The Coast Guard has a wide variety of missions, related both to homeland security and its other responsibilities. Table 1 shows a breakout of these missions—both security and non-security related—as delineated under the Homeland Security Act of 2002. The Coast Guard has overall federal responsibility for many aspects of port security and is involved in a wide variety of activities. Using its cutters, boats, and aircraft, the Coast Guard conducts security patrols in and around U.S. harbors, escorts large passenger vessels in ports, and provides protection in U.S. waterways for DOD mobilization efforts. It also gathers and disseminates intelligence information, including gathering information on all large commercial vessels calling at U.S. ports; the agency monitors the movement of many of these vessels in U.S. territorial waters. It conducts port vulnerability assessments; helps state and local port authorities to develop security plans for protecting port infrastructure; and actively participates with state, local, and federal port stakeholders in a variety of efforts to protect port infrastructure and ensure a smooth flow of commerce. In international maritime matters, the Coast Guard is also active in working through the International Maritime Organization to improve maritime security worldwide. It has spearheaded proposals before this organization to implement electronic identification systems, ship and facility security plans, and the undertaking of port security assessments. The Coast Guard’s homeland security role is still evolving; however, its resource commitments to this area are substantial and will likely grow. For example, under the recently enacted Maritime Transportation Security Act, the Coast Guard will likely perform numerous security tasks, such as approving security plans for vessels and waterside facilities, serving on area maritime security advisory committees, assessing antiterrorism measures at foreign ports, and maintaining harbor patrols. The Coast Guard has not yet estimated its costs for these activities; however, the President’s fiscal year 2004 budget request includes over $200 million for new homeland security initiatives, including new patrol boats, additional port security teams, and increased intelligence capabilities. To provide for the orderly transition of the Coast Guard to DHS on March 1, 2003, the Coast Guard established a transition team last year that identified and began addressing issues that needed attention. Coast Guard officials told us that they patterned their transition process after key practices that we identified as important to successful mergers, acquisitions, and transformations. The agency’s transition team consists of top management, led by the Chief of Staff, and enlists the assistance of numerous staff expertise throughout the agency through matrixing. According to Coast Guard officials, the scope of transition issues spans a wide variety of topics, including administrative and support functions, strategy, outreach and communication issues, legal considerations, and information management. The transition team focuses on both DHS- related issues and on issues related to maintaining an enduring relationship with the Department of Transportation (DOT). In addition to its own transition team, senior Coast Guard officials participated with OMB in developing the DHS reorganization plan late last year. Also, key Coast Guard officials participate on joint DHS and DOT transition teams that have been established to deal with transition issues in each department. We have testified that, despite the complexity and enormity of the implementation and transformation of DHS, there is likely to be considerable benefit over time from restructuring homeland security functions. These benefits include reducing risk and improving the economy, efficiency, and effectiveness of these consolidated agencies and programs. In the short term, however, there are numerous complicated challenges that will need to be resolved, making implementation a process that will take considerable time and effort. Reorganizations frequently encounter start-up problems and unanticipated consequences, and it is not uncommon for management challenges to remain for some time. Our past work on government restructuring and reorganization has identified a number of factors that are critical to success in these efforts. Coast Guard officials now involved in transition efforts told us that they are aware of these factors and are addressing many of them as they prepare to move to DHS. Our testimony today focuses on six of these factors—strategic planning, communication and partnership-building, performance management, human capital strategy, information management and technology, and acquisition management—and, based on past work, some of the key challenges the Coast Guard faces in addressing and resolving them. The strategic planning process involves assessing internal and external environments, working with stakeholders, aligning activities, processes, and resources in support of mission-related outcomes. Strategic planning is important within the Coast Guard, which now faces a challenge in merging past planning efforts with the new realities of homeland security. The events of September 11th produced a dramatic shift in resources used for certain missions. Cutters and patrol boats that were normally used offshore were quickly shifted to coastal and harbor security patrols. While some resources have been returned to their more traditional activities, others have not. For example, Coast Guard patrol boats in the nation’s Northeast were still conducting security patrols many months later, reducing the number of fisheries patrols by 40-50 percent from previous years. Even now, the Coast Guard continues to face new security-related demands on its resources. Most notably, as part of the current military build-up in the Middle East, the Coast Guard has sent nine cutters to assist the DOD in the event of war with Iraq. While its greatly expanded homeland security role has already been merged into its day-to-day operations, the Coast Guard faces the need to develop a strategic plan that reflects this new reality over the long term. Where homeland security once played a relatively small part in the Coast Guard’s missions, a new plan must now delineate the goals, objectives, strategies, resource requirements, and implementation timetables for achieving this vastly expanded role while still balancing resources among its various other missions. The agency is now developing a strategic deployment plan for its homeland security mission and plans to finish it sometime this year. However, development has not begun on a long-term strategy that outlines how it sees its resources—cutters, boats, aircraft, and personnel—being distributed across all of its various missions, as well as a timeframe for achieving desired balance among missions. We recommended in a recent report to this Subcommittee that the Coast Guard develop such a strategy to provide a focal point for all planning efforts and serve as a basis for spending and other decisions. The Coast Guard has taken this recommendation under advisement but has not yet acted on it. There is a growing realization that any meaningful results that agencies hope to achieve are likely to be accomplished through matrixed relationships or networks of governmental and nongovernmental organizations working together. These relationships exist on at least three levels. First, they exist within and support the various internal units of an agency. Second, they include the relationships among the components of a parent department, such as DHS. Third, they are also developed externally, to include relationships with other federal, state, and local agencies, as well as private entities and domestic and international organizations. Our work has shown that agencies encounter a range of barriers when they attempt coordination across organizational boundaries. Such barriers include agencies’ concerns about protecting jurisdictions over missions and control of resources, differences in procedures, processes, data systems that lack interoperability, and organizational cultures that may make agencies reluctant to share sensitive information. Specifically, our work has shown that the Coast Guard faces formidable challenges with respect to establishing effective communication links and building partnerships both within DHS and with external organizations. While most of the 22 agencies moving to DHS will report to under secretaries for the department’s various directorates, the Coast Guard will remain a separate entity reporting directly to the Secretary of DHS. According to Coast Guard officials, the Coast Guard has important functions that will require coordination and communication with all of these directorates, particularly the Border and Transportation Security Directorate. For example, the Coast Guard plays a vital role with Customs, Immigration and Naturalization Service, the Transportation Security Administration, and other agencies that are organized in the Directorate of Border and Transportation Security. Because the Coast Guard’s homeland security activities require interface with these and a diverse set of other agencies organized within several DHS directorates, communication, coordination, and collaboration with these agencies is paramount to achieve department-wide results. Effective communication and coordination with agencies outside the department is also critical to achieving the homeland security objectives, and the Coast Guard must maintain numerous relationships with other public and private sector organizations outside DHS. For example, according to Coast Guard officials, the Coast Guard will remain an important participant in DOT’s strategic planning process, since the Coast Guard is a key agency in helping to maintain the maritime transportation system. Also, the Coast Guard maintains navigation systems used by DOT agencies such as the Federal Aviation Administration. In the homeland security area, coordination efforts will extend well beyond our borders to include international agencies of various kinds. For example, the Coast Guard, through its former parent agency, DOT, has been spearheading U.S involvement in the International Maritime Organization. This is the organization that, following the September 11th attacks, began determining new international regulations needed to enhance ship and port security. Also, our work assessing efforts to enhance our nation’s port security has underscored the formidable challenges that exist in forging partnerships and coordination among the myriad of public and private sector and international stakeholders. A performance management system that promotes the alignment of institutional, unit, and individual accountability to achieve results is an essential component for organizational success. Our work has shown performance management is a key component of success for high- performing, results-oriented organizations. High-performing organizations have recognized that a key element of a fully successful performance management system is aligning individual employees’ performance expectations with agency goals so that employees can see how their responsibilities contribute to organizational goals. These organizations (1) define clear missions and desired outcomes, (2) measure performance as a way of gauging progress toward these outcomes, and (3) use performance information as a basis for decision-making. In stressing these actions, a good performance management system fosters accountability.