Secret Service has two missions—conducting criminal investigations and providing protection. The criminal investigative mission includes conducting investigations in areas such as financial crimes, identity theft, counterfeiting, computer fraud, and computer-based attacks on banking, financial, and telecommunications infrastructure, among other activities. As part of the protective mission, Secret Service protects, among others, the sitting President and Vice President and their families; major presidential and vice presidential candidates and, within 120 days of the general presidential elections, their spouses; the President- and Vice President–elect; and former presidents and their spouses. In addition to day-to-day protection activities, Secret Service is required to provide protection for National Special Security Events (NSSE). The NSSE designation was established by statute in December 2000, for “special events of national significance” requiring significant law enforcement presence. The kinds of events categorized as NSSEs include presidential inaugurations, international summits held in the United States, major sporting events attended by protected persons, and presidential nominating conventions. For instance, during the 2008 presidential campaign and the 2009 Inauguration, a number of events were designated as NSSEs, including both the Democratic and Republican Nominating Conventions, and the concert celebrating the Inauguration on the National Mall. Designations are at the discretion of the President, signed by the Secretary of DHS, generally on the basis of the size of the event, its significance, and importance of anticipated attendees. Since fiscal year 2007, Secret Service has received $1 million annually in appropriations towards NSSE funding, which is available until expended. Like other federal agencies receiving annual appropriations, Secret Service must comply with a variety of fiscal laws, or those laws related to the control and use of public funds. Specifically, the Antideficiency Act and section 503 outline requirements that must be met in the management of, and reporting on, funds, such as the funds for 2008 presidential candidate protection. The Antideficiency Act prohibits the making or authorizing of “an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation.” Section 503 states that “None of the funds … shall be available for obligation or expenditure for programs, projects or activities through a reprogramming of funds in excess of $5,000,000 or 10 percent, whichever is less … unless the Committees on Appropriations … are notified 15 days in advance of such reprogramming of funds.” Reliable financial systems are critical to meeting the reporting requirements associated with the Antideficiency Act and section 503. Since October 2004, Secret Service has been using the “Travel Manager, Oracle, PRISM, Sunflower” system (TOPS) to manage its financial business processes. TOPS is an integrated financial management system comprised of four applications: Travel Manager—input and management of travel vouchers; Oracle Financials—core financial and general ledger system; PRISM—procurement activities; and Sunflower—property management. Secret Service maintains financial data within TOPS by project code and object class. In addition, Secret Service uses the Manhours system to capture hours worked by its agents and certain support staff. According to Secret Service officials, prior to fiscal year 2005, Secret Service had one appropriation account, the Protection Services and Activity account, to manage appropriated funds for salaries and expenses. In fiscal year 2005, the Conference Report accompanying the 2005 DHS Appropriations Act itemized specific amounts for activities supported by Secret Service’s Salaries and Expenses appropriation account. The itemizations were made at Secret Service’s Program, Project, or Activity (PPA) level. Secret Service uses PPAs as subaccounts used to capture and track financial data such as funds allotted, obligations, and expenditures. According to Secret Service, three PPAs were used to fund 2008 campaign- related protection activities: Presidential Candidate Nominee Protection, which is for the protection Secret Service provides to major presidential and vice presidential candidates, and their spouses; NSSE, which is used for Secret Service planning and implementing security for designated NSSEs to ensure the physical protection of the President, the public, and other Secret Service protectees who participate in NSSEs; and Protection of Persons and Facilities, which operates to ensure the personal safety of certain designated individuals, such as the President and Vice President and former presidents and their spouses, protect the buildings and grounds where these individuals reside and work, and protect foreign heads-of-state visiting the United States. Table 1 shows the PPAs for Secret Service’s Salaries and Expenses account and the related fiscal year 2009 itemizations for each PPA. The unpredictable and changing nature of protectee activities creates ongoing challenges for Secret Service. These challenges include 1. generally short notice—sometimes 2-3 days—of protectees’ schedules and frequent schedule changes, which makes it difficult to budget for costs in advance; 2. newly scheduled events requiring shifts in personnel to maintain current assignments, often resulting in unexpected or additional overtime costs; 3. personnel cost information not being in real time due to delays in completion of travel vouchers; 4. the unanticipated increase in pace of the 2008 presidential campaign compared to previous campaigns upon which the fiscal year 2009 budget was based—for instance, the preinaugural events following the 2008 campaign included a three-stop train trip and a concert on the National Mall, not part of previous campaigns; and 5. the venue and activity being at the discretion of the protectee, to which Secret Service must adapt its protection services. In this context, Secret Service received $41 million in appropriated funds within its Presidential Candidate Nominee Protection PPA for fiscal year 2009. The amounts designated for PPAs are found in the explanatory statement accompanying DHS’ fiscal year 2009 Appropriations Act. Section 503(e) of the Appropriations Act provides that “such dollar amounts specified in this Act and accompanying explanatory statement shall be subject to the conditions and requirements ... of this section.” Early in fiscal year 2009, Secret Service realized that, due to the increased pace of the campaign and the large crowds, it might have a shortfall but believed at the time it could cover the additional expenses with funds from other PPAs. In January 2009, Secret Service contacted DHS and requested assistance to cover the shortfall. In May 2009, DHS directed Secret Service to submit a reprogramming request for the funding, which, after revision by DHS and Secret Service, was submitted to the Senate and House Appropriations Committees June 30, 2009. Figure 1 outlines the key events pertaining to the fiscal year 2009 shortfall. In light of these events, the Conference Report accompanying the fiscal year 2010 DHS Appropriations Act required the DHS CFO and the Secret Service Assistant Director for Administration to brief the Appropriations Committees on the process to be implemented in fiscal year 2010 to ensure the problems related to the fiscal year 2009 shortfall did not reoccur. Prior to the briefing, DHS and Secret Service developed a corrective action plan (CAP) to address the issues surrounding the shortfall. The CAP includes measures to “increase visibility,” “improve funds control,” and “increase the rigor of internal and external reprogrammings.” See appendix II for the full text of the CAP. Secret Service financial management personnel use an undocumented, manual process to prepare two key reports used to monitor obligations, manage its funds by PPA, and report to Congress: the Monthly Execution and Staffing Report, and the Presidential Campaign Cost Report. The Monthly Execution and Staffing Report provides data, by account and PPA, on enacted funding, unobligated carryover(s), obligations and expenditures to date, and staffing levels. Secret Service provides the Monthly Execution and Staffing Report to other external parties, such as the Appropriations Committees. The Presidential Campaign Cost Report is used internally to monitor costs (budgeted and actual) during the presidential campaign. Secret Service financial management personnel manually integrate information from several sources to prepare the Monthly Execution and Staffing Report. Each month, staff draw financial data from (1) 16 reports generated from TOPS—the Secret Service financial management system, (2) information from the Manhours system, which tracks work hours associated with each project, and (3) information from other accounting department reports and the SF-133 to prepare the Monthly Execution and Staffing Report. Furthermore, TOPS is set up to maintain and report financial data by project code and object class. As a result, the financial data needs to be manually adjusted in order to be presented by PPA in the Monthly Execution and Staffing Report. Secret Service officials acknowledged that they had not documented the procedures for developing and reviewing the Monthly Execution and Staffing Reports, and they agreed that it would be beneficial to have those procedures documented. Standards for Internal Control in the Federal Government state that internal controls need to be clearly documented and the documentation should appear in management directives, administrative policies, or operating manuals. Such documentation is useful to managers in controlling their operations and to any others involved in evaluating or analyzing operations. Documenting the process for preparing the Monthly Staffing and Execution Report would be useful to managers in controlling operations, as relying on an undocumented manual process to pull together information for the Monthly Execution and Staffing Report increases the risk of errors in that report. For example, as a result of human error, the Monthly Execution and Staffing Report for September 2009 originally sent to the Appropriations Committees overstated current year obligations for one PPA by $3 million while understating obligations for another PPA by $3 million. Similarly, an error in the Monthly Execution and Staffing Report for March 2009 occurred because the expenditures-to- date amount for one account was not updated and therefore the amount from the previous month was incorrectly carried forward for that account. Also, we noted several instances on the Monthly Execution and Staffing Reports that we reviewed where some formulas were inadvertently missing from columns such as unobligated authority and unexpended obligations. Secret Service could decrease the risk of reporting incomplete, inaccurate information by having documented procedures in place for its staff to prepare and review the Monthly Execution and Staffing Report. While other controls may also assist in helping to ensure Secret Service reports complete and accurate information, documenting these procedures to prepare and review the Monthly Execution and Staffing Report is a key first step. Secret Service also does not have documented procedures in place for how to split out costs for protection activities that could cut across multiple PPAs. Congress itemizes specific amounts from the Salaries and Expenses appropriation to individual PPAs. According to Secret Service, the activities associated with PPAs are not discrete because activities and costs related to PPAs may overlap. For example, according to Secret Service budget staff, during fiscal year 2009 they split costs for the January 2009 Inauguration across multiple PPAs—Presidential Candidate Nominee Protection ($4.1 million), Protection of Persons and Facilities ($1.0 million), and NSSE ($5.6 million). Budget staff explained that it charged some Inauguration costs to the Presidential Candidate Nominee Protection PPA because President-Elect Obama was in attendance. Similarly, some costs were charged to the Protection of Persons and Facilities PPA because former presidents and President Bush attended the Inauguration. Also, because the Inauguration was designated as an NSSE, some costs of the Inauguration were charged to the NSSE PPA. Similarly, during fiscal year 2010, Secret Service had another instance when it could justify charging costs across multiple PPAs but before doing so it had to seek clarification from DHS on the appropriate process and any necessary documentation. To help cover costs for the April 2010 Nuclear Security Summit, an NSSE, Secret Service used funds from the Protection of Persons and Facilities PPA ($1.9 million) because the summit included costs such as fencing and construction. While Secret Service staff have charged costs to multiple PPAs in some cases, they expressed concern because they were not certain whether this was the correct procedure to follow. As with the documentation of the process for preparing the Monthly Execution and Staffing Reports, and in accordance with Internal Control Standards, documented policies and procedures for charging costs in situations where more than one PPA is applicable would be useful to managers in controlling their operations. Establishing policies and procedures for charging costs could clarify how Secret Service can split costs between multiple PPAs and help manage funds for presidential candidate protection and other PPAs. Also, the lack of documented policies and procedures increases the risk of reporting incomplete, inaccurate information because Secret Service officials could unknowingly charge expenditures to the wrong PPA. Neither DHS nor Secret Service have documented early warning system benchmarks to use when monitoring Secret Service obligations and expenditures, and therefore these benchmarks may be inconsistently applied. The CAP developed by DHS and Secret Service outlines the actions that, if implemented, will help ensure that Secret Service financial management staff are monitoring obligations and expenditures, and effectively anticipating shortfalls. The plan directs Secret Service to implement an early warning system to track actual obligations against planned and anticipated obligations and to develop benchmarks that would act as “red flags” alerting the Secret Service CFO of potential funding shortfalls. While DHS and Secret Service have identified this as an action item in the CAP, Secret Service does not yet have a documented system of red flags to alert its staff to potential funding shortfalls. Similarly, DHS’ Budget Execution Guidance does not provide specific guidance on developing benchmarks, and Secret Service officials have not documented their own internal benchmark for monitoring obligations and expenditures as an early warning system. Internal Control Standards state that internal controls need to be clearly documented and that managers need to compare actual performance to planned or expected results, and activities need to be established to monitor performance measures and indicators. Even though documentation does not exist for such a system, both Secret Service and DHS noted that they take certain actions to identify potential funding shortfalls. For example, DHS officials told us that for annual appropriations, they would expect to see 25 percent of the appropriated amount used each quarter. Any deviations would be communicated during DHS’ quarterly reviews of Secret Service. Secret Service budget staff also said they use this “straight-line” approach to monitor budget execution. Nevertheless, written guidance on how to develop and document appropriate benchmarks for monitoring obligations and expenditures could help ensure a consistent application of red flags and therefore increase the effectiveness of an early warning system to alert officials of potential funding shortfalls. At the time of the fiscal year 2009 shortfall, DHS had written guidance covering communication necessary if a funding shortfall required a reprogramming notification under section 503, or was a potential or actual Antideficiency Act violation. Specifically, DHS’ fiscal year 2009 Budget Execution Guidance outlined the process for components to develop and submit a reprogramming request to DHS to comply with section 503 and required that DHS’ Office of the CFO (OCFO) transmit decisions on the requests to the component. For example, the Budget Execution Guidance requires all reprogrammings to be submitted at least 45 days in advance of anticipated expenditure of funds. In July 2008, DHS’ OCFO issued guidance concerning the investigation and reporting of Antideficiency Act violations. This guidance requires that, among other things, employees notify their supervisors if they suspect a potential Antideficiency Act violation, the component and DHS CFO evaluate the circumstances and complete a preliminary review, and—if it is determined a potential violation exists—an independent investigative officer complete a formal investigation and submit a report within 6 months. The Secret Service’s former CFO told us that he did not believe that the actions Secret Service took in January 2009 to address the fiscal year 2009 shortfall required congressional notification under section 503, or constituted an Antideficiency Act violation. Secret Service budget officials reported that, to cover the fiscal year 2009 shortfall in the Presidential Candidate Nominee Protection PPA, which reached $10.7 million, they charged three PPAs. They showed a negative balance of $4.1 million in the Presidential Candidate Nominee Protection PPA, and charged $5.6 million to the NSSE PPA and $1 million to the Protection of Persons and Facilities PPA. The former CFO told us that, at the time, he did not see the need for a reprogramming notification, and therefore the agency did not need to follow DHS’ guidance on communicating reprogramming requests. However, Secret Service budget officials acknowledged that, as discussed later in this report, the reprogramming request Secret Service submitted to DHS—and DHS submitted to the Senate and House Appropriations Committees on June 30, 2009—was for a $5.1 million reprogramming into the Presidential Candidate Nominee Protection PPA and did not mention or include amounts associated with other PPAs. The requested $5.1 million reprogramming exceeded section 503 notification thresholds. Therefore, GAO concluded that DHS and Secret Service violated section 503 and the Antideficiency Act. According to Secret Service officials, in January 2009 Secret Service communicated to DHS the fiscal year 2009 shortfall and requested assistance in covering it. According to the former Secret Service CFO, the agency realized it might have a shortfall in the Presidential Candidate Nominee Protection PPA as early as October 2008, but determined it could likely cover the costs using funding from both the Presidential Candidate Nominee Protection and NSSE PPAs. However, with the designation of additional NSSEs related to the Inauguration in December 2008, by January 2009 the agency realized it could not cover the costs from these two PPAs. Secret Service then informed DHS in January 2009 that it would have a funding shortfall in its Presidential Candidate Nominee Protection PPA—of which the agency could cover half. According to the former Secret Service CFO, DHS then agreed to look for funding to help cover the shortfall. DHS did not instruct Secret Service to submit a reprogramming request until May 2009—4 months after the agency’s first communication. Following DHS’ direction, Secret Service submitted a $5.1 million reprogramming request to DHS on June 1, 2009, an amount exceeding the section 503 threshold. DHS then followed its internal guidance in obtaining OMB approval of the request. Following OMB’s initial approval of the reprogramming request on June 19, 2009, Secret Service then modified its request—increasing the amount to include costs associated with the G20 Summit, which had just been designated an NSSE, and extended protection for former Vice President Cheney, of which Secret Service had just become aware—and resubmitted the request to DHS on June 25, 2009. After receiving OMB’s second approval on June 30, 2009, DHS submitted a reprogramming notification to Congress on the same day for $5.1 million to be reprogrammed into the Presidential Candidate Nominee Protection PPA. At the time of the fiscal year 2009 shortfall, there was no written guidance outlining the process for communicating within DHS or to the Appropriations Committees information about “internal reprogramming” of funds. For instance, the fiscal year 2009 Budget Execution Guidance does not include direction to components regarding how to report internal reprogrammings under the section 503 threshold in Monthly Execution and Staffing Reports. However, DHS stated that Secret Service was aware that it was permitted to internally reprogram funds between PPAs. According to Secret Service officials, they determined at the time that they could internally reprogram funds, and when doing so that they should report a negative balance in the Monthly Execution and Staffing Report. According to Secret Service officials, DHS communicated to Secret Service after the fact that it should have internally reprogrammed funding from another PPA into the Presidential Candidate Nominee Protection PPA and avoided showing a negative balance in unobligated authority. However, in the past, Secret Service had submitted Monthly Execution and Staffing Reports that had included negative balances in the Unobligated Authority column. According to Secret Service officials in the Office of Administration, DHS had not informed them not to do so. Since the fiscal year 2009 shortfall, Secret Service and DHS developed a CAP to, among other things, improve communication about internal and external reprogrammings. In addition, Secret Service officials told us that their communication with DHS about budget execution has improved, and DHS officials said that they now provide more training and guidance to components, such as guidance on general budget execution and Monthly Execution and Staffing Reports. For instance, DHS’ fiscal year 2010 Budget Execution Guidance now requires that Monthly Execution and Staffing Reports present information on both internal and section 503 reprogrammings. The CAP contains measures to improve guidance on what information to communicate during a funding shortfall, and requires that all internal transfers and reprogrammings be approved by the DHS CFO in writing within 24 hours of submission, all reprogramming proposals be submitted in writing and in the appropriate format with required information included, components must first initiate an internal funding review and clearly articulate the negative impact of using internal resources to cover the shortfall, and all above-threshold reprogrammings be submitted to the Appropriations Committees in a timely manner. CFOC A-123 Guidance is widely viewed as a “best practices” methodology for executing the requirements of appendix A of OMB Circular A-123, which requires management to develop corrective action plans for material weaknesses. This guidance provides that agencies construct a corrective action planning framework to facilitate plan preparation, accountability, monitoring, and communication. Key information to be included in corrective actions specified in this guidance includes, among other things, a description of the deficiency in sufficient detail to provide clarity and facilitate a common understanding of what needs to be done. DHS has developed and implemented two of the four communications- related CAP measures in accordance with this guidance. For instance, DHS’ fiscal year 2010 Budget Execution Guidance and DHS CFO’s Financial Management Policy Manual draft of Section 2.4–Budget Execution include updated guidance to components on how to implement two of the CAP measures outlined above, as shown in table 2. However, DHS did not develop and implement the remaining two of the communications-related CAP measures in accordance with this guidance. While DHS has implemented two of the four communication-related measures from the CAP in accordance with CFOC A-123 guidance, it has not developed and implemented the remaining two. Specifically, DHS has not provided written guidance describing what needs to be done to implement the CAP measures requiring that (1) components complete internal funding reviews prior to submitting reprogramming requests and articulate the negative impact of using internal resources to cover the shortfall—such as delays in hiring or postponement of training activities, or both—or (2) DHS provide timely submission of reprogramming notifications to the Senate and House Appropriations Committees. Implementing these remaining communication-related measures from the CAP could help ensure that DHS and Secret Service communicate effectively with each other and Congress in the event of future funding shortfalls. Specifically, receiving guidance on the information DHS would like to receive from components regarding their internal funding review and the negative impact of using their internal resources could help improve the effectiveness with which reprogramming requests are approved by DHS. For instance, Secret Service submitted a reprogramming request related to the April 12-13, 2010, Nuclear Security Summit to DHS on February 25, 2010. According to Secret Service officials in the Office of Administration, DHS denied their initial reprogramming request for the Nuclear Security Summit in part because it did not sufficiently describe Secret Service’s internal funding review and the negative impact upon the agency if it used internal resources. Secret Service subsequently revised and resubmitted its request to DHS on March 12, 2010. According to Secret Service officials, if DHS had provided clear guidance on its expectations for what information the reprogramming request should have included in this area, DHS could have approved the request more quickly. In addition, clearly defining time frames for its timely submission of reprogramming notifications to the Appropriations Committees, a measure delineated by DHS in the CAP, could help enable DHS and the committees to assess whether DHS effectively provides information about potential funding shortfalls. After receiving the revised Nuclear Security Summit request from Secret Service, DHS submitted the request to OMB for approval on April 5, 2010, more than 5 weeks after Secret Service’s initial submission. OMB approved the request on April 8, 2010—3 days after DHS’ submission. DHS then submitted the reprogramming notification to the Appropriations Committees on April 9, 2010, 6 weeks after Secret Service’s initial submission. Having the notification submitted 3 days—including the weekend—before the Nuclear Security Summit created challenges for Secret Service because, according to Secret Service officials, it was unaware of what funds would be available to cover the costs of the summit. Without clarifying what is meant by timeliness with respect to processing reprogramming requests, DHS is limited in its ability to assess whether its submission of this notification was completed in a timely manner and, consequently, to help Secret Service manage potential funding shortfalls and provide Congress the information it needs when making budgetary decisions. Secret Service performs the important mission of protecting presidential candidates and nominees. Because of the larger crowds and faster pace of the 2008 presidential campaign compared to prior campaigns, Secret Service’s spending exceeded the amount budgeted in its fiscal year 2009 Presidential Candidate Nominee Protection PPA. Given the importance of providing the Appropriations Committees with complete and accurate financial data concerning presidential candidate protection activities, it is imperative that Secret Service have the necessary documented internal control procedures in place, including financial management policies and procedures, to help ensure it can effectively manage and report on funds for presidential candidate protection. Relying on an undocumented manual process to pull together information for key reports on presidential candidate protection activities increases the risk that inaccurate information will be reported to Congress and errors could be made in budget management. Similarly, the lack of documented policies and procedures for splitting costs for presidential candidate protection activities across multiple PPAs increases the risk of reporting incomplete, inaccurate information on these activities. Also, lack of guidance on how to develop and document appropriate benchmarks for monitoring presidential candidate protection obligations and expenditures limits the ability of Secret Service financial management officials to identify any future funding shortfalls. Further, recognizing the communication breakdowns that occurred during fiscal year 2009, DHS and Secret Service have taken steps to improve communication, including developing the CAP. However, DHS has not clarified in its guidance all of the CAP measures, including components’ required documentation of internal funding reviews and the negative impacts of using internal resources in reprogrammings; and the time frames associated with its timely submission of reprogramming notifications to the Appropriations Committees. Providing this guidance could help DHS ensure it is able to approve components’ reprogramming requests more quickly, assess whether its submission of the reprogramming notifications to the Appropriations Committees are timely, and, ultimately, provide Congress the information it needs when making budgetary decisions. To improve financial management controls and communication related to presidential candidate protection budget execution, we recommend that the Secretary of DHS take the following five actions: direct the Director of Secret Service to develop documented procedures for preparing and reviewing its Monthly Execution and Staffing Reports and Presidential Campaign Cost Reports; direct the Director of Secret Service to develop written policies and procedures for charging costs when protection activities may be funded by multiple PPAs; direct the DHS CFO to ensure that DHS’ components, including Secret Service, have guidance and training on how to develop and document appropriate benchmarks for monitoring obligations and expenditures; direct the DHS CFO to develop and provide written guidance clarifying the elements necessary in a reprogramming request from a component to document internal funding reviews and the negative impact of using internal sources; and direct the DHS CFO to define time frames by which DHS could assess timeliness of submissions of reprogramming notifications to the Appropriations Committees. On June 23, 2010, DHS provided written comments on a draft of this report. DHS concurred with all five of our recommendations, and DHS and Secret Service are taking steps to improve financial management controls and communication related to presidential candidate budget execution. For instance, Secret Service has developed documented procedures for preparing and reviewing its Monthly Execution and Staffing Reports and Presidential Candidate Costs Reports, and begun to develop written policies and procedures for charging costs when protection activities may be funded by multiple PPAs. In addition, the DHS CFO plans to develop a scorecard to keep track of all reprogramming notifications and assess the timeliness of submissions. DHS’ comments are reproduced in appendix III. We are sending copies of this report to the Secretary of Homeland Security and interested congressional committees. In addition, this report will be available at no charge on the GAO Web site at http://www.gao.gov. Should you or your staff have any questions concerning this report, please contact either David Maurer at 202-512-9627 or by e-mail at maurerd@gao.gov or Susan Ragland at 202-512-9095 or by e-mail at raglands@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. The Hoorable Rert C. Brd Cirman, Subcommittee o HomelanSecrit Committee o Approritions Uited Ste Snate The Hoorable Geore V. Voiovich Ranking Miorit Memer, Subcommittee o HomelanSecrit Committee o Approritions Uited Ste Snate The Hoorable Dvid Price Cirman, Subcommittee o HomelanSecrit Committee o Approritions U.S. House of Rretive The Hoorable Hrold Rer Ranking Miorit Memer, Subcommittee o HomelanSecrit Committee o Approritions U.S. House of Rretive Subject: U.S. Secret Service—Stor Rtrictio Avilabilit of Fun Ivolving The coferece reort, H.R. Cf. R. No. 111-298, t 92 (2009), ccompanyng the Departmet of HomelanSecrit Approritions Act, 2010, Pub. L. No. 111-83, 123 St. 2142 (Oct. 28, 2009), directed GAO to examie whether the Departmet of HomelanSecrit (DHS) and the Uited Ste Secret Service (USSS) violted ectio 03 of the Cnsolidted Secrit, Disaster Assance, anCtinung Approritions Act, 2009, Pub. L. No. 110-329, div. D, 122 St. 362, 3680 (St. 30, 2008) and the Atideficie Act, 31 U.S.C. § 1341. For the reasns et oelow, dditio to thi legal oio, GAO ixaming DHS’s and USSS’s financil managemectice, as well as DHS olic anrocedre relted to communictions with it comagcie. See H.R. Cf. R. No. 111-298, t 92 (“coferee direct the Comtroller Geerl to . . . idetif ll ctionske or recommeded to e tke to ddress and correct any violtion”). ceiving from oth agcie ccounting reort, olic anrocedre docme, we coclde tht DHS and USSS violted oth ectio 03() and the Atideficie Act. Octice whe rederingions to o the view from the relevanagto eablictual record and the agy’s legaitio the subject mtter. GAO, Procedre and Prctice for Legal Deciions and Oions, GAO-06-1064SP (Washingto, D.C.: St. 2006), ilable t www.gao.ov/legal/rerce.html. I thi regard, we cocted meetings with oth USSS and DHS offici, reqting anre and coie of releant iternal correspdece. Both the Atideficie Act anectio 03() retrict the ilabilit of fun fo oligatio and expditre. The Atideficie Act rohiit an officer or em of the Uited Ste Govermet from mking or authorizing anxpditre or oligatiocess of or i dvance of ilable app § ligatio or the Atideroritions. 31 U.S.C. 1341()(1). Thus, an approritiousilable for an ag to ian ficie Act will e violted. 03() te: “Noe of the fun rovided by thi Act . . . ll ilable fo oligatio or expditre for ro, roject, or ctivitie through reromming of funcess of $,000,000 or 10 ercet, whichever i less, tht: (1) augmeting ro, rojec ctivitie; . . . tht wold result i change iting ros project, or ctivitie as approved by the Cngress, unless the o Approritions of the Snate and the House of Committees R of fun.” retive re otified 1ays dvance of such reromming Pub. L. No. 110-329, § 03(). Thi ectio, which applie to moun reter than $ millio, retrict the ilabilit of fun for oligatio (and expditre) by means of reromming of ro, roject, anctivitie (PPA) until roer otice i rovided. The moun degnated for PPA re found i the expanator teme ccompanyng DHS’s fir 2009 approritions ct. Sectio 03(e) of the approritions ct rovide th“such dollr expanator temell subject to the coditions and reqireme . . . of thi ectio.” Id. § 03(e). moun specified i thi Act anccompanyng USSSll under the directio of the Secret of HomelanSecrit, 18 U.S.C. §6(), and i reqired, mong other things, to rotect reidetiand vice reidetil candidte long with their spus and childre, 18 U.S.C. §6(). Cng. Rec. H9,801 (dil ed. St. 28, 2008). For fir 2009, USSS received fiapproritio of $1,408,729,000. Pub. L. No. 110-329, 122 St. t 3667. The expanator temet itemize $41,082,00 for the PreidetiCandidte Nomiee Protectio PPA. 1Cng. Rec. H9,801. Oligations connectio with reidetil candidte omiee rotectiod wi the inaugutio of the Preideand Vice Preidet, i the ret case, o Janu 20, 2009. Letter from Uderecret of Managemet, Departmet of Homeland ecrit, to the Cirman, Subcommittee o HomelanSecrit, Committee o S Approritions, Uited Ste Snate, June 30, 2009 (Rromming Notifictio). Sused baance from another USSS PPA to over [] hortfll iunding thi fias result of the rotective effort for O June 30, 2009, moth fter it reidetil candidte omiee rotectioded, DHS otified the Subcommittee HomelanSecrit of the HousanSnate Approritions Committee tht USSSd expded $,100,000 more thanee degnated for the PreidetiCandidte Nomiee Protectio PPA. RrommiNotifictio. DHSxped tht USS “c the 2008 PreidtiCapagn.” Id. t issue here i whether (1) DHS and USSS violted ectio 03(), and (2) if o, io of ectio 03() constitte violtio of the Atideficie Act. Sectio 03() O June 30, 2009, DHS otified the HousanSnate Subcommittee Homel Secrit of reromming of $.1 millio to cover hortfll i the USSS PreidetiCandidte Capagn Protectio PPA. Sectio 03() reqire the Secret of HomelanSecrit to rovide -day dvance otifictio of roed PPA rerommingscess of $ millio. A oted above, the 2008 reidetil cpagn officillded o Janua 20, 2009, anll USSSligations for candida protectioeerred by tht time. Neverth th PreidetiCandidte Nomiee Protectio PPA. eless, moth elapsed etwee e ed of the cpagn anotifictio of the $.1 millio reromming for the While it i uncler from the docmetio rovided to us by USSS and DHS whe USSSceeded the ectio 03() $ millio threhold, the threhold hd to hve eeceeded by the Inaugutio Janua 20, 2009, wheandidte ro eded. According to DHS, USSS used moun from it NtionaSpeciSecrit Eve PPA to cover itandidte rotectioligations tht eceeded the ome fil managemet issu, USSS doe ot ct idedetl of it pareag, DHS. Meeting etwee DHS Directorte of Managemet, Bet and Finance, and GAO, Jan. 12, 2010. DHS reqire it comagcie, iclding USSS, to submit writte reromming reqt to the DHS Directorte of Managemet, Bet and Finance. DHS submit ll reromming otifictions reqired under ectio 03() to the HousanSnate Approritions Committee. Id. $41 millio itemized i the expanator temet for the reidetil candidte rotectio PPA. Rromming Notifictio. However, ectio 03() specificll rovide tho fun re ilable throug rerommingcess of $ milli o unless HousanSnate Approritions Committee re otified 1ays dvance of the reromming. Sce DHSiled to otif the approritions commi 1ays dvance of the oligatio of the rerommed fun, and USSSrred oligationscess of t c violted ectio he $ millio threhold more thanays rior to ngressionaotifictio of the reromming, we coclde tht DHS and USSS (). The ecod qtio as whether violtio of ectio 03() constitte violt of the Atideficie Act. If an ag anligatiocess or dvance of moun thre legall ilable to the ag, the agas violted the ct. B-31740, Mr. 23, 2009. The Atideficie Act ete to ll roviions o imlicte the ilabilit of ag approritions an“agcieust consider the effect of ll l thddress the ilabilit of approritions.” Id., . Sectio 03() isuch lw. Uder ectio 03(), e of the fun approrited to DHS fir 2009 were legall ilable for oligatio throug rerommingcess of $ millio “unless the th reromming.” Pub. L. No. 110-329, § 03(). hortfll the PreidetiCandidte Nomiee Protectio PPA, et thee fun cold ot e rerommed until DHS otified Cngressays dvce of the reromming . Thus, USSS and DHS violted the Atideficie Act. The Atideficie Act reqire tht the ag he“sll reort immeditel to the .C. PreideanCngress ll relevant fct an temet of ctionske.” 31 U.S §1. I dditio, the agus copy of the reort to the Comtroller Geerl o the same dte it transmit the reort to the PreideanCngress. . 31 U.S.C. §1, as meded by Cnsolidted Approritions Act, 200, Pub. L I, § 1401, 118 St. 2809, 3192 (Dec. 8, 2004). See o No. 108-447, div. G, title B -30433, Mr. 8, 200. Appendix II: DHS CFO–Secret Service Corrective Action Plan (CAP) DHS CFO-USSS Corrective Action Plan Increase Visibility: Implement strategies so both USSS and CFO can more closely monitor obligations and expenditure, effectively anticipate shortfalls, and take the necessary actions before an over-obligation of funds occurs. Annual Obligation Plan: USSS will submit to CFO an annual obligation plan, with anticipated monthly obligations by PPA, prior to the start of each fiscal year. Updates for the plan will be provided to CFO before the start of each month. Early Warning System: USSS will track actual obligations against planned and anticipated obligations to develop benchmarks that would act as red flags alerting USSS CFO of potential funding shortfalls. Improve Funds Controls: Implement strategies to improve the control over funds distribution, including allotment, obligation, and expenditure. USSS will implement fiscal controls procedures to ensure that internal and external reprogramming requests are submitted significantly before anticipated over- obligations are anticipated to occur. DHS CFO has specific procedures in place if the monthly Budget Execution Report shows overspending at the PPA level. Specific training will be implemented to ensure that these procedures are followed. Increase the Rigor of Internal and External Reprogrammings: Specific processes will be implemented to standardize the process for internal and external reprogrammings, increase the rigor of the process, and ensure that the reprogramming vetting process does not impose burdensome delays. All internal transfers and realignments will now require the notification and written approval of DHS CFO. The Department’s written response will be sent within 24 hours. o DHS will implement new procedures to increase the rigor and responsiveness of reprogramming requests. o All external (above threshold) reprogramming proposals will be submitted to the Appropriations Committees in a timely manner. o DHS components will be required to first initiate an internal funding review to identify lower priority spending within their components before reaching out to the Department to identify sources in other components. . o A reprogramming can only be requested if insufficient internal funds can be identified and the component can clearly articulate the negative impact of using internal resources to cover the shortfall. o All reprogramming proposals must be submitted in writing and in the appropriate format. A reprogramming will only be considered in the Department after the impact of reducing funding for lower priority efforts is clearly articulated and communicated to DHS CFO in writing. In addition to the contacts named above, Susan Poling, Managing Associate General Counsel; Kirk Kiester, Assistant Director; Glenn Slocum, Assistant Director; David Alexander; Thomas Armstrong; Labony Chakraborty; Kathryn Crosby; Jill Evancho; Gabrielle Fagan; Tyrone Hutchins; and Felicia Lopez made key contributions to this report.

Summary: Due to the unprecedented pace and crowds of the 2008 presidential campaign, the U.S. Secret Service (Secret Service), a component of the Department of Homeland Security (DHS), exceeded its budgeted amount for fiscal year 2009 presidential candidate nominee protection funding, but did not notify Congress of this shortfall (fiscal year 2009 shortfall) until June 2009--5 months after the Inauguration. In response to the Conference Report accompanying the 2010 DHS Appropriations Act, this report addresses the extent to which, at the time of the fiscal year 2009 shortfall, (1) Secret Service had the necessary internal controls in place to help ensure it could effectively manage and report on funds for presidential candidate protection; and (2) Secret Service and DHS had policies and procedures in place to help ensure that information related to the fiscal year 2009 shortfall was communicated to DHS and Congress. To conduct the audit work, GAO reviewed appropriation laws and regulations, Secret Service financial reports, and various DHS and Secret Service policy and procedural documents. GAO also interviewed officials from DHS and Secret Service. At the time of the fiscal year 2009 shortfall, Secret Service did not have--and still does not have--all of the necessary internal controls, including policies and procedures, in place to help ensure it can effectively manage and report on funds for presidential candidate protection. For example, the agency relied on undocumented manual processes to prepare and review two key reports--the Monthly Execution and Staffing Report and the Presidential Campaign Cost Report--used to monitor obligations, manage its funds by subaccounts, and report to Congress. Documenting the processes to prepare and review these reports could decrease the risk of future reporting errors and be useful to managers in controlling operations. Secret Service also did not have documented procedures for charging costs for certain candidate protection activities that cut across multiple subaccounts. The subaccounts are not discrete, and Secret Service officials stated that they lacked clarity and procedures on which to use to cover costs for certain protection activities. Documenting policies and procedures for charging such costs could be useful in controlling operations and monitoring budget execution. Also, neither DHS nor Secret Service had documented benchmarks to serve as an early warning system when monitoring obligations and expenditures for potential future funding shortfalls. Lastly, DHS' budget guidance did not specify how to develop such benchmarks. Developing and implementing guidance on how to document benchmarks could help ensure that any future potential shortfalls in presidential candidate protection funds are identified in a timely manner. DHS and Secret Service lacked sufficient policies and procedures to ensure that information related to the fiscal year 2009 shortfall was communicated to DHS and Congress. At the time of the shortfall, DHS had written guidance on how to communicate a violation of the Antideficiency Act--which prohibits federal officials from obligating or expending funds in excess of appropriations--and notify Congress of a reprogramming, or shifting funds within an appropriation. However, because they mistakenly determined the guidance did not apply, Secret Service informed DHS of the shortfall and requested assistance in covering it. GAO issued a legal opinion determining that DHS and Secret Service violated reprogramming notification requirements and the Antideficiency Act. Further, DHS had no written guidance on communicating a reprogramming that did not require congressional notification. Since the shortfall, DHS and Secret Service developed a Corrective Action Plan (CAP) to address issues related to the shortfall. DHS implemented two of the four communication-related CAP measures, but has not provided written guidance for implementing the other two, which require that (1) components complete internal funding reviews prior to submitting reprogramming requests and articulate the negative impact of using internal resources to cover shortfalls, and (2) DHS provide timely submission of reprogramming notifications to the Appropriations Committees.Implementing these measures could help ensure better communication among Secret Service, DHS, and Congress in the event of future shortfalls, and help DHS and the committees assess whether DHS effectively provides information about potential shortfalls. GAO recommends that DHS and Secret Service (1) document certain financial management, cost allocation, and benchmark procedures, and (2) provide guidance on remaining communications-related corrective actions. DHS concurred.