a

GAO

United States Government Accountability Office

Report to the Ranking Minority Member, 

Committee on Homeland Security and 

Governmental Affairs, United States 

Senate

December 2005 HOMELAND 

SECURITY

DHS Needs to Improve 

Ethics-Related 

Management Controls 

for the Science and 

Technology 

Directorate

GAO-06-206
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-206.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact George H. 

Stalcup at (202) 512-6806 or 

stalcupg@gao.gov. 

Highlights of GAO-06-206, a report to the 

Ranking Minority Member, Committee on 

Homeland Security and Governmental 

Affairs, United States Senate 

December 2005

HOMELAND SECURITY

DHS Needs to Improve Ethics-Related 

Management Controls for the Science 

and Technology Directorate 

DHS’s S&T Directorate is working to improve its management controls to 

help guard against conflicts of interest for its IPA portfolio managers, but it 

can do more. In the first few years of DHS’s existence, the S&T Directorate 

focused on the urgency of organizing itself to meet the nation’s homeland 

security research and development requirements, and had few resources 

devoted to developing its management infrastructure, including the 

management controls to guard against conflicts of interest. In the past year, 

steps have been taken to improve these controls. For example, in June 2005, 

DHS implemented a new process for hiring IPA employees. Although the 

S&T Directorate is taking steps to improve its ethics-related management 

controls, several conditions still need to be addressed to better ensure that 

its IPA portfolio managers comply with the conflict of interest laws. First, 

the process for determining where research and development projects and 

funds are directed, including the role of the IPA portfolio managers, has 

never been finalized. Second, the S&T Directorate does not require 

documentation of how determinations are made about where research and 

development projects and funds are directed. Third, S&T Directorate 

officials are only now seeking waivers, where appropriate, and considering 

whether to take other actions that would allow IPA portfolio managers to 

participate in certain matters. Finally, DHS officials told us that S&T 

Directorate employees, including those hired under the IPA, are offered the 

same new employee and annual ethics training as are all DHS employees. 

However, employees hired under the IPA do not receive regular training that 

addresses their unique situation; namely that they have an agreement for 

future employment with an entity that may benefit from the S&T 

Directorate’s funding. 

The role of the IPA portfolio managers, five of whom came from the national 

laboratories, in determining where research and development projects and 

associated funds were directed was unclear. This was due to several factors. 

First, as previously discussed, the S&T Directorate has never finalized a 

standard process for determining where research and development projects 

and funds are directed, or the decision-making role of the IPA portfolio 

managers within such a process. Second, the extent of the IPA portfolio 

managers’ participation in making these determinations was unclear because 

there was no documentary evidence of how these determinations were 

actually made. Third, the testimonial evidence on the extent of the IPA 

portfolio managers’ involvement was inconsistent and, at times, vague. 

Because we could not determine whether or not the IPA portfolio managers 

participated “personally and substantially” in the decision-making process, 

which is precluded by 18 U.S.C. § 208, GAO contacted the Acting Director of 

the Office of Government Ethics (OGE) in September 2005. GAO suggested 

that OGE review this matter further in conjunction with its planned ethics 

program review of DHS. In December 2005, OGE officials told us that they 

plan to examine, among other matters, the transparency and accountability 

issues in DHS’s ethics program raised by our findings. 

The Department of Homeland 

Security’s (DHS) Science and 

Technology (S&T) Directorate was 

established to focus on areas such 

as addressing countermeasures for 

biological threats. To do this, it 

hired experts from the national 

laboratories under the authority of 

the Intergovernmental Personnel 

Act (IPA). The Directorate is 

organized into portfolios, led by 

portfolio managers. Questions have 

been raised about potential 

conflicts of interest for these 

individuals, since a portion of the 

Directorate’s research funds have 

gone to the national laboratories. 

GAO was asked to examine (1) the 

management controls established 

within the Directorate to help 

guard against conflicts of interest 

for IPA portfolio managers; and 

(2) the role of the IPA portfolio 

managers, particularly those from 

national laboratories, in 

determining where research and 

development projects were 

directed. 

What GAO Recommends

To improve the S&T Directorate’s 

ethics-related management 

controls, GAO recommends that 

DHS take several related actions to 

help ensure that IPA portfolio 

managers comply with conflicts of 

interest laws. DHS concurred with 

our recommendations, and noted 

several actions they plan to take. If 

implemented effectively, these 

actions would be responsive to 

some of our recommendations. 
Page i GAO-06-206 Homeland Security

Contents

Letter 1

Results in Brief 3

Background 6

DHS’s S&T Directorate Can Do More to Improve Its Management 

Controls Related to Conflicts of Interest for Its IPA Portfolio 

Managers 9

IPA Portfolio Managers’ Role in Determining Where R&D Projects 

and Funds Were Directed Was Unclear 12

Conclusions 14

Recommendations for Executive Action 15

Agency Comments and Our Evaluation 15

Appendixes

Appendix I: DHS Research and Development Funding Distribution in 

Fiscal Year 2004 18

Appendix II: Scope and Methodology 19

Appendix III: Comments from the Department of Homeland Security 21

Figures Figure 1: The S&T Directorate’s Offices and Overview of Their 

Functions 6

Figure 2: The S&T Directorate’s R&D Funding Obligations in Fiscal 

Year 2004 18
Page ii GAO-06-206 Homeland Security

Abbreviations

BTS Border and Transportation Security

DAEO Designated Agency Ethics Officer

DHS Department of Homeland Security

DOE Department of Energy

ERB Executive Review Board

FFRDC Federally Funded Research and Development Center

HSARPA Homeland Security Advanced Research Projects Agency

IPT Integrated Project Team

IPA Intergovernmental Personnel Act

OGC Office of General Counsel

OGE Office of Government Ethics

OPM Office of Personnel Management

ORD Office of Research and Development

PPB Office of Programs, Plans, and Budgets

R&D Research and Development

SED Systems Engineering and Development

S&T Science and Technology

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Page 1 GAO-06-206 Homeland Security

United States Government Accountability Office

Washington, D.C. 20548

A

December 22, 2005 Letr

The Honorable Joseph I. Lieberman

Ranking Minority Member

Committee on Homeland Security and Governmental Affairs

United States Senate

Dear Senator Lieberman:

The Department of Homeland Security’s (DHS) Science and Technology 

(S&T) Directorate was established by the Homeland Security Act of 20021

to coordinate the federal government’s civilian efforts to identify and 

develop countermeasures to chemical, biological, radiological, nuclear, and 

other emerging terrorist threats on our nation. This activity was not the 

previous responsibility of any one agency. The Office of Programs, Plans, 

and Budget (PPB) was created within the S&T Directorate to establish and 

oversee the priorities of DHS’s research and development activities. At the 

beginning of our review, PPB was organized into 18 portfolios, each 

focused on a particular discipline, such as addressing countermeasures for 

biological threats and border and transportation security.2

 Each portfolio 

was headed by a portfolio manager who, according to DHS, helped to 

establish the research and development needs and priorities of their 

portfolios. 

When the S&T Directorate began operating in March 2003, it hired 

scientists, engineers, and experts in needed disciplines from federal 

laboratories, universities, and elsewhere in the federal government under 

authority provided by the Intergovernmental Personnel Act (IPA) of 1970.3

 

Portfolio managers hired under the IPA were brought to DHS from these 

employers because of their expertise in the areas of greatest risk to the 

nation’s security. These managers were hired for a specified limited period 

with the understanding that they would subsequently return to their 

1

 Pub. L. No. 107-296 § 301, 116 Stat. 2135, 2163 (2002). 

2

 As of September 2005, there were 13 portfolios.

3

 5 U.S.C. §§ 3371-76. The IPA facilitates the temporary hiring of skilled personnel or 

specialists to and from other federal entities, state and local governments, colleges and 

universities, and Indian tribal governments. Such assignments may be used to achieve 

objectives such as assisting the transfer and use of new technologies. DHS hires IPAs under 

a 2-year agreement that can be renewed one time for 2 additional years, consistent with 

Office of Personnel Management (OPM) regulations.
Page 2 GAO-06-206 Homeland Security

“home” institution. Seven of the 16 portfolio managers for the 18 portfolios 

were employed by DHS under the IPA. Five of these 7 employees came 

from the national laboratories, which are owned by the Department of 

Energy (DOE) and operated by private contractors, and the two others 

came from a nonprofit organization and a federally funded research and 

development center (FFRDC).4

 You have raised questions about potential 

conflicts of interest for these individuals, since a portion of the 

Directorate’s research funds have gone to these laboratories. In fiscal year 

2004, 23 percent of the S&T Directorate’s $761 million in research and 

development project funding obligations went to the national laboratories. 

(Appendix I provides more detailed budgetary data). 

IPA employees are generally subject to the same conflict of interest laws 

and regulations as all other federal employees. One of these laws, Section 

208 of Title 18 of the United States Code (18 U.S.C. § 208), generally 

precludes federal employees from personally and substantially 

participating in decisions in which they have a financial interest, including 

participating in decisions that affect an entity, such as the national 

laboratories, with which they have an agreement for future employment. 

However, the agency official responsible for hiring the employee can grant 

a waiver of this law’s application if the official determines that the 

conflicting interest is not so substantial as to be deemed likely to affect the 

integrity of the services the government may expect. Further, the Office of 

Management and Budget (OMB) requires agencies to establish a set of 

management controls.5

 GAO issues standards for internal control in the 

federal government,6 as required by the Federal Managers’ Financial 

Integrity Act of 1982,7 which provide the overall framework for establishing 

and maintaining internal control and for identifying and addressing major 

performance challenges and areas at greatest risk for fraud, waste, abuse, 

and mismanagement. 

As agreed with your office, we examined (1) the management controls that 

have been established within DHS’s S&T Directorate to help guard against 

4

 FFRDCs are nonprofit organizations that are generally financed on a sole-source basis by 

federal agencies.

5

 OMB Circular No. A-123 (June 1995).

6

 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

7

 31 U.S.C. § 3512(c).
Page 3 GAO-06-206 Homeland Security

conflicts of interest for portfolio managers hired under the IPA, and (2) the 

role of the IPA portfolio managers (particularly those from the national 

laboratories) in determining where research and development (R&D) 

projects and associated funds are directed.

To address our objectives, we reviewed DHS documentation of 

management controls related to conflicts of interest and other relevant 

documents, as well as its Web-based research and development process 

currently under development. In addition, we reviewed ethics laws and 

regulations, guidance on internal controls, and prior GAO and DHS 

Inspector General work pertaining to DHS’s S&T Directorate and ethics 

issues. We also interviewed senior DHS officials, including the Assistant 

Secretary for Programs, Plans, and Budgets for the S&T Directorate and 

DHS’s Designated Agency Ethics Officer (DAEO), as well as other officials 

in the S&T Directorate, including the IPA portfolio managers. In addition, 

we judgmentally selected two portfolios within the S&T Directorate, and 

interviewed members of these portfolio teams, to examine in more detail 

the existence of their process and management controls and compare any 

differences in the application of such processes and controls. These 

portfolios were: (1) the Biological Countermeasures portfolio, which is the 

largest portfolio in the S&T Directorate and led by an IPA; and (2) the 

Border and Transportation Security portfolio, a smaller portfolio led by a 

career federal employee. We also met with the Acting Director of the Office 

of Government Ethics (OGE) and her staff. OGE is the federal agency 

responsible for overseeing the executive branch’s ethics programs. 

Appendix II contains more detailed information on our scope and 

methodology.

We performed our work from September 2004 through December 2005 in 

accordance with generally accepted government auditing standards.

Results in Brief DHS’s S&T Directorate is working to improve its management controls to 

help guard against conflicts of interest for employees hired under the IPA, 

but it can do more. In the first few years of DHS’s existence, the S&T 

Directorate focused on the urgency of organizing itself to meet the nation’s 

homeland security research and development requirements, and had few 

resources devoted to developing its management infrastructure, including 

the management controls to guard against conflicts of interest. However, in 

the past year, steps have been taken to improve these controls. For 

example, in June 2005, DHS implemented a new process for hiring IPA 

employees. Although DHS is taking steps to improve its management 
Page 4 GAO-06-206 Homeland Security

controls, there is more the Directorate can do to better ensure that its IPA 

portfolio managers comply with the conflict of interest laws. First, the 

process for determining where R&D projects and funds are directed, 

including the role of the IPA portfolio managers, has never been finalized. 

Second, the S&T Directorate does not require documentation of how 

determinations are made about where R&D projects and funds are 

directed. Third, S&T Directorate officials are only now seeking waivers, 

where appropriate, and considering whether to take other actions that 

would allow IPA portfolio managers to participate in certain matters. 

Finally, DHS officials told us that S&T Directorate employees, including 

those hired under the IPA, are offered the same new employee and annual 

ethics training as are all DHS employees. However, employees hired under 

the IPA do not receive regular training that addresses their unique 

situation; namely that they have an agreement for future employment with 

an entity that may benefit from the S&T Directorate’s funding.

The role of the IPA portfolio managers, five of whom were hired from the 

national laboratories, in determining where research and development 

projects and associated funds are directed was unclear. This was due to 

several factors. First, as previously discussed, the S&T Directorate has 

never finalized a standard process for determining where R&D projects and 

funds are directed, or for the decision-making role of the IPA portfolio 

managers within such a process. Second, the extent of the IPA portfolio 

managers’ participation in making the determinations was unclear because 

there was no documentary evidence of how those determinations were 

actually made. Finally, the testimony regarding the extent of the IPA 

portfolio managers’ involvement in the decision-making process was 

inconsistent and, at times, vague. For example, one IPA portfolio manager 

told us that he/she recused him/herself from any decision that may have 

involved his/her national laboratory, although this portfolio manager noted 

that he/she was present and “facilitated” the meetings when such decisions 

were made. Other IPA portfolio managers told us that they participated to 

varying degrees. However, because there was no documentation of the 

decision-making process, we could not determine the extent of the IPA 

portfolio managers’ actual involvement on any particular funding matter, or 

whether their involvement affected their national laboratory. Because we 

could not determine whether or not the IPA portfolio managers 

participated “personally and substantially” in the decision-making process, 

we contacted the Acting Director of OGE in September 2005, and suggested 

that OGE review this matter further in conjunction with its planned ethics 

program review of DHS. In December 2005, OGE officials told us that they 
Page 5 GAO-06-206 Homeland Security

plan to examine, among other matters, the transparency and accountability 

issues in DHS’s ethics program raised by our findings.

To help IPA portfolio managers comply with conflict of interest laws, we 

are making recommendations that the Secretary of DHS direct the 

Undersecretary for Science and Technology to work with DHS’s DAEO and 

OGE to establish additional ethics-related management controls for the 

S&T Directorate by 

• finalizing the R&D process;

• developing a system to document how decisions are made within the 

R&D portfolio teams;

• determining whether waivers of 18 U.S.C. § 208 are appropriate or other 

actions are needed;

• providing regular ethics training for IPA portfolio managers; and

• establishing a monitoring and oversight program of ethics-related 

management controls.

We provided a draft of this report to the Secretary of Homeland Security. 

DHS concurred with our recommendations and noted several actions that 

they plan to take. If implemented effectively, these actions would be 

responsive to some of our recommendations. For example, the S&T 

Directorate plans to (1) coordinate with the DAEO and OGE in seeking 

waivers under 18 U.S.C. § 208 for some of the IPAs in the S&T Directorate; 

(2) enhance its ethics-related training for IPAs; and (3) strengthen its 

monitoring and oversight programs for ethics-related management 

controls. 

Although DHS agreed with all of our recommendations, it believed that we 

misstated the facts in asserting that IPA employees do not routinely receive 

specific training regarding conflicts of interest. We revised the report to 

indicate that the ethics training we believe is still needed should focus on 

the application of the ethics statutes and regulations to the unique financial 

relationship between the IPA portfolio managers and their “home” 

institutions. Second, we are encouraged that the S&T Directorate is 

seeking waivers under 18 U.S.C. § 208 for some IPAs. However, IPA 

portfolio managers continue to be vulnerable to violating the conflict of 

interest laws because the S&T Directorate has not finalized the process for 
Page 6 GAO-06-206 Homeland Security

determining where research and development projects and funds are 

directed. DHS’s comments are provided in appendix III. In addition, we 

received technical comments from DHS, which we incorporated as 

appropriate. We also provided a draft to OGE. On December 8, 2005, we 

met with OGE officials, including the Deputy Director of the Office of 

Agency Programs, who provided us with technical comments, which we 

incorporated as appropriate.

Background The S&T Directorate consists of four offices responsible for managing and 

executing DHS’s R&D programs: (1) the Office of Programs, Plans and 

Budgets (PPB); (2) Office of Research and Development (ORD); 

(3) Homeland Security Advanced Research Projects Agency (HSARPA); 

and (4) Systems Engineering and Development (SED), as seen in figure 1 

below. 

Figure 1: The S&T Directorate’s Offices and Overview of Their Functions

a

 On June 29, 2005, a Chief Financial Officer position was created for the S&T Directorate to 

consolidate and execute budgetary planning. Because the budgetary responsibility for the S&T 

Directorate was moved out of the Office of Programs, Plans, and Budgets, its name was changed to 

the Office of Programs, Plans and Requirements (PPR). This new position and name change are not 

reflected in this figure.

In the first few years of DHS’s existence, the S&T Directorate focused on 

the urgency of organizing itself to meet the nation’s homeland security 

research and development requirements, and had few resources devoted to 

developing its management infrastructure, including the management 

Office of Programs, 

Plans & Budgets (PPB)a

Establishes S&T's overall

priorities and identifies

operational needs

Office of Research and

Development (ORD)

Manages and executes

DHS’s R&D programs

with federal laboratories

(including DOE labs)

and universities

Homeland Security

Advanced Research Projects

Agency (HSARPA)

Manages and executes

DHS’s R&D programs with

public or private sector

Office of Systems

Engineering

& Development (SED)

Prepares deployment, 

systems development, 

and demonstration

strategies for homeland

security technologies

Under Secretary for Science and Technology

Source: DHS.
Page 7 GAO-06-206 Homeland Security

controls to guard against conflicts of interest. In our 2004 report on DHS’s 

potential use of the national laboratories, we noted that when the S&T 

Directorate began operating in March 2003, they sought and hired 

scientists, engineers, and experts in needed disciplines from federal 

laboratories, universities, and elsewhere in the federal government.8

 These 

individuals were brought into the S&T Directorate to use their knowledge 

in ways that would help the Directorate achieve its mission quickly and 

effectively. DHS officials told us that these individuals came to DHS out of 

a sense of urgency and motivated by a strong sense of patriotism. Some of 

these scientists were hired from the national laboratories, and they came 

with the understanding that they would return to their laboratories 

following their time at DHS. 

As part of their responsibilities, portfolio managers led and facilitated 

Integrated Project Teams (IPT), which included representatives from ORD, 

HSARPA, and SED.9

 In addition to identifying R&D projects and budgets, 

IPTs were responsible for determining which office (ORD, HSARPA, or 

SED) within the S&T Directorate would be responsible for them. These 

determinations were important because it influenced whether the project 

and associated funds went to the public or private sector. According to a 

March 2004 Office of Inspector General report,10 ORD generally executes 

programs that involve the national laboratories and which the private 

sector should not, could not, or would not perform. HSARPA generally 

executes programs for which technology development involves the private 

sector. SED generally executes programs employing proven technologies 

and resulting in transition to operational systems.

As previously discussed, IPA employees are generally subject to the same 

laws and regulations that govern the ethical conduct of other federal 

employees. Section 208 of Title 18 of the United States Code, a criminal 

statute, generally precludes federal employees from personally and 

substantially participating in any particular matter that would have a direct 

and predictable effect on their financial interests, or the financial interest 

8

 GAO, 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).

9

 For more information on the use of IPTs, see GAO, Best Practices: DOD Teaming 

Practices Not Achieving Potential Results, GAO-01-510 (Washington, D.C.: Apr. 10, 2001).

10 Department of Homeland Security Office of Inspector General, Survey of the Science and 

Technology Directorate, OIG-04-24 (Washington, D.C.: March 2004).
Page 8 GAO-06-206 Homeland Security

of any organization attributable to them. An employee’s participation is 

“substantial” if their participation is meaningful to the matter. An employee 

can be personally and substantially involved in a variety of ways, including 

making a recommendation, rendering advice, or making a decision on a 

particular matter. The law can be waived if the employee first makes a full 

disclosure of the conflict of interest to the official responsible for his or her 

appointment, “and receives in advance a written determination made (i.e., 

waiver) by such official that the interest is not so substantial as to be 

deemed likely to affect the integrity of the services which the government 

may expect.”11 Executive departments and agencies are required to 

forward documentation of such waivers to OGE.12 Waivers cannot be 

granted to cover past activities. In addition to avoiding conflicts of interest, 

executive branch employees must avoid even the appearance of a conflict 

of interest. However, when there is potential for such an appearance of a 

conflict, an employee can be granted an “authorization” to work on a 

matter even in situations where a reasonable person with knowledge of the 

relevant facts can question the employee’s impartiality in a matter.13

As mentioned earlier, OMB requires agencies to establish a set of 

management controls and GAO issues standards for internal control in the 

federal government.14 In addition, GAO developed the Internal Control 

Management and Evaluation Tool15 to help managers and evaluators 

determine how well an agency’s internal control is designed and 

functioning and help determine what, where, and how improvements, 

when needed, may be implemented. The five standards for internal control 

are: control environment, risk assessment, control activities, information 

and communications, and monitoring. Two of these standards, control 

environment and control activities, include key factors related to conflicts 

of interest. If effectively implemented, these internal controls can help to 

guard against employees participating in actions that present a personal 

11 18 U.S.C. § 208(b)(1).

12 5 C.F.R. § 2640.303.

13 5 C.F.R. § 2635.502. Authorizations are based upon a determination “that the interest of the 

Government in the employee’s participation outweighs the concern that a reasonable person 

may question the integrity of the agency’s programs and operations.”

14 GAO/AIMD-00-21.3.1.

15 GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001).
Page 9 GAO-06-206 Homeland Security

conflict of interest. Examples of relevant key factors that address the 

establishment and maintenance of an effective control environment of an 

agency are: 

• establishment and use of a formal code of conduct and other policies 

communicating appropriate ethical and moral behavioral standards and 

addressing acceptable operational practices and conflicts of interest; 

• establishment of an ethical tone at the top of the organization and 

communicated throughout the agency; and

• implementation of policies and procedures for hiring employees.

Internal control activities are the policies, procedures, techniques, and 

mechanisms that help ensure that management’s directives to mitigate 

identified risks are carried out. Examples of relevant key factors that 

address internal control activities are:

• existence of appropriate policies, procedures, techniques, and 

mechanisms with respect to each of the agency’s activities;

• providing appropriate training and other control activities to give 

employees the tools they need to perform their duties and 

responsibilities to meet the demands of changing organizational needs; 

and

• documentation of transactions and other significant events is complete 

and accurate and facilitates tracing the transaction or event and related 

information from authorization and initiation, through its processing, to 

after it is completed.

DHS’s S&T Directorate 

Can Do More to 

Improve Its 

Management Controls 

Related to Conflicts of 

Interest for Its IPA 

Portfolio Managers

DHS’s S&T Directorate has implemented several management controls to 

help its IPA portfolio managers comply with conflict of interest laws and 

regulations. Most of these were implemented during the course of our 

review. Since the S&T Directorate was created in 2003, individuals 

employed in the S&T Directorate under the IPA have completed an 

“assignment agreement”, as required by OPM. Having procedures in place 

for hiring employees and implementing them is one aspect of an effective 

management control environment. The assignment agreements include a 

section on conflicts of interest and employee conduct. As part of the 

assignment agreement, each applicant must acknowledge that:
Page 10 GAO-06-206 Homeland Security

• “applicable Federal, State or local conflict-of-interest laws have been 

reviewed with the employee to assure that conflict-of-interest situations 

do not inadvertently arise during this assignment”; and

• “the employee has been notified of laws, rules and regulations, and 

policies on employee conduct which apply to him/her while on this 

assignment.”

We reviewed the IPA assignment agreements for all of the IPA portfolio 

managers and found that the IPA portfolio managers acknowledged these 

provisions. 

The S&T Directorate’s leadership took steps to establish an ethical tone 

and communicate it through a March 15, 2004, memorandum from DHS’s 

Undersecretary for S&T to all S&T Directorate employees emphasizing that 

they should strictly adhere to all applicable ethics laws. The memo 

summarized ethics laws, called attention to the consequences of 

noncompliance, provided points of contact for those with questions, and 

explained that S&T employees “have the responsibility to be scrupulous in 

complying with all applicable ethics laws.” Further, the memo specifically 

mentioned that employees hired under the IPA may not participate in 

matters involving their “home” institution (which, in the S&T Directorate, 

has often been a DOE national laboratory). The memo explained provisions 

of 18 U.S.C. § 208, stating that an employee may not participate “personally 

and substantially” in a particular matter that may affect an entity in which 

he has a financial interest and that “personal and substantial participation 

can occur if the employee participates in a decision, approval, disapproval, 

recommendation, investigation, or the rendering of advice on the matter.” 

According to DHS’s DAEO, the IPAs in the S&T Directorate were employed 

before a process was in place to screen them for personal conflict of 

interest issues. On June 30, 2005, the S&T Directorate issued new, internal 

procedures for hiring employees under the IPA. These new procedures 

outline the responsibilities of the parties involved in the hiring process and 

detail the steps necessary to hire an IPA. These steps include a preliminary 

review of financial disclosure forms by DHS’s Office of General Counsel 

(OGC) to determine whether conflicts of interest exist based on the roles 

and responsibilities of the proposed position. 

Along with these new hiring procedures, the S&T Directorate began 

requiring applicants being considered under the IPA to complete written 

disqualification statements meant to bar their involvement in any matter 
Page 11 GAO-06-206 Homeland Security

that could reasonably be perceived to affect the interests of their national 

laboratory or other employer. In addition, once hired, IPAs can complete a 

memorandum that provides their supervisor with a written recusal from 

“certain Government matters” that affect the institution to which they will 

return after their employment at DHS, and allows them “to describe the 

screening arrangement” they are implementing to ensure that they comply 

with their “obligation to recuse.” In this memorandum, the employee then 

lists each asset, entity, or other interest that gives rise to a disqualifying 

interest under 18 U.S.C. § 208. 

DHS officials told us that S&T Directorate employees, including those hired 

under the IPA, are offered the same new employee and annual ethics 

training as are all new DHS employees. Having training and orientation 

programs for new employees, with ongoing training for all employees, are 

key activities for establishing effective controls.16 On January 7, 2005, the 

Assistant Secretary of PPB also held a mandatory meeting for all IPAs in 

the S&T Directorate. S&T Directorate officials told us that this meeting was 

called to discuss the ethics issues that apply specifically to employees hired 

under the IPA, including the conflict of interest statutes. 

Other important management controls that could help ensure portfolio 

managers comply with conflict of interest laws are not yet in place in the 

S&T Directorate. Importantly, the process for determining where R&D 

projects and funds are directed, including the role of the IPA portfolio 

managers, has never been finalized. Establishment of a process for each 

agency activity is one of the key factors for meeting internal control 

standards. Though IPTs were created to help make this determination, as 

previously discussed, we were told that each IPT worked differently and 

there were no requirements to operate in the same way. In addition, 

neither the S&T Directorate nor its draft process requires documentation of 

how determinations are made about where R&D projects and funds are 

directed.

Further, the S&T Directorate is only now seeking waivers, where 

appropriate, and considering whether to grant authorizations or take other 

actions for their portfolio managers hired under the IPA. As we discussed, 

under 18 U.S.C. § 208(b)(1), the official responsible for an employee's 

16 For more on DHS’s training program, see GAO, Department of Homeland Security: 

Strategic Management of Training Important for Successful Transformation, GAO-05-888

(Washington, D.C.: Sept. 23, 2005).
Page 12 GAO-06-206 Homeland Security

appointment may grant a waiver in advance allowing participation in 

certain matters if he or she makes a written determination that the affected 

financial interest “is not so substantial as to be deemed likely to affect the 

integrity” of the employee's services. In May 2005, an S&T Directorate 

official stated to us that they first needed to “scrutinize all of their positions 

to determine whether an actual or apparent conflict requires such action.” 

In August 2005, senior S&T officials told us that, in conjunction with DHS’s 

DAEO and OGE, they had begun the process of determining whether to 

issue waivers to IPA portfolio managers. During our exit briefing with DHS 

in September 2005, DHS officials indicated that one option might be to not 

hire anyone for which a waiver may be needed. In DHS’s December 2005 

letter to us commenting on our report, it noted that the S&T Directorate is 

now seeking waivers for at least 6 of its IPAs.

Finally, IPA portfolio managers in the S&T Directorate are not routinely 

offered specific training that focuses on the application of the ethics 

statutes and regulations to the unique financial relationship between the 

IPA portfolio managers and their “home” institution. The January 2005 

meeting held with all IPAs in the S&T Directorate to discuss the specific 

ethics issues related to their circumstances is not scheduled to be repeated. 

Ensuring that management conveys the message on a periodic basis that 

integrity and ethical values must not be compromised is part of maintaining 

an effective control environment. Because of IPA portfolio managers’ ties 

to their “home” institution, and that their responsibilities at DHS may 

involve issues that affect their “home” institution, ensuring that these 

managers receive regular training that targets the application of conflict of 

interest laws to IPAs may keep them alert to those actions that could 

constitute a violation of such laws.

IPA Portfolio 

Managers’ Role in 

Determining Where 

R&D Projects and 

Funds Were Directed 

Was Unclear 

The recent changes and further improvements to the S&T Directorate’s 

ethics-related management controls are critical because we found that the 

role of the IPA portfolio managers in determining where R&D projects and 

associated funds were directed was unclear. This was due to several 

factors, as discussed in more detail below. 

First, the process that was to be followed by IPA portfolio managers when 

determining where R&D projects and funds are directed, and the decisionmaking role of the IPA portfolio managers within such a process, has never 

been finalized. DHS provided us with a draft version of this process as part 

of a Web-based tool. However, IPTs were not required to follow this draft 

process and team members from the two IPTs that we examined said that 
Page 13 GAO-06-206 Homeland Security

they were becoming familiar with the process. In this draft, DHS stated that 

IPTs, facilitated by portfolio managers, were to “decide” which office 

within the S&T Directorate would execute a project, (i.e., ORD, HSARPA, 

or SED). The draft stated that if the members of the IPT could not reach 

agreement, the project would be reviewed by the Executive Review Board 

(ERB), which consisted of the Assistant Secretary, Programs, Plans, and 

Budgets, and the Directors of SED, ORD, and HSARPA. However, in 

September 2005, senior S&T Directorate officials told us that the 

information regarding the decision-making role of the IPT in the draft Webbased tool was inaccurate, indicating that IPTs can only make 

recommendations to the ERB, but not a final decision. However, as we 

noted, 18 U.S.C. § 208 guards against “personal and substantial 

participation” through various actions which include “decision” and 

“recommendation.”

Second, DHS officials, portfolio managers, and IPT members were unable 

to provide us with any documentation, such as meeting minutes, to indicate 

the actual role that the five IPA portfolio managers from the national 

laboratories played in the decision-making process within the IPTs. Third, 

the testimony regarding the extent of the IPA portfolio managers’ 

involvement in the decision-making process was inconsistent and, at times, 

vague. For example, one IPA portfolio manager told us that he/she recused 

himself/herself from any decision that may have involved his/her national 

laboratory, although this manager noted that he/she was present and 

“facilitated” the IPT meetings when such decisions were made. Other IPA 

portfolio managers told us that they participated to varying degrees. For 

example, one told us that he/she was involved in the IPT decisions 

regarding which S&T Directorate office would execute a project only when 

the other IPT members could not reach agreement. Another told us that 

he/she participated in all IPT discussions that helped make this 

determination. However, because there was no documentation of the 

decision-making process, we could not determine the extent of the IPA 

portfolio managers’ actual involvement on any particular funding matter, or 

whether their involvement affected their “home” institution, such as a 

national laboratory. 

In March 2005, we discussed our review with OGE to obtain their views on 

the ethics issues, both in general and as they may specifically apply to the 

S&T Directorate. During these discussions, OGE officials told us that they 

planned to begin their first audit of DHS’s ethics program in late 2005. 

Because we could not determine whether or not the IPA portfolio managers 

participated “personally and substantially” in the decision-making process, 
Page 14 GAO-06-206 Homeland Security

however, we contacted the Acting Director of OGE in September 2005 and 

suggested that OGE review this matter further in conjunction with its 

planned ethics program review of DHS. In December 2005, OGE officials 

told us that they plan to examine, among other matters, the transparency 

and accountability issues in DHS’s ethics program raised by our findings. 

Conclusions In the first few years of its existence, the S&T Directorate focused on 

rapidly organizing itself to meet the nation’s homeland security R&D 

requirements. During this time, DHS had few resources devoted to 

developing the S&T Directorate’s management infrastructure, including 

management controls to guard employees against conflicts of interest. 

Although the S&T Directorate has recently implemented management 

controls to help protect against conflicts of interest, and is currently 

considering others, more needs to be done. In the absence of a process for 

deciding what entities will implement R&D projects, the role that IPA 

portfolio managers played has been inconsistent and the potential exists 

that they may have unknowingly violated conflict of interest laws. By 

developing and carrying out a process to decide which office will execute a 

project, and clearly defining the roles and responsibilities of those involved 

in the process, the S&T Directorate may help its IPA portfolio managers 

avoid such situations in the future. In addition, documenting how the 

decisions are made while implementing this process may help protect both 

DHS and its employees if questions are raised.

Ensuring that the S&T Directorate continues to have access to the best 

personnel with needed expertise is important to the success of DHS’s 

mission. The IPA provides the S&T Directorate with a mechanism to hire 

some of these people. However, because IPA portfolio managers have an 

arrangement for future employment with an entity that could benefit from 

the S&T Directorate’s work, determining whether (1) waivers of the 

conflict of interest laws are appropriate, (2) IPA portfolio managers should 

be authorized to work on these issues regardless of any appearance of a 

conflict, or (3) DHS should take other steps to facilitate the use of their 

expertise to achieve the S&T Directorate’s mission, could help ensure that 

these valuable employees are protected against violating conflict of interest 

laws. 

Further, once hired, IPA employees must understand how the ethics laws 

address their unique situations; namely, that they have an agreement for 

future employment with an entity that stands to benefit from the S&T 

Directorate’s funding. Regular training for IPA portfolio managers that 
Page 15 GAO-06-206 Homeland Security

targets the conflict of interest laws could help them understand what 

actions are not permitted.

Finally, to help ensure that DHS’s ethics-related management controls are 

implemented and working in a satisfactory manner, it is critical that DHS 

establish a monitoring and oversight program. Such a monitoring 

mechanism will allow the S&T Directorate to assess its ethics-related 

management controls in order to facilitate awareness and mitigation of risk 

in DHS, while providing a greater degree of impartiality and integrity.

Recommendations for 

Executive Action

To help IPA portfolio managers comply with the conflict of interest law, we 

are recommending that the Secretary of Homeland Security direct the 

Undersecretary of the S&T Directorate to improve the S&T Directorate’s 

management controls related to potential conflicts of interest by 

• finalizing the S&T Directorate’s R&D process and defining and 

standardizing the role of the IPA portfolio managers in this process;

• developing a system to document how decisions are made within the 

IPTs;

• determining, in consultation with DHS’s DAEO and OGE, whether 

waivers of 18 U.S.C. § 208 or authorizations related to the appearance of 

a conflict of interest are appropriate, or other actions are needed; 

• providing regular ethics training for IPA portfolio managers that focuses 

on the application of the ethics statutes and regulations to their unique 

financial situation; and 

• establishing a monitoring and oversight program of ethics-related 

management controls.

Agency Comments and 

Our Evaluation

We provided a draft of this report to the Secretary of Homeland Security. 

DHS concurred with our recommendations and noted some actions that 

they plan to take. If implemented effectively, these actions would be 

responsive to some of our recommendations. For example, the S&T 

Directorate plans to (1) coordinate with the DAEO and OGE in seeking 

waivers under 18 U.S.C. § 208 for some of the IPAs in the S&T Directorate; 

(2) enhance its ethics-related training for IPAs; and (3) strengthen its 
Page 16 GAO-06-206 Homeland Security

monitoring and oversight programs for ethics-related management 

controls.

Although DHS agreed with all of our recommendations, it believed that we 

misstated the facts in asserting that IPA employees do not routinely receive 

specific training regarding conflicts of interest. We revised the report to 

indicate that the ethics training we believe is still needed should focus on 

the application of the ethics statutes and regulations to the unique financial 

relationship between the IPA portfolio managers and their “home” 

institutions. Second, we are encouraged that the S&T Directorate has 

reviewed the individual circumstances of all of the IPAs in the S&T 

Directorate and is seeking waivers under 18 U.S.C. § 208 for at least six of 

these individuals. However, as stated in our report, the S&T Directorate 

has not finalized the process for determining where research and 

development projects and associated funds are directed, nor has it defined 

and standardized the role of the IPA portfolio managers in this process. 

Further, the ability of IPA portfolio managers themselves to influence or 

control where projects and funds are directed has been inconsistent and, at 

times, vague within the S&T Directorate. Thus, IPA portfolio managers 

continue to be vulnerable to violating the conflict of interest laws. DHS’s 

comments are provided in appendix III. In addition, we received technical 

comments from DHS, which we incorporated as appropriate. 

We also provided a draft to OGE. On December 8, 2005, we met with OGE 

officials, including the Deputy Director of the Office of Agency Programs, 

who provided us with technical comments, which we made as appropriate.

We are sending copies of this report to the Secretary of Homeland Security 

and other interested parties. In addition, this report is available at no 

charge on the GAO Web site at http://www.gao.gov. 
Page 17 GAO-06-206 Homeland Security

If you or your staff have any further questions about this report, please 

contact me at (202) 512-6806 or stalcupg@gao.gov. Major contributors to 

this report included Ben Crawford, Terry Draver, John Krump, James Lager, 

Andrea Levine, Sarah Veale, and Michael Volpe.

Sincerely yours,

George H. Stalcup

Director, Strategic Issues
Page 18 GAO-06-206 Homeland Security

Appendix I

DHS Research and Development Funding Apendxies

Distribution in Fiscal Year 2004 ApendxiI

In fiscal year 2004, the most recent year in which the Science and 

Technology (S&T) Directorate could provide us with detailed breakdowns 

of its obligated funds, about 41 percent of the $761 million obligated for its 

research and development (R&D) funding was distributed to Department 

of Energy and federal laboratories (mostly the Office of Research and 

Development’s programs) and about 40 percent to the private sector 

(mostly the Homeland Security Advanced Research Projects Agency’s 

programs), as seen in figure 2 below.

Figure 2: The S&T Directorate’s R&D Funding Obligations in Fiscal Year 2004

Note: This chart is presented for background purposes only; therefore we did not assess the reliability 

of the data.

a

 Includes Federally Funded Research and Development Centers, nonprofits, etc. 

b

 Includes DHS-funded laboratories. 

1%

Other federal agencies

$7,444,371

•

7%

Universities

$54,539,534

11% • All other a

$86,859,463

18% • Federal labs b

$134,402,675

23%

•

DOE labs

$172,242,463

40%

•

Private sector

$305,764,511

•

Source: DHS.
Page 19 GAO-06-206 Homeland Security

Appendix II

Scope and Methodology ApendxiI

The objectives of our review were to examine (1) the management controls 

that have been established within the Department of Homeland Security’s 

(DHS) Science and Technology (S&T) Directorate to help guard against 

conflicts of interest for portfolio managers hired under the 

Intergovernmental Personnel Act (IPA), and (2) the role of the IPA portfolio 

managers (particularly those from the national laboratories) in determining 

where research and development (R&D) projects and associated funds are 

directed.

To address our objectives, we analyzed DHS documentation of 

management controls related to conflicts of interest and other relevant 

documents. These documents included such materials as agency directives, 

official memos, human capital procedures, fiscal years 2007-2011 Planning, 

Programming, and Budgeting Cycle guidance, DHS reports and testimony 

to Congress, and IPA agreement forms for the Directorate’s employees 

hired under the IPA. In addition, we reviewed the most current, but 

incomplete, draft of an electronic version of the Research, Development, 

Testing and Evaluation process to be used by the S&T Directorate. We 

reviewed relevant laws and regulations, including the Homeland Security 

Act of 2002, Title 18 U.S.C. Section 208(a); (b); and 5 C.F.R. pt. 2635. In 

addition, we used GAO’s Standards for Internal Control in the Federal 

Government and Internal Control Management and Evaluation Tool. We 

also reviewed prior work from DHS’s Office of the Inspector General (OIG) 

and GAO on the DHS S&T Directorate and ethics-related issues.

We interviewed officials in the S&T Directorate, including the Deputy 

Secretary for S&T and head of Programs, Plans, and Budgets (PPB); 

Director of the Office of Research and Development (ORD); Acting 

Director of the Homeland Security Advanced Research Projects Agency 

(HSARPA); S&T portfolio managers, five of whom were employed by DHS 

on IPA agreements from the national laboratories; and the human capital 

director for S&T. We did not interview the Director of Systems, 

Engineering, and Development (SED) because SED works with mature 

technologies at or near the deployment stage, rather than technologies 

needing R&D by an entity like the national laboratories. More specifically, 

we examined the role of the IPA portfolio managers from the national 

laboratories in determining where R&D projects and associated funds were 

directed during the period from December 2004 through May 2005. In 

addition, we interviewed DHS’s Designated Agency Ethics Officer, 

attorneys in DHS’s General Counsel’s Office, and DHS’s OIG. 
Appendix II

Scope and Methodology

Page 20 GAO-06-206 Homeland Security

We judgmentally selected two portfolios within the S&T Directorate to 

examine in more detail the existence of their process and management 

controls and compare any differences in the application of such processes 

and controls. These portfolios were: (1) the Biological Countermeasures 

portfolio, which is the largest portfolio in the S&T Directorate and is run by 

an IPA; and (2) the Border and Transportation Security (BTS) portfolio, a 

smaller portfolio managed by a career federal employee. We interviewed 

the members of these Integrated Project Teams, which included 

representatives of PPB, HSARPA, ORD and SED. In addition, we reviewed 

the fiscal years 2004 and 2005 Execution Plans for the Biological 

Countermeasures portfolio, the fiscal year 2004 Execution Plan for the BTS 

portfolio, and the fiscal year 2004 BTS portfolio funding allocations by type 

of entity. (e.g., national laboratory, university, private industry, etc.)

We also met with the Acting Director of the Office of Government Ethics 

(OGE) and her staff to discuss the ethics issues we were reviewing at DHS. 

OGE exercises leadership in the executive branch to prevent conflicts of 

interest on the part of government employees and to resolve those conflicts 

of interest that do occur. The responsibilities of the Director of OGE 

include, among other things, consulting with agency ethics counselors and 

other responsible officials regarding the resolution of conflict of interest 

problems in individual cases, and ordering corrective action on the part of 

agencies and employees which the Director deems necessary.

Written comments from DHS are included in appendix III. We performed 

our work from September 2004 through December 2005 in accordance with 

generally accepted government auditing standards.
Page 21 GAO-06-206 Homeland Security

Appendix III

Comments from the Department of Homeland 

Security ApendxiI
Appendix III

Comments from the Department of Homeland 

Security

Page 22 GAO-06-206 Homeland Security
Appendix III

Comments from the Department of Homeland 

Security

Page 23 GAO-06-206 Homeland Security
Appendix III

Comments from the Department of Homeland 

Security

(450346) Page 24 GAO-06-206 Homeland Security
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