Forest Service: Improvements Needed in Internal Controls over Budget Execution Processes
Highlights
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Designated Appropriations." The purpose of this guidance is to reasonably assure that amounts designated in appropriations acts for specific purposes are properly used for the purpose specifically designed. Additionally, the Forest Service developed a training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its internal control practices over its budget execution processes, which will help ensure that amounts designated in appropriations acts for specific purposes are used as designated. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service issued Standard Operating Procedures entitled "Review of Unobligated Balances." The purpose of this guidance is to ensure review and prompt allocation of unobligated balances (prior year or other funds) for continuing need. Additionally, the Forest Service developed training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its internal control practices over its review and prompt allocation of unobligated balances for continuing need and is considered in its annual budget requests. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019 Forest Service issued Standard Operating Procedures (SOP) title "Funds Control System." According to the SOP, the purpose of this guidance is to reasonably assure the Forest Service has a comprehensive process in place for administrative control of funds. Forest Service submitted the revised guidance to USDA for approval and in turn USDA submitted and received an approval from OMB. Further, Forest Service developed training strategy and materials for agency-wide use. As a result, Forest Service has improved its controls over its review of administrative control of funds.
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| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Fire Transfer Strategy" that is available in the Directive System. The purpose of this guidance is to document the process of developing the fire suppression fund transfer strategy and the process assures control activities are implemented and all appropriate factors are considered. Additionally, the Forest Service developed a training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its control practices over its strategy to identify the amounts for fire suppression fund transfers will be efficiently and effectively achieved. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Agency Incident Financial Controls for Cooperative Fire Protection Agreements" that is available in the Directive System. The purpose of this guidance is to outline the necessary steps to improve financial controls, and mitigating control activities over adjustments affecting the final disposition of related receivables and payments authorized by cooperative fire protection agreements for incident activities. Additionally, the Forest Service developed a training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its control practices to properly and consistently perform its related control objectives to achieve its operational goals efficiently and effectively. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service updated and issued a Standard Operating Procedure entitled "Executing Reimbursable and Advance Collection Agreements." This document covers the three main phases for executing a reimbursable agreement; the authorization and modification of an agreement, receivable and payment management of the agreement, and closeout of the agreement. The purpose of this guidance is to outline the necessary steps, control activities, and responsible parties for entering into and executing signed reimbursable agreements within the Forest Service financial system of record. As a result, if effectively implemented, the Forest Service has improved its control practices over the authorization and modification of an agreement, receivable and payment management of the agreement, and closeout of the agreement. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Agency Incident Financial Controls for Cooperative Fire Protection Agreements," which addresses procedures related to reimbursable agreements. The purpose of this guidance is to outline the necessary steps to improve financial controls, including steps to ensure segregation of duties over adjustments affecting the final disposition of related receivables associated with reimbursable agreements. Additionally, the Forest Service developed a training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its control practices for monitoring and review of conflicting duties for receivables from reimbursable agreements which reduces the chance of both uncollectible receivables and risk of fraud. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Review and Certification of Unliquidated Obligations." The purpose of this guidance is to ensure appropriate personnel complete a timely review of unliquidated obligations to determine the validity of the obligation and take appropriate actions. Additionally, the Forest Service developed training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its control practices for optimizing the utilization of funds and timely adjustments of obligated balances. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, the Forest Service issued a Standard Operating Procedure entitled "Review and Certification of Unliquidated Obligations" available in the Directive System, which requires quarterly review and certification of Unliquidated Obligations with no activity for at least 12 months. Further, in August 2019 the Forest Service updated its Handbook (FSH 6509.11k, Chapter 50, Service-wide Finance and Accounting Handbook, Accounting, section on Obligations) with revised policy and procedures for unliquidated obligations, including review and certification processes. The updated handbook established a policy concerning obligations as prescribed in OMB Circular A-11. Additionally, the Forest Service developed a training strategy and materials for agency-wide use. As a result, if effectively implemented, the Forest Service has improved its control practices for optimizing the use of funds through the review of unliquidated obligations. This recommendation is closed as implemented.
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| Forest Service | 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) |
In September 2019, Forest Service issued a Standard Operating Procedure entitled "Directives Currency Review." The purpose of this guidance is to ensure that the CFO Financial Policy staff has a mechanism to provide a five year directives currency review in accordance with agency policy. The revised Standard Operating Procedures and directives provided for allotments, reimbursable agreements, and review of unliquidated obligations all contain a log to document the review and approval history and also state that the procedures should be updated every 5 years or when the parent directive is updated and must be appropriately approved. As a result, if effectively implemented, the Forest Service has improved its control practices to reasonably assure that updates to manuals and handbooks were made, reviewed, approved, and issued as needed for continued relevance and effectiveness. This recommendation is closed as implemented.
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| Forest Service | 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) |
In October 2020, the Forest Service informed us that they developed a template to be used when creating standard operating procedures (SOP) that included sections to insert applicable references to the Forest Service Directive System and to document review and approval by responsible officials. This was evidenced in the Forest Service SOPs updated for the allotments, reimbursable agreements, and review of unliquidated obligations. In addition, Forest Service also developed a paragraph to be inserted in the manuals and handbooks in the Directive System. This paragraph specifically instructs that SOPs or supplemental direction (such as desk guides) created for localized business processes should clearly refer to Directive System and be reviewed and approved. This was evidenced in the Forest Service handbooks updated for the allotments, reimbursable agreements, and review of unliquidated obligations. As a result, Forest Service has improved its controls to help ensure SOPs and desk guides refer to the applicable manuals and handbooks, and are reviewed and approved.
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