Congress Needs Better Information on Forest Service's Below-Cost Timber Sales

RCED-84-96: Published: Jun 28, 1984. Publicly Released: Jun 28, 1984.

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GAO analyzed 3,244 advertised timber sales made in four western Forest Service regions in fiscal year (FY) 1981 and 1982 to determine: (1) whether individual sales were being made below cost and, if so the general magnitude of this practice in terms of the number, amount of loss, and geographic location; (2) the justification for it; and (3) whether better data could be given to Congress.

GAO found that, overall, Forest Service revenues exceeded its costs by $712 million. However, although the timber was sold at or above appraised value, some of the sales did not generate enough revenues to cover the costs of making the sales. Below-cost sales had shortfalls of $64 million in 1981 and $92 million in 1982. Such sales occurred more frequently in Forest Service regions that had mostly low productivity timberlands, low sales values for predominant tree species, and relatively low volumes of timber sold. Generally, these sales were in areas that had steep terrain, which increased harvesting costs and involved engineering and construction costs. GAO found that, because the Forest Service does not identify and accumulate its costs for individual timber sales, it is hampered from taking timely actions to reduce costs or improve sale economics. GAO found that 47 to 89 percent of total sale costs were incurred after sale award. Limited cost data on individual sales hampered the Forest Service's response to its annual reporting requirement. The Forest Service makes below-cost sales to encourage the use of damaged timber, improve the growth of individual stands, or satisfy the needs of local communities dependent on national forest timber sales. Although the primary reason for selling timber below cost is to remove relatively low valued timber stands and replace them with higher valued timber stands, GAO found that this rationale was not validated by the net present value of the next stand of timber.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: No bills were introduced in, or other actions taken by, the 99th Congress regarding this recommendation.

    Matter: Congress should require the Secretary of Agriculture to revise the annual reporting to Congress on Forest Service activities to include an estimate of the number and volume of timber sales sold below cost, the amount lost on these sales, and the justification on a summary basis for making such sales.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Forest Service provided GAO with a draft of its Timber Sale Information System. GAO provided the House Appropriations Committee with an analysis of the system. In report AFMD-86-42, GAO outlined concerns about the system and concluded that it would not be fully responsive to a complete cost accounting system that would compare actual costs and benefits.

    Recommendation: The Secretary of Agriculture should require the Chief of the Forest Service to develop a capacity to systematically determine the costs to sell timber for all national forest timber sales and on a statistically valid basis compare these costs with the estimated value to be received from the sale.

    Agency Affected: Department of Agriculture

 

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