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Report to Congressional Requesters:

March 2005:

Department of Homeland Security:

A Comprehensive and Sustained Approach Needed to Achieve Management 
Integration:

GAO-05-139:

GAO Highlights:

Highlights of GAO-05-139, a report to congressional requesters:

Why GAO Did This Study:

The creation of the Department of Homeland Security (DHS) represents 
one of the largest reorganizations of government agencies and 
operations in recent history. Significant management challenges exist 
for DHS as it merges the multiple management systems and processes from 
its 22 originating agencies in functional areas such as human capital 
and information technology. GAO was asked to identify opportunities for 
DHS to improve its management integration.

What GAO Found:

GAO found that while DHS has made some progress in its management 
integration efforts, it has the opportunity to better leverage this 
progress by implementing a comprehensive and sustained approach to its 
overall integration efforts. GAO assessed DHS's integration efforts to 
date against three of nine key practices consistently found to be at 
the center of successful mergers and transformations: setting 
implementation goals and a time line to build momentum and show 
progress, dedicating an implementation team to manage the 
transformation, and ensuring top leadership drives it. While there are 
other practices critical to successful mergers and transformations--
including using the performance management system to define 
responsibility and assure accountability for change--GAO selected these 
three key practices because they are significant to building the 
infrastructure needed for DHS at this early juncture in its management 
integration efforts.

Establishing implementation goals and a time line is critical to 
ensuring success and could be contained in an overall integration plan 
for a merger or transformation. DHS has issued guidance and plans to 
assist its integration efforts, on a function-by-function basis 
(information technology and human capital, for example); but it does 
not have a comprehensive strategy, with overall goals and a time line, 
to guide the management integration departmentwide.

GAO's research shows that it is important to dedicate a strong and 
stable implementation team for the day-to-day management of the 
transformation. DHS has established a Business Transformation Office 
(BTO), reporting to the Under Secretary for Management, to help monitor 
and look for interdependencies among the individual functional 
integration efforts. However, the role of the BTO could be strengthened 
so that it has the requisite responsibility and authority to help the 
Under Secretary set priorities and make strategic decisions for the 
integration, as well as implement the integration strategy.

The current responsibilities of the Under Secretary contain some of the 
characteristics of a COO/CMO. GAO has reported that such a position 
could help elevate, integrate, and institutionalize DHS's management 
initiatives. Recent DHS actions, such as management directives 
clarifying roles for the integration, can provide the Under Secretary 
additional support. However, it is still too early to tell whether the 
Under Secretary will have sufficient authority to direct, and make 
trade-off decisions for the integration, and institutionalize it 
departmentwide. The Congress should continue to monitor whether it 
needs to provide additional leadership authorities to the Under 
Secretary, or create a new position that more fully captures the roles 
and responsibilities of a COO/CMO.

What GAO Recommends:

GAO recommends that the Secretary of DHS: (1) develop an overarching 
management integration strategy, and (2) provide its Business 
Transformation Office (BTO) with the authority and responsibility to 
serve as a dedicated integration team and help develop and implement 
the strategy. GAO also suggests that Congress monitor (1) the progress 
of DHS's management integration, for example, by requiring the 
department to periodically report the status of its efforts; and (2) 
whether senior leadership has the authority to elevate, integrate, and 
institutionalize its management integration and reassess whether to 
create a new Chief Operating Officer (COO) or Chief Management Officer 
(CMO) position to more effectively drive this integration. DHS 
generally agreed with the report's recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-05-139.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Eileen R. Larence at 
(202) 512-6510 or larencee@gao.gov.

[End of section] 

Contents:

Letter:

Results in Brief:

Background:

Selected Key Mergers and Transformation Practices Can Help Guide DHS in 
Taking a Comprehensive and Sustained Approach to its Management 
Integration Efforts:

Conclusions:

Recommendations for Executive Action:

Matters for Congressional Consideration:

Agency Comments and Our Evaluation:

Appendixes:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Homeland Security:

Related GAO Products:

Figures:

Figure 1: DHS Organizational Structure, as of December 2004:

Figure 2: Key Practices and Implementation Steps for Mergers and 
Organizational Transformations:

Abbreviations: 

BTO: Business Transformation Office:

BTS: Border & Transportation Security Directorate:

CAO: Chief Administrative Officer:

CBP: Customs & Border Protection:

CFO: Chief Financial Officer:

CHCO: Chief Human Capital Officer:

CIO: Chief Information Officer:

CIS: Citizenship and Immigration Services:

CMO: Chief Management Officer:

COO: Chief Operating Officer:

CPO: Chief Procurement Officer:

DHS: Department of Homeland Security:

EPR: Emergency Preparedness & Response Directorate:

FPS: Federal Protective Service:

ICE: Immigration & Customs Enforcement:

IG: Inspector General:

INS: Immigration & Naturalization Service (legacy):

IT: Information Technology:

OMB: Office of Management and Budget:

Letter March 16, 2005:

The Honorable Tom Davis: 
Chairman: 
Committee on Government Reform: 
House of Representatives: 

The Honorable Jon C. Porter: 
Chairman: 
Subcommittee on the Federal Workforce and Agency Organization: 
Committee on Government Reform: 
House of Representatives:

The Honorable Jo Ann Davis: 
House of Representatives:

The creation of the Department of Homeland Security (DHS) represents 
one of the largest reorganizations and consolidations of government 
agencies, personnel, programs, and operations in recent history. As 
DHS's Under Secretary for Management has stated, the implementation of 
the department is at once a full-scale government divestiture, merger, 
acquisition, and start-up. DHS faces significant management and 
organizational transformation challenges as it works to protect the 
nation from terrorism and simultaneously establish itself. It must 
integrate approximately 180,000 employees from 22 originating 
agencies,[Footnote 1] consolidate multiple management systems and 
processes, and transform into a more effective organization with robust 
planning, management, and operations. For these reasons, in January 
2005, we continued to designate the implementation and transformation 
of the department as high risk.[Footnote 2] DHS's Inspector General 
also reported, in December 2004, that integrating DHS's many separate 
components into a single, effective, efficient and economical 
department remains one of its biggest challenges.[Footnote 3] 
Furthermore, DHS must continue to meet these daunting challenges while 
transitioning to new leadership.

DHS has an overall vision to become a fully integrated and unified 
department, adhering to the former Secretary's high-level vision of 
"One DHS, One Fight." While the protection of the homeland is the 
primary mission of the department, critical to meeting this challenge 
is the integration of DHS's varied management processes, systems, and 
people--in areas such as information technology, financial management, 
procurement, and human capital--as well as in its administrative 
services. The integration of these various functions is being executed 
through DHS's management integration initiative. The success of this 
initiative is important since it provides critical support for the 
total integration of the department, including its operations and 
programs, to ultimately meet its mission of protecting the homeland. 
This report focuses on the progress DHS has made on this functional or 
management integration.

Specifically, we sought to identify opportunities for DHS to improve 
these management integration efforts. To address our objective, we 
assessed DHS's efforts to date against selected key practices we have 
reported are consistently found to be at the center of successful 
mergers and organizational transformations. These practices were 
identified to assist DHS in its consolidation before the department was 
created and were based on useful practices and lessons learned from 
major private and public sector organizational mergers, acquisitions, 
and transformations.[Footnote 4] We selected three of these nine 
practices as criteria for this review because they are significant to 
building the infrastructure needed to manage any merger or 
transformation and are particularly important to DHS at this early 
juncture in its management integration efforts:

* Setting implementation goals and a time line to build momentum and 
show progress from day one. A merger or transformation is a substantial 
commitment that could take years before it is completed, and therefore 
must be carefully and closely managed. As a result, it is essential to 
establish and track implementation goals and use a time line to 
pinpoint performance shortfalls and gaps and suggest midcourse 
corrections.

* Dedicating an implementation team to manage the transformation 
process. Dedicating a strong and stable implementation team with the 
responsibility for the transformation's day-to-day management is 
important to ensuring that it receives the focused attention needed to 
be successful.

* Ensuring top leadership drives the transformation. Sustained and 
consistent leadership can help provide the long-term attention required 
to effectively address significant management challenges and 
transformational needs.

We focused our review primarily on the management integration 
activities of DHS's Management Directorate because the Homeland 
Security Act of 2002 establishes that the Under Secretary for 
Management is responsible for the transition and reorganization process 
for the department.[Footnote 5] We did not include an assessment of the 
mission or program integration efforts of DHS in this review primarily 
because GAO has additional work under way on these efforts. To address 
our objective, we reviewed key transition, management integration, and 
planning and policy documents, and met with the chiefs of staff or 
directors of operations for the five directorates[Footnote 6] in DHS, 
as well as the U.S. Secret Service, the U.S. Coast Guard, the Bureau of 
Citizenship and Immigration Services, and other DHS offices. Within the 
Management Directorate, we reviewed documents from and met with the 
Under Secretary for Management, the Chief Financial Officer, the Chief 
Procurement Officer, the Chief Human Capital Officer, the Chief 
Information Officer, and the Chief Administrative Officer. We also 
examined reports from GAO, DHS's Inspector General, and others that 
addressed the integration of departmentwide management functions, such 
as the development of an integrated departmental financial management 
system, information technology, and others. A more detailed discussion 
of our scope and methodology is in appendix I.

We conducted our work from April 2004 through February 2005 in 
accordance with generally accepted government auditing standards.

Results in Brief:

Recently, DHS has made some progress in addressing its departmentwide 
management integration through the issuance of guidance and plans to 
assist the integration of each individual management function within 
the department, as well as the establishment of a Business 
Transformation Office (BTO), which it began in October 2004. However, 
DHS has the opportunity to better leverage these initial efforts by 
implementing a more comprehensive and sustained approach 
departmentwide. In particular, more closely adhering to the following 
three select key practices that have consistently been found to be at 
the center of successful mergers, acquisitions, and transformations 
would help DHS establish the management infrastructure needed to 
integrate the total department and achieve its critical mission of 
protecting the homeland:

Setting Implementation Goals and a Time Line: DHS Has Issued Some 
Guidance and Plans to Help Its Management Integration Efforts, But 
Needs an Overarching Strategy to Integrate Across Management Functions 
and to Identify Critical Interdependencies, Interim Milestones, and 
Possible Efficiencies:

DHS has issued some guidance and plans to assist each management 
function, such as information technology or human capital, in its own 
consolidation and integration, but does not have a comprehensive 
strategy, with overall goals and a time line, to guide the management 
integration across functions and departmentwide. Such a strategy is 
important because the pace and type of changes implemented in one 
function can be critical to successful change in another function. For 
example, integrating the disparate financial management systems DHS 
inherited depends on the integration of its many information technology 
systems. But DHS does not have a master blueprint with implementation 
goals, time lines, and interim milestones that identifies and manages 
these critical interdependencies and possible efficiencies across 
functions. DHS has the opportunity to build the individual functional 
plans into such a comprehensive strategy.

Dedicating an Implementation Team: DHS's Business Transformation Office 
Could Be Strengthened to Serve as a Dedicated Team to Help Set 
Priorities and Make Strategic Decisions for Management Integration and 
to Implement the Comprehensive Integration Strategy:

In October 2004, DHS established a BTO within its Management 
Directorate to help monitor and look for interdependencies among its 
discrete management integration efforts. The establishment of this 
office could help DHS further coordinate its integration efforts. 
However, the BTO is not responsible for leading and managing the 
coordination and integration that must occur across functions for DHS 
to achieve its critical mission. DHS could strengthen the role of the 
BTO by giving it more than a monitoring role, but also the 
responsibility and authority it needs to help the Under Secretary for 
Management create and implement the overarching management integration 
strategy, help set priorities, and make strategic decisions that will 
drive DHS's integration across the department.

Ensuring Top Leadership Drives the Transformation: Continued Monitoring 
Is Needed to Ensure Senior DHS Leadership Elevates, Integrates, and 
Institutionalizes Its Management Initiatives:

As it is currently structured, the roles and responsibilities of the 
Under Secretary for Management contain some of the characteristics of a 
Chief Operating Officer (COO) or Chief Management Officer (CMO), such 
as elevating, integrating, and institutionalizing responsibility for 
key functional management initiatives. However, the use of clearly-
defined, results-oriented performance agreements and setting a term 
appointment of not less than 5 years, are other important mechanisms to 
help ensure accountability and sustainability for these initiatives. In 
October 2004, DHS issued management directives to clarify 
accountability for the integration of the functions across the 
department. For example, the financial management directive established 
that the department's Chief Financial Officer (CFO) is accountable for 
consolidating and integrating financial systems across the department, 
but must work with the multiple CFOs who directly report to their 
respective agency and component heads in the other four DHS 
directorates to do so. The directives and the recent establishment of 
the BTO could strengthen the role and responsibilities of the 
Undersecretary for Management in DHS's management integration efforts. 
But it is still too early to tell whether these recent initiatives will 
provide the Under Secretary with sufficient authority to direct, and 
make trade-off decisions for the management integration initiatives and 
the institutionalization of them across the department. The Congress 
should continue to closely monitor whether additional leadership 
authorities are needed for the Under Secretary, or whether a revised 
organizational arrangement is needed to fully capture the roles and 
responsibilities of a COO/CMO position, including a performance 
agreement and term limit.

In order to provide a comprehensive approach to its management 
integration efforts, we recommend that the Secretary of DHS direct the 
Under Secretary for Management, working with others, to (1) develop an 
overarching management integration strategy for the department, with 
implementation goals and a time line; and (2) provide DHS's recently 
established BTO in its Management Directorate, with the appropriate 
authority and responsibility to help set priorities and make strategic 
decisions for the department's management integration efforts, as well 
as serve as a dedicated implementation team. One of BTO's 
responsibilities should be to help develop and implement the 
overarching management integration strategy. In addition, the Congress 
may wish to continue to monitor the progress of DHS's management 
integration, for example, by requiring the department to periodically 
report on the status of its efforts, to determine whether DHS has (1) 
implemented a departmentwide integration strategy; and (2) provided the 
BTO with sufficient authority to serve as a dedicated implementation 
team to lead and sustain the integration of the department. Finally, 
Congress may also wish to consider whether the Under Secretary for 
Management has the authority to elevate attention on management issues 
and transformational change, integrate various key management and 
transformation efforts, and institutionalize accountability for 
addressing management issues and leading transformational change, as 
the department's management integration moves forward. If necessary, 
Congress may want to reassess whether it needs to statutorily adjust 
existing positions, or create a new COO/CMO position, with provisions 
for a term limit and performance agreement, that has the necessary 
responsibilities and authorities to more effectively drive the 
integration.

In commenting on a draft of this report, DHS generally agreed with the 
report's recommendations. DHS also provided some additional information 
on the planned responsibilities and role of the BTO. For example, the 
department commented that the BTO is establishing an integrated project 
plan/integration strategy and anticipates it will be released by June 
2005.

Background:

The creation of DHS is an historic opportunity for the federal 
government to fundamentally transform how the nation will protect 
itself from terrorism and other threats. Not since the creation of the 
Department of Defense in 1947 has the federal government undertaken an 
organizational merger of this magnitude. Enacted on November 25, 2002, 
the Homeland Security Act established DHS by merging 22 disparate 
agencies and organizations with multiple missions, values, and 
cultures. On March 1, 2003, DHS officially began operations as a new 
department. DHS is now the third largest federal government agency with 
an anticipated budget of $40.7 billion for fiscal year 2005 and an 
estimated 180,000 employees.

In accordance with section 1502 of the Homeland Security Act, the 
President provided a DHS reorganization plan to appropriate 
congressional committees specifying the agencies that would integrate 
into DHS, along with an overall organizational structure, but the plan 
did not specify how the integration of these agencies and employees 
would occur.[Footnote 7] Section 701 of the Homeland Security Act gave 
the Under Secretary for Management at DHS the responsibility for the 
management and administration of the department, including the 
transition and reorganization process, among other things.[Footnote 8] 
As seen in figure 1, the Chief Financial Officer (CFO), the Chief 
Information Officer (CIO), the Chief Human Capital Officer (CHCO), the 
Chief Procurement Officer (CPO), and the Chief Administrative Officer 
(CAO) are all housed within the Management Directorate.[Footnote 9] 
Figure 1 shows the organizational structure of the department, as of 
December 2004.

Figure 1: DHS Organizational Structure, as of December 2004:

[See PDF for image]

[End of figure]

Selected Key Mergers and Transformation Practices Can Help Guide DHS in 
Taking a Comprehensive and Sustained Approach to its Management 
Integration Efforts:

DHS would have the comprehensive and sustained approach to its 
management integration efforts that it needs over the long term to 
successfully transform the agency, if it more closely adhered to three 
selected key practices that we have found consistently at the center of 
successful mergers, acquisitions, and transformations. Otherwise, the 
department runs the risk of not establishing and maintaining the 
management infrastructure needed to steer the integration of the 
department and ultimately to help meet its critical mission of 
protecting the homeland.

We identified these key practices through a forum the Comptroller 
General convened in September 2002, as DHS was being created, to help 
DHS merge its various originating components into a unified 
department.[Footnote 10] The forum was designed to identify and discuss 
useful practices and lessons learned from major private and public 
sector organizational mergers, acquisitions, and transformations. In 
July 2003, we further identified implementation steps for the nine key 
practices raised at the forum.[Footnote 11] These key practices and 
implementation steps are shown in figure 2.

Figure 2: Key Practices and Implementation Steps for Mergers and 
Organizational Transformations:

Practice: Ensure top leadership drives the transformation; 
Implementation steps: 
* Define and articulate a succinct and compelling reason for change; 
* Balance continued delivery of services with merger and transformation 
activities.

Practice: Establish a coherent mission and integrated strategic goals 
to guide the transformation; 
Implementation steps: 
* Adopt leading practices for results-oriented strategic planning and 
reporting.

Practice: Focus on a key set of principles and priorities at the outset 
of the transformation; 
Implementation steps: 
* Embed core values in every aspect of the organization to reinforce 
the new culture.

Practice: Set implementation goals and a time line to build momentum 
and show progress from day one; 
Implementation steps: 
* Make public implementation goals and time line; 
* Seek and monitor employee attitudes and take appropriate follow-up 
actions; 
* Identify cultural features of merging organizations to increase 
understanding of former work environments; 
* Attract and retain key talent; 
* Establish an organizationwide knowledge and skills inventory to allow 
knowledge exchange among merging organizations.

Practice: Dedicate an implementation team to manage the transformation 
process; 
Implementation steps: 
* Establish networks to support implementation team; 
* Select high-performing team members.

Practice: Use the performance management system to define the 
responsibility and assure accountability for change; 
Implementation steps: 
* Adopt leading practices to implement effective performance management 
systems with adequate safeguards.

Practice: Establish a communication strategy to create shared 
expectations and report related progress; 
Implementation steps: 
* Communicate early and often to build trust; 
* Ensure consistency of message; 
* Encourage two-way communication; 
* Provide information to meet specific needs of employees.

Practice: Involve employees to obtain their ideas and gain ownership 
for the transformation; 
Implementation steps: 
* Use employee teams; 
* Involve employees in planning and sharing performance information; 
* Incorporate employee feedback into new policies and procedures; 
* Delegate authority to appropriate organizational levels.

Practice: Build a world-class organization; 
Implementation steps: 
* Adopt leading practices to build a world-class organization.

Source: GAO.

[End of table]

To assess DHS's progress to date in integrating its management 
functions, we determined that three of the nine practices were 
especially important to ensure the agency has the management 
infrastructure it needs this early in the process to manage and sustain 
its integration: (1) an overarching integration strategy, with 
implementation goals and a time line that links its various individual 
management integration initiatives; (2) a dedicated implementation team 
with the responsibility and authority to drive the department's 
management integration; and (3) committed and sustained leadership. DHS 
has opportunities to more fully implement each of these practices and 
increase its ability to successfully integrate.

DHS Has Issued Some Guidance and Plans to Help Its Management 
Integration Efforts, But Needs an Overarching Strategy to Integrate 
Across Management Functions and to Identify Critical Interdependencies, 
Interim Milestones, and Possible Efficiencies:

We have reported that a merger or transformation is a substantial 
commitment that could take years before it is completed, and therefore 
must be carefully and closely managed and monitored to achieve success. 
Establishing implementation goals and a time line is critical to 
ensuring success, as well as pinpointing performance shortfalls and 
gaps and suggesting midcourse corrections. Such goals and time lines 
could be contained in an overall integration plan for a merger or 
transformation effort. It is important to note that such a plan 
typically goes beyond what is contained in an agency strategic plan, 
and provides more specific operational and tactical information to 
manage a sustained effort. For example, as required by the Government 
Performance and Results Act of 1993, a strategic plan generally 
contains the high-level goals and mission for an agency based on its 
statutory requirements, while an integration strategy would provide the 
activities and time lines needed, along with assigned responsibilities, 
for accomplishing the goals of an organizational merger or 
transformation.[Footnote 12] Finally, another element essential to 
executing a merger or transformation is to make the implementation 
goals and time lines public, so that employees, customers, and 
stakeholders are aware of what is to be accomplished and when.

Our prior work shows that DHS needed to carefully plan and manage its 
integration, and a study commissioned by DHS underscored that the 
department should use an overall integration strategy to help 
accomplish this. For example, prior to the establishment of the 
department, we identified a number of management challenges that DHS 
might face as it moved forward in its integration, such as the 
establishment of a comprehensive planning and management focus and the 
need for a results-oriented approach to ensure accountability and 
sustainability.[Footnote 13] In December 2002, we recommended that 
careful and thorough transition planning would be critical to the 
successful creation of DHS and that the importance of the transition 
efforts to implement the new homeland security could not be 
overemphasized.[Footnote 14] Specifically, we recommended to OMB that 
in developing an effective transition plan for DHS, it should ensure 
that the plan incorporates the key practices we identified as being 
found at the center of successful mergers and transformations. In July 
2004, we reported on the merger of the Federal Protective Service (FPS) 
into DHS and recommended that FPS develop an overall transformation 
strategy for how it will carry out its expanding mission, as well as 
meet other challenges it faces.[Footnote 15] DHS agreed with our 
recommendation. Moreover, in early 2003, DHS recognized the challenges 
it faced and commissioned a comprehensive management study to help the 
department create an operating structure that integrates the 
department's components and to facilitate a DHS-wide integration plan 
linked to core missions and capabilities, among other things.[Footnote 
16] This management study also recommended that DHS develop a 
comprehensive integration plan with major milestones defined, 
encompassing all of the department's integration initiatives including 
functional management and mission integration activities.

Early on, the department made some progress in consolidating the 
processes and systems of each individual function in areas such as 
information technology, financial management, procurement, and human 
capital. For example, according to DHS's performance and accountability 
report for fiscal year 2004 and updated information provided by DHS 
officials, the department has accomplished the following activities as 
part of its integration efforts:

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

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

* reduced the number of its payroll systems from 8 to 2, and expects to 
be using one single payroll system by the beginning of fiscal year 2006,

* consolidated 22 different human resource offices to 7,

* consolidated 271 processes associated with administrative services 
down to 103,

* consolidated bank card programs from 27 to 3, and:

* realigned more than 6,000 support services employees (both government 
and contractor) from the legacy U.S. Customs Service and the legacy 
Immigration and Naturalization Service (INS) to support the 68,000 
employees of the U.S. Customs and Border Protection (CBP), Immigration 
and Customs Enforcement (ICE), and Citizenship and Immigration Services 
(CIS) organizations.

In addition to improving the effectiveness of the department, according 
to DHS, these consolidation activities are aimed at realizing the 
efficiencies and economies of scale envisioned by the President and the 
Congress in creating DHS, by eliminating overlap and redundancies in 
these processes, systems, and services. The DHS IG reported in December 
2004 that while DHS has made notable progress in integrating its many 
separate components in one department, structural and resource problems 
continue to inhibit progress in certain support functions.[Footnote 17] 
For example, while the department is trying to create integrated and 
streamlined support service functions, most of the critical support 
personnel are distributed throughout the various components and are not 
directly accountable to the management chiefs. We have also identified 
areas of concern with some of these efforts and have made a number of 
recommendations to make these support functions more effective and 
efficient. (See app. II for a list of GAO reports on these individual 
consolidation efforts.) For example, we reported that DHS intends to 
acquire and deploy an integrated financial enterprise solution and 
reports that it has reduced the number of it legacy financial 
systems.[Footnote 18] While DHS has established an office within the 
Management Directorate to manage its financial enterprise solution 
project, we concluded that the acquisition is in the early stages and 
continued focus and follow through will be necessary for it to be 
successful.

DHS has issued some guidance to help each management function integrate 
its portion of the disparate processes and functions inherited when the 
22 organizations merged into DHS. According to DHS officials, the 
following plans and documents were helping to provide overall guidance 
for these functional integration efforts.

* Strategic Plan: According to several senior DHS officials, the CFO, 
CIO, and the staff officer to the Deputy Secretary, the agency's 
strategic plan, issued in February 2004, was the primary guidance being 
used for DHS's management integration. The DHS strategic plan describes 
the department's vision, mission, core values, and guiding principles 
to achieve its mission of protecting the homeland.[Footnote 19] In 
addition, one of its seven strategic goals, organizational excellence, 
acknowledges the need to integrate the systems, processes, and services 
the department inherited to improve efficiency and effectiveness.

* Draft Paper on the 21st Century Department: In April 2004, the Under 
Secretary for Management also developed a draft 21st century paper to 
provide more details as to how DHS would achieve its strategic goal of 
organizational excellence. The draft paper summarizes DHS's plans for 
its management integration within three primary areas: (1) human 
capital, (2) information technology, and (3) business transformation, 
including the support areas of procurement and acquisition, 
administrative services, and financial management and 
budgeting.[Footnote 20] The draft paper describes key integration 
initiatives it will take within each key area with short-term 
milestones, dates, and possible obstacles. For example, the paper 
discusses DHS plans to implement the Maximizing Results, Rewarding 
Excellence (MAXHR) initiative, the department's new human resources 
management system, and the Electronically Managing Enterprise Resources 
for Government Efficiency and Effectiveness (eMerge2) initiative. The 
latter uses a consolidated departmentwide solution approach to 
integrate DHS's financial and administrative systems, including 
accounting, acquisition, budgeting, and procurement.

* Management Directives: At the request of the Secretary and the Deputy 
Secretary, in October 2004, each of the five DHS management chiefs 
issued a management directive that, among other things, provides 
standard definitions of each of their respective roles and 
responsibilities, as well as a general description of how other 
directorates and agencies will support them. Specifically, the 
directives discuss the concept of dual accountability for both mission 
accomplishment and functional integration as the shared responsibility 
of the heads of DHS's individual agencies or components and the 
management chiefs. Each directive also discusses how the management 
chief, along with the heads of the directorates, agencies and others, 
will annually recommend and establish integration milestones for the 
consolidation of the chief's function and the development of 
performance metrics for the respective function.

While the documents and plans discussed above are being used to help 
DHS generally guide its management integration and DHS has made some 
progress in addressing integration concerns within each functional 
management area, there still is no overarching, comprehensive plan that 
clearly identifies the critical links that must occur across these 
functions, the necessary timing to make these links occur, how these 
critical interrelationships will occur, and who will drive and manage 
them. As previously discussed, an agency's strategic plan does not 
serve as a tactical or operational integration strategy and does not 
include the more detailed blueprints, time lines, and resources needed 
for accomplishing the department's management integration. The 
department's draft paper also does not have a comprehensive linkage 
across all of its functional initiatives with goals, time lines, and 
resources needed that would comprise a departmentwide integration 
strategy. Nor does it lay out how the integration across these 
functions must be managed. For example, to successfully implement DHS's 
human capital system, it must coordinate this implementation with IT 
modernization. In addition, the majority of the various management 
chiefs and senior officials we interviewed did not indicate to us that 
this draft paper was being used as an overarching management 
integration strategy. Finally, the recently issued management 
directives can be helpful in guiding individual functional integration 
efforts, as well as increasing departmentwide accountability for 
achieving its management integration, but the directives do not serve 
as a departmentwide integration strategy.

Some of the plans and directives already issued by DHS could be used as 
foundations for building this needed integration strategy. Such a 
strategy could also help to ensure that the various functional 
initiatives are prioritized, sequenced, and implemented in a coherent 
and integrated way, thereby achieving even greater efficiency and cost 
savings. Based on our prior work on mergers and transformations, as 
well as results-oriented management, such a comprehensive strategy 
would involve (1) looking across the initiatives within each of the 
stove-piped functional units and clearly identifying the critical links 
that must occur among these initiatives; (2) developing specific 
departmentwide goals and milestones that would allow DHS to track 
critical phases and essential activities; (3) identifying tradeoffs and 
setting priorities; and (4) identifying any potential efficiencies that 
could be achieved. The institution of a departmentwide management 
integration strategy could also provide the Congress, DHS's employees, 
and other key stakeholders with transparent information on the 
integration's goals, needed resources, critical links, cost savings, 
and status, and a way for these parties to hold DHS accountable for its 
management integration.

DHS's Business Transformation Office Could Be Strengthened to Serve as 
a Dedicated Team to Help Set Priorities and Make Strategic Decisions 
for Management Integration and to Implement the Comprehensive 
Integration Strategy:

Our research shows that a dedicated team vested with necessary 
authority and resources to help set priorities, make timely decisions, 
and move quickly to implement decisions is critical for a successful 
transformation. In addition, the team ensures that various change 
initiatives are sequenced and implemented in a coherent and integrated 
way. Furthermore, the team monitors and reports on the progress of the 
integration to top leaders and across the organization, enabling those 
leaders to make any necessary adjustments. Other networks, including a 
senior executive council, functional teams, or cross-cutting teams, can 
be used to help the implementation team manage and coordinate the day-
to-day activities of the merger or transformation. The 2003 study 
commissioned by DHS also recommended that the department should (1) 
establish a leadership team with implementation responsibility for 
integration across directorates and be held accountable for 
departmentwide performance, and (2) create a dedicated program 
management office responsible for the execution of both mission and 
management integration efforts.

The Under Secretary for Management had acknowledged the need for a 
dedicated program office to help guide the integration of management 
functions across the department, but had not created one until October 
2004 when funds were appropriated. Specifically, as part of DHS's 
fiscal year 2005 appropriation, the conference committee allocated 
$920,000 for DHS to establish a BTO, which will include a director and 
four additional staff that will report to the Under Secretary for 
Management.[Footnote 21] At the time of our review, DHS was still 
establishing the office within its Management Directorate and 
advertising for the director's position, but had not defined and filled 
the staff positions. According to the Acting Chief of Staff to the 
Under Secretary for Management, the department intends that the staff 
hired for the office will have expertise in program and project 
management, quality analysis, and performance and data analysis.

Based on our discussions with this official, and our analysis of 
documents describing the role of this office, the purpose of the BTO is 
to help monitor and look for interdependencies among the department's 
discrete management integration efforts. Another purpose of the BTO is 
to communicate the progress of the functional management initiatives 
across the department. For example, implementation of eMerge2, the 
financial integration solution currently in development, will involve 
several management functions, such as budgeting and procurement. The 
office is expected to monitor the progress of each management chief's 
functional integration efforts relative to individual management 
directives described previously, as well as look for continuous 
improvement from the services being delivered. According to the Acting 
Chief of Staff to the Under Secretary for Management, the BTO is not 
responsible for the implementation of such individual initiatives as 
eMerge2, or for leading and managing the coordination and integration 
that must occur across functions not only to make these individual 
initiatives work, but to achieve and sustain overall functional 
integration at DHS. Without creating a dedicated team to serve in this 
role, it will be more difficult for DHS to coordinate all integration 
initiatives across the department and make the tradeoffs necessary to 
undertake an integration of the magnitude of DHS.

As mentioned above, networks, including functional teams, can help the 
dedicated implementation team ensure that DHS's efforts are coordinated 
and integrated. DHS has recently strengthened the role of its 
functional councils through its management directives to help 
coordinate integration departmentwide. Early on, each management chief, 
such as the CIO, CHCO, or CFO established a functional council to 
address issues pertaining to the relative function. For example, the 
CFO established a Council that includes component or agency CFOs across 
DHS and addresses and coordinates departmentwide financial management 
issues. The other management chiefs established functional councils 
with similar membership drawn from their relative personnel in each 
component or agency. Likewise, the Under Secretary for Management has a 
respective Management Council that discusses issues of departmentwide 
importance, such as training and development programs, but this council 
is not dedicated full-time to managing the integration effort across 
the agency.

According to senior DHS officials in the Office of the Under Secretary 
for Management, the membership of these functional councils had 
primarily been serving in an information-sharing role for their 
particular management function across the department. The councils also 
have been helpful in gaining feedback and buy in from their members on 
function-specific issues of importance across DHS, as well as providing 
a way to communicate about these issues. More recently, according to 
its five management directives, DHS enhanced the role of its functional 
councils, to include more decision-making responsibilities, rather than 
just serving in an advisory capacity. In general, the councils are now 
responsible within each of their individual functional areas for: (1) 
establishing a strategic plan, (2) balancing priorities on how to best 
capitalize on the respective management function resources, (3) 
defining and continuously improving governance structures, processes, 
and performance, (4) establishing centers of excellence, boards, and 
working groups tied to relevant council priorities, (5) developing and 
executing formal communications programs for internal and external 
stakeholders, and (6) supporting the respective management chief in the 
design, planning, and implementation of an integration plan for the 
chief's individual functional area, among other things.

The increased authorities and responsibilities of the functional 
councils could help DHS further coordinate the integration of each 
individual function across the department, and the recent establishment 
of the BTO could also assist DHS in departmentwide integration issues. 
However, neither the functional councils or the BTO are currently 
serving as a dedicated team to help manage the department's management 
integration. The BTO is well-positioned to serve as a dedicated team, 
and the role of the office could be strengthened to provide it with the 
necessary authority and resources to set priorities and make strategic 
decisions to drive the overall integration strategy. The BTO could also 
be responsible for leading the development and implementation of the 
integration strategy as thus described and communicating the progress 
of the integration to top leaders and DHS stakeholders. Such a 
dedicated team, as led by a senior leader described below, can provide 
the focused, day-to-day management needed for successful integration.

Continued Monitoring Is Needed to Ensure Senior DHS Leadership 
Elevates, Integrates, and Institutionalizes Its Management Initiatives:

We have reported that top leadership clearly and personally involved in 
the merger or transformation represents stability and provides an 
identifiable source for employees to rally around during the tumultuous 
times created by such dramatic reorganizations and transformations as 
DHS's merger. Leadership must set the direction, pace, and tone for the 
transformation and could provide sustained attention over the long 
term. As we have previously reported, as DHS and other agencies, such 
as the Department of Defense, embark on large-scale organizational 
change initiatives to address 21st century challenges, such as national 
security concerns--there is a compelling need to elevate, integrate, 
and institutionalize responsibility for key functional management 
initiatives to help ensure their success.[Footnote 22] We have reported 
that creation of a COO or CMO for DHS could help to elevate attention 
on management issues and transformational change, integrate various key 
management and transformation efforts, and institutionalize 
accountability for addressing these issues and leading this 
change.[Footnote 23] For example, such an official could provide a 
single point of contact to manage the integration of functions that 
operate within their own vertical "stovepipes," such as information 
technology, human capital, or financial management, in a comprehensive 
and ongoing manner. Another potentially important mechanism for such a 
position is to use clearly-defined, results-oriented performance 
agreements accompanied by appropriate incentives, rewards, and 
accountability. To help ensure accountability over the long term, 
setting a term appointment of not less than 5 years can help provide 
the continuing focused attention essential to successfully completing 
multiyear transformations, which can extend beyond the tenure of 
political leaders.

The role of the Under Secretary for Management does contain some of the 
characteristics of a COO/CMO as we have described, such as integrating 
key management and transformation efforts by providing a single point 
of contact as the chief integrator of management functions across DHS. 
Congress anticipated the difficulty of establishing DHS by creating a 
Management Directorate as one of the five major organizational units of 
the new department and vesting responsibilities for the transition and 
reorganization of the department within the Office of the Under 
Secretary for Management. According to section 701 of the Homeland 
Security Act, the Under Secretary is responsible for the management and 
administration of the Department in such functional areas as budget, 
accounting, finance, procurement, human resources and personnel, 
information technology, and communications systems. In addition, the 
Under Secretary is responsible for the transition and reorganization 
process, to ensure an efficient and orderly transfer of functions and 
personnel to the Department, including the development of a transition 
plan. The Under Secretary also told us that she sees one of her roles 
as integrating the various management functions across the department.

Recent initiatives within the Department could help to strengthen the 
role and responsibilities of the Under Secretary for Management in 
leading DHS's management integration efforts. The management 
directives, issued in October 2004, are intended to clarify 
accountability for the integration of the functions across the various 
directorates. The directives create dual accountability relationships 
between the department-level functional chiefs and similar chiefs 
within the agencies and components in the four other directorates. For 
example, the department CFO within the Management Directorate is 
accountable for consolidating and integrating financial systems across 
the department and must work with the multiple CFOs for the various 
components within the four other directorates and agencies to do so. To 
help ensure this collaboration occurs, the department CFO has input to 
the agency and component CFOs' daily work and annual performance 
evaluations, according to the directive on financial management, but 
these CFOs still report to and take direction from their agency or 
component head. In addition, the recently established BTO could help 
provide the Under Secretary for Management with a team of resources 
dedicated to monitoring and assisting with the management integration.

It is still too early to tell, however, whether these initiatives will 
provide the Under Secretary for Management with the elevated authority 
necessary to integrate functions across the department and 
institutionalize this new structure, as envisioned for a COO, CMO, or 
similar position. For example, the indirect authority over component 
and agency chiefs who are critical to integration, and a BTO that 
primarily has a monitoring role, may not provide the authority the 
Under Secretary needs to set priorities for, and make trade-off 
decisions about resources and investments for integrating these 
functions. Likewise, without a comprehensive integration plan, the 
Under Secretary does not have a road map to guide and manage all the 
players critical to the integration.

Furthermore, without additional mechanisms in place to increase 
accountability and sustainability for achieving the results of the 
department's integration, DHS may not be successful in realizing the 
goals of an improved homeland security function with integrated 
management support. For example, as mentioned previously, at the time 
of our review, the then Secretary and Deputy Secretary had announced 
their intention to leave DHS in early 2005, raising questions about the 
agency's ability to provide the consistent and sustained senior 
leadership necessary to achieve integration over the long term. Without 
a senior leader with a term limit that extends beyond changes in 
administration, it may be difficult for DHS to successfully achieve its 
management integration. The Congress should continue to closely monitor 
whether additional leadership authorities are needed for the Under 
Secretary, or whether a revised organizational arrangement is needed to 
fully capture the roles and responsibilities of a COO/CMO position, 
such as elevating the position, and including a performance agreement 
and setting a term limit for it.

Conclusions:

Though national needs suggest a rapid reorganization of homeland 
security functions, such dramatic transitions of agencies and programs, 
as well as the breadth and scope of management support functions that 
need to be incorporated into the new department are likely to take time 
to achieve. DHS is engaged in a number of individual efforts and 
initiatives as it works to implement its vision of an integrated, 
unified department. However, the momentum to create a successful 
homeland security function generated by the attacks of 9/11 could be 
lost if DHS does not work quickly to put in place some key merger and 
transformation practices to be more effective in taking a comprehensive 
and sustained approach to its management integration.

First, without a comprehensive strategy addressing all departmental 
management integration initiatives, DHS may not be able to establish 
the critical links, identify tradeoffs, set priorities, and design the 
efficiencies needed to succeed in integrating the functional management 
of the department, especially given the long-term fiscal challenges 
facing the federal government. Some of the guidance and plans DHS has 
already created could be used as a foundation for building such an 
integrated strategy. Second, a dedicated implementation team, like the 
planned BTO, vested with the responsibility and authority, can be used 
to more actively drive the department's integration across functions. 
Finally, Congress could continue to monitor DHS's management 
integration efforts and whether the current role of the Under Secretary 
for Management in driving and sustaining these efforts over the long 
term is effective or needs to be enhanced by creating a senior 
leadership position, such as a COO/CMO. Without taking these steps, DHS 
may have difficulty providing a comprehensive approach and sustaining 
its long-term management integration efforts.

Recommendations for Executive Action:

In order to build the management infrastructure needed to help support 
the department's integration and transformation, we are making two 
recommendations to the Secretary of Homeland Security. We recommend 
that the Secretary direct the Under Secretary for Management, working 
with others, to:

* develop an overarching management integration strategy for the 
department. Such a strategy would, among other things, (1) look across 
the initiatives within each of the management functional units; (2) 
clearly identify the critical links that must occur among these 
initiatives; (3) identify tradeoffs and set priorities; (4) set 
implementation goals and a time line to monitor the progress of these 
initiatives to ensure the necessary links occur when needed; and (5) 
identify potential efficiencies, and ensure that they are achieved. The 
department should also use this strategy to clearly communicate a 
consistent set of goals and the progress achieved internally to all its 
employees, and externally to key stakeholders, such as the Congress; 
and:

* designate the planned BTO within DHS's Management Directorate as the 
dedicated implementation team for the department's management 
integration and provide it with the requisite authority and 
responsibility to help set priorities and make strategic decisions to 
drive the integration across all functions. The BTO would also be 
responsible for helping to develop and implement the overarching 
management integration strategy.

Matters for Congressional Consideration:

To help ensure accountability and sustainability for DHS's management 
integration over the long term, Congress may wish to continue to 
monitor the following:

* the progress of DHS's management integration, for example, by 
requiring the department to periodically report on the status of its 
efforts, especially to determine whether it has:

* implemented a departmentwide integration management strategy; and:

* provided the BTO with sufficient authority to serve as a dedicated 
implementation team to help set priorities and make strategic decisions 
to drive integration across all functions, and:

* whether the Under Secretary for Management has the authority to 
elevate attention on management issues and transformational change, 
integrate various key management and transformation efforts, and 
institutionalize accountability for addressing these management issues 
and leading this change. If not, the Congress could reassess whether it 
needs to statutorily adjust existing positions at DHS, or create a new 
COO/CMO position, with provisions for a term limit and performance 
agreement, that has the necessary responsibilities and authorities to 
more effectively drive the integration.

Agency Comments and Our Evaluation:

In commenting on a draft of this report, DHS generally agreed with the 
report's recommendations. DHS also provided additional information on 
the planned responsibilities and role of the BTO in departmental 
management integration. For example, DHS stated that the BTO is the 
dedicated resource for providing guidance for the integration of the 
department's management process, such as setting project management 
standards and establishing standardized processes for monitoring and 
reporting on the progress of DHS's integration initiatives. In 
addition, the department commented that the BTO is establishing an 
integrated project plan/integration strategy and anticipates it will be 
released by June 2005. However, at the time of our review, agency 
officials told us that there was not an integration strategy in place 
to manage the department's integration.

Based on our work on mergers and transformation practices, we also 
recommended that DHS provide the BTO with the appropriate authority and 
responsibilities to help set priorities and make strategic decisions 
for the department's integration efforts. DHS agreed with our 
recommendation and noted that the BTO is to serve as the agent for the 
Under Secretary for Management whose role is to lead the transition and 
reorganization of the department. The agency stated that the BTO has 
been vested with the authorities necessary to ensure an integration 
strategy is in place and will be used to advise management on decisions 
about, and direction on, integration. We agree that the BTO is well-
positioned to serve as a dedicated integration team, but continue to 
believe that the role of the office could be strengthened to provide it 
with the necessary authority and resources to set priorities and make 
strategic decisions to drive the overall integration strategy. DHS's 
more detailed written comments are reprinted in appendix II.

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the date of this letter. At that time, we will send copies of this 
report to the Ranking Minority Member of the Subcommittee on the 
Federal Workforce and Agency Organization, House Committee on 
Government Reform and to others and made publicly available at no 
charge on GAO's Web site at [Hyperlink, http://www.gao.gov].

If you have further questions about this report, please contact me or 
Sarah Veale at (202) 512-6806 or on [Hyperlink, larencee@gao.gov] or 
[Hyperlink, veales@gao.gov]. Major contributors to this report included 
John W. Barkhamer, Jr., Carole Cimitile, Dewi Djunaidy, Masha Pastuhov-
Pastein, and Amy W. Rosewarne.

Signed by: 

Eileen R. Larence: 
Director, Strategic Issues:

[End of section]

Appendixes:

Appendix I: Scope and Methodology:

To identify opportunities for DHS to improve its management integration 
efforts, we assessed these efforts by using three of the nine key 
practices consistently found at the center of successful mergers, 
acquisitions, and transformations.[Footnote 24] We selected three of 
these practices as criteria for this review because they are especially 
important to ensuring that DHS has the management infrastructure it 
needs at this early juncture in its efforts to sustain the integration 
of the department. The three selected practices are: ensuring top 
leadership drives the transformation, setting implementation goals and 
a time line to build momentum and show progress from day one, and 
dedicating an implementation team to manage the transformation process. 
We assessed the extent to which DHS is using these selected practices 
to support its management integration efforts, i.e., the integration of 
DHS's varied management processes, systems, and people--in areas such 
as information technology, financial management, procurement, human 
capital, and administrative services. We focused our review primarily 
on the management integration activities of DHS's Management 
Directorate because the Homeland Security Act of 2002 establishes that 
the Under Secretary for Management is responsible for the transition 
and reorganization process for the department. However, we limited the 
scope of our review to the integration of management functions at this 
time and did not review mission or program integration efforts of the 
department primarily because GAO has additional work under way on these 
efforts.

We reviewed and analyzed key DHS documents about the department's 
management integration, as well as interviewed key senior leaders in 
the Management Directorate and operational and program leaders from 
across the department. Key DHS documents that we used for our review 
include, but were not limited to, memoranda from the then Secretary and 
Deputy Secretary, the DHS Strategic Plan, various transition and 
integration planning and policy documents, materials from offices 
involved with integration efforts, and Departmental Management 
Directives that addressed the overall approach that each management 
chief was taking to the integration of its relevant management area.

We also asked key senior DHS officials to describe to us DHS's approach 
to its management integration, such as whether DHS had a plan for its 
integration and if a dedicated team was in place to manage the 
integration. Within the Management Directorate, we met with the Under 
Secretary for Management, the Chief Procurement Officer, the Chief 
Financial Officer, the Chief Administrative Officer, the Chief 
Information Officer, and the Chief Human Capital Officer. Other 
officials whom we interviewed included chiefs of staff and/or directors 
of operations for each of the five directorates, and key senior leaders 
from the Secret Service, the Coast Guard, the Bureau of Citizenship and 
Immigration Services, the Office of Public Affairs, and the Office for 
State and Local Government Coordination and Preparedness. We also 
reviewed published assessments on the organization of DHS and 
interviewed the authors of these publications to discuss their views on 
organizational change at DHS.

We also examined reports from GAO, DHS's Inspector General, and others 
that addressed the integration of departmentwide management functions, 
such as the development of an integrated departmental financial 
management system, and information technology, as well as reports that 
focused on the merger of specific agencies or initiatives within the 
Department, such as the Federal Protective Service.

We conducted our work from April 2004 through February 2005 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of Homeland Security:

U.S. Department of Homeland Security: Washington, DC 20528:

February 24, 2005:

Ms. Eileen R. Larence:
Acting Director, Strategic Issues: 
U.S. Government Accountability Office: 
Washington, DC 20548:

Dear Ms. Larence:

RE: Draft Report GAO-05-139, Homeland Security: Comprehensive and 
Sustained Approach Needed to Achieve Management Integration (GAO Job 
Code 450303):

Thank you for the opportunity to review and comment on the subject 
draft report. We generally concur with the recommendations and 
appreciate the acknowledgement of challenges and progress made in 
achieving management integration. The creation of the Department of 
Homeland Security (DHS) is the largest reorganization of government 
agencies and operations in recent history and significant challenges 
exist in merging multiple management systems and processes from 22 
legacy agencies. The Department continues to take significant strides 
in achieving its management integration goals.

We offer the following comments in response to the two recommendations 
made in the report.

Recommendations:

The Secretary direct the Under Secretary for Management, working with 
others, to:

* develop an overarching management integration strategy for the 
department. Such a strategy would, among other things, (1) look across 
the initiatives within each of the management functional units; (2) 
clearly identify the critical links that must occur among these 
initiatives; (3) identify tradeoffs and set priorities; (4) set 
implementation goals and a timeline to monitor the progress of these 
initiatives to ensure the necessary links occur when needed; and (5) 
identify potential efficiencies, and ensure that they are achieved, 
among other things. The department should also use this strategy to 
clearly communicate a consistent set of goals and the progress achieved 
internally to all its employees, and externally to key stakeholders, 
such as the Congress; and:

* designate the planned Business Transformation Office (BTO) within 
DHS' Management Directorate as the dedicated implementation team for 
the department's management integration and provide it with the 
requisite authority and responsibility to help set priorities and make 
strategic decisions to drive the integration across all functions. The 
BTO would also be responsible for helping to develop and implement the 
overarching management integration strategy.

Response:

In October of 2004, the Secretary signed functional integration 
management directives for each of the Management directorate functions: 
administrative services; finance; human capital; information 
technology; and procurement. Also, in Fiscal Year 2005, the Department 
created the Business Transformation Office. The BTO has been 
established as the dedicated resource for providing guidance, 
evaluation, and facilitation for the integration of the Department's 
management processes. It is authorized 5 FTEs for FY 2005.

In response to the first recommendation and significant to effectively 
carrying out the responsibilities of the BTO is the issuance of an 
integration strategy. The BTO is establishing an Integrated Project 
Plan/Integration Strategy and anticipates it will be released by June 
2005. The Integrated Project Plan/Integration Strategy includes an 
Organization Plan defining roles and responsibilities and identifies 
key deliverables and milestones. The BTO will establish processes to 
ensure that information is current and readily available.

The BTO is setting project management standards based on the accepted 
standard methodology from the Project Management Institute's Project 
Management Body of Knowledge. The BTO will be leveraging technology for 
project management tools and will provide certified project management 
expertise in developing project management practices for the Under 
Secretary for Management (USM) to track Functional Lines of Business 
major initiatives.

The BTO is establishing standardized reporting processes for monitoring 
and reporting on the progress of initiatives in three key areas: cost; 
schedule; and performance. Also, the BTO will help to establish 
priorities and identify gaps and will be responsible for identifying 
and managing for the USM the interdependent activities and timelines 
between the Lines of Business for major initiatives. The BTO will also 
develop and publish a communications strategy for both internal and 
external communications.

Additionally, the BTO will evaluate the performance of USM functions in 
providing operational support services in a shared environment. The BTO 
will also provide organizational development support to USM offices and 
departmental offices, proposing process and organizational improvements 
in delivering support services; and will manage the Tri-bureau Shared 
Services Operations Board and evolve it to the next phase as a fully 
functioning shared services delivery model.

The BTO will not be responsible for the actual implementation of the 
Line of Business integration plans. The BTO will track and monitor 
implementation, and provide corrective action/direction when necessary; 
however, each Line of Business is responsible and accountable for 
ensuring the plans for their functions are being appropriately 
implemented.

With respect to the second recommendation, the Homeland Security Act of 
2002 establishes that the Under Secretary for Management is responsible 
for the transition and reorganization process for the department. The 
BTO serves as the agent for the USM and has been vested by the USM with 
the authorities necessary to ensure the Integrated Project 
Plan/Integration Strategy is in place and is used to advise management 
decisions and direction on integration.

We again thank you for the opportunity to provide comments on this 
report.

Sincerely,

Signed by: 

Steven J. Pecinovsky:
Acting Director, GAO/OIG Liaison Office: 
Office of the Chief Financial Officer: 

[End of section]

Related GAO Products:

[End of section]

High-Risk Series: An Update. [Hyperlink, 
http://www.gao.gov/cgiin/getrpt?GAO-05-207] 
Washington, D.C.: January 2005. For more information on the Department 
of Homeland Security's major management challenges, see [Hyperlink, 
http://www.gao.gov/pas/2005/dhs.htm] 

Department of Defense: Further Actions Are Needed to Effectively 
Address Business Management Problems and Overcome Key Business 
Transformation Challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-140T] 
Washington, D.C.: November 18, 2004.

Homeland Security: Management Challenges Remain in Transforming 
Immigration Programs. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-81] 
Washington, D.C.: October 14, 2004.

Department of Homeland Security: Formidable Information and Technology 
Management Challenge Requires Institutional Approach. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-702] 
Washington, D.C.: August 27, 2004.

Homeland Security: Efforts Under Way to Develop Enterprise 
Architecture, but Much Work Remains. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-777] 
Washington, D.C.: August 6, 2004.

Financial Management: Department of Homeland Security Faces Significant 
Financial Management Challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-774] 
Washington, D.C.: July 19, 2004.

Homeland Security: Transformation Strategy Needed to Address Challenges 
Facing the Federal Protective Service. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-537] 
Washington, D.C.: July 14, 2004.

Department of Homeland Security: Financial Management Challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-945T] 
Washington, D.C.: July 8, 2004.

Status of Key Recommendations GAO Has Made to DHS and Its Legacy 
Agencies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-865R] 
Washington, D.C.: July 2, 2004.

Human Capital: DHS Faces Challenges in Implementing Its New Personnel 
System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-790] 
Washington, D.C.: June 18, 2004.

Transfer of Budgetary Resources to the Department of Homeland Security. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-329R] 
Washington, D.C.: April 30, 2004.

Human Capital: Preliminary Observations on Proposed DHS Human Capital 
Regulations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-479T] 
Washington, D.C.: February 25, 2004.

Human Capital: DHS Personnel System Design Effort Provides for 
Collaboration and Employee Participation. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1099] 
Washington, D.C.: September 30, 2003.

Results-Oriented Cultures: Implementation Steps to Assist Mergers and 
Organizational Transformations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-669] 
Washington, D.C.: July 2, 2003.

Homeland Security: Information Sharing Responsibilities, Challenges, 
and Key Management Issues. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-715T] 
Washington, D.C.: May 8, 2003.

Major Management Challenges and Program Risks: Department of Homeland 
Security. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-102] 
Washington, D.C.: January 2003.

Homeland Security: Management Challenges Facing Federal Leadership. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-260] 
Washington, D.C.: December 20, 2002.

Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned 
for a Department of Homeland Security and Other Federal Agencies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-293SP] 
Washington, D.C.: November 14, 2002.

Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A 
Potential Strategy to Address Federal Governance Challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-192SP] 
Washington, D.C.: October 4, 2002.

Homeland Security: Critical Design and Implementation Issues. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-957T] 
Washington, D.C.: July 17, 2002.

Homeland Security: Proposal for Cabinet Agency Has Merit, But 
Implementation Will Be Pivotal to Success. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-886T] 
Washington, D.C.: June 25, 2002.

Executive Guide: Effectively Implementing the Government Performance 
and Results Act. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-96-118] 
Washington, D.C.: June 1, 1996.

DHS Products:

Major Management Challenges Facing the Department of Homeland Security. 
OIG-05-06. DHS Office of the Inspector General. Washington, D.C.: 
December 2004.

Review of the Status of Department of Homeland Security Efforts to 
Address Its Major Management Challenges. OIG-04-21. DHS Office of the 
Inspector General. Washington, D.C.: March 2004.

(450303):

FOOTNOTES

[1] DHS was initially created with 22 originating agencies, and the 
Plum Island Animal Disease Center was transferred into DHS in June 2003.

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

[3] DHS, Major Management Challenges Facing the Department of Homeland 
Security, OIG-05-06 (Washington, D.C.: Dec. 1, 2004).

[4] GAO, Highlights of a GAO Forum, Mergers and Transformation: Lessons 
Learned for a Department of Homeland Security and Other Federal 
Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002) and GAO, 
Results-Oriented Cultures: Implementation Steps to Assist Mergers and 
Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 
2003).

[5] Pub. L. No. 107-296,  701(a)(9).

[6] The Homeland Security Act established five directorates within DHS 
for each of the following areas: (1) management, (2) science and 
technology, (3) information analysis and infrastructure protection, (4) 
border and transportation security, and (5) emergency preparedness and 
response. The U.S. Secret Service and the U.S. Coast Guard were also 
transferred to DHS, but are not within a directorate.

[7] The White House, Department of Homeland Security Reorganization 
Plan (Washington, D.C.: Nov. 25, 2002).

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

[9] In addition to reporting to the Under Secretary for Management, the 
CFO is also to report to the DHS Secretary on matters of financial 
management. See 31 U.S.C. 902(a)(1); Department of Homeland Security 
Financial Accountability Act of 2004, Pub. L. No.108-330,  3(a), (e).

[10] See GAO-03-293SP.

[11] See GAO-03-669.

[12] GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 
1996).

[13] GAO, Homeland Security: Proposal for Cabinet Agency Has Merit, But 
Implementation Will Be Pivotal to Success, GAO-02-886T (Washington, 
D.C.: June 25, 2002); GAO, Homeland Security: Critical Design and 
Implementation Issues, GAO-02-957T (Washington, D.C.: July 17, 2002); 
See GAO-03-102.

[14] GAO, Homeland Security: Management Challenges Facing Federal 
Leadership, GAO-03-260 (Washington, D.C.: Dec. 20, 2002).

[15] GAO, Homeland Security: Transformation Strategy Needed to Address 
Challenges Facing the Federal Protective Service, GAO-04-537 
(Washington, D.C.: July 14, 2004).

[16] Booz | Allen | Hamilton, Department of Homeland Security 
Management Study, (Washington, D.C.: July 8, 2003).

[17] Also see DHS, Office of Inspector General, Major Management 
Challenges Facing the Department of Homeland Security, OIG-05-06 
(Washington, D.C.: December 2004); DHS, Office of Inspector General, 
Review of the Status of Department of Homeland Security Efforts to 
Address Its Major Management Challenges, OIG-04-21 (Washington, D.C.: 
March 2004).

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

[19] Department of Homeland Security (DHS), Securing Our Homeland, U.S. 
Department of Homeland Security Strategic Plan (Washington, D.C.: 
February 2004).

[20] DHS, Management Directorate, 21st Century Department DRAFT "Themes 
and Owners" Paper, April 5, 2004.

[21] See H.R. Conf. Rep. No. 108-774 (2004), accompanying the 
Department of Homeland Security Appropriations Act for Fiscal Year 
2005, Pub. L. No. 108-334 (Oct. 18, 2004).

[22] GAO, Highlights of a GAO Roundtable: The Chief Operating Officer 
Concept: A Potential Strategy to Address Federal Governance Challenges, 
GAO-03-192SP (Washington, D.C.: Oct. 4, 2002); GAO, Department of 
Defense: Further Actions Are Needed to Effectively Address Business 
Management Problems and Overcome Key Business Transformation 
Challenges, GAO-05-140T (Washington, D.C.: Nov. 18, 2004).

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

[24] GAO-03-669.

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