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Safeguards for Procurement Integrity' which was released on April 29, 
2005.

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Report to Congressional Requesters:

United States Government Accountability Office:

GAO:

April 2005:

Defense Ethics Program:

Opportunities Exist to Strengthen Safeguards for Procurement Integrity:

GAO-05-341:

GAO Highlights:

Highlights of GAO-05-341, a report to congressional requesters.

Why GAO Did This Study:

To help ensure defense contracts are awarded fairly and current and 
former employees do not use their knowledge of DOD acquisition 
activities to gain financial or other benefits, DOD personnel are 
required to conduct themselves in a manner that meets federal ethics 
rules and standards.

Regulations require DOD to implement an ethics program and provide that 
contractors must conduct themselves with the highest degree of 
integrity and honesty. For this report, GAO assessed (1) DOD’s efforts 
to train and counsel its workforce to raise awareness of ethics rules 
and standards as well as DOD measures of the effectiveness of these 
efforts and (2) DOD’s knowledge of defense contractors’ programs to 
promote ethical standards of conduct. 

What GAO Found:

To implement its ethics program, DOD has delegated responsibility for 
training and counseling employees on conflict-of-interest and 
procurement integrity rules to more than 2,000 ethics counselors in 
DOD’s military services and agencies. These efforts vary in who is 
required to attend training and counseling, the content of ethics 
information provided, and how often the training and counseling is 
provided. While some variation may be warranted, DOD lacks the 
knowledge needed to determine whether local efforts are meeting the 
objectives of its ethics program—in large part because DOD does not 
systematically capture information on the quality and content of the 
training and counseling or employee activity as they relate to ethics 
rules and restrictions. Specifically, ethics counselors were unable to 
tell us if people subject to procurement integrity rules were trained. 
Instead, DOD evaluates its ethics program in terms of process 
indicators—such as the number of people filing financial disclosure 
forms, the number of ethics officials providing training and counseling 
services, and the amount of time ethics officials spend on such 
activities—which do not provide metrics to assess the effectiveness of 
local training and counseling efforts. DOD also lacks adequate 
information on the number and status of allegations of potential 
misconduct related to conflict-of-interest and procurement integrity 
rules. Ethics officials did not know of 53 reported allegations of 
potential misconduct referred to inspectors general offices. DOD has 
taken several actions since October 2004 aimed at enhancing its ethics 
program. However, without knowledge of training, counseling, and 
reported allegations of misconduct, DOD is not positioned to assess the 
effectiveness of its efforts.

DOD’s knowledge of defense contractor efforts to promote ethical 
standards is also limited. Defense regulations provide that contractors 
should have certain management controls, such as ethics training for 
all employees and systems to detect improper conduct in connection with 
government contracts. However, DOD had not evaluated the hiring 
practices of the contractors GAO contacted. Neither the Defense 
Contract Management Agency nor the Defense Contract Audit Agency—the 
agencies responsible for oversight of defense contractors’ operations—
had assessed the adequacy of contractors’ practices for hiring current 
and former government employees. An independent review of one of DOD’s 
largest contractors found that the company lacked the management 
controls needed to ensure an effective ethics program. Instead, the 
review found that the company relied excessively on employees to self-
monitor their compliance with post-government employment restrictions. 
The review concluded that by relying on self-monitoring, the company 
increased the risk of noncompliance, due to either employees’ willful 
misconduct or failure to understand complex ethics rules.

What GAO Recommends:

GAO is recommending that DOD regularly assess training and counseling 
efforts to ensure that individuals covered by conflict-of-interest and 
procurement integrity rules receive appropriate training and 
counseling, ensure ethics officials track and report on the status of 
alleged misconduct, and assess contractors’ ethics programs to gain 
knowledge and mitigate risk in DOD contracting relationships. In 
commenting on a draft of this report, DOD agreed with two 
recommendations and partially concurred with the third.

www.gao.gov/cgi-bin/getrpt?GAO-05-341.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact David C. Cooper at (202) 
512-4125 or cooperd@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

DOD Lacks Information to Evaluate Its Training and Counseling Efforts:

DOD Needs More Knowledge of Government Contractors' Standards of 
Conduct Efforts:

Conclusion:

Recommendations:

Agency Comments:

Appendix I: Scope and Methodology:

Appendix II: Comments from Department of Defense:

Table:

Table 1: Summary of Annual Ethics Training by Office:

United States Government Accountability Office:

Washington, DC 20548:

April 29, 2005:

The Honorable Ike Skelton: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives:

The Honorable Solomon P. Ortiz: 
Ranking Minority Member: 
Subcommittee on Readiness: 
Committee on Armed Services: 
House of Representatives:

The Honorable Vic Snyder:
Ranking Minority Member: 
Subcommittee on Military Personnel: 
Committee on Armed Services: 
House of Representatives:

In fiscal year 2004, officials from the Department of Defense (DOD) 
awarded contracts worth more than $200 billion for goods and services. 
Federal ethics rules and standards have been put in place to help 
safeguard the integrity of the procurement process by mitigating the 
risk that DOD employees will use their position to influence the 
outcomes of contract awards for future gain and that companies will 
exploit this possibility.

Given the sizeable dollars at stake and the risks inherent in federal 
contracting, you asked us to determine whether post-government 
employment rules are ensuring the public trust. In response, we 
assessed (1) DOD's efforts to train and counsel its workforce to raise 
awareness of the rules as well as DOD measures of the effectiveness of 
these efforts and (2) DOD's knowledge of defense contractors' programs 
to promote ethical standards of conduct. To satisfy our objectives, we 
met with the designated agency ethics officials, their designee, or 
ethics counselors in the Office of the Secretary of Defense, Air Force, 
Army, Navy, and the Defense Contract Management Agency and visited 
seven major defense contractors. Further details on the scope and 
methodology of our review can be found in appendix I. We conducted our 
review from April 2004 to March 2005 in accordance with generally 
accepted government auditing standards.

We did not address the effectiveness of the statutory provisions 
covering post-government employment restrictions or the extent to which 
violations have occurred.

Results in Brief:

Through its ethics program, DOD implemented ethics training and 
counseling efforts aimed at educating its workforce to raise awareness 
of conflict-of-interest and procurement integrity rules in order to 
prevent misconduct. However, DOD lacks departmentwide knowledge of the 
content of training and counseling, how often these services are 
provided, which employees receive information on conflict-of-interest 
and procurement integrity, and reported allegations of potential 
misconduct. Specifically, ethics counselors were unable to tell us if 
people subject to procurement integrity rules were trained. Ethics 
officials also did not know of 53 reported allegations of potential 
misconduct referred to inspectors general offices. Without knowledge of 
training, counseling, and reported allegations of misconduct, DOD is 
not positioned to assess the effectiveness of its efforts. Aware of the 
increased public concern about misconduct, DOD took several actions 
since October 2004 aimed at enhancing its ethics program.

DOD regulations provide that its contractors should have written codes 
of conduct, ethics training, and monitoring programs in place; however 
the seven contractors we visited indicated that DOD, through its 
oversight activities, did not monitor these contractors' recruiting, 
hiring, and placement practices of current and former government 
employees. In fact, a recent independent review of one of DOD's largest 
contractors found both gaps in the company's procedures and a failure 
to follow written policy, in certain cases. For example, the company 
relied excessively on employees to self-monitor compliance with 
standards of conduct rules and in doing so increased the risk of 
noncompliance, due to either employees' willful misconduct or failure 
to understand complex ethics rules.

We are making three recommendations to the Secretary of Defense to take 
actions in order to raise the level of confidence that DOD conducts 
business with impartiality and integrity. Specifically, to improve 
DOD's knowledge and oversight, DOD should regularly assess training and 
counseling efforts for quality and content to ensure that individuals 
covered by conflict-of-interest and procurement integrity rules receive 
appropriate training, and DOD should ensure ethics officials track and 
report on the status of alleged misconduct. We further recommend that 
DOD assess, as appropriate, contractor ethics programs to facilitate 
awareness and mitigation of risks in DOD contracting relationships. In 
commenting on a draft of this report, DOD concurred with two of our 
recommendations and partially concurred with the third. DOD concurred 
with our recommendations to regularly assess its training and 
counseling efforts for quality and content and to assess, as 
appropriate, contractor ethics programs. DOD partially concurred with 
our recommendation that ethics officials, as required by the joint 
ethics regulation, track and report on the status of alleged misconduct 
to the military services and defense agencies head ethics officials. 
DOD also provided technical comments, which we incorporated as 
appropriate. DOD's comments are included in their entirety in appendix 
II.

Background:

Federal statutes and regulations collectively require agencies to 
establish an ethics program intended to preserve and promote public 
confidence in the integrity of federal officials through their self-
reporting of potential conflicts-of-interest (financial disclosure), 
through knowledge of post-government employment restrictions 
(training), and through independent investigations of alleged 
wrongdoing.[Footnote 1] A key objective of an ethics program is to 
provide a formal and systematic means for agencies to prevent and 
detect ethics violations. The elements of a comprehensive ethics 
program include (1) a written policy of standards of ethical conduct 
and ethics guidance; (2) effective training and dissemination of 
information on ethical standards, procedures, and compliance; (3) 
monitoring to ensure the ethics program is followed; (4) periodically 
evaluating the effectiveness of the ethics program; and (5) levying 
disciplinary measures for misconduct and for failing to take reasonable 
steps to prevent or detect misconduct.

The joint ethics regulation[Footnote 2] is DOD's written policy 
establishing its ethics program. The ethics program emphasizes training 
and counseling to raise awareness of standards of ethical behavior and 
to prevent misconduct. DOD's ethics training requirement includes 
educating employees about the procedures to follow when considering 
employment outside of DOD and the post-government employment 
restrictions that may apply and to inform employees of the resources 
that are available to them to address ethics questions and concerns. 
The training includes an initial briefing to introduce employees to 
ethics regulations, such as conflict-of-interest and procurement 
integrity rules, and exit briefings to discuss restrictions that may 
apply once employees leave government service. Additional ethics 
briefings are held for certain senior employees on an annual basis. 
DOD's ethics counseling aims to address employee concerns and questions 
as they arise. The training and counseling is also to raise awareness 
so that DOD employees can recognize misconduct and report the matter to 
ethics officials, inspectors general officials, the head of the command 
or agency, criminal investigative offices, or any number of DOD 
hotlines. Responsibility for recognizing and reporting potential 
misconduct rests with all DOD employees.[Footnote 3] Additionally, the 
joint ethics regulation requires ethics officials to track and follow 
up on reports of potential misconduct. Finally, the DOD regulation 
requires periodic evaluations of local activities, which implement 
DOD's ethics program, to ensure they meet standards.

Defense regulations provide that government contractors should have 
standards of conduct and internal control systems to promote ethical 
standards, facilitate timely discovery and disclosure of improper 
conduct in connection with government contracts, and ensure corrective 
measures are promptly implemented.[Footnote 4] The regulations provide 
that contractors should have a written code of business ethics and 
conduct, an ethics training program for all employees, and to 
periodically review practices, procedures, policies, and internal 
controls for compliance with standards of conduct.

The federal government has a host of laws and regulations governing the 
conduct of its employees and contractors. The Compilation of Federal 
Ethics laws prepared by the United States Office of Government Ethics 
includes nearly 100 pages of statutes alone. For the purposes of this 
report, however, we note a few laws relevant to DOD officials whose 
responsibilities involved participation in DOD's acquisition process. 
The statutes are complex, and the brief summaries here are intended 
only to provide context for the issues discussed in this report.

The principal restrictions concerning employment for federal employees 
after leaving government service are found in 18 U.S.C. 207 and 41 
U.S.C. 423 (procurement integrity). The title 18 provision generally 
prohibits former federal employees and their supervisors from 
representing non-government entities concerning matters they handled 
while working for the federal government. Violation of the statute 
entails criminal penalties. In contrast, the title 41 provision more 
narrowly applies to contracting officials and also entails civil and 
administrative penalties. The provision generally restricts employment 
with a contractor if the official performed certain functions involving 
the contractor and a contract valued in excess of $10,000,000.[Footnote 
5] The law, however, permits employees to accept compensation "from any 
division or affiliate of a contractor that does not produce the same or 
similar products or services" that were produced under the 
contract.[Footnote 6]

There are also provisions related to post-government employment that 
are applicable to federal employees' actions while still in federal 
service. 18 U.S.C. 208 prohibits government employees from 
participating in matters in which they have a financial interest. The 
statute imposes criminal penalties on federal employees who begin 
negotiating future employment without first disqualifying themselves 
from any duties related to the potential employer. In addition 41 
U.S.C. 423(c) requires officials who participate personally and 
substantially in a procurement exceeding $100,000 to report promptly 
contacts by bidders or offerors regarding future employment.[Footnote 
7] The official must either reject the possibility of employment or 
disqualify himself or herself from further participation in the 
procurement.

DOD Lacks Information to Evaluate Its Training and Counseling Efforts:

DOD's joint ethics regulation, administered by DOD's General Counsel, 
requires DOD to provide training and counseling to educate employees 
regarding applicable ethics laws and regulations. To implement its 
ethics program, DOD relies on local ethics counselors within DOD's 
military services and agencies to train and counsel employees on 
conflict-of-interest and procurement integrity rules. Training is to 
raise individual awareness and to enable DOD employees to recognize 
misconduct and report any matter to appropriate officials. The joint 
ethics regulation also requires ethics officials to track and follow up 
on reports of misconduct. However, DOD lacks knowledge to evaluate the 
ability of its training and counseling efforts to prevent misconduct 
and ensure the public trust.

Training and Counseling Results Are Not Measured:

DOD has delegated responsibility for training and counseling to more 
than 2,000 ethics counselors assigned to commands and organizations 
worldwide. These ethics counselors administer ethics training and 
briefings, provide advice and counseling, and review employees' 
financial disclosure documents[Footnote 8] as outlined in the joint 
ethics regulation. At the 12 DOD locations we visited we found training 
and counseling efforts varied in the content of ethics information 
provided, who is required to attend training and counseling, and how 
often the training and counseling is provided. For example, some ethics 
counselors conduct extensive discussions about employees' plans upon 
separation at the exit briefing, some provide written advice, and 
others distribute pamphlets summarizing employment restrictions. Some 
ethics counselors have supplemented their annual training because they 
do not believe that the minimum requirements in the joint ethics 
regulation--an annual ethics briefing--are sufficient to ensure 
employees understand employment restrictions both during and after they 
leave government service. For example, a Navy ethics office offers 
live, interactive ethics training to all personnel at its location 
approximately three to four times a year.

DOD currently evaluates its ethics program's performance in terms of 
process indicators--such as the number of financial disclosure forms 
completed, the number of ethics counselors, and the amount of time 
spent by ethics counselors on training and counseling services. 
According to DOD officials, the information on the number of ethics 
counselors at each location and the amount of time they spend with 
employees can provide insight into the level of resources used. 
However, these process indicators do not provide DOD knowledge of which 
employees are subject to restrictions, which employees receive training 
and counseling, the quality and content of training, and who is leaving 
DOD for employment with contractors. For example, DOD does not know if 
the population critical to the acquisition process, those employees 
covered by procurement integrity restrictions, are trained. Further, 
many ethics counselors could not provide evidence that employees 
received the annual ethics training. Additionally, DOD does not know 
whether the training and counseling includes all relevant conflict-of-
interest and procurement integrity rules. As shown in Table 1, we found 
that the ethics counselors we interviewed did not consistently include 
information on the restrictions provided for in 18 U.S.C. 207, 18 
U.S.C. 208, and 41 U.S.C. 423 in their annual ethics briefings for the 
past 3 years.

Table 1: Summary of Annual Ethics Training by Office:

Year: Standards of Conduct Office, OSD, DOD Headquarters; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were not
available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were not 
available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not 
included in the training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not 
included in the training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: Department of Air Force, Pentagon; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: AFMC, Headquarters, Wright-Patterson Air Force Base[A]; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information included in annual 
ethics briefing; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 3: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: AFMC, 88th Wing, Wright-Patterson Air Force Base[B]; 
Procurement integrity (41 USC 423): 1: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: AFMC, Electronic Systems Command, Hanscom Air Force Base; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: Department of Army Headquarters[A]; 
Procurement integrity (41 USC 423): 1: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were not 
available; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: Department of Army Headquarters[B]; 
Procurement integrity (41 USC 423): 1: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: Department of Army Headquarters[C]; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 3: Information included in annual 
ethics briefing; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 3: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: AMC, Headquarters, Fort Belvoir, Va.[A]; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: AMC, Headquarters, Fort Belvoir, Va.[B]; 
Procurement integrity (41 USC 423): 1: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training 
materials were not available; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training 
materials were not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 1: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training 
materials were not available; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: AMC, Communications-Electronic Command, Fort Monmouth, N.J.[A]; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 3: Information included in annual 
ethics briefing; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 3: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: AMC, Communications-Electronic Command, Fort Monmouth, N.J.[B]; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available.

Year: Department of Navy, Headquarters; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training 
materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: NAVAIR Systems Command, Headquarters, Patuxent River, Md; 
Procurement integrity (41 USC 423): 1: Information not included in the 
training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Procurement integrity (41 USC 423): 2: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 3: Information included in annual 
ethics briefing; 
Restrictions on former employees (18 USC 207): 1: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: NAVAIR Systems Command, Naval Air Warfare Center-Weapons 
Division, China Lake, Calif; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: Defense Contract Management Agency, Headquarters; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
not included in the training materials, unable to determine based on 
the training material provided, or unable to determine because the 
training materials were not available; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
included in annual ethics briefing.

Year: Defense Contract Management Agency, East; 
Procurement integrity (41 USC 423): 1: Information included in annual 
ethics briefing; 
Procurement integrity (41 USC 423): 2: Information not included in the 
training materials, unable to determine based on the training material 
provided, or unable to determine because the training materials were 
not available; 
Procurement integrity (41 USC 423): 3: Information included in annual 
ethics briefing; 
Restrictions on former employees (18 USC 207): 1: Information 
included in annual ethics briefing; 
Restrictions on former employees (18 USC 207): 2: Information 
not included in the training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available; 
Restrictions on former employees (18 USC 207): 3: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 1: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 2: Information 
included in annual ethics briefing; 
Acts affecting personal financial interest (18 USC 208): 3: Information 
not included in the training materials, unable to determine based on the 
training material provided, or unable to determine because the training 
materials were not available.

Source: DOD (data); GAO (analysis).

Notes:

[A] SF 278 filers are employees who complete the public financial 
disclosure statements. SF 278 filers include senior officials, such as 
presidential appointees, general and flag officers (rank O-7 and 
above), and senior executive service members.

[B] OGE form 450 filers are employees who complete the confidential 
financial disclosure statements. OGE form 450 filers are certain 
federal employees, identified by each executive agency based on 
employees' roles and responsibilities.

[C] A subset of SF 278 filers at Army headquarters who report directly 
to the secretariat. 

[End of table]

Training and Counseling is to Facilitate Identification and Reporting 
of Misconduct, but Alleged Misconduct Is Not Being Tracked:

Training is to raise awareness of procurement integrity and conflict-
of-interest rules so DOD employees are able to recognize misconduct and 
report matters to appropriate officials. Ethics counselors are required 
to (1) review the facts of an allegation of misconduct and report the 
allegation to appropriate investigative organizations or the head of 
the DOD command of the suspected violator and the appropriate 
contracting officer, if applicable; (2) follow-up with the 
investigative office until a final determination is made on the 
allegation; and (3) periodically report on the status of the allegation 
of misconduct to the military service and defense agencies head ethics 
official. However, when we asked the ethics officials for information 
on allegations of misconduct and the status of investigations, they 
were not tracking or following-up on the status of alleged misconduct 
cases. For information on reported allegations of potential misconduct 
the ethics officials referred us to the inspectors general offices. 
According to inspectors general officials, DOD has not made an attempt 
to determine the extent that potential misconduct in terms of conflict-
of-interest and procurement integrity is reported. The information on 
reports of potential misconduct is maintained in various files and 
databases by multiple offices. As a result, DOD has not determined if 
reports of potential misconduct are increasing or decreasing and why 
such a change may be occurring. DOD Inspector General's hotline 
official told us that anecdotal evidence indicates post-government 
employment misconduct is a problem, but DOD has no basis for assessing 
the severity.

At the locations we visited, we obtained information from the inspector 
general officials demonstrating at least 53 cases of potential 
misconduct reported in the last 5 years. However, ethics officials at 
the Office of Secretary of Defense and the military headquarters we 
spoke with were not tracking the status of the reports of potential 
misconduct. Lacking this knowledge DOD has no assurance that ethics-
related laws and regulations are properly followed and that appropriate 
administrative or disciplinary action is taken. Also, the information 
on potential misconduct can help DOD understand the extent of the 
problem and the risk such behavior poses.

Ongoing Actions to Prevent Misconduct:

Concerned about the effectiveness of its efforts to minimize misconduct 
and prevent violations of conflict-of-interest and procurement 
integrity rules, DOD has taken actions aimed at enhancing its ethics 
program. In October 2004, the Deputy Secretary of Defense required (1) 
personnel who file public financial disclosure reports to certify that 
they are aware of and have not violated employment restrictions, (2) 
DOD components to include training on employment restrictions in annual 
ethics briefings to financial disclosure filers, and (3) DOD components 
to provide guidance on employment restrictions to all personnel leaving 
government service. While this directive clarifies the content required 
in DOD's training and counseling, no provisions were made to provide 
knowledge about whether the policy is implemented. Therefore, it is 
unclear at this time the extent that the actions called for in the 
directive will improve DOD's effort to prevent violations of post-
government employment restrictions.

In November 2004, the acting Undersecretary of Defense asked the 
Defense Science Board to establish a task force to assess whether DOD 
has adequate management and oversight processes to ensure the integrity 
of acquisition decisions. The task force report was due January 31, 
2005, and is expected to recommend options for improving checks and 
balances to protect the integrity of procurement decisions. Currently, 
the Defense Science Board is briefing preliminary findings to senior 
DOD officials and Congress.

Acknowledging the risk to the acquisition process the United States 
Attorney for the Eastern District of Virginia announced, in February 
2005, the creation of a procurement fraud working group to increase 
prevention and prosecution of fraud in the federal procurement process. 
This working group will facilitate the exchange of information among 
participating agencies, including DOD, and assist them in developing 
new strategies to prevent and to promote early detection of procurement 
fraud. Among the ideas and initiatives to be undertaken by the working 
group are efforts to detect ethics violations and conflicts of interest 
by current and former agency officials.

DOD Needs More Knowledge of Government Contractors' Standards of 
Conduct Efforts:

Defense acquisition regulations provide that government contractors 
should have standards of conduct and internal control systems that 
promote ethical standards, facilitate timely discovery and disclosure 
of improper conduct, and ensure corrective measures are promptly 
implemented. However, DOD cannot identify nor take action to mitigate 
risks because it lacks knowledge of its contractors' efforts to promote 
ethical standards. Recently a major defense contractor chartered an 
independent review of its hiring processes of current and former 
government employees. This review found both gaps in the company's 
procedures and a failure to follow written policy, in some cases. 
Weaknesses in the contractor's policies, procedures, and structure were 
identified, and recommendations were made for actions to be taken to 
mitigate risks.

DOD Does Not Have Adequate Knowledge of Its Contractors' Policies and 
Practices for Hiring Former and Current DOD Employees:

Defense regulations provide that government contractors must conduct 
themselves with the highest degree of integrity and honesty. 
Specifically, defense regulations provide that contractors should have 
(1) a written code of ethical conduct; (2) ethics training for all 
employees; (3) periodic reviews of its compliance with its code of 
ethical conduct; (4) systems to detect improper conduct in connection 
with government contracts; and (5) processes to ensure corrective 
actions are taken.[Footnote 9] The seven contractors we visited 
indicated that DOD had not discussed or reviewed their practices for 
hiring current and former government employees.

While DOD evaluates components of contractors' financial and management 
controls, neither the Defense Contract Management Agency nor the 
Defense Contract Audit Agency--the agencies responsible for oversight 
of defense contractors' operations--had assessed the adequacy of 
contractors' practices for hiring current and former government 
employees.[Footnote 10] DOD's lack of knowledge of the contractors' 
hiring practices and policies prevents DOD from being assured that 
effective controls are in place to address the risks posed by 
contractors.

Independent Review of Defense Contractor Finds Weaknesses in Controls 
for Managing Former Government Employees:

In February 2004, a major defense contractor hired an outside entity to 
conduct an independent evaluation of its hiring policies and practices. 
This review found that the company relied excessively on employees to 
self-monitor their compliance with post-government employment 
restrictions. The review concluded that by relying on employees to 
monitor their own behavior, the company increased the risk of 
noncompliance, due to either employees' willful misconduct or failure 
to understand complex ethics rules. The independent evaluation of the 
company's hiring policies and practices illustrates an opportunity for 
DOD to leverage knowledge of contractors' practices to identify and 
mitigate risks.

In general, the review identified lack of management controls as a 
weakness in the company's ethics program. Specifically, the review 
found the company lacked (1) a single focal point for managing its 
hiring process; (2) centralized management of its hiring process, which 
made it difficult to implement consistent procedures and effectively 
monitor efforts; (3) consistent maintenance of pre-hire records; (4) 
internal audits of its process for hiring former government employees; 
and (5) sufficient emphasis from senior company management to the 
ethics program in general and the training program in particular, among 
other things. As a result of these weaknesses, the company did not know 
whether employees were following its written policies and procedures 
addressing post-government employment restrictions.

Some contractors we spoke with stated that they used the lessons 
learned from the company's independent review to assess their own 
policies for recruiting, hiring, and assigning of current and former 
government employees to ensure they are complying with ethical 
standards. For example, some of the contractors are reviewing company 
personnel files to identify employees trained as well as former 
government employees hired. Some contractors were in the process of 
identifying methods to ensure that information on the hiring and 
training of former government employees is readily available, such as 
corporate personnel systems that will provide electronic files to allow 
the contractor to identify employees with prior DOD experience 
including contracts on which they worked as well as monitor employees' 
post-government career path. Similarly, knowledge of conditions at the 
company and at other contractors could provide DOD with information to 
better identify and understand risks to its acquisition process.

Conclusion:

In an environment where the risk of ethical misconduct can be costly, 
DOD is missing opportunities to raise the level of confidence that its 
safeguards protect the public trust. Better knowledge of training and 
counseling efforts is essential to ensuring that the large numbers of 
employees who leave DOD for contractors each year are aware of and 
abide by conflict-of-interest and procurement integrity rules. Finally, 
enhanced awareness of contractor programs would enable DOD to assess 
whether the public trust is protected.

Recommendations:

We are making three recommendations to the Secretary of Defense to take 
actions to improve DOD's knowledge and oversight of its ethics program 
and contractors' ethics programs to raise the level of confidence that 
DOD's business is conducted with impartiality and integrity:

* Regularly assess training and counseling efforts for quality and 
content, to ensure that individuals covered by conflict-of-interest and 
procurement integrity rules receive training and counseling that meet 
standards promulgated by DOD Standards of Conduct Office.

* Ensure ethics officials, as required by the joint ethics regulation, 
track and report on the status of alleged misconduct to the military 
services and defense agencies head ethics officials.

* Assess, as appropriate, contractor ethics programs in order to 
facilitate awareness and mitigation of risks in DOD contracting 
relationships.

Agency Comments:

DOD provided written comments on a draft of this report. DOD concurred 
with two of our recommendations and partially concurred with the third. 
DOD concurred with our recommendation to regularly assess training and 
counseling efforts for quality and content, and stated that it 
currently assesses and will continue to assess agencies' training and 
counseling efforts to ensure that personnel required to receive such 
training do so in accordance with applicable standards. As discussed in 
this report, DOD currently assesses its ethics program's performance in 
terms of process indicators--for example, number of financial 
disclosure forms completed, the number of ethics counselors, and the 
amount of time spent by ethics counselors on training and counseling. 
However, as DOD moves forward, its assessments should also provide DOD 
knowledge of which employees are subject to restrictions, which 
employees receive training and counseling, the quality and content of 
training, and who is leaving DOD for employment with contractors to 
ensure its ethics program achieves the goal of raising awareness of 
conflict-of-interest and procurement integrity rules in order to 
prevent ethical misconduct.

DOD concurred with our recommendation that DOD assess, as appropriate, 
contractor ethics programs, and stated that it intends to call upon 
companies throughout the defense industry to reexamine their ethics 
programs and share best practices. DOD also stated that the 
recommendation is currently implemented when contracting officers make, 
prior to awarding a contract, an affirmative determination of 
responsibility, which includes consideration of the potential 
contractor's business practices and the potential contractor's 
integrity. We believe assessments of contractor ethics programs would 
enhance contracting officers' ability to make such determinations. 
Knowledge about contractors' policies and practices for hiring former 
and current DOD employees would provide DOD more assurance that 
effective controls are in place to address the risks posed by potential 
violations of post government employment restrictions. As recent GAO 
bid protest decisions illustrate, lapses in ethical behavior can have 
significant consequences.

DOD partially concurred with our recommendation that the Secretary of 
Defense ensure that ethics officials, as required by the joint ethics 
regulation, track and report on the status of alleged misconduct to the 
military services and defense agencies head ethics officials. DOD 
stated that responsibility for tracking and reporting on the status of 
alleged misconduct resides with Departmental and federal law 
enforcement agencies, rather than ethics officials. While we agree that 
responsibility for enforcement should not reside with ethics officials, 
we believe senior DOD ethics officials should be knowledgeable 
concerning the scope and extent of ethics violations within the 
Department. Tracking alleged misconduct cases would provide senior DOD 
ethics officials knowledge about whether ethics-related laws and 
regulations are properly followed and that appropriate administrative 
or disciplinary action is taken. Also, information on alleged 
misconduct can position DOD to assess the effectiveness of its training 
and counseling efforts and understand the extent of the problem and the 
risk such behavior poses. As DOD revises its Joint Ethics Regulation, 
it should ensure its reporting structure provides for relaying 
misconduct information to senior DOD ethics officials.

Finally, DOD expressed concern that our report may be misinterpreted 
because it does not accurately capture the full extent of DOD programs. 
We recognize that the Department's programs are broader than reflected 
in our report. Our report identifies opportunities to improve (1) DOD's 
efforts to train and counsel its workforce to raise awareness of ethics 
rules and standards as well as DOD measures of the effectiveness of 
these efforts and (2) DOD's knowledge of defense contractors' programs 
to promote ethical standards of conduct. Notwithstanding its concerns, 
however, we note that DOD agreed that our report identifies 
opportunities to strengthen safeguards for procurement integrity.

DOD's comments are included in appendix II.

We are sending copies of this report to the Secretary of Defense and 
interested congressional committees. We will provide copies to others 
on request. This report will also be available at no charge on GAO's 
Web site at http://www.gao.gov.

If you have any questions about this report or need additional 
information please contact me at (202) 512-4125 or Blake Ainsworth, 
Assistant Director, at (202)512-4609. Other major contributors to this 
report were Penny Berrier, Kate Bittinger, Anne McDonough-Hughes, Holly 
Reil, and Karen Sloan.

Signed by: 

David E. Cooper, Director: 
Acquisition and Sourcing Management:

[End of section]

Appendix I: Scope and Methodology:

To address DOD's oversight of its agencies' implementation of ethics 
regulations we compared DOD's practices to established management 
guidelines. We did not determine the effectiveness of post-government 
employment legal restrictions or the extent to which violations of 
these restrictions may be occurring.

In assessing DOD oversight of its programs, we used the Standards for 
Internal Control in the Federal Government,[Footnote 11] Internal 
Control Management and Evaluation Tool,[Footnote 12] Office of 
Management and Budget Circular A-123 regarding management 
accountability and control, and the United States Sentencing Commission 
Guidelines Manual. We applied the management control framework to DOD 
and DOD component ethics programs.

To assess DOD's efforts to train and counsel its workforce to raise 
awareness and DOD measures of the effectiveness of these efforts, we 
met with the designated agency ethics official, their designee or 
ethics counselors in the Office of the Secretary of Defense, Air Force, 
Army, Navy, Defense Contract Management Agency. In addition to 
headquarters offices, we selected locations that according to the 
Federal Procurement Database System and DOD officials spent a large 
amount of money on acquisitions. Specifically, we met with officials 
from: (1) Standards of Conduct Office, General Counsel, Office of the 
Secretary of Defense; (2) General Counsel--Ethics and Personnel Office, 
Defense Contract Management Agency; (3) Associate Counsel--Ethics and 
Personnel, Eastern Region, Defense Contract Management Agency, (4) 
Ethics Office and Associate General Counsel (Fiscal & Administrative 
Law), Air Force; (5) Air Force Materiel Command, Wright Patterson Air 
Force Base, Air Force; (6) Electronic Systems Center, Hanscom Air Force 
Base, Air Force, (7) Deputy General Counsel (Ethics & Fiscal) and 
Standards of Conduct Office, Army; (8) Army Materiel Command, Fort 
Belvoir, Army; (9) Communications-Electronics Command Fort Monmouth, 
Army; (10) Office of General Counsel, Navy; and (11) Naval Air Systems 
Command, Patuxent River, Navy, (12) Naval Air Warfare Center Weapons 
Division, China Lake, Navy. We met with five contracting/acquisition 
offices and nine investigative offices at these locations.

To assess DOD's knowledge of defense contractors' programs to promote 
ethical standards of conduct, we interviewed seven defense contractors 
about their ethics programs and hiring practices of former government 
employees. Six of the contractors are ranked in the top 10 of defense 
contractors based on DOD spending in fiscal year 2003. The seventh is a 
contractor that was in the top 100 of defense contractors based on DOD 
spending. We attended the annual Defense Industry Initiative Annual 
Best Practices Forum, 2004. In addition, we reviewed a report to the 
chairman and board of directors of one major defense contractor 
responding to concerns about the company's policies and practices for 
the hiring of government and former government employees.

As part of these efforts, we reviewed relevant Federal ethics laws, the 
Federal Acquisition Regulation, Defense Federal Acquisition 
Regulation, DOD policies, directives and guidance governing conflict of 
interest and procurement integrity rules. We supplemented the DOD and 
DOD component ethics program information we collected by interviewing 
officials from the Office of Government Ethics, Department of Justice, 
Army Contracting Agency, Defense Acquisition Regulations Council, 
Office of Secretary of Defense Acquisition, Technology, and Logistics 
Office, World Policy Institute, and the American Federation of 
Government Employees. We also attended the 26TH Annual Council of 
Governmental Ethics Laws Conference, 2004.

We conducted our review from April 2004 to March 2005 in accordance 
with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from Department of Defense:

DEPARTMENT OF DEFENSE: 
OFFICE OF GENERAL COUNSEL: 
1600 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-1600:

18 APR 2005:

Mr. David E. Cooper:
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office:
441 G Street, NW: 
Washington, DC 20548:

Dear Mr. Cooper:

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) draft report, "DEFENSE ETHICS PROGRAM: 
Opportunities Exist to Strengthen Safeguards For Procurement 
Integrity," dated March 22, 2005, (GAO Code 120336/GAO-05-341). The 
Department of Defense partially concurs with the three recommendations 
in the draft report (see enclosure).

The first GAO recommendation is that the Secretary of Defense regularly 
assess training and counseling efforts for quality and content, to 
ensure that individuals covered by conflict-of-interest and procurement 
integrity rules receive training and counseling:

that meet standards promulgated by DoD Standards of Conduct Office. The 
Department concurs. The appropriate Designated Agency Ethics Officials 
(DAEOs), and their designees, as well as other pertinent Department 
officials, have regularly assessed, and will continue to assess, their 
DoD agencies' training and counseling efforts, to ensure that personnel 
required to receive such training and counseling do so in accordance 
with the standards promulgated by the Office of Government Ethics 
(OGE), as supplemented by the Department.

The second GAO recommendation is that the Secretary of Defense ensure 
that ethics officials, as required by the joint ethics regulation, 
track and report on the status of alleged misconduct to the military 
services and defense agencies head ethics officials.

The Department concurs, with the exception of the role of ethics 
officials in the process. The tracking and reporting of the status of 
alleged misconduct resides almost exclusively with Departmental and 
Federal law enforcement agencies. These various Department 
investigating organizations generally report to the appropriate agency 
head, who may forward such information to the pertinent DAEO or Deputy 
DAEO, who are the head ethics officials. Subsequent to the publication 
in 1993 of DoD 5500.7-R, the Joint Ethics Regulation (JER), the 
Department deemed that it is not appropriate for ethics counselors (the 
term the Department uses to indicate ethics officials) to play a role 
in the enforcement of alleged misconduct. An amendment of the entire 
JER, which will reflect the current operating status of the tracking 
and reporting mechanism, has been under development.

The third GAO recommendation is that the Secretary of Defense assess, 
as appropriate, contractor ethics programs in order to facilitate 
awareness and mitigation of risks in DoD contracting relationships. The 
Department concurs. This recommendation is currently implemented in the 
Department's procurements. Under FAR 9.103, Procurement Contracting 
Officers make, prior to award, an affirmative determination of 
responsibility, which includes consideration of the potential 
contractor's business practices and the potential contractor's 
integrity. Under FAR 9.406-1(a), during any administrative suspension 
or debarment proceeding or in reaching an administrative settlement, 
the contractor's ethics program may be examined. The Department does 
not believe, however, that it should approve or otherwise accept 
responsibility for the contractor's ethics program. Such responsibility 
properly lies with the contractor's management. Nevertheless, because 
we expect our contractors to have the highest ethical standards, the 
Department intends to call upon companies throughout the defense 
industry to reexamine their ethics programs and share best practices.

While the Department agrees that there are opportunities "to Strengthen 
Safeguards for Procurement Integrity," as stated in the subtitle of the 
Report, it is concerned that certain implications in the body of the 
Report may be misinterpreted and lead to conclusions not supported by 
the Report's actual Recommendations. Through eleven months of its 
review, GAO's tasking changed from an assessment of the extent to which 
the restrictions on post-employment were being followed by senior 
civilian employees, military officers, and contracting officials to an 
assessment of DoD's training of its personnel to raise awareness of the 
post-Government service employment rules, the effectiveness of that 
training, and DoD's knowledge of defense contractors' programs to 
promote ethical standards of conduct. Because GAO did not advise DoD of 
the changed tasking, however, DoD organizations provided data to GAO 
for the purpose of answering the original tasking. The body of the 
draft report, therefore, does not accurately capture the full extent of 
DoD programs.

The Department appreciates the opportunity to review the draft GAO 
report and offers the enclosed comments.

Sincerely,

Signed by: 

Daniel J. Dell'Orto: 
Principal Deputy:

Enclosure: As stated:

GAO DRAFT REPORT-DATED MARCH 22, 2005 GAO CODE 120336/GAO-05-341:

"DEFENSE ETHICS PROGRAM: Opportunities Exist to Strengthen Safeguards 
For Procurement Integrity"

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
regularly assess training and counseling efforts for quality and 
content, to ensure that individuals covered by conflict-of-interest and 
procurement integrity rules receive training and counseling that meet 
standards promulgated by DoD Standards of Conduct Office. (p. 13/GAO 
Draft Report):

DOD RESPONSE: Concur. The appropriate Designated Agency Ethics 
Officials (DAEOs), and their designees, as well as other pertinent 
Department officials, have regularly assessed, and will continue to 
assess, their DoD agencies' training and counseling efforts, to ensure 
that personnel required to receive such training and counseling do so 
in accordance with the standards promulgated by the Office of 
Government Ethics, as supplemented by the Department.

To ensure that there is no misunderstanding about who is covered by 
conflicts of interest and procurement integrity restrictions, who is 
required to receive training and counseling, and what are. the current 
required training standards, we provide the following clarification.

Who is Covered: All civilian employees and military officers are 
covered by 18 U.S.C. 207 (post-Government Service employment 
restrictions) and 18 U.S.C. 208 (restrictions on official duty while 
seeking employment outside the Government).

Enlisted members are covered by a JER provision similar to 18 U.S.C. 
208, and are subject to prosecution under the Uniform Code of Military 
Justice (UCMJ). The procurement integrity post-Government service 
employment restrictions apply to those civilian and military personnel 
included within the parameters of the statute.

Who is Required to Receive Training and Counseling and Current Training 
Standards: The Office of Government Ethics requires all personnel who 
are new to a Federal service to receive an ethics orientation. It also 
requires all personnel who file a Public Financial Disclosure Report to 
receive annual, verbal ethics briefings, which includes a reminder of 
the employees' responsibilities under the conflict of interest 
statutes. It further requires all personnel who file a Confidential 
Financial Disclosure Report to receive annual ethics briefings, which 
also includes a reminder of the employees' responsibilities under the 
conflict of interest statutes. The training must be verbal once every 
three years, and may be written in the remaining two years. The 
Department has established that the verbal training occurs throughout 
the Department during the same year, the next one occurring in 2006. In 
accordance with the JER, personnel covered by the procurement integrity 
restrictions file either a public or confidential financial disclosure 
report and, consequently, would be covered by these training 
requirements. The Department notes that OGE conducts program reviews of 
several DoD organizations each year. The reviews include an audit of 
the training program. To date, OGE auditors have generally found DoD 
organizations to be in compliance with the training requirements. In 
addition to (and separate from) the OGE requirements, during 2004, all 
members of the DoD acquisition corps were required to take specialized 
ethics training, which included post-Government service employment 
restrictions.

On October 25, 2004, the Deputy Secretary of Defense amended the JER 
and established three additional training and counseling requirements. 
On November 5, 2004, the Standards of Conduct Office (SOCO) established 
and published guidance to implement the new requirements.

1) DoD personnel who file a public financial disclosure report (SF 278) 
must annually certify that they are aware of the disqualification and 
employment restrictions of 18 U.S.C. 207 and 208, and 41 U.S.C. 423, 
and that they have not violated those restrictions. SOCO attached a 
model Annual Certification, which included a summary of the 
disqualification and employment restrictions, as well as definition of 
terms. Certifications for 2004 were to be filed by 12/31/04. For all 
subsequent years, SOCO recommended that the Certifications be collected 
with the financial disclosure reports. All senior Department officials, 
therefore, who may be those considered at the most risk for inadvertent 
violations, must now annually review the restrictions and certify that 
they are in compliance with them.

2) Training on post-Government service disqualification and employment 
restrictions (which would include those in the procurement integrity 
area) must be included in Annual Ethics Briefings. The SOCO guidance 
advised that although the OGE regulations already require that the 
conflict of interest statutes be covered in these briefings, the 
discussion of the restrictions must be enhanced. The SOCO 2004 Annual 
Ethics Briefing meets this requirement and is published on its website. 
This requirement covers all personnel who file either public or 
confidential financial disclosure reports, and, therefore, applies to 
all DoD employees involved in procurement.

3) DoD Components are required to provide guidance on post-Government 
service employment restrictions as part of out-processing procedures 
for personnel who are leaving Federal service. This regularizes what is 
already a common practice in many DoD organizations. Some organizations 
provide counseling by the legal office as personnel check out. Others 
provide written advice tailored to the requirements that apply to the 
departing individual. As the SOCO guidance advised, for example, an 
enlisted member with no procurement duties has very few restrictions, 
while senior personnel or personnel who are heavily involved in 
procurement receive more extensive guidance. This requirement ensures 
that those personnel who are not required to receive annual training, 
but who are nevertheless subject to post-Government service employment 
restrictions, will receive guidance as they leave Federal service.

To the extent that GAO is recommending that training and counseling 
required by these standards be regularly assessed by the appropriate 
authorities to ensure its quality and content, the Department concurs.

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
ensure ethics officials, as required by the joint ethics regulation, 
track and report on the status of alleged misconduct to the military 
services and defense agencies head ethics officials. (p. 13/GAO Draft 
Report):

DOD RESPONSE: Concur, with the exception of the role of ethics 
counselors in the process. The tracking and reporting of the status of 
alleged misconduct resides almost exclusively with Departmental and 
Federal law enforcement agencies. These various Department 
investigating organizations generally report to the appropriate agency 
head, who may forward such information to the pertinent DAEO or Deputy 
DAEO, who are the head ethics officials. Subsequent to the publication 
in 1993 of DoD 5500.7-R, the Joint Ethics Regulation (JER), the 
Department deemed that it is not appropriate for ethics counselors (the 
term the Department uses to indicate ethics officials) to play a role 
in the enforcement of alleged misconduct. An amendment of the entire 
JER, which will reflect the current operating status of the tracking 
and reporting mechanism, has been under development.

RECOMMENDATION 3: The GAO recommended that the Secretary of Defense 
assess, as appropriate, contractor ethics programs in order to 
facilitate awareness and mitigation of risks in DoD contracting 
relationships. (p. 13/GAO Draft Report):

DOD RESPONSE: Concur. This recommendation is currently implemented in 
the Department's procurements. Under FAR 9.103, Procurement Contracting 
Officers make, prior to award, an affirmative determination of 
responsibility, which includes consideration of the potential 
contractor's business practices and the potential contractor's 
integrity. Under FAR 9.406-1(a), during any administrative suspension 
or debarment proceeding or in reaching an administrative settlement, 
the contractor's ethics program may be examined. However, the 
Department does not believe that it should approve or otherwise accept 
responsibility for the contractor's ethics program. Such responsibility 
properly lies with the contractor's management. Nevertheless, because 
we expect our contractors to have the highest ethical standards, the 
Department intends to call upon companies throughout the defense 
industry to reexamine their ethics programs and share best practices. 

[End of section]

FOOTNOTES

[1] Agency ethics regulations reflecting government standards of 
conduct and statutory restrictions are required by Executive Order 
12674, Principles of Ethical Conduct For Government Officers and 
Employees, April 12, 1989, as modified by E.O. 12731, Principles of 
Ethical Conduct For Government Officers and Employees, October 17, 
1990. In addition to agency ethics regulations, the Federal Acquisition 
Regulation includes specific guidance concerning procurement integrity 
(FAR 3.104).

[2] DOD's joint ethics regulation (DOD Regulation 5500.7-R) merges the 
federal principles of ethical conduct and restrictions into a written, 
uniform source of standards of ethical conduct and guidance for its 
workforce. Its scope encompasses not only post government employment 
restrictions but also other ethics matters such as gifts, financial 
disclosure requirements, and political activities.

[3] Post-government employment restriction violations may also be 
reported by parties outside DOD such as contractors through DOD 
hotlines.

[4] Defense Federal Acquisition Regulation Supplement, subpart 203.70, 
Contractor Standards of Conduct.

[5] 41 U.S.C. § 423(d). The prohibition against accepting compensation 
from a contractor applies to former officials who

(A) served, at the time of selection of the contractor or the award of 
a contract to the contractor, as the procuring contracting officer, the 
source selection authority, a member of the source selection evaluation 
board, or the chief of a financial or technical evaluation team in a 
procurement in which that contractor was selected for award of a 
contract in excess of $10,000,000;

(B) served as the program manager, deputy program manager, or 
administrative contracting officer for a contract in excess of 
$10,000,000 awarded to that contractor, or

(C) personally made for the federal agency

(i) a decision to award a contract, subcontract, modification of a 
contract or subcontract, or a task order or delivery order in excess of 
$10,000,000 to that contractor;

(ii) a decision to establish overhead or other rates applicable to a 
contract or contracts for that contractor that are valued in excess of 
$10,000,000;

(iii) a decision to approve issuance of a contract payment or payments 
in excess of $10,000,000 to that contractor; or

(iv) a decision to pay or settle a claim in excess of $10,000,000 with 
that contractor.

[6] 41 U.S.C. § 423(d)(2).

[7] 41 U.S.C. § 423(c)(1)(A). 

[8] Certain federal employees are required to file a financial 
disclosure statement to satisfy federal conflict of interest laws. 
There are two separate groups of federal officials required to file. 
Public financial disclosure reports (SF-278) are filed by senior 
officials, such as presidential appointees, general and flag officers 
(rank O-7 and above), and senior executive service members. 
Confidential financial disclosure reports (OGE form 450) are filed by 
certain other federal employees, identified by the executive agency 
based on employees' roles and responsibilities. 

[9] Defense Federal Acquisition Regulation Supplement, subpart 203.70, 
Contractor Standards of Conduct. While this regulation provides that 
contractors should have such elements, they are not required to.

[10] Defense Contract Management Agency's review includes assessments 
of contractor performance measurements; Defense Contract Audit Agency 
audits include financial and internal control systems of contractors.

[11] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[12] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G 
(Washington, D.C.: August 2001).

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