DHS at Two Years: Fixing the Future

As US Court of Appeals Judge Michael Chertoff takes his seat as secretary of homeland security, he faces a host of challenges. It is no secret that the Department of Homeland Security (DHS) has not lived up to its promise, and it will take an extraordinary manager to turn things around. While the challenges are many, half a dozen are especially critical.
Build a department
First, the department is not really a “department” in the way that most federal agencies are. To a large degree, it is still simply the sum of the 22 different and disparate agencies that were merged into it two years ago. It has not yet developed into a cohesive, coherent, and effective whole. To make matters worse, virtually all of the components that were merged into it were dysfunctional to one degree or another, and none of these agencies’ fundamental problems were corrected before they became part of DHS.
As a result, the “Department” of Homeland Security is more or less a collection of different, disparate and dysfunctional components operating under a common name. Furthermore, even “Homeland Security” is not an entirely accurate description of DHS, since some of what its components do (the Coast Guard helps mariners in distress, for example) have nothing to do with homeland security, and some homeland security activities are carried out by other departments (for example, the FBI has now taken the lead on consolidating the various terrorist watch lists that different government agencies maintain).
Perhaps the best illustration of the degree to which DHS is still simply a loose collection of 22 components more or less conducting business as usual is the limited degree to which critically important senior department officials controltheir nominal subordinates. For example, the chief financial officer (CFO) does not have the power to hire, fire or direct the activities of the components’ CFOs. The component CFOs report to their respective component heads. The same is true for the chief information officer (CIO).
(Indeed, the CIO used to lament that I had more experts, about 25, on my staff in the Office of Inspector General devoted to auditing the department’s information technology activities than he had on his own staff to oversee the IT activities of DHS, the nation’s third-largest cabinet agency with a workforce of 180,000.)
To a considerable degree, the chief procurement officer (CPO) likewise lacks the power to direct and control the procurement activities of the department’s different components. Needless to say, this makes doing business difficult, and it invites waste, abuse and mismanagement. It was never clear to me why the outgoing senior leadership was so reluctant to give the CFO, the CIO and the CPO the authority they needed to do their jobs, but I hope that the incoming senior leadership team will do just that.
Control finances
Second, the new leadership team must get a handle on the department’s finances—both its accounting practices and its handling of contracts.
The department’s finances are basically a mess. No one expected the department to get a clean bill of financial health from its auditors in its first fiscalyear, given the admittedly difficult task of getting up and running. But everyone expected it to do at least marginally better the next year. Instead, the department’s financial performance went from bad to worse. In its first fiscal year, the department received a qualified opinion on two of its financial statements; in its second fiscal year, just ended, the auditors were unable to express any opinion at all because the department’s finances were so chaotic. And, the number of problems significant enough to be deemed “material” to the overall financial health of the department increased to 10 from seven.
As a consequence of this state of affairs, various components of the department had no idea how much money they were taking in and how much money they were sending out. The most egregious component in this regard was “ICE,” the Immigration and Customs Enforcement bureau. ICE has among the most important missions of any DHS component—namely, tracking down, apprehending, holding and then deporting illegal aliens, including illegal aliens who are criminals or, worse yet, terrorists. ICE had a budgetary shortfall of between $150 million and $200 million, resulting in forced belt tightening that severely limited its ability to carry out its mission. ICE had to institute a hiring freeze and suspend agents’ travel, their payments to confidential informants and even their cell phone use. Some aliens have been released because ICE lacked the money to continue to hold them.
Meanwhile, various department components were writing huge checks to contractors with few controls and little oversight. The Transportation Security Administration (TSA) became notorious for its profligate spending practices. It paid almost $50 million to one contractor, Boeing, for installing and maintaining explosive detection machines at airports throughout the country, even though virtually all of the real work was done by Boeing’s subcontractors. TSA could have contracted directly with the subcontractors and saved itself (and us taxpayers) a significant amount of money. Worse, this particular contract was administered as if it were a “cost-plus-a-percentage-of-cost”-type contact, which is illegal. A cost-plus-a-percentage-of-cost contract is one in which the contractor’s profit is a percentage of the costs it charges. The reason such contracts are illegal is, of course, that the contractor has no incentive to economize and every incentive to overcharge the government, since the more it charges the government the more profit it makes.
TSA also, it has been widely reported, paid nearly a half a million dollars for a lavish award ceremony for its employees. Sodas were purchased for nearly $4 each, three cheese displays cost $1,500, and a professional party planner was hired for $85,000. The ceremony would doubtless have cost much less had TSA simply sought competitive bids.
To address these different, but related, problems, the new secretary and his team should take a number of steps. To address the accounting issues, which are important because of their operational consequences, the CFO needs to be given control over the component CFOs, and his personal staff needs to increase significantly in size and competence. The secretary himself needs to make it clear—loudly and frequently—that those who practice or tolerate irresponsible financial practices and slipshod financial reporting will be held accountable.
As for the issue of contracts, the department needs to exercise vigilant oversight over contractors. It should practice competitive bidding as a matter of course, whether legally required or not. If a given contractor performs no necessary function itself, the department should arrange to do business directly with the subcontractors. And, in no instance should the department permit a contractor to decide what the department needs and what a reasonable price is for its (the contractor’s) proffered goods or services.
Critical infrastructure
A third important issue is completing the prioritized list of the nation’s most critical infrastructure that was promised by the end of last year.
It is inexcusable that three years after Sept. 11, 2001, the department still has not determined which sites and sectors are most important to the national security and the national economy, and which are most at risk of terrorist attack. Even the wealthiest and mightiest nation in the history of the world cannot protect every bridge, tunnel, chemical plant, bank, farm and factory. And, certainly, the list should not, as it reportedly does, include municipal golf courses and non-“iconic” amusement parks (Disneyland and Disneyworld probably should be on the list). The criteria for inclusion should be strategic value and risk of attack, not politics or pork.
Intelligence access
Fourth, if the department is truly to protect the homeland, it must have immediate access to the best available intelligence about threats to the homeland.
The department began as a bit player in the intelligence community when it opened its doors for business two years ago. In the two years since, its role has diminished even further. The Central Intelligence Agency has taken the lead on synthesizing government-wide threat information, and, as noted above, the Federal Bureau of Investigation has taken the lead on consolidating the various terrorist watch lists.
Now that the entire intelligence community has been radically overhauled in response to the recommendations of the 9/11 Commission, DHS’ intelligence component has been even further marginalized. This is unlikely to change anytime soon, and so the department will have to make the best of a bad situation. At a minimum, the secretary must ensure that DHS gets the information it needs, all of the information it needs, in a timely manner. Otherwise, the department will be caught unaware if and when—God forbid—disaster strikes again.
Allocate by risk
Fifth, the new secretary will need to work aggressively to persuade Congress to reallocate the department’s “first responder” budget to those cities that are most at risk of terrorism. Everyone knows that New York City and Washington, DC, are more at risk than, say, Topeka, Kan., or Omaha, Neb. The funds sent by DHS to local police departments, fire fighters, emergency healthcare professionals and other such first responders should be allocated accordingly.
Fix what’s broken
Finally, needless to say, the various vulnerability gaps that my office and other oversight groups inside and outside government have identifiedin aviation security, port security and border security must be closed. The vulnerabilities are well known, and the fixes are equally well known. They basically boil down to training, technology and funding.
More than anything, what’s been lacking to date is sustained management focus on fixing the problems that everyone knows exist. Secretary Chertoff will do his fellow Americans a big favor if he begins his tenure by acknowledging the problems and resolving to fix them. The American people expect and deserve nothing less. HST
Clark Kent Ervin served first as acting inspector general of DHS beginning in January 2003 and then as full inspector general from December 2003 until December 2004. In January 2005, he was named the Paul H. Nitze Fellow and Director of the Homeland Security Initiative at The Aspen Institute. He also serves as a commentator on homeland security issues for CNN. Ervin is a graduate of Harvard and Oxford University, where he was a Rhodes Scholar. Prior to his work at DHS, he was inspector general for the Department of State.

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