United States Department of Agriculture

Forest 

Service

March 2014

Forest Service

Fiscal Year 2013

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

produce an Agency Financial Report (AFR) for fiscal year 2013. 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, the independent auditors’ report, and the USDA Office of Inspector 

General’s (OIG) transmittal letter;

	The Required Supplementary Stewardship Infomation (RSSI);

	The Required Supplementary Infomation (RSI); and

	Other Information (OI), 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 included its FY 2013 Annual Performance Report (APR) and FY 2015 performance plan with its Congressional Budget Justification in February 2014. All of these documents are 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.
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Our Mission

Sustain the health, diversity, and 

productivity of the Nation’s forests and 

grasslands to meet the needs of present and 

future generations.
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Message From the Chief 

As Chief of the Forest Service, I am proud to update the public and Congress 

with the Forest Service’s fiscal year (FY) 2013 Agency Financial Report (AFR). 

Effective financial and programmatic management in the Forest Service is 

integral to the social, ecological, and economic sustainability of our Nation’s 

resources, so I am particularly proud to report our 12th consecutive unqualified 

audit opinion. This opinion indicates that an external auditor found the Forest 

Service’s financial statements to be true and fair. The audit also reported no 

material weaknesses.

The Forest Service mission—to sustain the health, diversity, and productivity 

of the Nation’s forests and grasslands to meet the needs of present and future generations—demonstrates 

our commitment to ensuring that our Nation’s forests and grasslands sustainably provide clean air and water, 

habitat for native fish and wildlife, opportunities for outdoor recreation, erosion control and soil renewal, and 

more. These same lands provide drinking water to about 3,400 communities for nearly 60 million citizens. 

In FY 2013, the Forest Service took an “all-lands” approach, working with our State, tribal, and private partners 

to implement and facilitate restoration efforts on the Nation’s forests and grasslands through our programs, 

tools, frameworks, and innovative research. Our restoration efforts focused on high-priority watersheds 

and areas ravaged by wildfire, bark beetle infestation, and drought—all exacerbated by climate change—to 

improve and maintain the resiliency of forest ecosystems, watersheds, and forest-dependent communities.

Recognizing that diversity of thought is the foundation of every successful organization, the Forest Service 

increased efforts to create and support collaboration, resulting in more meaningful engagement with 

communities. The agency also invested in its future by providing jobs, training, and community support in 

urban and underserved communities, in traditional resourced-based communities, and for veterans. We have 

made steady progress to become a fully inclusive organization with a more supportive work environment.

The greatest risk and challenge for the agency continues to be wildfire, specifically in the wildland urban 

interface, where human development borders on national forests or grasslands. It was in areas such as these 

that the Nation’s firefighting community witnessed a devastating loss of life in FY 2013. We expanded our 

ability to learn from this tragic loss of life with the completion of a second level of safety engagements in our 

Safety Learning Journey. We honor those lost to wildfire by ensuring lessons learned are incorporated into our 

decisionmaking as we continue our Safety Learning Journey in FY 2014. It is these efforts that keep the Forest 

Service on course to become a zero-fatality organization. 

Additionally, in those communities at greatest risks from wildfire, the Forest Service provided jobs for 

removing hazardous fuels and exceeded our goal for fuels treatments. We provided technical advice to 

over 7,000 communities in the development of their community wildfire protection plans. Forest Service 

crews in Colorado assisted search-and-rescue efforts in watersheds clogged with debris and mud from the 

unprecedented rains falling on hillsides scorched from wildfire. Although the agency dealt with a tough fire 

season in FY 2013, we continued a phenomenal record of suppressing 98 percent of our fires during initial 

attack.

iii
I am proud of this AFR and of all Forest Service employees, partners, and volunteers who contributed to the 

progress made in FY 2013. Looking forward, the Forest Service remains committed to upholding the trust of 

the American people through our stewardship of the Nation’s resources and through our efforts to continue 

improving our financial and performance accountability. 

The Forest Service’s Annual Performance Report—along with the FY 2015 Budget Justification—will provide 

a comprehensive assessment of the agency’s programmatic performance for FY 2013.

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

Forest Service Chief Financial Officer and Deputy Areas.............................................................................................A-4

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

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

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

Restoration................................................................................................................................................................A-12

Wildland Fire Management.......................................................................................................................................A-12

Jobs and Communities...............................................................................................................................................A-13

Inclusiveness and Diversity........................................................................................................................................A-13

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

The Government Performance and Results Modernization Act of 2010....................................................................A-14

Strategic Goals and Objectives.............................................................................................................................A-14

USDA’s Key Performance Measures......................................................................................................................A-14

Agency Priority Goals...........................................................................................................................................A-17

Summary Analysis of Financial Statements and Stewardship Information...................................................................A-19

Consolidated Balance Sheets.....................................................................................................................................A-19

Consolidated Statements of Net Cost........................................................................................................................A-23

Consolidated Statements of Changes in Net Position................................................................................................A-24

Combined Statements of Budgetary Resources........................................................................................................A-24

Analysis of Systems, Controls, and Legal Compliance...................................................................................................A-26

Management Assurances..............................................................................................................................................A-26

Limitations of Financial Statements..............................................................................................................................A-28

Part B: Financial Section...............................................................................................................................................B-1

The CFO’s Vision..............................................................................................................................................................B-2

Message From the Chief Financial Office.......................................................................................................................B-3

USDA Office of Inspector General Transmittal Letter.......................................................................................................B-5

Independent Auditor’s Report...........................................................................................................................................B-8

Audit Opinion...................................................................................................................................................................B-9

Report on Internal Controls..........................................................................................................................................B-12

Report on Compliance and Other Matters................................................................................................................B-25

Contents

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vi

Management’s Response to Audit Report......................................................................................................................B-30

Consolidated Balance Sheets..........................................................................................................................................B-31

Consolidated Statements of Net Cost.............................................................................................................................B-32

Consolidated Statements of Changes in Net Position....................................................................................................B-33

Combined Statements of Budgetary Resources..............................................................................................................B-34

Notes to the Consolidated and Combined Financial Statements..................................................................................B-35

Part C: Required Supplementary Stewardship Information (Unaudited)...........................................................C-1

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

Part D: Required Supplementary Information Section (Unaudited) .....................................................................D-1

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

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

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

Part E: Other Information Section (Unaudited) ....................................................................................................E-1

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

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

Net Cost of Operations by Strategic Goal.............................................................................................................................E-6

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

Improper Payments Improvement Act Reporting .............................................................................................................E-9
A-1

Part A: Management’s 

Discussion and Analysis Section

(Unaudited)
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-2

 About This Report

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

Financial Report (AFR) and Annual Performance Report (APR) in accordance with the Office of Management and Budget 

(OMB) Circulars A-136 and A-11, Section 200.4. 

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

public assess the Forest Service’s stewardship over the financial resources entrusted to it. This approach improves the 

Forest Service’s performance reporting in the following ways:

•	 Eliminating redundancy, especially where actual data can be used in lieu of estimates due to the timing of the report.

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

•	 Providing a more succinct and easily understood analysis of the Forest Service’s accountability over its resources.

The fiscal year (FY) 2013 Management’s Discussion and Analysis (MD&A) serves as a high-level overview of the Forest 

Service’s financial reporting, programmatic performance, and compliance with legal and regulatory requirements. The 

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

The Forest Service’s APR was published with the FY 2015 Congressional Budget Justification in February 2014 at 

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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 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 U.S. Department of 

Agriculture Under Secretary for Natural Resources and Environment. 

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

National Forest System (NFS), Research and Development (R&D), and State and Private Forestry (S&PF).
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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FOREST SERVICE CHIEF FINANCIAL OFFICER AND DEPUTY AREAS 

The CFO and deputy areas enable the Forest Service to accomplish its mission. The following sections highlight the 

programs from the CFO and each deputy area. Several FY 2013 accomplishments are included.

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. 

The CFO programs are Financial Management Systems, Financial Policy, Financial Reporting and Reconciliation, Audit and 

Assurance, and Budget and Finance.

 FY 2013 Chief Financial Officer Accomplishments 

•	 The Forest Service received its 12th consecutive unqualified opinion from the independent auditors and no material weaknesses were noted for FY 2013. The unqualified or clean opinion is the Forest Service’s assurance that 

internal controls are in place in the agency’s financial systems, processes, and procedures. 

•	 In FY 2013, the USDA Office of Inspector General (OIG) 

performed audits in areas of ecosystem management, 

roads, bridges, watersheds, firefighting succession planning, forest legacy, special uses, and financial statement 

reporting. By streamlining processes and increasing collaboration with the program areas, the Forest Service 

reached management decision on 86 OIG recommendations and closed 8 audits. The agency also participated in 

31 Government Accountability Office (GAO) audits for 

firefighting aircraft fleet, trails, coal leasing, climate 

change, hydropower relicensing, Forest Service work

planning, and border security. Nine of these GAO audits 

were closed, including 29 related recommendations.

•	 In this first year of migration to USDA’s new accounting system, the Financial Management Modernization Initiative 

(FMMI), the Forest Service interfaced six priority candidate systems for revenue accounting for programs such as 

minerals, recreation, and timber and eliminated one payment system. 

•	 The Forest Service implemented Phase II of the Point of Sales System (POSS), installing equipment for credit card and 

online payments at an additional 43 national forests. With these installations, the agency has now installed POSS at 

420 ranger districts, visitor centers, and supervisor’s offices for 84 of 154 national forests. Customers generated $70 

million in agency revenue through POSS, up from $23 million in FY 2012.

•	 The Forest Service performed 174 internal reviews of fees, timber cost collections, Job Corps Centers, and other special assignments to ensure that agency controls are established and are working as they should in accordance with 

agency policy and OMB guidance. 

Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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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.

The Business Operations programs are the Chief 

Information Office; 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 

Occupational Health; and Acquisition Management.

FY 2013 Business Operations Accomplishments

•	 The Forest Service exceeded its procurement preference goals for Women-Owned, Veteran-Owned, Small-Disadvantaged, and Historically Underutilized Business Zones (HubZone) businesses.

•	 The Forest Service consolidated the Customer Help Desk contract to a USDA-wide contract, saving the agency 

$500,000 and USDA over $1.2 million in the first year.

•	 The agency strategically broadened its recruitment and outreach to increase minority representation in candidate 

pools with a newly developed corporate hiring model. As a result, more than 12,000 candidates submitted applications, and nearly half were from underrepresented groups. Of that, the Forest Service hired 300 students, with 

more than 21 percent in underrepresented groups. The model also ensures each student intern receives a standard 

career experience, including training and mentoring.

•	 Stewardship contracting contributes to the development of sustainable rural communities, restores and maintains 

healthy forest ecosystems, and provides a continuing source of local income and employment. The agency awarded 

3 stewardship contracts in FY 2013 with values more than $8 million, $8.7 million, and $13.8 million and executed 

27 stewardship agreements for a combined value of $3.2 million. 

•	 The Forest Service cleared an outstanding Office of Personnel Management (OPM) audit issue from 2012 and led 

four field audits for 2013 that show Human Resource Service Teams meeting all OPM standards. 

•	 The Forest Service completed the design of a Coordinated Response Protocol (CRP) that requires a claims investigation for any fatality or serious injury of on-duty Forest Service employees. The CRP received the Chief’s approval for 

its immediate implementation and the standup of the Office of Learning on July 26, 2013, which was months ahead 

of initial expectations. 

•	 The agency developed a national protocol for check-in and check-out, a policy for temporary and hosted employees’ 

safety, a servicewide deployment of the Satellite Emergency Notification Devices, and the National Capital Region 

integration of an emergency notification system in response to employee feedback and in support of an enhanced 

safety culture in the Forest Service. 

Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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National Forest System

The NFS provides stewardship and management of the 193 million acres of national forests and grasslands. Following 

Secretary of Agriculture 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 programs are Engineering; 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; and the National Partnership Office.

FY 2013 National Forest System Accomplishments 

•	 The Forest Service treated 2,390,000 acres through integrated resource restoration (IRR)-type activities. The IRR-type 

activities contribute significantly to the improvement of watershed conditions by restoring and sustaining watershed 

function and resilience.

•	 The Forest Service prepared and sold 2,600 MMBF (million board feet) of timber as an important tool to increase watershed health and improve resilience at the landscape level.

•	 The Forest Service decommissioned 1,490 miles of road; this decommissioning will contribute directly to achieving 

resource restoration goals by addressing environmental impacts from the transportation systems.

•	 The agency used high-impact targeted (HIT) practices to achieve the sustainable management of 363,000 acres 

within the USDA Landscapes of National Importance areas. These HIT practices are implemented in priority landscapes to achieve USDA’s Agency Priority Goal #3 to “accelerate the protection of clean, abundant water resources 

by advancing USDA’s capacity to measure the effectiveness of conservation investments in addressing water resource 

concerns.”

•	 Of the 15,000 watersheds associated with NFS lands, the Forest Service has 52 percent of those in fully functional 

condition. An additional 12 watersheds are expected to be moved to an improved condition class through maintenance, enhancement, and restorative activities.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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Research and Development

Forest Service R&D provides scientific information and new technologies to support sustainable management of the 

Nation’s forests and rangelands. The program is federally mandated to provide new knowledge and technologies to 

foster healthy watersheds, forest products, wildlife protection, 

outdoor recreation opportunities, and other benefits across all 

U.S. territories and States (including Federal and non-Federal 

 lands). 

Research is organized under seven Strategic Program Areas 

 (SPAs), which support an integrated approach to studying broad,

complex environmental and social issues. See the Required 

Supplementary Stewardship Information section of the AFR for 

details on the R&D SPAs.

FY 2013 Research and Development Accomplishments

•	 The Forest Service developed methods based on new sources of satellite data to provide near real-time fire mapping 

and measurement. These data have also been incorporated in a simulation model that includes weather forecasts for 

more realistic short-term predictions of fire spread and activity. These advances greatly enhance the ability of firefighting agencies to identify and respond to wildland fires quickly, as well as to plan for tactical fire operations and 

strategic fire planning.

•	 The agency published Mapping Multiple Forest Threats in the Northwestern United States in collaboration with Oregon State University. The publication is a tool that uses a 15-mile radius “neighborhood analysis” to identify locations 

where forest threats such as wildfire, insects and disease, and development may be more concentrated relative to 

other areas and where multiple threats intersect. 

•	 The Forest Service hosted a climate change workshop for tribal environmental and natural resource managers in 

Flagstaff, AZ. The event led to an increased knowledge of climate change issues and the necessary dialogue on the 

needs and opportunities for tribes in Arizona and New Mexico to engage in climate-change planning.

•	 The Forest Service collaborated with the U.S. Department of the Interior (DOI), U.S. Geological Survey’s National 

Wildlife Health Center and Fish and Wildlife Service to identify key fungal species needed to understand the mysteries of White Nose Syndrome in bats. These fungi live in bat hibernation sites and even directly on the bats, but do 

not cause the devastating disease that has killed millions of bats in the Eastern United States. Researchers are examining these fungi to understand why one fungus can be deadly to bats while its close relatives are benign.

Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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State and Private Forestry

America’s forests, grasslands, and other open spaces are integral to the social, ecological, and economic well-being of the 

Nation. More than 50 percent of our Nation’s forests are privately owned and supply almost 30 percent of the surface 

drinking water to cities and rural communities. S&PF programs help protect these forests, providing support to keep 

them intact. Partnerships—so critical in implementing and delivering S&PF programs—help facilitate sound stewardship 

of lands across all ownerships on a landscape scale, while maintaining flexibility for individual forest landowners to 

pursue their objectives.

The S&PF programs are Fire and Aviation Management, Cooperative Forestry, Conservation Education, Urban and 

Community Forestry, Forest Health Protection, and the Office of Tribal Relations.

FY 2013 State and Private Forestry Accomplishments

•	 The Forest Service provided funding to the Veterans Fire Corps to assist veterans in their transition to civilian life. 

Through this partnership, more than 250 veterans were trained for wildland fire and fuels work. The agency hired 74 

of these veterans, and other wildland fire agencies hired another 35 veterans. The Forest Service has also begun a 

dialogue with the Wounded Warrior Regiment of the Quantico Marine Corps Base to explore nonfirefighting employment opportunities.

•	 In FY 2013, Secretary Vilsack approved the Report to the Secretary of Agriculture, USDA Policy and Procedures Review and Recommendations: Indian Sacred Sites (December 2012). The Forest Service addressed the recommendations with a strategic and inspirational approach that integrates Indian Sacred Sites into the Forest Service mission 

and provides for their protection through interagency coordination and collaboration.

•	 In partnership with the Ad Council as part of the Discover the Forest Campaign, the agency increased public awareness of family recreation opportunities through a newly developed targeted outreach for African-American audiences and increased awareness of DescubreElBosque.org, the campaign fulfillment site, by 15 percent among Spanishspeaking audiences. The Forest Service provided wildfire-prevention and science-education materials in English and 

Spanish to over 55,000 teachers in nearly 14,000 middle schools.

•	 The Forest Service invested in the USDA Wood to Energy Initiative by awarding cooperative agreements to five statewide wood energy teams in 2013. The teams—comprised of Federal and State agencies, private businesses, and nongovernmental organizations—support rural communities by addressing choices in financing, wood supply, and combustion technology that must be resolved before installing a system. The agency’s investment reduces energy costs 

for rural schools, hospitals, and businesses and increases these communities’ health and resilience.

Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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RESPONSIBILITY SEGMENTS

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

for sustained yields of wood, water, forage, wildlife, and recreation. Through management of the national forests and 

grasslands; research; and cooperation with States, tribes, and private forest owners, the agency strives to meet the 

needs of the Nation. Some of the responsibility segment names are the same as those used for deputy areas, but the 

terms are not necessarily synonymous for financial management reporting purposes. The mission is divided into four 

major responsibility segments. 

National Forests and Grasslands: This responsibility segment includes management of an estimated 193 million acres of 

NFS land, which includes 36.6 million acres of designated wilderness areas. In addition, the Forest Service partners with 

other agencies, nations, and organizations to foster global natural resource conservation and sustainable development of 

the world’s forest resources.

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

and rangeland management practices to develop and deliver scientific and technical knowledge for enhancing and 

protecting the economic productivity and environmental quality of the estimated 1.3 billion acres of forests and 

associated rangelands in the United States.

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

cooperative agreements with State and local governments, tribal governments, forest industries, and private landowners 

to provide technical and financial assistance that helps protect and manage non-Federal forests and associated rangeland 

and watershed areas.

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

resources on an estimated 193 million acres of NFS lands and the estimated 20 million acres of adjacent State and private 

lands.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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

Service.

FIGURE 1. LOCATIONS OF FOREST SERVICE ADMINISTRATIVE UNITS
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-11

 Demands, Risks, Conditions, and Trends

The Forest Service has a vital role in providing the values and benefits that people receive from healthy and resilient 

forests and grasslands by ensuring their sustainability and productivity for present and future generations. 

These values and benefits are now at risk. Drought, invasive species, uncharacteristically severe wildfires, and outbreaks 

of insects and disease are affecting the sustainability and productivity of America’s forests, grasslands, and watersheds. 

These stresses and disturbances, accelerated by the changing climate, are now occurring at an unprecedented rate.

For FY 2013, Forest Service Chief Tidwell reinforced his commitment to three focus areas—Safety, Restoration, and 

Wildland Fire Management—that address this risk and are the agency’s greatest hope for protecting rural communities 

and those who live or work in the wildland-urban interface (WUI) from wildfire. 

SAFETY

For Forest Service employees, working safely in high-risk environments that are prone to wildfire means recognizing 

that wildfires are not preventable, but rather inevitable. The Forest Service will continue its Safety Learning Journey 

with the goal of becoming a zero-fatality organization by focusing on the inherent risks in its mission-critical work and by 

developing mitigation strategies that involve the State and local firefighting communities.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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RESTORATION

The Forest Service will continue to work with State and Federal agencies, our partners, and local communities to achieve 

ecological sustainability by restoring high-priority watersheds, identifying areas at greatest risk from insects and disease, 

supporting the Collaborative Forest Landscape Restoration Program, and implementing the Western Bark Beetle Strategy. 

Perhaps most importantly, the agency will develop public and private partnerships to leverage resources that support 

these restoration goals. The Forest Service will continue these efforts into FY 2014, albeit at a reduced rate if agency 

budgets do not support all restoration initiatives. To improve the agency’s efficiency in all restoration efforts, the Forest 

Service will streamline environmental analysis and reduce forest plan revision costs by implementing the new planning 

rule.

WILDLAND FIRE MANAGEMENT

While it is not possible to control a wind-driven wildfire, it may be possible to minimize the potential for catastrophic 

wildfire by restoring or building fire-adapted communities and ecosystems and by working through cross-jurisdictional 

partnerships to develop community wildfire protection plans (CWPPs). 

The Forest Service’s wildland fire management policies, developed by research scientists and fire ecologists, allow 

some remote wildfires to burn today to reduce the risk from future catastrophic wildfires. People living in the fireprone areas of the Western States likely expect catastrophic wildfires, asking themselves not “if” but “when” because 

they understand these ecosystems have evolved with fire. To reduce the risks to homeowners and communities, the 

Forest Service encourages participation in the Firewise Program to learn mitigation measures that make it possible for 

firefighters to safely defend homes and communities, such as building homes with burn-resistant materials and clearing 

nearby trees, shrubs, and grasses.

Dirk Huber, Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

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The fire management agencies recognize that fire suppression is not achieved solely by boots on the ground, but by 

having air tankers that fight wildfires from the air. Although the Forest Service’s 10-year average cost of fire suppression 

has risen to more than $1 billion and 40 percent of the agency’s budget, there is still a critical shortage of large air 

tankers needed to fight wildfires, having decreased by 75 percent over the last decade from 44 to only 11 air tankers. 

During the past 10 years, the Forest Service made transfers from nonfirefighting accounts to pay for fire suppression 

costs, ranging from $100 million in FY 2007 to $999 million in FY 2012, and totaling approximately $2.7 billion. Of that 

total, $2.3 billion was repaid to the nonfirefighting accounts, but the transfers led to disruptions within many Forest 

Service programs. Each time the agency transfers money out of accounts to pay for fire suppression, there are significant 

and lasting impacts across the entire Forest Service. Not only do the impacts affect the ability of the Forest Service 

to conduct stewardship work on national forests and grasslands, they also affect agency partners, local governments, 

and tribes. In FY 2013, transfers from nonfirefighting accounts to pay for suppression costs totaled approximately $505 

million.

In addition to Safety, Restoration, and Wildland Fire Management, Chief Tidwell focuses on jobs in local communities and 

an inclusive and diverse workforce. 

JOBS AND COMMUNITIES

The Forest Service builds economic sustainability in local 

communities by delivering jobs and economic benefits from 

hazardous fuels reduction and other activities on the national forests 

and grasslands. The agency will continue to work with partners to 

expand markets for the biomass that is a product of fuels reduction 

activities, including wood-to-energy projects.

INCLUSIVENESS AND DIVERSITY

Diversity of thought is the foundation of every successful 

organization. Accordingly, the Forest Service will continue its focus 

on providing an inclusive work environment where everyone is 

respected and valued. The Forest Service welcomes the opportunity 

to be an employer of choice and to continue providing jobs, training, 

and community support in urban and underserved communities and 

in traditional, resourced-based communities. 

However, with 83 percent of the Nation’s population living in urban 

areas, many Forest Service programs must also promote healthier, 

more livable urban environments. The Forest Service is helping all 

Americans reconnect with the outdoors by encouraging their 

participation in its work and decisionmaking processes for forestryrelated activities.

Forest Service
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-14

 Performance Goals, Objectives, and Results

THE GOVERNMENT PERFORMANCE AND RESULTS MODERNIZATION ACT OF 2010

In May 2013, OMB provided updated guidance to all Federal agencies for changes coming from implementation of 

the Government Performance and Results Modernization Act of 2010 for strategic planning, setting priority goals, and 

quarterly performance reporting. 

All performance reported for the Agency Priority Goal and Key Performance Measures in this section is aligned with the 

USDA Strategic Plan FY 2010–2015. The Forest Service strategic plan is currently being updated and will be implemented 

in FY 2014.

The Federal Government’s shutdown delayed the Forest Service’s field reporting for FY 2013, so not all accomplishments 

were available when the AFR was prepared for publication. The final FY 2013 performance totals are available in the FY 

2013 APR that is published with the Forest Service’s FY 2015 Budget Justification in February 2014 at http://www.fs.fed.

us.

Strategic Goals and Objectives

The Forest Service’s program of work is aligned with USDA’s Strategic Goal 2 and its objectives.

USDA’s Strategic 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.

Strategic Objective 2.1—Restore and Conserve the Nation’s Forests, Farms, Ranches, and Grasslands

Strategic Objective 2.2—Lead Efforts to Mitigate and Adapt to Climate Change

Strategic Objective 2.3—Protect and Enhance America’s Water Resources

Strategic Objective 2.4—Reduce Risk from Catastrophic Wildfire and Restore Fire to its Appropriate Place on the 

Landscape

In FY 2013, the Forest Service prioritized its efforts to achieve USDA’s strategic objectives with an emphasis on the 

“theme” of each objective. These themes align the agency’s program of work directly to the objectives and are defined 

as Restoration—Forests, Grasslands and Watersheds; Communities—Strengthening Communities and Sustaining Jobs; 

and Fire—Responding to Wildfires and Reducing Risks.

USDA’s Key Performance Measures

In collaboration with USDA, the Forest Service identified key performance measures (KPMs) that report progress toward 

the strategic objectives on a cumulative basis.

The Forest Service records accomplishments performed under contract at the time the contract is issued to provide a 

consistent link between annual appropriated dollars and accomplishments. Other accomplishments are recorded at the 

time the work is completed. Actual performance data was published in the Forest Service FY 2013 APR at http://www.

fs.fed.us in February 2014.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-15

Restoration Theme—Forests, Grasslands and Watersheds

The Restoration Theme—aligned with USDA’s Strategic Objective 2.1—Restore and Conserve the Nation’s Forests, Farms, 

Ranches, and Grasslands—ensures that forest and grassland ecosystems are more adaptable to changing conditions, 

especially when faced with severe natural or human-induced disturbances. The Forest Service’s stewardship of these 

ecosystems improves the resiliency of the Nation’s forests and rangelands and provides the long-term benefits of clean 

air, clean drinking water for communities, renewable energy from biomass, wildlife and fish habitat, and forest products.

In FY 2013, the Forest Service achieved its restoration goals by focusing on active forest management through 

collaboration with its partners. The agency also integrated activities for watershed restoration at broad, landscape scales 

using peer-reviewed science of its research of ecosystems, the effects of changing climate, and the dynamics of invasive 

species. The Forest Service relied on this research and multiparty monitoring to guide its efforts through the continuous 

cycle of assessing, implementing, and adapting new information.

The KPM for annual acres of public and private forest lands restored or enhanced is the sum of acres treated annually 

that contribute significantly to improvement in watershed conditions. The KPM for the volume of timber sold from 

NFS lands is the amount of wood fiber provided each year to help meet the Nation’s demand for forest products in an 

environmentally sustainable manner.

TABLE 1. RESTORATION THEME’S KPM RESULTS

Key Performance Measure Result

Annual acres of public and private forest lands restored or enhanced (in millions) Met

Volume of timber sold (million board feet) Met

Communities Theme—Strengthening Communities and 

Sustaining Jobs

The Communities Theme—aligned with USDA’s Strategic Objective

2.1—Restore and Conserve the Nation’s Forests, Farms, Ranches,

and Grasslands—provides opportunities for economic expansion

that can support diverse employment in forest-dependent

communities. The Forest Service is committed to engaging 

communities across the Nation to reconnect with the outdoors, 

expand recreation benefits, and harness the many economic 

opportunities of our restoration activities.

In FY 2013, the Forest Service supported forest-dependent 

communities by maintaining and creating new jobs in rural 

communities and helping to diversify the forest products 

industry. This diversification nurtures the sustainability of local 

communities and the forest-contractor infrastructure that is 

needed to perform restoration work into the future.

Results for the KPM for communities with urban and community 

forestry programs is not available for the publication in the AFR. 

The results are available in the agency’s APR that was published 

with the Forest Service’s FY 2015 Budget Justification in 

February 2014 at http://www.fs.fed.us.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-16

TABLE 2. COMMUNITY THEME’S KPM RESULTS

Key Performance Measure Result

Communities with urban and community forestry programs resulting from Forest 

Service assistance (number of communities) Deferred

Fire Theme—Responding to Wildfires and Reducing Risks 

The Fire Theme—aligned with USDA’s Strategic Objective 2.4—Reduce Risk from Catastrophic Wildfire and Restore Fire 

to its Appropriate Place on the Landscape—restores and maintains resilient landscapes, fire-adapted communities, and 

effective responses to wildfire with local, State, tribal and Federal organizations. 

The Fire Theme is integral to the goals of landscape-scale restoration and cross-boundary landscape conservation. In 

FY 2013, the agency partnered with States, communities and Federal agencies to maximize suppression capabilities 

and support community efforts to reduce the direct threat of wildland fire. The Forest Service also supported the 

diversification and innovation of new markets for woody biomass extracted in the process of reducing hazardous fuels. 

In FY 2013, the Forest Service focused on the treatment of hazardous fuels in high-priority areas, including non-Federal 

acres under partnership agreements, to reduce the intensity, severity, or effects of wildland fire on communities and 

natural resources. The Forest Service lowered the targeted acres for FY 2013 due to the increased costs of treatments if 

numerous entries into the area are required to achieve and maintain desired results. 

In order to build community capacity to suppress and reduce losses from wildfires, the Forest Service provided technical 

assistance to develop CWPPs or equivalent plans. CWPPs are more common for communities in the Western States, 

while the communities that fall in the Southern Wildfire Risk Assessment and the Northeast Wildfire Risk Assessment 

areas develop plans that are equivalent, but not necessarily the same as the CWPP. 

In FY 2012, the Forest Service updated its data systems to more thoroughly capture fuels treatments that were identified 

not only in CWPPs, but also in the equivalent plans. For FY 2013, this change enabled the Forest Service to fully capture 

the integrated, partner-driven planning efforts that are going on at all levels of management.

The KPM for wildland-urban interface (WUI) acres treated to reduce the risk of catastrophic fire was reported to be 

1,608,000 acres. 

The KPM for acres treated in the WUI that have been identified in CWPPs is calculated from the total number of acres 

that are associated with a CWPP divided by the total number of treated WUI acres.

TABLE 3. FIRE THEME’S KPM RESULTS

Key Performance Measure Result

Acres of WUI fuels treated to reduce the risk of catastrophic fire (in millions) Met

Percentage of acres treated in the WUI that have been identified in CWPPs Met
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-17

Agency Priority Goal 

OMB defines an Agency Priority Goal (APG) as one that supports improvements in near-term outcomes, customer 

service, or certain efficiencies for an agency and advances progress toward longer term, outcome-focused strategic goals 

and objectives. APGs reflect the most critical, implementation-focused, performance improvement priorities of agency 

leadership and the Administration, and therefore do not reflect the full scope of the agency mission. 

For USDA’s Priority Goal 3, the Department identified USDA’s Landscapes of National Importance including national 

forests and private working lands in the Chesapeake Bay, Great Lakes, Upper and Lower Mississippi, and California Bay 

Delta. USDA’s Priority Goal 3 is—

Accelerate the protection of clean, abundant water resources by advancing USDA’s capacity 

to measure the effectiveness of conservation investments in addressing water resource concerns.

The Forest Service contributes to USDA’s achievement of this APG by accelerating the protection of clean, abundant 

water resources through the implementation of HIT practices on national forests and private working lands in priority 

watersheds. These HIT practices include specific activities and treatments that protect watersheds and water resources 

such as establishing forest vegetation, improving rangeland vegetation, restoring lake and stream habitat, and 

maintaining or decommissioning roads. 

TABLE 4. FOREST SERVICE’S PERFORMANCE FOR USDA’S PRIORITY GOAL 3

Performance USDA 

Baseline

FY 2011 

Actual

FY 2012 

Actual

FY 2013 

Target

FY 2013 

Year to 

Date

FY 2014 

Target

FY 2015 

Target1

Acres on which high-impact 

targeted practices are implemented 

on national forest and private 

working lands in priority landscapes 

to accelerate the protection of 

clean, abundant water resources

0 304,565 321,203 300,000 363,000 270,000 300,000

These HIT practices were implemented in partnership with individuals, communities, and tribal, State, and local 

governments to ensure a clean and abundant supply of water for people and the environment.

The annual USDA performance results for this APG are reported on the Performance.gov Web site. in February 2014, the 

Forest Service’s FY 2013 APR provided actual accomplishments for the Forest Service’s contribution to these performance 

measures.

 1 FY 2015 targets reflect published targets—or Forest Service contribution to multiagency targets—in the USDA Strategic Plan.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-18

The HIT practices implemented by the Forest Service resulted in treating 363,000 acres of lands of national 

importance. The contributing performance measures include: 

1. Acres of lake habitat restored or enhanced

2. Acre equivalent for stream habitat restored or enhanced

3. Acres of water or soil resources protected, maintained, or improved

4. Acres of water or soil resources protected, maintained, or improved by fuels treatment

5. Acre equivalent for roads decommissioned

6. Acre equivalent for high-clearance road improved

7. Acre equivalent for passenger car road improved

8. Acre equivalent for high-clearance road maintained

9. Acre equivalent for passenger car road maintained

10. Acre equivalent for road or stream crossings reconstructed or constructed for providing aquatic organism 

passage

11. Acres of forest land vegetation established

12. Acres of rangeland vegetation improved

13. Acres treated for noxious weeds or invasive plants on NFS lands

14. Acre equivalent for contaminated Abandoned Mine Land sites mitigated using CERCLA2 and non-CERCLA 

authority

15. Acre equivalent for road bridges constructed, rehabilitated, or replaced

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2 CERCLA is the Comprehensive Environmental Response, Compensation, and Liability Act. The objective of CERCLA is to clean up any uncontrolled 

releases of specified hazardous substances.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-19

Summary Analysis of Financial Statements and Stewardship Information

The Forest Service produces a series of financial statements on a quarterly 

basis to summarize the activity and associated financial position of the 

agency. In producing these statements, the agency seeks to provide 

relevant, reliable, and accurate financial information related to Forest 

Service activities. An analysis of the agency’s September 30, 2013, financial 

statements provides the following highlights and exhibits, reflecting the 

comparative amounts for FY 2013 and FY 2012.

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, 2013, Forest Service reports $4.9 billion in assets, 

representing a decrease of 9 percent from FY 2012 amounts.

TABLE 5. FOREST SERVICE ASSETS (IN MILLIONS)

Asset FY 2013 FY 2012 Difference 

in Dollars

Difference in 

Percentage

Fund Balance with Treasury $3,305 $3,684 $(379) (10%)

General Property and Equipment 1,338 1,392 (54) (4%)

Receivables, Net 226 296 (70) (24%)

Total of Major Categories $4,869 $5,372 $(503) (9%)

Other Asset Categories 24 26 (2) (8%)

Grand Total Assets $4,893 $5,398 $(505) (9%)

Consolidated 

Balance 

Sheets

Consolidated 

Statements of 

Net Cost

Consolidated 

Statements 

of Changes in 

Net Position

Combined 

Statements of 

Budgetary 

Resources
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-20

Fund Balance with Treasury 

The Fund Balance with Treasury (68 percent of assets) decreased $379 million (10 percent) from FY 2012, primarily due 

to sequestration, which were across-the-board spending cuts enacted to reduce the national budget deficit.

General Property, Plant, and Equipment 

General Property, Plant, and Equipment (PP&E) (27 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 they are not recorded within the Forest Service financial statements. 

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

attributes and that are expected to be preserved indefinitely. Stewardship assets are primarily land, held by the Forest 

Service as part of the NFS, and not acquired for, or in connection with, other general PP&E. 

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

and the Required Supplementary Information section.

Receivables, Net

Accounts Receivable, Net (5 percent of assets) decreased $70 million (24 percent) from FY 2012, primarily due to the 

collection in FY 2013 of outstanding FY 2012 fire billings with the State of Texas.

FY 2013 Assets
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-21

Other Assets

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

Service. 

Liabilities

As of September 30, 2013, the Forest Service reports $2.4 billion in liabilities, representing a decrease of 1 percent from 

FY 2012 amounts.

TABLE 6. FOREST SERVICE LIABILITIES (IN MILLIONS)

Liability FY 2013 FY 2012 Difference 

in Dollars

Difference in 

Percentage

Federal Employee Benefits $491 $470 $21 4%

Other Liabilities

 Accrued Liabilities 800 961 (161) (17%)

 Payments to States 325 346 (21) (6%)

Other Categories 753 618 135 22%

Grand Total Liabilities $2,369 $2,395 $(26) (1%)

Federal Employee Benefits

Federal Employee Benefits (21 percent of liabilities) had an increase of $21 million (4 percent) from FY 2012. 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. 

FY 2013 Liabilities
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-22

Accrued Liabilities

Accrued Liabilities (34 percent of liabilities) had a decrease of $161 million (17 percent) from FY 2012. 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 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 (13 percent of liabilities) decreased $21 million (6 percent) from FY 2012 primarily 

due to sequestration. 

The Payments to States Program was authorized by the Twenty-Five Percent Fund Act of May 23, 1908, as amended 

(16 U.S.C. 500). This program requires revenue generated by the sale of goods and services on the national forests to 

be shared with the States for public schools and public roads in the county or counties in which the national forests are 

located. The Secure Rural School and Community Self Determination Act of 2000, reauthorized on October 2, 2013, 

for FY 2013 as part of Public Law 113-40, also provides for roads and schools, Forest Service projects, and emergency 

services. In addition, the Payments to Counties, Bankhead-Jones Farm Tenant Act of 1937 requires 25 percent of the 

net revenues from each national grassland or land utilization project to be paid to the counties in which such lands are 

located.

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MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-23

Other Categories

Other Categories (32 percent of liabilities) increased $135 million (22 percent) from FY 2012. 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 $2.5 

billion for both unexpended appropriations and cumulative results of operations. The total net position decreased by 

$479 million (16 percent) from FY 2012. See the Consolidated Statements of Changes in Net Position section for further 

information on the changes in net position.

CONSOLIDATED STATEMENTS OF NET COST

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

revenue for the year. The Forest Service’s net cost of operations was $5.8 billion, representing a decrease of 5 percent 

from FY 2012 amounts.

TABLE 7. FOREST SERVICE NET COST OF OPERATIONS (IN MILLIONS) 

Net Cost of Operations FY 2013 FY 2012 Difference in 

Dollars

Difference in 

Percentage

Program Cost by Segment:

 National Forests and Grasslands $3,143 $3,377 $(234) (7%)

 Wildland Fire Management 2,658 2,833 (175) (6%)

 State and Private Forestry 411 388 23 6%

 Forest and Rangeland Research 329 342 (13) (4%)

Total Program Costs 6,541 6,940 (399) (6%)

Less: Total Earned Revenue 761 839 (78) (9%)

Net Cost of Operations $5,780 $6,101 $(321) (5%)

Expenses

Forest Service program costs are $6.5 billion for FY 2013, representing a decrease of 6 percent from FY 2012. 

FY 2013 Expenses By Segment
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-24

Revenue

The Forest Service’s earned revenue—from both public and intragovernmental sources—is $761 million for FY 2013 and 

$839 million for FY 2012, resulting in a decrease of $78 million. 

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

opportunities (campgrounds); mineral resources; livestock grazing; and special land use fees for power generation, 

resorts, and other business activities conducted on NFS lands. 

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

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

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.

TABLE 8. FOREST SERVICE NET POSITION (IN MILLIONS)

Net Position FY 2013 FY 2012 Difference 

in Dollars

Difference in 

Percentage

Unexpended Appropriations $1,043 $1,510 $(467) (31%)

Cumulative Results of Operations 1,481 1,493 (12) (1%)

Total Net Position $2,524 $3,003 $(479) (16%)

Unexpended Appropriations

The Unexpended Appropriations balance is $1.0 billion for FY 2013, representing a decrease of 31 percent from FY 

2012. The decrease is primarily due to sequestration. 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 funds from dedicated collections. It is the funds from dedicated collections that predominately finance the 

enhancement and maintenance of NFS lands, including reforestation. Funds from dedicated collections are presented 

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

Accounting Standard 43–Funds from Dedicated Collections: Amending Statement of Federal Financial Accounting 

Standards 27, Identifying and Reporting Earmarked Funds. For a detailed description of each fund, see Note 11: Funds 

from Dedicated Collections in Part B. Financial Section of the AFR.

COMBINED STATEMENTS OF BUDGETARY RESOURCES

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

make payments to the extent it has budgetary resources to cover such items. The Combined Statements of Budgetary 

Resources presents the sources of these budgetary resources, the status of the funds at yearend, and the relationship 

between its budgetary resources and the outlays made against them. Forest Service’s total budgetary resources were 

$7.8 billion in FY 2013 and $8.1 billion in FY 2012, representing a decrease of 4 percent from FY 2012.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-25

TABLE 9. FOREST SERVICE STATEMENT OF BUDGETARY RESOURCES (IN MILLIONS)

Statement of Budgetary Resources FY 2013 FY 2012 Difference in 

Dollars

Difference in 

Percentage

Total Budgetary Resources $7,779 $8,090 $(311) (4%)

Status of Budgetary Resources

Obligations Incurred 6,692 6,698 (6) (<1%)

Unobligated Balance–Apportioned 816 800 16 2%

Unobligated Balance–Unapportioned 271 592 (321) (54%)

Total Status of Budgetary Resources $7,779 $8,090 $(311) (4%)

Unobligated Balance–Apportioned

The Unobligated Balance—Apportioned was $816 million (10 percent) in FY 2013. 

Unobligated Balance–Unapportioned

The Unobligated Balance—Unapportioned was $271 million (4 percent) in FY 2013. The decrease is primarily due to 

sequestration. 

FY 2013 Statement of Budgetary Resources
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-26

 Analysis of Systems, Controls, and Legal Compliance

MANAGEMENT ASSURANCES

Federal Managers’ Financial Integrity Act 

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

that seriously affect an agency’s ability to meet these management control objectives as “material weaknesses.”

The FMFIA or Integrity Act 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

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, 2013. 

Federal Financial Management Improvement Act 

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

financial management systems that comply substantially with Federal financial management systems requirements, 

applicable Federal accounting standards, and the U.S. Standard General Ledger at the transaction level.” FFMIA also 

requires any agency unable to report substantial compliance with these requirements to develop remediation plans.

FFMIA Assertions

As of September 30, 2013, the Forest Service’s financial management systems overall substantially comply with 

applicable Federal accounting standards, application of the U.S. Standard General Ledger at the transaction level, and 

Federal financial management systems requirements. However, there was a certain instance in which Forest Service user 

access, authorization, and password controls were not in compliance with Forest Service policy and Federal financial 

management systems requirements. In addition, adequate segregation of duties was not maintained in one financial 

system.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-27

Federal Information Security Management Act 

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

Government’s information technology (IT). Departments covered by the Paperwork Reduction Act must implement 

the requirements of FISMA, reporting annually to OMB and Congress on the effectiveness of the agency’s security 

programs and independent OIG evaluations. No IT material weaknesses were noted for Assurance Year 2013 (ending 

June 30, 2013), in accordance with USDA’s Implementation Guide for OMB Circular A-123, Internal Control over Financial 

Reporting, Appendix A.

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

Forest Service management recognizes its responsibility for monitoring and correcting all internal control deficiencies. To 

identify potential deficiencies, the agency conducted an assessment of the effectiveness of internal control over financial 

reporting for the 2013 Assurance Year (ending June 30, 2013). 

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 narratives and flowcharts are used to evaluate workflow and internal control from beginning to end of program responsibility

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

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

policy and procedures

•	 Corrective action plans are developed for control and significant deficiencies

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

financial reporting area are operating effectively.

Anti-Deficiency Act Compliance 

In FY 2013, the Forest Service identified an Anti-Deficiency Act (ADA) violation relating to 31 U.S.C. Section 1517 

that specifically prohibits an agency from making obligations or expenditures in excess of an apportionment or 

reapportionment or in excess of the amount permitted by agency regulations.

Background

The Energy Policy Act of 2005 (Public Law 109-85) established congressional direction in Section 365 for the Secretary 

of the Interior to create a pilot project to improve Federal permit coordination. The Bureau of Land Management (BLM) 

transfers funds to the Forest Service to participate in the pilot. Priorities for the piloted program are to identify additional 

expertise to accomplish congressional direction to improve Federal permit coordination, continue improvement in 

processing oil and gas permits, and establish a joint Geographic Information Systems database tracking system between 

the BLM and the Forest Service. The White River National Forest and Thunder Basin Grasslands in the Rocky Mountain 

Region, the Carson National Forest in the Southwest Region, and the Ashley National Forest in Intermountain Region 

participated in the pilot.
MANAGEMENT’S DISCUSSION AND ANALYSIS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

A-28

Situation

The Forest Service reported obligations or expenditures in excess of the balance transferred to the Forest Service from 

the DOI BLM as of December 31, 2012. Reports indicated that the Forest Service spent $6,781.90 in excess of the 

$72,000 carried over from FY 2012. Although actions had transpired to obtain the funding needed for FY 2013 work by 

Forest Service and BLM, the warrant with additional funding was not received until January 31, 2013. 

LIMITATIONS OF FINANCIAL STATEMENTS

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

operations of the agency, pursuant to the requirements of Title 31 of the United States Code, Section 3515(b). 

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

Accounting Principles for Federal entities and the formats prescribed by OMB. The statements, however, are in addition 

to the financial reports used to monitor and control budgetary resources that are prepared from the same books and 

records. 

These statements should be read with the realization that they are for a component of the U.S. Government, a sovereign 

entity. 

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B-1

Part B: Financial Section
B-2

The CFO's Vision

Create an environment that enhances the use of integrated financial and performance 

information in decisionmaking through application of effective internal controls in agency 

management processes. We are committed to delivering services that transform complex 

information into practical knowledge for Forest Service as well as the American public.
B-3

Message From the 

Chief Financial Officer 

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

Agriculture (USDA), I am proud to present the Forest Service’s fiscal year (FY) 2013 

financial information. 

For the 12th consecutive year, the Forest Service demonstrated its ongoing 

commitment and continuance for excellence in financial management of the 

approximately $7.8 billion in public funds entrusted to the agency by receiving an 

unqualified audit opinion on its financial statements. Also, for the 6th consecutive year, 

the independent auditors reported no area of material weakness. 

The Financial Section of the FY 2013 Agency Financial Report provides several aspects 

of the Forest Service’s financial reporting. The core of the Financial Section is the independent auditors’ findings and 

opinion of the Forest Service’s audited financial statements and notes. The Required Supplementary Information (RSI) 

chapter reports costs for deferred maintenance and repairs of major assets and the condition of the National Forest 

System lands. The Required Supplementary Stewardship Information (RSSI) chapter reports the net cost of operations 

for the Forest Service’s Research and Development’s stewardship investments. Finally, the Other Information (OI) 

chapter provides management’s assurance for internal controls and the status of improper payments under the Improper 

Payments Improvement Act.

During FY 2013, the Forest Service conducted its assessment of the effectiveness of internal control over financial 

reporting in accordance with USDA’s Implementation Guide and as required by the Office of Management and Budget 

Circular A-123, Appendix. This assessment provided USDA with an unqualified assurance that internal controls over 

Forest Service financial reporting are operating effectively. 

FY 2013 was a year of successes and challenges. Forest Service completed the transition and migration to USDA’s new 

accounting system, the Financial Management Modernization Initiative (FMMI). Additionally, the agency successfully 

interfaced six priority candidate systems for accounting transactions relating to revenues and payments such as minerals, 

recreation, timber, and grants and agreements. 

Another success was the Phase II implementation of the Point of Sales System (POSS), installing equipment for 

credit card and online payments at an additional 43 national forests. With these installations, the agency has now 

installed POSS at 420 ranger districts, visitor centers, and supervisor’s offices for 84 of 154 national forests. In FY 2013, 

approximately $70 million in agency revenue was collected through POSS, up from $23 million in FY 2012.

Challenges came with this year’s fire season and the impact of reduced funding from the sequestration. FY 2013 was 

another year of record-breaking fires and suppression costs, as thousands of employees, partners, cooperators, and 

local, State, and tribal governments contributed directly and indirectly to the wildfire-suppression efforts. In September, 

Secretary of Agriculture Tom Vilsack notified the House and Senate Committees on Appropriations of the transfer of 

funds to the Wildland Fire Management, ensuring sufficient funding for these suppression efforts. These transfers were 

necessary due to severe wildfire conditions across the Western States.
B-4

Through all the successes and challenges in FY 2013, the agency continues to focus on becoming a diverse and inclusive 

organization where everyone is respected, welcomed, treated fairly and given the same opportunity to contribute to our 

mission. The Forest Service values the innovation and collaboration that come from inclusiveness. These qualities, in 

turn, enable our employees in the finance, budget, and program areas to support the achievement of the Forest Service 

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

present and future generations.”

 

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

Service programs. I hope that you find it useful and that you will follow our progress in advancing the Forest Service’s 

performance goals and efforts to improve accountability. The agency proudly carries out its financial responsibilities and 

remains committed to the sound management of resources under our stewardship. We look forward to more financial 

management improvements in FY 2014. 

THELMA J. STRONG

Chief Financial Officer
B-5
review disclosed no instances where Kearney did not comply, in all material respects, with 

government auditing standards, and the Office of Management and Budget Bulletin 14-02, Audit 

Requirements for Federal Financial Statements. 

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

FS’ financial position as of September 30, 2013 and 2012, and its net costs, changes in net 

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

principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, FS implemented a change in accounting 

principle to comply with the Federal Accounting Standards Advisory Board’s Technical Bulletin 

2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs. This change requires 

estimation of both friable and non-friable asbestos-related cleanup costs, and recognition of a 

liability and related expense for those costs that are both probable and reasonably estimable, 

consistent with the current guidance in Statement of Federal Financial Accounting Standards

(SFFAS) No. 5, Accounting for Liabilities of the Federal Government; SFFAS No. 6, Accounting 

for Property, Plant, and Equipment, Chapter 4, “Cleanup Costs”; and Technical Release 2, 

Determining Probable and Reasonably Estimable for Environmental Liabilities in the Federal 

Government.

Additionally, in Note 8 to the financial statements, “Environmental and Disposal Liabilities,” the 

Forest Service describes the asbestos abatement liability. The liability for fiscal year 2013 is 

recognized as an adjustment to the beginning balance of the Cumulative Results of Operations in 

the Statement of Changes in Net Position. The initial recognition of estimated liability for 

asbestos abatement costs as of September 30, 2013 is $118 million. 

Furthermore, as discussed in Note 1 to the consolidated financial statements, the FS reclassified 

certain amounts in the prior year’s combined Statement of Budgetary Resources (SBR) to 

conform to the current year’s presentation. These reclassifications had no effect on the 

previously reported SBR balances.

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

weaknesses in FS’ internal controls over: 

· Information technology; 

· Property, plant, and equipment; 

· Validity and accuracy of unliquidated obligations; 

· Timely recordation of cash activity; and 

· Payroll accrual. 

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

B-6
Kearney reported that FS overall substantially complied with the applicable Federal accounting 

standards and application of the United States Standard General Ledger at the transaction level. 

However, Kearney noted an instance in which the FS’ financial management systems and related 

controls were not in compliance with certain Federal financial management systems 

requirements. Additionally, Kearney reported noncompliance with the Anti-Deficiency Act and 

the Prompt Payment Act. Furthermore, Kearney noted that FS was not in compliance with 

grants pre-award requirements in the Code of Federal Resolutions. 

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

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

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

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

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

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

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

forwarding final action correspondence to OCFO.

We appreciate the courtesies and cooperation extended during this audit. This report contains 

publicly available information and will be posted in its entirety to our website 

http://www.usda.gov/oig in the near future.

B-7
B-8

Independent Auditor’s Report
1701 Duke Street, Suite 500, Alexandria, VA 22314

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

INDEPENDENT AUDITOR’S REPORT 

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

Department of Agriculture 

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of the United States Forest 

Service (Forest Service), which comprise the consolidated balance sheets as of September 30, 

2013 and 2012, the related consolidated statements of net cost and changes in net position, and 

the combined statements of budgetary resources (hereinafter referred to as the “consolidated 

financial statements”) for the years then ended, and the related notes to the consolidated financial 

statements. 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial 

statements in accordance with accounting principles generally accepted in the United States of 

America. This includes the design, implementation, and maintenance of internal control relevant 

to the preparation and fair presentation of consolidated financial statements that are free from 

material misstatement, whether due to fraud or error. 

Auditor’s Responsibility 

Our responsibility is to express an opinion on the consolidated financial statements based on our 

audits. We conducted our audits 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. 14-02, Audit Requirements for Federal Financial 

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

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

An audit involves performing procedures to obtain audit evidence supporting the amounts and 

disclosures in the consolidated financial statements. Procedures are selected based on auditor 

judgment, including an assessment of the risk of material misstatement of the consolidated 

financial statements, whether due to fraud or error. In assessing risk, the auditor considers 

internal control relevant to the entity’s preparation and fair presentation of the consolidated

financial statements in order to design audit procedures that are appropriate in the circumstances, 

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal 

control. Accordingly, we express no such opinion. An audit also includes evaluating the 

appropriateness of accounting policies used and the reasonableness of significant accounting 

estimates made by management, as well as evaluating the overall presentation of the 

consolidated financial statements. 

B-9
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 

basis for our audit opinion. 

Opinion 

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

material respects, the financial position of the Forest Service as of September 30, 2013 and 2012, 

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

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

America. 

Emphasis of Matter 

As discussed in Note 1 to the financial statements, the Forest Service implemented a change in 

accounting principle to comply with Federal Accounting Standards Advisory Board (FASAB) 

Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs. 

This change requires estimation of friable and non-friable asbestos-related cleanup costs, and 

recognition of a liability and related expenses for those costs that are probable and reasonably 

estimable, consistent with current guidance in Statement of Federal Financial Accounting 

Standards (SFFAS) No. 5, Accounting for Liabilities of the Federal Government; SFFAS No. 6, 

Accounting for Property, Plant, and Equipment, Chapter 4, “Cleanup Costs”; and FASAB 

Technical Release Number 2, Determining Probable and Reasonably Estimable for 

Environmental Liabilities in the Federal Government. 

Additionally, in Note 8 to the financial statements, “Environmental and Disposal Liabilities,” the 

Forest Service describes the asbestos abatement liability. The liability for fiscal year 2013 is 

recognized as an adjustment to the beginning balance of the Cumulative Results of Operations in 

the Statement of Changes in Net Position. The initial recognition of estimated liability for 

asbestos abatement costs as of September 30, 2013 is $118M.

Additionally, as discussed in Note 1 to the consolidated financial statements, the Forest Service 

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

conform to the current year’s presentation. These reclassifications had no effect on the 

previously reported Statement of Budgetary Resources balances. 

Our opinion is not modified with respect to these matters. 

Other Reporting Responsibilities 

Required Supplementary Information 

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

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

Supplementary Stewardship Information (hereinafter referred to as the “required supplementary 

information”) be presented to supplement the consolidated financial statements. This 

B-10
information, although not a part of the consolidated financial statements, is required by OMB 

and FASAB, who consider it to be an essential part of financial reporting for placing the 

consolidated financial statements in an appropriate operational, economic, and/or historical 

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

in accordance with auditing standards generally accepted in the United States of America. These 

procedures included inquiries of management about the methods used in preparing the 

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

consolidated financial statements, and other knowledge we obtained during our audits. We do 

not express an opinion or provide any assurance on the information because the limited 

procedures do not provide us with sufficient evidence to express an opinion or provide any 

assurance. 

Other Information 

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

statements taken as a whole. Other information is presented for the purpose of additional 

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

was not subject to the auditing procedures applied in the audits of the consolidated financial 

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

Independent Auditor’s Report on Internal Control Over Financial Reporting, and Independent 

Auditor’s Report on Compliance with Applicable Provisions of Laws, Regulations, Contract, and 

Grant Agreements 

In accordance with Government Auditing Standards and OMB Bulletin No. 14-02, we have also 

issued reports, dated December 5, 2013, on our consideration of the Forest Service’s internal 

control over financial reporting and our tests of the Forest Service’s compliance with certain 

provisions of laws, regulations, contracts, and grants agreements; and other matters for the year 

ended September 30, 2013. The purpose of these reports is to describe the scope of our testing of 

internal control over financial reporting and compliance and the results of that testing, and not to 

provide an opinion on 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. 14-02, and in considering the entity’s internal control 

over financial reporting and compliance. 

Alexandria, Virginia 

December 5, 2013 

B-11
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 OVER 

FINANCIAL REPORTING 

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

Department of Agriculture 

We have audited the accompanying consolidated financial statements of the United States Forest 

Service (Forest Service), which comprise the consolidated balance sheets as of and for the year 

ended September 30, 2013, the related consolidated statements of net cost and changes in net 

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

“consolidated financial statements”) for the year then ended, and have issued our report thereon, 

dated December 5, 2013. 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. 14-02, Audit Requirements 

for Federal Financial Statements. 

Internal Control Over Financial Reporting 

In planning and performing our audit of the consolidated financial statements, we considered the 

Forest Service’s internal control over financial reporting (internal control) to determine the 

appropriate audit procedures in the circumstances for the purpose of expressing our opinion on 

the consolidated financial statements, but not for the purpose of expressing an opinion on the 

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

on the effectiveness of the Forest Service’s internal control. We limited our internal control 

testing to those controls necessary to achieve the objectives described in OMB Bulletin No. 14-

02. We did not test all internal controls relevant to operating objectives, as broadly defined by 

the Federal Managers’ Financial Integrity Act of 1982 (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 

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

or detected and corrected on a timely basis. 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. 

Our consideration of internal control was for the limited purpose described in the preceding 

paragraph and was not designed to identify all deficiencies in internal control that might be 

material weaknesses or significant deficiencies; therefore, material weaknesses or significant 

deficiencies may exist that were not identified. Given these limitations, during our audit, we did 

B-12
not identify any deficiencies in internal control that we consider to be material weaknesses. 

However, material weaknesses may exist that have not been identified. We did identify certain 

deficiencies in internal control, described in the accompanying Schedule of Findings, that we 

consider to be significant deficiencies. 

We noted certain additional matters involving internal control over financial reporting that we 

will report to the Forest Service’s management in a separate letter. 

Forest Service’s Response to Findings 

The Forest Service’s management has provided its response to our findings in a separate 

memorandum attached to this report. The Forest Service’s response was not subject to the 

procedures applied in the audit of the consolidated financial statements, and accordingly, we do 

not express an opinion on it. 

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and the 

results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal 

control. This report is an integral part of an audit performed in accordance with Government 

Auditing Standards and OMB Bulletin No. 14-02 in considering the entity’s internal control. 

Accordingly, this communication is not suitable for any other purpose. 

Alexandria, Virginia 

December 5, 2013 

B-13
Schedule of Findings 

Significant Deficiencies 

I. Information Technology (Repeat Modified Condition)

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

Support Systems (GSS) and critical financial reporting applications, did not include evidence of 

a comprehensive risk analysis, effective monitoring of design and performance, nor the ability to 

identify and respond to changing risk profiles. The National Institute of Standards and 

Technology (NIST) and the Government Accountability Office’s (GAO) 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 (SoD) and principles of least privilege, as follows: 

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

(NRM) applications. Within the NRM applications, we noted seven Real Property 

Management (RPM) conflicts of permissions granted to users that violated the SoD 

Matrix provided by the Forest Service. The NRM applications’ management noted 

that of these seven conflicts, five RPM users were granted conflicting roles due to the 

nature of their work, as documented in the “Special Notes” section of the RPM SoD 

Matrix. The two remaining RPM user conflicts were remediated after identification 

by Kearney & Company, P.C. (Kearney) 

- We identified four NRM Locatable Minerals, three NRM Mineral Materials, and 

three NRM Range users in violation of the principles of least privilege. These users 

had more privileges assigned to their accounts than were necessary for their job 

functions. Of these 10 users, management noted that three NRM Locatable Minerals, 

three NRM Mineral Materials, and three NRM Range users were given conflicting 

roles due to the nature of their work, as documented in the “Special Notes” section of 

the Least Privilege Table. These violations of least privilege do not pose a risk of 

violation of SoD per the agency role definitions; however, they are a violation of the 

Forest Service’s information systems security policy and introduce unnecessary risk 

to data access and integrity. The one remaining NRM Locatable Minerals user 

conflict was remediated after Kearney’s audit procedures identified it. 

Although Kearney’s testing did not identify any improper or erroneous transactions that 

were a direct result of SoD weaknesses, inadequate SoD contributes to an overall 

weakening of the internal control environment, and increases the risk that errors and 

irregularities could occur and remain undetected. Inadequate SoD controls may lead to 

fraud or unauthorized transactions in the financial records. Additionally, one or more 

B-14
NRM users with access granting them excessive capabilities could introduce an error or 

unauthorized transaction relating to payments and entries within the Financial 

Management and Modernization Initiative (FMMI) without approval from another user. 

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

process to ensure that no individual has complete control over incompatible NRM 

functions. Additionally, Kearney recommends that the Forest Service administer access 

for the NRM information system in such a way that all users are provisioned with roles 

that do not violate the Forest Service’s information systems security policy or introduce 

unnecessary risk to data access and integrity. 

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

access administration process, as follows: 

- The Forest Service did not deactivate Incident Business System (IBS), NRM, and 

Virtual Incident Procurement (VIPR) accounts within one business day after

employees’ separation, in accordance with the Forest Service Manual

- Forest Service user accounts were not deactivated from the United States Department 

of Agriculture (USDA)-owned EmpowHR system and Integrated Acquisition System 

(IAS) within two business days after employees’ separation, in accordance with 

USDA policy 

- The Forest Service failed to reset Application Hosting Environment (AHE) service 

account passwords in accordance with Forest Service policy. 

System/application users who have been separated may unnecessarily retain access to 

information systems after their separation from the Forest Service. Failure to limit user 

access and processing capabilities to authorized individuals may result in defalcations 

and errors in accounting records. These accounts may also be used to circumvent 

controls over financial transactions, which could lead to erroneous and improper 

transactions, embezzlement, unauthorized use, or destruction of data, and may weaken 

the organization’s internal control structure. Inadequate account and identity 

management controls increase the risk that temporary and active accounts may be used 

by unauthorized Forest Service and contractor personnel to perform unauthorized 

activities. Further, when inactive and separated user accounts are not effectively 

reviewed by management, it increases the potential that unauthorized activities could 

occur without timely detection. 

Additionally, when passwords are not reset on a regular basis, familiarity with a 

password could eventually lead to its compromise. 

Recommendation Number 2: Kearney recommends that the Forest Service perform the 

following corrective actions to address this issue: 

- Investigate centralizing and automating the processes for disabling or deactivating 

accounts using an automated solution in which Human Resources (HR) actions (e.g., 

B-15
separations) trigger user accounts to be automatically disabled on Forest Serviceowned systems

- As in fiscal year (FY) 2012, implement a process to ensure that accounts for 

separated employees are disabled or removed from Forest Service information 

systems in a timely manner 

- Continue reengineering, revising, or otherwise better enforcing the existing user 

account review processes to ensure notifications of separated employee actions from 

HR are closely and effectively coupled with timely deactivation of user accounts in 

all systems 

- Enhance periodic user account reviews to determine whether unauthorized access 

occurred using separated user account credentials after the users’ separation dates 

- Review the procedures in place for resetting passwords on Forest Service-owned 

systems and applications 

- Monitor the removal of Forest Service users from non-Forest Service-owned systems 

to ensure users are removed timely. 

• Kearney cited background investigations as an internal control weakness in the FY 2011 

and 2012 audits. For the current FY, the Forest Service noted that the issue was fully 

remediated and closed as of May 10, 2013; however, Kearney noted that of the 19 

employees and contractors sampled, three were not in compliance with background 

investigation or re-investigation requirements (Kearney noted that one of the exceptions 

was remediated by the Forest Service by September 30, 2013). 

Forest Service employees and contractors who have not been screened by the background 

investigation process prior to gaining access to the Forest Service’s information system(s) 

and/or re-investigated according to Office of Personnel Management (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 3: As in FY 2012, Kearney recommends that the Forest 

Service’s management continue to strengthen procedures for identifying, communicating, 

documenting, and resolving outstanding security clearances and background 

investigations within the prescribed time periods. 

II. Property, Plant, and Equipment (Repeat Modified Condition)

The Forest Service reported approximately $1.3B in net property, plant, and equipment (PP&E) 

on its FY 2013 Balance Sheet, which is about 26% of its total assets. Kearney’s audit procedures 

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

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

When combined, these deficiencies are considered to be a significant deficiency, as summarized 

below. 

B-16
• For assets acquired that are not in ready-to-use condition or projects with an extended 

construction period, the Forest Service accumulates project costs in Work in Progress 

(WIP) until the asset is placed into service. Assets are placed into service upon 

completion of the Project Completion Certification Form. Failure to transfer WIP costs 

to completed PP&E in a timely manner could result in an understatement of depreciation 

expense and PP&E. 

The Forest Service’s recently modified (placed into service in the third quarter of FY 

2013) internal control structure did not identify WIP projects that are substantially 

complete. Kearney identified 113 WIP projects that had no financial activity in the last 

four months, or as of our June 30, 2013 and September 30, 2013 testing. Our procedures 

revealed that eight out of 37 projects sampled (a 9% error rate) were substantially 

complete and should have been placed into service, totaling approximately $3.2M of 

projects costs. Delays in the WIP transfer caused an understatement of depreciation by 

approximately $561,000. 

The exceptions identified during final substantive testing of WIP projects with no activity 

for four or more months caused an understatement in accumulated depreciation and 

depreciation expense of approximately $7,000 as of September 30, 2013. 

Additionally, the errors and processing delays in the Project Completion Certification 

Form resulted in a lack of accountability for asset custodianship, which could result in 

waste. 

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

Albuquerque Service Center (ASC), Budget and Finance (B&F) continue performing 

quarterly reviews over WIP projects with senior management, refine and modify controls 

over all material WIP projects that may cross over FYs, and record an accrual if deemed 

material at any FY end. 

• The Forest Service reported approximately $45M of repairs and maintenance expenses. 

Kearney evaluated 18 repairs and maintenance expenses, and identified 11 transactions 

that should have been capitalized rather than expensed. These transactions were for 

improvements of assets, including remodels, renovations, upgrades, or replacements. 

These improvements either improved the assets’ capacities or extended the assets’ useful 

lives. The Forest Service capitalizes costs incurred associated with initial purchases 

recorded in order to place an asset into service. However, additional costs incurred after 

the asset is placed into service regarding major repairs or work performed to key 

components of a structure (e.g., roof replacement) are not considered for capitalization 

purposes. Current practice does not differentiate between expenditures that help an asset 

achieve its expected life, and expenditures that extend an asset’s useful life. The 11 

errors account for approximately $2M of the total $3.6M in costs tested. In addition, 

accumulated depreciation of $22,133 was not recorded on the 11 errors identified. 

B-17
Kearney identified three transactions, totaling approximately $534,000, that should have 

been capitalized as personal property additions. These three errors produced an 

understatement of depreciation expense of $37,000. The net impact of the three errors 

and the associated depreciation expense that should have been recorded if assets were 

properly capitalized was an overstatement of $497,000 in net costs. Kearney noted three 

transactions that should have been capitalized as leasehold improvements rather than 

expensed. The three errors totaled $779,000 in costs that should have been capitalized. 

These three errors also produced an understatement of depreciation expense of $16,928. 

Kearney identified one additional transaction, which, while properly classified as an 

expense, was improperly charged to the repairs and maintenance Budget Object Code 

(BOC). 

Kearney identified 18 exceptions that produced a non-statistically projected 

understatement of $7.6M in PP&E as of September 30, 2013. Kearney also identified 

that the Forest Service did not include recorded acquisition costs associated with these 

transactions, causing an understatement in depreciation expense and accumulated 

depreciation of approximately $200,000. 

Recommendation Number 5: As in FY 2012, Kearney recommends that the Forest 

Service’s Acquisition Management (AQM) community issue a reminder to the Field 

Budget Approvers of the appropriate requisition process for the acquisition of capitalized, 

accountable, and/or sensitive personal property through IAS by properly classifying the 

acquisition of property through the correct BOCs. Kearney also recommends that the 

Forest Service review its policies with internal and external groups. 

• The Forest Service’s control structure contains two weaknesses related to real property 

operating lease disclosures, as follows: 

- The Forest Service does not accurately update future minimum payment amounts 

resulting from lease modifications and amendments. Kearney’s audit procedures 

identified seven errors over the evaluated sample of 12 real property operating leases, 

consisting of a 1.8% error rate, and extrapolated the error results to the annual 

disclosure amounts. This error rate extrapolated over the entire population of 405 real 

property operating leases results in an overstatement of $8.3M over the cumulative 

five-year disclosure period; the largest annual overstatement was approximately 

$3.6M in Year 5 and later 

- The Forest Service included all lease option periods in the disclosure instead of just 

fixed, non-cancelable lease payments. Kearney evaluated the overstatement by year 

and identified one error over the 12 real property operating leases evaluated, 

consisting of a 7% error rate, and extrapolated the error results to the annual 

disclosure amounts. This error rate extrapolated over the entire population results in 

an overstatement of $19M, which was the entire balance in Year 5 and later. 

The Forest Service’s future minimum lease payment disclosure for real property 

operating leases contains annual overstatements up to $8.3M as of June 30, 2013 and 

B-18
$33.6M as of September 30, 2013, resulting from amendments and modifications to 

payment terms not reflected in the disclosure summary; and annual overstatements up to 

$19M as of June 30, 2013, resulting from the inclusion of option years. Combined, the 

result is a possible overstatement of $27.3M as of June 30, 2013 and $33.6M as of 

September 30, 2013 for the real property operating lease future payments. 

Recommendation Number 6: As in FY 2012, Kearney recommends that the Forest 

Service review the current process for updating lease payment information to reflect the 

most recent lease amendments and modifications. Kearney also recommends that the 

Forest Service increase the frequency of updating the lease payment information. 

III. Validity and Accuracy of Unliquidated Obligations (New Condition) 

The Forest Service’s internal controls were not sufficient to ensure that unliquidated obligations 

(ULO) were consistently and systematically evaluated for validity and de-obligation. When 

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

• The Forest Service records obligations in its financial management system when it enters 

into an agreement, such as a contract or purchase order, to purchase goods and services. 

Once recorded, obligations remain open until they are fully reduced by a disbursement, 

de-obligated, or until the appropriation funding the obligation is closed. As invoices are 

received and payments are made, obligations are liquidated by the amount of the 

payments. 

ULOs represent the cumulative amount of orders, contracts, and other binding agreements 

not yet outlaid. The Forest Service’s policies and procedures provide guidance related to 

the periodic review, analysis, and validation of the ULO balances posted to the general 

ledger (GL). The Forest Service was unable to evaluate the validity of open obligations 

for the first and second quarters of FY 2013. Forest Service policy states, “The Forest 

Service is required to certify quarterly that reviews and corrective actions related to 

unliquidated obligations inactive for at least 12 months were performed.” The Forest 

Service received a waiver from USDA granting an exemption from performing the 

review and certification of ULOs for the first and second quarters of FY 2013. While the 

Forest Service obtained a waiver, a key internal control over accurate reporting of ULOs 

did not operate for at least half of the year and may have impacted the efficacy of the 

subsequent two quarterly certifications. As of August 1, 2013, the third quarter review 

was performed on schedule and the fourth quarter review will be performed on schedule. 

Failure to maintain an effective ULO control environment in which invalid open 

obligations are identified and de-obligated timely may result in difficulties in managing 

funds, improper payments, inaccurate budgetary reports, and possible violations of 

Federal regulations. 

The Forest Service’s internal controls were not sufficient to ensure that ULOs were 

consistently and systematically evaluated for validity and de-obligation. The Forest 

B-19
Service was unable to provide Kearney a ULO file that included all open obligations with 

current and prior year activity, to include the date of last activity. Therefore, Kearney 

evaluated the validity and liquidation status of 546 ULOs with a recorded value of $691M 

as of September 30, 2012. Kearney identified 12 exceptions that no longer represented 

future Forest Service funding needs. Thus, the obligations with a value of $829,000 were 

not de-obligated in a timely manner. 

Kearney selected a statistical sample of ULOs and evaluated the results. The identified 

exceptions produced a projected likely error of approximately $31.2M in the overall 

balance as of October 1, 2012. The current internal control structure was not operating 

effectively to facilitate the accurate reporting of ULO balances in the financial 

statements. 

Recommendation Number 7: Kearney recommends that the Forest Service re-establish its 

standardized processes to ensure the validity and accuracy of ULOs, to include defining 

aging and dollar-based strata, to ensure consistent and representative reviews of high risk 

ULOs are completed as in prior years. Kearney also recommends that the Forest Service 

take the following corrective actions to address this issue: 

- Strengthen the ULO validity procedures by requiring positive confirmations from all 

respondents. These positive confirmations should be returned in a timely manner to 

ensure inclusion in period-end financial reports and support audits 

- Perform independent reviews of program and post responses for high dollar, high risk 

ULOs. These responses should be compared to the supporting documentation to 

confirm the validity and accuracy of the ULO balances 

- The Forest Service’s management should work to enhance regional accountability of 

contracts, grants and agreements, or other obligating vehicles by sampling ULO 

certifications. In addition, the Forest Service should communicate the results of the 

samples upward and downward through the management structure to support regional 

accountability 

- The Forest Service should develop metrics to measure improvement and trends at the 

regions over time. 

IV. Timely Recordation of Cash Activity (New Condition)

The Intra-governmental Payment and Collection (IPAC) system was developed by the 

Department of the Treasury (Treasury) to standardize and streamline the payment or collection 

of funds for goods or services provided between Federal agencies. The Controller Operations 

Division (COD) of the National Finance Center (NFC) is responsible for recording all Treasury 

IPAC transactions in the financial system; however, the Forest Service should ensure these 

transactions are recorded in its financial system accurately and timely. Failure to record these 

transactions accurately and timely could result in erroneous and inaccurate financial statements. 

The Forest Service completes a Statement of Differences reconciliation to ensure the accuracy 

and timeliness of deposit and disbursement data reflected in the Fund Balance with Treasury 

B-20
(FBWT). Additionally, the Forest Service completes a reconciliation of its FBWT information 

to identify and resolve differences between the agency financial records and Treasury balances. 

The Forest Service’s cash collection and reconciliation control environments include design and 

operation weaknesses that, when combined, are considered to be a significant deficiency, as 

summarized below. 

• The FBWT reconciliation amount peaked at $2T as of March 30, 2013 for several 

reasons, including the continuing resolution and backlog of Treasury IPAC transactions. 

Of the $2T, $1.9T was provided under the continuing resolution and apportioned in 

accordance with OMB’s automatic apportionment bulletin. Once the continuing 

resolution was passed, Treasury processed the warrant for the $1.9T, and the overall 

FBWT reconciliation amount decreased to $26M as of June 30, 2013. Further, the Forest 

Service encountered delays in processing cash activity, to include IPAC transactions. 

Treasury developed IPAC to standardize and streamline the payment or collection of 

funds for goods or services provided between Federal agencies. The Forest Service 

should record these transactions in its financial system accurately and timely. Failure to 

record these transactions could result in erroneous and inaccurate financial statements. 

IPAC transactions processed between the Forest Service and other Federal agencies will 

follow their respective process areas through most of the acquisition or agreement stage 

(i.e., if it is a grant, it will follow the grant process; if it is a contract for goods, it will 

follow the IAS process, etc.). NFC is responsible for managing and monitoring IPAC 

transactions. The Forest Service’s ASC B&F receives and reviews a weekly suspense 

report detailing the outstanding IPAC transactions for which funds have been transferred 

but the transfer has not yet been matched to the agreement. The Forest Service does not 

enter the IPAC transactions into the financial records until the agreement matching 

occurs. For unrecorded transfers that are aged over 60 days, ASC B&F will follow up on 

the status of the payment with NFC. During FY 2013, this suspense account balance 

grew significantly over the previous year. As of July 25, 2013, there was a net 

unrecorded balance of $85M. 

The Forest Service Collections Clearinghouse (CCH) is primarily responsible for 

resolving collection records created by a Citibank lockbox that have not successfully 

interfaced into FMMI. Transactions that are not interfaced into FMMI are recorded into 

a suspense fund. If balances in the suspense fund are not cleared in a timely manner, the 

financial information may be overlooked and misallocated to the proper account. 

Kearney conducted a process overview with Forest Service personnel, including 

individuals responsible for unidentified lockbox collections. As of March 31, 2013, the 

Forest Service CCH reported 3,949 unidentified transactions with a net book value of 

$28M. 

The unidentified transactions may result in classifications and allocations to improper 

accounts. As a result of this finding, revenue and accounts receivable may be incomplete 

and inaccurate, which could result in a misstatement on the proprietary financial 

B-21
statements. Untimely recording of a collection or payment could result in a misstatement 

of assets or liabilities on the financial statements. 

As of September 30, 2013, the FBWT reconciliation amount was $2M and the IPAC net 

unrecorded balance was $9M; the Forest Service cleared the remaining backlog of 

unidentified Citibank lockbox cash collections. 

The untimely recording of a collection or payment could result in a misstatement of 

assets or liabilities on the financial statements. Accounts receivable and suspense 

accounts may be overstated, which could result in a misstatement to the financial 

statements. 

Recommendation Number 8: Kearney recommends that the Forest Service continue to 

monitor and manage the changes made to its control environment in the second half of 

the year to ensure continued performance. In addition, Kearney recommends that the 

Forest Service continue to find automated fixes to remove the labor intensive component 

for reporting unidentified Citibank lockbox collections. Kearney also recommends that 

the Forest Service continually review its process for outstanding IPAC transactions to 

facilitate the matching process performed by NFC. The level of detailed knowledge held 

by Forest Service personnel may be leveraged to decrease the time that the transactions 

remain in the aging status. 

V. Payroll (New Condition) 

The Forest Service recognizes that it has liabilities that exist as of the Balance Sheet date that are 

not recorded in the accounting system. These items are material in amount, and estimates of 

these liabilities must be recorded in the financial statements. Periodically, these estimates need 

to be validated to ensure that the methodology being utilized to create the accounting estimate is 

statistically relevant and is a true representation of the liability being accrued. If the 

methodology used to create an accounting estimate is not statistically sound or the accrual 

amounts posted are not validated, the agency risks misstating its Balance Sheet at the financial 

statement date. 

During testing, Kearney and the Forest Service determined that there are data quality issues in 

the actual payroll expenditures. The Forest Service received notification that pay period 19 

payroll corrections were still being posted in pay period 23 to the GL. Without complete payroll 

information, the Forest Service currently does not have the ability to validate the payroll accrual. 

Additionally, the Forest Service’s efforts to validate the accrual did not identify inaccuracies in 

payroll data. 

Subsequent to Kearney’s initial testing, the Forest Service recalculated the pay period 19 payroll 

expenditures and noted a $16M difference between the accrual and the actual expenditures. 

Further observations and details of the testing are summarized below. 

B-22
Kearney determined that the weakness in the payroll data is considered to be a significant 

deficiency, as summarized below. 

• Kearney performed an analysis of actual pay period 19 expenditures and compared them 

to the payroll accrual posted. Based on the accrual analysis, Kearney noted that the 

accrual amount posted for the fourth quarter of FY 2013 was $73M and the actual amount 

for the pay period covered by the accrual was $57M, which equates to a variance of 

$16M, or 22%. The variance is due to the data integrity issue with the pay period 19 data. 

The actual pay period 19 expenditures did not load correctly from the NFC Time and 

Attendance Validation System (TIME). TIME loaded pay period 19 into FY 2014 

instead of FY 2013. Therefore, the payroll expenditures for pay period 19 in the amount 

of $57M were incorrect. 

The Forest Service sets the parameters for the formulation and calculation of the payroll 

accrual, which is then executed and posted by NFC. Quarterly, the Forest Service’s 

Internal Quality Assurance (IQA) Branch performs a review of the payroll accrual 

amounts posted as well as a comparison to actual payroll expenditures. Historically, 

variances have been noted. A large variance was noted between the accrual amount and 

the actual expenditures, leading to an overstatement of estimated liabilities as of the FY 

2013 Balance Sheet date. Once the variance in question was brought to its attention, the 

Forest Service was not able to confirm the accuracy of the variance due to ongoing pay 

period 19 corrections. 

The weakness in the accuracy of payroll data may increase the risk that liabilities are 

misstated on the financial statements. 

Recommendation Number 9: Kearney recommends that the Forest Service implement a 

process to identify payroll data integrity issues and ensure that the payroll accrual is 

within an acceptable range of actual payroll expenditures. 

B-23
APPENDIX A: STATUS OF PRIOR YEAR DEFICIENCIES 

In the Independent Auditor’s Report on Internal Control on the United States Forest Service’s 

fiscal year 2012 financial statements,1

 two 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 2012 Status 2013 Status 

Information Technology Internal 

Control Environment 

Significant Deficiency Significant Deficiency 

Property, Plant, and Equipment Significant Deficiency Significant Deficiency 

																																																												

1 Independent Auditor’s Report on the U.S. Forest Service 2012 and 2011 Financial Statements. 

B-24
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 WITH APPLICABLE 

PROVISIONS OF LAWS, REGULATIONS, CONTRACT, AND GRANT 

AGREEMENTS 

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

Department of Agriculture 

We have audited the accompanying consolidated financial statements of the United States Forest 

Service (Forest Service), which comprise the consolidated balance sheets as of and for the year 

ended September 30, 2013, the related consolidated statements of net cost and changes in net 

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

“consolidated financial statements”) for the year then ended, and have issued our report thereon, 

dated December 5, 2013. 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. 14-02, Audit Requirements 

for Federal Financial Statements. 

Compliance with Applicable Provisions of Laws, Regulations, Contract, and Grant 

Agreements 

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

financial statements are free from material misstatement, we tested its compliance with certain 

provisions of laws, regulations, contract, and grant agreements, noncompliance with which could 

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

provisions of other laws and regulations specified in OMB Bulletin No. 14-02, including the 

provisions referred to in Section 803(a) of the Federal Financial Management Improvement Act 

of 1996 (FFMIA). We limited our tests of compliance to these provisions and did not test 

compliance with all laws, regulations, contract, and grant agreements applicable to the Forest 

Service. However, providing an opinion on compliance with these provisions was not an 

objective of our audit, and accordingly, we do not express such an opinion. The results of our 

tests, exclusive of those referred to in FFMIA, disclosed instances of noncompliance or other 

matters that are required to be reported under Government Auditing Standards, and are described 

in the accompanying Schedule of Findings. 

The results of our tests of compliance with FFMIA disclosed that the Forest Service’s financial 

management systems substantially complied with applicable Federal accounting standards and 

application of the United States Standard General Ledger at the transaction level. However, we 

noted a certain instance, described in the Schedule of Findings below, in which the Forest 

Service’s financial management systems and related controls were not in compliance with certain 

Federal financial management systems requirements. 

B-25
Forest Service’s Response to Findings 

The Forest Service’s management has provided its response to our findings in a separate 

memorandum attached to this report. The Forest Service’s response was not subject to the 

auditing procedures applied in the audit of the consolidated financial statements, and 

accordingly, we do not express an opinion on it. 

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of compliance and the 

results of that testing, and not to provide an opinion on compliance. This report is an integral 

part of an audit performed in accordance with Government Auditing Standards and OMB 

Bulletin No. 14-02 in considering the entity’s compliance. Accordingly, this communication is 

not suitable for any other purpose. 

Alexandria, Virginia 

December 5, 2013 

B-26
Schedule of Findings 

Noncompliance and Other Matters 

I. Noncompliance with the Antideficiency Act (New Condition)

As noted in its Assurance Letter, the Forest Service disclosed an instance of noncompliance or 

other matters that is required to be reported under Government Auditing Standards and OMB 

Bulletin No. 14-02. This instance is summarized in the following paragraphs. 

The Forest Service identified an Antideficiency Act (ADA) – 31 United States Code (U.S.C.) 

1517(a) violation. The Forest Service is subject to the ADA, which prohibits Federal agencies 

from obligating or expending Federal funds in advance or in excess of an appropriation, 

apportionment, or similar funding. On December 31, 2012, the Forest Service’s management 

identified Energy Policy Act Pilot (EPAP) obligations/expenditures, totaling $6,782, that were in 

excess of available funding. Partial funding of this Department of the Treasury (Treasury) 

Account Fund Symbol consisted of transfers from the United States Department of the Interior 

(DOI), Bureau of Land Management (BLM) to the Forest Service. The Forest Service expended 

more than the fiscal year (FY) 2012 carryover and had not formally received the FY 2013 DOI 

BLM transfers. Reports indicated that the Forest Service spent $6,782 in excess of the $72,000 

carried over from FY 2012. Although several actions had transpired between the Forest Service 

and BLM to obtain the funding needed for FY 2013 work, the Forest Service did not receive the 

warrant for additional funding until after December 31, 2012. This noncompliance is being 

reported to Congress and the President; estimated delivery of this letter is unknown, as the Forest 

Service is working with the Office of the General Council and the United States Department of 

Agriculture on the final letter. 

Failure to maintain effective controls and/or compensating controls to ensure compliance with 

the ADA could: 

• Increase the risk of fraud, waste, and mismanagement of funds 

• Affect the Government’s ability to effectively monitor budget execution 

• Affect the Government’s ability to accurately measure the full cost of its programs. 

Federal employees and/or agencies violating the ADA may be subject to appropriate 

administrative discipline, including suspension from duty without pay or removal from office. 

Employees and/or agencies may also be subject to fines, imprisonment, or both. 

II. Noncompliance with the Prompt Payment Act (New Condition)

The Forest Service is subject to Title 5 of the Code of Federal Regulations (CFR), Section 1315, 

“The Prompt Payment Act (PPA).” The PPA generally requires that Federal agencies pay 

commercial vendors within 7, 10, or 30 days of receipt of a proper invoice, depending on the 

nature of the product or service being provided. When timely payments are not made, the PPA 

requires that agencies calculate and include interest penalties in the vendor payments. Interest 

B-27
penalties represent additional and avoidable costs that decrease the amount of funds available for 

other needs. 

We conducted a process overview walkthrough with Forest Service personnel, including 

individuals responsible for monitoring transactions requiring payment of PPA interest penalties. 

We noted during the walkthrough that violations of the PPA occurred in the form of untimely 

payments to vendors, in which the incorrect interest penalty amount was calculated and 

disbursed. We also noted instances in which the vendors were not paid interest penalties when, 

in accordance with PPA, they were due to the vendors. The Forest Service was unable to 

quantify the total amount of PPA interest due. 

By not complying with the PPA, the Forest Service incurred additional and avoidable costs in the 

form of interest penalties. This decreases the amount of funds available for other needs. 

III. Noncompliance with Grants Management Pre-Award Requirements (Repeat 

Condition)

As noted in its Assurance Letter, the Forest Service disclosed an instance of noncompliance or 

other matters that is required to be reported under Government Auditing Standards and OMB 

Bulletin No. 14-02. This instance is summarized in the following paragraphs. 

The Forest Service was not in compliance with grants management pre-award requirements of 

Title 2 of the CFR, Section 225.35, “Agencies responsible for administering programs that 

involve cost reimbursement contracts, grants, and other agreements with governmental units 

shall issue regulations to implement the provisions of this part and its appendices,” and Title 7 of 

the CFR, Section 3016.20 (b), “The financial management systems of other grantees and 

subgrantees must meet the following standards: (1) Financial reporting; (2) Accounting records; 

(3) Internal control; (4) Budget control; (5) Allowable cost; (6) Source documentation; and (7) 

Cash management.” 

By not complying with the grants management pre-award requirements, the Forest Service is 

unable to determine if the recipient of the funding has adequate procedures in place to ensure the 

purpose, time, and extent of the funding is executed appropriately, and if the funding is used in 

accordance with the provisions set forth in the agreement. 

IV. FFMIA Noncompliance (Repeat Condition) 

Federal Financial Management Systems Requirements 

• User access, authorization, and password controls were not in compliance with Forest 

Service policy and Federal financial management systems requirements in some cases. 

In addition, adequate segregation of duties was not maintained in one financial system. 

For a detailed account of the FFMIA Federal financial management systems requirements 

noncompliance, see the Independent Auditor’s Report on Internal Control Over 

B-28
Financial Reporting, Schedule of Findings, Significant Deficiencies, II. Information 

Technology (Repeat Modified Condition), pages B-14–16. 

Applicable Federal Accounting Standards 

• No issues noted. 

Standard General Ledger at the Transaction Level 

• No issues noted. 

B-29
B-30
B-31

U.S. Department of Agriculture

Forest Service

CONSOLIDATED BALANCE SHEETS

As of September 30, 2013 and 2012

(in millions)

2013 2012

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 2) $3,305 $3,684 

Accounts Receivable, net (Note 3) 22 16 

Total Intragovernmental 3,327 3,700 

Cash and Other Monetary Assets 0 1 

Accounts Receivable, net (Note 3) 204 280 

General Property, Plant, and Equipment (PP&E), net (Note 4) 1,338 1,392 

Other (Note 1D) 24 25 

Total Assets $4,893 $5,398 

 Stewardship PP&E (Note 5)

Liabilities:

Intragovernmental:

 Accounts Payable $1 $0 

 Federal Employee Benefits (Notes 6 & 7) 71 71 

Other (Note 9) 46 159 

Total Intragovernmental 118 230 

Accounts Payable 52 32 

Federal Employee Benefits (Notes 6 & 7) 420 399 

Environmental and Disposal Liabilities (Note 8) 120 2 

Other (Note 9) 1,659 1,732 

Total Liabilities (Note 6) 2,369 2,395 

Commitments and Contingencies (Note 9)

Net Position:

Unexpended Appropriations - All Other funds 1,043 1,510 

Cumulative Results of Operations - Funds from Dedicated Collections (Note 11) 669 803 

Cumulative Results of Operations - All Other funds 812 690 

Total Net Position 2,524 3,003 

Total Liabilities and Net Position $4,893 $5,398 

The accompanying notes are an integral part of these statements.
B-32

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF NET COST

For the years ended September 30, 2013 and 2012

(in millions)

2013 2012

Program Costs (Note 12):

Total Gross Costs $6,541 $6,940

Less: Total Earned Revenue 761 839 

Net Cost of Operations $5,780 $6,101 

The accompanying notes are an integral part of these statements.
B-33

U.S. Department of Agriculture

Forest Service

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION

For the years ended September 30, 2013 and 2012

(in millions)

2013 2012

Funds from

Dedicated 

Collections

(Note 11)

All Other 

Funds

Consolidated 

Total

Funds from 

Dedicated 

Collections

(Note 11)

All Other 

Funds

Consolidated 

Total

Cumulative Results of Operations:

Beginning Balance $803 $690 $1,493 $1,002 $759 $1,761 Adjustment

Change in Accounting Principle (Note 1T) 0 (118) (118) 0 0 0 

Beginning Balance, as Adjusted $803 $572 $1,375 $1,002 $759 $1,761 

Budgetary Financing Sources:

Appropriations Used 0 5,509 5,509 0 5,264 5,264 Non-Exchange Revenue 0 0 0 0 1 1 Donations and Forfeitures of Cash 1 0 1 1 0 1 Transfers - In/Out without Reimbursement 27 110 137 (219) 355 136 

Other Financing Sources (Non-Exchange):

Transfers without Reimbursement (188) 1 (187) (18) 18 0 Imputed Financing 0 348 348 0 372 372 Other 80 (2) 78 76 (17) 59 

 Total Financing Sources (80) 5,966 5,886 (160) 5,993 5,833 

 Net Cost of Operations (54) (5,726) (5,780) (39) (6,062) (6,101)

 Net Change (134) 240 106 (199) (69) (268)

 Cumulative Results of Operations 669 812 1,481 803 690 1,493 

Unexpended Appropriations: Beginning Balance 0 1,510 1,510 0 2,056 2,056 

Budgetary Financing Sources:

Appropriations Received 0 5,303 5,303 0 4,728 4,728 Appropriation Transfers - In/Out 0 (4) (4) 0 (1) (1)Other Adjustments 0 (257) (257) 0 (9) (9)Appropriations Used 0 (5,509) (5,509) 0 (5,264) (5,264)Total Budgetary Financing Sources 0 (467) (467) 0 (546) (546)

 Total Unexpended Appropriations 0 1,043 1,043 0 1,510 1,510 

 Net Position $669 $1,855 $2,524 $803 $2,200 $3,003 

The accompanying notes are an integral part of these statements.
B-34

U.S. Department of Agriculture

Forest Service

COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the years ended September 30, 2013 and 2012

(in millions)

2013 2012

Budgetary Resources:

Unobligated Balance, Brought Forward, October 1 $1,392 $1,907 

Unobligated Balance Brought Forward, October 1, as Adjusted 1,392 1,907 

Recoveries of Prior Year Unpaid Obligations 21 131 

Other Changes in Unobligated Balance (+ or -) 0 (2)

Unobligated Balance from Prior Year Budget Authority, net 1,413 2,036 

Appropriations (Discretionary & Mandatory) 5,653 5,296 

Spending Authority from Offsetting Collections (Discretionary & Mandatory) 713 758 

Total Budgetary Resources (Note 15) $7,779 $8,090 

Status of Budgetary Resources:

Obligations Incurred (Note 14) $6,692 $6,698 

Unobligated Balance, End of Period:

Apportioned (Note 2) 816 800 

Unapportioned (Note 2) 271 592 

Total Unobligated Balance, End of Period 1,087 1,392 

Total Status of Budgetary Resources (Note 15) $7,779 $8,090 

Change in Obligated Balance:

Unpaid Obligations, Brought Forward, October 1 $2,557 $2,771 

Obligations Incurred 6,692 6,698 

Outlays (Gross) (-) (6,877) (6,781)

Recoveries of Prior Year Unpaid Obligations (-) (21) (131)

Unpaid Obligations, End of Year 2,351 2,557 

Uncollected Payments:

Uncollected Customer Payments from (531) (485)

Federal Sources, Brought Forward, October 1 (-)

Change in Uncollected Customer Payments, Federal Sources (+ or -) 72 (46)

Uncollected Payments, Federal Sources, End of Year (-) (459) (531)

Memorandum (non-add) Entries:

Obligated Balance, Start of Year (+ or -) 2,026 2,286 

Obligated Balance, End of Year (+ or -) 1,892 2,026 

Budget Authority and Outlays, Net:

Budget Authority, Gross (Discretionary and Mandatory) $6,366 $6,054 

Actual Offsetting Collections (Discretionary and Mandatory) (785) (712)

Change in Uncollected Customer Payments from Federal sources

(Discretionary and Mandatory) (+ or -) 72 (46)

Budget Authority, net (Discretionary and Mandatory) $5,653 $5,296 

Outlays, Gross (Discretionary and Mandatory) $6,877 $6,781 

Actual Offsetting Collections (Discretionary and Mandatory) (785) (712)

Outlays, net (Discretionary and Mandatory) 6,092 6,069 

Distributed Offsetting Receipts (-) (693) (530)

Agency Outlays, net (Discretionary and Mandatory) $5,399 $5,539 

The accompanying notes are an integral part of these statements.
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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 area office, five Research and Development stations, the Forest 

Products Laboratory, and the International Institute of Tropical Forestry. The Forest Service functions 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 include 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, Consolidated Statements of Net Cost, Consolidated Statements of Changes in 

Net Position, 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 

October 21, 2013. 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 

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

legal constraints and controls over the use of Federal funds. 

B-35
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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

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

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

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

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

collected from timber sales or recreation fees. 

C: FUND BALANCE WITH TREASURY 

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

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

current liabilities and finance authorized purchase commitments. 

D: OTHER ASSETS 

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

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

received. 

E: GENERAL PROPERTY, PLANT, AND EQUIPMENT 

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

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

useful life of 2 years or more. The Forest Service capitalization threshold for real and personal property is $25,000 

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

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

GAAP, the cost of general PP&E acquired under a capital lease is equal to the amount recognized as a liability for 

the capital lease at its inception (net present value of the lease payments) unless the net present value exceeds 

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

See Note 5 for specific disclosures related to multiuse 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. 

See Note 5 for specific disclosures related to Stewardship PP&E. 

G: LIABILITIES 

Liabilities represent the amount of monies or other resources that are likely to be paid by the Forest Service as a 

result of a transaction or event that has occurred. However, the Forest Service cannot satisfy a liability without an 

appropriation. Liabilities for which there is no appropriation and for which there is no certainty that an 

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

capacity, can abrogate liabilities. 

B-36
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

H: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

Environmental and Disposal Liabilities 

The Forest Service’s estimated environmental and disposal liabilities are Government-related and Governmentacknowledged in origin, principally associated with the future remediation of certain landfills, buildings, and other 

related sites in accordance with all applicable Federal, State, and local laws. 

See Note 8 for specific disclosures related to cleanup costs for ongoing operations. 

Asbestos Abatement Liabilities 

In accordance with the Financial Accounting Standards Advisory Board’s (FASAB) Technical Bulletin 2006-1, 

issued September 28, 2006, the Forest Service implemented new reporting requirements for estimated 

abatement liabilities for nonfriable asbestos. Prior to this technical bulletin, Forest Service recognized liabilities for 

the removal of asbestos that posed an immediate health threat (i.e., friable asbestos), but had not prepared an 

estimate of cleanup costs for the future removal of asbestos that did not pose an immediate health threat (i.e., 

nonfriable asbestos). The new reporting requirement is effective for reporting periods beginning after September 

30, 2012. The amount of the asbestos liability shall be shown as a “change in accounting principle” in the 

Statement of Changes in Net Position for fiscal year 2013. 

See Note 8 for specific disclosures related to asbestos abatement liabilities. 

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. 

See Note 9 for specific disclosures related to commitments and contingencies. 

J: WORKERS’ COMPENSATION LIABILITY

The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to Federal 

civilian employees injured on the job, employees who have incurred a work-related occupational disease, and 

beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Benefit 

claims incurred for the Forest Service’s employees under FECA are administered by the U.S. Department of 

Labor (DOL). The USDA uses Forest Service funds to reimburse the DOL for FECA claims. Consequently, the 

Forest Service recognizes a liability for this compensation comprised of: (1) an accrued liability that represents 

money owed for claims paid by the DOL through the current fiscal year and (2) an actuarial liability that represents 

the expected liability for Forest Service approved compensation cases to be paid beyond the current fiscal year. 

K: EMPLOYEE ANNUAL, SICK, AND OTHER LEAVE 

Annual and other vested leave, such as compensatory, credit hours, and restored leave, is accrued as it is 

earned, and the accrual is reduced as leave is taken. Each quarter, the balance in the accrued annual leave 

account is adjusted to reflect the latest pay rates and unused hours of leave. Sick leave is generally nonvested. 

Funding will be obtained from future financing sources to the extent that current or prior year appropriations are 

not available to fund annual and other types of vested leave earned but not taken. Sick leave and other types of 

nonvested leave are expensed when used. 

B-37
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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. The Office of Personnel Management (OPM) actuaries determine 

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

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

Forest Service for current period expense reporting. 

M: REVENUES AND OTHER FINANCING SOURCES 

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

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

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

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

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

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

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

goods have been delivered or services rendered. 

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

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

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

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

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

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

non-exchange revenue. 

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

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

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

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

are disclosed in Note 12 as intragovernmental or with the public based on the related source or customer, 

respectively. 

N: IMPUTED FINANCING 

The Forest Service recognizes as imputed financing the amount of accrued pension and post-retirement benefit 

expenses for current employees. The assets and liabilities associated with such benefits are the responsibility of 

the administering agency, OPM. Amounts paid from the Treasury Judgment Fund in settlement of claims or court 

assessments against the Forest Service are also recognized as imputed financing. Imputed financing for the 

years ended September 30, 2013 and 2012 was $348 million and $372 million, respectively. 

B-38
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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 U.S. Department of the Interior (DOI), Department of the Army, 

Department of the Navy, Department of the Air Force, and the U.S. Corps of Engineers, Civil. The Forest Service 

receives allocation transfers, as the child, from the DOL, Department of Transportation, 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: FUNDS FROM DEDICATED COLLECTIONS 

The Forest Service reports the funds from dedicated collections for which it has program management 

responsibility, using the following three criteria: 

 A statute committing the Federal Government to use specifically identified revenues and/or other financing 

sources that are originally provided to the Federal Government by a non-Federal source only for designated 

activities, benefits, or purposes. 

 Explicit authority for the fund to retain revenues and/or 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/or other 

financing sources that distinguishes the fund from the Federal Government’s general revenues. 

For further information see Note 11. 

R: INTER-ENTITY COST IMPLEMENTATION 

In accordance with U.S. GAAP, each entity’s full cost should incorporate the full cost of goods and services that it 

receives from other entities. The entity providing the goods and services has the responsibility to provide the 

receiving entity with information on the full cost of such goods or services either through billing or other advice. 

Recognition of inter-entity costs that are not fully reimbursed is limited to material items that (1) are significant to 

the receiving entity, (2) form an integral or necessary part of the receiving entity’s output, and (3) can be identified 

or matched to the receiving entity with reasonable precision. Broad and general support services provided by an 

entity to all or most other entities should not be recognized unless such services form a vital and integral part of 

the operations or output of the receiving entity. 

S: RECLASSIFICATIONS 

Certain amounts in the prior year’s SBR have been reclassified to conform to the current year’s presentation. 

These reclassifications had no effect on the previously reported SBR. 

B-39
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

T: CHANGE IN ACCOUNTING PRINCIPLE 

Effective for FY 2013, the Forest Service implemented a change in accounting principle to comply with the 

Federal Accounting Standards Advisory Board’s Technical Bulletin 2006-1, Recognition and Measurement of 

Asbestos-Related Cleanup Costs. This change requires (1) estimation of both friable and nonfriable asbestosrelated cleanup costs and (2) recognition of a liability and related expense for those costs that are both probable 

and reasonably estimable, consistent with the current guidance in Statement of Federal Financial Accounting 

Standard (SFFAS) 5, Accounting for Liabilities of the Federal Government; SFFAS 6, Accounting for Property, 

Plant, and Equipment, Chapter 4: Cleanup Costs, and Technical Release (TR) 2, Determining Probable and 

Reasonably Estimable for Environmental Liabilities in the Federal Government. The liability for FY 2013 is 

recognized as an adjustment to the beginning balance of Cumulative Results of Operations in the Statement of 

Changes in Net Position. 

See Note 8 for specific disclosures related to asbestos abatement liabilities. 

B-40
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 2: FUND BALANCE WITH TREASURY 

Funds with the U.S. Department of Treasury (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. 

Fund Balance with Treasury as of September 30, 2013 and 2012 (in millions) 

2013 2012 

A. Fund Balances:

(1) Trust Funds $207 $236 

(2) Special Funds 774 909 

(3) Revolving Funds 179 185 

(4) General Funds 1,993 2,235 

(5) Other Fund Types 152 119 

Total $3,305 $3,684 

B. Status of Funds:

(1) Unobligated Balance

(a) Available $816 $800 

(b) Unavailable 271 592 

(2) Obligated Balance not yet Disbursed 1,892 2,026 

(3) Non-Budgetary FBWT Accounts 326 266 

Total $3,305 $3,684 

B-41
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 3: ACCOUNTS RECEIVABLE, NET 

Intragovernmental Accounts Receivable represent amounts due under reimbursable and cooperative agreements 

with Federal entities for services provided by the Forest Service. An Allowance for Uncollectible Accounts is not 

established for these amounts because monies due from other Federal entities are considered fully collectible. As 

of September 30, 2013 and 2012, the Intragovernmental Accounts Receivable balances were $22 million and $16

million, respectively. 

Nonintragovernmental 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. 

Nonintragovernmental Accounts Receivable as of September 30, 2013 and 2012 (in millions) 

2013 2012 

Accounts Receivable $217 $300 

Allowance for Uncollectible Accounts (13) (20)

Accounts Receivable, Net $204 $280 

B-42
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 4: GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET 

Depreciation of General PP&E for the Forest Service is recorded on the straight-line method based on the 

estimated useful lives listed below. Capitalization thresholds are provided in Note 1, Section E. 

General Property, Plant, and Equipment as of September 30, 2013 (in millions) 

Property Class

Estimated 

Useful 

Life 

(Years) Cost

Accumulated

Depreciation

Book 

Value

Personal Property 

Equipment 5 - 20 $698 $(446) $252 

Internal Use Software 5 108 (98) 10 

Internal Use Software in Development n/a 76 0 76 

Total Personal Property 882 (544) 338 

Real Property

Land and Land Rights n/a 52 0 52 

Improvements to Land 10 747 (681) 66 

Construction in Progress n/a 91 0 91 

Buildings, Improvements, and Renovations 15 - 30 1,106 (656) 450 

Other Structures and Facilities 15 - 50 1,742 (1,420) 322 

Assets Under Capital Lease 5 - 30 57 (41) 16 

Leasehold Improvements 10 12 (9) 3

Total Real Property 3,807 (2,807) 1,000

Total $4,689 $(3,351) $1,338

B-43
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

General Property, Plant, and Equipment as of September 30, 2012 (in millions) 

Property Class

Estimated 

Useful 

Life 

(Years) Cost

Accumulated

Depreciation

Book 

Value

Personal Property 

Equipment 5 - 20 $686 $(438) $248

Internal Use Software 5 107 (91) 16

Internal Use Software in Development n/a 68 0 68

Total Personal Property 861 (529) 332

Real Property

Land and Land Rights n/a 52 0 52

Improvements to Land 10 745 (662) 83

Construction in Progress n/a 138 0 138

Buildings, Improvements, and Renovations 15 - 30 1,058 (631) 427

Other Structures and Facilities 15 - 50 1,720 (1,382) 338

Assets Under Capital Lease 5 - 30 58 (39) 19

Leasehold Improvements 10 12 (9) 3

Total Real Property 3,783 (2,723) 1,060

Total $4,644 $(3,252) $1,392

B-44
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 5: STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT 

This note provides information on certain resources entrusted to and stewardship responsibilities assumed by the 

Forest Service. These resources and responsibilities are referenced in accordance with U.S. GAAP on the Forest 

Service’s Balance Sheets. 

Stewardship PP&E 

Stewardship PP&E are assets whose physical properties resemble those of the General PP&E that are 

traditionally capitalized in the financial statements. Due to the nature of these assets, however, valuation would be 

difficult and matching costs with specific periods would not be meaningful. Stewardship PP&E includes heritage 

assets and stewardship land. The Forest Service reports Stewardship PP&E by site. Sites include national 

forests, national grasslands, other Forest Service-managed sites, and non-Forest Service-managed sites, such as 

museums and university laboratories. The protection of these lands and resources is a fundamental Forest 

Service responsibility. 

The mission of the Forest Service is to sustain the health, diversity, and productivity of the Nation’s forests and 

grasslands to meet the needs of present and future generations. The Forest Service strives to achieve quality 

land management under the sustainable multiple-use management concept to deliver the necessary products and 

services that are essential for enhancing natural resource stewardship and to meet the diverse needs of people. 

The preservation and management of heritage assets is guided through the enactment of many laws and 

regulations, including the Organic Administration Act of 1897 (16 U.S.C. 473-478, 479-482, 551), the Antiquities 

Act of 1906 (16 U.S.C. 431), the National Historic Preservation Act of 1966 (16 U.S.C. 470), the Archaeological 

Resources Protection Act of 1979 (16 U.S.C. 470aa et seq.), the Native American Graves Protection and 

Repatriation Act of 1990 (25 U.S.C. 3001), Executive Order 13287—Preserve America (issued March 3, 2003), 

National Register of Historic Places (36 CFR, part 60), Protection of Archaeological Resources Uniform 

Regulations (36 CFR part 296), and the Curation of Federally-owned and Administered Archaeological 

Collections (36 CFR part 79), as well as many others. 

The predominant laws governing the management of stewardship land are the Transfer Act of 1905 (16 U.S.C. 

472, 478, 495, 551, 554a, 615b, 554, 524), the Multiple Use-Sustained Yield Act of 1960 (16 U.S.C. 528-531, 528 

note), the Forest and Rangeland Renewable Resources Planning Act of 1974 (16 U.S.C. 1600 note, 1600-1614), 

and the National Forest Management Act of 1976 (16 U.S.C. 472a). 

These laws and regulations are implemented through Forest Service policy and guidance. Program management 

evaluations and technical reviews are performed to ensure compliance. 

Heritage Assets 

Heritage assets, as defined by U.S. GAAP, are PP&E that are unique for one or more of the following reasons: 

 Historical or natural significance 

 Cultural, educational, or artistic (e.g. aesthetic) importance 

 Significant architectural characteristics 

Heritage assets can include noncollection type assets, such as historic or prehistoric sites, monuments, and 

buildings, or collection type assets, such as objects gathered and maintained for exhibition at Forest Service 

locations and at non-Forest Service sites. 

B-45
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Some heritage assets may also be classified as multiuse 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 “multiuse” heritage asset. Multiuse heritage assets are capitalized as General PP&E. Multiuse 

heritage assets are reported as Stewardship PP&E. 

Heritage Asset categories can include the following: 

Priority Heritage Assets (PHA): Heritage assets of distinct public value that are, or should be, actively maintained, 

and meet one or more of the following criteria: 

 The property is recognized through an official designation, such as a listing on the National Register of 

Historic Places, State register, etc. 

 The property is recognized through prior investment in preservation, interpretation, and use. Any improvement 

to a PHA that meets real property designation criteria is considered real property.

 The property is recognized in an agency-approved management plan. 

 The property exhibits critical deferred maintenance needs, and those needs have been documented. 

Other Heritage Assets: Assets that may have potential important historical or cultural significance, but lack formal 

listing and the demonstrated need for active maintenance. 

Assemblage Assets: Any grouping of artifacts or archival materials aggregated through donation, agency events, 

site-specific or other field collection, other acquisition method, or combination therein. 

Addition and Deletion of Heritage Assets 

The Forest Service generally does not construct heritage assets, although, in some circumstances, important sitestructural components may be rehabilitated or reconstructed into viable historic properties to provide forest 

visitors with use and interpretation. Heritage assets may be added through the procurement process, but this 

rarely occurs. Normally, heritage assets are part of the land acquisition and inventory process. Deletion occurs 

through land exchange or natural disasters. Most additions occur through inventory activities where previously 

undocumented sites are discovered and added to the total. 

Heritage Assets Site by Management Area as of September 30, 2013 

Heritage Asset Sites by Management 

Area

2012

Final 

Sites Additions Deletions

2013

Final 

Sites

National Forests

Region 1 - Northern Region 15 0 0 15

Region 2 - Rocky Mountain Region 17 0 0 17

Region 3 - Southwestern Region 12 0 0 12

Region 4 - Intermountain Region 18 0 0 18

Region 5 - Pacific Southwest Region 18 0 0 18

Region 6 - Pacific Northwest Region 21 0 0 21

Region 8 - Southern Region 34 0 0 34

Region 9 - Eastern Region 17 0 0 17

Region 10 - Alaska Region 2 0 0 2

Subtotal 154 0 0 154

B-46
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Heritage Asset Sites by Management 

Area

2012

Final 

Sites Additions Deletions

2013

Final 

Sites

National Grasslands 

Region 1 - Northern Region 4 0 0 4

Region 2 - Rocky Mountain Region 7 0 0 7

Region 3 - Southwestern Region 4 0 0 4

Region 4 - Intermountain Region 1 0 0 1

Region 5 - Pacific Southwest Region 1 0 0 1

Region 6 - Pacific Northwest Region 1 0 0 1

Region 8 - Southern Region 2 0 0 2

Subtotal 20 0 0 20

Non-Forest Service Sites 168 7 (7) 168

TOTAL SITES 342 7 (7) 342

 Region 1— Montana, North Dakota, northern Idaho, and northwestern South Dakota 

 Region 2—Colorado, Kansas, Nebraska, South Dakota, and Wyoming 

 Region 3—Arizona and New Mexico 

 Region 4—Southern Idaho, Nevada, Utah, and western Wyoming 

 Region 5—California, Hawaii, Guam, and Trust Territories of the Pacific Islands 

 Region 6—Oregon and Washington 

 Region 8—Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, 

Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virgin Islands, and Virginia 

 Region 9—Delaware, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, 

New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, West Virginia, and 

Wisconsin 

 Region 10—Alaska 

Stewardship Land 

Stewardship land consists primarily of the national forests and grasslands owned by the Forest Service. 

Stewardship land is valued for its environmental resources, recreational and scenic value, cultural and 

paleontological resources, vast open spaces, and resource commodities and revenue provided to the Federal 

Government, States, and counties. 

National Forests 

The national forests are formally established and permanently set aside and reserved for national forest 

purposes. The following categories of National Forest System (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. 

B-47
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

 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 are 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 NFS. The 

program coordinates with a variety of partners, including State, local, and tribal governments, and private 

landowners through statewide planning for development of a land-adjustment strategy. 

The Land Acquisition Program preserves, develops, and maintains access to NFS lands and waters for the public 

and provides permanent access to public lands for recreation, commodity production, resource management, 

public safety, and community economic viability. 

The L&WCF statutory authority specifically defines the purpose to also include protecting the quality of scientific, 

scenic, historical, ecological, environmental, air and atmospheric, water resource, archeological values, as well as 

food and habitat for fish and wildlife, and managing the public lands for minerals, food, timber and fiber. 

From these several allowable uses of program funding, the program concentrates on protecting habitat for priority 

species identified in the national forest and grassland’s land management plans and enhancing recreational 

opportunities for areas with high demand for recreation. The program focuses acquisitions on inholdings and 

areas adjacent to existing NFS lands. 

B-48
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NFS Sites Reported by Major Category as of September 30, 2013 

Stewardship Land Asset Sites

2012

Final

Sites Additions Deletions

2013

Final

Sites

National Forests 154 0 0 154

National Grasslands 20 0 0 20

Research and Experiment Areas 3 0 0 3

National Preserves and Other Areas 3 0 0 3

TOTAL SITES 180 0 0 180

B-49
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 6: 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, 2013

and 2012, consisted of the following: 

Liabilities Not Covered by Budgetary Resources as of September 30, 2013 and 2012 (in millions) 

2013 2012 

Intragovernmental:

 Treasury Judgment Fund $23 $21

Other Unfunded Employment Related Liability (Note 9) 19 22

Federal Employee Benefits (Note 7) 71 71

Total Intragovernmental Not Covered by Budgetary Resources 113 114

Federal Employee Benefits (Note 7) 420 399

Environmental and Disposal Liabilities (Note 8) 120 0

Annual Leave Liability (Note 9) 201 209

Contingent Liabilities (Note 9) 40 43

Accrued Liability for Payments to States & Counties (Note 9) 325 346

Total Liabilities Not Covered by Budgetary Resources 1,219 1,111

Total Liabilities Covered by Budgetary Resources 1,150 1,284

Total Liabilities $2,369 $2,395

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-50
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 7: FEDERAL EMPLOYEE BENEFITS 

Liabilities under the Federal Employees’ Compensation Act (FECA) are incurred as a result of accrued workers' 

compensation benefits not yet paid by the Forest Service. 

Workers' compensation benefits include the current and expected future liability for death, disability, medical, and 

other approved costs. The U.S. Department of Labor (DOL) actuarially determines the expected future liability for 

the USDA as a whole, including the Forest Service. The Forest Service is billed annually as its claims are paid by 

the DOL. Payments to the DOL are deferred for 2 years so that the bills may be funded through the budget. The 

amounts of unpaid FECA billings constitute the accrued FECA payable. 

Accrued FECA Payable as of September 30, 2013 and 2012 (in millions) 

 2013 2012

Intragovernmental Federal Employee Benefits (Note 6) $71 $71 

Federal Employee Benefits (Note 6) 420 399 

Total $491 $470 

B-51
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 8: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

Forest Service discloses information related to cleanup costs for environmental hazards, in accordance with U.S. 

GAAP, which addresses liabilities associated with Government-related events and Government-acknowledged 

events. 

Government-related events are nontransaction-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 the 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 nontransaction 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 nonexchange 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, the U.S. 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, Financial Accounting Standards Advisory Board 

publication Technical Bulletin 2006-1, including the Comprehensive Environmental Response Compensation and 

Liability Act of 1980, the Resource Conservation and Recovery Act, 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. Estimated asbestos abatement liabilities also include expected future cleanup costs and the 

cost of preabatement inspection surveys. These surveys are used to determine the extent and type of asbestoscontaining building materials requiring removal and disposal during asset renovation or demolition. 

Environmental and Disposal Liabilities 

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 clean up any 

contaminated PP&E. Professional judgment and prior experience is often the basis for cost estimates. If the 

agency has no previous similar experience, the staff performs other comparable technical reviews or derives 

estimates using standard cost estimating guides. 

Exceptions occur when a previous activity results in release or potential release of a hazardous substance and if 

contamination migrates offsite from a current operation. In these instances, the total reasonably estimable costs 

are recognized when the exception is discovered. 

Forest Service cleanup cost estimates are based on the current total cost for a contaminated site according to 

laws, technology, and inflation/deflation. Forest Service updates cost estimates, including changes relating to 

prior period operations, for Government-related liabilities, at least annually, to reflect changes in laws or 

regulations, technology, and inflation or deflation. 

The Forest Service estimated liability for Government-related events as of September 30, 2013 and 2012, was $2

million for both fiscal years. 

B-52
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Asbestos Abatement Liabilities 

The Forest Service reports the cleanup of free-floating asbestos that is an immediate threat to human health as a 

Government-related Environmental and Disposal Liability. However, the asbestos contained in building materials, 

such as wall board and ceiling tiles, is undisturbed and presents no immediate threat to human health. 

Recognizing the financial liability for asbestos abatement costs is a change in accounting principle, recorded and 

reported for the first time in FY 2013, as required by the FASAB. The amount of the adjustment shall be shown as 

a “change in accounting principle” on the Statement of Changes in Net Position. 

The asbestos-related cleanup costs are recorded as a prior period adjustment in FY 2013. The total estimated 

asbestos abatement costs relates to prior period operations since the PP&E has been in service for a substantial 

portion of its estimated useful life. Estimates are calculated for buildings and structures constructed in years prior 

to 1981, per EPA and USDA Office of the Chief Financial Officer (OCFO) guidance. No asbestos abatement costs 

will be recovered through user charges. 

The USDA OCFO developed a Department-wide estimation methodology and calculated an abatement cost 

factor that is applied to the Forest Service square footage of asset groups expected to have asbestos. The 

“Construction Date” was used to identify the Forest Service assets built before 1981 to determine the assets 

expected to have asbestos. A “Building Type” indicator is used to identify Forest Service asset groups. The asset 

groups are broken out between “Complex” and “Basic” building structures: “Complex” buildings and structures are 

those with electrical, plumbing, and heating, ventilation, and air conditioning (HVAC) systems; “Basic” buildings 

and structures are those without electrical, plumbing, and HVAC systems. “Basic” buildings and structures were 

examined further to identify assets that are not expected to have asbestos, such as amphitheaters or picnic 

pavilions. Forest Service total square footage for complex assets are multiplied times the Department cost rate, 

in recognition of the high probability, on average, that asbestos was present. For basic assets expected to contain 

asbestos (such as a cabin or barn), 50 percent of the square footage is multiplied times the Department cost rate, 

in recognition of the lower probability, on average, that asbestos was present. A liability amount was not 

calculated for “Basic” buildings and structures that are not expected to contain asbestos. 

In addition to the estimate for asbestos abatement, Forest Service estimates preabatement inspection costs for 

each building over 4,999 square feet. These larger buildings are generally “central features” in a group of smaller 

buildings on one site or compound. An asbestos inspection generally includes all structures on the site, which is 

an economical approach because inspectors often must travel from larger cities to remote Forest Service 

locations. A construction industry standard publication for estimating the cost of construction jobs, R.S. Means 

Building Construction Cost Data, is used to determine the preabatement inspection cost for buildings over 4,999 

square. 

The only unrecognized portion of estimated asbestos abatement costs is the small segment of PP&E in which the 

presence of asbestos-containing materials is probable but not reasonably estimable. It is probable that numerous 

water and wastewater systems contain asbestos building materials, but sufficient information is not available to 

determine a reasonable estimate of abatement costs. Water and wastewater systems constructed prior to 1981 

include underground lengths of “transite pipe” (cement mixed with asbestos fibers), the linear footage of which 

cannot be estimated. 

The Forest Service initial recognition of estimated liability for asbestos abatement costs as of September 30, 

2013, is $118 million. 

B-53
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 9: OTHER LIABILITIES 

Other Liabilities as of September 30, 2013 and 2012 (in millions) 

2013 2012

NonCurrent Current TotalNonCurrent Current Total

Intragovernmental

Employer Contributions & Payroll Tax $0 15 $15 $0 37 $37 

Accrued Liabilities 23 14 37 21 34 55 

Advances from Others 0 18 18 0 44 44 

Deposit Liabilities 0 (43) (43) 0 1 1 

Other Unfunded Employment Related Liability (Note 6) 0 19 19 0 22 22 

Total Intragovernmental $23 23 $46 $21 138 $159 

Other 

Accrued Liabilities 0 763 763 0 906 906 

Advances from Others 0 89 89 0 86 86 

Deposit Liabilities 0 215 215 0 119 119 

Purchaser Road Credits 0 1 1 0 1 1 

Accrued Liability for Payments to States & Counties (Note 6) 0 325 325 0 346 346 

Annual Leave Liability (Note 6) 0 201 201 0 209 209 

Contingent Liabilities (Note 6) 0 40 40 0 43 43 

Custodial Liabilities 0 7 7 0 1 1 

Capital Leases (Note 10) 13 3 16 16 3 19 

Other 0 2 2 0 2 2 

Total Other $13 1,646 $1,659 $16 1,716 $1,732 

Total Other and Intragovernmental Liabilities $36 1,669 $1,705 $37 1,854 $1,891 

As of September 30, 2013 and 2012, 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 and the 

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

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

Deposit Liabilities: Deposit liabilities consist of collections deposited in deposit funds or clearing accounts 

awaiting disposition or reclassification. 

Accrued Liability for Payments to States and Counties: The Twenty-Five Percent Fund Act of May 23, 1908, 

as amended (16 U.S.C. 500), authorized the Payments to States Program. This program requires revenue 

generated by the sale of goods and services on the national forests to be shared with the States for public 

schools and public roads in the county or counties in which the national forests are located. The Secure Rural 

School and Community Self Determination Act of 2000, reauthorized on October 2, 2013, for FY 2013 as part of 

Public Law 113-40, also provides for roads and schools, Forest Service projects and emergency services. In 

addition, the Payments to Counties, Bankhead-Jones Farm Tenant Act of 1937 requires 25 percent of the net 

revenues from each national grassland or land utilization project to be paid to the counties in which such lands 

are located. 

B-54
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Annual Leave Liability: Annual and other vested leave such as compensatory, credit hours, and restored leave 

is accrued as it is earned, and the accrual is reduced as leave is taken. Each quarter, the balance in the accrued 

annual leave account is adjusted to reflect the latest pay rates and unused hours of leave. Funding will be 

obtained from future financing sources to the extent that current or prior year appropriations are not available to 

fund annual and other types of vested leave earned but not taken. 

Contingent Liabilities and Commitments: Forest Service reports contingent liabilities and commitments based 

on cases that are provided by OGC (see Note 1I). 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 that may require future financial obligations. 

These liabilities typically relate to Federal Tort Claims Act administrative and judicial claims, contract-related 

actions, personnel and employment-related matters, and various land and resource related claims and 

adjudications. Most of the cash settlements are expected to be paid out of the Judgment Fund, which is 

maintained by Treasury, rather than the operating resources of the Forest Service. 

The accrued and potential contingent liabilities as of September 30, 2013 and 2012, are summarized as follows: 

Accrued and Potential Contingent Liabilities as of September 30, 2013 (in millions) 

Accrued

Liabilities

Estimated 

Range of 

Loss

Lower End

Estimated 

Range of 

Loss

Upper End

Contingent Liabilities

Probable $40 $40 $593

Reasonably Possible 72 295

Accrued and Potential Contingent Liabilities as of September 30, 2012 (in millions) 

Accrued

Liabilities

Estimated 

Range of 

Loss

Lower End

Estimated 

Range of 

Loss

Upper End

Contingent Liabilities

Probable $43 $43 $567 

Reasonably Possible 41 185 

B-55
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 10: LEASE LIABILITIES 

The Forest Service enters into leasing agreements through leasing authority delegated by U.S. General Services 

Administration for general facilities (buildings and office space), equipment, and land. Leases may include 

renewal options for periods of 1 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, 2013 and 2012, and future 

capital and operating lease agreement payments as of September 30, 2013, consisted of the following: 

Summary of Assets Under Capital Leases as of September 30, 2013 and 2012 (in millions) 

Summary of Assets Under Capital Leases 2013 2012

Land, Buildings, Machinery, and Equipment $57 $58 

Accumulated Amortization (41) (39)

Total $16 $19 

Capital Lease Future Payment Schedule as of September 30, 2013 (in millions) 

Fiscal Year

Land and Buildings,

Machinery, and

Equipment

Year 1 (2014) $9 

Year 2 (2015) 8 

Year 3 (2016) 7 

Year 4 (2017) 5 

Year 5 (2018) 5 

After 5 Years 15 

Total Future Lease Payments $49 

Less: Imputed Interest (24)

Less: Executory Costs (9)

Subtotal 16 

Lease Liabilities Covered by 

Budgetary Resources $16 

Operating Lease Future Payment Schedule as of September 30, 2013 (in millions) 

Fiscal Year

Land and Buildings,

Machinery, and

Equipment

Year 1 (2014) $47 

Year 2 (2015) 41 

Year 3 (2016) 35 

Year 4 (2017) 31 

Year 5 (2018) 27 

After 5 Years 126 

Total Future Lease Payments $307 

B-56
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 11: FUNDS FROM DEDICATED COLLECTIONS 

In accordance with U.S. GAAP, the Forest Service administers certain funds from dedicated collections, which are 

specifically identified revenues, provided to the Government by non-Federal sources, 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 funds from dedicated collections 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 Titles

5004 Land Acquisition 

5005 Land and Water Conservation Fund

5008 National Forest Fund Receipts 

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 Midewin National Tallgrass Prairie 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

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-57
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Financial information for all funds from dedicated collections is included. Significant funds are specifically 

identified as shown below: 

Funds from Dedicated Collections as of and for the year ended September 30, 2013 (in millions) 

Cooperative 

Work *

State, Private, and

International 

Forestry Land and

Water Conservation 

Fund*

Payments to States 

National Forests 

Fund* Other Funds Total

ASSETS

Fund Balance with Treasury $181 $118 $108 $574 $981 

Accounts Receivable, Net 8 0 0 29 37 

Advances To Others 0 0 0 0 0

General Property, Plant & Equipment, Net 15 0 2 98 115 

TOTAL ASSETS $204 $118 $110 $701 $1,133 

LIABILITIES 

Accounts Payable $1 $ 0 $0 $4 $5 

Other Liabilities 82 36 302 39 459 

TOTAL LIABILITIES 83 36 302 43 464 

Total Net Position 121 82 (192) 658 669 

TOTAL LIABILITIES AND NET POSITION $204 $118 $110 $701 $1,133 

CHANGE IN NET POSITION

Beginning Balances, as adjusted $147 $99 $(130) $687 $803 

Budgetary Financing Sources:

Donations and Forfeitures of Cash 0 0 0 1 1 

Transfers -in/out without Reimbursement (10) 46 3 (12) 27 

Other Financing Sources:

Transfers-in/out without Reimbursement 0 0 (1) (187) (188)

Other 0 0 0 80 80 

Total Financing Sources (10) 46 2 (118) (80)

Revenue 87 0 48 355 490 

Expenses (103) (63) (112) (266) (544)

Net Cost of Operations (16) (63) (64) 89 (54)

ENDING BALANCES $121 $82 $(192) $658 $669 

* Treasury symbols with total asset values greater than or equal to $100M are reported individually. 

B-58
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Funds from Dedicated Collections as of and for the year ended September 30, 2012 (in millions) 

Cooperative 

Work *

Payments to 

States 

National 

Forests 

Fund*

Payments to 

Counties, 

National 

Grasslands*

Restoration

of Forest Lands 

and 

Improvements*

State, Private, 

and 

International 

Forestry Land 

and Water 

Conservation 

Fund*

Other 

Funds Total

ASSETS

Fund Balance with Treasury $213 $186 $138 $135 $131 $343 $1,146

Accounts Receivable, Net 2 0 0 2 0 12 16 

Advances To Others 0 1 0 0 0 0 1 

General Property, Plant & Equipment, Net 17 2 0 0 0 109 128 

TOTAL ASSETS $232 $189 $138 $137 $131 $464 $1,291

LIABILITIES 

Accounts Payable $1 $0 $0 $0 $0 $3 $4 

Other Liabilities 84 318 0 1 31 50 484 

TOTAL LIABILITIES 85 318 0 1 31 53 488 

Total Net Position 147 (129) 138 136 100 411 803 

TOTAL LIABILITIES AND NET POSITION $232 $189 $138 $137 $131 $464 $1,291

CHANGE IN NET POSITION

Beginning Balances, as adjusted $313 $(123) $62 $170 $94 $486 $1,002 

Budgetary Financing Sources:

Donations and Forfeitures of Cash 0 0 0 0 0 1 1 

Transfers -in/out without Reimbursement (160) 0 0 (80) 53 (32) (219)

Other Financing Sources:

Transfers-in/out without Reimbursement 0 0 0 0 0 (18) (18)

Other 0 0 77 0 0 (1) 76 

Total Financing Sources (160) 0 77 (80) 53 (50) (160)

Revenue 92 107 (1) 64 0 248 510 

Expenses (98) (113) 0 (18) (47) (273) (549)

Net Cost of Operations (6) (6) (1) 46 (47) (25) (39)

ENDING BALANCES $147 $(129) $138 $136 $100 $411 $803 

* Treasury symbols with total asset values greater than or equal to $100M are reported individually.

B-59
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Descriptions of the significant funds from dedicated collections 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 July 31, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act. 

State, Private, and International Forestry, Land and Water Conservation Fund 

The FY 2004 DOI and Related Agencies Appropriation Act (Public Law 108-108) authorizes the Forest Service to 

receive a transfer of receipts from DOI 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, 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. 

Payments to States, National Forests Fund 

The act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as “Payments to States,” requires, with 

a few exceptions, that 25 percent of all monies received from the national forests and deposited into the National 

Forest Fund (Treasury Symbol 125008) during a fiscal year from timber, grazing, special-use permits, power and 

mineral leases, and admission and user fees be paid to the States in which the national forests are located for 

public schools and public roads in the county or counties in which the national forests are situated. 

Payments to Counties, National Grasslands 

Receipts from Title III, Bankhead-Jones Farm Tenant Act lands designated as either national grasslands or land 

utilization projects should be credited to a special account (sec.60.1,para.3). When the status of such lands is 

changed to that of a national forest, credit such receipts to the National Forest Fund (125008). At the end of each 

calendar year, 25 percent of the net revenues from each national grassland or land utilization project are paid to 

the counties in which such lands are located. The Albuquerque Service Center, Budget and Finance, processes 

these payments (sec.60.1, para.3). These payments are not payments in lieu of taxes (PILT); instead, they are 

national grassland or land utilization project receipts to be shared through grants with local governments for the 

purposes stated in the Act.

Restoration of Forest Lands and Improvements 

The Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579c) states any monies received by the 

United States with respect to lands under the administration of the Forest Service (a) as a result of the forfeiture 

of a bond or deposit by a permittee or timber purchaser for failure to complete performance of improvement, 

protection, or rehabilitation work required under the permit or timber sale contract or (b) as a result of a judgment, 

compromise, or settlement of any claim, involving present or potential damage to lands or improvements, shall be 

deposited into the Restoration of Forest Lands and Improvements Account—12X5215. The monies are then 

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. 

B-60
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 12: SUBORGANIZATION PROGRAM COSTS/PROGRAM COSTS BY SEGMENT 

The Forest Service reflects costs through four primary responsibility segments: National Forests and Grasslands, 

Forest and Rangeland Research, State and Private Forestry, and Wildland Fire Management. A USDA Forest 

Service Strategic Plan FY 2013-2017 is being developed. The document will identify strategic goals for the 

agency. 

The following tables illustrate program costs by segment for the years ended September 30, 2013 and 2012. 

Program Costs by Segment for the year ended September 30, 2013 (in millions) 

National 

Forests and 

Grasslands

Forest and 

Rangeland 

Research

State 

and 

Private 

Forestry

Wildland Fire 

Management Total

Intragovernmental Gross Costs: 

Benefit Program Costs $321 $38 $13 $258 $630 

Imputed Costs 348 0 0 0 348 

Reimbursable Costs 152 20 12 197 381 

Total Intragovernmental Gross Costs 821 58 25 455 1,359 

 Less: Intragovernmental Earned Revenue 134 16 51 26 227 

 Intragovernmental Net Costs 687 42 (26) 429 1,132 

Gross Costs With the Public:

Grants and Indemnities 308 12 256 47 623

Stewardship Land Acquisition (Note 13) 45 0 0 0 45 

Other:

Operating Costs 1,754 238 93 1,997 4,082

Depreciation Expense 118 2 0 27 147 

Reimbursable Costs 97 19 37 132 285 

Total Other 1,969 259 130 2,156 4,514

Total Gross Costs with the Public 2,322 271 386 2,203 5,182 

Less: Earned Revenues from the Public 459 4 0 71 534 

Net Costs with the Public 1,863 267 386 2,132 4,648 

Net Cost of Operations $2,550 $309 $360 $2,561 $5,780 

B-61
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

Program Costs by Segment for the year ended September 30, 2012 (in millions) 

National 

Forests 

and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Wildland

Fire 

Management Total

Intragovernmental Gross Costs:

Benefit Program Costs $350 $42 $15 $240 $647 

Imputed Costs 372 0 0 0 372 

Reimbursable Costs 175 23 13 180 391 

Total Intragovernmental Gross Costs 897 65 28 420 1,410 

Less: Intragovernmental Earned Revenue 47 19 56 10 132 

Intragovernmental Net Costs 850 46 (28) 410 1,278 

Gross Costs With the Public:

Grants and Indemnities 368 6 231 90 695 

Stewardship Land Acquisition (Note 13) 51 0 0 0 51 

Other:

Operating Costs 1,798 246 97 2,105 4,246 

Depreciation Expense 117 2 0 27 146 

Reimbursable Costs 146 23 32 191 392 

Total Other 2,061 271 129 2,323 4,784 

Total Gross Costs with the Public 2,480 277 360 2,413 5,530 

Less: Earned Revenues from the Public 559 4 0 144 707 

Net Costs with the Public 1,921 273 360 2,269 4,823 

Net Cost of Operations $2,771 $319 $332 $2,679 $6,101

B-62
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 13: COST OF STEWARDSHIP PP&E 

Stewardship PP&E acquired in FYs 2013 and 2012 amounted to $45 and $51 million, respectively. Cost of 

Stewardship PP&E includes purchases of lands, easements, and rights-of-way. Stewardship land is land and land 

rights owned by the Federal Government and is excluded from General PP&E. Examples of stewardship land 

include land used for forests, grazing, and wildlife. 

Costs for stewardship land include all costs to acquire and prepare the land for its intended use. The acquired 

land was adjacent to existing forest/grassland sites, thus the number of sites reported in Note 5 remains 

unchanged. 

B-63
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 14: APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED 

An apportionment is an Office of Management and Budget (OMB)-approved plan to use budgetary resources and 

limits the obligations that may be incurred for specified time periods, programs, activities, projects, objects, or any 

combination thereof. Apportionments received from OMB are categorized as Category A (by quarter), Category B 

(by project), or Category E (exempt from apportionment). The amounts of direct and reimbursable obligations 

incurred by apportionment category are shown below. 

In FY 2012, the Forest Service had two treasury symbols that received Category A apportionments – 12X1106 

(National Forest System) and 12X1115 (Wildland Fire Management). Per OMB direction, Forest Service changed 

the apportionment category for these treasury symbols to Category B. All Forest Service treasury symbols are 

receiving Category B apportionments in FY 2013. 

Apportionment Categories of Obligations Incurred for the year ended September 30, 2013 (in millions) 

Apportionment 

Category A

Apportionment 

Category B Total

Obligations Incurred - Direct $0 $6,160 $6,160 

Obligations Incurred - Reimbursable 0 532 532 

Total Obligations Incurred $0 $6,692 $6,692 

Apportionment Categories of Obligations Incurred for the year ended September 30, 2012 (in millions) 

Apportionment 

Category A

Apportionment 

Category B Total

Obligations Incurred - Direct $4,233 $1,914 $6,147

Obligations Incurred - Reimbursable 175 376 551

Total Obligations Incurred $4,408 $2,290 $6,698

B-64
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 15: EXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF 

BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES 

GOVERNMENT 

The differences between the FY 2012 Statement of Budgetary Resources (SBR) and the FY 2012 actual numbers 

presented in the FY 2013 Budget of the U.S. Government (Budget) are summarized in the table below. The 

President’s Budget with actual numbers for 2013 was published in February of 2014, and to be made available at 

http://www.whitehouse.gov. OMB Circular A-136 states that the note should “identify and explain material 

differences between amounts reported in the SBR and actual amounts reported in the Budget of the United States 

Government as required by U.S. GAAP.” The Department’s threshold for explaining material variances is $25 

million and 10 percent. No variances meet this threshold. 

Differences between the FY 2012 SBR and the FY 2012 actual numbers presented in the FY 2013 Budget 

of the U.S. Government (in millions) 

SBR Line Description

SBR 

Amount

Budget 

Amount

Dollar 

Variance

Percentage 

Variance

Total Budgetary Resources/Status of Resources 8,090 8,079 11 0%

Total Status of Resources 8,090 8,079 11 0%

Unobligated Balance-Beginning of Year 1,907 1,898 9 0%

Recoveries of Prior Year Obligations 131 124 7 6%

New Budget Authority - Appropriations 5,296 5,299 (3) 0%

Spending Authority from Offsetting Collections 758 758 0 0%

Total New Obligations 6,698 6,694 4 0%

Unobligated Balance and Unobligated Balance not Available 1,392 1,385 7 1%

Obligated Balance - Beginning of Year 2,771 2,770 1 0%

Obligated Balance - End of Year 2,026 2,027 (1) 0%

Gross Outlays 6,781 6,781 0 0%

Less: Offsetting Collections (712) (713) 1 (1%)

Less: Distributed Offsetting Receipts (530) (533) 3 0%

Net Outlays 5,539 6,068 (529) (9%)

B-65
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 16: INCIDENTAL CUSTODIAL COLLECTIONS 

Custodial collections represent miscellaneous general fund receipts such as collections on land leases for 

resource extraction, sale of timber and other products administered by the Forest Service, civil monetary penalties 

and interest, and commercial fines and penalties. Custodial collection activities are considered immaterial and 

incidental to the mission of the Forest Service. However, the custodial activity transfer for FY 2013 includes 

collections for multiple FY’s, FY 2012 and prior, which should have been transferred to Treasury in previous 

years. Comparative presentation will begin in FY 2014. 

Incidental Custodial Collections for the year ended September 30, 2013 (in millions) 

Revenue Activity: 2013

Sources of Collections:

Miscellaneous $189 

Total Cash Collections $189 

Accrual Adjustments $6 

Total Custodial Revenue $195 

Disposition of Collections:

Transferred to Others:

Treasury $(195)

(Increase)/Decrease in Amounts Yet to be Transferred $0 

Net Custodial Activity $0

B-66
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 17: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Unpaid Obligations and Undelivered Orders as of September 30, 2013 and 2012 (in millions) 

2013 2012

Unpaid Obligations $2,351 $2,557

Undelivered Orders $1,513 $1,559

B-67
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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 nonmonetary 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, 2013 and 2012, the amount of marijuana on hand was 29,407 kg and 31,807 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-68
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

NOTE 19: RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

BUDGET (FORMERLY THE STATEMENT OF FINANCING) 

Reconciliation of Net Cost of Operations to Budget for the years ended September 30, 2013 and 2012 

(in millions) 

2013 2012

Resources Used to Finance Activities:

Budgetary Resources Obligated:

 Obligations Incurred $6,692 $6,698 

 Less: Spending Authority from Offsetting Collections and Recoveries 734 889 

 Obligations Net of Offsetting Collections and Recoveries 5,958 5,809 

 Less: Offsetting Receipts 693 530 

 Net Obligations 5,265 5,279 

Other Resources:

 Transfers in/out Without Reimbursement (187) 0 

 Imputed Financing from Costs Absorbed by Others 348 372 

 Other 78 59 

 Net Other Resources Used to Finance Activities 239 431 

Total Resources Used To Finance Activities 5,504 5,710 

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 43 297 

Resources that Fund Expenses Recognized in Prior Periods (214) (4)

Budgetary Offsetting Collections and Receipts that do not Affect 

 Net Cost of Operations

Change in Unfilled Orders 36 23 

Other 635 0 

Resources that Finance the Acquisition of Assets (95) (133)

Other Resources or Adjustments to Net Obligated Resources that do not 

 Affect the Net Cost of Operations (41) 15 

Total Resources Used to Finance Items not Part of the Net Cost of Operations 364 198 

Total Resources Used to Finance the Net Cost of Operations 5,868 5,908 

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 201 0 

 Increase in Environmental and Disposal Liability 2 1 

 Increase in Exchange Revenue Receivable from the Public (440) (2)

 Other 20 37 

Total Components of Net Cost of Operations that will Require or Generate

 Resources in Future Periods (217) 36 

Components not Requiring or Generating Resources:

 Depreciation and Amortization 147 146 

 Revaluation of Assets or Liabilities (13) 2 

Other Components not Requiring or Generating Resources:

 Bad Debt Expense (7) 13 

 Other 2 (4)

Total Components of Net Cost of Operations that will not Require or

 Generate Resources 129 157 

Total Components of Net Cost of Operations that will not Require or 

 Generate Resources in the Current Period (88) 193 

Net Cost of Operations $5,780 $6,101 

This note is intended to be a bridge between the entity’s budgetary and financial (proprietary) accounting. This 

B-69
U.S. Department of Agriculture 

Forest Service 

Notes to the Consolidated and Combined Financial Statements 

For the years ended September 30, 2013 and 2012 

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 nonbudgetary resources, (2) the budgetary and 

nonbudgetary resources used by an agency may finance activities that are not components of the net cost of 

operations, and (3) the net cost of operations may contain components that do not use or generate resources in 

the period. 

B-70
C-1

Part C: Required Supplementary 

Stewardship Information

(Unaudited)
Required Supplementary Stewardship Information—Unaudited

For the Years Ended September 30, 2013 and 2012

C-2

 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) 2013 Net Cost of Operations: $309 million. Of the $309 million—

•	 $284 million was an investment of Research and Development (R&D) funding

•	 $25 million was an investment of National Fire Plan funding and Joint Fire Science Program funding.

Forest Service R&D has an integrated portfolio that supports achievement of the agency’s strategic goals. The Forest 

Service R&D structure has two components: Priority Research Areas and Strategic Program Areas (SPAs). 

The Priority Research Areas address urgent needs in seven areas: Forest Disturbances, Forest Inventory and Analysis, 

Watershed Management and Restoration, Bioenergy and Biobased Products, Urban Natural Resources Stewardship, 

Nanotechnology, and Localized Needs Research. 

The SPAs are the long-term programs from which Priority Research Areas are funded. The following are the SPAs.

Wildland Fire and Fuels

Wildland Fire and Fuels R&D provides managers with the knowledge and tools to reduce negative impacts, while 

enhancing the beneficial effects, of wildland fire as a natural process. This knowledge and these tools are critical to 

understanding the human process of fire and fuels management on society and the environment. 

Research focuses on understanding and modeling fundamental fire processes; interactions of fire with ecosystems; and 

the environmental, social, and economic aspects of fire, as well as evaluating the integrated management strategies and 

disturbance interactions at multiple scales and the application of fire research to address management problems.

 Invasive Species

Invasive Species R&D provides the scientific 

information, methods, and technology to 

reduce or eliminate the introduction, spread, 

and impact of invasive species and to restore 

or improve the functionality of ecosystems 

affected by invasive species. 

Research focuses on nonnative plants, animals, 

fish, insects, diseases, invertebrates, and 

other species whose introduction is likely to 

cause economic or environmental harm to an 

ecosystem. 

Forest Service
Required Supplementary Stewardship Information—Unaudited

For the Years Ended September 30, 2013 and 2012

C-3

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 by adapting to climate variability and 

change. 

The program features ecosystem services with a high level of integration between water, air, and soil research, such 

as the effects of climate variability and change on water budgets or carbon sequestration metrics from an ecosystem 

perspective.

Wildlife and Fish

Wildlife and Fish R&D relies upon interdisciplinary

research to inform policy initiatives affecting wildlife 

and fish habitat on private and public lands and the 

recovery of threatened or endangered species. 

Scientists investigate the complex interactions among 

species; ecosystem dynamics and processes; land 

use and management; and any emerging broadscale 

threats, including global climate change, loss of open 

space, invasive species, and disease. 

Resource Management and Use

Resource Management and Use R&D provides the 

science and technology base to sustainably manage 

and use forest resources and forest fiber-based 

products. 

Research focuses on the plant sciences, soil 

sciences, social sciences, silviculture, productivity, 

forest and range ecology management, harvesting 

and operations, forest and biomass products and

utilization, economics, urban forestry, and climate 

change. 

Outdoor Recreation

Outdoor Recreation R&D promotes human and 

ecological sustainability by researching environmental 

management, activities, and experiences that connect 

people with the natural world. 

Research in outdoor recreation is interdisciplinary, 

focusing on nature-based recreation and the changing 

trends in American society; connections between 

recreation visitors, communities, and the environment;

 human benefits and consequences of recreation and 

nature contact; the effectiveness of recreation management and decisionmaking; and sustaining ecosystems 

affected by recreational use.

Forest Service

Forest Service
Required Supplementary Stewardship Information—Unaudited

For the Years Ended September 30, 2013 and 2012

C-4

Inventory and Monitoring

Inventory and Monitoring R&D provides the resource data, analysis, and tools that monitor vulnerable forest ecosystems 

for rapid change from threats of fire, insects, disease, natural processes, or management actions. From their research, 

scientists determine the status and trend of the health of the Nation’s forests and grasslands and the potential impact 

from climate change.

Their research integrates the development and use of science, technology, and remotely sensed data to better 

understand the incidences of forest fragmentation over time from changes in land use or from insects, disease, fire, and

extreme weather events. 

Research Categories

Each of the seven SPAs has stewardship investments in the following three categories: basic research, applied research, 

and development. 

Basic research is the systematic study directed toward new or improved knowledge and understanding. Applied research 

is the systematic study intended to gain knowledge or understanding necessary to meet a specific need. Development is 

the systematic application of knowledge or understanding, directed toward the production of useful materials, devices, 

systems, or methods. The following tables report net cost of R&D operations by these categories and by the FY 2013 

stewardship investment. 

TABLE 1. COST OF R&D STEWARDSHIP INVESTMENTS BY TYPE OF RESEARCH (IN MILLIONS)

R&D Stewardship Investments FY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Net Cost of Operations $309 $319 $327 $338 $323

Basic Research 77 80 91 94 87

Applied Research 192 207 220 227 220

Development 40 32 16 17 16

TABLE 2. NUMBER OF R&D STEWARDSHIP INVESTMENTS BY TYPE OF INVESTMENT

Types of R&D Stewardship Investments FY 2013 FY 2012 FY 2011 FY 2010 FY 2009

New interagency agreements and contracts 44 32 32 38 57

Continued interagency agreements and contracts 2 12 12 12 12

Articles published in journals 3,014 3,049 3,083 1,790 2,294

Articles published in all other publications 446 650 1,178 1,481 886

Patent(s) granted 2 8 3 2 3
D-1

Part D: Required Supplementary 

Information Section

(Unaudited)
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-2

 REQUIRED SUPPLEMENTARY INFORMATION 

DEFERRED MAINTENANCE AND REPAIRS

Deferred maintenance and repairs (DM&R) is maintenance that was scheduled to be performed but was delayed until a 

future period. DM&R represents a cost that the Federal Government has elected not to fund and, therefore, the costs are 

not reflected in the financial statements. 

DM&R 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. DM&R 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. 

DM&R 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 DM&R 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 DM&R 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. 

Forest Service
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-3

Estimated Deferred Maintenance and Repairs

DM&R estimates for most assets—except bridges—are based on condition surveys performed on a 5-year maximum 

revolving schedule. The bridge class is on a 2-year maximum revolving schedule. To date, surveys of all administrative 

buildings, dams, bridges, roads open to passenger cars, and recreation sites have been accomplished. The agency’s 

DM&R for National Forest System (NFS) roads is determined annually from random sample surveys, providing an 

80-percent level of confidence. 

The dollar amounts in Table 1, DM&R 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

TABLE 1. DM&R TOTALS BY ASSET CLASS AS OF SEPTEMBER 30, 2013 (IN MILLIONS)

Asset Class

Overall 

Condition Critical Maintenance

Noncritical 

Maintenance

Cost To Return to 

Acceptable Condition

Bridge Varies $38 $172 $210

Building Varies 80 1,145 1,225

Dam Varies 11 15 26

Fence Varies 268 0 268

Handling Facility Varies 22 0 22

Heritage Varies 3 18 21

Minor Constructed Features Varies 0 94 94

Roads Varies 633 2,634 3,267

Trail Varies 5 274 279

Trail Bridge Varies 3 6 9

Wastewater System Varies 16 16 32

Water System Varies 51 47 98

Wildlife, Fish, and Threatened 

and Endangered Species Varies 5 2 7

Grand Total $1,135 $4,423 $5,558

The overall condition of major asset classes ranges from poor to good depending on the location, age, and type of 

property. The standards for acceptable operating condition for various classes of general PP&E, stewardship, and 

heritage assets are as follows.
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-4

Conditions of roads and bridges within the NFS road system are measured by various standards: 

1. Federal Highway Administration regulations for the Federal Highway Safety Act. 

2. Best management practices for the nonpoint source provisions of the Clean Water Act from U.S. Environmental 

Protection Agency and States.

3. Road management objectives developed through the National Forest Management Act forest planning process.

4. Forest Service directives—Forest Service Manual (FSM) 7730, Operation and Maintenance (August 25, 2005, 

amendment was superseded with October 1, 2008, revision); Forest Service Handbook (FSH) 7709.56a, Road Preconstruction, and FSH 7709.56b, Transportation Structures Handbook. 

Dams shall be managed according to FSM 7500, Water Storage and Transmission, and FSH 7509.11, Dams Management 

Handbook. The condition of a dam is acceptable when the dam meets current 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 42.9 percent needing major repairs or renovations, approximately 14 percent in fair 

condition, and 43.1 percent of the facilities in good condition.1

The agency is currently developing an integrated strategy to realign its administrative facility infrastructure to meet 

current organizational structure and to reduce the maintenance liability for unneeded buildings, free up land for 

use by local communities and private enterprise, and provide added funds for infrastructure maintenance and 

development. Forest Service optimizes benefits from a combination of appropriations, facility conveyance receipts, and 

decommissioning of unneeded facilities. 

Recreation facilities are located within recreation sites that range from highly developed sites to general forest areas 

such as 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. Recreation 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.

1

 These percentages are estimated for the FY 2013 Forest Service Financial Report, or AFR.
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-5

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. 

DM&R of structures for wildlife, fish, and threatened and endangered species is determined by field biologists using their 

professional judgment. The DM&R 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. 

In FY 2013, the Forest Service developed the Invasive Species Framework to provide a vision for future agency policies 

and management strategies for all invasive species. Invasive species of insects, diseases, and plants continue to affect 

our native ecosystems by causing mortality to, or displacement of, native vegetation. The agency also released the next 

iteration of the National Insect and Disease Risk Map in FY 2013, providing a comprehensive public online database 

containing 750 forest pest hazard and risk models to support forest management across all landscapes. This key resource 

is used by not only the Forest Service, but by State and academic partners across the country.

The FY 2013 year-to-date accomplishments on NFS and State and Private Forestry lands include treatment of 761,000 

acres for invasives and 107,000 acres for native pests. These numbers should be considered preliminary, with final 

amounts of acres treated for invasives and native pests on NFS lands are available at http://www.fs.fed.us.

Forest Service
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-6

TABLE 2. COMBINED STATEMENT OF BUDGETARY RESOURCES BY MAJOR BUDGET ACCOUNT FOR THE YEAR 

ENDED SEPTEMBER 30, 2013 (IN MILLIONS)

National 

Forest and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Capital 

Improvement 

and 

Maintenance

Wildland Fire 

Management

Permanent 

and Trust 

Funds

Working 

Capital Fund Total

Budgetary Resources

Unobligated Balance Brought 

Forward, October 1 $180 $44 $104 $63 $181 $677 $143 $1,392

 Unobligated Balance 

Brought Forward, October 1, 

as Adjusted 180 44 104 63 181 677 143 1,392

Recoveries of Prior Year 

Unpaid Obligations 1 0 5 5 10 0 0 21

Unobligated Balance from 

Prior Year Budget Authority, 

net 181 44 109 68 191 677 143 1,413

Appropriations (Discretionary 

& Mandatory) 1,572 297 321 346 2,532 585 0 5,653

Spending Authority from 

Offsetting Collections 

(Discretionary & Mandatory) 56 18 45 26 258 26 284 713

 Total Budgetary Resources $1,809 $359 $475 $440 $2,981 $1,288 $427 $7,779

Status of Budgetary Resources

 Obligations Incurred $1,676 $325 $372 $383 $2,895 $796 $245 $6,692

 Unobligated Balance, End 

 of Year:

 Apportioned (Note 2) 119 35 100 50 111 203 198 816

 Unapportioned (Note 2) 14 (1) 3 7 (25) 289 (16) 271

Total Unobligated Balance, End 

of Year 133 34 103 57 86 492 182 1,087

Total Status of Budgetary 

Resources $1,809 $359 $475 $440 $2,981 $1,288 $427 $7,779

Change in Obligated Balance

Unpaid Obligations, Brought 

Forward, October 1 $408 $143 $612 $215 $1,016 $118 $45 $2,557

Obligations Incurred 1,676 325 372 383 2,895 796 245 6,692

Outlays (Gross) (-) (1,658) (342) (402) (448) (2,983) (801) (243) (6,877)

Recoveries of Prior Year 

Unpaid Obligations (-) (1) (5) (5) (10) 0 0 (21)

Unpaid Obligations, End of 

Year $425 $126 $577 $145 $918 $113 $47 $2,351
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-7

National 

Forest and 

Grasslands

Forest and 

Rangeland 

Research

State and 

Private 

Forestry

Capital 

Improvement 

and 

Maintenance

Wildland Fire 

Management

Permanent 

and Trust 

Funds

Working 

Capital Fund Total

Uncollected Payments

Uncollected Customer 

Payments From

Federal Sources, Brought 

Forward, October 1 (-) $(92) $(41) $(71) $(63) $(262) $0 $(2) $(531)

Change in Uncollected 

Customer Payments from 

Federal Sources (+ or -) (3) 2 (20) (6) 146 0 (47) 72

Uncollected Customer 

Payments From Federal 

Sources, End of Year (-) $(95) $(39) $(91) $(69) $(116) $0 $(49) $(459)

Memorandum (non-add) 

Entries:

Obligated Balance, Start of 

Year (+ or -) $316 $102 $541 $152 $754 $118 $43 $2,026

Obligated Balance, End of Year 

(+ or -)

330 87 486 76 802 113 (2) 1,892

Budget Authority and Outlays, 

Net

Budget Authority, Gross 

(Discretionary and Mandatory) $1,628 $315 $366 $372 $2,790 $611 $284 $6,366

Actual Offsetting Collections 

(Discretionary and Mandatory) (54) (20) (26) (20) (402) (26) (237) (785)

Change in Uncollected 

Customer Payments from 

Federal sources (Discretionary 

and Mandatory) (+ or -) (3) 2 (20) (6) 146 0 (47) 72

Budget Authority, net 

(Discretionary and 

Mandatory) $1,571 $297 $320 $346 $2,534 $585 $0 $5,653

Outlays. Gross (Discretionary 

and Mandatory) $1,658 $342 $402 $448 $2,983 $801 $243 $6,877

Actual Offsetting Collections 

(Discretionary and Mandatory) (54) (20) (26) (20) (402) (26) (237) (785)

Outlays, net (Discretionary and 

Mandatory) 1,604 322 376 428 2,581 775 6 6,092 

Distributed Offsetting Receipts 

(-) (271) 0 0 0 0 (422) 0 (693)

Agency Outlays, net 

(Discretionary and 

Mandatory) $1,333 $322 $376 $428 $2,581 $353 $6 $5,399

TABLE 2. COMBINED STATEMENT OF BUDGETARY RESOURCES BY MAJOR BUDGET ACCOUNT FOR THE YEAR 

ENDED SEPTEMBER 30, 2013 (IN MILLIONS) (CONTINUED)
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-8

TABLE 3. COMBINED STATEMENT OF BUDGETARY RESOURCES BY MAJOR BUDGET ACCOUNT FOR THE 

YEAR ENDED SEPTEMBER 30, 2012 (IN MILLIONS) 

National 

Forest

and 

Grasslands

Forest and

Rangeland 

Research

State and

Private 

Forestry

Capital 

Improvement

and 

Maintenance

Wildland Fire

Management

Permanent 

and

Trust Funds

Working

Capital Fund Total

Budgetary Resources

Unobligated Balance Brought 

Forward, October 1 $207 $42 $91 $102 $377 $955 $133 $1,907 

 Unobligated Balance 

Brought Forward, October 1, 

as Adjusted 207 42 91 102 377 955 133 1,907 

Recoveries of Prior Year 

Unpaid Obligations 7 2 7 11 100 3 1 131 

Other Changes in Unobligated 

Balance (+ or -) 0 0 (2) 0 175 (175) 0 (2)

Unobligated Balance from 

Prior Year Budget Authority, 

net 214 44 96 113 652 783 134 2,036 

Appropriations (Discretionary 

& Mandatory) 1,588 321 334 353 2,023 677 0 5,296 

 Spending Authority From 

Offsetting Collections 

(Discretionary & Mandatory) 57 21 78 28 300 29 245 758 

 Total Budgetary Resources $1,859 $386 $508 $494 $2,975 $1,489 $379 $8,090

Status of Budgetary Resources

 Obligations Incurred $1,679 $342 $404 $432 $2,793 $812 $236 $6,698 

 Unobligated Balance, End 

of Year:

 Apportioned (Note 2) 160 34 96 55 115 309 31 800 

 Unapportioned (Note 2) 20 10 8 7 67 368 112 592 

 Total Unobligated Balance, 

End of Year 180 44 104 62 182 677 143 1,392 

 Total Status of Budgetary 

Resources $1,859 $386 $508 $494 $2,975 $1,489 $379 $8,090 

Change in Obligated Balance

Unpaid Obligations, Brought 

Forward, October 1 $467 $157 $610 $383 $984 $124 $46 $2,771 

Obligations Incurred 1,679 342 404 432 2,793 812 236 6,698 

Outlays (Gross) (-) (1,731) (354) (395) (589) (2,661) (815) (236) (6,781)

Recoveries of Prior Year 

Unpaid Obligations (-) (7) (2) (7) (11) (100) (3) (1) (131)

Unpaid Obligations, End of 

Year $408 $143 $612 $215 $1,016 $118 $45 $2,557

Uncollected Payments
Required Supplementary Information—Unaudited

For the Years Ended September 30, 2013 and 2012

D-9

National 

Forest

and 

Grasslands

Forest and

Rangeland 

Research

State and

Private 

Forestry

Capital 

Improvement

and 

Maintenance

Wildland Fire

Management

Permanent 

and

Trust Funds

Working

Capital Fund Total

Uncollected Customer 

Payments from

Federal Sources, Brought 

Forward, October 1 (-) $(102) $(40) $(52) $(61) $(229) $0 $(1) $(485)

Change in Uncollected 

Customer Payments from 

Federal Sources (+ or -) 10 (1) (19) (2) (33) 0 (1) (46)

Uncollected Customer 

Payments from Federal 

Sources, 

End of Year (-) $(92) $(41) $(71) $(63) $(262) $0 $(2) $(531)

Memorandum (non-add) 

Entries

Obligated Balance, Start of 

Year (+ or -) $365 $117 $558 $322 $755 $124 $45 $2,286 

Obligated Balance, End of Year 

(+ or -) 316 102 541 152 754 118 43 2,026 

Budget Authority and Outlays, 

Net

Budget Authority, Gross 

(Discretionary and Mandatory) $1,645 $342 $412 $381 $2,323 $706 $245 $6,054 

Actual Offsetting Collections 

(Discretionary and Mandatory) (67) (19) (60) (26) (268) (29) (243) (712)

Change in Uncollected 

Customer Payments from 

Federal sources

(Discretionary and Mandatory) 

(+ or -) 10 (1) (19) (2) (33) 0 (1) (46)

Budget Authority, Net 

(Discretionary and 

Mandatory) $1,588 $322 $333 $353 $2,022 $677 $1 $5,296 

Outlays, Gross (Discretionary 

and Mandatory) $1,731 $354 $395 $589 $2,661 $815 $236 $6,781 

Actual Offsetting Collections 

(Discretionary and Mandatory) (67) (19) (60) (26) (268) (29) (243) (712)

Outlays, net (Discretionary and 

Mandatory) 1,664 335 335 563 2,393 786 (7) 6,069 

Distributed Offsetting Receipts 

(-) (31) 0 0 0 0 (499) 0 (530)

Agency Outlays, Net 

(Discretionary and 

Mandatory) $1,633 $335 $335 $563 $2,393 $287 $(7) $5,539 

TABLE 3. COMBINED STATEMENT OF BUDGETARY RESOURCES BY MAJOR BUDGET ACCOUNT FOR THE 

YEAR ENDED SEPTEMBER 30, 2012 (IN MILLIONS) (CONTINUED)
E-1

Part E: Other Information Section

(Unaudited)
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-2

 OTHER INFORMATION 

SCHEDULE OF SPENDING

The Schedule of Spending (SOS) presents an overview of how and where the Forest Service is spending money for the 

reporting period. The data that populate this schedule are the same underlying data used to populate the Statement of 

Budgetary Resources. The following SOS presents total budgetary resources, gross outlays, and total obligations incurred 

for the year ending September 30, 2013. 

TABLE 1. SCHEDULE OF SPENDING FOR THE YEAR ENDED SEPTEMBER 30, 2013 (IN MILLIONS)

2013

What Money Is Available To Spend?

Total Resources $7,779

Less Amount Available but Not Agreed To Be Spent 816

Less Amount Not Available To Be Spent 271

Total Amounts Agreed To Be Spent $6,692

How Was the Money Spent/Issued?

USDA Strategic 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:

Personnel Compensation and Benefits $2,962

Travel and transportation 150

Rent, communications, and utilities 183

Other contractual services 2,063

Supplies and materials 245

Equipment, land, and structures 177

Grants, subsidies, and contributions 589

Insurance claims and indemnities 7

Interest, dividends, and refunds (11)

Other 327

Total $6,692

Total Amounts Agreed To Be Spent $6,692

Who Did the Money Go To?

Federal $49

Non-Federal 6,643

Total Amounts Agreed To Be Spent $6,692
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-3

MANAGEMENT CHALLENGES

The Reports Consolidation Act of 2000 requires the U.S. Department of Agriculture (USDA), Office of Inspector General 

(OIG) to identify and report annually on the most serious management challenges the Department faces. To identify 

these Departmental challenges, OIG examines issued audit reports with recommendations where corrective actions have 

yet to be taken, assesses ongoing investigative and audit work to ascertain significant vulnerabilities, and analyzes new 

programs and activities that could pose significant challenges due to their range and complexity. 

Management Challenge 6—Action Needed To Improve Natural Resources Stewardship 

“One of USDA’s mission areas is ensuring the health of the land through sustainable management and conservation of 

the Nation’s natural resources. Over the years, USDA’s Forest Service and Natural Resource Conservation Service have 

had to balance budgetary concerns with the increasing demands placed on our Nation’s public and private lands, as well 

as the logistical issues of managing vast and geographically diverse natural resources. These agencies now face growing 

concerns such as climate change, increasing land development, conservation measures that affect human safety, and 

drilling for oil and gas on National Forest System (NFS) land. Successfully managing these demands will continue to pose 

a challenge in future years.”1

There were two Forest Service audits whose specific findings were identified under Management Challenge 6 of the OIG 

USDA Management Challenges (August 2013). 

OIG Audit Report No. 08703-05-SF—American Recovery and Reinvestment Act (Recovery Act)—Forest Service Hazardous Fuels Reduction and Ecosystem Restoration Projects on Non-Federal Lands

OIG reported that by continuing to improve its internal controls and coordination, the agency will be able to better fulfill 

its mission of caring for the Nation’s forests and grasslands. OIG’s findings include:

•	 The Forest Service’s Wildland Fire Management (WFM) Program allocated grants, including those under the Recovery Act, for activities without the necessary controls to ensure that the grant funds were both properly accounted for 

and used for their intended purpose. 

•	 The agency also did not enhance existing controls despite the Recovery Act’s requirements for greater transparency 

and accountability. 

•	 The agency did not ensure that it met the Recovery Act’s overall objective of maximizing job creation and retention 

in the most cost-effective manner possible. 

1

 Quoted text is from OIG USDA Management Challenges (August 2013).
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-4

Fiscal Year (FY) 2013 Accomplishments

•	 Implemented several actions to address grant-related Recovery Act inquiries as well as to improve overall Forest Service grant administration. 

•	 Revisited multiple Recovery Act equipment purchases and certified that the purchase of the equipment was necessary and that it was used primarily or exclusively for the projects to which it was charged. 

•	 Reviewed all active Recovery Act grant agreements to determine whether the required provisions were included and 

if they were not, revised the agreements to include the provisions. 

•	 Reviewed all existing non-Federal WFM Recovery Act and non-Recovery Act-funded grants to ensure that grant recipients claiming indirect costs have the required approvals and supporting documentation from the Office of Management and Budget (OMB). 

•	 Provided training for Forest Service program managers, grants and agreement specialists, and agency partners. Training included Webinars on financial management systems review, indirect costs, and OMB Circular A-133 audits; a 

Webinar on the proper distribution of salary, which was attended by over 700 people; 3 week-long training sessions 

covering Uniform Administrative Requirements; and training to employees and partners in multiple geographic locations on cost principles and basic grant management. 

•	 Worked closely with the Wyoming State Forestry Division to improve its controls over subgrant administration to ensure they reflect Federal requirements.

FY 2014 Planned Actions

•	 Conduct and implement actions to address Recovery Act-related inquiries and improve overall Forest Service grant 

administration.

•	 Improve grant recipients’ use of funds by enhancing pre-award and post-award controls and by continuing to increase training for Forest Service staffs and grant recipients. 

•	 Conduct various reviews to determine whether recipients charged Forest Service Recovery Act and non-Recovery Act 

grants appropriately and if funds were charged erroneously, recover the funds. 

•	 Establish controls to address processes 

that resulted in inadequate accounting, 

unsupported salaries, noncompetitive 

procurements, and unauthorized indirect 

costs.

Forest Service
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-5

OIG Audit Report No. 08601-01-21—Management of Oil and Gas Resources on National Forest System Land

OIG reported that rising energy prices have increased interest in the exploration and development of domestic oil and 

gas resources, some of which are found beneath public lands within national forests. The Forest Service needs to take 

greater strides in managing the growing practice of drilling for oil and gas on NFS land. OIG’s findings include:

•	 The agency was not adequately safeguarding NFS lands against environmental damage because it could not validate 

whether all well sites were being inspected annually, as required. 

•	 The Forest Service does not require operators to submit a spill plan that would ensure that operators are prepared to 

quickly respond to any spills even though permitting for oil and gas drilling on NFS lands does pose an environmental 

risk.

•	 The agency must work more closely with the Bureau of Land Management (BLM) in the U.S. Department of the Interior to regulate drilling operations, including establishing a more formal means of communication.

FY 2013 Accomplishments

•	 Enhanced exploration and development of Forest Service oil and gas resources on NFS land by taking steps to improve coordination with BLM, including monthly meetings to discuss the status of oil and gas issues as well as higher 

level monthly meetings.

•	 Coordinated with BLM to request access to the Automated Fluid Mineral Support System (AFMSS) to track nominations for oil and gas leasing and improve processing time, track inspections, improve retrieval of information in 

AFMSS, and implement a training plan for agency officials with AFMSS access.

•	 Issued a letter to the regional foresters with oil and gas operations reiterating the guidance contained in the Forest 

Service Manual, Section 2165–Response to Hazardous Material Releases, to develop spill response plans.

FY 2014 Planned Actions 

•	 Continue working with BLM to assess or improve cooperative efforts in reducing leasing and permitting backlogs, improving processing timeframes, and ensuring surface compliance. 

•	 Update the existing regional mineral leasing file databases to identify the number of requests for leasing NFS lands and their acreages 

(lease offers and expressions of interest) and to track critical dates 

associated with individual nominations. 

•	 Track leasing and permit processing times, using average processing 

times as a managerial tool for monitoring and improving processing 

efficiency from year to year. 

Forest Service
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-6

NET COST OF OPERATIONS BY STRATEGIC GOAL

The Forest Service’s Strategic Plan for FY 2007–2012 was the basis for the Consolidated Statements of Net Cost in FY 

2012, but the strategic plan expired and was not updated in FY 2013. The Forest Service’s program of work remains 

aligned with USDA’s Strategic 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 in the current USDA Strategic Plan 

for FY 2010–2015.

TABLE 2. CONSOLIDATED STATEMENT OF NET COST FOR THE YEAR ENDED SEPTEMBER 30, 2013 

(IN MILLIONS)

USDA’s Strategic 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 2013

Total Gross Costs $6,541

Less: Total Earned Revenue 761

Net Cost of Operations $5,780

A comparative analysis in FY 2013 by Forest Service strategic goals is not available due to the expiration of the strategic 

plan. For more information on the Consolidated Statements of Net Cost, refer to the Summary Analysis of Financial 

Statements and Stewardship Information section in the Management’s Discussion and Analysis.

http://www.thinkstock.com
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-7

TABLE 3. CONSOLIDATED STATEMENT OF NET COST BY STRATEGIC GOAL FOR THE YEAR ENDED 

SEPTEMBER 30, 2012 (IN MILLIONS)

Forest Service Strategic Goals 2012

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

1A. Gross Costs $4,997

1B. Less: Earned Revenue 604

1C. Net Goal Cost 4,393

2. Provide and Sustain Benefits to the American People:

2A. Gross Costs 278

2B. Less: Earned Revenue 34

2C. Net Goal Cost 244

3. Conserve Open Space:

3A. Gross Costs 347

3B. Less: Earned Revenue 42

3C. Net Goal Cost 305

4. Sustain and Enhance Outdoor Recreation Opportunities:

4A. Gross Costs 624

4B. Less: Earned Revenue 75

4C. Net Goal Cost 549

5. Maintain Basic Management Capabilities of the Forest Service:

5A. Gross Costs 486

5B. Less: Earned Revenue 59

5C. Net Goal Cost 427

6. Engage Urban America with Forest Service Programs:

6A. Gross Costs 69

6B. Less: Earned Revenue 8

6C. Net Goal Cost 61

7. Provide Science-Based Applications and Tools for Sustainable Natural 

Resource Management:

7A. Gross Costs 139

7B. Less: Earned Revenue 17

7C. Net Goal Cost 122

8A. Gross Costs not assigned to programs 0

8B. Less: Earned Revenue not attributed to programs 0

8C. Net Costs not assigned to programs 0

9A. Total Gross Costs $6,940

9B. Less: Total Earned Revenue 839

9C. Net Cost of Operations $6,101
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-8

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES

TABLE 4. AUDIT AND MANAGEMENT ASSURANCE TERMS AND DEFINITIONS

Term Definition

Beginning 

Balance

The FY 2013 beginning balance agrees with the FY 2012 ending balance of material 

weaknesses.

New The total number of material weaknesses that have been identified during FY 2013.

Resolved The total number of material weaknesses that dropped below the level of materiality in 

FY 2012.

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 2013 ending balance for material weaknesses at yearend.

Summary of Financial Statement Audit

TABLE 5. SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion Unqualified

Restatement No

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

Summary of Management Assurances

TABLE 6. EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA SECTION 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
OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-9

TABLE 7. EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA SECTION 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

The Statement of Assurance: “Systems conform, conform except for the below nonconformance(s), or do not conform to 

financial management system requirements.”2

TABLE 8. CONFORMANCE WITH FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS (FMFIA SECTION 4)

Statement of Assurance Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Nonconformances 0 0 0 0 0 0

Total Nonconformances 0 0 0 0 0 0

TABLE 9. CONFORMANCE WITH FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA)

Overall Substantial Compliance Agency Auditor

System Requirements Yes Yes

Accounting Standards Yes Yes

U.S. Standard General Ledger at the Transaction Level Yes Yes

IMPROPER PAYMENTS IMPROVEMENT ACT REPORTING

As required by the Improper Payments Information Act of 2002 (IPIA) and 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 or Agency Financial Report.

The Criteria for the Risk Assessment

USDA programs have been divided into two categories for the purpose of performing risk assessments: management 

certification and risk assessments. 

2

 The Statement of Assurance is defined in the Office of Management and Budget’s (OMB) Circular A-136, Section 4 Other Information.
3 In the FY 2012 Forest Service Agency Financial Report, the agency previously reported FY 2012 dollars for the International Programs Reduction 

Outlook as $885,500,000, which was an estimated amount. 

OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-10

Risk assessments are performed on all programs at least once every 3 years or more frequently if the USDA Office of 

the Chief Financial Officer (OCFO) deems necessary. In addition to risk assessments, agencies are required to provide a 

management certification that asserts among other things that: 

1. The program is still determined to be at low risk of improper payments.

2. There have been no significant program changes since the last risk assessment.

3. There have been no significant internal control changes since the last risk assessment.

4. There have been no new audit reports describing significant improper payments or internal control issues.

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 2013.

The Description of the Statistical Sampling Process

The IPIA requires statistical sampling for high-risk programs only. The Forest Service used Monetary Unit Sampling 

(MUS) to systematically analyze and review WFSU transactions (the IPIA reporting period of October 1, 2011 through 

September 30, 2012).

The Description of the Corrective Action Plan(s)

The result of Forest Service sampling over the WFSU program resulted in a testing error rate of 0.0 percent for FY 2013. 

In addition, the enhanced analytics conducted over the WFSU program resulted in $0 of improper payments or 0.0 

percent of total outlays.

Below is a table of the statistical sampling results of the WFSU assessment.

TABLE 10. THE STATISTICAL SAMPLING RESULTS OF THE WFSU ASSESSMENT

Fund

IPIA Reporting

FY 2013/

Actual FY 2012 

Population

Outlays3

IPIA Reporting

FY 2013/

Actual FY 2012 

Tested Outlay 

Amount

IPIA Reporting 

FY 2013/

Actual FY 2012 

Population 

Insufficient 

Documentation 

in Dollars

IPIA Reporting 

FY 2013/

Actual FY 2012 

Population 

Insufficient 

Documentation 

in Percent

IPIA Reporting 

FY 2013/

Actual FY 2012 

Population 

Improper 

Payment Error 

in Dollars

IPIA Reporting 

FY 2013/

Actual FY 2012 

Population 

Improper 

Payment Error 

in Percent

WFSU $835,023,441 $48,341,628 $0.00 0.0% $0.00 0.0%

During the current and previous 3 fiscal years, WFSU testing error rates have been 0 percent. The Forest Service has 

significantly reduced the potential for errors through continuous improvement and strengthening of internal controls, 

internal monitoring and reviews of potential improper payments, centralizing of accounting functions, improved 

communications, and follow-up prior to payment authorizations.

In FY 2014, management will be made aware of payments and held accountable for reduction and recoveries of improper 

payments. Dissemination of audit findings, recovery efforts, and identification of root causes ensure management’s 

awareness. Quarterly monitoring and corrective actions will improve accountability, identification, and resolution of 

improper payments in a timely manner. Statistical sampling will also be performed over all payments to identify the areas 

where erroneous payments are more prevalent.
Improper Payment Reduction Outlook 

The following tables for the Improper Payment (IP) Reduction Outlook are limited to the WFSU.

TABLE 11. ESTIMATED IMPROPER PAYMENT REDUCTION OUTLOOK (IN THOUSANDS)

Program

IPIA Reporting FY 

2014/Actual FY 2013 

Estimated Outlays

IPIA Reporting FY 

2014/Actual FY 2013 

Estimated IP %

IPIA Reporting FY 

2014/Actual FY 2013 

Estimated IP $

WFSU3 $992,700 0.00% $0.00

Program

IPIA Reporting FY 

2015/Actual FY 2014 

Estimated Outlays

IPIA Reporting FY 

2015/Actual FY 2014 

Estimated IP %

IPIA Reporting FY 

2015/Actual FY 2014 

Estimated IP $

WFSU3 $1,015,563 0.00% $0.00

Program

IPIA Reporting FY 

2016/Actual FY 2015 

Estimated Outlays

IPIA Reporting FY 

2016/Actual FY 2015 

Estimated IP %

IPIA Reporting FY 

2016/Actual FY 2015 

Estimated IP $

WFSU3 $1,035,874 0.00% $0.00

Recovery of Improper Payment

The Improper Payments Elimination and Recovery Act of 2010 requires Federal agencies to enhance their efforts in 

preventing, detecting, and recovering improper payments. The Forest Service conducted a retroactive review of FY 2012 

and 2013 billings to enhance its ability to identify and report recovery of improper payments. Internal reviews were also 

conducted periodically and reported to USDA’s Office of the Chief Financial Officer through the quarterly High Dollar 

Report for the high-risk WFSU fund.

TABLE 12. RECOVERY OF IMPROPER PAYMENTS ACTUAL DOLLARS RECOVERED

FY 2009 FY 20104 FY 2011 FY 2012 FY 20135

$1,720 $1,700,000 $2,115,003 $7,309,194 $1,660,372

Risk Assessment and Oversight Benefits

The benefits of enhanced risk assessments and oversight provide Forest Service management with information regarding 

the payment processes that have higher inherent risk. This will allow management to identify the root causes and 

improve and enhance internal controls and dedicate additional resources to reduce the risk of improper payments.

4 The methodology for reporting improper payments changed for FY 2010. The Forest Service previously reported FY 2010 dollars recovered as 

$584,994 in the FY 2010 Forest Service Agency Financial Report.

5 Improper Payment Recoveries (IPERA) reported to OCFO for FY 2013 First and Second Quarter.

OTHER INFORMATION—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

E-11
1

Acronyms and Abbreviations

(Unaudited)
ACRONYMS AND ABBREVIATIONS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

2

 ACRONYMS AND ABBREVIATIONS

Acronym or 

Abbreviation Explanation

ACSI American Customer Satisfaction Index

AFR Agency Financial Report

APG Agency Priority Goal

APR Annual Performance Report

ARRA American Recovery and Reinvestment Act of 2009

BS Balance sheet

CCF Hundred cubic feet

CERCLA Chief Financial Officer

CFO Chief Financial Officer

CFR Code of Federal Regulations

CRP Coordinated Response Protocol

CSRS Civil Service Retirement System

CWPP Community Wildfire Protection Plan

DM&R Deferred maintenance and repairs

DOI U.S. Department of the Interior

DOL U.S. Department of Labor

DOT U.S. Department of Transportation

EPA U.S. Environmental Protection Agency

FBWT Fund Balance With Treasury

FECA Federal Employees’ Compensation Act

FERS Federal Employees’ Retirement System

FFIS Foundation Financial Information System

FFMIA Federal Financial Management Improvement Act

FISMA Federal Information Security Management Act

FMFIA Federal Managers’ Financial Integrity Act

FMMI USDA Federal Management Modernization Initiative

FPL Forest Products Laboratory

FSH Forest Service handbook

FSM Forest Service manual

FY Fiscal year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GS General Schedule

GSA General Services Administration

HPPG High-priority performance goal
ACRONYMS AND ABBREVIATIONS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

3

Acronym or 

Abbreviation Explanation

HIT High-impacted targeted

IITF International Institute of Tropical Forestry

IRR Integrated resource restoration

IP Improper payment

IPERA Improper Payment Elimination and Recovery Act

IPIA Improper Payment Information Act

IT Information technology

kg Kilogram

L&WCF Land and Water Conservation Fund

MD&A Management’s Discussion and Analysis, a section of the AFR

MMBF Million board feet

MUS Monetary unit sampling

NFS National Forest System (Deputy Area)

NRE Natural Resources and Environment (USDA)

O&M Operations and Maintenance

OI 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

PILT Payments in lieu of taxes

POSS Point-of-Sale-System

PP&E Property, Plant, and Equipment

R&D Research and Development (Deputy Area)

RCRA Resource Conservation and Recovery Act

RSI Required Supplementary Information, a section of the AFR

RSSI Required Supplementary Stewardship Information, a section of the AFR

S&PF State and Private Forestry (Deputy Area)

SBR Statement(s) of Budgetary Resource(s)

SCNP Statement(s) of Change(s) in Net Position

SEND Satellite emergency notification devices

SNC Statement of Net Cost

SNP Statement of Net Position

SOF Statement of Financing
ACRONYMS AND ABBREVIATIONS—UNAUDITED

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

4

Acronym or 

Abbreviation Explanation

SPA Strategic planning area

U.S.C. United States Code

USDA U.S. Department of Agriculture

USSGL U.S. Standard General Ledger

WCF Working Capital Fund

WFM Wildland Fire Management

WFSU Wildland Fire Suppression

WUI Wildland-urban interface

YTD Year-to-date