Employee Standards of Conduct:

Improvements Needed in the Army and Air Force Exchange Service and the Navy Resale System Office

FPCD-79-15: Published: Apr 24, 1979. Publicly Released: Apr 24, 1979.

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The Army and Air Force Exchange Service (AAFES) and the Naval Resale System Office (NAVRESO) are the largest of the nonappropriated-fund agencies. They were established to provide merchandise and services to military service personnel at the lowest practical price and to contribute to military welfare and recreation programs from operating profits. Certain aspects of the agencies' standards of conduct programs need improvement including the enforcement of post-employment statutes and the financial disclosure systems.

Although three statutes restrict the post-employment activities of Exchange Service and the Resale System Office employees, the Resale System Office has no system to detect and prevent violations. The Exchange Service has a system, but inadequate filing, processing, and review procedures prevent it from being effective. Nineteen cases were found of possible violations of post-employment laws restricting selling activities of retired military officers at the Exchange Service and referred them to the Department of Justice and the military finance centers for further inquiry and disposition. Since the Exchange Service and the Resale System Office operate under Department of Defense (DOD) standards of conduct regulations, the same problems could exist in other Defense agencies.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should: (1) require AAFES and NAVRESO to identify all positions which normally provide opportunities for conflicts of interest and require incumbents to file annual financial statements; (2) require the development of specific guidance as to the types of financial interests, outside employment, or other situations which could create the appearance of conflicts of interest; (3) clarify instructions on the DOD disclosure form to require that the employment of spouses, minor children, and other household members be reported; (4) require that all consultants and advisors file disclosure statements; and (5) require periodic audits of the standard of conduct regulations and the financial disclosure systems throughout DOD to determine whether they are adequate. The Director of the Office of Personnel Management should: (1) develop new regulations concerning confidential financial disclosure systems addressing the problems discussed; and (2) thoroughly study the criminal and civil selling laws to determine their effectiveness and how they should be amended and enforced.

    Agency Affected:


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