Testimony_Jul17-2002_d02957t.txt

United States General Accounting Office
Testimony
GAO

Before the Select Committee on Homeland Security, House of
Representatives
For Release on Delivery Expected at 10:00 a.m. Wednesday, July
17, 2002
HOMELAND SECURITY



Critical Design and Implementation Issues

Statement of David Walker, Comptroller General of the United
States
a


GAO-02-957T

Mr. Chairman and Members of the Select Committee:

Thank you for the opportunity to appear before
this Select Committee today to discuss one of the most important
issues of our time, the reorganization of government agencies and
the reorientation of their missions to improve our nation's ability
to better protect our homeland. It is important to recognize that
this transition to a more effective homeland security approach is
part of a larger transformation effort that our government must
make to address emerging security, economic, demographic,
scientific, technological, fiscal and other challenges of the st
century and to meet the expectations of the American people for
timely, quality and cost-effective public services.
In the months since the horrible events of September 11th, the
President and the Congress have responded with important and
aggressive actions to protect the nation, including creating an
Office of Homeland Security (OHS), passing new laws such as the USA
Patriot Act and an initial emergency supplemental spending bill,
establishing a new agency to improve transportation security, and
working with unprecedented collaboration with federal, state, and
local governments, private sector entities, non-governmental
organizations, and other countries to prevent future terrorist acts
and to bring to justice those individuals responsible for such
terrible acts.
More recently, the Congress and the President have sought to
remedy longstanding issues and concerns in the government's
homeland security functions by proposing greater consolidation and
coordination of various agencies and activities. On June 6th, the
President announced a proposal to establish a Department of
Homeland Security (DHS) and on June 18th he transmitted draft
legislation to the Congress for its consideration. Both the House
and the Senate have worked diligently on these issues and this
Select Committee is now deliberating on a variety of proposals and
issues raised by House committees and subcommittees.
In my testimony today, I will focus on two major issues that we
believe the Congress should consider creating a new cabinet
department principally dedicated to homeland security: (1) the
national strategy and criteria needed to guide any reorganization
of homeland security activities and to help evaluate which agencies
and missions should be included in or left out of the new DHS; and
(2) key issues related to the successful implementation of, and
transition to, a new department, including leadership, cost and
phasing, and other management challenges. Our testimony is based
largely on our previous and ongoing work on national preparedness
issues1, as well as a review of the proposed legislation.
In response to global challenges the government faces in the
coming years, we have a unique opportunity to create an extremely
effective and performance-based organization that can strengthen
the nation's ability to protect its borders and citizens against
terrorism. There is likely to be considerable benefit over time
from restructuring some of the homeland security functions,
including reducing risk and improving the economy, efficiency, and
effectiveness of these consolidated agencies and programs. Sorting
out those programs and agencies that would most benefit from
consolidation versus those in which dual missions must be balanced
in order to achieve a more effective fit in DHS is a difficult but
critical task. Moreover, the magnitude of the challenges that the
new department faces will clearly require substantial time and
effort, and will take institutional continuity and additional
resources to make it fully effective. Numerous complicated issues
will need to be resolved in the short term, including a
harmonization of the communication systems, information technology
systems, human capital systems, the physical location of people and
other assets, and many other factors. Implementation of the new
department will be an extremely complex task and will ultimately
take years to achieve. Given the magnitude of the endeavor, not
everything can be achieved at the same time and a deliberate
phasing of some operations will be necessary. As a result, it will
be important for the new department to focus on: articulating a
clear overarching mission and core values; establishing a short
list of initial critical priorities; assuring effective
communication and information systems; and developing an overall
implementation plan for the new national strategy and related
reorganization. Further, effective performance and risk management
systems must be established, and work must be completed on threat
and vulnerability assessments.
1 See "Related GAO Products" at the end of this testimony.
Congress, in its deliberations on creating
a new department, should pay



Homeland Security

special attention to
strategy, criteria and priorities for reorganization critical to
the nation's efforts to protect the nation from terrorism.


Reorganization
Homeland Security Strategy
In recent testimony before the Congress, GAO urged that the
proposal for establishing DHS should not be considered a substitute
for, nor should it supplant, the timely issuance of a national
homeland security strategy.2 Based on our prior work, GAO believes
that the consolidation of some homeland security functions makes
sense and will, if properly organized and implemented, over time
lead to more efficient, effective, and coordinated programs; better
intelligence sharing; and a more robust protection of our people,
borders, and critical infrastructure. At the same time, the
proposed cabinet department, even with its multiple missions, will
still be just one of many players with important roles and
responsibilities for ensuring homeland security. At the federal
level, homeland security missions will require the involvement of
the Central Intelligence Agency (CIA), Federal Bureau of
Investigation (FBI), the U.S. Marshals Service, the Department of
Defense (DOD), and a myriad of other agencies. In addition, state
and local governments, including law enforcement and first
responder personnel, and the private sector also have critical
roles to play.
If anything, the multiplicity of players only reinforces the
recommendations that GAO has made in the past regarding the urgent
need for a comprehensive threat, risk, and vulnerability assessment
and a national homeland security strategy that can provide
direction and utility at all levels of government and across all
sectors of the country.3
2 U.S. General Accounting Office, Homeland Security: Proposal
for Cabinet Agency Has Merit But Implementation Will Be Pivotal to
Success, 
GAO-02-886T(Washington, D.C.: June 25, 2002).
3 U.S. General Accounting Office, Combating Terrorism: Selected
Challenges and Related Recommendations, 
GAO-01-822(Washington, D.C.: September 20, 2001).
Page 3 GAO-02-957T
We are pleased that the Administration has just released the
national homeland security strategy and GAO stands ready to work
with the Congress and the Administration to ensure that a sound and
strong strategy can be effectively implemented to protect the
country against terrorism. Although GAO has not had time to
thoroughly analyze the strategy yet, we previously suggested that
certain key elements be incorporated in the homeland security
strategy.4 We have indicated that a national homeland security
strategy should: 1) clearly define and establish the need for
homeland security and its operational components, 2) clarify the
appropriate roles and responsibilities of federal, state, and local
entities and build a framework for partnerships for coordination,
communication, and collaboration, and 3) create specific
expectations for performance and accountability, including
establishing goals and performance indicators. In addition, GAO has
said the national strategy development and implementation should
include 1) a regular update of a national-level threat and risk
assessment effort, 2) formulate realistic budget and resource plans
to eliminate gaps, avoid duplicate effort, avoid "hitchhiker"
spending, and protect against federal funds being used to
substitute for funding that would have occurred anyway, 3)
coordinate the strategy for combating terrorism with efforts to
prevent, detect, and respond to computer-based attacks, 4)
coordinate agency implementation by reviewing agency and
interagency programs to accomplish the national strategy, and 5)
carefully choose the most appropriate policy tools of government to
best implement the national strategy and achieve national
goals.
Based on our preliminary review, some of these elements have
been addressed in the national strategy. In the past, the absence
of a broadbased homeland security definition or the ad hoc creation
of a definition by individual government departments suggest that a
consistent and transparent definition be applied to help create a
more integrated approach and unified purpose. The President's
national homeland security strategy does provide for a proposed
definition of homeland security, which should help the government
to more effectively administer, fund and coordinate activities both
inside and outside a new department and to ensure that all parties
are focused on the same goals and objectives, results and outcomes.
It is critically important that the Congress and the Administration
agree on a definition since it serves as the foundation for a
number of key organizational, operational and funding
decisions.
4 
GAO-02-886T.


Need for Criteria and Reorganization
Finally, I would also note that, in the past, we have suggested
that a central focal point such as OHS be established statutorily
in order to coordinate and oversee homeland security policy within
a national framework.5 Today, we re-emphasize the need for OHS to
be established statutorily in order to effectively coordinate
activities beyond the scope of the proposed DHS and to assure
reasonable congressional oversight.
Often it has taken years for the consolidated functions in new
departments to effectively build on their combined strengths, and
it is not uncommon for these structures to remain as management
challenges for decades. It is instructive to note that the 1947
legislation creating DOD was further changed by the Congress in
1949, 1953, 1958, and 1986 in order to improve the department's
structural effectiveness. Despite these and other changes made by
DOD, GAO has consistently reported over the years that the
department -- more than 50 years after the reorganization --
continues to face a number of serious management challenges. In
fact, DOD has 8 of 24 government wide high-risk areas based on
GAO's latest list, including the governmentwide high-risk areas of
human capital and computer security.6 This note of caution is not
intended to dissuade the Congress from seeking logical and
important consolidations in government agencies and programs in
order to improve homeland security missions. Rather, it is meant to
suggest that reorganizations of government agencies frequently
encounter start-up problems and unanticipated consequences that
result from the consolidations are unlikely to fully overcome
obstacles and challenges, and may require additional modifications
in the future to effectively achieve our collective goals for
defending the country against terrorism.7
The Congress faces a challenging and complex job in its
consideration of DHS. On the one hand, there exists a certain
urgency to move rapidly in order to remedy known problems relating
to intelligence and information sharing and leveraging like
activities that have in the past and even today prevent the United
States from exercising as strong a homeland defense as
5 U.S. General Accounting Office, Homeland Security:
Responsibility and Accountability for Achieving National Goals, 
GAO-02-627T(Washington, D.C.: April 11, 2002).
6 U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-01-263(Washington, D.C.: January 2001).
7 U.S. General Accounting Office, Implementation: The Missing
Link in Planning Reorganizations, 
GAO-GGD-81-57(Washington, D.C.: March 20, 1981).
Page 5 GAO-02-957T
emerging and potential threats warrant. Simultaneously, that
same urgency of purpose would suggest that the Congress be
extremely careful and deliberate in how it creates a new department
for defending the country against terrorism. The urge to "do it
quickly" must be balanced by an equal need to "do it right." This
is necessary to ensure a consensus on identified problems and
needs, and to be sure that the solutions our government legislates
and implements can effectively remedy the problems we face in a
timely manner. It is clear that fixing the wrong problems, or even
worse, fixing the right problems poorly, could cause more harm than
good in our efforts to defend our country against terrorism.
GAO has previously recommended that reorganizations should
emphasize an integrated approach; that reorganization plans should
be designed to achieve specific, identifiable goals; and that
careful attention to fundamental public sector management practices
and principles, such as strong financial, technology, and human
capital management, are critical to the successful implementation
of government reorganizations.8 Similarly, GAO has also suggested
that reorganizations may be warranted based on the significance of
the problems requiring resolution, as well as the extent and level
of coordination and interaction necessary with other entities in
order to resolve problems or achieve overall objectives.9
GAO, based on its own work as well as a review of other
applicable studies of approaches to the organization and structure
of entities, has concluded that the Congress should consider
utilizing specific criteria as a guide to creating and implementing
the new department. Specifically, GAO has developed a framework
that will help the Congress and the Administration create and
implement a strong and effective new cabinet department by
establishing criteria to be considered for constructing the
department itself, determining which agencies should be included
and excluded, and leveraging numerous key management and policy
elements that, after completion of the revised organizational
structure, will be critical to the department's success. Figure 1
depicts the proposed framework:
8 U.S. General Accounting Office, Government Reorganization:
Issues and Principles, 
GAO/T-GGD/AIMD-95-166(Washington, D.C.: May 17,
1995).
9 Environmental Protection: Observations on Elevating the EPA to
Cabinet Status, March 
21, 2002 (GAO-02-552T).
Page 6 GAO-02-957T
Figure 1: Organization and Accountability Criteria for the
Department of Homeland Security

With respect to criteria that the Congress should consider for
constructing the department itself, the following questions about
the overall purpose and structure of the organization should be
evaluated:


•
Definition: Is there a clear and consistently applied
definition of homeland security that will be used as a basis for
organizing and managing the new department?


•
Statutory Basis: Are the authorities of the new
department clear and complete in how they articulate roles and
responsibilities and do they sufficiently describe the department's
relationship with other parties?


•
Clear Mission: What will the primary missions of the new
DHS be and how will it define success?



•
Performance-based Organization: Does the new department
have the structure (e.g., Chief Operating Officer (COO), etc.) and
statutory authorities (e.g., human capital, sourcing) necessary to
meet performance expectations, be held accountable for results, and
leverage effective management approaches for achieving its mission
on a national basis?

Congress should also consider several very specific criteria in
its evaluation of whether individual agencies or programs should be
included or excluded from the proposed department. Those criteria
include the following:


•
Mission Relevancy: Is homeland security a major part of
the agency or program mission? Is it the primary mission of the
agency or program?


•
Similar Goals and Objectives: Does the agency or program
being considered for the new department share primary goals and
objectives with the other agencies or programs being
consolidated?


•
Leverage Effectiveness: Does the agency or program being
considered for the new department create synergy and help to
leverage the effectiveness of other agencies and programs or the
new department as a whole? In other words, is the whole greater
than the sum of the parts?


•
Gains Through Consolidation: Does the agency or program
being considered for the new department improve the efficiency and
effectiveness of homeland security missions through eliminating
duplications and overlaps, closing gaps, and aligning or merging
common roles and responsibilities?


•
Integrated Information Sharing/Coordination: Does the
agency or program being considered for the new department
contribute to or leverage the ability of the new department to
enhance the sharing of critical information or otherwise improve
the coordination of missions and activities related to homeland
security?


•
Compatible Cultures: Can the organizational culture of
the agency or program being considered for the new department
effectively meld with


the other entities that will be consolidated? Field structures
and
approaches to achieving missions vary considerably between
agencies.



•
Impact on Excluded Agencies: What is the impact on
departments losing components to DHS? What is the impact on
agencies with homeland security missions left out of
DHS?

In addition to the above criteria that the Congress should
consider when evaluating what to include and exclude from the
proposed DHS, there are certain critical success factors the new
department should emphasize in its initial implementation phase.
Over the years, GAO has made observations and recommendations about
many of these success factors, based on effective management of
people, technology, financial, and other issues, especially in its
biannual Performance and Accountability Series on major government
departments.10 These factors include the following:


•
Strategic Planning: Leading results-oriented
organizations focus on the process of strategic planning that
includes involvement of stakeholders, assessment of internal and
external environments, and an alignment of activities, core
processes and resources to support mission-related
outcomes.


•
Organizational Alignment: The organization of the new
department should be aligned to be consistent with the goals and
objectives established in the strategic plan.


•
Communications: Effective communication strategies are
key to any major consolidation or transformation effort.


•
Building Partnerships: One of the key challenges of this
new department will be the development and maintenance of homeland
security partners at all levels of the government and the private
sector, both in the United States and overseas.


•
Performance Management: An effective performance
management system fosters institutional, unit and individual
accountability.


10 U.S. General Accounting Office, Major Management Challenges
and Program Risks: A Governmentwide Perspective, 
GAO-01-241(Washington, D.C.: January 2001).
Page 9 GAO-02-957T


•
Human Capital Strategy: The new department must ensure
that its homeland security missions are not adversely impacted by
the government's pending human capital crisis, and that it can
recruit, retain, and reward a talented and motivated workforce,
which has required core competencies, to achieve its mission and
objectives. The people factor is a critical element in any major
consolidation or transformation.


•
Information Management and Technology: The new department
should leverage state-of-the art enabling technology to enhance its
ability to transform capabilities and capacities to share and act
upon timely, quality information about terrorist
threats.


•
Knowledge Management: The new department must ensure it
makes maximum use of the collective body of knowledge that will be
brought together in the consolidation.


•
Financial Management: The new department has a
stewardship obligation to prevent fraud, waste and abuse; to use
tax dollars appropriately; and to ensure financial accountability
to the President, the Congress, and the American people.


•
Acquisition Management: Anticipated as one of the largest
federal departments, the proposed DHS will potentially have some of
the most extensive acquisition government needs. Early attention to
strong systems and controls for acquisition and related business
processes will be critical both to ensuring success and maintaining
integrity and accountability.


•
Risk Management: The new department must be able to
maintain and enhance current states of homeland security readiness
while transitioning and transforming itself into a more effective
and efficient structural unit. The proposed DHS will also need to
immediately improve the government's overall ability to perform
risk management activities that can help to prevent, defend
against, and respond to terrorist acts.


•
Change Management: Assembling a new organization out of
separate pieces and reorienting all of its processes and assets to
deliver the desired results while managing related risks will take
an organized, systematic approach to change. The new department
will require both




Homeland Security Reorganization and
Missions
an executive and operational capability to encourage and manage
change.
The President's proposal for the new department indicates that
DHS, in addition to its homeland security responsibilities, will
also be responsible for carrying out all other functions of the
agencies and programs that are transferred to it. In fact, quite a
number of the agencies proposed to be transferred to DHS have
multiple functions. Agencies or programs that balance multiple
missions present the Congress with significant issues that must be
evaluated in order to determine how best to achieve all of the
goals and objectives for which the entity was created. While we
have not found any missions that would appear to be in fundamental
conflict with the department's primary mission of homeland
security, as presented in the President's proposal, the Congress
will need to consider whether many of the non-homeland security
missions of those agencies transferred to DHS will receive adequate
funding, attention, visibility, and support when subsumed into a
department that will be under tremendous pressure to succeed in its
primary mission. As important and vital as the homeland security
mission is to our nation's future, the other non-homeland security
missions transferred to DHS for the most part are not small or
trivial responsibilities. Rather, they represent extremely
important functions executed by the federal government that, absent
sufficient attention, could have serious implications for their
effective delivery and consequences for sectors of our economy,
health and safety, research programs and other significant
government functions. Some of these responsibilities include:


•
maritime safety and drug interdiction by the Coast
Guard,


•
collection of commercial tariffs by the Customs
Service,


•
public health research by the Department of Health and
Human Services,


•
advanced energy and environmental research by the
Lawrence Livermore and Environmental Measurements labs,


•
responding to floods and other natural disasters by the
Federal Emergency Management Agency (FEMA), and


•
authority over processing visas by the State Department's
consular officers.


These examples reveal that many non-homeland security missions
could be integrated into a cabinet department overwhelmingly
dedicated to protecting the nation from terrorism. Congress may
wish to consider whether the new department, as proposed, will
dedicate sufficient management capacity and accountability to
ensure the execution of nonhomeland security missions, as well as
consider potential alternatives to the current framework for
handling these important functions. One alternative might be to
create a special accountability track that ensures that
non-homeland security functions are well supported and executed in
DHS, including milestones for monitoring performance. Conversely,
the Congress might separate out some of these functions. In doing
so, the Congress will still need to hold agencies accountable for
the homeland security missions that are not incorporated in the new
department. In making these decisions, Congress should consider the
criteria presented earlier in my testimony, especially those
related to agency transitions, such as mission relevancy, similar
goals and objectives, leveraging effectiveness, and creating gains
through consolidation. There are clearly advantages and
disadvantages to all of the decisions about placing agencies or
programs with multiple missions in DHS and Congress must carefully
weigh numerous important factors related to performance and
accountability in crafting the legislation.
For example, we have indicated in recent testimony that DHS
could serve to improve biomedical research and development
coordination because of the current fragmented state of disparate
activities. Yet, we remain concerned that the proposed transfer of
control and priority setting for research from the organizations
where the research would be conducted could be disruptive to dual
purpose programs, which have important synergies for public health
programs that need to be maintained.11 Similarly, we have testified
that the President's proposal, in tasking the new department with
developing national policy for and coordinating the federal
government's research and development efforts for responding to
chemical, biological, radiological, and nuclear weapons threats,
also transfers some of the civilian research programs of the
Department of Energy.12 Again, there may be implications for
research synergy.
11 U.S. General Accounting Office, Homeland Security: New
Department Could Improve Biomedical R&D Coordination but May
Disrupt Dual-Purpose Efforts, 
GAO-02-924T(Washington, D.C.: July 9, 2002).
12 U.S. General Accounting Office, Homeland Security: Title III
of the Homeland Security Act of 2002, 
GAO-02-927T(Washington, D.C.: July 9, 2002).
Page 12 GAO-02-957T
Congress may also craft compromises that strengthen homeland
security while reducing concerns of program disruption or
unanticipated consequences. One such example is seen in recent
deliberations about the appropriate location for visa processing.
Congressional debate has focused on two of our criteria, mission
relevancy and gains through consolidation. The visa function
attempts to facilitate legitimate travel while at the same time
denying entry to the United States of certain individuals,
including potential terrorists. Some have argued that the mission
of the visa function is primarily related to homeland security and
that therefore the function should be located within the proposed
department. Others have advocated that the Department of State
(State) should retain the visa function because they believe that
there would be no gains from consolidation. They point out that
State has an established field structure and that it may be
impractical to create a similar field structure in the proposed
department. The compromise position of several committees has been
to transfer responsibility for visa policy to the proposed
department, while retaining the cadre of overseas visa officers
within State.
As part of these deliberations, the Congress should consider not
only the mission and role that agencies fulfill today, but the
mission and role that they should fulfill in the coming years.
Thus, while it may be accurate that large portions of the missions
engaged in by the Coast Guard or FEMA today do not relate primarily
to homeland security, it is wholly appropriate for Congress to
determine whether the future missions of such agencies should focus
principally on homeland security. Such decisions, of course, would
require the Congress to determine the best approach for carrying
out a range of the government's missions and operations, in order
to see that non-homeland security activities of these departments
are still achieved. In fact, given the key trends identified in
GAO's recent strategic plan for supporting the Congress and our
long range fiscal challenges, it is appropriate to ask three key
questions: (1) what should the federal government do in the 21st
century? (2) how should the federal government do business in the
21st century? and (3) who should do the federal government's
business in the 21st century? These questions are relevant for DHS
and every other federal agency and activity.
As the proposal to create DHS demonstrates, the terrorist events
of last fall have provided an impetus for the government to look at
the larger picture of how it provides homeland security and how it
can best accomplish associated missions. Yet, even for those
agencies that are not being integrated into DHS, there remains a
very real need and possibly a unique opportunity to rethink
approaches and priorities to enable them to better target their
resources to address our most urgent needs. In some cases, the new
emphasis on homeland security has prompted attention to
longstanding problems that have suddenly become more pressing. For
example, we've mentioned in previous testimony the overlapping and
duplicative food safety programs in the federal government.13 While
such overlap and duplication has been responsible for poor
coordination and inefficient allocation of resources, these issues
assume a new, and potentially more foreboding, meaning after
September 11th given the threat from bio-terrorism. In another
example, we have recommended combining the Department of Justice's
Office of Domestic Preparedness with FEMA to improve
coordination.14 A consolidated approach to many of these issues can
facilitate a concerted and effective response to new threats and
mission performance.
Similarly, we have conducted a number of reviews of State's visa
function over the years and, based on our work, we believe that
there are a number of areas in which the visa function can be
strengthened. For example, the
U.S. government needs to ensure that there are sufficient staff
at overseas posts with the right training and experience to make
good decisions about who should and who should not receive a visa.
In addition, we are currently looking at ways that the visa
function can be strengthened as a screen against potential
terrorists and we expect to make recommendations later this fiscal
year. These recommendations will apply regardless of decisions
about the respective roles of the State Department and the proposed
Department of Homeland Security regarding visa functions.
13 Food Safety and Security: Fundamental Changes Needed to
Ensure Safe Food, October 
10, 2001 (GAO-02-47T).
14 
GAO-01-822.
Page 14 GAO-02-957T


Homeland Security Implementation and
Transition Issues
The ultimate effectiveness of the new department will be
dependent on successfully addressing implementation and transition
issues. Picking the right leadership for these critical positions
in the new department will be crucial to its success. If you don't
have the right leadership team in key policy, operational and
management positions, the department will be at risk. In addition
providing the new department with some reasoned and reasonable
human capital, management and budget flexibilities combined with
appropriate safeguards to protect the Congress' constitutional
authorities and to prevent abuse can also help contribute to a
successful transition. Both the Congress and the Executive Branch
have critical roles to play in achieving desired outcomes for the
American people.


Key Success Factors, Leadership and
Accountability
Among the most important elements for effectively implementing
the new cabinet department will be close adherence to the key
success factors. Strategic planning, building partnerships, human
capital strategies, financial management and other critical factors
will make the difference between a department that can quickly rise
to the challenge of its mission and one that might otherwise become
mired in major problems and obstacles that hamper efforts to
protect the nation from terrorism.
The quality and continuity of the new department's leadership is
critical to building and sustaining the long-term effectiveness of
DHS and homeland security goals and objectives. The experiences of
organizations that have undertaken transformational change efforts
along the lines that will be necessary for the new department to be
fully effective suggest that this process can take up to 5 to 10
years to provide meaningful and sustainable results. Given the
scope and nature of challenges facing the new department, the
critical question is how can we ensure that the essential
transformation and management issues receive the sustained,
top-level attention that they require. The nation can ill-afford to
have the secretary or deputy secretary being side-tracked by
administrative and operational details -- the mission of the
department requires their undivided attention.
As a result, it is important for the Congress to give serious
consideration to creating a deputy secretary for management/chief
operating officer (COO) position within the department to provide
the sustained management attention essential for addressing key
infrastructure and stewardship issues while helping to facilitate
the transition and transformation process. Recent legislative
language adopted by the House Committee on Government Reform
suggests elevating the undersecretary for management to a deputy
secretary, equivalent to the deputy position provided for in the
Administration's proposal. We believe that is an important first
step to ensuring that transformation and management issues receive
the top-level attention they require. Raising the organizational
profile of transformation and management issues is important to
ensure that the individual has the authority needed to successfully
lead department-wide initiatives. We are not convinced that an
under secretary for management, on par with the other under
secretaries, would necessarily have sufficient authority.
To provide further leadership and accountability for management,
Congress may wish to consider several points:


•
First, Congress should consider making the deputy
secretary for management/COO a term appointment of up to 7 years,
subject to Senate confirmation. A term appointment would provide
continuity that spans the tenure of the political leadership and
thereby help to ensure that long-term stewardship issues are
addressed and change management initiatives are successfully
completed.


•
Second, to further clarify accountability, the COO should
be subject to a clearly defined, results-oriented performance
contract with appropriate incentive, reward and accountability
mechanisms. The COO would be selected without regard to political
affiliation based on (1) demonstrated leadership skills in managing
large and complex organizations, and (2) experience achieving
results in connection with "good government" responsibilities and
initiatives. Requiring that both the performance contract and the
subsequent performance evaluation be made available to the Congress
would provide additional accountability and
transparency.


In addition to providing top-level leadership and
accountability, the department will need to develop employee
performance management systems that can serve as a key tool for
aligning institutional, unit, and employee performance; achieving
results; accelerating change; managing the organization on a
day-to-day basis; and facilitating communication throughout the
year so that discussions about individual and organizational
performance are integrated and ongoing.15 A cascading set of
resultsoriented performance agreements is one mechanism in a
performance management system that creates a "line of sight"
showing how individual employees can contribute to overall
organizational goals.16
Further accountability can be achieved by ensuring that all
relevant management laws are applied to the new department (e.g,
Government Performance and Results Act (GPRA), Chief Financial
Officers Act, Clinger-Cohen Act, etc.). These laws provide a
foundation for the management structure of the new department and a
basis for ensuring appropriate transparency and accountability.
15U.S. General Accounting Office, Human Capital: Key Principles
From Nine Private Sector Organizations 
, GAO/GGD-00-28 (Washington, D.C.: Jan. 31, 2000).
16 U.S. General Accounting Office, Managing for Results:
Emerging Benefits From Selected Agencies' Use of Performance
Agreements, GAO-01-115 (Washington, D.C.: Oct. 30, 2000).
Page 17 GAO-02-957T


Request for Increased Human Capital and
Management Flexibilities
The President's proposal includes a set of human capital and
management flexibilities for the new department. GAO believes that
its reasonable for certain flexibilities to be granted to the new
department in such areas as human capital, provided that they are
accompanied by adequate transparency and accountability safeguards
designed to prevent abuse. Human capital and management flexibility
will help the new department to reorganize, realign and transform
itself to achieve its important missions. Appropriate safeguards
can help to prevent abuse of federal employees and provide adequate
monitoring mechanisms to gauge performance. For instance, the
Congress may wish to provide the new department with "early out"
and "buy out" authority in order to help quickly realign the
component entities and provide for future flexibility. DHS might
consider new scientific and technical personnel tracks to encourage
recruitment, retention and rewarding of individuals with critical
knowledge, or Congress may wish to provide the new department with
some limited term appointment authority. These and other suggested
flexibilities for DHS should be viewed in the context of how
similar flexibilities have been exercised by other agencies with
similar missions, such as the Transportation Security
Administration (TSA), the DOD, the FBI, and the CIA. Congress
should also note that, as GAO has indicated in the past, agencies
are already accorded in law significant flexibilities, especially
with respect to human capital issues, but for a variety of reasons
they do not always take advantage of them.17 DHS should use the
these existing flexibilities and be given others in areas where
Congress has done so with other agencies (e.g., TSA, Internal
Revenue Service, DOD).
In requesting human capital flexibilities, questions have been
raised about whether they would result in eroding merit principles,
veterans' preferences, whistleblower protections, collective
bargaining and other basic civil service provisions. Recent
testimony to the Congress by Governor Ridge has clarified the
Administration's commitment to these provisions.18 The final
legislation should clearly reflect the applicability of these
tenets to the new department.
17 U.S. General Accounting Office, Managing For Results: Using
Strategic Human Capital Management to Drive Transformational
Change, 
GAO-02-940T(Washington, D.C.: July 15, 2002 ).
18 Statement of Governor Tom Ridge on the Department of Homeland
Security to the House Select Committee on Homeland Security, July
15, 2002.
Page 18 GAO-02-957T


Request for Increased Budget
Flexibility
Other flexibilities, such as ones for acquisitions and
contracting, are included in the President's proposal. Careful
analysis is needed to determine the need for additional
flexibilities. Congress may want to consider not expressly
providing certain flexibilities in the initial legislation, but
rather providing a mechanism for expedited consideration of
flexibilities should the new department request them in the future.
For example, the Congress might wish to agree on rules specifying
procedures for consideration of proposed changes, time limits on
debate, or requirements that any amendments to future legislation
be strictly related to DHS. This would not be the blanket grant of
authority envisioned in the original Freedom to Manage proposal,
but it would permit both the executive branch and the Congress to
feel confident that proposed changes would receive timely
consideration.
The Administration has suggested that it needs a special grant
of budget flexibility for the Department of Homeland Security. GAO
believes that Congress should be careful to distinguish between
those flexibilities that will solely enhance the operations of DHS
and those that might simultaneously raise other concerns, including
concerns about the constitutional responsibilities and prerogatives
of the legislative branch. For instance, the President's proposal
permits the Secretary to allocate funds as he sees fit, without
regard to the original purpose of the appropriations. Moreover,
there must be a system to identify homeland security funds across
the wide range of existing budget accounts and program activities.
This is necessary not only for the budget resolution and
appropriations process, but also for tracking budget execution and
for accountability to Congress.
The Congress, through its appropriations subcommittees, has
proven quite adept at creating and granting the kind of flexibility
it sees as appropriate to any given agency. Congress gives agencies
flexibility over the timing of spending by varying the period of
fund availability: agencies may receive one-year, multi-year and
no-year [permanent] funds. Congress has granted agencies varying
degrees of transfer or reprogramming authority. These flexibilities
are generally provided as part of the appropriations process and
consider the balance between accountability and flexibility to
ensure that Congress is a partner in the spending of taxpayer
funds.
Over the longer term the creation of the new Department may also
be an opportune time to review the account structure of the
Department's component entities. Should the orientation of budget
accounts be shifted


DHS Transition Issues
toward the strategic goals defined in plans? Such a
reorientation might facilitate the process of linking resource
allocation to results consistent with GPRA. Efforts designed to
rationalize the number of budget accounts within the new department
can serve to provide flexibility while ensuring accountability.
The creation of the Department of Homeland Security will be one
of the largest reorganizations ever undertaken and the difficulty
of this task should not be underestimated. Under the President's
proposal, 22 existing agencies and programs and 170,000 people
would be integrated into the new department in order to strengthen
the country's defense against terrorism. With an estimated budget
authority of the component parts of the new department of $37.45
billion, successfully transitioning the government in an endeavor
of this scale will take considerable time and
19
money. Careful and thorough planning will be critical to the
successful creation of the new department. While national needs
suggest a rapid reorganization of homeland security functions, the
transition of agencies and programs into the new department is
likely to take time to achieve. At the same time, the need for
speed to get the new department up and running must be balanced
with the need to maintain readiness for new and existing threats
during the transition period. Moreover, the organizational
transition of the various components will simply be the starting
point - as implementation challenges beyond the first year should
be expected in building a fully integrated department. As I stated
earlier, it could take 5 to 10 years to fully implement this
reorganization in an effective and sustainable manner.
A comprehensive transition plan needs to be developed. The
transition plan should establish a time table for the orderly
migration of each component agency or program to the new
department, identify key objectives to be achieved during the first
year following the transfer, and describe the strategy for
achieving an orderly transition and sustaining mission performance.
More detailed implementation plans also will be necessary to
address business system, processes, and resource issues. The
President has taken an important first step by establishing a
transition office within the Office of Management and Budget.
19 The President's proposal entitled The Department of Homeland
Security, President George W. Bush, June 2002.
Page 20 GAO-02-957T
Congress has an important oversight role to play in helping to
ensure the effective implementation of the new department. In
addition to the transition plans, Congress should consider
requiring DHS to submit regular progress reports on implementation
from the department and should also conduct periodic oversight
hearings to assess progress and performance. In this regard, GAO
stands ready to assist the Congress in conducting its oversight
role.
Increased cost must also be considered with regard to the
President's proposal. It is likely that over time consolidation of
functions within DHS may reduce costs below what otherwise would
have been the case if these functions continued to operate
separately. This, however, is unlikely to happen quickly. Moreover,
we should expect that any reorganization would incur start up costs
as well as require some funding for redundant activities to
maintain continuity of effort during the transition period. The
Congressional Budget Office (CBO) has estimated that the costs of
implementing the new department would be about $3 billion over the
next five years with an annual estimate of $150 million in FY2003
and $225 million thereafter. However, there are other transition
costs that CBO acknowledges are not included in their estimates
beyond the cost to hire, house, and equip key personnel. The CBO
estimate assumes continuation of the existing multi-pay and
retirement systems--however unlikely-- and does not address the
potential need to cross-train existing personnel. Although the
purchase of new computer equipment, supplies and compatible
information management systems are included, no estimates are
provided for the cost to correct existing computer system
deficiencies nor the resources to support some system redundancy
for a period of time. Finally, CBO did not attempt to price the
relocation of personnel to a central location.
The Administration has argued that CBO's estimates are inflated.
In fact, CBO estimates that 1 percent of the total annual spending
will be for administrative costs, but that a proportionate share of
the costs to currently administer these agencies will be
transferred. Depending on the decision to co-locate personnel and
the flexibilities ultimately provided to the Administration in
legislation--in particular a broad grant of transfer authority and
the ability to staff through non-reimbursable agreements with other
agencies-- these estimates may well change. More important than a
precise cost estimate of the transition, however, is the
recognition that there will be short-term transition costs and that
these costs need to be made transparent. To fully recognize the
transition costs, in fact, Congress should consider appropriating
for them separately.
In summary, I have discussed the reorganization of homeland
security functions and some critical factors for success. However,
the single most important element of a successful reorganization is
the sustained commitment of top leaders to modern, effective and
credible human capital strategies and to setting clear goals and
appropriate accountability mechanisms. Top leadership involvement
and clear lines of accountability for making management
improvements are critical to overcoming an organization's natural
resistance to change, marshalling the resources needed to improve
management, and building and maintaining organization-wide
commitment to new ways of doing business. Organizational cultures
will not be transformed, and new visions and ways of doing business
will not take root without strong and sustained leadership. Strong
and visionary leadership will be vital to creating a unified,
focused organization, as opposed to a group of separate units under
a single roof. Modern human capital strategies, including
implementing a credible, effective and equitable performance
management system that links institutional, unit, team and
individual performance measurement and reward systems to the
department's strategic plan, core values and desired outcomes will
be critical to success.
Mr. Chairman, this concludes my written testimony. I would be
pleased to respond to any questions that you or members of the
Select Committee may have at this time.


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