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If we could, at this point, go to our next witness. Maybe if you could wait. If it is an inordinate delay I will ask Mr. Harris to send you the questions in writing. [The material referred to follows:)
SEPTEMBER 13, 1977. Hon. ALAN CAMPBELL, Chairman, Civil Service Commission, Washington, D.C.
DEAR MR. CHAIRMAN: With further reference to your testimony before the Subcommittee on Administrative Law and Governmental Relations on Monday, September 12, 1977, I have received the enclosed letter from the Honorable Herbert Harris.
Congressman Harris has asked that I submit these questions so that your answers will be available to the Members of the Subcommittee in connection with the markup of a bill. Sincerely,
GEORGE E. DANIELSON,
and Governmental Relation 8. Enclosure.
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
Washington, D.C., September 13, 1977. Hon. GEORGE E. DANIELSON, Chairman, Subcommittee on Administrative Law and Governmental Relations,
Washington, D.O. DEAR GEORGE : On September 9, because of floor votes, I was unable to question Mr. Campbell, Chairman of the Civil Service Commission, on the financial disclosure bills. I would appreciate it if you would forward my questions to him so that he might respond before the subcommittee marks up a bill.
Question 1. Do you believe top-level career, competitive service personnel have the same obligation to disclose their private financial affairs to the public as appointed officials?
Question 2. Should financial disclosure legislation require filing by all competitive service personnel in GS-16 through 18 positions?
Question 3. Should competitive service personnel below GS-16, engaged in contracting, auditing, and law enforcement be required to file?
Question 4. If you believe, as H.R. 6954 requires, GS-16's through 18's in the competitive service, should file financial disclosure reports, to what degree should their reports be available to the public?
Question 5. Regarding individuals in the excepted service, should legislation designate these individuals by their responsibility or job classification, as in H.R. 6954, or by their rate of pay, as in other bills?
Question 6. Title II of H.R. 6954 establishes an Office of Government Ethics with a Director appointed by the President, and the bill provides that the Director will be under the general supervision of the Civil Service Commission. The bill does not address the question of ethics personnel in the various agencies. To what degree should the Director be independent of the Civil Service Commission? Should ethics personnel in the agencies be accountable to their agency heads or to the Director of the Office of Government Ethics? Thank you for your cooperation. Sincerely,
HERBERT E. HARRIS II,
Member of Congre88.
U.S. CIVIL SERVICE COMMISSION,
Washington, D.C., September 16, 1977. Hon. HERBERT E. HARRIS II, House of Representatives.
DEAR CONGRESSMAN Harris : Congressman George E. Danielson, Chairman of the Subcommittee on Administrative Law and Governmental Relations, has submitted to us your letter of September 13, 1977, in which you pose questions related to my testimony before the Subcommittee.
The fonowing responses correspond to your numbered questions :
Response 1. The Administration believes that top-level career, competitive service personnel have the same obligation as appointed officials to disclose their private financial affairs to the public as required in H.R. 6954. It is the positions they hold rather than the manner in which they attained them that is the criterion.
Response 2. Financial disclosure legislation should require filing by all competitive personnel, classified at GS-16 and above, including comparable officers in the foreign service and the uniformed services.
Response 3. Competitive service personnel below the grade of GS-16, when they are engaged in contracting, auditing, or law enforcement, would normally be required to file if they have authority to make decisions or take definitive action. The guide for their filing is contained in the Civil Service Commission's regulation—5 C.F.R. 735.503—which sets forth the conditions under which agencies must obtain financial statements from their employees.
The Administration is of the opinion that present legislation should require public disclosure only by top personnel. If in the future the Administration should find that public disclosure is necessary for other personnel, appropriate approval will be sought of the Congress.
Response 4. As to public disclosure, the Administration recognizes that there must be an accommodation between the public's need to know and the privacy rights of federal employees. It is for this reason that the Administration's billH.R. 6954—makes it illegal for anyone to inspect or obtain a copy of the financial statement for commercial or credit rating purposes, for charitable or political solicitations or for any unlawful cause. Civil sanctions can be imposed for any such violations.
Response 5. The Administration considered various alternatives as the formula under which employees' statements would be subject to public disclosure. It was ascertained that any cut-off other than that of grade classification would cause many persons to be included merely by the happenstance that their rate of pay, by reason of in-grade increases or otherwise, was equal to that of a GS-16. Thus, some GS-14s and 15s would be covered whereas most would not. Rate of pay was determined, therefore, not to be a proper guide.
Response 6. The Director of the proposed Office of Government Ethics would be under the general supervision of the Civil Service Commission. The Director would be appointed by the President by and with the advice and consent of the Senate. This same pattern is followed in most agencies. The President appoints, for example, the Secretary of each Department as well as the Assistant Secretaries. While they are all appointed by the President, the Assistant Secretaries are responsible to the Secretary in the overall operation of the Department.
Ethics personnel should be responsible to the agency in which they function rather than to the Director of the Office of Government Ethics. Basic to a determination of whether a conflict exists is the analysis of an employee's private activities in relation to his public duties and responsibilities. This can best be determined by the ethics personnel in each agency since they would be better acquainted with the activities and duties of its employees. More importantly, making the ethics personnel accountable to agency heads places responsibility where it must be if the system is to work. Otherwise, it would be too easy for the "buck to be passed" and enforcement would suffer. It should be noted that under H.R. 6954 the Director of the Office of Government Ethics would have oversight responsibility for all the agencies and could order corrective action on the part of an agency or its employees where positive action has not been taken in a situation that demands it. If we can be of additional assistance, please let us know. Sincerely yours,
ALAN K. CAMPBELL,
Chairman. Mr. CAMPBELL. Thank you. Mr. Mazzoli. Mr. Keller, Deputy Comptroller General, please.
TESTIMONY OF ROBERT F. KELLER, DEPUTY COMPTROLLER
GENERAL, GENERAL ACCOUNTING OFFICE Mr. DANIELSON. Thank you, Mr. Keller. I, again, have to apologize for the interruptions this morning.
Mr. KELLER. I can understand, Mr. Chairman. Mr. DANIELSON. The same forces which insist on financial disclosure are also the same forces that insist that every Member of Congress vote on everything down the line.
We are going to purify ourselves and save money in the long run. We will all be pure, we won't need prisons.
Mr. KELLER. I would like to introduce my colleagues at the table with me. Mr. Barclay on my left, who is associate general counsel, Mr. Hal Lewis on my right, who is assistant director of Federal Personnel and Compensation Division and Jack Covaleski, who is an auditor with the same division.
The gentlemen on my right have spent a good deal of time in the last 3 years auditing the financial disclosure system of the executive branch of the Government. As my statement points out at the beginning, we have issued 23 reports to the Congress on the system and we think that it needs a lot of improvement.
If I may mention, Mr. Chairman, if my statement could be filed will run through it and hit the high spots.
Mr. DANIELSON. Your statement will be received without objection. I would rather you just proceed and hit the points that you feel are of principal importance. I believe I have heard your testimony before, myself. However, I hasten to say that doesn't mean that the important points should not be repeated.
[The prepared statement of Mr. Keller follows:]
SUMMARY OF TESTIMONY OF ROBERT F. KELLER, DEPUTY COMPTROLLER GENERAL
OF THE UNITED STATES
During the past 3 years GAO has issued 23 reports concerning Federal agency financial disclosure systems. These reviews have revealed serious weaknesses in these systems, due, in part, to a lack of enforcement authority and effective monitoring. As a result of our reviews we recommended that the President establish an executive branch office of ethics with strong enforcement powers.
The Comptroller General believes that Title I of H.R. 9 as amended reflects GAO's recommendations and the President's proposals, and its enactment as part of H.R. 9 would establish an effective financial disclosure system.
The House Select Committee on Ethics has reported H.R. 7401—the Legislative Branch Disclosure Act of 1977—and we assume this bill will become Title II of H.R. 9. Many bills to establish financial disclosure systems for the Congress give administrative and/or audit authority to the General Accounting Office. The Comptroller General has stated on many occasions that he strongly opposes giving GAO such authority as it could potentially do great damage to GAO's effectiveness by endangering the close relationship which GAO must have with Members and committees of the Congress.
H.R. 7401 would require GAO to conduct, on a regular basis, a study of the effectiveness of the House and Senate financial disclosure systems. The Comptroller General fully supports this type of audit authority for GAO and recommends that H.R. 7401 be included as Title II of H.R. 9.
We also believe that the Congress must consider an individual's right to privacy when developing financial disclosure legislation. STATEMENT OF ROBERT F. KELLER, DEPUTY COMPTROLLER GENERAL OF THE
UNITED STATES Mr. Chairman and members of the committee, we appreciate your invitation to present our views on several proposed bills to establish a new financial disclosure system for top-level officers and employees of the three branches of the Federal Government.
During the past three years, we have issued 23 reports concerning the financial disclosure systems and standard of conduct regulations of executive branch departments and agencies. These reviews have revealed serious weaknesses in
agency systems, due, in part, to the lack of enforcement authority, and effective monitoring by the Civil Service Commission.
On February 28, 1977, we recommended that the President issue a statement to the heads of all executive departments and agencies setting forth a firm commitment to the highest standards of ethical conduct. We also recommended that he establish an executive branch Office of Ethics with adequate resources to address the problems of enforcement and compliance.
Among its responsibilities, we believe the Office of Ethics should
Issue uniform and clearly stated ethical standards of conduct and financial disclosure regulations as discussed in GAO reports.
Develop financial disclosure forms so that all relevant information is obtained concerning employee interests needed to enforce conflict-of-interest matters.
Make periodic audits of the effectiveness of agency financial disclosure systems on a sample basis to see that they include appropriate procedures for collecting and reviewing statements, and followup procedures to preclude conflicts of interest.
Establish a formal advisory service to render opinions on matters of ethical conduct so that all agencies are advised of such opinions.
Provide criteria for positions requiring disclosure statements.
Administer the financial disclosure system for Presidential appointees under section 401 of Executive Order 11222.
Report annually to the President and the Congress on the effectiveness of the ethics program and recommend changes or additions to applicable laws as appropriate.
Investigate and resolve ethical conduct matters unresolved at the agency level, including allegations against a Federal employee or officer.
Provide a continuing program of information and education of Federal officers and employees.
The President submitted to the Congress on May 3, 1977, a legislative proposal which would establish an Office of Government Ethics for the executive branch with strong oversight and enforcement powers. The President's proposal was embodied in H.R. 6954-the Ethics in Government Act of 1977—which would apply only to the executive branch. We believe the provisions of H.R. 6954 are needed to remedy the deficiencies that exist in the executive branch disclosure systems. We note that the provisions of Title I of H.R. 9 as amended, are similar to H.R. 6954.
On August 1, 1977, we reported to the Congress that the Civil Service Commission's financial disclosure system for top-level executive branch officials has not been effective because:
The Commission did not design and operate the system effectively;
The Commission was not involved in the review and investigation process of appointees by the White House and Senate confirmation committees;
The system was managed with limited support and insufficient resources ;
Additional financial information was needed from appointees because of their particular duties and responsibilities; and
Policies and criteria for blind trusts had not been formalized and enforced.
Most of the proposed legislation currently before the Congress also would address these deficiencies.
I would now like to briefly summarize some observations regarding certain segments of the bills.
FINANCIAL DISCLOSURE LEGISLATION Several bills, such as H.R. 1, would establish a financial disclosure system for all three branches of the Federal Government. These bills would give responsibility to the Comptroller General for administering a Government-wide financial disclosure system. We do not agree that this responsibility should be given to the Comptroller General.
On July 29, 1976, the Comptroller General appeared before this Subcommittee to present our views on H.R. 3249, a bill similar to H.R. 1. At that time he strongly emphasized that giving GAO the responsibility for administering a financial disclosure system, particularly for Members of Congress and congressional employees, could potentially do great damage to the overall effectiveness of our Office and endanger the close relationship which this Office must have with Members and committees of the Congress. We do not believe that oversight and investigation of the personal financial transactions of individual Members of Congress is consistent with our role as a nonpartisan arm of the Congress.
We believe that responsibility for administering a financial disclosure system should rest with each branch of Government.
H.R. 9-the Ethics in Government Act of 1977-as amended by the subcommittee on July 21, 1977, would establish a financial disclosure system for all three branches of the Federal Government.
Title I of H.R. 9 would establish an Office of Government Ethics in the executive branch with strong administrative and enforcement powers over the financial disclosure system. This Title reflects GAO's recommendations on actions needed to improve the executive branch financial disclosure system, and is similar to the President's proposals introduced as H.R. 6954 on May 3 to reform the financial disclosure system. In our opinion, Title I, with its strong enforcement provisions would create an effective financial disclosure system,
Title II of H.R. 9 concerning the establishment of a financial disclosure system for the legislative branch, we assume, will be based on the recommendations of the House Select Committee on Ethics. The Select Committee on Ethics reported H.R. 7401—the Legislative Branch Disclosure Act--on August 5, 1977. H.R. 7401 as reported by the Committee deals with the responsibilities of the Comp troller General in a manner that is satisfactory to us.
In testimony before the House Select Committee on Ethics in June of this year on H.R. 7401, the Comptroller General opposed giving GAO audit responsibility for the financial statements of Members of Congress and congressional employees. In addition there was testimony of the Chairman of the Federal Elections Commission, the Executive Director of the Alabama Ethics Commission, and a senior partner of Price Waterhouse & Co. who agreed that a random audit system of financial disclosure statements would be unworkable, meaningless, and basically unnecessary.
H.R. 7401, as reported, places the responsibility for seeing that there is compliance with the act with the Committee on Ethics of the Senate and the Committee on Standards of Official Conduct of the House. The Comptroller General is required to conduct a study before November 30, 1979, and regularly thereafter, to determine whether the act is being carried out effectively and whether timely and accurate reports are being filed by individuals subject to the act.
Specifically, the GAO study is expected to provide an analysis and recommendations concerning such items as:
Adequacy of coverage, including an evaluation of the manner in which Members designate persons to file;
Compliance with filing requirements by all covered individuals, including candidates;
Compliance with filing deadlines and the reasons for late filing;
The procedures and activity of the designated House and Senate Committees in fulfilling their compliance review role;
The discharge of administrative duties imposed on the Clerk and the Secretary, including their implementation of the requirement for public availability of the reports;
Any unnecessary burden or apparent omissions with regard to the contents of disclosure statements;
The discharge of duties imposed on designated State officials; and
The bill specifically directs the GAO, in its first study under this provision, to analyze the feasibility and potential need for systematic random audits of the financial disclosure reports. Within 30 days after completion of the investigation and study, the Comptroller General must transmit a report to the Congress containing a detailed statement of his findings and conclusions, together with his recommendations for such legislative and administrative changes deemed appro. priate.
We believe this type of GAO oversight if incorporated in H.R. 9, together with the enforcement authority of the supervising ethics offices and the Attorney General, and the public and media review of the financial disclosure statements, would be sufficient to insure the integrity of a Government-wide financial disclosure system.
We also note that section 101(f) (3) would require officers and employees of the General Accounting Office to file statements as an executive agency, as it is defined in section 105 of Title 5, United States Code. We believe this section should be amended to state "with the exception of the officers and employees of the General Accounting Office," and that title II, when incorporated, should