    Federal Timber Sales: Forest Service Could Improve Efficiency of
    Field-Level Timber Sales Management by Maintaining More Detailed
    Data (27-JUN-07, GAO-07-764).

    For years, GAO has raised concerns about the ability of the
    Department of Agriculture's Forest Service (Service) to track the
    amounts it obligates for and spends on timber sales and to use
    this information in managing the sales. Timber sales are
    generally carried out by ranger districts (the lowest level of
    the Service's decentralized organizational structure), which are
    overseen by national forest offices. The Bureau of Land
    Management (BLM) within the Department of the Interior also
    conducts timber sales. This report examines the extent to which
    (1) the Forest Service tracks timber sales-related obligations
    and expenditures, including the extent to which the Service uses
    this information in making management decisions; (2) BLM tracks
    timber sales-related obligations and expenditures; and (3) both
    agencies track their timber sales-related revenue.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-764
        ACCNO:   A71527
      TITLE:     Federal Timber Sales: Forest Service Could Improve
    Efficiency of Field-Level Timber Sales Management by Maintaining
    More Detailed Data
         DATE:   06/27/2007
      SUBJECT:   Budget obligations
    	     Data collection
    	     Forest management
    	     Funds management
    	     Land management
    	     Management information systems
    	     National forests
    	     Records
    	     Sales
    	     Timber sales

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    GAO-07-764

         * [1]Results in Brief
         * [2]Background

              * [3]Forest Service Organization
              * [4]Forest Service Timber Sales-Related Funding
              * [5]BLM Organization
              * [6]BLM Timber Sales-Related Funding

         * [7]The Forest Service's Aggregation of Obligation and Expenditu

              * [8]The Forest Service Tracks Obligations at the Program and For
              * [9]Cost Issues Prompted the Forest Service to Further Aggregate
              * [10]Lacking the System Data They Need, Many Field Managers Rely

         * [11]The Bureau of Land Management's Detailed Data Help Managers
         * [12]Both Agencies Have Systems That Track Revenue by Timber Sale

              * [13]Forest Service's Timber Sale Accounting System Maintains Rev
              * [14]BLM Uses Two Systems to Track Timber Sales Revenue

         * [15]Conclusions
         * [16]Recommendation for Executive Action
         * [17]Agency Comments

              * [18]Appendix I: Objectives, Scope, and Methodology
              * [19]Appendix II: Comments from the Forest Service
              * [20]Appendix III: Comments from the Department of the Interior
              * [21]Appendix IV: GAO Contact and Staff Acknowledgments

         * [22]GAO Contact
         * [23]Staff Acknowledgments

              * [24]Order by Mail or Phone

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    June 2007

    FEDERAL TIMBER SALES

    Forest Service Could Improve Efficiency of Field-Level Timber Sales
    Management by Maintaining More Detailed Data

    GAO-07-764

    Contents

    Letter 1

    Results in Brief 3
    Background 5
    The Forest Service's Aggregation of Obligation and Expenditure Data
    Hinders Field-Level Project Management 14
    The Bureau of Land Management's Detailed Data Help Managers Monitor
    Projects 20
    Both Agencies Have Systems That Track Revenue by Timber Sale 22
    Conclusions 26
    Recommendation for Executive Action 27
    Agency Comments 27
    Appendix I Objectives, Scope, and Methodology 29
    Appendix II Comments from the Forest Service 32
    Appendix III Comments from the Department of the Interior 33
    Appendix IV GAO Contact and Staff Acknowledgments 34

    Figures

    Figure 1: Forest Service Regions 7
    Figure 2: BLM-Administered Lands and State Jurisdictions 12

    Abbreviations

    BLM Bureau of Land Management
    CBS Collections and Billing System
    FFIS Foundation Financial Information System
    FFS Federal Financial System
    K-V Knutson-Vandenberg
    MIS Management Information System
    SCID Stewardship Contracting Information Database
    TIM Timber Information Management system
    TSA Timber Sale Accounting system
    TSIS Timber Sale Information System

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
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    separately.

    United States Government Accountability Office
    Washington, DC 20548

    June 27, 2007

    The Honorable Tom Harkin
    Chairman
    Committee on Agriculture, Nutrition, and Forestry
    United States Senate

    The Honorable Jeff Bingaman
    Chairman
    Committee on Energy and Natural Resources
    United States Senate

    As the steward for more than 190 million acres of federal land, the
    Department of Agriculture's Forest Service (Service) undertakes a myriad
    of land management projects to sustain the land's health, diversity, and
    productivity. Such projects may involve harvesting marketable timber, such
    as fuel reduction projects designed to thin heavy undergrowth and dense
    stands of trees, and salvaging (i.e., removing) dead and dying trees. In
    fiscal year 2006, the sale of timber generated revenue of over $221
    million for the Service.

    The Service has a decentralized structure consisting of the Washington
    Office and the field. The field consists of nine regions that oversee 155
    national forests; the forests, in turn, oversee hundreds of ranger
    districts. Timber harvests, like other land management projects, are
    generally conducted by the Service's ranger districts and national
    forests, and the Service places considerable decision-making authority in
    managers at these field offices. The Service funds its land management
    projects through various programs.^1 These programs include wildlife and
    fish management, forest products, grazing management, and so forth. Timber
    sales involving the harvest of live trees are generally conducted under
    the Forest Products Program, while sales involving the salvage of dead or
    dying trees are generally conducted under the Salvage Sale Program.

    ^1The Service allocates funds by budget line item; these items generally
    correspond to programs. For the purposes of this report, we will refer to
    the budget line items as programs.

    Forest Service timber sales activities have long been controversial, in
    part because of concerns over the ecological and financial costs
    associated with harvesting timber. For years, we, along with other
    organizations, have questioned the Service's ability to track the amount
    it spends on timber sales, as well as the Service's ability to use these
    data to make management decisions about its operations. For example, for
    fiscal years 1992 through 1997, the Department of Agriculture's Office of
    Inspector General reported that the Forest Service's accounting
    data--including data associated with timber sales--were not reliable. We
    reported a similar finding in 2001. Further, in 2003 and again in 2006, we
    reported that the Service does not maintain data on the actual cost of
    individual work activities, including timber sales, and as a result cannot
    assess the extent to which these activities yielded accomplishments
    commensurate with the dollars spent on them.

    In this context, you asked us to examine the Service's current mechanisms
    for tracking timber sales-related obligations and expenditures,^2 as well
    as timber sales-related revenue. In addition, given that the Bureau of
    Land Management (BLM) within the Department of the Interior also conducts
    timber sales, you asked us to include that agency in our review as well.
    Specifically, we agreed to determine the extent to which (1) the Forest
    Service tracks timber sales-related obligations and expenditures,
    including the extent to which the Service uses this information in making
    management decisions; (2) BLM tracks timber sales-related obligations and
    expenditures, and how BLM's methods for doing so compare with those of the
    Forest Service; and (3) the Forest Service and BLM track their timber
    sales-related revenue.

    In conducting our work, we reviewed Forest Service timber sales accounting
    policies and procedures; financial system manuals and documentation;
    reports from systems in place to track obligations, expenditures, and
    revenue; and databases and spreadsheets devised by field offices to track
    this information. We visited numerous field locations because the Forest
    Service is a decentralized agency. Our work included visiting six of the
    nine Forest Service regional offices and at least one national forest
    office in each of six regions. We also interviewed officials of five
    ranger districts. We also visited the Service's Washington Office and the
    Albuquerque Service Center, which performs many Forest Service accounting
    functions. Our BLM work included reviewing BLM timber sales accounting
    policies and procedures, financial system manuals and documentation, and
    reports from systems in place to track obligations, expenditures, and
    revenue. In addition, we visited the National Business Center in Denver,
    Colorado; two state offices; one district office; and one field office. At
    each of these Forest Service and BLM locations, we interviewed officials
    responsible for tracking timber sales and managing related obligations,
    expenditures, and revenue, and we reviewed related policies, procedures,
    and records. We conducted our review from April 2006 through April 2007 in
    accordance with generally accepted government auditing standards, which
    included an assessment of data reliability and internal controls.
    Additional information on our scope and methodology appears in appendix I.

    ^2An agency incurs an obligation when it places an order, signs a
    contract, purchases a service, or takes other actions that require the
    government to make payments immediately or in the future. An expenditure
    occurs when the payment is actually made (i.e., when funds are actually
    transferred). The U.S. budget uses obligational accounting to control the
    use of funds and ensure that agencies comply with appropriations law.

    Results in Brief

    The Forest Service tracks the funds it spends on timber sales, including
    obligations and expenditures for personnel and equipment, in a way that
    does not provide the detail that many field managers, such as district
    rangers and national forest supervisors, said they need in order to make
    management decisions--for example, in deciding how to allocate or redirect
    resources among sales. The Service does not track timber sales-related
    obligation or expenditure data by individual sale but rather aggregates
    these data by the programs that fund the sales--such as the Forest
    Products Program or the Salvage Sale Program. Also, within these programs,
    the Service recently stopped tracking obligations and expenditures at the
    ranger district level, where timber sales are generally carried out, and
    now tracks them instead at the national forest level. Forest Service
    headquarters officials said that the aggregation of obligation and
    expenditure data at the forest level was part of an effort to reduce the
    proliferation of job codes in the accounting system and the associated
    data management costs. These officials said that the aggregate data are
    "good enough" and that field managers do not need more detailed data.
    However, many field managers we talked with said that detailed data are
    crucial to their timber sales management efforts. Without obligation and
    expenditure data on individual sales, for example, field managers said
    they cannot compare actual expenditures on sales with planned
    expenditures, identify potential inefficiencies across sales, or identify
    resources available for redirection to another sale if needed. Further,
    without data on program obligations and expenditures at the ranger
    district level, field managers said they cannot efficiently compare actual
    and planned program obligations and expenditures across districts to
    ensure that spending is occurring as planned. To compensate for the lack
    of detailed data, many field managers have independently developed a
    variety of so-called "cuff records," such as spreadsheets, containing
    information they deem essential for managing their timber sales. Field
    managers we spoke with said that maintaining these cuff records is time
    consuming--for example, one forest official said he spends about 20
    percent of his time gathering and analyzing the data he needs to manage
    timber sales. As a result, although the aggregation of data has decreased
    the Service's recognized data management costs, it has increased the time
    spent by some field managers on tracking this information through cuff
    records, thus raising questions about the actual cost savings resulting
    from the aggregation of data. Moreover, the Service has not systematically
    determined the information needs of its field managers or the extent to
    which actual cost savings may be offset by the cost of maintaining cuff
    records. We are recommending actions the Service can take to improve its
    managers' ability to use obligation and expenditure data to understand the
    actual cost of work activities and make management decisions accordingly.

    In contrast to the Forest Service, BLM can track timber sales data by
    individual sale, thereby allowing field managers to use these data in
    managing the sales--including comparing planned and actual expenditures,
    identifying potential inefficiencies across sales, and redirecting
    resources among sales when needed. For example, using the unique job code
    assigned to each timber sale conducted under the Forest Ecosystem Health
    and Recovery Fund, managers can track all obligations and expenditures on
    each sale--from those incurred during the planning phase (e.g., on
    environmental assessments) to the final administrative expenditures
    involved in closing the sale. BLM chose to maintain detailed data because
    its managers find them necessary in making decisions about, for example,
    how to allocate resources or reduce expenditures. At the project level,
    for example, managers can track actual expenditures and compare them with
    planning estimates. More broadly, managers can analyze several years of
    data to identify trends in expenditures across offices. These data can
    then reveal how efficient offices are in accomplishing projects and inform
    decisions about reallocating resources among offices or programs.

    Both the Forest Service and BLM have systems that track and report revenue
    data by timber sale. Both agencies' systems track the volume, type, and
    value of timber harvested by individual timber sale; automatically
    generate bills to timber purchasers; and track payments against those
    bills. Over the past few years, both agencies have struggled with, but are
    now resolving, the challenge of tracking revenue from timber sales
    conducted under their stewardship contracting authority. Stewardship
    contracts generally involve the exchange of goods, such as timber, for
    contract services, such as thinning of small trees and brush. Such
    exchanges can be difficult to account for with traditional accounting
    systems. The Forest Service has recently added a module to its accounting
    system to track stewardship contracting revenue, and BLM has developed an
    agencywide database for stewardship contracting information.

    We provided a draft of this report to the Secretaries of Agriculture and
    the Interior for review and comment. The Forest Service and the Department
    of the Interior generally agreed with our report; their comment letters
    are presented in appendixes II and III, respectively.

    Background

    Both the Forest Service and BLM conduct timber sales as part of their
    management of public land. However, the agencies differ in their
    organizational structure and in the sources of funding they use for
    carrying out timber sales. Timber sales activities involve staff time and,
    in some cases, equipment and supplies, to identify the sale area, conduct
    the required environmental analyses, solicit bids, prepare the timber sale
    contract, mark the sale boundary and the trees to be cut or left, and
    monitor the harvest operations and reforestation activities.

    Forest Service Organization

    The Forest Service manages 193 million acres of national forests and
    grasslands. The Service has nine regions that oversee 155 national
    forests; the forests, in turn, oversee more than 600 ranger districts.
    Each region (see fig. 1) encompasses a broad geographic area, headed by a
    regional forester who reports directly to the Chief of the Forest Service
    and provides leadership for, and coordinates the activities of, the
    various forests within the region. Each forest, headed by a supervisor,
    allocates the budget and coordinates activities among the various ranger
    districts within the forest. Each ranger district, headed by a district
    ranger, conducts or oversees "on the ground" activities such as
    construction and maintenance of trails; operation of campgrounds;
    management of wildlife habitat; and the sale and harvest of forest
    products, including timber. The districts vary in size from 50,000 acres
    to more than 1 million acres.

    Figure 1: Forest Service Regions

    Note: The Forest Service has no Region 7.

    Forest Service Timber Sales-Related Funding

    The Forest Service's timber sales-related activities are funded by a
    variety of appropriations. Within the Service's appropriations, there are
    several programs (or "budget line items") directly or indirectly related
    to timber sales. For the Forest Products Program, which is responsible for
    most timber sales-related activity, the Forest Service received about
    $277.6 million of its $1.5 billion national forest system appropriation in
    fiscal year 2006. However, the Forest Products Program is not limited to
    timber sales; some expenditures within the program are associated with
    other products, such as mushrooms and decorative grasses and foliage. The
    Service issues permits that allow individuals to gather such products from
    the forests, whether for personal use or for sale. Conversely, not all
    timber sales-related expenditures are included in the Forest Products
    Program. Certain timber sales' planning expenses, for example, might be
    borne by other programs--including vegetation and watershed management or
    wildlife and fish management--if the primary purpose of the sale is to
    improve vegetative conditions or wildlife habitat rather than to provide
    commercial timber.

    The Forest Service also uses various other funds to pay for timber
    sales-related activities, including (1) the Knutson-Vandenberg Trust Fund,
    (2) the Salvage Sale Fund, (3) the Brush Disposal Fund, (4) the Timber
    Sales Pipeline Restoration Fund, and (5) stewardship contracting revenue.

               o The Knutson-Vandenberg (K-V) Trust Fund, established by the
               Knutson-Vandenberg Act of 1930 (16 U.S.C. SS 576-576b),^3 was
               created to collect a portion of timber sales revenue to pay for
               the reforestation of areas from which timber is cut. The
               reforestation projects eligible for such funding include growing
               trees for planting, planting trees, sowing seeds, removing weeds
               and other competing vegetation, and preventing animals from
               damaging new trees. The act was amended in 1976 to allow the
               Forest Service to use these funds for other timber sales area
               improvement activities, such as creating wildlife habitat. It was
               amended again in 2005 to authorize expenditures within the entire
               Forest Service region in which the timber sales occurred. In
               fiscal year 2006, the Forest Service allocated $40 million of K-V
               funds for forest product sales under the expanded authority, and
               another $77.6 million of K-V funds for activities conducted under
               the original K-V authority.

               o The Salvage Sale Fund, derived from salvage sale revenue, is
               used to pay for preparing and administering future salvage
               sales.^4 The fund may also be used to pay for the design,
               engineering, and supervision of construction of roads associated
               with such sales. The Salvage Sale Fund was created by the National
               Forest Management Act of 1976 (16 U.S.C. 472a(h)).^5 Individual
               salvage sale timber contracts designate the amount of receipts to
               be collected and transferred to the Salvage Sale Fund. For fiscal
               year 2006, the Forest Service allocated $75.8 million for salvage
               sales.

               o The Brush Disposal Fund, derived from payments made by timber
               purchasers, is used to pay for the removal of brush and debris
               that result from logging.^6 For fiscal year 2006, the Forest
               Service allocated $11.6 million from the Brush Disposal Fund for
               this purpose. The Brush Disposal Fund is a permanent fund created
               to allow the deposit of funds to pay for certain brush disposal
               work on all timber sales, including salvage sales. Forest Service
               staff complete brush disposal work using funds collected as an
               additional charge to the purchaser, based on the amounts paid for
               the trees harvested. The funds are deposited in the Brush Disposal
               Fund, and the Service generally seeks to spend them within 3 years
               of the completion of the sale. Brush disposal usually entails
               chipping or burning vegetative debris from the sale, such as
               stumps, broken treetops, tree limbs and branches, or damaged brush
               resulting from logging operations. Brush disposal is also referred
               to as slash disposal.

               o The Timber Sales Pipeline Restoration Fund, authorized by the
               Omnibus Consolidated Rescissions and Appropriations Act of 1996
               (Pub. L. No. 104-134), is used to pay for certain eligible timber
               sales. For fiscal year 2006, the Forest Service had $2.5 million
               in the pipeline fund. The act created this fund to receive a
               portion of the receipts from certain timber sales released under
               the fiscal year 1995 Supplemental Appropriations for Disaster
               Assistance and Rescissions Act. The revenue deposited in the fund
               is to be used for the preparation of timber sales not funded by
               annual appropriations and to fund certain recreation projects.
               Specifically, 75 percent of the revenue is to be used for the
               preparation of green timber sales on national forest and certain
               BLM lands, and 25 percent is to be used for recreation projects.
               o Stewardship contracting revenue, derived from stewardship
               projects involving the sale of timber, is used to pay for future
               stewardship projects.^7 For fiscal year 2006, the Forest Service
               had $1.7 million in such revenue available. Stewardship
               contracting involves the use of any of several contracting
               authorities that were first authorized for use by the Forest
               Service on a pilot basis in October 1998. The Omnibus Consolidated
               and Emergency Supplemental Appropriations Act for 1999 established
               stewardship contracting authority to achieve national forest land
               management goals that meet local and rural community needs.^8
               Prominent among the stewardship contracting authorities is the
               ability to (1) trade goods--timber, for example--for contract
               services, such as thinning of small trees and brush, and (2)
               retain for use in future stewardship projects any revenue
               generated through selling forest products such as timber, rather
               than returning the revenue to the Department of the Treasury, as
               is required for traditional timber sales. Although stewardship
               contracting was initially established as a demonstration project
               that involved a limited number of individual projects within the
               Forest Service and was to end in 2002, the Consolidated
               Appropriations Resolution of 2003, among other things, extended
               the use of stewardship contracting authority to 2013, eliminated
               the limit on the number of projects, authorized commercial tree
               removal for forest health purposes as a project purpose, and
               extended the authority to BLM.^9

    ^3Act of June 9, 1930, Ch. 416, 46 Stat. 527; Pub. L. No. 94-588, S 18, 90
    Stat. 2962 (1976); Pub. L. No. 109-54, S 412, 119 Stat. 551 (2005).

    ^4Timber sales are generally referred to either as green sales, which
    involve the harvest of live trees, or as salvage sales, which involve the
    harvest of trees that are dead, dying, or damaged by wind, fire, disease,
    or insects.

    ^5Pub. L. No. 94-588, S 14, 90 Stat. 2958 (1976), as amended.

    ^6Act of Aug. 11, 1916, ch. 313, 39 Stat. 462, as amended.

    ^7The law stated that the land management goals of stewardship contracts
    include road and trail maintenance, watershed restoration, and prescribed
    burning and noncommercial tree removal to improve forest health.

    The Forest Service's tracking of its timber sales-related expenditures has
    been the subject of several of our previous reports. For example, in 2001
    we reported that serious accounting and financial reporting deficiencies
    precluded an accurate determination of the total costs associated with the
    timber sales program and, in fact, rendered the Service's cost information
    unreliable.^10 In 2003, we noted that the Service could not accurately
    report on the actual costs of individual work activities.^11 And in 2006,
    we reported that the Forest Service did not have a system that allowed it
    to determine the cost of its activities below the program level, resulting
    in a continuing focus on budget management without a corresponding focus
    on cost management.^12

    ^8Pub. L. No. 105-277, S 347, 112 Stat. 2681-298 (1998). The Forest Service
    is authorized to use either contracts or agreements in implementing
    stewardship projects. In this report, we refer to all such arrangements as
    contracts.

    ^9Pub. L. No. 108-7, S 323, 117 Stat. 275 (2003). For further information
    about the Forest Service's use of stewardship contracting authority, see
    our report Federal Land Management: Additional Guidance on Community
    Involvement Could Enhance Effectiveness of Stewardship Contracting,
    [25]GAO-04-652 (Washington, D.C.: June 14, 2004).

    ^10GAO, Financial Management: Annual Costs of Forest Service's Timber
    Sales Program Are Not Determinable, [26]GAO-01-1101R (Washington, D.C.:
    Sept. 21, 2001).

    ^11GAO, Forest Service: Little Progress on Performance Accountability
    Likely Unless Management Addresses Key Challenges, [27]GAO-03-503
    (Washington, D.C.: May 1, 2003).

    BLM Organization

    BLM administers more land than any other federal agency--about 261 million
    acres. Of that amount--most of which is located in the western states,
    including Alaska--roughly 69 million acres (about 26 percent) are
    commercial forests and woodlands. BLM's organizational structure includes
    national, state, and field-level units. National units include BLM's
    headquarters office as well as national centers with specific service and
    support responsibilities, such as the National Business Center in Denver,
    Colorado. State-level units consist of 12 state offices that implement
    BLM's activities in one or more states. Field-level units include 144
    district and field offices that carry out the "on the ground" activities,
    including timber sales, under the supervision of the BLM state offices.
    Figure 2 shows BLM-administered lands and the boundaries of BLM state
    jurisdictions.

    ^12GAO, Managerial Cost Accounting Practices: Department of Agriculture
    and the Department of Housing and Urban Development, [28]GAO-06-1002R
    (Washington, D.C.: Sept. 21, 2006).

    Figure 2: BLM-Administered Lands and State Jurisdictions

    BLM Timber Sales-Related Funding

    BLM's timber sales-related activities are funded through various
    appropriations. BLM conducts timber sales under two separate forestry
    programs. Most of BLM's timber program is associated with the agency's
    lands in western Oregon, which are managed expressly for the purpose of
    providing a permanent source of timber supply, protecting watersheds,
    regulating stream flow, contributing to the economic stability of local
    communities and industries, and providing recreational facilities under
    the provisions of the Oregon and California Sustained Yield Act of
    1937.^13 These lands, heavily forested with Douglas fir and western
    hemlock species, are responsible for the majority of BLM's timber
    production. BLM timber sales undertaken in western Oregon are funded by
    the Oregon and California Grant Lands appropriation; in fiscal year 2006,
    BLM allocated $27.1 million for the sale of this timber. The remainder of
    BLM's timber sales occur on other lands, which are managed for multiple
    uses, including the sale of timber. These timber sales are funded by the
    Management of Lands and Resources appropriation, which was $10.4 million
    in fiscal year 2006.

    In addition to these appropriations, BLM's timber sales-related activities
    rely on the Forest Ecosystem Health and Recovery Fund, the Timber Sales
    Pipeline Restoration Fund, and funds from stewardship contracting
    activities. The Forest Ecosystem Health and Recovery Fund, which funds
    timber salvage sales, is derived from the federal share of revenue from
    BLM salvage sales and forest health restoration treatments.^14 This
    revenue is made available to BLM for planning and preparing salvage timber
    for disposal, the administration of salvage timber sales, and subsequent
    site preparation and reforestation. Since fiscal year 1998, the fund has
    also been available for forest health restoration treatments, including
    timber sales designed to release trees from competing vegetation, control
    tree densities, or treat hazardous fuels. BLM's Timber Sales Pipeline
    Restoration Fund operates under the same legislation pertaining to the
    Forest Service's pipeline fund. Finally, authority for stewardship
    contracting was originally limited to the Forest Service but was extended
    to BLM in fiscal year 2003. When BLM was first granted stewardship
    contracting authority, the Assistant Secretary of the Interior for Land
    and Minerals Management had to approve each stewardship contracting
    project. That approval has since been delegated to the state directors.
    Generally, stewardship contracts valued at $100,000 or more are handled by
    BLM's National Business Center or by the Oregon State Office, while those
    valued at less than $100,000 are handled by the state office that
    originated them.

    ^1343 U.S.C. 1181a et seq.

    ^14The federal share of revenue is that portion of revenue not paid to the
    counties in accordance with the requirements of 43 U.S.C. 1181f and 43
    U.S.C. 1181-1 et seq., and Pub. L. No. 106-393.

    The Forest Service's Aggregation of Obligation and Expenditure Data Hinders
    Field-Level Project Management

    The Forest Service tracks obligation and expenditure data at the program
    and forest levels through its accounting system--the Department of
    Agriculture's Foundation Financial Information System (FFIS). In fiscal
    year 2000, when it transitioned to FFIS, the Service lost the ability to
    track information--such as employees' actual time charges and supply
    purchases--at the project level (i.e., individual timber sale level).
    Instead, FFIS aggregates data at the program level. Currently, neither
    FFIS nor any other automated system tracks obligations and actual
    expenditures at the project level. Beginning in fiscal year 2006, as a
    cost-saving measure, the Service removed from FFIS the codes that had
    previously associated program obligations and expenditures with individual
    ranger districts. To compensate for the lack of detailed information,
    field managers have spent considerable time and effort to develop and
    maintain a variety of "cuff records," such as spreadsheets, that contain
    the data they need to manage their projects, including timber sales.

    The Forest Service Tracks Obligations at the Program and Forest Levels

    Through FFIS, the Forest Service tracks, at the program and forest levels,
    timber sales-related obligations from the National Forest Fund as well as
    from the K-V, brush disposal, salvage sale, pipeline, and stewardship
    funds. These obligations include costs for personnel, vehicles, and
    supplies and equipment. Personnel costs related to timber sales include
    time spent preparing for a sale (e.g., identifying the sale area and
    completing related environmental analyses), administering the sale
    contract, monitoring the harvest, and conducting or overseeing the
    postharvest reforestation and restoration activities.

    Since its transition to FFIS, the Service has aggregated data on
    obligations at the program level rather than at the project level. Staff
    charge their time to a job code that represents the program most
    applicable to the activities they conducted--for example, to the job code
    associated with the Forest Products Program or the Vegetation and
    Watershed Management Program. Overall, according to Forest Service
    officials, staff time is by far the Service's biggest expenditure--about
    75 percent or 80 percent of the total. Other expenditures include vehicles
    and supplies, such as paint for marking sale boundaries and marking trees
    to be cut or left.

    In addition to grouping data by program, FFIS also aggregates the program
    data at the forest level. For example, when staff at the ranger district
    level, where projects are carried out, complete their timesheets, the
    program job code to which they charge time indicates the national forest
    with which their district is associated. The code does not, however,
    indicate the district or the specific project with which the transaction
    is associated. Obligations for supplies and equipment are also tracked at
    the forest level. Previously, FFIS contained "subunit" job codes that tied
    this information to ranger districts.^15 Beginning in fiscal year 2006, as
    a cost-saving measure, the Forest Service removed these subunit job codes
    for timber sales-related activities.

    For stewardship contracting activities, on the other hand, no separate job
    code exists in FFIS by which to identify staff time and other obligations
    related to these activities. FFIS has no code for stewardship contracting
    activities because the Forest Service does not have a budget line item for
    these activities. Rather, stewardship contracting is considered a tool for
    accomplishing various forest management objectives. Accordingly, staff
    time and other obligations for stewardship contracting activities are
    charged to the one or more programs that benefit from the stewardship
    project and are thus included in these programs' obligations. For example,
    if the wildlife program were expected to derive a benefit from a
    stewardship thinning project (e.g., because the project would result in
    more open space for elk), then the wildlife program would fund part of the
    cost of that project. Field offices maintain spreadsheets to track the
    monthly progress of individual stewardship contracting projects and the
    payment mechanisms involved in each one (e.g., nonmonetary credits earned
    for service work, payments from appropriated funds or trust funds, and
    payments from revenue retained from stewardship projects).

    Cost Issues Prompted the Forest Service to Further Aggregate Data

    The Forest Service's decision to further aggregate data at the forest
    level beginning in fiscal year 2006--that is, to reduce reporting to a
    single job code per program per forest--was intended as a cost-saving
    measure. By reducing the number of job codes in use, the Service would in
    turn reduce the associated number of records that are maintained in FFIS,
    thereby reducing its data management costs. The Forest Service determined
    that a significant portion of the records was associated with job codes
    used to track information associated with ranger districts. According to
    officials of the Forest Service's Office of the Chief Financial Officer,
    removing these job codes was part of a continuing effort, begun in fiscal
    year 2004, to reduce the "proliferation" of job codes that was leading to
    increased data management costs, and doing so resulted in savings of about
    $8.9 million in 2006 dollars from fiscal year 2004 through fiscal year
    2006.

    ^15The Forest Service refers to national forests as "units"; thus, a
    ranger district is a "subunit."

    Forest Service headquarters officials, and some regional officials, told
    us that detailed tracking of data is not needed at the ranger district or
    project level and, consequently, that it was not an efficient use of
    Service funds to pay the costs associated with this unnecessary level of
    detail. According to one regional official, for example, district or
    project information is not needed to manage at the forest level; the
    forest supervisor just needs to know how close the forest is to achieving
    its objectives and how much of its allocation is still available for
    obligation. Tracking at the program level frees up time to do actual work,
    he said, rather than tracking multiple job codes. Other officials also
    said they were not convinced that forest and district managers needed to
    track all of the information they had historically maintained. Agency
    records, said one official, were not designed to be a "personal diary" for
    managers.

    Several headquarters officials, including Albuquerque Service Center
    officials, told us that field managers could use the Service's planning
    and budgeting system, known as WorkPlan, to monitor their projects.
    WorkPlan is an automated system in which project managers estimate how
    much they will spend on one or more work activities, such as preparing or
    administering timber sales. Managers prepare their WorkPlans at the
    beginning of the fiscal year--entering into each plan the personnel,
    vehicles, and other equipment they anticipate they will need to carry out
    the planned activities. Managers are free to choose the level of
    specificity associated with their WorkPlans. For example, one manager
    might create a single WorkPlan to encompass a district's entire timber
    sales program, while another might create an individual WorkPlan for each
    planned timber sale or for each phase of a timber sale.

    However, field managers we talked to said that, while they find the
    WorkPlan system a valuable planning tool, it does not meet their need for
    detailed information on what they have obligated or actually expended.
    That is, the WorkPlan system obtains data on obligations and actual
    expenditures from FFIS--which, as noted earlier, aggregates these data by
    program and national forest, not by ranger district, project, or
    individual WorkPlan. Similarly, while other Service systems, such as the
    Forest Service Activity Tracking System, contain project-level
    information, that information does not include obligation or actual
    expenditure data. The headquarters official responsible for overseeing
    program activities in the national forest system agreed that the WorkPlan
    system cannot provide field managers with such data at the district or
    project level. This official, and other headquarters officials, said that
    field managers who felt that this detailed information was necessary must
    develop their own tracking mechanisms.

    Lacking the System Data They Need, Many Field Managers Rely on Cuff Records

    Although several Forest Service officials contend that information on
    district- and project-level obligations and expenditures is not needed,
    managers we talked to at various levels of the Service's field
    organization said they rely on cuff records, such as spreadsheets, to
    track this information and help manage their projects. For example, these
    managers told us that by using cuff records to track project obligations
    and expenditures, they can more easily determine whether obligations and
    expenditures are charged to the appropriate programs, manage forest or
    regional allocations, and respond to outside requests for information
    about agency timber sales. The amount of time and effort required to
    develop and maintain such cuff records is necessitated by the lack of a
    system that maintains data on obligations and actual expenditures at the
    district or project level.

    Field managers we interviewed said they rely on cuff records to accumulate
    the detail they find necessary to track projects' progress and ensure that
    obligations and expenditures are being charged to the appropriate
    programs, as well as to ensure that their projects' on-the-ground progress
    keeps pace with the obligations and expenditures associated with the
    projects. One forest official said, for example, that the subunit codes
    (the ones that were eliminated through the move to aggregated data) are
    necessary to keep track of districts' obligations and expenditures.
    Accordingly, he continues to use these codes in his cuff records.
    Additionally, he requires each district to account for its obligations and
    expenditures on a project-by-project basis (in addition to using WorkPlan)
    and to provide those data to him so that he can track this information
    against the overall allocation for the forest. By comparing obligations
    and expenditures with the on-the-ground progress of individual projects,
    this manager can determine whether project spending is on schedule and
    whether funds need to be reallocated toward (or away from) individual
    projects to ensure that forest priorities are accomplished.

    Such tracking of project spending is important because a project might
    encounter unexpected costs--for example, unanticipated steps might need to
    be taken in order to remedy damage caused by a mudslide. If the project is
    of high priority, according to Forest Service officials we interviewed,
    the project manager will need to shift funds from other, lower priority
    projects in order to provide the additional funds needed to complete the
    high-priority project. However, without district- or project-level data on
    obligations, it is difficult--if not impossible--to know which other
    projects have funds available to shift to the priority project, as well as
    to understand the potential effects on the projects from which funds were
    moved.

    At another forest, an official noted that it is now "almost impossible,"
    without the subunit job codes, to track obligations and expenditures at
    the district level. Regarding the forest's K-V fund, for example, this
    official used to be able to maintain K-V fund balances by district; to do
    that now, he counts on district managers to keep cuff records. Further,
    the forest developed a K-V tracking spreadsheet, which is now the only
    tool available to officials at that forest for tracking the K-V funds and
    needs among projects.

    With the removal of the subunit codes from FFIS, several field managers
    told us they must depend on their cuff records to detect and correct
    erroneous transactions to ensure that their limited funds are spent as
    intended. In one region, for example, an official said she routinely
    scours the FFIS transaction register--which shows, for an individual
    program or forest, a record of each obligation--looking for erroneous
    charges. Because the list of transactions for a single program or forest
    can be hundreds of pages long, she checks only transactions over $1,000.
    When she finds a charge that seems potentially erroneous (e.g., a name she
    does not recognize or a credit card purchase that is questionable for a
    given program), she queries the managers of the staff areas. These
    managers then must investigate the potentially incorrect charges and
    correct them, if appropriate. This official said she spent 15 percent to
    20 percent of her time in fiscal year 2006 using her cuff records to track
    down potentially erroneous charges and correct them. She found, for
    example, that numerous time charges had been miscoded, resulting in a
    total of about $60,000 being erroneously charged to the timber program;
    she followed up and had those charges removed. This inefficient
    verification and correction process is used because the Forest Service
    does not have a system that links each charge with an individual district,
    by project, to enable officials to more easily detect erroneous charges.

    Other managers we spoke with expressed similar concerns about their
    diminished ability--since the shift to aggregated data--to identify costs
    for particular activities and to monitor obligations against their
    forests' allocation. When multiple districts charge the same code,
    managers cannot tell--without keeping detailed cuff records--who might be
    charging more time or obligating more money than planned to a code or
    charging the wrong code. If more time or money is spent on a project than
    was planned, a manager must be prepared to either delay further work on
    the project or redirect funds from other projects to compensate. However,
    in order to take either of these steps in time to avert overspending, the
    manager must have timely information on each project's expenditures. The
    effects of exceeding allocations can go beyond the project in which it
    occurs, or even beyond the forest. For example, officials in one region
    told us that a forest within the region had exceeded its allocation for
    planning so substantially that planning activities throughout the region
    had to be curtailed in order to compensate for the forest's error.^16 As a
    result, these managers have created cuff records to monitor projects as
    they proceed.

    Finally, many Forest Service staff we spoke with said they keep cuff
    records so that they can respond to the many requests they receive for
    information. For example, according to officials in different regions,
    timber industry groups, congressional staff, and others frequently ask for
    information on individual timber sales, including information on the
    volume of timber offered and associated costs, particularly unit rates to
    produce timber (in dollars per thousand board feet).^17 Responding to
    these requests is difficult, according to Service officials we
    interviewed, because the Service does not maintain information at the
    timber sales level; rather, managers must resort to cuff records in order
    to furnish the information.

    Given the labor-intensive and time-consuming nature of maintaining the
    various cuff records in existence throughout the Forest Service, the
    actual cost savings resulting from the Service's decision to aggregate
    data are not clear because substantial field resources are being expended
    to compensate for the unintended effects of this decision. That is, while
    the reduction in job codes maintained in FFIS has helped the Service
    decrease its recognized data management costs, it has at the same time
    resulted in additional, uncalculated costs in staff time devoted to
    tracking obligation and expenditure data at the district level. In fact,
    the information we gathered from managers in the field seems to contradict
    the assertion of a Forest Service official, noted earlier, that tracking
    obligations and expenditures at the forest level frees up time to do
    actual work rather than tracking multiple job codes. Instead, field
    managers told us that the time they need to spend tracking has actually
    increased because the system no longer provides this information at the
    district level. In addition, neither FFIS nor WorkPlan tracks obligations
    and actual expenditures at the project level. Consequently, field managers
    who wish to track district- or project-level data must do so manually.
    Forest Service headquarters officials told us that the agency has not
    attempted to determine the amount of time currently spent by field
    managers tracking this information or the associated costs of doing so.

    ^16Responsibility for fund control, by program, is at the regional level.

    ^17A thousand board feet is a common measure of timber volume. One board
    foot equals 12 inches by 12 inches by 1 inch.

    The Bureau of Land Management's Detailed Data Help Managers Monitor Projects

    In contrast to the Forest Service, BLM uses its Management Information
    System (MIS) to track timber sales-related obligations and expenditures at
    a level of detail useful to managers throughout the organization. Drawing
    from the Department of the Interior's Federal Financial System (FFS), MIS
    tracks timber sales obligations--such as employee time charges, supplies,
    and equipment--at various levels. For example, MIS tracks obligations by
    funding source and activity type, then by office and, in many cases,
    individual timber sale. The two funding sources most closely associated
    with timber sales are the Oregon and California Grant Lands appropriation
    and the Forest Ecosystem Health and Recovery Fund. As for activity types,
    those related to timber sales include (1) managing commercial timber sales
    and (2) restoring forests and woodlands through timber sales (e.g.,
    managing salvage sales). MIS also tracks obligations by office, at both
    the state office level and the field organization level (e.g., district
    offices and field offices). Lastly, MIS tracks obligations by specific
    project, such as a specific timber sale or stewardship project, when a
    project code is assigned. Project codes are required for all sales
    conducted through the Forest Ecosystem Health and Recovery Fund, including
    salvage sales, but are optional for sales conducted with other funds,
    including commercial sales. For commercial sales, for example, managers
    are free to assign codes to individual projects but are not required to do
    so if they do not believe it is necessary. In some locations, according to
    a BLM official, an office may conduct only one or two timber sales a year
    and, thus, may not find project codes necessary to identify individual
    sales. In one location, BLM officials said they assign project codes after
    the general planning work has been completed; in another location,
    officials said they assign project codes once funding approval has been
    received. Staff working on a specific timber sale would charge their time
    to the relevant funding code, activity code, office code, and project
    code.

    Using MIS has allowed BLM to maintain and monitor obligations and
    expenditures at various levels of detail without relying on complicated
    cuff records, as the Forest Service does. For example, an official from
    BLM's National Business Center said that the job codes assigned to timber
    sales conducted under the Forest Ecosystem Health and Recovery Fund allow
    managers to track all data on an individual sale--from the planning phase
    (e.g., on environmental assessments) to the final administrative
    activities involved in closing the sale. In other cases, a state office
    official said, individual project codes are not assigned (e.g., for sales
    conducted through the Timber Sales Restoration Pipeline Fund), but those
    sales can be identified by activity code and location, allowing managers
    to track information at those levels. This official said he also uses MIS
    to generally monitor district offices' obligations and expenditures. For
    example, MIS data allow him to compare the vehicle and labor obligations
    and expenditures one office charged to the timber program with the same
    type of obligations and expenditures charged by other offices.

    The level of detail available in BLM's system is a function of the
    agency's experience in the 1990s, according to a BLM official, when the
    agency began losing money on timber sales and officials struggled with how
    to handle the reporting of these losses. One of the alternatives discussed
    was not calculating timber sales expenditures at all, so that they would
    not potentially embarrass the agency politically--an option that this
    official referred to as "contrived obfuscation." Instead, with an eye
    toward providing full transparency and performance accountability, BLM
    took the opposite tack, according to this official; it decided to track
    data at an even more detailed level.

    Detailed expenditure data--captured in a cost accounting system--help
    managers understand how expenditures can be controlled without sacrificing
    service to the public. For example, managers of BLM's Wild Horse and Burro
    Program in Utah were able to use MIS to track expenditures on each work
    activity associated with the program.^18 Program managers identified
    expenditures for each activity and determined that the largest
    expenditures were for labor, particularly in conducting the adoption
    process and doing postadoption inspections, and for feed expenditures
    during the preadoption holding period. Armed with this information, BLM
    was able to reduce its labor expenditures by making greater use of
    volunteers and reduce its feed expenditures by capturing animals just
    prior to scheduled adoptions. In 1998, BLM collected slightly more than
    5,700 animals. After changing the process in 1999, based on expenditure
    data, the program collected more than 7,700 animals and reduced the
    expense of holding and feeding them by $600,000 (about $710,000 in 2006
    dollars).

    MIS has also proven useful in allowing BLM managers to make
    expenditure-based decisions with regard to timber sales. For example,
    expenditure data were used to determine the efficiency and effectiveness
    of individual BLM state timber programs. Trend data were generated for
    several years to compare how effectively the individual BLM state offices
    were accomplishing their projects relative to their expenditures. This
    information was used to move funding and resources among state offices to
    more effectively meet program goals and bureau priorities.

    ^18These work activities are planning and completing adoptions; gathering,
    holding, monitoring, and taking censuses of animals; and conducting
    compliance inspections.

    Both Agencies Have Systems That Track Revenue by Timber Sale

    The Timber Sale Accounting system maintains the Forest Service's timber
    sales revenue data, while two systems--the Timber Sale Information System
    and the Collections and Billing System--maintain BLM's timber sales
    revenue data. Both agencies' systems track sale and harvest information by
    individual timber sale; they also automatically bill purchasers and track
    payments. Both agencies also have systems for tracking revenue generated
    under their stewardship contracting authority, after initially struggling
    with how to implement the systems.

    Forest Service's Timber Sale Accounting System Maintains Revenue Data

    The Forest Service's Timber Sale Accounting (TSA) system maintains data on
    all timber-related revenue. The system tracks the volume, type, and value
    of timber harvested by individual timber sale; automatically generates
    bills to timber purchasers; and tracks payments against these bills. TSA
    tracks revenue from sales conducted with appropriated monies as well as
    those conducted with monies from the salvage sale and pipeline funds. TSA
    also tracks payments made by purchasers to fund reforestation and brush
    disposal activities. Recently, the Forest Service added a module to TSA to
    track revenue stemming from activities conducted under its stewardship
    contracting authority. These activities often involve the exchange of
    timber for services and thus can be difficult to account for with
    traditional systems.

    TSA maintains timber sales revenue data by individual timber sale contract
    or permit. Each contract or permit is given a unique identifying number in
    TSA, which provides a standardized process for managing the financial
    aspects of timber sales contracts and permits. (Permits involve the sale
    of forest products other than timber, such as firewood, mushrooms,
    Christmas trees, and decorative grasses and foliage.) TSA produces a
    monthly statement of account for each contract and permit; this statement
    contains a detailed breakdown of activities under that contract or permit
    and ensures accurate computation of revenue due the government.

    The revenue comes to the government in the form of cash or credits. Cash
    comes from timber purchasers' payments of bills for timber volume removed,
    or stumpage. A Forest Service sale inspector inspects the sales units at
    least once a month and reports the volume of timber harvested. TSA then
    automatically calculates the amount due, based on the amount harvested and
    the product rate, and generates a bill to the purchaser. Once payment is
    received, TSA distributes the cash to the appropriate revenue accounts,
    such as the National Forest System Fund, the K-V fund, and the Salvage
    Sale Fund. TSA also supplies this information to FFIS, where it is
    recognized as earned income.^19

    TSA also tracks "purchaser credits" and "cost share credits." Purchaser
    credits represent the value of road construction or reconstruction the
    timber purchaser performed. The purchaser receives credit for the work,
    which is deducted from the appraised value of stumpage.^20 TSA tracks the
    purchaser credits used to pay for (or offset) stumpage from year to year,
    as well as the balance of outstanding (unused) credits. TSA also tracks
    cost share credits, which represent the value of construction or
    reconstruction costs shared between the Forest Service and the purchaser.
    For example, if the Forest Service contributed materials, such as rock for
    a road surface, and the purchaser did the work, the value of the
    purchaser's share would appear in TSA. Purchaser and cost share credits
    can be used to pay for timber removed by the purchaser.

    Stewardship contracting has posed challenges for the Forest Service
    because the barterlike aspect of stewardship contracting can make it
    difficult to account for using traditional accounting systems. As a
    result, the Forest Service has struggled to incorporate into TSA a way to
    track the collection and distribution of revenue stemming from stewardship
    contracts. The accounting theory governing what are essentially barter
    transactions (although the value of both the timber and the services is
    appraised) is demanding, according to a regional official, and TSA
    programmers have devoted much time to this area.

    ^19In its audit report on the Forest Service's fiscal year 2006 financial
    statements, KPMG, the Service's independent auditor, noted that 7 of the
    208 timber sales revenue transactions tested were not recognized in the
    correct year. The report said that, although the Forest Service continues
    to improve its accounting operations, such deficiencies result in
    additional time and effort on the part of Service staff to research and
    resolve.

    ^20For contracts awarded prior to April 1, 1999, however, credits owed the
    purchaser for roadwork were not subtracted from the appraisal value (as is
    done for contracts awarded since April 1, 1999) but, rather, offset the
    stumpage value when the timber was removed.

    Until recently, the Forest Service had not automated the accounting for
    all activities conducted through stewardship contracts. Staff had to use
    manual spreadsheets to track, outside of TSA, the value of timber removed
    and the value of service work completed, thereby allowing them to compute
    the amount the purchaser owed for timber volume removed, if any.
    Accordingly, data on stewardship contracting activities have been entered
    into TSA for only the past few years, and the data were incomplete,
    according to the system administrator. In October 2006, during our review,
    the Forest Service implemented a TSA module that tracks most of the
    stewardship contracting data.

    Within TSA, the monetary activity associated with stewardship contracts is
    now tracked using two unique revenue codes. The first code represents a
    suspense account that contains monies collected from timber purchasers as
    advance payments--that is, money to pay for timber that is removed before
    the service work has been completed. In these cases, the advance monies
    are used to pay for the timber volume removed. Then, as the service work
    is performed, those monies are automatically refunded to the purchaser,
    and the stewardship credits are applied as payment for the volume removed
    to date. When all the service work has been completed and there is
    expected to be additional timber volume to be paid for with cash (i.e.,
    when the value of the timber exceeds the value of the service work), then
    the remaining suspense fund money is transferred to the retained receipts
    account. This account, represented by the second revenue code, is a
    region- and forest-specific revenue account that contains cash collected
    for timber when the value of the timber exceeded the value of the service
    work. In other words, a contractor has to pay the Forest Service only if
    the total timber value exceeds the total cost of services. The retained
    receipts account may be used to fund additional stewardship sales that
    have been approved by the regional forester.

    With the October 2006 addition of the stewardship accounting module, TSA
    now tracks the amount of stewardship work to be performed, the amount
    performed to date, the volume and value of timber removed, and any cash
    paid the contractor for service work performed (when the value of the
    service work exceeded the value of the timber). TSA automatically applies
    the available stewardship credits to pay for timber volume removed to
    date.

    Although TSA now has a module designed to capture monetary transactions
    related to stewardship contracts, regions and forests said they will
    continue maintaining spreadsheets to track the monthly progress of
    individual stewardship contracting projects and the payment mechanisms
    involved in each one. For example, the spreadsheets track nonmonetary
    "accrual" transactions, which represent the accrued value of credits
    earned by contractors for service work completed. These earned stewardship
    credits (nonmonetary) are used to "pay" for timber harvested and are
    important because the Forest Service has to know how much credit to extend
    when the purchaser wants to cut timber. Without this credit, the Service
    would demand a cash payment before the timber could be cut. Accordingly,
    stewardship work paid for with credits must be tracked separately from
    work paid for with cash. Every month, the field offices send their
    completed spreadsheets to the Albuquerque Service Center, which enters
    into FFIS the nonmonetary accrual information. At the end of April 2007,
    the service center was working on automating this process as well.

    BLM Uses Two Systems to Track Timber Sales Revenue

    In tracking timber sales revenue, BLM uses the Timber Sale Information
    System (TSIS) and the Collections and Billing System (CBS). TSIS maintains
    specific contract data for individual timber sales, including the volume,
    type, and value of timber harvested. Amounts owed by purchasers are
    calculated in TSIS and then entered into CBS, which is BLM's official
    revenue accounting system. CBS generates bills sent to purchasers and
    records collections received for contracts. TSIS and CBS track revenue
    from sales conducted with appropriated monies in addition to those
    conducted with monies from the Forest Ecosystem Health and Recovery Fund
    and the Timber Sales Restoration Pipeline Fund.

    TSIS and CBS maintain timber sales revenue data by individual timber sale
    contract through a unique sale number. This alphanumeric sale number
    identifies the state where the sale takes place, the field office
    administering it, the year, and the sequential sale number for that office
    in that year.

    Throughout the month, information from TSIS on timber harvest activity is
    entered into CBS, which generates bills sent to purchasers. These bills
    are based on the quantity and value of the timber harvested but may also
    include things such as road maintenance fees. At the end of each month,
    data in CBS and TSIS are reconciled.

    Collections are received either in the form of a check sent from the
    purchaser directly to the sale office or as an electronic funds transfer
    sent directly to the bank. All collections are posted to CBS, and a unique
    transaction number is included in the posting. This transaction number is
    generated either by CBS (for collections sent to the sale office) or by
    the bank (for collections electronically transferred there). When
    collection posting is complete, CBS automatically produces a statement
    that is then used to update TSIS. Data in the two systems are again
    reconciled. The reporting system in CBS allows staff to track revenue in
    various ways, such as by sale, purchaser, type of timber, or fund.

    BLM developed a separate system for recording revenue from timber sales
    conducted under stewardship contracting authority, the Stewardship
    Contracting Information Database (SCID). For revenue from stewardship
    contracts, BLM uses CBS to track monetary collections and SCID to track
    credits. Upon approval of a new stewardship contracting project, initial
    project information is entered into SCID, and each project is assigned a
    special project code that is used in both SCID and CBS.^21 Financial and
    project progress information is reported monthly in both systems. Because
    of the special circumstances created by the unique nature of stewardship
    contracting, BLM has devised collections solutions for the different types
    of contracts. One requirement common to both regular timber sales and
    stewardship contracting is that, prior to cutting or removing any forest
    products from BLM-administered lands, a contractor must either pay in
    advance for the product or provide some form of security as a payment
    bond. For stewardship contracts, the contractor has the additional option
    of using earned conservation credits (similar to the Forest Service's
    stewardship credits) in lieu of an advance payment or a payment bond.
    Contractors' advance payments are recorded in CBS and directed to a
    deposit suspense account. When the value of the product removed exceeds
    the amount deposited, the contractor makes additional payments, which are
    entered into CBS and directed to the regular stewardship contract product
    sales fund.

    Conservation credits are also tracked in SCID. When the value of the
    product removed is equal to or lesser than the value of the contractor's
    conservation credits, transactions are recorded in SCID. Once a
    contractor's conservation credits have been exhausted, payments for
    further product removed are recorded in CBS.

    Conclusions

    The Forest Service, like other federal agencies, is faced with limited
    resources with which to carry out multiple activities, such as maintaining
    campgrounds and trails, protecting wildlife habitat, and providing a
    supply of forest products to society. Given this multitude of pressing
    needs, the Service's efforts to reduce its data management costs--and thus
    allow more dollars to be directed to on-the-ground activities through
    which the Service carries out its mission--would appear laudable. As an
    unintended consequence, however, the agency has made it more difficult and
    resource intensive for field managers to manage the very activities that
    the Service seeks to emphasize. And because many field officials are
    maintaining cuff records to compensate for the lack of detailed data
    available from the Service's system, the Service cannot ensure that the
    hoped-for level of cost savings will materialize. That is, reductions in
    the Service's recognized data management costs may be offset by increases
    in the use of field resources to fill in the data gaps. More broadly,
    maintaining detailed data on the cost of the Service's various activities
    would not only assist field managers as they carry out the Service's
    mission but also allow the Service to better assess and improve the
    efficiency and cost-effectiveness of these activities and thereby improve
    its fiscal accountability.

    ^21Stewardship contracts involving projects funded by the Forest Ecosystem
    Health and Recovery Fund retain the project code already assigned them.

    Recommendation for Executive Action

    To ensure that field managers responsible for carrying out Forest Service
    operations have the data they need to manage effectively, and to provide
    the Congress and the public with useful cost data to assess the fiscal
    accountability of Service operations, we recommend that the Secretary of
    Agriculture direct the Chief of the Forest Service to systematically
    determine the information needs of the field managers on whom the Service
    relies to carry out its operations, and, based on the results of this
    analysis, take appropriate action to provide data that meet those
    information needs. The Service might consider, for example, creating a
    subsidiary system to track obligations and expenditures at a detailed
    level without further burdening the Department of Agriculture's primary
    system, FFIS.

    Agency Comments

    We provided the Departments of Agriculture and the Interior with a draft
    of this report for review and comment. The Forest Service generally agreed
    with the findings and recommendations in the report. Similarly, the
    Department of the Interior generally agreed with the report's contents.
    The Forest Service's and Interior's written comments are reproduced in
    appendixes II and III, respectively.

    As agreed with your offices, unless you publicly announce the contents of
    this report earlier, we plan no further distribution until 30 days from
    the report date. At that time, we will send copies to interested
    congressional committees, the Secretaries of Agriculture and the Interior,
    the Chief of the Forest Service, the Director of the Bureau of Land
    Management, and other interested parties. We will also make copies
    available to others upon request. In addition, the report will be
    available at no charge on the GAO Web site at http://www.gao.gov.

    If you or your staff have any questions about this report, please contact
    me at (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices
    of Public Affairs and Congressional Relations may be found on the last
    page of this report. GAO staff who made major contributions to this report
    are listed in appendix IV.

    Robin M. Nazzaro
    Director, Natural Resources and Environment

    Appendix I: Objectives, Scope, and Methodology

    Our overall objective was to examine the current mechanisms used by the
    Department of Agriculture's Forest Service (Service) for tracking timber
    sales-related obligations, expenditures, and revenue. In addition, given
    that the Department of the Interior's Bureau of Land Management (BLM) also
    conducts timber sales, we included that agency in our review.
    Specifically, our objectives were to determine the extent to which (1) the
    Forest Service tracks timber sales-related obligations and expenditures,
    including the extent to which the Service uses this information in making
    management decisions; (2) BLM tracks timber sales-related obligations and
    expenditures, and how BLM's methods for doing so compare to those of the
    Forest Service; and (3) the Forest Service and BLM account for their
    timber sales-related revenue.

    To determine how the Forest Service tracks timber sales-related
    obligations and expenditures and the extent to which Service managers use
    this information to make decisions about their programs, we reviewed
    agency documents and interviewed officials in headquarters and in six of
    the nine Forest Service regional offices about their timber sales
    accounting policies and procedures. Because the Forest Service has no
    agencywide system to track obligations and expenditures at the project
    level, we visited Forest Service regional offices in Alaska, Georgia,
    Montana, Oregon, Utah, and Wisconsin to interview officials responsible
    for tracking timber sales projects and their related obligations and
    expenditures.^1 At each of these regional offices, we interviewed
    officials responsible for tracking timber sales-related obligations,
    expenditures, and revenue, and officials responsible for planning and
    conducting timber sales-related activities. We also met with officials of
    one or more forest offices in each of six regions, as well as officials of
    five ranger districts, to discuss what information they need, the methods
    they use to capture it, and how they use it in managing their day-to-day
    operations.^2 During our site visits, we collected and reviewed records
    used to identify and track timber-related data. These included "cuff
    records," such as individually maintained computer spreadsheets and
    databases, along with manual modifications made to reports generated by
    the WorkPlan system. During one visit, we also accompanied an "activity
    review team" from the regional office on its site visits to evaluate field
    activities. We also reviewed documents and reports related to the
    Department of Agriculture's existing financial system, the Foundation
    Financial Information System (FFIS). We also reviewed previous work by GAO
    and the Department of Agriculture's Office of Inspector General.

    ^1These states contain, respectively, the Forest Service's Alaska,
    Southern, Northern, Pacific Northwest, Intermountain, and Eastern regional
    offices.

    ^2The information we gathered from field managers was not intended to be
    representative of all field managers. Instead, our interest was in gaining
    a perspective from these managers about the data they need and use in
    managing their projects. Our interviews ultimately revealed some recurring
    common themes across the locations we visited.

    Because BLM was not the primary focus of our review, our study of the
    extent to which it tracks timber sales-related obligations and
    expenditures was more limited than our work at the Forest Service.
    Additionally, unlike the Forest Service, BLM employs standardized
    agencywide guidance and systems to track this information at the project
    level; therefore, significant variation across different geographic
    locations was unlikely. Nevertheless, in order to interview officials
    responsible for tracking timber sales projects and their related
    obligations and expenditures, we visited several BLM locations, including
    the BLM state office in western Oregon that manages the majority of the
    agency's timber program, as well as a district office in Oregon; the BLM
    state office in Idaho, where we spoke with officials from the state
    office, one district office, and two field offices; and one field office
    in Montana. In addition, we visited BLM headquarters in Washington, D.C.,
    and the National Business Center in Denver, Colorado, and we conducted
    telephone interviews with BLM officials knowledgeable about the agency's
    cost accounting practices and systems. We obtained and reviewed documents
    on BLM's policies, procedures, and practices for tracking timber sales
    obligations and expenditures, including system manuals and other
    documentation for BLM's Timber Sale Information System (TSIS), Management
    Information System (MIS), and the Department of the Interior's Federal
    Financial System (FFS). Finally, we relied, in part, on GAO's previous
    work on accounting practices within the Department of the Interior.^3

    During our visits to Forest Service and BLM offices, including their
    respective budget and finance centers, we learned how both agencies
    account for timber sales-related revenue. We reviewed relevant portions of
    agency manuals and handbooks and documents detailing procedures to
    identify and report revenue, including revenue that the agencies manage
    through participation in an interagency agreement governing timber sales
    financed by the Timber Sales Pipeline Restoration Fund. We reviewed
    detailed descriptions of the Forest Service's revenue process, systems,
    and its internal controls prepared by the independent auditor, KPMG,
    during KPMG's annual audit of the Forest Service's financial statements,
    and we read the fiscal year 2006 audit report. We reviewed KPMG's overall
    approach and sampling methodology and determined that KPMG's relevant
    findings were sufficiently reliable for understanding sales-related
    revenue in the Forest Service. We also obtained information about the
    Forest Service's Timber Information Management (TIM) system, which
    contains detailed information on timber sales contracts. We also obtained
    information about the Timber Sale Accounting (TSA) system, which maintains
    timber sales revenue data, and interviewed the system administrator. To
    gain an understanding of how TIM and TSA maintain data, we held
    discussions with cognizant officials on internal controls over timber
    sales contracts, data entry practices, and revenue collection procedures.
    For BLM, we followed the same general procedures with respect to the
    following revenue tracking systems: the Collections and Billing System
    (CBS), FFS, and TSIS. Finally, in addition to reviewing both agencies'
    standard systems for timber revenue collection, we interviewed Forest
    Service and BLM officials about the progress they are making in designing
    or modifying systems to track revenue associated with stewardship
    contracting projects. Based on the collective information and findings
    from our discussions and interviews, we believe these data are
    sufficiently reliable for (separately and comparatively) reporting on
    systems for tracking timber sales-related revenue in the Forest Service
    and BLM.

    ^3GAO, Managerial Cost Accounting Practices at the Department of the
    Interior, [29]GAO-07-298R (Washington, D.C.: May 24, 2007).

    We conducted our review from April 2006 through April 2007 in accordance
    with generally accepted government auditing standards, which included an
    assessment of data reliability and internal controls.

    Appendix II: Comments from the Forest Service

    Appendix III: Comments from the Department of the Interior

    Appendix IV: GAO Contact and Staff Acknowledgments

    GAO Contact

    Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov

    Staff Acknowledgments

    In addition to the individual named above, Stephen Gaty, Assistant
    Director; Lisa Brownson; Sandra Davis; Barry Grinnell; Angela Pleasants;
    and Pam Tumler made key contributions to this report. Nancy Crothers,
    Denise Fantone, Tim Guinane, Kevin Jackson, Rich Johnson, Phil McIntyre,
    and Jack Warner also made important contributions to this report.

    (360702)

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    [36]www.gao.gov/cgi-bin/getrpt?GAO-07-764 .

    To view the full product, including the scope
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    Highlights of [37]GAO-07-764 , a report to congressional requesters

    June 2007

    FEDERAL TIMBER SALES

    Forest Service Could Improve Efficiency of Field-Level Timber Sales
    Management by Maintaining More Detailed Data

    For years, GAO has raised concerns about the ability of the Department of
    Agriculture's Forest Service (Service) to track the amounts it obligates
    for and spends on timber sales and to use this information in managing the
    sales. Timber sales are generally carried out by ranger districts (the
    lowest level of the Service's decentralized organizational structure),
    which are overseen by national forest offices. The Bureau of Land
    Management (BLM) within the Department of the Interior also conducts
    timber sales. This report examines the extent to which (1) the Forest
    Service tracks timber sales-related obligations and expenditures,
    including the extent to which the Service uses this information in making
    management decisions; (2) BLM tracks timber sales-related obligations and
    expenditures; and (3) both agencies track their timber sales-related
    revenue.

    [38]What GAO Recommends

    GAO recommends actions the Forest Service can take to ensure that its
    field managers have the obligation and expenditure data they need to
    manage effectively. In commenting on a draft of this report, the Forest
    Service generally agreed with its findings and recommendations. Similarly,
    the Department of the Interior agreed with the report's contents.

    The Forest Service tracks the funds it spends to conduct timber
    sales--such as funds for personnel and equipment--in a way that does not
    provide the detailed data many field managers, such as district rangers
    and forest supervisors, told us they need in order to properly manage
    these sales. The Service's accounting system aggregates obligation and
    expenditure data by the programs that fund the sales--such as the Forest
    Products Program and the Salvage Sale Program--and by national forest,
    rather than by individual timber sale or by ranger district. Forest
    Service headquarters officials told us that field managers do not need
    sale-by-sale or district-level data. However, many field managers told us
    that such data are crucial to their management of timber sales. For
    example, without such data to monitor the progress and cost of individual
    sales, field managers have difficulty both knowing when to redirect
    resources among sales and assessing the cost-effectiveness of individual
    sales. Without detailed data in the Service's accounting system, many
    field managers have developed manual "cuff records," such as spreadsheets,
    to maintain obligation and expenditure data at the individual sale or
    ranger district level. However, maintaining these cuff records can be time
    consuming, according to field managers, and can thus take time away from
    conducting "on the ground" activities such as overseeing timber harvests.
    Although headquarters officials said that aggregating data has reduced the
    cost of managing the accounting system data, the resources field managers
    are expending to compensate for the lack of detailed system data may
    partially offset those savings. However, the Service does not know the
    cost of maintaining cuff records, and it has not systematically identified
    field managers' information needs.

    BLM, in contrast to the Forest Service, tracks many timber sales
    obligations and expenditures by individual sale. BLM has chosen to
    maintain detailed data in order to allow its field managers to use these
    data in managing timber sales--by, for example, monitoring the progress
    and cost of sales. As a result of BLM's approach, field managers have
    access to detailed data without relying on cuff records.

    Overall, the Forest Service and BLM have systems that track revenue data
    by timber sale. These systems track the volume, type, and value of timber
    harvested; generate bills to timber purchasers; and track payments against
    those bills. Both agencies have struggled with, but are resolving, the
    challenge of tracking revenue from sales conducted under their stewardship
    contracting authority. Stewardship contracts generally involve the
    exchange of goods, such as timber, for contract services, such as thinning
    of brush. The Forest Service recently added a module to its accounting
    system to track revenue from stewardship contracting projects, while BLM
    has developed a database for this purpose.

    References

    Visible links
      25. http://www.gao.gov/cgi-bin/getrpt?GAO-04-652
      26. http://www.gao.gov/cgi-bin/getrpt?GAO-01-1101R
      27. http://www.gao.gov/cgi-bin/getrpt?GAO-03-503
      28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1002R
      29. http://www.gao.gov/cgi-bin/getrpt?GAO-07-298R
      30. http://www.gao.gov/
      31. http://www.gao.gov/
      32. http://www.gao.gov/fraudnet/fraudnet.htm
      33. mailto:fraudnet@gao.gov
      34. mailto:JarmonG@gao.gov
      35. mailto:AndersonP1@gao.gov
      36. http://www.gao.gov/cgi-bin/getrpt?GAO-07-764
      37. http://www.gao.gov/cgi-bin/getrpt?GAO-07-764
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