[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
DHS FINANCIAL MANAGEMENT: EVALUATING PROGRESS IN IMPROVING INTERNAL
CONTROLS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
FINANCE, AND ACCOUNTABILITY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 13, 2006
__________
Serial No. 109-258
__________
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
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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
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
BRIAN P. BILBRAY, California
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Benjamin Chance, 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
Erin Phillips, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
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Page
Hearing held on September 13, 2006............................... 1
Statement of:
Norquist, David, Chief Financial Officer, Department of
Homeland Security.......................................... 7
Zavada, David, Assistant Inspector General, Department of
Homeland Security.......................................... 16
Letters, statements, etc., submitted for the record by:
Norquist, David, Chief Financial Officer, Department of
Homeland Security, prepared statement of................... 9
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 3
Towns, Hon. Edolphus, a Representative in Congress from the
State of New York, prepared statement of................... 5
Zavada, David, Assistant Inspector General, Department of
Homeland Security, prepared statement of................... 18
DHS FINANCIAL MANAGEMENT: EVALUATING PROGRESS IN IMPROVING INTERNAL
CONTROLS
----------
WEDNESDAY, SEPTEMBER 13, 2006
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 and Towns.
Staff present: Mike Hettinger, staff director; Tabetha
Mueller, professional staff member; Erin Phillips, clerk; Seth
Lennon, staff assistant; Jean Gosa, minority assistant clerk;
and Adam Bordes, minority professional staff member.
Mr. Platts. A quorum being present, this hearing of the
Government Reform Subcommittee on Government Management,
Finance, and Accountability will come to order.
Five years ago on this day, we were still reeling from the
devastating attacks of September 11th. Over the course of the
next year, the President and Congress took steps to transform
the Federal Government. The result was the creation of the
Department of Homeland Security, an ambitious and sweeping
change in focus that brought 22 agencies together to combat
terrorism and to better protect the security of our citizens
here at home.
One of the primary objectives was to streamline our
operations and create economies of scale, to spend less on
overhead and more on the mission at hand. Sound financial
management is an important part of that equation, and DHS
inherited agencies with significant problems in this area. In
order to ensure that DHS would have the best chance to
establish sound business practices, I, along with the ranking
member, Mr. Towns, introduced H.R. 4259, the DHS Financial
Accountability Act, which President Bush signed into law on
October 16, 2004.
The DHS Financial Accountability Act mandated a structure
in line with the Chief Financial Officers Act of 1990,
establishing a Senate-confirmed CFO with direct access to the
Secretary. We certainly are pleased to welcome this new CFO,
the Honorable David Norquist, who will be with us and testify
here today. In addition, the act imposed on the Department the
most stringent audit requirements of any Federal agency, an
audit of internal controls.
Internal controls are the checks and balances intended to
prevent and detect mistakes. They are the key to
accountability. Unfortunately, financial audits of DHS have
identified 10 material weaknesses in internal control. These
problems affect more than just financial reports. They can
adversely impact operations. In 2005, the Bureau of Immigration
and Customs Enforcement experienced some budget shortfalls
because of accounting problems, and the Federal Emergency
Management Agency's internal control problems contributed to
millions of dollars in misspent funds in response to Hurricane
Katrina.
By subjecting DHS to increased scrutiny through the audit
process mandated in the DHS Financial Accountability Act, our
intent was to address the root causes of these problems. We did
not intend for the internal controls audit to be a paperwork
exercise; and I am pleased to hear that DHS is taking a
proactive, collaborative approach. In order to fix weaknesses,
not just identify them, the Office of the Inspector General is
working alongside the CFO performing ongoing audits that focus
on specific goals and action plans. These audits set specific
goals and measure progress. The end result will be a Department
that can focus more effectively on its critically important
mission.
Today, we are focused on the results of the first several
audits and provide the subcommittee with the chance to discuss
the results of these audits.
We are pleased again to be joined by Mr. Norquist, as well
as Mr. David Zavada, Assistant Inspector General for Audits,
who will testify today. We thank you both for being here. As
always, we appreciate your written testimony ahead of time to
give us some more in-depth background on what we will discuss
today. We certainly look forward to your opening comments and
expect that we will have a very good dialog as we move forward.
[The prepared statement of Hon. Todd Russell Platts
follows:]
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Mr. Platts. I am now pleased to yield to our ranking
member, Mr. Towns, from New York.
Mr. Towns. Thank you very much, Mr. Chairman, for holding
this hearing today to discuss ways in which we can improve the
internal controls over financial management at the Department
of Homeland Security. I am hopeful that today's witnesses can
shed some light on the progress being made toward this
important goal.
The creation of DHS in 2003 was daunting, as it required
the merging of 22 separate legacies agency into one management
framework. Unfortunately, the integration of uniform financial
management practices has proved overwhelming to agency
leadership at all levels, and DHS continues to demonstrate
significant material weaknesses in its financial reporting
process and internal control functions.
In response, Chairman Platts and this subcommittee worked
to enact the Department of Homeland Security Financial
Accountability Act, which finally brought DHS under the CFO Act
umbrella for all financial management activities. It also
requires DHS to assess their internal control functions on an
annual basis in order to insure that appropriate safeguards are
built into agency financial practices.
I am hopeful our witnesses today will be able to explain
how the weaknesses identified in the DHS fiscal year 2005
review of internal controls are being addressed for future
financial reporting activities. With many State and local
governments dependent upon DHS for vital resources, it is
imperative that controls be in place to govern the disbursement
and collection of revenues for all agency operations.
Once again, I thank my friend and chairman for his tireless
work. He has done a major job in terms of keeping this in the
forefront and continuing the discussions. He realizes how
important it is, and I would like to say to him I really
appreciate that.
This concludes my statement, and I yield back.
[The prepared statement of Hon. Edolphus Towns follows:]
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Mr. Platts. Thank you, Mr. Towns; and I appreciate your
kind words. But it truly has been a team effort with you and
your staff working with our staff on the Republican side, and I
think it is a good example that partisanship doesn't happen
here in this subcommittee. It is about good work and the joint
effort to just ensure that the taxpayer funds are well invested
and a good return for our citizens back home.
So we will turn to our witnesses. If I could ask both of
you to stand. Our practice is to swear in both of our witnesses
before your testimony. If you could raise your right hands.
[Witnesses sworn.]
Mr. Platts. Mr. Norquist, we'll begin with you; and we'll
give you roughly, I guess, a 6-minute timeframe. But if you
need to go over, we're glad to have you here; and if you need a
little more time than that, feel free to take that. Then we'll
go into questions.
So, Mr. Norquist.
STATEMENT OF DAVID NORQUIST, CHIEF FINANCIAL OFFICER,
DEPARTMENT OF HOMELAND SECURITY
Mr. Norquist. Thank you, sir.
Chairman Platts, Ranking Member Towns, thank you for this
opportunity to testify before you today.
As you have heard from past witnesses, DHS has many
challenges to overcome to improve its financial management. My
purpose before you today is to report to you on what I am doing
about those challenges, consistent with the language and spirit
of Public Law 108-330, the Department of Homeland Security
Financial Accountability Act.
My goals as CFO of Homeland Security are to make measurable
progress in a number of areas, to include providing timely,
accurate and useful financial data; improving our systems and
processes eventually leading to sustainable, clean audit
opinions; and implementing a sound internal control program.
I firmly believe that success in achieving these goals
begins by recognizing that strengthening financial management
is about more than systems. To address the root cause of the
problem, we must address people, policies, processes, systems
and assurance.
Regarding people, I have met with the agency chief
financial officers to evaluate their hiring and training
challenges. I believe there is a core set of knowledge that all
financial and management employees should be trained to when
they come on board in DHS. I have formed a task force to make
that happen. I am also starting a DHS-wide CFO mentorship
program so that we can identify and train the next generation
of chief financial officers.
With regard to policy, DHS needs to develop a Department-
wide financial management regulation. We are developing one DHS
way of conducting financial management. One set of regulations
will give us a common standard and understanding from which we
will operate. It will simplify our control environment and
provide us the standards for training and accountability.
The centerpiece of our effort to improve our financial
processes is our Internal Controls Over Financial Reporting
Playbook. The Playbook will be completed this fall and is the
culmination of an effort led by my office and supported by the
Inspector General's Office to identify the root causes that
underlie the material weaknesses. This will lead to more robust
and detailed corrective action plans and to achieve the goals
of the Financial Accountability Act.
With respect to our systems modernization efforts, let me
state that eMerge2 is dead. We do not have plans to launch the
development of a new, Department-wide financial management
system. The project documentation created at the inception of
eMerge2 identified the right goals. Its goals run along the
same lines as these I have outlined as my goals for DHS
financial management. However, the approach was not balanced
well enough across the framework of those five areas I
mentioned: people, policy, process, systems and assurance.
DHS still has a need to improve its resource management
systems, but before we begin making migrations we must have a
solid business case and know how the migrations tie into our
longer range plans. We need to separate our process problems
from the true system problems so we know which of our existing
systems can be our foundation to buildupon.
The final piece is assurance. DHS must have in place a
means by which we can test whether our internal controls are
well designed and operating effectively and for management to
be in a position to find what is wrong and fix it. To this end,
I am creating the CFO's assurance team to check our controls
and to direct and monitor our execution of the Playbook.
I would like to particularly thank the Office of the
Inspector General for their support of this effort.
We are working with the OIG on the internal control audit
for this year, as required under the Financial Accountability
Act. But, in addition, the IG is conducting a series of
performance audits that are helpful in improving our corrective
action plans, and I appreciate their strong participation.
DHS has come a long way since its inception in financial
management. During my tenure as the CFO, I intend to move DHS's
financial management beyond that of an agency in transition. I
know from my 3 months on the job that I have a big task in
front of me.
Thank you for your leadership and your continued support of
the Department of Homeland Security, and I would be happy to
answer any questions you may have.
Mr. Platts. Thank you, Mr. Norquist.
[The prepared statement of Mr. Norquist follows:]
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Mr. Platts. Mr. Zavada.
STATEMENT OF DAVID ZAVADA, ASSISTANT INSPECTOR GENERAL,
DEPARTMENT OF HOMELAND SECURITY
Mr. Zavada. Good afternoon, Chairman Platts, Ranking Member
Towns and members of the subcommittee. Thank you for inviting
me to testify before the subcommittee today on DHS financial
management and internal control.
Strong financial management and accountability are
essential to effectively and efficiently accomplish DHS's
mission. The Congress recognized this in establishing the
Department of Homeland Security Financial Accountability Act by
emphasizing financial management leadership and internal
control as essential elements of a sound financial management
system.
Financial management has been a management challenge for
DHS since its creation in 2003. DHS was created by
consolidating 22 separate domestic agencies with different
business processes and pre-existing internal control
weaknesses. In addition, DHS needed to create-a-department wide
capacity to lead, manage and oversee financial management.
For fiscal year 2005, DHS was unable to receive an opinion
on its financial statements, and 10 material internal control
weaknesses were reported for the 2nd straight year. The number
and extent of these weaknesses across the Department's
components are indicative of the challenges the Department
faces in improving financial management and producing timely
and reliable financial information.
To move forward, DHS must develop a comprehensive financial
management strategy that addresses organizational resources and
capabilities, inconsistent and flawed business processes, and
unreliable financial systems. An initial step in this process
is to prepare well-developed and comprehensive corrective
action plans to address known internal control weaknesses.
During 2006, we anticipated progress in addressing internal
control deficiencies. The Department identified four areas for
priority attention and improvement this year. These priority
areas were financial management oversight, financial reporting,
fund balance with Treasury and actuarial liabilities.
Over the past several months, we conducted a series of
performance audits to assess the effectiveness of DHS's
corrective action plans to address internal control weaknesses.
The audits are intended to provide ongoing feedback to the
Department as they develop and implement their plans. To date,
we have completed two audits focused on assessing the overall
corrective action plan process and specific corrective action
plans for 4 of the 10 material weaknesses. These weaknesses are
attributable to significant internal control problems within
the Office of the Chief Financial Officer, ICE and Coast Guard.
We recommend that the DHS take greater responsibility for
assessing internal control deficiencies and provide additional
tools for identifying root causes of weaknesses. Further, we
recommend that they closely integrate their corrective action
plans with the assessment being implemented as part of OMB
Circular A-123, Management's Responsibility for Internal
Control, and also with corrective action plans being
implemented to address information technology weaknesses.
The Office of the Chief Financial Officer has initiated a
Department-wide corrective action plan process and begun to
actively monitor progress. However, its own corrective action
plans need further development.
Weaknesses within the OCFO related to financial management,
oversight and reporting continue to exist. The OCFO plans to
conduct a comprehensive organizational staffing and human
resource needs study. We endorse this type of comprehensive
assessment in gap analysis.
At ICE, we found its corrective action plans and priority
areas to be comprehensive and well-developed. On its own
initiative, ICE began its corrective action plan processing in
the first quarter of fiscal 2006. Consequently, they are
further along in developing and executing corrective action
plans than the other DHS components.
The Coast Guard does not yet have a well-developed
corrective act plan. They have not yet thoroughly analyzed the
business processes and financial systems to determine the
underlying causes for many of its internal control weaknesses.
This analysis is crucial to identifying and implementing the
appropriate steps to actually move forward and correct these
weaknesses.
Financial management will continue to be a high priority
area for the OIG. We intend to continue our proactive and
engaged approach to overseeing DHS financial management
improvement efforts through our financial statement audit and
through a series of performance audits. We look forward to
conducting these audits and providing the results to the
Secretary and the Congress.
Mr. Chairman, this concludes my prepared remarks. I would
be happy to answer any questions.
[The prepared statement of Mr. Zavada follows:]
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Mr. Platts. Thank you both for your testimony. And I
appreciate both of you in your written and referencing in your
oral testimony the importance of financial management as it
relates to the core mission of the Department of Homeland
Security, that if we get this right it will enhance that
mission capability and effectiveness.
I want to start with maybe a question to both of you. In
response to the DHS Financial Accountability Act and the audit
of internal controls, you have kind of jointly moved forward
with the work on the performance audits and relating to the
corrective action plans. Can you summarize, maybe each of you,
how you see what's the greatest benefit of those corrective
action plans and the performance audits of them as we go
forward? What are you really looking for that will get us
further down the path to what we all want, which is good
financial management across the Department?
Mr. Norquist, if you would.
Mr. Norquist. Sure. Let me start with the performance
audits.
One of the major advantages of the performance audits is
the way that the IG is doing them, which is as we are
developing the corrective action plan so that their
recommendations and their findings are able to be built into
these corrective action plans from the beginning, this allows
us to start the process with much stronger corrective action
plans and with a much stronger process. So I really appreciate
that working relationship we have with them and the value of
those performance audits.
I think the advantage of the CAPs is it maps the way
forward. It gives a tool for myself to use with the components
to say, here was your problem, here was your plan. We've sat
down and had workshops to discuss was it sufficiently detailed,
is it effective. Now I'm going to be meeting with you on a
regular basis to discuss your progress against these plans.
Not every corrective action plan will move forward on
schedule. There will be hiccups. But it gives me a basis by
which to meet with them and say, are you addressing these? Is
it moving forward? It gives us performance metrics, it gives us
milestones to have, and it provides a map of the way forward. I
think that's an essential part of solving the problem, and I
think that's why these two things are so essential.
Mr. Zavada. In terms of the performance audits, what the
performance audit--the benefit of that was that we were able to
craft an audit that specifically addressed a particular element
of financial management, as opposed to a financial statement
audit which would be much broader. So what we've been able to
do is put a spotlight on an issue that we feel is very
important, the development of good corrective action plans.
Second, as David mentioned, certainly being able to provide
input to management on a real-time basis, to be able to
validate and work with them as they are developing this program
was certainly a secondary benefit.
In terms of corrective actions themselves, we see this as
the beginning of a process to implement A-123 effectively to
get to a clean opinion and to provide positive assurance on
internal control; and that is why we emphasize corrective
actions in the performance audit.
Mr. Platts. I share that perspective of the benefits that
we can achieve here and the kind of benchmarks that these
corrective action plans will give us.
One of the concerns--and I do appreciate, Mr. Norquist,
this may be not a fair question to you because of your recent
arrival. But one of the issues that the IG has pointed out is
the fact that there is not a Department-wide corrective action
plan. It wasn't begun until the third quarter and I believe is
still a work in progress. It seems that would be pretty
important to send that message through all the agencies. Here's
our Department-wide, you know, plan, and then it breaks down
into the individual agencies and programs that you are looking
at.
Can you give us an update of where that is? Why, I guess,
was there such a delay?
ICE moved forward right away with their individual plan.
But--and I don't know if you can adequately answer because of
not having been there. But your best understanding why the
delay to the third quarter and where do we stand now for that
Department-wide approach.
Mr. Norquist. Sure. Let me talk to that.
There's actually two parts to this. There is the corrective
action plan that relates specifically to the Office of the
Chief Financial Officer, as well as the Department-wide, which
is one we are going to build from the components. So let me
talk to both of those pieces.
The Office of the CFO contributes to some of the material
weaknesses, particularly on oversight; and I wasn't here at the
time that the original weakness was identified or that the
process began, so I may turn it over to David to talk to some
of that.
I suspect part of the problem was simply a workload issue.
As you've commented on before, we've been doing a lot to try
and strengthen the size and the training base of our work
force. We are continuing to do that. And so there was a
challenge as one financial audit ended and we began the other
to have the people identified to also build the corrective
action plan.
One thing I would note is when you commented about sort of
the different status of the corrective action plans of the
components, ICE, for example, under Assistant Secretary Julie
Meyers and CFO Debra Bond, were both in place by January and
have begun very aggressively tackling this issue.
The new head of the Coast Guard, the new CFO of the Coast
Guard came in in about June of this year, and so I think you
see that sort of a lag. I see a similar energy and focus from
them; and, hopefully, in several months we'll see the same type
of achievements that we are seeing out of ICE.
But there is a clear connection, I believe--and I'll let
the IG comment on this--between the leadership coming in and
grasping challenge and taking it as their own and providing
that sort of focus and energy. So when you see one place have
that change and then another not, it's OK. When you see the
other leadership change and the same type of energy coming in
behind it you can anticipate and look forward to working with
them to achieve similar results.
The Department, in terms of tackling the corrective action
plan for the Office of Chief Financial Officer, there were
several weaknesses identified. One is the number of people. We
have about 20 who are doing the accounting type of functions.
We have five people we have identified for hiring that are
coming on board. We will be getting additional positions, I
believe, in the appropriation bill. Both the House and the
Senate supported it. So that will continue to strengthen our
hand.
As David pointed out, we'll also be doing a study of skill
mix, which is, do our people who are there, many of whom--all
of whom are very talented, but do they have the particular
training and the skill sets to match the tasks we have? And
where there are gaps we'll provide the training classes. We'll
get them that experience so we can eliminate and close those
weaknesses. We will make a point of addressing the CFO
corrective action plan and fixing it. And I appreciate their
comments and their insights on the draft.
The second step is, once all the corrective action plans
are done--or not literally all because we will continue to
generate corrective action plans as management identifies
problems that need to be addressed--but as we wrap those up at
the end of September and October, we'll produce a Department-
wide plan which is the summation of those. This is similar to
what the Department of Defense did, which is to allow everybody
else to understand, here is how we are going to tackle this
issue across the Department. It gives a better idea as to when
these weaknesses will be addressed.
Just for an example, one of the things we have to do is fix
our financial management policy. The order in which we tackle
those policies will be informed by the corrective action plans,
where are the weaknesses, where are the most urgent needs, and
so we can tie our training, our policy adjustments, our system
migrations to the schedule of the corrective action plans so
we're tackling them in the right priority order. So that is
sort of the overview of both the CFO and the integrated
Department-wide plan.
Mr. Platts. Mr. Zavada, maybe if you want to comment on
your assessment of that overall plan, the Department-wide plan,
and then specifically--and you touched on it in your
testimony--with the Office of CFO and where they stand, in your
perspective, with staffing, you know, the training and the
skill sets and things as far as being able to improve on the
past.
Mr. Zavada. Well, in terms of the Department-wide
corrective action plan, we are certainly hopeful that the
Department will go back and--as they get their bureau
corrective action plans in and take the input that we have
given them in our performance audits and develop a Department-
wide corrective action plan. Certainly, you know, we have not
seen that yet. We understand that they do--they are preparing
that in what they are calling the ICOFR Playbook, and we're
anxious to take a look at that, and we will in future
performance audits.
In terms of the OCFO specifically, from our perspective,
DHS needs to build a capacity there to do the things that every
other Federal agency, or most every other Federal agency, can
do in financial management, and that is issue policies, that's
monitor progress of the components, it's facilitate solutions
to financial management problems within the agency and,
finally, to prepare and analyze financial statements and
reliable financial reports. Those capabilities are not there
yet; and we are hopeful that through--by conducting a study and
looking for gaps between the current skills and future, to be a
type model, that will give them a better understanding of the
issues and a clearer path to move forward.
Mr. Platts. And before I turn to the ranking member, just a
followup there on the make-up of the staffing. I know that
certainly at the beginning it was simply numbers where the CFO
started, and as that office has grown and the number of
personnel, still that breakout. And, Mr. Norquist, of the
roughly 80 employees there, how do they shake out in general
terms from budgetary versus accounting, you know, in the skill
sets? And how does that relate, then, Mr. Zavada, to your
office and seeing is the personnel there not just in bodies but
in actual skill to meet the challenges that the office of the
CFO is facing?
Mr. Norquist. Well, let's see. We have--if you break out
the 80, there's about 40 people doing what you call traditional
budgeting in one form or another. Part of those associated with
the fact that we provide budget support to parts of the
headquarters as well, like a component would. We have about 20
doing various forms of accounting, and then the balance would
be in places like program analysis and evaluation, one of the
requirements of the Financial Accountability Act, as well as
our link to the IG and sort of my immediate staff. Of those 20
accounting people, we have about seven who are certified CPAs.
We have--what I am very excited about, we have four who are
preparing to sit for the exam who are going through that
process.
I, frankly, am very supportive of providing the support and
encouragement for people to get the professionalization. We are
hiring five more that we have already identified. Of those,
three are CPAs as well. So, you know, when all of that is done,
we will have effectively doubled the number of CPAs. But
that's--you know, that's not a perfect measure, but, frankly, I
think it's an important indicator, building that type of core
skill set.
Mr. Zavada. I would just get back to my earlier answer and
say that I think the CFO office has a very dedicated staff. But
we do not believe--we believe that there is a lack of skills
and capabilities to do the things that I had mentioned earlier
that most other agencies can do in the area of financial
management, oversight and financial reporting. We had reported
this issue as early as 2004 in terms of the lack of capability
at that level. In some respects, it is not an issue that is
unique to financial management. We have seen the same thing in
acquisition management and reported on that at DHS as well at
the Department level.
Mr. Platts. Are you comfortable with the new individuals
coming on board and with the training that is being pursued,
that, in your opinion, we are going to get the office of CFO in
the near term to its staffing level and skills that we need to
address the concerns that you have appropriately raised?
Mr. Zavada. No. No. We feel they need to undertake a more
in-depth study. They need to look more closely at the skill
gaps, at what they need to do and the current skills that they
have. And I don't think it's just a matter of training. I think
the issues run deeper than that.
Mr. Platts. And, Mr. Norquist, the additional--the new
slots that you are looking to come through the appropriations
process, what are they in this area of----
Mr. Norquist. They'll be in both. They address a number of
areas. One of them will be particularly in the accounting side.
In addition, one of the things I feel is very important is
we do not--we need to not rely on the auditors to identify the
weaknesses. Management should be identifying the weaknesses.
Management should be making the statements that they have fixed
them. And the auditors have pointed this out to us on a number
of occasions, that we should be doing our own assurance tests
and not simply relying on the audit.
So I want to take some of those folks and build a
management assurance team that will go out and check our
processes, check organizations who have asserted that they have
completed their corrective action plans and have that
accountability. So we will be putting additional people against
this as well, and part of this is to make sure that when we
post the advertisements and we do the recruiting that we're
matching it to the skill sets that are needed and identified by
the study that he's talking about.
Mr. Platts. And that study is under way or planned?
Mr. Norquist. I don't know if they have actually begun the
study, but the steps to put it in place are under way, and it's
going to happen soon.
Mr. Platts. I guess because in various agencies and
departments what we come back to often is that human capital
issue and the ability to have people in place, not just bodies,
but who have the skills to perform the duties. And it seems
like from the IG's perspective that there's still a significant
challenge in this area of human capital and with the importance
of the Office of CFO setting the example that, while I like the
idea of the assurance teams and that ability to kind of go out
there and be that check and in an urgent situation you have a
team that you can call on to go out, I hope that's not going to
be at the expense of that first responsibility, which is the
staffing of the CFO office itself and to meet the needs that
have been identified by the Inspector General.
Mr. Norquist. I believe it'll be complementary.
I think the other thing about the assurance team is much of
their work would probably involve support from contractors who
had a particular skill or expertise that you could employ for a
short-term basis to target an area, but you are going to have
that sort of government leadership on a continuing basis
through it. But I would not want to set it up in a way that it
drew away from our needing to address the material weaknesses
that affect the Office of the Chief Financial Officer.
Mr. Platts. As we go forward I hope and one of the purposes
of our hearing, of this one, is to encourage the
communications. And, obviously, there is a very good working
relationship between the CFO and the IG's office, that
continue, and especially here in the concerns that still seem
pretty strong about the human capital within the Office of the
CFO that there remains a good dialog and interaction between
your two offices on that human capital side.
Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman.
Let me begin with you, Mr. Norquist. I would like to know
more about the internal control committee. Could you tell us
more about how that works?
Mr. Norquist. We have a management process using the
internal control committee that tries to ensure that the steps
forward on the internal control process brings in all the
different components. Although the CFO has the lead in internal
controls, many of the weaknesses, many of the challenges to fix
them extend into procurement, asset management, information
technology. So the internal control committee brings together
those groups of players to help make sure that there is that
connection.
In addition to which, working alongside the internal
control committee is the senior management committee. It will
be the group that makes a recommendation to the Secretary on
his statement of assurance, insures that there are accountable
officials for the internal control plans, and represents sort
of the leadership part of that activity.
So I think this is an important function in order to make
sure that everyone understands that they are part of the
internal control process, not simply it's a delegated function
to one person, because in that case it wouldn't execute
correctly.
Mr. Towns. I don't want to start a debate between you and
the IG, but he said something that I think that we need to
pursue. He mentioned that the skill gap--now, is it that--first
of all, do you agree with that? I don't want to put you on the
spot, but is it a fact that it is a big turnover or people are
not paid enough? I mean, that seems to be a problem of some
sort. So what do you think the problem might be?
I'm really not wanting to put you on the spot, but I really
want to see how we might be able to help you up here to be able
to really come to some kind of real--real working kind of
agreement that we can sort of move forward. Because there are
some problems, and I know you will agree with that. I'm happy
that you're on board, and I know you have only been there 3
months, and we're all excited about your being there, and I
want you to know that. But what--do you think that's going on
here, the reason we want to get a fix?
Mr. Norquist. Well, I sort of accept the auditor's--the
finding that there's a skill gap. I mean, I've worked with
these folks. I'm comfortable in their abilities. But there's a
number of tasks they have to be able to accomplish. I mean,
there is a wide range; and the fact that you're good at one
area doesn't mean that the Department is covered in all of the
areas it needs to tackle.
In addition, one of their findings a number of the auditors
pointed out is, because of the amount of work they spend
working with the components, they're not necessarily covering
the tasks that the headquarters is supposed to do. So some of
this is workload.
But I do believe that there is a need to address the skills
that we have, and that's why I agree with them on the need for
the assessment study. I'm quite open to whatever the study
comes back and says is the required set of skills versus the
ones we have, and I'm committed to--you know, we have a lot of
dedicated Federal civil servants, and we need to make sure that
if there is something they need to be trained on to do their
job that we get them that training. If there's a skill that you
can't simply train somebody to, then we need to hire people
with those backgrounds to make sure we fill in those gaps.
If somebody comes into my organization and identifies a
problem, my initial reaction isn't to disagree but to say, OK,
let's talk through it. I'm happy to look into how we're going
to fix that problem; and if this is one of the underlying
challenges, let's dedicate the resources and the people to
tackling it.
Mr. Towns. Mr. Zavada, do you think that it might be
connected with how much they are able to pay them as to that
might precipitate the skill gap? Because there is a correlation
between salary and performance. It should be.
Mr. Zavada. I'm not sure if pay is--would make a difference
or not. I do know that it's not just DHS, that other agencies,
to lesser degrees, have trouble attracting and retaining good
talent in the area of financial management. So it is a broader
problem. You know, as the bars have increased in financial
management and as we have accelerated and lessened the time to
prepare financial statements, for example, we haven't really
adjusted governmentwide on the skills side. So it's a broader
problem. It's just a little bit more severe--much more severe
at DHS, and I don't know if pay would make the difference or
not.
Mr. Towns. What about the turnover? Is it a big turnover?
Because I'm thinking about in terms of you're spending time and
you're training and you're getting them ready to be able to
assist, and then all of a sudden they say goodbye.
Mr. Norquist. There is a lot of challenge with turnover. In
our actual--in our financial management shop, I believe our
turnover has been relatively low. But turnover throughout the
Department is a challenge. We lose chief financial officers who
move on. We lose individuals.
Sometimes they are moving from one component in DHS to
another. In that case, I am actually pretty excited. I think
the more people DHS has who have worked for ICE and then for
the Coast Guard or for another organization, they get that
integrated broader view. I'm fine.
But the challenge becomes--for example, you train good
government accountants, you teach them all they need to know to
be good on financial statements, and then a private sector
comes along and hires them because there's a great demand for
people who understand the government accounting system. It's
the type of challenge that the information technology community
had, both inside the government. And so I think we need to be--
to look at that. And if----
You know, one of the points I made to the CFOs in our
organizations is we can't simply hire each other's staff and
think we're solving the problem. If we need to go out and
recruit, then we either need to target the skill set or we need
to find a different group of employees, bring them in and train
them and give them that skill set so they can develop and grow
inside our organization.
In some cases, you can find it. In some cases, you have to
build it. You find the right people with talent and enthusiasm
and you give them the training they need to tackle the mission.
You know, if it turns out that pay is a decisive factor in
this, I'll be certainly happy to get back with you on that.
Because I have seen different places where the Congress has
acted on that to address specific weaknesses in the hiring
challenges; and if that's the case here, if that's the result
of the study, I'll certainly get back to you on that issue.
Mr. Towns. Also, a part of that, I'm concerned about
whether or not you have the resources to really recruit, which
I think is also an issue. So, I mean, I know you have
additional funds coming in the appropriations, but the point is
that it might not be the kind of thing that will fix--I mean,
the point is that if you get additional money and you're able
to hire a few more people but you still have a turnover problem
or the salary is not where it should be, they're got going to
stay; and then we'll continue to come and have these kind of
sessions as to how do we fix it.
Mr. Norquist. That's right. It's not how many you hire.
It's how many you hire above what you're losing on a given
basis. And you can easily be excited about how you're bringing
on board and then watch a similar number of people move on to
other things.
Mr. Towns. Right.
Mr. Chairman, I yield back. My time has expired. Thank you.
Mr. Platts. Thank you, Mr. Towns.
I want to just followup briefly on the human capital issue
and the reference to the other agency. And we've heard that in
other hearings, too, the challenge of getting sufficient
qualified personnel in financial management positions.
I guess one--in your experience, Mr. Zavada, at OMB and
FAA, I guess, in the past as well, do you have any gauge for a
CFO office, out of 80, having 7 and going up to, say, 14 or so
CPAs, is that typical, that 10 percent or so? Or is that one of
the issues that we should have a higher percentage of actual
CPAs for the challenge that we are--what we're demanding of
this office?
Mr. Zavada. I don't know what the exact mix is. I think
that is why it is very important to do this study and do some
benchmarking. You know, let's see what other departments have.
Let's see what their capabilities are to address these common
needs that other agencies have as well as DHS.
So I think we just need to take a little bit of a deeper
dive on the issue. It's not just doing an internal assessment.
I mean, we have been very--we feel very strongly that an expert
in the area of human resources, probably an independent expert,
you know, really needs to come in and perform this study.
The CFO's office has done an internal study. It was a very
frank study, an assessment, and I think it identified gaps
generally, but what we need now is a more detailed study done
by somebody who has--with expertise in this area, so that we
can answer the questions that you're asking: How does DHS stack
up against other agencies, and what are the right ratios?
Mr. Platts. This may be a question you don't have the
knowledge to give an informed answer, but is there, in your
knowledge, a CFO office in another Department or agency that
you think does kind of epitomize the role model for not just
DHS but across the board that jumps out that maybe, you know,
we want to be looking at?
Mr. Zavada. Well, I think, you know, if you look at the
scorecard, the President's management agenda scorecard, there
are seven or eight green agencies. Those agencies have met the
standards. Obviously, they are able to do the things that I
outlined earlier. They would probably be a good place to start.
I also think possibly looking into the private sector at
private companies that are the same size as DHS, maybe doing
some benchmarking there might be helpful.
Mr. Platts. Mr. Norquist, with the CFO Council and the fact
that the hiring and finding of qualified people is a
challenge--and I know there's a lot of interaction with you and
your colleagues on the CFO Council--is there an ongoing dialog
about a partnership, you know, and going after, you know, a
pool of individuals so it's not each of you competing and
stealing from each other or competing with each other but
you're kind of a clearinghouse for qualified financial
management personnel that can then come into a kind of a pool
of applicants that each of you can turn to?
Mr. Norquist. I have talked to Linda Combs about this issue
and specifically talked about recommendations for CFOs, places
to go. She has several ideas on ways to search for CFOs, both
in the private sector and elsewhere, to bring into the
government to give us that expertise. She's not as enthusiastic
as my approach as to go and find them and take them from other
organizations because she's got that broader perspective.
But one of the points that I made to her and I asked for
her to think about and get back to me with some feedback is we
also need to start growing the civil servants who will become
the next generation of CFOs. So one of the things I put forward
is a proposal to our CFO Council, is to say let's take nominees
from each of our organizations, very talented, successful
individuals, and give them an opportunity to rotate for a
period of time with different CFOs in the Department so they
see how other organizations inside DHS work, not just the one
they grew up in. Let them see the range of tasks that a CFO
does. Let them develop some understanding of whether or not
that's something that interests them and start getting people
who think ``I can do that.''
Then when it becomes time to find the next Deputy CFO in an
organization, you've got a group of people who are thinking of
themselves as potential future CFOs, who understand the range
of responsibilities, who can have--if they've got an accounting
background, they've learned about budgeting; if they've got a
budgeting background, they've got to learn about accounting;
and they've understood more than just their component.
I think all of that, you know, is a management
responsibility. It's hard when you're trying to deal with
tomorrow's task to remember that part of this is the long-term
solution.
Again, this gets to the sort of importance of the
corrective action plans and others, is to keep focusing. What's
not just the solution for tomorrow, what's the long-term
solution? How do we keep growing the people, the skill set and
so forth to address this as the long-term solution?
Mr. Platts. I think that the IG's reference to the private
sector--and I don't know for certain if it's still the case,
but I know in many years past a friend whose father was an
executive within McDonalds, and they had what they called
Hamburger U, where they brought management trainees from all
over the country, all the stores, to that central training
program. I think that's kind of what you're talking about, is
let each Department or agency say here's one or two or three or
four, whatever, this year, that we would like to be part of a
kind of a CFO training program that's governmentwide.
And something that, from the testimony that we have
received, probably bears some great merit of being looked at to
address the needs across the agencies and something that in our
discussions with Linda and those at OMB--because it's certainly
I know in the individual agency departments finding that in
your budget is not going to be a case with the demands in the
sense of whether that can be something that's led by OMB in
looking long term.
Another question that relates to personnel and, Mr.
Norquist, to your interaction with all of the 22 agency CFOs
out there that, ultimately, what they do impacts what you are
able to do, and as the Department CFO you're the one that's
going to ultimately bear the responsibility and have, you know,
to answer for their actions.
Can you describe your relationship with them and how your
authority--as far as having input into who is in those
positions now or in the future with the various agency heads
and making sure there is a good understanding of their
relationship to you as the CFO for the whole Department?
Mr. Norquist. Sure. I have a very good working relationship
with the CFOs in the Department. I have found them very
responsive. I have found them very dedicated.
I meet with them in several different ways. One is, as the
CFO Council, we all have to come together as group. But I also
have a series of regularly scheduled meetings with particularly
the large components so that I sit down one on one on with the
CFO from the Coast Guard and with others to talk about what
their issues are, what's going on in their organization to help
me understand and to work with them.
I haven't had a problem with responsiveness or chain-of-
command-type relationships. I do play a role in helping
organizations select their next CFO or deputy CFO. I play a
role, and as we get into the evaluation period and we will be
more actively involved in the evaluations of their performance
for the year in setting their standards.
I believe those types of things set out in the CFO Act are
all very helpful. I am frequently asked in these type of forums
if it's enough, and the answer is I haven't run into a problem
yet in this process, but if I discovered a place where the
relationship was not as effective as it would be because of
something in the legislation, I'd let you know. But I think,
right now, it works very smoothly, and the legislation
accomplishes what it was intended to.
Mr. Platts. That's good to hear. And we do always welcome
and are glad to have feedback if there's areas of the law that
need to be fine-tuned, whether it's the CFO Act or others.
In your answer, you reference especially the Coast Guard
and ICE and the importance and, in both of your testimonies,
how critical a role that those two play in long-term success of
getting a clean and, you know, really a workable opinion that
day to day means good management practices at the Department as
a whole. Can you each describe your perspective on where you
see ICE, where you see Coast Guard today and what's their
biggest challenges remaining to get to good management
practices? And then comparison, you know, to each other. You
know, maybe one needs to be looking at versus the other and
learning from each other.
Mr. Norquist. OK. Did you want to start or do you want me
to?
Mr. Zavada. Sure. I don't mind.
Certainly, ICE--the reason why ICE stands out is because
they started early. They have a--they have put together a solid
plan. They did the analysis to know what the underlying causes
are of some of their weaknesses. They have leadership support,
both at the CFO--in the CFO office with a strong CFO as well as
at the Assistant Secretary level; and they have dedicated
resources.
What they've established is a project management office
that's sole purpose is to oversee and execute corrective
actions. Everyone has another job to do, and if corrective
actions are done as a collateral duty they're less likely to
get executed. So that's what sets ICE apart.
And ICE is at the point now where they are--and you see
this in the recommendations that we made to them. They're
further along the continuum of corrective actions. They're at
the point where they're thinking about how do we validate some
of the things that we have done and how do we integrate the A-
123 assessment process in terms of executing some of those
validations of corrective action. So they're thinking further
along the continuum.
They're also thinking in terms of the project management
office, which is highly dependent upon contractor resources,
how do we transition that to be a more stable CFO office and
CFO organization. So they're just clearly further along in
terms of their thinking on corrective actions and the
relationship between corrective actions and good financial
management practices in the long run.
Coast Guard is one of our primary areas of concern when it
comes to financial management. Their organization, in terms of
financial management, is in flux. They have not done that
underlying root cause analysis to know what their problems
relate to. They are probably the exception within the
Department in terms of looking more or needing to look more
deeply at their financial systems to understand what type of
problems are short term and what type of problems are long
term. But the Coast Guard, as opposed to ICE, is at the very
beginning of the corrective action plan process, at the
beginning of the continuum.
Mr. Platts. Thank you.
Mr. Norquist. I think that's a fair assessment.
One of the things I noticed, for example, is Debra Bond,
the CFO of ICE, is very aggressive, very forward leaning, very
engaged on the corrective action plans; and frequently she
shows up at my office to discuss a financial issue. She'll
often have her Assistant Secretary, Julie Meyers, with her,
which shows me the amount of support she's getting from her
leadership, that dedication that when we move an organization
is so critical for their success. So I see that teamwork, and
that's reassuring.
I have found one of the valuable things in the performance
audit was it showed clearly, from the IG's perspective, that
they had been making the progress, that energy and drive was
producing results. It is my hope that is what we see from the
Coast Guard in a period of time. I have seen a similar shift
with the new Coast Guard leadership and the new Chief Financial
Officer, the same willingness to tackle the issue.
When I read the performance audits, I had a meeting I think
the next day with the Coast Guard. I said, we need to sit down
with ICE and have them talk you through what they did because,
clearly, what they did is working. And as you begin to develop
your plans I want you to learn both--granted, they're not
perfect matches. There's going to be differences--but to learn
the lesson of what successes they have had to help you map the
same way. Because I want the Coast Guard--and they're equally
important that they get off on the right foot, and I don't want
that management and leadership enthusiasm to sputter with the
difficulty in executing a plan.
So I want to help them as much as possible and to
capitalize on the strong support they have from the top.
Mr. Platts. A quick followup, and I want to get to Mr.
Towns again.
Why hasn't the Coast Guard been more proactive, and your
statement was that they have not really done that underlying
root cause analysis. Why not, since we know--I mean, you know
early on when we transitioned in the Department, we are now
several years down the path, and all along we have known the
Coast Guard is one of the challenges. Why hasn't Coast Guard
done it, and, quite frankly, why hasn't the Secretary of the
Department said, hey, you are behind the eight-ball here; we
need to get on the stick here and get this done? Why are we
still talking about getting them on the right track as opposed
to them being on the right track like ICE is?
Mr. Norquist. I actually defer to the IG on this because
the new leadership came in at the same time I did, so I am not
sure of the history of their predecessor.
Mr. Zavada. Since I've been at the Department since
January, I might be able to take the same route.
Mr. Platts. I think it is a question that we will probably
be following up on and to the Secretaries and the--you know,
the senior leadership, that when you have within the Department
two of the key areas of focus, ICE and Coast Guard, you have
one that is aggressively moving forward, the other one is not,
and perhaps will now with the new leadership. And that may be a
part of the reason why we have new leadership in the sense of
the CFO efforts. But, you know, it doesn't really, you know,
kind of come together well as to why you know we are not seeing
that same effort on the Coast Guard's part.
Mr. Zavada. Well, I will say that the Coast Guard is a
contributor also to the departmentwide material weakness on
financial management oversight and reporting. It is not--those
problems are not just within the OCF at the Department level.
So a lot of the skill and capability issues are resident there,
and they are trying to inform a transformation team, and they
are trying the deal with those. But I think that to some extent
there may have been a contributing factor in the past.
Mr. Platts. It is clear that until they get on the ball and
get working, the efforts of your office, no matter how well the
office of CFO for the Department is operating, we are never
going to get to what we are all after, which is a clean opinion
that is not clean once a year, but means year round we have
good systems in place. We are never going to get there until
all entities, and especially the large ones like Coast Guard--
and I--my ranking member has been very patient with me as I
have gone way over my time.
So Mr. Towns.
Mr. Towns. Thank you very much. No problem.
You know, in the beginning, you know, we talked about the
possibility of the culture of independence might be difficult,
Mr. Zavada, with some of the legacy agencies that would be
difficult, you know, to break. Have you encountered that?
Mr. Zavada. I have encountered that in my own office. It
is--we are a collection, as the rest of the Department, of a
lot of different pieces, a lot of different departments, and
departments have different ways of doing things, and it is--it
has been a challenge, and I am sure it is a challenge DHS-wide
to make those processes consistent and uniform. So, yes, I
think that is something that I have seen.
Also, I would say that getting back to when DHS was
created, as I said in my testimony, some of these problems do
go back to the way that some of these initial departmentwide
management functions were resourced from the start, and as I
said, we have seen--we have reported on issues related to
acquisition management and the skills and capabilities there,
and similarly within the CFO's office. So, you know, there is a
lot of catch-up to do.
Mr. Towns. All right. Let me ask you one of the most
significant challenges you believe DHS will face in complying
with 123 for internal controls.
Mr. Zavada. Well, in my view, implementation of Circular A-
123 for DHS is about corrective actions. It makes no sense to
document processes that are broken, to test controls that are
broken where you know that there are already weaknesses that
exist. So the ability for DHS to effectively implement Circular
A-123 relies on their ability to put together well-developed
corrective action plans and to execute those corrective action
plans.
In our audit reports we have tried to identify the linkages
as we see them between the A-123 assessment process and the
corrective action plan process, and the Department understands
this, and clearly I am sure when their Echifer playbook comes
out, it will be reflective of that understanding and that
linkage.
Mr. Towns. Let me ask both of you this. And ``leave me
alone'' will not be an acceptable answer. What more can we do?
What do you see as Members of Congress that we could do to
assist you both of you? What more can we do? Is there anything
that we need to be doing?
Mr. Norquist. Well, first of all, let me start by
expressing my appreciation for everything you have done so far.
As I have mentioned to people, this is not an area where I can
have conversations and get sustained interest and enthusiasm.
It is important, but it is important in a way that is hard for
people to appreciate how internal controls play into sound
financial management and sound financial management plays into
protecting tax dollars.
So I appreciate the seriousness this committee and the two
of you in particular have taken with this issue and the
thoughtfulness in this legislation as I have been part and
parcel in going through this, being one of the CFO Senate-
confirmed positions the act calls for. I have studied the
language and appreciated the careful balance that was put into
it.
I think that going forward there are several places of
importance. One is, for example, when we have identified
solutions or areas such as the additional people in the
appropriations bill to make sure that is not lost in the
enactment in the bill. That is certainly not a high-profile
item that there will be additional finance and accounting
people in the Office of the Chief Financial Officer in an
appropriation act. But making sure that is there--and, again, I
appreciate the two committees because they've both been
supportive of this--but working in a Member-to-Member level to
make sure that people understand these small things make a
difference, that is certainly very valuable and greatly
appreciated.
The other is the helpfulness of the individual meetings,
being able to get together with you, giving you an update of
where we are, letting people inside the Department and
elsewhere know that you are paying attention, that you care,
that you are there to support us as we move forward, I think,
is very valuable. People look for that constructive engagement,
and I appreciate that.
So I think those are two areas, and I mentioned everything,
the ability to go to you if I see something where it is beyond
my capacity to fix because it requires a legislative change.
Knowing that there is a group of people who understand the
issue, who will be able to understand the point that they were
trying to make in how that would improve financial management
is very valuable. It give us a place to go to in working on a
solution to go forward.
Mr. Zavada. I would agree with David in terms of your
interest, certainly the committee's interest, in financial
management, broad interest in internal control, which is not a
very sexy topic, but is really the foundation of timely and
reliable information and the beginning of being able to better
manage programs. So certainly your committee's interest more
broadly in financial management, your committee's interest in
DHS, this hearing, being able to discuss corrective action
plans and put a spotlight on corrective action plans as the
beginning of the process toward financial management
improvement at DHS, I think, has been very helpful.
Mr. Towns. Thank you. On that note I thank both of you, and
I yield back, Mr. Chairman.
Mr. Platts. Thank you, Mr. Towns. And I often kid about
getting interested in these topics which to me are so important
because it is how we spend the public's money and the
effectiveness in spending that money, and I joke that if I
could get one of you to admit that you have been using
steroids, we would have a packed room here. The media would be
really interested in covering.
Mr. Norquist. Would it help me to get a clean opinion?
Mr. Platts. We--you know, maybe Mr. Towns' next hearing,
you know, is going to be about how steroids is--it is
unfortunate, you know, you talk about hearings on baseball
players using steroids, and you get a packed room. You talk
about how we are spending $2 trillion of the public's money and
how we are trying to improve the effectiveness of that
expenditure, and we are grateful for the members of the media
who are here, but it is a fraction of those who cover the
steroid hearings. So unfortunately, we think it is important,
we know you do, and you are devoting your professional lives to
it, so we are glad to be partnered with you.
Let me--I have two other areas I want to touch on. One is
relating to the financial management line of business and the
consolidation of how you are operating now with your systems
and who is managing them, and I know ICE is serving some of
them, Coast Guard and the Federal Law Enforcement Center,
Training Center, is serving some of the smaller bureaus.
Is there, first, any plans internally for any further
consolidation, you know, to Coast Guard or the Federal Law
Enforcement Training Center? I mean, where do things stand, and
where do you see yourself going?
Mr. Norquist. Here is the way forward as I see it. What I
have asked folks to do is, based on either audits that we have
already done, work that has carried over from the original
merge, or from additional work that we have to do, triage our
component and their financial systems. Some of them work fine.
They support clean opinions. They may not be the same system
everyone else uses, but they are doing just fine. They are not
my first priority to fix. They are not contributing to a
material weakness.
The second group of those components show the system can
operate fine, but there has either been some minor modification
to it or some process change about the way they are using it.
This is contributing to the problem, and the answer is let us
tackle that as part of the corrective action plan and fix it.
The third group would be those components who have either
got a version of the application that is no longer supported,
does not support a clean opinion, or has been so modified as to
not necessarily be recoverable the way it is. And those are the
places I want to focus the migration strategy on, which is they
are going to be biggest improvement, they are going to make the
biggest contribution to improving our financial statement. I
will start by targeting them, and again, consistent with OMB
line of business, the question is let us not build a new
system, let's find an instance of that system or different
system we are already using we can migrate them to. My
preference is let us find something that has a track record or
capability to support the clean opinion, to do the things we
know the system to do. And then let us spend our energy moving
that component over.
Migration is very time-consuming. It creates a lot of
challenges. It can create disruption. So I want to make sure we
are very careful about the moves and the cost/benefit is there.
But I want to target the ones that have the greatest challenges
and make them the lead cases to move, because then we will get
the biggest results for the most we make.
Mr. Platts. What is your understanding from OMB on the
requirement for the line of business in either, you know,
migrating in house to identified Centers of Excellence, as they
have been called, or having to go outside within government or
outside privately? What is your understanding from OMB of how
that is supposed to play out in the sense of doing that
analysis of, you know, competing possibilities, public to
public or public/private, and the timeframe from when you are
expected to have your systems either internally with the Center
of Excellence or elsewhere with the Center of Excellence?
Mr. Norquist. Well, I have given them the same type of
briefing which is the basis of the statement that I have
prepared for this committee where I talk them through the types
of changes I saw, and one of them was this issue of triaging
the system and identifying the ones to move first. The core
principle which they have, which is the same as ours, which is
don't build a new system, find one to migrate them, we can do
it by moving to somebody in house. We can do it by moving to
someplace in the private sector. I am very open depending on
what the analysis says is the most efficient way to move
forward both in terms of these and the migration and the long-
term savings to the taxpayer.
In terms of time line, you know, there is little patientce
in letting us do our analysis, but they would very much like us
to be able to lay out for them who is next and when do we see
that migration happening, and I told them I need more
information to be able to pick out which of the candidates are
the ones that need to meet first, and what the right pros and
cons are, and how to move them. But they have been meeting with
us on this. We are going to work very closely with them on it
and make sure we are on board.
Mr. Platts. But at this point there is no date certain that
you have been told that you are expected to have the entire
Department either migrated internally or externally to a Center
of Excellence?
Mr. Norquist. They haven't conveyed that to me, no.
Mr. Platts. OK. Also related to that is about building a
data warehouse or other enterprise data reporting solution.
What is the plan there? You know, how you are approaching that,
that challenge?
Mr. Norquist. Well, timely and accurate financial data is
absolutely essential. It is a very high priority for me. A data
warehouse is one way to get there. There are several options,
so we are going to look through those to figure out which one
gives us the information we need. That is certainly an option
we are going to consider, but I haven't made a decision that is
necessarily the way to move forward, but it is certainly one of
our options.
Mr. Platts. OK. I think maybe a final question, Mr. Zavada.
In your remarks earlier talking about the benefits of the
performance audits and this dialog here internally within DHS,
do you see the approach that you are taking, partnering with
the CFO and the performance audits kind of hand in hand with
the correction and action plan development implementation,
something that we should be looking to help promote across the
Department and agencies in the Federal Government, that it is a
way to get to a better foundation for financial management?
Mr. Zavada. Well, I think the most important element of
solving these problems is good communication between management
and the auditors, and certainly we have that, and the
performance audits have helped to facilitate that even further.
I think governmentwide there may be certain cases, certain
material weaknesses that are intractable really, or there has
been--not really been activity on them, where putting a
spotlight on it through a separate, more flexible audit and
providing more detailed recommendations as to how management
can go about fixing those problems could work. I don't think it
is something that across the board you could say works in every
situation, but there could be cases where putting that
spotlight on and providing that additional in-depth analysis
can be helpful.
I think certainly in DHS's case this has given us an
opportunity to work closely with the CFO's office to improve
management, to improve financial management, and to provide
some constructive recommendations as plans were being
developed. And we are trying to do more of that in the work
that we do. We are doing some of that in acquisition
management, where we are looking at procurement risks before
you enter into procurements as opposed to looking after the
fact and saying--pointing out errors. So this is very much in
line with the type of work that we would like to do in the IG's
office.
Mr. Platts. Actually I have one final--more of a comment,
and, Mr. Norquist, it kind of comes back to the challenge that
we have touched on about Coast Guard and the critical role they
play. I kind of see it as a similar analogy when we have worked
with NASA and the CFO at NASA and the interactions between her
and all of the CFOs at the different centers around the
country. And thankfully she has a lot more direct input to the
CFOs and authority relating to their reviews and who is in
those positions. I think it gives her a greater ability to have
a good operation at the agency level.
With your counterpart or colleague now, the new CFO at the
Coast Guard entity, is, in your dialog, is--we appreciate being
new and apparently about the same time I think as you came in,
and--but that while we are patient, we also do want to see the
Coast Guard take a more aggressive approach as we talked about
with ICE. And they would probably rather have you up here
having to take the questions than be here themselves. And as we
have told NASA, if we are not able to get the answers from you
or, in the case of NASA, with the agency CFO, that means we
will have to--the entity CFO--and because we certainly need to
see improvement there if we are going to get to the
departmentwide advancement, which is what we are all after in
this particular effort.
Mr. Norquist. I will be happy to make that observation at
the next CFO council.
Mr. Platts. And that interaction--and I am sure they are
wanting to do just that, and we have high hopes for their
success because it does play such a critical role.
We again appreciate both of your testimonies here today,
your written testimonies, your work from your staff leading up
to the hearings, and just in general your dedication as public
servants to the good of our Nation and the benefits to our
citizens.
We will keep the record open for 2 weeks, if there is any
additional information that you feel the need to supply to us.
We are grateful for your work, and this hearing stands
adjourned.
[Whereupon, at 3:25 p.m., the subcommittee was adjourned.]