sibility for reviewing the confidential financial statements for their employees. There are approximately 90 DEOs and they hold senior management positions in EPA.

As EPA's DAEO, however, I view my role as the national program manager for our ethics program. In this role, I have sought ways to institutionalize ethics as a program within EPA. We have sought ways to create an institutional memory that provides the foundation for an ongoing ethics program that will continue notwithstanding the departure of the DAEO or any of the DEOs.

To achieve this, we have standardized review procedures for the review of employee confidential financial statements and the public financial statements. We have emphasized the concept that adminisiration of the ethics program is not solely my responsibility but is a shared responsibility with the DEO's and that compliance with ethics requirements is a shared responsibility of all EPA employees. We have sought ways to communicate substantive information related to ethics requirements to EPA DEO's through training, providing resource materials, and the creation of an ethics advisory system. We have monitored the DEO's compliance with their responsihilities through an annual certification and have used the audit resources of the EPA Office of Inspector General to audit components of the ethics program each year.

I also have an arrangement with the Inspector General's Office that allows for consultation with me by EPA supervisors before disciplinary action is imposed for violation of an ethics requirement.

I would like to highlight four areas in our program in a little bit more detail.

In l983, we developed written standard operating procedures for the review of public financial statements. Through these procedures my staff and I have a common understanding of what will go into the review of each public financial statement before it is sent forward for my review. Also in 1983, we developed written standard operating procedures for the review of confidential financial statements by DEOs. Through these procedures, we have provided guidance for the level of review that is expected for each confidential financial statement review.

In addition to providing written review procedures, we have sought ways to assist the DEO's in carrying out their responsibilities. Initially, we provided training to the DEO's through one day conferences to review the substantive and procedural requirements for the ethics program. Beginning this year, we modified our approach to DEO training. We initiated a separate training session with each DEO and the senior management staff within that office. I anticipate that we will have visited each of our 10 regional offices by the end of this year. Next year, I hope that we will have com

?leted our visits to the other field office DEOs and all headquarters JEOs.

In 1984, we started an ethics advisory system to distribute any new information or guidance to the DEOs. In 1985, we assembled a ..U-^kbook. tor the DEOs that consolidated the Federal laws, regulation* suid KPA guidance that a DEO may need to review a confiitamtal financial statement. As part of the deskbook, we developed A v-ih«\;<Uafc tor the DEOs. We also maintain an ethics calendar that identifies the dates when we send timely reminders to the DEOs that certain requirements are due.

I believe that an integral part of having a good ethics program is creating ways to receive feedback that the program is ongoing. Beginning in 1984 I have requested an annual certification from each DEO when the annual review of confidential financial statements is completed. This year, we will request some additional statistical information as well to monitor the number of filers and the type of remedial actions taken.

Starting with FY 1985, I requested that the Office of Inspector General include auditing components of the ethics program as part of the IG's annual audit work plan. Within three to five years, I anticipate that all components of the ethics program will be audited and then we will start over again. We have used the audit findings as part of our DEO training program.

There is one final area that I would like to highlight. When there is an allegation of a violation of an ethics requirement that may require the imposition of a disciplinary action, the Inspector General s Office advises the action official that I should be consulted in deciding upon the appropriate disciplinary action that should be imposed. Through this arrangement, we hope that employees will be treated fairly and consistently.

This concludes my opening statement, and I am available for questions.

Mr. Sikorski. Thank you, Mr. Yamada.

Mr. Paone.

TESTIMONY OF GABRIELE J. PAONE, DEPUTY AGENCY ETHICS AND AUDIT COORDINATION OFFICIAL, U.S. DEPARTMENT OF THE INTERIOR

Mr. Paone. I want to thank the subcommittee members for this opportunity to discuss the ethics program of the Department of the Interior and to present information about the ethics program in general.

I want to explain at the outset that I am the Deputy Agency Ethics Official for the Department of the Interior. The Designated Agency Ethics Official, or DAEO, for the Department is the Assistant Secretary—Policy, Budget and Administration, Mr. Gerald R. Riso.

Mr. Sikorski. How does that work?

Mr. Paone. Excuse me?

Mr. Sikorski. Do you respond to the DAEO?

Mr. Paone. Yes, sir. I report directly to the DAEO.

Mr. Sikorski. And he is the Assistant Secretary?

Mr. Paone. He is the Assistant Secretary, yes.

Mr. Sikorski. Thank you.

Mr. Paone. Since the primary focus of this hearing is on the Office of Government Ethics, I want to state for the record that the working relationship between the Department of the Interior and the Office of Government Ethics is excellent. Director Martin and his staff have provided us with prompt, accurate, professional assistance and support on many of our cases and policy issues. The monitoring and compliance staff of the Office of Government Ethics has conducted training sessions for Department employees and provided sound recommendations for improvements to the Department's ethics program based on evaluations they conducted.

In most large executive branch agencies, responsibility for the ethics program rests with the General Counsel or the Solicitor. At the Department of the Interior, responsibility for the ethics program rests with the Assistant Secretary—Policy, Budget and Administration. This placement is based primarily on five rigorous statutory requirements that apply only to certain classes of Interior employees. These five statutes, which are in addition to Executive Order 11222 and the several other ethics statutes and regulations that apply throughout the executive branch, directly affect many policy and administrative decisions in 10 of Interior's 13 major bureaus and offices. This factor and the need for consistent application of the ethics laws in all of the Department's bureaus and offices, led to the conclusion that a management-oriented systems approach was needed to properly coordinate, implement, monitor and enforce the ethics program at the Department.

As a result, Interior's ethics program has been well integrated into the management levels of our Department. For example, each Bureau Director is designated as ethics counselor for his or her organization and each has certain ethics program responsibilities that cannot be further delegated. In addition, the employee appeals process for ethics matters requires the involvement of the concerned program Assistant Secretary and the Under Secretary. This integration, along with a strong ethics training program, has brought a new understanding of and appreciation for our ethics and conduct program.

When viewing the government's ethics program in general, perhaps the most significant observation is the lack of uniform application among bureaus and offices within an agency and among different agencies. As noted earlier, the ethics program of the Department has been structured to achieve a more uniform internal applicaIion. There are many reasons for the lack of uniform application including ambiguities in the laws, different statutory requirements- t'rom agency-to-agency and regulations that lead to inconsistent, application. In my view, the lack of uniform application is the -uiiiituv challenge for the legislature and for those of us involved j' nc Administration of this important program.

'. *iii o* happy to answer the questions you have regarding our

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'.'«v V- -•«* :' -'tc**'* *iv«*cy£t>e/ sessions with employees of EPA A s w .^ v \\.n.ah^ ^^kcaJt problems. And Mr. Yamada, you -Nv >n Vvs> -* Vv.t^ i* vh* s&w* years you have been at EPA— not even three years in this position—put together a strong anc well-managed program. Similarly, you sir, Mr. Paone.

Both of you commented upon the need to have a strong martagtr ment capacity in a serious, successful ethics program. Is that correct?

Mr. Yamada. That is correct. I think that the problemE of inconsistencies either over time or at the same time among the various components drive you to find ways to stabilize the program.

Secondly, if you view ethics as a separate requirement, I think you are headed for failure. You have to integrate it throughout the agency. You have to integrate it at all the decision-making levels.

Mr. Sikorski. In light of what we have heard this morning and at other times, if you view ethics as frosting on the executive cake, as something you can do without when times get tough or as something other than part of the day-to-day management and administration of whatever responsibilities Congress and the President have given to an agency, you are bound to get into trouble. The program is not going to work and there are going to be some ethics violations. Is that a fair analysis?

Mr. Yamada. Yes, I would agree with that. I think there is another aspect of that as well, and that is, at any time, an agency is always short of resources. I mean, you always have competing priorities in the allocation of resources within the agency. And if the ethics program isn't run as a program, then you won't be able to compete for a fair share of those resources. And if you stand back and treat it as a requirement, you will be shut out.

Mr. Sikorski. So there are some good practical reasons, in terms of management resource allocation, as well as theoretical reasons to intertwine ethics as part of the management of a particular program or activity or responsibility.

My thought is that, if ethics is part of a program, how you conduct an investigation, how you hold a hearing, how you rule on or make a decision or revise or do anything else is set in an ethical structure, which hopefully assists in the proper public decision at the end. If you diverge from that ethical structure and try to make decisions or take actions outside of the ethical structure, you are going to have some problems with the Feds and with the public, perhaps, if it finds out. But also, you are not going to have the decision that probably would be the wisest decision at the end.

Mr. Yamada. I agree with that. I think the difficulty you have is, if you have ethical problems, it first of all erodes the public confidence in the agency. And as you are well aware, most of the hard decisions at EPA are very controversial and they are very, very difficult decisions for management to make. We would prefer to address those issues and defend issues on the merits and not have also to defend ethical problems coupled with those decisions. I think they detract from a discussion of the decisions on the merits.

Mr. Sikorski. Mr. Paone, do you have a comment?

Mr. Paone. Yes, I agree. I think it is very important to integrate the ethics concerns into the everyday management, and I think one of the things that stood out to me when I first began at the Department of the Interior was the fact that oftentimes the ethics characterizations were things that were considered after the decision had been made and it was too late. What you have to do is change that Mr. Sanger. Yes.

Mr. Sikorski. Did you ask for OGE's support prior to your termination, your resignation, in supporting you as the Designated Agency Ethics Official?

Mr. Sanger. I didn't really ask for their support. Actually, Ms. Ley talked to me at times. The Office of Government Ethics became particularly interested I think when they met with Mr. Swidler and Mr. Swidler suggested that my future was somewhat uncertain. So I was asked by the Office of Government Ethics to keep them informed about my situation, and I did. I discussed it with them daily, and including a lengthy discussion with Mr. Martin in a call initiated by him.

Mr. Sikorski. Mr. Dean, in a letter you say was written by Zigrossi responds to the Director of OGE by saying we will, of course, take prompt actions on these findings and recommendations, and we will have our ethics agency official, Mr. Sanger, coordinate these actions with your office. July 1, 1986.

Mr. Sanger. That didn't occur.

Mr. Sikorski. That did not occur, but that is what Mr. Dean said would occur.

Section 402(b)(9) of the Ethics in Government Act of 1978 gives the Director of the Office of Government Ethics the authority to order corrective action on the part of agencies or employees "which he deems necessary."

What would you say that Mr. Martin should do with regards to corrective action at TVA?

Mr. Sanger. Well, I thought all of these referrals to the two different law firms and to the IG just unnecessarily delayed the matter. I didn't think there was any real dispute about the facts.

If the chairman please, you stated it very accurately to start with, what kind of a cure was necessary. And what we have done, TVA does have a tremendous nuclear problem and by not handling this conflict problem, we keep aggravating it to the extent that that is an aggravation. So I think we should have handled it earlier.

Mr. Sikorski. Did either of you, Mr. Mason, Mr. Sanger, ever discuss with the Office of Government Ethics the possibility of referring this conflict-of-interest controversy to the Department of Justice?

Mr. Sanger. We talked about that.

Mr. Sikorski. And was there interest at the Office of Government Ethics for doing such?

Mr. Sanger. As I understand it, there was some discussion with the Department of Justice, but I don't understand that there was any formal referral.

Mr. Sikorski. But as I understand, Ms. Ley communicated to you that the Department of Justice was interested in pursuing this matter?

Mr. Sanger. That is correct. The discussion was at the June 25th meeting with Martin and Ley in which they recounted that there had been this informal conversation with the people at the Public Integrity Section of the Department of Justice, and we left that meeting with the comment from the Office of Government Ethics that they would be considering the mechanism for OGE's further