HomeEthics Program ResourcesDoD Ethics Guidance SOCO Advisories 2016 SOCO AdvisoriesAdvisory 16-05 December 22, 2016

Advisory 16-05 December 22, 2016

  1. OGE announces changes to the standards governing gifts from outside sources (5 CFR 2635 Subpart B).
     

    The Office of Government Ethics (OGE) has revised the regulation governing when Executive Branch employees may accept gifts from sources outside of the Federal government. The revisions to 5 C.F.R. § 2635, Subpart B take effect on January 1, 2017. This SOCO Advisory will highlight some of the more significant changes but does not discuss every revision. Ethics counselors should read the new rules in their entirety, along with the comments OGE published in the Federal Register on November 27, 2015 and November 18, 2016. OGE has included new examples that will help ethics counselors applying the rules. The changes emphasize more explicit consideration of whether acceptance of a gift would call into question an employee's integrity or impartiality. The revised rule also creates new requirements for agency designees to document certain determinations in writing.

  2. Considerations for declining otherwise permissible gifts (5 C.F.R. § 2635.201(b)).
     

    OGE has not changed the fundamental prohibition on employees soliciting or accepting anything of monetary value from a prohibited source or offered because of the employee's official position (unless excluded from the definition of "gift" or an exception applies). However, OGE's new rule adds a standard to assist employees and ethics counselors in evaluating not only whether a gift may be accepted, but whether it should be accepted.

    1. Values-based decision-making. OGE commented that "Section 2635.201(b)(1) is designed to increase uniformity and promote public trust by articulating factors, which are informed by the ethical values consistent with the executive branch's Principles of Ethical Conduct, in order to guide the employee's decision-making process." (81 FR 81641 at 8162). SOCO notes that this change is consistent with the values-based ethical decision-making emphasized by the Secretary of Defense in his "Leader-Led, Values-Based Ethics Engagement" memo of February 12, 2016. Ethics training for DoD employees should include a discussion of the Secretary's memo and the factors in Section 2635.201(b)(2).

    2. Evaluating gift acceptance under the rules. The current regulation simply states it is never inappropriate and frequently prudent for an employee to decline a gift...," without articulating factors an employee should consider before accepting a gift (See current rule § 2635.204). OGE's comments to the new rule indicate their concern that ethics counselors have tended to focus exclusively on whether a regulatory exception allows acceptance of a gift, without sufficiently analyzing appearance concerns. Section 2635.201(b) of the new rule now provides a uniform standard across the Executive Branch that ethics counselors and employees may apply when evaluating whether or not to accept a gift from an outside source. OGE did suggest the standard is non-binding. That means an employee who accepts a gift that qualifies for an exception under § 2635.204 may not face disciplinary action for violating 5 CFR § 2635 in the event someone later subjectively disagrees with the employee's analysis of appearance concerns (See § 2635.201(b)(3) and OGE comments at 81 FR 81641 at 81643). While the new regulation reminds employees they should seek advice from an agency ethics official when determining whether or not to decline an otherwise permissible gift, the plain language of the regulation makes clear that the employee is ultimately accountable for the decision he / she makes. (See § 2635.201(b)(4) and OGE comments at 81 FR 81641 at 81643).

  3. General prohibition on solicitation or acceptance of gifts (Section 2635.202) and limitations on use of exceptions (Section 2635.205).
     

    OGE retained the prohibitions on employees soliciting or accepting gifts from prohibited sources and accepting gifts offered because of the employee's official position, but discussion of the limitations on using exceptions to the gift rules is now contained in a separate section (new § 2635.205). OGE has added that an employee may not accept a gift in violation of any Executive Order or when acceptance is specifically prohibited by a supplemental agency regulation issued with OGE's concurrence (§ 2635.205(e) & (f)). This would address, for example, political appointees prohibited under the current President's Ethics Pledge (E.O. 13490 of January 21, 2009) from accepting gifts from registered lobbyists. It would also include the gift rules in DoD's supplemental standards of conduct regulation (5 C.F.R. Part 3601).

  4. Changes to definition of "gift" and other terms (Section 2635.203); former Section 2635.204(g)(1) exception is now an exclusion.
     

    OGE has made slight changes to several terms defined in § 2635.203, and added a number of new examples. OGE has not published a (track changes) version of the new rule, so ethics counselors should re-familiarize themselves with common terms by comparing the current and new regulation closely.

    1. Changes to exclusions. OGE has made important amendments to the items excluded from the definition of gift in § 2635.203. First, OGE's longstanding interpretation that the exclusion for (modest food and refreshments) is only available for non-alcoholic food and drink is now stated in the rule itself (§ 2635.203(b)(1)). The exclusion for (items with little intrinsic value) has been clarified in that they need not be intended solely for presentation, but rather, primarily for presentation (§ 2635.203(b)(2)). Ethics counselors should review the examples provided in the rule.

    2. New exclusion: free attendance when presenting information for agency. Perhaps the most significant change OGE has made in § 2635.203 is to now exclude from the definition of gift what has previously been an exception allowing free attendance at an event where an employee is assigned to present information on behalf of his/her agency. (Cf. new § 2635.203(b)(8) with the language formerly in § 2635.204(g)(1)).

      1. The exception in what is currently § 2635.204(g)(1) that allows an employee to accept free attendance for his or her spouse or other guest under certain circumstances has also been incorporated into the new exclusion at § 2635.203(b)(8)(iii). (Likewise, OGE has excluded from the definition of (gift) an offer of free attendance to certain personnel, such as security details or press officers, who are assigned by the agency to perform official duties in support of the presenting employee. This regulatory exclusion accords with OGE's longstanding interpretation of current § 2635.204(g)1).) (80 FR 74004 at 74005, discussing proposed changes ultimately incorporated into OGE's final rule at § 2635.203(b)(8)(ii).)

      2. As discussed above, OGE's new rule adds (nonbinding) factors that officials should consider when determining whether or not to accept a gift that is otherwise permissible. By the letter of the rule, considering these factors only applies to evaluating a gift exception, and need not be applied to any gift exclusion. This includes the former exception for free attendance at a speaking engagement now excluded from the definition of (gift) under § 2635.203(b)(8). Given OGE's emphasis on values-based decision-making in the new rules (and SECDEF's February 12, 2016 policy memo), it is always appropriate for ethics counselors and employees to evaluate the potential that accepting the benefits of free attendance, such as meals and conference attendance, associated with an official speaking engagement would cause a reasonable person to question the integrity or impartiality of DoD or the employee.

    3. Changes to (market value,) indirect gift, and (free attendance)

      1. OGE has made slight changes to the definition of market value and added four new examples to the rule. Example 2 to § 2635.203(c) makes it clear that value is determined by what it would cost the recipient to purchase the gift, not what the offeror actually paid.

      2. The definition of a gift which is indirectly solicited or accepted now includes one (given with the employee's knowledge and acquiescence to... a member of the employee's household) (§ 2635.203(f)(1) (emphasis added)).

      3. The new rule changes the definition of (free attendance) currently in § 2635.204(g)(4). Although the new rule at § 2635.203(g) still does not include (a meal taken outside of a group setting) as part of free attendance where the employee is a presenter at the event, he or she may accept an invitation to a separate meal for participating presenters that is hosted by the sponsor of the event. In proposing the changes, OGE acknowledged that such presenter luncheons or dinners are customary and the exchange of ideas with the other presenters is often of benefit to the employee's agency. (80 FR 74004 at 74006)

  5. Section 2635.204 exceptions to the prohibition against accepting certain gifts.
     

    OGE added many new examples in revising the exceptions to the rule, including some addressing issues of social media, store gift cards, and honorary degrees from foreign institutions of higher education. The introduction to the gift exceptions in § 2635.204 now emphasizes prudentially declining gifts (if acceptance would cause a reasonable person to question the employee's integrity or impartiality.) It also refers back to the standard OGE set forth in § 2635.201(b) for consideration in determining whether a gift should be accepted. (See introduction to new § 2635.204)

    1. No change to the de minimis exception. In responding to comments on the proposed rule, OGE declined to raise the monetary limits of the de minimis exception in § 2635.204(a) ($20 per occasion; $50 per year from a single source). OGE determined that raising the limit would not strengthen the integrity of the executive branch's operations. (81 FR 81641 at 81645)

    2. Invitations from a former employer. OGE's revised rule allows an employee to accept, as a gift based on an outside business or employment relationship, free attendance to a former employer's event where the prior employment relationship clearly motivated the invitation and other former employees have been invited to attend. Examples might include a holiday party or event to honor a retiring former co-worker hosted by the Government employee's former employer. (See revised § 2635.204e)(4) and accompanying example.) Relationships with former employers may nonetheless raise concerns, particularly where the former employer is an organization or company that does business with DoD. As the standard in revised rule § 2635.201(b) makes clear, before accepting a gift of free attendance to a former employer's event, an employee should always consider the potential that acceptance would cause a reasonable person to question his or her impartiality or integrity.

  6. Written determination now required to accept free attendance to any widely attended gathering (§ 2635.204(g)).
     
    1. Written determination required for all WAGs. Perhaps the most significant change for DoD ethics counselors in OGE's revised rule is a new requirement for the (agency designee) to provide a written determination of agency interest before an employee may accept free attendance to any widely attended gathering (WAG). The current rule only requires this determination to be in writing when the offeror has interests that may be substantially affected by the performance or nonperformance of an employee's duties (Cf. current rule § 2635.204(g)(3)(i) to new § 2635.204(g)(1) & (3)). Section 2635.204(g)(4) in the new rule lists the criteria an agency designee must consider when assessing the agency's interest in an employee accepting a gift of free attendance to a WAG.

    2. Form and substance. OGE considered comments about increased work for ethics counselors from requiring all WAG determinations to be in writing and retained by the agency for six years, but determined that agency officials making these determinations have always been required to evaluate the relevant circumstances, and that the potential benefits in promoting public confidence in Government operations outweigh concerns about additional labor. In commenting on the proposed and final rule (80 FR 74004 at 74008, and 81 FR 81641 at 81646, respectively), and in response to concerns raised by DoD during the rulemaking process, OGE indicated agencies have discretion and flexibility to determine how to comply with the new requirement. An email is sufficient and need not describe the analysis, so long as the agency designee has actually considered the criteria. OGE indicated even a simple statement that (I am authorizing you to attend [X event], pursuant to 5 C.F.R. § 2635.204(g)) is sufficient. Nonetheless, it may be prudent and helpful to list the factors in the written determination, particularly where the agency designee is not an ethics counselor. SOCO's online Ethics Resource Library includes a sample process and memo employees may use to request agency designee approval to accept an invitation of free attendance to a WAG.

    3. Record retention requirement. DoD expressed concern that the new rule would require individual employees to retain copies of the agency's written WAG determinations for their entire Federal careers in the event their attendance was later questioned through the Inspector General or military justice processes. In response, OGE explained that the applicable records retention schedule (GRS 2.8, item 0001) makes the agency responsible for retaining a record of the written determination for six years. SOCO nonetheless believes that a best practice for senior officials in the department is to retain a copy for their personal records, as they do with other ethics opinions.

    4. Agency designee. Ethics counselors should refer to the definition of (agency designee) in Section 1-202 of the Joint Ethics Regulation (DoD 5500.7-R) and recall that the ethics counselor only acts in this capacity when advising a military officer in grade of O-7 or above who is in command, or any civilian Presidential appointee confirmed by the Senate (PAS). SOCO is considering recommending a change to the definition of (agency designee) that would allow ethics counselors to make the determination of agency interest for other senior officials, but such an amendment to the JER has not yet been proposed. Ethics counselors will need to work closely with employees and the employees' supervisors who qualify as (agency designee) to ensure proper creation and retention of written determinations.

    5. Other changes to the WAG exception. Ethics counselors should be aware of several other changes implemented in the new rule. First, the rule now incorporates OGE's consistent view that there must be an opportunity to exchange ideas among attendees in order for an event to qualify as a WAG. (See revised rule § 2635.204(g)(2) and OGE comments in 81 FR 81641 at 81646.) OGE has raised to $375 the ceiling on the value of free attendance when a person other than the event sponsor invites and pays for the employee to attend the event. (Revised rule § 2635.204(g)(3)(iv)). Finally, the rule has been amended to make clear that an employee may accept free attendance to the WAG for only one guest, consistent with OGE's historical interpretation of this rule. (See at § 2635.204(g)(6) and OGE comments to the proposed rule at 80 FR 74004 at 74007.)

  7. Written determination now required to accept certain social invitations under § 2635.204(h).
     

    The new rule retains the exception allowing employees to accept unsolicited social invitations from other than a prohibited source. However, if the person sponsoring the event or extending the invitation to the agency's employee is not an individual (e.g., the invitation is from a corporation or an organization), then the agency designee must make a written determination (that the employee's attendance would not cause a reasonable person with knowledge of the relevant facts to question the employee's integrity or impartiality...) (§ 2635.204(h)(3)) As with the written determination now required under the WAG exception, agencies have discretion to determine the level of detail in the written authorization and may use email to deliver it. (See OGE comments on the final rule in 81 FR 81641 at 81646.)

  8. New exception for informational materials (§ 2635.204(m)).
     

    OGE added an exception allowing employees to accept for personal use unsolicited gifts of informational materials. OGE recognized that donors often provide such gifts to communicate a donor's ideas or position rather than to personally benefit the recipient. (Informational materials) are primarily educational or instructive, and this exception cannot be used to accept, for example, novels, videos, or pictures intended for display. (See OGE comments to the proposed rule in 80 FR 74004 at 74008.) Ethics counselors should familiarize themselves with the definition of (informational materials,) as well as the requirement for a written determination by an agency designee using the standard in § 2635.201(b) when the value of informational materials from the same person exceeds $100 in a calendar year.

  9. Limitations on use of exceptions (§ 2635.205).
     

    The limitations on using the gift exceptions have been moved from what is currently in § 2635.202(c) to new § 2635.205. OGE's comments to the proposed rule acknowledge that some exceptions permit employees to solicit certain gifts as long as they do not use their official position to induce the gift. Other exceptions do not allow gifts to be solicited under any circumstances. Ethics counselors should read OGE's comments to the proposed rule in 80 FR 74004 at 74009 to fully appreciate the distinctions, and consider the standard in revised rule § 2635.201(b) to assess whether accepting under one of the rule's exceptions would cause a reasonable person to question an employee's impartiality or integrity.

  10. Properly disposing of gifts and maintaining documentation.

    New § 2635.206 revises the rules for disposing of gifts that were formerly in § 2635.205, and now allows a tangible gift valued at less than $100 to be destroyed as one way of disposing of it when there is not authority to accept it. Return of, or reimbursement for, the gift by the employee remain acceptable options as well. The rule emphasizes that disposition of a prohibited gift must occur promptly. (See § 2635.206(a), (a)(1), and (a)(3), and (c).)

    1. Market value of tangible items may be estimated by referencing the retail cost of a similar item of like quality. (§ 2635.206(a)(1)) (Destruction may be carried out by physical destruction or by permanently discarding the gift by placing it in a waste receptacle.) (OGE comments on proposed rule in 80 FR 74004 at 74009; see also Example 1 to § 2635.206(a)(1).) Concerned about issues of constructive receipt and not creating incentives for donors to offer gifts an employee could not otherwise accept, OGE rejected a suggestion to allow employees to donate tangible gifts to charity in lieu of destruction or other disposition. (See OGE comments on the final rule in 81 FR 81641 at 81648.)

    2. The new rule encourages employees to record actions taken to dispose of gifts that cannot otherwise be accepted. (§ 2635.206(d)) The rule suggests an e-mail from the employee to her ethics counselor or supervisor. However, use of the gift logs that many senior officials in DoD personally maintain to document ethics counselor advice and gift disposition is also a best practice. These logs are not agency records and the employee should retain them with his or her other important records of service in case questions should arise about a gift in the future.

 

DISCLAIMER: The purpose of this advisory is to disseminate relevant information and sources of general guidance, policy and law on Government Ethics issues to the Department of Defense ethics community. Advisories are not intended to be and should not be cited as authoritative guidance, DoD policy, or law.