Forest Service: Alaska Region's Operating Costs for Fiscal Years 1993
Through 1998 (Testimony, 07/28/98, GAO/T-RCED-98-227).

Pursuant to a congressional request, GAO discussed: (1) the National
Forest Service's Alaska Region's allocation of funds for its operating
costs for fiscal year (FY) 1993 through FY 1998; (2) the nature,
purpose, and allocation of centralized field costs and the steps the
Alaska Region is taking to comply with the congressional limitation on
the expenditures for the regional office and centralized field costs;
(3) the rationale for and the distribution of regional reserve funds;
and (4) whether the Forest Service's National Forest System and Research
appropriations were used appropriately to pay for work performed by the
Pacific Northwest Research Station in connection with the revision of
the Tongass Land Management Plan and for post-plan studies.

GAO noted that: (1) the Alaska Region's operating costs ranged from $108
million to $127 million annually during FY 1993 through FY 1997; (2) the
region allocated 71 to 76 percent of these funds to field offices
carrying out local programs; 13 to 17 percent for managing regional
office operations; 4 to 7 percent for centralized field costs; 2 to 5
percent for regional reserves; and 2 to 4 percent for State and Private
Forestry operations; (3) for FY 1998, the region's estimated allocations
totalled about $106 million to carry out these regional programs; (4)
until FY 1998, the Alaska Region used centralized field costs to manage
certain programs or activities for the benefit of multiple offices; (5)
the Forest Service's FY 1998 appropriations act limited the Alaska
Regional Office's expenditures for regional office operations and
centralized field costs to $17.5 million; (6) to comply with this
legislative requirement, the Alaska Region eliminated the use of the
centralized field cost category, included unallocated funds in regional
reserve accounts until the funds are distributed to the field units, and
separated the costs for State and Private Forestry operations from the
operations of the regional office; (7) the Alaska Region establishes
reserves because of the uncertainty about the timing or the amount of
funds needed for certain projects; (8) once the specific amount or
responsible unit is determined, the region distributes the necessary
reserves to the unit responsible for making the payment; (9) any ending
balance in the reserve category becomes the carryover amount for the
next fiscal year; (10) beginning in FY 1995, both the Alaska Region's
portion of the National Forest System appropriation and the Pacific
Northwest Research Station's portion of the Forest and Rangeland
Research appropriation funded the work performed by the Research Station
scientists on the revision of the Tongass Land Management Plan and
post-plan studies; (11) documentation of the rationale for decisions
about the funding split for particular work performed by the research
scientists could not be provided; and (12) GAO could not determine
whether the National Forest System and Research appropriations were used
appropriately or inappropriately for FY 1995 through FY 1998.

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

 REPORTNUM:  T-RCED-98-227
     TITLE:  Forest Service: Alaska Region's Operating Costs for Fiscal 
             Years 1993 Through 1998
      DATE:  07/28/98
   SUBJECT:  National forests
             Forest management
             Appropriated funds
             Research and development facilities
             Cost accounting
             Budgetary reserves
             Funds management
IDENTIFIER:  Forest Service Tongass Land Management Plan
             Tongass National Forest (AK)
             Chugach National Forest (AK)
             Alaska
             
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Cover
================================================================ COVER


Before the Committee on Energy and Natural Resources, U.S.  Senate

For Release
on Delivery
Expected at
10:00 a.m.  EDT
Tuesday
July 28, 1998

FOREST SERVICE - ALASKA REGION'S
OPERATING COSTS FOR FISCAL YEARS
1993 THROUGH 1998

Statement of James K.  Meissner, Associate Director,
Energy, Resources, and Science Issues
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-227

GAO/RCED-98-227T


(141190)


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


============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to discuss our recently issued report
to you on the costs to operate the Forest Service's Alaska Region.\1
The Forest Service provides the Alaska Region with annual
appropriations for its operations, and the region further allocates
these appropriations to cover the regional office's costs, the
centralized field costs that fund activities that usually have
regionwide benefits, and the costs of the four field offices at the
Tongass and Chugach National Forests.  The remainder is designated as
reserves. 

In response to your request, we provided you with information on (1)
the region's allocation of funds for its operating costs for fiscal
years 1993 through 1998; (2) the nature, purpose, and allocation of
centralized field costs and the steps the Alaska Region is taking to
comply with the congressional limitation on the expenditures for the
regional office and centralized field costs; (3) the rationale for
and the distribution of regional reserve funds; and (4) whether the
Forest Service's National Forest System and Research appropriations
were used appropriately to pay for work performed by the Pacific
Northwest Research Station in connection with the revision of the
Tongass Land Management Plan and for post-plan studies. 

In summary: 

  -- The Alaska Region's operating costs ranged from $108 million to
     $127 million annually during fiscal years 1993 through 1997. 
     The region allocated from 71 to 76 percent of these funds to the
     field offices for carrying out local programs, such as timber
     sale preparation or wildlife activities; 13 to 17 percent for
     managing regional office operations, including overall direction
     and support for field offices; 4 to 7 percent for centralized
     field costs; 2 to 5 percent for regional reserves; and 2 to 4
     percent for State and Private Forestry operations.  For fiscal
     year 1998, the region's estimated allocations totaled about $106
     million to carry out these regional programs.

  -- Until fiscal year 1998, the Alaska Region used centralized field
     costs to manage certain programs or activities for the benefit
     of multiple offices.  Centralized field costs include activities
     such as payments to the National Finance Center for payroll and
     accounting services.  The Forest Service's fiscal year 1998
     appropriations act limited the Alaska Regional Office's
     expenditures for regional office operations and centralized
     field costs to $17.5 million.  To comply with this legislative
     requirement, the Alaska Region eliminated the use of the
     centralized field cost category, included unallocated funds in
     regional reserve accounts until the funds are distributed to the
     field units, and separated the costs for State and Private
     Forestry operations from the operations of the regional office.

  -- The Alaska Region establishes reserves because of the
     uncertainty about the timing or the amount of funds needed for
     certain projects.  Once the specific amount or responsible unit
     is determined, the region distributes the necessary reserves to
     the unit responsible for making the payment.  In fiscal years
     1995 through 1997, the Alaska Region distributed reserves
     ranging from $6 million to $12 million.  The four field offices
     received from 87 to 98 percent of the reserves during this
     period, and the remainder went to the region for regional office
     operations.  Any ending balance in the reserve category becomes
     the carryover amount for the next fiscal year.

  -- Beginning in fiscal year 1995, both the Alaska Region's portion
     of the National Forest System appropriation and the Pacific
     Northwest Research Station's portion of the Forest and Rangeland
     Research appropriation funded the work performed by the Research
     Station scientists on the revision of the Tongass Land
     Management Plan and post-plan studies.  Although we asked for
     documentation of the rationale for decisions about the funding
     split for the particular work performed by the research
     scientists, neither of these organizations could provide us with
     such documentation.  As a result, we could not determine whether
     the National Forest System and the Research appropriations were
     used appropriately or inappropriately for fiscal years 1995
     through 1998. 


--------------------
\1 Forest Service:  Review of the Alaska Region's Operating Costs
(GAO/RCED-98-106R, Mar.  31, 1998). 


   ALASKA REGION'S OPERATING COSTS
   FOR FISCAL YEARS 1993 THROUGH
   1998
---------------------------------------------------------- Chapter 0:1

Annually, the Forest Service receives appropriations to operate its
nationwide programs.  On the basis of these appropriations, the
Forest Service allocates a portion to each of its regions to carry
out the regional and field office programs.  In the case of the
Alaska Region, appropriations are further allocated to (1) the
regional office, which provides overall direction and support for
programs and activities in the region as well as funds for the State
and Private Forestry operations located in Anchorage, Alaska; (2) the
centralized field costs, which fund programs or activities that
usually have regionwide benefits;\2 (3) the four field offices to
operate "on the ground" programs; and (4) reserve accounts from which
distributions are made during the year to the field offices. 

As shown on table 1, the Alaska Region's operating costs ranged from
$108 million to $127 million annually during fiscal years 1993
through 1997 and were estimated to be about $106 million for fiscal
year 1998. 



                                Table 1
                
                  Year-End Budget Allocations, Fiscal
                        Years 1993 Through 1998

                         (Dollars in thousands)

                                         Fiscal year
                        ----------------------------------------------
Budgeted amounts          1993    1994    1995    1996    1997  1998\a
----------------------  ------  ------  ------  ------  ------  ------
Regional office\b       $17,51  $18,72  $17,91  $15,67  $16,45  $18,74
                             3       6       3       2       3       9
State and Private\c      2,586   1,988   4,369   3,561   2,568   4,154
Centralized field        5,018   5,653   6,139   7,283   7,619     0.0
 costs
Field offices           94,990  91,504  77,173  84,767  83,977  69,760
Reserves                 6,508   3,185   2,568   6,295   5,611  13,386
======================================================================
Total                   $126,6  $121,0  $108,1  $117,5  $116,2  $106,0
                            15      56      62      78      28      49
----------------------------------------------------------------------
\a Based on the Alaska Region's Final Budget Allocation; the year-end
statements were not available at the time of our review. 

\b Includes amounts for permanent appropriations, trust funds, and
revolving funds. 

\c The amounts provided to the State and Private Forestry operations
in Anchorage--a separate organizational unit within the Forest
Service--are shown as a separate category even though the Alaska
Region's financial reports traditionally have included these amounts
as part of the regional office costs. 


--------------------
\2 The region eliminated the use of centralized field costs in fiscal
year 1998. 


   THE REGIONAL OFFICE'S USE OF
   CENTRALIZED FIELD COSTS
---------------------------------------------------------- Chapter 0:2

Until fiscal year 1998, the Alaska Region used a category of
operating costs, known as centralized field costs, as a means to
improve efficiency by having one office--either the regional office
or one of the field units--manage certain programs or activities for
the benefit of multiple offices.  Centralized field costs include
activities such as payments to the National Finance Center for
payroll and accounting services.  Overall, the centralized field
costs established by the region increased from about $5 million in
fiscal year 1993 to almost $9 million in fiscal year 1997, and the
number of programs or activities included in these costs fluctuated
from 24 to 41 during the same period.  However, this overall increase
is not reflective of the increases or decreases in individual
centralized field costs during this period because the same programs
or activities were not funded each year nor did the amounts of
individual centralized field costs remain constant.  As a component
of the Alaska Region's overall operating budget, these costs averaged
about 5 percent of the total. 


      FIELD OFFICE OFFICIALS CITE
      BOTH ADVANTAGES AND
      DISADVANTAGES OF CENTRALIZED
      FIELD COSTS
-------------------------------------------------------- Chapter 0:2.1

Regional office budget officials viewed the use of these centralized
field costs as a means to better achieve efficiency because the costs
of certain programs or activities generally would be managed
centrally rather than allocating each unit's share of the cost and
then requiring each unit to pay its proportional amount.  Field
office officials cited both the advantages and disadvantages of using
centralized field costs.  Yet none of these field office officials
could provide us with specific examples of disadvantages that
negatively affected their operations or what more they could have
accomplished if centralized field costs had not existed. 


      RECENT LEGISLATION RESULTS
      IN RECLASSIFICATION OF
      CENTRALIZED FIELD COSTS
-------------------------------------------------------- Chapter 0:2.2

In the conference report for the Forest Service's fiscal year 1998
appropriations, the conferees expressed concern "about the appearance
that expenditures for regional office operations and centralized
field costs have risen significantly as a proportion of annual
appropriated funds since 1993." As a result, in the appropriations
act the Congress limited the Alaska Regional Office's expenditures
for the regional office's operations and centralized field costs to
$17.5 million, without 60 days prior notice to the Congress. 

The preliminary budget allocation for fiscal year 1998 regional
office operations and centralized field costs totaled about $26.5
million.  According to a regional budget official, the region is
currently implementing the following measures to meet the
congressional limitation: 

  -- Eliminating all existing centralized field costs by allocating
     the funds directly to the field units whenever the office and
     amounts are known.

  -- Placing unallocated funds into a reserve account and
     distributing them as decisions are reached as to which office
     will receive the money.

  -- Separating the costs associated with the State and Private
     Forestry organizational unit from the regional office's
     expenses. 

According to the regional budget official, the region eliminated
centralized field costs and was able to reduce the planned regional
office cost allocations to about $18.7 million as of March 4, 1998. 
Although this estimate exceeds the $17.5 million congressional
limitation, according to an Alaska Region budget official, further
adjustments will be made as the year progresses to ensure that
regional office operating expenses do not exceed the amount allowed
by the Congress.  He also stated that centralized field costs will
not be used in the future. 


   REGIONAL RESERVES DISTRIBUTED
   TO LOCAL FIELD OFFICES
---------------------------------------------------------- Chapter 0:3

The Alaska Region establishes reserves because of the uncertainty
about the timing or the amount of funds needed for certain projects. 
Once the specific amount or responsible unit is determined, the
region distributes the necessary reserves to the unit responsible for
making the payment.  In fiscal years 1995 through 1997, the Alaska
Region distributed reserves ranging from $6 million to $12 million. 
The four field offices received from 87 to 98 percent of the reserves
during this period, and the remainder went to the region for regional
office operations.  Any ending balance in the reserve category
becomes the carryover amount for the next fiscal year. 


      LOCAL PROGRAMS GENERALLY
      WERE NOT AFFECTED BECAUSE
      THE REGION ESTABLISHED
      RESERVES
-------------------------------------------------------- Chapter 0:3.1

To determine whether reserves play a positive or negative role in
effectively implementing programs, we spoke with officials of each of
the four field offices.  The officials agreed that establishing a
reserve amount to facilitate the accounting for unknowns was an
effective procedure and believed that the region's actions in this
case generally led to less paperwork for the local units.  In most
cases, the field offices viewed reserves as a reasonable approach to
addressing the uncertainties related to contracting, such as delays,
cost increases, or the lack of appropriate bids.  Thus, overall, the
field office officials generally supported the process of
establishing reserves and the manner in which the regional office
approached the distribution of these funds. 


   THE RATIONALE FOR THE SPLIT
   FUNDING FOR THE WORK OF
   RESEARCH SCIENTISTS ON THE
   TONGASS LAND MANAGEMENT PLAN
   WAS NOT DOCUMENTED
---------------------------------------------------------- Chapter 0:4

Beginning in fiscal year 1995, the Forest Service's Pacific Research
Station scientists performed work in connection with the Tongass Land
Management Plan.  The work of the Research Station scientists was
jointly funded:  Part of the expenses was funded from the Alaska
Region's portion of the National Forest System appropriation, which
is normally used for forest planning activities, and another part was
funded by the Research Station's portion of the Research
appropriation, which is used for research activities.  The work
performed by the Research Station scientists dealt with (1) the
revision of the Tongass Land Management Plan, including resource
conservation assessments, resource analyses, workshops, and risk
assessment panels and (2) the post-plan priority research studies
identified in the plan as important for further amendments or
revisions to the plan.  Although we asked for documentation of the
rationale for decisions about the funding split for the particular
work performed by the research scientists, neither of these
organizations could provide us with adequate explanations or
documentation. 

According to the Forest Service's records, for fiscal years 1995
through 1998 the work of the scientists will have cost about $4.7
million, of which $2.8 million was funded by the National Forest
System appropriation and $1.9 million was funded by the Research
appropriation.  Our analysis of these data showed that the Research
Station scientists used 60 percent of the funds for the revision of
the plan and 40 percent for post-plan studies.  According to an
Intra-Agency Agreement, the Alaska Region and the Research Station
plan to continue funding post-plan studies at about $1.35 million
annually in future years with $900,000 and $450,000 from the National
Forest System and Research appropriations, respectively. 


      USE OF THE NATIONAL FOREST
      SYSTEM APPROPRIATION
-------------------------------------------------------- Chapter 0:4.1

The Congress provided the National Forest System appropriation for
the management, protection, improvement, and utilization of the
National Forest System and for forest planning, inventory, and
monitoring, all of which are non-research activities. 

We asked regional budget and fiscal officials to provide (1)
justification for the charges to the National Forest System
appropriation for the work of the Pacific Research Station scientists
and (2) the criteria that they used to make this determination. 
These officials said that such a determination was not made and that
they could not provide us with information on the types of tasks
performed by the scientists with National Forest System funds.  They
also could not provide us with any criteria, such as agency guidance
or procedures, that were available in 1995 to make such a
determination.  In effect, when the Research Station scientists
requested National Forest System funds for work on the Tongass Land
Management Plan, the Alaska Region provided the funds requested, but
it did not determine if the activities funded were a proper charge to
the appropriation. 

On March 4, 1998, the Alaska Region provided us with its final budget
allocation for fiscal year 1998, and again we asked the budget
officials for their justification for charges to the National Forest
System appropriation for the work of the Pacific Northwest Research
Station scientists, including the documentation required by the
August 1997 revision to the Forest Service's Service-Wide
Appropriations Handbook.  These officials said that such a
justification was not made and that they had not complied with the
documentation requirements of the Handbook. 


      THE USE OF THE RESEARCH
      APPROPRIATION
-------------------------------------------------------- Chapter 0:4.2

The Forest and Rangeland Research appropriation was provided by the
Congress for the Forest Service's research stations to conduct,
support, and cooperate in investigations, experiments, tests, and
other activities necessary to obtain, develop, and disseminate the
scientific information required to protect and manage forests and
rangelands, all of which are research activities. 

We asked the Pacific Northwest Research Station staff, including the
Science Manager for the Tongass Land Management Plan team, to provide
justification for the charges to the Research appropriation for the
work of the Research Station scientists and the criteria used to make
the determination.  This official said that such a determination was
not documented and that he could not provide us with documentation on
the types of tasks performed using research funds.  Also, the
official could not provide us with any criteria to make such a
determination. 

On March 4, 1998, the Research Station provided us with the estimated
budget allocation for fiscal year 1998, and again we asked the
Pacific Northwest Research Station's Science Manager for
justification for the charges to the Research appropriation for the
work of the Research Station scientists, including the documentation
required by the August 1997 revision to the Forest Service's
Service-Wide Appropriations Handbook.  This official said that such a
justification was not made and that the Research Station had not
complied with the documentation requirements of the handbook,
although it is in the process of developing a procedure to address
the handbook's requirements. 


      THE OFFICE OF INSPECTOR
      GENERAL PREVIOUSLY REPORTED
      ON SIMILAR SITUATIONS
-------------------------------------------------------- Chapter 0:4.3

The Department of Agriculture's Office of Inspector General addressed
a similar issue in its May 1995 report on the use of the National
Forest System appropriation for research studies performed by the
Forest Service's research stations.  The report pointed out that the
Forest Service's directives did not provide clear guidance for
determining the type of reimbursable work that research stations
could do for the Forest Service's other units.  According to the
Inspector General's report, this situation resulted in unauthorized
augmentation of the Forest Service's Forest and Rangeland Research
appropriation. 

The Inspector General recommended that the Forest Service supplement
its direction in its manual that provides guidance on the type of
reimbursable work that research stations may perform for the Forest
Service's other units and establish procedures for reviewing the work
that research stations perform for other units to ensure that it is
in compliance with appropriations law and the direction in the
manual.  On August 28, 1997, the Forest Service issued an interim
directive to its Service-Wide Appropriations Handbook that provides
direction on jointly funded projects, including preparing financial
plans and determining the appropriate funding allocations

However, as of the date of our report, neither the Alaska Region nor
the Research Station have complied with the August 1997 directive. 
Furthermore, because of the lack of documentation or adequate
explanations, we could not determine whether the National Forest
System and the Research appropriations were used appropriately or
inappropriately in fiscal years 1995 through 1998.  This type of
documentation is particularly important when projects, such as the
revision of the Tongass Land Management Plan and post-plan studies,
are jointly funded by two appropriations that were provided for
specifically different purposes, because the tasks funded by each
must be identified and charged to the correct appropriation. 
Clearly, the use of one appropriation to accomplish the purpose of
another is improper. 

It is imperative that the Forest Service in general and the Alaska
Region in particular have procedures in place to ensure that
appropriations are made available only for their stated purposes and
that controls are in place to ensure that the procedures are used
throughout the Forest Service. 

In our report, we recommended that the Chief of the Forest Service
direct the Alaska Regional Forester and the Pacific Northwest
Research Station Director to (1) fully comply with the Forest
Service's August 28, 1997, direction on special Research funding
situations, which requires the preparation of financial plans and
documentation of the determination of the appropriate funding
allocations, and (2) establish procedures to ensure compliance with
appropriations law Forest Service-wide.  To date, we have not
received the Forest Service's statement of actions taken on our
recommendations required by 31 U.S.C.  720. 


-------------------------------------------------------- Chapter 0:4.4

Mr.  Chairman, this concludes our prepared statement.  We will be
pleased to respond to any questions that you or the Members of the
Committee may have. 


*** End of document. ***