DHS Management and Administration Spending: Reliable Data Could Help DHS Better Estimate Resource Requests
Released: 2014-01-03T00:00:00

Letter

Background

DHS Organization and Missions

DHS’s seven operational components, listed along the bottom of figure 1, lead the department’s frontline activities. As described in DHS’s Quadrennial Homeland Security Review Report, the department has five core missions: (1) preventing terrorism and enhancing security, (2) securing and managing our borders, (3) enforcing and administering our immigration laws, (4) safeguarding and securing cyberspace, and (5) ensuring resilience to disasters.focuses on two areas: (1) providing essential support to national and economic security, such as maximizing the collection of customs revenue, and (2) maturing and strengthening DHS, such as enhancing shared awareness of risks and threats. DHS’s eight support components provide resources, analysis, equipment, research, policy development, and In addition to the five missions, DHS support to help ensure the operational components have the tools and resources to accomplish DHS’s missions. Figure 1 shows DHS’s organizational structure.

Appropriation account and PPA: Congress appropriates funds to DHS in appropriations accounts that authorize it to incur obligations and make payments (expenditures) from the Treasury for specified purposes.These appropriations accounts are further broken down by program, project, or activity (PPA). PPAs are identified in conference reports and in the President’s budget submission. In addition, each DHS component explains its funding request by PPA in DHS’s congressional budget justification. PPAs are intended to provide a meaningful representation of the operations financed by the account. PPAs are not standard among DHS components. For example, the Transportation Security Administration’s PPAs generally align with its programs (e.g., Screening Partnership Program and Secure Flight), whereas the Coast Guard’s PPAs align with expense type. For example, the Coast Guard’s Operating Expenses account consists of the following six PPAs: military pay and allowances, civilian pay and benefits, training and recruiting, operating funds and unit-level maintenance, centrally managed accounts, and depot-level maintenance. In addition, the number of appropriations accounts and PPAs each component has varies. For example, the President’s fiscal year 2013 budget submission requested funding for the Federal Law Enforcement Training Center in a total of two appropriations accounts and three PPAs. In contrast, the budget submission requested funding for FEMA in a total of nine appropriations accounts and 19 PPAs. We previously found that there are limitations to using account structures to identify and analyze M&A spending.appropriation account structure was not constructed to delineate program and administrative expenses. In particular, (1) the budget does not identify an administrative account for all agencies, (2) similar expenses are categorized differently across agencies and within the same agencies from year to year, and (3) administrative accounts do not include all administrative expenses of an agency. See appendix I for more details on the limitations of using appropriations accounts and PPAs to identify M&A spending.

Specifically, we found that the Object classification: Object classes are numbered categories used in budget preparation to classify obligations by the types of goods or services purchased by the federal government. Obligations are commitments that create a legal liability of the federal government for the payment of goods and services. For example, an agency incurs an obligation when it places an order, signs a contract, purchases a service, or awards a grant. Obligations may also include interagency transactions where funds are transferred from one appropriation account to another. Object class information is mandated by law, which requires the President’s budget to present obligations by object class for each account. In DHS’s annual congressional budget justification, components break down their funding requests for each PPA by object class. The Office of Management and Budget (OMB) established five major object classes; by number, they are as follows: 10, personnel compensation and benefits; 20, contractual services and supplies; 30, acquisition of assets; 40, grants and fixed charges; and 90, other. See appendix I (table 5) for a description of the major object classes. These major classes are divided into smaller classes. For example, object class 20 includes 21, travel and transportation of persons; 24, printing and reproduction; and 26, supplies and materials. See figure 2 for examples of the contractual services and supplies object classification for DHS.

We previously found that object class data have limitations when used to identify and analyze obligations of an M&A nature.not an object class exclusively for M&A activities, so obligations for M&A For example, there is activities cannot be separated from obligations for mission activities. See appendix I for more details on the limitations of using object class data to identify M&A spending.

Financial Systems

Components use financial systems to track obligations and expenditures by account and PPA, as well as object classification. The term “financial system” includes an information system, composed of one or more applications, that is used for collecting, processing, maintaining, transmitting, or reporting data about financial events; supporting financial planning or budgeting activities; accumulating and reporting costs information; or supporting the preparation of financial statements. Of the 15 DHS components, 6 own and operate financial systems. The remaining components, with the exception of the Office of Inspector General, which relies on the Department of the Treasury, are customers of those 6 components that own and operate their own financial systems For example, the Coast and serve as internal shared service providers.Guard owns and operates a financial system, and TSA and the Domestic Nuclear Detection Office are customers of the Coast Guard. Each of the 6 components that own financial systems use different software or versions of software. Table 1 depicts which DHS components own financial systems and which are customers that use those systems.

In addition to the financial systems components utilize to track budget execution, DHS utilizes the FYHSP System PDM to develop the FYHSP report to Congress and assist the department with budget formulation. In response to DHS’s Bottom-Up Review, which called for the capability to better align DHS’s budget with its missions, PA&E developed the FYHSP System PDM.submit their resource allocation plans to request funding for future years. Financial systems use the appropriation structure specified by Congress for budget execution, while the PDM captures DHS’s programmatic The PDM is a data collection tool for components to structure used for resource formulation, managerial decision making, performance management, and articulating outcome-oriented mission programs to the public.

DHS Components Define M&A Activities Differently and Can Identify M&A Spending, but Limitations Exist in Obtaining Data from Fiscal Years 1999 through 2013

The eight DHS components we reviewed define M&A spending differently. According to component officials, the components can identify M&A spending, but they do not do so because they are not required to by the department. In addition, the methods for identifying M&A spending vary among components. Components also have varied ability to report consistent, reliable M&A data, limiting the data available from fiscal years 1999 through 2013. Because components define M&A differently, have different methods for identifying spending, and limitations exist in obtaining data, it is not possible to compare components’ M&A spending data from fiscal years 1999 through 2013.

DHS Components Define M&A Activities Differently and Can Identify M&A Spending

Officials from all eight DHS components we reviewed provided us different definitions of M&A activities and told us that they can identify spending on M&A activities. (See table 2.) Four of the eight components in our review—FEMA, FLETC, ICE, and TSA—define their M&A activities according to the activities funded through their appropriations accounts and PPAs that are M&A in nature (i.e., activities of a support nature such as planning and budgeting, legal support, and IT infrastructure), while the other four—Coast Guard, DMO, CBP, and USSS—each define M&A activities differently and their definitions are not tied to activities in specific appropriation accounts or PPAs. For example, TSA officials stated that TSA’s M&A activities are those found within its Transportation Security Support appropriations account, specifically the following three PPAs: Headquarters Administration, Human Capital Services, and Information Technology. These three PPAs fund TSA’s headquarters and support functions. Alternatively, the Coast Guard does not have an M&A PPA. According to Coast Guard officials, the Coast Guard’s M&A activities are those associated with headquarters and its service centers, such as personnel support and finance, which support the entire Coast Guard and cannot be attributed to a single unit or mission. Unlike officials in other components, DMO officials said that they consider all of DMO’s activities to be M&A in nature, and therefore all of its spending to be M&A.

DHS components are not required by the department to identify M&A spending as they obligate or expend funds, and as a result, none of the eight components we reviewed currently do so. However, all the components said they can identify M&A spending. Seven of the components would use their financial systems to identify M&A spending, while one component would use its cost model. However, methods for identifying spending vary among components. For example, FEMA officials said they can obtain M&A data from object classes within FEMA’s financial system, while Coast Guard officials said that they can use expenditures by cost centers and ICE officials said that they can calculate obligations and expenditures by PPA. Alternatively, officials from one component, CBP, said that CBP can use its cost model, which aligns costs with activities—but is separate from its financial system—to identify M&A spending. Table 2 summarizes how DHS components we reviewed define and would identify M&A activities and spending.

DHS components have varied ability to report consistent, reliable M&A data, limiting the data available from fiscal years 1999 through 2013. While FEMA officials stated that FEMA could provide data since fiscal year 1999, officials from seven of the eight DHS components we reviewed told us they would be able to provide M&A spending data for some, but not all, fiscal years since 1999 because of changes in their financial systems and data reliability issues, among other reasons. Examples of these limitations in obtaining data include the following: Financial system changes: Officials from two of eight components cited a change or upgrade to their financial systems as a reason for not having data readily available since fiscal year 1999. For example, according to USSS officials, they could most easily identify M&A data for fiscal years 2005 through 2012, since USSS changed its financial system in 2005. The officials added that obtaining M&A data before fiscal year 2005 would be time-consuming, and the data would be difficult to merge with data in USSS’s current system because the financial systems are not compatible or linked.

Data reliability: Officials from two of eight components cited data reliability as a reason for not having data readily available since fiscal year 1999. For example, officials representing DMO—which was established in fiscal year 2004 along with its financial system—told us that they do not consider fiscal year 2004 data to be reliable because the data are for a partial year and the officials were learning the system; however, they consider the next fiscal year’s data (2005) reliable, as the financial system was fully operational for an entire fiscal year and officials had become familiar with using the system.

Date component established: Four of the eight components were not established, or not established in their current form, until after 1999, and therefore data are not available or could be difficult to obtain. For example, CBP officials told us that obtaining M&A data prior to fiscal year 2003—when CBP was part of other federal departments—would be nearly impossible because the offices and agencies in those departments were not wholly transferred into what is now CBP.

Table 3 provides information on the range of M&A data available by fiscal year, and the reason for that range.

Because components define M&A differently, have different methods for identifying spending, and limitations exist in obtaining data, it is not possible to compare components’ M&A spending data from fiscal years 1999 through 2013. Furthermore, components’ missions and authorities have changed over time, making a meaningful analysis of a single component’s spending over time difficult. For example, the Coast Guard doubled in size shortly after the terrorist attacks of September 11, 2001, because its mission was broadened to include additional national security responsibilities such as increasing port security. Specifically, as reported in the President’s fiscal year 2003 budget, port security accounted for approximately 1 to 2 percent of daily operations before September 11, 2001, and accounted for between 50 and 60 percent of daily operations in fiscal year 2003. Additionally, FEMA’s authority changed with the Post- Katrina Emergency Management Reform Act of 2006. The act enhanced FEMA’s autonomy—FEMA became a distinct entity within DHS—and responsibilities. For example, the act tasked FEMA with leading and supporting the nation’s risk-based, comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation. Appendix I provides additional information on limitations to identifying and analyzing DHS’s M&A data.

DHS Identifies Some M&A Spending and Is Taking Steps to Define and Collect Data on M&A Activities, but Could Improve Reliability of Data for Estimating Future Resource Requests

DHS has not identified the department’s total spending on M&A activities, but through two efforts to achieve efficiencies and reduce spending, it identifies spending on some M&A activities. DHS implemented a system to estimate the percentage of the department’s budget request in future years that is identified as M&A using a common definition, but not all components are adhering to the definition when entering resource allocation requests into the system. DHS is taking steps to require components to apply the same common M&A definition to obligations and expenditures contained in their financial systems, but it is too early to tell whether the steps DHS is taking will allow it to successfully collect reliable M&A data in the future.

DHS Identifies Spending on Specific M&A Activities through Two Efforts to Achieve Efficiencies and Reduce Spending

According to DHS OCFO officials, DHS has not identified the department’s total spending on M&A activities since DHS’s inception in 2003 because (1) there has not been a common M&A definition and (2) obtaining data would require requesting data from the components, which would require a manual, labor-intensive effort on their part to identify the data in their financial systems. However, through two efforts to achieve efficiencies and reduce spending, DHS is identifying and collecting data on components’ spending on specific M&A activities.

As avoidance figures quarterly through the ER Quarterly Reporting System.The ER collects expenditure data for three initiatives to determine whether the cost avoidance figures are reasonable and to verify components’ compliance with the initiatives: 1. facilities: rental costs for nongovernmental facilities for meetings, conferences, and training events; 2. printing: total cost of printed products; and 3. travel: all expenditures assigned to object class 21 travel and transportation of persons.

The data provided reflect all spending on the initiatives, including M&A activities and operational activities, such as mission-critical travel. According to the ER data, travel expenditures far exceeded spending on facilities rental and printing from fiscal years 2010 through 2012. Furthermore, components’ travel and printing expenditures were similar in both fiscal years 2010 and 2011, but increased in fiscal year 2012. In contrast, expenditures on facilities rental steadily declined from fiscal years 2010 to 2012. According to the ER Director, variations in expenditures across years are a result of mission needs, which can be cyclical in nature. For example, according to USSS officials, USSS generally has increased travel costs in an election year because of its mission to protect presidential candidates. Figure 3 shows DHS spending by initiative for fiscal years 2010 through 2012.

The ER office requires components to report their cost avoidance figures for 5 of the 46 initiatives: (1) facilities, (2) IT inventory management, (3) printing, (4) travel, and (5) wireless assets and services. Cost avoidances are savings that are reallocated to mission-critical activities, and do not result in decreases to the budget. These initiatives include M&A activities as well as operational activities, such as mission-critical travel, so the cost avoidances reported are not limited to M&A activities. DHS has reported achieving cost avoidances through sharing excess IT equipment within the department rather than buying new equipment, and using government office space and online tools for conferences instead of renting private facilities, for example. Figure 4 shows the cost avoidances DHS has achieved by these five initiatives for fiscal year 2012 through the first quarter of fiscal year 2013.

DHS has achieved the greatest cost avoidances through the wireless assets and services, IT inventory management, and facilities initiatives. According to the ER data, FEMA, for example, reported a collective cost avoidance of $8 million during the time period as a result of reducing by approximately half what it was paying for wireless service per employee. Cost avoidances have been limited for the printing and travel initiatives relative to the other initiatives. According to officials from six of the eight components we interviewed, there are limited opportunities to avoid these costs, since mission needs dictate spending. For example, USSS officials stated that while USSS looks for opportunities to reduce costs and has recently opted for travel by bus rather than by aircraft, it ultimately has limited control over travel spending because the agency must provide protection for its protectees when and where they travel.

In response to the Campaign to Cut Waste—a government-wide effort to reduce administrative spending—DHS sets spending targets and tracks components’ spending (obligations and expenditures) for seven M&A categories: (1) travel, (2) printing, (3) supplies, (4) advisory service contracts (e.g., contracts for IT services and program management), (5) promotional items, (6) IT devices, and (7) executive sedan services. DHS components’ spending targets generally reflect a 20 percent decrease from their fiscal year 2010 spending levels in accordance with Executive Order 13589, issued in November 2011, and a subsequent May 2012 memorandum from OMB providing implementation guidance. Unlike ER data, the figures reported for the Campaign to Cut Waste generally exclude spending on mission-essential activities (e.g., travel for national security purposes), as the goal of the Campaign to Cut Waste is to reduce spending on administrative activities. The Campaign to Cut Waste concluded at the end of fiscal year 2013 per OMB guidance, with the exception of continued collection of spending data for travel.

Of the eight components we reviewed, officials from six reported having difficultly determining spending for some of the Campaign to Cut Waste categories, highlighting the challenges of both defining and identifying M&A activities and spending. More specifically, while officials from all eight components did not report any difficulties determining travel spending, six of the eight components reported difficultly determining spending on promotional items, supplies, and/or IT devices. Officials from these six components cited unclear definitions and lack of a straightforward method to identify spending, such as no corresponding object class, as reasons for the difficulty. For example, ICE, TSA, and USSS officials stated that what qualifies as a promotional item is not well defined in the guidance, and as a result, the activities and associated spending that should be reported for this category are subjective. According to DHS OCFO and FEMA officials, FEMA delayed reporting its spending on office supplies in April 2013 when it realized the figures previously reported may have been overstated, as the object class that contains office supplies also includes purchases made on credit cards, which could include items other than office supplies. Officials from four of the eight components we reviewed reported difficulties determining spending for IT devices as a result of the broad definition in the executive order and the ability to isolate spending on specific types of IT devices (e.g., laptops) in their financial system.

Despite the data limitations described above, we determined that the data are sufficiently reliable to illustrate general levels of DHS’s spending against its spending targets on the Campaign to Cut Waste categories for six of the seven categories (all but IT devices). Overall, DHS spent 12 percent less than its spending target for fiscal year 2012 on these six categories. However, given that data for the IT device category are incomplete and the final spending and spending target figures are being determined, it is unknown at this time whether DHS met its overall spending goal for fiscal year 2012. According to DHS’s Budget Division, for fiscal year 2013, the department was on track to meet or exceed the reduction levels established in the executive order in the areas of supplies and advisory service contracts, which will allow DHS to meet its overall spending target. Table 4 shows the amount DHS spent compared with its spending target by Campaign to Cut Waste category during fiscal year 2012 and the first two quarters of fiscal year 2013.

In response to DHS’s 2010 Bottom-Up Review, which called for the capability to better align DHS’s budget with its missions, PA&E implemented the FYHSP System PDM in March 2010, as well as three activity types for categorizing the department’s activities: (1) Mission/Operational; (2) Mission Support; and (3) Business Support (also referred to as M&A), including a definition of M&A activities. The FYHSP System PDM User Manual directs components to submit resource allocation requests by activity type according to the definitions below: 1. mission/operational activities: activities that directly contribute to a mission outcome (e.g., screening and disaster operations).2. mission support: activities providing a product or service for, and tailored to, mission/operational activities (e.g., logistical support, research and development, and intelligence). 3. business support (also referred to as M&A): activities found on the master list of 92 activities included in the user manual (e.g., conduct strategic planning, manage public affairs, and ensure information security).

As a result, DHS has the ability to model the percentage of its future years’ budget requests allocated to each of the three activity categories, including M&A, using a consistent definition. However, on the basis of our analysis of the activities entered into the FYHSP System PDM for fiscal years 2012 and 2013, we determined that 1 component did not enter any business support/M&A activities, and 5 components did not correctly categorize their business support activities since they entered some business support activities as mission support activities. Further, according to an analysis conducted by PA&E of the activities entered in the PDM as business support/M&A for fiscal years 2014 through 2018, components did not correctly categorize their requests by activity type or enter all of their business support/M&A activities, among other errors. For example,

9 out of 15 components did not correctly word a portion of their business support/M&A activities to correspond with the master list;

4 of the 15 components entered the wrong corresponding business support/M&A activity number as found on the master list for a portion of their business support activities; and

4 out of 15 components entered fewer business support/M&A activities than PA&E would have expected, and 1 component did not enter any business support activities.

According to DHS PA&E officials, the errors are a result of manual data entry or components not adhering to the guidance in the PDM user manual. For example, 1 component believes every activity it undertakes is in support of its mission and therefore it has no business support/M&A activities. Standards for Internal Control in the Federal Government calls for relevant, reliable, and timely information to be available for external reporting purposes and management decision making. Additionally, these Standards state that management should put in place control mechanisms and activities to enable it to enforce its directives and achieve results, such as providing relevant, reliable, and timely information. Furthermore, the Statement of Federal Financial Accounting Concepts No. 1, Objectives of Federal Financial Reporting, states that the objectives of federal financial reporting are to provide useful information to assist internal and external users in assessing the budget integrity, operating performance, stewardship, and systems and control of the federal government. DHS does not have a mechanism in place to work with the components to correct data errors in the PDM. According to PA&E, as of August 2013, it was in the process of working with components to revise the master list from 92 activities to fewer than 50 in conjunction with DHS’s efforts to revise its Quadrennial Homeland Security Review Report. In addition, in September 2013, PA&E told us that it plans to develop drop-down menus for the FYHSP System PDM to systematically ensure consistency of nomenclature and spelling of business support activities. While the development of drop-down menus will likely address the errors as a result of incorrectly worded activities and wrong activity numbers, the steps to be taken will not address the errors related to components not entering business support activities into the PDM or entering business support activities as mission support activities. By implementing a mechanism to assess whether components have entered the appropriate business support activities into the PDM, and working with the components to correct the data, as needed, DHS would be better positioned to reliably estimate and report to external stakeholders, such as Congress, what percentage of the department’s resource allocations requests are identified as M&A.

DHS Has Taken Steps to Enhance the Collection of Actual M&A Spending, but It Is Too Early to Assess These Efforts

DHS has taken steps to enhance the collection of actual M&A spending for the department as a whole. However, DHS’s M&A definition only applies to future allocation requests entered into the FYHSP System PDM beginning with fiscal year 2012. Accordingly, it is not used by components to identify obligations or expenditures by activity type in their financial systems. According to DHS, there is no linkage between components’ financial systems and the FYHSP System PDM because the systems were built upon different structures. Components’ financial systems are designed to track how components are spending funds and track obligations and expenditures according to their appropriations accounts and PPAs, which are established by the Appropriations Committees and are different for each component. The PDM was designed to help estimate future resource needs and was created based on a common account structure that aligns activities with the department’s programmatic structure—missions and objectives, according to the FYHSP System PDM User Manual. Managerial cost accounting concepts and standards call for reliable and timely information on the full cost of federal programs, their activities, and outputs. The cost information can be used by Congress and federal executives in making decisions about allocating federal resources, authorizing and modifying programs, and evaluating program performance. The cost information can also be used by program managers in making managerial decisions to improve operating economy and efficiency.

Financial Systems Integration Office, 2007 Report on Federal Financial Management Standards: Common Government-wide Accounting Classification Structure, version 1.0. major upgrade to their system, or (3) move to a shared service provider. One element of the 73, defined by DHS is “mission activity,” which requires components to identify data by activity type using the same business support (or M&A) definition in the FYHSP System PDM. Furthermore, through an effort called CFO Horizon, DHS has developed a data repository in which to collect data from DHS and its components’ various financial systems, so when data such as M&A are collected by the components in the future, they can be readily accessible by the department for consolidation, according to the CFO Horizon Concept of Operations.

DHS OCFO is implementing ACS in two phases: Phase I and Phase II. According to DHS OCFO officials, DHS anticipates publishing the ACS Policy and Standards in November 2013, thus completing Phase I in the first quarter of fiscal year 2014. Phase II, implementation of ACS by the components, is scheduled to begin in fiscal year 2014. If a component does not store and cannot derive the data element, the component will not be expected to report on the data element until it modernizes, upgrades or move to a shared service provider, according to a DHS official. The mission activity element is not an element components can provide or easily provide without financial system modernization. According to the preliminary results of an assessment conducted by OCFO on the ability of the components to meet the ACS requirements using their financial systems as of May 2013, none of the components capture or store data by “mission activity” in their financial systems. While 4 of 15 components responded they could derive the data from their existing systems, 3 reported the level of difficulty to be high. Therefore, most components will need to modernize their systems in order to obtain M&A data, as they are currently unable to obtain or derive the data with their current financial systems. DHS is in the early stages of the phased implementation of its financial system modernization, with completion projected for the second quarter of fiscal year 2018.

OCFO officials told us that in response to their assessment of components’ readiness to implement ACS, some components reported that even after they have a financial system that provides the capability to categorize by mission activity, they may not be able to do so because funds are not obligated by activity type. For example, CBP officials told us that approximately 70 percent of CBP’s budget is for salaries and benefits, and defining an individual’s salary by mission activity is difficult given that individuals, especially those working in the field (e.g., border patrol agents), perform a wide variety of tasks, making it difficult to accurately break down their salary expenses by activity type (mission, mission support, and business support). Additionally, TSA reported that it would be an extensive burden to manually enter such data. According to DHS OCFO officials, while implementation of any new financial system and new accounting structure is inherently challenging, it is executing a process to address issues as they are identified. However, it is too early to tell whether the steps DHS is taking will allow it to successfully collect reliable M&A data in the future.

Conclusions

DHS has developed a common definition of M&A activities for resource planning for the department, but on the basis of our analysis, and PA&E’s analysis, not all components are accurately identifying or entering business support/M&A activities in accordance with the definition in the FYHSP System PDM User Manual when entering their future resource allocation requests into the PDM. By implementing a mechanism to assess whether components have entered the appropriate M&A activities into the PDM, and working with the components to correct the data, as needed, DHS would be better positioned to reliably estimate and report to external stakeholders, such as Congress, what percentage of the department’s resource allocations requests are identified as M&A. DHS’s M&A definition applies only to future allocation requests entered into the FYHSP System PDM. Accordingly, it is not used by components to identify obligations or expenditures by activity type in their financial systems. While DHS has drafted the ACS Policy and Standards to require components to collect the same data elements, including mission activity, financial system modernization, which is scheduled for completion in fiscal year 2018, will need to take place before all components are in a position to implement the mission activity element. Further, some components have identified challenges to categorizing obligations and expenditures by activity type regardless of the capability of their financial systems. Consequently, it is too early to tell how successful the steps DHS is taking will be in allowing it to collect reliable M&A spending data in the future.

Recommendation for Executive Action

To help ensure DHS is able to reliably estimate the department’s future resource allocation requests identified as M&A, we recommend that the Under Secretary for Management direct PA&E to implement a mechanism to assess whether components have entered the appropriate M&A activities into the PDM, and work with the components to correct the data, as needed.

Agency Comments and Our Evaluation

We provided a draft of this report to DHS for its review and comment. DHS provided written comments, which are reprinted in appendix III, and concurred with our recommendation. In its written comments, DHS stated that it will continue to periodically assess whether components have entered the appropriate M&A activities into the PDM and continue to work with components to correct the data, as needed. In addition, DHS stated it will develop and implement a mechanism to ensure component compliance with guidance in time for the fiscal years 2016-2020 programming and budget process with an estimated completion date of June 30, 2014. Such actions should address the intent of our recommendation. DHS also provided technical comments, which we incorporated as appropriate.

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Appendix I: Limitations to Identifying and Analyzing Management and Administration Spending

We sought to independently identify and analyze the Department of Homeland Security’s (DHS) management and administration (M&A) activities and related spending from fiscal years 1999 through 2013 but were unable to because of various limitations. In particular, sources of federal budget data, including appropriations accounts broken down into program, project, or activity (PPA) and object classes, do not clearly distinguish M&A spending from other types of spending. Moreover, in cases where appropriations accounts and PPAs are largely M&A, the activities contained in those groupings are not consistent from year to year or complete since M&A activities can be found in other accounts or PPAs.

Appropriation Account and PPA Limitations

We previously found that there are limitations to using account structures to identify and analyze M&A spending because the appropriation account structure was not constructed to delineate program and administrative expenses. In particular, (1) the budget does not identify an administrative account for all agencies, (2) similar expenses are categorized differently across agencies and within the same agencies from year to year, and (3) administrative accounts do not include all administrative expenses of an agency. We identified the same limitations based on our review of DHS’s appropriations accounts and PPAs.

On the basis of our review, of DHS’s appropriation account and PPA structure, 5 of 15 DHS components did not have an M&A account or PPA for fiscal year 2013. Moreover, for those 10 components that did have M&A PPAs in 2013, they did not all exist as far back as fiscal year 1999 or did not exist in their current form, making an analysis over time nearly impossible. For example, the Federal Law Enforcement Training Center’s (FLETC) Management and Administration PPA was established beginning with fiscal year 2013 at the request of the Office of Management and Budget to obtain better insight on M&A costs. Additionally, the Federal Emergency Management Agency (FEMA) previously had a Management and Administration account with an Operating Activities PPA, but those activities were within the Salaries and Expenses account, including all seven of its PPAs, for fiscal year 2013. For the components, such as U.S. Customs and Border Protection (CBP), which existed as legacy agencies in different federal departments before DHS was established, it would be difficult to identify relevant expenditures by PPA before 2003 because agencies and offices were not transferred intact.

For those 10 components with M&A PPAs, they differed from one another in terms of the activities funded through those PPAs. For example, activities contained in the Management and Administration PPA for FLETC include providing budget, finance, accounting, financial systems, financial statements, relocation, travel, and strategic planning functions, as well as asset management and human capital services, among others. U.S. Immigration and Customs Enforcement’s (ICE) activities contained in its Personnel Compensation and Benefits, Service, and Other Costs PPA include overseeing the budget, procurement, and facilities; providing human resources services and training for all employees and special agents; and tracking the agency’s performance measurements, but do not include strategic planning functions and asset management like FLETC’s. Without a consistent definition, comparing M&A spending among DHS components would likely lead to inaccurate conclusions about which components are spending more or less on M&A activities.

On the basis of our review we also found that the activities included and funded in a component’s PPA can also change annually. As a result, an increase in an M&A PPA may not actually mean increased M&A spending. For example, the conference report accompanying the fiscal year 2012 DHS appropriations act provided that funding for the Office of the Assistant Secretary for Cybersecurity and Communications and the Office of the Assistant Secretary for Infrastructure Protection had been moved to the National Protection and Programs Directorate M&A account. As a result, the National Protection and Programs Directorate requested an additional $3.9 million for its Directorate Administration PPA within its M&A account in fiscal year 2013. Without understanding this organizational change or the activities included in a particular PPA, the National Protection and Programs Directorate appears to have increased spending on Directorate Administration activities by $3.9 million. Conducting a year-to-year comparison without understanding these types of organizational changes could lead to faulty conclusions. Finally, M&A PPAs may not capture all M&A-related expenses, as some M&A activities may be captured in other PPAs. For example, FEMA officials reported that its M&A PPAs are found within its Salaries and Expenses appropriation account, but noted that there may be other accounts containing M&A activities.

Object Classification Limitations

We previously found that object class data have limitations when used to identify and analyze obligations of an M&A nature since (1) no object class contains purely M&A activities, so obligations for M&A activities cannot be separated from obligations for mission activities; (2) the same type of expenses can be assigned to different object classes; and (3) reimbursements made by federal agencies are reobligated, which can lead to double counting. We identified the same limitations on the basis of our review. For example, we found that object class 26, supplies and materials, which is seemingly an administrative object class, is appropriately used by DHS components to capture obligations for more than office supplies. Specifically, Coast Guard officials told us the Coast Guard’s obligations for fuel for marine and air assets, uniforms, and ammunition, among other operational expenses, are assigned to object class 26. Similarly, the U.S. Secret Service (USSS) uses this object class to report obligations for fuel for the presidential limousine as well as the rest of its vehicle fleet. See table 5 for the entire list of object classes.

Given the different missions of DHS components and different activities assigned to an object class from component to component, any cross- component comparison of object class data could lead to inaccurate conclusions. This problem is compounded given that when components do have the same types of expenses, they can be appropriately assigned to different object class categories. For example, on the basis of our review, we found that one component may decide that information technology (IT) support belongs to budget object class 26, supplies and materials, while another component may decide these same IT costs belong to object class 25.7, operation and maintenance of equipment, according to a DHS Budget Division Analyst.

Finally, object class data can exaggerate spending because reimbursable authority can lead to double counting if direct obligations cannot be distinguished from reimbursable obligations. Object classes present gross obligations—that is, the separate obligations made by each appropriation account, including the “reobligation” of amounts received as reimbursements from other federal agencies—and not actual expenses. For example, according to a DHS Budget Division Analyst, in fiscal year 2010, DHS had approximately $2 billion in expenditures in the supplies object class, but $512 million of the $2 billion was reimbursable authority.

Appendix II: Objectives, Scope, and Methodology

This report addresses the following questions: 1. How have select DHS components defined and identified their M&A activities and spending, and to what extent are M&A data available from fiscal years 1999 through 2013? 2. How has DHS identified M&A spending department-wide, and to what extent has DHS defined M&A activities and taken steps to enhance efforts to collect M&A data?

To address the first objective, we analyzed DHS’s congressional budget justifications, budget execution reports, and budget-in-briefs, as well as presidential budgets and appropriations legislation from fiscal years 2004 through 2013 to understand how M&A activities are defined and accounted for within components’ appropriations accounts. We sought to independently identify components’ M&A activities and related spending, but were unable to because of various challenges. In particular, sources of federal budget data do not define and distinguish all M&A spending from other types of spending. Moreover, in cases where groupings of budget data, such as appropriation accounts, are largely M&A, the activities contained in those groupings do not include all M&A activities and are not consistent from year to year. To determine how selected DHS components define their M&A activities and how they would go about identifying spending associated with these activities, we interviewed officials representing two of DHS’s eight support components— Departmental Management and Operations (DMO) and FLETC—and six of DHS’s seven operational components—FEMA, CBP, the U.S. Coast Guard, the Transportation Security Administration, ICE, and USSS.selected these eight components based on the amount of their budget authority (totaling nearly 88 percent of DHS’s fiscal year 2013 budget authority); their mission, for components with both operational and support missions; and date established, for components established both before and after the inception of DHS. To determine the extent to which M&A data are available from fiscal years 1999 through 2013, we We interviewed officials from the eight selected components about their ability to provide M&A spending data during the timeframe. We did not obtain available data from the components because the data would not be comparable. While the results of our interviews cannot be generalized across all DHS components, these interviews allowed us to obtain perspectives on how selected components would define and identify M&A spending, as well as the availability of their M&A data since fiscal year 1999.

To address the second objective, we examined DHS’s two efforts to identify and manage its spending on specific M&A activities—DHS’s Efficiency Review (ER)—an effort to identify opportunities to improve efficiency and streamline decision making through a series of initiatives— and the Obama administration’s Campaign to Cut Waste—a government- wide effort to reduce administrative spending. Specifically, we analyzed all available expenditure and cost avoidance data collected through the ER. The ER collects expenditure data for three initiatives: (1) facilities, (2) printing, and (3) travel. The ER also collects cost avoidance data for five initiatives: (1) facilities, (2) IT inventory management, (3) printing, (4) travel, and (5) wireless assets and services. We analyzed all expenditure and cost avoidance data available from the third quarter of fiscal year 2009—when data collection began—through the first quarter of fiscal year 2013—the most recent data available at the time of our review. To assess the reliability of the data, we reviewed the data for obvious errors and traced one component’s recorded expenditure and cost avoidance data back to documentation showing its original data submission. We also interviewed component officials responsible for entering the data, and the ER Director to determine how the data are collected and maintained in the ER Quarterly Reporting Site. We determined that the expenditure data likely understate DHS’s total spending, since some components and offices did not submit their expenditures at all in certain quarters or did not report all expenditures, as they excluded certain types of travel. Specifically, one component and one office did not report their facilities expenditures, one component and two offices did not report their printing expenditures, and one office did not report its travel expenditures, and three components under-reported their travel expenditures. Despite these limitations, the data were sufficiently reliable to illustrate general levels of spending by DHS. We determined that the cost avoidance data prior to fiscal year 2012 were not reliable, since the formula used during that time frame for two of the initiatives—printing and travel—was not an accurate method to determine cost avoidances, a conclusion with which component officials concurred because figures could be overstated. However, we determined that cost avoidance data beginning with the first quarter of fiscal year 2012 were sufficiently reliable for reporting DHS’s cost avoidances as the ER Office began requiring an explanation of the specific actions that led to cost avoidance in order for the cost avoidance to be counted.

We analyzed data collected for the Campaign to Cut Waste for fiscal year 2012 through the second quarter of fiscal year 2013—all of the data available at the time of our review. Specifically, we analyzed DHS’s spending against its spending targets for all seven categories of the campaign—(1) travel, (2) printing, (3) supplies, (4) advisory service contracts, (5) promotional items, (6) IT devices, and (7) executive sedan services. To assess the reliability of the data, we discussed DHS’s implementation of and methodology for developing metrics for the campaign with a Budget Analyst from the Office of the Chief Financial Officer (OCFO) Budget Division. We also interviewed officials from the eight DHS components in our review about how they determine and report their spending figures for the campaign, and any challenges they experience in determining these figures. On the basis of these interviews, we identified data limitations in terms of the consistency, completeness, and accuracy of the data for three of the categories as a result of components defining categories differently, and experiencing difficulty identifying accurate figures or not reporting figures as a result of the difficulties. After considering the portion of spending these categories contributed to total spending tracked by the Campaign to Cut Waste, we determined the data were sufficiently reliable to illustrate general levels of DHS’s spending against its spending targets on the Campaign to Cut Waste categories for six of the seven categories—all but IT devices, for which data are not complete, and therefore excluded from our analysis.

We also analyzed fiscal year 2012 and 2013 data in the Future Years Homeland Security Program (FYHSP) System Program Data Module (PDM), which was developed by DHS, in part to model the percentage of DHS’s resource allocation requests that are for activities identified as M&A in future years. We compared components’ categorization of activities by type in the PDM with the definitions for the three activity type categories (mission/operational, mission support, and business support/M&A) as stated in the FYHSP System PDM User Manual, which provides guidance to components on entering data into the PDM. We discussed the development and implementation of the FYHSP System PDM with DHS OCFO Program Analysis & Evaluation (PA&E) officials who oversee the PDM. Moreover, we reviewed PA&E’s data quality analysis of fiscal year 2014 through 2018 resource requests identified as M&A to determine the accuracy of M&A data entered into the PDM consistent with instructions in the user manual. On the basis of our review of the analysis for any obvious data errors and outliers, we determined that the results of PA&E’s analysis are sufficiently reliable for identifying any limitations of the PDM data. On the basis of our analysis, PA&E’s analysis, and interviews with PA&E officials, we determined the data were not sufficiently reliable for reporting the percentage of DHS’s resource allocations requests that are categorized as M&A. We compared the ability to use the PDM data with criteria in Standards for Internal Control in the Federal Government and Statement of Federal Financial Accounting Concepts No. 1, Objectives of Federal Financial Reporting. We did not assess the reliability of data beyond the categorization by activity type (e.g., categorization of activities by investment type), since such data were outside of the scope of our review.

Also, to address the second objective, we interviewed DHS OCFO officials in the Resource Management Transformation Division to discuss the steps DHS has taken to enhance the collection of M&A data for the department as a whole. We analyzed documentation related to DHS’s efforts to implement its business intelligence initiative to standardize financial data, among other things. Specifically, we analyzed documentation describing DHS’s plans for standardizing its accounting structure across the department, including its draft Accounting Classification Structure (ACS) Policy and Standards and ACS Guidebook. We compared these efforts against criteria for cost accounting in the Statement of Federal Financial Accounting Standards No. 4, Managerial Cost Accounting Standards and Concepts. We also reviewed the Concept of Operations and program milestones for “CFO Horizon”—a means to consolidate components’ financial data. Finally, we interviewed OCFO Resource Management Transformation officials about their efforts to implement CFO Horizon and develop ACS.

We conducted this performance audit from February 2013 to December 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix III: Comments from the Department of Homeland Security

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Glenn Davis (Assistant Director), Lisa Canini, and Wendy Dye made significant contributions to this work. David Dornisch, Eric Hauswirth, Tracey King, Mike LaForge, Lara Miklozek, Leah Nash, Jack Warner, and Leonard Zapata also contributed to this report.

Related GAO Products

DHS Financial Management: Additional Efforts Needed to Resolve Deficiencies in Internal Controls and Financial Management Systems. GAO-13-561. Washington, D.C.: September 30, 2013.

High Risk Series: An Update. GAO-13-283. Washington, D.C.: February 2013.

Streamlining Government: Key Practices from Select Efficiency Initiatives Should Be Shared Governmentwide. GAO-11-908. Washington, D.C.: September 30, 2011.

Financial Management: NOAA Needs to Better Document Its Policies and Procedures for Providing Management and Administration Services. GAO-11-226. Washington, D.C.: January 31, 2011.

A Glossary of Terms Used in the Federal Budget Process. GAO-05-734SP. Washington, D.C.: September 2005.

Budget Object Classification: Origins and Recent Trends. GAO/AIMD-94-147. Washington, D.C.: September 13, 1994.

Budget Issues: Assessing Executive Order 12837 on Reducing Administrative Expenses. GAO/AIMD-94-15. Washington, D.C.: November 17, 1993.

Budget Issues: Limitations on Analyzing the Cost of Administrative Operations. GAO/AFMD-86-54BR. Washington, D.C.: July 22, 1986.