The BLM's Management Control ProgramThe BLM's Management Control ProgramDuring fiscal year 1998, the BLM corrected the oil and gas production accountability material weakness. The Bureau was also successful in completing scheduled fiscal year 1998 corrective actions on the remaining three material weaknesses: inadequate range monitoring, inadequate oversight of the Land Exchange Program, and inadequate administration and oversight of the Wild Horse and Burro Herd Management Program. Specifically, the BLM issued the final Standards and Guidelines Implementation Policy for Healthy Rangelands, finalized the BLM Land Exchange Handbook, and issued a contract for development of an Adoption Marketing Strategy.
The results of management control reviews conducted during fiscal year 1998 indicate that BLM's systems of management, administrative, and financial controls provide reasonable assurance that the objectives of the Federal Managers' Financial Integrity Act have been achieved.
The BLM piloted some of the components of its new evaluation process through the use of self-assessment surveys administered to all BLM State and Field Offices. In addition, on-site visits were conducted at selected locations by interdisciplinary teams made up of BLM top management officials, subject matter experts, and external customers.
Based upon these survey results and on-site visits, areas of positive performance, continuous improvement opportunities, and best practices were identified. This new way of reviewing BLM programs has provided additional opportunities to share successes and to incorporate lessons learned into our day-to-day work processes. Guidance developed during fiscal year 1998 provided the framework for developing training modules to educate all BLM employees about the new evaluation process.
The Government Auditing Standards, issued by the Comptroller General, require government officials and employees to be accountable for managing public programs. Audits can be conducted by the Department of the Interior's Office of Inspector General (OIG) or by the Government Accounting Office (GAO). Audits for the past three fiscal years are summarized in the accompanying charts.
A total of 89 program audits were initiated from fiscal year 1996 through fiscal year 1998. Sixty of these 89 audits have been closed, indicating that audit recommendations have been implemented to improve management of BLM programs. The 29 audits that remain open either are awaiting final audit reports from the GAO/OIG, or are still works in progress as implementation of recommendations proceeds.
Overview of the Financial StatementsThis section of the Annual Report presents BLM's financial statements. We believe these statements are a fair and accurate presentation of our financial position, net cost of operations, changes in net position, and budgetary resources, and details regarding financing. This is reflected in the unqualified audit opinion rendered on the financial statements by the independent auditors. Sound financial management is a top priority for the BLM at all levels of the organization.
The financial statements have been prepared pursuant to the requirements of the Chief Financial Officers Act of 1990. While the statements have been prepared from BLM's books and records in accordance with the guidance provided by the Office of Management and Budget, the statements differ from financial reports used to monitor and control budgetary resources that are prepared from the same books and records.
The statements should be read with the realization that they are for a component of a sovereign entity, that liabilities not covered by budgetary resources cannot be liquidated without enactment of an appropriation, and that payment of all liabilities other than for contracts can be abrogated by the sovereign entity.
In response to the need to ensure that all computers and information systems are ready for the Year 2000, the Department of the Interior has implemented an initiative to analyze and correct potential Year 2000 conflicts. The BLM is actively involved in this effort and has made significant strides in converting the Bureau's finance and accounting system and all of the related programs and reports from 2-digit to 4-digit year fields. All of the programs and reports were thoroughly tested, and during fiscal 1999, the BLM will perform further testing after resetting the system date to the year 2000. Further information regarding the Department's overall state of readiness and other Year 2000 issues, including the Department's contingency plan, is presented in the Department of the Interior's Fiscal Year 1998 Accountability Report.
Statement of Federal Financial Accounting Standards No. 4, Managerial Cost Accounting Concepts and Standards For the Federal Government, requires agencies to report the full cost of programs, activities, and outputs. The standard includes requirements for accumulating and reporting costs on a regular basis for management use, establishing responsibility segments to match costs with outputs, determining the full cost of government goods and services, recognizing the costs of services provided between agencies within the government, and using appropriate costing methodologies to accumulate and assign costs to outputs.
The BLM has selected Activity Based Costing (ABC) as the methodology to accumulate cost data for effective management use and to assign costs to outputs. During fiscal year 1998, BLM management defined the Bureau's responsibility segments, analyzed activities and tasks in Montana, conducted a Bureauwide analysis for the Wild Horse and Burro program, and initiated a Bureauwide analysis of all programs to fully implement ABC during FY 99. The responsibility segments have been defined as follows:
Direct costs incurred in each of these activities are reported in the appropriate responsibility segment. Administrative costs and various indirect costs are allocated to the responsibility segments in a manner appropriate for each type of cost.
The Office of Management and Budget (OMB) made a presentation at the 1998 Financial Statement Audit Forum discussing its guidance to agencies that deferred maintenance disclosed in fiscal year 1998 financial statements would not be audited. OMB's conclusion was that deferred maintenance disclosure is not necessary for fair presentation of the financial statements and that the required footnote can be labeled "unaudited" without resulting in opinion qualification. This is based on the Federal Accounting Standards Advisory Board conclusion that Statement of Federal Financial Accounting Standards No. 6 states that deferred maintenance is not sufficiently measurable to require recognition.
The total funding needed to address all of the BLM's deferred maintenance is difficult to estimate with any degree of accuracy because of a number of factors discussed in the footnote.
Several prior period adjustments are recorded in the fiscal year 1998 financial statements. These consist of amounts that would have been recorded in the fiscal year 1997 or prior year statements had the data been available, or they represent changes, based on subsequent information, to amounts that were reported in the FY 97 or prior year statements.
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Bureau of Land Management Notes to Principal Financial
Statements(dollars in thousands)
These financial statements have been prepared to report the financial position, net cost of operations, changes in net position, and budgetary resources, and details regarding financing of the Bureau of Land Management (BLM), as required by the Chief Financial Officers Act of 1990. The consolidating and combining financial statements present financial information by responsibility segment. They have been prepared from BLM's financial records in accordance with the form and content of agency financial statements as specified by the Office of Management and Budget (OMB). The statements have been prepared in accordance with OMB Bulletin 97-01, including the technical amendments thereto, and the BLM accounting policies that are summarized in this note. These statements are different from the financial reports submitted to OMB for purposes of monitoring and controlling the obligation and expenditure of budgetary resources.
The BLM, a bureau of the Department of the Interior (DOI), was established on July 16, 1946, through the consolidation of the General Land Office and the Grazing Service in accordance with the provisions of Sections 402 and 403 of the President's Reorganization Plan No. 3 of 1946 (60 Stat. 1097). The BLM's functions are set forth in Section 301 of the Federal Land Policy and Management Act of 1976 (43 USC 1731).
On March 12, 1996, Secretary Babbitt signed Order Number 3198, transferring the Department's Helium Operations from the U.S. Bureau of Mines to the BLM. This was done under the authority of Section 2 of Reorganization Plan No. 3 of 1950 (64 Stat. 1262), as amended. The helium production fund was established by the Helium Act (50 U.S.C. 10), enacted March 3, 1925, and amended by the Helium Act Amendments of 1960 (P.L. 86-777). Helium production and refining were discontinued on April 1, 1998, pursuant to the Helium Privatization Act of 1996 (P.L. 104-273).
The accompanying consolidated and combined financial statements include all appropriated funds, as well as all other funds for which the BLM maintains financial records. Financial records are maintained by fund types as described below:
1. General Funds: These funds consist of expenditure accounts used to record financial transactions arising from Congressional appropriations as well as receipt accounts. The principal general fund expenditure accounts maintained are:
a. Management of Lands and Resources
b. Wildland Fire Management
c. Payments in Lieu of Taxes
d. Oregon and California Grant Lands
2. Special Funds: The BLM maintains both special fund receipt accounts and special fund expenditure accounts. Collections made into special fund expenditure accounts are available receipts and are considered BLM revenue. These collections are included in amounts transferred to Treasury and are recorded as appropriations. Collections made into special fund receipt accounts are earmarked by law for a specific purpose but are not generated from a continuing cycle of operations. Receipts are deposited as collected. Funds deposited into special fund receipt accounts typically arise from sales of public lands and materials, sales of timber, fees and commissions, mineral leases, and other charges for services provided by the BLM to users of the public lands. Amounts deposited into special fund receipt accounts are subject to various distribution formulas as specified by law.
3. Revolving Funds: This type of fund is used to finance and manage a continuous cycle of business-type operations. The BLM maintains a Working Capital Fund (WCF) as a single administrative unit established to finance and account for services and commodities furnished to various program activities. The WCF was established in 1978 under Section 306 of the Federal Land Policy and Management Act of 1976 (Public Law 94-579) with an initial investment of $2,000 in appropriated funds. Since that time, additional equity has been provided through intragovernmental transfers or donations of inventories, capital equipment, and other assets. Transfers or donations are made without reimbursement to the donating activity. All additional income to the WCF has been generated through charges to BLM's programs or other government agencies. The services provided by the WCF include motor vehicles, stores, a sign shop, a Departmental forms center, and the collection and disbursement of receipts from surface management of the Naval Oil Shale Reserve under an October 2, 1987, memorandum of understanding with the Department of Energy. In addition, the WCF provides funding for travel advances and petty cash funds held by imprest fund cashiers.
In addition to the WCF, Helium Operations is funded through a public enterprise revolving fund. This fund was established with monies from the U.S. Treasury to manage the
federal helium program, which includes helium production, storage, conservation, and sales activities. Funding for current management of this program is provided by sales of helium. Pursuant to the Helium Privatization Act of 1996, production and refining of helium has been discontinued, but crude helium storage and sale of the helium stockpile will continue through January 1, 2015.
4. Trust Funds: The BLM maintains two trust accounts to carry out specific programs under trust agreements and statutes. The Land and Resource Management Trust Fund contains monies contributed by non-federal organizations for resource development, protection, and management; conveyance of lands omitted in original surveys; and public surveys requested by individuals. The Alaska Townsite Trustee Fund receives money from the sale of town lots to non-natives and is available to cover the expenses involved in selling and maintaining townsites.
5. Deposit Funds: These funds are maintained to account for receipts awaiting proper classification or receipts held in escrow until ownership is established, at which time proper distribution can be made. Refer to Note 11.
Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts and Standards For the Federal Government, requires agencies to report the full cost of programs, activities, and outputs. The standard includes requirements for accumulating and reporting costs on a regular basis for management use, establishing responsibility segments to match costs with outputs, determining the full cost of government goods and services, recognizing the costs of services provided between agencies within the government, and using appropriate costing methodologies to accumulate and assign costs to outputs.
The BLM has selected Activity Based Costing (ABC) as the methodology to accumulate cost data for effective management use and to assign costs to outputs. During fiscal year 1998, BLM management defined the Bureau's responsibility segments, analyzed activities and tasks in Montana, conducted a Bureauwide analysis for the Wild Horse and Burro program, and initiated a Bureauwide analysis of all programs to fully implement ABC during FY 99. The responsibility segments have been defined as follows:
Direct costs incurred in each of these activities are reported in the appropriate responsibility segment.
Administrative costs and various indirect costs are allocated to the responsibility segments in a manner appropriate for each type of cost.
The BLM maintains its accounting records on both an accrual accounting basis and a budgetary accounting basis. Under the accrual method, revenues are recognized when earned and expenses are recognized when incurred, without regard to the receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds. Significant interfund balances and transactions have been eliminated.
In response to SFFAS No. 4 requirements, the FY 1998 financial statements are grouped by BLM responsibility segments rather than by fund type. These responsibility segments have been selected by management to best coincide with BLM's strategic plan and mission. Comparative data for FY 1997 were developed by recasting last year's information into responsibility segment groups.
The BLM receives most of the funding needed to support its programs through annual, multiyear, and no-year appropriations that may be used, within statutory limits, for operating and
capital expenditures. Additional amounts are obtained through reimbursements for services performed for other Federal agencies, state and local governments, and the private sector. Finally, the BLM receives imputed financing from the Office of Personnel Management (OPM) for current and future pension and retirement benefits paid by OPM on behalf of the BLM and from the U. S. Department of the Treasury (Treasury) Judgement Fund for payment of settlements resulting from litigation against the BLM.
Revenues, such as those from reimbursable agreements, are recognized when earned. These revenues may be used to offset the cost of producing products or furnishing services, and to recover overhead costs.
Receipts are either available to the BLM for expenditure or are received by the BLM on behalf of others and are passed on to the Treasury or distributed to other governmental agencies. Gross receipts are reported as cash as received, while amounts billed but not yet received are included in both accounts receivable and undistributed collections. Bad debt expenses relating to those receivables are not considered to be a BLM expense; they are charged against undistributed collections. Transfers of receipts to Treasury and others are reported on the accrual basis. That portion of the transfers that will not be disbursed until the subsequent fiscal year is also included in undistributed collections. Thus, the net position of the BLM is not affected by these activities relating to collections, whether they be billings, bad debt expenses, or timing differences between the receipt of such collections and their subsequent disbursement.
Helium fund sales are authorized by Chapter 10 of Title 50 of the United States Code, enacted March 3, 1925, as amended by Public Law 86-777, dated September 13, 1960, entitled "Helium Act Amendments of 1960". Paragraph 167a(4) authorizes the Secretary to, "dispose of, by lease or sale, property, including wells, lands, or interest therein, not valuable for helium production, and oil, gas, and byproducts of helium operations not needed for Government use, except that property determined by the Secretary to be 'excess' within the meaning of section 3(e) of the Federal Property and Administrative Services act of June 30, 1949, as amended (40 U.S.C. 471 et. seq.); and to issue leases to the surface of lands or structures thereon for grazing or other purposes when the same may be done without interfering with the production of helium;..." Amounts accumulating in the fund in excess of amounts the Secretary deems necessary to carry out the Helium Act and contracts negotiated thereunder are paid to Treasury and credited against any amounts borrowed from Treasury.
The Helium Privatization Act of 1996 (P.L. 104-273), dated October 9, 1996, caused Interior to cease producing, refining, and marketing refined helium as of April 1, 1998, but authorized the storage, transporting, and withdrawing of crude helium and the maintaining and operating of crude helium storage facilities already in existence. Interior is further authorized to enter into agreements with private parties for the recovery and disposal of helium on federal lands, and to sell stockpile crude helium until the helium reserves are reduced to 600 million cubic feet.
The helium fund is authorized to retain all receipts, which include, but are not limited to, fees, penalties, interest, and administrative charges on past due receivables and proceeds from the sale of its assets. Fees, penalties, interest, and administrative charges are credited to a revenue account and are recorded as a financing source. Gains and losses are computed when assets are sold and recorded as a financing source or use of finances respectively.
The BLM does not maintain cash in commercial bank accounts. Cash receipts and disbursements are processed by Treasury. Fund balances with Treasury include appropriated, revolving, and trust funds that are available to pay current liabilities and finance authorized purchase commitments. Also included are various other receipt and expenditure funds. Cash balances held outside Treasury are not material. Further details on fund balances with Treasury are contained in Note 2.
Accounts receivable consist of amounts owed to the BLM by other federal agencies or by the public. Amounts earned through the provision of services to the public are not recognized as receivables until billed. Receivables from other federal agencies and certain state government agencies are recognized when the revenue is earned. The BLM recognizes bad debts arising from uncollectible accounts receivable by establishing an allowance for doubtful accounts based upon past experience in collecting accounts receivable and analysis of outstanding balances. See Note 3 for additional information concerning accounts receivable.
Except for Helium Operations, BLM's inventory consists of items that will be consumed in future operations. Inventory is held by the WCF for use in BLM's resource management programs and is also maintained for sign construction, employee uniforms, and the DOI forms function. The use of inventory accounts is declining in BLM; that inventory still on hand is stated at cost using the average cost method.
The helium inventory held for sale is the actual above-ground refined helium at the end of the fiscal year, plus an estimate of the amount of stockpile helium to be sold in the following fiscal year. The helium stockpile inventory is stored in a partially depleted natural gas reservoir. The cost to purchase the stockpile helium was $12.058 per mcf. The volume of helium is accounted for on a perpetual inventory basis. Each year, the amount of helium is verified by collecting reservoir data and using generally accepted petroleum engineering principles to calculate the volume. The calculated volumes support the volume carried in the inventory. At a reservoir abandonment pressure of 25 psia, 95 percent of the stockpile is deemed recoverable. The amount of helium that is eventually recovered will depend on the future price of helium and the ability to control the mixing of native gas and stockpile helium. Gas and storage rights for the storage of helium are recorded at cost. A depletion allowance is computed annually to record the gas consumed in the processing of helium for sale.
Helium Operations' operating materials and supplies consisted of tools, supplies, small machinery, etc., consumed in the production and extraction of helium. These items were written off during fiscal year 1998 pursuant to the discontinuation of operations.
Except for Helium Operations, BLM's inventory is not held for sale, nor is any of the inventory balance held in reserve for future use or sale. There is no excess, obsolete, or unserviceable inventory, nor is there any inventory held for repair. The BLM does not hold any other related property, including forfeited property, foreclosed property, seized property, commodities, or stockpile materials. Note 4 provides more information on BLM's inventory.
This category consists of acquired lands; structures, facilities and improvements; automated data processing (ADP) software; equipment and vehicles; construction in progress; and property being held pending disposition. Prior to FY 1995, roads, trails, and bridges were also included in this category.
Statement of Federal Financial Accounting Standards (SFFAS) No. 6, Accounting for Property, Plant, and Equipment, and SFFAS No. 8,
Supplementary Stewardship Reporting, have been issued by the Federal Accounting Standards Advisory Board. The standards recommend different accounting treatments for different types of property, plant, and equipment (PP&E), and provide for a distinction between general PP&E and stewardship PP&E. The former are PP&E used to provide general government services or goods. The latter include stewardship land-all land held by the Federal government that is not acquired for or in connection with an item of general PP&E-and heritage assets, including PP&E that have historical or natural significance.
The standards recommend that Federal entities establish appropriate capitalization thresholds. The BLM has established a capitalization threshold of $250 per facility/site for real property components of general PP&E. Prior to FY 1995, the BLM had no minimum capitalization threshold for real property. The capitalization threshold for personal property remains unchanged. The standards provide for capitalized property to continue to be reported on the Statement of Financial Position. PP&E that are not capitalized-because they are under the capitalization threshold, or because they are stewardship PP&E-are to be expensed in the period of acquisition. The standards require a separate stewardship report to provide relevant information regarding stewardship PP&E. The BLM started providing the stewardship report in the FY 1996 Annual Report and have improved it each year. There is a complete stewardship report in the fiscal year 1998 annual report.
Capitalized property and equipment are recorded as follows:
1. General PP&E real property is capitalized at cost, if the aggregate cost of the site/facility is $250 or more. Acquired land associated with capitalized assets is recorded separately from the structures, facilities, and improvements. Structures such as buildings that are used by the BLM but administered by the General Services Administration or other federal agencies are not recognized as BLM assets.
2. Purchased ADP software is capitalized at cost if the acquisition cost is $5 or more and the estimated useful life is 2 years
or more. Internally developed software is not capitalized.
3. Equipment and vehicles are capitalized at cost if the acquisition cost is $5 or more and the estimated useful life is 2 years or more.
4.,Costs are accumulated in a construction in progress account for capitalizable general PP&E under construction or being acquired in incremental stages until the property is completed or totally acquired. At that time, the property is transferred to the appropriate asset account(s).
Depreciation for WCF vehicles and heavy equipment is recorded using the straight-line method, based upon useful lives ranging from 2 to 20 years with a 20 percent residual value.
Depreciation for non-WCF equipment and purchased ADP software is based on useful lives of up to 30 years, with a residual value of 10 percent. Except in the helium fund, prior to FY 1997, the BLM did not depreciate structures, facilities, and other improvements. Beginning in FY 1997, however, the BLM has initiated depreciation for all capitalized real property, and has recorded the current year depreciation as well as the depreciation applicable to prior periods.
The basis for capitalization of donated property and equipment is the estimated fair market value.
Information on property and equipment values is found in Note 5.
Liabilities represent the amount of monies or other resources that are likely to be paid by the BLM as the result of transactions or events that have already occurred. However, no liability can be paid by the BLM absent an appropriation. Liabilities for which an appropriation has not been enacted are, therefore, classified as liabilities not covered by budgetary resources, with no certainty that the appropriations will be enacted. In addition, BLM liabilities arising from sources other than contracts can be abrogated by the Government, acting in its sovereign capacity.
Debt to Treasury is a liability of the Helium Fund. Borrowings occurred at various dates. Amounts borrowed became due 25 years from the date the funds were borrowed and are now past due.
Net worth debt is the amount due for the net capital and retained earnings of the Helium Fund established under 50 U.S.C. 10, Section 164, enacted March 3, 1925 (prior to amendment by the Helium Act Amendments of 1960), as determined by the Secretary as of September 13, 1960, plus any monies expended thereafter by the Department of the Interior from funds provided in the Supplemental Appropriation Act, 1959, for construction of a helium plant at Keyes, Oklahoma.
Additional borrowing from Treasury refers to funds borrowed under 50 U.S.C. 10, Section 167j, which authorizes borrowings to acquire and construct helium plants and facilities and for other related purposes including the purchase of helium.
Interest on borrowing is compound interest on the debt described above that has not been repaid to Treasury. While the debt was current, interest was calculated annually at rates determined by the Secretary of the Treasury, taking into consideration the current average market yields of outstanding marketable obligations of the United States having maturities comparable to the investments authorized. The interest rate on the net capital and retained earnings was determined as of September 13, 1960, and the interest rate on additional borrowing was determined as of the time of each borrowing. The U.S. Treasury short-term borrowing rate was used to calculate the annual interest expense while the debt was past due. With the passage of the Helium Privatization Act of 1996, Public Law 104-273, enacted October 9, 1996, no further interest expense occurs. The Act defines the amount repayable to the United States as all funds required to be repaid as of October 1, 1995, with no further interest accruing on the debt.
Additional information on debt to Treasury appears in Note 8.
Amounts associated with the payment of annual leave are accrued while leave is being earned by employees, and this accrual is reduced as leave is taken. Each year the balance in the accrued annual leave account is adjusted to reflect current pay rates. To the extent current or prior year appropriations are not available to finance annual leave, future financing sources will be used.
Sick leave and other types of leave are expensed as taken because they are nonvesting in nature.
The BLM is a party to various administrative proceedings, legal actions, environmental suits, and claims brought by or against it. Contingent liabilities are recorded in the accounting records when the event potentially leading to the recognition of a liability is probable, and a reliable estimate of the scope of the potential liability is available. Further information on contingent liabilities is found in Note 15.
Nearly half of the BLM's employees participate in the Civil Service Retirement System (CSRS), to which the BLM makes matching contributions. The BLM does not report CSRS assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to its employees. Reporting such amounts is the responsibility of the Office of Personnel Management (OPM).
On January 1, 1987, the Federal Employees Retirement System (FERS) became effective pursuant to Public Law 99-335. Most employees hired after December 31, 1983, are automatically covered by FERS and Social Security. Employees hired prior to January 1, 1984, were authorized to elect to join FERS and Social Security or to remain in CSRS. FERS offers a savings plan to which the BLM automatically contributes 1 percent of pay and matches any employee contribution up to an additional 4 percent of pay. For employees in FERS, the BLM contributes the employer's matching share for Social Security; the BLM contributes the employer's matching share of Medicare, 1.45 percent, for both FERS and CSRS employees.
Effective in FY 1997, the BLM recognizes its share of the expense of employee benefit programs and future pension outlays incurred by OPM and the imputed financing source applicable to the expense. Further information on imputed financing is available in Note 20.
The BLM has entered into some lease arrangements that potentially qualify as capital leases. However, the BLM has historically not considered lease arrangements for inclusion as assets. The dollar value of leases that could qualify as capital leases is not considered material.
The components of Net Position are defined as follows:
1. Unexpended appropriations include undelivered orders and unobligated balances; the latter may include both available and unavailable amounts.
2. Cumulative results of operations is comprised of 1) the difference between revenues and expenses, 2) the net amount of transfers of assets in and out without reimbursement, and 3) donations, all since inception of the fund(s).
The BLM purchases or constructs infrastructure assets such as buildings, dams, recreational facilities, administrative facilities, and transportation systems consisting of roads, trails, and bridges. These assets permit the enjoyment and use of the public lands for recreation, revenue generation, and other purposes. There is, however, a significant amount of deferred maintenance resulting from a lack of sufficient funding to conduct scheduled repair and preventative maintenance.
The BLM defines deferred maintenance as maintenance which was not performed when it was scheduled, and has been deferred to a future period. The impact of maintenance not being timely performed is the potential for a decline in the condition and/or functionality of the facility. The BLM's deferred maintenance backlog does not preclude the public lands from being used and managed; however, BLM management believes that increased maintenance would enhance public enjoyment of the public lands, preserve invested capital, and reduce liability.
According to BLM policy, deferred maintenance is recognized for real property only. Personal property is either maintained and repaired as needed or is disposed of, and is not subject to deferred maintenance. Assets subject to deferred maintenance are grouped in five categories: 1) roads and trails, 2) recreation sites, 3) administrative sites, 4) dams, and 5) bridges. Estimated costs of correcting deferred maintenance are based on condition assessment surveys, consistent with Departmental policy, and each of the categories is reviewed and updated on a cyclical basis. Costs are estimated based on either the costs to the BLM for corrective measures to be taken by employees, or the cost of executing a contract for the maintenance. Overhead is not included in the estimated cost. The scope and nature of certain property, such as roads and trails, is such that annual condition assessments would never be feasible, because the volume and remoteness of many of these assets limits how many can be assessed in a year.
Financial statement information and budgetary information are both obtained from the same systems of records for very different purposes, and accordingly do not always appear to agree. In the case of deferred maintenance, the notes to the financial statements disclose the entire estimated deferred maintenance needs as of September 30, 1998. Budget requests are for future funding and recently have been limited to the combined highest priority critical health and safety and environmental protection deferred maintenance and capital improvement needs of the BLM. The deferred maintenance funding contained in the budget request is included within the total deferred maintenance reported in the notes to the financial statements. See Note 25 for additional information concerning deferred maintenance.
Comparative data for the prior fiscal year is presented in order to provide an understanding of changes in BLM's financial position and operations. Implementation of SFFAS No. 4 introduced reporting by responsibility segments and necessitated a restatement of FY 1997 data so that valid comparisons could be made between FY 1997 and FY 1998. Footnote disclosure of financing data and the Combined Statement of Budgetary Resources are new in FY 1998 and comparative data is not required. Except for the Combined Statement of Budgetary Resources, all statements are on a consolidated basis and use eliminating entries to avoid overstatement of balances caused by intrabureau transactions.
U.S. Government cash is accounted for on an overall consolidated basis by Treasury. The balances shown on the Consolidated Comparative Statements of Financial Position represent BLM's right to draw on Treasury for valid expenditures. The balances consist of general fund receipt accounts, general fund expenditure accounts, trust funds, revolving funds, special fund receipt accounts, special fund expenditure accounts, and deposit funds. Refer to Note 1(B). Fund balances as shown on BLM's records are reconciled periodically with Treasury's records.
Accounts receivable represent amounts owed to the BLM. Entity accounts receivable represent amounts that the BLM has authority to use. Entity intragovernmental accounts receivable represent amounts due from other federal agencies, while entity governmental accounts receivable represent amounts due from non-federal entities. Non-entity accounts receivable are amounts that are generated by BLM's programs but are not available to the programs. All of the non-entity accounts receivable represent amounts due from non-federal entities.
Beginning in FY 1997, all capitalized real property is being depreciated. Previously, only Helium Operations was recording depreciation expense for real property. Accumulated depreciation was calculated for all real property from the time of acquisition through September 30, 1997. The portion applicable to FY 1997 is recorded as depreciation expense, and the portion prior to FY 1997 is recorded as a prior period adjustment. In FY 1998, a significant effort was made to move previously completed projects out of construction in progress and record them as real property, and to recognize depreciation starting from the date the assets were placed in service. This resulted in a prior period adjustment of $2,894. Additional discussion of these adjustments may be found in Notes 1(H) and 21.
Unmatured timber sales contracts represent the obligation and the right of contractors to cut specific quantities of timber within a defined time period at a set price. These contracts represent
future revenue to the U.S. Government that will materialize in future accounting periods as contracts are fulfilled by the cutting of timber. Also see Note 12.
For financial reporting purposes, the BLM has not recognized the value of negotiable securities or certificates of deposit pledged to guarantee performance of contracts. These instruments are accepted in lieu of bond coverage in the following programs: solid or fluid energy minerals extraction (oil, gas, coal, etc.), rights-of-way on the public or other lands, and certain contracts (performance bonds). Interest earned is paid to the owner of the security or certificate of deposit and is not available to the BLM. At September 30, 1998, the value of these securities was $5,659; at September 30, 1997, the value was $4,788. Since these assets are not available to the BLM unless a customer defaults on an agreement, they are not recognized as BLM assets or liabilities.
A liability is recognized for the salaries and benefits earned by employees but not yet paid at the close of the fiscal year. At September 30, 1998, accrued payroll liabilities were $30,312, primarily representing 13 days of earned but unpaid compensation for BLM's workforce. At September 30, 1997, accrued payroll liabilities were $25,165, primarily for 12 days of earned but unpaid compensation.
Undistributed collections represent amounts collected into unavailable special receipt funds that have not yet been transferred to other funds.
The BLM processes collections from various sources for activities related to public land administration. At any given time, the BLM may have collections that have not been specifically classified. These amounts are held in suspense pending further classification or resolution.
Deferred credits consist of unmatured timber sales contracts, advances from customers of the helium fund, and special fund billed amounts. Unmatured timber sales contracts are described in Note 6. Customer advances in the helium fund represent advance payments on helium purchases and storage contracts. Special fund billed amounts are a combination of advance bills for anticipated obligations, as well as actual bills for obligations already incurred.
Workers and unemployment compensation payable represents the Department of Labor estimate of these liabilities.
The BLM accrues annual leave not covered by budgetary resources. Prior to FY 98 this expense was allocated to the two funds with the most planned labor activity. Beginning with fiscal year 1998, the expense is allocated to all funds which have personnel costs, in the ratio of those costs. The accrual is updated annually based on actual labor hours and current pay rates.
Judgements and Claims: The BLM is a party to a number of lawsuits where the plaintiff is seeking monetary damages. In the opinion of BLM management and legal counsel, a reasonable estimate of the potential outcome or liability of these claims cannot be made. The lawsuits involve a variety of issues, including lost revenues when timber contracts were suspended because of environmental issues, injuries or death which occurred on BLM managed land or roads, issues regarding takings and suspension of mining claims, and other issues. The resultant outcomes will not materially affect BLM's future financial condition. The U.S. Treasury's Judgement Fund will likely bear many of the costs incurred to pay judgements or settlements.
Environmental Cleanup: The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and the Resource Conservation and Recovery Act require Federal agencies to report sites where hazardous wastes are or have been stored, treated, or disposed of, and require responsible parties, including federal agencies, to clean up releases of hazardous substances. The BLM faces major challenges in cleaning up hazardous substance releases on the public lands. Virtually all of these releases arise from non-BLM and non-federal uses of the lands, such as illegal dumping, transportation spills, landfills, mineral development operations, pipelines, and airports. Substantial portions of the costs of cleanup will be incurred by, or recovered from, responsible parties.
The BLM has fifteen small emergency response actions in progress as of September 30, 1998, which will require future funding. This type of action is usually mitigated without performing a study and, generally, the responsible party is not found, which results in BLM bearing the expense. Future funding required as of September 30, 1998, is estimated at $1,126 to $1,156. At September 30, 1997, the estimated future funding of small sites was $978.
Larger sites require one or more studies to determine the scope of the contamination and the possible cleanup techniques. Cleanup costs are inestimable until the study is complete. When the studies are complete, several cleanup options are generally suggested with the approximate range of cost of each, and BLM management determines the most appropriate course of action.
In these larger sites, efforts are made to identify and locate potentially responsible parties who are held liable for the cost of studies and cleanup. Frequently, litigation is required to enforce payment. As of September 30, 1998, approximately 25 studies were underway or were planned, with future costs estimated between $4,586 to $4,836. The BLM will probably pay $1,426 to $1,676 of that total. At September 30, 1997, the BLM had studies underway or planned with estimated future costs of $3,000, of which BLM expected to pay approximately $1,252.
Studies have been completed at 41 sites, and at September 30, 1998, future cleanup costs are estimated at $26,586, with BLM expecting to pay $10,929 of that total. At September 30, 1997, studies had been completed for 26 sites with an estimated cleanup cost of $20,000, of which BLM expected to pay $4,395.
In addition to the above, the BLM is aware of 73 sites where no work has been done at all and where we have insufficient information to make any estimates at all regarding the actions necessary to mitigate the site or the likely costs.
Abandoned Mine Lands: According to a BLM study, in an area of 7.4 million acres, almost 7,000 Abandoned Mine Land (AML) sites were verified containing over 6,600 safety hazards. During the period 1993 - 1996, an abatement of public safety hazards occurred in 537 sites. The report estimated that over 70,000 AML sites could exist on BLM-administered land. The BLM faces a significant exposure to lawsuits or claims for damages resulting from injury or death at one or more of these sites. We have no basis for estimating the future financial impact of this situation.
Pursuant to OMB guidance, the presentation of Federal Employees' Compensation Act actuarial liabilities for workers' compensation benefits is a liability based on Department of Labor computations. This liability includes the expected future liability for death, disability, medical, and other approved costs relating to current compensation act claims.
In fiscal year 1997, the actuarial data was not provided in time for inclusion in the BLM financial statements; the liability was recognized in the Interior consolidated statements. The fiscal year 1998 computation showed a negative expense occurring between 1997 and 1998. Accordingly, the fiscal year 1998 actuarial estimate of $52,478 is presented as a liability and a prior period adjustment.
Unfunded expenses consists of four categories: the change in accrued annual leave for BLM personnel, the change in the liability for workers and unemployment compensation, the probable, reasonably estimable costs from pending litigation, and the total probable BLM expense for environmental cleanup.
Statement of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting for Liabilities of the Federal Government, establishes accounting and reporting standards for liabilities relating to the federal employee benefit programs, including retirement, health benefits, and life insurance. The Office of Personnel Management (OPM) is responsible for paying the cost of these benefits, and prior to FY 97 the employing agencies had not been recognizing any of the cost.
Under the provisions of SFFAS No. 5, employing agencies must recognize the cost of pensions and other retirement benefits during their employees' active years of service, and must recognize the current annual cost of the Federal Employee Health Benefit (FEHB) program and the Federal Employee Group Life Insurance (FEGLI) program.
OPM actuaries have provided the employing agencies with rates for calculating the estimated cost of pension and other retirement benefits. They have also provided rates for use in calculating the cost of FEHB and FEGLI. The Department provided labor cost data for the BLM to use in applying the OPM rates to calculate the total imputed cost of these benefits. While BLM funds are not used to pay the cost of these personnel benefits, these are a BLM operating expense which must be reported to accurately reflect the cost of doing business. The use of OPM funds for this purpose is an imputed source of financing for the BLM.
The Department of the Treasury Judgement Fund is another imputed source of financing, included for the first time in fiscal year 1998. The BLM is a party to numerous lawsuits where the plaintiff is seeking monetary damages. In many cases, when the BLM is required to pay the plaintiff, either as a result of settlement or adjudication, payment is actually made from the Judgement Fund rather than BLM appropriations. Treasury provides agencies with information regarding the month and amount of payments actually made.
Several prior period adjustments are recorded in the fiscal year 1998 financial statements. These consist of amounts that would have been recorded in the fiscal year 1997 or prior year statements had the data been available, or they represent changes, based on subsequent information, to amounts that were reported in the FY 97 or prior year statements.
When the FY 97 statements were prepared, the actuarial estimate of future costs for workers' compensation was not available. This estimate would have been recorded as an unfunded liability at the end of FY 97, and the FY 98 statements would have reflected a $2,215 decrease in the estimate. The net actuarial estimate for workers' compensation has now been recorded as a prior period adjustment.
In the fiscal year 1997 statements, the BLM reported a potential future outlay of $7,900 based on our lawyers' best estimate of the outcome of pending litigation. Our lawyers have advised us this year that the likely outcome of current pending litigation, including the cases which comprised the amount reported in the fiscal year 1997 statements, is impossible to predict. Based on the more current information, we have made a prior period adjustment to reverse the liability recorded in FY 97.
The BLM responded to a Management Letter issue regarding construction projects not being closed out timely. During FY 98, the BLM gathered completion reports for a number of construction projects and processed the cumulative costs out of the construction in progress account and into asset accounts, making the appropriate corresponding entry into the real property module. Depreciation was calculated from the date the assets were actually placed in service through the current period. In many cases, portions of the depreciation were applicable to prior periods, and have been recorded as such.
In FY 1997, all capitalized real property was being depreciated, but prior to that, only Helium Operations was recording depreciation expense for real property. During FY 1997, accumulated depreciation was calculated for all real property from the time of acquisition through September 30, 1997. The portion applicable to FY 1997 was recorded as depreciation expense, and the portion prior to FY 1997 was recorded as a prior period adjustment.
The BLM has entered into some lease arrangements that potentially qualify as capital leases. However, the BLM has historically not considered lease arrangements for inclusion as assets. The dollar value of leases that could qualify as capital leases is not considered material.
The BLM also has operating leases for various types of space acquired through the General Services Admin-istration (GSA) and directly from commercial sources. These leases typically have terms up to 20 years and most contain provisions for cancellation prior to the full term of the lease. GSA space leases are cancellable with 120 days notice and accordingly do not meet the criteria for being reported as a future liability. The future lease payments due, as shown below, are only for space leased from commercial sources.
Government vehicles are acquired from GSA for indefinite periods of time frequently exceeding one year, but the regulations governing the acquisition and use of these vehicles do not meet the definition of a lease. Accordingly, GSA vehicles are not included in future lease payments due. Leased equipment in the BLM constitutes an immaterial amount and is not included below.
Future Operating Lease Payments Due as of September 30, 1998:
The Helium Privatization Act of 1996 (Public Law 104-273), enacted October 9, 1996, directs the privatizing of the Department of the Interior's Federal Helium Refining Program. Under this law, Interior ceased producing, refining, and marketing refined helium as of April 1, 1998. Interior is authorized to store, transport, and withdraw crude helium and maintain and operate crude helium storage facilities in existence on the date of enactment. The Department may also enter into agreements with private parties for the recovery and disposal of helium on federal lands and may grant leasehold rights to any such helium. The sale of stockpile crude helium will commence no later than January 1, 2005, and will continue until January 1, 2015, at which time the helium reserves should be reduced to 600 million cubic feet.
SFFAS No. 7, Accounting for Revenue and Other Financing Sources, established the Statement of Financing and required that it be prepared and audited beginning with the FY 1998 financial statements. Subsequent guidance from OMB indicated that this information could be presented as a note, rather than as a principal statement, in FY 98. Unlike other statements, the Statement of Financing is prepared at the reporting entity level rather than at the responsibility segment level. Comparative data is not required for the FY 1998 statement, but is required for subsequent years.
The intent of the Statement of Financing is to facilitate the reconciliation of the financial net cost of operations with obligations of budget authority. Because the accrual-based measures used in the Statement of Net Cost differ from the obligation-based measures used in the Statement of Budgetary Resources, this reconciliation is needed to understand the differences.
The Statement of Financing consists of four sections: 1) resources used to fund activities; 2) resources used to fund items not part of the net cost of operations; 3) components of net cost of operations that do not require or generate resources during the reporting period; and, 4) components of net cost that require future funding. The statement starts with budgetary and non-budgetary resources, subtracts items that consume resources without affecting net cost of operations, and adds back net cost items that do not affect budgetary resources and items that require future funding.
The BLM purchases or constructs infrastructure assets such as buildings, dams, recreational facilities, administrative facilities, and transportation systems consisting of roads, trails, and bridges. These assets permit the enjoyment and use of the public lands for recreation, revenue generation, and other purposes. There is, however, a significant amount of deferred maintenance resulting from a lack of sufficient funding to conduct scheduled repairs and preventative maintenance.
The BLM tracks infrastructure assets in two systems: the Transportation Information Management System (TIMS) for Oregon and California Grant Lands roads, and the Facilities Inventory Maintenance and Management System (FIMMS) for all other real property. FIMMS encompasses approximately 90 percent of the total deferred maintenance in the BLM. The cost of correcting deferred maintenance is a data element in each system and is estimated based on condition assessment surveys. Assets subject to deferred maintenance are grouped in five categories: 1) roads and trails, 2) recreation sites, 3) administrative sites, 4) dams, and 5) bridges.
BLM personnel perform condition assessment surveys on a cyclical basis by category and update FIMMS with the current information. In fiscal year 1998, BLM performed condition assessment surveys for recreation sites, cyclic dams, and bridges. In addition, the BLM expended considerable resources to up-date and document as much data as possible in the other categories, which have not had condition assessment surveys in recent years.
FIMMS was originally designed to be a tracking system rather than a financial system and, accordingly, cost estimates entered in previous years were for the use of engineers and were not intended for budget formulation or financial reporting use. During fiscal year 1998, the BLM performed a significant number of condition assessments to enhance the data integrity in FIMMS by having more current data supported by written documentation. As a result, the data was improved, but the work needed to fully document and support the total deferred maintenance funding requirements of the BLM will take several years.
In this initial effort, a number of inconsistencies were identified which will require BLM management to issue policy guidance and which preclude reporting a dollar value of deferred maintenance needs with any degree of confidence. FIMMS contains a dollar estimate of $258,000 of deferred maintenance needs, but there are conditions causing overstatements and other conditions causing understatements which make the true number impossible to estimate with any assurance. Overestimates were caused by data up-dates which added to prior estimates rather than replacing them, inappropriate inclusion of capital improvement costs with deferred maintenance, and inclusion of the cost of work to come into compliance with the Americans With Disabilities Act (ADA), which the Department has identified, at different times, as part of deferred maintenance and not part of deferred maintenance.
Understatement of deferred maintenance needs include cases where no condition assessments have been done, so deferred maintenance was not recorded, and cases where FIMMS has old data which does not reflect subsequent deterioration which increases the cost of restoration or the inflationary impact on the costs.
FIMMS is operated independently as a separate application in each of the states. The BLM Protection and Response Group led the effort in fiscal year 1998 to improve the data in FIMMS, and has developed a long-term plan to address the system needs of FIMMS, to assure consistent policies and procedures are in place, and to develop and record fully supported, auditable deferred maintenance data.
As of September 30, 1998, the BLM estimates that the total amount of
deferred maintenance could be within the range of $100,000 to $500,000.
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