Forest Service

Serious, long-standing accounting and financial reporting weaknesses continue to plague the Forest Service's operations. As a result, GAO has included the Forest Service in its list of government operations that are particularly vulnerable to waste, fraud, abuse, and mismanagement. (See GAO/HR-99-1, Jan. 1999.) The Forest Service's problems have included a lack of basic accountability for major assets and liabilities, the inability to accurately track the cost of programs and activities, and significant reporting errors in the Forest Service's financial statements and the records that support those statements. In addition, the Forest Service has experienced significant problems in implementing its new accounting system, which is crucial to overcoming its financial management shortcomings and attaining basic accountability over billions of dollars in taxpayers' funds and investments. This testimony (1) briefly describes the historical pattern of the Forest Service's financial management weaknesses, (2) discusses the fundamental problems that the Forest Service must resolve to achieve financial accountability, (3) outlines GAO's criteria for placing the Forest Service's financial management on its high-risk list and what must take place for the agency to be removed from that list, and (4) highlights corrective measures that the agency has under way.

GAO noted that: (1) since its first audit of the Forest Service's financial statements, which covered fiscal year (FY) 1991, the Department of Agriculture Inspector General (IG) has found serious accounting and financial reporting weaknesses; (2) the IG issued an adverse opinion on the fiscal years 1991 and 1992 financial statements, due to major inaccuracies in those statements; (3) for fiscal years 1993 and 1994, the IG issued qualified audit opinions and reported that the Forest Service's financial statements were unreliable due to pervasive errors in the field-level data supporting the land, buildings, equipment, accounts receivable, and accounts payable accounts; (4) this unfavorable pattern continued the following year when the IG issued an adverse audit opinion on the Forest Service's FY 1995 financial statements; (5) due to the severity of the accounting and reporting deficiencies, the Forest Service did not prepare financial statements for FY 1996, but chose instead to focus on trying to resolve these problems; (6) there are three fundamental problems that the Forest Service must resolve before it can achieve the most basic levels of financial accountability; (7) the Forest Service must correct the basic accounting and reporting deficiencies that have plagued the agency for years; (8) it must overcome the initial implementation problems it encountered with its new accounting system, Foundation Financial Information System (FFIS), and complete the implementation of the system agencywide; (9) the Forest Service needs to revise its field structure to provide functional lines of accountability for financial management; (10) because of the severe weaknesses in the Forest Service's accounting and financial reporting, GAO designated it as a new high-risk area in the latest High-Risk Series report; (11) GAO identified agencies that are material to the government's financial statements and have been unable to produce auditable financial statements for the agency as a whole; (12) the Forest Service met this criteria; (13) in order to be removed from the list, the Forest Service will need to demonstrate sustained financial accountability; (14) the Forest Service has recently hired experienced staff to fill key financial management and systems positions; and (15) several of these newly hired individuals have experience successfully implementing FFIS at other agencies.