Forest Service: Unauthorized Use of the National Forest Fund (Letter
Report, 08/29/97, GAO/RCED-97-216).
Pursuant to a congressional request, GAO reviewed the Forest Service's
use of its National Forest Fund, focusing on: (1) the timber harvest
volumes, the timber receipts for fiscal years (FY) 1990 through 1996,
and the timber sale funds returned to the Treasury from the National
Forest Fund; (2) the actions taken by the Forest Service toward the end
of FY 1996 to cover the shortfall in the National Forest Fund; (3)
whether the Forest Service has been using the proper funding source for
the spotted owl guarantee payment; and (4) the Forest Service's plans
for FY 1997 to ensure that the National Forest Fund has sufficient funds
to make the payments to the states.
GAO noted that: (1) GAO's analysis of timber sales activities in FY 1990
through 1996 showed that the key indicators of the timber
program--harvested volumes, timber receipts, and amounts available for
return to the U.S. Treasury--have dramatically decreased; (2) in FY
1996, the forest service was faced with having insufficient funds
available in the National Forest Fund to make the required payments to
the states--including the legislatively required payment to compensate
certain counties in California, Oregon, and Washington for the listing
of the northern spotted owl as a threatened species (spotted owl
guarantee)--and to meet its other required obligations; (3) in August
and September 1996, the Forest Service transferred to the National
Forest Fund a total of $56.1 million in timber sale receipts originally
intended for deposit in other specific Forest Service funds; (4)
however, even with this adjustment, a shortfall of $17.8 million
remained; (5) in mid-September, the Forest Service requested that the
Treasury make available $135 million appropriated under the Omnibus
Budget Reconciliation Act of 1993, for the 1996 payment of the spotted
owl guarantee; (6) the Forest Service received approval for the
appropriation on November 26, 1996; (7) as of August 12, 1997, the
National Forest Fund had a balance of about $116 million for FY 1996
activities; (8) the Forest Service plans to return this amount to the
Treasury's General Fund; (9) the Forest Service used the National Forest
Fund in FY 1994 and 1995 to make the spotted owl guarantee payments to
certain counties in California, Oregon, and Washington; (10) this was an
unauthorized use of the fund; (11) instead, the Forest Service was
required to use the spotted owl guarantee appropriation specifically
enacted for this purpose; (12) on January 29, 1997, the Forest Service:
(a) provided initial guidance to its regions on the priority for the
distributions of receipts to ensure that funds are available to make
payments to the states and to meet other obligations; and (b) required
the regions to initiate a review process to ensure that the receipts
were managed in accordance with these priorities; (13) in May 1997, the
Forest Service established a National Task Force for Trust Funds and
Payments to the States; and (14) the task force was charged with
developing a national policy for the management of receipts and trust
funds so that there would be sufficient receipts available in the
National Forest Fund to make the payments to the states and to meet
other mandatory obligations.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-216
TITLE: Forest Service: Unauthorized Use of the National Forest Fund
DATE: 08/29/97
SUBJECT: Federal/state relations
Timber sales
Endangered species
Appropriated funds
Federal fund accounts
Receipt accounts
Funds management
Budget deficit
National forests
Accounting procedures
IDENTIFIER: National Forest Fund
Knutson-Vandenberg Trust Fund
Salvage Sale Fund
Timber Sale Deposit Fund
California
Oregon
Washington
Northern Spotted Owl Guarantee
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Cover
================================================================ COVER
Report to the Chairman, Committee on Agriculture, House of
Representatives
August 1997
FOREST SERVICE - UNAUTHORIZED USE
OF THE NATIONAL FOREST FUND
GAO/RCED-97-216
National Forest Fund
(141056)
Abbreviations
=============================================================== ABBREV
NFF - National Forest Fund
OMB - Office of Management and Budget
Letter
=============================================================== LETTER
B-277560
August 29, 1997
The Honorable Robert F. Smith
Chairman, Committee on Agriculture
House of Representatives
Dear Mr. Chairman:
This report responds to your request for information on the Forest
Service's use of its National Forest Fund. You were concerned
whether, with the declining receipts from the sale of federal timber,
the Forest Service will have sufficient funds available in the future
to meet its National Forest Fund obligations, including its required
payments to the states. You pointed out that although the Forest
Service had historically returned large sums of money from the sale
of timber to the U.S. Treasury, it found itself in a deficit
position in fiscal year 1996 and had to use appropriated funds to
fund the shortfall.
As agreed with your office, we provided information on (1) the timber
harvest volumes, the timber receipts for fiscal years 1990 through
1996, and the timber sale funds returned to the Treasury from the
National Forest Fund; (2) the actions taken by the Forest Service
toward the end of fiscal year 1996 to cover the shortfall in the
National Forest Fund; (3) whether the Forest Service has been using
the proper funding source for the spotted owl guarantee payment; and
(4) the Forest Service's plans for fiscal year 1997 to ensure that
the National Forest Fund has sufficient funds to make the payments to
the states.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Our analysis of timber sales activities in fiscal years 1990 through
1996 showed that the key indicators of the timber program--harvested
volumes, timber receipts, and amounts available for return to the
U.S. Treasury--have dramatically decreased. Harvested volumes
decreased 65 percent; timber receipts decreased 55 percent; and the
funds available for return to the Treasury decreased 86 percent.
In fiscal year 1996, the Forest Service was faced with having
insufficient funds available in the National Forest Fund to make the
required payments to the states--including the legislatively required
payment to compensate certain counties in California, Oregon, and
Washington for the listing of the northern spotted owl as a
threatened species (spotted owl guarantee)--and to meet its other
required obligations. The Forest Service took two actions to remedy
this problem. First, in August and September 1996, the Forest
Service transferred to the National Forest Fund a total of $56.1
million in timber sale receipts originally intended for deposit in
other specific Forest Service funds.\1 However, even with this
adjustment, a shortfall of $17.8 million remained. In mid-September,
the Forest Service requested that the Treasury make available $135
million appropriated under the Omnibus Budget Reconciliation Act of
1993 (P.L. 103-66, as amended), for the 1996 payment of the spotted
owl guarantee. The Forest Service received approval for the
appropriation on November 26, 1996. As of August 12, 1997, the
National Forest Fund had a balance of about $116 million for fiscal
year 1996 activities; the Forest Service plans to return this amount
to the Treasury's General Fund.
The Forest Service used the National Forest Fund in fiscal years 1994
and 1995 to make the spotted owl guarantee payments to certain
counties in California, Oregon, and Washington. This was an
unauthorized use of the fund. Instead, the Forest Service was
required to use the spotted owl guarantee appropriation specifically
enacted for this purpose. In addition, the Forest Service must
continue to use this appropriation until fiscal year 2003.
On January 29, 1997, the Forest Service (1) provided initial guidance
to its regions on the priority for the distributions of receipts to
ensure that funds are available to make the payments to the states
and to meet other obligations and (2) required the regions to
initiate a review process to ensure that the receipts were managed in
accordance with these priorities. In May 1997, the Forest Service
established a National Task Force for Trust Funds and Payments to the
States. The task force was charged with developing a national policy
for the management of receipts and trust funds so that there would be
sufficient receipts available in the National Forest Fund to make the
payments to the states and to meet other mandatory obligations.
--------------------
\1 Timber sale receipts are deposited in the Timber Sale Deposit
Fund, and once the timber is harvested and the receipts become
"earned," these funds are transferred to the National Forest Fund and
other forest funds. Originally, the Forest Service had intended that
this $56.1 million in timber sale receipts be deposited in the
Salvage Sale Fund, which is used for preparing and administering
future salvage sales, and in the Knutson-Vandenberg Fund, which is
used for reforestation activities after the timber has been
harvested.
BACKGROUND
------------------------------------------------------------ Letter :2
The Forest Service, within the U.S. Department of Agriculture,
manages the 192- million-acre national forest system with its 155
national forests. The national forests generate receipts from a
variety of resources, including recreation, grazing, and minerals;
however, timber sale receipts have traditionally generated more than
90 percent of the total receipts. For example, in fiscal year 1996,
timber sale receipts totaled about $576 million of the Forest
Service's $638 million in receipts from all resources.
Receipts from all resources, except timber, are deposited directly in
the National Forest Fund (NFF),\2 which is a receipts-holding account
from which the Forest Service's obligations are distributed. For
timber sale receipts, the Forest Service first distributes a portion
of the receipts to two funds that are used for various timber sale
activities, such as reforestation or preparing and administering
future salvage sales. The remaining timber sale receipts are
deposited in the NFF and combined with the receipts from other
resources. Each forest has its own sub-NFF account that is
accumulated at the regional level, and all regional NFF accounts are
accumulated to develop the national NFF. At the end of the fiscal
year, any amount not distributed from the NFF is deposited in the
General Fund of the U.S. Treasury. (App. I provides additional
information about the NFF and its receipts and distributions for
fiscal years 1990 through 1996 and the Forest Service's projections
for fiscal year 1997.)
--------------------
\2 The NFF is an "indefinite appropriation," which is an
appropriation of an unspecified amount of money.
THE DECLINE IN THE TIMBER
HARVESTS, TIMBER RECEIPTS, AND
RETURNS TO THE TREASURY
------------------------------------------------------------ Letter :3
For fiscal years 1990 through 1996, the key indicators of the timber
program--harvested volumes, timber receipts, and amounts available
for return to the Treasury--decreased dramatically. As can be seen
in table 1, for timber sales--the largest component of the Forest
Service's receipts--harvested volumes decreased by 65 percent,
receipts decreased by 55 percent, and the amounts available for
return to the Treasury decreased by 86 percent.
Table 1
Harvested Volumes, Timber Receipts, and
Amounts Available for Return to the
Treasury, Fiscal Years 1990 Through 1996
(Dollars in millions; volume in billions
of board feet)
Amount
availabl
Amount Amount e for
distribu distribu return
Harvest Timber ted to ted from to
Fiscal year volume receipts NFF NFF\a Treasury
-------------------- -------- -------- -------- -------- --------
1990 10.5 $1,368.8 $822.7 $410.3\b $412.4
1991 8.5 1,157.2 649.8 373.6\c 276.2
1992 7.3 1,090.8 504.6 363.7\c 140.9
1993 5.9 989.0 416.0 339.7\c 76.3
1994 4.8 910.2 420.9 340.4\c 80.5
1995 3.9 681.1 294.2 292.7\c 1.5
1996 3.7 609.3 186.8\e 264.4 -77.6\e
1996 adjusted 3.7 609.3 320.5\d, 264.4\g 56.1\h
f
----------------------------------------------------------------------
Note: This table does not reflect the additional funds that may have
been available for return to the Treasury in fiscal years 1994 and
1995 had the spotted owl payments been made pursuant to P.L. 103-66,
as amended.
\a Distributions from the NFF related to timber normally include the
payments to the states, the roads and trails fund, and the
purchaser-elect roads account. Any funds remaining are available for
return to the Treasury. These receipts relate only to the timber
resource and not other receipts.
\b No spotted owl payment in fiscal year 1990.
\c Spotted owl payment made out of the NFF.
\d Includes the Knutson-Vandenberg Fund and the Salvage Sale Fund
collections of $20.5 million and $35.6 million, respectively, from
August and September 1996 that were transferred to the NFF.
\e Insufficient funds remaining in the NFF to make the spotted owl
payment for timber.
\f Includes the timber portion of the General Fund
Appropriation--$133.7 million-- pursuant to P.L. 103-66, as amended.
\g Includes the timber portion of the spotted owl payment of $133.7
million.
\h This amount is included in the total balance of $116 million that
the Forest Service plans to return the Treasury. As of August 12,
1997, these funds were still in the NFF.
One of the reasons for the decline in the level of harvests was the
listing of the northern spotted owl as a threatened species, which
virtually halted all timber sales in the Pacific Northwest. The
listing was followed by a decline in timber receipts and returns to
the Treasury. However, the decline in the amounts available for
return to the Treasury was even more severe because the Forest
Service chose to make the payments for the spotted owl guarantee from
the NFF during fiscal years 1994 and 1995. In fiscal year 1995, the
amount available for return to the Treasury from the timber program
dropped to a low of $1.5 million. In fiscal year 1996, the NFF
lacked sufficient funds to meet its obligations--including the
spotted owl payments--by a deficit of $77.6 million. Therefore, the
Forest Service exercised its authority to use the General Fund
Appropriation--Northern Spotted Owl Guarantee--provided for by P.L.
103-66, as amended.
ACTIONS TAKEN BY THE FOREST
SERVICE TO MAINTAIN A POSITIVE
NFF BALANCE IN FISCAL YEAR 1996
------------------------------------------------------------ Letter :4
In fiscal year 1996, the Forest Service was faced with having
insufficient funds available in the NFF to make its payments to the
states--including the spotted owl guarantee--and to meet its other
required obligations. The Forest Service took two actions to remedy
this problem. First, the Forest Service transferred to the NFF a
total of $56.1 million originally intended to be deposited in the
Salvage Sale Fund and the Knutson-Vandenberg Fund. However, even
with this additional money, a shortfall of $17.8 million still
remained in the NFF. The Forest Service's next action was to request
the appropriation of about $135 million for the 1996 payments for the
spotted owl guarantee authorized by the Omnibus Budget and
Reconciliation Act of 1993 (P.L. 103-66, as amended).
FOREST SERVICE TRANSFERRED
$56.1 MILLION TO THE NFF
---------------------------------------------------------- Letter :4.1
The Forest Service's first analysis--performed in May 1996--of the
estimated receipts for fiscal year 1996 showed that the NFF's
anticipated receipts were dangerously low. The analysis, generally
performed to estimate the payments to the states, resulted in the
Forest Service's beginning a series of internal discussions to
identify why the receipts were so low. While the Forest Service
estimated that it would be able to cover the payments to the states,
it also estimated that only $33.6 million would be available in the
NFF to cover all other needs.
Even though the Forest Service was aware as early as May 1996 that
the NFF was projected to be dangerously low at the end of 1996, and
informally discussed the potential shortage internally between April
and August, it did not formally initiate procedures to activate the
spotted owl guarantee appropriation until September 1996. Instead,
on August 27, 1996, the Forest Service instructed its regions to
transfer the funds to the NFF that had been originally intended for
deposit in the Salvage Sale Fund and Knutson-Vandenberg Fund for the
remainder of the fiscal year to make up for the shortfall. The
memorandum pointed out that the problem was occurring for several
reasons, including the reduction in total receipts, the requirement
for the spotted owl guarantee payments to some states, the setting
aside of funding for tripartite land exchanges\3 by the national
forests covered by the spotted owl guarantee, and the deposit of
receipts in both the Salvage Sale Fund and the Knutson-Vandenberg
Fund. The memorandum pointed out that the regions needed to review
the balances in their NFF, Salvage Sale Fund, and Knutson-Vandenberg
Fund and stressed that if the regions had a deficit in their NFF
accounts, it should be offset by a transfer of funds from one of the
other accounts. These adjustments resulted in a total of $56.1
million being transferred to the NFF--$35.6 million that would have
been deposited in the Salvage Sale Fund and $20.5 million that would
have been deposited in the Knutson-Vandenberg Fund. According to the
Forest Service's records, the regions used a variety of approaches to
make these accounting adjustments. While most regions made the
adjustments at the regional level, some were made at the forest
level, and one region was granted permission to make no adjustments
at all.
Although the regions and forests were told that the August and
September accounting adjustments would be reversed, thus allowing
them to deposit the funds into the Salvage Sale Fund and the
Knutson-Vandenberg Fund as originally intended, this was not possible
because the balance in the NFF is unavailable for disbursement after
the close of the fiscal year. These funds must be returned to the
Treasury, and therefore, the Forest Service's Salvage Sale Fund and
the Knutson-Vandenberg Fund lost this amount for fiscal year 1996.
--------------------
\3 Tripartite land exchanges are authorized by the General Exchange
Act of 1922 and the Weeks Act of 1911. A tripartite land exchange
involves three parties: the landowner, the Forest Service, and the
purchaser of the timber. Under these authorities, the Forest Service
can make timber sales contracts that contribute a portion of receipts
to a suspense account to fund the land exchanges. Because these
amounts are captured before any distributions to the NFF they are, in
effect, a direct deduction from any amount otherwise being deposited
into the NFF. The Forest Service instructed its regional offices not
to initiate these exchanges in fiscal year 1996.
FOREST SERVICE RECEIVED $135
MILLION SPOTTED OWL
GUARANTEE APPROPRIATION
---------------------------------------------------------- Letter :4.2
According to Forest Service officials, several situations arose after
the initial analysis of the NFF shortfall. In early summer, the
Pacific Northwest Region sharply curtailed its timber harvesting
program because of the extensive fire season it was experiencing,
which reduced the estimated receipts from that region. In addition,
several internal deliberations raised concerns about the budget
implications of requesting the spotted owl guarantee appropriation,
which necessitated additional discussions with congressional
committees. Also, according to Forest Service officials, external
concerns arose about the interpretation of the statutory amounts
allowed under the legislation--that is, Office of Management and
Budget (OMB) attorneys questioned whether the Forest Service was
entitled to the entire spotted owl guarantee or just the shortfall.\4
Because of the uncertainty about whether the Forest Service would
receive the appropriation, the Forest Service needed to assure the
U.S. Department of Agriculture that all external parties would agree
to the request before it could be submitted.
Thus, in early September 1996, the Forest Service started working
with OMB to obtain its concurrence with the request for the spotted
owl guarantee appropriation from the Treasury because of the $17.8
million shortfall in the NFF. In a letter dated September 19, 1996,
the Forest Service requested that the Treasury provide the spotted
owl guarantee appropriation for fiscal year 1996 of $135 million as
authorized by P.L. 103-66, as amended. In its request, the Forest
Service stated that its national forest receipts had declined
significantly in fiscal year 1996 and would not be sufficient to
cover the full payments due the states, including the spotted owl
guarantee.
On October 3, 1996, the Treasury advised the Forest Service that
while the Forest Service had the authority to obtain the spotted owl
guarantee appropriation, funds could not be deposited directly into
the NFF as requested and that the request must be resubmitted for a
new General Fund expenditure account.\5 Five weeks later, on November
7, 1996, the Forest Service resubmitted its request to the Treasury
for a new General Fund expenditure account entitled "Payments to the
States, Northern Spotted Owl Guarantee, Forest Service." According to
a Forest Service official, this delay in resubmitting the request to
Treasury resulted from higher-priority tasks of year-end closings.
Because they were assured that they would be receiving the
appropriation and that the moneys would be received in fiscal year
1997 for the fiscal year 1996 payments, the Forest Service considered
the year-end closings a higher priority.
On November 26, 1996, the Treasury--with the concurrence of
OMB--approved the request and provided a warrant of $135 million to
the Forest Service to make the spotted owl guarantee payments.
Because the deficit in the NFF was only $17.8 million, when the
Forest Service placed the $135 million into the NFF, it created a
balance of $115.9 million after final adjustments. Forest Service
officials told us that they will return this amount to the Treasury;
however, as of August 12, 1997, the Forest Service still retained the
money in the NFF.
--------------------
\4 According to Forest Service officials, the Treasury made the
determination that the entire $135 million should be requested and
agreed that any balance remaining should be returned to the Treasury.
\5 According to the Treasury, the spotted owl guarantee appropriation
comes from the General Fund of the Treasury and as such, is not a
receipt and therefore could not be deposited into the NFF, which is a
receipt account. This appropriation had to be deposited into its own
account, from which disbursements could be made.
POOR FINANCIAL MANAGEMENT
CONTRIBUTED TO THE NFF
SHORTFALL IN FISCAL YEAR
1996
---------------------------------------------------------- Letter :4.3
Our review of the fiscal year 1996 timber balances in the NFF
revealed that many forests--especially in the Pacific Northwest
Region--had negative year-end balances in their NFF accounts.
According to the Forest Service's records, the negative balances at
the forest level resulted when these forests transferred funds from
the NFF to the Salvage Sale Fund and the Knutson-Vandenberg Fund
during the year, even if sufficient receipts had not been received on
the particular sale in the current fiscal year. According to a
Forest Service official, the forests and regions were not aware that
the NFF is closed out annually. The Salvage Sale Fund and the
Knutson-Vandenberg Fund, however, remain open.
A negative balance in the NFF is very similar to writing a check
without any money in the bank. The forests with negative NFF
balances were forests that relied on the fact that other forests
would have sufficiently large positive balances to counteract their
negative amounts.\6 For example, while 10 of the 19 forests in the
Pacific Northwest Region had negative balances of about $37 million,
the overall region had a positive balance of about $24 million.
While we do not know the extent of all of these types of adjustments
nationwide, we have reason to believe that their total amount would
exceed $37 million. However, even if the amount was only $37
million, it still would mean, in effect, that over 10 forests in the
Pacific Northwest Region deposited nothing in the NFF for the entire
fiscal year. We believe that these adjustments contributed to the
overall shortfall in the NFF and portray a lack of sound financial
management by the Forest Service. It is our view that such
adjustments, if permitted, should be limited to the current year's
receipts.
--------------------
\6 When these negative balances were rolled up to the regional level,
however, each region had a positive balance at the year's end.
According to the Forest Service, only a positive national NFF balance
is required--each region's and each forest's balance need not be
positive.
UNAUTHORIZED USE OF THE NFF TO
MAKE SPOTTED OWL GUARANTEE
PAYMENTS IN FISCAL YEARS 1994
AND 1995
------------------------------------------------------------ Letter :5
The Forest Service used the NFF in fiscal years 1994 and 1995 for the
required spotted owl guarantee payments to certain counties in
California, Oregon, and Washington. This was an unauthorized use of
the fund. Instead, the Forest Service was required to use the
appropriations specifically made available by the Congress by the
Omnibus Budget and Reconciliation Act of 1993 (P.L. 103-66, as
amended) for the spotted owl guarantee and should continue to use
this appropriation until fiscal year 2003, when it expires.
The Forest Service is required to pay the states 25 percent of the
gross receipts earned on national forests for the use by the counties
in which the receipts were earned.\7 For specific counties in
California, Oregon, and Washington, the listing of the northern
spotted owl as a threatened species accounted for a substantial drop
in the size of timber harvests--and therefore a substantial drop in
the receipts that the counties would have received. To reduce this
fiscal impact, the Congress included the "safety net" spotted owl
guarantee legislation in the yearly appropriations for fiscal years
1991, 1992, and 1993, and provided that the payments to the states be
made out of the NFF--an indefinite appropriation. The Omnibus Budget
Reconciliation Act of 1993 provided appropriations to make such
payments to these states beginning in fiscal year 1994 through fiscal
year 2003 and established the formulas for calculating the payments.
The Forest Service did not use this authority in 1994 and 1995;
rather, it elected to make the spotted owl guarantee payments from
the NFF as it made its normal payments to the states.\8 The Forest
Service chose this method of payment because ample receipts were
available in the NFF, which, if not used for the payment, would have
been returned to the Treasury. The Forest Service also told us that
its decision not to use the spotted owl appropriation was articulated
in its budget explanatory notes approved by OMB and submitted to the
House and Senate Committees on Appropriations.
The Forest Service should have used the spotted owl appropriation
rather than the NFF to make the spotted owl guarantee payment for
fiscal years 1994 and 1995. This specific appropriation was enacted
in lieu of the Congress's prior practice in fiscal years 1991, 1992,
and 1993 of providing annual appropriations from the Forest Service's
receipts for this purpose. Using the specific appropriation is in
keeping with 31 U.S.C. 1301(a), which provides that public funds may
be used only for the purpose or purposes for which they were
appropriated. This provision prohibits charging authorized items to
the wrong appropriation and unauthorized items to any appropriation.
Moreover, the Forest Service's disclosure in its budget submission to
the Congress is not a substitute for legislation and, therefore, did
not authorize continued payments from the NFF.
--------------------
\7 Gross receipts are defined as the amount of moneys deposited in
the Salvage Sale Fund and the Knutson-Vandenberg Fund, the amount of
Purchaser Road Credits used, and deposits to the NFF from all
resources.
\8 P.L. 103-66, as amended, also authorized the spotted owl
guarantee appropriation for the Bureau of Land Management, which has
been using its authority since fiscal year 1994.
THE FOREST SERVICE'S ACTIONS IN
FISCAL YEAR 1997 TO IMPROVE THE
NFF'S MANAGEMENT
------------------------------------------------------------ Letter :6
On January 29, 1997, the Deputy Chief, National Forest System, issued
initial guidance to the regions on the actions they should take in
the short term and discussed the long-term actions needed to more
effectively manage these funds. In the short term, the regions were
asked to implement a series of distribution priorities for timber
sale receipts to ensure that funds are available to make the payments
to the states and to meet other obligations, as well as to support
critical elements of the reforestation and salvage sale programs.\9
The guidance also required that each region initiate a sale review
process within the region to ensure that the trust funds and timber
sale accounts are being managed in accordance with these priorities.
According to Forest Management and Financial Management officials,
the intent of the guidance was not to dictate a specific priority or
action for each individual timber sale. Rather, the guidance was
intended to establish a framework for managing overall receipts and
to make the regions and the forests aware of their obligations and of
the need to manage their programs to meet these obligations.
For the long term, the January 29, 1997, guidance pointed out that
solutions to the problem will require changes in both work processes
and patterns of behavior and that effective controls will also
require changes in accounting procedures. The Deputy's memorandum
concluded that, clearly, actions are needed at all levels to tackle
the problem. At the national level, an improved process is needed
for program-level decisions to cover the required payments. To make
progress in these areas, the Deputy said that he would appoint a task
force in early 1997 to focus on the long-term solutions that would
ensure that sufficient money is available to make the 25-percent
payments to the states.
We contacted each of the regions to gain an understanding of how they
were implementing the short-term actions discussed in the January 29,
1997, guidance. All of the regions told us that they would manage
the timber receipts and corresponding deposits to the NFF from a
forest or regional perspective rather than on a sale-by-sale basis.
Most of the regions have instituted monitoring procedures, such as
developing a spreadsheet showing projected total receipts and
balances for each forest's NFF after required obligations are met.
However, four regions said that because they had not experienced any
problems in the past, they had instituted no special procedures.
On May 2, 1997, the Forest Service provided additional guidance to
the regions on how to correct some of the accounting adjustments made
in August and September 1996. As pointed out earlier, these
adjustments created a multitude of problems. For example, some of
the regional and forest adjustments resulted in overpayments to the
states of about $730,000 in fiscal year 1996. According to the
Forest Service, these overpayments will be adjusted in the states'
fiscal year 1997 payments.
In addition, this guidance formally advised the regions that the
amounts transferred to the NFF in fiscal year 1996 that had
originally been intended for deposit in the Salvage Sale Fund and the
Knutson-Vandenberg Fund would not be returned to each forest but
instead would be returned to the Treasury. However, the guidance
permitted each region to recover these funds out of fiscal year 1997
receipts to the extent that the region was able to meet all of its
NFF requirements. In other words, if a forest earned fiscal year
1997 receipts beyond those needed for the payments to the states and
for other NFF obligations that normally would have been deposited in
the NFF, the forest could deposit that excess into the Salvage Sale
Fund and the Knutson-Vandenberg Fund to the extent that it had
transferred funds originally intended for those accounts in fiscal
year 1996. Forest Service officials told us that the regions had
sufficient receipts in fiscal year 1997 to recover the $56.1 million
they had transferred to the NFF in fiscal year 1996. The Forest
Service is also projecting that there will be a balance in the NFF at
the end of the fiscal year of $127.5 million to be returned to the
Treasury.
The Forest Service also told us that in early October 1997, it would
request the fiscal year 1997 spotted owl guarantee appropriation
amounting to $129.9 million. According to Forest Service officials,
because the Treasury account is already established, they should not
experience the same types of problems for fiscal year 1997.
A final long-term action involved establishing, in late May 1997, the
National Task Force for Trust Funds and Payments to the
States--composed of regional and headquarters fiscal, accounting, and
forest management representatives. The task force was charged with
developing a national policy on the management of receipts and trust
funds so that sufficient receipts would be available in the NFF to
make the payments to the states along with meeting the Forest
Service's other mandatory obligations. According to the task force
leader, the task force plans to provide definitive guidance on
periodic monitoring of NFF balances; adjustments among the NFF, the
Salvage Sale Fund, and the Knutson-Vandenberg Fund; and the allowable
uses of excess NFF balances. The task force estimates that it will
issue its final report in August 1997. In addition, the Forest
Service told us that it eventually plans to incorporate the results
of the task force's report into the Forest Service's Manual and its
fiscal and timber management handbooks.
--------------------
\9 Historically, regions and forests did not consider the obligations
for the payments to the states and other NFF obligations as part of
their funds management requirements.
OBSERVATIONS
------------------------------------------------------------ Letter :7
Traditionally, the Forest Service has had a large timber program that
returned hundreds of millions of dollars to the U.S. Treasury.
However, the magnitude of receipts returned to the Treasury masked
some of the Forest Service's underlying financial management
weaknesses. Only in recent years, with the drastic reduction in
timber sales and corresponding decreases in receipts, has it become
more apparent that the Forest Service's financial management of its
receipts and trust funds is in need of improvement.
Lured into a false sense of security by the historically large
returns to the Treasury, the Forest Service was unprepared to handle
the crises it faced in fiscal year 1996. The problems of
insufficient funds in its NFF and the loss of $56.1 million to other
timber-related funds could have been lessened, if not mitigated, if
the Forest Service had better financial controls over the adjustments
made among the Salvage Sale Fund, the Knutson-Vandenberg Fund, and
the NFF and more oversight of its funds' management practices. The
inability of the Forest Service to initiate the spotted owl guarantee
appropriation in a timely manner greatly contributed to the problems
experienced at the forest, regional, and national levels. However,
the fiscal year 1996 occurrences are an illustration of the much
larger fiscal accountability problems facing the Forest Service.
In short, because the Forest Service does not now have the benefit of
hundreds of millions of dollars as a cushion, it is now incumbent on
the Forest Service to establish sound financial management controls.
We have pointed out some of these weaknesses in two of our recent
reports on the Knutson-Vandenberg Fund.\10 On balance, while we
believe that the establishment of the task force to review the
management of the trust funds is a good first step, we also believe
that the Forest Service has a long way to go toward solving its
fiscal and accountability problems.
--------------------
\10 Forest Service: Management of Reforestation Program Has
Improved, but Problems Continue (GAO/RCED-94-257, Sept. 15, 1994);
Forest Service's Reforestation Funding: Financial Sources, Uses, and
Condition of the Knutson-Vandenberg Fund (GAO/RCED-96-15, June 21,
1996).
RECOMMENDATIONS
------------------------------------------------------------ Letter :8
Because the Forest Service inappropriately made the spotted owl
guarantee payments out of the National Forest Fund in fiscal years
1994 and 1995, its accounting records do not properly reflect the
operations of the National Forest Fund for these years. Therefore,
we recommend that the Secretary of Agriculture request that the
Secretary of the Treasury establish the spotted owl appropriations
account for fiscal years 1994 and 1995, pursuant to P.L. 103-66, as
amended, and continue to use this authority until the termination of
the statute in fiscal year 2003.
We also recommend that the Secretary of Agriculture direct the Chief
of the Forest Service to make the necessary accounting adjustments to
properly reflect the use of the spotted owl appropriation in lieu of
the National Forest Fund to make the spotted owl payments in fiscal
years 1994 and 1995.
AGENCY COMMENTS
------------------------------------------------------------ Letter :9
We provided a draft of this report to the Forest Service for review
and comment. We met with Forest Service officials, including the
Deputy Director, Forest Management; the Director, Financial
Management; the Director, Program Development and Budget Staff; the
Acting Associate Deputy Chief, Operations; and a representative of
the U.S. Department of Agriculture's Office of General Counsel. The
Forest Service said that the information in our report accurately
presented the operations of the National Forest Fund during fiscal
years 1990 through 1997. The Forest Service acknowledged that it
should have used the spotted owl guarantee appropriation instead of
the NFF during fiscal years 1994 and 1995, and agreed with the
recommendations for corrective action.
---------------------------------------------------------- Letter :9.1
We conducted our review at the Forest Service's headquarters and each
of its regional offices. We interviewed officials and reviewed and
analyzed records of the Forest Service's headquarters fiscal, budget,
and forest management staffs. We also interviewed and obtained
information from the Division of Funds Management, U.S. Treasury;
and the Agriculture Branch of the Office of Management and Budget.
We did not independently verify the reliability of the data provided
nor of the systems from which they came. In addition, we did not
attempt to determine what the results would have been if the Forest
Service had used the proper appropriation to make the spotted owl
guarantee payments in fiscal years 1994 and 1995 because we were
specifically asked to provide a historical view of what actually
occurred in fiscal years 1990 through 1996. We conducted our review
from May 1997 through August 1997 in accordance with generally
accepted government auditing standards.
As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 15 days after the date of this letter. We will then send
copies to the Secretary of Agriculture and the Chief of the Forest
Service. We will also make copies available to others on request.
If you or your staff have any questions about this report, please
call me at (206) 287-4810. Major contributors to this report are
listed in appendix II.
Sincerely yours,
James K. Meissner
Associate Director, Energy, Resources,
AND SCIENCE ISSUES
============================================================== Letter
THE NATIONAL FOREST FUND AND ITS
DISTRIBUTIONS, FISCAL YEARS 1990
THROUGH 1996
=========================================================== Appendix I
The National Forest Fund (NFF)--an indefinite appropriation--was
established pursuant to the Act of March 4, 1907 (P.L. 59-242, as
amended, 16 U.S.C. 499). This act provides that all moneys received
from the national forests are deposited into a Department of the
Treasury miscellaneous receipts account--the NFF. For timber sale
receipts, the Forest Service first distributes a portion of the
receipts into two funds that are used for various timber sale
activities, such as reforestation or preparing and administering
future salvage sales. The remaining timber sale receipts are
deposited into the NFF and combined with the receipts from other
resources. Moneys from the NFF are transferred to other specified
Treasury accounts or funds to satisfy various legal obligations.
Moneys remaining after meeting these obligations must be transferred
to the Treasury at year-end. Basically, the NFF serves as a holding
account for national forest receipts from such resources as grazing,
mining, recreation, and timber--after payments are made to the
Salvage Sale Fund and the Knutson-Vandenberg Fund from the timber
receipts--and are available for use by the Forest Service. The
statutes listed below provide the authority for making the
distributions:
-- Payments to the States (Act of May 23, 1908, P.L. 60-136, as
amended, 16 U.S.C. 500). This act requires that 25 percent of
all receipts from each national forest be paid to the state in
which the forest is located to be used to benefit roads and
schools in the counties where the receipts were earned. This
payment was established as a substitute for property taxes on
national forest lands because the federal government cannot be
taxed by state or local governments. For purposes of
calculating the payments to the states, receipts are defined as
the amount of receipts deposited in the Salvage Sale Fund, the
Knutson-Vandenberg Fund, the amount of Purchaser Road Credits
used, and the amount deposited in the NFF from all resources.
-- Payments to States Concerning Northern Spotted Owl (Department
of the Interior and Related Agencies Appropriations Acts, 1991,
1992, and 1993, P.L. 101-512, P.L. 102-154, and P.L. 102-381,
respectively). The Forest Service's appropriations acts for
fiscal years 1991 through 1993 provided for payments to
California, Oregon, and Washington, for counties that had lost
portions of the 25-percent payments to the states because of the
listing of the northern spotted owl as a threatened species.
These payments, which are in lieu of the 25-percent payments to
the states, are based on an average of the receipts from prior
years. The Forest Service continued to make these payments from
the NFF in fiscal years 1994 and 1995. The Forest Service was
not authorized to make these payments from the NFF and should
have used the spotted owl guarantee appropriation established
specifically for that purpose by the Congress in the Omnibus
Budget Reconciliation Act of 1993 (P.L. 103-66, as amended).
-- Payments to Minnesota (Act of June 22, 1948, 16 U.S.C. 577g).
This act provides a special payment to the state of Minnesota
for lands in the Boundary Waters Canoe Area in St. Louis, Cook,
and Lake counties. Under the act, the Secretary of Agriculture
pays 0.75 percent of the appraised value of certain Superior
National Forest lands for distribution to the counties.
-- Roads and Trails Fund (Act of March 4, 1913, as amended, 16
U.S.C. 501). This provision specifies that 10 percent of all
moneys received--except salvage sale receipts--from the national
forests during each fiscal year are to be expended for the
construction and maintenance of roads and trails within the
national forests in the states where the receipts were
collected. Since fiscal year 1982, the amount deposited into
the Roads and Trails Fund has been transferred to the General
Fund of the Treasury to offset annual appropriations for road
and trail construction and maintenance.
-- Purchaser-Elect Roads (National Forest Management Act of 1976,
P.L. 94-588, 16 U.S.C. 472a(i)). This act allows certain
timber purchasers --designated as small business concerns--to
elect to have the Forest Service build the roads required by the
timber sale contracts. If the purchaser makes the election, the
price paid for the timber will include the estimated cost of the
roads. The Forest Service transfers this amount from the NFF to
the purchaser-elect account.
-- Acquisition of National Forest Lands Under Special Acts (Act of
June 11, 1940, 54 Stat. 297; Act of June 11, 1940, 54 Stat.
299, Act of May 26, 1944, 58 Stat 227; and Act of Dec. 4, 1967,
P.L. 90-171, 81 Stat. 531, 16 U.S.C. 484a). The first three
acts provide for a special fund to acquire lands within critical
watersheds to provide soil stabilization and the restoration of
vegetation. The funds are available only for certain national
forests in Utah, Nevada, and southern California. The final act
provides for the replacement of National Forest System lands
acquired by state, county, or municipal governments or public
school authorities in land exchanges.
-- Range Betterment Fund (Federal Land Policy and Management Act of
1976, P.L. 94-579, as amended by the Public Rangelands
Improvement Act of 1978, P.L. 95-514, 43 U.S.C. 1751). This
act provides that 50 percent of all moneys received as fees for
grazing domestic livestock on national forest lands in the 16
western states is to be credited to a separate account in the
Treasury. These funds are authorized to be appropriated and
made available for use for on-the-ground rehabilitation,
protection, and improvements of such lands.
-- Recreation Fee Collection Costs (Land and Water Conservation
Fund Act of 1965, P.L. 88-578, 78 Stat. 897, as amended by the
Omnibus Budget Reconciliation Act of 1993, P.L. 103-66, 16
U.S.C. 4601-6a(i)(1)). These acts authorize the Secretary of
Agriculture in any fiscal year to withhold from certain fees
collected an amount equal to the cost of collecting such fees,
but not more than 15 percent of the fees collected. Such
amounts shall be retained by the Secretary and shall be
available for expenditure without further appropriation to cover
such fee collection costs.
-- Tongass Timber Supply Fund (Alaska National Interest Lands
Conservation Act of 1980, P.L. 96-487, 94 Stat. 1761, as
amended). This act was intended to maintain the timber supply
from the Tongass National Forest to the dependent industry at a
rate of 4.5 billion board feet per decade and to protect the
existing timber industry in southeast Alaska from possible
reductions in the timber sale program as a result of wilderness
and national monument designations in the Tongass National
Forest. This fund was eliminated by the Tongass Timber Reform
Act (P.L. 101-626), enacted in November 1990.
-- Timber Sales Pipeline Restoration Fund (Omnibus Consolidated
Rescissions and Appropriations Act of 1996, P.L. 104-134).
This act created a 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, to be used for the preparation of additional
timber sales that are not funded by annual appropriations and
for the backlog of recreation projects.
In fiscal years 1990 through 1996, the Forest Service received almost
$3.9 billion in national forest fund receipts and distributed about
$2.6 billion to these various funds or accounts. The remaining $1.3
billion was returned to the U.S. Treasury. In addition, the $378
million deposited in the Roads and Trails Fund was also returned to
the U.S. Treasury. Table I.1 provides the details, by fiscal year,
of these transactions.
Table I.1
National Forest Fund Receipts and
Distributions, Fiscal Years 1990 Through
1996
(Dollars in thousands)
Fiscal year
--------------------------------------------------------------
NFF activity 1990 1991 1992 1993 1994 1995 1996 1997\a
------------------------- ------ ------ ------ ------ ------ ------ ------ ------
Receipts
-----------------------------------------------------------------------------------------
Timber $822,7 $649,8 $504,5 $416,0 $420,8 $294,2 $186,7 $212,6
00 01 92 05 54 22 76 11
Grazing 9,133 9,753 9,464 9,268 9,779 7,780 6,572 5,845
Land use 4,748 4,740 4,983 5,282 5,760 6,051 4,485 6,950
Recreation--special uses 27,483 27,952 14,948 36,102 36,785 36,774 37,526 33,544
Recreation user fees 13,734 14,958 31,542 13,186 10,870 9,547 9,977 7,675
Minerals 32,369 19,145 9,107 1,600 1,156 1,422 1,616 1,391
Power 982 1,134 1,245 1,426 1,648 1,597 1,885 1,846
Quartz crystals 26 0 26 25 32 22 36 0
NFF total\b 911,17 727,48 575,90 482,89 486,88 357,41 248,87 269,86
5 2 8 4 4 6 3 2
End-of-year adjustments\c 15,134 - 68,865 - 20,012 1,262 30,651 0
6,150 37,723
NFF to be distributed 926,30 721,33 644,77 445,17 506,89 358,67 279,52 269,86
9 2 3 1 6 8 4 2
Spotted owl appropriation 0 0 0 0 0 0 135,02 129,89
2\d 4\d
Total to be distributed 926,30 721,33 644,77 445,17 506,89 358,67 414,54 399,75
9 2 3 1 6 8 6 6
Distributions
-----------------------------------------------------------------------------------------
Payments to states 344,83 152,18 169,00 159,24 162,62 132,06 119,52 98,579
5 9 1 3 0 9 4
Spotted owl guarantee 0 169,34 153,82 145,27 145,27 140,14 135,02 129,89
payment 8 2 9 6 9 2 4
Payments to Minnesota 1,251 1,252 1,255 1,263 1,267 1,267 1,267 1,267
Roads and trails\e 91,010 72,642 57,480 48,187 48,569 35,609 24,784 27,680
Special acquisitions 1,103 1,148 1,190 1,212 1,252 1,317 1,069 1,069
50-percent grazing 4,489 4,796 4,647 4,545 4,800 3,811 3,212 2,882
Purchaser-Elect Program 4,859 5,806 8,546 8,457 5,945 5,945 5,945 5,945
Recreation user fees 8,927 9,723 9,716 8,571 7,065 6,206 6,485 4,989
Tongass Timber Supply 42,887 0 0 0 0 0 0 0
Fund
Timber Sales Pipeline 0 0 0 0 0 0 1,400 0
Restoration Fund
Returned to the U.S. 426,94 304,42 239,11 68,414 130,10 32,306 115,83 127,45
Treasury\b 8 9 7 3 9\f\ 1
-----------------------------------------------------------------------------------------
Note: This table does not reflect the $145 million from fiscal year
1994 and the $140 million from fiscal year 1995 that could have been
returned to the Treasury had the spotted owl payment been made
pursuant to P.L. 103-66, as amended.
\a Based on the Forest Service's adjusted second quarter projections.
\b Figures may not add because of rounding.
\c At the end of the fiscal year, some adjustments are made to other
funds before a final amount is determined as the amount in the NFF to
be distributed.
\d These are the amounts of the spotted owl guarantee appropriations
for fiscal years 1996 and 1997.
\e Since fiscal year 1982, the amount distributed to the Roads and
Trails Fund has been returned to the Treasury to offset
appropriations for road and trail construction.
\f According to Forest Service officials, this amount will be
transferred back to the Treasury. However, as of August 12, 1997,
the transfer had not been made.
Source: Forest Service ASR-08 reports and Computation for
Distribution of Moneys Received From National Forests for Fiscal
Years 1990 to 1996.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
ENERGY, RESOURCES, AND SCIENCE
ISSUES
Linda L. Harmon
John P. Murphy
Victor S. Rezendes
Hugo W. Wolter, Jr.
OFFICE OF GENERAL COUNSEL
Alan R. Kasdan
*** End of document. ***