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

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.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Brian P. Crowley Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-9450