[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                   PROGRESS IN ADDRESSING MANAGEMENT
                    CHALLENGES AT THE DEPARTMENT OF
                           HOMELAND SECURITY

=======================================================================




                                HEARING

                                 of the

                 SELECT COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 2004

                               __________

                           Serial No. 108-48

                               __________

    Printed for the use of the Select Committee on Homeland Security


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                               __________





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                 SELECT COMMITTEE ON HOMELAND SECURITY



                 Christopher Cox, California, Chairman

Jennifer Dunn, Washington            Jim Turner, Texas, Ranking Member
C.W. Bill Young, Florida             Bennie G. Thompson, Mississippi
Don Young, Alaska                    Loretta Sanchez, California
F. James Sensenbrenner, Jr.,         Edward J. Markey, Massachusetts
Wisconsin                            Norman D. Dicks, Washington
David Dreier, California             Barney Frank, Massachusetts
Duncan Hunter, California            Jane Harman, California
Harold Rogers, Kentucky              Benjamin L. Cardin, Maryland
Sherwood Boehlert, New York          Louise McIntosh Slaughter, New 
Lamar S. Smith, Texas                York
Curt Weldon, Pennsylvania            Peter A. DeFazio, Oregon
Christopher Shays, Connecticut       Nita M. Lowey, New York
Porter J. Goss, Florida              Robert E. Andrews, New Jersey
Dave Camp, Michigan                  Eleanor Holmes Norton, District of 
Lincoln Diaz-Balart, Florida         Columbia
Bob Goodlatte, Virginia              Zoe Lofgren, California
Ernest J. Istook, Jr., Oklahoma      Karen McCarthy, Missouri
Peter T. King, New York              Sheila Jackson-Lee, Texas
John Linder, Georgia                 Bill Pascrell, Jr., North Carolina
John B. Shadegg, Arizona             Donna M. Christensen, U.S. Virgin 
Mark E. Souder, Indiana              Islands
Mac Thornberry, Texas                Bob Etheridge, North Carolina
Jim Gibbons, Nevada                  Ken Lucas, Kentucky
Kay Granger, Texas                   James R. Langevin, Rhode Island
Pete Sessions, Texas                 Kendrick B. Meek, Florida
John E. Sweeney, New York

                      John Gannon, Chief of Staff
       Stephen DeVine, Deputy Staff Director and General Counsel
           Thomas Dilenge, Chief Counsel and Policy Director
               David H. Schanzer, Democrat Staff Director
             Mark T. Magee, Democrat Deputy Staff Director
                    Michael S. Twinchek, Chief Clerk

                                  (II)























                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Christopher Cox, a Representative in Congress From 
  the State of California, and Chairman, Select Committee on 
  Homeland Security..............................................     1
The Honorable Jim Turner, a Representative in Congress From the 
  State of Texas, and Ranking Member, Select Committee on 
  Homeland Security..............................................     2
The Honorable Robert E. Andrews, a Representative in Congress 
  From the State of New Jersey...................................    26
The Honorable Norman D. Dicks, a Representative in Congress From 
  the State of Washington........................................    44
The Honorable Jennifer Dunn, a Representative in Congress From 
  the State of Washington........................................     5
The Honorable Bob Etheridge, a Representative in Congress From 
  the State of North Carolina....................................    40
The Honorable Sheila Jackson-Lee, a Representative in Congress 
  From the State of Texas: Prepared Statement....................     4
The Honorable Zoe Lofgren, a Representative in Congress From the 
  State of California............................................    32
The Honorable Bill Pascrell, Jr., a Representative in Congress 
  From the State of North Carolina...............................    38
The Honorable John Shadegg, a Representative in Congress From the 
  State of Arizona...............................................    35
The Honorable Pete Sessions, a Representative in Congress From 
  the State of Texas.............................................    29
The Honorable Christopher Shays, a Representative in Congress 
  From the State Connecticut.....................................    41

                                WITNESS

The Honorable James M. Loy, Deputy Secretary, Department of 
  Homeland Security
  Oral Statement.................................................     6
  Prepared Statement.............................................    10

                                APPENDIX
                 Questions and Responses for the Record

Responses from the Honorable James M. Loy:
  Questions from the Honorable Sheila Jackson-Lee................    54
  Questions from the Honorable Louise M. Slaughter...............    53
  Questions from the Honorable John E. Sweeney...................    47
  Questions from the Honorable Jim Turner........................    50














                   PROGRESS IN ADDRESSING MANAGEMENT

                    CHALLENGES AT THE DEPARTMENT OF

                           HOMELAND SECURITY

                              ----------                              


                         Thursday, May 6, 2004

                          House of Representatives,
                     Select Committee on Homeland Security,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:42 a.m., in Room 
2318, Rayburn House Office Building, Hon. Christopher Cox 
[chairman of the committee] presiding.
    Present: Representatives Cox, Dunn, Shays, Camp, Shadegg, 
Sessions, Turner, Dicks, Frank, Slaughter, DeFazio, Lowey, 
Andrews, Norton, Lofgren, McCarthy, Pascrell, Etheridge, Lucas, 
and Chandler.
    Chairman Cox. [Presiding.] Good morning. A little over a 
year has passed since the Department of Homeland Security 
opened for business on March 1, 2003. With the stroke of a pen, 
the President and the Congress created the third largest 
cabinet department and with it a remarkably lengthy to-do list. 
The task that we set before the leaders of this new Department 
required creative thinking and extraordinary energy, as we are 
now keenly aware, also definite persistence.
    The Homeland Security Act not only created entirely new 
functions, such as intelligence fusion, infrastructure 
protection and cybersecurity that had to be built from scratch, 
but also required the merger of 22 government agencies into one 
coherent whole. That is a management challenge of the first 
magnitude.
    Secretary Ridge and you, Admiral Loy, have taken command of 
not one but many distinct organizations, each with its own 
operating culture and mission, and you have had to undertake 
this complex merger in a near constant heightened alert 
environment and while under unprecedented scrutiny from the 
administration, the Congress and the American public.
    There has been no greater challenge to leadership in any of 
our Federal agencies, and I want to commend the Secretary and 
you, Admiral Loy, for the remarkable progress that you have 
made in one short year. Some of the Department of Homeland 
Security's accomplishments over the past year have been 
visible. Others have taken place behind the scenes.
    Everyone has been able to see our airports, seaports and 
borders hardened, and a good deal of publicity has surrounded 
the Federal government's grants of billions of dollars for 
States, local governments and first responders to help prepare 
our communities for terrorist attacks. Less visible but just as 
important is the dramatic improvement in intelligence and 
information sharing among Federal agencies and their State and 
local partners.
    Today, we have asked Admiral Loy to join us to talk about 
all of these accomplishments and the many remaining management 
challenges. While the operational and analytical elements of 
the Department have been busy preventing and protecting us from 
terrorist attack, the Department's managerial leadership has 
been developing an overarching strategic plan to guide the 
Department's future.
    You have been working on integrating legacy systems and 
procedures in order to achieve a more centralized, mission-
focused structure. This integration is critical to the long-
term success of the Department and its mission to make America 
safer. It will be, therefore, a continuing focus of 
congressional oversight.
    Admiral Loy is the Deputy Secretary and the functional 
equivalent of chief operating officer who is leading this 
effort, and by all accounts your leadership is visionary and 
firm. Thank you on behalf of the American people for your 
dedication and hard work and we welcome your testimony today.
    Management Directorate, which Admiral Loy oversees, has 
been tasked with consolidating administrative support systems 
Department-wide and enhancing interoperability of the many 
legacy IT systems within the Department. We hope to learn more 
today about the effectiveness of these efforts and to offer our 
support to ongoing efforts to consolidate and integrate DHS 
operations as quickly as possible.
    This committee has an important role to play in working 
with the Department during this merger integration process. By 
focusing on milestones and setting goals for management 
improvements, this committee can help the Department to 
implement your strategic plan--a plan that is in place and that 
will build upon the successes of the past year.
    We look forward to working with you, Admiral Loy, on 
setting achievable goals and milestones for implementing your 
strategic plan and in making sure that this plan is tied to the 
5-year budget that you will be submitting to Congress later 
this month.
    We also look forward to working with you as we continue to 
develop our DHS authorization bill. The committee clearly wants 
this authorization process to be an institutionalized means of 
helping the Department, now and over the long-term. As you 
know, one of the ideas that we have discussed is elevating the 
Department's cross-cutting management functions into your 
office in order to provide clearer lines of authority and 
responsibility with respect to IT personnel, procurement, and 
finance functions.
    We will work with you to ensure that these and other 
reforms that we may adopt help you to do your job better, which 
is our goal. I thank you again for your appearance today and 
now recognize the ranking member, Mr. Turner from Texas, for an 
opening statement.
    Mr. Turner. Thank you, Mr. Chairman. Welcome, Admiral Loy. 
We appreciate your presence here, and I know I speak for 
everyone on the committee when I say thank you for your 
continued service to our country.
    I know you face a daunting challenge in trying to oversee 
the integrating of the 22 legacy agencies and 180,000 
employees, and I know it is a difficult job, and I know that 
you are well aware, as we all are, that some of the management 
challenges that you deal with are unique to your agency and 
that failure to carry them out correctly could subject us to 
serious exposures in terms of our national security, and I know 
you carry that burden every day.
    We are here today, of course, to try to review the progress 
of the Department more than one year after its establishment to 
review your achievements and to probe some of the remaining 
management challenges that we know must be overcome.
    I want to applaud you for your progress. The issuance of 
the first strategic plan earlier this year was a needed step, 
and I think it is clear the Department one year into its 
existence is much more mature today, and its structure seems to 
be gaining greater clarity.
    There are issues, of course, that we all know remain and 
some that have come to my attention, including my concern about 
the widely reported accounting irregularities involving a 
suspected $1.2 billion shortfall, which we understand led two 
of your departments' front-line units to declare a hiring 
freeze earlier this spring. I would like to know whether this 
suspected shortfall was the result of an internal accounting 
error or failure of coordination between Department components 
or whether it is really a true budget shortfall.
    With a total budget of $36 billion for this fiscal year, I 
know you agree that it is critical that the Department be able 
to account for its finances with precision and be overseen by a 
strong Chief Financial Officer.
    Information technology is another area that remains, I 
think, a management challenge. I am concerned the Department 
may be falling short on integrating the basic systems that 
would improve daily operations and improve information sharing 
and ensure that the Department is a unified and well run 
agency. It is troubling to me, as described by an official 
source in the press, that the Department may not know, for 
example, how many employees it actually has. And, obviously, 
that kind of information in the press undermines the 
credibility of the Department. And I am not sure I understand 
why that kind of information would not be in existence.
    I also find it somewhat troubling that the Chief 
Procurement Officer and the Chief Information Officer appear to 
be organizationally weak and may not have sufficient authority 
over the hundreds of legacy agency systems and functions for 
which they are responsible.
    I know there have been a number of initiatives made in this 
area, such as the Investment Review Board to examine purchases 
over $50 million, and additional reforms may be needed to 
ensure the Department's purchases and use of IT are 
appropriately coordinated.
    I also am concerned with the reports that there is a high 
degree of turnover among executives in the IT and contracting 
areas. Clearly, such occurrences in high turnover would hamper 
the ability of the Department to accomplish its mission.
    And, finally, I want to briefly touch upon the new pay-for-
performance system for employees. We all understand the vital 
mission of protecting the homeland depends upon a highly 
skilled and highly motivated workforce. We know we can invest 
billions in technology, have the best strategies available, 
but, ultimately, our security lies in the hands of the 
dedicated men and women who work every day in your Department.
    I hope the Department continues to develop its human 
resources system, and as you do so seek to ensure fairness, 
transparency and employee involvement in the overall process. 
Unless our employees are appropriately compensated and 
experience job satisfaction, we know their morale will suffer 
and our homeland security will be compromised. As a former 
military officer, I know you understand very well the value of 
the highly motivated and dedicated workforce.
    The Department clearly has had to blaze a pathway into some 
unchartered territory in the last year. It has made some 
mistakes, but it is finding its way and it is making progress. 
And I know that through your leadership, Admiral Loy, along 
with Secretary Ridge, that the Department is committed to 
addressing each of the management challenges that I mentioned 
in accomplishing the vital mission of protecting our country.
    So our committee is here in a bipartisan way to help you 
accomplish your task. Only by letting us know what your 
problems are and where the Congress needs to step forward and 
help can we do our job to join with you in protecting our 
Nation. Thank you again, Admiral, for being here. Thank you, 
Mr. Chairman.

         Prepared Statement of the Honorable Sheila Jackson-Lee

    I would like to thank Chairman Cox, Ranking Member Turner, and our 
witness today, Honorable James Loy for making today's hearing happen. 
The subject of this hearing has been a harbinger of evil that we, 
unfortunately, must address if we expect to truly secure our nation 
before the next terror threat occurs or before another person is 
injured or killed. The thorough and proper integration of 22 separate 
agencies into one umbrella is no small task; therefore, there is always 
room for improvement. In this case, however, quick and complete 
improvements are necessary to save lives. The management and functional 
problems that existed when each pre-DHS division of government continue 
to exist now, and in fact, the integration of these divisions may have 
exacerbated a lot of those problems. For four (4) of the seven major 
agencies (i.e., Immigration and Naturalization Service (INS), Federal 
Emergency Management Agency (FEMA), Customs Service, Transportation 
Security Administration, the Office of Domestic Preparedness, the u.S. 
Coast Guard, and the Secret Service) that became DHS on March 1, 2003, 
auditors reported 18 material weaknesses (i.e., a condition that 
precludes the entity's internal control from providing reasonable 
assurance that misstatements, losses, or noncompliance would be 
prevented or detected on a timely basis) in internal control for fiscal 
year 2002. In addition, for five (5) of the seven (7) major agencies, 
auditors reported that the agencies' financial management systems were 
not in substantial compliance with the Federal Financial Management 
Improvement Act (FFMIA) of 1996. These statistics are very troubling 
when we think about the reality that the Homeland Security Act 
essentially conglomerated the material weaknesses and proven inability 
to comply with the FFMIA.
    For example, according to a GAO study released on September 10,2003 
(GAO-03-1134T) with respect with the former Immigration and 
Naturalization Service (INS), for both FY 2001 and 2002, auditors 
reported that INS did not have a reliable system for providing regular, 
timely data on the numbers of completed and pending immigration 
applications, and the associated collections of fees valued at nearly 
$1 billion for FY 2002! What this means is that over the course of 
these fiscal years, INS did not accurately or regularly determine the 
fees that it earns without relying on an extensive service-wide, year-
end physical count of over 5.4 million pending applications. 
Supposedly, INS has been working on a new tracking system to facilitate 
its inventory process. I would like to know the progress of this 
system. How can we realistically rely on the Administration's newly 
announced immigration policy when we know from the above data that it 
may well have been created based on significantly estimated performance 
and fee data?
    In addition, relating to the problems arising from the 
conglomeration of the different agencies and from a conversation that I 
had with a member of the Houston Airport System, there needs to be an 
``intermodal law enforcement mechanism'' to ensure that law enforcement 
is in a position to react quickly once the magnitude of the emergency 
has been determined. For example, at Bush Intercontinental Airport in 
Houston, there is a concern that more law enforcement agents are 
needed. When an emergency arises that falls outside the scope of the 
Houston Police Department's (HPD's) jurisdiction, the Federal Bureau of 
Investigation (FBI) is the next first responder to receive the call of 
duty. This period of problem identification and jurisdiction 
determination creates a time lag that puts lives in serious jeopardy. 
The FY 2004 budget did not fund the addition of law enforcement 
personnel, so we are now in a quandary.
    In addition, with respect to the hiring cap for professional and 
administrative positions at TSA for airports, I spoke with a 
constituent at the Houston Airport System and he complained that the 
cap is creating a major source of vulnerability. Houston has 3 
airports, and two of them are considered ``high traffic'' or extremely 
busy. Furthermore, at Bush Intercontinental Airport, there is a 
proposal to add as many as 18 new TSA checkpoints in the expansion of 
its international wing. With this kind of expansion at other airports 
around the nation coupled with ever- increasing air travel, we need to 
make some serious changes in the way TSA and other divisions manage 
their duties.
    I hope that we can arrive at some positive solutions to these 
problems so that the vulnerabilities that are being created don't 
escalate.
    Thank you.

    Chairman Cox. Thank the gentleman. The Vice Chairman of the 
full committee, the gentlelady from the State of Washington, 
Ms. Dunn.
    Ms. Dunn. Thank you very much, Mr. Chairman. After the 
tragic events on September 11, Congress and the President acted 
swiftly to create the Department of Homeland Security, a 
department designed to remedy internal government problems and 
to make it much more difficult, if not impossible, for 
terrorists to assail our way of life.
    The issue of homeland security was not at the front of most 
Americans' minds before the attacks on September 11, and the 
organization of Federal government reflected that fact. 
September 11 was our wake-up call, and the President and the 
Congress answered that call.
    The Department of Homeland Security is a demonstration of 
our commitment to protect Americans and to prepare in case of 
another attack. Creating the Department of Homeland Security 
has been a gigantic undertaking. Mergers of this magnitude are 
unusual if not unprecedented, whether we are talking about the 
private sector or the public sector. DHS combined the efforts 
of 22 separate entities, all responsible for some piece of the 
security puzzle, into one department focused on a new mission--
to protect our homelands.
    Today, we look to the Deputy Secretary of the Department of 
Homeland Security, Admiral Loy, to guide us through the 
management strategy for continuing to build a strong and 
focused Department. We know that managing 22 legacy agencies 
and organizations is an extraordinary assignment. We understand 
the structural and cultural barriers that hinder transformation 
in a merger situation. We applaud the leaders of the Department 
for making significant progress over this last year, and we are 
here to support and encourage Department-wide implementation of 
mission-driven policy.
    The mission of the Department of Homeland Security is 
perhaps the most important mission that we, the Federal 
government, will ever undertake. I am pleased that we have 
individuals like Admiral Loy leading the effort, because I know 
he also understands it, and I look forward to your testimony, 
Admiral Loy.
    Chairman Cox. Thank the gentlelady. I would advice members 
that Admiral Loy has agreed to be with us for this hearing till 
12:30. All members are free to make opening statements under 
our rules. Those members who waive opening statements will have 
an additional 3 minutes added to the time allotted for their 
questions. And so at this time, I would ask if there are 
further opening statements?
    If not, Admiral Loy, we have, of course, your prepared 
testimony, and you are recognized for purposes of summarizing 
it for us orally.

  STATEMENT OF THE HONORABLE JAMES M. LOY, DEPUTY SECRETARY, 
                DEPARTMENT OF HOMELAND SECURITY

    Admiral Loy. Thank you, Mr. Chairman. Chairman Cox, ranking 
member Turner, distinguished members of the committee, I am 
pleased to appear at the hearing of the House Select Committee 
on Homeland Security. The Department of Homeland Security 
appreciates the support we have received from this committee as 
we have worked with you to establish and refine this Department 
in support of our unified effort nationally to prevent and 
deter terrorist attacks and to protect against and respond to 
threats and hazards of all kinds to our Nation.
    Authorizing oversight from the Congress is an enormously 
important function. It provides ideas, and it provides the 
reinforcement of direction and provides programmatic support as 
part of the annual dialogue between the executive and the 
legislative branches. Secretary Ridge and I and the rest of DHS 
recognize the value of that discourse and we try to look 
forward to holding up our end of the conversation.
    The Department of Homeland Security has indeed made, we 
believe, significant organizational strides during the first 
year of our operation. Nearly 180,000 employees and a budget of 
over $31 billion were brought under DHS just a little over a 
year ago.
    We are in the midst really of three full-time jobs at the 
Department. First, we are executing the merger that has been 
described--22 executive branch elements coming into one 
cabinet-level agency. Second, we are trying to do that without 
detrimental impact on mission accomplishment; in fact, our 
challenge, of course, is to make significant improvements in 
meeting that mission. And, third, and last, we are forging a 
new identity in culture, born in the ashes of September 11, 
2001 and dedicated to ensuring to the very best of our ability 
that such events never recur.
    Any one of these challenges is a very heavy lift. All three 
together properly draw the attention of many to applaud, to 
constructively criticize or to wonder aloud as to what it is 
that we are really doing. That review is welcome. We certainly 
do not have a corner on the market of good ideas, and although 
we are very proud of what we have gotten done this past year, 
we still know we have a long way to go, and we welcome the 
assistance of all to help us secure America.
    I believe the committee interests cross all three of our 
challenges, but I also sense that today we are principally 
interested in governance. Setting up the management structure 
of DHS was debated well, of course, in the creation of the 
Homeland Security Act. On the other hand, as often is the case, 
every bill is not perfect, and there are areas properly 
available for us to review, and I look forward to that 
discussion.
    I would like to just offer quick comments in three areas 
and then take your questions. First, there are many noteworthy 
accomplishments to review from year one. Among the Department's 
accomplishments in consolidating inherited support systems 
during its first year are these: 8 payroll systems that have 
been reduced to 3, and the Department expects to be using only 
1 system by the end of 2004; 22 human resource offices that 
have been reduced to 7; 13 contracting offices that have been 
reduced to 8; 19 financial management service providers that 
have been reduced to 10.
    DHS has initiated an ambitious management initiative called 
eMerge2, designed to produce a consolidated enterprise solution 
for a variety of administrative functions, including 
accounting, budgeting and acquisition.
    DHS has instituted and designed the Future Years Homeland 
Security Program, the FYHSP, the parallel, if you will, to the 
Department of Defense's FYDP, with the goal of tying overall 
strategy to a 5-year resource plan outlining long-range goals 
and resource requirements.
    In February, the Department proposed new regulations for 
human resource management. The goal of the effort was to design 
a flexible and competitive system viewed as an opportunity to 
take an historic step in Federal government employment policy. 
The public comment period at the tail end of this project ended 
on March 22, 2004, but I must say how proud we are at the 
inclusive nature of that process from beginning to end.
    We had an 80-person team that was designing this new 
system. That team included representatives from all walks of 
not only our Department but the unions that represent our 
employees and everyone else that we felt had an equity in the 
system along the way.
    There are over 3,500 comments now in the public docket from 
the comment period, and at the present time DHS and OPM, our 
partner in this effort, are analyzing those comments. Officials 
hope to issue final regulations later this year after the meet-
and-confer process has concluded. Following the issuance of 
final regulations, the system, as proposed, will be phased in 
over several years.
    We have also made progress in consolidating and integrating 
operational programs. For example, there is currently now on 
the shelf an interim national response plan and a national 
incident management system. There is in final review the first 
formal version of that national response plan. This represent 
an effort to consolidate from as many as 12 different 
contingency plans which used to be on the shelf a single way 
that this Department will coordinate the requirements 
associated with any national hazard, manmade or otherwise, that 
comes towards this country's direction.
    The Department has taken steps towards consolidating its 
first responder grants and programs; as Mr. Turner mentioned, 
those grants and programs that support the first responder 
community, always the first on the scene and most often the 
last to leave any kind of an event. The One Face at the Border 
Program was designed and implemented consolidating three very 
different border inspection functions into one. That has now 
proven itself over months of use as to be a constructive change 
to the way we welcome people through the portals of our 
country.
    Several programs and ideas that were free-standing and set 
asides of themselves have now been integrated to forge a curb-
to-cockpit system of aviation security for our Nation that is 
admittedly not yet complete but is, oh, so much better than 
that which was in place on that day back in September of 2001.
    It still remains clear that we have challenges that lie 
ahead. I would offer that information technology, further 
systems integration, information sharing, and issues about 
interoperability are areas that continue to deserve and receive 
serious attention in the Department. These are initiatives 
underway that have not culminated in a final game plan as to 
how best to do them. More on that thought in just a moment.
    A secondary of attention from my opening remarks is vision. 
As the chairman mentioned, on the occasion of the first 
anniversary of this Department in 1 March, the Secretary 
published our first strategic plan. This was an effort 
undertaken by the leadership cadre of the Department--off-site 
together, no facilitators in place, just us trying to figure 
out the best way to forge our future.
    The national strategy for homeland security and the 
Homeland Security Act of 2002 served to mobilize and organize 
our Nation to secure the homeland from terrorist threats. To be 
successful, complex missions required a focused effort from all 
society. This is an all-hands evolution for our country.
    One primary reason for the establishment of the Department 
was to provide the unifying corps for the vast national network 
or organizations and institutions involved in efforts to secure 
our country. In order to better do this and to provide guidance 
to the 180,000 men and women in the Department who work every 
day on this important task, the Department found itself 
required to develop its own strategic plan.
    The new vision and mission statements plus the strategic 
goals therein will provide the framework for the thousands of 
action items that will focus to daily operations of the 
Department. I would trust that each of you have seen copies of 
our plan at this point. We will certainly make sure they are 
sent to you if you have not.
    The vision, very clearly: Preserving our freedoms, 
protecting America, we secure our homeland. I think its 
simplicity offers focus. Our mission: We will lead a unified 
national effort to secure America. We will prevent and deter 
terrorist attacks and protect against and respond to threats 
and hazards to the Nation. We will ensure safe and secure 
borders, welcome lawful immigrants and visitors and promote the 
free flow of commerce.
    The core values of the Department of Homeland Security are 
personal attributes expected of every employee. I watched it 
work almost magically with my service in the Coast Guard for 
over 40 years. Core values are enormously important as that 
third job we undertake to build DHS identity and culture.
    Those are simply three: Integrity, service before self, 
each of us serves something far greater than ourselves; 
vigilance guarding America, relentlessly identifying and 
deterring threats that pose a danger to the safety of our 
people; respect, honoring our partners, honoring the concepts 
for which America stands--liberty, democracy, civil rights--and 
act on such things as our constitutional duty requires.
    And seven action oriented strategic goals: Awareness, 
prevention, protection, response and recovery and then service 
and organizational excellence as mandates from the Secretary to 
all of our workforce to take us where we want to go.
    Objectives are arranged under each goal, and there are 
literally hundreds of milestones, activities and projects 
associated with each objective. Our planning mandate is to link 
each and every such activity and project to a line item in the 
2006 budget as it comes forward and display its owner and 
timeline to any and all who would look.
    I personally review those milestones monthly and demand the 
metrics necessary for objective monitoring of progress. This 
strategic plan has given the DHS workforce the confidence of 
knowing where their work fits into the big picture and the 
comfort that it all makes sense and that the boss has a solid 
game plan and the will to exercise it.
    And, lastly, Mr. Chairman, I offer this simple notion that 
a department like ours with thousands of very important 
activities must take the time to prioritize our work. Secretary 
Ridge gave us all kudos for work well done in year one and then 
quickly delivered a set of seven key priorities for us to 
concentrate on in year two. They are information sharing and 
infrastructure protection, interoperability, integrated ports 
and borders, new technologies and tools, better prepared States 
and communities, improved customer service for immigrants and a 
21st century department.
    I will leave that list just on the table as a menu of 
things that you perhaps would like to discuss, but please know 
we have taken each of them, made a senior department official 
personally responsible for it, had a 20-page paper developed 
that described our intention for specific goals, responsible 
owners and milestones. We turned a solid information brief to 
the Secretary to be sure we were on the right track, and in 
several instances are setting up program shops to manage our 
progress in that subject area.
    Mr. Chairman, there has been a tremendous amount 
accomplished since this Department was created, and we are 
cognizant of how much more work remains to be done. I tried to 
identify several areas as I prepared my testimony where the 
Congress might look to help us.
    One of the biggest challenges that faces us at the moment, 
in particular, is the need to consolidate the Department's 
headquarters location in a single place. This co-location will 
serve to improve communications, provide efficiencies and 
better establish our identity as a department. We are working 
with the Armed Services Committees to expand our presence at 
the Nebraska Avenue complex, and I seek your support to that 
end.
    Beyond that, we have asked Congress to delay the deadlines 
for biometrically based passports to be mandatory at our 
borders. I personally wonder if high consequence areas like 
nuclear, biological and cyber are properly organized and 
recognized in the Department. I even wonder if adequate 
attention can be given to major policy judgments from a small 
shop well hidden inside the Chief of Staff's organization.
    These are just a few of the areas the Secretary will seek 
your support on as we take stock after year one and try to make 
adjustments to how we do business. Mr. Chairman, thank you for 
allowing me to run on just a bit. There is just an incredible 
array of work being done and to be done in this new department.
    Again, we are proud of our work so far, appreciative of the 
committee's support, but mostly the Secretary and I are proud 
of our workforce--180,000 plus strong who day after day make 
their contribution to securing our homeland. They deserve the 
resources and support they need to do their work and the very 
best leadership and management that we can muster. We are 
trying hard to give them that every day.
    I look forward to your questions, and thank you very much, 
Mr. Chairman, for allowing me to make an opening statement.
    [The statement of Admiral Loy follows:]

                Prepared Statement of Admiral James Loy

    Chairman Cox, Ranking Member Turner, distinguished members of the 
Committee--I am pleased to appear at this hearing of the House Select 
Committee on Homeland Security. The Department of Homeland Security 
appreciates the support we have received from this Committee as we have 
worked with you to establish and refine this Department in support of 
our unified national effort to prevent and deter terrorist attacks and 
protect against and respond to threats and hazards to the nation.
    I would also like to acknowledge the tremendous work of the 
Department's management team and their dedicated staff in keeping DHS 
on track and focused on our ultimate goal of transforming a formerly 
disparate set of organizations into a cohesive 21st century Department.
    This reorganization of government has presented the biggest `change 
management'' challenge of all time. Never before have we witnessed a 
full-scale government divestiture, merger, acquisition and startup all 
coming together at once--certainly not on this scale. Neither have we 
seen a consolidation of this size occur with such national importance 
and urgency and in such a short amount of time.
    Our biggest challenge was to establish the Department, transfer her 
employees in from other agencies, and establish a working 
organizational environment while making sure that we did not lose a 
step in accomplishing all of the critical missions with which we were 
charged.
    This reorganization and transition required looking beyond old 
agendas, missions, cultures, histories and processes . . . and coming 
together as one holistic enterprise. It required--and finally enabled--
employees from many different organizations to rally around a single 
mission: to deter and prevent terrorist attacks, to protect our people 
and infrastructure and respond to threats and hazards to our nation in 
a way that is respectful of individual privacy and civil liberties . . 
. ultimately, to secure borders, but also keep open the doors so 
characteristic of, and essential to, this welcoming and economically 
thriving country.
    In the post 9/11 world, our employees renewed their respect for the 
importance of their jobs and recognized the need to do them differently 
and better. And so our charge was to unify that sense of purpose and 
mission. Our charge was to make it easier for them to do their jobs 
and, as a nation, approach the protection of our people and our way of 
life in a smarter, more effective and more efficient way. Sec. 
    When the President laid out his direction and the Congress created 
the Department of Homeland Security, the expectations were clear that 
this Department be unlike any other within the federal government. At 
the core of these expectations was the priority of developing a model 
agency for the new century that supports in an effective, efficient and 
rational manner the unified national effort to secure America.
    In order to respond to new and different 21st century threats, this 
Department's organizational identity must incorporate the 
characteristics of flexibility, innovation, efficiency and 
responsiveness. The Department's ability to become a modern, agile, and 
integrated organization is essential to adequately support this 
Department in its efforts to confront the challenges of the new century 
in a bold way.
    The definition of a 21st century Department is a consolidated and 
focused Department that seeks to integrate, with laser-like precision, 
the various resources and efforts across the federal government in 
order to prevent, protect against and respond to terrorist attacks that 
threaten the American way of life. Inherent in this definition of a 
21st century Department is the need for DHS to be organized and to be 
able to provide the highest quality of support service for the men and 
women on the front lines in the war on terrorism. Just as this 
Department was created to execute a mission unlike any other agency in 
government, so should the delivery of service be as unique in 
supporting this critically important mission.
    The Department of Homeland Security has made great organizational 
strides during the first year of operations. Nearly 180,000 employees 
and a budget of $31.2 billion were brought under DHS a little more than 
a year ago.
    At the same time, from the start, we also had to remain focused on 
our operational activities--that is, while we worked swiftly to get 
servers up, systems consolidated, a stapler on every desk--we had to be 
squarely focused on the protection of the country.
    Operationally, one of the top priorities achieved by the Department 
was to integrate specific departmental functions to enhance 
efficiencies and create greater accountability in one seamless border 
service. For the first time in the country's history, all agencies of 
the United States Government with significant border responsibilities 
have been unified into one agency of our government, Customs and Border 
Protection (CBP); one agency, one face, to manage and secure the 
Nation's borders.

    Strategic Planning, Financial Management, & Budget
    The Department's first high-level Strategic Plan was released in 
February. This Strategic Plan sets forth the vision and mission 
statements, core values, guiding principles and strategic goals and 
objectives that provide the framework to guide the actions that make up 
the daily operations of the Department. The full breadth of our 
activities is guided by the high-level goals of: Awareness, Prevention, 
Protection, Response, Recovery, Service, and Organizational Excellence.
    The Department's Strategic Plan reflects the determination of our 
nation to prevail against terror, to protect our homeland and to 
improve the way we serve our diverse customers. Describing who we are 
and what we do, it conveys the beliefs and values that govern our 
conduct. It outlines what we will accomplish. This document provides 
the vision and direction, as well as the goals and objectives for the 
Department while our detailed budget plan describes how we will achieve 
those results. Each program in the budget plan will be linked to our 
goals and objectives and will have timelines and ownership associated 
with specific performance.
    One of the biggest strategic challenges currently facing DHS is the 
need to consolidate the Department's headquarters operations in one 
location. This collocation will significantly improve the 
communications, efficiency, and effectiveness of the Department's 
management and day-to-day direction. Without Congressional approval, 
however DHS cannot fully move into its preferred headquarters--the 
Nebraska Avenue Complex (NAC), which is currently an active military 
base. DHS, the Navy, and the General Services Administration have 
jointly submitted a legislative proposal to establish the DHS 
headquarters at the NAC. We believe Congress should pass this 
legislation as a stand-alone bill so that the Department can 
consolidate its headquarters as soon as possible. Every day that DHS 
fails to consolidate its operations, the Department is hobbled in 
achieving its ultimate goal of protecting the American people and the 
homeland.
    Equally important to this Department is sensible financial 
management and sensible financial management requires informed 
financial and management decisions. To ensure policy decisions are made 
based on sound rationale, such as a program's contribution to our 
strategic goals and measurable results, DHS has put in place a 
comprehensive planning, evaluation, and investment review process.
    At the core of this process is the Future Years Homeland Security 
Program--FYHSP. Section 874 of the Homeland Security Act of 2002, 
requires the Department to prepare the FYHSP. The FYHSP process will 
help ensure that current and out year program requirements are properly 
identified, planned, and aligned with DHS goals and priorities and have 
measurable meaningful performance outcomes. The Department's first 
FYHSP is expected to be provided to Congress this month.
    In the past year, an Investment Review Board (IRB) and Joint 
Requirements Council (JRC) were established. The JRC identifies 
crosscutting opportunities and common requirements among DHS 
Organizational Elements for investments and aids in determining how 
best to ensure that the Department uses its resources wisely and in the 
best interest of the American public. The IRB is an executive committee 
that reviews high-level investments for formal entry into the annual 
budget process and also serves as a forum for discussing investment 
issues and resolving problems requiring senior management attention. 
Specifically, the IRB and JRC review major capital investments to:

         Integrate Departmental priorities, resource planning, 
        investment control, budgeting, acquisition, and investment 
        management to ensure resources are wisely used.
         Ensure that spending directly supports and furthers 
        DHS's mission and provides optimal benefits and capabilities to 
        stakeholders and customers.
         Identify poorly performing programs and investments so 
        corrective actions can be taken.
         Identify duplicative efforts for consolidation and 
        mission alignment when it makes good sense or when economies of 
        scale can be achieved.
    Over the past year, DHS has streamlined the number of financial 
management service providers in the Department from nineteen to ten 
with a continual focus on further consolidations. We are implementing a 
consolidated bankcard program that is reducing the significant number 
of bankcard programs for purchase, travel, and fleet throughout the 
Department among the 22 legacy entities to three. We developed and 
delivered to Congress on time, the Department's FY 2005 President's 
Budget and accompanying Congressional Justifications. We subjected 
ourselves to, and successfully completed, an audit of our consolidated 
FY 2003 financial statements. We have also made strides in our attempt 
to build one financial system for the Department. Most importantly, all 
of this has been accomplished with no negative impact on mission 
operations.
    Essential to sound financial management is a sound and robust 
financial management system. When DHS was created, we inherited over 
100 resource management systems from the 22 organizations that were 
merged to create DHS. Few of these systems are integrated, several are 
outdated and many have limited functionality. To address this problem, 
the Department has undertaken a resource transformation initiative 
entitled eMerge\2\. The goal of eMerge\2\, which stands for 
``electronically Managing enterprise resources for government 
effectiveness and efficiency'', is to improve resource management and 
enable the bureaus to move ``Back Office'' effectiveness and efficiency 
to ``Front Line'' Operations.
    eMerge\2\ is a business-focused program that seeks to consolidate 
and integrate the Department's budget, accounting and reporting, cost 
management, asset management, and acquisitions and grants functions. 
Once procured and developed, the solution will be rolled out in several 
phases focusing first on those organizations most in need of improved 
basic financial management services. eMerge\2\ is currently in the 
midst of an exhaustive requirements definition and design phase, which 
is expected to evolve into a solutions acquisition phase this summer. 
As eMerge\2\ is implemented over the next few years, it will greatly 
enhance Departmental visibility, oversight and accountability of 
component operations and financial management.
    Holding managers accountable for achieving established goals and 
results is integral to DHS's financial management and planning. Towards 
this end, the performance budget forges a strong link between resources 
and performance, shows what is being accomplished with the money being 
spent, and establishes accountability for the levels of performance 
achieved. The Program Assessment Rating Tool (PART) complements the 
performance budget by providing the Department an objective means of 
assessing the value and contribution of individual programs to 
achieving the Department's objectives. It also provides a tool for 
assessing how the program is being managed.

Shared Services
    In July 2003 an integrated project team was established to realign 
and transform support services for the 68,000 mission delivery 
employees assigned to Immigration and Customs Enforcement (ICE), 
Customs and Border Protection (CBP), and Citizenship and Immigration 
Services (CIS). This was especially difficult because ICE was highly 
decentralized, and CBP was highly centralized. The team was to develop 
a basis for shared services, consolidate services where appropriate to 
realize economies of scale, and ensure accountability. The result was 
that CIS, ICE, and CBP each became primary service providers for 
selected services. For example, CBP provides facilities acquisition and 
management, ICE provides supervisory leadership training, and CIS 
provides records management. For some services, however, the three 
components remain self-supporting. Those services include procurement, 
personal property, budget, and labor and employee relations. This 
effort within the Department is referred to as the ``Tri-Bureau'' 
effort.
    On March 1, 2003, DHS faced the daunting task of supporting 22 
different components receiving services from nine different parent 
agencies. To provide continuity of service, DHS signed Memoranda of 
Understanding (MOU) with each of the parent agencies to continue that 
support. Then, on May 1, the Under Secretary for Management established 
a transition team to consolidate support services throughout the 
department. The team identified 255 unique services in the 22 
components and DHS headquarters resulting in 3,457 separate services 
requirements. The services were catalogued under eight lines of 
business: administrative services, human resources, information 
technology, procurement, financial management, civil rights, legal, and 
security. By October 2003, the department was supporting 1463 of the 
3457 services, and it is the expectation that most of the services will 
be provided by DHS by the end of FY 2004.
    The Department's Office of Administrative Services has been able to 
consolidate 35% of Administrative Services functions through the Tri-
Bureau effort. Additionally, DHS has consolidated 22 different personal 
property management systems down to 3 and will utilize one, single 
property management system with implementation of the emerge2 
initiative.
    The Department has also managed to consolidate 22 different 
processes for each administrative support service across the 
Department, such as mail, printing, vehicles, etc., down to 8 
processes. Further implementation of the shared services strategy 
utilized under the Tri-Bureau effort will allow even further 
consolidation of these processes to occur.
    The consolidation of processes and systems supports the DHS goal of 
being a 21st century Department. Above all, supporting the DHS 
organizational elements in their mission is the top priority. The use 
of national standards, proven management controls, and a practice of 
continuously improving program performance are enabling the Office of 
Administrative Services to effectively develop and implement a 
consolidated approach for the management of DHS safety, environmental 
management, records and publications, real property, personal property, 
and mail operations.
    For example, asset management and mail management consolidation 
studies are currently underway within the Department. The intent of the 
real property consolidation studies, as part of our overall asset 
management plan, is to assess and analyze the Department's real 
property portfolio to develop the most effective and efficient profile 
that best supports the organizational mission.
    The Asset Management Board is responsible for coordinating and 
reviewing the policies, procedures and utilization of the physical 
assets of the Department including real and personal property. The 
board ensures consistent priorities for capital improvement projects at 
all levels. In addition, the Board oversees a system of asset program 
councils that bring together program experts and users to define 
guidance, metrics and requirements. These councils serve multiple 
roles: program management oversight and control, strategic sourcing 
initiatives, and development of new joint requirements.
    Additionally, integrated and standardized mail handing and 
management processes are currently under development to improve the 
security, movement, and delivery of mail across DHS, and the 
development of consolidated mail facilities are already improving the 
productivity and safety of the DHS mail operations.

    Procurement & Acquisition
    Within the procurement and acquisition arenas, the Department has 
consolidated acquisition support for the 22 legacy agencies within 8 
major procurement programs within DHS. Acquisition support for S&T, 
IAIP, CIS, ODP, the Office of the Secretary and Under Secretary for 
Management, as well as other headquarters customers has been 
consolidated within one major acquisition program.
    DHS is currently managing several complex enterprise-wide 
acquisition programs. The U.S. Coast Guard's Integrated Deepwater 
System (IDS) Program, for example, is one of the largest performance-
based acquisition programs in the United States. The Coast Guard, one 
of the nation's five armed services, is a military, multi-mission, and 
maritime service within the Department of Homeland Security. This 
service is responsible for the protection of the public, the 
environment, and U.S. economic and security interests in the maritime 
domain--including America's coasts, ports and inland waterways as well 
as international waters.
    In order to meet America's 21st-century maritime threats and 
challenges, the Coast Guard initiated the Integrated Deepwater System 
(IDS) Program in the late 1990s. The Deepwater Program is intended to 
provide the capability and capacity for the Coast Guard to meet all 
maritime missions legislatively mandated in the Homeland Security Act. 
Deepwater assets are needed to perform missions in ports, waterways, 
coastal areas, and extending seaward to anywhere the Coast Guard needs 
to take appropriate action and respond 24 hours a day, every day, in 
various environments from Arctic to tropical and equatorial climates 
throughout the world. The Deepwater Program will recapitalize and 
transform the Coast Guard to ensure it has the necessary platforms and 
systems to continue to meet these and future missions and sustain its 
operational excellence well into the 21st century.
    The Office of Small and Small Disadvantaged Business Utilization 
(OSDBU) has created a robust and innovative outreach program for its 
constituency. Outreach includes counseling on how to market to DHS and 
its buying activities and provides opportunities for these small 
businesses to engage both federal government employees and large 
business concerns that may be interested in the supplies or services 
these firms offer. The OSDBU has conducted extensive outreach to the 
Department's business partners and has assisted in the development of a 
website designed to assist the private sector in realizing business 
opportunities with the Department.
    DHS has also implemented new and consolidated acquisition policies 
and procedures (Homeland Security Acquisition Regulations and Homeland 
Security Acquisition Manual) that are among the most flexible in the 
entire federal government. Under them, simplified selection procedures 
are authorized for ``commercial item'' purchases of $7.5 million or 
less--that's 50 percent higher than most agencies--and red tape can be 
slashed altogether for so-called ``micro-purchases'' under $7,500, 
triple the normal amount. Publication of this regulation and guidance 
was another major step in combining the cultures of 22 disparate 
agencies by ensuring that these organizational elements now operate 
under a single, DHS-wide program regulation.
    We've also established a department-wide program for strategic 
sourcing and supply chain management. Specifically, DHS has initiated 
14 cross-functional commodity councils tasked with creating sourcing 
strategies for goods and services acquired throughout the Department. 
Councils govern a wide range of requirements, from simple items such as 
office supplies, to more sophisticated requirements, such as boats and 
their maintenance, or complex IT infrastructure needs. Accrued savings 
in excess of $1M is expected for consolidation of handgun testing 
requirements. Combining office supply needs will result in realized 
savings of 55 percent off retail pricing arrangements. For DHS 
Headquarters alone, approximately $750,000 was saved over a six month 
period. Significant savings have been realized in the early stages of 
this initiative--for FY 05, a total of $100 million is expected to be 
realized.
    In February of 2004, DHS announced its partnership with the 
Department of Defense's EMALL program, which is an internet-based 
marketplace that allows purchasers to access DoD's wide variety of 
vendors and catalogs and enhances DHS' ability to provide a one-stop 
shopping experience to acquire the goods and services needed to support 
DHS' mission. The partnership with DOD EMALL enables DHS to participate 
in one of the largest existing government-to-business exchanges and 
will result in a projected savings for the Department in FY 05 of $8 
million.

Human Capital
    In the area of human capital, we have made tremendous strides 
towards organizational efficiency and unified policy. The Department 
has managed to consolidate the 22 different human resource servicing 
centers that existed and reduced the number down to seven with the goal 
of consolidating down to three or fewer of these centers. Additionally, 
the eight different payroll systems have been consolidated down to 
three, with the goal of utilizing one, single payroll provider for the 
entire Department by Spring 2005.
    Our Human Capital office has also established unified policies on 
performance management and Senior Executive Service performance 
appraisals.
    As the Congress recognized with the passage of the Homeland 
Security Act, DHS has been given a critical responsibility. Our mission 
is to protect the country from terrorists and keep terrorists? weapons 
from entering the country. We can't afford to fail. We need the ability 
to act swiftly and decisively in response to critical homeland security 
threats and other mission needs. It is essential that we continue to 
attract and retain highly talented and motivated employees who are 
committed to excellence--the most dedicated and skilled people our 
country has to offer. The current system is too cumbersome to achieve 
this goal.
    The existing system was designed for a different time. The world 
has changed, jobs have changed, missions have changed . . . and our HR 
systems need to change as well to support this new environment. The 
current system, while it has many positive features, is insufficient to 
meet our needs.
    The Department, in conjunction with OPM, had an historic 
opportunity to design a system that meets our critical mission 
requirements and is responsive to DHS employees. We understood 
Congress' desire to allow employees to participate in a meaningful way 
in the creation of a new system. With OPM Director James' support and 
leadership, we engaged in an unprecedented collaborative effort to 
create the new system. Over 80 DHS employees, supervisors, union 
representatives and OPM staff were appointed to a Design Team. During 
the spring of 2003, that team conducted 64 nationwide town hall and 
focus group meetings to gain input from employees in all major DHS 
components. They also contacted over 65 public and private sector 
organizations and human resource experts as part of their research. The 
Secretary appointed a Senior Review Committee to guide the work of the 
Design Team and to review all the options developed by the Team. The 
Committee included both DHS and OPM leaders and the three Union 
Presidents from the largest DHS unions.
    In developing these proposals for a new human resource management 
system, the Secretary and the Director accepted the guiding principles 
developed by the Senior Review Committee and the Design Team. These 
principles state that the Department of Homeland Security must ensure, 
first and foremost, that such systems are mission-centered. Such 
systems must be performance-focused, contemporary, and excellent. They 
must generate respect and trust; they must be based on the principles 
of merit and fairness embodied in the statutory merit system 
principles; and they must comply with all other applicable provisions 
of law. We have worked hard to solicit the input of our employees and 
their representatives, the general public, and other interested parties 
during the thirty day public comment period.
    We are proposing a system that has a stronger correlation between 
performance and pay and greater consideration of local market 
conditions. Our proposal contains three major changes to the current 
General Schedule pay structure: first, we have proposed open pay ranges 
eliminating the ``step increases'' in the current system which are tied 
to longevity; second, we are proposing that pay would be adjusted by 
job type in each market not across all job types in each market; and 
third, we are proposing to create performance pay pools where all 
employees who meet performance expectations will receive performance 
based increases.
    The proposals for performance management are designed to foster 
high levels of performance and to ensure that good performance is 
recognized, rewarded, and reinforced. The system will be designed to 
make meaningful distinctions in performance and to hold employees 
accountable at all levels. We are proposing to phase in the performance 
management system before making any adjustments to pay based on that 
system. We are fully cognizant that this is one of the biggest 
challenges that lies ahead and that there is detailed work that must be 
done before we can implement the new system.
    Our proposed labor relations construct meets our operational needs 
while providing for collective bargaining and encouraging consultation 
with employee representatives. One of the most significant changes 
which we have proposed is the scope of bargaining over management 
rights. In the face of a committed and unpredictable enemy, the 
Department must have the authority to move employees quickly when 
circumstances demand; it must be able to develop and rapidly deploy new 
technology to confront threats to national security; and it must be 
able to act without delay to properly secure the Nation's borders and 
ports of entry. We propose that the Department not be required to 
bargain over the exercise of these rights. Our proposal provides for 
consultation with employee representatives both before and after 
implementation when circumstances permit. We have proposed to retain 
the same bargaining obligations as we have today concerning the 
exercise of the remaining management rights.
    We recognize that these are significant changes. They are necessary 
for the Department to carry out its mission and fulfill the 
requirements of the Homeland Security Act to create a 21st century 
system that is flexible and contemporary while protecting fundamental 
employee rights. We have developed these proposals with extensive input 
from our employees and their representatives. And we continue to 
encourage a dialogue as we proceed through the regulatory process.
    The comment period for the proposed regulations closed on March 
22nd--there are approximately 3,500 comments in the public docket 
including comments from members of Congress, the unions representing 
DHS employees, other employee groups, individual employees, and members 
of the general public. Those comments are being analyzed at this time.
    As required by the Homeland Security Act, DHS and OPM are reviewing 
all the recommendations from employee representatives and will prepare, 
after full and fair consideration of those recommendations, a 
Congressional notification which highlights those recommendations which 
have been accepted and those which have not been accepted.
    DHS and OPM have worked with the Director of the Federal Mediation 
and Conciliation Service to draft procedures to govern the 
legislatively-mandated ``meet and confer'' process--we will be reaching 
out to employee representatives who commented on the proposed 
regulations to include them in this process as appropriate. 
Additionally, DHS and OPM have continued to have discussions with the 
three major unions representing DHS employees--to ensure a clear 
understanding of their joint comments and to agree on the process going 
forward.
    We hope to issue final regulations later this year after the meet 
and confer process has concluded--and to begin, as indicated in the 
preamble to the proposed regulations, a phased approach to implement 
the regulations across DHS. We have asked for over $100 million to 
support the implementation of the regulations including monies to 
support training of our managers in the new system--implementation will 
continue throughout the next two fiscal years.
    In the interim, our employees continue to do outstanding work on 
behalf of the American people. We are proud of all we have accomplished 
in our first year. And, we are especially proud of the employees who 
have made it possible.

Information Technology
    Information technology will provide the Department of Homeland 
Security a competitive edge as it transforms into a 21st century 
agency. There is no mission endeavor that will not benefit by 
exploiting information technology to prevent terrorism, or to 
facilitate the movement of goods and people. Whether it is sharing the 
latest geo-spatial data with our federal, state, local, and tribal 
partners, or processing immigration benefits, information technology 
will enable smarter, more customer friendly solutions for America. 
Further, modern back-office systems to provide a responsible accounting 
of the taxpayers? funds and to manage a highly motivated workforce must 
be deployed quickly and cost effectively to manage our 180,000 employee 
workforce.
    Merging 22 agencies, also presents information technology 
challenges for our 21st century agency. Rationalizing disparate 
technologies with conflicting business rules, consolidating data 
centers and networks, getting the right information to border agents, 
preventing cyber attacks against our mission critical systems, or even 
having a common email system must be achieved to help detect and deter 
future terrorist attacks.
    The challenge facing the IT function of DHS is very complex. For 
example, to accomplish its dual mission of border security and trade 
facilitation, U.S. Customs and Border Protection (CBP) is modernizing 
its operational processes and the information technology that supports 
them. As an integral component of ``Smart Borders,'' the web-based 
Automated Commercial Environment (ACE) will provide CBP officers with 
the state-of-the-art tools and enhanced information they need to 
decide--before a container or other cargo reaches the border--what 
should be targeted because it is high risk, and what should be 
expedited because it complies with U.S. laws. The burden of paper-
intensive manual processing of goods will be significantly reduced, 
facilitating the movement of commerce, and reducing costs for both 
government and the private sector. The ACE will provide a single, 
centralized, on-line access point to connect CBP and the trade 
community, enabling businesses and their CBP account managers to have a 
national account view of their trade activity. Through the creation of 
a shared data warehouse, ACE will enable border enforcement agencies 
access to a large volume of information, streamlined data collection, 
and a significantly enhanced capability to share and analyze 
information. The ACE will ultimately be delivered to all ports, 
locations, and transportation modes.
    Ultimately, there are three major areas of focus with regard to 
information technology within the Department. The first is to ensure 
that the men and women on the front lines of the Department have all 
the IT enabled solutions, tools, and training they need to safeguard 
the United States and to deliver the Department's safety and service 
related missions. We must deliver new mission solutions with quality 
and speed, in a secure and cost-effective manner.
    The second area of challenge addresses the integration of existing 
IT enabled solutions. Guided by our Enterprise Architecture, the 
Department is identifying opportunities to consolidate and rationalize 
mission solutions. For example, in mission areas like threat 
identification and management, identity credentialing and 
collaboration, we have identified multiple solutions in use within the 
various organizational elements of the Department. The IT role is to 
facilitate the operators and subject matter experts in our agencies in 
determining the optimal number and nature of mission solutions needed.
    Finally, the third area of challenge is to realize efficiencies and 
economies of scale that the President and Congress desired by creating 
DHS. We must rapidly identify and eliminate overlap and redundancy 
within the IT infrastructure, as well as in key IT support programs 
including Information Security. At the same time, we must ensure that 
we maintain mission operations while we restructure, integrate, and 
consolidate our IT infrastructure.
    In his proposal for creating the Department nearly two years ago, 
the President highlighted the use of enterprise architecture techniques 
to improve both the sharing and use of information. The President 
stated that the ``development of a single enterprise architecture for 
the department would result in elimination of the sub-optimized, 
duplicative, and poorly coordinated systems, and processes, that are 
prevalent in government today. There would be rational prioritization 
of projects necessary to fund homeland security missions based on an 
overall assessment of requirements rather than a tendency to fund all 
good ideas beneficial to a separate unit's individual needs even if 
similar systems are already in place elsewhere.''
    The Department's leadership has discussed the vision and strategy 
of DHS and how that strategy must fulfill the President's vision; 
additionally, that vision must be supported by a disciplined capital 
planning and investment control process that is guided by business-
driven enterprise architecture. Version 1 of the enterprise 
architecture describes a target information management infrastructure 
that will be dramatically different from the one DHS has today. One 
that will provide timely, accurate, useful and actionable information 
to all individuals who require it all the time. We believe this effort 
was truly unique in the federal government in that we delivered a 
comprehensive and immediately useful target enterprise architecture in 
less than four months.
    Version 1 of the Homeland Security Enterprise Architecture (HLS EA) 
defines the enterprise architecture at a conceptual level and outlines 
a general transition strategy that must be broken down further for the 
architecture to be implemented.
    Version 2 is currently on track for completion early in the 4th 
quarter, FY04. Along with continuing the hard work of developing 
greater detail, we will continue reaching deeper to find more 
opportunities for consolidation and opportunities to develop new and 
improved mission support capabilities enabled by information 
technology. Version 2 of the enterprise architecture, together with the 
associated transition plan, will serve as the basis for further 
improving DHS mission performance and facilitating IT alignment, 
integration, and consolidation.
    By creating the Department, the Congress took a great step toward 
bringing together many of the Federal agencies involved in homeland 
security--Customs, INS, FEMA, and others. We've put significant efforts 
into integrating these functions, both at the level of technology and 
at the level of operational processes. We've built and continue to 
optimize a single DHS wide-area network, and we've established a common 
e-mail domain and Department-wide collaboration capabilities.
    Under the direction of Secretary Ridge, the Department was tasked 
with the creation of an integrated information technology (IT) 
infrastructure that supports the missions of the Department and is 
accessible by federal, state and local law enforcement agencies. To 
carry out that activity, the DHS CIO, with representation from every 
major DHS directorate and key agency/bureau, established the goal of 
``One Network'' by December 2004 and ``One Infrastructure'' by December 
2005.
    The DHS IT Infrastructure Roadmap, completed in FY 2003, delineates 
the integration, consolidation, and transformation of existing DHS 
infrastructures into a single world-class IT infrastructure capable of 
supporting real-time information flow throughout DHS. The Roadmap 
focuses on centralizing development of standards and protocols, 
improving transportation of information, and streamlining processes and 
procedures, to achieve a centrally managed, homogeneous IT 
infrastructure with an integrated network, consolidated data centers, 
and standardized collaboration and desktop environments.
    Immediately after the Department's formation last Spring, the key 
Federal agency partners laid the policy basis for information sharing 
in a Memorandum of Understanding that gives priority to preventing 
terrorism and mandates faster and broader exchange of law-enforcement 
and intelligence data. Additional MOUs and operating agreements 
implementing this policy have been developed around specific needs.

Watch List Consolidation, Interoperability, Information Sharing, & 
Infrastructure Protection
    In May, the President establish the Terrorist Threat Integration 
Center (TTIC), and DHS immediately assigned staff on site to coordinate 
information exchange, while technical staff have been working closely 
to establish secure communications for automated operations.
    Following issuance of HSPD-6, Secretary Ridge, Attorney General 
Ashcroft, Director of Central Intelligence Tenet and Secretary Powell 
established a framework for interagency cooperation to set up the 
Terrorist Screening Center for initial operations on December 1. DHS, 
FBI, and State Department staff have moved into this joint operations 
center, and have established the secure communications and systems to 
create a consolidated Watch List for use by all key agencies. At the 
same time, the agencies are planning for a 2004 milestone to further 
automate the distribution of these data by establishing direct system-
to-system links, based on a common data format.
    Agreed standards for data exchange are a key enabler for integrated 
computer systems. DHS is leveraging work already under way in the 
Department of Justice through its GLOBAL Information Sharing Initiative 
and the Intelligence Community's Metadata Working Group. Our goal is 
maximum use of common data formats so that Federal and local partners 
can build systems that will immediately interoperate with others, 
without expensive customization.
    In March, Secretary Ridge announced the initial deployment of the 
first component of the Homeland Security Information Network (HSIN). 
This component, based on software adapted from the Department of 
Defense, will provide secure communications between DHS and 100-plus 
sites in all 50 states and major cities. Additional capabilities will 
be added to the HSIN framework, which is designed to create a shared 
collaboration space among all Federal, State, and local entities 
partnering in the homeland-security mission.
    Whether fighting a fire or responding to a terrorist attack, 
efficient and effective emergency response requires coordination, 
communication, and the sharing of vital information and equipment among 
numerous public safety and security agencies. As the National Strategy 
for the Physical Protection of Critical Infrastructures and Key Assets 
makes clear, ``systems supporting emergency response personnel, 
however, have been specifically developed and implemented with respect 
to the unique needs of each agency. Such specification complicates 
interoperability, thereby hindering the ability of various first 
responder organizations to communicate and coordinate resources during 
crisis situations.''
    In line with the needs of emergency response providers and the 
National Strategy cited above, DHS has developed intradepartmental 
program offices to address several key homeland security priorities. 
Accordingly, DHS is establishing a program office to significantly 
improve interoperability, allowing firefighters, police officers and 
other emergency personnel to communicate and share equipment with each 
other during a major disaster. The Directorate of Science and 
Technology (S&T) within DHS has been tasked to lead the planning and 
implementation of the Office of Interoperability and Compatibility 
(OIC) in coordination with other DHS programs. By coordinating and 
leveraging the vast efforts spread across the federal government, OIC 
will reduce unnecessary duplication in programs and spending, identify 
and promote best practices, and coordinate federal activities related 
to research and development, testing and evaluation, standards, 
technical assistance, training, and grant funding related to 
interoperability.
    In a related vein, the Department has announced the formation of a 
Federal Advisory Committee on Data Integrity, Privacy and 
Interoperability to advise the Secretary and the Chief Privacy on 
programmatic, policy, operational, administrative and technological 
issues within the Department that concern privacy, data integrity and 
data interoperability. This Advisory Committee will serve an important 
function to ensure that DHS decision-makers have available the 
expertise of leading authorities on these matters as policies 
concerning data sharing are developed and implemented.
    There has been a tremendous amount accomplished since this 
Department was created, and we are fully cognizant that much more work 
remains to be done. We must also focus on further refining ourselves 
and our identity both operationally and organizationally. Some of these 
steps to accomplish this objective have been laid out for you today. We 
look forward to continuing to work with the Committee and the Congress 
in furthering our national goal of ensuring the security of this great 
nation.

    Chairman Cox. Thank you very much, Admiral Loy. We are, of 
course, on both sides of the aisle very proud of the 180,000 
plus people that work at the Department of Homeland Security. 
And as I mentioned and Mr. Turner mentioned and Ms. Dunn 
mentioned, the operational side of DHS couldn't be more 
important and more noticed by us in Congress and by the 
country.
    The importance of the operational side and the analytical 
side of DHS is one of the reasons that your management 
challenges are so great, because at the same time that the 
Nation expects you to execute all of these functions and 
perform all of these analyses and undertake all of these 
activities, we also want you to consummate this merger. We also 
want you to build from scratch brand new pieces of this 
enormous cabinet department that didn't exist before.
    I want to, just for flavor, put before you three quotations 
from different observers about the management challenges that 
DHS faces and ask you to react to them as scene setters. First, 
Professor Donald F. Kettle, who is a public administration 
expert, offers the observation that, quote, top officials have 
been able to devote relatively little time to the vast 
management problems of getting such a large operation up and 
running, because senior officials are so buried under the 
pressing day-to-day operational issues and have little energy 
and less time to devote to resolving management issues.
    Second, the General Accounting Office has observed that, 
``The challenges in integrating disparate organizational 
cultures and the major transformation that DHS is undergoing 
requires a strong Chief Operating Officer to elevate attention 
to and integrate management initiatives and institutionalize 
accountability for addressing them.''
    Third, ``Most independent experts,'' this is a quotation, 
``Most independent experts consistently find that successful 
change management initiatives can take from 5 to 7 years.''
    Given the challenges that DHS faces in merging 22 agencies, 
many with their own long-standing management challenges, the 
organizational transformation that you are trying to work, I 
would ask you to take into account some of these comments are 
critical, some mere observations, and tell us the following: 
First, how long do you believe it will take before the 
Department can achieve what you would consider to be full 
integration? And for that purpose, imagine your aspirational 
goal for what full integration could theoretically mean.
    Second, do you see yourself as filling the job description 
of the strong chief operating officer? And I don't mean for you 
to have to evaluate your strengths and weaknesses but rather 
the box that you have on the chart. Is that job that you hold 
responsible for being the strong chief operating officer that 
GAO says that we need?
    Third, is there anything that we can do organizationally, 
that Congress can do to assist you in this respect so that this 
taffy pull that Professor Kettle mentions that you have got to 
do two things at once--you have got to run the place, and then 
you have got to tackle the management challenges--that it isn't 
a distraction but rather we can do both simultaneously?
    One option, as you know, this committee is considering is 
transferring the components of the management directorate to 
the Office of the Deputy Secretary. TIOs, by way of example, 
and the Department of Transportation and Commerce are located 
in the Office of the Secretaries, elevating positions such as 
the CIO and the CFO would enable them to more easily and more 
efficiently guide Department-wide policy efforts.
    What are your thoughts? Do you agree that reform such as 
that might help enhance overall management of the Department?
    Admiral Loy. Thank you, Mr. Chairman. It is a very wide-
ranging question. Let me see if I can take it in pieces. First 
of all, with respect to how long it will take, of course we all 
have as a reference point the last time we tried this kind of 
reorganization in the Federal government was about 1947, and it 
took us about 40 years, and that just got us to Goldwater-
Nichols where we had an awful lot more work to do after that. 
So that standard is certainly something that we are not abiding 
by.
    I truly believe, sir, given where we have come from, and 
even some of the numerical references I tried to give you in my 
opening testimony where we started with 19 of these and are at 
10 now on our way to 1; where we started with 22 of these and 
we are on 7 now, on our way to 1. There is a bit of evidence 
there that suggests even in the face of sort of saying, ``Well, 
we took the low-hanging fruit, the easy stuff early and the 
rest of the way to 1 is going to be very difficult,'' that that 
functional integration effort, I believe, by the time this 
Department is celebrating its third birthday should largely 
have been accomplished. And the framework associated with it 
should in fact be in place, including largely the cultural buy-
in, if you will, from the 22 disparate organizations that came 
together to form the new department.
    I think we at the top of the organization have to stress 
this DHS identity. The notion that it is a ``one team-one 
fight'' slogan, if you will, from Secretary Ridge is a very 
real rallying cry for many in the Department.
    And I also believe that it has an enormous amount to do 
with keeping the other leaders in the organization--the agency 
heads, the undersecretaries--on board with the direction that 
we are going. That is why all of those players were in the room 
when we went off to our off-site to develop the strategic plan. 
I was not interested in someone being able to say, ``I didn't 
have my opportunity to see where we were going and now I am not 
going there.'' They were all in the room, believe me, and they 
all contributed, and what we ended up with, with our vision, 
mission and goal set, is a package deal bought into by every 
member of that leadership team. The ownership that we walked 
out of there with is a statement about everybody going in that 
direction.
    So I would think, sir, that at end of the third--when this 
organization is celebrating its third anniversary, we will have 
accomplished this framing integration effort functionally that 
we have set out to do.
    This notion of whether or not the Deputy Secretary is the 
right place to push that, I think without a doubt, sir, that it 
is. It is the only place that the entire Department comes 
together, and the committee's expectation of what the COO ought 
to get done should rest with that position in the Department.
    To that end, I look forward to conversations and work with 
you on whether or not organizational elements such as you 
suggest with respect to the Undersecretary for Management would 
be better served in an adjusted position within the Department. 
At the moment, I feel absolutely no qualms in reaching to the 
Undersecretary for Management and as necessary to the CFO-CIO. 
I spent personally an awful lot of time with the CIO, with the 
CFO, with others at that level.
    We have arranged a meeting standard in the Department where 
the Secretary personally meets with all of the undersecretaries 
and his direct reports once a week. I attend that meeting and 
then have another meeting with a widened horizon that pulls all 
those players to the table, and I am able to hear literally on 
a weekly basis from every one of those places inside the 
Department.
    So how you go about the engagement process I think is 
absolutely crucial, and I think the right place you put the 
responsibility is in the Deputy Secretary's chair.
    What can the Congress do to assist? You have offered at 
least an initial notion, sir, with your comment about the 
Undersecretary for Management. I suggested in my opening 
comments that there are a couple of places that we have come to 
recognize where if the threats to this Nation are really looked 
at carefully in terms of maybe a pie chart that has segments 
about the threat itself, the likelihood of the threat and the 
consequences of the threat, several things to me have literally 
jumped off the table with respect to the consequence piece.
    So I offered in my opening remarks at least a short 
inventory of things nuclear, of things biological and of things 
cyber that may actually be something that we want to focus our 
attention on organizationally as well as functionally. We have 
not made those judgments yet inside the Department, and I have 
not taken to the Secretary any recommendations in that regard, 
specifically, but those are several things, sir, that we are 
already talking about.
    Chairman Cox. Thank you very much for your complete answer. 
I look forward to working with you on these aspects and 
challenges.
    The gentleman from Texas, Mr. Turner?
    Mr. Turner. Thank you, Mr. Chairman. Thank you again, 
Admiral Loy. Now, sometime if I take a big picture view of what 
we are facing and the challenge we are trying to overcome, it 
strikes me sometimes that we have yet to really fully 
understand and comprehend the changed world that we live in. 
For decades, we all knew that protecting the national security 
was carried out primarily by the Department of Defense--the 
Army, the Navy, Air Force, the Marines.
    Admiral Loy. Coast Guard, sir.
    Mr. Turner. Coast Guard. Absolutely, yes, sir. And in the 
post-September 11 world, we were confronted with the fact that 
the enemy was one that we have not dealt with before and that 
this war against our terrorist enemies is not going to be won 
by simply toppling states that may be terrorist havens, because 
terrorists can find havens in many places in the world. And by 
our actions to merge 22 agencies, I think what we were really 
saying is that we now have 22 new agencies who must be 
dedicated to the same mission as the Department of Defense, and 
that is national security.
    And the Congress, to my knowledge, has never hesitated to 
fund whatever is necessary in the Department of Defense to 
protect our national security, but I am convinced that we have 
a long way to go in terms of fully carrying out the task of 
securing the necessary resources, necessary programmatic 
efforts necessary to protect the national security in this new 
environment.
    And I am pleased to hear your thinking, particularly along 
the lines of your personal efforts to try to think in terms of 
the threat, the likely threat and the consequences, because it 
clearly is the catastrophic event that we must fear the most.
    I hope you will take a look at a bill that I introduced 
Tuesday to try to move us forward in a more rapid pace in the 
area of bioterrorism to deal with the--.
    Admiral Loy. Certainly will, sir.
    Mr. Turner. --piece of the picture that I think is being 
neglected.
    But when I think about the fact that a lot of those 
agencies, let's say Customs and Border Patrol, for example, 
were engaged prior to the merger in a task that we all knew was 
important, that is protecting our borders against illegal 
immigration, and yet we know that there are estimates now that 
in spite of all those previous efforts, there are somewhere 
between, I am told, 7 to 12 million illegal immigrants in this 
country today.
    And so all of a sudden in the post-September 11 environment 
we have decided that there can't be any because one of those 
illegals might be a terrorist. And so we are trying to 
reconstruct the agencies of government to ensure that what was 
previously just a law enforcement function that it didn't work 
perfectly, we could all probably live with it without great 
danger, and so we ended up with 7 to 12 million illegal 
immigrants in this country. Now we have declared we can't have 
any. And that is a major shift in the responsibility of 
government.
    I have had a lot of concerns about this issue of 
information sharing. I am sure the 9-11 Commission is going to 
be full of recommendations for us on how to solve the 
information sharing task, and you and I had a conversation in 
my office a few weeks ago about the need that I see and I think 
you share to develop a comprehensive intelligence information 
sharing system that can collect intelligence and share it among 
a wide variety of Federal agencies in real time so that when 
you are looking at someone who is crossing our border and you 
work for the Customs and Border Patrol agencies, you can say, 
``I can find out what my government knows now about this 
individual that is coming across the border.'' And so that 
local law enforcement officials when stopping somebody who 
might be speeding and looks suspicious can find out in real 
time what all of our government agencies know.
    I have concerns that, even sitting on some of the 
classified briefings we have from time to time, that different 
agencies of government who brief us on threats are not even 
saying the same thing. So, if you will, address this issue that 
I know you have concern about. I think I suggested once that 
you look at what the Miracle Foundation software was to try to 
develop a comprehensive information sharing system.
    Are we working toward that end? Are we still working within 
the FBI and still working within DHS to improve IT and yet have 
we come to grips with this concept of total intelligence 
information sharing in real time and how we are going to have 
to go about getting that?
    Admiral Loy. Yes, sir, I am happy to comment on that. Just 
this last week I have been personally involved three or four 
hours a day in an eligible receiver exercise which puts at the 
table all the players in the Federal government with a scenario 
being played out. This particular one had to do with a ship 
coming towards the United States, and a lot of inputs to the 
exercise offered insight that there might be something on that 
ship that we were very concerned about. And then proceeded to a 
national capital region kind of scenario where in fact there 
was already a device somewhere in the United States, and more 
and more evidence became focused on the capital region.
    I only use that as a forum to offer for you that the 
sharing process you were describing, such that whether the 
agency found it out or whether the Bureau found it out or 
whether some longshoreman on the port in Norfolk observed it 
and made it an observation to whomever and passed it up the 
line, through the course of this exercise this week I felt 
better than I have ever felt with respect to all players seeing 
all information and being able to make judgments toward their 
responsibilities attendant to that.
    I would extend your concerns, because I know you have them, 
sir, as you expressed them, about the sharing process among 
Federal agencies to include the down-the-line--that horizontal 
sharing is very, very important, and I think the establishment 
of TTIC and the TSC are concrete steps along the path toward 
where we want to be in that regard.
    Now, are they permanent steps or not? I think that is a 
judgment to be taken down the road when TSC, for example, who 
is in the process of developing the integrated watch list has 
accomplished its purpose, although it is a dynamic one with 
people coming and going on to that list every day. Once that 
purpose has been accomplished, is that the final organizational 
placement, a freestanding agency for our terrorist watch list? 
I think that is to be determined down the road.
    But the TTIC organization, which absorbs all source 
intelligence, foreign and domestic, to grapple and have at 
their analytical table, if you will, the means to think through 
the bigger picture, that process seems to be working very, very 
well. John Brennan, I believe, is doing one of the most 
positive jobs that is being done in our Federal government as 
the Director of TTIC.
    I was just in New Hampshire last week, sir, Kentucky the 
week before, announcing the establishment of the Homeland 
Security Department's piece of that action, which is to take 
the products of an all-source intelligence activity and read 
them through the lenses of the homeland security glass and then 
share them vertically down through State and local activities 
to get to the other end. This little chart is just a little 
depiction of the homeland security information network that we 
delivered and activated in New Hampshire and in Kentucky just 
last week, which will be at 50 State and 6 territories and 50 
of our largest urban centers to the point where that traffic 
police officer will have at his disposal real-time information 
about who he might be dealing with as he pulls over someone for 
a speeding violation.
    So we are well on the way to accomplishing your vision, I 
think, Mr. Turner. Lots of work still to be done and the edges 
and the marginal adjustments to those things to make sure they 
are right, but I think your vision is no different than that of 
all of us who are working so hard to make it happen on the job.
    Chairman Cox. Gentlelady from Washington, Ms. Dunn, is 
recognized for 8 minutes.
    Ms. Dunn. Thank you, Mr. Chairman. Thank you. I have a 
couple of questions, Admiral. According to a study by a leading 
consulting firm, most corporate majors fail to deliver results 
that meet expectations. The study found that the failures were 
most often attributable not to flawed vision but to poor 
integration. This is obviously not your average two-party 
merger. We are dealing with 22 distinct organizations with 
distinct cultures. What are the control mechanisms that you as 
a manager of this project are focusing on, number one? And 
given the reality of the political climate and the pressure to 
get things done as quickly as we can, with your priority list 
constantly changing, how do you decide what is or is not a 
realistic expectation?
    Admiral Loy. It is a great question and one that we pour 
over daily in the Department, Ms. Dunn. I think I would answer 
it this way: The Secretary, by way of the strategic plan with 
respect to functional excellence in five action goals and two 
service goals, if you will, has challenged each and every 
member of the Department to rise to the occasion and be part of 
the new way of doing business in government. That last goal, 
called organizational excellence is all about forging a 21st 
century cabinet-level agency, not being bound by the baggage, 
if you will, or even the legacy sometimes enormously proud of 
may of those agencies that came together with us on March 1 
last year.
    We have forged over the course of this year not only those 
evens strategic goals but then these theme areas which the 
secretary has now sort of pulled into a core of absolute that 
we believe are the crucial keys to the functional integration 
of the Department at the other end of the day.
    So 3 years from now, as I indicated to the chairman, when 
we wake up on that March the 1st, if we have played our cards 
right, if we have led and managed well, if we have delegated 
well to people who perfectly are able to the job done that we 
asked them to get done, as long as we are clear and provide 
them the resources to do it, I think we will be where we want 
to be in these seven core theme areas. So that is about the 
things that make a difference as to whether our homeland will 
be secure.
    It is about better critical infrastructure protection, it 
is about better information sharing, to go back to Mr. Turner's 
point, it is about better interoperability. God knows if we 
learned a single lesson from the horrors of September 11 in New 
York it was that the firemen could not talk to the police 
officers, who couldn't talk to the EMTs, who couldn't talk to 
their base. That is totally unacceptable.
    So when the interoperability theme was provided and a rose 
was pinned on one senior leader in the Department to be 
responsible for that, his responsibility is not to live within 
his little cell and make it happen. His responsibility is to 
reach wherever he needs to reach to pull together the 
wherewithal to make that happen.
    I am personally monitoring those things month after month 
after month, looking at the milestones and the individuals 
responsible for that work, and it is that commitment, if you 
will, I believe, that will make a difference to allow this 
merger, which you properly describe as enormously challenging, 
to succeed at the other end of the day.
    I mean it is trite to say failure is not an option and such 
things as that. It is far more fundamental to have in place the 
mechanics necessary to take us from where we are to where we 
want to be.
    Ms. Dunn. Very interesting. Thank you. You actually 
answered my second question, so let me put to you another one. 
I appreciated your detailed description about the progress the 
Department is making in consolidating the functions of the 
systems and so forth. And so let's talk for a minute about 
program consolidation. It seems to me that one of the critical 
benefits gained from consolidating all those agencies is that 
all components would be able to take advantage one mission-
centered R&D program. What is your response to that 
observation? And how are we making sure that R&D efforts are 
also being coordinated Department-wide?
    Admiral Loy. Two things. First of all, you are absolutely 
right on point with a very important part of what we are trying 
to do. The science and technology directorate, under Dr. 
McQueary's direction, is responsible for this particular one. 
And his outreach with respect to functionally integrating the 
R&D efforts as well as other science and technology 
applications for the Department is where we hold him 
responsible over time.
    There is probably--some might see it as a complication, I 
don't perhaps necessarily do--but in the law that created the 
Department, there is at least two organizations, the Coast 
Guard and the Secret Service, that have been decreed in the law 
to ``stay in tact,'' quote, unquote, as they came into the 
Department, for very good reasons. But what I imagine, for 
example, with respect to the R&D process is a several-fold 
approach. One, what do we do with laboratories inside the 
Department and laboratories that are outside the Department but 
actually can bear on what we are doing in DHS? The integration 
of those efforts functionally are a fundamental absolute for 
Dr. McQueary to have some degree of control over what is going 
on there.
    The second thing is about customer requirements. Dr. 
McQueary should not sit in his cubicle and imagine what are the 
right R&D programs to be defined for the Department of Homeland 
Security, he must be aggressively accepting and challenging his 
customers, including the other directorate chiefs and 
undersecretaries in the Department to define for him the things 
that will make their work better.
    For example, having spent a couple of years at the 
Transportation Security Administration, I can tell you that our 
goal there is in the longer-term to get away from heavily 
people-dependent technologies at our airports and on the way 
toward some smaller, faster, better box that will be the 
enabling device 3, 4, 5 years from now to replace lots and lots 
of people with a capable piece of technology that can do the 
security job that we want done at the airport.
    So I would offer that that is not where Dr. McQueary would 
logically wake up in the morning, but I can tell you Dave Stone 
wakes up in the morning thinking about that, so Dr. McQueary's 
review of customer requirements has to be a complete one. And 
when that is complete, then the Secretary can help Dr. McQueary 
define priorities in terms of what his budget allows him to get 
on with. But in that scheme, he is serving a customer base that 
is, as the Department, representative of R&D needs across the 
Nation.
    Chairman Cox. The gentlelady's time has expired. The 
gentleman from New Jersey, Mr. Andrews is recognized for 8 
minutes.
    Mr. Andrews. Thank you, Mr. Chairman. Thank you, Admiral, 
for your testimony and more importantly for your service to the 
country. It is very much appreciated.
    Admiral Loy. Thank you, sir.
    Mr. Andrews. This morning, if a person who was on the CIA 
watch list tried to board an airplane, would the TSA know that 
in real time? Would the know the person who tried to get on the 
airplane is on the CIA watch list?
    Admiral Loy. To the degree the--you are referring--we have 
two lists, sir, that are in use, if you will, at the airports, 
and they are actually used by the airlines as well as TSA for 
the moment. That is what the CAPP system is all about at the 
moment. And the means by which we offer insight to the no-fly 
list and the selectee list offers guidance as to whether or not 
that person gets on the airplane at all, no-fly list, or 
whether he gets on the airplane with secondary screening if he 
is on the selectee list.
    Mr. Andrews. Is there anybody who is on the CIA watch list 
who is not on these two lists that the TSA has?
    Admiral Loy. Sir, I am not sure what you are referring to 
as the CIA watch list. The CIA makes a contribution to these 
two defined lists that are if not real time certainly within a 
24-hour window updated daily.
    Mr. Andrews. Isn't there supposed to be one list? Isn't 
that what an integrated watch list is?
    Admiral Loy. Actually, it is the Terrorist Screening Center 
that is developing an integrated single watch list for all of 
us to use across the Nation, and when that product is complete, 
that is precisely the list that we will be using, sir.
    Mr. Andrews. Okay. So it is at least logically possible 
that the CIA has a list of people that they are watching 
because they are worried about them and that some of the people 
who are on that CIA list are not on the same list that we are 
using to keep people off of airplanes. Is that right?
    Admiral Loy. It is conceivable, but in my practice, sir, 
the CIA, the Bureau and others who can make a contribution to 
either of those lists I just described, one is associated--the 
no-fly list are those terrorists that have been deemed so or 
those who associate with terrorists, and the selectee list is 
just a lesser level of concern but offers us a chance to not 
just pass them through primary screening but require that they 
go through secondary screening.
    Mr. Andrews. But we are still relying upon someone at CIA 
or FBI to insert that information on the list that TSA is 
using, correct?
    Admiral Loy. That is correct, sir.
    Mr. Andrews. So if TSA doesn't ask or CIA or FBI don't 
offer the information, it doesn't wind up on the list, doesn't 
wind up on the list that keeps people off an airplane.
    Admiral Loy. That would be correct. My experience has been 
they do project those names forward and we put them on the 
list.
    Mr. Andrews. Okay. Isn't that why we wanted an integrated 
watch list, so we wouldn't have any possibility of someone 
getting to it 48 hours late or forgetting to ask? Isn't that 
why we wanted it?
    Admiral Loy. One of many reasons, but, yes.
    Mr. Andrews. Okay. Why don't we have one? We are two and a 
half years after September 11. I mean I know almost nothing 
about running an intelligence operation, and I know even less 
about software, but what is the big deal about taking a list 
that the CIA and the FBI had, merging it into one secure, well 
vetted, limited access database that everybody uses? Why 
haven't we done this in 30 months?
    Admiral Loy. That particular chore was assigned and is 
precisely the reason that the President chose not to wait for a 
maturing process of a new department to come into vogue but 
rather establish the TSC to stand up and do that job. That is 
exactly what they are doing.
    Mr. Andrews. But the job isn't done yet. The TSC hasn't 
done it. Is there something more complicated here than saying 
everybody who is going to make a contribution to a list that 
people have got to worry about has got to put them all in the 
same list and same database? Is it more complicated than that?
    Admiral Loy. It is a very complicated system, sir, but I am 
not the one responsible for that at the moment. I would be 
happy to find out from the Director of the TSC and get back to 
you.
    Mr. Andrews. Well, you know, we are here talking about 
management issues, and, boy, if this isn't a management issue, 
I don't know what is. And this is not a rhetorical question. 
There may be something far more complex about how to do this 
than what I just said, and if there is, I welcome to hear it, 
but I haven't heard it yet, and I just don't understand why all 
of the intelligence sources that are out there working on these 
problems, they are not contributing to a common database that 
has very secure access, very limited use by very trustworthy 
people.
    I just don't get this, and we have had various people from 
the Department before the committee over about an 18-month 
period now giving us deadlines that don't get met and 
procedures that don't seem to come about. I appreciate the fact 
that you will get us an answer from someone who is supposed to 
be doing the answer, but we have had that before, and I just 
don't understand this.
    And I will tell you something: The number one job of the 
Department is not simply to make us safer, it is to build 
confidence in the public that we are in fact safer. And this is 
not a confidence-building measure here, and I understand that 
you have been given--you and your colleagues have been given 
probably the most difficult organizational merger in the modern 
history of the United States, public or private sector, and if 
the issue here were that the health benefits weren't uniform 
among different agencies, I am sympathetic to that but I 
understand.
    Admiral Loy. Yes, sir.
    Mr. Andrews. If the issue were that you have got stovepipe 
computer systems that can't necessarily share data in an 
efficient way, I understand. If the issue were that you haven't 
worked out the encryption technology so that you can carefully 
limit such a secure database as the integrated watch list, I 
would understand. What I do not understand is that we are here 
2 years later and we still don't have this in place. I mean can 
you tell us when we will? I mean I know it is not your specific 
responsibility, but when is this going to happen?
    Admiral Loy. I think the goal is to have it done very soon, 
sir. I don't have the dates in my mind as to what the TSC 
Director is obligated to accomplish, but I know she is on 
track, and I will be happy to talk with her today and ask her 
to get back to you on the specifics of her responsibility.
    Mr. Andrews. I appreciate that, and not just me, but the 
committee.
    Admiral Loy. Sure.
    Mr. Andrews. I know that Mr. Turner has worked on this 
issue, Mr. Cox has worked on this issue, a lot of people have, 
and I do not mean this as any way an attack on the 
administration. It is a question that I think needs to be 
answered. And if I have missed some technical explanation, 
please tell me, but I think everybody at the Department is 
responsible for this.
    I think you very succinctly said that the goal of the 
Department is to deter and then prevent, if possible, attacks 
on the homeland. That is the best I have heard it said. But you 
can't deter and prevent if you don't know who it is you are 
trying to guard against. And if we have viable operational 
intelligence about who it is we are going to guard against and 
it is not shared among all the agencies that have that function 
responsibility, then we have a huge problem.
    Final thing I want to say this: Interoperability, there is 
not a person who follows this issue that doesn't understand 
that this tower babble problem is a big deal. The amount of 
money the administration put in the budget for interoperability 
this year is zero--zero. Now, I am not in favor of spending a 
whole lot of money until we figure out how to fix the problem, 
but part of figuring out how to fix the problem must include 
calling together the experts in this field to design a system 
that works. Why did you propose nothing in the fiscal year 
budget for interoperability if it is a problem?
    Admiral Loy. Well, there is an awful lot of money in the 
budget in a variety of different programs that we feel do need 
to be brought together to provide this interoperability 
solution that we are all looking for, whether it is an interim 
or temporary patch process of which there are very, very good 
products out there to help us do that or whether it is the 
design of an entirely new system that over time we need to go 
to.
    In many of those places where there is a system that is 
serving the police officers and a separate one serving the 
firemen and a separate one serving EMTs or whatever, the 
dollars associated with those programs are what we find a means 
by which we can integrate the wherewithal from the combined 
budgets of those separate systems as disparate systems. That is 
what I think functional integration is all about.
    Mr. Andrews. Well, and I see my time is up. I would say 
with all due respect that paying for solving interoperability 
problems by depleting other resources is not the way to do 
this.
    Admiral Loy. Well, I was not suggesting we would deplete 
sources, sir. I would suggest we would use those resources in a 
smarter way than they have been used disparately to this point.
    Mr. Andrews. It isn't very smart if the money comes from 
training or biochem suits for first responders, and I don't 
know what else is in the budget that it would come from. So 
thank you very much, Admiral, I appreciate it.
    Chairman Cox. The Chair would note with to the gentleman's 
questions about the Terrorist Screening Center that the 
committee just had a hearing on this subject a few weeks ago. 
The committee is very, very concerned with this. I would also 
note that the question whether the Terrorist Screening Center 
should come under the responsibility of the Department of 
Homeland Security is a very good one. It is one that the 
committee is interested in, but the gentleman is well aware 
that it is not the responsibility presently of the Department 
of Homeland Security, it is the responsibility of the 
Department of Justice and the FBI. I hope we will continue to 
do this question.
    Mr. Andrews. Will the chairman yield just for a moment? I 
do note, and I did say, that I think the committee has been 
very diligent in pursuing this issue. I hope that diligence 
continues, because we should not let some jurisdictional 
barrier get in the way of getting an answer to this question.
    Chairman Cox. The gentleman's point is well taken. The 
gentleman from Texas, Mr. Sessions, is recognized for 8 
minutes.
    Mr. Sessions. I thank the chairman. Admiral Loy, welcome--.
    Admiral Loy. Morning, sir.
    Mr. Sessions. --to this subcommittee. We, as you have 
heard, place great value upon your competency and your capacity 
to serve this great Nation in homeland security.
    I would first like to start by saying that I had an 
opportunity several weeks ago to be with your Air and Marine 
Interdiction and Operations Unit in San Angelo, Texas and 
Corpus Christi under the direction of Colonel Charles 
Stallworth who is doing a fabulous job. The men and women who I 
came into contact with are very proud not only of the 
Department and the achievements that have been made but also of 
their job and the ability that they have to perform that duty. 
And I think that speaks well of many other things which the 
Department is doing well and hopefully will continue to do.
    I also, sir, have had an opportunity over the last couple 
weeks to talk to Judge Bonner and Mike Garcia who worked for 
one of our former colleagues, Asa Hutchinson, who I think is 
doing a fabulous job also. The nature of the questions that I 
would like to have you address are specifically two.
    One about the aerostats, which are these balloons, tethered 
balloons, which are along our Southwest border. They were 
transferred to the Department of Defense. The Department of 
Defense over the last few years has had a change of focus for 
them, taking from necessarily those functions that they were 
doing to war, and I believe that there has not been a proper 
focus put on the proper manning, funding and utilization of 
those aerostats.
    Secondly, the question I have deals with essentially legal 
immigration into this country with a visa. And it is my hope 
that there would be some discussion, and I am interested in 
hearing from you today, about those avenues which where people 
come in. There are about 130,000 of them that stay. I have had 
direct conversations, as I alluded to, With Judge Bonner and 
Mike Garcia about a willingness of this Nation to understand 
about everybody that comes here, everybody that does not leave, 
a process.
    Once again, we are dealing with legal people, but they have 
come to this country and said that they would come here under 
the provisions that we said and they should leave under the 
provisions that we have laid out. And I believe that it is in 
the best interest for us to have a legal framework that it is 
very difficult for us if we do not follow our laws and to 
insist that our laws be well understood.
    And so I am interested in a discussion about aerostats, and 
if you tell me you don't know a lot about it, I can understand 
that. I would like to ask that you follow up. And, secondly, 
about the discussions that are taking place over the some 
130,000 people that violate our laws and the things that I 
believe need to be done, could realistically be done in that 
endeavor. And I appreciate the gentleman's response.
    Admiral Loy. Yes, sir. Thank you. With respect to 
aerostats, I go back a long way with aerostats in the 
counterdrug efforts of my time in the Coast Guard and working 
diligently with the Border Patrol, with the then legacy Customs 
Service and INS as well as DEA and all the other players that 
were involved in that process and recognize the value of what 
the aerostat offers in terms of border value, sensor value, 
eyes in the sky, if you will, at the other end of the day.
    I think there probably was waning of interest in terms of 
what was actually associated with the aerostats along the 
Southwest border of the United States, which I assume, sir, 
that is the ones you are talking about, because we have got 
them elsewhere as well. And their contribution, which was 
largely hinged in the tail end of 10 years ago to the drug 
trade and what we were trying to do on the counternarcotics 
effort, that probably did wane in terms of focus and interest. 
Certainly, in terms of the DOD's responsibilities that are so 
widespread at this point would continue, I would think, to have 
them less focused on the maintenance and the manning and the 
staffing and the support to them at this particular point in 
time.
    But what I can tell you is since September 11 there has 
been a dramatic resurgence of interest in border control writ 
large, whether it is up to 1,000 Border Patrol agents on the 
Canadian border where we used to have fewer than 400, whether 
it is the R&D, to go back to Ms. Dunn's question about focusing 
on UAVs as a different way of dealing with sensors over our 
borders, maritime or land borders with Mexico or Canada.
    So the notion of whether or not aerostats play dramatically 
into our concern level about border issues is, I would think, 
on the rise and rising. And so we would be remiss, I would 
think, to set aside the use of the aerostats for the moment 
until there is a better mousetrap in place, so to speak, to 
take the place of what they are providing us in the way of 
censoring capability.
    So I am an old fan of them and a current fan of them until 
we get something better in place that would serve the purpose 
that they serve for us as a piece of the bigger picture of 
border control.
    Mr. Sessions. It would be my hope with respect to this, if 
I could, Admiral, to pass along that I will in a letter to you 
about perhaps the information which I had received about those 
activities related to the utilization of that. And I will be 
pleased to do that and would appreciate a response back. And 
you can give it to me. It does not have to be to the committee.
    Admiral Loy. Honored to do so, sir.
    Mr. Sessions. So that I can deal with it on an issue basis 
where I receive factual information and perhaps just not 
heresy.
    Admiral Loy. Sure. You bring up the issue with respect to 
migrants, and I would say there are three things that are very 
important for us to hold on to, because that is a very complex 
question. First of all, visa policy for the United States of 
America. We inherited the responsibility for visa policy from 
other executive branch agencies as it came in our direction. 
The Secretary has asked Undersecretary Hutchinson to take on 
the challenge in very quick fashion of examining the visa 
policy of the United States of America, together with the State 
Department and all the other players, and get back to him in 
very short order--I believe there is a scheduled briefing for 
the Secretary next week--as to the overview, if you will, of 
visa policy in our country.
    Second point is about portal control, if you will, and we 
as a Department are now responsible for that. I can suggest, as 
many of you know, that legacy INS was unable over the course of 
the last 20 years to develop an adequate entry-exit system for 
the United States of America. In the course of 7 months we 
stood up US-VISIT where millions of people have now come and 
gone through that particular system and effected, if you will, 
a control of the borders at the portals of entry to our 
country.
    We have now in 114 airports, 15 different seaports, we will 
have US-VISIT at the 50 busiest land border crossings of our 
country by the end of this year and at all of them by the end 
of next year. All of that is associated with the ongoing work 
with our international colleagues in terms of standard setting 
about passports and all the affiliated things that are 
connected to that.
    So border and portal control, a function now the 
responsibility of our Department, we have made, we believe, 
dramatic steps forward in establishing the end game with 
respect to that.
    And then, lastly, with respect to the naturalization 
process itself, many of those folks you are describing may very 
well be coming to our country with every intention of becoming 
honorable Americans at the other end of the day. Today, a 
system we inherited, by the way, is a broken system with 8-or 
9-year waits for that process to run its course. The President 
has very clearly said, ``Make that no longer than 18 months,'' 
and we are in the business of establishing clear pilot programs 
that will prove to us the means by which we will get that 
backlog reduced to where it should be in a reasonable system, 
as the President has directed us to do.
    So it is a complex question, sir, that you ask. I believe 
we have--our intentions are honorable and in the right 
direction with respect to those three aspects of it, and I hope 
in there somewhere was the answer to what you are concerned 
about.
    Mr. Sessions. I thank the gentleman. In fact, I believe 
that there should be some very specific things that this 
administration would come into contact with that, and my point 
would be is that we live in a legal framework of this country, 
and if we do not enforce the laws of this country, we allow 
other people to come and take advantage of that, and they 
become criminals. It would be my hope that there would be an 
immediate response that we would know who was nearing the end 
of their term, that they would be expected to leave and that we 
would not allow anything other than that and would take them on 
an expedited basis, perhaps for legal.
    I will follow up with a letter to you and would expect a 
response accordingly. And I thank the gentleman and thank the 
chairman.
    Chairman Cox. The gentleman's time has expired. The 
gentleman from California, a member on the Subcommittee on 
Cybersecurity, Science and Research and Development, Ms. 
Lofgren is recognized for 8 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman, and thank you, 
Admiral Loy. There are many things I would like to ask you 
about, and I am not sure there will be time to ask them all, 
but I do want to focus in on the Cybersecurity Subcommittee.
    Over the past year and a half, members of this subcommittee 
have spent a lot of time looking at what I think are sometimes 
very complex issues involved in securing the Nation's critical 
cyberinfrastructure. And as we have done that, we have looked 
at the Department's commitment to pursuing a sound strategy on 
cybersecurity, and I think members of the subcommittee have 
serious concerns about our accomplishments in that area.
    We are concerned that we are not doing an adequate job, in 
all honesty, and recently--well, the concerns really lie with 
whether we are sufficiently implementing the national strategy 
to secure cyberspace, whether staffing is adequate--I think 
that was mentioned earlier--not only in terms of the actual 
number of staff but the number of temporary employees, the 
turnover and also the placement of the division sort of buried 
down in the bowels of the bureaucracy and whether it is getting 
the attention that we need, and, furthermore, concerns about 
channels of communication between that division and the top 
levels of the Department.
    And in fact last week Chairman Cox, Ranking Member Turner, 
Chairman Thornberry and myself sent a letter to Secretary Ridge 
regarding the cybersecurity mission at the Department. Have you 
seen this letter? Are you aware of the letter?
    Admiral Loy. Yes, ma'am. We have gotten your letter.
    Ms. Lofgren. And we have asked, the four of us, for a 
response by Monday, May 10. Do you think the Department will be 
able to meet this deadline that we have asked them to meet?
    Admiral Loy. I certainly--it is now very much clear in my 
mind that that was the deadline that you are asking for, Ms. 
Lofgren. We will try very hard to do that, and I will take that 
back as I go back today.
    Ms. Lofgren. Okay. Thank you very much, and I would just--I 
hate to be a nag but I also wanted to raise an issue because it 
has happened repeatedly that we have asked Mr. Liscouski and 
others to follow up with questions that we have not had answers 
to at the Department, and we just don't get answers. It is like 
the questions go in, it is a black hole, months go by, we never 
get answers. And I am wondering in your management capacity if 
you could check and see what is the problem there on getting 
answers back to the committee.
    And also, again, we take our oversight commitment very 
seriously, and I am proud to say that the Cybersecurity and 
Science Subcommittee has operated in a very bipartisan manner. 
We not only have Chairman Thornberry work as a team but our 
staffs have worked as a team. We see this as not a party 
mission but an American mission.
    We never get testimony in a timely manner from people 
within the division. The rules are that it be 48 hours in 
advance. Sometimes we get it an hour before the hearings begin. 
That is really not--it is happening over and over again, even 
after we complain. And it does not give the committee time to 
fulfill its obligations of oversight. So I would like you also, 
if you would, please, to find out what is the problem there so 
that we can get that corrected.
    I would also like to talk just a little bit, it is not in 
the Cybersecurity Subcommittee, but about the Immigration 
Service, former Immigration Service, and that function. I also 
serve on the Immigration Subcommittee in the Judiciary 
Committee, and that whole function has been troubled for many 
years, as you have acknowledged, but I am fearful that we are 
not making the progress that we should make, in all honesty.
    The President has indicated he wants the backlog to be 
decreased. In fact, the backlog is growing. It is not 
shrinking, it is growing, and the time for processing is 
growing. And that, actually, although sometimes it may seem 
that it is not a security issue, I mean these are petitions of 
American citizens for their husbands or wives or adoptions, it 
is a whole mish-mash, but the fact that it is not--that our 
processes are not computerized sufficiently does I think pose a 
threat to the United States.
    In September of 2003, the GAO did a report and pointed out 
that in order to get information about financial information, 
that the INS would have to go and do hand counts to get--that 
is on page 4 of the GAO report--hand counts to answer the 
questions. Well, what that tells us is that it is on paper. I 
mean they can't actually get a computerized report. In January 
of that same year, the GAO again pointed out that the 
application workload has to be corrected, that the visa 
operations needed attention and that its weakness in technology 
management that is very much a problem.
    Now, you mentioned US-VISIT, and I think that is a very 
good start, but I want to bring some concerns to your 
attention, because I think we are sewing some problems for down 
the road. Two years ago I asked NIST what it would cost for 
them to set a biometric standard that could be utilized, and 
they said it wasn't a funded activity but that for about $2 
million, they had the lab capacity, they could provide the 
biometric standard. Well, that never happened. They were never 
funded. DHS had funds but they never actually provided the 
funds to NIST. And as of this moment, those biometric standards 
have not actually been developed nor adopted.
    Consequently, we are now engaging in an effort that is 
going to lead to a multiplicity of biometric standards that may 
or may not be suitable for a common database. For example, US-
VISIT is using two index figures. However, the international 
biometrics that are pursuing with machine-readable passports is 
going to be facial recognition. The two are not going to 
provide a common database. Furthermore, it is not necessarily 
going to be compatible with the watch list.
    And what we need, and I think the sooner we do this the 
better, is that we need to have some common standard or a 
multiplicity of standards. There is no reason why we can't have 
more than one biometric, but we need to have some 
standardization or else we will end up in 2 or 3 years with a 
system-wide problem that is similar to what we had with the 
INS.
    I would also urge, and I may actually even offer as 
amendments to our authorization, that we insist that the INS do 
something--I keep calling them the INS out of habit--.
    Admiral Loy. No problem.
    Ms. Lofgren. --that they computerize--I mean we can track 
our Fed Ex package online, but you cannot find out where your 
application is for your spouse if you are an American citizen 
with repeated askings over 2 or 3 years. They are filing by 
name and a number still, but they ought to be filing matters by 
biometrics, because you can have duplication of names but you 
cannot have duplication of biometrics. And it ought to be the 
same biometrics that is being utilized by our national security 
agencies, by the FBI, by the State Department. All of these 
things are highly doable. It is just a matter of management and 
making them happen.
    And so I don't know you, but you have a reputation as a 
manager. I am asking you, really pleading with you, to exert 
some management control in this area and to make it happen, 
because I think until we--and we can integrate these legacy 
systems. I mean we can get off the shelf actually to integrate 
these legacy systems, which is why I say this is a management 
issue, it is not a technology issue, and I hope that you will, 
next time I see you, be able to tell me that we have solved 
these problems, and I look forward to the answers to our 
question on Monday.
    Admiral Loy. Thank you.
    Ms. Lofgren. Thank you very much.
    Admiral Loy. May I just for a moment, sir? Thanks, Ms. 
Lofgren. Very, very excellent questions and issues across the 
board, as you described. Just a moment on several of them. 
First, with respect to cyber, both the Secretary and I have 
recognized that we have perhaps not found organizationally the 
right focus that cyber deserves, if you will, and I think of 
SCADAs and so many other systems that are so dependent there 
that it is one of those things that as I think about 
consequences it sort of jumps off the chart as does nuclear, 
like does bio and other such things. So we are thinking very, 
very along the same lines, if you will.
    I had a meeting 2 weeks ago where I called together folks 
from industry, folks from--observers that could help us help 
the chairman, if you will, of our NCSD, our National 
Cybersecurity Division inside IAIP. There is a great book 
called, ``Black Ice,'' that if you haven't read it is what 
prompted me to have this meeting because it sort of was a 
confirming scare tactic almost. We are taking cyber very, very 
seriously, and over the course of the next weeks we will be 
going in the directions that are you describing as needed.
    I apologize, ma'am, for the responsiveness commentary that 
you are describing, and I promise you that I will go back, find 
this letter, see if it is possible to answer on Monday and if 
not, call you and let you know that's to be the case.
    On CIS issues, again, this is something the Department 
inherited. As you keep using the phrase INS, I keep saying they 
are not there anymore. We have really broken INS into three 
pieces, and the ICE piece is working very well. The pieces that 
found their way into CBP are working very well. The piece that 
continues to offer services to the immigrant population is 
where the managerial concentration needs to be to press on. So 
that is where I am going.
    Ms. Lofgren. If I may, I know my time is expired. The three 
divisions cannot work well unless they all work well. For 
example, the terrorists that came in through--and that helped 
destroy the towers--should never have been admitted, because 
they had applied for a change in status to a student visa off 
their visitors visa. Had that been computerized instead of on a 
piece of microfiche sitting in a box, the officer at entry 
would have denied them entry.
    Admiral Loy. You are right.
    Ms. Lofgren. And I don't fault the officer. He didn't have 
the data. And so you can't do the job unless it is all working 
together.
    Admiral Loy. All those challenges are very real. The IT end 
of CIS is something we are working on hard. We have just hired 
a new CIO to help them in that process of sorting out what they 
need to do, and integrating that, as both the chairman and Mr. 
Turner have indicated, into the bigger picture of IT 
integration Department-wide is part of our challenge.
    Chairman Cox. The gentlelady's time has expired. The 
gentleman from Arizona, the chairman of the Subcommittee on 
Emergency Preparedness and Response, Mr. Shadegg, is recognized 
for 5 minutes.
    Mr. Shadegg. Thank you, Mr. Chairman. First, let me thank 
my colleague, Mr. Shays, for deferring to me. I need to be 
elsewhere, and so he agreed to let me go first and I appreciate 
that.
    Admiral I want to thank you for being here, I want to thank 
you for your testimony. I frequently say both here and at home 
that you and the Secretary have I think the second and third 
toughest jobs in Washington, D.C. I give the President the 
toughest job. But I, quite frankly, think standing up a new 
department is phenomenally difficult, trying to bring together 
the agencies you have to bring together. Get them working 
together in a concerted fashion is very difficult. I appreciate 
your bringing to that task the expertise and the knowledge and 
the dedication that you have. I appreciate your work in the war 
on drugs in the past where I think our paths first crossed.
    I also want thank you for the Arizona Border Control 
Initiative. It has made a huge difference--.
    Admiral Loy. Sure has.
    Mr. Shadegg. --it has been a tremendous success, and I 
appreciate it very much.
    I really wanted to discuss two specific kind of discreet 
issues. The first is the whole issue of the EP&R Division. I 
have a concern that the EP&R Division, Emergency Preparedness 
and Response Division, brought to the task the mentality of 
FEMA, which is a reactive mentality to an emergency or a 
disaster which cannot be prevented and therefore must be simply 
reacted to. And I have had conversations on the topic of this 
with people at the directorate who kind of look at it and say, 
``'Well, all emergencies are the same. If it is a forest fire 
or a flood or a hurricane, we have to go in and do our cleanup 
job.''
    And I see Department of Homeland Security as different than 
that. Indeed, I think the chairman and I have a very strong 
belief that this Department is about preventing attacks, not 
necessarily getting good at scooping up victims of an attack. I 
noticed that the emergency management grants, the fire grants 
and the homeland security grants are now being administered by 
the Office of State and Local Grant Coordination.
    I guess my question of you--my first question of you before 
I switch to a different topic is do you still believe the 
Emergency Preparedness and Response Division should be focused 
on all hazards, and if so, is it appropriately within the 
Department of Homeland Security or should it be somewhere else? 
And should the function of preparedness for a terrorist attack, 
which I think is a different mindset because you can stop a 
terrorist attack, should that be what remains within DHS?
    Admiral Loy. Sir, as you well know, the President has just 
signed HSPD-8, which is about preparedness in general. 
Interestingly, the word, ``preparedness,'' was a large part of 
that off-site conversation I mentioned with the leadership 
cadre of the Department.
    I think at the moment the so-called FEMA mindset you 
described is something that we certainly have to work on so as 
to make sure that the response and recovery functionalities of 
the Department are reflective and appreciative of the 
awareness, prevention and protection, sort of the pre-event, if 
you will, functionalities of the Department.
    So we are working very hard to make sure they are aware of 
that. And, of course, through IAIP, concentrating on prevention 
and protection and the awareness piece that I believe is 
absolutely an imperative to come in front of all of it. In 
other words, if we truly understand what is going on in the 
domain we are responsible for, we can build better prevention 
and protection and even response and recovery protocols. But 
the front end has got to be focused on information, 
intelligence, the sharing thereof, the analysis thereof and the 
understanding thereof.
    I don't have an immediate problem with the FEMA mentality 
in EP&R as the response and recovery agents, so to speak, of 
the Department, but I do want them to appreciate that the 
Department's responsibility is across the board.
    Mr. Shadegg. Appreciate that, and it is an ongoing concern 
on my part.
    Let me flip to a different topic. I recently met with 
Marsha Florian, who is the TSA Federal Security Director at Sky 
Harbor Airport in Arizona. It is one of the largest airports in 
the Nation. We are the fifth largest metropolitan area in the 
Nation. We have 100,000 passengers each and every day, 1,500 
flights every day. It is the world's busiest three-runway 
airport and it faces a lot of challenges.
    As you know, there is this artificial cap that has been 
placed on TSA employees by Congress, and I understand that in 
Phoenix, Arizona, as a result of that cap, we are literally 
forcing those people to work much longer hours than they are 
used to. We are trying to get the job done I think with too few 
employees to meet an artificial cap that I am not certain 
serves the public.
    I do know that there can be dire economic consequences if 
we drive people away from air travel because they can't get 
through security lines in a reasonable amount of time, and of 
course everyone appreciates the fact that if in fact by trying 
to do the job with too few people we let something slip 
through, that is a catastrophe in itself.
    And I am interested in finding out whether or not the 
Department has looked at this issue, whether or not the 
congressional demand that you come down to, 45,000 employees, 
is an unreasonable demand for you to be able to do the job, and 
if it is, whether you are willing to come forward to the 
Congress and make that point? And if not, if you think you can 
do it with 45,000, how do you deal with an airport like Sky 
Harbor where, quite frankly, the caps on the use of personnel, 
at least I think, are currently causing delays and may be 
causing the possibility of a breakdown in potential security?
    Admiral Loy. Quickly, sir, this is obviously a topic that 
could take an awful long time to answer, but let me give you my 
quick answer. My experience at TSA is this, sir: We at TSA very 
likely overhired initially when we were pushing 55,000; 56,000; 
57,000 screeners. I think the focus that was offered by the cap 
became a constructive influence to make sure we were being 
efficient and effective along the way.
    I further believe that two other things play here. One is 
the full-time/part-time challenge; in other words, the activity 
profile of an airport, even one as busy as Sky Harbor, has 
peaks and valleys to it associated with the day and with the 
week. So we are working very hard to try to live within the cap 
as it relates to full-time and part-time mix, varying at every 
given airport, in the hands of the Federal Security Director 
like Marcia is at Phoenix, to get the right package there for 
that particular airport.
    But I also believe that now we are literally back to pre-
September 11 throughput, and in a place like Sky Harbor well 
beyond, there needs to be a mechanical device of some kind in 
the appropriations process that says when the throughput is 
wherever it is and it is growing and there has not been that 
technological breakthrough that we think will eventually be the 
answer, we need to be attendant to that as it relates to 
adequacy of TSA screeners at those airports.
    We have to challenge TSA to devise that. I didn't get it 
done while I was there, so I have challenged them to devise 
that mechanical means to help us understand the predictive 
nature of if the throughput is going up, what is the attendant 
increase in screeners that would be appropriate?
    Mr. Shadegg. My time has expired, but let me on that point 
make two points. One--.
    Chairman Cox. The gentleman's time has expired. Please be 
brief, because we have only got 10 minutes left in the hearing.
    Mr. Shadegg. I will be very brief. My understanding is that 
some airports that were very efficient at the outset are now 
being punished by the fact that they were being efficient and 
if they are being pressed down after having been efficient in 
the beginning, they are hurting. Second, I believe the American 
people and I know that I would support an increase in the cap 
if you cannot get the job done with that arbitrary cap. It was 
created when the bill was passed without knowledge really of 
the task we were undertaking. Thank you, Mr. Chairman.
    Chairman Cox. The gentleman's time has expired. The 
gentleman from New Jersey, Mr. Pascrell, is recognized for 8 
minutes.
    Mr. Pascrell. Thank you, Mr. Chairman. Thank you, Admiral, 
for your service. I just want to make rapid questions here, and 
if you would make your answers brief, I would appreciate it.
    Admiral Loy. Sure.
    Mr. Pascrell. We do not have a universal watch list, true 
or false?
    Admiral Loy. True.
    Mr. Pascrell. We do not have a risk assessment which would 
highlight our most vulnerable assets, true or false?
    Admiral Loy. False. We have a pretty decent process by 
which we are prioritizing the critical infrastructure of our 
Nation.
    Mr. Pascrell. Do we have a risk assessment then for the 
Nation which we have been asking for, a national risk 
assessment? Yes or no?
    Admiral Loy. I do not have a piece of paper to give to you, 
sir, but the effort of the aftermath of HSPD-7 will yield that 
for us. Our goal is to build precisely that.
    Mr. Pascrell. My next question, Admiral, is you know we 
have discussed interoperability. This panel is very clear about 
it, the first responders are very clear about it. It is a 
disaster out there ready to happen again. Are you telling me 
that there is enough money in the budget that we do not have to 
have any money in the line item of interoperability, that is 
communication for our first responders, that we will have 
enough money in the rest of the budget left over from whatever 
program?
    Admiral Loy. I am going to actually ask if I can get back 
to you, Mr. Pascrell, on that, because I have put into motion a 
challenge that is not only about communications 
interoperability but includes equipment and training and the 
rest of that notion that is, I believe, an imperative for our 
Department. I have not got the budget feel that I would need 
for that quite yet, sir, so I will be glad to get back to you 
when I do.
    Mr. Pascrell. My next question is what relationship do you 
have with the FCC in trying to get them to provide the adequate 
enough number of bands for our first responders which is a 
current problem and is a critical situation? And, secondly, is 
the FCC cooperating with you?
    Admiral Loy. So far they are, sir.
    Mr. Pascrell. What are they doing to cooperate? Tell me.
    Admiral Loy. Well, they are attending the meetings that we 
are holding to develop whatever the plan is for the 
distribution of the bandwidth necessary to satisfy first 
responders' needs as a critical imperative for our country.
    Mr. Pascrell. So they are going to meetings.
    Admiral Loy. They are helping us develop the plan, sir.
    Mr. Pascrell. Would you provide to the committee what plans 
we are talking about?
    Admiral Loy. Yes, sir.
    Mr. Pascrell. So that we can communicate that to first 
responders all over the United States.
    You know, Admiral, you talk about the melding, the 
consolidation of grants. There is a very serious problem here 
as far as we are concerned and that is you have melded the fire 
grants, which have been very successful by everyone's 
estimation, you have melded them with everything else. Fire 
grants go directly to communities. They do not go through the 
State so that no State--no State--can skim off any money that 
is going directly--it has been highly successful. Do you intend 
to change that process?
    Admiral Loy. No.
    Mr. Pascrell. No. So we are going to continue. We are going 
to meld the money, but we are going to maintain that 
category--.
    Admiral Loy. We are not even going to meld the money. Those 
are specified--.
    Mr. Pascrell. Well, how do you meld the programs without 
melding the money?
    Admiral Loy. Well, all we are trying to do is offer for 
their benefit, because they asked for it, the State and locals 
an opportunity to have a one-stop shop for the administrative 
processes associated with grant administration.
    Mr. Pascrell. Do you realize the danger, Admiral, in doing 
that is that you will meld the basic needs that existed before 
September 11, which prompted and precipitated the Fire Act of 
1999, you are melding those basic needs with the terror needs 
of our police and our fire all over this country?
    Admiral Loy. I guarantee you, sir, that won't happen.
    Mr. Pascrell. Well, then why do we have less money for fire 
grants for 2005 than in 2004? In fact, $250 million less and 
$655 million less for the COPS Program. If we are trying to 
defend America, how can we justify that?
    Admiral Loy. Well, I can justify it, sir. If you look at 
the total number of dollars, in the window between 1999 and 
2001, we distributed from the Federal government, from the 
Congress of the United States about $1.3 billion. From 2002 to 
2004, we distributed over $13 billion which was over a 900 
percent increase.
    Mr. Pascrell. Admiral, Admiral, you are doing exactly what 
we predicted was going to happen 5 months ago, and that is--.
    Admiral Loy. I am just giving you an aggregate number, sir.
    Mr. Pascrell. Excuse me, sir. Excuse me, sir. What you are 
doing is consolidating very basis needs with needs dealing with 
prevention in response to terror. It is an absolute sham as far 
as I am concerned, and it does not do justice.
    I want to get quickly to the two questions that you and I 
have talked about, and that is the employees. Have any of our 
employees within the Department, within DHS, lost their 
collective bargaining rights as of today?
    Admiral Loy. I think only in the effort with putting 
together legacy Customs agents and legacy INS agents into the 
new CBP officer role. The promotion process that offered all of 
them constancy and consistency in their respective duties and 
responsibilities took them to a level where they were no longer 
appropriately represented in the bargaining process. They 
were--.
    Mr. Pascrell. Excuse me, what does that mean. You took them 
to a level that they are no longer appropriately--.
    Admiral Loy. They are now 13s as opposed to 12s, and it 
took them out of the window of the bargaining package that was 
there before.
    Mr. Pascrell. Could you translate that for me what you just 
said, I am sorry.
    Admiral Loy. Yes, sir. I didn't say that well--.
    Mr. Pascrell. I am trying to follow you.
    Admiral Loy. --and I apologize.
    Mr. Pascrell. No, you said it well, but I didn't understand 
you.
    Admiral Loy. In the recent efforts to recognize the 
differences in pay associated with INS players who went into 
the portal effort and became CBP officers and from a different 
source legacy Customs officers came, there were differences in 
the pay scales associated with what they had used to do with 
their legacy agencies. Their new responsibilities in One Face 
at the Border offered the requirement that we would merge all 
of that into a single package and we made absolutely certain 
that no one lost any pay by promoting, if you will, advancing 
in the pay scale the folks that came from INS, and the 
equivalency there offered them a point on the scale where they 
dropped away from being represented collectively.
    Mr. Pascrell. Thank you for clarifying your answer. I would 
like to yield so that Mr. Etheridge will have some time.
    Mr. Etheridge. I thank the gentleman, and I know time is 
running short.
    Chairman Cox. Mr. Etheridge, just to advise you, I will not 
count this time that I am speaking against you, but literally 
the time has gone out just now.
    Mr. Etheridge. Okay.
    Chairman Cox. So I would yield to the gentleman to put a 
question but hopefully we will come back with more time.
    Mr. Etheridge. I will wait for my turn.
    Chairman Cox. If that is correct, then the gentleman's time 
is expired. The gentleman from Connecticut, Mr. Shays, is 
recognized for 5 minutes.
    Mr. Shays. thank you, and I may not even need to use my 5 
minutes. Welcome, Admiral.
    Chairman Cox. If the gentleman would suspend. Admiral Loy, 
we understand by prearrangement that you are here until 12:30. 
What is your schedule at this moment? Might you stay for an 
additional 10 minutes?
    Admiral Loy. I can, sir.
    Chairman Cox. That being the case, the gentleman is 
recognized for 5 minutes and we will--.
    Mr. Shays. Thank you very much. Admiral, I think you have a 
mammoth task to bring together the people all over the country 
and have those synergies work well. Ultimately, though, if you 
do succeed, it will be a tremendous contribution to our 
country.
    I would like to focus in on how you deal with the following 
while you are trying to reorganize. And the following is I 
happen to believe there will be a terrorist attack or more 
during the course of this year. We have to deal with the World 
War II Memorial, we have to deal with the G8 Summit, we have 
two conventions, we have the presidential election and then the 
inaugural. And I would like to know how you get involved in 
these issues as the Deputy and how you task your folks to deal 
with these issues?
    Admiral Loy. Sir, I think you are right on to reflect on 
the schedule of events in front of us. It begins with the World 
War II Memorial and includes the conventions, it includes the 
Olympics, it includes the G8 Summit, it includes a number of 
high-profile events coming at us.
    We began, at the Secretary's direction, at the President's 
direction, I might add, 3 weeks ago an interagency security 
planning effort that, if you will, takes a HSPD7 and puts it on 
steroids--accelerates it, focuses it in such a fashion that we 
are enormously attentive between now and over the course of the 
next six to 8 months to the intelligence stream going by and 
the attendant requirement to upgrade our security paradigms 
wherever we would think that to be the most appropriate.
    We would happily come perhaps in closed session, sir, and 
help you understand precisely what we are doing in that regard, 
but you have very correctly recognized an upcoming window that 
in wake especially of the Madrid bombings and what appears to 
at least have been a political consequence reached on the basis 
of terrorist behavior, that we will watch carefully, for 
example, the Italian elections and the Polish elections and the 
Philippine elections that will also happen before our own.
    What we have done, sir, is establish five working groups 
inside the Department with the attendant reach requirement to 
go all places necessary to pull together a game plan that we 
will present back to Secretary Ridge by the end of this month 
and hold into place in a sustained manner across that window of 
time you just described.
    Mr. Shays. Let me just make a comment, and I don't need an 
answer, but I hope and pray that when the Department issues 
warnings and if we go to an elevated level, that we don't have 
the department say, ``Just do what you normally do.'' If, for 
instance, we believe that you are at greater risk by going to 
an event, let people like adults decide whether they want to 
go. They may, for instance, decide to go to the Olympics but 
not take their 4-year-old children or 10-year-old child or 
whatever. They may decide to go to the convention but maybe 
they will change their behavior a little bit. And I know you 
don't want to discourage from going but allow them the adult 
decision.
    I can tell you this: I will ask for any briefings during 
that time, and if I believe that there is something that that 
public needs to know about, while I won't disclose it, I will 
certainly voice my concern and say what I would be doing as a 
Member of Congress based on what I have seen. I hope that you 
will treat the American people like adults and do that.
    Admiral Loy. Yes, sir. I am with you on the general notion 
that, first of all, I think it is our obligation to share 
information that we have that would put anyone in danger as to 
what the information is and allow those judgments to be taken 
by our citizens.
    Chairman Cox. Gentleman's time has expired. Mr. Etheridge 
is recognized for his full five minutes.
    Mr. Etheridge. Thank you, Mr. Chairman, and I trust I won't 
take it all. I am going to return, Admiral Loy, back to a point 
that was made earlier as it relates to CIS. I realize that is 
one area of a broad area of responsibility, as others have 
said, but in our office and I know in a lot of other offices, 
this is an area that we get overworked in tremendously. It 
would be a lot easier if we got a lot more prompt response.
    Last year, the independent auditor's report indicated that 
the Bureau of Citizen and Immigration Service process for 
tracking and reporting the status of applicants and related 
information was inconsistent and inefficient. Now, I would 
contend, and our response in our office, that hasn't changed a 
lot. And every person that is come before this committee, I am 
going to say to you, I have raised this same question, when are 
we going to be computerized--you have heard this already.
    Admiral Loy. Sure.
    Mr. Etheridge. They will say, ``Well, we have got a 
timeline.'' Last time I asked, I said, ``Please give me a 
data.'' Well, I get a date and the date slips. And others have 
talked about it here. But I am going to give you just one 
example, there are a lot of other examples, but when you have 
to keep going back and you keep going back, it takes up time, a 
tremendous amount of personnel time for our folks, for the 
people at INS and the service areas.
    It is just bogging down, and part of the reason, and it was 
talked about a few minutes ago, so I am going to repeat it 
again, because I think it has got to be on the record, we have 
got to get it done, these things are not computerized; they are 
in boxes. They are still in paper boxes. And when it takes up 
for just a I-130 visa application for people who are citizens 
of this country now, when they are just trying to reach out to 
their spouse, over 2 years to get something moving, that is 
unacceptable.
    Admiral Loy. It is unacceptable, I agree, sir.
    Mr. Etheridge. And what I want to know is what specific 
steps is DHS management tracking this system that you are going 
to address the inefficiencies and get a handle on this backlog, 
because as was said a few minutes ago, it is not getting less, 
it is growing, and I fear if it continues to grow, we aren't 
going to be able to deal with the issues, and the violations 
are going to get even greater.
    Admiral Loy. Yes, sir. I think this issue is an absolutely 
right square one for us to take and address with the leadership 
and management necessary to make it right. It is a system that 
has plagued our country, frankly, for tens of years, and when 
this brand new department inherited the responsibility for it, 
that was recognized by this President who indicated, ``Let's 
get that backlog management from whatever those horrible 
numbers are down to something that is reasonable.'' That is 
precisely where we are going.
    We have established five major pilot programs to reengineer 
the processes inside each one of the systems you were 
describing, whether it is the I-130 or the many other systems 
that they are responsible for, and get out of there things that 
don't need to be done and make more efficient things that do 
need to be done.
    What I can tell you, sir, is that the IT piece is well 
recognized, but there is--I don't have a date on the horizon 
that I would even pretend to share with you at this time.
    Mr. Etheridge. Admiral, I know we are struggling because we 
don't have an answer for it right now. Can you get back with a 
timeline?
    Admiral Loy. I will be delighted to get back for you, sir, 
a game plan to fix that.
    Mr. Etheridge. So we can have a timeline of--please.
    Admiral Loy. You bet.
    Mr. Etheridge. So we will have it in writing. If you will 
do that, I appreciate it. And, finally, let me move to one 
other issue and a lot of the stuff I have here has already been 
covered.
    In looking over the report, the Inspector General's report, 
the Division Chief Information Officer and others had a 
turnover of about 45 percent, which is substantial since the 
Department opened its doors. And we have heard that a number of 
the directorates, such as IAIP, are having problems getting 
people to take positions they need to move them into and fill 
some of the gaps. And they are now being filled with 
contractors.
    My question is can you help us understand why the turnover 
is as high as it is and how we are planning at DHS to address 
the turnover and the directorate staffing needs? And if it is 
being staffed by contractors, how long will this last and how 
long before we will staff it with full people, and is there a 
cost savings?
    Admiral Loy. Yes, sir. Let's take the IAIP piece first. One 
of the things that I asked the committee's support of as we 
engage with the Armed Services Committees and others is to get 
this Nebraska Avenue complex thing behind us. Let's get that 
established as the headquarters for the foreseeable future with 
the attendant office spaces there that are appropriate to allow 
us to hire up IAIP to its allotted FCE.
    General LaBute has committed to not only me but to the 
Congress in the form of the Appropriations Committee a hiring 
plan that at 50 per month over the course of the next several 
months he will find himself hired up to complement.
    In the meantime, the combination of contractors and 
detailees, if you will, from attendant agencies inside the 
Department, has enabled him to get on with some of the work 
that he is responsible for, certainly the most important work.
    I am one who will challenge him as to whether or not the 
budgeted input you were just describing, the good steward input 
associated with whether or not he can get done, what is the mix 
that is best appropriate for him to deal that with? President's 
management agenda includes an outsourcing notion that offers us 
an opportunity in this cabinet agency to establish a manpower 
paradigm that may very well be different than what has been 
used in the executive branch in the past. And if contractors 
and outsourced functionality is the best way for us to get done 
what we need to get done, that is the way we plan to go.
    Mr. Etheridge. Thank you. And only one thing I would say on 
the contracting and I will yield back my time. I want us to be 
careful because contractors have already gotten us in trouble 
in some others areas of the world--.
    Admiral Loy. Indeed.
    Mr. Etheridge. And we don't want that to happen again. And 
I hope we will have more to say about that later, and I yield 
back, Mr. Chairman.
    Chairman Cox. Gentleman from Washington is recognized.
    Mr. Dicks. Thank you, and I will be very brief because I 
know we have got to go to a vote.
    Admiral Loy, it is good to see you again. I consider you 
one of our best public officials, and I am glad to see you in 
this job. And our colleagues have outlined a number of 
challenges for you, the information we have on the 
implementation of the utilization of information technology 
being one of them, and I am very glad to hear this mentioned 
time and time again.
    All of the reports done by all the outside agencies keep 
pointing to this one area, and the database on counterterrorism 
is the kind of the thing that has to get done. And if you can 
get anything else done, I would try to work on that watch list 
database so we have one area where we can check all the names. 
To let this go on and on without bringing it to culmination is 
simply unacceptable.
    Admiral Loy. We will be a demanding customer.
    Mr. Dicks. All right. Number two, on the TSA limit, I 
didn't realize and staff informed me today, this was something 
that was done in the Appropriations Committee. I would love it 
if you guys could come up with some language that would help 
us. I am prepared to talk to the chairman who is a member of 
this committee about that as well.
    We have the same problems in Seattle. You and I talked 
about that at some length earlier. You have got to have enough 
people--you have got to give them the ability to manage. Set a 
limit on dollars or whatever, but you have got to give them the 
ability to manage the situation, so if you need more people at 
a particular time, you can do it. I think an arbitrary limit, 
especially now that traffic has recovered, doesn't make any 
sense.
    And the other thing I would just mention since you are a 
top official in the Department: we had a hearing yesterday on 
the whole question of port security, and I don't think the 
position of the administration is tenable--that port security 
is just going to be handled by the local port authority. We are 
not getting anywhere near the money that the Coast Guard says 
we need to do port security adequately. And Congress has had to 
add the money for port security. This is the first year that 
Congress even had an appropriation request for money for port 
security from the administration. But we have got to figure out 
a better solution than this, and to let this thing go on and 
not protect our ports.
    Just remember what happened when we had the lockout on the 
west coast just for a few days. All of a sudden it was 
affecting the economy of the entire country. And if we don't 
make sure we have got good security at these ports, we are 
leaving ourselves open to a major vulnerability. And the Coast 
Guard has, I think, laid out what is necessary--$1.5 billion 
the first year and $7.5 billion over 10 years, and we are not 
anywhere near that. I hope you will take a look at that because 
of your background, your expertise and experience as the 
commandant of the Coast Guard.
    Admiral Loy. I will, sir.
    Mr. Dicks. Thank you. Thank you, Mr. Chairman.
    Chairman Cox. The gentleman's time has expired. Thank you 
very much, Admiral Loy, for being with us all morning and part 
of the afternoon. The record will remain open for members to 
submit written questions for a period of Ten? And we would 
appreciate the Department responding to those formally as well.
    Admiral Loy. Will do, sir.
    Chairman Cox. The hearing is adjourned.
    [Whereupon, at 12:42 p.m., the committee was adjourned.]


                            A P P E N D I X

                              ----------                              


                 Questions and Responses for the Record

                  The Honorable James M. Loy Responses

      Questions for the Record from the Honorable John E. Sweeney

    1. Admiral Loy, a recent GAO study (June 30, 2003) analyzed federal 
government efforts to coordinate geographic information system (GIS) 
activities. The study concluded, ``to date, the potential of GIS has 
not been fully realized. While steps have been taken to improve the 
coordination of government GIS efforts, much more work still needs to 
be done to round out a comprehensive set of standards and to ensure 
that they are broadly applied.'' I am concerned that this is 
particularly true within the Department of Homeland Security. Are you 
supportive of efforts to consolidate GIS activities under the Chief 
Information Officer at DHS? Are steps being taken to achieve this goal?
    Answer:
    The DHS Geospatial Management Office (GMO) has been established 
within the DHS Office of The Chief Information Officer (CIO) and is 
currently operational within the Department. The GMO is responsible 
within the Department to coordinate geospatial information needs, 
requirements and other related spatial data activities that support the 
Enterprise Geospatial Information System (E-GIS) capability. The GMO 
will provide clear and concise policy direction across the Department 
as needed for an E-GIS geospatial information capability. The GMO will 
guide the development and execution of the implementation plan for the 
geospatial enablement of DHS mission systems. The plan will provide a 
common set of geospatial data management and processing capabilities 
that will be incorporated into the emerging Homeland Security (HLS) 
Enterprise Architecture. This will allow the Department to further 
enable awareness, prevention, protection, response, recovery of the 
homeland security mission.
    The GMO has already produced a significant body of work, including 
a strategic plan, and a forward-looking Enterprise Architecture for 
Geospatial activity in the HLS mission space. While standards are an 
essential piece they can not alone resolve the challenges in achieving 
effective geospatial management. We believe the key to interoperability 
is the overall strategy, of which standards are a critical component. 
Through the GMO, we are developing a full strategic solution for the 
HLS mission and for the Department. Although DHS does have significant 
challenges of coordinating the activities of the 22 incoming agencies 
from which it was formed, the opportunity is in front of us to affect 
an enterprise solution set which will make a significant contribution 
to the interoperable solutions which the National Spatial Data 
Infrastructure (NSDI) has been fostering over the last 10 years.
    Additionally, the Department is a partner agency of the President's 
Geospatial One-Stop initiative. The purpose of this government-wide 
effort is to provide Federal, state, local, and tribal agencies with 
single-point of access to map-related data enabling consolidation of 
redundant data. Its goal is to improve the ability of the public and 
government to use geospatial information to support the business of 
government and improve decision-making. Through this initiative and the 
work under the Federal Geographic Data Committee, the Department is an 
active participant toward achieving the shared goals of improved 
geospatial management and coordination.

    The President's budget included $5 million for the coordination of 
geospatial management activities within the CIO's office. I am 
concerned that this falls far short of what is needed to move forward 
in this area. The GAO study suggested, ``Priority should be given to 
ensuring that the federal government promotes common GIS standards 
wherever practicable, facilitates participation by all stakeholders, 
and as a result reduces redundant systems and data collection efforts. 
What steps is the Department taking with these limited resources to 
meet these objectives?

    Answer:
    The Department maintains its goals of coordinating geospatial 
activities across the DHS enterprise, continuing to develop and 
implement the Geospatial View of the DHS Enterprise Architecture, 
consolidation of capital asset planning, and promoting a well defined 
and documented strategic approach to interoperability of information 
systems utilizing the power of location and time in a Geospatial 
reference frame. The DHS Operational Elements? Geospatial efforts 
contribute greatly to the overall DHS Geospatial activities. Based on 
the current funding levels, the Department will be able to accomplish 
the initiation of the identified need in fiscal year 2005.
    Across the Federal government, work on common standards continues 
under the Geospatial One-Stop initiative. Through partnership with 
state and local organizations, Geospatial One-Stop developed thirteen 
standards to improve sharing and use of geospatial data. The Federal 
Geographic Data Committee is now building from these initial standards 
to identify other opportunities for standards development.

    Some of my colleagues have introduced bills to consolidate GIS 
activities within the CIO's office at DHS. Could you provide the 
committee with your views on these proposals?

    Answer:
    The Department has analyzed each of the bills to which you are 
referring. While they each share a common goal of legislating the 
introduction of a program management office for geospatial activities, 
under the DHS Office of the Chief Information Officer (OCIO), they 
diverge in details beyond that. Each has a varying level of detail 
defining business approaches, policies, and descriptions of the 
``geospatial landscape'', and in varying ways, appear to define the 
solutions to some of the well known issues. Senators Akaka, Collins, 
and Lieberman have proposed the amendment, ``A bill to provide for 
additional responsibilities for the Chief Information Officer of the 
Department of Homeland Security relating to geographic information.'', 
to S.1230 that DHS supports. This amendment provides the DHS OCIO the 
authority and responsibilities necessary to meet the geospatial goals 
and objectives required of the Department.

    2. I expressed my concern two months ago to Secretary Ridge that 
S&T is not moving quickly on SAFETY Act applications for procurements 
of anti-terrorism technologies. In fact, I have heard complaints the 
directorate is reviewing the applications for qualification almost like 
an FDA drug approval process.
    The SAFETY Act was meant to replace Public Law 85-804 as mechanism 
for addressing insurable liability exposure for high-risk homeland 
security procurements. The process that DHS/S&T has in place currently 
is not expedited the deployment of the technologies needed for these 
procurements and they are being held up. The information requested is 
extremely excessive, the process is too bureaucratic, and there is not 
a lot of confidence S&T will qualify anything any time soon.
    U/S McQueary went on the record stating no company spent more than 
120 hours completing a SAFETY Act application. I know for certain that 
one company spent 700 hours on the SAFETY Act application and an 
additional 300 hours--for a total of over 1,000 hours--on just one 
application for one anti-terrorism technology.
    I am especially concerned that New York will remain vulnerable to 
future acts of terrorism if we don't see a more aggressive approach in 
getting these solutions deployed immediately (before the RNC), 
especially technologies that have already been used by the government/
military, and are now being modified for homeland security purposes.
    Specifically, when will the bulk of current applications be 
approved? How many projects--Federal, state, and local--do you expect 
to approve for SAFETY Act coverage this year based on the number of 
applications submitted thus far?

    Answer:
    Your question, and other similar questions from other members of 
Congress, expresses concern that the process established by the 
Department to implement the SAFETY Act is overly complicated, 
burdensome, operates to deter applications, and, perhaps most 
importantly, is more comprehensive than intended by Congress. I 
understand your concerns and your desire for a more streamlined 
process. However, I believe the process the Department has implemented 
is consistent with the minimum requirements of the Act.
    The statute is quite specific in the elements the Secretary is 
required to consider when evaluating an application for either tier of 
SAFETY Act protection. Destination, the lower tier, which provides the 
seller with a limitation on liability, requires consideration of at 
least the following seven criteria:
        1. Prior United States Government use or demonstrated 
        substantial utility and effectiveness.
        2. Availability of the technology for immediate deployment in 
        public and private settings.
        3. Existence of extraordinarily large or extraordinarily 
        unquantifiable potential third party liability risk exposure to 
        the seller or other provider of such anti-terrorism technology.
        4. Substantial likelihood that such anti-terrorism technology 
        will not be deployed unless protections under the SAFETY Act 
        are extended.
        5. Magnitude of risk exposure to the public if such anti-
        terrorism technology is not deployed.
        6. Evaluation of all scientific studies that can be feasibly 
        conducted in order to assess the capability of the technology 
        to substantially reduce risks of harm.
        7. Anti-terrorism technology that would be effective in 
        facilitating the defense against acts of terrorism, including 
        technologies that prevent, defeat or respond to such acts.
    Certification, which affords the higher level of protection of the 
presumed government contractor defense, requires the Secretary to (1) 
conduct a ``comprehensive review of the design of such technology and 
determine whether it will perform as intended,'' (2) determine if the 
technology ``conforms to the [s]eller's specifications,'' and (3) 
determine that the technology is ``safe for use as intended.'' In 
addition, the statute requires each applicant for certification to 
conduct a safety and hazard analysis on the technology and to provide 
the results as part of the application.
    If the Department was to limit its role in evaluating applications 
for designation to conducting a basic analysis of the technology to 
confirm that it actually works and would not pose an inherent risk of 
injury to others, the Secretary would only be considering criterion 7 
and part of criterion 6 rather than all seven criteria as required by 
the Act. While the Department does not interpret these requirements to 
require the actual testing of each technology by DHS, it does believe 
compliance with the statutory requirement to review ``all scientific 
studies that can feasibly be conducted'' for every application for 
designation and the requirement to conduct a ``comprehensive review'' 
for applications for certification necessitates at least the level of 
review established by our existing procedures.
    You also expressed concern with the number of hours some companies 
have invested in completing The SAFETY Act application. To obtain 
specific data on this issue, the Acting Director, Office of SAFETY Act 
Implementation, personally spoke with each company that submitted a 
full application to obtain feedback regarding the time and effort each 
company invested in completing the application. The responses indicate 
that the amount of time was proportional to the size of the company, 
with small to medium sized organizations spending considerably less 
time completing the application then did large corporations. Overall, 
most organizations spent approximately 150 hours to complete a full 
application. The least amount of time reported to complete an 
application was 25 hours and the most was 1000 hours.
    Discussions by the Acting Director, Office of SAFETY Act 
Implementation, with the single applicant that spent the 1000 hours 
indicate that the extensive amount of time required for this applicant 
to complete the application was primarily a result of its internal 
decisions on how to address the application and its existing internal 
policies and procedures, not from the complexity of the application 
itself. Confirmation of this assessment came from discussions with two 
applicants of similar size; one reported its application took no more 
than 100 hours across the entire company and the other reported 200 
hours. Based on this information, the Department is confident that it 
is the business practices of the particular applicant resulted in the 
extraordinary investment of time in the application and not the 
application or the Department's implementation of the Statute. 
Nevertheless, the Office of SAFETY Act Implementation has substantially 
completed a major revision of the application kit, including the 
application forms, their instructions, and general information on the 
SAFETY Act and the Office of SAFETY Act Implementation. These changes 
were based on comments solicited from applicants, industry 
associations, and congressional staffers. The Department believes the 
revised application kit addresses the issues raised in your question 
and will be well received by industry once issued. The revision is 
currently being finalized at the Department level.
    I do share your desire that our process not cause applications to 
be unduly delayed and I am confident this is not the case. As of May 
21, 2004, the Department has received 84 pre-applications and 18 full 
applications. In addition, there are an additional 50 pre-applications 
and 22 full applications in various stages of completion on the SAFETY 
Act web site. With the exception of one pre-application still under 
review, all of the pre-applications have been reviewed and comments 
provided to the applicants. Of the full applications received, 11 were 
deemed incomplete, eight have been evaluated by the Office of SAFETY 
Act Implementation and are now awaiting final action by Under Secretary 
McQueary, and three are in various stages of the evaluation process. 
Let me assure you that the Department is sensitive to the issue of 
timeliness, and we are proud that the evaluation of each complete 
application for designation or certification under the SAFETY Act has 
been accomplished in less than the 90 days allocated in the interim 
regulations. Final action on the eight applications by the Under 
Secretary for Science and Technology is imminent and will be within the 
30 days allocated in the interim regulations for each of the pending 
applications. In summary, each and every application for designation or 
certification under the provisions of The SAFETY Act has been processed 
within the time frames set forth in the interim regulations.
    Finally, you ask for a prediction on the number of applications the 
Department anticipates receiving for the balance of this year. This is 
the first year of a new program and we have no basis to provide a 
numerical estimate. The Department does believe the imminent 
announcement of the first group of designations and certifications, 
coupled with our various outreach programs, will generate a significant 
increase in the rate of applications for the balance of the year. The 
Department would be pleased to provide periodic status reports 
regarding the number of applications received to your office and 
Congress if desired.

    3. In TSA's procurement of homeland security related technologies, 
is TSA requiring as part of its solicitations that companies bidding on 
such solicitations apply for coverage under the SAFETY Act? If not, why 
not?

    Answer:
    TSA does not include in its solicitations for transportation 
security related technologies the requirement that companies bidding on 
such solicitations apply for coverage under the SAFETY Act. Neither the 
SAFETY Act itself nor any other provision of law requires that 
companies apply for such coverage. Applying for coverage under the 
SAFETY Act is a discretionary act; contractors may choose to apply for 
such coverage, but whether one does so or not is a business decision on 
the part of the company.

        Questions for the Record from Ranking Member Jim Turner

    Enhancing the Strategic Focus
    4. In addition to dealing with day-to-day challenges, one of the 
responsibilities of senior management is to think strategically--over 
the long term--about the priorities of the Department, and ensure that 
its workforce, its programs, and its processes are all working together 
to achieve desired results. I think this is especially important for 
the Department of Homeland Security. While you have a lot on your plate 
to deal with every day, it's vital for you and your colleagues to make 
sure that you think strategically about how best to protect our 
country, using all sources of information that now reside in the new 
Department to help you chart your future course. Related to this point, 
I think it's important to have concrete performance standards and 
metrics in place that can be used to determine whether the Department 
is truly achieving its objective of making us safer from the multitude 
of threats we face. Along these lines:
    Would the Department benefit from a dedicated strategy office that 
could, in part, look at the long-term threat posed by terrorism to the 
United States, analyze and evaluate ways in which terrorists could 
attack us over the long-term, and make recommendations on the long-term 
strategy and investment priorities of the Department?
    If not, what office in the Department is currently engaged in such 
strategic work? Do they have ready access to you and Secretary Ridge? 
It does not exist, should it be created?

    ANSWER:
    The Department agrees that strategic thinking and planning is vital 
to ensuring homeland security. It is also important that we establish 
concrete performance milestones and metrics to determine how well we 
are achieving our strategic goals and objectives. The Department 
already has put in place the structure to support these issues. The 
Department established the Program Assessment and Evaluation Office 
(PAE), under the office of the Under Secretary for Management. PAE 
handles development and coordination of the strategic plan, tracking of 
strategic issues and coordination of performance based Planning, 
Programming, Budgeting and Execution (PPBE). PAE coordinates with all 
of the organizations within DHS to ensure that all planning and 
programming is cohesive and tracks performance through quarterly 
accountability reports.
    The Department's first high-level Strategic Plan was released in 
February. This Strategic Plan set forth the vision and mission 
statements, core values, guiding principles and strategic goals and 
objectives that provide the framework to guide the actions that make up 
the daily operations of the Department. The full breadth of our 
activities is guided by the high-level goals of: Awareness, Prevention, 
Protection, Response, Recovery, Service, and Organizational Excellence. 
The Department' Strategic Plan and additional planning guidance 
provides focused guidance for departmental objectives and provide the 
standards for accurate and concise measurement of agency performance.
    To help match the Department's resources with operational strategy, 
the Department has instituted a long-term comprehensive planning, 
programming and budgeting system to support development of the Future 
Years Homeland Security Program (FYHSP). This is a step-by-step 
strategic decision-making process and links the threat assessments, 
resource constraints, and the policy intentions of our political 
leadership to the thousands of detailed readiness actions needed to 
meet the missions of the Department of Homeland Security. The system 
aligns resources to programs that support the Department' objectives, 
demonstrate accountability, are performance driven, have identified 
long term benefits, and meet the Department's priorities.
    Direct input into the Department's strategic planning and 
programming process comes from the Information Analysis and 
Infrastructure Protection (IAIP) Directorate. IAIP is a full partner 
and consumer of all intelligence-generating agencies, such as the 
National Security Agency, the CIA and the FBI. IAIP coordinates and 
develops the long-range strategic assessments concerning the nature of 
the terrorist threat facing the country. Based on the threat 
assessment, IAIP and other components of the Department such as the 
Border and Transportation Security Administration, Coast Guard, Science 
and Technology Directorate, Emergency Preparedness and Response 
Directorate develop short-term and long-term strategies to counter the 
projected threat. In addition, the Department has established an 
Operations Integration staff to coordinate interagency strategy and 
operational planning. The heads of these organizations have direct 
access to both the Secretary and Deputy Secretary.

    Status of Implementing GAO Recommendations
    5. The Congress looks to GAO to recommend improvements in 
government operations. Along that line, I asked GAO to provide the 
status report on the Department's activities to implement previous 
recommendations GAO has made, including to its legacy agencies. GAO 
informs me that of the several hundred recommendations it made to DHS, 
appropriately 110 are what GAO considers ``key'' recommendations.
    Indeed, many of these recommendations are targeted to specific 
program areas within the various Department directorates. However, 
others are intended to improve operations and management department-
wide. As an example, last August GAO recommended that, in developing 
its enterprise architecture for computer systems, the Department should 
coordinate with various federal law enforcement agencies, state and 
local authorities, and the private sector to foster information-sharing 
initiatives and to eliminate possible confusion and duplication of 
effort.
    What is the status of your fully implementing GAO's 
recommendations? What are the factors that may limit your ability to 
implement more?

    Answer:
    Per the chart below, as of May 2004 GAO reports an estimated 354 
recommendations for DHS and 112 of these are high priority; and 103 of 
the total recommendations are considered closed. Of the high priority 
recommendations, over half are pending review for completion at GAO. It 
also should be noted that the preponderance of the open recommendations 
are associated with legacy agencies prior to the establishment of DHS 
and some date back as far as 1997. As a result, it is extremely 
difficult or impossible for current DHS personnel to assure 
implementation for recommendations associated with legacy departments. 
We have assessed these recommendations and are in on-going negotiations 
with GAO to close those identified with the legacy organizations.

                                Status and Priority of GAO Recommendations to DHS
----------------------------------------------------------------------------------------------------------------
     Priority Code            Open          Under Review *      In Progress         Closed            Total
----------------------------------------------------------------------------------------------------------------
               High                30                  4                44                34              112
----------------------------------------------------------------------------------------------------------------
           Moderate                55                  5                19                17               96
----------------------------------------------------------------------------------------------------------------
                Low                77                 10                 7                52              146
----------------------------------------------------------------------------------------------------------------
              Total               162                 19                70               103              354
----------------------------------------------------------------------------------------------------------------

        Notes:
        * Under review means that DHS 
        has taken action and provided 
        some documentation in response to 
        the recommendation that they believe 
        should be sufficient to close the 
        recommendation. That action and 
        documentation are `under review' by 
        the GAO team that initiated the 
        recommendation.
        # In progress means that DHS 
        is taking action in response to 
        the recommendation but has not 
        fully implemented it.
         All `closed' recommendations 
        have been closed by the GAO 
        initiating team.

Suspected $1.2 Billion Budget Shortfall

    6. In March of this year, DHS announced a hiring freeze at two of 
its frontline units, CBP and ICE because accounting staff were 
uncertain if a suspected $1.2 billion budget shortfall was real or an 
accounting irregularity. DHS reportedly has three different pay systems 
that do not use the same budgeting principles and budget codes. What is 
the department doing to better integrate its financial systems to 
ensure that such an incident is not repeated?

    Answer:
    Staff from the Department's Office of the Chief Financial Officer 
(CFO), Border and Transportation Security (BTS) Directorate, and the 
U.S. Citizenship and Immigration Services (USCIS) have briefed your 
staff on the circumstances and facts surrounding the alleged $1.2 
billion shortfall as reported by The Wall Street Journal. The 
Department also established a review team composed of staff from the 
CFO' Office, BTS, USCIS, and the U.S. Coast Guard to assess the 
situation. The review team engaged in a detailed budget reconciliation 
effort between the three bureaus. The team examined the allocation of 
resources and services throughout the three bureaus, and this effort 
resulted in an immediate internal realignment of $212 million. A 
subsequent internal realignment of approximately $270 million is 
possible, pending additional discussions and coordination on the final 
documentation and billing. There is no $1.2 billion shortfall as 
reported by The Wall Street Journal.
    The Congress has recognized that funds may need to be realigned 
between ICE, CBP, and USCIS. In the Joint Explanatory Statement (H. 
Rpt. 108-280) accompanying the Department of Homeland Security 
Appropriations Act, 2004 (Pub. L. 108-90), the Congress recognized that 
the budgetary resources may need to be realigned. Specifically, the 
Congress noted: ``The conferees are aware that the Department is 
conducting a comprehensive review of administrative and other mission 
responsibilities, particularly as they affect ICE and other agencies 
that have inherited multiple legacy missions. While funding provided by 
this conference agreement is based on the best possible information 
available, the conferees understand there may be a need to adjust 
funding to conform to the decisions resulting from the review.'' A 
similar statement was included under the heading discussing CBP.
    While unrelated to the budget review discussed above, when DHS was 
established one and one half years ago, it blended 22 distinct agencies 
and bureaus inheriting a myriad of redundant management functions, 
processes, and systems: for example, 40 general ledgers, 30 different 
procurement processes, and 20 different approaches to managing travel 
costs. In fiscal year 2005 DHS will implement the new finance/
accounting/budget resource management system, eMerge2 
(Electronically Managing Enterprise Resources for Government Efficiency 
and Effectiveness), that will transform disparate business and 
financial management systems into one, uniform, electronic solution for 
the Department. It will support a ``one environment'' model with common 
core processes that is critical to the success of DHS. eMerge2 
will provide decision-makers with critical business, budget, 
accounting, procurement, grants, assets, and travel information in near 
``real time;' and eliminate stovepipes between components.
    The Department is committed to the security of the nation and we 
will continue to work towards successful operation of the three 
bureaus--CBP, USCIS, and ICE. To that end, we will continue to work 
with the Congress, to ensure that funds are aligned to mission 
objectives and are consistent with congressional intent.

         Questions for the Record from Rep. Louise M. Slaughter

    The proposed regulations eliminate the Merit System Protection 
Board of its current authority to modify agency-imposed penalties in 
DHS cases involving removal and adverse actions of employees.

    7. Please explain (a) why has the standard of evidence for MSPB 
cases been drastically decreased when it is the committee's 
understanding that agencies currently win over 80 percent of their 
cases brought before the MSPB? (b) how does this comply with the 
Congressional intent of the Homeland Security Act that employees are 
entitled to fair treatment in any appeals that they bring and are 
entitled to due process?

    Answer:
    We note the concern you and other members of Congress have 
expressed on this issue and are examining this issue very closely as we 
draft the interim final regulations for the Department of Homeland 
Security.

    8. The Homeland Security Act requires that the new system ensure 
that employees may organize and bargaining collectively. Yet, the 
proposed regulations practically wipe out full collective bargaining 
rights by allowing DHS to set working conditions through non-negotiable 
department regulations.
    How does this comply with the Congressional intent of the DHS Act 
that employees have meaningful collective bargaining rights?

    Answer:
    The proposed regulations still require bargaining over procedures 
and appropriate arrangements over lay-offs, retention, discipline, 
leave, and promotions. In addition, bargaining over procedures and 
appropriate arrangements for other core management rights is not 
prohibited and may occur at the discretion of management. If no 
bargaining occurs, management through a consultative process is 
required to consider union views and recommendations.

    9. The proposed regulations also severely curtail if not eliminate 
collective bargaining rights over most core day-to-day operational 
decisions, such as the assignment of work, the deployment of personnel, 
and the use of new technology by DHS personnel. Other issues would have 
to have a ``significantly effect a substantial portion of the 
bargaining unit'' before even being subject to post impact and 
implementation bargaining.
    Could you please define for the committee, the Department's 
definition of ``significant impact'' and ``substantial portion'' of a 
bargaining unit?

    Answer:
    The intent of this change is to focus bargaining on matters that 
are of significant concern and relieve the parties of potentially 
lengthy negotiations over matters that are limited in scope and effect. 
The proposed Homeland Security Labor Relations Board will have 
jurisdiction over negotiability and duty to bargain disputes and will 
through case law or advisory opinions further define these terms.

    10. The proposed regulations reassign many of the functions of the 
independent Federal Relations Labor Authority (FLRA) to a new ``in-
house'' DHS Labor Relations Board, composed exclusively of members 
appointed by the Secretary.
    Why do the proposed regulations gut the ability of the FLRA, an 
independent arbiter with decades of experience, to make these 
decisions? At a minimum, why can't employee representatives' have a 
role in appointing members of this ``in-house'' DHS Board?

    Answer:
    DHS believes that an independent Homeland Security Labor Relations 
Board dedicated to adjudicating DHS cases will provide a needed mission 
focus and homeland security expertise to dispute resolution. In 
addition, having a single Board oversee a unified dispute resolution 
process will promote more efficient and effective decision making. It 
should be noted that the regulations do propose that the FLRA continue 
to oversee representation elections and retain its jurisdiction over 
the handling of unfair labor practice charges concerning the rights and 
obligations of individual employees.
    While the proposed regulations require that the Secretary appoint 
the Board members, the regulations are silent on how candidates and 
potential candidates might receive consideration. We plan to consider 
different ways to accomplish this while at the same time recognizing 
that Board independence is critical.

    11. The proposed regulations create the establishment of two new 
entities, the DHS Labor Relations Board and an internal DHS panel to 
consider appeals involving mandatory removal offenses. Yet, in the 
proposed regulations, it is clear that the department is uncertain as 
to what type of judicial review will be available from decisions of 
these new groups.
    Can you please describe to the committee what type of judicial 
review the department envisions?

    Answer:
    The Department supports providing its employees with an opportunity 
for judicial review of certain agency actions. As the proposed 
regulations state however, OPM and DHS lack the statutory authority to 
confer jurisdiction to hear appeals in the U.S. courts of appeals or 
the U.S. Court of Appeals for the Federal Circuit. The proposed 
regulations specifically sought public comment on this issue and we 
hope to be able to identify a strategy for ensuring judicial review 
similar to what employees currently have.

    12. The new personnel regulations create a new pay for performance 
system and pay banding for all DHS employees.
    Has there ever been a study, report or private sector analysis on 
how a pay for performance pay system would work in a law enforcement 
setting where teamwork is essential?

    Answer:
    Performance management systems used to reward employees are not 
inherently structured to focus on individual performance. Many such 
systems require that employees exhibit such behaviors or skills as 
ability to work within a team, efforts to foster team building and 
interaction, etc. Such systems can provide rewards based on the 
accomplishments of an organizational unit or a team. The design efforts 
currently under way at the DHS are mindful of the critical need for 
employees to work together in teams particularly in the law enforcement 
arena. Thus, the performance management system that will be developed 
and the pay for performance system associated with it will include the 
kinds of elements that will foster this close working relationship, 
while emphasizing individual achievement where this is appropriate, 
e.g., in administrative support occupations, or scientific research.

    13. In addition how will a supervisor be able to accurately assess 
the performance of an employee who they might see only a few times a 
year?

    Answer:
    The envisioned performance management system will allow managers 
and employees to collaboratively plan performance objectives that are 
linked to the Department of Homeland Security Strategic Plan. Several 
things can be done to help a supervisor to accurately assess the 
performance of an employee that the supervisor might see only a few 
times each year, including visits to the remote worksite where the 
employee is located. Supervisors will be required, based on the 
language in the proposed regulations, to provide periodic feedback to 
an employee on his or her actual performance as compared to the 
supervisor's performance expectations, including one or more formal 
interim performance reviews during each appraisal period (5 CFR 
9701.407(b)); review of work products that an employee produces, 
including activity reports, investigative case reports, and the like; 
and, discussion of employee work with peers and customers. In addition, 
an employee, under procedures being developed, will be asked to provide 
input to the performance appraisal in order for the supervisor to have 
as complete a picture of the employee's accomplishments as possible.

     Questions for the Record from the Honorable Sheila Jackson-Lee

    Transformation of DHS
    14. What are the most pressing management challenges facing the 
department, and what is currently being done to address them? What are 
the key barriers you face in meeting these challenges?

    Answer:
    To develop our organization's capacity for change and to speed our 
integration, there are several management challenges that are currently 
being addressed through the office of the Under Secretary for 
Management (OUSM). DHS has now reached the next level of sophistication 
in its evolution as a Department. Achieving management efficiencies and 
improvements, as envisioned by the Homeland Security Act, are a key 
linchpin in the overall strategic effort to create one DHS and should 
be coordinated by a cohesive organization to ensure maximum return on 
investment.
    We are blending 22 distinct agencies and bureaus, each with its 
employees, mission, and culture, into a single, unified Department 
whose mission is to secure the homeland. Simultaneous with that 
harmonization and integration effort, we are devising new processes and 
infrastructure to integrate the Departmental offices. primary focus in 
OUSM is Business Transformation. We need to transform multiple legacy 
business practices, and their legacy infrastructure, into harmonized or 
single business practices across the enterprise. We have the 
opportunity to build the 21st century department and that will be 
accomplished by business transformations. Examples of enterprise-wide 
transformations include eMerge 2 (Electronically Managing 
enterprise resources for government effectiveness and efficiency); 
MAXHR (the unitary human capital management system) and, the 
Homeland Secure Data Network (HSDN) (secure communications backbone for 
not only the DHS enterprise but also secure communications with all 
federal, state, local and tribal Homeland Security stakeholders. 
Integrating our actions and making DHS a cohesive, capable and service-
oriented organization whose cross-cutting functions are optimized to 
protect our nation against threats and effectively respond to disasters 
is one of our Guiding Principles in the DHS Strategic Plan.
    These programs are currently being executed with varying degrees of 
management integration and consistency across lines of business, 
including formal risk assessment, integrated timelines and cohesive 
measurement activities. We continue to aggressively solve immediate and 
real business gaps while at the same time, defining and implementing 
new business operations and building Department wide infrastructures 
and processes. As a result, we require a formalized and systematic 
approach for defining, chartering, supporting, synchronizing, and 
measuring change programs for the foreseeable future.

    15. Does DHS have an overall plan or strategy to integrate the 
department, with implementation goals and a timeline, and has it 
dedicated a senior leadership team to lead and manage the integration 
and transformation process?

    Answer:
    The Department of Homeland Security (DHS) was established to bring 
together various federal organizations with homeland security functions 
and to ensure the integration of their operations to achieve the 
Department's common mission of leading the unified effort to protect 
America. Since its inception in March 2003, DHS has continued to work 
towards the comprehensive integration of the original 22 agencies that 
were combined to create the Department. The creation of functional 
directorates and the restructuring of legacy organizations is the 
foundation for this integration. The Department's Strategic Plan and 
the seven key priorities identified for the second year serve as the 
unifying core of our continuing commitment to coordinate and integrate 
the missions of our five directorates and three distinct reporting 
agencies. The Secretary's key priorities includes specific actions that 
the Department is committed to achieve by March 1, 2005, and lay the 
foundation for longer-term federal, state, and local integrated 
initiatives that significantly enhance homeland security capabilities 
throughout the nation.
    In December of 2003, the Secretary created an integration staff 
that would help the Department achieve seamless mission and operational 
planning across the five directorates and three distinct reporting 
agencies. The Headquarters Operational Integration Staff (I-STAFF) was 
formed to assist the Department's Leadership Team in coordinating and 
integrating department programs and missions at the headquarters level, 
as well as vertically at the regional level. The I-STAFF is also 
charged with the planning and implementation of a unified DHS regional 
structure.

    16. How is DHS balancing its efforts to integrate the department 
with ensuring the continued delivery of services of its legacy 
agencies? How is DHS ensuring the balance between its homeland and non-
homeland security missions?

    Answer:
    The continued integration of Department programs enhances the 
delivery of services to external stakeholders by building a cohesive 
and coordinated Department-wide operational mission that supports our 
goal of leading the unified effort to protect America. The five 
programmatic directorates and three distinct reporting agencies are 
charged with coordinating a broad spectrum of homeland security 
missions which include securing borders and transportation systems, 
maritime security, responding to and recovering from all-hazards 
incidents, critical infrastructure protection, information analysis, 
and scientific research and development. The I-STAFF ensures that these 
homeland security missions are coordinated and integrated horizontally 
across all DHS headquarters directorates and distinct reporting 
agencies, and that integrated departmental efforts are conducted at the 
field and regional level. In addition, the I-STAFF is helping to build 
Department-wide capabilities by ensuring the seamless integration of 
threat monitoring and operational response activities; formalizing the 
processes and protocols to enable executive decision-making during 
periods of heightened alert; establishing a process for headquarters 
and regional participation in the National Homeland Security Training 
and Exercise Program; and developing a comprehensive regional 
implementation plan that facilitates the Department's transformation 
toward a fully-functioning DHS regional structure.
    While homeland security missions are the critical priority for the 
Department, non-homeland security missions are an integral part of the 
Department's efforts to support the National Strategy for Homeland 
Security.

    17. GAO has noted that one option could be adopting the Chief 
Operating Officer concept to elevate and integrate key management and 
transformation efforts, and to institutionalize accountability for 
achieving these changes. Has DHS considered implementing such a 
position?

    Answer:
    The Director of the I-STAFF is charged with leading the effort to 
integrate cross-directorate strategic, operational and contingency 
planning; providing synchronized support for operational response and 
crisis decision making; managing national homeland security education, 
training and exercise programs and leading the development, 
implementation and oversight of the DHS regional structure. Through the 
implementation of I-STAFF programs and initiatives, the I-STAFF 
Director establishes the mechanisms and protocols that ensure that 
programs and operations are integrated into a cohesive Department-wide 
operational vision that supports the unified DHS mission. The I-STAFF 
Director reports directly to the Secretary of DHS.

    18. Have DHS's employees and other interested parties been involved 
and engaged in developing the department's integration and 
transformation strategy? How has this strategy been communicated to 
DHS's employees and to other interested parties?

    Answer:
    DHS employees from every directorate and distinct agency have 
played an integral role in realizing the Department's promise to 
achieve seamless mission planning and execution in helping to achieve 
the ultimate goals of preventing and deterring terrorist attacks and 
protecting and responding to threats and hazards to the nation. The I-
STAFF alone is composed of approximately 50 DHS staff detailed from 
every directorate, agency and office within the Department. As 
representatives of their respective directorates, agencies and offices, 
these individuals form the nucleus of an integrating and coordinating 
staff that promotes interdepartmental and interagency initiatives that 
enhance homeland security missions throughout the nation. In addition, 
DHS employees within the field and regional offices have formed local 
coordination networks that integrate varying operational missions 
within specific cities and regions to ensure the effective and 
efficient delivery of homeland security services to our external 
stakeholders.
    DHS employees are kept informed of transformation and integration 
initiatives through a number of communications methods including 
memoranda from the Secretary, directives and guidance from Under 
Secretaries and agency heads, weekly newsletters, informational e-mails 
and the DHS web site.

    19. DHS recently released a strategic plan that sets forth goals 
and broad objectives for the Department. How is this plan being 
integrated into the Department's planning processes and operations to 
make achievement of these goals a reality?

    Answer:
    The Department has prepared a Future Years Homeland Security 
Program (FYHSP)--a five-year resource plan that reflects the vision of 
how we intend to preserve our freedoms, protect America, and secure our 
homeland. The Department's strategic plan is the basis for the FYHSP. 
This FYHSP will ensure the Department takes a strategic approach to 
budgeting and a long-term view in developing the Department of Homeland 
Security program priorities and operational strategies. As a planning 
document, the FYSHP is the culmination of efforts to examine 
departmental priorities and the five-year ramifications of program and 
budget decisions. Our strategic plan is the roadmap for the Department 
and provides the cornerstone of the FYHSP. This year's FYSHP reports 
how our five-year budget links directly to our strategic goals. The 
Department will review priorities and plans yearly with a long-term 
view of where we want to go and the best way to get there and adjust 
subsequent FYHSPs accordingly.
    Great strides have been made in instituting a comprehensive and 
cyclic planning, programming, and budgeting system to align the 
Department' five-year resource requirements with strategic goals in 
light of competing programmatic priorities and limited resources. 
However, the Department is continuing to further assess and refine 
programs and activities and their potential impact on upcoming budget 
requests.
    To support development of the FYHSP, the Department implemented a 
comprehensive Planning, Programming, and Budgeting System (PPBS). The 
PPBS is a strategic decision-making process. It links strategic 
direction in light of threat assessments and resource constraints to 
the thousands of detailed readiness actions needed to meet the missions 
of the Department of Homeland Security.
    In addition, the Performance Budget Overview (PBO), the annual 
performance plan sent to Congress with the President' Budget, is 
organized by strategic plan goals. The fiscal year 2004 PBO shows how 
each program supports DHS goals, as well as program performance goals 
and measures. Throughout the year, progress is monitored by a Quarterly 
Performance Report, again organized by strategic goals and objectives. 
Each program reports on its key performance measures, with a 
consolidated report provided to senior leadership for review and 
assessment of progress in meeting our FYHSP and strategic plans.

    20. The department has experience significant turnover among the 
senior executive ranks in key positions. Since DHS opened its doors, 
divisional CIOs have turned over at a rate of 45 percent. How is DHS 
ensuring that continuity of leadership remains intact during this 
critical period of transformation?

    Answer:
    Our current executive recruiting strategy continue to attract 
highly qualified and diverse applicants. Leadership positions are 
filled quickly. DHS has also established a workforce planning process 
that helps us identify potential occupational gaps in our key 
leadership positions. We have created a One DHS leadership model to 
ensure that our leadership pipeline is prepared when future leadership 
positions become available. We are also at the beginning stages of 
designing and developing a One DHS Leadership curriculum and a One DHS 
Senior Executive Service Candidate Development Program. Assisting with 
retaining key leaders is our new pay and performance system for Senior 
Executive Services members. Pay will be based on individual performance 
and/or contribution to the agency's performance. The Department will be 
able to ensure that those senior executives demonstrating the highest 
levels of individual performance will be rewarded appropriately. Once 
the Department receives certification from OPM, the pay cap will also 
be raised to the Executive II level which will be an incentive for the 
senior leadership.

Financial Systems
    22. In March of this year, DHS announced a hiring freeze at two of 
its frontline units, CBP and ICE because accounting staff were 
uncertain if a potential $1.2 billion budget shortfall was real or an 
accounting glitch. DHS reportedly has three different pay systems that 
do not use the same budgeting principles and budget codes. What is the 
department doing to better integrate its financial systems to ensure 
that such an incident is not repeated?

    Answer:
    Staff from the Department's Office of the Chief Financial Officer 
(CFO), Border and Transportation Security (BTS) Directorate, and the 
U.S. Citizenship and Immigration Services (USCIS) have briefed your 
staff on the circumstances and facts surrounding the alleged $1.2 
billion shortfall as reported by The Wall Street Journal. The 
Department also established a review team composed of staff from the 
CFO's Office, BTS, USCIS, and the U.S. Coast Guard to assess the 
situation. The review team engaged in a detailed budget reconciliation 
effort between the three bureaus. The team examined the allocation of 
resources and services throughout the three bureaus, and this effort 
resulted in an immediate internal realignment of $212 million. A 
subsequent internal realignment of approximately $270 million is 
possible, pending additional discussions and coordination on the final 
documentation and billing. There is no $1.2 billion shortfall as 
reported by The Wall Street Journal.
    The Congress has recognized that funds may need to be realigned 
between ICE, CBP, and USCIS. In the Joint Explanatory Statement (H. 
Rpt. 108-280) accompanying the Department of Homeland Security 
Appropriations Act 2004 (Pub. L. 108-90), the Congress recognized that 
the budgetary resources may need to be realigned. Specifically, the 
Congress noted: ``The conferees are aware that the Department is 
conducting a comprehensive review of administrative and other mission 
responsibilities, particularly as they affect ICE and other agencies 
that have inherited multiple legacy missions. While funding provided by 
this conference agreement is based on the best possible information 
available, the conferees understand there may be a need to adjust 
funding to conform to the decisions resulting from the review.'' A 
similar statement was included under the heading discussing CBP.
    While unrelated to the budget review discussed above, when DHS was 
established just over one year ago, it blended 22 distinct agencies and 
bureaus inheriting a myriad of redundant management functions, 
processes, and systems: for example, 40 general ledgers, 30 different 
procurement processes, and 20 different approaches to managing travel 
costs. In fiscal year 2005 DHS will implement the new finance/
accounting/budget resource management system, eMerge2 
(Electronically Managing Enterprise Resources for Government Efficiency 
and Effectiveness), that will transform disparate business and 
financial management systems into one, uniform, electronic solution for 
the Department. It will support a ``one environment'' model with common 
core processes that is critical to the success of DHS. eMerge2 
will provide decision-makers with critical business, budget, 
accounting, procurement, grants, assets, and travel information in near 
``real time;'' and eliminate stovepipes between components.
    The Department is committed to the security of the nation and we 
will continue to work towards successful operation of the three 
bureaus--CBP, USCIS, and ICE. To that end, we will continue to work 
with the Congress, to ensure that funds are aligned to mission 
objectives and are consistent with congressional intent.

    23. What is the implementation milestone for the ``eMerge'' system 
and are there factors impeding its development and implementation? 
Specifically, how will DHS use the $56 million requested for fiscal 
year 2005?

    Answer:
    eMerge\2\ has a planned implementation strategy involving three 
phases. The phases were designed around the unique needs of each of the 
organizational entities making up DHS. The three phases are as follows:
        o Phase I--Most in Need . . . . Building the Foundation; 
        targeted for implementation beginning Fall 2004
        o Phase II--Improving Functional Integration . . . . Migrating 
        to Standards; targeted for implementation beginning Spring 2005
        o Phase III--Providing for Uniqueness . . . . Unifying 
        Operations; targeted for implementation beginning Fall 2005
    The solicitation will require a proposal for the solution and 
specific implementation plans and timetables.

    At this point, there are no significant impediments to development 
and implementation, however the eMerge\2\ program does employ a risk 
management effort and has identified several significant risks to which 
the program is sensitive. A few of the more critical risks are:
        o Budget--Obviously, any reduction in the current budget would 
        seriously impact the program.
        o Infrastructure Readiness--eMerge\2\ is dependant upon the 
        readiness of the IT infrastructure to support implementation. 
        Any risks associated with IT infrastructure rollout ultimately 
        affect eMerge\2\ rollout.
        o Stakeholder Resistance--Any large implementation project 
        always runs the risk of stakeholder resistance. eMerge\2\ 
        therefore, is employing a comprehensive change management plan, 
        addressing issues through careful analysis, outreach, training 
        and interaction.
    The eMerge\2\ budget for fiscal year 2005 will be applied to the 
following areas: We will continue to refine the business requirements, 
acquire and implement a solution, perform a gap analysis at each 
implementation site, make preparation for data migration, and employ 
portfolio analysis, communication and change management and program 
administration.

    24. The DHS/IG reports that in its first audit of the department's 
financial statement, KPMG rendered a qualified opinion and cited 
several internal control weaknesses for the financial systems. How is 
DHS working to correct these problems?

    Answer:
    The Department's fiscal year 2003 Performance and Accountability 
Report includes the auditor's report on internal control. The fiscal 
year 2003 report presented a total of 14 weaknesses in internal 
control, seven of which are considered material to the consolidated 
financial statements. In response, the Department' CFO has required 
each affected organization to develop detailed, measurable clean action 
plans (CAP) to resolve and correct these weaknesses, including 
weaknesses in information controls in its financial systems. Commencing 
April, the CFO initiated monthly CAP meetings with each DHS 
organization CFO to discuss the status of action and underlying 
milestones to resolve these weaknesses. All CAP actions must be 
sufficient to enable the auditors to complete their testing to the 
extent necessary to render an independent report containing an opinion 
on the consolidated financial statements, among other things, and a 
report on internal controls by the accelerated due date of November 15, 
2004. To date, Department organizations are making measurable progress 
in addressing weaknesses specific to their organization. The 
Department's CFO implemented an automated tracking system for use in 
monitoring individual weaknesses in internal control at the 
organization level. The CFO anticipates rolling this system out to the 
organizations in the near future for their use in tracking organization 
weaknesses in internal control that may not warrant tracking at the 
Department level.

    25. DHS is the largest federal agency that is currently not under 
the Chief Financial Officer Act of 1990. In light of this, what steps 
is the agency taking to ensure its compliance to appropriate laws and 
guidelines governing federal financial management?

    Answer:
    The Department's CFO chairs the Department's CFO Council. The CFO 
Council has a mission and agenda similar in scope with councils chaired 
by CFOs at CFO Act agencies. The CFO Council is comprised of senior 
management officials from each of the Department's directorates, 
bureaus and offices. The council's primary purpose is to advocate 
financial management across the Department, including compliance with 
applicable laws and regulations. Within the CFO's organization, the 
Director, Office of Financial Management, chairs the Department's 
Financial Management Working Group. This group, which also serves as 
the Department's Accounting and Auditing Committee, comprised of 
Department managers responsible for federal financial management in the 
Department, develops and promulgates Department-wide financial policy 
and accounting standards in such areas as the Debt Collection 
Improvement Act, the Federal Managers? Financial Improvement Act, 
Improper Payments Information Act, among many others. The working group 
also conducts special studies into all exposures drafts issued by 
central agencies that impact the Department's financial management 
operations. The working group supports the basic premise that financial 
management is a responsibility shared by all offices.

    Proposed Human Capital System
    DHS is currently developing final regulations for a pay and 
performance management system for employees. The President's fiscal 
year 2005 budget requests $102.5 million for this effort. Under the 
system, the GS grade and step configuration would be replaced with pay 
bands, with performance-based pay increases, that will be applied to 
newly-formed occupational ``clusters''. The proposed regulations would 
also impose new requirements on collective bargaining and the 
Department' handling of employees' adverse actions.

    26. What is the status of issuing final regulations for the new 
system and what key barriers confront the department as it moves toward 
their adoption?

    Answer:
    The final regulations for the new DHS human resources system were 
posted at the Federal Register on January 26, 2005.
    While a number of challenges will confront DHS once the final 
regulations are issued and the Department begins system development and 
implementation, the main challenge is to complete training and 
development of our managers and supervisors, who will be required to 
make the critical day-to-day decisions.

    27. How is the department ensuring that the rights of employees are 
preserved under the new system and how are the views of the groups 
representing DHS employees and the federal workforce being considered 
in the process?

    Answer:
    The Homeland Security Act of 2002 requires DHS to adhere to merit 
system principles and to avoid prohibited personnel practices.
    Employee involvement has been a critical component to date and will 
continue to be so. DHS has honored its commitment to a collaborative 
process through communications to all stakeholders regarding the 
design, development, and implementation of the new human resources 
system. A formal meet and confer process with employee representatives, 
as required by the Homeland Security Act, began in June and concluded 
in August. It has been followed by continuing conversations with 
employee representatives.. The Department is providing weekly 
newsletters, and announcements on the DHS internet website. An email 
address was created to solicit input from employees, and there have 
been hundreds of questions and comments submitted.Sec. 

    Contract Management
    The DHS/OIG has reported that a major challenge for the department 
is the management and identification of procurements, with DHS 
struggling to compile and maintain a detailed and accurate listing of 
its contracts. The DHS/OIG has also reported that during its first year 
of operation, the Transportation Security Agency (TSA) relied 
extensively on contractors to accomplish its mission, but some 
contracts were written without clearly defined deliverables, and TSA 
lacked staff to provide adequate oversight.

    28. What is the department doing to improve its procurement 
operations, including merging in contracts from legacy agencies, to 
ensure that it has appropriate control over this function?

    Answer:
    Many significant actions have been accomplished to date to improve 
the overall operation of the Department' procurement function. These 
include:
    1. Issued the Homeland Security Acquisition Regulation (HSAR). The 
HSAR supplements federal regulations and promulgates specific DHS 
policies, procedures and delegations. This represents another major 
step in combining cultures of disparate agencies and ensuring 
consistent operation under a single, DHS-wide procurement regulation.
    2. Established department-wide program for strategic sourcing and 
supply chain management. Specifically, 16 cross-functional commodity 
councils have been tasked to create sourcing strategies for goods and 
services acquired throughout the Department. Councils govern a wide 
range of requirements, from simple items such as office supplies, to 
more sophisticated requirements, such as boats and their maintenance or 
complex IT infrastructure needs.
    3. Established a comprehensive Investment Review Process (IRP). The 
IRP integrates planning, controls, budgeting, acquisition, and the 
management of investments to ensure public resources are wisely 
invested. The IRP is predicated on the principle that cross functional 
teams are necessary for the proper program management throughout the 
entire acquisition life-cycle. The Investment Review Board (IRB) that 
manages this process is chaired by the Deputy Secretary.
    4. Created a robust and innovative Small and Small Disadvantaged 
Business outreach program. The program includes dependable guidance on 
marketing to DHS while providing abundant opportunities for small 
businesses to engage both federal government representatives and large 
business concerns interested in their supplies or services.
    5. Developed a strategic acquisition workforce career development 
plan that addresses education, training and experience requirements for 
the entire acquisition workforce as well as recruitment, retention, 
intern and certification programs.
    6. Finally, the Chief Procurement Officer is in the process of 
developing a comprehensive oversight and compliance program to be used 
in the assessment of all DHS acquisition functions. The program will be 
multi-faceted and will include the use of the Government Accountability 
Office framework, on-site reviews of our operational procurement 
offices, and performance measure and metrics.

    29. The Chief Procurement Officer (CPO) does not have direct line 
authority over procurement operations for legacy agency components 
inherited by DHS, and the office is experiencing staffing shortages. 
How does the department plan to further empower the CPO and address its 
resource problems for the procurement function?

    Answer:
    The CPO commissioned a study to determine the number of operational 
contracting positions that are required to support the functions that 
transferred into the Department without this support. We are currently 
discussing this study with the affected organizations and working 
quickly to finalize the numbers and begin immediate recruitment of the 
necessary contracting professionals. These individuals will be placed 
in the Office of Procurement Operations in DHS headquarters. This 
office reports directly to the Chief Procurement Officer.
    The remaining seven operational activities do not report directly 
to the CPO; however, all contracting authority is granted through the 
CPO and the CPO retains oversight responsibility for these 
organizations. That said however, we are currently analyzing options to 
determine the feasibility of creating a direct reporting relationship 
to the CPO.

    Information Technology
    30. Do you worry that the Enterprise Architecture (EA) is a 
sufficiently robust tool to drive needed IT integration within DHS in 
light of the fact that, according to GAO, less than 10% of all federal 
agencies with EAs have ever moved past writing EAs to actually 
implementing plans with tangible products and projects?

    Answer:
    DHS is developing a business driven, ``actionable EA'' which 
integrates traditional EA tools with portfolio/performance management 
techniques to drive mission transformation projects. Mission 
transformation guides where IT integration must occur to meet mission 
requirements. These portfolios of projects will then be continuously 
assessed for their likelihood of enabling the department to achieve its 
strategic goals and objectives. Our EA work to date points to several 
potential transformation programs. One example is an Enterprise 
Services portfolio, which will be driven by the CIO to create ``One IT 
Infrastructure'' for the department to integrate networks, email, data 
centers, and operations centers. Another example is a Traveler 
portfolio, which will be driven by the Under Secretary for Border and 
Transportation Security to facilitate the lawful movement of people 
across our borders and via our transportation systems and will focus on 
screening and credentialing technology integration. Using EA in this 
fashion has resulted in tangible products and projects for the 
department.

    31. Does the DHS Chief Information Officer have sufficient power to 
drive IT integration within DHS they do not even have direct line 
authority over divisional Chief Information Officers and all of the 
systems and projects that they manage?

    Answer:
    The DHS CIO plays a key role in all levels of the department's 
investment review process. The CIO serves as a member of the 
department's Investment Review Board and, is the Chair of the 
Enterprise Architecture Board. In these capacities, the CIO provides 
input into and influence upon Department-wide IT Investment decisions. 
The CIO has recently established the Infrastructure Transformation 
Office, the goal of which is to transform the multiple IT 
infrastructures within DHS and as required, to direct and manage the 
change for all infrastructure assets and investments including people, 
processes, and technologies. The CIO is initiating a process, similar 
to that currently in process in the Infrastructure Transformation 
Office, where projects are managed centrally, inlcuding the management 
of IT assets, people, processes, practices, funding, and operations, 
however those assets remain in their organization. For example, the ITO 
is authorized to establish the necessary projects and organizational 
elements required to create the One Network, One Infrastructure. This 
includes driving and managing the change for all infrastructure assets 
and investments; including people, processes, and technologies. The CIO 
will leverage the use of Organizational Element staffs in additional 
areas, such as enterprise architecture and network management, to 
ensure accomplishment of department-wide IT goals and objectives.
    In addition, the Department has issued a Management Directive that 
deals with the functional integration of the IT functions within DHS. 
This Management Directive (MD) establishes the Department of Homeland 
Security' (DHS) vision and direction on the authorities and 
responsibilities of the leadership of the Department' Chief Information 
Officer. It reinforces our commitment to create a unified 21st century 
department in both mission accomplishment and support systems 
performance as quickly as possible. As such, this directive is the 
principal document for leading, governing, integrating, and managing 
the IT function throughout DHS.
    The DHS Chief Information Officer (CIO), through the functional 
integration concept, will be held accountable for designing the system 
to optimize the IT function, setting the standards for functional 
performance, creating the department-wide policies and processes, 
providing the automated solutions to yield greater efficiencies, and 
nurturing the development and success of centers of excellence. 
Organizational Element heads will likewise be accountable to support 
these progressive business functions as a key part of their commitment 
to mission accomplishment.

    32. According the DHS Inspector General's office, turnover among 
divisional Chief Information officers has been 45 percent since DHS 
opened. Can you help us understand why turnover has been so high, and 
how DHS can make important progress on integrating IT systems when it 
can not retain its top IT executives?

    Answer:
    DHS is facing, as are many other federal agencies, a ``graying'' of 
the workforce. Many of the senior executives in the IT community are 
either eligible to retire, or are within several years of being 
eligible. These retirements will have a severe impact on the IT senior 
leadership; this event highlights the importance of having succession 
and career planning strategies to develop and retain the more junior 
members of the workforce; it is that junior workforce who must be 
equipped with the knowledge and skills to move into senior management 
positions. To this end, the DHS CIO Council has identified as one of 
its top priorities IT Human Capital. This initiative is focused on 
identifying the current skills available within the DHS IT workforce, 
and providing the training and development needed for IT employees to 
move into senior leadership positions.

    33. It is our understanding that DHS is falling short on a number 
of basic technology projects that would improve DHS daily operations. 
DHS has still not rationalized such basic systems for its own employees 
in important administrative areas like accounting, acquisition, 
procurement, grant management, asset management, and budgeting and 
cost-accounting. What role did poor systems integration play in the 
recent discovery of a $1.2 billion budget shortfall in DHS' Immigration 
and Customs Enforcement (ICE) and Customs and Immigrations Services 
(CIS)?

    Answer:
    DHS recognizes the value and importance of integrated systems of 
accounting, acquisition, procurement, grant management, asset 
management, budgeting, and cost-accounting. When DHS was established in 
March 2003, it blended 22 distinct agencies and bureaus inheriting a 
myriad of redundant management functions, processes, and systems: for 
example, 40 general ledgers, 30 different procurement processes, and 20 
different approaches to managing travel costs. In FY-2005 DHS plans to 
implement the new finance/accounting/budget resource management system, 
eMerge2 (electronically Managing enterprise resources for 
government efficiency and effectiveness.) This system will transform 
disparate business and financial management systems into one, uniform, 
electronic solution for the Department. It will support a ``one 
environment'' model with common core processes that is critical to the 
success of DHS. eMerge2 will provide decision-makers with 
critical business, budget, accounting, procurement, grants, assets, and 
travel information in near ``real time;'' and eliminate stovepipes 
between components.
    There never was a $1.2 billion shortfall in ICE. However, to 
examine the budget situation, the Department of Homeland Security 
established a review team composed of staff from the CFO's Office, BTS, 
CBP, ICE, CIS, and the Coast Guard to assess this situation. The review 
team engaged in a detailed budget reconciliation effort and examined 
the allocation of resources and services throughout the bureaus.The 
Congress has recognized that funds may need to be realigned between 
ICE, CBP, and CIS. In the Joint Explanatory Statement (H. Rpt. 108-280) 
accompanying the Department of Homeland Security Appropriations Act, 
2004 (P.L. 108-90), the Congress recognized that the budgetary 
resources may need to be realigned. Specifically, the Congress noted: 
``The conferees are aware that the Department is conducting a 
comprehensive review of administrative and other mission 
responsibilities, particularly as they affect ICE and other agencies 
that have inherited multiple legacy missions. While funding provided by 
this conference agreement is based on the best possible information 
available, the conferees understand there may be a need to adjust 
funding to conform to the decisions resulting from the review.'' A 
similar statement was included under the heading discussing CBP.
    The Department is committed to the security of the nation and we 
will continue to work towards successful operation of CBP, ICE and CIS. 
To that end, we will continue to work with the Congress, to ensure that 
funds are aligned to mission objectives and are consistent with 
congressional intent.

    34. Help us understand what you have done and are doing to rectify 
the following problems. It seems hard to believe, but DHS may not even 
know how many employees it has at any given time. In September, 2003, 
DHS CIO Cooper was quoted as saying that, ``The Department keeps a 
running hand-tallied list of its staff, with the total varying from 
190,000 to 225,000 depending on which of the 22 component agencies 24 
human resources systems are consulted.'' Furthermore, pay and personnel 
systems still need to be integrated despite DHS promises to ``[merge] 
the personnel and pay systems of all DHS component agencies into a 
single system,'' and that, ``the new system was targeted for completion 
by the end of the [2003].'' $102.5 million is requested for DHS 
Departmental Operations to support the creation of new human-resources 
systems. Nonetheless, DHS predicts that a central administrative system 
``may be years away,'' and acknowledges that DHS officials are just 
beginning to ``set the initial requirements for the merger project.''

    Answer:
    We are able to report the number of employees who work for DHS at 
any given time; however at present this reporting requires assembling 
information from 3 different payroll providers. At the time of its 
standup, DHS components received payroll services from 8 different 
payroll providers. Significant efforts during this past year have 
resulted in the consolidation from 8 to 3 payroll providers--the 
National Finance Center (NFC), the Department of Transportation (DOT), 
and the General Services Administration (GSA). DHS intends to move to 
one payroll provider, and the NFC has been identified as the target 
end-state provider.
    DHS employees serviced by GSA have been converted to NFC in August 
2004, leaving only DOT payroll accounts to be migrated. Conversion of 
DOT payroll services this fiscal year is not possible due to various 
technical and schedule-related risks, but is planned for August 2005. 
DOT provides service to TSA and Coast Guard. Until such time as a 
consolidated database exists for reporting purposes, interim procedures 
have been established to receive bi-weekly data feeds from DOT, 
providing us with consolidated workforce information.
    With respect to broader HR enterprise technology solutions, DHS 
plans to partner with the OPM/OMB ``HR Line of Business'' initiative to 
identify and deploy an integrated human resources system. The current 
schedule for deployment includes a prototype in early fiscal year 2005, 
with a rapid implementation during 2005-2006.

    35. The President's budget request for fiscal year 2005 includes 
$4.4 billion for information technology spending at the Department of 
Homeland Security. Of that, $226 million is requested for ``Department-
wide Technology Investments'' for ``cross-cutting initiatives that help 
the 22 pre-DHS components merge into one.'' Please provide detail on 
the major components of that $226 million, and whether the CIO has 
direct and authoritative control over those dollars.

    Answer:
    The CIO, through allocations to him, has direct control and is 
responsible for executing the Department-wide IT Investment fund. In 
fiscal year 2005, approximately $226 million was requested for the 
Department-wide Information Technology Investments account, including 
$100 million for Wireless activities, $31million for Security 
Activities, and $95 million for Information Technology services. The 
wireless funding is being used to replace legacy border components, 
specifically to upgrade and/or replace older infrastructure components 
and for the enablement of enhanced capability and broader coverage. The 
wireless activities include funding for new investments in radio 
infrastructure along the nation' borders; which continues an effort to 
coordinate wireless initiatives and infrastructure across federal, 
state, local, and tribal government.
    A total of $31 million is being used for Security Activities, which 
includes:
    $10 million to support the Federal Watch List and Integration 
program. fiscal year 05 activities include:
         establishing operational system interfaces for DHS 
        organizations that receive data from the Terrorist Screening 
        Center for use in watch list operations;
         completing the development of the To-Be model for 
        enhancing DHS processes that employ data from the terrorist 
        screening DB;
         developing the plan to move to that To-Be environment; 
        and construction of plans for the use of biometrics in 
        terrorist screening
    $21M to support the Homeland Security Information Technology and 
Evaluation Program. fiscal year 05 activities include:
         the Office of the Chief Information Officer (OCIO) 
        partnering with the Office for Domestic Preparedness (ODP) in 
        managing the Homeland Security Information Technology 
        Evaluation Program (ITEP).
         State Administrative Agencies (SAAs) will be 
        encouraged to submit candidate information technology 
        demonstration projects. The fiscal year 2005 ITEP projects will 
        build on those of fiscal year 2004 to further demonstrate novel 
        uses of existing, ``state-of-the-market'' information 
        technology to remove one or more significant barriers in 
        homeland security mission critical areas.
    $95 million is being used for general information technology 
investments.
    $ 9 million is being used for Enterprise Architecture (EA) efforts 
in order to:
         develop, implement, and maintain a comprehensive and 
        integrated EA;
         establish processes for maintaining and maturing the 
        EA;
         develop a decision support methodology to select, 
        control, and evaluate DHS Information Technology (IT) 
        investments;
         develop a detailed master plan for the alignment of IT 
        investments with the EA business and data model.
    $4 million is being for our Enterprise Service Delivery Environment 
(Portal Technologies) to:
         support information sharing by integrating current 
        internal and external websites to be more customers focused;
         enhance the core enterprise service delivery 
        environment.
    $5M is being used to support the Department' Geospatial Activities, 
which include:
         collaborating with the Wireless Program Office on a 
        joint IT initiative. The GeoWireless Program initiative is 
        centered around three pilot projects designed to effect an 
        operational decision support capability utilizing interoperable 
        wireless and geospatial technologies. These projects include:
                o Miami Situational Awareness--Combination of 
                geospatial and wireless technologies providing 
                situational awareness, strategic and tactical decision 
                support capabilities for the combined Miami Air and Sea 
                Port facilities. Enable delivery of and remote update 
                of decision support capability, and enable real time 
                situational awareness.
                o ENFORCE Case Management System--Spatially enabling 
                the ENFORCE system, and leveraging wireless and 
                geospatial technologies to enable remote update and 
                access. Enable interoperable interaction with critical 
                decision support systems with a spatial and temporal 
                context.
                o Geospatial Service Center--Create internet enabled 
                geospatial mapping and information services which 
                deliver critical information to remote service points, 
                and further extend services through wireless 
                technologies, to the field. Enable delivery of and 
                remote update of decision support services, and enable 
                real time situational awareness.

$56 million is being used to develop and integrate the Department' 
financial management system (eMerge 2)

$21 million is being used to support the Department' Human Resources IT 
Systems, which includes:
         awarding a contract to support design, development, 
        and implementation of new HRIT system;
         developing governance models, configuration management 
        processes and other program management processes

    36. How is DHS addressing the following urgent IT--related problems 
highlighted by the IG and in the press:
    According to the Inspector General's office, ``the lack of an 
agreed upon IT infrastructure'' prevents the Office of Information 
Analysis's Risk Assessment Division from communicating ``with [state, 
local, and private sector] partners inhibits the exchange of 
information;''
    According to the Inspector General's office, IAIP officials have 
``expressed concerns that IAIP lacked connectivity to access sensitive 
databases maintained at other federal agencies, thus hampering their 
efforts to conduct business on a daily basis;'' and
    According to Information Week, the office of the CIO has had 
problems sending or receiving secure email.

    Answer:
    The CIO has recognized that in order to address the challenges 
noted above, there was a need to create an organization which would 
have full authority to transform the multiple IT infrastructures within 
DHS and as required, directing and managing the change for all 
infrastructure assets and investments including people, processes, and 
technologies. The CIO established the Infrastructure Transformation 
Office (ITO) with full time representation from the major 
organizational elements with the responsibility to establish the 
department' single IT infrastructure. The ITO Program, under the 
direction of the CIO and with the advice of the DHS CIO Council is 
responsible for program management and implementation of the DHS wide 
``One Network, One Infrastructure.''
    The objective of the Infrastructure Transformation Program is to 
centralize management of IT assets, people, processes, practices, 
funding, and operations in order to achieve improved IT Infrastructure 
interoperability. The ITO is authorized to establish the necessary 
projects and organizational elements required to create the One 
Network, One Infrastructure. This includes driving and managing the 
change for all infrastructure assets and investments; including people, 
processes, and technologies.

                                 
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