Financial Disclosure

The Office of Government Ethics oversees the administration of the public and confidential financial disclosure systems for the executive branch. It also administers the blind trust and certificate of divestiture programs in the executive branch.

Public Financial Disclosure

Certain senior officers and employees of the executive branch are required to file a public report (SF 278) disclosing their financial interests as well as the interests of their spouse and minor children. Public filers must report:

Any interest in property held in a trade or business or for investment or the production of income (real estate, stocks, bonds, securities, futures contracts, beneficial interests in trusts or estates, pensions and annuities, mutual funds, etc.) that meet reporting thresholds.
Earned income, retirement benefits, honoraria and any other non-investment income.
Gifts and reimbursements that meet reporting thresholds.
Liabilities (personal loans from certain family members, a mortgage on a personal residence, automobile, furniture and appliance loans, revolving charge accounts that do not exceed $10,000 at the close of the reporting period are excluded from reporting).
Agreements or arrangements with respect to future employment, leaves of absence and continuation of payments or benefits from a former employer, and outside positions such as an officer, director, trustee, general partner, proprietor, employee, consultant, etc. of any organization (but positions with religious, social, fraternal or political entities are excluded, as are solely honorary positions).

Confidential Financial Disclosure

Certain other less senior executive branch employees whose duties involve the exercise of discretion in sensitive areas such as contracting, procurement, administration of grants and licenses, and regulating or auditing non-Federal entities are required to file confidential financial disclosure reports (OGE Form 450). This reporting system generally tracks the approach of the public disclosure system with some differences. Ranges of values of assets and income from assets are not required to be reported nor are interests in or income from bank accounts, money market mutual funds, U.S. obligations and Government securities. The most notable difference is that confidential reports are not available to the public.

Recusals

One remedy that is often appropriate for avoiding a potential conflict of interest is recusal or disqualification. This simply means that the employee does not participate in a matter that could affect the employee's financial interest.

Waivers

Another remedy for dealing with conflicts of interest is the use of waivers. An individual waiver of the statutory bar may be granted by an authorized official when the conflicting financial interest is not substantial. For example, an official might grant a waiver where the employee owned only a few shares of a particular stock. Waivers may also be granted to special Government employees serving on advisory committees. The Office of Government Ethics is authorized to issue regulatory waivers for certain classes of financial interests. For example, interests in companies that are held in a widely diversified mutual fund are exempted from the application of the conflicts of interest statute. Finally, waivers are available for dealing with conflicts that arise from financial interests derived from Native American birthrights.

Certificates of Divestiture

Section 1043 of the Internal Revenue Code provides for the deferral of capital gains taxes on assets that must be sold to comply with ethics program requirements. Proceeds from divested assets must be reinvested in certain specified categories of investments. This change allows for a more flexible remedy to conflicts that avoid subjecting an executive branch employee to costly tax consequences that would otherwise result from the sale. In order to take advantage of the tax deferral mechanism, a Certificate of Divestiture must be obtained from the Office of Government Ethics before the sale occurs. Certificates of Divestiture are issued by OGE in accordance with its procedures and policies.

Trusts

Finally, a blind trust may be available as a remedy for a potential conflict of interest. In order to be recognized, the trust must include certain required provisions in the trust instrument and have an approved independent trustee. A blind trust must be approved by the Director of the Office of Government Ethics before it is executed.

There is no requirement that a person utilize a blind trust as a means of resolving potential conflicts of interest. Generally, a blind trust will be appropriate where the holdings are of such an array and magnitude that creation of a qualified trust would be the most practical means of avoiding conflicts.

Reference:
Section 102(f), Ethics in Government Act of 1978; 5 C.F.R. part 2634, 5 C.F.R. part 2640.

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