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

Financial	Report	(AFR)	for	fiscal	year	2011.	This	AFR	was	produced	in	accordance	with	the	Office	

of	Management	and	Budget	(OMB)	Circular	A-136 Financial	Reporting	Requirements.

The	AFR	provides–

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

Management’s	Discussion	and Analysis	(MD&A);

 The	Financial	Section,	comprised	of	the	audited	financial	statements	and	notes,	and	

required	supplementary	information,	the	independent	auditors’	report,	and	the	USDA	

Office	of	Inspector	General’s	(OIG)	transmittal	letter;

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

Management’s	Assurances,	and	recovery	audit	results	for	erroneous	and	improper	

payments,	in	accordance	with	the	Improper	Payments Information	Act	(IPIA).

 In	addition	to	the	AFR,	the	Forest	Service	will	include	its	FY	2011 Annual	Performance	

Report	(APR)	and	FY	2012 performance	plan	with	its	Congressional	Budget	Justification	

in	February	2012.

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.
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

 i

Message From the Chief

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

present our fiscal year (FY) 2011 Agency Financial Report (AFR). This report 

describes the stewardship and management of the public funds entrusted to 

our care, as reflected in our mission—“to sustain the health, diversity, and 

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

and future generations.”

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

and serving people. The seven strategic goals in the Forest Service Strategic Plan 

for FY 2007–2012 are (1) to 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 focus is on the ground—on the places where you live, work, and play. Above all, we are dedicated to 

keeping everyone on the ground safe and secure. Our objective is to serve our communities, both rural and 

urban. One way to achieve this objective is to work with partners to sustain healthy, resilient forests and 

rangelands on Federal, State, and private lands. Healthy lands support the outdoor activities of millions of 

Americans each year, a service we proudly provide on the National Forest System. A central concern for all 

Americans is sustainable land management. We owe it to ourselves and to future generations to protect our 

communities, properties, and wildland resources from catastrophic fire and other threats.

Today’s conservation challenges are daunting. Climate change has intensified regional drought, triggered 

extreme weather events, and contributed to uncharacteristically severe wildfires and outbreaks of insects and 

disease. America’s forested watersheds also face degradation by invasive species and from the conversion of 

working forests and ranches to developed uses. 

To address this challenging environment, the Forest Service has embraced five major focus areas: 

Safety. Our jobs sometimes take us into high-risk environments, such as managing wildland fires. A constant, 

relentless focus on safety is the only way we work.

Inclusiveness. Diversity of thought is fundamental to any successful organization. We are creating a work 

environment that fully supports inclusiveness and diversity—that is free from barriers and discrimination, both 

for our employees and for the public we serve.

Restoration. The key to conservation is to restore the functions and processes characteristic of healthy, 

resilient forest and grassland ecosystems. We are bringing people together to collaborate across ownerships—

to pursue common restoration goals based on mutual respect. Watershed restoration is essential to 

accomplish our restoration goals. Watersheds capable of delivering plentiful supplies of pure, clean water can 

also deliver all the other benefits that people get from forests—clean air, habitat for wildlife, opportunities for 

outdoor recreation, and more. 

iii
Wildland fire. As communities have spread into fire-prone forests, fire seasons have steadily worsened. 

We are meeting the challenge by restoring fire-adapted ecosystems; helping to create fire-adapted human 

communities; and making safe, effective, risk-based wildland fire management decisions.

Community. Conservation begins where people live. Our job is to work with local communities for social and 

economic, as well as ecological sustainability. Our goal is a continuous network of healthy forested landscapes, 

from remote wilderness areas to shady urban neighborhoods, parks, and greenways. Community- or placebased conservation provides jobs and economic opportunities associated with restoration projects and with 

outdoor recreation and tourism.

At the Forest Service, a sound financial foundation is necessary for meeting our obligations to the American 

people. This report demonstrates our accountability to the people we serve. In lieu of a Performance and 

Accountability Report, it complies with Office of Management and Budget Circular A–136, Financial Reporting 

Requirements.

I am pleased to announce that the Forest Service received an “unqualified audit opinion” for FY 2011, meaning 

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

The agency officially closed all open financial statement audits and recommendations, in addition to closing a 

record number of program audits. In total, the Forest Service closed 15 audits and 99 audit recommendations 

during the year; thereby significantly improving agency internal controls.

Founded more than a century ago, the Forest Service was a model of financial accountability for its time. 

Since then, our responsibilities have grown; we now play a role in sustainable forest management all over the 

country and, indeed, around the world. Nevertheless, we are still committed to our founding principles of 

sound financial management and accountability to the American people. 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 protecting and restoring America’s forests and grasslands, for the benefit of generations to 

come. 

THOMAS L. 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

Demands,	Risks,	Conditions,	and	Trends....................................................................................... A-10

The	Forest	Service’s	Safety	Journey......................................................................................... A-10

Restoration	and	Wildland	Fire.................................................................................................. A-11

Improve	Forest	Health	and	Reduce	Firefighting	Costs	......................................................... A-12

Performance	Goals,	Objectives,	and	Results................................................................................. A-13

								Forest	Service	Strategic	Goals	and	Program	Performance................................................... A-13

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

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

						

A-14

Strategic	Goal	2:	Provide	and	Sustain	Benefits	to	the	American	People.....................	 A-15

Strategic	Goal	3:	Conserve	Open	Space......................................................................... A-17

Strategic	Goal	4:	Sustain	and	Enhance	Outdoor	Recreation	Opportunities................ A-18

Strategic	Goal	5:	Maintain	Basic	Management	Capabilities	of	the	Forest	Service..... A-19

Strategic	Goal	6:	Engage	Urban	America	in	Forest	Service	Programs.......................... A-20

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

Natural	Resources	Management....................................................................................... A-21

								Forest	Service	Contributions	to	the	USDA	Strategic	Plan...................................................... A-22

Summary	Analysis	of	Financial	Statements	and	Stewardship	Information........................... A-23	

Consolidated	Balance	Sheets.................................................................................................... A-23

Consolidated	Statements	of	Net	Cost....................................................................................... A-27

Consolidated	Statements	of	Changes	in	Net	Position............................................................ A-28

Combined	Statements	of	Budgetary	Resources..................................................................... A-28

Analysis	of	Systems,	Controls,	and	Legal	Compliance ................................................................		 A-30

Management	Assurances......................................................................................................... A-30

Federal	Managers’	Financial	Integrity	Act	Assertions	(FMFIA).....................................	 A-30

Federal	Financial	Management	Improvement	Act	(FFMIA).......................................... A-30

Federal	Information	Security	Management	Act	(FISMA)...............................................	 A-31

Internal	Controls	Over	Financial	Reporting	(Circular	A-123, Appendix	A)...................	 A-31

Other	Management	Information,	Initiatives,	and	Issues	 A-32

Limitations	of	Financial	Statements...............................................................................................		 A-32

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

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

USDA Office	of	Inspector	General Transmittal	Letter................................................................. B-3

Independent	Auditors’	Report....................................................................................................... B-5

Audit	Opinion............................................................................................................................. B-6

Report	on	Internal	Controls..................................................................................................... B-8

Report	on	Compliance	and	Other	Matters.............................................................................. B-16

Management’s	Response	to	Audit	Report.................................................................................... B-18

Consolidated	Balance	Sheets................................................................................................... B-19

Consolidated	Statements	of	Net	Cost...................................................................................... B-20

Consolidated	Statements	of	Changes	in	Net	Position............................................................	 B-21

Combined	Statements	of	Budgetary	Resources...................................................................... B-22

Notes	to	the	Consolidated	and	Combined	Financial	Statements.........................................	 B-23

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

Net	Cost of	Operations	by	Strategic	Goal.................................................................................... E-4

Improper	Payments	Improvement	(IPIA)	Reporting	................................................................. E-6

The	Criteria	for	the	Risk	Assessment........................................................................................ E-6	

The	Description	of	the	Statistical	Sampling	Process.............................................................. E-6	

The	Description	of	the	Corrective	Action	Plan(s)................................................................... E-6	

Improper	Payments	Reduction	Outlook................................................................................. E-7	

Recovery	of	Improper	Payment................................................................................................ E-7	

Risk	Assessment	and	Oversight	Benefits.................................................................................. E-8	

Summary	of	Financial	Statement	Audit	and	Management	Assurances.................................... E-8

Summary	of	Financial	Statement	Audit................................................................................... E-8	

Summary	of	Management	Assurances.................................................................................... E-8	

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,	2011	AND	2010

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	fiscal	year	(FY)	2013	Congressional	Budget	Justification	in	

February	2012	at http://www.fs.fed.us.	

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

ways by:	

 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	2011	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,	2011	AND	2010

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	

USDA	Under	Secretary	for	Natural	Resources	and	Environment.

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

and	Private	Forestry (S&PF),	Research	and	Development (R&D),	National	Forest	System (NFS),	and	

Business	Operations.	

FOREST	SERVICE	CHIEF	FINANCIAL	OFFICER	AND	THE	DEPUTY	AREAS	

Within	the	CFO	and	each	deputy	area (the	third	tier	in	the	organization	chart)	are	the	programmatic	

areas	that	enable	the	Forest	Service	to	achieve	its	mission.

Office of the 

Chief

Legislative

 Affairs 

Office of 

Climate Change

Law Enforcement 

and Investigations International

 Programs

State and Private 

Forestry 

Deputy Area 

Research and 

Development

Deputy Area

Business 

Operations

 Deputy Area

Chief 

Financial Officer

 5 Research 

Stations 

Forest Products 

Laboratory

International 

Institute of Tropical 

Forestry

 9 NFS Regions 

National Forest 

System

 Deputy Area

Office

of Communication

S&PF 

Northeastern Area 

A-3
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

CHIEF	FINANCIAL	OFFICER	

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

and	reliable	financial	and	program	performance	information	in	

compliance	with	the	Chief	Financial	Officers	Act	of	1990.	

FY	2011	CFO	Accomplishments

 Received	the 10th	consecutive	clean	audit	opinion	and	had	no	

material	weaknesses	for	the	4th	consecutive	year.

 Closed	open	financial	statement	audits	and	recommendations	

and	a	record	number	of	program	audits.	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.

 Continued	the	implementation	of	the	Point-of-Sale	System	

(POSS) to improve	cash	management,	including	payment	of	

permits	and	other	indebtedness	via	a	Web	portal. With	the	

new	implementation/training	strategy	for	FY	2012,	the	agency	

expects	an	8-fold	increase	in	the	number	of	implementations.

 Strengthened	financial	management	controls	over	payments	

with	improved	payment	testing in	compliance	with	the	

Improper	Payments	Elimination	Recovery	Act	(IPERA)	and	

Improper	Payments	Information	Act	(IPIA).		The	agency	

enhanced	its	statistical	testing	of	high-risk	programs,	

completed	a	review	of	billings	to	identify	improper	payments,	

and	acquired	software	that	will	improve	internal	controls	over	

payments	for	FY	2012.

Financial 

Management and 

Systems 

Chief 

Financial Officer

Financial Policy 

Financial Reporting 

and Reconciliation

Audit and Assurance

Budget and Finance

A-4
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

STATE	AND	PRIVATE	FORESTRY	

S&PF’s	Northeastern	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.	Washington	

Office	Staffs	are	listed	to	the	left.

FY	2011	S&PF	Accomplishments1

		

 Protected	more	than	149,000	acres	of	at-risk	forest	from	

conversion.

 Achieved	a	16-percent increase	over	FY	2010	in	the	acres	

treated	in	the	Wildland	Urban	Interface	(WUI)	that	are	

identified	in	Community	Wildfire	Protection	Plans	(CWPPs).

 Assisted	forest	landowners	in	managing	more	than	1.8	million	

acres	sustainably	under	forest	stewardship	plans.

 Achieved	agreements	with	a	total	of	23	States	to	help	

landowners	market	ecosystem	services.

																																																												

1 Amounts	are	considered	“year-to-date.”		Actual	amounts	will	be	published	in	the FY	2011	Annual	Performance	Report	at	http://www.fs.fed.us	

in	February	2012.

State and Private

 Forestry 

Urban and Community 

Forestry

Fire and Aviation 

Management

Cooperative Forestry 

Conservation 

Education

Forest Health 

Protection

Office of Tribal 

Relations

A-5
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

RESEARCH	AND	DEVELOPMENT

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

Products	Laboratory,	and	the	International	Institute	of Tropical	

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

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

Office	programs	that	support	achievement	of	the	agency’s	strategic	

goals	with	an	emphasis	in	seven	strategic	program	areas	(SPAs):

 Wildland	Fire	and	Fuels

 Invasive	Species

 Water,	Air,	and	Soil

 Wildlife	and	Fish

 Resource	Management	and	Use

 Outdoor	Recreation

 Inventory	and	Monitoring

FY	2011	R&D	Accomplishments2

 Provided more	than	200,000	maps,	graphs,	and	charts	on	

current	and	future3 fire-weather	conditions	at	high	spatial	and	

temporal	resolution	over	the	entire	continental	United	States.	

Products	are	updated	twice	a	day	and	delivered	through	the	

World	Wide	Web	in	real	time	at	http://FireWeather.info.	

 Developed	ICWater	for the	U.S.	Department	of	Defense	to	

assess	movement	in	Japanese	rivers	of	radioactive	

contaminants	released	from	the earthquake-damaged	

Fukushima	Daiichi	nuclear	power	plant.	ICWater	rapidly	

assesses risk	to	drinking	water	during	toxic-spill	emergencies.

 Produced	a	Web-based	tool,	TACCIMO4

,	to	bring	the	best	

climate-change	science	to	decisionmakers	and	planners	in	a	

simple	and	usable	format.

 Released	a	new	version	of	the	Forest	Service	and	its	partners’

free	software,	i-Tree	v.4.	In	Minneapolis,	MN,	one	i-Tree	study	

found	that	street	trees	provided	$25	million	in	benefits,	

ranging	from	energy	savings	to	increased	property	values.	In	

Chattanooga,	TN,	i-Tree found	that	urban	forests	received	

$12.18	in	benefits	for	every	dollar	invested.

																																																												

2 Amounts	are	considered	“year-to-date.”		Actual	amounts	will	be	published	in	the	FY	2011	Annual	Performance	Report	at	http://www.fs.fed.us	

in	February	2012.

3 “Future”	is	defined as	up	to	75	hours	in	advance.	 4 TACCIMO	is	the	Template	for	Assessing	Climate	Change	Impacts	and	Management	Options.

Research and

Development

Environmental 

Sciences

Policy Analysis

Resource Use 

Sciences

Forest Management 

Sciences

Quantitative Sciences

Science Quality 

Services

A-6
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

NATIONAL	FOREST	SYSTEM

The	NFS provides stewardship	and	management	of	the	193	million	

acres	of	national	forests	and	grasslands.	Following	U.S.	Department	of	

Agriculture	Secretary	Tom	Vilsack’s	vision,	the	Forest	Service	has	

placed	a	focus	on	improving	the	health	of	its	watersheds,	restoring	

ecosystem	functions,	increasing	forest	resilience	to	climate	change,	

and	contributing	to	vibrant	local	economies.	

The	NFS	has	nine	regions,	comprised	of	national	forest	and	grasslands.	

Each	region	is	led	by	a	regional	forester	who	reports	directly	to	the	

Chief	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. Within	the	9	NFS	regions	are	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.

FY	2011	NFS Accomplishments5

 Protected	economically	vital	fish	populations	by	restoring	

more	than	3,800	stream	miles	and	more	than	26,000	acres	of	

lake habitat and	reconnecting	nearly	600	miles	of	threatened	

and	endangered	species	habitat.

 Achieved	2,954,842 tons	of	woody	biomass	made	available	

from	NFS	lands	for	bioenergy	generation.

 Achieved	a	94-percent	visitor	satisfaction	rating	with	facilities,	

services,	and	settings.

																																																												

5 Amounts	are	considered	“year-to-date.”		Actual	amounts	will	be	published	in	the	FY	2011	Annual	Performance	Report	at	http://www.fs.fed.us

in	February	2012.

Engineering

National Forest

 System

Lands

Wilderness and Wild and 

Scenic Rivers

Rangeland Management

Recreation, Heritage, 

and Volunteer 

Resources

Forest Management

Watershed, Fish, 

Wildlife, Air, and Rare 

Plants

Minerals and Geology 

Management

Ecosystem Management 

Coordination

National Partnership 

Office

A-7
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

BUSINESS	OPERATIONS	

The	Business	Operations	Deputy	Area	provides	the	tools	that	Forest	

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

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

Business	Operations’ staff provides critical	services	to	the	agency	and	its	

employees.	

FY	2011	Business	Operations	Accomplishments

 Fully	implemented	the	Human	Resources	Redesign.

 Completed	the	new	Forest	Service	policy	and	electronic	form	

for	telework.	

 Exceeded the	80-day	staffing	goal	with	the	all-time	low	of	70	

days.

 Migrated	100	percent	of	employees’	email	to	the	Forest	

Service’s	implementation	of	USDA’s	Enterprise	Messaging	

System,	or	gEMS.	The	target	was	80	percent.	

 Identified	no	system	material	weaknesses	through	the	financial	

audit	process.

 Completed	8-hour	safety	training	for	an	estimated	40	percent	

of	all	Forest	Service	personnel.

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	necessarily	

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

responsibility	segments:		

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

estimated	193	million	acres	of	NFS	land,	which	include	36.6 million	acres	of	designated	wilderness	areas.	

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

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

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

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

Chief Information 

Office

Business 

Operations

Acquisition 

Management

Enterprise Program

Strategic Planning, 

Budget, and 

Accountability

Human Resource 

Management

Job Corps Civilian 

Conservation Centers

Office of Regulatory 

and Management 

Services

Office of Safety and 

Occupations Health

A-8
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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.

A-9
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

DEMANDS, RISKS, CONDITIONS, AND TRENDS 

THE	FOREST	SERVICE’S SAFETY	JOURNEY	

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

for	the	land	and	serving	people.	However,	no	employee	should	get	hurt	on	behalf	of	the	agency.	Each	

employee	has	inherent	value	as	a	person	that	touches	and	enriches	the	lives	of	many	others.

Unfortunately,	many	of	our	colleagues	are	hurt	or	killed	each	year.	That	is	unacceptable.	The	Forest	

Service	is committed	to	dramatically	different	safety	outcomes	but	recognizes	that	commitment	is	not	

enough.	In	a	spirit	of	humility	we	have	magnified	our	focus	and	engaged	in	a	“journey”	to	discover	what	

else	it	will	take.	Although	we	know	there	is	much	we	do	not	know,	we	are	confident	that	it	is	indeed	a	

journey	more	than	a	destination	–	one	that	will	require	our	sustained	effort.		

The	Forest	Service	is	also	confident	that	each	employee	must	be	part	of	that	journey,	and	that	together	

we	can	make	a	big	difference	in	the	safety	outcomes	we	experience.	In	the	coming	months,	we	will	have	

meaningful	discussions	about	reducing	hazards	and	improving	safety.	Therefore,	we	ask	all	Forest	

Service	employees	to	join	us	on	this	journey	to	ensure	we	are	not	only	the	world’s	premier	conservation	

agency	but	also	world-class	in	being	safe.

In	FY	2011,	the	Chief	of	the	Forest	Service	

shared	the	National	Leadership	Council’s	

(NLC’s)	intention	to	engage	every	employee	

in	a	meaningful	dialogue	as	part	of	an	

agencywide	initiative—the		Forest	Service	

Safety	Journey.	Senior	and	middle	leaders	

with	the	support	of	"Safety	Catalysts"	were

trained	as	cadre	members	during	2.5-day	

sessions.	Cadre	members are, in	turn,	

convening	mandatory	1-day	safety	

engagement	sessions	for	all	employees.	The	

NLC’s goal	for	this	initiative	is	100 percent of	

Forest	Service	employees	by	the	end	of	

calendar	year	2011.

To	mitigate	the	safety	risk	even	further,	a

subgroup	of	NLC	members	reached	out	to	internal	and	external	experts	and	employees	to	help	design	a	

continuously	improving	safety	system	based	on	learning rather	than	compliance.	The	Forest	Service	is	

currently	benchmarking	existing	efforts	and	approaches	to	ensure	the	agency captures	and	retains	what	

is	working	well	as	part	of	our	corporate	approach.

A-10
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Learning	objectives	for	the	1-day	safety	engagement	session	for	all	employees	included:

1. Stimulate	different	thinking	about	safety.

2. Introduce	some	basic	tools	to	improve	employee	risk	management	skills.

3. Help	build	a	safety	learning	culture.

Hundreds	of	employees	have	been asked	to	share	their	ideas	on	the	most	strategic	investments	the	

agency	could	make	to	dramatically	improve	safety.	More	than	80	unique	suggestions	were	identified.	

The	NLC	recommended several	high-leverage	investments for	FYs	2011	and	2012 to	the	Executive	

Leadership	Team	(ELT).	The	ELT	intends	to	make	strategic	investments	that	will	make	a	difference	in	

employee	and	public	safety.	

RESTORATION	AND	WILDLAND	FIRE

Climate	change	poses	a	significant	threat	to	

America’s	forests	and	grasslands	and	

jeopardizes	the	Nation’s	fresh	water supply,	

recreational	opportunities,	and	wildlife	

habitat.	Problems	caused	by	wildfires,	

changing	rain	patterns,	and	expanding	

forest	insect	infestations	have	been	driven	

in	part	by	a	changing	climate;	future	

impacts	are	projected	to	be	more	severe.	

Across	the	United	States,	wildfire	seasons	

have	been	getting	worse with	an	annual	

average	of	6.7 million	acres	burned	

between	2001	and	2011. In	2011	alone,	8.2	

million	acres	were	burned;	the	Wallow	Fire	

broke	the	record	with	more	than	500,000	

acres	burned. Also,	from	1999	through	October	2011,	nearly	34,000	homes,	businesses,	and	

outbuildings	burned	in	wildfires.

What	are	we	doing	to	address	these	problems?	The	Forest	Service’s	Cohesive	Wildfire	Management	

Strategy has	three	main	goals:

1. First,	restoring	fire-adapted	ecosystems	on	a	landscape	scale	by	reducing	fuels	and	

reintroducing	fire.

2. Second,	building	fire-adapted	human	communities.

3. Third,	responding	appropriately	to	wildfire;	using	fires	where	we	can;	and	suppressing	them

where	they	threaten	lives,	homes,	and	critical	natural	resources.

A-11
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

IMPROVE	FOREST	HEALTH	AND	REDUCE	FIREFIGHTING	COSTS

In	USDA	Management	 Challenges	 (August	 2011),	the	Office	 of	Inspector	General	 (OIG)	found	 that	 the	

Forest	Service	needed	to	improve	forest	health	and	reduce	firefighting	costs.	The	Forest	Service	spends	

significant	funds	to	reduce	hazardous	fuels	in	forests	to protect	people	and	property	from	wildfires,	yet	

fuels	accumulate	three	times	faster	than	the	agency	can	reduce	them.	The	overall	cost	of	wildland	fire	

management	is	more	than 40	percent	of	the	agency’s	budget.

The OIG	 recommended the Forest	 Service	 focus not	 only	 on	 managing	 natural	 resources	 but	 also	 on	

ensuring	that	it	approaches	complex	budgetary	and	human	resource	management	issues with	the	same	

dedication.	In	FY	2011,	the	Forest	Service:	

 Hired a	contractor	to	conduct	an	indepth	analysis	to	determine how	the	agency	should	proceed	

with	determining	future	firefighting-crew	needs	and	costs.		

 Developed	performance	standards	to	assess	whether	the	tactics	employed	are	cost	effective.	

 Revamped	the	Working	Capital	Fund	program	and	developed	the	“Aerial	Firefighting	Aircraft	

Replacement	Action	Plan”	in	an	effort	to	strengthen	the	agency’s	aerial	firefighting	acquisition	

process.

The	OIG	also	recommended	that	the	Forest	Service	needs	a	cohesive	strategy	to	effectively	combat	

invasive	species.	In	FY	2011,	the	Forest	Service	conducted	an	overall	review	of	the	agency’s	information	

systems	for	the	invasive	species	program	and	took	steps	to	ensure	that	the	systems	are	adequate.		In	FY	

2012,	the	agency	plans	to	develop	new	NFS	invasive	species	management	policy	and	an	adequate,	

cohesive	internal	control	environment	for	managing	the	program.

The	OIG	identified	workforce	succession	planning	for	firefighters	as	an	emerging	issue	that	may	develop	

into	a	management	challenge.	With	many	employees	approaching	retirement,	the	Forest	Service’s

firefighting	workforce	is	particularly	vulnerable.	Since	firefighter	trainees	take	an	average	of	23	years	to	

qualify	for	critical	firefighting	positions,	this	situation	becomes	more	urgent.	The	agency	is	responding	

by	developing	a	new	firefighting	business	model	and	approaching	workforce	issues	through	strategic	

planning	and	multiagency	coordination.

A-12
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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	influence	program	and	resource	

allocation	decisionmaking.	

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

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

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

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

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

throughout	the	fiscal	year	to	reflect	changed	conditions.

FOREST	SERVICE	STRATEGIC	GOALS	AND	PROGRAM	PERFORMANCE

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

its	efforts	in	support	of	the	mission:

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

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

Goal	3:	Conserve	Open	Space.

Goal	4:	Sustain	and	Enhance	Outdoor	Recreation	Opportunities.

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

Goal	6:	Engage	Urban	America	with	Forest	Service	Programs.

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

Forest	Service	performance	results	reported	in	the	MD&A	are	FY	2011	year-to-date	(YTD)	actual	

performance	reported	as	of	November	7,	2011.	Final	performance	accomplishments	for	these	strategic

measures	will	be	published	in	the	FY 2011	APR	in	February	2012. Final	resources by	strategic	goal—

identified	as	“Estimated”—	will	also	be	available	in	the	APR.

A-13
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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	Management,	and	Management	of	Aquatic	and	Terrestrial	Habitats.

Reduce	the	risk	to	communities	and	natural	resources	from	wildfire.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Moved	toward	desired	

conditions

(acres	and	percentage)

991,000

39%

799,215

27%

693,957

24%

960,000

40%

516,310

30%

54%

75%

1,600,000

40%

Maintained	in	desired	

conditions

(acres	and	percentage)

830,000

33%

1,146,720

38%

1,231,800

42%

1,200,000

50%

586,318

34%

49%

68%

2,000,000

50%

Brought	into	stewardship	

contracts	(acres)	 57,500 88,304 152,834 250,000 100,577 40%	 300,000

Build	community	capacity	to	suppress	and	reduce	losses	from	wildfires.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Treated	in	the	WUI that

have	been	identified	in	

CWPPs

6 or	equivalent	

plans	(percentage of	

acres)

17% 41% 44.8% 75% 51.8%	 69% 75%

																																																												

6 CWPPs	are	Community	Wildfire	Protection	Plans.

Goal	1	Resources	by	Fiscal	Year		

(in	millions)

2009	 2010 Estimated	

2011

$4,620 $4,240 $4,138

A-14
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Restore	and	maintain	healthy	watersheds	and	diverse	habitats.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Watersheds	in	class	1	

condition		

(percentage of	all)

30% 30% 26% 30%	 52.3%	 171.6%	 32%

Terrestrial	habitat	

restored (acres,	in	

thousands)

642 2,154	 2,037 1,725 1,876 120%	 3,973,000

Stream	habitat	restored

(miles) 4,600 3,498 3,577 2,312 2,350	 87%	 2,670

Lake	habitat	restored

(acres) 18,000 23,570 27,779 16,437 18,269 111%	 23,600

Acres	needing	

reforestation	or	timber	

stand	improvement	that	

were	treated

(percentage)	

13% 18% 23% 15.5%	 13.8%	 89.3%	 17%

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	provides	

for 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	S&PF programs,	the	Forest	Service	provides	technical	and	financial	assistance	for	

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

Goal	2	Resources	by	Fiscal	Year 		

(in	millions)

2009	 2010 Estimated	

2011

$572 $394 $355

A-15
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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

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

capacity	and	infrastructure	in	local	communities.	

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Wood	fiber	

provided	to	meet	

demand7 (CCF8)	

5,400,000 4,829,254 5,020,841 4,916,781 4,845,059 98.5%	 5,232,000

Green	tons	

and/or	volume	of	

woody	biomass	

available	through	

permits,	

contracts,	grants,	

agreements,	or	

the	equivalent9

(number)

N/A 2,331,989 3,306,138 2,700,000 2,954,842 109%	 2,700,000

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

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

communities.

																																																												

7 Actual	measure	is	“Wood	fiber	provided	to	meet	the	Nation’s	demand	for	forest	products	in	an	environmentally	sustainable	manner.” 8 CCF=Hundred	cubic	feet 9 Actual	measure	is	“Number	of	green	tons	and/or	volume	of	woody	biomass	from	hazardous	fuel	reduction	and	restoration	treatments	on	

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

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

National	forests	and	

grasslands	under	grazing	

permit	that	are	

sustainably	managed	for	

all	rangeland	products	

(acres,	in	thousands)

81,560 79,097 76,154 81,560 75,387 92.4%	 81,560

A-16
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Help	meet	energy	resource	needs.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Land	Special	Use	Permit	

applications	for	energyrelated	facilities	that	are	

completed	within	

prescribed	timeframes

(percentage)	

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

Energy-mineral	

applications	that	are	

processed	within	

prescribed	timeframes	

(percentage)	

45% 8% 5% 45% 43.5%	 97%	 10%

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	maintaining

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.	

Goal	3	Resources	by	Fiscal	Year

(in	millions)

2009 2010 Estimated	

2011

$165 $210 $177

A-17
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Protect	forests	and	grasslands	from	conversion	to	other	uses.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Environmentally	

important forests	and	

grasslands	protected	

from	conversion

(acres,	cumulative	and	

annual)	

1,360,000

(0)

1,897,809

176,471

2,056,107

136,960

2,174,107

118,000	

2,210,563

149,720

102%

127%

2,601,809

(301,000)

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	of	outdoor	recreation	experiences.	

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Recreation	sites	

maintained	to	standard

(percentage)	

65% 67% 68% 70%	 71.2%	 100.7%	 70%

Total	recreation	capacity	

at	developed	recreation	

sites	that	meets	

accessibility	standards

(percentage)	

10% 23% 19% 27% 23.1%	 84.7%	 30%

Trails	that	meet	national	

quality	standards

(percentage)	

60% 26% 41% 35%	 25.3%	 72.2%	 50%

Goal	4	Resources	by	Fiscal	Year

(in	millions)

2009	 2010 Estimated	

2011

$851 $677 $650

A-18
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Customers	who	are	

satisfied	with	recreation	

facilities,	services,	and	

settings	(percentage)	

80% 91% 94% 90% 93.8%	 104% 90%

Road	system	intended	for	

passenger-car	use	that is	

suitable	for	passenger-car	

use	(percentage)	

29% 89% 90% 89% 89.9%	 101% 75%

Secure	legal	entry	to	national	forest	lands	and	waters.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

High-priority	access	rightsof-way	acquired	

(percentage)	

90% 74% 106% 85% N/A10 N/A 95%

Improve	the	management	of	off-highway	vehicle	use.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

NFS	lands	covered	by	new	

motor	vehicle	use	maps	

reflecting	a	designated-use	

system	of	roads,	trails,	and	

areas	(percentage)	

0% 44% 66.7% 100% 76.7%	 76.7%	 100%

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

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

natural	events,	overuse,	and	various	management	and	law	

enforcement	activities.	The	Forest	Service	maintains	a	workforce	with	

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

Effectively	managing	its	natural	resources	and	ensuring	the	safety	of	

the	land	and	its	users	requires	quality	data	from	agency information	

systems,	current	strategic	unit	plans,	prepared	law	enforcement	officials,	and	facility	maintenance.	The	

Forest	Service	strives	to	improve	the	administration	of	national	forest	lands	and	facilities	“for	present	

and	future	generations.”	

																																																												

10 Actual	accomplishment	for	this	performance	measure	will	be	available	in	the	FY	2013	Budget	Justification,	available	at	http://www.fs.fed.us	

in	February	2012.

Goal 5	Resources	by	Fiscal	Year

(in	millions)

2009	 2010 Estimated	

2011

$663 $440 $414

A-19
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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

agency’s	mission.	

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Administrative	facilities	

that	are	being	

maintained	to	standard	

(percentage)	

64% 66% 64% 63%	 63% 100% 65%

Newly	reported	

encroachments	and	title	

claims	administered	to	

standard11	(percentage)	

60% 5% 34% 20% N/A12 N/A 35%

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	of	urban	and	community	forests	to	provide	a	wide	range	of	

public	benefits.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Communities	with	

developing	or	

established	urban	and	

community	forestry	

programs	resulting	from	

Forest	Service	

assistance	(number)

6,564 6,853 7,102 7,200 14,263 198%	 10,000

																																																												

11Efforts	are	underway	to	develop	a	new	performance	measure	and	associated	targets	for	this	activity. 12 Actual	accomplishment	for	this	performance	measure	will	be	available	in	the	FY	2013	Budget	Justification,	available	at	http://www.fs.fed.us

in	February	2012.

Goal	6	Resources	by	Fiscal	Year

(in	millions)

2009	 2010 Estimated	

2011

$35 $37 $34

A-20
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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	is	transferred	to	many	organizations,	including	policymakers,	

wildland	fire	managers,	and	communities.

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

Technology and	Development	Centers.

PERFORMANCE	

MEASURE BASELINE FY2009

FY

2010

FY	2011 2012

TARGET YTD YTD	% TARGET

Customer	satisfaction	with	

R&D	products	and	services	

(ACSI13 score)

72 75 72 75 75 100% 75

Patent	applications	filed

(number) 10 6	 6	 6	 4	 66% 8	

																																																												

13 American	Customer	Satisfaction	Index (ACSI),	an	economic	indicator	that	measures	the	satisfaction	of	consumers	across	the	U.S.	economy.

Goal	7	Resources	by	Fiscal	Year

(in	millions)

2009	 2010 Estimated	

2011

$99 $127 $118

A-21
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

FOREST	SERVICE	CONTRIBUTIONS	TO	THE	USDA STRATEGIC	PLAN

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

performance	measures.	

USDA

PERFORMANCE	MEASURE

FY	2009	

ACTUAL

FY	2010

ACTUAL

FY	2011 FY	2012

TARGET

FY	2015

TARGET TARGET YEAR-END	

PROJECTION

Acres	on	which	high-impact	targeted	

practices are	implemented	on	National	

Forest	System	and	private lands	in	

priority	landscapes	to	accelerate	the	

protection	of	clean,	abundant	water	

(millions	of	acres)

0	 .410 .60014 .330 1.5 N/A15

Annual	economic	contribution	of	

recreation	on	national	forests	and	

grasslands	(thousands of	jobs)

238	 238 238 238 N/A 247

Percentage	of	acres	treated	in	the	

wildland-urban	interface	that	have	

been	identified	in	Community	Wildfire	

Protection	Plans

41% 44.8% 75% 51.8%	 75% 55%

Cumulative	acres	in	the	National	Forest	

System	that	are	in	a	desired	condition	

relative	to	fire	regime		(millions	of	

acres)

58.5 58.8 59.6 59.185 60.1 61.5

Protected	from	conversion	through	

easements	and	fee-simple	purchases	

(thousands	of	acres)

1,924 2,225 2,494 2,245 2,828 2,860

 

																																																												

14 The	target	of	.600	acres	is	the	Forest	Service	target	and	only	a	portion	of	the	overall	target	for	USDA.	USDA’s	target	is	supported	by	multiple	

agencies	and	is	still	expected	to	be	met.	 15 N/A	is	not	applicable.

A-22
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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.	These	statements	are:	

Consolidated	Balance	Sheets

Consolidated	Statements	of	Net	Cost

Consolidated	Statements	of	Changes	in	Net	Position

Combined	Statements	of	Budgetary	Resources

In	 producing	 these	 statements,	 the	 agency	 seeks	 to	 provide	 relevant,	 reliable,	 and	 accurate	 financial	

information	related	to	Forest	Service	activities.	An	analysis	of	the	agency’s	September	30,	2011,	financial	

statements	 provides	 the	 following	 highlights	 and	 exhibits,	 reflecting	 the	 comparative	 amounts	 for	 FY	

2011	and	FY 2010.

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,	2011,	Forest	Service	reports	$6.1 billion	in	assets,	representing	a	decrease of	11

percent	from	FY	2010 amounts.	

ASSETS	(in	millions)

ASSET

FY	

2011

FY	

2010

DIFFERENCES

DOLLARS PERCENTAGES

Fund	Balance	with	Treasury $4,379 $5,252 ($873) (17%)

General	Property	and	Equipment 1,400 1,383 17 1%	

Receivables,	Net 276 139 137 99%

Total	of	Major	Categories $6,055 $6,774 ($719)	 (11%)

Other	Asset	Categories 24 51 (27) (53%)

Grand	Total	Assets $6,079 $6,825 ($746)	 (11%)	

A-23
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Fund	Balance	with	Treasury	(FBWT)

FBWT (72	percent	of	assets)	decreased	$873	million	(17	percent)	from	FY	2010,	primarily	due	to	

recissions	(cancellations)	of	prior-year	balances	as	well	as	increased	disbursements	of	American	

Recovery	and	Reinvestment	Act	(ARRA)	funds.	FBWT	is	the	amount	in	the Forest	Service’s	accounts	with	

the	U.S.	Department	of	Treasury	that	are	available	only	for	the	purposes	for	which	the	funds	were	

appropriated.	These	accounts	include	general	funds,	revolving	funds,	special	funds,	trust	funds,	deposit	

funds,	clearing	accounts,	and	miscellaneous	receipt	accounts.

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

General	PP&E	(23 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,	which	are	

categorized	as	Stewardship	PP&E.

Stewardship	PP&E

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

financial	value	as	do	the	general	PP&E	assets,	so	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.

Fund	Balance	

with	Treasury

72%

General	

Property	and	

Equipment

23%

Receivables,	

Net

5% Other	Asset	

Categories

0%

FY	2011	Assets

A-24
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Receivables,	Net

Accounts	Receivable,	Net	(5	percent	of	assets)	increased	$137 million	(99 percent)	from	FY	2010,	

primarily	due	to	an	increase	in wildfire	activity,	primarily in	the	State	of	Texas,	with	associated	

reimbursable	revenue	to	be	paid	by	the	State.

Other	Assets

Other	assets	(less	than	1	percent	of	assets)	decreased	$27	million	(53	percent)	from	FY	2010,	primarily	

due	to	reductions	in	advances	and	prepayments	for	goods	and	services	provided	to	the	Forest	Service,	

as	well	as	redemption	of	Treasury	securities	in	the first	quarter	of	FY	2011.		

LIABILITIES	

As	of	September	30,	2011,	the	Forest	Service	reports	$2.3 billion	in	liabilities, representing	an	increase	of	

6	percent	from	FY	2010 amounts.	

LIABILITIES	(in	millions)

LIABILITY

FY

2011

FY

2010

DIFFERENCES

DOLLARS PERCENTAGES

Federal	Employee	Benefits $454 $443 $11 2%

Other	Liabilities	(non-Federal)

					Accrued	Liabilities 782 734 48 7%

					Payments	to	States 357 409 (52) (13%)

Other	Categories 669 551 118 21%

Grand	Total	Liabilities $2,262 $2,137 $125 6%

Federal	

Employee	

Benefits

20%

Accrued	

Liabilities

34%

Payments	to	

States

16%

Other	

Categories

30%

FY	2011	Liabilities

A-25
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Federal	Employee	Benefits

Federal	Employee	Benefits	(20 percent	of	liabilities)	had	an	increase	of	$11 million	(2	percent)	from	FY	

2010.	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	 $48 million	 (7	 percent)	 from	 FY	 2010.	

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.			

Payments	to	States

The	liability	for	Payments	to	States	(16 percent	of	liabilities)	decreased	$52 million	(13 percent)	from	

FY 2010	primarily	due	to	legislative	mandates	calling	for	a	declining	scale	in	payment	calculation	of	

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

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

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

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

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

Other	Categories

Other	 Categories	 (30	 percent	 of	 liabilities)	 increased	 $118	 million	 (21	 percent) from	 FY	 2010.	 Other	

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

collections	deposited	in	clearing	accounts	awaiting	disposition	or	reclassification.	

NET	POSITION

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

reported	unexpended	appropriations	of	$2.1 billion	and	cumulative	results	of	operations	of	$1.8 billion.	

The	total	net	position	decreased	by	$871 million	(19 percent)	from	FY	2010.		

A-26
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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	$6.3	billion,	

representing	an	increase	of	4	percent	from	FY	2010 amounts.

NET	COST	OF	OPERATIONS (in	millions)

DESCRIPTION

FY

2011

FY

2010

DIFFERENCES

DOLLARS PERCENTAGES

Program	Cost	by	Segment:

		National	Forests	and	Grasslands $3,603 $3,808 ($205)	 (5%)

		Wildland	Fire	Management 2,817 2,078 739 36%

		State	and	Private	Forestry 390 448 (58) (13%)

		Forest	and	Rangeland	Research 350 368 (18) (5%)

Total	Program	Costs 7,160 6,702 458 7%	

Less:	Total	Earned	Revenue $833 $623 $210 34%

Net	Cost	of	Operations $6,327 $6,079 $248 4%

Expenses

Forest	Service program	costs	are	$7.2	billion	for	FY	2011,	representing	an	increase	of	7	percent	from	

FY 2010.	The	increase	is	primarily	due	to	increased	Wildland	Fire	Management costs	(39 percent	of	

program	costs)	as	a	result	of	increased	wildfire activity in	the	State	of	Texas.	

Revenue

The	Forest	Service’s earned	revenue—from	both	the	public	and	intragovernmental—is	$833	million	for	

FY	2011	and	$623 million	for	FY	2010,	resulting	in	an	increase	of	$210	million.	The	increase of	revenue	is	

primarily	attributed	to	reimbursable	services	provided	to	the	State	of	Texas	for	fire	suppression.	

National	

Forests	and	

Grasslands

50%

Wildland	Fire	

Management

39% State	and	

Private	Forestry

6%

Forest	and	

Rangeland	

Research

5%

FY	2011	Expenses	by	Segment

A-27
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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)

NET	POSITION

FY

2011

FY

2010

DIFFERENCES

DOLLARS PERCENTAGES

Unexpended	Appropriations $2,056 $2,991 ($935) (31%)

Cumulative	Results	of	Operations 1,761 1,697 64 4%	

Total	Net	Position $3,817 $4,688 ($871)	 (19%)

Unexpended	Appropriations

The	Unexpended	Appropriations	balance	is	$2.1 billion	for	FY	2011,	representing	a decrease of	31

percent	from	FY 2010.	The	decrease	is	primarily	due	to	FY	2011	Treasury	Recissions,	reductions	in	

appropriations	received	in	FY	2011,	and	an	increase	in	appropriations	used	in	FY	2011,	which	causes	the	

unexpended	balance	to	decrease	as	reflected	by	the	increase	in	total	program	costs.	

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.

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.

A-28
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Forest	Service's	total	budgetary	resources	were	$8.6 billion	in FY 2011	and	$9.3	billion	in	FY 2010,	

representing	a decrease of	8 percent	from	FY	2010.	

STATEMENT	OF	BUDGETARY	RESOURCES	(in	millions)

STATEMENT	OF	BUDGETARY	RESOURCES FY	

2011

FY	

2010

DIFFERENCES

DOLLARS PERCENTAGES

Total	Budgetary	Resources $8,585 $9,339 ($754) (8%)

Status	of	Budgetary	Resources 		

				Obligations	Incurred 6,678 6,980 (302) (4%)

				Unobligated	Balance–Apportioned 1,194 1,361 (167) (12%)

				Unobligated	Balance–Not	Available 713 998 (285) (29%)

Total	Status	of	Budgetary	Resources $8,585 $9,339 ($754) (8%)

Unobligated	Balance–Apportioned

The	Unobligated	Balance–Apportioned	decreased	$167	million	(12	percent)	in	FY	2011,	primarily	due	to	

a	decrease	in	the	balances	in	FY	2011	for	Wildland	Fire	Management.	The	need	to	obligate	funds	for	

increased	fire-related	activities	caused	the	reduction	in	unobligated	balances.	

Unobligated	Balance–Not	Available

The	Unobligated	Balance–Not	Available	decreased	$285	million	(29	percent)	in	FY	2011,	primarily	due	to	

transfers	 out	 of	 budget	 authority	 from	 the	 FLAME	 Act	 Fund.	 The	 transfers	 were	 needed	 to	 cover	 the	

increased	 wildfire	 activity.	 This	 reduction	 was	 offset	 by	 fewer	 apportionments	 in	 FY	 2011	 for	 the	

Recreation	Fee	Demonstration	Program	and	an	increase	in	appropriations	received	for	the	Cooperative	

Work	Trust	Fund.	

Obligations	

Incurred

78% Unobligated	

Balance–

Apportioned

14%

Unobligated	

Balance–Not	

Available

8%

FY	2011	Status	of	Budgetary	Resources

A-29
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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,	below.	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,	2011.	

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,	2011.	

1.	Federal	financial	management	system	requirements.

2.	Applicable	Federal	Accounting	Standards.

3.	The	USSGL	at	the	transaction	level.

FY	2011 Results

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

above.

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	

A-30
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010	

FEDERAL	INFORMATION	SECURITY	MANAGEMENT	ACT	(FISMA)		

The	FISMA	provides	the	framework	for	securing	the	Federal	Government's information	technology	(IT).	

Departments	covered	by	the	Paperwork	Reduction	Act	must	implement	the	requirements	of	FISMA,	

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

independent	OIG evaluations.	

FY	2011 Results

No	IT	material	weaknesses	were	noted	for	Assurance	Year	2011.	

INTERNAL	CONTROLS	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	2011	Assurance	Year	(ending	June	30,	2011),	in	accordance	with	

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

Appendix	A.

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

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

the	following	procedures	in	this	process:

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

beginning	to	end	of	program	responsibility.

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

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

compliance	with	policy	and	procedures.

 Corrective	action	plans	are	developed	for	control	and	significant	deficiencies.

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

that	controls	over	the	financial	reporting	area	are	operating	effectively.

A-31
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

OTHER	MANAGEMENT	INFORMATION,	INITIATIVES,	AND	ISSUES

ARRA

In	FY	2011,	ARRA16 funds	enabled	the	Forest	Service	to	treat more	than 510,670	acres	of	NFS	land	to	

reduce	wildfire	risk and	create	or	retain	more	than 3,751	jobs	each	quarter.	For	more	information,	go	to	

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

Seven	out	of	nine	Fast	Reports17 issued	by	OIG	in	FY	2011	were	completed	and	corrective	actions	were	

implemented.	The	Forest	Service	continues	to work	on	mitigating	the	remaining	two Fast	Reports.	The	

OIG	commended	the	Forest	Service	for	working	proficiently	to	ensure	that	the	agency	was	accountable	

for	the	efficient	and	effective	disbursement	of	ARRA	funds.		

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.		

																																																												

16 For	more	information	on	ARRA,	go	to	http://usda.gov/wps/portal/arra?navid=USDA_ARRA_PLAN. 17 Fast	Reports	are	OIG	findings	reported	to	Forest	Service	management	that	require	a	response	within	5	days	on	(1)	the	factual	accuracy	of	the	

finding,	and	(2)	any	proposed	corrective	action	to	remediate	the	issue.

A-32
Part B

FINANCIAL SECTION

B-1
Message From the 

Chief Financial Officer 

The Forest Service, an agency of the Department of Agriculture (USDA), 

strives to increase transparency of financial information that promotes the 

Open Government initiative and accountability and demonstrates results 

to the American people. As Chief Financial Officer, I am especially pleased 

to note that for the 10th consecutive year, the Forest Service received an 

unqualified (“clean”) audit opinion on its principal FY 2011 financial statements. 

Additionally, for the 4th consecutive year, the independent auditors reported no 

area of material weakness. 

As outlined in Chief Tidwell’s message at the beginning of this report, we have worked aggressively in FY 

2011 to complete recommended actions and close all open financial statement audits and a record number 

of program audits. These results demonstrate the agency’s continued commitment to financial management 

excellence.

The agency’s continued achievements in financial management are due in part to its focus on collaboration 

between the finance, budget, and program areas, as well as the various partnerships within each of these 

areas. Collaboration efforts advance good communication, transparency, integration, and efficiency in delivery 

of services. The joint efforts of Forest Service managers, employees, and partners are key as the Forest Service 

sustains quality financial management.

In keeping with USDA’s commitment to deploy an enhanced financial system, the Forest Service is moving 

forward to prepare for the significant changes that come with the Financial Management Modernization 

Initiative (FMMI). In FY 2012, the Forest Service will continue to devote resources to ensure a successful 

implementation of FMMI in early FY 2013.

While we celebrate our successes, we also realize we have areas in which we can improve and strive to 

promote efficiency and continuous improvement. 

Chief Tidwell addressed the daunting conservation challenges in his message. As such, we continue to address 

the inherent logistical challenges of managing vast natural resources that are becoming more complicated and 

expensive. It is key that we provide timely and accurate financial data to assist managers in making decisions as 

they manage these important resources.

DONNA M. CARMICAL

Chief Financial Officer

B-2
B-3
B-4
Independent Auditorʼs Report

B-5
1701 Duke Street, Suite 500, Alexandria, VA 22314

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

REPORT OF INDEPENDENT AUDITORS 

To the Chief of the United States Forest Service 

The Inspector General, United States Department of Agriculture 

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

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

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

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

statements”) for the year then ended. The financial statements are the responsibility of the Forest 

Service’s management. Our responsibility is to express an opinion on these financial statements 

based on our audit. The financial statements of the Forest Service as of September 30, 2010 

were audited by other auditors whose report, dated November 5, 2010, expressed an unqualified 

opinion on those statements. 

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

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

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

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

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

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

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

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

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

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

In our opinion, the financial statements referred to above, including the accompanying notes, 

present fairly, in all material respects, the financial position of the Forest Service as of 

September 30, 2011, and its net cost of operations, changes in net position, and changes in 

budgetary resources for the year then ended, in conformity with accounting principles generally 

accepted in the United States of America. 

Our audit was conducted for the purpose of forming an opinion on the basic financial statements 

taken as a whole. The information in the Management’s Discussion and Analysis, Required 

Supplementary Stewardship Information, Required Supplementary Information, and Other 

Accompanying Information sections is not a required part of the basic financial statements. 

Rather, they are considered supplementary information required by OMB Circular A-136,

Financial Reporting Requirements, and the Federal Accounting Standards Advisory Board. This 

supplementary information is the responsibility of the Forest Service’s management. We have 

applied certain limited procedures, which consisted principally of inquiries of management 

regarding the methods of measurement and presentation of the supplementary information and 

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

basic financial statements, and other knowledge we obtained during our audit. However, such 

B-6
information was not subjected to the procedures applied in our audit of the basic financial 

statements. Accordingly, we do not express an opinion on this information. 

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

we have also issued reports, dated November 8, 2011, on our consideration of the Forest Service’s 

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

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

September 30, 2011. The purpose of those reports is to describe the scope of our testing of 

internal control over financial reporting and compliance and the Forest Service’s compliance with 

certain provisions of laws and regulations as well as the results of that testing, and not to provide 

an opinion on the internal control over financial reporting or on compliance and other matters. 

Those reports are an integral part of an audit performed in accordance with Government Auditing 

Standards and OMB Bulletin No. 07-04, as amended, and should be considered in assessing the 

results of our audit. 

Alexandria, Virginia 

November 8, 2011 

B-7
1701 Duke Street, Suite 500, Alexandria, VA 22314

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

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL 

To the Chief of the United States Forest Service 

The Inspector General, United States Department of Agriculture 

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

of and for the year ended September 30, 2011, and have issued our report dated November 8, 

2011. We conducted our audit in accordance with auditing standards generally accepted in the 

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

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

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

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

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

assessing internal control to provide reasonable assurance that the broad control objectives of the 

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

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

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

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

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

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

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

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

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

Discussion and Analysis. 

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

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

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

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

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

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

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

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

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

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

ensuring efficient operations. 

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

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

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

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

B-8
possibility that a material misstatement of the entity’s financial statements will not be prevented 

or detected and corrected on a timely basis. 

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

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

control that might be significant deficiencies or material weaknesses; therefore, there can be no 

assurance that all deficiencies, significant deficiencies, or material weaknesses have been 

identified. We did not identify any deficiencies in internal control that we consider to be material 

weaknesses, as defined above. 

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

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

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

to be significant deficiencies. 

Significant Deficiencies 

I. Information Technology (IT) 

The Forest Service’s IT internal control structure, both for the general support systems and 

critical financial reporting applications, did not include a comprehensive risk analysis, effective 

monitoring of design and performance, and an ability to identify and respond to changing risk 

profiles. The National Institute of Standards and Technology (NIST) and Government 

Accountability Office (GAO) (in its Federal Information System Controls Audit Manual 

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

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

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

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

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

duties. In one instance, three users of one application had access to the application’s 

development and production environments. The Forest Service’s control structure relies 

on a manual control to mitigate this weakness; however, Kearney & Company, P.C.’s 

(Kearney) audit procedures indicated that this manual control does not mitigate the 

weakness. In the second instance, eight users of another application were able to perform 

incompatible functions. The Forest Service’s control structure contains an automated 

review control for these functions at the Albuquerque Service Center (ASC); however, 

Kearney’s audit procedures did not indicate that the Forest Service mitigates the risk 

related to this segregation of duties weakness to an acceptable level. 

Recommendation Number 1: Kearney recommends that the Forest Service monitor 

access to systems in order to prevent users from having incompatible functions, and 

document any instances of conflicting roles and provision of access based on risk 

B-9
analysis. Kearney also recommends that the Forest Service augment and improve the 

identified mitigating controls to specifically address the weaknesses identified. 

• The Forest Service did not deactivate employee accounts within one business day of an 

employee’s separation, as required by Forest Service policy. Kearney’s audit procedures 

identified approximately 600 separated employees in four applications. If their accounts 

are not deactivated timely, employees who have been separated may be able to access 

information systems after their separation from the Forest Service, which could result in 

waste, fraud, or abuse. Failure to limit user access and processing capabilities to 

authorized employees may result in system vulnerabilities, possible defalcations, and 

errors in accounting records. 

Recommendation Number 2: Kearney recommends that the Forest Service implement a 

process to ensure that inactive accounts and accounts for separated employees are 

disabled or removed from Forest Service information systems in a timely manner. 

• The Forest Service does not currently maintain a comprehensive IT inventory of 

hardware and software for one General Support System (GSS), nor does it currently 

document and maintain hardware and software configuration baselines for two GSSs. 

Without a process for managing configuration baselines, the Forest Service increases the 

risk that information systems and their supporting IT infrastructures are not configured in 

a manner to maximize security. Weak security could lead to the compromise of 

information systems, and ultimately, sensitive financial data. Weak security could also 

negatively impact the confidentiality, integrity, and availability of financial system data. 

Additionally, the Forest Service cannot develop a comprehensive and effective IT 

Contingency Plan (CP) without baseline configurations. Failure to develop and test an IT 

CP may result in the loss of system access, data, and automated controls, which could 

lead to errors and defalcations. 

Recommendation Number 3: Kearney recommends that the Forest Service implement a 

process to ensure that information system inventories and configuration baselines are 

documented and updated in accordance with policy. This may require the Forest Service 

to document, back up, and protect a current and comprehensive baseline inventory of 

hardware, software, and firmware. This may also require the Forest Service to map 

hardware, software, and firmware to the applications they support. Kearney also 

recommends that the Forest Service select mandatory configuration settings based off of a 

NIST-approved baseline, and document any deviations from the baseline. This may

require the Forest Service to ensure that changes to existing baselines follow the change 

management process, whereby changes are authorized, tested, approved, and documented 

according to policy. 

• The Forest Service did not update documentation authorizing two information systems to 

operate in a timely manner. Specifically, the Forest Service did not fully implement all 

recommended steps within the risk management framework, including ongoing 

monitoring of the control environment and updating of System Security Plans (SSP) on 

B-10
an annual basis, as required per United States Department of Agriculture (USDA) policy. 

By not monitoring the control environments for information systems and updating SSPs, 

the Forest Service increases the likelihood that risks to information systems will not be 

adequately mitigated in a timely and consistent manner, which may ultimately lead to 

errors in accounting records. 

Recommendation Number 4: Kearney recommends that the Forest Service implement a 

process to ensure that the risk management framework is fully implemented. This may

require the Forest Service to update SSPs at least annually, or whenever there is a 

significant change to the control environment. Kearney also recommends that the Forest 

Service certify and accredit all information systems before they are placed into operation 

or at least every three years, or more frequently if major system changes occur. 

• The Forest Service does not have a formal and documented service provider management 

monitoring function in place. The Forest Service has not assigned responsibility for 

monitoring contracts, Service Level Agreements (SLA), and Statements on Standards for 

Attestation Engagement (SSAE) No. 16 reports. The Forest Service has not mitigated the 

risks associated with the use of service providers, and may not be able to identify 

ineffective or inefficient services provided by service providers, or failures in the service 

providers’ control environments. 

Recommendation Number 5: Kearney recommends that the Forest Service implement a 

process to ensure that third party SLAs are executed, and that SSAE No. 16 reports are 

received from all service providers and evaluated. This may require the Forest Service to 

implement a service provider management process to identify parties responsible for 

monitoring contracts, agreements, SLAs, and SSAE No. 16 reports.

• The Forest Service was not able provide documentation supporting the status of any 

background re-investigations, as required by Office of Personnel Management (OPM) 

and USDA policy. The Forest Service did not provide documentation required by policy 

to support the status of three out of 45 initial background investigations. Employees and 

contractors who have not been screened by the background investigation process prior to 

gaining access to Forest Service information system(s) and/or have not been reinvestigated according to OPM guidance may have access to Forest Service information 

systems that exceeds their need-to-know. This may lead to users compromising sensitive 

financial data or introducing unauthorized transactions. 

Recommendation Number 6: Kearney recommends that the Forest Service improve its 

process for background investigations and re-investigations to ensure that necessary 

investigations are performed in accordance with Forest Service policy. This may require 

the Forest Service to ensure that databases used to track contractors’ and employees’ 

background investigations and re-investigations are continually updated with contractors 

joining and leaving the Forest Service. This may also require the Forest Service to ensure 

that contractors and employees have background investigations commensurate with their 

position descriptions, and that re-investigations are completed in a timely manner. 

B-11
• The Forest Service uses single factor authentication for remote access (i.e., user name and 

password), which is insufficient for a moderate to high-sensitivity system, according to 

Federal Information Processing Standard 199. Although the Forest Service has installed 

the software necessary to support multi-factor authentication for remote access users, it

has not completed the implementation. The Forest Service has not fully complied with 

Homeland Security Presidential Directive 12, in that Personal Identity Verification cards 

have not been issued to approximately half of the 15,000 Forest Service employees and 

2,500 contractors with Virtual Private Network access. Lack of multi-factor 

authentication over remote access could cause financial systems to be vulnerable to 

fraudulent access. Multi-factor authentication should be designed to be a more secure 

control to ensure that only approved and appropriate access to sensitive financial data is 

allowed. 

Recommendation Number 7: Kearney recommends that the Forest Service implement a 

process to ensure that the selection of authentication methods is appropriate based on 

risk. Kearney also recommends that the Forest Service implement multi-factor 

authentication for remote access. Since the Forest Service network can be accessed 

remotely, it is imperative that multi-factor authentication, rather than single factor 

authentication, be used to protect sensitive financial data. 

II. Property, Plant, and Equipment (PP&E) 

The Forest Service reported approximately $1.4 billion in net PP&E on its fiscal year (FY) 2011 

Balance Sheet, which is about 23% of its total assets. Kearney’s audit procedures identified 

several internal control deficiencies that negatively impact the Forest Service’s ability to record 

real and personal property transactions in a complete, accurate, and timely manner. These 

deficiencies are discussed below. 

• The Forest Service’s internal control structure was not sufficient to ensure that projects 

were transferred from Work in Process (WIP) to PP&E as the project was substantially 

completed and placed into service. Specifically, field personnel do not submit project 

completion forms timely. Property personnel do not review WIP projects for indications 

of substantial completion. Forest Service policy produces at least a three-month delay in 

transferring substantially completed projects to PP&E. 

Kearney’s audit procedures identified eight current year untimely WIP transfers, a 40% 

error rate, and 106 WIP projects that had no financial activity in the last four months. 

Additional procedures revealed that 18 projects, a 90% error rate, were substantially 

complete and should have been placed into service. Delays in the WIP transfer caused an 

understatement of depreciation by approximately $1.2 million. 

Recommendation Number 8: Kearney recommends that the Forest Service perform an 

annual evaluation of WIP projects to timely identify the need for WIP project closure. 

This may require the Forest Service to monitor the potential impact of understating 

depreciation expense related to untimely WIP transfers. Kearney also recommends that 

B-12
the Forest Service improve escalation procedures to ensure appropriate monitoring and 

communication with field personnel. 

• The Forest Service reported approximately $24 million of repairs and maintenance 

expenses. Kearney’s audit procedures identified approximately $10 million of expenses 

that should have been capitalized in 26 transactions—a 42% error rate. The Forest 

Service’s internal control structure did not ensure that only expenditures related to 

ordinary repairs and maintenance were expensed; the Forest Service expensed asset 

improvements, which included assets that were being remodeled, renovated, upgraded, or 

replaced. These improperly expensed transactions resulted in an understatement of 

depreciation by approximately $100,000. 

Recommendation Number 9: Kearney recommends that the Forest Service revise its 

existing desk procedures related to acquisition and capitalization of property that 

highlight the need to include capitalized costs when acquiring assets, and include 

direction stressing the need for periodic notifications and communication between field 

personnel and the ASC. Kearney also recommends that the Forest Service review its

current capitalization procedures to assess an acceptable level of risk for not accurately 

capturing all capital improvement projects. This may require the Forest Service to 

identify and implement preventative and detective controls as necessary. 

• The Forest Service’s internal control structure did not ensure that capitalized personal 

property costs were complete and accurate. Kearney’s audit procedures identified four 

transactions, a 3% error rate, in which approximately $5,000 of costs were not 

capitalized, projecting approximately $1 million in understated PP&E. These costs were 

related to transportation and modifications, and the errors resulted from the improper 

coding of transactions. In addition to an understatement of PP&E, these errors produced 

an understatement of current year depreciation expense. 

Recommendation Number 10: Kearney recommends that the Forest Service revise its

existing desk procedures related to acquisition and capitalization of property highlighting 

the need to include capitalized costs when acquiring assets, and include direction 

stressing the need for periodic notifications and communication between field personnel 

and the ASC. Kearney also recommends that the Forest Service perform a review over 

all personal property additions for FY 2011 (in both personal property sub-ledger 

systems), and analyze and assess all capitalized costs associated with placing personal 

property into service. In addition, Kearney recommends that the Forest Service 

implement a detective control that analyzes costs associated with placing an asset into 

service at the Budget Object Code (BOC) level and comparing these costs to the job 

codes used for capitalized property. 

• The Forest Service’s internal control structure did not ensure that leases were accounted 

for properly. Kearney’s audit procedures identified that 20 of the 47 capital leases, a 

43% error rate, did not qualify for capital lease treatment when the option periods were 

removed from the analysis. In addition, the Forest Service did not update future 

B-13
minimum operating lease payment schedules for subsequent changes to payment terms. 

Assets under capital leases were overstated by approximately $6 million, obligations 

under capital leases were understated by approximately $1 million, and the future 

minimum operating lease payment disclosure was originally and cumulatively overstated 

by $180 million. 

Recommendation Number 11: Kearney recommends that the Forest Service refine and 

reassess its processes and internal controls related to lease accounting to ensure that 

leased assets are recorded accurately and completely. Kearney also recommends that the 

Forest Service implement a procedure to ensure that changes to operating leases are 

reflected in the future minimum payment schedule. 

• The Forest Service’s internal control structure does not ensure that property disposals are 

recorded timely. Kearney’s audit procedures identified 23 property disposals recorded in 

the current year that occurred in a prior FY. 

Recommendation Number 12: Kearney recommends that the Forest Service strengthen its

monitoring controls over property disposals at the field level in order to more accurately 

align the physical disposal of the asset in question and the receipt of the field supporting 

documentation. 

During the audit, we noted certain other matters that we will report to the Forest Service’s 

management in a separate letter. Additionally, the Forest Service’s management has indicated in 

a separate response that it concurs with the findings presented in our report. We did not audit the 

Forest Service’s response, and accordingly, we do not express an opinion on it. 

* * * * * * * * * 

This report is intended solely for the information and use of Forest Service management, those 

charged with governance and others within the Forest Service, the USDA Office of Inspector 

General, OMB, GAO, Department of the Treasury, and Congress, and is not intended to be and 

should not be used by anyone other than these specified parties. 

Alexandria, Virginia 

November 8, 2011 

B-14
APPENDIX A: Status of Prior Year Deficiencies 

In the Independent Auditor’s Report on Internal Control included in the audit report of the Forest 

Service’s FY 2010 financial statements,1

 several issues were noted related to internal control 

over financial reporting. The table below presents a summary of the current year status of these 

issues. 

Prior Year Internal Control Significant Deficiencies 

Control Deficiency 2010 Status 2011 Status 

IT Internal Control Environment Significant Deficiency Significant Deficiency 

Accounts Payable Accruals Significant Deficiency N/A

Financial Reporting Requirements Significant Deficiency N/A

Credit Card Transactions Significant Deficiency Management Letter 

Revenue Related Transactions Significant Deficiency N/A

Third Party Transactions Review Significant Deficiency Modified Repeat Condition 

(included in the IT 

Significant Deficiency) 

* * * * * * * * * 

This report is intended solely for the information and use of Forest Service management, those 

charged with governance and others within the Forest Service, the United States Department of 

Agriculture’s Office of Inspector General, Office of Management and Budget, Government 

Accountability Office, Department of the Treasury, and Congress, and is not intended to be and 

should not be used by anyone other than these specified parties. 

																																																												

1 Independent Auditor’s Report on the U.S. Forest Service 2010 and 2009 Financial Statements. 

B-15
1701 Duke Street, Suite 500, Alexandria, VA 22314

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

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE AND OTHER MATTERS 

To the Chief of the United States Forest Service 

The Inspector General, United States Department of Agriculture 

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

of and for the year ended September 30, 2011, and have issued our report dated November 8, 

2011. We conducted our audit in accordance with auditing standards generally accepted in the 

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

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

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

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

with laws and regulations. 

As part of obtaining reasonable assurance about whether the Forest Service’s financial 

statements are free of material misstatement, we performed tests of the Forest Service’s 

compliance with certain provisions of laws and regulations, noncompliance with which could 

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

other laws and regulations specified in OMB Bulletin No. 07-04, as amended. As part of our 

work, we performed tests of compliance with the Federal Financial Management Improvement 

Act of 1996 (FFMIA) Section 803(a) requirements. We limited our tests of compliance to these 

provisions; we did not test compliance with all laws and regulations applicable to the Forest 

Service. Providing an opinion on compliance with certain provisions was not an objective of our 

audit and accordingly, we do not express such an opinion. 

Under FFMIA, we are required to report whether the Forest Service’s financial management 

systems substantially comply with Federal financial management systems requirements, 

applicable Federal accounting standards, and the U.S. Standard General Ledger (USSGL) at the 

transaction level. Our audit procedures indicated that the Forest Service substantially complies 

with FFMIA; however, we noted two instances in which the Forest Service’s financial 

management systems did not substantially comply with certain Federal financial management 

systems requirements, applicable Federal accounting standards, and the USSGL at the 

transaction level. The Forest Service did not maintain adequate segregation of duties in two 

financial systems. Additionally, the Forest Service did not terminate approximately 600 user 

access accounts upon employee separation. 

Except as noted above, the results of our tests of compliance with the provisions of selected laws 

and regulations disclosed no instances of noncompliance that are required to be reported under 

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

B-16
During the audit, we noted certain other matters that we will report to the Forest Service’s 

management in a separate letter. Additionally, the Forest Service’s management provided a 

separate response to our report. We did not audit the Forest Service’s response, and accordingly, 

we do not express an opinion on it. 

* * * * * * * * * 

This report is intended solely for the information and use of the Forest Service management, 

those charged with governance and others within the Forest Service, the U.S. Department of 

Agriculture Office of Inspector General, OMB, the Government Accountability Office, the 

Department of the Treasury, and Congress, and is not intended to be and should not be used by 

anyone other than these specified parties. 

Alexandria, Virginia 

November 8, 2011 

B-17
B-18
2011 2010

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 2) 4,379$ 5,252$ 

Investments (Note 3) - 6

Accounts Receivable, net (Note 4) 20 24

Total Intragovernmental 4,399 5,282

Cash and Other Monetary Assets 1 1 

Accounts Receivable, net (Note 4) 256 115

General Property, Plant, and Equipment (PP&E), net (Note 5) 1,400 1,383

Other (Note 1D) 23 44

Total Assets $ 6,079 $ 6,825

 Stewardship PP&E (Note 6)

 Federal Employee Benefits (Notes 7 & 8) 73$ 74$ 

Other (Note 10) 188 132

Total Intragovernmental 261 206

Accounts Payable 36 47

Federal Employee Benefits (Notes 7 & 8) 381 369

Environmental and Disposal Liabilities (Notes 7 & 9) 1 1

Other (Note 10) 1,583 1,514

Total Liabilities (Note 7) 2,262 2,137

Commitments and Contingencies (Note 10)

Unexpended Appropriations - other funds 2,056 2,991

Cumulative Results of Operations - earmarked funds (Note 12) 1,002 933

Cumulative Results of Operations - other funds 759 764

Total Net Position 3,817 4,688

Total Liabilities and Net Position $ 6,079 $ 6,825

Intragovernmental:

Net Position:

(in millions)

U.S. Department of Agriculture

Forest Service

As of September 30, 2011 and 2010

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these statements.

Liabilities:

B-19
2011 2010

Total Gross Costs $ 7,160 $ 6,702

Less: Total Earned Revenue 833 623

Net Cost of Operations $ 6,327 $ 6,079

Program Costs (Note 13):

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF NET COST

For the years ended September 30, 2011 and 2010

(in millions)

The accompanying notes are an integral part of these statements.

B-20
U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION

For the years ended September 30, 2011 and 2010

(in millions)

FY 2011 FY 2010

Earmarked Earmarked

Funds Consolidated Funds All Other 

(Note 12) All Other Funds Total (Note 12) Funds 

Cumulative Results of Operations:

 Beginning Balance $ 933 $ 764 $ 1,697 $ 907 $ 7

Budgetary Financing Sources:

 Appropriations Used - 5,849 5,849 - 5,5 Non-Exchange Revenue - 2 2 -  Donations and Forfeitures of Cash 1 - 1 1  Transfers - In/Out without Reimbursement 116 - 116 170 

Other Financing Sources (Non-Exchange):

 Transfers without Reimbursement (68) 68 - (60)  Imputed Financing - 425 425 - 4 Other 66 (68) (2) 43 ( Total Financing Sources 115 6,276 6,391 154 5,9 Net Cost of Operations (46) (6,281) (6,327) (128) (5,9 Net Change 69 (5) 64 26 

 Cumulative Results of Operations 1,002 759 1,761 933 76Unexpended Appropriations:

 Beginning Balance - 2,991 2,991 - 2,9

Budgetary Financing Sources:

 Appropriations Received - 5,327 5,327 - 5,5 Appropriation Transfers - In/Out - (3) (3) -  Other Adjustments - (410) (410) -  Appropriations Used - (5,849) (5,849) - (5,5 Total Budgetary Financing Sources - (935) (935) - 

 Total Unexpended Appropriations - 2,056 2,056 - 2,99 Net Position $ 1,002 $ 2,815 $ 3,817 $ 933 $ 3,75

The accompanying notes are an integral part of these statements.

B-21
2011 2010

Budgetary Resources:

Unobligated Balance, Brought Forward, October 1 $ 2,359 $ 2,745 

Recoveries of Prior Year Unpaid Obligations 94 40 

Budget Authority:

Appropriations 5,824 6,094 

Spending Authority from Offsetting Collections:

Earned:

Collected 496 495 

Change in Receivables from Federal Sources 137 (50)

Change in Unfilled Customer Orders:

Advance Received 49 7 

Without Advance from Federal Sources 38 9 

Subtotal 6,544 6,555 

Nonexpenditure Transfers, net (2) (1)

Permanently Not Available (410) - 

Total Budgetary Resources (Note 16) 8,585$ 9,339$ 

Status of Budgetary Resources:

Obligations Incurred (Note 15):

Direct $ 6,064 $ 6,571 

Reimbursable 614 $ 409 

Subtotal 6,678 6,980 

Unobligated Balance-Apportioned (Note 2) 1,194 1,361 

Unobligated Balance Not Available (Note 2) 713 998 

Total Status of Budgetary Resources (Note 16) 8,585$ 9,339$ 

Change in Obligated Balance:

Obligated Balance, net

Unpaid Obligations, Brought Forward, October 1 $ 3,072 $ 2,641 

Less: Uncollected Customer Payments from Federal Sources,

Brought Forward, October 1 (310) (351)

Total Unpaid Obligated Balance, net 2,762 2,290 

Obligations Incurred, net 6,678 6,980 

Less: Gross Outlays (6,885) (6,509)

Less: Recoveries of Prior Year Unpaid Obligations, actual (94) (40) 

Change in Uncollected Customer Payments from Federal Sources (175) 41 

Obligated Balance, net, End of Period

Unpaid Obligations (Note 17) 2,771 3,072 

Less: Uncollected Customer Payments from Federal Sources (485) (310)

Total, Unpaid Obligated Balance, net, End of Period (Note 2) 2,286$ 2,762$ 

Net Outlays:

Gross Outlays 6,885$ 6,509$ 

Less: Offsetting Collections (545) (503)

Less: Distributed Offsetting Receipts (467) (429)

Net Outlays 5,873$ 5,577$ 

The accompanying notes are an integral part of these statements.

(in millions)

U.S. Department of Agriculture

Forest Service

 COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the years ended September 30, 2011 and 2010

B-22
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES 

A: REPORTING ENTITY

The U.S. Department of Agriculture (USDA) Forest Service (Forest Service) was established on February 1, 

1905, as an agency of the United States Federal Government within the USDA, for the purpose of maintaining 

and managing the Nation's forest reserves. It operates under the guidance of the Under Secretary for Natural 

Resources and Environment. Forest Service policy is implemented through nine regional National Forest System 

(NFS) offices, one State and Private Forestry (S&PF) area office, five Research and Development (R&D) stations, 

the Forest Products Laboratory (FPL) and the International Institute of Tropical Forestry (IITF), functioning in

nearly all States, Puerto Rico, and the U.S. Virgin Islands. 

The Forest Service's mission includes the following four major segments: 

National Forests and Grasslands – Protection and management of an estimated 193 million acres (unaudited) 

of NFS land that includes 36.6 million acres (unaudited) of designated wilderness areas. In addition, the Forest 

Service partners with other nations and organizations to foster global natural resource conservation and 

sustainable development of the world’s forest resources.

Forest and Rangeland Research – Research and development of forest and rangeland management practices 

to provide scientific and technical knowledge for enhancing and protecting the economic productivity and 

environmental quality of the 1.3 billion acres (unaudited) of forests and associated rangelands in the United 

States.

State and Private Forestry – Cooperation with and assistance to State and Local governments, Tribal 

governments, forest industries, and private landowners to help protect and manage non-Federal forests and 

associated rangeland and watershed areas.

Wildland Fire Management – Protection of life, property, and natural resources on NFS lands, extending to an

estimated additional 20 million acres (unaudited) of adjacent State and private lands.

The accompanying consolidated and combined financial statements of the Forest Service account for all funds 

under the Forest Service's control. Substantially all assets are considered “entity assets” and are available for use 

in the Forest Service’s operations.

B: BASIS OF PRESENTATION AND ACCOUNTING

The Consolidated Balance Sheets (BS), Consolidated Statements of Net Cost (SNC), Consolidated Statements of 

Changes in Net Position (SCNP), and the Combined Statements of Budgetary Resources (SBR) (hereinafter 

referred to as the “financial statements”) were prepared to report the financial position, net costs, changes in net

position, and budgetary resources of the Forest Service. The financial statements have been prepared from the 

books and records of the Forest Service in accordance with accounting principles generally accepted in the 

United States of America as promulgated by the Federal Accounting Standards Advisory Board (U.S. GAAP) and 

in accordance with the Office of Management and Budget (OMB) Circular A-136, Financial Reporting 

Requirements, revised 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 

the obligation of funds according to legal requirements, which in many cases is prior to the occurrence of an 

B-23
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

accrual-based transaction. The recognition of budgetary accounting transactions is essential for compliance with 

legal constraints and controls over the use of Federal funds. 

 

The Forest Service recognizes budgetary resources as assets when cash funds held by U.S. Department of 

Treasury (Treasury) is made available through the Treasury General Fund warrants and other transfers. In 

addition to appropriated funds, the Forest Service is authorized by law to retain specific earned revenues primarily 

from sales of forest products and services and to spend these monies on resource management activities 

identified in the governing legislation. Some examples of the Forest Service’s earned revenues are monies 

collected from timber sales or recreation fees. 

C: FUND BALANCE WITH TREASURY 

Treasury processes cash receipts and disbursements on behalf of the Forest Service. Funds on deposit with 

Treasury are primarily appropriated, trust and other fund types such as special funds that are available to pay 

current liabilities and finance authorized purchase commitments. 

D: OTHER ASSETS

Payments made by the Forest Service in advance of the receipt of goods and services are recorded as advances 

at the time of payment and recognized as expenditures/expenses when the related goods and services are 

received. 

E: GENERAL PROPERTY, PLANT, AND EQUIPMENT

General property, plant, and equipment (PP&E) includes real and personal property used in normal business 

operations. Real and personal property is recorded at cost or estimated fair value and must have an estimated 

useful life of 2 years or more. The Forest Service capitalization threshold for real and personal property is $25 

thousand or more. Internal use software is capitalized in accordance with U.S. GAAP if the fair value meets or 

exceeds $100,000. The Forest Service recognizes liabilities for capital leases in accordance with U.S. GAAP. 

Under U.S. GAAP the cost of general PP&E acquired under a capital lease is equal to the amount recognized as 

a liability for the capital lease at its inception (net present value of the lease payments) unless the net present 

value exceeds the fair value of the asset. There are no restrictions on the use or convertibility of general PP&E. 

See Note 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 

appropriation will be enacted, are classified as unfunded liabilities. The U.S. Government, acting in its sovereign 

capacity, can abrogate liabilities. 

B-24
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 choose to remain in CSRS. FERS offers a savings plan to which 

the Forest Service automatically contributes 1.0 percent of pay and matches any employee contribution up to an 

additional 4.0 percent of pay. For FERS participants, the Forest Service also contributes the employer’s matching 

share for Social Security.

The Forest Service recognizes the imputed cost of pension and other health and life insurance retirement benefits 

during the employees’ active years of service. Office of Personnel Management (OPM) actuaries determine 

B-25
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

pension cost factors by calculating the value of pension benefits expected to be paid in the future and 

communicate these factors and information regarding the full cost of health and life insurance benefits to the 

Forest Service for current period expense reporting. 

M: REVENUES AND OTHER FINANCING SOURCES

The Forest Service is funded principally through Congressional appropriations and other authorizations in the 

Budget of the United States. The Forest Service receives annual, multi-year, and no-year appropriations that are 

used, within statutory limits, for operating and capital expenditures. Other funding sources are derived through 

reimbursements for services performed for other Federal and non-Federal entities, sale of goods to the public, 

gifts from donors, cost-share contributions and interest on invested amounts.

 

Appropriations are used at the time the related program or administrative expenses are incurred or when the 

appropriations are expended for capital property and equipment. Other revenues are recognized as earned when 

goods have been delivered or services rendered. 

In accordance with U.S. GAAP, the Forest Service classifies revenue as either “exchange revenue” or “nonexchange revenue.” Exchange revenue arises from transactions that occur when each party to the transaction 

sacrifices value and receives value in return. An example of exchange revenue is the income from the sale of 

forest products. In some cases, the Forest Service is required to remit exchange revenue receipts to Treasury. In 

other instances, the Forest Service is authorized to use all, or a portion of its exchange revenues for specific 

purposes. Non-exchange revenue is revenue the Federal Government is able to demand or receive because of its 

sovereign powers. Penalties and cash donations received from private citizens and organizations are examples of 

non-exchange revenue.

The Forest Service reports the full cost of products and services generated from the consumption of resources. 

Full cost is the total amount of resources used to produce a product or provide a service unless otherwise noted. 

In accordance with U.S. GAAP, the Forest Service’s pricing policies are set to recover full cost except where 

mandated by law or for the public good, such as in the case of grazing fees. Also, costs and exchange revenue 

are disclosed in Note 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, 2011 and 2010 was $425 million and $426 million, respectively.

O: PARENT/CHILD REPORTING REQUIREMENTS

The Forest Service is a party to allocation transfers with other federal agencies as both a transferring (parent) 

entity and/or a receiving (child) entity. Allocation transfers are legal delegations by one department of its authority 

to obligate budget authority and outlay funds to another department. A separate fund account (allocation account) 

is created in the Treasury as a subset of the parent fund account for tracking and reporting purposes. All 

allocation transfers of balances are credited to this account, and subsequent obligations and outlays incurred by 

the child entity are charged to this allocation account as they execute the delegated activity on behalf of the 

parent entity. In accordance with OMB Circular A-136, all financial activity related to these allocation transfers 

(e.g., budget authority, obligations, and outlays) is reported in the financial statements of the parent entity, from 

which the underlying legislative authority, appropriations and budget apportionments are derived. The Forest 

Service allocates funds as the parent to the Department of 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. 

B-26
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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.

 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-27
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 2: FUND BALANCE WITH TREASURY 

Funds with Treasury are primarily appropriated (general and special funds), revolving (working capital fund), and 

trust funds that are available to pay current liabilities and finance authorized purchase commitments. The 

category of other fund types includes deposit and suspense accounts. It is the Forest Service’s policy to ensure 

the Fund Balance with Treasury (FBWT) reported on the balance sheets is consistent with the records of the 

Treasury. 

The Forest Service has a known discrepancy with Treasury in FBWT, suspense account 12F3885, as of 

September 30, 2011. These suspense accounts were discontinued effective July 31, 2008. 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, 2011, 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, 2011, is $222,169. 

Fund Balance with Treasury as of September 30, 2011 and 2010 consisted of the following:

 

2011 2010

(1) Trust Funds 397$ 374$ 

(2) Special Funds 964 943

(3) Revolving Funds 178 167

(4) General Funds 2,726 3,686

(5) Other Fund Types 114 82

4,379$ 5,252$ 

(1) Unobligated Balance

(a) Available 1,194$ 1,361$ 

(b) Unavailable 713 998

(2) Obligated Balance not yet Disbursed 2,286 2,762

(3) Non-Budgetary FBWT Accounts 186 131

4,379$ 5,252$ 

B. Status of Funds:

Total

(in millions)

A. Fund Balances:

Total

B-28
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 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 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 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. Forest Service 

earmarked fund investments reported in FY 2010 were redeemed in 1st Quarter FY 2011.

 

Investments

As of and for the year ended September 30, 2011

(in millions)

Amortization 

Method Cost

Net 

Amortized 

(Premium) 

Investments, 

Net

Market Value 

Disclosure

(3) Non-Marketable: 

Market-Based Straight-Line $ - $ - $ - $ -

Total N/A $ - $ - $ - $ -

Investments

As of and for the year ended September 30, 2010

(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-29
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 and 2010, the Intragovernmental Accounts Receivable balances were $20 million and $24

million, respectively.

Non-Intragovernmental Accounts Receivable is comprised primarily of timber harvest and reimbursements and 

refunds owed to the Forest Service for fire prevention and suppression activities. An Allowance for Uncollectible 

Accounts is established against outstanding non-Federal accounts receivable based on historical experience. The 

historical percentage is calculated by comparing the ending fiscal year balance in the write-off account against the 

previous ending fiscal year balance of open accounts receivable. The historical percentage is then applied to the 

ending balance of open accounts receivable. This approach is used to estimate the allowance for uncollectible 

accounts and recording receivables at net realizable value. 

Non-Intragovernmental Accounts Receivable as of September 30, 2011 and 2010 consisted of the following:

 

2011 2010 

Accounts Receivable $ 264 $ 121 

Allowance for Uncollectible Accounts (8) (6)

Accounts Receivable, Net $ 256 $ 115 

(in millions)

B-30
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 and 2010 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 - 20 702$ $ (462) 240$ 

Internal Use Software 5 94 (84) 10

Internal Use Software in Development n/a 73 - 73

Total Personal Property 869 (546) 323

Real Property

Land and Land Rights n/a 52 - 52

Improvements to Land 10 732 (644) 88

Construction in Progress n/a 187 - 187

Buildings, 

Improvements, and 

Renovations 15 - 30 993 (615) 378

Other Structures and Facilities 15 - 50 1,692 (1,346) 346

Assets Under Capital Lease 5 - 30 61 (39) 22

Leasehold Improvements 10 11 (7) 4

Total Real Property 3,728 (2,651) 1,077

Total 4,597$ $ (3,197) 1,400$ 

September 30, 2011

(in millions)

B-31
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 15 - 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-32
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 Stewardship PP&E by site. Sites include National 

Forests, National Grasslands, other Forest Service-managed sites, and non Forest Service-managed sites such 

as museums and university laboratories. The protection of these lands and resources is a fundamental Forest 

Service responsibility.

The mission of the Forest Service is to sustain the health, diversity, and productivity of the Nation’s forests and 

grasslands to meet the needs of present and future generations. The Forest Service strives to achieve quality 

land management under the sustainable multiple-use management concept to deliver the necessary products and 

services that are essential for enhancing natural resource stewardship and to meet the diverse needs of people. 

The preservation and management of heritage assets is guided through the enactment of many laws and 

regulations including the Organic Administration Act of 1897 (16 U.S.C. 473-478, 479-482, 551), the Antiquities 

Act of 1906 (16 U.S.C. 431), the National Historic Preservation Act of 1966 (16 U.S.C. 470), the Archaeological 

Resources Protection Act of 1979 (16 U.S.C. 470aa et seq.), the Native American Graves Protection and 

Repatriation Act of 1990 (25 U.S.C. 3001), Executive Order 13287 – Preserve America, issued March 3, 2003, 

National Register of Historic Places (36 CFR, part 60), Protection of Archaeological Resources Uniform 

Regulations (36 CFR part 296), and the Curation of Federally-owned and Administered Archaeological 

Collections (36 CFR part 79), as well as many others.

The predominant laws governing the management of stewardship land are the Transfer Act of 1905 (16 U.S.C. 

472, 478, 495, 551, 554a, 615b, 554, 524), the Multiple Use-Sustained Yield Act of 1960 (16 U.S.C. 528-531, 528 

note), the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1600 note, 1600-1614), 

and the National Forest Management Act of 1976 (16 U.S.C. 472a). 

These laws and regulations are implemented through Forest Service policy and guidance. Program management 

evaluations and technical reviews are performed to ensure compliance. 

Heritage Assets

Heritage assets, as defined by U.S. GAAP, are PP&E that are unique for one or more of the following reasons:

 Historical or natural significance

 Cultural, educational, or artistic (e.g. aesthetic) importance

 Significant architectural characteristics

Heritage assets can include non-collection type assets, such as historic or prehistoric sites, monuments, and 

buildings, or collection type assets, such as objects gathered and maintained for exhibition.

B-33
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

Some heritage assets may also be classified as multi-use heritage assets if they serve two purposes—a heritage 

function and a general government operations function, such as a forest guard station building. The building may 

be listed on the National Register of Historic Places, but it serves primarily as an administrative site, hence, it is 

considered a “multi-use” heritage asset. Multi-use heritage assets are capitalized as General PP&E. Multi-use 

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. Assemblage assets 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. 

Addition and Deletion of Heritage Assets 

The Forest Service generally does not construct heritage assets, although in some circumstances important sitestructural components may be rehabilitated or reconstructed into viable historic properties to provide forest 

visitors with use and interpretation. Heritage assets may be added through the procurement process, but this 

rarely occurs. Normally, heritage assets are part of the land acquisition and inventory process. Deletion occurs 

through land exchange or natural disasters. Most additions occur through inventory activities where previously 

undocumented sites are discovered and added to the total.

B-34
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

The Heritage Asset Sites reported by management area as of September 30, 2011, are as follows:

HERITAGE ASSET SITES 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 155 18 (6) 167

TOTAL SITES 330 18 (6) 342

Additions Deletions

FY 2011 

Final Sites

FY 2010 

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-35
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 

grassland.

National Preserves and Other Areas 

National preserves is established to protect and preserve scientific, scenic, geologic, watershed, fish, wildlife, 

historic, cultural, and recreational values; and provide for multiple use and sustained yield of its renewable 

resources. Other areas include areas administered by the Forest Service that are not included in one of the above 

groups. 

Addition and Deletion of Stewardship Lands 

The Land and Water Conservation Fund (L&WCF) Land Acquisition Program acquires land for the Forest Service 

NFS. The program coordinates with a variety of partners, including State, local, and Tribal governments, and 

private landowners through statewide planning for development of a land-adjustment strategy.

The Land Acquisition Program preserves, develops, and maintains access to NFS lands and waters for the public 

and provides permanent access to public lands for recreation, commodity production, resource management, 

public safety, and community economic viability. 

The L&WCF statutory authority specifically defines the purpose to also include protecting the quality of scientific, 

scenic, historical, ecological, environmental, air and atmospheric, water resource, archeological values, as well as 

food and habitat for fish and wildlife, and managing the public lands for minerals, food, timber and fiber. 

B-36
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

From these several allowable uses of program funding, the program concentrates on protecting habitat for priority 

species identified in the national forest and grassland’s Land Management Plans and enhancing recreational 

opportunities for areas with high demand for recreation. The program focuses acquisitions on inholdings and 

areas adjacent to existing NFS lands.

The NFS sites reported by major category as of September 30, 2011, 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 2011 

Final Sites

FY 2010 

Final Sites

TOTAL SITES 

Additions Deletions

B-37
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 7: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

Liabilities not covered by budgetary resources are liabilities for which Congressional action is needed before 

budgetary resources can be provided. Liabilities not covered by budgetary resources as of September 30, 2011

and 2010 consisted of the following: 

2011 2010

Intragovernmental:

Treasury Judgment Fund 20$ 18$ 

Other Unfunded Employment Related Liability 21 14

Federal Employee Benefits (Note 8) 73 74

Total Intragovernmental Not Covered by Budgetary Resources 114 106

Federal Employee Benefits (Note 8) 381 369

Annual Leave Liability 214 214

Contingent Liabilities (Note 10) 12 -

Accrued Liability for Payments to States 357 409

Total Liabilities Not Covered by Budgetary Resources 1,078 1,098

Total Liabilities Covered by Budgetary Resources 1,184 1,039

Total Liabilities 2,262$ 2,137$ 

(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-38
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 and 2010 consisted of the following:

 

2011 2010

Intragovernmental Federal Employee 

Benefits (Note 7) 73$ 74$ 

Federal Employee Benefits (Note 7) 381 369

Total 454$ 443$ 

(in millions)

B-39
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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. 

Cleanup costs associated with events such as toxic waste damage caused by non-Federal entities or natural 

disasters, may ultimately become the responsibility of the Forest Service. However these costs do not meet the 

definition of a “liability” until, and to the extent that financial responsibility is acknowledged by the Forest Service, 

Congress has appropriated resources, and an exchange or non-exchange transaction has occurred.

The Forest Service is subject to environmental laws and regulations regarding air, water, and land use, the 

storage and disposal of hazardous materials, and the operation and closure of facilities at which environmental

contamination may be present. Forest Service project managers confer with the appropriate States, the Office of 

General Counsel (OGC), and occasionally, Environmental Protection Agency (EPA) and local governments. The 

agency follows cleanup requirements from the legislative sources in Appendix I of Federal Financial Accounting 

and Auditing, Technical Release No. 2, including the Comprehensive Environmental Response Compensation 

and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), other Federal or 

State regulations and USDA or Forest Service policy, as necessary. Estimated environmental and disposal 

liabilities include expected future cleanup costs, and the cost of studies necessary to evaluate response 

requirements for those sites where future liability is unknown.

PP&E cleanup cost estimates—usually immaterial to the total project cost for the majority of demolitions, 

deconstructions, or renovations—are included in PP&E operations and maintenance costs (O&M). When 

contamination occurs that is not addressed under regular O&M, the agency develops a cost estimate for the total 

cleanup and, to the extent it is probable and reasonable to estimate, records the cost to cleanup any 

contaminated PP&E. Professional judgment and prior experience is often the basis for cost estimates. If the 

agency has no previous similar experience, the staff performs other comparable technical reviews or derives 

estimates using standard cost estimating guides. 

Exceptions occur when a previous activity results in release or potential release of a hazardous substance, and if 

contamination migrates offsite from a current operation. In these instances, the total reasonably estimable costs 

are recognized when the exception is discovered. 

Forest Service cleanup cost estimates are based on the current total cost for a contaminated site according to 

laws, technology, and inflation/deflation. Forest Service updates cost estimates, including changes relating to 

prior period operations, for Government-related liabilities at least annually, to reflect changes in laws or 

regulations, technology, and inflation or deflation. 

The Forest Service has recognized an estimated liability for government related events of $1 million for the years 

ended September 30, 2011 and 2010.

B-40
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 10: OTHER LIABILITIES 

Non-Current Current Total Non-Current Current Total

Intragovernmental 

Employer Contributions & Payroll Tax $ - 36 36$ $ - 30 30$ 

Accrued Liabilities 20 67 87 18 43 61

Advances from Others - 42 42 - 26 26

Deposit Liabilities - 2 2 - 1 1 

Other (Note 7) - 21 21 - 14 14

Total Intragovernmental $ 20 168 188$ $ 18 114 132$ 

Other 

Accrued Liabilities - 782 782 - 734 734

Advances from Others - 83 83 - 49 49

Deposit Liabilities - 108 108 - 77 77

Purchaser Road Credits - 1 1 - 1 1 

Accrued Liability for Payments to States & Counties - 357 357 - 409 409

Annual Leave Liability - 214 214 - 214 214

Contingent Liabilities - 12 12 - - - 

Custodial Liabilities - 1 1 - 3 3 

Capital Leases (Note 11) 19 3 22 22 3 25

Other - 3 3 - 2 2 

Total Other $ 19 1,564 1,583$ $ 22 1,492 1,514$ 

Total Other and Intragovernmental Liabilities $ 39 1,732 1,771$ $ 40 1,606 1,646$ 

(in millions)

2011 2010

As of September 30, 2011 and 2010, 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, Bankhead-Jones Farm Tenant Act of 1937 requires 25 percent of the net revenues from each national 

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

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 

B-41
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 the Forest Service contingent liabilities 

and commitments increased by $12 million from cases that are now reported as probable (Refer to Note 1I) from 

OGC. Based on information provided by legal counsel, management accrues liabilities for some adverse actions 

determined to be probable in occurrence and reasonably estimable. The Forest Service discloses potential 

liabilities related to claims where the probability of occurrence is at least reasonably possible. There are no 

estimated obligations related to cancelled appropriations for which there is a contractual commitment for payment.

In addition, there are no contractual arrangements which may require future financial obligations. 

The accrued and potential contingent liabilities as of September 30, 2011 and 2010 are summarized as follows:

(in millions)

FY 2011

(in millions)

Accrued 

Liabilities Lower End Upper End

Contingent Liabilities

Probable 12$ $ 12 $ 199

Reasonably Possible $ 33 $ 125

FY 2010

(in millions)

Accrued 

Liabilities Lower End Upper End

Contingent Liabilities

Probable $ - $ - $ 17

Reasonably Possible $ 1 $ 198

Estimated Range of Loss

Estimated Range of Loss

B-42
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 and 2010 and future capital and operating lease agreement 

payments as of September 30, 2011 consisted of the following: 

 

2011 2010

Land, Buildings, Machinery, and 

Equipment $ 61 61$ 

Accumulated Amortization (39) (36)

Total $ 22 25$ 

Year 1 (2012) 9

Year 2 (2013) 9

Year 3 (2014) 8

Year 4 (2015) 8

Year 5 (2016) 7

After 5 Years 26

$ 67

 (33)

 (12)

 22

Lease Liabilities Covered by Budgetary Resources $ 22

(in millions)

Fiscal Year

Year 1 (2012) $ 48

Year 2 (2013) 40

Year 3 (2014) 35

Year 4 (2015) 31

Year 5 (2016) 27

After 5 Years 155

$ 336

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-43
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 

*5264 Timber Sales Pipeline Restoration Fund

*5268 Recreation Fee Demonstration Program

*5277 MNP Rental Fee Account

*5278 Midewin National Tallgrass Prairie Restoration Fund 

*5360 Land Between the Lakes Management Fund 

*5361 Administration of Rights-of-Way and Other Land Uses Fund 

*5363 Valles Caldera Fund

5367 State, Private and International Forestry Land and Water Conservation Fund

*5462 Hardwood Technology Transfer and Applied Research Fund

*5540 Stewardship Contracting Product Sales, Funds Retained

*5896 Payments to Counties, National Grasslands 

*8028 Cooperative Work, Forest Service

8029 Mount Saint Helens Highway 

8034 Gifts, Donations, and Bequests for Forest and Rangeland Research

8039 Land Between the Lakes Trust Fund 

8046 Reforestation Trust Fund 

*8203 Gifts and Bequests, Department of Agriculture

B-44
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011

(in millions)

 Cooperative 

Work 

 Payments to 

States National 

Forests Fund 

 Restoration of 

Forest Lands and 

Improvements 

 State, Private, & 

International 

Forestry Land & 

Water 

Conservation 

Fund 

 Other 

Funds Total 

ASSETS

Fund Balance with Treasury $ 376 $ 206 $ 170 $ 123 487$ 1,362$ 

Investments - - - - - - 

Accounts Receivable, Net 2 - 2 - 13 17

Advances To Others - 1 - - 1 - 

General Property, Plant & Equipment, Net 16 3 - - 99 118

TOTAL ASSETS $ 394 $ 210 $ 172 $ 123 599$ 1,498$ 

LIABILITIES

Accounts Payable $ 1 $ 1 $ - $ - $ 4 2 $ 

Other Liabilities 80 332 2 29 49 492

TOTAL LIABILITIES 81 333 2 29 51 496

Total Net Position 313 (123) 170 94 548 1,002

TOTAL LIABILITIES AND NET POSITION $ 394 $ 210 $ 172 $ 123 599$ 1,498$ 

CHANGE IN NET POSITION

Beginning Balances, as adjusted $ 326 $ (191) $ 170 $ 83 545$ 933$ 

Budgetary Financing Sources:

 Donations and Forfeitures of Cash - - - - 1 1 

 Transfers -in/out without Reimbursement - - - 53 63 116

Other Financing Sources:

 Transfers-in/out without Reimbursement - - - (68) - (68) 

 Other - - - - 66 66

Total Financing Sources - - - 53 62 115

Revenue 88 116 19 - 212 435

Expenses (101) (48) (19) (42) (271) (481) 

Net Cost of Operations (13) 68 - (42) (59) (46) 

ENDING BALANCES $ 313 $ (123) $ 170 $ 94 548$ 1,002$ 

B-45
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

Earmarked Funds

As of and for the year ended September 30, 2010

(in millions)

 Cooperative 

Work 

 Payments 

to States 

National 

Forest 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 97 448 933

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 - 65 120 415

Expenses (112) (37) (38) (73) (187) (96) (543) 

Net Cost of Operations (33) 81 (5) (73) (31) (128) (67) 

ENDING BALANCES $ 326 $ (191) $ 170 $ 83 $ 97 448$ 933$ 

Descriptions of the significant earmarked funds are as follows:

Cooperative Work

Cooperative contributions are deposited into Treasury account 12X8028 for disbursement in compliance with the 

terms and provisions of the agreement between the cooperator and the Forest Service. Cooperators include 

timber purchasers, not-for-profit organizations, and local hunting and fishing clubs. The governing authorities are 

the Cooperative Funds Act of June 30, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act.

Payments to States, National Forests Fund

The Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as “Payments to States”, requires with 

a few exceptions, that 25 percent of all monies received from the national forests and deposited into the National 

Forest Fund (Treasury Symbol 125008) during a fiscal year from timber, grazing, special-use permits, power and 

mineral leases, and admission and user fees be paid to the States in which the national forests are located, for 

public schools and public roads in the county or counties in which the national forests are situated. The Secure 

B-46
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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-47
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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, 2011 and 2010. 

 

Program Costs by Segment

For the year ended September 30, 2011 

(in millions)

National 

Forests 

and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Wildland 

Fire 

Management Total

 Intragovernmental Gross Costs: 

Benefit Program Costs 345$ 43$ 15$ 240$ 643$ 

Imputed Costs 425 - - - 425

Reimbursable Costs 146 19 13 194 372

Total Intragovernmental Gross Costs 916 62 28 434 1,440

 Less: Intragovernmental Earned Revenue 53 19 42 9 123

 Intragovernmental Net Costs 863 43 (14) 425 1,317

Gross Costs With the Public:

Grants and Indemnities 381 10 233 162 786

Stewardship Land Acquisition (Note 14) 44 - - - 44

Other:

Operating Costs 1,988 255 104 1,929 4,276

Depreciation Expense 119 2 - 24 145

Reimbursable Costs 155 21 25 268 469

 Total Other 2,262 278 129 2,221 4,890

Total Gross Costs with the Public 2,687 288 362 2,383 5,720

Less: Earned Revenues from the Public 503 4 - 203 710

Net Costs with the Public 2,184 284 362 2,180 5,010

Net Cost of Operations 3,047$ 327$ 348$ $ 2,605 6,327$ 

B-48
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

Program Costs by Segment

For the year 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 12 135 313

Total Intragovernmental Gross Costs 878 61 27 359 1,325

 Less: Intragovernmental Earned Revenue 77 28 28 (1) 132

 Intragovernmental Net Costs 801 33 (1) 360 1,193

Gross Costs With the Public:

Grants and Indemnities 421 16 287 75 799

Stewardship Land Acquisition (Note 14) 57 - - - 57

Other:

Operating Costs 2,185 259 117 1,513 4,074

Depreciation Expense 118 2 - 28 148

Reimbursable Costs 149 30 17 103 299

 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 - 39 491

Net Costs with the Public 2,482 303 421 1,680 4,886

Net Cost of Operations 3,283$ 336$ 420$ $ 2,040 6,079$ 

B-49
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 14: COST OF STEWARDSHIP PP&E 

Stewardship PP&E acquired in FYs 2011 and 2010 amounted to $44 and $57 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-50
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

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 2011 and 2010. 

 

Apportionment 

Category A

Apportionment 

Category B Total

Obligations Incurred - Direct $ 4,014 $ 2,050 6,064$ 

Obligations Incurred - Reimbursable 260 354 614

Total Obligations Incurred $ 4,274 $ 2,404 6,678$ 

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$ 

For the year ended September 30, 2011

(in millions)

For the year ended September 30, 2010

(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, 2011 and 2010

NOTE 16: EXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF 

BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES 

GOVERNMENT 

The differences between the FY 2010 Statement of Budgetary Resources (SBR) and the FY 2010 actual numbers 

presented in the FY 2012 Budget of the United States Government (Budget) are summarized in the table below. 

The President’s Budget with actual numbers for 2011 has not yet been published, and is expected to be published 

in February of 2012, 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%. No variances meet this threshold.

SBR Budget Dollar Percentage

SBR Line Description Amount Amount Variance Variance

Total Budgetary Resources/Status of Resources 9,339 9,334 5 0%

Total Status of Resources 9,339 9,334 5 0%

Unobligated Balance-Beginning of Year 2,745 2,741 4 0%

Recoveries of Prior Year Obligations 40 41 (1) -2%

New Budget Authority 6,094 6,094 - 0%

Spending Authority from Offsetting Collections 461 460 1 0%

Non Expenditure Transfers (1) (2) 1 -50%

Total New Obligations 6,980 6,980 - 0%

Unobligated Balance & Unobligated Balance not Available 2,359 2,354 5 0%

Obligated Balance - Beginning of Year 2,290 2,290 - 0%

Obligated Balance - End of Year 2,762 2,763 (1) 0%

Gross Outlays 6,509 6,508 1 0%

Less: Offsetting Collections (503) (502) (1) 0%

Less: Distributed Offsetting Receipts (429) (426) (3) -1%

Net Outlays 5,577 6,006 (429) -7%

(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, 2011 and 2010

NOTE 17: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Undelivered orders included in unpaid obligations as of September 30, 2011 and 2010 were as follows:

2011 2010

Unpaid Obligations 2,771 3,072

Undelivered Orders 1,860 2,243

(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, 2011 and 2010

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, 2011 and 2010, the amount of marijuana on hand was 28,205 (kg) and 32,046 (kg), respectively. Since the 

amount of seized property is deemed to be immaterial, a schedule of brought forward balances, additions, 

deletions and adjustments is not presented. 

 

B-54
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

NOTE 19: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

BUDGET (FORMERLY THE STATEMENT OF FINANCING)

2011 2010

Resources Used to Finance Activities:

Budgetary Resources Obligated:

Obligations Incurred $ 6,678 6,980$ 

Less: Spending Authority from Offsetting Collections and Recoveries 814 501

Obligations Net of Offsetting Collections and Recoveries 5,864 6,479

Less: Offsetting Receipts 467 429

Net Obligations 5,397 6,050

Other Resources:

Transfers in/out Without Reimbursement - 3

Imputed Financing from Costs Absorbed by Others 425 426

Other (2) (15)

Net Other Resources Used to Finance Activities 423 414

Total resources used to finance activities 5,820 6,464

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 380 (421)

Resources that Fund Expenses Recognized in Prior Periods (20) (27)

Budgetary Offsetting Collections and Receipts that do not Affect 

Net Cost of Operations

Change in Unfilled Orders 89 16

Other (1) -

Resources that Finance the Acquisition of Assets (184) (163)

Other Resources or Adjustments to Net Obligated Resources that do not 

Affect the Net Cost of Operations 66 60

Total Resources Used to Finance Items not Part of the Net Cost of Operations 330 (535)

Total Resources Used to Finance the Net Cost of Operations 6,150 5,929

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 (7) (3)

Total Components of Net Cost of Operations that will Require or Generate

Resources in Future Periods (7) 5

Components not Requiring or Generating Resources:

Depreciation and Amortization 145 148

Revaluation of Assets or Liabilities 34 2

Other Components not Requiring or Generating Resources:

Bad Debt Expense 6 (1)

Other (1) (4)

Total Components of Net Cost of Operations that will not Require or

Generate Resources 184 145

Total Components of Net Cost of Operations that will not Require or 

Generate Resources in the Current Period 177 150

Net Cost of Operations $ 6,327 6,079$ 

(in millions)

B-55
U.S. Department of Agriculture

Forest Service

Notes to the Consolidated and Combined Financial Statements

For the years ended September 30, 2011 and 2010

This note is intended to be a bridge between the entity’s budgetary and financial (proprietary) accounting. This 

reconciliation first identifies total resources used by an entity during the period (budgetary and other) and then 

makes adjustments to the resources based upon how they were used to finance net obligations or cost. The 

budgetary information used to calculate net obligations (the first four lines) must be presented on a combined 

basis to enable a direct tie to the Statement of Budgetary Resources. The reconciliation then explains the 

difference between the budgetary net obligations and the proprietary net cost of operations by setting forth the 

items that reconcile the two amounts. The budgetary net obligations and the proprietary net cost of operations are 

different in that (1) the net cost of operations may be financed by non-budgetary resources; (2) the budgetary and 

non-budgetary resources used by an agency may finance activities which are not components of the net cost of 

operations; and (3) the net cost of operations may contain components which do not use or generate resources in 

the period. 

B-56
Part C 

REQUIRED SUPPLEMENTARY 

STEWARDSHIP INFORMATION 

Unaudited 

C- 1
REQUIRED	SUPPLEMENTARY	STEWARDSHIP	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010	

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)	2011 Net	Cost	of	Operations:	$327 million.		Of	the	$327 million—	

$299 million was	an	investment	of	Research	and	Development	(R&D)	funding;

$	28 million	was	an	investment	of	National	Fire	Plan	funding	and	Joint	Fire	Science	Program	

funding.

Forest	Service	R&D	has	an	integrated	portfolio	that	supports	achievement	of	the	agency’s	strategic	goals	

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,	2011	AND	2010	

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.

C-3
REQUIRED	SUPPLEMENTARY	STEWARDSHIP	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010	

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	2011	stewardship	investment.	

R&D	Stewardship	Investments 2011	 2010 2009	 2008	 2007	

Net	Cost	of	Operations	(in	millions) $327 $338 $323 $304 $261

Basic	Research 91 94 87 82 60

Applied	Research 220 227 220 207 154

Development 16 17 16 15 47

New	interagency	agreements	and	contracts 32 38 57 40 41

Interagency	agreements	and	contracts	continued 12 12 12 12 17

Articles	published	in	journals 3,083 1,790 2,294 1,903 1,336

Articles	published	in	all	other	publications 1,178 1,481 886 1,487 1,846

Patent(s)	granted 3	 2	 3	 6	 3	

Patent	licenses	executed 2	 0	 0	 1	 0	

C-4
Part D 

REQUIRED SUPPLEMENTARY 

INFORMATION 

Unaudited 

D-1
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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.		

The	Forest	Service	uses	condition	surveys	to	

estimate	deferred	maintenance	on	all	major	

classes	of	its	PP&E.	Over	the	past	decade,	

the	Forest	Service	has	implemented	a	national	effort	to	collect	detailed	data	on	infrastructure	condition	

and	maintenance	and	improvement	needs.	No	deferred	maintenance	exists	for	fleet	vehicles,	as	they	

are	managed	through	the	agency’s	working	capital	fund.	Each	fleet	vehicle	is	maintained	according	to	

schedule.	The	cost	of	maintaining	the	remaining	classes	of	equipment	is	expensed.

The	agency	is	committed	to	sustaining	a	manageable	level	of	infrastructure—disinvesting	in

infrastructure	that	can	no	longer	be	managed	to	appropriate	standards,	rightsizing	its	asset	portfolio,	

and	eliminating	the	substantial	backlog	of	deferred	maintenance.	

Estimated	Deferred	Maintenance

Deferred	maintenance	estimates	for	most	assets—except	bridges—are	based	on	condition	surveys	

performed	on	a	5-year	maximum	revolving	schedule.		The	bridge	class	is	on	a	2-year	maximum	revolving	

schedule.	To	date,	surveys	of	all	administrative	buildings,	dams,	bridges,	roads	open	to	passenger	cars,	

D-2
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

and	recreation	sites	have	been	accomplished.	The	agency’s	deferred	maintenance	for	National	Forest	

System	(NFS)	roads	is	determined	annually	from	random	sample	surveys,	providing	an	80-percent	level	

of	confidence.	

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,	2011	(in	millions)

Asset	Class

Overall	

Condition

Critical

Maintenance

Noncritical	

Maintenance

Cost	To	Return	

To	Acceptable	

Condition

Bridge Varies $33 $151 $184

Building Varies 83 981 1,064

Dam Varies 8	 15 23

Fence Varies 293 0	 293

Handling	Facility Varies 22 0	 22

Heritage Varies 7	 19 26

Minor	Constructed	Features1 Varies 0	 109 109

Roads2 Varies 334 3,000 3,334

Trail Varies 6	 290 296

Trail	Bridge Varies 3	 7	 10

Wastewater	System Varies 19 17 36

Water	System Varies 61 48 109

Wildlife,	Fish,	and	TES3		 Varies 5	 2	 7	

Grand	Total $874 $4,639 $5,513

 

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	NFS	road	system	are	measured	by	various	standards:	

1. Federal	Highway	Administration	regulations	for	the	Federal	Highway	Safety	Act;	

2. Best	management	practices	for	the	nonpoint	source	provisions	of	the	Clean	Water	Act	from	the	

U.S.	Environmental	Protection	Agency	and	States;	

3. Road	management	objectives	developed	through	the	National	Forest	Management	Act	forest	

planning	process;	and

																																																												

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	$4,762 million.	All	road	beds	are	

considered	stewardship	assets. 3 In	prior	years,	Wildlife, Fish,	and	Threatened	and	Endangered	Species were	incorrectly	identified	as	"Wilderness."		

D-3
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

4. Forest	Service	directives—Forest	Service	Manual	(FSM)	7730,	Operation	and	Maintenance	

(August	25,	2005,	amendment	was	superseded	with	October	1,	2008,	revision);	Forest	Service	

Handbook	(FSH)	7709.56a,	Road	Preconstruction,	and	FSH	7709.56b,	Transportation	Structures	

Handbook.	

Dams	shall	be	managed	according	to	FSM	7500,	Water	Storage	and	Transmission,	and	FSH	7509.11,	

Dams	Management	Handbook.	The	condition	of	a	dam	is	acceptable when	the	dam	meets	current	

design	standards	and	does	not	have	any	deficiencies	that	threaten	the	safety	of	the	structure	or	public.	

For	dams	to	be	rated	in	acceptable	condition,	the	agency	needs	to	restore	the	dams	to	the	original	

functional	purpose,	correct	unsightly	conditions,	or	prevent	more	costly	repairs.

Buildings	shall	comply	with	the	National	Life	Safety	Code,	the	Forest	Service	Health	and	Safety	

Handbook,	and	the	Occupational	Safety	Health	Administration	as	determined	by	condition	surveys.	

These requirements	are	found	in	FSM	7310,	Buildings	and	Related	Facilities,	revised	November	19,	2004.	

The	condition	of	administrative	facilities	ranges	from	poor	to	good,	with	approximately	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.	

D-4
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Trails	and	trail	bridges	are	managed	according	to	Federal	law	and	regulations	(CFR	36).	More	specific	

direction	is	contained	in	FSM	2350,	Trail,	River,	and	Similar	Recreation	Opportunities,	and	the	FSH	

2309.18,	Trails	Management	Handbook.	

Deferred	maintenance	of	structures	for	wildlife,	fish,	and	threatened	and	endangered	species	is	

determined	by	field biologists	using	their	professional	judgment.	The	deferred	maintenance	is	

considered	critical	if	resource	damage	or	species	endangerment	would	likely	occur	if	maintenance	were	

deferred	much	longer.	

CONDITION	OF	HERITAGE	ASSETS	AND	STEWARDSHIP	LANDS

Heritage	Assets

Heritage	professionals	are	responsible	for	documenting	and	maintaining	cultural	resource	condition	

assessments	to	standard.	Periodic	monitoring	and	condition	assessments	are	the	basis	for	applying	

protective	measures	and	treatments	to	vulnerable,	deteriorating,	or	threatened	cultural	resources.	The	

condition	of	heritage	assets	depends	on	the	type	of	asset	and	varies	from	poor	to	fair.

Stewardship	Land	

The	condition	of	NFS	lands	varies	by	

purpose	and	location.	The	Forest	Service	

monitors	the	condition	of	its	stewardship	

lands	based	on	information	compiled	by	

two	national	inventory	and	monitoring	

programs—Forest	Inventory	and	Analysis	

and	Forest	Health	Monitoring.	

Although	most	of	the	estimated	193	

million	acres	of	stewardship	lands	

continue	to	produce	valuable	benefits—

clean	air	and	water,	habitat	for	wildlife,	

and	products	for	human	use—significant	

portions	are	at	risk	to	pest	outbreaks	or	

catastrophic	fires.	

There	are	25	million	acres	of	NFS	lands	at	risk	to	future	mortality	from	insects	and	diseases,	based	on	

the	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	2011	year-to-date4 accomplishments	on	NFS	and	State	and	Private	Forestry lands	include	

treatment	of	254,883 acres	for	invasives	and	28,581 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	2012	at	http://www.fs.fed.us.	

																																																												

4 Actual	accomplishments	for	FY	2011	will	be	published	in	the	FY	2013	Budget	Justification	in	February	2012	at	

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

D-5
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

National	Forest Forest	and State	and Capital	Improvement Wildland	Fire Permanent	and Working

Budgetary	Resources: and	Grasslands Rangeland	Research Private	Forestry and	Maintenance Management Trust	Funds Capital	Fund Total

Unobliga ted	Balance,	Brought	Forwa rd,	October	1: $																	221 $																												47 $																					 65 $																										106 $															 862 $																								934 $													124 $																		 2,359

Recoveries	of	Prior	Yea r	Unpaid	Obliga tions 																							 7 																																1 																									 9 																														13 																			 59 																														3 																			 2 																									 94

Budge t	Authori ty:

Appropria tion 																1,601 																												307 																					 278 																												473 														 2,465 																										700 																				- 																				 5,824

Spending	Authori ty	from	Offse tting	Collections

Ea rned

Collected 																					 74 																														25 																							 42 																														20 																			 58 																												27 															250 																							 496

Change	in	Receivables	from	Federal	Sources 																						(7) 																														 (3) 																										- 																																5 																	 142 																														 - 																				- 																							 137

Change	in	Unfilled	Cus tomer	Orders

Advance	Received 																								- 																																 - 																							 15 																																 - 																						- 																												34 																				- 																									 49

Wi thout	Advance	from	Federal	Sources 																				(15) 																																3 																							 30 																														13 																					 7 																														 - 																				- 																									 38

Subtotal 																1,653 																												332 																					 365 																												511 														 2,672 																										761 															250 																				 6,544

Nonexpendi ture	Trans fers,	ne t 																					 12 																														27 																					 106 																																 - 																(147) 																														 - 																				- 																										(2)

Permanently	Not	Available 																						(3) 																														 (1) 																								(1) 																														 (1) 																(404) 																														 - 																				- 																						(410)

Total	Budgetary	Resources $														1,890 $																										406 $																			 544 $																										629 $												 3,042 $																					1,698 $													376 $																		 8,585

Status	of	Budgetary	Resources:

Obliga tions	Incurred:

Di rect $														1,621 $																										340 $																			 394 $																										500 $												 2,466 $																								743 $																		- $																		 6,064

Reimbursable 																					 62 																														24 																							 59 																														27 																	 199 																														 - 															243 																							 614

Subtotal 																1,683 																												364 																					 453 																												527 														 2,665 																										743 															243 																				 6,678

																			 161 																														34 																							 81 																														96 																	 135 																										592 																	 95 																				 1,194

Unobliga ted	Balance	Not	Available 																					 46 																																8 																							 10 																																6 																	 242 																										363 																	 38 																							 713

Total	Status	of	Budgetary	Resources $														1,890 $																										406 $																			 544 $																										629 $												 3,042 $																					1,698 $													376 $																		 8,585

Change	in	Obligated	Balance:

Obliga ted	Balance,	ne t

Unpaid	Obliga tions,	Brought	Forwa rd,	October	1 $																	469 $																										147 $																			 567 $																										728 $															 999 $																								119 $															43 $																		 3,072

Les s:		Uncollected	Cus tomer	Payments	from	

			Federal	Sources,	Brought	Forwa rd,	October	1 																		(124) 																												 (40) 																						(22) 																												 (43) 																		(81) 																														 - 																				- 																						(310)

Total	Unpaid	Obliga ted	Balance,	ne t 																			 345 																												107 																					 545 																												685 																	 918 																										119 																	 43 																				 2,762

Obliga tions	Incurred,	ne t 																1,683 																												364 																					 453 																												527 														 2,665 																										743 															243 																				 6,678

Les s:	Gros s	Outlays 															(1,678) 																										 (353) 																				(401) 																										 (859) 													(2,620) 																								 (735) 														(239) 																			(6,885)

Les s:	Recoveries	of	Prior	Yea r	Unpaid,	actual 																						(7) 																														 (1) 																								(9) 																												 (13) 																		(59) 																												 (3) 																		(2) 																								(94)

Change	in	Uncollected	Cus tomer	Payments	from	Federal	Sources 																					 22 																																 - 																						(30) 																												 (18) 																(149) 																														 - 																				- 																						(175)

Obliga ted	Balance,	ne t,	End	of	Period

Unpaid	Obliga tions 																			 467 																												157 																					 610 																												383 																	 984 																										124 																	 46 																				 2,771

Les s:		Uncollected	Cus tomer	Payments	from	Federal	Sources 																		(102) 																												 (40) 																						(52) 																												 (61) 																(229) 																														 - 																		(1) 																						(485)

Total,	Unpaid	Obliga ted	Balance,	ne t,	End	of	Period $																	365 $																										117 $																			 558 $																										322 $															 755 $																								124 $															45 $																		 2,286

Net	Outlays:

Gros s	Outlays $														1,678 $																										353 $																			 401 $																										859 $												 2,620 $																								735 $													239 $																		 6,885

Les s:	Offse tting	Collections 																				(74) 																												 (25) 																						(57) 																												 (21) 																		(58) 																										 (60) 														(250) 																						(545)

Les s:	Di s tributed	Offse tting	Receipts 																				(86) 																																 - 																										- 																																 - 																						- 																								 (381) 																				- 																						(467)

Ne t	Outlays $														1,518 $																										328 $																			 344 $																										838 $												 2,562 $																								294 $														(11) $																		 5,873

Combined	Statement	of	Budgetary	Resources	by	Major	Budget	Account

For	the	year	ended	September	30,	2011

(in	millions)

Unobliga ted	Balance -Apportioned

D-6
REQUIRED	SUPPLEMENTARY	INFORMATION—UNAUDITED

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

National	Forest Forest	and State	and Capital	Improvement Wildland	Fire Permanent	and Working

Budgetary	Resources: and	Grasslands Rangeland	Research Private	Forestry and	Maintenance Management Trust	Funds Capital	Fund Total

Unobliga ted	Balance,	Brought	Forwa rd,	October	1: $																	220 $																											44 $																					 55 $																							 663 $															 712 $																								924 $													127 $																		 2,745

Recoveries	of	Prior	Yea r	Unpaid	Obliga tions 																							 9 																															2 																									 5 																													 2 																			 18 																														3 																			 1 																									 40

Budge t	Authori ty:

Appropria tion 																1,636 																											312 																					 308 																									 556 														 2,517 																										765 																				- 																				 6,094

Spending	Authori ty	from	Offse tting	Collections

Ea rned

Collected 																					 74 																													29 																							 29 																											 20 																			 78 																												26 															239 																							 495

Change	in	Receivables	from	Federal	Sources 																						(2) 																															3 																								(1) 																												(1) 																		(49) 																														 - 																				- 																								(50)

Change	in	Unfilled	Cus tomer	Orders

Advance	Received 																						(1) 																													 (1) 																									 6 																													 1 																						- 																														2 																				- 																											 7

Wi thout	Advance	from	Federal	Sources 																								- 																													 (1) 																							 10 																													 8 																				(8) 																														 - 																				- 																											 9

Subtotal 																1,707 																											342 																					 352 																									 584 														 2,538 																										793 															239 																				 6,555

Nonexpendi ture	Trans fers,	ne t 																					 12 																													29 																					 113 																														- 																(155) 																														 - 																				- 																										(1)

Permanently	Not	Available

Total	Budgetary	Resources $														1,948 $																									417 $																			 525 $																				 1,249 $												 3,113 $																					1,720 $													367 $																		 9,339

Status	of	Budgetary	Resources:

Obliga tions	Incurred:

Di rect $														1,654 $																									346 $																			 429 $																				 1,125 $												 2,231 $																								786 $																		- $																		 6,571

Reimbursable 																					 73 																													24 																							 31 																											 18 																			 20 																														 - 															243 																							 409

Subtotal 																1,727 																											370 																					 460 																						 1,143 														 2,251 																										786 															243 																				 6,980

																			 170 																													35 																							 58 																											 90 																	 276 																										710 																	 22 																				 1,361

Unobliga ted	Balance	Not	Available 																					 51 																													12 																									 7 																											 16 																	 586 																										224 															102 																							 998

Total	Status	of	Budgetary	Resources $														1,948 $																									417 $																			 525 $																				 1,249 $												 3,113 $																					1,720 $													367 $																		 9,339

Change	in	Obligated	Balance:

Obliga ted	Balance,	ne t

Unpaid	Obliga tions,	Brought	Forwa rd,	October	1 $																	448 $																									142 $																			 501 $																							 362 $												 1,007 $																								129 $															52 $																		 2,641

Les s:		Uncollected	Cus tomer	Payments	from	

			Federal	Sources,	Brought	Forwa rd,	October	1 																		(126) 																											 (38) 																						(14) 																										(36) 																(137) 																														 - 																				- 																						(351)

Total	Unpaid	Obliga ted	Balance,	ne t 																			 322 																											104 																					 487 																									 326 																	 870 																										129 																	 52 																				 2,290

Obliga tions	Incurred,	ne t 																1,727 																											370 																					 460 																						 1,143 														 2,251 																										786 															243 																				 6,980

Les s:	Gros s	Outlays 															(1,697) 																									 (363) 																				(388) 																								(775) 													(2,242) 																								 (793) 														(251) 																			(6,509)

Les s:	Recoveries	of	Prior	Yea r	Unpaid,	actual 																						(9) 																													 (2) 																								(5) 																												(2) 																		(18) 																												 (3) 																		(1) 																								(40)

Change	in	Uncollected	Cus tomer	Payments	from	Federal	Sources 																							 2 																													 (2) 																								(9) 																												(7) 																			 57 																														 - 																				- 																									 41

Obliga ted	Balance,	ne t,	End	of	Period

Unpaid	Obliga tions 																			 469 																											147 																					 567 																									 728 																	 999 																										119 																	 43 																				 3,072

Les s:		Uncollected	Cus tomer	Payments	from	Federal	Sources 																		(124) 																											 (40) 																						(22) 																										(43) 																		(81) 																														 - 																				- 																						(310)

Total,	Unpaid	Obliga ted	Balance,	ne t,	End	of	Period $																	345 $																									107 $																			 545 $																							 685 $															 918 $																								119 $															43 $																		 2,762

Net	Outlays:

Gros s	Outlays $														1,697 $																									363 $																			 388 $																							 775 $												 2,242 $																								793 $													251 $																		 6,509

Les s:	Offse tting	Collections 																				(73) 																											 (28) 																						(35) 																										(21) 																		(78) 																										 (29) 														(239) 																						(503)

Les s:	Di s tributed	Offse tting	Receipts 																				(83) 																															 - 																										- 																														- 																						- 																								 (346) 																				- 																						(429)

Ne t	Outlays $														1,541 $																									335 $																			 353 $																							 754 $												 2,164 $																								418 $															12 $																		 5,577

Combined	Statement	of	Budgetary	Resources	by	Major	Budget	Account

For	the	year	ended	September	30,	2010

(in	millions)

Unobliga ted	Balance -Apportioned

D-7
Part E

OTHER ACCOMPANYING INFORMATION

Unaudited

E- 1
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

OTHER ACCOMPANYING INFORMATION (OAI) 

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	2011.

Forest	Service	 Management	and	Community	Action	Needed	To	Improve	Forest	Health	and	Reduce	

Firefighting	Costs1

Forest	Service’s	Invasive	Species	Program-OIG	Audit	Report	Number 08601-7-AT

Completed	Fiscal	Year 2011	Accomplishments/Action(s)

-Ensured National	Forest	System’s	(NFS)	Invasive	Species	Program	accomplishments	were	included	within	the	

agency’s	annual performance	reporting	process.

-Conducted	an	overall	review	of	the	agency’s	information	systems	for	the	Invasive	Species	Program	and	took	steps	

to	ensure the	systems	are adequate	to	report	data.

Planned	FY	2012	Actions

-Develop	new	NFS	invasive	species	management	policy	(Forest	Service	Manual 2900)	to	include	program-wide	

policy	of	providing	early	detection	and	rapid	response within	Forest	Service and	document	all	Invasive	Species	

Program’s	internal	policies	and	procedures.

-Develop	an	adequate,	cohesive	internal	control	environment	for	managing	the	Invasive	Species	Program	and	

reporting	accurately	how	much	the	agency	is	spending to	combat	invasive	species.	

Implement	a	monitoring	plan	to	assess	the	Invasive	Species	Program	and	related	internal	control.

-Revise	the	National	Strategy	and	Implementation	Plan	for	Invasive	Species	management	and	establish	a	control	

for	revising	the	strategy	once	every	5	years.	

-Develop	an	inventory	plan	including	responsibilities,	timeframes,	and	benchmarks	for	inventorying	all	invasive	

species,	the	risk	the	species	poses,	and	the	efficacy	of	available	treatments.	

-Develop	a	standard	for	how	many	acres	are	affected	by	each	of	the	agency’s	treatments,	and	require	the	regions	

to	follow	these	standards	when	reporting	performance	results.	

-Develop	and	implement	a	formal	review	system	to	verify	the	accuracy	of	invasive	species	accomplishment	data	

reported.

Forest	Service’s	Contracted Labor	Crews-OIG	Audit	Report	Number		08001-2-AT

Completed	FY	2011	Accomplishments/Action(s)

-Hired	a	contractor	to	conduct	an	in-depth	analysis	to	determine	how	the	agency	should	proceed	with	determining	

future	firefighting crew	needs	and	costs.	

-National	Wildlife	Coordinating	Group		established	a	new	evaluation	form	to	reflect	clear	and	objective	standards	

for	evaluating	the	effectiveness	of	firefighting	crews,	implemented	a	plan	for	tracking	the	results	of	these	

performance	evaluations,	eliminated	duplicate	inspections	of	dispatched	contract	crews	at	an	incident,	and	

incorporated	the	use	an	electronic	employment	eligibility	verification	system	as	required	by	Executive	order.	

Large	Fire	Suppression	Costs–OIG	Audit	Report	Number 08601-44-SF

																																																												

1 USDA’s	Management	Challenge Number	6.	

E-2
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Completed	FY	2011	Accomplishments/Action(s)

-Required	the	agency	to	develop	incident	commander	and	line	officer	evaluations	that	include	performance	

standards	to	assess	whether	the	tactics	employed	are	cost	effective	and	assure	financial	oversight.	The	Forest	

Service issued	a	letter	directing	the	regional	foresters	to	use	the	Incident	Commander	Effectiveness	Rating	Form

for	incident	commander	and	line	officer	performance	evaluations.	The	agency	now	focuses	on	risk	management	

and	risk	exposure	to	evaluate	incident	commander	performance	and	developed	the standards based	on	the	

information	obtained	in	the	Incident	Action	Plans,	Incident	Status	Summaries	and	Unit	Logs,	which	provide	the	

necessary	information	to	measure	and	evaluate	the	success	of	daily	fire	action, activities,	and	costs.	

Replacement	Plan	for	Firefighting	Aerial	Resources–OIG	Report	Number 08601-53-SF

Completed	FY	2011	Accomplishments/Action(s)

-Revamped	the	Working	Capital	Fund	(WCF)	program	and	developed	the	“Aerial	Firefighting	Aircraft	Replacement	

Action	Plan”	in	an	effort	to	strengthen	the	agency’s	aerial	firefighting	acquisition	process.	The	plan	includes	specific	

goals	and	timelines	for	completing	the	planning	and	procurement	processes.	In	addition,	the	plan	requires	that	the	

integrated	project	team	develop	a	5-year	“USDA	Forest	Service	Aerial	Firefighting	Strategic	Plan”	and	adopt	goals	

and	performance	measures.	The	plan	also	requires	that	the	agency	analyze	its	current	firefighting	systems	and	

databases	to	address	whether	the	capability	for	assessing	air	tankers'	impact	on	suppressing	fires	during	"initial	

attack,"	and	"after"	for	those	fires	that	escape,	can	be	incorporated	within	the	systems.	Finally,	it	requires	the	

agency	to	analyze	actual	performance	data	collected	from	the	systems and	databases	in	accordance	with	the	goals	

and	performance	measures.

-Set	specific	goals	and	timeframes	for	completing	the	aviation	planning	and	procurement	processes.

-Developed	a	“WCF	Fleet	Aircraft	Replacement	Plan”	approved	on	April	18,	2011,	that	shows	estimated	

timeframes	and	costs	for	replacing	aircraft.

-Established	a	new	process	to	develop	WCF	aircraft	rates	and	periodically	review	the	rates	to	ensure the	agency	

meets	its	long-term	needs	for	replacing	aircraft.	

Firefighting	Succession	Planning–OIG	Audit	Report	Number 08601-54-	SF

Planned	FY	2012	Actions

-With	USDA’s	Natural	Resources	and	Environment mission	area,	continue	to	work	with	the	U.S.	Office	of	Personnel	

Management	(OPM)	to	assure	fire	management	positions	are	classified	appropriately	and	direction	on	the	use	of	

the	GS-401	job	series	is provided	throughout	the	agency.	

-Develop	a	“Firefighter	Workforce	and	Succession	Planning	Action	Plan” to	list	each	recommendation	from	the	

audit	and	the	key	steps	and	milestones	for	completing	all	the	tasks	under	the	audit,	along	with	the	program	leads	

and	estimated completion	dates.	

-Develop	a	“Fire	and	Aviation	Management	Workforce	and	Development	Strategic	Framework” document	that	

includes	a	workforce	goal	for	recruiting,	developing,	and	retaining	a	highly	skilled	fire	and	aviation	workforce	and	a	

support	force	of	Forest	Service employees	in	other	disciplines.		This	document	provides	the	overall	philosophy	and	

desired	future	of	fire	and	aviation	in	the	Forest	Service.		The	framework	will	help	determine	the	appropriate	

numbers	and	skill	mix	of	employees and detail	how	the	agency	will	get	there.		

E- 3
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

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).

USDA	Strategic	Goal Forest	Service	Strategic	Goal

Goal	1:	Assist	rural	

communities	to	create	

prosperity	so	they	are	selfsustaining,	repopulating,	and	

economically	thriving

Goal	2: Provide	and	Sustain	Benefits	to	the	American	People

Goal	4: Sustain	and	Enhance	Outdoor	Recreation	Opportunities

Goal	6: Engage	Urban	America	With	Forest	Service	Programs

Goal	2:	Ensure	our	national	

forests	and	private	working	

lands	are	conserved,	restored,	

and	made	more	resilient	to	

climate	change,	while	

enhancing	our	water	

resources	

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

Goal	3: Conserve	Open Space

Goal	5: Maintain	Basic	Management	Capabilities	of	the	Forest	Service

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- 4
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Strategic	Goals: 2011 2010

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

1A.	Gross	Costs 																						4,897 $																			4,611

1B.	Less:	Earned	Revenue 																									570 																									429

1C.	Net	Goal	Cost 																						4,327 $																			4,182

2.	Provide	and	Sustain	Benefits	to	the	American	People:

2A.	Gross	Costs 																									478 																									430

2B.	Less:	Earned	Revenue 																											 56 																											 40

2C.	Net	Goal	Cost 																									422 $																							390

3.	Conserve	Open	Space:

3A.	Gross	Costs 																									235 																									227

3B.	Less:	Earned	Revenue 																											 28 																											 21

3C.	Net	Goal	Cost 																									207 $																							206

4.	Sustain	and	Enhance	Outdoor	Recreation	Opportunities:

4A.	Gross	Costs 																									816 																									748

4B.	Less:	Earned	Revenue 																											 95 																											 69

4C.	Net	Goal	Cost 																									721 $																							679

5.	Maintain	Basic	Management	Capabilities	of	the	Forest	Service:

5A.	Gross	Costs 																									543 																									510

5B.	Less:	Earned	Revenue 																											 63 																											 47

5C.	Net	Goal	Cost 																									480 $																							463

6.	Engage	Urban	America	with	Forest	Service	Programs:

6A.	Gross	Costs 																											43 																											39

6B.	Less:	Earned	Revenue 																														4 																														4

6C.	Net	Goal	Cost 																											39 $																									35

7A.	Gross	Costs 																									148 																									137

7B.	Less:	Earned	Revenue 																											 17 																											 13

7C.	Net	Goal	Cost 																									131 $																							124

			Total	Gross	Costs $																			7,160 $																			6,702

			Total	Earned	Revenue 																									833 																									623

			Net	Cost	of	Operations $																			6,327 $																			6,079

7.	Provide	Science-based	Applications	and	Tools	for	Sustainable	Natural	Resource	

Management:

U.S.	Department	of	Agriculture

Forest	Service

CONSOLIDATED	STATEMENTS	OF	NET	COST

For	the	years	ended	September	30,	2011	and	2010

(in	millions)

E- 5
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

IMPROPER	PAYMENTS	IMPROVEMENT	ACT	(IPIA) REPORTING

As	required	by	the	Improper	Payments	Information	Act	of	2002	(IPIA)	and	Office	of	Management	and	

Budget	(OMB)	Circular	A-123,	Appendix	C,	agencies	are	to measure	high-risk	programs	annually,	

estimate	the	amount	of	improper	payments,	and	report	the	estimate	in	the	Performance	and	

Accountability	Report	(PAR).

THE	CRITERIA	FOR	THE	RISK	ASSESSMENT	

USDA	programs	have	been	divided	into	two	categories	for	the	purpose	of	performing	risk	assessments:	

management	 certification	 and	 risk	 assessments. Risk	 assessments	 are	 performed	 on	 all	 programs	 at	

least	 once	every	3	 years	 or	more	 frequently	 if the Office	 of	 the	 Chief	 Financial	Officer	(OCFO)	deems	

necessary.	In	addition	to	risk	assessments,	agencies	are	required	to	provide	a	management	certification	

which	asserts,	among	other	things,	that:	(1)	the	program	is	still	determined	to	be	at	low	risk	of	improper	

payments,	(2)	there	have	been	no	significant	program	changes	since	the	last	risk	assessment,	(3)	there	

have	been	no	significant	internal	control	changes	since	the	last	risk	assessment,	and	(4)	there	have	been	

no	new	audit	reports	describing	significant	improper	payments	or	internal	control	issues.	If	any	of	these	

statements	are	not	true,	OCFO	may	ask	that	the	agency	perform	a	risk	assessment	on	that	program	for	

the	current	fiscal	year.	

Wildland	 Fire	 Suppression	 Fund	 (WFSU)	 has	 been	 identified	 as	 a	 high-risk	 program	 for	 Forest	 Service

since	FY	2004. No	new	high-risk	programs	were	identified	for	FY	2011.

THE	DESCRIPTION	OF	THE	STATISTICAL	SAMPLING	PROCESS	

The	IPIA requires	statistical	sampling	for	high-risk	programs	only.	The	Forest	Service	used	Monetary	Unit	

Sampling	(MUS)	to	systematically	analyze	and	review	WFSU	transactions	for	FY	2011	(the	period	of	

10/01/2009	through	9/30/2010).

THE	DESCRIPTION	OF	THE	CORRECTIVE	ACTION	PLAN(S)	

The	result	of	our	sampling	over	the	WFSU	program	resulted	in	a	testing	error	rate	of	0.00 percent for	FY	

2011.	In	addition,	the	enhanced analytics	conducted	over	the	WFSU	program	resulted	in	$204,626	of	

improper	payments	or	0.03 percent of	total	outlays.	The	root	causes	of	the	improper	payments	were	

mostly	administrative	in	nature	or	related	to	travel	advances.

Below	is	a	table	of	the	statistical	sampling	results	of	the	WFSU	assessment.

Fund Population	

Outlays

Tested	Outlay	

Amount

Population	

Insufficient	Documentation

Population	

Improper	Payment	Error

Dollars Rate Dollars Rate

WFSU $491,122,137 $	46,991,848 $0.00 0.0% $0.00 0.0%

E- 6
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

The	Forest	Service	continues	to	improve	internal	controls	with continuous	internal	monitoring	and	

analytics	of	possible	improper	payments.	The	centralization	of	accounting	functions	has	improved	

communication	and	follow-up	prior	to	payment	authorization,	which	has	reduced	the	potential	for	

errors.			

In	FY	2012,	the	Forest	Service is	continuing	to	enhance	its	risk	assessment	process	and	use monitoring	

and	analytics	to	assess	the	root	cause	of	improper	payments	and	conduct	additional	corrective	action	to	

improve	the	effectiveness	of	internal	controls.	The	Forest	Service is	also	researching	automated	tools	

that	will	serve	as	effective	preventative	internal	controls	to	reduce	improper	payments.	In	addition	to	

the	annual	risk	assessments,	quarterly	reviews	will	also	be	conducted	to	identify	potential	duplicate	

payments	using automated	statistical	software.	Statistical	sampling	will	also	be	performed	over	all	

payments	to	identify	the	areas	where	erroneous	payments	are	more	prevalent.

IMPROPER	PAYMENT	REDUCTION	OUTLOOK	

The	following	tables	for	the	Improper	Payment	Reduction	Outlook	are	limited	to	the	WFSU.	

Improper	Payment	Reduction	Outlook (in	thousands)

IPIA	Reporting	Year FY	2010 FY	2011	 FY	2012	

Actual	Fiscal	Year FY	2009	 FY	2010 FY	2011	

Program Outlays IP	% IP	$ Outlays IP	% IP	$ Outlays IP	% IP	$

WFSU2 $480,800 0.00% $0.00 $491,000 0.00% $0.00 $595,290 0.00% $0.00

Improper	Payment	Reduction	Outlook (in	thousands)

IPIA	Reporting	Year FY	2013	 FY	2014	

Actual	Fiscal	Year FY	2012	 FY	2013	

Program Estimated	

Outlays IP	% IP	$ Estimated	Outlays IP	% IP	$

WFSU3 $885,000 0.00% $0.00 $992,700 0.00% $0.00

RECOVERY	OF	IMPROPER	PAYMENT	

The	Improper	Payments	Elimination	and	Recovery	Act	of	2010	(IPERA)	requires	Federal agencies	to	

enhance	their	efforts	in	preventing,	detecting,	and	recovering	improper	payments.	Beginning	FY	2011,	

the	Forest	Service conducted	a	retroactive	review	of	FYs	2010	and	2011	billings	to	enhance	our	ability	to	

identify	and	report	recovery	of	improper	payments.	Internal	reviews	were	also	conducted	periodically	

and	reported	to	OCFO	through	the	quarterly	High	Dollar	Report	for	the	high-risk	WFSU	fund.

																																																												

2

	Credit	card	transactions	and	salaries	and	expenses	were	excluded	from	the	Wildland	Fire	Suppression	(WFSU)	population	and	considered	as	

separate	funds.

3

	Credit	card	transactions	and	salaries	and	expenses	were	excluded	from	the	WFSU	population	and	considered	as	separate	funds.

E- 7
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

Recovery	of	Improper	Payments

Actual	Dollars	Recovered

FY	2007	 FY	2008	 FY	2009	 FY	20104 FY	2011	

$85,658 $99,361 $1,720 $1,700,000 $2,115,003

RISK	ASSESSMENT	AND	OVERSIGHT	BENEFITS	

The	benefits	of	enhanced	risk	assessments	and	oversight	have	enlightened	Forest	Service management	

with	information	regarding	the	payment	processes	that	have	higher	inherent	risk.	This	will	allow	

management	to	identify	the	root	causes	and	improve	and	enhance	internal	controls	and	dedicate	

additional	resources	to	reduce	the	risk	of	improper	payments.

SUMMARY	OF	FINANCIAL STATEMENT	AUDIT	AND	MANAGEMENT	ASSURANCES	

Exhibit1.	Definitions	for	terms	used	in	this	section

Beginning	

Balance The	FY	2011	beginning	balance	agrees	with	the	FY	2010	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	the	Federal	Managers’	Financial	

Integrity	Act	(FMFIA),	Section	2	Effectiveness	of	Internal	Control	over	Financial	Reporting to	a	

FMFIA,	Section	4	Conformance	with	Financial	Management	System	Requirements.	

Ending	

Balance The	Forest	Service’s	FY	2011	ending	balance	for	material	weaknesses	at	yearend.

SUMMARY	OF	FINANCIAL	STATEMENT	AUDIT	

Summary	of	Financial	Statement	Audit

Audit	Opinion Unqualified

Restatement No

Material	Weaknesses Beginning	

Balance

New Resolved Consolidated Reassessed Ending	

Balance	

0	 0	 0	 0	 0	 0	

Total	Material	Weaknesses 0	 0	 0	 0	 0	 0	

																																																												

4 The	methodology	for	reporting	improper	payments	changed	for	FY	2010.	The	Forest	Service	previously	reported	FY	2010	dollars	recovered	as	

$584,994	in	the FY	2010	Forest	Service	Agency	Financial	Report.

E-8
OTHER	ACCOMPANYING	INFORMATION—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

SUMMARY	OF	MANAGEMENT	ASSURANCES	

Effectiveness	of	Internal	Control	over	Financial	Reporting	(FMFIA	§	2)

Statement	of	Assurance Beginning	

Balance

New Resolved Consolidated Reassessed Ending	

Balance	

Material	Weaknesses 0	 0	 0	 0	 0	 0	

Total	Material	Weaknesses 0	 0	 0	 0	 0	 0	

Effectiveness	of	Internal	Control	over	Operations	(FMFIA	§2)

Statement	of	Assurance Beginning	

Balance

New Resolved Consolidated Reassessed Ending	

Balance

Material	Weaknesses 0	 0	 0	 0	 0	 0	

Total	Material	Weaknesses 0	 0	 0	 0	 0	 0	

Conformance	with	Financial	Management	System	Requirements	(FMFIA	§4)

Statement	of	Assurance

Systems	conform,	conform	except	for	the	below	nonconformance(s),	or	do	not	conform	to	

financial	management	system	requirements	(OMB	Circular	A-136,	Section	4	OAI)

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

							U.S.	Standard	General	Ledger at	the	Transaction	Level Yes Yes

E- 9
Appendix: 

ACRONYMS AND ABBREVIATIONS 

Unaudited 

Appendix- 1
ACRONYMS	AND	ABBREVIATIONS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

ACRONYMS	AND	ABBREVIATIONS

ACRONYM	OR	

ABBREVIATION EXPLANATION

ACSI American	Customer	Satisfaction	Index

AFR Agency	Financial	Report

APR Annual	Performance	Report

ARRA American	Recovery	and	Reinvestment	Act	of	2009

ASC Albuquerque	Service	Center

BS balance	sheet(s)

CCF hundred	cubic	feet

CERCLA Comprehensive	Environmental	Response,	Compensation,	and	Liability	Act	of	1980

CFO Chief	Financial	Officer

CFR Code	of	Federal	Regulations

CRO Cumulative Results	of	Operations

CSRS Civil	Service	Retirement	System

CWPP Community	Wildfire	Protection	Plan

DOI U.S.	Department	of	the	Interior

DOL U.S.	Department	of	Labor

DOT U.S.	Department	of	Transportation

ELT executive	leadership	team

EPA U.S.	Environmental	Protection	Agency

FBWT fund	balance	with	treasury

FECA Federal	Employees’	Compensation	Act

FERS Federal	Employees’	Retirement	System

FFIS Foundation	Financial	Information	System

FFMIA Federal	Financial	Management	Improvement	Act

FISMA Federal	Information	Security	Management	Act

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

FY fiscal	year

GAAP Generally	Accepted	Accounting	Principles

GAO Government	Accountability	Office

gEMS Government	Enterprise	Messaging	Service

GS General	Schedule

GSA General	Services	Administration

H.R. House	Rule

HRM Human	Resource	Management

IITF International	Institute	of	Tropical	Forestry

IP improper	payment

IPERA Improper	Payment	Elimination	and	Recovery	Act

IPIA Improper	Payment	Information	Act

IT information	technology

K-V	 Knutson-Vandenberg,	a	trust	fund	for	timber	sale	area	improvements

Kg kilogram

L&WCF Land	and	Water	Conservation	Fund

MD&A Management’s	Discussion	and	Analysis,	a	section	of	the	AFR

MNP Midewin	National	Tallgrass	Prairie

MUS monetary	unit	sampling

NFS National	Forest	System	(Deputy	Area)

Appendix- 2
ACRONYMS	AND	ABBREVIATIONS—UNAUDITED	

FOR	THE	YEARS	ENDED	SEPTEMBER	30,	2011	AND	2010

ACRONYM	OR	

ABBREVIATION EXPLANATION

NLC national	leadership	council

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)

OIG Office	of	Inspector	General	(USDA)

OGC Office	of	General	Counsel

OMB Office	of	Management	and	Budget

OPM Office	of	Personnel	Management

PAR Performance	and	Accountability	Report

PHA Priority	heritage	assets

P.L. Public	Law

POSS Point-of-Sale-System

PP&E Property,	Plant,	and	Equipment

R&D Research	and	Development	(Deputy	Area)

RCRA Resource	Conservation	and	Recovery	Act

RSI Required	Supplementary	Information,	a	section	of	the	AFR

RSSI Required	Supplementary	Stewardship	Information,		a	section	of	the	AFR

S&PF State	and	Private	Forestry	(Deputy	Area)

SBR Statement(s)	of	Budgetary	Resource(s)

SCNP Statement(s)	of	Change(s)	in	Net	Position

SNC Statement(s)	 of Net	Cost

SNP Statement	of	Net	Position

SOF Statement	of	Financing

TACCIMO Template	for	Assessing	Climate	Change	Imports	and	Management	Options

U.S.C. United	States	Code

USDA U.S. Department	of	Agriculture

USSGL U.S.	Standard	General	Ledger

WCF Working	Capital	Fund

WFSU Wildland	Fire	Suppression

WUI wildland-urban	interface

YTD year-to-date

Appendix- 3