[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
DHS IN TRANSITION: ARE FINANCIAL MANAGEMENT PROBLEMS HINDERING MISSION
EFFECTIVENESS?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
FINANCE, AND ACCOUNTABILITY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JULY 27, 2005
__________
Serial No. 109-82
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
24-086 WASHINGTON : 2005
_________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government
Printing Office Internet: bookstore.gpo.gov Phone: toll free
(866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail:
Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada BRIAN HIGGINS, New York
KENNY MARCHANT, Texas ELEANOR HOLMES NORTON, District of
LYNN A. WESTMORELAND, Georgia Columbia
PATRICK T. McHENRY, North Carolina ------
CHARLES W. DENT, Pennsylvania BERNARD SANDERS, Vermont
VIRGINIA FOXX, North Carolina (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Government Management, Finance, and Accountability
TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee
Ex Officio
HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Tabetha Mueller, Professional Staff Member
Nathaniel Berry, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on July 27, 2005.................................... 1
Statement of:
Hale, Janet, UnderSecretary for Management, Department of
Homeland Security; Andrew Maner, Chief Financial Officer,
Department of Homeland Security; Linda Combs, Comptroller,
Office of Federal Financial Management, Office of
Management and Budget; and Richard Skinner, Acting
Inspector General, Department of Homeland Security......... 6
Combs, Linda............................................. 23
Hale, Janet.............................................. 6
Maner, Andrew............................................ 11
Skinner, Richard......................................... 29
Letters, statements, etc., submitted for the record by:
Combs, Linda, Comptroller, Office of Federal Financial
Management, Office of Management and Budget, prepared
statement of............................................... 25
Hale, Janet, UnderSecretary for Management, Department of
Homeland Security, prepared statement of................... 8
Maner, Andrew, Chief Financial Officer, Department of
Homeland Security, prepared statement of................... 14
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of Mr. Ervin. 4
Skinner, Richard, Acting Inspector General, Department of
Homeland Security, prepared statement of................... 31
DHS IN TRANSITION: ARE FINANCIAL MANAGEMENT PROBLEMS HINDERING MISSION
EFFECTIVENESS?
----------
WEDNESDAY, JULY 27, 2005
House of Representatives,
Subcommittee on Government Management, Finance, and
Accountability,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts, Gutknecht, Duncan, and
Towns.
Staff present: Mike Hettinger, staff director; Dan Daly,
counsel; Tabetha Mueller, professional staff member; Jessica
Friedman, legislative assistant; Nathaniel Berry, clerk; Hailey
Gilmore and Lauren Kovarik, interns; Adam Bordes, minority
professional staff member; and Jean Gosa, minority assistant
clerk.
Mr. Platts. This hearing of the Government Reform
Subcommittee on Government Management, Finance, and
Accountability will come to order.
We are going to begin with opening statements, with the
hope of getting through both Member and witness opening
statements before the first round of votes, then have probably
about a 25 minute recess during the votes, and then come back
to Q and A, depending on the time of Mr. Towns, Mr. Souder, and
others who we believe will join with us at some point. Either
they will offer their statements for the record or have
opportunity to present them, as well.
Financial management of the Department of Homeland Security
is regrettably somewhat in disarray. Recent reports have
revealed serious accounting problems, including mismanagement
of large contracts at the Transportation Security
Administration, ineffective control of grants processing, and
budget shortfalls at the Bureau of Immigration and Customs
Enforcement.
In a statement prepared for this hearing, former DHS
Inspector General Clark Kent Ervin highlighted the operational
impact of this budget shortfall, and I would like to read a
brief statement from that ``ICE was forced to institute a
hiring freeze. The agents had insufficient funding to fill
their cars with gas, pay confidential informants, and even use
their cell phones.''
We owe it to the men and women who protect our borders and
put their lives on the line day in and day out to do a better
job managing their department. We owe it to the taxpayers to do
a much better job keeping track of the dollars they entrust to
us to secure the homeland.
We cannot continue to have contracts mishandled because the
appropriate controls are not in place. We cannot continue to
spend money and not know where it went. We cannot continue to
experience budget shortfalls because projections were made with
unreliable and inaccurate data. This must be a top priority for
Secretary Chertoff and all senior management officials at the
Department.
Luckily, we have a blueprint for a sound financial
management foundation: the Chief Financial Officers Act of
1990. The CFO Act was debated over a period of 5 years and
passed in response to financial management crises not unlike
those currently being experienced at DHS. The CFO Act
established a centralized financial management structure
designed to provide CFOs with the authority to make
improvements and the responsibility to be held accountable for
their efforts. This law applies to every major department in
the U.S. Government.
Congress provided an important tool by applying the
provisions of the CFO Act to the Department of Homeland
Security, giving the Department a mandate to adopt the
appropriate financial management foundation. Behind the scenes,
this committee has been working for over a year with the
Department to ensure that this law was appropriately
implemented and that all requirements were met. We worked with
the Department in good faith, allowing a dual reporting
structure so that the CFO could interface both with the
undersecretary for management, while still reporting directly
to the Secretary.
The Department recently completed its second stage review;
but, unfortunately, the version of the new organizational chart
that the Secretary presented to the Congress and the public did
not include any reference whatsoever to the Office of the CFO.
I am pleased to say that a new version of this chart, which I
received last evening, does, in fact, represent a structure
that gives the CFO a clear delineation and direct reporting
relationship to the Secretary.
We do not presume to think that implementing this structure
will be a silver bullet and solve all the problems at DHS, but
it is a foundation that will ensure that financial management
is a top priority and that the CFO has the necessary standing
to impose the needed reforms, and that this standing and
prioritization is understood throughout the Department and with
all partners of the Department.
One requirement of the law that has not been addressed,
however, is the fact that the CFO candidate must be confirmed
by the Senate--something that has not yet occurred. I am
interested to hear what steps will be taken to remedy this
situation and where we currently stand.
Yesterday marked exactly 58 years since President Truman
signed the National Security Act, creating the Department of
Defense on July 26, 1947. In the nearly six decades since its
creation, DOD has yet to get a handle on its financial
management. We cannot afford to have DHS go down the same road,
and appropriate focus on financial management sooner rather
than later at the Department of Homeland Security is a key step
to avoiding a repeat of DOD's longstanding financial problems.
Complying with the CFO Act is not onerous, and it is clearly
not optional.
Today we are pleased to hear from the Honorable Janet Hale,
Undersecretary for Management at the Department of Homeland
Security; Mr. Andy Maner, the Department's Chief Financial
Officer; the Honorable Linda Combs, Comptroller of the Office
of Federal Management at the Office of Management and Budget;
and the Honorable Richard Skinner, the Acting Inspector General
at the Department of Homeland Security.
We certainly thank each and every one of you for being
here, along with your staff--your presence here today, as well
as the testimony in writing you submitted in advance, and your
willingness to take our questions.
Before we continue, I would like to ask unanimous consent--
as the only one present, I guess that will be an easy one. We
will probably reaffirm that with Mr. Towns once he arrives. We
would include the statement I referenced from former Inspector
General Clark Kent Ervin. That statement will be included in
the record.
[The prepared statement of Mr. Ervin follows:]
Mr. Platts. While we await Mr. Towns' arrival, and that may
occur after the votes, I think what we will do is proceed to
our witnesses' opening statements. As a practice of the full
committee and the subcommittee, we would ask all of our
witnesses to stand and be sworn in, and any staff that will be
giving you guidance as a part of your testimony, if they would
also stand and be sworn.
[Witnesses sworn.]
Mr. Platts. Thank you. The clerk will note that all
witnesses affirmed the oath.
Again, we appreciate your written testimonies. If you can
do your best to try to stay to about 5 minutes, that would
allow us to hopefully get everyone in before the votes.
Secretary Hale, we will begin with you.
STATEMENTS OF JANET HALE, UNDERSECRETARY FOR MANAGEMENT,
DEPARTMENT OF HOMELAND SECURITY; ANDREW MANER, CHIEF FINANCIAL
OFFICER, DEPARTMENT OF HOMELAND SECURITY; LINDA COMBS,
COMPTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT, OFFICE OF
MANAGEMENT AND BUDGET; AND RICHARD SKINNER, ACTING INSPECTOR
GENERAL, DEPARTMENT OF HOMELAND SECURITY
STATEMENT OF JANET HALE
Secretary Hale. Thank you, Mr. Chairman. Thank you for
having all of us here today to reemphasize our personal
commitments as well as the professional commitments of the
Department of Homeland Security to financial integrity and
accountability.
As you have heard all of us say over the last 2\1/2\ years,
this was a divestiture, a merger, an acquisition of a dot com,
and startup of an international conglomerate. It was brought
together to strengthen the security of this homeland, but to do
so with integrity and strong financial resources being
dedicated to that front-line mission. That is why it is so
important for us to do just the sort of things that you have
referenced in your opening remarks.
There were 180,000 people, $31 billion, and 22 agencies
that came into this Department. We took our stewardship of both
front-line mission, but integration of those programs with,
again, maximizing the resources to the front line and being
able to consolidate into a much more efficient and effective
manner over these last 2\1/2\ years. In my testimony you will
see some of the accomplishments. I am so proud of the men and
women who have been able to accomplish that.
Secretary Chertoff in his very early days reemphasized, as
he did again in the last 2 weeks when he reemphasized in second
stage review, the importance of financial integrity and
procurement. He asked Acting I.G. Rick Skinner and the Chief
Procurement Officer, Greg Rothwell, to come to his office in
those very early days to sort of say how can we exactly address
the sort of issues that you have talked about. He wants to be
sure that we spend the taxpayers' money wisely and, in fact,
has asked all of us to be vigilant of that task.
You did reference in his second stage review the
organization chart, and I would like to just emphasize again to
you, sir, that this was an attempt to actually lay out the
organizational structure. I was pleased to be able to submit
with my testimony that clarification. There is no doubt in our
mind that Andy Maner, the CFO, is a direct report to the
Secretary, and I do truly appreciate your leadership in
recognizing the dual report in your legislation.
Andy, the CFO, needs to have that relationship with the
Secretary, the Deputy Secretary, and with the agency heads, as
well as the dual report, so he has that. He has it through
small, but tremendously meaningful daily meetings with the
Secretary. He has it in sort of the ability to develop,
formulate, and execute the budget and to lead the financial
management aspects of the Department. We see him as a leader.
We see that access, that direct report, but also that dual
report is incredibly important.
I would like to just take a couple seconds on why that dual
report is important because we all recognize that support and
access that he needs to have to the Secretary. But, as you
referenced, the Chief Procurement Officer, the Chief
Information Officer [CIO], the Chief Human Capital Officer--
that is a management team that, in fact, the synergies between
them can strength and guide our financial management and our
accountability throughout the Department. I think they have
been a great team, and I think that dual report is one that has
been important. Again, sir, I recognize and thank you for that
leadership in recognizing that.
You asked about the requirement of the law to submit a
nomination for the CFO. We do take that seriously in the
Department. As you and I have talked and as others in the
Department have talked with you, we are actively recruiting a
CFO and hope to have one selected in the very near future. I
can and will again reaffirm to you that we will keep this
committee apprised of the progress and actually look forward to
having a selection, as I said, in the near future.
We take this act seriously. We take your leadership and
your stewardship and your oversight of the Department
seriously. I actually think that I will leave the details of
the financial act to Andy Maner as he talks about it. But,
again, I want to thank Andy for his professional leadership in
the CFO as he has done it before the act and during the act.
Thank you, Mr. Chairman, for the opportunity to testify in
front of you today.
Mr. Platts. Thank you, Madam Secretary.
[The prepared statement of Secretary Hale follows:]
Mr. Platts. Mr. Maner.
STATEMENT OF ANDREW MANER
Mr. Maner. Thank you, Mr. Chairman. I want to also thank
you for inviting me up here today. It has been about a little
over a year since I have been up here. I just would ask that my
full written statement be submitted for the record.
I appreciate the work that this committee has undertaken
and its ongoing concern and support for financial
accountability at DHS. I also appreciate the support of my
fellow panel partners here that they have given to DHS as we
have stood up the Department in our efforts to instill sound
practices throughout the Department. The recent attacks in
London remind us DHS has an incredibly important mission.
Protecting this Nation and its citizens from the threat of
terrorism is why this Department was created and is the No. 1
priority of this Department.
That said, as Undersecretary Hale alluded to, financial
management is also extremely important. Secretary Chertoff, in
his announcements this month, has reaffirmed his commitment to
the stewardship of national resources as an element and one of
the key imperatives that he wants to monitor as we drive his
near-term agenda at DHS.
The vision for financial management at DHS is one where
there exists a framework of people, processes, and systems
which stakeholders such as leaders, managers, people like
myself are to have accurate, timely, and useful information to
make effective decisions in support of our missions. This
vision means that we can support an unqualified opinion on our
financial statements, we can make reasonable assurances over
our internal controls, and we can relate our spending to our
performance, and that we have an integrated financial
management system or group of systems, and, finally, that we
have a cadre of dedicated and highly talented financial
managers to pull this together.
As CFO of the Department, I am keenly aware of the
importance of sound financial management and am proud of the
great progress the Department has and continues to make in
furtherance of this vision.
In January we set forth a 3-year strategy for receiving
unqualified opinion on our consolidated financial statements
and eliminating all material weaknesses. This strategy involves
achieving full visibility of our financial management issues
and challenges, correcting our material weaknesses, and
complying with the internal control provisions of the Financial
Accountability Act.
We are hard at work on correcting material weaknesses
identified in our 2004 audit. Many of the underlying issues
behind the weaknesses are very complex, and in most cases have
no quick fix, but we are taking aggressive, methodical, and
appropriate steps to address them.
As for the material weaknesses involving financial
management and the structure and processes in my office and
around my office, significant accomplishments have been made to
date. We have instituted stronger quality control processes by
issuing guidance to our components much earlier in the process.
We have hired and contracted many additional skilled accounting
personnel. In fact, the FTE in my office has nearly doubled
since I was here last.
We have initiated a comprehensive internal control
assessment of our process. We have significant open
communication and regular reporting with the Secretary, his
team, key leadership, and stakeholders such as OMB, the IG,
GAO, and our auditors.
The Secretary has clearly communicated in writing our goals
for financial improvement to our agencies. We have actively
engaged our components through monthly CFO councils, weekly
working groups, and, of course, our internal control meetings.
All organizations with internal weaknesses have developed their
corrective action plans and spell out how they will remediate
these actions. We hired a Deputy CFO who is probably among the
best in Government to lead a lot of these efforts.
We are also making progress in our efforts to improve our
financial management systems, which is a key component of all
this. Since I have testified before this committee, we have
completed an exhaustive Department-wide requirements definition
and design phase, hired a systems integrator; and we have
identified a comprehensive, Department-wide, not just Bureau-
wide, Department-wide solution. We have completed an
enterprise-wide buy for software. We have begun work on e-
travel and on other financial management issues such as a
dashboard and other payroll improvements.
We are also developing performance metrics so that we know
how we are doing and our CFOs and other agency heads know how
they are doing against those goals.
As far as implementation of the Financial Accountability
Act, we are making great progress here and I am very proud of
our efforts.
While I believe that GAO's criteria for assessing whether
an organization is ready to support such an audit would suggest
that DHS might not be ready, it is, nonetheless, a requirement
that we are addressing with vigor. The task of examining and
documenting internal controls over financial reporting is time
consuming and very challenging, as many in the private sector
and the Government would attest, but we agree that it is
imperative that DHS move as swiftly as possible to implement.
As Secretary Chertoff reported to you last month in a
letter, DHS has initiated extraordinary steps to organize the
Department to prepare for and execute an audit of our internal
controls. We established an Internal Control Committee
comprised of senior DHS executives to orchestrate our
implementation of the act. We have developed and published an
implementation guide for complying with those provisions of the
act. We have initiated a comprehensive internal control
assessment of the reporting processes within my office, and
Coast Guard, one of our largest components, has also initiated
process level documentation files. And over the summer we will
be executing a detailed and technical seven-step plan to
support the Secretary's assertion this year and to prepare for
our audit next year.
I am obviously very pleased with our trailblazing
implementation of an internal controls process. Implementation
concerns aside--and there are many--the Department's initial
efforts are ernest, credible, and I intend for DHS to be a
leader in the Federal Government in establishing best practices
in reporting on internal control.
In closing, let me thank you personally and the
subcommittee and assure you that DHS and I are committed to all
parts of the Financial Accountability Act, and we believe that
effective internal control is, indeed, a key to accountability.
DHS leadership is committed to a culture of integrity,
accountability, and effectiveness, and we will continue to work
with Congress, OMB, GAO, and the IG to ensure inherited
weaknesses do not become ingrained into our operation.
Thank you, Mr. Chairman.
Mr. Platts. Thank you, Mr. Maner.
[The prepared statement of Mr. Maner follows:]
Mr. Platts. Dr. Combs.
STATEMENT OF LINDA COMBS
Ms. Combs. Thank you, Chairman Platts and members of the
committee. I thank you for the opportunity to appear before you
again today to discuss the financial management issues at the
Department of Homeland Security.
The administration has made improving financial management,
as you know, one of its top priorities. The President, through
his management agenda, is holding executive departments and
agencies accountable for achieving clean audits, building
strong internal controls, and creating an atmosphere here
timely and accurate financial data is used by agency leaders on
a day-to-day basis to inform key decisions and strategies
within their departments.
It is through these financial disciplines that the
Government can ensure that the American public has good
stewards at the helm for the American taxpayers; also, that
Government leaders are making smart decisions, and that those
dollars that the Federal agencies have can carry out their
mission successfully.
Nowhere are these objectives more important than at the
Department of Homeland Security. We all know the critically
important mission that has just been discussed by my colleagues
here that this Department is charged with, and we all know the
enormous challenges that the Department has faced in bringing
together numerous and complex organizations to help achieve
their mission.
In my role in the Office of Management and Budget as
Comptroller, I am charged with carrying out the President's
management improvement initiative and financial management
Government-wide; therefore, I work closely with Homeland
Security on these efforts. I am pleased to be able to sit here
with my colleagues today, who I believe are very strong leaders
and have a very clear and strong understanding of financial
challenges that they face. They are committed to doing what is
necessary to meet those challenges, and they have developed an
aggressive schedule for implementing critical improvements, and
they have had significant and important accomplishments that
are serving as a foundation for further progress.
In fiscal year 2003, the year of the DHS existence, they
conducted an audit of significant parts of financial operation,
and even though they were not required to do that at that
particular time. But this process provided the Department with
an early visibility into internal control and other financial
vulnerabilities and provided a very good foundation for moving
forward.
In fiscal year 2004 DHS completed a more comprehensive
review of financial management activities, and did so just 2
days past the 45-day deadline that was accelerated, and the
previous year I think they had reported in 136 days, as opposed
to 45. That is a significant accomplishment.
DHS has also been working aggressively to ensure that its
corrective actions lead to fewer material weaknesses in its
2005 audit report. They have moved quickly to comply with
requirements for an audit opinion on internal controls pursuant
to public law 108-330. The Department has taken many critical
steps, some you have heard about already and some you will hear
about further today, including the establishment of the
Internal Controls Committee. And, having done that before in
previous agencies myself, I can attest to how important that is
throughout the Government in having that in the individual
departments.
Developing an implementation guide and strategy and
adopting the GAO internal control management and evaluation
tool, aligning those efforts with the Government-wide
implementation guidance for circular A-123, those are heroic
efforts.
In closing, the administration remains committed and
remains dedicated to improving overall financial management
across Government.
Given the Department of Homeland Security's unique and
vital purpose of protecting our homeland, I can assure you that
we are committed to closely monitoring the Department's
progress; to ensure that it continues to take the necessary
steps; to improve its financial reporting, financial
management, and internal control processes; and offer any help
that we can along the way in terms of assuring their success.
I look forward to maintaining an ongoing dialog with this
subcommittee on the specific efforts and progress that Homeland
Security is making to meet its financial management and
reporting goals and requirements.
Thank you, Mr. Chairman, for the opportunity to be before
your committee today. I am pleased to answer any questions.
Mr. Platts. Thank you, Dr. Combs.
[The prepared statement of Ms. Combs follows:]
Mr. Platts. Mr. Skinner.
STATEMENT OF RICHARD SKINNER
Mr. Skinner. Thank you, Chairman Platts, for the
opportunity to testify today about the OIG's work regarding
financial management at the Department of Homeland Security.
I would like to summarize three issues from my prepared
statement that I have submitted for the record, and that is the
Department's current financial reporting status, implementation
of internal control requirements, and the role of the CFO.
First, concerning the state of the Department's current
financial reporting, as you know, DHS received a disclaimer of
opinion on its 2004 financial statements. However, this
disclaimer obscured some very good news, and that is, for
several DHS components with accounting operations, we noted
relatively few problems that contributed to the Department's 10
material weaknesses. When one analyzes the reasons for the
disclaimer in the material weakness, the critical path for
improving financial reporting becomes clear; that is, fix the
process at Immigration and Customs Enforcement [ICE], and at
the Coast Guard and at the Department's CFO office.
I am pleased to report that the Department has taken
significant steps in addressing our recommendations regarding
the structure of the CFO's office. The CFO's office, as Andy
Maner has already pointed out, has hired a deputy and several
accountants and contracted with an accounting firm to evaluate
the consolidated financial reporting process. Also, the CFO has
developed automated procedures that identify abnormalities in
financial reporting. The bureaus research the abnormalities and
the CFO monitors the bureaus' progress in correcting them. We
will be reviewing the utility of these changes in our current
audit cycle.
The Coast Guard has also made some structural improvements.
It has hired an experienced civilian financial manager to
coordinate its financial reporting in order to lend continuity
to the rotational environment of the military. The Coast Guard
also has hired a contractor to evaluate its internal controls
for certain financial processes as part of the Department's
overall effort to implement the DHS Financial Accountability
Act.
ICE presents the most difficult financial reporting
challenge for DHS. Its financial management problems have
reverberated throughout DHS, consuming large amounts of
management time and affecting the accounts of other significant
DHS components. We reported in 2004 that ICE fell seriously
behind in its basic accounting functions. Many of these
problems persist today. To help address these issues, ICE has
recently appointed a new acting CFO and financial management
director.
Second, concerning the implementation of the internal
control requirements of the DHS Financial Accountability Act,
this presents a tremendous challenge to DHS, a challenge that
the Department is taking very seriously. The CFO is committing
Department and bureau resources to the project and has taken or
is taking the necessary actions to meet this requirement. But
this is not going to be an easy task. The Department is
starting in the hole, so to speak; that is, as a new, not-yet
fully integrated organization with 10 material weaknesses, a
disclaimer on its 2004 financial statements, and major
accounting problems with two of its critical components, ICE
and Coast Guard. Nevertheless, with the right resources, a
genuine commitment, and a sustained leadership, DHS can be
successful implementing this requirement.
Finally, concerning the need to strengthen the role of the
CFO, I had previously reported my concern about the CFO's
authority within the Department in our 2004 management
challenges report. My concern was that under the Department's
management directive the CFO does not have direct authority
over financial management personnel at the component level.
Component heads retained control over the financial management
resources in the respective organizations. This concept of
operation tends to divide the responsibility for financial
management from the authority to command the resources needed
for good financial management.
Notwithstanding my concerns in this regard, however, I am
encouraged by the Secretary and Deputy Secretary's commitment
to financial management. In my meetings with them, it became
clear to me that they have made financial management in the
Department a priority, as evidenced by the CFO's direct
reporting responsibilities to the Secretary on all financial
management issues.
The results of our ongoing audit of the Department's
financial reporting will go a long way in determining whether
new authorities vested in the CFO is sufficient for good
Department-wide financial management.
Mr. Chairman, that concludes my remarks. I will be happy to
answer questions.
Mr. Platts. Thank you, Mr. Skinner.
[The prepared statement of Mr. Skinner follows:]
Mr. Platts. I appreciate all four of your opening
statements. I am going to recess now to the call of the Chair
and hopefully be back in 20 or 25 minutes. I apologize for
keeping you waiting.
[Recess.]
Mr. Platts. We will reconvene the hearing.
I am pleased to have been joined by our ranking member, Mr.
Towns from New York. He is going to submit his opening
statement for the record without objection.
I know Mr. Duncan will be here shortly.
We are going to go into the questions. Again, I thank each
of you for your written statements and your testimony here
today. I want to say up front that, while we want to have a
frank and substantive dialog with you today, that I certainly
appreciate the dedicated work of each of you and your
colleagues in your respective offices, and appreciate the
efforts you are making on behalf of all of our fellow citizens.
I think we are all after the same thing, which is an
accountable Federal Government and, in specific in this case, a
well-run and efficient Department of Homeland Security that can
well fulfill its critically important mission. As Mr. Maner
said, given the attacks in recent weeks in Great Britain, all
the more important a reminder of the nature of that mission. It
is why we, quite frankly, have spent as much time as we have on
the financial management of the Department, because clearly the
better we do on financial management the more resources are
available to that front-line mission, and that we really are
after achieving that ultimate goal.
I want to begin, Mr. Maner, with the internal control audit
issue. I appreciate directly in our conversations and in other
forums you have expressed concerns about the process for moving
forward with the internal control audit and the timing of it
for the 2006 fiscal year. One of the things I have read, or
maybe I have taken from your comments, is the concern that your
audit is not going to be maybe a good audit, in other words, a
clean audit or a very positive audit, because of not being able
to have everything done in advance that you would like to.
Quite honestly, I would expect it to highlight some
deficiencies and do not think that is a bad thing though.
The analogy would be to last week when Dr. Combs was here
with us on improper payments, and I said it may sound a little
unusual but I am hoping that this year's number is higher than
last year's $45 billion because we know the money is out there
and I would rather we identify the improper payments because
then we can go after and try to prevent them in the future by
uncovering them. That is really what we see with the internal
control audit is to help identify problem areas.
That being said, where do you stand today as far as a
comfort level of us going forward and that we are not looking
for a clean audit but just to get to that better--and, in fact,
your statement kind of made it for me. You were talking about
2004 being your baseline audit because you address the
additional four statements as opposed to the 2003 audit, and in
your words, ``The harder and deeper you test a system, the
truer, more complete an assessment you get and the more
weaknesses you are likely to find. My goal is to get to
bedrock.'' That is exactly what we are after in the internal
audit, and, again, where you are today.
Mr. Maner. Sure. Well, first of all, I think many in the
Government, we are trying to all find our way through this.
This audit, probably one of this size has not been attempted
before, so we are working with OMB, working with our auditor.
And so where am I today? Again, GAO has spoken on this issue,
which is: when is an entity ready for an audit of this size and
of this scope? That is really what I have been talking about.
It does not do you all the good that you want to do an audit if
you are not ready for an audit.
What do I mean by that? So much of an internal controls
audit, really, so much of any audit, is the planning and
documentation phase. In other words, an auditor is going to
come into a room on internal controls just as they would a
balance sheet and say, ``OK, show me your documentation.'' If I
do not and the Department and every component that is viable
does not have that documentation done, the auditor could say,
``I cannot. I do not have enough information. I have to
disclaim this audit.'' And so my statement and my thinking is I
just believe that we need to be ready for the audit, and that
is producing for an internal controls audit, as you know, a
massive amount of documentation.
So we are going down the road. We have put our planning
guidance out, as you know, and we are going to do it. But I am
mindful of the statements GAO has made about when is someone
ready for an audit. I am mindful of the push back and the
issues we have discussed within our own Internal Controls
Committee, but, to the broader point, we are going to do it, we
are going to do it as best we can, and we are going to get
better every year.
Mr. Platts. I agree that the audit readiness and
preparation is key here, and really one of the reasons of when
we agreed to 1 year, doing 2006 instead of 2005, was to give
that opportunity. But I also look at it that if we had said
2007, somehow we would fill all the time between now and 2007.
If we had said 2008, in other words, human nature is if we have
a deadline we all the more work to make that deadline. That is
part of that push.
You reference in your testimony, in talking about the
internal control audit, one of the challenges apparently is in
the staff, and, in your words, very taxing on a thin financial
management cadre. It is something I believe the Inspector
General has referenced, as well, as far as the ability from the
human capital resources to have enough experts, enough
individuals.
When I read both the IG's statement and yours, I take that
perhaps you do not have enough staff, by what you are saying.
If that is the case, have you made requests for additional
staff in order to comply with the law, which is to be ready for
that 2006 audit?
Mr. Maner. Sure. Before I address staffing, let me just
make one follow-on point to your comments about your delay.
You are absolutely right. You will fill the time. I just
want to continue to assure this subcommittee that, because we
have 10 material weaknesses on international controls already
identified by ourselves and our auditor, I just want to make
sure all realize that those are serious weaknesses that give
us, that have us moving in the right direction, so the ball is
moving forward. I just wanted to make that point.
In terms of staffing, of course, because this is relatively
new in the Government and new even to the private sector, it is
not about numbers of people. It is certainly about the quality
of the people. People have undergone something this rigorous.
And so I believe we do have the right number of people, but we
have asked for and the appropriation has been generous to date
for additional dollars so we can get some advice from the
outside, and we have done that.
So at present I am pleased with our staffing in that our
financial management shop and in my office total our staffing
has doubled since I have been there. So numbers of people not
as important, but both ourselves and our components are going
to need to add this expertise, for sure, to be able to do this.
Mr. Platts. What did you mean then by the thin financial
cadre? I mean, because in your written statement it seems like
you do not have enough.
Mr. Maner. No. I believe that with the challenges DHS has
in front of it with regard to our financial statements, and
that includes some of the things you mentioned in your opening
statement about ICE, challenges at the Coast Guard, all of our
weaknesses. We could all be busy morning, noon, and night with
just that audit, and on top of it the new audit just is
additional requirement. So we have asked for, the
administration has provided, and to date the Congress has given
us additional people, as well. So I did not mean to imply we
are not growing, because we are growing to meet that
requirement.
Mr. Platts. A followup question on this and then I want to
get to Mr. Towns, and we also are pleased to have been joined
by Mr. Duncan from Tennessee.
On the audit, itself, I think in the 2006 budget request,
the $5 million that I believe is specifically for the cost of
the audit being done, in our dialogs, the committee's dialog
with some entities in the field that may be a low number. Are
you confident that is going to cover the cost of the internal
control audit?
Mr. Maner. Well, there's actually, we intend to use the
resources that we have and have asked for for really three
pockets, which is, one, people on our own staff. Two would be
preparation, getting ready for the audit. And then three would
be the cost of the audit. Some of those will be done with
appropriated dollars and some we will, when it is a shared
cost, we will use our working capital fund for the various
bureaus. From now as we go forward, bureaus will be expected to
ask for and we will put dollars for that in their budget from
this point forward. So we have ingrained that requirement into
our budget cycle. It is a well-known thing now.
Mr. Platts. So the $5 million is additional money basically
to the CFO for the audit, but you are also going to be looking
for all of the entities within the Department to kick in
dollars from their own budgets?
Mr. Maner. They will have to begin to do that, yes, to
prepare for the audit and then also pay for the audit.
Mr. Platts. And carry a share of the cost of the audit?
Mr. Maner. Right.
Mr. Platts. And your three items, it sounds like you again
said you have asked for additional staff?
Mr. Maner. I would love to get back to the committee even
while we are here today, because I believe the money that I
asked for in the 2006 budget was for getting ready and for five
additional FTE to help us on the internal controls, but I will
make sure I clarify if that is not correct.
Mr. Platts. OK. Thank you, Mr. Maner.
Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman.
Mr. Maner, I am not sure I understand why you think that an
audit at this time would be counterproductive. I am not sure I
understand that, because you are talking about readiness and
you are talking about planning and documentation. I mean, with
a new agency, I mean, it seems to me that you should be ready,
I mean, because I could see if you were the Department of
Defense, but a new agency, why would not you be ready for and
also be receptive to it at this point in time? It is not clear
to me.
Mr. Maner. Well, let me first say that I absolutely embrace
the active law and I intend to, and we have talked internally
and externally that we intend to embrace the law in its
totality. In previous conversations with the committee last
year, I raised some issues about it, but the law is the law and
we intend to comply with it.
As for being ready for it, again, as this committee knows
and others know, there is internal controls work in your
financial statement audit, so we are learning. We have 10
material weaknesses already, so we have, again, plenty to do.
In terms of it being duplicative, again, it is the law and
we are going to get ready for it and we are going to do it, but
I will say that people should not underestimate the amount of
rigor and amount of documentation and planning that needs to be
done to do this right. So will we be there in a year? We will
not be there in a year. But we will do it, and when we do our
first audit next year we will go as far as we can go. We have
embraced it with the full vigor of the leadership of the
Department.
Mr. Towns. It is not a staffing problem?
Mr. Maner. The internal controls audit certainly relates to
staffing, but you need to do a tremendous amount of
documentation. I cannot overemphasize the amount of
documentation. Now, I must tell you I must confess I have not
done one of these before, so I am learning from people in the
private sector, I am learning from people within the Government
who have done it.
In fact, one of our bureaus, Customs and Border Protection,
has done one of these a few years ago before they came to
Homeland. What I have learned, it is about documentation,
documenting all processes, everything from start to finish, and
it is just time consuming.
Mr. Towns. OK. Let me ask you a question about a letter
here. I have a copy of a letter here dated July 20th from
Congressman Benny Thomas to Secretary Chertoff. It questions
DHS on its decision to award a single vendor a blanket purchase
agreement for the new MAX HR system. Has DHS responded to
Congressman Thomas' inquiry?
Secretary Hale. I know that if it has not actually been
sent that we are in the throes of doing it and that we have
been in discussion with the committee staff. I am just not sure
whether the signature is on the letter, but we have been in
discussion with the committee staff on that, I believe.
Mr. Towns. All right. So it will be happening very soon?
Secretary Hale. Yes.
Mr. Towns. Thank you.
Mr. Maner, as you well know, our committee has been active
in pursuing new policies and activities for agencies to reduce
the extensive amounts of improper payments identified by GAO.
What efforts are underway at DHS to further identify and reduce
such payments in the future? What are you doing to correct
that?
Mr. Maner. Well, certainly improper payments is part of our
overall audit process and we had, I believe, a few of our
bureaus undergo specific audits, themselves, to determine how
extensive the issues are at Homeland. Improper payments exist
certainly everywhere, and it is our responsibility to limit
that. We had one particular instance at FEMA, one of their
accounts that scored in an area that we would be uncomfortable
with above the OMB level, and we have addressed that issue.
But certainly the work of this committee, the work of Dr.
Combs and others on this, we are going to be very mindful of
this going forward. But it continues to be something we track
on our monthly dashboard. In other words, our components submit
to us and we put out to everyone for everyone to see how
everyone is doing in improper payments, so it continues to be a
key metric for us as we evaluate our components and ourselves.
Mr. Towns. Mr. Chairman, is that our red light or yours?
Mr. Platts. I think it is yours.
Mr. Towns. I yield.
Mr. Platts. We will be back to you. Thank you, Mr. Towns.
Mr. Duncan.
Mr. Duncan. Well thank you, Mr. Chairman. I do not have a
lot of questions. I will say this: it gets kind of
discouraging, though, when we hear over and over and over again
about all these billions that are being lost or misspent or
whatever you want to say about it. I mean, a couple of months
ago we heard that the Defense Department had mis-spent $35
billion in Iraq and had lost $9 billion in additional money,
just lost $44 billion.
Of course, nobody is supposed to criticize the Defense
Department now, but still that seems to me to be a pretty
horrible thing to mis-spend or lose $44 billion. Then last week
we heard about several other departments and agencies that had
mis-spent--other than the Defense Department--that has mis-
spent I think it was $45.1 billion in our hearing. Was it last
week that we had that hearing?
And nothing ever happens to anybody. Nobody gets fired.
Nobody is really held accountable. It does not come out of
their pocket, so far too many people do not seem to care, and
then we talk about these billions so often that it just goes
right over people's heads.
I mentioned one other time that Charlie Cook, the very
respected political analyst, said in a speech I heard about a
year ago, he said nobody can humanly comprehend a figure over
$1 billion, and I guess that is really true. But it just gets
really discouraging at times to keep hearing this from every
department and agency in the Federal Government.
I do not know that there's any way really to stop this
unless we just really drastically down-size the size and cost
of the Federal Government. I do not think we are going to do
that. I tore out this article a few days ago about the TSA. It
says, ``TSA lost control of over $300 million spent by this
contractor to hire airport screeners after 9/11.'' It just
seems like we read stuff like that every day. I just do not
know.
I will say this: I sure appreciate you continuing to hold
these hearings and call attention to these things, because if
we are going to have any hope to do anything about these things
this is the best way to do it. But I tell you, after you hear
this year after year after year you just become convinced that
the Federal Government cannot do anything in an economic or
efficient or especially in a frugal way.
I yield back.
Mr. Platts. Thank you, Mr. Duncan.
I wanted to come back to the internal audit control issue.
We have had some informal discussions on the issue and the
support within the Department for doing this. Mr. Maner, you
referenced that you are fully behind this and understand the
importance of it, embracing it.
I do want to ask, though, back to the ongoing
appropriations process. On January 30th this year then Deputy
Secretary Loy had sent a memo to all the undersecretaries and
others. From the copy I received it does not appear that it
came to you as CFO but to others in the Department to ``impress
upon the importance of the internal control requirements of the
DHS Financial Accountability Act.'' Seven days later, the
President's budget comes up with the request for a year delay
on the terms of that legislation that was just referenced.
I guess, first, are you aware of what the genesis of that
memo was, and did you receive it? And, Secretary Hale, did you
also receive a copy of that memo?
Mr. Maner. Yes. Sir, I would have helped write that memo
for the Deputy Secretary. Again, the previous discussions, I
guess it is a bit of if I had three wishes back then, maybe one
of them was to have 1 more year to get ready. But I fully
recognize that the committee passed and the full House and
Senate passed and the President signed, and we started to get
ready for it.
I think what you referenced in the budget document was an
oversight, part of a previous discussion, but I hope that the
memo and the series of memos since from our leadership,
including Secretary Chertoff, have made it to you and that you
see that we are fully behind it, and the work that we did. We
always appreciate a dialog and the way you engaged us and OMB
in the drafting of the legislation, we appreciated it. We
appreciated the extra year. We may have wished for two, but now
we are fully behind it.
Mr. Platts. Secretary Hale, had you received a copy of that
memo, to your memory?
Secretary Hale. As Andy, the CFO office, said, it worked
with the Deputy Secretary's office, and yes, I saw it as it was
in preparation and then again as it was distributed.
Mr. Platts. I guess I have gotten conflicting
understandings of how that request even got in the budget
document, whether it was OMB's initiative or the Department's.
I would be interested in both of you sharing your understanding
of how it came to be in the document and who drafted it and
signed off on it being in there.
Mr. Maner. Yes. The accountability lies with me, certainly,
which general provisions which go into the budget, which there
are sometimes hundreds, lots of fine print. They start to get
prepared many months before the submission of the budget, both
to OMB and then ultimately to the Congress the first Monday of
February. So there are lots of general provisions and it got in
there.
Mr. Platts. So it is your initiative to have it included?
Mr. Maner. It was my initiative when we initially did a
call in the summer for general provisions.
Mr. Platts. And this was after the law was signed by the
President?
Mr. Maner. Probably before when it was first drafted, but
then certainly after once it got in, so accountability lies
with me. It should not have been in there. It is our mistake.
But hopefully the dates of other things show you that we have
not just recently gotten going on the audit. We have been doing
it for some time.
Mr. Platts. In the Senate appropriations bill for DHS there
is language that addresses this request as if it is still a
valid, open request from the Department that you would like a
year delay. Given your acknowledgement that it was contrary to
the President's wishes, since he signed the law, and you have
said several times, including earlier this year when we
discussed it, that it should not have been in there and you
regret it was in there, did you make any effort to the
appropriators to the House or Senate and say, ``Page 574, I
think it was, or so, that is null and void, that request. We
stand by the President's signing the act into law.''
Mr. Maner. Sir, I had not known that it was in the Senate
bill, but we have certainly, I have certainly talked with folks
and people know that we are embracing the bill. So it shouldn't
be in there.
Mr. Platts. The Senate and House appropriators know that
you do not want a year delay?
Mr. Maner. I suspect they do, but I do not know for sure.
Mr. Platts. Would you feel comfortable making sure they are
aware that you do not want a year delay?
Mr. Maner. I do.
Mr. Platts. If you would do so and copy the committee with
that----
Mr. Maner. We will do it.
Mr. Platts. That way we are all on the same page, not just
the authorizers but the appropriators, they know that you stand
by the 2006 and we are moving forward?
Mr. Maner. Happy to do it.
Mr. Platts. OK. Thank you.
Dr. Combs, in a letter from Clay Johnson earlier this year,
April 6th, to--it was in response to a letter to Secretary
Chertoff and Director Bolton from myself, Mr. Towns, Chairman
Davis, Chairman Cox, Mr. Waxman, Mr. Thompson, that the
importance of meeting the audit requirements of the DHS
Financial Accountability Act. In response to our letter, Mr.
Johnson wrote back, and in his letter he stated that ``OMB will
continue to support the need for DHS to fully prepare itself
for meeting internal implementation deadlines and complying
with its internal control requirements.'' It raised a little
concern with me that, while there's an acknowledgement of the
act's requirements, that the focus is going to be on meeting
internal deadlines in the Department or OMB, as opposed to,
again, the letter of the law. Are you aware of any deadlines
that are being used for guidance in DHS in complying with the
internal control audit that are different than the law, itself?
Ms. Combs. No, sir, I am not aware of anything except full
administration support of the law, itself, and of doing
everything we can to fully support our colleagues here in the
administration and fully adhering to that.
Mr. Platts. Thank you.
Secretary Hale, Mr. Maner, we did not receive a letter, a
response from the Department to that April 6th letter until
just last week. It was dated May 9th, but turned up in our
hands July 20th, and my understanding is the other recipients
of the letter received it about the same time, last week.
I guess, one, I was wondering why the delay. What happened?
It seems like the letter perhaps was written in May but never
shared with us. Are you aware of the reasons for the delay in
it being actually communicated to us?
Mr. Maner. No. I have the letters here. That is
unacceptable. We received your letter, it looks like, on April
6th and our response, as you say, is dated May 9th, so I see no
reason why that should not have been up here sooner.
Mr. Platts. Yes. If it was just mine with mail here I would
maybe understand. Sometimes that happens with mail.
Mr. Maner. We do not tend to mail. We bring things up. That
should not have----
Mr. Platts. Mr. Skinner, were you aware of the request for
the delay in the budget document?
Mr. Skinner. No, not until we saw it in the budget request.
Mr. Platts. How did you come to be aware of it? Actually,
your staff had seen it in the budget request?
Mr. Skinner. Yes.
Mr. Platts. Once the budget was submitted to Congress or
prior to that?
Mr. Skinner. No. Once it was submitted to Congress.
Mr. Platts. Did you raise any concerns or issues about that
since it was the letter of the law was 2006 and 2 months after
the----
Mr. Skinner. I think our staff did, in fact, have
conversations with people in the office of the CFO, and my
recollection is that there was concern that the Department was
not ready, because they had rolled up their sleeves and were
going full speed ahead with regards to trying to address or
develop corrective action plans for the material weaknesses, as
well as attempting to integrate their financial management
systems and producing financial statements that we could opine
on, an opinion that would be qualified as opposed to a
disclaimer. I think all the attention was over on the
preparation of the financial statements. People believed this
was a diversion and a distraction and----
Mr. Platts. I want to stop you there. So it was conveyed to
you by others in the Department that doing--complying with the
internal control audit would be a distraction from their
responsibilities?
Mr. Skinner. During this year, yes. Everyone believed,
since we did the 2004 statements that was our base year, 2005
was a very critical year for the Department to break away from
the disclaimer into a qualified opinion.
Mr. Platts. I appreciate your frankness and would suggest
to the Department that there clearly is a difference of
opinion, then, between this committee and the Department that
doing an internal control audit is a distraction from the work,
the financial management work of the Department.
I will not go into great detail but I am going to get into
the TSA audit that was referenced by Mr. Duncan. There's other
TSA audits, the ICE debacle at the end of year 2002, the $300
million short. Those are all internal control problems, and the
sooner we get after them the more responsible we are for the
taxpayer funds and the sooner we can better fulfill the mission
of the Department.
Mr. Skinner, your opinion is doing an internal control
audit would be beneficial to the Department and its fiduciary
duties to the taxpayers?
Mr. Skinner. Most certainly. If we can attest to the
internal controls with regard to financial reporting, I think
that adds another level of assurances that the financial
statements that you see and the public sees are accurate and
reliable. I think an audit of those assertions will also aid
management to identify any gaps--any problems they have with
their processes that can be fixed and hopefully in the future
eliminate all internal control or material management
weaknesses.
Mr. Platts. I share that opinion, and all the more why we
will continue to push the issue here.
I want maybe just one final question in this area before
yielding back to the ranking member. Ms. Hale, on July 15th of
this year, 2 days after we had submitted our request for the
Department to come up and testify regarding compliance with the
DHS Financial Accountability Act, as well as the 2004 audit,
Secretary Chertoff sent a memo to agency personnel regarding
compliance with the Financial Accountability Act, and on the
copy that was provided to us a handwritten note from the
Secretary saying ``This is very important.''
My understanding is that is the first of his referencing
the act in specific in documents, and the fact that it happened
2 years after our request, I guess I am glad we made the
request because it maybe help put it on his radar. I was
interested if you could share with us your knowledge about that
memo and kind of what generated it at that time versus earlier
in the process, given he had been in office for several months
and this law has been on the books at this point for 10 months.
Secretary Hale. I think Andy is just reminding me that
during the 2SR process I think the 2SR team reviewed--this is
one of the areas that he had set up and during that process
sort of reviewing the financial management in the Department.
So while it may have been coincidence in timing, I believe--and
Andy would have much more detail--that it had been in
preparation before, again, because his concern about financial
management and why he set that up as one of the 2SR reviews,
why we had Deputy CFO Eugene Schied as one of the key leaders
in that second stage review.
Mr. Maner. One of the key findings, sir, of that team that
we briefed was that, as fast as possible, much like a lot of
the other 2SR areas, which encompassed most everything the
Department does, one of the key findings was to make sure that
after Secretary Chertoff had a couple months to be in the
office, that he communicate his goal and his commitment, too,
so that was one of the things we took on and why we put that
out.
Mr. Platts. And I appreciated, as one who spends a lot of
time on financial accountability, that the second stage review
included referencing financial accountability. I guess I was
somewhat surprised, then, in the Secretary's letter to Chairman
Davis of this committee on July 13th, 2 days earlier,
referencing the second stage review and a lot of the ongoing
work and the reallocation of functions and things, that nowhere
in the, I think it is about a seven or eight-page letter, is
financial accountability mentioned once. Did I miss something
that was separate from this letter?
Secretary Hale. Not having a copy of that letter in front
of me, I believe that is probably our 872 letter that talks
about the movement of organizations, and because your statute
had passed, he was a direct report, we do not need to do a
reorganization notice, so that was literally the notification
to the Congress of those organizational elements that were
moving.
Mr. Platts. And so, because my legislation had already
passed, it is not something new.
Secretary Hale. Right.
Mr. Platts. And that is not in this letter?
Secretary Hale. That is correct, sir.
Mr. Platts. That leads into the next issue with the
reorganization and the identification of the CFO within the
management structure. But before I get into that I am way over
my time, and that is now my red light, Mr. Towns. I will yield
to the ranking member, Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman.
Dr. Combs, good to see you again.
Ms. Combs. Thank you, Mr. Towns.
Mr. Towns. How engaged were you and other OMB staffers in
developing Secretary Chertoff's proposal, reorganization
proposal?
Ms. Combs. I am sorry? Could you repeat the question?
Mr. Towns. Yes. I was just saying how engaged were you and
others at OMB in the review and development of Secretary
Chertoff's reorganization proposal? Were financial management
concerns a significant component of this?
Ms. Combs. I can assure you Secretary Chertoff and his
staff developed their proposal and I was not, of course,
confirmed until 3 weeks ago, so I personally have not been
involved in that.
Mr. Towns. OK. Does the mission of DHS, along with its
decentralized structure, pose a significant barrier to
effective financial management practices?
Ms. Combs. I am not quite sure how decentralized the
thought is. I think what, frankly, the centralization housed
within the CFO is probably more pervasive than one might guess
by looking at the organizational chart or perhaps even looking
at some of the material that has been subsequently presented to
you. I think the appropriate question here might be for Mr.
Maner to explain some of the things that he and I have talked
about, about how very, very strong his CFO shop actually is in
reaching into the component areas, and I think you would be
good to actually hear some of the things that he has actually
done over the last year to strengthen the CFO shop within DHS.
Mr. Towns. Let's yield to him.
Ms. Combs. Let's.
Mr. Maner. Thank you, Doctor. This has been something that
has been very important to me in how we execute the
relationship between our office and our bureaus. In fact, at
last year's hearing when I was here we had a nice dialog about
it. What we have focused on very much since I have been there
is this centralization of processes and systems between our
bureaus.
In other words, we do not want to have 10 different ways to
close our books. We do not want to have 10 different ways to
process a travel voucher, 10 different ways to do PCS moves. We
have focused on integrating so that we have standard operating
procedures [SOPs], in the Department where when you come in as
a new employee and you are at the Secret Service or you are at
Customs you open a book and say, ``How do I do X?'' ``In the
Department we do it this way.''
So we have put a fair amount of capital and a fair amount
of human work into having people help us develop those SOPs, so
that is on the process side and I believe--this has been my
belief-- that is one of the most important things we can do out
of the box is to standardize the Department.
The second is to continue working to streamline our
financial management systems. When we first started the
Department we had 19 financial providers in the Department,
people getting accounting service from 19 providers. We have
taken that to 10, and then in the last year we have reduced
that to 8. I want to continue to work and streamline and reduce
those, and certainly when an agency is in need of a new system
we want to provide a Department-wide financial system. We are
also working to provide a dashboard for management so we know
what everyone's financial performance is.
So the themes here out of the gate are processes and
systems. More about people, which is, I think, an important
aspect, how I interact with the other CFOs at the components,
it has been an important part of my term as CFO. We have lots
of interaction. Certainly I have a monthly CFO council. We have
weekly meetings, as well.
But I think how do you get that closeness to those people
and how do you get that integration? To me it does revolve
around performance management and how these people are rated
and compensated, how they are hired, and if need be, fired. And
I have full authority given to me in management directives
signed by Secretary Ridge to do all of those things.
So even in the last few months we have literally responded
to questions for help from our agencies who are looking for
CFOs, found them qualified people, and put them in.
So as it relates to people, process, and systems, I do not
think it would be correct to say we are not centralized. I
think we are centralized in a meaningful way without severing
the important dual relationship between a bureau CFO and their
agency head.
Mr. Towns. All right. Thank you very much.
Mr. Chairman, my time has expired.
Mr. Platts. Thank you, Mr. Towns.
Mr. Gutknecht from Minnesota.
Mr. Gutknecht. Thank you, Mr. Chairman.
I do not really so much have a question but a comment and a
compliment. To sort of pursue what has been said already,
particularly by my colleague from Tennessee, we spend an awful
lot of money on these kinds of programs.
In fact, one of my disappointments was that when we created
the Department of Homeland Security it was supposed to be the
consolidation of an awful lot of programs that were in diverse,
various different departments, that by consolidating those
ultimately the cost would be less, certainly not any more than
we were spending before. Of course, that was then, this is now,
and we have seen the cost of this Department be substantially
more than we were promised at the beginning.
In my opinion, that is bad enough, but when you add in that
there is an awful lot of money that cannot be accounted for,
that makes it even more difficult to defend.
Finally, and I think this is for the benefit of everybody
here, in a little over a month we will celebrate the 4-year
anniversary of that terrible attack on the United States. I
think we need to be reminded once in a while when we say, well,
maybe next year we can do something about this, or maybe we are
working on that.
When the United States of America wants to do something we
have proven that we can do it and we can do it rapidly. I
remind you that we won World War II in less than 3\1/2\ years,
and if you think about what all went on to make certain that
happened, it just boggles my mind that we cannot come up with
sound accounting systems in almost 3\1/2\ years.
So, Mr. Chairman, I appreciate this hearing. I hope you
will continue to hold these hearings, because I think our
constituents and the people who pay the bills expect no less.
I yield back.
Mr. Platts. Thank you, Mr. Gutknecht. For good or bad for
everyone involved, we do plan to continue our oversight
responsibilities and the importance of getting this right the
sooner the better for all involved.
I want to come back to where we left off with my last round
of questions on the reorganization issue. I want to start with
the organizational chart. In any department that puts these
out, in my office we have a similar organizational chart. One
of the purposes for doing it is to convey to all parties in the
entity in question and outside of the entity the line of
authority and where everyone falls and so there is no
misunderstanding.
That being said, as was referenced in the last question's
answer, the letter did not reference the CFO position change in
the July 13th letter to Chairman Davis because it was done as
of last October, I was a little surprised when the
organizational chart came out as part of the second stage
review and had no CFO. To me that sends a terribly wrong
message, that the message that has been conveyed to me by the
Secretary, by the Deputy Secretary here today, by officials is
that this is a priority, this is a position we see as was
intended by Congress in the passage of the CFO Act of 1990 that
the CFO is a strategic manager, one of the key people in each
and every major department or agency. Yet we have an
organizational chart that did not even identify him anywhere.
This seemed problematic and seemed inappropriate, not to
mention non-compliant with the law.
I guess I would start with Secretary Hale. How did that
come to be? Were you involved in the development of the
original organizational chart, and specifically the lack of the
CFO being identified in that chart?
Secretary Hale. Sir, I was involved and let me again
emphasize to you the importance of the CFO and that direct
reporting relationship.
Hindsight and your, I think, quick pointing that out to us
is why we made a very important and I think clarifying part of
this. What we were trying to do, and every once in a while
hindsight is a good part for us, we were, again, like that 872
level trying to talk about the moving parts.
But clearly understand that it is important, as you have
said, to both internal and external. I think internal inside
DHS they understand the role, the leadership that the CFO plays
in general, and this one in specific. Andy Maner is involved in
absolutely every single major financial issue in this
department and sits at the right hand of the Secretary and the
Deputy Secretary, so I think it is important that we did
clarify it, sir, and want to have absolutely no
misunderstanding that we take that direct responsibility,
direct reporting because of the importance of financial
management to the Secretary.
Mr. Platts. Your statement was that the chart was a focus
on the moving parts, and the CFO was not moving, but it was not
in the organizational chart prior, right, delineating direct
report?
Secretary Hale. Yes. Interesting, on the day of the
announcement--and I can only tell you that of all the things we
do in the Department, charts may not be our strength. But one
of the moving parts was the Office of Security from the Deputy
Secretary reporting back to me, and so I had the opportunity to
go see the Office of Security Personnel, who were quite
concerned about an organization chart that had an old one on
the Undersecretary for Management. I can tell you from the
development of our charts and with the day-in and day-out
operation, we do understand and we do support the direct report
to the Secretary.
Mr. Platts. The reason I am focusing on this is not because
I think a chart makes a difference, but it does send a message
because you do not get to speak to every person in the
Department or every partner who is acting with the Department
outside, and so people do give a lot of weight to these and
say, ``Does he really have the authority that they say he
does?'' So that is part of the importance of reflecting,
notwithstanding the fact that also the law says----
Secretary Hale. Absolutely.
Mr. Platts [continuing]. He's got direct reporting
authority. Even in your new chart I will make one more
suggestion.
Secretary Hale. We always listen.
Mr. Platts. I take the work of previous Congresses and
Presidents as they are intended to be, as the letter of the law
of the land, the law of the land, the intent of the CFO Act
when it was passed, of how important a position this is. Even
in the revised chart I appreciate the dual reporting showing
that Mr. Maner has that direct report to the Secretary and
Deputy Secretary, as well as to you as Undersecretary.
The chart to your right, my left, is how I would suggest it
to say to the world at large, the public at large, that yes,
our CFO position is equal to our assistant secretary for public
affairs, our assistant secretary for congressional and inter-
governmental affairs. In fact, our CFO is by law a direct
report to the Secretary. Those other positions I believe are
not. And to say, this is not a sub-level. This is equal if not
more important because it is the people's money.
I would make that suggestion and would be interested in the
realignment that is identified in the reorganization chart, and
that being made clear to all Department employees as it goes
to, Mr. Maner, one of your statements about your authority. I
think I understood you right that, per a directive of then
Secretary Ridge, you do have the authority to fire entity CFOs
within the Department?
Mr. Maner. Yes. I enjoy some authorities already in the CFO
Act, but certainly management directives are what guide a
Department, and in consultation with agency heads we can affect
variable compensation, performance ratings, that sort of
things, so yes.
Mr. Platts. Including the right to fire?
Mr. Maner. Yes. We have that, too.
Mr. Platts. Of all CFOs in all the 22 agencies?
Mr. Maner. We really do not have 22 agencies, per se, but
in our major operating entities in which there is a key
financial person----
Mr. Platts. Right.
Mr. Maner [continuing]. The answer would be yes.
Mr. Platts. And are you also consulted in the hiring of
those positions?
Mr. Maner. Yes, absolutely. And in most cases I might lead
that effort or help the agency identify candidates.
Mr. Platts. I am very pleased to hear that. I think that is
key. The Inspector General has referenced that in his written
testimony and I think here today, as well. Long-term, that is,
to me, critical. We have been working with NASA, and they have
seen some improvements from a disjointed structure where the
CFO, in essence, took what arrived on her desk but at least
initially did not have the ability to go out into the various
NASA centers and say to the CFOs, now you need to answer to me,
as well, because I have to put my name on what you are giving
me. They have sought to improve that and it sounds like you are
making good headway in doing the same at the Department of
Homeland Security.
The issue of a permanent CFO--and, Secretary Hale, you have
raised or spoke about an ongoing effort. As we have expressed
in conversations, as well as in writing between you and others
in the Department and myself and the committee, the requirement
said 6 months to have a Senate-confirmed CFO in place. Ten
months have passed since the requirement was enacted. We are 4
months overdue. I appreciate in your comments here today and my
conversation with Secretary Jackson last week that there is a
serious effort to move forward and comply with the law to have
a Senate-confirmed CFO in place.
First I would be interested in whether you have begun
interviews?
Secretary Hale. Yes, sir.
Mr. Platts. When was the first interview conducted,
roughly?
Secretary Hale. Last November.
Mr. Platts. I take it, the fact that there was not a
submission between November and now, as we speak, that initial
candidate or candidates was, for whatever reason, not
acceptable?
Secretary Hale. Let me talk a little bit about it if I may,
sir?
Mr. Platts. Yes, please.
Secretary Hale. As you and I have discussed, there is, in
my humble estimation, no more important position to fill right
now in Department of Homeland Security. The Secretary may look
at some of his other boxes, but it is critical for us. One of
the things that is terribly important is to get the right
person in the right job, and we want to be sure that they have
the knowledge, the drive. This is a leadership position. It is
a leadership, as you have well indicated here, and, so, we want
to be sure.
I hesitate to say this, but I know that it has been a
challenge in the rest of the Government to get appropriate
CFOs, qualified and nominated. We take this terribly serious.
We also want to be sure that, probably to use the wrong
expression, I do not want to just fill the box. I want to be
sure that we have the right person in the job. This Department,
this mission, and, as you all in this hearing today
demonstrate, we have large challenges in front of us. We have a
very good CFO that is at the helm right now, and we will
continue to drive, as we have said, to fill that position in
the very near future with a recommendation and keep you
informed.
Mr. Platts. I have reason to believe that we will see a
name submitted some time in August to the President for
consideration of submission to the Senate? Is that accurate?
Secretary Hale. It is our absolute goal to do that.
Mr. Platts. Well, my hope is that will occur. I agree you
want the right person, but we also need to comply with the law.
Secretary Hale. Sure.
Mr. Platts. How many individuals have been interviewed
since the law was passed to this date?
Secretary Hale. There have been a series of interviews done
by me and by others, but I have probably talked to seven or
eight in the last 2 months and sort of have done extensive
outreach to be sure that we have a wide range of candidates as
we have looked across the Government.
Mr. Platts. Prior to the last 2 months, and specifically in
the 6-months that would have allowed compliance with the law,
how many people were interviewed and in what depth were those
interviews? How senior were they? Were the Secretary, the
Deputy Secretary at those interviews?
Secretary Hale. Actually, the process inside the Department
for all of the chiefs have been one that I would do a
significant amount, so as we have sort of filled, whether it
was the CIO or a couple of the other ones that may be vacant,
that I would try and reach out again because of my expertise--I
have served as a CFO in several different departments--to try
and sort of do that.
The Deputy Secretary, the Secretary have all been sort of
engaged in looking at the types of candidates and have asked me
to do the early screenings, and so it is, again, with sort of
knowledge of who the candidates are, the types of people we are
looking at.
Mr. Platts. So how many people in that first 6 months were
interviewed in depth?
Secretary Hale. Sir, I would hate to give you a number, but
it is somewhere between 7 and 10.
Mr. Platts. Not in the last 2 months, but in the 6-months--
--
Secretary Hale. In that period about sort of finding
candidates, reaching out, in-depth interviews sitting in my
office, 5, 7, 10. I am not sure. I can get you that number.
Mr. Platts. If you could, I would be interested in actually
who they were that were interviewed and the timeframe.
Secretary Hale. I would actually be happy to share that
with you, sir. I think some of these, as you reach out to
people as they are obviously either interested or not
interested, there are some privacy issues, but I would be very
happy to talk to you about that.
Mr. Platts. And not just those where there was just an
informal conversation, I am looking for someone who actually
came in and interviewed to be considered. I appreciate the
privacy concerns there.
The reason for the question is again, Congress passed the
law, the President said it is a good idea, and it needed to be
a priority. I think we have someone who is very dedicated in
the position to now, has been working diligently, and I am sure
if his wife and children were here they would say too
diligently, I imagine, in the hours you are putting in, and I
respect that. But I do not think it took 10 months for us to
find Andy.
Secretary Hale. It took me a little time to talk him into
it. And, again, we did the same kind of exhaustive search. Our
first CFO was fabulous. It was Bruce Carnes who was here at the
Department and then went back to the Department of Energy. And
I am not sure how long between Andy sort of being able to
identify, because you start with sort of a set of let's go get
the best financial person, let's go find somebody that has
Homeland Security knowledge. Let's go be sure that we have
somebody that has the leadership skills.
So I am not sure how long it was, but it was probably 4 or
5 months between knowing that Bruce was leaving and before we
actually had Andy locked, loaded, and in the chair. And, sir,
again, that was without the Senate confirmation. The period
sometimes for Senate confirmation is, as you well know,
sometimes longer.
Mr. Platts. But the concern is that we appreciate the
challenges, but we continue to fill positions, CFO or deputy
CFO positions, throughout the Department, and when we have an
instance where it is a statutory requirement, it seems to be
taking longer than when it is not a statutory requirement. I
think that we need to be compliant as quickly as possible.
I am sure that in your various positions you have given
deadlines to subordinates to meet, and if they fail to meet
them there were consequences, and when my citizens back home
fail to comply with the law there are consequences, and we have
clear failure to comply with the law. Whether we like it or
not, that is what the law is. It seems like there are not any
consequences here at the Federal Government level. And so I
hope we will see compliance as quickly as possible.
I have some additional questions. Mr. Towns, did you have
others?
Mr. Towns. Yes, I do. Thank you, sir.
Mr. Skinner, some airports have turned again to private
contractors instead of TSA for screening duties. What can you
report to us about the performance of these contractors, and
what controls are in place to monitor their performance? Will
the new structure of DHS management functions aid the oversight
of TSA contractors?
Mr. Skinner. I believe you are referring to the pilot
program. TSA has piloted five airports across the country----
Mr. Towns. Right.
Mr. Skinner [continuing]. In using private contractors to
provide screening services.
Mr. Towns. Right.
Mr. Skinner. At this point in time we have not done any
assessments of their utility, that is, how well or how
effective and efficient they are, in fact, operating. That is
something that is on our radar screen, however, for the very
near future.
Mr. Towns. What bothers me, I am sort of wondering, until
we sort of tie some of these things down and sort of know where
we are going or what we are doing, should we do anything else
until we sort of get some of this under control? I am thinking
in terms of the statements made by both of my colleagues on the
other aisle in reference to the fact that we just have too many
things that are just loops. To experiment with something at
this point in time, I mean, really, is it a good thing to do, I
mean, just from your own background and experience?
Mr. Skinner. I think that the pilot project is part of the
legislation that was created that set up the Federalization of
the screening process at the airports. The reason for that is,
after a 2, 3, 4-year assessment period, we can make a
determination whether some airports can opt out of the
Federalization program and go back to using private screeners
so long as there is sufficient oversight by the Federal
Government, or, in this case, the Department of Homeland
Security.
In my experiences with regard to contracting these type of
activities out, I do not see that would create a problem so
long as there is a strong procurement oversight function in the
Department, one that monitors and holds contractors
accountable. Without that oversight and monitoring role, that
is, holding people accountable, yes, you can get yourself in
trouble.
As far as I know from our general contact with these
airports--we have visited them as part of our penetration
tests, as you may know--we have found no anomalies or anything
to suggest that they are out of control. They are not
performing any better or any worse than our Federalized
airports.
Mr. Towns. On that note then, Ms. Hale, has Congress
provided adequate resources for DHS to comply with its
administrative responsibilities and internal control functions?
Are financial resources preventing DHS from improving upon its
internal control functions? Are there personnel barriers? I
mean, we want to help. Just trying to get a handle on
everything.
Secretary Hale. Thank you, sir, for both yours and the
chairman's support in this area. I think, as Andy Maner
indicated, this is partially a learning curve for us. We have
the resources in the budget. I anticipate that we will get
those, although there were some rather large reductions taken,
but I guess not in the CFO area, so I think we are probably OK
as we go into conference here.
I think we will be fine. It is, again, both with the
leadership, the documentation, and the planning that Andy Maner
discussed before, we are committed to doing this task and we
think we have the resources necessary. And I think in this
regard if we do not I do not think we will be shy about it
because, again, we are very committed to this and we are
developing right now the 2007 budget request, so we will sort
of look and have some time under our belt to see what it takes
and be sure that we ask for the resources in 2007, as well. Get
it in 2006, started the planning in 2005, and be sure that we
are a watchful eye as we go into the 2007.
Mr. Towns. You have our attention, so now is the time to do
it.
Secretary Hale. Yes, sir. I think most importantly for us
is to get the--as I know you all share this, as well--is to get
the appropriations bill, be sure that we have the appropriate
staff, the background, the folks that Andy has brought on
board, and be able to lead that effort.
Mr. Towns. Right. Thank you very much. I yield back, Mr.
Chairman.
Mr. Platts. Thank you, Mr. Towns.
I will turn to some of the audit findings, the 2004 audit
findings. Mr. Maner, one of the issues that jumps out is the
ICE--Immigration Customs Enforcement--issue and the significant
budget difficulties at the end of the year. According to the
audit, ``ICE experienced significant budget difficulties due at
least in part to the late preparation by the Office of the CFO
of agreements to reimburse if a cost incurred on other's
behalf. ICE fell seriously behind in basic accounting
functions. This condition is very serious for ICE and for the
Department.'' I think that also then gets into Clark Kent
Ervin's written statement about agents being unable to put gas
in their cars, pay informants, use their cell phones. Can you
address your understanding of the audit findings regarding
failures within your office?
Mr. Maner. Well, first of all, I think it is important to
understand the situation at ICE in 2004 and the latter part of
2003. To understand that you have to understand that ICE was
not only going through a very difficult but important merger,
but something else was happening at the same time that is often
forgotten about, and that is that the INS, an organization that
existed for decades, was being dismantled.
Both of these decisions were absolutely the right
decisions, and creating an enforcement bureau like ICE was the
right decision. This all was taking place last year. The 2003
appropriations did not take into account the new structure, and
the 2004 budget was the first time where the budget actually
was able to reflect the new structures. The 2004 budget was
just a basic estimation of what the new Customs and Border
Protection and ICE would look like.
So we spent--my office spent thousands and thousands of
hours, and I personally spent nearly 20 to 40 hours a week on
this issue for the better part of last summer.
At the end of it, some very good Government things have
happened. First of all, ICE was going through this merger. They
were also the Department's accounting service provider. So we
were very much attached at the hip as this was going on but it
was not all bad, and I did read Mr. Ervin's statement and I
have read a lot of media reports about ICE, and I have heard a
lot of the lore about how they cannot wash their cars, cannot
get their gas, that sort of thing.
And some of that may be true. A 15,000-plus person agency.
I can tell you their enforcement numbers for that time period
were higher than they had been before in terms of a lot of
their drug interdiction, alien removals, fugitive operations,
that sort of thing. So the agency was performing, but they were
doing so under some budget difficulties, which is why we were
in a room trying to dismantle the regional structure and
district structure of the INS, make sure the money was in the
right bureau. There's no handbook for it. It has probably never
been done for the past 50 years. We did it, put thousands of
hours. It was the right thing.
And with the help of the Congress, I might say, and OMB--
last year we were able to infuse some cash into ICE to make it
through the year.
So everyone played a key part in making sure ICE was
solvent and was able to continue.
In terms of the specific piece you mentioned, which is
reimbursable agreements, let me just say one of the good
Government pieces that Undersecretary Hale, myself, and the
leadership wanted to make sure we did with these new bureaus is
that they not be allowed to reproduce and create new
organizational structures. That there be some shared services.
That we not just say, oh, because I am a new bureau I get my
own HR shop, I get my own procurement shop. So we put into
place, under Ms. Hale's leadership, a group of people to make
sure that was happening. This has come to be known as tri-
bureau shared services. It began with all through the year, and
at the end of the year we had to put reimbursable agreements in
place to reflect that. It took a long time. It was the right
decision. But, as you suggest in your statement, it did take a
little more time.
Not to presuppose a following question, but I do want to
report that in fixing ICE, which I know is important to the
committee and certainly all of us at the table, we do not want
to just fix it in the short term--in other words, make them
solvent 1 year. We are interested in making sure they are an
ongoing concern. So what we have done is put into place a
pretty aggressive people, process, and system assistance
package, if you will, to ICE, meaning they needed new financial
management leadership, we needed to be more involved in their
processes because of course they were also our financial
accounting provider. And then we probably need to look at their
systems, as well.
So the fix for them long term incorporates all three of
those aspects, and I just want you to know--Mr. Skinner
mentioned in his opening statement new people we have put in,
very hopeful for that. Also, in the supplemental the Congress
the administration did for 2005, there was new budgetary and
finance people included in that. So people side, we are getting
there. My office, sir, as you and I dialogd last year, I think
we are going to have times where, of our sort of 10 big
operating bureaus, some are going to be on the left side of the
bell curve, some are going to be OK, and some are just going to
be cruising along. Right now ICE is in that in need part of
their existence and we are trying to help them as best we can.
Mr. Platts. I commend you for the approach of a long-term
solution. We have had lots of hearings with lots of departments
and agencies and sound like a broken record that we are not
looking for heroic efforts at the end of the year that makes
things look good for a day and then we move on, but to truly
get to the core problem so we fix it permanently and have a
long-term solution, so I agree with that approach.
My understanding from the Inspector General's statement is
there's an acting CFO at ICE. Where do we stand with that
position from, again, a permanent position, appointee? Is that
in the works?
Mr. Maner. Yes. They have three key financial positions. We
have put a budget director in there and a director of finance.
Some of these are SESers, some of them are not. Right now the
budget director is the acting CFO, and then they have to put a
permanent person there. So I suspect that will be done. As you
know, sir, they are also undergoing a leadership change at the
moment and it is certainly my belief that one of the first
things we will talk about with the new leadership is our
recommendations and our suggestions of ways to help fill those
permanently, but I can assure you that they are in pretty good
stead in terms of people right now.
Mr. Platts. Inspector General Skinner, you reference the
efforts there and ongoing efforts, but you also state that your
current findings lead you to believe there are still some
significant accounting challenges or problems at ICE. Could you
expand on that?
Mr. Skinner. Yes. There most certainly is. As I speak right
now, we are currently working in ICE evaluating their
accounting problems. I do not want to draw conclusions at this
point in time. We have not drawn any conclusions yet. But I can
say our early observations suggest that they still have serious
problems and it will take time to work them through.
One of the most notable problems would probably be their
financial reporting difficulties. We continue to find abnormal
balances in certain accounts that cannot be explained. Until
they can get to the bottom of why each month they are having
substantial abnormal balances, the problem is going to persist.
That is what they currently are working on.
Mr. Platts. What dollar amounts are we talking about the
balances that they cannot account for?
Mr. Skinner. We are talking millions of dollars,
substantial amounts. If it was immaterial, we would not be
raising a red flag. These are significant amounts of money that
cannot be easily explained.
Now, they have made improvements since last year. Those
amounts have been reduced. But still we have not really got to
the bottom of what is causing the balances to be out of sync.
That is what we are working on and that is what ICE is working
on, as well.
The new leadership they have in place has really added
value and has accelerated their ability to improve their
accounting and their financial reporting, but it is something
that I think is going to require close attention by the CFO,
close attention by ICE management, and close attention by
Department management all the way up through the Secretary. If
we want to get to the point where we can have qualified
opinions this year, at best, unqualified opinions in the out
years, then we have to fix the problems that exist in ICE.
Mr. Platts. Secretary Hale, what is your familiarity with
the ongoing problems that we are still having, apparently
millions of dollars unable to be properly accounted for?
Because I certainly accept Mr. Maner's statements that no one
is suggesting this has not been a tremendous transformation,
and 22 agencies, 170,000 employees, 18 material weaknesses
inherited.
But we are 2\1/2\ years along, and the fact that this late
into the 2005 fiscal year we are still having end of month fund
balance difficulties to the tune of millions of dollars causes
me to believe apparently we are not throwing enough effort,
manpower to get to the bottom of it if we are near now the end
of the third quarter of the current fiscal year, the problem
that we knew was a problem in last year's fiscal year. So your
understanding of that issue?
Secretary Hale. I think I share both the IG and the CFO's
concerns about this and continue to sort of, mostly through the
CFO, again with the leadership there, talk about sort of the
importance of the financial management, being sure we have the
resources that are there and they take the appropriate steps.
We do two things in the Department. One, we have a CFO
Council that Mr. Maner shares, and then I chair a Management
Council where we have talked about some of the issues and the
importance of this. We have actually talked about sort of
taking these kinds of issues back again this month to them,
both to the internal controls but also sort of where we are
along the compendium so that we can get ready. So I share your
concerns. I share, I think, Andy's, as well as----
Mr. Platts. Are you aware of any specific reasons that have
been identified yet for the lack of accountability for millions
of dollars?
Secretary Hale. I think it is, again, their sort of their
statements and they are continuing to try and align their
accounts.
Mr. Platts. So your answer is no, you are not aware of
specific reasons for the inaccurate end-of-month accounts?
Secretary Hale. Other than the systemic ones that we are
continuing with their corrective action plan to try and work
through to be able to close the monthly accounts and be able to
prepare the statements. I think that is why we have had the
corrective action plans. We continue to work with them on
those. So I think it is----
Mr. Platts. Mr. Maner, you apparently would like to expand
on that?
Mr. Maner. Always happy to, because I spent a lot of my
life doing it there. Again, there are still systemic problems
at ICE and it is not enough to say we inherited them from DOJ
because some of them are new. But what we have to do is--I just
would not want the committee to think otherwise. It is a
people, a process, and a system fix.
The things that are happening at month's end and early
close are issues. I want to also salute a lot of the hard-
working people at ICE. They had a tremendous attrition problem
right at the beginning--this is before I arrived--right at the
beginning of the merger where more than half of their senior
financial management left ICE, so to build the people back up
who know how to do this, who know how to do it like a drum
beat, the things that happen every night, the people who put
processes in place, and gets the internal controls because it
is not just financial management people, it is the special
agent in charge that is in the field and how they work within
the financial system and financial confines. So it is totally
and utterly systemic that will only be fixed if we attack all
three of those areas equally. And I just want to assure you
that they are not looking at just one.
Mr. Platts. The example here with ICE, the conversation
previously on the permanent CFO nominee, personnel challenges,
Inspector General was referencing whether there's enough
personnel within the CFO office to meet the demands we are
placing on it--given how important the mission of this
Department is, no greater important agency out there other than
DOD, itself, and DHS and DOD kind of go one in the same,
because for the national government the most important
responsibility we have is protecting our citizens.
Education is certainly a priority, environmental
protection, transportation. Protecting the lives of our
citizens is the most important responsibility we have. If there
are management personnel challenges at the Department, I would
expect that we would hear the Secretary of the Department at
the top of his lungs saying, I need help over here, Mr.
President, to get the best and the brightest from whatever
other department to this Department.
That is not happening. Because until we fix ICE's financial
problems, until we fix TSA's financial problems, we are going
to continue to spend a lot of money. And yes, the report
numbers for ICE look good, but what we do not know is how many
people slipped through, perhaps simply wanted to work here,
perhaps wanted to create harm here. How many did we not catch?
And so the fact that I hear that we are doing our best
and--I accept that at least half of your senior management at
ICE, in the midst of a dramatic transformation, that is a high
hurdle to get over. But, given the role of that agency and the
importance of it, it should be a Government priority. If it
means we take somebody and say, ``We are moving you from HHS,
from Ed, from EPA, from wherever, to DOD or to DHS,'' that is
what we need to do. And that is not anything I have heard from
the Secretary, from the President, from OMB, from anyone in a
senior position of this administration. I hear that we are
working on it.
Given that this is about protecting the lives of Americans
and making sure we are protecting their dollars so that we can
then spend those dollars on protecting their lives, working on
it is not good enough. Doing it is what is going to be good
enough.
I do not mean that in an antagonistic way, because I truly
mean when I say we are on the same team. But I think the two of
you and Inspector General Skinner at the Department, Dr. Combs,
this is an alarm all of you should raise at the CFO Council
meetings, with Director Bolton, with Chief of Staff Card, with
the President, himself. You should all be raising that alarm
that we do not have the personnel that we need to do what we
are being charged to do, and then get their help in making it
happen.
I do want to raise quickly a couple of specific examples,
because as we talked about ICE I think it is fair to say when
we get to an audit of internal controls that is going to help
us get to the cause of the problem such as we are seeing at
ICE. Is that a fair statement? I would be interested actually
in all of your opinions.
Mr. Skinner. Yes.
Mr. Platts. That is going to help us get to the bottom of
it.
Mr. Maner. Yes, it would.
Mr. Platts. To that foundation problem. And I think it
epitomizes, no matter what the internal control audit cost,
given that we are unable to account for millions every month in
their end-of-month balances, and then we get into some of the
actual lost funds at TSA and elsewhere, whatever it costs we
are going to recoup it very quickly.
I do want to raise specifically the audit on TSA, and if
you do not have the answers today you can followup with the
committee. That would be great. I guess this would be to both
Inspector General Skinner as well as Mr. Maner and Secretary
Hale.
Some of the audit findings, according to the news reports,
my understanding is the audit, itself, has not been shared
publicly yet, that is an ongoing review for a FOIA request?
Secretary Hale. I think you are talking about the DCAA
audit of the TSA.
Mr. Platts. Of TSA. Right.
Secretary Hale. This is the contract with Pearson----
Mr. Platts. Right.
Secretary Hale [continuing]. Where there has been much
newspaper publicity about it. If I could just have a couple
seconds on that, sir, and then I think you asked about sort of
that audit, itself. It is correct to say that the contract
grew. It has also not been reported that we disallowed almost
$140 million worth of those invoices that were submitted. The
DCAA--the TSA asked to come in to be sure that they looked at
that contract.
It is important, I think, to understand because there is,
like you, no one in this Department that wants to waste
American taxpayer dollars and, far more importantly, wants to
put the money appropriated to the front-line mission. But, I
was not part of the Department of Homeland Security. It
occurred during its standup when it was part of the Department
of Transportation. But, I have spent a little time looking at
that contract or not specifically at the contract but the
circumstances around it. I do think it is important to note
that when they started that time and materials contract,
meeting congressional deadlines, but also being sure that, as
the scope changed, they did not know how many screeners they
were going to hire, so very clear management oversight and
involvement in that contract, when they met with the
contractor, sort of went through this process and then
themselves decided to pull in DCAA.
So we have gone through that. DCAA is finished their audit.
That was the basis on which then TSA had to make their own
independent decisions about how much of the Pearson money to
ultimately pay. I know the Inspector General has been very
involved in that, as well. But we have not shared that
publicly. There have been some FOIA requests and they are going
through the redacted version of that. We would be happy to
share, sir, with the committee under the appropriate
circumstances.
Mr. Platts. Well, I would urge the public sharing of that
information. The earlier the better, certainly with the
understanding of, if there are things that are sensitive
relating to Homeland Security, to be redacted.
In the Secretary's statements regarding the second stage
review, he said--under stewardship he said, ``A commission to
measure performance--'' which is what this audit was. It is
measuring the performance of TSA and its handling of the
contract. That is how I view performance, how do we operate
this contract.
The Secretary said, ``A commitment to measure performance
and share results.'' So we have done an audit. What is reported
in the press is that the audit said we did not do a very good
job in overseeing this contract and we should share that and
say mistakes were made and we are going to correct them.
Just a couple. I do not want to keep you here past this
round of votes. That is why, unfortunately, I am raising them
here so you do not have to wait.
One of the things highlighted, I do not know the substance
of this but according to the statements in media, a $5.4
million claim for 9 months salary for the chief executive of an
event and logistics firm that received a contract before it was
incorporated and went out of business after the contract ended,
a contract for the hotels that were acquired instead of using
the testing centers where the contract gave them 10 percent on
whatever the charge for the room was, so there's incentive to
get higher room costs and they make more money.
I think that is one of the things that was identified in
the audit that perhaps the Inspector General is aware of, point
after point of terrible oversight of taxpayer dollars. If there
are a viable and logical answer to some of these statements,
the sooner that is public the more trust that the public is
going to have in what the Department is doing.
I realize TSA was not then under DHS, but it is today. So I
am not going to get into all the various points, but the news
article is pretty alarming if half of what is in here is true,
and so I do urge the public sharing of that information, and we
as a committee look forward to having a chance to review that,
as well, because the reason that article caught my attention
and I set it aside--as you can tell, I use blue markers, and I
have lots of blue marks--is because it to me is all about
internal controls and the breakdown of internal controls
regarding what was originally a bill of $800-some million, I
believe, that we negotiated down to $700-some, I believe.
Secretary Hale. I think it would be interesting, sir, and
we would be happy to set this up, to have the committee and
even yourself, sir, hear about that contract.
Mr. Platts. I think that would be very helpful to us.
Secretary Hale. I think having listened to sort of the
steps that they took at the time as they were obviously right
after September 11th in setting this up after that terrible
tragedy, but also the steps they have taken subsequent to that
in their sort of acquisition process. I think both of those
would be a very important sort of set of information for this
committee to have.
Mr. Platts. A final question regarding, again, if half of
what is in here is accurate, I am concerned, regarding the TSA
contract or the ICE. I think I know the answer to the question,
but is anyone aware of anyone who was demoted or fired for any
of the financial misdoings related to those two issues?
Mr. Skinner. Congressman Platts, I can address the TSA
issue in the Pierson contract. We will be issuing a report
probably within the next 30 days addressing the TSA's oversight
and management of that particular contract. I am not at liberty
right now to discuss the details of that report.
Mr. Platts. I appreciate that.
Mr. Skinner. It is not public yet, but we will be making it
public hopefully in the next 30 days, and, of course, we will
be delivering it to this committee.
The report is going to be highly critical, obviously, but
one of the things we have to keep in mind, at that time, when
that contract was awarded, there were only 12 people working at
TSA. There was only one contracting officer at TSA to manage a
multi-million, almost a billion-dollar contract.
Mr. Platts. Terrible management breakdown.
Mr. Skinner. It was doomed for problems.
Mr. Platts. Yes. And that goes to----
Mr. Skinner. No question about it. But TSA has come a long
way and the Department has come a long way since then. They are
still building and improving, and we need to recognize that. Of
course, we are going to try to show that in our report--the
steps that have been taken since. The problems back to 2002 and
2003. We are in 2005 now. That is the issue that we should be
addressing: where are we at in 2005?
Mr. Platts. And that we learn from the mistakes of 2002 and
2003.
Mr. Skinner. Yes, sir.
Mr. Platts. And that is why I even raise it, is that we can
do a lot better in 2005 and 2006 if we make sure the internal
control breakdowns of 2002 and 2003 are not repeated.
Mr. Skinner. Most certainly. This is a poster child for
what not to do to manage a contract.
Mr. Platts. I apologize that I do need to run to get to a
floor vote. Secretary Hale, did you have one last thing that
you wanted to add?
Secretary Hale. No, sir. Thank you, again.
Mr. Platts. And the thanks is from us to you. In each of
you, sometimes I may be critical and try to ask some tough
questions, but it is because of that commitment that we all at
the end of the day get to a shared goal of doing right by
taxpayers and, in this case, right by protecting the lives of
our citizens. I know each of you are putting in incredible
hours.
As a fellow dad with young children, Mr. Maner, I
sympathize with your wife. My wife sympathizes especially with
your wife. But we are grateful for your service and we will
raise concerns when we have them. But hopefully it is
understood that it is seeking to get to our shared goal.
Thank you each for your testimony here today.
We will keep the record open for 2 weeks for any additional
information that we have requested. Again, we wish you well in
your efforts.
Thank you.
We stand adjourned.
[Whereupon, at 4:10 p.m., the subcommittee was adjourned.]