[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                     TRANSFORMING THE DEPARTMENT OF
                       HOMELAND SECURITY THROUGH
                        MISSION-BASED BUDGETING

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

                                HEARING

                               before the

         SUBCOMMITTEE ON MANAGEMENT, INTEGRATION, AND OVERSIGHT

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 29, 2005

                               __________

                           Serial No. 109-28

                               __________

       Printed for the use of the Committee on Homeland Security
                                     
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                     

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

                               __________



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                     COMMITTEE ON HOMELAND SECURITY

                 Christopher Cox, California, Chairman

Don Young, Alaska                    Bennie G. Thompson, Mississippi
Lamar S. Smith, Texas                Loretta Sanchez, California
Curt Weldon, Pennsylvania,           Edward J. Markey, Massachusetts
Christopher Shays, Connecticut       Norman D. Dicks, Washington
Peter T. King, New York              Jane Harman, California
John Linder, Georgia                 Peter A. DeFazio, Oregon
Mark E. Souder, Indiana              Nita M. Lowey, New York
Tom Davis, Virginia                  Eleanor Holmes Norton, District of 
Daniel E. Lungren, California        Columbia
Jim Gibbons, Nevada                  Zoe Lofgren, California
Rob Simmons, Connecticut             Sheila Jackson-Lee, Texas
Mike Rogers, Alabama                 Bill Pascrell, Jr., New Jersey
Stevan Pearce, New Mexico            Donna M. Christensen, U.S. Virgin 
Katherine Harris, Florida            Islands
Bobby Jindal, Louisiana              Bob Etheridge, North Carolina
Dave G. Reichert, Washington         James R. Langevin, Rhode Island
Michael McCaul, Texas                Kendrick B. Meek, Florida
Charlie Dent, Pennsylvania

                                 ______

         SUBCOMMITTEE ON MANAGEMENT, INTEGRATION AND OVERSIGHT

                     Mike Rogers, Alabama, Chairman

Christopher Shays, Connecticut       Kendrick B. Meek, Florida
John Linder, Georgia                 Edward J. Markey, Massachusetts
Tom Davis, Virginia                  Zoe Lofgren, California
Katherine Harris, Florida            Sheila Jackson-Lee, Texas
Dave G. Reichert, Washington         Bill Pascrell, Jr., New Jersey
Michael McCaul, Texas                Donna M. Christensen, U.S. Virgin 
Charlie Dent, Pennsylvania           Islands
Christopher Cox, California (Ex      Bennie G. Thompson, Mississippi 
Officio)                             (Ex Officio)

                                  (II)



























                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Mike Rogers, a Representative in Congress From the 
  State of Alabama, and Chairman, Subcommittee on Management, 
  Integration, and Oversight.....................................     1
The Honorable Kendrick B. Meek, a Representative in Congress From 
  the State of Florida, and Ranking Member, Subcommittee on 
  Management, Integration, and Oversight.........................     2
The Honorable Donna Christensen, a Delegate in Congress From the 
  U.S. Virgin Islands............................................    36
The Honorable Charlie Dent, a Representative in Congress From the 
  state of Pennsylvania..........................................    31
The Honorable John Linder, a Representative in Congress From the 
  State of Georgia...............................................    29

                               WITNESSES
                                Panel I

The Honorable David M. Walker, Comptroller General of the United 
  States Government Accountability Office:
  Oral Statement.................................................     3
  Prepared Statement.............................................     5

                                Panel II

Mr. Jonathan B. Breul, Partner, IBM Business Consulting Services, 
  Senior Fellow, IBM Center for The Business of Government:
  Oral Statement.................................................    41
  Prepared Statement.............................................    42
The Honorable Maurice P. McTigue, Director, Government 
  Accountability Project, Mercatus Center, George Mason 
  University:
  Oral Statement.................................................    37
  Prepared Statement.............................................    39
Mr. Carl J. Metzger, Director, Government Results Center, Grant 
  Thornton LLP:
  Oral Statement.................................................    45
  Prepared Statement.............................................    46

                            A P P E N D I X
                   Additional Questions and Responses

Questions from Hon. Kendrick B. Meek:
  Mr. Jonathan D. Breul Responses................................    57
  Hon. Maurice P. McTigue Responses..............................    58
  Mr. Carl J. Metzger Responses..................................    59












 
                      TRANSFORMING THE DEPARTMENT
                      OF HOMELAND SECURITY THROUGH
                         MISSION-BASED BUGETING

                              ----------                              


                        Wednesday, June 29, 2005

                  House of Representatives,
                    Committee on Homeland Security,
                                Subcommittee on Management,
                                Integration, and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 3 p.m., in room 
210, Cannon House Office Building, Hon. Mike Rogers [chairman 
of the subcommittee] presiding.
    Present: Representatives Rogers, Linder, Dent, Meek, and 
Christensen.
    Mr. Rogers. [Presiding.] This meeting of the Subcommittee 
on Management, Integration, and Oversight will come to order.
    I would first like to thank the Comptroller General of the 
United States as well as our other distinguished witnesses for 
taking time out of their busy schedules to join us here today.
    The hearing will focus on the use of mission-based 
budgeting as a way to help transform and strengthen the 
Department of Homeland Security. Under the Homeland Security 
Act of 2002, several core mission areas were established for 
the Department's management effort.
    These missions include preventing terrorist attacks, 
reducing the vulnerability of the United States to terrorism, 
and minimizing the damage from terrorist attacks and assisting 
in recovery efforts.
    As an agency that began life as a hodgepodge of 22 separate 
components, DHS would benefit greatly from mission-based 
budgeting. This tool would help focus the Department's scarce 
resources on activities in these mission areas.
    It would also help transform the agency into an integrated 
organization focused on its core mission of homeland security. 
And finally, it would help ensure one of the Federal 
Government's largest and most important agencies is spending 
limited tax dollars wisely.
    We are pleased to have with us today witnesses to discuss 
the Department's current spending methods and priorities. Our 
first panel will include Hon. David Walker, Comptroller General 
of the United States.
    Mr. Walker has over 20 years of experience working with the 
budget process, and I hope he will shed some light on the best 
ways of prioritizing spending. He also plans to discuss the 
Department's resource management and comment on ways to improve 
overall accountability.
    Our second panel includes several experts on Federal 
budgeting from the private and non-profit sectors. These 
experts will bring to the table lessons learned by other 
Federal departments that could be applied to DHS.
    And, of course, we will look forward to hearing from this 
panel how the Department can transform and integrate itself 
through mission-based budgeting. Once again, I would like to 
thank the witnesses for joining us today, and I look forward to 
their testimony on an important topic.
    And I now yield to my friend and colleague from Florida, 
the ranking member, Mr. Meek.
    Mr. Meek. Thank you, Mr. Chairman. I am excited about being 
here once again on our subcommittee that we have here dealing 
with the department that I think is one of the most vital 
agencies and departments of the Federal Government.
    And it goes toward the homeland. It also goes toward the--
of making sure that we protect the homeland for future 
generations.
    Mr. Chairman, I must add that every time we have a 
subcommittee hearing I think it is important that the 
Department of Homeland Security is present, and I know that 
they are going through their 90-day review, and the second 
phase of the review, and I understand Secretary Chertoff is 
going to be making some announcements pretty soon about his 
review.
    But I think it is important that we continue to do the 
things that we are doing, Mr. Chairman, getting the facts and 
lining it up so when the Department of Homeland Security is 
ready to start answering some of the tough questions before 
this committee--not in the way of saying they are not doing 
their job, but just saying that they are about finding answers 
to some of the problems that we are actually unveiling, not 
only within other governmental agencies but also as it relates 
to the private sector that has come forth and shared new ideas 
and concerns.
    And I know that you are in concert in making sure that we 
make this department as tight as possible, especially when we 
start talking about the taxpayers' money.
    I also have to point out the fact that we have some good 
people over at the Department of Homeland Security. We know 
that it has its problems--22 legacy agencies that had their 
issues as it relates to management from the forefront and from 
the beginning.
    But I think, Mr. Comptroller, I am so glad to have you here 
today because, as you are aware, the GAO has designated DHS as 
a high-risk agency, an agency that--noting that DHS faces a 
number of management challenges to improve its ability to be 
able to carry out its duty as it relates to homeland security 
agency.
    Amongst those challenges are the need to provide a focus 
for management efforts and the need to improve strategic 
planning. The GAO also went on to note that DHS's failure to 
effectively address its management challenges and program risks 
could have serious consequences for our nation's security. And 
that is serious business, when we start talking about 
protecting the homeland.
    Also, as it relates to our second panel, I, too, join in 
with the chairman and thank you for taking time out of your 
schedule to come and share best practices that have already 
been effective in other Federal agencies.
    We have a lot to do and a short time to do it. And your 
testimony today is going to be very, very helpful to us, 
especially after Secretary Chertoff completes his second phase 
of his review, and start coming up with a plan of action so 
that we can legislate in a way that will protect not only the 
homeland but also protect it for future generations to come.
    Mr. Chairman, I look forward to hearing fruitful and 
thoughtful testimony. Thank you for having this hearing.
    Mr. Rogers. I thank the gentleman. I would like to remind 
our witness that your entire statement will be put into the 
record, so if you could limit your oral statement to 5 minutes 
that would give us more time for question and answer 
interaction.
    I call the first panel and recognize Hon. David Walker, 
Comptroller General of the United States, for your statement.

            STATEMENT OF THE HONORABLE DAVID WALKER

    Mr. Walker. Thank you, Mr. Chairman, Mr. Meek. It is a 
pleasure to be before this subcommittee to talk about the 
Department of Homeland Security and how it can use performance 
budgeting and risk management principles in order to maximize 
program performance in an environment of increasing fiscal 
constraints.
    If I can, Mr. Chairman, let me offer a proposed definition 
for mission-based budgeting. I think it is important to not 
just focus on what we call it but what we are trying to 
achieve. I would offer a mission-focused, results-oriented and 
outcome-based budgeting approach that is designed to maximize 
value and mitigate risk within current and expected resource 
levels.
    I think all of those dimensions are important. In that 
regard, as you and Mr. Meek know, our nation currently faces 
serious long-range structural deficits that ultimately we are 
going to have to address.
    While we have been adding additional resources to homeland 
security for understandable reasons, it is unrealistic to 
expect that we are going to be able to continue to add 
resources at the rate of increase that we have in recent years.
    Therefore, it is very, very important that we properly 
allocate those resources to achieve the most positive results 
and mitigate the most risk, recognizing that there is no such 
thing as zero risk in today's world, and yet at the same point 
in time there are finite limits as to how much resources that 
we have to commit.
    We have done quite a bit of work dealing with the 
Department of Homeland Security in a variety of areas. Mr. Meek 
is correct in saying that we put the Department of Homeland 
Security's transformation effort on our high-risk list. 
However, it is not the entire department.
    It is the effort to combine 22 different agencies, many of 
which did not have homeland security as their central mission 
before September 11, 2001. This involves making sure that they 
are operating as a cohesive and effective whole, consistent 
with the principle that I talked about before.
    Our view is that while the Department of Homeland Security 
has made some progress with regard to strategic planning, and 
while it is starting to use risk-based concepts and 
performance-based approaches to a greater extent than it did 
prior to the creation of the Department, more needs to be done, 
especially in light of the environment that we are in at the 
present point in time.
    We believe that, as our latest high-risk series notes, 
additional emphasis has to be taken to employ risk management 
principles in determining how resources will be allocated and 
to try to achieve more specifically defined results or outcomes 
consistent with the missions that are laid out in the statute.
    There are some agencies that are using risk management 
concepts to a greater extent--for example, the Coast Guard, the 
Customs and Border Protection Service, TSA, as well as the 
Customs Enforcement Office of Investigations. They have taken 
some initial steps to try to use some of these concepts, but we 
think much more needs to be done.
    Furthermore, I think it is fair to say, Mr. Chairman, that 
Congress has a critically important role to play, not only with 
regard to the oversight process--and I commend this committee 
and subcommittee for discharging its related responsibilities--
but also with regard to the authorizing and appropriations 
functions.
    As my statement notes approximately 40 percent of the $5.1 
billion in statewide homeland security grant funds that were 
awarded for fiscal years 2002 through 2005 were shared equally 
among the 50 states, the District of Columbia, the Commonwealth 
of Puerto Rico and certain U.S. territories.
    The remaining amount was distributed according to state 
populations. Therefore, by definition, during this period of 
time we were not employing a risk-based approach to resource 
allocation.
    I think it is very important to look for not only ways that 
the Department of Homeland Security can take a more strategic, 
performance-oriented and risk-based approach to discharging its 
responsibilities, consistent with the statutory requirements, 
but I think that Congress also has to think about whether and 
to what extent it should be employing different approaches in 
how those funds are allocated in order to achieve the best 
results, and mitigate the most risk with available resources. 
After all, the crunch is coming from a budget standpoint.
    Thank you, Mr. Chairman.
    [The statement of Mr. Walker follows:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Rogers. I thank the gentleman.
    At the conclusion of your remarks, you said Congress needs 
to do more. Specifically give me a couple of examples.
    Mr. Walker. As you know, Mr. Chairman, there is a lot of 
money that is allocated to homeland security, most of which 
relates to the Department of Homeland Security, but not all of 
it does.
    The example that I include in my testimony on page 15 talks 
about during the period 2002 to 2005, there were certain 
statewide homeland security grant funds, and those funds were 
not allocated based upon any risk-based approach.
    It was more of an equitable distribution of those funds to 
make sure that we spread the money broadly rather than taking a 
more risk-based approach for determining how the money should 
be allocated. We also need to understand how the money was used 
and whether or not it resulted in mitigation of risk and a 
positive outcome.
    Mr. Rogers. So when you say we should do more, are you 
first and foremost recommending that we go completely to risk-
based distribution? We made a successive approximation this 
year with our authorizing legislation, but you want to see it 
be 100 percent?
    Mr. Walker. I think you should do as much as you believe 
you can comfortably achieve, given the fact that the Congress 
ultimately has to be able to achieve enough consensus to pass 
the bill.
    As we all know, under the Constitution, every state gets 
two senators and has a representative number of members in this 
House, and so you may need to have some amount of funds that 
end up getting allocated to each state. However, I think you 
should maximize the amount of funding that can be allocated 
based upon risk, especially given the fact that funding is 
likely to become more difficult in the years ahead.
    Mr. Rogers. I understand that the CIA currently uses 
mission-based budgeting. Do you know of any other Federal 
agencies you could offer us as good examples of how it works?
    Mr. Walker. None that I can think of off the top of my head 
that meets the definition that I just said, other than GAO.
    I would also note that we have not done work in the CIA for 
a long time. While they may assert that they use mission-based 
budgeting, I am not sure that, in reality, if you looked at it 
closely, that would be the case. I can't say one way or the 
other.
    Mr. Rogers. You made reference a little while ago about how 
mission-based budgeting could help make sure that we spread 
scarce resources more effectively, and you talked about being 
able to look at the results.
    Is analyzing the results an essential component of mission-
based budgeting, or is mission-based budgeting going to be 
primarily beneficial by allowing to conceptually know where we 
are putting our resources? Or do you have to have this results 
component as well?
    Mr. Walker. I would respectfully suggest, Mr. Chairman, 
that we need all of the components that I laid out in my 
proposed definition. I can briefly restate that--I think it 
needs to be mission-focused, results-oriented, and outcome-
based, that is designed to maximize value and mitigate risk 
within current and expected resource levels.
    Those all involve tradeoffs. The Government as a whole has 
a lot of very capable people doing a lot of very good work, but 
in the final analysis we have to be able to demonstrate what 
type of results are being achieved with the resources--both 
financial, human, technological, and others--that are being 
given, especially given increasing budget pressures.
    Mr. Rogers. If you were to tell somebody in a nutshell--you 
are in rural Alabama, you stop at a gas station, and you are 
trying to tell Joe Blow why mission-based budgeting is 
beneficial. What would be the simple answer as to why we should 
do it?
    Mr. Walker. Of course, I was born in Alabama, and I may 
have stopped at that gas station at some point in time, Mr. 
Chairman.
    Mr. Rogers. I knew--
    Mr. Walker. But I think the reason that we need to achieve 
the definition that I stated is because we face large and 
growing structural deficits. We have unlimited demands but 
limited resources.
    We need to make sure that we are doing everything that we 
can to mitigate as much risk as possible while maintaining 
economic growth--
    Mr. Rogers. What do you mean--
    Mr. Walker. --and minimizing tax burden.
    Mr. Rogers. --when you say mitigate resources?
    Mr. Walker. Mitigate risk.
    Mr. Rogers. OK.
    Mr. Walker. Mitigate risk. There is no such thing as zero 
risk in today's world. You could allocate whatever amount of 
money you decided to allocate. We will always have risk.
    Yet at the same point in time, given resource constraints, 
we need to use whatever money that we have in a very targeted 
fashion, and we need to understand what difference is being 
made with those funds.
    Mr. Rogers. I thank the gentleman. My time is expired.
    I now yield to my friend and colleague from Florida, Mr. 
Meek, for any questions he may have.
    Mr. Meek. Mr. Chairman, you were marching down the street 
that most Americans are trying to figure out what we are 
talking about, and what does this really mean.
    And I am glad in your testimony that--most of it you 
entered for the record, but you tried to address some of the 
finer points of the reason why we are having this hearing 
today.
    And I know that it will even get more crystal when we move 
to the second panel about exactly the benefits of having the 
Department of Homeland Security being the agency that is 
responsible for prevention and also protection and response.
    It is very difficult to be able to foresee some of the 
issues that the department will be facing. And if they are 
facing it, then America would be facing it.
    I have a question for you--actually, the question prior to 
our meeting--that I just need an answer to. And we know the 
department has basically three primary issues here. That is 
prevention, prevent terrorist attacks within the United States, 
reduce America's vulnerability to terrorism and minimize the 
damage from potential attacks and natural disasters, I must 
add.
    Is it fair to say that a comprehensive plan or a strategy 
that is designed to fulfill the mission of each of the prongs 
of the agency as relates to its mission statement, or the 
reasons why they are in business in the first place, before we 
can arrive at what you may call a mission-based budget 
framework--basically, the question is what is the relationship 
between mission-based budgeting and the department's ability to 
craft a strategic plan and carry this mission out?
    I am trying to figure out how can we actually get the 
department up to a B or a C-plus as it relates to mission-based 
budgeting. And I am asking a question on top of a question--
more of a statement, because I believe it is a good lead-in.
    When you look at this, and you start looking at the 
deficit, and you start looking, like you say, at future years, 
the way I see it now, as a member of Congress--also, a member 
of the Armed Services Committee--this is fighting terrorism, 
the early years.
    And I believe the department is going to continue to grow 
funding-wise. I think that there is a movement here in Congress 
to make the department more of an assistance to local 
government and state government versus just being a big grant 
operation and continuing to, you know, roll down that avenue, 
and that is going to be very expensive.
    How can we bring it under control as it relates to those 
mission statements that I mentioned, and not knowing what the 
future may hold?
    Mr. Walker. Well, Mr. Meek, first, I think we have to keep 
in mind that there are several different definitions of mission 
for the Department of Homeland Security. You have several in 
the statute. The three that you mentioned are clearly in the 
statute.
    There are a number of other areas that are mentioned in the 
statute as well, because the statute also says that the 
Department of Homeland Security is supposed to continue to 
discharge the responsibilities that the various 22 agencies 
were discharging prior to its creation.
    Therefore, while you might expect that a disproportionate 
amount of their time and attention and resources would be 
focused to the three critical objectives that you talked about, 
they also need to make sure that they define what objectives 
they are trying to achieve with regard to their other missions 
that existed prior to September 11th.
    There is the Homeland Security Act and the National 
Homeland Security Strategy, which covers those three. There is 
also the DHS strategic plan which needs to cover everything 
that is in the Homeland Security Strategy as well as the Act of 
2002.
    As you know, GPRA, the Government Performance and Results 
Act, which was passed in the early 1990's, provides a framework 
for moving forward here. It provides for strategic planning. It 
also provides for annual performance and plans. It also 
provides for annual performance and accountability reports.
    In addition to using those existing statutory mechanisms as 
a way to try to bring this alive, I also think we have to look 
at the appropriations process, what type of budgets are being 
submitted as part of the appropriations process, and how we can 
help assure that it is a supplement to, not a substitute for, 
the information that the appropriators are used to getting. 
They need to get appropriate information along the lines of 
what I am talking about to help them make more informed 
decisions in resource allocation and to help them understand 
what is working and what is not working.
    We also have to keep in mind that we should not just look 
within the Department of Homeland Security, but there are other 
players on the field dealing with homeland security, and we 
can't forget about that. We also need to understand what other 
players are doing to try to achieve these overall objectives, 
even though they may not be within the Department of Homeland 
Security.
    Mr. Meek. Just one last question for you, because I know we 
have to get to another member and the second panel. It is going 
to be a serious balancing act. And as we educate ourselves, not 
only as a subcommittee but a committee in general, when you are 
looking at Department of Homeland Security, you have to look at 
not only the issue of performance but priority, but also 
politics.
    And all of that comes together, and when it comes together, 
it is really something to deal with, because nine times out of 
10 what we are trying to avoid is being in shock mode, like we 
were on 9/11 without the Department of Homeland Security, 
looking at the needs of the country, looking at making sure 
that we can be able to draft legislation that will be able to 
have a department that can be responsive, not only in a time of 
emergency and prevention but also fiscally responsible in how 
it deals with its programming and also monitor making sure that 
the people of the United States of America is getting its 
money's worth, because the confidence of the department is at 
stake not only within but without, outside with Americans, how 
they feel about the department as it goes to protect the 
homeland, which is its primary mission.
    Mr. Walker. I think a key point here, real quickly, Mr. 
Meek, is you have got to have a plan. You have got to set 
priorities. You have got to target resources where you think 
you are going to have the maximum positive effect and mitigate 
the most risk.
    They need to have results-based outcomes that they are 
focusing on, because otherwise if you don't have that approach, 
the assumption is that if you give more money, you are going to 
get more results. That is false. That is not necessarily true.
    We have many Federal Government programs and tax policies 
where we assume that if we do more, we are going to get better 
results, when in reality we don't even know what results we are 
getting with what we have right now.
    Mr. Rogers. I thank the gentleman.
    The chair now recognizes the gentleman from Georgia, Mr. 
Linder, for any questions he may have.
    Mr. Linder. You said early on that the risk in this 
Department, or the difficulties in this Department, is not the 
Department itself but the effort to combine 22 agencies. Isn't 
that the Department?
    Mr. Walker. That is clearly one of the risks. One of the 
reasons that it is on the high-risk list is because it is an 
amalgamation of 22 different entities, with different systems, 
different cultures, et cetera, many if not most of which--in 
fact, were not primarily focused on protecting the homeland 
before the creation of this Department.
    So, yes, that is the Department, and they are a key player. 
But my only point is there are some things that go well in the 
Department. I hate to put a department on the high-risk list, 
because that indicts anything and everybody associated with the 
department. I would rather put a program, a function or 
activity rather than a department.
    Mr. Linder. Have you done any analysis of any parts of the 
Department yet?
    Mr. Walker. Oh, we have, Mr. Linder. We are doing work at 
the request of this committee and others all the time with 
regard to homeland security.
    Mr. Linder. Have you done any analysis of TSA?
    Mr. Walker. The Transportation Security Administration? 
Yes, we have. We have done quite a bit of work on TSA.
    Mr. Linder. You constantly talk about measuring risk versus 
reward, and I am very familiar with your doomsday scenario for 
35 years from now.
    If you have 690 million passenger trips in 2004 on the 
airlines, you spend $5 billion taking away their fingernail 
clippers, and you have nine billion passenger trips on the 
railroads, and we spend $200 million there, is that 
proportional risk, do you think?
    Mr. Walker. No, and, frankly, Mr. Linder, as you may or may 
not know, my wife used to be in the airline industry. She is a 
retiree from Delta Airlines. She was a flight attendant. I 
think one of the things that we need to think about in 
Government is what is the most realistic current and future 
risk.
    Frankly, a lot of things that we are doing with regard to 
TSA are to prevent past risks rather than necessarily what the 
most likely current and future risks are.
    And by that, I mean, if I can, quickly, what happened on 
September 11th, to a great extent, was that the terrorists 
exploited not only our system but how pilots and flight 
attendants had been trained. They were trained to be 
acquiescent. They were trained to be able to do whatever the 
hijacker said, and so were the passengers.
    Fundamental changes have occurred such that the likelihood 
that that would happen again I think is extremely remote, 
irrespective of what TSA does.
    Mr. Linder. I agree, and I think Pennsylvania proved that 
to us. What bothers me is we are always fighting the last war, 
and I think it is highly unlikely that airlines will be used in 
the next push. I think it is more likely that it will be 
something from the biological or nuclear area--get a huge, huge 
bang for the buck.
    And we spend about less than 2 percent of the budget on 
intelligence to find out if there are people out there looking 
for this stuff, and we spend virtually nothing on biological, 
which is, frankly, quite, I think, more difficult than nuclear. 
Is that measuring the risks appropriately?
    Mr. Walker. I think we need to be analyzing current and 
future likely threats and risk. We should be informed by what 
has happened in the past but not driven by what has happened in 
the past.
    Quite frankly, Mr. Linder, I believe that many times 
Washington is a lag indicator. Washington tends to respond to 
what has already happened and does not do enough to try to 
anticipate what might happen and to allocate time and resources 
accordingly.
    I believe that any comprehensive threat and risk-based 
approach must do what you are talking about. Let's look at 
today and tomorrow--what do we need to do, what resources do we 
need, who needs to do what--rather than necessarily looking 
backward.
    Mr. Linder. Thank you.
    Thank you, Mr. Chairman.
    Mr. Rogers. I thank the gentleman.
    The gentleman from Pennsylvania, Mr. Dent, is recognized.
    Mr. Dent. Thanks, Mr. Chairman.
    I apologize for coming a little late, Mr. Walker, to hear 
your testimony. Describe for me the difference between 
performance-based budgeting and mission-based budgeting, and 
what is the difference?
    Mr. Walker. There is a lot of terminology that is being 
used, and I proposed a definition, Mr. Dent. Call it 
performance-budgeting and mission budgeting. I think what we 
need to try to achieve is the following.
    We need to have a mission-focused, results-oriented and 
outcome-based budgeting approach that is designed to maximize 
value and mitigate risk within current and expected resource 
levels. That means results-oriented and risk-based. That is 
what is important, I believe.
    Mr. Dent. And it is my understanding that the CIA uses 
mission-based budgeting, and what other Federal agencies that 
you are aware of utilize it?
    Mr. Walker. Other than GAO, I am not aware of any. I will 
say that I have heard, as the chairman mentioned, that CIA 
asserts that they do. I don't know if they do or not. I cannot 
attest to that because we are not doing work in the Agency, in 
general, much less in this area.
    Mr. Dent. Would the Homeland Security Department--you see 
there would be significant benefits just--is it more beneficial 
in the homeland security area, intelligence area, than perhaps 
other areas of government, mission-based budgeting, or--
    Mr. Walker. My personal view is this ought to be applied 
throughout Government. I think obviously to the extent that you 
are talking about self-preservation, to the extent that you are 
talking about safety and security in the hierarchy of needs, 
that is most fundamental.
    It is particularly important to the extent that you are 
talking about security and intelligence activities designed to 
protect our national and homeland security. But I think it is a 
concept that ought to apply broadly, including within the 
Defense Department.
    Mr. Dent. How would this type of budgeting affect the 
management of DHS, for example? What would be your thoughts on 
that?
    Mr. Walker. I think it would help them to focus on trying 
to achieve more demonstrable and positive outcomes given the 
limitations in resources and other authorities that they have.
    As I mentioned before, I think the Congress has a role to 
play here, too, because the Congress has to think about--to the 
extent that the Congress is appropriating resources to DHS--if 
you want them to employ a risk-based approach, then the 
resources need to be overwhelmingly allocated in a way that 
allows them to allocate those resources based upon risk rather 
than per state, per capita, or those types of approaches.
    It may be difficult, but that is inherently contrary to a 
risk-based approach.
    Mr. Dent. Thank you.
    Mr. Rogers. The chair now recognizes the gentlelady from 
the Virgin Islands, Ms. Christensen.
    Mrs. Christensen. Good afternoon. I apologize for being 
late. The time kind of got away from me.
    And if you have answered this question before, I apologize, 
and maybe you might want to elaborate if you started it, but 
could you tell me how mission-based budgeting is one of several 
tools that could be used in creating a budget plan, one of a 
multifaceted number of tools that--how is it one of those tools 
that should be used in creating a budget plan?
    Mr. Walker. I think that mission-based budgeting is 
something that needs to be used in concert with a number of 
other things that agencies should be doing now under the 
Government Performance and Results Act.
    For example, have a strategic plan, align the organization 
to that plan, have an annual performance plan, have an annual 
performance and accountability report. I think that mission-
based budgeting has to be informed by those elements and should 
be used as a supplement to, rather than a substitute for, the 
type of information that the appropriators are accustomed to 
getting in making their annual decisions.
    I know there have been some concerns expressed in the 
appropriations committees that if they are going to have this 
kind of information, they would like to have it as a supplement 
to, not a substitute for, what they are accustomed to getting. 
They are used to dealing with information they have been 
getting in the past.
    Mrs. Christensen. Do you see the new secretary moving in 
this direction? I mean, he talks about redesigning the 
Department and allocating funds according to risks and 
catastrophic risks rather than what you consider more minor 
events. Do you see him moving in this direction?
    Mr. Walker. Based upon some of his recent statements, he 
seems to conceptually be moving in this direction. But as was 
mentioned before, he is supposed to be reporting back in the 
near future as to what the results of his initial due diligence 
are and what specific proposals he has for the way forward for 
the Department of Homeland Security.
    I look forward to receiving those, as I am sure you do as 
well.
    Mrs. Christensen. Yes. You talked about GPRA and the 
strategic planning process. How important is it for the 
Department to create an auditable financial statement?
    Mr. Walker. My personal view is that given the amount of 
money involved, which is tens of billions of dollars, the 
taxpayers have a right to have accountability over those funds.
    I don't believe that audited financial statements are an 
end in and of themselves. I think the taxpayers have a right to 
that. I also believe that it is very, very important that the 
Department have a plan, because if you don't have a plan, you 
are going nowhere fast--
    Mrs. Christensen. Right.
    Mr. Walker. --that that plan has to be prepared consistent 
with the principles that I laid out before. That is of primary 
importance.
    Mrs. Christensen. Thank you.
    Mr. Rogers. There are a couple of things I want to know. 
First of all, why do you think more agencies don't use mission-
based budgeting?
    Mr. Walker. Number one, they are not necessarily familiar 
with the concept. Number two, it is not something that 
Congress, frankly, has either demanded or, in some cases, even 
desired.
    I think it is going to take a behavioral change both within 
the executive branch, as well as an openness on behalf of the 
Congress, to use this type of information in order to make 
resource allocation decisions, in considering reauthorization 
of programs as well as in connection with oversight-related 
activities.
    Mr. Rogers. Is it your belief there would be institutional 
reluctance to embrace mission-based budgeting?
    Mr. Walker. As you know, Mr. Chairman, there is a lot that 
has to be done right now with regard to preparing the strategic 
plan, the annual performance plan, the annual performance 
accountability report, the annual budget that has to be 
presented.
    I think a lot of people are looking at this as this is an 
incremental burden. It may make a lot of sense, but I want to 
make sure that somebody is actually going to use it and it is 
actually going to be meaningful and make a difference with 
regard to resource allocations.
    That is why I say I think it is not only changing the 
culture and the mindset in the executive branch, I think it is, 
frankly, to a certain extent, changing the culture and the 
mindset on Capitol Hill.
    Mr. Rogers. One of my big frustrations, as I have been 
working on this subcommittee and trying to get information from 
DHS about their expenditures, is that it seems apparent to me--
and I think the recent Inspector General's audit demonstrated 
this--that they don't really seem to know why they are asking 
for the numbers they are asking for, for particular projects. 
They can't justify them.
    And my question is, would mission-based budgeting in any 
way remedy that, or is that a separate area?
    Mr. Walker. It would help to address that issue.
    Mr. Rogers. How? How would it--
    Mr. Walker. It would help to address the issue because 
basically it gets you to focus on why are we here, why do we 
exist, what are we trying to accomplish, what do we need to do 
in order to try to achieve the desired goals and objectives--
meaning in an outcome-based approach--how much in resources do 
we need in order to try to get that done, meaning human 
resources, financial resources, technological capabilities, et 
cetera, who do we need to partner with, both within Government, 
outside of Government, as a way to try to be able to maximize 
the chance of success.
    I think it is very complementary and very intellectually 
consistent to trying to achieve and to move in the direction 
that you are talking about.
    Mr. Rogers. Great. In January 2003 the GAO first listed DHS 
on its high-risk list. In that assessment, the GAO identified 
the following issues: DHS's annual goals and time frames were 
vague or altogether absent; DHS's capacity to achieve the 
stated goals was uncertain; and third, DHS's performance 
measures and plans to monitor, assess, and independently 
evaluate the effectiveness of corrective measures has not been 
fully developed.
    And my question is, have you observed that DHS is making 
any progress in remedying these shortcomings?
    Mr. Walker. They are making progress, but they have a ways 
to go before they will be off the high-risk list. In addition 
to--
    Mr. Rogers. By ways to go, do you mean months, years?
    Mr. Walker. Well, we update it, as you know, Mr. Chairman, 
every 2 years. While we may end up putting a new area on the 
high-risk list off cycle if it is a particularly acute and 
large problem, generally speaking we make decisions to put 
items on every 2 years and to take them off every 2 years.
    So the earliest that we would be able to consider taking 
them off would be in January of 2007 since we just published 
our list in January of 2005. It is unlikely that they will meet 
the criteria necessary in order to come off in January of 2007.
    What is important is that they have a plan and be able to 
break it down into key milestones, and to be able to 
demonstrate that they are making significant progress toward 
getting to where they need to be, and some of the concepts we 
are talking about here are integral to that, I think.
    Mr. Rogers. OK. Why do you think it is unlikely that in 2 
years they couldn't right the wrongs that you outlined? They 
seem pretty fundamental.
    Mr. Walker. I think they can make significant progress 
within 2 years, but I think there is a couple of dimensions. 
One dimension is what are they trying to do to achieve their 
mission as it relates to strategic planning, organizational 
alignment, performance-based budgeting concepts, et cetera.
    The second thing is what are they doing to try to integrate 
and transform the 22 different departments and agencies that 
now comprise the Department of Homeland Security. So they 
really have two massive undertakings that they need to 
undertake, and they need to do it in a coordinated, and 
hopefully, an integrated manner.
    I think the likelihood that they will be able to get there 
between now and January of 2007 is not great, but not 
impossible.
    Mr. Rogers. Great. Thank you. My time is up.
    I yield to the gentleman from Florida, Mr. Meek, for any 
questions he may have.
    Mr. Meek. Mr. Walker, I noticed earlier you said that 
Customs and Border Protection and also TSA--and reading the 
report on the 14th page is also mentioning the Coast Guard--
have practiced what we are talking about here on a limited 
basis within the Department of Homeland Security.
    I have to go further down the last paragraph on page 14 
where TSA--they took very limited vulnerability assessments of 
a selected general aviation airports based on specific security 
concerns, a request by the airport officials at that time.
    And they said it was quite costly and also impractical, and 
due to the fact that we have 19,000 general aviation airports 
nationwide and approximately 4,800 public use general aviation 
airports, I am trying to figure out, especially when you come 
down to the meat of the matter--I don't know if that is an 
excuse, saying we just don't want to do this, or is that an 
accurate statement by TSA, or assessment of what--
    Mr. Walker. I think this comes back to the issue that we 
talked about before. One of the things that needs to happen is 
there needs to be a comprehensive threat and risk assessment 
based upon current and future likely threats, what do we think 
they are, and therefore how do we need to spend our time and 
allocate our resources.
    For example, to what extent do 19,000 general aviation 
airports, where there is a limit, in general, as to what type 
of aircraft can use those airports--to what extent do they 
represent the same risk as a major commercial airport where you 
have, a lot bigger aircraft that could do a lot more damage, if 
you will? I mean, those are some of the concepts that we need 
to be thinking about.
    I think we also have to be thinking about how might it be 
used. Is it as a weapon like it was on 9/11, or is it a 
delivery device to deliver some other type of weapon of mass 
destruction that may not be very large?
    This is part of the thinking that has to be done to be able 
to say well, we don't automatically want to go out and look at 
all 19,000 general aviation airports--we need to see how that 
fits in within the overall context of what the most likely 
threat is, and how do we end up allocating our resources.
    You might pick a sample to go to rather than all of them. 
You might have a rotating scheme. Lots of concepts I think 
should be explored.
    Mr. Meek. You know, Mr. Walker, that goes back to the 
regional planning security group that is there to make these--
to rank the threat levels not only at the Department of 
Homeland Security but also local law enforcement agencies.
    There is a first responder component to this, too. Just as 
a last question--and I can't believe that I have so many 
questions for you, because we are all trying to really 
understand. I am used to performance-based budgeting.
    What is the difference between performance-based budgeting 
and mission-based budgeting? You mentioned--I guess it is all 
the same, I say ``tomato,'' you say ``tomato,'' kind of thing.
    Mr. Walker. To be honest with you, Mr. Meek, I am used to 
performance-based budgeting, too. The mission-based budgeting 
is a relatively new concept to me. To me, in substance, we need 
to achieve what I talked about before, the elements.
    I think when you are talking about performance-based, you 
are talking about results, trying to achieve results. 
Obviously, you want to achieve results consistent with what 
your mission is. I mean, and so to me they are not mutually 
exclusive. You know, they are complementary.
    Mr. Meek. Okay. That is it for me, Mr. Chairman. It is a 
component--it is an element of the mission-based budgeting, and 
I think that the members and also those that we want to carry 
out this new concept should understand that it is just adding 
more on to performance-based, because the unknown is there, so 
there has to be a mission.
    And we may not accomplish that mission within the time 
line, especially when you start looking at annual budgets. 
Thank you very much for coming before us.
    Mr. Walker. Thank you. I would respectfully suggest that 
whether it is a strategic plan, whether it is a performance 
plan, whether it is the budget, mission is fundamental. Why are 
we here? What are we trying to achieve?
    But again, the performance part is focusing on results, 
focusing on outcomes--not just efforts, but outcomes and, 
again, targeting resources to where you are likely to do the 
most good and mitigate the most risk. Those are the concepts.
    Mr. Rogers. I thank the gentleman.
    Ms. Christensen, did you have some additional questions?
    Mrs. Christensen. Basically, it is two parts to one 
question. One of the things that we have seen in the department 
is the inability, even after these few years, for the different 
agencies that have been brought together to merge their 
missions.
    It would seem to me that mission-based budgeting would 
force some of what we have not been able to accomplish in the 
department to happen. That is one side of it. I wonder if you 
would comment on that.
    But the other side of it is that many of the agencies have 
functions within them that are not related to homeland 
security, and I was wondering how mission-based budgeting would 
affect those agencies that have split missions.
    Mr. Walker. I think it is important to recognize that while 
the three areas that Mr. Meek mentioned before, which were the 
primary areas under the National Homeland Security Strategy, or 
the things that people normally talk about as being the top 
priorities for the Department of Homeland Security, the statute 
that created the Department of Homeland Security includes a 
number of other elements, mission-oriented elements, including 
the fact that it was expected that they would not diminish 
their efforts with regard to the many other activities that 
they were engaged in prior to 9/11. The Coast Guard, for 
example, had boating safety and maritime rescue operations that 
they were focused on.
    My view is that mission-based budgeting could help cross 
the silos. To the extent that you have many different 
entities--and there are 22 entities just within the Department 
of Homeland Security.
    To the extent that you are focusing on a mission, it could 
help you to cross those silos. What different role and 
responsibility do each of these silos have to try and 
accomplish the mission? How do we allocate resources and 
authorities across those silos?
    I think it also is a concept that should apply in every 
major department and agency and across departments and agencies 
as well.
    By the way, the United States does not have a strategic 
plan. The United States does not have an annual performance 
plan. Each department and agency does, but the United States 
does not. And I would respectfully suggest we ought to think 
about changing that.
    Mrs. Christensen. Could it adversely impact the other 
missions, like--I guess the Coast Guard would be one, because 
they also have rescue and, you know, the other--
    Mr. Walker. Right, search and rescue, and boating safety 
and--
    Mrs. Christensen. Right.
    Mr. Walker. Navigation, and--
    Mrs. Christensen. You can do both, do the mission-based 
budgeting within homeland security and--it doesn't have to 
adversely affect the other--
    Mr. Walker. No, it doesn't.
    Mrs. Christensen. --responsibilities.
    Mr. Walker. It doesn't. But on the other hand, choices have 
to be made. Whatever amount of resources and authorities that 
Congress decides to give the Department of Homeland Security, 
it is going to have to make tough choices in collaboration with 
the Congress on how to allocate those resources.
    Mrs. Christensen. Right. But if the country had a plan, it 
would be easier to do it.
    Mr. Walker. Plans normally help.
    Mrs. Christensen. Yes. Thank you.
    Mr. Rogers. I would remind the witness that several members 
may have questions that weren't here today and they may submit 
them to you. We will leave the record open for 10 days for you 
to make any written replies to any questions that may be 
tendered.
    And I want to thank you for your time, Mr. Walker. It has 
been very beneficial to have you here, and you are excused.
    Mr. Walker. Thank you, Mr. Chairman, very much. It is good 
to be here.
    Mr. Rogers. Thank you.
    And I now call up the second panel.
    I want to thank you gentlemen for your time. It is very 
helpful to us. I know you are busy, and I appreciate you being 
here.
    The chair now recognizes Hon. Maurice McTigue, 
Distinguished Visiting Fellow and Director of the Government 
Accountability Project at the George Mason University's 
Mercatus Center, for any statement you may have.

         STATEMENT OF THE HONORABLE MAURICE P. McTIGUE

    Mr. McTigue. Thank you, Mr. Chairman, and thank you, 
members, for the invitation to be here.
    I want to start by making a comment on some of the 
discussion that I heard that preceded the second panel, and 
that is about how you might define mission-based budgeting.
    And I think that I agree very much with what Mr. Walker 
said. But in my view, if you were to apply that to the 
Department of Homeland Security, it would read something like 
spending money first on those things that will do most to 
accomplish an improvement in the security of the homeland.
    And that is really what you are talking about, 
concentrating first on those things that will make the biggest 
difference, and then later on on the things that make a lesser 
difference.
    Also, I think when you look at this issue you have to look 
at here is an organization that technically was a merger of a 
number of other organizations that really did have quite 
disparate functions. There is a requirement that they carry out 
those traditional functions as well as accomplish the new 
function of making the homeland of the United States more safe.
    I think that you need to look at those as two different 
missions for some of those organizations. The Coast Guard has 
to accomplish its traditional mission of search and rescue and 
protection of the coast at the same time that it has to also 
accomplish its mission of protecting the homeland.
    What that really requires, in my view, is that the 
organizations that comprise the conglomerate of the Department 
of Homeland Security have to take collective responsibility for 
the security of the homeland, also have to accept that 
resources are going to go to those functions that would have 
the greatest impact on improving the security of the homeland 
and that they would have to go to those functions first.
    So it is not all bad news, in my view. The Department of 
Homeland Security is very new, and if you looked at the private 
sector, mergers take a long time for them to start to really 
assimilate the two cultures--because normally it is only two, 
and here we are looking at 22--assimilate those cultures and 
start to concentrate collectively on what the mission of the 
new organization is.
    The thing that gives me encouragement about the Department 
of Homeland Security is that I like some of the things that 
they have written into their strategic plaintiff, because, as 
Mr. Walker said, this is looking forward, not looking at the 
experiences of the past.
    And if I were to put the proposal to somebody 
hypothetically about what would you do if you were asked to 
take responsibility for improving the safety of the homeland, 
the first thing that you would do is that you would identify 
the threat. And homeland security calls that awareness.
    The second thing that you would do is that you would look 
to defuse that threat, and they call that prevention. The third 
thing you would do is that you would make it harder for people 
to hurt America and American things. And that is protection.
    The fourth, you would stop or diminish the damage whenever 
an attack was to occur. And that is called response. It might 
mean things like shooting down a plane that is over a protected 
area or looks like it is going to try and commit a terrorist 
act.
    All of these things--and then you have to think about what 
would we do in the case of an attack. And that means putting 
people's lives back together, and they call that recovery.
    All of these things have to be accomplished at the same 
time as not damaging the American way of life and the life and 
liberty of Americans to go about their normal business. They 
call that service.
    And finally, you need to have the capability to accomplish 
all of these tasks, and that is called organizational 
excellence. So if you thought about those things--awareness, 
prevention, protection, response, recovery, service and 
organizational excellence--immediately you start to have a 
framework that says there are some of these things we should 
invest in first and some of them we should invest in later.
    While recovery is very important, if you put all of the 
investment in recovery and you didn't do enough in awareness, 
what you have done is increased the risk that an act will be 
successful, damage will occur, but you are going to be good at 
recovery.
    See, in my view, to the American public, success at the 
Department of Homeland Security is measured in terms of nothing 
happening. It is very difficult to measure what caused nothing 
to happen. So at that level, I think that it is good.
    What is not yet good is being able to identify which 
actions are going to give us the greatest benefit in awareness, 
which actions are going to give us the greatest benefit in 
terms of prevention.
    And as those start to be identified, then I think the role 
of Congress in being able to say we should target money at 
these things first will become more apparent and easier.
    Thank you, Mr. Chairman.
    [The statement of Mr. McTigue follows:]

             Prepared Statement of Hon. Maurice P. McTigue

    Mr. Chairman, I am honored to have been invited to testify before 
you on consideration of the use of prioritization when determining 
funding allocations for the Department of Homeland Security (DHS.) 
However, as I ponder the title of this hearing ``mission-based 
budgeting'', I come to the conclusion that the title really poses the 
question of whether the budget process can help guarantee the mission 
of DHS. My considered opinion on that question is that a ``mission-
based budget'' can do a great deal to move the department towards a 
central, collective focus of improved security for Americans at home. 
My experience in examining organizational performance also tells me 
that those organizations with a tight focus on their mission are more 
likely to be successful in achieving their mission.
    Any consideration of performance at DHS must acknowledge some 
fundamental truths. The Department of Homeland Security, created by 
Executive Order signed by the President in January of 2003 is the 
biggest merger in the history of United States government. However, the 
merger was conducted in a time of urgency and the normal organizational 
preparation that would precede such a merger in the private sector did 
not occur in the creation of DHS. Instead, 23 significant existing 
organizations with very disparate activities and cultures were dropped 
into one single corporate body with instructions to sort it out, to 
make the homeland safe, and continue to do all of the things currently 
done by each merging organization. In all normal circumstances, it 
would take years for this huge organization to develop a common culture 
with collective responsibility for protecting the homeland and an 
internal acceptance that resources go first to those functions that 
will make the greatest contribution to diminishing the risk to the 
homeland.
    I would now like to expand on those comments by saying that unless 
the right internal incentives are created then no progress towards a 
common culture with a priority mission of protecting the homeland will 
be made. In fact, absent the right incentives it is probable that in 10 
years DHS will still be 23 independent organizations living under the 
same umbrella with no shared focus on improved security for the 
homeland. The strongest incentives leading to changed culture in 
organizations are those that determine the basis for the allocation of 
resources. The initiative of the committee to give consideration to 
``mission-based budgeting'' is very timely and appropriate.
    While it is reasonably easy to accept intellectually and 
practically that a move towards ``mission-based budgeting'' is the 
right thing to do, pondering how to accomplish this initiative is a 
major challenge, but not impossible. When considering this challenge, 
it is necessary to recognize that each of the component parts of the 
department have two roles: improving the security of the homeland and 
accomplishing their historic service to the American public. The 
purpose here is to give priority to those functions that will 
contribute most to the improved security of the homeland while not 
jeopardizing the traditional services provided.
    In my view, the best way to approach this challenge is to separate 
the two roles and identify improving security of the homeland as the 
primary role of the Department of Homeland Security (DHS) with 
traditional services being the responsibility of the component parts of 
DHS. This requires a vision of DHS that resembles a conglomerate with 
collective responsibility for improving the security of the homeland 
and individual responsibility for accomplishing its traditional 
functions. Under this vision, it is possible to imagine a scenario in 
which DHS purchased improved security from the various components of 
the department according to how much improvement each purchase brings 
to security of the homeland. The above structure would help to create 
the environment for growing a collective responsibility across the 
department for improved security for the homeland without jeopardizing 
the other traditional functions.
    The next issue is addressing the question of whether this is 
workable. The key to achieving a universally shared commitment across 
all the components of DHS is to articulate goals that spell out a 
strategy for improved security and can be adopted and supported by each 
organization yet are unique to the role of the collective department. 
In my view, the department in its current strategic plan has 
significantly captured this concept. What is now needed is the physical 
manifestation that the goals laid out in the strategic plan will indeed 
be the basis for management decision-making and will lead to improved 
security for Americans at home. A major reinforcement of those goals 
would result if Congress were to link its funding priorities to the 
same goals.
    Considering whether this is a viable proposition requires that we 
look at those strategic plan goals. (Note: currently this strategic 
plan is under review by the new Director but at time of writing I am 
unaware of whether he has completed that review and released his 
findings.) (Note: the comments in italics are mine and reflect my 
interpretation of these goals.)

        Awareness:
        Identify and understand threats, assess vulnerabilities, 
        determine potential impacts and disseminate timely information 
        to our homeland security partners and the American public.
        ``Timely knowledge of potential threats.''

        Prevention:
        Detect, deter and mitigate threats to our homeland.
        Eliminating the threat.''

        Protection:
        Safeguard our people and their freedoms, critical 
        infrastructure, property and the economy of our Nation from 
        acts of terrorism, natural disasters, or other emergencies.
        ``Making it harder to do damage to Americans, or to America.''

        Response:
        Lead, manage and coordinate the national response to acts of 
        terrorism, natural disasters, or other emergencies.
        ``Capability and readiness to eliminate mitigate or diminish 
        the impact of acts of terrorism.''

        Recovery:
        Lead national, state, local and private sector efforts to 
        restore services and rebuild communities after acts of 
        terrorism, natural disasters, or other emergencies.
        ``Rebuilding the lives of Americans and their communities after 
        terrorist acts.''

        Service:
        Serve the public effectively by facilitating lawful trade, 
        travel and immigration.
        ``In the face of threat to allow America to enjoy the American 
        way of life.''

        Organizational Excellence:
        Value our most important resource, our people. Create a culture 
        that promotes a common identity, innovation, mutual respect, 
        accountability and teamwork to achieve efficiencies, 
        effectiveness and operational synergies.
        ``Having the capability to get the job done.''

    While in most organizations I would really consider this to be 
mainly a values statement, in the case of DHS these things can be 
considered outcomes. It is also possible to see that there is a logical 
progression to these goals. Plus, it is possible to determine an order 
of priorities. For example, it would make little sense to have high 
levels of excellence on recovery if that was achieved at the expense of 
Awareness, Prevention or Protection. It is also possible to assess 
which parts of DHS make the greatest contributions to Awareness, 
Prevention, or Protection. However, if it were not possible to prevent 
an attack, it would be strategically irresponsible to consume all the 
resources for Awareness, Prevention and Protection and then not have 
the capacity to recover from an attack. So what would be necessary 
would be a strategically weighted approach to investing in improved 
homeland security that gave the greatest weight to those goals that 
would prevent a terrorist event but also have appropriate backup if the 
primary strategy were to fail for whatever reasons. (Note: I would 
recommend separating the goals of Homeland Security from the 
traditional tasks of the component organizations of DHS.)
    Given the above, it is also possible to see a developing culture at 
DHS that would have a collective responsibility for improving the 
security of the homeland while at the same time maintaining individual 
responsibilities for traditional functions. It is also possible to 
foresee an environment where Congress could clearly indicate its 
priorities by its budget allocations and be able to exercise clear 
accountability from DHS for those priorities. What I am envisioning 
here is a two-tier system of budget allocations. One tier of 
allocations would specify the improvements expected in each of the goal 
areas in DHS's strategic plan. A second tier would be organization-
specific and would provide for the traditional activities of 
organizations like FEMA and the Coast Guard. While I accept that such 
an approach is theoretically possible, I also recognize that there will 
be considerable difficulty in physical implementation.
    One of the greatest challenges facing DHS is the difficulty of 
measuring improved security. For example, how do you measure something 
that did not happen when the public expectation of success is that no 
terrorist events occur on the homeland? However, there are many 
relevant factors that can be measured to allow constructive analysis to 
determine whether there has been an improvement in the security of the 
homeland. Some of this information would, by its very nature, have to 
remain classified, but improvements in the state of knowledge about 
terrorist activities would certainly be a measure of success against 
the Awareness Goal. The success of actions taken or strategies 
implemented that defused that risk would also be appropriate measures 
of success against the Prevention goal. The strategic actions taken to 
protect information, venues, assets and other potential targets can be 
measured as improvements against the Protection goal. Response is about 
readiness and the military have long specialized in measuring their 
readiness. That knowledge would provide the basis for measuring 
improvements against the Response goal. FEMA has widespread experience 
in assessing the recovery times and costs from disasters which would 
form the basis of the measures against the Recovery Goal.
    Such information allows qualified people to competently advise 
Congress about the existence of strengths and weaknesses in the 
protection of the homeland, and allows for the advisement on where 
strategic investment by Congress would give the greatest gains in 
security.

Conclusion:
    The question posed by this hearing is, ``Can the security of the 
American Homeland be improved by taking a strategic approach to funding 
the department of Homeland Security based upon linking funding to 
advancing the mission of the department?'' My answer is emphatically, 
yes! In fact, to do otherwise would be irresponsible and would invoke 
an avoidable risk that could be eliminated by ``mission-based 
budgeting''. However, implementation will not be easy and will require 
a high level of commitment to mission by senior managers at DES over 
the sectional interests of their own organization.

    Mr. Rogers. I thank the gentleman.
    The chair now recognizes Mr. Jonathan Breul, Partner, IBM 
Business Consulting Services, and Senior Fellow of the IBM 
Center for the Business of Government, for any statement he may 
have.

     STATEMENT OF JONATHAN B. BREUL, PARTNER, IBM BUSINESS 
CONSULTING SERVICES, SENIOR FELLOW, IBM CENTER FOR THE BUSINESS 
                         OF GOVERNMENT

    Mr. Breul. Thank you, Mr. Chairman.
    According to research that we sponsored, there is ample 
opportunity to use mission and performance information at each 
stage of the budget process.
    Until recently, performance of most public programs and 
their managers have been judged almost exclusively on inputs 
and activity. Quoting Jonathan Walters, who is one of the folks 
who has done research for us, in a book called ``Measuring 
Up,'' he says, ``Governments have always been really good at 
measuring one thing: spending. What government has been really 
lousy at is measuring what was accomplished through the 
spending and its action.''
    With a mission orientation, budgeting can provide much more 
information to the resource allocation process so that funds 
are allocated where they are most likely to maximize the 
achievement of mission outcome.
    At the same time, I want to add some caution to that, which 
is that you clearly would not want to establish a mechanistic 
link between mission outcomes and budget. That is neither 
possible nor desirable.
    The department has been making significant progress in 
developing its strategic plan and its annual performance 
accountability report. And both of those include specific 
performance measures to assess the results of its activities.
    However, at the moment, there is very little basis for 
assessing the contribution of the budget toward the overall 
mission goals. You won't find that in the budget submission.
    And as a further example, if you look at the Department's 
efforts to comply with the Office of Management and Budget's 
measurement system linking budgets and performance, something 
called the PART, the Program Assessment Rating Tool, the 
Department has only had limited success, because most of its 
performance is tied to subgoals, activities two or three levels 
below the mission and thus unable to give you an assessment of 
budget and mission in a helpful fashion.
    Many other organizations have attempted to implement 
mission-driven budgeting. Those that have, indicate that it is 
much more challenging than they had anticipated and that actual 
implementation is uneven, particularly to start.
    The reasons for those are several. A mission orientation 
requires a much more fundamental approach to thinking and 
managing. It requires thinking about the budget and the 
management across all of the functions of the activity of the 
organization, not just specific pieces. And organizational 
change of that kind is not easy.
    Second, mission outcomes are much broader in nature than 
the outputs of specific programs. They tend to be much more 
difficult to quantify, even when that is possible and 
meaningful to do so.
    Nonetheless, there is substantial evidence from many 
sources that it is possible to focus on mission and that it is 
possible to assess the extent to which mission has been 
accomplished.
    Mission-oriented budgeting will not be the answer to the 
vexing resource tradeoffs involving political choice, but it 
does, however, offer the promise to modify and inform the 
policy decisions and the resource allocation decision by 
shifting the focus of the debate much more from input, to the 
question of overall mission accomplishment, which are the 
crucial questions that are crucial to the Department's success 
and to the nation's security.
    [The statement of Mr. Breul follows:]

                Prepared Statement of Jonathan D. Breul

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to discuss transforming the Department of Homeland Security 
(DHS) through mission-based budgeting.
    I am a Partner in IBM Business Consulting Services and a Senior 
Fellow with the IBM Center for The Business of Government. The IBM 
Center for The Business of Government is dedicated to stimulating 
research and facilitating discussion of new approaches to improving the 
effectiveness of government at all levels in the United States and 
around the world.

Mission Budgeting
    Good government advocates have called for mission-oriented 
budgeting for decades. The 1949 Hoover Commission called for a shift in 
budget focus away from the inputs of government to its function, 
activities, costs and accomplishments. According to an October 2003 
report from the IBM Center for The Business of Government, there is 
ample opportunity to use mission and performance information at each 
stage of the budget process--that is, not only in the Office of 
Management and Budget (OMB) and the Congress, but in the agencies and 
by the audit community as well. The report, Performance Budgeting: 
Opportunities in the Federal Budget Process, by Philip G. Joyce, 
associate professor of public administration at The George Washington 
University, presents a comprehensive view of how performance 
information can be used at various stages and provides a number of 
specific recommendations designed to sustain progress to date and to 
further the use of performance information in the federal budget.

DHS is not alone
    All governments are under increasing pressure to produce--and to 
demonstrate--results in terms of their mission. Over the last decade, 
countries around the world have undertaken reforms with the aim of 
improving the relevance and effectiveness of public services and the 
quality of public sector management. A key aspect of most reform 
strategies has been a focus on mission results and outcomes.
    Yet, until recently, the performance of most public programs, and 
of their managers, has been judged largely on inputs and activities, in 
particular, how they have spent their allocated budget, and perhaps, on 
activities undertaken and outputs produced. Government too often is 
preoccupied with process and with following the rules, without adequate 
focus on the benefits that actually arise from public sector 
expenditure and activities. Measures of effectiveness across 
organizations and functions remains a major challenge not only within 
DHS, but throughout the public sector. As Jonathan Walters notes in 
Measuring Up: ``Governments have always been really good at measuring 
one thing: spending. . .What government has been really lousy at is 
measuring what was accomplished through that spending and action.''

What is mission-budgeting?
    With a mission orientation, information about mission (not 
programs, process or activities) can inform the policy debate and help 
determine the agenda. In this way, questions of outcomes, and what 
forms or approaches are likely to be effective or not, would be taken 
into consideration in the allocation of resources.
    Organizational performance can be tied to mission attainment and 
communicated agency-wide. Performance can be directly linked with the 
overall mission. Goals, objectives, outputs and outcomes can be tracked 
at every level so that there can be continual assessment and 
reassessment of the allocation of resources in relation to those 
elements in as close to real time as possible.
    Finally, mission-based budgeting can provide more information to 
the resource allocation process, so that funds are allocated where they 
are most likely to maximize the achievement of mission outcomes. At a 
minimum, linking missions to budgeting can illustrate what benefits 
arise from expenditures. However a mechanistic link between mission 
outcomes and budget allocations is neither possible nor desirable. 
Nonetheless, information about mission can play a significant role in 
the overall budget process.

The Department of Homeland Security
    The terrorist attacks on September 11 drove home the immediate and 
enduring requirement for significant changes in US national security. 
Asymmetric threats, growing dependence (and vulnerability) on 
information systems, and the need for faster cycle-time response put 
the nation at great risk.
    Three years ago, Congress and the President took on the enormous 
undertaking of creating a new Department whose central mission would be 
to secure the homeland. Section 101 of the Homeland Security Act set 
forth prevention of terrorist attacks, vulnerability reduction, and 
response to and recovery from terrorist attacks as the main missions of 
DHS, along with its inherited non-homeland security-related functions. 
Currently, however, neither the Department nor Congress can tell from 
budget submissions how much is being allocated for these main mission 
areas.
    To address this challenge the Department should take steps to 
measure performance and budget with more of a mission-oriented focus. 
Only when the Department allocates its limited resources based on 
mission area (prevention, vulnerability reduction, recovery/response, 
and non-homeland security related functions) will it be transformed 
into an integrated, new operation to meet its homeland security 
missions.

Current situation
    The Department has made significant progress developing a strategic 
plan and an annual performance and accountability report with specific 
program performance measures to assess results of DHS activities in 
achieving its goals. However, there is little basis at present for 
assessing the contribution of the budget toward the mission goals. 
Further, nearly a third of the Department's budget goes to non-homeland 
security functions.
    The Department's efforts to comply with OMB's measurement system 
for linking budgets to performance (the Program Assessment Rating Tool, 
or PART) have met with limited success, since DHS ties performance to 
sub-goals that lie two or three levels below these overarching 
objectives. Congress has fared little better in assessing performance. 
DHS appears to provide the new Homeland Security appropriations 
subcommittees with less budget justification detail than other agencies 
provide their subcommittees.

Implemention
    Mission-based budgeting requires a top-down approach. Initially, it 
can present a major challenge, but the potential rewards are great. The 
move toward mission-based budgeting can begin with any number of 
actions, including defining, prioritizing and selecting mission 
outcomes, evaluating the strengths and weaknesses of current programs 
using standardized measures and describing the outcomes of competing 
mission strategies and engaging stakeholders to evaluate them.
    This blueprint would reflect a rigorous annual program and budget 
process to prioritize operational funding and long term investments in 
terms of mission as well as to ensure that they reflect the Secretary?s 
priorities and those of the President. This could provide an ongoing 
mechanism to monitor and adjust the implementation as well. Finally, it 
could be a powerful way for the Secretary to flag key issues and 
influence funding decisions and tradeoffs earlier rather than later in 
the budget process.
    There is little point in engaging in such an effort, however, 
unless it is going to be used in some way. Indeed, if staff do not see 
how a mission-oriented budget can be used, this is likely to breed 
cynicism that can make further efforts to focus on mission more 
difficult. This is why it is absolutely critical to generate buy-in and 
commitment at all levels of the Department, as well as key 
congressional committees and staff. This can result in change that can 
represent the most enduring--and the most significant--form of use, 
namely in terms of actual day-to-day decision-making and management.

Challenges
    Implementing a mission or outcome-oriented approach has proved 
deceptively difficult. Countries that have attempted this approach 
indicate that it has proved to be more challenging than they had 
anticipated, with actual implementation uneven, at least initially. Why 
has an outcome focus proved to be so difficult?
    First, a mission orientation represents a fundamentally different 
way of thinking and of managing, across all aspects of an organization, 
including how it relates to citizens and major stakeholders. In order 
to be effective, mission-oriented thinking needs to be incorporated 
into the organizational culture at all levels. Organizational change of 
this kind is rarely easy, it always takes time to put into place and to 
sustain, it is certain to encounter at least some intiial resistance, 
and it requires an array of approaches and supports.
    Second, mission outcomes are longer term in nature than outputs and 
activities. Typically, they are influenced by a variety of factors in 
addition to the program intervention in question. They tend to be far 
more difficult to quantify than activities and outputs, where it is 
even possible or meaningful to do so. Given the achievement of the 
mission usually depends in part upon factors beyond the direct control 
of Departmental programs or their managers, a different approach to 
attribution may be required than with inputs or outputs. This can imply 
the need for to changes to exisiting accountability and reward 
mechanisms such as the new pay for performance system.
    There is, nonetheless, substantial evidence from many sources that 
it is possible to provide for a focus on mission and that it is 
possible to assess the extent to which the mission has been achieved.

Advantages of mission-based budgeting
    There are many positive effects that can occur as a result of a 
more direct linkage between mission and the allocation of resources. 
First, it can lead to a more efficient use of resources, since 
questions about the success of mission activities are tied to the 
allocation of resources. Second, such a linkage can help inform key 
stakeholders, including the Congress, whether taxpayers are receiving 
sufficient ``value for money.'' Third, when either additions or 
deletions from the Department's budget need to be made, these can be 
targeted in a way to optimize mission performance.
    Each of these three effects is important primarily because the 
resources are scarce; therefore the way in which these resources are 
allocated is crucial to the Department's effectiveness.

Conclusion
    The Department of Homeland Security is dealing with very real and 
immediate threats and operational responsibilities. Mission-oriented 
budgeting will not be the answer to the vexing resource trade-offs 
involving political choice. It does, however, have the promise to 
modify and inform policy decisions and resource allocation by shifting 
the focus of debates from inputs to the mission outcomes and results 
which are crucial to the Department?s success and to the nation?s 
security.
    Thank you again for the opportunity to testify. I look forward to 
answering your questions.

    Mr. Rogers. Thank you, Mr. Breul.
    The chair now recognizes Mr. Carl J. Metzger, director of 
the Government Results Center, for any statement he may have.

 STATEMENT OF CARL METZGER, DIRECTOR, GOVERNMENT RESULTS CENTER

    Mr. Metzger. I thank you so much for the honor to testify 
before you, Mr. Chairman and members. I direct an independent 
non-profit center that for the last 11 years has been helping 
agencies to share the lessons learned and the better practices 
in managing for results.
    The comments that I am going to make are based upon really 
exposure to those departments and agencies sharing about what 
they are trying to do. I reach roughly 10,000 government 
officials. We hold monthly meetings that bring together easily 
anywhere from 80 to 200 of those people, planners, budgeters, 
et cetera.
    What we have seen is that from that sharing there are some 
important things that would apply to what the Homeland Security 
Department is trying to do, and all the details of what I have 
said, of course, are in my written statement. I would 
particularly like to emphasize a couple of them.
    First of all, the extraordinary importance of leadership. 
We have seen that where you have top leaders like the deputy 
secretary or an assistant secretary who truly understand the 
workings of the department and how to motivate their people, 
who understand Government's process to manage for results, 
those results are achieved. Cultures are being transformed.
    I especially have been impressed by the work of Deputy 
Secretary Designate Lynn Scarlett at Interior for that purpose 
and Assistant Secretary for Administration and Management 
Patrick Pizzella at the Labor Department. Those two people 
understand what is going on. They motivate their employees. And 
they get the work done.
    Second, the governance process. I think it should be as 
adaptable as possible to the changes going on. At a department 
such as homeland security, changes, be they politically changes 
with priority changes and all that, may be potentially 
cataclysmic, as we saw a few years ago.
    People have to be expecting that they have to apply those 
principles of performance budgeting, which I think are really 
similar in principle to the mission-based budgeting that you 
are interested in applying here. To us, it seems that the 
mission budgeting is a simplification of the performance 
budgeting.
    But the principles for performance-based budgeting are the 
same as described in OMB's Circular A-11. What is important is 
that the leadership makes the governance process effective and 
working toward results. It is helpful to have an exemplary 
department component that you can apply some of these 
foundational important aspects to.
    For example, total costing. Congress has been interested in 
total costing and especially comparing it with results that 
might occur as a result of some incremental change in the 
resource allocation.
    Departments where there is a model agency trying to develop 
total costing as a foundation for the managing for results, 
such as the Interior Department's Fish and Wildlife Service, 
are picking up people understanding what they are doing, and 
they like to apply it department-wide. That is helpful.
    Real involvement of stakeholders and partners for the 
Homeland Security Department is struggling from so much newness 
and complexity. To become an entity toward these three 
missions, it is particularly critical to involve key 
stakeholders and partners in major transformations.
    I think Congress in particular should be viewed more as a 
partner than a stakeholder, because an effective working 
relationship to adjust quickly to the environment has to happen 
here. The missing elements often in agencies are fully 
understanding stakeholder needs, adjusting to those needs, and 
successfully communicating an agency's achieved measured 
outcomes.
    At present, most legislators and their staffers have 
concluded that aligned budget and performance structures work 
only if performance cost information is credible, compelling, 
accepted and directly useful for their objectives.
    Supplementing rather than replacing key information used by 
appropriations committees should be the guide. Closing that gap 
can be realized by truly involving Congress early and 
continuously in the dialogue. I believe what you are trying to 
do here--to simplify in the face of all this complexity--is an 
admirable thrust toward helping the American public to 
understand, at least in tune with preventing vulnerability 
reduction and recovery response.
    If we can at least understand our costs, our results, 
according to those three things, and somehow develop a 
crosswalk toward the seven strategic goals in the current 
homeland security strategic plan, this will help. And I hope 
that we can see the result of Secretary Chertoff's second 
review to see how we can make changes that will apply the 
interests that you have.
    Thank you.
    [The statement of Mr. Metzger follows:]

                 Prepared Statement of Carl J. Metzger

    Mr. Chairman and Members of the Subcommittee:
    Thank you. It is an honor to testify about our views on Mission-
Based Budgeting as a mechanism to transform the Department of Homeland 
Security (DHS). We are reasonably familiar with the Department's 
historical origins of assimilated disparate agencies, legislative 
foundations, and subsequent Planning, Operations and Reporting. 
Particularly striking are the monumental management challenges to the 
new leadership team of Secretary Michael Chertoff, Deputy Secretary 
Michael Jackson, and Under Secretary for Management Janet Hale and how 
this new team is wisely addressing those challenges initially. The 
Secretary's ``second-stage review'' to take a close look at the 
missions, goal achievement, and gaps between where DHS is and wants to 
be is completing this month. He has clearly articulated that DHS 
leadership must act jointly to: integrate intelligence, policy and 
operations across the department so each component is directed from an 
enterprise-wide perspective with a clear focus on prescribed DHS 
outcomes. Bureaucratic stovepipes must be eliminated and information 
shared effectively.
    The Department identified in its FY 2004 Performance and 
Accountability Report notable performance highlights in achieving its 
seventh strategic goal of Organizational Excellence, such as reducing 
nineteen financial management centers to ten, consolidating contracting 
offices, formulating its first enterprise architecture, and 
establishing a Network Operations Center and an enterprise-wide 
intranet.
    The motivation of this Subcommittee, as Stakeholders, is to 
accelerate this improvement process by reforming the way the Department 
allocates its limited resources based on the three mission areas of 
prevention, vulnerability reduction, and recovery/response plus non-
homeland security-related functions. DHS submissions in the future will 
clearly reflect budget, cost, performance and results but will be 
simplified by mission segment. Other than a ``mission'' orientation, 
mission-based budgeting is not unlike performance-based budgeting that 
is mandated for all federal agencies by OMB in Circular A-11. DHS would 
develop recommendations that would specify (a) institutional, 
financial, and productivity goals and (b) funding for department-wide 
priorities. Once approved and implemented, I agree that, first, 
Departmental leadership would be better able to hold DHS entities 
accountable for achieving and complying with performance expectations 
and guidelines and, second, that American citizens would better 
understand resource allocation priorities and results by the tri-
partite mission segmentation of prevention, vulnerability reduction, 
and response/recovery.
    The non-profit Government Results Center which I direct has for 
more than eleven years assisted government agencies share lessons 
learned in performance management, reaching approximately 10,000 
officials via e-mails and upwards of 200 government personnel monthly 
in free meetings that feature reports by Department Leaders and 
practitioners on various cost, performance, results and integration 
management efforts in the federal government. My comments and 
suggestions to the Subcommittee are based upon our learning about those 
departments? and agencies? better practices toward managing for 
results. The remarks will be according to the following categories:
         The Extraordinary Importance of Leadership
         An Adaptable Governance Process
         Development of an Exemplary Departmental Component
         Strategically-Aligned, Continuously Improving Culture
         Benchmark Before DHS Application
         Real Involvement of Stakeholders and Partners

THE EXTRAORDINARY IMPORTANCE OF LEADERSHIP
    The Interior Department proclaims it is critical to have leadership 
direction, ownership and support. ``Direction'' to Interior means both 
substantive strategic direction on the Agency's future courses of 
action, and direction in terms of how the performance (mission)-budget 
process will be managed, and who is responsible. ``Ownership'' means 
that senior leadership actually uses the system to make crucial 
resource decisions, and they personally identify with its successes and 
failures--meaning that they have an active hand in designing and 
tailoring the system to suit their needs. . .and not totally delegate 
to staff. ?Support? means paying more than lip service to the system, 
but truly providing adequate funds and the appropriate intellectual 
capital. This suggests an ongoing learning process in which decision-
makers too should be trained to understand and use the system. Managers 
in the Interior Department do not hesitate to commend the Deputy 
Secretary (Designate), Lynn Scarlett, for her in-depth knowledge of the 
planning, financial and program management, bureau operations, support 
functions, reporting, and success in motivating employees. Every day 
Ms. Scarlett is personally leading the cultural transformation by 
demonstrating how supervisors must manage strategically, involving 
subordinates and communicating how an individual employee's work 
actually aligns with Interior's strategic goals.
    Similarly, Patrick Pizzella, Assistant Secretary for Administration 
and Management, exerts extraordinary leadership at the Department of 
Labor. Because of his centralized oversight through his OASAM staff, 
Mr. Pizzella successfully deploys cultural transformation and 
excellence into Labor's Administrations. Ten years ago Labor was not 
evaluated as a leading Department in results-based management. Today 
Labor IS a recognized leader as judged by OMB and other external 
reviewers. Both Interior and Labor have leaders at the Deputy Secretary 
or Assistant Secretary level who have accepted top responsibility for 
performance management integration and the cultural transformation 
process.

AN ADAPTABLE GOVERNANCE PROCESS
    Governance is critical to transformation in that it provides a 
clear, transparent decision-making process that fosters consistent 
behavior linked to the missions and senior management vision. The goal 
of governance should be consistent and effective oversight for 
initiatives throughout all phases of their lifecycles. A governance 
system is necessary to establish enterprise-wide standards for senior 
leadership, program managers, business sponsors, and support functions. 
Breeding and nurturing an accountability culture takes time and top 
leadership insistence. Operating divisions must be actively involved in 
design, implementation and evaluation. Leadership must insist on their 
organization's responsiveness to OMB and Congress, working with both as 
effectively as possible to understand and adjust. Anecdotes abound of 
agencies? dialogue with OMB examiners where initial PART scores for 
programs were very low but through program managers? communications of 
proven results, scores rose dramatically. Listening, understanding, and 
adjustment are powerful to gain satisfaction of stakeholders and 
partners.
    At the Department of Labor, a management review board shares 
department-wide responsibility for long-term, outcome-oriented results. 
There is a cross-cutting emphasis by the Board. They focus on goals 
important to the Department as a whole, but provide a framework which 
maps the cascading responsibilities down to every level within the 
Department. Every SESer, non-SES manager and supervisor has managerial 
and programmatic performance standards to be achieved in a cost-
effective manner. There is at least one efficiency measure for every 
program. A performance-cost model recognizes the importance of both 
total cost and marginal cost associated with performance improvements.
    NASA has developed a well-integrated system of strategic goals and 
performance goals with total and marginal costs. They relate those 
goals to the three mission areas of Understand & Protect, Explore, and 
Inspire. An interesting feature of NASA's system is that they keep 
their performance, cost and accountability system tightly linked to 
their evolving vision, mission and themes. In that sense, they provide 
an excellent example of an adjustable, mission-based budgeting 
structure. NASA adjusts to political and priority changes. They have 
adjusted by streamlining goals, redesigning and simplifying their 
budget structure, and reducing the number of program areas--with every 
area relating back to the goals and forward to performance measures. 
They reduced the number of performance measures in order to focus on 
the critical few that drive the success of their mission. They have 
allocated all costs and budgets to the new structure. Their Integrated 
Budget and Performance Document aspires to be understandable to the 
public and used as a key tool in managing the agency.

DEVELOPMENT OF AN EXEMPLARY DEPARTMENTAL COMPONENT
    Many departments have selected one component agency to develop an 
exemplary target process and system. The Fish and Wildlife Service at 
Interior is one example of cost and performance integration. The bureau 
tracks its costs through activity-based costing methodology and through 
cause-and-effect relationships assigns those activity costs to what 
they term ``critical success factors''. Critical success factors are 
tied to the bureau's operational goals. These operational goals are 
subsequently aligned with the Department's end outcome measures. The 
two key elements in this structure are: (1) proper alignment to 
Departmental goals in order to support the Department in viewing the 
costs of its strategic objectives; and (2) cause-and-effect 
relationships to enable the bureau to analyze marginal costs and 
understand how changes in outcome targets/measures impact the resources 
required to achieve them. The initiative is promising for establishing 
a results and accountability culture that is complete with shared 
values and practices for a department-wide application.
    In the mid-1990's we saw how the pilot Marine Safety and Security 
Program provided a planning and reporting model for the entire Coast 
Guard to emulate. In turn, Transportation incorporated many of the 
Coast Guard's processes and system for a department-wide application, 
and DOT became recognized as a leader to study and benchmark.

STRATEGICALLY-ALIGNED, CONTINUOUSLY IMPROVING CULTURE
    Mission-based budgeting is an approach used to allocate an 
organization's resources in a cost-effective manner to the primary 
components of the organization's mission. Do a better job of making 
wise resource investments based on evaluating how these investments 
contribute to the Agency's mission. These contributions need to be 
spelled out in terms of concrete, measurable outcomes that make a 
difference to the taxpayer, and to America.
    The challenges many observe in achieving ``results-oriented, 
accountable government'' are similar, in many respects, to those 
encountered in implementing mission-based budgeting. These challenges 
can be grouped into three categories: (1) the measurement challenge; 
(2) the management challenge; and (3) the cultural challenge. The 
measurement challenge concerns the difficulty of accurately determining 
how dollars drive performance. Measuring the cost of inputs, 
activities, outputs and ultimately outcomes related to missions becomes 
progressively more complex. As one proceeds along this continuum, a 
larger number of people and institutions contribute to the results, and 
it becomes harder to attribute given results to any single source of 
effort or dollars. The management challenge is how to allocate dollars 
to missions in the absence of analytically rigorous evidence. Various 
allocation mechanisms are available, including professional judgment, 
politically-driven motives, or pro rata assignments. But any of these 
approaches are on shaky analytical footing and can be called into 
question by internal and external stakeholders. Thus, Agency 
administrators must carefully design planning processes that 
accommodate the views of stakeholders.
    The cultural challenge associated with mission-based budgeting or 
performance-budgeting relates both (a) to the organizational culture of 
the Agency initiating this effort and (b) to the Agency's Congressional 
oversight, authorizing and appropriations committees. Agency cultures 
will need to overcome the `stovepipe' mentality that has traditionally 
dictated that funding is allocated to line organizations based on 
capabilities and input needs. In such traditional organizations, budget 
linkage to missions or outcomes is accomplished through budgetary, 
strategic plan or performance plan narrative that declares the 
relationship to exist. True allocation of resources to missions or 
outcomes based on demonstrated performance connections is much rarer. 
However, some Departments, such as Interior and Labor, have 
demonstrated top leadership commitment to breaking down the stovepipes 
and not only backing, but actively guiding and participating in a 
strategically-aligned, continuously improving process that analytically 
allocates dollars to performance outcomes in successively more rigorous 
ways.

BENCHMARK BEFORE DHS APPLICATION
    Since DHS is looking anew at its organizational and budget 
structure in accord with its missions, it would be prudent to identify 
lessons learned and better practices, at least in other federal 
departments. The DHS-wide eMerge2 solution has begun but is temporarily 
halted. In addition to the better practices in departments and agencies 
cited above, benchmarking to glean lessons from the Defense 
Department's enterprise-wide initiatives makes sense. The DHS at this 
juncture, is probably more complicated to run, even in comparison with 
DOD. However, DOD is working to evolve an effective bureaucratic 
discipline to run their enterprise-wide systems.
    Benchmarking that DOD evolution as well as financial management, 
integration and budget restructuring efforts in other departments 
should be helpful to DHS. A strong DHS-wide, performance and cost-based 
management information and decision support system will accelerate the 
acceptance and use of mission-based budgeting as a legitimate 
management tool.

REAL INVOLVEMENT OF STAKEHOLDERS AND PARTNERS
    For the DHS who is struggling with so much newness and complexity 
to become an entity united toward three missions, it is particularly 
crucial to involve key stakeholders and partners in major 
transformations. Congress in particular must be viewed as more than a 
stakeholder. Congress must be a partner to work together with DHS on 
developing an effective working relationship that is capable of 
adjusting quickly in an environment that is changeable and potentially 
cataclysmic. In the absence of such a partnership, challenges to 
mission-based budgeting will be exacerbated. The Government 
Accountability Office recently observed that planning and budget 
structures serve different purposes, and any effort to achieve 
meaningful connections between them highlights tensions between their 
differing objectives. Appropriations staffers, for example, have a 
concern that all of this new performance-based budget information will 
replace some of the workload and output categories for which they 
currently get cost breakdowns. Staffers need that kind of information 
to satisfy their constituents. Restructuring can only take root once 
support exists for the underlying performance goals and metrics. In due 
course, once the goals and underlying information become more 
compelling and are used by Congress, budget restructuring may become a 
more useful tool to advance both mission-based budgeting and 
performance budgeting. The budget structure will more likely reflect--
rather than drive--the use of performance and cost information in 
budget decisions. The missing elements regularly in agencies are fully 
understanding stakeholder needs, adjusting to those needs and 
successfully communicating an agency's achieved, measured outcomes.
    At present most legislators and their staffers have concluded that 
aligned budget and performance structures work only if performance-cost 
information is credible, compelling, accepted, and directly useful for 
their objectives. Many, as in most States, use outcome measures as 
input to policy decisions, but rely on workload and output measures to 
make funding decisions. Supplementing, rather than replacing, key 
information used by appropriations committees should be the guide. 
Closing that gap can be realized by truly involving Congress early in 
the dialogue.
    Thank you, Mr. Chairman. I hope this testimony will be helpful to 
the Subcommittee in your deliberations on the most effective way to 
evaluate, monitor and allocate resources for our homeland security.

    Mr. Rogers. Thank you.
    I would like to start off with a few questions.
    Mr. McTigue, you outlined some goals and talked about 
awareness and prevention being first among those. But then you 
went on to make the point that the desired result is for 
nothing to happen, but that is difficult to measure.
    How do you reconcile going to mission-based budgeting when 
you need results as a component, a measurable result, when you 
can't measure what didn't happen?
    Mr. McTigue. I don't accept that you can't actually measure 
it, Mr. Chairman. The military, for example, are very, very 
good at doing threat assessments, and they can tell you whether 
the threat assessment is escalating or diminishing.
    The insurance industry is extremely good at looking at 
demographics and deciding how risk is changing. The banking 
industry is very good at doing the same.
    And within homeland security, I think that it is possible 
to gradually acquire the skill to be able to say we can see an 
escalation in the threat from this particular quarter or from 
this possible facility, and we need to do something about it.
    So over time, I think that skill can be built. That would 
then tell you that we need to be putting more resources into 
awareness, so that we become aware of that and we can take 
action before anything happens. We need to be putting more 
resources into prevention, because with the knowledge we have 
to be able to actually do something to try and defuse the 
situation.
    Now, it seems to me that those two things are critical to 
preventing anything from happening. The others sort of cascade 
down as the event becomes more likely. These are your second, 
third, fourth, and fifth sort of stops to the terrorist act and 
helping with the recovery.
    So, yes, I think that is possible. And I would just add 
this, Mr. Chairman, and that is that if you think about 
mission-based budgeting and you think about performance-based 
budgeting, here is a comparison.
    If you took the issue of hunger, you could have 
performance-based budgeting for all of these programs that help 
to feed hungry people. And you might measure them, and you 
might decide that we have been highly successful. But you have 
done nothing to diminish hunger, because all you have done is 
you have concentrated on programs that feed hungry people 
rather than looking at what caused that hunger and how can we 
remove the hunger.
    With mission-based budgeting, you would focus on what is 
going to gradually eliminate the hunger rather than what is 
going to most effectively feed people. I think that is good.
    I think it is axiomatic in performance-based budgeting that 
you are going to focus on the mission. But there would be a 
possibility that people didn't, that they just focused on 
whether or not this was going to give you a better performance 
from this activity.
    Mr. Rogers. Great.
    Mr. Breul, in your statement, you indicate that neither the 
Department of Homeland Security nor Congress can tell from the 
current budget submissions how much is being allocated for the 
budgetary mission areas of prevention of terrorism, 
vulnerability reduction and response to and recovery from 
terrorist attacks.
    Could you elaborate on this statement and explain why it is 
important to have this information?
    Mr. Breul. [inaudible]
    Mr. Rogers. Did you agree with Mr. McTigue's assessment of 
the measurability of these?
    Mr. Breul. [inaudible]
    Mr. Rogers. My time has expired. I now yield to the ranking 
member, Mr. Meek, for any questions he may have.
    Mr. Meek. Thank you, Mr. Chairman.
    Mr. McTigue, you mentioned an issue of a normal merger in 
your testimony, and you said that it takes time. And I think 
the reason why a number of members of Congress and also the 
American people, and even some of you in academia--you know, 
when it comes down to protecting the homeland, patience is not 
necessarily one of the great values that we hold.
    How long do you think it will take for us to--as Mr. Breul 
mentioned just a minute ago, for us to become one? Because we 
have a department that was put together by the Congress, there 
are a lot of kingdoms within the agency we have now.
    How do we get down--have you seen any proposals or have 
there been writings on how we can streamline not only 
management in the Department--and maybe Secretary Chertoff may 
answer many of these questions in the coming days, because I am 
pretty sure that he has some thoughts on this--to be able to 
get us toward mission-based budgeting, because we have the 
whole issue of attrition, which is just out of control in the 
Department?
    No one stays long enough to be able to even buy into a 
concept on what we should be doing as it relates to mission-
based budgeting, leave alone the other missions that we have.
    Mr. McTigue. Congressman, my response to you would be given 
no change, in 10 years you might be looking at a department 
that looks very much the same as it does today, particularly if 
the allocation of resources are done as Mr. Breul suggested on 
a component-by-component basis.
    You could change that if you were to start to think about 
funding the Department of Homeland Security on--we purchase the 
traditional functions from each of those component agencies, so 
the Coast Guard does its traditional job and so does the 
Customs do its traditional job, and the Secret Service protects 
the important personages, but at the same time you thought 
about now we also have to protect the homeland, and these are 
going to be the most important components.
    We want to increase our capability of detecting threats, so 
we are going to charge the homeland with increasing that 
capability and give it some more resources to do that. We are 
going to increase its capability to prevent--in other words, 
find ways of defusing a threat when that exists.
    And as you do that, then I believe that you will tie the 
Department together, because the incentives created by people 
having to work together will tend to produce a culture that 
works together. While you allow them to work as separate 
functions, then they will never develop a common culture, in my 
view.
    Mr. Meek. Thank you.
    This is a question for the entire panel, whoever wishes to 
respond to it. When you start looking at the Department of 
Homeland Security and mission-based budgeting--and I asked 
this, a pretty much similar question, I asked the Comptroller--
how do you balance not only the policy but also the influence 
from Congress and other Governmental figures here in the 
capital city here in Washington, D.C., and politics that goes 
along with that that can very well disrupt mission-based 
budgeting?
    And, Mr. Breul--am I pronouncing your name correctly, sir?
    Mr. Breul. Yes.
    Mr. Meek. Okay. You mention in your statement on page five, 
where you list the advantages of mission-based budgeting--you 
mention first there are many positive effects that incur as a 
result of a more direct link between mission and allocation of 
resources, which makes perfect sense, you know, reading it.
    Also, you go on--I am going to go further. second, such a 
link can help inform stakeholders, including Congress, whether 
taxpayers are receiving sufficient value for their money. 
Third, you go on to say when either additions or deletions from 
the Department's budget needs to be made, these can be targeted 
in a way to optimize the mission performance.
    I am going to tell you, I mean, just from a layperson--
let's just take off the congressional hat--that makes perfect 
sense, but how we get there is the hard part, and, you know, it 
is almost like I love sausage, but I don't want to see it made.
    And it is kind of hard to get there, and I know that there 
is some thinking--and I am pretty sure all of you would like 
for us to take our political hat off and do what we have to do 
on behalf of the country, but that is not necessarily the issue 
here.
    One of my constituents met me once and said--and he was 
sharing something with me, Mr. Chairman, and he kept going on 
and on and on, and then he said well, you are going to get a 
chance to say something in a minute.
    I am just going to say this before I close, because I would 
like for anyone that wishes to answer the question. This 
committee was put together by House speaker and also the 
Democratic leader and other members of Congress that cared 
about this subject.
    It is the first time in the history of the country that we 
have really focused enough to learn about what we need to know 
to be able to lead in this area. So this is groundbreaking.
    I know this subcommittee is not full right now, but it is 
going into the record. Staff is being educated. We are also 
being educated on what we are supposed to do. We are the 
stewards of responsibility, I believe.
    And we are going to have to be the interpreters on the 
floor and in other committees about our responsibility, so that 
means that we have to resist certain things just because we 
can. We can do something. We have to resist. And that is a 
difficult balancing act for us.
    And so I am asking those of you that are focusing on the 
seriousness of the matter to just dive into politics for a 
minute and talk about exactly what you feel that we should do 
as responsible policymakers to make sure that we can deal with 
this mission-based budgeting, because I am understanding it 
clearer now as not only I read but I am hearing what you are 
saying, because I believe that we cannot afford to continue to 
give, give, give, give, give money to the Department of 
Homeland Security thinking that that is the be-all and the end-
all, because it is not.
    And so we have to get to some sort of targeting. When you 
start talking about sending the resources to the place where it 
needs to be, that means there is going to be a U.S. senator or 
congressperson that is going to have to explain why they are 
not getting the homeland security dollars in their district, 
because no one wants to, I guess, blow up an empty field. I 
don't know.
    Mr. Breul. Let me try to give you an answer to that. I 
think the simple answer--and it was suggested by Comptroller 
General David Walker--there is a need for a game plan, which is 
the strategic plan for the Department.
    The strategic plan will lay out just how the mission is to 
be achieved, and the mission, again, in terms of the Department 
as a whole, so that as you go about making that sausage there 
is a recipe, there is a plan, and you are not just doing a 
little of this and a little that and making it up as you go 
along.
    The strategic plan--and it is a statutorily required item 
at this point, based on the Government Performance and Results 
Act--is something the Department and the Secretary are charged 
with developing. It must be updated every 3 years.
    And importantly, those departmental strategic plans are to 
be developed in discussion with stakeholders, but importantly, 
from your standpoint, in consultation with Congress.
    They are supposed to engage the Congress in a dialogue as 
to what the pieces and elements might be so that all of the 
elements that comprise the mission of that department--those 
stipulated, the three primary ones in the Homeland Security 
Act, as well as the other functions--are accommodated and 
expressed in a mission format that makes sense, so that then 
they can go about executing and you can go about allocating 
resources in a way that maximizes the achievement of that 
stated mission.
    So there is a means to do it. I think the strategic plan is 
the main tool to do it.
    Mr. McTigue. Congressman Meek, if I could just make a 
comment as well, before I came to the United States I used to 
be a member of parliament in New Zealand, so I have experience 
from the side of the political battles, which I had to get into 
to get decisions through. I was also a member of cabinet, so I 
had some experience from that side.
    The chairman asked me earlier on whether or not you could 
measure if the risk was getting greater or less, and I said the 
answer was yes. Also, as Jonathan Breul said, you can measure 
whether or not your capability of being able to respond to that 
risk has improved or deteriorated.
    What you can also say, using that same kind of analogy, is 
that if we starve this particular issue from resources, then 
the risk to the American people has gone up by 5 percent, 7 
percent, or 10 percent. Mr. Senator, do you want to be 
responsible for that?
    And certainly, as a member of parliament, I didn't want to 
be responsible for those things. So I think that you can start 
to identify the consequence of not putting the money in the 
high priority issues. There is a consequence, and it is that 
the risk to Americans gets greater.
    Mr. Meek. I am sorry.
    Mr. Metzger. Yes, I would like to comment about what an 
agency is doing. On page three of my written testimony, I 
referred to NASA. They have developed a well integrated system 
of strategic goals and performance goals with total and 
marginal cost.
    I pick up on Mr. Breul's comment about the importance of 
the planning. I pick up on my earlier comment about the 
importance of the governance process, because the agency 
relates those goals to their three mission areas of understand 
and protect, explore and inspire.
    Besides those three mission areas, which have subordinate 
goals under them, they have three enabling goals that they 
spell out. So they keep their performance, cost, and 
accountability system tightly linked to their evolving vision, 
mission, and themes, as they call them.
    In that sense, they provide an excellent example of an 
adjustable mission-based budgeting structure. They adjust to 
political and priority changes. They adjust by streamlining 
goals, redesigning and simplifying their budget structure, and 
reducing the number of program areas with every area relating 
back to the goals and forward to performance measures, reduced 
number of performance measures they do in order to focus on the 
critical few that drive the success of the missions.
    They allocate all costs and budgets to the new structure. 
They have an integrated budget and performance document that 
aspires to be understandable to the public and, importantly, 
used as a key tool in everyday managing of the agency.
    Mr. Meek. Well, Mr. Chairman, I just want to--I know we are 
into a close now--thank our panel, and I will definitely save 
your information, so if I need further information--I am glad 
that you mentioned the issue of the homeland security strategic 
plan.
    I will tell you personally I have been paying close 
attention to the statutory language. We have put components 
there--that is when they came out with the major components 
that the Department of Homeland Security has to follow.
    Of course, there are about four more than what I have 
actually talked about. But I think that is important, Mr. 
Chairman, as we move on. I know that Mr. Chertoff, due to the 
age of the Department--that will be coming back around again, 
to write a new strategic plan, and I think it is important, and 
I know that Congress will take part in that.
    I don't know what level of input we will have, but within, 
that is important. But thank you, gentlemen, for your time.
    Mr. Rogers. I would like to ask Mr. Metzger, in your 
statement, you indicate under a mission-based approach DHS 
would develop recommendations that would specify, A 
institutional, financial, and productivity goals and, B funding 
for department-wide priorities.
    In your view, would this make DHS more accountable?
    Mr. Metzger. Yes. Could you say which particular page that 
is in the notes?
    Mr. Rogers. No, I don't--
    Mr. Metzger. OK. Yes. I think the important thing is that 
through the governance process imposed upon by insisting top 
leadership that the flow downward through to the levels of the 
managers of the entities, the managers of the programs, the 
managers of the functions, even individual employees, which is 
what Interior does, they will accomplish the alignment--
    Mr. Rogers. Does Interior have mission-based budgeting?
    Mr. Metzger. No. They have performance-based budgeting and 
they have strategic goals, of course, which are the 
overarching, and their annual plan calls for performance goals 
that are aligned with that.
    Mr. Rogers. What do you think is going to be the 
institutional reaction to this push for mission-based 
budgeting?
    Mr. Metzger. Well, I think it will be hard in the homeland 
security case, of course, because they all have their 
stovepipes that they have been accustomed to. This is a major 
challenge that the Department has, to break those down.
    The only way you are going to get around that, I think, is 
by having the top leaders--and those, of course, would be the 
secretary, the deputy secretary and the assistant or the under 
secretary--for management to understand what is going on.
    What is impressive at Interior is that the leaders really 
understand, have an in-depth knowledge of what is going on. 
This is very hard in a department with 180,000 employees and 22 
legacy agencies. But the only way it is going to get done, is 
if you accelerate the process that is of such great interest to 
the Congress.
    The dialogue between the agency and the Congress, 
especially at this juncture, I think is the most important 
thing to shortening the time frame to have results that are 
more transparent to the public, accepted by the public, 
accepted by the appropriators, so they understand what is going 
on, too.
    Dialogue, communications--that is the most important thing 
that the executive agencies can do in getting the sense of 
ownership, involvement, of the stakeholders.
    And in the DHS case I think they have got to be considered 
having Congress considered as real partners in all of this and 
not just stakeholders somewhat up here, but really involved, 
thinking through the problems.
    Mr. Rogers. I would ask you the same question I asked Mr. 
Walker. Why do you think more agencies haven't already adopted 
mission-based budgeting? And I would ask any one of you to take 
that one.
    Mr. Metzger. Well, I would say offhand that homeland 
security is in especially dire need of having simplicity, 
because of all this complexity going on.
    Mr. Rogers. Organizationally.
    Mr. Metzger. Organizationally. The mission structure would 
help, hopefully, to accelerate the process of change--
    Mr. Rogers. But again, why don't you think more agencies or 
departments have this? Nobody else has it other than GAO, and 
we think CIA might. Why do the other agencies not have--
    Mr. Metzger. NASA does, as I said.
    Mr. Rogers. NASA does.
    Mr. Metzger. At least they did when I last checked a year 
ago. But it can be done as in their case. They have a matrix on 
a single page that shows how it does relate the mission, the 
goals, and the themes spread across the top. It is a very 
impressive one.
    Mr. Rogers. Mr. Breul?
    Mr. Breul. Let me venture a guess for you. I mean, part of 
it is that this is tough stuff. Most of the agencies have not 
wrestled with the question of strategic plans and performance 
missions but only in the last 2 years.
    This is a relatively new phenomena and taking it up to the 
level of looking at the mission as a whole is harder to grasp. 
Frankly, the Congress and the appropriations process focuses on 
the pieces. Appropriation breaks down into program and 
subaccounts and the rest, so the process tends to look at the 
pieces rather than the whole.
    But a number of departments are working in this direction. 
The Labor Department is a notable one. I would also point out 
the Department of Transportation where Deputy Secretary Jackson 
comes from--DOT has four major missions that it poses and 
imposes on all the functions and activities in the department.
    They look to safety, mobility, economic growth and 
security, and they see those as the overarching mission of that 
department. And they have all the program departments look 
toward those as the animating way of moving forward with their 
mission.
    And I think you will see that department and a few others 
working in this direction fairly soon.
    Mr. Rogers. I want to thank all of you for your time. It 
has been very helpful to us as members as well as our staff.
    I would point out to you, the same way I did to Mr. Walker, 
that we have several members who aren't here that may have 
questions they will submit to you. We are going to leave the 
record open for 10 days. If you could make a written response 
to inquiries they might have, that would be helpful.
    And thank you again for your time. And with that, this 
committee stands adjourned.
    [Whereupon, at 4:34 p.m., the subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


                   Additional Questions and Responses

   Questions from Hon. Kendrick Meek for Jonathan D. Breul Responses

    Question 1.: The inability of the financial systems to interact is 
the kind of problem that was anticipated when 22 different legacy 
agencies were merged together, each with its own budgetary and 
accounting systems. What role should DHS' Chief Financial Officer (CFO) 
play in making sure that the agency can make the changes that would be 
required by mission based budgeting?
    The Chief Financial Officers Act of 1990 which created the position 
of a CFO at the major departments and agencies sets forth specific 
authority and details the responsibilities of the major federal agency 
CFO offices (31 V.S.C. 902). These statutory duties include development 
and maintenance of systems that provide complete, accurate and timely 
reporting of financial information.
    The Department's CFO is also tasked with budget formulation, budget 
execution and performance management functions. For these reasons, the 
CFO should be involved through out the lifecycle of nearly every 
departmental initiative, from budgeting and funding at the front end 
through cost management during execution to the final accounting and 
reporting of expenditures. Working with other departmental officials, 
the CFO should play a major role in making changes required by mission-
based budgeting.

    Question: 2. Because of the non-mission based work that DHS does 
like that of handling natural disasters through Federal Emergency 
Management Agency (FEMA) is it even possible to successfully do 
mission-based budgeting?
    Yes, it should be possible to successfully do mission-based 
budgeting. The Government Performance and Results Act of 1993 (GPRA) 
requires the department to develop a strategic plan, as well an annual 
performance plan and report. The strategic plan should define both the 
department's mission and a set of long-range goals and objectives for 
all of the department's major programs and functions.
    The strategic plan consists of several elements, including a 
mission statement and a set of long-term goals. The mission statement 
describes the purpose of the agency, its raison detre. The long-term 
goals (called general goals and objectives) not only describe how an 
agency will carry out its mission, but also must cover all the major 
programs and functions of the agency.

    Question: 3. In the federal government, the Director of Central 
Intelligence, and now the Director of National Intelligence (DNI) have 
used mission-based budgeting to plan budgets and track the assignment 
and spending of resources among the various intelligence agencies based 
on its missions for about the last ten years. How easy or hard is it 
for DHS to do this given that unlike the DNI whose primary 
responsibility is intelligence, DHS has a wide range of duties?
    The strategic plan required under the Government Performance and 
Results Act is a means to forge a link between the mission and all of 
the other major functions and activities of the department. GPRA 
requires agencies to plan and measure performance using the same 
structures which form the basis for their budget request: program 
activities. This critical design element of GPRA aims at assuring a 
simple, straightforward link among plans, budgets and performance 
information and the related congressional oversight and resource 
allocation process.
    Implementing a mission or outcome-oriented approach can 
nevertheless be difficult. There are a number of reasons why. First, a 
mission orientation represents a fundamentally different way of 
thinking and of managing, across all aspects of an organization, 
including how it relates to citizens and major stakeholders. 
Organizational change of this kind is rarely easy. It always takes time 
to put into place and to sustain, it is certain to encounter at least 
some initial resistance, and it requires an array of approaches and 
supports. Second, mission outcomes are longer term in nature than 
outputs and activities. They tend to be far more difficult to quantify 
than activities and outputs, where it is even possible or meaningful to 
do so.
    There is, nonetheless, substantial evidence from many sources that 
it is possible to provide for a focus on mission and that it is 
possible to assess the extent to which the mission has been achieved.

Questions from Hon. Kendrick Meek for Hon. Maurice P. McTigue Responses

    Question 1.: The inability of the financial systems to interact is 
the kind of problem that was anticipated when 22 legacy agencies merged 
each with its own budgetary and accounting systems. What role should 
DHS's Chief Financial Officer (CFPP play in making sure that the agency 
can make the changes that would be required by mission budgeting?
    Mr. McTigue's Response The merger that created the Department of 
Homeland Security (DHS) did not create the problem that the Federal 
Government has with its accounting systems. The problem already 
existed. The merger placed more urgency on finding a solution to the 
fact that it was impossible for policy makers to compare the cost and 
efficiency of different activities from different organizations because 
used different systems for recording cost, if indeed cost was 
identified at all.
    The goal should not merely be to integrate the department's 
different financial accounting systems for the sake of integration. The 
goal should be to have a single system that actually produces the 
financial information Congress needs. Thus, it is imperative the effort 
start by defining what information the system is supposed to produce, 
rather than simply starting with or more existing systems and asking 
how they could be combined with the least trouble.

    Question 2.: Because of non-mission based work that DHS does like 
that of handling natural disasters through the Federal Emergency Agency 
(FEMA) is it even possible to successfully mission-based funding?
    Mr. McTigue's Response: The answer to the question is yes, but 
mission-based budgeting requires that funding for the disparate 
missions of each agency be allocated separately and that the expected 
results under each mission be made explicit.
    In order to manage multiple missions of DHS as a result of merging 
22 major of government, it is necessary to think of DHS as a 
conglomerate that has an overarching responsibility for the security of 
the homeland. For the overarching mission, the department can purchase 
specific services from each its agencies that will produce specific 
results, measured in increased security for the homeland. At the same 
time, each of these organizations will also be funded separately for 
their other mission responsibilities.
    FEMA, for example, has a disaster response and recovery capability 
that can be employed in response to natural disasters or terrorist such 
as 9--11. It makes more sense to develop and deploy such capabilities 
in multiple missions than to develop separate organizations that would 
handle response and recovery from natural and terrorist-induced 
disasters. When allocating funding at FEMA, the agency's multiple 
missions should be identified and separate funding tied to each.
    The budgetary process should separate the multiple missions of each 
agency and apply a different funding formula for each or goal. To do 
otherwise will only lead to confusion for Congress when trying to 
determine if the organizations are achieving the expectations mission 
by mission that Congress set for them.

    Question 3: In the Federal Government, the Director of the Central 
Intelligence Agency, and now the Director of National Intelligence 
(DNI) have used mission-based budgeting to plan budgets and track the 
assignment and spending of resources among the various intelligence 
agencies based on its missions for about ten years. How easy or hard is 
it for DHS to do this given that, unlike the DNI whose primary 
responsibility is intelligence, DHS has a wide range of duties?
    Response; In my view this is no more difficult for DHS than for any 
other agency, provided Congress makes its intent clear in the 
appropriation process. Of course that would require a change to the way 
in which Congress makes appropriation decisions. To begin with, it 
would Congress to fund outputs instead of inputs and to identify the 
expected result and a linkage to the that occurred in the outcome at 
the time of appropriation. All of these things are possible.
    To address Congress' needs, it is first necessary to reach a common 
understanding of the purpose of ``mission-based budgeting''. My 
definition is: ``Mission-based budgeting is a process focuses budget 
decision making on actions necessary to accomplish the mission and 
directs funding to those actions based on a system of prioritization.''
    In order to achieve such a mission-based budgeting system, certain 
information must be known and transparent:
        1. If the mission is to make the homeland more secure, there 
        should be a process that measures increases or decreases in the 
        safety of the homeland. To the best of my knowledge, this 
        measure does yet exist. So, the first task is to develop a 
        credible way to measure such increases or decreases.
        2. Funding will go first to activities that will make quickest 
        and greatest contribution to increased security homeland. This 
        presumes that the knowledge exists to what are the greatest 
        threats what are the greatest in the security arrangements. As 
        this may well be information that would quite properly to keep 
        not aware if that information exists.
        3. The department should know the costs and benefits--in terms 
        of improved security--for each of its activities. I am 
        reasonably certain that this information currently does not 
        exist. In order to be able to evaluate this, the department 
        must have a financial system that gives a fully attributed cost 
        to all activities and is able to link the cost results of each 
        activity expressed in terms of increased security.
    Therefore, the role of a CFO would be to construct department wide 
systems that produce financial information in the form expressed above 
that is consistent and allows credible comparisons across all units 
inside DHS. Because this information is useless it can be linked into 
specific improvements in the security of the homeland, this task 
reaches beyond the spectrum of the CFO and requires input and 
cooperation from the entire management team.
    Finally, Congress should be able to expect a budget request that 
details each activity seeking funding completely on a cost-to-output 
basis and assesses how much the funding of that activity will increase 
security of the homeland in terms of a percentage across the entire 
analysis. For example: the funding of this activity at this level will 
decrease the risk to the homeland by one percentage point.
    With this information, Congress can then very clearly direct 
funding to those activities that will produce the greatest gains and 
delay or terminate funding to activities that do not make an acceptable 
contribution to improved security of the homeland.
    However, even if Congress does not change the way in which it makes 
appropriations, it is still possible to implement mission-based funding 
at the agency level. This would require the vesting in the Secretary of 
Homeland Security the authority to identify and prioritize the threats 
to the homeland, to design appropriate responses, and to allocate funds 
accordingly.
    The same process could be used by the Secretary to allocate the 
resources required to fund the historic missions of the other 
organizations inside DHS (for example, natural disaster relief at 
FEMA). This process would only be possible if Congress granted the 
Secretary significant flexibility regarding the allocation of funds. 
Much of this prioritizing could indeed be done before the appropriation 
was finalized by Congress so that Congress could see how the allocation 
would be structured and the Secretary would only have to make 
adjustments for variations in the final funding level for the 
department after the appropriation was finalized.

    Questions from Hon. Kendrick Meek for Carl J. Metzger Responses

    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to reply to your constructive and 
excellent questions of August 17th. It is an honor to enlarge upon my 
previous testimony of 29 June on Mission-Based Budgeting as a mechanism 
to transform the Department of Homeland Security (DHS). I will address 
your questions in order:
        1. The Role of the Chief Financial Officer (CFO)
        2. Federal Emergency Management Agency (FEMA)
        3. Comparison of the Department of Homeland Security (DHS) and 
        the Director of National Intelligence (DNI)
    My comments reflect continuous review since June 29th of published 
information, including the July 14th report by your Committee's 
Democrats, Protecting America Against Terrorists: The Case for a 
Comprehensive Reorganization of the Department of Homeland Security; 
Mr. Chertoff's congressional testimonies and public speeches; articles 
on the Second Stage Review (2SR) that involved over 250 DHS personnel 
and subsequent DHS organizational and policy changes reported in daily, 
weekly and monthly periodicals; Government Accountability Office (GAO) 
publications on the DHS; press reports of the DHS response to acts of 
terrorism (London) and natural disasters (Hurricane Katrina); and re-
reading of the December 13th, 2004 joint study by the Center on 
Strategic and International Studies (CSIS) and the Heritage Foundation 
on DHS organization. My comments further are my own and not necessarily 
those of the Government Results Center's partner or sponsoring 
organizations. The Government Results Center is a non-profit, 
independent research and communications organization; our mission is to 
serve public servants by assisting federal agencies share lessons 
learned and better practices in improving government performance and 
results.

        1. The Role of the Chief Financial Officer
    While the survey and consensus-building methodology of the 2SR and 
DHS consequent leadership decisions on the relative authorities of the 
DHS Management Directorate compared with other directorates was a 
laudable decision-making process, I have been persuaded by the DHS 
Inspector General and GAO studies on shortfalls in DHS financial, 
information and procurement management practices. I am also aware that 
Mr. Chertoff believes his oversight of the CFO through the Under 
Secretary for Management is practical and preferable (statement of July 
25). However, I agree with the Committee Democrats study that the 
authority of the Chief Financial Officer (CFO), Chief Information 
Officer, and Chief Procurement Officer (CPO) should be elevated to a 
level above the other directorates.
    It made sense for DHS initially to bring together carefully but 
somewhat loosely the disparate 22 agencies into one Department with the 
broad, yet singular mission of preparing for and responding to 
terrorism acts or disasters by assuring no major disruption of their 
traditional individual services to the public. Certainly chaos has been 
successfully avoided. However, at this second stage for planning DHS 
should increase the authority of especially important Department-level 
management functions over the various directorates. Both financial 
management and information technology and sharing management deserve 
such immediate attention for purposes of accountability reporting and 
program management. Given the size of the DHS budget and extensive use 
of contractor services, better department-wide procurement management 
too should be considered. More central management controls will 
accelerate effective performance and results management. It is not 
advisable to permit audit able financial statements to take the DHS 
five to seven years to develop as forecast in the IG report. Corrective 
action over internal controls should be accelerated; activity-based or 
some form of total costing for performance or mission-based budgeting 
should be implemented DHS-wide as soon as practical. For that goal it 
is important that the CFO and CIO offices work together with 
coordinating oversight of their counter-parts in the directorates.
    I make these comments based upon my fifty years of experience in 
ninety countries, particularly in program management with major 
manufacturing corporations in the oil and chemical industries and 
general management with management consulting firms serving U.S. 
federal and foreign governments.

    2. Federal Emergency Management Agency (FEMA)
    This second question suggests handling natural disasters is ``non-
mission based'', that DHS is pre-dominantly concerned with homeland 
security to counter terrorism and to allocate its limited resources 
based on the three mission areas of prevention, vulnerability 
reduction, and response/recovery. In my opinion future government 
organization will march toward organizing toward effective plans and 
operations controls over similar and compatible missions and goals. 
Congress has been hinting at that orientation when discussing 
efficiency and effectiveness improvements in cross-cutting programs 
such as job training or food safety in recent years.
    The point is that it makes sense for a ``non-mission'' entity such 
as FEMA to be an integral part of DHS resource utilization and funding 
because FEMA and other parts of DHS have similar management objectives. 
Does FEMA not have the same tri-partite concern of prevention, 
vulnerability reduction, and response/recovery that DHS has for its 
mission segments? Does FEMA management not, such as with Hurricane 
Katrina in the last few days, engage a multitude of DHS, other federal, 
state and local government agencies and private sector organizations to 
serve the public urgently? Are not terrorist acts as unpredictable as 
natural disasters? Or their resultant costs unpredictable? FEMA 
management in principle faces the same event occurrence, costs and 
resource utilization uncertainties as all DHS faces.
    The Coast Guard has successfully for years used scenario planning 
to assist them in developing reasonable strategic plans and performance 
budgets. Similarly DOD's Quadrennial Defense Reviews and management are 
based upon a four-part sequence of plan, brief, do and review. Reviews 
are especially useful and often neglected in agencies, but they are 
important to the Army (called ``after-action reviews'') and Air Force 
(dubbed ``de-briefs'') as explained in two recent books. DOD like DHS 
is beset by uncertainty but manages to plan, secure funding, execute, 
and review to improve. I believe FEMA may readily fit into a DHS 
sequence of planning, briefing, doing and review within a mission-based 
budgeting context, or for that matter, within an adjusted strategic 
goal structure in keeping with the Secretary's six point agenda.

    3. Comparison of the Department of Homeland Security (DHS) and the 
Director of National Intelligence (DNI)
    The Director of Central Intelligence/DNI's use of mission-based 
budgeting to plan budgets and track the assignment and spending of 
resources among the various intelligence agencies based on its missions 
over these last ten years has been notable. Similarly the Office of 
National Drug Control Policy (ONDCP) over approximately the same time 
frame has been monitoring goals, strategies and results of over fifty 
law enforcement agencies in drug control. ONDCP has been helpful to the 
Executive Office of the President (EOP) and Congress in that analytical 
and tracking process for drug control. Managing neither intelligence 
nor drug control has been easy, especially in today's environment of 
addressing freedom of information or privacy issues within such a free 
society as ours. There are so many obstacles, checks and balances 
placed on our American government. Harry S. Truman said it best in 
1958, ``Whenever you have an efficient government, you have a 
dictatorship''. We have to operate openly and by consensus, paying 
attention to a myriad of internal and external voices, often in 
conflict.
    The formation of the DHS in itself from an assortment of 22 
agencies was tremendously ambitious, but it was and is necessary to 
focus properly on the threats against us. Convincing taxpayers and our 
Congress of the need and allocation of precious resources is difficult. 
There is a decided tendency to be reactive rather than proactive with 
insight into relative degrees of risk according to three variables: 
threat, vulnerability, and consequences. Secretary Chertoff recognizes 
the importance of risk-based planning in the recently-released National 
Preparedness Goals. In the same document he expresses the need for 
state and local partners to receive grants to ``build the right 
capabilities in the right places at the right level''. Partnerships are 
deemed truly necessary. Scarcely a week goes by without reading of DHS 
progress or attention in the press: plain-language radio rules, smart 
ID cards for first responders, consolidation of 250 DHS aircraft and 
500 pilots into the Customs and Border Protection bureau, the DHS IG 
report on the IT systems? weak access controls and a lack of 
contingency planning, creation of a new DHS Operations Coordination 
Division, and new DHS assistance to the New York mass transit system 
and selected ports, The GAO is trying to assist DHS through its 
congressionally-requested analyses and recommendations.
    Secretary Chertoff in his public appearances stresses the 
importance of DHS being results-oriented, to measure success in terms 
of the outcomes produced--to be network-focused, that is, building 
teams with partners in all other agencies and the private sector. He 
emphasizes being flexible - to be prepared and to react quickly since 
the enemy reacts rapidly to change. Rigid structures and procedures 
cannot be the way we define our thinking, he says. His approach is 
managerially sound. He has enlisted people and managers in the 2SR, 
then briefed internally, in Congress, and the public. As an experienced 
general manager, I would give the Secretary latitude in implementing 
his re-organization and monitor as constructively as possible in the 
weeks and months ahead. His is a ``hard'' job. To the extent that a 
simpler, mission-based budgeting framework could be developed to assist 
him makes management sense to me.
    Thank you, Mr. Chairman. I hope my answers to your new questions 
will be helpful to the Subcommittee in your deliberations on the most 
effective way to evaluate, monitor and allocate resources for our 
homeland security.

                                 
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