Department of Homeland Security: Science and Technology
Directorate's Expenditure Plan (22-JUN-07, GAO-07-868).
In recent years GAO and others have reported on problems in the
financial management environment at the Department of Homeland
Security's (DHS) Science and Technology Directorate (S&T). S&T
was established by the Homeland Security Act of 2002 to, among
other things, coordinate the federal government's civilian
efforts to identify and develop countermeasures to emerging
terrorist threats to our nation. As DHS's primary research and
development arm, the directorate is tasked with providing
federal, state, local, and tribal officials with state-of-the-art
technology and other resources, such as protocols and training
procedures for use in responding to, and recovery from, chemical,
biological, radiological, nuclear, and explosive attacks. S&T is
led by an Under Secretary and has a Chief Financial Officer (CFO)
who is responsible for all budgeting and accounting for financial
resources. S&T receives funds for research, development,
acquisition, and operations. It also receives funds for
management and administration that support the operations of the
directorate in both headquarters and the field, such as the
expenditures for personnel compensation and benefits, travel, and
rent. The Department of Homeland Security Appropriations Act,
2007 (Appropriations Act) provided about $973 million for S&T, of
which about $838 million (about 86 percent) was for research,
development, acquisition, and operations, and $135 million (about
14 percent) was for salaries and expenses of the Office of the
Under Secretary and for management and administration of programs
and activities. The Appropriations Act restricted S&T from
obligating $60 million (about 44 percent) of the $135 million
until the Secretary of Homeland Security prepared a fiscal year
2007 expenditure plan that was to be received and approved by the
Committees on Appropriations of the Senate and House of
Representatives that (1) was broken down by program, project, and
activity (PPA), (2) contained a detailed breakdown and
justification of the management and administrative costs for each
PPA, and (3) described the method utilized to develop the budget
for administration costs in the budget requests for fiscal years
2006 and 2007. The Appropriations Act also required GAO to review
the plan. In responding to this mandate, we assessed whether
S&T's fiscal year 2007 expenditure plan satisfied the above
conditions of the Appropriations Act. In April 2007, we briefed
Congress on the preliminary results of our work. On May 9, 2007,
Congress released the $60 million management and administration
funding that had been restricted by the act.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-868
ACCNO: A71306
TITLE: Department of Homeland Security: Science and Technology
Directorate's Expenditure Plan
DATE: 06/22/2007
SUBJECT: Accountability
Appropriated funds
Counterterrorism
Federal funds
Financial management
Funds management
Homeland security
Internal controls
Program evaluation
Reporting requirements
Research and development
Standards
Technology
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GAO-07-868
* [1]Scope and Methodology
* [2]Results
* [3]Concluding Observations
* [4]Agency Comments and Our Evaluation
* [5]GAO Contact
* [6]Acknowledgments
* [7]GAO's Mission
* [8]Obtaining Copies of GAO Reports and Testimony
* [9]Order by Mail or Phone
* [10]To Report Fraud, Waste, and Abuse in Federal Programs
* [11]Congressional Relations
* [12]Public Affairs
Report to Congressional Committees
United States Government Accountability Office
GAO
June 2007
DEPARTMENT OF HOMELAND SECURITY
Science and Technology Directorate's Expenditure Plan
GAO-07-868
Contents
Letter 1
Scope and Methodology 2
Results 3
Concluding Observations 5
Agency Comments and Our Evaluation 6
Appendix I Briefing Slides 8
Appendix II Comments from the Department of Homeland Security 33
Appendix III GAO Contact and Staff Acknowledgments 35
Abbreviations
CBRNE chemical, biological, radiological, nuclear, and explosive
CFO Chief Financial Officer
DHS Department of Homeland Security
FTE full-time equivalent
PPA program, project, and activity S&T Science and Technology
Directorate
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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separately.
United States Government Accountability Office
Washington, DC 20548
June 22, 2007
The Honorable Robert C. Byrd
Chairman
The Honorable Thad Cochran
Ranking Minority Member
Subcommittee on Homeland Security
Committee on Appropriations
United States Senate
The Honorable David E. Price
Chairman
The Honorable Harold Rogers
Ranking Minority Member
Subcommittee on Homeland Security
Committee on Appropriations
House of Representatives
Subject: Science and Technology Directorate's Expenditure Plan
In recent years GAO and others have reported on problems in the financial
management environment at the Department of Homeland Security's (DHS)
Science and Technology Directorate (S&T). S&T was established by the
Homeland Security Act of 2002 to, among other things, coordinate the
federal government's civilian efforts to identify and develop
countermeasures to emerging terrorist threats to our nation.^1 As DHS's
primary research and development arm, the directorate is tasked with
providing federal, state, local, and tribal officials with
state-of-the-art technology and other resources, such as protocols and
training procedures for use in responding to, and recovery from, chemical,
biological, radiological, nuclear, and explosive attacks. S&T is led by an
Under Secretary and has a Chief Financial Officer (CFO) who is responsible
for all budgeting and accounting for financial resources.
S&T receives funds for research, development, acquisition, and operations.
It also receives funds for management and administration that support the
operations of the directorate in both headquarters and the field, such as
the expenditures for personnel compensation and benefits, travel, and
rent. The Department of Homeland Security Appropriations Act, 2007
(Appropriations Act) provided about $973 million for S&T, of which about
$838 million (about 86 percent) was for research, development,
acquisition, and operations, and $135 million (about 14 percent) was for
salaries and expenses of the Office of the Under Secretary and for
management and administration of programs and activities.^2 The
Appropriations Act restricted S&T from obligating $60 million (about 44
percent) of the $135 million until the Secretary of Homeland Security
prepared a fiscal year 2007 expenditure plan that was to be received and
approved by the Committees on Appropriations of the Senate and House of
Representatives that:
o was broken down by program, project, and activity (PPA),^3
o contained a detailed breakdown and justification of the
management and administrative costs for each PPA, and
o described the method utilized to develop the budget for
administration costs in the budget requests for fiscal years 2006
and 2007.^4
^1Pub. L. No. 107-296, SS 301-302, 116 Stat. 2135, 2163-2164 (2002).
^2Pub. L. No. 109-295, 120 Stat. 1355, 1375 (2006).
^3PPA is the most specific level of budget items identified in budget
related documents. For example, S&T currently has 11 PPAs, such as
laboratory facilities and border and maritime.
^4For purposes of this report, future costs will be referred to as
"projected expenditures."
The Appropriations Act also required GAO to review the plan. In responding
to this mandate, we assessed whether S&T's fiscal year 2007 expenditure
plan satisfied the above conditions of the Appropriations Act.^5 In April
2007, we briefed your offices on the preliminary results of our work. On
May 9, 2007, Congress released the $60 million management and
administration funding that had been restricted by the act.
Scope and Methodology
To accomplish our objective, we analyzed S&T's fiscal year 2007
expenditure plan and related documentation. We also interviewed the S&T
CFO and other program officials, and discussed their process for
developing their budget requests and documents. While we did not
independently verify the reasonableness of the projected management and
administration expenditure data in the expenditure plan and supporting
documentation, we discussed these projected expenditures with S&T
officials to reconcile any data inconsistencies. (As discussed later in
this report, our review identified misclassifications of expenditure
data.) This report and accompanying briefing slides (see app. I) convey
the information provided during the April 2007 briefings to your offices
and, where appropriate, updated information. We conducted our work at
S&T's headquarters in Washington, D.C., from February 2007 to May 2007, in
accordance with generally accepted government auditing standards.
^5In addition, the Appropriations Act required that S&T spend no more than
$3,000 for official reception and representation expenses. To meet this
requirement, S&T officials said that these expenses are tracked separately
and are being monitored to ensure that they do not exceed this limit. (See
app. I for additional information.)
Results
The S&T fiscal year 2007 expenditure plan, including related documentation
and other information provided by S&T program officials, did not fully
satisfy the conditions set forth in the Appropriations Act. Prior to the
obligation of the $60 million, the Appropriations Act required S&T to
provide an expenditure plan by PPA, as well as a detailed breakdown and
justification for the projected management and administrative expenditures
by PPA. While the research and development data in the expenditure plan
were presented by PPA, such as for laboratory facilities and explosives,
the management and administration data were not. For example, S&T's
expenditure plan described the projected expenditures for research,
development, acquisition, and operations for each specific PPA, whereas
the projected management and administrative expenditures were not broken
out by these categories. Because the management and administration data
were not broken out by PPA, the condition requiring a detailed breakdown
and justification of these projected expenditures by PPA was not
satisfied. S&T officials indicated that the breakdown and justification of
these expenditures were not provided in the expenditure plan because S&T
manages these costs by business areas and functions, such as business
operations, rather than by PPA. Further, according to S&T officials, the
management and administration account represents funds that support S&T's
entire mission and, for the most part, are not directly attributable to
any one PPA. However, in response to our data request, S&T broke out the
projected management and administration expenditures by PPA using various
methodologies to estimate the allocation of these costs to each PPA. Using
such a methodology is consistent with generally recognized allocation
methodologies. For example, S&T apportioned the total business operations
expenditures, which include, among other things, rent, supplies, and
employee bonuses and awards, to each PPA based on the number of full-time
equivalent (FTE) staff budgeted for each of them. According to S&T
officials, accounting for these costs by PPA--in order to have actual cost
data to use in formulating future estimates rather than allocating
projected expenditures across PPAs--would require either significant
changes to its financial accounting system or the use of an off-line
system designed solely for this purpose. (See app. I for the approximate
estimates on the breakout of projected management and administration
expenditures by PPA.)
The expenditure plan, including related documentation and other
information provided by program officials, partially satisfied the
legislative condition to describe the method utilized to derive the budget
for projected administration expenditures in the fiscal years 2006 and
2007 budget requests. The plan identified the categories of expenses that
the budget requests were intended to cover--such as salaries, benefits,
and business operations--and indicated that the fiscal year 2007 budget
request was developed based on the prior year expenditures for these
categories. However, the plan did not describe the method used to develop
each category of expenses. S&T officials acknowledged this and added that
in addition to historical expenditure data from S&T's financial systems,
the budget requests were also based on projections of new expenses.
As required, S&T provided its Fiscal Year 2007 Expenditure Plan, dated
January 11, 2007, to the Committees on Appropriations of the Senate and
the House of Representatives. However, S&T officials recently made changes
in the plan to correct misclassification of the planned management and
administration funding by groups of similar expenses, such as equipment
and travel. For example, projected travel expenditures were revised
downward from about $4 million to $358,000, while projected equipment
expenditures were revised upward from about $478,000 to about $8 million.
S&T identified these misclassifications in responding to our questions and
data requests as part of this review. On May 9, 2007, S&T provided
Congress with information on its revised management and administration
funding by groups of similar expenses.
During the course of our work, we observed instances in which S&T
operations may not have been in compliance with GAO's Standards for
Internal Control in the Federal Government^6 and associated guidance in
two areas. The plan submitted to Congress did not accurately reflect the
classification of the management and administration funding by groups of
similar expenses. The inaccuracies were not identified during management's
review, which suggests that S&T may not have an effective review process
in place. The GAO standards require that management generally design
internal controls to ensure that ongoing monitoring occurs during the
normal course of operations. The internal controls could include a
strategy to ensure that ongoing monitoring is effective and that separate
evaluations are conducted where problems are identified. These standards
also state that internal controls need to be clearly documented, and the
documentation should be readily available for examination.
^6GAO, Standards for Internal Control in the Federal Government,
[13]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999).
In addition, S&T does not appear to be in compliance with GAO standards
and associated guidance regarding adequate staffing, particularly in
managerial positions. Further, S&T has experienced significant personnel
turnover in a key operations and program management function. During our
review, we found that about 35 percent of S&T's total authorized FTE
positions were vacant as of March 2007, and about 53 percent of the CFO
office FTE positions were vacant.^7 Further, S&T has had two different
CFOs in the 23 months since that position was established in July 2005.
S&T officials acknowledged the importance of documented internal controls.
Officials stated that on the basis of departmental guidelines, they are in
the process of developing written standard operating procedures that,
among other things, describe the internal controls to ensure that
budgetary data are properly reviewed for accuracy and reliability. In
addition, S&T developed a hiring plan in December 2006 and stated that it
expects to be fully staffed by the end of calendar year 2007. As a result,
we are not making recommendations at this time.
Concluding Observations
In order to facilitate oversight and accountability of S&T, Congress has
required information on the projected full expenditures of S&T's PPAs,
including projected expenditures for management and administration, as
well as those for research, development, acquisition, and operations.
While S&T does not account for or report its management and administration
expenditures by PPA, S&T demonstrated that it can allocate these projected
expenditures across each PPA using acceptable methodologies. It is
important to recognize, however, that these projected expenditures will
generally be estimates and will not be based on historical data of actual
costs from S&T's financial management system.
^7DHS stated that since that time S&T's CFO office has increased its
staffing level.
Further, internal controls serve as the first line of defense in detecting
errors, fraud, waste, abuse, and mismanagement. We identified areas of
weakness in S&T's internal controls, which S&T acknowledged. S&T plans to
develop and document controls in these areas. If effectively implemented,
this should help the directorate to improve its accountability and provide
Congress better information.
Agency Comments and Our Evaluation
We provided a draft of this report to DHS for review and comments. On June
15, 2007, we received written comments on the draft report, which are
reproduced in full in appendix II. DHS generally agreed with the report
and its findings.
With regard to our observation that S&T's operations may not have been in
compliance with GAO's Standards for Internal Control in the Federal
Government, DHS reported that S&T has taken a number of actions to correct
previous financial management problems and deficiencies, and is working to
implement other corrective measures. For example, DHS stated that S&T has
initiated an independent review of its internal controls, and has
developed corrective action plans to address potential weaknesses
identified by the review. We support S&T's efforts to strengthen its
internal controls and encourage the department to take aggressive action
to monitor their implementation and effectiveness.
DHS also provided technical comments on specific sections of the report,
which we have considered and incorporated where appropriate.
We will send copies of this report to the Secretary of Homeland Security
and the Under Secretary of the Science and Technology Directorate, and
other interested congressional committees. We will also make copies
available to others on request. In addition, the report will be available
at no charge on GAO's Web site at [14]http://www.gao.gov . If you have any
questions or need additional information, please contact me at (202)
512-8777 or by e-mail at [15][email protected] . Contact points for our
Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Key contributors to this report are acknowledged in
appendix II.
Eileen Larence
Director
Homeland Security and Justice Issues
Appendix I: Briefing Slides
Appendix II: Comments from the Department of Homeland Security
Appendix III: GAO Contact and Staff Acknowledgments
GAO Contact
Eileen R. Larence, (202) 512-8777
Acknowledgments
In addition to the contact named above, Steve Morris, Assistant Director;
Virginia Chanley; Willie Commons III; Thomas Hackney; Kyle Lamborn; Linda
Miller; and Katrina Moss made key contributions to this report.
(440575)
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