Financial Management: Forest Service's Efforts to Achieve Financial Accountability

Published by the Government Accountability Office on 1999-02-08.

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

Accounting and Information
Management Division


February      8,1999

The Honorable John R. Kasich
Chairman, Committee on the Budget
House of Representatives

Subject:      Financial Management:      Forest Service’s Efforts to Achieve Financial

Dear Mr. Chairman:

This letter    is the fifth in a series of status reports responding to your request in
July 1996     that we monitor the Forest Service’s progress in improving the
reliability   of its accounting and financial data. This letter summarizes the
information      provided during a January 25,1999, briefing to your office regarding
corrective    actions that the Forest Service has taken thus far in fiscal year 1999,
as well as    the key remaining tasks it must still perform in order to ensure the
reliability   of its accounting and financial data. The briefing slides are attached.

The Forest Service has recently hired experienced staff to fill key financial
management and systems positions. The Forest Service is also in the process of
consolidating 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. This
new organization and management team will help provide the strong
management and leadership needed by the Forest Service to correct its long-
standing accounting deficiencies and achieve financial accountability.

At the same time, the Forest Service still faces major challenges and tight time
frames if it is to achieve its goal of an unqualified audit opinion on its fiscal year
2000 financial statements; implement its new accounting system, the Foundation
Financial Information     System, by October 1,1999; hire additional skilled
accounting and systems personnel; and produce reliable financial information
that can be used for making business decisions. In addition, the Forest Service
must decide how to deal with a key issue regarding its autonomous field
structure as it relates to financial management.      In particular, the Forest Service

                   GAO/AIMD-99-68R    Forest Service’s Efforts   to Achieve Financial   Accountability

must decide whether it will mirror the national o&e’s financial management
organizational structure throughout the field, including hiring chief financial
officers at the regional level. In summary, as we have emphasized in our prior
reports, achieving financial accountability will require the concentrated effort
and sustained commitment of Forest Service management and staff.

In January 1999, we designated Forest Service financial management as a high-
risk area. Since 1990, we have periodically reported on government operations
identified as high risk because of their greater vulnerabilities to waste, fraud,
abuse, and mismanagement. Our high-risk status reports are now provided at
the start of each new Congress and the latest, High-Risk Series: An Update
(January 1999, GAO/HR-99-l),     was recently issued. Over time, as high-risk
operations have been corrected and other risks have emerged, we have removed
areas from the list and added new ones to keep the Congress current on areas
needing attention. The Forest Service’s high-risk designation means that we will
be giving sustained attention to monitoring its efforts to achieve financial

We conducted our work from December 1998 through January 1999 in
accordance with generally accepted,government auditing standards. We
requested comments on our draft briefing slides from the Forest Service and the
U.S. Department of Agriculture’s (USDA) Office of the Chief Financial Officer
and Office of the Inspector General. These parties provided some clarifying
comments that we incorporated into our slides as appropriate.

We are sending copies of this letter to the Ranking Minority Member of your
Committee, the Secretary of Agriculture, the USDA Chief Financial Officer, the
Chief of the Forest Service, the Forest Service’s Chief Financial Officer, the
Director of the Office of Management and Budget, and other interested parties.
Copies will also be made available to others upon request.

 Page 2          GAO/AIMD-99-68R   Forest Service’s Efforts to Achieve Financial   Accountability

We will continue to monitor Forest Service progress and periodically report to
you. If you have any questions about this letter or the earlier briefing, please
contact me at (202) 512-9508 or McCoy Williams, Assistant Director, at (202)

Sincerely yours,

Linda M. Calbom
Director, Resources, Community,
 and Economic Development, Accounting
 and Financial Management Issues



Page 3             GAO/AIMD-99-68R   Forest Service’s Efforts to Achieve Financial   Accountability

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GAo   Purpose

       To report on the Forest Service’s efforts to
       achieve financial accountability

         Discuss corrective actions taken in fiscal year

         Identify key tasks remaining

                                                      Page 2
GAo   Scope and Methodology

       Focused on critical tasks that the Forest Service
       must address to achieve financial accountability

        l   Attended briefings on Foundation Financial
            Information System (FFIS) activities

        l   Interviewed IG and,Forest Service officials

        l   Reviewed the following documents
            l consultant’s reports
            l Forest Service project plans
            l Forest Service Y2K certification reports
            l the IG’s assessment of corrective actions
                                                          Page 3
ilAO   Background

       l   Since August 1996, the Forest Service, the IG, and the
           CFO have worked together to correct the accounting
           and financial reporting problems identified in the fiscal
           year 1995 IG audit report

       l   Since December 1996, GAO has reported and/or
           testif ied on
            0 how unreliable financial data hampers the agency’s
              and the Congress’ decisionmaking ability
            . how the lack of accountability exposes the Forest
              Service to mismanagement and misuse of its assets
            l  Forest Service efforts to improve financial

                                                             Page 4
GAo   Actions Taken in Fiscal Year 1999 and
      Key Tasks Remaining
      e   Organizational structure

      l   FFIS

      l   Accounting deficiencies

                                          Page 5
GAo   Actions Taken in Fiscal Year 1999 -
      Organizational Structure
      l   Restructured the national office to include both
          Budget and Financial Management functions
          under the Forest Service CFO

      l   Hired experienced staff to fill key financial
          management and systems positions

                                                          Page 6
GAo   Actions Taken in Fiscal Year 1999 .-
      0 USDA contracted with Logistics Management
        Institute to conduct a study of feeder systems

      l   Developed detailed project plan

      l   Completed testing on 8 of 16 critical financial
          systems for Y2K compliance

                                                      Page 7
GAo   Actions Taken in Fiscal Year 1999 -                     .
      Accounting Deficiencies
      l   Prepared a high level action plan to address real
          property accounting deficiencies

      l   Completed physical inventory of personal

      l   Completed physical i.nventory of real property
          (except for road assets)

      l   Contracted with PricewaterhouseCoopers to
          study core competency of accounting functions

                                                     Page 8
GAo       Key Tasks Remaining -
          Organizational Structure
      l    Establish the following staff offices under the
           Forest Service CFO
           l FFIS Project Management Office
           l Financial Reports & Analysis

      0 Hire accountants for newly created positions

      l    Decide whether to establish a Deputy Regional
           Forester for Financial Management (CFO) within
           each region

                                                       Page 9
GAo   Key Tasks Remaining -
      l   Complete business process reengineering

      l   integrate or interface feeder systems with FFIS

      l   Fully implement and convert all data to FFIS by
          Oct. 1, 1999

      0   Complete testing on remaining 8 critical financial
          systems and certify all critical systems as Y2K
          compliant by March 31, 1999

                                                      Page IO
GAo   Key Tasks Remaining -
      Accounting Deficiencies
      l   Include financial management responsibilities in
          job descriptions at the forest level

      l   Develop a detailed quality assurance plan for
          analyzing and tracking inventory data

      l   Complete inventory of road assets

      l   Integrate Accounts Payable and Accounts
          Receivable functions into accounting system

                                                    Page 11
          Job Code 913844
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