In an effort to increase homeland security following the September 11, 2001, terrorist attacks on the United States, President Bush issued the National Strategy for Homeland Security in July 2002 and signed legislation creating DHS in November 2002. The strategy set forth the overall objectives, mission areas, and initiatives to prevent terrorist attacks within the United States, reduce America’s vulnerability to terrorism, and minimize the damage and assist in the recovery from attacks that may occur. The strategy also called for the creation of DHS. The department, which began operations in March 2003, represented a fusion of 22 federal agencies to coordinate and centralize the leadership of many homeland security activities under a single department. Although the National Strategy for Homeland Security indicated that many federal departments (and other nonfederal stakeholders) will be involved in homeland security activities, DHS has the dominant role in implementing the strategy. The strategy identified six mission areas and 43 initiatives. DHS was designated the lead federal agency for 37 of the 43 initiatives. In addition, DHS had activities underway in 40 of the 43 initiatives. In addition, DHS has the dominant share of homeland security funding. Figure 1 shows the proposed fiscal year 2006 homeland security funding for federal departments and agencies, with DHS constituting about 55 percent of the total. The November 2002 enactment of legislation creating DHS represented a historic moment of almost unprecedented action by the federal government to fundamentally transform how the nation protects itself from terrorism. Rarely in the country’s past had such a large and complex reorganization of government occurred or been developed with such a singular and urgent purpose. This represented a unique opportunity to transform a disparate group of agencies with multiple missions, values, and cultures into a strong and effective cabinet department whose goals are to, among other things, protect U.S. borders, improve intelligence and information sharing, and prevent and respond to potential terrorist attacks. Together with this unique opportunity, however, came a significant risk to the nation that could occur if the department’s implementation and transformation was not successful. GAO designated DHS’s transformation as high-risk in January 2003based on three factors. First, DHS faced enormous challenges in implementing an effective transformation process, developing partnerships, and building management capacity because it had to effectively combine 22 agencies with an estimated 170,000 employees specializing in various disciplines— including law enforcement, border security, biological research, computer security, and disaster mitigation—into one department. Second, DHS faced a broad array of operational and management challenges that it inherited from its component legacy agencies. In fact, many of the major components that were merged into the new department, including the Immigration and Naturalization Service, the Transportation Security Administration, Customs Service, Federal Emergency Management Agency, and the Coast Guard, brought with them at least one major problem such as strategic human capital risks, information technology management challenges, or financial management vulnerabilities, as well as an array of program operations challenges and risks. Finally, DHS’s national security mission was of such importance that the failure to effectively address its management challenges and program risks could have serious consequences on our intergovernmental system, our citizen’s health and safety, and our economy. Overall, our designation of DHS’s transformation as a high-risk area and its inclusion on the 2003 High-Risk List was due to the failure to transform the diverse units into a single, efficient, and effective organization would have dire consequences for our nation. Since our 2003 designation of DHS’s transformation as high-risk, DHS leadership has provided a foundation for maintaining critical operations while undergoing transformation. DHS has worked to protect the homeland and secure transportation and borders, funded emergency preparedness improvements and emerging technologies, assisted law enforcement activities against suspected terrorists, and issued its first strategic plan. According to DHS’s performance and accountability report for fiscal year 2004 and updated information provided by DHS officials, the department has accomplished the following activities as part of its integration efforts: reduced the number of financial management service centers from 19 to 8, consolidated acquisition support for 22 legacy agencies within 8 major procurement programs, consolidated 22 different human resources offices to 7, and consolidated bank card programs from 27 to 3. As described in the next section, despite real and hard-earned progress, DHS still has significant challenges to overcome in all of its management areas. It is because of these continuing challenges that we continue to designate the implementation and transformation of DHS as high-risk. DHS faces a number of management challenges to improving its ability to carry out its homeland security missions. Among these challenges, which are discussed in more detail in the following sections, are providing focus for management efforts, monitoring transformation and integration, improving strategic planning, managing human capital, strengthening financial management infrastructure, establishing an information technology management framework, managing acquisitions, and coordinating research and development. One challenge that DHS faces is to provide focus on management efforts. The experience of successful transformations and change management initiatives in large public and private organizations suggests that it can take 5 to 7 years until such initiatives are fully implemented and cultures are transformed in a substantial manner. Because this timeframe can easily outlast the tenures of managers, high-performing organizations recognize that they need to have mechanisms to reinforce accountability for organization goals during times of leadership transition. Focus on management efforts needs to be provided at two levels of leadership. The first level is that of the political appointees in top leadership positions. These leaders are responsible for both mission and management support functions. Although DHS has been operating about 2 years, it has had two Secretaries, three Deputy Secretaries, and additional turnover at the Undersecretary and Assistant Secretary levels. The problem of turnover in top leadership is not unique to DHS. The average tenure of political leadership in federal agencies—slightly less than 3 years for the period 1990-2001—and the long-term nature of change management initiatives can have critical implications for the success of those initiatives. The frequent turnover of the political leadership has often made it difficult to obtain the sustained and inspired attention required to make needed changes. Similarly, the recent turnover in DHS’s top leadership raises questions about the department’s ability to provide the consistent and sustained senior leadership necessary to achieve integration over the long term. Another level for focus on management efforts is those leaders responsible for day-to-day management functions. As we have reported, a Chief Operating Officer (COO)/Chief Management Officer (CMO) may effectively provide the continuing, focused attention essential to successfully completing these multiyear transformations in agencies like DHS. At DHS, we have reported that the COO/CMO concept would provide the department with a single organizational focus for the key management functions involved in the business transformation of the department, such as human capital, financial management, information technology, acquisition management, and performance management, as well as for other organizational transformation initiatives. We have also recently testified that a COO/CMO can effectively provide the continuing, focused attention essential to successfully complete the implementation of DHS’s new human capital system, a large-scale, multiyear change initiative. The specific implementation of a COO/CMO position must be determined within the context of the particular facts, circumstances, challenges and opportunities of each individual agency. As the agency is currently structured, the roles and responsibilities of the Under Secretary for Management contain some of the characteristics of a COO/CMO for the department. According to Section 701 of the Homeland Security Act, the Under Secretary for Management is responsible for the management and administration of the Department in such functional areas as budget, accounting, finance, procurement, human resources and personnel, information technology, and communications systems. In addition, the Under Secretary is responsible for the transition and reorganization process and to ensure an efficient and orderly transfer of functions and personnel to the Department, including the development of a transition plan. While the protection of the homeland is the primary mission of the department, critical to meeting this challenge is the integration of DHS’s varied management processes, systems, and people—in areas such as information technology, financial management, procurement, and human capital—as well as in its administrative services. The integration of these various functions is being executed through DHS’s management integration initiative. The success of this initiative is important since the initiative provides critical support for the total integration of the department, including its operations and programs, to ultimately meet its mission of protecting the homeland. Last week, we released a report on DHS’s management integration efforts to date as compared against selected key practices consistently found to be at the center of successful mergers and transformations. Overall, we found that while DHS has made some progress in its management integration efforts, it has the opportunity to better leverage this progress by implementing a comprehensive and sustained approach to its overall integration efforts. First, key practices show that establishing implementation goals and a timeline is critical to ensuring success and could be contained in an overall integration plan for a merger or transformation. DHS has issued guidance and plans to assist its integration efforts, on a function-by-function basis (information technology and human capital, for example); but it does not have such a comprehensive strategy to guide the management integration departmentwide. Specifically, DHS still does not have a plan that clearly identifies the critical links that must occur across these functions, the necessary timing to make these links occur, how these critical interrelationships will occur, and who will drive and manage them. Second, it is important to dedicate a strong and stable implementation team for the day-to-day management of the transformation, a team vested with the necessary authority and resources to help set priorities, make timely decisions, and move quickly to implement decisions. In addition, this team would ensure that various change initiatives are sequenced and implemented in a coherent and integrated way. DHS is establishing a Business Transformation Office, reporting to the Under Secretary for Management, to help monitor and look for interdependencies among the individual functional integration efforts. However, this office is not currently responsible for leading and managing the coordination and integration that must occur across functions not only to make these individual initiatives work but also to achieve and sustain the overall management integration of DHS.