COMPTROLLER GENERAL'S
REPORT TO THE CONGRESS

PROBLEMS FOUND IN THE
FINANCIAL DISCLOSURE SYSTEM
FOR DEPARTMENT OF COMMERCE

EMPLOYEES

DIGEST

The special relationship between the Department
of Commerce and the Nation's business community
calls for unusual attention by Commerce in
maintaining a financial disclosure system that
will insure employee financial holdings are
effectively reviewed so that the employee, the
agency, and the public are protected.

GAO reviewed

--effectiveness of the financial disclosure
system at Commerce,

--financial interests reported by its employ-
ees, and

--the question of whether other of its offi-
cials should be filing financial disclosure

statements.

The agency's financial disclosure system had
deficiencies that could have caused it to
be ineffective in preventing possible appear-
ances of conflicts of interest. GAO found

--employees did not file statements when re-
quired,

--some employees not required to file financial
disclosure statements have responsibilities
that warrant the filing of a statement, and

--the agency had not developed adequate pro-
cedures for collecting, processing, control-
ling, and reviewing statements.

GAO's review of 328 of 3,200 financial disclosure
statements filed by Commerce employees in
1975 revealed that 86 held 139 interests that
give the appearance of conflicting with their
assigned duties and responsibilities.

Tear Sheet. Upon removal, the report cover date should be noted hereon.

i

FPCD-76-55

Accordingly, the Secretary of Commerce should

--review and take immediate action on employees' interests questioned by GAO;

--develop procedures for effectively collecting, controlling, and processing statements;

--establish criteria and a system for reviewing statements;

--devise a method to follow up promptly on financial interests;

--expand Commerce's comprehensive criteria for determining who should file; and

--insure statements are filed systematically by all employees who should file.

We discussed our findings with representatives in Commerce's Offices of General Counsel and Personnel that are responsible for the financial disclosure system. Commerce was not given an opportunity to formally comment on recommendations in this report, but the above officials, for the most part, did not offer any objections to the system deficiencies noted. Comments were not made on the financial holdings GAO questioned because Commerce had not had an opportunity to consider each case. (See p. 18.)

This is one in a series of GAO reports on
financial disclosure systems in departments,
boards, and commissions of the Government.
(See pp. 20 and 21.)

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CHAPTER 1

INTRODUCTION

The Department of Commerce was established by the act of March 4, 1913 (37 Stat. 736; 15 U.S.C. 1501) which reorganized the Department of Commerce and Labor, transferring labor activities into a separate department. The primary statutory mission of Commerce is to foster, promote, and develop foreign and domestic commerce of the United States. Through the years, the mission has evolved to encompass a responsibility to foster, serve, and promote the Nation's economic development and technological advancement. Commerce attempts to fulfill its mission, which is carried out by several agencies, through

--participating with other Government agencies in the creation of national policy, through the President's Cabinet and its subdivisions;

--promoting progressive business policies and growth;

--assisting States, communities, and individuals toward
economic progress;

--strengthening the international economic position.
of the United States;

--improving man's comprehension and uses of the physical environment and its oceanic life;

--assuring effective use and growth of the Nation's
scientific and technical resources; and

--acquiring, analyzing, and disseminating information concerning the Nation and the economy to help achieve increased social and economic benefit.

Those major agencies involved in fulfilling Commerce's mission and a brief description of their primary responsibilities follow:

--Economic Development Administration provides as-
sistance for long-range economic development of
areas with severe unemployment and low-family-income
problems.

promotes and

--Office of Minority Business Enterprise
assists the expansion of minority enterprise by co-
ordinating and encouraging action by Federal, State,