THE ARMY AND AIR FORCE EXCHANGE SERVICE AND THE NAVY RESALE SYSTEM OFFICE 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. THEY EMPLOY TENS OF THOUSANDS OF PERSONNEL IN WORLDWIDE MULTIBILLION-DOLLAR OPERATIONS. BECAUSE OF THE MAGNITUDE OF THEIR OPERATIONS, THEY MUST BE SURE THEIR EMPLOYEES MAINTAIN THE HIGHEST STANDARDS OF CONDUCT. THE ENFORCEMENT OF POSTEMPLOYMENT STATUTES AND THE FINANCIAL DISCLOSURE SYSTEMS ARE TWO AREAS WHERE STANDARDS OF EMPLOYEE CONDUCT NEED IMPROVEMENT. ALTHOUGH THREE STATUTES RESTRICT THE POSTEMPLOYMENT ACTIVITIES OF EMPLOYEES, THE RESALE SYSTEM OFFICE HAS NO REPORTING SYSTEM TO DETECT AND PREVENT VIOLATIONS. THE EXCHANGE SERVICE HAS SUCH A SYSTEM, BUT INADEQUATE FILING, PROCESSING, AND REVIEW PROCEDURES PREVENT IT FROM BEING EFFECTIVE. THE AGENCIES' FINANCIAL DISCLOSURE SYSTEMS HAVE MANY GAPS AND WEAKNESSES THAT UNDERMINE FULL AND COMPREHENSIVE FINANCIAL DISCLOSURES BY EMPLOYEES. PUBLIC LAW 95-521 ESTABLISHED AN OFFICE OF GOVERNMENT ETHICS IN THE OFFICE OF PERSONNEL MANAGEMENT TO PROVIDE LEADERSHIP AND ENFORCEMENT IN THE EXECUTIVE BRANCH ETHICS PROGRAM. THE DIRECTOR OF THIS OFFICE SHOULD DEVELOP NEW REGULATIONS CONCERNING CONFIDENTIAL FINANCIAL DISCLOSURE SYSTEMS, ADDRESSING THE PROBLEMS DISCUSSED IN THIS REPORT AND IN PREVIOUS GENERAL ACCOUNTING OFFICE REPORTS. THE DIRECTOR SHOULD ALSO STUDY, IN COORDINATION WITH THE DEPARTMENTS OF JUSTICE AND DEFENSE, THE CRIMINAL AND CIVIL SELLING LAWS TO DETERMINE THEIR EFFECTIVENESS AND HOW THEY SHOULD BE AMENDED AND ENFORCED. (AUTHOR ABSTRACT MODIFIED)