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




 
  DHS FINANCIAL MANAGEMENT: EVALUATING PROGRESS IN IMPROVING INTERNAL 
                                CONTROLS

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      FINANCE, AND ACCOUNTABILITY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 13, 2006

                               __________

                           Serial No. 109-258

                               __________

       Printed for the use of the Committee on Government Reform


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



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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
BRIAN P. BILBRAY, California

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                      Benjamin Chance, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

   Subcommittee on Government Management, Finance, and Accountability

              TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina        EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia                  MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota             PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee

                               Ex Officio
                      HENRY A. WAXMAN, California

                     Mike Hettinger, Staff Director
               Tabetha Mueller, Professional Staff Member
                          Erin Phillips, Clerk
            Adam Bordes, Minority Professional Staff Member



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 13, 2006...............................     1
Statement of:
    Norquist, David, Chief Financial Officer, Department of 
      Homeland Security..........................................     7
    Zavada, David, Assistant Inspector General, Department of 
      Homeland Security..........................................    16
Letters, statements, etc., submitted for the record by:
    Norquist, David, Chief Financial Officer, Department of 
      Homeland Security, prepared statement of...................     9
    Platts, Hon. Todd Russell, a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........     3
    Towns, Hon. Edolphus, a Representative in Congress from the 
      State of New York, prepared statement of...................     5
    Zavada, David, Assistant Inspector General, Department of 
      Homeland Security, prepared statement of...................    18


  DHS FINANCIAL MANAGEMENT: EVALUATING PROGRESS IN IMPROVING INTERNAL 
                                CONTROLS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 13, 2006

                  House of Representatives,
Subcommittee on Government Management, Finance, and 
                                    Accountability,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2247, Rayburn House Office Building, Hon. Todd Russell 
Platts (chairman of the subcommittee) Presiding.
    Present: Representatives Platts and Towns.
    Staff present: Mike Hettinger, staff director; Tabetha 
Mueller, professional staff member; Erin Phillips, clerk; Seth 
Lennon, staff assistant; Jean Gosa, minority assistant clerk; 
and Adam Bordes, minority professional staff member.
    Mr. Platts. A quorum being present, this hearing of the 
Government Reform Subcommittee on Government Management, 
Finance, and Accountability will come to order.
    Five years ago on this day, we were still reeling from the 
devastating attacks of September 11th. Over the course of the 
next year, the President and Congress took steps to transform 
the Federal Government. The result was the creation of the 
Department of Homeland Security, an ambitious and sweeping 
change in focus that brought 22 agencies together to combat 
terrorism and to better protect the security of our citizens 
here at home.
    One of the primary objectives was to streamline our 
operations and create economies of scale, to spend less on 
overhead and more on the mission at hand. Sound financial 
management is an important part of that equation, and DHS 
inherited agencies with significant problems in this area. In 
order to ensure that DHS would have the best chance to 
establish sound business practices, I, along with the ranking 
member, Mr. Towns, introduced H.R. 4259, the DHS Financial 
Accountability Act, which President Bush signed into law on 
October 16, 2004.
    The DHS Financial Accountability Act mandated a structure 
in line with the Chief Financial Officers Act of 1990, 
establishing a Senate-confirmed CFO with direct access to the 
Secretary. We certainly are pleased to welcome this new CFO, 
the Honorable David Norquist, who will be with us and testify 
here today. In addition, the act imposed on the Department the 
most stringent audit requirements of any Federal agency, an 
audit of internal controls.
    Internal controls are the checks and balances intended to 
prevent and detect mistakes. They are the key to 
accountability. Unfortunately, financial audits of DHS have 
identified 10 material weaknesses in internal control. These 
problems affect more than just financial reports. They can 
adversely impact operations. In 2005, the Bureau of Immigration 
and Customs Enforcement experienced some budget shortfalls 
because of accounting problems, and the Federal Emergency 
Management Agency's internal control problems contributed to 
millions of dollars in misspent funds in response to Hurricane 
Katrina.
    By subjecting DHS to increased scrutiny through the audit 
process mandated in the DHS Financial Accountability Act, our 
intent was to address the root causes of these problems. We did 
not intend for the internal controls audit to be a paperwork 
exercise; and I am pleased to hear that DHS is taking a 
proactive, collaborative approach. In order to fix weaknesses, 
not just identify them, the Office of the Inspector General is 
working alongside the CFO performing ongoing audits that focus 
on specific goals and action plans. These audits set specific 
goals and measure progress. The end result will be a Department 
that can focus more effectively on its critically important 
mission.
    Today, we are focused on the results of the first several 
audits and provide the subcommittee with the chance to discuss 
the results of these audits.
    We are pleased again to be joined by Mr. Norquist, as well 
as Mr. David Zavada, Assistant Inspector General for Audits, 
who will testify today. We thank you both for being here. As 
always, we appreciate your written testimony ahead of time to 
give us some more in-depth background on what we will discuss 
today. We certainly look forward to your opening comments and 
expect that we will have a very good dialog as we move forward.
    [The prepared statement of Hon. Todd Russell Platts 
follows:]

[GRAPHIC] [TIFF OMITTED] T4768.001

    Mr. Platts. I am now pleased to yield to our ranking 
member, Mr. Towns, from New York.
    Mr. Towns. Thank you very much, Mr. Chairman, for holding 
this hearing today to discuss ways in which we can improve the 
internal controls over financial management at the Department 
of Homeland Security. I am hopeful that today's witnesses can 
shed some light on the progress being made toward this 
important goal.
    The creation of DHS in 2003 was daunting, as it required 
the merging of 22 separate legacies agency into one management 
framework. Unfortunately, the integration of uniform financial 
management practices has proved overwhelming to agency 
leadership at all levels, and DHS continues to demonstrate 
significant material weaknesses in its financial reporting 
process and internal control functions.
    In response, Chairman Platts and this subcommittee worked 
to enact the Department of Homeland Security Financial 
Accountability Act, which finally brought DHS under the CFO Act 
umbrella for all financial management activities. It also 
requires DHS to assess their internal control functions on an 
annual basis in order to insure that appropriate safeguards are 
built into agency financial practices.
    I am hopeful our witnesses today will be able to explain 
how the weaknesses identified in the DHS fiscal year 2005 
review of internal controls are being addressed for future 
financial reporting activities. With many State and local 
governments dependent upon DHS for vital resources, it is 
imperative that controls be in place to govern the disbursement 
and collection of revenues for all agency operations.
    Once again, I thank my friend and chairman for his tireless 
work. He has done a major job in terms of keeping this in the 
forefront and continuing the discussions. He realizes how 
important it is, and I would like to say to him I really 
appreciate that.
    This concludes my statement, and I yield back.
    [The prepared statement of Hon. Edolphus Towns follows:]

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    Mr. Platts. Thank you, Mr. Towns; and I appreciate your 
kind words. But it truly has been a team effort with you and 
your staff working with our staff on the Republican side, and I 
think it is a good example that partisanship doesn't happen 
here in this subcommittee. It is about good work and the joint 
effort to just ensure that the taxpayer funds are well invested 
and a good return for our citizens back home.
    So we will turn to our witnesses. If I could ask both of 
you to stand. Our practice is to swear in both of our witnesses 
before your testimony. If you could raise your right hands.
    [Witnesses sworn.]
    Mr. Platts. Mr. Norquist, we'll begin with you; and we'll 
give you roughly, I guess, a 6-minute timeframe. But if you 
need to go over, we're glad to have you here; and if you need a 
little more time than that, feel free to take that. Then we'll 
go into questions.
    So, Mr. Norquist.

     STATEMENT OF DAVID NORQUIST, CHIEF FINANCIAL OFFICER, 
                DEPARTMENT OF HOMELAND SECURITY

    Mr. Norquist. Thank you, sir.
    Chairman Platts, Ranking Member Towns, thank you for this 
opportunity to testify before you today.
    As you have heard from past witnesses, DHS has many 
challenges to overcome to improve its financial management. My 
purpose before you today is to report to you on what I am doing 
about those challenges, consistent with the language and spirit 
of Public Law 108-330, the Department of Homeland Security 
Financial Accountability Act.
    My goals as CFO of Homeland Security are to make measurable 
progress in a number of areas, to include providing timely, 
accurate and useful financial data; improving our systems and 
processes eventually leading to sustainable, clean audit 
opinions; and implementing a sound internal control program.
    I firmly believe that success in achieving these goals 
begins by recognizing that strengthening financial management 
is about more than systems. To address the root cause of the 
problem, we must address people, policies, processes, systems 
and assurance.
    Regarding people, I have met with the agency chief 
financial officers to evaluate their hiring and training 
challenges. I believe there is a core set of knowledge that all 
financial and management employees should be trained to when 
they come on board in DHS. I have formed a task force to make 
that happen. I am also starting a DHS-wide CFO mentorship 
program so that we can identify and train the next generation 
of chief financial officers.
    With regard to policy, DHS needs to develop a Department-
wide financial management regulation. We are developing one DHS 
way of conducting financial management. One set of regulations 
will give us a common standard and understanding from which we 
will operate. It will simplify our control environment and 
provide us the standards for training and accountability.
    The centerpiece of our effort to improve our financial 
processes is our Internal Controls Over Financial Reporting 
Playbook. The Playbook will be completed this fall and is the 
culmination of an effort led by my office and supported by the 
Inspector General's Office to identify the root causes that 
underlie the material weaknesses. This will lead to more robust 
and detailed corrective action plans and to achieve the goals 
of the Financial Accountability Act.
    With respect to our systems modernization efforts, let me 
state that eMerge2 is dead. We do not have plans to launch the 
development of a new, Department-wide financial management 
system. The project documentation created at the inception of 
eMerge2 identified the right goals. Its goals run along the 
same lines as these I have outlined as my goals for DHS 
financial management. However, the approach was not balanced 
well enough across the framework of those five areas I 
mentioned: people, policy, process, systems and assurance.
    DHS still has a need to improve its resource management 
systems, but before we begin making migrations we must have a 
solid business case and know how the migrations tie into our 
longer range plans. We need to separate our process problems 
from the true system problems so we know which of our existing 
systems can be our foundation to buildupon.
    The final piece is assurance. DHS must have in place a 
means by which we can test whether our internal controls are 
well designed and operating effectively and for management to 
be in a position to find what is wrong and fix it. To this end, 
I am creating the CFO's assurance team to check our controls 
and to direct and monitor our execution of the Playbook.
    I would like to particularly thank the Office of the 
Inspector General for their support of this effort.
    We are working with the OIG on the internal control audit 
for this year, as required under the Financial Accountability 
Act. But, in addition, the IG is conducting a series of 
performance audits that are helpful in improving our corrective 
action plans, and I appreciate their strong participation.
    DHS has come a long way since its inception in financial 
management. During my tenure as the CFO, I intend to move DHS's 
financial management beyond that of an agency in transition. I 
know from my 3 months on the job that I have a big task in 
front of me.
    Thank you for your leadership and your continued support of 
the Department of Homeland Security, and I would be happy to 
answer any questions you may have.
    Mr. Platts. Thank you, Mr. Norquist.
    [The prepared statement of Mr. Norquist follows:]

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    Mr. Platts. Mr. Zavada.

    STATEMENT OF DAVID ZAVADA, ASSISTANT INSPECTOR GENERAL, 
                DEPARTMENT OF HOMELAND SECURITY

    Mr. Zavada. Good afternoon, Chairman Platts, Ranking Member 
Towns and members of the subcommittee. Thank you for inviting 
me to testify before the subcommittee today on DHS financial 
management and internal control.
    Strong financial management and accountability are 
essential to effectively and efficiently accomplish DHS's 
mission. The Congress recognized this in establishing the 
Department of Homeland Security Financial Accountability Act by 
emphasizing financial management leadership and internal 
control as essential elements of a sound financial management 
system.
    Financial management has been a management challenge for 
DHS since its creation in 2003. DHS was created by 
consolidating 22 separate domestic agencies with different 
business processes and pre-existing internal control 
weaknesses. In addition, DHS needed to create-a-department wide 
capacity to lead, manage and oversee financial management.
    For fiscal year 2005, DHS was unable to receive an opinion 
on its financial statements, and 10 material internal control 
weaknesses were reported for the 2nd straight year. The number 
and extent of these weaknesses across the Department's 
components are indicative of the challenges the Department 
faces in improving financial management and producing timely 
and reliable financial information.
    To move forward, DHS must develop a comprehensive financial 
management strategy that addresses organizational resources and 
capabilities, inconsistent and flawed business processes, and 
unreliable financial systems. An initial step in this process 
is to prepare well-developed and comprehensive corrective 
action plans to address known internal control weaknesses.
    During 2006, we anticipated progress in addressing internal 
control deficiencies. The Department identified four areas for 
priority attention and improvement this year. These priority 
areas were financial management oversight, financial reporting, 
fund balance with Treasury and actuarial liabilities.
    Over the past several months, we conducted a series of 
performance audits to assess the effectiveness of DHS's 
corrective action plans to address internal control weaknesses. 
The audits are intended to provide ongoing feedback to the 
Department as they develop and implement their plans. To date, 
we have completed two audits focused on assessing the overall 
corrective action plan process and specific corrective action 
plans for 4 of the 10 material weaknesses. These weaknesses are 
attributable to significant internal control problems within 
the Office of the Chief Financial Officer, ICE and Coast Guard.
    We recommend that the DHS take greater responsibility for 
assessing internal control deficiencies and provide additional 
tools for identifying root causes of weaknesses. Further, we 
recommend that they closely integrate their corrective action 
plans with the assessment being implemented as part of OMB 
Circular A-123, Management's Responsibility for Internal 
Control, and also with corrective action plans being 
implemented to address information technology weaknesses.
    The Office of the Chief Financial Officer has initiated a 
Department-wide corrective action plan process and begun to 
actively monitor progress. However, its own corrective action 
plans need further development.
    Weaknesses within the OCFO related to financial management, 
oversight and reporting continue to exist. The OCFO plans to 
conduct a comprehensive organizational staffing and human 
resource needs study. We endorse this type of comprehensive 
assessment in gap analysis.
    At ICE, we found its corrective action plans and priority 
areas to be comprehensive and well-developed. On its own 
initiative, ICE began its corrective action plan processing in 
the first quarter of fiscal 2006. Consequently, they are 
further along in developing and executing corrective action 
plans than the other DHS components.
    The Coast Guard does not yet have a well-developed 
corrective act plan. They have not yet thoroughly analyzed the 
business processes and financial systems to determine the 
underlying causes for many of its internal control weaknesses. 
This analysis is crucial to identifying and implementing the 
appropriate steps to actually move forward and correct these 
weaknesses.
    Financial management will continue to be a high priority 
area for the OIG. We intend to continue our proactive and 
engaged approach to overseeing DHS financial management 
improvement efforts through our financial statement audit and 
through a series of performance audits. We look forward to 
conducting these audits and providing the results to the 
Secretary and the Congress.
    Mr. Chairman, this concludes my prepared remarks. I would 
be happy to answer any questions.
    [The prepared statement of Mr. Zavada follows:]

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    Mr. Platts. Thank you both for your testimony. And I 
appreciate both of you in your written and referencing in your 
oral testimony the importance of financial management as it 
relates to the core mission of the Department of Homeland 
Security, that if we get this right it will enhance that 
mission capability and effectiveness.
    I want to start with maybe a question to both of you. In 
response to the DHS Financial Accountability Act and the audit 
of internal controls, you have kind of jointly moved forward 
with the work on the performance audits and relating to the 
corrective action plans. Can you summarize, maybe each of you, 
how you see what's the greatest benefit of those corrective 
action plans and the performance audits of them as we go 
forward? What are you really looking for that will get us 
further down the path to what we all want, which is good 
financial management across the Department?
    Mr. Norquist, if you would.
    Mr. Norquist. Sure. Let me start with the performance 
audits.
    One of the major advantages of the performance audits is 
the way that the IG is doing them, which is as we are 
developing the corrective action plan so that their 
recommendations and their findings are able to be built into 
these corrective action plans from the beginning, this allows 
us to start the process with much stronger corrective action 
plans and with a much stronger process. So I really appreciate 
that working relationship we have with them and the value of 
those performance audits.
    I think the advantage of the CAPs is it maps the way 
forward. It gives a tool for myself to use with the components 
to say, here was your problem, here was your plan. We've sat 
down and had workshops to discuss was it sufficiently detailed, 
is it effective. Now I'm going to be meeting with you on a 
regular basis to discuss your progress against these plans.
    Not every corrective action plan will move forward on 
schedule. There will be hiccups. But it gives me a basis by 
which to meet with them and say, are you addressing these? Is 
it moving forward? It gives us performance metrics, it gives us 
milestones to have, and it provides a map of the way forward. I 
think that's an essential part of solving the problem, and I 
think that's why these two things are so essential.
    Mr. Zavada. In terms of the performance audits, what the 
performance audit--the benefit of that was that we were able to 
craft an audit that specifically addressed a particular element 
of financial management, as opposed to a financial statement 
audit which would be much broader. So what we've been able to 
do is put a spotlight on an issue that we feel is very 
important, the development of good corrective action plans.
    Second, as David mentioned, certainly being able to provide 
input to management on a real-time basis, to be able to 
validate and work with them as they are developing this program 
was certainly a secondary benefit.
    In terms of corrective actions themselves, we see this as 
the beginning of a process to implement A-123 effectively to 
get to a clean opinion and to provide positive assurance on 
internal control; and that is why we emphasize corrective 
actions in the performance audit.
    Mr. Platts. I share that perspective of the benefits that 
we can achieve here and the kind of benchmarks that these 
corrective action plans will give us.
    One of the concerns--and I do appreciate, Mr. Norquist, 
this may be not a fair question to you because of your recent 
arrival. But one of the issues that the IG has pointed out is 
the fact that there is not a Department-wide corrective action 
plan. It wasn't begun until the third quarter and I believe is 
still a work in progress. It seems that would be pretty 
important to send that message through all the agencies. Here's 
our Department-wide, you know, plan, and then it breaks down 
into the individual agencies and programs that you are looking 
at.
    Can you give us an update of where that is? Why, I guess, 
was there such a delay?
    ICE moved forward right away with their individual plan. 
But--and I don't know if you can adequately answer because of 
not having been there. But your best understanding why the 
delay to the third quarter and where do we stand now for that 
Department-wide approach.
    Mr. Norquist. Sure. Let me talk to that.
    There's actually two parts to this. There is the corrective 
action plan that relates specifically to the Office of the 
Chief Financial Officer, as well as the Department-wide, which 
is one we are going to build from the components. So let me 
talk to both of those pieces.
    The Office of the CFO contributes to some of the material 
weaknesses, particularly on oversight; and I wasn't here at the 
time that the original weakness was identified or that the 
process began, so I may turn it over to David to talk to some 
of that.
    I suspect part of the problem was simply a workload issue. 
As you've commented on before, we've been doing a lot to try 
and strengthen the size and the training base of our work 
force. We are continuing to do that. And so there was a 
challenge as one financial audit ended and we began the other 
to have the people identified to also build the corrective 
action plan.
    One thing I would note is when you commented about sort of 
the different status of the corrective action plans of the 
components, ICE, for example, under Assistant Secretary Julie 
Meyers and CFO Debra Bond, were both in place by January and 
have begun very aggressively tackling this issue.
    The new head of the Coast Guard, the new CFO of the Coast 
Guard came in in about June of this year, and so I think you 
see that sort of a lag. I see a similar energy and focus from 
them; and, hopefully, in several months we'll see the same type 
of achievements that we are seeing out of ICE.
    But there is a clear connection, I believe--and I'll let 
the IG comment on this--between the leadership coming in and 
grasping challenge and taking it as their own and providing 
that sort of focus and energy. So when you see one place have 
that change and then another not, it's OK. When you see the 
other leadership change and the same type of energy coming in 
behind it you can anticipate and look forward to working with 
them to achieve similar results.
    The Department, in terms of tackling the corrective action 
plan for the Office of Chief Financial Officer, there were 
several weaknesses identified. One is the number of people. We 
have about 20 who are doing the accounting type of functions. 
We have five people we have identified for hiring that are 
coming on board. We will be getting additional positions, I 
believe, in the appropriation bill. Both the House and the 
Senate supported it. So that will continue to strengthen our 
hand.
    As David pointed out, we'll also be doing a study of skill 
mix, which is, do our people who are there, many of whom--all 
of whom are very talented, but do they have the particular 
training and the skill sets to match the tasks we have? And 
where there are gaps we'll provide the training classes. We'll 
get them that experience so we can eliminate and close those 
weaknesses. We will make a point of addressing the CFO 
corrective action plan and fixing it. And I appreciate their 
comments and their insights on the draft.
    The second step is, once all the corrective action plans 
are done--or not literally all because we will continue to 
generate corrective action plans as management identifies 
problems that need to be addressed--but as we wrap those up at 
the end of September and October, we'll produce a Department-
wide plan which is the summation of those. This is similar to 
what the Department of Defense did, which is to allow everybody 
else to understand, here is how we are going to tackle this 
issue across the Department. It gives a better idea as to when 
these weaknesses will be addressed.
    Just for an example, one of the things we have to do is fix 
our financial management policy. The order in which we tackle 
those policies will be informed by the corrective action plans, 
where are the weaknesses, where are the most urgent needs, and 
so we can tie our training, our policy adjustments, our system 
migrations to the schedule of the corrective action plans so 
we're tackling them in the right priority order. So that is 
sort of the overview of both the CFO and the integrated 
Department-wide plan.
    Mr. Platts. Mr. Zavada, maybe if you want to comment on 
your assessment of that overall plan, the Department-wide plan, 
and then specifically--and you touched on it in your 
testimony--with the Office of CFO and where they stand, in your 
perspective, with staffing, you know, the training and the 
skill sets and things as far as being able to improve on the 
past.
    Mr. Zavada. Well, in terms of the Department-wide 
corrective action plan, we are certainly hopeful that the 
Department will go back and--as they get their bureau 
corrective action plans in and take the input that we have 
given them in our performance audits and develop a Department-
wide corrective action plan. Certainly, you know, we have not 
seen that yet. We understand that they do--they are preparing 
that in what they are calling the ICOFR Playbook, and we're 
anxious to take a look at that, and we will in future 
performance audits.
    In terms of the OCFO specifically, from our perspective, 
DHS needs to build a capacity there to do the things that every 
other Federal agency, or most every other Federal agency, can 
do in financial management, and that is issue policies, that's 
monitor progress of the components, it's facilitate solutions 
to financial management problems within the agency and, 
finally, to prepare and analyze financial statements and 
reliable financial reports. Those capabilities are not there 
yet; and we are hopeful that through--by conducting a study and 
looking for gaps between the current skills and future, to be a 
type model, that will give them a better understanding of the 
issues and a clearer path to move forward.
    Mr. Platts. And before I turn to the ranking member, just a 
followup there on the make-up of the staffing. I know that 
certainly at the beginning it was simply numbers where the CFO 
started, and as that office has grown and the number of 
personnel, still that breakout. And, Mr. Norquist, of the 
roughly 80 employees there, how do they shake out in general 
terms from budgetary versus accounting, you know, in the skill 
sets? And how does that relate, then, Mr. Zavada, to your 
office and seeing is the personnel there not just in bodies but 
in actual skill to meet the challenges that the office of the 
CFO is facing?
    Mr. Norquist. Well, let's see. We have--if you break out 
the 80, there's about 40 people doing what you call traditional 
budgeting in one form or another. Part of those associated with 
the fact that we provide budget support to parts of the 
headquarters as well, like a component would. We have about 20 
doing various forms of accounting, and then the balance would 
be in places like program analysis and evaluation, one of the 
requirements of the Financial Accountability Act, as well as 
our link to the IG and sort of my immediate staff. Of those 20 
accounting people, we have about seven who are certified CPAs. 
We have--what I am very excited about, we have four who are 
preparing to sit for the exam who are going through that 
process.
    I, frankly, am very supportive of providing the support and 
encouragement for people to get the professionalization. We are 
hiring five more that we have already identified. Of those, 
three are CPAs as well. So, you know, when all of that is done, 
we will have effectively doubled the number of CPAs. But 
that's--you know, that's not a perfect measure, but, frankly, I 
think it's an important indicator, building that type of core 
skill set.
    Mr. Zavada. I would just get back to my earlier answer and 
say that I think the CFO office has a very dedicated staff. But 
we do not believe--we believe that there is a lack of skills 
and capabilities to do the things that I had mentioned earlier 
that most other agencies can do in the area of financial 
management, oversight and financial reporting. We had reported 
this issue as early as 2004 in terms of the lack of capability 
at that level. In some respects, it is not an issue that is 
unique to financial management. We have seen the same thing in 
acquisition management and reported on that at DHS as well at 
the Department level.
    Mr. Platts. Are you comfortable with the new individuals 
coming on board and with the training that is being pursued, 
that, in your opinion, we are going to get the office of CFO in 
the near term to its staffing level and skills that we need to 
address the concerns that you have appropriately raised?
    Mr. Zavada. No. No. We feel they need to undertake a more 
in-depth study. They need to look more closely at the skill 
gaps, at what they need to do and the current skills that they 
have. And I don't think it's just a matter of training. I think 
the issues run deeper than that.
    Mr. Platts. And, Mr. Norquist, the additional--the new 
slots that you are looking to come through the appropriations 
process, what are they in this area of----
    Mr. Norquist. They'll be in both. They address a number of 
areas. One of them will be particularly in the accounting side.
    In addition, one of the things I feel is very important is 
we do not--we need to not rely on the auditors to identify the 
weaknesses. Management should be identifying the weaknesses. 
Management should be making the statements that they have fixed 
them. And the auditors have pointed this out to us on a number 
of occasions, that we should be doing our own assurance tests 
and not simply relying on the audit.
    So I want to take some of those folks and build a 
management assurance team that will go out and check our 
processes, check organizations who have asserted that they have 
completed their corrective action plans and have that 
accountability. So we will be putting additional people against 
this as well, and part of this is to make sure that when we 
post the advertisements and we do the recruiting that we're 
matching it to the skill sets that are needed and identified by 
the study that he's talking about.
    Mr. Platts. And that study is under way or planned?
    Mr. Norquist. I don't know if they have actually begun the 
study, but the steps to put it in place are under way, and it's 
going to happen soon.
    Mr. Platts. I guess because in various agencies and 
departments what we come back to often is that human capital 
issue and the ability to have people in place, not just bodies, 
but who have the skills to perform the duties. And it seems 
like from the IG's perspective that there's still a significant 
challenge in this area of human capital and with the importance 
of the Office of CFO setting the example that, while I like the 
idea of the assurance teams and that ability to kind of go out 
there and be that check and in an urgent situation you have a 
team that you can call on to go out, I hope that's not going to 
be at the expense of that first responsibility, which is the 
staffing of the CFO office itself and to meet the needs that 
have been identified by the Inspector General.
    Mr. Norquist. I believe it'll be complementary.
    I think the other thing about the assurance team is much of 
their work would probably involve support from contractors who 
had a particular skill or expertise that you could employ for a 
short-term basis to target an area, but you are going to have 
that sort of government leadership on a continuing basis 
through it. But I would not want to set it up in a way that it 
drew away from our needing to address the material weaknesses 
that affect the Office of the Chief Financial Officer.
    Mr. Platts. As we go forward I hope and one of the purposes 
of our hearing, of this one, is to encourage the 
communications. And, obviously, there is a very good working 
relationship between the CFO and the IG's office, that 
continue, and especially here in the concerns that still seem 
pretty strong about the human capital within the Office of the 
CFO that there remains a good dialog and interaction between 
your two offices on that human capital side.
    Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Let me begin with you, Mr. Norquist. I would like to know 
more about the internal control committee. Could you tell us 
more about how that works?
    Mr. Norquist. We have a management process using the 
internal control committee that tries to ensure that the steps 
forward on the internal control process brings in all the 
different components. Although the CFO has the lead in internal 
controls, many of the weaknesses, many of the challenges to fix 
them extend into procurement, asset management, information 
technology. So the internal control committee brings together 
those groups of players to help make sure that there is that 
connection.
    In addition to which, working alongside the internal 
control committee is the senior management committee. It will 
be the group that makes a recommendation to the Secretary on 
his statement of assurance, insures that there are accountable 
officials for the internal control plans, and represents sort 
of the leadership part of that activity.
    So I think this is an important function in order to make 
sure that everyone understands that they are part of the 
internal control process, not simply it's a delegated function 
to one person, because in that case it wouldn't execute 
correctly.
    Mr. Towns. I don't want to start a debate between you and 
the IG, but he said something that I think that we need to 
pursue. He mentioned that the skill gap--now, is it that--first 
of all, do you agree with that? I don't want to put you on the 
spot, but is it a fact that it is a big turnover or people are 
not paid enough? I mean, that seems to be a problem of some 
sort. So what do you think the problem might be?
    I'm really not wanting to put you on the spot, but I really 
want to see how we might be able to help you up here to be able 
to really come to some kind of real--real working kind of 
agreement that we can sort of move forward. Because there are 
some problems, and I know you will agree with that. I'm happy 
that you're on board, and I know you have only been there 3 
months, and we're all excited about your being there, and I 
want you to know that. But what--do you think that's going on 
here, the reason we want to get a fix?
    Mr. Norquist. Well, I sort of accept the auditor's--the 
finding that there's a skill gap. I mean, I've worked with 
these folks. I'm comfortable in their abilities. But there's a 
number of tasks they have to be able to accomplish. I mean, 
there is a wide range; and the fact that you're good at one 
area doesn't mean that the Department is covered in all of the 
areas it needs to tackle.
    In addition, one of their findings a number of the auditors 
pointed out is, because of the amount of work they spend 
working with the components, they're not necessarily covering 
the tasks that the headquarters is supposed to do. So some of 
this is workload.
    But I do believe that there is a need to address the skills 
that we have, and that's why I agree with them on the need for 
the assessment study. I'm quite open to whatever the study 
comes back and says is the required set of skills versus the 
ones we have, and I'm committed to--you know, we have a lot of 
dedicated Federal civil servants, and we need to make sure that 
if there is something they need to be trained on to do their 
job that we get them that training. If there's a skill that you 
can't simply train somebody to, then we need to hire people 
with those backgrounds to make sure we fill in those gaps.
    If somebody comes into my organization and identifies a 
problem, my initial reaction isn't to disagree but to say, OK, 
let's talk through it. I'm happy to look into how we're going 
to fix that problem; and if this is one of the underlying 
challenges, let's dedicate the resources and the people to 
tackling it.
    Mr. Towns. Mr. Zavada, do you think that it might be 
connected with how much they are able to pay them as to that 
might precipitate the skill gap? Because there is a correlation 
between salary and performance. It should be.
    Mr. Zavada. I'm not sure if pay is--would make a difference 
or not. I do know that it's not just DHS, that other agencies, 
to lesser degrees, have trouble attracting and retaining good 
talent in the area of financial management. So it is a broader 
problem. You know, as the bars have increased in financial 
management and as we have accelerated and lessened the time to 
prepare financial statements, for example, we haven't really 
adjusted governmentwide on the skills side. So it's a broader 
problem. It's just a little bit more severe--much more severe 
at DHS, and I don't know if pay would make the difference or 
not.
    Mr. Towns. What about the turnover? Is it a big turnover? 
Because I'm thinking about in terms of you're spending time and 
you're training and you're getting them ready to be able to 
assist, and then all of a sudden they say goodbye.
    Mr. Norquist. There is a lot of challenge with turnover. In 
our actual--in our financial management shop, I believe our 
turnover has been relatively low. But turnover throughout the 
Department is a challenge. We lose chief financial officers who 
move on. We lose individuals.
    Sometimes they are moving from one component in DHS to 
another. In that case, I am actually pretty excited. I think 
the more people DHS has who have worked for ICE and then for 
the Coast Guard or for another organization, they get that 
integrated broader view. I'm fine.
    But the challenge becomes--for example, you train good 
government accountants, you teach them all they need to know to 
be good on financial statements, and then a private sector 
comes along and hires them because there's a great demand for 
people who understand the government accounting system. It's 
the type of challenge that the information technology community 
had, both inside the government. And so I think we need to be--
to look at that. And if----
    You know, one of the points I made to the CFOs in our 
organizations is we can't simply hire each other's staff and 
think we're solving the problem. If we need to go out and 
recruit, then we either need to target the skill set or we need 
to find a different group of employees, bring them in and train 
them and give them that skill set so they can develop and grow 
inside our organization.
    In some cases, you can find it. In some cases, you have to 
build it. You find the right people with talent and enthusiasm 
and you give them the training they need to tackle the mission.
    You know, if it turns out that pay is a decisive factor in 
this, I'll be certainly happy to get back with you on that. 
Because I have seen different places where the Congress has 
acted on that to address specific weaknesses in the hiring 
challenges; and if that's the case here, if that's the result 
of the study, I'll certainly get back to you on that issue.
    Mr. Towns. Also, a part of that, I'm concerned about 
whether or not you have the resources to really recruit, which 
I think is also an issue. So, I mean, I know you have 
additional funds coming in the appropriations, but the point is 
that it might not be the kind of thing that will fix--I mean, 
the point is that if you get additional money and you're able 
to hire a few more people but you still have a turnover problem 
or the salary is not where it should be, they're got going to 
stay; and then we'll continue to come and have these kind of 
sessions as to how do we fix it.
    Mr. Norquist. That's right. It's not how many you hire. 
It's how many you hire above what you're losing on a given 
basis. And you can easily be excited about how you're bringing 
on board and then watch a similar number of people move on to 
other things.
    Mr. Towns. Right.
    Mr. Chairman, I yield back. My time has expired. Thank you.
    Mr. Platts. Thank you, Mr. Towns.
    I want to just followup briefly on the human capital issue 
and the reference to the other agency. And we've heard that in 
other hearings, too, the challenge of getting sufficient 
qualified personnel in financial management positions.
    I guess one--in your experience, Mr. Zavada, at OMB and 
FAA, I guess, in the past as well, do you have any gauge for a 
CFO office, out of 80, having 7 and going up to, say, 14 or so 
CPAs, is that typical, that 10 percent or so? Or is that one of 
the issues that we should have a higher percentage of actual 
CPAs for the challenge that we are--what we're demanding of 
this office?
    Mr. Zavada. I don't know what the exact mix is. I think 
that is why it is very important to do this study and do some 
benchmarking. You know, let's see what other departments have. 
Let's see what their capabilities are to address these common 
needs that other agencies have as well as DHS.
    So I think we just need to take a little bit of a deeper 
dive on the issue. It's not just doing an internal assessment. 
I mean, we have been very--we feel very strongly that an expert 
in the area of human resources, probably an independent expert, 
you know, really needs to come in and perform this study.
    The CFO's office has done an internal study. It was a very 
frank study, an assessment, and I think it identified gaps 
generally, but what we need now is a more detailed study done 
by somebody who has--with expertise in this area, so that we 
can answer the questions that you're asking: How does DHS stack 
up against other agencies, and what are the right ratios?
    Mr. Platts. This may be a question you don't have the 
knowledge to give an informed answer, but is there, in your 
knowledge, a CFO office in another Department or agency that 
you think does kind of epitomize the role model for not just 
DHS but across the board that jumps out that maybe, you know, 
we want to be looking at?
    Mr. Zavada. Well, I think, you know, if you look at the 
scorecard, the President's management agenda scorecard, there 
are seven or eight green agencies. Those agencies have met the 
standards. Obviously, they are able to do the things that I 
outlined earlier. They would probably be a good place to start.
    I also think possibly looking into the private sector at 
private companies that are the same size as DHS, maybe doing 
some benchmarking there might be helpful.
    Mr. Platts. Mr. Norquist, with the CFO Council and the fact 
that the hiring and finding of qualified people is a 
challenge--and I know there's a lot of interaction with you and 
your colleagues on the CFO Council--is there an ongoing dialog 
about a partnership, you know, and going after, you know, a 
pool of individuals so it's not each of you competing and 
stealing from each other or competing with each other but 
you're kind of a clearinghouse for qualified financial 
management personnel that can then come into a kind of a pool 
of applicants that each of you can turn to?
    Mr. Norquist. I have talked to Linda Combs about this issue 
and specifically talked about recommendations for CFOs, places 
to go. She has several ideas on ways to search for CFOs, both 
in the private sector and elsewhere, to bring into the 
government to give us that expertise. She's not as enthusiastic 
as my approach as to go and find them and take them from other 
organizations because she's got that broader perspective.
    But one of the points that I made to her and I asked for 
her to think about and get back to me with some feedback is we 
also need to start growing the civil servants who will become 
the next generation of CFOs. So one of the things I put forward 
is a proposal to our CFO Council, is to say let's take nominees 
from each of our organizations, very talented, successful 
individuals, and give them an opportunity to rotate for a 
period of time with different CFOs in the Department so they 
see how other organizations inside DHS work, not just the one 
they grew up in. Let them see the range of tasks that a CFO 
does. Let them develop some understanding of whether or not 
that's something that interests them and start getting people 
who think ``I can do that.''
    Then when it becomes time to find the next Deputy CFO in an 
organization, you've got a group of people who are thinking of 
themselves as potential future CFOs, who understand the range 
of responsibilities, who can have--if they've got an accounting 
background, they've learned about budgeting; if they've got a 
budgeting background, they've got to learn about accounting; 
and they've understood more than just their component.
    I think all of that, you know, is a management 
responsibility. It's hard when you're trying to deal with 
tomorrow's task to remember that part of this is the long-term 
solution.
    Again, this gets to the sort of importance of the 
corrective action plans and others, is to keep focusing. What's 
not just the solution for tomorrow, what's the long-term 
solution? How do we keep growing the people, the skill set and 
so forth to address this as the long-term solution?
    Mr. Platts. I think that the IG's reference to the private 
sector--and I don't know for certain if it's still the case, 
but I know in many years past a friend whose father was an 
executive within McDonalds, and they had what they called 
Hamburger U, where they brought management trainees from all 
over the country, all the stores, to that central training 
program. I think that's kind of what you're talking about, is 
let each Department or agency say here's one or two or three or 
four, whatever, this year, that we would like to be part of a 
kind of a CFO training program that's governmentwide.
    And something that, from the testimony that we have 
received, probably bears some great merit of being looked at to 
address the needs across the agencies and something that in our 
discussions with Linda and those at OMB--because it's certainly 
I know in the individual agency departments finding that in 
your budget is not going to be a case with the demands in the 
sense of whether that can be something that's led by OMB in 
looking long term.
    Another question that relates to personnel and, Mr. 
Norquist, to your interaction with all of the 22 agency CFOs 
out there that, ultimately, what they do impacts what you are 
able to do, and as the Department CFO you're the one that's 
going to ultimately bear the responsibility and have, you know, 
to answer for their actions.
    Can you describe your relationship with them and how your 
authority--as far as having input into who is in those 
positions now or in the future with the various agency heads 
and making sure there is a good understanding of their 
relationship to you as the CFO for the whole Department?
    Mr. Norquist. Sure. I have a very good working relationship 
with the CFOs in the Department. I have found them very 
responsive. I have found them very dedicated.
    I meet with them in several different ways. One is, as the 
CFO Council, we all have to come together as group. But I also 
have a series of regularly scheduled meetings with particularly 
the large components so that I sit down one on one on with the 
CFO from the Coast Guard and with others to talk about what 
their issues are, what's going on in their organization to help 
me understand and to work with them.
    I haven't had a problem with responsiveness or chain-of-
command-type relationships. I do play a role in helping 
organizations select their next CFO or deputy CFO. I play a 
role, and as we get into the evaluation period and we will be 
more actively involved in the evaluations of their performance 
for the year in setting their standards.
    I believe those types of things set out in the CFO Act are 
all very helpful. I am frequently asked in these type of forums 
if it's enough, and the answer is I haven't run into a problem 
yet in this process, but if I discovered a place where the 
relationship was not as effective as it would be because of 
something in the legislation, I'd let you know. But I think, 
right now, it works very smoothly, and the legislation 
accomplishes what it was intended to.
    Mr. Platts. That's good to hear. And we do always welcome 
and are glad to have feedback if there's areas of the law that 
need to be fine-tuned, whether it's the CFO Act or others.
    In your answer, you reference especially the Coast Guard 
and ICE and the importance and, in both of your testimonies, 
how critical a role that those two play in long-term success of 
getting a clean and, you know, really a workable opinion that 
day to day means good management practices at the Department as 
a whole. Can you each describe your perspective on where you 
see ICE, where you see Coast Guard today and what's their 
biggest challenges remaining to get to good management 
practices? And then comparison, you know, to each other. You 
know, maybe one needs to be looking at versus the other and 
learning from each other.
    Mr. Norquist. OK. Did you want to start or do you want me 
to?
    Mr. Zavada. Sure. I don't mind.
    Certainly, ICE--the reason why ICE stands out is because 
they started early. They have a--they have put together a solid 
plan. They did the analysis to know what the underlying causes 
are of some of their weaknesses. They have leadership support, 
both at the CFO--in the CFO office with a strong CFO as well as 
at the Assistant Secretary level; and they have dedicated 
resources.
    What they've established is a project management office 
that's sole purpose is to oversee and execute corrective 
actions. Everyone has another job to do, and if corrective 
actions are done as a collateral duty they're less likely to 
get executed. So that's what sets ICE apart.
    And ICE is at the point now where they are--and you see 
this in the recommendations that we made to them. They're 
further along the continuum of corrective actions. They're at 
the point where they're thinking about how do we validate some 
of the things that we have done and how do we integrate the A-
123 assessment process in terms of executing some of those 
validations of corrective action. So they're thinking further 
along the continuum.
    They're also thinking in terms of the project management 
office, which is highly dependent upon contractor resources, 
how do we transition that to be a more stable CFO office and 
CFO organization. So they're just clearly further along in 
terms of their thinking on corrective actions and the 
relationship between corrective actions and good financial 
management practices in the long run.
    Coast Guard is one of our primary areas of concern when it 
comes to financial management. Their organization, in terms of 
financial management, is in flux. They have not done that 
underlying root cause analysis to know what their problems 
relate to. They are probably the exception within the 
Department in terms of looking more or needing to look more 
deeply at their financial systems to understand what type of 
problems are short term and what type of problems are long 
term. But the Coast Guard, as opposed to ICE, is at the very 
beginning of the corrective action plan process, at the 
beginning of the continuum.
    Mr. Platts. Thank you.
    Mr. Norquist. I think that's a fair assessment.
    One of the things I noticed, for example, is Debra Bond, 
the CFO of ICE, is very aggressive, very forward leaning, very 
engaged on the corrective action plans; and frequently she 
shows up at my office to discuss a financial issue. She'll 
often have her Assistant Secretary, Julie Meyers, with her, 
which shows me the amount of support she's getting from her 
leadership, that dedication that when we move an organization 
is so critical for their success. So I see that teamwork, and 
that's reassuring.
    I have found one of the valuable things in the performance 
audit was it showed clearly, from the IG's perspective, that 
they had been making the progress, that energy and drive was 
producing results. It is my hope that is what we see from the 
Coast Guard in a period of time. I have seen a similar shift 
with the new Coast Guard leadership and the new Chief Financial 
Officer, the same willingness to tackle the issue.
    When I read the performance audits, I had a meeting I think 
the next day with the Coast Guard. I said, we need to sit down 
with ICE and have them talk you through what they did because, 
clearly, what they did is working. And as you begin to develop 
your plans I want you to learn both--granted, they're not 
perfect matches. There's going to be differences--but to learn 
the lesson of what successes they have had to help you map the 
same way. Because I want the Coast Guard--and they're equally 
important that they get off on the right foot, and I don't want 
that management and leadership enthusiasm to sputter with the 
difficulty in executing a plan.
    So I want to help them as much as possible and to 
capitalize on the strong support they have from the top.
    Mr. Platts. A quick followup, and I want to get to Mr. 
Towns again.
    Why hasn't the Coast Guard been more proactive, and your 
statement was that they have not really done that underlying 
root cause analysis. Why not, since we know--I mean, you know 
early on when we transitioned in the Department, we are now 
several years down the path, and all along we have known the 
Coast Guard is one of the challenges. Why hasn't Coast Guard 
done it, and, quite frankly, why hasn't the Secretary of the 
Department said, hey, you are behind the eight-ball here; we 
need to get on the stick here and get this done? Why are we 
still talking about getting them on the right track as opposed 
to them being on the right track like ICE is?
    Mr. Norquist. I actually defer to the IG on this because 
the new leadership came in at the same time I did, so I am not 
sure of the history of their predecessor.
    Mr. Zavada. Since I've been at the Department since 
January, I might be able to take the same route.
    Mr. Platts. I think it is a question that we will probably 
be following up on and to the Secretaries and the--you know, 
the senior leadership, that when you have within the Department 
two of the key areas of focus, ICE and Coast Guard, you have 
one that is aggressively moving forward, the other one is not, 
and perhaps will now with the new leadership. And that may be a 
part of the reason why we have new leadership in the sense of 
the CFO efforts. But, you know, it doesn't really, you know, 
kind of come together well as to why you know we are not seeing 
that same effort on the Coast Guard's part.
    Mr. Zavada. Well, I will say that the Coast Guard is a 
contributor also to the departmentwide material weakness on 
financial management oversight and reporting. It is not--those 
problems are not just within the OCF at the Department level. 
So a lot of the skill and capability issues are resident there, 
and they are trying to inform a transformation team, and they 
are trying the deal with those. But I think that to some extent 
there may have been a contributing factor in the past.
    Mr. Platts. It is clear that until they get on the ball and 
get working, the efforts of your office, no matter how well the 
office of CFO for the Department is operating, we are never 
going to get to what we are all after, which is a clean opinion 
that is not clean once a year, but means year round we have 
good systems in place. We are never going to get there until 
all entities, and especially the large ones like Coast Guard--
and I--my ranking member has been very patient with me as I 
have gone way over my time.
    So Mr. Towns.
    Mr. Towns. Thank you very much. No problem.
    You know, in the beginning, you know, we talked about the 
possibility of the culture of independence might be difficult, 
Mr. Zavada, with some of the legacy agencies that would be 
difficult, you know, to break. Have you encountered that?
    Mr. Zavada. I have encountered that in my own office. It 
is--we are a collection, as the rest of the Department, of a 
lot of different pieces, a lot of different departments, and 
departments have different ways of doing things, and it is--it 
has been a challenge, and I am sure it is a challenge DHS-wide 
to make those processes consistent and uniform. So, yes, I 
think that is something that I have seen.
    Also, I would say that getting back to when DHS was 
created, as I said in my testimony, some of these problems do 
go back to the way that some of these initial departmentwide 
management functions were resourced from the start, and as I 
said, we have seen--we have reported on issues related to 
acquisition management and the skills and capabilities there, 
and similarly within the CFO's office. So, you know, there is a 
lot of catch-up to do.
    Mr. Towns. All right. Let me ask you one of the most 
significant challenges you believe DHS will face in complying 
with 123 for internal controls.
    Mr. Zavada. Well, in my view, implementation of Circular A-
123 for DHS is about corrective actions. It makes no sense to 
document processes that are broken, to test controls that are 
broken where you know that there are already weaknesses that 
exist. So the ability for DHS to effectively implement Circular 
A-123 relies on their ability to put together well-developed 
corrective action plans and to execute those corrective action 
plans.
    In our audit reports we have tried to identify the linkages 
as we see them between the A-123 assessment process and the 
corrective action plan process, and the Department understands 
this, and clearly I am sure when their Echifer playbook comes 
out, it will be reflective of that understanding and that 
linkage.
    Mr. Towns. Let me ask both of you this. And ``leave me 
alone'' will not be an acceptable answer. What more can we do? 
What do you see as Members of Congress that we could do to 
assist you both of you? What more can we do? Is there anything 
that we need to be doing?
    Mr. Norquist. Well, first of all, let me start by 
expressing my appreciation for everything you have done so far. 
As I have mentioned to people, this is not an area where I can 
have conversations and get sustained interest and enthusiasm. 
It is important, but it is important in a way that is hard for 
people to appreciate how internal controls play into sound 
financial management and sound financial management plays into 
protecting tax dollars.
    So I appreciate the seriousness this committee and the two 
of you in particular have taken with this issue and the 
thoughtfulness in this legislation as I have been part and 
parcel in going through this, being one of the CFO Senate-
confirmed positions the act calls for. I have studied the 
language and appreciated the careful balance that was put into 
it.
    I think that going forward there are several places of 
importance. One is, for example, when we have identified 
solutions or areas such as the additional people in the 
appropriations bill to make sure that is not lost in the 
enactment in the bill. That is certainly not a high-profile 
item that there will be additional finance and accounting 
people in the Office of the Chief Financial Officer in an 
appropriation act. But making sure that is there--and, again, I 
appreciate the two committees because they've both been 
supportive of this--but working in a Member-to-Member level to 
make sure that people understand these small things make a 
difference, that is certainly very valuable and greatly 
appreciated.
    The other is the helpfulness of the individual meetings, 
being able to get together with you, giving you an update of 
where we are, letting people inside the Department and 
elsewhere know that you are paying attention, that you care, 
that you are there to support us as we move forward, I think, 
is very valuable. People look for that constructive engagement, 
and I appreciate that.
    So I think those are two areas, and I mentioned everything, 
the ability to go to you if I see something where it is beyond 
my capacity to fix because it requires a legislative change. 
Knowing that there is a group of people who understand the 
issue, who will be able to understand the point that they were 
trying to make in how that would improve financial management 
is very valuable. It give us a place to go to in working on a 
solution to go forward.
    Mr. Zavada. I would agree with David in terms of your 
interest, certainly the committee's interest, in financial 
management, broad interest in internal control, which is not a 
very sexy topic, but is really the foundation of timely and 
reliable information and the beginning of being able to better 
manage programs. So certainly your committee's interest more 
broadly in financial management, your committee's interest in 
DHS, this hearing, being able to discuss corrective action 
plans and put a spotlight on corrective action plans as the 
beginning of the process toward financial management 
improvement at DHS, I think, has been very helpful.
    Mr. Towns. Thank you. On that note I thank both of you, and 
I yield back, Mr. Chairman.
    Mr. Platts. Thank you, Mr. Towns. And I often kid about 
getting interested in these topics which to me are so important 
because it is how we spend the public's money and the 
effectiveness in spending that money, and I joke that if I 
could get one of you to admit that you have been using 
steroids, we would have a packed room here. The media would be 
really interested in covering.
    Mr. Norquist. Would it help me to get a clean opinion?
    Mr. Platts. We--you know, maybe Mr. Towns' next hearing, 
you know, is going to be about how steroids is--it is 
unfortunate, you know, you talk about hearings on baseball 
players using steroids, and you get a packed room. You talk 
about how we are spending $2 trillion of the public's money and 
how we are trying to improve the effectiveness of that 
expenditure, and we are grateful for the members of the media 
who are here, but it is a fraction of those who cover the 
steroid hearings. So unfortunately, we think it is important, 
we know you do, and you are devoting your professional lives to 
it, so we are glad to be partnered with you.
    Let me--I have two other areas I want to touch on. One is 
relating to the financial management line of business and the 
consolidation of how you are operating now with your systems 
and who is managing them, and I know ICE is serving some of 
them, Coast Guard and the Federal Law Enforcement Center, 
Training Center, is serving some of the smaller bureaus.
    Is there, first, any plans internally for any further 
consolidation, you know, to Coast Guard or the Federal Law 
Enforcement Training Center? I mean, where do things stand, and 
where do you see yourself going?
    Mr. Norquist. Here is the way forward as I see it. What I 
have asked folks to do is, based on either audits that we have 
already done, work that has carried over from the original 
merge, or from additional work that we have to do, triage our 
component and their financial systems. Some of them work fine. 
They support clean opinions. They may not be the same system 
everyone else uses, but they are doing just fine. They are not 
my first priority to fix. They are not contributing to a 
material weakness.
    The second group of those components show the system can 
operate fine, but there has either been some minor modification 
to it or some process change about the way they are using it. 
This is contributing to the problem, and the answer is let us 
tackle that as part of the corrective action plan and fix it.
    The third group would be those components who have either 
got a version of the application that is no longer supported, 
does not support a clean opinion, or has been so modified as to 
not necessarily be recoverable the way it is. And those are the 
places I want to focus the migration strategy on, which is they 
are going to be biggest improvement, they are going to make the 
biggest contribution to improving our financial statement. I 
will start by targeting them, and again, consistent with OMB 
line of business, the question is let us not build a new 
system, let's find an instance of that system or different 
system we are already using we can migrate them to. My 
preference is let us find something that has a track record or 
capability to support the clean opinion, to do the things we 
know the system to do. And then let us spend our energy moving 
that component over.
    Migration is very time-consuming. It creates a lot of 
challenges. It can create disruption. So I want to make sure we 
are very careful about the moves and the cost/benefit is there. 
But I want to target the ones that have the greatest challenges 
and make them the lead cases to move, because then we will get 
the biggest results for the most we make.
    Mr. Platts. What is your understanding from OMB on the 
requirement for the line of business in either, you know, 
migrating in house to identified Centers of Excellence, as they 
have been called, or having to go outside within government or 
outside privately? What is your understanding from OMB of how 
that is supposed to play out in the sense of doing that 
analysis of, you know, competing possibilities, public to 
public or public/private, and the timeframe from when you are 
expected to have your systems either internally with the Center 
of Excellence or elsewhere with the Center of Excellence?
    Mr. Norquist. Well, I have given them the same type of 
briefing which is the basis of the statement that I have 
prepared for this committee where I talk them through the types 
of changes I saw, and one of them was this issue of triaging 
the system and identifying the ones to move first. The core 
principle which they have, which is the same as ours, which is 
don't build a new system, find one to migrate them, we can do 
it by moving to somebody in house. We can do it by moving to 
someplace in the private sector. I am very open depending on 
what the analysis says is the most efficient way to move 
forward both in terms of these and the migration and the long-
term savings to the taxpayer.
    In terms of time line, you know, there is little patientce 
in letting us do our analysis, but they would very much like us 
to be able to lay out for them who is next and when do we see 
that migration happening, and I told them I need more 
information to be able to pick out which of the candidates are 
the ones that need to meet first, and what the right pros and 
cons are, and how to move them. But they have been meeting with 
us on this. We are going to work very closely with them on it 
and make sure we are on board.
    Mr. Platts. But at this point there is no date certain that 
you have been told that you are expected to have the entire 
Department either migrated internally or externally to a Center 
of Excellence?
    Mr. Norquist. They haven't conveyed that to me, no.
    Mr. Platts. OK. Also related to that is about building a 
data warehouse or other enterprise data reporting solution. 
What is the plan there? You know, how you are approaching that, 
that challenge?
    Mr. Norquist. Well, timely and accurate financial data is 
absolutely essential. It is a very high priority for me. A data 
warehouse is one way to get there. There are several options, 
so we are going to look through those to figure out which one 
gives us the information we need. That is certainly an option 
we are going to consider, but I haven't made a decision that is 
necessarily the way to move forward, but it is certainly one of 
our options.
    Mr. Platts. OK. I think maybe a final question, Mr. Zavada. 
In your remarks earlier talking about the benefits of the 
performance audits and this dialog here internally within DHS, 
do you see the approach that you are taking, partnering with 
the CFO and the performance audits kind of hand in hand with 
the correction and action plan development implementation, 
something that we should be looking to help promote across the 
Department and agencies in the Federal Government, that it is a 
way to get to a better foundation for financial management?
    Mr. Zavada. Well, I think the most important element of 
solving these problems is good communication between management 
and the auditors, and certainly we have that, and the 
performance audits have helped to facilitate that even further.
    I think governmentwide there may be certain cases, certain 
material weaknesses that are intractable really, or there has 
been--not really been activity on them, where putting a 
spotlight on it through a separate, more flexible audit and 
providing more detailed recommendations as to how management 
can go about fixing those problems could work. I don't think it 
is something that across the board you could say works in every 
situation, but there could be cases where putting that 
spotlight on and providing that additional in-depth analysis 
can be helpful.
    I think certainly in DHS's case this has given us an 
opportunity to work closely with the CFO's office to improve 
management, to improve financial management, and to provide 
some constructive recommendations as plans were being 
developed. And we are trying to do more of that in the work 
that we do. We are doing some of that in acquisition 
management, where we are looking at procurement risks before 
you enter into procurements as opposed to looking after the 
fact and saying--pointing out errors. So this is very much in 
line with the type of work that we would like to do in the IG's 
office.
    Mr. Platts. Actually I have one final--more of a comment, 
and, Mr. Norquist, it kind of comes back to the challenge that 
we have touched on about Coast Guard and the critical role they 
play. I kind of see it as a similar analogy when we have worked 
with NASA and the CFO at NASA and the interactions between her 
and all of the CFOs at the different centers around the 
country. And thankfully she has a lot more direct input to the 
CFOs and authority relating to their reviews and who is in 
those positions. I think it gives her a greater ability to have 
a good operation at the agency level.
    With your counterpart or colleague now, the new CFO at the 
Coast Guard entity, is, in your dialog, is--we appreciate being 
new and apparently about the same time I think as you came in, 
and--but that while we are patient, we also do want to see the 
Coast Guard take a more aggressive approach as we talked about 
with ICE. And they would probably rather have you up here 
having to take the questions than be here themselves. And as we 
have told NASA, if we are not able to get the answers from you 
or, in the case of NASA, with the agency CFO, that means we 
will have to--the entity CFO--and because we certainly need to 
see improvement there if we are going to get to the 
departmentwide advancement, which is what we are all after in 
this particular effort.
    Mr. Norquist. I will be happy to make that observation at 
the next CFO council.
    Mr. Platts. And that interaction--and I am sure they are 
wanting to do just that, and we have high hopes for their 
success because it does play such a critical role.
    We again appreciate both of your testimonies here today, 
your written testimonies, your work from your staff leading up 
to the hearings, and just in general your dedication as public 
servants to the good of our Nation and the benefits to our 
citizens.
    We will keep the record open for 2 weeks, if there is any 
additional information that you feel the need to supply to us.
    We are grateful for your work, and this hearing stands 
adjourned.
    [Whereupon, at 3:25 p.m., the subcommittee was adjourned.]

                                 
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