03.05.07: Password Management

To meet the 03.05.07: password management requirement, you must define and enforce how passwords are created, stored, transmitted, rotated, recovered, and audited across systems that handle CUI, with evidence that the rules are consistently applied in identity systems and endpoints. Operationalize it by standardizing password policy, configuring technical controls, and retaining repeatable proof for assessments ¹.

Key takeaways:

• You need both policy and system-enforced configuration for password controls, plus recurring evidence ¹.
• Scope must include all accounts that can access CUI: workforce, admins, service accounts, and third-party access paths ¹.
• Assessors will look for configuration exports, logs, and account inventories, not screenshots and good intentions ¹.

03.05.07 sits in the access control/authentication hygiene lane of NIST SP 800-171 Rev. 3 and is easy to “think you have” because most organizations already have an HR-friendly password policy. Assessments fail it for a different reason: the policy does not match how identity actually works in production, especially for privileged access, service accounts, shared accounts, and third-party support logins.

Treat this requirement as a build-and-prove exercise. Build means you pick a single password standard, define where passwords are allowed (and where they are not), and configure systems so users cannot bypass it. Prove means you can show evidence of enforcement across directories, endpoints, cloud consoles, and remote access tools, on demand, without scrambling.

This page is written for a CCO, compliance officer, or GRC lead who needs requirement-level implementation guidance. It focuses on operational scope, step-by-step execution, evidence you should retain, and the exam questions that usually trigger findings. The underlying requirement is 03.05.07 (Password Management) in NIST SP 800-171 Rev. 3 ¹.

Regulatory text

Requirement: “NIST SP 800-171 Rev. 3 requirement 03.05.07 (Password Management).” ¹

Operator meaning: You are expected to manage passwords as a controlled security mechanism, not an informal user habit. For any environment that stores, processes, or transmits CUI, you should be able to demonstrate: (1) documented password rules, (2) technical enforcement in identity and access systems, and (3) operational processes for exceptions, resets, storage, and monitoring ¹.

Plain-English interpretation (what “password management” really means)

Password management under 03.05.07 is the set of controls that prevent weak, reused, exposed, or mishandled passwords from becoming an easy initial access path into CUI systems. In practice, that means you control the full password lifecycle:

• Creation: how strong passwords must be; how they’re chosen; how you prevent common/breached passwords.
• Storage: where passwords may exist (e.g., password manager vault) and where they may not (e.g., spreadsheets, tickets, runbooks).
• Transmission: how passwords are shared when necessary, and how you stop sharing over insecure channels.
• Reset and recovery: how you verify identity, handle helpdesk resets, and protect recovery mechanisms.
• Privileged and service use: how you manage admin and non-human credentials differently from user passwords.
• Auditability: how you can prove enforcement and investigate misuse ¹.

Who it applies to (entity + operational context)

Entities: Organizations implementing NIST SP 800-171 Rev. 3, including federal contractors and any nonfederal system handling CUI ¹.

Operational scope (what systems/accounts are in-scope):

• Identity providers/directories used to authenticate to CUI systems (e.g., enterprise directory, cloud IdP).
• Endpoints and servers that access or store CUI.
• Administrative interfaces for CUI environments (cloud consoles, hypervisors, backup consoles, MDM, EDR, etc.).
• Remote access paths into CUI environments (VPN, VDI, jump hosts, support tools).
• Accounts:
  • Standard workforce accounts with CUI access
  • Privileged/admin accounts
  • Service accounts and API keys where passwords exist
  • Third-party accounts used for support/maintenance where they can reach CUI ¹

If a third party can log in and touch CUI, your password management rules must cover that path, even if the third party “owns” the tool. Contract terms and technical enforcement both matter.

What you actually need to do (step-by-step)

Use this sequence to implement 03.05.07 in a way that survives assessment.

Step 1: Define the password standard (policy + technical baseline)

Create a password management standard that is specific enough to configure systems. Include:

• Password length/complexity rules (express them as settings, not prose).
• Prohibited password behaviors (reuse, sharing, storing in tickets/docs).
• Requirements for privileged and service accounts (stronger controls, tighter handling).
• Requirements for third-party access (no shared credentials; time-bound where possible).
• Where passwords must be stored (approved password manager) and prohibited storage locations ¹.

Deliverable: Password Management Standard (owned by Security/GRC; approved by management).

Step 2: Inventory authentication sources and account types for CUI scope

Build a scoped inventory that maps:

• CUI systems → authentication method → identity source (IdP, local accounts, app-native accounts)
• Account types used in each system (user/admin/service/third party)
• Where local accounts exist and why (legacy, break-glass, appliance constraints) ¹

This prevents the common failure mode: you configure your IdP well, but forget app-native admin accounts and “temporary” third-party logins.

Deliverable: CUI Authentication & Account Inventory.

Step 3: Configure enforcement in the identity layer first

Implement password policy controls centrally where possible:

• Directory/IdP password policy settings aligned to your standard
• Conditional access rules for risky sign-ins where supported
• Controls that reduce password reliance (MFA, SSO) where feasible, while still meeting password management obligations for remaining password-based paths ¹

Deliverables: Configuration exports from IdP/directory, plus change records.

Step 4: Close the “local password” gaps on endpoints and servers

For endpoints/servers in CUI scope:

• Enforce local password policy via device management or configuration management.
• Eliminate shared local admin passwords; where local admin accounts must exist, manage them centrally (password rotation, access control, audit trail).
• Confirm admin access paths use named accounts with least privilege; document any break-glass account handling and storage in the password manager ¹

Deliverables: MDM/GPO/config management policy exports; local admin account inventory; exception register.

Step 5: Implement privileged password handling (admin + service accounts)

Create separate operational rules for privileged credentials:

• Store privileged passwords only in an approved vault with access logging.
• Require check-out/check-in where possible; rotate after use for shared operational accounts.
• For service accounts, document owners, purpose, dependencies, and rotation approach. If rotation is technically hard, document compensating controls and a plan to remediate ¹

Deliverables: privileged account list; vault access logs; service account register.

Step 6: Lock down password reset and recovery

Assessors often probe password resets because they bypass “strong password” controls.

• Document helpdesk reset workflow, identity verification steps, and approvals for privileged resets.
• Restrict who can perform resets; log all reset events.
• Protect recovery methods (disable weak recovery options; control who can change recovery email/phone for admins) ¹

Deliverables: helpdesk procedure; ticket samples (redacted); reset logs.

Step 7: Build recurring evidence collection (assessment-ready)

Set up a repeatable cadence to collect proof:

• IdP/directory password policy exports
• List of accounts exempted from policy and why
• Password vault reports (who has access to privileged folders; access logs)
• Sampling of endpoint/server policy enforcement outputs
• Exception register with approvals and expiration dates ¹

If you use Daydream, treat this as a mapped control with scheduled evidence requests to IT/SecOps and auto-reminders so evidence collection is not a fire drill at assessment time ¹.

Required evidence and artifacts to retain

Keep artifacts that prove both design and operating effectiveness:

Design evidence

• Password Management Policy/Standard (approved, versioned) ¹
• CUI Authentication & Account Inventory ¹
• Exception process + exception register template ¹

Operating evidence

• IdP/directory configuration exports showing password controls ¹
• Endpoint/server configuration enforcement outputs (MDM/GPO/config tool exports) ¹
• Password vault access control list and audit logs for privileged credentials ¹
• Redacted helpdesk tickets for password resets and privileged reset approvals ¹
• Service account inventory with owner, purpose, and credential handling method ¹

Common exam/audit questions and hangups

Expect these questions in a NIST SP 800-171-style assessment ¹:

1. “Show me the enforced password policy.” They want system output, not a PDF.
2. “Which systems are not using the central IdP?” App-native accounts are a common gap.
3. “How do you manage local admin passwords?” Shared local admin passwords are a frequent finding.
4. “How do third parties authenticate?” They will test whether third-party access is named, controlled, and logged.
5. “How do you handle service accounts?” Undocumented service account passwords trigger risk calls.
6. “Show password reset controls.” Weak reset flows can invalidate the rest of the program.

Frequent implementation mistakes (and how to avoid them)

• Mistake: Policy-only compliance. Fix: pair every requirement statement with the exact setting location and evidence artifact you will produce ¹.
• Mistake: Ignoring non-human credentials. Fix: maintain a service account register and assign owners who must attest to credential handling ¹.
• Mistake: Shared accounts for IT convenience. Fix: require named admin accounts; if a shared account is unavoidable, put it in the vault with check-out logging and documented compensating controls ¹.
• Mistake: Third-party support logins outside governance. Fix: require third-party access requests, time-bound access, and evidence of offboarding when work ends ¹.
• Mistake: No exception lifecycle. Fix: every exception needs an owner, rationale, compensating controls, and a removal date tied to a ticket ¹.

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this requirement, so this page does not cite any specific actions.

Operationally, weak password management commonly leads to unauthorized access, lateral movement, and difficulty proving CUI protections during an assessment. The compliance risk is straightforward: if you cannot demonstrate consistent password controls and evidence for in-scope systems and accounts, assessors can record a deficiency against 03.05.07 ¹.

Practical 30/60/90-day execution plan

Use phases rather than date promises; your timing depends on system sprawl and ownership.

First 30 days (Immediate)

• Approve a Password Management Standard with clear scope for CUI systems ¹.
• Build the CUI Authentication & Account Inventory; identify app-native and local accounts ¹.
• Start an exception register; log current known gaps (service accounts, legacy apps, third-party logins) ¹.

Days 31–60 (Near-term)

• Configure and validate IdP/directory password controls; export evidence ¹.
• Implement password vault controls for privileged credentials; restrict and log access ¹.
• Standardize password reset procedures and logging; test privileged reset approvals ¹.

Days 61–90 (Stabilize + prove)

• Roll endpoint/server enforcement to remaining in-scope assets; reduce local/shared admin passwords ¹.
• Complete service account inventory, assign owners, and document rotation/controls ¹.
• Set recurring evidence pulls (directory exports, vault reports, exception review) and track in Daydream so evidence is continuously assessment-ready ¹.

Frequently Asked Questions

Does 03.05.07 require a specific password length or rotation schedule?

The provided excerpt identifies the requirement as “Password Management” but does not specify numeric parameters in the data you provided ¹. Set parameters in your standard, then prove enforcement through system configuration exports.

Are service accounts in scope for password management?

Yes, if a service account uses a password (or password-equivalent secret) to access systems that handle CUI, you should manage it under your password standard ¹. Keep an inventory, ownership, storage, and rotation approach as evidence.

If we use MFA everywhere, do we still need to meet the password management requirement?

MFA reduces risk but does not remove the need to manage passwords anywhere they still exist ¹. Assessors will still ask how passwords are set, stored, reset, and audited for remaining password-based authentication.

Can third parties use shared credentials for emergency support?

Treat shared credentials as an exception case that requires strong compensating controls, vault storage, access logging, and a defined expiration/removal process ¹. Named accounts with auditable access are easier to defend.

What evidence is most persuasive in an assessment?

Configuration exports from your IdP/directory, endpoint enforcement outputs, and password vault access logs typically matter more than narrative policy ¹. Keep redacted reset tickets and an exception register to show operations.

How do we operationalize evidence collection without building a spreadsheet program?

Define an evidence set tied to 03.05.07 and schedule recurring collection from system owners ¹. Daydream can track the control, assign evidence tasks to IT/SecOps, and retain the artifacts for assessment readiness ¹.

Footnotes

1. NIST SP 800-171 Rev. 3