DHS, one of the 24 Chief Financial Officer (CFO) Act agencies, was formed from 22 agencies, including the following agencies or parts of agencies: the U.S. Customs Service, which was formerly located in the Department of the Treasury; the Federal Emergency Management Agency; the Coast Guard; and most of the Immigration and Naturalization Service, which was formerly located in the Department of Justice. Tables 1 and 2 show the representation of career employees at DHS and governmentwide as of September 2003 and September 2007, respectively. There were slight increases in percentage points among nearly all minority groups DHS-wide between 2003 and 2007. The greatest change DHS-wide was a decrease in White men. The greatest differences between the governmentwide data and DHS-wide data were among Hispanic men— in both 2003 and 2007 the representation of Hispanic men was more than 10 percentage points higher than the representation governmentwide, and for White women, the representation was nearly 10 percentage points lower. For both 2003 and 2007, the representation of women at DHS, with the exception of Hispanic women, was below the governmentwide level, the biggest difference being among White and African American women. See appendix I for a breakdown of the DHS-wide representation data by DHS components. Taking a closer look at the DHS-wide data, table 3 shows the representation of career employees at DHS by pay plan/grade as of September 2003. Minority employees generally represented less than 10 percent of career employees among all the pay plans and grades. Examples of the exceptions included the representation of Hispanic men in the blue collar pay plan, grades 5 to 8, and grades 9 to 12, where they ranged from 15 to over 21 percent. In grades 1 to 4, African American women represented over 17 percent, and Hispanic women represented nearly 13 percent of employees. Among the higher grades and pay plans— grades GS-13 to GS-15, SES, and SL/ST—the percentage of White women ranged from over 17 to more than 22 percent, and no minority group exceeded 9 percent of career employees. By 2007, the representation of career employees at DHS by pay plan/grade showed only slight increases and decreases. Exceptions, as shown in table 4, were in the percentage of White men in the SL/ST pay plan, which increased from 0 percent in 2003 to more than 65 percent in 2007, and White women, which during this period in the same pay plan increased from 0 percent to almost 28 percent. The representation of minorities was still less than 10 percent in grades GS-13 and above. As we have reported, leadership in agencies across the federal government, especially at senior executive levels, is essential to providing accountable, committed, consistent, and sustained attention to human capital and related organizational transformation issues. Having a diverse SES corps, which generally represents the most experienced segment of the federal workforce, can be an organizational strength that can bring a wider variety of perspectives and approaches to bear on policy development and implementation, strategic planning, problem solving, and decision making. The members of the career SES are the highest nonpolitically appointed leaders in the federal workforce, and we recently looked more closely at their representation governmentwide. Table 5 shows the total number of career SES and the percentage of women and minority SES in DHS and at the 23 other CFO Act agencies in 2003 and 2007. Overall at DHS, the total number of SES increased by more than 50 percent between 2003 and 2007 going from 208 to 325. Within that total, the percentage of women increased from 21.2 percent to 26.2 percent. In 2003, the representation of women within individual CFO Act agencies ranged from 15.9 to 40.7 percent, with more than two-thirds of the agencies having at least 25 percent women—DHS had 21.2 percent. The representation of minorities within the CFO Act agencies in 2003 ranged from 7.2 to 42.0 percent with more than two-thirds having at least 15 percent minorities—DHS had 15.9 percent. In 2007, the representation of women at these agencies ranged from 19.9 to 45.5 percent, with more than half of the agencies having 30 percent or more women—DHS had 26.2 percent. For minority representation, CFO Act agency rates ranged from 6.1 to 43.8 percent, with two-thirds having at least 15 percent or more minorities—DHS had 13.2 percent. Minority representation in the career SES governmentwide generally increased by less than 1 percentage point from September 2003 through September 2007 as shown in table 6. During this period, the representation of men in the SES decreased by 2.6 percentage points, and White men by 2.7 percentage points; whereas, the percentage of women increased by 2.7 percentage points. At DHS, the extent of change in the representation of career SES employees was generally greater than the change that occurred in the governmentwide SES from September 2003 through September 2007. For example, as shown in table 7, the percentage of White women in DHS’s career SES was 23.1 percent in 2007, 5.8 percentage points above the 2003 rate of 17.3 percent. White men and African American men experienced the largest decrease in their representation in the career SES by 2007, dropping 3.1 and 2.3 percentage points, respectively. Overall, minorities decreased from 15.9 to 13.2 percent. The vast majority of potential successors for career SES positions will come from the GS pay plan for grades GS-15 and GS-14, the levels that serve as the SES developmental pool. Table 8 shows the changes in the representation of the SES developmental pool governmentwide from September 2003 to September 2007. Governmentwide, the total number of employees in the SES developmental pool decreased slightly from September 2003 to September 2007. The greatest change in representation was a decrease of 5.3 percentage points in the number of White men from 2003 to 2007. The percentage of women in the governmentwide SES developmental pool increased by 3.9 percentage points between 2003 and 2007, but the percentage of men in this developmental pool decreased by this same amount. By 2007, the representation of each of the minority groups in the governmentwide SES developmental pool increased by 1.3 percentage points or fewer, resulting in an overall increase of 3.7 percentage points for minorities. Unlike the total number of employees in the governmentwide SES developmental pool, those in DHS’s SES developmental pool increased by more than half. The two greatest changes in representation within DHS’s career SES developmental pool from September 2003 through September 2007 were for White men, which decreased by 4.2 percentage points, and minorities, which increased by 4.6 percentage points, of which African American women increased by 1.8 percentage points, as shown in table 9. While we did not analyze factors that contributed to changes in DHS workforce from September 2003 through September 2007, OPM and the Equal Employment Opportunity Commission (EEOC) in their oversight roles require federal agencies, including DHS, to analyze their workforces. Both OPM and EEOC also report on governmentwide representation levels. Under OPM’s regulations implementing the Federal Equal Opportunity Recruitment Program (FEORP), agencies are required to determine where representation levels for covered groups are lower than the civilian labor force (CLF) and take steps to address those differences. EEOC’s Management Directive 715 (MD-715) provides guidance and standards to federal agencies for establishing and maintaining effective equal employment opportunity (EEO) programs, including a framework for executive branch agencies to help ensure effective management, accountability, and self-analysis to determine whether barriers to EEO exist and to identify and develop strategies to mitigate or eliminate the barriers to participation. Specifically EEOC’s MD-715 states that agency personnel programs and policies should be evaluated regularly to ascertain whether such programs have any barriers that tend to limit or restrict equitable opportunities for open competition in the workplace. The initial step is for agencies to analyze their workforce data with designated benchmarks, including the CLF. If analysis of their workforce profiles identifies potential barriers, agencies are to examine all related policies, procedures, and practices to determine whether an actual barrier exists. EEOC requires agencies to report the results of their analyses annually. A high-performance organization relies on a dynamic workforce with the requisite talents and up-to-date skills to ensure that it is equipped to accomplish its mission and achieve its goals. Such organizations typically foster a work environment in which people are enabled and motivated to contribute to continuous learning and improvement as well as mission accomplishment and which provides both accountability and fairness for all employees. In addition, the approach that a high-performance organization takes toward its workforce is inclusive and draws on the strengths of employees at all levels and of all backgrounds. This approach is consistent with that of diversity management. We have defined diversity management as a process intended to create and maintain a positive work environment where the similarities and differences of individuals are valued, so that all can reach their potential and maximize their contributions to an organization’s strategic goals and objectives. In our past work, we identified nine leading practices in diversity management that experts agreed should be present in some combination for creating and managing diversity. The leading diversity management practices identified by a majority of experts were as follows: Top leadership commitment—a vision of diversity demonstrated and communicated throughout an organization by top-level management. Diversity as part of an organization’s strategic plan—a diversity strategy and plan that are developed and aligned with the organization’s strategic plan. Diversity linked to performance—the understanding that a more diverse and inclusive work environment can yield greater productivity and help improve individual and organizational performance. Measurement—a set of quantitative and qualitative measures of the effect of various aspects of an overall diversity program. Accountability—the means to ensure that leaders are responsible for diversity by linking their performance assessment and compensation to the progress of diversity initiatives. Succession planning—an ongoing, strategic process for identifying and developing a diverse pool of talent for an organization’s potential future leaders. Recruitment—the process of attracting a supply of qualified, diverse applicants for employment. Employee involvement—the contribution of employees in driving diversity throughout an organization. Diversity training—organizational efforts to inform and educate management and staff about diversity. DHS’s Acting Chief Human Capital Officer (CHCO) testified in April 2008 on actions the Department is taking to create and manage its workforce. These actions are consistent with leading diversity management practices in four areas: (1) a diversity strategy as part of its strategic plan, (2) recruitment, (3) employee involvement, and (4) succession planning. We have not conducted a review of DHS’s diversity management efforts; therefore, we cannot comment on the effectiveness of DHS’s implementation of these practices. In addition, because we do not highlight a particular practice, it is not meant to imply success or lack of success by DHS in implementing other diversity management practices. Diversity strategy as part of the strategic plan. DHS established an objective in its 2004 Strategic Plan to “ensure effective recruitment, development, compensation, succession management and leadership of a diverse workforce to provide optimal service at a responsible cost.” In an August 2007 progress report on implementation of mission and management functions, we indicated that DHS had taken action to satisfy most of the elements related to developing a results-oriented strategic human capital plan. We noted that in addition to the strategic human capital plan that DHS issued in October 2004, which covers 2004 to 2008, the department developed a fiscal year 2007 and 2008 Human Capital Operational Plan, which provides measurable goals that the department is using to gauge the effectiveness of its human capital efforts. DHS officials provided us with a copy of DHS’s Corporate Diversity Strategy, issued in March 2008, and stated that the department has developed a Diversity Action Plan, which it plans to submit to the DHS Diversity Council for approval in May 2008. The Diversity Strategy outlines DHS’s policy of encouraging a diverse workforce and the value of a diverse workforce in accomplishing DHS’s mission. Among the guiding principles is integrating diversity into the organization culture rather than as a stand alone program and recognizing that diversity is a matter of equity and fairness. To help ensure accountability, among other things, the strategy calls for establishing a senior-level Diversity Council, which DHS officials reported has been done, integrating diversity strategies into DHS’s comprehensive human resource operation, and ensuring that all DHS leaders have access to training, tools, and support needed to serve as de facto diversity champions. Recruitment. To achieve its strategic plan objective of a diverse workforce, in his April 2008 testimony, DHS’s Acting CHCO stated that recruitment strategies have been implemented at the department and component levels to improve diversity of the DHS talent pool. DHS officials told us that the department partners with several minority-serving institutions and participates in several intern, scholarship, and fellowship programs; officials provided a recruitment brochure. These officials also indicated that in October 2007, the DHS began a Veterans’ Outreach Program as a means of recruiting a diverse workforce. This outreach strategy consists of (1) a Web site for one-stop employment and other information, (2) an advisory forum of external veterans as stakeholders, and (3) training in veterans’ preference and reemployment rights for EEO and human capital specialists. DHS has also created an SES-level Director of Recruiting and Diversity within the Chief Human Capital Office. Employee Involvement. Employees can make valuable contributions in driving diversity throughout an organization. Our work on leading diversity management practices identified several forms these contributions can take, including mentoring and community outreach with private employers, public schools, and universities. DHS officials described actions the department is taking to provide opportunities for employees at various levels throughout the department to receive mentoring. In addition, DHS officials stated that they have developed formal partnerships with minority professional service organizations, including the Urban League’s Black Executive Exchange Program, where DHS provides speakers that participate in outreach programs at historically black colleges and universities. DHS officials indicated they are pursuing similar partnerships with the National Association of Hispanic Federal Executives, the African American Federal Executive Association, and the Asian American Executive Network. Succession Planning. Succession planning is a comprehensive, ongoing strategic process that provides for forecasting an organization’s senior leadership and other needs; identifying and developing candidates who have the potential to be future leaders; and selecting individuals from among a diverse pool of qualified candidates to meet executive resource needs. Succession planning and management can help an organization become what it needs to be, rather than simply recreate the existing organization. Leading organizations go beyond a “replacement” approach that focuses on identifying particular individuals as possible successors for specific top-ranking positions and engage in broad, integrated succession planning and management efforts that focus on strengthening both current and future capacity. They anticipate the need for leaders and other key employees with the necessary competencies to successfully meet the complex challenges of the 21st century. For DHS, in addition to the changes that will occur as a result of the upcoming new administration, several factors including recent turnover and expected retirements provide opportunities for DHS to affect the diversity of its workforce and highlight the importance of succession planning. Recently, we reported that the overall attrition rates for permanent DHS employees (excluding SES and presidential appointees) at 8 percent and 7 percent in 2005 and 2006, respectively, exceeded the 4 percent average rate for all cabinet-level agencies. These higher attrition rates, about 14 to 17 percent, were among transportation security officers in DHS’s Transportation Security Administration. The attrition rate for SES and presidential appointees was also higher than the average senior- level attrition rate for all cabinet-level departments. As for retirements, about 20 percent of career employees at DHS as of fiscal year 2007 are projected to be eligible to retire by 2012, and certain key occupations within the department are expected to have high retirement eligibility rates, such as customs and border protection agents—about 51 percent. In 2006, OPM reported that approximately 60 percent of the executive branch’s 1.6 million white-collar employees and 90 percent of about 6,000 federal executives will be eligible for retirement over the next 10 years. Considering retirement eligibility and actual retirement rates of the SES is important because individuals normally do not enter the SES until well into their careers; thus SES retirement eligibility is much higher than for the workforce in general. If a significant number of SES members were to retire, it could result in a loss of leadership continuity, institutional knowledge, and expertise among the SES corps, with the degree of loss varying among agencies and occupations. Succession planning also is tied to the federal government’s opportunity to affect the diversity of the executive corps through new appointments. Racial, ethnic, and gender diversity in the SES is an important component for the effective operation of the government. In September 2003, we reported that agencies in other countries use succession planning and management to achieve a more diverse workforce, maintain their leadership capacity, and increase the retention of high-potential staff. According to the Acting CHCO’s April 3, 2008, testimony and discussion with senior level human capital officials, the department is taking steps to develop a qualified and diverse pool of applicants for SES positions by preparing its mid-career employees through a variety of leadership development programs. These programs include the DHS SES Candidate Development Program (primarily for GS-15s) and the DHS Fellows Program (for GS-13s, GS-14s, and GS-15s). See appendix II for representation data for both programs since their inception. According to DHS officials, the DHS Fellows Program, initiated in 2006, is a competitive developmental program where participants are placed in high-visibility rotational assignments, receive training in such areas as leadership, and form small groups to work on specific projects. After completion of this 11-month program, participants remain in their current assignments but, according to DHS officials, are prepared for advancement when the opportunities arise. Participants in both of the DHS leadership programs receive mentoring and coaching and rotational assignments. However, according to DHS officials, employees at other levels of the organization can also participate in ad hoc mentoring and rotational assignments. Effective training and development programs can enhance the federal government’s ability to prepare its workforce and thereby achieve results. The efforts that DHS officials described are consistent with these practices. Chairman Thompson, Ranking Member King, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. For further information regarding this statement, please contact George Stalcup, Director, Strategic Issues, on (202) 512-6806 or at stalcupg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement included Belva Martin and Kiki Theodoropoulos, Assistant Directors; Karin Fangman; Mary Y. Martin; and Greg Wilmoth. Tables 10 and 11 below provide demographic data by race and gender on the Department of Homeland Security’s (DHS) career employees by DHS component for September 2003 and September 2007. In 2003 and 2007, the U.S. Customs and Border Protection (USCBP) and the U.S. Immigration Customs Enforcement (USICE) had the highest percentage of Hispanic men, while the Transportation Security Administration (TSA) had the highest percentage of African American men. DHS officials stated that they have two formal leadership development programs to prepare future DHS leaders: the DHS Fellows Program for GS- 13, GS-14, and GS-15 staff (an 11-month program) and the DHS Senior Executive Service (SES) Candidate Development Program, generally for GS-15s (an 18-month program). Tables 12 and 13 below provide a breakdown of the representation of women and minorities in each of these programs.

Summary: The Department of Homeland Security (DHS) was created from a disparate group of agencies with multiple missions, values, and cultures into a cabinet department whose goals are to, among other things, protect U.S. borders and infrastructure, improve intelligence and information sharing, and prevent and respond to potential terrorist attacks. GAO designated the implementation and transformation of DHS as a high-risk area in 2003, and it remains so. While DHS has made progress, it continues to face challenges in transforming into an effective, integrated organization. In response to a request to provide information on diversity in DHS and steps DHS is taking to create and manage a diverse workforce, GAO is providing demographic data related to the federal government as a whole and DHS's workforce. GAO obtained these data from the Office of Personnel Management's (OPM) Central Personnel Data File (CPDF). GAO used its past work on leading diversity management practices (GAO-05-90) and reviewed data from DHS on its diversity management practices. Data in OPM's CPDF show that as of September 2007, the overall percentages of women and minorities have increased in the career SES governmentwide, the highest nonpolitically appointed leaders in the federal workforce, and the SES developmental pool for potential successors since September 2003. As part of GAO's recent analysis of the diversity of the SES and the SES developmental pool, GAO reviewed career, or permanent, SES appointments at DHS and DHS's SES developmental pool. During this 4-year period, the total number of career SES and those in the SES developmental pool for potential successors increased at DHS. The percentage of women in the SES increased, while the percentage of minorities decreased. For the SES developmental pool, the percentage of women and minorities increased. While GAO did not analyze the factors that contributed to changes in DHS's workforce for this period, OPM and the Equal Employment Opportunity Commission in their oversight roles require federal agencies, including DHS, to analyze their workforces. As part of a strategic human capital planning approach, agencies need to develop long-term strategies for acquiring, developing, motivating, and retaining a diverse workforce. An agency's human capital planning should address the demographic trends that the agency faces with its workforce, especially retirements, which provide opportunities for agencies to affect the diversity of their workforces. DHS reported taking steps to affect the diversity of its workforce. These steps are consistent with several leading diversity management practices: (1) a diversity strategy as part of its strategic plan, (2) recruitment, (3) employee involvement, and (4) succession planning. For example, DHS cited its use of intern programs for recruiting and its implementation of two leadership development programs for managing succession. GAO has not conducted a review of DHS's diversity management efforts; therefore, it cannot comment on the effectiveness of DHS's implementation of these practices.