Lawmakers urge DHS to speed up financial consolidation

The Homeland Security Department has made little progress in developing an integrated financial management system to address financial weaknesses the agency has inherited, a Government Accountability Office representative said Thursday.

At a hearing before the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, McCoy Williams, director of financial management and assurance at GAO, commended DHS for halting an unsuccessful attempt at a financial management system, but added that the department has made little progress since.

The failed system, known as eMerge2, was expected to establish the strategic direction for modernizing DHS financial, accounting, procurement, personnel, asset management and travel systems, processes and polices, Williams said. But after officials discovered that a contract awarded to BearingPoint Inc. in 2004 was plagued with management challenges, the department's chief financial officer declared the project officially "dead," Williams said.

David Norquist, DHS' new chief financial officer, said the department spent about $52 million on eMerge2. But the agency made a responsible decision to end the project before spending an estimated total of $229 million, the CFO added. Former department financial chief Andrew Maner let the eMerge2 contract expire Dec. 22, 2005.

Norquist said DHS has developed a new strategy -- the Transformation and Systems Consolidation -- which calls for component agencies to consolidate financial systems into one of two models, based on the Transportation Security Administration or the Customs and Border Protection bureau. He said that by fiscal 2009, he expects about half of the department to migrate to the designated system.

Still, Williams said the TSA and CBP systems have numerous weaknesses themselves and "consequently do not appear to be good candidates to be models for an entity with an annual budget in excess of $40 billion."

Williams recommended that DHS obtain guidance from the Internal Controls Over Financial Reporting Playbook, which was created by the department in March to establish policies and processes for developing a sound financial management system. "While the ICOFR Playbook in particular continues to focus primarily on getting a 'clean' audit opinion on DHS' annual financial statements, getting a 'clean' audit opinion, although important, is not the end goal," he said. "The end goal is to establish a fully functioning CFO operation."

Keith Rhodes, a chief technologist at GAO, said the key to developing a financial management system at DHS is ensuring financial discipline in the process and ensuring that discipline is continuous through turnover and changing presidential administrations. "Having no discipline is the vendor's dream and the oversight's nightmare," Rhodes said.

Meanwhile, Sen. Claire McCaskill, D-Mo., expressed concern over an article published Wednesday in The Washington Post that exposed mismanagement of contracts at DHS and said the average annual cost of a contract employee is $250,000. "I'm trying to figure out why we have gotten into this wave of privatization where we're blowing the top off of work being done," McCaskill said.

Norquist said that since taking office, he has launched a number of recruitment, retention and training efforts to increase the office's reliance on career civil servants. "Clearly there are places where we need contractors," he said. "But I believe there is a need to shift."