Forest Service Management: Little Has Changed as a Result of the Fiscal
Year 1995 Budget Reforms (Chapter Report, 12/02/98, GAO/RCED-99-2).

Pursuant to a congressional request, GAO reviewed the Forest Service's
implementation of fiscal year (FY) 1995 budget reforms, focusing on the
progress that the agency has made toward becoming more accountable for
its results.

GAO noted that: (1) the Forest Service's management of the National
Forest System has not appreciably changed as a result of the increased
flexibility offered by the FY 1995 budget reforms; (2) consolidating the
line items was intended to provide field managers with greater
discretion in deciding where to spend funds to better achieve the
agency's goals and objectives; (3) however: (a) some field offices have
continued to distribute and track funds as if the consolidation had not
occurred; and (b) the budget is still structured primarily by individual
resource-specific programs; (4) the reforms expanded the Forest
Service's authority to move funds between line items without the
Appropriations Committees' approval; (5) the agency has seldom requested
such approval either before or after the reforms; (6) the agency
submitted one or two requests a year for the Appropriations Committees'
approval to move funds among line items for the National Forest System
in fiscal years 1994 through 1997; (7) the reforms have not had a
noticeable impact on the number of times that the Forest Service has
made such requests of the Committees; (8) the reforms restructured the
agency's budget so that all the funding for a project is consolidated in
the program that will benefit most from the project; (9) however, a
benefiting program may not have the funds needed to implement a project;
(10) it may require other programs that are providing support services
to absorb the costs of those services; (11) this practice circumvents
the requirements established by the Appropriations Committees and the
agency to move funds between line items and understates a project's
costs; (12) the Forest Service has not provided Congress with the
improved accountability that the Appropriations Committees requested
when they gave the agency increased flexibility over its budget; (13)
GAO found that: (a) the agencywide criteria developed by the Forest
Service to allocate appropriated funds to its regions and forests are
often not linked to its strategic goals and objectives; (b) the agency's
performance measures do not adequately reflect its accomplishments or
progress toward achieving the goals and objectives; and (c) the
management cost and performance reporting system that the agency has
been developing for over 10 years uses the inadequate performance
measures as input; and (14) the Forest Service, Congress, and others do
not have an adequate measure of the agency's funding needs or its
progress toward achieving its goals and objectives.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-2
     TITLE:  Forest Service Management: Little Has Changed as a Result 
             of the Fiscal Year 1995 Budget Reforms
      DATE:  12/02/98
   SUBJECT:  Forest management
             Budget administration
             National forests
             Accountability
             Agency missions
             Performance measures
             Mission budgeting
             Congressional/executive relations
             Reprogramming of appropriated funds
             Management information systems

             
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Cover
================================================================ COVER


Report to the Subcommittee on Interior and Related Agencies,
Committee on Appropriations, House of Representatives

December 1998

FOREST SERVICE MANAGEMENT - LITTLE
HAS CHANGED AS A RESULT OF THE
FISCAL YEAR 1995 BUDGET REFORMS

GAO/RCED-99-2

The Forest Service's Fiscal Year 1995 Budget Reforms

(141072)


Abbreviations
=============================================================== ABBREV

  GAO - General Accounting Office
  GPRA - Government Performance and Results Act
  MAR - Management Attainment Report

Letter
=============================================================== LETTER


B-280861

December 2, 1998

The Honorable Ralph Regula
Chairman
The Honorable Sidney R.  Yates
Ranking Minority Member
Subcommittee on Interior
 and Related Agencies
Committee on Appropriations
House of Representatives

As agreed with your offices, this report discusses (1) the Forest
Service's implementation of fiscal year 1995 budget reforms and (2)
the progress that the agency has made toward becoming more
accountable for its results.  The report contains recommendations to
the Secretary of Agriculture that are designed to improve the
agency's performance accountability.  Our review was limited
primarily to the funds that were appropriated to manage the National
Forest System. 

As requested, unless you publicly announce its contents earlier, we
plan no further distribution of this report until 10 days after the
date of this letter.  At that time, we will send copies to the
appropriate congressional committees, the Secretary of Agriculture,
and the Chief of the Forest Service.  We will also make copies
available to others upon request. 

Please call me at (202) 512-3841 if you or your staff have any
questions about this report.  Major contributors to this report are
listed in appendix II. 

Barry T.  Hill
Associate Director, Energy,
 Resources, and Science Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

In fiscal year 1992, the U.S.  Department of Agriculture's Forest
Service was cited by the National Performance Review--a White
House-led study of ways to improve the efficiency of federal
programs--as an example of an agency whose budget structure impeded
the productive management and the efficient use of taxpayer dollars. 
As the Forest Service moved from managing individual resources, such
as wildlife, recreation, timber, rangeland, and water, to a more
broad-scale, more comprehensive approach to land management
(ecosystem management), the agency proposed significant changes in
its budget structure for fiscal year 1995 to help implement this
management approach and improve efficiency. 

Subsequently, the Forest Service asked its Appropriations Committees
to restructure its budget to increase the agency's flexibility to
carry out its mission and to improve its ability to use funds where
they are most needed.  In acting on the Forest Service's
appropriations for fiscal year 1995, the House and Senate Committees
on Appropriations (1) consolidated line items in the agency's budget
for which specific amounts of funds are allocated, thereby providing
larger pools of funds and, thus, greater discretion to field and
program managers in deciding where to spend the funds; (2) expanded
the agency's authority to move funds between line items without the
Committees' approval; and (3) restructured the agency's budget so
that all the funding to carry out a project--including the funding
for services provided by others--is consolidated in the program that
will benefit most from the project (called the "benefiting function"
concept).  In return for this increased budget flexibility, the
Appropriations Committees expected the Forest Service to improve its
performance measures and accountability for its expenditures and
results. 

The Chairman and Ranking Minority Member of the Subcommittee on
Interior and Related Agencies, House Committee on Appropriations,
asked GAO to review the Forest Service's implementation of the fiscal
year 1995 budget reforms.  As agreed with their offices, this report
discusses (1) the Forest Service's implementation of the fiscal year
1995 budget reforms and (2) the progress that the agency has made
toward becoming more accountable for its results.  GAO's review was
limited primarily to funds appropriated to manage the 155 forests, 20
national grasslands, and 17 national recreation areas that make up
the National Forest System.  The National Forest System's
appropriation represented about $1.3 billion or about 47 percent of
the Forest Service's discretionary appropriations and about 37
percent of its total appropriations for fiscal year 1997. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:2

The Forest Service's management of the National Forest System has not
appreciably changed as a result of the increased flexibility offered
by the fiscal year 1995 budget reforms.  Specifically, consolidating
the line items was intended to provide field managers with greater
discretion in deciding where to spend funds to better achieve the
agency's goals and objectives.  However, (1) some field offices have
continued to distribute and track funds as if the consolidation had
not occurred, and (2) the budget is still structured primarily by
individual resource-specific programs, such as those for timber sales
and wildlife habitat management, although the agency's strategic
goals and objectives increasingly require that these and other
programs be integrated to achieve broader stewardship objectives,
such as restoring or protecting the health of a forest.  The reforms
also expanded the Forest Service's authority to move funds between
line items without the Appropriations Committees' approval.  However,
the agency has seldom requested such approval either before or after
the reforms.  According to information provided by the Forest
Service, the agency submitted one or two requests a year for the
Appropriations Committees' approval to move funds among line items
for the National Forest System in fiscal years 1994 through 1997. 
Therefore, the reforms have not had a noticeable impact on the number
of times that the Forest Service has made such requests of the
Committees.  Finally, the reforms restructured the agency's budget so
that all the funding for a project is consolidated in the program
that will benefit most from that project.  However, for a variety of
reasons, including underestimating a project's costs, a benefiting
program may not have the funds needed to implement a project.  In
these instances, it may require other programs that are providing
support services to absorb the costs of those services.  This
practice circumvents the requirements established by the
Appropriations Committees and the agency to move funds between line
items and understates a project's costs. 

The Forest Service has not provided the Congress with the improved
accountability that the Appropriations Committees requested when they
gave the agency increased flexibility over its budget.  GAO found
that (1) the agencywide criteria developed by the Forest Service to
allocate appropriated funds to its regions and forests are often not
linked to its strategic goals and objectives; (2) in many instances,
the agency's performance measures do not adequately reflect its
accomplishments or progress toward achieving the goals and
objectives; and (3) the management cost and performance reporting
system that the agency has been developing for over 10 years uses the
inadequate performance measures as input.  As a result, the Forest
Service, the Congress, and other interested parties do not have an
adequate measure of the agency's funding needs or its progress toward
achieving its goals and objectives. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:3


   THE BUDGET REFORMS HAVE
   RESULTED IN LITTLE CHANGE IN
   MANAGING THE NATIONAL FORESTS
---------------------------------------------------------- Chapter 0:4

The Forest Service's management of the National Forest System has not
appreciably changed as a result of the fiscal year 1995 budget
reforms primarily because of two underlying causes--one relatively
new and the other as old as the agency itself.  New is the inability
of the agency's budget structure to keep pace with the Forest
Service's ongoing transition from an agency emphasizing consumption
(primarily producing timber) to one emphasizing conservation
(primarily sustaining wildlife and fish) and from one managing
specific resources to one managing forested and other natural
systems.  As old as the agency itself is the Forest Service's highly
decentralized organizational structure and the considerable autonomy
and discretion that field and program managers have in interpreting
and applying the agency's policies and directions.  As in the past,
(1) implementation of the fiscal year 1995 reforms within the Forest
Service's hierarchical organization has been left to the discretion
of regional, forest, and district offices with uneven and mixed
results, and (2) there has been no consequence associated with making
a certain decision and no responsibility fixed for attaining a
particular result. 


      THE FOREST SERVICE'S BUDGET
      STRUCTURE IS NOT CONSISTENT
      WITH THE AGENCY'S STRATEGIC
      GOALS AND OBJECTIVES
-------------------------------------------------------- Chapter 0:4.1

Notwithstanding the fiscal year 1995 budget reforms, there is
currently no clear link between the Forest Service's integrated
approach to natural resources management, which emphasizes restoring
and protecting the health of forested, rangeland, and aquatic
systems, and the agency's budget structure, which remains highly
fragmented along the lines of resource-specific programs and
activities, such as managing timber sales, livestock grazing,
wildlife habitat, and wildfires. 

For example, the Forest Service cites the goal of restoring and
protecting forested systems as its highest mission and funding
priority.  However, rather than having a larger pool of funds
available to achieve this goal and greater discretion to spend the
funds, a forest or district office may have to use up to 24 different
funding sources to implement a plan to restore or protect a forested
system.  These funding sources include four National Forest System
line items over which the forests have the most control.  Of the
remaining 20 funding sources, 7 are from the state and private
forestry appropriation, 2 are from the wildland fire management
appropriation, 1 is from the land acquisition appropriation, and the
other 10 are from various permanent appropriations and trust funds
for such activities as brush removal, timber salvage sales, and
reforestation.  According to some Forest Service officials, this
fragmented approach can result in inefficiently implementing a plan
to restore or protect a forest. 

The inability of the Forest Service's budget structure to keep pace
with the agency's movement away from goals and objectives that
clearly benefit one resource-specific program toward using multiple
programs to accomplish broader stewardship objectives has also caused
some confusion within the agency in identifying the program that will
benefit most from a project so that costs can be consistently charged
to that program.  Timber as a commodity program versus timber as a
tool to achieve a stewardship objective, such as restoring an
unhealthy forest, is an example.  Although timber sales are
increasingly being used as a tool to maintain or restore the health
of forests rather than solely to provide timber as a commodity, the
costs to prepare and administer the timber sales are still being
charged to timber sales management. 


      SOME FOREST SERVICE FIELD
      OFFICES CONTINUE TO
      DISTRIBUTE AND TRACK FUNDS
      AS IF THE CONSOLIDATION OF
      LINE ITEMS HAD NOT OCCURRED
-------------------------------------------------------- Chapter 0:4.2

The considerable autonomy and discretion that the Forest Service has
given its field and program managers has resulted in, among other
things, some forest and district offices continuing to distribute and
track funds as if the consolidation of the line items had not
occurred, thus undermining the full potential of the budget reforms
to simplify the management of funds.  To illustrate, the fiscal year
1995 budget reforms reduced the number of timber-related line items
from seven to two, thus providing field and program managers with
larger pools of funds and more flexibility and discretion in deciding
where to spend the funds.  However, according to the official
responsible for the natural resources budget and finance in the
Pacific Northwest (Region 6) office, some forests and districts in
the region continue to distribute funds and track expenditures for as
many as 14 different activities under the two line items, including
several activities for the line items that were eliminated. 

Although field and program managers have some flexibility to move
funds among activities, district office staff tend to see the
distributions as rigid limits to planning and accounting for work. 
Rather than move funds among activities during a fiscal year, field
and program staff may redistribute work charged to activities after
the fact in order to achieve or maintain specific levels of funding
for activities (called "retroactive redistribution"). 

Finally, under the benefiting function concept embodied in the Forest
Service's budget reforms, programs are expected to pay the costs of
support services provided by other programs.  However, individual
programs that underestimate the costs of a project or otherwise do
not have the funds needed to pay for a project's support services may
require other programs to absorb the costs of the services.  For
example, on the basis of an internal survey of the National Forest
System that was conducted in July 1998 at GAO's request, a program
official at the Washington Office estimated that since fiscal year
1995, on average, about 49 percent of the funds allocated to the
Lands program to survey, locate, mark and post, and maintain
previously marked property lines between lands in the National Forest
System and lands in other ownership has been used to support other
programs, but charged to the Lands program. 

Agency officials informed GAO that "charging as budgeted" and not "as
worked" was sometimes a more acceptable option than not doing the
project or seeking to meet their needs by moving funds between line
items, which, depending on the amount, may require the approval of
either the Chief of the Forest Service or the Appropriations
Committees.  This practice not only circumvents the requirements
established by the Appropriations Committees and the agency to move
funds between line items and understates a project's costs, it also
precludes the Forest Service from providing the Congress and other
interested parties with meaningful, useful, and reliable information
on the costs and the accomplishments of the National Forest System's
programs. 


   ACCOUNTABILITY IS HAMPERED BY
   INADEQUATE PERFORMANCE MEASURES
   AND A FOCUS ON
   RESOURCE-SPECIFIC OUTPUTS
---------------------------------------------------------- Chapter 0:5

In exchange for the greater flexibility granted to the Forest Service
by the fiscal year 1995 budget reforms, the Appropriations Committees
expected the agency to, among other things, improve its performance
measures and increase its accountability for results.  However, the
Forest Service has not provided the Congress with improved
accountability. 

Currently, there is no clear link between the Forest Service's
strategic goals and objectives and its budget allocation criteria and
performance measures.  Rather than develop new criteria and measures
and improve existing ones to better align them with its mission and
funding priorities, the agency is trying to use old resource-specific
allocation criteria and performance measures with its new
integrated-resource goals and objectives.  For example, the Forest
Service cites the goal of restoring and protecting forested systems
as its highest mission and funding priority and repeatedly emphasizes
that timber sales are increasingly being used as a tool to maintain
or restore the health of forests rather than solely to provide
commercial timber.  However, the criteria that the Forest Service
used to allocate fiscal year 1998 funds to its field offices to
manage timber sales are based solely on managing timber as a
commodity rather than on using it as a tool to achieve a stewardship
objective.  Similarly, the primary objective of the agency's
timber-related performance measures used to indicate progress toward
restoring or protecting forested systems is to provide a continuous
supply of timber from the national forests, rather than to maintain
or restore the health of the forests. 

In addition, the Forest Service's performance measures often do not
adequately reflect the agency's accomplishments or progress toward
achieving its goals and objectives.  For instance, the agency counts
facilities that are not being maintained "to standard" and miles of
Forest Service-managed roads that are "less than fully maintained" as
accomplishments toward its strategic objective of improving the level
of customer satisfaction provided by recreational opportunities in
national forests. 

The "disconnect" between the Forest Service's strategic goals and
objectives and its performance measures and the inadequacy of those
measures become even more critical because the management cost and
performance reporting system, which the agency has been developing
since 1988, uses the performance measures to display the relationship
between expenditures and results.  Inadequate and unreliable
performance measures that are also not linked to the agency's
strategic goals and objectives will be used to report accomplishments
in achieving the goals and objectives.  As a result, the Forest
Service, the Congress, and other interested parties will not have an
adequate measure of the agency's funding needs or its progress toward
achieving its goals and objectives. 

While additional changes to the Forest Service's budget structure
seem to be warranted to facilitate management of the 155 national
forests, GAO believes that any future revisions should coincide with,
rather than precede, actions required to correct known accounting and
financial reporting deficiencies as well as problems with
performance-related data, measurement, and reporting.  However, the
Forest Service has not established a schedule to achieve
accountability for its performance and is uncertain when its
management cost and performance reporting system will be fully
implemented.  A firm schedule is needed so the agency can demonstrate
progress toward becoming more accountable for its performance and
results. 

Developing and implementing a firm schedule to correct identified
management deficiencies and to achieve performance accountability
will require strong leadership within the agency and sustained
oversight by the Congress to make clear the demarcation between the
discretion that regional, forest, and district offices have in
managing their lands and resources and the need to strictly adhere to
the agency's policies and requirements relating to financial and
performance accountability.  In April 1998, the Forest Service placed
responsibility for fiscal and business management under a Chief
Operating Officer, who reports directly to the Chief of the Forest
Service.  This restructuring is intended to improve the agency's
accounting and business practices and may provide the needed
leadership. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:6

To improve the Forest Service's accountability for results, GAO
recommends that the Secretary of Agriculture direct the Chief of the
Forest Service to (1) revise the agency's budget structure, budget
allocation criteria, and performance measures to better link them to
the Forest Service's strategic goals and objectives and (2)
incorporate the new performance measures into the management cost and
performance reporting system that the agency is developing. 
Moreover, to help ensure that the budget allocation criteria and
performance measures are revised and the management cost and
performance reporting system is implemented in a timely manner, GAO
recommends that the Secretary direct the Chief to establish a firm
schedule to achieve performance accountability. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:7

GAO provided copies of a draft of this report to the Forest Service
for its review and comment.  The agency generally agreed with the
report's findings and recommendations.  However, it believed that
improvements to its budget structure should be made concurrently
with, rather than after, improvements to its budget allocation
criteria, performance measures, and reporting systems, as suggested
in the draft report.  GAO agrees with the Forest Service that a
piecemeal approach to correcting known accounting and financial
reporting deficiencies and performance-related problems will not work
and has revised the report accordingly. 

The Forest Service was also concerned that the draft report implied
that its Washington and regional offices have not been budgeting and
allocating funds in a manner consistent with the fiscal year 1995
budget reforms.  GAO revised the report to clarify that (1) since
fiscal year 1995, the funds have generally been budgeted and
allocated at the agency's Washington and regional offices in a manner
consistent with the budget reforms, (2) the implementation of the
reforms at the forest and district offices has been left to the
discretion of field and program managers, and (3) some forest and
district offices continue to distribute and track funds as if the
reforms had not occurred.  The agency's comments, together with GAO's
responses to them, appear in appendix I. 


INTRODUCTION
============================================================ Chapter 1

The Department of Agriculture's Forest Service manages about 192
million acres of land--nearly 9 percent of the nation's total surface
area and 30 percent of all federal lands.  Laws guiding the
management of the 155 forests, 20 national grasslands, and 17
national recreation areas within the National Forest System require
the agency to manage its lands to provide high levels of six
renewable surface uses--outdoor recreation, rangeland, timber,
watersheds and waterflows, wilderness, and wildlife and fish--to
current users while sustaining undiminished the lands' ability to
produce these uses for future generations.  In addition, the Forest
Service's guidance and regulations require the agency to consider the
production of nonrenewable subsurface resources, such as oil, gas,
and hardrock minerals, in its planning.\1

To carry out the Forest Service's mission, each year the President's
budget proposes and the Congress appropriates funds to, among other
things, (1) manage the National Forest System, (2) conduct or sponsor
forest and rangeland research, and (3) enhance the health and
sustainable management of the nation's state and private forests.  In
committee reports, the House and Senate Committees on Appropriations
allocate funds to one or more line items within each of these
appropriations.  The agency then allocates these funds to its
headquarters (Washington Office) and field offices. 

In the mid-1990s, the Forest Service asked the House and Senate
Appropriations Committees to restructure its budget to increase the
agency's flexibility to carry out its mission and to improve its
ability to use funds where they are most needed.  The Committees
incorporated many of these requested budget reforms in approving the
Forest Service's fiscal year 1995 appropriations. 


--------------------
\1 Hardrock minerals include gold, silver, lead, iron, and copper. 


   HOW THE FOREST SERVICE IS
   ORGANIZED
---------------------------------------------------------- Chapter 1:1

The Forest Service, created in 1905, is a hierarchical organization
whose management is highly decentralized and whose managers have
considerable autonomy and discretion for interpreting and applying
the agency's policies and directions.  The Chief of the Forest
Service heads the agency and, through Agriculture's Under Secretary
for Natural Resources and Environment, reports to the Secretary of
Agriculture. 

In April 1998, the Chief of the Forest Service restructured the
agency's management team to facilitate needed efficiencies regarding
the Forest Service's accountability and business practices.  As a
result of the restructuring, a Chief Operating Officer is responsible
for fiscal and business management and an Associate Chief for Natural
Resources has direct oversight for natural resources programs.  Both
report directly to the Chief of the Forest Service. 

Among other things, the Forest Service's Washington Office
establishes policy and provides technical direction to the National
Forest System's three levels of field management:  9 regional
offices, 123 forest offices, and about 600 district offices.  At the
Washington Office, the National Forest System has separate program
directors for nine programs:  Engineering; Lands; Recreation,
Heritage, and Wilderness Resources; Minerals and Geology; Range
Management; Forest Management; Watershed and Air Management;
Wildlife, Fish, and Rare Plants; and Ecosystem
Management.\2 Similar lines of program management exist at the
regional, forest, and district office levels.  However, because of
budgetary constraints, the management of some of these programs may
be combined. 


--------------------
\2 One definition of an ecosystem is a distinct ecological unit that
is formed when interdependent communities of plants and animals,
which can include humans, interact with their physical environment
(i.e., soil, water, and air). 


   HOW THE FOREST SERVICE'S BUDGET
   CYCLE WORKS
---------------------------------------------------------- Chapter 1:2

The Forest Service starts to develop a budget for a given fiscal year
about 2 years before the fiscal year begins.  The agency constructs a
budget for the National Forest System and other
appropriations--including forest and rangeland research and state and
private forestry--that indicates how funds will be allocated among
line items.  The agency submits its proposed budget to the Department
of Agriculture for review and any changes about 15 months before the
fiscal year begins.  Agriculture, in turn, submits the Forest
Service's budget to the Office of Management and Budget for review
and any changes about a year before the beginning of the fiscal year
in which the funds will be spent. 

The President's budget is submitted to the Congress no later than the
first Monday in February for the fiscal year beginning the coming
October 1st.  Shortly afterwards, the Forest Service submits its
explanatory notes to the House and Senate Committees on
Appropriations.  Once the Committees review, amend, and approve the
agency's budget, the Congress appropriates funds for the National
Forest System and for other Forest Service appropriations as part of
the appropriations act for the Department of the Interior and related
agencies.  The Committees' reports or the appropriations act may also
specify restrictions on certain types of spending and may earmark
funds for special activities or projects. 

Once funds are received by the Forest Service, the agency removes
funds needed to operate the Washington Office and specifies funding
that will be used for national commitments and for special projects. 
The Washington Office then allocates the remaining funds by line item
to its regional offices. 

The appropriation for the National Forest System includes 21 budget
and extended budget line items that are generally used to fund the
system's nine programs.  A National Forest System program may be
funded from one or more line items under the appropriation for the
National Forest System.  When a program, such as Minerals and
Geology, is funded from only one line item--in this instance,
Minerals and Geology Management--the line item is referred to as a
"budget line item." Other programs are funded from two or more line
items.  For example, the Forest Management program is funded from the
Timber Sales Management and the Forestland Vegetation Management line
items.  These line items are referred to as "extended budget line
items" and are aggregated into a budget line item for Forestland
Management.  (See table 1.1.)



                                        Table 1.1
                         
                         The National Forest System's Budget and
                         Extended Budget Line Items Used to Fund
                          the National Forest System's Programs

Fiscal year 1995 National Forest System budget
and extended budget line items                  National Forest System programs
----------------------------------------------  -----------------------------------------
Ecosystem Planning, Inventory, and              Ecosystem Management
Monitoring\a

Recreation Management                           Recreation, Heritage, and Wilderness
Wilderness Management                           Resources
Heritage Resources

Wildlife Habitat Management                     Wildlife, Fish, and Rare Plants
Inland Fish Habitat Management
Anadromous Fish Habitat Management
Threatened, Endangered, and Sensitive Species
Habitat Management

Grazing Management                              Range Management
Rangeland Vegetation Management

Timber Sales Management                         Forest Management
Forestland Vegetation Management

Soil, Water, and Air Operations                 Watershed and Air Management
Watershed Improvements

Minerals and Geology Management                 Minerals and Geology

Real Estate Management                          Lands
Landline Location

Road Maintenance                                Engineering
Facility Maintenance

Law Enforcement Operations\b                    \b

General Administration\c                        \c
-----------------------------------------------------------------------------------------
\a This line item is currently called Land Management Planning,
Inventory, and Monitoring. 

\b This line item is under the Director, Law Enforcement and
Investigations, who reports to the Chief of the Forest Service. 

\c This line item funds general line management, administrative
support, and common services within the National Forest System. 

Source:  Forest Service. 

Funds are usually allocated to the agency's nine regional offices on
the basis of budget allocation criteria developed by the Forest
Service.  For example, the criteria for allocating funds from the
Wildlife Habitat Management extended budget line item to each region
include, among other things, the number of acres, the opportunities
for habitat restoration and enhancement, and the number of big game
species.  Regions then distribute the funds by line item to the 155
national forests on the basis of regional budget allocation criteria
or on a program-by-program assessment of needs. 

Finally, each national forest office allocates funds to its districts
by line item and by the type of activity that will be performed.  For
example, a national forest office might allocate some funds within
the Grazing Management extended budget line item to a district to be
used specifically to construct improvements for livestock grazing. 
District personnel not only receive funding slated for specific
activities within each line item, they also track and charge their
work accordingly. 


   WHY THE FOREST SERVICE
   REQUESTED MORE FLEXIBILITY IN
   ITS BUDGET STRUCTURE
---------------------------------------------------------- Chapter 1:3

In fiscal year 1992, the Forest Service was cited by the National
Performance Review--a White House-led study of ways to improve the
efficiency of federal programs--as an example of an agency whose
budget structure impeded the productive management and the efficient
use of taxpayer dollars.  As the Forest Service moved from managing
individual resources, such as wildlife, recreation, timber,
rangeland, and water, to a more broad-scale, more comprehensive
approach to land management (ecosystem management), the agency
proposed significant changes in its budget structure for fiscal year
1995 to help implement this management approach and improve
efficiency. 

In acting on the Forest Service appropriations for fiscal year 1995,
the House and Senate Appropriations Committees (1) consolidated line
items in the agency's budget for which specific amounts of funds are
allocated, (2) expanded the agency's authority to reprogram funds
without requesting the Committees' approval,\3 and (3) restructured
the agency's budget so that all funding to carry out a
project--including the funding for services provided by others--is
consolidated in the program that will benefit most from the project. 
In return for this increased budget flexibility, the Appropriations
Committees expected the Forest Service to improve its performance
measures and accountability for expenditures and results. 


--------------------
\3 Congressional reprogramming guidelines for the Forest Service
define reprogramming as the reallocation of funds from one budget
line item to another within the same appropriation.  Under these
guidelines, when a report by either the House or Senate Committee on
Appropriations displays an allocation of an appropriation below a
budget line item, such as an extended budget line item, then the
extended budget line item, rather than the budget line item, becomes
the basis for reprogramming.  Table 1.1 displays the budget line
items and extended budget line items for which funds are allocated
under the appropriation for the National Forest System. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:4

The Chairman and Ranking Minority Member of the Subcommittee on
Interior and Related Agencies, House Committee on Appropriations,
asked us to review the Forest Service's implementation of the fiscal
year 1995 budget reforms.  As agreed with their offices, this report
discusses (1) the Forest Service's implementation of the fiscal year
1995 reforms and (2) the progress that the agency has made toward
becoming more accountable for its results.  Our review was limited
primarily to funds appropriated to manage the National Forest System. 
The appropriation for the National Forest System represented about
$1.3 billion or about 47 percent of the Forest Service's
discretionary appropriations and about 37 percent of its total
appropriations for fiscal year 1997. 

We conducted our work at the Forest Service's Washington Office;
three of the agency's nine regional offices--the Pacific Northwest
(Region 6), the Southern (Region 8), and the Eastern (Region 9); and
five national forests--the Deschutes and Willamette (in Oregon and
Region 6), the Daniel Boone (in Kentucky and Region 8), and the
Superior and Chippewa (in Minnesota and Region 9). 

To obtain information on both objectives, we interviewed Forest
Service budget officials, field managers, and officials responsible
for managing various programs within the National Forest System at
all of the agency's locations that we visited.  We also obtained and
reviewed relevant reports, records, correspondence, budget data,
budget allocation criteria, and data on performance indicators at
these offices. 

In addition, to obtain information on the Forest Service's
implementation of the budget reforms, we reviewed applicable laws and
legislative histories relating to the reforms, the agency's
directives and guidance in implementing the reforms, and the agency's
budget justification explanatory notes.  To obtain information on the
Forest Service's progress toward becoming more accountable for its
results, we reviewed relevant reports by the Department of
Agriculture's Office of Inspector General, relevant studies by a
consulting firm and an environmental group, and prior GAO reports and
testimonies. 

We performed our work from September 1997 through September 1998 in
accordance with generally accepted government auditing standards.  In
conducting our work, we did not independently verify the reliability
of the financial data provided by the Forest Service nor did we trace
the data to the systems from which they came.  These systems were, in
some cases, subject to audit procedures by the Department of
Agriculture's Office of Inspector General in connection with the
agency's financial statement audits. 

For fiscal years 1995, 1996, and 1997 and previous years,
Agriculture's Office of Inspector General reported that because of
significant internal control weaknesses in various accounting
subsystems, the Forest Service's accounting data were not reliable. 
Despite these weaknesses, we used the data because they were the only
data available and are the data that the agency uses to manage its
programs. 

We obtained comments on a draft of this report from the Forest
Service.  The agency's comments and our evaluation are presented in
appendix I. 


THE BUDGET REFORMS HAVE RESULTED
IN LITTLE CHANGE IN MANAGING THE
NATIONAL FORESTS
============================================================ Chapter 2

The Forest Service's management of the National Forest System has not
appreciably changed as a result of the increased flexibility offered
by the fiscal year 1995 budget reforms.  Specifically, although
consolidating the budget line items and extended budget line items
was intended to provide field managers with larger pools of funds
and, thus, greater discretion in deciding where to spend the funds,
some forest and district offices have continued to distribute and
track funds as if the consolidation had not occurred.  In addition,
the budget is still structured primarily by individual
resource-specific programs, such as timber sales and wildlife habitat
management, although the agency's strategic goals and objectives
increasingly require that these and other programs be integrated to
achieve broader stewardship objectives, such as restoring or
protecting forested ecosystems. 

The fiscal year 1995 budget reforms also expanded the Forest
Service's ability to move funds between line items without the
Appropriations Committees' approval.  However, the agency has seldom
requested such approval either before or after the reforms.  On the
basis of information provided by the Forest Service, the agency
submitted one or two requests a year for the Appropriations
Committees' approval to reprogram funds among line items for the
National Forest System in fiscal years 1994 through 1997.  Thus, the
reforms have not had a noticeable impact on the number of
reprogrammings requested from the Appropriations Committees. 

Finally, the fiscal year 1995 budget reforms restructured the Forest
Service's budget so that all the funding for a project is
consolidated in the program that will benefit most from that project. 
However, for a variety of reasons, including underestimating a
project's costs, a benefiting program may not have the funds needed
to implement a project.  In these instances, it may require other
programs that are providing support services to absorb the costs of
the services instead of seeking to meet its needs by moving funds
between line items or requesting that funds be reprogrammed.  This
practice circumvents the requirements established by the
Appropriations Committees and the agency to move funds between line
items and understates a project's costs.  It also precludes the
Forest Service from providing the Congress and other interested
parties with meaningful, useful, and reliable information on the
costs and the accomplishments of the National Forest System's
programs. 


   THE BENEFITS OF CONSOLIDATING
   LINE ITEMS HAVE NOT BEEN FULLY
   REALIZED
---------------------------------------------------------- Chapter 2:1

The fiscal year 1995 budget reforms reduced the number of budget line
items and extended budget line items in the Forest Service's budget
from 72 to 48, primarily by combining many of them.  Within the
appropriation for the National Forest System, the budget line items
and extended budget line items were reduced from 37 to 28.  Line
items for which a specific amount of funds are allocated to support
the National Forest System were reduced from 31 to 21, or by almost
one-third.  (See table 2.1.)



                                    Table 2.1
                     
                        Comparison of the National Forest
                     System's Budget and Extended Budget Line
                        Items, Fiscal Years 1994 and 1995

Line items before     Line items after budget
budget reforms        reforms
(fiscal year 1994)    (fiscal year 1995)            Explanation of changes
--------------------  ----------------------------  ----------------------------
--                    Ecosystem Planning,           New budget line item was
                      Inventory, and Monitoring     established by shifting
                                                    funds from other line items.

Recreation Use        Recreation Use                Line items remained
--Recreation          --Recreation Management       virtually unchanged.
Management            --Wilderness Management
--Wilderness          --Heritage Resources
Management
--Cultural Resources
Management

Forest Trail          --                            Seventy percent of this
Maintenance                                         budget line item's funds
                                                    shifted to Recreation
                                                    Management and 30 percent
                                                    shifted to Wilderness
                                                    Management in fiscal year
                                                    1995.

Wildlife and Fish     Wildlife and Fisheries        Line items remained
Habitat Management    Habitat Management            virtually unchanged.
--Wildlife            --Wildlife Habitat
Management            Management
--Inland Fish         --Inland Fish Habitat
Management            Management
--Anadromous Fish     --Anadromous Fish Habitat
Management            Management
--Threatened,         --Threatened, Endangered,
Endangered, and       and Sensitive Species
Sensitive Species     Habitat Management
Management

Range Management      Rangeland Management          Four extended budget line
--Range Vegetation    --Grazing Management          items were consolidated into
Management            --Rangeland Vegetation        two.
--Rangeland           Management
Improvements
--Wild Horses and
Burros
--Noxious Weed
Control

Timber Sales          Forestland Management         Two budget line items were
Administration and    --Timber Sales Management     consolidated into one, and
Management            --Forestland Vegetation       seven extended budget line
--Timber Resource     Management                    items were consolidated into
Inventory Planning                                  two.
--Silvicultural
Examination
--Sales Preparation
--Harvest
Administration

Reforestation and
Timber Stand
Improvement
--Reforestation
--Timber Stand
Improvement
--Nursery and Tree
Improvement
Operations

Soil, Water, and Air  Soil, Water, and Air          Soil Inventory was moved to
Management            Management                    new Ecosystem Planning,
--Soil, Water, and    --Soil, Water, and Air        Inventory, and Monitoring
Air Operations        Operations                    budget line item.
--Soil and Water      --Watershed Improvements
Resource
Improvements
--Soil Inventory

Minerals and Geology  Minerals and Geology          Line item was not changed.
Management            Management

Real Estate           Land Ownership Management     Two budget line items became
Management            --Real Estate Management      extended budget line items
                                                    under a new budget line item
                      --Landline Location           called Land Ownership
Landline Location                                   Management.

Forest Road           Infrastructure Management     Two budget line items became
Maintenance           --Road Maintenance            extended budget line items
                                                    under a new budget line item
                      --Facility Maintenance        called Infrastructure
Facility Maintenance                                Management.

Cooperative Law       Law Enforcement Operations    Three budget line items were
Enforcement                                         consolidated into one budget
                                                    line item.
Drug Enforcement

National Forest
System Law
Enforcement

General               General Administration        Budget line item was not
Administration                                      changed.
--------------------------------------------------------------------------------
Source:  Forest Service. 

The intent of this consolidation was to simplify the management of
funds.  By combining funds into larger pools, field and program
managers would have increased flexibility and greater discretion in
deciding where to spend the funds. 

The Forest Service officials we interviewed generally support
consolidating line items in the budget and, in many instances, favor
additional consolidation.  However, some forest and district offices
continue to distribute and track funds by line items that were
combined under the fiscal year 1995 reforms, thus counteracting the
increased flexibility and discretion provided by the consolidation. 
In addition, there is no clear link between the Forest Service's
integrated-resource approach to natural resources management, which
emphasizes maintaining and restoring the health of forested,
rangeland, and aquatic ecosystems, and the resource-specific line
items in the agency's budget. 


      SOME FOREST SERVICE FIELD
      OFFICES CONTINUE TO
      DISTRIBUTE AND TRACK FUNDS
      AS IF THE CONSOLIDATION OF
      LINE ITEMS HAD NOT OCCURRED
-------------------------------------------------------- Chapter 2:1.1

Since the fiscal year 1995 budget reforms, funds have generally been
budgeted and allocated at the Forest Service's Washington and
regional offices consistent with the consolidated budget line items
and extended budget line items.  However, the implementation of the
reforms at the forest and district offices has been left to the
discretion of field and program managers.  As a result, some forest
and district offices continue to distribute and track funds as if the
consolidation had not occurred, thus undermining the full potential
of the budget reforms to simplify the management of funds. 

For example, in acting on the fiscal year 1995 appropriations for the
Forest Service, the House and Senate Appropriations Committees
reiterated to the agency the importance of clearly presenting in its
budget justification the same level of detailed information that had
been provided under the old budget structure.  According to the
Forest Service, for most programs, this meant keeping the same, or
possibly expanding, the number of activities used to track
expenditures.  For example, to account for funds allocated to the
National Forest System's 21 line items, the Pacific Northwest office
(Region 6) tracks funds for as many as 217 different activities,
including many for line items that were eliminated through
consolidation.  To illustrate, although the fiscal year 1995 budget
reforms reduced the number of timber-related extended budget line
items in the National Forest System's appropriation from seven to
two, that office still tracks funds for as many as 14 different
activities under the two line items, including several activities for
the line items that had been eliminated.  (See fig.  2.1.)

   Figure 2.1:  Timber-Related
   Extended Budget Line Items in
   the National Forest System's
   Appropriation for Fiscal Years
   1994 and 1995 and Activities
   Tracked at the Pacific
   Northwest Regional Office

   (See figure in printed
   edition.)

Source:  Forest Service. 

According to the official at the Pacific Northwest office who is
responsible for natural resources budget and finance, in addition to
tracking expenditures by activity, some forest and district offices
have also chosen to distribute funds by activity rather than by line
item.  Although field and program managers have some flexibility to
move funds among activities, district office staff tend to see the
distributions as rigid limits to planning and accounting for work. 
For example, instead of moving funds among activities during a fiscal
year, field and program staff may redistribute work charged to
activities after the fact to achieve or maintain specific levels of
funding within activities (called "retroactive redistribution").  In
1998, this practice was noted in a review of the Forest Service's
financial systems by a private consulting firm\4 as well as a report
by the Department of Agriculture's Office of Inspector General.\5


--------------------
\4 Modernizing Financial Management at the Forest Service:  Financial
Management & Organizational Analysis, Coopers & Lybrand Consulting
(Mar.  18, 1998). 

\5 Review of Forest Service's Retroactive Redistribution (Evaluation
Report No.  08801-4-Hq., Aug.  1998). 


      THE FOREST SERVICE'S BUDGET
      STRUCTURE IS NOT CONSISTENT
      WITH THE AGENCY'S STRATEGIC
      GOALS AND OBJECTIVES
-------------------------------------------------------- Chapter 2:1.2

The Forest Service is an agency in transition.  Over the past decade,
the agency has shifted its emphasis from consumption (primarily
producing timber) to conservation (primarily sustaining wildlife and
fish) and has moved from managing specific resources to a broader,
more comprehensive ecosystem-based approach to land management. 
However, notwithstanding the fiscal year 1995 budget reforms, the
Forest Service's budget structure has not kept pace with the agency's
transformation and, as a result, there is no clear link between the
agency's ecosystem-based strategic goals and objectives and the
National Forest System's resource-specific line items. 

As the Forest Service has made clear in several documents during the
past year, its overriding mission and funding priority, consistent
with its existing legislative framework, is to maintain or restore
the health of the lands entrusted to its care.  These documents
include the agency's September 30, 1997, strategic plan prepared
under the Government Performance and Results Act of 1993 (the Results
Act),\6 its fiscal year 1999 budget explanatory notes,\7 its first
annual performance plan developed under the Results Act,\8 and the
Chief's March 1998 natural resource agenda for the twenty-first
century.\9 The agency intends to limit goods and services on national
forests--including recreational experiences, commercial sawtimber and
other forest products, and livestock and wildlife forage--to the
types, levels, and mixes that the lands are capable of sustaining. 
The documents also make clear that the agency intends to fulfill this
responsibility primarily by using an ecosystem-based approach to land
management that emphasizes integrating resource-specific programs and
activities to maintain and restore the health of forested, aquatic,
and rangeland ecosystems. 

The fiscal year 1995 budget reforms created a new line
item--ecosystem planning, inventory, and monitoring--to allow the
Forest Service to plan more along the boundaries of natural systems. 
However, the Forest Service's budget structure remains highly
fragmented along the lines of individual resource-specific programs
and activities, such as managing timber sales, livestock grazing,
wildlife habitat, and wildfires.  This fragmentation works against an
integrated approach to land management.  For example, the Forest
Service's fiscal year 1997 annual report cites the goal of restoring
and protecting forested ecosystems as the agency's highest
priority.\10 However, rather than having one large pool of funds
available to achieve this goal and greater discretion to spend funds,
a forest or district office may have to use up to 24 different
funding sources to implement a plan to restore or protect a forested
ecosystem.  These funding sources include four National Forest System
line items over which the forest and district offices have the most
control.  Of the remaining 20 funding sources, 7 are from the state
and private forestry appropriation, 2 are from the wildland fire
management appropriation, 1 is from the land acquisition
appropriation, and the other 10 are from various permanent
appropriations and trust funds for such activities as brush removal,
timber salvage sales, and reforestation.  According to some Forest
Service officials we talked to, this fragmented approach can result
in inefficiently implementing an ecosystem-based management plan. 


--------------------
\6 USDA Strategic Plan 1997-2002:  A Healthy and Productive Nation in
Harmony With the Land, Forest Service Strategic Plan, U.S. 
Department of Agriculture, Office of the Secretary (Sept.  30, 1997). 

\7 FY 1999 Budget Explanatory Notes for the Committee on
Appropriations, U.S.  Department of Agriculture, Forest Service (Feb. 
1998). 

\8 FY 1999 USDA Forest Service Annual GPRA Performance Plan, U.S. 
Department of Agriculture, Forest Service (Feb.  4, 1998). 

\9 A Gradual Unfolding of a National Purpose:  A Natural Resource
Agenda for the 21st Century, Speech Before Forest Service Employees,
Chief of the Forest Service (Mar.  2, 1998). 

\10 Report of the Forest Service, Fiscal Year 1997, U.S.  Department
of Agriculture (May 1998). 


   EXPANDING THE FOREST SERVICE'S
   REPROGRAMMING AUTHORITY HAS NOT
   HAD A NOTICEABLE EFFECT ON THE
   NUMBER OF REPROGRAMMING
   REQUESTS
---------------------------------------------------------- Chapter 2:2

Since fiscal year 1995, the House and Senate Committees on
Appropriations have expanded the Forest Service's ability to move
funds between line items without the Committees' approval and then
taken some of this increased flexibility away.  Similarly, the Forest
Service has loosened, then tightened, its requirements relating to
obtaining the approval of the Chief before a region can move funds
among extended budget line items.  However, increasing or reducing
the funding threshold for obtaining the Committees' approval to
reprogram funds and loosening or tightening the agency's requirements
seem to have little effect on the number of reprogrammings that the
Forest Service requests from the Appropriations Committees. 


      THE HOUSE AND SENATE
      APPROPRIATIONS COMMITTEES
      HAVE INCREASED, THEN
      REDUCED, THE FUNDING
      THRESHOLD FOR OBTAINING
      THEIR APPROVAL TO REPROGRAM
      FUNDS
-------------------------------------------------------- Chapter 2:2.1

Before fiscal year 1995, the Forest Service was required to obtain
the Appropriations Committees' approval to reprogram more than
$250,000, or 10 percent of the funds, whichever was less on an annual
basis, between budget line items and extended budget line items.  As
part of the fiscal year 1995 budget reforms, the House and Senate
Appropriations Committees expanded the agency's reprogramming
authority by allowing it to move, without requesting the Committees'
approval, (1) up to $3 million between budget line items, or 10
percent of the funds for a budget line item, whichever was less on an
annual basis, and (2) funds among the extended budget line items
within a budget line item.  The agency, in turn, delegated the
authority to move funds among the extended budget line items within a
budget line item to its regional offices. 

However, concerned that the reforms had provided the Forest Service
with too much latitude to make changes without sufficiently involving
the Congress, the Appropriations Committees reduced the agency's
reprogramming authority in fiscal year 1998 by requiring the Forest
Service to obtain their approval to reprogram more than $500,000, or
10 percent of the funds, whichever was less on an annual basis,
between both budget line items and extended budget line items.  The
Forest Service, in turn, tightened its reprogramming guidelines to
require its regional offices to obtain the approval of the Chief
before reprogramming funds between the National Forest System's
budget line items or among its extended budget line items, up to
$500,000. 


      THE FOREST SERVICE HAS BEEN
      ABLE TO MEET MOST OF ITS
      NEEDS BY MOVING FUNDS,
      DOLLAR-FOR-DOLLAR, BETWEEN
      LINE ITEMS
-------------------------------------------------------- Chapter 2:2.2

The Forest Service's district, forest, and regional offices have
always been able to move funds between line items, regardless of the
funding threshold for obtaining the Appropriations Committees'
approval through a process called "brokering." Under this process,
the Forest Service tries to meet its needs by moving funds between
line items at the lowest possible organizational level without ever
exceeding the amounts allocated in the Committees' reports. 

Districts within a national forest advise their forest office of any
need to move funds from one line item to another.  The forest office
then offsets or brokers the requests of one district against the
requests of other districts within the forest, thus keeping the total
funds for each line item within the amount allocated to that forest
office and avoiding the need to request a reprogramming.  Requests
that cannot be brokered at the level of the forest office are
submitted to the regional office, which offsets the requests of one
forest office against the requests from others within the region,
thus keeping the total funds for each line item within the amount
allocated to the regional office and again avoiding the need to
request a reprogramming.  Finally, requests that cannot be brokered
at the regional level are submitted to the Washington Office, which
offsets the requests of one region against the requests of other
regions while still keeping the total funds for each line item within
the amount allocated to the agency and avoiding the need to request a
reprogramming. 

For example, during a fiscal year, one district office may need more
funds for wildlife habitat management and less funds for recreation
management than it was allocated while another district office within
the same forest may need more funds for recreation management and
less funds for wildlife habitat management.  Under the Forest
Service's brokering process, the districts would simply trade or
offset funds allocated for wildlife habitat management for funds
allocated for recreation management.  Trades that cannot be made at
the level of the forest office are elevated to the regional level and
ultimately to the Washington Office.  Because the total funds for
both line items remain within the amounts allocated to the agency,
reprogramming is not required. 


      OBTAINING THE APPROPRIATIONS
      COMMITTEES' APPROVAL TO
      REPROGRAM FUNDS HAS ALWAYS
      BEEN THE ALTERNATIVE OF LAST
      RESORT
-------------------------------------------------------- Chapter 2:2.3

Needs that cannot be met by brokering must be met by reprogramming. 
Although the Forest Service could not document the benefits resulting
from expanding the agency's authority to reprogram funds without the
Appropriations Committees' approval, increasing the funding threshold
and allowing regional offices more flexibility to move funds to meet
changed conditions may reduce the administrative burden at the
Washington Office and at other organizational levels within the
agency.  Conversely, reducing the funding threshold and the regional
offices' flexibility to move funds may increase the administrative
burden at these organizational levels.  However, neither increasing
or reducing the funding threshold nor loosening or tightening the
regional offices' flexibility to move funds seems to affect the
number of reprogrammings that the Forest Service requests from the
Committees. 

According to Forest Service officials, the agency rarely seeks
reprogramming approval because it is the agency's responsibility to
stay as close as possible to the amounts allocated in the Committees'
reports.  In addition, the process to request and obtain the
Committees' approval to reprogram funds can take several months.  The
process of determining reprogramming needs generally begins during a
midyear review at which regional needs that cannot be met by
brokering are identified.  The agency then attempts to meet those
needs that cannot be offset dollar-for-dollar by reprogramming funds
within its authority to do so.  Only if it cannot meet its
reprogramming needs within its funding threshold will the Forest
Service request the Appropriations Committees' approval to reprogram
funds, and only after the request has been (1) routed to several
offices within the Department of Agriculture for sequential review
and approval, (2) subsequently submitted to the Office of Management
and Budget for its review and approval, and (3) forwarded to the
Secretary of Agriculture for submittal to the Committees. 

As a result, the Forest Service has seldom requested such approval
either before or after the fiscal year 1995 budget reforms.  On the
basis of information provided by the Forest Service, the agency
submitted one or two requests a year for the Appropriations
Committees' approval to reprogram funds among line items for the
National Forest System in fiscal years 1994 through 1997.  The
amounts totaled about $29.1 million in fiscal year 1994, $35.5
million in fiscal year 1995, $9.5 million in fiscal year 1996, and
$13.7 million in fiscal year 1997. 


   FUNDING TO CARRY OUT A PROJECT
   IS NOT ALWAYS CONSOLIDATED IN
   ONE PROGRAM
---------------------------------------------------------- Chapter 2:3

The fiscal year 1995 budget reforms restructured the Forest Service's
budget so that all funding to carry out a project is consolidated in
the program that will benefit the most from that project.  Under this
concept--called "benefiting function"--a program, such as Forest
Management, that requires support services from other programs,
including the Wildlife, Fish, and Rare Plants, to assist in
conducting environmental analyses and preparing environmental
documents relating to a planned timber sale, should pay the costs of
those services, rather than the programs that provide the support. 
However, programs that underestimate the costs of a project or
otherwise do not have the funds needed to pay for a project's support
services may require other programs that are providing support
services to absorb the costs of the services. 

Agency officials informed us that "charging as budgeted" and not "as
worked" was sometimes a more acceptable option than either not doing
the project or requesting a time-consuming and possibly uncertain
brokering or reprogramming of funds.  However, this practice not only
circumvents the requirements established by the Appropriations
Committees and the agency to move funds between line items and
understates a project's cost, it also precludes the Forest Service
from providing the Congress and other interested parties with
meaningful, useful, and reliable information on the costs and the
accomplishments of the National Forest System's programs. 

Although quantifying the extent to which staff providing support
services do not charge their work to the benefiting program is not
possible without firsthand knowledge of each project, the practice of
a benefiting program requiring other programs to absorb the costs of
providing support services appears to be widespread throughout the
Forest Service.  For example, at our request, an official in the
Lands program at the Washington Office conducted an internal survey
of the National Forest System in July 1998.  On the basis of that
systemwide survey, he estimated that since fiscal year 1995, on
average, about 49 percent of the funds allocated to the Lands program
to survey, locate, mark and post, and maintain previously marked
property lines between lands in the National Forest System and lands
in other ownership (landline location) have been used to support
other programs, but charged to the Lands program.  Funds allocated to
the Lands program for landline location activities average about $14
million a year. 

Other studies have reached similar conclusions.  For instance, a
March 1998 report by a private consulting firm that examined the
Forest Service's financial systems states that "the capability to
work around 'charged as worked' initiatives is the most serious
criticism of the agency's current accounting and budget
infrastructure.  This capability is often cited as the primary reason
for the Forest Service's lack of financial credibility."\11

Moreover, "charging as budgeted" and not "as worked" appears to be
occurring at all three levels of National Forest System field
management.  For example, a March 1998 report by the Department of
Agriculture's Office of Inspector General states that 8 out of 10
biological evaluations conducted in one district office were paid for
by the Wildlife, Fish, and Rare Plants program instead of the
benefiting program (e.g., timber and recreation).\12 Similarly,
Wildlife, Fish, and Rare Plants program officials in the Pacific
Northwest (Region 6) office observed that the recreation, minerals,
and range programs were not providing adequate funds for biological
support services to prepare environmental documents, so funds were
being taken inappropriately from the wildlife program.  And, a
briefing paper prepared in 1996 by the Washington Office's director
of the Wildlife, Fish, and Rare Plants program noted that no attempt
had been made to fund salary costs within the Washington Office
consistent with the concept of benefiting function. 

According to several Forest Service officials we spoke to and agency
documents that we reviewed, in some instances, staff from programs
providing support services may not always charge their costs to the
benefiting program because the program primarily benefiting from the
work has not been clearly identified, defined, or understood.  For
example, work mischarged to fisheries activities in the Wildlife,
Fish, and Rare Plants program in the Eastern Region (Region 9)
dropped from an average of 60 percent to 12 percent after the region
circulated guidance on identifying the benefiting program and the
importance of charging work to it.  Other regional offices and forest
offices have issued similar guidance to clarify specific benefiting
programs and activities. 

Some of the confusion in identifying the benefiting program may be
because the Forest Service's budget structure has not kept pace with
the agency's movement away from goals and objectives that clearly
benefit one resource-specific program toward using multiple programs
to accomplish broader ecosystem-based goals and objectives.  Timber
as a commodity program versus timber as a tool to achieve a
stewardship objective, such as maintaining or restoring a forested
ecosystem, is an example.  The agency's Forest Management Program
Report for fiscal year 1997 notes that the proportion of total
harvest volume removed solely for timber commodity purposes had
fallen from 71 percent in fiscal year 1993 to 52 percent in fiscal
year 1997.\13 During that time, the proportion removed for forest
stewardship purposes--mostly to accomplish a forest ecosystem
health-related objective--had grown from 23 to 40 percent.  This
trend is expected to continue and, by fiscal year 1999, the Forest
Service estimates that the proportion of total harvest volume removed
solely for timber commodity purposes will have fallen to 46 percent
while the proportion removed for forest stewardship purposes will
have grown to 54 percent.  Although timber sales will increasingly be
used as a tool to maintain or restore forested ecosystems, timber
sales management under the Forest Management program is still
identified as the benefiting function. 

We found instances where field and program managers justified
charging the programs providing support services because many
programs benefited from the project, so they decided that the program
with available funding should pay.  For example, a snowmobile club
using the Superior National Forest in Minnesota asked permission from
the Forest Service to build a snowmobile trail.  However, because of
the requirements of the Wilderness Act, the trail could not be
constructed on lands designated as wilderness.  To locate the
boundary of the wilderness, the Lands program was required to survey
the area of the forest where the trail was to be built and mark and
post the boundaries of the wilderness.  Officials at the Forest
Service's Washington Office agree that the Recreation, Heritage, and
Wilderness Resources program was the benefiting program because it is
responsible for both recreation and wilderness management.  However,
the costs to survey, locate, and mark and post the boundaries of the
wilderness area were absorbed by the Lands program. 

The forest office's budget and finance officer justified charging the
costs to the Lands program by pointing out that the boundaries of the
wilderness area would eventually have to be established anyway. 
However, the manager of the Lands program in the forest office stated
that locating the boundaries of wilderness to build a snowmobile
trail was a relatively low priority within that program.  Moreover,
the funds allocated to that program were needed to meet the Forest
Service's priority of reducing the risks, such as timber theft, soil
and water degradation, and encroachments and trespass, to the
National Forest System's resources that are caused by the rapid
population growth along the boundaries of the national forests--an
area termed the "wildland/urban interface."

In an April 1997 report,\14 we stated that the Forest Service had not
given adequate attention to improving its accountability for
expenditures and performance and that improvements are often left to
the discretion of regional offices and forests with uneven or mixed
results.  The failure of certain regions, forests, and districts to
consistently charge the costs of support services to the benefiting
programs is another example of an organizational culture of
indifference toward accountability.  In the April 1997 report, as
well as in March 1998 testimony,\15 we observed that strong
leadership within the Forest Service would be required to ensure
corrective action. 


--------------------
\11 Modernizing Financial Management at the Forest Service: 
Financial Management & Organizational Analysis, Coopers & Lybrand
Consulting (Mar.  18, 1998). 

\12 Forest Service Wildlife and Fisheries Habitat Management, Fiscal
Year 1996 (Audit Report No.  08601-4-At, Mar.  1998). 

\13 National Summary:  Forest Management Program Report for Fiscal
Year 1997, U.S.  Department of Agriculture, Forest Service, FS-627
(July 1998). 

\14 Forest Service Decision-Making:  A Framework for Improving
Performance (GAO/RCED-97-71, Apr.  29, 1997). 

\15 Forest Service:  Lack of Financial and Performance Accountability
Has Resulted in Inefficiency and Waste (GAO/T-RCED/AIMD-98-135, Mar. 
26, 1998). 


ACCOUNTABILITY IS HAMPERED BY
INADEQUATE PERFORMANCE MEASURES
AND A FOCUS ON RESOURCE-SPECIFIC
OUTPUTS
============================================================ Chapter 3

In exchange for the greater flexibility granted to the Forest Service
by the fiscal year 1995 budget reforms, the Appropriations Committees
expected the agency to, among other things, improve its performance
measures and increase its accountability for results.  Actions to be
taken by the Forest Service included improving its existing
performance measure system and implementing a management cost and
performance reporting system that it was developing.  In addition,
the Forest Service has developed agencywide criteria to allocate
appropriated funds to its regions and forests.  However, (1) the
Forest Service's budget allocation criteria are often not linked to
the agency's strategic goals and objectives; (2) its performance
measures do not, in many instances, adequately reflect its
accomplishments or progress toward achieving its goals and
objectives; and (3) the management cost and performance reporting
system that the agency was, and is still, developing uses the
performance measures as input.  As a result, the Forest Service, the
Congress, and other interested parties do not have an adequate
measure of the agency's funding needs or its progress toward
achieving its goals and objectives. 


   THE FOREST SERVICE'S BUDGET
   ALLOCATION CRITERIA OFTEN ARE
   NOT LINKED TO ITS STRATEGIC
   GOALS AND OBJECTIVES
---------------------------------------------------------- Chapter 3:1

Since fiscal year 1996, the Forest Service has used criteria
developed at the Washington Office to allocate funds by extended
budget line items to its field offices.  However, these allocation
criteria often are not linked to the agency's strategic goals and
objectives. 

For instance, the Forest Service's fiscal year 1997 annual report
cites the goal of restoring and protecting forested ecosystems as the
agency's highest priority.\16 Similarly, the agency's September 30,
1997, 5-year strategic plan makes clear that, consistent with its
existing legislative framework, the Forest Service's overriding
mission and funding priority is to maintain or restore the health of
the lands entrusted to its care and that it intends to fulfill this
responsibility primarily by maintaining and restoring the health of
forested, aquatic, and rangeland ecosystems.\17 The agency's July
1998 Forest Management Program Report for fiscal year 1997 continues
this theme, noting that the proportion of total harvest volume
removed to accomplish forest ecosystem health-related objectives and
other forest stewardship purposes had grown to 40 percent and that by
fiscal year 1999 this proportion is expected to increase to 54
percent.\18 However, the criteria that the Forest Service used to
allocate fiscal year 1998 funds to its field offices to manage timber
sales were based solely on managing timber as a commodity rather than
on using it as a tool to accomplish a stewardship objective. 

In its first annual performance plan developed under the Government
Performance and Results Act of 1993 (the Results Act),\19 dated
February 4, 1998, the Forest Service identified three extended budget
line items within the National Forest System appropriation that are
available to forest and district offices to restore or protect
forested ecosystems, including one for Timber Sales Management. 
However, all three of the budget allocation criteria for this funding
source relate to providing a continuous supply of timber from the
national forests, not to restoring or protecting the forested
ecosystems.  While the agency's Forest Management Program Report for
fiscal year 1997 stresses the fact that the timber being removed from
the national forests today includes proportionately more (1) dead and
dying trees, as opposed to green timber, and (2) nonsawtimber, as
opposed to sawtimber,\20 the criteria for allocating funds
appropriated for Timber Sales Management for fiscal year 1998 relate
solely to the volume of green timber produced or offered.  (See table
3.1.)



                               Table 3.1
                
                   Fiscal Year 1998 Budget Allocation
                 Criteria Related to Using Timber Sales
                as a Tool to Restore or Protect Forested
                               Ecosystems

                                National Forest     Budget allocation
                                System funding      criteria for
Strategic objective             source              fiscal year 1998
------------------------------  ------------------  ------------------
Restore or protect the          Timber Sales        Amount of green
ecological integrity of         Management          volume that could
forested ecosystems to                              be produced at
maintain their biological and                       current service
physical components,                                level (50%)
functions, and
interrelationships and the                          Amount of green
capability for self-renewal.                        timber that could
                                                    be produced with
                                                    unlimited funding
                                                    (25%)

                                                    3-year average of
                                                    green timber
                                                    offered (25%)
----------------------------------------------------------------------
Source:  Forest Service. 


--------------------
\16 Report of the Forest Service, Fiscal Year 1997, U.S.  Department
of Agriculture (May 1998). 

\17 USDA Strategic Plan 1997-2002:  A Healthy and Productive Nation
in Harmony With the Land, Forest Service Strategic Plan, U.S. 
Department of Agriculture, Office of the Secretary (Sept.  30, 1997). 

\18 National Summary:  Forest Management Program Report for Fiscal
Year 1997, U.S.  Department of Agriculture, Forest Service, FS-627
(July 1998). 

\19 FY 1999 USDA Forest Service Annual GPRA Performance Plan, U.S. 
Department of Agriculture, Forest Service (Feb.  4, 1998). 

\20 Sawtimber is defined as trees of such size and quality that they
contain logs suitable for processing into lumber. 


   THE FOREST SERVICE'S SYSTEM FOR
   MEASURING PERFORMANCE IS
   INADEQUATE
---------------------------------------------------------- Chapter 3:2

Soon after the fiscal year 1995 budget reforms were enacted, the
Forest Service sent a memorandum to its managers outlining the
reforms and how it intended to fulfill its commitment to the Congress
to improve accountability.  Among other things, the Forest Service
planned to develop new measures of performance and improve existing
indicators in the primary system it has been using to measure
performance--the Management Attainment Report or MAR report.  The
indicators in the MAR report are intended to measure how well the
Forest Service's field offices are, and the agency as a whole is,
performing.  However, with few exceptions, the agency officials we
interviewed considered the MAR report to be, at best, an imperfect
measure of the agency's performance and, at worst, misleading. 

In total, the MAR report has more than 100 indicators for the
National Forest System's nine programs.  These indicators include the
number of forest plan revisions completed or underway, the number of
miles of wilderness trails, the number of heritage sites evaluated or
protected, and the number of acres of noxious weeds treated.  The
indicators are intended to measure how well field offices are
performing.  Information from the MAR report is also used to report
the Forest Service's performance to the Congress and the public. 

Prior to the beginning of a fiscal year, Forest Service program
managers in the Washington Office negotiate performance targets for a
handful of MAR indicators for their individual programs.  These
targets are then allocated by program to the regional, forest, and
district offices.  At the end of the fiscal year, program staff in
the district offices report their accomplishments by indicator to
their forest office.  The forest offices combine the districts'
accomplishments and forward them to their regional office, which in
turn combines the forests' accomplishments and forwards them to the
Washington Office where they are combined and reported to the
Congress and the public. 


      PERFORMANCE MEASURES OFTEN
      DO NOT ADEQUATELY REFLECT
      ACCOMPLISHMENTS OR PROGRESS
      TOWARD ACHIEVING STRATEGIC
      GOALS AND OBJECTIVES
-------------------------------------------------------- Chapter 3:2.1

The MAR indicators often do not adequately reflect the Forest
Service's progress toward achieving its strategic goals and
objectives.  For instance, restoring and protecting forested
ecosystems is the Forest Service's highest priority.  However, more
often than not, the MAR indicators do not provide any indication of
the agency's progress toward achieving this objective. 

For example, in its first annual performance plan developed under the
Results Act, the Forest Service identifies three MAR indicators
related to the three extended budget line items within the National
Forest System appropriation that are available to forest and district
offices to restore or protect forested ecosystems.  (See table 3.2.)
However, none of these MAR indicators provides a good measure of the
agency's progress toward achieving this objective. 



                               Table 3.2
                
                Fiscal Year 1998 National Forest System-
                 Related MAR Indicators Used to Measure
                Progress Toward Restoring or Protecting
                          Forested Ecosystems

                        National Forest System  MAR indicators for
Strategic objective     funding sources         fiscal year 1998
----------------------  ----------------------  ----------------------
Restore or protect the  Timber Sales            None
ecological integrity    Management
of forested ecosystems                          Forestlands maintained
to maintain their       Forestland Vegetation   or enhanced by timber
biological and          Management              stand improvement
physical components,
functions, and                                  Acres restored by
interrelationships and                          reforestation
the capability for
self-renewal.                                   Acres of terrestrial
                        Wildlife Habitat        wildlife habitat
                        Management              restored or enhanced
----------------------------------------------------------------------
Source:  Forest Service. 

The primary objective of the activities relating to two of the three
MAR indicators is to provide for a continuous supply of timber from
the national forests, rather than to maintain or restore the health
of the lands.  For instance, timber stand improvement is defined by
the Forest Service as "noncommercial cutting and other treatments
made to increase the growth and improve the quality of trees for
timber uses" and reforestation is defined as "treatments or
activities that help to reestablish stands of trees after harvest."

The remaining MAR indicator is intended to measure a biological
component of a forested ecosystem; that is, its wildlife.  However,
this indicator measures only the number of acres of terrestrial
wildlife habitat restored or enhanced and not the agency's progress
toward accomplishing its stated objective of maintaining
well-distributed viable populations of wildlife (the viability or
viable populations requirement).  Moreover, because the indicator is
limited to wildlife, it does not measure the agency's progress toward
maintaining the diversity of other biological components of
ecosystems, such as plant communities. 

The Forest Service's September 30, 1997, 5-year strategic plan also
identifies goals and objectives for goods and services on national
forests, including providing quality recreational experiences.  In
addition, the Chief's March 1998 natural resource agenda for the
twenty-first century emphasizes recreation as one of only four key
areas on which the Forest Service intends to focus its resources.\21
However, of the six potential funding sources within the National
Forest System's appropriation that are available to forest and
district offices to provide quality recreation, four did not have any
MAR indicators relating specifically to recreation for fiscal year
1998.  In addition, none of the fiscal year 1998 MAR indicators for
the remaining two funding sources--recreation management and road
maintenance--measures the agency's progress toward providing quality
recreational experiences.  Rather than quality and outcomes, the MAR
indicators measure quantity or such outputs as seasonal capacity
available at developed facilities; the number of miles of roads and
recreational trails; the number of permits "in existence" for private
recreational cabins, special group events, and other noncommercial
special uses; and the number of visitors to the forests.  (See table
3.3.) Moreover, (1) the seasonal capacity available at developed
facilities includes capacity that is not being maintained "to
standard," (2) the number of special use permits includes those not
administered to standard but "on the books," and (3) the total miles
of Forest Service-managed roads includes those "less than fully
maintained." Thus, a substandard facility or an unmaintained road is
counted as an accomplishment toward improving the level of customer
satisfaction provided by recreational opportunities on national
forests. 



                               Table 3.3
                
                Fiscal Year 1998 National Forest System-
                 Related MAR Indicators Used to Measure
                   Progress Toward Providing Quality
                        Recreational Experiences

                                National Forest
                                System funding      MAR indicators for
Strategic objective             sources             fiscal year 1998
------------------------------  ------------------  ------------------
Provide quality recreation      Wildlife Habitat    None
experiences with minimal        Management
impacts to ecosystem stability                      None
and condition.                  Inland Fisheries
                                Habitat
                                Management          None

                                Anadromous
                                Fisheries Habitat   None
                                Management

                                Threatened,
                                Endangered, and     Seasonal developed
                                Sensitive Species   facility capacity
                                Habitat             available
                                Management          (standard and
                                                    substandard)
                                Recreation
                                Management          Total miles of
                                                    recreation trails

                                                    Total number of
                                                    special-use
                                                    permits (standard
                                                    and substandard)

                                                    Number of
                                                    visitors

                                                    Roads maintained
                                                    (standard and
                                Road Maintenance    substandard)

----------------------------------------------------------------------
Source:  Forest Service. 

In its fiscal year 1999 annual performance plan developed under the
Results Act, the Forest Service stated that it is developing a new
process--called "Meaningful Measures"--that will, among other things,
(1) identify measurable components of the recreation program; (2)
establish standards of quality for each component; and (3) monitor,
measure, and report actual management attainment of the quality
standards.  The plan states that the process should be available in
fiscal year 1999 for use in preparing the fiscal year 2000
performance plan.  However, as noted by the Department of
Agriculture's Office of Inspector General in 1998,\22 the process,
which has been under development since at least 1994, (1) is still
evolving, (2) has not been implemented, and (3) has not been
integrated in the automated real property inventory and management
system that the agency has been developing since 1993. 

Not only do the MAR indicators often measure quantity and outputs
when they should be measuring quality and outcomes, they do not
measure outputs consistently.  A frequent complaint by officials we
interviewed was that many of the MAR indicators are so broadly
defined that two field units reporting identical accomplishments may
have expended very different levels of effort and accomplished very
different objectives.  For example, for fiscal year 1998, one of the
MAR indicators for both the Wildlife Habitat Management and the
Threatened, Endangered, and Sensitive Species Habitat Management
extended budget line items was the "total number of structures
constructed." However, according to agency officials, a structure can
be as inexpensive as a wooden box for nesting ducks or as
resource-intensive as a fish ladder to increase the number of adult
fish migrating upstream.  A field unit with few resources, yet eager
to meet its performance targets, has an incentive to focus on less
resource-intensive activities even though by focusing its efforts on
one large project it might actually provide greater wildlife
benefits. 

Finally, many Forest Service officials stated that MAR data are not
reliable.  They told us that they do not expend much effort to ensure
the accuracy of the information they report.  Moreover, no unit of
the National Forest System that we visited systematically reviewed
and audited the accuracy of the accomplishments reported by field and
program staff, and some have developed so-called "cuff" records and
reports that are unique to the units and cannot be combined and
reported to the Congress and the public. 


--------------------
\21 A Gradual Unfolding of a National Purpose:  A Natural Resource
Agenda for the 21st Century, Speech Before Forest Service Employees,
Chief of the Forest Service (Mar.  2, 1998). 

\22 Forest Service Maintenance Backlog, U.S.  Department of
Agriculture, Office of Inspector General (Feb.  4, 1998). 


   THE FOREST SERVICE'S MANAGEMENT
   COST AND PERFORMANCE REPORTING
   SYSTEM WILL NOT PROVIDE
   ADEQUATE PERFORMANCE
   INFORMATION
---------------------------------------------------------- Chapter 3:3

In exchange for the greater flexibility granted to the Forest Service
by the fiscal year 1995 budget reforms, the agency also agreed to
implement a management cost and performance reporting system called
All Resources Reporting that it has been developing since fiscal year
1988.\23 The agency is uncertain when this system will be fully
implemented.  The system is intended to provide meaningful, useful,
and reliable information on the National Forest System's costs,
revenues, accomplishments, and economic benefits to help meet the
agency's responsibilities for financial management and accomplishment
reporting.  To provide such information, the reporting system depends
on both reliable financial data and adequate performance measures,
neither of which the Forest Service currently has. 

All Resources Reporting is intended to be an integrated financial and
accomplishment reporting system.  It was designed to clearly display
the relationship between expenditures associated with a program or
activity in a national forest and the revenues collected or other
outcomes or outputs resulting from that program or activity.  In
addition, it is to include socioeconomic information to help assess
the annual social and economic benefits derived from a national
forest.  The system is comprised of a family of year-end financial
statements and other reports intended to capture the benefits and
costs of program management.  However, the system and its statements
and reports depend on accurate and complete financial and performance
data, which the agency cannot provide. 

We have previously reported on shortcomings in the Forest Service's
information systems and accounting and financial data--such as the
lack of reliable account balances for lands, buildings, and roads and
the lack of detailed records to substantiate amounts that the agency
either owes or is owed by others.  These shortcomings preclude the
Forest Service from presenting accurate and complete financial
information.  Because of the severity of the problems identified, we
are monitoring and periodically reporting on the Forest Service's
effort to correct its accounting and financial reporting
deficiencies.\24 On the basis of our work, we believe that the
earliest that the Congress may have assurance that the agency's
financial statements are reliable is when the Department of
Agriculture's Inspector General reports on the Forest Service's
fiscal year 2000 statements sometime in fiscal year 2001.\25

To clearly display the relationship between expenditures and results,
the All Resources Reporting system must also have adequate and
complete performance data.  However, to measure performance, the
reporting system relies on the MAR indicators, which may be
inadequate measures of the Forest Service's accomplishments or
progress toward achieving its goals and objectives.  Moreover, while
the agency has identified the actions required to correct known
accounting and financial reporting deficiencies and has established a
schedule to attain financial accountability within the next few
years, it has not identified the actions required to correct the
problems with its performance measures or established a schedule to
achieve accountability for its performance by a certain date. 


--------------------
\23 Forest Service:  Status of the All-Resource Cost Reporting
Project (GAO/AFMD-89-65, Apr.  14, 1989). 

\24 Forest Service:  Status of Progress Toward Financial
Accountability (GAO/AIMD-98-84, Feb.  27, 1998). 

\25 Forest Service:  Lack of Financial and Performance Accountability
Has Resulted in Inefficiency and Waste (GAO/T-RCED/AIMD-98-135, Mar. 
26, 1998). 


CONCLUSIONS AND RECOMMENDATIONS
============================================================ Chapter 4

The Forest Service's management of the National Forest System has not
appreciably changed as a result of the fiscal year 1995 budget
reforms primarily because of two underlying causes--one relatively
new and the other as old as the agency itself.  New is the inability
of the agency's budget structure to keep pace with the Forest
Service's ongoing transition from an agency emphasizing consumption
(primarily producing timber) to one emphasizing conservation
(primarily sustaining wildlife and fish) and from an agency managing
specific resources to one managing forested and other ecosystems.  As
a result, there is (1) currently no clear link between the agency's
ecosystem-based strategic goals and objectives and the
resource-specific National Forest System line items in its budget and
(2) some confusion within the agency in identifying the program that
will benefit most from a project so that costs can be consistently
charged to that program. 

As old as the Forest Service itself is the agency's highly
decentralized organizational structure and the considerable autonomy
and discretion that field and program managers have in interpreting
and applying the agency's policies and directions.  As in the past,
(1) implementation of the fiscal year 1995 reforms within the Forest
Service's hierarchical organization has been left to the discretion
of regional, forest, and district offices with uneven and mixed
results and (2) there has been no consequences associated with making
a certain decision and no responsibility fixed for attaining a
particular result. 

The broad discretion that the Forest Service has given its field and
program managers has resulted in, among other things, (1) some forest
and district offices continuing to distribute and track funds as if
the reforms had not occurred, (2) some field managers redistributing
work charged to other activities after the fact in order to achieve
or maintain specific levels of funding within activities, and (3)
programs without the funds needed to pay for a project's support
services requiring other programs that are providing the support to
absorb the costs of the services rather than seeking to meet their
needs by moving funds between line items or by requesting a
reprogramming of funds by the Chief of the Forest Service or the
House and Senate Appropriations Committees. 

Moreover, the Forest Service has not fulfilled its part of the "quid
pro quo" with the Congress that resulted from the fiscal year 1995
budget reforms.  Although the Appropriations Committees gave the
agency increased flexibility over its budget, the Forest Service has
not provided the Committees with the improved accountability that
they requested. 

Currently, there is no clear link between the Forest Service's
strategic goals and objectives and its budget allocation criteria and
performance measures.  Rather than develop new criteria and measures
and improve existing ones to better align them with its mission and
funding priorities, the agency is trying to use old resource-specific
allocation criteria and performance measures with its new
integrated-resource goals and objectives. 

The disconnect between the Forest Service's strategic goals and
objectives and its performance measures and the inadequacy of the
measures themselves become even more critical because the management
cost and performance reporting system, which the agency has been
developing since 1988, uses the performance measures to display the
relationship between expenditures and results.  Inadequate and
unreliable performance measures that are also not linked to the
agency's strategic goals and objectives will be used to report
accomplishments in achieving those goals and objectives.  As a
result, the Forest Service, the Congress, and other interested
parties do not have an adequate measure of the agency's funding needs
or its progress toward achieving its goals and objectives. 

While further changes to the Forest Service's budget structure seem
to be warranted to facilitate management of the 155 national forests,
we believe that any future revisions should coincide with, rather
than precede, actions required to correct known accounting and
financial reporting deficiencies as well as problems with
performance-related data, measurement, and reporting.  However, the
Forest Service has not established a schedule to achieve
accountability for its performance and is uncertain when its
management cost and performance reporting system will be fully
implemented.  A firm schedule is needed so that the agency can
demonstrate progress toward becoming more accountable for its
performance and results. 

Developing and implementing a firm schedule to correct identified
management deficiencies and to achieve performance accountability
will require strong leadership within the agency and sustained
oversight by the Congress to make clear the demarcation between the
discretion that regional, forest, and district offices have in
managing their lands and resources and the need to strictly adhere to
the agency's policies and requirements relating to financial and
performance accountability.  The April 1998 restructuring of the
Forest Service's management team that placed responsibility for
fiscal and business management under a Chief Operating Officer who
reports directly to the Chief of the Forest Service may provide the
needed leadership. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:1

To improve the Forest Service's accountability for results, we
recommend that the Secretary of Agriculture direct the Chief of the
Forest Service to (1) revise the agency's budget structure, budget
allocation criteria, and performance measures to better link them to
the Forest Service's strategic goals and objectives and (2)
incorporate the new performance measures into the management cost and
performance reporting system that the agency is developing. 
Moreover, to help ensure that the budget allocation criteria and
performance measures are revised and the management cost and
performance reporting system is implemented in a timely manner, we
recommend that the Secretary direct the Chief to establish a firm
schedule to achieve performance accountability. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 4:2

We provided copies of a draft of this report to the Forest Service
for its review and comment.  The agency's comments, together with our
responses to them appear in appendix I. 

The Forest Service generally agreed with the report's findings and
recommendations.  However, it believed that improvements to its
budget structure should be made concurrent with, rather than after,
improvements to its budget allocation criteria, performance measures,
and reporting systems as suggested in the draft report.  We agree
with the Forest Service that a piecemeal approach to correcting known
accounting and financial reporting deficiencies and
performance-related problems will not work and have revised the
report accordingly.  The Forest Service also provided comments on the
factual content of the report, and changes were made as appropriate. 




(See figure in printed edition.)Appendix I
COMMENTS FROM FOREST SERVICE
============================================================ Chapter 4



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Forest Service's October 23,
1998, letter. 


   GAO COMMENTS
---------------------------------------------------------- Chapter 4:3

1.  We have revised the report to clarify that (1) since fiscal year
1995, funds have generally been budgeted and allocated at the
agency's Washington and regional offices consistent with the budget
reforms, (2) implementation of the reforms at the forest and district
offices has been left to the discretion of field and program
managers, and (3) some forest and district offices continue to
distribute and track funds as if the reforms had not occurred. 

2.  We agree with the Forest Service that a piecemeal approach to
correcting known accounting and financial reporting deficiencies and
performance-related problems will not work and have revised the
report to state that improvements to the agency's budget structure
should be made concurrent with, rather than after, improvements to
its budget allocation criteria, performance measures, and reporting
systems. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

Jean Brady
Marcus R.  Clark, Jr.
Charles S.  Cotton
Doreen S.  Feldman
Angela M.  Sanders


*** End of document. ***