oversight

The OGC Adviser, Vol. 1, No. 4

Published by the Government Accountability Office on 1977-07-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                       Office of The General Counsel




VOLUME1                 JULY 1977                                       NUMBER 4




          ARTICLE:

              Revision of the GAO Code of Ethics

                                                    Raymond J. Wyrsch            1


          COMMENT:

              Legal Representation for Federal Employees                         5


          NOTES:

              GAO As A Conduit of Information                                    8

              User Charges Revisited                                             9




          United States General Accounting Office
                 Washington, D.C. 20548
                                     From The Editors

   In this issue of The Adviser, we discuss two subjects of interest to all GAO employees:
the recent revision of the GAO Code of Ethics and the newly issued Justice Department
guidelines for the representation of Federal employees. We hope that our readers will find
the treatment of these topics, together with the Notes on the User Charge Statute and
another wrinkle in GAO access to records, informative.

   This issue concludes the first volume of The Adviser. We would like to express our deep
appreciation to those who have contributed to the success of Volume I, and to you, our
readers, for your warm response.




      The OGG Adviser-Published by the Office of the General Counsel for the
      professional staff of the United States General Accounting Office.
                            General Counsel-Paul G. Dembling
                        Editors-Ralph L. Lotkin - Donald I. Mirisch
                            REVISION OF THE GAO CODE OF ETHICS


                                                   Raymond]. Wyrschl

                    "Government service requires unusually high standards of honesty,
                    integrity, impartiality, and conduct by Government employees and
                    special Government employees. This assures the proper performance of
                    Government business and confidence in the Government on the part of
                    the citizens.

                    "Over the years, the General Accounting Office has achieved a
                    reputation for integrity and objectivity in carrying out its mission. All
                    of us, as employees of GAO, have a stake in maintaining this
                    reputation. This revision of GAO Order 084!.l-Code of Ethics
                    Including Employees' Responsibilities and Conduct-is primarily an
                    effort to strengthen our safeguards for preventing financial conflicts of
                    interest."



   The above remarks by the Comptroller General                 Government agency), or (c) has interests that may
introduce and set out the motivation for the recent             be substantially affected by the performance or
revision of GAO Order 0841.1, the GAO Code of                   nonperformance of the employee's official duty
Ethics. To insure the Order's effectiveness, all GAO            (e.g., an industrial farming operation which may be
employees will want to thoroughly familiarize                   adversely affected by a proposed recommendation
themselves with its provisions. This article is                 in an agriculture report).
intended to assist in that effort by briefly describ-
ing the various standards of conduct and enforce-                  This does not mean that an employee is prohib-
ment mechanisms.                                                ited from accepting or soliciting anything of value
                                                                from every individual and organization. An
                                                                employee is permitted to accept: (a) a gift, loan,
    A.    Specific Standards of Conduct                         etc., which stems from and is motivated by a
                                                                family relationship, (b) food and refreshments of
1. Acceptance of Gifts and Entertainment                        nominal value during an infrequent luncheon or
                                                                dinner meeting, (c) loans from financial institu-
                                                                tions on customary terms to finance normal
   The Order prohibits any employee from solicit-               everyday affairs (e.g., home mortgage and car
ing or accepting, directly or indirectly, any gift,             loans), and (d) unsolicited advertising or promo-
gratuity, favor, entertainment, loan, or other thing            tional material of nominal value (e.g .. calendars).
of monetary value from a person who: (a) has, or is
seeking to obtain, contractual or other business                   There are certain restrictions with respect to an
relations with the Government (e.g., a Government               employee being reimbursed by private sources for
contractor), or (b) conducts operations or activities           travel and living expenses. When an employee is
that are subject to audit, investigation, decision, or          not on official business he is not precluded from
regulation by GAO (e.g., an official of another                 accepting bona fide reimbursement, unless other-


1 Attorney Adviser, Office of the General Counsel (Special Studies and Analysis), GAO.
wise prohibited by law, for such necessary (but not         prohibits any GAO employee from receiving any
excessive) expenses. On the other hand, with                salary or anything of value from a private source as
certain exceptions, an employee cannot be reim-             compensation for the performance of his Govern-
bursed for travel and Ii ving expenses from a private       ment duties and responsibilities. This prohibition is
source while he is traveling on official business.          distinguishable from the above restriction and
                                                            relates only to the performance of Government
2. Outside Employment                                       duties. It is aimed at preventing not only the actual
                                                            or apparent occurrence of bribery, but also the
   The Order prohibits any employee from engag-             possible compromising of an employee's indepen-
ing in outside employment or other activity, for or         dent judgment. The prohibition extends to pay-
without compensation, not compatible with his               ments from any private source and is not confined
Government employment. Incompatible activities              to such sources having direct or indirect dealings
include but are not limited to: (a) acceptance of a         with GAO.
fee or compensation which may result in or create
the appearance of a conflict of interest (e.g.,
                                                            4. Assistance to Private Parties Dealing with the Government
contract auditors being employed part time by a
major Government contractor), (b) outside                      Again implementing a criminal statute,3 the
employment which tends to impair his ability to             Order prohibits any GAO employee form acting on
perform his Government duties and responsibilities
                                                            behalf of a private party in any matter in which the
in an acceptable manner (e.g., working on a                 Government is a party or has a direct and
full-time all-night shift), or ( c) outside employment      substantial interest. This prohibition refers to the
or activity that is likely to result in criticism of, or    situation where an employee assists a third person
cause embarassment to, GAO.                                 who has some type of claim against or dispute with
                                                            a Government agency. Of course, the prohibition
   In certain cases, outside employment may be
                                                            does not prohibit an employee from representing
permissible, but the employee cannot make that
                                                            himself in a matter involving the Government, nor
judgment by himself. Rather, he must request and
                                                            does it preclude an employee from assisting a
receive from the Office official permission, the
                                                            fellow employee in a personnel proceeding, pro-
specific procedures for which are specified in the
                                                            vided the employee does not receive a fee for his
Order. (See paragraphs 4- 7 of chapter 4.) Permis-          assistance.
sion to engage in outside employment extends only
to the specific employment described in the
request (i.e., no carte blanche approvals will be           5. Postemployment Restrictions
granted) and will normally cover 3 years, unless
sooner revoked or modified. Professional employ-               Once an employee leaves Government service, he
ees who receive permission to engage in outside             should keep in mind two restrictions that arc also
employment are subject to additional restrictions,          criminal in nature. First, there is a permanent ban
designed to preclude one from presenting himself            against any former employee acting as an agent or
to the public as a private practitioner. For employ-        attorney in a matter in which the Governmcn t is a
ees in grade GS-13 and above, permission generally          party or has an interest and in which he partici-
will not be given unless good reasons are shown             pated personally and substantially as a Government
(e.g., financial difficulties), and, if given, it is good   employee. Second, there is a 1-year ban against any
for 1 year only.                                            former employee appearing personally before any,
                                                            court or Government agency as an agent or
3. Outside Compensation for Government Services             attorney in any matter that was under his official
                                                            responsibility during the last year of his Govern-
    Implementing a criminal statute,2        the Order      ment employment. 4



218   u.s.c. 209 (1970).
318   u.s.c. 205 (1970).
418   u.s.c. 207 (1970).


2
        B.    Actual and Apparent                                      D. Confidential Statement of
             Conflicts of Interest                                   Employment and Financial Interests

   Aside from the above specific and identifiable                      Perhaps the most significant revision effected by
standards of conduct, there is the basic conflict-of-               the Order relates to the filing of the Confidential
interest principle that no public servant shall use                 Statement of Employment and Financial Interests
his public office or position for private gain.                     (GAO Form 310), the primary purpose of which is
Consistent with this principle and reflective of the                to enable reviewing officials to compare the finan-
criminal prohibition in 18 U.S.C. 208(a) (1970) ,                   cial interests and non-Government employment of
the Order prohibits any employee from partici-                      their staff members with their official duties and
pating in any GAO assignment in which he, his                       assignments, in order to determine whether any
spouse, minor child, partner, or other specified                    have questionable financial interests.
related organization or person has a financial
interest, unless he first obtains written approval. 5                  Under the new Order, all professional employees
When confronted with such a conflict-of-interest                    are required to submit statements to the appro-
situation--however small or insignificant the finan-                priate reviewing official. "Professional employees"
cial interest may be (e.g., one share of stock)-the                 are those in statutory positions, positions in grade
employee must submit details of the case, in                        GS-7 and above in 2-grade interval series, and all
writing, to the appropriate reviewing official. The                 other positions in grade GS-13 and above. Also,
employee will be considered disqualified from the                   reviewing officials are now authorized to designate
assignment in question until the matter is resolved,                certain nonprofessional positions under their super-
the precise procedure for which is set forth in the                 vision as being susceptible to conflicts of interest
Order (sec paragraph 4 of chapter 7).                               because of the nature of their work. Incumbents of
                                                                    these positions will be required to file confidential
                                                                    statements.
      C.     Prohibited Financial Interests
                                                                       Each designated employee, once he has filed an
                                                                    initial confidential statement, must submit an
   As a means of preventing the occurrence of a
                                                                    additional statement with appropriate amendments
conflict-of-interest situation in the first instance, as
                                                                    by June 30 of each year, and whenever he is
well as removing the appearance of impropriety,
                                                                    reassigned or detailed for a period of 30 days or
the Order places a blanket restriction on the
                                                                    more to a different division or office. The appro-
financial interests of employees. Specifically, the
                                                                    priate reviewing official must review each state-
Order prohibits any employee from having a direct
                                                                    ment within 15 days of the date of submission. If
or indirect financial interest that conflicts substan-
tially, or appears to conflict substantially, with his              he finds no apparent conflict of interest, he shall so
Government duties and responsibilities. It should                   certify. If he finds a conflict, the employee will be
be emphasized that this restriction does not neces-                 given an opportunity to explain. The procedures
sarily refer to any one GAO assignment of an                        for resolving such a case are set forth in detail in
employee but rather to his general duties and                       the Order (see paragraph 12 of chapter 7).
responsibilities. For example, the ownership of
stock in an energy comp<my by an employee                                  E.    Interpretative and Adviso~y
assigned to the Energy and Minerals Division, or in
a large dcfcnsc contractor by an employee assigned                              Service-Ethics Counselors
to the Procurement and Systems Acquisition Divi-
sion, may be questionable in a given case.                             From time to time various conflict-of-interest

5Briefly, the Order states that an actual conflict-of-interest situation exists whenever (1) a private interest (financial, personal,
 or one resulting from non-Government employment) of an employee might affect the performance of his official duties or
 (2) information gained through an employee's official duties is used for his personal benefit. An apparent conflict of
 interest exists whenever a reasonable person, judging from outward appearances, might suspect the existence of an actual
 conflict.



                                                                                                                                  3
questions, both administrative and legal in nature,     advisory service, the publication of an instructive,
will naturally arise. To provide effective advice and   simply written booklet is planned. In the mean- ,
counsel on legal questions the Order provides for       time, please do not hesitate to contact OGC if you
the appointment of an Ethics Counselor, together        have any questions regarding the revised Order, or
with as many deputy ethics counselors as may be         any conflict-of-interest matter.
appropriate. Complementing this interpretative and




4
                                                                                             COMMENT

               LEGAL REPRESENTATION FOR FEDERAL EMPLOYEES

   The issue of when a Federal employee is entitled       criminal offense.
to legal representation at Government expense is of
interest to us all. Recently, the Department of           5. Likewise, the Department will neither provide
Justice issued new guidelines that describe the           nor pay for representation where the positions
situations in which Department representation is to       taken would oppose positions maintained by the
be provided to a Federal employee who is involved         United States itself.
in his individual capacity in civil or criminal
proceedings.                                               Representation is limited to state criminal pro-
                                                        ceedings and civil and congressional proceedings. A
  The guidelines, codified          at   28   C.F.R.    Federal employee who has committed a Federal
§ § 50.15-50.16, provide that:                          crime is, by definition, acting outside the scope of
                                                        his employment, and, in any event, the Justice
  1. The Department will represent a Government         Department cannot both prosecute and defend an
  employee who is sued or subpoenaed in his             employee charged with a crime,
  individual capacity if the acts that constitute the
  subject of the proceeding reasonably appear to           What about the rare situations in which the
  have been performed within the scope of his           Department will not provide or pay for legal
  employment, so long as he is not the subject of a     counsel under the new guidelines? The guidelines
  Federal criminal investigation with respect to        state that representation at Federal expense will be
  such acts.                                            provided only in the instances discussed above. If
                                                        this were construed as barring payment of
  2. Where evidence of specific part1c1pation in a      employee legal fees by any other Federal agency, it
  crime is present, but the employee reasonably         might conflict with recent GAO decisions.
  appears to have been acting within the scope of
  his employment, the Department will pay for a            GAO has considered the matter of provision of
  private attorney. The guidelines require advance      legal representation for employees by Government
  approval of private counsel by the Department.        agencies on a number of occasions. In those
                                                        instances, the Department of Justice declined to
  3. When the Department determines that se\'eral       provide counsel to an employee, either because of
  employees who are entitled to representation          its view that he is not entitled to it or because of a
  have sufficiently conflicting interests that the      conflict with a position taken by the United States
  Department could not represent all of them, it        in a particular dispute.
  will pay for an approved private attorney.
                                                           In a 1973 case,1 the Comptroller General held
  4. The Department will neither represent nor          that, under the circumstances, appropriations for
  pay for the representation of an employee with        the Administrative Office of United States Courts
  respect to acts for which an indictment or            could be used to pay for representation of Federal
  information has been filed against him by the         judges by private attorneys. The principal criteria
  United States, or where a pending Department          established are: (1) the Justice Department has
  investigation indicates that his acts constitute a    been asked and has declined, or has previously


153 Comp. Gen. 301 (1973).




                                                                                                            5
stated that it would decline, to provide representa-            the case, the agency in which the matter arose
tion in a particular case or class or cases and (2) the         should be free to use its best judgment in hiring
agency determines that it is in the best interest of            private counsel.
the United States, and necessary for the purpose of
the particular appropriation involved, that the                    Second, strict application of section 3106 could
individual or body be represented by counsel. This              contravene the general rule that, where an officer
decision was made notwithstanding the provisions                of the United States is sued because of some act
of 28 U.S.C. 515-519, under which, unless other-                done in the discharge of his official duties, the
wise authorized by law, the conduct and super-                  expense of defending the suit should be home by
vision of litigation in which the United States or an           the United States.4 The rational for this rule was
agency or officer thereof is a party is reserved to             aptly set forth in a letter of July 25, 1975, from
the Department of] ustice.                                      the Assistant Attorney General, Civil Division, to
                                                                the Comptroller General:
   An additional bar not present in the 1973 case
was the provision of 5 U.S.C. 31062 that restricts
the employment of attorneys or counsel for the                        "* * * The United States acts
conduct of litigation to which the United States or                   through its employees. Accord-
a Federal agency or employee is a party. This                         ingly, upholding the authority and
restriction applies only to the heads of executive                    propriety of actions taken by
and military departments and does not affect the                      employees in furtherance of their
judiciary, which was the subject of the decision.                     duties serves as well to protect
                                                                      the Federal Government as the
   In another matter, the Comptroller General                         employee.* * * The Government
followed the 19 7 3 decision in allowing the Small                    would face obvious morale pro-
Business Administration to reimburse an                               blems if it failed to defend employ-
employee's attorney fees where the United States                      ees carrying out official policy.
Attorney had withdrawn from a case, requiring the                     Federal employees would be less
employee to hire private counsel. 3 The decision                      vigorous in upholding Federal law
notes that SBA is not an executive department but                     and in discharging their du ties if,
an "independent establishment," so that 5 U.S.C.                      when sued, they had to absorb their
3106 would not apply. However, the case also                          expense of litigation. For these and
suggests that 5 U.S.C. 3106, like 28 U.S.C.                           other reasons it has long been the
515-519, would not be a bar to payment of an                          general policy of the Department of
attorney's fees by an agency where the Department                     Justice to afford representation to
of Justice had declined to afford counsel, and                        employees sued for acts taken in
where it was determined to be in the best interest                    the performance of their official
of the United States to provide representation.                       duties * * *. ,,5

   The rationale for the Comptroller General's
approach appears to rest on two principles. First,                 The recent Justice Department policy statement
section 3106 seems to be designed as a supplement               on representation of Federal employees should be
to 28 U.S.C. 515-519, to assure that all litigation             read with the foregoing background in mind.
involving the United States, an agency, or an.                  Hopefully, the guidelines will enable employees to
employee will be controlled by the Justice Depart-              be properly represented in most cases.
ment. Thus, when the Department has, for some
reason unrelated to whether it is in the Govern-                  However, even where Department counsel may
ment's interest to defend the employee, declined                be unavailable pursuant to the new guidelines, the

2"* * * [T] he head of an Executive department or military department may not employ an attorney or counsel for the
 conduct of litigation in which the United States, an agency, or employee thereof is a party * * * but shall refer the matter to
 the Department of Justice***."
355 Comp. Gen. 408 (1975). See also, 56 Comp. Gen. 640 (B-137762, B-143673, May 16, 1977).
4see, Kont'gsberg v. Hunter, 308 F. Supp. 1361, 1363 (W.D. Mo. 1970); 6 Comp. Gen. 214 (1926); 53 Comp. Gen. 301, 305
 (1973).
5Letter quoted at 55 Comp. Gen. 412.
6
agency employing the individual sued may still be               sentation. 7 The Department will apply the criteria
able to pay for legal counsel, under the applicable             discusse~  earlier in this Comment and will inform
Comptroller General decisions, where such is deter-             the agency and/or the employee whether represen-
mined by the em ploying agency to be in the best                tation will be provided. If the Department declines,
interest of the United States.6 Presumably, such a              the employee may still discuss with the agency
determination would require that the employee                   whether it can pay for private representation itself,
being sued was acting within the scope of his                   under the applicable Comptroller General deci-
official duties. Where the Justice Department's                 s10ns.
refusal to provide representation is based on its
determination that such would not be in the best                   Within GAO, attorneys in the Office of the
interest of the United States, the employing agency             General Counsel are available to discuss any aspect
may be expected to consult with the Department                  of the Justice Department guidelines and to advise
and to accord great weight to its determination.                employees who are or may become involved in
However, as the facts in the Comptroller General                legal proceedings resulting from the performance
decisions discussed in this Comment make clear,                 of their official duties. Don't hesitate to contact
the Justice Department is not necessarily the most              OGC if you have a problem in this area. 8
appropriate determiner of the best interest of the
United States in all cases, particularly those in
which the Department and the employing agency
may have conflicting interests.

    Should they be sued, most employees will be
concerned primarily with the mechanics of obtain-
ing representation. The Justice Department guide-
lines set out the procedure for this. An employee
who believes he is entitled to representation after
becoming a party to or being subpoenaed in a state
criminal proceeding, or a civil or congressional
proceeding, must submit a request for representa-
tion, together with copies of all papers served upon
him, to his immediate supervisor or the person
designated by the head of the agency for such
purpose. The employing agency will then forward
to the Civil Division of the Department of Justice a
statement of whether the employee was acting
within the scope of his employment, together with
its recommendation as to whether representation
should be provided.

   All supporting data must also be submitted with
the agency report; ho\-vever, any communication
between the employee and any person acting as an
attorney at his employing agency will be subject to
the attorney-client privilege. This means that such
information may not be disclosed or used by the
Department of Justice without the permission of
the employee who initiated the request for repre-

61n this connection compare the Comptroller General decisions that allowed payment of attorneys' fees for private litigants
  where the United States had a beneficial interest in the outcome, 42 Comp. Gen. 595 (1963 ), and the recent decision
  allowing regulatory agencies to pay the attorneys' fees of persons who wish to participate in proceedings before the agency,
  56 Comp. Gen. I l l (1976}. See also, B-92288, Feb. 19, 1976; B-139703,July 24, 1972.
7 28 C. F.R. § 50.l 5(a)(l }.
8 See also, "The GAO Auditor in Court," The OGG Adviser, Vol. I, No. I (October 1976}, for a discussion of what to do if
  you are subpoenaed.
                                                                                                                            7
NOTES

                       GAO AS A CONDUIT OF INFORMATION


   Occasionally, ~I embers of Congress, acting in             Comptroller General such informa-
their individual capacities, ask us to obtain for             tion regarding the powers, duties,
them information or documents from Federal                    activities, organization, financial
agencies that they have been, or would be, unable             transactions, and methods of
to get on their own. This type of request-in effect,          business of their respective offices
for GAO to act as a conduit of information-has                as he may from time to time
both policy and legal implications.                           require of them; and the Comptrol-
                                                              ler General, or any of his assistants
                                                              or employees, when duly author-
            The Policy Issue                                  ized by him, shall, for the purpose
   It is GAO's general policy not to act on behalf            of securing such information, have
of .Members of Congress (or, for that matter,                 access to and the right to examine
anyone else) to secure information or documents               any books, documents, papers, or
from Federal agencies that an individual would not            records of any such department or
be entitled to if the request for the information or          establishment. The authority con-
document were made directly to the agency.                    tained in this section shall not be
                                                              applicable to expenditures made
   It is not difficult to foresee how a policy of             under the provisions of section 107
accepting requests for information as a conduit for           of this title."
an individual requester could strain GAO's re-
sources. It is not a remote possibility that, in a     While this law clearly authorizes GAO complete
short period of time, GAO would be viewed as a         access to records when carrying out its audit
clearinghouse for Federal documents and informa-       responsibilities, when we request such documents
tion. This role would require the diversion of audit   on behalf of an individual Member of Congress, the
and legal manpower from normal GAO assignments         provisions of 5 U.S.C. 552 (the Freedom of
to information gathering. Acting as a conduit also     Information Act (FOIA)), not those of 31 U.S.C.
affects our legal status vis-a-vis Federal agencies    54, authorize, as well as potentially limit, that
when requesting access to records.                     access.

           Legal Implications
                                                          Individuals requesting information from Federal
   As discussed in Vol. 1, No. 1 of The Adviser, the   agencies typically do so under the FOIA. (For a
authority of the General Accounting Office to have     discussion of this act, sec Vol. 1, No. 3 of Tlze
access to records maintained by the various Federal    Adviser at pages 4-5.) GAO has interpreted the
agencies is found in § 313 of the Budget and           FOIA provisions to the effect that, while there is
Accounting Act of 1921, 31 U.S.C. 54:                  no authority to withhold information from the
                                                       Congress, the word "Congress" as used in the
                                                       statute applies to congressional commit tees and
       "All departments and establish-                 does not include Members of Congress acting in
       ments shall furnish to the                      their individual capacities. This ruling is supported




8
by the legislative history of the statute. For                gress are subject to the same limitations as are
example, H.R. Rep. No. 1497, 89th Cong., 2d                   members of the public.
Sess., pp. 11-12, states:
                                                                       Suggested Course of Action
      "Members of the Congress have all                         If, in the future, you are asked by a Member of
      the rights of access guaranteed to                     Congress acting in his individual capacity to obtain
      'any person' * * *."                                   information from a Federal agency, you should
                                                             refer to and be guided by GAO's policy as set forth
                                                             in this Note. Should you have any questions
Accordingly, with regard to the disclosure of                concerning implementation of this policy, please
restricted information, individual Members of Con-           contact Robert A. Evers of OGC (275-3140).




                                   USER CHARGES REVISITED


   If you plan to rely on the User Charge Statutel           ed a revised fee schedule, effective March 1, 197 5.
to encourage a Federal agency to attempt to                  This scheme was promptly challenged by two
recover the full cost of its public service activities,      additional lawsuits.5
you should be aware that GAO recently reviewed
the extent to which a Government agency may
recover the cost of providing services to the public            All four cases ultimately reached the United
under this law, in light of several recent court             States Court of Appeals for the District of Colum-
decisions dealing with that agency's fees. These             bia Circuit. The precedent-setting Supreme Court
decisions may significantly limit the costs that             opinions provided little guidance to the Court of
agencies may collect under the statute. In one               Appeals as to how, if at all, an agency should go
decision, the Supreme Court invalidated the                  about the quantitative task of assessing charges for
Federal Communication Commission's 1970 fee                  its services. In National Cable Television, the
schedule .2 The Court remanded the case to the               Supreme Court had said that FCC should not
Commission, instructing it to reappraise the m1nual          consider those costs that inure to the benefit of the
fee imposed on community antenna television                  public in computing a fee base. The Court indica-
(CATV) systems. Shortly thereafter, FCC                      ted that the Commission could assess a fee mea-
suspended collection of these charges.                       sured by the special benefit received by CATV
                                                             operators. Rather than confronting the constitu-
   Two subsequent lawsuits were brought with                 tional issue of whether IOAA represented a per-
respect to FCC's 1970 fee schedule. One suit3                missible delegation of the Congress' taxing power
attacked the entire schedule after FCC tried to              to Federal agencies, the Supreme Court decided
limit the scope of the Supreme Court's decision to           that FCC could properly achieYe the congressional
annual fees for broadcast and cable television               intention that broadcasting companies defray some
systems. The other action4 challenged particular             of the Commission's regulatory costs by assessing
fees assessed by the Commission.                             fees based on the value of FCC's sen-ices to the
                                                             recipient, rather than on a public policy or inter-
   During the course of this litigation, FCC adopt-          est-served basis.

1Independent Offices Appropriations Act, 1952, §501, 65 Stat. 290, as codified, 31 U.S.C. §483a (1970) (referred to as
 IOAA).
2National Cable Television Association, Inc. v. United States, 415 U.S. 336 (1974): see also, Federal Power Commission v.
 New England Power Co., 415 U.S. 345 (1974)-establishing standards that agencies must meet in order to charge fees under
 IOAA.
I Footnotes continued on p. 10j
                                                                                                                     9
          On December 16, 1976, the Court of Appeals                   FCC submitted a written response to the GAO
       issued four related decisions, remanding to FCC              report dated June 24, 1977, disagreeing with the
       several of the agency's orders involving the collec-         GAO contention that the four Court of Appeals
       tion of fees from Commission regulatees. The                 decisions provide sufficient guidance to devise a
       Court of Appeals interpreted the two 19 74 Su-               permissible fee schedule. The Commission also
       preme Court decisions and attempted to provide               maintains ·that it does not now have and cannot
       FCC with the criteria it would need to assess a              obtain the data necessary to recalculate what the
       permissible fee.                                             lawful fee would have been in the past. Lastly,
                                                                    FCC prefers that the Congress enact new legisla-
          In order to avoid assessing a fee based on public         tion, rather than FCC attempting to adopt yet
       policy. or interest served, the Court of Appeals             another fee schedule under the User Charge Statute
       instructed FCC to charge its regulatees for services         in face of the confusing and ambiguous court
       which assist them in complying with their statu-             decisions.
       tory du ties. These are necessary services that are
       proper even though they might be based partly on                FCC has requested a meeting with the appro-
       some incidental public interest served. The Court            priate congressional committees in order to decide
       of Appeals ruled that, to the extent a fee recovers          on a course of action. GAO is preparing an answer
       more than necessary costs, it represents a charge            to the FCC response and will most likely remain
       for the independent public interest served and               closely involved in this matter until all the issues
       constitutes a tax that, according to the Supreme             are resolved.
       Court, FCC has no power to levy.
                                                                       Meanwhile, because the Supreme Court did not
          FCC took the position that the court cases                reach the constitutional issue of whether IOAA
       provided insufficient guidance to enable it to               represented a permissible delegation of the Con-
       devise any valid fee schedule and proposed to                gress' taxing power to Federal agencies, it is
       return all the fees. The House and Senate Sub-               uncertain whether a Federal agency, under author-
       committees on Communications asked GAO to                    ity of IOAA, may lawfully assess a fee that is based
       interpret the four Court of Appeals decisions. The           on any element of public policy or interest served.
       subcommittees wish to prevent FCC from re-                   The Court of Appeals' approach, distinguishing
       funding $164.1 million in total fees collected from          independent from incidental public interest
       1970 to 1976.                                                through the device of necessary services, has not
                                                                    been reviewed by the Supreme Court or tested in
          dn May 6, 1977, GAO issued a report entitled,             other jurisdictions. Moreover, no one is certain
       "Establishing a Proper Fee Schedule Under the                about the scope of the Supreme Court's decisions.
       Independent Offices Appropriation Act, 19 52 ,"              They may apply solely to the litigan ts-FPC and
       CEDD-77-70. The GAO report expresses the belief              FCC; or they may apply only to Federal regulatory
       that sufficient guidance is contained in the Court           agencies; or they may apply to all Federal agencies.
       of Appeals' decision to permit the establishment of
       fee schedules for services provided by Government                If IOAA is again the subject of litigation that
       agencies. GAO believes a reasonable interpretation           reaches the Supreme Court, the Court might well
       of the court's decisions requires FCC to ( 1)                interpret IOAA differently. It is noteworthy that
       separate regulatees into "recipient classes," (2)            two of the nine justices presently sitting on the
       calculate the cost basis for each fee to be assessed         Court did not participate in the 1974 cases, and
       against each recipient class, identifying costs and          one who did is no longer on the Court. Further,
       excluding the "independent public interest"                  two justices dissented in the National Cable Tele-
       served, and ( 3) apportion the allowable identified          vision case. In other words, five of the nine present
       costs among the members of each recipient class.             Supreme Court justices either have expressed no

       3National Association of Broadcasters, et al., v. Federal Communications Commission, Nos. 75-1087, et al. (D.C. Cir.,
        Dec. 16, 1976). S''rt F-2,/ lllf,. I
                                          -;;:r
                                                  ro v. s.A,,,. }).r,, Zrf  '''?" J
       4{;~~): ~~!:.{ <;l.';':j/)l"::,ns;;~ ~#>:~:·i';~(";;1;5·o'nimissi;/,,, Nos. 75-1503,           et al.
                                                                                                       (D.C. Cir., Dec. 16,
       f)f/ational Cable Television Association, Inc., et al., v. Federal Communications Commission, Nos. 75-1053, et al. (D.C.
        Cir. Dec. 16, 1976), and 7,1ectronics Industries Association, et al., v. Federal Communications Commission, Nos.
         75-1120, et al. (D.C. Cir.. Dec. 16, 1976).

IJc.r,f~iw. ., ~(.(.' F. ,,, ''""' ITU "· r. ~.J. {. 2.~ S" (1176)
                           ($'{
F~ch,,.... ,   U~l4ks·~/ ~-)J-q F,2-f 110'1, 1 t"d.s.~.,().c, zcr-o(r?T6)
formal opm10n concerning IOAA or disagree with      Richard R. Pierson (275-2888) or John Higgins
the present status of the law as expressed in the   (275-6263) of OGC regarding reports or projects
two Supreme Court cases.                            that involve either 31 U.S.C. 483a (1970) or
                                                    OMB Circular A-25 (issued September 23, 1959),
  Because of the confusion presently surrounding    which implements the User Charge Statute.-Steve
application of IOAA, the General Counsel has        Sorett
encouraged all GAO employees to contact




                                                                                                 11
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