Homeland Security says it's following financial law

The Homeland Security Department is following a law designed to strengthen financial management, officials told skeptical lawmakers on Wednesday.

The department's chief financial officer reports directly to Secretary Michael Chertoff as required by the Homeland Security Financial Accountability Act (H.R. 4259) and will continue to do so, Undersecretary for Management Janet Hale said at a House hearing. Witnesses also deflected criticisms that the department is stalling on implementing the law's audit requirements.

Organizational charts released when Chertoff announced his plan to restructure the department neglected to show CFO Andrew Maner as a direct report. A revised chart, provided to the House Government Reform Subcommittee on Management, Finance and Accountability for the hearing Wednesday afternoon, shows Maner reporting to both Hale and Chertoff.

The CFO has enjoyed a direct line to the secretary since October 2004, when President Bush signed the financial accountability law, Hale said. The chart published on the day Chertoff unveiled his plans for restructuring the department, and descriptions provided to members of Congress, focused on moving parts and mistakenly left Maner off the list of direct reports, Hale said.

Homeland Security's four other business chiefs-information, procurement, human capital and administrative officers-will continue to report to Hale, though Chertoff has said that he and Deputy Secretary Michael Jackson will meet with them regularly. The arrangement balances hands-on leadership involvement in each management area with a need to limit direct reports, Chertoff said.

But in written testimony, Clark Kent Ervin, Homeland Security's former inspector general, said he is concerned that the reporting structure leaves the business chiefs without enough power. "In my view, the secretary missed an opportunity during the second stage review to give the CFO, and the CIO and chief procurement officer, the authority they need to get the job done," Ervin stated.

The business chiefs have a say in personnel decisions at Homeland Security's bureaus, but share authority to hire, fire, evaluate and "otherwise direct" staff in their respective areas with bureau heads.

"One of the key reasons why the financial performance and accounting of the department have been so poor is that the CFO can only exhort, cajole and attempt to persuade his component counterparts to do what is necessary to right the department's financial ship," Ervin wrote. "If he had the power to tell his nominal subordinates what to do and to hold them accountable for doing it, he could be far more effective."

Acting Inspector General Richard Skinner was less outspoken in his criticism but also expressed concerns. "Component heads retain control over the financial management resources in their organization," he testified. "This concept of operations tends to divide the responsibility for financial management from the authority to command the resources needed to good financial management."

Maner told subcommittee members that he believes he has plenty of influence. He also said he is working to implement a financial accountability law provision requiring Homeland Security to obtain audit opinions on internal controls starting in fiscal 2006. Internal controls are checks and balances designed to detect fraud or waste of money.

The department would have benefited from extra time to obtain the audit opinion, but is committed to meeting the fiscal 2006 deadline in the law, Maner said. Language seeking a yearlong delay on the internal controls requirements made it into the department's budget request prior to passage of the financial accountability law, he said.

Rep. Todd Platts, R-Pa., expressed concerns over the requested delay and testimony from Skinner indicating that some DHS officials feel the internal control audit will distract them from addressing more pressing financial problems. At Platts' request, Maner agreed to inform the appropriations committee that he plans to obtain the opinion on schedule.

An internal control audit would help Homeland Security get to the bottom of financial troubles, including the persistent budget shortfalls at the Immigration and Customs Enforcement bureau, Platts said. The bureau came up short $200 million to $300 million in fiscal 2004, forcing a hiring freeze and the release of illegal aliens who could pose a security threat, Ervin said in his testimony.

ICE's finances have improved, in part because the bureau recently appointed an acting CFO and a financial management director, Skinner told subcommittee members. But the bureau continues to experience significant problems. Each month it fails to account for millions of dollars, and the reason for these discrepancies remains unclear, he said.

Ervin, who could not attend the hearing, urged the department to fix its accounting weaknesses quickly.

"While the subject of financial management may seem arcane and dry to some . . . getting financial management right is critical to the operational effectiveness of the federal agency charged with leading the effort to secure the homeland," he stated in his written testimony. "Needless to say, no mission in government is more important than this one, and so anything that makes the performance of the department less than optimal has serious implications for the security of the nation."