Homeland Security: Overview of Department of Homeland Security	 
Management Challenges (20-APR-05, GAO-05-573T). 		 
                                                                 
The Department of Homeland Security (DHS) plays a key role in	 
coordinating the nation's homeland security efforts with	 
stakeholders in the federal, state, local, and private sectors.  
While GAO has conducted numerous reviews of specific DHS	 
missions, such as border and transportation security and	 
emergency preparedness, this testimony addresses overall DHS	 
management issues. This testimony addresses (1) why GAO 	 
designated DHS's transformation as a high-risk area; and (2) the 
specific management challenges facing DHS.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-573T					        
    ACCNO:   A21982						        
  TITLE:     Homeland Security: Overview of Department of Homeland    
Security Management Challenges					 
     DATE:   04/20/2005 
  SUBJECT:   Accountability					 
	     Agency missions					 
	     Counterterrorism					 
	     Department of Homeland Security			 
	     Emergency preparedness				 
	     Federal agency reorganization			 
	     General management reviews 			 
	     Homeland security					 
	     Human capital					 
	     Information technology				 
	     Internal controls					 
	     National preparedness				 
	     Program management 				 
	     Risk management					 
	     Strategic planning 				 
	     Transportation security				 
	     Research and development				 
	     Procurement planning				 
	     Financial management				 
	     GAO High Risk Series				 
	     National Strategy for Homeland Security		 

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GAO-05-573T

United States Government Accountability Office

GAO	Testimony before the Subcommittee on Management, Integration, and
Oversight,

Committee on Homeland Security, House of Representatives

For Release on Delivery

Expected at 10:00 a.m. EDT HOMELAND SECURITY

Wednesday, April 20, 2005

       Overview of Department of Homeland Security Management Challenges

Statement of Norman J. Rabkin
Managing Director, Homeland Security and Justice

GAO-05-573T

[IMG]

April 2005

HOMELAND SECURITY

Overview of Department of Homeland Security Management Challenges

  What GAO Found

GAO designated DHS's transformation as a high-risk area in 2003, based on
three factors. First, DHS faced enormous challenges in implementing an
effective transformation process, developing partnerships, and building
management capacity because it had to transform 22 agencies into one
department. Second, DHS faced a broad array of operational and management
challenges that it inherited from its component legacy agencies. Finally,
DHS's failure to effectively address its management challenges and program
risks could have serious consequences for our national security. Overall,
DHS has made some progress, but significant management challenges remain
to transform DHS into a more efficient organization while maintaining and
improving its effectiveness in securing the homeland. Therefore, DHS's
transformation remains a high-risk area.

DHS faces a number of management challenges to improve its ability to
carry out its homeland security missions. Among these challenges are

o  providing focus for management efforts,

o  monitoring transformation and integration,

o  improving strategic planning,

o  managing human capital,

o  strengthening financial management infrastructure,

o  establishing an information technology management framework,

o  managing acquisitions, and

o  coordinating research and development.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to appear before this subcommittee to address
management challenges facing the Department of Homeland Security (DHS).
The department plays a major role in the protection of the homeland
against terrorist and other threats. In addition to managing its own
affairs, the department also has a key role in implementing the National
Strategy for Homeland Security and coordinating the larger homeland
security efforts of the entire nation, to include other stakeholders in
the federal, state, local, and private sectors. While GAO has conducted
numerous reviews of specific DHS mission areas- including border and
transportation security, information analysis and infrastructure
protection, emergency preparedness and response, and defending against
catastrophic threats-my statement is limited to overall management issues.
These generally cut across many if not all of the DHS agencies and mission
areas. In my testimony today, I will address two topics:

o  Why has GAO designated DHS's transformation as a high-risk area?

o  What specific management challenges does the department face?

This testimony continues GAO's long-standing efforts to provide Congress
with information on homeland security strategies and programs. In February
of last year, we testified on the desired characteristics of national
strategies, and whether various strategies-including the National Strategy
for Homeland Security-contained those desired characteristics.1 In March
of last year, we summarized strategic homeland security recommendations by
GAO and selected congressionally chartered commissions.2 In July of last
year, we reported on GAO recommendations to DHS and the department's
progress in implementing such recommendations.3 In January of this year,
we provided a comprehensive report on DHS and other federal agency efforts
and challenges related to

1GAO, Combating Terrorism: Evaluation of Selected Characteristics in
National Strategies Related to Terrorism, GAO-04-408T (Washington, D.C.:
Feb. 3, 2004).

2GAO, Homeland Security: Selected Recommendations from Congressionally
Chartered Commissions and GAO, GAO-04-591 (Washington, D.C.: Mar. 31,
2004).

3GAO, Status of Key Recommendations GAO Has Made to DHS and Its Legacy
Agencies, GAO-04-865R (Washington, D.C.: July 2, 2004).

  Summary

implementing the National Strategy for Homeland Security.4 And just last
month in March, we reported on DHS progress in management integration.5
Together, these baseline efforts are intended to aid congressional
oversight in assessing the effectiveness of federal homeland security
activities.

My comments are based on our wide-ranging, completed, and ongoing work,
and our institutional knowledge of homeland security and various
government organizational and management issues. We conducted our work in
accordance with generally accepted government auditing standards.

GAO designated DHS's transformation as high-risk in January 2003, based on
three factors. First, DHS faced enormous challenges in implementing an
effective transformation process, developing partnerships, and building
management capacity because it had to transform 22 agencies into one
department. Second, DHS faced a broad array of operational and management
challenges that it inherited from its component legacy agencies. Finally,
DHS's failure to effectively address its management challenges and program
risks could have serious consequences for our national security. As we
reported earlier this year, the implementation and transformation of DHS
remains high-risk.6 Overall, DHS has made some progress, but significant
challenges remain to transform DHS into a more effective organization with
robust planning, management, and operations while maintaining and
improving readiness for its highly critical mission to secure the
homeland. Failure to effectively carry out its mission continues to expose
the nation to potentially serious consequences.

DHS faces a number of specific management challenges to improving its
ability to carry out its homeland security missions. Among these
challenges are ensuring departmentwide focus on management issues through
the establishment of a Chief Operating Officer or Chief Management Officer
position; coordinating its varied management

4GAO, Homeland Security: Agency Plans, Implementation, and Challenges
Regarding the National Strategy for Homeland Security, GAO-05-33
(Washington, D.C.: Jan. 14, 2005).

5GAO, Department of Homeland Security: A Comprehensive and Sustained
Approach Needed to Achieve Management Integration, GAO-05-139 (Washington,
D.C.: Mar. 16, 2005).

6 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan.
2005).

processes, systems, and people through the development of an overarching
management integration; improving strategic planning; effectively managing
strategic human capital; strengthening its financial management
infrastructure; developing a comprehensive strategic management framework
that addresses key information technology disciplines; properly managing
acquisitions; and coordinating research and development among its
components and with other entities.

                                   Background

In an effort to increase homeland security following the September 11,
2001, terrorist attacks on the United States, President Bush issued the
National Strategy for Homeland Security in July 2002 and signed
legislation creating DHS in November 2002.7 The strategy set forth the
overall objectives, mission areas, and initiatives to prevent terrorist
attacks within the United States, reduce America's vulnerability to
terrorism, and minimize the damage and assist in the recovery from attacks
that may occur. The strategy also called for the creation of DHS. The
department, which began operations in March 2003, represented a fusion of
22 federal agencies to coordinate and centralize the leadership of many
homeland security activities under a single department.

Although the National Strategy for Homeland Security indicated that many
federal departments (and other nonfederal stakeholders) will be involved
in homeland security activities, DHS has the dominant role in implementing
the strategy. The strategy identified six mission areas and 43
initiatives.8 DHS was designated the lead federal agency for 37 of the 43
initiatives.9 In addition, DHS had activities underway in 40 of the 43
initiatives.10 In addition, DHS has the dominant share of homeland
security funding. Figure 1 shows the proposed fiscal year 2006 homeland
security

7Homeland Security Act of 2002, Pub. L. No. 107-296 (Nov. 25, 2002).

8The six mission areas are Intelligence and Warning, Border and
Transportation Security, Domestic Counterterrorism, Protecting Critical
Infrastructures and Key Assets, Defending Against Catastrophic Threats,
and Emergency Preparedness and Response. Each of these has several
initiatives. For example, under the Border and Transportation Security
mission area, the initiatives include ensuring accountability in border
and transportation security, creating smart borders, and reforming
immigration services.

9The strategy itself, or subsequent Homeland Security Presidential
Directives, designated lead agencies for most of the initiatives. In some
cases, agencies shared leadership.

10For a more complete analysis of the strategy's mission areas,
initiatives, lead agencies, and implementation, see GAO-05-33.

funding for federal departments and agencies, with DHS constituting about
55 percent of the total.

Figure 1: Proposed Fiscal Year 2006 Homeland Security Funding by
Department

Source: GAO, based on OMB, Analytical Perspectives, Budget of the United
States Government, Fiscal Year 2006.

Notes: Budget authority in millions of dollars.

"All other agencies" includes the Departments of Agriculture ($704
million), Veterans Affairs ($299 million), Transportation ($192 million),
Commerce ($183 million), and Treasury ($111 million), as well as the
National Science Foundation ($344 million), National Aeronautics and Space
Administration ($205 million), Environmental Protection Agency ($184
million), Social Security Administration ($178 million), General Services
Administration ($80 million), U.S. Army Corps of Engineers ($72 million),
and several smaller agencies. Numbers may not total to 100 because of
rounding.

GAO Designated DHS's Transformation As High-Risk

The November 2002 enactment of legislation creating DHS represented a
historic moment of almost unprecedented action by the federal government
to fundamentally transform how the nation protects itself from
terrorism.11 Rarely in the country's past had such a large and complex
reorganization of government occurred or been developed with such a
singular and urgent purpose. This represented a unique opportunity to
transform a disparate group of agencies with multiple missions, values,
and cultures into a strong and effective cabinet department whose goals
are to, among other things, protect U.S. borders, improve intelligence and
information sharing, and prevent and respond to potential terrorist
attacks. Together with this unique opportunity, however, came a
significant risk to the nation that could occur if the department's
implementation and transformation was not successful.

GAO designated DHS's transformation as high-risk in January 2003based on
three factors. 12 First, DHS faced enormous challenges in implementing an
effective transformation process, developing partnerships, and building
management capacity because it had to effectively combine 22 agencies with
an estimated 170,000 employees specializing in various disciplines-
including law enforcement, border security, biological research, computer
security, and disaster mitigation-into one department. Second, DHS faced a
broad array of operational and management challenges that it inherited
from its component legacy agencies. In fact, many of the major components
that were merged into the new department, including the Immigration and
Naturalization Service, the Transportation Security Administration,
Customs Service, Federal Emergency Management Agency, and the Coast Guard,
brought with them at least one major problem such as strategic human
capital risks, information technology management challenges, or financial
management vulnerabilities, as well as an array of program operations
challenges and risks. Finally, DHS's national security mission was of such
importance that the failure to effectively address its management
challenges and program risks could have serious consequences on our
intergovernmental system, our citizen's health and safety, and our
economy. Overall, our designation of DHS's transformation as a high-risk
area and its inclusion on the 2003 High-Risk List was due to the failure
to transform the diverse units into a single,

11Pub. L. No. 107-296 (Nov. 25, 2002).

12GAO, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: Jan.
2003); and Major Management Challenges and Programs Risks: Department of
Homeland Security, GAO-03-102 (Washington, D.C.: Jan. 2003).

efficient, and effective organization would have dire consequences for our
nation.

Since our 2003 designation of DHS's transformation as high-risk, DHS
leadership has provided a foundation for maintaining critical operations
while undergoing transformation. DHS has worked to protect the homeland
and secure transportation and borders, funded emergency preparedness
improvements and emerging technologies, assisted law enforcement
activities against suspected terrorists, and issued its first strategic
plan. According to DHS's performance and accountability report for fiscal
year 2004 and updated information provided by DHS officials, the
department has accomplished the following activities as part of its
integration efforts:

                                       0M

                                       0M

                                     0M 0M

reduced the number of financial management service centers from 19 to 8,

consolidated acquisition support for 22 legacy agencies within 8 major
procurement programs,

consolidated 22 different human resources offices to 7, and

consolidated bank card programs from 27 to 3.

DHS Management Challenges

As described in the next section, despite real and hard-earned progress,
DHS still has significant challenges to overcome in all of its management
areas. It is because of these continuing challenges that we continue to
designate the implementation and transformation of DHS as high-risk.13

DHS faces a number of management challenges to improving its ability to
carry out its homeland security missions. Among these challenges, which
are discussed in more detail in the following sections, are

o  providing focus for management efforts,

o  monitoring transformation and integration,

o  improving strategic planning,

o  managing human capital,

o  strengthening financial management infrastructure,

13GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan
2005).

o  establishing an information technology management framework,

o  managing acquisitions, and

o  coordinating research and development.

                              Providing Focus for
                               Management Efforts

One challenge that DHS faces is to provide focus on management efforts.
The experience of successful transformations and change management
initiatives in large public and private organizations suggests that it can
take 5 to 7 years until such initiatives are fully implemented and
cultures are transformed in a substantial manner. Because this timeframe
can easily outlast the tenures of managers, high-performing organizations
recognize that they need to have mechanisms to reinforce accountability
for organization goals during times of leadership transition.

Focus on management efforts needs to be provided at two levels of
leadership. The first level is that of the political appointees in top
leadership positions. These leaders are responsible for both mission and
management support functions. Although DHS has been operating about 2
years, it has had two Secretaries, three Deputy Secretaries, and
additional turnover at the Undersecretary and Assistant Secretary levels.
The problem of turnover in top leadership is not unique to DHS. The
average tenure of political leadership in federal agencies-slightly less
than 3 years for the period 1990-2001-and the long-term nature of change
management initiatives can have critical implications for the success of
those initiatives. The frequent turnover of the political leadership has
often made it difficult to obtain the sustained and inspired attention
required to make needed changes. Similarly, the recent turnover in DHS's
top leadership raises questions about the department's ability to provide
the consistent and sustained senior leadership necessary to achieve
integration over the long term.

Another level for focus on management efforts is those leaders responsible
for day-to-day management functions. As we have reported, a Chief
Operating Officer (COO)/Chief Management Officer (CMO) may effectively
provide the continuing, focused attention essential to successfully
completing these multiyear transformations in agencies like DHS.14 At

14On September 9, 2002, GAO convened a roundtable of government leaders
and management experts to discuss the COO concept and how it might apply
within selected federal departments and agencies. See GAO, 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).

DHS, we have reported that the COO/CMO concept would provide the
department with a single organizational focus for the key management
functions involved in the business transformation of the department, such
as human capital, financial management, information technology,
acquisition management, and performance management, as well as for other
organizational transformation initiatives.15 We have also recently
testified that a COO/CMO can effectively provide the continuing, focused
attention essential to successfully complete the implementation of DHS's
new human capital system, a large-scale, multiyear change initiative.16

The specific implementation of a COO/CMO position must be determined
within the context of the particular facts, circumstances, challenges and
opportunities of each individual agency. As the agency is currently
structured, the roles and responsibilities of the Under Secretary for
Management contain some of the characteristics of a COO/CMO for the
department. According to Section 701 of the Homeland Security Act, the
Under Secretary for Management is responsible for the management and
administration of the Department in such functional areas as budget,
accounting, finance, procurement, human resources and personnel,
information technology, and communications systems.17 In addition, the
Under Secretary is responsible for the transition and reorganization
process and to ensure an efficient and orderly transfer of functions and
personnel to the Department, including the development of a transition
plan.

Monitoring Transformation While the protection of the homeland is the
primary mission of the

and Integration 	department, critical to meeting this challenge is the
integration of DHS's varied management processes, systems, and people-in
areas such as

15GAO, The Chief Operating Officer Concept and its Potential Use as a
Strategy to Improve Management at the Department of Homeland Security,
GAO-04-876R (Washington, D.C.: June 28, 2004).

16GAO, Human Capital: Observations on Final DHS Human Capital Regulations,
GAO-05-391T (Washington, D.C.: March 2, 2005), and GAO, Human Capital:
Preliminary Observations on Final Department of Homeland Security Human
Capital Regulations, GAO-05-320T (Washington, D.C.: Feb. 10. 2005).

17Other responsibilities of the Under Secretary for Management under
section 701 include financial management, procurement, human resources and
personnel, information technology and communications systems, facilities
and property management, security, performance measurements, grants and
other assistance management programs, internal audits, and maintenance of
immigration statistics.

information technology, financial management, procurement, and human
capital-as well as in its administrative services. The integration of
these various functions is being executed through DHS's management
integration initiative. The success of this initiative is important since
the initiative provides critical support for the total integration of the
department, including its operations and programs, to ultimately meet its
mission of protecting the homeland. Last week, we released a report on
DHS's management integration efforts to date as compared against selected
key practices consistently found to be at the center of successful mergers
and transformations.18

Overall, we found that while DHS has made some progress in its management
integration efforts, it has the opportunity to better leverage this
progress by implementing a comprehensive and sustained approach to its
overall integration efforts. First, key practices show that establishing
implementation goals and a timeline is critical to ensuring success and
could be contained in an overall integration plan for a merger or
transformation. DHS has issued guidance and plans to assist its
integration efforts, on a function-by-function basis (information
technology and human capital, for example); but it does not have such a
comprehensive strategy to guide the management integration departmentwide.
Specifically, DHS still does not have a plan that clearly identifies the
critical links that must occur across these functions, the necessary
timing to make these links occur, how these critical interrelationships
will occur, and who will drive and manage them.

Second, it is important to dedicate a strong and stable implementation
team for the day-to-day management of the transformation, a team vested
with the necessary authority and resources to help set priorities, make
timely decisions, and move quickly to implement decisions. In addition,
this team would ensure that various change initiatives are sequenced and
implemented in a coherent and integrated way. DHS is establishing a
Business Transformation Office, reporting to the Under Secretary for
Management, to help monitor and look for interdependencies among the
individual functional integration efforts. However, this office is not
currently responsible for leading and managing the coordination and
integration that must occur across functions not only to make these

18GAO, Department of Homeland Security: A Comprehensive and Sustained
Approach Needed to Achieve Management Integration, GAO-05-139 (Washington,
D.C.: Mar. 16, 2005).

individual initiatives work but also to achieve and sustain the overall
management integration of DHS.

To address this challenge, we recommended, and DHS agreed, that it should
develop an overarching management integration strategy and provide it's
recently established Business Transformation Office with the authority and
responsibility to serve as a dedicated integration team and also help
develop and implement the strategy.

Improving Strategic Planning

Effective strategic planning is another challenge for DHS. We have
previously identified strategic planning as one of the critical success
factors for new organizations. This is particularly true for DHS, given
the breadth of its responsibility and need to clearly identify how
stakeholders' responsibilities and activities align to address homeland
security efforts. Without thoughtful and transparent planning that
involves key stakeholders, DHS may not be able to implement its programs
effectively. In 2004, DHS issued its first departmentwide strategic plan.
We have evaluated DHS's strategic planning process, including the
development of its first departmentwide strategic plan, and plan to
release a report on our findings within a few weeks. This report will
discuss (1) the extent to which DHS's planning process and associated
documents address the required elements of the Government Performance and
Results Act of 1993 (GPRA) and reflect good strategic planning practices
and (2) the extent to which DHS's planning documents reflect both its
homeland security and nonhomeland security mission responsibilities.

Managing Human Capital 	Another management challenge faced by DHS is how
to manage its human capital. Our work in identifying key practices for
implementing successful mergers and transformations indicates that
attention to strategic human capital management issues should be at the
center of such efforts. DHS has been given significant authority to design
a new human capital system free from many of the government's existing
civil service requirements, and has issued final regulations for this new
system. We have issued a

series of reports on DHS's efforts to design its human capital system.19
First, we found that the department's efforts to design a new human
capital system was collaborative and facilitated the participation of
employees from all levels of the department, and generally reflected
important elements of effective transformations. We recommended that the
department maximize opportunities for employees' involvement throughout
the design process and that it place special emphasis on seeking the
feedback and buy-in of front line employees in the field. Second, we found
that DHS's human capital management system, as described in the recently
released final regulations, includes many principles that are consistent
with proven approaches to strategic human capital management. For example,
many elements for a modern compensation system--such as occupational
cluster, pay bands, and pay ranges that take into account factors such as
labor market conditions-are to be incorporated into DHS's new system.
However, these final regulations are intended to provide an outline and
not a detailed, comprehensive presentation of how the new system will be
implemented. Thus, DHS has considerable work ahead to define the details
of the implementation of its system, and understanding these details is
important to assessing the overall system.20

Strengthening Financial Management Infrastructure

DHS faces significant financial management challenges. Specifically, it
must address numerous internal control weaknesses, meet the mandates of
the DHS Financial Accountability Act,21 and integrate and modernize its
financial management systems, which individually have problems and
collectively are not compatible with one another. Overcoming each of these
challenges will assist DHS in strengthening its financial management

19GAO, Human Capital: Preliminary Observations on Proposed DHS Human
Capital Regulations, GAO-04-479T (Washington, D.C.: February 25, 2003);
Posthearing Questions Related to Proposed Department of Homeland Security
(DHS) Human Capital Regulations, GAO-04-570R (Washington, D.C.: March 22,
2004); Additional Posthearing Questions Related to Proposed Department of
Homeland Security (DHS) Human Capital Regulations, GAO-04-617R
(Washington, D.C.: April 30, 2004); Human Capital: DHS Faces Challenges in
Implementing Its New Personnel System, GAO-04-790 (Washington, D.C.: June
18, 2004); and Human Capital: DHS Personnel System Design Effort Provides
for Collaboration and Employee Participation, GAO-03-1099 (Washington,
D.C.: September 30, 2003).

20GAO, Human Capital: Preliminary Observations on Final Department of
Homeland Security Human Capital Regulations, GAO-05-320T (Washington,
D.C.: Feb. 10, 2005).

21Pub. L. No. 108-330 (Oct. 16, 2004).

environment, improving the quality of financial information available to
manage the department day to day, and obtaining an unqualified opinion on
its financial statements.

DHS's independent auditors were unable to issue an opinion on any of the
department's financial statements for fiscal year 2004. This was a
substantial setback in DHS's financial management progress, compounded by
continued challenges in resolving its internal control weaknesses. The
number of material internal control weaknesses at the department has
increased from 7 as of September 30, 2003 to 10 as of September 30, 2004.
With the passage of the Department of Homeland Security Financial
Accountability Act (the Accountability Act), DHS is now subject to the
Chief Financial Officers Act of 1990 (the CFO Act)22 and the Federal
Financial Management Improvement Act of 1996 (FFMIA).23 The Accountability
Act also requires that in fiscal year 2005 the Secretary of Homeland
Security include an assertion on internal controls over financial
reporting at the department, and in fiscal year 2006 requires an audit of
internal controls over financial reporting. We will continue to monitor
the steps DHS is taking to meet the requirements of the Accountability Act
as part of our audit of the consolidated financial statements of the
United States government.

We reported in July 2004 that DHS continues to work to reduce the number
of financial management service providers and to acquire and deploy an
integrated financial enterprise solution.24 At that time, DHS reported
that it had reduced the number of financial management service providers
for the department from the 19 providers at the time DHS was formed to 10.
DHS planned to consolidate to 7 providers. Additionally, DHS hired a
contractor to deploy an integrated financial enterprise solution. This is
a costly and time consuming project and we have found that similar
projects have proven challenging for other federal agencies.

22Pub. L. No. 101-576 (Nov. 15, 1990).

23Division A, Section 101(f), Title VIII, of Public Law 104-208 is
entitled the Federal Financial Management Improvement Act of 1996. FFMIA
requires the major departments and agencies covered by the CFO Act to
implement and maintain financial management systems that comply
substantially with (1) federal financial management systems requirements,
(2) applicable federal accounting standards, and (3) the U.S. Government
Standard General Ledger at the transaction level.

24GAO, Financial Management: Department of Homeland Security Faces
Significant Financial Management Challenges, GAO-04-774 (Washington: D.C.:
July 19, 2004).

We will therefore continue to monitor DHS's progress on overcoming this
serious challenge.

Establishing an Information Technology Management Framework

DHS has recognized the need for a strategic management framework that
addresses key information technology disciplines, and has made a
significant effort to make improvements in each of these disciplines. For
example, DHS is implementing its information technology (IT) investment
management structure, developing an enterprise architecture, and has begun
IT strategic human capital planning. However, much remains to be
accomplished before it will have fully established a departmentwide IT
management framework. To fully develop and institutionalize the management
framework, DHS will need to strengthen strategic planning, develop the
enterprise architecture, improve management of systems development and
acquisition, and strengthen security. To assist DHS, we have made numerous
recommendations, including (1) limiting information technology investments
until the department's strategic management framework is completed and
available to effectively guide and constrain the billions of dollars that
DHS is spending on such investments; (2) taking appropriate steps to
correct any limitations in the Chief Information Officer's ability to
effectively support departmentwide missions; and (3) ensuring the
department develops and implements a well-defined enterprise architecture
to guide and constrain business transformation and supporting system
modernization. The development of this framework is essential to ensuring
the proper acquisition and management of key DHS programs such as U.S.
Visitor and Immigrant Status Indicator Technology (US-VISIT), Automated
Commercial Environment, and Secure Flight.25 To this end, we have recently
reported on key management challenges and weaknesses for each of the
programs that an effective

25For information about the challenges these programs face, see GAO,
Homeland Security: Some Progress Made, but Many Challenges Remain on U.S.
Visitor and Immigrant Status Indicator Technology Program, GAO-05-202
(Washington, D.C.: Feb. 23, 2005); Information Technology: Customs
Automated Commercial Environment Program Processing, but Need for
Management Improvements Continues, GAO-05-267 (Washington, D.C.: Mar. 14,
2005); and Aviation Security: Secure Flight Development and Testing under
Way, but Risks Should Be Managed as System Is Further Developed,
GAO-05-356 (Washington, D.C.: Mar. 28, 2005).

DHS-wide framework for managing systems investments would be instrumental
in addressing.26

Managing Acquisitions

Our work has indicated that managing acquisitions is also a major
management challenge for DHS. The department faces the challenge of
structuring its acquisition organization so that its various procurement
organizations are held accountable for complying with procurement policies
and regulations and ensuring that taxpayer dollars are well-spent. In
addition, the department has in place a number of large, complex, and
high-cost acquisition programs, such as US-VISIT and the Coast Guard's
Deepwater program, which will need to be closely managed to ensure that
they receive the appropriate level of oversight and that acquisition
decisions are made based on the right level of information. For example,
we reported in March 2004 that the Deepwater program needed to pay more
attention to management and contractor oversight in order to avoid cost
overruns.27 We have also reported on contract management problems at the
former Immigration and Naturalization Service, now a part of DHS, and
TSA.28 We will issue a report at the end of the this month that addresses
(1) areas where DHS has been successful in promoting collaboration among
its various organizations, (2) areas where DHS still faces challenges in
integrating the acquisition function, and (3) the department's progress in
implementing an effective review process for its major, complex
investments.

Coordinating Research and DHS also faces management challenges in
coordinating research and

Development 	development (R&D). Our work has recently found that DHS has
not yet completed a strategic plan to identify priorities, goals,
objectives, and policies for the R&D of homeland security technologies and
that additional challenges remain in its coordination with other federal
agencies. Failure to complete a strategic plan and to fully coordinate its
research efforts

26GAO, Department of Homeland Security: Formidable Information and
Technology Management Challenge Requires Institutional Approach,
GAO-05-702 (Washington, D.C.: Aug. 27, 2004).

27GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.: Mar. 9, 2004).

28GAO, Contract Management: INS Contracting Weaknesses Need Attention from
the Department of Homeland Security, GAO-03-799 (Washington, D.C.: Jul.
25, 2003) and Transportation Security Agency: High-Level Attention Needed
to Strengthen Acquisition Function, GAO-04-544 (Washington, D.C.: May 28,
2004).

may limit DHS's ability to leverage resources and could increase the
potential for duplication of research. In addition, DHS faces challenges
with regard to its use of DOE laboratories. These challenges include the
development of a better working relationship through better communication
and the development of clear, well-defined criteria for designating the
DOE laboratories to receive the majority of DHS's R&D funding. Moreover,
DHS faces the challenge of balancing the immediate needs of the users of
homeland security technologies with the need to conduct R&D on advanced
technologies for the future.29

Similarly, conducting R&D on technologies for detecting, preventing, and
mitigating terrorist threats is vital to enhancing the security of the
nation's transportation system. In our report on the Transportation
Security Administration's (TSA) and DHS's transportation security R&D
programs, we found that although TSA and DHS have made some efforts to
coordinate R&D with each other and with other federal agencies, both their
coordination with the Department of Transportation (DOT) and their
outreach to the transportation industry have been limited.30 For example,
officials from the modal administrations of DOT, which continue to conduct
some transportation security R&D, said they had not provided any input
into TSA's and DHS's transportation security R&D project selections.
Consequently, DOT's and the transportation industry's security R&D needs
may not be adequately reflected in TSA's and DHS's R&D portfolios.
Therefore, we recommend that TSA and DHS (1) develop a process with DOT to
coordinate transportation security R&D, such as a memorandum of agreement
identifying roles and responsibilities and designating agency liaisons and
(2) develop a vehicle to communicate with the transportation industry to
ensure that its R&D security needs have been identified and considered.
DHS generally concurred with our report and its recommendations.

29GAO, Homeland Security: DHS Needs a Strategy to Use DOE's Laboratories
for Research on Nuclear, Biological, and Chemical Detection and Response
Technologies, GAO-04-653 (Washington, D.C.: May 24, 2004).

30GAO, Transportation Security R&D: TSA and DHS Are Researching and
Developing Technologies, but Need to Improve R&D Management, GAO-04-890
(Washington, D.C.: Sep. 30, 2004).

  Importance of Focusing on Management Issues

Given the dominant role that DHS plays in securing the homeland, it is
critical that DHS be able to ensure that its management systems are
operating as efficiently and effectively as possible. While it is
understood that a transformation of this magnitude takes time and that
DHS's immediate focus has been on its homeland security mission, we see
the need for DHS to increase its focus on management issues. This is
important not only to DHS itself, but also to the nation's homeland
security efforts, because, in addition to managing its own organization,
DHS plays a larger role in managing homeland security and in coordinating
with the activities of other federal, state, local, and private
stakeholders. This larger DHS role presents its own unique challenges.

o  	For example, DHS faces the challenge of clarifying the role of
government versus the private sector. In April 2002, we testified that the
appropriate roles and responsibilities within and between the levels of
governments and with the private sector are evolving and need to be
clarified.31 New threats are prompting a reassessment and shifting of
long-standing roles and responsibilities. These shifts have been occurring
on a piecemeal and ad hoc basis without the benefit of an overarching
framework and criteria to guide the process.

o  	As another example, DHS faces a challenge in determining how federal
resources are allocated to non-federal stakeholders. We have long
advocated a risk management approach to guide the allocation of resources
and investments for improving homeland security.32 Additionally, OMB has
identified various tools, such as benefit-cost analysis, it considers
useful in planning such as capital budgeting and regulatory
decisionmaking.33 DHS must develop a commonly accepted framework and
supporting tools to inform cost allocations in a risk management process.
Although OMB asked the public in 2002 for suggestions on how to adjust
standard tools to the homeland security setting,34 a vacuum currently
exists in which benefits of homeland

31GAO, Homeland Security: Responsibility and Accountability for Achieving
National Goals, GAO-02-627T (Washington, D.C.: Apr. 11, 2002).

32GAO, Homeland Security: Key Elements of a Risk Management Approach,
GAO-02-150T (Washington, D.C.: Oct. 12, 2001); and Homeland Security: A
Risk Management Approach Can Guide Preparedness Efforts, GAO-02-208T
(Washington, D.C.: Oct. 31, 2001).

33OMB Circulars A-11 and A-94.

34OMB, 2003 Report to Congress on Combating Terrorism (Washington, D.C.:
Sept. 2003).

security investments are often not quantified and almost never valued in
monetary terms.35

o  	As a final example, DHS faces a challenge in sharing information among
all stakeholders. DHS has initiatives underway to enhance information
sharing (including the development of a homeland security enterprise
architecture to integrate sharing between federal, state, and local
authorities). However, our August 2003 report noted that these
initiatives, while beneficial for the partners, presented challenges
because they (1) were not well coordinated, (2) risked limiting
participants' access to information, and (3) potentially duplicated the
efforts of some key agencies at each level of government.36 We also found
that despite various legislation, strategies, and initiatives, federal
agencies, states, and cities did not consider the information sharing
process to be effective.

A well-managed DHS will be needed to meet these larger homeland security
challenges. As DHS continues to evolve, integrate its functions, and
implement its programs, we will continue to review its progress and
provide information to Congress for oversight purposes.

  GAO Contacts and Staff Acknowledgments

Mr. Chairman, this concludes my prepared statement. I will now be pleased
to respond to any questions that you or other members of the subcommittee
have.

For further information about this testimony, please contact Norman J.
Rabkin at 202-512-8777.

Other key contributors to this statement were Stephen L. Caldwell, Wayne
A. Ekblad, Carole J. Cimitile, Ryan T. Coles, Tammy R. Conquest, Benjamin
C. Crawford, Heather J. Dunahoo, Kimberly M. Gianopoulos, David B.
Goldstein, Randolph C. Hite, Robert G. Homan, Casey L. Keplinger, Eileen
R. Larence, Michele Mackin, Lisa R. Shames, and Sarah E. Veale.

35OMB Circular A-11.

36GAO, Homeland Security: Efforts to Improve Information Sharing Need to
be Strengthened, GAO-03-760 (Washington, D.C.: Aug. 27, 2003).

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