Management's Discussion and Analysis

Definitions Used in the USDA Forest Service’s Audit Process

Audit

Followup

A process used to ensure prompt and responsive action is taken once management decision has been reached on recommendations contained in final audit reports.

DC

A disallowed cost is a questioned cost that management sustains or agrees is not chargeable to the Government.

FTBU

Funds to be put to better use are funds that OIG has recommended could be used more efficiently if management took actions to implement and complete the recommendation, including:

• Reductions in outlays
• A deobligation of funds from programs or operations
• A withdrawal of interest subsidy costs on loans or loan guarantees, insurance, or bonds
• Costs not incurred by implementing recommended improvements related to the operations of the establishment, a contractor, or grantee
• An avoidance of unnecessary expenditures noted in pre-award reviews of contract or grant agreements
• Any other savings, which are specifically identified.

Management Decision

Management’s evaluation of the audit findings and recommendations and the issuance of a final decision by management concerning its response to the findings and recommendations, including necessary actions and an estimated completion date.

Outstanding Audits/Audit Recommendations

Audits and audits recommendations remaining unresolved 1 year or more past the management decision date.

Reportable Audit

Audits with management decision, but without final action 1 or more years past the management decision date.

No.

DC($)

FTBU($)

No.

DC($)

FTBU($)

No.

DC($)

FTBU($)

1

2,500,000

-

25

1,350,000

70,269,210

-

-

-

Explanations for Inspector General (OIG) Audits Behind Schedule

Pending System Development, Implementation, or Enhancement

08001-1-HQ

Forest Service Implementation of GPRA

6/28/2000

03/31/2005

---

Pending Issuance of Policy/Guidance

08001-2-HQ

Review of Forest Service Security over Aircraft and Aircraft Facilities

03/29/2001

03/31/2004

---

08002-2-SF

Valuation of Lands Acquired in Congressionally Designated Areas

11/28/2000

11/28/2003

---

08003-2-SF

Humboldt/Toiyabe National Forest Land Adjustment Program

08/05/1998

11/28/2003

27,900,000

08003-5-SF

Land Acquisition and Urban Lot Management

12/15/2000

12/31/2003

10,329,300

08003-6-SF

Zephyr Cove Land Exchange

07/14/2000

11/28/2003

18,700,000

08099-6-SF

Security Over USDA IT Resources

03/27/2001

12/31/2003

---

08099-37-AT

FY 1991 Financial Statement Audit

09/30/1993

09/30/2003

---

08099-42-AT

FY 1992 Financial Statement Audit

11/16/1993

09/30/2003

---

08401-4-AT

FY 1995 Financial Statement Audit

05/18/2001

12/31/2003

---

08401-7-AT

FY 1997 Financial Statement Audit

05/18/2001

09/30/2003

---

08601-7-SF

Controls over Research

09/15/1995

11/28/2003

5,024,245

08601-27-SF

National Land Ownership Adjustment Team

03/28/2002

11/28/2003

---

08801-3-AT

Real and Personal Property Issues

05/18/2001

09/30/2003

---

08801-6-SF

Forest Service Land Adjustment Program San Bernadino National Forest and South Zone

01/19/2000

11/28/2003

---

Pending Receipt and/or Processing of Final Action Documentation

08017-4-SF

Termination Settlement Proposal – Bodenhamer, Inc.

04/29/2001

09/30/2003

---

08401-9-AT

FY 1999 Financial Statement Audit

05/18/2001

09/30/2003

---

08601-4-AT

Forest Service Wildlife and Fisheries Management

09/17/1996

09/30/2003

148,049

08601-25-SF

Working Capital Fund Enterprise

08/29/2001

09/30/2003

2,600,000

08801-3-SF

Review of the Confidential Financial Disclosure System

06/16/2000

09/30/2003

---

Pending Results of Request for Change in Management Decision

08099-9-TE

Challenge Cost Share Program

06/22/2001

09/30/2003

---

08401-1-AT

FY 1994 Financial Statement Audit

01/09/1996

10/31/2003

---

08401-8-AT

FY 1998 Financial Statement Audit

05/18/2001

09/30/2003

---

Pending Issuance of Policy/Guidance and External Action is Required

08601-1-AT

Hazardous Waste at Active and Abandoned Mines

03/29/1996

12/31/2003

1,950,000

External Action Is Required

08601-5-SF

Graduated Rate Fee System

04/08/1997

09/30/2005

3,617,616

08801-4-TE

Forest Service Collection on Royalties on Oil and Gas Production

08/09/1999

11/28/2003

---

Management and Program Delivery Issues

Source:

OIG Major USDA Management Challenges, November 8, 2002

“Lack adequate internal control system to ensure compliance with standards”

“Improper administration of grants to States and nonprofit organizations”

“Inefficient controls over environmental analysis processes for timber sales”

“Development of policies for partnerships with private parties”

Completed a review in Region 8 to evaluate compliance with standards listed in the Quality Assurance Guide (CFO Bulletin 2003-007) and agency policy and direction.

Developed a new, more comprehensive internal review process, which was piloted in piloted in Region 3 and the Northeastern Area.

Developed standard review procedures of environmental assessments, National Environmental Policy Act (NEPA) implementation, and other environmental regulations.

Carried out plans for monitoring of Administrative Control Plan (ACP); implementing corrective actions; and developing new training requirements and tools for effective analysis of NEPA and Endangered Species Act documentation.

Completed a national review of 52 timber sales; regional development of NEPA improvement plans; and regional implementation of a timber sale review process, selecting a specific number of sales each year to focus on OIG/Forest Service review.

Revised the Grants and Agreements Guidebook to improve business relationships between the agency and partners.

Established the Partnership Resource Center Web site through an agreement between the Forest Service and National Forest Foundation. This Web site contains the latest information on partnerships and the authorities and instruments available to Forest Service and partners to achieve goals.

Drafted partnership legislation is now in final review at USDA, before moving to OMB and Congress for approval.

Published a Grants and Agreements deskguide in November 2002, with on-going training for all specialists.

Continue to place an increased emphasis on the management control environment, including internal controls.

Revise and publish selected policies and procedures. FY 2004 compliance reviews and other management control reviews have been planned and/or scheduled. The review plans for FY 2005 will be completed in FY 2004. In FY 2004, the Forest Service will:

Implement a 4 year review cycle to ensure that statutory and regulatory guidance is followed and that reviews are performed in compliance with internal controls related to grants and agreement administration.

Participate in USDA implementation of an electronic grants application in the first quarter of 2004.

Participate in the USDA requirements session for an automated solution for Grants and Agreement administration and accounting.

Complete Budget and Finance and Acquisition Management field-level reviews at six locations (three regional offices, two research stations, and the Forest Products Lab) by June 30, 2004 .

Schedule the complete monitoring of the administrative control for fourth quarter FY 2004.

Draft legislation for 2004 Congress authorizing the Forest Service to enter into partnerships with a range of external partners.

Complete a partnership guide for communities, nongovernmental organizations, and others potential partners by end of the third quarter, FY 2004.

Develop a leadership guide for Forest Service leadership and decision- makers by end of third quarter FY 2004 that addresses the professional skills needed before entering into partnerships.

“Lack of appropriate goals and objectives and accurate performance measures”

Delivered presentation by Forest Service Region 5 partnership specialist and USDA OGC on partnership issues to grants and agreements specialists at the National Grants and Agreements conference in May. A new partnership handbook was published in September 2003.

Completed 2003 Strategic Plan Update (delivery to USDA expected by September 30, 2003 ) with newly refined output measures and linkages. These measures were then used in the FY 2005 budget development process and in the design of the PAS.

Develop an assessment tool for field units’ use by end of 4 th quarter FY 2004 that assesses either the unit has the necessary resources, personnel, and skills for entering into partnerships.

Continue the collaboration with the National Forest Foundation for the Partnership Resource Center Web site.

Design PAS system from November 2003 through March 2004.

Implement PAS beginning in August 2004.

National Fire Plan

Source:

OIG Major USDA Management Challenges, November 8, 2002

“Waste and misuse of project funds”

Established project criteria for rehabilitation and restoration projects.

Established all costs in the NFP fire model.

Review a representative sample of rehabilitation and restoration projects selected for NFP funding by end of first quarter, FY 2004, to ensure they meet project selection criteria.

Review and clarify direction regarding NFP funds also in first quarter, FY 2004.

Grant and Agreement Administration

Source:

OIG Major USDA Management Challenges, November 8, 2002

“Grants used for unintended purpose”

“Federal funds not matched”

“Unauthorized expenditures”

“Did not conform with Federal Grants and Cooperative Agreements Act, OMB, and USDA regulations”

“Accounting records mismanaged”

Revised and piloted the process in Region 3, including steps necessary to follow statutory and regulatory guidance. Based on the results of the pilot study, this process will ensure that regional reviews related to grant and agreement administration will be performed to compliance.

The CFO issued national bulletins to clarify FFIS Project Cost Accounting (PCAS) procedures and to require their use for reimbursable agreements. The Financial Policy and Analysis Staff is responsible for issuing national direction contained in the CFO bulletins; Financial Accounting and Operations Staff and the FFIS Help Desk support field operations for PCAS processing.

Implement the 4-year review cycle, encompassing all regions and stations. Where problems are identified in future reviews, corrective action will be developed and implemented.

Implement the USDA-wide e-Grants application in the first quarter, FY 2004.

Participate in the Department-wide requirements session for an automated solution for grant and agreement administration and accounting.

Complete the scheduled Budget, Finance, and Acquisition Management field-level reviews at six locations– three regional offices, two research stations, and the Forest Products Lab–by June 30, 2004 .

Security of Aircraft

Source:

GAO Report entitled, “Major Management Challenges and Program Risks”, GAO-03-96, (January 2003)

“Lack of security standards”

“Lack of risk assessments to identify threats and misuse of aircraft by terrorists”

“Lack of security on air bases”

Developed a National Aviation Security Policy that includes security standards for all aviation facilities, linking agency response to the Homeland Security Advisory System in the first half of the fiscal year. These standards will be incorporated at all facilities that undergo an upgrade or new construction.

Implemented security improvements at the highest priority facilities.

Developed regional security procedures to respond to changes in the Homeland Security Advisory System threat levels.

Reclassified all pilot positions, both Government and contract, from “Low Risk” to “Moderate Risk Public Trust” positions, requiring a higher level of background check for these positions.

Continued to undertake efforts to improve aviation security. Significant accomplishments during this period included ongoing consultation and coordination with the Transportation Security Administration (TSA) regarding aviation security policy and procedures. In consultation with TSA, the Forest Service issued a firefighter travel safety alert addressing security screening and travel requirements.

Began development of procedures for aviation security technology review and assessment procedures. Continued to review Forest Service policy handbooks and manuals for needed changes and modifications related to aviation security.

Developed at the Missoula Technology and Development Center an evaluation protocol for security technology usable with aircraft, which enables new security technologies to protect the agency’s aviation assets. Contingency plans were developed to use funds, where available, to implement needed security improvements at the highest risk facilities.

Complete the National Aviation Security Policy that contains security standards for all aviation facilities and links agency response actions to the Homeland Security Advisory System. These standards will be incorporated at all facilities that undergo new construction or upgrading. The policy will be finalized in the first quarter of FY 2004.

Include in the Forest Service National Aviation Security Policy a formal methodology requiring all regions to conduct risk and vulnerability assessments for all aircraft. Also, the National Aviation Security policy requires a twice-a-year review of these assessments. The policy is scheduled to become effective the first quarter FY 2004.

Establish a position that will assure continued monitoring, review, and analysis of adherence/compliance to aviation security policies and procedures in FY 2004.

Conduct a test at the of the “aircraft electronic security system” at the Missoula Technology and Development Center in early FY 2004. Pending funding availability, begin purchasing these systems in the second quarter of FY 2004

Improving Performance and Accountability

Source:

GAO Report entitled, “Major Management Challenges and Program Risks”, GAO-03-96, (January 2003)

“Accountability of funds expended”

“Lack of good performance measures and linkage to the budget”

“Coordination with other federal agencies”

“Strong Internal Control is Critical to Program Delivery”

Refined agency output measures for the FY 2005 budget, and developed linkages to these measures in the 2003 Strategic Plan Update. These same measures are tied to activities used to develop the budget (BFES) and will be incorporated in the Forest Service’s PAS, which will track agency performance against the measures.

Clarified which executive is responsible for GPRA requirements and the PMA Budget and Performance Integration Initiative, as required by the GAO-issued report titled, Forest Service: Little Progress on Performance Accountability likely unless Management Addresses Key Challenges , (number GAO-03-503, May 2003).

Reaffirmed that Sally Collins, as the Associate Chief and Chief Operating Officer, is and continues to be the senior executive responsible for agency performance accountability, including the development of the PAS.

Implement PAS by accomplishing these milestones throughout FY 2004 and FY 2005:

System design—from November 2003 through March 2004

Alignment and integration with key systems (FFIS, INFRA, etc.)-- November 2003 through August 2004

Full system implementation-- August 2004 through January 2005

Initiate requirement for line officer/manager certification of reported accomplishments

Use a two-step process to evaluate high-risk processes within the agency, including risk assessment and the agency’s internal review process. Milestones include:

Conduct agency risk assessment by June 30, 2004

Issue new policy and procedures by September 2005

Annually conduct minimum of two Chief Reviews

Annually conduct reviews for financial compliance and internal control based on highest priorities

Annually conduct program/activity reviews

Annually conduct acquisition internal control reviews