January 19, 1995
DO-95-005
MEMORANDUM
TO: Designated Agency Ethics Officials
FROM: Stephen D. Potts
Director
SUBJECT: Improving the Confidential Financial Disclosure System
Last year, the Office of Government Ethics (OGE) began to
assess the need for improving the confidential financial disclosure
system, which was created just over two years ago under authority
of the 1989 Ethics Reform Act and Executive Order 12674 (see
subpart I of 5 C.F.R. part 2634). This DAEOgram will update you on
our progress.
BACKGROUND
By DAEOgram DO-94-031 of September 14, 1994, we discussed
ongoing efforts at OGE to improve the confidential disclosure
system. Earlier in 1994, our single-issue audit of the system's
effectiveness had canvassed ethics officials at 75 agencies. In
response to the most common concern, our DAEOgram urged agencies to
reevaluate their designation of positions for filing and offered
guidance designed to limit the number of filers. Subsequently, in
October and November 1994, we conducted two brown bag lunches with
selected agency ethics officials, to gain further insight into
suggestions obtained from the audit for improving the confidential
system.
CURRENT INITIATIVES
We have now begun several new phases in our overall plan of
improving the confidential disclosure system, which will build on
the single-issue audit and brown bag lunches:
1) Position designation
We have concluded that the flexibility afforded agencies by
the current regulation at 5 C.F.R. §§ 2634.904 and 2634.905 in
designating and excluding positions for filing should be retained.
We note that section 201(d) of Executive Order 12674 required OGE
to promulgate regulations which would guide agencies in determining
which employees should file confidential disclosure reports.
Discretion is crucial in order to effectively translate and adapt
this uniform system to the unique needs of diverse agencies. Our
evaluation of the single-issue audit and brown bag lunch
discussions confirmed this diversity and the need for flexibility.
The DAEOgram of September 14, 1994, suggested methods by which
agencies could use that flexibility to their advantage, such as
establishing de facto pay grade floors, or limiting designation by
specific levels of authority or the degree of supervision over a
position.
We can also offer guidance in interpreting phrases used in the
designation and exclusion criteria of the financial disclosure
regulation. As noted in the DAEOgram of September 14, 1994,
assistance with the terms "personal and substantial" can be found
at 5 C.F.R. §§ 2635.402(b)(4) and 2637.201(d). In future
DAEOgrams, we may provide additional clarification of other terms
by way of examples which are tailored to various agency
circumstances. Your specific suggestions in this regard would be
appreciated.
2) Revising the SF 450
An OGE committee is actively reviewing the SF 450 and will
draft a revision which we hope to distribute for comment later this
year. That revision will note the 1993 regulatory change at
5 C.F.R. § 2634.907(a) which eliminated the requirement to disclose
deposit accounts in financial institutions, money market funds and
accounts, and U.S. Government obligations and securities. The
revision will also improve the instructions to the SF 450, and it
will, within current regulatory requirements, attempt to make the
form itself more user friendly by incorporating some of the ideas
which you expressed in the single-issue audit and brown bag
discussions.
3) Future amendments to the regulation
A separate OGE committee is exploring the feasibility of
modifying the regulation which governs content of confidential
disclosure, at subpart I of 5 C.F.R. part 2634, to accommodate
significant concerns expressed through our single-issue audit and
the brown bag lunches. This is, of necessity, a long-term project,
because we must examine the intent of Congress and the President in
establishing a confidential system to complement the public system;
consider the effect of recent initiatives under the National
Performance Review to reinvent Government; determine which agency
suggestions for modifying the content of disclosure have broad-
based support; evaluate the impact of any major changes on agency
ethics programs in the areas of training, supplemental regulations,
employee union relations, and effective conflict prevention; and
consider Congressional expectations for confidential disclosure as
an internal control mechanism.
We will keep you apprised of further developments, and we
welcome your continued advice and suggestions.