Department of Homeland Security: Financial Management Challenges Page: 3 of 16
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Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss financial management challenges facing the
Department of Homeland Security (DHS). When DHS began operations in March 2003, it
faced the daunting task of bringing together 22 diverse agencies. Not since the creation
of the Department of Defense in the 1940s had the federal government undertaken a
transformation of this magnitude. Because of the challenges and risks associated with
the transformation and implementation of DHS, the sheer size of the undertaking, and
the prospect of serious consequences for the nation should DHS fail to adequately
address its management challenges and risks, GAO designated the transformation and
implementation of DHS high-risk in January 2003.1 Our high-risk program, established in
1990, has helped the executive branch and the Congress to galvanize efforts to seek
lasting solutions to high-risk problems and challenges.
As we previously reported,2 DHS faces significant financial management challenges,
including (1) addressing the existing and newly identified internal control weaknesses in
the inherited components, and (2) integrating a myriad of redundant financial
management systems. Enactment of the Department of Homeland Security Financial
Accountability Act (S. 1567) will enhance DHS's chances for overcoming these
DHS, like other federal agencies, has a stewardship obligation to prevent fraud, waste,
and abuse; to use tax dollars appropriately; and to ensure financial accountability to the
President, the Congress, and the American people. Management must establish effective
internal controls to safeguard assets, protect revenue, and make authorized payments.
Unfortunately, improper payments are a widespread and significant problem receiving
increased attention in the federal government. Improper payments occur for many
reasons including insufficient oversight or monitoring, inadequate benefits eligibility
controls, and automated system deficiencies. However, based on our previous work, one
point is clear, the basic or root causes of improper payments can typically be traced to a
lack of or breakdown in internal control. While DHS was not required to report improper
payments for fiscal year 2003, several of its inherited weaknesses clearly suggest risk for
improper payments and loss of revenue. DHS, as it addresses inherited material
weaknesses and integrates its business functions, should pay close attention to
implementing strong internal controls.
For the most part, DHS's component entities are using legacy financial management
systems that have a myriad of problems, such as disparate, nonintegrated, outdated, and
inefficient systems and processes. DHS will need to focus on building future systems as
'U.S. General Accounting Office, High-RiskSeries: An Update, GAO-03-119 (Washington, D.C.: January
2For example, see U.S. General Accounting Office, Major Management Challenges andProgram Risk:
Department of Homeland Security, GAO-03-102 (Washington, D.C.: January 2003) and Department of
Homeland Security: Challenges and Steps in Establishing Sound Financial Management, GAO-03-1134T
(Washington, D.C.: Sept. 10, 2003).
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United States. Government Accountability Office. Department of Homeland Security: Financial Management Challenges, text, July 8, 2004; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc293340/m1/3/: accessed November 18, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.