Information Technology: DHS Needs to Fully Define and Implement Policies and Procedures for Effectively Managing Investments
Released: 2007-04-27T00:00:00

Letter

Background

Since beginning operations in March 2003, DHS has assumed operational control of about 209,000 civilian and military positions from 22 agencies and offices specializing in one or more aspects of homeland security. The intent behind DHS’s merger and transformation was to, among other things, improve coordination, communication, and information sharing among the multiple federal agencies responsible for carrying out the mission of protecting the homeland.

Overview of DHS Organizational Structure

To accomplish its mission, the department is organized into various components, each of which is responsible for specific homeland security missions and for coordinating related efforts with its sibling components, as well as external entities. Table 1 shows DHS’s principal organizations and their missions. An organizational structure is shown in figure 1.

Within the Management Directorate is the Office of the CIO, which is expected to leverage best available technologies and IT management practices, provide shared services, coordinate acquisition strategies, maintain an enterprise architecture that is fully integrated with other management processes, and advocate and enable business transformation. Other DHS entities also are responsible or share responsibility for critical IT management activities. For example, DHS’s major organizational components (e.g., directorates, offices, and agencies) have their own CIOs and IT organizations. Control over the department’s IT funding is vested primarily with the components’ CIOs, who are accountable to the heads of their respective components. The Director of Program Analysis and Evaluation is the sponsor for the department’s capital planning and investment control process and serves as the executive agent and coordinator for the process. This Director reports to the Chief Financial Officer (CFO).

IT Is Critical to DHS’s Mission Performance

To accomplish its mission, DHS relies extensively on IT. For example, for fiscal year 2007 DHS requested about $4.16 billion to support 278 major IT programs. Table 2 shows the fiscal year 2007 IT funding for key DHS components.

As mentioned earlier, DHS requested about $4 billion for fiscal year 2008, which is the third largest planned IT expenditure among federal departments.

Prior GAO Reviews of DHS’s IT Investment Management Efforts

During the last 3 years, we have reported on steps that DHS has taken to establish its IT investment management activities and the associated challenges it faced.

In May 2004, we reported that DHS was in the midst of developing and implementing a strategic approach to IT management. We also reported that DHS’s interim efforts to manage IT investments did not provide assurance that those investments were strategically aligned. As a result, we concluded that DHS system investments were at risk of requiring rework in order to properly align with strategic mission goals and outcomes. Accordingly, we recommended that DHS limit its IT investments to those efforts that were deemed cost-effective via several criteria and considering any future system rework that would be needed to later align the system with the department’s emerging systems integration strategy.

In August 2004, we reported that DHS had established several key foundational elements for investment management. However, we also reported that DHS was not providing effective departmental oversight of IT investments, with many investments not receiving control reviews, due in large part to the lack of an organized process for conducting the reviews. Accordingly, we recommended that DHS establish milestones for the initiation and completion of major information and technology management activities, such as conducting these control reviews.

In March 2006, we testified that DHS had worked to institutionalize IT management controls across the department but still faced challenges. We identified actions that DHS reported it was taking, while noting, for example, that the department still needed to define explicit criteria for determining if investments aligned with the agency’s modernization road map (enterprise architecture).

Overview of DHS’s Approach to Investment Management

DHS’s enterprisewide and component agency IT investments are categorized into one of four “levels” of investments that determine the extent and scope of the required project and program management, the level of reporting requirements, and the review and approval authority. An investment is assigned to a level based on its total acquisition costs and total life cycle costs. Table 3 shows the dollar thresholds that DHS reports it uses in determining investment levels.

Several entities and individuals are involved in managing these investments. Table 4 lists the decision-making bodies and personnel involved in DHS’s investment management process, and provides a description of their key responsibilities and membership.

Figure 2 shows the relationship among the key players in DHS’s investment management process.

DHS’s investment management process consists of four phases (which it refers to as Capital Planning Investment Control Steps): (1) the preselect phase supports the initial conception and development of the investment, (2) the select phase supports the selection of the investment from among competing investments, (3) the control phase supports the monitoring of investments for acceptable performance, and (4) the evaluate phase supports the evaluation of investments for progress made against objectives. Each phase of the process is made up of multiple steps that set out requirements that need to be met in order for the boards to make decisions about the investments. The investment management phases are aligned with projects’ life cycle phases, as illustrated in figure 3. According to DHS policy, the boards are to review projects at key decision points or at least annually. Figure 3 shows where these key decision points (see shaded areas) are to occur in a project’s life cycle and in the investment management process.

DHS’s preselect phase is to identify the business needs and assess the preliminary costs and benefits needed for the development and support of an investment’s initial concept. During this phase, the component agency is to assign a project manager to develop an investment review request— essentially an investment proposal—and to scope the project. The document is to provide initial information, which is to be used to establish a schedule for the investment’s key milestone reviews and be reviewed by the Integrated Project Review Team (IPRT). For major investments (level 1 and 2 investments), project managers are required to also assemble an interdisciplinary team to assist in the management of the investment. During this phase, the EAB assesses investments for alignment with the enterprise architecture and provides recommendations to the appropriate decision-making authorities (recommendations for level 1 investments are made to the IRB, those for level 2 investments are made to the JRC, and those for level 3 and 4 investments are made to the heads of the components). Project managers present investment proposals to their component-level investment review boards for approval.

In the select phase, DHS is to assess investments against a uniform set of evaluation criteria and thresholds to ensure that the department selects the investments that best support its mission. All new and existing investments are to go through this phase in support of DHS’s annual programming and budgeting process. Based on the assessments during the select phase, DHS is to prioritize investments and decide which investments to include in its portfolios. The select phase is also intended to help the department justify budget requests by demonstrating the resources required for individual investments. At the end of the selection process, the department is to produce a scored and ranked list of Exhibit 300s for all major investments and an Exhibit 53 for all level 1 through level 4 IT investments for submission to the Office of Management and Budget.

Once resources are expended to acquire planned capabilities, the investment is assumed to be in the control phase, and control related activities are to continue throughout the investment’s life cycle. During this phase, project managers are responsible for preparing inputs for periodic reporting in support of investment reviews. The purpose of the reviews is to ensure that investments are performing within acceptable cost, schedule, and performance parameters. The Acquisition Program Baseline is the main control instrument used through predeployment to baseline these parameters for investments. The IPRT reviews the Acquisition Program Baseline and other periodic reporting documents and provides recommendations to the project teams, if needed. Once the project teams have made the recommended changes, the IPRT provides a summary package to the component agency heads and DHS’s review boards (IRB and JRC) to support key milestone decision reviews and other reviews established in the investment’s investment review request during the preselect phase.

The evaluate phase begins when an investment is implemented or is deployed and operational. During this phase, project managers are responsible for conducting postimplementation reviews (PIR) to evaluate the impact of the investment on the department’s mission and programs. The PIR focuses on three primary areas: impact to stakeholders and customers, ability to deliver results, and ability to meet baseline goals. Major investments that are in the operations and maintenance phases are required to perform an operational analysis to measure performance and cost against the investment’s baseline. If the investment’s performance is deficient, the program manager is required to introduce corrective actions. Any changes to the investment’s original baseline need to be approved by the appropriate IRB. The lessons learned from conducting a PIR are to be reported to the IPRT for use throughout the department.

Overview of GAO’s ITIM Maturity Framework

The ITIM framework consists of five progressive stages of maturity that an agency can achieve in its investment management capabilities. It was developed on the basis of our research into the IT investment management practices of leading private- and public-sector organizations. The maturity stages are cumulative; that is, in order to attain a higher stage, an agency must institutionalize all of the critical processes at the lower stages, in addition to the higher stage critical processes.

The framework can be used to assess the maturity of an agency’s investment management processes and as a tool for organizational improvement. The overriding purpose of the framework is to encourage investment processes that promote business value and mission performance, reduce risk, and increase accountability and transparency in the decision process. We have used the framework in several of our evaluations, and a number of agencies have adopted it. These agencies have used ITIM for purposes ranging from self-assessment to redesign of their IT investment management processes.

ITIM’s five maturity stages (see fig. 4) represent steps toward achieving stable and mature processes for managing IT investments. The successful attainment of each stage leads to improvement in the organization’s ability to manage its investments. With the exception of the first stage, each maturity stage is composed of “critical processes” that must be implemented and institutionalized in order for the organization to achieve that stage. These critical processes are further broken down into key practices that describe the types of activities that an organization should be performing to successfully implement each critical process. It is not unusual for an organization to be performing key practices from more than one maturity stage at the same time. However, our research shows that agency efforts to improve investment management capabilities should focus on implementing all lower stage practices before addressing higher stage practices.

In the ITIM framework, Stage 2 critical processes lay the foundation for sound IT investment processes by helping the agency to attain successful, predictable, and repeatable investment control processes at the project level. At Stage 2, the emphasis is on establishing basic capabilities for selecting new IT projects, and on developing the capability to (1) control projects so that they finish predictably within established cost, schedule, and performance expectations and (2) identify and mitigate potential exposures to risk.

Stage 3 is where the agency moves from project-centric processes to portfolio-based processes and evaluates potential investments by how well they support the agency’s missions, strategies, and goals. This stage requires that an organization continually assess both proposed and ongoing projects as parts of complete investment portfolios—integrated and competing sets of investment options. It focuses on establishing a consistent, well-defined perspective on IT investment portfolios and maintaining mature, integrated selection (and reselection), control, and evaluation processes, which are to be evaluated during PIRs. This portfolio perspective allows decision makers to consider the interaction among investments and the contributions to organizational mission goals and strategies that could be made by alternative portfolio selections, rather than to focus exclusively on the balance between the costs and benefits of individual investments. Organizations implementing Stage 2 and 3 key practices have in place capabilities that assist in establishing the selection, control, and evaluation processes required by the Clinger-Cohen Act of 1996.

Stages 4 and 5 require the use of evaluation techniques to continuously improve both investment processes and portfolios in order to better achieve strategic outcomes. At Stage 4 maturity, an organization has the capacity to conduct IT succession activities and, therefore, can plan and implement the deselection of obsolete, high-risk, or low-value IT investments. An organization with Stage 5 maturity conducts proactive monitoring for breakthrough technologies that will enable it to change and improve its business performance.

As mentioned earlier, each ITIM critical process is further broken down into key practices that describe the tasks that an organization should be performing to successfully implement each critical process. Key practices include organizational commitments, which are typically policies and procedures; prerequisites, which are conditions that must exist to implement a critical process successfully; and activities, which address the implementation of policies and procedures.

DHS Has Established the Structure Needed to Effectively Manage Its Investments but Has Yet to Fully Define Many of the Related Policies and Procedures

Through IT investment management, organizations define and follow a corporate process to help senior leadership make informed decisions on competing IT investment options. Such investments, if managed effectively, can have a dramatic impact on an organization’s performance and accountability. If mismanaged, they can result in wasteful spending and lost opportunities for improving delivery of services. Based on our framework, an organization should establish the management structure needed to manage its investments; build the investment foundation by selecting and controlling individual projects (Stage 2 capabilities); and manage projects as a portfolio of investments, treating them as an integrated package of competing investment options and pursuing those that best meet the strategic goals, objectives, and mission of the agency (Stage 3 capabilities).

DHS has established the management structure to effectively manage its investments. However, the department has yet to fully define 8 of the 11 related policies and procedures defined by our ITIM framework. Specifically, while DHS has documented the policies and related procedures for project-level management, some of these procedures do not include key elements. For example, procedures for selecting investments do not cite either the specific criteria or steps for prioritizing and selecting new IT proposals, and procedures for management oversight of IT projects and systems do not specify the rules that the investment boards are to follow in overseeing investments. In addition, the department has yet to define most of the policies associated with managing its IT projects as investment portfolios. Officials attributed the absence of policies and procedures at the portfolio level to other investment management priorities. Until DHS fully defines and documents its policies and procedures for investment management, it risks selecting investments that will not meet mission needs in the most cost-effective manner.

DHS Has Established an Investment Management Structure and Project- Level Policies, but It Has Not Fully Defined Supporting Procedures

At ITIM Stage 2, an organization has attained repeatable, successful IT project-level investment control processes and basic selection processes. Through these processes, the organization can identify expectation gaps early and take the appropriate steps to address them. ITIM Stage 2 critical processes include (1) defining IT investment board operations, (2) identifying the business needs for each IT investment, (3) developing a basic process for selecting new IT proposals and reselecting ongoing investments, (4) developing project-level investment control processes, and (5) collecting information about existing investments to inform investment management decisions. Table 5 describes the purpose of each of these Stage 2 critical processes.

DHS has established a management structure within which to execute investment management processes. As previously mentioned, this management structure consists of two review boards, the IRB and the JRC, which are responsible for defining and implementing DHS’s IT investment management approach. The membership for these boards appropriately consists of senior executives at the department level and from the major business units and the CIO organization. Other entities, including the EAB and IPRT, play a critical role in supporting the boards and performing investment management activities.

DHS has also fully documented the policies and certain procedures associated with project-level management. Specifically, the department’s Investment Review Process management directive establishes the framework for department investment management by documenting a high-level investment management process and defining project-level policies, including policies for such key activities as identifying projects or systems that support business needs and selecting among new investment proposals. In addition, other documents specify the procedures associated with these policies. For example, the Investment Management Handbook and Business Case Life Cycle Handbook specify procedures for relating projects and systems to DHS’s business needs, and the Capital Planning and Investment Control Guide and Systems Development Lifecycle specify procedures for integrating funding and selection.

Nevertheless, some of DHS’s project-level procedures fail to address key elements as follows: Procedures for selecting investments do not cite either the specific criteria or steps for prioritizing and selecting new IT proposals. According to officials, such elements are being used to select new IT proposals. However, unless the criteria and steps for prioritizing and selecting new proposals are documented in procedures, it is unlikely that they will be used consistently.

Procedures for management oversight of IT projects and systems do not specify the steps and criteria (i.e., rules) for the investment boards to follow in controlling investments. Documenting these rules would provide reasonable assurance that key investment control activities are being performed consistently and would establish transparency and thus promote departmentwide understanding of how decisions are made.

A methodology, with explicit decision-making criteria, does not exist to guide the EAB in determining an investment’s alignment with the DHS enterprise architecture. DHS has developed Enterprise Architecture Board Process Guidance that the EAB uses in its reviews of investments, and this guidance contains a standard template for projects to use in providing information to the board; however, it does not describe the procedures governing how alignment is to be determined. As a result, the EAB’s assessments are based on subjective and unverifiable judgments. This is a significant weakness given the importance of architecture alignment in ensuring that programs will be defined, designed, and developed in a way that avoids duplication and promotes interoperability and integration.

DHS officials stated that they are aware of the absence of documented procedures in certain areas of project-level management, but said that they are nevertheless carrying out the activities that these procedures would address if they were documented. The officials attributed the absence of procedures to resource constraints, stating that, with a full time staff of six to support departmentwide investment management activities, they are more focused on performing investment management rather than documenting it in great detail. While we do not question the importance of actually implementing IT investment management practices, as evidenced by the fact that our ITIM framework provides for such implementation, it is important to recognize that implementation of undefined processes will at best produce ad hoc and inconsistent results. Accordingly, our framework provides for both documenting how IT investment management is to be performed through policies and procedures and for actually implementing these policies and procedures. Unless DHS’s IT investment process guidance specifies procedures for Stage 2 activities that cover all the elements of effective project-level investment management, it is unlikely that key activities will be carried out consistently and in a disciplined manner. This means that DHS is at risk of investing in IT assets that will not cost-effectively meet mission needs.

Table 6 summarizes our findings relative to DHS’s execution of the seven key policy and procedure practices needed to manage IT investments at the project level (Stage 2).

DHS Has Largely Not Documented Policies and Procedures for Portfolio Management

Once an agency has attained Stage 2 (i.e., project-level) maturity, it needs to effectively manage critical processes for managing its investments as a portfolio or set of portfolios (Stage 3). IT investment portfolios are integrated, agencywide collections of investments that are assessed and managed collectively based on common criteria. Managing investments as portfolios is a conscious, continuous, and proactive approach to allocating limited resources among an organization’s competing initiatives in light of the relative benefits expected from these investments. Taking an agencywide perspective enables an organization to consider its investments in a more comprehensive and integrated fashion, so that collectively the investments optimally address the organization’s missions, strategic goals, and objectives. Managing IT investments as portfolios also allows an organization to determine its priorities and make decisions about which projects to begin funding and continue to fund based on analyses of the relative organizational value and risks of all projects, including projects that are proposed, under development, and in operation. Although investments may initially be organized into subordinate portfolios—based on, for example, business lines or life cycle stages—and managed by subordinate investment boards, they should ultimately be aggregated into enterprise-level portfolios.

According to ITIM, Stage 3 maturity involves (1) defining the portfolio criteria; (2) creating the portfolio; (3) evaluating (i.e., overseeing) the portfolio; and (4) conducting PIRs. Table 7 summarizes the purpose of each of these processes.

DHS has not yet fully established any of the policies and procedures associated with managing the 22 IT portfolios that it recently established. For example, the department does not have documented policies and procedures for creating and modifying portfolio selection criteria or for creating its portfolios. In addition, DHS does not have documented policies and procedures for evaluating (or controlling) its portfolios. Further, while the department has policies and procedures for conducting PIRs, these policies and procedures do not specify several items, including roles and responsibilities for conducting reviews, and how conclusions, lessons learned, and recommended management actions are to be shared with executives and others.

DHS officials attributed the lack of portfolio-level policies and procedures to the fact that resources have been assigned to other investment management activities, such as its efforts to establish the 22 portfolios. However, they said that establishing these policies and procedures is important, and thus they are taking steps to begin defining them. Specifically, they said that a portfolio manager for four portfolios—Grants, Case Management, Portal, and Disaster Management—was hired in the fall of 2006, and this manager’s responsibilities include developing the direction, guidance, and procedures for departmental portfolio management. They also said that another portfolio manager is currently being recruited. In addition, DHS officials stated that the PIR procedures defined in the Operational Analysis Guide are being updated to focus more on lessons learned.

Not having documented policies and procedures for portfolio management is a significant weakness, particularly since officials told us that they recently began performing control reviews of these portfolios. Until DHS fully establishes the policies and procedures for portfolio-level management, DHS is at risk of not selecting and controlling the mix of investments in a manner that best supports the department’s mission needs.

As illustrated in table 10, none of the practices associated with policies and procedures for Stage 3 have been executed. Table 8 summarizes the rating for each critical process required to manage investments as a portfolio and summarizes the evidence that supports these ratings.

DHS Has Not Fully Executed Key Practices Associated with Effectively Controlling Investments

DHS has not fully implemented any of the key practices needed to control investments—either at the project level or at the portfolio level. For example, according to DHS officials and our review of the department’s control review schedule, the investment boards have not conducted regular reviews of investments. Further, while control activities are sometimes performed, they are not performed consistently across projects. In addition, because the policies and procedures for portfolio management have yet to be defined, control of the department’s investment portfolios is ad hoc, according to DHS officials. Officials told us that to strengthen IT investment management, they have recently hired a portfolio manager and are recruiting another one. Until DHS fully implements processes to control its investments, both at the project and portfolio levels, it increases the risk of not meeting cost, schedule, benefit, and risk expectations.

DHS Has Not Implemented the Key Practices Associated with Controlling Investments at the Project Level

As we have previously reported, an organization should effectively control its IT projects throughout all phases of their life cycles. In particular, its investment board should observe each project’s performance and progress toward predefined cost and schedule expectations, as well as each project’s anticipated benefits and risk exposure. The board should also employ early warning systems that enable it to take corrective actions when cost, schedule, and performance expectations are not met.

According to our ITIM framework, effective project-level control requires, among other things, (1) providing adequate resources for IT project oversight; (2) developing and maintaining an approved management plan for each IT project; (3) making up-to-date cost and schedule data for each project available to the oversight boards; (4) having regular reviews by each investment board of each project’s performance against stated expectations; and (5) ensuring that corrective actions for each underperforming project are documented, agreed to, implemented, and tracked until the desired outcome is achieved. (The key practices are listed in table 9.)

Although (as discussed in the previous section), DHS has established some policies and procedures, DHS has not implemented any of the prerequisites and activities associated with effective project control. For example, DHS officials stated that the department does not have adequate resources, including human capital, for project oversight.

In addition, although DHS policies and procedures call for certain control activities to be performed, these have not always taken place. For example, DHS policy and procedures call for cost, schedule, benefit, and risk parameters to be documented in (1) Acquisition Program Baselines (APB) and risk management plans for major projects in the capability development and demonstration or production and deployment phases and (2) in operational analysis (OA) documents and Exhibit 300s for projects in operations and support (steady state). However, DHS officials acknowledged that some projects do not have APBs or OAs and stated that a management directive to implement the OA policy is in draft. In addition, although the APBs are supposed to be approved by the appropriate board at the alternative selection milestone decision point, DHS officials stated that this does not always happen. Instead, these officials said that the Office of Program Analysis and Evaluation is reviewing APBs for “interim approval.” In addition, OAs are currently reviewed by the boards only if a problem arises with the projects. Of the three investments we reviewed, an APB and risk management plan were developed for one (Transportation Worker Identification Credentialing or TWIC). However, these documents are being updated to reflect changes in the project’s scope and have not yet been approved by the IRB. For another investment (Integrated Wireless Network or IWN), although, according to officials, an APB was developed, it was not approved by the IRB, although it should have been given its life cycle stage. For the third investment (National Emergency Management Information System or eNEMIS), an OA document specifies the cost, schedule, and benefit expectations for the project. However, the OA has not been reviewed by an investment board because the project has not experienced a problem that would trigger its review.

Data on actual performance are also not provided to the appropriate IT investment board on a regular basis. Specifically, according to the Investment Review Process management directive, Periodic Reporting Manual, and Investment Management Handbook, actual cost, schedule, and benefits performance data for projects through the production and deployment phase should be provided to the boards in the APB and the IPRT’s analyses of quarterly reports for key milestone decision reviews and annual reviews. However, our review of the fiscal year 2006 control schedule showed that project reviews did not always occur; therefore, the boards were not provided with data on actual project performance on a regular basis. In addition, a schedule for fiscal year 2007 project reviews has not been developed. Moreover, officials confirmed that these reviews do not always occur stating that, for fiscal year 2007, the boards’ reviews have been scheduled reactively, for projects that have legislatively required expenditure plans or have otherwise prompted congressional interest. In addition, while the IPRT is supposed to monitor data on the actual performance of projects in operations and support, these data are provided to the boards only if problems arise.

Regarding investment board reviews of the performance of IT projects and systems against expectations, DHS’s policy requires that ongoing project reviews be conducted either annually or at milestone decision points. However, these reviews are not conducted in a timely manner for all level 1 and 2 investments that are not the subject of congressional interest. Officials stated that the Under Secretary for Management would likely be issuing new guidance aimed at making the review schedule more proactive.

Finally, DHS officials told us that the investment boards do not effectively track the implementation of corrective actions for underperforming projects, primarily because they do not have a robust tool to support them in this activity.

This means that DHS executives do not have the information they need to determine whether investments are meeting expectations, which increases the risk that underperforming projects will not be identified and corrected in a timely manner.

Table 9 shows the ratings for each key practice required to control investments (except for the policies and procedures, which were discussed in the previous section) and summarizes the evidence that supports these ratings.

DHS Has Not Implemented Key Practices Needed to Control Its Investment Portfolios

The critical process associated with controlling investment portfolios (evaluating the portfolio under Stage 3 of our ITIM framework) builds upon the Stage 2 critical process providing investment oversight by adding the elements of portfolio performance to an organization’s investment control capacity. Compared with less mature organizations, Stage 3 organizations will have the capability to control the risks faced by each investment and to deliver benefits that are linked to mission performance. In addition, a Stage 3 organization will have the benefit of performance data generated by Stage 2 processes. Executive-level oversight of risk management outcomes and incremental benefit accumulation provides the organization with increased assurance that each IT investment will achieve the desired results. Table 10 lists the key practices associated with this critical process, with the exception of the establishment of policies and procedures, which was discussed earlier.

Although officials told us that DHS has taken steps to classify its investments into 22 IT portfolios, the department has largely not defined the policies and procedures needed to control these portfolios (see earlier section of this report). As a result, DHS officials stated that they are performing portfolio-level control in an ad hoc manner. To begin addressing this, they stated that an analyst was recently hired to help develop guidance and procedures for the IT portfolios, and another staff member is being recruited. Without documented policies and procedures for controlling its investment portfolios, the department’s efforts to evaluate its portfolios will remain ad hoc, compounding its risk of investing in new and existing IT systems that are not aligned with DHS’s mission and business priorities and do not meet cost, schedule, and performance expectations.

Conclusions

Given the importance of IT to DHS’s mission performance and outcomes, it is vital for the department to adopt and employ an effective institutional approach to IT investment management. To its credit, the department has established aspects of such an approach and thus has a basis for achieving greater maturity. However, its approach is missing key elements of effective investment management, such as procedures for implementing project-specific investment management policies, as well as policies and procedures for portfolio-based investment management. Further, it has yet to fully implement either project- or portfolio-level investment control practices. All told, this means that DHS lacks the complete institutional capability needed to ensure that it is investing in IT projects that best support its strategic mission needs and that ongoing projects will meet cost, schedule, and performance expectations. After almost 4 years in operation, DHS is overdue in having a mature approach to investment management. Without one, DHS is impaired in its ability to optimize mission performance and accountability.

Recommendations for Executive Action

To strengthen DHS’s investment management capability and address the weaknesses discussed in this report, we recommend that the Secretary of Homeland Security direct the Undersecretary for Management, in collaboration with the CFO and CIO, to devote the appropriate attention to development and implementation of effective investment management processes. At a minimum, this should include fully defining and documenting project-and portfolio-level policies and procedures that address the following eight areas: selecting new investments, including specifying the criteria and steps for prioritizing and selecting these proposals; reselecting ongoing IT investments, including specifying the criteria and steps for prioritizing and reselecting these investments; overseeing (i.e., controlling) IT projects and systems, including specifying the procedural rules for the investment boards’ operations and decision making during project oversight; identifying and collecting information about investments, including assigning responsibility for the process and ownership of the information and defining the locations for information storage; creating and modifying IT portfolio selection criteria; analyzing, selecting, and maintaining the investment portfolios; assessing portfolio performance at regular intervals to reflect current conducting postimplementation reviews of IT investments, including defining roles and responsibilities for doing so, and specifying how conclusions, lesson learned, and recommended management actions are to be shared with executives and others.

In addition, we recommend that the department implement key investment control processes. At a minimum, this should include these six project- level practices: providing adequate resources, including people, funding, and tools, for IT having IT projects and systems, including those in steady state (operations and maintenance), maintain approved project management plans that include expected cost and schedule milestones and measurable benefit and risk expectations; providing data on actual performance (including cost, schedule, benefit, and risk performance) to the appropriate IT investment board; having each investment board use verified data to regularly review the performance of IT projects and systems against stated expectations; taking appropriate actions to correct or terminate each underperforming IT project or system in accordance with defined criteria and the documented policies and procedures for management oversight; and having the investment board regularly track the implementation of corrective actions for each underperforming project until the actions are completed.

It should also include the following six portfolio-level practices: providing adequate resources, including people, funding, and tools, for reviewing the investment portfolios and their projects; making board members familiar with the process for evaluating and improving the portfolio’s performance; providing results of relevant Providing Investment Oversight reviews from Stage 2 to the investment boards; developing, reviewing, and modifying criteria for assessing portfolio performance at regular intervals to reflect current performance expectations; defining and collecting IT portfolio performance measurement data that are consistent with portfolio performance criteria; and executing adjustments to the IT investment portfolios in response to actual portfolio performance.

Agency Comments

In DHS’s written comments on a draft of this report, signed by the Director, Departmental GAO/Office of Inspector General Liaison, the department stated that it agreed with our findings and recommendations and will use the report to improve its investment management and review processes. The department’s written comments are reprinted in appendix II. The department also provided technical comments that we incorporated in the report where appropriate.

We are sending copies of this report to the Chairmen and Ranking Minority Members of other Senate and House committees that have authorization and oversight responsibilities for homeland security and other interested congressional committees; the Director of the Office of Management and Budget; and the DHS Secretary, Undersecretary for Management, Chief Financial Officer, and Chief Information Officer. We also will make copies available to others upon request. In addition, the report will be made available at no charge on the GAO Web site at www.gao.gov.

If you or your staff have any questions about matters discussed in this report, please contact me at (202) 512-3439 or by e-mail at hiter@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs Office may be found on the last page of this report. Key contributors to this report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to (1) determine whether the Department of Homeland Security (DHS) has established the management structure and policies and procedures needed to effectively manage its information technology (IT) investments and (2) determine whether the department is implementing key practices needed to effectively control these investments.

To address our first objective, we reviewed the results of the department’s self-assessment of practices associated with project-level and portfolio- level policies and procedures and compared them against the relevant practices in Stages 2 and 3 of our IT Investment Management (ITIM) framework. We also validated and updated the results of the self- assessment through document reviews and interviews with officials. We reviewed written policies, procedures, guidance, and other documentation providing evidence of executed practices, including DHS’s Investment Review Process Management Directive, Capital Planning and Investment Control Guide, Investment Management Handbook, Periodic Reporting Manual, and various management memoranda. Our review focused on DHS’s capabilities related to Stages 2 and 3 in our framework that relate to policies and procedures because those stages lay the foundation for higher maturity stages and assist organizations in complying with the investment management provisions of the Clinger Cohen Act.

To address our second objective, we reviewed the results of the department’s self-assessment of critical processes within Stages 2 and 3 that are associated with project-level and portfolio-level oversight and compared them against our ITIM framework. We also validated and updated the results of the self-assessment through document reviews and interviews with officials. In addition, we reviewed DHS’s Investment Review Board, Joint Resources Council, and Enterprise Architecture Board investment-related materials, including the investment review boards’ control schedule, status reports, meeting minutes, portfolio-related documents, and records of decisions. We also conducted interviews with officials from the Office of the Chief Information Officer, the Office of the Chief Financial Officer, and the Office of Program Analysis and Evaluation whose main responsibilities are to control investments and ensure that DHS’s IT investment management process is implemented and followed.

As part of our analysis for the second objective, we selected three investments as case studies to verify that the key practices for investment control were being applied. The investments selected were major systems when we began our review. They also (1) represented a mix of enterprisewide (i.e., headquarters) and component agency investments; and (2) spanned different life cycle phases. The three investments are described below: DHS Integrated Wireless Network (IWN)—This network is to provide a coordinated nationwide approach to reliable, seamless, interoperable wireless communications. It is intended to support federal agents and officers engaged in the conduct of law enforcement, protective services, homeland defense, and disaster response with DHS, the Department of Justice, and the Department of the Treasury. IWN is a major enterprisewide investment and is in the capability development and demonstration phase. It has an estimated life cycle cost of $4.3 billion and is designated as a level 1 investment.

Transportation Security Administration’s Transportation Worker Identification Credentialing (TWIC)—This project is intended to improve security by establishing a systemwide common secure credential, used across all transportation nodes, for all personnel requiring unescorted physical and/or logical access to secure areas of the transportation system. It is a major component agency investment and is designated as a level 1 investment. The total cost of the program is estimated at appropriately $307 million through fiscal year 2012.

Federal Emergency Management Agency’s National Emergency Management Information System (eNEMIS)—eNEMIS is a mission critical application and infrastructure that supports the entire life cycle of emergency or disaster (including acts of terrorism) declarations. The project tracks major incidents; supports mission assignments and other predeclaration response activities; processes the governor’s request for assistance; and automates the preliminary damage assessment process, the regional analysis, and summary. It is a major component agency investment that is in the operations and support phase and is designated as a level 1 investment with an estimated total life cycle cost of $319 million. For these investments, we reviewed project management documentation, such as acquisition program baseline, operational analysis document, and decision memoranda.

For both objectives, we rated the ITIM key practices as “executed” on the basis of whether the agency demonstrated (by providing evidence of performance) that it had fully met the criteria of the key practice. A key practice was rated as “not executed” when we found insufficient evidence of a practice during the review or when we determined that there were significant weaknesses in DHS’s execution of the key practice. We provided DHS an opportunity to produce evidence for the key practices that we rated as “not executed.”

We conducted our work at DHS headquarters in Washington, D.C., from February 2006 through March 2007 in accordance with generally accepted government auditing standards.

Appendix II: Comments from the U.S. Department of Homeland Security

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Sabine Paul, Assistant Director; Gary Mountjoy, Assistant Director; Mathew Bader; Justin Booth; Barbara Collier; Tomas Ramirez; and Niti Tandon made key contributions to this report.