Homeland Security: DHS Needs to Improve Ethics-Related Management Controls for the Science and Technology Directorate
Published: 2005-12-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: The Department of Homeland Security’s (DHS) Science and Technology  (S&T) Directorate was established by the Homeland Security Act of 2002  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.  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.   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  “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). 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. GAO issues standards for internal control in the  federal government, as required by the Federal Managers’ Financial  Integrity Act of 1982, 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  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.
subsections: section_title: Background
paragraphs: 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.
Under Secretary for Science and Technology Development (ORD)
Agency (HSARPA) & Development (SED)
Prepares deployment,  systems development,  (including DOE labs)
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  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.  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.  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, 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  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.”  Executive departments and agencies are required to  forward documentation of such waivers to OGE.  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.
As mentioned earlier, OMB requires agencies to establish a set of  management controls and GAO issues standards for internal control in the  federal government.  In addition, GAO developed the Internal Control  Management and Evaluation Tool 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  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.
section_title: DHS’s S&T Directorate Can Do More to Improve Its Management Controls Related to Conflicts of Interest for Its IPA Portfolio Managers
paragraphs: 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:  “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  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. 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  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.
section_title: IPA Portfolio Managers’ Role in Determining Where R&D Projects and Funds Were Directed Was Unclear
paragraphs: 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 decision- making 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  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 Web- based 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,  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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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   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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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  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.
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.
section_title: DHS Research and Development Funding Distribution in Fiscal Year 2004
paragraphs: 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.
section_title: Scope and Methodology
paragraphs: 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.
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.