Federal Timber Sales:

Process for Appraising Timber Offered for Sale Needs to Be Improved

RCED-90-135: Published: May 2, 1990. Publicly Released: May 4, 1990.

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Pursuant to a congressional request, GAO reviewed the Forest Service's and Bureau of Land Management's (BLM) process for appraising timber offered for sale.

GAO found that: (1) BLM and the Forest Service used the transaction evidence appraisal method to advertise timber sales because the method better estimated the timber's fair market value; (2) two of the Forest Service's main timber-producing regions used the residual value method because of limited staff resources and outdated data; (3) Forest Service regions received limited guidance and oversight from headquarters in implementing the appraisal method; (4) regions reduced their appraisal estimates to stimulate competition and compensate for any price inaccuracies; and (5) the Forest Service did not have adequate internal controls over the timber appraisal process. GAO also found that: (1) neither appraisal method ensured a minimum selling price that would adequately protect the government's interest and enhance revenues; and (2) BLM and the Forest Service advertised their fiscal year (FY) 1988 timber sales for less than the costs of preparing and administering the sales.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Forest Service has studied the below-cost issue since the early 1990's and had a draft policy in late 1992. The current administration did not pursue the draft policy and decreased the emphasis of the timber program, which not only dramatically reduced the size of the traditional program, but significantly changed the nature of the program from resource extraction to ecosystem management, forest health, and landscape management. In 1995, the Forest Service formed another task force which studied the issue of below-cost timber sales in relation to the new ecosystem management approach. In May 1997, the Forest Service developed proposed direction that addressed the role that timber harvesting would play in achieving the ecological, economic, and social objectives of the Service, but did not address the below-cost issue. In view of the significant change in the nature of the timber program, the time that has elapsed, and the lack of action, GAO is closing the recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to consider all timber sales costs in establishing advertised prices for timber sales.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: The Forest Service directed, and Region I has accomplished, bringing appraisals within 30 percent of average bid and backoff to 5 to 25 percent.

    Recommendation: In order to establish bid prices that better approximate fair market value, the Chief, Forest Service, should direct Region 1 to reduce its rollback factor to be more consistent with the other regions.

    Agency Affected: Department of Agriculture: Forest Service

  3. Status: Closed - Implemented

    Comments: Language added in Forest Service Manual (2420.3) stating that all regions except Alaska (Region 10) are to use transaction evidence as its primary appraisal method starting late in 1992.

    Recommendation: In order to establish bid prices that better approximate fair market value, the Chief, Forest Service, should direct Regions 5 and 6 to switch to the transaction evidence appraisal method.

    Agency Affected: Department of Agriculture: Forest Service

  4. Status: Closed - Implemented

    Comments: Language added to Forest Service Manual (2420.42) stating that it is the responsibility of the timber director in Washington to monitor the performance of the appraisal system. Section 2422.1 requires regional foresters to report to the WO twice a year on how well their appraisal systems are approximating fair market value.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to improve its timber appraisal process by requiring routine headquarters monitoring of how well regional appraisal systems are approximating fair market value.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: Language added to Forest Service Manual (2420.2) stating the objectives of the timber appraisal system and thereby giving guidance to all regions on what the appraisal system must include.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to improve its timber process by improving the guidance to regions on developing and maintaining timber appraisal systems.

    Agency Affected: Department of Agriculture

  6. Status: Closed - Not Implemented

    Comments: The Forest Service has studied the below-cost issue since the early 1990's and had a draft policy in late 1992. The current administration did not pursue the draft policy and decreased the emphasis of the timber program, which not only dramatically reduced the size of the traditional program, but significantly changed the nature of the program from resource extraction to ecosystem management, forest health, and landscape management. In 1995, the Forest Service formed another task force which studied the issue of below-cost timber sales in relation to the new ecosystem management approach. In May 1997, the Forest Service developed proposed direction that addressed the role that timber harvesting would play in achieving the ecological, economic, and social objectives of the Service, but did not address the below-cost issue. In view of the significant change in the nature of the timber program, the time that has elapsed, and the lack of action, GAO is closing the recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to adopt the formal decisionmaking process described in this report as an integral part of its forthcoming guidelines and procedures regarding timber sales which do not recover costs.

    Agency Affected: Department of Agriculture

 

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