Forest Service:

Better Procedures and Oversight Needed to Address Indirect Expenditures

RCED-98-258: Published: Aug 28, 1998. Publicly Released: Sep 28, 1998.

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Pursuant to a congressional request, GAO provided information on overhead costs for the Forest Service's Brush Disposal Fund, Salvage Sale Fund, Reforestation Trust Fund, Cooperative Work--Other Fund, and Cooperative Work--Knutson-Vandenberg Fund, focusing on: (1) the reasons why indirect costs rose; (2) actions taken by the Forest Service and others to control these costs; and (3) other actions that may help the Forest Service control these costs in the future.

GAO noted that: (1) inconsistencies in the Forest Service's accounting system make it difficult to ascertain specifically why indirect costs rose for these five funds during fiscal years 1993-97; (2) according to the Forest Service, indirect costs rose for four main reasons: the implementation of a congressionally established program to increase the amount of salvage timber offered for sale, additional costs associated with downsizing, the allocation of costs incurred in previous years but not charged against the funds at the time, and computer modernization; (3) however, during this same time period, the Forest Service was changing its policies about how to account for indirect costs, and individual regions and forests were implementing these policies in markedly different ways; (4) as a result, the accounting system produced information that was not consistent from year to year or location to location; (5) neither GAO nor the Forest Service is able to say how much indirect costs increased as a result of the factors the Forest Service cites and how much they changed because of these accounting inconsistencies; (6) to control costs, the Forest Service took a number of actions, most of which were aimed at reducing costs generally and not targeted specifically at indirect costs; (7) in particular, the agency reduced its permanent staff by 14 percent, and individual regions used a variety of other measures, including closing some district offices, consolidating others, and centralizing certain administrative functions, such as contracting and procurement; (8) for their part, congressional appropriation committees reduced the budget line item for some indirect costs; (9) one way the Forest Service responded to the reductions was to reclassify some indirect costs to other accounts; (10) an essential step for controlling indirect costs is establishing clear definitions for them and applying the definitions consistently over time and across locations; (11) if implemented properly, a new accounting standard released by the Financial Accounting Standards Advisory Board, which recommends accounting principles for the federal government, will go a long way towards providing consistent and reliable data on the Forest Service's indirect costs; and (12) once the problems with the Forest Service's accounting system are solved and the agency's indirect costs are clearly known, there is the opportunity for informed decisions to be made on how to control them.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Forest Service has prepared a definition of indirect costs and supporting information that was published in the fiscal year 2000 Budget Justification. Forest Service staff state that this definition, which is consistent with Federal Financial Accounting Standard No. 4, will be included in their new Foundation Financial Information System scheduled for release on October 1, 1999. However, this new definition does not now comply with other parts of SFFAS No. 4 which states that accounting data is to be allocated from within the same period of time. The Forest Service plans to use 1998 data to allocate its 2000 costs. The Forest Service Chief Financial Officer thinks that the new definition is a significant first step in improving Forest Service cost accounting.

    Recommendation: To ensure that consistent and reliable cost data are available upon which to base management decisions and monitor trends, the Secretary of Agriculture should direct the Chief of the Forest Service to incorporate the Statement of Federal Financial Accounting Standards No. 4 into the Forest Service's cost accounting system.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: The Forest Service has prepared a definition of indirect costs and supporting information that was published in the fiscal year 2001 and 2002 Budget Justification, Budget Appendix and Budget Explanatory Notes. Forest Service staff state that this definition has also been included in the draft version of the 1900 Budget Handbook. All Forest Service offices will be required to use this Handbook which is expected to take care of the inconsistencies GAO encountered during its review. All comments on the draft have been received and reviewed, and the draft has been revised. The revised draft is currently undergoing a last review. The Handbook is expected to be released in final form sometime in 2002.

    Recommendation: To ensure that consistent and reliable cost data are available upon which to base management decisions and monitor trends, the Secretary of Agriculture should direct the Chief of the Forest Service to ensure that all offices consistently implement guidance with respect to accounting for indirect costs and hold the offices accountable by following up to make sure that the standards are being consistently used.

    Agency Affected: Department of Agriculture

 

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