Most of the money allotted for defunct DHS financial management project went unspent

The Homeland Security Department has not spent the bulk of the money associated with two unsuccessful information technology projects aimed at integrating its financial managements systems, a department official told a congressional panel on Friday.

Of the $47 million DHS carried over from eMerge2, its first failed financial systems project, the department obligated just $4.8 million to the now-defunct successor project, the Transformation and Systems Consolidation, according to Peggy Sherry, acting chief financial officer and deputy CFO, during a House Oversight and Government Reform subcommittee hearing.

On Friday, Nextgov, a sister site of Government Executive, reported that the department is abandoning plans for construction of TASC -- a combined finance, acquisition and asset management system, at a departmentwide data center. "It really makes sense for us to focus on critical needs and systems that need to be modernized," Sherry said, adding that DHS wanted to focus on implementing that plan in "small, manageable segments." The decision to cancel the project follows contract protests by incumbent vendors and a Web-based service provider.

The department spent $9 million on TASC's unsuccessful precursor, eMerge2. The two unsuccessful projects together cost $13.8 million to date.

Sherry's comments were in response to a question from Rep. Todd Platts, R-Pa., chairman of the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management, about potential waste involved in the failed financial management projects. Sherry was on Capitol Hill to discuss overall financial management at DHS.

Platts and Subcommittee ranking member Edolphus Towns, D-N.Y., shepherded into law the 2006 Department of Homeland Security Financial Accountability Act, which requires DHS to perform audits of its internal controls on financial reporting. It was the first -- and remains the only department -- with such a mandate. The internal control audit is in addition to an annual financial management audit required of DHS and 23 other agencies covered by the 1990 Chief Financial Officers Act. Platts would like to see the requirement in the 2006 law extended to other departments.

DHS, which did not receive a clean opinion from the Government Accountability Office on its fiscal 2010 financial statement, is also on the watchdog's high-risk list for programs and departments vulnerable to waste, fraud and abuse. Sherry said the department has reduced its material weaknesses during the past five years from 18 to 6, and is committed to the goal of receiving a qualified audit opinion on its consolidated balance sheet in fiscal 2011.

Platts, in his opening statement, praised the department for its "steady progress," but pointed out that most of the material weaknesses still on the books are related to process and not systems. "Regardless of what decisions DHS makes on how it will integrate its information systems, the underlying processes must be corrected for that system to function properly," he said.

The U.S. Coast Guard's financial management continues to be a problem for the whole department, but Sherry said officials have been working together to identify the root causes of its accounting and budgeting challenges as well as ongoing struggles with systems and internal controls. Sherry cited strides the department has made, particularly in the area of preventing and recovering improper payments. Across DHS, the amount of improper payments recovery auditors have identified has dropped from $929,000 in fiscal 2008 to $38,000 in fiscal 2010.

Sherry credited the 2006 financial accountability law with improving the department's bottom line. "The audit has worked for us very well. I do think for the department, it's really becoming the way we do life at DHS," she said.

Both Towns and Platts, while praising Sherry for her work and career in federal government, expressed concern that DHS still does not have a Senate-confirmed CFO at the helm. The two plan to question the White House about the matter.