Homeland Security Financial Accountability Act: History and Recent Developments

CRS Report for Congress
Homeland Security Financial Accountability Act:
History and Recent Developments
Updated November 15, 2004
Virginia A. McMurtry
Specialist in American National Government
Government and Finance Division


Congressional Research Service ˜ The Library of Congress

Homeland Security Financial Accountability Act:
History and Recent Developments
Summary
Prior to the enactment of the Department of Homeland Security (DHS) Financial
Accountability Act (P.L. 108-330), the DHS was the only federal cabinet department
not included under the Chief Financial Officers (CFO) Act of 1990. DHS had a
CFO, but the position was not subject to Senate confirmation.
In the 108th Congress, S. 1567, to bring DHS under the CFO Act, passed the
Senate on November 21, 2003, and a related bill, H.R. 4259, was approved by the
House on July 20, 2004. Supporters of the DHS Financial Accountability Act
contended that the CFO Act and related laws should apply consistently across the
executive branch, and that the “unequal” status initially accorded the CFO in DHS
denigrated the CFO position and the importance of financial management in DHS.
Proponents also argued that the CFO position, with its fiduciary responsibilities,
carries with it special needs for accountability which Senate confirmation reinforces.
On the other hand, at the beginning of the 108th Congress the Bush
Administration continued to oppose bringing the DHS CFO under the CFO Act, on
grounds of special managerial principles for the new DHS, and, subsequently, from
the rationale of reducing the number of positions subject to Senate confirmation. By
the summer of 2004, however, the Administration’s opposition to the legislation
appeared to have lessened. On September 29, 2004, under unanimous consent in the
Senate, H.R. 4259 was discharged from the Governmental Affairs Committee, and
the bill was then passed. The Department of Homeland Security Financial
Accountability Act was signed into law on October 16, 2004 (P.L. 108-330).
As enacted, H.R. 4259 brings the CFO in DHS directly under the CFO Act, as
amended. The new law also serves to bring DHS under the Government
Management Reform Act of 1994 and the Federal Financial Management
Improvement Act of 1996, and makes the CFO in DHS a statutory member of the
Chief Financial Officers Council. There is a dual reporting framework for the CFO
in DHS — to the head of the department (as in all the other CFO Act agencies) and,
concurrently, to the Under Secretary for Management (the prior arrangement for the
CFO in DHS). The measure requires an audit of internal controls over financial
reporting in DHS after FY2005. H.R. 4259 as enacted creates an Office of Program
Analysis and Evaluation within DHS, requires DHS to prepare a Future Years
Program and a Security Strategy Report for Congress, and requires a joint study by
the CFO Council and the President’s Council on Integrity and Efficiency (PCIE) of
the costs and benefits of having all CFO agencies obtain audit opinions of their
internal controls. Finally, the new law requires that specified DHS authorizing
committees receive notification 15 days in advance of transfer and reprogramming
actions.
This report will not be further updated.



Contents
Background Prior to the 108th Congress............................1
Initial Developments in the 108th Congress..........................2
Senate Action.................................................3
Subsequent House Action in 2003.................................4
House Action in 2004..........................................6
Other Considerations...........................................8
Comparison of House and Senate Bills............................10
Final Enactment..............................................11
List of Tables
Table 1. Comparison of Major Provisions in House-Passed and
Senate-Passed Versions of the DHS Financial Accountability Act.......10



Homeland Security
Financial Accountability Act:
History and Recent Developments
Background Prior to the 108th Congress
The Chief Financial Officers (CFO) Act of 19901 sought to improve financial
management practices by establishing a new leadership structure for federal financial
management.2 The framework created by the law included two new positions within
the Office of Management and Budget and 23 chief financial officers (CFO) and
deputy CFOs in major executive departments and agencies.3 Of the 23 CFO
positions, 16 were filled by presidential appointees, as confirmed by the Senate. CFO
positions subject to confirmation included those in the 14 cabinet-level departments
(excluding the Department of Homeland Security or DHS), the Environmental
Protection Agency, and the National Aeronautics and Space Administration. The
remaining seven CFO positions (for the Agency for International Development,
General Services Administration, National Science Foundation, Nuclear Regulatory
Commission, Office of Personnel Management, Small Business Administration, and
Social Security Administration), along with all 23 deputy CFO positions, were career
positions, filled by agency head appointment.
The Homeland Security Act of 2002 provided for a CFO position in the new
department.4 Unlike the appointment procedure for CFOs in other cabinet-level
departments, however, the CFO in the Department of Homeland Security was
appointed by the President, but not subject to Senate confirmation. With respect to
specific duties and responsibilities of the CFO for DHS, Section 103(e), Performance
of Specific Functions, stated: “Subject to the provisions of this Act, every officer of
the Department [the CFO included] shall perform the functions specified by law for


1 104 Stat. 2838; codified as amended at 31 U.S.C., Chapters 5, 9, 11, and 35; also 5 U.S.C.

5313-5315, 38 U.S.C. 201 nt, and 42 U.S.C. 3533.


2 For additional discussion of the CFO Act and related financial management laws, see CRS
Report RL31965, Financial Management in the Federal Government: Efforts to Improve
Performance, by Virginia A. McMurtry.
3 There were originally 23 CFO agencies, but when the Social Security Administration was
established as an independent agency, pursuant to the Social Security Independence and
Program Improvements Act of 1994 (108 Stat. 1467), an additional CFO position was
created, bringing the total to 24. When the Department of Homeland Security was created,
the Federal Emergency Management Agency (FEMA) was merged into it, along with
FEMA’s CFO position, bringing the total back to 23 CFOs. With enactment of the DHS
Financial Accountability Act, as detailed below, there are now 24 CFOs.
4 P. L. 107-296, Sec. 103; 116 Stat. 2145.

the official’s office or prescribed by the Secretary.”5 The law made no reference to
the CFO Act or to Chapter 9 of Title 31. In addition, unlike all the other CFOs, who
report directly to the agency head, the CFO for DHS might report to the Secretary,
or to “another official of the Department, as the Secretary may direct.” 6
Although the act establishing DHS did not place the new CFO position under
Chapter 9 of Title 31, the issue was addressed in both chambers during consideration
of the legislation in the 107th Congress. In the Senate, the initial measure to create
DHS (S. 2452 in the 107th Congress), as approved by the Governmental Affairs
Committee in May 2002, did not include a requirement that the new department be
subject to the CFO Act. Likewise, in June 2002, when another bill to create a DHS
(H.R. 5005 in the 107th Congress) was introduced in the House, the requirement was
absent. As debate concerning specific provisions in the measures continued into the
summer, there were efforts to establish linkage to the CFO Act for the proposed CFO
position in DHS. The Senate Governmental Affairs Committee adopted a substitute
amendment to S. 2452 on July 25, 2002, offered by then-Chairman Joseph
Lieberman, “that would have made the Department of Homeland Security subject to
the CFO Act. Also in July 2002, Representative Stephen Horn offered a similar
amendment during the House Government Reform’s consideration of H.R. 5005,
which the Committee approved.”7 H.R. 5005, as passed by the House on July 25,
2002, contained in Section 911 conforming and technical amendments to Chapter 9
of 31 U.S.C. to add DHS to the list of agencies covered by the CFO Act.
Initial Developments in the 108th Congress
On March 1, 2003, the Department of Homeland Security became the 15th
department in the federal government when 22 separate agencies were merged into
the new entity. Some of the agencies transferred to DHS came with known serious
financial management problems. For example, four of the major agencies transferred
— the Immigration and Naturalization Service, Transportation Security
Administration, Customs Service, and Federal Emergency Management Agency —
had a total of 18 material weaknesses in internal control reported by auditors for
FY2002.8
Following establishment of DHS, awareness grew of the linkages between the
CFO Act and other laws enacted as amendments to it. Since the CFO in DHS was
not formally under the CFO Act, DHS was not covered by the Federal Financial
Management Improvement Act (FFMIA) of 1996 (110 Stat. 3009-389), which
amended the CFO Act. FFMIA requires agencies subject to the CFO Act to


5 Ibid.
6 Ibid., Sec. 702, 116 Stat. 2219.
7 U.S. Congress, Senate Committee on Governmental Affairs, Department of Homeland
Security Financial Accountability Act, report to accompany S. 1567, 108th Cong., 1st sess.,
S.Rept. 108-211 (Washington: GPO, 2003), p. 4.
8 U.S. General Accounting Office, Department of Homeland Security: Challenges and Steps
in Establishing Sound Financial Management, GAO-03-1134T (Washington: Sept. 10,

2003), p. 2.



implement and maintain financial management systems that comply substantially
with federal financial management systems requirements, applicable federal
accounting standards, and the federal government’s standard general ledger at the
transaction level. Under FFMIA, auditors report on compliance with these
requirements in the annual financial statement audits. Agency CFOs subject to the
CFO Act, along with their deputies, are members of the Chief Financial Officers
Council, established “to advise and coordinate the activities of the agencies of its
members on such matters as consolidation and modernization of financial systems,
improved quality of financial information, financial data and information standards,
internal controls, legislation affecting financial operations and organizations, and any
other financial management matter.” The CFO in DHS was not a statutory member
of the Council.
In summer 2003, legislation was introduced, with bipartisan support, relating
to the status of the CFO in DHS. On July 24, Representative Todd Platts, chair of
the Subcommittee on Government Efficiency and Financial Management, introduced
H.R. 2886, the Department of Homeland Security Financial Accountability Act;
cosponsors included the vice chair and ranking member of the subcommittee and the
chair and ranking member of the Committee on Government Reform. In introducing
the bill, Representative Platts noted that provisions in H.R. 2886 would put the CFO
in DHS “on the same footing as the CFOs at the rest of the cabinet-level departments
by ensuring that the Department’s CFO is a presidential appointee subject to Senate
confirmation, that the CFO reports directly to the Secretary, and that the CFO is a
part of the statutorily created CFO Council.”9 A companion bill, S. 1567, was
introduced by Senator Peter Fitzgerald, chair of the Subcommittee on Financial
Management, the Budget, and International Security, on August 1, 2003, with the
subcommittee’s ranking member as a cosponsor. Senator Fitzgerald noted that while
DHS Secretary Tom Ridge had testified that the department would make every effort
to adhere to provisions of the CFO Act, as amended, passage of S. 1567 “will ensure
that future secretaries and future administrations also will comply with the CFO
Act.”10
Senate Action
On October 22, 2003, the Governmental Affairs Committee met to consider S.
1567 and adopted by voice vote an amendment in the nature of a substitute, and then
ordered the amended bill to be reported to the full Senate.11 The bill was reported on
November 20, 2003, and passed the Senate by unanimous consent the following
day. 12


9 Rep. Todd Platts, “Introducing the Department of Homeland Security Financial
Accountability Act,” Congressional Record, daily edition, vol. 149, July 25, 2003, p. E1587.
10 Sen. Peter Fitzgerald, remarks in the Senate, Congressional Record, daily edition, vol.

149, Aug. 1, 2003, p. S10916.


11 Greta Wodele, “Senate Panel Institutes Financial Accountability at Homeland Security
Department,” at [http://nationaljournal.com/members/markups/2003/10/200329506.htm].
12 “Department of Homeland Security Financial Accountability Act,” vote in the Senate,
(continued...)

A written report was filed on November 25, 2003.13 In discussing S. 1567, the
report stated: “Application of the CFO Act to the Department of Homeland Security
is essential to ensure that the newest, and one of the largest, Cabinet-level
departments in the Federal Government adheres to the same financial management
reporting requirements and standards that other agencies must follow and that were
developed over more than a decade.” In addition to the CFO requirements, the
Senate bill would have required DHS to produce audit opinions on internal controls
for financial reporting; this goes beyond current guidance in OMB Bulletin 01-02 for
agencies simply to obtain testing and report on internal controls. According to the
report, such a requirement for an audit opinion “will provide assurances that the
Department’s internal controls are effective in deterring fraudulent financial
reporting, protecting assets, and providing an early warning of significant control
weaknesses.”14
Subsequent House Action in 2003
The legislative history of H.R. 2886 in the House was more complex, since the
bill was jointly referred and two committees became involved, the Committee on
Government Reform and the Select Committee on Homeland Security. On
September 10, 2003, the Subcommittee on Government Efficiency and Financial
Management held a hearing on “Developing Sound Business Practices at the
Department of Homeland Security.” Testimony was received from OMB, GAO, and
DHS.15 On September 24, 2003, the subcommittee voted to report H.R. 2886 to the
full committee, after adopting an amendment in the nature of a substitute, offered by
Subcommittee Chair Platts, unanimously by voice vote. The Platts substitute
modified dates in the original bill, by delaying the requirement for DHS to obtain an
audit opinion on its internal controls until FY2005 and moving up the preparation
and audit of DHS’s first financial statements to FY2003 (by removing an extension
waiver provision). The third change in the substitute version entailed a new
requirement that the CFO Council and the President’s Council on Integrity and
Efficiency undertake a joint study assessing potential costs and benefits if all of the
CFO agencies were required to obtain audit opinions of their internal controls.
On October 8, 2003, the Select Committee on Homeland Security held a hearing
on “Review of Homeland Security’s Financial Accountability and Performance
Evaluation Process to Examine Waste, Fraud, and Abuse,” and received testimony
from DHS, OMB, and private sector witnesses.16 On October 30, 2003, the select
committee voted to report H.R. 2886 favorably, after agreeing to a substitute
amendment offered by Chairman Cox; both actions were taken unanimously, by


12 (...continued)
Congressional Record, daily edition, vol. 149, Nov. 21, 2003, pp. S15499-S15500.
13 See S.Rept. 108-211 (Washington: GPO, 2003).
14 Ibid., p. 4.
15 Statements available at [http://reform.house.gov/GEFM/Hearings/EventSingle.aspx?Event
ID=403].
16 Statements available at [http://hsc.house.gov/testimony1.cfm?get_archive=yes].

voice vote. The Cox amendment incorporated the changes included in the Platts
substitute. H.R. 2886 emerged from markup by the select committee with additional
provisions as well:
!new section on “findings of Congress,” presenting a rationale for
strong and effective financial management policies and practices in
DHS;
!new reporting requirement for DHS Secretary to submit to Congress
an annual comprehensive report on U.S. homeland security strategy;
!creation of a new Office of Program Analysis and Evaluation within
DHS, to link financial management and budgeting with program
analysis and evaluation, and modeled on the system currently
utilized by the Department of Defense;
!notice of appropriations reprogramming actions to include the House
Select Committee on Homeland Security and the Senate Committee
on Government Affairs;17
!arrangement whereby the CFO in DHS would report to the Secretary
regarding financial management matters and to the Under Secretary
for Management regarding other responsibilities of the CFO.
The select committee filed a written report to accompany H.R. 2886 on
November 12, 2003; with respect to background and need for the legislation, the
report stated, in part, “H.R. 2886 is needed to ensure that the newly-created
Department of Homeland Security (DHS) implements and adheres to a number of
sound financial management, planning, and budgeting practices.”18


17 Reprogramming entails the shifting of funds from one purpose to another within an
appropriations account during the implementation phase of the federal budget process.
Unlike a transfer of funds, which involves shifting of budgetary resources from one
appropriations account to another, reprogramming does not require statutory authorization.
In an effort to facilitate congressional oversight of reprogramming actions, appropriations
subcommittees, and sometimes authorizing committees as well, may establish rules and
procedures for reprogramming. Typically such guidelines involve formal agency notification
to stipulated congressional committees prior to implementing the reprogramming and are
included in committee reports accompanying appropriations bills. Less commonly,
reprogramming procedures may be incorporated in statutory language, as is the case for
DHS. The Department of Homeland Security Appropriations Act, 2004, requires that the
House and Senate Appropriations committees be notified 15 days in advance of certain
reprogramming actions (P.L. 108-90, Sec. 503; 117 Stat. 1152-53). One of the provisions
added to H.R. 2886, during markup by the Select Committee on Homeland Security, would
extend the requirement of notification to include the select committee along with the Senate
Governmental Affairs Committee. H.R. 4259 added the House Government Reform
Committee to the list.
18 U.S. Congress, House Select Committee on Homeland Security, Department of Homeland
Security Financial Accountability Act, report to accompany H.R. 2886, 108th Cong., 1st sess.,
(continued...)

Meanwhile, on November 6, 2003, the Government Reform Committee voted
to report H.R. 2886, as amended, favorably; the voice vote was unanimous. At
markup the full committee considered the version of the bill as marked up at the
Government Efficiency Subcommittee, absent the additional changes resulting from
markup by the select committee.19
House Action in 2004
On May 4, 2004, Representative Platts introduced H.R. 4259, a bill representing
a revised version of the DHS Financial Accountability Act, to supersede H.R. 2886.
The new bill, characterized as a consensus measure, was cosponsored by the vice
chair and ranking member of the Subcommittee on Government Efficiency and
Financial Management and by the chairs and ranking members of the Government
Reform Committee and Select Committee on Homeland Security. Administrative
concerns apparently prompted this action, since both Government Reform and
Homeland Security reported H.R. 2886 favorably in the fall of 2003, but with
differing amendments. “It was just cleaner to introduce a new bill,” a committee staff
member explained.20 On May 6, 2004, the Government Reform Committee reported
H.R. 4259 favorably, by voice vote.21 The ranking Democrat on the full committee,
Representative Henry Waxman, characterized the legislation as “the product of a
serious, productive conversation that includes compromises from all sides.”22 H.R.
4259 was also referred to the Select Committee on Homeland Security, but on May

19, 2004, the chair waived further consideration of the bill by the select committee.23


The four major additions to H.R. 2886 as reported by the select committee were
retained in the new measure.
On July 20, 2004, H.R. 4259 passed the House under suspension of the rules.24
Representative Platts commended DHS for its efforts in being fiscally responsible:
“Although they [DHS Secretary Tom Ridge and other administration officials] are
not required to comply with the CFO Act, they have made a determined effort to do


18 (...continued)
H.Rept. 108-358, part 1 (Washington: GPO, 2003), p. 5.
19 U.S. Congress, House Committee on Government Reform, Department of Homeland
Security Financial Accountability Act, report to accompany H.R. 4259, 108th Cong., 2nd
sess., H.Rept. 108-533, part 1 (Washington: GPO, 2004), p. 4.
20 Cited by Amelia Gruber, “House Committee Advances DHS Financial Accountability
Bill,” GovExec.com, May 6, 2004.
21 A written report was filed on June 9, 2004. See U.S. Congress, House Committee on
Government Reform, Department of Homeland Security Financial Accountability Act,thnd
report to accompany H.R. 4259, 108 Cong., 2 sess., H.Rept. 108-533, part 1 (Washington:
GPO, 2004).
22 Cited by Zach Patton, “Reform Panel Raises Homeland Security Department Accounting
Standards,” Congress Daily, May 6, 2004.
23 The letter from Chairman Cox is included in H.Rept. 108-533, part 1, p. 7.
24 Department of Homeland Security Financial Accountability Act, vote in the House,
Congressional Record, daily edition, vol. 150, July 20, 2004, p. H6074.

so and are setting a good example.” Enactment of H.R. 4259, nonetheless, was
necessary, according to Representative Platts, in order to ensure DHS compliance
with provisions in the CFO Act, as amended, in the future.25 Representative Towns,
the ranking member of the Government Efficiency Subcommittee, likewise urged
passage of H.R. 4259, noting, in concluding his remarks, “This is a necessary step
forward if we are to develop an efficient and effective agency that is ready to achieve
its purposes of protecting our citizens, infrastructure, and borders.”26
H.R. 4259 (subsequently enacted as P.L. 108-330) sought to amend Chapter 9
of 31 U.S.C. to bring DHS under the CFO Act and subsequent amendments, such as
FFMIA. The CFO for DHS would be appointed by the President, subject to Senate
confirmation, and would serve as a member of the CFO Council. H.R. 4259 would
require DHS to obtain annual audit opinions on its internal controls over financial
reporting after FY2005.27 The report from the Government Reform Committee
accompanying H.R. 4259 noted the importance of the requirement for an opinion-
level audit of DHS’ internal controls:
Currently, audit guidance from OMB requires a report on internal controls in
conjunction with annual financial audits. Having an auditor issue an opinion on
the internal controls report would help uncover inherent weaknesses and address
problems as business practices are being established, before they become28
ingrained. Strong internal controls are essential to sound management.
An important modification in H.R. 4259 from S. 1567 and the earlier House bill
as reported by the Government Reform Committee in 2003 was a dual reporting
structure for the DHS CFO, who would report both to the DHS Secretary (akin to
other cabinet-level CFOs) and concurrently to the Under Secretary for Management
(the arrangement for the CFO in DHS prior to enactment of P.L. 108-330). H.R.

4259 also would create an Office of Program Analysis and Evaluation within DHS,


and would require DHS to prepare a Future Years Program and a Security Strategy
Report for Congress. Further, the House-passed bill would require the Chief
Financial Officers Council and the PCIE jointly to conduct a study of the costs and
benefits of having all CFO agencies obtain audit opinions of their internal controls.
Finally, H.R. 4259 would require that the House Government Reform Committee,
the Senate Governmental Affairs Committee, and the Homeland Security Select
Committee receive notification 15 days in advance of transfer and reprogramming
actions. 29


25 Rep. Todd Platts, ibid., p. H6073.
26 Rep. Edolphus Towns, ibid., H6074.
27 Currently CFO Act agencies undergo annual audits of their financial statements, but are
not required to have formal audit opinions of their internal controls.
28 H.Rept. 108-533, part 1, p. 2.
29 Previous language, originating in the markup by the select committee, which extended the
requirement for reprogramming notification to two of the authorizing committees, did not
include the House Government Reform Committee.

Other Considerations
The Senate version of the DHS Financial Accountability Act (S. 1567) passed
the Senate on November 21, 2003, and a related bill (H.R. 4259) was approved by
the House on July 20, 2004. The legislation appeared to enjoy considerable support;
as noted in testimony by GAO:
The goals of the CFO Act and related financial reform legislation, such as
FFMIA, are to provide Congress and agency management with reliable financial
information for managing and making day-to-day decisions and to improve
financial management systems and controls to properly safeguard the
government’s assets. DHS should not be the only cabinet-level department not
covered by what is the cornerstone for pursuing and achieving the requisite30
financial management systems and capabilities in the federal government.
Supporters also contended that the CFO Act and related laws should apply
consistently across the executive branch, and that the “unequal” status previously
accorded the CFO in DHS denigrated the CFO position and the importance of
financial management in DHS. The CFO position, with its fiduciary responsibilities,
carried with it special needs for accountability, which Senate confirmation reinforces,
proponents argued.
On the other hand, the Bush Administration had opposed bringing the DHS
CFO under the CFO Act, on grounds of special managerial principles for the new
DHS and, subsequently, from the rationale of reducing the number of positions
subject to Senate confirmation. As an OMB official testified in September 2003
regarding application of the CFO Act to DHS:
It is OMB’s position that the substantive provisions of the CFO Act should
apply to the new Department of Homeland Security.... However, the CFO Act
specifies an organization structure — direct reporting of the CFO to the agency
head — that is inconsistent with the structure Congress endorsed when it passed
the Homeland Security Act of 2002. The Homeland Security Act enacted the
President’s proposal to consolidate management responsibilities at the new
Department under the Under Secretary for Management.... Requiring the CFO
at ... [DHS] to report directly to the Secretary of Homeland Security would dilute
this principle.
The Administration is also working with Congress to reduce the number of
officials subject to confirmation by the Senate, and therefore opposes making the31
CFO subject to confirmation by the Senate.
Andrew Maner, currently serving as CFO for DHS, along with his predecessor,
Bruce Carnes, had maintained that, however well-intentioned the legislation, it was
unnecessary. In testimony before a House subcommittee in March 2004, Mr. Maner
stated:


30 GAO-03-1134T, p. 2.
31 Statement of Linda M. Springer before the Subcommittee on Government Efficiency and
Financial Management, Sept. 10, 2003. Available at [http://house.gov/UploadedFiles/
springer_testimony0910.pdf].

Like many others, I appreciate and applaud the objectives of H.R. 2886... That
said, I do believe that much of what is contemplated in the legislation may not
be critical or necessary to DHS at this juncture.... [T]his legislation will not alter
the way in which I perform my job, nor will it provide me any tools, reporting32
structures, or other authorities that I do not have today.
Concern was also voiced about the potential cost of conducting audits of internal
controls in DHS, as well as creating a new Office of Program Analysis and
Evaluation, and imposing additional planning and reporting requirements on DHS.
On July 8, 2004, the Senate Subcommittee on Financial Management, the
Budget, and International Security held a hearing focusing on the federal
government’s consolidated financial statements and on financial management at the
Departments of Defense and Homeland Security. In his opening statement,
Chairman Fitzgerald referred to the legislation to bring the CFO position in DHS
under the 1990 statute, noting “We look forward to hearing from our witnesses on33
their views regarding the importance of applying the CFO Act to DHS.”
Testimony from DHS CFO Andrew Maner at the Senate subcommittee hearing
in July arguably might be construed as indicative of a lessening of the
Administration’s opposition to the legislation. Unlike prior statements from
Administration officials, which suggested that the DHS Financial Accountability Act
was unnecessary and undesirable, in July, Mr. Maner stated:
As CFO of DHS, I commend all relevant efforts by the executive and legislative
branches, including those of the chairman [Senator Fitzgerald] and Mr. Akaka
[ranking minority member of the subcommittee] with S. 1567 ... to make our
controls tighter and to provide financial managers better tools to complete our
mission more efficiently and effectively.34
Further, Mr. Maner’s July testimony did not reiterate the Administration’s
previous objections to bringing DHS directly under the CFO Act, especially with
regard to the framework for Senate confirmation and administrative placement of the
CFO. One might surmise that the absence of such commentary in July reflected tacit
acceptance of the dual reporting arrangement for the CFO in DHS, as developed in
the House.35 Mr. Maner cited one remaining objectionable provision in S. 1567 —


32 Statement of Andrew B. Maner before House Subcommittee on Government Efficiency
and Financial Management, March 10, 2004. Available at [http://house.gov/UploadedFiles/
Maner_T estimony.pdf].
33 Statement of Sen. Peter Fitzgerald before the Senate Subcommittee on Financial
Management, the Budget, and International Security, July 8, 2004. Available at [http://
govt -a ff.senate.gov/index.cfm?Fuseaction=Hearings .T estimony&T estimonyID=633&
HearingID=188].
34 Statement of Andrew B. Maner, ibid.
35 The dual reporting language emerged in the fall of 2003, during consideration of H.R.
2886 by the House Select Committee on Homeland Security, as an apparent attempt to craft
a compromise provision acceptable to the Administration. Conversation between the author
(continued...)

the requirement for an opinion audit of DHS’s internal controls, beginning in
FY2005 — stating, in part, “Such an audit could be costly in dollars and staff time
and may not bring the level of benefits to the agency that it might be intended to
provide.”36 Therefore, he recommended postponing the effective date of the audit of
internal controls until at least FY2006, as provided in the House version.37
Comparison of House and Senate Bills
Table 1 provides an overview of major provisions in the DHS Financial
Accountability Act, as initially passed by the Senate in 2003 (S. 1567) and by the
House (H.R. 4259).
Table 1. Comparison of Major Provisions in
House-Passed and Senate-Passed Versions of the
DHS Financial Accountability Act
Issue Found in H.R. 4259Found in S. 1567
Amend 31 USC 901(b) to placeYesYes
CFO in DHS directly under the
CFO Act
Reporting FrameworkDual Only to Secretary
(to DHS Secretary and
also to Under Secretary
for Management)
Audit of DHS internal controlsYes, Yes,
for financial reportingafter FY2005starting FY2005
Create new Office of ProgramYesNo
Analysis and Evaluation in DHS
DHS to prepare Future YearsYesNo
Program and Security Strategy
Report
Joint study by CFO Council andYesNo
PCIE of costs/benefits of
requiring audits of internal
controls for all CFO agencies
Notify DHS authorizingYesNo


committees 15 days in advance
of transfer and reprogramming
actions
35 (...continued)
and staff of the select committee, Oct. 29, 2003.
36 Ibid.
37 H.R. 4259 would require DHS to include audit opinions of internal controls over its
financial reporting “... only for fiscal years after fiscal year 2005.” See Congressional
Record, daily edition, vol. 150, July 20, 2004, p. H6072.

Both versions of the DHS Financial Accountability Act, as initially passed by
the Senate (S. 1567) and by the House (H.R. 4259), would have brought the CFO in
DHS directly under the CFO Act, as amended. This would also have brought DHS
under the Government Management Reform Act of 1994 and the Federal Financial
Management Improvement Act of 1996, and would have made the CFO in DHS a
statutory member of the Chief Financial Officers Council. The House-passed
version, however, provided a dual reporting framework for the CFO in DHS — to the
head of the department (as in all the other CFO Act agencies) and, concurrently, to
the Under Secretary for Management (the initial arrangement for the CFO in DHS).
Both measures would have required an audit of internal controls over financial
reporting in DHS, although the timing in the two bills differed (beginning with
FY2005 in S. 1567 and after FY2005 in H.R. 4259). The House bill also contained
additional provisions not found in the Senate version. H.R. 4259 also would have
created an Office of Program Analysis and Evaluation within DHS, would have
required DHS to prepare a Future Years Program and a Security Strategy Report for
Congress, and would have required a joint study by the CFO Council and the
President’s Council on Integrity and Efficiency (PCIE) of the costs and benefits of
having all CFO agencies obtain audit opinions of their internal controls for financial
reporting. Finally, H.R. 4259 would have required that the DHS authorizing
committees (the Senate Committee on Governmental Affairs, the House Committee
on Government Reform, and the House Select Committee on Homeland Security),
receive notification 15 days in advance of transfer and reprogramming actions.
Final Enactment
The DHS Financial Accountability Act passed the Senate under unanimous
consent and the House under suspension of the rules, reflecting substantial bipartisan
support for the measure. However, S. 1567 and H.R. 4259 contained some
differences, and the Constitution requires that both chambers pass a bill in identical
form before presentment to the President.
When legislation has passed the House and Senate in differing versions, one
mechanism for resolving differences is the conference committee.38 This approach
seemed unlikely with respect to S. 1567 and H.R. 4259, because of time constraints
for the remainder of the 108th Congress. Another possibility was for the House and
Senate to reach agreement via exchange of amendments between the houses.39 Time
constraints also worked against use of this technique.
An alternative approach used previously to enact financial management
legislation toward the end of a Congress entails incorporating bill language
acceptable to both the House and Senate as an amendment to an essential


38 See CRS Report 98-696 GOV, Resolving Legislative Differences in Congress: Conference
Committees and Amendments Between the Houses, by Elizabeth Rybicki and Stanley Bach.
39 Ibid., pp. 7-8.

appropriations measure.40 For example, a bill to create a special CFO position in the
Executive Office of the President was enacted in 1999 as part of the Treasury and
General Government Appropriations Act for FY2000.41 Likewise, the Federal
Financial Management Improvement Act of 1996, containing noteworthy
amendments to the CFO Act of 1990, was enacted as a part of the Omnibus
Consolidated Appropriations Act for FY1997.42
In line with such past practice, Senator Fitzgerald submitted an amendment
(S.Amdt. 3592),43 incorporating the provisions of H.R. 4259, intended to be proposed
by him during Senate consideration of the DHS FY2005 appropriations bill.44
However, the amendment was not offered before Senate passage of H.R. 4567,
following a vote to substitute the provisions of S. 2537, on September 14, 2004.45
Instead, a simpler procedure was employed to resolve differences in the versions
of the DHS Financial Accountability Act as passed by the House and Senate,
whereby either chamber may approve the bill as passed by the other body. On
September 29, 2004, the Senate Committee on Governmental Affairs was discharged
from further consideration of H.R. 4259 and the bill was then passed by unanimous
consent.46 President George W. Bush signed the bill into law on October 18, 2004.47
As enacted, H.R. 4259 brings the CFO in DHS directly under the CFO Act, as
amended. The new law also serves to bring DHS under the Government
Management Reform Act of 1994 and the Federal Financial Management
Improvement Act of 1996, and makes the CFO in DHS a statutory member of the


40 Procedural rules in the House and Senate exist to promote separate consideration of bills
providing annual appropriations from those containing substantive legislative provisions.
Departure from the procedural separation may occur, however, since the rules are not self-
enforcing, may be waived, and are not fully comprehensive. See CRS Report RL30619,
Examples of Legislative Provisions in Omnibus Appropriations Acts, by Robert Keith.
41 See P.L. 106-58, Sec. 638; 113 Stat. 475, Sept. 29, 1999.
42 P.L. 104-208; 110 Stat. 3009, at 3009-389. After a rather complicated legislative history,
the FFMIA provisions became a part of the conference agreement approved by both
chambers.
43 See Congressional Record, daily edition, vol. 150, Sept. 8, 2004, pp. S8970-S8971. At the
same time, Senator Fitzgerald submitted three other amendments (S.Amdt. 3590, S.Amdt.

3591, and S.Amdt. 3593), each of which incorporated pieces of H.R. 4259.


44 S. 2537 was reported by the Senate Appropriations Committee (S.Rept. 108-280) on June
17, 2004. H.R. 4567, the House version of FY2005 appropriations for DHS, passed the
House on June 18, 2004 by vote of 400-5. See CRS Report RL32302, Appropriations for
FY2005: Department of Homeland Security, by Jennifer E. Lake and Dennis Snook.
45 A conference report to accompany H.R. 4567 was filed on Oct. 9, 2004, with House
approval occurring that same day, and Senate approval following on Oct. 11. The measure
was signed into law on Oct. 18, 2004 (P.L. 108-334). See ibid.
46 Department of Homeland Security Financial Accountability Act, vote in the Senate,
Congressional Record, vol. 150, Sept. 29, 2004, pp. S9987-S9988.
47 P.L. 108-330, 118 Stat. 1275. See Weekly Compilation of Presidential Documents, vol.

40, num. 43, Oct. 25, 2004, p. 2531.



Chief Financial Officers Council. There is a dual reporting framework for the CFO
in DHS — to the head of the department (as in all the other CFO Act agencies) and,
concurrently, to the Under Secretary for Management (the prior arrangement for the
CFO in DHS). The measure requires an audit of internal controls over financial
reporting in DHS to begin after FY2005. H.R. 4259 as enacted creates an Office of
Program Analysis and Evaluation within DHS, requires DHS to prepare a Future
Years Program and a Security Strategy Report for Congress, and requires a joint
study by the CFO Council and the President’s Council on Integrity and Efficiency
(PCIE) of the costs and benefits of having all CFO agencies obtain audit opinions of
their internal controls. Finally, the new law requires that specified DHS authorizing
committees receive notification 15 days in advance of transfer and reprogramming
actions.