Senator COHEN. The final witnesses today include a panel of witnesses from the Defense Department and the GAO. Testifying on behalf of the GAO is Rosslyn Kleeman, Associate Director, General Government Division.

The Department of Defense is represented by Alvin Tucker, Deputy Assistant Inspector for Auditing, accompanied by David Cooke, of the Office of the Secretary General of Defense.

Before you begin, I would like to just make an observation. Many times we find the executive branch coming before Congress and saying, "Boy, these guys really don't live in the real world, and they pass these sanctimonious laws but don't understand what the full implication is for those of us who have to go out and hire people. Aren't they setting themselves up as some sort of moral paragons of virtue up here behind this dais?"

That really isn't the case. I think the difference is that we have to go out and run for public office. If you are concerned about examination, let me tell you, it is a wonderful experience to go out and get examined by your opponents, by your political adversaries, and by the press. That is the difference. We have to go through this. We are held accountable on a daily basis, and people who work for the executive branch aren't. They are never seen for the most part. They work in many of these buildings here, and no one knows much about them.

So that is why the standards are imposed, because those in the executive branch certainly have a coequal share of power, perhaps much more so in the executive decisionmaking process than we do as legislators.

So what we are trying to do is to say that we are ensuring the public, who never gets a chance to see all those folks at work before the public, that certain standards are being adhered to.

I sometimes feel uncomfortable. We are looking down like a group of judges, totally untainted by reality, as to what you have to deal with, but we are up there and we have to be accountable to people, unlike most members of the executive branch. With that, we will start with Ms. Kleeman.

TESTIMONY OF ROSSLYN S. KLEEMAN, ASSOCIATE DIRECTOR, GENERAL GOVERNMENT DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY L. NYE STEVENS, GROUP DIRECTOR, GENERAL GOVERNMENT DIVISION; AND ALVIN TUCKER, DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDITING, DEPARTMENT OF DEFENSE, ACCOMPANIED BY DAVID O. COOKE, DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR ADMINISTRATION

Ms. KLEEMAN. Thank you, Mr. Chairman and Senator Levin. We are pleased to be here today to discuss, as you asked, a statutory interpretation that invalidates financial disclosure requirements as they affect a large portion of the Federal Government's work force. In August 1983, we became aware of certain Department of Justice legal opinions that severely affected the enforcement of financial reporting requirements in several agencies. In essence, these opinions indicated that agency financial disclosure systems could not be validly applied to the majority of the executive branch work

force those who occupy positions below grade 16, or below the Senior Executive Service.

Attached to my statement is an August 30, 1983 letter to the chairman of the Subcommittee on Human Resources of the House Post Office and Civil Service Committee. I'd like to submit that for the record and tell you that the letter notes that section 207(C) of the Ethics in Government Act had been interpreted by the Department of Justice as superseding financial disclosure requirements in other statutes, many of them specific to individual programs or agencies.

The Ethics in Government Act applies only to Federal employees in the Senior Executive Service, or grade 16 and above. But section 207(A) of the act authorized the President to issue an Executive order extending the disclosure requirements to other employees; however, when we wrote the letter, no Executive order had yet been issued.

The effect of this situation was that there were no legally enforcible financial disclosure requirements for the vast majority of the Federal work force. We, thus, had to suspend work that we had ongoing and some planned work on financial disclosure systems in two bureaus of the Department of Interior. And we have initiated no new work in this area.

As Mr. Martin acknowledged, the situation described in the August 1983 letter still prevails. The President has not issued an Executive order extending financial disclosure requirements to executive branch employees not covered by the law, even though executive branch officials have known of this problem since 1980.

Our view remains the same as we expressed it 18 months ago, that, ultimately, a legislative solution to the problem will be required.

The letter I've submitted for the record provides a brief analysis of four possible options for resolving the problem. We recognize that each of the options involves some disadvantages and are not prepared to make a specific recommendation on a solution at this time.

This concludes my statement, Mr. Chairman. I will be glad to answer any questions.

[The letter referred to follows:]

Subject: Options for Amending the Ethics in Government Act

This letter is in response to an August 22, 1983 request from your office for a quick analysis of problems arising from an interpretation of the provision in the Ethics in Government Act that supersedes financial disclosure requirements under other laws. Department of Justice opinions issued to the Environmental Protection Agency in April of 1980 and to the Office of Government Ethics in February of 1983 indicate that presently Federal employees at the GS-15 grade level and below (with few exceptions) are not subject to financial disclosure requirements. Those opinions àre based on the Department of Justice interpetation of sections 207(a) and (c) of the Ethics in Government Act.

Section 207 (c), Title II of the Ethics in Government Act (Public Law 95-521) states:

The provisions of this title requiring the
reporting of information shall supersede
any general requirement under any other
provision of law or regulation with respect
to the reporting of information required
for purposes of preventing conflicts of
interest or apparent conflicts of interest.

On April 11, 1980 the Department of Justice concluded that this section of the Act displaced the general financial reporting

requirement provisions of four environmental protection laws.1/ Other Federal agencies--the Department of the Interior, for example--have similar reporting requirements affected by this Justice opinion.

Section 207(a) Title II of the Ethics in Government Act,

however, states:

The President may require officers and
employees in the executive branch
(including the United States Postal
Service and members of the uniformed
services) not covered by this title to
submit confidential reports in such
form as is required by this title.

The Department of Justice in a memorandum to the Acting Director of the office of Government Ethics on February 10, 1983 concluded that employee confidential financial disclosure reports ordered by the President should include the same information required of higher level employees under Title II of the Ethics Act.

Because the President has not yet exercised his authority to require confidential financial dislosure under 207(a), these Department of Justice opinions mean that there is currently no enforceable requirement for public or confidential financial disclosure by Federal employees below the GS-16 grade level. The statutory prohibitions on the financial interests of specific groups of Federal employees, however, still exist. Therefore, Federal officials responsible for agency ethics programs have been left with duties to enforce statutory provisions that prohibit certain financial interests employees may hold, but these officials no longer have a legal basis for requiring the necessary public or confidential disclosure reporting by employees below the GS-16 grade level in order to enforce these prohibitions.

1/ Section 26 (e) of the Toxic Substance Control Act, 15 U.S.c. 2625(e)

Section 1007 of the Solid Waste Disposal Act, 42 U.S.C. 6906 Section 318 of the Clean Air Act, 42 U.S.C. 7618

Section 12 of the Environmental Research, Development and Demonstration Authorization Act of 1978, Public Law 95-155, 91 Stat. 1263

Monitoring of Implementation Curtailed

Our review of the financial disclosure systems operated by Federal agencies has been curtailed pending a resolution of the dilemma confronting agency officials responsible for administering and operating financial disclosure systems.

Without a valid reporting requirement in place, we are not in a position to report positive or negative audit results on systems designed to process financial disclosure statements, insofar as those systems purport to address employees at the GS-15 grade level or below. If we report positively on an agency's design and implementation of such, we in essence will be endorsing an unauthorized system. If we report negative findings, the agency could argue that it is not legally obligated to require financial disclosure reporting, public as well as confidential, from its employees below the GS-16 grade level.

Three of our current audits of Federal financial disclosure systems have been affected by the Justice opinions. We have asked the Congressional requestor of two audits for permission (1) to close one audit with a staff briefing and (2) to suspend audit work at another agency. The third audit report, with a number of negative findings, has been delayed because of this issue. These jobs involve an assessment of the agencies'.' financial disclosure systems for Federal employees at the GS-16 and above grade level as well as employees below the GS-16 grade level.

Our past audits reveal that financial disclosure for employees at the GS-16 and above grade level, which continues to be in effect, is a small segment of agencies' overall financial disclosure systems. For example, at the Department of the Interior's Minerals Management Service, 14 employees at the GS-16 and above grade level filed the public disclosure form SF-278 required by the Act. Another 1,300 employees below the GS-16 grade level filed other confidential or public disclosure statements. Only the 14 employees at the GS-16 and above grade level are currently required to file disclosure statements under the Ethics in Government Act.

Options for Resolving the Problem

There are several ways to resolve this problem. GAO has not yet had time to analyze thoroughly all of the implications of the alternatives, but some pros and cons are presented below:

1.

The President could issue a new executive order under Section 207(a). This would bring confidential reporting requirements for employees below the GS-16 grade level into conformance with reporting requirements for higher grades prescribed in Title II of the Ethics in Government Act.