[Final Audit Report on National Biological Service Financial Statements for Fiscal Year 1994]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 95-I-546

Title: Final Audit Report on National Biological Service Financial
       Statements for Fiscal Year 1994

Date: 	February 24, 1995

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United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240


February 23, 1995


MEMORANDUM

TO:               The Secretary

FROM:             Acting Inspector General

SUBJECT SUMMARY:  Final Audit Report for Your Information - "National
                  Biological Service Financial Statements for Fiscal Year
                  1994" (No. 95-I-546)

DISCUSSION:  Based on the results of our audit, we concluded that the National
Biological Service's financial statements for fiscal year 1994 are presented fairly, the
Service's internal accounting control structure except for the controls related to
accounts payable (accrued expenses) meets the established internal control
objectives, and the Service has complied in all material respects with applicable laws
and regulations.  We also found the financial information in the Service's overview
to be consistent with the information presented in its financial statements.

Based on the Service's response to the draft report, we considered the
recommendation relating to accounts payable resolved.


/s/Joyce N. Fleischman

Joyce N. Fleischman

Attachment

Prepared by:  Marvin Pierce
Extension:  208-4252

 
 
United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
   Headquarters Audits
   1550 Wilson Boulevard
     Suite 401                
   Arlington, VA 22209

February 24, 1995


Memorandum

To:         Assistant Secretary for Fish and Wildlife and Parks

From:       Acting Assistant Inspector General for Audits

Subject:    Final Audit Report on National Biological Service Financial Statements
            for Fiscal Year 1994 (No. 95-I-546)

This report presents the results of our audit of the National Biological Service's
financial statements for fiscal year 1994, as required by the Chief Financial Officers
Act of 1990.  Based on the results of our audit, we concluded that (1) the financial
statements are reliable in all material respects; (2) the internal control structure in
effect on September 30, 1994, provided reasonable assurance that any losses of assets
or misstatements in financial information that are material to the financial statements
would be detected except for the controls relating to accounts payable (accrued
expenses); (3) there were no instances of material noncompliance with selected
provisions of laws and regulations for fiscal year 1994 that we tested; and (4) the
financial information in the overview relating to the financial statements is reliable
and consistent with the information contained in the statements.

In our draft report, we recommended that the Biological Service strengthen internal
controls by developing and implementing procedures to recognize accrued expenses
for all goods and services received by the end of the year.  The February 3, 1995,
response (Appendix 1) from the Biological Service concurred with our
recommendation, and the response was sufficient for us to consider the
recommendation resolved.  Accordingly, the unimplemented recommendation will
be referred to the Assistant Secretary - Policy, Management and Budget for tracking
of implementation, and no further response to this office is required.

The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the Congress on all audit reports issued, action taken to
implement audit recommendations, and identification of each significant
recommendation on which corrective action has not been taken.


/s/ Marvin Pierce

Marvin Pierce

 
 
CONTENTS

                                                                       Page

REPORT ON FINANCIAL STATEMENTS, INTERNAL CONTROLS,
AND COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

FINDING AND RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

APPENDICES

1. NATIONAL BIOLOGICAL SERVICE
RESPONSE TO DRAFT REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

2. STATUS OF AUDIT REPORT RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . 43

 
 
United States Department of the Interior
      OFFICE OF INSPECTOR GENERAL
           Headquarters Audits
          1550 Wilson Boulevard
                Suite 401
           Arlington, VA 22209


February 24, 1995

Memorandum

To:         Director, National Biological Service

From:       Acting Assistant Inspector General for Audits

Subject:    Final Report on National Biological Service Financial Statements for
            Fiscal Year 1994

In accordance with the Chief Financial Officers Act of 1990, we audited the
accompanying National Biological Service's financial statements for the fiscal year
ending September 30, 1994.  These financial statements are the responsibility of the
National Biological Service, and our responsibility is to express an opinion, based on
our audit, on these financial statements.

Our audit was conducted in accordance with the "Government Auditing Standards,"
issued by the Comptroller General of the United States, and Office of Management
and Budget Bulletin 93-06, "Audit Requirements for Federal Financial Statements,"
and was completed on February 3, 1995.  These audit standards require that we plan
and perform the audit to obtain reasonable assurance as to whether the
accompanying financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and notes.  An audit also includes assessing the
accounting principles used and significant estimates made by management.  We
believe that our audit provides a reasonable basis for our opinion.

We found that the financial statements and accompanying notes present fairly the
National Biological Service's assets, liabilities, and net position; revenues, financing
sources, and expenses; cash flows; and budget and actual expenses.  We also found
that these financial statements are presented in conformity with the accounting
standards and policies described in Note 1 of the Notes to Financial Statements.  We
did not audit the information presented in the supplemental schedules that follow
the Notes to Financial Statements; therefore, we do not express an opinion on them.

As part of our audit, we evaluated the Biological Service's internal control structure,
tested the Biological Semite's compliance with selected provisions of laws and

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regulations, and reviewed the financial information presented in the Biological
Service's overview.  However, because of inherent limitations in any system of
internal controls, losses, noncompliance, or misstatements may nevertheless occur
and not be detected.  We also caution that projecting our evaluations to future
periods is subject to the risk that controls or the degree of compliance with the
controls may deteriorate.

Except as discussed in the paragraph below, we found that the Biological Service's
internal control structure in effect on September 30, 1994, was sufficient to safeguard
assets against loss from unauthorized use or disposition; ensure that transactions
were executed in accordance with laws and regulations; ensure that transactions were
properly recorded, processed, and summarized; and provide reasonable assurance
that any losses, noncompliance, or misstatements that are material to the financial
statements would be detected.  In addition, we found that there were no material
instances of noncompliance with selected provisions of laws and regulations for fiscal
year 1994 that we tested, and nothing came to our attention in the course of our
other audit work to indicate that material noncompliance with such provisions
occurred.  Further, we found that the financial information in the Biological Service's
overview relating to the financial statements is reliable and consistent with the
information presented in the financial statements.

Our audit disclosed that the Biological Service had not established procedures to
ensure that accounts payable (accrued expenses) were established for unrecorded
payment vouchers held by the U.S. Fish and Wildlife Service's Finance Center, which
provides the Biological Service with accounting services.  This issue is considered a
significant reportable condition but not a material weakness (see page 3).

Our review of Office of Inspector General and U.S. General Accounting Office audit
reports related to the scope of this audit disclosed that there were no significant
unresolved and unimplemented recommendations that affected the Biological
Service's financial statements.


/s/ Marvin Pierce

Marvin Pierce

2

 
FINDING AND RECOMMENDATION

Recording Accounts Payable (Accrued Expenses)

The National Biological Service needs to improve its year-end procedures for
ensuring that accruals are made for all goods and services received by the end of the
fiscal year.  Procedures were not developed because the Biological Service believed
that its existing fiscal year-end accrual process recognized all valid expenses and
accounts payable.  However, we found 3,066 documents for goods and services
received that had been submitted by the Biological Service's field offices to the
Finance Center but that had not been processed.  (The Biological Service's
accounting records are maintained by the U.S. Fish and Wildlife Service's Finance
Center.) Consequently, as of September 30, 1994, approximately $2 million had not
been accrued as expenses or recorded as accounts payable.  Although the Biological
Service took steps after the end of fiscal year 1994 to reduce the backlog of
unrecorded documents and made adjustments to the financial statements for the
unrecorded accrued expenses, further procedures are need to ensure that accruals
are made for any unrecorded expenses at fiscal year-end.

Recommendation

We recommend that the Biological Service strengthen internal controls by developing
and implementing procedures to recognize accrued expenses for all goods and
services received by the end of each fiscal year.

National Biological Service Response

The February 3, 1995, response (Appendix 1) from the Chief Financial Officer,
National Biological Service, concurred with the recommendation.  The Biological
Service said that it will work on policies and procedures with the U.S. Fish and
Wildlife Service's Division of Finance to ensure that accrued expenditures are
established for unrecorded payment vouchers during the year-end process.

Office of Inspector General Comments

The Biological Service's response was sufficient for us to consider the
recommendation resolved but not implemented.  Accordingly, it will be referred to
the Assistant Secretary for Policy, Management and Budget for tracking of
implementation (see Appendix 2).

3

 
 
 u. s. Department of the Interior - National Biological Service 



Annual Financial
Report of Fiscal Year
1994 Activity

4

 
DEPARTMENT OF THE INTERIOR
National Biological Service

Fiscal Year 1994 Annual Financial Report

TABLE OF CONTENTS

                                                            PAGE

The Organization
  Background . . . . . . . . . . . . . . . . . . . . . . . . 1
  Structure . . . . . . . . . . . . . . . . . . . . . . . . .1

The Mission. . . . . . . . . . . . . . . . . . . . . . . . . 3

The Programs Objectives and Accomplishments . . . . . . . . .3

Research . . . . . . . . . . . . . . . . . . . . . . . . . . 3
  Species Biology . . . . . . . . . . . . . . . . . . . . . .4
  Population Dynamics . . . . . . . . . . . . . . . . . . . .6
  Ecosystems . . . . . . . . . . . . . . . . . . . . . . . . 6

Inventory and Monitoring . . . . . . . . . . . . . . . . . . 9

Information Transfer . . . . . . . . . . . . . . . . . . . .10

Cooperative Research Units . . . . . . . . . . . . . . . . .13

Facilities Operation and Maintenance . . . . . . . . . . . .14

Administration . . . . . . . . . . . . . . . . . . . . . . .14

Construction . . . . . . . . . . . . . . . . . . . . . . . .15

Operation and Maintenance of Quarters . . . . . . . . . . . 16

Financial Management Performance . . . . . . . . . . . . . .17

Financial Statements . . . . . . . . . . . . . . . . . . . .19

Notes to Financial Statements . . . . . . . . . . . . . . . 23

Supplemental Information
  Employee Count by Grade . . . . . . . . . . . . . . . . . 32
  Reimbursable Agreements . . . . . . . . . . . . . . . . . 33

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Annual Financial Report of Fiscal Year 1994 Activity
             National Biological Service

                  The Organization

Background

The National Biological Service came into existence November 11,
1993, with the passage of the Department of the Interior and
related agencies Appropriation Act for 1994, Public Law 103-138.

The Department established the NBS by combining the biological
research and survey activities of seven Departmental bureaus. The
table below shows the number of employees transferred from the
contributing agencies to the NBS on November 14, 1993:

      Bureau                                 Employees Transferred

Bureau of Land Management (BLM)                                30
Minerals Management Service (MMS)                               4
Bureau of Reclamation (BOR)                                     6
National Park Service (NPS)                                   200
U.S. Fish and Wildlife Service (FWS)                        1,608
Office of Surface Mining Reclamation&Enforcement (OSM)          1
U.S. Geological Survey (USGS)                                   0
                                              Total :       1,849

Structure

The programs and functions of the NBS are carried out through the
following major organizational components:

Headquarters Office

Consists of the Director, Deputy Director, Assistant Directors,
and the staff offices and divisions reporting to them and
provides national policy formulation and program direction for
each of the programs implemented under the NBS Research,
Inventory and Monitoring, and Information Transfer.

Regions

The NBS Regions were approved in 1994 and will come into
existence in 1995. Each office will be headed by a Regional
Director, and will have overall responsibility for providing line
management, procedural and operational guidance for all NBS
activities - except national programs - within the region under
its jurisdiction. There will be four Regions, Western, Mid-
Continent, Southern and Eastern.

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Science Centers

Each headed by a Center Director, Science Centers have
responsibility for directing and conducting large scale regional
research, monitoring, and information transfer activities within
their specialty areas of jurisdiction; for coordination with and
support to resource managers and other research customers; for
providing administrative support as delegated; and for
supervising Field Stations for whom they have jurisdiction. There
are 16 Science Centers.

Cooperative Units

Each headed by a Unit Leader, Cooperative Units have
responsibility for conducting research, graduate-level education,
and technical assistance activities in support of Interior
bureaus, other federal and state agencies, and universities.
Their activities are most often local, regional, or statewide in
nature, but they may address larger scale issues as special
expertise is needed. Acting in concert, they can also provide a
nationwide network of research stations. There are 72 Cooperative
Units.

Inventory and Monitoring Activities

The Assistant Director for Inventory and Monitoring directs
national efforts for the status and trends; and establishes
policy, standards, and protocols for a coordinated inventory and
monitoring program at the local and regional level. Activities
will include efforts to inventory the abundance, distribution,
and health of plants, animals, and ecosystems on public lands and
as requested, on state and private lands. Standardized protocols
are being established in cooperation with other agencies to
enhance comparability of methods.

Information Transfer

The Assistant Director for Information Transfer directs
activities related to management and storage of data within the
NBS as well as the transfer of scientific information to research
customers.  These activities include the development of scientific
publications, databases, and syntheses of information generated
by research and inventory and monitoring programs.

Bureauwide Support  Offices

The Geographic Information Systems Technical Center, located in
Denver, Colorado, and headed by the Technical Center Director,
provides Bureauwide technical, scientific, data management and
administrative services. It maintains field stations for local
and regional support in Onalaska, Wisconsin.

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                            The Mission

The mission of the NBS is to work with others to provide the
scientific understanding and technologies needed to support the
sound management and conservation of our Nation's biological
resources. The primary role of the NBS is to meet the biological
research needs of other organizations within the Department of
the Interior, other federal agencies, States, local entities,
Tribes, and private and nonprofit users.  The NBS acts as an
independent science bureau, without advocating positions on
resource management issues and without regulatory or land and
water development authorities.

            The Programs Objectives and Accomplishments

The NBS is comprised of the following seven program areas, each
with specific responsibilities to carry out the Director's
scientific research objectives.

o   Research
    - Species Biology
    - Population Dynamics
    - Ecosystems
o   Inventory and Monitoring
o   Information Transfer
o   Cooperative Research Units
o   Facility Operation and Maintenance
o   Administration
o   Construction

Research Overview

Research on biological resources includes laboratory and field
studies on plants and animals, including their habitats.  Data
collection analysis and reports are on subjects such as
systematic, physiology behavior, ecology, system processes,
structure and functions.  Research involves both basic and
applied scientific investigation that will provide information
useful for the management of plants, animals, and ecosystems.  It
is intended that research on biological resources will be both
interdisciplinary and broader than just biological research.  For    
instance, NBS will include research on valuing biological
resources (economic models) and will examine demographic and
technological trends to help anticipate research effects and
establish research needs.

The NBS Research Activity includes three Subactivities:  (1)
Species Biology,  (2) Population Dynamics, and (3) Ecosystems.

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Species Biology Research

Program Objectives

Species biology research provides the Department of the Interior
bureaus and others with basic biological information manifested
at the species level.  This information is related to the
survival and reproduction of individual members of a species,
i.e., their essential needs and life requirements.  It includes
research into physiology, behavior, genetics, health and disease
control, reproduction, systematic, toxicology, and habitat
needs.  Information gained through species biology research
contributes to the ability of agencies to fulfill the mandates
of:  (1) managing trust species (including plants) such as those
listed as threatened or endangered under the Endangered Species
Act; migratory birds; marine mammals; and fish that are
anadromous or migratory in inter-jurisdictional waters; and (2)
other species of interest in managing land resources, such as
nongame species and nonindigenous species.

Program Accomplishments

Current species biology research is focused on four broad program
areas:  contaminants, wildlife, fish, and endangered species.
Contaminants research is conducted to determine the effects of
contaminants on biotic resources, mechanisms of toxic action such
as teratology in sensitive species, identification of species
that can be used as surrogates in testing to protect rare species
and their environments, and, for protection of individual species
establishment of environmental criteria for contaminants.

Research on wildlife focuses on birds covered by the Migratory
Bird Treaty Act, including waterfowl, neotropical migratory
birds, raptors, shorebirds, and short-distance migrants, and on
marine mammals.  It includes studies to gain knowledge on nesting
behavior, physiology, and organisms that cause disease in
wildlife and the ways these organisms affect host organism
biology.  Species-level research on other nongame species focuses
on systematic and taxonomy, primarily in conjunction with
responsibility for curation of collections of amphibians,
reptiles, birds, and mammals from North and Central America in
the U.S. National Museum of Natural History.

These studies also investigate the distribution and range of
plants and animals.  This also includes certain investigations of
taxa to clarify matters of identity, distribution or abundance
that may be of management significance.  For example, research on
polar bears, walrus and sea otters, species covered by the Marine
Mammal Protection Act and assigned to Department of the Interior
stewardship, focuses on molecular biological techniques to
develop information that may be used in defining populations and
relationships.

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Fish species research focuses on the following basic aspects of
fishery resources:  (1) provide species level biological
information needed to improve the quality and quantity of
cultured fish, the operating efficiency of hatchery rearing
systems, and fish diseases and health in cultured and wild
populations.  Anesthetics, disinfectants, and related
therapeutants are formulated, tested, and registered to allow
improved fish culture and population management;  (2) collect and
provide information about the biology of aquatic nonindigenous
species (ANS), such as exotic zebra mussels, in order to identify
the principal pathways by which ANS are introduced and dispersed,
to develop methods to prevent and control potential ANS, and to
minimize impacts; (3) investigates the effects of project-induced
modifications of reservoir storage levels, water releases and
temperature changes on individual species, including detailed
studies on endangered species potentially affected by Department
of the Interior projects.

The NBS conducts research to determine effects of nonindigenous
species on native flora and fauna, develops methods to prevent
the introduction of potentially nuisance species into the
Nation's ecosystems, develop environmentally safe measures to
control established nuisance species, and monitor the
distribution and potential spread of nonindigenous species in
North America.  The NBS research program on non-native species is
approximately $3.5 million in FY 1995.  Activities include a
major research effort on the zebra mussel invasion, focusing on
the effects of zebra mussels on the Great Lakes ecosystem,
development of a geographic information system to establish their
current and potential geographic distribution in the Nation, and
development of environmentally safe methods for their control.
Research is also conducted on the biological effects and control
of nonnative weeds on Federal lands.

In partnership with other Federal, state and nongovernmental
agencies, NBS also conducts research on chemical and biological
control of sea lampreys in the Great Lakes, brown tree snake
control on Guam, evaluation of biological agents for controlling
purple loosestrife, and the biology and control of ruffe in Lake
Superior, and effects of introduced species as competitors and
vectors of pathogens on native biota in Hawaii.

In addition, one global climate change research project focuses
on determining the threshold sensitivities of freshwater and
coastal aquatic organisms to the direct effects of ultraviolet
radiation using survival, mortality, behavioral modification, and
biochemical measures as indicators of stress.

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Population Dynamics Research

Program Objectives

Population dynamics research provides tools and information for
understanding and making predictions about groups of individuals
of a species' population.  This research is directed at
determining the causes and effects of variation in populations of
fish and wildlife, including determining natality and mortality
rates, productivity, recruitment, effects of predation and
competition, and the influence of environmental variables.
Effective management requires understanding the relationships
among these factors, because most management efforts are directed
to populations, not individuals.  Population-level research helps
answer questions concerning population status and species
survival.  Scientists have demonstrated, for example, that
certain contaminants cause carcinomas in some fish species;
population dynamics research will address the question as to how
effects on individuals, such as carcinomas, influence the
survival of the population.

Program Accomplishments

Population dynamics research on migratory game birds includes
analysis and modeling of information collected from management
surveys and field studies on breeding grounds in the Prairie
Pothole region, Alaska and Canada, and wintering grounds.
Research on nongame species focuses primarily on nongame
migratory birds, mammals, reptiles and amphibians.  Research
includes determining population trends, improving census methods
and investigating species declines.  The role of disease and
other limiting factors in the population dynamics of wildlife
species is also evaluated.

Investigations such as population modeling provide information
used to assess and allocate fishery resources.  Data are needed
to fulfill long-term commitments to the International Joint
Commission for management of fish populations and established
treaties in the Great Lakes basin.  Concepts and methods are
developed to predict the impacts of selective harvest of
populations of anadromous and transboundary species and long-term
effects of intensive fishing on naturally reproducing stocks.
This research also includes investigations on the effects of
nonindigenous species on native stocks.

Ecosystems Research

Program Objectives

Research on ecosystems provides information for and understanding
of communities of species, and relates needs of these communities
to the surrounding environment.  It provides information and

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tools for holistic conservation of plant and animal resources.

The Department of the Interior has separate but interrelated
responsibilities for vast tracts of public land and for
populations of fish and wildlife species under federal
jurisdiction.  Ecosystem-level research addresses the need for
sound scientific knowledge to guide the Department's efforts in
meeting both kinds of responsibilities in a comprehensive,
integrated fashion.

Program Accomplishments

Management of ecosystems can lead to cost savings over the
current system for conservation of living resources, which is
largely directed toward individual species.  Conservation of one
or of many species may be the ultimate goal of ecosystems
research, but the prime emphasis is on the natural structure and
function of ecosystems rather than on the biology of single
species examined in isolation.  Conservation of a single species
is expensive and often impossible once ecosystems on which these
species depend have been lost or critically altered.  Research on
endangered and threatened species has traditionally been
conducted at the species and population levels.  However,
attention has focused recently on studying groups of species
within a given ecosystem and the broad range of factors that
threaten species and ecosystems.

Specific areas of research include effects of environmental
contaminants, acid precipitation, global climate change and
habitat alterations on ecosystems; the influence of nonindigenous
and other undesirable species on native biotic communities; and
functions and values of unique or high-diversity systems such as
habitat islands and riparian and wetland habitats, in maintaining
fish and wildlife populations.  Ecosystem research develops and
evaluates alternative habitat management practices, restoration
strategies, and mitigation measures for their effectiveness in
maintaining and enhancing populations and ecosystems.  Also
included is research on new methods of measuring and tracking the
condition of ecosystems that ultimately might form the basis for
improved inventory and monitoring programs.

Ecosystem research under way in FY 1994 includes a variety of
investigations related to wildlife, fisheries, and habitat
conservation issues.  Studies of wildlife emphasize the effects
of environmental change on populations for which the Department
has statutory responsibility, particularly game and nongame
migratory birds.  Increasingly, NBS will catalyze and participate
in regional and issue-specific agenda and priority setting
efforts.  These efforts will be based on consultations with a
range of management and scientific interests, and upon collection
and assessment of a full range of existing information.

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Studies of neotropical migratory birds attempt to relate changes
in distribution, abundance, and species composition to habitat
fragmentation of the breeding grounds and to tropical
deforestation in Central and South American wintering areas.
Other research attempts to measure, predict, and evaluate habitat
management alternatives on resources of concern to the
Department, including effects of specific management regimes on
waterfowl productivity, hunter harvest, predation, and outbreaks
of disease.  Fishery investigations broadly examine the
relationships between quality of aquatic environments and the
occurrence and abundance of fish species.  Much of this research
focuses on the quality, availability, and effects of development
on necessary habitats.  For example, some studies examine the
factors affecting fish passage at hydroelectric facilities,
evaluate habitat changes in impounded rivers and the response of
fish populations to them, and assess the dynamics of food webs on
which young fish depend.

NBS participates in the United States Global Change Research
Program (USGCRP), which is administered by the National Science
and Technology Council.  NBS Global Change Research supports
ecological process studies and long-term measurement of
ecological responses at the species, community, ecosystem,
landscape and regional level.  Projects are designed to:  (1)
determine response and sensitivity of species, ecosystems, and
ecological processes to existing climate conditions and other
environmental factors;  (2) evaluate how global change may
influence ecosystem dynamics, structure and function; habitat
quality; population viability; species abundance and
distribution; physiological response of species; changes in
migratory patterns; and long-term ecosystem variability,
resiliency and productivity; and (3) assess approaches to sustain
productivity, health, and diversity of species, populations and
ecosystems through adaptation or mitigation.

Global Change research is being conducted in National Parks, in
Fish and Wildlife Service refuges, and on Bureau of Land
Management lands.  Where appropriate, research involves the
surrounding ecosystem, for example, in South Florida and the
Pacific Northwest.  Several research projects are collaborative
efforts with the U.S. Geological Survey or the U.S. Forest
Service.  Other projects utilize the academic expertise and
technological facilities of state universities (e.g., through
cooperative agreements).

NBS conducts research in relation to oil and gas development on
the Outer Continental Shelf.  These studies include the potential
impacts of oil and gas development on territories and movements
of seabirds, marine mammals, benthic organisms, and sea turtles.
Research also relates to long-term assessments of the effects of
oil and gas operations.  NBS will conduct research for OSM on the

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use of wetlands to treat waters and areas affected by acid mine
drainage.  Other research needs include developing improved
revegetation abilities.

NBS conducts and manages research in support of the Bureau of
Reclamation's needs for biological information.  Research needs
include study of wildlife habitat, especially riparian habitat,
in conjunction with the operation of Reclamation projects;
evaluation of wetland habitat to be created from the re-use of
treated sewage effluent; examination of new methods for
monitoring water quality and aquatic toxicity in waters impaired
by heavy metals pollution; and investigation of emergent plant
invasion and saline lake beaches to protect the piping plover
habitat.

Inventory and Monitoring

Program Objectives

The program objectives of the Inventory and Monitoring program
are:

     Conduct inventories and monitor the status and trends of the
      Nation's biotic resources including plants, animals and
      ecosystems.

     Publish the first periodic National Biological Status and
      Trends Report in FY 1995.

     Integrate and coordinate existing Department of the Interior
      (DOI) inventory and monitoring efforts to ensure maximum
      collaboration with inventory and monitoring efforts outside
      the Department, with a focus on filling identified gaps.

Program Accomplishments

The NBS is developing an integrated Inventory and Monitoring
Activity with common standards and protocols.  This will allow
for statistically valid assessments of trends and comparisons
among locales and across time.  The integrated monitoring
programs are structured, so that the results can be readily
tailored to provide information at the level of detail and scale
requested by each specific user (e.g., National Park
superintendents, U.S. Fish and Wildlife Service Refuge managers,
Bureau of Land Management managers, Bureau of Reclamation
engineers), and others, while providing a national overview of
biological indicators of managed species and lands.

Inventories include studies to determine the types, abundance,
and distribution of organisms and their habitats.  Monitoring
provides information on the trends (e.g., increasing or
decreasing abundance or locations) of particular species or

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habitats.  Monitoring also provides qualitative and quantitative
indicators of the health and condition of plants, animals, and
ecosystems (e.g., species diversity, age structure, presence or
loss of functions, or level of contamination).  Monitoring the
status and trends of plants, animals and ecosystems will provide
the early warning indicators needed by resource managers to plan
proactively, allowing the time for collaborative solutions
between environmental and economic interests.

The NBS Inventory and Monitoring Activity is consolidating,
integrating, and building upon contributing programs transferred
from several DOI bureaus, including national programs such as the
Gap Analysis Project (GAP), Biomonitoring of Environmental Status
and Trends (BEST), North American Bird Banding System (NABBS),
Electronic Data Processing (EDP) Section migratory bird data
storage and the Breeding Bird Survey (BBS), plus specific
research and site-specific efforts directed toward National
Parks, BLM and BOR lands, and National Wildlife Refuges.

The Inventory and Monitoring Activity is conducting studies to
develop and/or improve inventory and monitoring tools and
techniques that provide enhanced capability and accuracy in
surveying and enumerating populations and habitats; detecting and
quantifying environmental stressors such as contaminants;
assessing the condition or health of species, populations, and
ecosystems; and interpreting, modeling, and reporting the results
of monitoring.  Some tools or techniques being developed and
validated include a prototype technique for identifying and
mapping areas of species richness (one measure of biological
diversity) and identifying gaps where more habitat protection and
management is needed (GAP).  Other examples of tools being
developed and validated are devices that measure the contaminants
in the aquatic environment and the potential for uptake by plants
and animals.

Information Transfer

Program Objectives

A wealth of data exists about the natural resources of the United
States.  In addition to the data produced by the NBS Research and
Inventory and Monitoring activities, these data are located in
files, publications, and computers in Federal, State and local
governments and in non-government organizations such as
universities, museums, libraries, corporations and conservation
and natural heritage groups.  A major challenge for the NBS is to
find these data and make the data useful to NBS customers and
partners to support sound management of natural resources.  In
addition, these data are critical for the identification of data
gaps to be targeted by NBS Research and Inventory and Monitoring
activities.

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The Information Transfer budget activity is managed by the
Information and Technology Services (I&TS) component of the NBS.
I&TS works to provide access to, disseminate, and share
biological resource data and information on the biological
resources of the United States.  To accomplish this, it is
necessary to plan and implement information technology systems
and techniques for the collection, storage, retrieval, analysis,
use, and timely dissemination of comprehensive biological data
and information to promote sound management of the Nation's
natural resources.  One of the objectives of NBS is to be a
leader in identifying, developing, and promoting appropriate
technologies and information products.  Specifically, NBS
promotes and supports the use of GIS and statistical techniques
in study and data gathering designs, remote sensing technology
and techniques in data gathering, techniques for ecosystem
modeling, simulations, forecasting and visualization, multi-media
(sound and video), and graphics presentations.  It will also lead
in establishing partnerships among customers and contributors
internal and external to NBS.

Program Accomplishments

The majority of the funding and staffing resources which formed
the I&TS program immediately after the creation of NBS were
located at the research centers across the country.  These
resources were dedicated to development of new techniques,
methods and protocols, information dissemination and technical
assistance for understanding and sustaining healthy fish and
wildlife and their aquatic and terrestrial habitats.  In FY 1994,
these important activities were sustained and redirected to
provide information and technology services to all DOI bureaus
and their partners.  In addition, these activities were more
sharply focused on ecosystems related issues.  Examples include:
synthesis of data to evaluate policies for preservation, and
habitat and water management in various ecosystems nationwide;
development of standardized economic techniques to improve
natural resource economic assessments; use of organism health
assessment capabilities to link contaminant sources to natural
resources damage assessment activities; and technical assistance,
such as diagnostic work for fish and wildlife die-offs and
contaminant tissue sample analysis.

NBS reported to the Congress in February 1994 on how NBS and the
Natural Heritage Network will interrelate with, share, and pool
data from other existing Federal databases, including the
Environmental Protection Agency's EMAP program, and survey and
monitoring efforts currently under way in the U.S. Forest Service
and to study how to make such pooled and shared data available to
users.

In FY 1994, NBS expanded its information dissemination and
technical assistance functions to include the following: editing

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and publication of scientific papers in a new series of NBS peer
reviewed publications; providing workshops and training in new
technologies (e.g., GIS' 93 - a workshop and conference on the
development and use of geographic information systems and related
technologies); technical assistance in the application of models
and techniques; and publication of handbooks (GIS Source book and
Wildlife Management) and reviews (Wildlife Review and Fisheries
Review).  A strategic planning workshop was held to focus on
development of policies, guidelines and programs relating to NBS
information, communications, and records issues.  As a result of
the workshop, inter-organizational teams will be employed to
develop implementation plans for these issues.

In FY 1994, NBS directed resources to coordinate major NBS
information, communications, and records systems.  This includes
planning and beginning a biological information infrastructure, a
capability that does not currently exist, that will provide
significant benefits to researchers, resource managers and
decision makers.  This "National Biological Information
Infrastructure" will be a network of distributed databases and
information sources (automated and non-automated) for biological
resources.  This information network is intended for use by
Federal and state agencies, researchers, universities and
museums, planning and environmental consultants, private
companies, landowners, and the public.  The information
infrastructure is planned for development and implementation in
phases.  The first phase will be an on-line "directory"
(available through Internet or directly) briefly describing
existing databases and giving points of contact.  The second
phase will be a "clearinghouse" allowing users to search a
network of computers, look at summary, descriptive information
about the databases, and determine if the data in the databases
meets their needs.  The final phase will be a "virtual" national
biological database, in which users access and retrieve data from
the distributed databases on the network.

Also in FY 1994, NBS established partnerships with entities
producing biological information.  For example, the NBS has
established a memorandum of understanding with The Nature
Conservancy to explore ways that national and state natural
heritage data can be accessed and used by the NBS, its customers
and partners.  Finally, the NBS is identifying the techniques and
technology required by NBS and its partners to analyze biological
data to assist in directing research activities and in
understanding the health and condition of the nation's biological
resources.

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Cooperative Research Units

Program Objectives

The NBS includes Cooperative Research Units from three former
bureaus:  the Bureau of Land Management (BLM), the National Park
Service (NPS), and the U.S. Fish and Wildlife Service (FWS).
While differing in structure, purpose and funding, they share
four key features:

     They have been established in cooperation with host
      universities and, in some cases, state fish and wildlife
      agencies.

     They provide the capability to address local and regional
      research needs, and have special focus for mission-oriented
      research for land and resource managers.

     They offer access through cooperating agencies to special
      expertise, such as engineering, hydrology and economics,
      that complement the traditional renewable natural resources
      research disciplines.

     Because of their dispersed nature, they are a key contact
      for research colleagues and peers in other federal and state
      agencies and academia, and support local needs of resource
      managers.

In addition to these common features, NBS Cooperative Research
Units also offer different expertise.  These include fish and
wildlife research biologists and development of graduate level
education programs in fish and wildlife management; forestry and
range science biologists; and botanists and social scientists.
In this sense, their expertise is more complementary than
duplicative.

Program Accomplishments

The Cooperative Research Program provides the natural resources
management community with a high quality scientific basis for
making management decisions, and with highly trained
professionals to implement them.  The strengths of the
Cooperative Research Program are the unique cooperation among
federal and state governments and academia; the diversity of
scientific expertise among the federal employees and other
cooperators; and the geographic distribution of the units.  These
cooperative arrangements provide the federal government with
access to faculty expertise and university facilities.  The
dispersed location of the Units offer research opportunities on
virtually every type of North American ecological community or
system.  The Cooperative Research Program helps foster research
activity on lands managed by the Department.  Moreover, units

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cooperate on issues of shared interest, thus allowing work on
problems transcending state and regional boundaries, such as
resource management in major rivers or ecological systems.

Facilities Operations and Maintenance

Program Objectives

The NBS manages a network of 16 Science Centers, 40 field
stations, and 72 Cooperative Research Units.  This represents a
large capital investment in major research facilities. NBS has
responsibility for protecting and maintaining those facilities to
carry out their missions.  Operation and Maintenance funds
provide the basic costs of keeping the research facilities open
and operating in a safe and efficient manner. Title to all land,
buildings and other structures is still held by the Fish and
Wildlife Service and it is anticipated that title will be
transferred at a future date.

Program Accomplishments

This Activity includes the base administrative and facility
management costs of the NBS research centers, their field
stations, and associated support for Cooperative Research Units.
These activities are not directly related to the specific
research programs; the needs remain relatively constant
regardless of the number or types of projects conducted and
represent the cost of maintaining the research capability.  These
costs include basic administrative services and utilities, safety
and security services, laundry services, waste disposal, cleaning
services, grounds maintenance, mechanical systems maintenance,
public use-related expenses, and the salaries of staff who
provide routine maintenance.  Because of the nature of biological
research - especially the potential for disseminating contagious
disease vectors or contaminated wastes - many of these facilities
have extremely high standards for isolation and containment of
wastes.

Administration

Program Objectives

The program objectives of the Administration program are:

     To provide general administrative support to all NBS
      programs and organization levels to enable them to function
      effectively.

     To provide that support with a quality service ethic and at
      the lowest possible cost, and

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     To develop opportunities and programs to ensure a culturally
      diverse NBS work force.


Program Accomplishments

The Administration Activity provides executive and managerial
direction, budget development and execution, procurement and
contracting services, property management, financial management,
directives systems management, human resources management,
safety, and funding for a variety of Bureauwide fixed costs.
Administration provides funding for a portion of NBS executive
and managerial direction expenses, including portions of NBS's
four regional executive staff, and for basic administrative
support services to sustain ongoing operations for all NBS
programs.

In order to minimize administrative overhead costs, much of NBS'
general administration requirements will continue to be provided
by buying services from other Departmental bureaus.

Bureau-wide fixed costs are budgeted centrally because certain
essential program support costs are relatively uncontrollable by
NBS, and due to the nature of the origination and billing
arrangements, are more effectively and efficiently managed
centrally.  This includes space rental payments to GSA and to
private lessors, FTS 2000 charges and some of NBS's general
purpose commercial telephone services, unemployment compensation
payments to the Department of Labor, mail and postal service, and
payments to the Department for services provided through the
Departmental Working Capital Fund.

Construction

Program Objectives

This activity funds construction of new facilities for the NBS,
and will also include funding for the rehabilitation and
modernization necessary to meet new laws and standards, and to
improve the capabilities of the facilities so that research may
be conducted efficiently.

Program Accomplishments

During FY 1994, NBS commenced major rehabilitation of two
pathological incinerators at the National Wildlife Health
Research Center in Madison, Wisconsin, to comply with the State
of Wisconsin Administrative Code regarding Control of Hazardous
Pollutants.  Additionally, planning and design commenced for
rehabilitation of the biology building at the National Fisheries
Contaminants Research Center in Columbia, Missouri, to facilitate
biological research and to improve energy conservation.

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Operation and Maintenance of Quarters

Program Objective

The program objectives of the Operation and Maintenance of
Quarters is to provide for maintenance and operation of National
Biological Service quarters through the use of rental receipts.

Program Accomplishments

In certain designated circumstances, it is necessary for
personnel to occupy government-owned quarters.  Such
circumstances include isolation of the site, protection of
wildlife or fishery stocks (e.g., water flow to fish tanks could
be interrupted by freeze), health and welfare of visitors, and
protection of government property.

Quarters require regular operational upkeep as well as periodic
rehabilitation and upgrading to maintain safe and healthful
conditions for occupants.  Rental receipts are used for general
maintenance and repair of quarters buildings; code and regulatory
improvements; retrofitting for energy efficiency; correction of
safety discrepancies, utilities, access roads, grounds and other
site maintenance service; and the purchase of replacement
equipment such as household appliances, air conditioners,
furnaces, lease agreements; and routine maintenance costs which
continue when housing units are vacant.  "Vacant" housing is made
available for occupancy by volunteers who are not subject to
paying rent.

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                  Financial Management Performance

Background

NBS receives many of the basic financial management services from
the U. S. Fish and Wildlife Service (Service). The Service's
Finance Center (1) receives and processes all of the NBS
obligation and payment documents,  (2) prepares, issues and
collects Accounts Receivable for debts arising out of the normal
course of business,  (3) prepares all the regulatory financial
reports and statements, and (4) prepares the internal financial
management reports used by the NBS operating units to manage
their funds.

The NBS Finance primary focus is to ascertain the type and scope
of future financial management services needed and information
required by NBS financial management.

Accomplishments

NBS participated in a study regarding Remote Data Entry. Based on
the results of this study NBS dramatically expanded the use of
the Federal Financial System (FFS). The NBS Science Center's were
provided the training and empowered to enter financial data
directly into the FFS. These improvements increased the accuracy
and timeliness of document input.

NBS actively participated in the Department's financial
management community by participating in the Chief Financial
Officers and Financial Officers Partnership activities.

NBS has increased the use of the Employee Travel Credit Card
program resulting in a decrease in the number and amount of
temporary duty travel advances.

NBS began implementing a series of directives, instructions and
procedures to improve financial management.

Reimbursable agreements accounted for $33 million in obligations
in 1994. NBS has instituted policy and procedures concerning
delegations of authority; and the basic budget and financial
requirements of reimbursable agreements.

NBS has also begun efforts to expand the use of the GSA Small
Item Purchases Credit Card system. NBS plans to have all
appropriate organizations trained and issued the cards by the end
of FY 1995.

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Initiatives

Determine the scope of financial management activity in future
fiscal years.

      Fiscal Year 1994 Activity: NBS received the authority from
      the Department's Office of Financial Management to explore
      various options and alternatives in this area.

Determine the basic needs of NBS' various operating entities from
region, research station and cooperative units.

      Fiscal Year 1994 Activity: Finance has expanded the
      capabilities of the Research Center's by expanding their
      roles in: (a) redistribution of payroll costs, (b)
      redistribution of non payroll costs,  (c) Input of year-end
      accruals, and (d) transmittal of year-end documents directly
      to the Finance Center for processing. In addition, we are
      continuing to explore various options in providing each unit
      with automated Budget Tracking systems.

Determine the NBS future role in Remote Data Entry.

      Fiscal Year 1994 Activity: NBS plans a vigorous expansion of
      Remote Data Entry. Our future plans involve: (a) Small Item
      Payments,  (b) Small Item Credit Card and (c) Utility
      payments.

Study new automated approaches  that may save FTE and budget
resources.

      Fiscal Year 1994 Activity: Finance has completed the first
      phase of the Budget Tracking system study.  Now that NBS has
      the ability to seek alternative solutions to our financial
      management needs, we will also be able to strengthen our
      integrated approach to these problems. As an example the
      Fixed Asset module of FFS is being implemented by some
      Interior bureaus for Personal Property Management.

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                        NATIONAL BIOLOGICAL SERVICE
                      STATEMENT OF FINANCIAL POSITION
                         AS OF SEPTEMBER 30, 1994
                               (IN DOLLARS)

                                                                       1994

ASSETS
  Entity Assets:
    Intragovernmental Assets:
      Fund Balance with Treasury (Note 2)                         $ 56,645,137
      Accounts Receivable, Net - Public (Note 3)                     1,101,979
      Advances                                                          82,062
   Governmental Assets:
      Accounts Receivable, Net - Federal (Note 3)                    9,033,684
      Other Governmental (Note 10)                                  10,399,604
      Property and Equipment, Net (Note 4)                           1,440,836

  Total Entity Assets                                               78,703,302

TOTAL ASSETS                                                      $ 78,703,302

LIABILITIES
  Liabilities Covered by Budgetary Resources:
   Intragovernmental Liabilities:
      Accounts Payable                                            $  2,888,224
      Other Intragovernmental Liabilities (Note 5)                   4,182,984
   Governmental Liabilities:
      Accounts Payable                                               2,484,868
      Other Government Liabilities (Note 5)                            924,514
   Total Liabilities Covered by Budgetary Resources:                10,480,590

  Liabilities not Covered by Budgetary Resources:
   Governmental Liabilities:
   Other Government Liabilities (Note 5)                             7,445,692
   Total Liabilities not Covered by Budgetary Resources:             7,445,692

TOTAL LIABILITIES                                                   17,926,282

NET POSITION
  Balances:
   Unexpended Appropriations (Note 6)                               56,331,003
   Invested Capital                                                  1,440,836
   Cumulative Results of Operations (Note 6)                            51,269
   Other (Note 10)                                                  10,399,604
   Future Funding Requirements (Note 6)                             (7,445,692)
   Total Net Position (Note 6)                                      60,777,020

TOTAL LIABILITIES AND NET POSITION                                $ 78,703,302

The accompanying notes are an integral part of this financial statement.

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                  NATIONAL BIOLOGICAL SERVICE
      STATEMENT OF OPERATIONS AND CHANGES IN NET POSITION
             FOR THE YEAR ENDED SEPTEMBER 30, 1994
                        (IN DOLLARS)

                                                           1994

REVENUES AND FINANCING SOURCES
  Appropriated Capital Used                           $ 109,509,914
  Revenues from Sales of Goods and Services
      To the Public                                       2,158,614
      Intragovernmental                                  15,409,068
  Other Revenues and Financing Sources (Note 10)         21,521,323

 Total Revenues and Financing Sources                   148,598,919

EXPENSES

  Program and Operating Expenses (Note 7)               151,745,141
  Other                                                      11,699
 Total Expenses                                         151,756,840

    EXCESS (SHORTAGE) OF REVENUES AND FINANCING
    SOURCES OVER TOTAL EXPENSES                       $  (3,157,921)

NET POSITION, BEGINNING BALANCE                       $           0
  Adjustments (Note 10)                                   6,163,102
  Excess (Shortage) of Revenue and Financing
  Sources over Total Expenses                            (3,157,921)
  Plus (minus) Non Operating Changes (Note 8)            57,771,839

NET POSITION, ENDING BALANCE                          $  60,777,020

The accompanying notes are an integral part of this financial statement.

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                       NATIONAL BIOLOGICAL SERVICE
                         STATEMENT OF CASH FLOWS
                  FOR THE YEAR ENDED SEPTEMBER 30, 1994
                              (IN DOLLARS)

                                                                 1994

CASH FLOWS FROM OPERATING ACTIVITIES
   Excess (Shortage) of Revenues and Financing
   Sources Over Total Expenses                              $  (3,157,921)

 Adjustments Affecting Cash Flows
   Appropriated Capital Used                                 (109,509,914)
   Increase (Decrease) in Accounts Receivable                 (10,135,663)
   Increase (Decrease) in Other Assets                            (82,062)
   Increase (Decrease) in Accounts Payable                      5,373,092
   Increase (Decrease) in Other Liabilities                     5,107,498
   Other Unfunded Expenses                                      3,209,190
 Total Adjustments                                           (106,037,858)

Net Cash Used by Operating Activities                        (109,195,780)

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of Property, Plant and Equipment                    (1,440,836)

 Net Cash Used by Investing Activities                         (1,440,836)

CASH FLOWS FROM FINANCING ACTIVITIES
  Appropriations (Current Warrants)                           163,519,000
  Add:
      Transfers of Cash from Others                             5,722,753
Deduct:
      Transfers of Cash to Others                              (1,960,000)
 Net Cash Provided by Financing Activities                    167,281,753


 Net Cash Provided by Operating,
  Investing and Financing Activities                           56,645,137

 Beginning Fund Balance With Treasury                                   0

 Ending Fund Balance With Treasury                          $  56,645,137

The accompanying notes are an integral part of this financial statement.

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      NATIONAL BIOLOGICAL SERVICE
STATEMENT OF BUDGETARY RESOURCES AND ACTUAL EXPENSES
    FOR THE YEAR ENDED SEPTEMBER 30, 1994
          (IN DOLLARS)

BUDGET
OBLIGATIONS
PROGRAM NAME                     RESOURCES

General and Other Funds     $ 201,601,678   $ 142,496,699   $ 33,189,124   $ 130,285,830

Adjustment For Resources,      31,870,614      10,399,604              0      21,471,010
Obligations and Expenses
Not Transferred by the
U.S. Fish and Wildlife Service

TOTALS                      $ 233,472,292   $ 152,896,303   $ 33,189,124   $ 151,756,840



BUDGET RECONCILIATION:

                        A. Total Expenses                               $ 151,756,840

                        B. Add:
                            (1) Capital Acquisitions                        1,440,836

                        C. Less: Expense not covered by Available Budget Authority
                            (1) Depreciation and Amortization                       0
                            (2) Annual Leave Expense                        3,209,190
                            (3) Other Expenses                             21,471,010

                        D. Accrued Expenditures                           128,517,476
                        E. Less Reimbursements Earned                      17,567,746

                        F. Accrued Expenditures, Direct (Note 10)       $ 110,949,730

The accompanying notes are an integral part of this financial statement.

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                       NATIONAL BIOLOGICAL SERVICE
                    NOTES TO THE FINANCIAL STATEMENTS
                  FOR THE YEAR ENDING SEPTEMBER 30, 1994

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


A.  Basis of Presentation

These financial statements have been prepared to report the financial position
and results of operations of the National Biological Service (NBS) as required
by the Chief Financial Officers Act of 1990.  They have been prepared from
the books and records of the NBS in accordance with the form and content for
entity financial statements specified by the Office of Management and Budget
(OMB) in OMB Bulletin 94-01, dated November 16, 1993, as well as the
NBS's accounting policies which are summarized in this note.


B.  Reporting Entity

The NBS was created by Secretarial Order No. 3173 dated September 29,1993
under authority provided by sections 2 and 5 of Reorganization Plan No. 3 of
1950 (64 Stat. 1262:5 U.S.C. App.).

The mission of the NBS is to provide the scientific basis for decisions
requiring biological knowledge.  The NBS conducts studies on biological
resources in support of land and resource managers within the Department of
the Interior.  It also serves, on a reimbursable basis, the needs of other
Federal agencies, states, and the private sector.

Authority over money or other budget authority made available to NBS is
vested in the Director of NBS, who is responsible for administrative oversight
and policy direction of NBS.  Separate accounts are maintained to restrict the
use of money or other budget authority to the purposes and time period for
which authorized and to provide assurance that obligations do not exceed
authorized amounts.

The accompanying financial statements have been prepared from NBS's
consolidated standard general ledger.  Included are all funds and accounts
under the control of NBS and allocations from other Federal agency
appropriations transferred to NBS under specific legislative authority.  NBS is
responsible for maintaining accounts in multiple funds.  Overall there are three
separate fund types:

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      General Funds -- These funds are expenditure accounts used to record
      financial transactions arising from Congressional appropriations or
      other authorizations to spend general revenues. The principal general
      fund is Research, Inventories, and Surveys.

      Trust Funds -- NBS maintains one trust fund account to carry out
      specific programs under trust agreements and statutes.  The Contributed
      Fund trust fund receives contributions for projects related to research.

      Special Funds -- Special fund receipt accounts are credited with receipts
      from specific sources that are earmarked by law for a specific purpose,
      but which are not generated from a cycle of operations.  These receipts
      are available immediately. Special fund expenditure accounts are used
      to record amounts appropriated from special fund receipts to be used
      for special programs according to specific provisions of law.  The
      principal special fund is Operation and Maintenance of Quarters.

Because the trust fund was determined to have immaterial account balances, it
was not considered necessary or appropriate to provide separate combining
statements.


C.  Basis of Accounting

Transactions are recorded on an accrual accounting basis and a budgetary
basis. Under the accrual method, revenues are recognized when earned and
expenses are recognized when a liability is incurred, without regard to receipt
or payment of cash. Budgetary accounting facilitates compliance with legal
constraints and controls over the use of federal funds.


D.  Revenues and Other Financing Sources

NBS receives the majority of the funding needed to support the program
through appropriations.  The NBS receives annual, multi-year, and no-year
appropriations that may be used within statutory limits for operating expenses
and capital expenditures (primarily equipment, furniture, and furnishings).
Additional amounts are obtained through reimbursements for services provided
for other Federal agencies.

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Appropriations are recognized as revenues at the time the related program or
administrative expenses are incurred. Appropriations expended for property
and equipment are recognized as expenses when the asset is consumed in
operations. Other revenues are recognized when earned, i.e., goods have been
delivered or services rendered.  These revenues may be used to offset the cost
of operations at field sites (including an amount to recover the costs of
appropriate overhead).


E.  Funds with the U.S. Treasury

NBS does not maintain cash in commercial bank accounts. Cash receipts and
disbursements are processed by the U.S. Treasury. The balance in the
Treasury represents all unexpended balances in NBS accounts.  The funds with
Treasury are available to pay current liabilities and finance authorized
purchase commitments.


F.  Property and Equipment

NBS defines capitalized equipment as those assets, other than buildings or
other structures, that have an estimated useful life of greater than 1 year and
an initial acquisition cost exceeding $5 thousand.  Depreciation is recorded
using the straight-line method based on the estimated useful life of the
respective assets ranging from 8 to 25 years. Depreciation is not calculated in
the year of acquisition.


G.  Liabilities

Liabilities represent the amount of monies or other resources that are likely to
be paid by NBS as the result of a transaction or event that has already
occurred. However, no liability can be paid by NBS absent an appropriation.
Liabilities for which an appropriation has not been enacted are therefore
classified as unfunded liabilities and there is no certainty that the
appropriations will be enacted. Also, liabilities of NBS arising from other than
contracts can be abrogated by the Government, acting in its sovereign
capacity.

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H.  Annual, Sick, and Other Leave

Annual leave is accrued as it is earned and the accrual is reduced as leave is
taken. Each year, the balance in the accrued annual leave account is adjusted
to reflect current pay rates. To the extent current appropriations are not
available to fund annual leave earned but not taken, funding will be obtained
from future funding sources.

Sick leave and other types of nonvested leave are expensed as taken.


I.  Retirement Plan

The majority of the NBS's employees participate in the Civil Service
Retirement System (CSRS), to which NBS makes matching contributions equal
to 7 percent of pay. On January 1, 1987, the Federal Employees Retirement
System (FERS) went into effect pursuant to Public Law 99-335. Most
employees hired after December 31, 1983, are automatically covered by
FERS, and Social Security. Employees hired prior to January 1, 1984, can
elect to either join FERS and Social Security or remain in CSRS. A primary
feature of FERS is that it offers a savings plan which automatically contributes
1 percent of pay and matches any employee contribution up to an additional 4
percent of pay.

For most employees hired since December 31, 1983, NBS also contributes the
employer's matching share for Social Security. NBS does not report CSRS or
FERS assets, accumulated plan benefits, or unfunded liabilities, if any,
applicable to NBS employees. Reporting such amounts is the responsibility of
the Office of Personnel Management and the Federal Employees Retirement
System.


J.  Comparative Data

Comparative data for the prior year have not been presented because this is the
first year for which financial statements are prepared for NBS activities. In
future years, comparative data will be presented in order to provide an
understanding of changes in the financial position and operations of the NBS.


K.  Contingencies

NBS is not aware of any contingent liabilities, litigation, claims, or
assessments which represent financial claims against NBS.

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L.  Supplemental Schedules

Supplemental schedules are presented after these notes for clarification and
further disclosure.


NOTE 2.  FUND BALANCES WITH TREASURY


Cash receipts and disbursements are processed by the Treasury. The fund
balance with Treasury represents all unexpended balances in NBS accounts and
the right to draw on the Treasury for allowable expenditures.  The balance is
comprised of the following at September 30, 1994 (in dollars):

Fund Balances:
                  Obligated         Unobligated              Total
                                    Available

General Funds     $ 30,384,886      $ 24,658,840      $ 55,043,726
Trust Funds            338,601         1,184,794         1,523,395
Special Funds            5,795            72,221            78,016

Total             $ 30,729,282      $ 25,915,855      $ 56,645,137



NOTE 3.  ACCOUNTS RECEIVABLE

Accounts receivable consists of amounts owed NBS by other federal agencies and
amounts owed by the public. Accounts receivable as of September 30, 1994, consist
of (in dollars):


                                                        1994

Accounts Receivable-Governmental                $  9,033,684

Accounts Receivable-Intragovernmental              1,101,979

Total Accounts Receivable                       $ 10,135,663

27

32

 
NOTE 4.  PROPERTY AND EQUIPMENT, NET

Depreciation of property, plant, and equipment will be recorded using the straight-line
method.  Land, property, plant, and equipment consist of the following as of
September 30, 1994, (in dollars):

                  Service     Acquisition
                  Life        Value
Fixed assets      20-50yr      $   5,301
Equipment         8-25yr       1,390,358
Sub total                      1,395,659
Construction
in Progress                       45,177
      Total                   $1,440,836


NOTE 5.  OTHER LIABILITIES

A. Other Liabilities Covered by Budgetary Resources:

                                                Total
                                                Current
                                                Liabilities
Intragovernmental:
  Accrued Funded Payroll/Benefits               $ 3,296,912
  Advances from Others                              499,899
  Disbursements in Transit                          386,173
  Total                                         $ 4,182,984

Governmental:
  Advances from Others                            $ 914,632
  Disbursements in Transit                              746
  Deposit Liability                                   9,136
  Total                                           $ 924,514

Payments received in advance of the delivery of goods or services relating to
reimbursable agreements with the public, such as State-Federal-academic partnerships
in research and graduate education for the management of natural resources, totaled
$499,899, and those relating to reimbursable agreements with other Federal agencies
totaled $914,632.

B. Other Liabilities Not Covered by Budgetary Resources:

Other liabilities not covered by budgetary resources total $7,445,692 and represent the
accrued unfunded annual leave of NBS.

28

33

 
NOTE 6.  NET POSITION


As of September 30, 1994, fund account balances are as follows (in dollars):

                              Appropriated
                                  Funds         Trust Funds       Total

Unexpended Appropriations
Unobligated
Available                     $24,731,061       $ 1,184,794       $25,915,855
  Undelivered Orders           30,234,377           180,771        30,415,148
Invested Capital                1,440,836                 0         1,440,836
Cumulative Results                    956            50,313            51,269
Other                          10,399,604                 0        10,399,604
Future Funding
Requirements                   (7,445,692)                0        (7,445,692)

Total                         $59,361,142       $ 1,415,878       $60,777,020


NOTE 7.  PROGRAM AND OPERATING EXPENSES

Presented below are total operating expenses for FY 1994 by object classification
(in dollars):

Operating Expenses by Object Classification:

                  1994

Personnel Compensation and Benefits       $  89,494,170
Travel and Transportation                     4,295,356
Rental, Communication and Utilities           3,563,557
Printing and Reproduction                       183,186
Contractual Services                         18,994,583
Supplies and Materials                        8,188,731
Equipment not Capitalized                     1,077,184
Grants, Subsidies and Contributions           4,461,392
Insurance Claims & Indemn/Interest               15,972
NBS Expenses recorded by the U.S.            21,471,010
Fish and Wildlife Service (Note 10)
Totals                                    $ 151,745,141

29

34

 
NOTE 8. NON-OPERATING CHANGES

Presented below are the non-operating changes for FY 1994 (in dollars).

1994

Increases:
  Unexpended Appropriations               $ 54,009,086
  Transfers of Cash from Others              5,722,753
  Total Increases                           59,731,839
Decreases:
  Transfers of Cash to Others                1,960,000
  Total Decreases                            1,960,000
Net Non-Operating Changes                 $ 57,771,839


NOTE 9.  CONTINGENCE

The estimate of obligations relating to canceled appropriations for which NBS has
contractual commitment for payment is not applicable as NBS does not have any
cancelled appropriations for FY94.


NOTE 10. OTHER DISCLOSURES

Although the U.S. Fish and Wildlife Service (FWS) research and development
program was transferred to NBS, FWS still holds title to all land, property and
equipment. FWS is currently in the process of identifying all property to be
transferred to NBS; however, the value of the property has not been determined.

Included in these financial statements as Other Revenues and Financing Sources offset
by Program and Operating Expenses are $21,471,010 in expenses that were recorded
on FWS financial records during FY94 that liquidated undelivered orders applicable
to functions transferred to NBS that originated prior to October 1, 1993, and were
retained in the FWS accounting system. At September 30, 1994, $ 10,399,604 of
these undelivered orders still exist in the FWS accounting system and are reported in
these financial statements as Other Governmental Assets offset by Other Net Position
Balances.

Also included as an adjustment to Net Position is the future funding requirements at
September 30, 1993, in the amount of $4,236,502 that represented the unfunded
annual leave liability applicable to employees that were transferred from FWS when
NBS was created.

30

35

 
The Direct Accrued Expenditures as reported on the Statement of Budgetary
Resources and Actual Expenses will not agree to the final SF-133, Report on Budget
Execution, line 16 for the year ended September 30, 1994, due to an audit adjustment
made to accounts payable in the amount of $2,000,000.

31

36

 
            DEPARTMENT OF THE INTERIOR
            National Biological Service
              EMPLOYEE COUNT BY GRADE
              as of September 30, 1994


Executive Level  . . . . . . .                             7


GS/GM-15 . . . . . . . . . . .                       34

GS/GM-14 . . . . . . . . . . .                      129

GS/GM-13 . . . . . . . . . . .                      278

GS-12  . . . . . . . . . . . .                      300

GS-11  . . . . . . . . . . . .                      154

GS-10  . . . . . . . . . . . .                        3

GS-9 . . . . . . . . . . . . .                      188

GS-8 . . . . . . . . . . . . .                       10

GS-7 . . . . . . . . . . . . .                      199

GS-6 . . . . . . . . . . . . .                      103

GS-5 . . . . . . . . . . . . .                      270

GS-4 . . . . . . . . . . . . .                       95

GS-3 . . . . . . . . . . . . .                       19

GS-2 . . . . . . . . . . . . .                        5

GS-1 . . . . . . . . . . . . .                        3

     Subtotal (GS/GM)  . . . .                    1,790

Wage grade . . . . . . . . . .                       99


Grand Total  . . . . . . . . .                    1,896

32

37

 
Reimbursable Agreements for FY 1994

By Customer Type

                                    Agreement    Obligations      Number of
                                      Amounts       Incurred     Agreements
                                                                           
Federal Agency                                                             
BONNEVILLE POWER ADMIN              3,865,370      2,725,632             14
BUREAU OF LAND MANAGEMENT             157,663        152,810              9
BUREAU OF RECLAMATION-DFC             791,370        492,023             11
CORPS OF ENGINEERS                 12,016,861     10,310,989             74
DEPT OF AIR FORCE                   1,288,715      1,013,330             15
DEPT OF ARMY                        1,777,063      1,347,732             20
DEPT OF ENERGY                        237,897        224,084              2
DEPT OF JUSTICE                         2,000            215              1
DEPT OF NAVY                          295,021        242,603              8
DEPT OF TRANSPORTATION                 36,019         32,957              1
ENVIRONMENTAL PROTECTION AGENCY     5,891,754      2,789,481             38
FISH & WILDLIFE SERVICE            12,340,199      8,404,562            279
FOOD & DRUG ADMIN                      93,532         90,844              1
GENERAL SERVICES ADMIN                  2,000          1,980              1
MINERALS MANAGEMENT SERVICE            15,611         13,612              3
NASA                                   42,748         38,654              1
NATIONAL MARINE FISHERIES             745,003        579,777              5
NATIONAL OCEANIC & ATMOSPHERIC AD     355,604        243,298              8
NATIONAL PARK SERVICE                 687,382        449,323             22
NATIONAL SCIENCE FOUNDATION            67,800         67,780              1
OFFICE OF AIRCRAFT SERVICE              1,009          1,009              1
OFFICE OF THE SECRETARY               803,053        369,929              5
U S DEPT OF AGRICULTURE               346,431        263,501             12
U S FOREST SERVICE                    167,776
                                      117,161             11


33
38

 
                                    Agreement    Obligations      Number of
                                      Amounts       Incurred     Agreements
                                                                           
U S GEOLOGICAL SURVEY                 104,970         88,877              5
US MARINE CORPS                       486,002        104,884              5
   Federal Agency                  42,618,853     30,167,047            553
                                                                           
Non-Government                                                             
CONSERVATION FUND                      21,535         19,015              1
UNIVERSITY OF NEBRASKA                 57,000         52,215              1
    Non-Government                     78,535         71,230              2
                                                                           
State Agency                                                               
CENTRAL UTAH WATER CONSERV             14,900         14,900              1
COLORADO STATE UNIVERSITY             191,000        111,267              1
EAST BAY MUNICIPAL UTILITY              2,592          2,592              1
GREAT LAKES FISHERY COMMISSION      1,473,400      1,207,588              1
MASON & HANGER SILAS MASON            316,983        285,285              1
MONTANA POWER CO                       29,560         26,053              1
OREGON DEPT OF FISH & WILDLIFE        320,020        317,629              2
SMITHSONIAN INSTITUTION                 9,824          2,733              1
SOUTHWESTERN POWER ADMIN               49,403         44,110              1
STATE OF ALASKA                        20,000         20,000              1
STATE OF CALIFORNIA                   441,044        212,666              4
STATE OF HAWAII                        60,000         40,000              2
STATE OF IDAHO                         46,000         45,996              2
STATE OF ILLINOIS                       9,687          9,645              1
STATE OF INDIANA                       58,125         57,702              1
STATE OF IOWA                          20,000         20,000              1
STATE OF KENTUCKY                      20,000         20,000              1
STATE OF LOUISIANA                     35,000         34,615              1
STATE OF NEVADA                        27,247         27,028              2
STATE OF NORTH CAROLINA                20,000         20,000              1

34

39

 
                                    Agreement    Obligations      Number of
                                      Amounts       Incurred     Agreements
                                                                           
STATE OF NORTH DAKOTA                  20,000         20,000              1
STATE OF OHIO                          20,000         20,000              1
STATE OF SOUTH DAKOTA                  20,000         13,557              1
STATE OF TEXAS                         20,000         20,000              1
STATE OF VIRGINIA                      20,000         20,000              1
STATE OF WASHINGTON                    62,594         60,126              2
STATE OF WISCONSIN                     73,239         30,920              4
STATE OF WYOMING                       20,000            681              1
TENNESSEE VALLEY AUTHORITY            213,115        198,038              2
UPPER MISSISSIPPI RIVER BASIN         100,000         45,256              1
WEST ARAPAHOE SOIL CONSERVATION         2,500          2,466              1
   State Agency                     3,736,233      2,950,853             43
                                                                           
                                                                           
Grand Total:                       46,433,621     33,189,130            598

35

40

 
APPENDIX 1
Page 1 of 2

United States Department of the Interior

NATIONAL BIOLOGICAL SURVEY
    Washington, DC 20240


February 3, 1995

MEMORANDUM

To:         Acting Assistant Inspector General for Audits

From:       Chief Financial Officer

Subject:    Draft Audit Report on National Biological Service
            Financial Statements for Fiscal Year 1994 (Assignment
            No. C-IN-NBS-001-94)

This is our response to your draft audit report dated January 25,
1995, with the same subject as above.

We concur with your findings that procedures have not been
initiated to ensure that accrued expenditures are established for
unrecorded payment vouchers held by the Fish and Wildlife Service
(FWS) Finance Center during the year-end process.

The National Biological Service (NBS), working in concert with
the FWS Division of Finance and using the services of the FWS
Finance Center, will pursue the following policies and procedures
to ensure that accrued expenditures are established for
unrecorded payment vouchers during the year-end process:

      1.  The NBS is vigorously pursuing the implementation of
          the IMPACT credit card program.  By fiscal year 1995
          year-end all Science Centers will be using these credit
          cards for commercial vendor purchases under $2,500.
          This action should greatly decrease the number of
          vendor invoices received.

      2.  The NBS, in concert with the FWS Finance Center, will
          expand the use of vendor payment remote data entry.
          The current FWS remote data entry plan will allow NBS
          Science Centers and the NBS Headquarter offices to
          enter vendor payments of $2,500 and less.  We are
          working with the FWS Division of Finance on the details
          of implementation.

      3.  Vendor invoices and receiving reports are sent to the
          Finance Center during the year-end process using a
          special transmittal form.  For most of the year-end
          period these invoices are entered into the Federal
          Financial System (FFS) as payments vouchers.
          The payment voucher transactions automatically create

41

 
APPENDIX 1
Page 2 of 2

          the appropriate accrued expenditure.  The NBS is
          working with the FWS Division of Finance to improve
          year end accrual procedures for accounts payable, to
          ensure that an accurate balance for both undelivered
          orders and accounts payable is reflected in the general
          ledger and on year end financial statements.

These three actions should, for all practical purposes, eliminate
any unrecorded year-end payment vouchers.  The year-end vendor
payment statistics report revealed that payments of $2,500 or
more represented only 6.5 percent of the 27,200 payments made.
The use of the IMPACT credit card and remote data entry of vendor
payments, therefore, has the potential of affecting 93.5 percent
of vendor invoice payments.

Our IMPACT credit card plan has already been approved by the
Department of the Interior.  In addition, the office of the
Assistant Director for Budget and Administration has conducted
credit card training sessions and contracted with the FWS
Regional offices and GSA for several others.

The FWS remote data entry of vendor payments plan has already
been approved by the Department of the Interior and been tested
in the FWS Region 6 office.  The FWS has informed us that their
immediate plans are to expand the remote data entry of vendor
payments to FWS Region 5 and the FWS headquarters office.

The NBS receives all of its financial management services from
the FWS Division of Finance.  Two of the three actions described
above depend on appropriate action by the FWS Division of Finance
for effective implementation.

The NBS Deputy Chief Financial Officer, Lawrence Ferris, is the
designated responsible official for these actions.  The target
date for completion is no later than September 30, 1995.
Mr. Ferris can be reached on (303) 969-7238.  As you know, this
was the NBS first financial statements and we appreciated the
professional and cooperative manner displayed by your staff.  The
audit team headed, by Scot Tilley and Jim Lowe, provided helpful
advice and guidance to assist us through our first successful
financial statement efforts.


/s/James C. Leupold

James C. Leupold

42

 
APPENDIX 2

STATUS OF AUDIT REPORT RECOMMENDATION

Finding/Recommendation
       Reference                 Status         Action Required

           1                  Resolved; not     No further response to the
                              implemented.      Office of Inspector General
                                                is required,  The
                                                recommendation will be
                                                referred to the Assistant
                                                Secretary for Policy,
                                                Management and Budget for
                                                tracking of implementation.


 U.S. GOVERNMENT PRINTING OFFICE: 1995 301-126/00042

43

 
                    ILLEGAL OR WASTEFUL ACTIVITIES
                         SHOULD BE REPORTED TO
                  THE OFFICE OF INSPECTOR GENERAL BY:



      Sending written documents to:                   Calling:



                  Within the Continental United States


U.S. Department of the Interior                 Our 24-hour
Office of Inspector General                     Telephone HOTLINE
P.O. Box 1593                                   1-800-424-5081 or
Arlington, Virginia 22210                       (703) 235-9399

                                                TDD for the hearing impaired
                                                (703) 235-9403 or
                                                1-800-354-0996


                  Outside the Continental United States

                            Caribbean Area


U.S. Department of the interior                 (809) 774-8300
Office of Inspector General
Caribbean Region
Federal Building & Courthouse
Veterans Drive, Room 207
St. Thomas, Virgin Islands 00802


                         North Pacific Region

U.S. Department of the Interior                 (700) 550-7279 or
Office of Inspector General                     COMM 9-011-671-472-7279
North Pacific Region
238 Archbishop F.C. Flores Street
Suite 807, PDN Building
Agana, Guam 96910

 
Toll Free Numbers
1-800-424-5081
TDD 1-800-354-0996

FTS/Commercial Numbers
703-235-9399
TDD 703-235-9403

HOTLINE

P.O. BOX 1593
Arlington, Virginia 22210