INSTRUCTOR: Milton D. Coffman

LESSON: Financial Management of BAER Project (Tracking of Expenditures)

OBJECTIVES:

Upon successful completion of this lesson, participants will be able to install, implement, track and monitor BAER expenditures through the lead agency’s books.

OVERVIEW:

In your packet is a copy of the Eighth Street BAER financial package from 1996. This was a 15,300-acre fire involving Forest Service, BLM, State, County, City of Boise, and private landholdings. This was the third large BAER effort on the Boise Forest in 5 years and we continue to learn. What I am sharing with you are the financial management high points of these three efforts.

There is one key point I need to stress: the core team needs to read and understand what is in the BAER handbook to understand and comprehend what is appropriate and what is not. For instance, the current draft handbook still has two points which have not been resolved. The first involves the use of trees as a permissible emergency rehabilitation treatment, and the second concerns repairing or replacing minor facilities through the BAER effort. When the BAER report goes in for funding authorization, it is important only those treatments authorized are included to ensure a speedy return of the request.

After most large fires, especially those involving urban interface, an agency (BLM, FS, NPS, BIA) will feel the need to rehab the burned-over areas to spend the healing process and reduce the potential for mud/flood events to downstream areas. To accomplish this, Federal funding is required to start the process. In most cases, you are dealing with other Federal agencies, various levels of State, county, and city governments, and private citizens. The last group works with NRCS who is the funding source for them.

The first item of business is to determine a lead agency. This normally is the agency which had the jurisdiction for fire suppression for is the largest Federal landowner. "This agency will take the lead in securing the needing funds through their sources to work on all the federal land involved." At the same time, a short incident command team needs to be formed and a BAER qualified Finance Section Chief appointed. The size of composition to the team will be determined by the complexity of the upcoming effort.

The fact you are dealing with multiple entities and a large sum of money requires the formation of a financial group. Their primary functions are:

1. Provide administrative interface between the partners.

2. Ensure the funds are spent in accordance with direction.

3. Ensure the project stays within budget.

4. Ensure agreements are executed, signed, and follow agency direction.

5. Ensure all billings are done in a timely manner.

6. Ensure the project follows sound business management practices.

7. Provide adequate staffing to handle the personnel, costs, and procurement functions.

8. Provide administrative oversite for the multiple agencies to ensure a uniform and consistent application of the policies, regulations, and rules of each agency.

9. Complete the written financial package and distribute.

If the proposed project is over $500,000, OR has multiple partners involved in the project’s funding, OR has NRCS involvement, then it is imperative a Cost Unit Leader position is established very early. Except for small projects, DO NOT PLAN on having the financial (Finance Section Chief) handle both jobs. This causes a shortfall in both areas which will come back to haunt you.

NARRATIVE:

There is no standard pattern for a BAER effort. Each one is unique and must be dealt with accordingly. There is, however, one aspect which is not unique and that is: THE WORK WILL BE DONE ON THE GROUND. This will normally consist of trenching, cross felling, scarification, aerial seeding, rangeland drill seeding, etc., post monitoring, along with the overall management and administration of the project.

As mentioned above, there are a few critical points that need to addressed early in the process:

1. Very early in the process, there must be written agreements between ALL OF THE PARTIES on what each will bring to the table, their individual requirements, funding and/or inkind work they are going to provide. At first, these agreements will be verbal with a few written notes for reference. However, they must be signed, sealed, and delivered to all parties within the first few days of the project actually spending on-the-ground money. These agreements provide a basis for the financial manager to put together the necessary cost centers.

2. A lead agency must be decided on early in the process. The draft calls for this agency to request the funding through their WO. As mentioned above, this agency will normally be the one which had the suppression responsibility or the majority of the land being treated. The incident commander or the command staff does not have to come from this agency.

3. A firm agreement from each partner on the amount of funding or inkind work each agrees to provide. This needs to completed quickly to provide the procurement/contracting personnel the authority to obligate funds. At this time, NRCS’s participation in the project needs to be firmed up. They typically enter into an agreement with the lead agency to provide 75 percent of the funding for non-Federal land within the project area. The remaining 25 percent comes from the State, county, city, and/or private landowners either in the form of cash or contributed (inkind) labor, equipment, or supplies.

4. Establish lines of communications between all the players of this project. You need names, phone numbers, (day/night) of people who can make the decisions or can get to the people who can make the decisions in a very short timeframe. Each agency or player has a fiscal/financial interest in the project. This person needs to communicate with the BAER team on their financial expectations, the detail of accounting they want, and how they want the final product displayed.

5. The group needs to establish a meeting schedule to keep all parties informed on theprior day’s accomplishments, what is planned for the next few days, any surprises encountered during the prior day’s activities and expenditure estimates verified where possible in the financial records.

There are five distinct phases to any BAER project. There is, of course, overlap, but for the ease of discussion, I will separate them. The phases are (1) assessment, (2) execution, (3) closeout, (4) monitoring, and (5) final report. Each of these have their individual administrative and financial characteristics.

1. Assessment:Of the five, the initial assessment, in many ways, is the most critical. It is this initial stage where areas to be treated are determined, ownership of said acres, and the initial type of treatment required. This stage includes the efforts to prepare the BAER report for funding, so good cost estimates are essential. The financial group can provide the technical advice on the best ways to meet the objectives of the primary players. If this is done right, coupled with the daily meetings to verify what is happening on the ground, the other four phases of the operation will move smoothly.

2. Execution:Once the funding approval is granted and work begins, the team will provide the financial person the required information on a daily basis to keep accurate records, make obligation estimates to be followed up with actual data, and make future estimates of time and costs to ensure the project stays within the overall budget. This daily flow of information allows the financial person the ability to take opportunities for savings and apply them to the cost centers where overruns are occurring. Regardless of how well the plan is made, changes will occur, weather will slow progress, or outside events will drain needed resources. During the daily meetings, all aspects of the project will be discussed and the financial group will provide valuable information to facilitate the completion of the project. This phase of the operation typically has the longest duration with many opportunities to stumble. I cannot stress enough that communication is needed during this phase of the project. Without it, the stumbles becomes drops and the project begins to falter.

3. Closeout: During the last 10 percent of the time for the project, the financial group is ensuring all the records are up to date and current, inservice and intra-agency funding authorizations are within acceptable bounds, and very few financial surprises are hidden. At this stage, claims are reviewed and estimates made on their cost. There are two main tasks during this phase:(1) ensure none of the parties have overspent their authorization, including all anticipated future obligations and adequate funds are available for the monitoring; and (2) the distribution of indirect charges to the tasks is current and the final distribution of the costs to the parties has been fairly determined.

4. Monitoring: The financial group ensures the funding for the monitoring is secure and available for the lead agency to obligate. It is very important these funds are left alone or the lead agency will need to use their appropriated funds or request additional funding to complete this important phase of the operation. The draft handbook allows limited monitoring and evaluation of implemented treatments using BAER/EFR funds. The current thinking is monitoring will limited not to exceed 5 percent of the total cost for a period not to exceed 3 years initially.

5. The final product of the financial team is to prepare a report similar to the Eighth Street report which is part of this package. This report tells what happened, what went good, what needs correction, etc. It should be shared with the national BAER community. To ensure everything is captured, the financial report should be completed within 120 days after the completion of the project. These reports should be made readily available to units who have a large fire and are looking forward to a BAER effort. This will make their lives much easier so they do not have to reinvent the wheel.

COST ACCOUNTING

The draft handbook for USDA/USDI agencies has definitions of legal and proper expenditures of BAER funds. This should make the financial aspects of charged as worked/benefitting function and Congressional Intent much easier to administer.

If it is a one agency BAER effort with no or minor participation by other parties, then the establishment of cost centers may not be required. One charge (job code) can meet the needs of management. On the other hand, if there are multiple agencies involved with an intermixing of treatments on intermingled landownership, then it is important to establish cost centers to ensure the best distribution of costs possible. It is important during the initial stages to determine if a particular player or agency has specific rules, policies, or regulations which need to be addressed. Also, at this time, the master agreements on the distribution of management and overhead costs need to be resolved. It can be as simple as a percentage based on acreage of each partner to a breakdown by cost center by landowner by estimated cost.

For simple projects, you can do the calculations by hand and use ledger sheets to track costs, accomplishments, and other details. However, for the complex and expensive projects, a PC loaded with ICARS (Incident Cost Accounting and Reporting System) or a similar software package must be provided to the financial group.

One aspect of cost accounting is to split out the direct cost from the indirect costs and then apply the indirect costs back to the direct costs. This is where the incident commander, task managers, and the financial group need to have a clear understanding of what goes where and with what. This becomes particularly important when dealing with the NRCS because they work on a unit cost basis rather than total cost. There are good estimates for individual tasks such as straw dam check bales and trenches, but how much of the indirect costs should be applied to each task needs to be agreed upon up front. Two simple approaches are: (1) total indirect costs divided by the total direct cost and the percentage applied to the individual task, and (2) spread the indirect costs based on percentage of acres being treated by landowner. Whatever the method, it needs to be decided upfront.

SUMMARY

The financial aspects of a BAER/EFR project is challenging, rewarding, and a great learning experience. Whatever position you have on a project, you need to work closely with the financial group. This will ensure the team meets the objective. The financial people may ask silly questions, say you can’t do something, or it has to be done differently. This is what the team meetings are all about. You have to remember, this is not your money, but belongs to the taxpayer and they expect it to be spent wisely. Working with the financial group to resolve differences is part of the challenging experience. Together, the team is responsible for meeting the BAER/EFR plan. One last item: If you starting up a BAER effort, be sure to call those people who have successfully completed a project.