FT
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
NORTHERN DIVISION
10 W. JACKSON BLVD.. 4TH FUOOH
CHICAGO. ILLINOIS 6O6O4 i
r
OFFICE OF AUDIT
312/353-2406
July 31, 1990
OFFICE OF INVESTIGATION
312/393-290?
SUBJECT:
Audit Report No. E1SFPO-05-0111-0100415
Report on Region 5's Implementation of .the
Ethics in Government Act of 1978 I '
•is
FROM:
TO:
Anthony C. Carrollo .
Divisional Inspector General for Audits
Northern Division j
Valdas Adamkus
Regional Administrator
Region 5
SCOPE AND OBJECTIVES
We have completed an audit of Region 5's compliance with the
Ethics in Government Act of 1978; Executive Order No. 11222; and
40 CFR Part 3, Employee Responsibilities and Conduct. Region 5
has two Deputy Ethics Officials, the Regional Administrator and
the Regional Counsel. This report covers the responsibilities of
both officials. . {
i
The overall objective of our audit was to determine whether both
Deputy Ethics Officials had assured that employees complied with
Government rules regarding financial interests and investments,
outside employment, and other outside activities. Our specific
objectives were to determine whether the Deputy Ethics Officials
are:
1. Properly identifying and notifying! employees to file
Confidential Statements of Employment and Financial
Interest (confidential statements) as required under 40
CFR 3.302 (b) and (c);
2. Ensuring that applicable employees1 properly and prompt-
ly file;
3. Properly reviewing the financial interests and outside
employment of employees for potential conflicts, and -
promptly resolving any conflicts. !
The audit was performed in accordance with the Government Audit-
ing Standards issued by the Comptroller General of the United
.States (1988 revision). Our audit period was October 1, 1988
m
HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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through December 31, 1989. Our field work was conducted from
December 7, 1989 to. March 31, 1990. . {
To accomplish our objectives, we interviewed employees in the
Office of Regional Counsel and in Region 5's Human Resources
Branch who have responsibilities for administering the confiden-
tial statement program. We reviewed policies, procedures, and
practices for confidential statements. We also reviewed Region
5's records regarding their implementation of the Federal Man-
agers' Financial Integrity Act for Fiscal Years 1988 and 1989.
Our review of these records showed that the Region had not
identified any weaknesses regarding the financial disclosure
statement program. We also interviewed employees regarding their
understanding of reporting requirements.
Our review did not include Region 5 employees in the Senior
Executive Service. They are required to submit an Executive
Personnel Financial Disclosure Report to EPA's Deputy General
Counsel in Headquarters who is the Agency's Designated Agency
Ethics Official.
Finally, we followed up on actions, that were planned by the
Deputy Ethics Officials in response to recommendations made in
our prior reports on confidential statements1. We have commented
on these actions, where applicable, in our report. No other
issues came to our attention which were significant enough to
warrant expanding the scope of our review.
SUMMARY OF FINDINGS
Although the Deputy Ethics Officials were aware of their ethics
responsibilities and duties, our review showed that the Regional
Administrator needed to improve procedures to ensure receipt of
confidential statements from all employees that are required to
file them. This issue is discussed in our first finding. Our
second finding concerns both the Regional Administrator's and the
Regional Counsel's need to ensure that employees report employ-
ment and financial interests for spouses, minor children, and
blood relatives residing with the employee.
1 Report No. 60336, Report on Review of Region V's Implemen-
tation of the Ethics in Government Act of 1978 by the Regional
Administrator, December 16, 1985.
- Report No. 60337, Report on Review of Region V's Implementa-
tion of the Ethics in Government Act of 1978 by the Regional
Counsel, December 16, 1985.
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Problems Persist in Collecting
Confidential Statements
Region 5 did not effectively.collect confidential statements
because it had neither formal written procedures nor had it .
implemented a previously proposed ADP system jthat would have
better ensured that all confidential statements were received or
received timely. Our review showed the Regional Administrator
inaccurately certified to the EPA's ethics official that con-
fidential statements were required from 97 employees below the ,,
GS/GM 13 level and that all of these employees complied with this
requirement. Our review showed that 99 employees below the GS/GM
13 level were required to file and that only 59 (60%) of those
employees submitted a confidential statement.' Consequently, for
those employees that did not submit confidential statements, the
Regional Administrator was unlikely to be aware of conflicts of
interest between the employees' EPA duties and responsibilities
and their personal financial interests and activities.
We previously reported that employees were not submitting con-
fidential statements timely to the Regional Administrator in a
December 1985 report . In response to that report, the Regional
Administrator proposed to automate procedures to better ensure
confidential statements were received timely J Procedures were
not automated nor formalized in writing. Human Resources Branch
officials currently responsible for administering Region 5's
confidential statement program were not aware of or involved with
the issues identified in our prior report. Current procedures
have informally evolved during the time that{the number of
confidential statements submitted to the Regional Administrator
increased from 143 in 1984 to 284 in 1989. Formal written
procedures and an ADP system, like that proposed by the Region in
response to our December 1985 audit report, will better ensure
that all employees submit confidential statements and submit them
timely. Besides .not having formal written procedures, the
employee designated to administer the program had no formal
training in reviewing statements for possible conflicts of
interest.
In response to our draft report, Region 5 stated that they are
developing procedures to identify required filers to ensure that
all covered employees are notified of the requirement to submit a
confidential statement. All procedures will be formalized in
writing. Also, ethics training will be provided to those employ-
ees responsible for reviewing the confidential statements.
The actions planned by Region 5, when implemented, will substan-
tially correct the deficiencies cited in ourjreport. We recom-
mend that the Regional Administrator ensure regional officials
2 Report No. 60336. See Footnote 1 on page 2.
i
3 i
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complete their planned corrective actions and provide us with a
written action plan that includes specific milestone dates to
implement their planned actions.
Confidential Statements Need To Include
Spouse. Child, and Blood Relative Data
Few employees, who submitted confidential statements to either
the Regional Administrator or the Regional Counsel, included
information regarding the employment and financial interests of
spouses, minor children, or blood relatives residing with the
employee (relatives). Our review of 307 confidential statements,
that were submitted to either the Regional Administrator or the
Regional Counsel, disclosed that only 60 employees showed this
type of information. The following demonstrates that not all
employees may be reporting this type of informations
We determined that 25 Superfund employees who did not
include spousal information on their confidential statements
were married. We contacted 5 of these employees. All 5
said their spouses were employed. However, none of them had
disclosed this information on their confidential statement.
One employee advised us that her spouse was employed in an
environmental related industry.
Without a full and complete disclosure of required information,
neither the Regional Administrator nor the Regional Counsel can
make a complete assessment of conflicts of interest.
This condition usually occurred because employees did not under-
stand or were not aware of the requirements for providing this
type of information. Sometimes this resulted from the employee
not completely reading the form, which had the instructions on
the back of the form. During the course of our review, the
Acting Regional Counsel and the Regional Administrator issued
instructions to employees required to file to better ensure that
these employees include all required information.
In response to our draft report, Region 5 stated that they will
review and revise the instructions accompanying the confidential
statement form to further clarify and emphasize the importance of
information requirements covering employment and other financial
interests of spouses, children, and other relatives.
The actions planned by Region 5, when implemented, will substan-
tially correct the deficiencies cited .in our report. We recom-
mend that the Regional Administrator ensure regional officials
complete their planned corrective actions and provide us with a
written action plan that includes specific milestone dates to
implement their planned actions.
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ACTION REQUIRED
In accordance with EPA Order 2750, the action official is re-
quired to provide this office a written response to the audit
report within 90 days of the audit report date.
i '-
BACKGROUND
To ensure the proper performance of government business and the
maintenance of citizens' confidence in their Government, it is
essential that government employees maintain high standards of
honesty, integrity, impartiality, and conduct. Accordingly, the
Ethics in Government Act of 1978 (P.L. 95-521) and its implement-
ing regulations require confidential statements for reporting
income, interest in properties, gifts and reimbursements, liabil-
ities, and employment relationships. j
4 I
Government employees are subject to disciplinary action for
violating the conflict of interest requirements. The type of
disciplinary action depends on the nature of the violation and
may include admonishment, written reprimand) suspension, demo-
tion, or removal. |
i
EPA regulations in 40 CFR Part 3, set forth the ethical standards
which apply to all EPA employees. These regulations supplement
regulations of the Office of Government Ethics and describe
additional restrictions and requirements concerning actions which
create an appearance of impropriety. An impropriety, for ex-
ample, could pertain to outside employment, travel,reimburse-
ments, or publishing activities. EPA's regulations also estab-
lish a system for counseling employees concerning the statutes
and regulations, obtaining approval for outside employment, and
collection and review of confidential statements. The Adminis-
trator delegated the responsibilities for overall management of
the EPA ethics program to the Deputy General Counsel as the
Designated Agency Ethics Official (ethics official). The ethics
official appoints the Deputy Ethics Officials (deputy ethics
official) to assist him. In Region 5, the Regional Administrator
serves as the deputy ethics official for all employees except for
the Office of Regional Counsel. For the Office of Regional
Counsel, the Regional Counsel is the deputy
The deputy ethics officials are responsible
ethics official.
fors (1) advising
employees in their organization of ethics rules, (2) coordinating
their advice with the ethics official, and (3) reviewing requests
for approval of outside employment. The deputy ethics officials
may designate in writing that staff members may assist in the
review of confidential statements. The deputy ethics officials
are responsible for collecting, reviewing, and maintaining
confidential statements. If a confidentialjstatement indicates a
potential conflict problem, remedial action'is necessary. This
may include (1) waiver'by the ethics official, (2) divesture, (3)
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exclusion from participation in certain matters, (4) reassign-
ment, or (5) setting up a "blind trust". ^
Region 5's Regional Counsel requires all attorneys to file.
confidential statements. The Regional Administrator requires all
employees in grades GS/GM-13 or above to file confidential
statements. .He also requires confidential statements from
employees below the. grade GS/GH-13 level that are in the category
defined ia. 40 CPR 3.302 (c)(2). That is, they have duties, which
directly affect the financial interests of specific parties.
As the table below shows, the number of Region 5 employees that
are required to submit confidential statements has increased
substantially from 1984 to 1989.
—..o _», 1984 1989
A. Regional Administrator
GS/GM 13-15 112 185
Grades below GS/GM 13 31 99
Totals for Regional Administrator 143 284
it
B. Regional Counsel
GS/GM 13-15 N/A 45
Grades below GS/GM 13 N/A 2J?
Totals for Regional Counsel 47 74^
(N/A-A Not Available)
Totals for Region 5 190 358
We discuss in Finding Number 1, that 40 employees below the GS/GM
13 level and 11 employees at the GS/GM 13-15 level, for a total
of 51 employees, did not submit their most recent annual con-
fidential statement, due on July 31, 1989, to the Regional
Administrator. Therefore, in reviewing confidential statements
for employment and other financial interests of spouses, minor
children, and other blood relatives residing with the employee,
we were limited to reviewing 307 confidential statements
(358-51). We discuss this issue in Finding Number 2.
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I
FINDINGS AND RECOMMENDATIONS
• j
Finding No. 1 - Problems Persist In Collecting
Confidential Statements!
Region 5, did not effectively collect confidential statements
because it had neither formal written procedures nor had it
implemented a previously proposed AOF system that would have
better ensured all confidential statements were received or
received timely. For example, our review showed the Regional
Administrator inaccurately certified to EPA's ethics official
that confidential statements were required from 97 employees
below the GS/GM 13 level and that all of these employees complied
with this requirement. Our review showed that 99 employees below
the GS/GM 13 level were, required to file and that only 59 (60%)
of these employees submitted a confidential statement. Conse-
quently, for those employees that did not submit confidential
statements, the Regional Administrator was unlikely to be aware
of conflicts of interest between the employees' EPA duties and
responsibilities and their personal financial interests and
activities. |
We previously* reported that employees were not submitting con-
fidential statements timely to the Regional' Administrator in a
December 1985 report3. In response to that report, the Regional
Administrator proposed to automate procedures to better ensure
confidential statements were received timely. Procedures .were
not automated nor formalized in writing. Human Resource Branch
officials currently responsible for administering Region 5's
confidential statement program were not aware of or involved with
the issues identified in our prior report. Current procedures
have informally evolved during the time that the number of
confidential statements submitted to the Regional Administrator
increased from 143 in 1984 to 284 in 1989. j Formal written
procedures and an ADP system, like that proposed by the Region in
response to our December 1985 audit report,) will better ensure
that all employees submit confidential statements and submit them
timely. Besides not having formal written procedures, the
employee designated to administer the program had no formal
training in reviewing statements for possible conflicts of
interest.
Agency Requirements
EPA regulations, 40 CFR Part 3, explain the requirements for
submitting and reviewing confidential statements. Among the
requirements are those that states
3 Report No. 60336. See Footnote 1 onjpage 2.
7 !-
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1. Bach employee required to file must submit a confidential
statement within 30 days after entrance on duty into a
covered position, or within 30 days after being notified of
the requirement to file.
2. Each employee required to file must submit an annual con-
fidential statement by July 31 of each year, even if no
changes or additions have occurred during that year.
3, The deputy ethics official (Regional Administrator) must
certify to the ethics official (General Counsel) that all
required employees have filed a confidential statement, in
his certification, the Regional Administrator states that he
has reviewed and signed each confidential statement and
taken all necessary remedial action.
Regional Administrator'^ Annual
Certification is Inaccurate
On October 2, 1989, the Regional Administrator certified to EPA7a
ethics official that confidential statements were received from
all 97 employees below the GS/GM 13 level that were required to
submit one. Our review showed that only 59 of these employees
had actually submitted a confidential statement at the time of
the Regional Administrator's certification. In those instances
where employees had not submitted confidential statements, the
Regional Administrator could not identify and deter conflicts of
interest between EPA duties and responsibilities and personal
financial interests and activities.
EPA has recognized that requiring confidential statements from
certain employees below the GS/GM 13 level is an important part
of the Agency's ethics program. In a June 6, 1988 memorandum to
all deputy ethics officials, the ethics official explained that
certain employees below the GS/GM 13 level are required to file
if they are in the categories specified at 40 CFR 3.302(c)(2)
(i.e., employees whose duties involve the selection or approval
of contractors, or known subcontractors under an EPA prime
contract).
Region 5 took action to identify employees below the GS/GM 13
level who should file confidential statements. In a July 6, 1988
memorandum to all Divisional and Office Directors, the Regional
Administrator stated that the types of positions identified as
meeting this category were contracting officers, project offi-
cers, inspectors, auditors, and on-scene coordinators. Accord-
ingly, the Regional Administrator requested that Division and
Office Directors submit the names of persons occupying positions
in these categories to Region 5's personnel office. Subsequent-
ly, Region 5's Division and Office Directors reported 108 employ-
ees occupying positions below the GS/GM 13 level who needed to
file a confidential statement.
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I
Our review also showed that the Regional Administrator's cer-
tification that all 185 employees in the GS/GM 13-15 level had
submitted confidential statements was inaccurate. Our review of
confidential statements actually filed showed that 11 employees
in the GS/GM 13-15 level had not submitted a confidential state-
ment. For these 11 employees, the Regional. Administrator is also
unlikely to be aware of conflicts of interest.
i
We discussed the Regional Administrator's certification with
officials in Region 5's Human Resource Branch. They explained
that the employee relations specialist, who is currently respon-
sible for receiving and reviewing confidential statements, spends
about 10 percent of her time administering the confidential
statement program. In addition, the employee relations special-
ist had identified late filers and sent reminder notices to them.
However, because of her other job responsibilities, she did not
have time to ensure thart all confidential statements were re-
ceived, nor time to ensure that other information on the Regional
Administrator's certification was correct. In addition, the
officials advised us that employees seem not! to understand the
importance of filing confidential statements.
' i
The employee relations specialist said that she does not have an
official written definition of her responsibilities nor a com-
plete and approved set of procedures to follow. She explained
that (1) identifying who should file, (2) providing them with the
confidential statement form, and (3) collecting the completed
forms, were actions based on informal practices that have evolved
over time. She added that she has the Agency's general guidance
on ethics, but has no formal training in reviewing statements for
possible conflicts of interest. ; I
At the time we began our review, the Regional Administrator had
not formally designated any employee as a deputy counselor for
confidential statements filed after December 31, 1988. EPA
regulations permit the Regional Administrator to formally desig-
nate a deputy counselor to assist him in administering the
confidential statement program. On Hay 27, J1988, the Regional
Administrator designated the Chief, Personnel Management Section
as deputy counselor for reviewing confidential statements filed
between February 28, 1988 and December 31, 1988. The deputy
counselor could sign anyone's form on which |no financial interest
was reported and was responsible for bringing possible conflicts
of interest to the Regional Administrator's attention after
making arrangements for remedial action. The employee relations
specialist noted any remedial action taken on the form prior to
the Regional Administrator's review of the confidential state-
ment. .
During our review, Human Resource Branch officials initiated
action to better ensure that the Regional Administrator's subse-
quent certifications are accurate. They reviewed the Division
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and Office Director's lists of employees below the GS/GM 13
who should submit confidential statements.. They advised us
9 of the 108 positions identified either did not have employees
in the positions at the time of the Regional Administrator's
certification, or that the positions were clerical and the
employee should not have to file a confidential statement. AS a
result of their review, they believed 99 employees below the
GS/GM 13 level should have filed confidential statements at the
time of the Regional Administrator's October 2, 1989 certifica-
tion .
Human Resource Branch officials intend to request all employees
who did not comply with the filing requirement to submit a
confidential statement. These actions are appropriate. In
addition, procedures or controls need to be established to ensure
that, in the future, all confidential statements are submitted as
required. This is necessary to prevent the same condition from
recurring.
Human Resource Branch officials should also discuss the clerical
positions identified by Division and Office Directors to ensure
these clerical employees do not have duties which could directly
affect the financial interests of specific parties. In response
to our draft report, officials concluded that clerical employees
did not have to file confidential statements.
We also informed the officials that they should request Division
and Office Directors to advise them of any employees who were
newly hired or promoted into positions that were vacant at the
time of the Regional Administrator's certification. We discuss
this issue further in the next section of our report.
Also during our review, Region 5 formally designated a deputy
counselor to review confidential statements filed between January
1, 1990 and December 31, 1990. This deputy counselor may sign
all forms in which no financial interests are reported and should
bring possible conflicts of interest to the Regional Administra-
tor.
Confidential Statements Not Received or Filed
Timely By Newlv Hired And Promoted Employees
Our review also showed that 24 other employees who were newly
hired or recently promoted had not filed confidential statements
at the time we completed our fieldwork. All 24 employees were
hired or promoted into covered positions since July 31, 1989, and
were not subject to the Regional Administrator's certification.
Our review disclosed that, as of December 31, 1989, none of these
24 employees had been notified that they were required to file a
confidential statement. Consequently, none of these employees
submitted a confidential statement within the required 30 days.
Unless these employees submit a confidential statement, the
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Regional Administrator will also be unlikely to determine if any
of these employees have conflicts of interest.
The employee relations specialist explained! that she did not send
an update notification and confidential statement forms to
employees in November 1989. Accordingly/ employees who were
promoted or hired after July 31, 1989, probably will not file a
confidential statement, until the next, notification update (March
1990). As a result.of our review, the employee relations spe-
cialist advised us that she sent an update notification for the
period ending March 31, 1990, and that she would ensure that the
recently hired employees submit a confidential statement. The
Region needs to develop formal procedures and controls to ensure
this same condition does not continue to occur in the future.
i
In addition to newly hired and promoted employees that have not
filed confidential statements, our review showed that 20 other
employees promoted or hired into covered positions in FT 1989 did
not submit their confidential statements within the required 30
days. Untimely confidential statements can cause delays in the.
review process, and, in our opinion, may prevent the performance
of timely and thorough reviews. . Table 1 shows the number of days
that confidential statements were late for newly hired or pro-
moted employees in PY 1989. I
' •• ' • !
. Table 1 j
Days Confidential Statements Were Late
Number of Occurrences
New Hire Promoted Total
1- 60 days late 5 5
61-120 days late 14 5
121-180 days late I 6 6
181-240 days late ! 2 2
241-273 days late _ ! 2
Totals ^^ 19 20
We also discussed this issue with the employee relations special-
ist. Currently, she depends on other employees in the staffing
section of Region 5's Human Resource Branch' to send her copies of
all personnel action forms for newly hired or promoted employees.
Once she receives the forms, she notifies the newly hired or
promoted employees that they must file a confidential statement.
The employee explained that, if the staffing section of Region
5 's Human Resource Branch does not consistently and promptly send
the personnel action forms, she will not know who has been hired
or promoted. Therefore, current procedures do not ensure that
she receives the forms consistently from the staffing section.
This can contribute to untimely notification to an employee that
a confidential statement is required. j
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As a result of current procedures, the employee relations spe-
cialist was not always able to notify newly hired or promoted
employees that they are required to file a confidential state-
ment. Therefore, most newly hired or promoted employees are not
notified that they must file a confidential statement until the
annual filing, which is July 31, or the update filings which are
supposed to occur on November 30 and March 31 of each year. This
results in delays in submitting confidential statements of at
least four months or more.
Region 5 Initiatives to Improve
Procedures Were Not Completed
Our office previously reported that Regional employees were not
timely submitting confidential statements. A report issued by
our office on December 16, 1985 disclosed that, in every case,
employees hired or promoted into covered positions during Fiscal
Years 1984 and 1985 had not filed their initial confidential
statement within the required 30 days. Also, our report dis-
closed that under procedures in existence, at that time, there
could be delays of four months or more before newly hired or
promoted employees were recognized as being required to file.
This review recommended that the deputy ethics official devise a
system to promptly notify all employees coming into covered
positions of the requirement to file a confidential statement
within 30 days.
In response to our December 16, 1985 report, the Regional Admin-
istrator explained that the Region was studying ways in which
notification could be accomplished by the use of the Region's ADP
system. The response stated that the Region would institute a
procedure to manually identify the newly hired or promoted
employees, with a goal of having the system automated as soon as
possible. Human Resource Branch officials advised us they were
not aware of the Region's proposed action and that procedures
have not been automated.
The importance of using confidential statements as a means of
identifying potential conflicts of interest was demonstrated in a
February 1990 GAO report, "HUD Financial Disclosure Reports
Missing or Not Reviewed" (GAO/GGD-90-51). This report showed
that HUD's financial disclosure reporting and reviewing system
lacked basic elements, such as clearly defined responsibilities;
formal written procedures; and management information on the
status of collection, review, and approval of confidential
statements. Therefore, HUD was not in a position to address
actual or potential conflicts of interest. Region 5 officials
need to develop an adequate system to ensure receipt of all
confidential statements and to identify and resolve potential and
actual conflicts of interest.
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Confidential statements are essential to ensuring that the
Regional Administrator has the information from, which to judge
whether any actual, potential, or apparent conflict of interest
exists. A lack of formal written procedures and an automated
tracking system increases the risk that not jail confidential
statements will be received or received timely. Region 5's
current procedures that have evolved over time did not ensure
receipt of confidential statements
Draft Reort
?
We recommended that the Regional Administrators
1. Develop procedures and controls which will ensure that all
employees are notified of the requirements to submit a
confidential statement and comply with the requirements.
' I
2. Develop formal procedures for a designated employee to use
when reviewing confidential statements. Formal procedures
should also include steps for identifying employees below the
6S/6M 13 level who should file confidential statements.
3. Provide ethics training to employees reviewing confidential
statements to better ensure thorough reviews. Training or
seminars emphasizing the importance of confidential statement
requirements should also be provided to Division and Office
Directors.
4. Ensure that Division and Office Director discuss and concur
with Human Resource Branch's determination that certain
clerical employees need not file a confidential statement.
Regional Reply to Draft PIG Report
The Region agreed with our findings and outlined measures to
address our recommendations:
1. The Human Resource Branch is currently in the process of
identifying employees who should file confidential state-
ments, and coding these positions into their computer
system. New. selectees for covered positions are being coded
for financial disclosure as they enterjthese positions.
This will ensure that the employees receive prompt notifica-
tion so they can file timely.
Also, the Acting Regional Counsel has established a check-
list process to remind new employees to submit confidential
statements. Finally, methods for assuring all statements
are timely submitted are currently being studied.
2. All procedures will be put into written form.
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3. Ethics training will be provided to those employees respon-
sible for reviewing the confidential statements.
4. Officials determined that clerical employees were not
required to file confidential statements.
Auditor's Comments
The actions outlined try Region 5 in reply to our draft report
recommendations, when implemented, will substantially correct the
deficiencies cited.
Recommendations
We recommend that the Regional Administrator ensure that the
planned corrective actions are completed and provide us with a
written action plan that includes specific milestone dates to
implement their planned actions.
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Finding No. 2 -
Confidential Statements Need To Include
Spouse. Child, and Relative Data
Few employees who submitted confidential statements to either the
Regional Administrator or the Regional Counsel included informa-
tion regarding the employment and financial
minor children, or blood relatives residing
interests of spouses,
with the employee
(relatives). Our review of 307 confidential statements, that
were submitted to either the Regional Administrator or the
Regional Counsel, disclosed that only 60 employees showed this
type of information. The following demonstrates that not all
employees may be reporting this type of informations
He determined that 25 Superfund employees who did not
include spousal information on their confidential statements
were married. We contacted 5 of thesejemployees. All 5
said their spouses were employed. However, none of them had
disclosed this information on their confidential statement.
One employee advised us that her spouse was employed in an
environmental related industry.
Without a full and complete disclosure of required information,
neither the Regional Administrator' nor the Regional Counsel can
make a complete assessment of conflicts of interest.
This condition usually occurred because employees did not under-
stand or were not aware of the requirements for providing this
type of information. Sometimes this resulted from the employee
not completely reading the form which had the instructions on the
back of the form. During the course of ourj review, the Acting
Regional Counsel and the Regional Administrator issued instruc-
tions to employees required to file to better ensure that these
employees include all required information.
Agency Requirements
Agency requirements for reporting employment of spouses, minor
children, and other relatives are explained
in 40 CFR Part 3.
Employees are prohibited from knowingly participating in an EPA
activity in which the employee, the employee's spouse, minor
child, or relative has a financial interest!. Accordingly,
financial interests and employment of spouses, minor children,
and relatives must be reported on the employee's confidential
statement. The size of the financial interest is irrelevant, as
is the employee's level of responsibility. Moreover, it does not
matter that the organization in which the employee or the employ-
ee's spouse, minor child, or relative has a financial interest is
a non profit or public interest group. These types of organiza-
tions may still have financial interests which EPA duties may
affect.
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Few Employees
Spouse. Child, or- Relative
During our review, the employee relations specialist responsible
for receiving and reviewing statements for the Regional Admini-
strator advised us that although the confidential statement form
and Regional notices accompanying the form provide instructions,
few employees include spouse, minor child, or relative data.
There are instances where she has determined through her personal
knowledge that employees are married and have neglected to
include spouse information on their confidential statements. In
these instances, she asked the employees to correct their con-
fidential statements. However, she advised us that determining
who is married is difficult because personnel records are not
always current regarding an employees marital status and employ-
ees may not indicate they are married on their confidential
statements.
Human Resource Branch officials and officials from the Office of
Regional Counsel explained that EPA's confidential statement form
needs to more clearly and prominently display the need for
employment and financial interests of spouses, minor children or
relatives. Currently, EPA's instructions that employees must
report this information are on the back of the form. Officials
believe that if the form more clearly explained and prominently
displayed the requirement for including employment and financial
interests of spouses, minor children, and relatives, that more
employees would comply with this requirement. Presently, Region-
al employees are advised of the requirement in a notice attached
to the form.
Employees have explained to the employee relations specialist
that they were not clear as to the requirements and that the form
did not contain separate space for them to include this type of
information. Employees, for example, have advised her that they
believed employment and financial interest of spouses was re-
quired only if the spouse was involved in environmentally related
companies.
We reviewed confidential statements to determine what percentage
of employees included employment or financial interest informa-
tion regarding spouses, minor children, or relatives. Our review
shows that in 1989, 60 employees in Region 5 reported this type
of information. The Regional Administrator received 233 con-
fidential statements of which 43 (18%) showed employment or other
financial interests of spouses, minor children, or relatives.
The Regional Counsel received 74 confidential statements, of
which 17 (23%) showed employment or other financial interests of
spouses, minor children, or relatives.
To help us determine whether employees understand the type of
information that is required, we selected confidential statements
16
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from Region 5's Superfund program for further review. We select-
ed the Superfund program because it is the largest program in
Region 5. We reviewed confidential statements for 39 Superfund
employees and found that 33 did not include!spouse information.
For these 33 statements, we reviewed personnel records which
showed that 25 of these employees were married. In these in-
stances,, the Region needs to know if the spouses are employed or
have other financial interests that require disclosure. The,
following demonstrates that not all,employees may be reporting
this type of information:
We contacted 5 of the 25 employees for interviews. These 5
employees all said that their spouses were employed.
However, each of them had neglected to disclose their
spouses employment on their confidential statement. One
employee also advised us that their spouse was employed in
an environmental Delated industry.
• *.!
The one individual, who has a spouse employed in an environmental
related industry, is a supervisor in Region 5's Superfund pro-
gram. As a supervisor, this employee has access to restricted
information. In this situation, there is not only a potential
for the EPA employee to give information to the spouse, but also
for the spouse to exert influence over the EPA employee's deci-
sions regarding matters such as contractor or remedy selection.
Regional officials explained that in situations like this,- when
there is a potential for conflict of interest, a "recusal" is
required. A recusal is a declination to take part in certain
matters that conflict with an employee's EPA duties. If an
employee has interests that create an actual or apparent conflict
of interest, an employee submits a recusal to their supervisor,
with a copy to the deputy ethics official. r The recusal would
state that the employee is avoiding participation in matters
affecting their financial interest, and list the entities for
which involvement is being recused. The Region had three re-
cusals on file for Fiscal Years 1988 and 1989.
A review of personnel records showed the above employee did not
have a recusal on file. We advised the Regional Administrator's
employee relations specialist that the employee did not have a
recusal on file. During the .course of our fieldwork, the employ-
ee relations specialist requested and received a recusal from the
employee.
Prior PIG Reports Disclose \
Lack of Information j
Our prior reports issued on December 16, 1985, also reported that
few confidential statements disclosed spouse employment, and none
showed dependent child employment or financial interest of a
spouse, child, or blood relative residing with the employee. As
17
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a result of our report, Region 5's assistant deputy ethics I
official sent a memorandum to employees asking them to amend
their confidential statements to include data on spouse employ-
ment and financial interests, if necessary. After receiving this
memorandum, eight employees submitted corrected confidential
statements.
We discussed this isstie with P*Kjl«mffl Administrator and Acting
Regional Counsel representatives. During the course of our
current review, Region 5 acted to better ensure that employees
reported employment and other interests of spouses, children, and
other relatives. On February 21, 1990, the Acting Regional
Counsel sent a memorandum to all attorneys asking them to review
their confidential statements to ensure they disclosed the
employment and other interests of their spouses, children, or
other relatives. The attorneys were required to amend their
confidential statements if they did not previously disclose
required information. On February 28, 1990, the Acting Regional
Counsel sent another memorandum to 19 attorneys that he iden-
tified as married, but who did not include any information on
their confidential statements on whether their spouses were
employed or had other financial interests. These attorneys, if
necessary, were also required to amend their confidential state-
ments. As of March 2, 1990, six attorneys responded to this
memorandum. Four indicated their spouse was not employed and two
filed amended reports to include-spousal employment information.
On April 25, 1990, the Regional Administrator sent a similar memo
to his employees regarding the requirement of including employ-
ment and other financial interest information for spouses,
children, and other relatives. To avoid having to send a memo-
randum after the confidential statements are received, Human
Resource Branch officials explained that they would determine
whether the cover memorandum accompanying the confidential
statement form could be expanded to explain the necessary infor-
mation requirements to all employees.
The Regional Administrator and the Acting Regional Counsel have
acted to better ensure that employees report spouse, minor child,
and relative information on their statements. Obtaining this
information is important to ensure that conflicts of interest do
not exist.
Draft Report Recommendat:
We recommended that the Regional Administrator and Acting Region-
al Counsel review and revise the instructions accompanying the
confidential statement form to further clarify and emphasize the
importance of the information requirements covering employment
and other financial interests of spouses, children, and other
relatives.
18
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Regional Reply to PIG Report
In response to the draft report recommendation, the Region stated
that they will issue a more detailed memorandum clarifying the
reporting requirements and attach a sample confidential state-
ment. They also have sent follow-up memoranda, where applicable,
to all affected employees requesting submission of spousal, minor
children, and relative information. j
i
Region 5 stated that the design of the form may contribute to
employees not reporting employment and other financial interests
of spouses, children, and other relatives, j The Region believes
that (1) the instructions on the front of the confidential
statement form do not clearly explain wherej spousal/minor child-
ren information should be included, and (2)
instructions and/or the form is warranted.
*
Auditor's Comments
a revision of the
The actions outlined by Region 5 in reply to our draft report
recommendations, when implemented, will substantially correct the
deficiencies cited. !
The confidential statement form is an EPA form. Therefore,.
action to revise the form would have to occur at the Headquarters
level. A prior audit report, Report No. 81054, issued by the
Internal Audit Division on May 10, 1988, recommended the form be
revised. Headquarters response to that report stated that the
Office of Government Ethics was establishing Government-wide
procedures. Therefore, it was impractical to revise the con-
fidential statement at that time.
Recommendation
We recommend that the Regional Administrator and Acting Regional
Counsel ensure that the planned corrective actions are completed
and provide us with a written action plan that includes specific
milestone dates to implement their planned actions.
19
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Appendix 1
DATE:
"JIfN
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION V
the
Draft Audit Report No. E1SFFO-05-0111
SUBJECT: Review of Region VTs implementation of
Ethics in Government Act" of 1978
FROM- Valdas V. Adamkus
Regional Administrator
TO: Anthony Carrollo,
Divisional Inspector General for Audits
Northern Division
Thank you for the opportunity to comment on the audit findings in
the subject draft audit report. We have reviewed the audit
report and found it to be informative and useful. The following
comments represent Region V's response to the
audit findings.
Finding No. 1 - Problems Persist in Collecting Confidential
Statements
The report indicated that the Region did not effectively collect
Confidential Statements because of a lack of formal written
procedures and a failure to implement a previously proposed ADP
system that would have better ensured that all Confidential
statements were received and in a timely manner. The auditor
identified four recommendations that the Deputy Ethics Official
should consider:
(1) Develop procedures which 'will ensure that all employees are
notified of the requirements to submit a
Statement;
Confidential
(2)
(3)
(4)
Formalize procedures for a designated employee to use in
administering the program; I
Provide ethics training to employees reviewing Confidential
.Statements to better ensure thorough reviews are made for
conflicts of interest; and
Ensure that Division and Office Directors discuss and concur
with the Human Resources Branch's determination that certain
clerical employees need not file a Confidential Statement.
20
EPA FORM 1»H (REV. 3-Ti)
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Appendix 1
Page 2 of 6
-2-
With regard to the first recommendation, our current practice is
that employees in positions which require filing a Confidential
Statement of Employment and Financial Interests under the
provisions of 40 CFR 3.302 (b) and (c), are individually issued a
memorandum with an explanation of the requirement to file such a
statement. The memorandum indicates that the financial interests
of spouses and minor children living in the same household must
also be reported. Since there is still some apparent confusion
over these requirements, a more detailed memorandum with an
attached sample Confidential Statement will be issued to further
clarify the reporting requirements. This will be accomplished by
the July, 1990 annual filing period. While identification of
employees in positions a.t the GS-12 level and below, who are
required to file a Confidential Statement has been a persistent
problem over the years, during 1988 and 1989, we identified a
larger percentage of those persons than ever before (an increase
of over 300%). Further, the Human Resources Branch is currently
in the process of identifying any remaining employees who should
file so that they may be coded into our computer system. New
selectees for covered positions are being coded for financial
disclosure as they enter these positions. This will ensure that
they receive timely notification so that they may file within the
time frame required by regulation. Once all of this is
accomplished, we will have the systems and processes in place to
ensure notification to covered employees.
The final report should note that the employee responsible for
reviewing the statements had previously identified the problem of
timely follow-up with late filers and/or non-responsive
employees. Often second and third reminders are sent out.
However, because the person assigned 10 review these forms has a
heavy workload involving many other important responsibilities,'
sending second and third follow-up notices becomes cumbersome.
We are currently exploring solutions to this recurrent problem.
The procedures already in place can and will be put into written
form. However, the failure of employees to submit the financial
interest statements appears to be due to the employees' apparent
lack of understanding of the importance of complying with the
filing requirements rather than a failure to be notified of the
need to file. Hence, follow-up is a major concern as referenced
above. To alleviate late submittal, the Acting DEO has
established a checklist process to serve as a tickler system to
remind new employees to submit Confidential Statements. A
reminder win be sent 15 days after an employee comes on duty, if
the Confidential Statement has not been received. Other
reminders will be sent within 20 and 25 days if needed.
21
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Appendix 1 .
Page 3 of 6
-3-
Methods for assuring that those late and non-filers submit their
statements timely, as requested, are currently being studied.
This issue should be resolved before the March, 1991 update
period. .
Ethics training will be provided to those employees responsible
for reviewing the Confidential Statements in accordance with
recommendation three; target date for completion is October 1991.
Regarding recommendation four, the issue of whether certain
clerical employees should be filing Confidential Statements
appears to be answered by 40 CFR 3.302(c)(2), revised 7/1/89,
which reads in part, "The Deputy Ethics Official may also require
employees in those positions classified at lGS-12 and below to
file if their duties directly affect the financial interests of
specific parties. Such positions are limited to Contracting
Officers, Project Officers, Inspectors, Auditors, and On-Scene
Coordinator representatives." Based on this definition, clerical
employees are not covered and should not have filed in July 1989.
Finding JJot 2 - Confidential Statements Need to Include
Spouse. Child and Relative Data
i
The report noted that only 60 employees disclosed information
pertaining to employees' spouses, children,}and other relatives.
The auditor was able to determine that 25 Superfund employees,
who did not provide spousal information, were married. They also
contacted 5 of these employees and all said
employed. However, none of these employees
their spouses were
had disclosed this
information on their Confidential Statements.
I
The auditor concluded that this failure was due to either the
employees' lack of understanding of the requirement or their lack
of awareness of the requirements for providing this information
which may have resulted from employees not reading the back of
the form. The report.recommended that the Deputy Ethics Official
review and revise the instructions accompanying the Confidential
Statement Form 3120.1 to further clarify and emphasize the
requirements covering employment and other financial interest of
spouses, children and other relatives. This recommendation will
be implemented, however, it is important to point out that the
requirements for reporting financial information on spouses,
children and other relatives are included in1 the aforementioned
memorandum noted in our response to the first recommendation of
finding No.l.
22
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Page 4 of 6
-4-
Additionally, a statement is typed on the front, top of the form
which States "EMPLOYMENT AND FINANCIAL INTERESTS OF SPOUSES AND
MINOR CHILDREN MUST BE REPORTED" (copies attached). The July,
1990 annual notice will further expand the instructions and
provide"sample confidential notices to illustrate proper
completion of this information.
Follow-up memoranda have been sent to all affected employees
requesting submission of spousal, minor children and relative
information, where applicable. The results of this effort are
being evaluated. However, reaction to this effort supports our
contention that the design of the form may, in fact, contribute
to employee failure to report these other interests as required.
The instructions on the front of the form do not clearly explain
where spousal/minor children information should be included. All
references made to reporting requirements are regarding the
employees' financial interest. It would seem that a revision of
these instructions and/or the form is warranted.
»
Again, I appreciate the opportunity to review the draft report
and provide input into the final report.
Valdas V. Ad
23
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NOTE: riUANCIAL AND EMPLOYMENT INTERESTS OF Sl'OUSU'J AND Hl|vKj)K a-liiX-^ i--obt ...
Confidential Statement of Employment
^x -— ,-~ - and Financial Interests
*\X tZ. l"^/» (for use £iy regular and special Federal employee*!
Date o! Ap0o«r«nie«i to
P'CSent PoS'l'O«
lion Title *nd Of g»n«»HO«
Page 5 ofU
for Special GovgTninem Employee* Only
r-criod o'
Iftotit —- Tol
Estimated NO. ol.DayS Sc«v,Cc TO'
8e Performed
•nd Financial Interests
List the names of all corporations, companies, firms or other
business enterprises, partnerships, nonprofit .organisations.
•educational, governmental, or other institutions: (a) with
which you are .associated- as art employee; officer, owner.
•. director, trusiec;partrter. advisor or consultant with-or without '•
compensation: (b) in which you have any continuing financial •
interest through a pension or. retirement plan, shared income.' ;
•or other arrangement as a result .of current or prior employ-
ment or business or professional association; (c) in wh'fch you
Nam'e and Kind ol Organisation
(Uie fart 1 designations wrter«
• •
Address
. " . • ' *
. ' "
PART II —
List the names of your creditors other than mortgagees of
real property property, which you occupy solely as a per- •
sonal residence or those to whom you are indebted for •
Name and Address of Creditor
"'•.'.' ' .
have any financial interest thro
options, bonds, securities, or o
'trusts: or pon either to you or to
onnected for research
ersohat services to.be
. -OMIT -INTERESTS
'HQFTHEINSTRUC-
sre is not enough room
e< .'.' V . ." .'
• Nature ef financial inie«cst. •
e.g.'. Stocks. Prior Income •
(Ute Pirt i (61 {cj. and (til
i ' . •'
'
• * . * " * ,
Creditor* I
ordinary household or living expenses Such as household
furnishings, automobiles', educational, vacation, or. similar
expenses. IF NONE. WRITE NONE. . /. - -
Character 01 indebtedness, e.g..
4
t
. ' • t
Personal Loan. Note. Mo'tg*;*
• ' •
".' •••"..'
'PART III — Interests in Real Property • : . •
List your interests in real property or rights in lands, other. than property which you occupy solely as a personal residence.
N»i«»e of im«»esi. e.g.. Ownership
Investment Trust
Mortgage. Lien.
• .
Type of Property. « 9. .'Residence,
Hotel. Aaanrr^nt. Undeveloped Land
•>
Address
(Ifturaf. o/»« eeuntr «/Kf Stale)
'PART IV — Employee Certification end Agency Review . • .
I CERTIFY that the statements ! have made on this form and all EPA regulations at 40 CFR Pan 3 and that to the best o< my
attached schedules are true, complete and correct to the best knowledge and belief there are no conflicts between my EPA
of my knowledge and belief. I also CERTIFY that 1 have read duties and my financial or employment interests.
Employee Signature - •
^
The information contained in this statement discloses no conflict of interest under applicable laws and
IW—°"*"S*«-
£f»A Fm«n 31 ?O 1 |H«*. S-8'l IN
cviout edition it ufttoieie
24
Date
• r
regulations. >
Date
"
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PRIVACY ACT NOTICE Appendix i
Page 6 of 6
GENERAL: Public Law 93-579 (Privacy.Act of 1974, Dec. 31. (974) requires that the
following information be furnished to individuals filing Confidential Statements of
Employment and Financial Interests.
AUTHORITY: Title40, Code of Federal Regulations. Chapter I. Pan 3. Employee Respon-
sibilities and Conduct.
PURPOSES AMD USES: This information is used to determine whether there is a
conflict between your financial or employment interests and the performance of your
Government duties. Where actual, potential, or apparent conflict exists, remedial action
may be necessary; for example, recusal from participation in certain matters, waiver
under 18 U.S.C. §208{b), divestiture, reassignment, or creation of a blind trust.
EFFECTS OF NONDISCLOSURE: Failure to furnish any or all of the information may be
grounds for nonemployment or dismissal or other disciplinary action. En addition, false
statements may constitute a violation of 18 U.S.C. §1O01.
INSTRUCTIONS
This information is required under Sections 206 and 402 of Executive Order 11222,
Office of Personnel Management regulations at 5 C.F.R. Part 735. Subpart O. and EPA
regulations at 40 C.F.R. §3.302(b). This information is confidential and may not be
disclosed except as provided in Appendix A to 40 C.F.R. Part 3, Subpart C.
EPA regulations at 40 C.F.R. §3.302(b) list positions whose incumbents are required to file
and establish criteria under which the Designated Agency Ethics Official or Deputy Ethics
Officials may require other employees to file. Such a requirement to file must be in writing
and is subject to the EPA grievance system. -/
The following information need not be reported:
0 positions held in any religious, social, fraternal, or political entity and positions solely
of an honorary nature;
0 information relating to life insurance; variable annuity, or guaranteed investment
contracts issued by insurance companies;
0 deposits in banks, savings and loan associations, credit unions, and similar financial
institutions;
0 bonds or other securities issued by the U.S. Government or its agencies;
0 interests in an approved "blind trust" or "excepted trust" (see 5 CFR 734.402 and
734.403 for definitions).
Interests and employment of spouses and minor children must be reported, together with
interests and employment of other blood relatives living in the employee's household. In
addition, interests in underground or surface mining operations of in-laws residing in an
employee's household must be reported if such interests fit the definition of "indirect"
financial interests in 30 C.F.R. §706.3. However, interests of a spouse living separate and
apart from the employee with the intention of terminating the marriage need not be
reported.
Reports are due: (1) within 30 days after assuming a position for which filing is required; (2)
by July 31 of each year; and (3) where the employee's interests have changed since the
last report, a supplemental report listing the changes is due by November 30 and March 3 /
of each year.
EPA Form 3120-1 (Rev. S-64| R«vene
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Appendix 2
DISTRIBUTION OF AUDIT REPORT
Region 5
Regional Administrator (5-RA)
Regional Counsel (5-C)
Regional Audit Followup Coordinator (5-MFA)
i
Human Resources and Program Support Branch (5-MP)
Office of Public Affairs
Headquarters
Inspector General (A-109)
Office of General Counsel (LE-130J
Director, Financial Management Division
Comptroller (PM-225)
(PM-226)
Agency Followup Official (PM-225)
ATTN: Director, Resource Management Division
Agency Followup Official (PM-208)
Associate Administrator for Regional Operations (A-101)
i
Office of Congressional 'Affairs (A-103)
Office of Public Affairs (A-107)
26
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