When the Department of Homeland Security was created on March 1, 2003, it was the largest and most complex reorganization ever attempted in American history. At the close of its first year of operations, the Century Foundation commissioned an assessment of the Department’s performance relevant to four critical homeland security challenges: aviation security, intelligence gathering and coordination, immigration, and coordination with State and local governments. The evaluation of the Department’s performance is based on assessments of strategy, capacity, and results. Grades were assigned for the DHS’s performance on each of the four critical homeland security challenges. In the area of aviation security, the DHS earned a grade of B-. Chapter 1 discusses the background of aviation security and identifies the three weakest areas of aviation security as timely screener background checks, security in general aviation, and security in air cargo. The DHS earned the grade of B- in the area of intelligence gathering and coordination. Chapter 2 explores where improvements in intelligence operations are needed. It is imperative that the DHS create a clear mission and strategy for analyzing information and for sharing information with State and local officials. The DHS earned a grade of C+ on immigration security issues, which is discussed in detail in chapter 3. Improvements include a need to reduce the backlog of immigration and naturalization cases and preventing illegal entry at borders. The DHS earned a grade of C in its coordination efforts with State and local governments. Chapter 4 points out that the overall accessibility and flexibility of grant money to local governments and first responders needs improvement. Finally, the overall management of the DHS was evaluated and earned a grade of C+. The DHS should strive to work with Congress and other key stakeholders to develop clear policy goals. Despite these weaknesses, the DHS performed strongly in tracking the entry and matriculation of foreign students; in hiring checkpoint screeners; in creating an effective system for screener background checks; in expanding the use of Federal marshals on planes; and in implementing the DHS Information Analysis and Infrastructure Protection Directorate. Footnotes, tables, appendix