Homeland Security: DHS Needs to Improve Ethics-Related Management
Controls for the Science and Technology Directorate (22-DEC-05,
GAO-06-206).
The Department of Homeland Security's (DHS) Science and
Technology (S&T) Directorate was established to focus on areas
such as addressing countermeasures for biological threats. To do
this, it hired experts from the national laboratories under the
authority of the Intergovernmental Personnel Act (IPA). The
Directorate is organized into portfolios, led by portfolio
managers. Questions have been raised about potential conflicts of
interest for these individuals, since a portion of the
Directorate's research funds have gone to the national
laboratories. GAO was asked to examine (1) the management
controls established within the Directorate to help guard against
conflicts of interest for IPA portfolio managers; and (2) the
role of the IPA portfolio managers, particularly those from
national laboratories, in determining where research and
development projects were directed.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-206
ACCNO: A43817
TITLE: Homeland Security: DHS Needs to Improve Ethics-Related
Management Controls for the Science and Technology Directorate
DATE: 12/22/2005
SUBJECT: Accountability
Conflict of interests
Homeland security
Internal controls
Laboratories
Research and development
Research program management
Research programs
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GAO-06-206
* Report to the Ranking Minority Member, Committee on Homeland Security
and Governmental Affairs, United States Senate
* December 2005
* homeland security
* DHS Needs to Improve Ethics-Related Management Controls for the
Science and Technology Directorate
* Contents
* Results in Brief
* Background
* DHS's S&T Directorate Can Do More to Improve Its Management
Controls Related to Conflicts of Interest for Its IPA Portfolio
Managers
* IPA Portfolio Managers' Role in Determining Where R&D Projects
and Funds Were Directed Was Unclear
* Conclusions
* Recommendations for Executive Action
* Agency Comments and Our Evaluation
* DHS Research and Development Funding Distribution in Fiscal Year 2004
* Scope and Methodology
* Comments from the Department of Homeland Security
United States Government Accountability Office
Report to the Ranking Minority Member,
Committee on Homeland Security and Governmental Affairs, United States Senate
December 2005
HOMELAND SECURITY
DHS Needs to Improve Ethics-Related Management Controls for the Science and
Technology Directorate
a
HOMELAND SECURITY
DHS Needs to Improve Ethics-Related Management Controls for the Science
and Technology Directorate
What GAO Found
DHS's S&T Directorate is working to improve its management controls to
help guard against conflicts of interest for its IPA portfolio managers,
but it can do more. In the first few years of DHS's existence, the S&T
Directorate focused on the urgency of organizing itself to meet the
nation's homeland security research and development requirements, and had
few resources devoted to developing its management infrastructure,
including the management controls to guard against conflicts of interest.
In the past year, steps have been taken to improve these controls. For
example, in June 2005, DHS implemented a new process for hiring IPA
employees. Although the S&T Directorate is taking steps to improve its
ethics-related management controls, several conditions still need to be
addressed to better ensure that its IPA portfolio managers comply with the
conflict of interest laws. First, the process for determining where
research and development projects and funds are directed, including the
role of the IPA portfolio managers, has never been finalized. Second, the
S&T Directorate does not require documentation of how determinations are
made about where research and development projects and funds are directed.
Third, S&T Directorate officials are only now seeking waivers, where
appropriate, and considering whether to take other actions that would
allow IPA portfolio managers to participate in certain matters. Finally,
DHS officials told us that S&T Directorate employees, including those
hired under the IPA, are offered the same new employee and annual ethics
training as are all DHS employees. However, employees hired under the IPA
do not receive regular training that addresses their unique situation;
namely that they have an agreement for future employment with an entity
that may benefit from the S&T Directorate's funding.
The role of the IPA portfolio managers, five of whom came from the
national laboratories, in determining where research and development
projects and associated funds were directed was unclear. This was due to
several factors. First, as previously discussed, the S&T Directorate has
never finalized a standard process for determining where research and
development projects and funds are directed, or the decision-making role
of the IPA portfolio managers within such a process. Second, the extent of
the IPA portfolio managers' participation in making these determinations
was unclear because there was no documentary evidence of how these
determinations were actually made. Third, the testimonial evidence on the
extent of the IPA portfolio managers' involvement was inconsistent and, at
times, vague. Because we could not determine whether or not the IPA
portfolio managers participated "personally and substantially" in the
decision-making process, which is precluded by 18 U.S.C. S: 208, GAO
contacted the Acting Director of the Office of Government Ethics (OGE) in
September 2005. GAO suggested that OGE review this matter further in
conjunction with its planned ethics program review of DHS. In December
2005, OGE officials told us that they plan to examine, among other
matters, the transparency and accountability issues in DHS's ethics
program raised by our findings.
United States Government Accountability Office
Contents
Letter Results in Brief Background DHS's S&T 1 3 6
Directorate Can Do More to Improve Its 9 12
Management Controls Related to Conflicts 14 15
of Interest for Its IPA Portfolio Managers 15
IPA Portfolio Managers' Role in
Determining Where R&D Projects and Funds
Were Directed Was Unclear Conclusions
Recommendations for Executive Action
Agency Comments and Our Evaluation
Appendixes DHS Research and Development Funding
Appendix I: Distribution in Fiscal Year 2004 Scope and
Appendix II: Methodology Comments from the Department 18 19
Appendix III: of Homeland Security 21
Figures The S&T Directorate's Offices
Figure 1: and Overview of Their Functions
Figure 2: The S&T Directorate's R&D
Funding Obligations in Fiscal
Year 2004 6 18
Abbreviations
BTS Border and Transportation Security
DAEO Designated Agency Ethics Officer
DHS Department of Homeland Security
DOE Department of Energy
ERB Executive Review Board
FFRDC Federally Funded Research and Development Center
HSARPA Homeland Security Advanced Research Projects Agency
IPT Integrated Project Team
IPA Intergovernmental Personnel Act
OGC Office of General Counsel
OGE Office of Government Ethics
OPM Office of Personnel Management
ORD Office of Research and Development
PPB Office of Programs, Plans, and Budgets
R&D Research and Development
SED Systems Engineering and Development
S&T Science and Technology
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separately.
A
United States Government Accountability Office Washington, D.C. 20548
December 22, 2005
The Honorable Joseph I. Lieberman Ranking Minority Member Committee on
Homeland Security and Governmental Affairs United States Senate
Dear Senator Lieberman:
The Department of Homeland Security's (DHS) Science and Technology (S&T)
Directorate was established by the Homeland Security Act of 20021 to
coordinate the federal government's civilian efforts to identify and
develop countermeasures to chemical, biological, radiological, nuclear,
and other emerging terrorist threats on our nation. This activity was not
the previous responsibility of any one agency. The Office of Programs,
Plans, and Budget (PPB) was created within the S&T Directorate to
establish and oversee the priorities of DHS's research and development
activities. At the beginning of our review, PPB was organized into 18
portfolios, each focused on a particular discipline, such as addressing
countermeasures for biological threats and border and transportation
security.2 Each portfolio was headed by a portfolio manager who, according
to DHS, helped to establish the research and development needs and
priorities of their portfolios.
When the S&T Directorate began operating in March 2003, it hired
scientists, engineers, and experts in needed disciplines from federal
laboratories, universities, and elsewhere in the federal government under
authority provided by the Intergovernmental Personnel Act (IPA) of 1970.3
Portfolio managers hired under the IPA were brought to DHS from these
employers because of their expertise in the areas of greatest risk to the
nation's security. These managers were hired for a specified limited
period with the understanding that they would subsequently return to their
1 Pub. L. No. 107-296 S: 301, 116 Stat. 2135, 2163 (2002).
2 As of September 2005, there were 13 portfolios.
3 5 U.S.C. S:S: 3371-76. The IPA facilitates the temporary hiring of
skilled personnel or specialists to and from other federal entities, state
and local governments, colleges and universities, and Indian tribal
governments. Such assignments may be used to achieve objectives such as
assisting the transfer and use of new technologies. DHS hires IPAs under a
2-year agreement that can be renewed one time for 2 additional years,
consistent with Office of Personnel Management (OPM) regulations.
"home" institution. Seven of the 16 portfolio managers for the 18
portfolios were employed by DHS under the IPA. Five of these 7 employees
came from the national laboratories, which are owned by the Department of
Energy (DOE) and operated by private contractors, and the two others came
from a nonprofit organization and a federally funded research and
development center (FFRDC).4 You have raised questions about potential
conflicts of interest for these individuals, since a portion of the
Directorate's research funds have gone to these laboratories. In fiscal
year 2004, 23 percent of the S&T Directorate's $761 million in research
and development project funding obligations went to the national
laboratories. (Appendix I provides more detailed budgetary data).
IPA employees are generally subject to the same conflict of interest laws
and regulations as all other federal employees. One of these laws, Section
208 of Title 18 of the United States Code (18 U.S.C. S: 208), generally
precludes federal employees from personally and substantially
participating in decisions in which they have a financial interest,
including participating in decisions that affect an entity, such as the
national laboratories, with which they have an agreement for future
employment. However, the agency official responsible for hiring the
employee can grant a waiver of this law's application if the official
determines that the conflicting interest is not so substantial as to be
deemed likely to affect the integrity of the services the government may
expect. Further, the Office of Management and Budget (OMB) requires
agencies to establish a set of management controls.5 GAO issues standards
for internal control in the federal government,6 as required by the
Federal Managers' Financial Integrity Act of 1982,7 which provide the
overall framework for establishing and maintaining internal control and
for identifying and addressing major performance challenges and areas at
greatest risk for fraud, waste, abuse, and mismanagement.
As agreed with your office, we examined (1) the management controls that
have been established within DHS's S&T Directorate to help guard against
4 FFRDCs are nonprofit organizations that are generally financed on a
sole-source basis by federal agencies.
5 OMB Circular No. A-123 (June 1995). 6 GAO, Standards for Internal
Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.:
November 1999).
7 31 U.S.C. S: 3512(c).
Results in Brief
conflicts of interest for portfolio managers hired under the IPA, and (2)
the role of the IPA portfolio managers (particularly those from the
national laboratories) in determining where research and development (R&D)
projects and associated funds are directed.
To address our objectives, we reviewed DHS documentation of management
controls related to conflicts of interest and other relevant documents, as
well as its Web-based research and development process currently under
development. In addition, we reviewed ethics laws and regulations,
guidance on internal controls, and prior GAO and DHS Inspector General
work pertaining to DHS's S&T Directorate and ethics issues. We also
interviewed senior DHS officials, including the Assistant Secretary for
Programs, Plans, and Budgets for the S&T Directorate and DHS's Designated
Agency Ethics Officer (DAEO), as well as other officials in the S&T
Directorate, including the IPA portfolio managers. In addition, we
judgmentally selected two portfolios within the S&T Directorate, and
interviewed members of these portfolio teams, to examine in more detail
the existence of their process and management controls and compare any
differences in the application of such processes and controls. These
portfolios were: (1) the Biological Countermeasures portfolio, which is
the largest portfolio in the S&T Directorate and led by an IPA; and (2)
the Border and Transportation Security portfolio, a smaller portfolio led
by a career federal employee. We also met with the Acting Director of the
Office of Government Ethics (OGE) and her staff. OGE is the federal agency
responsible for overseeing the executive branch's ethics programs.
Appendix II contains more detailed information on our scope and
methodology.
We performed our work from September 2004 through December 2005 in
accordance with generally accepted government auditing standards.
DHS's S&T Directorate is working to improve its management controls to
help guard against conflicts of interest for employees hired under the
IPA, but it can do more. In the first few years of DHS's existence, the
S&T Directorate focused on the urgency of organizing itself to meet the
nation's homeland security research and development requirements, and had
few resources devoted to developing its management infrastructure,
including the management controls to guard against conflicts of interest.
However, in the past year, steps have been taken to improve these
controls. For example, in June 2005, DHS implemented a new process for
hiring IPA employees. Although DHS is taking steps to improve its
management controls, there is more the Directorate can do to better ensure
that its IPA portfolio managers comply with the conflict of interest laws.
First, the process for determining where R&D projects and funds are
directed, including the role of the IPA portfolio managers, has never been
finalized. Second, the S&T Directorate does not require documentation of
how determinations are made about where R&D projects and funds are
directed. Third, S&T Directorate officials are only now seeking waivers,
where appropriate, and considering whether to take other actions that
would allow IPA portfolio managers to participate in certain matters.
Finally, DHS officials told us that S&T Directorate employees, including
those hired under the IPA, are offered the same new employee and annual
ethics training as are all DHS employees. However, employees hired under
the IPA do not receive regular training that addresses their unique
situation; namely that they have an agreement for future employment with
an entity that may benefit from the S&T Directorate's funding.
The role of the IPA portfolio managers, five of whom were hired from the
national laboratories, in determining where research and development
projects and associated funds are directed was unclear. This was due to
several factors. First, as previously discussed, the S&T Directorate has
never finalized a standard process for determining where R&D projects and
funds are directed, or for the decision-making role of the IPA portfolio
managers within such a process. Second, the extent of the IPA portfolio
managers' participation in making the determinations was unclear because
there was no documentary evidence of how those determinations were
actually made. Finally, the testimony regarding the extent of the IPA
portfolio managers' involvement in the decision-making process was
inconsistent and, at times, vague. For example, one IPA portfolio manager
told us that he/she recused him/herself from any decision that may have
involved his/her national laboratory, although this portfolio manager
noted that he/she was present and "facilitated" the meetings when such
decisions were made. Other IPA portfolio managers told us that they
participated to varying degrees. However, because there was no
documentation of the decision-making process, we could not determine the
extent of the IPA portfolio managers' actual involvement on any particular
funding matter, or whether their involvement affected their national
laboratory. Because we could not determine whether or not the IPA
portfolio managers participated "personally and substantially" in the
decision-making process, we contacted the Acting Director of OGE in
September 2005, and suggested that OGE review this matter further in
conjunction with its planned ethics program review of DHS. In December
2005, OGE officials told us that they plan to examine, among other
matters, the transparency and accountability issues in DHS's ethics
program raised by our findings.
To help IPA portfolio managers comply with conflict of interest laws, we
are making recommendations that the Secretary of DHS direct the
Undersecretary for Science and Technology to work with DHS's DAEO and OGE
to establish additional ethics-related management controls for the S&T
Directorate by
o finalizing the R&D process;
o developing a system to document how decisions are made within the R&D
portfolio teams;
o determining whether waivers of 18 U.S.C. S: 208 are appropriate or
other actions are needed;
o providing regular ethics training for IPA portfolio managers; and
o establishing a monitoring and oversight program of ethics-related
management controls.
We provided a draft of this report to the Secretary of Homeland Security.
DHS concurred with our recommendations and noted several actions that they
plan to take. If implemented effectively, these actions would be
responsive to some of our recommendations. For example, the S&T
Directorate plans to (1) coordinate with the DAEO and OGE in seeking
waivers under 18 U.S.C. S: 208 for some of the IPAs in the S&T
Directorate;
(2) enhance its ethics-related training for IPAs; and (3) strengthen its
monitoring and oversight programs for ethics-related management controls.
Although DHS agreed with all of our recommendations, it believed that we
misstated the facts in asserting that IPA employees do not routinely
receive specific training regarding conflicts of interest. We revised the
report to indicate that the ethics training we believe is still needed
should focus on the application of the ethics statutes and regulations to
the unique financial relationship between the IPA portfolio managers and
their "home" institutions. Second, we are encouraged that the S&T
Directorate is seeking waivers under 18 U.S.C. S: 208 for some IPAs.
However, IPA portfolio managers continue to be vulnerable to violating the
conflict of interest laws because the S&T Directorate has not finalized
the process for determining where research and development projects and
funds are directed. DHS's comments are provided in appendix III. In
addition, we received technical comments from DHS, which we incorporated
as appropriate. We also provided a draft to OGE. On December 8, 2005, we
met with OGE officials, including the Deputy Director of the Office of
Agency Programs, who provided us with technical comments, which we
incorporated as appropriate.
The S&T Directorate consists of four offices responsible for managing and
Background
executing DHS's R&D programs: (1) the Office of Programs, Plans and
Budgets (PPB); (2) Office of Research and Development (ORD);
(3) Homeland Security Advanced Research Projects Agency (HSARPA); and (4)
Systems Engineering and Development (SED), as seen in figure 1 below.
Figure 1: The S&T Directorate's Offices and Overview of Their Functions
Source: DHS.
a On June 29, 2005, a Chief Financial Officer position was created for the
S&T Directorate to consolidate and execute budgetary planning. Because the
budgetary responsibility for the S&T Directorate was moved out of the
Office of Programs, Plans, and Budgets, its name was changed to the Office
of Programs, Plans and Requirements (PPR). This new position and name
change are not reflected in this figure.
In the first few years of DHS's existence, the S&T Directorate focused on
the urgency of organizing itself to meet the nation's homeland security
research and development requirements, and had few resources devoted to
developing its management infrastructure, including the management
controls to guard against conflicts of interest. In our 2004 report on
DHS's potential use of the national laboratories, we noted that when the
S&T Directorate began operating in March 2003, they sought and hired
scientists, engineers, and experts in needed disciplines from federal
laboratories, universities, and elsewhere in the federal government.8
These individuals were brought into the S&T Directorate to use their
knowledge in ways that would help the Directorate achieve its mission
quickly and effectively. DHS officials told us that these individuals came
to DHS out of a sense of urgency and motivated by a strong sense of
patriotism. Some of these scientists were hired from the national
laboratories, and they came with the understanding that they would return
to their laboratories following their time at DHS.
As part of their responsibilities, portfolio managers led and facilitated
Integrated Project Teams (IPT), which included representatives from ORD,
HSARPA, and SED.9 In addition to identifying R&D projects and budgets,
IPTs were responsible for determining which office (ORD, HSARPA, or SED)
within the S&T Directorate would be responsible for them. These
determinations were important because it influenced whether the project
and associated funds went to the public or private sector. According to a
March 2004 Office of Inspector General report,10 ORD generally executes
programs that involve the national laboratories and which the private
sector should not, could not, or would not perform. HSARPA generally
executes programs for which technology development involves the private
sector. SED generally executes programs employing proven technologies and
resulting in transition to operational systems.
As previously discussed, IPA employees are generally subject to the same
laws and regulations that govern the ethical conduct of other federal
employees. Section 208 of Title 18 of the United States Code, a criminal
statute, generally precludes federal employees from personally and
substantially participating in any particular matter that would have a
direct and predictable effect on their financial interests, or the
financial interest
8 GAO, 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).
9 For more information on the use of IPTs, see GAO, Best Practices: DOD
Teaming Practices Not Achieving Potential Results, GAO-01-510 (Washington,
D.C.: Apr. 10, 2001).
10 Department of Homeland Security Office of Inspector General, Survey of
the Science and Technology Directorate, OIG-04-24 (Washington, D.C.: March
2004).
of any organization attributable to them. An employee's participation is
"substantial" if their participation is meaningful to the matter. An
employee can be personally and substantially involved in a variety of
ways, including making a recommendation, rendering advice, or making a
decision on a particular matter. The law can be waived if the employee
first makes a full disclosure of the conflict of interest to the official
responsible for his or her appointment, "and receives in advance a written
determination made (i.e., waiver) by such official that the interest is
not so substantial as to be deemed likely to affect the integrity of the
services which the government may expect."11 Executive departments and
agencies are required to forward documentation of such waivers to OGE.12
Waivers cannot be granted to cover past activities. In addition to
avoiding conflicts of interest, executive branch employees must avoid even
the appearance of a conflict of interest. However, when there is potential
for such an appearance of a conflict, an employee can be granted an
"authorization" to work on a matter even in situations where a reasonable
person with knowledge of the relevant facts can question the employee's
impartiality in a matter.13
As mentioned earlier, OMB requires agencies to establish a set of
management controls and GAO issues standards for internal control in the
federal government.14 In addition, GAO developed the Internal Control
Management and Evaluation Tool15 to help managers and evaluators determine
how well an agency's internal control is designed and functioning and help
determine what, where, and how improvements, when needed, may be
implemented. The five standards for internal control are: control
environment, risk assessment, control activities, information and
communications, and monitoring. Two of these standards, control
environment and control activities, include key factors related to
conflicts of interest. If effectively implemented, these internal controls
can help to guard against employees participating in actions that present
a personal
11 18 U.S.C. S: 208(b)(1). 12 5 C.F.R. S: 2640.303. 13 5 C.F.R. S:
2635.502. Authorizations are based upon a determination "that the interest
of the
Government in the employee's participation outweighs the concern that a
reasonable person may question the integrity of the agency's programs and
operations."
14 GAO/AIMD-00-21.3.1. 15 GAO, Internal Control Management and Evaluation
Tool, GAO-01-1008G (Washington, D.C.: August 2001).
DHS's S&T Directorate Can Do More to Improve Its Management Controls Related
to Conflicts of Interest for Its IPA Portfolio Managers
conflict of interest. Examples of relevant key factors that address the
establishment and maintenance of an effective control environment of an
agency are:
o establishment and use of a formal code of conduct and other policies
communicating appropriate ethical and moral behavioral standards and
addressing acceptable operational practices and conflicts of interest;
o establishment of an ethical tone at the top of the organization and
communicated throughout the agency; and
* implementation of policies and procedures for hiring employees.
* Internal control activities are the policies, procedures,
techniques, and mechanisms that help ensure that management's
directives to mitigate identified risks are carried out. Examples
of relevant key factors that address internal control activities
are:
o existence of appropriate policies, procedures, techniques, and
mechanisms with respect to each of the agency's activities;
o providing appropriate training and other control activities to give
employees the tools they need to perform their duties and
responsibilities to meet the demands of changing organizational needs;
and
* documentation of transactions and other significant events is
complete and accurate and facilitates tracing the transaction or
event and related information from authorization and initiation,
through its processing, to after it is completed.
* DHS's S&T Directorate has implemented several management controls
to help its IPA portfolio managers comply with conflict of
interest laws and regulations. Most of these were implemented
during the course of our review. Since the S&T Directorate was
created in 2003, individuals employed in the S&T Directorate
under the IPA have completed an "assignment agreement", as
required by OPM. Having procedures in place for hiring employees
and implementing them is one aspect of an effective management
control environment. The assignment agreements include a section
on conflicts of interest and employee conduct. As part of the
assignment agreement, each applicant must acknowledge that:
o "applicable Federal, State or local conflict-of-interest laws have
been reviewed with the employee to assure that conflict-of-interest
situations do not inadvertently arise during this assignment"; and
o "the employee has been notified of laws, rules and regulations, and
policies on employee conduct which apply to him/her while on this
assignment."
We reviewed the IPA assignment agreements for all of the IPA portfolio
managers and found that the IPA portfolio managers acknowledged these
provisions.
The S&T Directorate's leadership took steps to establish an ethical tone
and communicate it through a March 15, 2004, memorandum from DHS's
Undersecretary for S&T to all S&T Directorate employees emphasizing that
they should strictly adhere to all applicable ethics laws. The memo
summarized ethics laws, called attention to the consequences of
noncompliance, provided points of contact for those with questions, and
explained that S&T employees "have the responsibility to be scrupulous in
complying with all applicable ethics laws." Further, the memo specifically
mentioned that employees hired under the IPA may not participate in
matters involving their "home" institution (which, in the S&T Directorate,
has often been a DOE national laboratory). The memo explained provisions
of 18 U.S.C. S: 208, stating that an employee may not participate
"personally and substantially" in a particular matter that may affect an
entity in which he has a financial interest and that "personal and
substantial participation can occur if the employee participates in a
decision, approval, disapproval, recommendation, investigation, or the
rendering of advice on the matter."
According to DHS's DAEO, the IPAs in the S&T Directorate were employed
before a process was in place to screen them for personal conflict of
interest issues. On June 30, 2005, the S&T Directorate issued new,
internal procedures for hiring employees under the IPA. These new
procedures outline the responsibilities of the parties involved in the
hiring process and detail the steps necessary to hire an IPA. These steps
include a preliminary review of financial disclosure forms by DHS's Office
of General Counsel (OGC) to determine whether conflicts of interest exist
based on the roles and responsibilities of the proposed position.
Along with these new hiring procedures, the S&T Directorate began
requiring applicants being considered under the IPA to complete written
disqualification statements meant to bar their involvement in any matter
that could reasonably be perceived to affect the interests of their
national laboratory or other employer. In addition, once hired, IPAs can
complete a memorandum that provides their supervisor with a written
recusal from "certain Government matters" that affect the institution to
which they will return after their employment at DHS, and allows them "to
describe the screening arrangement" they are implementing to ensure that
they comply with their "obligation to recuse." In this memorandum, the
employee then lists each asset, entity, or other interest that gives rise
to a disqualifying interest under 18 U.S.C. S: 208.
DHS officials told us that S&T Directorate employees, including those
hired under the IPA, are offered the same new employee and annual ethics
training as are all new DHS employees. Having training and orientation
programs for new employees, with ongoing training for all employees, are
key activities for establishing effective controls.16 On January 7, 2005,
the Assistant Secretary of PPB also held a mandatory meeting for all IPAs
in the S&T Directorate. S&T Directorate officials told us that this
meeting was called to discuss the ethics issues that apply specifically to
employees hired under the IPA, including the conflict of interest
statutes.
Other important management controls that could help ensure portfolio
managers comply with conflict of interest laws are not yet in place in the
S&T Directorate. Importantly, the process for determining where R&D
projects and funds are directed, including the role of the IPA portfolio
managers, has never been finalized. Establishment of a process for each
agency activity is one of the key factors for meeting internal control
standards. Though IPTs were created to help make this determination, as
previously discussed, we were told that each IPT worked differently and
there were no requirements to operate in the same way. In addition,
neither the S&T Directorate nor its draft process requires documentation
of how determinations are made about where R&D projects and funds are
directed.
Further, the S&T Directorate is only now seeking waivers, where
appropriate, and considering whether to grant authorizations or take other
actions for their portfolio managers hired under the IPA. As we discussed,
under 18 U.S.C. S: 208(b)(1), the official responsible for an employee's
16 For more on DHS's training program, see GAO, Department of Homeland
Security: Strategic Management of Training Important for Successful
Transformation, GAO-05-888 (Washington, D.C.: Sept. 23, 2005).
Page 11 GAO-06-206 Homeland Security
IPA Portfolio Managers' Role in Determining Where R&D Projects and Funds Were
Directed Was Unclear
appointment may grant a waiver in advance allowing participation in
certain matters if he or she makes a written determination that the
affected financial interest "is not so substantial as to be deemed likely
to affect the integrity" of the employee's services. In May 2005, an S&T
Directorate official stated to us that they first needed to "scrutinize
all of their positions to determine whether an actual or apparent conflict
requires such action." In August 2005, senior S&T officials told us that,
in conjunction with DHS's DAEO and OGE, they had begun the process of
determining whether to issue waivers to IPA portfolio managers. During our
exit briefing with DHS in September 2005, DHS officials indicated that one
option might be to not hire anyone for which a waiver may be needed. In
DHS's December 2005 letter to us commenting on our report, it noted that
the S&T Directorate is now seeking waivers for at least 6 of its IPAs.
Finally, IPA portfolio managers in the S&T Directorate are not routinely
offered specific training that focuses on the application of the ethics
statutes and regulations to the unique financial relationship between the
IPA portfolio managers and their "home" institution. The January 2005
meeting held with all IPAs in the S&T Directorate to discuss the specific
ethics issues related to their circumstances is not scheduled to be
repeated. Ensuring that management conveys the message on a periodic basis
that integrity and ethical values must not be compromised is part of
maintaining an effective control environment. Because of IPA portfolio
managers' ties to their "home" institution, and that their
responsibilities at DHS may involve issues that affect their "home"
institution, ensuring that these managers receive regular training that
targets the application of conflict of interest laws to IPAs may keep them
alert to those actions that could constitute a violation of such laws.
The recent changes and further improvements to the S&T Directorate's
ethics-related management controls are critical because we found that the
role of the IPA portfolio managers in determining where R&D projects and
associated funds were directed was unclear. This was due to several
factors, as discussed in more detail below.
First, the process that was to be followed by IPA portfolio managers when
determining where R&D projects and funds are directed, and the
decision-making role of the IPA portfolio managers within such a process,
has never been finalized. DHS provided us with a draft version of this
process as part of a Web-based tool. However, IPTs were not required to
follow this draft process and team members from the two IPTs that we
examined said that they were becoming familiar with the process. In this
draft, DHS stated that IPTs, facilitated by portfolio managers, were to
"decide" which office within the S&T Directorate would execute a project,
(i.e., ORD, HSARPA, or SED). The draft stated that if the members of the
IPT could not reach agreement, the project would be reviewed by the
Executive Review Board (ERB), which consisted of the Assistant Secretary,
Programs, Plans, and Budgets, and the Directors of SED, ORD, and HSARPA.
However, in September 2005, senior S&T Directorate officials told us that
the information regarding the decision-making role of the IPT in the draft
Web-based tool was inaccurate, indicating that IPTs can only make
recommendations to the ERB, but not a final decision. However, as we
noted, 18 U.S.C. S: 208 guards against "personal and substantial
participation" through various actions which include "decision" and
"recommendation."
Second, DHS officials, portfolio managers, and IPT members were unable to
provide us with any documentation, such as meeting minutes, to indicate
the actual role that the five IPA portfolio managers from the national
laboratories played in the decision-making process within the IPTs. Third,
the testimony regarding the extent of the IPA portfolio managers'
involvement in the decision-making process was inconsistent and, at times,
vague. For example, one IPA portfolio manager told us that he/she recused
himself/herself from any decision that may have involved his/her national
laboratory, although this manager noted that he/she was present and
"facilitated" the IPT meetings when such decisions were made. Other IPA
portfolio managers told us that they participated to varying degrees. For
example, one told us that he/she was involved in the IPT decisions
regarding which S&T Directorate office would execute a project only when
the other IPT members could not reach agreement. Another told us that
he/she participated in all IPT discussions that helped make this
determination. However, because there was no documentation of the
decision-making process, we could not determine the extent of the IPA
portfolio managers' actual involvement on any particular funding matter,
or whether their involvement affected their "home" institution, such as a
national laboratory.
In March 2005, we discussed our review with OGE to obtain their views on
the ethics issues, both in general and as they may specifically apply to
the S&T Directorate. During these discussions, OGE officials told us that
they planned to begin their first audit of DHS's ethics program in late
2005. Because we could not determine whether or not the IPA portfolio
managers participated "personally and substantially" in the
decision-making process,
Conclusions
however, we contacted the Acting Director of OGE in September 2005 and
suggested that OGE review this matter further in conjunction with its
planned ethics program review of DHS. In December 2005, OGE officials told
us that they plan to examine, among other matters, the transparency and
accountability issues in DHS's ethics program raised by our findings.
In the first few years of its existence, the S&T Directorate focused on
rapidly organizing itself to meet the nation's homeland security R&D
requirements. During this time, DHS had few resources devoted to
developing the S&T Directorate's management infrastructure, including
management controls to guard employees against conflicts of interest.
Although the S&T Directorate has recently implemented management controls
to help protect against conflicts of interest, and is currently
considering others, more needs to be done. In the absence of a process for
deciding what entities will implement R&D projects, the role that IPA
portfolio managers played has been inconsistent and the potential exists
that they may have unknowingly violated conflict of interest laws. By
developing and carrying out a process to decide which office will execute
a project, and clearly defining the roles and responsibilities of those
involved in the process, the S&T Directorate may help its IPA portfolio
managers avoid such situations in the future. In addition, documenting how
the decisions are made while implementing this process may help protect
both DHS and its employees if questions are raised.
Ensuring that the S&T Directorate continues to have access to the best
personnel with needed expertise is important to the success of DHS's
mission. The IPA provides the S&T Directorate with a mechanism to hire
some of these people. However, because IPA portfolio managers have an
arrangement for future employment with an entity that could benefit from
the S&T Directorate's work, determining whether (1) waivers of the
conflict of interest laws are appropriate, (2) IPA portfolio managers
should be authorized to work on these issues regardless of any appearance
of a conflict, or (3) DHS should take other steps to facilitate the use of
their expertise to achieve the S&T Directorate's mission, could help
ensure that these valuable employees are protected against violating
conflict of interest laws.
Further, once hired, IPA employees must understand how the ethics laws
address their unique situations; namely, that they have an agreement for
future employment with an entity that stands to benefit from the S&T
Directorate's funding. Regular training for IPA portfolio managers that
targets the conflict of interest laws could help them understand what
actions are not permitted.
Finally, to help ensure that DHS's ethics-related management controls are
implemented and working in a satisfactory manner, it is critical that DHS
establish a monitoring and oversight program. Such a monitoring mechanism
will allow the S&T Directorate to assess its ethics-related management
controls in order to facilitate awareness and mitigation of risk in DHS,
while providing a greater degree of impartiality and integrity.
To help IPA portfolio managers comply with the conflict of interest law,
we
Recommendations for
are recommending that the Secretary of Homeland Security direct the
Undersecretary of the S&T Directorate to improve the S&T Directorate's
management controls related to potential conflicts of interest by
o finalizing the S&T Directorate's R&D process and defining and
standardizing the role of the IPA portfolio managers in this process;
o developing a system to document how decisions are made within the
IPTs;
o determining, in consultation with DHS's DAEO and OGE, whether waivers
of 18 U.S.C. S: 208 or authorizations related to the appearance of a
conflict of interest are appropriate, or other actions are needed;
o providing regular ethics training for IPA portfolio managers that
focuses on the application of the ethics statutes and regulations to
their unique financial situation; and
o establishing a monitoring and oversight program of ethics-related
management controls.
Agency Comments and Our Evaluation
We provided a draft of this report to the Secretary of Homeland Security.
DHS concurred with our recommendations and noted some actions that they
plan to take. If implemented effectively, these actions would be
responsive to some of our recommendations. For example, the S&T
Directorate plans to (1) coordinate with the DAEO and OGE in seeking
waivers under 18 U.S.C. S: 208 for some of the IPAs in the S&T
Directorate;
(2) enhance its ethics-related training for IPAs; and (3) strengthen its
monitoring and oversight programs for ethics-related management controls.
Although DHS agreed with all of our recommendations, it believed that we
misstated the facts in asserting that IPA employees do not routinely
receive specific training regarding conflicts of interest. We revised the
report to indicate that the ethics training we believe is still needed
should focus on the application of the ethics statutes and regulations to
the unique financial relationship between the IPA portfolio managers and
their "home" institutions. Second, we are encouraged that the S&T
Directorate has reviewed the individual circumstances of all of the IPAs
in the S&T Directorate and is seeking waivers under 18 U.S.C. S: 208 for
at least six of these individuals. However, as stated in our report, the
S&T Directorate has not finalized the process for determining where
research and development projects and associated funds are directed, nor
has it defined and standardized the role of the IPA portfolio managers in
this process. Further, the ability of IPA portfolio managers themselves to
influence or control where projects and funds are directed has been
inconsistent and, at times, vague within the S&T Directorate. Thus, IPA
portfolio managers continue to be vulnerable to violating the conflict of
interest laws. DHS's comments are provided in appendix III. In addition,
we received technical comments from DHS, which we incorporated as
appropriate.
We also provided a draft to OGE. On December 8, 2005, we met with OGE
officials, including the Deputy Director of the Office of Agency Programs,
who provided us with technical comments, which we made as appropriate.
We are sending copies of this report to the Secretary of Homeland Security
and other interested parties. In addition, this report is available at no
charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any further questions about this report, please
contact me at (202) 512-6806 or [email protected]. Major contributors to
this report included Ben Crawford, Terry Draver, John Krump, James Lager,
Andrea Levine, Sarah Veale, and Michael Volpe.
George H. Stalcup Director, Strategic Issues Appendix I
DHS Research and Development Funding Distribution in Fiscal Year 2004
In fiscal year 2004, the most recent year in which the Science and
Technology (S&T) Directorate could provide us with detailed breakdowns of
its obligated funds, about 41 percent of the $761 million obligated for
its research and development (R&D) funding was distributed to Department
of Energy and federal laboratories (mostly the Office of Research and
Development's programs) and about 40 percent to the private sector (mostly
the Homeland Security Advanced Research Projects Agency's programs), as
seen in figure 2 below.
Figure 2: The S&T Directorate's R&D Funding Obligations in Fiscal Year 2004
Private sector $305,764,511
1%
Other federal agencies$7,444,371
7%
Universities$54,539,534
All other a$86,859,463
Federal labsb$134,402,675
DOE labs$172,242,463
Source: DHS.
Note: This chart is presented for background purposes only; therefore we
did not assess the reliability of the data.
a Includes Federally Funded Research and Development Centers, nonprofits,
etc.
b Includes DHS-funded laboratories.
Appendix II
Scope and Methodology
The objectives of our review were to examine (1) the management controls
that have been established within the Department of Homeland Security's
(DHS) Science and Technology (S&T) Directorate to help guard against
conflicts of interest for portfolio managers hired under the
Intergovernmental Personnel Act (IPA), and (2) the role of the IPA
portfolio managers (particularly those from the national laboratories) in
determining where research and development (R&D) projects and associated
funds are directed.
To address our objectives, we analyzed DHS documentation of management
controls related to conflicts of interest and other relevant documents.
These documents included such materials as agency directives, official
memos, human capital procedures, fiscal years 2007-2011 Planning,
Programming, and Budgeting Cycle guidance, DHS reports and testimony to
Congress, and IPA agreement forms for the Directorate's employees hired
under the IPA. In addition, we reviewed the most current, but incomplete,
draft of an electronic version of the Research, Development, Testing and
Evaluation process to be used by the S&T Directorate. We reviewed relevant
laws and regulations, including the Homeland Security Act of 2002, Title
18 U.S.C. Section 208(a); (b); and 5 C.F.R. pt. 2635. In addition, we used
GAO's Standards for Internal Control in the Federal Government and
Internal Control Management and Evaluation Tool. We also reviewed prior
work from DHS's Office of the Inspector General (OIG) and GAO on the DHS
S&T Directorate and ethics-related issues.
We interviewed officials in the S&T Directorate, including the Deputy
Secretary for S&T and head of Programs, Plans, and Budgets (PPB); Director
of the Office of Research and Development (ORD); Acting Director of the
Homeland Security Advanced Research Projects Agency (HSARPA); S&T
portfolio managers, five of whom were employed by DHS on IPA agreements
from the national laboratories; and the human capital director for S&T. We
did not interview the Director of Systems, Engineering, and Development
(SED) because SED works with mature technologies at or near the deployment
stage, rather than technologies needing R&D by an entity like the national
laboratories. More specifically, we examined the role of the IPA portfolio
managers from the national laboratories in determining where R&D projects
and associated funds were directed during the period from December 2004
through May 2005. In addition, we interviewed DHS's Designated Agency
Ethics Officer, attorneys in DHS's General Counsel's Office, and DHS's
OIG.
Appendix II Scope and Methodology
We judgmentally selected two portfolios within the S&T Directorate to
examine in more detail the existence of their process and management
controls and compare any differences in the application of such processes
and controls. These portfolios were: (1) the Biological Countermeasures
portfolio, which is the largest portfolio in the S&T Directorate and is
run by an IPA; and (2) the Border and Transportation Security (BTS)
portfolio, a smaller portfolio managed by a career federal employee. We
interviewed the members of these Integrated Project Teams, which included
representatives of PPB, HSARPA, ORD and SED. In addition, we reviewed the
fiscal years 2004 and 2005 Execution Plans for the Biological
Countermeasures portfolio, the fiscal year 2004 Execution Plan for the BTS
portfolio, and the fiscal year 2004 BTS portfolio funding allocations by
type of entity. (e.g., national laboratory, university, private industry,
etc.)
We also met with the Acting Director of the Office of Government Ethics
(OGE) and her staff to discuss the ethics issues we were reviewing at DHS.
OGE exercises leadership in the executive branch to prevent conflicts of
interest on the part of government employees and to resolve those
conflicts of interest that do occur. The responsibilities of the Director
of OGE include, among other things, consulting with agency ethics
counselors and other responsible officials regarding the resolution of
conflict of interest problems in individual cases, and ordering corrective
action on the part of agencies and employees which the Director deems
necessary.
Written comments from DHS are included in appendix III. We performed our
work from September 2004 through December 2005 in accordance with
generally accepted government auditing standards.
Appendix III
Comments from the Department of Homeland Security
Appendix III Comments from the Department of Homeland Security Appendix
III Comments from the Department of Homeland Security Appendix III
Comments from the Department of Homeland Security
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