Financial Disclosure: Implementation of Statute Governing Senate and
Legislative Agency Personnel (Letter Report, 03/16/94, GAO/GGD-94-77).
Since the passage of the Ethics Reform Act of 1989, the Senate Ethics
Committee has improved its financial disclosure report review system.
Today, state election offices are being used to identify candidates who
must file reports, reports are reviewed within 60 days of receipt,
filers are notified when more information is needed, a computer is
tracking outstanding financial disclosure reports, and late filing fees
are being imposed. The Committee's reviewers are not in a position to
identify and resolve all potential conflicts of interest because they
are not familiar enough with the work done by employees who file
financial disclosure reports. However, procedures have been instituted
that could help spot potential conflicts of interest. Copies of the
reports are now sent to each filer's respective office, Senator, or
legislative agency, which are more knowledgeable about the kind of work
their employees perform.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-94-77
TITLE: Financial Disclosure: Implementation of Statute Governing
Senate and Legislative Agency Personnel
DATE: 03/16/94
SUBJECT: Financial disclosure reporting
Ethical conduct
Congressional employees
Oversight by Congress
Compliance
Internal controls
Disclosure law
Reporting requirements
Political candidates
Conflict of interest
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Cover
================================================================ COVER
Report to the Select Committee on Ethics, U.S. Senate
March 1994
FINANCIAL DISCLOSURE -
IMPLEMENTATION OF STATUTE
GOVERNING SENATE AND LEGISLATIVE
AGENCY PERSONNEL
GAO/GGD-94-77
Financial Disclosure
Abbreviations
=============================================================== ABBREV
Letter
=============================================================== LETTER
B-254224
March 16, 1994
The Honorable Richard H. Bryan
Chairman
The Honorable Mitch McConnell
Vice Chairman
Select Committee on Ethics
United States Senate
The Ethics in Government Act of 1978, as amended, requires us to
conduct studies regularly to determine whether the provisions of
title I governing financial disclosure of federal personnel are being
carried out. This report, which focuses on the Senate, recognizes
the progress made in implementing title I by your Committee, which is
the supervising ethics office for the Senate.
We are also issuing a companion report\1 to the House Committee on
Standards of Official Conduct. The report focuses on the House
Committee's review of financial disclosure reports in the House. In
1993, we issued a report on the judicial branch addressing its
procedures for implementing title I provisions of the act.\2
--------------------
\1 Financial Disclosure: Implementation of Statute Governing House
and Legislative Agency Personnel (GAO/GGD-94-76, Mar. 16, 1994).
\2 Financial Disclosure: Implementation of Statute Governing
Judicial Branch Personnel (GAO/GGD-93-85, Apr. 27, 1993).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Since the passage of the Ethics Reform Act of 1989, which amended the
Ethics in Government Act of 1978, the Senate Select Committee on
Ethics has modified and improved its financial disclosure report
review system. Actions taken included using state election offices
to identify candidates who must file reports, reviewing reports
within 60 days of receipt, notifying filers when additional
information is needed, using a computerized system to track
outstanding financial disclosure reports, and assessing late filing
fees.
The Committee's reviewers are not in a position to identify and
resolve all potential conflict-of-interest situations because the
reviewers do not have sufficient knowledge of the work performed by
employees who file financial disclosure reports. However, procedures
have been implemented that could aid in identifying potential
conflict-of-interest situations. In accordance with section 902 of
the Ethics Reform Act of 1989, copies of the reports are to be sent
to each filer's respective office, Senator, or legislative agency.
Individuals in these groups are in a better position to know the
types of work their employees perform.
BACKGROUND
------------------------------------------------------------ Letter :2
Financial disclosure reports are designed to provide a system for
senior government officials to disclose their financial interests in
a form open to public scrutiny. This procedure is done to identify
conflicts between the officials' financial interests and the
interests of the public they serve. The law requires that filers
disclose income, financial transactions, assets, liabilities, and
certain other financial information.
In 1991, 1,378 Senate Members, officers, employees, principal
assistants, candidates, and certain employees of legislative
agencies\3 filed financial disclosure reports with the Office of
Public Records in the Office of the Secretary of the Senate.
Generally, financial disclosure reports were required from persons
who made $72,298 or more annually in 1990. Table 1 presents the
number of filers by category.
Table 1
Number of Individuals Filing Financial
Disclosure Reports for Each Category of
Filers for 1991
Number
of
Category filers
-------------------------------------------------- --------
Members of the Senate 100
Officers and employees of the Senate 650
Terminating Members, officers, and employees of 40
the Senate and legislative agencies
Candidates for the Senate 62
Legislative agencies' employees 526
============================================================
Total 1,378
------------------------------------------------------------
Source: GAO's analysis of the Office of Public Records' financial
disclosure index.
Within the Senate, the Select Committee on Ethics is responsible for
providing for the review of financial disclosure reports to ensure
that the reports comply with applicable laws and regulations. The
Committee's staff reviews the reports to ensure that (1) the reported
information is in the proper format; (2) sufficient information is
contained in the reports to allow the supervising Senator or head of
the office, public, media, and others viewing the reports to
determine the nature and extent of the filer's financial interests;
and (3) the reports are in compliance with certain restrictions, such
as those dealing with receiving honoraria, gifts, and outside
employment and income that could represent conflicts of interest. (A
list of all the laws and regulations having relevance to financial
disclosure reports filed in the Senate is presented in app. I.)
--------------------
\3 The five legislative agencies that report to the Senate are the
General Accounting Office, the Office of Technology Assessment, the
Office of the Attending Physician, the Physician Payment Review
Commission, and the Prospective Payment Assessment Commission.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :3
Section 108 of the Ethics in Government Act, as amended, requires the
Comptroller General to do studies on a regular basis to determine
whether the financial disclosure provisions contained in title I are
being carried out effectively by the executive, legislative, and
judicial branches. We focused our current review primarily on the
Senate's system for implementing new filing and reviewing provisions
established by the act.
To determine how the statutory provisions addressing the review of
public disclosure reports in section 106 of the Ethics in Government
Act were being carried out by the Senate Select Committee on Ethics,
we determined what policies, regulations, and procedures had been
established for implementing the provisions. To identify these
policies, regulations, and procedures, we interviewed the counsel and
other staff of the Committee responsible for report reviews. The
Committee's staff is responsible for establishing the procedures,
performing the reviews of financial disclosure reports, and
recommending penalties. We also met with the staff of the Office of
Public Records--the office that receives and makes the reports
available to the public--and legal and personnel officials in four of
the five legislative agencies that manage the filing of financial
disclosure reports required to be submitted to the Secretary of the
Senate. We also reviewed the Senate filing form, reporting
instructions, and the Senate Rules.
To assess the internal controls for implementing the act's filing and
review provisions, we reviewed a random sample of 20 of the 1,378
financial disclosure reports filed in 1991. We limited the sample
size because of improvements made by the Committee in response to a
1989 GAO report on the legislative branch's financial disclosure
systems.\4 The sample is not projectable to the 1,378 reports filed
in 1991.
Our review of the reports in our sample was aimed at (1) testing
whether established procedures for reviewing the reports were being
followed and (2) observing the Committee's actual practices in
administering applicable statutory controls for reviewing reports.
In reviewing the reports, we completed a data collection instrument
to record data on implementation of various sections of the act
related to reviewing public reports. Specifically, we gathered data
on the type of procedures that were used in reviewing reports, the
extent to which review was done on actions that could have resulted
in conflicts of interest, actions taken by the filers to correct
errors or omissions in reporting, and the filers' compliance with
applicable laws and regulations. We did not attempt to second guess
the reviewers' judgments of the disclosure reports; nor did we assess
the extent to which Senators and legislative agencies reviewed
financial disclosure reports.
Our review was done from March 1992 through November 1993 in
accordance with generally accepted government auditing standards.
--------------------
\4 Financial Disclosure: Legislative Branch Systems Improved But Can
Be Further Strengthened (GAO/GGD-89-103, Sept. 8, 1989).
THE SENATE SELECT COMMITTEE ON
ETHICS HAS IMPROVED ITS
FINANCIAL DISCLOSURE REVIEW
SYSTEM FOR IMPLEMENTING THE ACT
------------------------------------------------------------ Letter :4
Since the passage of the Ethics Reform Act of 1989, the Senate Select
Committee on Ethics has modified its financial disclosure review
system to implement newly established provisions of the Ethics in
Government Act. We found that the Committee complied with the
following provisions of the act dealing with filing and reviewing
financial disclosures:
Disclosure reports were reviewed within 60 days of receipt, as
required by section 106 (a)(2) of the act.
Additional information needed to complete reports and the deadline
by which the information must be submitted was identified, and
filers were notified, as required by section 106 (b)(2)(A) of
the act.
Filing fee penalties of $200 were assessed for reports filed over
30 days late, as required by section 104 (d) of the act.
Reporting instructions were issued that incorporated all new filing
requirements imposed by the Ethics Reform Act of 1989.
The Committee also implemented recommendations from our September
1989 report. The first recommendation dealt with improving the
timeliness of report amendments by tracking the status of requested
amendments until they were received and approved. The Committee has
developed a computerized tracking system so that the date reports are
due and the status of any amendments can be accessed for monitoring
purposes. To deal with the problem of late filing and nonfiling
among candidates, the report recommended publicizing the names of
candidates who file late or who do not file a report. The Office of
Public Records established a list, available to the public and media,
that shows the filing status of candidates and others. In addition,
our previous review found that the Committee experienced difficulty
identifying certain individuals who were required to file reports.
The Committee took action to correct this problem by (1) requesting
that the election offices of each state and the various legislative
agencies notify the Committee of all candidates and employees who met
the criteria requiring them to file financial disclosure reports and
(2) establishing a procedure that requires the names of new employees
in the Senate be sent to the Committee as soon as they are appointed.
PROCEDURES HAVE BEEN
ESTABLISHED TO AID IN
IDENTIFYING POTENTIAL
CONFLICT-OF-INTEREST SITUATIONS
------------------------------------------------------------ Letter :5
Report reviewers on the staff of the Select Committee on Ethics have
the information available in the financial disclosure reports to
evaluate some activities that relate to financial conflicts of
interest. For example, the reviewers evaluate financial restrictions
on reported (1) gift amounts, (2) donations to charities in lieu of
honoraria, and (3) outside employment and income. These
restrictions, such as whether the value of gifts received exceeds the
$250 annual limitation from one source, can be assessed from the
information presented in the report.
The Committee's reviewers are not in the best position to identify
and resolve all matters covered by applicable conflict-of-interest
laws and regulations. Because the reviewers do not have sufficient
knowledge of the work performed by filers of financial disclosure
reports, they cannot always compare the work performed with the
financial interests identified in the reports. In 1991, the Senate
Ethics Committee sent copies of the reports back to the filers'
respective Senators and legislative agencies, as required by Senate
Resolution 236, which implements section 902 of the Ethics Reform Act
of 1989. This process enables persons more familiar with the filer
to identify and resolve such conflicts of interest.\5
In 1993, the Committee delegated the responsibility for reviewing GAO
employees' financial disclosure reports to the Comptroller General.
An April 5, 1993, letter to the Comptroller General said that
"The Committee has concluded that it is appropriate that review
and certification of the public disclosure forms for GAO
officers and employees be performed by your agency....
Additionally, we request that you endeavor to resolve any
conflicts of interest on the part of any GAO officer or employee
and refer to this Committee those unresolved conflicts in
accordance with sections 106(b)(3)."
According to the letter, the Committee delegated the authority to GAO
because (1) GAO is in a "unique position in evaluating the
information reported by individuals within GAO's employ for conflicts
of interest" and (2) GAO's review had previously duplicated the
Committee's review. The Committee retains the option of reviewing a
sample of the reports reviewed by GAO. The Committee has not yet
delegated responsibility to the other four agencies that report to
the Committee (Office of Technology Assessment, Office of Attending
Physician, Physician Payment Review Commission, and Prospective
Payment Assessment Commission). According to the counsel, this is
primarily because the four offices together have fewer than 100
filers; the Office of Technology Assessment has about 89 employees
who file reports, and the other three offices have fewer than 10
filers.
--------------------
\5 As noted previously, we did not assess the degree to which
Senators or legislative agency officials reviewed financial
disclosure reports.
CONCLUSIONS
------------------------------------------------------------ Letter :6
The Committee has taken actions to implement our prior
recommendations concerning the filing and review of financial
disclosure reports and to implement the new provisions in the Ethics
Reform Act of 1989. Also, procedures have been established that, if
properly implemented, should aid in identifying potential
conflict-of-interest situations.
COMMITTEE COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :7
A Counsel for the Select Committee on Ethics provided oral comments
on January 13, 1994. The Counsel stated that in general the
Committee agrees with our report that its program meets the act's new
requirements for filing and reviewing reports. The Committee also
provided some technical changes, which we incorporated in the report.
---------------------------------------------------------- Letter :7.1
We are also sending copies of this report to other interested parties
and will make copies available to others upon request.
The major contributors to this report are listed in appendix II. If
you have any questions about this report, please contact me on
202-512-5074.
Nancy Kingsbury
Director
Federal Human Resource
Management Issues
WRITTEN CRITERIA APPLICABLE TO THE
REVIEW OF LEGISLATIVE BRANCH
PERSONNEL FINANCIAL DISCLOSURE
REPORTS
=========================================================== Appendix I
Title Description
---------------------------- --------------------------------------------------
Applicable laws
Title I of the Ethics in Contains financial disclosure requirements of
Government Act of 1978, as federal personnel.
amended
Titles III and VI of the Contains provisions concerning gifts, outside
Ethics Reform Act of 1989 employment and income, and honoraria.
18 U.S.C. 201 Prohibits receiving anything of value for
performing official acts other than as provided by
law.
18 U.S.C. 203 Prohibits officer or employee from receiving
compensation for services rendered personally or
by another person before any government
department, court, or agency on a matter in which
the United States is a party or has a direct and
substantial interest.
18 U.S.C. 204 Prohibits any Member of Congress from practicing
in the United States Claims Court or Court of
Appeals.
18 U.S.C. 205 Prohibits officer or employee from acting as agent
or attorney for anyone in a claim against the
United States or before any department, agency, or
court in a matter in which the United States is a
party or has a direct or substantial interest.
18 U.S.C. 207 Prohibits Members, officers, and employees
(including committee staff, leadership staff, and
legislative offices staff) for a period of 1 year
after leaving office, from knowingly making any
communication to specified federal officials with
the intent to influence.
18 U.S.C. 208 Prohibits a covered person from personal and
substantial participation in a matter when the
person has a financial interest in the matter. The
prohibition applies regardless of the value of the
financial interest.\a In the legislative branch,
section 208 is only applicable to GAO employees.\b
Regulations
Senate Rule 37 (1) Prohibits a Member, officer, or employee from
receiving compensation to the person's beneficial
interest from any source, the receipt of which
occurs by influence improperly exerted from the
person's position in Congress.
Senate Rule 37 (4) Prohibits a Member, officer, or employee from
knowingly using an official position to introduce
or aid the progress of legislation, a principal
purpose of which is to further the person's
pecuniary interest.
Senate Rule 37 (7) Requires employees on the staff of a committee who
are compensated at a rate in excess of $25,000 per
annum and employed more than 90 days in a calendar
year to divest themselves of any substantial
holdings which may be directly affected by the
actions of the committee, unless the Select
Committee on Ethics has granted permission to
retain such holdings.
Senate Rule 37 (10) Prohibits any employee required to file a
financial disclosure report from participating
personally and substantially as an employee of the
Senate in contact with any agency of the executive
or judicial branch with respect to nonlegislative
matters affecting any nongovernmental person in
which the employee has a significant financial
interest.
Other written criteria
Financial disclosure Describes the preparation, filing, and review of
statement instructions for financial disclosure reports; public access to
Senate reports; and regulations governing reporting.
--------------------------------------------------------------------------------
\a Section 208 also prohibits an employee's participation when the
employee's spouse, minor child, partner, organization in which the
employee is serving as an officer, director, trustee, general
partner, or employee, or someone with whom the employee is
negotiating or has an arrangement concerning prospective employment,
has such an interest.
\b The Department of Justice has determined that section 208 applies
to GAO employees because they are employees of an independent agency
of the United States and the Comptroller General is appointed by the
President.
Source: The U. S. Senate Code of Official Conduct.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
-------------------------------------------------------- Appendix II:1
Timothy P. Bowling, Associate Director, Federal Human Resource
Management Issues
Norman A. Stubenhofer, Assistant Director, Federal Human Resource
Management Issues
Thomas C Davies, Jr., Evaluator-in-Charge
John J. Tavares, Advisor
Jeffrey W. Dawson, Evaluator
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C.
-------------------------------------------------------- Appendix II:2
V. Bruce Goddard, Senior Attorney