April 9, 1992


MEMORANDUM FOR DESIGNATED AGENCY ETHICS OFFICIALS

FROM:      STEPHEN D. POTTS
           DIRECTOR

SUBJECT:   Publication of new regulation on public and confidential
           financial disclosure and new standard form for
           confidential financial disclosure


A.   Background and Effect

     Title II of the Ethics Reform Act of 1989 made several changes
to the public financial disclosure system and the procedures for
qualified blind and diversified trusts in the executive branch.
It also authorized, and Section 201(d) of Executive Order 12674
directed, the establishment of a revised uniform system of
confidential financial disclosure for the executive branch.  To
implement these new requirements, OGE published an interim
regulation on April 7, 1992, in the Federal Register (57 FR 11800-
11830), after extensive consultation with the Department of Justice
and the Office of Personnel Management over the past two years.
A copy of that regulation is enclosed.

     Additionally, we will be publishing a notice in the Federal
Register during the week of April 13, concerning a draft new
standard form for confidential financial disclosure, which we have
submitted to the Office of Management and Budget for paperwork
reduction approval and to GSA for standard form approval.  This
form will be used by all executive branch agencies for their
confidential filers, once it is approved as a standard form and the
new regulation on confidential disclosure becomes effective.  OGE
was explicitly empowered to promulgate such a standard form by the
terms of the Reform Act.  A draft copy is enclosed.  Any comments
should be submitted within 30 days.

     The regulation, on which any comments must be submitted within
60 days, combines guidance for the public and confidential systems
into a single rule, to be codified at 5 CFR part 2634.  As an
interim rule, it immediately replaces current subparts A - I of 5
CFR part 2634 on public financial disclosure and qualified trusts.
The revised public system became effective in January 1991, and it
has been in use since then with the revised SF 278 and instructions
which this Office issued last year.

     Those portions of the interim regulation pertaining to
confidential financial disclosure will not become effective until
October 5, 1992, which is 180 days following Federal Register
publication.  That delayed effective date is designed to allow for
an orderly transition to the new uniform confidential system and
for the new confidential standard form to be finalized and stocked
through GSA.  Upon the interim regulation's effective date for the
new confidential disclosure system, OPM's subpart D and § 735.106
of 5 CFR part 735 pertaining to the current confidential disclosure
system will automatically be replaced, and agency regulations
implementing those sections will be superseded.  Likewise, the 0PM
model formats and agency forms based thereon which are currently
being used to collect confidential financial disclosures from both
regular and special Government employees will be superseded.
Because the new regulation will eliminate portions of 5 CFR part
735 and the 0PM model formats for confidential disclosure, 0PM has
jointly issued the new interim regulation with OGE.


B.   General Substance and Purpose

     Changes to the public financial disclosure system and to the
qualified trust program which the new interim regulation implements
are based primarily on the statutory requirements of the Reform
Act, as incorporated into the revised SF 278 and its accompanying
instructions which this Office issued last year.  We have
previously summarized them in OGE's DAEO-grams of December 18,
1989, and May 17, 1990, which discussed all changes made by the
Ethics Reform Act of 1989.  Additionally, these modifications were
highlighted in OGE's Government Ethics Newsgram in the
Winter/Spring 1990 edition and the Summer 1990 edition.  We also
issued a DAEO-gram on January 10, 1991, which summarized the
changes in the revised SF 278; a DAEO-gram on April 9, 1991, which
discussed procedures for collection of the late filing fee
authorized by the Reform Act; and a DAEO-gram on December 19, 1991,
which provided guidance on a further statutory amendment to the
thresholds for reporting gifts and reimbursements, effective
January 1, 1992.

     The new uniform confidential financial disclosure system is
based on the public system, to the extent practicable.  A decision
to link the two systems resulted from the comments which we
received following our publication in the Federal Register of a
proposed confidential disclosure rule on December 2, 1986, at 51
FR 43359-43365.  Additionally, the Reform Act and Executive Order
12674 suggested a confidential system designed to complement the
public system.

     In furtherance of this purpose, the interim regulation sets
out core information common to both the public and the confidential
systems, including definitions of terms; statement of philosophy;
and detailed disclosure guidance applicable to both systems, such
as scope of reportable items, dollar thresholds, exclusions,
illustrations, filing procedures, ethics agreements, filing
extensions, review, and penalties.  Separate subparts of the
regulation offer specific guidance unique to each system, including
who files, which financial information elements apply, reporting
periods, due dates, and to whom completed reports may be released.


C.   The New Confidential Disclosure System and Standard Form

     The new uniform confidential financial disclosure system and
standard form are designed to be comprehensive enough to satisfy
the purposes of disclosure for covered middle grade employees and
special Government employees and to achieve the goal of uniformity,
yet simple enough not to unnecessarily intrude on employee privacy
or create added review burdens for agencies.  Although modeled
after the public disclosure system, the new confidential disclosure
system and standard form will be less extensive in several
important respects.  For example, the confidential system and form:

*    will not require disclosure of any values or amounts;

*    will     require disclosure of purchases, sales, and exchanges
of assets (transactions);

*    will     require separate detailed disclosure of sources of
earned income exceeding $5,000;

*    will     require termination reports.

     The new confidential disclosure system and standard form will,
when effective on October 5, 1992:

*    establish a uniform confidential disclosure system and a
single standard disclosure form throughout the executive branch for
both regular and special Government employees who are covered, with
supplementation by agencies only when necessary for unique
circumstances or special agency responsibilities, as approved by
OGE;

*    establish dollar thresholds for confidential disclosure which
parallel the public system (the current confidential system
generally has no de minimus exclusions);

*    specify confidential disclosure elements to include assets,
income sources, gifts, liabilities, private employment agreements
and arrangements, and outside positions, reflecting an expansion
which was recommended by Congress and GAO;

*    expand the confidential reporting period from the current
snapshot of interests held on the reporting date to coverage of the
preceding one year period for both new entrant and annual reports;

     continue the current practice of requiring confidential
disclosures covering the filer, spouse and children on certain
schedules, but make it parallel with the public system which
applies to dependent children, not minor children; and delete the
current requirement for disclosures covering other "blood relatives
who are residents of the employee's immediate household";

*    standardize the confidential reporting due dates throughout
the executive branch, with new entrant reports to be filed not
later than 30 days after entering a covered position (or earlier
if the agency needs disclosures to determine suitability), and
annual reports due October 31 each year for the period through
September 30;

     (Note: In response to agency comments expressed at OGE's
     three-day ethics conference last fall, an October due
     date for annual confidential reports is being established
     to ease agency review burdens by avoiding overlap with
     the collection and review of the SF 278 public financial
     disclosure reports, which are due in May each year.)

*    require annual reports of all covered confidential filers if
the incumbent serves more than 60 days in the 12 months preceding
September 30;

*    continue the current practice of requiring all new entrants
in covered positions to file, regardless of anticipated length of
service;

*    continue the current practice of allowing agencies to
designate which positions, within the pay grade limitations,
require confidential disclosure filing, using similar criteria as
in the current system: positions involving personal and substantial
participation in certain sensitive agency responsibilities;
continue the current practice of covering all special Government
employees, unless they file public reports or are specifically
exempted by their agency; and cover certain public filers where
agencies determine, with OGE approval, that supplemental
confidential information is necessary;

*    establish general pay grade boundaries for those positions
with sensitive responsibilities which agencies can designate as
confidential filers at GS-15 and below (plus comparable grades) and
0-6 and below, without the current GS-13 floor (Note: This floor
had been waived by OGE under the current system, for agencies who
so requested).


D.   The Phase-in Process

     To the extent feasible, we want to minimize overlaps between,
or gaps in, reporting periods as the new confidential reporting
system is phased in.  Agencies may choose to proceed with any
planned annual confidential disclosure collections under their
current system during the next few months prior to the new uniform
system's effective date, in which case OGE will not object if they
wish to waive the filing requirement under the new system for
October 31, 1992.  Alternatively, agencies may choose to suspend
all future annual filings under their current confidential
disclosure system, in anticipation of collecting under the new
system on October 31.  As necessary, we will provide additional
guidance to ease the transition process and to advise agencies on
eliminating their superseded confidential disclosure regulations
and forms.

     We anticipate that the new standard form can be approved and
adequately stocked by GSA in time for agencies to begin using it
when the confidential disclosure provisions of the new interim
regulation take effect on October 5, 1992.  As soon as it has been
approved and stocked by GSA, we will advise you as to how it may
be requisitioned.  The enclosed draft copy of the proposed standard
form is NOT to be used for financial disclosure collections prior
to October 5; it is being provided solely for your examination in
connection with our submission to OMB for paperwork reduction
approval.

Enclosures