National Forests:

Financial Ability Reviews of Prospective Timber Purchasers Need Improvement

RCED-89-110: Published: Mar 31, 1989. Publicly Released: Mar 31, 1989.

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In response to a congressional request, GAO examined whether Forest Service regional offices performed financial ability reviews of prospective timber purchasers who had previously defaulted on timber sales contracts.

GAO found that: (1) although the Forest Service issued a directive that required financial reviews of prospective timber sales purchasers that had defaulted on timber sales contracts within the previous 3 years, the regional offices awarded contracts to seven companies that defaulted on timber sales contracts; (2) the offices conducted the reviews for two purchasers, but awarded five contracts totalling about $43.4 million without conducting the reviews; (3) the regions did not perform the reviews prior to award, because they were not aware that the purchasers had defaulted on other contracts; (4) in some cases the reviews were not done at the correct local or regional level, because the purchasers operated in more than one forest within the region; (5) the regions did not coordinate with other regions or the Bureau of Land Management (BLM) regarding the need for reviews; (6) neither the Forest Service nor the regions knew that BLM required defaulted purchasers to provide a bond of 50 percent of the total contract price; (7) most of the local and regional officials were not satisfied with the directive, since each forest conducted reviews differently; and (8) many of those responsible for the reviews had not received any formal training or guidance.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Forest Service developed a formal information mechanism on defaults and conducted appropriate training of staff.

    Recommendation: The Chief of the Forest Service should establish a formal mechanism to ensure that information on purchasers who have defaulted on timber sales contracts is available to responsible officials at the forest and regional levels. This could be done by providing contracting officers and regional reviewing officials with default listings and other information that they need to comply with the directive. Also, in an effort to standardize and improve the process, the Forest Service should ensure that appropriate training is provided in conjunction with the issuance of its Financial Analysis Handbook.

    Agency Affected: Department of Agriculture: Forest Service


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