oversight

Forest Service: A Framework for Improving Accountability

Published by the Government Accountability Office on 1999-10-13.

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

                     United States General Accounting Office

GAO                  Report to the Subcommittee on Interior
                     and Related Agencies, Committee on
                     Appropriations, House of
                     Representatives

October 1999
                     FOREST SERVICE
                     A Framework for
                     Improving
                     Accountability




GAO/RCED/AIMD-00-2
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-282736

      October 13, 1999

      The Honorable Ralph Regula
      Chairman
      The Honorable Norman Dicks
      Ranking Minority Member
      Subcommittee on Interior
        and Related Agencies
      Committee on Appropriations
      House of Representatives

      As agreed with your offices, this report discusses the status of the Forest Service’s efforts to
      (1) achieve financial accountability, (2) become more accountable for its performance, and
      (3) better align its budget with its strategic goals and objectives. Appendix I provides
      information, in the form of a “desktop guide,” on individual deficiencies and on the status of
      the Forest Service’s actions to correct them.

      As requested, unless you publicly announce its contents earlier, we plan no further distribution
      of this report until 10 days after the date of this letter. At that time, we will send copies to the
      appropriate congressional committees; the Honorable Dan Glickman, Secretary of Agriculture;
      and the Honorable Mike Dombeck, Chief of the Forest Service. We will also make copies
      available to others upon request.

      Please call me at (202) 512-3841 if you or your staff have any questions about this report. Major
      contributors to this report are listed in appendix IV.




      Barry T. Hill
      Associate Director, Energy, Resources,
        and Science Issues
Executive Summary


                   The Department of Agriculture’s Forest Service, like any publicly financed
Purpose            agency, must account to the public for its use of the tax dollars
                   appropriated to it to carry out its mission. To account fully for its use of
                   these funds, the agency needs to provide accurate and timely information
                   on how much it was authorized to spend on specific programs and
                   activities, how it spent the funds, and what it accomplished with the
                   money. Currently, however, the Forest Service cannot accurately report its
                   expenditures and accomplishments, and its budgetary, financial, and
                   performance systems and data are not linked.

                   The Forest Service is taking actions to correct known problems with its
                   accounting and financial reporting, as well as with its performance-related
                   data, measurement, and reporting. However, the agency’s efforts to
                   achieve accountability will take years. Furthermore, strong leadership
                   within the Forest Service and sustained oversight by the Congress will be
                   needed to ensure that the corrective actions are completed. To help in
                   providing this oversight, the Chairman and Ranking Minority Member of
                   the Subcommittee on Interior and Related Agencies, House Committee on
                   Appropriations, asked GAO to monitor and periodically report on the
                   agency’s efforts to achieve accountability. As agreed with their offices, this
                   report discusses the status of the Forest Service’s efforts to (1) achieve
                   financial accountability, (2) become more accountable for its
                   performance, and (3) better align its budget with its strategic goals and
                   objectives.


                   Since the first audit of the Forest Service’s financial statements, which
Results in Brief   covered fiscal year 1991, Agriculture’s Inspector General has found serious
                   accounting and financial reporting weaknesses, many of which continue
                   today. For instance, the Forest Service lacks supporting records to
                   substantiate, at a detailed level, the amounts it either owes or is owed by
                   others. Additionally, the Forest Service has had significant problems
                   implementing its new accounting system, which the agency has stated is
                   key to correcting its financial management deficiencies and to attaining
                   accountability over billions of dollars in taxpayer funds and investments.
                   Furthermore, the independence afforded the agency’s autonomous field
                   structure has hampered efforts to correct accounting and financial
                   reporting weaknesses. The Forest Service has completed several actions
                   and begun others that, if successfully carried through, represent important
                   steps toward achieving financial accountability. For example, it has
                   created three new fiscal and business management positions.




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                        Executive Summary




                        Nevertheless, major barriers remain, and the Forest Service may take
                        several years to achieve financial accountability.

                        To improve the effectiveness, efficiency, and accountability of its
                        programs, the Forest Service has begun to implement a results-based
                        performance accountability system. This effort includes clarifying its
                        mission priorities and identifying its general goals. However, the agency
                        has not been able to develop (1) quantifiable objectives and long-term and
                        annual measures of its progress in achieving its broad, general goals or
                        (2) strategies to achieve its goals and objectives. As a result, (1) the
                        national forests cannot blend agencywide objectives and strategies with
                        local priorities in revising their plans, (2) funds are being allocated to
                        regions and forests on the basis of old criteria that often are not linked to
                        the agency’s new goals and objectives, and (3) line managers cannot be
                        held accountable for achieving the goals and objectives.

                        The Forest Service’s current budget structure is directly linked to the
                        agency’s resource-specific programs, which, in turn, are intended to fund
                        program-specific projects and activities in the field. However, the link
                        between the agency’s budget structure and land management activities has
                        weakened as the field offices have addressed issues or problems that are
                        not aligned with the agency’s resource-specific programs. As a result, there
                        is often no clear link between the current budget structure and the way
                        work activities are structured in the field. Although GAO believes that the
                        Forest Service’s budget structure should be revised to better link it to the
                        agency’s strategic goals and objectives, it also believes that any future
                        revisions should coincide with actions required to correct known
                        accounting and financial reporting deficiencies as well as problems with
                        performance-related data, measurement, and reporting.



Principal Findings

Barriers to Financial   The Inspector General’s February 1999 audit report on the Forest Service’s
Accountability Remain   fiscal year 1998 financial statements—a disclaimer of opinion—shows that
                        the agency remains unable to (1) reliably track major assets worth billions
                        of dollars, (2) accurately allocate revenues and costs to its programs in its
                        financial reports, and (3) accurately prepare its financial statements. The
                        report also identifies numerous financial reporting errors and major
                        internal control weaknesses. For example, the Forest Service still lacks




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Executive Summary




supporting records to substantiate, at a detailed level, the amounts it
either owes or is owed by others. Not having reliable accounts receivable
information severely impairs the agency’s ability to collect money owed it
by other agencies. Not having reliable accounts payable data impedes the
agency’s ability to readily determine the costs it has incurred and the
amounts it owes at any given point.

The Forest Service has also had significant problems implementing its new
accounting system—the Foundation Financial Information System—which
the agency has stated is key to correcting its financial management
deficiencies and to achieving financial accountability. For instance, GAO
reported in February 1999 that the three Forest Service units that were
implementing the system were unable to produce the critical budgetary
and accounting reports that track the agency’s obligations, assets,
liabilities, revenues, and costs, in part because (1) ending balances could
not be converted from the old accounting system to the new one and
(2) the old accounting system was no longer functional for these units.

Among the factors that have hampered the Forest Service’s efforts to
correct accounting and financial reporting weaknesses and to implement
the new accounting system has been the independence afforded the
agency’s autonomous field structure. According to an independent
contractor retained by the Forest Service to analyze and report on the
agency’s financial management and organization, each Forest Service unit
operates independently, whether it is executing budgets, developing
financial plans, or accounting for reimbursable agreements. The
contractor characterized the agency’s organizational structure as a
“chaotic financial environment” and stated that it creates inconsistent
practices and credibility problems.

While major barriers remain, the Forest Service has completed several
actions and begun others that, if successfully carried through, represent
important steps toward achieving financial accountability. For example, in
April 1998, the Chief of the Forest Service restructured the agency’s
management team, creating, among other things, three new fiscal and
business management positions. In addition, the agency has (1) hired
experienced staff to fill key financial management and systems positions,
including several individuals who have implemented the new accounting
system successfully at other agencies, and (2) consolidated its budgeting,
financial management, financial systems development and operations, and
related analytical and quality assurance functions into a new central office.
Together, the Forest Service’s new organizational structure and new fiscal



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                           Executive Summary




                           and business management team should help provide a nucleus around
                           which financial accountability can be built. However, the new fiscal and
                           business management team will first need to ensure that clear lines of
                           responsibility and accountability for financial management extend
                           throughout the Forest Service’s highly decentralized and autonomous
                           organizational structure.

                           The Forest Service’s goal is to implement the new accounting system
                           agencywide on October 1, 1999, and to obtain an unqualified audit opinion
                           on its fiscal year 2000 financial statements. However, given the major
                           accounting and reporting deficiencies that remain, the serious problems
                           that the agency has experienced in implementing the new system, and the
                           unresolved issue of how to ensure clear lines of responsibility and
                           accountability for financial management throughout the organization, GAO
                           believes that the Forest Service’s goal of an unqualified audit opinion on
                           its fiscal year 2000 financial statements is optimistic.


Establishing a System to   To comply with the requirements of the Government Performance and
Measure Performance Has    Results Act of 1993 (the Results Act), the Forest Service has made clear
Been Difficult             that, in keeping with its existing legislative framework, its overriding
                           mission and funding priority is to maintain and restore the health,
                           productivity, and diversity of the lands entrusted to its care to meet the
                           needs of present and future generations. It intends to limit goods and
                           services on the national forests to the types, levels, and mixes imposed by
                           considerations of land health. The Forest Service’s general
                           goals—(1) ensuring sustainable ecosystems (land health), (2) providing
                           multiple benefits for people within the capabilities of ecosystems (service
                           to people), and (3) ensuring an effective organization (organizational
                           effectiveness)—are consistent with its mission priorities.

                           Over the last several years, the Forest Service has worked at, but not
                           succeeded in, developing quantifiable objectives and long-term and annual
                           measures of its progress in achieving its mission priorities and general
                           goals. In particular, the agency has not been able to develop specific and
                           quantifiable objectives linking its broad, general goals and its long-term
                           and annual performance measures. Although the agency uses terms like
                           “healthy and diverse ecosystems,” “ecological sustainability,” “healthy
                           forests,” and “forest ecosystem vitality” to express its goals and
                           objectives, these terms may mean different things to different people, and
                           different people could use different measures to assess progress toward
                           them. In addition, measuring long-term trends in land health requires



                           Page 5                          GAO/RCED/AIMD-00-2 Forest Service Accountability
Executive Summary




accurate baseline data, but the agency does not know the condition of
many aquatic, forested, and rangeland ecosystems on its lands.

Moreover, some of the Forest Service’s annual performance measures do
not encourage progress toward its goals and objectives. For instance,
hazardous fuels, which accumulated under the Forest Service’s
decades-old policy of putting out wildfires, now support larger, often
catastrophic, wildfires, many of which threaten lives and property,
especially along the boundaries of forests (wildland/urban interfaces)
where population has grown significantly in recent years. Acres along
these interfaces are among the costliest and most difficult to treat, yet they
also pose the greatest hazards to lives and property. However, the agency’s
measure of progress in reducing hazardous fuels on the national forests
and its basis for future years’ funding—the number of acres
treated—encourages a focus on quantity without reference to difficulty or
safety. Thus, field offices have an incentive to select the easiest and least
costly rather than the most hazardous and more costly acres to treat.

The Forest Service also has not established strategies that describe how it
will achieve its goals and objectives and what operational processes and
resources will be required. For example, to address the serious forest
health problem of the increasing number of uncontrollable and often
catastrophic wildfires, the Forest Service has agreed to develop, but
currently does not have, a cohesive strategy for (1) reducing accumulated
fuels on national forests nationwide and (2) maintaining these fuels at
acceptable levels. Such a strategy, when developed, will, among other
things, help the agency to quantify its objective of ensuring healthy and
diverse forestlands and serve as a basis for establishing funding priorities
and developing more meaningful performance measures.

As the Forest Service works to develop quantifiable objectives,
implementable strategies, and measurable indicators of progress, many
forest plans are being revised or are due for revision. In addition, funds
continue to be allocated to regions and forests on the basis of old criteria
that are often not linked to the agency’s new strategic goals. And, although
the agency intends to modify its managers’ performance standards to
reflect its goals and objectives, it cannot establish clear standards for
holding these officials accountable until it develops appropriate
objectives, strategies, and measures of performance.




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                             Executive Summary




The Forest Service’s         The Forest Service is an agency in transition. Over the past decade, it has
Budget Structure Is Not      refocused the mix of its activities, shifting from producing timber and
Clearly Linked to Its Land   other goods and services toward restoring or protecting land health and
                             forest resources. Currently, it is attempting to identify where or under
Management Activities        what circumstances it should restore degraded lands through active
                             management rather than allow nature to take its course. These issues are
                             controversial and represent significant changes in the agency’s mission
                             and funding priorities and management approaches. It is, therefore,
                             important for the Forest Service to provide the Congress with a clear
                             understanding of what is being achieved with the funds that are being
                             spent. However, over time, the link between the agency’s budget structure
                             and land management activities has weakened.

                             The Forest Service’s current budget structure is directly linked to its
                             resource-specific programs, which, in turn, are intended to fund
                             program-specific projects and activities in the field. However, the link
                             between the agency’s budget structure and land management activities has
                             weakened as its districts, forests, and regions have addressed issues or
                             problems that are not aligned with its programs. For example, a decade
                             ago, the Congress could be reasonably assured that funds allocated to the
                             Forest Service’s Forest Management program for timber sales would be
                             used primarily to produce commercially valuable timber to help meet the
                             nation’s demand for wood products. Today, however, timber sales are
                             increasingly being used to restore degraded ecosystems, and
                             approximately half of the timber being removed from the national forests
                             is being removed for stewardship purposes—mostly to accomplish
                             forest-health-related objectives. As a result, funds allocated to the agency’s
                             Forest Management program for timber sales must now be split to
                             accomplish both commodity and stewardship objectives. The Forest
                             Service’s field offices must also use funds from two or more
                             appropriations or budget line items to address problems or issues that
                             exceed the scope of its resource-specific programs, such as protecting the
                             habitats of the northern spotted owl and other wide-ranging species.

                             One purpose of the Results Act is to improve the link between allocating
                             resources and achieving results with those resources. The Forest Service
                             included as a separate component in its fiscal year 2000 budget
                             justification a preliminary proposal to better link the National Forest
                             System appropriation with its performance goals and objectives. In
                             addition, in August 1999, the National Academy of Public
                             Administration—a congressionally chartered, independent, nonpartisan,
                             nonprofit organization—proposed changes to the National Forest System



                             Page 7                           GAO/RCED/AIMD-00-2 Forest Service Accountability
                  Executive Summary




                  appropriation as well as to the agency’s Wildland Fire Management
                  appropriation. As of August 1999, the Forest Service was working with its
                  appropriations subcommittees, the Department of Agriculture, and the
                  Office of Management and Budget to present a revised budget structure
                  with its fiscal year 2001 budget request.

                  GAO has previously concluded that further changes to the Forest Service’s
                  budget structure seem to be warranted to facilitate the agency’s
                  management of the 155 national forests. In addition, GAO has
                  recommended that the Forest Service’s budget structure be revised to
                  establish better links to the agency’s strategic goals and objectives.
                  However, GAO has also maintained that any future revisions should
                  coincide with actions required to correct known accounting and financial
                  reporting deficiencies as well as problems with performance-related data,
                  measurement, and reporting. As discussed in this report, major barriers to
                  financial accountability remain, and the performance measures needed to
                  gauge the Forest Service’s progress in achieving its goals and objectives
                  have not been developed.


                  GAO provided a draft of this report to the Forest Service for review and
Agency Comments   comment. The agency generally agreed with the report and said it
                  accurately and fairly presents information on the Forest Service’s efforts
                  to achieve financial accountability, become accountable for its
                  performance, and better align its budget with its strategic goals and
                  objectives. The Forest Service stated, however, that the report should
                  include some additional information on steps it has taken within the past
                  year to improve its financial accountability. In response, GAO revised the
                  draft report to mention some additional efforts that the Forest Service has
                  undertaken. The Forest Service’s comments appear in appendix III.




                  Page 8                          GAO/RCED/AIMD-00-2 Forest Service Accountability
Page 9   GAO/RCED/AIMD-00-2 Forest Service Accountability
Contents



Executive Summary                                                                                     2


Chapter 1                                                                                            12
                        How the Forest Service Is Organized                                          12
Introduction            How the Forest Service Plans                                                 13
                        Weaknesses Identified in Prior GAO Products                                  14
                        Objectives, Scope, and Methodology                                           14

Chapter 2                                                                                            17
                        Major Accounting and Reporting Deficiencies Remain                           17
Barriers to Financial   Serious Problems Impede the New Accounting System’s                          20
Accountability            Implementation
                        Current Field Structure Hampers Accountability                               21
Remain                  Corrective Measures Are Under Way                                            22
                        The Forest Service’s Accounting and Financial Reporting Has                  25
                          Been Designated as a High-Risk Area

Chapter 3                                                                                            26
                        The Requirements of the Results Act                                          26
Establishing a System   The Forest Service Has Clarified Its Mission Priorities and                  29
to Measure                Identified General Goals and Management Approaches
                        The Agency Has Not Developed Quantifiable, Measurable                        31
Performance Has           Objectives and Strategies to Achieve Them
Been Difficult          Field Offices Continue to Plan and Budget Without Quantifiable               37
                          Objectives and Strategies

Chapter 4                                                                                            42
                        How the Forest Service’s Budget Is Currently Structured                      42
The Forest Service’s    The Forest Service’s Budget Structure and Land Management                    44
Budget Structure Is       Activities Are Not Clearly Linked
                        The Forest Service Is Attempting to Link Its Budget Structure                48
Not Clearly Linked to     With Its Performance Goals and Objectives
Its Land Management
Activities
Appendixes              Appendix I: Desktop Guide to the Forest Service’s Management                 52
                          Deficiencies and Corrective Actions
                        Appendix II: The Forest Service’s Proposed Outcomes and                      58
                          High-Priority Long-Term and Annual Performance Measures for
                          Its Land Health and Service to People Objectives




                        Page 10                         GAO/RCED/AIMD-00-2 Forest Service Accountability
          Contents




          Appendix III: Comments From the Forest Service                               62
          Appendix IV: GAO Contacts and Staff Acknowledgments                          63

Tables    Table 3.1: The Forest Service’s General Goals                                30
          Table 3.2: The Forest Service’s Existing Goals, Objectives, and              33
           Proposed Outcomes and the Santiago Declaration’s Criteria
          Table 3.3: Fiscal Year 2000 Budget Allocation Criteria for Timber            38
           Sales Management
          Table 3.4: Fiscal Year 2000 Budget Allocation Criteria for                   39
           Recreation Management
          Table 4.1: The Forest Service’s Fiscal Year 1999 Budget Structure            43
           for Discretionary Appropriations
          Table 4.2: The Forest Service’s Preliminary Proposal to                      50
           Consolidate and Restructure the National Forest System
           Appropriation

Figures   Figure 1.1: The Forest Service’s Organizational Structure for                13
            Natural Resources Programs
          Figure 2.1: Location of New Fiscal and Business Management                   23
            Positions Within the Forest Service’s Organizational Structure
          Figure 3.1: Steps in the Forest Service’s Performance                        28
            Accountability Process
          Figure 4.1: Linking Three Extended Budget Line Items to Five                 47
            Performance Objectives




          Abbreviations

          CAS        Central Accounting System
          CFO        Chief Financial Officer
          FFIS       Foundation Financial Information System
          GAO        General Accounting Office
          GPRA       Government Performance and Results Act
          OMB        Office of Management and Budget
          USDA       U.S. Department of Agriculture


          Page 11                         GAO/RCED/AIMD-00-2 Forest Service Accountability
Chapter 1

Introduction


                       The Forest Service, an agency within the U.S. Department of Agriculture,
                       is one of four major federal land management agencies.1 The Forest
                       Service manages about 192 million acres of land—nearly 9 percent of the
                       nation’s total surface area and 30 percent of all federal lands. Laws guiding
                       the management of the 155 national forests, 20 national grasslands, and 17
                       national recreation areas within the National Forest System require the
                       agency to manage its lands to provide high levels of six renewable surface
                       uses—outdoor recreation, rangeland, timber, watersheds and waterflows,
                       wilderness, and wildlife and fish—to current users while sustaining
                       undiminished the lands’ ability to produce these uses for future
                       generations. In addition, the Forest Service’s guidance and regulations
                       require the agency to consider the production of nonrenewable subsurface
                       resources, such as oil, gas, and hardrock minerals, in its planning.2


                       The Forest Service, created in 1905, is a hierarchical organization whose
How the Forest         management is highly decentralized and whose managers have
Service Is Organized   considerable autonomy and discretion in interpreting and applying the
                       agency’s policies and directions. The Chief of the Forest Service heads the
                       agency and, through Agriculture’s Under Secretary for Natural Resources
                       and Environment, reports to the Secretary of Agriculture.

                       To carry out the agency’s multiple-use and sustained-yield mission, an
                       Associate Chief for Natural Resources in headquarters (the Washington
                       Office) has direct oversight of three major areas: (1) the National Forest
                       System, (2) Forest and Rangeland Research and Development, and
                       (3) State and Private Forestry. The National Forest System is composed of
                       two organizational structures—a field structure comprising 9 regional
                       offices, 123 forest offices, and about 600 district offices and a program
                       structure consisting of nine separate resource-specific programs. (See fig.
                       1.1.) Among other things, program directors for each of the nine separate
                       programs at the Forest Service’s Washington Office establish policy and
                       provide technical direction to the National Forest System’s three levels of
                       field management. Similar lines of program management exist at the
                       regional, forest, and district office levels. However, because of budgetary
                       constraints, the management of some of these programs may be combined.




                       1
                        The other three are the National Park Service, the Bureau of Land Management, and the Fish and
                       Wildlife Service, all within the Department of the Interior. Together, the four agencies manage about
                       95 percent of all federal lands.
                       2
                        Hardrock minerals include gold, silver, lead, iron, and copper.



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                                       Chapter 1
                                       Introduction




Figure 1.1: The Forest Service’s
Organizational Structure for Natural
Resources Programs                                                                        Chief




                                                                                   Associate Chief,
                                                                                  Natural Resources




                                                                 Deputy Chief,       Deputy Chief,             Deputy Chief,
                                                                 Research and          National                 State and
                                                                 Development            Forest                    Private
                                                                                       System                    Forestry




                                                                                            National Forest System programs
                                       9 regional offices
                                                                                  Engineering
                                                                                  Lands
                                                                                  Recreation, Heritage, and Wilderness Resources

                                       123 forest offices                         Minerals and Geology
                                                                                  Range Management
                                                                                  Forest Management
                                                                                  Watershed and Air Management
                                       About 600 district
                                                                                  Wildlife, Fish, and Rare Plants
                                           offices
                                                                                  Ecosystem Management




                                       Source: Forest Service.



                                       In carrying out its mission, the Forest Service follows a planning process
How the Forest                         that is largely based on laws enacted during the 1970s. This process
Service Plans                          consists of a series of steps linking national, regional, forest, and district
                                       decision-making and becomes increasingly specific as planning progresses
                                       from the national level to the forest and district levels. The process
                                       includes (1) preparing a long-term strategic plan that maps the agency’s
                                       course for the next decade and beyond; (2) developing regional guides that
                                       help link the agency’s strategic planning at the national level with forests’
                                       and districts’ planning at more local levels; (3) developing a land and
                                       resource management plan, commonly called a forest plan, for managing




                                       Page 13                                   GAO/RCED/AIMD-00-2 Forest Service Accountability
                        Chapter 1
                        Introduction




                        each forest; and (4) reaching project-level decisions for implementing
                        these plans. Forest plans blend national and regional demands with local
                        forests’ capabilities and needs and serve as a basis for developing future
                        budget proposals. Forest plans must be revised at least every 15 years.


                        In prior reports and testimonies, we have identified weaknesses and
Weaknesses Identified   deficiencies in the Forest Service’s financial data and statements,
in Prior GAO Products   performance measures, and budget structure and observed that the agency
                        cannot accurately account for its expenditures and results.3 Currently, the
                        Forest Service budgets and the Congress appropriates funds on the basis
                        of a budget structure that is not linked to the agency’s performance goals
                        and objectives. The Forest Service then allocates the funds to its field
                        offices according to criteria that are also often not linked to its goals and
                        objectives. The autonomous field offices, in turn, spend the money to
                        accomplish what they have identified as their highest priorities, which may
                        or may not be consistent with agencywide goals and objectives or with the
                        purposes for which the funds were allocated. In addition, the Forest
                        Service is unable to accurately track the cost of, and allocate revenue to,
                        its various programs and activities or to ensure that field-level data are
                        accurate. Without accurate financial data and statements, the agency is
                        unable to, among other things, accurately report its performance, monitor
                        the income and spending levels of its programs and activities, and make
                        informed decisions about future funding. Also lacking objective and
                        independently verifiable annual and long-term performance-based
                        measures to assess relevant outputs, service levels, and outcomes, the
                        Forest Service cannot hold its managers accountable for their
                        performance, and the information that the agency produces tells very little
                        about what is actually occurring on the national forests.


                        To help in providing oversight of the Forest Service’s progress toward
Objectives, Scope,      achieving accountability, the Chairman and Ranking Minority Member of
and Methodology         the Subcommittee on Interior and Related Agencies, House Committee on
                        Appropriations, asked us to monitor and periodically report on the
                        agency’s efforts to achieve both financial and performance accountability.
                        As agreed with their offices, this report discusses the status of the Forest


                        3
                         See, for example, Forest Service: Lack of Financial and Performance Accountability Has Resulted in
                        Inefficiency and Waste (GAO/T-RCED/AIMD-98-135, Mar. 26, 1998), High-Risk Series: An Update
                        (GAO/HR-99-1, Jan. 1999), Major Management Challenges and Program Risks: Department of
                        Agriculture (GAO/OCG-99-2, Jan. 1999), Forest Service Management: Little Has Changed as a Result of
                        the Fiscal Year 1995 Budget Reforms (GAO/RCED-99-2, Dec.2, 1998), and Forest Service
                        Decision-Making: A Framework for Improving Performance (GAO/RCED-97-71, Apr. 29, 1997).



                        Page 14                                    GAO/RCED/AIMD-00-2 Forest Service Accountability
Chapter 1
Introduction




Service’s efforts to (1) achieve financial accountability, (2) become more
accountable for its performance, and (3) better align its budget with its
strategic goals and objectives. Appendix I provides information, in the
form of a “desktop guide,” on individual deficiencies and on the status of
the Forest Service’s actions to correct them.

We conducted our work primarily at the Forest Service’s Washington
Office and at two national forests—the Willamette in Oregon (Region
6) and the Mark Twain in Missouri (Region 9). To obtain information on all
of the objectives, we interviewed Forest Service budget, fiscal, and
business management officials at the agency’s Washington Office. We also
interviewed forest supervisors, district managers, and other officials
responsible for managing various programs and activities at the two
national forests we visited. In addition, we interviewed the agency’s
budget team leader from Region 9 and strategic planning leader from
Region 6. We also reviewed the Forest Service’s budget justifications and
annual performance plans for fiscal years 1999 and 2000; its
September 1997 strategic plan; relevant agency reports, records,
correspondence, speeches, news releases, and other documents; and prior
GAO reports, testimonies, and workpapers.


To obtain additional information on the status of the Forest Service’s
efforts to achieve financial accountability, we reviewed relevant reports
and testimonies by the Department of Agriculture’s Office of Inspector
General, including its audit of the Forest Service’s fiscal year 1998
financial statements, and a study by a consulting firm that addressed the
agency’s financial management and organization.4 We also discussed the
Forest Service’s efforts with the agency’s Chief Financial Officer and key
members of her staff.

To address the agency’s progress in becoming more accountable for its
performance, we reviewed the requirements of the Government
Performance and Results Act of 1993, identified the various components of
a results-based performance accountability system, and obtained
information on the Forest Service’s efforts to address each component. In
addition, we compared the agency’s existing strategic objectives with its
proposed outcomes, and its proposed outcomes with internationally
recognized criteria for sustainable forest management. We also reviewed
the agency’s budget allocation criteria, its existing and proposed



4
Modernizing Financial Management at the Forest Service: Financial Management & Organizational
Analysis, Coopers & Lybrand Consulting (Mar. 18, 1998).



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Chapter 1
Introduction




performance measures, and relevant studies, including a report by a
Committee of Scientists that addressed the agency’s planning process.5

In addition, we analyzed an alternative budget structure that the Forest
Service identified in its fiscal year 2000 budget justification. We focused
our analysis on determining the extent to which the proposed changes
would better link the agency’s budget with its strategic goals and
objectives. We also reviewed a study by a natural resource policy research
and education organization that addressed the agency’s budget structure.6

We performed our work from December 1998 through August 1999 in
accordance with generally accepted government auditing standards. In
conducting our work, we did not independently verify the reliability of the
financial data provided by the Forest Service or trace the data to the
systems from which they came. Some of these systems have been included
in audits of the agency’s financial statement audits by the Department of
Agriculture’s Office of Inspector General. Since auditing the Forest
Service’s fiscal year 1991 financial statements, the Inspector General has
reported serious internal control weaknesses in various accounting
subsystems that result in unreliable accounting data. Despite these
weaknesses, we used the data because they were the only data available
and are the data that the agency uses to manage its programs.

We obtained comments on a draft of this report from the Forest Service.
The agency’s comments are presented in appendix III.




5
Sustaining the People’s Lands: Recommendations for Stewardship of the National Forests and
Grasslands into the Next Century, U.S. Department of Agriculture, Committee of Scientists,
Washington, D.C. (Mar. 15, 1999).
6
Toward Integrated Resource Management on the National Forests: Understanding Forest Service
Budget Reform, Pinchot Institute for Conservation, Washington, D.C. (Mar. 4, 1997).



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                           Since the first audit of the Forest Service’s financial statements, which
                           covered fiscal year 1991, Agriculture’s Inspector General has found serious
                           accounting and financial reporting weaknesses, many of which continue
                           today. Additionally, the Forest Service has had significant problems
                           implementing its new accounting system—the Foundation Financial
                           Information System (FFIS)—which the agency has stated is key to
                           correcting its financial management deficiencies and to attaining
                           accountability over billions of dollars in taxpayer funds and investments.
                           Furthermore, the independence afforded the agency’s autonomous field
                           structure has hampered efforts to correct accounting and financial
                           reporting weaknesses and to implement FFIS. These shortcomings mean
                           that the agency and the Congress do not have accurate financial data to
                           track the cost of programs and activities and to help make informed
                           decisions about future funding. They also raise questions about the
                           accuracy of programs’ performance measures and of certain budget data
                           drawn from the same database.

                           The Forest Service has completed several actions and begun others that, if
                           successfully carried through, represent important steps toward achieving
                           financial accountability. Nevertheless, major barriers remain, and the
                           Forest Service may take several years to achieve financial accountability.
                           Therefore, in January 1999, we designated the Forest Service’s financial
                           management as a high-risk area because of the serious and long-standing
                           accounting and financial reporting weaknesses plaguing its operations.1
                           This high-risk designation means that we will be giving sustained attention
                           to monitoring the Forest Service’s efforts to achieve financial
                           accountability.


                           The Inspector General’s February 1999 audit report on the Forest Service’s
Major Accounting and       fiscal year 1998 financial statements—a disclaimer of opinion—shows that
Reporting                  the agency remains unable to (1) reliably track major assets worth billions
Deficiencies Remain        of dollars, (2) accurately allocate revenues and costs to its programs in its
                           financial reports, and (3) accurately prepare its financial statements.
                           Specifically, the report stated that

                       •   continuing financial management deficiencies prevented the Forest
                           Service from preparing complete, reliable, and consistent financial
                           statements;



                           1
                            High-Risk Series: An Update (GAO/HR-99-1, Jan. 1999).



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•   the lack of an integrated accounting system and material weaknesses
    within the current system resulted in inaccurate and unreliable financial
    data; and
•   internal controls were not sufficient to safeguard assets or to ensure that
    field-level data were accurate.

    The Inspector General’s report identified numerous financial reporting
    errors and major internal control weaknesses that had an impact on the
    following accounts and activities:

•   The Forest Service’s reported $3 billion in Fund Balance Accounts with
    the U.S. Treasury,2 maintained by Agriculture’s National Finance Center,
    were not in balance with the amounts reported by the Treasury.3 The
    Center made a net adjustment of $535 million to balance these accounts
    for all of Agriculture, an undetermined portion of which pertained to the
    Forest Service. In reality, the Center was simply transferring the
    differences to various suspense accounts and did not research the
    differences to determine which accounts were affected. Because most
    assets, liabilities, revenues, and expenses stem from, or result in, cash
    transactions, errors in these accounts may affect the accuracy of the
    Forest Service’s financial reports, including the budget execution reports
    and other information reported to the Congress.
•   The accuracy of the reported $2.6 billion in net Property, Plant, and
    Equipment could not be determined because the Forest Service lacked
    procedures and controls for reporting real property and found
    discrepancies after most units had reportedly certified and validated their
    respective amounts of property, plant, and equipment. Additionally, the
    Forest Service did not complete physical inventories of personal property.
    Until a system of controls is put in place to accurately track the quantities,
    locations, and costs of these assets, the Congress cannot be assured that
    the Forest Service’s requests for additional funds to acquire property,
    plant, or equipment are warranted.
•   The Forest Service lacks supporting records (a subsidiary ledger system)
    to substantiate, at a detailed level, amounts the agency either owes or is
    owed by others (accounts payable and accounts receivable). Forest
    Service officials stated that when FFIS is implemented in all Forest Service
    units, the agency will have more reliable data. However, the accuracy of

    2
     The Forest Service records its budget authority in asset accounts called Fund Balance Accounts with
    the Treasury and increases or decreases these accounts as it collects or disburses funds.
    3
     For the last 8 years, the Inspector General has reported numerous material control weaknesses in the
    operations at National Finance Center. The Center processes the majority of the Forest Service’s
    financial transactions, and the control weaknesses negatively affect the reliability of the Forest
    Service’s data.



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    these accounts will be driven, to a great extent, by the reliability of the
    data entered at the field level. Not having reliable accounts receivable
    information severely impairs the Forest Service’s ability to collect money
    owed it by other agencies. Not having reliable accounts payable data
    impedes the agency’s ability to readily determine the costs it has incurred
    and the amounts it owes at any given point.
•   The Forest Service did not properly allocate $2.87 billion in reported net
    costs among the major components of the agency. This occurred because
    the team responsible for preparing the financial report (the Statement of
    Net Costs) was not trained to properly allocate revenues and costs to the
    units that generated those revenues or incurred those costs. The ability to
    properly match revenues and costs with the appropriate sources is
    especially important for the Forest Service because it conducts significant
    revenue-generating activities. Without such information, it is not possible
    to determine the extent to which taxpayers bear the costs of these
    activities. Additionally, proper cost information is necessary to assess how
    effectively and efficiently the agency has used its resources to achieve
    results.

    In addition to the above deficiencies, the Inspector General also reported
    that the Forest Service’s use of a vast and complex process to classify and
    allocate costs in its accounting system increases the risk of errors or
    irregularities and the potential for unauthorized use of appropriations or
    trust funds. According to the report, the Forest Service used at least
    269,000 management codes during fiscal year 1997, most of which were
    unique to the local levels, to distribute costs to programs, and this practice
    continued during fiscal year 1998.

    The Inspector General’s report further stated that controls were not
    adequate to ensure that the shifting of costs from one account to another
    was authorized, approved, justified, or documented. Accordingly, the
    Inspector General concluded that there was insufficient assurance that the
    shifting of costs was done in a manner consistent with appropriations law.

    Specifically, the Forest Service used a practice called
    “distribution/redistribution” to achieve or maintain specific levels of
    funding within accounts. The agency either (1) initially distributed the
    costs to accounts on the basis of the amounts budgeted rather than the
    actual costs of providing services to the programs or (2) retroactively
    changed accounting codes, object classes, and other accounting data after
    the data had been initially entered and processed to redistribute the costs
    among accounts.



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                      The practices of “charging as budgeted and not as worked” and
                      “retroactive redistribution” to achieve or maintain specific levels of
                      funding within accounts often misstate a project’s costs by understating
                      the costs to one account and overstating the costs to another account. In
                      addition, they preclude the Forest Service from providing the Congress
                      and other interested parties with meaningful, useful, and reliable
                      information on the costs of its programs and activities.


                      Successfully implementing FFIS agencywide is critical to the Forest
Serious Problems      Service’s efforts to achieve financial accountability. In reports issued since
Impede the New        January 1998, the Inspector General, an outside consultant retained by
Accounting System’s   Agriculture to independently review and assess FFIS’ management and
                      implementation, and we have identified serious problems with the
Implementation        system’s implementation.

                      In February 1998,4 for example, we reported problems with FFIS’
                      processing of data and with transferring data between FFIS and its feeder
                      systems that raised questions about FFIS’ implementation. In that report,
                      we also noted that the three Forest Service units that are implementing
                      FFIS were unable to produce the critical budgetary and accounting reports
                      that track the Forest Service’s obligations, assets, liabilities, revenues, and
                      costs, in part because (1) ending balances could not be converted from the
                      old accounting system to FFIS and (2) the old accounting system was no
                      longer functional for these units.

                      Agriculture’s outside consultant also identified numerous problems with
                      FFIS’ implementation. For example, in March 1998,5 the consultant reported
                      that the failure of the Forest Service to simplify its business processes had
                      a significant negative impact on FFIS’ implementation. One major problem
                      was the onerous process the agency used to classify and allocate costs in
                      its accounting records for work performed, which led to greater
                      operational costs. Furthermore, the process was virtually impossible to
                      perform because of its demands on computer capacity.

                      The Forest Service must correct these implementation problems before it
                      attempts to bring FFIS on-line agencywide.



                      4
                       Forest Service: Status of Progress Toward Financial Accountability (GAO/AIMD-98-84, Feb. 27, 1998).
                      5
                       Independent Assessment of USDA’s Foundation Financial Information System, Logistics Management
                      Institute (AG801R1, Mar. 1998).



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                    Another critical issue that needs to be addressed is ensuring that the
                    Forest Service has prepared and tested its Year 2000 business continuity
                    and contingency plans. Like other federal agencies, the Forest Service is
                    highly dependent on information technology to carry out its business, and
                    Year 2000-induced failures of one or more mission-critical systems may
                    have a severe impact on the agency’s ability to deliver critical services.
                    The Forest Service reported that as of April 9, 1999, all 17 of its
                    mission-critical systems were Year 2000 compliant. However, the agency
                    depends on information and data provided by other organizations,
                    including other federal agencies and state and local governments.
                    Therefore, the risk of failure is not limited to the agency’s internal
                    information systems, and one weak link anywhere in the chain of critical
                    dependency could disrupt the Forest Service’s operations. Given this
                    interdependency and risk, it is imperative that the Forest Service develop
                    continuity and contingency plans that identify, assess, manage, and
                    mitigate Year 2000 risks and help ensure the continuity of its core business
                    processes.


                    In February 1998, we reported that the Forest Service’s autonomous
Current Field       organization may hinder top management’s ability to gain the full
Structure Hampers   participation of all regional fiscal directors in efforts to achieve financial
Accountability      accountability.6 In March 1998, an independent contractor retained by the
                    Forest Service to analyze and report on the agency’s financial management
                    and organization also raised the issue of the agency’s autonomous
                    organizational structure.7 Specifically, the contractor noted that the Forest
                    Service lacked a consistent structure for financial management practices.
                    Furthermore, the contractor reported that whether the subject is
                    executing budgets, developing financial plans, accounting for
                    reimbursable agreements, or creating management codes, each unit
                    operates independently. The contractor characterized the Forest Service’s
                    organizational structure as a “chaotic financial environment” and stated
                    that it creates inconsistent practices and credibility problems.

                    The contractor recommended that the Forest Service establish a new
                    position of Deputy Chief/Chief Financial Officer at the Washington Office.
                    In addition, the contractor stated that the creation of a Chief Financial
                    Officer and a consolidated financial management organization in
                    headquarters would need to be mirrored throughout the agency’s field

                    6
                     Forest Service: Status of Progress Toward Financial Accountability (GAO/AIMD-98-84, Feb. 27, 1998).
                    7
                    Modernizing Financial Management at the Forest Service: Financial Management & Organizational
                    Analysis, Coopers & Lybrand Consulting (Mar. 18, 1998).



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                      organization. Accordingly, the contractor recommended that a Deputy
                      Regional Forester for Financial Management/Chief Financial Officer be
                      established within each region. The contractor based this recommendation
                      on the need to ensure clear lines of responsibility and accountability by
                      having a single executive within each region who is in charge of financial
                      management, including all accounting, budgeting, financial planning and
                      analysis, and strategic planning. As discussed below, the Forest Service
                      has partially implemented this recommendation.


                      While major barriers remain, the Department of Agriculture and the Forest
Corrective Measures   Service have completed several actions and begun others that, if
Are Under Way         successfully carried through, represent important steps toward achieving
                      financial accountability. For example, in April 1998, the Chief of the Forest
                      Service restructured the agency’s Washington Office management team,
                      creating three new fiscal and business management positions—a Chief
                      Operating Officer, a Chief Financial Officer, and a Deputy Chief for
                      Business Operations. Another new position—an Associate Chief for
                      Natural Resources—was created to directly oversee the Forest Service’s
                      regional, forest, and district offices, as well as the agency’s research and
                      development and state and private forestry programs and activities. Both
                      the Chief Operating Officer and the Associate Chief for Natural Resources
                      report directly to the Chief of the Forest Service. (See fig. 2.1.)




                      Page 22                                GAO/RCED/AIMD-00-2 Forest Service Accountability
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Figure 2.1: Location of New Fiscal and
Business Management Positions
Within the Forest Service’s                                                                  Chief
Organizational Structure




                                                                Chief                                             Associate
                                                               Operating                                         Chief, Natural
                                                                Officer                                           Resources




                                             Deputy Chief,   Deputy Chief,   Deputy Chief,       Deputy Chief,   Deputy Chief,    Deputy Chief,
                                                 Chief         Business       Policy and          Research         National        State and
                                               Financial      Operations      Legislation            and            Forest           Private
                                                Officer                                          Development       System           Forestry




                                                Fiscal and
                                                Accounting



                                                 Financial
                                                 Analysis



                                                 Program
                                               Development
                                                and Budget


                                                 Financial
                                                 Systems/
                                                   FFIS




                                             Source: Forest Service.




                                             In addition, Agriculture or the Forest Service took the following positive
                                             actions during or after fiscal year 1998:

                                         •   Agriculture’s Office of the Chief Financial Officer established a project
                                             management office that has only one objective—developing and carrying
                                             out a strategic plan for implementing FFIS departmentwide. This office
                                             reports directly to Agriculture’s Office of the Chief Financial Officer and




                                             Page 23                                    GAO/RCED/AIMD-00-2 Forest Service Accountability
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    should provide the focused attention and independence that is needed to
    help successfully implement the system.
•   The Forest Service has proposed reducing the number of management
    codes by more than 50 percent. The agency believes this reduction would
    simplify the tracking of expenditures and would standardize the codes
    throughout the agency.
•   The three Forest Service units that initially implemented FFIS are no longer
    allowed to redistribute costs from one account to another after the fact in
    order to achieve or maintain specific levels of funding within accounts
    (“retroactive redistribution”). Other units using the old accounting
    system have been directed to substantially curtail the use of retroactive
    distribution. The agency believes that eliminating retroactive
    redistribution will help to ensure that expenditures are charged to the
    correct accounts.
•   The Forest Service has hired experienced staff to fill key financial
    management and systems positions. Several of these newly hired
    individuals have implemented FFIS successfully at other agencies.
•   The Forest Service has consolidated its budgeting, financial management,
    financial systems development and operations, and related analytical and
    quality assurance functions into a new central office headed by the Chief
    Financial Officer.

    Furthermore, according to the Forest Service’s Chief Financial Officer, the
    agency has recently undertaken additional steps to improve its budget and
    financial processes, as well as the development of its financial statements.
    The Chief Financial Officer also stated that the Forest Service is working
    collaboratively with Agriculture’s Office of Inspector General to improve
    accountability over real and personal property.

    Together, the Forest Service’s new organizational structure and new fiscal
    and business management team should help provide (1) the leadership
    needed by the Forest Service to correct its long-standing accounting and
    reporting deficiencies and (2) a nucleus around which financial
    accountability can be built. However, the new fiscal and business
    management team will first need to ensure that clear lines of responsibility
    and accountability for financial management extend throughout the Forest
    Service’s organizational structure. Key to resolving this issue is addressing
    the agency’s highly decentralized and autonomous field office financial
    management structure. A Forest Service official told us that a decision
    about hiring chief financial officers at the regional level will be made after
    FFIS is implemented agencywide.




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                       Since 1990, we have reported at the start of each new Congress on
The Forest Service’s   government operations that we have identified as high risks because of
Accounting and         their vulnerability to waste, fraud, abuse, and mismanagement. In our
Financial Reporting    latest report,8 we designated the Forest Service’s accounting and financial
                       reporting as a new high-risk area. For us to remove the high-risk
Has Been Designated    designation, the Forest Service will need to demonstrate sustained
as a High-Risk Area    financial accountability. At a minimum, it will need to obtain an
                       unqualified opinion on its financial statements for 2 consecutive fiscal
                       years. To obtain an unqualified opinion, the Forest Service will need not
                       only to correct previously identified financial management deficiencies
                       but also to implement key accounting and financial reporting requirements
                       that became effective in fiscal year 1998.

                       The Forest Service’s goal is to implement FFIS agencywide on October 1,
                       1999, and to obtain an unqualified audit opinion on its fiscal year 2000
                       financial statements. Therefore, the earliest that we could remove the
                       high-risk designation is 2003. However, given the major accounting and
                       reporting deficiencies that remain, the serious problems that the agency
                       has experienced in implementing FFIS, and the unresolved issue of how to
                       ensure clear lines of responsibility and accountability for financial
                       management throughout the organization, we believe that the Forest
                       Service’s goal of an unqualified audit opinion on its fiscal year 2000
                       financial statements is optimistic.

                       Moreover, achieving financial accountability goes beyond receiving an
                       unqualified audit opinion. Major reforms, such as the Chief Financial
                       Officers Act (the CFO Act), focus on maintaining a strong system of internal
                       controls and systematically providing the accurate, timely, and relevant
                       financial information needed for management decision-making and
                       accountability throughout the year. Even if the Forest Service is able,
                       through its efforts, to obtain reliable year-end data but does not back up
                       its efforts through fundamental improvements in underlying internal
                       controls, financial management systems, and operations that allow for the
                       routine production of accurate, relevant, and timely data to support
                       ongoing program management and accountability, the agency will not
                       achieve the intended results of the CFO Act or meet our criteria for removal
                       from the high-risk list.




                       8
                        High-Risk Series: An Update (GAO/HR-99-1, Jan. 1999).



                       Page 25                                    GAO/RCED/AIMD-00-2 Forest Service Accountability
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Establishing a System to Measure
Performance Has Been Difficult

                      The Government Performance and Results Act of 1993 (the Results Act)
                      seeks to improve the effectiveness, efficiency, and accountability of
                      federal programs by establishing a system for agencies to set goals for
                      their programs’ performance and to measure results. To comply with the
                      act’s requirements, the Forest Service has begun to implement a
                      results-based performance accountability system, including clarifying its
                      mission priorities and identifying its general goals. However, the agency
                      has not been able to develop (1) quantifiable objectives and long-term and
                      annual performance measures to gauge its progress in achieving its broad,
                      general goals or (2) strategies to achieve its goals and objectives. As a
                      result, the national forests cannot blend agencywide objectives and
                      strategies with local priorities in revising their plans. In addition, funds are
                      being allocated to regions and forests on the basis of old criteria that are
                      often not linked to the agency’s new goals and objectives. Finally, line
                      managers cannot be held accountable for achieving the goals and
                      objectives.


                      Under the Results Act, federal agencies were required to submit strategic
The Requirements of   plans no later than September 30, 1997, to the Office of Management and
the Results Act       Budget (OMB) and the Congress. Updates of the strategic plan are required
                      at least every 3 years thereafter. The plan, covering not less than 5 years,
                      must contain (1) a comprehensive mission statement for major functions
                      and operations of the agency; (2) general and outcome-related goals; (3) a
                      description of how the agency will achieve the goals and what operational
                      processes and resources will be required; (4) a description of how the
                      goals relate to annual performance plan goals; (5) an identification of key
                      factors external to, and beyond the control of, the agency that could
                      significantly affect the achievement of the goals; and (6) a description of
                      program evaluations that the agency used in establishing and revising the
                      general goals, with a schedule for future program evaluations.

                      Annually, beginning with fiscal year 1999, agencies must submit to OMB
                      performance plans covering each program activity1 in the agency’s budget.
                      Each agency’s plan must (1) establish goals that define the level of
                      performance to be achieved by a program activity; (2) express the goals in
                      an objective, quantifiable, and measurable form unless an alternative form
                      is approved by OMB; (3) describe the operational processes and resources
                      required to achieve the goals; (4) establish performance indicators to be
                      used in measuring or assessing the relevant outputs, service levels, and

                      1
                       The term “program activity” refers to the listing of projects and activities in the appendix portion of
                      the Budget of the United States Government. Program activity structures are intended to provide a
                      meaningful representation of the operations financed by a specific budget account (appropriation).



                      Page 26                                       GAO/RCED/AIMD-00-2 Forest Service Accountability
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outcomes of each program activity; (5) provide a basis for comparing
actual program results with the established goals; and (6) describe the
means to be used to verify and validate measured values.

Annually, beginning March 31, 2000, agencies must submit program
performance reports covering performance for the previous fiscal year to
the President and the Congress. Reports beginning in 2002 must include
actual program performance results for the 3 preceding fiscal years. In
each report, an agency is to compare its performance against its goals,
summarize the findings of program evaluations completed during the fiscal
year, and describe the actions needed to address any unmet goals.

The process of implementing the Results Act within the Forest Service can
be portrayed as a number of interrelated steps. (See fig. 3.1.) A discussion
of what the agency has done to implement each step provides a
benchmark for measuring its future progress.




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                                       Establishing a System to Measure
                                       Performance Has Been Difficult




Figure 3.1: Steps in the Forest
Service’s Performance Accountability
Process                                                      Determine mission and funding priorities




                                                              Identify general, outcome-oriented goals




                                                       Develop quantifiable long-term and annual objectives
                                                              and measures to assess performance




                                                   Establish strategies to achieve priorities, goals, and objectives




                                                         Blend goals, objectives, and strategies into plans




                                                          Align annual budgets with goals and objectives




                                                       Link funding allocation criteria to goals and objectives




                                                    Tie unit and individual performance to goals and objectives




                                                    Assess and revise priorities, goals, objectives, strategies,
                                                           plans, and allocation criteria as necessary




                                       Source: GAO’s analysis of documents from the Forest Service.




                                       Page 28                                       GAO/RCED/AIMD-00-2 Forest Service Accountability
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                         Performance Has Been Difficult




                         The statutory authorities intended to guide the management of the
The Forest Service       national forests provide little direction for the Forest Service in resolving
Has Clarified Its        conflicts among competing uses on its lands. However, the requirements in
Mission Priorities and   environmental laws and their implementing regulations and judicial
                         interpretations do. Responding to these requirements and judicial
Identified General       interpretations, as well as to changing public values and concerns about
Goals and                the management of the national forests and to increased scientific
                         understanding of the functioning of ecological systems and their
Management               components, the Forest Service has, over the past 2 decades, refocused
Approaches               the mix of its activities away from producing timber and other goods and
                         services and toward restoring or protecting land health and forest
                         resources.2

                         During the past 2 years, the Forest Service has clarified its mission
                         priorities in several documents, including its September 30, 1997, strategic
                         plan3 and its first two annual performance plans4 prepared under the
                         Results Act. According to the agency, consistent with its existing
                         legislative framework, its overriding mission and funding priority is to
                         maintain and restore the health, productivity, and diversity of the lands
                         entrusted to its care to meet the needs of present and future generations. It
                         intends to limit goods and services on the national forests to the types,
                         levels, and mixes imposed by considerations of land health and ecological
                         sustainability.5 However, these priorities are still “de facto” in that they
                         have evolved over many years, responding, in part, to many laws and
                         judicial decisions, and the Congress has never explicitly accepted them or
                         acknowledged their effects on the availability of timber, recreation, and
                         other uses on the national forests.6




                         2
                          Forest Service Priorities: Evolving Mission Favors Resource Protection Over Production
                         (GAO/RCED-99-166, June 17, 1999).
                         3
                          USDA Strategic Plan 1997-2002: A Healthy and Productive Nation in Harmony With the Land, Forest
                         Service Strategic Plan, U.S. Department of Agriculture, Office of the Secretary (Sept. 30, 1997).
                         4
                           FY 1999 USDA Forest Service Annual GPRA Performance Plan, U.S. Department of Agriculture,
                         Forest Service (Feb. 4, 1998) and USDA Forest Service FY 2000 Annual Performance Plan, U.S.
                         Department of Agriculture, Forest Service (Feb. 1, 1999).
                         5
                          One definition of ecological sustainability is maintaining the composition (biological diversity of
                         plants and animals), structure (biological and physical attributes, such as large trees, unconstrained
                         rivers, and habitat patterns), and processes (including photosynthesis, water movement, and
                         disturbance cycles) of biological and ecological systems (ecosystems).
                         6
                          Forest Service Decision-Making: A Framework for Improving Performance (GAO/RCED-97-71, Apr.
                         29, 1997) and Forest Service Decision-Making: Greater Clarity Needed on Mission Priorities
                         (GAO/T-RCED-97-81, Feb. 25, 1997).



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                                  The Forest Service’s September 1997 strategic plan includes three very
                                  broad, general goals: (1) ensuring sustainable ecosystems, (2) providing
                                  multiple benefits for people within the capabilities of ecosystems, and
                                  (3) ensuring an effective organization (organizational effectiveness). In the
                                  agency’s fiscal year 2000 budget justification,7 the goal of ensuring
                                  sustainable ecosystems is also referred to as “land health,” and the goal
                                  of providing multiple benefits for people within the capabilities of
                                  ecosystems is also called “service to people.” (See table 3.1.) These goals
                                  capture the agency’s motto of “caring for the land and serving people,”
                                  are consistent with its mission priorities, and encompass all of its major
                                  functions and operations.

Table 3.1: The Forest Service’s
General Goals                     1997 strategic plan                                 Fiscal year 2000 budget justification
                                  Ensure sustainable ecosystems                       Land health
                                  Provide multiple benefits for people within         Service to people
                                  the capabilities of ecosystems
                                  Ensure organizational effectiveness                 Organizational effectiveness
                                  Source: The Forest Service’s September 1997 strategic plan and fiscal year 2000 budget
                                  justification.



                                  To achieve its goals and objectives for land health and service to people
                                  and to accommodate the requirements of the Endangered Species Act and
                                  other environmental laws, the Forest Service has turned to a
                                  science-based, ecological approach for managing its lands and resources.
                                  This approach, called ecosystem management, is designed to ensure the
                                  sustained functioning and diversity of natural systems—such as
                                  watersheds, airsheds, soils, and vegetative and animal communities—by
                                  analyzing and planning along their boundaries rather than along the
                                  boundaries of national forests. The Endangered Species Act is then used
                                  as a “fine filter” to catch and support the special needs of species that
                                  otherwise would go unmet.




                                  7
                                    FY 2000 Budget Justification for the Committee on Appropriations, U.S. Department of Agriculture,
                                  Forest Service (Feb. 1999).



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                            In March 1998, we reported that the Forest Service had not developed
The Agency Has Not          objective, verifiable accomplishment measures and criteria that focus on
Developed                   actual improvements and gauge longer-term (5- to 10-year) trends in the
Quantifiable,               condition of specific resources or attributes of environmental quality, such
                            as sediment loads in streams or the percentage of trail miles meeting a
Measurable                  specific standard.8 In December 1998, we reported that the agency’s
Objectives and              performance measures often do not adequately reflect accomplishments
                            or progress toward achieving strategic goals and objectives.9 In that
Strategies to Achieve       report, we recommended that the Forest Service revise its performance
Them                        measures to better link them to its strategic goals and objectives.

                            Over the last several years, the Forest Service has worked at, but not
                            succeeded in, developing quantifiable objectives and long-term and annual
                            measures to assess its progress in achieving its mission priorities and
                            general goals. In particular, the agency has not been able to develop a
                            cascading hierarchy, or layers of more specific and quantifiable objectives,
                            between its broad, general goals and the long-term and annual
                            performance measures that are intended to gauge its progress in achieving
                            the goals.10 It has also worked at, but not finalized, various strategies to
                            achieve its goals and objectives.


Quantifiable Long-Term      In its September 1997 strategic plan and first two annual performance
and Annual Objectives and   plans, the Forest Service identified a number of objectives under each of
Measures                    its three general goals. In its fiscal year 2000 budget justification, the
                            Forest Service aligns the goals with proposed outcomes and with criteria
                            in the 1995 “Santiago Declaration” to sustain the world’s forests.11 Table
                            3.2. identifies the agency’s existing goals and objectives, its proposed
                            outcomes, and the Santiago Declaration’s criteria. The fiscal year 2000
                            budget justification also aligns the agency’s proposed outcomes with its

                            8
                            Forest Service: Lack of Financial and Performance Accountability Has Resulted in Inefficiency and
                            Waste (GAO/T-RCED-98-135, Mar. 26, 1998).
                            9
                             Forest Service Management: Little Has Changed as a Result of the Fiscal Year 1995 Budget Reforms
                            (GAO/RCED-99-2, Dec. 2, 1998).
                            10
                             For examples of agencies that have used cascading hierarchies of goals, including the Bureau of Land
                            Management, see Performance Budgeting: Initial Experiences Under the Results Act in Linking Plans
                            With Budgets (GAO/AIMD/GGD-99-67, Apr. 12, 1999).
                            11
                             “The Santiago Declaration, Criteria and Indicators for the Conservation and Sustainable
                            Management of Temperate and Boreal Forests (The Montreal Process),” (Feb. 3, 1995). The nonlegally
                            binding agreement has been signed by the United States and 11 other countries—Argentina, Australia,
                            Canada, Chile, China, Japan, Mexico, New Zealand, the Republic of Korea, the Russian Federation, and
                            Uruguay. The Forest Service is the lead agency for implementing the criteria and indicators in the
                            United States and has committed to integrating and using them, to the extent possible, in planning,
                            budgeting, and reporting.



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existing and planned long-term and annual performance measures. (See
app. II.) An analysis of the table and the appendix helps highlight the
problems that the agency has experienced in attempting to link long-term
and annual performance measures to its general goals.




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Table 3.2: The Forest Service’s Existing Goals, Objectives, and Proposed Outcomes and the Santiago Declaration’s Criteria
Existing goals and objectives              Proposed outcomes                        The Santiago Declaration’s criteria
Ensure sustainable ecosystems (land           Ensure sustainable ecosystems (land                Ensure sustainable ecosystems (land
health)                                       health)                                            health)
• Ensure healthy and diverse forestlands      • Healthy forests                                  • Maintenance of forest ecosystem health
• Ensure healthy and diverse aquatic          • Healthy grasslands                               and vitality
ecosystems                                    • Clean water                                      • Conservation of biological diversity
• Ensure healthy and diverse rangelands       • Robust fish and wildlife populations             • Conservation and maintenance of soil
• Respond to hazardous substance sites        (improved viability)                               and water resources
• Protect threatened, endangered, and         • Clean air                                        • Maintenance of forests’ contribution to
sensitive species                             • Productive soils                                 global carbon cycles
• Develop scientific and management
information to support sustainable
ecosystem management
 • Protect natural wilderness ecosystem
values
Provide multiple benefits for people          Provide multiple benefits for people               Provide multiple benefits for people
(service to people)                           (service to people)                                (service to people)
• Provide quality recreation experiences      • Quality outdoor recreation and natural           • Maintenance of productive capacity of
• Provide for heritage resource education     settings                                           forest ecosystems
and use                                       • Improved urban environments                      • Maintenance and enhancement of
• Support improved urban environments         • Healthy rural communities                        long-term multiple socioeconomic benefits
• Support healthy and diverse rural           • Continuing availability of goods and             to meet the needs of societies
communities                                   services
• Provide for sustainable yield of wood and   • Safe public lands and facilities
forest products                               • Good neighbors
• Provide for sustainable grazing use
• Support ecologically sound minerals
production
• Develop scientific and management
information to support improved natural
resource management and use
• Provide a safe environment for the public
and employees on National Forest System
lands
• Provide safe infrastructure and access to
National Forest System lands
 • Provide for special uses and protect
National Forest System land title
Ensure organizational effectiveness           Ensure organizational effectiveness                Ensure organizational effectiveness
• Ensure a productive and diverse workforce   • Productive and diverse workforce                 • Legal, institutional, and economic
• Improve customer service                    • Improved customer service                        framework for forest conservation and
• Integrate information systems               • Integrated information systems and               sustainable management
• Improve financial management and            management processes
accountability                                • Sound financial systems and management
• Ensure an effective and efficient           • Effective and efficient administrative
administrative organization                   organization
                                              • Improved knowledge and decision-making
                                              to support management and use
                                              Source: The Forest Service’s fiscal year 2000 budget justification and annual performance plan.




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First, the Forest Service has not made clear the link between its existing
objectives, its proposed outcomes, and the Santiago Declaration’s criteria.
For instance, all three contain very similar goals relating to healthy forests,
making it difficult to distinguish (1) an objective from an outcome and an
outcome from a criterion and (2) how outcomes are linked to objectives or
how the criteria will be used to measure the objectives and/or outcomes.

Second, some proposed outcomes appear to result from other proposed
outcomes. For example, clean water, robust fish and wildlife populations,
and productive soils are the outcomes of healthy forests and grasslands,
yet they are all layered together as proposed outcomes.

Third, some proposed outcomes appear to be broad, general objectives,
and some broad, general objectives appear to be outcomes or measures of
performance. For example, one proposed “outcome” under the Forest
Service’s goal of providing multiple benefits for people is the continuing
availability of goods and services—a very broad, general objective.
Conversely, some existing “objectives” are more specific, quantifiable,
and measurable outcomes relating to the continued availability of goods
and services, such as providing a sustainable yield of wood and forest
products, providing for sustainable grazing use, and supporting
ecologically sound minerals production. In addition, these objectives are
identified as annual performance measures under the proposed outcome
of continuing the availability of goods and services. Thus, instead of a
cascading hierarchy of objectives, outcomes, and measures, a very broad,
general outcome is wedged between very similar objectives and measures
of performance.

Fourth, although the Forest Service uses terms like “healthy and diverse
ecosystems,” “ecological sustainability,” “healthy forests,” and “forest
ecosystem vitality” to express its goals and objectives, these terms may
mean different things to different people, and different people could use
different measures to assess progress toward them. For instance, the
agency has identified the objective of ensuring healthy and diverse
forestlands as an overriding priority in achieving its goal of land health.12
However, despite widespread use of the term in recent years, forest health
does not have a generally accepted definition. The Forest Service, in its
strategic plan and annual performance plans, defines forest health as the
“ecological integrity” of forested ecosystems. The agency defines
ecological integrity as a forested ecosystem’s structure, composition, and

12
   See, for example, the Report of the Forest Service, Fiscal Year 1997, U.S. Department of Agriculture
(May 1998).



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processes; ability to maintain biological and physical components,
functions, and interrelationships; and capability for self-renewal.
Nevertheless, many Forest Service staff and others with whom we have
spoken say that, because of its vagueness and subjectivity, the concept of
forest health is often difficult to use effectively.13 According to officials on
the Arapaho and Roosevelt National Forests in Colorado, the definition of
forest health as the ecological integrity of an ecosystem lacks management
objectives. Therefore, national forests in the Rocky Mountain Region
(Region 2) define forest health instead as a condition where influences on
the forest, including pests, silvicultural treatments, and timber harvesting
practices, do not threaten resource management now or in the future.
They believe that this definition is quite clear in tying management
objectives to forest health, has more meaning for the management of the
forests, and is the only way to measure whether national forests are
meeting their goals.

Fifth, to measure long-term trends in land health requires accurate
baseline data. However, the agency does not know the current condition
of many aquatic, forested, and rangeland ecosystems. For example, in its
performance plans for fiscal years 1999 and 2000, the Forest Service
acknowledges that inventories of 40 percent of the aquatic ecosystems on
its lands are inadequate to determine their condition. Similarly,
descriptions of the condition of forested ecosystems within the national
forests are generally based on estimates, and the criteria for determining
their condition and assigning priorities to needed actions have not been
developed. Without these data, it is not possible to measure the impact of
management actions on the lands and resources.

Sixth, some of the Forest Service’s annual performance measures do not
encourage progress toward its goals and objectives. For instance,
hazardous fuels, which accumulated under the Forest Service’s
decades-old policy of putting out wildfires, now support larger, often
catastrophic, wildfires, many of which threaten lives and property,
especially along the boundaries of forests (wildland/urban interfaces)
where population has grown significantly in recent years.14 Acres along
these interfaces are among the costliest and most difficult to treat, yet they
also pose the greatest hazards to lives and property. However, the agency’s
measure of progress in reducing hazardous fuels on the national forests


13
 Western National Forests: A Cohesive Strategy Is Needed to Address Catastrophic Wildfire Threats
(GAO/RCED-99-65, Apr. 2, 1999).
14
 Western National Forests: A Cohesive Strategy Is Needed to Address Catastrophic Wildfire Threats
(GAO/RCED-99-65, Apr. 2, 1999).



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                              and its basis for future years’ funding—the number of acres
                              treated—encourages a focus on quantity without reference to difficulty or
                              safety. Thus, field offices have an incentive to select the easiest and least
                              costly rather than the most hazardous and more costly acres to treat.


Strategies to Achieve Goals   To implement its stated goals and objectives and measure its performance,
and Objectives                the Forest Service will also need to establish strategies that describe how
                              it will achieve its goals and objectives and what operational processes and
                              resources will be required. In particular, many types of active
                              management—such as timber sales on lands in the Pacific Northwest
                              inhabited by the northern spotted owl and other old-growth-dependent
                              species—have threatened rather than contributed to the achievement of
                              ecological goals over the past few decades. Therefore, the agency will
                              need to identify where or under what circumstances it should intervene to
                              restore or protect the health of ecosystems rather than allow nature to
                              take its course.15

                              In March 1998, the Chief of the Forest Service identified a natural resource
                              agenda for the next century.16 The agenda identifies four areas of
                              emphasis: watershed health and restoration, sustainable forest
                              management, the national forest road system, and recreation. Among other
                              things, it (1) establishes watershed health and restoration as the overriding
                              priority and/or concern in planning for and implementing resource
                              management actions, (2) temporarily suspends new road construction into
                              most roadless areas until the Forest Service can develop a long-term forest
                              roads policy, and (3) commits the agency to providing superior customer
                              service and to ensuring that the rapid growth of recreation on the national
                              forests does not compromise the long-term health of the lands.

                              Although not directly linked to the Results Act, the agenda is intended to
                              start a gradual unfolding of a national purpose for the agency, set the
                              agency’s priorities, and give strategic focus to its programs. However,
                              much work remains to translate the agenda into implementable strategies.
                              For example, to address the serious forest health problem of the
                              increasing number of uncontrollable and often catastrophic wildfires, the
                              Forest Service has agreed to develop, but currently does not have, a


                              15
                               Review of Proposed Legislation to Reform Laws Governing Federal Forest Management in the United
                              States, Testimony by Dr. K. Norman Johnson before the Subcommittee on Forests and Public Land
                              Management, Committee on Energy and Natural Resources, U.S. Senate (Feb. 25, 1997).
                              16
                               A Gradual Unfolding of a National Purpose: A Natural Resource Agenda for the 21st Century, Speech
                              before Forest Service Employees, Chief of the Forest Service (Mar. 2, 1998).



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                         cohesive strategy for (1) reducing accumulated fuels on national forests
                         nationwide and (2) maintaining these fuels at acceptable levels.17 Such a
                         strategy, when developed, will, among other things, help the agency to
                         quantify its objective of ensuring healthy and diverse forestlands and serve
                         as a basis for establishing funding priorities and developing more
                         meaningful performance measures.


                         As the Forest Service works to develop quantifiable objectives,
Field Offices Continue   implementable strategies, and measurable indicators of progress, many
to Plan and Budget       forest plans are being revised or are due for revision. In addition, funds
Without Quantifiable     continue to be allocated to regions and forests on the basis of old criteria
                         that are often not linked to the agency’s new strategic goals. Finally,
Objectives and           although the agency intends to modify its managers’ performance
Strategies               standards to reflect its goals and objectives, it cannot establish clear
                         standards for holding these officials accountable until it develops
                         appropriate objectives, strategies, and measures of progress.


Forest Plans Are Being   The last of the 123 forest plans covering all 155 forests in the National
Revised                  Forest System was approved in 1995. Twelve of the forest plans—costing
                         an estimated $3 million each, or a total of $36 million—have already been
                         revised, and 20 more plans—costing another $60 million—are scheduled
                         for completion in 1999 and 2000. However, the Forest Service has not
                         determined how or if the national forests will blend agencywide objectives
                         and strategies with local priorities in revising their plans.

                         The approach taken by Interior’s National Park Service suggests some
                         positive insights for the Forest Service in linking plans to results.18 The
                         agency already requires the 376 separate units in the National Park System
                         to develop strategic plans to address applicable agencywide goals, as well
                         as goals specific to each unit’s unique legislative and operating
                         environments. Both the agency and individual parks and programs have
                         prepared strategic and annual performance plans with measurable
                         outcome-related goals.




                         17
                          Western National Forests: Status of Forest Service’s Efforts to Reduce Catastrophic Wildfire Threats
                         (GAO/T-RCED-99-241, June 29, 1999).
                         18
                          National Park Service: Efforts to Link Resources to Results Suggest Insights for Other Agencies
                         (GAO/AIMD-98-113, Apr. 10, 1998).



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Old Budget Allocation                  Since fiscal year 1996, the Forest Service has used criteria to allocate
Criteria Are Being Used                appropriated funds to its field offices. However, the criteria used by the
                                       agency often are not linked to its performance-based goals and objectives.

                                       As the Forest Service noted in its fiscal year 2000 budget justification, a
                                       criteria-based approach for allocating funds (1) improves the objectivity
                                       and rationality of the budget as a process for establishing policy and
                                       program priorities and (2) establishes a visible and rational basis for
                                       allocating resources. According to the agency, it assigns annual funding to
                                       its field offices on the basis of their ability to achieve agencywide goals
                                       and objectives. However, the Washington Office’s criteria for allocating
                                       funds to the field offices continue to be linked primarily to
                                       resource-specific programs and activities, such as timber sales and
                                       controlled fires, rather than to goals and objectives, which increasingly
                                       require that these programs and activities be integrated to achieve broader
                                       stewardship objectives, such as reducing the risk of uncontrollable
                                       wildfires.19

                                       For instance, about half of the funding for timber sales in fiscal year 2000
                                       will be used to support the agency’s land health mission through activities
                                       designed to restore or protect the ecological integrity of forested
                                       ecosystems. However, all three of the budget criteria for allocating the
                                       $197 million requested to manage timber sales in fiscal year 2000 relate to
                                       the cost-effectiveness of preparing and administering the sales, not to
                                       restoring or protecting forested ecosystems. (See table 3.3.)

Table 3.3: Fiscal Year 2000 Budget
Allocation Criteria for Timber Sales   Criterion                                                                                 Weight
Management                             Amount of green volume that could be
                                       produced at current service level                                                      50 percent
                                       Amount of green timber that could be
                                       produced with unlimited funding                                                        25 percent
                                       3-year average of green timber offered                                                 25 percent
                                       Source: Forest Service.



                                       Similarly, under its goal of service to people, the Forest Service has
                                       singled out recreation for special emphasis and funding, and the Chief has
                                       committed the agency to providing superior customer service and quality
                                       settings and experiences. However, all five of the budget criteria for

                                       19
                                        Forest Service Management: Little Has Changed as a Result of the Fiscal Year 1995 Budget Reforms
                                       (GAO/RCED-99-2, Dec. 2, 1998) and Western National Forests: A Cohesive Strategy Is Needed to
                                       Address Catastrophic Wildfire Threats (GAO/RCED-99-65, Apr. 2, 1999).



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                                     allocating the $145 million requested for recreation management in fiscal
                                     year 2000 relate solely to the quantity rather than the quality of
                                     recreational experiences on the national forests. (See table 3.4.)

Table 3.4: Fiscal Year 2000 Budget
Allocation Criteria for Recreation   Criterion                                                                                     Weight
Management                           Recreation use (in millions of visitor days)                                              31 percent
                                     Developed site capacity (in persons at one
                                     time)                                                                                     30 percent
                                     Acres of nonwilderness national forests and
                                     grasslands                                                                                18 percent
                                     Existing miles of nonwilderness trails                                                    12 percent
                                     Number of special use permits (for ski
                                     areas, resort lodges, marinas, guide
                                     services, private recreational cabins, etc.)                                               9 percent
                                     Source: Forest Service.



                                     Basing the allocation of funds for recreation management solely on the
                                     quantity rather than the quality of recreational experiences on the national
                                     forests could work counter to the agency’s commitment to providing
                                     superior customer service and quality settings and experiences and could
                                     give forests an incentive to maintain substandard facilities and sites. For
                                     example, on the Mark Twain National Forest in Missouri, we visited one
                                     campground with numerous substandard facilities, including a water and
                                     sewer system that posed potential health and safety hazards. Another
                                     campground on the forest was not only substandard but also clearly
                                     inferior to other federal, state, local, and private campgrounds in the
                                     immediate vicinity. However, the forest’s future years’ funding for
                                     developed facilities and sites is based primarily on developed site capacity
                                     and the total number of visitor days rather than the quality of the sites and
                                     the recreational experience. Therefore, the forest is reluctant to close the
                                     campgrounds or turn their management over to another federal or
                                     nonfederal entity for fear that its future years’ funding could be reduced.

                                     According to the National Academy of Public Administration,20 using a
                                     criteria-based approach for allocating funds does not result in budgets that
                                     reflect the Forest Service’s changing priorities, nor does it allow the
                                     agency to hold field organizations and employees fully accountable for



                                     20
                                      The National Academy of Public Administration is an independent, nonpartisan, nonprofit
                                     organization chartered by the Congress to help federal, state, and local governments improve their
                                     performance.



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                        expenditures or performance.21 The Academy observed that distributing
                        budget resources on the basis of allocation criteria “is a poor substitute
                        for making hard choices among alternatives given limited resources.” The
                        Academy recommended replacing the Forest Service’s criteria-based
                        approach with one based on the agency’s strategic plan and the level of
                        resources needed to accomplish stated goals and objectives.


Managers’ Performance   Integrating human resource management activities into an agency’s
Cannot Be Tied to       organizational mission rather than treating the activities as isolated
Strategic Goals and     support functions can improve the implementation of performance-based
                        management.22 This sort of integration is particularly important in a highly
Objectives              decentralized and autonomous organization like the Forest Service and
                        may include tying individual performance management, career
                        development programs, and pay and promotion standards to the agency’s
                        goals and objectives.

                        According to the Forest Service, it intends to link accountability for
                        achieving its goals and objectives to the performance of individuals. Key
                        performance measures and indicators will become part of the standards
                        used to evaluate their annual performance. Toward this end, the agency
                        has modified the performance standards for some of its managers to
                        establish a link to its goals and objectives. The agency is also developing a
                        communication plan for explaining the scope, approach, and importance
                        of performance accountability to its employees and customers.

                        However, without quantifiable objectives, implementable strategies, and
                        measurable indicators of progress, Forest Service officials cannot be held
                        accountable for their performance. For instance, since the agency has not
                        reached agreement on a definition of forest health, activities needed to
                        achieve one definition of forest health, such as tree stand conditions,
                        might conflict with activities needed to achieve another definition of forest
                        health, such as the ecological integrity of forested ecosystems. Numerous
                        administrative appeals and judicial actions have been filed by
                        environmental groups out of concern that efforts to improve the health of
                        tree stands—which would be implemented, in part, through timber
                        harvesting—might exacerbate problems affecting species, habitat, or



                        21
                         Restoring Managerial Accountability to the United States Forest Service, Report by a Panel of the
                        National Academy of Public Administration for the United States Forest Service (Aug. 1999).
                        22
                         Transforming the Civil Service: Building the Workforce of the Future, Results of a GAO-Sponsored
                        Symposium (GAO/GGD-96-35, Dec. 20, 1995).



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watersheds. Thus, depending on the operative definition of forest health, a
manager could be rewarded or punished for the same action.

In addition, some of the Forest Service’s annual performance measures do
not adequately reflect accomplishments or progress toward achieving the
agency’s goals and objectives. For instance, if managers are held
accountable for meeting the agency’s acreage targets for reducing
hazardous fuels, then they will continue to focus on areas where the costs
of reducing fuels are low so that they can reduce fuels on more acres,
rather than on those areas with the highest fire hazards, including
especially the wildland/urban interfaces.




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Chapter 4

The Forest Service’s Budget Structure Is Not
Clearly Linked to Its Land Management
Activities
                       As discussed in chapter 3, the Forest Service is (1) refocusing the mix of
                       its activities, shifting from producing timber and other goods and services
                       toward restoring or protecting land health and forest resources, and
                       (2) attempting to identify where or under what circumstances it should
                       restore degraded lands through active management rather than allow
                       nature to take its course. These issues are controversial and represent
                       significant changes in the agency’s mission and funding priorities and
                       management approaches. It is, therefore, important for the Forest Service
                       to provide the Congress with a clear understanding of what is being
                       achieved with the funds that are being spent. However, over time, the link
                       between the agency’s budget structure and land management activities has
                       weakened.

                       As of August 1999, the Forest Service was working with its appropriations
                       subcommittees, the Department of Agriculture, and OMB to present a
                       revised budget structure with its fiscal year 2001 budget request. However,
                       although we believe that the Forest Service’s budget structure should be
                       revised to better link it to the agency’s strategic goals and objectives, we
                       also believe that any future revisions should coincide with actions
                       required to correct known accounting and financial reporting deficiencies
                       as well as problems with performance-related data, measurement, and
                       reporting. As discussed in this report, major barriers to financial
                       accountability remain and the performance measures needed to gauge the
                       Forest Service’s progress in achieving its goals and objectives have not
                       been developed.


                       Each year the President’s budget proposes and the Congress appropriates
How the Forest         moneys to fund the Forest Service’s programs and activities as part of the
Service’s Budget Is    appropriations act for the Department of the Interior and related agencies.
Currently Structured   For fiscal year 1999, the agency’s budget included 10 discretionary
                       appropriations (budget accounts). In committee reports, the House and
                       Senate Committees on Appropriations allocated funds within 5 of the
                       Forest Service’s 10 discretionary appropriations to 21 “budget line items“
                       and 34 “extended budget line items.”1 (See table 4.1.) These budget line
                       items and extended budget line items are intended to provide a meaningful
                       representation of the operations financed by the five appropriations.
                       Within the agency’s largest discretionary appropriation—National Forest
                       System—budget line items and extended budget line items are generally

                       1
                        Among the four major federal land management agencies, budget line items and extended budget line
                       items are unique to the Forest Service. For the Bureau of Land Management, the National Park Service,
                       and the Fish and Wildlife Service, budget line items and extended budget line items are referred to as
                       program activities and subactivities, respectively, in the agencies’ respective budget documents.



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                                          used to fund the system’s nine resource-specific programs identified in
                                          figure 1.1.


Table 4.1: The Forest Service’s Fiscal Year 1999 Budget Structure for Discretionary Appropriations
Appropriation (budget account)                                  Budget line item/extended budget line item
National Forest System                                          Land management planning
                                                                Inventory and monitoring
                                                                Recreation use
                                                                     • Recreation management
                                                                     • Wilderness management
                                                                     • Heritage resources
                                                                Wildlife and fisheries habitat management
                                                                     • Wildlife habitat management
                                                                     • Inland fisheries habitat management
                                                                     • Anadromous fisheries habitat management
                                                                     • Threatened, endangered, and sensitive
                                                                        species habitat management
                                                                Rangeland management
                                                                     • Grazing management
                                                                     • Range vegetation management
                                                                Forestland management
                                                                     • Timber sales management
                                                                     • Forestland vegetation management
                                                                Soil, water, and air management
                                                                     • Soil, water, and air operations
                                                                     • Watershed improvements
                                                                Minerals and geology management
                                                                Landownership management
                                                                     • Real estate management
                                                                     • Land line location
                                                                Infrastructure management
                                                                     • Facility maintenance (nonrecreation)
                                                                     • Facility maintenance (recreation)
                                                                     • Trail maintenance
                                                                Law enforcement operations
                                                                General administration
State and Private Forestry                                      Forest health management
                                                                     • Federal lands
                                                                     • Cooperative lands
                                                                                                                      (continued)


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Appropriation (budget account)                                          Budget line item/extended budget line item
                                                                        Cooperative fire protection
                                                                              • State fire assistance
                                                                              • Volunteer fire assistance
                                                                        Cooperative forestry
                                                                              • Forest stewardship
                                                                              • Stewardship incentives program
                                                                              • Forest legacy program
                                                                              • Economic action program
                                                                              • Pacific Northwest assistance programs
                                                                              • Urban and community forestry
Forest and Rangeland Research                                           None
Wildland Fire Management                                                Preparedness
                                                                        Operations
Reconstruction and Construction                                         Facilities
                                                                              • Research
                                                                              • Fire, administrative, and other
                                                                              • Recreation
                                                                        Roads and trails
                                                                              • Roads reconstruction and construction
                                                                              • Roads maintenance and decommissioning
                                                                              • Trails reconstruction and construction
Land Acquisition—Land and Water Conservation Fund                       Acquisition management
                                                                        Land purchase
Acquisition of lands for national forests—special acts                  None
Acquisition of lands to complete exchanges                              None
Range Betterment Fund                                                   None
Gifts, donations, and bequests—Forest Research                          None

                                               Source: The Forest Service’s fiscal year 2000 budget justification (explanatory notes).




                                               One purpose of the Results Act is to improve the link between allocating
The Forest Service’s                           resources and achieving results with those resources. However, over time,
Budget Structure and                           the link between the Forest Service’s budget structure and land
Land Management                                management activities has weakened. This weakening occurs when the
                                               Forest Service’s regions, forests, and districts either (1) disaggregate funds
Activities Are Not                             within a budget line item or extended budget line item to accomplish
Clearly Linked                                 multiple objectives or (2) consolidate funds from two or more




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appropriations and/or aggregate funds from various budget line items and
extended budget line items within an appropriation to address problems
or issues whose scope exceeds that of individual resource-specific
programs.2

The Forest Service’s current budget structure was developed over time to
respond to specific needs. Budget line items and extended budget line
items are directly linked to the agency’s resource-specific programs,
which, in turn, are intended to fund program-specific projects and
activities in the field. While the Forest Service’s needs have changed, its
budget and program structures have not.

For example, a decade ago, the Congress could be reasonably assured that
funds allocated to the Forest Service’s Forest Management program for
timber sales would be used primarily to produce commercially valuable
timber to help meet the nation’s demand for wood products. Today,
however, timber sales are increasingly being used to restore degraded
ecosystems, and approximately half of the timber being removed from the
national forests is being removed for stewardship purposes—mostly to
accomplish forest-health-related objectives.3 For instance, most of the
trees that need to be removed to reduce accumulated fuels and lower the
risk of catastrophic fires are small in diameter and have little or no
commercial value.4 As a result, funds allocated to the agency’s Forest
Management program for timber sales must now be disaggregated to
accomplish both commodity and stewardship objectives.

Conversely, the Forest Service’s regions, forests, and districts must
consolidate funds from two or more appropriations and/or aggregate funds
from various budget line items and extended budget line items within an
appropriation to address problems or issues that cut across the
boundaries of resource-specific programs. These problems and issues


2
 The Results Act permits agencies to aggregate, disaggregate, or consolidate the program activities in
their budgets (budget line items and extended budget line items) so that the activities are aligned with
the goals presented in the performance plans. Aggregation combines program activities within one of
an agency’s budget accounts (appropriations). Disaggregation breaks a single program activity in one
budget account into two or more activities. Consolidation combines some or all of the program
activities in two separate budget accounts to form a single program activity that appears in the
performance plan. See Agencies’ Annual Performance Plans Under the Results Act: An Assessment
Guide to Facilitate Congressional Decisionmaking, Version 1, (GAO/GGD/AIMD-10.1.18, Feb. 1998).
3
 Forest Service: Amount of Timber Offered, Sold, and Harvested, and Timber Sales Outlays, Fiscal
Years 1992 Through 1997 (GAO/RCED-99-174, June 15, 1999) and Forest Service Management: Little
Has Changed as a Result of the Fiscal Year 1995 Budget Reforms (GAO/RCED-99-2, Dec. 2, 1998).
4
 Western National Forests: A Cohesive Strategy Is Needed to Address Catastrophic Wildfire Threats
(GAO/RCED-99-65, Apr. 2, 1999).



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include protecting the habitats of the northern spotted owl and other
wide-ranging species,5 reducing the growing threat of catastrophic
wildfires,6 mitigating sediment levels in streams to ensure safe drinking
water,7 and preventing and suppressing damaging insect and disease
infestations.

For example, the agency has agreed to develop a cohesive strategy to
address the growing threat of catastrophic wildfires in the interior West.
This strategy will involve most, if not all, of the 91 national forests in the
region.8 According to the Forest Service, reducing this threat will require
“a full range of tools,” including timber sales, thinning, watershed
improvement projects, wildlife habitat treatments, prescribed fires, and
mechanical treatments and will involve staff representing programs in fire
management, forest health, forest management, watersheds, fire research
and development, and wildlife and fish management. Such a strategy must
consolidate funds from at least four discretionary appropriations—the
National Forest System, which funds the national forests; State and Private
Forestry, which funds special grants to communities at risk of wildfire;
Forest and Rangeland Research, which funds fire-related research; and
Wildland Fire Management, which funds programs for reducing hazardous
fuels. Moreover, within the National Forest System appropriation, the
strategy will need to aggregate funds from many budget line items,
including those that support programs responsible for timber, wildlife and
fish, recreation, and water and air quality.9

The lack of a clear link between the Forest Service’s current budget
structure and its performance goals and objectives is exemplified by the
effort of the agency’s Washington Office to link or crosswalk 3 of its 34
extended budget line items to 5 of its 23 performance objectives. (See fig.
4.1.) For example, for every dollar allocated for Forest Stewardship, the
Forest Service estimates that $0.05 will be spent to ensure healthy and


5
 Ecosystem Planning: Northwest Forest and Interior Columbia River Basin Plans Demonstrate
Improvements in Land-Use Planning (GAO/RCED-99-64, May 26, 1999).
6
 Western National Forests: A Cohesive Strategy Is Needed to Address Catastrophic Wildfire Threats
(GAO/RCED-99-65, Apr. 2, 1999).
7
 Oregon Watersheds: Many Activities Contribute to Increased Turbidity During Large Storms
(GAO/RCED-98-220, July 29, 1998).
8
 Western National Forests: Status of Forest Service’s Efforts to Reduce Catastrophic Wildfire Threats
(GAO/T-RCED-99-241, June 29, 1999).
9
 Western National Forests: Status of Forest Service’s Efforts to Reduce Catastrophic Wildfire Threats
(GAO/T-RCED-99-241, June 29, 1999).




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                                        diverse aquatic ecosystems, $0.60 will be spent to ensure healthy and
                                        diverse forestlands, $0.05 will be spent to provide quality recreational
                                        experiences, and $0.30 will be spent to provide for a sustainable yield of
                                        wood and forest products.


Figure 4.1: Linking Three Extended
Budget Line Items to Five Performance                                                                         Performance objective
                                        Appropriation/extended budget line item
Objectives
                                                                                                 5%             Ensure healthy and
                                        National Forest System                                                   diverse aquatic
                                                                                                                   ecosystems
                                           • Wildlife Habitat Management
                                                                                                60%
                                           • Timber Sales Management
                                                                                             Aggregation
                                                                                                54%
                                                                                                                Ensure healthy and
                                                                                                                diverse forestlands
                                        State and Private Forestry                              60%
                                           • Forest Stewardship


                                                                                                20%
                                                                                                                Ensure healthy and
                                                                                            Disaggregation      diverse rangelands



                                                                                               20%
                                                                                                                  Provide quality
                                                                                                5%                 recreational
                                                                                                                   experiences




                                                                                               46%
                                                                                                                   Provide for
                                                                                            Consolidation
                                                                                                                sustainable yield of
                                                                                                                 wood and forest
                                                                                                30%
                                                                                                                     products




                                        Source: GAO’s analysis of Forest Service data.




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                         The link between the Forest Service’s current budget structure and its
                         performance goals and objectives becomes even less clear and more
                         complex as more appropriations, budget line items, and extended budget
                         line items are crosswalked to more performance objectives. Moreover, the
                         Forest Service’s regions, forests, and districts currently have no way to
                         track or report how actual spending compares with planned spending by
                         performance goal and objective. Faced with a similar situation, the
                         National Park Service designed an entirely separate information system to
                         report each park’s estimates of spending by performance goal and
                         objective.10 However, where such record-keeping is simply informational
                         and not a matter of fund control, the accuracy and completeness of the
                         information could come into question, according to the Pinchot Institute.11



                         Ultimately, any changes to the Forest Service’s budget structure must be
The Forest Service Is    cleared by OMB and will result from negotiations between the agency and
Attempting to Link Its   its appropriations subcommittees. All the parties have indicated their
Budget Structure With    willingness to better link the Forest Service’s budget to its performance
                         goals and objectives.
Its Performance Goals
and Objectives           In its circular on the Results Act (A-11), OMB encourages agencies to
                         consider changes to their budget account structure that would “lead to
                         more thematic or functional presentations of both budget and
                         performance information, thereby enhancing the understanding of
                         programs and measures of performance.” According to OMB, current
                         differences between the program activities structure in an agency’s budget
                         and the program activities structure in its performance plans should
                         eventually diminish as the agency modifies either its budget structure or
                         its performance goals and objectives.

                         In its report on the fiscal year 2000 appropriations for the Department of
                         the Interior and related agencies (S. Rep. No. 106-99), the Senate
                         Committee on Appropriations stated that the Forest Service’s current
                         budget structure “does not accurately reflect current programs and does
                         not provide an adequate linkage to a performance measurement process
                         that will improve accountability and performance.” The Committee
                         believes that it is important for the Forest Service to present a revised

                         10
                          National Park Service: Efforts to Link Resources to Results Suggest Insights for Other Agencies
                         (GAO/AIMD-98-113, Apr. 10, 1998).
                         11
                          “Toward Integrated Resource Management on the National Forests: Understanding Forest Service
                         Budget Reform,” Pinchot Institute for Conservation, Washington, D.C. (Mar. 4, 1997.)



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budget structure with its fiscal year 2001 budget request that “reflects the
agency mission; provides a strong linkage to the Government Performance
and Results Act strategic goals; incorporates annual performance
measures; and improves overall accountability.”

According to the Forest Service, the annual performance plans it prepares
under the Results Act (see ch. 3) are intended to be the basic management
tool for directing resources and budgets to programs and activities that
move the agency toward accomplishing its long-term goals and outcomes.
In its fiscal year 2000 budget justification, the agency recognizes the need
to link its budget structure and accounting information with its
performance information to ensure accountability and improve
management.

In its report on the fiscal year 1999 appropriations for the Department of
the Interior and related agencies (H.R. Rep. No. 105-609), the House
Committee on Appropriations directed the Forest Service to contract with
the National Academy of Public Administration to assess the restructuring
of the Forest Service’s budget. In the interim, the Forest Service included
as a separate component in its fiscal year 2000 budget justification a
preliminary proposal to change its budget structure to one that it believes
is better linked to its proposed objectives. The proposed changes were
confined to 2 of the agency’s 10 discretionary
appropriations—Reconstruction and Construction and the National Forest
System. (See table 4.1.) For fiscal year 2000, the Forest Service proposed,
and the Committees accepted, a new appropriation—ultimately titled
Reconstruction and Maintenance—to consolidate and restructure (1) the
Reconstruction and Construction appropriation and (2) the infrastructure
management budget line item and extended budget line items within the
National Forest System appropriation. The Forest Service also presented a
preliminary proposal to replace the remaining 11 budget line items and 15
extended budget line items within the National Forest System
appropriation with 4 budget line items and 7 extended budget line items.
(See table 4.2.)




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Table 4.2: The Forest Service’s
Preliminary Proposal to Consolidate   Budget line items                                    Extended budget line items
and Restructure the National Forest   Forest and rangeland health                          None
System Appropriation
                                      Fish and wildlife conservation                       None
                                      Conservation of soil, water, and air resources None
                                      Public benefits                                      Recreation use management
                                                                                           Grazing use management
                                                                                           Timber sales management
                                                                                           Minerals and geology management
                                                                                           Landownership management
                                                                                           Law enforcement operations
                                                                                           Planning, inventory, and monitoring
                                      Source: The Forest Service’s fiscal year 2000 budget justification.



                                      The Forest Service’s preliminary proposal to revise its budget structure
                                      would have better linked the National Forest System appropriation with
                                      the performance goals and objectives in the agency’s September 1997
                                      strategic plan and first two annual performance plans prepared under the
                                      Results Act.

                                      The Committees did not accept the Forest Service’s preliminary proposal
                                      to make further changes to the National Forest System appropriation,
                                      choosing instead to await the results of the study by the National Academy
                                      of Public Administration. In its August 1999 report, the Academy proposed
                                      changes to the National Forest System appropriation as well as to the
                                      agency’s Wildland Fire Management appropriation.12 As of August 1999,
                                      the Forest Service was working with its appropriations subcommittees,
                                      the Department of Agriculture, and OMB to present a revised budget
                                      structure with its fiscal year 2001 budget request.

                                      In a December 1998 report on Forest Service management,13 we concluded
                                      that further changes to the Forest Service’s budget structure seemed to be
                                      warranted to facilitate the agency’s management of the 155 national
                                      forests, and we recommended that the agency’s budget structure be
                                      revised to establish better links to the Forest Service’s strategic goals and
                                      objectives. However, we also maintained that any future revisions should
                                      coincide with actions required to correct known accounting and financial
                                      reporting deficiencies as well as problems with performance-related data,
                                      measurement, and reporting. As discussed in this report, major barriers to

                                      12
                                       Restoring Managerial Accountability to the United States Forest Service, Report by a Panel of the
                                      National Academy of Public Administration for the United States Forest Service (Aug. 1999).
                                      13
                                       Forest Service Management: Little Has Changed as a Result of the Fiscal Year 1995 Budget Reforms
                                      (GAO/RCED-99-2, Dec. 2, 1998).



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financial accountability remain, and the performance measures needed to
gauge the Forest Service’s progress in achieving its goals and objectives
have not been developed.




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Management Deficiencies and Corrective
Actions
                              According to the February 1999 report of the Department of Agriculture’s
Accounting                    Inspector General on his audit of the Forest Service’s fiscal year 1998
Weaknesses                    financial statements—a disclaimer of opinion—the Forest Service remains
                              unable to reliably keep track of major assets worth billions of dollars,
                              cannot accurately allocate revenues and costs to its programs, and made
                              significant errors in preparing its financial statements. Specifically, the
                              report stated that continuing financial management deficiencies prevented
                              the Forest Service from preparing complete, reliable, and consistent
                              financial statements. In addition, the agency lacks an integrated
                              accounting system, and problems within the current system resulted in
                              inaccurate and unreliable financial data. Finally, internal controls were not
                              sufficient to safeguard assets or to ensure that field-level data were
                              accurate.


Status of Corrective Action   The Forest Service has made some improvements, but significant work is
                              still needed. Forest Service personnel conducted real property inventories
                              for the first time in many years in fiscal year 1998. The Forest Service
                              established a team to review its budget and accounting activities and to
                              recommend ways of simplifying and improving its business operations.
                              The Forest Service also implemented sweeping changes in its management
                              structure to improve accountability and reform its financial systems. The
                              Forest Service restructured its Washington Office management team in
                              April 1998 to create functional lines of accountability for fiscal
                              management that report directly to the Chief of the Forest Service. The
                              agency has also consolidated its budgeting, financial management,
                              financial systems development and operations, and related analytical and
                              quality assurance functions in a new central office headed by a Chief
                              Financial Officer. This new organization and management team should
                              help provide the strong management and leadership needed by the Forest
                              Service to correct its long-standing accounting and reporting deficiencies.


                              The Department of Agriculture’s current financial accounting system, the
Implementation of a           Central Accounting System (CAS) is not in compliance with the U.S.
New Accounting                Government Standard General Ledger,1 is not well integrated, and is
System                        generally outdated. In 1994, the Department’s Office of the Chief Financial
                              Officer purchased a system, the Foundation Financial Information System
                              (FFIS), to replace CAS departmentwide. Because of financial deficiencies at
                              the Forest Service, the Department decided that the Forest Service would

                              1
                               The U.S. Government Standard General Ledger provides a standard chart of accounts and
                              standardized transactions that agencies are to use in all their financial systems.



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                              be one of the first of its agencies to implement FFIS. However, the system
                              failed to operate properly at the three operating units where it was
                              installed, (e.g., it could not produce certain critical budgetary and
                              accounting reports that track obligations, assets, liabilities, revenues, and
                              costs) because the Forest Service did not simplify its business processes
                              before implementing FFIS, added feeder systems to FFIS, implemented the
                              system before it was fully tested, and exercised inadequate oversight and
                              management control over the project.


Status of Corrective Action   Because of these difficulties, the Forest Service has deferred the full
                              implementation of FFIS in all of its units until October 1, 1999. The Forest
                              Service has established two teams to manage the FFIS project—a
                              functional team responsible for implementing FFIS agencywide, providing
                              training, and integrating accounting standards, new business practices,
                              and policies and procedures with financial systems; and a technical team
                              responsible for providing technical input, ensuring that infrastructure
                              exists to support FFIS, monitoring performance, and preparing and
                              maintaining system and application documentation. Heading the project is
                              the Forest Service’s new Chief Financial Officer, who has experience with
                              the FFIS software package. Forest Service officials told us that
                              implementation is on schedule for release to the remainder of the agency
                              at the beginning of fiscal year 2000.


                              The Forest Service’s largely autonomous field organization may hinder top
The Forest Service’s          management’s ability to gain the full participation of all regional fiscal
Field Structure               directors in efforts to achieve financial accountability.


Status of Corrective Action   A consultant hired by the Forest Service recommended that the agency
                              establish a new position of Deputy Chief, Chief Financial Officer, who
                              would consolidate all of the financial management functions within the
                              Washington Office. In addition, the consultant advised the replication of
                              the national financial management structure at the regional level,
                              recommending that a Deputy Regional Forester for Financial
                              Management/Chief Financial Officer be established within each region.

                              The Forest Service restructured its national office management team in
                              April 1998 to create functional lines of accountability for fiscal
                              management that report directly to the Chief of the Forest Service. Three
                              new management positions were created: a Chief Operating Officer, a



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                              Deputy Chief/Chief Financial Officer, and a Deputy Chief for Business
                              Operations. The agency will decide whether to hire chief financial officers
                              at the regional level after it has implemented FFIS agencywide.

                              This restructuring addresses some of the concerns we have previously
                              raised about the Forest Service’s management structure. However, the key
                              issue about the autonomous field structure, as it relates to financial
                              management, remains unresolved.


                              According to the Forest Service, expenditures are often correctly recorded
Retroactive                   to the management codes worked but are then reassigned to different
Redistribution                codes, depending upon the availability of funds, through a practice known
                              as retroactive redistribution. However, retroactive redistribution leaves no
                              record of changes in expenditures, making it difficult if not impossible to
                              identify where changes occurred. Given the number of transactions and
                              lines of accounting and the detail involved, accountability is lost.


Status of Corrective Action   For fiscal year 1999, retroactive redistribution is not an option for units
                              using the new accounting system, FFIS. Other units still using the old
                              accounting system, CAS, have been directed to substantially curtail the use
                              of retroactive redistribution. Unavoidable changes must be properly
                              authorized, approved, justified, and supported with documentation to
                              provide an audit trail of retroactive redistribution activities under CAS.

                              The Forest Service has said that regional foresters, station directors, area
                              directors, the International Institute of Tropical Forestry director, and the
                              Deputy Chief, Chief Financial Officer, will be responsible for establishing
                              controls to ensure that the authorizations and documentation take place.

                              According to the Forest Service, retroactive redistribution will no longer
                              be feasible after the agency fully implements FFIS on October 1, 1999.


                              Under the benefiting function concept embodied in the fiscal year 1995
Charging “as                  budget reforms, programs (such as Forest Management and Recreation,
Budgeted” and Not             Heritage, and Wilderness Resources) are expected to pay the costs of
“as Worked”                   support services provided by other programs. However, staff from
                              programs providing support services may not always charge their costs to
                              the benefiting program if the program primarily benefiting from the work
                              has not been clearly identified, defined, or understood. In addition,



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                              individual programs that underestimate the costs of a project or otherwise
                              do not have the funds needed to pay for a project’s support services may
                              require other programs to absorb the costs of the services. This practice of
                              charging “as budgeted” and not “as worked” circumvents the
                              requirements established by the appropriations committees and the
                              agency for moving funds between line items and understates a project’s
                              costs. It also precludes the Forest Service from providing the Congress
                              and other interested parties with meaningful, useful, and reliable
                              information on the costs and the accomplishments of programs.


Status of Corrective Action   Several regional and forest offices have issued guidance to managers that
                              explains how to identify the benefiting program and stresses the
                              importance of charging work to it. However, agency officials informed us
                              that charging “as budgeted” and not “as worked” was sometimes more
                              acceptable than not doing the project, requesting the brokering of funds
                              between offices or regions, or requesting a time-consuming and possibly
                              uncertain reprogramming of funds. They further stated that, if reasonably
                              final budgets are distributed to the field in a timely manner, managers may
                              be better able to plan projects within their program’s available funding
                              levels. Guidance reinforcing the need for reliable information on the costs
                              of projects is also required.


                              The Forest Service has developed agencywide criteria to allocate
Budget Allocation             appropriated funds to its regions to improve the objectivity and rationality
Criteria                      of the budget as a process for establishing policy and program priorities.
                              However, the budget allocation criteria are often not linked to the agency’s
                              strategic goals and objectives. Rather than develop new criteria or
                              improve existing ones to better align them with its mission and funding
                              priorities, the agency has been trying to use old resource-specific
                              allocation criteria with its new integrated-resource goals and objectives.


Status of Corrective Action   The Forest Service has reported that, given the complexity of managing
                              natural resources, no set of criteria will yield the optimal allocation.
                              Management review will still be required to ensure the proper distribution
                              of funds. Agency officials informed us that, while efforts to improve the
                              budget allocation criteria were ongoing, no specific changes to the fiscal
                              year 1999 budget allocation criteria were made to assist in planning the
                              fiscal year 2000 budget.




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                              Currently, there is no clear link between the Forest Service’s strategic
Inadequate                    goals and objectives and its performance measures. The agency’s
Performance                   performance measures often do not adequately reflect the agency’s
Measures                      accomplishments or progress toward achieving its goals and objectives. In
                              addition, the Forest Service’s existing indicators often measure quantity
                              and outputs when they should be measuring quality and outcomes, do not
                              measure outputs consistently, and are not reliable. For instance, the
                              agency counts facilities and miles of Forest Service-managed roads as
                              accomplishments toward its strategic objective of improving customer
                              satisfaction even when the facilities are not maintained “to standard” and
                              the roads are “less than fully maintained.”


Status of Corrective Action   Over the last year, the Forest Service has made some progress in
                              identifying long-term performance measures and in reducing the number
                              of annual indicators in its performance plan. For instance, in its fiscal year
                              2000 budget justification, the Forest Service proposed a set of long-term
                              measures for its proposed objectives. During an April 7, 1999, consultation
                              between Forest Service and congressional staff, the agency identified a
                              subset of these measures that it intends to implement agencywide in fiscal
                              year 2000.


                              Indirect costs (overhead) have risen over time; however, accounting
Indirect Costs                inconsistencies make it difficult to ascertain specifically why. An essential
                              step for controlling indirect costs is establishing clear definitions for them
                              and applying the definitions consistently over time and across locations.2


Status of Corrective Action   As directed by Public Law 105-277, the Omnibus Consolidated and
                              Emergency Supplemental Appropriations Act for Fiscal Year 1999, the
                              Forest Service submitted proposed definitions of indirect costs in its fiscal
                              year 2000 budget justification to the appropriations committees. The
                              agency reported that these definitions were consistent with standards
                              developed by the Federal Accounting Standards Advisory Board and will
                              be used consistently within the agency’s cost accounting system to display
                              the full cost of activities. In addition, the Forest Service included in its
                              budget submission a spreadsheet displaying estimates of indirect costs by
                              extended budget line item for the Forest Service’s regions, stations, and



                              2
                               Forest Service: Better Procedures and Oversight Needed to Address Indirect Expenditures
                              (GAO/RCED-98-258, Aug. 28, 1998).



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Washington Office. The Forest Service estimates indirect costs at about
19 percent of total funding.




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Appendix II

The Forest Service’s Proposed Outcomes
and High-Priority Long-Term and Annual
Performance Measures for Its Land Health
and Service to People Objectives
Proposed outcome      Long-term performance measures                          Annual performance measures
Clean water           • Trends in miles of streams and acres of lakes         • Miles of riparian areas and acres of wetlands
                      meeting state water quality standards                   restored
                      • Trends in miles of riparian areas that are properly
                      functioning, functionally at risk, nonfunctional, and
                      not assessed
                      • [Trends in watersheds where the timing and
                      magnitude of flow regimes are within the range of
                      natural variability]
                      • [Trends in road and trail mileage that meet           • Miles of roads and trails reconstructed, maintained,
                      environmental standards/best management                 and decommissioned to improve soil, water, and air
                      practices]                                              quality
                                                                              • Number of hazardous material and
                                                                              abandoned/inactive mine sites reclaimed
Healthy forests and   • Trends in acres at risk from native insects and       • Acres of forests and grasslands treated to reduce
grasslands            diseases                                                unacceptable risk from native insects and diseases
                      • Trends in acres at risk from invasive plants and/or • Acres of forests and grasslands treated to reduce
                      exotic insects and diseases                           unacceptable levels of invasive plants and exotic
                                                                            insects and/or diseases
                      • Trends in acres at risk from wildland fires           • Acres of forests and grasslands treated through
                                                                              prescribed fire and mechanical treatments to reduce
                                                                              unacceptable levels of hazardous fuels
                                                                              • Feet of fireline constructed to protect firefighting
                                                                              capability
                                                                              • Trends in firefighter resources available for wildland
                                                                              fire suppression
                                                                              • Dollar value of federal excess personal property
                                                                              equipment for fire suppression loaned to states
                                                                              • Number of volunteer fire departments assisted
                      • Trends in number of endangered rare plant
                      species
                      • [Trends in ecological integrity ratings by
                      ecoregion]
                      • [Trends in achieving land-ownership patterns that     • Acres acquired and/or exchanged in support of
                      promote or improve desired forest and grassland         desired ecological conditions or land patterns
                      conditions]                                             (specifics to be added later)
                                                                              • Acres of land acquired through the forest legacy
                                                                              program
                                                                              • Number of forest legacy state-level needs
                                                                              assessments completed
                                                                              • Number of forest stewardship plans completed
                                                                              • Acres of land in stewardship management plans
                                                                              • Acres of multiresource practices implemented
                                                                              through stewardship incentives practices
                                                                                                                           (continued)




                                        Page 58                                  GAO/RCED/AIMD-00-2 Forest Service Accountability
                                               Appendix II
                                               The Forest Service’s Proposed Outcomes
                                               and High-Priority Long-Term and Annual
                                               Performance Measures for Its Land Health
                                               and Service to People Objectives




Proposed outcome             Long-term performance measures                         Annual performance measures
Robust fish and wildlife     • Trends in number of endangered fish and wildlife     • Number of conservation agreements signed
populations (improved        species
viability)
                             • Population trends for selected species               • Number of recovery and conservation actions taken
                             • Habitat trends for selected species                  • Acres and miles of habitat improved
Clean air                    • Trends in the percentage of air quality monitoring   • None
                             sites meeting or moving toward attainment of air
                             quality objectives
Productive soils             • Trends in acres meeting soil quality standards       • None
Quality outdoor recreation   • [Trends in recreation quality and use of recreation • Percentage of estimated capacity used for
and natural settings         capacity]                                             dispersed recreation, developed recreation, and
                                                                                   congressionally designated areas
                             • Trends in acres and constructed features meeting • Percentage of acres meeting scenic quality and
                             scenic integrity objectives                        land ownership pattern objectives
                                                                                    • Number of heritage sites protected
                                                                                    • Acres inventoried for heritage sites
                                                                                    • Acres of wilderness condition inventoried
                                                                                    • Percentage of scheduled measures implemented
                                                                                    for congressionally designated areas
                             • [Trends in deferred recreation facility              • Number of facilities and miles of roads and trails
                             maintenance]                                           constructed, reconstructed, and maintained
                             • [Trends in recreation user satisfaction by use and
                             geographic region]
Improved urban               • Proportional range between growth in population      • [Number of communities implementing urban
environments                 and land use; retention and/or enhancement of          natural resource assessments/projects]
                             green infrastructure
                                                                                    • Number of participating communities
                                                                                    • Number of technical assists to communities
                                                                                    • Hours of volunteer assistance generated
                             • Adoption of new technology by urban
                             policymakers to reduce infrastructure costs and
                             improve environmental quality
Healthy rural communities    • [Trends in selected indicators of community          • Number of rural communities working under
                             vitality]                                              broad-based local strategic plans
                                                                                    • [Percentage of participating communities using
                                                                                    outcome measurement systems based on strategic
                                                                                    plans]
                                                                                    • Number of rural communities using outcome
                                                                                    measurement systems based on local strategic plans
                                                                                    • Number of tribal and minority communities
                                                                                    receiving assistance
                                                                                    • Number of research studies focused on solving
                                                                                    resource problems
                                                                                                                               (continued)




                                               Page 59                                GAO/RCED/AIMD-00-2 Forest Service Accountability
                                               Appendix II
                                               The Forest Service’s Proposed Outcomes
                                               and High-Priority Long-Term and Annual
                                               Performance Measures for Its Land Health
                                               and Service to People Objectives




Proposed outcome             Long-term performance measures                          Annual performance measures
Continuing availability of   • Trends in the quantities and/or values of a wide      • Forest and grassland products provided, including
goods and services           variety of goods and services provided from the         (1) volume of wood fiber sold, (2) revenue from and
                             national forests and grasslands, consistent with        number of special forest products sold, (3) number of
                             maintaining ecological integrity                        months of grazing use, and (4) number of minerals
                                                                                     operations
                                                                                     • Number of special use applications processed and
                                                                                     number of permits administered to standard
                                                                                     • Number of land and access cases resolved to
                                                                                     protect or provide public and private access
                                                                                     • Miles of boundary marked/maintained to standard
                                                                                     • Number of livestock grazing allotments
                                                                                     administered to standard
                                                                                     • Number of energy and nonenergy minerals’
                                                                                     operations administered to standard

                             • Trends in employment and income sustained from
                             the national forests and grasslands
                             • Development and application of new knowledge          • [New technology adopted by public and private
                             to ensure the availability of goods and services        land managers]
                             • [Acres of nonindustrial private forestlands
                             managed with landowners’ understanding of
                             options and consequences related to the
                             production of commodities, amenities, services,
                             sustainability, and residual conditions]
Safe public lands and        • Trends in criminal activity on national forests and   • Number of serious safety incidents investigated
facilities                   grasslands                                              and corrected
                                                                                     • Number of marijuana plants eradicated
                                                                                     • Number of incident, violation, and warning notices
                                                                                     issued
                                                                                     • Number of investigations completed
                                                                                     • Number of patrol hours provided through
                                                                                     cooperative agreements with other law enforcement
                                                                                     agencies
                             • Trends in the percentage of miles of roads and        • Miles of roads and trails and number of facilities
                             trails and the number of facilities and services        reconstructed, maintained, and decommissioned to
                             meeting public safety standards                         meet safety standards
                                                                                     • Percentage of special use permits administered to
                                                                                     meet safety standards
                             • [Trends in customers’ perceptions of personal         • [Customers’ perception of personal security on
                             security on national forests and grasslands]            national forests and grasslands]
Good neighbors               • [Trends in public perceptions of the quality of       • Number of partners and value of partners’
                             relationships with national forests and grasslands      contributions
                             managers]
                                                                                     • Number of people contacted through conservation
                                                                                     education programs
                                                                                     • Number of Forest Service volunteer hours
                                                                                                                                (continued)


                                               Page 60                                 GAO/RCED/AIMD-00-2 Forest Service Accountability
                                              Appendix II
                                              The Forest Service’s Proposed Outcomes
                                              and High-Priority Long-Term and Annual
                                              Performance Measures for Its Land Health
                                              and Service to People Objectives




Proposed outcome            Long-term performance measures                             Annual performance measures
Improved knowledge and • Percentage of total acres of forest, [grassland,              • Number of reports and data sets for forest inventory
decisionmaking to support and aquatic] ecosystems covered by forest                    and health monitoring activities provided to public
management and use        inventory and analysis, forest health monitoring, or         and private land managers that characterize
                          other nationally consistent monitoring systems               resource status, conditions, and trends
                                                                                       • Average inventory cycle length for updating
                                                                                       state-level data in the forest inventory and analysis
                                                                                       monitoring system
                                                                                       • Percentage of plots measured
                                                                                       • Development of new inventory technology
                            • [Assessments of capacity and accomplishments             • Scientific knowledge provided by research that
                            of the research and development program by peer            assists public and private land managers in meeting
                            review]                                                    existing legal and regulatory requirements
                                                                                       • [Research capacity (scientist years, publications,
                                                                                       etc.)]
                                                                                       • Number of technology transfer activities
                                                                                       • Number of technologies developed and transferred
                                                                                       to users
                            • [Trends in acres meeting forest plan goals for           • Acres of landscape-scale and watershed
                            composition, structure, and function and                   assessments completed
                            percentage of forests’ and regions’ monitoring
                            reports consistent with national protocols]                •Acres of soil, water, riparian area, forests, and
                                                                                       grasslands inventoried and monitored
                                                                                       • Percentage of scheduled water quality monitoring
                                                                                       tasks implemented
                                                                                       • Percentage of scheduled air quality sites monitored
                                                                                       • Acres monitored for soil quality improvements
                                                                                       • Amount (acres and miles) of fish, wildlife, and rare
                                                                                       plant habitat inventoried and monitored

                                              Note: Bracketed measures [] have been identified, but not developed, by the Forest Service.

                                              Source: The Forest Service’s fiscal year 2000 budget justification.




                                              Page 61                                     GAO/RCED/AIMD-00-2 Forest Service Accountability
Appendix III

Comments From the Forest Service




               Page 62    GAO/RCED/AIMD-00-2 Forest Service Accountability
Appendix IV

GAO Contacts and Staff Acknowledgments


                  Charles S. Cotton, (202) 512-5281
GAO Contacts      McCoy Williams, (202) 512-6906


                  In addition to those named above, Marcus R. Clark, Jr.; Ryan T. Coles;
Acknowledgments   Susan L. Conlon; Elizabeth R. Eisenstadt; Doreen S. Feldman; Kathleen A.
                  Gilhooly; and Louis J. Schuster made key contributions to this report.




(141243)          Page 63                         GAO/RCED/AIMD-00-2 Forest Service Accountability
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