prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: While HUD has primary responsibility for addressing lead paint hazards in federally-assisted housing, EPA also has responsibilities related to setting federal lead standards for housing  EPA sets federal standards for lead hazards in paint, soil, and dust  Additionally, EPA regulates the training and certification of workers who remediate lead paint hazards  CDC sets a health guideline known as the “blood lead reference value” to identify children exposed to more lead than most other children  As of 2012, CDC began using a blood lead reference value of 5 micrograms of lead per deciliter of blood  For children whose blood lead level is at or above CDC’s blood lead reference value, health care providers and public health agencies can identify those children who may benefit the most from early intervention  CDC’s blood lead reference value is based on the 97 5th percentile of the blood lead distribution in U S  children (ages 1 to 5), using data from the National Health and Nutrition Examination Survey  Children with blood lead levels above CDC’s blood lead reference value have blood lead levels in the highest 2 5 percent of all U S  children (ages 1 to 5)  HUD, EPA, and the Department of Health and Human Services (HHS) are members of the President’s Task Force on Environmental Health Risks and Safety Risks to Children  HUD co- chairs the lead subcommittee of this task force with EPA and HHS  The task force published the last national lead strategy in 2000  The primary federal legislation to address lead paint hazards and the related requirements for HUD is the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992)  We refer to this law as Title X throughout this report  Title X required HUD to, among other things, promulgate lead paint regulations, implement the lead hazard control grant programs, and conduct research and reporting, as discussed throughout this report  The two key regulations that HUD has issued under Title X are the Lead Disclosure Rule and the Lead Safe Housing Rule: Lead Disclosure Rule  In 1996, HUD and EPA jointly issued the Lead Disclosure Rule  The rule applies to most housing built before 1978 and requires sellers and lessors to disclose any known information, available records, and reports on the presence of lead paint and lead paint hazards and provide an EPA-approved information pamphlet prior to sale or lease  Lead Safe Housing Rule  In 1999, HUD first issued the Lead Safe Housing Rule, which applies only to housing receiving federal assistance or federally-owned housing being sold  The rule established procedures for evaluating whether a lead paint hazard exists, controlling or eliminating the hazard, and notifying occupants of any lead paint hazards identified and related remediation efforts  The rule established an “elevated blood lead level” as a threshold that requires landlords and PHAs to take certain actions if a child’s blood test shows lead levels meeting or exceeding this threshold  In 2017, HUD amended the rule to align its definition of an “elevated blood lead level” with CDC’s blood lead reference value  This change lowered the threshold that generally required landlords and PHAs to act from 20 micrograms to 5 micrograms of lead per deciliter of blood  According to the rule, when a child under age 6 living in HUD-assisted housing has an elevated blood lead level, the housing provider must take several steps  These generally include testing the home and other potential sources of the child’s lead exposure within 15 days, ensuring that identified lead paint hazards are addressed within 30 days of receiving a report detailing the results of that testing, and reporting the case to HUD  Office of Lead Hazard Control and Healthy Homes (Lead Office)  HUD’s Lead Office is primarily responsible for administering HUD’s two lead hazard control grant programs, providing guidance on HUD’s lead paint regulations, and tracking HUD’s efforts to make housing lead-safe  The Lead Office collaborates with HUD program offices on its oversight and enforcement of lead paint regulations  For instance, the Lead Office issues guidance, responds to questions about requirements of lead paint regulations, and provides training and technical assistance to HUD program staff, PHA staff, and property owners  The Lead Office’s oversight efforts also include maintaining email and telephone hotlines to receive complaints and tips from tenants or homeowners, among others, as they pertain to lead paint regulations  Additionally, the Lead Office, in collaboration with EPA, contributes to the operation of the National Lead Information Center––a resource that provides the general public and professionals with information about lead, lead hazards, and their prevention  Office of Public and Indian Housing (PIH)  HUD’s PIH oversees and enforces HUD’s lead paint regulations for the rental assistance programs  As discussed earlier, this report focuses on the two largest rental assistance programs serving the most families with children––the Housing Choice Voucher and public housing programs  Housing Choice Voucher program  In the voucher program, eligible families and individuals are given vouchers as rental assistance to use in the private housing market  Generally, eligible families with vouchers live in the housing of their choice in the private market  The voucher generally pays the difference between the family’s contribution toward rent and the actual rent for the unit  Vouchers are portable; once a family receives one, it can take the voucher and move to other areas where the voucher program is administered  In 2017, there were roughly 2 5 million vouchers available  Public housing program  Public housing is reduced-rent developments owned and operated by the local PHA and subsidized by the federal government  PHAs receive several streams of funding from HUD to help make up the difference between what tenants pay in rent and what it costs to maintain public housing  For example, PHAs receive operating and capital funds through a formula allocation process  PHAs use operating funds to pay for management, administration, and day-to-day costs of running a housing development  Capital funds are used for modernization needs, such as replacing roofs or remediating lead paint hazards  According to HUD rules, generally families that are income-eligible to live in public housing pay 30 percent of their adjusted income toward rent  In 2017, there were roughly 1 million public housing units available  For both of these rental assistance programs, the Office of Field Operations (OFO) within PIH oversees PHAs’ compliance with lead paint regulations, in conjunction with HUD field office staff  The office has a risk-based approach to overseeing PHAs and performs quarterly risk assessments  Also within PIH, staff from the Real Estate Assessment Center are responsible for inspecting the physical condition of public housing properties  Office of Policy Development and Research (PD&R)  HUD’s PD&R is the primary office responsible for data analysis, research, and program evaluations to inform the development and implementation of programs and policies across HUD offices  of the total grant amount, while the Lead Hazard Reduction Demonstration grant program has required at least a 25 percent match  For fiscal years 2013–2017, HUD awarded $527 million for its lead hazard control grants, which included 186 grants to state and local jurisdictions (see fig  1)  In these 5 years, about 40 percent of grants awarded went to jurisdictions in the Northeast and 31 percent to jurisdictions in the Midwest––regions of the country known to have a high prevalence of lead paint hazards  Additionally, in these 5 years, 90 percent of grant awards went to grantees at the local jurisdiction level (cities, counties, and the District of Columbia)  The other 10 percent of grant awards went to state governments  During this time period, HUD awarded the most grants to jurisdictions in Ohio (17 grants), Massachusetts and New York (15 grants each), and Connecticut (14 grants)  HUD’s Lead-Based Paint Hazard Control grant and the Lead Hazard Reduction Demonstration grant programs have incorporated Title X statutory requirements through recent annual funding notices and their grant processes  Title X contains applicant eligibility requirements and selection criteria HUD should use to award lead grants  To be eligible to receive a grant, applicants need to be a state or local jurisdiction, contribute matching funds to supplement the grant award, have an approved comprehensive affordable housing strategy, and have a certified lead abatement program (if the applicant is a state government)  HUD has incorporated these eligibility requirements in its grant programs’ 2017 funding notices, which require applicants to demonstrate that they meet these requirements when they apply for a lead grant  According to the 2017 funding notices, applicants must detail the sources and amounts of their matching contributions in their applications  Similarly, applicants must submit a form certifying that the proposed grant activities are consistent with their local affordable housing strategy  HUD’s 2017 funding notices state that if applicants did not meet these eligibility requirements, HUD would not consider their applications  Additionally, Title X requires HUD to award lead grants according to the following applicant selection criteria: the extent to which an applicant’s proposed activities will reduce the risk of lead poisoning for children under the age of 6; the degree of severity and extent of lead paint hazards in the applicant’s jurisdiction; the applicant’s ability to supplement the grant award with state, local, or private funds; the applicant’s ability to carry out the proposed grant activities; and other factors determined by the HUD Secretary to ensure that the grants are used effectively  In its 2017 funding notices, HUD incorporated the Title X applicant selection criteria through five scoring factors that it used to assess lead grant applications  HUD allocated a certain number of points to each scoring factor  Applicants are required to develop their grant proposals in response to the scoring factors  When reviewing applications, HUD staff evaluated an applicant’s response to the factors and assigned points for each factor  See table 1 for a description of the 2017 lead grant programs’ scoring factors and points  As shown in table 1, HUD awarded the most points (46 out of 100) to the “soundness of approach” scoring factor, according to HUD’s 2017 funding notices  Through this factor, HUD incorporated Title X selection criteria on an applicant’s ability to carry out the proposed grant activities and supplement a grant award with state, local, or private funds  For example, HUD’s 2017 funding notices required applicants to describe their detailed plans to implement grant activities, including how the applicants will establish partnerships to make housing lead-safe  Specifically, HUD began awarding 2 of the 100 points to applicants who demonstrated partnerships with local public health agencies to identify families with children for enrollment in the lead grant programs  Additionally, HUD asked applicants to identify partners that can help provide assistance to complete the lead hazard control work for high-cost housing units  Furthermore, HUD required applicants to identify any nonfederal funding, including funding from the applicants’ partners  Appendix I includes examples of state, local, and nongovernmental funds that selected grantees planned to use to supplement their lead grants  In its lead grant programs, HUD has taken actions that were consistent with OMB’s requirements for competitively awarded grants  OMB generally requires federal agencies to: (1) establish a merit-review process for competitive grants that includes the criteria and process to evaluate applications; and (2) develop a framework to assess the risks posed by applicants for competitive grants, among other things  Through a merit-review process, an agency establishes and applies criteria to evaluate the merit of competitive grant applications  Such a process helps to ensure that the agency reviews grant applications in a fair, competitive, and transparent manner  Consistent with the OMB requirement to establish a merit review process, HUD has issued annual funding notices that communicate clear and explicit evaluative criteria  In addition, HUD has established processes for reviewing and scoring grant applications using these evaluative criteria, and selects grant recipients based on the review scores (see fig  2)  For example, applicants that score at or above 75 points are qualified to receive awards from HUD  Also, HUD awards funds beginning with the highest scoring applicant and proceeds by awarding funds to applicants in a descending order until funds are exhausted  Furthermore, consistent with the OMB requirement to develop a framework to assess applicant risks, HUD has developed a framework to assess the risk posed by lead grant applicants by, among other things, deeming ineligible those applicants with past performance deficiencies or those that do not have a financial management system that meets federal standards  However, HUD has not fully documented or evaluated its lead grant processes in reviewing and scoring the grants and making award decisions: Documenting grant processes and award decisions  While HUD has established processes for its lead grant programs, it lacks documentation, including detailed guidance to help ensure that staff carry out processes consistently and appropriately  Federal internal control standards state that agency management should develop and maintain documentation of its internal control system  Such documentation assists agency management by establishing and communicating the processes to staff  Additionally, documentation of processes can provide a means to retain organizational knowledge and communicate that knowledge as needed to external parties  The Lead Office’s Application Review Guide describes its grant application review and award processes at a high level but does not provide detailed guidance for staff as to how tasks should be performed  For example, the Guide notes that reviewers score eligible applications according to factors contained in the funding notices but does not describe how the reviewers should allocate points to the subfactors that make up each factor  Lead Office staff told us that creating detailed scoring guidance would be challenging because applicants’ proposed grant activities differ widely, and they said that scoring grant applications is a subjective process  While scoring grant applications may involve subjective judgments, improved documentation of grant review and scoring processes, including additional direction to staff, can help staff apply their professional judgment more consistently in evaluating applications  By better documenting processes, HUD can better ensure that staff evaluate applications consistently  Additionally, HUD has not fully documented its rationale for deciding which applicants receive lead grant awards and for deciding the dollar amounts of grant awards to successful applicants  In prior work examining federal grant programs, one recommended practice we identified is that agencies should document the rationale for award decisions, including the reasons individual applicants were selected or not and how award funding amounts were determined  While HUD’s internal memorandums listed the applicants selected and the award amounts, these memorandums did not document the rationale for these decisions or provide information sufficient to help applicants understand award outcomes  Lead Office staff told us that most grantees have received the amount of funding they requested in their applications, which was generally based on HUD’s maximum grant award amount  Lead Office staff said they could use their professional judgment to adjust award amounts to extend funding to more applicants when applicants received similar scores  However, the Lead Office’s documentation we reviewed did not explain this type of decision making  For example, in 2017, when two applicants received identical scores on their applications, HUD awarded each applicant 50 percent of the remaining available funds rather than awarding either applicant the amount they requested  Representatives of one of the two grantees told us they did not know why the Lead Office had not provided them the full amount they had requested  Lead Office staff told us that, to date, HUD has not considered alternative ways to award grant funding amounts  By fully documenting grant award processes, including the rationale for award decisions and amounts, HUD could provide greater transparency to grant applicants about its grant award decisions  Evaluating processes  HUD lacks a formal process for reviewing and updating its lead grant funding notices, including the factors and point allocations used to score applications  Federal internal control standards state that agencies should implement control activities through policies and that periodic review of policies and procedures can provide assurance of their effectiveness in achieving the agency’s objectives  Lead Office staff told us that previous changes to the factors and point allocation used to score applicants have been made based on informal discussions among staff  However, the Lead Office does not have a formal process to review and evaluate the relevance and appropriateness of the factors or points used to score applicants  Lead Office staff told us that they have never analyzed the scores applicants received for the factors to identify areas where applicants may be performing well or poorly or to help inform decisions about whether changes may be needed to the factors or points  Additionally, HUD has not changed the threshold criteria used to make award decisions since the threshold was established in 2003  As previously shown in figure 2, applicants who received at least 75 points (out of 100) have been qualified to receive a grant award  However, HUD grant documentation, including the funding notices and the Application Review Guide, does not explain the significance of this 75-point threshold  Lead Office staff stated that this threshold was first established in 2003 by HUD based on OMB guidance  A formal review of this 75-point threshold can help HUD determine whether it remains appropriate for achieving the grant programs’ objectives  Furthermore, by periodically evaluating processes for reviewing and scoring grant applications, HUD can better determine whether these processes continue to help ensure that lead grants reach areas of the country at greater risk for lead paint hazards  HUD has begun to develop analyses and tools to inform its efforts to target outreach and ensure that grant awards go to areas of the country that are at risk for lead paint hazards  However, HUD has not developed time frames for incorporating the results of the analyses into its lead grant programs’ processes  HUD has required jurisdictions applying for lead grants to include data on the need or extent of the problem in their jurisdiction (i e , scoring factor 2)  Additionally, Lead Office staff told us that HUD uses information from the American Healthy Homes Survey to obtain information on lead paint hazards across the country  However, the staff explained that the survey was designed to provide meaningful results at the regional level and did not include enough homes in its sample to provide information about housing conditions, such as lead paint hazards, at the state or local level  Because HUD awards lead grants to state and local jurisdictions, it cannot effectively use the survey results to help the agency make award decisions or inform decisions about areas for potential outreach  In early 2017, the Lead Office began working with PD&R to develop a model to identify local jurisdictions (at the census-tract level) that may be at heightened risk for lead paint hazards  Lead Office staff said that they hope to use results of this model to develop geographic tools to help target HUD funding to areas of the country at risk for lead paint hazards but not currently receiving a HUD lead grant  Lead Office staff said that they could reach out to these at-risk areas, help them build the capacity needed to administer a grant, and encourage them to apply  For example, HUD has identified that Mississippi and two major metropolitan areas in Florida (Miami and Tampa) had not applied for a lead grant  HUD has conducted outreach to these areas to encourage them to apply for a lead grant  In 2016, the City of Jackson, Mississippi, applied for and received a lead grant  Though the Lead Office has collaborated with PD&R on the model, HUD has not developed specific time frames to operationalize the model and incorporate the results of the model for using local-level data to help better identify areas at risk for lead paint hazards  Federal internal control standards require agencies to define objectives clearly to enable the identification of risks  This includes clearly defining time frames for achieving the objectives  Setting specific time frames could help to ensure that HUD operationalizes this model in a timely manner  By operationalizing a model that incorporates local data on lead paint hazard risk, HUD can better target its limited grant resources towards areas of the country with significant potential for lead hazard control needs  We performed a county-level analysis using HUD and Census Bureau data and found that most lead grants from 2013 through 2017 have gone to counties with at least one indicator of lead paint hazard risk  Information we reviewed, such as relevant literature, suggests that the two common indicators of lead paint hazard risk are the prevalence of housing built before the 1978 lead paint ban and the prevalence of individuals living below the poverty line  We defined areas with lead paint hazard risk as counties that had percentages higher than the corresponding national percentages for both of these indicators  The estimated average percentage nationwide of total U S  housing stock constructed before 1980 was 56 9 percent and the estimated average percentage nationwide of individuals living below the poverty line was 17 5 percent  As shown in figure 3, our analysis estimated that 18 percent of lead grants from 2013 through 2017 have gone to counties with both indicators above the estimated national percentages, 59 percent of grants have gone to counties with estimated percentages of old housing above the estimated national percentage, and 7 percent of grants have gone to counties that had estimated poverty rates above the estimated national percentage  (For an interactive version of this map, click here ) When HUD finalizes its model and incorporates information into its lead grant processes, HUD will be able to better target its grant resources to areas that may be at heightened risk for lead paint hazards  In 2016, HUD began to incorporate new steps to monitor PHAs’ compliance with lead paint regulations for nearly 4,000 PHAs  Previously, according to PIH staff, HUD required only that PHAs annually self-certify their compliance with lead paint laws and regulations, and HUD’s Real Estate Assessment Center inspectors check for lead paint inspection reports and disclosure forms at public housing properties during physical inspections  Starting in June 2016, PIH began using new tools for HUD field staff to track PHAs’ compliance with lead paint requirements in the voucher and public housing programs  As shown in figure 4, PIH’s compliance oversight processes for the voucher and public housing programs include various monitoring tools for overseeing PHAs  Key components of PIH’s lead paint oversight processes include the following: Tools for tracking lead hazards and cases of elevated blood levels in children  HUD uses two databases to monitor PHAs’ compliance with lead paint regulations: (1) the Lead-Based Paint Response Tracker, which PIH uses to collect and monitor information on the status of lead paint-related documents, including lead inspection reports and disclosure forms, in public housing properties but not in units with voucher assisted households; and (2) the Elevated Blood Lead Level Tracker, which PIH uses to collect and monitor information reported by PHAs on cases of elevated blood levels in children living in voucher and public housing units  In June 2016, OFO began using the Lead-Based Paint Response Tracker database to store information on public housing units and to help HUD field office staff to follow up with PHAs that have properties missing required lead documentation  In July 2017, OFO began using information recorded in the Elevated Blood Lead Level Tracker to track whether PHAs started lead remediation activities in HUD- assisted housing within the time frames required by the Lead Safe Housing Rule  Lead paint hazards included in PHAs’ risk assessment scores  OFO assigns scores to PHAs based on their relative risk in four categories: physical condition, financial condition, management capacity, and governance  OFO uses these scores to identify high- and very high-risk PHAs that will receive on-site full compliance reviews  In July 2017, OFO incorporated data from the Real Estate Assessment Center into the physical condition category of its Risk Assessment Protocol to help account for potential lead paint hazards at public housing properties  Questions about lead paint included as part of on-site full compliance reviews  In fiscal year 2016, HUD field offices began conducting on-site full compliance reviews at high- and very high-risk PHAs as part of HUD’s compliance monitoring program to enhance oversight and accountability of PHAs  In fiscal year 2017, as part of the reviews, HUD field office staff started using a compliance monitoring checklist to determine if PHAs comply with major HUD rules and to gather additional information on the PHAs  This checklist included lead-related questions that PIH field office staff use to determine whether PHAs meet the requirements in lead paint regulations for both the voucher and public housing programs  In 2016, OFO and HUD field offices began using information from the new monitoring efforts to identify potential noncompliance by PHAs with lead paint regulations and help the PHAs resolve the identified issues  According to HUD data, as of November 2017, the Lead-Based Paint Response Tracker indicated that 9 percent (357) of PHAs were missing both lead inspection reports and lead disclosure forms for one or more properties  There were 973 PHAs missing one of the two required documents  OFO staff told us that they prioritized following up with PHAs that were missing both documents  According to OFO staff, PHAs can resolve potential noncompliance by submitting adequate lead documentation to HUD  OFO staff told us the agency considers missing lead documentation as “potential” noncompliance because PHAs may provide the required documentation or they may be exempt from certain requirements (e g , HUD-designated elderly housing)  While HUD has taken steps to strengthen compliance monitoring processes, it does not have a plan to identify and address the risks of noncompliance by PHAs with lead paint regulations  Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving the defined objectives  Furthermore, when an agency has made significant changes to its processes—as HUD has done with its compliance monitoring processes—management review of changes to these processes can help the agency determine that its control activities are designed appropriately  Our review found that HUD does not have a plan to help mitigate and address risks related to noncompliance with lead paint regulations by PHAs (i e , ensuring lead safety in assisted housing)  Additionally, our review found several limitations with HUD’s new compliance monitoring approach, which include the following: Reliance on PHA self-certifications  HUD’s compliance monitoring processes rely in part on PHAs self-certifying that they are in compliance with lead paint regulations, but recent investigations have found that some PHAs may have falsely certified that they were in compliance  In November 2017, HUD filed a fraud complaint against two former officials of the Alexander County (Illinois) Housing Authority, alleging that the former official, among other things, falsely certified to HUD that the Housing Authority was in compliance with lead paint regulations  Further, PIH staff told us there are ongoing investigations related to potential noncompliance with lead paint regulations and false certifications at two other housing authorities  Lack of comprehensive data for the public housing program  OFO started to collect data for the public housing program in the Lead-Based Paint Response Tracker in June 2016 and the inventory of all public housing properties includes units inspected since 2012  In addition, HUD primarily relies on the presence of lead inspection reports but does not record in the database when inspections and remediation activities occurred and does not determine whether they are still effective  Because of this, the information contained in the lead inspection reports may no longer be up-to-date  For example, a lead inspection report from the 1990s may provide evidence that abatement work was conducted at that time, but according to PIH staff, the housing may no longer be lead-safe  Lack of readily available data for the voucher program  The voucher program does not have readily available data on housing units’ physical condition and compliance with lead paint regulations because data on the roughly 2 5 million units in the program are kept at the PHA level  According to PIH staff, HUD plans to adopt a new system for the voucher program that will include standardized, electronic data for voucher units  PIH staff said the new system (Uniform Physical Condition Standards for Vouchers Protocol) will allow greater oversight and provide HUD the ability to conduct data analysis for voucher units  Challenges identifying children with elevated blood lead levels  For several reasons, PHAs face ongoing challenges receiving information from state and local public health departments on the number of children identified with elevated blood lead levels  First, children across the U S  are not consistently screened and tested for exposure to lead  Second, according to CDC data, many states use a less stringent health guideline to identify children compared to the health standard that HUD uses (i e , CDC’s current blood lead reference value)  PIH staff told us that some public health departments may not report children with elevated blood levels to PHAs because they do not know that a child is living in a HUD- assisted unit and needs to be identified using the more stringent HUD standard  Lastly, Lead Office staff told us that privacy laws in some states may impose restrictions on public health departments’ ability to share information with PHAs  Limited coverage of on-site compliance reviews  While full on-site compliance reviews can be used to determine if PHAs are in compliance with lead paint regulations, OFO conducts a limited number of these reviews annually  For example, in Fiscal Year 2017, OFO conducted 72 reviews of the roughly 4,000 total PHAs  Based on OFO information, there are 973 PHAs that are missing either lead inspection reports or lead disclosure forms indicating some level of potential noncompliance  HUD’s steps since June 2016 to enhance monitoring of PHAs’ compliance with lead paint regulations have some limitations that create risks in its new compliance monitoring approach  By developing a plan to help mitigate and address the various limitations associated with the new compliance monitoring approach, HUD could further strengthen its oversight and help ensure that PHAs maintain lead-safe housing units  HUD does not have detailed procedures to address PHA noncompliance with lead paint regulations or to determine when enforcement decisions may be needed  Lead Office staff told us that their enforcement program aims to ensure that PHAs have the information necessary to remain in compliance with lead paint regulations  According to federal internal control standards, agencies should implement control activities through policies and procedures  Effective design of procedures to address noncompliance would include documenting specific actions to be performed by agency staff when deficiencies are identified and related time frames for these actions  While HUD staff stated that they address PHA noncompliance through ongoing communication and technical assistance to PHAs, HUD has not documented specific actions to be performed by staff when deficiencies are identified  OFO staff told us that in general, PIH has not needed to take many enforcement actions because field offices are able to resolve most lead paint regulation compliance concerns with PHAs through ongoing communication and technical assistance  For example, HUD field offices sent letters to PHAs when Real Estate Assessment Center inspectors could not locate required lead inspection reports and lead disclosure forms, and requested that the PHA send the missing documentation within 30 days  However, OFO’s fiscal years 2015–2017 internal memorandums on monitoring and oversight guidance for HUD field offices did not contain detailed procedures, including time frames or criteria HUD staff would use to determine when to consider whether a more formal enforcement action might be warranted  Additionally, Lead Office staff said if efforts to bring a PHA into compliance are unsuccessful, the Lead Office would work in conjunction with PIH and HUD’s Office of General Counsel’s Departmental Enforcement Center to determine if an enforcement action is needed, such as withholding or delaying funds from a PHA or imposing civil money penalties on a PHA  Lead Office staff also told us that instead of imposing a fine on a PHA, HUD would rather work with the PHA to resolve the lead paint hazard  However, the Lead Office provided no documentation detailing the specific steps or time frames HUD staff would follow to determine when a noncompliance case is escalated to the Office of General Counsel  In a March 2018 report to Congress, HUD noted that children continued to test positive for lead in HUD-assisted housing in 2017  In the same report, HUD notes PIH and the Lead Office will continue to work with PHAs to ensure compliance with lead paint regulations  By adopting procedures that clearly describe when lead paint hazard compliance efforts are no longer sufficient and enforcement decisions are needed, HUD can better keep PHAs accountable in a consistent and timely manner  The standard HUD uses to identify children with elevated blood lead levels and initiate lead hazard control activities in its rental assistance aligns with the health guideline set by CDC in 2012  HUD also uses CDC’s health guideline in its lead grant programs  In HUD’s January 2017 amendment to the Lead Safe Housing Rule, HUD made its standard for lead in a child’s blood more stringent by lowering it from 20 micrograms to 5 micrograms of lead per deciliter of blood, matching CDC’s health guideline (i e , blood lead reference value)  Specifically, HUD’s stronger standard allows the agency to respond more quickly when children under 6 years old are exposed to lead paint hazards in voucher and public housing units


Report 2:  The January 2017 rule also established more comprehensive testing for children and evaluation procedures for HUD assisted housing  According to HUD’s press release that accompanied the rule, by aligning HUD’s standard with CDC’s guidance, HUD can respond more quickly in cases when a child who lives in HUD assisted housing shows early signs of lead in their blood  The 2017 rule notes HUD will revise the agency’s elevated blood lead level to align with future changes HHS may make to its recommended environmental intervention level  HUD’s standards for lead dust levels align with EPA standards for its rental assistance programs and exceed EPA standards for the lead grant programs  In 2001, EPA published a final rule on lead paint hazard standards, including lead dust clearance standards  The rule established standards to help property owners, contractors, and government agencies identify lead hazards in residential paint, dust, and soil and address these hazards in and around homes  Under these standards, lead is considered a hazard when equal to or exceeding 40 micrograms of lead in dust per square foot sampled on floors and 250 micrograms of lead in dust per square foot sampled on interior window sills  In 2004, HUD amended the Lead Safe Housing Rule to incorporate the 2001 EPA lead dust standards as HUD’s standards  Since this time, HUD has used EPA’s 2001 lead hazard standards in its rental assistance programs  In February 2017, HUD released policy guidance for its lead grantees requiring them to meet new and more protective requirements for identifying and addressing lead paint hazards in the lead grant programs than those imposed by EPA’s 2001 standards that HUD uses in the rental assistance programs  For example, the policy guidance requires grantees to consider lead dust a hazard on floors at 10 micrograms per square foot sampled (down from 40) and on window sills at 100 micrograms per square foot sampled (down from 250)  The policy guidance noted that the new requirements are supported by scientific evidence on the adverse effects of lead exposure at low blood lead levels in children  Further, the policy guidance established a standard for porch floors––an area that EPA has not covered––because porch floors can be both a direct exposure source for children and a source of lead dust that can be tracked into the home  On December 27, 2017, the United States Court of Appeals for the Ninth Circuit ordered EPA to issue a proposed rule updating its lead dust hazard standard and the definition of lead-based paint within 90 days of the decision becoming final and a final rule within 1 year of the proposed rule  Because HUD’s Lead Safe Housing Rule generally defines lead paint hazards and lead dust hazards to mean the levels promulgated by EPA, if EPA changes its 2001 standards those new standards would be used in HUD’s rental assistance programs  On March 16, 2018, EPA filed a request to the court asking for clarification for when EPA is required to issue the proposed rule and followed up with a motion seeking clarification or an extension  In response to EPA’s motion, on March 26, 2018, the court issued an order clarifying time frames and ordered that the proposed rule be issued within 90 days from March 26, 2018  HUD’s Lead Safe Housing Rule requires a stricter lead inspection standard for public housing than for voucher units  According to HUD staff, HUD does not have the authority to require the more stringent inspection in the voucher program  While HUD has acknowledged that moving to a stricter inspection standard for voucher units would provide greater assurance that these units are lead-safe and expressed its plan to support legislative change to authorize it to impose a more stringent inspection standard, HUD has not requested authority from Congress to amend its inspection standard for the voucher program  For voucher units, HUD requires PHAs to ensure that trained inspectors conduct visual assessments to identify deteriorated paint for housing units inhabited by a child under 6 years old  In a visual assessment, an inspector looks for deteriorated paint and visible surface dust but does not conduct any testing of paint chips or dust samples from surfaces to determine the presence of lead in the home’s paint  By contrast, for public housing units, HUD requires a stronger inspection process  Lead- based paint inspections are required for pre-1978 public housing units  If that inspection identifies lead-based paint, PHAs must then perform a risk assessment  In a risk assessment, in addition to conducting a visual inspection, an inspector tests for the presence of lead paint by collecting and testing samples of paint chips and surface dust, and typically using a specialized device (an X-ray fluorescence analyzer) to measure the amount of lead in the paint on a surface, such as a wall, door, or window sill  Staff from HUD’s Lead Office and the Office of General Counsel told us that Title X did not include specific risk assessment requirements for voucher units, and HUD does not believe, therefore, that it has the statutory authority to require an assessment more thorough than a visual assessment of voucher units  As of May 2018, HUD had not requested statutory authority to change the visual assessment standard used in the voucher program  However, HUD previously acknowledged the limitation of the weaker inspection standard in a June 2016 publication titled Lead- Safe Homes, Lead-Free Kids Toolkit  In this publication, HUD noted its plans to support legislative change to strengthen lead safety in voucher units by eliminating reliance on visual-only inspections  Staff from HUD’s Lead Office and Office of General Counsel told us the agency recognizes that risk assessments are more comprehensive than visual assessments  The staff noted that, by definition, a risk assessment is a stronger inspection standard than a visual-only assessment because it includes additional identification and testing  In responding to a draft of this report, HUD cited the need to conduct and evaluate the results of a statistically rigorous study on the impacts of requiring a lead risk assessment versus a visual assessment, such as the impact on leasing times and the availability of housing for low-income families  HUD further noted that such a study could explore whether alternative options to the full risk assessment standard (such as targeted dust sampling) could achieve similar levels of protection for children in the voucher program  Requesting and obtaining authority to amend the standard for the voucher program would not preclude HUD from doing such a study  Such analysis might support a range of options based on consideration of health effects for children, housing availability, and other relevant factors  Because HUD’s Lead Safe Housing Rule contains a weaker lead inspection standard for the voucher program children living in voucher units may be less protected from lead paint hazards than children living in public housing  By requesting and obtaining statutory authority to amend the voucher program inspection standard, HUD would be positioned to take steps to ensure that children in the voucher program are provided better protection as indicated by analysis of the benefits and costs from amending the standard  HUD has taken limited steps to measure, evaluate, and report on the performance of its programmatic efforts to ensure that housing is lead- safe  First, HUD has tracked one performance measure for its lead grant programs but lacks comprehensive performance goals and measures  Second, while HUD has evaluated the effectiveness of its Lead-Based Paint Hazard Control grant program, it has not formalized plans and does not have a time frame for evaluating its lead paint regulations  Third, HUD has not issued an annual report on the results of its lead efforts since 1997  A key aspect to promoting improved federal management and greater efficiency and effectiveness is that agencies set goals and report on performance  We have previously reported that a program performance assessment contains three key elements––program goals, performance measures, and program evaluations (see fig  5)  In our prior work, we have noted that both the executive branch and congressional committees need evaluative information to help them make decisions about the programs they oversee––information that tells them whether, and why, a program is working well or not  Program goals and performance measures  HUD has tracked one performance measure for making private housing units lead-safe as part of its lead grant programs but lacks goals and performance measures that more fully cover the range of its lead efforts  In addition to our prior work on program goals and performance measures, federal internal control standards state that management should define objectives clearly and that defining objectives in measurable terms allows agency management to assess performance toward achieving objectives  According to Lead Office staff, HUD provides information on its goals and performance measures related to its lead efforts in the agency’s annual performance reports  For example, the fiscal year 2016 report contains information about the number of private housing units made lead-safe as part of HUD’s lead grant programs but does not include any performance measures on HUD’s lead efforts for the voucher and public housing programs  Lead Office staff told us HUD does not have systems to count the number of housing units made lead-safe in these two housing programs  The staff said the Lead Office and PIH recently began discussing whether data from an existing HUD database could be used to count units made lead-safe within these programs  However, they could not provide additional details on the status of all these efforts  Without comprehensive goals and performance measures, HUD does not know the results it is achieving with all its lead paint hazard reduction efforts  Moreover, HUD may be missing opportunities to use performance information to improve the results of its lead efforts  Program evaluations  HUD has evaluated the effectiveness of its Lead- Based Paint Hazard Control grant program but has not taken similar steps to evaluate the Lead Safe Housing Rule or Lead Disclosure Rule  As previously stated, our prior work on program performance assessment has noted the importance of program evaluations to know how well a program is working relative to its objectives  Additionally, Title X required HUD to conduct research to evaluate the long-term cost-effectiveness of interim lead hazard control and abatement strategies  For its Lead-Based Paint Hazard Control Grant program, HUD has contracted with outside experts to conduct evaluations  For example, the National Center for Healthy Housing and the University of Cincinnati’s Department of Environmental Health evaluated whether the lead hazard control methods used by grantees continued to be effective 1, 3, 6, and 12 years later  The evaluations concluded that the lead hazard control activities used by grantees substantially reduced lead dust levels and the original evaluation and those completed 1 and 3 years later were also associated with substantial declines in the blood lead levels of children living in the housing remediated using lead grant program funds  HUD has general plans to conduct evaluations of the Lead Safe Housing Rule and the Lead Disclosure Rule, but Lead Office and PD&R staff said they did not know when or if the studies will begin  In a 2016 publication, HUD noted its plans to evaluate the Lead Safe Housing Rule requirements and noted that such an evaluation would contribute toward policy recommendations and program improvements  Additionally, in its 2017 Research Roadmap, PD&R outlined HUD’s plans for two studies to evaluate the effectiveness of requirements within the Lead Safe Housing and Lead Disclosure Rules  However, PD&R and Lead Office staff were not able to provide a time frame for when the studies would begin  PD&R staff told us that the plans noted within the Research Roadmap were HUD’s first step in research planning and prioritization but that appropriations for research have been prescriptive in recent years (i e , tied to specific research topics) and fell short of the agency’s research needs  By studying the effectiveness of requirements included within the Lead Safe Housing and Lead Disclosure Rules, including the cost- effectiveness of the various lead hazard control methods, HUD could have more complete information to assess how effectively it uses federal dollars to make housing units lead-safe  Reporting  HUD has not reported on its lead efforts as required since 1997  Title X includes annual and biennial reporting requirements for HUD  Staff from HUD’s Lead Office and General Counsel told us that in 1998 the agency agreed with the congressional committees of jurisdiction that HUD could satisfy this reporting requirement by including the required information in its annual performance reports  Lead Office staff told us HUD’s recent annual performance reports do not contain specific information required by law and that HUD has not issued other publicly available reports that contain the Title X reporting requirements  Title X requires HUD to annually provide Congress information on its progress in implementing the lead grant programs; a summary of studies looking at the incidence of lead poisoning in children living in HUD-assisted housing; the results of any required lead technical studies; and estimates of federal funds spent on lead hazard evaluation and reduction in HUD-assisted housing  As previously stated, the annual performance reports have provided information on the number of housing units made lead-safe through the agency’s lead grant programs, but not through the voucher or public housing programs  In March 2018, Lead Office staff told us HUD plans to submit separate reports on the agency’s lead effort, covering the Title X reporting requirements, starting in fiscal year 2019  By HUD complying with Title X statutory reporting requirements, Congress and the public will be in a position to better know the progress HUD is making toward ensuring that housing is lead-safe  Lead exposure can cause serious, irreversible cognitive damage that can impair a child for life  Through its lead grant programs and oversight of lead paint regulations, HUD is helping to address lead paint hazards in housing  However, our review identified specific areas where HUD could improve the effectiveness of its efforts to identify and address lead paint hazards and protect children in low-income housing from lifelong health problems: Documenting and evaluating grant processes  HUD could improve documentation for its lead grant programs’ processes by providing more specific direction to staff and documenting grant award rationale  In doing so, HUD could better ensure that grant program staff score grant applications consistently and appropriately and provide greater transparency about its award decisions  Additionally, periodically evaluating its grant processes and procedures could help HUD better ensure that its lead grants reach areas most at risk for lead paint hazards  Identifying areas at risk for lead hazards  By developing specific time frames to finalize and incorporate the results of its model to more fully identify areas at risk for lead paint hazards, HUD can better identify and conduct outreach to at-risk localities that its lead grant programs have not yet reached  Overseeing compliance with lead paint regulations  False self- certifications of compliance by some PHAs and other limitations in HUD’s compliance monitoring approach make it essential for HUD to develop a plan to mitigate and address limitations, as well as establish procedures to determine when enforcement decisions are needed  These actions could further strengthen HUD’s oversight and keep PHAs accountable for ensuring that housing units are lead-safe  Amending inspection standard in the voucher program  Children living in voucher units may receive less protection from lead paint hazards than children living in public housing units because HUD applies different lead inspection standards to the two programs  HUD could ensure that children in the voucher program are provided better protection from lead by requesting and obtaining statutory authority to amend the voucher program inspection standard as indicated by analysis of the benefits and costs of amending the standard  Assessing and reporting on performance  Fully incorporating key elements of performance assessment—by developing comprehensive goals, improving performance measures, and adhering to reporting requirements—could better enable HUD to assess its own progress and target its resources toward lead efforts that maximize impact  Additionally, HUD may be missing opportunities to inform the Congress and the public about how HUD’s lead efforts have helped reduce lead poisoning in children  We are making the following nine recommendations to HUD: The Director of HUD’s Lead Office should ensure that the office more fully documents its processes for scoring and awarding lead grants and its rationale for award decisions  (Recommendation 1) The Director of HUD’s Lead Office should ensure that the office periodically evaluates its processes for scoring and awarding lead grants  (Recommendation 2) The Director of HUD’s Lead Office, in collaboration with PD&R, should set time frames for incorporating relevant data on lead paint hazard risks into the lead grant programs’ processes  (Recommendation 3) The Director of HUD’s Lead Office and the Assistant Secretary for PIH should collaborate to establish a plan to mitigate and address risks within HUD’s lead paint compliance monitoring processes  (Recommendation 4) The Director of HUD’s Lead Office and the Assistant Secretary for PIH should collaborate to develop and document procedures to ensure that HUD staff take consistent and timely steps to address issues of PHA noncompliance with lead paint regulations  (Recommendation 5) The Secretary of HUD should request authority from Congress to amend the inspection standard to identify lead paint hazards in the Housing Choice Voucher program as indicated by analysis of health effects for children, the impact on landlord participation in the program, and other relevant factors  (Recommendation 6) The Director of the Lead Office should develop performance goals and measures to cover the full range of HUD’s lead efforts, including its efforts to ensure that housing units in its rental assistance programs are lead-safe  (Recommendation 7) The Director of the Lead Office, in conjunction with PD&R, should finalize plans and develop a time frame for evaluating the effectiveness of the Lead Safe Housing and Lead Disclosure Rules, including an evaluation of the long-term cost effectiveness of the lead remediation methods required by the Lead Safe Housing Rule  (Recommendation 8) The Director of the Lead Office should complete statutory reporting requirements, including but not limited to its efforts to make housing lead-safe through its lead grant programs and rental-assistance programs, and make the report publicly available  (Recommendation 9) We provided a draft of this report to HUD for review and comment  We also provided the relevant excerpts of the draft report to CDC and EPA for their review and technical comments  In written comments, reproduced in appendix III, HUD disagreed with one of our recommendations and generally agreed with the remaining eight  HUD and CDC also provided technical comments, which we incorporated as appropriate  EPA did not have any comments on the relevant excerpts of the draft report provided to them  In its general comments, HUD noted that the lead grant programs and HUD’s compliance assistance and enforcement of lead paint regulations have contributed significantly to, among other things, the low prevalence of lead-based paint hazards in HUD-assisted housing  Further, HUD said the lead grant programs and compliance assistance and enforcement of lead paint regulations have played a critical part in developing and maintaining the national lead-based paint safety infrastructure  HUD asked that this contextual information be included in the background of the report  The draft report included detailed information on the purpose and scope of HUD’s lead grant programs, two key regulations related to lead paint hazards, and efforts to make housing lead-safe  Furthermore, the draft report provided context on other federal agencies’ role in establishing relevant standards and guidelines for lead paint hazards  We made no changes in response to this comment because we did not think it was necessary for background purposes  HUD disagreed with the draft report’s sixth recommendation to request authority from Congress to use the risk assessment inspection standard to identify lead paint hazards in the Housing Choice Voucher program  As discussed in the report, HUD’s Lead Safe Housing Rule requires a more stringent lead inspection standard (risk assessments) for public housing than for Housing Choice Voucher units, for which a weaker inspection standard is used (visual assessments)  In its written comments, HUD said that before deciding whether to request the statutory authority to implement risk assessments for voucher units, it would need to conduct and evaluate the results of a statistically rigorous study on the impacts of requiring a lead risk assessment versus a visual assessment, such as the impact on leasing times and the availability of housing for low-income families  HUD further noted that such a study could explore whether alternative options to the full risk assessment standard (such as targeted dust sampling) could achieve similar levels of protection for children in the voucher program  We note that requesting and obtaining authority to amend the standard for the Housing Choice Voucher program would not preclude HUD from doing such a study  We acknowledge that the results of such a study might support a range of options  Therefore, we revised our recommendation to provide HUD with greater flexibility in how it might amend the lead inspection standard for the voucher program based on consideration of not only leasing time and availability of housing, as HUD emphasized in its written comments, but also based on the health effects on children  The need for HUD to review the lead inspection standard for the voucher program is underscored by the greater number of households with children served by the voucher program compared to public housing, as well as recent information indicating that more children with elevated blood lead levels are living in voucher units than in public housing  HUD generally agreed with our remaining eight recommendations and provided specific information about planned steps and other considerations related to implementing them  For example, in response to our first three recommendations on the lead grant programs, HUD outlined specific steps it plans to take, such as updating its guidance for scoring grant applications and reviewing its grant application scoring methods to identify potential improvements  In response to our fourth and fifth recommendations to the Director of HUD’s Lead Office on compliance monitoring and enforcement of lead paint regulations, HUD noted that PIH should be the primary office for these recommendations with the Lead Office providing support  While these recommendations had already recognized the need for the Lead Office to collaborate with PIH, we reworded them to clarify that it is not necessary for the Lead Office to have primary responsibility for their implementation  HUD generally agreed with our seventh and eighth recommendations, but noted some considerations for implementing them  For our seventh recommendation about performance goals and measures, HUD noted that it will re-examine the availability of information from the current housing databases to determine whether data on housing unit production can be added to the existing data collected  HUD noted if that information is not sufficient, it would need to obtain Office of Management and Budget approval and have sufficient funds for such an information technology project  For our eighth recommendation about evaluating the Lead Safe Housing and Lead Disclosure Rules, HUD noted if its own resources are insufficient, the time frame for implementing this recommendation may depend on the availability of funding for contracted resources  Finally, in response to our ninth recommendation, HUD said that it will draft and submit annual and biennial reports to the congressional authorizing and appropriations committees and then post the reports on the Lead Office’s public website  We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Housing and Urban Development, the Administrator of the Environmental Protection Agency, and the Secretary of Health and Human Services, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  Under the Department of Housing and Urban Development’s (HUD) Lead-Based Paint Hazard Control and the Lead Hazard Reduction Demonstration grant programs, HUD competitively awards grants to state and local jurisdictions, as authorized by the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992)  Title X requires each grant recipient to make matching contributions with state, local, and private funds (i e , nonfederal) toward the total cost of activities  For the Lead-Based Paint Hazard Control grant and the Lead Hazard Reduction Demonstration grant programs, the matching contribution has been set at no less than 10 percent and 25 percent, respectively, of the total grant amount  For example, if the total grant amount is $3 million, then state or local jurisdictions must provide at least $300,000 and $750,000, respectively, for each grant program, in additional funding toward the cost of activities  HUD requires lead grant applicants to include information on the sources and amounts of grantees’ matching contributions as part of their grant applications  Additionally, Title X requires HUD to award grants in part based on an applicant’s ability to leverage state, local, and private funds to supplement the federal grant funds  To identify the nonfederal funding sources grantees used in the lead hazard control grants, we selected and reviewed the lead grant applications of 20 HUD grantees and interviewed representatives from 10 of these  We selected these grantees based on their geographic locations; the number of HUD lead grants they had previously received; experience with HUD’s lead hazard control grants; and whether they have received both grants from 2013 through 2017  Grantees we selected included entities at the state, municipality, and county levels  Information from our grant application reviews and interviews of grantees cannot be generalized to all HUD grantees  Based on our review of the selected grant applications and interviews of selected grantees, we found that grantees planned to use the following types of nonfederal funding sources as their matching contributions to support their lead grants activities: State and local funds  Eighteen of the 20 grantees we selected noted that they planned to use state or local funding sources to supplement HUD’s grant funds  The state and local funding sources included state or local general funds and local property taxes or fees  For example, grantees in Connecticut, Baltimore, and Philadelphia used state or local general funds to cover personnel and operating costs  Additionally, grantees in Alameda County (California), Hennepin County (Minnesota), Malden, St  Louis, and Winnebago County (Illinois) planned to use local taxes, including property taxes or fees, such as real estate recording and building permit fees, to cover some costs associated with their lead hazard control grants activities  Community Development Block Grant funds  Ten of the 20 grantees we selected indicated that they planned to use Community Development Block Grant (CDBG) program funds to cover part of the costs of their lead hazard control grants  CDBG program funds can be used by states and local communities for housing; economic development; neighborhood revitalization; and other community development activities  For example, grantees in Baltimore and Memphis noted in their grant applications that they planned to use the funds to cover costs related to personnel, operations, and training  Nongovernmental contributions or discounts  Eight of 20 grantees we selected stated that they anticipated some forms of nongovernmental contributions from nonprofit organizations or discounts from contractors to supplement the lead grants  For example, all eight grantees stated that they expected to receive matching contributions from nonprofit organizations  Table 2 summarizes the nonfederal funds by source that the 20 selected grantees planned to use, based on our review of these grantees’ applications  Furthermore, almost all of the selected grantees stated in their grant applications or told us that they expected to receive or have received other nonfederal funds in excess of their matching contributions  For example, 15 grantees stated that they generally required or encouraged property owners or landlords to contribute toward the lead hazard remediation costs  Also, grantees in Baltimore, District of Columbia, Lewiston, and Providence indicated that they expected to receive monetary or in-kind donations from organizations to help carry out lead hazard remediation, blood lead-level testing, or training  Additionally, the grantee in Alameda County (California) told us that they have received nonfederal funds from a litigation settlement with a private paint manufacturer  This report examines the Department of Housing and Urban Development’s (HUD) efforts to (1) incorporate statutory requirements and other relevant federal standards in its lead grant programs; (2) monitor and enforce compliance with lead paint regulations for its rental assistance programs; (3) adopt federal health guidelines and environmental standards for lead hazards in its lead grant and rental assistance programs; and (4) measure and report on its performance related to making housing lead-safe  In this report, we examine lead paint hazards in housing, and we focus on HUD’s lead hazard control grant programs and its two largest rental assistance programs that serve the most families with children: the Housing Choice Voucher (voucher) and public housing programs  To address all four objectives, we reviewed relevant laws, such as the Residential Lead-Based Paint Hazard Reduction Act (Title X of the Housing and Community Development Act of 1992, referred to as Title X throughout this appendix) and relevant HUD regulations, such as the Lead Safe Housing Rule and a January 2017 amendment to this rule  To examine trends in funding for HUD’s lead grant programs for the past 10 years, we also reviewed HUD’s budget information for fiscal years 2008 through 2017  We interviewed HUD staff from the Office of Lead Hazard Control and Healthy Homes (Lead Office), Office of Public and Indian Housing (PIH), Office of Policy Development and Research (PD&R), and other relevant HUD program and field offices  Finally, we reviewed our prior work and those of HUD’s Office of Inspector General  To address the first objective, we reviewed HUD’s Notices of Funding Availability (funding notices), policies, and procedures to identify HUD’s grant award processes for the Lead-Based Paint Hazard Control grant and Lead Hazard Reduction Demonstration grant programs  For example, we reviewed HUD’s annual notices of funding availability from 2013 through 2017 to identify HUD’s scoring factors for evaluating grant applications  We compared HUD’s grant award processes in 2017 with Title X statutory requirements, the Office of Management and Budget (OMB) requirements for awarding federal grants, and relevant federal internal control standards  We also interviewed HUD staff about the agency’s grant application review and award processes  To determine the extent to which HUD’s grants have gone to counties in the United States potentially at high risk for lead paint hazards, we compared grantee locations from HUD’s lead grant data for grants awarded from 2013 through 2017 with county-level data on two indicators of lead paint hazard risk from the 2011–2015 American Community Survey—a continuous survey of households conducted by the U S  Census Bureau  We analyzed HUD’s grant data to determine the number and dollar amount of grants received by each grantee, and the grantees’ addresses  We then conducted a geographic analysis to determine whether each HUD lead grant went to a county that met at least one, both, or neither of the two commonly known indicators of lead paint hazard risk—the age of housing and poverty level  We identified these two indicators through a review of relevant academic literature, agency research, and state lead modelling methodologies  We used data from the 2011–2015 American Community Survey because the data covered a time frame that best aligned with the 5 years of lead grant data (2013 through 2017)  Using its county-level data, we calculated an estimated average percentage nationwide of housing units built before 1980 (56 9 percent) and an estimated average percentage nationwide of individuals living below the poverty level (17 5 percent)  We used 1980 as a benchmark for age of housing because the American Community Survey data for age of housing is separated by the decade of construction and 1980 was closest in time to the 1978 federal lead paint ban  We categorized counties based on whether their levels of pre-1980 housing and poverty were above one, both, or neither of the respective national average percentage for each indicator  The estimated average nationwide and county-level percentages of the two indicators (e g , older housing and poverty rate) are expressed as a range of values  For the lower and upper ends of the range, we generated a 95 percent confidence interval that was within plus or minus 20 percentage points  We classified a county as above the estimated average percentages nationwide if the county’s confidence interval was higher and did not overlap with the nationwide estimate’s confidence interval  We omitted the data for 12 counties that we determined were unreliable for our purposes  We analyzed data starting in 2013 because that was the first year for which these grant data were available electronically  We also interviewed HUD staff to understand their efforts and plans to perform similar analyses using indicators of lead paint hazard risk  To assess the reliability of HUD’s grant data, we reviewed documentation of HUD’s grant database, interviewed Lead Office staff on the processes HUD used to collect and ensure the reliability of the data, and tested the data for missing values, outliers, and obvious errors  To assess the reliability of the American Community Survey data, we reviewed statistical information from the Census Bureau and other publicly available documentation on the survey and conducted electronic testing of the data  We determined that the HUD grant data and American Community Survey county-level data on age of housing and poverty were sufficiently reliable for identifying areas at risk of lead paint hazards and determining the extent to which lead grants from 2013 through 2017 have gone to at-risk areas  Furthermore, to obtain information about how HUD works with grantees to achieve program objectives, we conducted in-person site visits to five grantees located in five localities (Alameda County, California; Atlanta, Georgia; Baltimore, Maryland; District of Columbia; and San Francisco, California); and interviewed an additional five grantees on the telephone (Hennepin County, Minnesota; Lewiston, Maine; Malden, Massachusetts; Providence, Rhode Island; and Winnebago County, Illinois)  In addition, we reviewed the grant applications of the 10 grantees we spoke to and an additional 10 grantees from 10 additional jurisdictions (State of Connecticut; Cuyahoga County, Ohio; Denver, Colorado; Monroe County, New York; Philadelphia, Pennsylvania; Memphis, Tennessee; San Antonio, Texas; St  Louis, Missouri; Tucson, Arizona; and State of Vermont)  We selected the 10 grantees for site visits or interviews based on the following criteria: geographic variation, number of years the grantees had HUD’s lead grants, and grantees that have received both types of lead grants from 2013 through 2017  We selected the 10 additional grantees’ applications for review based on geographic diversity and to achieve a total of two applications for each year during our 5-year time frame, with at least one application from each of the two HUD lead grant programs  As part of our review of selected grant applications, we identified nonfederal funding sources used by grantees, such as local tax revenues, contractor discounts, and property owner contributions  Information from the selected grantees and grant applications review cannot be generalized to those grantees we did not include in our review  Additionally, we interviewed representatives from housing organizations to obtain additional examples of any nonfederal funding sources, such as state or local bond measures, or low-interest loans to homeowners  To address the second objective, we also reviewed HUD guidance and internal memorandums related to its efforts to monitor and enforce compliance with lead paint regulations for public housing agencies (PHA), the entities that manage HUD’s voucher and public housing rental assistance programs  In addition, we reviewed HUD’s documentation of databases it uses to monitor compliance, including the Lead-Based Paint Response Tracker and the Elevated Blood Lead Level Tracker, and observed HUD staff’s demonstrations of these databases  HUD staff also provided a demonstration of the Record and Process Inspection Data database (known as “RAPID”) used by HUD’s Real Estate Assessment Center to collect physical inspection data for public housing units  We obtained and reviewed information from HUD about instances of potential noncompliance with lead paint regulations by PHAs as of November 2017 and enforcement actions HUD has taken  We compared HUD’s regulatory compliance monitoring and enforcement approach to federal internal control standards  We interviewed staff from HUD’s Lead Office, Office of General Counsel, Office of Field Operations, and field staff, including four HUD regional directors in areas of the country known to have a high prevalence of lead paint hazards, about internal procedures for monitoring and enforcing compliance with lead paint regulations by the PHAs within their respective regions  To address the third objective on HUD’s adoption of federal health guidelines and environmental standards for lead paint hazards in its lead grant and rental assistance programs, we reviewed relevant rules and HUD documentation  To identify relevant federal health guidelines and environmental standards, we reviewed guidelines and regulations from the Centers for Disease Control and Prevention (CDC) and the Environmental Protection Agency (EPA) and interviewed staff from each agency  To identify state and local laws with different requirements than these federal guidelines and standards, we obtained information from and interviewed staff from CDC’s Public Health Law Program and the National Conference of State Legislatures  We compared HUD’s requirements to CDC’s health guideline known as the “blood lead reference value” and EPA’s standards for lead-based paint hazards and lead-dust clearance standards  Finally, we reviewed information in HUD’s 2017 funding notices and lead grant programs’ policy guidance about requirements for grantees as they pertain to health guidelines and environmental standards  We also interviewed HUD staff about how HUD has used the findings from lead technical study grants to consider changes to HUD’s requirements and processes regarding identifying and addressing lead paint hazards for the grant programs  To address the fourth objective, we reviewed HUD documentation related to performance goals and measures, program evaluations, and reporting  For example, we reviewed HUD’s recent annual performance reports to identify goals and performance measures related to HUD’s efforts to make housing lead-safe  Further, we reviewed Title X to identify requirements related to evaluating and reporting on HUD’s lead efforts  We reviewed program evaluations and related studies completed by outside experts for the lead grant programs and interviewed staff from one of the organizations that conducted the evaluations  In addition, we interviewed Lead Office and PD&R staff about the agency’s plans to evaluate the requirements in the Lead Safe Housing Rule and reviewed corresponding agency documentation about these plans  Additionally, we reviewed the Lead Office’s most recent strategic plan (2009) and annual report (1997) on the agency’s lead efforts  We compared HUD’s use of performance goals and measures, program evaluations, and reporting against leading practices for assessing program performance and federal internal control standards  Finally, we interviewed staff from HUD to understand goals and performance measures used by the agency to assess their lead efforts  We conducted this performance audit from March 2017 to June 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, John Fisher (Assistant Director), Beth Faraguna (Analyst in Charge), Enyinnaya David Aja, Farah Angersola, Carol Bray, William R  Chatlos, Anna Chung, Melinda Cordero, Elizabeth Dretsch, Christopher Lee, Marc Molino, Rebecca Parkhurst, Tovah Rom, Tyler Spunaugle, and Sonya Vartivarian made key contributions to this report 

ground_truth: Commonly known for protecting the President, the Secret Service also plays a leading role in investigating and preventing financial and electronic crimes. To accomplish its mission, the Secret Service relies heavily on the use of IT infrastructure and systems. In 2009, the component initiated the IITT investment—a portfolio of programs and projects that are intended to, among other things, improve systems availability and security in support of the component's business operations. GAO was asked to review the Secret Service's oversight of its IT portfolio and workforce. This report discusses the extent to which the (1) CIO implemented selected IT oversight responsibilities, (2) Secret Service implemented leading IT workforce planning and management practices, and (3) Secret Service and DHS implemented selected performance monitoring practices for IITT. GAO assessed agency documentation against 14 selected component CIO responsibilities established in DHS policy; 15 selected leading workforce planning and management practices within 5 topic areas; and two selected leading industry project monitoring practices that, among other things, were, in GAO's professional judgment, of most significance to managing IITT. The U.S. Secret Service (Secret Service) Chief Information Officer (CIO) fully implemented 11 of 14 selected information technology (IT) oversight responsibilities, and partially implemented the remaining 3. The CIO partially implemented the responsibilities to establish a process that ensures the Secret Service reviews IT contracts; ensure that the component's IT policies align with the Department of Homeland Security's (DHS) policies; and set incremental targets to monitor program progress. Additional efforts to fully implement these 3 responsibilities will further position the CIO to effectively manage the IT portfolio. Of the 15 selected practices within the 5 workforce planning and management areas, the Secret Service fully implemented 3 practices, partly implemented 8, and did not implement 4 (see table). Within the strategic planning area, the component partly implemented the practice to, among other things, develop IT competency needs. While the Secret Service had defined general core competencies for its workforce, the Office of the CIO (OCIO) did not identify all of the technical competencies needed to support its functions. As a result, the office was limited in its ability to address any IT competency gaps that may exist. Also, while work remains to improve morale across the component, the Secret Service substantially implemented the employee morale practices for its IT staff. Secret Service officials said the gaps in implementing the workforce practices were due to, among other things, their focus on reorganizing the IT workforce within OCIO. Until the Secret Service fully implements these practices for its IT workforce, it may be limited in its ability to ensure the timely and effective acquisition and maintenance of the component's IT infrastructure and services. Of the two selected IT project monitoring practices, DHS and the Secret Service fully implemented the first practice to monitor the performance of the Information Integration and Technology Transformation (IITT) investment. In addition, for the second practice—to monitor projects on incremental development metrics—the Secret Service fully implemented the practice on one of IITT's projects and partially implemented it on another. In particular, OCIO did not fully measure post-deployment user satisfaction with the system on one project. OCIO plans to conduct a user satisfaction survey of the system by September 2018, which should inform the office on whether the system is meeting users' needs. GAO is making 13 recommendations, including that the Secret Service establish a process that ensures the CIO reviews all IT contracts, as appropriate; and identify the skills needed for its IT workforce. DHS concurred with all recommendations and provided estimated dates for implementing each of them.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: The Secret Service plays a critical role in protecting the President, Vice President, their immediate families, and national leaders, among others  In addition, the component is responsible for safeguarding the nation’s currency and financial payment systems  To accomplish its mission, Secret Service officials reported that, as of June 2018, the component had approximately 7,100 employees (including the Uniformed Division, special agents, and administrative, professional, and technical staff)  These employees were assigned to the component’s headquarters in Washington, D C , and 133 field offices located throughout the world (including 115 domestic offices and 18 international offices)  The Secret Service’s employees are heavily dependent on the component’s IT infrastructure and communications systems to perform their daily duties  According to data reported on the Office of Management and Budget’s IT Dashboard, the component planned to spend approximately $104 8 million in fiscal year 2018 to modernize and maintain its IT environment  To manage this IT environment, the Secret Service hired a full-time CIO in November 2015  In addition, in an effort to improve its management structure, the component consolidated all IT staff and assets under this new CIO in March 2017  OCIO officials stated that these staff include the government employees who provide direct and indirect support of the day-to-day operations of the Secret Service’s enterprise systems and services  According to Secret Service officials, the component’s IT workforce included 190 staff, as of July 2018  These officials stated that 166 of these employees were located in the component’s headquarters in Washington, D C , and 24 were located in domestic field offices  The officials also reported that these July 2018 staffing levels were below their current approved staffing level of 220 staff (which included 44 positions in domestic field offices)  Secret Service IT staff also deploy to other locations, as necessary, to provide support for certain security activities  For example, the Secret Service reported that, in 2017, OCIO deployed over 79 staff to New York, N Y , to provide communications support during the United Nations General Assembly  As a component of DHS, the Secret Service must follow the department’s policies and processes for managing acquisitions, including IT acquisitions  DHS categorizes its acquisition programs according to three levels that are determined by the life cycle costs of the programs  These levels then determine the extent of required program and project management and the acquisition decision authority (the individual responsible for management and oversight of the acquisition)  The department also categorizes its acquisition programs as major or non- major based on expected cost  Table 1 describes the levels of DHS’s acquisition programs and their associated acquisition decision authorities  DHS’s policies and processes for managing major acquisition programs are primarily set forth in its Acquisition Management Directive 102-01 and Acquisition Management Instruction 102-01-001  In particular, these policies establish that a major acquisition program’s decision authority is to review the program at a series of predetermined acquisition decision events to assess whether the program is ready to proceed through the acquisition life cycle phases  Figure 1 depicts the acquisition life cycle established in DHS acquisition management policy  DHS’s Acquisition Management Directive and Instruction do not establish an acquisition life cycle framework for the department’s non-major acquisition programs  Instead, according to the Instruction, Component Acquisition Executives (i e , the senior acquisition official within a component that is responsible for implementation, management, and oversight of the component’s acquisition process) are required to establish component-specific non-major acquisition policies and guidance that support the “spirit and intent” of the department’s acquisition policies  To that end, the Secret Service developed a policy that establishes an acquisition life cycle framework for its non-major acquisition programs  This acquisition framework for the component’s non-major acquisition programs is consistent with the acquisition framework that DHS established for its major acquisition programs  In particular, the Secret Service’s framework includes the same phases and decision events as DHS’s framework (e g , acquisition decision event 2A, the point at which the acquisition decision authority determines whether a program may proceed into the obtain phase)  In addition, DHS’s Systems Engineering Life Cycle Instruction and Guidebook outline a framework of major systems engineering activities and technical reviews that are to be conducted by all DHS programs and projects, both major and non-major  This framework is intended to ensure that appropriate systems engineering activities are planned and implemented, and that a program’s development effort is meeting the business need  In particular, the systems engineering life cycle framework consists of nine major activities (e g , requirements definition, integration, and testing) and a set of related technical reviews (e g , preliminary design review) and artifacts (e g , requirements documents)  DHS policy allows programs to tailor these activities, technical reviews, and artifacts based on the unique characteristics of the program (e g , scope, complexity, and risk)  For example, a program may combine systems engineering technical reviews and artifacts, or add additional reviews  This tailored approach must be documented in a program’s systems engineering life cycle tailoring plan  The systems engineering technical reviews are intended to provide DHS the opportunity to determine how well a program has completed the necessary systems engineering activities  Each technical review includes a minimum set of exit criteria that must be satisfied before a program may move on to the next systems engineering activity  At the end of the technical review, the program manager must develop a technical review completion letter that documents the outcome of the review, including stakeholder concurrence that the exit criteria were satisfied  Moreover, DHS’s agile instruction, which was first issued in April 2016 and updated in April 2018, identifies agile as the preferred development approach for the department’s IT programs and projects  Agile is a type of incremental (i e , modular) development, which calls for the rapid delivery of software in small, short increments rather than in the typically long, sequential phases of a traditional waterfall approach  DHS’s agile instruction also states that component CIOs are to set modular (i e , incremental) outcomes and target measures to monitor progress in achieving agile implementation for IT programs and projects  To that end, the department identified core metrics that its agile IT programs are to use to monitor progress, including the number of story points completed per release and the number of releases per quarter  Further, DHS policy and guidance have established an acquisition (i e , contract) review process that is intended to enable the DHS CIO to review and effectively guide the department’s IT expenditures  According to the department’s IT acquisition review guidance, DHS components with a CIO (which includes the Secret Service) are to submit to DHS OCIO for review, IT acquisitions that (1) have total estimated procurement values of $2 5 million or more; and (2) are funded by a level 1, 2, or 3 program with a life cycle cost estimate of at least $50 million (i e , a major investment, as defined by DHS’s capital planning and investment control guidance)  DHS policies and guidance also establish numerous responsibilities for the department’s component-level CIOs that are aimed at ensuring proper oversight and management of the components’ IT investments  Among other things, these component-level CIO responsibilities relate to topics such as IT budgeting, portfolio management, and oversight of programs’ systems engineering life cycles  Table 2 identifies 14 selected IT oversight responsibilities for DHS’s component CIOs  The Secret Service acquires IT infrastructure and services that are intended to improve its ability to execute its investigation and protection missions  According to data reported on the Office of Management and Budget’s IT Dashboard, the Secret Service planned to spend about $104 8 million on IT in fiscal year 2018, which included approximately $34 6 million for the development and modernization of its IT infrastructure and services, and about $70 2 million for the operations and maintenance of this infrastructure (including 21 existing IT systems)  Also according to data reported on the IT Dashboard, as of April 2018, the Secret Service had one major IT investment (called the Information Integration and Technology Transformation and discussed in more detail later in this report), seven non-major IT investments, and one non- standard infrastructure investment  Figure 2 depicts the Secret Service’s planned IT spending for fiscal year 2018  The Secret Service has faced long-standing challenges in managing its IT infrastructure  For example, A National Security Agency audit of the Secret Service’s IT environment in 2008 identified network and system vulnerabilities that needed immediate remediation to protect the component’s systems and electronic information  The Secret Service determined in 2010 that it had IT capability gaps associated with three key areas: network security, information sharing and situational awareness, and operational communications  The component reported that it required a significant IT modernization effort with sustained investment of resources to replace dated and restrictive network and communications capabilities  The Secret Service also reported in 2010 that it had 42 mission- support applications that were operating on a 1980’s mainframe that lacked multi-level security (i e , the ability to view classified information from two security levels, such as secret and top secret, at the same time), was beyond its equipment life cycle, and was at risk of failing  Further, in 2011, DHS’s Office of Inspector General reported that the Secret Service’s existing infrastructure did not meet current operational requirements  According to the Secret Service, this dated infrastructure was unable to support newer technologies (e g , Internet protocol), share common DHS enterprise services, or migrate to the department’s consolidated data centers  To address challenges with its IT environment, in 2009, the Secret Service initiated the IITT investment, which is intended to modernize and enhance the component’s infrastructure, communications systems, applications, and processes  In particular, IITT is a portfolio of programs and projects that are meant to, among other things, improve systems availability in support of the Secret Service’s business operations, increase interoperability with other government systems and networks, enhance the component’s system and network security, and enable scalability to support growth  From 2010 to July 2018, according to OCIO officials, the Secret Service spent approximately $392 million on IITT  In fiscal year 2018, the component had planned to spend approximately $42 7 million on IITT (i e , about 40 percent of its total planned IT spending for the fiscal year), according to data reported on the Office of Management and Budget’s IT Dashboard  In total, the planned life cycle cost estimate for IITT is at least $811 million  As of June 2018, IITT was a major investment comprised of two programs (one of which included three projects) and one standalone project (i e , it was not part of another program) that had capabilities that were in planning or development and modernization  These programs and project were the Enabling Capabilities program, Enterprise Resource Management System program (which included three projects that were each being implemented using an agile methodology: Uniformed Division Resource Management System, Events Management, and Enterprise-wide Scheduling), and the Multi-Level Security project  Table 3 describes the IITT programs and projects that had capabilities that were in planning or development and modernization, as of June 2018  The table also includes the associated level, acquisition decision authority, estimated life cycle costs, and planned or actual dates of operational capability for each of the programs and projects  (Appendix II also provides additional information on these programs and projects ) The Enabling Capabilities program within IITT is designated as a major acquisition program  As such, its acquisition decision authority is the DHS Under Secretary for Management, and both DHS and the Secret Service provide oversight to this program  IITT’s other program and project—the Enterprise Resource Management System program (which includes three projects, as discussed earlier) and Multi-Level Security project—are designated non-major acquisition programs  In June 2011, DHS’s Under Secretary for Management delegated acquisition decision authority for this non-major program and project to the Secret Service Component Acquisition Executive  As such, oversight of the Enterprise Resource Management System program (including its three projects) and the Multi- Level Security project is conducted primarily at the component level  The Secret Service also implemented other capabilities that are now in operations and maintenance (i e , the capabilities have been fielded and are operational) as part of the IITT investment, such as a capability to move data between systems in separate classification levels (e g , top secret and secret) and communications interoperability  Table 4 describes IITT capabilities that are in operations and maintenance  DHS, including the Secret Service, has faced long-standing challenges in effectively managing its workforce  In January 2003, we designated the implementation and transformation of DHS as high risk, including its management of human capital, because it had to transform 22 agencies—several with major management challenges—into one department  This represented an enormous and complex undertaking that would require time to achieve in an effective and efficient manner  Since that time, the department has made important progress in strengthening and integrating its management functions  Nevertheless, we have continued to report that significant work remains for DHS to improve these management functions  Among other things, we previously reported that the department had lower average employee morale than the average for the rest of the federal government  We also reported that, in 2011, based on employee responses to the Office of Personnel Management’s Federal Employee Viewpoint Survey—a tool that measures employees’ perceptions of whether and to what extent conditions characterizing successful organizations are present in their agency—DHS was ranked 31st out of 33 large agencies on the Partnership for Public Service’s Best Places to Work in the Federal Government rankings  The most recent results of these surveys in 2017 showed that DHS continues to maintain its low rankings  DHS’s Office of Inspector General has reported on challenges that the Secret Service has faced in managing its IT workforce  Specifically, in October 2016, the Inspector General reported that the Secret Service CIO did not have oversight of, or authority over, all IT resources, including the workforce; in particular, almost all of the component’s IT employees were located in a division outside of OCIO; and the Secret Service had vacancies in key positions responsible for managing IT, including not having a full-time CIO from December 2014 through November 2015  As previously discussed, the Secret Service has taken actions to address these two issues with the management of its IT workforce  These actions included hiring its full-time CIO in November 2015 and consolidating the workforce and all IT assets under this CIO in March 2017  Of the 14 selected responsibilities established for component-level CIOs in DHS’s IT management policies, the Secret Service CIO had fully implemented 11 responsibilities and had partially implemented 3 responsibilities  Table 5 summarizes the extent to which the Secret Service CIO had implemented each of the 14 responsibilities  The Secret Service CIO fully implemented 11 of the 14 selected component-level CIO responsibilities  Examples of the responsibilities that the CIO fully implemented are as follows: Develop, implement, and maintain a detailed IT strategic plan  Consistent with DHS’s IT Integration and Management directive, in January 2017, the Secret Service CIO developed an IT strategic plan that outlined the CIO’s strategic IT goals and objectives, as well as tasks intended to meet the goals and objectives  The CIO maintained this strategic plan, to include updating it in January 2018  The CIO also took steps to implement the tasks identified within the strategic plan, such as working to develop an IT training program  In particular, as part of this effort to develop an IT training program, OCIO identified recommended training for the office’s various IT workforce groups (discussed in more detail later in this report)  Concur with each program’s and/or project’s systems engineering life cycle tailoring plan  In accordance with DHS’s Systems Engineering Life Cycle instruction, the Secret Service CIO concurred with the systems engineering life cycle tailoring plan for one program and three projects included in the Secret Service’s IITT investment  Specifically, the CIO documented his approval via his signature on the tailoring plans for IITT’s Enabling Capabilities program, and Multi-Level Security, Uniformed Division Resource Management System, and Events Management projects  Participate on DHS’s CIO Council, Enterprise Architecture Board, or other councils/boards as appropriate, and appoint employees to serve when necessary  As required by DHS’s IT Integration and Management directive, the Secret Service CIO participated on two required DHS-level councils/boards, and appointed a delegate to serve in his place, when necessary  Specifically, the Secret Service CIO or the CIO’s delegate—the Deputy CIO—attended bi-monthly meetings of the DHS CIO Council  In addition, another Secret Service CIO appointee—the component’s Chief Architect—attended an ad hoc meeting of the Enterprise Architecture Board in June 2017  In addition, the Secret Service CIO had partially implemented three component-level CIO responsibilities, as follows  Manage the component IT investment portfolio, including establishing a component-level IT acquisition review process that enables component and DHS review of component acquisitions (i e , contracts) that contain IT  As directed in DHS’s Capital Planning and Investment Control directive and guidebook, the Secret Service CIO took steps to manage the component’s IT investment portfolio, including reviewing certain contracts containing IT  For example, among our random sample of 33 IT contracts that the Secret Service awarded between October 1, 2016, and June 30, 2017, we found that the CIO or the CIO’s delegate had reviewed 31 of these contracts  However, the CIO had not established and documented a defined process for reviewing contracts containing IT, which may have contributed to why the CIO or the CIO’s delegate did not review 2 of the 33 contracts in our sample  OCIO officials were unable to explain why neither of these officials reviewed the 2 contracts, which had a combined planned total procurement value of approximately $1 75 million  In particular, one of the contracts, with a planned total procurement value of about $1,122,934, was to provide credentialing services for the 2017 Presidential Inauguration  The other contract, with a planned total procurement value of about $629,337, was to provide maintenance support for a logistics system  The OCIO officials acknowledged that both contracts should have been approved by one of these officials  Without establishing and documenting an IT acquisition review process that ensures that the CIO or the CIO’s delegate reviews all contracts containing IT, as appropriate, the CIO’s ability to analyze the contracts to ensure that they are a cost-effective use of resources and are aligned with the component’s missions and goals is limited  Ensure all component IT policies are in compliance and alignment with DHS IT directives and instructions  As required by DHS’s IT Integration and Management directive, the Secret Service CIO had ensured that certain component IT policies were in compliance and alignment with DHS IT directives and instructions  For example, in alignment with the department’s IT Integration and Management directive, the Secret Service’s Investment Governance for IT policy specifies that the component CIO (in conjunction with each Secret Service Office) is responsible for developing the component IT spend plan, as well as developing and maintaining an IT strategic plan  However, the Secret Service’s enterprise governance policy was not in compliance with DHS’s IT Integration and Management directive  Specifically, while the department’s policy states that the Secret Service CIO is responsible for developing and reviewing the component’s IT budget formulation and execution, the Secret Service’s enterprise governance policy does not specify this as the CIO’s responsibility  According to OCIO officials, the Secret Service CIO participates in the development and review of the IT budget formulation and execution as a member of the Executive Resources Board (the Secret Service’s highest-level governing body, which has the final decision authority and responsibility for enterprise governance), and the Secret Service Deputy CIO is a voting member of the Enterprise Governance Council (the Secret Service’s second-level governance body and advisory council to the Executive Resources Board)  However, the Secret Service’s enterprise governance policy has not been updated to reflect these roles  The Secret Service did not update its enterprise governance policy to properly reflect the CIO’s and Deputy CIO’s roles on the Executive Resources Board or Enterprise Governance Council because OCIO officials were not aware that these roles were not properly documented in the component’s policy until we identified this issue during our review  Further compounding the issue of the Secret Service’s enterprise governance policy not properly reflecting the CIO’s and Deputy CIO’s roles and responsibilities on the component’s governance boards is that the Secret Service has not developed a charter for its Executive Resources Board  We have previously reported that a best practice for effective investment management is to define and document the board’s membership, roles, and responsibilities  One such way to do so is via a charter  According to Secret Service officials, the component does not have a charter for the board because, while the Secret Service has established the board pursuant to law, there is little statutory guidance on how the board must be formalized, including whether a charter is required  The officials acknowledged that development of a board charter is a best practice  They stated that, in response to our review, the component has begun efforts to develop a charter for the Executive Resources Board, but they did not know when it would be completed  Until the Secret Service updates its enterprise governance policy to specify (1) the CIO’s current role and responsibilities on the Executive Resources Board, to include developing and reviewing the IT budget formulation and execution, and (2) the Deputy CIO’s role and responsibilities on the Enterprise Governance Council, the CIO’s ability to develop and review the component’s IT budget may be limited  Further, until the Secret Service develops a charter for its Executive Resources Board that specifies the roles and responsibilities of all board members, including the CIO, the Secret Service will not be effectively positioned to ensure that all members understand their roles and responsibilities on the board and will perform them as expected  Set modular outcomes and target measures to monitor the progress in achieving agile implementation for IT programs and/or projects within their component  Consistent with DHS policy, the Secret Service CIO has set modular outcomes and target measures to monitor the progress of two IITT projects that the component is implementing using an agile methodology—Uniformed Division Resource Management System and Events Management  For example, the modular outcomes set for these projects included measuring planned and actual burndown (i e , the number of user stories completed)  In addition, the projects were to measure their velocity (i e , the rate of work completed) for each sprint (i e , a set period of time during which the development team is expected to complete tasks related to developing a piece of working software)  However, the modular outcomes and target measures did not include product quality or post-deployment user satisfaction, although such measures are leading practices for managing agile projects  According to Secret Service OCIO officials, the component does not mandate the specific metrics that its agile projects are to use; instead, each project is to determine the metrics based on stakeholder requirements and unique project characteristics  The officials further stated that these metrics are to be documented in an acquisition program baseline and program management plan; this baseline and program management plan are then to be approved by the CIO  To its credit, the component’s one agile project that, as of May 2018, had deployed its system to users—the Uniformed Division Resource Management System—did measure product quality  OCIO officials also stated that they regularly receive verbal, undocumented feedback from users on the system and they plan to conduct a documented user satisfaction survey on this system by September 2018  Nevertheless, without ensuring that product quality and post- deployment user satisfaction metrics are included in the modular outcomes and target measures that the CIO sets for monitoring agile projects, the Secret Service lacks assurance that the Events Management project or other future agile projects will measure product quality or post-deployment user satisfaction  Without guidance specifying that agile projects track these metrics, the projects may not do so and the CIO may be limited in his knowledge of the progress being made on these projects  Workforce planning and management is essential for ensuring that federal agencies have the talent, skill, and experience mix they need to execute their missions and program goals  To help agencies effectively conduct workforce planning and management, the Office of Personnel Management, the Chief Human Capital Officers Council, DHS, the Secret Service, and we have identified numerous leading practices related to five workforce areas: strategic planning, recruitment and hiring, training and development, employee morale, and performance management  Table 6 identifies the five workforce areas and 15 selected leading practices associated with these areas (3 practices within each area)  Of the five selected workforce planning and management areas, the Secret Service had substantially implemented two of the areas and minimally implemented three of the areas for its IT workforce  In addition, of the 15 selected leading practices associated with these workforce planning and management areas, the Secret Service had fully implemented 3 practices, partly implemented 8 practices, and did not implement any aspects of 4 practices  Table 7 summarizes the extent to which the Secret Service had implemented for its IT workforce the five selected workforce planning and management areas and 15 selected leading practices associated with those areas, as of June 2018  Strategic workforce planning is an essential activity that an agency needs to conduct to ensure that its human capital program aligns with its current and emerging mission and programmatic goals, and that the agency is able to meet its future needs  We previously identified numerous leading practices related to IT strategic workforce planning, including that an organization should (1) establish and maintain a strategic workforce planning process, including developing all competency and staffing needs; (2) regularly assess competency and staffing needs, and analyze the IT workforce to identify gaps in those areas; and (3) develop strategies and plans to address gaps in competencies and staffing  The Secret Service minimally implemented the three selected leading practices associated with the IT strategic workforce planning area  Specifically, the component partly implemented two of the practices and did not implement one practice  Table 8 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices  Establish and maintain a strategic workforce planning process, including developing all competency and staffing needs—partly implemented  The Secret Service took steps to establish a strategic workforce planning process for its IT workforce  For example, the Secret Service CIO developed and maintained a plan that identified strategic workforce planning tasks, to include analyzing the staffing requirements of the IT workforce  In addition, the Secret Service defined general core competencies (e g , communication and customer service) for its workforce, including IT staff  However, OCIO did not identify all required knowledge and skills needed to support this office’s functions  In particular, while OCIO identified certain technical competencies that its IT workforce needs, such as cybersecurity, the office did not identify and document all of the technical competencies that it needs  OCIO officials stated that they did not identify and document the technical competencies that the office needs because the Secret Service was focused on reorganizing the IT workforce under a single, centralized reporting chain within the CIO’s office  Consequently, the officials stated that they had not completed the work to identify all required IT knowledge and skills necessary to support the office  Yet, the Secret Service completed the IT workforce reorganization effort over a year ago, in March 2017 and, since then, OCIO has not identified all of the required IT knowledge and skills that the office needs  OCIO officials told us that they plan to identify all of the technical competency needs for the IT workforce, but they were unable to specify a time frame for when these needs would be fully identified  Until OCIO identifies all of the required knowledge and skills for the IT workforce, the office will be limited in its ability to identify and address any competency gaps associated with this workforce  In addition, the Secret Service did not reliably determine the number of IT staff that it needs in order to support OCIO’s functions  Specifically, in January 2017, an independent review of the staffing model that the component used to identify its IT workforce staffing needs found that the model was not based on any verifiable underlying data  In late August 2018, Office of Human Resources officials reported that they had hired a contractor in early August 2018 to update the staffing model to improve the quality of the data  These officials expected the contractor to finish updating the model by August 2019  The officials plan to use the updated model to identify the Secret Service’s IT workforce staffing needs for fiscal year 2021  Updating the staffing model to incorporate verifiable workload data should increase the likelihood that the Secret Service is able to appropriately identify its staffing needs for its IT workforce  Regularly assess competency and staffing needs, and analyze the IT workforce to identify gaps in those areas—not implemented  The Secret Service regularly assessed the competency and staffing needs for 1 of the occupational series within its IT workforce (i e , the 2210 IT Specialist series)  However, it did not regularly assess the competency and staffing needs for the remaining 11 occupational series that are associated with the component’s IT workforce, nor identify any gaps that it had in those areas  OCIO officials stated that they had not assessed these needs or identified competency or staffing gaps because, among other things, the Secret Service was focused on reorganizing the IT workforce under a single, centralized reporting chain within the CIO’s office  However, as previously mentioned, the component completed this effort in March 2017, but OCIO did not subsequently assess its competency and staffing needs, nor identify gaps in those areas  OCIO officials reported that they plan to assess the competencies of the IT workforce to identify any gaps that may exist; however, they were unable to identify a specific date by which they expect to have the capacity to complete this assessment  Until OCIO regularly analyzes the IT workforce to identify its competency needs and any gaps it may have, OCIO will be limited in its ability to determine whether its IT workforce has the necessary knowledge and skills to meet its mission and goals  Further, Office of Human Resources officials reported that they plan to update the staffing model that they use to identify their IT staffing needs to include more reliable workload data  However, as discussed earlier, the Secret Service had not yet developed that updated model to determine its IT staffing needs  Office of Human Resources officials reported that once they update the staffing model they plan to re- evaluate the Secret Service’s IT staffing needs  The officials also stated that, going forward, they plan to reassess these needs each year as part of the annual budget cycle  Regular assessments of the IT workforce’s staffing needs should increase the likelihood that the Secret Service is able to appropriately identify the number of IT staff it needs to meet its mission and programmatic goals  Develop strategies and plans to address gaps in competencies and staffing—partly implemented  The Secret Service developed recruiting and hiring strategies to address certain competency and staffing needs (e g , cybersecurity) for its IT workforce  These strategies included, among other things, participating in DHS-wide recruiting events and using special hiring authorities  However, because OCIO did not identify all of its IT competency and staffing needs, and lacked a current analysis of its entire IT workforce, the Secret Service could not provide assurance that the recruiting and hiring strategies it developed were specifically targeted towards addressing current OCIO competency and staffing gaps  For example, without an analysis of the IT workforce’s skills, OCIO did not know the extent to which it had gaps in areas such as device management and cloud computing  As a result, the Secret Service’s recruiting strategies may not have been targeted to address any gaps in those areas  Until the Secret Service updates its recruiting and hiring strategies and plans to address all IT competency and staffing gaps identified (after OCIO completes its analysis of the entire IT workforce, as discussed earlier), the Secret Service will be limited in its ability to effectively recruit and hire staff to fill those gaps  According to the Office of Personnel Management, the Chief Human Capital Officers Council, and our prior work, once an agency has determined the critical skills and competencies that it needs to achieve programmatic goals, and identifies any competency or staffing gaps in its current workforce, the agency should be positioned to build effective recruiting and hiring programs  It is important that an agency has these programs in place to ensure that it can effectively recruit and hire employees with the appropriate skills to meet its various mission requirements  The Office of Personnel Management, the Chief Human Capital Officers Council, and we have also identified numerous leading practices associated with effective recruitment and hiring programs  Among these practices, an agency should (1) implement recruiting and hiring activities to address skill and staffing gaps by using the strategies and plans developed during the strategic workforce planning process; (2) establish and track metrics to monitor the effectiveness of the recruitment program and hiring process, including their effectiveness at addressing skill and staffing gaps, and report to agency leadership on progress addressing those gaps; and (3) adjust recruitment plans and hiring activities based on recruitment and hiring effectiveness metrics  The Secret Service minimally implemented the selected three leading practices associated with the recruitment and hiring workforce area  Specifically, the component partly implemented one of the three practices and did not implement the other two practices  Table 9 lists these selected practices and provides our assessment of the Secret Service’s implementation of the practices  Implement recruiting and hiring activities to address skill and staffing gaps by using the strategies and plans developed during the strategic workforce planning process—partly implemented  OCIO officials implemented the activities identified in the Secret Service’s recruiting and hiring plans  For example, as identified in its recruiting plan, OCIO participated in a February 2017 career fair to recruit job applicants at a technology conference  In addition, in August 2017, OCIO participated in a DHS-wide recruiting event  Secret Service officials reported that, during this event, they conducted four interviews for positions in OCIO  However, as previously discussed, OCIO did not identify all of its IT competency and staffing needs, and lacked a current analysis of its entire IT workforce  Without complete knowledge of its current IT competency and staffing gaps, the Secret Service could not provide assurance that the recruiting and hiring strategies that it had implemented fully addressed these gaps  Establish and track metrics to monitor the effectiveness of the recruitment program and hiring process, including their effectiveness at addressing skill and staffing gaps, and report to agency leadership on progress addressing those gaps—not implemented  The Secret Service had not established and tracked metrics for monitoring the effectiveness of its recruitment and hiring activities for the IT workforce  Officials in the Office of Human Resources attributed this to staffing constraints and said their priority was to address existing staffing gaps associated with the Secret Service’s law enforcement groups  In June 2018, Office of Human Resources officials stated that they plan to implement metrics to monitor the effectiveness of the hiring process for the IT workforce by October 2018  The officials also stated that they were in the process of determining (1) the metrics that are to be used to monitor the effectiveness of their workforce recruiting efforts and (2) whether they need to acquire new technology to support this effort  However, the officials did not know when they would implement the metrics for assessing the effectiveness of the recruitment activities and whether they would report the results to leadership  Until the Office of Human Resources (1) develops and tracks metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce, including their effectiveness at addressing skill and staffing gaps; and (2) reports to component leadership on those metrics, the Secret Service and the Office of Human Resources will be limited in their ability to analyze the recruitment program to determine whether the program is effectively addressing IT skill and staffing gaps  Further, Secret Service leadership will lack the information necessary to make effective recruitment decisions  Adjust recruitment plans and hiring activities based on recruitment and hiring effectiveness metrics—not implemented  While the Secret Service CIO stated in June 2018 that he planned to adjust the office’s recruiting and hiring strategies to focus on entry- level staff rather than mid-career employees, this planned adjustment was not based on metrics that the Secret Service was tracking  Instead, the CIO stated that he planned to make this change because his office determined that previous mid-career applicants were often unwilling or unable to wait for the Secret Service’s lengthy, required background investigation process to be completed  However, as previously mentioned, the Secret Service did not develop and implement any metrics for assessing the effectiveness of the recruitment and hiring activities for the IT workforce  As a result, the Office of Human Resources and OCIO were not able to use such metrics to inform adjustments to their recruiting and hiring plan and activities, thus, reducing their ability to target potential candidates for hiring  Until the Office of Human Resources and OCIO adjust their recruitment and hiring plans and activities as necessary, after establishing and tracking metrics for assessing the effectiveness of these activities for the IT workforce, the Secret Service will be limited in its ability to ensure that its recruiting plans and activities are appropriately targeted to potential candidates  In addition, the component will lack assurance that these plans and activities will effectively address skill and staffing gaps within its IT workforce  An organization should invest in training and developing its employees to help ensure that its workforce has the information, skills, and competencies that it needs to work effectively  In addition, training and development programs are an integral part of a learning environment that can enhance an organization’s ability to attract and retain employees with the skills and competencies needed to achieve cost-effective and timely results  DHS, the Secret Service, and we have previously identified numerous leading training and development-related practices  Among those practices, an organization should (1) establish a training and development program to assist the agency in achieving its mission and goals; (2) use tracking and other control mechanisms to ensure that employees receive appropriate training and meet certification requirements, when applicable; and (3) collect and assess performance data (including qualitative or quantitative measures, as appropriate) to determine how the training program contributes to improved performance and results  The Secret Service minimally implemented the selected three leading practices associated with the training and development workforce area  Specifically, the component partly implemented two of the three practices and did not implement one practice  Table 10 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices  Establish a training and development program to assist the agency in achieving its mission and goals—partly implemented  OCIO was in the process of developing a training program for its IT workforce  For example, OCIO developed a draft training plan that identified recommended training for the office’s various IT workforce groups (e g , voice communications employees)  However, the office had not defined the required training for each IT workforce group  In addition, OCIO officials had not yet determined which activities they would implement as part of the training program (e g , soliciting employee feedback after training is completed and evaluating the effectiveness of specific training courses), nor did they implement those activities  OCIO officials stated that they had not yet fully implemented a training program because their annual training budget for fiscal year 2018 was not sufficient to implement such a program  However, resource constrained programs especially benefit from identifying and prioritizing training activities to inform training budget decisions  Until OCIO (1) defines the required training for each IT workforce group, (2) determines the activities that it will include in its IT workforce training and development program based on its available training budget, and (3) implements those activities, the office may be limited in its ability to ensure that the IT workforce has the necessary knowledge and skills for their respective positions  Use tracking and other control mechanisms to ensure that employees receive appropriate training and meet certification requirements, when applicable—partly implemented  OCIO used a training system to track that the managers for IITT’s programs had met certain certification requirements for their respective positions  In addition, OCIO manually tracked the technical training that certain IT staff took  However, as discussed earlier, OCIO did not define the required training for each IT workforce group  As such, the office was unable to ensure that IT staff received the appropriate training relevant to their respective positions  Until it ensures that IT staff complete training specific to their positions (after defining the training required for each workforce group), OCIO will have limited assurance that the workforce has the necessary knowledge and skills  Collect and assess performance data (including qualitative or quantitative measures, as appropriate) to determine how the training program contributes to improved performance and results—not implemented  As previously discussed, OCIO did not fully implement a training program for the IT workforce; as such, the office was unable to collect and assess performance data related to such a program  OCIO officials stated that, once they fully implement a training program, they intend to collect and assess data on how this program contributes to improved performance  However, the officials were unable to specify a time frame for when they would do so  Until OCIO collects and assesses performance data (including qualitative or quantitative measures, as appropriate) to determine how the IT training program contributes to improved performance and results (once the training program is implemented), the office may be limited in its knowledge of whether the training program is contributing to improved performance and results  Employee morale is important to organizational performance and an organization’s ability to retain talent to perform its mission  We have previously identified numerous leading practices for improving employee morale  Among other things, we have found that an organization should (1) determine root causes of employee morale problems by analyzing employee survey results using techniques such as comparing demographic groups, benchmarking against similar organizations, and linking root cause findings to action plans; and develop and implement action plans to improve employee morale; (2) establish and track metrics of success for improving employee morale, and report to agency leadership on progress improving morale; and (3) maintain leadership support and commitment to ensure continued progress in improving employee morale, and demonstrate sustained improvement in morale  With regard to its IT workforce, the Secret Service substantially implemented the selected three practices associated with the employee morale workforce area  Specifically, the component fully implemented two of the selected practices and partly implemented one practice  Table 11 lists these selected practices and provides our assessment of the Secret Service’s implementation of the practices  Determine root causes of employee morale problems by analyzing employee survey results using techniques such as comparing demographic groups, benchmarking against similar organizations, and linking root cause findings to action plans  Develop and implement action plans to improve employee morale—fully implemented  The Secret Service used survey analysis techniques to determine the root causes of its low employee morale, on which we have previously reported  For example, the component conducted a benchmarking exercise where it compared the morale of the Secret Service’s employees, including IT staff, to data on the morale of employees at other agencies, including the U S  Capitol Police, U S  Coast Guard, and the Drug Enforcement Administration  As part of this exercise, the Secret Service also compared its employee work-life offerings (e g , on-site childcare and telework program) to those available at other agencies  In addition, the Secret Service developed and implemented action plans for improving employee morale  Among these action plans, for example, the component implemented a student loan repayment program and expanded its tuition assistance program’s eligibility requirements  Establish and track metrics of success for improving employee morale, and report to agency leadership on progress improving morale—fully implemented  The Secret Service tracked metrics for improving employee morale and reported the results to leadership  For example, the component tracked metrics on the percentage of the workforce, including IT staff, that participated in the student loan repayment and tuition assistance programs  In addition, the Chief Strategy Officer reported to the Chief Operating Officer the results related to meeting those metrics  Maintain leadership support and commitment to ensure continued progress in improving employee morale, and demonstrate sustained improvement in morale—partly implemented  Secret Service leadership developed and implemented initiatives that demonstrated their commitment to improving the morale of the Secret Service’s workforce  For example, since 2014, the Secret Service had worked with a contractor to identify ways to improve the morale of its entire workforce, including IT staff  However, as of June 2018, the Secret Service was unable to demonstrate that it had sustained improvement in the morale of the component’s IT staff  In particular, the component was only able to provide IT workforce-specific results from one employee morale assessment that was conducted subsequent to the consolidation of this workforce into OCIO in March 2017  These results were from an assessment conducted by the component’s Inspection Division in December 2017 (the assessment found that the majority of the Secret Service’s IT employees rated their morale as “very good” or “excellent ”) While the component also provided certain employee morale results from the Office of Personnel Management’s Federal Employee Viewpoint Survey in 2017, these results were not specific to the IT workforce  Instead, this workforce’s results were combined with those from staff in another Secret Service division  According to OCIO officials, the results were combined because, at the time of the survey, the IT workforce was administratively identified as being part of that other division  OCIO officials stated that, going forward, they plan to continue to assess the morale of the IT workforce on an annual basis as part of the Federal Employee Viewpoint Survey  In addition, the officials stated that OCIO-specific results may be available as part of the 2018 survey results, which the officials expect to receive by September 2018  By measuring employee satisfaction on an annual basis, the Secret Service should have increased knowledge of whether its initiatives that are aimed at improving employee morale are in fact increasing employee satisfaction  Agencies can use performance management systems as a tool to foster a results-oriented organizational culture that links individual performance to organizational goals  We have previously identified numerous leading practices related to performance management that are intended to enhance performance and ensure individual accountability  Among the performance management practices, agencies should (1) establish a performance management system that differentiates levels of staff performance and defines competencies in order to provide a fuller assessment of performance, (2) explicitly align individual performance expectations with organizational goals to help individuals see the connection between their daily activities and organizational goals, and (3) periodically provide individuals with regular performance feedback  The Secret Service substantially implemented the selected three leading practices associated with the performance management workforce area  Specifically, the component fully implemented one of the three practices and partly implemented the other two practices  Table 12 lists these selected leading practices and provides our assessment of the Secret Service’s implementation of the practices  Establish a performance management system that differentiates levels of staff performance and defines competencies in order to provide a fuller assessment of performance—partly implemented  The Secret Service’s performance management process requires leadership to make meaningful distinctions between levels of staff performance  In particular, the component’s performance plans for IT staff, which are developed by the Office of Human Resources and tailored by OCIO, as necessary, specify the criteria that leadership use to determine if an individual has met or exceeded the expectations associated with each competency identified in their respective performance plan  The performance plans include pre-established, department-wide competencies that are set by DHS, as well as occupational series-specific goals that may be updated by the Secret Service  However, because OCIO did not fully define and document all of its technical competency needs for the IT workforce, as discussed earlier, the Secret Service’s performance plans for IT staff did not include performance expectations related to the full set of technical competencies required for their respective positions  In addition, because OCIO officials were unable to specify a time frame for when they will identify all of the technical competency needs for the IT workforce (as previously discussed), the officials were also unable to specify a time frame for when they would update the IT workforce’s performance plans to include those relevant technical competencies  Until OCIO updates the performance plans for each occupational series within the IT workforce to include the relevant technical competencies, once identified, against which IT staff performance should be assessed, the office will be limited in its ability to provide IT staff with a complete assessment of their performance  In addition, Secret Service management will have limited knowledge of the extent to which IT staff are meeting all relevant technical competencies  Explicitly align individual performance expectations with organizational goals to help individuals see the connection between their daily activities and organizational goals—partly implemented  The Secret Service’s performance plans for IT staff identified certain goals that appeared to be related to organizational goals and objectives  For example, the performance plan for the Telecommunications Specialist occupational series (which is one of the series included in OCIO’s IT workforce) identified a goal for staff to support the voice, wireless, radio, satellite, and video systems serving the Secret Service’s protective and investigative mission  This performance plan goal appeared to be related to the component’s strategic goal on Advanced Technology, which included an objective to create the infrastructure needed to fulfill mission responsibilities  However, the Secret Service was unable to provide documentation that explicitly showed how individual employee performance links to organizational goals, such as a mapping of the goals identified in employee performance plans to organizational goals  Specifically, while Office of Human Resources officials stated that each Secret Service directorate is responsible for ensuring that employee goals map to high-level organizational goals, OCIO officials stated that they did not complete this mapping  The officials were unable to explain why they did not align the goals in their employees’ performance plans to the component’s high-level goals  According to the officials, the Secret Service is in the process of implementing a new automated tool that will require each office to explicitly align individual performance expectations to organizational goals  The officials stated that OCIO plans to use this tool to create employees’ fiscal year 2019 performance plans  By explicitly demonstrating how individual performance expectations align with organizational goals, the Secret Service’s IT staff should have a better understanding of how their daily activities contribute towards achieving the Secret Service’s goals  Periodically provide individuals with regular performance feedback—fully implemented  Secret Service leadership periodically provided their IT staff with performance feedback  Specifically, on an annual basis, OCIO staff received feedback during a mid-year and end-of-year performance feedback assessment  In our prior work, we have stressed that candid and constructive feedback can help individuals maximize their contribution and potential for understanding and realizing the goals and objectives of an organization  Further, this feedback is one of the strongest drivers of employee engagement  According to leading practices of the Software Engineering Institute, effective program oversight includes monitoring program performance and conducting reviews at predetermined checkpoints or milestones  This is done by, among other things, comparing actual cost, schedule, and performance data with estimates in the program plan and identifying significant deviations from established targets or thresholds for acceptable performance levels  In addition, the Software Engineering Institute previously identified leading practices for effectively monitoring the performance of agile projects  According to the Institute, agile development methods focus on delivering usable, working software frequently; as such, it is important to measure the value delivered during each iteration of these projects  To that end, the Institute reported that agile projects should be measured on velocity (i e , number of story points completed per sprint or release), development progression (e g , the number of user stories planned and accepted), product quality (e g , number of defects), and post-deployment user satisfaction  DHS and the Secret Service had fully implemented the selected leading practice for monitoring the performance of one program and three projects within the IITT investment, and conducting reviews of this program and these projects at predetermined checkpoints  In addition, with regard to the selected leading practice for monitoring agile projects, the Secret Service had fully implemented this practice for one of its two projects being implemented using agile and had partially implemented this practice for the other project  Table 13 provides a summary of DHS’s and the Secret Service’s implementation of these leading practices, as relevant for one program and three projects within IITT  Monitor program performance and conduct reviews at predetermined checkpoints or milestones  Consistent with leading practices, DHS and the Secret Service monitored the performance of IITT’s program and projects by comparing actual cost, schedule, and performance information against planned targets and conducting reviews at predetermined checkpoints  For example, within the Secret Service: The Enabling Capabilities program and Multi-Level Security project monitored their contractors’ costs spent to-date on a monthly basis and compared them to the total contract amounts  OCIO used integrated master schedules to monitor the schedule performance of the Enabling Capabilities program and Multi-Level Security project  OCIO also monitored the cost, schedule, and performance of the Uniformed Division Resource Management System and Events Management projects during monthly status reviews  In addition, DHS and the Secret Service conducted acquisition decision event reviews and systems engineering life cycle technical reviews of IITT’s program and projects at predetermined checkpoints and, when applicable, identified deviations from established cost, schedule, and performance targets  For example: Secret Service OCIO met with DHS’s Office of Program Accountability and Risk Management in February 2017, and with DHS’s Acting Under Secretary for Management in June 2017, to discuss a schedule breach for the Enabling Capabilities program  In particular, the Enabling Capabilities program informed DHS that the program needed to change the planned date for acquisition decision event 3 (the point at which a decision is made to fully deploy the system) in order to conduct tests in an operational environment prior to that decision event  This delay was due to the Secret Service misunderstanding the tests that it was required to conduct prior to that decision event  Specifically, the Enabling Capabilities program had conducted tests on “production representative” systems, but these tests were not sufficient to meet the requirements for acquisition decision event 3  The project team for Multi-Level Security identified that certain technical issues they had experienced would delay system deployment and full operational capability (the point at which an investment becomes fully operational)  As such, in October 2017, the project notified the Secret Service Component Acquisition Executive of these expected delays  In particular, the web browser that was intended to provide users on “Sensitive But Unclassified” workstations the ability to view information from different security levels, experienced technical delays in meeting personal identity verification requirements  The project team also described for the executive how the schedule delay would affect the project’s performance metrics and funding, and subsequently updated the project plan accordingly  Measure and monitor agile projects on, among other things, velocity (i e , number of story points completed per sprint or release), development progression (e g , the number of features and user stories planned and accepted), product quality (e g , number of defects), and post-deployment user satisfaction  Secret Service OCIO measured its two agile projects—Uniformed Division Resource Management System and Events Management— using certain agile metrics  In particular, OCIO officials measured the Uniformed Division Resource Management System and Events Management projects using key metrics related to velocity and development progression  For example, the officials measured development progression for both projects on a daily basis  In addition, OCIO officials monitored each project’s progress against these metrics during bi-weekly reviews that they conducted with each project team  The OCIO officials also tracked product quality metrics for the Uniformed Division Resource Management System  For example, on a monthly basis, the officials tracked the number of helpdesk tickets that had been resolved related to the system  In addition, on a quarterly basis, they tracked the number of Uniformed Division Resource Management System defects that (1) had been fixed and (2) were in the backlog  However, while OCIO officials received certain post-deployment user satisfaction information from end-users of the Uniformed Division Resource Management System by, among other things, tracking the number of helpdesk tickets related to the system and via daily verbal, undocumented feedback from certain Uniformed Division officers, OCIO officials had not fully measured and documented post- deployment user satisfaction with the system, such as via a survey of employees who use the system  The officials stated that they had not conducted and documented a survey because they were focused on (1) addressing software performance issues that occurred after they deployed the system to a limited number of users, and (2) continuing system deployment to the remaining users after they addressed the performance issues  OCIO officials stated that they plan to conduct such a documented survey by the end of September 2018  The results of the user satisfaction survey should provide OCIO with important information on whether the Uniformed Division Resource Management System is meeting users’ needs  The Secret Service’s full implementation of 11 of 14 component-level CIO responsibilities constitutes a significant effort to establish CIO oversight for the component’s IT portfolio  Additional efforts to fully implement the remaining 3 responsibilities, including ensuring that all IT contracts are reviewed, as appropriate; ensuring that the Secret Service’s enterprise governance policy appropriately specifies the CIO’s role in developing and reviewing the component’s IT budget formulation and execution; and ensuring agile projects measure product quality and post-deployment user satisfaction, will further position the CIO to effectively manage the Secret Service’s IT portfolio  When effectively implemented, IT workforce planning and management activities can facilitate the successful accomplishment of an agency’s mission  However, the Secret Service had not fully implemented all of the 15 selected practices for its IT workforce for any of the five areas— strategic planning, recruitment and hiring, training and development, employee morale, and performance management  The Secret Service’s lack of (1) a strategic workforce planning process, including the identification of all required knowledge and skills, assessment of competency gaps, and targeted strategies to address specific gaps in competencies and staffing; (2) targeted recruiting activities, including metrics to monitor the effectiveness of the recruitment program and adjustment of the recruitment program and hiring efforts based on metrics; (3) a training program, including the identification of required training for IT staff, ensuring that staff take required training, and assessment of performance data regarding the training program; and (4) a performance management system that includes all relevant technical competencies, greatly limits its ability to ensure the timely and effective acquisition and maintenance of the Secret Service’s IT infrastructure and services  On the other hand, by monitoring program performance and conducting reviews at predetermined checkpoints for one program and three projects associated with the IITT investment, in accordance with leading practices, the Secret Service and DHS provided important oversight needed to guide that program and those projects  Measuring projects on leading agile metrics also provided the Secret Service CIO with important information on project performance  We are making the following 13 recommendations to the Director of the Secret Service: The Director should ensure that the CIO establishes and documents an IT acquisition review process that ensures the CIO or the CIO’s delegate reviews all contracts containing IT, as appropriate  (Recommendation 1) The Director should update the enterprise governance policy to specify (1) the CIO’s current role and responsibilities on the Executive Resources Board, to include developing and reviewing the IT budget formulation and execution; and (2) the Deputy CIO’s role and responsibilities on the Enterprise Governance Council  (Recommendation 2) The Director should ensure that the Secret Service develops a charter for its Executive Resources Board that specifies the roles and responsibilities of all board members, including the CIO  (Recommendation 3) The Director should ensure that the CIO includes product quality and post-deployment user satisfaction metrics in the modular outcomes and target measures that the CIO sets for monitoring agile projects  (Recommendation 4) The Director should ensure that the CIO identifies all of the required knowledge and skills for the IT workforce  (Recommendation 5) The Director should ensure that the CIO regularly analyzes the IT workforce to identify its competency needs and any gaps it may have  (Recommendation 6) The Director should ensure that, after OCIO completes an analysis of the IT workforce to identify any competency and staffing gaps it may have, the Secret Service updates its recruiting and hiring strategies and plans to address those gaps, as necessary  (Recommendation 7) The Director should ensure that the Office of Human Resources (1) develops and tracks metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce, including their effectiveness at addressing skill and staffing gaps; and (2) reports to component leadership on those metrics  (Recommendation 8) The Director should ensure that the Office of Human Resources and OCIO adjust their recruitment and hiring plans and activities, as necessary, after establishing and tracking metrics for assessing the effectiveness of these activities for the IT workforce  (Recommendation 9) The Director should ensure that the CIO (1) defines the required training for each IT workforce group, (2) determines the activities that OCIO will include in its IT workforce training and development program based on its available training budget, and (3) implements those activities  (Recommendation 10) The Director should ensure that the CIO ensures that the IT workforce completes training specific to their positions (after defining the training required for each workforce group)  (Recommendation 11) The Director should ensure that the CIO collects and assesses performance data (including qualitative or quantitative measures, as appropriate) to determine how the IT training program contributes to improved performance and results (once the training program is implemented)  (Recommendation 12) The Director should ensure that the CIO updates the performance plans for each occupational series within the IT workforce to include the relevant technical competencies, once identified, against which IT staff performance should be assessed  (Recommendation 13) DHS provided written comments on a draft of this report, which are reprinted in appendix III  In its comments, the department concurred with all 13 of our recommendations and provided estimated completion dates for implementing each of them  For example, with regard to recommendation 2, the department stated that the Secret Service would update its enterprise governance policy and related policies to outline the roles and responsibilities of the CIO and Deputy CIO, among others, by March 31, 2019  In addition, for recommendation 13, the department stated that the Secret Service OCIO will include relevant technical competencies in performance plans, as appropriate, in the next performance cycle that starts in July 2019  If implemented effectively, these actions should address the weaknesses we identified  The department also identified a number of other actions that it said had been taken to address our recommendations  For example, in response to recommendation 8, which calls for the Office of Human Resources to (1) develop and track metrics to monitor the effectiveness of the Secret Service’s recruitment activities for the IT workforce and (2) report to component leadership on those metrics, DHS stated that the Secret Service’s Office of Human Resources’ Outreach Branch provides to the department metrics on recruitment efforts toward designated priority mission-critical occupations  However, for fiscal year 2017, only 1 of the 12 occupational series associated with the Secret Service’s IT workforce was designated as a mission-critical occupation for the component (i e , the 2210 IT Specialist series)  The 11 other occupational series were not designated as mission- critical occupations  In addition, for fiscal year 2018, none of these 12 occupational series were designated as mission-critical occupations  As such, metrics on recruiting for these IT series may not have been reported to DHS leadership  Moreover, while we requested documentation of the recruiting metrics for the Secret Service’s IT workforce and, during the course of our review, had multiple subsequent discussions with the Secret Service regarding such metrics, the component did not provide documentation that demonstrated it had established recruiting metrics for its IT workforce  Tracking such metrics and reporting the results to Secret Service leadership, as we recommended, would provide management with important information necessary to make effective recruitment decisions  Further, in response to recommendation 10, which among other things, calls for the CIO to define the required training for each IT workforce group, the department stated that the Secret Service OCIO recently developed training requirements for each workforce group, which were issued during our audit  However, while during our audit OCIO provided a list of recommended training courses, the office did not identify them as being required courses  Defining training that is required for each IT workforce group, as we recommended, would inform OCIO of the necessary training for each position and enable the office to prioritize this training, to ensure that its staff have the needed knowledge and skills  In addition to the aforementioned comments, we received technical comments from DHS and Secret Service officials, which we incorporated, as appropriate  We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Director of the Secret Service, and other interested parties  In addition, this report is available at no charge on the GAO website at http://www gao gov  Should you or your staffs have any questions on information discussed in this report, please contact me at (202) 512-4456 or HarrisCC@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made major contributions to this report are listed in appendix IV  Our objectives were to evaluate the extent to which: (1) the U S  Secret Service (Secret Service) Chief Information Officer (CIO) has implemented selected information technology (IT) oversight responsibilities, (2) the Secret Service has implemented leading workforce planning and management practices for its IT workforce, and (3) the Secret Service and the Department of Homeland Security (DHS) have implemented selected performance and progress monitoring practices for the Information Integration and Technology Transformation (IITT) investment  To address the first objective, we analyzed DHS’s policies and guidance on IT management to identify the responsibilities that were to be implemented by the component-level CIO related to overseeing the Secret Service’s IT portfolio, including existing systems, acquisitions, and investments  From the list of 33 responsibilities that we identified, we then excluded the responsibility that was associated with information security, which is expected to be addressed as part of a separate, subsequent GAO review  We also excluded those responsibilities that were significantly large in scope (e g , implement an enterprise architecture) or that, in our professional judgment, lacked specificity (e g , provide timely delivery of mission IT services)  As a result, we excluded from consideration for this review a total of 10 CIO responsibilities  For the 23 that remained, we then combined certain responsibilities that overlapped with other related responsibilities  For example, we combined related responsibilities on the component CIO’s review of IT contracts  As a result, we identified 14 responsibilities for review  We validated with the acting DHS CIO that these responsibilities were key responsibilities for the department’s component-level CIOs  We then included all 14 of the responsibilities in our review  The 14 selected component-level CIO responsibilities were: 1  Develop and review the component IT budget formulation and execution  2  Manage the component IT investment portfolio, including establishing an IT acquisition review process that enables component and DHS review of component acquisitions (i e , contracts) that contain IT  3  Develop, implement, and maintain a detailed IT strategic plan  4  Ensure all component IT policies are in compliance and alignment with DHS IT directives and instructions  5  Concur with each program’s and/or project’s systems engineering life cycle tailoring plan  6  Support the Component Acquisition Executive to ensure processes are established that enable systems engineering life cycle technical reviews and that they are adhered to by programs and/or projects  7  Ensure that all systems engineering life cycle technical review exit criteria are satisfied for each of the component’s IT programs and/or projects  8  Ensure the necessary systems engineering life cycle activities have been satisfactorily completed as planned for each of the component’s IT programs and/or projects  9  Concur with the systems engineering life cycle technical review completion letter for each of the component’s IT programs and/or projects  10  Maintain oversight of their component’s agile development approach for IT by appointing the responsible personnel, identifying investments for adoption, and reviewing artifacts  11  With Component Acquisition Executives, evaluate and approve the application of agile development for IT programs consistent with the component’s agile development approach  12  Set modular outcomes and target measures to monitor the progress in achieving agile implementation for IT programs and/or projects within their component  13  Participate on DHS’s CIO Council, Enterprise Architecture Board, or other councils/boards as appropriate, and appoint employees to serve when necessary  14  Meet the IT competency requirements established by the DHS CIO, as required in the component CIO’s performance plan  To determine the extent to which the Secret Service CIO has implemented these responsibilities, we obtained and assessed relevant component documentation and compared it to the responsibilities  Specifically, we obtained and analyzed documentation including evidence of the CIO’s participation on the Secret Service governance board that has final decision authority and responsibility for enterprise governance, including the IT budget; monthly program management reports showing the CIO’s oversight of IT programs, projects, and systems; monthly status reports on program spending; the Secret Service’s IT strategic plan; the Secret Service’s enterprise governance policy; meeting minutes from the DHS board and council on which the CIO participated (i e , the CIO Council and Enterprise Architecture Board); and documentation demonstrating whether the CIO met the IT competency requirements  In addition, we obtained and analyzed relevant documentation related to the CIO’s oversight of the major IT investments on which the Secret Service was spending development, modernization, and enhancement funds during fiscal year 2017  As of July 2017, the component had one investment—IITT—that met this criterion  IITT is a portfolio investment that, as of July 2017, included two programs (one of which included three projects) and one standalone project (i e , it was not part of another program) that had capabilities that were in planning or development and modernization: the Enabling Capabilities program, Enterprise Resource Management System program (which included three projects, called Uniformed Division Resource Management System, Events Management, and Enterprise-wide Scheduling), and Multi-Level Security project  In particular, we obtained and analyzed documentation related to the CIO’s oversight of the systems engineering life cycles for IITT’s Enabling Capabilities program and the Uniformed Division Resource Management System, Events Management, and Multi-Level Security projects  This documentation included acquisition program baselines, systems engineering life cycle tailoring plans, and systems engineering life cycle technical review briefings and completion letters  We then compared the documentation against the five selected systems engineering life cycle oversight responsibilities (responsibilities 5, 6, 7, 8, and 9)  We also obtained and analyzed documentation related to the CIO’s oversight of two projects that the Secret Service was implementing using an agile methodology—Uniformed Division Resource Management System and Events Management  Specifically, we obtained and assessed documentation of (1) the CIO’s approval for these projects to be implemented using an agile methodology and (2) the agile development metrics that the CIO established for each of these projects  We then compared this documentation to the three agile development-related component-level CIO responsibilities (responsibilities 10, 11, and 12)  Further, to determine the extent to which the Secret Service CIO had established an IT acquisition (i e , contract) review process that enabled component and DHS review of component contracts that contain IT (which is part of responsibility 2), we first asked Secret Service officials to provide us with a list of all new, unclassified IT contracts that the component awarded between October 1, 2016, and June 30, 2017  The Secret Service officials provided a list of 54 contracts  We validated that these were contracts for IT or IT services by: (1) searching for them in the Federal Procurement Data System – Next Generation; (2) identifying their associated product or service codes, as reported in that system; and (3) determining whether those codes were included in the universe of 79 IT product or service codes identified by the Category Management Leadership Council  In validating the list of 54 contracts provided by the Secret Service, we determined that 5 of the contracts were not associated with an IT product or service code  As such, we removed those contracts from the list  In addition, we found that three other items identified by the component were not in the Federal Procurement Data System – Next Generation  Secret Service officials subsequently confirmed that these three items were not contracts  We therefore removed these three items from the list  As such, the final list of validated contracts identified by the Secret Service included 46 IT contracts  In addition, to identify any IT contracts that were not included in the list provided by the Secret Service, we conducted a search of the Federal Procurement Data System – Next Generation to identify all unclassified contracts that (1) the component awarded between October 1, 2016, and June 30, 2017; (2) were not a modification of a contract; and (3) were associated with 1 of the 79 IT product or service codes identified by the Category Management Leadership Council  Based on these criteria, we identified 144 Secret Service IT contracts in the Federal Procurement Data System – Next Generation (these 144 contracts included the 46 contracts previously identified by Secret Service officials)  We then asked Secret Service officials to validate the accuracy, completeness, and reliability of these data, which they did  From each of these two lists of IT contracts (i e , the list of 46 IT contracts identified by the Secret Service and the list of 144 IT contracts that we identified from the Federal Procurement Data System – Next Generation), we then selected random, non-generalizable samples of contracts, as described below  First, from the list of 46 IT contracts identified by Secret Service officials, we removed 4 contracts that had total values of less than $10,000  To ensure that we selected across all contract sizes, we randomly selected 12 contracts from the remaining list of 42 contracts, using the following cost ranges: $10,000 to $50,000 (4 contracts), more than $50,000 to less than $250,000 (4 contracts), and more than $250,000 (4 contracts)  Second, from our list of 144 IT contracts that we identified from the Federal Procurement Data System – Next Generation, we removed the 46 contracts identified by Secret Service officials  We also removed 12 contracts that had total values of less than $10,000  To ensure that we selected across all contract sizes, we randomly selected 21 contracts from the remaining list of 86 contracts, using the following cost ranges: $10,000 to $50,000 (7 contracts), more than $50,000 to less than $250,000 (7 contracts), and more than $250,000 (7 contracts)  In total, we selected 33 IT contracts for review  We separated the contracts into the three cost ranges identified above in order to ensure that contracts of different value levels had been selected  This enabled us to determine the extent to which the CIO appropriately reviewed contracts of all values  To determine the extent to which the CIO had established an IT contract approval process that enabled the Secret Service and DHS, as appropriate, to review IT contracts, we first asked Secret Service Office of the CIO (OCIO) officials for documentation of their IT contract approval process  These officials were unable to provide such documentation  Instead, the officials stated that the Secret Service CIO or the CIO’s delegate approves all IT contracts prior to award  The officials also provided documentation that identified four staff to whom the CIO had delegated his approval authority  Further, the officials stated that, in accordance with DHS’s October 2016 IT acquisition review guidance, they submitted to DHS OCIO for approval any IT contracts that met DHS’s thresholds for review, including those that (1) had total estimated procurement values of $2 5 million or more, and (2) were associated with a major investment  Based on the IT acquisition review process that Secret Service OCIO officials described, we then obtained and analyzed each of the 33 selected IT contracts and associated approval documentation to determine whether or not the Secret Service CIO or the CIO’s delegate had approved each of the contracts  In particular, we (1) reviewed the name of the contract approver on the approval documentation, and (2) compared the signature dates that were on the contracts to the signature dates that were identified on the associated approval documentation  In addition, to determine whether or not the Secret Service CIO submitted to DHS OCIO for approval the IT contracts that (1) had total estimated procurement values of $2 5 million or more, and (2) were associated with major investments, we first analyzed the 144 Secret Service IT contracts that we had previously pulled from the Federal Procurement Data System – Next Generation to determine which contracts met the $2 5 million threshold  We identified 4 contracts that met this threshold  We then requested that OCIO identify the levels (i e , major or non-major) of the investments associated with these contracts  According to OCIO officials, 3 of the 4 contracts were associated with non-major investments and 1 was not associated with an investment  As such, based on DHS’s October 2016 IT acquisition review guidance, none of these contracts needed to be submitted to DHS OCIO for review  We also interviewed Secret Service officials, including the CIO and Deputy CIO, regarding the CIO’s implementation of the 14 selected component-level responsibilities  We assessed the evidence against the selected responsibilities to determine the extent to which the CIO had implemented them  To address the second objective—determining the extent to which the Secret Service had implemented leading workforce planning and management practices for its IT workforce—we first identified seven topic areas associated with human capital management based on the following sources: The Office of Personnel Management’s Human Capital Framework  Office of Personnel Management and the Chief Human Capital Officers Council Subcommittee for Hiring and Succession Planning, End-to-End Hiring Initiative  GAO, High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO, IT Workforce: Key Practices Help Ensure Strong Integrated Program Teams; Selected Departments Need to Assess Skill Gaps  GAO, Department of Homeland Security: Taking Further Action to Better Determine Causes of Morale Problems Would Assist in Targeting Action Plans  GAO, Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government  GAO, Results-Oriented Cultures: Creating a Clear Linkage between Individual Performance and Organizational Success  DHS acquisition guidance  Secret Service acquisition guidance  Among these topic areas, we then selected five areas that, in our professional judgment, were of particular importance to successful workforce planning and management  They were also previously identified as part of our high-risk and key issues work on human capital management  These areas include: (1) strategic planning, (2) recruitment and hiring, (3) training and development, (4) employee morale, and (5) performance management  We also reviewed these same sources and identified numerous leading practices associated with the five topic areas  Among these leading practices, we then selected three leading practices within each of the five areas (for a total of 15 selected practices)  The selected practices were foundational practices that, in our professional judgment, were of particular importance to successful workforce planning and management  Table 14 identifies the five selected workforce areas and 15 selected associated practices  To determine the extent to which the Secret Service had implemented the selected leading workforce planning and management practices for its IT workforce, we obtained and assessed documentation and compared it against the 15 selected practices  In particular, we analyzed the Secret Service’s human capital strategic plan, human capital staffing plan, IT strategic plan, documentation of the component’s staffing model that it used to determine the number of IT staff needed, an independent verification and validation report on the component’s staffing models, documentation of the current number of IT staff, the Secret Service’s recruitment and outreach plans, documentation of DHS’s hiring authorities (which are applicable to the Secret Service), the Secret Service’s training strategic plan, IT workforce training plan, action plans for improving employee morale, and templates used for measuring and reporting employee performance  We also interviewed Secret Service officials—including the CIO, Deputy CIO, and workforce planning staff—about the component’s workforce- related policies and documentation  Further, we discussed with the officials the Secret Service’s efforts to implement the selected workforce practices for its IT workforce  Regarding our assessments of the Secret Service’s implementation of the 15 selected workforce planning and management practices, we assessed a practice as being fully implemented if component officials provided supporting documentation that demonstrated all aspects of the practice  We assessed a practice as not implemented if the officials did not provide any supporting documentation for that practice, or if the documentation provided did not demonstrate any aspect of the practice  We assessed a practice as being partly implemented if the officials provided supporting documentation that demonstrated some, but not all, aspects of the selected practice  In addition, related to our assessments of the Secret Service’s implementation of the five selected overall workforce areas, we assessed each area as follows, based on the implementation of the three selected practices within each area: Fully implemented: The Secret Service provided evidence that it had fully implemented all three of the selected practices within the workforce area; Substantially implemented: The Secret Service provided evidence that it had either fully implemented two selected practices and partly implemented the remaining one selected practice within the workforce area, or fully implemented one selected practice and partly implemented the remaining two selected practices within the workforce area; Partially implemented: The Secret Service provided evidence that it had partly implemented each of the three selected practices within the workforce area; Minimally implemented: The Secret Service provided evidence that it partly implemented two selected practices and not implemented the remaining one selected practice within the workforce area, or partly implemented one selected practice and not implemented the remaining two selected practices within the workforce area; or Not implemented: The Secret Service did not provide evidence that it had implemented any of the three selected practices within the workforce area  To address the third objective—determining the extent to which the Secret Service and DHS have implemented selected performance and progress monitoring practices for IITT—we reviewed leading project monitoring practices and guidance from the Software Engineering Institute  First, we reviewed the practices within the Project Monitoring and Control process area of the Institute’s Capability Maturity Model Integration® for Acquisition  Based on our review, we identified four practices associated with monitoring program performance and progress  In our professional judgment, all four of these practices were of significance to managing the IITT investment given the phase of the life cycle that the investment was in  As such, we elected to include all four of these practices in our review, and combined them into one practice, as follows: Monitor program performance and conduct reviews at predetermined checkpoints or milestones by, among other things, comparing actual cost, schedule, and performance data with estimates in the program plan and identifying significant deviations from established targets or thresholds for acceptable performance levels  Next, given the agile development methodology that the Secret Service was using for certain projects within IITT, we reviewed the Software Engineering Institute’s technical note on the progress monitoring of agile contractors  Based on our review, and in consultation with an internal expert, we selected four agile metrics that the Institute identified as important for successful agile implementations and that, in our professional judgment, were of most significance to monitoring the performance of IITT’s agile projects  We then combined these four metrics into one practice, as follows: Measure and monitor agile projects on velocity (i e , number of story points completed per sprint or release), development progression (e g , the number of features and user stories planned and accepted), product quality (e g , number of defects), and post-deployment user satisfaction  To determine the extent to which DHS and the Secret Service had implemented the first selected practice, we analyzed relevant program management and governance documentation for IITT’s Enabling Capabilities program, and Multi-Level Security, Uniformed Division Resource Management System, and Events Management projects  In particular, we analyzed acquisition program baselines, DHS acquisition decision event memorandums, artifacts from DHS and Secret Service program oversight reviews, cost monitoring reports, program integrated master schedules, and program status briefings, and compared this documentation to the selected practice  We also interviewed Secret Service OCIO officials regarding the Secret Service’s and DHS’s efforts to monitor the IITT investment’s performance and progress  To determine the extent to which the Secret Service had implemented the second selected practice related to measuring and monitoring agile projects on agile metrics (i e , velocity, development progression, product quality, and post-deployment user satisfaction), we obtained and analyzed agile-related documentation for the two projects that the Secret Service was implementing using an agile methodology—Uniformed Division Resource Management System and Events Management  Specifically, to determine the extent to which the Secret Service was measuring and monitoring these two projects on metrics for velocity and development progression, we obtained and analyzed documentation, such as sprint burndown charts and monthly program status reports, and compared it to the selected practice  In addition, the agile metrics for product quality and post-deployment user satisfaction were only applicable to projects that had been deployed to users  As such, these metrics were applicable to the Uniformed Division Resource Management System (which the Secret Service had deployed to users) and were not applicable to Events Management (which the Secret Service had not yet deployed to users, as of early May 2018)  We therefore obtained and analyzed documentation demonstrating that Secret Service OCIO measured product defects for the Uniformed Division Resource Management System  We also requested documentation demonstrating that OCIO had measured and monitored post-deployment user satisfaction for this project, including via a survey  OCIO officials stated that they had not conducted such a survey and were unable to provide documentation demonstrating they had measured post- deployment user satisfaction for the Uniformed Division Resource Management System  To assess the reliability of the cost, schedule, and agile-related data that were in DHS and the Secret Service’s program management and governance documentation for the IITT investment, we (1) analyzed related documentation and assessed the data against existing agency records to identify consistency in the information, and (2) examined the data for obvious outliers, incomplete, or unusual entries  We determined that the data in these documents were sufficiently reliable for our purpose, which was to evaluate the extent to which DHS and the Secret Service had implemented processes for monitoring the IITT investment’s performance and progress  We conducted this performance audit from May 2017 to November 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  As of June 2018, the Secret Service’s Information Integration and Technology Transformation (IITT) investment included two programs (one of which included three projects) and one project that had capabilities that were in planning or development and modernization, as described below: Enabling Capabilities  This program is intended to, among other things, (1) modernize and enhance the Secret Service’s information technology (IT) network infrastructure, including increasing bandwidth and improving the speed and reliability of the Secret Service’s IT system performance; (2) enhance cybersecurity to protect against potential intrusions and viruses; and (3) provide counterintelligence and data mining capabilities to improve officials’ ability to perform the Secret Service’s investigative mission  Enterprise Resource Management System  This program comprises three projects that are intended to provide: a system that will enable the Secret Service’s Uniformed Division to efficiently and effectively plan, provision, and schedule missions (this project is referred to as Uniformed Division Resource Management System), a system that will unify the logistical actions (e g , assigning personnel) surrounding special events that Secret Service agents need to protect, such as the United Nations General Assembly (this project is referred to as Events Management), and a capability for creating schedules for Secret Service agents and administrative, professional, and technical staff, as well as the ability to generate reports on information such as monthly hours worked (this project is referred to as Enterprise-wide Scheduling)  Multi-Level Security  This project is intended to enable authorized Secret Service users to view two levels of classified information on a single workstation  Previously, data at various security levels were contained and used in multiple disparate systems  Multi-Level Security is intended to streamline users’ access to information at different security levels in order to enable them to more quickly and effectively perform their duties  Table 15 provides the planned life cycle cost and schedule estimates (threshold values) for each IITT program and project that had capabilities in planning or development and modernization, as of June 2018  In addition, the table describes any changes in those cost and schedule estimates, as well as the key reasons for any changes, as identified by officials from the Secret Service’s Office of the Chief Information Officer  In addition to the contact named above, the following staff made key contributions to this report: Shannin O’Neill (Assistant Director), Emily Kuhn (Analyst-in-Charge), Quintin Dorsey, Rebecca Eyler, Javier Irizarry, and Paige Teigen 


Report 2: As part of the annual budget formulation process for each fiscal year, DOD establishes for each of nine foreign currencies, a foreign currency budget rate (units of foreign currency per one United States (U S ) Dollar) to use when developing O&M and MILPERS funding requirements for overseas expenditures  Foreign currency budget rates for a particular fiscal year are established approximately 18 months prior to the fiscal year when overseas obligations will be incurred and disbursements made  For example, in June 2015, OUSD(C) issued guidance to, in part, instruct the services on the foreign currency rates to use in building their fiscal year 2017 budgets  In February 2016, as part of the President’s budget, DOD submitted its proposed fiscal year 2017 budget to Congress, and it began incurring obligations against subsequently appropriated amounts on October 1, 2016  DOD has used various methodologies for establishing the foreign currency budget rates  In 2005, we reviewed DOD’s methodology for developing its foreign currency budget rates and reported that DOD’s approach for estimating its foreign currency requirements for the fiscal year 2006 budget was a reasonable approach for forecasting foreign currency rates that could produce a more realistic estimate than its historical approach  In its fiscal year 2006 through 2016 budget requests, DOD used a centered weighted average model that combined both a 5-year average of exchange rates and an average of the most recently observed 12 months of exchange rates  For its fiscal year 2017 request, DOD adjusted its methodology to establish the foreign currency budget rates  Specifically, DOD established its foreign currency rates by calculating a 6-month average of Wall Street Journal rates published every Monday from May 25, 2015, to November 16, 2015  According to an OUSD(C) official, the 6-month average more closely represented foreign currency exchange rates experienced by the department during budget formulation, and it accounted for the strength of the U S  Dollar, which had increased as compared with its historical 5- year average  DOD’s analysis found that the use of the 5-year historical average would have resulted in substantial gains when compared with gains expected from application of the 6-month average  More specifically, DOD projected gains of about $1 billion using the 5-year average of rates  During the fiscal year for which a budget is developed, DOD incurs obligations for its overseas O&M and MILPERS activities  Those obligations are recorded using the foreign currency budget rates  DOD uses various methods for selecting foreign currency rates to liquidate those obligations through disbursements, which may differ from the budget rates  DOD’s preferred payment method for foreign currency transactions is the Department of Treasury’s (Treasury) comprehensive international payment and collection system—the International Treasury Services (ITS gov) system—which serves federal agencies making payments in nearly 200 countries  ITS gov offers a number of rates, including advanced rates available up to 5 days in advance of disbursement, and the spot rate  The spot rate is the price for foreign currencies for delivery in 2 business days  While advanced rates, like spot rates, are based on the current market rate, advanced rates at the time they are selected are generally higher than the spot rate, with the 5-day advanced rate being the highest, because the rates are locked in ahead of the actual value date  While the spot rate can be more cost-effective, it requires immediate transaction processing, which may not be feasible for all disbursements  Differences between obligations incurred at the foreign currency budget rates and the amounts that DOD actually disburses drive gains or losses in the appropriated amounts DOD has available for its planned overseas expenditures  For example, if DOD budgeted for the U K  Pound at a rate of  6289 (that is, 1 U S  Dollar buys  6289 U K  Pounds) as it did in fiscal year 2016, and the rate experienced at the time of disbursement was  6845, then DOD would have requested more funds than were actually needed for transactions involving the U K  Pound  That would have resulted in a gain from the transaction—meaning that DOD would need less funds than were budgeted for the transaction  Conversely, a current rate that is lower than what was budgeted will result in a loss—and DOD would require more funds than were budgeted for the transaction  Within each of the services’ O&M and MILPERS appropriations accounts, amounts are available for overseas activities  Amounts obligated for overseas activities, along with associated foreign currency gains and losses, are managed by the services as part of the overall management of their O&M and MILPERS appropriations accounts  Service components use foreign currency fluctuation accounts within their O&M and MILPERs appropriations to manage realized gains and losses in direct programs due to fluctuations in foreign exchange rates  The service-level foreign currency fluctuation accounts are maintained at various budgetary levels within the service components  In fiscal year 1979, Congress appropriated $500 million to establish the FCFD account for purposes of maintaining the budgeted level of operations in the MILPERS and O&M appropriation accounts by mitigating substantial gains or losses to those appropriations caused by foreign currency rate fluctuations  FCFD appropriations are different from the O&M and MILPERS appropriations in two ways  First, FCFD account amounts are no-year amounts, meaning that they are available until expended, while in general, O&M and MILPERS appropriations are 1-year amounts and expire at the end of the fiscal year for which they were appropriated  Expired O&M and MILPERS amounts remain available only for limited purposes for 5 additional fiscal years  At the end of the 5-year expired period, any remaining O&M or MILPERS amounts, obligated or unobligated, are canceled and returned to Treasury  Second, FCFD account amounts may be used only to pay obligations incurred because of fluctuations in currency exchange rates of foreign countries, while O&M amounts are available for diverse expenses necessary for the operation and maintenance of the services and MILPERS amounts are available for service personnel-related expenses, such as pay, permanent changes of station travel, and expenses of temporary duty travel, among other purposes  Amounts from the FCFD account may be transferred to service-level foreign currency fluctuation accounts within O&M and MILPERS appropriation accounts to offset losses in buying power due to unfavorable differences between the budget rate and the foreign currency exchange rate prevailing at the time of disbursement  The FCFD account may be replenished in several ways  Amounts transferred from the FCFD to O&M and MILPERS appropriations may be returned when not needed to liquidate obligations because of subsequent favorable foreign currency rates in relation to the budget rate, or because other amounts have become available to cover obligations  A transfer back to the FCFD of unneeded amounts must be made before the end of the second fiscal year of expiration following the fiscal year of availability of the O&M or MILPERS appropriation to which the funds were originally transferred  Amounts may also be transferred to the FCFD account even if they did not originate there  Specifically, DOD may transfer to the FCFD account any unobligated O&M and MILPERS amounts unrelated to foreign currency exchange fluctuations so long as the transfers are made not later than the end of the second fiscal year of expiration of the appropriation  While multiple transfers of these unobligated amounts may be made during a fiscal year, any such transfer is limited so that the amount in the FCFD account does not exceed the statutory maximum of $970 million at the time of transfer  When the FCFD account balance is at the maximum balance, the services normally retain in their service- level O&M and MILPERs foreign currency fluctuation accounts any gains resulting from favorable foreign currency rates  Finally, any amounts transferred, whether from the FCFD account to an O&M or MILPERS account, or from an O&M or MILPERS account to the FCFD, are merged with the account and assume the characteristics of that account, including the period of availability of the funds contained in the account  Visibility of service-level foreign currency fluctuation account and FCFD transactions is maintained through the services’ accounting systems and execution reports  DOD uses the following reports to track its foreign currency funds: Foreign Currency Fluctuations, Defense Report (O&M): provides data on O&M foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been liquidated and disbursed at the time of the report  Foreign Currency Fluctuation, Defense Report (MILPERS): provides data on MILPERS foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been disbursed at the time of the report  In 2013 we analyzed and reported on carryover balances in federal accounts, which amounted to $2 2 trillion in fiscal year 2012, and we found that greater examination of carryover balances by an agency provides opportunities for enhanced oversight of their management of federal funds and may help identify opportunities for potential budgetary savings  Carryover balances are composed of both obligated and unobligated amounts  Only accounts with multi-year or no-year amounts, such as the FCFD, may carry over amounts that remain legally available for new obligations from one fiscal year to the next  DOD’s carryover balances would include FCFD account balances carried from one year to the next  DOD’s FCFD account is composed of unobligated carryover amounts that accumulate when unneeded for transfer to O&M and MILPERS accounts to cover foreign currency fluctuations  FCFD unobligated carryover balances include any expired, unobligated balances from the military services’ O&M and MILPERS accounts, which can include any gains due to favorable foreign currency fluctuations that are not used to cover other losses and that are transferred into the FCFD  DOD revised its foreign currency budget rates in fiscal years 2014 through 2016, which resulted in budget rates in these years that were more closely aligned with rates published by Treasury  Furthermore, the revised budget rates in fiscal years 2014 through 2016 decreased DOD’s projected O&M and MILPERS funding needs  The revised budget rates also decreased potential gains and losses in the amount of funds that DOD had available for its planned overseas expenditures  DOD revised its foreign currency budget rates in fiscal year 2014 and continued to do so in fiscal years 2015 and 2016 before making adjustments to its methodology in fiscal year 2017  According to an OUSD(C) official, the methodology developed in 2017 resulted in budget rates that were more closely aligned with market rates than in previous years, making revision of the 2017 budget rates unnecessary  DOD’s revisions to its foreign currency budget rates in fiscal years 2014 through 2016 resulted in rates that more closely aligned with those published by Treasury  Further, they decreased the expected gains that would have otherwise resulted from a substantial increase in the strength of the U S  Dollar, in fiscal years 2014 through 2016, relative to other foreign currencies from the time the budget rates were set as compared with the rates available once the fiscal year began  Prior to fiscal year 2014, DOD did not revise its foreign currency budget rates  DOD officials did not provide an explanation for why the budget rates for fiscal years 2009 through 2013 were not revised  DOD developed, in November 2015, a set of standard operating procedures that describe the methodology it used for formulating budget rates for the nine foreign currencies included in its budget submission  These procedures also state that DOD is required to update the budget rates once an appropriation is enacted for the fiscal year  For example, if Congress reduces DOD’s appropriations due to favorable foreign currency rates, such as the $1 5 billion reduction in DOD’s total fiscal year 2016 appropriations, OUSD(C) then revises the budget rates to absorb the reduced funding levels  OUSD(C) officials stated that other factors are also considered when determining whether to revise the foreign currency budget rates, and that the department communicates the revised budget rates to the DOD components and Congress  For example, OUSD(C) assesses the value of each of the nine foreign currencies used to develop the budget request relative to the strength of the U S  Dollar during the fiscal year  An OUSD(C) official also noted that the effects that the rate changes would have across these foreign currencies are also considered prior to submitting recommended rate revisions to the OUSD(C) leadership for approval  The official stated that one currency may be experiencing a loss, while another is experiencing a gain, which can affect whether to revise the rates and what those revisions should be  Additionally, the OUSD(C) official stated that “significant” projected gains or losses could drive a revision to the foreign currency budget rates, and that an informal $10 million threshold for projected gains and losses is used to determine when the foreign currency budget rates are revised  According to OUSD(C) officials, DOD components and Congress were notified when the budget rates were revised during fiscal years 2014 through 2016, including an explanation for why the rates were revised  OUSD(C) also includes the budget rates for each of the nine foreign currencies on its website and identifies any instances in which the budget rates were revised with the effective date of any rate revisions  Our analysis of DOD’s use of revised budget rates during fiscal years 2014 through 2016 found that the revised budget rates for those years were more closely aligned with rates published by Treasury  More specifically, for the nine foreign currencies included in DOD’s budget, our analysis comparing DOD’s initial and revised budget rates for fiscal years 2009 through 2017 with average Treasury rates for these years found that DOD’s budget rates differed from Treasury rates by less than 10 percent in about 64 percent of the total 162 occurrences we examined  While we are unaware of any criteria that suggest how closely DOD’s foreign currency budget rates should align with market rates, we used 10 percent as a basis for our analysis because Treasury’s guidance states that amendments to its published exchange rates are required if rates differ from current rates by 10 percent or more  We further examined these occurrences to determine what the differences were between the DOD and Treasury rates before and after DOD began revising its budget rates in fiscal year 2014  Of the 162 occurrences we reviewed, there were 90 occurrences included in our comparison for fiscal years 2009 through 2013, and 72 occurrences were included in our comparison for fiscal years 2014 through 2017  Our analysis shows the following: For fiscal years 2014 through 2017, DOD’s budget rates for its nine foreign currencies differed from Treasury rates by less than 10 percent in about 71 percent of the occurrences  This increased from about 59 percent of the occurrences for the period of fiscal years 2009 through 2013, before DOD began revising its rates after the fiscal year began  For fiscal years 2014 through 2017, DOD’s budget rates differed from Treasury’s rates by 10 percent or more after DOD began revising its rates in fiscal year 2014 in about 29 percent of the occurrences, which is a decrease from about 41 percent of the occurrences prior to fiscal year 2014  Figure 2 below shows the number of occurrences in which DOD’s initial and revised rates differed from Treasury rates by less than 10 percent, and the occurrences in which DOD’s rates differed from Treasury rates by 10 percent or more  The occurrences that are less than 10 percent of Treasury rates are most closely aligned with Treasury rates  According to DOD officials, the differences between DOD’s foreign currency budget rates and Treasury rates are driven primarily by market volatility (that is, the differences in the foreign currency rates from when DOD formulates its budget rates, prior to the fiscal year, and the foreign currency rates determined by Treasury when obligated amounts are liquidated through disbursements during the fiscal year)  According to the OUSD(C) official responsible for formulating and revising the foreign currency budget rates, the delay that occurs between the time when a budget rate is set (approximately 18 months prior to the beginning of a particular fiscal year) and the actual fiscal year is a major factor for why the budget rate may be revised  According to the official, the market rates experienced during fiscal years 2014 through 2016 were substantially different from those expected when the budget rates for those years were developed  Therefore, DOD revised its budget rates during these years to more closely align with market rates experienced  Specifically, this official stated that DOD revised its budget rates during fiscal years 2014 through 2016 to decrease the expected gains that would have otherwise resulted during these fiscal years from a substantial increase in the strength of the U S  Dollar relative to other foreign currencies from the time the budget rates were set as compared with more favorable rates available once the fiscal year began  In order to more closely align its budget rates with market rates, DOD introduced a new methodology to establish the foreign currency budget rates for fiscal year 2017 because DOD anticipated approximately $1 billion in projected gains if it used the prior methodology  As a result of this change in the methodology, according to the OUSD(C) official, DOD did not experience substantial gains or losses in fiscal year 2017  Therefore, DOD did not revise its foreign currency budget rates during fiscal year 2017  However, as previously stated, the official did not provide an explanation as to why the budget rates for fiscal years 2009 through 2013 were not revised  DOD’s use of revised foreign currency budget rates decreased DOD’s projected O&M and MILPERS funding needs and any potential gains and losses that would have occurred due to foreign currency fluctuations during fiscal years 2014 through 2016  Because DOD uses its budget rates to establish its projected annual O&M and MILPERS funding requirements for planned overseas expenditures, any revisions to the budget rates affect DOD’s estimate of its funding needs  For example, our analysis shows that as a result of revising its budget rates during fiscal years 2014 through 2016, DOD’s projected funding needs for the period of fiscal years 2009 through 2017 decreased from about $60 2 billion to about $57 5 billion—a decrease of about $2 7 billion  To further show the effect that changing foreign currency rates could have on DOD’s projected funding for planned overseas expenditures for fiscal years 2009 through 2017, we also compared DOD’s projected O&M and MILPERS funding needs, based on its initial and revised foreign currency budget rates, against projected funding needs based on the use of foreign currency rates published by Treasury during the fiscal year  Our analysis shows that DOD’s projected O&M and MILPERS foreign currency funding needs using Treasury rates would have been about $58 4 billion, or about $885 million more than the $57 5 billion that DOD had projected using its initial and revised budget rates  DOD also uses foreign currency budget rates to calculate gains or losses attributable to foreign currency fluctuations  Specifically, DOD determines gains and losses due to foreign currency fluctuations by comparing the budget rate (that is, initial or revised budget rate) used to incur obligations against a more current market rate at the time it liquidates its obligations through disbursements  Therefore, revisions to the budget rates not only change DOD’s projected O&M and MILPERS funding requirements for the fiscal year in which the revisions occur, but also change the baseline from which the potential gains or losses would result when DOD liquidates its overseas O&M and MILPERS obligations through disbursements  For example, in fiscal year 2016, Congress reduced DOD’s total appropriations by $1 5 billion  As a result of this reduction and favorable foreign currency rates, DOD revised its fiscal year 2016 budget rates in February 2016 and applied the revised foreign currency budget rates in its calculations of gains and losses due to foreign currency fluctuations since the beginning of the fiscal year to absorb the reduced funding level  In applying the revised budget rates, a $30 million gain DOD had previously projected became a projected loss of about $186 2 million  The use of revised budget rates also affects the movement of funds from the FCFD account  For example, if the use of the revised budget rate creates a loss and DOD is unable to cover the increased costs to its O&M or MILPERS appropriations, funds from the FCFD account may be used to cover its planned overseas expenditures  DOD has taken some steps to reduce costs in selecting foreign currency rates to liquidate its obligations through disbursements  However, DOD organizations are not always selecting the most cost-effective rates to convert U S  Dollars, and DOD has not determined whether opportunities exist to achieve additional efficiencies when making disbursements  DOD liquidates its obligations through disbursements for overseas expenditures using Treasury’s ITS gov system, which provides DOD organizations with a choice of foreign currency rates to apply when making disbursements in a foreign currency  The foreign currency rate chosen determines how many U S  Dollars must be paid for the transaction  Treasury officials explained that customers may choose either the spot rate or an advanced rate  The spot rate is the price for foreign currencies for delivery in 2 business days  Treasury officials explained that advanced rates are exchange rates that are “locked in” and guaranteed by the bank processing the disbursement 5, 4, or 3 days in advance of payment processing, which is known as the “value date” of a disbursement  Normally, the cost of the rate increases the further from the date of disbursement that it is locked in  While DOD often uses a 5-day advanced rate to make its disbursements, the other rate options available, such as a 3-day advanced and a spot rate, can be more cost-effective  We analyzed data provided by Treasury from its ITS gov system and found that for disbursements made during the period of June and July 2017, the 5-day advanced rate was more costly than the 3-day advanced rate  In instances where the spot rate was available, we found that it was also more cost-effective than either the 3- day or 5-day advanced rates  For example, for those transactions processed through ITS gov on June 13, 2017, DOD would have paid 1 U S  Dollar for  881 European Euros if using the 5-day advanced rate;  883 European Euros if using the 3-day advanced rate; and  889 European Euros if using the spot rate  In the case of the Army, an Army Financial Management Command official provided us information indicating that the service has estimated potential cost savings that would result from more consistently selecting 3-day advanced rates through the ITS gov system to make overseas disbursements of amounts, rather than the 5-day advanced rate  More specifically, the Army estimated between $8 million and $10 million in annual savings by transitioning from a 5-day to a 3-day advanced rate when selecting foreign currency rates  According to officials, the Army has transitioned all paying locations to the 3-day advanced rate  The Army estimates that these locations have produced $6 04 million in savings through February 2018  Although the Army indicated that it also planned to analyze whether use of the spot rate was feasible, it had not conducted this review at the time of our review  Data provided to us by Treasury from its ITS gov system indicate that in June and July of 2017, the Air Force used the 5-day advanced rate exclusively for its disbursements, while the Navy and Marine Corps relied on both the 5-day and the 3-day advanced rates  Our analysis of these data show the Air Force would have achieved total savings for those 2 months of about $258,000 if it had made its disbursements using the 3- day versus the 5-day advanced rate  The savings resulting from each transaction varied based on the amount of the transaction  For example, on June 13, 2017, the Air Force disbursed a payment exceeding $3 7 million and would have saved more than $9,000 for that transaction if the 3-day advanced rate had been used  For the same single transaction, if the spot rate had been used instead of the 5-day advanced rate, the Air Force would have saved more than $31,000  The savings associated with the Navy’s and Marine Corps’ disbursements for the same 2-month period showed the potential for less dramatic savings of less than $100 because the Navy and Marine Corps used the 3-day advanced rate as opposed to the 5-day advanced rate for most of its disbursements  Where information on the spot rate was available, its use, as opposed to either the 5-day or 3-day advanced rate, would have resulted in additional savings opportunities for those 2 months  While these examples are illustrative of cost savings opportunities in June and July 2017, Treasury data show that in fiscal year 2016, DOD disbursed more than $11 8 billion through ITS gov and, as of July 2017, had disbursed more than $9 6 billion through ITS gov  Our analysis suggests that DOD could achieve further cost savings by more consistently selecting cost-effective foreign currency rates, such as the 3-day advanced or spot rates, with which to make disbursements  In selecting foreign currency rates, DOD’s Financial Management Regulation states that disbursements should be computed to avoid gains or deficiencies (losses) due to fluctuations in rates of exchange to the greatest extent possible  If there is no rate of exchange established by agreement between the U S  government and the foreign country, then foreign currency transactions are to be conducted at the prevailing rate  The prevailing rate of exchange is the most favorable rate legally available for acquisition of foreign currency for official disbursement and other exchange transactions  Additionally, GAO’s Standards for Internal Control in the Federal Government calls for management to periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks  DOD disbursement organizations have flexibility in selecting foreign currency rates to use when making disbursements using ITS gov  There is no DOD-wide requirement for the services to review the rates used to make disbursements and, except for the Army, the services have not conducted such a review  This step is necessary to determine whether there are opportunities for savings by more consistently selecting cost- effective foreign currency rates  We discussed disbursement processes with DOD and Air Force, Navy, and Marine Corps financial management officials, including the factors considered when selecting foreign currency rates  In addition, a Defense Finance and Accounting Service official noted that currencies can have criteria specifying when a payment is made and provided us the ITS gov user’s guide, which addresses “special currency requirements,” such as those that would drive advanced payment for a currency  For example, the user’s guide indicates that payment for transactions involving the Afghanistan Afghani must be made 2 days in advance of the value date, and cannot be made on a Friday  However, information that is contained in the ITS gov user’s guide and that we received from a Treasury official indicate that none of the nine foreign currencies for which DOD budgets place restrictions on when payment must be made; and therefore, this consideration should not drive the use of a specific rate at disbursement  Marine Corps financial management officials told us that the foreign currency rate selected at disbursement is at the discretion of the disbursing officer based on operational requirements, with the understanding that the most favorable rate for the government is the preference, while balancing mission requirements and the time necessary to process the transaction  These officials acknowledged that the 3-day advanced rate can be more cost-effective to the government but indicated that there are occasions when the 5-day advanced rate should be used because it provides more time to process the payments from deployed locations operating in different time zones or with limited communication capabilities  However, we found that OUSD (C) officials and financial management officials with the headquarters of the Air Force, Navy, and Marine Corps were not involved in disbursement, were unaware of what rates were being used at disbursement, and had not reviewed the rationale for selecting one rate over another  For example, Air Force and Navy headquarters officials we spoke with were unable to provide insight as to what drives the decision to use one rate over another  One Navy financial management official told us that he was unaware of any Navy policy that directs a specific rate to be used when disbursing funds, and suggested that the absence of such a policy provides the flexibility for officials to determine which approach is best  Headquarters, Marine Corps officials also stated that they did not monitor foreign currency rates used for disbursements or the reasons why one rate was selected over another  Based on our inquiry, officials indicated that they would analyze the foreign currency rates used for disbursements in 2017 and whether opportunities existed to achieve savings by using other rates available through ITS gov  A Marine Corps official subsequently provided us with information that showed that two of three disbursing offices that currently utilize ITS gov for disbursements use the 3-day advanced rate exclusively and one uses the 5-day advanced rate  The official noted that a technical issue within ITS gov has restricted the disbursing office currently using the 5-day advanced rate from choosing any other rate, but that the service was further assessing options to correct the issue  In our conversations with an official in OUSD(C) about why the other services had not reviewed the foreign currency rates used for disbursements to determine what was being paid through ITS gov and whether there was an opportunity for savings, the official commented that OUSD(C) had not directed the services to conduct any reviews in this area  This official was unaware that different foreign currency rates were used to make disbursements, and assumed that the military services all make disbursements in the same way  However, as discussed above, the services are using different rates resulting in inconsistency across the department  The official further indicated that DOD could perform a review to determine the cost differences of using one disbursement rate over another  Absent a review of the rates the services are using in making disbursements and whether cost savings could be achieved by more consistently selecting the most cost-effective foreign currency rates available for use at disbursement, DOD is at risk for paying more to convert U S  Dollars for overseas expenditures than would otherwise be required  In fiscal years 2009 through 2016, DOD used the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed  However, DOD does not effectively manage the FCFD account balance based on projected gains or losses  Transfers of expired unobligated balances from MILPERS and O&M accounts into the FCFD account have been made to replenish the account balance to the statutory limit of $970 million, without consideration of projected losses due to foreign currency fluctuations  Furthermore, DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 contains incomplete and inaccurate information  In fiscal years 2009 through 2016, DOD transferred approximately $1 92 billion out of the FCFD account to cover losses that the services experienced due to foreign currency fluctuations in 6 of the 8 years we reviewed  For these years, DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts during the fiscal year in which the funds were obligated for overseas expenses  The transfer amounts were based on both losses realized from actual disbursements and projected losses for any remaining obligations to be liquidated  The projected losses were calculated based on the current foreign currency market rates as of the time of the calculation  Based on the service-level data we reviewed, all of the services reported that they experienced losses in at least 5 of the fiscal years we reviewed  For example, the Army reported that it experienced losses in its MILPERS account for 5 of 8 years, while the Marine Corps reported that it experienced losses in its O&M and MILPERS accounts in each of the 8 years  In addition to the transfers to cover losses within the services’ MILPERS and O&M accounts, in fiscal year 2013 DOD transferred an additional $969 million to the Defense Working Capital Fund to offset fuel cost losses  Since fiscal year 2012, DOD has maintained the FCFD end-of-year account balance at $970 million—the maximum allowed by statute  To replenish the funds that were transferred out of the FCFD account, DOD transferred unobligated balances to the FCFD account from the services’ O&M and MILPERS accounts  While DOD can also replenish the FCFD account or absorb foreign currency losses in certain currencies by transferring to the FCFD account any gains experienced by the services, our analysis found that DOD did not transfer any gains into the FCFD account for fiscal years 2009 through 2016  Figure 3 shows the transfers into and out of the FCFD account and the end-of-year FCFD account balance for fiscal years 2009 through 2016  Our analysis also shows that DOD transferred funds to maintain the FCFD account at its maximum balance since 2012, despite experiencing fewer losses due to foreign currency fluctuations than it had experienced in fiscal years 2009 to 2011  Of the $1 92 billion transferred from the FCFD account to the services’ MILPERS and O&M accounts to cover losses, $464 5 million was transferred since fiscal year 2012, when DOD began maintaining its FCFD account at the maximum level  During that time, some of the services experienced foreign currency gains, while others experienced losses  For example, at the end of fiscal year 2013 the Navy reported a total realized and projected cumulative gain for its O&M and MILPERS accounts of about $98 6 million  In that same year, the Marine Corps reported a cumulative realized and projected loss for its O&M and MILPERS accounts of approximately $12 7 million  Had DOD not transferred unobligated funds back into the FCFD account, it would have retained a positive balance of approximately $505 5 million  However, DOD maintained the account balance at $970 million by transferring approximately $495 3 million in unobligated balances into the account  As part of its management of the FCFD account balance, DOD analyzes data on realized and projected losses as the basis for transferring funds from the FCFD account to the services’ MILPERS and O&M accounts to cover losses  However, DOD does not consider projected losses when making transfers of unobligated O&M and MILPERS balances into the FCFD account  Figure 4 below shows the FCFD account balance that DOD has maintained in relation to the transfers out of the account to cover losses  Specifically, according to the OUSD(C) official responsible for managing the FCFD account, DOD maintains the FCFD account balance at $970 million to maximize unobligated balances within the military services’ O&M and MILPERS accounts before they are canceled and are no longer available to DOD  In addition, this official stated that DOD prefers to maintain the maximum balance in case it is needed due to sudden, unfavorable swings in foreign currency exchange rates  Our review of the documentation used to make transfers into and out of the FCFD account corroborates that DOD maintains the FCFD account balance to maximize the retention of unobligated balances  Specifically, we found instances in which the documentation states that the transfers of unobligated balances into the FCFD account were made for the purpose of replenishing the account balance to the statutory limit  For example, DOD transferred $89 million from the FCFD account to the Army for losses it had realized and projected in fiscal year 2014, and later transferred unobligated balances of the same amount back into the account  DOD’s documentation states that this transfer of unobligated balances was made for the purpose of replenishing the account to $970 million in order to finance estimated foreign currency losses resulting from the decline in value of the U S  Dollar  However, the transfer to the Army already covered the realized losses and projected losses for any remaining disbursements  In other words, estimated foreign currency losses had already been accounted for at the time of the transfer to the Army  In addition, based on data reported by the Air Force, Marine Corps, and Navy, DOD had an estimated cumulative gain of about $30 million for fiscal year 2014 based on the other services’ gains and losses, which could have been transferred to the FCFD account to absorb any additional foreign currency losses elsewhere  However, DOD did not transfer those gains to the FCFD account  Similarly, based on data reported by these services, DOD experienced cumulative realized and projected gains of more than $200 million in fiscal year 2013 and about $92 6 million in fiscal year 2015, but it did not transfer any gains to the FCFD account because the account balance had already reached its maximum using transferred unobligated balances  Despite replenishing the account balance to the maximum amount for the purpose of covering additional losses, the FCFD transfers have not been made to fully offset losses in some years, further raising questions about the need to maintain the balance at the statutory cap of $970 million annually  Specifically, in 3 of the 6 years in which DOD transferred funds from the FCFD account to the services’ MILPERS and O&M accounts, DOD did not use the FCFD account to fully cover the losses that the Air Force, Marine Corps, and Navy experienced  In fiscal year 2011, for example, DOD’s transfers out of the FCFD account to these services covered about 88 percent of the reported MILPERS and O&M losses that these services had realized and projected to lose by the end of the fiscal year  In fiscal year 2012, FCFD transfers covered almost 72 percent of the MILPERS and O&M realized and projected losses reported by the Air Force, Marine Corps, and Navy, as of the end of the fiscal year  In fiscal year 2016, DOD FCFD transfers to these services covered approximately 55 percent of their reported MILPERS and O&M realized and projected losses by the end of the fiscal year  The OUSD(C) official we spoke with stated that FCFD transfers to cover losses begin with a request from the services, and the OUSD(C) office and the services then coordinate on the final transfer amount  In addition, some service officials told us that they try to cover their losses using each service’s available funding before reaching out for assistance from the FCFD account  Therefore, based on a service’s ability to cover the loss, it may not always request an FCFD transfer to cover the full amount of realized and projected losses  Further, according to an OUSD(C) official, the timing of a service’s request for an FCFD transfer may also affect any differences between the amount transferred and the actual losses experienced  Specifically, if a service requests a transfer early in the fiscal year based on realized and projected losses, actual losses experienced as of the end of the fiscal year may be greater than or less than the transfer amount due to foreign currency fluctuations  Using transfers of unobligated balances, DOD has maintained its FCFD account balance at the maximum level allowed by statute because it has not analyzed realized and projected losses to determine what size account balance is necessary to meet the intended purpose of the account  In our prior work, we have developed key questions for evaluating federal account balances that agencies may use to identify the amount of the balance necessary to maintain agency or program operations  Through examination of carryover balances, oversight of agencies’ management of federal funds may be enhanced  Specifically, we reported that understanding an agency’s processes for estimating and managing carryover balances provides information to assess how effectively agencies anticipate program needs, and ensure the most efficient use of resources  To estimate and manage carryover balances, agencies may consider such factors as future needs of the account, economic indicators, and historical data  If an agency does not have a robust strategy in place to manage carryover balances or is unable to adequately explain or support the reported carryover balance, then a more in-depth review is warranted  In those cases, balances may either fall too low to efficiently manage operations or rise to unnecessarily high levels, producing potential opportunities for those funds to be used more efficiently elsewhere  When asked about maintaining the balance at a level necessary to cover losses, rather than at the maximum level allowed by statute, the OUSD(C) official indicated that the OUSD(C) takes a cautious approach and prefers to have the additional flexibility allowed by the higher balance  Further, the official stated that it would be difficult for DOD to attempt to base its unobligated balance transfers and the FCFD account balance on analysis and evaluation, given the unpredictable nature and constant volatility of foreign currency rates  Our guidelines on evaluating carryover balances acknowledge that external events beyond an agency’s control can dramatically affect carryover balances  However, the challenges that are inherent in predicting foreign currency rates do not preclude DOD from conducting analysis to glean insight as to the appropriate size for the balance of the account and what potential opportunities for savings might exist  Specifically, our guidelines suggest that agencies would benefit from considering the sources and fiscal characteristics of an account with carryover balances  In this case, the FCFD account can receive funds from transfers of unobligated balances and realized foreign currency gains  In addition, DOD can make multiple transfers throughout a fiscal year and can transfer funds from the FCFD to and from the services’ O&M and MILPERS accounts simultaneously, if necessary  These characteristics of the FCFD account already provide the department with flexibility, indicating that DOD may be positioned to manage the FCFD balance in a more analytical manner based on any projected losses  Without analyzing any realized or projected losses to determine what balance may be needed to meet the FCFD account’s intended purpose, the account balance may be kept at a higher level than is necessary  As a result, although an exact amount is unknown, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these funds may have been more efficiently used in supporting other defense activities or returned to Treasury after the account is canceled by law  DOD prepares financial reports to monitor the status of its foreign currency funds, but some of DOD’s financial reporting on foreign currency fluctuations for fiscal years 2009 through 2016 is incomplete and inaccurate  DOD’s Financial Management Regulation establishes reporting requirements specifically for tracking all transactions that increase or decrease the FCFD  In accordance with that guidance, the services provide data from their accounting systems to the Defense Finance and Accounting Service to generate reports that are used as a tool with which the services and OUSD(C) can monitor how they are expending funds appropriated for overseas expenditures  For O&M appropriations, the Foreign Currency Fluctuations, Defense (O&M) report provides data on foreign currency gains and losses for each service, by currency, including data on projected gains or losses for any remaining obligations that have not yet been disbursed at the time of the report  The Foreign Currency Fluctuations, Defense Report (MILPERS) provides similar information for the MILPERS appropriation  We reviewed end-of-year Foreign Currency Fluctuations, Defense (O&M) and (MILPERS) reports for fiscal years 2009 through 2016 and found that some of the reporting for O&M was incomplete and inaccurate, which hampers the quality of information available to manage the FCFD account  For instance, we found the following: Incomplete data in the Foreign Currency Fluctuations Defense (O&M) reports: In our review of the end-of-year Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports we observed several instances of incomplete data in the O&M reports, and these affect managers’ ability to make sound decisions to manage foreign currency gains and losses  First, for the Navy, we found that the report data showed, for multiple currencies across fiscal years 2011 through 2016, values in the realized variance column, indicating that the service had experienced a gain or loss in a particular currency; however, the reports showed values of zero in other columns that are necessary for calculating the gain or loss  Second, the Air Force data for the Turkey Lira, in fiscal year 2012, showed a gain or loss without any data indicating what would have driven the gain or loss  Third, in one instance, Marine Corps data on obligations for fiscal year 2011 were missing from the end-of-year reports until 2014  Missing obligation data for these end-of-year reports indicate a limitation in using these reports for tracking actual gains and losses  Inaccurate data in the Army’s Foreign Currency Fluctuations Defense (O&M) reports: The Army’s Foreign Currency Fluctuation Defense (O&M) reports are inaccurate and cannot be used to reliably track gains or losses, and this hinders managers from making sound decisions regarding the Army’s foreign currency gains and losses  The reports are inaccurate in that the Army’s accounting system charges disbursements to the current fiscal year appropriation rather than to the fiscal year appropriation that incurred the obligation, as required by the Financial Management Regulation  According to officials from the Army Budget Office, the Army designed its General Fund Enterprise Business System (GFEBS) to record disbursements to the current fiscal year based on differing interpretations of a previous version of the Regulation  Because the Army is not recording its disbursements to the fiscal year appropriation as the other services are, Army data are inaccurate and cannot be used by the OUSD(C) official responsible for overseeing DOD’s foreign currency program to track the Army’s foreign currency transactions and maintain full visibility of DOD’s overall gains and losses in a given fiscal year  Army Budget Office officials acknowledged that the Army will need to modify its system to record disbursements consistent with Financial Management Regulation guidance, but it has not developed a plan or timeline for doing so  Without accurate reporting of the Army’s foreign currency transactions, DOD lacks information for tracking and helping to manage the Army’s foreign currency gain and losses  DOD’s Financial Management Regulation specifies the data that must be included in the Foreign Currency Fluctuations Defense (O&M) and (MILPERS) reports and the roles and responsibilities of the services as well as the Defense Finance and Accounting Service for ensuring the quality of those data  However, we identified data issues in our analysis that indicate that quality is inconsistent  For example, officials from the Navy stated that they had observed the incomplete data for some currencies and speculated that the incompleteness was attributable to data entry errors  Similarly, according to an OUSD(C) official, the Defense Finance and Accounting Service is notified when discrepancies are found in the reports and the Defense Finance and Accounting Service officials coordinate with the services to correct the data  However, neither Navy nor the Defense Finance and Accounting Service officials have corrected the data  Although DOD’s Financial Management Regulation specifies the data that are to be included, as well as roles and responsibilities of the services and the Defense Finance and Accounting Service, it does not identify who is responsible for correcting erroneous or missing data  According to an OUSD(C) official, correcting reporting issues is an area that OUSD(C), the Defense Finance and Accounting Service, and the services can improve on, and they would benefit from guidance in the Financial Management Regulation that establishes the steps that should be taken for making such corrections  Further, GAO’s Standards for Internal Control in the Federal Government and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended, both establish the importance of using reliable and complete information for making decisions  In addition, DOD’s Financial Management Regulation establishes responsibilities for both the DOD components and the Defense Finance and Accounting Service to establish appropriate internal controls to ensure that financial reporting data are complete, accurate, and supportable, in order for managers to make sound decisions and exercise proper stewardship over these resources  Effectively managing foreign currency gains and losses as well as any projected gains or losses for any remaining obligations that have not yet been liquidated through disbursement requires complete and accurate data  OUSD(C) and service officials recognize the importance of reliable data, as well as the need to take steps to improve the quality of the foreign currency gains and losses data  Without OUSD(C) establishing guidance to ensure that the Foreign Currency Fluctuation Defense (O&M) report data that tracks foreign currency gains and losses are complete, DOD and Congress do not have information to make sound decisions and exercise proper stewardship over resources due to foreign currency fluctuations  Furthermore, until the Army establishes a plan and timeline for modifying its system to record foreign currency disbursements in an accurate manner, the Army and DOD will lack quality information for tracking and helping to manage the Army’s and DOD’s foreign currency gain and losses  Congress provides DOD with a significant amount of funding each year to purchase goods and services overseas and to pay service-members stationed abroad  DOD develops and can revise foreign currency budget rates to determine its funding needs and calculate any gains or losses that result from DOD’s overseas expenditures  The Army has estimated potential cost savings that would result from more consistently selecting a more cost-effective foreign currency rate for making disbursements to liquidate its overseas O&M obligations  However, DOD has not fully determined whether additional cost-saving opportunities exist because the services have not reviewed the rates used for foreign currency disbursements  Absent a review of the foreign currency rates the services are using at disbursement, including whether cost-saving opportunities exist, by more consistently selecting cost-effective foreign currency rates, DOD risks paying more than would be required otherwise  Further, while DOD has used the FCFD account to cover losses that resulted from foreign currency fluctuations, it has not managed the FCFD account balance by basing the transfers of unobligated balances into the FCFD account on an analysis of realized and projected losses  Without basing its FCFD account balance on such analyses, DOD may be maintaining balances in the FCFD account that are hundreds of millions of dollars higher than needed to cover any losses it has experienced, and these amounts may have been more efficiently used supporting other defense activities or ultimately returned to Treasury, once expired  Moreover, DOD has not established guidance and other procedures to ensure that complete and accurate data are included in financial reporting on foreign currency funds, and this limits the quality of information available to effectively manage the FCFD account  We are making the following four recommendations to DOD  The Secretary of Defense ensures that: The Under Secretary of Defense (Comptroller), in coordination with the U S  Army, Air Force, Navy, and Marine Corps, should conduct a review of the foreign currency rates used at disbursement to determine whether cost-saving opportunities exist by more consistently selecting cost- effective rates at disbursement  (Recommendation 1) The Under Secretary of Defense (Comptroller) should analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of this analysis as the basis for transfers of unobligated balances to the account  (Recommendation 2) The Under Secretary of Defense (Comptroller) should revise the Financial Management Regulation to include guidance on ensuring that data are complete and accurate, including assignment of responsibility for correcting erroneous data in its Foreign Currency Fluctuations Defense (O&M) reports  (Recommendation 3) The Secretary of the Army should develop a plan with timelines for implementing changes to its General Fund Enterprise Business System to accurately record its disbursements, consistent with DOD Financial Management Regulation guidance  (Recommendation 4) We provided a draft of this report to DOD for review and comment  In its written comments, reproduced in appendix II, DOD concurred with our first, third, and fourth recommendations and outlined its plan to address them  DOD partially concurred with our second recommendation that the Under Secretary of Defense (Comptroller) analyze realized and projected losses to determine the necessary size of the FCFD account balance and use the results of the analysis as the basis for transfers of unobligated balances to the account  DOD also provided technical comments, which we incorporated in the report, where appropriate  In partially concurring with our second recommendation, DOD stated that projecting foreign currency gains or losses can be difficult given that foreign currency rates can be volatile due to various factors, such as trade balances, money supply, and national income, as well as arbitrary disturbances that affect foreign currency rates that cannot be predicted or forecasted, such as the departure of the United Kingdom from the European Union  DOD noted that because of the risk and volatility associated with foreign currency rates, the Congress established the FCFD account  We agree that forecasting foreign currency rates is challenging due to market volatility and include examples in our report of the effect of foreign currency rate fluctuations on DOD’s planned foreign currency obligations  Our report also describes the relationship between gains and losses and foreign currency fluctuations, and the movement of funds from the FCFD account to offset any losses  As our report also discusses, DOD calculates actual and projected losses due to foreign currency fluctuations and uses those projections as the basis, at least in part, for any transfers out of the FCFD account to cover losses experienced in the military services’ O&M and MILPERS appropriations  However, our report also notes that DOD does not consider its calculations of actual and future projected losses when making transfers of unobligated O&M and MILPERS balances to replenish the FCFD account  Instead, since fiscal year 2012, DOD has kept the FCFD account balance at the maximum level allowed by statute by using unobligated balances before they are canceled and are no longer available to DOD, regardless of whether the funds were needed in the account to offset any projected losses  DOD’s comments also stated that projecting gains or losses for foreign currency to determine the size of the FCFD account opens the door to greater uncertainty and risk at a time when the department is working to rebuild readiness and implement the National Defense Strategy  Our report describes the characteristics of the FCFD account that provide DOD with flexibility to manage market volatility, thereby helping to address uncertainty and reduce risk  For example, DOD can make multiple transfers of funds to the FCFD account throughout a fiscal year in response to unforeseen foreign currency fluctuations  The FCFD account can also receive funds from transfers of actual foreign currency gains and/or unobligated balances  As we also noted, DOD made use of its authority to transfer expired unobligated MILPERS and O&M amounts into the FCFD account in the event that actual losses exceeded the projected amounts and additional transfers were deemed necessary  We continue to believe that by analyzing actual and projected losses and basing the transfer of any unobligated balances on these losses, DOD would be better positioned to determine the size of the FCFD account balance that is necessary to meet its intended purpose  Further, such analyses would provide opportunities to more efficiently use unobligated balances for other defense activities or return the balances to Treasury  We are sending copies of this report to the Secretary of Defense, the Under Secretary of Defense (Comptroller), the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, the Commandant of the Marine Corps, and appropriate congressional committees  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-5431 or russellc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  Key contributors to this report are listed in appendix III  To describe the Department of Defense’s (DOD) revised foreign currency budget rates since 2009 and the relationship between the revised budget rates and DOD’s projected Operation and Maintenance (O&M) and Military Personnel (MILPERS) funding needs, we reviewed DOD’s foreign currency budget rates for the period of fiscal years 2009 through 2017, and we identified any years during which DOD revised the initial budget rates  We compared DOD’s initial foreign currency budget rates and revised foreign currency budget rates with rates published by the U S  Treasury Department (Treasury) for fiscal years 2009 through 2017  This period corresponded with data available to us on DOD’s initial and revised rates and allowed for use of the most current data available, since DOD had not yet decided whether or not to revise the fiscal year 2018 budget rates, while we were conducting our audit work  We chose rates published by Treasury for this comparison because Treasury has the sole authority to establish for all foreign currencies or credits the exchange rates at which such currencies are to be reported by all agencies of the government  Because Treasury rates are issued quarterly, we averaged Treasury’s first and second quarter rates for each currency and compared the Treasury average with DOD’s initial budget rates  Similarly, we computed an average of the third and fourth quarter Treasury rates for each currency and compared them with the DOD initial or revised budget rates, where applicable  These comparisons are meant to show the difference between DOD’s budget rates and Treasury rates for the first 6 months of the fiscal year, and the difference between DOD’s revised exchange rates and Treasury rates for the last 6 months of the fiscal year  Further, we analyzed the extent to which DOD’s budget rates were within 10 percent of Treasury rates during these same years  We chose 10 percent as the basis for our analysis because Treasury’s guidance states that amendments to the quarterly rates will be published during the quarter to reflect significant changes in the quarterly data, such as rate changes of 10 percent or more  Additionally, to understand the effect that revising the budget rates had on DOD’s O&M and MILPERS funding estimates and on potential gains or losses due to foreign currency fluctuations, we used a three-step approach  First, we identified the amount of O&M and MILPERS funds DOD requested for each currency  We converted the U S  Dollars requested to the total amount of foreign currency needed by multiplying the U S  Dollars requested by DOD’s initial budget rate  Second, we determined the total amount of U S  Dollars required using the revised rates by dividing the total amount of foreign currency needed using DOD’s initial budget rate by DOD’s revised budget rate  We used this same approach to determine the total amount of U S  Dollars required using the average Treasury rates  Third, we computed the differences in DOD’s O&M and MILPERS foreign currency funding needs by subtracting the U S  Dollars required to meet its foreign currency needs based on the average Treasury rates from the amounts required based on DOD’s initial budget rates and DOD’s revised budget rates, respectively  We discussed further with officials from the Office of the Under Secretary of Defense, Comptroller (OUSD(C)) the factors considered in revising the rates and whether those factors are communicated within and outside of the department  To evaluate the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates at which to make disbursements and determine whether opportunities exist to gain additional savings, we reviewed accounting standards and any guidelines that exist regarding disbursements and calculations of foreign currency gains and losses, such as DOD’s Financial Management Regulation 7000 14-R, which calls for the use of prevailing foreign currency rates to make disbursements  We also discussed with agency officials how those guidelines are being carried out, and whether DOD or the services have developed guidance that instructs the services in selecting rates used for disbursements in foreign currencies  Additionally, we examined a non-generalizable selection of data for DOD disbursements made during the months June and July 2017 from Treasury’s International Treasury Service (ITS gov) system to determine which rates DOD used during this period and what savings might be achievable from using alternate rates  We chose data from those 2 months because it was the most recent data available on disbursements at the time Treasury provided the data for our review  Additionally, we discussed with officials from OUSD(C) and the services any analysis and ongoing efforts to transition to more cost-effective rates, including savings that may result  To assess the extent to which DOD has effectively managed the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses, and maintained quality information to manage these funds, we analyzed DOD data for fiscal years 2009 through 2016 on foreign currency gains and losses reported by each of the services as reported in their Foreign Currency Fluctuation, Defense (O&M) and (MILPERS) reports; movements of funds between the FCFD account and the services’ O&M and MILPERS accounts; and the end-of-year FCFD account balances  We chose this time period in order to capture years in which both gains and losses were experienced, and for which DOD had complete data on gains and losses, fund transfers, and end-of-year balances for the FCFD account  Because the Army charges disbursements to the current fiscal year appropriation instead of the fiscal year appropriation that incurred the obligation, we requested that the Army adjust its reported data on foreign currency gains and losses and provide information consistent with how the other services report them, and with DOD’s Financial Management Regulation  However, the Army was unable to provide us with data that were consistent with what was provided by the other services at the time of our review  We, therefore, were unable to use Army data for purposes of comparison with data provided by the other services  We compared the end-of-year FCFD account balances and the use of the account with guidelines established in our prior work on the importance of examining unobligated balances  Additionally, we reviewed and analyzed DOD financial reports on foreign currency gains or losses and compared the reports, including any identified discrepancies, against best practices and standards on accurate reporting and maintaining quality information, such as those in GAO’s Standards for Internal Control in the Federal Government, and the Federal Accounting Standards Advisory Board’s Handbook of Federal Accounting Standards and Other Pronouncements, as Amended  To determine the reliability of the data used in addressing these objectives, we analyzed DOD and Treasury foreign currency rates, data on DOD foreign currency disbursements, and DOD financial reporting data on foreign currency gains and losses to identify any missing or inaccurate information, and we discussed with agency officials any identified abnormalities and how the information was extracted from systems, when appropriate  We found the data to be sufficiently reliable for the purposes of our reporting objectives, with the exception of the financial reporting on financial gains and losses  Specifically, based on problems with the completeness and accuracy of DOD’s financial reporting on foreign currency gains and losses, we found that these data were not sufficiently reliable for the purpose of computing exact totals for the gains and losses DOD experienced  However, because DOD uses these data as the basis for decisions related to management of the FCFD account, we included the data in our analysis to provide insight into the scope of gains and losses experienced  We also spoke with OUSD(C), military service, and Treasury officials regarding the process and systems used to input the reviewed data and generate the foreign currency reports we reviewed  We conducted this performance audit from February 2017 to April 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Matt Ullengren, Assistant Director; and Tulsi Bhojwani, Justin Bolivar, Carol Bray, Amie Lesser, Kelly Liptan, Felicia Lopez, Leah Nash, Randy Neice, Jacqueline McColl, Mike Silver, Roger Stoltz, Susan Tindall, John Trubey, Elaine Vaurio, and Cheryl Weissman made key contributions to this report 

ground_truth: DOD requested about $60 billion for fiscal years 2009 - 2017 to purchase goods and services overseas and reimburse service-members for costs incurred while stationed abroad. DOD uses foreign currency exchange rates to budget and pay (that is, disburse amounts) for these expenses. It also manages the FCFD account to mitigate a loss in buying power that results from foreign currency rate changes. GAO was asked to examine DOD's processes to budget for and manage foreign currency fluctuations. This report (1) describes DOD's revision of its foreign currency budget rates since 2009 and the relationship between the revised rates and projected O&M and MILPERS funding needs; (2) evaluates the extent to which DOD has taken steps to reduce costs in selecting foreign currency rates to disburse funds to liquidate O&M obligations, and determined whether opportunities exist to gain additional savings; and (3) assesses the extent to which DOD has effectively managed the FCFD account balance. GAO analyzed data on foreign currency rates, DOD financial management regulations, a non-generalizable sample of foreign currency disbursement data, and FCFD account balances. The Department of Defense (DOD) revised its foreign currency exchange rates (“budget rates”) during fiscal years 2014 through 2016 for each of the nine foreign currencies it uses to develop its Operation and Maintenance (O&M) and Military Personnel (MILPERS) budget request. These revisions decreased DOD's projected O&M and MILPERS funding needs. DOD's revision of the budget rates during these years also decreased the expected gains (that is, buying power) that would have resulted from an increase in the strength of the U.S. Dollar relative to other foreign currencies. DOD did not revise its budget rates in fiscal years 2009 through 2013. For fiscal year 2017, DOD changed its methodology for producing budget rates, resulting in rates that were more closely aligned with market rates. According to officials, that change made it unnecessary to revise the budget rates during the fiscal year. DOD has taken some steps to reduce costs in selecting foreign currency rates used to pay (that is, disburse amounts) for goods and services, but DOD has not fully determined whether opportunities exist to achieve additional savings. The Army has estimated potential savings of up to $10 million annually by using a foreign currency rate available 3 days in advance of paying for goods or services rather than a more costly rate available up to 5 days in advance. The Army has converted to the use of a 3-day advanced rate. GAO's analysis suggests that DOD could achieve cost savings if the services reviewed and consistently selected the most cost-effective foreign currency rates when paying for their goods and services. Absent a review, DOD is at risk for paying more than it would otherwise be required to conduct its transactions. DOD used the Foreign Currency Fluctuations, Defense (FCFD) account to cover losses (that is, less buying power) due to unfavorable foreign currency fluctuations in 6 of the 8 years GAO reviewed. Since 2012, DOD has maintained the FCFD account balance at the statutory limit of $970 million, largely by transferring unobligated balances before they are cancelled from certain DOD accounts into the FCFD. However, DOD has not identified the appropriate FCFD account balance needed to maintain program operations by routinely analyzing projected losses and basing any transfers into the account on those expected losses. Thus, DOD may be maintaining balances that are hundreds of millions of dollars higher than needed, and that could have been used for other purposes or returned to the Treasury Department (see figure). GAO is making four recommendations, including that DOD review opportunities to achieve cost savings by more consistently selecting the most cost-effective foreign currency rates used for the payment of goods and services, and analyze projected losses to manage the FCFD account balance. DOD generally concurred with the recommendations.