Prior to fiscal year 2017,  the Forest Service’s budgetary resources consisted primarily of no-year  funds. Forest Service Did Not Properly Design Control Activities for Its Allotments Process, Administrative Control of Funds, and Fund Transfers

While the Forest Service had documented processes for allotting its  budgetary resources, it did not have an adequate process and related  control activities for reasonably assuring that (1) amounts designated in  appropriations acts for specific purposes are used as designated and   (2) unobligated no-year appropriation balances from prior years were  reviewed for their continuing need. Forest Service Does Not Have an Adequate Process and Related Control Activities for Reasonably Assuring That Appropriated Amounts Are Used for the Purposes Designated

While the Forest Service had documented processes for allotting its  budgetary resources, it did not have an adequate process and related  control activities to reasonably assure that amounts designated in  appropriations acts for specific purposes are used as designated—as  required by the purpose statute, which states that “appropriations shall be  applied only to the objects for which the appropriations were made except  as otherwise provided by law.” We reviewed Forest Service documents  about its budget authority processes, which included control objectives,  related control activities, and processes over the allotment of its  budgetary resources. In February 2017, we issued a legal opinion, related to the  Forest Service’s use of the $65 million, which concluded that the Forest  Service had failed to comply with the purpose statute. This  increased the risk that the Forest Service may make budget requests in  excess of its needs. Forest Service Did Not Have Properly Designed Processes and Related Control Activities for Reimbursable Receivables and Collections

The Forest Service enters into various reimbursable agreements with  agencies within USDA, other federal agencies, state and local  government agencies, and nongovernment entities to carry out its mission  for public benefit. Forest Service Lacked Adequate Segregation of Duties over Reimbursable Agreements

The Forest Service lacked control activities over the segregation of  incompatible duties performed by line officers and program managers for  reimbursable agreements and any adjustments affecting the final  disposition of related receivables. Therefore, the line officer is responsible for initiating the Cost  Share Agreement, modifying the Cost Settlement Package, and changing  or canceling the related receivable, which represent conflicting duties. In fiscal year 2016, the Forest Service  deobligated about $319 million of its unliquidated obligations from prior  years. Forest Service Processes and Control Activities for Review and Certification of Unliquidated Obligations Were Not Properly Designed

The Forest Service’s procedures related to the review of unliquidated  obligations were not properly designed and were inconsistent with USDA  and Forest Service policy. Further, the  manuals and handbooks were not timely reviewed and updated to reflect  processes and systems currently in use. Because the Forest Service’s process and related control activities over  its review and certification of unliquidated obligations were not adequately  described in its manuals and handbooks, the Forest Service is at risk that  its control activities may not reasonably assure that control objectives  provide (1) optimum utilization of funds and (2) for unliquidated  obligations that are no longer needed to be efficiently and effectively  deobligated and made available for other program needs. In addition, the Forest  Service’s manuals and handbooks, which provide the directives for the  areas we reviewed, had not been reviewed by management in  accordance with the Forest Service’s 5-year review policy. As a result, the Forest  Service is at increased risk that the control activities may not be  consistently performed across the agency and that the guidance in the  SOPs and desk guides may not comply with agency policy in the  Directive System. In its comments,  reproduced in appendix III, the Forest Service stated that it generally  agreed with the report and that it has made significant progress to  address the report’s findings. A-11. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine 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) unliquidated obligations. To address our second objective, we reviewed the Forest Service’s  policies, procedures, and other documentation and interviewed agency  officials to develop an understanding of its processes related to  reimbursable agreements and related collection activities.
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 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.

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.