Forest Service Needs to Improve Efforts to Protect the Government's Financial Interests and Reduce Below-Cost Timber Sales

GAO discussed the Forest Service's efforts to: (1) collect on defaulted timber sales contracts and reduce further defaults; and (2) reduce the number of below-cost timber sales. GAO noted that: (1) the Service collected about $35 million of the $302 million in damages that it assessed from defaulted contracts and was taking steps to improve its collection processes; (2) the Service's key contracting measures were similar to other timber sellers' measures, although the Service and one federal timber seller returned or credited down payments or deposits before contractors substantially completed the contracts; (3) such practices lessened the Service's security in terms of access to funds in the event of a default; (4) in fiscal year 1990, the Service incurred timber sale preparation and administration expenses of $35.6 million that it could not recover as a result of below-cost timber sales; and (5) preparation and administrative costs varied greatly by forest. GAO also noted that the Service issued a draft policy aimed at reducing losses caused by below-cost timber sales, but the policy left gaps in a comprehensive approach, since the Service: (1) would not subject many below-cost sales to review; (2) did not consider costs when setting minimum prices for advertised timber sales; and (3) did not evaluate on a timely basis whether the benefits of a below-cost sale justified the unrecoverable cost.

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: Victor S. Rezendes Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-6082