Forest Service:

Year-end Financial Reporting Significantly Improved, but Certain Underlying Problems Remain

GAO-03-538: Published: May 1, 2003. Publicly Released: Jun 2, 2003.

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Since 1996, we have periodically reported on Forest Service financial management problems that we, the U.S. Department of Agriculture's (USDA) Office of the Inspector General, and other independent auditors have identified. We have designated the Forest Service financial management as a high-risk area since 1999. Because of these longstanding financial management deficiencies, the House Committee on Resource's Subcommittee on Forests and Forest Health asked GAO to report on the Forest Service's progress in correcting its financial management problems and on remaining challenges and actions underway to address those challenges.

The Forest Service has made significant progress toward achieving financial accountability, receiving its first "clean" or unqualified audit opinion on its financial statements for fiscal year 2002. This was attained because top management dedicated considerable resources to address accounting and reporting deficiencies. We consider this a positive step; however, sustaining this outcome and achieving financial accountability will require more than obtaining year-end numbers for financial statement purposes. The Forest Service continues to face several major challenges, many of which resulted in unfavorable audit opinions in the past. Specifically, the Forest Service's fiscal year 2002 financial statement audit report disclosed material internal control weaknesses related to its two major asset accounts--fund balance with the U.S. Department of the Treasury, and property, plant, and equipment--as well as for certain estimated liabilities, payroll processes, computer security controls, and software application controls related to its procurement and property systems. Further, the Forest Service has not addressed the challenges of replacing or enhancing legacy feeder systems and implementing a financial management field operation that supports efficient and effective day-to-day financial operations and routinely produces reliable and timely financial information. The Forest Service has corrective actions underway or planned that are intended to resolve these problems, including a financial management strategic plan. If this plan is to serve as a "road map" toward financial accountability, the Forest Service needs to ensure that its plan is comprehensive, integrating and prioritizing the various corrective action initiatives underway and planned.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The USDA Forest Service Financial Management Improvement Plan and Material Weakness Action Plan Details, provide persons responsible for carrying out corrective actions, target dates, status, and resources needed including FTEs and contract amounts.

    Recommendation: To help ensure sustained commitment and timely implementation of financial management improvement efforts, the Chief of the Forest Service should direct the Chief Financial Officer to develop a comprehensive financial management strategic plan that identifies the responsible parties for carrying out corrective actions.

    Agency Affected: Department of Agriculture: Forest Service

  2. Status: Closed - Implemented

    Comments: The USDA Forest Service's Business Operations Strategic Plan, Version 2, dated October 2004 along with the Forest Service Financial Management Improvement Plan and Material Weakness Action Plan Details, provide target dates for corrective actions, persons responsible for carrying out corrective actions, status, and resources needed including FTEs and contract amounts.

    Recommendation: To help ensure sustained commitment and timely implementation of financial management improvement efforts, the Chief of the Forest Service should direct the Chief Financial Officer to develop a comprehensive financial management strategic plan that includes target dates and resources necessary to implement corrective actions.

    Agency Affected: Department of Agriculture: Forest Service

  3. Status: Closed - Implemented

    Comments: In April 2004, the agency initiated a Financial Management Improvement Plan (FMIP) to reengineer the budget and finance business processes and standardize the budget and finance functions into a centralized location. The design phase was completed in November 2004 at which time the building/testing phase began. To address organization issues, the project team prepared a centralization business case, including an estimate of the investment required to implement the centralized processes as well as anticipated benefits. In January 2005, the Budget and Finance Operations Center in Albuquerque, New Mexico opened and centralization of activities is scheduled to be completed by October 2005. The FMIP assumes that centralization will improve internal controls by reducing the number of accounting stations from 153 to a single location. The FMIP also provides for standardization of business processes and procedures to eliminate redundancies, errors, and rework in order to ensure accountability for transaction processing and reporting. The plan focuses on fixing the accounting processes (i.e. source of accounting errors and control weaknesses). Internal control corrective actions, including training, are addressed in a series of detailed plans that cover the various facets of Forest Service's financial operations such as property, receivables, budget execution and payments. To specifically address FFMIA weaknesses, the Chief Financial Officer issued an updated remediation plan that details the areas of noncompliance and corrective actions planned.

    Recommendation: To help ensure sustained commitment and timely implementation of financial management improvement efforts, the Chief of the Forest Service should direct the Chief Financial Officer to develop a comprehensive financial management strategic plan that specifies corrective actions to address financial management challenges, including internal control weaknesses, Federal Financial Management Improvement Act of 1996 compliance deficiencies, system problems and organization issues.

    Agency Affected: Department of Agriculture: Forest Service

  4. Status: Closed - Implemented

    Comments: In November 2004, the Forest Service issued its finalized version of the "USDA Forest Service Business Operations Plan, Version 2, which defines long-term and short-term financial management goals. The Plan is divided into 6 goals, one of which is to "Ensure Financial Accountability." The goal statement is as follows: Effectively accomplish Business Operations components of the agency's efforts to improve and maintain financial accountability and integrity as demonstrated through an unqualified audit opinion. Objectives include (1) sustain financial management improvements and maintain an unqualified audit opinion through excellence in resource and capital asset management; (2) provide accurate reports to internal and external business partners; (3) agency and budget decisions are based on the use of tools that assess agency performance; (4) sustain financial improvements through the issuance of manuals and handbooks, the provision of financial management training, and the resolution of material weaknesses and audit findings; and (5) agency use of WorkPlan improves budget formulation and allocation processes.

    Recommendation: To help ensure sustained commitment and timely implementation of financial management improvement efforts, the Chief of the Forest Service should direct the Chief Financial Officer to develop a comprehensive financial management strategic plan that clearly defines long-term and short-term financial management goals and objectives.

    Agency Affected: Department of Agriculture: Forest Service

  5. Status: Closed - Implemented

    Comments: In April 2004, the agency initiated a Financial Management Improvement Plan (FMIP) to reengineer the budget and finance functions. The FMIP prioritizes the improvement initiatives, including financial management system enhancements, using the following criteria: (1) Criticality of "fixing" the process (versus the risk of not fixing), (2) Return on investment, (3) Resources available to make the change, (4) Readiness for change, and (5) Dependencies on other initiatives.

    Recommendation: To help ensure sustained commitment and timely implementation of financial management improvement efforts, the Chief of the Forest Service should direct the Chief Financial Officer to develop a comprehensive financial management strategic plan that prioritizes and links the various improvement initiatives underway and planned, including USDA financial management systems enhancement efforts.

    Agency Affected: Department of Agriculture: Forest Service

 

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