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GAO reports on agencies' financial

disclosure system



FDA's staff manual guide on protection

against conflict of interest for SGES,
October 1976



Principal officials responsible for admin

istering activities discussed in this



Civil Service Commission




Food and Drug Administration


Department of Health, Education, and Welfare


Public Records and Documentation Center


special Government employees




The Food and Drug Administration, an organiza-
tion within the Department of Health, Educa-
tion, and Welfare (HEW), is a principal consumer
protection and regulatory agency of the Govern-
ment, charged with enforcing Federal laws in-
volving food, drugs, medical devices, and cos-
metics. Special Government employees augment
the agency's regular full-time staff, providing
technical knowledge essential to the agency.
To maintain public confidence in Food and Drug
Administration decisions these employees must
adhere to the highest ethical standards.
(See pp. 2 and 28.)

How do conflict-of-interest statutes for special
Government employees apply to the Food and Drug
Administration? Problems in answering this
question have hindered the agency's development
of policy to protect against special Govern-
ment employee conflicts of interest.

(See pp.
13 and 15.) The agency thinks it has finally
answered this question (see p. 15) but it
needs to develop its policy further and sub-
mit it to HEW and the Civil Service Commission
for approval. It also needs to develop sup-
porting procedures. (See p. 18.)

--In January 1976, the agency issued, in draft,

policy to be used on a pilot basis. Before
then, conflict-of-interest issues were re-
solved case by case. Revised policy was
issued in October 1976 based in part on GAO'S
review. (See pp. 10 and 15.)

--GAO found numerous errors and inconsistencies

in case files. (See ch. 5.) These were
directly attributable to the lack of formal
policy before January 1976 and to the fact
that the policy issued at the time was in
draft to be used on a pilot basis.

See pp.
23 and 28.)

Iear Sheet. Upon removal, the report cover date should be noted hereon.



--GAO did not find any cases involving actual

conflicts of interest. But the scope of GAO'S review was not sufficiently broad to enable GAO to find such cases should they exist. No comparison was made between specific financial interests and individual duties and responsibilities (See pp. 31 and 32.)

--The Food and Drug Administration believes

that it is in the forefront of policy development for special Government employees. (See p. 13.) But GAO is still concerned because present guidance does not provide policy for all special Government employees. (See pp. 16 and 17.)

The Food and Drug Administration needs to develop procedures to make sure that special Government employees serving on committees do not participate in matters in which they are disqualified by employment or other financial interests. Based on tests made by GAO, the Food and Drug Administration officials charged with this responsibility did not always have required information. (See p. 19.)

The Food and Drug Administration further needs to formalize its system of public disclosure to make sure that potentially controversial interests held by special Government employees are described clearly and consistently. (See pp. 20 through 22.)

GAO recommends that the Secretary, HEW, actively assist the Food and Drug Administration in developing a policy to protect against conflicts of interest and to resolve difficult policy issues. (See p. 29.)

GAO also recommends that the Secretary, HEW, direct the Commissioner of the Food and Drug Administration to take steps to improve its system (see pp. 29 and 30) including:

--Completing system development which in

volves (1) developing policy to provide
guidance for special Government employees not
covered by present policy guidance, (2) sub-
mitting its policy guidance to HEW and the
Civil Service Commission for approval,
(3) developing specific procedures to
make sure policy is implemented, and (4)
improving the form used to collect fi-
nancial disclosure information.

--Issuing guidelines clearly defining he

responsibilities and organizational level of officials making the initial conflict-ofinterest recommendation.

--Formalizing the system to make sure that

special Government employees do not parti-
cipate in agency matters in which they
have financial interests and hence are dis-

--Developing written procedures setting forth

what information should be contained in public disclosure memoranda and the format to be used, so the information will be presented clearly and understandably.

This review was requested by the Chairman,
Oversight and Investigations Subcommittee,
Committee on Interstate and Foreign Commerce.
The primary concerns were:

--The effectiveness of the Food and Drug Ad

ministration's financial disclosure system for special Government employees.

--Whether financial disclosure statements are

promptly filed by the special Government employees and reviewed by the agency.

--Whether special Government employees appear

to have financial conflicts of interest which could affect the quality and objectivity of their work for the agency. (See p. 31.)

Tear Sheet

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