STATEMENT OF
MARILYN L. GLYNN ACTING DIRECTOR OFFICE OF GOVERNMENT ETHICS
MR. CHAIRMAN, SENATOR HARKIN, AND MEMBERS OF THE SUBCOMMITTEE:
Thank you for the opportunity to appear today to discuss the policies and procedures in place to avoid conflicts of interest in the executive branch generally and at the National Institutes of Health (NIH) in particular. Mr. Chairman, you requested that the Office of Government Ethics (OGE) Aprovide an overview of how ethics rules and regulations are determined and implemented throughout the executive branch and the role of the Office of Government Ethics.@ In addition, you requested that OGE Asummarize the results of any ethics audits that the Office of Government Ethics has conducted at the NIH within the last 10 years@ and provide documents relating to these audits.
The Executive Branch Ethics Program and OGE=s Role
Established by the Ethics in Government Act of 1978, OGE is the executive branch agency responsible for directing policies relating to the prevention of conflicts of interest on the part of Federal executive branch officers and employees. As the supervising ethics office, OGE develops rules relating to ethics and conflicts of interests, establishes the framework for the public and confidential financial disclosure systems, develops training and education programs for use by executive branch ethics officials and employees, and supports and reviews individual agency ethics programs to ensure they are functioning properly.
While OGE provides direction and overall leadership to the executive branch ethics program, the head of each agency has primary responsibility for the ethics program at his agency. Each agency head appoints a Designated Agency Ethics Official (DAEO) to manage the ethics program and act as a liaison to OGE. The DAEO and his staff ensure that the required ethics program elements are accomplished. Basic elements and responsibilities of an agency ethics program include effective collection and review of financial disclosure reports; ethics training that meets the requirements of OGE=s training regulations; an employee counseling program; and prompt and effective action for violations of the ethics rules. Additionally, an agency that wishes to supplement the Standards of Ethical Conduct to meet its particular needs may submit a proposed supplement to OGE for concurrence and joint issuance. Through its role to provide direction and leadership to executive branch agencies and departments, OGE supports high ethical standards for employees and strengthens the public's confidence that the Government's business is conducted with impartiality and integrity.
As the supervising ethics office of the executive branch, OGE has developed and issued various executive branch-wide regulations in Title 5 of the Code of Federal Regulations, including the Standards of Ethical Conduct for Employees of the Executive Branch (Part 2635), rules that implement the financial reporting requirements in the Ethics in Government Act (Part 2634), and rules that implement criminal conflict of interest laws (Parts 2635, 2637, 2640 and 2641). Pursuant to the Ethics in Government Act and Executive Order 12674 (as modified by E.O. 12731), these regulations are issued after consultation with the Attorney General and the Office of Personnel Management. While developing and publishing rules are important and central elements of OGE=s role in providing direction and leadership to the executive branch ethics program, it is, in a sense, only the starting point. With an emphasis on education and prevention, OGE works with agencies to implement these rules by assisting agencies in carrying out their responsibilities through training of ethics officials, sponsoring regular national and regional conferences, and communicating with agencies through memoranda to agency ethics officials (ADAEOgrams@) and an electronic list service. Additionally, to ensure consistency in the interpretation of its rules, OGE issues redacted versions of important advisory opinions it issues each year.
To ensure that DAEOs receive accurate and timely consultation on ethics issues, OGE also provides one-on-one consultation to agencies through its attorneys and a desk officer system in which each agency is assigned an individual ethics specialist as a primary OGE contact. OGE attorneys and desk officers assist agencies on a wide range of ethics issues, including responding to questions regarding application of specific rules in the Standards of Ethical Conduct, providing assistance in analyzing conflict of interest questions, and responding to questions relating to implementation of the financial disclosure systems. In addition to these outreach activities with agencies, OGE is responsible for monitoring and evaluating the executive branch ethics program. This function is accomplished through periodic program reviews of the ethics programs at each agency. The purpose of the review is to ensure that agencies have developed effective ethics systems and procedures, in compliance with OGE regulations, to prevent conflicts of interest and other violations of ethics laws and regulations. Individual misconduct by employees is investigated by the Office of Inspector General responsible for each agency. I will discuss our review process in greater depth later in my testimony.
Policies and Procedures For Avoiding Conflicts of Interest
1. New Standards of Ethical Conduct Issued in 1993 The current Standards of Ethical Conduct, at 5 C.F.R. Part 2635, became effective in 1993. Prior to that, ethics rules were located in numerous sources and implemented in a decentralized, sometimes inconsistent, manner largely by individual agencies. In 1989, President George H.W. Bush created the President's Commission on Federal Ethics Law Reform to evaluate the existing ethics program and make recommendations for improvement. One of the Commission's central recommendations was that OGE consolidate all executive branch standards of conduct regulations into a single, uniform set of rules. The Commission found that Athe sheer bulk of ethics statutes and rules, inconsistent rules, and varying interpretations have contributed greatly to making compliance difficult. To the extent that rules and interpretations can be standardized, the rules can be more easily understood and compliance will be facilitated.@ President's Commission on Federal Ethics Law Reform, To Serve with Honor, p. 93 (March 1989). In addition to a standardized set of rules, the Commission recognized that some agencies would need to have supplemental regulations specifically tailored to their needs. For example, owning stock in a particular company or industry could pose a problem at one agency but not others.
Shortly after the Commission issued its report in 1989, President Bush announced a comprehensive ethics reform proposal and an executive order that directed OGE to promulgate Aregulations that establish a single, comprehensive, and clear set of executive-branch standards of conduct that shall be objective, reasonable, and enforceable.@ Section 201(a) of Executive Order 12674 of April 12, 1989 (as modified by E.O. 12731). In addition, agency heads were directed to A[s]upplement, as necessary and appropriate the comprehensive executive branch-wide regulations of the Office of Government Ethics, with regulations of special applicability to the particular functions and activities of that agency.@ Section 301(a) of E.O. 12674. One of the premises of this package was the recognition of the need to balance the competing interests of having exacting rules that ensure employees will act with the utmost integrity with the need to avoid rules that are so restrictive that able members of the public will be discouraged from entering public service. Striking this balance properly was an important factor in the development of the Standards of Ethical Conduct, and it continues to influence OGE's interpretation of the ethics rules and laws. Indeed, this is a continuous process, and OGE currently has a project focused on considering how to modernize and update the Standards with respect to outside activities, among other issues.
At the time the Standards became effective, agency specific regulations were largely supplanted. To the extent that agency policy was inconsistent with the new rule, agencies were expected to bring those policies into compliance with the executive branch-wide Standards or issue supplemental regulations, with the concurrence of OGE, when a determination was made that doing so was necessary and appropriate in view of that agency's programs and operations. To allow time to issue supplemental regulations, however, agency regulations that had prohibited specific financial interests or specific types of outside employment or that required prior approval for outside activities were allowed to remain in effect, through a series of grandfather provisions, for several years or until the agency had issued a supplement as a replacement. To date over 35 agencies, including the Department of Health and Human Services (HHS), have issued supplemental regulations. As discussed more fully later in this testimony, through a program review conducted at HHS in 1995 C the first program review at that agency after the new Standards became effective in 1993 C OGE determined that written guidance NIH provided to employees about criteria for permissible outside activities and employment was inconsistent with provisions in the new Standards. As such, OGE recommended that these policies be revised to be consistent with the new rules and noted that HHS could consider proposing supplemental regulations that addressed, should they determine it was necessary, more stringent criteria for employees at NIH.
HHS did issue a supplemental regulation in 1996 that included prohibitions on certain types of outside activities and employment applicable to all HHS employees, including those employed at NIH. Specifically, HHS employees may not provide compensated professional or consultative services related to the preparation of any grant application, contract proposals, program report, or other document intended for submission to HHS. Additionally, HHS employees may not participate in compensated outside activities with respect to particular activities funded by HHS. This supplemental regulation also contains prohibitions on outside activities and employment applicable to employees of the Food and Drug Administration and the Office of the Chief Counsel, and to the outside practice of law by attorneys in the Office of the General Counsel. HHS did not propose any special standards for NIH employees in its supplemental regulation.
2. Handling Conflicts of Interest Arising from Outside Activities (including Employment)
One of the major areas that can give rise to conflicts of interest questions is employees= outside activities. Two basic issues must be addressed when an employee proposes to engage in an outside activity: whether the employee may participate in the outside activity and, if permissible, what rules apply to such participation. a. Conflicting Outside Activities and Judging Appearance Problems
The Standards prohibit an employee from engaging in an outside activity that conflicts with his official duties. An outside activity will conflict with an employee's official duties if it is prohibited by statute or an agency supplemental regulation, or if the disqualification required to avoid a conflict of interest is so central or critical to the performance of the employee=s official duties that his ability to perform his job is materially impaired. This provision recognizes that even if an outside activity is not prohibited under this standard, it may nonetheless violate other principles or standards and therefore be prohibited. See 5 C.F.R. ' 2625.802. For example, even if a proposed outside activity does not conflict with an employee=s duties, it may be prohibited if it creates the appearance that the employee is using public office for private gain. When an employee wishes to participate in an outside activity for which a disqualification from certain matters is required to avoid a conflict of interest, a determination that the resulting conflict will materially impair that employee's ability to do his job requires a judgment call based on a variety of facts, including the nature of the employee=s duties, the needs of the office, and the ability to reassign projects in the office. However, whether or not a disqualification is required, an agency should consider whether the employee=s participation in the outside activity is prohibited by any other provision in the Standards, including if participating in the activity would create the appearance that he is using public office for private gain.
The Standards provide that whether Aparticular circumstances create an appearance that the law or these standards have been violated shall be determined from the perspective of a reasonable person with knowledge of the relevant facts.@ 5 C.F.R. ' 2635.101(b)(14). Agencies are undoubtedly in the best position to determine if an outside activity is permissible under these Standards generally, and with respect to appearances in particular. Some things that an agency should consider in making a decision about whether participation in an outside activity will create the appearance that an employee is using public office for private gain are the level of the employee's position and the nature of his duties; the subject of the outside work and its relation to agency programs and operations; the identity of the outside employer and its relationship to the agency, including whether it receives grants or contracts; and the timing of the offer of employment. The Standards do not contemplate direct consultation on ethics issues between OGE and employees of other agencies. Rather, the regulations provide that employees and their supervisors should seek advice from their agency ethics officials and that those ethics officials may consult with OGE as necessary. The reason for this is clear: agencies are in a better position to know or develop the facts necessary to understand how the issue implicates agency programs. This is particularly true with respect to questions regarding appearances, and OGE will generally defer to agency determinations on these questions.
OGE's role in this process is to provide consultation, upon request, to agency ethics officials regarding application of the Standards and applicable laws. Such assistance may be provided through informal consultations over the phone, in meetings, or through the advisory opinion process. When necessary, OGE consults with the U.S. Department of Justice when an agency presents an issue of first impression with respect to one of the criminal conflict of interest statutes. While the final judgment on appearances rests with the agency, OGE has an important role in ensuring that agencies understand the rules and are applying them consistently across the executive branch. OGE may also provide agencies with input on these issues through its periodic program reviews.
b. When an Outside Activity Is Approved. The Standards of Ethical Conduct provide that an employee who is engaged in an outside activity must comply with all applicable provisions set forth in the rules, including rules that prohibit use of position or Government resources, information, and time in connection with outside activities and that relate to providing representational services on behalf of others before the Government. Particularly relevant in the context of the present inquiry are the rules that require employees not to participate in certain Government matters when their own interests, or the interests of others, are affected by such matters.
Non-participation may be required in connection with an outside activity under one of two ethics provisions. Under 18 U.S.C. ' 208, a criminal conflict of interest statute, an employee is prohibited from participating personally and substantially in any particular matter that would have a direct and predictable effect upon an employee's own financial interest or upon the financial interests of her or her non-Government employer, among others. Adherence to the statute is accomplished by not participating in the particular matter. Under 5 C.F.R. ' 502 of the Standards of Ethical Conduct, an employee is also required to recuse himself when he determines that his impartiality would reasonably be questioned if he were to participate in a particular matter involving specific parties where persons with whom he has certain personal or business relationships are involved. The obligation to recuse when necessary and to ensure that a disqualification is observed, always remains the personal responsibility of the individual employee subject to the disqualification. An employee should notify his supervisor when he becomes aware of the need to disqualify himself from certain matters because of a potential conflict of interest. Once notified, the employee=s supervisor also has a responsibility to facilitate the disqualification by ensuring that the employee is not assigned to work on matters from which he is disqualified. Agency ethics officials obviously have an important role through direct counseling to, and education of, employees to ensure that they understand when a recusal is required and how to effectively implement a required recusal. OGE=s role is to ensure that agency ethics officials understand the rules and ensure that they are applied consistently across the executive branch.
It is worth noting that agencies do have discretion with respect to whether a disqualification will be approved as an appropriate remedy for a potential conflict of interest. In other words, the Standards permit a supervisor to disapprove a request for approval of an outside activity if the required disqualification is unworkable because other employees in the office cannot readily be assigned to work on the matter from which the requesting employee would be disqualified if he were permitted to pursue the proposed outside employment. See 5 C.F.R. ' 2635.403(b).
3. Financial Disclosure The financial disclosure systems implemented by OGE for the executive branch are one of the ways that potential conflicts of interest may be identified and handled. The Ethics in Government Act requires senior officials in the executive, legislative and judicial branches to file public reports of their finances as well as other interests outside the Government. The theory of public financial disclosure is rooted in post Watergate concepts of "Government in the Sunshine," which aims to promote public confidence in the integrity of Government officials. Congress also sought Ato strike a careful balance between the rights of individual officials and employees to their privacy and the right of the American people to know that their public officials are free from conflicts of interest.@ H. Rep. No. 800, 95th Cong., 1st Sess. 18 (1977). OGE has no authority to alter the statutory requirements. OGE's regulation and the public financial disclosure report (SF 278) format reflect the law's mandates and its dual purpose: avoiding conflicts of interest through analysis of disclosures and ensuring public confidence in Government through disclosure as an end in itself.
The statute specifies which officials in the executive branch file a SF 278. Employees in statutorily specified positions must file the SF 278; neither the employees nor their agencies have the discretion to determine that they may be exempted from this requirement. Among the positions specified as subject to this filing requirement are the President, Vice President, certain commissioned White House appointees, senior postal service employees, Presidential nominees requiring Senate confirmation, other political appointees, and members of the Senior Executive Service. Congress specified that a senior employee paid under an alternative pay systems must file when his position=s rate of basic pay is equivalent to or greater than 120 percent of the minimum rate of basic pay for GS 15.
Additionally, the Director of OGE was granted the authority to designate additional positions for filing SF 278s if OGE determines that those positions are equivalent to others that normally require filing, generally referred to as an Aequal classification@ determination. OGE gives careful consideration to requests that a position be subject to the public financial disclosure requirements based on an Aequal classification@ argument, paying special attention to Congress= concern that the right balance be struck between the employee=s right to privacy and the public=s right to know public officials are free of conflicts of interest.
A variety of factors are considered in making equal classification determinations, but it is important to keep in mind that the amount of compensation paid to an employee is not the crucial factor in determining whether an employee is in a position covered by the public reporting requirements. The law contemplates that the quality and level of responsibility must be considered. While the amount of pay may, in many cases, be commensurate with responsibility, in recent years Congress has developed pay plans that provide relatively high levels of compensation to recruit and retain employees who are highly skilled and qualified in their fields, such as doctors.
Concerns have been raised about the positions at NIH for which public disclosure is not required. Specifically, a recent news report asserts that, based on a 1998 OGE opinion, officials at NIH are Aallowing@ senior employees to avoid public financial disclosure requirements. The article suggests that NIH as an agency, and its employees individually, have improperly exercised discretion in this area. This is simply not true. Indeed, as noted above, neither NIH nor its employees have discretion in this area.
I would like to take this opportunity to explain how certain determinations were made with respect to positions covered by the public financial disclosure system at HHS generally, including NIH. In late 1997, the DAEO at HHS requested OGE=s opinion on what was meant by the term Arate of basic pay@ when determining, among other things, whether employees under a particular pay system are required to file public financial disclosure reports. At that time, the Secretary of HHS had been empowered to appoint a number of employees in the ASenior Biomedical Research Service@ under a new pay system in which pay was determined by the Secretary in an amount not less than the minimum rate payable for a GS-15 and not more than the rate of pay for level I of the Executive Schedule. Under this system there were no steps or grades within the range; it was one broad Apay band.@
Under the statutory requirements for filing, employees in Apay band@ systems would be subject to the public financial disclosure reporting requirement only if their Arate of basic pay@ was equal to or greater than 120 percent of the rate of basic pay for a GS-15. In an opinion issued in early 1998, OGE determined that, based on previous opinions interpreting both the statutory language and legislative history of the Ethics in Government Act, the term Arate of basic pay@ means the lowest step authorized for a position=s pay grade. For Apay band@ systems in which the minimum allowable pay is less than 120 percent of the basic rate of pay for a GS-15, and where there are no intermediate steps or grades, this means that no employee compensated under that Apay band@system is required to file a public financial disclosure report, regardless of the actual amount they are compensated. As a practical matter this mean that some employees at NIH who had been required to file a public financial disclosure report because they had previously been in the Senior Executive Service were no longer required to do so. HHS has recently requested that OGE consider whether a number of positions at NIH meet the criteria for filing a public financial disclosure report under an equal classification analysis.
OGE Program Reviews at NIH
As I stated earlier, OGE conducts systemic reviews of all executive branch department and agency ethics programs to determine whether agencies have developed effective ethics systems and procedures, in compliance with OGE=s regulations, to prevent conflicts of interests. OGE currently conducts reviews of 35 agencies annually, with major agencies being reviewed approximately every 5 to 6 years. Agencies are selected for review based on the length of time since their last review, OGE staff concerns about an agency=s program, and news media reports of ethical concerns.
These reviews generally focus on several ethics program elements, including the structure and staffing of the ethics program, the financial disclosure systems, the ethics education and training program, the advice and counseling services, the outside activity approval process, ethics systems for advisory committees, acceptance of travel payments from non-Federal sources under 31 U.S.C. ' 1353, ethics staff relations with the Office of Inspector General, and ethics issues unique to that agency. In large agencies or departments, OGE may look at how the ethics program is managed in its individual components rather than the entire agency. The reviews do not typically look at individual employee cases of conflict. On occasion concerns about an individual employee will arise in the course of a review, and OGE will consider the facts giving rise to the concern and make appropriate recommendations.
Once a program review report is issued, the agency is required to report, within 60 days, on any actions it will take to address issues raised in the report. OGE conducts a six-month followup to check on the agency=s progress in addressing these issues. In rare cases, where we find programs that are extremely deficient, we will send a Notice of Deficiency to the agency requiring them to correct certain matters, usually within a specified period of time.
Since 1990, OGE has performed three program reviews at NIH and has a fourth review underway. In 1991, we conducted a review focusing on the National Cancer Institute (NCI), the National Heart, Lung and Blood Institute (NHLBI), and the National Institute of Allergy and Infectious Diseases (NIAID). This review focused in part on the NIH outside activity approval process as it related to scientists and doctors. Our recommendations focused on the need to improve the criteria and process for approving outside activities, particularly in the area of teaching, speaking, and writing. Our main concerns were that some activities appeared to be approved without adequate documentation. We also observed that a large proportion of outside activity requests were being considered and approved after the activity had already taken place. It is important to note that the 1991 program review was conducted prior to the issuance of the new executive branch-wide Standards of Ethical Conduct.
Following the 1991 review we met with the Director of NIH and the HHS DAEO to discuss our concerns. We recommended that HHS assist NIH in establishing an Office of Ethics on site at NIH and that clear policies, consistent with OGE regulations, concerning outside activities be developed. We also again recommended that HHS correct its department-wide standards of conduct regulations to reflect the correct standards for outside speaking and writing activities. Following the 1991 review, HHS established a satellite ethics office at NIH and issued interim guidance to NIH on the correct standards for approving teaching, speaking and writing activities.
In 1995, OGE conducted a program review at NIH looking at NCI, NHLBI, and NIAID. While OGE will normally review different components in a large agency like NIH, it was felt that a follow-up at these three institutes was appropriate given the results of the previous review. We were pleased to find that NIH had put much time and effort into developing its guidance on outside activities, and in implementing a much improved system for approving outside activities.
As noted previously, the new executive branch-wide Standards of Ethical Conduct became effective prior to the 1995 review. After the Standards went into effect some NIH policy guidance on outside activities C though consistent with our 1991 recommendations C was superseded. Following the 1995 review, NIH did rescind its guidance on outside activities, and HHS issued supplemental regulations, though, as previously noted, HHS did not propose any special standards for NIH employees in its supplemental regulation.
In 2000, OGE conducted a program review at NIH of the National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMSD), the National Institute of Child Health and Human Development (NICHHD), and the National Institute of Diabetes and Digestive and Kidney Disorders NIDDKD). Recommendations included ensuring that proper determinations are made before issuing statutory conflict of interest waivers to special Government employees on Federal advisory committees, and recommendations to NIDDKD in particular regarding the procedure for approval to engage in outside activities. The latter recommendation arose primarily from the fact that a new ethics official at NIDDKD could not locate the approvals granted before he took the position. Through our normal follow-up procedures, we concluded that NIH took actions to implement these recommendations.
OGE has initiated a 2004 review of the NIH ethics program. This review will be performed at the Office of the Director, NCI, NIAID, and the Clinical Center, and it will focus on the structure and staffing of NIH=s ethics program, the public financial disclosure system, the criteria and process for approving outside activities, the criteria and process for approving the acceptance of awards, and other basic ethics systems.
Conclusion
In closing, I would like to emphasize that OGE stands ready to work with you, the Committee, HHS, and NIH to ensure that the public has the highest confidence in the important work of all the components at NIH.
I would be happy to answer any questions you may have.
