COMPTROLLER GENERAL'S
REPORT TO THE CONGRESS

FINANCIAL DISCLOSURE FOR

HIGH-LEVEL EXECUTIVE OFFICIALS:
THE CURRENT SYSTEM AND THE

NEW COMMITMENT

Civil Service Commission

DIGEST

Both houses of the Congress have adopted new
Codes of Conduct and requirements for publicly
disclosing financial interests which are mile-
stones in our Government's history to prevent
actual and potential conflicts of interest.
The leaders of both Houses of the Congress
have pledged their personal support to enact
into law these new codes and reporting require-
ments. Current legislative proposals before
the Congress would, if enacted, remedy many
of the system's deficiencies identified by
the GAO review.

High-level Federal officals' disclosures
and holdings of financial interests are
governed by Executive Order 11222, criminal
and civil statutes, and regulations prescribed
by the Civil Service Commission, and the
executive departments and agencies. In 1965
the President delegated this system's opera-
tion to the Civil Service Commission.

GAO's review was based on financial disclosure
statements filed with the Commission as of
June 30, 1975. The review did not include
the disclosure statements of incoming Presi-
dential appointees of the new administration.
Many, but not all, of the appointees included
in the review are no longer in office.

Although GAO reviewed every statement, it did
not attempt to determine whether financial
interests reported were free from conflicts
of interest from an audit viewpoint. Such
a review would have required extensive work
at each Federal agency. Instead, the review
focused on the effectiveness of the system to
identify and resolve conflict-of-interest
situations. (See p. 8.)

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

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FPCD-77-59

Problems exist because:

--The Commission did not design and operate the system effectively.

--The system lacked enforcement authority from the President.

--The Commission was not involved in the review and investigation process of appointees by the White House and Senate confirmation committees.

--The system was managed with limited support and insufficient resources.

--Additional financial information was needed from appointees because of their particular duties and responsibilities.

(See

--Policies and criteria for blind trusts had
not been formalized and enforced.
chs. 3 and 4.)

Since January 1977 there has been a new commitment to ethics in both the Congress and the executive branch of the Government. The President has required his appointees to publicly disclose their financial interests. He has proposed legislation to the Congress that would

--expand safeguards against actual or potential conflicts of interest on the part of executive branch officials,

--create a new program of public disclosure, --create an Office of Government Ethics, and --strengthen and broaden the post-Government employment restrictions. (See p. 2.)

The Senate has passed S. 555, the Public Officials Integrity Act of 1977. Titles III and IV of S. 555 deal with financial disclosure by high-level officials in all three branches of the Federal Government.

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Tear Sheet

Most of the provisions of the President's leg-
islative proposal are included in S. 555, and
the President has endorsed its enactment.
(See p. 35.) GAO's recommendations for
strengthening and improving the system are
discussed in chapter 5.

In a series of reports issued over a 3-year
period, GAO has found deficiencies in the
existing laws, regulations, and procedures
relating to conflicts of interest. (See
pp. 45 to 47).

GAO did not obtain formal comments from officials of the Civil Service Commission. Instead, it met with them and their comments were considered in the report.

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5

Senate review

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112245

6

6

666

CHANGES ARE NEEDED IN THE EXECUTIVE
ORDER AND CSC'S PROCEDURES

8

NEED TO FORMALIZE BLIND TRUST PROCEDURES
CSC's policies and criteria for blind
trusts

19

20