Since its first financial statement audit for the fiscal year ended September  30, 1991, the Forest Service has faced numerous serious accounting and  financial reporting weaknesses that have prevented it from receiving a  positive audit opinion. In January  1999, due to the longstanding serious accounting and financial reporting  problems, we designated Forest Service financial management as a high- risk area. The Forest Service Has Made Significant Progress toward Achieving Financial Accountability

The Forest Service has made significant progress toward achieving  financial accountability. To achieve this milestone, the Forest Service’s top  management dedicated considerable resources and focused staff efforts to  address accounting and reporting deficiencies that had prevented a  favorable opinion in the past. Despite Progress Made, Accountability Challenges Remain

Achieving financial accountability involves more than obtaining a clean  audit opinion by producing reliable onetime year-end numbers for financial  statement purposes. The agency also faces the challenge of  implementing a financial management field organization that supports  effective and efficient day-to-day financial operations. In its fiscal year 2002 audit report on the Forest Service’s financial  statements, the auditor continued to report serious internal control  weaknesses with regard to the Forest Service’s two major asset accounts-- fund balance with Treasury and property, plant, and equipment. Also,  KPMG reported material deficiencies related to certain estimated  liabilities, payroll processes, general controls and certain application  software computer controls. One example of noncompliance with federal financial  management systems requirements was that the Forest Service did not  have required certification and accreditations of security controls  performed timely on its procurement and property systems. In its fiscal year 2002 report on Forest Service’s Information Technology,  the auditor reported certain weaknesses in internal controls related to the  feeder systems. Corrective Actions Are Underway or Planned to Resolve Remaining Problems

While the conditions discussed above present a major challenge to  achieving financial accountability, the Forest Service has several efforts  underway or planned, that if implemented, should help to resolve many of  its financial management problems and to move toward sustainable  financial management business processes. Recommendations for Executive Action

To help ensure sustained commitment and timely implementation of  financial management improvement efforts, we recommend that the Chief  of the Forest Service direct the Chief Financial Officer to develop a  comprehensive financial management strategic plan that    clearly defines long-term and short-term financial management goals   specifies corrective actions to address financial management  challenges, including internal control weaknesses, FFMIA compliance  deficiencies, system problems and organization issues;   includes target dates and resources necessary to implement corrective   identifies the responsible parties for carrying out corrective actions; and   prioritizes and links the various improvement initiatives underway and  planned, including USDA financial management systems enhancement  efforts.
Why GAO Did This Study

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.

What GAO Found

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.