due or the "as of" date for reporting financial interests held. Moreover, GAO found that not all employees had filed statements. (See p. 8.)

The Department's review criteria needs clarification to assist officials in reviewing statements. The Department's regulatory and statutory prohibitions have not been interpreted so that officials know specifically how to apply the restrictions when analyzing employees' financial interests. (See p. 9.)

The Department had identified neither the employees nor the positions prohibited from having financial interests. Department regulations exempt holdings valued at less than $5,000 and less than 1 percent of the outstanding shares of stock from being actual or potential conflicts of interest if those holdings are not specifically prohibited by statute or regulation.

Instructions for completing the financial disclosure statement ask the employee to list only financial interests prohibited by statute or regulation or those that are not exempt. The statements only list the names of the interests held. They do not show (1) which interest the employee considers prohibited by statute or regulation or (2) any data on the value of the interest or the percent of ownership.

Review officials generally applied the exemption provision to all reported financial interests and, in some cases, inconsistently applied the exemption provision. (See p. 11.) Using the Department's criteria, any holding in an agricultural-related interest should be questionable if it is reported. On this basis, when evaluating employees' financial holdings as listed on the statements, GAO questioned any reported financial interest in (1) companies that produce or use agricultural products, (2) companies that do business with the Department, and (3) farmland, timberland, and/or undeveloped land.

GAO made a limited review of 429 employees' financial disclosure statements and considered

499 reported financial interests as questionable (191 corporate and 308 real property interests). (See p. 13.)

GAO recommends that the Secretary of Agri-
culture take action to correct the system's
deficiencies discussed in this report.
(See p. 16.)

Although Department officials did not have
an opportunity to review a draft of this
report and submit formal comments, GAO dis-
cussed its findings with officials responsible
for the financial disclosure system in the
Department's Offices of General Counsel and
Personnel. They stated that a closer look

at the Department's regulations was needed
to clarify and resolve the issues raised in
this report. They provided information on
actions undertaken or planned to improve
the system. Many of the Department's planned
actions should help correct the system's
weaknesses. (See p. 15 and app. I.)

Tear Sheet

INTRODUCTION

The Department of Agriculture was established by the act of May 15, 1862, to acquire and disseminate useful information on agricultural subjects in the most general and comprehensive sense. Through the years, several other acts have been passed that have given the Department additional responsibilities. The Department operates in the areas of research, education, conservation, marketing, regulatory work, agricultural adjustment, surplus disposal, and rural development.

Generally, the Department's principal responsibilties

are to

--improve and maintain farm income, assure maximum
productivity of farm products for which there is
a market demand, and develop and expand markets
abroad for agricultural products;

--help curb and cure poverty, hunger, and malnutrition;

--enhance the environment and maintain our capacity to produce by helping landowners to protect soil, water, forests, and other natural resources;

-assure standards of quality in the daily food
supply through inspection and grading services;
and

--carry out national growth policies through rural
development, credit, and conservation programs.

The Department is organized into several operating agencies and staff offices. A list of the agencies and a brief description of their principal responsibilties are included in appendix II.

Because of the diversified nature of its responsibilities and their effect on the American public, it is important that the Department maintain an effective financial disclosure system.

SCOPE OF REVIEW

Our review at Department headquarters, Washington, D.C., was made pursuant to requests from Members of Congress. Primary concerns expressed in these requests were whether:

--Federal agencies have effective financial
disclosure systems for revealing conflict-
of-interest situations.

--All required financial disclosure statements
were promptly and properly filed.

--The financial disclosure statements were ade-
quately reviewed and analyzed.

We selectively reviewed all financial disclosure statements filed by Department employees in 1975 and their position descriptions. We did not review all financial interests listed nor were any employees contacted regarding their actual duties or their financial holdings. The main purpose of our examination was to determine if the agency adequately reviewed the financial disclosure statements and detected and acted on any possible conflicts. The confidentiality of these statements was maintained at all times. Our working papers do not contain employee names. We used codes which are traceable to the names of employees and their questionable holdings. Lists of the employees, our code, and their questionable holdings were given to the Department at the end of our audit. We also reviewed position descriptions of 148 positions not required to file financial disclosure statements to determine whether they should be required to file because of their duties and responsibilities.

Our review did not focus on existing statutory criminal provisions concerning the activities of Federal employees affecting their personal financial interests (18 U.S.C. 208). We note, however, that the requirements of the statute are no more stringent than the requirements of the regulations we reviewed.