Department of Homeland Security: Continued Progress Made Improving and Integrating Management Areas, but More Work Remains
Released: 2012-09-20T00:00:00

Letter

DHS Has Made Progress in Addressing Its Management Challenges, but Has Significant Work Ahead to Achieve High-Risk Outcomes

Since we designated the implementation and transformation of DHS as high risk in 2003, DHS has made progress addressing management challenges and senior department officials have demonstrated commitment and top leadership support for addressing the department’s management challenges. However, the department has significant work ahead to achieve positive outcomes in resolving high-risk issues. For example, DHS faces challenges in modernizing its financial systems, implementing acquisition management controls, and improving employee satisfaction survey results, among other things. As DHS continues to mature as an organization, it will be important for the department to continue to strengthen its management functions, since the effectiveness of these functions affects its ability to fulfill its homeland security and other missions.

Financial management. DHS has made progress in addressing its financial management and internal controls weaknesses, but has been unable to obtain an unqualified audit opinion on its financial statements since the department’s creation and faces challenges in modernizing its financial management systems. DHS has, among other things, reduced the number of material weaknesses in internal controls from 18 in 2003 to 5 in fiscal year 2011; achieved its goal of receiving a qualified audit opinion on its fiscal year 2011 consolidated balance sheet and statement of custodial activity for the first time since the department’s creation; established a goal of obtaining an audit opinion on all of its fiscal year 2012 financial statements; and expanded the scope of the annual financial audit to the complete set of fiscal year 2012 financial statements, which DHS believes will help it to obtain an unqualified opinion for fiscal year 2013.

However, DHS continues to face challenges in financial management. For example, DHS anticipates difficulties in providing its auditors transaction- level detail to support balances reported in its fiscal year 2012 financial statements in order to obtain an opinion on its financial statements. This is due to, among other things, components not retaining original acquisition documentation or enforcing policies related to recording purchases and making payments. DHS also anticipates its auditors issuing a disclaimer in their fiscal year 2012 report on internal controls over financial reporting due to material weaknesses in internal controls, such as lack of effective controls over the recording of financial transactions related to property, plant, and equipment.

In addition, in December 2011, DHS reported that the Federal Emergency Management Agency (FEMA), U.S. Coast Guard (USCG), and U.S. Immigration and Customs Enforcement (ICE) have an essential business need to replace their financial management systems, but DHS has not fully developed its plans for upgrading existing or implementing new financial systems at these agencies. According to DHS’s June 2012 version of its Integrated Strategy for High Risk Management, the department plans to extend the useful life of FEMA’s current system by about 3 years, while FEMA proceeds with a new financial management system solution, and is in the process of identifying the specific approach, necessary resources, and time frames for upgrading existing or implementing new financial systems at USCG and ICE. Without sound processes, controls, and systems, DHS faces long-term challenges in obtaining and sustaining an unqualified opinion on both its financial statements and internal controls over financial reporting, and ensuring its financial management systems generate reliable, useful, timely information for day-to-day decision making. We currently have ongoing work related to DHS’s efforts to improve its financial reporting that we expect to report on in the spring of 2013.

Acquisition management. DHS has made progress in the acquisition management area by enhancing the department’s ability to oversee major acquisition programs. For example:

DHS has established eight Centers of Excellence for cost estimating, systems engineering, and other disciplines to bring together program managers, senior leadership staff, and subject matter experts to promote best practices, provide expert counsel, technical guidance, and acquisition management tools; and each DHS component has established a Component Acquisition Executive (CAE) to provide oversight and support to programs within the component’s portfolio.

According to DHS, as of June 2012, 75 percent of the core CAE support positions were filled.

In March 2012, DHS completed the development of a Procurement Staffing Model to determine optimal numbers of personnel to properly award and administer contracts. In June 2012, DHS reported that it is taking steps to implement the staffing model throughout headquarters and the components.

DHS included a new initiative (strategic sourcing) in its December 2011 Integrated Strategy for High Risk Management to increase savings and improve acquisition efficiency by consolidating contracts departmentwide for the same kinds of products and services. The Office of Management and Budget’s Office of Federal Procurement Policy has cited DHS’s efforts among best practices for implementing federal strategic sourcing initiatives. Earlier this month, we reported that the department has implemented 42 strategically sourced efforts since the department’s inception. According to DHS data, the department’s spending through strategic sourcing contract vehicles has increased steadily from $1.8 billion in fiscal year 2008 to almost $3 billion in fiscal year 2011, representing about 20 percent of DHS’s procurement spending for that year.

However, DHS continues to face significant challenges in managing its acquisitions. For example:

Earlier this week, we reported that 68 of the 71 program offices we surveyed from January through March 2012 responded that they experienced funding instability, workforce shortfalls, and/or changes to their planned capabilities over the programs’ duration. We have previously reported that these challenges increase the likelihood acquisition programs will cost more and take longer to deliver capabilities than expected.

Our recent review of DHS acquisition management also identified that while DHS’s acquisition policy reflects many key program management practices that could help mitigate risks and increase the chances for successful outcomes, it does not fully reflect several key portfolio management practices, such as allocating resources strategically. DHS plans to develop stronger portfolio management policies and processes, but until it does so, DHS programs are more likely to experience additional funding instability, which will increase the risk of further cost growth and schedule slips. We recommended that DHS take a number of actions to help mitigate the risk of poor acquisition outcomes and strengthen the department’s investment management activities. DHS concurred with all of our recommendations and noted actions it had taken or planned to address them.

Human capital management. DHS has taken a number of actions to strengthen its human capital management. For example:

DHS issued human capital-related plans, guidance, and tools to address its human capital challenges, including a Workforce Strategy for 2011-2016; a revised Workforce Planning Guide, issued in March 2011, to help the department plan for its workforce needs; and a Balanced Workforce Strategy tool, which some components have begun using to help achieve the appropriate mix of federal and contractor skills.

The department implemented two programs to address senior leadership recruitment and hiring, as we reported in February 2012. While DHS’s senior leadership vacancy rate was as high as 25 percent in fiscal year 2006, it varied between 2006 and 2011 and declined overall to 10 percent at the end of fiscal year 2011.

DHS developed outreach plans to appeal to veterans and other underrepresented groups.

While these initiatives are promising, DHS continues to face challenges in human capital management. For example:

As we reported in March 2012, based on our preliminary observations of DHS’s efforts to improve employee morale, federal surveys have consistently found that DHS employees are less satisfied with their jobs than the government-wide average. DHS has taken steps to identify where it has the most significant employee satisfaction problems and developed plans to address those problems, such as establishing a departmentwide Employee Engagement Executive Steering Committee, but has not yet improved employee satisfaction survey results. We plan to issue a final report on our findings later this month.

As we reported in April 2012, changes in FEMA’s workforce, workload, and composition have created challenges in FEMA’s ability to meet the agency’s varied responsibilities and train its staff appropriately. For example, FEMA has not developed processes to systematically collect and analyze agencywide workforce and training data that could be used to better inform its decision making. We recommended that FEMA, among other things, identify long-term quantifiable mission-critical goals, establish lines of authority for agencywide workforce planning and training efforts, and develop systematic processes to collect and analyze workforce and training data. DHS concurred with our recommendations and reported actions underway to address them.

Information technology management. DHS has made progress in strengthening its IT management, but the department has much more work to do to fully address its IT management weaknesses. Among other accomplishments, DHS has: strengthened its enterprise architecture; defined and begun to implement a vision for a tiered governance structure intended to improve program and portfolio management, as we reported in July 2012; established a formal IT Program Management Development Track and staffed Centers of Excellence with subject matter experts to assist major and non-major programs.

Based on preliminary observations from our review of DHS’s major at-risk IT acquisitions we are performing for the committee, these improvements may be having a positive effect. Specifically, as of March 2012, approximately two-thirds of the department’s major IT investments we reviewed (47 of 68) were meeting current cost and schedule commitments (i.e. goals).

DHS has made progress, but the department has much more work to do to fully address its IT management weaknesses. For example, the department needs to: finalize the policies and procedures associated with its new tiered governance structure and continue to implement this structure, as we recommended in our July 2012 report; continue to implement its IT human capital plan, which DHS believed would take 18 months to fully implement as of June 2012; and continue its efforts to enhance IT security by, among other things, effectively addressing material weaknesses in financial systems security, developing a plan to track and promptly respond to known vulnerabilities, and implementing key security controls and activities.

Management integration. DHS has made progress in integrating its individual management functions across the department and its component agencies. For example, DHS has put into place common policies, procedures, and systems within individual management functions, such as human capital, that help to integrate its component agencies, as we reported in September 2011. To strengthen this effort, in May 2012, the Secretary of Homeland Security modified the delegations of authority between the Management Directorate and their counterparts at the component level. According to DHS, this action will provide increased standardization of operating guidelines, policies, structures, and oversight of programs. Additionally, DHS has taken steps to standardize key data elements for the management areas across the department to enhance its decision-making. For example, in April 2012, the Under Secretary for Management appointed an executive steering committee and tasked this committee with creating a “Data Mart” to integrate data from disparate sources and allow the dissemination of timely and reliable information by March 2013. Further, consistent with our prior recommendations, DHS has implemented mechanisms to promote accountability for management integration among department and component management chiefs by, among other things, having the department chiefs develop written objectives that explicitly reflect priorities and milestones for that management function.

Although these actions are important, DHS needs to continue to demonstrate sustainable progress in integrating its management functions within and across the department and its components and take additional actions to further and more effectively integrate the department. For example, DHS recognizes the need to better integrate its lines of business. The Integrated Investment Life Cycle Model (IILCM), which the department is establishing to manage investments across the department’s components and management functions, is an attempt at doing that. DHS identified the IILCM as one of its most significant management integration initiatives in January 2011. However, the June 2012 update reported that this initiative is in its early planning stages, will be phased in over multiple budget cycles, and requires additional resources to fully operationalize. In September 2012, DHS reported that it has developed draft policy and procedural guidance to support implementation of the IILCM and now plans to begin using aspects of this new approach to develop portions of the department’s fiscal years 2015 through 2019 budget.

DHS strategy for addressing GAO’s high-risk designation. In January 2011, DHS issued an agencywide management integration strategy—the Integrated Strategy for High Risk Management—as we recommended in our March 2005 report on DHS’s management integration efforts. DHS’s most recent version of the strategy, issued in June 2012, greatly improved upon prior versions and addressed feedback we previously provided by, for example, identifying key measures and progress ratings for the 18 initiatives included in the strategy and the 31 outcomes.believe the June 2012 strategy, if implemented and sustained, provides a path for DHS to address our high-risk designation.

DHS can further strengthen or clarify its Integrated Strategy for High Risk Management to better enable DHS, Congress, and GAO to assess the department’s progress in implementing its management initiatives by, among other things: determining the resource needs for all of the corrective actions in the strategy; communicating to senior leadership critical resource gaps across all initiatives; and identifying program and project risks in a supporting risk mitigation plan for all initiatives.

Going forward, DHS needs to continue implementing its Integrated Strategy for High Risk Management and show measurable, sustainable progress in implementing its key management initiatives and corrective actions and achieving outcomes. We will continue to monitor, assess, and provide feedback on DHS’s implementation and transformation efforts through our ongoing and planned work, including the 2013 high-risk update that we expect to issue in January 2013.

Chairman King, Ranking Member Thompson, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have.

GAO Contact and Staff Acknowledgments

For questions about this statement, please contact David C. Maurer at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Maria Strudwick, Assistant Director; Victoria Miller, Analyst-in- Charge; and Chloe Brown. Other contributors include: David Alexander, Michael LaForge, Tom Lombardi, Anjalique Lawrence, Gary Mountjoy, Sabine Paul, and Katherine Trimble. Key contributors for the previous work that this testimony is based on are listed within each individual product.

Appendix I: Summary of Actions and Outcomes for Addressing the Implementing and Transforming the Department of Homeland Security High-Risk Area

Related GAO Reports

Homeland Security: DHS Requires More Disciplined Investment Management to Help Meet Mission Needs. GAO-12-833. Washington, D.C.: September 18, 2012.

Department of Homeland Security: Oversight and Coordination of Research and Development Should Be Strengthened. GAO-12-837. Washington, D.C.: September 12, 2012.

Homeland Security: DHS Has Enhanced Procurement Oversight Efforts, but Needs to Update Guidance. GAO-12-947. Washington, D.C.: September 10, 2012.

Information Technology: DHS Needs to Further Define and Implement Its New Governance Process. GAO-12-818. Washington, D.C.: July 25, 2012.

Federal Emergency Management Agency: Workforce Planning and Training Could Be Enhanced by Incorporating Strategic Management Principles. GAO-12-487. Washington, D.C.: April 26, 2012.

Department of Homeland Security: Preliminary Observations on DHS’s Efforts to Improve Employee Morale. GAO-12-509T. Washington, D.C.: March 22, 2012.

Department of Homeland Security: Continued Progress Made Improving and Integrating Management Areas, but More Work Remains. GAO-12-365T. Washington, D.C.: March 1, 2012.

Information Technology: Departments of Defense and Energy Need to Address Potentially Duplicative Investments. GAO-12-241. Washington D.C.: February 17, 2012.

DHS Human Capital: Senior Leadership Vacancy Rates Generally Declined, but Components’ Rates Varied. GAO-12-264. Washington, D.C.: February 10, 2012.

Department of Homeland Security: Additional Actions Needed to Strengthen Strategic Planning and Management Functions. GAO-12-382T. Washington D.C.: February 3, 2012.

Department of Homeland Security: Progress Made and Work Remaining in Implementing Homeland Security Missions 10 Years after 9/11. GAO-11-881. Washington D.C.: September 7, 2011.

High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 2011.

Information Security: Federal Agencies Have Taken Steps to Secure Wireless Networks, but Further Actions Can Mitigate Risk. GAO-11-43. Washington, D.C.: November 30, 2010.

Department of Homeland Security: Assessments of Selected Complex Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010.

Information Security: Agencies Need to Implement Federal Desktop Core Configuration Requirements. GAO-10-202. Washington, D.C.: March 12, 2010.

Financial Management Systems: DHS Faces Challenges to Successfully Consolidating Its Existing Disparate Systems. GAO-10-76. Washington, D.C.: December 4, 2009.

Department of Homeland Security: Actions Taken Toward Management Integration, but a Comprehensive Strategy Is Still Needed. GAO-10-131. Washington, D.C.: November 20, 2009.

Homeland Security: Despite Progress, DHS Continues to Be Challenged in Managing Its Multi-Billion Dollar Annual Investment in Large-Scale Information Technology Systems. GAO-09-1002T. Washington, D.C.: September 15, 2009.

Department of Homeland Security: Billions Invested in Major Programs Lack Appropriate Oversight. GAO-09-29. Washington, D.C.: November 18, 2008.

Department of Homeland Security: Better Planning and Assessment Needed to Improve Outcomes for Complex Service Acquisitions. GAO-08-263. Washington, D.C.: April 22, 2008.

Homeland Security: Departmentwide Integrated Financial Management Systems Remain a Challenge. GAO-07-536. Washington, D.C.: June 21, 2007.

Information Technology Investment Management: A Framework for Assessing and Improving Process Maturity, version 1.1. GAO-04-394G. Washington, D.C.: March 2004.

High-Risk Series: Strategic Human Capital Management. GAO-03-120. Washington, D.C.: January 2003.

Determining Performance and Accountability Challenges and High Risks. GAO-01-159SP. Washington, D.C.: November 2000.

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