DOD PERSONNEL

Weaknesses in Security

Investigation Program

Are Being Addressed

Statement of Carol R. Schuster, Associate Director, National Security

Preparedness Issues, National Security and International Affairs Division

United States General Accounting Office

GAO Testimony

Before the Committee on Armed Services

U.S. Senate

For Release on Delivery

Expected at

9:30 a.m.

Thursday,

April 6, 2000

GAO/T-NSIAD-00-148
1

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss our past work on personnel security investigations

conducted by the Defense Security Service. As you know, the Defense Security Service is

responsible for conducting background investigations on Department of Defense (DOD) civilian and

military personnel, consultants, and contractors seeking security clearances. Today, I would like to

describe how decisions to grant or deny security clearances to DOD employees and contractors are

made; summarize the key findings from our October 1999 report; and discuss DOD actions on our

recommendations. The centerpiece of our report was an analysis of the completeness and timeliness

of a representative sample of Defense Security Service investigations finished in January and

February 1999.1

Representative Ike Skelton requested this work based on his concern about

espionage committed by DOD employees who held security clearances. From 1982 through

September 1999, 68 of 80 individuals convicted of committing espionage against the United States

were DOD employees. All of these employees had undergone personnel security investigations and

held security clearances.

SUMMARY

The Department of Defense uses a two-part process to determine whether an individual should be

granted a security clearance. The first phase is the personnel security investigation, in which

Defense Security Service investigators corroborate information provided by the applicant, interview

character references, and review federal and local records for financial vulnerabilities and criminal

activity. The second phase is the adjudication, which is conducted by eight DOD components.

Adjudicators weigh favorable and unfavorable information with regard to a number of factors (such

as the nature, extent, and seriousness of any conduct). If, on balance, the evidence suggests the

individual is a good security risk, the clearance can be granted.

Safeguarding sensitive national security information is one of the most important responsibilities

entrusted to public servants. Therefore, it is critical that only those individuals who have passed the

scrutiny of rigorous background investigations be granted security clearances. Unfortunately, our

evaluation of Defense Security Service personnel security investigations revealed serious lapses in

the thoroughness and timeliness of these investigations, raising questions about the risks such lapses

pose to national security. Our detailed analysis of 530 personnel security investigations showed that

the vast majority did not comply with federal standards for conducting such investigations.

Nevertheless, all of the DOD employees investigated were granted top secret security clearances

even though Defense Security Service investigators had not always verified such basic information

as residency, citizenship, or employment. We also found that these investigations were not

completed in a timely manner. At the time of our review, the Defense Security Service estimated

that there was a backlog of 600,000 cases awaiting reinvestigation. As a result of these conditions,

some of DOD’s 2.4 million personnel currently holding security clearances may be handling sensitive

national security information without having been thoroughly screened. In addition, in 1994, the

Joint Security Commission reported that delays in obtaining security clearances cost DOD several

billion dollars because workers were unable to perform their jobs while awaiting a clearance.2

Several factors, including a series of ineffective management reforms at the Defense Security Service

between 1996 and early 1999 contributed to these deficiencies. During this period, the Defense

Security Service relaxed its investigative guidance, eliminated key quality control mechanisms,

inadequately trained its investigators, and ineffectively managed automation of its case processing

1

DOD Personnel: Inadequate Personnel Security Investigations Pose National Security Risks (GAO/NSIAD-00-12, October 27, 1999). 2

The Secretary of Defense and the Director of Central Intelligence established the Joint Security Commission in May 1993 to review

security policies and procedures. It was convened twice and issued reports on its work in 1994 and 1999.
2

system. Moreover, the Assistant Secretary of Defense (Command, Control, Communications, and

Intelligence) did not provide effective oversight of the agency’s operations during this period.

DOD has responded positively to our recommendations for improving the overall management of its

personnel security investigation program. For example, the Secretary of Defense has designated the

program a key agency vulnerability in his most recent report to the President and the Congress filed

in accordance with the Federal Managers’ Financial Integrity Act. This designation should provide

added visibility that should enable the Department to monitor progress in correcting identified

problems. In addition, the Director of the Defense Security Service has developed a strategic plan

and is developing performance measures to improve the quality of the investigative work, has

reinstituted training and quality control mechanisms, and has worked out a plan for addressing the

large backlog of cases awaiting reinvestigation. By May 1, 2000, DSS must provide the Deputy

Secretary of Defense a plan to enhance or replace the agency’s automated case management system.

However, we must emphasize that, due to the breadth of the problems, it may take several years and

many millions of dollars before all of the necessary improvements are made.

Before turning to the details of our findings on the security investigation process, I would like to first

provide background information on the process currently used in DOD to determine whether an

individual should be granted a security clearance.

SECURITY CLEARANCES ARE GRANTED OR DENIED THROUGH

A TWO-PART PROCESS

DOD grants security clearances after completing two related processes. The first phase involves an

investigation into the individual’s past to obtain information related to making a determination

whether he or she can be entrusted with classified information. The second phase, termed the

adjudication process, involves a weighing of the information collected in the first phase to determine

whether a clearance should be granted or denied.

Investigation Phase

With respect to the first phase, all federal departments and agencies that conduct background

investigationsincluding the Defense Security Service (DSS) and others, such as the Office of

Personnel Management, and the Federal Bureau of Investigationare expected to conduct their

investigations in accordance with federal investigative standards approved by the President in 1997.

For clearances at the top secret level, these standards require investigations in the following nine

areas:

• corroboration of a subject’s date and place of birth, and verification of citizenship for foreignborn subjects and their foreign-born immediate family members;

• corroboration of education;

• verification of employment for the past 7 years and interviews with supervisors and co-workers;

• interviews with character references and former spouses;

• interviews with neighbors to confirm residences;

• a national agency check on the subject and spouse or cohabitant, using files and records held by

federal agencies (such as the Federal Bureau of Investigation);
3

• a financial review, including a credit bureau check;

• a local agency check of criminal history records and other public records to verify any civil or

criminal court actions involving the subject; and

• a personal interview with the subject.

Adjudication Phase

Upon completion of the investigation, DSS forwards the information to one of eight DOD

adjudication facilities, which then initiate the adjudication phase.3

Each case is to be judged on its

own merits and the final determination as to whether a security clearance should be granted or

denied is the responsibility of the specific DOD agency requesting the clearance. In making their

determinations, adjudication personnel are to consider 13 factors, such as the individual’s allegiance

to the United States; criminal and personal conduct; and substance abuse or mental disorders. To

assess security risk, adjudicators employ a “whole person” approach in which they carefully consider

both favorable and unfavorable information, especially noting factors that mitigate past unfavorable

circumstances. In evaluating unfavorable information about an individual’s conduct, the adjudicator

is to consider

• the nature, extent, and seriousness of the conduct;

• the circumstances surrounding the conduct, including knowledgeable participation;

• the frequency and recency of the conduct;

• the individual’s age and maturity at the time of the conduct;

• the voluntariness of participation;

• the presence or absence of rehabilitation and other pertinent behavior changes;

• the motivation for the conduct;

• the potential for pressure, coercion, exploitation, or duress; and

• the likelihood of continuation or recurrence.

For example, when considering an individual with a history of drug use, successful completion of a

drug rehabilitation program with no evidence of recent drug use would be considered a mitigating

factor. If after this evaluation of the “whole person,” the preponderance of evidence suggests that

the individual is a good security risk, the individual can be granted a security clearance even though

the investigation may have uncovered significant unfavorable information. In making these

determinations, the federal adjudication guidelines state that “any doubt as to whether access to

classified information is clearly consistent with national security will be resolved in favor of the

national security.”

3

These facilities are: Air Force Headquarters 497th Intelligence Group; Army Central Personnel Security Clearance Facility; Department of

the Navy Central Adjudication Facility; National Security Agency; Defense Intelligence Agency; Joint Chiefs of Staff; Washington

Headquarters Services; and the Defense Office of Hearings and Appeals.
4

At the request of Representative Ike Skelton, we are currently evaluating DOD’s adjudication

program. Our work will include reviewing a representative sample of cases from several of DOD’s

adjudication facilities to determine how these facilities are conducting their work. As part of this

work, we expect to be able to provide statistical information on clearances granted and denied by

the various adjudication facilities and the extent to which adjudication decisions are overturned

after an appeal.

Now, I will turn to the results of our analysis of the first phase of the security clearance process —

the conduct of DSS background investigations.

DSS INVESTIGATIONS LACKED REQUIRED

INFORMATION AND WERE UNTIMELY

DOD’s personnel security investigation program has resulted in investigations that did not obtain the

information required by federal standards; did not address issues that the investigations revealed

which could disqualify individuals from holding security clearances; and were not completed in a

timely manner. The deficiencies in the program were due to a series of ineffective management

reforms at DSS and inadequate oversight by the Assistant Secretary of Defense (Command, Control,

Communications, and Intelligence).

DSS Investigations Were Incomplete

To determine the completeness of DSS investigations, we selected a representative sample of 530

investigations finished by DSS in January and February 1999 for four key customersthe Air Force,

the Army, the Navy, and the National Security Agency.4

Our findings are projectable only to the

investigations conducted by these four DOD components. However, because these entities

accounted for 73 percent of the investigative work conducted by DSS in fiscal year 1998, we believe

that our findings suggest systemic program weaknesses. In the 530 cases we reviewed, DOD granted

top secret clearances notwithstanding that

• 92 percent of the 530 investigations were deficient in that they did not contain information in at

least one of the nine required investigative areas, and

• 77 percent of the investigations were deficient in meeting federal standards in two or more areas.

As shown in figure 1, we found problems primarily in six of the nine areas that the federal standards

require for a security clearance investigation. Frequently, DSS did not confirm residency,

corroborate birth or citizenship for foreign-born subjects, spouses, or family members, verify

employment, interview character references, and/or check local agency records.

4

To assure the quality of our analysis, we had DOD review the analytical tool we used to evaluate the completeness of the cases, had two

GAO staff independently review each case, and had the affected adjudication facilities review our results.
5

Figure 1: Percent of Deficient Investigations in Nine Required Investigative Areas

Percent of deficient investigations

Source: GAO sample of 530 DSS investigations.

Importantly, in 16 percent of the investigations we examined, DSS did not pursue issues pertaining to

individuals’ prior criminal history, alcohol and drug use, financial difficulties, and other problems

that its investigators uncovered. Any of these issues, if corroborated, could prevent an individual

from being granted a security clearance. Of particular concern is the failure to resolve issues

pertaining to large outstanding debts and bankruptcy, since financial gain has been the major reason

individuals committed espionage. The following cases illustrated these lapses.

• A reinvestigation for an individual working on cross-service issues revealed that the subject’s

credit report showed $10,000 past due on a mortgage and indicated that the lender had begun

foreclosure proceedings. The subject denied knowledge of the matter, and investigative records

do not show that DSS pursued the matter further by contacting the lender.

• An initial investigation for an individual assigned to a communications unit revealed a

bankruptcy on the subject’s credit report, but investigative records do not show that DSS

questioned the subject about the matter or made any further attempt to address it.

• Records for a reinvestigation of an electronics technician do not show that DSS attempted to

verify the subject’s claim to be a member of a foreign military service and to hold foreign

citizenship. Further, although the investigative file indicated that the subject might have been

involved in shooting another individual, we found no evidence that the matter was pursued by

DSS.

54

51

47

36

30

23

10

1 1

0

10

20

30

40

50

60

Residency Birth &

citizenship

Employment References Local records

check

Education National

agency check

Finances Subject

interview
6

Untimely Investigations Created Costly Delays and Backlog

DSS investigations take too much time. DOD components and contractors want investigations

completed in 90 days to avoid costly delays. Nevertheless, half of the 530 investigations we reviewed

took 204 or more days to complete. In 1994, the Joint Security Commission reported that delays in

obtaining security clearances cost DOD several billion dollars in fiscal year 1994 because workers

were unable to perform their jobs while awaiting a clearance. In February 1999, representatives of

several contractors complained to DSS about the time taken to clear their personnel, pointing out

that the delays threatened to affect some facilities’ ability to effectively perform on contracts and

meet cost schedules. The representatives noted that 64 percent (1,426) of the 2,236 investigations

they had requested were pending for more than 90 days, with 76 investigations pending since 1997.

In addition, adjudication facility officials said that they frequently made decisions to grant or deny

clearances based on incomplete investigations because it would take too long to have DSS obtain the

missing information. Figure 2 shows that DSS completed only 4 of the 530 investigations we

reviewedless than 1 percentunder 90 days, whereas 11 percent took more than 1 year.

Figure 2: Calendar Days Needed to Complete Investigations

Percent of days

Note: Numbers in bars represent number of cases within each range.

Source: GAO sample of 530 DSS investigations.

At the time we completed our review in October 1999, about 600,000 DOD individuals holding

clearances were overdue for reinvestigations5

. This backlog resulted, in large part, from quotas

5

The 1997 federal investigative standards require a periodic reinvestigation of individuals granted access to classified information.

Clearances are outdated if a reinvestigation has not been initiated in the past 5 years for top secret clearances, 10 years for secret

clearances, and 15 years for confidential clearances.

4

209

161

99

57

0

50

100

150

200

250

0-90 91-180 181-270 271-365 365
7

imposed by the Assistant Secretary of Defense (Command Control, Communications, and

Intelligence) in 1996 on the number of reinvestigations that DOD components could request in a

given year. In 1994 and 1999, the Joint Security Commission reported that delays in initiating

reinvestigations create risks to national security because the longer individuals hold clearances the

more likely they are to be working with critical information systems. Also, the longer a

reinvestigation is delayed, the greater the risk that changes in an individual’s behavior will go

undetected. DOD is currently initiating several efforts to reduce this large backlog. The Chairman of

the House Subcommittee on National Security, Veterans Affairs, and International Relations has

asked us to examine the accuracy of DOD’s estimate of its backlog of cases awaiting reinvestigation.

We expect to report the results of this work later this year.

Ineffective Management Reforms and Inadequate

Oversight Led to Deficient Investigations

We believe that ineffective management reforms at DSS, made in the interest of streamlining

operations, are directly related to the deficiencies we noted in its security investigations.6Between

1996 and early 1999, DSS relaxed its investigative requirements against the advice of the Security

Policy Board, eliminated critical investigative quality control mechanisms, did not adequately train

its staff on the new federal investigative standards, and ineffectively managed the implementation of

a new $100 million automation effort. The underlying cause of DSS’s investigative deficiencies was

inadequate management oversight by the Assistant Secretary of Defense (Command, Control,

Communications, and Intelligence).

DSS Relaxed Investigative Guidance

From August 1996 through February 1999, DSS relaxed its investigative requirements through a

series of policy letters to its investigative staff. Several of these letters gave investigators greater

discretion in how they would meet the federal standards or pursue investigative issues. For

example, although the federal standards require credit information on a subject, DSS eliminated the

requirement to contact creditors about debts revealed by the subject. DSS also eliminated its

practice of routinely verifying disputed credit accounts. Although the federal standards require

investigators to obtain character references on the subject, DSS gave investigators “broad leeway” in

deciding whether to obtain references from the subject’s neighborhood. DSS also did not require its

investigators to make local agency checks for a subject’s prior criminal history if local jurisdictions

charged a service feean exception not provided for in the standards. These policy changes caused

much confusion among agency staff. In responding to our survey of nearly 1,300 DSS investigators

and case analysts 7

, 59 percent of the investigators and 90 percent of the case analysts said that the

policy guidance had confused them about what investigative requirements they were to follow.

In 1996 and again in 1998, the Security Policy Board advised DSS not to adopt policies that ran

counter to the federal investigative standards.8

The Board noted that DOD was a full partner in

developing the new standards and that the planned actions would undermine the objectives of

achieving reciprocity in investigations among the federal government’s agencies, cause a serious

6

DSS undertook these reforms as reinvention efforts ostensibly based on the National Performance Review, which called for improving

government at less cost.

7

DSS case analysts plan the investigative scope, assign the required work to DSS field offices, and determine if all investigative criteria

have been met and all issues relevant for a clearance decision have been resolved.

8

The Board, which consists of senior representatives from 10 federal agencies, departments, and other organizations, is responsible for

developing directives for U.S. security policies, procedures, and practices.
8

deterioration in the quality of investigative work, and increase security risk. It stated that if DSS

wanted to change the standards, it should bring such requests to the Board, which was specifically

established for that purpose. In spite of this advice, DSS adopted the relaxed investigative guidance.

DSS Eliminated Key Quality Control and Training Mechanisms

In 1996, DSS eliminated two quality control mechanisms that were critical to ensuring the quality of

the investigative worksupervisory review of completed investigations and its quality assurance

branch. Previously, field supervisors routinely reviewed all completed investigations before they

were forwarded to DSS headquarters and submitted to the adjudication facilities for clearance

decisions. The quality assurance branch conducted weekly reviews of a sample of completed

investigations and published a newsletter on common investigative problems. Both programs were

eliminated under DSS’ s reinvention efforts in order to shift personnel to the investigative staff.

Inadequate training on the federal standards for both investigators and case analysts has also

diminished investigative quality. During the past 3 years, DSS provided almost no formal training on

the standards, and DOD dismantled the major training organization that provided the training. As a

result, from 43 percent to more than 80 percent of the investigators we surveyed stated that they

were inadequately trained on the various federal standards. Figure 3 shows the areas where the

investigators most frequently cited training gaps.

Figure 3: Percent of Investigators Without Recent Training on Investigative Requirements

Source: 1999 GAO survey of 1,009 DSS investigators who provided information on their

training.

Costly Automation Initiative Has Been Plagued by Problems

DSS did not properly plan for the implementation of a new information system designed to automate

its personnel security investigation case processing. As a result, DSS has not been able to process its

81

73 71

65

62 62 59

49 48 46 45 45 43

0

10

20

30

40

50

60

70

80

90

Military records check

Family legal status

Employment

Subjects' citizenship

Subjects' birth

Subjects' past education

Verify divorces

Subjects' recent education

Local records checks

Verify civil and criminal acts

Check unemployment

Interview divorced spouses

Verify employment over 6 months
9

investigations in a timely manner, and the volume of investigations sent to field offices and the

adjudication facilities has decreased sharply. The automation system was not adequately designed

or tested before being implemented. Thus, DSS was unable to achieve the paperless processing

system that would have streamlined processing and the flow of cases to investigative staff was

significantly reduced. According to DSS officials, DOD may have to add $100 million to $300 million

more to the $100 million already spent on its automation efforts to have a workable system. The

automation problems have also exacerbated DSS’ s efforts to cope with the large backlog of overdue

investigations.

Our survey of investigators shows the dramatic impact the automation problems have had on their

workload. Before the system was implemented in October 1998, 58 percent of the investigators said

they had too much work. Since the system was implemented, the situation has reversed60 percent

said they had too little work. A similar decrease in workload has occurred at the adjudication

facilities. The volume of investigative cases for four facilities included in our review dropped

between 37 percent and 67 percent following the implementation of the new automated system.

DOD Exercised Inadequate Oversight

The problems we found in the completeness and timeliness of DSS investigations and in its

automation efforts were due to inadequate oversight by the Assistant Secretary of Defense

(Command, Control, Communications, and Intelligence). For at least 4 years, DSS has operated with

little scrutiny of its programs by the Assistant Secretary, who is responsible for DSS oversight.

Sound management practices call for such oversight. DOD officials stated that once DSS initiated its

reinvention efforts, it was allowed to operate, for the most part, at its own discretion.

DOD IS IMPLEMENTING GAO’s RECOMMENDATIONS

DOD agreed that the deficiencies we found represent a potential risk to the personnel security

program and the protection of classified information, and it agreed to take action on all of our

recommendations. For example, DOD has complied with our recommendation to identify its

personnel security investigation program as a significant internal control weakness in its most recent

report to the President and the Congress under the Federal Managers’ Financial Integrity Act. This

designation should provide added visibility that should enable the Department to monitor progress in

correcting identified problems. In addition, the office of the Assistant Secretary of Defense

(Command, Control, Communications, and Intelligence) has been holding periodic meetings with

DSS to discuss the various problems we identified and develop methods to correct them. In fact, the

Director of DSS began taking corrective actions after our briefings even before we completed our

review. Based on our recommendations, he has developed a strategic plan and is developing

performance measures to guide DSS in improving its operations; reinstituted key quality control and

training mechanisms; reviewed DSS’s investigative procedures with the goal of bringing them in line

with federal investigative standards; and taken several actions to address the large backlog of cases

awaiting reinvestigations. Further, he has expressed his intention to improve cooperation with the

Security Policy Board. DSS has also established three separate teams to assess the problems

associated with its automation initiative and established a Program Management Office to serve as

the system’s operational manager. By May 1, 2000, DSS must provide the Deputy Secretary of

Defense a plan to enhance or replace the agency’s automated case management system.

The Director also established an Operational Standards and Quality Council composed of

representatives from the office of the Assistant Secretary, DSS, and the adjudication facilities to

discuss the approaches to deal with various investigative and adjudicative issues with the overall

objective of improving the quality of the work. We also recommended that the adjudication facilities
10

be directed to grant clearances only when all essential investigative work has been completed. Our

ongoing analysis of cases recently adjudicated should shed light on how the adjudicative process is

working.

Mr. Chairman and Members of the Committee, this concludes my prepared remarks. I would be

happy to answer any questions you may have.

Contacts and Acknowledgements

For future contacts regarding this testimony, please call Carol Schuster at (202) 512-3958. Key

contributors to this testimony included Christine Fossett, Rodney Ragan, and Frank Bowen.

(702062)
11

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