.”

Based on the results of the U.S. Forest Service’s look-back analysis and our review of that data there 

continues to be quantitative variability in the accrual amount from quarter to quarter which would suggest 

possible future modifications to the methodology or underlying assumptions built into the model or additional 

assumptions that would need to be added depending on the quarterly accrual period. The September 30, 2009 

accrued liability, considering the results of our review, is understated by approximately $14.6 million but 

during other FY 2009 quarters, it was overstated by as much as $60 million. 

B-19
 (Continued) 

Recommendation Number 10:

We recommend that U.S. Forest Service management continue to analyze and evaluate the need for any 

adjustments to the methodology and/or assumptions to the MAP II expense accrual in order to reduce the 

variability and potential magnitude of the variance identified by the validation analysis. 

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

changes to U.S. Forest Service operations, information systems or business processes have an effect on any 

management assumptions used in the MAP II expense accrual as noted in prior year Recommendation 6D of 

Audit Report No. 08401-10-FM, November 2009. 

Validation and Documentation of Revenue Accrual Policy Needs to be Enhanced (Repeat Condition)

Recreation Revenue: 

The U.S. Forest Service could not substantiate all of its assumptions on the materiality of not recording 

recreation revenue (i.e., special use permit transactions) in the proper period in accordance with U.S. GAAP. 

In our current year revenue test work, we identified: 

• Nine recreation revenue transactions out of 145 general revenue samples in which the U.S. Forest Service 

recorded future revenue in the current year. 

• One recreation revenue transaction out of 145 general revenue samples in which the U.S. Forest Service 

recorded prior period revenue in the current year. 

• One recreation revenue transaction out of 145 general revenue samples in which the U.S. Forest Service 

recorded prior and future period revenue in the current year. 

The U.S. Forest Service does not perform an annual review of recreational revenue that includes and analyzes 

revenue recognized from recreation revenue to ensure that the effects of not recording such revenues within 

the period of performance are immaterial, both individually and in the aggregate for all types of revenue. 

Statement of Federal Financial Accounting Standard (SFFAS) No. 7, Accounting for Revenue and Other 

Financing Sources, 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.” 

SFFAS No 7 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.”

SFFAS No 7 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.”

B-20
 (Continued) 

Not recording revenue and associated reversals of revenue in the proper period can cause a significant 

misstatement of revenue in any given year causing inconsistent reporting of operating results. As a result of

our extrapolation of FY 2010 general revenue exceptions, which includes recreational revenue, there is a 

known and most likely overstatement of $20.5 million. This amount was proposed and passed as an audit 

difference. 

Recommendation Number 11:

We recommend that U.S. Forest Service management perform an annual review of recreation revenue that 

includes all of the U.S. Forest Service management’s assumptions with regards to accruing or not accruing for 

recreation revenue. 

Recommendation Number 12:

We recommend that U.S. Forest Service management includes and analyzes revenue recognized from 

recreation revenue to determine the effects of recording or not recording such revenues within the period of 

performance and not by budget FY. 

In addition, we continue to recognize the need for the U.S. Forest Service management to 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 as noted in prior year 

Recommendation 8C of Audit Report No. 08401-9-FM, November 2009.

Non-Accrual of Certain Revenue Categories:

The U.S. Forest Service uses a pre-determined percentage when determining the types of revenue transactions 

that would be material and subject to accrual in accordance with U.S. GAAP. For FY 2010, the U.S. Forest 

Service used 3 percent of total prior year revenue. 

The U.S. Forest Service has an established accrual policy and an annual memorandum which states what 

types of revenue in excess of 3 percent of total prior year revenue shall be subject to accrual. However, the 

U.S. Forest Service lacks a comprehensive analysis of revenue types that are not accrued for in accordance 

with the 3 percent accrual policy, which would be periodically updated, to determine if its accrual policies are 

reasonable and the un-accrued amounts are immaterial individually or in the aggregate. 

SFFAS No. 7, Accounting for Revenue and Other Financing Sources, 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.” 

SFFAS No. 7 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.”

Significant amounts of revenue could be recorded in an improper period causing the U.S. Forest Service to 

misstate their revenues for any given FY. 

B-21
 (Continued) 

Recommendation Number 13:

We recommend that U.S. Forest Service management support and justify through a retrospective review on an 

annual basis the types of revenues that are not accrued in accordance with their 3 percent revenue accrual 

policy and would not have a material impact on revenue accruals individually or in the aggregate. 

Number 3: The U.S. Forest Service Needs to Develop a Coordinated Intra-Agency Effort to Address 

Financial Reporting Requirements (Partial Repeat Finding)

Stewardship Property Plant and Equipment (Heritage Assets) Accountability and Reporting Needs 

Continued Improvement (Repeat Condition)

During our substantive testing of stewardship assets during FY 2010, we noted that the U.S. Forest Service 

did not have a complete and accurate listing heritage assets collections on non-U.S. Forest Service sites. 

Specifically, we noted that seven sites out of a sample of 12 were not recorded as part of the U.S. Forest 

Service’s opening balance for non-U.S. Forest Service sites nor were the sites included in the listing provided 

by the U.S. Forest Service as of May 31, 2010. 

Additionally, we noted that 18 heritage asset sites (non-U.S. Forest Service sites) that were reported at 

September 30, 2009 were not included in the listing as of September 30, 2010 and were not reported as 

deletions in the U.S. Forest Service’s September 30, 2010 notes to the financial statements. 

The U.S. Forest Service does not have effective policies and procedures to capture and report data from 

the field sites relating to heritage assets located at non‐U.S. Forest Service sites. 

SFFAS Number (No.) 29, Heritage Assets and Stewardship Land, paragraph 3 identifies the following: “A 

description of the major methods of acquisition and withdrawal of heritage assets during the reporting 

period. This should include disclosure of the number of physical units (by major category) of transfers 

of  heritage  assets  between  Federal  entities  and  the  number  of  physical  units  (by  major  category)  of 

heritage assets acquired  through donation or devise, if material.  In addition,  the  fair value of heritage 

assets acquired through donation or devise during the reporting period should be disclosed, if known 

and material.” 

SFFAS No 29 paragraph 25 identifies that: “Heritage assets should be quantified in terms of physical units. 

The appropriate level of aggregation and physical units of measure for each major category should be 

meaningful and determined by the preparer based on the entity’s mission, types of heritage assets, and how it 

manages the assets.” 

SFFAS No. 29 paragraph 43 notes that: “These standards are effective for reporting periods beginning 

after September 30, 2005 with the exception of the specific paragraphs listed below. These exceptions 

provide for a phase‐in of disclosure requirements being reported as basic information such that these 

standards  will  be  fully  implemented  for  reporting  periods  beginning  after  September  30,  2008:  a. 

Section c and section d1 in par. 25 and 40 are effective for reporting periods beginning after September 

30, 2007; b. Section d2 and section d3 in par. 25 and 40 are effective  for reporting periods beginning 

after September 30, 2008; and.....” 

The U.S. Forest Service’s information reported in the notes to the financial statements for beginning balance, 

current year additions, and possibly deletions to heritage asset sites is not complete or accurate. 

B-22
 (Continued) 

Recommendation Number 14:

We recommend that U.S. Forest Service management establish policies and procedures to ensure that information 

on additions, deletions, and balances of heritage assets is collected by the field offices and provided to 

Albuquerque Service Center (ASC) in a timely manner to ensure that all information regarding heritage assets is 

completely and accurately recorded in the notes to the financial statements. 

Recommendation Number 15:

We recommend that U.S. Forest Service management train personnel on the policies and procedures referred to in 

Recommendation number 14 above. 

Recommendation Number 16:

We recommend that U.S. Forest Service management monitor compliance with the policies and procedures to 

ensure that information is collected by the field and provided to the ASC on a specific date (e.g., June 30) as well 

as updated periodically subsequent to the collection of data to ensure that all heritage assets, including current 

year additions and, if applicable, deletions are completely and accurately reported in the annual notes to the 

financial statements. 

Comprehensive Linking of Strategic Goals and Reporting of Program Costs Needs Improvement 

(Repeat Condition) 

During our test work over Note 13: Sub-organization Program Costs/Program Costs by Segment, we noted 

the major programs identified in the Sub-organization Program Costs/Program Costs by Segment note 

disclosure do not directly 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 the 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 

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 adequately relate to the following responsibility segments as reported 

on the U.S. Forest Service’s notes to the financial statements. 

1. National Forests and Grasslands 

2. Forest and Rangeland Research 

3. State and Private Forestry 

4. Wildland Fire Management 

When the Foundation Financial Information System (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. 

B-23
 (Continued) 

Per OMB Circular No. A-136, Section II.4.4.1 “The SNC [Statement of Net Cost] 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 the Government Performance 

and Results Act of 1993 (GPRA).”

The U.S. Forest Service’s costs in the financial statements are not presented in a level of detail that provides a 

meaningful comparison of costs to outputs/performance measures.

We continue to recognize the need for the U.S. Forest Service management to work towards aligning 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) as noted in prior year Recommendation 11B of Audit Report 08401-

10-FM, November 2009. 

Number 4: 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 using traditional government procurement regulations. During FY 2010, the 

U.S. Forest Service incurred expenses of approximately $193.5 million through the use of purchase cards. In 

addition, the U.S. Forest Service uses fleet cards to purchase automotive-related services without going 

through traditional government procurement regulations. During FY 2010, the U.S. Forest Service incurred 

expenses of approximately $67 million through the use of fleet cards. 

Purchase Card Monitoring Needs Continued Improvement (Repeat Condition)

During our field site test work over the operating effectiveness of controls, we tested 122 purchase card 

transactions and noted the following 26 exceptions related to the 30/60 day approval process: 

• Not approved by either the cardholder or supervisor 

o Eight exceptions 

• Cardholder approval exceeded 60 days causing both approvals to be untimely 

o 13 exceptions 

• Cardholder approved within 30 days; however, no supervisor approval 

o Two exceptions 

• Cardholder approval exceeded 30 days but supervisor approved timely 

o Three exceptions

The U.S. Forest Service cardholders and supervisors are not approving transactions in the bank’s Electronic 

Access System (EAS) within the timeframe specified in USDA and Forest Service Handbook (FSH) policy. 

USDA Departmental Regulation number 5013-6 “Use of the Purchase Card and Related Alternative Payment 

Methods” Section 9 “Special Instructions” states the following: 

B-24
 (Continued) 

Paragraph o: Requirement to Timely and Accurately Approve Transactions by Cardholders states “It is 

USDA policy that cardholders shall approve their transactions no later than 30 days after a transaction appears 

in the bank’s EAS, absent extenuating circumstances.” 

Paragraph p: Requirement to Timely and Accurately Final Approve Transactions by AO’s [Approving 

Officer’s] states “It is USDA policy that AOs shall approve transactions selected for final approval no later 

than 30 days after a transaction has been selected. All card accounts assigned to an AO who fails to final 

approve the selected transactions within a total of 60 days will be deactivated, absent extenuating 

circumstances.” 

FSH 6309.32 “Federal Acquisition Regulation” Chapter 4G13 “Simplified Acquisition Procedures” states the 

following: 

4G13.301-72 “Responsibilities” section (a)(2) – “Cardholders are responsible for reconciling their 

accounts.” 

4G13.301-72 “Responsibilities” section (a)(3) – “The cardholder’s supervisor is responsible for the 

cardholder’s proper use of the card and checks (current check writers) and proper expenditure of funds.” 

Without timely reviews, purchases made with government-issued purchase cards could be noncompliant with 

statutory or regulatory guidelines. Late reviews could impact the early identification of such problems as:

• Split purchases, 

• Exceeding authority, and 

• Personal use. 

We continue to recognize the need for the U.S. Forest Service management to 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 (Repeat Condition)

During our test work over the design and operating effectiveness of internal controls for fleet transactions 

covering the period October 1, 2009 to August 31, 2010, we noted the following exceptions: 

• Evidence of management review over fleet transactions (control): 

o One exception out of one sample tested during our test of design 

o One exception out of 11 samples tested during our test of operating effectiveness 

• Receipt was not maintained or provided (control/substantive support): 

o Three exceptions out of 30 samples tested during our testing for the period October 1, 2009 to 

August 31, 2010 

U.S. Bank has been unable to provide the data necessary for the U.S. Forest Service fleet administrators to 

generate statistical sampling and review reports. Therefore, fleet managers currently have no consistent 

documented and auditable process for reviewing monthly fleet purchase listings. In addition, users of fleet 

cards are not retaining receipts for purchases made with a fleet card. 

USDA Departmental Regulation number 5400-006 “Use of the Fleet Charge Card and Alternative Payment 

Methods” Section 10 “Procedures” states the following: 

B-25
 (Continued) 

Paragraph j: (1). “Usage Monitoring”-“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 DPM [Departmental Management] and AFPC’s [Agency Fleet Program Coordinator] 

monitoring fleet charge card transactions through the EAS and statistical sampling. Fleet charge card users 

must provide information to any request made by coordinators, the DPM, Office of the Inspector General 

(OIG), and/or any other duly authorized individual/organization regarding questionable transactions (e.g., 

amount of fuel purchased exceeds vehicle capacity, overly frequent maintenance or repairs on fleet and non 

fleet vehicles and motorized equipment).” 

Paragraph h: “Receipts” – “Users of the fleet charge cards or alternative payment methods must submit 

receipts for purchases. The LFPC, an accountable property official, or other management official responsible 

for the fleet and non-fleet vehicles and motorized equipment must keep all receipts for a minimum of one 

calendar year in order to maintain an adequate audit trail.” 

There is a possibility that inappropriate expenses could go undetected if management reviews are not 

conducted in a consistent and timely manner. 

Recommendation Number 17:

We recommend that the U.S. Forest Service management monitor compliance with the retention of receipts 

policy that is effective July 1, 2010, which requires that receipts be retained for all fleet card purchases, and 

ensure that the newly issued fleet card monitoring requirements are implemented and adhered to uniformly 

and consistently throughout the U.S. Forest Service. 

Number 5: 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 2010 audit we noted current and prior year transactions that resided in general ledger (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 noted the following exceptions as a result of our test work. 

• We identified 19 exceptions out of 99 sample items, for which there was a lack of support to prove the 

funds are valid to be included in GL account 2400. 

• Four items out of 99 sample items were for collection of settlement amounts related to fire incidents from 

prior years that remained in the suspense account because the U.S. Forest Service has been unable to 

determine ultimate distribution in a timely manner. 

The U.S. Treasury and U.S. Forest Service definition of funds defines fund OPAC as OPAC 

Collections/Disbursements; SDFG as Undistributed Intergovernmental payment; and SDNG as advances 

without orders non-Federal. 

We noted that the U.S. Forest Service has misclassified the following funds between Federal and non-Federal 

categories at September 30, 2010. 

• OPAC (Federal Fund) contained approximately $52,000 of non-Federal funds. 

• SDFG (Federal Fund) contained approximately $688,000 of non-Federal funds. 

• SDNG (Non-Federal Fund) contained approximately $1.6 million of Federal funds. 

B-26
 (Continued) 

Finally, funds SDDA (Deposit Fund Account) and SDSD, Deposit Fund Suspense should have been 

eliminated in FY 2000 and any transactions therein should have been moved to other funds. Although the 

combined balance of both funds net to zero, each fund had a balance at September 30, 2010. 

There is a lack of policies and procedures, in particular procedures over monitoring and oversight to ensure 

proper review and assessment of the accuracy of the monies 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. Forest Service could be misstating its liability for deposit funds, clearing accounts and undeposited 

collections (GL account 2400). As of September 30, 2010 there is a known overstatement of approximately 

$4.0 million and a known understatement of approximately $17.5 million causing a net known understatement 

of approximately $13.5 million. Additionally, there are funds totaling approximately $6.0 million remaining 

in GL account 2400 in Fund BCBC, including approximately $5.0 million in fire-related collections that have 

not been distributed in a timely manner. These amounts remain in GL account 2400 pending final resolution 

of the ultimate distribution of funds. 

Recommendation Number 18:

We recommend that U.S. Forest Service management establish and implement policies and procedures to 

provide for monitoring and oversight of the suspense account transactions to ensure that the balance in the 

account is valid and supportable by: 

• Ensuring Federal and non-Federal funds are properly classified, 

• Resolving the ultimate disposition of old deposits in GL account 2400, and 

• Ensuring that future deposits are transferred to the appropriate account. 

In addition, 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 account 2400 as noted 

in prior year Recommendation 5 of Audit Report No. 08401-8-FM, November 2007. 

B-27
 (Continued) 

Internal Controls over the Reimbursable Agreement Close-out Process Need Continued Improvement 

(Repeat Condition) 

During our substantive testing of liability for advances and prepayments (GL account 2310) balances as of 

June 30, 2010, we noted that the U.S. Forest Service is not closing out its reimbursable agreements within the 

time frames noted in its policy. Specifically, we noted 20 exceptions out of 125 sample items in which the 

period of performance had lapsed, there was no subsequent activity in the agreement, and there were not any 

pending obligations applicable to the agreement. The following table identifies the exceptions noted and the 

length of time that the agreements remain open after the period of performance lapsed. 

Period Lapsed Since Expiration of Agreement

90 days 

to 1 year

1 to 2 years 2 to 3 years 3 plus years Undeterminable due to 

lack of supporting 

documentation

3 3 3 6 5

In addition, during our substantive testing of Unfilled Customer Orders without advance (GL account 4221) 

balances as of June 30, 2010, we noted that the U.S. Forest Service is not closing out its reimbursable 

agreements within the time frames noted in its policy. Specifically, we noted 23 exceptions out of 121 sample 

items in which the period of performance had lapsed, there was no subsequent activity in the agreement, and 

there were not any pending obligations applicable to the agreement. The following table identifies the 

exceptions noted and the length of time that the agreements remain open after the period of performance 

lapsed. 

Period Lapsed Since Expiration of Agreement

90 days to 1 

year

1 to 2 years 2 to 3 years 3 plus years Undeterminable due 

to lack of supporting 

documentation

3 2 1 13 (5 of which 

were abnormal 

balances

4

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 “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 account 4222) and 

advances from others (GL account 2310). The errors identified in the sample were extrapolated to the 

population and an overstatement was estimated at $12.1 million. This amount was proposed and passed as an 

audit adjustment. 

Although our GL account 4221 account test work disclosed several control exceptions during the FY, our 

substantive test work extrapolated to a most likely overstatement of $2.1 million. As a result, we did not 

propose an audit adjustment due to the immateriality of the amount. 

B-28
 (Continued) 

Recommendation Number 19:

We recommend that the U.S. Forest Service management develop a policy and process that would ensure that 

field offices timely notify the ASC Budget and Finance (B&F) to initiate the timely closure of agreements. 

Recommendation Number 20:

We recommend that the U.S. Forest Service management provide an appropriate level of oversight and 

monitoring to inform field sites of agreements that appear to be ready for closure. 

Policy for Reporting Incident Finance Related Revenue Transactions Needs Clarification 

During our FY 2010 revenue test work we noted an incident finance related revenue transaction which was 

not reported timely by the U.S. Forest Service field reporting office to the ASC. Although our test work did 

not disclose numerous exceptions, the risk surrounding these incident finance related transactions is greater 

than most other transactions and the amounts are often material. 

This condition occurred because U.S. Forest Service revenue policy and procedures do not specify what is 

meant by timely for the reporting office (field units) to submit accrual information to the ASC. 

SFFAS No. 7, Accounting for Revenue and Other Financing Sources, 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.” 

SFFAS No. 7Paragraph 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.”

Not recording revenue in the proper period can cause a misstatement of revenue in any given year causing 

inconsistent reporting of operating results. There was a known overstatement of approximately $4.7 million. 

Recommendation Number 21:

We recommend that the U.S. Forest Service management enhance policies and procedures to define, 

quantitatively, the meaning of timely to ensure that revenues are recorded timely. 

Recommendation Number 22:

We recommend that the U.S. Forest Service management train personnel to ensure that the information 

provided by the field units is closely monitored and is provided to ASC within a reasonable and specified 

time. 

Cash Collection Officer Audit Internal Control Needs Improvement (Repeat Finding)

During our planning for the FY 2010 audit, U.S. Forest Service management disclosed to us that sufficient 

corrective action had not taken place to correct the prior year audit recommendation for Cash Collection 

B-29
Exhibit I 

 

Officer (CCO) audits. As a result, we did not perform any current FY audit testwork over the operating 

effective of this control. 

We continue to recognize the need for the U.S. Forest Service management to review and access the 

efficiency of the control environment for the audits of cash collected by CCOs and where necessary revise 

and train personnel on new policies and procedures as noted in prior year Recommendation 14 of Audit 

Report 08401-10-FM, November 2009. 

Number 6: Procedures for Reviewing 3rd Party-Processed Transactions Needs to be Developed 

Based on our test work, including inquiries with U.S. Forest Service management, the agency did not have a 

policy to perform a review and approval of data (e.g. the payroll accrual) entered into FFIS by the USDA on 

the agency’s behalf. Based on discussions with management, a GL account activity analysis over significant 

GL accounts has been performed monthly for the past year. The payroll accrual is recorded in GL accounts 

2210, Accrued Funded Payroll and Leave, and 2213, Employer Contributions and Payroll Taxes Payable, the 

majority of which is recorded in 2210. Account 2213 has been included in the activity analysis; however, 

2210, the GL account with the most significant amount, was not included in the analysis until September of 

2010. Additionally, there is no one specifically assigned to the review of the 2210 and 2213 GL accounts. 

In addition, the U.S. Forest Service had a 3rd party transaction processed in FFIS on its behalf, however, 

because no review of the transaction occurred, the processing error was not identified and the U.S. Forest 

Service’s customer was billed for the expense incurred to date plus the remaining obligation balance instead 

of only the expenses incurred to date. 

The USDA has access to the U.S. Forest Service’s general ledger and can record entries without the review 

and approval of the U.S. Forest Service. The U.S. Forest Service does not have a policy to review and 

approve the 3rd party processed entries to ensure that the entries made are complete and accurate. 

The U.S. GAO’s report titled Standards for Internal Control in the Federal Government (GAO/AIMD-00-

21.3.1) states that “Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination. The documentation should 

appear in management directives, administrative policies, or operating manuals and may be in paper or 

electronic form. All documentation and records should be properly managed and maintained.” 

Lack of a policy over 3rd party processed transactions and the necessary understanding of the process 

performed increase the risk that an incorrectly processed transaction may not be detected and may result in a 

misstatement to the financial statements and relevant disclosures. 

Recommendation Number 23:

We recommend that U.S. Forest Service management develop a policy that includes a review procedure over 

transactions posted by 3rd parties, to facilitate an effective control environment and to ensure accurate 

financial reporting and disclosure. 

Recommendation Number 24:

We recommend that U.S. Forest Service management develop a standard operating procedure over the payroll 

accrual process, beginning with how, when, and what information is provided by the U.S. Forest Service to 

the 3rd party processor, to the processors’ procedures, to U.S. Forest Service’s control environment 

surrounding the posted accrual amount. 

B-30
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 

reference where the issue is monitored for audit follow-up. In the status column of the table a 

recommendation will be noted as either: 

• Open, which means corrective action has not been completed by the U.S. Forest Service. 

• Closed, which means corrective action has been completed by the U.S. Forest Service. 

• Reissued- Closed, which means a new recommendation has been issued in the current year report due to 

the changes in the business process making the prior year recommendation not practical. 

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-10-FM November 2009

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Continue to Improve its 

Information Technology 

Internal Control Environment

[2010 Significant Deficiency;

2009 Significant Deficiency]

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 [Entry Processing 

Inquiry Correction System] EPIC access listings to 

verify that access is appropriate and in compliance with 

policy.

B. Implement periodic reviews of [Incident Business 

Database] 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.

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 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 [Change Management 

Board] CMB.

Closed

Closed

Closed

Closed

B-31
Exhibit II 

 (Continued)

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-10-FM November 2009

Material Weakness/ 

Significant Deficiency

Recommendation Status

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.

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.

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 [Group Policy Object] 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.

Closed

Closed

Closed

Closed

Closed

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.

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.

Closed;

Reissued

Open

Open

B-32
Exhibit II 

 (Continued)

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-10-FM November 2009

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Refine its Period-end 

Expense Accrual Processes 

(Partial Repeat Finding)

[2010 Significant Deficiency;

2009 Significant Deficiency]

6. We recommend that U.S. Forest Service management:

A. Develop policies and procedures to validate the 

reasonableness of the MAP II estimate through a 

comparison of subsequent payments to the MAP II 

generated 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.

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 

[work-in-process] WIP.

B. Create escalation procedures to ensure that real 

property assets that are placed into service are recorded 

in the proper FY. 

Closed

Closed

Closed

Open

Closed;

Reissued

Closed

Closed

B-33
Exhibit II 

 (Continued)

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-10-FM November 2009

Material Weakness/ 

Significant Deficiency

Recommendation Status

The U.S. Forest Service Needs 

to Develop Comprehensive 

Procedures and Analysis to 

Document and Support 

Management’s Assumptions 

Regarding Revenue Accruals

[2010 Significant Deficiency;

2009 Significant Deficiency]

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. 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. 

Closed; 

Reissued

Closed; 

Reissued

Open

The U.S. Forest Service Needs 

to Develop A Coordinated 

Intra-Agency Effort to 

Address Implementation of 

New Accounting Standards 

and Financial Reporting 

Requirements

[2010 Significant Deficiency;

2009 Significant Deficiency]

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 

into INFRA [Infrastructure Management System] 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.

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.

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.

Closed

Closed; 

Reissued

Closed

Closed; 

Reissued

B-34
Exhibit II 

 (Continued)

Open Conditions In this Table are Referenced In Exhibit I

USDA OIG Audit Report No. 08401-10-FM November 2009

Material Weakness/ 

Significant Deficiency

Recommendation Status

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).

Open

Management Review 

Procedures of Credit Card 

Transactions and Controls 

Over the Programs Need 

Continued Improvement

[2010 Significant Deficiency;

2009 Significant Deficiency]

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.

13. We recommend that U.S. Forest Service management, 

once U.S. 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.

Closed

Open

Closed

The U.S. Forest Service Needs 

to Improve Internal Controls 

for Revenue Related 

Transactions

[2010 Significant Deficiency;

2009 Significant Deficiency]

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.

Open

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

The U.S. Forest Service Needs 

to Continue to Improve its 

General Controls Environment

[2010 Significant Deficiency;

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.

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.

Closed

Closed

Closed

Open

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. 

Closed

The U.S. Forest Service Needs 

to Improve Internal Controls 

for Revenue Related 

Transactions

[2010 Significant Deficiency,

2009 Significant Deficiency,

2008 Significant Deficiency]

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; 

Reissued

Closed;

Reissued

The U.S. Forest Service Needs 

to Refine its Period-end 

Accrual Processes

[2009 Significant Deficiency

2008 Significant Deficiency]

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 

variances such that any necessary correcting 

adjustments could be processed in a timely manner.

Closed

B-36
Exhibit II 

 

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]

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 [Entry Processing Inquiry Correction 

System] EPIC access listings to verify that access is 

appropriate and in compliance with policy.

B. Ensure that proper [segregation of duties] 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.

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.

Closed

Closed

Closed

The U.S. Forest Service Needs 

to Continue to Improve its 

Financial Management and 

Reporting Process

[2010 Significant Deficiency;

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 

account 2400.

Open

Review of Credit Card 

Transactions and Controls 

Over the Programs Need 

Continued Improvement

[2010 Significant Deficiency

2009 Significant Deficiency;

2008 Significant Deficiency;

2007 Significant Deficiency]

10. We recommend that U.S. Forest Service management:

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. 

Closed; 

Reissued

B-37
Exhibit III 

 

STATUS OF PRIOR YEAR’S NONCOMPLIANCE FINDINGS 

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 [standard general ledger] SGL at the transactional 

level.

Closed

B-38
Exhibit IV

B-39
2010 2009

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 2) $ 5,252 $ 5,146

Investments (Note 3) 6 6

Accounts Receivable, net (Note 4) 24 45

Total Intragovernmental 5,282 5,197

Cash and Other Monetary Assets 1 1

Accounts Receivable, net (Note 4) 115 165

General Property, Plant, and Equipment (PP&E), net (Note 5) 1,383 1,359

Other (Note 1D) 44 40

Total Assets $ 6,825 $ 6,762

 Stewardship PP&E (Note 6)

 Federal Employee Benefits (Notes 7 & 8) $ 74 $ 72

Other (Note 10) 132 107

Total Intragovernmental 206 179

Accounts Payable 47 64

Federal Employee Benefits (Notes 7 & 8) 369 349

Environmental and Disposal Liabilities (Notes 7 & 9) 1 1

Other (Note 10) 1,514 1,545

Total Liabilities (Note 7) 2,137 2,138

Commitments and Contingencies (Note 10)

Unexpended Appropriations - other funds 2,991 2,966

Cumulative Results of Operations - earmarked funds (Note 12) 933 907

Cumulative Results of Operations - other funds 764 751

Total Net Position 4,688 4,624

Total Liabilities and Net Position $ 6,825 $ 6,762

U.S. Department of Agriculture

Forest Service

CONSOLIDATED BALANCE SHEETS

As of September 30, 2010 and 2009

(in millions)

The accompanying notes are an integral part of these statements.

Liabilities:

Intragovernmental:

Net Position:

B-40
The accompanying notes are an integral part of these statements.

2010 2009

Total Gross Costs $ 6,702 $ 6,589

Less: Total Earned Revenue 623 679

Net Cost of Operations $ 6,079 $ 5,910

Program Costs (Note 13):

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF NET COST

For the years ended September 30, 2010 and 2009

(in millions)

B-41
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 $ 907 $ 751 $ 1,658 $ 1,179 $ 543 $ 1,722

Budgetary Financing Sources:

 Appropriations Used 5,531 - 5,531 5,391 1 5,392

 Non-Exchange Revenue - 2 2 - 1 1

 Donations and Forfeitures of Cash 1 - 1 1 - 1

 Transfers - In/Out without Reimbursement 170 - 170 259 (130) 129

Other Financing Sources (Non-Exchange):

 Transfers - In/Out without Reimbursement (60) 63 3 (70) 71 1

 Imputed Financing - 426 426 - 344 344

 Other 43 (58) (15) 48 (70) (22)

Total Financing Sources 154 5,964 6,118 239 5,607 5,846

Net Cost of Operations (128) (5,951) (6,079) (511) (5,399) (5,910)

Net Change 26 13 39 (272) 208 (64)

Cumulative Results of Operations 933 764 1,697 907 751 1,658

Unexpended Appropriations:

 Beginning Balance 2,966 - 2,966 1,969 1 1,970

Budgetary Financing Sources:

 Appropriations Received 5,557 - 5,557 6,405 - 6,405

 Appropriation Transfers - In/Out - (1) (1) - (1) (1)

 Other Adjustments - - - - (16) (16)

 Appropriations Used (5,531) - (5,531) (5,391) (1) (5,392)

 Total Budgetary Financing Sources - 25 25 (1) 997 996

 Total Unexpended Appropriations 2,991 - 2,991 2,966 - 2,966

 Net Position $ 933 $ 3,755 $ 4,688 $ 907 $ 3,717 $ 4,624

FY 2010 FY 2009

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION

For the years ended September 30, 2010 and 2009

(in millions)

B-42
2010 2009

Budgetary Resources:

Unobligated Balance, Brought Forward, October 1 $ 2,745 $ 2,170 

Recoveries of Prior Year Unpaid Obligations 40 38 

Budget Authority:

Appropriations 6,094 7,107 

Spending Authority from Offsetting Collections:

Earned:

Collected 495 535 

Change in Receivables from Federal Sources (50) (23)

Change in Unfilled Customer Orders:

Advance Received 7 1 

Without Advance from Federal Sources 9 (51)

Subtotal 6,555 7,569

Nonexpenditure Transfers, net (1) - 

Permanently Not Available - (5)

Total Budgetary Resources (Note 16) $ 9,339 $ 9,772

Status of Budgetary Resources:

Obligations Incurred (Note 15):

Direct $ 6,571 $ 6,545 

Reimbursable 409 482 

Subtotal 6,980 7,027

Unobligated Balance-Apportioned (Note 2) 1,361 2,031 

Unobligated Balance Not Available (Note 2) 998 714 

Total Status of Budgetary Resources (Note 16) $ 9,339 $ 9,772

Change in Obligated Balance:

Obligated Balance, net

Unpaid Obligations, Brought Forward, October 1 $ 2,641 $ 2,132 

Less: Uncollected Customer Payments from Federal Sources,

Brought Forward, October 1 (351) (425)

Total Unpaid Obligated Balance, net 2,290 1,707

Obligations Incurred, net 6,980 7,027

Less: Gross Outlays (6,509) (6,480)

Less: Recoveries of Prior Year Unpaid Obligations, actual (40) (38)

Change in Uncollected Customer Payments from Federal Sources 41 74

Obligated Balance, net, End of Period

Unpaid Obligations (Note 17) 3,072 2,641 

Less: Uncollected Customer Payments from Federal Sources (310) (351)

Total, Unpaid Obligated Balance, net, End of Period (Note 2) $ 2,762 $ 2,290

Net Outlays:

Gross Outlays $ 6,509 $ 6,480

Less: Offsetting Collections (503) (536)

Less: Distributed Offsetting Receipts (429) (574)

Net Outlays $ 5,577 $ 5,370

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, 2010 and 2009

(in millions)

B-43
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 and Development (R&D) 

stations, the Forest Products Laboratory (FPL) and the International Institute of Tropical Forestry (IITF), 

functioning in nearly all States, Puerto Rico, and the U.S. Virgin Islands. 

The Forest Service's mission includes the following four major segments: 

National Forests and Grasslands - Protection and management of an estimated 193 million acres (unaudited) of 

NFS land that includes 36.6 million acres (unaudited) of designated wilderness areas. In addition, the Forest 

Service partners with other nations and organizations to foster global natural resource conservation and 

sustainable development of the world’s forest resources; 

Forest and Rangeland Research - Research and development of forest and rangeland management practices to 

provide scientific and technical knowledge for enhancing and protecting the economic productivity and 

environmental quality of the 1.3 billion acres (unaudited) of forests and associated rangelands in the United States; 

State and Private Forestry – Cooperation with and assistance to State and local governments, Tribal 

governments, forest industries, and private landowners to help protect and manage non-Federal forests and 

associated rangeland and watershed areas; 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 as promulgated by the Federal Accounting Standards Advisory Board (U.S. GAAP) and in 

accordance with the Office of Management and Budget (OMB) Circular A-136, Financial Reporting Requirements, 

revised September 29, 2010. 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-44
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 U.S. GAAP if the fair value meets or 

exceeds $100 thousand. The Forest Service recognizes liabilities for capital leases in accordance with U.S. 

GAAP. Under U.S. GAAP the cost of general PP&E acquired under a capital lease is equal to the amount 

recognized as a liability for the capital lease at its inception (net present value of the lease payments) unless the 

net present value exceeds the fair value of the asset. There are no restrictions on the use or convertibility of 

general PP&E. 

See Note 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 U.S. GAAP, all heritage assets and stewardship land 

information has been reclassified as basic, except for condition information, which is reclassified as required 

supplementary information (RSI). 

See Note 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 

appropriation. Liabilities for which there is no appropriation and for which there is no certainty that an 

B-45
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 remote. Where probable and reasonably estimable, the full value of amounts related to 

unsettled litigation and other claims against the Forest Service is recognized as a liability and expense. Expected 

amounts related to litigation and other claims include amounts to be paid by Treasury on behalf of the Forest 

Service from a permanent appropriation for judgments and from other appropriations. 

J: WORKERS’ COMPENSATION LIABILITY 

The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to Federal 

civilian employees injured on the job, employees who have incurred a work related occupational disease and 

beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Benefit 

claims incurred for the Forest Service’s employees under FECA are administered by the U.S. Department of Labor 

(DOL). The USDA uses Forest Service funds to reimburse the DOL for FECA claims. Consequently, the Forest 

Service recognizes a liability for this compensation comprised of: (1) an accrued liability that represents money 

owed for claims paid by the DOL through the current fiscal year and (2) an actuarial liability that represents the 

expected liability for Forest Service approved compensation cases to be paid beyond the current fiscal year. 

K: EMPLOYEE ANNUAL, SICK, AND OTHER LEAVE 

Annual and other vested leave such as compensatory, credit hours, and restored leave is accrued as it is earned, 

and the accrual is reduced as leave is taken. Each quarter, the balance in the accrued annual leave account is 

adjusted to reflect the latest pay rates and unused hours of leave. Sick leave is generally non-vested. Funding will 

be obtained from future financing sources to the extent that current or prior year appropriations are not available to 

fund annual and other types of vested leave earned but not taken. Sick leave and other types of non-vested leave 

are expensed when used. 

L: PENSION AND OTHER RETIREMENT BENEFITS 

Forest Service employees participate in either the Civil Service Retirement System (CSRS) or the Federal 

Employees Retirement System (FERS). The employees who participate in CSRS are beneficiaries of the Forest 

Service’s matching contribution, equal to 7.0 percent of pay, distributed to their annuity account in the Civil Service 

Retirement and Disability Fund. 

FERS went into effect on January 1, 1987, pursuant to Public Law 99-335. FERS and Social Security 

automatically cover most employees hired after December 31, 1983. Employees hired prior to January 1, 1984 

could elect to join FERS and Social Security, or to remain in CSRS. FERS offers a savings plan to which the 

Forest Service automatically contributes 1.0 percent of pay and matches any employee contribution up to an 

B-46
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 U.S. GAAP, the Forest Service classifies revenue as either “exchange revenue” or “nonexchange revenue.” Exchange revenue arises from transactions that occur when each party to the transaction 

sacrifices value and receives value in return. An example of exchange revenue is the income from the sale of 

forest products. In some cases, the Forest Service is required to remit exchange revenue receipts to 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 U.S. GAAP, the Forest Service’s pricing policies are set to recover full cost except where 

mandated by law or for the public good, such as in the case of grazing fees. Also, costs and exchange revenue 

are disclosed in Note 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, 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, 2010 and 2009 was $426 million and $344 million, respectively. 

O: PARENT/CHILD REPORTING REQUIREMENTS 

The Forest Service is a party to allocation transfers with other federal agencies as both a transferring (parent) 

entity and/or a receiving (child) entity. Allocation transfers are legal delegations by one department of its authority 

to obligate budget authority and outlay funds to another department. A separate fund account (allocation account) 

is created in the U.S. Treasury as a subset of the parent fund account for tracking and reporting purposes. All 

B-47
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

allocation transfers of balances are credited to this account, and subsequent obligations and outlays incurred by 

the child entity are charged to this allocation account as they execute the delegated activity on behalf of the parent 

entity. In accordance with OMB Circular A-136, all financial activity related to these allocation transfers (e.g., 

budget authority, obligations, and outlays) is reported in the financial statements of the parent entity, from which 

the underlying legislative authority, appropriations and budget apportionments are derived. The Forest Service 

allocates funds, as the parent, to the Department of Transportation (DOT), Department of Interior (DOI), 

Department of the Army, Department of the Navy, Department of the Air Force, and the Corps of Engineers, Civil. 

The Forest Service receives allocation transfers, as the child, from the DOL, DOT, and DOI. 

P: USE OF ESTIMATES 

Management has made certain estimates and assumptions when reporting assets, liabilities, revenue, and 

expenses. Actual results could differ from these estimates. Significant estimates underlying the accompanying 

financial statements include the majority of accrued liabilities and federal employee benefits liabilities. 

Q: EARMARKED FUNDS 

The Forest Service reports the earmarked funds for which it has program management responsibility, using the 

following three criteria: 

 A statute committing the Federal Government to use specifically identified revenues and other financing 

sources only for designated activities, benefits, or purposes; 

 Explicit authority for the earmarked fund to retain revenues and other financing sources not used in the 

current period for future use to finance the designated activities, benefits, or purposes; 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. 

R: INTER-ENTITY COST IMPLEMENTATION 

In accordance with U.S. GAAP, each entity’s full cost should incorporate the full cost of goods and services that it 

receives from other entities. The entity providing the goods and services has the responsibility to provide the 

receiving entity with information on the full cost of such goods or services either through billing or other advice. 

Recognition of inter-entity costs that are not fully reimbursed is limited to material items that (1) are significant to 

the receiving entity, (2) form an integral or necessary part of the receiving entity’s output, and (3) can be identified 

or matched to the receiving entity with reasonable precision. Broad and general support services provided by an 

entity to all or most other entities should not be recognized unless such services form a vital and integral part of 

the operations or output of the receiving entity. 

 

B-48
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 a known discrepancy with Treasury in FBWT, suspense account 12F3885, as of 

September 30, 2010. These suspense accounts were discontinued effective July 31, 2008. The USDA elected not 

to obtain a waiver, which would have permitted 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. Although there is 

continuing activity in 12F3875, as of September 30, 2010, the balance is zero and therefore did not result in a 

discrepancy with Treasury. Per Treasury guidance, the balances are not reported to Treasury. The difference 

between the FBWT balance and Treasury as of September 30, 2010, is approximately $5 million. 

Fund Balance with Treasury as of September 30, 2010 and 2009 consisted of the following: 

 

2010 2009

(1) Trust Funds 374$ 406$ 

(2) Special Funds 943 875 

(3) Revolving Funds 167 178 

(4) General Funds 3,686 3,620 

(5) Other Fund Types 82 67 

5,252$ 5,146$ 

(1) Unobligated Balance

(a) Available 1,361$ 2,031$ 

(b) Unavailable 998 714 

(2) Obligated Balance not yet Disbursed 2,762 2,290 

(3) Non-Budgetary FBWT Accounts 131 111 

5,252$ 5,146$ 

B. Status of Funds:

Total

(in millions)

A. Fund Balances:

Total

B-49
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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. Instead, 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 and provide the fund with the authority to draw upon the U.S. Treasury for future 

authorized expenditures. 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. 

 

Investments

As of and for the year ended September 30, 2010

(in millions)

Amortization 

Method Cost

Net 

Amortized 

(Premium) 

Investments, 

Net

Market Value 

Disclosure

(3) Non-Marketable: 

Market-Based Straight-Line 6$ $ - $ 6 $ 6

Total N/A 6$ $ - $ 6 $ 6

Investments

As of and for the year ended September 30, 2009

(in millions)

Amortization 

Method Cost

Net 

Amortized 

(Premium) 

Discount

Investments, 

Net

Market Value 

Disclosure

(3) Non-Marketable: 

Market-Based Straight-Line 6$ $ - $ 6 $ 6

Total N/A 6$ $ - $ 6 $ 6

B-50
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010 and 2009, the Intragovernmental Accounts Receivable balances were $24 million and $45 

million, respectively. 

Non-Intragovernmental Accounts Receivable is comprised primarily of timber harvest and reimbursements and 

refunds owed to the Forest Service for fire prevention and suppression activities. An Allowance for Uncollectible 

Accounts is established against outstanding non-Federal accounts receivable, based on historical experience. The 

historical percentage is calculated by comparing the ending fiscal year balance in 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, 2010 and 2009 consisted of the following: 

 

2010 2009 

Accounts Receivable $ 121 $ 169 

Allowance for Uncollectible Accounts (6) (4)

Accounts Receivable, Net $ 115 $ 165 

(in millions)

B-51
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010 and 2009 the Forest Service’s General PP&E consisted of the following: 

Property Class

Estimated Useful 

Life (Years) Cost

Accumulated 

Depreciation Book Value

Personal Property 

Equipment 5 - 20 688$ $ (467) 221$ 

Internal Use Software 5 95 (76) 19 

Internal Use Software in Development n/a 46 46 -

Total Personal Property 829 (543) 286 

Real Property

Land and Land Rights n/a 51 51 -

Improvements to Land 10 715 (624) 91 

Construction in Progress n/a 139 139 -

Buildings, 

Improvements, and 

Renovations 30 977 (591) 386 

Other Structures and Facilities 15 - 50 1,698 (1,301) 397 

Assets Under Capital Lease 5 - 30 61 (36) 25 

Leasehold Improvements 10 14 (6) 8 

Total Real Property 3,655 (2,558) 1,097 

Total 4,484$ $ (3,101) 1,383$ 

September 30, 2010

(in millions)

B-52
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

Property Class

Estimated Useful 

Life (Years) Cost

Accumulated 

Depreciation Book Value

Personal Property 

Equipment 5 - 20 723$ $ (527) 196$ 

Internal Use Software 5 187 (157) 30 

Internal Use Software in Development n/a 30 30 -

Total Personal Property 940 (684) 256 

Real Property

Land and Land Rights n/a 51 51 -

Improvements to Land 10 700 (604) 96 

Construction in Progress n/a 121 121 -

Buildings, 

Improvements, and 

Renovations 30 945 (568) 377 

Other Structures and Facilities 15 - 50 1,680 (1,259) 421 

Assets Under Capital Lease 5 - 30 63 (35) 28 

Leasehold Improvements 10 14 (5) 9 

Total Real Property 3,574 (2,471) 1,103 

Total 4,514$ $ (3,155) 1,359$ 

September 30, 2009

(in millions)

B-53
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 6: STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT 

This note provides information on certain resources entrusted to and stewardship responsibilities assumed by the 

Forest Service. These resources and responsibilities are referenced in accordance with U.S. GAAP on the Forest 

Service’s Balance Sheets. 

Stewardship PP&E 

Stewardship PP&E are assets whose physical properties resemble those of the General PP&E that are 

traditionally capitalized in the financial statements. Due to the nature of these assets, however, valuation would be 

difficult and matching costs with specific periods would not be meaningful. Stewardship PP&E includes heritage 

assets and stewardship land. The Forest Service reports 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 by U.S. GAAP, are PP&E that are unique for one or more of the following reasons: 

 Historical or natural significance 

 Cultural, educational, or artistic (e.g. aesthetic) importance 

 Significant architectural characteristics 

Heritage assets can include non-collection type assets, such as historic or prehistoric sites, monuments, and 

buildings, or collection type assets, such as objects gathered and maintained for exhibition. 

Some heritage assets may also be classified as multi-use heritage assets if they serve two purposes—a heritage 

function and a general government operations function, such as a forest guard station building. The building may 

B-54
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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: Heritage assets of distinct public value that are, or should be, actively maintained, and 

meet one or more of the following criteria: 

 The property is recognized through an official designation; such as a listing on the National Register of 

Historic Places, State register, etc. 

 The property is recognized through prior investment in preservation, interpretation, and use. Any 

improvement to a PHA that meets real property designation criteria is considered real property. 

 The property is recognized in an agency-approved management plan. 

 The property exhibits critical deferred maintenance needs, and those needs have been documented. 

Other Heritage Assets: Assets that may have potential important historical or cultural significance, but lack formal 

listing and the demonstrated need for active maintenance. 

Assemblage Assets: Any grouping of artifacts or archival materials aggregated through donation, agency events, 

site-specific or other field collection, other acquisition method, or combination therein. 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.” 

B-55
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

The Heritage Asset Sites (Units) reported by management area as of September 30, 2010, are as follows: 

HERITAGE ASSET SITES (Units) 

BY MANAGEMENT AREA

National Forests

Region 1 - Northern Region 15 - - 15

Region 2 - Rocky Mountain Region 17 - - 17

Region 3 - Southw estern Region 12 - - 12

Region 4 - Intermountain Region 18 - - 18

Region 5 - Pacific Southw est Region 18 - - 18

Region 6 - Pacific Northw est Region 21 - - 21

Region 8 - Southern Region 35 - - 35

Region 9 - Eastern Region 17 - - 17

Region 10 - Alaska Region 2 - - 2

Subtotal 155 155

National Grasslands 

Region 1 - Northern Region 4 - - 4

Region 2 - Rocky Mountain Region 7 - - 7

Region 3 - Southw estern Region 4 - - 4

Region 4 - Intermountain Region 1 - - 1

Region 5 - Pacific Southw est Region 1 - - 1

Region 6 - Pacific Northw est Region 1 - - 1

Region 8 - Southern Region 2 - - 2

Subtotal 20 20

Non Forest Service Sites 135 20 - 155

TOTAL SITES 310 20 - 330

Additions Deletions

FY 2010 

Final Sites

FY 2009 

Final Sites

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-56
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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. 

From these several allowable uses of program funding, the program concentrates on protecting habitat for priority 

B-57
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

species identified in the national forest and grassland’s Land Management Plans and enhancing recreational 

opportunities for areas with high demand for recreation. The program focuses acquisitions on inholdings and 

areas adjacent to existing NFS lands. 

The NFS sites reported by major category as of September 30, 2010, are as follows: 

STEWARDSHIP LAND ASSET SITES

National Forests 155 - - 155

National Grasslands 20 - - 20

Research and Experiment Areas 3 - - 3

National Preserves and Other Areas 3 - - 3

181 - - 181

FY 2010 

Final Sites

FY 2009 

Final Sites

TOTAL SITES 

Additions Deletions

B-58
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 7: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

Liabilities not covered by budgetary resources as of September 30, 2010 and 2009 consisted of the following: 

2010 2009

Intragovernmental:

Treasury Judgment Fund 18$ 18$ 

Other Unfunded Employment Related Liability 14 15 

Federal Employee Benefits (Note 8) 74 72 

Total Intragovernmental Not Covered by Budgetary Resources 106 105 

Federal Employee Benefits (Note 8) 369 349 

Annual Leave Liability 214 206 

Contingent Liabilities - 16 

Accrued Liability for Payments to States 409 442 

Environmental and Disposal Liabilities (Note 9) - 1 

Total Liabilities Not Covered by Budgetary Resources 1,098 1,119 

Total Liabilities Covered by Budgetary Resources 1,039 1,019 

Total Liabilities 2,137$ 2,138$ 

(in millions)

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-59
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010 and 2009 consisted of the following: 

 

 

2010 2009

Intragovernmental Federal Employee 

Benefits (Note 7) 74$ 72$ 

Federal Employee Benefits (Note 7) 369 349 

Total 443$ 421$ 

(in millions)

B-60
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 9: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

 

Forest Service discloses information related to cleanup costs for environmental hazards, in accordance with U.S. 

GAAP, which addresses liabilities associated with Government-related events and Government-acknowledged 

events. 

Government-related events are non-transaction based events that involve interaction between the Forest Service 

and the environment; damages caused by such factors as ongoing operations or natural forces. The resulting 

liability is considered probable based on Forest Service’s responsibility for cleanup of Government-related events 

and is recognized in the period the event occurs or as soon as it becomes measurable. 

Government-acknowledged events are non-transaction events that are of financial consequence to the Forest 

Service because it chooses to respond to the event, and the primary responsible party cannot be located. 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-61
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 10: OTHER LIABILITIES 

Non-Current Current Total Non-Current Current Total

Intragovernmental 

Employer Contributions & Payroll Tax $ 30 30 - $ 28 28$ -

Accrued Liabilities 43 61 18 22 40 18

Advances from Others 26 26 - 21 21 -

Deposit Liabilities 1 1 - (6) (6) -

Custodial Liabilities - - - 9 9 -

Other (Note 7) 14 - 14 15 15 -

Total Intragovernmental $ 114 132 18 $ 89 107$ 18

Other 

Accrued Liabilities 734 734 - 721 721$ -

Advances from Others 49 49 - 46 46 -

Deposit Liabilities 77 77 - 85 85 -

Purchaser Road Credits 1 1 - 1 1 -

Accrued Liability for Payments to States & Counties 409 409 - 442 442 -

Annual Leave Liability 214 214 - 206 206 -

Contingent Liabilities - - - 16 - 16 

Custodial Liabilities 3 3 - - - -

Capital Leases (Note 11) 22 3 25 25 3 28 

Other 2 2 - - - -

Total Other $ 1,492 22 1,514 $ 1,504 1,545$ 41

Total Other and Intragovernmental Liabilities $ 1,606 1,646 40 $ 1,593 1,652$ 59

(in millions)

2010 2009

As of September 30, 2010 and 2009, 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. Legislation mandates a declining scale in payment calculation of approximately 90 

percent of the full funding amount for the preceding fiscal year. In addition, the Payments to Counties, BankheadJones 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-62
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010, the Forest Service had several legal 

actions pending; however, pending actions totaled less than $1 million. Based on information provided by legal 

counsel, management accrues liabilities for some adverse actions determined to be probable in occurrence and 

reasonably estimable. The Forest Service discloses potential liabilities related to claims where the probability of 

occurrence is at least reasonably possible. There are no estimated obligations related to cancelled appropriations 

for which there is a contractual commitment for payment. In addition, there are no contractual arrangements which 

may require future financial obligations. 

The accrued and potential contingent liabilities as of September 30, 2010 and 2009 are summarized as follows: 

FY 2010

(in millions)

Accrued 

Liabilities Lower End Upper End

Contingent Liabilities

Probable -$ -$ $ 17

Reasonably Possible $ 1 $ 198

FY 2009

(in millions)

Accrued 

Liabilities Lower End Upper End

Contingent Liabilities

Probable 16$ $ 16 $ 30

Reasonably Possible $ 2 $ 192

Estimated Range of Loss

Estimated Range of Loss

B-63
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010 and 2009 and future capital and operating lease agreement 

payments as of September 30, 2010 consisted of the following: 

 

2010 2009

Land, Buildings, Machinery, and 

Equipment $ 61 63$ 

Accumulated Amortization (36) (35)

Total $ 25 28$ 

Year 1 (2011) 10

Year 2 (2012) 9

Year 3 (2013) 9

Year 4 (2014) 9

Year 5 (2015) 8

After 5 Years 32

$ 77

 38

 14

 25

Lease Liabilities Covered by Budgetary Resources $ 25

(in millions)

Fiscal Year

 Year 1 (2011) $ 46

 Year 2 (2012) 42

 Year 3 (2013) 40

 Year 4 (2014) 38

 Year 5 (2015) 36

 After 5 Years 258

$ 460

Capital Leases: 

(in millions)

Summary of Assets Under Capital Leases

Future Payments Due:

Total Future Lease Payments

Less: Imputed Interest

Total Future Lease Payments

Operating Leases:

Future Payments Due:

Land & Buildings, 

Machinery, and 

Equipment

Land & Buildings, 

Machinery, and 

Equipment

Less: Executory Costs 

 Subtotal

B-64
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 12: EARMARKED FUNDS 

In accordance with U.S. GAAP, the Forest Service administers certain earmarked funds, which are specifically 

identified revenues, often supplemented by other financing sources that remain available over time. These funds 

predominately finance the enhancement and maintenance of NFS lands, including reforestation. Donations are 

handled on a cash basis and all other collections are accounted for on an accrual basis. The following is a list of 

earmarked funds and their base Treasury symbols for which the Forest Service has program management 

responsibility. Those with an asterisk are authorized by specific legislative acts as permanent indefinite 

appropriations. 

 

Treasury Account Symbols and Titles

5004 Land Acquisition 

5008 National Forest Fund Receipts 

5010 Recreation Fees for Collection Costs 

5072 Fees, Operation and Maintenance of Recreation Facilities 

5201 Payments to States, National Forest Fund 

*5202 Timber Roads Purchaser Election 

*5203 Roads and Trails for States, National Forest Funds 

*5204 Timber Salvage Sales

*5206 Expenses, Brush Disposal 

5207 Range Betterment Fund 

5208 Acquisition of Lands for National Forests, Special Acts 

5212 Construction of Facilities or Land Acquisition 

*5213 Payments to Minnesota (Cook, Lake and St. Louis Counties), National Forest Funds 

*5214 Licensee Program 

*5215 Restoration of Forest Lands and Improvements 

5216 Acquisition of Lands to Complete Land Exchanges (Funds EXSL and EXSC) 

5217 Tongass Timber Supply Fund 

*5219 Operation and Maintenance of Quarters 

*5220 Resource Management Timber Receipts 

*5223 Quinault Special Management Area 

*5224 Strawberry Valley Land Transfer 

*5225 Pacific Yew, Forest Service 

*5264 Timber Sales Pipeline Restoration Fund

*5268 Recreation Fee Demonstration Program

*5277 MNP Rental Fee Account

*5278 Midewin National Tallgrass Prairie Restoration Fund 

*5360 Land Between the Lakes Management Fund 

*5361 Administration of Rights-of-Way and Other Land Uses Fund 

*5363 Valles Caldera Fund

5367 State, Private and International Forestry Land and Water Conservation Fund

*5462 Hardwood Technology Transfer and Applied Research Fund

*5540 Stewardship Contracting Product Sales, Funds Retained

*5896 Payments to Counties, National Grasslands 

*8028 Cooperative Work, Forest Service

8029 Mount Saint Helens Highway 

8034 Gifts, Donations, and Bequests for Forest and Rangeland Research

8039 Land Between the Lakes Trust Fund 

8046 Reforestation Trust Fund 

*8203 Gifts and Bequests, Department of Agriculture

B-65
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

Financial information for all earmarked funds is included, and significant funds are specifically identified as shown 

below: 

Earmarked Funds

As of and for the year ended September 30, 2010

(in millions)

 Cooperative 

Work 

 Payments to 

States National 

Forests Fund 

 Restoration of 

Forest Lands and 

Improvements 

 State, Private, & 

International 

Forestry Land & 

Water 

Conservation 

Fund 

 Recreation Fee 

Demonstration 

Program 

 Other 

Funds Total 

ASSETS

Fund Balance with Treasury $ 357 $ 197 $ 169 $ 124 $ 98 372$ 1,317$ 

Investments - - - - - 6 6 

Accounts Receivable, Net 2 - 2 - 1 11 16 

Advances To Others - 1 - 9 - - 10 

General Property, Plant & Equipment, Net 19 2 - - 3 97 121 

TOTAL ASSETS $ 378 $ 200 $ 171 $ 133 $ 102 486$ 1,470$ 

LIABILITIES

Accounts Payable $ 2 $ - $ - $ - $ 1 2$ 5$ 

Other Liabilities 50 391 1 50 4 36 532 

TOTAL LIABILITIES 52 391 1 50 5 38 537 

Total Net Position 326 (191) 170 83 448 933 97

TOTAL LIABILITIES AND NET POSITION $ 378 $ 200 $ 171 $ 133 $ 102 486$ 1,470$ 

CHANGE IN NET POSITION

Beginning Balances, as adjusted $ 359 $ (272) $ 175 $ 80 $ 128 437$ 907$ 

Budgetary Financing Sources:

 Donations and Forfeitures of Cash 1 - - - - - 1 

 Transfers -in/out without Reimbursement - - - 76 94 170 -

Other Financing Sources:

 Transfers-in/out without Reimbursement (1) - - - (59) - (60) 

 Other - - - - 43 43 -

Total Financing Sources - - - 76 78 154 -

Revenue 79 118 33 - 120 415 65

Expenses (112) (37) (38) (73) (96) (543) (187)

Net Cost of Operations (33) 81 (5) (73) (31) (128) (67)

ENDING BALANCES $ 326 $ (191) $ 170 $ 83 $ 97 448$ 933$ 

B-66
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

Earmarked Funds

As of and for the year ended September 30, 2009

(in millions)

 Cooperative 

Work 

 Restoration 

of Forest 

Lands and 

Improvements 

 Payments 

to States 

National 

Forest Fund 

 Recreation Fee 

Demonstration 

Program 

 State, Private, 

& International 

Forestry Land 

& Water 

Conservation 

Fund 

 Other 

Funds Total 

ASSETS

Fund Balance with Treasury $ 388 $ 150 $ 150 $ 130 $ 105 358$ 1,281$ 

Investments - - - - 6 6 -

Accounts Receivable, Net 3 26 - - 15 44 -

Advances To Others - - 1 - 6 1 8 

General Property, Plant & Equipment, Net 19 - 3 3 93 118 -

TOTAL ASSETS $ 410 $ 176 $ 154 $ 133 $ 111 473$ 1,457$ 

LIABILITIES

Accounts Payable $ 2 $ 1 $ 1 $ 1 $ 1$ 6$ -

Other Liabilities 49 424 - 4 32 35 544 

TOTAL LIABILITIES 51 425 1 5 32 36 550 

Total Net Position 359 175 (271) 128 437 907 79

TOTAL LIABILITIES AND NET POSITION $ 410 $ 176 $ 154 $ 133 $ 111 473$ 1,457$ 

CHANGE IN NET POSITION

Beginning Balances, as adjusted $ 263 $ 153 $ (34) $ 147 $ 106 545$ 1,180$ 

Budgetary Financing Sources:

 Donations and Forfeitures of Cash 1 - - - - - 1 

 Transfers -in/out without Reimbursement 130 - - - 49 80 259 

Other Financing Sources: - 

 Transfers-in/out without Reimbursement - - - - (70) (70) -

 Other - - - - 48 48 -

Total Financing Sources 131 - - - 49 58 238 

Revenue 91 31 162 67 41 392 -

Expenses (126) (399) (9) (86) (207) (903) (76)

Net Cost of Operations (35) 22 (237) (19) (166) (511) (76)

ENDING BALANCES $ 359 $ 175 $ (271) $ 128 $ 437$ 907$ 79

Descriptions of the significant earmarked funds are as follows: 

Cooperative Work 

Cooperative contributions are deposited into Treasury account 12X8028 for disbursement in compliance with the 

terms and provisions of the agreement between the cooperator and the Forest Service. Cooperators include 

timber purchasers, not-for-profit organizations, and local hunting and fishing clubs. The governing authorities are 

the Cooperative Funds Act of June 30, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act. 

Payments to States, National Forests Fund 

The Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as “Payments to States”, requires with a 

few exceptions, that 25.0 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 

B-67
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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. 

Restoration of Forest Lands and Improvements 

The Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579c) states any monies received by the 

United States with respect to lands under the administration of the Forest Service (a) as a result of the forfeiture of 

a bond or deposit by a permittee or timber purchaser for failure to complete performance of improvement, 

protection, or rehabilitation work required under the permit or timber sale contract or (b) as a result of a judgment, 

compromise, or settlement of any claim, involving present or potential damage to lands or improvements, shall be 

deposited into the Restoration of Forest Lands and Improvements Account – 12X5215 and made available until 

expended to cover the cost of any improvement, protection, or rehabilitation work on lands under the 

administration of the Forest Service rendered necessary by the action which led to the forfeiture, judgment, 

compromise, or settlement, provided that any portion of the monies so received in excess of the amount expended 

in performing the work necessitated by the action which led to their receipt shall be transferred to miscellaneous 

receipts. 

State, Private, and International Forestry, Land and Water Conservation Fund 

The Fiscal Year 2004 Department of Interior and Related Agencies Appropriation Act (Public Law 108-108) 

authorizes the Forest Service to receive a transfer of receipts from Department of Interior’s Land and Water 

Conservation Fund to finance the existing Forest Legacy Program, funded previously by State and Private Forestry 

general appropriation, 12X1105. To accommodate the new financing arrangement and at OMB’s request, the 

Department of Treasury established a new special fund, 12X5367, “State, Private and International Forestry Land 

and Water Conservation Fund”. The program expenditures include grants and an occasional land purchase but 

no real property will be procured or constructed. 

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. 

B-68
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 2010 and 2009. 

 

Program Costs by Segment 

For the years ended September 30, 2010 

(in millions) 

National 

Forests 

and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Wildland 

Fire 

Management Total

 Intragovernmental Gross Costs: 

Benefit Program Costs 305$ 42$ 15$ 224$ 586$ 

Imputed Costs 426 - - - 426 

Reimbursable Costs 147 19 12 313 135

Total Intragovernmental Gross Costs 878 61 27 1,325 359

 Less: Intragovernmental Earned Revenue 77 28 28 132 (1)

 Intragovernmental Net Costs 801 33 (1) 1,193 360

Gross Costs With the Public:

Grants and Indemnities 421 16 287 799 75

Stewardship Land Acquisition (Note 14) 57 - - - 57 

Other:

Operating Costs 2,185 259 117 1,513 4,074 

Depreciation Expense 118 2 - 148 28

Reimbursable Costs 149 30 17 299 103

 Total Other 2,452 291 134 1,644 4,521 

Total Gross Costs with the Public 2,930 307 421 1,719 5,377 

Less: Earned Revenues from the Public 448 4 - 491 39

Net Costs with the Public 2,482 303 421 1,680 4,886 

Net Cost of Operations 3,283$ 336$ 420$ $ 6,079$ 2,040

B-69
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

Program Costs by Segment

For the years ended September 30, 2009 

(in millions) 

National 

Forests 

and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Wildland 

Fire 

Management Total

 Intragovernmental Gross Costs: 

Benefit Program Costs 570$ 1$ -$ $ 583$ 12

Imputed Costs 344 - - - 344 

Reimbursable Costs 143 20 9 150 322 

Total Intragovernmental Gross Costs 1,057 21 9 162 1,249 

 Less: Intragovernmental Earned Revenue 49 30 20 128 29

 Intragovernmental Net Costs 1,008 (9) (11) 1,121 133

Gross Costs With the Public:

Grants and Indemnities 417 17 269 788 85

Stewardship Land Acquisition (Note 14) 63 - - - 63 

Other:

Operating Costs 1,609 284 117 1,944 3,954 

Depreciation Expense 131 3 - 163 29

Reimbursable Costs 157 32 17 372 166

 Total Other 1,897 319 134 2,139 4,489 

Total Gross Costs with the Public 2,377 336 403 2,224 5,340 

Less: Earned Revenues from the Public 452 5 - 551 94

Net Costs with the Public 1,925 331 403 2,130 4,789 

Net Cost of Operations 2,933$ 322$ 392$ $ 5,910$ 2,263

B-70
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 14: COST OF STEWARDSHIP PP&E 

Stewardship PP&E acquired in FYs 2010 and 2009 amounted to $57 and $63 million, respectively. Cost of 

Stewardship PP&E includes purchases of lands, easements, and rights-of-way. Stewardship land is land and land 

rights owned by the Federal Government and are excluded from General PP&E. Examples of stewardship land 

includes land used for forests, grazing, and wildlife. 

Costs for stewardship land include all costs to acquire and prepare the land for its intended use. The acquired land 

was adjacent to existing forest/grassland sites, thus the number of sites reported in Note 6 remains unchanged. 

B-71
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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 are the amounts of direct and reimbursable obligations 

incurred by apportionment category for FY 2010 and 2009. 

 

Apportionment 

Category A

Apportionment 

Category B Total

Obligations Incurred - Direct $ 3,537 $ 3,034 6,571$ 

Obligations Incurred - Reimbursable 93 316 409 

Total Obligations Incurred $ 3,630 $ 3,350 6,980$ 

Apportionment 

Category A

Apportionment 

Category B Total

Obligations Incurred - Direct $ 4,031 $ 2,514 6,545$ 

Obligations Incurred - Reimbursable 176 306 482 

Total Obligations Incurred $ 4,207 $ 2,820 7,027$ 

For the year ended September 30, 2010

(in millions)

For the year ended September 30, 2009

(in millions)

B-72
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 16: EXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF 

 BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES 

 GOVERNMENT 

The differences between the FY 2009 Statement of Budgetary Resources (SBR) and the FY 2009 actual numbers 

presented in the FY 2011 Budget of the United States Government (Budget) are summarized in the table below. 

The President’s Budget with actual numbers for 2010 has not yet been published, and is expected to be published 

in February of 2011, and to be made available at www.whitehouse.gov. OMB Circular A-136 states that the note 

should “identify and explain material differences between amounts reported in the SBR and actual amounts 

reported in the Budget of the United States Government as required by U.S. GAAP.” The Department’s threshold 

for explaining material variances is $25 million and 10%. Based on this threshold, the variance noted for Net 

Outlays is due to the exclusion of the Distributed Offsetting Receipts from the calculation of the amount reported in 

the Budget. No other variances meet the Department’s threshold. 

SBR Budget Dollar Percentage

SBR Line Description Amount Amount Variance Variance

Total Budgetary Resources/Status of Resources 9,772 9,766 6 0%

Total Status of Resources 9,772 9,766 6 0%

Unobligated Balance-Beginning of Year 2,170 2,163 7 0%

Recoveries of Prior Year Obligations 38 39 (1) -3%

New Budget Authority 7,107 7,106 1 0%

Spending Authority from Offsetting Collections 462 461 1 0%

Non Expenditure Transfers - 2 (2) -100%

Total New Obligations 7,027 7,028 (1) 0%

Unobligated Balance & Unobligated Balance not Available 2,745 2,738 7 0%

Obligated Balance - Beginning of Year 1,707 1,706 1 0%

Obligated Balance - End of Year 2,290 2,289 1 0%

Gross Outlays 6,480 6,481 (1) 0%

Less: Offsetting Collections (536) (536) - 0%

Less: Distributed Offsetting Receipts (574) (574) - -100%

Net Outlays 5,370 5,945 (575) -10%

(in millions)

B-73
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 17: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

The unpaid obligations of $3,072 and $2,641 million included undelivered orders of $2,243 and $1,825 million, as 

of September 30, 2010 and 2009, respectively. 

B-74
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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, 

2010 and 2009, the amount of marijuana on hand was 32,046 (kg) and 32,382 (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-75
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

NOTE 19: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

 BUDGET (FORMERLY THE STATEMENT OF FINANCING) 

2010 2009

Resources Used to Finance Activities:

Budgetary Resources Obligated:

Obligations Incurred $ 6,980 7,027$ 

Less: Spending Authority from Offsetting Collections and Recoveries 501 500 

Obligations Net of Offsetting Collections and Recoveries 6,479 6,527 

Less: Offsetting Receipts 429 574 

Net Obligations 6,050 5,953 

Other Resources:

Transfers in/out Without Reimbursement 3 1 

Imputed Financing from Costs Absorbed by Others 426 344 

Other (15) (22)

Net Other Resources Used to Finance Activities 414 323 

Total resources used to finance activities 6,464 6,276 

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in Budgetary Resources Obligated for Goods, 

Services, and Benefits Ordered But not Yet Provided (421) (370)

Resources that Fund Expenses Recognized in Prior Periods (27) (74)

Budgetary Offsetting Collections and Receipts that do not Affect 

Net Cost of Operations

Change in Unfilled Orders 16 (49)

Decrease in Exchange Revenue Receivable from the Public - 15 

Other - 178 

Resources that Finance the Acquisition of Assets (163) (142)

Other Resources or Adjustments to Net Obligated Resources that do not 

Affect the Net Cost of Operations 60 (99)

Total Resources Used to Finance Items not Part of the Net Cost of Operations (535) (541)

Total Resources Used to Finance the Net Cost of Operations 5,929 5,735 

Components of the Net Cost of Operations that will not Require or Generate 

Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods:

Increase in Annual Leave Liability 8 - 

Increase in Exchange Revenue Receivable from the Public (3) 7 

Other - - 

Total Components of Net Cost of Operations that will Require or Generate

Resources in Future Periods 5 7 

Components not Requiring or Generating Resources:

Depreciation and Amortization 148 163 

Revaluation of Assets or Liabilities 2 1 

Other Components not Requiring or Generating Resources:

Bad Debt Expense (1) 22 

Other (4) (18)

Total Components of Net Cost of Operations that will not Require or

Generate Resources 145 168 

Total Components of Net Cost of Operations that will not Require or 

Generate Resources in the Current Period 150 175 

Net Cost of Operations $ 6,079 5,910$ 

(in millions)

B-76
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2010 and 2009 

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-77
Part C 

REQUIRED SUPPLEMENTARY 

STEWARDSHIP INFORMATION 

Unaudited 

C-1
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

The  stewardship  objective  of  Federal  financial  reporting  includes  accountability  for  Stewardship 

Investments.  

RESEARCH AND DEVELOPMENT—FOREST AND RANGELAND RESEARCH 

Fiscal year (FY) 2010 Net Cost of Operations: $338 million.  Of the $338 million— 

$309 million was an investment of Research and Development (R&D) funding; 

$29  million  was  an  investment  of  National  Fire  Plan  funding  and  Joint  Fire  Science  Program 

funding. 

Forest Service R&D has an integrated portfolio that supports achievement of the agency’s strategic goals 

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 wildland fire, as a natural process, and understand 

the human process of fire and fuels management on society and the environment.   

Research  focuses on understanding and modeling  fundamental  fire processes, interactions of  fire with 

ecosystems  and  the  environmental,  social,  and  economic  aspects  of  fire,  as  well  as  evaluating  the 

integrated management strategies and disturbance interactions at multiple scales and the application of 

fire research to address management problems. 

Invasive Species 

Invasive  Species  R&D  provides  the  scientific  information,  methods,  and  technology  to  reduce  or 

eliminate  the  introduction,  spread,  and  impact  of  invasive  species  and  to  restore  or  improve  the 

functionality of ecosystems affected by invasives species.    

Research  focuses on 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. 

C-2
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

Wildlife and Fish 

Wildlife and Fish R&D relies upon interdisciplinary research to inform policy initiatives affecting wildlife 

and fish habitat on private and public lands, and the recovery of threatened or endangered species.  

Scientists investigate the complex interactions among species, ecosystem dynamics and processes, land 

use  and  management,  and  any  emerging  broadscale  threats,  including  global  climate  change,  loss  of 

open space, invasive species, and disease.  

Resource Management and Use 

Resource Management and Use R&D provides the 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. 

Each of  the seven SPAs has stewardship investments in  the  following  three categories: basic  research, 

applied research, and development.   

Basic research is the systematic study directed toward new or improved knowledge and understanding. 

Applied  research  is  the  systematic  study  intended  to  gain  knowledge  or  understanding  necessary  to 

meet  a  specific  need.  Development  is  the  systematic  application  of  knowledge  or  understanding, 

directed toward the production of useful materials, devices, systems, or methods. The following exhibit 

reports net cost of R&D operations by these categories and by the FY 2010 stewardship investment.  

C-3
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

R&D Stewardship Investments 2010 2009 2008 2007 2006

Net Cost of Operations (in millions) $338 $323 $304 $261 $318

Basic Research 94 87 82 60 76

Applied Research 227 220 207 154 166

Development 17 16 15 47 76

New interagency agreements and contracts 38 57 40 41 54

Interagency agreements and contracts continued 12 12 12 17 15

Articles published in journals 1,790 2,294 1,903 1,336 1,691

Articles published in all other publications 1,481 886 1,487 1,846 1,817

Patent(s) granted 2 3 6 3 7

Patent licenses executed 0 0 1 0 1

C-4
Part D 

REQUIRED SUPPLEMENTARY 

INFORMATION 

Unaudited 

D-1
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

REQUIRED SUPPLEMENTARY INFORMATION 

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.  

D-2
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

 

The dollar amounts in Exhibit 1, Deferred Maintenance Totals by Asset Class, include:  

 A Forest Service standard factor that includes design, contracting, and overhead costs.  

 A remoteness factor that includes the estimated travel time to the asset. 

 A heritage factor. 

Exhibit 1: Deferred Maintenance Totals by Asset Class as of September 30, 2010 (in millions) 

Asset Class

Overall 

Condition

Critical

Maintenance

Noncritical 

Maintenance

Cost To Return 

To Acceptable 

Condition

Bridge Varies $34 $138 $172

Building Varies 125 913 1,038

Dam Varies 6 18 24

Fence Varies 297 ‐ 297

Handling Facility Varies 22 ‐ 22

Heritage Varies 8 18 26

Minor Constructed Features1 Varies ‐ 116 116

Roads2 Varies 310 2,797 3,107

Trail Varies 7 289 296

Trail Bridge Varies 4 7 11

Wastewater System Varies 23 14 37

Water System Varies 67 50 117

Wildlife, Fish, and TES3 Varies 5 2 7

Grand Total $908 $4,362 $5,270

 

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 U.S. 

Environmental Protection Agency and States;  

3. Road  management  objectives  developed  through  the  National  Forest Management  Act  forest 

planning process; and 

                                                            

1

 In prior years, Minor Constructed Features were mislabeled as "Recreation Sites." 

2

 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 $4,439 million. All road beds are 

considered stewardship assets. 

3

 In prior years, Wildlife, Fish, and TES (threatened and endangered species) were incorrectly identified as 

"Wilderness."  

D-3
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

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  35  percent 

needing major repairs or renovations; approximately 14 percent in fair condition; and 51 percent of the 

facilities in good condition.  

The  agency  is  currently  developing  an  integrated  strategy  to  realign  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.  

D-4
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

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).  

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  FY  2010  year‐to‐date4

  accomplishments  on  NFS  lands  include  treatment  of  198,478  acres  for 

invasives and 33,043 acres for native pests. These numbers should be considered preliminary, with final 

amounts  of  acres  treated  for  invasives  and  native  pests  on  NFS  lands  available  in  February  2011  at 

http://www.fs.fed.us. 

                                                            

4

 The year‐to‐date accomplishments are as of September 27, 2010. 

D-5
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

D-6
REQUIRED SUPPLEMENTARY INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

D-7
Part E

OTHER ACCOMPANYING INFORMATION

Unaudited

E-1
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

OTHER ACCOMPANYING INFORMATION 

MANAGEMENT CHALLENGES 

The Reports Consolidation Act of 2000 requires USDA Office of Inspector General (OIG) to identify and report annually 

on  the  most  serious  management  challenges  the  Department  faces.  The  following  table  lists  the  Forest  Service 

responses to address the management challenges identified in August 2010.  

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 2010 ACCOMPLISHMENTS

Conducted the annual internal‐control risk assessment. 

Completed the annual review on agency performance accountability within the various regions.

Assessed all major Forest Service financial/mixed‐financial systems in accordance with Chief Information Officer (CIO) policy. 

Implemented corrective actions for a large number of findings and recommendations identified through Office of Management and Budget (OMB) 

A‐123 and Office of Inspector General (OIG)/Government Accountability Office (GAO) audits. Closed 8 OIG audits and over 80 audit 

recommendations.

PLANNED ACTIONS FOR FY 2011

Review performance accountability within various regions. 

Conduct annual internal‐control risk assessment.

Assess all major Forest Service financial and mixed‐financial systems scheduled for assessment.

Continue implementing corrective actions identified through OMB A‐123 and OIG/GAO audits.

Maintain a high closure rate for closing OIG audits and have no audits over 3 years old.

Improve monitoring and management of critical firefighter positions.

Improve management over contracted labor crews.

Improve American Recovery and Reinvestment Act of 2009 (ARRA) contract and grant monitoring regarding payments.

Obtain a “Clean” audit opinion.

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 and establish procedures to better respond to wildland fire threats.

FY 2010 ACCOMPLISHMENTS

Directed physical resources via the FY 2010 Program Direction to effectively address the changing environment of forest health and the expanding 

wildland‐urban interface (WUI) and to enter hazardous fuels accomplishments into the applicable database by fiscal yearend.

Continued to conduct large‐fire cost reviews and implement corrective actions, as applicable.  All regions with fires meeting the review criteria 

completed their reviews.  

Partnered with States and counties to develop and deliver fire prevention ordinances to use in planning and zoning in WUI areas.  Participated in 

meetings such as the Chief, Managers, and Supervisors meeting sponsored by the National Association of State Foresters (January 4 through 7, 

2010) and the 2010 Annual WUI Conference (March 3 through April 1, 2010).

Obtained clarification on August 4, 2010 from USDA’s Office of General Council (OGC) on Forest Service’s and States’ protection responsibilities in 

the WUI and of other private properties threatened by wildfire.  There was no change to the way we do business.

Completed full implementation and use of the Wildland Fire Decision Support System (WFDSS) that assists fire managers and analysts in making 

strategic and tactical decisions and introduces economic principals into the fire decision process. 

PLANNED ACTIONS FOR FY 2011

Issue guidance for monitoring the effectiveness of hazardous fuel treatments and restoration projects in FSM 5140 to include direction stating 

"Complete a fuel treatment effectiveness assessment on all wildfires that start in or burn into a fuel treatment that has been completed within the 

last 10 years (within last 3 years in the Southern Region).  All fuel treatment effectiveness assessment reports must be submitted within 90 days of 

control of the fire.”

Continue to develop tools for the regions to use in assessing and managing wildfire risk.

Continue to work with State, local, and tribal governments and other land management agencies to encourage the use of “Firewise” and “Ready! 

Set! Go!” to better protect people and communities threatened by wildland fire.

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, 2010 AND 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 and establish procedures to better respond to wildland fire threats.

Submit to Congress and implement the Cohesive Wildland Fire Management Strategy.

NET COST OF OPERATIONS BY STRATEGIC GOAL 

The Forest Service Strategic Plan FY 2007‐2012 has seven strategic goals: 

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

Goal 2:  Provide and Sustain Benefits to the American People 

Goal 3:  Conserve Open Space 

Goal 4:  Sustain and Enhance Outdoor Recreation Opportunities 

Goal 5:  Maintain Basic Management Capabilities of the Forest Service 

Goal 6:  Engage Urban America with Forest Service Programs 

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

The Forest Service Strategic Goals align to USDA’s Strategic Goals 1 and 2 (of four).

CROSSWALK OF FOREST SERVICE GOALS WITH USDA STRATEGIC GOALS

USDA Strategic Goal Forest Service Strategic Goal

Goal 2: Provide and Sustain Benefits to the American People

Goal 4: Sustain and Enhance Outdoor Recreation Opportunities

Goal 1: Assist rural 

communities to create 

prosperity so they are self‐

sustaining, repopulating, and 

economically thriving Goal 6: Engage Urban America With Forest Service Programs

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

Goal 3: Conserve Open Space

Goal 5: Maintain Basic Management Capabilities of the Forest Service

Goal 2: Ensure our national 

forests and private working 

lands are conserved, restored, 

and made more resilient to 

climate change, while 

enhancing our water 

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

Management

The following schedule aligning net costs to strategic goals is an estimate and is presented for informational purposes. 

Allocation of actual gross costs and earned revenue is based on applying a percentage of the enacted budget for each of 

the respective strategic goals to the total enacted budget.  

E-3
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

E-4 
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

IMPROPER PAYMENTS IMPROVEMENT ACT (IPIA) REPORTING 

The Improper Payments Information Act of 2002 (IPIA) requires each agency to assess its programs and identify which, if 

any  programs  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. A risk assessment, however, may be required annually 

by the Office of the Chief Financial Officer (OCFO) for a particular program. The OCFO reviews all risk assessments. 

USDA identified Wildland Fire Suppression Fund  (WFSU)  for FY 2010 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 2010. 

THE DESCRIPTION OF THE STATISTICAL SAMPLING PROCESS

For FY 2010 IPIA Reporting, the Forest Service used Monetary Unit Sampling (MUS) to systematically analyze and review 

WFSU transactions for FY 2010—the period of 10/01/2008 through 9/30/2009. 

THE DESCRIPTION OF THE CORRECTIVE ACTION PLAN(S) 

The result of the sampling was an error rate of zero percent for FY 2010 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 $988,000,000 $ 70,168,905 $0.00 0.0% $0.00 0.0%

To  maintain  a  zero‐percent  testing  error  rate,  the  Forest  Service  continues  to  improve  internal  controls,  conduct 

continuous internal monitoring of possible improper payments, use centralization of accounting functions, and improve 

communication and followup prior to payment authorization to reduce the potential for error.  

IMPROPER PAYMENT REDUCTION OUTLOOK 

The following tables for the Improper Payment Reduction Outlook are limited to the WFSU. 

Improper Payment Reduction Outlook (in thousands)

IPIA Reporting Year FY 2009 FY 2010 FY 2011

Actual Fiscal Year FY 2008 FY 2009 FY 2010

Program Outlays IP % IP $ Outlays

1 IP % IP $ Estimated 

Outlays IP % IP $

WFSU $1,370,029 0.02% $232 $480,800 0.00% $0.00 $503,400 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-5
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

Improper Payment Reduction Outlook (in thousands)

IPIA Reporting Year FY 2012 FY 2013

Actual Fiscal Year FY 2011 FY 2012

Program Estimated 

Outlays IP % IP $ Estimated Outlays IP % IP $

WFSU $452,400,000 0.00% $0.00 $465,970,000 0.00% $0.00

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 for 

FY 2006 through FY 2009. 

Beginning FY 2010, Forest Service further enhanced its internal review process to identify improper payments. Internal 

reviews  are  conducted  periodically  and  reported  to  OCFO  through  the  quarterly  High  Dollar  Report.  Forest  Service 

pursues  collection  efforts  for  recovery  of  the  entire  amount  of  the  improper  payment,  when  and  if  that  action  is 

warranted. 

Recovery of Improper Payments

Actual Dollars Recovered

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

$311,961 $85,658 $99,361 $1,720 $584,994

RISK ASSESSMENT AND OVERSIGHT BENEFITS

The  Forest  Service  assessments  resulted  in  a  FY  2010  IPIA  reporting  error  rate  of  zero  percent,  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 mitigated by the internal controls that have been 

implemented by management.  

 

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES

Exhibit 1. Definitions for Terms used in this section 

Beginning 

Balance The FY 2010 beginning balance agrees with the FY 2009 ending balance of material weaknesses.

New The total number of material weaknesses that have been identified during FY 2010.

Resolved The total number of material weaknesses that dropped below the level of materiality in FY 2010.

Consolidated The combining of two or more findings.

Reassessed

The removal of any finding not attributable to corrective actions. For example, management 

may have re‐evaluated and determined a material weakness does not meet the criteria for 

materiality or is reclassified under another heading, such as FMFIA, Section 2 Effectiveness of 

Internal Control over Financial Reporting to a FMFIA, Section 4 Conformance with Financial 

Management System Requirements.

Ending 

Balance The Forest Service’s FY 2010 ending balance for material weaknesses at yearend.

E-6
OTHER ACCOMPANYING INFORMATION—UNAUDITED 

FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

 

SUMMARY OF FINANCIAL STATEMENT AUDIT

Summary of Financial Statement Audit

Audit Opinion Unqualified, qualified, disclaimer, or adverse

Restatement Yes or No

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance 

0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

SUMMARY OF MANAGEMENT ASSURANCES

Effectiveness of Internal Control over Financial Reporting ( FMFIA § 2)

Statement of Assurance Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance 

Material Weaknesses 0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Effectiveness of Internal Control over Operations ( FMFIA §2)

Statement of Assurance Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance

Material Weaknesses 0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Conformance with Financial Management System Requirements ( FMFIA §4)

Systems conform, conform except for the below nonconformance(s), or do not conform to 

financial management system requirements (OMB Circular A‐136, Section 4 OAI) Statement of Assurance

Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance

Nonconformances 0 0 0 0 0 0

Total Nonconformances 0 0 0 0 0 0

Conformance with Federal Financial Management Improvement Act ( FFMIA)

Agency Auditor

Overall Substantial Compliance

       System Requirements Yes Yes

       Accounting Standards Yes Yes

       USSGL at the Transaction Level Yes Yes

E-7
Appendix: 

ACRONYMS AND ABBREVIATIONS 

Unaudited 

Appendix-1
ACRONYMS AND ABBREVIATIONS 

Explanation

ACSI American Customer Satisfaction Index

AFR Agency Financial Report

APR Annual Performance Report

ARRA American Recovery and Reinvestment Act of 2009

ASC Albuquerque Service Center

B&F Budget and Finance

BS Balance sheet(s)

CCF hundred cubic feet

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act of 1980

CFO Chief Financial Officer

CIO Chief Information Officer

CSRS Civil Service Retirement System

CWPP Community Wildfire Protection Plan

DOI U.S. Department of the Interior

DOL U.S. Department of Labor

EPA U.S. Environmental Protection Agency

EROC Economic Recovery Operations Center

FACTS II Federal Agencies' Centralized Trial‐Balance System II

FBWT fund balance with treasury

FECA Federal Employees’ Compensation Act

FERS Federal Employees’ Retirement System

FFIS Foundation Financial Information System

FFMIA Federal Financial Management Improvement Act

FISMA Federal Information Security Management Act

FLAME Federal Land Assistance, Management and Enhancement Act

FMFIA Federal Managers’ Financial Integrity Act

FMMI USDA Federal Management Modernization Initiative

FPL Forest Products Laboratory

FSH Forest Service handbook

FSM Forest Service manual

FTE full‐time equivalent

FY fiscal year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GL General ledger

GSA General Services Administration

HRM Human Resource Management

IG Inspector General

IITF International Institute of Tropical Forestry

INFRA Infrastructure application, one of the  corporate Forest Service Natural Resource Applications 

IPIA Improper Payment Information Act

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

Appendix-2
Explanation

NFC National Finance Center

NFR notice of finding and recommendation

NFS National Forest System (Deputy Area)

NIPF non‐industrial private forest

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

PHA Priority heritage assets

PII personally identifiable information

PP&E Property, Plant, and Equipment

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)

SFFAS Statement of Federal Financial Accounting Standards

SGL Standard General Ledger

SCNP Statement(s) of Change(s) in Net Position

SPA R&D’s strategic program areas

SPFI Summary of Performance and Financial Information

SNC Statement of(s) Net Cost

TAFS Treasury Appropriation Fund Symbol

TES threatened and endangered species

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

WFDSS Wildland Fire Decision Support System

WFSU Wildland Fire Suppression

WO Washington Office

WUI wildland‐urban interface

YTD year‐to‐date

Appendix-3