Forest fire fighting is a major responsibility for the Department’s Land and Forest Service
Fire fighting operations are the responsibility of the Department’s Land and Forest Service (the Service). Fire fighting operations are managed through Edmonton headquarters, four regional offices, and seventeen area or district offices across the Province. Responsibility for the financial administration of fire operations is distributed amongst these central, regional, and area offices. The regional and area offices, in conjunction with the central Edmonton warehouse, maintain an estimated $70 million in equipment and inventory. During the peak of the season, the fire fighting effort can involve several thousand people, including contracted personnel, full time staff, and seasonal workers.
There have been changes in the way the Service fulfills its fire fighting duties
In recent years, downsizing, decentralization, and new computerized systems have had an impact on the management of fire operations. Downsizing within the Department, in conjunction with the contracting of key services by private sector firms, means that many fire fighting activities are no longer delivered directly by Departmental staff. With decentralization, many of the operational and financial functions previously handled centrally have migrated to the regions. New computer systems provide the Service with access to and analysis of Province-wide information quickly and efficiently.
The severe 1998 fire season highlighted a number of operational weaknesses
The 1998 fire season was one of the most extreme in Alberta history. The Service dealt with 1,696 fires that consumed 734,815 hectares of Alberta’s timber. For the 1998 fire season, Environmental Protection’s fire fighting costs exceeded $230 million. By comparison, the average annual fire fighting cost over the last five years had been
$87 million. The severity of the fire season tested all aspects of the Service’s operations and highlighted several areas that could be improved. For example, the 1998 fire season was expected to be severe, yet fire stations were not fully manned before major fires broke out. Fire fighting teams were not manned and ready at the beginning of the season.
Arrangements for infrastructure such as transportation, base camps, and equipment were not in place at the beginning of the fire year.
The Service has
undertaken initiatives to improve field operations
Recognizing that it can improve its fire fighting operations, the Service has sought the input of stakeholders, peers, and consultants to review its 1998 performance. For example, under the direction of a joint Service-industry steering committee, an extensive external review of fire fighting is underway. In addition, the Service has instituted a number of internal committees to review specific aspects of fire fighting. As part of my annual audits, I will be monitoring the progress, findings, and results of these reviews.
My work focuses on financial administration systems
My examination focussed on the systems that support the financial administration of the forest fire fighting activity, such as business planning and budgeting, personnel and training, accounting controls, contract management, and the recovery of expenses.
Many financial
weaknesses noted in 1998 have been corrected for the 1999 fire season
As was the case with its operations, the Service encountered a number of problems with its financial administration of fire fighting in 1998. In many cases I have been able to confirm that administrative weaknesses have been corrected in time for the 1999 fire season. For example, in 1998 very few contracts with key suppliers were in place at the beginning of the fire season. The absence of contracts exposed the
Service to volatility in the rates charged by contractors negotiating on short notice in a busy season. However, in 1999 this situation has been corrected and contract
arrangements were in place before the start of the fire season.
My recommendations may apply to operational matters as well
In my recommendations regarding financial administration, I have targeted strategic, policy, and procedural preparedness by the Service and the Department. I believe that these processes establish a structure for sound financial administration. However, as these recommendations are strategic in nature, they may also apply to the operational efficiency and effectiveness of fire fighting. I encourage the Department to consider their impact on functions more broadly defined than financial administration.
Budgeting fire fighting
Special warrants were used in the past
Prior 1994, forest fire fighting was budgeted within the Department budget at approximately $12 million per year.
At that time, the average fire season cost about $50 million, so there was understood to be a funding shortfall before the fiscal year began. The shortfall would then be funded by Special Warrants that were issued through the year.
The Environmental Protection and
Enhancement Fund now funds fire fighting
In 1994, the government changed its funding strategies. As Special Warrants would no longer be used to finance the fighting of fires, the Environmental Protection and
Enhancement Fund was used to provide funding flexibility within the Ministry. The Environmental Protection and Enhancement Act states that the Fund can be used “with respect to any matter that is under the administration of the Minister”. A transfer of revenues from the Department of Environmental Protection finances the Fund. Each year, the Department calculates a “base revenue”, which is the total budgeted revenues less budgeted dedicated revenues. Actual revenues in excess of the base revenue are transferred to the Fund. In 1998-99, the transfer totaled $79 million.
The Ministry’s fire fighting budget has been set at $50 million
In 1994, Environmental Protection and Treasury also agreed to budget for an average fire year. The ten year average cost was used to establish a Ministry-wide fire fighting budget of approximately $50 million. Within the Ministry, the
Department would budget the annual pre-suppression costs, which total about $38 million per year. Pre-suppression costs are essentially the fixed costs required to prepare for the upcoming fire season, including such items as water bomber contracts. The Fund would then budget for the remaining fire suppression costs of about $12 million. This arrangement was still in place for the 1998-99 fiscal year, with dollar values unchanged from 1994.
Annual fire fighting costs in excess of $50 million are treated as emergency expenditures in the Fund
The Department has stated that forest fire fighting is, by its nature, an emergency activity. Under the current conditions, the base $50 million Ministry-wide budget tends to be expended very early in the fiscal year. As a result, the Fund then finances fire fighting operations through the rest of the year without relying on Legislative supplemental estimates or special warrants. Expenditures from the Fund are
governed by the review exercised by Treasury Board and the Standing Policy Committee. Fire fighting costs are reported in the financial statements of both the Department and the Fund. The total Ministry fire fighting cost is not specifically reported in the Ministry financial statements.
Budgeting annual fire fighting costs
Recommendation No. 27
It is recommended that the Department of Environment budget for the expected annual fire fighting costs based on the most current information. Further, it is
recommended that the fire fighting budget be subject to legislative approval, including approval for any
supplemental estimates required during the year.
In my view, the fire fighting budget should be controlled by the
Legislative vote process
The Fund provides the opportunity for expenditure without legislative approval. It is a fund to be distributed at the discretion of the Minister, subject to guidelines established by Treasury Board. However, I believe that the controls embodied in the annual Legislative estimate and vote process are important to the accountability process. As well, given that the Ministry is required to operate financially within centrally approved financial parameters, I question whether the separate Fund arrangement offers significantly greater flexibility than budgeting through the Legislative vote process. The Department has the ability to forecast a severe
fire season early in the fiscal year, so preparing for
supplemental estimates should not be a compelling reason to avoid the Legislative process. If the fire season turns out to be less expensive than expected, any unused funding could be allowed to lapse.
Best estimates for the year should form the budget request
I also believe that the Department’s annual fire fighting responsibilities are routine in the sense that the Department must address these challenges each year. Prudent
management and accountability dictate that an organization should budget for its expected annual expenditures based on the most current information available. To calculate its expected expenditures, the Department has the benefit of recent historical results plus sophisticated predictive capacity based on systems that monitor and analyze weather,
vegetation, and other significant forest fire factors. I recognize that the ability to predict the severity of a fire season is not synonymous with predicting the eventual actual costs for the fire season. As well, I understand that the timetable for budget preparation means that initial budgets will often be best estimates only. Nevertheless, I believe that the process can support more accurate budgeting. In the past few years, the Ministry’s overall $50 million fire fighting budget has only been sufficient to fund a few months’
activities. The average of the last five years’ actual fire fighting costs has reached $87 million. The most current results are even higher. In 1998-99, fire fighting costs exceeded $230 million; for 1999-2000, they are expected to reach $170 million.
Upcoming replacements and upgrades should also be budgeted
Of increasing concern in recent years, the Department needs to plan for the replacement or upgrade of its fire fighting infrastructure. For example, the Department feels that community airports need to be upgraded and aircraft and equipment replaced. These types of expenditure should also be budgeted annually as they support the essential service.
Financial reporting issues can also be resolved through Departmental budgeting
Budgeting through the Department would also offer a
solution to existing financial reporting issues. As mentioned, there is no financial statement that reports the total cost of fire fighting. As well, the Fund purchases assets (both capital and inventory) that are critical to fire fighting, yet the assets are not reported in the Fund nor the Department.
Having all expenditures budgeted and reported through the Department would eliminate these problems.
The need for the
Enhancement Fund should also be reviewed
There is a corollary to my discussion of budgeting fire fighting through the Department. As mentioned, fire fighting is now largely financed through the Fund. For example, in 1998-99, $211 million was spent from the Fund to finance forest fire fighting activities. If these expenses were moved to the Department’s financial statement, then all that remains in the Fund’s expenses is $6 million, spent on various programs. With much of its program activities gone, the continuing need for the Fund should be reviewed.
Consistency in regional plans and operations
Recommendation No. 28
It is recommended that the Land and Forest Service of the Department of Environment ensure that its
strategies, goals, and processes are effectively implemented through regional business plans and operations.
Business planning is the foundation for successful financial administration
Financial control begins with sound business planning.
Business planning sets the priorities for the organization and allocates scarce resources to the activities of greatest benefit.
The Service should ensure that regional business plans embrace critical Departmental and Service strategies and goals. Appropriate measurable criteria within these plans would also assist the Service in monitoring each region’s success against organizational objectives.
Regional, Service, and Departmental business plans can be better aligned
The Service is still in the process of developing its processes to ensure that its critical business plan goals are being
addressed by regional business plans. At the time of our examination, only one region had completed an annual plan.
I understand that the other regions are developing their first plans. We also found that the Service business plan did not contain quantifiable financial goals against which to measure success. The Service should also consider training its
regional managers in business planning. A better-integrated planning process would ensure that all regions consistently address critical Departmental and Service objectives.
Central monitoring of regional financial practices should be enhanced
Financial control in a decentralized environment also requires consistently applied financial practices. Central control should exist to ensure that accounting policies and procedures are being followed at regional offices and that the accounting practices are efficient and effective. For
example, the Edmonton headquarters does not monitor the regional inventory counts for timeliness and accuracy. In
our testing, we also found that areas differed in their
accounting practices; some had stringent accounting controls while others were more relaxed in their practices. For example, in some regions, personnel can make purchases from local merchants on Environmental Protection’s account without a purchase order; in others, a purchase order would be required. Some form of central review or audit function may be an effective way to ensure that accounting practices are followed consistently in the area and regional offices.
Contract management Recommendation No. 29
It is recommended that the Land and Forest Service of the Department of Environment refine its contract management processes.
Cost-benefit analysis should be prepared to support outsourcing decisions
The decision to outsource services should weigh the costs and benefits of contracting against other alternatives, including providing those services in house. The cost-benefit analysis should consider all relevant costs, including borrowing, costs to secure contractors’ equipment, and so on.
My review showed that few cost-benefit analyses supported decisions to outsource, and those analyses that had been prepared were often completed after the contracting decision had been made. In my view, none of these analyses
considered all relevant costs. The Service could assist the regional personnel who are charged with this responsibility by providing training and guidance.
Where significant,
qualitative analysis should support the contracting decision
For some services, the cost-benefit analysis should be supplemented by further qualitative analysis. A catering contract is an example where quality of service is difficult to quantify yet has an impact on the morale and health of the fire crews. Once the contractor has been engaged there may be little recourse if the quality of service is unsatisfactory.
The Service may wish to procure these types of service by way of a request for proposals rather than through tendering.
Under tendering, I understand that the Department is generally obligated to accept the lowest bid unless
unsatisfactory past performance can be proven. Requests for proposals offer greater flexibility in contractor selection.
Monitoring of contracts can be strengthened
Once the contract has been awarded, management should monitor the delivery of the service to ensure that the contractor is meeting the requirements of the contract. We found that the approach used for monitoring contracts varied
from area to area. For example, in some areas workers were required to sign for all meals, while other areas simply relied on their reckoning of the number of workers on the site. As well, at the conclusion of many contracts it would be useful to analyze the performance of the contractor, and compare actual performance against expectations and competitive arrangements. In our testing, we found that some areas completed a contract completion report, while other areas did not. Guidelines or standards for post-contract analysis would be useful as not all contracts are of sufficient size or
importance to warrant the exercise.
Duplication of manual data entry
It is recommended that the Department review its systems to identify opportunities to eliminate the duplication of manual data entry.
There are several cases of duplicate manual data entry to computer systems
The Department currently relies on several computer systems, both financial and non-financial, into which its employees must manually enter the same information. For example, thousands of invoices are manually entered to the Service’s fire management program FIRES, and these same invoices are also manually entered into IMAGIS, the
Department’s integrated accounts payable and general ledger system. As well, information concerning fire contracts is manually entered into the FIRES system; this same
information is then manually re-entered into the Department’s contract system, CONR.
The elimination of duplication offers a number of benefits
Some of these systems may be replaced in the foreseeable future. In those cases it may be feasible to integrate the functionality of the overlapping systems and thereby eliminate duplicate manual entry. For those systems that will not be replaced, electronic integration offers significant benefits. Integration would save staff time and costs related to the manual re-entry of identical information. As well, one point of entry for data would mean that only one set of input controls need be relied upon in the edit and validation process. The reduction in duplicate data entry may also eliminate the need for manual reconciliation of data between systems that contain the same information. For example, the reconciliation of the costs in FIRES (the operational system) to those in IMAGIS (the financial system) has been time and resource intensive. In part because the data in these two systems was not reconciled on a timely basis, forecasts of total fire fighting costs were underestimated throughout the 1998 fire season.
Timber fees are another example of duplication of manual data entry
In an example not directly related to fire operations, timber fees represent the Service’s largest revenue stream.
Royalties are entered into the Service’s TPRS system both manually and electronically (through the Internet). The assessed amounts are then manually re-entered into the Department’s CARS accounts receivable system, which tracks the revenue received. Summary information from the CARS
system is then manually entered into the IMAGIS system.
Regional financial training and support
It is recommended that the Land and Forest Service ensure that its field personnel have sufficient financial background and training, supported by up-to-date financial policies and procedures.
Training is critical to sound financial administration
We noted in our previous recommendations that further training is needed in the areas of business planning and contract management. Training for the Service’s
computerized fire accounting systems is also essential to ensure that appropriate financial decisions can be made. In the course of our examination, we found that a lack of training in FIRES slowed data entry, resulting in uncertainty as to overall expenditures at any given point in the 1998 fire season. The Department has recently acquired another computerized accounting system capable of tracking the Service’s inventory throughout Province. To succeed with this system, sufficient training will be essential, especially if the Department plans to have temporary staff working with this system.
Qualifications for incoming field staff with financial responsibilities may need to be enhanced
With the decentralization of the Department, regional offices are responsible for more financial decision making and analysis than in the past. However, the position
requirements for regional staff have not changed for several
requirements for regional staff have not changed for several