Financial Disclosure: Identifying and Remediating Conflicts of Interest in the Executive Branch

Financial Disclosure: Identifying and Remediating Conflicts of Interest in the Executive Branch

Updated May 30, 2023
Financial Disclosure: Identifying and Remediating Conflicts of
Interest in the Executive Branch
When taking an official action (e.g., making decisions or
and Senate) are required to file financial disclosure forms
recommendations), American public servants are expected
within a specified period. Generally, this is within 30 days
to put the government’s interests ahead of their own. The
of declaring their candidacy or May 15, whichever is later.
Ethics in Government Act of 1978 (5 U.S.C. §§13101-
13111), as amended, is based upon this principle and
Once financial disclosure forms are filed with the
requires certain employees to file annual financial
employee’s agency (the House or Senate for legislative
disclosure statements. Federal agencies use the disclosed
branch employees, Members of Congress, or candidates for
information to identify and remediate real or perceived
the House or Senate; or the Administrative Office of the
conflicts of interest, as necessary.
Courts for the judicial branch), the DAEO reviews the
filings for compliance, completeness, and to identify any
real or perceived conflicts of interest. Individuals who fail
Every Federal employee serves not one but many
to file or file false reports are subject to statutory penalties
masters.... Manifestly, the principle proscribing
(5 U.S.C. §13106).
conflicts of interests is aimed not at these normal
multiple allegiances of employee-citizens or at direct
There are two types of financial disclosure reports—public
controversies between them and their employer-
(OGE Form 278) and confidential (OGE Form 450). The
Government, but only at such activities as will impair
requirement to file a public or confidential report largely
the integrity of the Federal service and deprive the
depends on the individual’s governmental role. Both public
Government of the full performance for which it has
and confidential reports require the disclosure of similar
bargained.
information. Each filer reports information about their
assets, income, employment agreements, transactions,
—House Committee on the Judiciary,
liabilities, and gifts for themselves, their spouse, and
Subcommittee No. 5, March 1, 1958, p. 1.
dependent children.
Identifying Conflicts of Interest
Public Financial Disclosure
Public financial disclosure filings are available for public
Federal law (18 U.S.C. §208) prohibits government
inspection. Public filers (5 C.F.R. §2634.202) include
employees from participating “personally and substantially”
in any covered activity in which the employee, spouse,
• the President;
minor child, general partner, or previous organization has a
financial interest. If a covered official is negotiating future
• the Vice President;
employment, they are prohibited from participating in
• executive branch employees, including Special
certain activities with that organization. Pursuant to the
Government Employees (SGE) who are classified above
Ethics in Government Act and regulations issued by the
GS-15 of the General Schedule or at a “rate equal to or
Office of Government Ethics (OGE), compliance with laws
greater than 120% of the minimum rate of basic pay for
prohibiting financial conflicts of interest is primarily
achieved with the assistance of each federal agency’s
GS-15”;
Designated Agency Ethics Official (DAEO). The DAEO, a
• uniformed servicemembers paid at or in excess of O-7;
position established in the Ethics in Government Act and
•
accompanying regulations, is tasked with, among other
administrative law judges;
things, training agency staff on ethics matters; ensuring
• executive branch employees who are in a position
compliance with financial disclosure requirements; and
“excepted from the competitive service by reason of
reviewing, identifying, and assisting in the remediation of
being of a confidential or policy-making character”;
conflicts of interest.
• the Postmaster General, the Deputy Postmaster General,
Current law (5 U.S.C. §§13101-13111) and regulations (5
each Governor of the United States Postal Service Board
C.F.R. §2634.201) require covered employees to file annual
of Governors;
financial disclosure reports on or before May 15 each year.
• the Director of OGE and each agency’s designated
Newly hired covered employees must file within 30 days of
agency ethics officer; and
appointment, and nominees must complete their forms
•
within five days of the White House’s transmission of their
civilian employees employed in the Executive Office of
nomination to the Senate. Candidates for federal office
the President and holding a commission of appointment
(e.g., President, Vice President, House of Representatives,
from the President.
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Financial Disclosure: Identifying and Remediating Conflicts of Interest in the Executive Branch
Public disclosure filings for the most senior officials in the
If upon review the DAEO determines a conflict of interest
executive branch—the President, Vice President, and
exists, they can, if necessary, negotiate with the filer to
appointees and nominees to positions classified at Level I
remedy the conflict. There are several remediation options
and Level II of the Executive Schedule—are available
(5 C.F.R. §2634.605(b)(6)), including recusal, divestiture,
directly from the OGE website. All other public financial
resignation, waiver, or the establishment of a qualified blind
disclosure statements can be accessed using OGE Form
or diversified trust (5 C.F.R. §2634.802(a)). Remediation
201. For 2021, OGE reported that there were 29,141 public
efforts can culminate in a written ethics agreement.
filers.
For more information, see CRS In Focus IF12019,
Confidential Financial Disclosure
Executive Branch Ethics and Financial Disclosure
Confidential financial disclosure filings are not available
Administration: The Role of Designated Agency Ethics
for public inspection. Confidential filers (5 C.F.R.
Officials (DAEOs).
§2634.904) are largely determined by level of pay, type of
work done, and level of responsibility. Covered employees
Disqualification (Recusal)
file confidential disclosure reports with their agency.
Because government decisionmaking generally requires
Confidential financial disclosure filers
government officials to put the government’s interests
above personal interests (5 C.F.R. §2635.101(a)), an
• are classified at or below GS-15 or do not meet the pay
identified conflict of interest could be remediated through
or classification threshold for public filing;
recusal.
• participate in certain government activities related to
Divestiture
contracting; procurement; or administering or
If recusal is not reasonable in a given circumstance, a filer
monitoring grants, subsidies, licenses, or other federally
also has an option to divest (e.g., sell) the asset that puts the
conferred financial or operational benefits; and
filer in conflict with their governmental function. Often,
• engage in certain activities related to decisionmaking or
divesture can occur without financial harm. In limited
the approval of decisions, making recommendations,
cases, the filer can request a certificate of divestiture under
conducting investigations or audits, or rendering advice
5 C.F.R. §2634, Subpart J to “minimize the burden that
or opinions.
would result from paying capital gains tax on the sale of
assets to comply with conflict of interest requirements.”
Special government employees (SGEs; 18 U.S.C. §202) are
generally required to file confidential financial disclosure
Waivers
reports (5 C.F.R. §2634.901).
In certain situations, waivers can be granted for conflicts of
interest. Federal law (18 U.S.C. §208(b)) and regulation (5
For 2021, OGE reported that there were 342,892
C.F.R. §2640) provide conditions when waivers might be
confidential filers.
given. For example, individuals might receive a waiver for
“financial interests which are too remote or too
Periodic Transaction Reporting
inconsequential to affect the integrity ... of the employee.”
In 2012, the STOCK Act (P.L. 112-105) required the
“prompt reporting of financial transactions.” The law
Blind or Diversified Trusts
requires covered filers to report financial transactions (e.g.,
In some circumstances, employees may use a qualified
stocks, bonds, commodity futures, and other securities) that
blind trust or a qualified diversified trust “to reduce real or
exceeded $1,000 within 45 days of making the transaction.
apparent conflicts of interest” (5 C.F.R. §2634.401). In
Periodic transaction reports are filed with the employee’s
these cases, an independent trustee or similar individual is
agency, the same as annual financial disclosure.
appointed “to administer the trust and to manage trust assets
without participation by, or the knowledge of, any
Remediating Conflicts of Interest
interested party or any representative of an interested
Once a covered employee files a public or confidential
party.”
financial disclosure report with the agency, the DAEO
reviews the filing to ensure its completeness and to identify
Reassignment/Resignation
holdings or liabilities that might violate or appear to violate
If a conflict of interest cannot be remediated or if the filer
federal law, executive orders, or agency-specific statues or
does not want to recuse or divest, and a waiver is not
regulations (5 C.F.R. §2634.605). The DAEO must
available, the employee could request a transfer, a
complete the review within 60 days.
reassignment, or a limitation of duties, or resign.
Following the review, the DAEO will certify the filing. If
For more information about executive branch ethics
the DAEO does not believe they have enough information
financial disclosure, see CRS In Focus IF10634, Office of
to certify the filing or if the filing is incomplete, they can
Government Ethics: A Primer.
ask the filer for additional information. For certain
individuals, (e.g., the DAEO, nominees and appointments
Jacob R. Straus, Specialist on the Congress
requiring presidential appointment and Senate confirmation,
and employees of the Executive Office of the President)
IF11904
filings are forwarded by the agency to OGE for final
certification.
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Financial Disclosure: Identifying and Remediating Conflicts of Interest in the Executive Branch

Disclaimer
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https://crsreports.congress.gov | IF11904 · VERSION 3 · UPDATED