In an effort to strengthen 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. DHS, 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 identified that many other federal departments (and other nonfederal stakeholders) are involved in homeland security activities, DHS has the dominant role in implementing the strategy. The strategy identified 6 mission areas and 43 initiatives. DHS was designated as the lead federal agency for 37 of the 43 initiatives, and has activities under way in 40 of the 43 initiatives. The Homeland Security Act of 2002, which created DHS, represented a historic moment of almost unprecedented action by the federal government to fundamentally transform how the nation thinks of homeland security, including how it protects itself from terrorism. Also significant was the fact that many of the 22 departments brought together under DHS were not focused on homeland security missions prior to September 11, 2001. 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. The creation of DHS 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 and infrastructure, 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 efforts were not successful. Mission areas designated as high risk have national significance, while other areas designated as high risk represent management functions that are important for agency performance and accountability. The identified areas can have a qualitative risk that may be detrimental to public health or safety, national security, and economic growth, or a fiscal risk due to the size of the program in question. Examples of high-risk areas include federal governmentwide problems, like human capital management; large programs, like Social Security, Medicaid, and Medicare; and more narrow issues, such as contracting at a specific agency. The DHS transformation is unique in that it involves reorganization, management, and program challenges simultaneously. We first designated DHS’s transformation as high risk in January 2003 based on three factors. First, DHS faced enormous challenges in implementing an effective transformation process, developing partnerships, and building needed management capacity because it had to effectively combine 22 agencies with an estimated 170,000 employees into one department. Second, DHS faced a broad array of operational and management challenges that it inherited from its component legacy agencies. For example, many of the major components that were merged into the department, including the Immigration and Naturalization Service, the Transportation Security Administration, the Customs Service, the Federal Emergency Management Agency, and the Coast Guard, brought with them existing challenges in areas such as strategic human capital, information technology, and financial management. 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 citizens’ health and safety, and our economy. Our prior work on mergers and acquisitions, undertaken before the creation of DHS, found that successful transformations of large organizations, even those faced with less strenuous reorganizations than DHS, can take 5 to 7 years to achieve. On the basis of the need for more progress in its transformation efforts, DHS’s implementation and transformation stayed on our high-risk update for 2005. Further, in November of 2006, we provided the congressional leadership a listing of government programs, functions, and activities that warrant further congressional oversight. Among the issues included were DHS integration and transformation efforts. Managing the transformation of an organization of the size and complexity of DHS requires comprehensive planning, integration of key management functions across the department, and partnering with stakeholders across the public and private sectors. DHS has made some progress in each of these areas, but much additional work is required to help ensure sustainable success. Apart from these integration efforts, however, a successful transformation will also require DHS to follow through on its initial actions of building capacity to improve the management of its financial and information technology systems, as well as its human capital and acquisition efforts. Thorough planning is important for DHS to successfully transform and integrate the management functions of 22 disparate agencies into a common framework that supports the organization as a whole. Our past work has identified progress DHS has made in its planning efforts. For example, the DHS strategic plan addresses five of six Government Performance and Results Act required elements and takes into account its non-homeland security missions, such as responding to natural disasters. Furthermore, several DHS components have developed their own strategic plans or strategic plans for missions within their areas of responsibility. For example, U.S. Immigration and Custom’s Enforcement (ICE) has produced an interim strategic plan that identifies its goals and objectives, and the U.S. Customs and Border Protection (CBP) developed a border patrol strategy and an anti terrorism trade strategic plan. However, deficiencies in DHS’s planning efforts remain. A DHS-wide transformation strategy should include a strategic plan that identifies specific budgetary, human capital, and other resources needed to achieve stated goals. The strategy should also involve key stakeholders to help ensure that resource investments target the highest priorities. DHS’s existing strategic plan lacks these linkages, and DHS has not effectively involved stakeholders in the development of the plan. DHS has also not completed other important planning-related activities. For example, some of DHS’s components have not developed adequate outcome-based performance measures or comprehensive plans to monitor, assess, and independently evaluate the effectiveness of their plans and performance. Integrating core management functions like financial, information technology, human capital, and procurement is also important if DHS is to transform itself into a cohesive, high-performing organization. However, DHS lacks a comprehensive management integration strategy with overall goals, a timeline, and a dedicated team to support its management integration efforts. In 2005, we recommended that DHS establish implementation goals and a timeline for its management integration efforts as part of a comprehensive integration strategy, a key practice to help ensure success for a merger or transformation. Although DHS has issued guidance and plans to assist management integration on a function by function basis, it has not developed a plan that clearly identifies the critical links that should occur across these functions, the necessary timing to make these links occur, how these interrelationships will occur, and who will drive and manage them. In addition, although DHS had established a Business Transformation Office that reported to the Under Secretary for Management to help monitor and look for interdependencies among the individual functional management integration efforts, that office was not responsible for leading and managing the coordination and integration itself. In addition to the Business Transformation Office, we have suggested that Congress should continue to monitor whether it needs to provide additional leadership authorities to the DHS Under Secretary for Management or create a Chief Operating Officer/Chief Management Officer position which could help elevate, integrate, and institutionalize DHS’s management initiatives. Finally, DHS cannot successfully achieve its homeland security mission without working with other entities that share responsibility for securing the homeland. Partnering for progress with other governmental agencies and private sector entities is central to achieving its missions. Since 2005, DHS has continued to form necessary partnerships and has undertaken a number of coordination efforts with private sector entities. These include, for example, partnering with (1) airlines to improve aviation passenger and cargo screening, (2) the maritime shipping industry to facilitate containerized cargo inspection, (3) financial institutions to follow the money trail in immigration and customs investigations, and (4) the chemical industry to enhance critical infrastructure protection at such facilities. In addition, FEMA has worked with other federal, state, and local entities to improve planning for disaster response and recovery. However, partnering challenges continue as DHS seeks to form more effective partnerships to leverage resources and more effectively carry out its homeland security responsibilities. For example, because DHS has only limited authority to address security at chemical facilities, it must continue to work with the chemical industry to ensure that it is assessing vulnerabilities and implementing security measures. Also, while TSA has taken steps to collaborate with federal and private sector stakeholders in the implementation of its Secure Flight program, these stakeholders stated that TSA has not provided them with the information they would need to support TSA’s efforts as they move forward with the program. DHS has made limited improvements in addressing financial management and internal control weaknesses and continues to face significant challenges in these areas. For example, since its creation, DHS has been unable to obtain an unqualified or “clean” audit opinion on its financial statements. The independent auditor’s report cited 10 material weaknesses—i.e., significant deficiencies in DHS’s internal controls— showing no decrease from fiscal year 2005. These weaknesses included financial management oversight, financial reporting, financial systems security, and budgetary accounting. Furthermore, the report found two other reportable conditions and instances of non-compliance with eight laws and regulations, including the Federal Managers’ Financial Integrity Act of 1982, the Federal Financial Management Improvement Act of 1996, and the Federal Information Security Management Act of 2002. While there continue to be material weaknesses in its financial management systems, DHS has made some progress in this area. For example, the independent auditor’s fiscal year 2006 report noted that DHS had made improvements at the component level to improve financial reporting during fiscal year 2006, although many challenges were remaining. Also, DHS and its components have reported developing corrective action plans to address the specific material internal control weaknesses identified.