Wildfire Suppression: Funding Transfers Cause Project Cancellations and Delays, Strained Relationships, and Management Disruptions
Published: 2004-06-02T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2003, wildfires burned roughly 4 million acres, destroyed over 5,000 structures, took the lives of 30 firefighters, and cost over $1 billion to suppress. The substantial expense of fighting wildfires has exceeded the funds appropriated for wildfire suppression nearly every year since 1990. To pay for wildfire suppression costs when the funds appropriated are insufficient, the U.S. Forest Service and the Department of the Interior have transferred funds from their other programs. GAO was asked to identify (1) the amount of funds transferred and reimbursed for wildfire suppression since 1999, and the programs from which agencies transferred funds; (2) the effects on agency programs from which funds were taken; and (3) alternative approaches that could be considered for estimating annual suppression costs and funding wildfire suppression.
section_title: What GAO Found
paragraphs: The Forest Service and Interior transferred over $2.7 billion from other agency programs to help fund wildfire suppression over the last 5 years. On average, the Congress reimbursed agencies about 80 percent of the amounts transferred. Interior primarily used funds from its construction and land acquisition accounts. In recent years, the Forest Service used funds from many different programs; while before 2001, it transferred funds from a single reforestation program/timber sale area restoration trust fund. Transferring funds for wildfire suppression resulted in canceled and delayed projects, strained relationships with state and local agency partners, and difficulties in managing programs. These impacts affected numerous activities, including fuels reduction and land acquisition. Although transfers were intended to aid fire suppression, some projects that could improve agency capabilities to fight fires, such as purchasing additional equipment, were canceled or delayed. Further, agencies' relationships with states, nonprofit groups, and communities were negatively impacted because agency officials could not fulfill commitments, such as awarding grants. Transfers also disrupted the agencies' ability to manage programs, including annual and long-term budgeting and planning. Although the agencies took some steps to mitigate the impacts of transfers, the effects were widespread and will likely increase if transfers continue. To better manage the wildfire suppression funding shortfall, the agencies should improve their methods for estimating suppression costs by factoring in recent changes in the costs and uncertainties of fighting wildfires. Also, the Congress could consider alternative funding approaches, such as establishing a governmentwide or agency-specific reserve account.

section_title: Letter
paragraphs: In 2003, wildfires burned roughly 4 million acres, destroyed over 5,000  structures, and took the lives of 30 firefighters.  While extreme, this past  fire season does not stand out among recent ones, which have broken  records not only in the number of acres burned but also in the cost of  suppressing the fires.  In 2000, 2002, and 2003, costs to suppress wildfires  were well over $1 billion and reached nearly $1 billion in 2001.  The  substantial expense of suppressing wildfires has exceeded the amount  appropriated for wildfire suppression every year for the past 5 years.  One  reason for this difference is that suppression appropriations are based on  estimates of wildfire suppression costs, which are difficult to make due to  the inherent unpredictability of wildfires.  The federal agencies responsible  for wildfire management—the U.S. Forest Service in the Department of  Agriculture and the Bureau of Indian Affairs, Bureau of Land Management,  U.S. Fish and Wildlife Service, and National Park Service in the Department  of the Interior—provide the bulk of the resources needed to suppress these  fires.  To pay for wildfire suppression when appropriated funds for  suppression are insufficient, the Forest Service and Interior transfer funds  from other programs within their respective agencies as permitted by law.
Seeking information on the effects of transferring funds to pay for wildfire  suppression on other Forest Service and Interior programs, you asked us to  identify (1) the amount of funds transferred and reimbursed from  nonsuppression programs from 1999 through 2003, the programs affected,  and the procedures the Forest Service and Interior followed when  transferring and reimbursing funds; (2) the effects on the agencies’  programs from which funds were transferred; and (3) alternative  approaches that could be considered for estimating annual suppression  costs and funding wildfire suppression.
In conducting our review, we contacted budget officers at Forest Service  and Interior headquarters, as well as in the Forest Service’s nine regions, to  collect information on the amount of funds transferred from and  reimbursed to various Forest Service and Interior programs.  We also  visited six Forest Service regional offices and 7 national forests and  contacted an additional 14 national forests to examine impacts to the  programs from which funds were transferred to support fire suppression.   Where appropriate, we also met with officials from the four Interior  agencies that are involved with wildfire suppression activities as well as  grant recipients, a state forester, and representatives of nonprofit  organizations.  In our review of impacts, we focused on 2002 and 2003  because in these 2 years transfers for wildfire suppression involved many  more programs than they had previously.  To determine alternatives for  estimating wildfire suppression costs, we reviewed the agencies’ current  estimation methods, compared the estimates with actual costs and  discussed reasons for differences between them with agency officials, and  identified alternatives for estimating suppression costs.  Also, to determine  alternative approaches for funding wildfire suppression, we reviewed  previous GAO and Congressional Budget Office reports, as well as a Forest  Service study related to budgeting for emergencies, and discussed  alternative funding options with agency officials.  We took the appropriate  measures to ensure that Forest Service and Interior data on the amount of  funds transferred and reimbursed from 1999 through 2003 were sufficiently  reliable for the purposes of our study.  We performed our work between  July 2003 and March 2004 in accordance with generally accepted  government auditing standards.  See appendix I for additional details on  our scope and methodology.
subsections: section_title: Background
paragraphs: About one-third of all land in the United States is federally owned and  consists largely of forests, grasslands, and other vegetated lands.  Over the  years, underbrush has grown substantially on these lands, and along with  recent drought conditions and disease infestation, has fueled larger and  more intense wildfires.  Further, there has been an increase in the number  and size of communities that border these areasin what is known as the  wildland urban interface.  Suppressing wildfires that threaten these areas  costs significantly more because protecting homes and other structures is  costly.  In 2000 and 2002, wildfires burned nearly 8.5 million and 7 million  acres, respectively; and in 2003, wildfires burned about another 4 million  acres.  In both 2000 and 2002, suppression costs were over $1.4 billion each  year; in 2003, suppression costs nearly reached that amount.
Because suppression costs have exceeded appropriated funds, the  agencies have had to transfer funds from other programs to supplement  their suppression funds.  Two years in advance of when funds are  appropriated, the Forest Service and Interior develop budget requests by  estimating the annual costs to suppress wildfires.  Estimating these costs is  inherently difficult because of the unpredictable nature of wildfires,  including where they will occur, how intense they will be, and how quickly  they will spread.  As a result, these estimates, at times, result in funding for  wildfire suppression that is insufficient to cover actual suppression costs.   Historically, the Forest Service and Interior have used a 10-year rolling  average of suppression expenditures as the foundation for their  suppression budget requests.  During each year’s fire season, the Forest  Service and Interior also develop monthly forecasts to update the overall  suppression costs estimate and determine how much additional funding, if  any, will be needed.  When it becomes apparent that annual appropriated  funds are insufficient to support forecasted suppression needs, the Forest  Service and Interior are authorized to use funds from other programs  within their agency to pay for emergency firefighting activities.
section_title: Agencies Transferred over $2.7 Billion from Numerous Programs to Fund Wildfire Suppression from 1999 through 2003; 80 Percent Was Reimbursed
paragraphs: From 1999 through 2003, the Forest Service and Interior transferred over  $2.7 billion from various agency programs to help fund wildfire  suppression when appropriated funds were insufficient.  The Forest  Service transferred monies from numerous programs supporting the  breadth of its activities, while Interior transferred funds primarily from two  programsconstruction and land acquisition.  To determine the amount of  funds to transfer, the agencies used similar monthly forecasting models to  determine suppression funding needs during the fire seasons.  Agency  officials acknowledged, however, that the models produced widely varying  forecasts of suppression costs that substantially underestimated actual  costs.  Also, in determining the programs from which to transfer funds, the  agencies attempted to select programs with projects that would not be  significantly impacted by transfers because a portion of their funds would  not be needed until subsequent years.  Between 1999 and 2003, the  Congress reimbursed the agencies for about 80 percent of the funds that  were transferred on average.  However, the Congress did not always  reimburse the programs in amounts proportionate to the transfers.  In  addition, the Forest Service and Interior had some discretion in distributing  the reimbursements among various projects, depending on their priorities  at the time of reimbursement.
subsections: section_title: From 1999 through 2003, Agencies Transferred over $2.7 Billion from Numerous Programs
paragraphs: For each of the last 5 years, wildfire suppression costs have been  substantially greater than the amount of funds appropriated for  suppression, necessitating the Forest Service and Interior to transfer over  $2.7 billion from other agency programs to help fund wildfire suppression  activities.  Of this amount, the Forest Service transferred the majority— almost $2.2 billion—while Interior transferred over $500 million.  Nearly  half of the total amount was transferred in 1 year alone, 2002, but  substantial transfers were needed for other recent severe fire seasons as  well.  For example, during the 2000 and 2003 fire seasons, almost $400  million and about $870 million were transferred, respectively.   As  illustrated in figure 1, suppression costs have exceeded suppression  appropriations almost every year since 1990.
To determine the amount of funds to transfer each year, the agencies used  monthly forecasting models to estimate likely wildfire suppression costs  during the wildfire season.  Agency officials acknowledged, however, that  the models produced forecasts of suppression costs that varied by  hundreds of millions of dollars when compared with actual, year-end  suppression costs.  For example, in June 2003, Interior’s forecasting model  predicted that suppression costs for the year would exceed suppression  appropriations by about $72 million.  A month later, the model predicted  costs would exceed appropriations by about $56 million; by late August, the  model predicted that costs would exceed appropriations by more than $100  million.  By the end of the fiscal year, Interior had transferred over $175  million to cover actual suppression costs.  Forest Service forecasts also  were well short of year-end suppression costs during 2003.  The agency’s  forecasting model predicted that annual suppression costs would reach  nearly $800 million, indicating that current year funds would be about $375  million less than projected needs.  By the end of the fiscal year, however,  the Forest Service had transferred nearly $700 million to cover suppression  costs of over $1 billion.  Both Forest Service and Interior officials indicated  there is a high degree of uncertainty in trying to estimate the current year’s  suppression costs, primarily because weather conditions are difficult to  predicteven over the short term.  Despite the discrepancies between  agency forecasts and actual suppression costs, the agencies have  performed no formal assessments of their forecasting models’ accuracy.   Agency officials acknowledged that such assessments would be useful for  monitoring and improving the reliability of their models and enhancing  their ability to predict when transfers will be needed and how much to  transfer.  The agencies also acknowledged that the forecasts have not been  accurate and are revising the models in an effort to improve the forecasts.
In deciding the programs from which to transfer funds, Interior and Forest  Service officials primarily selected programs with projects that would not  be significantly impacted by transfers because a portion of their funds  would not be needed until subsequent years.  Interior transferred funds  mostly from its construction and land acquisition programs, with about  two-thirds of the funds coming from construction.  These two programs are  used to construct and maintain facilities, roads, and trails on Interior lands,  among other things, and to acquire additional public lands.  In 2002 and  2003, Interior also transferred some funds from fire-related preparedness,  postfire rehabilitation, and hazardous fuels reduction projects in order to  support suppression activities.  Within Interior, the National Park Service  transferred substantially more funds than the other three agencies over the  last 5 years, transferring about 60 percent of the $540 million transferred.
Unlike Interior, the Forest Service transferred monies from numerous  programs supporting the breadth of its activities.  These programs included  its construction; land acquisition; national forest system, which among  other things conducts postwildfire rehabilitation and restoration work; and  state and private forestry programs, which support activities such as grants  to states, tribes, communities, and private landowners for fire  management, urban forestry, and natural resource education as well as  insect suppression.  Before 2001, the Forest Service had transferred funds  solely from its Knutson-Vandenberg Fund (K-V Fund), because historically  this restoration program had large amounts of money that could not be used by the end of the fiscal year.  Since the mid-1980s, the Forest Service  has transferred more than $2.3 billion from this program; however, more  than $400 million has not been reimbursed.  As a result, the Forest Service  became concerned about the viability of the K-V Fund as a source of  transfers and in 2001 began transferring funds from other major Forest  Service programs.
The Forest Service and Interior programs from which funds were  transferred and the amount of funds transferred and reimbursed from 1999  through 2003 are outlined in table 1.  Additional details on these matters are  included in appendixes II and III.
section_title: The Congress Reimbursed Agencies for about 80 Percent of the Funds Transferred
paragraphs: Over the last 5 years, the Congress reimbursed, on average, about 80  percent of the funds that the Forest Service and Interior transferred for  wildfire suppression expenses.  Although the agencies received nearly full  reimbursement for funds transferred in 2000 and 2001, the Forest Service  and Interior were reimbursed about 74 percent and about 81 percent,  respectively, of the funds transferred in 2002 and 2003.  For these later 2  years, individual Forest Service programs were reimbursed at varying  rates.  For example, the Congress reimbursed the Forest Service’s state and  private forestry program for nearly 100 percent and its national forest  system program for 40 percent of the funds transferred in 2002.  In contrast,  the Congress reimbursed Interior’s construction and land acquisition  programs at about 81 percent each.
Congressional appropriators and Office of Management and Budget (OMB)  officials worked with Forest Service and Interior officials to determine the  amount of funds to reimburse to the numerous agency programs impacted  by funding transfers in order to help the agencies meet their current  program needs.  For example, according to Forest Service officials, state  and private forestry projects, such as community assistance grants and  forest legacy project grants, were important priorities when the Forest  Service received reimbursements in 2003 for funds transferred in 2002.  As  a result, the state and private forestry program received full  reimbursement.  In contrast, the national forest system had a large amount  of funds transferred in 2002 that was dedicated for the salaries of staff  diverted from their normal duties to fight wildfires.  OMB officials  indicated that since these employees had been paid—albeit out of the  wildfire suppression account—the transferred salaries required no  reimbursement.  Therefore, the national forest system program was  reimbursed for a much smaller amount—about 40 percent.
When the Forest Service and Interior received less than full reimbursement  for funds transferred in 2002 and 2003, the agencies used different  procedures to distribute the reimbursed funds within their programs.   Forest Service officials distributed the funds to projects reflecting current  priorities within individual programs, which were not necessarily the same  projects from which funds were transferred.  For example, Forest Service  officials in California targeted the funds to projects within the San  Bernardino National Forest to help address the increased wildfire risk  created by insect infestation, even though no funds had been transferred  from these projects.  Similarly, officials in Colorado directed the  reimbursed funds to high-priority rehabilitation efforts in the aftermath of  the Hayman fire that had occurred in the Pike-San Isabel National Forest in  June 2002.  In contrast to the Forest Service’s approach, Interior  reimbursed funds solely to projects from which funds were transferred; however, the four agencies within Interior did this in varying ways.  For  example, the Fish and Wildlife Service fully repaid its high-priority  construction projects for transfers made in 2002, although it did not repay  lower priority construction projects that also transferred funds, such as the  restoration of a visitors center.  The Bureau of Indian Affairs, on the other  hand, fully repaid all projects from which funds were transferred in 2002,  except one—a school renovation project that agency officials believed  could be delayed pending future additional funding.  In contrast, the  Bureau of Land Management repaid all construction projects at the same  percentage, while the National Park Service repaid construction projects at  widely varying amounts depending on their perceived priorities.
Table I provides information on the amount of funds reimbursed to the  various Forest Service and Interior programs.  Additional details on  reimbursements are provided in appendix II.
section_title: Transfers Caused Project Cancellations and Delays, Strained Relationships with Agency Partners, and Created Difficulties in Program Management
paragraphs: The Forest Service and Interior canceled or delayed numerous projects,  failed to fulfill certain commitments to partners, and faced difficulties in  managing their programs when funds were transferred for fire suppression.   The agencies canceled or delayed contracts, grants, and other activities,  which in some cases increased the costs and time needed to complete  projects.  Further, agency relationships with state agencies, nonprofit  organizations, and communities became strained when the agencies could  not fulfill commitments, such as awarding grants on time.  In addition,  transfers disrupted agency efforts to effectively manage programs, causing  planned activities to go unfunded and, in some cases, causing program  funds to be depleted or overspent.  If transfers continue, the impacts on  projects, relationships, and program management will likely continue and  increase.  Although Forest Service and Interior local units generally are  aware of these impacts, the agencies have no systems in place to track the  impacts at a national level.  (Dollars noted in the remaining text of this  section are not adjusted for inflation.)
subsections: section_title: Numerous Projects Were Delayed or Canceled
paragraphs: Projects in a variety of Forest Service and Interior programs were delayed  or canceled as a result of funding transfers, thereby affecting agency  firefighting capabilities, construction and land acquisition goals, state and  community programs, and other resource management programs.   Furthermore, officials often had to duplicate their efforts because of  transfers, which prolonged delays and added costs.  For example, officials  had to revise budgets and construction plans, update cost estimates, and  rewrite land acquisition documents when delays caused them to become  outdated, all of which further compounded project delays.  In some cases,  preparation of such documents added substantial costs.  For example,  appraisal and legal fees for certain land acquisition efforts added thousands  of dollars to project costs.  In addition, when delays were prolonged,  supply costs increased, land prices rose, and impacts to natural resources  spread, which also increased projects’ costs.
subsections: section_title: Projects Related to Firefighting Capabilities
paragraphs: Although funding transfers were intended to aid fire suppression, in some  cases, the Forest Service and Interior delayed projects that were intended  to reduce fire risk or improve agency firefighting capabilities.  Following  are examples of such projects:  Fuels reduction projects, New Mexico:  In 2003, $191,000 was  transferred from three fuels reduction projects covering 480 acres of  Forest Service land in the wildland urban interface.  All three thinning  projects were near communities, affecting about 325 homes.  The  projects are scheduled to be completed in 2004.
National Park Service fire facilities projects, nationwide:  In 2002,  about $3.4 million was transferred from 13 fire facilities projects at 10  different parks.  The projectsincluding construction of facilities for  fire equipment storage; a crew dormitory; and fire engine storage  buildings, among otherswere delayed for several months.  Four of  these projects—in Big Bend National Park (Texas); Yellowstone  National Park (Idaho, Montana, and Wyoming); Sequoia and Kings  Canyon National Parks (California); and Shenandoah National Park  (Virginia)were again delayed in 2003 when about $1.9 million was  transferred.
Forest Service fire facilities projects, California:  In 2003, the Forest  Service deferred construction of two engine bays, one fire station, and  three fire barracks in California because of funding transfers.   Consequently, fire crews at one forest must live in housing that,  according to agency officials, is substandard and has required recurring  maintenance to address roof leaks, plumbing malfunctions, and  electrical failures caused by rodents damaging the wires.  Additionally,  officials told us that such conditions make it difficult to recruit and  retain fire crews.
Wildfire management courses, southern region:  In 2003, the Forest  Service canceled two required training courses for officials who  approve wildfire management decisions and expenses.  About 80  officials who represent national forests in at least 12 states had planned  to attend.  One course emphasized cost containment, and the other  covered a wide range of fire management issues, including safety.  Both  courses were rescheduled and held in 2004.
Fire research projects, Montana:  When funds were transferred in 2002,  the LANDFIRE project—a multiagency effort to collect comprehensive  data on fire risk—was delayed about 3 months, the collection of data  critical for modeling fire behavior was delayed about 6 months, and data  on smoke levels were lost because an instrument was not purchased in  time to use it during the 2002 fire season.  In addition, temporary staff  were released early in 2002, further reducing the amount of research  that could be performed.
section_title: Construction and Land Acquisition Projects
paragraphs: Agency officials also targeted construction and land acquisition programs  for funding transfers because these projects are often funded one year,  with the expectation that the project will be implemented—and the funds  spent—over several years.  Consequently, these programs often have large  unused fund balances, and transfers can sometimes be made with minimal  impact as long as the funds are reimbursed before they are needed.   Accordingly, some officials, especially in the Interior agencies, told us that  impacts to projects had been relatively limited.  Nevertheless, many  construction and land acquisition projects were delayed or canceled,  particularly in the Forest Service.
Some construction projects that were delayed due to funding transfers  were delayed for 1 year or more because of seasonal requirements, even  when funds were reimbursed after only a few months.  For example, a  project to replace three backcountry bridges at the Inyo National Forest in  California was planned for late summer when stream flows would be low  and conditions would be safe for workers.  According to a Forest Service  official, the project was important for public safety because one bridge was  completely washed out and the other two bridges were at risk of failing  while people were crossing them.  Figure 2 shows one of these bridges  before—when handrails were sagging or missing and support logs were  decayingand after it was replaced.  Project funds were transferred in  2002, so the project was deferred to late summer 2003; however, funds  were once again transferred, and the project was not completed until 2004.
In other cases, additional adverse effects resulted when projects with  seasonal requirements were delayed.  For example, according to a Forest  Service official, a popular campground in Arizona may be closed during the  2004 operating season while improvements are made because seasonal  requirements combined with fire transfers resulted in extended delays.  In  2003, $450,000 was transferred from this project, delaying it 2 months into  the winter.  Because of the weather construction crews could not work on  the project, thus it was delayed several additional months.  Further, this  campground was already closed during the 2003 operating season because  funding transfers in 2002 had delayed planned improvements.
In some cases, construction projects that were initially delayed were  canceled when supply costs rose and the Forest Service no longer had  sufficient funds to pay for the projects.  For example, a 2003 project to  rehabilitate a historic residence at the Sierra National Forest in California  was delayed when funds were transferred for wildfire suppression.   According to an agency official, the project, which would have converted  the residence into a public information facility, was intended to attract  tourists and help diversify the local economy in an area where a 1994  lumber mill closure contributed to a deteriorating economy.  The lowest  bid that the Forest Service received for the project was about $186,000.   However, before the funds were reimbursed, the contractorciting a 300  percent increase in lumber pricesrescinded the bid and estimated the  new cost of the project at $280,000, an increase of nearly $100,000.   Consequently, the Forest Service canceled the project and resubmitted it in  its 2005 budget, with a higher cost estimate.
Land acquisition costs can also increase when projects are delayed.  For  example, figure 3 shows a portion of a 65-acre property in Arizona that the  Forest Service intended to purchase for approximately $3.2 million in 2002,  but had to defer due to funding transfers.  About a year later, the Forest  Service purchased the property, but the value had increased, costing about  $195,000 more than it had a year earlier.  A nonprofit organization also  incurred additional costs of about $3,000 because it paid for the updated  appraisal.
In addition, the agencies sometimes risked losing the opportunity to  purchase land when funds were transferred from land acquisition  programs.  For example, in 2003, the Fish and Wildlife Service planned to  purchase property in Alabama that contains habitat for the gopher tortoise,  which is a species of concern in Alabama.  However, because of funding  transfers and only partial reimbursement, the service no longer had  sufficient funds.  Agency officials were concerned that the property would  be sold privately.  To prevent a sale to private owners, a nonprofit  organization agreed to buy the property and hold it until the Fish and  Wildlife Service could purchase it from them.
section_title: Grants to States and Communities
paragraphs: When funds were transferred for fire suppression, many Forest Service  grants were delayed or canceled, which affected states, communities,  nonprofit organizations, and others.  Examples of such projects are  discussed below:  Urban and community forestry grants in seven states, southern  region:  The Forest Service did not fund eight urban and community  forestry grants totaling $993,000 due to 2003 funding transfers.  State  forestry departments planned to “subgrant” about 80 percent of the  funds to local communities for more than 75 projects, such as planting  trees, developing local land use plans, and holding several workshops  and conferences on topics such as urban forestry.
Community assistance grant, New Mexico:  A 2002 grant to a small  business owner was delayed about 6 months because of funding  transfers.  The business processes small-diameter wood to make signs  and other marketable products, and the grant would have paid for a  wood chipper essential to the process.  When the grant was delayed, the  business owner could not purchase the chipper and process the wood.   As a result, he closed his business for a year, laid off some staff, and  reported estimated revenue losses of millions of dollars.
Watershed education grant, New Mexico:  A 2003 economic action grant  for $32,000 was canceled and will not be funded.  The grant would have  paid for a nonprofit organization to conduct an education project about  sustainable grazing in a severely degraded watershed where the  intended audience included ranchers, community members, public  officials, and others.  The nonprofit organization reported investing  about $5,250 in preparation for the project.
section_title: Resource Management Projects
paragraphs: When resource management projects were delayed and canceled, natural  resources were affected (e.g., soils eroded, insects infested forests, and  encroaching plants spread and threatened newly planted trees).  Further,  prolonged delays sometimes compounded these effects because additional  time allowed the damage to spread.  For example, at the Lincoln National  Forest in New Mexico, a project to repair a washout in a road was deferred  when funds were transferred in 2002.  During a 2-year delay that was  partially caused by funding transfers, the washout grew dramatically.   Consequently, a more significant structure is now needed to prevent  erosion, which will result in additional costs of between $9,000 and $15,000,  according to an agency official. Additionally, at the White River National  Forest in Colorado in 2003, $111,000 was transferred from a project to  remove about 150 acres of trees infested with spruce beetlethereby  deferring the project.  As a result, the infestation grew to about 230 acres,  killing additional trees and raising the cost of the project about $24,000  more than previously estimated, according to an agency official.  Further,  there is a chance that the beetle population will spread to the point where it  cannot be contained at any cost and where tree mortality will increase  dramatically—affecting up to 6,000 acres.  If this further infestation occurs,  an agency official said the project would be canceled.
According to an official at the Bitterroot National Forest in Montana, a  project to stabilize 9 miles of a dirt road was delayed when about $1.2  million was transferred in 2002.  As shown in figure 4, the road was  collapsing.  As a result, sediment was running into a creek, jeopardizing the  habitat of two species of fish, one of which is a threatened species.  Two  years after the transfer, $430,000 was reimbursed to the project, and  officials expect to stabilize about 2 of the 9 miles of road.  Because of the  prolonged delay, however, additional sediment has run into the stream and  further compromised the fish habitat.  Furthermore, agency officials do not  expect to receive any additional reimbursement to complete the remaining  stabilization, and they are concerned about the increasing sedimentation  and continuing decline of the fish habitat.
In addition, sometimes canceling one project affects the success of others.   For example, at the Hiawatha National Forest in Michigan, a project  intended to ensure the success of reforestation efforts—by removing  encroaching plants—will be canceled in 2004.  The encroaching plants are  crowding newly planted trees, as shown in the photograph on the left in  figure 5, and threatening their survival, according to agency officials.  As a  result, one official estimated that 20 to 25 percent of the newly planted  trees will die, and that it will cost about $24,000 to remove the dead trees  and reforest the area.  In contrast, the photograph on the right shows a site  where young trees were protected by removing encroaching plants, and,  consequently, the trees survived.
Examples such as these were widespread in the six regions we visited.  For  example, because of funding transfers in 2002 and 2003, the Forest  Service’s northern region deferred reforestation on 5,900 acres, weed  control on 74,000 acres, maintenance on 1,500 miles of road, replacement  of 150 culverts to improve fish habitat, repair of five damaged bridges, and  award of 11 stewardship contracts.
section_title: Agency Relationships with Partners Were Strained
paragraphs: When the Forest Service and Interior transferred funds for fire  suppression, they sometimes failed to fulfill commitments to partners,  which caused relationships to be strained.  Federal agencies rely on  partnerships and other forms of collaboration with each other, state and  local governments, nonprofit organizations, and others to accomplish their  work.  For example, federal land acquisitions are often facilitated by  nonprofit organizations and involve private landowners, agency recreation  programs depend on volunteers, and some research projects are joint  efforts between the Forest Service and Interior and may involve university  participants as well.  In addition, communities, state forestry programs, and  others depend on federal grant programs for financial support.  When funds  were transferred for fire suppression, not only were federal programs  impacted, but nonprofit organizations, states, and communities were also  affected.
In transferring funds from land acquisition programs, agency relationships  with nonprofit organizations were affected.  Nonprofit organizations often  facilitate agency land acquisitions by negotiating with landowners and by  sometimes purchasing the land, then selling it to the agency.  When  agencies delayed land acquisitions, nonprofit organizations sometimes  incurred interest costs of thousands of dollars on loans they took out for  the purchase of the land.  These costs were generally absorbed by the  nonprofit organization and not passed on to the federal agencies.  For  example, one organization bought a parcel of land in South Carolina with  the intent of selling it to the Forest Service in 2002; however, the funds to  purchase the land were transferred for wildfire suppression.  The Forest  Service eventually purchased the land in 2003, but in the meantime, the  nonprofit organization had incurred about $300,000 in interest costs.  One  nonprofit organization reported that 22 land acquisition projects were  delayed in 2002, and 21 projects in 2003, due to transfers.  A representative  from the organization said that if funds are again transferred in 2004, the  organization will view this practice as a trend, rather than an anomaly, and  will likely invest its funds elsewhere rather than work with the Forest  Service and Interior.
Agency relationships with landowners were affected as well.  For example,  the Forest Service has been working for several years with state officials  and others to obtain a conservation easement in Hawaii.  According to a  Forest Service official, it “has been a major effort to build a high enough  level of trust with the private landowner.”  The official is concerned that  transfers—which depleted the necessary funds for this project in both 2002  and 2003—may jeopardize their relationship with the landowner, who may  choose to develop the property rather than wait for the Forest Service to  secure the necessary funds.  If the land is developed, an important habitat  for two endangered bird species will be lost.
Community groups and volunteer or nonprofit organizations also invest  considerable time and money to prepare projects and grant proposals.   When the Forest Service and Interior did not fulfill their commitments,  some of these investments were lost.  For example, a 2002 Collaborative  Forest Restoration Program grant in New Mexico would have paid for  thinning treatments to be conducted by a local workforce, with the  resulting wood chips to be processed into marketable products.  A  nonprofit organization that was a partner in the project conducted a  $30,000 training program to prepare the local workforce.  However, the  grant was delayed for about 6 months because of 2002 funding transfers,  and when funds became available, the trainees were employed elsewhere  and unavailable.  Another example involves a nonprofit organization that  works collaboratively with communities and Forest Service and Interior  agencies to design and implement large-scale fire restoration projects  across the country.  The collaborative teams collectively review the  outcomes of projects, such as controlled burns, and share their knowledge  and experience with one another.  Of the 30 projects that were to receive  federal funding, 12 have been delayed as a result of funding transfers.   According to a representative of this organization, the practice of  transferring funds for wildfire suppression “hurts the credibility of  agencies,” and has led two of the project teams to not apply for further  funding because of the uncertainty caused by the possibility of transfers.
The fire transfers also affect state forestry departments, which depend on  Forest Service grants to support their programs.  In recent years, state  budgets have been strained, making it difficult for state governments to  compensate for the loss of federal funding.  When the Forest Service began  transferring funds for fire suppression in 2002, some states were concerned  about the viability of their forestry programs.  For example, Forest Service  grants supply nearly 60 percent of Nebraska’s annual State Forest Service  budget, without which the state would have to significantly reduce its  operation—including laying off staff.  According to the Nebraska State  Forester, when funds were transferred in 2002, the state had already spent  over $1 million beyond its existing budget because it anticipated receiving a  Forest Service grant.  After a period of uncertainty, the grant was awarded.   However, the State Forester said that, partly as a result of ongoing budget  uncertainties, one staff member left the agency and two candidates  declined job offers, leaving another position vacant.
States were also affected when, in 2003, $50 million was transferred from  the 5-year, $100 million Forest Land Enhancement Program, and only $10  million was reimbursed.  This program, which is managed by states, helps  private landowners improve the health of their forestlands through  activities such as timber improvement, wildlife habitat management, and  fuels reduction.  The $100 million was intended to last for 5 years.  In the  first year, the Forest Service allocated $20 million to the states, leaving an  $80 million balance in the program.  When only $10 million of the $50  million transfer was reimbursed, the program was left with a balance of $40  million—or half of the expected budget—for the remaining 4 years.   Foresters are concerned about the viability of the program, which provides  an economically feasible alternative to landowners who might otherwise  sell their land for development.  Further, foresters believe that by  preventing development of such land, the program helps avoid habitat  fragmentation, which was identified by the Forest Service Chief as one of  the four largest threats to the nation’s forests.  Nonetheless, with so much  of the program’s budget lost to funding transfers and its viability in  question, agency officials did not expect to receive any funding for the  program in 2004 and did not request any funding for 2005.  According to  agency officials, the Forest Service will not be able to continue the program  unless the Congress appropriates funds for fiscal year 2005 or subsequent  years of the authorization period.
section_title: Agencies’ Management Efforts Were Disrupted
paragraphs: When funds were transferred for fire suppression, the agencies’ efforts to  manage their programs—including budgeting and planning for annual and  long-term programs of work—were disrupted.  Some programs, such as the  Forest Service K-V and Working Capital Funds, are managed like savings  accounts, accumulating funds over multiple years to be spent according to  a specific schedule for activities such as forest improvement and vehicle  maintenance and replacement.  When transfers were made from these  programs without subsequent reimbursement, agencies had to begin  accumulating the funds again or cancel the planned expenses.  For other  programs, such as construction and land acquisition, transfers interfered  with agency and congressional priorities.  In some cases, Forest Service  programs went into deficit because transfers disrupted planned budgets  and officials overspent program funds in order to pay for essential  expenses.  Actions taken by the agencies may have mitigated some of these  impacts, but compounded others.
subsections: section_title: Program Funding Shortfalls
paragraphs: Funding transfers have left the Forest Service with insufficient funds to pay  for all of the K-V projects it planned at the time the funds were collected.   Over the past 5 years, about $640 million has been transferred from the K-V  Fund for wildfire suppression, while only $540 million has been  reimbursed.  Moreover, transfers have been made from the K-V Fund for  decades with only partial reimbursement.  Since the mid-1980s, about $2.3  billion has been transferred from the K-V Fund, and only $1.9 billion has  been reimbursed.  According to agency officials, there have been sufficient  funds to fully implement the K-V reforestation projects in any given year.   However, there have not always been sufficient funds over the years to  implement other programs that rely on the K-V Fund.  For example, before  reimbursements were received for 2003 transfers, Forest Service officials  said they would only be able to fund about $60 million of $96 million in K-V  projects for 2004 dealing with activities such as habitat improvement.  Even  though reimbursements for 2003 transfers were later received, Forest  Service officials indicated that many of the habitat improvement projects  that had been deferred to absorb the shortfall will not be accomplished in  2004 due to the shortened period of work.  Faced with unpredictable  information about funding transfers and reimbursements, it has been  difficult for the Forest Service to reliably estimate how much will be  deposited into and withdrawn from the K-V Fund and, therefore, to  effectively manage the fund and the programs it supports.
Similarly, transferring funds from the Working Capital Fund disrupted the  Forest Service’s efforts to carry out long-term expense planning, making it  difficult for agency officials to effectively manage programs.  For example,  the Forest Service no longer has enough funds to pay for its planned  vehicle and computer replacements because of funding transfers.  Each  program that uses vehicles or computers allocates a portion of its budget to  pay monthly charges into the Working Capital Fund, which accrues these  deposits over a period of years to spend on vehicle and computer  purchases and maintenance.  Vehicles and computers are then maintained  as needed and replaced according to a schedule designed to maximize cost  effectiveness.  In 2002 and 2003, however, some of the funds that agency  officials had been accumulating for years were transferred and no longer  available for maintenance and planned replacements.  As a result,  maintenance and replacement schedules were disrupted, and purchases  had to be delayed.  For example, in 2002, the Forest Service postponed  planned purchases of fire engines, helitack trucks, fire crew carriers, and  patrol rigs when funds were transferred in California.  Since more than 90  percent of these transfers were not reimbursed, agency officials had to  either continue using older vehicles or reduce their fleet size and will have  to make additional payments to accrue enough savings for the planned  purchases.
section_title: Changes in Project Priorities
paragraphs: Forest Service efforts to prioritize projects were also disrupted.  In an  attempt to avoid project delays and cancellations after having lost funds to  transfers in 2002, agency officials awarded contracts and grants earlier in  the year in 2003.  Although such efforts mitigated some impacts of funding  transfers, they also interfered with agency attempts to implement high- priority projects.  When officials expected funds to be transferred, they  implemented projects that could be completed quickly and early in the  year, although they were not necessarily their highest priority projects.  On  the other hand, the Forest Service was able to implement some of its high- priority projects later by redirecting reimbursements to them.  For  example, in California, agency officials targeted funds to the San  Bernardino National Forest, where insect infestation had caused  widespread tree mortality and elevated fire risk.  In Colorado, officials  directed reimbursements to high-priority rehabilitation efforts in the  aftermath of the Hayman fire, shown in figure 6.
The redirection of funds was authorized by the Congress and may have  helped preserve agency priorities.  However, under some programs, such as  construction and land acquisition, appropriations committee reports direct  the agencies to fund specific projects (which agency officials refer to as  “congressionally directed” projects).  In some cases, officials paid for  congressionally directed projects by shifting funds from projects that the  committee reports had not specifically identified, or projects that were less  expensive than anticipated, and therefore had “savings.”  However, one  National Park Service official expressed concern about these unfunded  projects, suggesting that if transfers continue without complete  reimbursement, the construction program may no longer have sufficient  funds to pay for all congressionally directed projects, even though funds  were already appropriated for them.
section_title: Program Funding Deficits
paragraphs: Funding transfers also disrupted annual budgeting efforts, contributing to  numerous individual Forest Service programs going into deficit in 2003  when agency officials overspent funds internally set aside for the  programs.  Forest Service officials attributed the deficits in part to actions  they took to execute the transfer of funds—specifically, the combination of  spending early and transferring late.  In 2002, the fire season began  unusually early, and the Forest Service ordered an agencywide spending  freeze on all nonessential expenses beginning in early July.  By doing so,  the Forest Service ensured that enough funds were available to pay for  suppression costs.  However, at the end of the fiscal year, there were  substantial funds left in some programs, and officials believed that more  projects could have been completed.  In an effort to avoid this situation and  to complete more projects while still providing for suppression costs in  2003, the Forest Service did not start transferring funds until mid-August  and, even then, did not order a spending freeze.  In addition, agency  officials focused on spending money earlier in the year, so that they could  complete more projects before funds were transferred for suppression.   After funds were transferred, some programs had nearly depleted their  financial resources.  Nevertheless, agency officials said they continued  spending in a number of cases because they had made commitments to  contractors or others, or because expenses such as vehicle maintenance  were essential.  At year-end, some programs were in deficit.  For example,  all 11 forests in the Forest Service’s southwestern region ended 2003 with  deficits in at least 30 percent of the programs from which transfers were  made.  Seven of the 11 forests had deficits in 50 percent or more of these  programs.
Another factor that contributed to 2003 program deficits was that the  Forest Service used unreliable estimates to determine the amount of  money available for transfers.  Specifically, when the Forest Service made  transfers in 2003, its headquarters officials estimated the minimum balance  necessary for each program by projecting salary needs for the remainder of  the fiscal year and adding a small amount for contingencies.  The estimate  was based on two pay periods in July, and, in most cases, headquarters  transferred all of the balance above this estimated amount.  However,  headquarters officials made this transfer without adequately consulting the  regions or local forest units to obtain information on their specific salary  needs for the remainder of the fiscal year.  As such, in some cases, the  salary estimates were understated because some staff were on suppression  duty during the two pay periods and the suppression program was paying  their salaries.  Consequently, when these staff returned from suppression  duty before the end of the fiscal year, the balance remaining was not always  sufficient to cover their salary costs.  According to headquarters officials,  they used rough salary estimates because suppression program funds were  nearly depleted and they needed to make transfers immediately, leaving  inadequate time for forest-level officials—who have access to detailed  payroll information—to estimate salary costs.  Nevertheless, officials in the  Washington Office directed regional and forest-level officials to ensure that  all full-time staff continued to be paid in full.  In order to do so, in some  cases, staff worked in alternate programs so that they could be paid  through those programs.  In other cases, agency officials continued to draw  salaries from depleted programs, and, as a result, the programs went into  deficit.  Further, to avoid this situation, some officials said their managers  encouraged them to go on fire suppression detail where there was a need,  so that their salaries would be paid from the suppression program.  Forest  Service officials indicated they used the following year’s appropriation to  replenish the programs that went into deficit; however, this practice  reduced the amount of funds available for that year’s program of work.
Finally, if transfers to pay for wildfire suppression continue, project  cancellations and delays, strained relationships, and management  difficulties will likely continue and be compounded.  According to agency  officials, some impacts have yet to become apparent.  For example, some  projects are funded in one year with the expectation that the funds will be  spent over several years as the project is implemented.  For such projects,  the impacts of transfers may only become apparent as the project nears its  completion.  Additionally, when projects are deferred to the next year,  agency officials often must use resources originally dedicated to other  projects.  The result is a domino effect:  deferring one year’s projects  displaces the next year’s projects, which must in turn be deferred to the  following year.  Furthermore, because of 2003 program deficits, the  impacts of funding transfers will continue into 2004.  For programs that  were in deficit at the end of 2003, officials had to first pay off the deficit at  the beginning of 2004, effectively reducing their annual budget and the  number of projects they will be able to fund.
If funding transfers continue, the agencies and the Congress will repeatedly  confront difficult decisions in determining how much funding to transfer  from which programs and how much to reimburse.  In making such  decisions, the Forest Service and Interior have attempted to minimize  impacts to programs and projects, but neither agency systematically tracks  such impacts at a national level.  To identify the impacts of funding  transfers on its programs in 2003, Forest Service officials collected some  information about impacts from regional offices.  However, the information  was neither consistent nor comprehensive because not every region  provided it, and those that did, provided it in different forms with varying  degrees of detail.  Enhancing their understanding of how funding transfers  affect programs could improve the ability of the agencies and the Congress  to minimize negative impacts to programs and projects.
In 2003, the Forest Service added a feature to its accomplishment reporting  system to track the impacts of funding transfers.  The feature allows  agency officials to identify which national performance goals are affected  by transfers and to what extent.  For example, officials can identify how  many acres of land were not acquired because of funding transfers.   However, there are several agency programs that do not use this system to  track their accomplishments.  If more programs used this system and  tracked accomplishment shortfalls caused by funding transfers, the Forest  Service and the Congress would have more comprehensive information  and could make more informed decisions about wildfire suppression  funding, transfers, and reimbursements.  Interior similarly could refine its  existing accomplishment tracking systems to collect nationwide  information about the impacts of transfers on their programs.  Because  accomplishment information is compiled at the end of the fiscal year, it  would be of limited value in determining potential effects of current year  transfers before they are made.  Nevertheless, nationwide information on  impacts from prior years could help agency officials and the Congress  make informed decisions about current year transfers and  reimbursements.
section_title: Improvements for Estimating Suppression Costs and Alternatives for Funding Wildfire Suppression Could Be Considered
paragraphs: To help mitigate the negative impacts of funding transfers, the Forest  Service and Interior should improve their method for estimating annual  suppression costs and the Congress could consider alternative approaches  for funding wildfire suppression.  The agencies’ use of a 10-year average of  wildfire suppression costs to estimate and budget for annual suppression  costs has substantially underestimated actual costs during the last several  years.  While uncertainties about the number of wildfires and their location,  size, and intensity make it difficult to estimate wildfire suppression costs,  alternative methods that more effectively account for these uncertainties  and annual changes in firefighting costs should be considered for  improving the information provided to agency and congressional decision  makers.  Additionally, to further mitigate the impacts of funding transfers,  the Congress could consider several alternative approaches to funding  wildfire suppression, such as establishing a governmentwide or agency- specific reserve account dedicated to funding wildfire suppression  activities.  Each alternative has advantages and disadvantages with respect  to, among other things, reducing the need to transfer funds, creating  incentives for agencies to contain suppression costs, and allowing for  congressional review.  Thus, selecting any alternative would require the  Congress to make difficult decisions, including taking into consideration  the effect on the federal budget deficit.
subsections: section_title: Annual Wildfire Suppression Budgets and Appropriation Decisions Have Been Based on Cost Estimates That Have Significantly Understated Actual Costs
paragraphs: For the past several years, the Forest Service, Interior, and the Congress  have made annual wildfire suppression budget and appropriations  decisions based on estimates of suppression costs that frequently have  substantially understated actual costs.  In developing their annual  suppression budgets, the Forest Service and Interior use a 10-year average  of suppression costs to estimate annual suppression costs.  The agencies  calculate this estimate up to 2 years in advance of when suppression funds  are actually needed.  The Congress also uses this estimate in deciding how  much to appropriate for wildfire suppression activities.  However, since  1990, these annual estimates frequently have understated actual  suppression costs by hundreds of millions of dollars, as illustrated in figure  7.  In fact, over the last 5 years, the estimates have understated actual  suppression costs by about $1.8 billion.  This shortfall in funding to cover  actual suppression costs has occurred, in part, because the agencies and  the Congress developed annual budget requests and made appropriation  decisions for suppression activities on the basis of these estimates.  In  funding suppression activities based on these estimates, the Congress was  able to fund, and the agencies were able to address, other program  priorities without negatively affecting the federal budget deficit.  However,  in doing so, the agencies have had insufficient funds to pay for all  suppression activities in recent years because of the increase in the number  and intensity of wildfires and the costs to suppress them.  As a result, the  agencies have had to transfer hundreds of millions of dollars from other  programs.
section_title: Improvements in Estimating Suppression Costs Should Be Considered
paragraphs: Alternative methods should be considered for improving the suppression  cost estimates that are provided to agency and congressional decision  makers for use in estimating and funding wildfire suppression costs.   Agency officials acknowledged that the 10-year average has substantially  understated actual suppression costs in recent years.  Although agency  officials indicated they have considered alternative methods for improving  the forecasts, they believe that the 10-year average is a reasonable and  inexpensive way to estimate wildfire suppression costs.  However, the  usefulness of a 10-year average is limited when actual costs change rapidly  from year to year, as they have recently.  Furthermore, because the average  is presented as a “point estimate” of likely costs instead of in conjunction  with a range of cost estimates reflecting the uncertainties of wildfires, it  may convey an unwarranted sense of precision to decision makers.  For  example, as shown in figure 7, recent actual suppression costs have been  higher than earlier levels.  Agency officials believe that recent abnormal  drought conditions have contributed to unusually large and catastrophic  wildfires that are much more expensive to suppress than typical fires  prevalent for most of the previous 10 years.  In addition, over the last few  years, the cost of fighting wildfires in the wildland urban interface has risen  significantly due to the number of homes built in these areas and the  increased resources needed to protect them from wildfires.  Also, costs  related to the use of aircraft to fight wildfires, especially insurance rates,  have increased significantly since September 11, 2001.  Alternative methods  that more effectively account for annual changes in expenditures and that  convey the uncertainties associated with making the forecasts should be  considered for improving the information provided to agency and  congressional decision makers.  For example, an estimate based on a  weighted 10-year average, in which more weight in the average is given to  recent expenditures relative to older ones, may be more effective in  accounting for annual changes in expenditures.  This information could  provide agency and congressional decision makers with more useful data  to develop budget requests and fund suppression activities at a level that  reduces the need for funding transfers and subsequent reimbursements.   However, in doing so, higher estimated costs for suppression could result,  at least in the near term.  In this context, the Congress would have to make  difficult decisions about whether to increase funding for wildfire  suppression to more closely reflect estimated costs, and, if so, whether to  reduce appropriations to other government programs in order to avoid  adding to the federal budget deficit.
section_title: Alternative Wildfire Funding Approaches Merit Further Consideration
paragraphs: In addition to the agencies refining their estimates of suppression costs, the  Congress also could consider alternative funding approaches to further  mitigate the effects of funding transfers on agency programs and reduce  the need to provide supplemental appropriations.  For example, the  Congress might consider creating an emergency reserve account that is  governmentwide or agency-specific, and that provides a specific amount of  funds when the reserve is created or allows for as much funding as is  necessary.  Each alternative has advantages and disadvantages related to  influencing the need for transferring funds, creating incentives for the  agencies to contain suppression costs, and allowing for congressional  review.  We previously issued two reports, and the Congressional Budget  Office issued testimony, that presented various alternatives for funding  wildfire suppression and other emergency needs.  Some of the  alternatives presented in these reports and testimony are summarized in  table 2 and described below: Reserve accounts provide early recognition that there will likely be a  demand on federal resources for natural disastersthus providing greater  transparency in the budget process.  The greater the amount of funds in the  reserve account, the less likely agencies would need to transfer funds from  other programs.  Reducing the need to transfer funds would mitigate the  need for supplemental appropriations that have added hundreds of millions  of dollars to the federal budget deficit.  However, the greater the amount of  funds in the reserve account, the more difficult it would be for the  Congress to limit total government spending.  On the other hand, if the  Congress limited the amount of funds appropriated for wildfire  suppression, including the amount in the reserve account, there would be a  greater chance that the agencies would need to transfer funds, and the  Congress would need to reimburse the transfers through supplemental  appropriations.  The amount and accessibility of funds in the reserve  account also may affect the agencies’ incentives to contain the costs of  suppression activities.  However, the effect of such incentives would likely  be limited, given that many unpredictable and uncontrollable factors affect  the costs of fire suppression activities.
subsections: section_title: Governmentwide Reserve Account
paragraphs: The Congress could create a governmentwide reserve account into which  funds normally appropriated to agencies having responsibility for  addressing unforeseen situations and emergencies would be appropriated.   These agencies would include not only the Forest Service and Interior, but  also the Federal Emergency Management Agency and the Department of  Defense, among others.  Combining the emergency funds of all these  agencies into one account might alleviate the need for supplemental  appropriations, because in any given year an increase in spending for one  agency may be offset by a lower than usual spending by another agency.   Without supplemental appropriations, there would be no increase in the  budget deficit.  A possible disadvantage of using a governmentwide reserve  that is funded annually is that it could produce the expectation that the  entire fund should be spent each year and, as the year progresses, claims  on the fund might increase.  Similarly, a governmentwide reserve might not  provide incentives for agencies to contain the costs of wildfire suppression.
A governmentwide reserve account could be created using funds  designated as no-year money, so that funds not spent in a given year remain  in the account for use in following years.  Under such an account, there  would be no incentive to spend the entire fund each year.  To further  control the use of the reserve account, the agencies’ access to the fund  could be tied to specific criteria.  Criteria could parallel those previously  offered by OMB in designating funds as an emergency requirement; namely,  that the emergency (1) require a necessary expenditurean essential or  vital expenditure, not one that is merely useful or beneficial; (2) occur  suddenlyquickly coming into being, not building up over time; (3) be  urgenta pressing and compelling need requiring immediate action; (4) be  unforeseennot predictable or anticipated as a coming need; and (5) not  be permanentthe need to fund is temporary.  Nevertheless, whether the  funds are designated as no-year or not, additional funding could still be  needed at year-end.  If so, the agencies would need to transfer funds from  other program accounts, and the Congress would have to choose between  providing supplemental appropriations to reimburse the funding  transfers—which would add to the federal budget deficit—or providing no  reimbursements.  In such cases, even if the agencies did need to transfer  funds, the amount transferred would be less than it would have been  without the reserve.
section_title: Agency-Specific Reserve Accounts
paragraphs: Another approach for funding wildfire suppression activities cited in one of  our earlier reports is to establish agency-specific reserve accounts for  those agencies that regularly respond to federal emergencies and require  those agencies to satisfy criteria similar to the OMB criteria previously  described, before the funds are released. Agency-specific reserve accounts  could be funded through a permanent, indefinite appropriation, which  would provide as much funding as needed for specific purposes and would  always be available for those purposes without any further action by the  Congress.  A permanent, indefinite appropriation would eliminate the need  to transfer funds from other programs and to provide supplemental  appropriations to reimburse funding transfers.  A disadvantage of an  indefinite appropriation is that if actual expenditures exceed the estimates,  the federal budget deficit will be greater than anticipated.  A disadvantage  of a permanent appropriation is that it would lessen the opportunity for the  Congress to regularly review the efficiency and effectiveness of fire  suppression activities, because such reviews are typically conducted  during the annual appropriations process.
Alternatively, funding for agency-specific reserve accounts could be  provided through a current, indefinite appropriation, which provides as  much funding as needed for the current fiscal year.  Funding wildfire  suppression using a current, indefinite appropriation would allow the  Congress to periodically review suppression activities through the annual  appropriations process since the Congress would appropriate reserve  funds each year.  However, an indefinite appropriation could still result in  higher than estimated costs and a higher than anticipated federal budget  deficit.  Additionally, any indefinite appropriation would have no inherent  incentives for the agencies to contain suppression costs because the  funding level would be unlimited.
Agency-specific reserve accounts also could be funded by a definite  appropriation with a specific amount of funds, not to be exceeded in a  given year.  With such limits, there would be an incentive for the agencies  to contain suppression costs.  As with a current, indefinite appropriation,  the Congress could review suppression activities each year during its  annual appropriations process.  This alternative also could avoid increasing  the federal budget deficit if appropriations to other agency program  accounts were reduced by an amount corresponding to the amount in the  reserve.  However, should suppression costs be higher than the amount  provided in the reserve account for the current year, a decision would need  to be made on whether to transfer funds from other agency programs and,  if so, whether to reimburse the funding transfers with a supplemental  appropriation that would increase the federal budget deficit.
Recently, the Senate Committee on the Budget has proposed an option for  funding wildfire suppression activities in its resolution on the budget for  fiscal year 2005.  The resolution would provide for a reserve account  funded through a definite appropriation of up to $500 million in additional  annual funding for fiscal years 2004 through 2006.  The funds in the  account would be available to the Forest Service and Interior for fire  suppression activities only if (1) the agencies are initially appropriated  funds equal to or greater than the 10-year average of wildfire suppression  costs and (2) the initial appropriations are insufficient to cover actual  costs.  Such an alternative would add to the federal budget deficit, unless  the $500 million was reduced from other Forest Service, Interior, or other  governmentwide programs when the Congress initially develops the federal  budget.  Further, if the funds in this account were sufficient to pay for all  wildfire suppression activities above the 10-year average of suppression  costs, there would be no need for the Forest Service or Interior to transfer  funds from other program accounts.  Had there been a $500 million reserve  account available for wildfire suppression over the last 5 years, transfers  would still have been necessary, but to a lesser extent, because suppression  costs greatly exceeded the 10-year average in the extensive fire seasons in  2002 and 2003.
section_title: Other Funding Options
paragraphs: During our visits with agency officials, we also discussed various other  ideas for acquiring additional revenues to help pay for wildfire suppression.   One idea was to charge fees for visitors, and state, local, and private  entities that use federal land and resources, or to people who own property  adjacent to federal forest land.  For example, agencies could place a  surcharge on existing user fees at national forests, parks, and other federal  lands and use the additional revenue to help fund wildfire suppression.   Another idea was to establish a special fund, similar to the K-V Fund,  whose revenues would be dedicated to wildfire suppression.  Revenues  accruing to such a fund could come from fees charged for state, local, or  private use of federal lands and its resources.  Still another option was to  levy a stipend on property owners’ federal tax for living in the wildland  urban interface.  Some other, more unconventional methods for mitigating  the federal share of wildfire suppression costs also were discussed, such as  allowing private companies to “sponsor” fire suppression efforts by  providing funding as a measure of corporate goodwill to the local  community.  The advantage of all of these options would be to reduce the  federal government’s burden to pay for fire suppression.  Because the  Forest Service and Interior do not have the authority to increase funding  for suppression over the amount provided in appropriations, any of these  options would require congressional action.  Further, all of these options  could strain agency relations with the public and others.
section_title: Conclusions
paragraphs: Wildfires burn millions of acres of federal land every year, and the Forest  Service and Interior spend billions of dollars suppressing them.  In doing  so, the agencies must balance the goal of protecting lives, property, and  resources against the goal of containing costs.  Transferring funds from  other agency programs has helped fund needed wildfire suppression  activities but not without a cost.  These transfers have had widespread  negative effects on Forest Service and Interior programs, projects,  relationships, and management.  In addition, the subsequent repayment of  transfers with supplemental appropriations has added hundreds of millions  of dollars to the federal budget deficit.  These effects are likely to increase  should funding transfers continue to be necessary in the future.
Notwithstanding the uncertainties and difficulty of accurately estimating  wildfire suppression costs, there are a number of factors that exacerbate  the problem of transferring funds to help suppress wildfires.  First, the  methodology the agencies use to estimate suppression costs and determine  their budgets is flawed because it does not adequately account for recent  increases in the costs to suppress wildfires.  Without this information, the  Congress may have insufficient information to make prudent funding  decisions.  Second, the estimates generated by the monthly forecasting  models have been inaccurate and did not provide a sound basis for  deciding if, and to what extent, funding transfers were needed.  Third, the  agencies have inadequate information to understand the effects that  transfers are having on their programs.  As such, they are not well  positioned to report the impacts to the Congress or make informed  decisions about future transfers.  Finally, the Forest Service’s method for  estimating salary costs for the remainder of the fiscal year without  adequately consulting with local forest units is problematic.  Consequently,  Forest Service headquarters officials do not have sufficiently accurate data  to make transfer decisions and preclude agency programs from going into  deficit.
Because of the difficulty of accurately estimating suppression costs and the  budget implications of providing additional funding for suppression, it is  likely that suppression funding shortfalls will continue in the future.  To  minimize the budgetary implications, the intended goal should be to  achieve an appropriate balance between the shortfall and the impacts that  transfers will have on agency programs.  Despite the best efforts to achieve  this balance, there will be times when the size of the shortfall will create  problems and impacts to important programs.  Currently, there is no  budgeting or funding mechanism that can help mitigate these impacts.   Consequently, the agencies are forced to make difficult decisions to fund  wildfire suppression at the expense of meeting other important  programmatic goals.
section_title: Recommendations for Executive Action
paragraphs: To help minimize the impacts of wildfire funding transfers on other agency  programs and to improve the agencies’ budget estimates for wildfire  suppression costs, we are recommending that the Secretaries of  Agriculture and the Interior direct the Forest Service and Interior agencies  to work together to   improve their methods for estimating annual wildfire suppression costs  by more effectively accounting for annual changes in costs and the  uncertainties associated with wildfires in making these estimates, so  that funding needs for wildfire suppression can be predicted with  greater accuracy;  annually conduct a formal assessment of how the agencies’ methods for  estimating annual suppression costs and their monthly forecasting  models performed in estimating wildfire suppression costs relative to  actual costs, to determine if additional improvements are needed; and  consistently track accomplishment shortfalls caused by funding  transfers across all programs and include this information in annual  accomplishment reports to provide agency decision makers and the  Congress with better information for making wildfire suppression  transfer and funding decisions.
In addition, to more accurately determine the amount of funds available to  transfer for wildfire suppression, we recommend that the Secretary of  Agriculture direct the Chief of the Forest Service to estimate remaining  salary needs for the fiscal year by consulting with local forest officials to  obtain more current, specific payroll information, so that the risk of  programs going into deficit can be reduced.
section_title: Matters for Congressional Consideration
paragraphs: To reduce the potential need for the Forest Service and Interior to rely on  transferring funds from other programs to pay for wildfire suppression on  public lands, the Congress could consider alternative funding approaches  for wildfire suppression, such as, but not limited to, establishing a  governmentwide or agency-specific emergency reserve account.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Secretaries of Agriculture and the  Interior for review and comment.  In responding, the Forest Service  generally concurred with our findings and recommendations, and Interior  concurred with our findings, but both agencies expressed concerns about  our recommendation that they pursue alternative methods for estimating  suppression costs.  Both the Forest Service and Interior provided written  comments, which are included in appendixes IV and V, respectively.
Concerning our recommendation that the agencies improve their methods  for estimating annual wildfire suppression costs, Interior commented that  the current method—relying on the 10-year average of suppression costs— has proved to be “a reasonable and durable basis for suppression  budgeting.”  In support of this point, they noted that between 1995 and  1998, their actual suppression costs were below the 10-year average in  three seasons.  While we do not dispute this fact, we disagree that using the  10-year average has been “a reasonable and durable basis” for budgeting for  suppression costs.  As noted in our report, since 1990, the agencies’  reliance on the 10-year average has frequently resulted in annual budget  estimates well below actual suppression costs.  For Interior, the 10-year  average was below actual costs in 8 of the 14 years since 1990; for the two  agencies together, the 10-year average was below actual costs in 11 of the  14 years.  Further, in the years when the average has understated actual  costs, the difference has frequently been significant.  Over the last 5 years,  the 10-year average has understated the two agencies’ actual suppression  costs by a total of about $1.8 billion.
The Forest Service, in commenting on the use of the 10-year average,  recognized the weaknesses associated with using the average to estimate  annual wildfire suppression costs and noted the agency has looked into  other methods that could more accurately predict future suppression costs.   Some of the methods considered included using a 5-year average and  inflating the historical costs to current dollar values.  The Forest Service  also noted that agency officials have discussed various modeling methods  with researchers who said they could design a very expensive, complex  model that would be more accurate than the 10-year average.  We support  the Forest Service for taking this initial step and encourage the agency to  continue its efforts to identify and implement a cost-effective method for  improving their estimates of annual suppression costs.  As noted in our  report, alternative methods that more effectively account for annual  changes in expenditures and that convey the uncertainties associated with  making the forecasts should be considered.
The Forest Service also noted that our report does not address the  potential consequences associated with not making the funding transfers.   These negative impacts could include (1) not having adequate personnel  and equipment, (2) an increase in the number of acres burned, and (3) an  increase in the loss of homes and other property.  While we believe that  such impacts could result if funding transfers did not occur, the objective  of our report is to identify the effects on Forest Service and Interior  programs from which funds were actually transferred.
In addition, Interior noted that shifting funds from one program to another  within the wildland fire management account does not constitute a  transfer, and, as such, we were incorrect in saying that Interior transferred  funds from wildland fire programs.  However, as noted in footnote 2, for  ease of explanation throughout the report, we use the word “transfer” to  refer both to the transfer of funds from one appropriation account to  another and to the reprogramming of funds between programs within a  single appropriation account.  In either situation, the program from which  the funds were taken is affected.
The agencies also provided other comments and technical clarifications on  the draft that we incorporated into the report where appropriate.
As arranged with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after the  date of this letter.  At that time, we will send copies of this report to the  Chairman, Senate Committee on Energy and Natural Resources; the  Chairman and Ranking Minority Member, House Committee on Resources;  the Chairman and Ranking Minority Member, Subcommittee on Forests  and Forest Health, House Committee on Resources; and other interested  congressional committees.  We will also send copies of this report to the  Secretary of Agriculture; the Secretary of the Interior; the Chief of the  Forest Service; the Directors of the Bureau of Land Management, the  National Park Service, and the Fish and Wildlife Service; the Acting  Director, Bureau of Indian Affairs; the Director, Office of Management and  Budget; and other interested parties.  We will make copies available to  others upon request.  In addition, this report will be available at no charge  on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841.  Key contributors to this report are listed in appendix VI.
section_title: Scope and Methodology
paragraphs: To determine the amount and the programs from which the U.S. Forest  Service and the Department of the Interior transferred funds from 1999  through 2003, we collected data from the agencies’ headquarters on funds  transferred and reimbursed by agency, program, and year.  We identified  the procedures the agencies follow when transferring and reimbursing  funds by obtaining and reviewing agency strategy and planning documents  and discussing the procedures actually used with agency officials in  headquarters, regional offices, and local units.  We also interviewed agency  officials about the internal controls they use to carry out these procedures.   In addition, we contacted budget officers at the Forest Service’s nine  regional offices and obtained information on the amounts transferred and  reimbursed to their units.  Where appropriate, we also met with officials  from the Interior agencies that are involved with wildfire suppression  activities—the Bureau of Indian Affairs, Bureau of Land Management, U.S.  Fish and Wildlife Service, and National Park Service.  We interviewed  budget officers in Forest Service and Interior headquarters about the  financial systems they use to ensure the accuracy of the amount of funds  transferred and reimbursed.  We also interviewed Office of Management  and Budget (OMB) officials to obtain their views on the reliability and  completeness of the data they receive from each agency, as well as the  adequacy of the agencies’ internal procedures to generate and track these  data.  Although we relied primarily on agency data, we compared these  data with budget documents that corroborated the amounts transferred  and reimbursed, where possible.  We took appropriate measures to ensure  that the Forest Service and Interior data on the amount of funds transferred  and reimbursed and on actual suppression costs were sufficiently reliable  for our purposes, and that the internal procedures at the Forest Service and  Interior were sufficient to generate these data.  In addition, we used the  Gross Domestic Product Price Index to adjust dollars for inflation.
To identify the impacts on agency programs from which funds were  transferred, we interviewed Forest Service and Interior headquarters  officials with responsibility for the affected programs.  We also visited six  Forest Service regional offices; 7 national forests, and contacted an  additional 14 national forests; and visited seven Interior field offices.   Although we did not visit all Forest Service regions, we chose a nonprobability sample of regions that reflected a range of funds transferred  as well as the geographic diversity of program impacts (see table 3).
Where appropriate, we also met with Interior field offices, grant recipients,  a state forester, and representatives of nonprofit organizations who were  collocated in the Forest Service regions visited.  In addition, we contacted  national forests officials in each region we visited and obtained detailed  information regarding the specific impacts to their programs and projects.   We interviewed representatives of impacted programs in both regional and  national forest offices.  We collected documents that listed the projects  deferred or canceled due to transfers; obtained information on the cost of  the impact to some affected projects; and—in some instances—conducted  site visits to affected project locations.  In our review of impacts, we  focused on fiscal years 2002 and 2003 because in these 2 fiscal years  transfers for wildfire suppression involved many more programs than they  did previously.
In reviewing the agencies’ methods for estimating suppression costs, we  discussed the details of each method with agency officials responsible for  developing the estimates.  We reviewed the agencies’ current estimation  methodology, compared the estimates with actual costs and discussed the  reasons for differences between them with agency officials, and identified  alternatives for estimating suppression costs.  In reviewing alternative  approaches for funding wildfire suppression, we reviewed previous GAO  and Congressional Budget Office reports, as well as a Forest Service study  related to budgeting for emergencies, and discussed alternative funding  options with agency officials.  We also obtained the views of OMB officials  on other appropriation approaches for funding wildfire suppression.  In  addition, we analyzed Forest Service and Interior budget documents,  congressional appropriations documents, and agency suppression cost  forecasting models.
We performed our work between July 2003 and March 2004 in accordance  with generally accepted government auditing standards.
section_title: Summary of Funds Transferred from and Reimbursed to Forest Service and Interior Programs, 1999 through 2003
paragraphs: These tables summarize the amount of funds transferred from and  reimbursed to Forest Service and Interior programs from 1999 through  2003.  Table 4 summarizes the funds transferred from major Forest Service  programs and from the construction and land acquisition programs, as well  as various fire programs, within Interior’s four agencies that have  responsibility for wildfire suppression activities.  Table 5 summarizes the  amount of funds reimbursed to these programs over the 5-year period.  The  information presented in the tables was obtained from Forest Service and  Interior budget documents.
section_title: Summary of Funds Made Available for Transfers, by Forest Service Region
paragraphs: These tables include information on funds made available for transfers, by  Forest Service region.  Table 6 summarizes information on funds made  available for transfers by region for each year from 1999 through 2003.   Table 7 summarizes information on funds made available for transfers by  major Forest Service program and by region, aggregated over the 5-year  period.  Table 8 summarizes information on funds made available for  transfers as a percentage of overall budget authority for each Forest  Service region and by major program for 2002.
section_title: Comments from the Department of Agriculture
section_title: Comments from the Department of the Interior
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Nathan Anderson, Paul Bollea,  Christine Bonham, Christine Colburn, John Delicath, Timothy Guinane, and  Richard Johnson made key contributions to this report.
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