Forest Service's Accounting System for Accounts Receivable

Published by the Government Accountability Office on 1977-07-11.

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

                         DOCUMENT RESUME
02799 - [A1993039

[Forest Service's Accounting System for Accounts Receivable].
FGMSD-77-42; B-159687. Jujy 11, 1977. 4 pp.
Report to John B. cGuire, Chief, Fore!t Service; by D. L.
Scantlebury, Director, Financial and General Management tudies
Issue Area: Accounting and Financial Reporting (2800); Land Use
    Planning and Control: Utilization of the Public Lands
    Resource (2304).
Contact: Financial and General Management Studies Div.
Budget Function: iscellnenus: Financial Management and
    Information Systems (1002).
Organization Concerned: Department of Agriculture.

         The Forest Service's Region 6 system of accounting for
accounts receivable, including related billing and collection
procedures, was reviewed. Findings/Conclusions: Accounting,
billing, and collecting for accounts receivable at Region 6
were, for the most part, effective and accorded with the system
approved by the Comptroller General in 1970. However, procedures
designed to -encourage timely payment by contractors were not
followed by ll Forest offices in Region 6. Only one of four
national forests reviewed followed established procedures and
kept late payments to a minimum. The large amount of accounts
receivable--$119.7 million in September 1976--illustrates the
potential for reducing Government borrowing if bills can be
collected more expeditiously. Recommendations: National Forest
offices should be advised of the financial impact of delinquent
accounts, and should be directed to follow established
procedures to insure timely collection. (DJM)
                                  UNITED STATES GENERAL ACCOUNTING OFFICE
           a     /                         WASHINGTON, O.C. 20548


O~             B-159687                                             JIL 11 1977

CXd            Mr. John R. McGuire
o              Chief, Forest Service
               Department of Agriculture

               Dear Mr. McGuire:

                    This report reviews the Forest Service's system of
               accounting for accounts receivable, including related bill-
               ing and collection procedures. We made this review at Forest
               Service Headquarters in Washington, D.C.. and at Region 6 in
               Portland, Oregon: it was part of a multiagency review on
               which we plan to issue an overall report to the Congress.

                    Our review showed that the accounting, billing, and
               collection practices for accounts receivable at Region 6
               were, for the most part, effective and in accordance with
               the accounting system approved b the Comptroller General
               in June 1970. Specifically, we found that receivables were
               promptly and accurately recorded and billing and collection
               procedures were effective. However, procedures designed to
               encourage timely payment by contractors were not followed
               by all forest offices in Region 6.

                    The following sections summarize the scope and results
               of our review and our recommendations to help insure timely
               collection of accounts receivable.

               SCOPE OF REVIEW

                    We reviewed the accounting for and reporting of accounts
               receivable at Region 6 of the Forest Service. We also re-
               viewed this region's use of billing and collection procedures
               to obtain payment for timber sales and miscellaneous fees.

                 As of September 30, 1976, the Forest Service reported
            $119.7 million in accounts receivable from the public, of
            which $51.8 million was reported by national forest offices
            administered by Region 6. Our review was limited to the
            Region 6 headquarters office, four national forest offices
            and five rnger district offices. The four forest offices
            included in this review accounted for $85.5 million of tne


$241.6 million collected by Region 6 in the year ended
June 30, 1976. Although only Region 6 was included in
our review, all regions operated under standard Forest
Service procedures.


     Region 6 was prompt and accurate in recording accounts
receivable. Also, the amount reported to the Secretary of
tne Treasury as of September 30, 1976, was accurate.

     We tested the accuracy of recorded receivable balances
by examining supporting documentation, reconciling control
accounts with subsidiary accounts, and analyzing cutoff
dates for recording receivables. Although we did not obtain
written confirmation of accounts receivable balances f ,m
Forest Service customers, we were able to satisfy ourselves
that the receivables were valid by tracing records of timber
hauled from the forest to records of subsequent billings.
Also, we traced the billings to the payments received.
Based on the tests performed, we concluded that accounts
receivable were promptly and accurately recorded.


     To determine if payments were received in a timely
manner, we compared established procedures to actual collec-
tion practices. Three of the four forest offices we re-
viewed in Region 6 were not following established procedures
designed to make timber purchasers pay their bills on time.
As a result. 36, 37, and 47 percent of the payments to the
three forest offices during a 4-month period were received
after the due date.

     The "Forest Service Manual" and timber sales contracts
provide that, if the contractor does not pay for timber
sales within 15 days after billing, the forest office may,
after notifying the purchaser's representative, suspend any
or all of the purchaser's operations.  In the event of con-
sistent late ayment, the manual encourages immediate sus-
pension. Of the four national forest offices reviewed, only
one, Willamette, followed the established procedures and
suspended logging operations.   oing so was apparently effec-
tive because the percentage of delinquent payments at this


forest office was much lower than the percentage at the
other three, as illustrated by the following schedule.

           Schedule of Late Payments to Forest Offices
                 for-August-Through-November 1976
Forest office        Total billings          Late payments
                                            Dollar         of
                                            amount      total
Willamette            $37,839,003        $ 1,005,322      3
Deschutes               7,154,667          2,567,506     36
Gifford-Pinchot        17,086,213          8,097,475     47
Mt. Baker-
 Snoqualmie            l0,18881            3,7090;68     37
     Total            $72,198;764        $15,379;371     21

     Although the overall percentage of late payments com-
pared to total billings is not small, most bills were paid
within 5 days of the due date, which was established by con-
tract as being 15 days from the date of the invoice. How-
ever, $847,440 of the late payments was received over 5 days
after the due date.

     Because of the laLge amount of accounts receivable--
$119.7 million at September 30, 1976--potential exists for
a reduction in the borrowing requirement[ f the Government
if bills can be collected in a more timely manier.   In addi-
tion, late payments cause additional administrative effort
for Forest Service personnel because followup action is re-
quired when payment is not received by the due date.

     Delinquent payments and a lack of followup action on
delinquent accounts were found to be problems during a pre-
vious fiscal management program review at one of the four
forest offices. During the last 3 years, accounting and
collection procedures at the other three forest offices had
not been specifically covered by the internal review staff
of the Forest Service.


     One national forest office followed established procedures
and kept late payments to a minimum. We believe other forest


offices can encourage timber purchasers to pay their bills
on time by following established collection procedures.

      We recommend that you advise national forest offices of
the financial impact of delinquent accounts and direct that
they follow established procedures to insure timely collec-

     We discussed the results of our review with responsible
personnel at Forest Service Headquarters and Region 6. They
plan to make clear to all national forest filces the finan-
cial impact of late collections and the need to use available
procedures, including suspension of the purchaser's timber
operation, to insure timely collection.

     We would be pleased to discuss our review results with
you or your representatives and would appreciate receiving
your comments on the actions taken on our recommendation
within 30 days. We are sending copies of this report to the
Department's Director of the Office of Audit.

     We wish to thank you for the courtesy and cooperation
extended to our representatives..

                              Sincerely yours,

                              D. L. Scantlebury