Forest Service: Agency's Response to Our Recommendations on the
Management of the Knutson-Vandenberg Fund (Testimony, 07/07/98,
GAO/T-RCED-98-240).
Pursuant to a congressional request, GAO discussed the shortcomings in
the Forest Service's administration of the Knutson-Vandenberg Trust Fund
(K-V Fund), focusing on the: (1) transfers from the K-V Fund that have
not been fully restored; (2) effect of unrestored transfers on planned
projects; (3) lack of financial information to ensure compliance with
the K-V Act requirements; and (4) lack of a standardized methodology for
calculating and limiting program support costs.
GAO noted that: (1) between 1990 and 1996, $645 million was transferred
from the K-V Fund to support emergency firefighting activities that was
not reimbursed; (2) to assist Congress in its consideration of any
future requests for appropriations to restore previously transferred
funds, GAO recommended that the Secretary of Agriculture report to
Congress on the financial status of the K-V fund; (3) the Department has
begun providing Congress with additional information on the financial
status of the K-V Fund; (4) in fiscal year 1997, Congress acted upon
that information by providing $202 million to partially repay moneys
transferred from the K-V Fund; (5) the Secretary of Agriculture has not
directed the Forest Service to revise the list of planned K-V projects
to take into account the actual balance in the K-V Fund; (6) although
the K-V Act requires that K-V Fund expenditures in one sale area be
limited to amounts collected in the same area, the Forest Service does
not collect expenditure data on a sale-by-sale basis; (7) GAO
recommended that the Secretary of Agriculture direct the Forest Service
to perform an analysis of alternatives to obtain the financial data
necessary to ensure that the K-V Fund's expenditures in one sale area
are limited to the amounts collected from that area, as required by the
K-V Act; (8) the Secretary of Agriculture indicated that such an
analysis was not necessary and that the current Forest Service methods
fulfilled the requirements of the K-V Act; (9) at the time of GAO's 1996
report, the Forest Service did not have a system in place to ensure the
consistent handling of program support charges for the K-V program
agencywide; and (10) since that time, the Forest Service has completed
an analysis of the methodological changes that are needed to standardize
the Forest Service's practices for assessing and withholding program
support costs for the K-V program and the results of the agency's work
should be implemented when the practices become part of the Forest
Service's directives in September 1998.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-98-240
TITLE: Forest Service: Agency's Response to Our Recommendations on
the Management of the Knutson-Vandenberg Fund
DATE: 07/07/98
SUBJECT: Trust revolving funds
Forest management
Funds management
Forest conservation
Federal interfund transactions
Government collections
Internal controls
Timber sales
IDENTIFIER: Knutson-Vandenberg Trust Fund
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Cover
================================================================ COVER
Before the Subcommittee on Government Management, Information, and
Technology, Committee on Government Reform and Oversight, House of
Representatives
For Release
on Delivery
Expected at
10 a.m. PDT
Tuesday
July 7, 1998
FOREST SERVICE - AGENCY'S RESPONSE
TO OUR RECOMMENDATIONS ON THE
MANAGEMENT OF THE
KNUTSON-VANDENBERG FUND
Statement of James K. Meissner,
Associate Director,
Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division
GAO/T-RCED-98-240
GAO/RCED-98-240T
(141233)
Abbreviations
=============================================================== ABBREV
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to be here today to provide information
on some of our work on the Forest Service's Knutson-Vandenberg Trust
Fund, commonly referred to as the K-V Fund. Essentially, this fund
is the primary source of Forest Service moneys used for the
reforestation of timber harvest areas. The fund is also used to
improve timber stands and other renewable resources within the
harvested areas. Although the amount of expenditures from the K-V
Fund may vary from year to year, expenditures for fiscal year 1997
were a little more than $166 million.
As requested, our statement today is drawn primarily from our June
1996 report\1
on shortcomings in the administration of the K-V Fund. The report
addressed the following issues: (1) the transfers from the K-V Fund
that have not been fully restored, (2) the effect of unrestored
transfers on planned projects, (3) the lack of financial information
to ensure compliance with the K-V Act requirements, and (4) the lack
of a standardized methodology for calculating and limiting program
support costs. We will also discuss the Department of Agriculture's
subsequent actions on our recommendations to improve the management
of the K-V program. In summary:
-- Between 1990 and 1996, $645 million was transferred from the K-V
Fund to support emergency firefighting activities that was not
reimbursed. To assist the Congress in its consideration of any
future requests for appropriations to restore previously
transferred funds, we recommended that the Secretary of
Agriculture report to the Congress on the financial status of
the K-V Fund. The Department has begun providing the Congress
with additional information on the financial status of the K-V
Fund. In fiscal year 1997, the Congress acted upon that
information by providing $202 million to partially repay moneys
transferred from the K-V Fund. At the beginning of fiscal year
1998, the K-V Fund had an unrestored balance of about $493
million.
-- The Secretary of Agriculture has not directed the Forest Service
to revise the list of planned K-V projects to take into account
the actual balance in the K-V Fund, as we recommended. The
Department stated that it would not require such a list until it
was certain that K-V funding for the year was inadequate.
-- Although the K-V Act requires that K-V Fund expenditures in one
sale area be limited to amounts collected in the same area, the
Forest Service does not collect expenditure data on a
sale-by-sale basis. We recommended that the Secretary of
Agriculture direct the Forest Service to perform an analysis of
alternatives (including the costs and benefits of each
alternative) to obtain the financial data necessary to ensure
that the K-V Fund's expenditures in one sale area are limited to
the amounts collected from that area, as required by the K-V
Act. The Department of Agriculture has not implemented our
recommendation. The Secretary of Agriculture indicated that he
did not believe such an analysis was necessary and that the
current Forest Service methods fulfilled the requirements of the
K-V Act.
-- At the time of our 1996 report, the Forest Service did not have
a system in place to ensure the consistent handling of program
support charges for the K-V program agencywide. We recommended
that the Secretary of Agriculture require all organizational
levels to use a standardized methodology for assessing and
withholding the support costs for the K-V program that would
limit expenditures for program support to the amounts collected
for such purposes. Since that time, the Forest Service has
completed an analysis of the methodological changes that are
needed to standardize the Forest Service's practices for
assessing and withholding program support costs for the K-V
program and the results of the agency's work should be
implemented when the practices become part of the Forest
Service's directives in September 1998.
--------------------
\1 Forest Service's Reforestation Funding: Financial Sources, Uses,
and Condition of the Knutson-Vandenberg Fund (GAO/RCED-96-15, June
21, 1996).
BACKGROUND
---------------------------------------------------------- Chapter 0:1
The Knutson-Vandenberg Trust Fund, as authorized by the Act of June
9, 1930, as amended (16 U.S.C. 576-576b), allows portions of the
receipts from timber sales to be deposited into the K-V Fund to be
used to reforest timber sale areas. In addition to being used for
planting trees, these deposits may also be used for eliminating
unwanted vegetation and for protecting and improving the future
productivity of the renewable resources on forest land in sale areas,
including sale area improvement operations, maintenance,
construction, and wildlife habitat management.
Reforestation is needed where timber harvests or natural disasters
have depleted the existing timber stands. In fiscal year 1997, about
$166 million was expended from the K-V Fund for reforestation and
related projects. The majority of the K-V moneys--about $115 million
in fiscal year 1997--was used to fund direct reforestation
activities. In addition to the direct reforestation expenditures,
about $51 million was used for costs incurred to support and manage
the reforestation program, such as rents, utilities, computer
equipment, or the salaries of program support staff.
Federal law permits the Forest Service to transfer amounts from the
K-V Fund, as well as other Forest Service appropriations, to
supplement the Forest Service's firefighting funds when emergencies
arise. The Forest Service is authorized to advance money from any of
its appropriations and trust funds to pay for fighting forest fires.
The Forest Service is not authorized to restore amounts so
transferred. Congressional action is required to restore such funds.
The Forest Service's oversight and management of the K-V Fund and the
reforestation program are decentralized. Forest Service headquarters
and the nine regional offices establish policy and provide technical
direction to forest offices. The forest offices, in turn, provide
general oversight to district offices and help the districts plan K-V
projects. The district ranger is responsible for overseeing the
planning and implementation of K-V projects.
K-V FUND HAS NOT BEEN FULLY
REIMBURSED
---------------------------------------------------------- Chapter 0:2
Between 1990 and 1996, the Forest Service transferred about $645
million from the K-V Fund for emergency firefighting activities that
had not been fully reimbursed. Since these transfers had not been
reimbursed, these funds were unavailable for K-V projects. In the
past, when such transfers were made, the Department of Agriculture
requested and received supplemental appropriations to restore the
transferred moneys, generally within 2 years of the original
transfer. However, in more recent time, the Department of
Agriculture had not submitted a request for a supplemental
appropriation to the Congress. It was not until March 15, 1996, that
the Department of Agriculture submitted a request for supplemental
appropriations to the Office of Management and Budget for the $420
million transferred during fiscal years 1990, 1992, and 1995. After
an additional $225 million was transferred from the K-V Fund in 1996,
the Congress, in 1997, provided $202 million from the emergency
firefighting appropriation as a partial reimbursement of the K-V
Fund. At the beginning of fiscal year 1998, the K-V Fund had an
unrestored balance of about $493 million.
To provide the Congress with the information it needs to consider any
future requests for appropriations to restore previously transferred
funds, we recommended that the Secretary of Agriculture report to the
Congress on the financial status of the K-V Fund. The Department of
Agriculture has informed the Congress about the general dimensions of
the K-V funding issue on several occasions, and that information has
resulted in some replenishment of the K-V Fund. For example, the
Fiscal Year 1997 Omnibus Appropriation Bill provided additional
appropriations for emergency firefighting, and $202 million was
apportioned to the K-V Fund in January 1997. In addition, the
Department has begun providing the Congress with information on the
K-V Fund balance at the beginning of each fiscal year, expected K-V
collections during the year, and expected K-V expenditures so that
the impact of future firefighting transfers can be assessed.
UNRESTORED FIREFIGHTING
TRANSFERS JEOPARDIZE SOME
PLANNED PROJECTS
---------------------------------------------------------- Chapter 0:3
Although the Forest Service acknowledged that failure to restore the
amounts transferred from the K-V Fund would potentially disrupt the
K-V program, forest and district offices continued to operate and
plan for future reforestation projects as if the transfers had not
occurred. Furthermore, the Forest Service had not informed the
Congress of the impact that the funding shortfall would have on the
agency's reforestation activities or developed a plan or strategy for
reallocating the remaining funds to the highest-priority projects.
Although timber receipts of as much as $200 million had been added to
the fund annually, the Forest Service will not be able to pay for all
of its planned projects, estimated in fiscal year 1996 at about $942
million, unless the moneys transferred from the K-V Fund for
firefighting purposes are restored.
We recommended that if the administration decides not to forward to
the Congress the Department's request for restoration of the funds
transferred for firefighting purposes, or the Congress decides not to
restore these funds during the fiscal year 1997 budget
considerations, the Secretary of Agriculture should direct the Chief
of the Forest Service, by the end of fiscal year 1997, to revise the
list of planned K-V projects to take into account the actual balance
in the K-V Fund.
The Department has not implemented this recommendation and believes
that the Forest Service had sufficient funding to meet all K-V
requirements for 1998 and that revising the list of K-V projects
downward to match the reduced K-V funding would be both speculative
and not creditable. The Department added that it would not require
such a list until it was certain that K-V funding for the year was
inadequate. In that event, it would provide the Congress with a
generic description of the types of K-V activities that would be
dropped.
FOREST SERVICE CANNOT ENSURE
COMPLIANCE WITH THE K-V ACT'S
REQUIREMENT
---------------------------------------------------------- Chapter 0:4
The K-V Act requires that the K-V Fund expenditures in any one sale
area not exceed the amount collected in that sale area. To
facilitate the management of K-V projects and the accounting for K-V
funds, however, the Forest Service allows each forest to pool its K-V
collections for each timber sale into a forest-level fund, commonly
called a K-V pool. At the end of each fiscal year, each forest is
required to create a balance sheet showing the cash available for its
K-V projects, the projected collections from ongoing sales, and the
estimated costs for planned projects.
The Forest Service does not have the financial management information
and controls needed to ensure compliance with the K-V Act prohibition
limiting K-V Fund expenditures on individual sale areas to the
collections from those same sale areas. Collections are recorded for
individual sales, whereas expenditures are managed and recorded in
total at the district level rather than by individual sales. By
allowing each forest to pool K-V collections without adequate
financial controls and information, the Forest Service cannot ensure
that trust fund expenditures do not exceed collections for a given
sale area.
We recommended that the Secretary of Agriculture direct the Chief of
the Forest Service to perform, in consultation with the Chief
Financial Officer, an analysis of alternatives (including the costs
and benefits of each alternative) to obtain the financial data
necessary to ensure that the K-V Fund's expenditures in one sale area
are limited to the amounts collected from that area, as required by
the K-V Act.
The Secretary of Agriculture did not request that the Forest Service
analyze alternatives to the sale-by-sale accounting system that would
ensure compliance with the K-V Act. The Secretary indicated that he
did not believe such an analysis was necessary and that the current
Forest Service methods fulfilled requirements of the K-V Act. We
continue to believe that the Forest Service's current information
systems and controls do not provide assurance that the expenditures
in one sale area do not exceed the collections from that sale area as
required by law.
FOREST SERVICE LACKS AN
EFFECTIVE METHOD FOR
CALCULATING AND LIMITING
PROGRAM SUPPORT COSTS
---------------------------------------------------------- Chapter 0:5
The Forest Service collects a certain amount of K-V funds on each
timber sale to pay for the costs of supporting the program at all
organizational levels. The regions and forests issue guidance that
specifies the percentage of K-V funds that should be collected from
individual sale areas to support the program at the forest, regional,
and Washington offices. The agency's overall guidance, however, does
not explain how individual regions or forests should calculate and
limit amounts for program support. If the allocations for support
costs are not limited to the amount collected, however, funds
available for project expenditures in sale areas could be
insufficient.
Only one forest we visited during our 1996 review limited its use of
K-V funds for program support to the amounts collected for that
purpose. For three of the forests, the regions did not restrict
their expenditures for program support to the amounts that had been
collected, nor did the forests limit the amount spent for program
support at the forest level. For example, if a project costs $100,
the forest might instruct the district to collect an additional 20
percent of the project's cost, or $20, to cover the cost of
supporting the program. When the forest allocated funds for a
project to the district, it withheld funds to cover the forest's
support costs. However, rather than limiting these withholdings--to
continue our example--to 20 percent of the project's cost, or $20,
the forest would withhold 20 percent of the total cost ($120) or $24.
This method of determining support costs would reduce the amount
available for project work to $96, $4 less than the projected need.
We recommended that the Secretary of Agriculture direct the Chief of
the Forest Service to require all organizational levels to use a
standardized methodology for assessing and withholding the support
costs for the K-V program that would limit expenditures for program
support to the amounts collected for such purposes.
The Secretary of Agriculture directed the Chief of the Forest Service
to establish a standardized methodology for assessing and withholding
program support costs for the K-V program, and the Forest Service
formed a task force to recommend what that standardized methodology
would be. The task force completed its work in November 1997, and
the Forest Service estimates that the corrective action will be fully
implemented when the recommended changes become part of the agency's
directives in September 1998.
-------------------------------------------------------- Chapter 0:5.1
Mr. Chairman, on the basis of the Department of Agriculture's
response to our recommendations, it appears that it has taken
positive actions on our recommendations to better inform the Congress
about the magnitude of transfers from the K-V Fund for firefighting
purposes and the need to establish a standardized methodology for
assessing and withholding program support costs for the K-V program.
The Department of Agriculture has not implemented our recommendations
concerning revising the list of K-V projects downward because of
inadequate funding or performing an analysis of alternatives to a
sale-by-sale accounting of K-V Fund expenditures. We continue to
believe that action is needed in these areas. We will be pleased to
respond to any questions that you or the Members of the Subcommittee
may have.
*** End of document. ***