42 



from TSPIRS right now. As I understand it, the costs associated 

 with the road base known as the "road prism" are currently ex- 

 cluded from TSPIRS depreciation accounts because they are not 

 seen as permanent, nondeteriorating assets. 



Is this accounting treatment consistent with other long-term cap- 

 ital expenditures included in TSPIRS or private sector accounting 

 for such assets? 



Mr. Leonard. 



Mr. Leonard. Mr. Chairman, the accounting system we have — 

 and I might just observe that the criticism of this is coming from 

 economists, and it is not an economic problem. It is an accounting 

 problem. The accountants are responsible for keeping track of 

 costs. 



When Congress told us to develop an accounting system, we as- 

 signed that task to certified public accounts who followed standard 

 accounting procedures in developing the system. That work was 

 done under the direct supervision of the General Accounting 

 Office, which has told the Congress that that system is inconsistent 

 with generally accepted accounting standards. We have had 



Senator Daschle. Let me just stop you there. I would think that 

 the cost of a road base would be considered a depreciable asset in 

 all other accounting practices. You are telling me that the General 

 Accounting Office is saying that it is not? 



Mr. Leonard. That is correct. Also, we went out and got an inde- 

 pendent accounting firm to review the program, and in fact, the 

 handling of the road prism was recommended by that outside ac- 

 counting firm as opposed to amortized from the road against the 

 total volume to be harvested over the road. 



The system is consistent with that used in the timber industry. 

 The fact is that the prism of the road does not wear out. It is a 

 permanent attribute to the land. The things that wear out — the 

 culverts, the road surface and the bridges — are depreciated over 

 their expected life. But the things that do not wear out, once you 

 have made that notch in the side of the mountain, barring land- 

 slides or something, that stays there and is a permanent facility. 

 That is the theory of the treatment, and that is what the account- 

 ants are telling us we should be doing. 



Senator Daschle. The impression that I have always had — and I 

 would be interested if Mr. Francis or Mr. Riley could weigh in 

 here — but I have always been told by the industry that the cost of 

 a road base is a depreciable asset. So you are telling me that you 

 have had private accounts and the General Accounting Office both 

 telling you just the opposite? 



Mr. Leonard. Yes. 



Mr. Francis. Mr. Chairman, I am not an accountant, and I am 

 not going to try to say that I understand accounting, because I 

 have enough trouble balancing my own checkbook. But in fiscal 

 year 1992, what Mr. Leonard just said is that we are not account- 

 ing for $193 million in costs that they have put into the National 

 Forest System, primarily into the timber program. That is $193 

 million. Somewhere, somebody has got to account to the taxpayers 

 of the United States about how they spent $200 million, and if they 

 don't account for it there, where do they account for it? How are 

 they held accountable to people in this country for their hard- 



