For Release on Delivery

Expected at 10:00 a.m.

Wednesday

February 16, 2000

GAO/T-NSIAD-00-65

DOD PERSONNEL

Inadequate Personnel

Security Investigations

Pose National Security

Risks

Statement of Carol R. Schuster, Associate Director,

National Security Preparedness Issues, National Security

and International Affairs Division

Testimony

Before the Subcommittee on National Security, Veterans

Affairs, and International Relations, Committee on

Government Reform, House of Representatives

United States General Accounting Office

GAO
Page 1 GAO/T-NSIAD-00-65

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss our recent evaluation of Defense

Security Service personnel security investigations.1 This evaluation was

conducted at the request of the Ranking Minority Member of the House

Armed Services Committee, who was concerned about espionage

committed by Department of Defense (DOD) employees who held security

clearances. From 1982 through September 1999, 80 individuals were

convicted of committing espionage against the United States; 68 of these

were DOD employees, and all had undergone personnel security

investigations and held security clearances.

The Defense Security Service is the key investigative agency responsible

for conducting investigations of DOD’s civilian and military personnel,

consultants, and contractors.

Today, I would like to discuss the results of our analysis of a

representative sample of Defense Security Service investigations

completed in January and February 1999. Specifically, I will discuss (1) the

completeness and timeliness of the agency’s investigations, (2) the factors

that contributed to the deficiencies we found, and (3) our major

recommendations. But first, let me provide a brief summary of my

testimony.

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 the 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. All of the individuals 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 Defense Security Service

investigations have not been completed in a timely manner and that there

1DOD Personnel: Inadequate Personnel Security Investigations Pose National Security Risks

(GAO/NSIAD-00-12, Oct. 27, 1999).

Summary
Page 2 GAO/T-NSIAD-00-65

is a current backlog of over 600,000 cases for 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

In examining the reasons for these deficiencies, we identified a series of

ineffective management reforms at the Defense Security Service that

occurred from 1996 through early 1999. We found that the Defense

Security Service-in an effort to streamline operations and improve

efficiency-relaxed its investigative guidance, eliminated key quality

control mechanisms, inadequately trained its investigators, and

ineffectively managed automation of its case processing system. However,

the underlying cause of the Defense Security Service’s problems is

insufficient oversight of its operations by the Assistant Secretary of

Defense (Command, Control, Communications, and Intelligence). We

believe that these factors led to incomplete investigations and exacerbated

the growing backlog of uninvestigated cases.

Our report made a series of recommendations to improve the overall

management of the personnel security investigation program. These

recommendations include identifying the program as containing material

internal control weaknesses in DOD’s next report to the President and the

Congress in accordance with the Federal Managers’ Financial Integrity

Act. We also recommended that the Secretary of Defense require the

Defense Security Service Director to develop a strategic plan and

performance measures to improve the quality of the investigative work

and correct other identified weaknesses. DOD agreed with all of our

recommendations and is in the early stages of making the necessary

changes. However, because of the seriousness and breadth of the

problems, it may take several years and many millions of dollars before all

of the necessary improvements are made.

Because of the importance of our methodology to our results, I would like

to provide some background information on how we selected cases for

our evaluation and how we determined whether investigations were

complete. To obtain the most recent cases possible, we selected a random

sample of investigations completed by the Defense Security Service (DSS)

2The Joint Security Commission was established in May 1993, by the Secretary of Defense and the

Director of Central Intelligence to review security policies and procedures. It was convened twice and

issued reports on its work in 1994 and 1999.

Background
Page 3 GAO/T-NSIAD-00-65

in January and February 1999. We drew our sample from DSS’s four

largest customers: the Air Force, the Army, the Navy, and the National

Security Agency. Although our findings are projectable only to the

investigations done for these four DOD components, these entities

accounted for 73 percent of the investigative work done by DSS in fiscal

year 1998. Therefore, our findings suggest systemic program weaknesses.

To ensure the objectivity of our analysis, we used the federal investigative

standards approved by the President in 1997, which apply to all federal

departments and agencies. All investigations must be conducted in

accordance with these standards, which are designed to help determine

whether individuals can be trusted to properly protect classified

information. For top secret clearances, these standards require

investigations in the following nine areas:

• corroboration of a subject’s date and place of birth, and verification of

citizenship for foreign-born 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);

• 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 of the subject.

We employed several methods to ensure the accuracy of our review of

DSS investigations. First, we developed a data collection instrument that

incorporated the federal investigative standards and had it reviewed by

officials from the office of the Assistant Secretary of Defense (Command,

Control, Communications, and Intelligence) and the Army’s adjudication
Page 4 GAO/T-NSIAD-00-65

facility.3 Second, two GAO staff reviewed each sampled investigation to

ensure that no important investigative information was overlooked. Third,

to ensure the accuracy of our work, we returned a random subsample of

deficient investigations to the Air Force, the Army, the Navy, and the

National Security Agency adjudication facilities for their review.

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.

• The Air Force, Army, Navy, and National Security Agency adjudication

facilities agreed with our findings.

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 obtain the following information: confirmation of

residency; corroboration of birth or citizenship for a foreign-born subject,

spouse, or family member; verification of employment; interviews of

character references; and a check of local agency records.

3An adjudication facility decides whether to grant or deny a clearance. In DOD, there are eight

adjudication facilities.

DSS Investigations

Lacked Required

Information
Page 5 GAO/T-NSIAD-00-65

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

Percent of deficient investigations

Source: GAO sample of 530 DSS investigations.

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 disqualify 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 there was

no evidence that DSS pursued the matter further by contacting the lender.

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
Page 6 GAO/T-NSIAD-00-65

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

revealed a bankruptcy on the subject’s credit report. There was no

evidence that DSS questioned the subject about the matter or made any

further attempt to address it.

• A reinvestigation for an electronics technician contained no evidence 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 may have been involved in

shooting another individual, we found no evidence that the matter was

pursued by DSS.

DSS investigations take too much time. Although DOD components and

contractors want investigations completed in 90 days to avoid costly

delays, 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 wrote

to the DSS Director complaining about the time taken to clear personnel

scheduled to work on defense contracts and pointed out that the delays

were threatening 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. They considered this a judicious weighing of the risks

entailed. 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.

Untimely

Investigations Created

Costly Delays and

Backlog
Page 7 GAO/T-NSIAD-00-65

Figure 2: Calendar Days Needed to Complete Investigations

Percent of days

Source: GAO sample of 530 DSS investigations.

About 600,000 DOD individuals holding clearances are overdue for

reinvestigations.4 This backlog resulted, in large part, from quotas imposed

by the Assistant Secretary in 1996 (and that continue today) 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.

4The 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.

0

5

10

15

20

25

30

35

40

45

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

Days to complete

209

4

161

99

57
Page 8 GAO/T-NSIAD-00-65

The deficiencies in DOD’s personnel security investigation program are

due to DSS’s ineffective management reforms and inadequate program

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

Communications, and Oversight). 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.5

DSS’s actions were undertaken as reinvention efforts ostensibly based on

the National Performance Review, which called for improving government

at less cost.6 However, DSS’s actions did not achieve this result.

From August 1996 through February 1999, DSS relaxed its investigative

requirements through a series of policy letters. Several of these letters

gave investigators greater discretion in how they would meet the federal

standards or pursue investigative issues that might be significant. For

example, although the federal standards require credit information to be

obtained 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 that local agency checks for a subject’s prior criminal history be

done if local jurisdictions charge a service fee, an exception not provided

for in the standards. Similarly, although the standards require verification

of divorces, bankruptcies, and other court actions, DSS only required that

divorce records be routinely reviewed. These policy changes caused much

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

DSS investigators and case analysts, 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. The

5The Board consists of senior representatives from the following 10 federal agencies, departments, and

other organizations: the Central Intelligence Agency; the National Security Council; the Office of

Management and Budget; the Joint Chiefs of Staff; the Departments of Commerce, Defense, Energy,

Justice, and State; and a non-defense agency rotated on an annual basis (now served by the

Department of Transportation). It is responsible for developing directives for U.S. security policies,

procedures, and practices.

6The National Performance Review was a task force headed by Vice President Albert Gore, Jr., in 1993

aimed at reinventing government to make it less expensive and more efficient.

Ineffective

Management Reforms

and Inadequate

Oversight Led to

Deficient

Investigations

DSS Relaxed Investigative

Guidance Contrary to

Security Policy Board’s

Advice
Page 9 GAO/T-NSIAD-00-65

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 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. The new DSS Director, appointed in June

1999, has acknowledged the need to bring DSS standards in line with the

federal standards, and he has directed a review toward this end. He also

has expressed his intention to improve cooperation with the Security

Policy Board.

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.

Investigative quality has also been diminished by inadequate training on

the federal standards for both the investigative and case analysts staffs.

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.

DSS Eliminated Important

Quality Control

Mechanisms and Did Not

Provide Adequate Training
Page 10 GAO/T-NSIAD-00-65

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

Percent of investigators

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

training.

DSS did not properly plan for the implementation of a new system

designed to automate its personnel security investigation case processing.

As a result, (1) DSS has not been able to process its investigations; (2) the

volume of investigations sent to field offices and the adjudication facilities

has decreased sharply; and (3) 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 exacerbated DSS’s efforts to cope with the large backlog of

overdue investigations.

Poorly Planned

Automation Efforts Have

Consumed Millions of

Dollars and Delayed Case

Processing

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
Page 11 GAO/T-NSIAD-00-65

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: Now,

60 percent of the investigators 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.

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.

Because of the significant weaknesses in DOD’s personnel security

investigation program and the program’s importance to national security,

we made numerous recommendations to the Secretary of Defense. We

identified the program as containing material internal control weaknesses

and recommended that the Secretary report this to the President and the

Congress in accordance with the Federal Managers’ Financial Integrity

Act. We recommended that the Secretary develop a strategic plan and

performance measures for the program. We also called for the Secretary to

(1) direct that oversight of DSS be increased, (2) provide the necessary

funding and prioritization to effectively deal with the large backlog of

overdue investigations, (3) improve the mechanisms for implementing

investigative policy changes consistent with federal procedures, (4)

establish effective investigative quality control mechanisms and a training

infrastructure, (5) take near- and long-term actions to correct the case

automation problems, and (6) direct the adjudication facilities to grant

clearances only when all essential investigative work has been done. With

respect to this last recommendation, the Ranking Minority Member, House

Committee on Armed Services, has recently asked us to review DOD’s

adjudication policies and procedures, including those used to grant and

deny clearances for DOD contractors.

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

the personnel security program and the protection of classified

Inadequate Oversight Is

Underlying Cause of DSS

Problems

DOD Is Implementing

GAO’s

Recommendations
Page 12 GAO/T-NSIAD-00-65

information. DOD concurred with all our recommendations to improve its

personnel security investigation program and to fully implement all

recommendations. In response to our recommendations, DOD is in the

process of taking a series of actions to correct program weaknesses. To its

credit, DOD did not wait for us to issue our final report before it began

taking corrective actions. Although most of DOD’s actions are in their

early stages, they appear to be responsive to our recommendations and are

positive steps toward addressing the weaknesses we found.

Mr. Chairman and Members of the Subcommittee, this concludes my

prepared remarks. I would be happy to answer any questions you may

have.

(702035)
Page 13 GAO/T-NSIAD-00-65

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