Forest Service

A May 1998 report (GAO/RCED-98-164R) found that overhead costs at the Forest Service--called "indirect" costs by the Forest Service--had risen over time. The costs grew from 16 to 27 percent of total expenditures between 1993 and 1997 for the five funds GAO reviewed--the Brush Disposal Fund, the Salvage Sale Fund, the Reforestation Trust Fund, the Cooperative Work/Other Fund, and the Cooperative Work/Knutson-Vandenberg Fund. This report discusses (1) the reasons indirect costs rose, (2) steps taken by the Forest Service and others to control these costs, and (3) other measures that may help the Forest Service to 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

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.

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