Forest Service:

Improvements Needed in Internal Controls over Budget Execution Processes

GAO-18-56: Published: Jan 31, 2018. Publicly Released: Jan 31, 2018.

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Asif A. Khan
(202) 512-9869
khana@gao.gov

 

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What GAO Found

In fiscal years 2015 and 2016, the Forest Service received discretionary no-year appropriations of $5.1 billion and $5.7 billion, respectively. It is critical for the Forest Service to manage its budgetary resources efficiently and effectively. While the Forest Service had processes over certain of its budget execution activities, GAO found the following internal control deficiencies:

Budgetary resources. The purpose statute requires that amounts designated in appropriations acts for specific purposes are used as designated. The Forest Service did not have an adequate process and related control activities to reasonably assure that amounts were used as designated. In fiscal year 2017, GAO issued a legal opinion that the Forest Service had failed to comply with the purpose statute with regard to a $65 million line-item appropriation specifically provided for the purpose of acquiring aircraft for the next-generation airtanker fleet. Further, the Forest Service lacked a process and related control activities to reasonably assure that unobligated no-year appropriation balances from prior years were reviewed for their continuing need; did not have a properly designed system for administrative control of funds, which keeps obligations and expenditures from exceeding limits authorized by law; and had not properly designed control activities for fund transfers to its Wildland Fire Management program. These deficiencies increase the risk that the Forest Service may make budget requests in excess of its needs.

Reimbursable agreements. To carry out its mission, the Forest Service enters into reimbursable agreements with agencies within the U.S. Department of Agriculture (USDA), other federal agencies, state and local government agencies, and nongovernment entities. The Forest Service (1) did not have adequately described processes and related control activities in manuals and handbooks for its reimbursable agreement processes and (2) lacked control activities related to segregating incompatible duties performed by line officers and program managers. For example, line officers may be responsible for initiating cost sharing agreements, modifying cost settlement packages, and changing or canceling the related receivable, which represent incompatible duties. As a result, programs and resources may not be protected from waste, fraud, and mismanagement.

Unliquidated obligations. The Forest Service's processes and control activities over the review and certification of unliquidated obligations were not properly designed to reasonably assure the best use of funds and that unliquidated obligations would be efficiently and effectively deobligated and made available for other program needs. Further, the current process, as designed, was inconsistent with USDA and Forest Service policy.

In addition, the Forest Service's manuals and handbooks, which provide directives for the areas that GAO reviewed, had not been reviewed by management in accordance with the Forest Service's 5-year review policy. Further, standard operating procedures and desk guides prepared by staff to supplement the manuals and handbooks were not issued as directives and therefore were not considered official policy. This increases the risk that control activities may not be consistently performed across the agency.

Why GAO Did This Study

The Forest Service, an agency within USDA, performs a variety of tasks as steward of 193 million acres of public forests and grasslands. Its budget execution process for carrying out its mission includes (1) allotments, which are authorizations by an agency to incur obligations within a specified amount, and (2) unliquidated obligations, which represent budgetary resources that have been committed but not yet paid. Deobligation refers to an agency's cancellation or downward adjustments of previously incurred obligations, which may result in funds that may be available for reobligation.

GAO was asked to review the Forest Service's internal controls over its budget execution processes. This report examines the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) review and certification of unliquidated obligations.

GAO reviewed the Forest Service's policies, procedures, and other documentation and interviewed agency officials.

What GAO Recommends

GAO is making 11 recommendations to improve processes and related internal control activities over the management of the Forest Service's budgetary resources, reimbursable receivables and collections, and its process for reviewing unliquidated obligations. The Forest Service generally agreed with the report and stated that it has made significant progress to address the report findings.

For more information, contact Asif A. Khan at (202) 512-9869 or khana@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The Forest Service generally agreed with this recommendations and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should (1) revise its process and (2) design, document, and implement related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are properly used for the purposes specifically designated. (Recommendation 1)

    Agency Affected: Department of Agriculture: Forest Service

  2. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should (1) develop a process and (2) design, document, and implement related control activities to reasonably assure that unobligated no-year funds from prior years are reviewed for continuing need. (Recommendation 2)

    Agency Affected: Department of Agriculture: Forest Service

  3. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should (1) design, document, and implement a comprehensive system for administrative control of funds and (2) submit it for review and approval by USDA before issuance, as required by the USDA Budget Manual. (Recommendation 3)

    Agency Affected: Department of Agriculture: Forest Service

  4. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should design, document, and implement control activities over the preparation and approval of a fire suppression fund transfers strategy, to specify all appropriate factors to be considered in developing and documenting the strategy, and incorporate these control activities into the Directive System. (Recommendation 4)

    Agency Affected: Department of Agriculture: Forest Service

  5. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should design, document, and implement processes and related control activities for its fire incident cooperative agreements to reasonably assure efficient and effective operations and timely and reliable reporting of reimbursable receivables related to fire incident cooperative agreements, and incorporate them in the Directive System. (Recommendation 5)

    Agency Affected: Department of Agriculture: Forest Service

  6. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should update the reimbursable and advanced collection agreement (RACA) manuals and handbooks to adequately describe the processes and related control activities applicable to RACAs to reasonably assure that staff will know (1) how and when to perform processes and control activities and (2) how to document their performance. (Recommendation 6)

    Agency Affected: Department of Agriculture: Forest Service

  7. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should design, document, and implement segregation of duties or mitigating control activities over reimbursable agreements and any adjustments affecting the final disposition of related receivables. (Recommendation 7)

    Agency Affected: Department of Agriculture: Forest Service

  8. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should modify, document, and implement control activities consistent with USDA and Forest Service policy to reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken. (Recommendation 8)

    Agency Affected: Department of Agriculture: Forest Service

  9. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should adequately describe the processes and related control activities for unliquidated obligations review and certification processes in manuals and handbooks within the Directive System. (Recommendation 9)

    Agency Affected: Department of Agriculture: Forest Service

  10. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that manuals and handbooks for allotments, reimbursable agreements, and review of unliquidated obligations are reviewed and updated every 5 years, consistent with Forest Service policy. (Recommendation 10)

    Agency Affected: Department of Agriculture: Forest Service

  11. Status: Open

    Comments: The Forest Service generally agreed with this recommendation and stated that it has made significant progress to address this recommendation. Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No. A-11. Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement. We will obtain and review documentation supporting actions taken by Forest Service.

    Recommendation: To improve internal controls over the Forest Service's budget execution processes, the Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that standard operating procedures and desk guides (1) clearly refer to guidance in the Directive System for allotments, reimbursable agreements, and review of unliquidated obligations and (2) are reviewed and approved by responsible officials prior to use. (Recommendation 11)

    Agency Affected: Department of Agriculture: Forest Service

 

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