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Congressional Testimony

RESTORING MANAGERIAL ACCOUNTABILITY TO
THE UNITED STATES FOREST SERVICE

BEFORE THE
UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES

FEBRUARY 16, 2000

INTRODUCTION

Mr. Chairman, and members of the subcommittee, thank you for the opportunity to present findings and recommendations which appeared in the National Academy of Public Administration's (the Academy) 1999 report on managerial accountability in the U.S. Forest Service.

During the past several years, the U.S. Forest Service has experienced persistent management weaknesses, financial accounting deficiencies, and problems with the relevance and veracity of its data and its strategic planning. These problems concerned oversight agencies as well as Congress. The Forest Service, at the direction of Congress, contracted with the Academy for an independent assessment of changes it is making to its business and fiscal systems and for recommendations on ways to strengthen its budget and planning processes. The Academy also examined two collateral issues: the Forest Service's organizational structure and its performance measurement system. In my testimony I will comment on six aspects of the U.S. Forest service's management:

• implementation of the Forest Service's new financial system;
• budget and appropriation structure;
• budget process;
• organizational structure and design;
• strategic planning and performance measurement; and
• leadership.

NEW FINANCIAL SYSTEM

To address problems in its current accounting system, the Forest Service is changing over to the modern Foundation Financial Information System (FFIS). The system was brought on-line October 1, 1999. Successful implementation of FFIS will provide the Forest Service with a standard general ledger that meets government accounting standards. FFIS will also allow the Forest Service to produce accurate accounting reports and project accounting consistent with a project-oriented performance measurement system, automated allocation of indirect costs, improved property accounting and accountability, and positive funds control. Improved financial accountability may in turn lead to an acceptable audit. However, in and of itself, implementation of the FFIS will not solve the agency's problems especially those related to the lack of credible data.

BUDGET AND APPROPRIATION STRUCTURE

To realize the full benefits of the FFIS, the Academy perceived that the Forest Service requires a revised budget structure. The current budgeting system, which is consistent with the structure of congressional appropriations, is based on resource-specific line items, and not on the multiple-use, ecosystem-based work the Forest Service actually performs. Under this system, it is now virtually impossible to relate expenditures back to the budget and to track performance accurately. Although meaningful performance planning and measurement are fundamental requirements of both Congress and the administration, and despite the mandates of the Government Performance and Results Act of 1993, the Forest Service has not been able to develop adequate performance measures. None of the several attempts to date to simplify the budget addressed this problem of the fundamental mismatch between budget structure and work performed.

With respect to budget structure, the Academy recommended the following reforms:

• A budget structure for the National Forest System appropriation that consists of five Budget Line Items: Planning and Assessment, Multiple Use Ecosystem/Watershed Management Projects, Recreation, Fire Pre-suppression and Suppression and Law Enforcement.
• Congressional elimination of the Wildland Fire Management appropriation and transfer of the related funds to the National Forest System Fire Pre-suppression, and Suppression Budget Line Item, so that all funds associated with fire are in a single Budget Line Item.
• The Academy panel recommended no changes to the State and Private Forestry, and Public Asset Protection and Management, the Land Acquisition, and the Forest and Rangeland Research appropriations. However, it recommended that the Forest Service develop a formal management process to give regional foresters means of providing input in the development of the research program.

The structure of the congressional appropriations drives the Forest Service's budget structure. In line with the recommended budget structure, the Academy panel recommended the adoption of a revised appropriation structure for the Forest Service as shown below, to be effective in FY 2001. Assuming Congress accepts the proposed structure, it should instruct the Forest Service to submit its FY2001 budget request according to the revised structure (with crosswalks between the budgets for FY 1999, 2000, and 2001). The Congress should also require a follow-up report by June 2000 of the implementation plans the Forest Service is putting in place to ensure use of the new structure in FY 2001. The report should include the specific outcome-based measures the Forest Service will use to assess performance.

APPROPRIATIONS BUDGET LINE ITEM

• National Forest System · Planning and Assessment
• Multiple Use Ecosystem/Watershed Management Projects
• Fire Pre-Suppression and Suppression
• Law Enforcement
• Forest and Rangeland Research
• State and Private Forestry · Forest Health Management
• Cooperative Fire Protection
• Cooperative Forestry
• Land Acquisition · Acquisition Planning
• Land Purchase
• Acquisition of Lands to Complete Exchanges
• Special Acts Associated with the Acquisition of Lands for National Forests
• Public Asset Protection and Management · Reconstruction/Construction
• Maintenance

The Academy panel furthered recommended that Congress direct the Forest Service to provide it with an operating plan, at a mutually agreeable level of detail below the Budget Line Item, within 30 days after enactment of the appropriation. The operating plan should explain any conditions during the fiscal year that warrant a change in funding in a Budget Line Item. At the mid-point of the fiscal year, the Forest Service should provide the appropriations subcommittees with an updated operating plan with a review of its current plans, including explanations of any changes.

BUDGET PROCESS

If the Forest Service is to realize the full benefits of an improved accounting system and a new budget structure, it also needs to change the process for developing funding requirements and allocating budget obligation authority. The Academy panel recommended that the Chief of the Forest Service task the Chief Financial Officer with developing and implementing a budget process that requires the following;

• Publishing annual sets of programs and projects derived from the Forest Service's strategic plan, against which budgets and allocations will be developed. Each major field unit (such as the regions and research stations) should provide similar guidance to its subordinate units.
• Instituting a process whereby each field activity develops and prioritizes its budgetary requirements and submits them through the organizational hierarchy to the Washington Office.
• Organizing the budget submissions in the Washington Office according to overall priorities as reflected in the strategic plan.
• Providing feedback to the submitting organization when budget decisions are made.
• Providing a process for regional foresters to make inputs on their research needs in the national forests.

The Academy panel presented two additional recommendations related to the Forest Service budget:

(1) A significant part - approximately one-fifth - of the Forest Service budget comes from funds provided through as many as 23 trust funds and special accounts. The Academy panel recommended that the Forest Service and Congress review these appropriations to determine if they are achieving the desired results.

(2) The Academy panel recommended that the Forest Service adopt the definitions it submitted in the FY 2000 Forest Service budget justification. Further, the Academy Panel recommended that the Forest Service present the indirect budget by cost element and by location in its FY2001 budget justification. Because the definitions will be new to the Forest Service personnel, an audit should be made after the end of the fiscal year to identify and form the basis for corrective actions.

ORGANIZATIONAL STRUCTURE AND DESIGN

Changes in the Forest Service's organizational structure and design are needed if the agency is to get the most benefit from the new financial accounting system and revised budget structure and achieve related improvements in managerial accountability.

The Academy panel suggested the following organizational changes:

• Creation of the position of Deputy Chief under the Chief of the Forest Service, with principal responsibility for the day-to-day internal operations.
• Creation of the position of Director of Administration, with responsibility for non-financial administrative activities (such as personnel and procurement). The Chief Operating Officer position should be eliminated.
• A line of reporting to the newly titled Associate Chief, National Forest System for the following groups, consistent with the recommended budget structure: regional foresters, planning staff, ecosystem/watershed management staff, recreation management staff, assets management staff, wildland fire management staff, and law enforcement staff.
• A direct line of reporting by the Chief Financial Officer to the Chief/Deputy Chief, to elevate programmatic and financial analysis to a level that assures independence and fulfills the fundamental intent of the Chief Financial Officer Act of 1990.
• The addition of an independent program analysis capability under the Chief Financial Officer, to focus principally on program development, analysis, and review, while keeping the accounting function viable and accurate. The Chief Financial Officer should stress the development and use of a policy analysis capability not only in his or her organization, but also throughout the Forest Service. Hiring in the Chief Financial Officer's Office should be heavily weighted toward program analytical skills, rather than accounting skills.
• The Forest Service should consider renaming the proposed Budget Staff the "Program Analysis and Budget Staff" to emphasize the unit's responsibility for independent program analysis and development of the agency's annual budget. The Program Analysis and Budget Staff should be organized programmatically into three primary appropriations areas - National Forest System, State and Private Forestry, and Rangeland Research - and two specialized staffs - Special Studies Group and Budget Group. The Special Studies Group would provide analytical support on agency-wide issues, requirements, and initiatives to the Chief Financial Officer, as well as the Chief and Deputy Chief, and to the three appropriations groups. The Budget Group would handle technical preparation of the budget submissions and funding allocations to the Washington Office and the field. It would assure that all allocations comply with the laws and the congressional limitations and/or earmarks.
• The same staff unit responsible for developing the budget should also have responsibility for program analysis, rather than placing it in an organization whose chief focus is accounting cost analysis, as called for in the Chief Financial Officer's current plan.
• The Academy panel urged the Chief Financial officer and senior managers to begin implementation of these structural changes, particularly hiring, of new staff as quickly as possible.

STRATEGIC PLANNING AND PERFORMANCE MEASUREMENT

In recent years, the Forest Service attempted to produce a strategic plan linked to outputs and outcomes, as mandated by the Government Performance and Results Act. At this stage the strategic planning process is not advanced enough to clarify the Forest Service's choices or firmly establish its direction. The Academy panel endorsed the need for the Forest Service to develop a strategic plan to provide a road map for management of the Forest Service and a basis for defining roles and responsibilities, delegating authority, and determining resource requirements.

The strategic plan should be linked to unit plans and program and project measurements at many levels: national, state, regional, community, and individual site. It should provide useful information to different stakeholders. Other Forest Service plans should be organized in program/project framework at the forest level, based on identification of specific documents within the Planning and Assessment Budget Line Item. Forest Service Programs should be defined in a hierarchy under each budget line item.

Programs are the long-term, central priorities of the department's that carry out the agency's mission. Examples are aquatic ecosystems management or forestlands health management. Projects define a specific unit of work at a specific location, an initial cost, schedule, and performance criteria that define outcomes and benefits in quantitative or qualitative terms. The projects form the substructure of the programs. The project criteria should be used at the forest and region levels to evaluate progress. Funding for each project would come wholly from the Budget Line Item for the particular program/project effort.

The Forest Service may want to publish a manual, as a companion to the strategic plan, that describes the management structure and extensive system of plans that are needed to implement agency programs, and that discusses how all parts of the agency, down to the field and project levels, are involved in the planning and performance cycle.

Forest Service management needs to ensure the planning and design of a hierarchy of performance measures from the lowest practical project level to the national level. The proposed budget structure lends itself to results-oriented management because it is compatible with performance assessment at both a low and high level of detail. Managers will have to employ "systems thinking" in order to incorporate site-specific projects and multiple ecosystems and recognize their interrelationships. The performance measurement criteria should include costs and other measures, such as adequacy of performance, effort, and effectiveness.

LEADERSHIP

In the end, the source of the Forest Service's problem is not the lack of financial accountability or a budget structure that does not match work actually performed. Rather, it is the lack of managerial accountability. Attaining a clean audit opinion by itself will not restore the agency's credibility and trust with Congress and other external groups, nor will a reliable financial accounting system and rational budget structure. These are only management tools. Merely appreciating the value of these tools is not good enough. Managers must use them because they believe the tools will help them make better decisions. They must, for example, value strategic plans and the linking of budgets to performance because the tools help them do their job effectively. A shift toward this way of thinking must start with the Forest Service's top leadership, who must in turn have full support from the leadership of the Department of Agriculture. Successful implementation of the new management tools and other changes will require significant involvement of the Forest Service Chief and senior managers.

The Academy panel was optimistic that the Forest Service has the capacity to fix the problems with financial accounting, although it questions the short timeframe designated for doing so. Similarly, the Forest Service should be able to improve the budget structure and process. However, based on past failures of leadership to carry through fully on reforms, the panel was concerned about whether the Forest Service will do what needs to be done. It was also concerned that there is inadequate recognition that the real issue is the lack of managerial accountability and, underlying that, insufficient proactive, consistent, and focused leadership. These are the true sources of accounting and budget problems. Leadership must recognize and be willing to tackle the absence of managerial accountability and to establish a standard of excellence in performance.

CONCLUSION

Mr. Chairman, the Academy thanks you for the opportunity to have undertaken this study and to prepare this testimony which is intended to result in more effective public management. The Academy is aware that improving governmental performance in a cost-effective manner is a central theme of your subcommittee. The Academy is impressed by your interest in results-oriented management and your ability to bring the concept to life in a number of agencies. Because of the U.S. Forest Service's past record of accomplishment, the Academy is optimistic that if the recommendations presented in this report are successfully implemented, the American public will continue to derive benefits from our forests.

Mr. Chairman, this concludes my written statement. I would be pleased to answer questions you or members of the subcommittee have at this time.