DOD Personnel Clearances: New Concerns Slow Processing of	 
Clearances for Industry Personnel (17-MAY-06, GAO-06-748T).	 
                                                                 
The Department of Defense (DOD) is responsible for about 2	 
million active personnel security clearances. About one-third of 
the clearances are for industry personnel working on contracts	 
for DOD and more than 20 other executive agencies. Delays in	 
determining eligibility for a clearance can heighten the risk	 
that classified information will be disclosed to unauthorized	 
sources and increase contract costs and problems attracting and  
retaining qualified personnel. Long-standing delays in completing
hundreds of thousands of clearance requests and numerous	 
impediments that hinder DOD's ability to accurately estimate and 
eliminate its clearance backlog led GAO to declare DOD's	 
personnel security clearance program a high-risk area in January 
2005. This testimony presents GAO's (1) preliminary observations 
from its ongoing review of the timeliness and completeness of	 
clearances, (2) concerns about the upcoming expiration of an	 
executive order that has resulted in high level commitment to	 
improving the governmentwide clearance process, and (3) views on 
factors underlying DOD's decision to stop accepting clearance	 
requests for industry personnel.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-748T					        
    ACCNO:   A54160						        
  TITLE:     DOD Personnel Clearances: New Concerns Slow Processing of
Clearances for Industry Personnel				 
     DATE:   05/17/2006 
  SUBJECT:   Eligibility determinations 			 
	     Executive orders					 
	     Interagency relations				 
	     Internal controls					 
	     Personnel security clearance programs		 
	     Personnel security policies			 
	     Security clearances				 
	     Security clearance backlogs			 
	     Timeliness 					 

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GAO-06-748T

     

     * Background
     * Summary
     * Preliminary Observations from GAO's Ongoing Audit Suggests A
     * Expiration of Executive Order Could Slow Improvements in Cle
     * Unexpected Volume of Clearance Requests and Funding Constrai
     * Concluding Observations
     * Staff Contact and Acknowledgments
     * Related GAO Products
          * Order by Mail or Phone

Testimony

Before the Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia, Committee on Homeland Security
and Governmental Affairs, U.S. Senate

United States Government Accountability Office

GAO

For Release on Delivery Expected at 2:30 p.m. EDT

Wednesday, May 17, 2006

DOD PERSONNEL CLEARANCES

New Concerns Slow Processing of Clearances for Industry Personnel

Statement of Derek B. Stewart, Director Defense Capabilities and
Management

GAO-06-748T

Chairman Voinovich and Members of the Subcommittee:

I am pleased to be here today to discuss the Department of Defense's (DOD)
personnel security clearance program and problems related to clearances
for industry personnel. Since declaring DOD's program a high-risk area in
January 2005, we have testified before this Subcommittee three times on
security clearance-related issues. Before providing my observations about
the current problems in the security clearance process, I would like to
provide some background to (1) give a general context for understanding
clearances and describe the importance of industry personnel to our
national security, (2) discuss how clearance problems can negatively
affect national security, and (3) provide information about several recent
events affecting the overall status of DOD's personnel security clearance
program.

                                   Background

For over 2 decades, we have reported on problems with DOD's personnel
security clearance program as well as the financial costs and risks to
national security resulting from these problems (see Related GAO Reports
at the end of this statement). For example, at the turn of the century, we
documented problems such as incomplete investigations, inconsistency in
determining eligibility for clearances, and a backlog of overdue clearance
reinvestigations that exceeded 500,000 cases.1 More recently in 2004, we
identified continuing and new impediments hampering DOD's clearance
program and made recommendations for increasing the effectiveness and
efficiency of the program.2 Also in September 2004 and June and November
2005, we testified before this Subcommittee on clearance-related problems
faced governmentwide, DOD-wide, and for industry personnel in particular.3

1 GAO, DOD Personnel: More Consistency Needed in Determining Eligibility
for Top Secret Security Clearances, GAO-01-465 (Washington, D.C.: Apr. 18,
2001); GAO, DOD Personnel: More Actions Needed to Address Backlog of
Security Clearance Reinvestigations, GAO/NSIAD-00-215 (Washington, D.C.:
Aug. 24, 2000); and GAO, DOD Personnel: Inadequate Personnel Security
Investigations Pose National Security Risks, GAO/NSIAD-00-12 (Washington,
D.C.: Oct. 27, 1999).

2 GAO, DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce
Backlogs and Delays in Determining Security Clearance Eligibility for
Industry Personnel, GAO-04-632 (Washington, D.C.: May 26, 2004); and GAO,
DOD Personnel Clearances: DOD Needs to Overcome Impediments to Eliminating
Backlog and Determining Its Size, GAO-04-344 (Washington, D.C.: Feb. 9,
2004).

A critical step in the federal government's efforts to protect national
security is to determine whether an individual is eligible for a personnel
security clearance. Specifically, an individual whose job requires access
to classified information must undergo a background investigation and
adjudication (determination of eligibility) in order to obtain a
clearance. As with federal government workers, the demand for personnel
security clearances for industry personnel has increased during recent
years. Additional awareness of threats to our national security since
September 11, 2001, and efforts to privatize federal jobs during the last
decade are but two of the reasons for the greater number of industry
personnel needing clearances today. As of September 30, 2003, industry
personnel held about one-third of the approximately 2 million DOD-issued
clearances. DOD's Office of the Under Secretary of Defense for
Intelligence has overall responsibility for DOD clearances, and its
responsibilities also extend beyond DOD. Specifically, that office's
responsibilities include obtaining background investigations and
adjudicating clearance eligibility for industry personnel in more than 20
other federal agencies,4 as well as the clearances of staff in the federal
government's legislative branch.

3 GAO, DOD Personnel Clearances: Government Plan Addresses Some
Longstanding Problems with DOD's Program, But Concerns Remain, GAO-06-233T
(Washington, D.C.: Nov. 9, 2005); GAO, DOD Personnel Clearances: Some
Progress Has Been Made but Hurdles Remain to Overcome the Challenges That
Led to GAO's High-Risk Designation, GAO-05-842T (Washington, D.C.: June
28, 2005); and GAO, Intelligence Reform: Human Capital Considerations
Critical to 9/11 Commission's Proposed Reforms, GAO-04-1084T (Washington,
D.C.: Sept. 14, 2004).

Problems in the clearance program can negatively affect national security.
For example, delays reviewing security clearances for personnel who are
already doing classified work can lead to a heightened risk of disclosure
of classified information. In contrast, delays in providing initial
security clearances for previously non cleared personnel can result in
other negative consequences, such as additional costs and delays in
completing national security-related contracts, lost-opportunity costs,
and problems retaining the best qualified personnel.

Long-standing delays in completing hundreds of thousands of clearance
requests for servicemembers, federal employees, and industry personnel as
well as numerous impediments that hinder DOD's ability to accurately
estimate and eliminate its clearance backlog led us to declare the program
a high-risk area in January 2005. The 25 areas on our high-risk list at
that time received their designation because they are major programs and
operations that need urgent attention and transformation in order to
ensure that our national government functions in the most economical,
efficient, and effective manner possible.5

4 We identified 22 other agencies in GAO-04-632. Executive Order No.
10865, Safeguarding Classified Information Within Industry, Feb. 20, 1960,
which was amended by Executive Order No. 12829, National Industrial
Security Program, Jan. 6, 1993, authorizes DOD to reach agreement with
other federal departments and agencies to extend its regulations
concerning authorizations for access to classified information by
industry. The agencies that have entered into agreements with DOD for
security services under the National Industrial Security Program are the
(1) National Aeronautics and Space Administration, (2) Department of
Commerce, (3) General Services Administration, (4) Department of State,
(5) Small Business Administration, (6) National Science Foundation, (7)
Department of Treasury, (8) Department of Transportation, (9) Department
of the Interior, (10) Department of Agriculture, (11) Department of Labor,
(12) Environmental Protection Agency, (13) Department of Justice, (14)
Federal Reserve System, (15) U.S. Government Accountability Office
(formerly U.S. General Accounting Office), (16) U.S. Trade Representative,
(17) U.S. International Trade Commission, (18) U.S. Agency for
International Development, (19) Nuclear Regulatory Commission, (20)
Department of Health and Human Services, (21) Department of Homeland
Security, and (22) Department of Education. The Department of Energy and
the Central Intelligence Agency are signatories of the National Industrial
Security Program Operating Manual and thus have reciprocity with DOD under
provisions of the manual. Three federal agencies (the Department of
Energy, the Central Intelligence Agency, and Nuclear Regulatory
Commission) also may grant security clearances to industry personnel who
work on national security-related programs.

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

Shortly after we placed DOD's clearance program on our high-risk list, a
major change in DOD's program occurred. In February 2005, DOD transferred
its personnel security investigations functions and about 1,800
investigative positions to the Office of Personnel Management (OPM). Now,
DOD obtains nearly all of its clearance investigations from OPM,6 which is
currently responsible for 90 percent of the personnel security clearance
investigations in the federal government.7 DOD retained responsibility for
adjudication of military personnel, DOD civilians, and industry personnel.

Other recent significant events affecting DOD's clearance program have
been the passage of the Intelligence Reform and Terrorism Prevention Act
of 2004 and the issuance of the June 2005 Executive Order 13381,
"Strengthening Processes Relating to Determining Eligibility for Access to
Classified National Security Information." The act included milestones for
reducing the time to complete clearances, general specifications for a
database on security clearances, and requirements for greater reciprocity
of clearances (the acceptance of a clearance and access granted by another
department, agency, or military service). Among other things, the
executive order resulted in the Office of Management and Budget (OMB)
taking a lead role in preparing a strategic plan to improve personnel
security clearance processes governmentwide.

Using the context that I have laid out for understanding the interplay
between DOD and OPM in DOD's personnel security clearance processes, I
will address three issues. First, I will provide a status update and
preliminary observations from our ongoing audit on the timeliness and
completeness of the processes used to determine whether industry personnel
are eligible to hold a top secret clearance-an audit that this
Subcommittee requested. Second, I will discuss potential adverse effects
that might result from the July 1, 2006, expiration of Executive Order
13381. Finally, I will discuss DOD's recent action to suspend the
processing of clearance requests for industry personnel.

6 Currently the National Security Agency, Defense Intelligence Agency, and
National Reconnaissance Office each have a waiver that allows them to
contract for their own personnel security clearance investigations.

7 In GAO-05-842T, we listed the departments/agencies having statutory or
delegated authority to conduct background investigations, as identified by
the then Deputy Associate Director of OPM's Center for Investigations
Services. Those departments/agencies are Central Intelligence Agency;
Department of State; Department of the Treasury; Internal Revenue Service;
Bureau of Engraving and Printing; Federal Bureau of Investigation;
National Security Agency; U.S. Agency for International Development;
Department of Homeland Security; Bureau of Customs and Border Protection;
U.S. Secret Service; Small Business Administration; Broadcasting Board of
Governors; Department of Justice-Bureau of Alcohol, Tobacco, Firearms, and
Explosives; U.S. Postal Service; Tennessee Valley Authority; National
Reconnaissance Office; and Peace Corps. Even though these agencies have
authority to conduct their own investigations, some of them request OPM to
conduct all or part of their investigations.

With the exception of the update and preliminary observations on our
current audit, my comments today are based primarily on our completed work
and our institutional knowledge from our prior reviews of the clearance
processes used by DOD and, to a lesser extent, other agencies. In
addition, we used information from the Intelligence Reform and Terrorism
Prevention Act of 2004, executive orders, and other documents such as a
memorandum of agreement between DOD and OPM. We conducted our work in
accordance with generally accepted government auditing standards in May
2006.

                                    Summary

Although our audit of DOD's clearance processes for industry personnel is
ongoing, we have three preliminary observations. First, communication
problems between DOD and OPM may be limiting governmentwide efforts to
improve personnel security clearance processes. For example, until
recently, OPM had not officially shared its investigator's handbook with
DOD adjudicators. Adjudicators raised concerns that without knowing what
was required for an investigation by the investigator's handbook, they
could not fully understand how investigations were conducted and the
investigative reports that form the basis for their adjudicative
decisions. OPM indicates that it is revising the investigator's handbook
and is obtaining comments from DOD and other customers. Second, OPM faces
performance problems due to the inexperience of its domestic investigative
workforce, and it is still in the process of developing a foreign presence
to investigate leads overseas. OPM reports that it is making progress in
establishing an overseas presence, but that it will take time to fully
meet the demand for overseas investigative coverage. Third, some DOD
adjudication facilities have stopped accepting closed pending cases-that
is, investigations formerly forwarded to DOD adjudicators from OPM-even
though some required investigative information is not included.

The expiration of Executive Order 13381 could slow improvements in the
security clearance processes governmentwide, as well as for DOD in
particular. The executive order, which among other things delegated
responsibility for improving the clearance process to the Director of OMB,
is set to expire on July 1, 2006. We have been encouraged by the high
level of commitment that OMB demonstrated in the development of a plan to
address clearance-related problems. Because there has been no indication
that the executive order will be extended, we are concerned about whether
such progress will continue without OMB's high-level management
involvement. If OMB does not continue in its current role, OPM may not be
in a position to assume additional high-level commitment for several
reasons, including its inability to resolve disputes with other agencies.

Finally, a billing dispute between DOD and OPM may cause further delays in
processing security clearances for industry personnel. DOD stopped
processing applications for clearance investigations for industry
personnel on April 28, 2006, and attributed its actions to an overwhelming
volume of requests for industry personnel security investigations and
funding constraints. DOD's inability to accurately project its security
clearance workload makes it difficult to determine clearance-related
budgets and staffing requirements. The funding constraints that
contributed to the stoppage are related to the costs resulting from the
agreement that transferred DOD's clearance investigations function to OPM.
DOD has asked OMB to mediate the dispute; however, information from DOD
and OPM indicates that OMB has directed the two agencies to continue to
work together to resolve the matter. According to representatives from DOD
and OPM inspector general offices, they are currently investigating all of
the issues raised in the Under Secretary's and Associate Director's
correspondences and have indicated that they intend to issue reports on
their reviews during the summer.

 Preliminary Observations from GAO's Ongoing Audit Suggests Additional Problems

Mr. Chairman, at your and other congressional members request, we continue
to examine the timeliness and completeness of the processes used to
determine whether industry personnel are eligible to hold a top secret
clearance. Two key elements of the security clearance process are
investigation and adjudication. In the investigation portion of the
security clearance process, the investigator seeks to obtain information
pertaining to the security clearance applicant's loyalty, character,
reliability, trustworthiness, honesty, and financial responsibility. For
top secret security clearances, the types or sources of information
include an interview with the subject of the investigation, national
agency checks (e.g., Federal Bureau of Investigations and immigration
records), local agency checks (e.g., municipal police and court records),
financial checks, birth date and place, citizenship, education,
employment, public records for information such as bankruptcy or divorce,
and interviews with references. In the adjudication portion of the
security clearance process, government employees in 10 DOD adjudication
facilities-2 of which serve industry-use the information gathered at the
investigation stage to approve, deny, or revoke eligibility to access
classified information. Once adjudicated, the security clearance is then
issued up to the appropriate eligibility level, or alternative actions are
taken if eligibility is denied or revoked. A major part of our audit is
reviewing fully adjudicated industry cases to determine the completeness
of both the investigations and the adjudications for top secret
clearances. We will complete this audit and issue a report to your
Subcommittee and other congressional requesters this fall.

I will briefly mention three of the preliminary observations that we have
been able to derive thus far from our audit.

           o  Communication problems may be limiting governmentwide efforts
           to improve the personnel security clearance process. The billing
           dispute that I discuss later in this testimony is one example of a
           communication breakdown. In addition, until recently, OPM had not
           officially shared its investigator's handbook with DOD
           adjudicators. Adjudicators raised concerns that without knowing
           what was required for an investigation by the investigator's
           handbook, they could not fully understand how investigations were
           conducted and the investigative reports that form the basis for
           their adjudicative decisions. OPM indicates that it is revising
           the investigator's handbook and is obtaining comments from DOD and
           other customers.
           o  OPM acknowledges that despite its significant effort to develop
           a domestic investigative workforce, performance problems remain
           because of the workforce's inexperience. OPM reports that they are
           making progress in hiring and training new investigators, however,
           they have also noted that it will take a couple of years for the
           investigative workforce to reach desired performance levels. In
           addition, OPM is still in the process of developing a foreign
           presence to investigate leads overseas. OPM also reports that it
           is making progress in establishing an overseas presence, but that
           it will take time to fully meet the demand for overseas
           investigative coverage.
           o  Some DOD adjudication facilities have stopped accepting closed
           pending cases-investigations forwarded to adjudicators even though
           some required information is not included-from OPM. DOD
           adjudication officials need all of the required investigative
           information in order to determine clearance eligibility. Without
           complete investigative information, DOD adjudication facilities
           must store the hard-copy closed pending case files until the
           required additional information is provided by OPM. According to
           DOD officials, this has created a significant administrative
           burden.

           The July 1, 2006, expiration of Executive Order 13381 could slow
           improvements in personnel security clearance processes
           governmentwide as well as for DOD in particular. Among other
           things, this new executive order delegated responsibility for
           improving the clearance process to the OMB Director from June 30,
           2005, to July 1, 2006. We have been encouraged by the high level
           of commitment that OMB demonstrated in the development of a plan
           to improve the personnel security clearance process
           governmentwide. Also, the OMB Deputy Director met with GAO
           officials to discuss OMB's general strategy for addressing the
           problems that led to our high-risk designation for DOD's clearance
           program. Demonstrating strong management commitment and top
           leadership support to address a known risk is one of the
           requirements for removing DOD's clearance program from GAO's
           high-risk list.

           Because there has been no indication that the executive order will
           be extended, we are concerned about whether such progress will
           continue without OMB's high-level management involvement. While
           OPM has provided some leadership in assisting OMB with the
           development of the governmentwide plan, OPM may not be in a
           position to assume additional high-level commitment for a variety
           of reasons if OMB does not continue in its current role. These
           reasons include: (1) the governmentwide plan lists many management
           challenges facing OPM and the Associate Director of its
           investigations unit, such as establishing a presence to conduct
           overseas investigations and adjusting its investigative workforce
           to the increasing demand for clearances; (2) adjudication of
           personnel security clearances and determination of which
           organizational positions require such clearances is not an OPM
           responsibility; and (3) agencies' disputes with OPM-such as the
           current billing dispute with DOD-may need a high-level, impartial
           third party to mediate a resolution.

           DOD stopped processing applications for clearances for industry
           personnel on April 28, 2006. DOD attributed its actions to an
           overwhelming volume of requests for industry personnel security
           investigations and funding constraints.

           The unexpected volume of security clearance requests resulted in
           DOD having to halt the processing of industry security clearances.
           We have testified repeatedly that a major impediment to providing
           timely clearances is DOD's inaccurately projected number of
           requests for security clearances DOD-wide and for industry
           personnel specifically. DOD's inability to accurately project
           clearance requirements makes it difficult to determine
           clearance-related budgets and staffing. In fiscal year 2001, DOD
           received 18 percent fewer requests than it projected (about
           150,000); and in fiscal years 2002 and 2003, it received 19 and 13
           percent (about 135,000 and 90,000), respectively, more requests
           than projected. In 2005, DOD was again uncertain about the number
           and level of clearances that it required, but the department
           reported plans and efforts to identify clearance requirements for
           servicemembers, civilian employees, and contractors. For example,
           in response to our May 2004 recommendation to improve the
           projection of clearance requests for industry personnel, DOD
           indicated that it is developing a plan and computer software to
           have the government's contracting officers (1) authorize the
           number of industry personnel clearance investigations required to
           perform the classified work on a given contract and (2) link the
           clearance investigations to the contract number.

           An important consideration in understanding the funding
           constraints that contributed to the stoppage is a DOD-OPM billing
           dispute, which has resulted in the Under Secretary of Defense for
           Intelligence requesting OMB mediation. The dispute stems from the
           February 2005 transfer of DOD's personnel security investigations
           function to OPM.

           The memorandum of agreement signed by the OPM Director and the DOD
           Deputy Secretary prior to the transfer lists many types of costs
           that DOD may incur for up to 3 years after the transfer of the
           investigations function to OPM. One cost, an adjustment to the
           rates charged to agencies for clearance investigations, provides
           that "OPM may charge DOD for investigations at DOD's current rates
           plus annual price adjustments plus a 25 percent premium to offset
           potential operating losses. OPM will be able to adjust, at any
           point of time during the first three year period after the start
           of transfer, the premium as necessary to cover estimated future
           costs or operating losses, if any, or offset gains, if any."

           The Under Secretary's memorandum says that OPM has collected
           approximately $50 million in premiums in addition to approximately
           $144 million for other costs associated with the transfer. The OPM
           Associate Director subsequently listed costs that OPM has
           incurred. To help resolve this billing matter, DOD requested
           mediation from OMB, in accordance with the memorandum of agreement
           between DOD and OPM. Information from DOD and OPM indicates that
           OMB subsequently directed the two agencies to continue to work
           together to resolve the matter on their own. According to
           representatives from DOD and OPM inspector general offices, they
           are currently investigating all of the issues raised in the Under
           Secretary's and Associate Director's correspondences and have
           indicated that they intend to issue reports on their reviews
           during the summer.

           Mr. Chairman, I want to assure you that we will continue taking
           multiple steps to assess and monitor DOD's personnel security
           clearance program. As I have discussed, we are currently reviewing
           the timeliness and completeness of the processes used to determine
           whether industry personnel are eligible to hold a top secret
           clearance. We will report that information to your Subcommittee
           this fall. Also, our standard steps of monitoring programs on our
           high-risk list require that we evaluate the progress that agencies
           make toward being removed from GAO's high-risk list.8 Finally, we
           continuously monitor our recommendations to agencies to determine
           whether active steps are being taken to overcome program
           deficiencies.

           Mr. Chairman and Members of the Subcommittee, this concludes my
           prepared statement. I would be happy to answer any questions you
           may have at this time.

           For further information regarding this testimony, please contact
           me at 202-512-5559 or [email protected]. Individuals making key
           contributions to this testimony include Jack E. Edwards, Assistant
           Director; Jerome Brown; Kurt A. Burgeson; Susan C. Ditto; David
           Epstein; Sara Hackley; James Klein; and Kenneth E. Patton.

           Managing Sensitive Information: Departments of Energy and Defense
           Policies and Oversight Could Be Improved. GAO-06-369 . Washington,
           D.C.: March 7, 2006.

           Managing Sensitive Information: DOE and DOD Could Improve Their
           Policies and Oversight. GAO-06-531T . Washington, D.C.: March 14,
           2006.

           GAO's High-Risk Program. GAO-06-497T . Washington, D.C.: March 15,
           2006.

           Questions for the Record Related to DOD's Personnel Security
           Clearance Program and the Government Plan for Improving the
           Clearance Process. GAO-06-323R . Washington, D.C.: January 17,
           2006.

           DOD Personnel Clearances: Government Plan Addresses Some
           Long-standing Problems with DOD's Program, But Concerns Remain.
           GAO-06-233T . Washington, D.C.: November 9, 2005.

           Defense Management: Better Review Needed of Program Protection
           Issues Associated with Manufacturing Presidential Helicopters.
           GAO-06-71SU . Washington, D.C.: November 4, 2005.

           DOD's High-Risk Areas: High-Level Commitment and Oversight Needed
           for DOD Supply Chain Plan to Succeed. GAO-06-113T . Washington,
           D.C.: October 6, 2005.

           Questions for the Record Related to DOD's Personnel Security
           Clearance Program. GAO-05-988R . Washington, D.C.: August 19,
           2005.

           Industrial Security: DOD Cannot Ensure Its Oversight of
           Contractors under Foreign Influence Is Sufficient. GAO-05-681 .
           Washington, D.C.: July 15, 2005.

           DOD Personnel Clearances: Some Progress Has Been Made but Hurdles
           Remain to Overcome the Challenges That Led to GAO's High-Risk
           Designation. GAO-05-842T . Washington, D.C.: June 28, 2005.

           Defense Management: Key Elements Needed to Successfully Transform
           DOD Business Operations. GAO-05-629T . Washington, D.C.: April 28,
           2005.

           Maritime Security: New Structures Have Improved Information
           Sharing, but Security Clearance Processing Requires Further
           Attention. GAO-05-394 . Washington, D.C.: April 15, 2005.

           DOD's High-Risk Areas: Successful Business Transformation Requires
           Sound Strategic Planning and Sustained Leadership. GAO-05-520T .
           Washington, D.C.: April 13, 2005.

           GAO's 2005 High-Risk Update. GAO-05-350T . Washington, D.C.:
           February 17, 2005.

           High-Risk Series: An Update. GAO-05-207 . Washington, D.C.:
           January 2005.

           Intelligence Reform: Human Capital Considerations Critical to 9/11
           Commission's Proposed Reforms. GAO-04-1084T . Washington, D.C.:
           September 14, 2004.

           DOD Personnel Clearances: Additional Steps Can Be Taken to Reduce
           Backlogs and Delays in Determining Security Clearance Eligibility
           for Industry Personnel. GAO-04-632 . Washington, D.C.: May 26,
           2004.

           DOD Personnel Clearances: Preliminary Observations Related to
           Backlogs and Delays in Determining Security Clearance Eligibility
           for Industry Personnel. GAO-04-202T . Washington, D.C.: May 6,
           2004.

           Security Clearances: FBI Has Enhanced Its Process for State and
           Local Law Enforcement Officials. GAO-04-596 . Washington, D.C.:
           April 30, 2004.

           Industrial Security: DOD Cannot Provide Adequate Assurances That
           Its Oversight Ensures the Protection of Classified Information.
           GAO-04-332 . Washington, D.C.: March 3, 2004.

           DOD Personnel Clearances: DOD Needs to Overcome Impediments to
           Eliminating Backlog and Determining Its Size. GAO-04-344 .
           Washington, D.C.: February 9, 2004.

           Aviation Security: Federal Air Marshal Service Is Addressing
           Challenges of Its Expanded Mission and Workforce, but Additional
           Actions Needed. GAO-04-242 . Washington, D.C.: November 19, 2003.

           Results-Oriented Cultures: Creating a Clear Linkage between
           Individual Performance and Organizational Success. GAO-03-488 .
           Washington, D.C.: March 14, 2003.

           Defense Acquisitions: Steps Needed to Ensure Interoperability of
           Systems That Process Intelligence Data. GAO-03-329 . Washington
           D.C.: March 31, 2003.

           Managing for Results: Agency Progress in Linking Performance Plans
           With Budgets and Financial Statements. GAO-02-236 . Washington
           D.C.: January 4, 2002.

           Central Intelligence Agency: Observations on GAO Access to
           Information on CIA Programs and Activities. GAO-01-975T .
           Washington, D.C.: July 18, 2001.

           Determining Performance and Accountability Challenges and High
           Risks. GAO-01-159SP . Washington, D.C.: November 2000.

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

           DOD Personnel: More Accurate Estimate of Overdue Security
           Clearance Reinvestigations Is Needed. GAO/T-NSIAD-00-246 .
           Washington, D.C.: September 20, 2000.

           DOD Personnel: More Actions Needed to Address Backlog of Security
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           August 24, 2000.

           Security Protection: Standardization Issues Regarding Protection
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           Security Protection: Standardization Issues Regarding Protection
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           Computer Security: FAA Is Addressing Personnel Weaknesses, But
           Further Action Is Required. GAO/AIMD-00-169 . Washington, D.C.:
           May 31, 2000.

           DOD Personnel: Weaknesses in Security Investigation Program Are
           Being Addressed. GAO/T-NSIAD-00-148 . Washington, D.C.: April 6,
           2000.

           DOD Personnel: Inadequate Personnel Security Investigations Pose
           National Security Risks. GAO/T-NSIAD-00-65 . Washington, D.C.:
           February 16, 2000.

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

           Background Investigations: Program Deficiencies May Lead DEA to
           Relinquish Its Authority to OPM. GAO/GGD-99-173 . Washington,
           D.C.: September 7, 1999.

           Department of Energy: Key Factors Underlying Security Problems at
           DOE Facilities. GAO/T-RCED-99-159 . Washington, D.C.: April 20,
           1999.

           Performance Budgeting: Initial Experiences Under the Results Act
           in Linking Plans With Budgets. GAO/AIMD/GGD-99-67 . Washington,
           D.C.: April 12, 1999.

           Military Recruiting: New Initiatives Could Improve Criminal
           History Screening. GAO/NSIAD-99-53 . Washington, D.C.: February
           23, 1999.

           Executive Office of the President: Procedures for Acquiring Access
           to and Safeguarding Intelligence Information. GAO/NSIAD-98-245 .
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           Inspectors General: Joint Investigation of Personnel Actions
           Regarding a Former Defense Employee. GAO/AIMD/OSI-97-81R .
           Washington, D.C.: July 10, 1997.

           Privatization of OPM's Investigations Service. GAO/GGD-96-97R .
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           Cost Analysis: Privatizing OPM Investigations. GAO/GGD-96-121R .
           Washington, D.C.: July 5, 1996.

           Personnel Security: Pass and Security Clearance Data for the
           Executive Office of the President. GAO/NSIAD-96-20 . Washington,
           D.C.: October 19, 1995.

           Privatizing OPM Investigations: Implementation Issues.
           GAO/T-GGD-95-186 . Washington, D.C.: June 15, 1995.

           Privatizing OPM Investigations: Perspectives on OPM's Role in
           Background Investigations. GAO/T-GGD-95-185 . Washington, D.C.:
           June 14, 1995.

           Security Clearances: Consideration of Sexual Orientation in the
           Clearance Process. GAO/NSIAD-95-21 . Washington, D.C.: March 24,
           1995.

           Background Investigations: Impediments to Consolidating
           Investigations and Adjudicative Functions. GAO/NSIAD-95-101 .
           Washington, D.C.: March 24, 1995.

           Managing DOE: Further Review Needed of Suspensions of Security
           Clearances for Minority Employees. GAO/RCED-95-15 . Washington,
           D.C.: December 8, 1994.

           Personnel Security Investigations. GAO/NSIAD-94-135R . Washington,
           D.C.: March 4, 1994.

           Classified Information: Costs of Protection Are Integrated With
           Other Security Costs. GAO/NSIAD-94-55 . Washington, D.C.: October
           20, 1993.

           Nuclear Security: DOE's Progress on Reducing Its Security
           Clearance Work Load. GAO/RCED-93-183 . Washington, D.C.: August
           12, 1993.

           Personnel Security: Efforts by DOD and DOE to Eliminate
           Duplicative Background Investigations. GAO/RCED-93-23 .
           Washington, D.C.: May 10, 1993.

           Administrative Due Process: Denials and Revocations of Security
           Clearances and Access to Special Programs. GAO/T-NSIAD-93-14 .
           Washington, D.C.: May 5, 1993.

           DOD Special Access Programs: Administrative Due Process Not
           Provided When Access Is Denied or Revoked. GAO/NSIAD-93-162 .
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           Security Clearances: Due Process for Denials and Revocations by
           Defense, Energy, and State. GAO/NSIAD-92-99 . Washington, D.C.:
           May 6, 1992.

           Due Process: Procedures for Unfavorable Suitability and Security
           Clearance Actions. GAO/NSIAD-90-97FS . Washington, D.C.: April 23,
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           Weaknesses in NRC's Security Clearance Program. GAO/T-RCED-89-14 .
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           Nuclear Regulation: NRC's Security Clearance Program Can Be
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           Nuclear Security: DOE Actions to Improve the Personnel Clearance
           Program. GAO/RCED-89-34 . Washington, D.C.: November 9, 1988.

           Nuclear Security: DOE Needs a More Accurate and Efficient Security
           Clearance Program. GAO/RCED-88-28 . Washington, D.C.: December 29,
           1987.

           National Security: DOD Clearance Reduction and Related Issues.
           GAO/NSIAD-87-170BR . Washington, D.C.: September 18, 1987.

           Oil Reserves: Proposed DOE Legislation for Firearm and Arrest
           Authority Has Merit. GAO/RCED-87-178 . Washington, D.C.: August
           11, 1987.

           Embassy Blueprints: Controlling Blueprints and Selecting
           Contractors for Construction Abroad. GAO/NSIAD-87-83 . Washington,
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           Security Clearance Reinvestigations of Employees Has Not Been
           Timely at the Department of Energy. GAO/T-RCED-87-14 . Washington,
           D.C.: April 9, 1987.

           Improvements Needed in the Government's Personnel Security
           Clearance Program. Washington, D.C.: April 16, 1985.

           Need for Central Adjudication Facility for Security Clearances for
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           Effect of National Security Decision Directive 84, Safeguarding
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           October 18, 1983.

           Faster Processing of DOD Personnel Security Clearances Could Avoid
           Millions in Losses. GAO/GGD-81-105 . Washington, D.C.: September
           15, 1981.

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  Expiration of Executive Order Could Slow Improvements in Clearance Processes

 Unexpected Volume of Clearance Requests and Funding Constraints Delay Security
                   Clearances for Industry Personnel Further

                            Concluding Observations

                       Staff Contact and Acknowledgments

8 The general steps required to remove DOD's personnel security clearance
program from the high-risk list are summarized in GAO-06-233T .

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Highlights of GAO-06-748T a testimony before the Subcommittee on Oversight
of Government Management, the Federal Workforce, and the District of
Columbia, Committee on Homeland Security and Governmental Affairs, U.S.
Senate

May 17, 2006

DOD PERSONNEL CLEARANCES

New Concerns Slow Processing of Security Clearances for Industry Personnel

The Department of Defense (DOD) is responsible for about 2 million active
personnel security clearances. About one-third of the clearances are for
industry personnel working on contracts for DOD and more than 20 other
executive agencies. Delays in determining eligibility for a clearance can
heighten the risk that classified information will be disclosed to
unauthorized sources and increase contract costs and problems attracting
and retaining qualified personnel. Long-standing delays in completing
hundreds of thousands of clearance requests and numerous impediments that
hinder DOD's ability to accurately estimate and eliminate its clearance
backlog led GAO to declare DOD's personnel security clearance program a
high-risk area in January 2005.

This testimony presents GAO's (1) preliminary observations from its
ongoing review of the timeliness and completeness of clearances, (2)
concerns about the upcoming expiration of an executive order that has
resulted in high level commitment to improving the governmentwide
clearance process, and (3) views on factors underlying DOD's decision to
stop accepting clearance requests for industry personnel.

GAO's ongoing review of the timeliness and completeness of security
clearance processes for industry personnel has provided three preliminary
observations. First, communication problems between DOD and the Office of
Personnel Management (OPM) may be limiting governmentwide efforts to
improve the personnel security clearance process. Second, OPM faces
performance problems due to the inexperience of its domestic investigative
workforce, and it is still in the process of developing a foreign presence
to investigate leads overseas. Third, some DOD adjudication facilities
have stopped accepting closed pending cases-that is, investigations
formerly forwarded to DOD adjudicators from OPM-even though some required
investigative information was not included.

In addition, the expiration of Executive Order 13381 could slow
improvements in the security clearance processes governmentwide, as well
as for DOD in particular. The executive order, which among other things
delegated responsibility for improving the clearance process to the Office
of Management and Budget (OMB), is set to expire on July 1, 2006. GAO has
been encouraged by the high level of commitment that OMB has demonstrated
in the development of a plan to address clearance-related problems.
Because there has been no indication that the executive order will be
extended, GAO is concerned about whether the progress that has resulted
from OMB's high-level management involvement will continue. Issues such as
OPM's need to establish an overseas presence are discussed as potential
reasons why OPM may not be in a position to assume an additional
high-level commitment if OMB does not continue in its current role.

Finally, inaccurate projections of clearance requests and funding
constraints are delaying the processing of security clearance requests for
industry personnel. DOD stopped processing new applications for clearance
investigations for industry personnel on April 28, 2006. DOD attributed
its actions, in part, to an overwhelming volume of requests for industry
personnel security investigations. DOD's long-standing inability to
accurately project its security clearance workload makes it difficult to
determine clearance-related budgets and staffing requirements. The funding
constraints that also underlie the stoppage are related to the transfer of
DOD's personnel security investigations functions to OPM. DOD has
questioned some of the costs being charged by OPM and has asked OMB to
mediate the DOD-OPM dispute. Information from the two agencies indicates
that OMB has directed the agencies to continue to work together to resolve
the matter. According to officials in the DOD and OPM inspector general
offices, they are investigating the billing dispute and expect to report
on the results of their investigations this summer.
*** End of document. ***