Homeland Security: Overview of Department of Homeland Security Management Challenges
Published: 2005-04-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Homeland Security (DHS) plays a key role in coordinating the nation's homeland security efforts with stakeholders in the federal, state, local, and private sectors. While GAO has conducted numerous reviews of specific DHS missions, such as border and transportation security and emergency preparedness, this testimony addresses overall DHS management issues. This testimony addresses (1) why GAO designated DHS's transformation as a high-risk area; and (2) the specific management challenges facing DHS.
section_title: What GAO Found
paragraphs: GAO designated DHS's transformation as a high-risk area in 2003, based on three factors. First, DHS faced enormous challenges in implementing an effective transformation process, developing partnerships, and building management capacity because it had to transform 22 agencies into one department. Second, DHS faced a broad array of operational and management challenges that it inherited from its component legacy agencies. Finally, DHS's failure to effectively address its management challenges and program risks could have serious consequences for our national security. Overall, DHS has made some progress, but significant management challenges remain to transform DHS into a more efficient organization while maintaining and improving its effectiveness in securing the homeland. Therefore, DHS's transformation remains a high-risk area. DHS faces a number of management challenges to improve its ability to carry out its homeland security missions. Among these challenges are providing focus for management efforts; monitoring transformation and integration; improving strategic planning; managing human capital; strengthening financial management infrastructure; establishing an information technology management framework; managing acquisitions; and coordinating research and development.

section_title: Letter
paragraphs: I appreciate the opportunity to appear before this subcommittee to  address management challenges facing the Department of Homeland  Security (DHS). The department plays a major role in the protection of the  homeland against terrorist and other threats. In addition to managing its  own affairs, the department also has a key role in implementing the  National Strategy for Homeland Security and coordinating the larger  homeland security efforts of the entire nation, to include other  stakeholders in the federal, state, local, and private sectors. While GAO  has conducted numerous reviews of specific DHS mission areas— including border and transportation security, information analysis and  infrastructure protection, emergency preparedness and response, and  defending against catastrophic threats—my statement is limited to overall  management issues. These generally cut across many if not all of the DHS  agencies and mission areas. In my testimony today, I will address two  topics:    Why has GAO designated DHS’s transformation as a high-risk area?
What specific management challenges does the department face?
This testimony continues GAO’s long-standing efforts to provide Congress  with information on homeland security strategies and programs. In  February of last year, we testified on the desired characteristics of  national strategies, and whether various strategies—including the National  Strategy for Homeland Security—contained those desired characteristics.  In March of last year, we summarized strategic homeland security  recommendations by GAO and selected congressionally chartered  commissions. In July of last year, we reported on GAO recommendations  to DHS and the department’s progress in implementing such  recommendations. In January of this year, we provided a comprehensive  report on DHS and other federal agency efforts and challenges related to  implementing the National Strategy for Homeland Security. And just last  month in March, we reported on DHS progress in management  integration. Together, these baseline efforts are intended to aid  congressional oversight in assessing the effectiveness of federal homeland  security activities.
My comments are based on our wide-ranging, completed, and ongoing  work, and our institutional knowledge of homeland security and various  government organizational and management issues. We conducted our  work in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: In an effort to increase homeland security following the September 11,  2001, terrorist attacks on the United States, President Bush issued the  National Strategy for Homeland Security in July 2002 and signed  legislation creating DHS in November 2002. The strategy set forth the  overall objectives, mission areas, and initiatives to prevent terrorist  attacks within the United States, reduce America’s vulnerability to  terrorism, and minimize the damage and assist in the recovery from  attacks that may occur. The strategy also called for the creation of DHS.  The department, which began operations in March 2003, represented a  fusion of 22 federal agencies to coordinate and centralize the leadership of  many homeland security activities under a single department.
Although the National Strategy for Homeland Security indicated that  many federal departments (and other nonfederal stakeholders) will be  involved in homeland security activities, DHS has the dominant role in  implementing the strategy. The strategy identified six mission areas and 43  initiatives. DHS was designated the lead federal agency for 37 of the 43  initiatives. In addition, DHS had activities underway in 40 of the 43  initiatives. In addition, DHS has the dominant share of homeland security  funding. Figure 1 shows the proposed fiscal year 2006 homeland security  funding for federal departments and agencies, with DHS constituting  about 55 percent of the total.
section_title: GAO Designated DHS’s Transformation As High-Risk
paragraphs: The November 2002 enactment of legislation creating DHS represented a  historic moment of almost unprecedented action by the federal  government to fundamentally transform how the nation protects itself  from terrorism. Rarely in the country’s past had such a large and complex  reorganization of government occurred or been developed with such a  singular and urgent purpose. This represented a unique opportunity to  transform a disparate group of agencies with multiple missions, values,  and cultures into a strong and effective cabinet department whose goals  are to, among other things, protect U.S. borders, improve intelligence and  information sharing, and prevent and respond to potential terrorist  attacks. Together with this unique opportunity, however, came a  significant risk to the nation that could occur if the department’s  implementation and transformation was not successful.
GAO designated DHS’s transformation as high-risk in January 2003based  on three factors.  First, DHS faced enormous challenges in implementing  an effective transformation process, developing partnerships, and building  management capacity because it had to effectively combine 22 agencies  with an estimated 170,000 employees specializing in various disciplines— including law enforcement, border security, biological research, computer  security, and disaster mitigation—into one department. Second, DHS  faced a broad array of operational and management challenges that it  inherited from its component legacy agencies. In fact, many of the major  components that were merged into the new department, including the  Immigration and Naturalization Service, the Transportation Security  Administration, Customs Service, Federal Emergency Management  Agency, and the Coast Guard, brought with them at least one major  problem such as strategic human capital risks, information technology  management challenges, or financial management vulnerabilities, as well  as an array of program operations challenges and risks. Finally, DHS’s  national security mission was of such importance that the failure to  effectively address its management challenges and program risks could  have serious consequences on our intergovernmental system, our citizen’s  health and safety, and our economy. Overall, our designation of DHS’s  transformation as a high-risk area and its inclusion on the 2003 High-Risk  List was due to the failure to transform the diverse units into a single,  efficient, and effective organization would have dire consequences for our  nation.
Since our 2003 designation of DHS’s transformation as high-risk, DHS  leadership has provided a foundation for maintaining critical operations  while undergoing transformation. DHS has worked to protect the  homeland and secure transportation and borders, funded emergency  preparedness improvements and emerging technologies, assisted law  enforcement activities against suspected terrorists, and issued its first  strategic plan. According to DHS’s performance and accountability report  for fiscal year 2004 and updated information provided by DHS officials, the  department has accomplished the following activities as part of its  integration efforts:  reduced the number of financial management service centers from  19 to 8,  consolidated acquisition support for 22 legacy agencies within 8  major procurement programs,  consolidated 22 different human resources offices to 7, and  consolidated bank card programs from 27 to 3.
As described in the next section, despite real and hard-earned progress,  DHS still has significant challenges to overcome in all of its management  areas. It is because of these continuing challenges that we continue to  designate the implementation and transformation of DHS as high-risk.
section_title: DHS Management Challenges
paragraphs: DHS faces a number of management challenges to improving its ability to  carry out its homeland security missions. Among these challenges, which  are discussed in more detail in the following sections, are    providing focus for management efforts,    monitoring transformation and integration,   improving strategic planning,    managing human capital,    strengthening financial management infrastructure,    establishing an information technology management framework,    managing acquisitions, and    coordinating research and development.
subsections: section_title: Providing Focus for Management Efforts
paragraphs: One challenge that DHS faces is to provide focus on management efforts.  The experience of successful transformations and change management  initiatives in large public and private organizations suggests that it can  take 5 to 7 years until such initiatives are fully implemented and cultures  are transformed in a substantial manner. Because this timeframe can  easily outlast the tenures of managers, high-performing organizations  recognize that they need to have mechanisms to reinforce accountability  for organization goals during times of leadership transition.
Focus on management efforts needs to be provided at two levels of  leadership. The first level is that of the political appointees in top  leadership positions. These leaders are responsible for both mission and  management support functions. Although DHS has been operating about 2  years, it has had two Secretaries, three Deputy Secretaries, and additional  turnover at the Undersecretary and Assistant Secretary levels. The  problem of turnover in top leadership is not unique to DHS. The average  tenure of political leadership in federal agencies—slightly less than 3 years  for the period 1990-2001—and the long-term nature of change management  initiatives can have critical implications for the success of those initiatives.  The frequent turnover of the political leadership has often made it difficult  to obtain the sustained and inspired attention required to make needed  changes. Similarly, the recent turnover in DHS’s top leadership raises  questions about the department’s ability to provide the consistent and  sustained senior leadership necessary to achieve integration over the long  term.
Another level for focus on management efforts is those leaders responsible  for day-to-day management functions. As we have reported, a Chief  Operating Officer (COO)/Chief Management Officer (CMO) may effectively  provide the continuing, focused attention essential to successfully  completing these multiyear transformations in agencies like DHS. At  DHS, we have reported that the COO/CMO concept would provide the  department with a single organizational focus for the key management  functions involved in the business transformation of the department, such  as human capital, financial management, information technology,  acquisition management, and performance management, as well as for  other organizational transformation initiatives. We have also recently  testified that a COO/CMO can effectively provide the continuing, focused  attention essential to successfully complete the implementation of DHS’s  new human capital system, a large-scale, multiyear change initiative.
The specific implementation of a COO/CMO position must be determined  within the context of the particular facts, circumstances, challenges and  opportunities of each individual agency. As the agency is currently  structured, the roles and responsibilities of the Under Secretary for  Management contain some of the characteristics of a COO/CMO for the  department. According to Section 701 of the Homeland Security Act, the  Under Secretary for Management is responsible for the management and  administration of the Department in such functional areas as budget,  accounting, finance, procurement, human resources and personnel,  information technology, and communications systems. In addition, the  Under Secretary is responsible for the transition and reorganization  process and to ensure an efficient and orderly transfer of functions and  personnel to the Department, including the development of a transition  plan.
section_title: Monitoring Transformation and Integration
paragraphs: While the protection of the homeland is the primary mission of the  department, critical to meeting this challenge is the integration of DHS’s  varied management processes, systems, and people—in areas such as  information technology, financial management, procurement, and human  capital—as well as in its administrative services. The integration of these  various functions is being executed through DHS’s management  integration initiative. The success of this initiative is important since the  initiative provides critical support for the total integration of the  department, including its operations and programs, to ultimately meet its  mission of protecting the homeland. Last week, we released a report on  DHS’s management integration efforts to date as compared against  selected key practices consistently found to be at the center of successful  mergers and transformations.
Overall, we found that while DHS has made some progress in its  management integration efforts, it has the opportunity to better leverage  this progress by implementing a comprehensive and sustained approach to  its overall integration efforts. First, key practices show that establishing  implementation goals and a timeline is critical to ensuring success and  could be contained in an overall integration plan for a merger or  transformation. DHS has issued guidance and plans to assist its integration  efforts, on a function-by-function basis (information technology and  human capital, for example); but it does not have such a comprehensive  strategy to guide the management integration departmentwide.  Specifically, DHS still does not have a plan that clearly identifies the  critical links that must occur across these functions, the necessary timing  to make these links occur, how these critical interrelationships will occur,  and who will drive and manage them.
Second, it is important to dedicate a strong and stable implementation  team for the day-to-day management of the transformation, a team vested  with the necessary authority and resources to help set priorities, make  timely decisions, and move quickly to implement decisions. In addition,  this team would ensure that various change initiatives are sequenced and  implemented in a coherent and integrated way. DHS is establishing a  Business Transformation Office, reporting to the Under Secretary for  Management, to help monitor and look for interdependencies among the  individual functional integration efforts. However, this office is not  currently responsible for leading and managing the coordination and  integration that must occur across functions not only to make these  individual initiatives work but also to achieve and sustain the overall  management integration of DHS.
To address this challenge, we recommended, and DHS agreed, that it  should develop an overarching management integration strategy and  provide it’s recently established Business Transformation Office with the  authority and responsibility to serve as a dedicated integration team and  also help develop and implement the strategy.
section_title: Improving Strategic Planning
paragraphs: Effective strategic planning is another challenge for DHS. We have  previously identified strategic planning as one of the critical success  factors for new organizations. This is particularly true for DHS, given the  breadth of its responsibility and need to clearly identify how stakeholders’  responsibilities and activities align to address homeland security efforts.  Without thoughtful and transparent planning that involves key  stakeholders, DHS may not be able to implement its programs effectively.  In 2004, DHS issued its first departmentwide strategic plan. We have  evaluated DHS’s strategic planning process, including the development of  its first departmentwide strategic plan, and plan to release a report on our  findings within a few weeks. This report will discuss (1) the extent to  which DHS’s planning process and associated documents address the  required elements of the Government Performance and Results Act of 1993  (GPRA) and reflect good strategic planning practices and (2) the extent to  which DHS’s planning documents reflect both its homeland security and  nonhomeland security mission responsibilities.
section_title: Managing Human Capital
paragraphs: Another management challenge faced by DHS is how to manage its human  capital. Our work in identifying key practices for implementing successful  mergers and transformations indicates that attention to strategic human  capital management issues should be at the center of such efforts. DHS  has been given significant authority to design a new human capital system  free from many of the government’s existing civil service requirements,  and has issued final regulations for this new system. We have issued a  series of reports on DHS’s efforts to design its human capital system.  First, we found that the department’s efforts to design a new human  capital system was collaborative and facilitated the participation of  employees from all levels of the department, and generally reflected  important elements of effective transformations. We recommended that  the department maximize opportunities for employees’ involvement  throughout the design process and that it place special emphasis on  seeking the feedback and buy-in of front line employees in the field.  Second, we found that DHS’s human capital management system, as  described in the recently released final regulations, includes many  principles that are consistent with proven approaches to strategic human  capital management. For example, many elements for a modern  compensation system—-such as occupational cluster, pay bands, and pay  ranges that take into account factors such as labor market conditions—- are to be incorporated into DHS’s new system. However, these final  regulations are intended to provide an outline and not a detailed,  comprehensive presentation of how the new system will be implemented.  Thus, DHS has considerable work ahead to define the details of the  implementation of its system, and understanding these details is important  to assessing the overall system.
section_title: Strengthening Financial Management Infrastructure
paragraphs: DHS faces significant financial management challenges.  Specifically, it  must address numerous internal control weaknesses, meet the mandates  of the DHS Financial Accountability Act, and integrate and modernize its  financial management systems, which individually have problems and  collectively are not compatible with one another. Overcoming each of  these challenges will assist DHS in strengthening its financial management  environment, improving the quality of financial information available to  manage the department day to day, and obtaining an unqualified opinion  on its financial statements.
DHS’s independent auditors were unable to issue an opinion on any of the  department’s financial statements for fiscal year 2004. This was a  substantial setback in DHS’s financial management progress, compounded  by continued challenges in resolving its internal control weaknesses. The  number of material internal control weaknesses at the department has  increased from 7 as of September 30, 2003 to 10 as of September 30, 2004.  With the passage of the Department of Homeland Security Financial  Accountability Act (the Accountability Act), DHS is now subject to the  Chief Financial Officers Act of 1990 (the CFO Act) and the Federal  Financial Management Improvement Act of 1996 (FFMIA). The  Accountability Act also requires that in fiscal year 2005 the Secretary of  Homeland Security include an assertion on internal controls over financial  reporting at the department, and in fiscal year 2006 requires an audit of  internal controls over financial reporting. We will continue to monitor the  steps DHS is taking to meet the requirements of the Accountability Act as  part of our audit of the consolidated financial statements of the United  States government.
We reported in July 2004 that DHS continues to work to reduce the  number of financial management service providers and to acquire and  deploy an integrated financial enterprise solution. At that time, DHS  reported that it had reduced the number of financial management service  providers for the department from the 19 providers at the time DHS was  formed to 10. DHS planned to consolidate to 7 providers. Additionally,  DHS hired a contractor to deploy an integrated financial enterprise  solution. This is a costly and time consuming project and we have found  that similar projects have proven challenging for other federal agencies.
We will therefore continue to monitor DHS’s progress on overcoming this  serious challenge.
section_title: Establishing an Information Technology Management Framework
paragraphs: DHS has recognized the need for a strategic management framework that  addresses key information technology disciplines, and has made a  significant effort to make improvements in each of these disciplines. For  example, DHS is implementing its information technology (IT) investment  management structure, developing an enterprise architecture, and has  begun IT strategic human capital planning.  However, much remains to be  accomplished before it will have fully established a departmentwide IT  management framework. To fully develop and institutionalize the  management framework, DHS will need to strengthen strategic planning,  develop the enterprise architecture, improve management of systems  development and acquisition, and strengthen security. To assist DHS, we  have made numerous recommendations, including (1) limiting information  technology investments until the department’s strategic management  framework is completed and available to effectively guide and constrain  the billions of dollars that DHS is spending on such investments; (2) taking  appropriate steps to correct any limitations in the Chief Information  Officer’s ability to effectively support departmentwide missions; and (3)  ensuring the department develops and implements a well-defined  enterprise architecture to guide and constrain business transformation  and supporting system modernization. The development of this framework  is essential to ensuring the proper acquisition and management of key  DHS programs such as U.S. Visitor and Immigrant Status Indicator  Technology (US-VISIT), Automated Commercial Environment, and Secure  Flight. To this end, we have recently reported on key management  challenges and weaknesses for each of the programs that an effective  DHS-wide framework for managing systems investments would be  instrumental in addressing.
section_title: Managing Acquisitions
paragraphs: Our work has indicated that managing acquisitions is also a major  management challenge for DHS. The department faces the challenge of  structuring its acquisition organization so that its various procurement  organizations are held accountable for complying with procurement  policies and regulations and ensuring that taxpayer dollars are well-spent.  In addition, the department has in place a number of large, complex, and  high-cost acquisition programs, such as US-VISIT and the Coast Guard’s  Deepwater program, which will need to be closely managed to ensure that  they receive the appropriate level of oversight and that acquisition  decisions are made based on the right level of information. For example,  we reported in March 2004 that the Deepwater program needed to pay  more attention to management and contractor oversight in order to avoid  cost overruns.  We have also reported on contract management problems  at the former Immigration and Naturalization Service, now a part of DHS,  and TSA.  We will issue a report at the end of the this month that  addresses (1) areas where DHS has been successful in promoting  collaboration among its various organizations, (2) areas where DHS still  faces challenges in integrating the acquisition function, and (3) the  department’s progress in implementing an effective review process for its  major, complex investments.
section_title: Coordinating Research and Development
paragraphs: DHS also faces management challenges in coordinating research and  development (R&D). Our work has recently found that DHS has not yet  completed a strategic plan to identify priorities, goals, objectives, and  policies for the R&D of homeland security technologies and that additional  challenges remain in its coordination with other federal agencies. Failure  to complete a strategic plan and to fully coordinate its research efforts  may limit DHS’s ability to leverage resources and could increase the  potential for duplication of research. In addition, DHS faces challenges  with regard to its use of DOE laboratories. These challenges include the  development of a better working relationship through better  communication and the development of clear, well-defined criteria for  designating the DOE laboratories to receive the majority of DHS’s R&D  funding. Moreover, DHS faces the challenge of balancing the immediate  needs of the users of homeland security technologies with the need to  conduct R&D on advanced technologies for the future.
Similarly, conducting R&D on technologies for detecting, preventing, and  mitigating terrorist threats is vital to enhancing the security of the nation’s  transportation system. In our report on the Transportation Security  Administration’s (TSA) and DHS’s transportation security R&D programs,  we found that although TSA and DHS have made some efforts to  coordinate R&D with each other and with other federal agencies, both  their coordination with the Department of Transportation (DOT) and their  outreach to the transportation industry have been limited. For example,  officials from the modal administrations of DOT, which continue to  conduct some transportation security R&D, said they had not provided any  input into TSA’s and DHS’s transportation security R&D project selections.  Consequently, DOT’s and the transportation industry’s security R&D needs  may not be adequately reflected in TSA’s and DHS’s R&D portfolios.  Therefore, we recommend that TSA and DHS (1) develop a process with  DOT to coordinate transportation security R&D, such as a memorandum  of agreement identifying roles and responsibilities and designating agency  liaisons and (2) develop a vehicle to communicate with the transportation  industry to ensure that its R&D security needs have been identified and  considered. DHS generally concurred with our report and its  recommendations.
section_title: Importance of Focusing on Management Issues
paragraphs: Given the dominant role that DHS plays in securing the homeland, it is  critical that DHS be able to ensure that its management systems are  operating as efficiently and effectively as possible. While it is understood  that a transformation of this magnitude takes time and that DHS’s  immediate focus has been on its homeland security mission, we see the  need for DHS to increase its focus on management issues. This is  important not only to DHS itself, but also to the nation’s homeland  security efforts, because, in addition to managing its own organization,  DHS plays a larger role in managing homeland security and in coordinating  with the activities of other federal, state, local, and private stakeholders.  This larger DHS role presents its own unique challenges.
For example, DHS faces the challenge of clarifying the role of  government versus the private sector. In April 2002, we testified that  the appropriate roles and responsibilities within and between the levels  of governments and with the private sector are evolving and need to be  clarified. New threats are prompting a reassessment and shifting of  long-standing roles and responsibilities. These shifts have been  occurring on a piecemeal and ad hoc basis without the benefit of an  overarching framework and criteria to guide the process.
As another example, DHS faces a challenge in determining how federal  resources are allocated to non-federal stakeholders. We have long  advocated a risk management approach to guide the allocation of  resources and investments for improving homeland security.  Additionally, OMB has identified various tools, such as benefit-cost  analysis, it considers useful in planning such as capital budgeting and  regulatory decisionmaking. DHS must develop a commonly accepted  framework and supporting tools to inform cost allocations in a risk  management process. Although OMB asked the public in 2002 for  suggestions on how to adjust standard tools to the homeland security  setting, a vacuum currently exists in which benefits of homeland  security investments are often not quantified and almost never valued  in monetary terms.
As a final example, DHS faces a challenge in sharing information  among all stakeholders. DHS has initiatives underway to enhance  information sharing (including the development of a homeland security  enterprise architecture to integrate sharing between federal, state, and  local authorities). However, our August 2003 report noted that these  initiatives, while beneficial for the partners, presented challenges  because they (1) were not well coordinated, (2) risked limiting  participants’ access to information, and (3) potentially duplicated the  efforts of some key agencies at each level of government. We also  found that despite various legislation, strategies, and initiatives, federal  agencies, states, and cities did not consider the information sharing  process to be effective.
A well-managed DHS will be needed to meet these larger homeland  security challenges. As DHS continues to evolve, integrate its functions,  and implement its programs, we will continue to review its progress and  provide information to Congress for oversight purposes.
Mr. Chairman, this concludes my prepared statement. I will now be  pleased to respond to any questions that you or other members of the  subcommittee have.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For further information about this testimony, please contact Norman J.  Rabkin at 202-512-8777.
Other key contributors to this statement were Stephen L. Caldwell,    Wayne A. Ekblad, Carole J. Cimitile, Ryan T. Coles, Tammy R. Conquest,  Benjamin C. Crawford, Heather J. Dunahoo, Kimberly M. Gianopoulos,  David B. Goldstein, Randolph C. Hite, Robert G. Homan, Casey L.  Keplinger, Eileen R. Larence, Michele Mackin, Lisa R. Shames, and      Sarah E. Veale.
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