Department of Homeland Security:

Science and Technology Directorate's Expenditure Plan

GAO-07-868: Published: Jun 22, 2007. Publicly Released: Jun 22, 2007.

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In recent years GAO and others have reported on problems in the financial management environment at the Department of Homeland Security's (DHS) Science and Technology Directorate (S&T). S&T was established by the Homeland Security Act of 2002 to, among other things, coordinate the federal government's civilian efforts to identify and develop countermeasures to emerging terrorist threats to our nation. As DHS's primary research and development arm, the directorate is tasked with providing federal, state, local, and tribal officials with state-of-the-art technology and other resources, such as protocols and training procedures for use in responding to, and recovery from, chemical, biological, radiological, nuclear, and explosive attacks. S&T is led by an Under Secretary and has a Chief Financial Officer (CFO) who is responsible for all budgeting and accounting for financial resources. S&T receives funds for research, development, acquisition, and operations. It also receives funds for management and administration that support the operations of the directorate in both headquarters and the field, such as the expenditures for personnel compensation and benefits, travel, and rent. The Department of Homeland Security Appropriations Act, 2007 (Appropriations Act) provided about $973 million for S&T, of which about $838 million (about 86 percent) was for research, development, acquisition, and operations, and $135 million (about 14 percent) was for salaries and expenses of the Office of the Under Secretary and for management and administration of programs and activities. The Appropriations Act restricted S&T from obligating $60 million (about 44 percent) of the $135 million until the Secretary of Homeland Security prepared a fiscal year 2007 expenditure plan that was to be received and approved by the Committees on Appropriations of the Senate and House of Representatives that (1) was broken down by program, project, and activity (PPA), (2) contained a detailed breakdown and justification of the management and administrative costs for each PPA, and (3) described the method utilized to develop the budget for administration costs in the budget requests for fiscal years 2006 and 2007. The Appropriations Act also required GAO to review the plan. In responding to this mandate, we assessed whether S&T's fiscal year 2007 expenditure plan satisfied the above conditions of the Appropriations Act. In April 2007, we briefed Congress on the preliminary results of our work. On May 9, 2007, Congress released the $60 million management and administration funding that had been restricted by the act.

The S&T fiscal year 2007 expenditure plan, including related documentation and other information provided by S&T program officials, did not fully satisfy the conditions set forth in the Appropriations Act. Prior to the obligation of the $60 million, the Appropriations Act required S&T to provide an expenditure plan by PPA, as well as a detailed breakdown and justification for the projected management and administrative expenditures by PPA. While the research and development data in the expenditure plan were presented by PPA, such as for laboratory facilities and explosives, the management and administration data were not. For example, S&T's expenditure plan described the projected expenditures for research, development, acquisition, and operations for each specific PPA, whereas the projected management and administrative expenditures were not broken out by these categories. Because the management and administration data were not broken out by PPA, the condition requiring a detailed breakdown and justification of these projected expenditures by PPA was not satisfied. S&T officials indicated that the breakdown and justification of these expenditures were not provided in the expenditure plan because S&T manages these costs by business areas and functions, such as business operations, rather than by PPA. Further, according to S&T officials, the management and administration account represents funds that support S&T's entire mission and, for the most part, are not directly attributable to any one PPA. However, in response to our data request, S&T broke out the projected management and administration expenditures by PPA using various methodologies to estimate the allocation of these costs to each PPA. Using such a methodology is consistent with generally recognized allocation methodologies. For example, S&T apportioned the total business operations expenditures, which include, among other things, rent, supplies, and employee bonuses and awards, to each PPA based on the number of full-time equivalent (FTE) staff budgeted for each of them. According to S&T officials, accounting for these costs by PPA--in order to have actual cost data to use in formulating future estimates rather than allocating projected expenditures across PPAs--would require either significant changes to its financial accounting system or the use of an off-line system designed solely for this purpose. The expenditure plan, including related documentation and other information provided by program officials, partially satisfied the legislative condition to describe the method utilized to derive the budget for projected administration expenditures in the fiscal years 2006 and 2007 budget requests. The plan identified the categories of expenses that the budget requests were intended to cover--such as salaries, benefits, and business operations--and indicated that the fiscal year 2007 budget request was developed based on the prior year expenditures for these categories. However, the plan did not describe the method used to develop each category of expenses. S&T officials acknowledged this and added that in addition to historical expenditure data from S&T's financial systems, the budget requests were also based on projections of new expenses.

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