Testimony before the Subcommittee on 

Management, Integration, and Oversight, 

Committee on Homeland Security, House 

of Representatives

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 10:00 a.m. EDT 

Wednesday, April 20, 2005 HOMELAND SECURITY

Overview of Department 

of Homeland Security 

Management Challenges 

Statement of Norman J. Rabkin 

Managing Director, Homeland Security and Justice 

GAO-05-573T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-573T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Norman Rabkin 

at (202) 512-8777 or rabkinn@gao.gov. 

Highlights of GAO-05-573T, a testimony 

before the Subcommittee on 

Management, Integration, and Oversight, 

Committee on Homeland Security, House 

of Representatives 

April 2005

HOMELAND SECURITY

Overview of Department of Homeland 

Security Management Challenges 

GAO designated DHS’s transformation as a high-risk area in 2003, based on 

three factors. First, DHS faced enormous challenges in implementing an 

effective transformation process, developing partnerships, and building 

management capacity because it had to transform 22 agencies into one 

department. Second, DHS faced a broad array of operational and 

management challenges that it inherited from its component legacy 

agencies. Finally, DHS’s failure to effectively address its management 

challenges and program risks could have serious consequences for our 

national security. Overall, DHS has made some progress, but significant 

management challenges remain to transform DHS into a more efficient 

organization while maintaining and improving its effectiveness in securing 

the homeland. Therefore, DHS’s transformation remains a high-risk area. 

DHS faces a number of management challenges to improve its ability to carry 

out its homeland security missions. Among these challenges are 

• providing focus for management efforts, 

• monitoring transformation and integration, 

• improving strategic planning, 

• managing human capital, 

• strengthening financial management infrastructure, 

• establishing an information technology management framework, 

• managing acquisitions, and 

• coordinating research and development. 

The Department of Homeland 

Security (DHS) plays a key role in 

coordinating the nation’s homeland 

security efforts with stakeholders 

in the federal, state, local, and 

private sectors. While GAO has 

conducted numerous reviews of 

specific DHS missions, such as 

border and transportation security 

and emergency preparedness, this 

testimony addresses overall DHS 

management issues. 

This testimony addresses 

(1) why GAO designated DHS’s 

transformation as a high-risk area; 

and (2) the specific management 

challenges facing DHS. 
Page 1 GAO-05-573T 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to appear before this subcommittee to 

address management challenges facing the Department of Homeland 

Security (DHS). The department plays a major role in the protection of the 

homeland against terrorist and other threats. In addition to managing its 

own affairs, the department also has a key role in implementing the 

National Strategy for Homeland Security and coordinating the larger 

homeland security efforts of the entire nation, to include other 

stakeholders in the federal, state, local, and private sectors. While GAO 

has conducted numerous reviews of specific DHS mission areas—

including border and transportation security, information analysis and 

infrastructure protection, emergency preparedness and response, and 

defending against catastrophic threats—my statement is limited to overall 

management issues. These generally cut across many if not all of the DHS 

agencies and mission areas. In my testimony today, I will address two 

topics: 

• Why has GAO designated DHS’s transformation as a high-risk area? 

• What specific management challenges does the department face? 

This testimony continues GAO’s long-standing efforts to provide Congress 

with information on homeland security strategies and programs. In 

February of last year, we testified on the desired characteristics of 

national strategies, and whether various strategies—including the National 

Strategy for Homeland Security—contained those desired characteristics.1

In March of last year, we summarized strategic homeland security 

recommendations by GAO and selected congressionally chartered 

commissions.2

 In July of last year, we reported on GAO recommendations 

to DHS and the department’s progress in implementing such 

recommendations.3

 In January of this year, we provided a comprehensive 

report on DHS and other federal agency efforts and challenges related to 

 1

GAO, Combating Terrorism: Evaluation of Selected Characteristics in National 

Strategies Related to Terrorism, GAO-04-408T (Washington, D.C.: Feb. 3, 2004). 

2

GAO, Homeland Security: Selected Recommendations from Congressionally Chartered 

Commissions and GAO, GAO-04-591 (Washington, D.C.: Mar. 31, 2004). 

3

GAO, Status of Key Recommendations GAO Has Made to DHS and Its Legacy Agencies, 

GAO-04-865R (Washington, D.C.: July 2, 2004). 
Page 2 GAO-05-573T 

implementing the National Strategy for Homeland Security.4 And just last 

month in March, we reported on DHS progress in management 

integration.5

 Together, these baseline efforts are intended to aid 

congressional oversight in assessing the effectiveness of federal homeland 

security activities. 

My comments are based on our wide-ranging, completed, and ongoing 

work, and our institutional knowledge of homeland security and various 

government organizational and management issues. We conducted our 

work in accordance with generally accepted government auditing 

standards. 

GAO designated DHS’s transformation as high-risk in January 2003, based 

on three factors. First, DHS faced enormous challenges in implementing 

an effective transformation process, developing partnerships, and building 

management capacity because it had to transform 22 agencies into one 

department. Second, DHS faced a broad array of operational and 

management challenges that it inherited from its component legacy 

agencies. Finally, DHS’s failure to effectively address its management 

challenges and program risks could have serious consequences for our 

national security. As we reported earlier this year, the implementation and 

transformation of DHS remains high-risk.6

 Overall, DHS has made some 

progress, but significant challenges remain to transform DHS into a more 

effective organization with robust planning, management, and operations 

while maintaining and improving readiness for its highly critical mission to 

secure the homeland. Failure to effectively carry out its mission continues 

to expose the nation to potentially serious consequences. 

DHS faces a number of specific management challenges to improving its 

ability to carry out its homeland security missions. Among these 

challenges are ensuring departmentwide focus on management issues 

through the establishment of a Chief Operating Officer or Chief 

Management Officer position; coordinating its varied management 

 4

GAO, Homeland Security: Agency Plans, Implementation, and Challenges Regarding the 

National Strategy for Homeland Security, GAO-05-33 (Washington, D.C.: Jan. 14, 2005). 

5

GAO, Department of Homeland Security: A Comprehensive and Sustained Approach 

Needed to Achieve Management Integration, GAO-05-139 (Washington, D.C.: Mar. 16, 

2005). 

6

 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan. 2005). 

Summary 
Page 3 GAO-05-573T 

processes, systems, and people through the development of an 

overarching management integration; improving strategic planning; 

effectively managing strategic human capital; strengthening its financial 

management infrastructure; developing a comprehensive strategic 

management framework that addresses key information technology 

disciplines; properly managing acquisitions; and coordinating research and 

development among its components and with other entities. 

In an effort to increase homeland security following the September 11, 

2001, terrorist attacks on the United States, President Bush issued the 

National Strategy for Homeland Security in July 2002 and signed 

legislation creating DHS in November 2002.7

 The strategy set forth the 

overall objectives, mission areas, and initiatives to prevent terrorist 

attacks within the United States, reduce America’s vulnerability to 

terrorism, and minimize the damage and assist in the recovery from 

attacks that may occur. The strategy also called for the creation of DHS. 

The department, which began operations in March 2003, represented a 

fusion of 22 federal agencies to coordinate and centralize the leadership of 

many homeland security activities under a single department. 

Although the National Strategy for Homeland Security indicated that 

many federal departments (and other nonfederal stakeholders) will be 

involved in homeland security activities, DHS has the dominant role in 

implementing the strategy. The strategy identified six mission areas and 43 

initiatives.8

 DHS was designated the lead federal agency for 37 of the 43 

initiatives.9

 In addition, DHS had activities underway in 40 of the 43 

initiatives.10 In addition, DHS has the dominant share of homeland security 

funding. Figure 1 shows the proposed fiscal year 2006 homeland security 

 7

Homeland Security Act of 2002, Pub. L. No. 107-296 (Nov. 25, 2002). 

8

The six mission areas are Intelligence and Warning, Border and Transportation Security, 

Domestic Counterterrorism, Protecting Critical Infrastructures and Key Assets, Defending 

Against Catastrophic Threats, and Emergency Preparedness and Response. Each of these 

has several initiatives. For example, under the Border and Transportation Security mission 

area, the initiatives include ensuring accountability in border and transportation security, 

creating smart borders, and reforming immigration services. 

9

The strategy itself, or subsequent Homeland Security Presidential Directives, designated 

lead agencies for most of the initiatives. In some cases, agencies shared leadership. 

10For a more complete analysis of the strategy’s mission areas, initiatives, lead agencies, 

and implementation, see GAO-05-33. 

Background 
Page 4 GAO-05-573T 

funding for federal departments and agencies, with DHS constituting 

about 55 percent of the total. 

Figure 1: Proposed Fiscal Year 2006 Homeland Security Funding by Department 

Notes: Budget authority in millions of dollars. 

“All other agencies” includes the Departments of Agriculture ($704 million), Veterans Affairs ($299 

million), Transportation ($192 million), Commerce ($183 million), and Treasury ($111 million), as well 

as the National Science Foundation ($344 million), National Aeronautics and Space Administration 

($205 million), Environmental Protection Agency ($184 million), Social Security Administration ($178 

million), General Services Administration ($80 million), U.S. Army Corps of Engineers ($72 million), 

and several smaller agencies. Numbers may not total to 100 because of rounding. 

$938

1,666

3,104

2,981

4,407

9,514

27,333

$49,943

President's request

per agency

Total

Department of

State

Department of 

Energy

Department of 

Justice

All other agencies

Department of

Health and Human

Services

Department of

Defense

Department of

Homeland Security

54.7%

8.8%

6.0%

6.2%

3.3%

2.0%

19.0%

Source: GAO, based on OMB, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2006.

Agency
Page 5 GAO-05-573T 

The November 2002 enactment of legislation creating DHS represented a 

historic moment of almost unprecedented action by the federal 

government to fundamentally transform how the nation protects itself 

from terrorism.11 Rarely in the country’s past had such a large and complex 

reorganization of government occurred or been developed with such a 

singular and urgent purpose. This represented a unique opportunity to 

transform a disparate group of agencies with multiple missions, values, 

and cultures into a strong and effective cabinet department whose goals 

are to, among other things, protect U.S. borders, improve intelligence and 

information sharing, and prevent and respond to potential terrorist 

attacks. Together with this unique opportunity, however, came a 

significant risk to the nation that could occur if the department’s 

implementation and transformation was not successful. 

GAO designated DHS’s transformation as high-risk in January 2003based 

on three factors. 12 First, DHS faced enormous challenges in implementing 

an effective transformation process, developing partnerships, and building 

management capacity because it had to effectively combine 22 agencies 

with an estimated 170,000 employees specializing in various disciplines—

including law enforcement, border security, biological research, computer 

security, and disaster mitigation—into one department. Second, DHS 

faced a broad array of operational and management challenges that it 

inherited from its component legacy agencies. In fact, many of the major 

components that were merged into the new department, including the 

Immigration and Naturalization Service, the Transportation Security 

Administration, Customs Service, Federal Emergency Management 

Agency, and the Coast Guard, brought with them at least one major 

problem such as strategic human capital risks, information technology 

management challenges, or financial management vulnerabilities, as well 

as an array of program operations challenges and risks. Finally, DHS’s 

national security mission was of such importance that the failure to 

effectively address its management challenges and program risks could 

have serious consequences on our intergovernmental system, our citizen’s 

health and safety, and our economy. Overall, our designation of DHS’s 

transformation as a high-risk area and its inclusion on the 2003 High-Risk 

List was due to the failure to transform the diverse units into a single, 

 11Pub. L. No. 107-296 (Nov. 25, 2002). 

12GAO, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: Jan. 2003); and Major 

Management Challenges and Programs Risks: Department of Homeland Security, 

GAO-03-102 (Washington, D.C.: Jan. 2003). 

GAO Designated 

DHS’s Transformation 

As High-Risk 
Page 6 GAO-05-573T 

efficient, and effective organization would have dire consequences for our 

nation. 

Since our 2003 designation of DHS’s transformation as high-risk, DHS 

leadership has provided a foundation for maintaining critical operations 

while undergoing transformation. DHS has worked to protect the 

homeland and secure transportation and borders, funded emergency 

preparedness improvements and emerging technologies, assisted law 

enforcement activities against suspected terrorists, and issued its first 

strategic plan. According to DHS’s performance and accountability report 

for fiscal year 2004 and updated information provided by DHS officials, the 

department has accomplished the following activities as part of its 

integration efforts: 

● reduced the number of financial management service centers from 

19 to 8, 

● consolidated acquisition support for 22 legacy agencies within 8 

major procurement programs, 

● consolidated 22 different human resources offices to 7, and 

● consolidated bank card programs from 27 to 3. 

As described in the next section, despite real and hard-earned progress, 

DHS still has significant challenges to overcome in all of its management 

areas. It is because of these continuing challenges that we continue to 

designate the implementation and transformation of DHS as high-risk.13

DHS faces a number of management challenges to improving its ability to 

carry out its homeland security missions. Among these challenges, which 

are discussed in more detail in the following sections, are 

• providing focus for management efforts, 

• monitoring transformation and integration, 

• improving strategic planning, 

• managing human capital, 

• strengthening financial management infrastructure, 

 13GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan 2005). 

DHS Management 

Challenges 
Page 7 GAO-05-573T 

• establishing an information technology management framework, 

• managing acquisitions, and 

• coordinating research and development. 

One challenge that DHS faces is to provide focus on management efforts. 

The experience of successful transformations and change management 

initiatives in large public and private organizations suggests that it can 

take 5 to 7 years until such initiatives are fully implemented and cultures 

are transformed in a substantial manner. Because this timeframe can 

easily outlast the tenures of managers, high-performing organizations 

recognize that they need to have mechanisms to reinforce accountability 

for organization goals during times of leadership transition. 

Focus on management efforts needs to be provided at two levels of 

leadership. The first level is that of the political appointees in top 

leadership positions. These leaders are responsible for both mission and 

management support functions. Although DHS has been operating about 2 

years, it has had two Secretaries, three Deputy Secretaries, and additional 

turnover at the Undersecretary and Assistant Secretary levels. The 

problem of turnover in top leadership is not unique to DHS. The average 

tenure of political leadership in federal agencies—slightly less than 3 years 

for the period 1990-2001—and the long-term nature of change management 

initiatives can have critical implications for the success of those initiatives. 

The frequent turnover of the political leadership has often made it difficult 

to obtain the sustained and inspired attention required to make needed 

changes. Similarly, the recent turnover in DHS’s top leadership raises 

questions about the department’s ability to provide the consistent and 

sustained senior leadership necessary to achieve integration over the long 

term. 

Another level for focus on management efforts is those leaders responsible 

for day-to-day management functions. As we have reported, a Chief 

Operating Officer (COO)/Chief Management Officer (CMO) may effectively 

provide the continuing, focused attention essential to successfully 

completing these multiyear transformations in agencies like DHS.14 At 

 14On September 9, 2002, GAO convened a roundtable of government leaders and 

management experts to discuss the COO concept and how it might apply within selected 

federal departments and agencies. See GAO, Highlights of a GAO Roundtable: The Chief 

Operating Officer Concept: A Potential Strategy to Address Federal Governance 

Challenges, GAO-03-192SP (Washington, D.C.: Oct. 4, 2002). 

Providing Focus for 

Management Efforts 
Page 8 GAO-05-573T 

DHS, we have reported that the COO/CMO concept would provide the 

department with a single organizational focus for the key management 

functions involved in the business transformation of the department, such 

as human capital, financial management, information technology, 

acquisition management, and performance management, as well as for 

other organizational transformation initiatives.15 We have also recently 

testified that a COO/CMO can effectively provide the continuing, focused 

attention essential to successfully complete the implementation of DHS’s 

new human capital system, a large-scale, multiyear change initiative.16

The specific implementation of a COO/CMO position must be determined 

within the context of the particular facts, circumstances, challenges and 

opportunities of each individual agency. As the agency is currently 

structured, the roles and responsibilities of the Under Secretary for 

Management contain some of the characteristics of a COO/CMO for the 

department. According to Section 701 of the Homeland Security Act, the 

Under Secretary for Management is responsible for the management and 

administration of the Department in such functional areas as budget, 

accounting, finance, procurement, human resources and personnel, 

information technology, and communications systems.17 In addition, the 

Under Secretary is responsible for the transition and reorganization 

process and to ensure an efficient and orderly transfer of functions and 

personnel to the Department, including the development of a transition 

plan. 

While the protection of the homeland is the primary mission of the 

department, critical to meeting this challenge is the integration of DHS’s 

varied management processes, systems, and people—in areas such as 

 15GAO, The Chief Operating Officer Concept and its Potential Use as a Strategy to 

Improve Management at the Department of Homeland Security, GAO-04-876R

(Washington, D.C.: June 28, 2004). 

16GAO, Human Capital: Observations on Final DHS Human Capital Regulations, 

GAO-05-391T (Washington, D.C.: March 2, 2005), and GAO, Human Capital: Preliminary 

Observations on Final Department of Homeland Security Human Capital Regulations, 

GAO-05-320T (Washington, D.C.: Feb. 10. 2005). 

17Other responsibilities of the Under Secretary for Management under section 701 include 

financial management, procurement, human resources and personnel, information 

technology and communications systems, facilities and property management, security, 

performance measurements, grants and other assistance management programs, internal 

audits, and maintenance of immigration statistics. 

Monitoring Transformation 

and Integration 
Page 9 GAO-05-573T 

information technology, financial management, procurement, and human 

capital—as well as in its administrative services. The integration of these 

various functions is being executed through DHS’s management 

integration initiative. The success of this initiative is important since the 

initiative provides critical support for the total integration of the 

department, including its operations and programs, to ultimately meet its 

mission of protecting the homeland. Last week, we released a report on 

DHS’s management integration efforts to date as compared against 

selected key practices consistently found to be at the center of successful 

mergers and transformations.18

Overall, we found that while DHS has made some progress in its 

management integration efforts, it has the opportunity to better leverage 

this progress by implementing a comprehensive and sustained approach to 

its overall integration efforts. First, key practices show that establishing 

implementation goals and a timeline is critical to ensuring success and 

could be contained in an overall integration plan for a merger or 

transformation. DHS has issued guidance and plans to assist its integration 

efforts, on a function-by-function basis (information technology and 

human capital, for example); but it does not have such a comprehensive 

strategy to guide the management integration departmentwide. 

Specifically, DHS still does not have a plan that clearly identifies the 

critical links that must occur across these functions, the necessary timing 

to make these links occur, how these critical interrelationships will occur, 

and who will drive and manage them. 

Second, it is important to dedicate a strong and stable implementation 

team for the day-to-day management of the transformation, a team vested 

with the necessary authority and resources to help set priorities, make 

timely decisions, and move quickly to implement decisions. In addition, 

this team would ensure that various change initiatives are sequenced and 

implemented in a coherent and integrated way. DHS is establishing a 

Business Transformation Office, reporting to the Under Secretary for 

Management, to help monitor and look for interdependencies among the 

individual functional integration efforts. However, this office is not 

currently responsible for leading and managing the coordination and 

integration that must occur across functions not only to make these 

 18GAO, Department of Homeland Security: A Comprehensive and Sustained Approach 

Needed to Achieve Management Integration, GAO-05-139 (Washington, D.C.: Mar. 16, 

2005). 
Page 10 GAO-05-573T 

individual initiatives work but also to achieve and sustain the overall 

management integration of DHS. 

To address this challenge, we recommended, and DHS agreed, that it 

should develop an overarching management integration strategy and 

provide it’s recently established Business Transformation Office with the 

authority and responsibility to serve as a dedicated integration team and 

also help develop and implement the strategy. 

Effective strategic planning is another challenge for DHS. We have 

previously identified strategic planning as one of the critical success 

factors for new organizations. This is particularly true for DHS, given the 

breadth of its responsibility and need to clearly identify how stakeholders’ 

responsibilities and activities align to address homeland security efforts. 

Without thoughtful and transparent planning that involves key 

stakeholders, DHS may not be able to implement its programs effectively. 

In 2004, DHS issued its first departmentwide strategic plan. We have 

evaluated DHS’s strategic planning process, including the development of 

its first departmentwide strategic plan, and plan to release a report on our 

findings within a few weeks. This report will discuss (1) the extent to 

which DHS’s planning process and associated documents address the 

required elements of the Government Performance and Results Act of 1993 

(GPRA) and reflect good strategic planning practices and (2) the extent to 

which DHS’s planning documents reflect both its homeland security and 

nonhomeland security mission responsibilities. 

Another management challenge faced by DHS is how to manage its human 

capital. Our work in identifying key practices for implementing successful 

mergers and transformations indicates that attention to strategic human 

capital management issues should be at the center of such efforts. DHS 

has been given significant authority to design a new human capital system 

free from many of the government’s existing civil service requirements, 

and has issued final regulations for this new system. We have issued a 

Improving Strategic 

Planning 

Managing Human Capital 
Page 11 GAO-05-573T 

series of reports on DHS’s efforts to design its human capital system.19

First, we found that the department’s efforts to design a new human 

capital system was collaborative and facilitated the participation of 

employees from all levels of the department, and generally reflected 

important elements of effective transformations. We recommended that 

the department maximize opportunities for employees’ involvement 

throughout the design process and that it place special emphasis on 

seeking the feedback and buy-in of front line employees in the field. 

Second, we found that DHS’s human capital management system, as 

described in the recently released final regulations, includes many 

principles that are consistent with proven approaches to strategic human 

capital management. For example, many elements for a modern 

compensation system—-such as occupational cluster, pay bands, and pay 

ranges that take into account factors such as labor market conditions—-

are to be incorporated into DHS’s new system. However, these final 

regulations are intended to provide an outline and not a detailed, 

comprehensive presentation of how the new system will be implemented. 

Thus, DHS has considerable work ahead to define the details of the 

implementation of its system, and understanding these details is important 

to assessing the overall system.20

DHS faces significant financial management challenges. Specifically, it 

must address numerous internal control weaknesses, meet the mandates 

of the DHS Financial Accountability Act,21 and integrate and modernize its 

financial management systems, which individually have problems and 

collectively are not compatible with one another. Overcoming each of 

these challenges will assist DHS in strengthening its financial management 

 19GAO, Human Capital: Preliminary Observations on Proposed DHS Human Capital 

Regulations, GAO-04-479T (Washington, D.C.: February 25, 2003); Posthearing Questions 

Related to Proposed Department of Homeland Security (DHS) Human Capital 

Regulations, GAO-04-570R (Washington, D.C.: March 22, 2004); Additional Posthearing 

Questions Related to Proposed Department of Homeland Security (DHS) Human Capital 

Regulations, GAO-04-617R (Washington, D.C.: April 30, 2004); Human Capital: DHS Faces 

Challenges in Implementing Its New Personnel System, GAO-04-790 (Washington, D.C.: 

June 18, 2004); and Human Capital: DHS Personnel System Design Effort Provides for 

Collaboration and Employee Participation, GAO-03-1099 (Washington, D.C.: September 

30, 2003). 

20GAO, Human Capital: Preliminary Observations on Final Department of Homeland 

Security Human Capital Regulations, GAO-05-320T (Washington, D.C.: Feb. 10, 2005). 

21Pub. L. No. 108-330 (Oct. 16, 2004). 

Strengthening Financial 

Management 

Infrastructure 
Page 12 GAO-05-573T 

environment, improving the quality of financial information available to 

manage the department day to day, and obtaining an unqualified opinion 

on its financial statements. 

DHS’s independent auditors were unable to issue an opinion on any of the 

department’s financial statements for fiscal year 2004. This was a 

substantial setback in DHS’s financial management progress, compounded 

by continued challenges in resolving its internal control weaknesses. The 

number of material internal control weaknesses at the department has 

increased from 7 as of September 30, 2003 to 10 as of September 30, 2004. 

With the passage of the Department of Homeland Security Financial 

Accountability Act (the Accountability Act), DHS is now subject to the 

Chief Financial Officers Act of 1990 (the CFO Act)22 and the Federal 

Financial Management Improvement Act of 1996 (FFMIA).23 The 

Accountability Act also requires that in fiscal year 2005 the Secretary of 

Homeland Security include an assertion on internal controls over financial 

reporting at the department, and in fiscal year 2006 requires an audit of 

internal controls over financial reporting. We will continue to monitor the 

steps DHS is taking to meet the requirements of the Accountability Act as 

part of our audit of the consolidated financial statements of the United 

States government. 

We reported in July 2004 that DHS continues to work to reduce the 

number of financial management service providers and to acquire and 

deploy an integrated financial enterprise solution.24 At that time, DHS 

reported that it had reduced the number of financial management service 

providers for the department from the 19 providers at the time DHS was 

formed to 10. DHS planned to consolidate to 7 providers. Additionally, 

DHS hired a contractor to deploy an integrated financial enterprise 

solution. This is a costly and time consuming project and we have found 

that similar projects have proven challenging for other federal agencies. 

 22Pub. L. No. 101-576 (Nov. 15, 1990). 

23Division A, Section 101(f), Title VIII, of Public Law 104-208 is entitled the Federal 

Financial Management Improvement Act of 1996. FFMIA requires the major departments 

and agencies covered by the CFO Act to implement and maintain financial management 

systems that comply substantially with (1) federal financial management systems 

requirements, (2) applicable federal accounting standards, and (3) the U.S. Government 

Standard General Ledger at the transaction level. 

24GAO, Financial Management: Department of Homeland Security Faces Significant 

Financial Management Challenges, GAO-04-774 (Washington: D.C.: July 19, 2004). 
Page 13 GAO-05-573T 

We will therefore continue to monitor DHS’s progress on overcoming this 

serious challenge. 

DHS has recognized the need for a strategic management framework that 

addresses key information technology disciplines, and has made a 

significant effort to make improvements in each of these disciplines. For 

example, DHS is implementing its information technology (IT) investment 

management structure, developing an enterprise architecture, and has 

begun IT strategic human capital planning. However, much remains to be 

accomplished before it will have fully established a departmentwide IT 

management framework. To fully develop and institutionalize the 

management framework, DHS will need to strengthen strategic planning, 

develop the enterprise architecture, improve management of systems 

development and acquisition, and strengthen security. To assist DHS, we 

have made numerous recommendations, including (1) limiting information 

technology investments until the department’s strategic management 

framework is completed and available to effectively guide and constrain 

the billions of dollars that DHS is spending on such investments; (2) taking 

appropriate steps to correct any limitations in the Chief Information 

Officer’s ability to effectively support departmentwide missions; and (3) 

ensuring the department develops and implements a well-defined 

enterprise architecture to guide and constrain business transformation 

and supporting system modernization. The development of this framework 

is essential to ensuring the proper acquisition and management of key 

DHS programs such as U.S. Visitor and Immigrant Status Indicator 

Technology (US-VISIT), Automated Commercial Environment, and Secure 

Flight.25 To this end, we have recently reported on key management 

challenges and weaknesses for each of the programs that an effective 

 25For information about the challenges these programs face, see GAO, Homeland Security: 

Some Progress Made, but Many Challenges Remain on U.S. Visitor and Immigrant 

Status Indicator Technology Program, GAO-05-202 (Washington, D.C.: Feb. 23, 2005); 

Information Technology: Customs Automated Commercial Environment Program 

Processing, but Need for Management Improvements Continues, GAO-05-267

(Washington, D.C.: Mar. 14, 2005); and Aviation Security: Secure Flight Development and 

Testing under Way, but Risks Should Be Managed as System Is Further Developed, 

GAO-05-356 (Washington, D.C.: Mar. 28, 2005). 

Establishing an 

Information Technology 

Management Framework 
Page 14 GAO-05-573T 

DHS-wide framework for managing systems investments would be 

instrumental in addressing.26

Our work has indicated that managing acquisitions is also a major 

management challenge for DHS. The department faces the challenge of 

structuring its acquisition organization so that its various procurement 

organizations are held accountable for complying with procurement 

policies and regulations and ensuring that taxpayer dollars are well-spent. 

In addition, the department has in place a number of large, complex, and 

high-cost acquisition programs, such as US-VISIT and the Coast Guard’s 

Deepwater program, which will need to be closely managed to ensure that 

they receive the appropriate level of oversight and that acquisition 

decisions are made based on the right level of information. For example, 

we reported in March 2004 that the Deepwater program needed to pay 

more attention to management and contractor oversight in order to avoid 

cost overruns.27 We have also reported on contract management problems 

at the former Immigration and Naturalization Service, now a part of DHS, 

and TSA.28 We will issue a report at the end of the this month that 

addresses (1) areas where DHS has been successful in promoting 

collaboration among its various organizations, (2) areas where DHS still 

faces challenges in integrating the acquisition function, and (3) the 

department’s progress in implementing an effective review process for its 

major, complex investments. 

DHS also faces management challenges in coordinating research and 

development (R&D). Our work has recently found that DHS has not yet 

completed a strategic plan to identify priorities, goals, objectives, and 

policies for the R&D of homeland security technologies and that additional 

challenges remain in its coordination with other federal agencies. Failure 

to complete a strategic plan and to fully coordinate its research efforts 

 26GAO, Department of Homeland Security: Formidable Information and Technology 

Management Challenge Requires Institutional Approach, GAO-05-702 (Washington, D.C.: 

Aug. 27, 2004). 

27GAO, Contract Management: Coast Guard’s Deepwater Program Needs Increased 

Attention to Management and Contractor Oversight, GAO-04-380 (Washington, D.C.: Mar. 

9, 2004). 

28GAO, Contract Management: INS Contracting Weaknesses Need Attention from the 

Department of Homeland Security, GAO-03-799 (Washington, D.C.: Jul. 25, 2003) and 

Transportation Security Agency: High-Level Attention Needed to Strengthen Acquisition 

Function, GAO-04-544 (Washington, D.C.: May 28, 2004). 

Managing Acquisitions 

Coordinating Research and 

Development 
Page 15 GAO-05-573T 

may limit DHS’s ability to leverage resources and could increase the 

potential for duplication of research. In addition, DHS faces challenges 

with regard to its use of DOE laboratories. These challenges include the 

development of a better working relationship through better 

communication and the development of clear, well-defined criteria for 

designating the DOE laboratories to receive the majority of DHS’s R&D 

funding. Moreover, DHS faces the challenge of balancing the immediate 

needs of the users of homeland security technologies with the need to 

conduct R&D on advanced technologies for the future.29

Similarly, conducting R&D on technologies for detecting, preventing, and 

mitigating terrorist threats is vital to enhancing the security of the nation’s 

transportation system. In our report on the Transportation Security 

Administration’s (TSA) and DHS’s transportation security R&D programs, 

we found that although TSA and DHS have made some efforts to 

coordinate R&D with each other and with other federal agencies, both 

their coordination with the Department of Transportation (DOT) and their 

outreach to the transportation industry have been limited.30 For example, 

officials from the modal administrations of DOT, which continue to 

conduct some transportation security R&D, said they had not provided any 

input into TSA’s and DHS’s transportation security R&D project selections. 

Consequently, DOT’s and the transportation industry’s security R&D needs 

may not be adequately reflected in TSA’s and DHS’s R&D portfolios. 

Therefore, we recommend that TSA and DHS (1) develop a process with 

DOT to coordinate transportation security R&D, such as a memorandum 

of agreement identifying roles and responsibilities and designating agency 

liaisons and (2) develop a vehicle to communicate with the transportation 

industry to ensure that its R&D security needs have been identified and 

considered. DHS generally concurred with our report and its 

recommendations. 

 29GAO, Homeland Security: DHS Needs a Strategy to Use DOE’s Laboratories for 

Research on Nuclear, Biological, and Chemical Detection and Response Technologies, 

GAO-04-653 (Washington, D.C.: May 24, 2004). 

30GAO, Transportation Security R&D: TSA and DHS Are Researching and Developing 

Technologies, but Need to Improve R&D Management, GAO-04-890 (Washington, D.C.: 

Sep. 30, 2004). 
Page 16 GAO-05-573T 

Given the dominant role that DHS plays in securing the homeland, it is 

critical that DHS be able to ensure that its management systems are 

operating as efficiently and effectively as possible. While it is understood 

that a transformation of this magnitude takes time and that DHS’s 

immediate focus has been on its homeland security mission, we see the 

need for DHS to increase its focus on management issues. This is 

important not only to DHS itself, but also to the nation’s homeland 

security efforts, because, in addition to managing its own organization, 

DHS plays a larger role in managing homeland security and in coordinating 

with the activities of other federal, state, local, and private stakeholders. 

This larger DHS role presents its own unique challenges. 

• For example, DHS faces the challenge of clarifying the role of 

government versus the private sector. In April 2002, we testified that 

the appropriate roles and responsibilities within and between the levels 

of governments and with the private sector are evolving and need to be 

clarified.31 New threats are prompting a reassessment and shifting of 

long-standing roles and responsibilities. These shifts have been 

occurring on a piecemeal and ad hoc basis without the benefit of an 

overarching framework and criteria to guide the process. 

• As another example, DHS faces a challenge in determining how federal 

resources are allocated to non-federal stakeholders. We have long 

advocated a risk management approach to guide the allocation of 

resources and investments for improving homeland security.32

Additionally, OMB has identified various tools, such as benefit-cost 

analysis, it considers useful in planning such as capital budgeting and 

regulatory decisionmaking.33 DHS must develop a commonly accepted 

framework and supporting tools to inform cost allocations in a risk 

management process. Although OMB asked the public in 2002 for 

suggestions on how to adjust standard tools to the homeland security 

setting,34 a vacuum currently exists in which benefits of homeland 

 31GAO, Homeland Security: Responsibility and Accountability for Achieving National 

Goals, GAO-02-627T (Washington, D.C.: Apr. 11, 2002). 

32GAO, Homeland Security: Key Elements of a Risk Management Approach, GAO-02-150T

(Washington, D.C.: Oct. 12, 2001); and Homeland Security: A Risk Management Approach 

Can Guide Preparedness Efforts, GAO-02-208T (Washington, D.C.: Oct. 31, 2001). 

33OMB Circulars A-11 and A-94. 

34OMB, 2003 Report to Congress on Combating Terrorism (Washington, D.C.: Sept. 2003). 

Importance of 

Focusing on 

Management Issues 
Page 17 GAO-05-573T 

security investments are often not quantified and almost never valued 

in monetary terms.35

• As a final example, DHS faces a challenge in sharing information 

among all stakeholders. DHS has initiatives underway to enhance 

information sharing (including the development of a homeland security 

enterprise architecture to integrate sharing between federal, state, and 

local authorities). However, our August 2003 report noted that these 

initiatives, while beneficial for the partners, presented challenges 

because they (1) were not well coordinated, (2) risked limiting 

participants’ access to information, and (3) potentially duplicated the 

efforts of some key agencies at each level of government.36 We also 

found that despite various legislation, strategies, and initiatives, federal 

agencies, states, and cities did not consider the information sharing 

process to be effective. 

A well-managed DHS will be needed to meet these larger homeland 

security challenges. As DHS continues to evolve, integrate its functions, 

and implement its programs, we will continue to review its progress and 

provide information to Congress for oversight purposes. 

Mr. Chairman, this concludes my prepared statement. I will now be 

pleased to respond to any questions that you or other members of the 

subcommittee have. 

For further information about this testimony, please contact Norman J. 

Rabkin at 202-512-8777. 

Other key contributors to this statement were Stephen L. Caldwell, 

Wayne A. Ekblad, Carole J. Cimitile, Ryan T. Coles, Tammy R. Conquest, 

Benjamin C. Crawford, Heather J. Dunahoo, Kimberly M. Gianopoulos, 

David B. Goldstein, Randolph C. Hite, Robert G. Homan, Casey L. 

Keplinger, Eileen R. Larence, Michele Mackin, Lisa R. Shames, and 

Sarah E. Veale. 

 35OMB Circular A-11. 

36GAO, Homeland Security: Efforts to Improve Information Sharing Need to be 

Strengthened, GAO-03-760 (Washington, D.C.: Aug. 27, 2003). 

GAO Contacts and 

Staff 

Acknowledgments 

440413 
Page 18 GAO-05-573T 
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