<o" ....TES Op

f:4,J~ United States

(3 Office of Government Ethics

1201 New York Avenue, NW., Suite 500

Washington, DC 20005-3917

March 6 J 1995

Stephen Sharfman

Legal Advisor

Postal Rate Commission

Suite 300

1333 H Street, NW.

Washington, DC 20268

Dear Mr. Sharfman:

The Ofl:ice of Government Ethics (OGE) has completed its second

review of the Postal Rate Commission's (PRC) ethics program. This

review was conducted pursuant to section 402 of the Ethics in

Government Act of 1978, as amended. Our objectives were to

determine the ethics program's effectiveness and ,compliance with

applicable laws and regulations. To achieve our objectives, we

examined the following program elements: the administration of the

ethics program, the public and confidential financial disclosure

systems, the ethics education and training program, the counseling

and advice services, the acceptance of travel and related expenses

from non-Federal sources under 31 U.S.C. § 1353, and the internal

procedures used to process standards of conduct and criminal

conflict-of-interest violations. The review was conducted during

December 1994 and January 1995 in Washington, DC.

BACKGROUND

PRC is an independent agency created by the Postal

Reorganization Act, as amended. Its primary function is to submit

recommended decisions regarding postage rates, fees, and mail

classifications to the United States Postal Service Governors.

Additionally, PRC acts on appeals of Postal Service decisions to

close or consolidate post offices and investigates complaints

concerning postage rates, fees, mail classifications, or services.

It also responds to requests for advisory opinions from the Postal

Service.

PRC is composed of five Commissioners appointed by the

President with the advice and consent of the Senate, one of whom is

designated as Chairman, and approximately 40 additional employees

trained in the areas of law, economics, statistics, and cost

accounting.

ADMINISTRATION OF THE ETHICS PROGRAM

The PRC ethics program is centralized within the Office of the

Legal Advisor (OLA). The Legal Advisor is the Designated Agency

Ethics Official (DAEO) and an attorney-advisor within OLA is the

OGE·l0G

Allt\ll~l 1992
Mr. Stephen Sharfman

Page 2

Alternate DAEO. Both the DAEO and the Alternate DAEO share the

day-to-day responsibilities of administering the ethics program

along with the Personnel Office, which assists in managing the

confidential financial disclosure and ethics education and training

programs.

PRIOR OGE REPORT

OGE previously conducted a review of PRC' s ethics program

during August 1985. The October 1985 report stemming from this

review commended PRC ethics officials on the effort devoted toward

the program, but recommended several improvements to make the

program more effective. These recommendations focused primarily on

the public and confidential financial disclosure systems and

included: reviewing all positions to ensure that appropriate

employees file confidential reports, conducting more thorough

reviews of both public and confidential reports, ensuring that

copies of waivers are included in filers' individual financial

disclosure files, and obtaining letters from all employees

certifying that they do not have holdings prohibited by PRC

regulations. With regard to the ethics education and training and

counseling and advice programs, the report recommended sending

employees periodic reminders to familiarize themselves with PRC's

standards of conduct and providing employees with post-employment

counseling upon departure.

STANDARDS OF CONDUCT

PRC's standards of conduct were originally found at 39 C.F.R.

part 3000. This regulation was superseded by the executive branchwide standards of conduct at 5 C.F.R. part 2635, with the exception

of certain sections which PRC revised and reissued at 39 C.F.R.

part 3000. The revised regulation includes a general provisions

statement acknowledging that the executive branch standards of

conduct apply to PRC employees and notes that the DAEO is

designated by the Chairman and is responsible for the ethics

program. It also retains the existing rules relating to ex parte

communications by PRC employees regarding particular matters in

contested proceedings before the Commission. Portions of PRC' s

supplemental standards of conduct regulation are also restated in

this revised regulation for ease of reference.

PRC's supplemental standards of conduct regulation at 5 C.F.R.

part 5601 focuses on prohibited financial interests, seeking

employment, and outside employment. The prohibited financial

interests section at 5 C.F.R. § 5601.102 prohibits employees from

having any financial interests in a person whose interests are

significantly affected by rates of postage, fees for postal

services, the classification of mail, or the operations of the

Postal Service. Section 3000.735-103(b) of 39 C.F.R. expands upon

this prohibition by authorizing the PRe Chairman to determine the
Mr. Stephen Sharfman

Page 3

appropriate maximum limit for an employee's interest in stocks,

bonds, or other forms of securities in anyone entity or person.

Section 5601.103 of 5 C.F.R. essentially restates the seeking

employment rules contained in the executive branch-wide standards

of conduct. This section also requires employees to provide notice

of disqualification to their supervisor upon determining that they

will not participate in a particular matter affecting the financial

interests of a prospective employer.

Section 5601.104 of 5 C.F.R. prohibitsPRC employees from

engaging in outside employment with or for a company or person

whose interests are significantly affe. ':ec by rates of postage,

fees for postal services, the classiflcation of mail, or the

operations of the Postal Service. This section also requires

employees to obtain written approval from the DAEO before engaging

in outside employment.

PUBLIC FINANCIAL DISCLOSURE SYSTEM

PRC has procedures in place to ensure that public financial

disclosure reports are generally filed and reviewed in accordance

with applicable laws and regulations. However, the written

procedures governing the administration of the public financial

disclosure system should be revised to include procedures for

identifying and collecting reports from new entrant and termination

filers. Additionally, PRC should review the public reports in a

more timely manner.

Public Financial Disclosure

Procedures Are Generally

Effective

The Alternate DAEO is primarily responsible for the

administration of the public financial disclosure system, including

distributing and collecting the public reports (SF 278). The

Alternate DAEO is also responsible for conducting the initial

review of the public reports. Once the initial review is

completed, the Alternate DAEO forwards the reports to the DAEO for

final review and certification.

PRC has written procedures which formalize the steps followed

to administer both the public and confidential financial disclosure

systems. However, these procedures do not include a system for

collecting new entrant or termination public reports from incoming

or departing covered employees. PRC should update the written

procedures to incorporate a system for identifying these employees

and collecting their public reports.
Mr. Stephen Sharfman

Page 4

Public Reports Were

Generally Filed In

A Timely Manner

We reviewed 5 of the 11 public reports filed in 1994, all of

which were incumbent reports. 1 Our review revealed that 4 of the

5 reports were filed by the appropriate filing deadline in

accordance with 5 C.F.R. § 2634.201. 2

Public Reports Were Not Reviewed

In A Timely Manner

None of the public reports were reviewed within 60 days from

the date of filing as required by 5 C.F.R. § 2634.605(a). PRC

ethics officials informed their OGE desk officer after the 60-day

time frame had elapsed that the reports had not yet been reviewed

due to extenuating circumstances. All public reports were

subsequently reviewed and certified by December 15, 1994. PRC

should ensure that all future public reports are reviewed within

the 60-day time frame.

Review Of The Public Reports

Was Thorough

The review of the public reports by the DAEO and Alternate

DAEO appeared to be thorough. We found no substantive or technical

deficiencies during our review of these reports. We were impressed

with the Alternate DAEO's use of follow-up memorandums to notify

filers of deficiencies which needed to be addressed before their

reports could be finally certified.

CONFIDENTIAL FINANCIAL DISCLOSURE SYSTEM

PRC has procedures in place to ensure that confidential

financial disclosure reports are generally filed and reviewed in

accordance with applicable laws and regulations. However, PRC

should obtain written approval from OGE for their additional

confidential reporting requirement.

lThe six reports

Commissioners and the

forwarded for review

§ 2634.602 (c) (1) .

we did

DAEO.

to OGE

not review were filed by the

These reports WGre previously

in accordance with 5 C.P.R.

ZOne filer received an extension until May 31, 1994, but did

not file a report until June 23, 1994.
Mr. Stephen Sharfman

Page 5

Confidential Financial

Disclosure Procedures

Are Effective

As with the public system, the Alternate DAEO is primarily

'responsible for the administration of the confidential financial

disclosure system. In addition to distributing and collecting the

confidential financial disclosure reports (SF 450), the Alternate

DAEO is solely responsible for the review and certification of the

confidential reports. Once the review and certification is

completed, the Alternate DAEO notifies the DAEO of the results of

the review.

The Personnel Office notifies OLA whel1 new employees enter

positions that require the filing of a confidential report. As

with the incumbent reports, the new entrant reports are

distributed, collected, reviewed, and certified by the Alternate

DAEO.

Written Approval Needed From

OGE For Additional Reporting

Requirement

Section 3000.735-103(b) of 39 C.F.R. authorizes the PRC

Chairman to determine the appropriate maximum limit for an interest

in stocks, bonds or other forms oJ securities in anyone entity or

person held by a PRe employee. In accordance with this authority,

PRC currently requires confidential filers to note any holdings

exceeding $15,000 on their confidential report.

Section 2634.103 (a) (2) of 5 C.F.R. states that an agency

cannot impose,1tadditional reporting, requirements on either public

or confidential filers" uD)ess specifically authorized by the

Office of Governmel).t, Ethics as supplemental confidential

reporting." If PRe wishes to maintain this supplemental reporting

requirement, it is necessary to submit a written request to OGE for

approval. '

Confidential Reports Were

Filed And Reviewed In A

Timely Manner

We reviewed all of the 20 confidential reports filed in 1993.

Of these, 19 were incumbent reports and 1 was a new entrant.

Additionally, we reviewed all of the 1994 incumbent confidential

reports for timeliness of filingj however, we did not conduct any

further review of these reports since they had not been reviewed or

certified at the time of our review.

All of the 1993 and 1994 incumbent reports were filed by the

appropriate deadline, or shortly thereafter. However, the one new
Mr. Stephen Sharfman

Page 6

entrant report filed in 1993 was filed more than 30 days from the

date the employee entered a covered position. In addition, both

the 1993 and 1994 confidential reports were reviewed and certified

within 60 days of the date of filing. 3

ETHICS EDUCATION AND TRAINING

PRC has established an effective ethics education and training

program which complies with the requirements of applicable ethics

regulations.

Initial Ethics Orientation

Requirement Being Met

Pursuant to 5 C.F.R. § 2638.703, new employees are provided

an initial ethics orientation within 90 days of entering on duty.

The Personnel Office provides new employees with copies of 5 C.F.R.

parts 2635 and 5601, 39 C.F.R. part 3000, and the names and

telephone numbers of the DAEO and Alternate DAEO. Employees are

provided one hour of official duty time to review these materials.

Annual Ethics Training

Was Completed

All covered employees received annual ethics training in 1994.

Almost half of the covered employees attended an annual ethics

training course provided in September by OGE in coordination with

the Small Agency Council. The remaining employees were provided

annual ethics training by the Alternate DAEO. This training

included a presentation of an ethics training video and a

dis2~dsion of the corres~onding case studi -~, ~~ ensure that all

covered employees received annual ethics training ( course attendees

were required to sign attendance sheets.

COUNSELING AND ADVICE SERVICES

Ethics counseling and advice are provided to employees of PRC

by the DAEO and Al ternate DAEO; however, there were very few

written determinations issued recently. The DAEO stated that

because of the small size of PRC, most advice on ethics questions

is issued verbally and on an informal basis.

3According to the Alternate DAEO, the 1994 incumbent

confidential reports were reviewed and certified during the final

week of December 1994.
Mr. Stephen Sharfman

Page 7

Counselinq And Advice Services

Are Consistent With Ethics

Laws And Regulations

We reviewed all written advice issued in 1993 and 1994. The

written advice addressed such issues as gift acceptance, fundraising activities, official travel, and outside employment. The

advice appeared to be consistent with applicable ethics laws and

regulations.

Outside Emplovment Notification

Is Required

PRCis supplemental standards of conduct regulation requires

all employees to notify the DAEO in writing before accepting or

engaging in outside employment. According to the DAEO, there have

been no such requests recently.

Post-Employment Counseling

Is Provided Upon Request

According to the Alternate DAEO, there is no requirement that

departing employees receive post-employment counseling from OLA.

post-employment counseling is provided upon request, but because of

the small size of the agency and the relatively low turnover, this

type of counseling is rarely provided. The Alternate DAEO provided

us with a copy of a memorandum for departing employees which he

prepared subsequent to the completion of our fieldwork. This

memorandum summarizes the post-employment restrictions and

instructs departing employees to contact the Legal Advisor with any

questions they may have regarding these restrictions. ":(;'!,I.l'''.

GENERAL SERVICES ADMINISTRATION TRAVEL

Under the General Services Administration I s (GSA) Interim

Rule 4 at 41 C.F.R. part 304-1, implementing 31 U.S.C. § 1353,

Federal agencies can accept travel, subsistence, and related

expenses from non-Federal sources in connection with employees'

attendance at certain meetings and similar functions related to

their official duties. This regulation requires agencies to report

to OGE on a semiannual basis the acceptance of those travel expense

payments over $250. During the most recent six-month period from

April 1, 1994, to September 30 , 1994 I PRC did not accept any

payments in excess of $250.

Procedures For Accepting

Travel Expense Payments

Are Effective

A PRC memorandum dated May 7, 1993, establishes the procedures

for PRC acceptance of travel expense payments under the GSA
Mr. Stephen Sharfman

Page 8

authority. These procedures effectively delineate the process for

requesting and accepting such payments. Additionally, the

procedures have recently been updated to reflect the requirements

of the most recent version of the GSA regulation (Interim Rule 4) . Finally, we were impressed that the PRC Chairman is the only

official authorized to approve requests to accept travel payments

under this authority. This delegation of authority is notable

because according to 41 C.F.R. § 304-1.3(c), agencies are to ensure

that officials delegated the authority to determine the propriety

of accepting such payments are at as high an administrative level

as practical to ensure adequate consideration and review of the

circumstances surrounding the offer and acceptance of the payment.

STANDARDS OF CONDUCT AND CONFLICT-OF-INTEREST VIOLATIONS

PRC does not have an Inspector General. Therefore, OLA is

responsible for processing allegations of standards of conduct

violations and referring alleged violations of the criminal

conflict-of-interest laws to the Department of Justice. According

to the DAEO, there have been no standards of conduct violations or

criminal referrals in the past two years.

CONCLUSIONS

Overall, PRC has an effective ethics program. The public

reports were filed in a timely manner and the review of these

reports appeared to be thorough. The confidential reports were

also filed and reviewed in a timely and thorough manner. In

addition, the ethics education and counseling programs provide

employees with appropriate and timely information. Finally, PRC

rr,a.intains effeL.:ive and up-to-date procedures for the acceptance of

travel expense payments under 31 U.S.C. § 1353. However, PRC

should ensure that public financial disclosure reports are reviewed

within 60 days from the date of filing. Additionally, PRe should

obtain written approval from OGE for their supplemental

confidential reporting requirement.

RECOMMENDATIONS

We recommend that you:

1. Ensure that public financial disclosure

reports are reviewed within 60 days from the

date of filing as required by 5 C.F.R.

§ 2634.605(a).

OGE for the

reporting

5 C.F.R.

approval from

confidential

accordance with

Obtain written

supplemental

requirement in

§ 2634.103(a)(2).

2.
Mr. Stephen Sharfman

Page 9

In closing, I would like to thank the OLA and Personnel Office

officials for all of their efforts on behalf of the ethics program.

Please advise me within 60 days of the specific actions your agency

has taken or plans to take concerning the recommendations in our

report. A brief follow-up review will be scheduled within six

months from the date of this report. In view of the corrective

action authority vested with the Director of the Office of

Government Ethics under subsection 402 (b) (9) of the Ethics in

Government Act, as implemented in subpart D of 5 C.F.R. part 2638,

it is important that PRC officials take actions to implement our

recommendations in a timely manner. A copy of this report is being

forwarded to the PRC Chairman .. Please contact Dale Christopher at

202-523-5757, extension 1130, if we may be of further assistance.

Sincerely,

)tt~\·~~- Stt'p~~ D. Potts fB°"--

Director

Report Number 95-010