ing this period also increased. It increased from 24 activities in 1993 to 41 activities in 1997.

Regional office budget officials viewed the use of the centralized field costs as a means to better achieve efficiency because the cost of central programs or activities generally would be managed centrally rather than allocating each unit's share of the costs and then requiring each unit to pay its proportional amount.

Field office officials and, as you cited earlier, the forest supervisors, cited both advantages and disadvantages for using centralized field costs. Yet none of these field officials could provide us with specific examples of disadvantages that negatively affected their operations.

In the conference report on the Forest Service fiscal 1998 appropriations, the conferees expressed concern about the appearance that expenditures for regional office operations and centralized field costs have risen significantly as a proportion of annual appropriated funds since 1993. As a result, the appropriations act limited the Alaska regional office's expenditures to $17.5 million.

As I said earlier, they did three things to be able to eliminate costs. Their initial budget estimate was $26.5 million and they were able to move that figure down to $18.7 million by doing three things: eliminating all existing centralized field costs; placing unallocated funds into a reserve account; and separating out the costs associated with the State and private forestry.

Again, this reduced the amount to $18.7 million. The ceiling imposed by the Congress is $17.5 million. The Forest Service in March assured us that they would be able to move that figure down to the Congressional limitation. Perhaps today they will tell you how they are going to move that final amount down.

The Alaska Region establishes reserves because of the uncertainty about the timing or the amount of funds needed for certain projects. Once the specific amount and the responsible unit is determined, the region distributes the necessary reserves to the unit responsible for making the payment. In fiscal years 1995 through 1997, the Alaska Region distributed between $6 million and $12 million in reserves. The field units received between 87 and 98 percent of these reserves.

To determine whether reserves play a positive or negative role in effectively implementing programs, we spoke with officials of each of the four field offices. The officials agreed that establishing a reserve amount to facilitate the accounting for unknowns was an effective procedure and believed that the region's actions in this case generally led to less paperwork. In most cases the field offices viewed reserves as a responsible approach to addressing the uncertainties related to contracting, for such issues as delays, cost increases, or the lack of an appropriate bid. Thus, overall the field office officials generally supported the process of establishing re

serves.

Probably the most important issue involves appropriations. Beginning in fiscal year 1995, the Forest Service Pacific Research Station scientists performed work in connection with the Tongass land management plan. The work of the research station scientists was jointly funded. Part of the expenses was funded from the Alaska Region's portion of the national forest system appropriation, which

is normally used for forest planning, and another part from the research station's appropriation, which is normally used for research activities.

The work performed by the research station scientists dealt with the revision of the Tongass land management plan and for postplan studies. Although we asked for documentation on the rationale for decisions about the funding split for the particular work performed by the research scientists, neither of these organizations could provide us with adequate explanation or documentation.

I might add, Mr. Chairman, we asked this throughout the job on numerous occasions, to both the research scientists as well as to the regional staff.

According to Forest Service records for fiscal year 1995 through 1998, the work of the scientists will cost about $4.7 million, which is split $2.8 million out of the national forest system appropriation and $1.9 million out of the research appropriation.

The Congress provided the national forest system appropriation for the management, protection, improvement, and utilization of the national forest system and forest planning, inventorying, and monitoring. We asked regional budget and fiscal officials to provide two things: justification for the charges to the national forest system appropriation for the work of the research station scientists; and the criteria they used to make such a determination. These officials said that such a determination was not made and that they could not provide us with information on the types of tasks provided by the scientists. They also could not provide us with the criteria, such as agency guidance or procedures, that were available in 1995 to make such a determination.

In effect, when the research station scientists requested national forest system funds for work on the Tongass land management plan, the Alaska Region provided funds requested, but it did not determine if those activities funded were a proper use of that appropriation.

On March 4, 1998, the Alaska Region provided us with its final budget allocation for fiscal year 1998, and again we asked the budget officials for their justification for charges to the national forest system appropriation for the work of the scientists, including documentation required by the August 1997 revision to the Forest Service-wise Appropriations Handbook. These officials said that such a justification was not made and that they had not complied with the documentation requirements in the handbook.

The forest and rangeland research appropriation was provided by the Congress for the Forest Service research stations to conduct, support, and cooperate in investigations, experiments, tests, and other activities necessary to obtain, develop, and disseminate the scientific information required to protect and manage forest and rangelands, all of which are considered research activities.

Again, just as in the prior case, we asked the Pacific Northwest Research Station staff, including the science manager for the Tongass land management plan, to provide justification for the charges to the research appropriation for the work of the research station scientists and the criteria they used to make such a determination. This official said that such a determination was not documented and that he could not provide us with documentation of

the types of tasks performed when using research funds. Also, the official could not provide us with any criteria that he might have used in making such a determination.

Again, on March 4, 1998, the research station provided us with its estimate for 1998 operating costs. The science manager again could not provide us with the justification that they had used for the research scientists.

I will skip the section that I have in our statement with regard to the IG since he is here and he can discuss the matter himself. I would just conclude with: In our report we recommended that the Chief of the Forest Service direct the Alaska regional forester and the Pacific Northwest Research Station director to: fully comply with the Forest Service's August 28, 1997, direction on special research funding situations, which requires the preparation of financial plans and the documentation of the determination of the appropriate funding allocations; and, two, establish procedures to ensure compliance with appropriation law Forest Service-wide. To date we have not received the Forest Service's statement of actions taken on our recommendations, required by 31 U.S.C. 720.

Mr. Chairman, this concludes our prepared statement. We would be pleased to respond to any questions that you might have about this.

[The prepared statement of Mr. Meissner follows:]

PREPARED STATEMENT OF JAMES K. MEISSNER, ASSOCIATE DIRECTOR, ENERGY, RESOURCES, AND SCIENCE ISSUES RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION, GENERAL ACCOUNTING OFFICE

Mr. Chairman and members of the committee, we are pleased to be here today to discuss our recently issued report to you on the costs to operate the Forest Service's Alaska Region.1 The Forest Service provides the Alaska Region with annual appropriations for its operations, and the region further allocates these appropriations to cover the regional office's costs, the centralized field costs that fund activities that usually have regionwide benefits, and the costs of the four field offices at the Tongass and Chugach National Forests. The remainder is designated as reserves. In response to your request, we provided you with information on (1) the region's allocation of funds for its operating costs for fiscal years 1993 through 1998; (2) the nature, purpose, and allocation of centralized field costs and the steps the Alaska Region is taking to comply with the congressional limitation on the expenditures for the regional office and centralized field costs; (3) the rationale for and the distribution of regional reserve funds; and (4) whether the Forest Service's National Forest System and Research appropriations were used appropriately to pay for work performed by the Pacific Northwest Research Station in connection with the revision of the Tongass Land Management Plan and for post-plan studies.

In summary:

• The Alaska Region's operating costs ranged from $108 million to $127 million annually during fiscal years 1993 through 1997. The region allocated from 71 to 76 percent of these funds to the field offices for carrying out local programs, such as timber sale preparation or wildlife activities; 13 to 17 percent for managing regional office operations, including overall direction and support for field offices; 4 to 7 percent for centralized field costs; 2 to 5 percent for regional reserves; and 2 to 4 percent for State and Private Forestry operations. For fiscal year 1998, the region's estimated allocations totaled about $106 million to carry out these regional programs.

• Until fiscal year 1998, the Alaska Region used centralized field costs to manage certain programs or activities for the benefit of multiple offices. Centralized field costs include activities such as payments to the National Finance Center for payroll and accounting services. The Forest Service's fiscal year 1998 appro

1 Forest Service: Review of the Alaska Region's Operating Costs (GAOCED-98-106R, Mar. 31, 1998).

The report has been retained in committee files.

priations act limited the Alaska Regional Office's expenditures for regional office operations and centralized field costs to $17.5 million. To comply with this legislative requirement, the Alaska Region eliminated the use of the centralized field cost category, included unallocated funds in regional reserve accounts until the funds are distributed to the field units, and separated the costs for State and Private Forestry operations from the operations of the regional office. • The Alaska Region establishes reserves because of the uncertainty about the timing or the amount of funds needed for certain projects. Once the specific amount or responsible unit is determined, the region distributes the necessary reserves to the unit responsible for making the payment. In fiscal years 1995 through 1997, the Alaska Region distributed reserves ranging from $6 million to $12 million. The four field offices received from 87 to 98 percent of the reserves during this period, and the remainder went to the region for regional office operations. Any ending balance in the reserve category becomes the carryover amount for the next fiscal year.

• Beginning in fiscal year 1995, both the Alaska Region's portion of the National Forest System appropriation and the Pacific Northwest Research Station's portion of the Forest and Rangeland Research appropriation funded the work performed by the Research Station scientists on the revision of the Tongass Land Management Plan and post-plan studies. Although we asked for documentation of the rationale for decisions about the funding split for the particular work performed by the research scientists, neither of these organizations could provide us with such documentation. As a result, we could not determine whether the National Forest System and the Research appropriations were used appropriately or inappropriately for fiscal years 1995 through 1998.

ALASKA REGION'S OPERATING COSTS FOR FISCAL YEARS 1993 THROUGH 1998 Annually, the Forest Service receives appropriations to operate its nationwide programs. On the basis of these appropriations, the Forest Service allocates a portion to each of its regions to carry out the regional and field office programs. In the case of the Alaska Region, appropriations are further allocated to (1) the regional office, which provides overall direction and support for programs and activities in the region as well as funds for the State and Private Forestry operations located in Anchorage, Alaska; (2) the centralized field costs, which fund programs or activities that usually have regionwide benefits; 2 (3) the four field offices to operate "on the ground" programs; and (4) reserve accounts from which distributions are made during the year to the field offices.

As shown on table 1, the Alaska Region's operating costs ranged from $108 million to $127 million annually during fiscal years 1993 through 1997 and were estimated to be about $106 million for fiscal year 1998.

Table 1.-YEAR-END BUDGET ALLOCATIONS. FY 1993 THROUGH 1998

$17,513 $18,726 $17,913 $15,672 $16,453 $18,749

Total

$126,615 $121,056 $108,162 $117,578 $116,228 $106,049

1Based on the Alaska Region's Final Budget Allocation; the year-end statements were not available at the time of our review.

2 Includes amounts for permanent appropriations, trust funds, and revolving funds.

The amounts provided to the State and Private Forestry operations in Anchorage-a separate organizational unit within the Forest Service-are shown as a separate category even though the Alaska Region's financial reports traditionally have included these amounts as part of the regional office costs.

2 The region eliminated the use of centralized field costs in fiscal year 1998.

THE REGIONAL OFFICE'S USE OF CENTRALIZED FIELD COSTS

Until fiscal year 1998, the Alaska Region used a category of operating costs, known as centralized field costs, as a means to improve efficiency by having one office either the regional office or one of the field units-manage certain programs or activities for the benefit of multiple offices. Centralized field costs include activities such as payments to the National Finance Center for payroll and accounting services. Overall, the centralized field costs established by the region increased from about $5 million in fiscal year 1993 to almost $9 million in fiscal year 1997, and the number of programs or activities included in these costs fluctuated from 24 to 41 during the same period. However, this overall increase is not reflective of the increases or decreases in individual centralized field costs during this period because the same programs or activities were not funded each year nor did the amounts of individual centralized field costs remain constant. As a component of the Alaska Region's overall operating budget, these costs averaged about 5 percent of the total.

Field office officials cite both advantages and disadvantages of centralized field costs Regional office budget officials viewed the use of these centralized field costs as a means to better achieve efficiency because the costs of certain programs or activities generally would be managed centrally rather than allocating each unit's share of the cost and then requiring each unit to pay its proportional amount. Field office officials cited both the advantages and disadvantages of using centralized field costs. Yet none of these field office officials could provide us with specific examples of disadvantages that negatively affected their operations or what more they could have accomplished if centralized field costs had not existed.

Recent legislation results in reclassification of centralized field costs

In the conference report for the Forest Service's fiscal year 1998 appropriations, the conferees expressed concern "about the appearance that expenditures for regional office operations and centralized field costs have risen significantly as a proportion of annual appropriated funds since 1993." As a result, in the appropriations act the Congress limited the Alaska Regional Office's expenditures for the regional office's operations and centralized field costs to $17.5 million, without 60 days prior notice to the Congress.

The preliminary budget allocation for fiscal year 1998 regional office operations and centralized field costs totaled about $26.5 million. According to a regional budget official, the region is currently implementing the following measures to meet the congressional limitation:

• Eliminating all existing centralized field costs by allocating the funds directly to the field units whenever the office and amounts are known.

• Placing unallocated funds into a reserve account and distributing them as decisions are reached as to which office will receive the money.

• Separating the costs associated with the State and Private Forestry organizational unit from the regional office's expenses.

According to the regional budget official, the region eliminated centralized field costs and was able to reduce the planned regional office cost allocations to about $18.7 million as of March 4, 1998. Although this estimate exceeds the $17.5 million congressional limitation, according to an Alaska Region budget official, further adjustments will be made as the year progresses to ensure that regional office operating expenses do not exceed the amount allowed by the Congress. He also stated that centralized field costs will not be used in the future.

REGIONAL RESERVES DISTRIBUTED TO LOCAL FIELD OFFICES

The Alaska Region establishes reserves because of the uncertainty about the timing or the amount of funds needed for certain projects. Once the specific amount or responsible unit is determined, the region distributes the necessary reserves to the unit responsible for making the payment. In fiscal years 1995 through 1997, the Alaska Region distributed reserves ranging from $6 million to $12 million. The four field offices received from 87 to 98 percent of the reserves during this period, and the remainder went to the region for regional office operations. Any ending balance in the reserve category becomes the carryover amount for the next fiscal year. Local programs generally were not affected because the region established reserves To determine whether reserves play a positive or negative role in effectively implementing programs, we spoke with officials of each of the four field offices. The officials agreed that establishing a reserve amount to facilitate the accounting for unknowns was an effective procedure and believed that the region's actions in this case generally led to less paperwork for the local units. In most cases, the field of