Top Homeland Security Department officials say their biggest near-term management priority is providing better oversight of the department's $2 billion in annual grants and nearly $15 billion in annual contracts.

The department has issued some $20 billion in grants — mostly through the Federal Emergency Management Agency — since it was created seven years ago. But DHS doesn't know whether the grants have improved security or disaster preparedness; audits by the Government Accountability Office criticized some grant programs for duplicating one another and focusing on the wrong goals.

Large contracting programs — such as the Coast Guard's Deepwater program, and the department's high-tech border security system called SBINet — often break their budgets and fall short of expectations.

Department officials say they're taking steps to fix those problems.

Elaine Duke, the department's undersecretary for management, said she's setting up a new oversight office to manage DHS grant programs. The department plans to staff the office with 20 people, and is more than halfway to that goal. Staffers will review inspector general reports on grant programs to look for problematic trends, and they'll work with managers to improve the quality of data collected about grant programs.

"We have a senior executive that's been hired and leading it. All the grants will still be executed through the components," Duke said in an interview. "The role [of this office] is governance. … It's important that we look collectively [to see] what are the trends."

DHS is also working to staff up its procurement office. Duke said the department plans to hire more procurement officers in 2010 and is also working to streamline its policies for drafting contract requirements.

"We want to have a certified program manager running every one of our [acquisition] programs," Duke said.

Two challenges out of many

But grant and contract management is only one of many problems plaguing the department, according to the latest annual report from the inspector general. Information technology systems still have endemic security flaws; the department still hasn't consolidated separate IT systems from its dozens of component agencies; and financial management systems still don't interact with one another.

"They've had a real challenge knitting together such a big and diverse organization," said Dave Maurer, a director of Homeland Security and Justice issues at the Government Accountability Office. "That's why we've had this department on our high-risk list since Day One."

Experts, DHS officials and even auditors say that, despite the criticism, the department ismaking progress in areas including IT security, procurement and grants management.

"If you look at the end goals, then yes, these reports are accurate, we're not where we need to be yet," Duke said. "But the reports presume a zero start. They don't reflect the fact that we're digging ourselves out of gaps, out of the serious problems we inherited."

In the long term, experts say, DHS will face much larger challenges in fixing its financial management systems. They received the lowest marks in the recent IG's report; Inspector General Richard Skinner said the department has made only minimal progress toward consolidating those systems. And it lacks sufficient accounting and financial management personnel to audit its financial statements.

Maurer, the GAO analyst, said many of those problems are from legacy systems at the nearly two dozen agencies that combined to form DHS. He also said the department didn't think through its needs early on — and many of the early IT systems it bought are now coming back to cause problems.

"In the beginning, there was this attitude that they just had to buy something to get it in place, and hopefully it would work," he said. "But the department needs to recognize that it's more mature. It needs to stop acting like it's new."

Duke said the department is also working to address some of the cultural hangovers from its abrupt creation.

"I think we've made a lot of progress on governance, so to speak, on recognizing that the success of certain management areas depends on the relationship between headquarters and the field," Duke said. "The role of the components is to execute; the goal of headquarters is to provide oversight and set policy."

Flat budgets in the future

Duke said other short-term priorities include reducing the number of facility leases — DHS has more than 40 leases in the Washington area alone — and consolidating IT systems.

"DHS was handed a position where … we had to consolidate, taking a number of systems and making one. We have to get that IT issue settled," Duke said. "But that's an area where we have to spend money to save money."

But experts say the department might not have much money to spend. Budgets are expected to remain tight.

Michael Chertoff, the former Homeland Security secretary, said Congress deserves at least some of the blame for the department's ongoing management challenges. DHS answers to more than 100 congressional committees, many of whom constantly add new requirements for the department — and they don't provide the funding to support those requirements.

"In general, I think, there has been steady progress toward improving management," Chertoff said. "But the biggest problem comes at appropriation time, when Congress shifts money out of management lines. That's appealing to the public, because legislators can say, ‘We're adding more agents' … but without people to provide management capacity, it's not very useful."

Many legislators concur.

"Part of the problem is that we come in, Congress comes in, and we set new priorities and shuffle the money around," said Sen. George Voinovich, R-Ohio.