Ethics Review of Employee Farming Interests: An Employee Guide

• I. Executive Branch Public Financial Disclosure Report, OGE 278e
  • Part 1 - Positions Held Outside U.S. Government
  • Part 2 - Filer's Employment Assets, Income and Retirement Accounts
  • Part 3 - Agreements or Arrangements
  • Part 4 - Compensation in Excess of $5,000 Paid by One Source
  • Part 5 - Spouse's Employment Assets, Income and Retirement Accounts
  • Part 6 - Other Assets and Income
  • Part 7 - Transactions
  • Part 8 - Liabilities
  • Part 9 - Gifts, Reimbursements, and Travel Expenses
• II. Ethics Analysis
• III. Additional Restriction for Certain Non-Career Senior Executive Schedule (SES) Employees
• IV. Secretary and Other Presidential Appointees Requiring Senate Confirmation (PAS) Outside Earned Income Limitation

Numerous employees at the U.S. Department of Agriculture (USDA) have farming interests. For the most part, farming poses no problem. However, when these employees are appointed to positions of authority, a careful review of their farming activities is required. This review is generally accomplished through the financial disclosure process.

Below are the reporting elements of the OGE 278e, Executive Branch Public Financial Disclosure Report, followed by the analytical considerations for an ethics advisor. They serve here as a checklist for public filers. Confidential filers, who have farming interests, may also use this material as a guide for the completion of the OGE-450, Executive Branch Confidential Financial Disclosure Report. While the reporting elements of the OGE -450 are not as extensive as those of the OGE 278e, they cover the same subject matter. Respective "Parts" of the OGE-450 are indicated within parentheses below.

I. Executive Branch Public Financial Disclosure Report, OGE 278e

Part 1: Positions Held Outside U.S. Government. (Part III of the OGE-450)

List all positions you currently hold and held within the preceding two calendar years relating to your farming interests. This includes: general partners in a farm partnership; officer or employee of a farm corporation; or director of a farming-related organization or association.

Part 2 - Filer's Employment Assets, Income and Retirement Accounts

Field 1: Asset Description. (Part I of the OGE-450)

Report the following:

• Name under which the farm does business (if incorporated, so indicate);
• Location of the farm (city/county and state);
• Type and percentage of interest you have in the farm, such as a limited partner, general partner, sole owner, or corporate shareholder;
• Identification of and relationship to other owners; and
• Business of the farm, such as corn or livestock.

Note: Exact acreage or bushels of a particular crop or number of livestock are not required.

Field 2: EIF

• Select "N/A."

Field 3: Asset Values. (Not reportable on the OGE-450)

Report the aggregate market value of assets. If you are a:

• Limited partner or investor - report the value of all shares held; or
• Sole owner or general partner - report the value of the land, crops (standing or in storage), livestock, farm equipment, buildings, etc.

Fields 4 and 5: Income Type and Income Amount. (Part I of the OGE-450, report income type only. OGE-450 filers are not required to report income amounts or values.)

Report the type and amount of income from the farm and all related assets. If you are a:

• Sole Proprietor - report the type of income (i.e., crop sales) in the column titled, "Other," and the amount of income under the column titled, "Actual Amount."
• General Partner - follow the format for a sole proprietor above, however, report the type of income as a "partnership distribution."
• Limited Partner/Corporate Shareholder - check the type of income and category of amount of income.

Also list farm rents or royalties.

Part 3: Agreements or Arrangements. (Part IV of the OGE-450)

List all other connections with the farm such as any benefit and pension plans, leases and tenant relationships.

Part 4: Compensation in Excess of $5,000 Paid by One Source.(Not reportable on the OGE-450)

This reporting requirement is limited to new entrant public filers only.

List the name and address (city and state) of each entity from which your farm received compensation in excess of $5,000 within the preceding two calendar years and the current calendar year up to the date of filing. Include a brief description of the service provided for each.

Part 5: Spouse's Employment Assets & Income and Retirement Accounts

• Reporting a Farm in Which You Have No Financial Interest
  
  Report a farm that your spouse operates as a business, and in which you have no financial interest, if its value was more than $1,000 at the end of the reporting period or if it produced more than $1,000 in earned income during the reporting period (or $200 in interest, dividends, capital gains, rent, or royalties).
  
  Do not report passive investment interests in a farm in Part 5. Report these interests in Part 6 instead.
  
  Description: Provide the name of farm (or write "spouse's farm" for a sole proprietorship); the location of the farm (either the city and state or the county and state); and the business of the farm, such as crops or livestock. In addition, it is helpful if you specify the type of interest that your spouse has in the farm, such as "sole proprietor" or "general partner."
  
  EIF: Select "N/A."
  
  Value: Select the appropriate category to report the value of the farm, including such assets as the land, the crops (standing or in storage), the livestock, the farm equipment, the buildings, etc.
  
  Income Type: Write "farming income" if your spouse's earned income exceeded $1,000 during the reporting period. Select the applicable type of income categories for income over $200 that can be classified as interest, dividends, capital gains, rent, or royalties.
  
  Income Amount: Select the categories corresponding to the total amount of interest, dividends, capital gains, rent, or royalties. Do not provide an amount for earned income.
• Reporting a Farm in Which You Have a Financial Interest
  
  If you have only a passive investment interest in a farm that your spouse operates as a business, you may use the guidance above for your spouse's interest in the farm and may report your interest in Part 6. If you also have an active role in the business, you would report your interest in Part 2.

Part 6: Other Assets and Income

Report a passive investment interest in a farm or farmland if the value of the interest was more than $1,000 at the end of the reporting period or if it produced more than $200 in income during the reporting period.

Description:

1. Farm: Provide the name of the farm; the location of the farm (either the city and state or the county and state); the business of the farm, such as crops or livestock; and, if applicable, an indication that the farm has been leased to a third party. In addition, it is helpful if you specify the type of interest that you have in the farm, such as "sole proprietor" or "general partner."
2. Farmland: Identify the interest as farmland and provide its location (either the city and state or the county and state). In addition, if applicable, provide the name of the partnership or other entity used to hold the farmland and note any leasing arrangements.

EIF: Select "N/A."

Value: Report the value of your interest by selecting the appropriate category.

Value: Report the value of your interest by selecting the appropriate category.

Income Type: Specify the type(s) of income if the total amount of income produced during the reporting period exceeded $200.

Income Amount:

1. Income less than $201: Select the category for "None (or less than $201)."
2. Dividends, capital gains, interest, rent, or royalties: Select the category that corresponds to the total amount of income produced during the reporting period.
3. Other income: Provide the exact amount of income produced during the reporting period.

Part 7: Transactions. (Part I of the OGE-450, limited to indicating those line items sold during the reporting period by placing an "X" in the column provided.)

Part 8: Liabilities. (Part II of the OGE-450)

You are not required to report the liabilities of your farm, unless the liabilities are unrelated to your farming operations. If you are receiving rent from farmland that you hold directly, report any mortgage that you owe on the farmland in Part 8. By contrast, you are not required to report a mortgage that you owe on farmland used as part of your farming business. What constitutes “unrelated to the operations of the farm” will vary based on the specific circumstances; however, the following general guidelines apply:

• Publicly traded corporations: Assets and liabilities of a publicly traded corporation are deemed to be related to the operations of the business for purposes of financial disclosure. Consequently, report liabilities of business that is publicly traded, e.g., a corporation.

• Business that are not publicly traded: For other business types, e.g., sole proprietor, partnership, consider factors such as the type of asset or liability and its relationship to the economic activity conducted by the business. No one factor is necessarily controlling; however, in many cases, the asset type itself will demonstrate a relationship between the asset and operations of the business and eliminate the need for further analysis. For example, a filer would NOT need to itemize office furniture, equipment, supplies, inventory, accounts receivable, accounts payable, working capital funds, real estate used in the operations of the filer’s business, or any mortgages on such real estate. If, however, you buy the property adjacent to yours and rent it to another party, the loan on the adjacent property IS reportable, because it is unrelated to the business of your farming operation. (Also report the rental income in Part 2.)

Part 9: Gifts, Reimbursements, and Travel Expenses. (Part V of the OGE-450)

List all gifts received from the farm (corporation) such as transportation, food or entertainment totaling $390 or more.

II. Ethics Analysis

Conflict of Interest (18 U.S.C. 208)

When considering a potential for a conflict of interest, the reviewing ethics advisor will raise questions regarding:

• Identification of the farm's participation in subsidy and other Federal programs;
• Geographic location in relation to the filer's government activities and the potential for contracts between the farm and the filer's office or jurisdiction; and
• Land rented to sharecroppers.

To avoid a potential conflict, you should disqualify yourself from substantially participating in (i.e., recommending, influencing or deciding) a particular matter that will affect the financial interests of the farm (i.e., contract, grant, application or claim). This is accomplished by submitting a formal Notice of Disqualification to the agency, which your ethics advisor will help craft.

Prohibited Representation (18 U.S.C. §§203 and 205)

If you hold any interest in the farm, other than as a sole proprietorship, you may face a potential section 203 or 205 violation regarding the representation of others before the Executive or Judicial branches of the government concerning matters where the government is a party or has an interest, such as submission of an application for USDA or other Federal benefits on behalf of the farm.

Representation means to knowingly make with intent to influence, a communication (orally or in writing) to, or appearance before (including mere attendance at a meeting) any officer or employee of the Executive or Judicial branches of the government on behalf of a third party in connection with a matter of interest to the Federal government. The term does not include the communication of technical information.

To avoid a violation in these instances, you should refrain from representing the interests of the farm before the government and pass that task to a spouse, partner or other corporate officer.

Additional Restriction for Farm Service Agency Employees (FSA)

All FSA employees, their spouses, and their minor children are subject to the following prohibitions:

• Prohibited Real Estate Purchases. These individuals may not directly or indirectly purchase real estate:
  1. Held in the FSA inventory;
  2. For sale under forfeiture to FSA; or
  3. From an FSA "program participant."
• Prohibited Transaction with FSA Program Participants. FSA employees, their spouses, and their minor children may not directly or indirectly:
  1. Buy, sell, or lease real property to or from;
  2. Buy personal property from, sell personal property to, or lease personal property to or from; or
  3. Employ for compensation a person whom the filer knows or reasonably should know to be an FSA program participant directly affected by decisions of the FSA State Office.

The above information serves as a brief overview. See 5 C.F.R Part 8301 for an explanation of terms used, exceptions and additional information.

III. Additional Restriction for Certain Non-Career Senior Executive Schedule (SES) Employees (5 CFR 2636.304(a))

Non-career employees whose rate of basic pay is at or above 120% of the rate of basic pay for GS-15-01 are subject to a 15% outside earned income limitation. These employees may not receive outside earned income attributable to a calendar year, which exceeds 15% of the annual rate of basic pay for Level II of the Executive Schedule. The restriction applies on a pro rata basis to persons who enter into covered non-career positions after January 1st of any calendar year. Employees who expect to exceed the above income limitation should contact the USDA Office of Ethics. This restriction does not apply to special Government employees (SGEs). (See 5 CFR 2636.305-.307 for additional restrictions applicable to non-career SES employees.)

IV. Secretary and Other Presidential Appointees Requiring Senate Confirmation (PAS) Outside Earned Income Limitation

These employees may not receive outside earned income during the term of their appointments. Passive income such as rents and royalties in place prior to Federal appointment or dividends, capital gains and interest is acceptable.