April 1, 1998
                                   DO-98-011

MEMORANDUM

TO:       Designated Agency Ethics Officials

FROM:     Stephen D. Potts
          Director

SUBJECT:  Regulatory Amendment to Clarify Finality of Position
          Designations for Confidential Financial Disclosure 

     Pursuant to 5 C.F.R. §§ 2634.904 and 2634.905, each executive
branch department and agency designates which of its positions will
require employees to file confidential financial disclosure reports
(primarily OGE Form 450), applying criteria stated in the
regulation.  Employee complaints about such designations are
reviewed under the procedures at 5 C.F.R. § 2634.906, whereby the
decision of the agency head or his designee is final.  

     When the Office of Government Ethics (OGE) issued this
regulation in 1992, we considered the finality language to be clear
and unambiguous.  It has become apparent, however, that some may be
interpreting that finality as limited to the agency's internal
decisional mechanism for review, leaving open the possibility of
negotiated grievance and arbitration procedures, or other remedies
within or outside the agency.  See, for example, the Federal Labor
Relations Authority's decision in American Federation of Government
Employees, Local 3258 (Union) and U.S. Department of Housing and
Urban Development, Boston, Massachusetts (Agency), 0-AR-2734 (FLRA,
Feb. 19, 1998).

     In order to clarify the original intent of the regulation, OGE
has, therefore, issued a minor clarifying regulatory amendment. 
See 63 Fed. Reg. 15273-15274 (March 31, 1998).  Effective
immediately, it states more emphatically that the agency head's (or
his designee's) decision upon review of complaints regarding the
designation of employee positions for filing confidential financial
disclosure reports is final and conclusive for all purposes,
notwithstanding any other provision of law or regulation.   

     This amendment reemphasizes, by expressly stating, that this
procedure is the sole and exclusive means of seeking such review,
and that the final decision by the agency head or designee is
intended to preclude administrative or negotiated grievances,
arbitration procedures, and any other review or appeal, either
within or outside the agency.

     The purpose of finality, without additional appeals or
complaints, is to avoid protracted review of filer designations,
which could seriously undermine the effectiveness and orderly
administration of the executive branch confidential financial
disclosure system.  While an agency's decision to require
confidential reports by employees in designated positions affects
the privacy of employees, there are sufficient safeguards built
into the system to adequately minimize privacy intrusions, such
that the need for nonpublic financial disclosure clearly outweighs
privacy concerns.  Therefore, prompt and final decisions about who
must file these reports are necessary and appropriate.  

     The bases for the executive branch confidential financial
disclosure system and the safeguards that have been built in are
described at 5 C.F.R. § 2634.901.  Specifically, the confidential
disclosure system serves the necessary purposes of assisting in the
prevention of employee conflicts of interest and maintaining
ethical integrity in agency programmatic functions.  These reports
are strictly confidential, not available to the public under the
Freedom of Information Act  (5 U.S.C. § 552, exemptions (b)(3),
(b)(4) and (b)(6)) or otherwise, and protected under the Privacy
Act (5 U.S.C. § 552a), section 107(a) of the Ethics in Government
Act (5 U.S.C. appendix, § 107(a)), and section 201(d) of Executive
Order 12674.  Additionally, only certain types of positions may be
designated, applying the criteria provided in the regulation, and
employees may seek review by the agency head (or designee) of an
agency decision to designate their positions for filing, in
accordance with the procedure prescribed in § 2634.906. 

     Given the importance of the confidential reporting system and
these built-in protections for employees, OGE had determined when
the regulation was issued in 1992 that it was necessary and
appropriate to reach finality promptly when handling confidential
filer designation complaints.  That was and continues to be the
basis for the statement in the regulatory text at 5 C.F.R.
§ 2634.906 that the decision of the agency head or his designee is
final.  The clarifying regulatory amendment of March 31 will serve
to dispel any lingering doubt as to the meaning of that finality.