Intelligence Reform: Human Capital Considerations Critical to	 
9/11 Commission's Proposed Reforms (14-SEP-04, GAO-04-1084T).	 
                                                                 
GAO has performed extensive work and gained experience on	 
government transformation and the critical role that human	 
capital management can play in driving this change. Valuable	 
lessons from these efforts could help guide the proposed reforms 
in the intelligence community envisioned by the 9/11 Commission. 
At the request of this subcommittee, this statement focuses on	 
(1) the lessons GAO has learned from successful mergers and	 
organizational transformations; particularly the need for	 
committed and sustained leadership and the role of performance	 
management systems in these changes; (2) human capital		 
flexibilities that can be used as essential tools to help achieve
these reforms; (3) how the Federal Bureau of Investigation (FBI) 
is using these lessons and human capital flexibilities to	 
transform to meet its evolving mission in the post 9/11 	 
environment, and (4) GAO's findings to date on the factors that  
must be considered in the approach to the government's security  
clearance process, as a means to accelerate the process for	 
national security appointments. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-1084T					        
    ACCNO:   A12458						        
  TITLE:     Intelligence Reform: Human Capital Considerations	      
Critical to 9/11 Commission's Proposed Reforms			 
     DATE:   09/14/2004 
  SUBJECT:   Domestic intelligence				 
	     Federal agency reorganization			 
	     Federal intelligence agencies			 
	     Human resources utilization			 
	     Interagency relations				 
	     Military intelligence				 
	     Performance measures				 
	     Strategic information systems planning		 
	     Strategic planning 				 
	     Homeland security					 

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GAO-04-1084T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia, Committee on Governmental Affairs

For Release on Delivery Expected at 9:30 a.m. EST Tuesday, September 14,
2004

INTELLIGENCE REFORM 

  Human Capital Considerations Critical to 9/11 Commission's Proposed Reforms

J. Christoper Mihm, Managing Director Strategic Issues

A

GAO-04-1084T 

September 14, 2004

INTELLIGENCE REFORM

Human Capital Considerations Critical to 9/11 Commission's Proposed Reforms

  What GAO Found

Recognizing that people are the critical element in transformation
initiatives is key to a successful transformation of the intelligence
community and related homeland security organizations. GAO's work in
successful mergers and transformations shows that incorporating strategic
human capital management approaches will help sustain any reforms in the
intelligence community. Successful major change management initiatives in
large public and private sector organizations can often take at least 5 to
7 years to create the accountability needed to ensure this success. As a
result, committed and sustained leadership is indispensable to making
lasting changes in the intelligence community. Accordingly, the Congress
may want to consider lengthening the terms served by the directors of the
intelligence agencies, similar to the FBI Director's 10-year term. One of
the major challenges facing the intelligence community is moving from a
culture of a "need to know" to a "need to share" intelligence information.
The experience of leading organizations suggests that performance
management systems-that define, align, and integrate institutional, unit,
and individual performance with organizational outcomes-can provide
incentives and accountability for sharing information to help facilitate
this shift.

Significant changes have been underway in the last 3 years regarding how
the federal workforce is managed. The Congress passed legislation
providing certain governmentwide human capital flexibilities, such as
direct hire authority. While many federal agencies have received human
capital flexibilities, others may be both needed and appropriate for
intelligence agencies, such as providing these agencies with the authority
to hire a limited number of term-appointed positions on a noncompetitive
basis.

Human capital challenges are especially significant for the intelligence
organizations, such as the FBI, that are undergoing a fundamental
transformation in the aftermath of September 11, 2001. For the last 3
years, we have been using the lessons learned from successful
transformations to monitor the FBI's progress as it transforms itself from
its traditional crime enforcement mission to its post 9/11 homeland
security priorities- counterterrorism, counterintelligence and cyber
crimes. For example, the FBI has undertaken a variety of human capital
related initiatives, including major changes in realigning, retraining,
and hiring special agents and analysts with critical skills to address its
top priorities.

The 9/11 Commission recommended that a single federal security clearance
agency should be created to accelerate the government's security clearance
process. Several factors must be considered in determining the approach to
this process. The large number of requests for security clearances for
service members, government employees, and others taxes a process that
already is experiencing backlogs and delays. Existing impediments-such as
the lack of a governmentwide database of clearance information, a large
clearance workload, and too few investigators-hinder efforts to provide
timely, high-quality clearance determinations.

United States Government Accountability Office

Chairman Voinovich, Senator Durbin, and Members of the Subcommittee:

I am pleased to be here today to discuss how strategic human capital
management can drive the transformational challenges of the intelligence
community. The work of the 9/11 Commission has clearly demonstrated the
need to fundamentally change the organization and culture of the
intelligence community to enhance its ability to collect, analyze, share,
and use critical intelligence information-a crucial mission of the
community. In a knowledge-based federal government, including the
intelligence community, people-human capital-are the most valuable asset.
How these people are organized, incentivized, enabled, empowered, and
managed are key to the reform and ultimate effectiveness of the
intelligence community and other organizations involved with homeland
security.

To this end, we have conducted extensive work on government
transformation, and the critical role that human capital management plays
in driving this change over the past several years. In August 2004,
Comptroller General David M. Walker testified before the Committee on
Government Reform, U.S. House of Representatives, on how the valuable
lessons we learned from this work can be applied to address the challenges
of reform in the intelligence community.1 He stated that while the
intelligence community has historically been addressed separately from the
remainder of the federal government, and while it undoubtedly performs
some unique missions that present unique issues (e.g. the protection of
sources and methods), many of its major transformational challenges are
similar, or identical to those that face most government agencies, such as
changing their cultures to fit evolving missions. Experience has shown
that strategic human capital management must be the centerpiece of any
serious change management initiative. As the Comptroller General also
recently noted, many of the challenges facing the intelligence community
as knowledge-based organizations, are similar to those he faced when he
began his tenure at GAO. As a result, GAO has gained valuable experience
and knowledge in government transformation that can be shared with the
intelligence community. We also stand ready to use the experience and
knowledge we have gained to offer GAO's assistance in support of the
Congress' legislative and oversight activities for the intelligence
community.

1GAO, 9/11 Commission Report: Reorganization, Transformation, and
Information Sharing, GAO-04-1033T (Washington, D.C.: Aug. 3, 2004).

As I recently testified before your subcommittee, more progress in
addressing human capital challenges has been made in the last 3 years than
in the last 20 years; nevertheless, much more needs to be done.2 Federal
human capital strategies are not yet appropriately constituted to meet
current and emerging challenges or to drive the needed transformation
across the federal government. The basic problem has been the longstanding
lack of a consistent approach to marshaling, managing, and maintaining the
human capital needed to maximize government performance and ensure
accountability because people define the organization's culture, drive its
performance, and embody its knowledge base. Human capital (or people)
strategy is the critical element to maximizing performance and ensuring
accountability. Thus, federal agencies, including our intelligence and
homeland security communities, will need the most effective human capital
systems to address these challenges and succeed in their transformation
efforts during a period of sustained budget constraints.

Under the leadership of this subcommittee and others in Congress, we have
seen major efforts to address the human capital challenges involved in
transforming these communities, such as the transformation of the Federal
Bureau of Investigation (FBI) and the creation of the Department of
Homeland Security (DHS). Nevertheless, as the 9/11 Commission and our work
indicate, much more needs to be done to ensure that agencies' cultures are
results-oriented, customer-focused, and collaborative in
nature-characteristics critical to high performing organizations.3 As
agreed, my statement today will cover four major points. First, I will
discuss how we can use the lessons we have learned to date from successful
private and public sector mergers and transformations to guide the
intelligence community's human capital reforms; particularly the need for
committed and sustained leadership, and the use of performance management
systems to help achieve the necessary change. Second, I will discuss
several human capital flexibilities that could be used as essential tools
to help achieve these reforms, such as providing agencies with the
authority to hire a limited number of term-appointed positions. Third, I
will also discuss GAO's prior work on FBI's efforts to use these lessons
and

2GAO, Human Capital: Building on the Current Momentum to Transform the
Federal Government, GAO-04-976T (Washington, D.C.: July 20, 2004).

3GAO, Comptroller General's Forum: High-Performing Organizations: Metrics,
Means and Mechanisms for Achieving High Performance in the 21st Century
Public Management Environment, GAO-03-343SP (Washington, D.C.: Feb. 13,
2004).

human capital flexibilities as it transforms to meet its evolving mission
in the post 9/11 environment. Finally, I will summarize our findings to
date on the factors that must be considered in the approach to the
government security clearance process, as a means to accelerate the
process for national security appointments.

My comments are based on our completed GAO work and our institutional
knowledge on organizational transformation and human capital issues, as
well as on homeland security. We conducted our work in accordance with
generally accepted government auditing standards.

  Key Mergers and Transformation Practices Can Be Used to Guide Intelligence
  Community Reforms

Experience shows that failure to adequately address-and often even
consider-a wide variety of people and cultural issues are at the heart of
unsuccessful organizational transformations. Recognizing the people
element in these initiatives and implementing strategies to help
individuals maximize their full potential in the new environment are key
to a successful transformation of the intelligence community and related
homeland security organizations. Mergers and transformations require more
than just changing organizational charts. They require fundamental changes
in strategic human capital management approaches, particularly in
defining, aligning, and integrating key institutional, unit, and
individual performance management and reward systems to achieve desired
outcomes.

The 9/11 Commission has recommended several transformational changes, such
as the establishment of a National Counterterrorism Center for joint
operational planning and intelligence, and the creation of a National
Intelligence Director position to oversee national intelligence centers
across the federal government. The Director would manage the national
intelligence program, oversee agencies that contribute to it, and
establish important aspects of a human capital system. Specifically, the
Director would be able to set common personnel and information technology
policies across the intelligence community. In addition, the Director
would have the authority to evaluate the performance of the people
assigned to the Center.

The creation of a National Counterterrorism Center and a National
Intelligence Director would clearly represent major changes for the
intelligence community. Recent structural and management changes have
occurred and are continuing to occur in government that provide lessons
for the intelligence community's transformation. For example, in

anticipation of the creation of DHS, in September 2002, the Comptroller
General convened a forum of private and public sector experts to help
identify useful practices and lessons learned from mergers, acquisitions,
and transformations that DHS and other federal agencies could use to
successfully transform their cultures.4 In a follow-up report, we also
identified specific steps that organizations can adopt to help implement
these practices, as seen in table 1.5 These practices and steps also
provide guidance on what must occur to effectively transform the
intelligence community.

4GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons
Learned for a Department of Homeland Security and Other Federal Agencies,
GAO-03-293SP (Washington, D.C.: Nov. 14, 2002).

5GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers
and Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2,
2003).

Table 1: Key Practices and Implementation Steps for Mergers and
Transformations

Practice Implementation Steps

Ensure top leadership drives the transformation.  o  Define and articulate
a succinct and compelling reason for change.

o  Balance continued delivery of services with merger and transformation
activities.

Establish a coherent mission and integrated strategic goals to guide  o 
Adopt leading practices for results-oriented strategic planning and

                         the transformation. reporting.

Focus on a key set of principles and priorities at the outset of the  o 
Embed core values in every aspect of the organization to reinforce
transformation. the new culture.

Set implementation goals and a timeline to build momentum and  o  Make
public implementation goals and timeline.

show progress from day one.  o  Seek and monitor employee attitudes and
take appropriate followup actions.

o  Identify cultural features of merging organizations to increase
understanding of former work environments.

o  Attract and retain key talent.

o  Establish an organizationwide knowledge and skills inventory to
exchange knowledge among merging organizations.

Dedicate an implementation team to manage the transformation  o  Establish
networks to support implementation team. process.  o  Select
high-performing team members.

Use the performance management system to define the  o  Adopt leading
practices to implement effective performance responsibility and assure
accountability for change. management systems with adequate safeguards.

Establish a communication strategy to create shared expectations  o 
Communicate early and often to build trust. and report related progress. 
o  Ensure consistency of message.

o  Encourage two-way communication.

o  Provide information to meet specific needs of employees.

Involve employees to obtain their ideas and gain ownership for the  o  Use
employee teams.

transformation.  o  Involve employees in planning and sharing performance
information.

o  Incorporate employee feedback into new policies and procedures.

o  Delegate authority to appropriate organizational levels.

Build a world-class organization.  o  Adopt leading practices to build a
world-class organization.

Source: GAO.

I would now like to discuss how two of these key practices, providing
leadership commitment and using performance management systems, can help
guide the intelligence community reforms.

Ensuring Committed and Sustained Leadership Is a Key Practice to Drive
Transformation in the Intelligence Community

Committed, sustained, highly qualified, and inspired leadership, and
persistent attention by all key parties in the successful implementation
of organizational transformations are indispensable to making lasting
changes in the intelligence community. Experience shows that successful
major change management initiatives in large public and private sector
organizations can often take at least 5 to 7 years to help to create the
accountability needed to ensure that long-term management and
transformation initiatives are successfully completed. This length of time
and the frequent turnover of political leadership in the federal
government have often made it difficult to obtain the sustained and
inspired attention to make the needed changes. For example, while the FBI
Director has a 10year term appointment, most of the intelligence agency
heads have shorter term appointments. In his August 2004 testimony on the
proposed 9/11 Commission reforms, the Comptroller General suggested that
the Congress may want to place attention on lengthening the period of time
served by the directors of the other intelligence agencies to provide the
continuity and management needed to make the tremendous changes that occur
during organizational transformations.

We have also reported that the appointment of agency chief operating
officers is one mechanism that should be considered to provide continuity
by elevating attention on management issues and transformation,
integrating these various initiatives, and institutionalizing
accountability for addressing them.6 We believe that to provide such
leadership continuity during reform of the intelligence community, one
option that the Congress could consider is for the National Intelligence
Director to appoint a Chief Operating Officer. This executive could serve
under a term appointment to institutionalize accountability over extended
periods and to help ensure that the long-term management and
organizational initiatives of the National Counterterrorism Center and the
Director are successfully completed. In general, the Chief Operating
Officer could be responsible to the National Intelligence Director for the
overall direction, operation, and management within the intelligence
community to improve its performance. These responsibilities include
implementing strategic goals, and assisting the National Intelligence
Director in promoting reform, measuring results, and other
responsibilities.

6GAO, Highlights of a GAO Roundtable: The Chief Operating Officer Concept:
A Potential Strategy to Address Federal Governance Challenges,
GAO-03-192SP (Washington, D.C.: Oct. 4, 2002).

Finally, there are also leadership continuity challenges that occur during
transitions between administrations, and in the Presidential appointment
process. For example, the 9/11 Commission noted that recent
administrations did not have their full leadership teams in place for at
least 6 months after the transitions occurred. The Commission recommended
that the disruption of national security policymaking during a change of
administrations be minimized as much as possible. The Comptroller General
suggests that one way to avoid disruption and to provide continuity during
transitions is that if the Congress creates Deputy or Assistant National
Intelligence Directors, to designate one of them as the Principal Deputy,
such as the Director of the Central Intelligence Agency (CIA), whose term
appointment, as previously discussed, would not coincide with the term of
the National Intelligence Director.

Using Performance Management Systems Is Another Key Practice to Help
Transform the Intelligence Community

A central theme of the 9/11 Commission report was that one of the major
challenges facing the intelligence community is moving from a culture of a
"need to know" to a "need to share." The Congress and the President are
separately considering a series of important structural and policy changes
that would facilitate this shift. The experiences of leading organizations
suggest that a performance management system can also be a part of the
solution. Senator Voinovich, at your request and others, we previously
identified leading performance management practices that should prove
helpful for intelligence agencies seeking to move to a culture of "need to
share" and thus improve their performance.7 The key practices are as
follows:

7GAO, Results-Oriented Cultures: Creating a Clear Linkage Between
Individual Performance and Organizational Success, GAO-03-488 (Washington,
D.C.: Mar. 14, 2003).

Figure 1: Key Practices for Effective Performance Management

1. Align individual performance expectations with organizational goals. An
explicit alignment helps individuals see the connection between their
daily activities and organizational goals.

2. Connect performance expectations to crosscutting goals. Placing an
emphasis on collaboration, interaction, and teamwork across organizational
boundaries helps strengthen accountability for results.

3. Provide and routinely use performance information to track
organizational priorities. Individuals use performance information to
manage during the year, identify performance gaps, and pinpoint
improvement opportunities.

4. Require follow-up actions to address organizational priorities. By
requiring and tracking follow-up actions on performance gaps,
organizations underscore the importance of holding individuals accountable
for making progress on their priorities.

5. Use competencies to provide a fuller assessment of performance.
Competencies define the skills and supporting behaviors that individuals
need to effectively contribute to organizational results.

6. Link pay to individual and organizational performance. Pay, incentive,
and reward systems that link employee knowledge, skills, and contributions
to organizational results are based on valid, reliable, and transparent
performance management systems with adequate safeguards.

7. Make meaningful distinctions in performance. Effective performance
management systems strive to provide candid and constructive feedback and
the necessary objective information and documentation to reward top
performers and deal with poor performers.

8. Involve employees and stakeholders to gain ownership of performance
management systems. Early and direct involvement helps increase employees'
and stakeholders' understanding and ownership of the system and belief in
its fairness.

9. Maintain continuity during transitions. Because cultural
transformations take time, performance management systems reinforce
accountability for change management and other organizational goals.

Source: GAO.

An effective performance management system is a vital tool for aligning
the organization with desired results and creating a "line of sight"
showing how team, unit, and individual performance can contribute to
overall organizational results. In addition, to be successful,
transformation efforts, such as the one envisioned for the intelligence
community, must have leaders, managers, and employees who are capable of
integrating and creating synergy among the multiple organizations
involved. A performance management system can help send unmistakable
messages about the behavior that the organization values and that support
the organization's mission and goals, as well as provide a consistent
message to employees about how they are expected to achieve results. Thus,
as transformation efforts are implemented, individual performance and
contributions are evaluated on competencies such as change management,

cultural sensitivity, teamwork, collaboration, and information sharing.
Leaders, managers, and employees who demonstrate these competencies are
rewarded for their successful contributions to the achievement of the
transformation process.

  Human Capital Flexibilities Are Also Essential Tools for Intelligence
  Community Transformation

Significant changes have been underway in the last 3 years regarding how
the federal workforce is managed. For example, the Congress passed
legislation providing certain governmentwide human capital flexibilities,
such as direct hire authority.8 In addition, individual agencies-such as
the National Aeronautical and Space Administration, the Department of
Defense (DOD), and DHS-received flexibilities intended to help them manage
their human capital strategically to achieve results. While many federal
agencies have received additional human capital flexibilities, others may
be both needed and appropriate for the intelligence and other selected
agencies. For example, the 9/11 Commission recommends rebuilding CIA's
analytical capabilities, enhancing the agency's human intelligence
capabilities, and developing a stronger language program. Human capital
flexibilities can help agencies like the CIA meet these critical human
capital needs.

Therefore, to further enable the intelligence agencies to rapidly meet
their critical human capital needs and workforce plans, the Comptroller
General suggests that Congress could consider, as necessary, legislation
granting selected agency heads the authority to hire a limited number of
positions for a stated period of time (e.g., up to 3 years) on a
noncompetitive basis. The Congress has passed legislation granting this
authority to the Comptroller General of the United States and it has
helped GAO address a range of critical needs in a timely, effective, and
prudent manner over many years. The Comptroller General was also provided
the authority to carry out early retirement offers which may be made to
any employee or group of employees based on a number of factors including
(1) geographic area, organizational unit, or occupational series or level;
or (2) skills, knowledge, or performance, which he suggests would further
assist intelligence agencies in planning and shaping their future
workforces. For GAO, the Comptroller General can deny any requests for
early retirement if he determines that granting them would jeopardize
GAO's ability to achieve its mission.

8GAO, Human Capital: Increasing Agencies' Use of New Hiring Flexibilities,
GAO-04959T (Washington, D.C.: July 13, 2004).

As the Congress considers reforms to the intelligence community's human
capital policies and practices, it should also consider whether agencies
have the necessary institutional infrastructure to effect these changes.
At a minimum, this infrastructure includes a human capital planning
process that integrates the agency's human capital policies, strategies,
and programs with its program goals, mission and desired outcomes; the
capabilities to effectively develop and implement a new human capital
system; and importantly, a performance management system with a set of
appropriate principles and safeguards-including reasonable transparency
and appropriate accountability mechanisms-to ensure the fair, effective,
credible, nondiscriminatory implementation and application of a new
system.

  FBI Is Using Strategic Human Capital Management to Transform and Meet Post
  9/11 Challenges

Human capital challenges are especially significant for the intelligence
organizations, such as the FBI, that are undergoing a fundamental
transformation in the aftermath of September 11, 2001. For the last 3
years, we have been monitoring the FBI's progress as it transforms itself
from its traditional crime enforcement mission to its post September 11
homeland security priorities-counterterrorism, counterintelligence, and
cyber crimes. In terms of human capital, this has meant major changes in
recruiting, training, and deploying FBI's staff resources. Specifically,
the 9/11 Commission recommends that the FBI create a specialized and
integrated national security workforce, consisting of agents, analysts,
linguists, and surveillance specialists who are recruited, trained,
rewarded, and retained to ensure the development of an institutional
culture with expertise in intelligence and national security. While the
FBI has made admirable progress on a number of these human capital fronts,
substantial challenges remain.9

Linchpins of any successful transformation are (1) a strategic plan to
guide an organization's mission, vision, and the steps necessary to
achieve its long-term goals; and (2) a strategic human capital plan linked
to the strategic plan that guides recruitment, hiring, training, and
retention decisions for staff with skills critical to the organization's
mission and goals. In March 2004, we reported that the FBI had completed
both of these

9GAO, FBI Transformation: Human Capital Strategies May Assist the FBI in
Its Commitment to Address Its Top Priorities, GAO-04-817T (Washington,
D.C.: June 3, 2004).

plans.10 With respect to strategic human capital planning, FBI has
developed a strategic human capital plan that contains many of the
principles that we have laid out for an effective human capital system.11
For example, it highlights the need for the FBI to fill identified skill
gaps, in such areas as language specialists and intelligence analysts, by
using various personnel flexibilities including recruiting and retention
bonuses.12

In addition, in the immediate aftermath of September 11, 2001, the FBI
undertook a variety of human capital-related initiatives to align with its
transformation efforts. These initiatives included realigning, retraining,
and hiring special agents and analysts with critical skills to address its
top priorities, and taking initial steps to revamp its performance
management system.

In relation to realigning resources to fit the new agency priorities, the
FBI has transferred agents from its drug, white-collar crime, and violent
crime programs to focus on counterterrorism and counterintelligence
priorities. This realignment of resources has permanently shifted 674
field agent positions from drug, white-collar, and violent crime program
areas to counterterrorism and counterintelligence since September 11,
2001. About 550 of these positions were drawn from the drug crime area.
Yet because of demands in the counterterrorism and counterintelligence
programs, the FBI has had a continuing need to temporarily redirect
special agent resources from traditional criminal investigative programs
to address its top priorities.13

In terms of retraining its existing staff, the FBI also revamped its
special agent training curriculum to enhance skills in counterterrorism
investigation techniques. The revised training for new agents was
instituted in April 2003 and by the end of that calendar year, it was
expected that

10GAO, FBI Transformation: FBI Continues to Make Progress in Its Efforts
to Transform and Address Priorities, GAO-04-578T (Washington, D.C.: Mar.
23, 2004).

11GAO, A Model of Strategic Human Capital Management, GAO-02-373SP
(Washington, D.C.: March 2002).

12GAO, Human Capital: Effective Use of Flexibilities Can Assist Agencies
in Managing Their Workforces, GAO-03-2 (Washington, D.C.: Dec. 6, 2002).

13GAO, FBI Transformation: Data Inconclusive on Effects of Shift to
Counterterrorism-Related Priorities on Traditional Crime Enforcement,
GAO-04-1036 (Washington, D.C.: Aug. 31, 2004).

agents transferring from more traditional crime areas to work in the
priority areas would have received specialized training. To enhance the
skills and abilities of FBI analysts, the FBI created the College of
Analytic Studies at the Quantico training facility in October 2001. This
program, with assistance from CIA personnel, provides training to both new
and inservice analysts in tools and techniques for both strategic and
technical analysis.

The FBI set ambitious goals for hiring in many specialty areas over the
last few years. While it has achieved success in some areas, such as
increasing the number of special agents hired with intelligence and
foreign language proficiency, achieving other hiring goals has been more
challenging. Specifically, the FBI has had some difficulty in retaining
and competing with other government agencies and the private sector for
intelligence analysts. These problems may be related to the truncated
career ladder for intelligence analysts at the FBI compared to the career
ladders for the same types of positions at other federal agencies. For
example, both the CIA and the National Security Agency (NSA) maintain a
career ladder for intelligence staff that includes both senior executive
(managerial) and senior level (nonmanagerial) positions. Although, the FBI
has actively moved towards establishing a GS-15 senior managerial level
position for its intelligence staff, this would still not create a level
playing field with the rest of the intelligence community that has the
authority to provide positions at the Senior Executive Service (SES)
level. Should the FBI decide to adopt senior managerial and SES positions
for its intelligence staff, the agency will need to develop and implement
a carefully crafted plan that includes specific details on how such an
intelligence career service would integrate into its strategic plan as
well as its strategic human capital plan, the expectations and
qualifications for the positions, and how performance would be measured.

As discussed previously, an effective performance management system is a
vital tool for aligning the organization with desired results and showing
how team, unit, and individual performance can contribute to overall
organizational results. As we have previously reported, the current FBI
system for rating agents and analysts-a pass/fail system-is inadequate to
achieve that needed linkage. A successful performance management system
should make meaningful distinctions in performance so that staff can
understand their role in relation to agency objectives. It should also map
a course of progress to improve performance so that it more closely aligns
with agency goals. The FBI has made progress in adjusting its performance
management system for senior executives to conform to the

performance management principles that I previously discussed. Although
FBI's human capital plan indicates that it is also moving in the direction
of changing the performance management system for agents and analysts, a
major effort will be needed before it is operational.

As we have highlighted, in recent years, the FBI has used a variety of
available human capital flexibilities, such as recruitment bonuses and
retention allowances, to help recruit and retain valuable staff resources.
As with any organization undergoing transformation and considering the use
of additional human capital strategies, the FBI would have to weigh all
options that are available to it before implementing a successful human
capital strategy, including using existing administrative flexibilities
and requesting new legislative alternatives. The FBI would also need to
ensure that it has the institutional infrastructure in place so that any
human capital flexibilities are used appropriately.

  Many Factors Must Be Considered in Approach to Government Security Clearance
  Process

The 9/11 Commission also raised concerns about minimizing national
security policymaking disruptions during the change of administrations by
accelerating the process for national security appointments. The
Commission recommended that a single federal agency should be responsible
for providing and maintaining security clearances and for ensuring uniform
security clearance standards, including maintaining a single
governmentwide database of clearance information, as a way to address this
concern. In prior work, we have found that many factors must be considered
in addressing the government security clearance process. These factors
include the personnel security clearance criteria and process, recent
actions that DOD has taken to consolidate investigative and adjudicative
functions, and existing impediments and internal control concerns for
security clearance programs.

All Security Clearances Are In considering ways in which to approach the
government's security Already Governed by the clearance process, it is
helpful to note that since 1997, all agencies have Same Criteria and
General been subject to a common set of personnel security investigative
standards

and adjudicative guidelines for determining whether service
members,Process government employees, industry personnel, and others are

eligible to receive a security clearance.14 Classified information is
categorized into three levels-top secret, secret, and confidential.15 The
expected damage to national defense or foreign relations that unauthorized
disclosure could reasonably be expected to cause is "exceptionally grave
damage" for top secret information, "serious damage" for secret
information, and "damage" for confidential information.

In addition, all agencies generally follow a similar clearance process.
DOD's process for determining eligibility is used here to illustrate the
stages required in making such a determination for federal agencies. We
are highlighting DOD's process because, as of September 30, 2003, DOD was
responsible for the clearances issued to approximately 2 million
personnel, including nearly 700,000 industry personnel who work on
contracts issued by DOD and 22 other federal agencies16 as well as staff
in the legislative branch of the federal government. (see fig. 2).

              Figure 2: DOD's Personnel Security Clearance Process

                                  Source: DOD.

14The White House, "Implementation of Executive Order 12968," Memorandum,
(Washington, D.C.: Mar. 24, 1997). This memorandum approves the
adjudication guidelines, temporary eligibility standards, and
investigative standards required by Executive Order 12968, Access to
Classified Information, (Aug. 2, 1995).

15Classification of National Security Information, 5 C.F. R. S:1312.4
(2003).

16GAO, DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce
Backlogs and Delays in Determining Security Clearance Eligibility for
Industry Personnel, GAO-04-632 (Washington, D.C.: May 26, 2004) for a
listing of the 22 agencies. DOD Regulation 5200.2-R, DOD Personnel
Security Program (Feb. 23, 1996) describes the clearance process for
legislative staff.

Recent Attempts to Consolidate Some Investigative and Adjudicative
Functions

In terms of centralizing personnel investigations, The National Defense
Authorization Act for Fiscal Year 2004 authorized an action that, if
taken, would result in the Office of Personnel Management (OPM) being
responsible for an estimated 80 percent of the personnel investigations
conducted for the federal government.17 The Act authorized the transfer of
DOD's personnel security investigative functions and 1,855 investigative
employees to OPM. OPM indicated that it will not accept the transfer at
least during fiscal year 2004 because of concerns about the financial risk
associated with the authorized transfer. DOD and OPM have, however, signed
a memorandum of understanding that, among other things, results in OPM
providing DOD investigative staff with training on OPM's investigative
procedures as well as training on and access to OPM's case management
system.

As for centralizing the adjudication steps in the clearance process, in
May 2004, we reported that DOD's Senior Executive Council was considering
the consolidation of the clearance adjudicative functions that two of
DOD's 10 central adjudication facilities perform.18 A DOD official told us
that the consolidation would provide greater flexibility in using
adjudicators to meet changes in the clearance approval workload and could
eliminate some of the time required to transfer cases between adjudication
facilities. A wider-ranging adjudicative initiative is also being
undertaken in DOD. When fully implemented, the Joint Personnel
Adjudication System (JPAS) is supposed to enhance DOD's adjudicative
capabilities by-among other things-consolidating information into a
DOD-wide security clearance data system (instead of maintaining the data
on 10 adjudication facility-specific systems), providing near real-time
input and retrieval of clearance-related information, and improving the
ability to monitor overdue reinvestigations and estimate the size of that
portion of delayed clearances. JPAS, identified as mission critical by the
DOD Chief Information Officer, was supposed to be implemented in fiscal
year 2001 and is now projected for full implementation sometime in fiscal
year 2004. Even though JPAS may consolidate adjudicative data on the
approximately 2 million clearances

17 Pub. L. 108-136 S: 906 (Nov. 24, 2003).

18GAO-04-632; GAO, DOD Personnel Clearances: DOD Needs to Overcome
Impediments to Eliminating Backlog and Determining Its Size, GAO-04-344
(Washington, D.C.: Feb. 9, 2004) lists DOD's current 10 central
adjudication facilities and the roles that each plays in awarding
clearances.

that DOD had on September 30, 2003, other agencies, such as the FBI,
maintain their own databases with adjudicative information.

Addressing Existing Impediments and Internal Control Concerns is Important
to Any Consolidation Decision

Regardless of the decision about whether or not to consolidate
investigative and adjudicative functions governmentwide, existing
impediments-such as the lack of a governmentwide database of clearance
information- hinder efforts to provide timely, high-quality clearance
determinations. I will discuss two of those major impediments-large
workloads and too few investigators, and two internal control issues. The
remainder of this section relies heavily on work that we conducted on
DOD's investigative and adjudicative functions because there is a dearth
of reports available on these functions in other federal departments and
agencies.

The large number of requests for security clearances for service members,
government employees, and industry personnel taxes a process that already
is experiencing backlogs and delays. In fiscal year 2004, GAO published
reports documenting the numbers of clearance requests and delays in
completing investigations by DOD (for service members, government
employees and industry personnel), OPM (for DOD and the Federal Air
Marshal Service), and the FBI (for state and local law enforcement
officials).19 In fiscal year 2003, DOD submitted over 775,000 requests for
investigations. The large number of investigative and adjudicative
workload requirements is also found in the form of a growing portion of
the requests requiring top secret clearances, in at least one segment of
the population. From fiscal year 1995 through fiscal year 2003, the
proportion of all requests requiring top secret clearances for industry
personnel grew from 17 to 27 percent. According to DOD, top secret
clearances take 8 times more investigative effort to complete and 3 times
more adjudicative effort to review than do secret clearances. In addition,
a top secret clearance must be renewed twice as often as a secret
clearance-every 5 years instead of every 10 years. The full effect of

19GAO-04-344; GAO-04-632; GAO, DOD Personnel Clearances: Preliminary
Observations Related to Backlogs and Delays in Determining Security
Clearance Eligibility for Industry Personnel, GAO-04-202T (Washington,
D.C.: May 6, 2004); GAO, Aviation Security: Federal Air Marshal Service Is
Addressing Challenges of Its Expanded Mission and Workforce, but
Additional Actions Needed, GAO-04-242 (Washington, D.C.: Nov. 19, 2003);
and GAO, Security Clearances: FBI Has Enhanced Its Process for State and
Local Law Enforcement Officials, GAO-04-596 (Washington, D.C.: Apr. 30,
2004).

requesting a top secret, rather than a secret clearance, thus is 16 times
the investigative effort and 6 times the adjudicative effort.

The limited number of investigative staff available to process requests
hinders efforts to issue timely clearances. According to a senior OPM
official, DOD and OPM together need roughly 8,000 full-time-equivalent
investigative staff to eliminate the security clearance backlogs and
deliver timely investigations to their customers. However, in our February
report, GAO estimated that DOD and OPM have around 4,200
full-time-equivalent investigative staff who are either federal employees
or contract investigators, slightly more than half as many as needed.20

Internal control concerns are also present with regard to personnel
security clearances. A 1999 GAO report documented problems with the
quality of DOD personnel security clearance investigations. The severity
of these problems led DOD to declare its investigations program a systemic
weakness under the Federal Managers' Financial Integrity Act.21 That
declaration has continued to be made each year in DOD's annual statement
of assurance. We continued to track these issues and in 2001, we
recommended DOD establish detailed documentation requirements to support
adjudicative decisions as a way to strengthen internal controls.22 Three
years earlier, the DOD Office of the Inspector General stated that no DOD
office is assigned the responsibility to ensure that the various
adjudication facilities consistently implement adjudicative policies and
procedures.

When OPM was privatizing its investigative function in 1996 to create the
company that still conducts the vast majority of OPM's investigations for
the federal government, we raised an internal control concern, namely that
OPM's contract with the newly created company would require the contractor
to conduct personnel security clearance investigations on its own
employees.23 This remains one area of concern because OPM officials

20GAO-04-344.

21GAO, DOD Personnel: Inadequate Personnel Security Investigations Pose
National Security Risks, GAO/NSIAD-00-12 (Washington, D.C.: Oct. 27,
1999).

22GAO, DOD Personnel: More Consistency Needed in Determining Eligibility
for Top Secret Security Clearances, GAO-01-465 (Washington, D.C.: Apr. 18,
2001).

23GAO, Privatization of OPM's Investigations Service, GAO/GGD-96-97R
(Washington, D.C.: Aug. 22, 1996).

told us in April 2003 that its contractors were still conducting the
investigations on its own personnel.

Conclusions	The 9/11 Commission recognized that fundamental changes in the
management of human capital in the intelligence and homeland security
communities will improve the efforts of these communities to effectively
carry out its fundamental mission-to gather and share intelligence that
will ultimately help to protect the American people.

Human capital considerations, such as the recruitment and retention of key
skills and competencies, performance incentives to share information, and
more flexible approaches to the management of human capital, are crucial
to the success of the intelligence community reforms envisioned by the
9/11 Commission, and agencies involved with the intelligence community
will need the most effective human capital systems to succeed in their
transformation efforts. Thus, strategic management of human capital is one
such reform critical to maximizing the performance of the intelligence
community.

Committed, sustained, highly qualified, and inspired leadership, and
persistent attention by all key parties to the successful implementation
of these reforms and organizational transformations will be essential, if
lasting changes are to be made and the challenges we are discussing today
are to be effectively addressed.

Chairman Voinovich and Members of the Subcommittee, this concludes my
prepared statement. I would be pleased to answer any questions you may
have.

Contacts and	For further information regarding this statement, please
contact J. Christopher Mihm, Managing Director, Strategic Issues, on (202)
512-6806

Acknowledgments	or at [email protected] or Eileen Larence, Acting Director,
Strategic Issues, at [email protected]. Individuals making key
contributions to this statement included Carole Cimitile, Dewi Djunaidy,
Jack Edwards, Laurie Ekstrand, Charles Johnson, Lisa Shames, Derek
Stewart, and Sarah Veale.

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