Wasted Year

From in-house bickering to a fumbled national crisis, the Homeland Security Department is still a mess.

Patience has worn thin with Homeland Security Department Secretary Michael Chertoff since he took the reins last March, even among those who have labored in the department's trenches and usually could be counted on for some sympathy, or at least to hold the party line.

"I like Chertoff and his people," says a former senior official. "But not what they've done in the past year. It's been a wasted year, really."

DHS has made little progress during the past 12 months. How little? The department's report on management challenges for 2006 contains sections that were cut and pasted from the 2005 report.

The department has not been devoid of success: Its U.S. Visitor and Immigrant Status Indicator Technology program met a congressional deadline to install biometric scanning equipment at more than 200 ports of entry. Also up and running is the 2002 Support Anti-Terrorism by Fostering Effective Technologies Act approval process, which is intended to spur development of counterterrorism tools by limiting companies' liability if their products fall short.

But the list of failures is longer. Homeland Security's response to Hurricane Katrina set a new standard for government incompetence. The department has made almost no headway in securing high-profile targets such as mass transit systems, cargo shipments and chemical plants.

"It was a year of tremendous pressure obviously placed upon [Chertoff] and the new directorates at the department," said G. William Hoagland, senior budget adviser to Senate Majority Leader Bill Frist, R-Tenn., during a January forum in Washington. "It was a year when managing rapidly changing events pushed officials to their limits, both mentally as well as physically." DHS has been treading water instead of integrating its many components. The department delayed rollout of MaxHR, its controversial new personnel system, after a federal court found key portions to be illegal. Emerge2, the expensive, unwieldy program to unite the department's financial systems, collapsed under its own weight. The procurement office, meant to streamline billions of dollars of purchases each year, continues to struggle from chronic underfunding and understaffing.

What's more, all Homeland Security's failings took place in the spotlight. Not only has the department's every move been scrutinized by the press and public, but every action is parsed and seized upon for political advantage in Congress and by the Bush administration. The politicization of almost everything related to DHS is reflected in the reluctance of highly placed former officials to speak on the record about their experiences. Only off the record have they been willing to talk about how management problems hobbled the department from the start.

Chertoff came in intending to tackle those problems. When he took the helm last spring, he promised big changes, stemming from a massive, no-stone-left-unturned study of DHS. "Old categories, old jurisdictions, old turf will not define our objectives," he promised an audience at The George Washington University when he announced his second stage review.

After his speech, Chertoff sequestered himself, insiders say, keeping company with only a small group of key advisers-mostly transplants from the Justice Department, where Chertoff had served as assistant attorney general for the criminal division from 2001 to 2003, before his brief stint as a federal appeals court judge. For senior officials outside Chertoff's circle, "There's no access," says a former official. Chertoff's style was a jarring contrast to that of his predecessor, Tom Ridge, former congressman and Pennsylvania governor. Ridge managed with the extroverted style of a politician, with many meetings and public appearances, lots of handshakes and exhortations to work as a team.

While to some it came off as empty cheerleading and glad-handing, many staffers who labored 80-plus-hour weeks to hold the new department together seemed to appreciate Ridge's approach.

Insiders vs. Outsiders

That's changed, recently departed staffers agree. "Now, Chertoff's advisers are the team," says a former headquarters official. "They send out requests for information, 'Give me a 10-page issue paper on the history of a certain program.' You never hear what goes on behind that."

While disappointing or frustrating to some, the situation also is not surprising. "It's what you'd expect. It's the difference between a politician and a judge," says another former aide to Ridge's inner circle familiar with the dynamic.

The clock ticks on, even as former judges deliberate, and Chertoff's review, originally slated to end in May 2005, stretched to July. Senior posts emptied and weren't filled. At one point, more than 20 key positions, including several undersecretary and assistant secretary spots, were empty or filled with acting appointees, because the reorganization was expected to eliminate or change several posts.

Chertoff's secretive second stage review sowed doubt among many employees that their projects would stay intact. Lacking leadership, much work ground to a halt. "Nothing happened" during the review, a former headquarters official says. "The holds on nominations had an inordinate effect" on DHS, explains another top-level player, because so much change was set to occur in a "fragile" department, but no one knew what the changes would be. Projects missed deadlines, rollouts were delayed, improvements were put on hold and the department fell behind on crucial efforts to protect the country.

Finally, on July 13, Chertoff emerged to announce the first results of the review, and the beginning of a shake-up: He created several offices, split up two directorates, eliminated a third, shifted a number of smaller operations and announced some new policies. Nominations started flowing to the Hill to permanently fill empty seats.

The department responded, swinging into action to implement Chertoff's changes. The engines of the DHS bureaucracy rumbled to life. "From mid-July to September, the department was very active and productive," a former official recalls. "People didn't know how the reorganization would shake out, but at least we had a plan."

Then Katrina struck on Aug. 29. Despite preparations by staffers on all fronts-from weather watchers to emergency response officials to public relations aides-the hurricane threw DHS leadership into turmoil. The response was shocking inside and outside headquarters. Chertoff had pledged publicly that his department would prioritize catastrophic events over all others. He had inherited a brand-new National Re-sponse Plan, created by Ridge's team to give a basic but sturdy framework for responding quickly and effectively to a major disaster. Yet when the moment came to implement the plan, the leadership seized up.

Chertoff did not activate a portion of the plan specifically designed for handling catastrophes, even though some officials say that doing so could have saved lives and brought the chaotic situation in New Orleans under control. Instead, he melted into the background. President Bush, Federal Emergency Management Agency Director Michael Brown, and later the Coast Guard's Adm. Thad Allen instead took the spotlight.

Inside the department, the work that began in earnest after Chertoff's July announcement quickly ground to a halt. "Everything was Katrina for about two months," a former official says. Even after the situation in the Gulf Coast region had calmed, the focus at headquarters was how to reform FEMA-or re-reform FEMA-since Chertoff had targeted it for changes in July.

Unwanted Child

The fault for Homeland Security's stagnation doesn't stop with Chertoff. The Bush administration has neglected homeland security, former officials say, and the department has suffered for it.

The White House created DHS, the largest bureaucracy since the Pentagon, only after Democrats forced it to do so.

Until 2005, it treated the department like an unwanted child, putting it under strict orders not to be an embarrassment, cost more money or ask for favors.

When the spotlight shone on DHS, it highlighted just how poorly designed the new department was.

Neither the White House nor Congress adequately assessed or provided for the herculean task of twisting, forcing and cajoling 22 ill-fitting and at times ill-tempered agencies to act like one organization. That has fallen to a succession of dedicated men and women who, in the absence of actual plans or forethought, have rolled up their sleeves and gone to work.

Unfortunately, rolled-up sleeves aren't enough. Former FEMA chief Michael Brown proved that.

Only recently has Chertoff become an active voice for the department, as the public's attention has shifted away from the Gulf Coast crisis toward other issues.

He has pledged a renewed focus on immigration and border security issues, among other things. But even in those areas DHS has a troubled history, rife with indecision and leadership conflicts that have impeded its efforts.

Those conflicts loom large in the bureaus responsible for overseeing immigration and border security.

Long-standing problems between DHS' bureaus of Immigration and Customs Enforcement and Customs and Border Protection exemplify the management mayhem that dogged Secretary Chertoff in his first year.

War at the Core

CBP is responsible for enforcing immigration and customs laws at and immediately around the nation's borders and ports of entry. ICE is responsible for investigating criminal and terrorist activity and enforcing immigration and customs laws within the interior of the country.

Financial problems at ICE have received widespread congressional and public attention. So has lack of coordination between the two bureaus. Interviews with DHS officials and documents obtained by Government Executive reveal that senior managers knew within weeks of the department's creation that serious problems existed, but they struggled to find solutions.

Former ICE administrator Michael Garcia and former CBP commissioner Robert Bonner were unable to resolve a funding dispute between their agencies, according to the officials and documents. Their boss, Asa Hutchinson, who was DHS undersecretary for Border and Transportation Security, was fully aware of the disagreement.

Garcia declared that his agency had a huge budget shortfall just three months after the department was officially stood up in March 2003. In June 2003, Garcia wrote to Hutchinson saying that up to $500 million should be transferred immediately from CBP to ICE. Bonner fought the transfer of funds to ICE.

"The budget was hugely screwed up," says Andrew Maner, Homeland Security's former chief financial officer, who also served as Bonner's chief of staff when the dispute began. Another budget official, who spoke on background, says Garcia's staff did not produce evidence to verify that CBP owed ICE up to $500 million: "Show me the data that substantiates what you are saying, because you don't move half-a-billion dollars on a whim in one memo."

Hutchinson was unable to mediate the problem. He told Garcia and Bonner to get their staffs together and work out a solution, but nine months later, staffers were at a bitter impasse and ICE-the government's second-largest investigative agency, next to the FBI-was running out of money.

"Since June, ICE and CBP staffs have had numerous meetings with no resolution. Neither has CBP transferred any funds due to ICE," Garcia wrote on March 11, 2004, to Hutchinson and Janet Hale, DHS undersecretary for management. "We need immediate resolution of these funding issues, otherwise ICE will have no choice but to begin curtailment of services provided to both ICE and CBP."

Garcia listed "drastic measures" that his agency would have to take, including cutting back staff operations and support, limiting special operations, and reducing bed space to detain illegal immigrants and criminals.

"Given the magnitude of the shortfall, there is no solution we can implement that would not adversely impact staffing and the ICE mission," Garcia warned Hutchinson and Hale. "In most cases, there is agreement in principle with CBP, but no agreement on the remedy, namely payment to ICE. Accordingly, I respectfully request your assistance in bringing these matters to a quick resolution."

By the end of March 2004, ICE instituted a hiring freeze. In the months that followed, Garcia's other warnings came to fruition: The agency started releasing criminal aliens nationwide because it did not have enough space to detain them, and it implemented restrictions on all nonessential spending. Agents in the field said they did not have money to put gas in their cars, travel for investigations or fully do their work.

With the two agencies unable to resolve the dispute, Homeland Security's budget shop was dragged in. "I did not see [the Border and Transportation Security Directorate] engage at all . . . in trying to resolve this problem. It was all tossed up to the department," says a budget official on background.

"It was a total nightmare," Maner adds.

The DHS budget shop went to work on finding solutions. Weekly meetings turned into daily meetings, auditors were sent around the country, and every account was scrubbed. "There was very little confidence in anything. You had to go through everything with a fine-toothed comb," says one of the officials.

By the end of fiscal 2004, the budget shop had gotten ICE $627 million by reprogramming funds. But it wasn't enough. A DHS source, who spoke on condition of anonymity, says the funding only covered expenses in 2004. Budget shortfalls carried over into 2005 and 2006 due to recurring costs.

Bruised Egos

The department hired Chicago-based consulting firm Grant Thornton LLP in December to examine the ICE and CBP budgets. The firm discovered that ICE had a huge budget shortfall, while CBP had about $460 million in unspent funds.

Grant Thornton found weaknesses in ICE's financial management. The bur-eau was using an antiquated accounting system and did not have enough financial staff. "CBP appears to have the systems, procedures and staff to manage their resources. DHS should figure out some way to share this expertise with ICE."

But the source says Grant Thornton's findings were buried. Rather than transfer CBP's unused funds to ICE, Hale developed a team to come up with another solution. In March 2005, the team proposed to Congress a complex reprogramming of funds among multiple DHS agencies and programs.

Congress rejected the request, and instead gave ICE new money in May 2005 as part of an emergency funding bill to support the wars in Iraq and Afghanistan. ICE's budget also was increased through the fiscal 2006 budget.

When all was said and done, ICE had been given almost $1.6 billion in extra funding by the end of 2005 through internal DHS reprogramming and congressional appropriations. According to the DHS budget shop, ICE is now on solid financial footing-almost three years after Garcia first sounded the alarm bells.

"[There were] a lot of bruised egos, a lot of hard meetings, a lot of cussing and swearing. But it's fixed," Maner says.

An October 2005 ICE budget document shows the agency still is grappling with staffing shortfalls, however. ICE would need about $450 million in new funding to fill more than 2,000 vacant positions, according to the document. About 1,000 are empty in the Office of Investigations.

ICE spokesman Dean Boyd says the agency is evaluating its options and eliminating some vacant positions. He says ICE is staffing new projects, and the fiscal 2007 budget request contains a 21 percent funding increase that would allow more hires.

Garcia left ICE last fall to become U.S. Attorney for the Southern District of New York; Bonner retired in November. Garcia declined comment. Hutchinson, who left the department to run for Arkansas governor, issued a statement saying he "was pleased with the progress we made on resolving the conflict [between ICE and CBP] even if much work remained to be done upon my departure."

Fumbled Fleet

Caught up in the resource war between ICE and CBP was the office of Air and Marine Operations. Before DHS was created in 2003, AMO was a Customs agency focused largely on drug interdiction missions along the Southwest border, and in the Caribbean and in Latin America. With a fleet of 133 aircraft and 82 vessels, many equipped with sophisticated sensors designed especially for the drug war, and 1,000 employees, half of whom were highly trained pilots or marine and aviation enforcement officers, the agency was integral to ICE operations and a key player in other agencies' counternarcotics operations, as well as in multiagency efforts to secure events deemed to be of national significance-such as the Super Bowl and the presidential inauguration.

But soon after it was rolled into ICE as part of Homeland Security, funding shortfalls resulting from the reorganization quickly began taking a toll. In his June 6, 2003, memo to Hutchinson, Garcia wrote it was "urgent" that $178 million in operations and maintenance funding be transferred from CBP to AMO. By the following spring, the problems had only worsened. In another memo to Hutchinson and Hale on March 11, 2004, Garcia wrote: "The FY 2004 enacted budget simply did not provide ICE with all of the resources from legacy Customs that previously funded the Investigations and Air and Marine Operations programs (acknowledged by CBP) . . . ICE has received neither funding nor [full-time personnel] for mission support for legacy Customs Office of Investigations and Air and Marine Operations ($86.7 million)."

Without intervention from senior department leaders, AMO faced, among other outcomes, "significant staff reductions in both operations and support [and] severely restricted flight hours," Garcia wrote. AMO had begun staffing new offices along the northern border, but those plans quickly ground to a halt, leaving dozens of pilots and staff in flux. A hiring freeze had already put in bureaucratic limbo nearly 100 would-be pilots, some of whom had quit other jobs to accept conditional employment with AMO only to discover that circumstances had changed. A recapitalization plan to modernize aircraft and vessels fell into a deep freeze.

CBP Air

But in September 2004, the impasse between ICE and CBP over AMO funding seemed resolved when Garcia and Bonner jointly announced that AMO would transfer from ICE to CBP, ostensibly because AMO's mission was more in line with that of CBP's. If the money wouldn't come to AMO, then AMO would go to the money.

To members of AMO, the move seemed like good news, at least initially. "We regarded Bonner as a strong leader. Given all the problems we had when we were part of ICE, some of us thought we were finally going to have the resources and the leadership we needed to do our job," says a pilot who asked not to be identified.

With the inclusion of AMO's highly trained workforce and sophisticated interdiction equipment, Bonner, who was increasingly under pressure to improve border security, saw a way to significantly boost surveillance along the borders and to streamline CBP's operations.

In the summer of 2005, he announced that aviation assets from AMO and the Border Patrol would be merged into a new organization, CBP Air. By consolidating training and maintenance and coordinating missions, Bonner and others at DHS saw an opportunity to save money and improve operations.

In January, Bonner's replacement, acting Commissioner Deborah J. Spero, announced a similar merger of the marine side of AMO with the Border Patrol's marine operations to form CBP Air and Marine.

But in October, when Bonner announced details about how the new CBP Air would be structured (a structure now mirrored across the marine side as well), members of the former AMO were disturbed. Under the reorganization, Border Patrol sector chiefs along the northern and southern borders would have tactical control of aviation assets for day-to-day operations. The sector chiefs would be assisted by directors of air operations-former AMO aviators with expertise in aircraft management and maintenance issues.

To at least some former AMO pilots, the idea that senior Border Patrol officials, few with any experience in aviation, would be directing their daily activities was unpalatable. Furthermore, the directors of air operations would receive performance appraisals from the Border Patrol chiefs, a move that some believe could jeopardize pilot safety by putting inappropriate pressure on the directors to meet every request of the sector chiefs, their raters. In addition, the structure emphasizes local priorities of the Border Patrol sector chiefs over broader national security priorities, says a CBP headquarters official formerly with AMO.

"This was a hostile takeover by the Border Patrol," a pilot says, echoing the sentiments of several former AMO pilots reached by Government Executive.

The concerns have found an audience on Capitol Hill. Rep. Pete Sessions, R-Texas, complained in a letter to Chertoff on Oct. 27 that the reorganization left AMO's former customers such as ICE and the Drug Enforcement Administration "forced to carry on without critical assets."

Additionally, he wrote, the new structure "risks compromising other efforts equally critical to our national security." Congress is considering legislation that would take the air assets out of CBP altogether to create a stand-alone air force whose director would report directly to the DHS secretary. In the meantime, Congress is withholding $10 million from CBP Air until the agency produces long-term plans that explain how CBP will effectively use and modernize this new air force.

Crafting the strategic plan and appeasing critics now falls to Michael C. Kostelnik, the assistant commissioner of CBP Air and Marine. Kostelnik, a former Air Force pilot and senior executive at NASA, says change always is difficult, particularly in tradition-bound organizations such as the former Customs Service and the Border Patrol.

His top priorities are to finalize the strategic plan, a modernization plan and a revised air operations manual-essentially the bible for aviation in the new organization. At stake are all policies and regulations governing standards, maintenance, safety, operational procedures, personnel rules and more. Because the Border Patrol and AMO operated very differently, the changes are bound to upset many.

"I'm trying to take the best of each of the legacy approaches," Kostelnik says. "There won't be winners or losers; there will just be one new corporate air force." A senior official at CBP Air who has been highly critical of the merger says he and others are guardedly optimistic about the leadership Kostelnik may bring to an organization that has had more than its share of problems fitting into Homeland Security: "I think that someday this will be a very good place to work."