Audit Division
Audit Summary

Department of Conservation
and Natural Resources
Division of Forestry
Report LA96-4

Results in Brief

Serious financial management and internal control problems plague the Nevada Division of Forestry. As a result, NDF failed to collect at least $260,000 in reimbursable costs from federal agencies since 1993, because (1) it has not adjusted its billing rates to recover the state's costs, and (2) its systems and procedures are ineffective and unreliable. Furthermore, inappropriate accounting practices and other errors, led to improper or questionable expenditures of at least $250,000 during the last 2 years. These problems also impair the accuracy and reliability of information prepared by NDF about its financial operations. In addition, because of poor management controls, NDF violated state budgetary and accounting laws, circumvented state purchasing requirements, and misapplied state personnel regulations.

These problems stem from significant management control weaknesses and a lack of qualified financial management personnel. However, NDF could have prevented many of these problems if it had implemented recommendations from prior audits. Recently, the Agency has taken some actions to correct these long standing problems, but more steps are needed to ensure allowable costs are recovered, accounting systems provide accurate and reliable information, and state laws and regulations are followed.

Principal Findings

1. Because NDF has not periodically adjusted its employee overhead billing rates, it failed to recover $110,000 in federal reimbursements during the period covered by our audit. NDF's employee overhead billing rate of 15% has not been revised since the 1970's, despite significant increases in employee overhead costs. In 1994, for instance, NDF's overhead costs averaged 37% of employee wages. (page 11)

2. We estimate NDF could have recovered additional federal reimbursements of $95,000 over the last 2 years if proper aircraft and vehicle billing rates had been used. But, since NDF has not periodically reviewed or adjusted its equipment billing rates, they fall short of recovering the state's costs. In addition, NDF could not provide adequate documentation to support many of the rates it charges. (page 12)

3. Because of flaws in NDF's billing systems and procedures, some allowable costs were not identified and others were not properly recorded or correctly billed. For instance, NDF lost about $10,000 over the last 2 years because it did not bill federal agencies for SIIS coverage on some firefighters. Unrecovered costs due to billing errors found during our testing totaled more than $34,000. However, based on the number of errors we found, total unrecovered costs are likely much more. (page 15)

4. NDF's billing process not only results in numerous errors, it causes unnecessary delays. On average it took NDF nearly 3 months to prepare federal billings. In addition, many billings were rejected or returned for corrections, further delaying federal reimbursements. Untimely reimbursements often leave NDF without funds to pay fire suppression costs, and result in delayed payments to vendors. (page 17)

5. NDF improperly accounted for a number of transactions by charging expenses to wrong accounts, and by crediting revenues to wrong accounts and to the wrong fiscal year. As a result of inappropriate accounting entries and other recording errors, NDF spent $125,000 that should have reverted to the State General Fund in fiscal year 1993. Improper accounting practices also resulted in inaccurate and unreliable information about the Division's financial activities. (page 20)

6. Because NDF had not established proper controls over charges to its Fire Suppression Account, we noted a number of improper and questionable charges to the account. We estimate as much as $120,000 may have been improperly charged to the account over the last 2 years. (page 23)

7. The failure to establish adequate management controls led to violations and circumventions of state laws and regulations, and the loss and misuse of state resources. Examples include violating state budget and purchasing laws to obtain unauthorized computer equipment, failing to comply with terms of a federal agreement resulting in unreimbursed firefighting costs of $21,000, and making incorrect payments to employees, because of numerous payroll reporting errors. (page 25)