Financial Management: Forest Service Is Not Consistently Implementing Charge-as-Worked Cost Reporting

Published by the Government Accountability Office on 1990-06-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                                                                    Forest Service Is Not
                                                                                                    Implementing Charge-
                                                                                                    as-Worked Cost

                                                                                                                   llll I  141561

8.                 United Statea
&A0                General Accounting Office
                   Washington, D.C. 20548

                   Accounting and Finati
                   Management Division


                   June 12,199O

                   The Honorable Sidney R. Yates
                   The Honorable Ralph Regula
                   Ranking Minority Member
                   Subcommittee on Interior
                     and Related Agencies
                   Committee on Appropriations
                   House of Representatives

                   As part of your review of the Forest Service’s proposal for a new budget
                   system known as “end-results” budgeting, you asked us to examine For-
                   est Service efforts to improve the accuracy of financial information in
                   its existing budgeting and reporting system. Your concerns centered on
                   the Forest Service’s practice of charging time, equipment, and overhead
                   in ways that conformed to planned or budgeted amounts rather than
                   ways that indicated how these resources were actually used. As you
                   requested, we reviewed actions taken by the Forest Service to charge its
                   accounts as worked rather than as budgeted in fiscal years 1988 and

                   The Forest Service took a number of actions to implement the charge-as-
Results in Brief   worked policy and we found that Forest Service employees had a strong
                   awareness of the need to properly charge costs as worked. The agency’s
                   end-of-year cost data for fiscal year 1988 differed from budgeted
                   amounts received at the beginning of the year, indicating that the policy
                   was being followed. However, we also found that, because Forest Ser-
                   vice headquarters issued broad guidance rather than detailed proce-
                   dures for charge-as-worked, some confusion and inconsistency existed
                   among regions, forests, and districts. Furthermore, certain Forest Ser-
                   vice practices inhibited compliance with charge-as-worked, and head-
                   quarters did not establish management controls to be used by all units to
                   ensure compliance with the policy and provide comparable cost report-
                   ing from unit to unit.

                   To correct these problems, more detailed guidance on the charge-as-
                   worked policy from headquarters is necessary. We are recommending a
                   number of actions to improve reporting of future cost information.

                   Page 1                             GAO/AFMJMO-60   Forest !hvice   Cost lhmwthl

                       The National Forest System is divided into nine geographic regions.
Background             Each region consists of several forests, and each forest is divided into a
                       number of ranger districts. A forest or district budget, under the current
                       budget structure, may be divided into numerous budget activities such
                       as timber sales preparation, trail maintenance, and wilderness

                       Prior to 1988, the Forest Service emphasized the need to keep charges at
                       or below budgeted amounts for each activity. As a result, managers
                       often charged costs to the correct accounts only until the budgeted
                       amounts were reached. They charged costs above budgeted amounts to
                       other accounts that had available funds. Due to this practice, costs
                       reported for specific budget line items often did not reflect actual
                       expenditures for the associated activities. This inaccurate reporting of
                       costs affected the accuracy of subsequent budgets because the planned
                       line item amounts were based on prior years’ budgeted amounts rather
                       than actual costs.

                       In 1987, the Forest Service asked the Congress to (1) approve 2-year
                       funds to better accommodate the nature of its work, (2) reduce the
                       required level of justification in the Forest Service’s budget request from
                       more than 50 individually budgeted activities to approximately 10, and
                       (3) focus congressional control and reprogramming requirements on out-
                       put targets, such as acres reforested. The budgeting method proposed in
                       this request is referred to as “end-results” budgeting.

                       Your committee asked us to review how the Forest Service Chief’s direc-
Objective, Scope,and   tive to charge as worked was implemented. Our work addressed Forest
Methodology            Service efforts in fiscal years 1988 and 1989. We collected data from
                       Forest Service headquarters in Washington, DC.; all nine regional
                       offices; and various forest and district offices. As agreed with your
                       office, we concentrated on the charging of labor, equipment, and over-
                       head costs.

                       To determine what actions had been taken to implement the charge-as-
                       worked policy, we administered a data collection instrument at 30 for-
                       ests in 8 of the 9 regions’ and at a minimum of 3 forests per region. We
                       surveyed 152 field employees, including 62 staff specialists, 30 members

                       ‘We did not visit forests in Region 10, Alaska.

                       Page 2                                            GAO/AFMD-WSO   Forest   !.+ervice Cost Reporting
                        of district management teams, 30 district rangers, and 30 forest supervi-
                        sors. These categories represent employees who work on various activi-
                        ties and charge multiple management codes, supervise other staff,
                        prepare and monitor budgets and cost information, and/or enforce and
                        monitor Forest Service policies, including the charge-as-worked policy.
                        In addition, we interviewed budget and fiscal staff in all nine regions
                        and in headquarters. We also reviewed documentation such as time and
                        attendance reports, equipment records, and internal review reports.
                        Lastly, we analyzed fiscal year 1988 agencywide financial data to deter-
                        mine if the Forest Service had refrained from its past practice of incor-
                        rectly charging costs so that accounts balanced to zero at year-end.

                        We conducted our work from February 1989 through March 1990. Our
                        work was conducted in accordance with generally accepted government
                        auditing standards.

                        The Forest Service took a number of actions to implement the charge-as-
Forest Service Is       worked policy, including the following major ones:
Attempting to Capture
Accurate Costs          Directive from the Chief. On June 8, 1988, the Chief of the Forest Ser-
                        vice issued Interim Directive Number 36 for the Service-Wide Finance
                        and Accounting Handbook. This directive defined the charge-as-worked
                        policy, described managers’ general authority and responsibility for
                        implementing the policy, and discussed some of the management control
                        standards for charging costs to appropriate activities. (See appendix I.)

                        Letters,    memoranda,   and training.  The Chief and his deputies also
                        issued letters and memoranda emphasizing the importance of accurate
                        cost data. Foresters; administrative officers; and budget and fiscal staff
                        in regions, forests, and districts supplemented these documents with
                        meetings and discussions, training sessions, and additional written
                        materials. In addition, some units used other innovative approaches,
                        including a slide show, a videotape, promotional items, and a charge-as-
                        worked hotline.

                        Revisions    to the account   coding structure.In an attempt to ensure
                        that all units charged costs for similar work activities to the proper fund
                        codes, the Forest Service approved a set of standard codes that all units
                        were required to use beginning with fiscal year 1989. This set of codes,
                        which provides a framework for capturing and reporting consistent cost
                        information, constitutes the minimum group of fund and activity codes
                        that field units currently must use to account for work performed.

                        Page 3                                   GAO/AFMD-90-50   Forest Service Coat Reporting

                       We found that these actions resulted in a strong awareness of the
                       charge-as-worked policy and the need to properly charge costs. Of the
                       162 field staff we surveyed, ranging from staff specialists to forest
                       supervisors, 144 responded that they were familiar with the charge-as-
                       worked policy from a moderate to a very great extent. In addition,
                       employee attitudes were generally positive. Most employees commented
                       that the policy is effective and is having a positive impact on their work
                       by providing more accurate cost information for future budget planning.

                       We also found that the policy is having some effect on how employees
                       keep track of costs. Under the Forest Service’s prior practices, little to
                       no variances would be expected between beginning-of-year budgeted
                       amounts and end-of-year expenditures in budget activity categories. On
                       the other hand, under the charge-as-worked concept, variances reflect-
                       ing differences between projected costs and actual expenditures are to
                       be expected. Our analysis of agencywide cost data for the National For-
                       est System l-year funds in fiscal year 1988 showed variances for all
                       budget activities. For example, we found that budgeted amounts
                       exceeded expenditures for the minerals management, land-line location,
                       and timber budget activity accounts, and that budgeted amounts were
                       less than expenditures for the facilities and range management

                       Although headquarters, region, forest, and district staff were generally
Employee Support for   committed to properly comply with the charge-as-worked policy, we
Policy Is Strong but   found problems in the Forest Service’s attempts to implement it. We
Confusion and          found that field units used differing criteria to decide which accounts to
                       charge for the costs of “work details,” shared services, and equipment.
Inconsistency Exist    They also used different budget activity accounts to finance similar
                       activities, and they differed in how they used work activity categories.
                       As a result, cost information is not comparable among units.

                       Work details.    Work details occur when one Forest Service unit
                       “details” or sends employees to perform work on Forest Service projects
                       at another unit. An August 1988 Forest Service memo estimated that the
                       servicewide salary cost alone for employees on work details amounts to
                       about $260 million annually, most of which is not “charged to the cor-
                       rect appropriation [Forest Service budget activity] and work activity nor
                       reflected on the right unit’s books.” Subsequent to issuance of Interim
                       Directive Number 36 in June 1988, headquarters directed field units to
                       charge costs for work details to the unit benefiting from the services

                       Page 4                              GAO/AFMJMO-50   Forest Service Cost Reporting

rather than to the unit performing the services.2 We found the imple-
mentation of this guidance varied among all nine regions. For instance,
some units charged costs to the benefiting unit if the detail was longer
than 2 weeks; other units charged costs to the benefiting unit if the
detail was longer than 1 week; others charged all costs of work details to
the benefiting unit regardless of the length of detail; and still others,
depending on the kind of detail, charged travel costs to the benefiting
unit and salary costs to the performing unit.

Shared services. Shared services occur when one Forest Service unit
performs work that benefits another unit as well as itself. The charge-
as-worked policy states that costs should be allocated proportionately
among units benefitting from shared services. Headquarters did not pro-
vide specific guidance on how to determine which units benefit or what
share of the costs a benefitting unit should be responsible for. Regions
used varying criteria for identifying the benefiting unit and the amounts
to be allocated. We found that in two regions, forests negotiated with
each other on who would bear the costs of shared services. In another
region, costs were charged in various ways, such as splitting the salary
and cost of shared services between the performing and benefiting unit
and splitting the costs between the region and the benefiting forest.
Without a standard methodology for allocating costs, valid cost compari-
sons cannot be made between the various regions and forests.

Equipment     costs. The charge-as-worked policy directed units to
“charge equipment use by month and applicable unit of measure,” We
found no uniformity in how units captured the monthly costs of equip-
ment, which account for approximately 8 percent of the Forest Service’s
annual expenditures. Forest Service staff cited various cost allocation
methods for the same kinds of equipment, such as trucks. For example,
13 of the 30 forest supervisors we talked with responded that equip-
ment costs were monitored and charged to individual projects by having
staff either (1) sign out the equipment at the beginning of each day or
each project, or (2) keep detailed records of miles driven or hours used.
Seventeen supervisors said that equipment costs were charged to multi-
ple activities based on a planned percentage rather than actual use.

Of 114 field employees with whom we spoke and who had a basis for
expressing an opinion on the accuracy of equipment charges, 69

2Two exceptions are training, which is charged to the sending (benefiting) unit, and details to fight
forest fires, which are charged to a specific, separate appropriation. Charges for these details are not
discussed in this report.

Page 5                                             GAO/AFMD-90.60      Forest Service Cost Reporting

                       responded that the recording of equipment/vehicle costs is less accurate
                       than the recording of labor costs. Several of these employees and head-
                       quarters officials commented that the recording of equipment costs is
                       the weakest aspect of compliance with the charge-as-worked policy.

                       Budget activity   accounts. Our review of Forest Service documentation
                       showed that units did not charge similar costs to the same budget activ-
                       ity accounts. For example, one region charged costs for computer ser-
                       vices to General Administration and other accounts such as timber and
                       recreation, while another region charged computer costs entirely to its
                       General Administration account.

                       Categories     of work. According to Forest Service internal review
                       reports, several units differed in their interpretation of Forest Service
                       policy in their use of work activity codes. For example, one forest found
                       that its staff did not use correct work activity codes in recording some
                       activities they performed, and concluded that the staff did not properly
                       understand work activity coding. Similarly, during a June 1989 review
                       of the implementation of the Timber Sale Program Information Report-
                       ing System, headquarters staff found that timber planning costs in one
                       region under review varied from $0.03 to $38.00 per thousand board
                       feet, indicating that staff did not have a clear and consistent under-
                       standing of what work should be recorded under the timber planning
                       activity code.

Certain Budget and     charge-as-worked policy. These practices hamper units’ efforts to charge
Accounting Practices   costs to the benefiting activities and may result in inaccurate cost infor-
Inhibit Charge-as-     mation for some activities. They include reprogramming policies and
                       procedures, the delayed allocation of final budgets, and the requirement
Worked                 for fire prevention employees to charge the fire management account.

                       Reprogramming.     Reprogramming is the shifting of funds within an
                       appropriation from one identified purpose to another. It allows units to
                       reallocate funds from projects where work is completed or where funds
                       are not needed to projects where funds are inadequate to complete
                       approved work. This permits units to record the actual costs of projects
                       and correct inaccurate budget estimates. The level of authority neces-
                       sary to approve this shifting of funds varies with the amount of funds
                       or the type of reprogramming. Reprogramming is generally preceded by
                       consultation between the federal agencies and the appropriate congres-
                       sional committees. It involves formal notification and, in some instances,

                       Page 6                              GAO/AJ?MD-90-50   Forest Service Cost Reporting
opportunity for congressional committees to state their approval or dis-
approval. However, Forest Service guidance provides that reprogram-
ming actions which shift less than $260,000 from one budget activity to
another can generally be approved by the Chief, and actions which shift
amounts within a budget activity may be approved by regional

Forest Service officials stated that, as a result of charge-as-worked, the
level of reprogramming requests increased from fiscal year 1987 to fis-
cal year 1988. However, 47 percent of the district rangers and 33 per-
cent of the forest supervisors we talked with, as well as a few other
district staff, cited difficulties with the reprogramming process as a
major obstacle to the success of charging costs as worked. The reasons
they gave included that (1) supervisors were reluctant to reprogram
because it might have appeared that their units had not done a good job
in planning their initial budgets, (2) reprogramming is cumbersome and
confusing and, thus, not responsive to their needs to charge costs as
worked, (3) staff were confused about who had reprogramming author-
ity, and (4) staff received mixed messages about reprogramming and the
charge-as-worked policy.

As an example of this last problem, as discussed below, when all
reprogramming requests for the first quarter of 1989 were denied, field
units were uncertain as to the reasons for the denials,

Field staff also commented that sometimes they did not receive timely
responses to their reprogramming requests. Depending on the amount of
the request, as many as seven layers of approval may have been
required. Delays in receiving responses often resulted because of the
number of management levels involved in processing requests. Further-
more, headquarters denied all reprogramming requests for the first
quarter of fiscal year 1989 because the requests were incomplete and
did not comply with prescribed procedures. While the disapprovals may
have been valid, they sent the wrong message to field units. One unit
responded that, if a reprogramming request it had submitted was not
approved, the costs of completing certain required work would have to
be charged to other budget activities. While the unit’s total costs would
not change, activity costs would not accurately reflect what was done,
defeating the purpose of charge-as-worked cost reporting.

Page 7                              GAO/AFMD-90450   Forest Service Cost Reporting

Final budgets.  Districts experienced delays in receiving final budgets
because of the Forest Service’s allocation process, which involved sev-
eral management levels. These delays affected the units’ decisions to
comply with the charge-as-worked policy.

Once Forest Service headquarters received its overall final budget, allo-
cations for each activity had to be determined and then distributed to
each region, Each region, in turn, determined and then allocated funds
for each activity to each forest within it. Finally, each forest determined
and allocated amounts to each district. The amount of time taken to
complete this process varied among regions, forests, and districts. In one
instance, a district did not receive its fiscal year 1988 final budget until
May 1988-over 7 months after headquarters had received the Forest
Service’s final budget. Staff in other units cited delays in receiving their
final budgets of 3 to 6 months. For much of the year units worked under
original budget requests.

Thirty percent of the district rangers and other district staff we talked
with who had budget responsibilities commented that the delayed
receipt of final budgets inhibited adherence to the charge-as-worked pol-
icy. Units were reluctant to reprogram when comparison to budget esti-
mates indicated that insufficient funds would be available to complete
approved projects because they were uncertain whether additional
funds would be available for reprogramming. The units also knew that if
they continued to charge costs to the underfunded projects, they risked
running deficits.

Primary purpose principle. The primary purpose principle permits
employees hired for fire prevention to perform work for other activities
when not needed for fire prevention but to charge such work to the fire
management budget activity account if the other activities do not have
funds available. The principle also requires these employees to charge
their regular 8-hour pay to fire management, instead of to fire suppres-
sion (the other fire prevention account), when actually fighting a fire.
According to headquarters officials, the Forest Service originally
adopted the primary purpose principle to stabilize the fire management
budget. The Forest Service recognizes and accepts that, in applying the
principle, units cannot charge costs as worked. Headquarters is cur-
rently reviewing its continued use.

Page 8                               GAO/AFMD-30-50   Forest Service Cost Reporting

                       In response to our end-results budgeting report to the Congress,3 the
Management Controls    Chief of the Forest Service stated that two specific internal controls
for Charge-as-Worked   would be instituted for charge-as-worked: (1) charge-as-worked criteria
Are Inconsistently     would be incorporated in all program, general management, and activity
                       reviews and (2) a performance standard on charge-as-worked would be
Applied                included in all line-officer performance appraisals.

                       We found that adherence to the Chief’s first corrective action varied by
                       location. Seventeen of the 30 districts and 11 of the 30 forests we visited
                       either had no internal reviews or had not incorporated charge-as-
                       worked in any of their reviews. In addition, we found the quality of
                       internal reviews conducted in the other 13 districts and 19 forests
                       varied by location. For example, one forest conducted an intensive
                       review of documents such as purchase orders and accounting transac-
                       tion registers, while at another forest the review consisted only of ask-
                       ing employees “Are you charging as worked?” Finally, about half of the
                       regional fiscal officers we interviewed said that, although there was a
                       great deal of correspondence between regions and headquarters on
                       charge-as-worked issues, headquarters did not regularly review or
                       report on the regions’ efforts.

                       We found that the Chief’s second corrective action had not been fully
                       implemented. Not all managers were being held accountable for ensuring
                       that their units were charging as worked, although a standard was to be
                       incorporated into their performance appraisals. Thirty-seven percent of
                       the district rangers and 20 percent of the forest supervisors we inter-
                       viewed said their performance appraisals did not contain elements that
                       encouraged charging as worked.

                       In addition to internal reviews and performance standards, the charge-
                       as-worked directive stipulated that each unit establish an administrative
                       control system to ensure compliance with the policy. The directive did
                       not specify what the control system should consist of. One-third of the
                       regional fiscal officers we interviewed said they had no such system.

                       Forest Service managers and employees are generally supportive of the
Conclusions            charge-as-worked policy and mindful of the need to report costs cor-
                       rect.ly. However, the Forest Service has begun to implement the policy
                       without providing a servicewide structure that would enable field units
          Y            to uniformly comply with the policy. As a result, units are not applying

                       sForest Service: Evaluation of “End-Results” Budgeting Test (GAO/AFMD-88-46, March 31, 1088).

                       Page 9                                        GAO/AFMLWO-50     Forest   Service Cost Reporting
                      consistent approaches to implementing the policy and some employ
                      practices that inhibit it.

                      Until Forest Service accounting policies and practices are uniform and
                      consistent with the charge-as-worked policy, the Forest Service will not
                      realize the full benefits from its efforts. The Forest Service needs to
                      ensure that its accounting procedures are standardized so that local
                      units can report accurate, uniform, and meaningful cost data in support
                      of its “end-results” budgeting efforts.

                      To ensure that the Forest Service fully and consistently implements the
Recommendations       charge-as-worked policy and accurately records and reports costs, we
                      recommend that the Chief of the Forest Service do the following:

                  . Issue detailed procedures to be followed by all units to ensure consistent
                    treatment of costs incurred for work details, shared services, equipment
                    use, and computer services.
                  . Clarify definitions for work activity codes by providing descriptive
                    examples so that work performed for similar activities is consistently
                    charged to the same budget activity accounts.
                    Ensure that reprogramming requirements and procedures do not inter-
                    fere with charging as worked.
                    Ensure the timely allocation of budgets to all levels of the Forest
                    Consider eliminating the primary purpose principle.
                    Ensure that management controls are consistently used by all units to
                    monitor compliance with the charge-as-worked policy.
                    Ensure that the Chief’s commitment to hold all line officers accountable
                    for enforcing the charge-as-worked policy by including it as an element
                    in performance contracts is enforced.

                      In commenting on a draft of this report, the Forest Service agreed “there
Agency Comments       are a number of situations that may result in disincentives for field
                      units to charge as worked.” Although the Forest Service did not provide
                      responses to our recommendations, the agency acknowledged that
                      “there is a need for additional management direction.”

                      In its response to our report, the Forest Service reiterated that it is a
                      Forest Service policy to charge as worked and to request reprogramming
                      according to congressional guidelines. The Forest Service also stated
                      that headquarters has made a considerable effort to communicate

                      Page 10                             GAO/AFMD-90-50   Forest Service Cost Reporting


        reprogramming requirements to field units and that it will continue to
        work to ensure that all field units understand what is expected by the
        Congress and the Chief.

        Discussing delays in the allocation of final budgets and their impact on
        charging as worked, the Forest Service indicated that it is taking steps
        to improve the timeliness of budget allocations. The Forest Service also
        pointed out that field units are expected to develop work plans from
        initial budgets without waiting for final budget allocations.

        We are sending copies of this report to the Chief of the Forest Service,
        the Secretary of Agriculture, oversight committees, the Director of the
        Office of Management and Budget, and other interested parties. Copies
        will also be made available to others upon request.

        Please contact me at (202) 275-9406 if you have any questions concern-
        ing this report. Major contributors to this report are listed in appen-
        dix III.

        Dennis J. Duquette     c/
        Director, Civil Audits

        Page 11                             GAO/AFMD-90-50   Forest Service Cost Reporting


Letter                                                                                  1

Appendix I                                                                      14
Forest Service Chief’s
Interim Directive
Number 35
Appendix II                                                                     17
Comments From the
Forest Service
Appendix III                                                                    20
Major Contributors to
This Report

                         Page 12   GAO/AFMD-90-60   Forest Service Cost Reporting
Page 13   GAO/AFMD-90-60   Forest Service Cost Reporting
Appendix I

Forest Service Chief’s Interim Directive
Number 35


                                                     FOKIIST SERVICE HANDBOOK
                                                          Washington, DC
                              FSH 6509.11k    - SERVICE-WIDE FINANCE AND ACCOUNTINGWANDBOOK
              INTERIM DIRECTIVE NO. 35                                                                    June 8, 1988
              DURATION: One year          from issuance        date unless previously          terminated     or
              POSTING NOTICE: Last ID was No. 34 to chapter                  50,     dated     4/27/88.

              This Interim Directive    provides Servicewide fiscal control standards for
              charging work to appropriata      fund and work activity codes.  It also provides
              direction   on use and review   of multi-line  management codes.

              pJ-        FISCAL CONTROLS
                    1. Authority.    A system of administrative    control must be in place which
              provides    reasonable assurance to responsible     officials      that the bUd@ing,
              Obligation,    and expenditure  of fund codes and work activities          meet Comptroller
              General fund control guidelines     and are legally      available     for the intended
              purpose (31 USC 1301 and FSM 6510.3).

                     2. Responsibility.        It   is the responsibility          of fiscal     officers     to:
                  a. Provide line officers appropriate     advice and assistance concerning the
              use of fund code6 and work activities    during the budgeting and work planing
                    b.    Serve as a principle       advisor     in the structuring          of management codes.
                  c.    Conduct     reviews   to ensure employee compliance             with    the charge-as-worked

                     3.Definition.      The term “Charge-as-worked”      is used to refer to the
              creating,   recording,    and reporting   of work performed, equipment used, and costs
              incurred  in a manner that every transaction          is charged to the benefiting fund
              codes and work activities       to the fullest    extent possible.
                   4. Cbarps-as-Worked Controls.     Each unit shall establish                       an administrative
              control system that ensure8 that every transaction     is charged                      to the benefiting
              fund codes and work activities   to the fullest  extent possible.                        As a minlmw,
              control system shall ensure that yearend accounting records:

                          Page 14                                           GAO/AFMD-90-M)           Forest Service Cost Reporting
             Appendix     I
             Forest Service Chief’s Interim Directive
             Number 85


        a.      Result    In a reasonably         accurate    reflection      of actual   work performed.
        b.      Provide       comparable   unit    coat information.
        c.      Allow proper accountability             to the Congress.
          5. Accuracy of Charges.  In establishing   fiscal    control sy8teme for
     charging coat8, unit8 shall apply the following    accuracy    standards:
              a..     PaYrOll  Accuracy.          Charge payroll        coats by day.        Hours may be
     reoorded       In 4 hour 8OgWnt8.

              b.      Contract     Accuracy.      Charge     contract      costs by dollar    amounts.
             c.       Equipnent Uee Accuracy.              Charge equipment      u8e by month and
    applicable        unit of measure.
         6. Management Codes. A8 a minimum, establish    nanagement codea that record
    the fund codes and work activities  required Sor national  reporting.   Use
    Exhibit 1 a8 a guide In structuring  management Codes.
    ThO u8e of mlti-line        management code8 shall be the exception rather than the
    rule.      Establish  such management codes only under the multiple         funding
    fIfUWOIng principle       (PSI 1909.13, seotion 41).    Multi-line     codes should be used
    only when work can tte directly       Identified with two or Bore fund codes or work
    aativItIe8     and proportional   shares of coat8 are supported       by a sound basis,
    suoh aa unit, project,       or personal work plene, historical       workload factor8, a
    8aBpling Of a&u81 work, or daily diaries.           If 8 sound bMi8 18 not available,
    do not use DUlti-line       management Oode8; instead   make charge8 directly       to the
    fund Code and work activity       Involved via a single-line       management code.
    Uoowent the bar18 wed to fund multi-line           aenagement code8 on the workplan or
    other planning doowent.

          7. -Reviews.    Review all multi-line    nanagement aodes and adjust a8 needed
    at a l idywr review and M of July 31 of eaoh year.          Review multi-line
    management aode when reprogramming or other 8IgnIfioant          work load factor8
    ooour, such an new legI8latIon     or Increa8ed/reduced    progreme.    Reviews should
    conoist   of oo8paring actual work performed     and co8t8 Inourred to original
    plan8.    Following review8, make adjustments     to workplane and accounting     records
    to aanure that aaoountabIlIty     for fund8 Is In substantial     agreement with actual
    work performed.     Rake suoh adjU8tment8   within 30 day8 Of review wh8MVer
    possible but, in no case, later than yearend.
    Work plans,  equipent  use recorda, and other supporting doauments must be
    speoifio  enough to 8110~ reviewer8 to identify the ti#e spent and to conclude
    that adjustments made represent a rba8OrMblO a88uranoe that charges are proper.
     ILLIAl4 L. RICE
    7Jeput.y chief


             Page 15                                                    GAO/AFMD-W-60 Forest Service Cost Reporting
                                                   Appendix I
                                                   Forest Service ChWo           Interim        Directive
                                                   Number 36


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ID No.         35


                                                   Page 16                                                            GAO/APMD-90-50         Forest Service Cast Reporting
Apbndix     II

Comments From the Forest Service

supplementing those in the
report text appear at the
end of this appendix.                                                                14u1& IixieperWnue Sy
                                                                                     P.O. Box %090
                                                                                     w-gtal,    DC M090-6090

                                                                        Raply To:    1420
                                                                            ~gt,e:   APR S 0 1990

                             Mr. Dennis J. Duquette, Director
                             Civil Audits
                             Aocountlng and Financial ManagementDivision
                             U. S. General Aooounting Office
                             Washington, D. C. 20548
                             Dear Mr. Duquette:
                             We appreciate the opportunity   to review the draft report entitled Einancial
                                                              Not as-&&d
                                             , APMD-90-50. We have put a lot of effort Into emphasizing
                             aharge-as-worked and we appreciate having your report. The following are our
                             ooraaents and reooxxsandations:
                             The report puts considerable emphasis on reprogramming as a major factor in
                             inhibiting   charge-as-worked (CAW. Reprograuxning is related to CAWonly when
                             appropriations In a budget line item are inadequate to carryout the targets
                             set In the appropriation process or to meet unanticipated mandatory program
                             requirements. Congressional guidelines control reprogramming. It is national
                             policy to CAWand to request reprograraning using the congressional
                             guidelines.    Though we would prefer more flexibility and end-results
                             budgeting, we are working to ensure we adhere to congressional guidelines.
                             Considerable effort has been made to coranunicate reprogrmnming requirements to
                             field units.    The Forest Service Headquarters distributed a letter March 15,
                             1989) which described reprogramming guidelines and procedures. The Issue also
                             has been disaussed In detail at national budget and fiscal meetings.
                             Reprogrsaxxing associated with emphasis on CAWis a relatively    recent
                             development and It takes time to gain understanding throughout our extensive
                             field organization.    Wewill continue to work to assure all our field units
                             understand what is expected by the Congress and the Chief.
Now on p. 7.                 The last statement In the first paragraph on page 13 is unolear to us.    Also,
Now on p. El.                Item (3) In the first statement on page 14 could be improved by using
See comment 1.               examples.
                             Timeliness of allocations to field units is an Involved and sometimes lengthy
                             prooess. Timeliness also concerns us and we are taking steps to reduce the
                             amount of time from when the Appropriation Act is signed to the tlma that
                             Districts receive the budget authority.   Much of the time lag is due to
                             requirements outside Forest Servioe control; apportionment approval, Treasury
                             moving the cash to Forest Service accounts, and receiving cash from other

                                   Page 17                                 GAO/AFMD-90-60Forest Service Cost Reporting
     Appendix II
     CommentsFrom the Forest Service

Dennis J. Duquette, Director                                            2

agencies.    This is complicated by the fact that we have so many budget line
Field units are expected to develop work plans from the initial budget advice
rather than waiting for the final advice. The initial  advice reaches them
before the beginning of the fiscal year. Each unit Is expected to implement
and follow this budget direction.
In summary, we agree that there are a number of situations that may result      in
disincentives for field units to charge-as-worked and there is a need for
additional managementdirection.   The report does a good job of identifying
areas where further work is needed.

% (J.Hill)

     Page 18                                  GAO/AFMlNMMO Forest Service Cost Reporting
              Comments   km   the Forest Service

              The following is GAO'S comment on the Forest Service’s letter dated
              April 30,199O.

              1. We have added examples to clarify the report.
GAO Comment


              Page 19                              GAO/AFMD-90-50   Forest Service Cost Reporting
Appendix 111


                        Luise $3,Jordan, Assistant Director
Accounting and          Henry C. Theriault, Writer-Editor
Financial Management
Division, Washington,

                        Billie J. North, Regional Management Representative
Denver Regional         Patricia E. Cheeseboro, Evaluator-in-Charge
Office                  Larry A. Dare, Evaluator
                        William F. Wright, Evaluator
                        Cheryl A. Brand, Evaluator
                        Diane L. Sanelli, Reports Analyst
                        Paul A. Gvoth, Jr., Operations Research Analyst
                        Tammy S. Olmedo, Programmer Analyst

(S17107)                Page 20                               GAO/AFMDW50   Forest Service Cost Reporting
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