cial statements, I placed a proviso in this bill, in subsection (d) on pages 4 and 5 which refers to financial statements. The proviso reads: Providing, however, That this subsection shall not apply to any employee who has authority to determine final agreements which fix the tax or other liability of any person, corporation, or other legal entity, or the provisions of contracts which require expenditures of moneys of the United States in excess of $100.

I would be glad to have any comments on whether you feel that this proviso is justified or whether it is too restrictive.

Mr. CONNERY. Yes, Mr. Chairman. As I mentioned in my statement, mentioned section 1(j), and I would like our counsel to state at this time what our suggestion in that regard is as an addendum or amendment to section 1(j).

Mr. GRAVES. Senator, there is an interesting story, an anecdote that bears on this point. As an attorney and as a legislator you are mindful of the treachery of words and the extent to which legislative intent can sometimes be misconstrued later on in the course or in administrative agencies. As we would read the language in your present proviso, as it applies within IRS, we are applying a commonsense, oldfashioned reading of the words which we think it would mean, that only those employees at the regional office of IRS who have authority to bind the IRS as to the determination of administrative liability of a taxpayer would fall within it. In other words, only that class of employee and above would be within the proviso and could accordingly be required to submit the financial questionnaires.

However, interestingly enough it has been reported to us that one surely exalted official within IRS management has already made a public statement in which he has expressed interpretation of the language in question and although it is hearsay on my part, the thrust of what he said, it would not apply within IRS at all and this suggests the division of viewpoint which you might reasonably try to avoid.

Now, taking the original interpretation as the one which I think the committee would undoubtedly intend, we would suggest language somewhat along this line for the proviso:

Provided, however, That this subsection shall not apply to any employee who has authority to make final determinations for the United States or any agency thereof, with respect to any tax, contractural, tortious or other claim of liability, either by or against the United States or any agents thereof, where the amount of said claim exceeds $100.00.

I think that would nail them down and avoid-eliminate the possibility of subsequent maneuvering.

Senator ERVIN. I would frankly admit that I found more difficulty drawing this proviso than any other provision of the bill.

Mr. GRAVES. May I say, Senator, we had great difficulty ourselves and only after trying to apply it to a specific concrete situation, could we come up with any suggestion.

Senator ERVIN. I drafted this bill myself, but I regard it as only a blueprint for discussion rather than the formulation of the final language of what we hope would be public law.

Mr. GRAVES. We were mindful of that and very appreciative.

Senator ERVIN. The reason I put $100 as the cutoff figure is that I found one agency had such a broad regulation on financial statements that an employee, in order to purchase a pencil or notebook, would be required to file a financial statement.

Mr. GRAVES. I am not surprised to hear it, sir.

Senator ERVIN. I would like to ask a few questions based on form 1361 which is the U.S. Treasury Department-Internal Revenue Service financial statement questionnaire, which some employees and applicants have to file. This statement comprises 17 separate questions and I have diligently studied it and cannot see anything a man owns that he does not have to list-not only his own possessions, but those of his immediate family.

If any of you gentlemen can think of any species of property an employee might possess that he would not have to list here, please tell me about it.

Mr. BURSACH. I can think of goodwill and that is all.

Senator ERVIN. The fact that such a detailed form has to be filled out indicates that the agency does not have any such goodwill toward its employees and therefore does not consider them assets.

Mr. CONNERY. Your point is very well taken, Mr. Chairman. Senator ERVIN. For example, one has to disclose under figure 5: cash in banks, cash in safe deposit box, and cash anywhere else. For example, I have a little coin purse in my pocket with maybe a couple of quarters, nickels, dimes—a little change. An employee, under this questionnaire, would have to disclose that change to the IRS.

Mr. CONNERY. I might say, Mr. Chairman, in this regard, that we used, within the Service the same form slightly amended in our program directed at racketeers. We invited these people, in the course of initiating the investigation of their returns to submit this same questionnaire that is insisted upon by the agency relative to its employees. The taxpayers, of course, have the option of declining.

Senator ERVIN. Now, under (h) it requires listing of cash surrender value of life insurance. I just wonder what business it is of the Internal Revenue Service to know what the cash surrender value on the life insurance of the employees or immediate member of his family is. Mr. GRAVES. It is all part and parcel of net worth. Why they need it we do not know.

Mr. CONNERY. I might say this, that not only is the item questionable as to the necessity that it be made known, but it is also an item that in my experience is very difficult to procure. It is very difficult to get this information in many instances. Even the policyholder has to run back to the home office, correspond with the home office of the agency and get involved and it is of some benefit in the audit techniques employed, but as far as the various majority of employees are concerned, it is of questionable value, really.

Senator ERVIN. Then you have to list liabilities in excess of $200. You have to list them separately.

Mr. CONNERY. That is exactly right.

Senator ERVIN. I had a call from a Government employee who said he had creditors whom he owed $10,000 that he borrowed from individuals. They learned about this new program and said they did not want their names disclosed. One creditor said he was afraid his wife might find out he loaned some money and he would get in trouble at home. The employee paid off these debts because his creditors did not want their names exposed.

Mr. CONNERY. That is exactly right, sir. That same difficulty is encountered in the statement of financial interest, I might add, where

it requires the employee, not only to list his own assets of this nat that you mentioned, but also that of his in-laws and employees generally are incurring some difficulty in troubles at home in soliciting this information from their mother-in-laws, father-in-laws, and so for

Senator ERVIN. I guess all persons would pass these qualifications if they had not been thrifty enough to save anything at all. Then he could show he was fully qualified to serve his Government with distinction.

Mr. CONNERY. He would be investigated perhaps, I venture to s Mr. AUTRY. Mr. Connery, on page 2 of the statement you note that in the southwest district a branch chief required a supervisor to provide names of employees who participated in certain integrated sche activities, sports activities, and social activities.

You did not say whether the branch chief intended to encourage or discourage such participation, but it seems to me that is exactly the point. If you can allow this sort of coercion, for one purpose, you can do it for another purpose.

Mr. CONNERY. You are quite right, Mr. Autry. This particular thing as we know it stems from the revision or chapter 17 of the Treasury personnel manual that deals with, in the name, "Equal Employ ment Opportunity." Actually, the thrust of that document as we see it, is to invade the private lives of Federal employees and an unwarranted invasion, I might add that we feel that this bill comes to grips

with.

Mr. AUTRY. I do not know whether the draft has come into your possession, whether you are familiar with it or whether it is the same one you were talking about, but we have one called chapter 713, "Nondiscrimination," subchapter 22, which is intended to be distributed all Treasury managers. As I understand it, among other thing Treasury managers should be alert to opportunities for working with or in support of private groups such as NAACP, Urban League, and Plans for Progress. I wonder if we can single out those two organizations, NAACP and Urban League, could we not just as easily include the Kiwanis Club or Rotary Club or a political action organization or the American Legion or even the Democratic or Republican Parties

Mr. CONNERY. Once again, this is a very good point, Mr. Autry, and as a personal comment on that, I might tell you this, that under this climate, of course, I would be afforded administrative leave to engage in this type of activity. In other words, the Government would pay for my time on bus rides and what have you. But in my activity. in my home community as a member of the Optimist Club, for example, of which I am an officer, I take annual leave each and every week to attend our functions. I am afforded no administrative time whatsoever for that activity. As a matter of fact, over a 2-year perio I was required to take in excess of 90 hours of annual leave to participate in this type of community endeavor.

Mr. AUTRY. This new draft runs to some 30 pages. I wonder if the treasury manager is going to have time to do anything else if he does everything that is requested here. We will place the complete text the record. There is no need to read it all now. For instance however managers are required to assist in planning campus tours for loca Negro high school students, and to organize college clubs. They are

encouraged to get the city council to enact an equal housing opportunity ordinance. If this administration believes the employees should be doing this, the next administration can ask them to seek repeal of the equal housing laws; could it not?

Mr. CONNERY. Yes, we believe so.

Mr. AUTRY. You are asked to support beautification endeavors to provide for flower and grass seed. I'm not sure what that means; I suppose individual managers would have to decide for themselves. What is the status of this draft now? The subcommittee is not certain. Mr. CONNERY. We have been asked by the Internal Revenue Service as an organization to comment on these provisions that you refer to and we submitted our comments, as memory serves me, in the latter part of July. As to what the particular status of this proposed amendment to the manual is at this time, I have no idea. I do not know what it is now. However, I do want to emphasize that we are for merit within the Federal Establishment, but we are very concerned, as you express your concern here, by the obvious thrust of these particular proposals in manual form.

For example, I think the chapter, the revised chapter to which you referred, as I remember, refers to making one's self available to teach dropouts at night. Well, we, in the Internal Revenue Service, we represent just thousands, thousands of highly skilled enforcement offirers. And believe you me, our nights are filled with study of our cases that we are working on, doing research, relative to tax issues on our cases and I think it is quite easily discerned what could happen with the enactment of this particular manual. For example, it has been our experience that where this sort of encouragement, so to speak, is given, that those who do not sign up for it become very discouraged when promotions are announced down the road.

Mr. AUTRY. Thank you.

On page 6 of your statement you mention the Escobedo and Miranda decisions, and you also mention the lack of any right to counsel for the Internal Revenue Service employees. I will ask, in fact, if Internal Revenue Service employees are not two steps removed from the standards set by the Supreme Court in Escobedo and Miranda-that is, defendants in criminal cases are required to be appraised of their rights, to be taken before a magistrate and told that they may have an attorney. If an employee asks for an attorney, then it is completely within the supervisor's discretion that you can have an attorney; is that

correct?

Mr. CONNERY. I refer that to counsel.

Mr. GRAVES. That is essentially correct, Mr. Autry. As a matter of fact, when NAIRE was negotiating over that year-long, rather tortuous period with IRS attempting to obtain an administrativecreated right to counsel, that issue of notice and appraisal of rights was another one that was swept under the rug when the final decision was made, or I would say when the IRS finally implemented the decision that it had already agreed to in principle and that was left ungranted. There is no guaranteed right of notice and certainly no right of the substantive counsel that you are speaking about.

Mr. AUTRY. Mr. O'Rourke of the NAIRE 12th district wrote the subcommittee concerning financial disclosure and said that, coupled with other programs that had been foisted on employees in one guise

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or another in the last few years, it accounts for the high turnover in Federal agencies. He stated that the morale of the Federal employee has never been lower. He said that the current invasion of privacy accounts in part for the lowering of morale which has led to 33 percent turnover. Would you agree with his opinion?

Mr. CONNERY. We agree with that, Mr. Autry. I think the Inter nal Revenue personnel officials will inform you that the turnover has hit an all-time high this year. And this, I might emphasize, is in areas and in skills that are very difficult to replace. It takes many years to replace a highly skilled investigator capable of working with our complex tax cases.

Mr. AUTRY. You do feel, then, that morale is lower and this is substantiated by the high turnover this year?

Mr. CONNERY. I most definitely do, sir. As a matter of fact, these people are completely frustrated by their inability to come to grips with their problems with the agency as a matter of communication You cannot-you have no means under the present setup to even know what the decisions are-what decisions are in the mill. And the only right or grace that is afforded you is to come in and consult, so-called with the managers after the decision has been made, you see, as Mr. O'Rourke points out. And I happen to be very well acquainted with him and I know that is one of the problems that he is referring to. Another thing that Mr. O'Rourke was referring to that you touched on, I believe, is dealt with in your section 1(k) where the bill very wisely provides for the presence of counsel or other person of the individual's choice in these interrogations that you referred to in my statement.

Now, the reason that that is so very important to us is that many of the Government employees cannot afford even the reasonable standard bar association fees to have an attorney present, a private attor ney present during what may be days of questioning, whether he could very easily-because I know of an instance in which an employee had an attorney present during 3 or 4 days of this interrogation and wound up with a $1,100 bill that he could not quite match financially. And many of our members in NAIRE are attorneys that are working in the service and these people are familiar with the various Treasury personnel manuals and regulations and could be of vast assistance to these individuals when they are being interrogated by these members of the inspection service.

Now, this is, as I mentioned in my statement, is particularly apt, relative to these noncriminal matters, and at the present time under the policy statements issued by the Commission of Internal Revenue we are not afforded this right. We do have the right-he is granted these rights in substance, relative to criminal, and suspected criminal matters, but not otherwise.

Mr. AUTRY. And though it may start out as a supervisory matter, it could become a criminal matter.

Mr. CONNERY. A very good point. That is exactly right.

Senator ERVIN. In the previous hearing we had our attention called to a regulation of the Internal Revenue Service which vested power in the inspector to determine whether a man should have a lawyer or not depending upon the likelihood of a criminal charge arising. I practiced law for years and when a person came to me and asked the