Department of Justice ESIGN Legal Considerations

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LEGAL CONSIDERATIONS IN DESIGNING AND
IMPLEMENTING ELECTRONIC PROCESSES:

A GUIDE FOR FEDERAL AGENCIES

November 2000

EXECUTIVE SUMMARY

Under the Government Paperwork Elimination Act (GPEA), Pub. L. No.
105-277, §§1701-1710 (1998) (codified as 44 U.S.C.A. § 3504 n. (West
Supp. 1999)), Federal Executive agencies are required, by October 21,
2003, to provide for (1) "the option of the electronic maintenance,
submission, or disclosure of information, when practicable, as a
substitute for paper;" and (2) "the use and acceptance of electronic
signatures, when practicable." The Office of Management and Budget
(OMB) has developed guidance to assist agencies in implementing GPEA's
requirements. "Procedures and Guidance; Implementation of the
Government Paperwork Elimination Act," 65 FR 25508, May 2, 2000 ("OMB
Guidance"). As part of the OMB Guidance, the Department of Justice is
charged with developing, in consultation with federal agencies and OMB,
practical guidance on legal considerations related to agency use of
electronic filing and recordkeeping. The purpose of this Guide is to
identify legal issues that agencies are likely to face in converting to
electronic processes and to provide some suggestions on how to address
them. Agencies should also consider the significance of the "Electronic
Records and Signatures in Global and National Commerce Act" (E-SIGN)
(Pub.L. 106-229, § 1, June 30, 2000, 114 Stat. 464, codified at 15
U.S.C. §§ 7001 -- 7006), although a detailed discussion of that
statute's impact on the federal agencies is beyond the scope of this
Guide.

The rise of electronic commerce offers agencies exciting
opportunities to convert -- or redesign -- paper-based processes to
electronic ones. While some agencies have experience using electronic
processes, others are just beginning to examine the opportunity of
electronic processing, or are just beginning to consider electronic
processing for more sensitive transactions. In moving to electronic
processes, agencies face many important decisions. Among those
decisions is one crucial question of interest to the Department of
Justice: When an agency converts each type of transaction to an
electronic-based process, how should the agency design that process so
as to protect its legal rights and minimize legal risks that may
compromise the agency's mission? In accordance with the OMB Guidance on
GPEA, agency considerations of cost, risk, and benefit, as well as any
measures taken to minimize risks, should be commensurate with the level
of sensitivity of the transaction. Low-risk information processes may
need only minimal safeguards, while high-risk processes may need more.
In the context of legal and litigation risks, "low-risk information
processes" are those that have a small chance of generating significant
liability, financial impact, or litigation that would have a
significant effect on the agency.1

The many potential benefits of re-designing (or designing) agency
processes to use electronic-based processes are apparent: increased
efficiency, accessibility, and reliability. Advances in technology,
public expectations, Congress's mandate in the GPEA, and Administration
policy all require that agencies of the United States move
expeditiously to adopt electronic processes. Some agencies are already
seeing benefits from increasing their use of and reliance on electronic
recording and transaction systems. These benefits may not be fully
realized unless the agency designs its processes with care. This Guide
explains the legal issues an agency is likely to face in designing
electronic-based processes (Part I), examines four overarching legal
issues that should be considered with respect to converting any given
type of system or operation (Part II), and discusses general and
specific steps agencies should consider in converting to electronic
processes (Part III). The reader who already recognizes the legal
issues presented by electronic processes and those involved in
replacing paper processes with electronic ones may wish to turn first
to Part III, which does not depend on the analysis of Parts I and II
for an understanding of its suggestions.

In deciding whether and how to convert any given process from paper
to an electronic one, agencies should consider at least the following
four issues, which are examined in Part II:

Availability B Will the important information regarding a
transaction be collected, retained, and accessible whenever needed
despite changes to computer hardware or software? How long should the
information be kept given legal record-keeping needs? The important
transaction information to be collected and accessible typically
includes the content or substance of the transaction (for
example, the text of a contract); the processing of the transaction
(such as when and from where a communication was sent and when and
where it was received); the identities of the parties and the specific individuals involved in the transaction; and the intent of the parties (such as whether they intended to enter into a binding contract).

Legal Sufficiency B Certain types of transactions must be in
"writing" and "signed" in order to be legally enforceable. The law is
still developing with respect to whether such requirements will be
satisfied by all electronic processes in all circumstances. By using
electronic processes that address the issues raised in this Guide,
agencies can increase the likelihood that their electronic transactions
will meet such legal standards. Federal laws, such as GPEA, address the
legal validity and enforceability of electronic records and signatures.
GPEA states that: "electronic records submitted or maintained in
accordance with procedures developed under this title, or electronic
signatures or other forms of electronic authentication used in
accordance with such procedures, shall not be denied legal effect,
validity, or enforceability because such records are in electronic
form." E-SIGN similarly provides that records relating to commercial,
financial, or consumer transactions shall not be denied legal effect
solely because they are in electronic form or signed by electronic
signature. Although Federal activities are usually governed by federal
rather than state law, it is also noteworthy that various state laws,
such as versions of the Uniform Electronic Transactions Act (UETA) that
are currently being introduced in the states, similarly address the
legal validity of electronic records and signatures, including in the
formation of a contract. UETA states: "a record or signature may not be
denied legal effect or enforceability solely because it is in
electronic form. . . [A] contract may not be denied legal effect or
enforceability solely because an electronic record was used in its
formation."

Reliability B Will electronic records be sufficiently reliable and
persuasive to satisfy courts and others who must determine the facts
underlying agency actions? Will the electronic records be maintained in
such a way so as to satisfy admissibility requirements? Will sufficient
context be preserved so that the electronic records are usable?

Compliance With Other Laws B Will the agency's use of electronic
methods to obtain, send, disclose, and store information comply with
applicable laws such as those governing privacy, confidentiality,
recordkeeping, and accessibility to persons with disabilities? Myriad
federal laws govern the use and disclosure of information gathered by
the federal government. Agencies generally have developed systems for
addressing such laws with regard to paper-based information. Electronic
processes also will have to be designed to allow an agency to comply
with such laws.

Part III of the Guide provides both general and specific steps an
agency may take to reduce the potential legal risks of moving to
electronic transactions. The general steps include:

1. Conduct an analysis of the nature of a transaction
or process to determine the level of protection needed and the level of
risk that can be tolerated;
2. Consider potential costs, quantifiable and unquantifiable, direct and indirect, in performing a cost/benefit analysis;
3. Use available sources of expertise, such as legal, programmatic, and
technical experts, inside and outside your agency, including the OMB
Guidance;
4. Consider developing a comprehensive plan when converting a
traditional process to an electronic one, especially if converting
means re-engineering the existing process;
5. Consider the kinds of information relevant to the process and ensure that necessary information is gathered;
6. Consider using a "terms and conditions" agreement;
7. Incorporate an appropriate retention and access policy for the
records produced by electronic processes, including long-term retention
where necessary;
8. Be aware of legal concerns that implicate effectiveness of or impose restrictions on electronic data or records;
9. Just as should be done with paper processes, document the various
steps in your electronic process so that you can demonstrate the
reliability of your process to courts and others who must determine the
facts underlying an agency action;
10. Analyze the full range of technological options and follow commercial trends where appropriate;
11. If an agency considers using an outside entity to manage
information, the agency should consider the various liability and
privacy issues that may arise as a result of this system; and
12. Retain paper-based information in important or sensitive contexts where necessary.

The specific suggestions in Part III detail the types of information
that should be gathered, retained, and made available on demand. They
also make recommendations that address particular agency activities,
including contracting, regulatory programs and other programs that
require reporting of information, and benefit programs.

Appendix A provides key legal issues for agencies to consider in
adopting an electronic process. The appendix is intended to serve as a
resource for agencies; it is not a required checklist and it is not an
exhaustive listing of the possible issues such processes may raise.
Appendix B provides the names and contact information for the attorneys
who may be contacted should readers have specific questions or comments
about this Guide .

1For example, even small
transactions that take place in great volume could expose the agency to
a large overall risk, even though each particular transaction does not.

LEGAL CONSIDERATIONS IN DESIGNING AND
IMPLEMENTING ELECTRONIC PROCESSES:
A GUIDE FOR FEDERAL AGENCIES

U.S. DEPARTMENT OF JUSTICE

TABLE OF CONTENTS

INTRODUCTION

I. WHY AGENCIES SHOULD CONSIDER LEGAL RISKS

A. Legal issues involved in Conversion to Electronic Processes
B. Identifying Legal Issues
C. Assessing the Significance of the Risk

II. LEGAL ISSUES TO CONSIDER IN "GOING PAPERLESS"

A. Availability of Information

1. Will the electronic process gather necessary information?
2. Will the information be retained?
3. Will the information continue to be accessible?

B. Legal Sufficiency of Electronic Records

1. The importance of writings
2. The importance of signatures
3. Electronic alternatives to traditional signatures
4. Federal and state statutes will affect agencies' use of electronic processes

C. Reliability of Electronic Information

1. The legal significance of context surrounding the collection or creation of electronic information
2. The perceived reliability of electronic data
3. Persuasiveness of electronic processes and information derived from them
4. Admissibility of information derived from electronic processes

D. Legal Requirements Affecting Electronic Processes

III. REDUCING THE LEGAL RISKS IN "GOING PAPERLESS"

A. Should Every Agency Function Be Completely "Paperless"?
B. General Guidelines

1. Conduct an analysis of the nature of a transaction
or process to determine the level of protection needed and the level of
risk that can be tolerated
2. Consider potential costs and benefits, quantifiable and
unquantifiable, direct and indirect, in performing a cost/benefit
analysis
3. Use available sources of expertise inside and outside your agency, including the OMB procedures
4. Consider developing a comprehensive plan when converting a
traditional process to an electronic one, especially if converting
means re-engineering the existing process
5. Consider the kinds of information relevant to the process; ensure that necessary information is gathered
6. Consider using a "terms and conditions" agreement
7. Incorporate a long-term retention and access policy for electronic processes
8. Be aware of legal concerns that implicate effectiveness of or impose restrictions on electronic data or records
9. Develop processes that can form the basis of persuasive evidence
10. Analyze the full range of technological options and follow commercial trends cautiously
11. Consider the unique legal risks presented by outsourcing an agency's data management and storage functions
12. Retain extrinsic information in important or sensitive contexts

C. Specific Guidelines

1. General information to gather, retain, and have available
2. Information regarding particular types of transactions

a. Contracts and related transactions
b. Regulatory programs (and any programs that require reporting of information)
c. Benefit programs

3. Retention and Availability

CONCLUSION

APPENDIX A - KEY LEGAL ISSUES TO CONSIDER IN ADOPTING AN ELECTRONIC PROCESS

APPENDIX B - CONTACT INFORMATION

LEGAL CONSIDERATIONS IN DESIGNING AND
IMPLEMENTING ELECTRONIC PROCESSES:
A GUIDE FOR FEDERAL AGENCIES

U.S. DEPARTMENT OF JUSTICE

INTRODUCTION

Under the Government Paperwork Elimination Act (GPEA), Pub. L. No.
105-277, §§1701-1710 (1998) (codified as 44 U.S.C.A. § 3504 n. (West
Supp. 1999)), Federal Executive agencies 1 are required, by October 21,
2003, to provide for (1) "the option of electronic maintenance,
submission, or disclosure of information, when practicable, as a
substitute for paper," and (2) "the use and acceptance of electronic
signatures, when practicable." The Office of Management and Budget
(OMB) has developed guidance to assist agencies in implementing GPEA's
requirements. "Procedures and Guidance; Implementation of the
Government Paperwork Elimination Act," 65 FR 25508, May 2, 2000 ("OMB
Guidance"). As part of the OMB Guidance, the Department of Justice is
charged with developing, in consultation with federal agencies and OMB,
practical guidance on legal considerations related to agency use of
electronic filing and recordkeeping. The purpose of this Guide is to
identify legal issues that agencies are likely to face in converting to
electronic processes and to provide some suggestions on how to address
them. Agencies should also consider the significance of the "Electronic
Records and Signatures in Global and National Commerce Act" (E-SIGN)
(Pub.L. 106-229, § 1, June 30, 2000, 114 Stat. 464, codified at 15
U.S.C. §§ 7001 -- 7006), although a detailed discussion of that
statute's impact on the federal agencies is beyond the scope of this
Guide.

In accordance with the OMB Guidance on GPEA, agency considerations
of cost, risk, and benefit, as well as any measures taken to minimize
risks, should be commensurate with the level of sensitivity of the
transaction. Low-risk information processes may need only minimal
safeguards, while high-risk processes may need more. In the context of
legal and litigation risks, "low-risk information processes" are those
that have a small chance of generating significant liability, financial
impact or litigation that would have a significant effect on the
agency.2

The many potential benefits of re-designing (or designing) agency
processes to use electronic-based processes are readily apparent:
increased efficiency, accessibility, and reliability. Some agencies are
already seeing benefits from increasing their use of and reliance on
electronic recording and transaction systems. Yet, these benefits may
not be fully realized unless the agency designs its processes with
care. The collection and management of electronic records is becoming
increasingly important for federal agencies.

Agencies must electronically receive, transmit, and store
information in ways that will be acceptable to their program
participants and others, while not violating legal restrictions,
jeopardizing the government's legal rights, or unduly exposing the
government to liabilities, criminal acts or other waste, fraud or
abuse. The shift away from paper-based records raises serious record
collection, management and retention issues, some of which are familiar
to the world of paper records and some of which are unique to
electronic record retention and retrieval. On the other hand,
electronic records can offer benefits, like easier search and
retrieval, that may reduce some of the problems of paper-based records
management. Thus, the objective of any conversion to electronic
processes is to maximize the benefits that such systems can offer,
while simultaneously minimizing any risks, including legal risks.

The term "electronic processes" includes any use of computers or
other electronic devices to conduct transactions or business, to store
data or records, or to transmit communications or information (whether
text, voice or visual images). Electronic processes encompass not only
the hardware and software applications, but also the personnel,
procedures, and policies that make the system work properly.

This Guide raises issues that agencies should consider in deciding
when each of their processes and functions should be partially or
entirely converted to an electronic process and how such electronic
processes should be designed in order to reduce legal risks that may be
identified. The first two parts of this Guide discuss the importance of
the legal issues to the conversion process and explore the issues that
electronic processes present to the agencies. The last part provides a
list of suggested steps that agencies may incorporate into their
decision-making process to address the issues raised in Parts I and II.
The reader who already recognizes the legal issues presented by
electronic processes and those involved in replacing paper processes
with electronic ones may wish to turn first to Part III, which does not
depend on the analysis of Parts I and II for understanding of its
suggestions. 3

This Guide is intended only to provide information and analysis to
the Department's client agencies. It is intended only to assist those
agencies in identifying general issues in process design and is not
intended to provide binding rules or standards for the use of
electronic processes. The Department anticipates that agencies will
exercise their own discretion in determining how to address the issues
discussed in this Guide. Nothing herein is intended for use in
resolving particular cases or to confer any right on any person or
group. See, e.g., United States v. Caceres, 440 U.S. 741 (1979). The
function of providing opinions and legal advice to executive agencies
is conferred by regulation on the Office of Legal Counsel. 28 C.F.R.
§0.25 (1999). To the extent that an agency seeks the legal opinion of
the Department of Justice regarding these matters, we recommend that
the agency contact the Office of Legal Counsel.

I. WHY AGENCIES SHOULD CONSIDER LEGAL RISKS

Government agencies are enmeshed in law: they are creatures of law;
they act pursuant to legal authority; they are bound to carry out legal
duties in a way legally accountable to the public; and they are subject
to special restrictions imposed by law. For example, government
procurement processes are regulated by law. Over time, agencies have
developed processes to respond to obligations and practices imposed by
these responsibilities. Therefore, agencies should be aware of the
legal implications of converting or re-engineering existing processes
and the legal changes that can occur in the move from traditional to
electronic processes.4

Advances in technology, public expectations, Congress's mandate in
GPEA, and Administration policy all require that agencies of the United
States government move expeditiously to adopt electronic processes. As
this Guide explains, it is important to consider carefully the legal
requirements and risks associated with the process involved. In many
cases, the legal aspects of the process may be apparent and adopting an
electronic process may be comparatively simple. In others, designing an
electronic process that adequately protects an agency's ability to
carry out its programs and legal obligations, and that deters fraud and
misconduct by private parties, may be more difficult. In such cases,
adopting electronic processes may require a substantial and long-term
commitment of agency staff and resources, including close involvement
at an agency's highest levels.

Finally, we note that our comparisons in this Guide of electronic
processes to paper systems should not in any way be taken as an
endorsement of the continued use of those paper processes. Rather,
because everyone is familiar with paper systems, we refer to those
systems to assist agencies in issue-spotting as they develop their
electronic processes.5

A. Legal Issues Involved in Conversion to Electronic Processes

Agencies keep records for several reasons: to carry out their public
responsibility to conduct agency business with due care in a fiscally
responsible manner, to meet statutory recordkeeping requirements, and
to provide the information necessary to protect the government's
interest when disputes arise over agency operations. Paper-based
systems of records have evolved over time to satisfy those needs. Many
of those systems are being replaced by electronic processes that are
being deployed over short time periods. Often, problems arise because
the re-engineered process does not fully capture the needs of the
agency. As a result, the adoption of electronic systems, or the
conversion of paper-based records systems to electronic ones, can
present significant legal issues that need to be identified and
addressed as part of the decision-making process. New legal issues may
arise from the use of the new storage media and the new electronic
mechanisms that allow agencies to conduct business and deal with the
public in a manner that was not possible in the paper world. On the
other hand, other legal issues may be reduced with an effective
electronic process. For example, the use of a digital signature on a
document can cryptographically bind the signature to the entire
document, whereas a written signature on the last page of a such a
document may leave questions as to which of the preceding pages are
part of the signed document.

Electronic processes can be designed in such a way that the
electronic transactions and their terms can be recorded in a legally
adequate manner. For example, an agency can design its electronic
processes so that program participants can readily ascertain when they
become eligible for benefits and the agency can establish that program
participants agreed to certain limitations on the agency's obligations.
Even if it is determined that some legal obligations cannot be
established electronically, perhaps most of the program's business can
be conducted and recorded electronically if just a few crucial paper
instruments are used and saved.

B. Identifying Legal Issues

At this point, no one can provide definitive guidelines as to what
program safeguards will ultimately be necessary to protect an agency's
interests and create binding and enforceable obligations on the agency
and those with whom it does business. What we can say, however, is that
agencies should attempt to understand which risks have increased and
which have decreased through the adoption of electronic processes. If
agencies incorporate within their processes mechanisms to account for
those risks, they will be far less likely to be surprised by
unfavorable rulings than an agency that simply converts paper systems
to electronic ones without undertaking such an analysis. The act of
addressing these risks will give agency decision-makers a better
understanding of the differences between paper and electronic processes
and put them in a better position to design and implement electronic
systems that will preserve the strengths of paper processes while
avoiding the weaknesses inherent to paper and the flaws that have been
incorporated into the paper systems over the years.

A key question agencies face in converting to or adopting electronic
processes is whether the system under consideration meets the
applicable legal requirements and provides adequate evidence of its
transactions and actions. In certain situations, an agency may
determine that an electronic process is "good enough" to meet its legal
needs without regard to whether it is comparable to or as good as its
prior process. At the other extreme, some agencies may decide that
electronic conversion will require a complete re-engineering of their
business processes in order to address the legal risks and issues that
a particular system presents or that are not being addressed as
effectively in their existing system.

Because most of our common experience and legal precedent comes from
the paper-based world, many agencies will use their existing
paper-based systems as a reference point in their analysis. So long as
agencies recognize that most paper processes have risks associated with
them, they may wish to consider whether the new systems will work at
least as well as the traditional ones, and consider the significance of
the risks posed by their conversion. The discussion that follows
compares some aspects of paper systems to electronic processes as a
method to identify legal issues that need to be considered in designing
electronic processes. No disparagement of electronic processes, nor
praise for paper ones, is meant by this analytical device.

Well-designed paper systems have advantages: paper records are more
or less permanent; alterations usually can be detected; important
contextual information may be added as the paper is processed; access
to documents often can be controlled easily; many documents can be
preserved for long periods of time and remain readable without special
equipment; and there are well-settled rules that have developed over
time to address issues such as the validity, authenticity, and
reliability of paper documents. But paper also has limitations: storage
of paper documents consumes vast amounts of space; single documents may
easily be lost or become irretrievable; access is limited to those
having physical possession of the document or a copy; extracting
information from multiple paper sources is difficult and
time-consuming; search capabilities are limited; some paper
deteriorates and can become unreadable within a few years; and paper is
bulky and difficult to transport in large volumes. By contrast,
effective electronic processes can overcome some of paper's weaknesses:
electronic records, when properly organized or archived, are easier to
store, search, and retrieve than paper and allow for much broader
access than paper documents.

An example describing both an agency's traditional process and its
electronic process serves to illustrate this point. Suppose that an
agency program involves transactions with an individual, and that the
agency receives data about the transaction not only from the individual
participant (e.g., an application form, financial statements), but also
from other sources (e.g., agency personnel's reports on the
transaction). In the traditional paper-based system, the agency
probably would have kept a file with the specific paper documents
submitted by each source (e.g., the paper application form and
financial statements from the participant, and internal reports from
agency staff). If a dispute ever arose that required a determination of
who submitted what information, the paper documents in the file
probably would reflect the needed information. (If the system were
flawed, however, misfiled paper documents might not be retrievable at
all.) A well-designed electronic process should ordinarily be able to
provide the same information as the paper system: who submitted the
information; what information was submitted; when the information was
submitted; and whether all the relevant information was retrieved.

Agencies traditionally file paper communications by subject or by a
name of a person or entity. The challenge in such a system is to ensure
that all communications are properly filed in the appropriate place.
When such a system works properly, agency employees (and the lawyers
who represent the agency) have a permanent record (typically arranged
chronologically) of all the significant documents pertaining to the
matter. When it does not, documents may be irretrievably lost through
misfiling. Electronic documents, on the other hand, may be maintained
in a way that uses identifiers to associate the documents with a
particular matter or "file," which often allows for easier access.
However, for certain types of electronic records systems, processes and
procedures must be developed to address such issues as creating
accurate and correct associations in the electronic files, ensuring
that each document is maintained in an unaltered state, and identifying
the source, date, and content of additional information added.6

C. Assessing the Significance of the Risk

An agency that routinely found itself able to enforce its
programmatic requirements when they were embodied in written documents
could face significant problems if it converts to an electronic process
that does not capture information legally sufficient to enforce its
interests. The full scope of agency operations can be affected by the
government's ability to litigate successfully any disputes involving
agency programs and operations. The outcome of litigation can dictate
whether an agency can:

collect money owed it on various loans, grants or other debts;
enforce security interests it received to secure various financial
transactions and thereby protect a lending or granting program;
enforce important regulatory requirements;
continue to interpret its program, statute or regulations in accordance with current practices;
enforce contracts with third parties that are necessary for the successful running of its programs or mission; or
avoid unintended liabilities.

To be able to protect the government's interests in litigation, the
Department of Justice needs available, reliable, and persuasive agency
records: records that are complete, uniform, easily understood, easily
accessible and have been kept under a system that ensures a chain of
custody of submissions and information gathered from all sources. Those
requirements will not disappear merely because the medium of
transactions changes from paper to electronic.

Even relatively infrequent litigation can have a very substantial
impact on an agency. A government victory in a single case may provide
binding precedent that approves an agency practice or establishes the
validity of agency regulations. Conversely, a loss in a single case
might establish adverse precedent that rejects an agency practice or
even invalidates an agency regulation. The agency may be able to seek a
different result in future cases, but an initial loss may generate
precedent that will affect the outcome of those cases, and may open the
door to litigation by other parties who might not even have been aware
that an argument was available. Even disputes and litigation over
monetary claims against an agency may establish controlling
interpretations of statutes and regulations. On the other hand,
agencies should note that for transactions that an agency determines
have low risk of being involved in litigation and that involve low
financial risk, many of the considerations described in this Guide may
not apply.

Moreover, while criminal prosecutions and civil fraud cases involve
a relatively small number of transactions within any given agency, such
actions are critical to the integrity of agency programs because they
serve to deter others from engaging in similar conduct. When an agency
does not have a credible deterrent to fraud through vigorous detection
and prosecution policies, fraud typically increases dramatically.
Without effective and successful litigation on the agency's behalf,
fraud in agency programs may increase and legal challenges to agency
actions could have a greater chance of success. Essential to such
litigation is the consistent accuracy and reliability of an agency's
recordkeeping system, whether paper or electronic.

Finally, agencies must be able to satisfy a variety of people
besides judges and juries. Agencies are accountable to the public,
customers, auditors, and Congress, and may have varying legal
obligations to each. Electronic processes sufficient to protect an
agency's position in court should also be able to address any legal
responsibilities to these other audiences just as well-designed paper
processes.

II. LEGAL ISSUES TO CONSIDER IN "GOING PAPERLESS"

As an agency identifies processes for conversion from paper to
electronic, the agency should ask how it should design those processes
so as to protect its legal rights and minimize legal risks that may
compromise the agency's mission.

In answering these questions, agencies should consider the following four issues:

(1) Will the electronically gathered and stored information be collected, retained, and accessible whenever needed?

(2) Will the electronic collection, transmission, or
storage of "documents" or information comply with applicable legal
requirements, including, for example, laws requiring that certain
records be maintained in a particular form or format?

(3) Will electronic records be sufficiently reliable to be useful
to Congress, agency decision-makers, private disputants, judges,
juries, and others who must determine the facts underlying agency
actions?

(4) Will the agency's use of electronic methods to obtain, send,
disclose and store information comply with applicable laws, such as
those governing recordkeeping, privacy, confidentiality, and
accessibility?

Our discussion of each of these issues is an attempt to assist the
agencies in spotting relevant issues; this discussion is not intended
to provide authoritative answers or to endorse any particular
technology.

A. Availability of Information

To ensure the availability of information in an electronic process,
agencies should ensure: (1) that an electronic process collects all
relevant information; (2) that the information is retained properly;
and (3) that the information is readily accessible. The potentially
lengthy period of time between the collection of information and its
use in many situations, including litigation, highlights the importance
of these issues.

Most agencies now file and retain significant paper documents
themselves. Some agencies converting to electronic processes have
considered requiring the party that submits electronic information to
retain the original form and source documents relating to the filing,
perhaps in paper and perhaps electronically. Other agencies,
recognizing the technical complexity of electronic records management,
may hire contractors to maintain the information and provide more than
ministerial support. If agencies rely on the people or entities
submitting information to retain legally significant documents, they
might find some of those documents unavailable if a dispute over the
transaction arises. Similarly, if an agency uses an outside information
manager, it should contractually ensure that its information is
properly retained and that the agency has access to its own
information. In either case, the agency should take appropriate steps
to ensure that information in third-party hands is available when
needed.

1. Will the electronic process gather necessary information?

Agencies should carefully examine the processes that they will be
converting to electronic processes, and determine what information must
be collected from each transaction. In adopting electronic processes,
agencies should ascertain whether the following four specific types of
information should be captured and retained: (1) content of the
transaction, including all records that comprise the substance of the
transaction or filing; (2) records that contain information about how
the transaction was processed, including dates received and changes or
modifications that were made in records; (3) a means to authenticate
the identity of all people who participated in the transaction both
inside and outside the agency, and the scope of each person's
participation; and (4) for appropriate transactions, a means for
establishing the intent of the participants to enter into the
transaction or agreement. See also, e.g., Public Citizen v. Carlin, 184
F.3d 900, 910 (D.C. Cir. 1999) (discussing preservation of content,
structure, and context of federal records).

Information gathering issues can be demonstrated through the following example:

- Abel claims that he sent his application along with an
  explanatory electronic note that concerned key information on his
  application.

An agency operates a direct loan program. Formerly, the agency
received loan applications on paper, but now receives them
electronically through its web site. Four applicants (Abel, Baker,
Company and Donald) submit loan applications that contain materially
false and misleading information. When challenged by the agency, Abel,
Baker, Company and Donald offer the following excuses:

- Baker claims that he submitted truthful information, and that someone must have altered it after he sent it.

- Company, a large corporation, claims that no employee was
  authorized to apply for a loan, so a rogue employee (identity unknown)
  must have sent the application without the company's knowledge. The
  agency's electronic process does not show who or even what office at
  Company submitted the application.

- Donald claims he was only working on a draft application with
  only preliminary information that he never meant to send, and that he
  must have pushed the "enter" button by accident, thus unwittingly
  transmitting his "draft" as though it were a real application.

Does the agency's electronic process provide
adequate safeguards, just as paper processes must, to refute the
arguments raised by Abel, Baker, Company and Donald?

Content. When agencies collect information in paper
form, additional information beyond that requested by the four corners
of the form is frequently supplied. The document received by an agency
might include additional attachments not necessarily required, and the
agency might supplement the record with interlineations or notes. The
physical composition of the document can attest to its completeness -
for example, pages that were stapled together by the sender suggest
that this was the document that was intended to be submitted to the
agency. The agency's electronic process should include safeguards so
that an agency can establish all of the information that was submitted
by the sender as a single electronic document.

In the above example, the agency's electronic process should be
designed in such a way that the agency can demonstrate that Abel's
submission included only the application form and no attached
electronic note or other information. In a paper system, the agency
would point out that it has standardized its filing procedures in a way
that ensures that all attachments are saved with the documents. (Of
course, this presumes that the agency has such standards.) Abel would
be faced with convincing the agency or a court that he did, in fact,
include an attachment to his filing. In the electronic as in the
physical world, the agency must also be able to show that its processes
have been designed to capture entire communications and that its files
contain everything that it received from Abel.

Processing. Agencies should also ensure that their
electronic processing captures all relevant information, such as when
and where the document was sent and received and whether the document
was subsequently altered, and, if so, the source, date, and content of
the alteration. Electronic systems can be designed to capture such
information, including alterations or changes to a document. In the
above example, if the agency's electronic process reliably kept track
of all alterations to the applications after receipt, it could prove
that Baker's application was not altered.

Identities. Often it is crucial to be able to prove
who (i.e., a specific individual) submitted a communication or agreed
to a transaction with an agency. Paper documents generally accomplish
this fairly well, most commonly by containing a handwritten signature
that can be matched with a specific person, a letterhead or return
address on the document or envelope, and so on. Some transactions are
so important that agencies require a personal appearance before some
designated official in order to establish identity, e.g., having a
notary endorse or certify the signature.

Agencies should consider whether, in appropriate circumstances, a
proposed electronic process will gather information sufficient to
identify the person who submitted a communication or agreed to a
transaction. For important transactions, particularly those that
require proof of an individual's identity, or that he or she is
creating a legally binding obligation, an agency may wish to require
those individuals to employ some form of electronic signature. In the
above example, the use of a digital signature could provide the agency
a reliable means of identifying the name, position, and location of the
specific individual who submitted the document, and thus, it would be
difficult for Company to deny that one of its employees filed the
application. See the discussion below in Section II.B.2 regarding the
legal significance of signatures.

Intent of the parties. Enforcement of an agency's
rights often depends upon being able to prove what was intended by a
communication. Did the parties intend a transmission of information to
be a draft of a possible contract or a final, legally binding contract?
Did an individual who transmitted information to the agency intend it
to be a formal report which, if false, could result in his criminal
prosecution? Paper-based transactions and communications typically
answer such questions in a number of ways, for example, by whether a
document "looks" like a contract or just an informal letter, whether it
contains a handwritten signature, or whether it contains a warning that
it is submitted under "penalty of perjury." Similar methods can be used
in the electronic world.

The agency could probably defeat Donald's argument in the above
example by showing, for instance, that (1) its electronic process would
not allow an application to be transmitted unless Donald had clicked
"yes" after being shown a message explaining that by doing so, he was
submitting a final application upon which the agency would rely; (2) it
had provided a telephone number or e-mail address for Donald to notify
the agency that an application had been submitted in error; or (3) the
agency had actually notified Donald that it had received his
application.7

2. Will the information be retained?

Audits, Congressional inquiries, litigation and other dispute
resolution often take place years after the agency's acts and
transactions occurred and the "files" are considered closed. But such
information remains essential to the agency's abilities to protect its
program and to the ability of the Department of Justice to investigate
and litigate the agency's cases. Information no longer necessary for
day-to-day operations also may be useful to the agency itself (for
example, when agencies update procedures and revise regulations).
Additionally, different types of information require different levels
of retention. Thus, agencies should determine which information should
be retained and for what period of time, as well as which information
may be discarded soon after receipt.

Electronic systems should be designed and maintained to guard
against data corruption, whether through accidental deletion, equipment
failures, storage media deterioration over time, stray electromagnetic
forces, or myriad other hardware and software problems. Such systems
should also be designed to limit access to authorized users -- for
example, by requiring controlled password identification for access to
certain information. Finally, an electronic system should be designed
to ensure proper file retention and tracing of alterations and updates
(as to source, date, and content, and all other internal controls that
are required to produce a secure and reliable record maintenance and
retention system). 8

Electronic data are frequently transferred or converted from one
storage medium or software system to another. In this process
(sometimes referred to as "data migration"), important information,
such as formatting and the structure and content of electronic forms,
may be lost, or even the record itself destroyed unless appropriate
steps are taken. Similarly, unless such changes are thoroughly
documented, it can be difficult to demonstrate that the critical
information was not changed in the process. In transition between
systems, agencies sometimes maintain multiple, overlapping systems,
particularly in the transition from paper to electronic based systems.
Because information from all systems may be required to be maintained
under the Federal Records Act, 9 and may be needed for various
purposes, agencies should address retention issues for all systems,
even overlapping ones.

3. Will the information continue to be accessible?

Unlike paper files which, when properly organized and maintained in
the ordinary course of business, are readily available and usable
without any special equipment, electronic information is not always
accessible without special equipment and software. Agencies should
consider several factors related to the accessibility of electronic
records. First, computer technology is rapidly changing and software
and formatting standards may quickly become obsolete. Computer-stored
data may become useless unless the agency can provide the continued
capability with the older technologies or can accurately translate the
document as more modern systems are implemented. Second, if in the
future, an agency no longer has staff who are familiar and competent to
work with the electronic processes necessary to read older data, such
data could be functionally unavailable.10 Electronic files might be
stored while encrypted by software or protected by passwords no longer
available or remembered years later, unless steps are taken to preserve
the software or passwords. As noted above, these concerns are no less
serious if the information is held by an outside party.

B. Legal Sufficiency of Electronic Records

Various state and federal laws require that certain types of
transactions or events be reflected by written or signed documents.
Case law and other legal authorities offer some guidance as to what
types of transactions are covered and what types of records satisfy
such requirements. GPEA addresses this situation by providing that
electronic records and signatures shall not be denied legal effect
because they are in electronic form. The recently enacted E-SIGN
legislation contains similar provisions as to certain transactions, but
a discussion of its provisions is beyond the scope of this Guide.

1. The importance of writings

In many circumstances, the law requires that the terms of an
agreement or other legal obligation be in "writing." 11 The essence of
the "writing" requirement is to establish a record that is not subject
to imperfect memory or to competing claims as to what parties to an
agreement intended. The formal requirement that legal documents be
reduced to "writing" has been justified on many bases, including:
providing the type of ceremony needed to make the parties appreciate
the fact that they are undertaking enforceable legal obligations;
creating evidence that the legal instrument exists and was entered
into; simplifying litigation by narrowing the scope of relevant
evidence; and providing evidence more permanent than a witness's
recollection.

A statutory "writing" requirement does not necessarily imply that
this writing must be on paper. Indeed, E-SIGN and GPEA may limit the
courts§ authority to restrict the term "writing" to paper documents.
But the functional purposes underlying a "writing" requirement are
important, and courts might require that these purposes be satisfied
(whether through interpreting the term "writing" or in some other
fashion) whether a document is on paper or is in electronic form.
Electronic documents that satisfy the purposes of the "writing"
requirement should be acceptable to the courts so long as they have the
same (or better) indicia of reliability as their paper counterparts.
Thus, electronic documents that provide a documentary recording of a
transaction in a manner that establishes and memorializes the terms
should constitute a "writing." To the extent that an electronic
document is more like a traditional "writing" than an oral agreement,
it should be treated by the law similarly to a paper document.12 The
challenge in creating electronic documents is to ensure that disparate
communications (such as exchanges of e-mail) are reduced to a single
document in a manner that provides evidence that the parties understand
that the document memorializes the underlying terms and conditions.
Electronic documents that satisfy those purposes are more likely to be
given legal effect.

Federal and state laws traditionally have required that many types
of documents, particularly contracts,13 be in writing and signed by the
parties to be bound. State laws known as the "Statute of Frauds" also
require many contracts be written.14See Restatement (Second) of
Contracts § 110 (1979). 15 Many states have introduced amendments that
relate to electronic contracts, and these amendments are likely to have
an impact on the "writing" and "signature" requirements contained in
state statutory codes.

A federal statute, 31 U.S.C. §1501(a)(1)(A) (1994), provides that
United States government obligations may be enforced "only when
supported by documentary evidence of . . . a binding agreement between
an agency and another person (including an agency) that is . . . in
writing, in a way and form, and for a purpose authorized by law." As of
the date of this Guide, no federal court has construed this writing
requirement in the context of electronic commerce nor has a court
squarely addressed the question of whether a purely electronic record,
created as part of an automated system, would alone meet the Statute of
Frauds.16 However, case law and other legal authorities offer limited
guidance as to whether federal and state statutes of frauds or other
statutory requirements of writings will be satisfied by electronic
substitutes. The Comptroller General has concluded, for example, that
contracts formed using some electronic technologies may constitute
valid obligations of the government for purposes of 31 U.S.C. §1501, so
long as the technology used provides the same degree of assurance and
certainty as traditional "paper and ink" methods of contract
formation.17

As to state statutes, many state statutes of frauds do not define
"writing." However, courts have accepted electronic communications that
result in a paper document at the end of the communications process,
such as a telegram, as a "writing." See, e.g., Hillstrom v. Gosnay, 614
P.2d 466 (Mont. 1980).18 To the extent that the electronic process
clearly records the terms of agreements and is adequate to show that
the parties intended to make those agreements -- that is, they serve
the purposes that the law has required and relied on paper to serve --
it is more likely that they will be accepted by the courts.19

Many court systems will themselves soon be allowing electronic
filing of formal pleadings and briefs. As courts become more familiar
with electronic records through electronic filings, they presumably
will become more likely to recognize the validity of records and
agreements recorded solely in electronic form in sensibly implemented
electronic recording systems. Courts, however, might be reluctant to
interpret legal requirements liberally merely because of technological
advances, and the risk that courts may lag in doing so cannot be
discounted altogether.

2. The importance of signatures

Signatures have been given a unique place in the law partly because
they reflect physical characteristics of individuals that were applied
to the particular document at issue. Generally, the presence of a
signature on a document is sufficient to identify the person who signed
the document (although courts might require that someone identify the
signature as belonging to the signor), to indicate that the person read
and was familiar with the contents of the document (or at least had the
opportunity to read it before she signed it), and to demonstrate that
the person agreed and intended to be bound by the contents of the
documents she signed.20 These may be only assumptions, but agencies,
businesses and the courts routinely rely on them.21 Such "presumptions"
provide a set of rules for associating an individual with a document
and establishing his or her intent to accept or acknowledge its
contents. Many of those rules are supported by centuries of case law
and, in some cases, statutes that enforce them. Of course, signatures
can be forged, may be illegible, or may have been placed on a document
in a manner that does not satisfy the rules. In those situations, the
party challenging the signature generally has the burden to rebut or
overcome the presumption.

Unlike traditional signatures, electronic alternatives do not yet
necessarily enjoy the long history of use and common expectations that
surround traditional signatures. However, other steps have been taken
-- and undoubtedly more will be taken in the future -- to support the
validity of electronic signatures. For example, an increasing number of
statutes and regulations impose the same presumptions of identity,
intent, or familiarity with content that are typically associated with
paper signatures. The proper design of legal instruments can reduce the
need for such presumptions. Until such presumptions become widely
accepted for electronic signatures, agencies should ensure that the
electronic signature technologies they adopt identify the signers of
the document and clearly express their intent and familiarity with the
document.

For example, statutes that require certain agency officials to
authorize or approve an agency action might not be satisfied with
something less than a signature on a document. Thus, simply affixing a
"/s/ [Named Official]" on an electronic document authorizing a
particular agency action may not satisfy any requirement that agency
actions be authorized in a signed writing by the appropriate official,
any more than it would on a paper document. The official's signature on
a paper authorization demonstrates that the official saw and signed the
authorization; the law presumes that the official was aware of the
contents and the effect of signing the document. To the extent that an
agency adopts electronic processes for such approvals, it must ensure
that the technology utilized provides a legally acceptable method for
indicating approval of the action.

3. Electronic alternatives to traditional signatures

Electronic signatures generally fall into three broad methods of
identifying an individual: something the individual knows, something
the individual possesses, and something about the individual. Examples
of techniques that use these methods include user identification codes
and passwords (i.e., numbers or codes known to the individuals such as
a "PIN," a passcode, or a private key used to make a digital signature
22), tokens, smart cards or other physical objects that the user
possesses that may be inserted into a reading device, and devices that
measure physical, or "biometric,"23 characteristics of the
individual.24 The National Institute of Standards and Technology has
recognized that use of a combination of authentication techniques can
"substantially increase" the security of an authentication system. For
example, public key digital signature technology is designed to work
only when the private key which is used to make a signature is used in
conjunction with the proper PIN, password, or biometric identifier. 25

Properly implemented, various types of electronic signatures, like
traditional signatures, can offer increasing degrees of reliability,
although no system -- either electronic or traditional -- can
completely prevent fraud or misuse. Depending on the nature of the
transactions, smart cards and sophisticated digital signatures that use
public key cryptography can frequently offer a reasonable degree of
reliability. The risk with these technologies is that any number that
can be typed or any card or token that can be inserted can also be
disclosed to others or stolen. Parties seeking to avoid a transaction
might claim that their identifying number, card or token was given to
others who then acted as imposters.26 Of even greater reliability is a
properly implemented biometric-based digital signature. When coupled
with public key cryptography, biometric-based digital signatures become
an even more powerful tool that holds much promise. However, the
widespread use of biometrics would be expensive to implement, its
commercial application is still relatively limited, and not every
transaction requires this very high degree of security.27

Moreover, electronic signature methods vary in their ability to
ensure that an electronic document to which they are bound has not been
altered after signing. Some methods provide no assurance at all, but
systems using "public key, private key" digital signatures generally
are designed to reveal such alterations. Thus, the better approach is
to vary the level of security, depending on the significance of the
underlying documents. For those records where the need for reliability
is even higher, agencies should consider using a combination of
security methods.28

Indeed, a well-designed electronic system can make the indication of
agreement more trustworthy than paper documents that are ambiguous as
to intent. The creative design of the agreement formation stage of an
electronic process offers agencies the possibility to develop an
indication of intent that is even more meaningful than one arising from
traditional paper processes. For example, when a multi-page paper
document is signed only on the last page, the question is sometimes
raised whether all of the pages were included in the document the
signer signed. An electronic signature bound to the entire document
eliminates any question as to the contents of the document signed by
the signer. With high value transactions, exceeding, rather than merely
meeting, the reliability standards of paper signatures, should be an
agency's goal.

4. Federal and state statutes will affect agencies' use of electronic processes

a. The Government Paperwork Elimination Act

On October 21, 1998, Congress enacted the Government Paperwork
Elimination Act, Pub. L. No. 105-277, §§1701-1710 (1998) (codified as
44 U.S.C.A. § 3504 n. (West Supp. 1999)).29 Among other things, the
GPEA provides for the development of procedures for agencies by October
21, 2003, to use and accept electronic signatures,30 and for agencies
to provide "for the option of the electronic maintenance, submission,
or disclosure of information, when practicable as a substitute for
paper" and "for the use and acceptance of electronic signatures, when
practicable." GPEA §1704. Moreover, "to the extent feasible and
appropriate," agencies that expect receipt by electronic means of
50,000 or more submittals are to have "multiple methods of electronic
signatures" available. GPEA § 1703(b)(1)(E).

GPEA may leave issues unresolved. For example, GPEA may not
necessarily make electronic records valid and enforceable under all
circumstances (any more than paper signatures are valid under all
circumstances). GPEA Section 1707 provides that certain electronic
records or signatures "shall not be denied legal effect, validity, or
enforceability because such records are in electronic form." (Section
101 of E-SIGN contains similar language about the validity of
electronically recorded commercial transactions.) While that wording
bars courts from invalidating electronic records and signatures merely
because they are in electronic form, it does not require courts to
accept electronic records and signatures that are deficient in other
respects merely because they are in electronic form. For example, if
there are reasons to doubt that it was actually the electronic
signature holder who affixed the signature in question, a court might
not accept the electronic signature, just as it might decline to accept
a paper signature that could not be verified. Also, GPEA may apply only
to certain types of electronic signatures and to records that meet
certain requirements, such as the records submitted, used, or
maintained in accord with the OMB Guidance required by GPEA. 31

b. State Statutes

Some states have enacted statutes designed to make certain
electronic submissions as enforceable as signed paper documents. 32
Because those statutes might only give effect to electronic submissions
that meet specified requirements, each statute must be examined for
other provisions affecting the proof of the transaction, such as who
(the sender or receiver) has the burden of proving whether the sender
named in the transmission really sent it and whether its contents were
altered. 33 Some states have enacted broader statutes, including
variants on the Uniform Electronic Transactions Act (1999), which was
promulgated by the National Conference of Commissioners on Uniform
State Laws. It is unclear to what extent the GPEA (discussed above in
Section II.B.4.a) might preempt certain of such state laws or parts of
them, or the extent to which such state laws are applicable to
transactions to which the government is a party or acquires an interest
(e.g., government-insured loans).

C. Reliability of Electronic Information

To be useful, agency information must be reliable and meaningful.
While litigators are primarily concerned about the persuasiveness of
information in a courtroom, the usability of agency information affects
many aspects of agency work. Agency employees must be able to rely on
the information to function effectively within the agency as well as to
discuss the results of agency work with those outside the agency.

1. The legal significance of context surrounding the collection or creation of electronic information

Any information collection system should provide a means to define,
limit and show the context of the information supplied to the extent it
is necessary for a particular transaction. For example, a "form" to be
filled out may require specified information to be supplied on
particular lines or in boxes, and such forms usually are accompanied by
explanatory instructions. Completed paper forms include a means of
identifying not only the answers, but also the questions and
instructions. The meaning of the answers is evident from the document
itself.

Electronic processes that use "forms" generally display a template of
the form to the person filling it out. The person enters the
information requested by the form. If the system is designed to retain
and reproduce only the answers,
and not the questions or instructions, disputes may arise over the
meaning of the information supplied. Knowing an answer without knowing
the corresponding question is of little value. Electronic submission
systems generally should be designed to provide a copy of the form
(including all questions and instructions) in response to which
information was supplied to the agency, or bind the form to the answers
provided. If an agency's forms change over time, and the information on
the form is important either to the underlying transaction or to an
agency process or program, then the electronic process should be
designed to keep track of the exact form used by each submitter of
information.

2. The perceived reliability of electronic data

Even though many people routinely rely on electronic information,
such as electronic mail, some people are skeptical about the
reliability of electronic data that are created by unfamiliar
government processes. Electronic information may not be perceived as
reliable if the underlying processes that create or maintain the data
themselves are not viewed as reliable. For example, many people believe
that information in electronic storage is vulnerable to tampering,
either by internal (i.e., within the agency) or external sources. 34
The internal vulnerability concerns can be addressed by demonstrating
that there are sufficient electronic procedures in place to prevent
accidental or unauthorized alteration of information and to provide an
audit trail to trace all changes. The concerns about external
vulnerability may be met by showing that the computer system has
measures in place to prevent and detect intrusions from outside and to
store important information securely, off the network, where outsiders
cannot obtain access to it.

3. Persuasiveness of electronic processes and information derived from them

Because electronic processes in many respects are more complex than
paper methods, explaining them or their reliability may be more
difficult. Whatever systems or methods are ultimately chosen by the
agency, the agency will need to provide reliable information regarding
its systems (verified by periodic audits) to a variety of audiences
including judges and juries, agency employees, and members of the
general public with whom the agency has dealings. The agency should be
able to communicate this information in a straightforward and sensible
manner and should recognize that people are likely to have varying
degrees of knowledge about such processes.

4. Admissibility of information derived from electronic processes

As with evidence in any form, electronic records must meet the legal
requirements for "admissibility" before the government can use them in
court. Generally, the party seeking to introduce records must show that
the evidence is "authentic" (that is, provides proof that it is what it
purports to be), and that it is the "best evidence" (that is, that it
is the original or an acceptable duplicate). In addition, in order to
be able to use electronic or any other agency records as evidence, the
government in most cases must establish that the records were generated
and maintained by a "trustworthy" process. If an electronic process
does not reliably show who transmitted a piece of information to the
agency, when it was transmitted, and that it has not been altered
either intentionally or inadvertently, then, depending on the
circumstances, the electronic record might not even be admissible,
which means that the record could not even be considered by the judge
or jury in deciding the merits of the government's claims or defenses.
35

It is consequently of paramount importance that agencies using
electronic processes ensure that their processes store and reproduce
records in a manner that will result in records that will be admissible
in court. In general, an agency's electronic processes must be able to
produce reliably the information that we discuss in Section III.C.,
below, and any other relevant information. To determine what other
information might be relevant for this purpose, agencies should consult
the Department of Justice or agency attorneys who litigate the
particular agency's cases.

D. Legal Requirements Affecting Electronic Processes

The government has long-established systems for handling paper
records in ways that generally meet legal requirements regarding the
use, storage, and disclosure of information. As agencies convert to
electronic processes, they must ensure that those processes also
facilitate and comply with such legal requirements. If disregarded,
these restrictions could be a source of legal liability.

Legal requirements can affect the use of electronic processes in
many contexts, some requiring that the government be able to produce or
disclose information, others prohibiting the government from releasing
specified information. Such requirements include:

The Freedom of Information Act (FOIA), 5 U.S.C. §552 (Supp. IV
1998), requires release of certain information in agency records to
members of the public upon request. This statute has been applied to
computer records. See, e.g., Cleary, Gottlieb, Steen & Hamilton v.
Department of Health & Human Servs., 844 F. Supp. 770 (D.D.C.
1993). The FOIA statute was recently amended to clarify the status of
electronic records under public access law. See Pub. L. No. 104-231,
110 Stat. 3048, §§ 1-12 (1996) (codified as amended in scattered
sections of 5 U.S.C. § 552). See also David MacDonald, Note, The
Electronic Freedom of Information Act Amendments: A Minor Upgrade to
Public Access Law, 23 Rutgers Computer & Tech. L.J. 357 (1997).

Discovery in litigation. The federal government could be subject
to discovery in any litigated case (even if it is not a party). 36 Such
discovery can reach electronic records as well as paper records.
Depending upon the circumstances, the agency might be required to
gather all electronic records pertaining to a specified person, topic,
transaction or event.

The Federal Records Act (FRA) requires federal agencies to ensure
adequate and proper documentation of their policies, decisions,
procedures, and essential transactions, by maintaining "records" as
defined under the FRA. See 44 U.S.C. §§3101 and 3301 (1994). The
National Archives and Records Administration has promulgated standards
for the creation, use, preservation, and disposition of electronic
records, which also specifically address the minimum requirements for
electronic recordkeeping systems that maintain the official file copy
of text documents on electronic media, including e-mail systems. 36
C.F.R. §§1234.22, 1234.24(b) (1999). The government's compliance with
its FRA obligations as they affect the preservation of e-mail and word
processing documents has been the subject of extensive litigation in
the D.C. Circuit. See Public Citizen v. Carlin, 184 F.3d 900 (D.C. Cir.
1999); Armstrong v. Executive Office of the President, 1 F.3d 1274
(D.C. Cir. 1993). 37

The Privacy Act, 5 U.S.C. § 552a (Supp. IV 1998), imposes certain
restrictions on agency use of personal data. In enacting the Privacy
Act, Congress was concerned predominantly with the increasing use of
computers and sophisticated information systems and the potential abuse
of such technology. Thomas v. United States Dept of Energy, 719 F.2d
342 (10th Cir. 1983). The Privacy Act also (1) requires agencies to
provide notice about how information in a system of records is stored,
accessed and used; (2) requires agencies to provide a means for
subjects to challenge, correct or rebut information relating to those
records; and (3) provides specific standards for computer matching of
electronic records containing personal information.

The Rehabilitation Act of 1973, 29 U.S.C. 701 et seq., prohibits
federal agencies from discriminating against otherwise qualified
persons with disabilities. Sections 501 and 504 of the Act prohibit
disability-based discrimination against qualified individuals
(employees and members of the public) participating in federal
programs. New Section 508 of the Act, 29 U.S.C.A. 794d (West Supp.
1999), as amended in 1998, requires that all electronic and information
technology systems and products used by any federal agency be
accessible to persons with disabilities, including both employees and
members of the public. Agencies will have to adhere to specific
standards for accessibility of electronic products and systems. Section
508 also authorizes individuals to file administrative complaints or to
sue agencies that have procured inaccessible electronic systems in
violation of the law. 38

Other laws restricting agency disclosure of information, such as
the Trade Secrets Act, 18 U.S.C. § 1905 (Supp. II 1996), prohibit
federal officials from disclosing trade secrets or certain other types
of confidential information about persons or businesses, unless
authorized by law.

Other laws and regulations require systems of records to be
capable of verifying that information in an agency's possession is used
solely for authorized purposes and restrict access to information for
certain defined purposes and by only those agency officials who are
involved in those authorized purposes. These statutes and regulations
will require electronic processes to guard against unauthorized use of
such information and track access to that information. (For example, 26
U.S.C. § 6103 (Supp. III 1997) limits access to a taxpayer's tax return
information to only those Internal Revenue Service employees who are
directly involved in a matter involving that taxpayer; 8 U.S.C. §
1255a(c)(2)(B)(4), (5) (1994), prohibits Immigration and Naturalization
Service employees from using applications for legalization for any
immigration-related purpose other than the legalization program.)

Other statutes or regulations unique to a given agency might impose
further requirements or restrictions on the availability or disclosure
of agency information. For example, an agency decision to allow
electronic submissions by the public raises many potential issues that
should be considered, such as the notice requirements of the Privacy
Act, the requirements of the Rehabilitation Act, and the requirements
that the FOIA may impose on access to information regarding
submissions, including providing the electronic forms or templates used
to capture the submission.

III. REDUCING THE LEGAL RISKS IN "GOING PAPERLESS"

The concerns highlighted in Part II, some of which have not yet been
clearly decided by the courts, should not unduly deter agencies from
taking advantage of electronic processes for many of their functions.
Agencies should first analyze whether total conversion would be
appropriate for each existing process, and examine what new processes
may be needed. For those processes that are to be converted, agencies
should take steps to reduce the legal risks in "going paperless."

This part of the Guide provides suggested steps that agencies may
incorporate into their decision-making process to address the issues
raised above. The first section of this part provides an analytic
process of general considerations, and the second provides specific
suggestions, including the types of information that should be
gathered, retained, and made available on demand. The second section
also makes recommendations that address particular agency activities,
including contracting, regulatory programs, and other programs that
require reporting of information, and benefit programs. These suggested
steps will be helpful to agencies as they attempt to reduce legal risk
when converting their processes. In accordance with the OMB Guidance on
GPEA, agency considerations of cost, risk, and benefit, as well as any
measures taken to minimize risks, should be commensurate with the level
of sensitivity of the transaction. Low-risk information processes may
need only minimal safeguards, while high-risk processes may need more.
In the context of legal and litigation risks, "low-risk information
processes" are those that have a small chance of generating significant
liability, financial impact or litigation that would have a significant
effect on the agency.39

In addition, Appendix A provides key legal issues for agencies to
consider in adopting an electronic process. The appendix is intended as
a helpful resource for agencies; it is not intended to be a required
checklist or an exhaustive listing of the possible issues such
processes may raise.

A. Should Every Agency Function Be Completely "Paperless"?

Before attempting to make every agency process paperless, agencies
should analyze whether total conversion would be appropriate for each
process. Even if parts of an agency function are converted to an
electronic process, agencies should consider whether some paper
documents still should be used. The GPEA requires that, by October 21,
2003, agencies provide for "the option of the electronic maintenance,
submission, or disclosure of information, when practicable as a
substitute for paper," and for "the use and acceptance of electronic
signatures, when practicable." GPEA § 1704. If an agency concludes that
such use for a particular type of transaction or process is not
practicable, the agency is not required by the GPEA to so use
electronic processes.

We note, however, that conversion to electronic processes need not
be an "all or nothing proposition." An agency may conclude that it is
appropriate to convert most of its processes, while continuing to use
paper (at least for the time being) for one particular part of its
process. This reflects the common-sense recognition that, for some
important transactions, retaining a paper document might be the best,
most certain, and easiest to prove medium for establishing a legally
significant transaction or event.

B. General Guidelines

In considering whether each agency function or type of transaction
should be converted to an electronic process, and, if so, how that
process should be designed, agencies can take the following steps to
address the concerns discussed above.

1. Conduct an analysis
of the nature of a transaction or process to determine the level of
protection needed and the level of risk that can be tolerated

Different agency functions and types of data pose different levels of
legal risk. The greater the risk, the more carefully the agency should
consider whether that particular function or type of data should be
converted to an electronic process, and if so, how the electronic
process will be designed. Riskier functions and processes dealing with
more important data may require more stringent safeguards when
converted to electronic processes. The following types of functions are
likely to pose greater legal risks:

Transactions that have legal significance. This includes
transferring funds, forming a contract or other obligation, or
fulfilling a legal responsibility, such as submitting a required filing.

Transactions open to the public. Other things being equal,
transactions with the general public generally pose more of a
litigation risk than transactions among agency employees or other
federal agencies.

Transactions with newcomers. Some processes occur in the context
of a long-term relationship, such as a contractual or an ongoing
regulatory relationship. Other transactions, such as a one-time
submission of information, take place in the absence of a relationship
between the submitter and the government agency, and might be riskier.

Processes historically susceptible to fraud or litigation. These
include claims for funds or reporting debts and liabilities to the
government. (On the other hand, some kinds of fraud are difficult to
find in a paper process, simply because human beings cannot wade
through all the submissions to catch inconsistencies or patterns that
warrant further investigation the way a well-instructed computer can.)

In addition, the following types of agency information or data generally need the greatest protection:

Instruments reflecting rights and obligations. These include
contracts, task orders, and other instruments by which the government
or those dealing with the government undertake an obligation.

Information traditionally used in agency litigation. For example,
documents in administrative records of agency decisions or agency
rulemaking, and information from agency files about individuals who are
involved in disputes are often of critical importance in litigation.
These and other types of information that are more likely to be needed
in litigation need greater protection than, for example, generalized
information on the agency's web site. Agencies might wish to confer on
this point with this Department's litigating divisions that represent
them in court.

Legally protected or sensitive data. This includes data protected
by the Privacy Act or the Trade Secrets Act, or information that is
otherwise sensitive, such as national security or law enforcement
information, attorney-client or other privileged information, and
personnel or medical records.

The above-mentioned principles should also be used to determine the
type of authentication procedure needed for the transaction. Higher
risk transactions should use more reliable forms of authentication,
while lower risk transactions may use less rigorous methods. Such an
appraisal may allow for greater security for very important
transactions, while reducing the burden on agencies in connection with
transactions that may not need the assurances of more rigorous forms of
authentication.

2. Consider potential
costs and benefits, quantifiable and unquantifiable, direct and
indirect, in performing a cost/benefit analysis

Costs and benefits for government processes are not measured in
strictly monetary terms. Consider whether conversion to an electronic
process might change the effectiveness of the system, the amount of
fraud, the amount of litigation, and the success rate in litigated
cases -- all of which could impose costs or benefits on the agency.
Consider the costs of complying with the legal requirements described
in Section II.D, above, the cost of retaining and ensuring
accessibility of data, the cost of personnel to manage the system, and
other indirect costs. Consider, too, the benefits such a conversion
could create, such as an increased ability to analyze data, greater
ease in retrieving information, and more efficient storage of
information. These various benefits and costs should also be compared
to those in an agency's existing system.

3. Use available sources of expertise inside and outside your agency, including the OMB procedures

Many of the issues discussed in this Guide are unquestionably
complex and draw on many kinds of knowledge, including both technical
and legal experience. On legal and risk analysis issues, expertise in
an agency can reside both in the General Counsel's office and in the
Inspector General's office. Outside of an agency, such expertise exists
in the Department of Justice. An agency might wish to consult with the
particular Department of Justice components that typically litigate its
cases.

As discussed above, the GPEA requires the OMB to issue procedures
for use and acceptance of electronic signatures. See above at footnote
27. This guidance may be helpful to agencies. Moreover, opposing
litigants might argue that the GPEA confers benefits only on systems
adopted and used in accord with the OMB Guidance. Therefore, to avoid
such challenges, agencies should conform their procedures to the OMB
Guidance and affirmatively note their usage of the OMB Guidance on the
record.

4. Consider developing
a comprehensive plan when converting a traditional process to an
electronic one, especially if converting means re-engineering the
existing process

Agencies should design electronic processes to ensure that the
processes are at least as reliable, and serve the same purposes, as the
paper-based systems they replace. Agencies also should consider any
existing deficiencies in their paper processes and remedy those when
converting to electronic processes; they should be especially careful
to identify and correct any deficiencies that will be magnified by the
transition to the new system. Use of electronic processing provides
unprecedented opportunities for adopting processes that would be
impractical, unknown, and unimaginable in a paper-based system.

Agencies should consider developing a comprehensive plan that
identifies issues and fixes responsibility for addressing those issues,
including the legal concerns outlined here. In developing such a plan,
an agency should encourage participation by all those affected by the
conversion inside the agency, including program managers, lawyers,
technical staff, persons familiar with each of the statutes that impose
particular requirements (e.g., the Privacy Act, FOIA, and the
Rehabilitation Act), and those interested parties from outside the
agency, such as OMB and other client or sister agencies. By following
such an approach, an agency is more likely to assure that all needs are
being addressed during system development and over the long run, at
least to the extent expressed in the plan.

For example, agencies may risk legal liabilities if their electronic
processes are not designed to comply with the Rehabilitation Act, 29
U.S.C. §794d (West Supp. 1999), that generally requires all processes
to be accessible to persons with disabilities. The Rehabilitation Act
and other applicable statutes may be overlooked in the planning process
unless those within the agency responsible for complying with or
administering such statutes are consulted and involved in the planning
process. If these issues are not addressed in the system design,
agencies may risk legal liability and incur large costs in redesigning
non-compliant components.

5. Consider the kinds of information relevant to the process; ensure that necessary information is gathered

Electronic processes should be designed to gather all relevant
information pertaining to each transaction, including the four types of
information discussed above: content, processing, identities, and
intent of the parties. See above at Section II.A.1; see also, e.g.,
Public Citizen v. Carlin, 184 F.3d 900, 910 (D.C. Cir. 1999)
(discussing preservation of content, structure, and context of federal
records). In deciding what information should be gathered by an
electronic process, it is useful to consider what information the
agency gathers in its paper transactions or recordkeeping. To the
extent such information is or might be useful or important, the
electronic process must be designed to capture the same or comparable
information. For example, when converting a process by which a
contractor submits invoices from subcontractors supporting progress
payment requests to document costs, agencies should consider ways to
capture equivalent information about the authenticity of the invoices.
Conversion to an electronic system also presents a useful opportunity
to do a zero-assumption review of what different or additional
information, not previously gathered by paper, can and ought to be
gathered by a new electronic system (and, perhaps, what information can
be omitted). In some respects, a good design of an electronic system
should not merely strive to replicate the paper system it replaces, but
should aim at fulfilling the necessary information functions even
better. 40

6. Consider using a "terms and conditions" agreement

Agency managers could consider formalizing an agreement, sometimes
referred to as a "terms and conditions agreement," among the parties to
the electronic process, to ensure that all conditions of submission and
receipt of data electronically are mutually known and understood. This
process can assist in avoiding repudiation, rebutting a claim of
ignorance, and even, where appropriate, shifting allocation of risk.
Agencies should consult with their general counsel for guidance on the
most appropriate terms for such agreements.

7. Incorporate a long-term retention and access policy for electronic processes

Aside from any requirements mandated by statutes or regulations
governing government recordkeeping (see Section II.D, above), agencies
should maintain the data that will be needed to protect their rights in
litigation and otherwise. Litigation about an agency's program can take
place many years after the program has come to an end, and the
information to support that litigation should remain available and
unaltered. The amount of time for which records must be kept varies by
agency and type of data. Agencies should consult with their general
counsel, the Department of Justice, or the National Archives and
Records Administration for advice on these matters.

Keeping data available in electronic form means not only having the
data stored on an electronic medium that is available and can be
accessed through appropriate software, but it also includes having
available staff or contractors who are familiar with operating the
computer programs that can read data of a particular format. Auditing
legacy systems can also be helpful. Further, the agency should retain
the means to recover data that might have been encrypted or
password-protected with long-forgotten or canceled passwords. Where
agencies have multiple overlapping systems that are used during
transition periods, agencies should generally retain necessary
information from all of the systems.

8. Be aware of legal concerns that implicate effectiveness of or impose restrictions on electronic data or records

Before permitting the electronic submission of information, agencies
should review the wording of all applicable statutes and any
implementing regulations to verify that electronic reporting or
submission would be permitted without a legislative or rule change. The
criteria agencies require for electronic transactions involving the
public, such as electronic reporting, should be published to the
regulated community, either by way of formal rule-making, legislative
amendment, or some other appropriate means.

In addition, many uses of data are subject to restrictions under
general regimes of federal law. Some agencies are subject to legal
regimes that are specific to their particular work. Therefore, it may
be necessary to create a mechanism for protecting disclosure of the
contents of electronically transmitted information. See above Section
II.D.

9. Develop processes that can form the basis of persuasive evidence

To be usable, electronic information must be persuasive. Electronic
processes that can be shown to gather, retain, and reproduce data
reliably and without alteration are likely to be more persuasive.
Electronic processes should be designed to enhance these
characteristics.

Generally, there are at least four factors that agencies should
consider in developing persuasive electronic processes, which may
offset each other but should be considered separately:

Simplicity and directness of the evidence. Simple and
more direct evidence is generally far more effective than complex or
complicated evidence.

Example: A videotape of an individual conducting a transaction
would be more persuasive to many juries than a detailed examination of
computer logs from the agency's system. Similarly, because fingerprints
generally are familiar to most people as reliable identifiers,
digitized fingerprints incorporated into an electronic signature might
be more persuasive to many people than other electronic signature
techniques.

Corroboration of the evidence. Rebuttable evidence can be made substantially stronger if it is corroborated by other evidence.

Example: If the evidence shows that a fraud was
committed at a particular time reliably authenticated, and that a smart
card used to commit that fraud had previously been issued to an
individual, and that the individual had the same smart card after the
fraud was committed, it suggests that the individual had the card when
the fraud took place. If the use of the smart card required the use of
a password that had also been issued to the individual and the
individual had not reported the loss of either, the evidence against
that individual would be even stronger.

Quality of the technology at issue. Different
technological solutions can provide different levels of quality for
persuasiveness to the jury.

Quality of the management and implementation of the
electronic process. Even the best technology can be inadequately
implemented, managed, audited, or certified, leading to a loss of
credibility.

Example: An agency receives an important
communication from an outside party, sent in encrypted form, with an
electronic signature. The agency "opens" the message, prints it in
plain text on paper, and places it in the file, without keeping proof
of how the message was received, or retains a copy of the data without
the electronic signature attached. If the sender later denies sending
the communication, the agency may be unable to prove who sent it or
that it was not altered after receipt.

10. Analyze the full range of technological options and follow commercial trends where appropriate

Not all available technologies are necessarily suitable for an agency's
needs, nor should it be assumed that all methods used by the private
sector are necessarily appropriate for government use. For example,
private institutions generally can select their customers, reducing the
risk of fraud and abuse by choosing to do business only with those who
appear trustworthy and by taking affirmative steps to control fraud.
But many government programs are open to all comers, thus exposing
government systems to greater risk. Agencies also might face greater
obstacles than private businesses in implementing complex technology
programs or quickly changing them as circumstances dictate. Government
agencies should generally use proven technology. The government
operates under legal restrictions, such as the Privacy Act, that may
not bind the private sector.

11. Consider the unique legal risks presented by outsourcing an agency's data management and storage functions

Many agencies are considering using outside parties to help manage
information stored in electronic form. Some agencies are requiring
private parties with whom they deal to retain originals and source
documents instead of filing them with the agency. Other agencies are
contracting out information management and storage functions to varying
degrees. The future will present creative uses of third parties to
serve many other roles, such as, for example, providing so-called
"electronic notary" services to validate data and time-stamp electronic
information. These creative strategies can address some agency
information management needs, such as ensuring the accessibility or the
reliability of information.

However, these uses of outside parties to perform data storage
functions traditionally performed by agency personnel can also create a
variety of additional legal risks that should be carefully considered
before turning over an agency's files to a private party. In addition
to other terms, contractual arrangements to provide data maintenance or
storage services should, at a minimum, contain provisions providing the
agency complete access to its records, specifying that the records will
be kept in accord with standards that ensure the long-term
availability, integrity, and reliability of the records; that the
records will be legally adequate to defend the agency's rights in court
or administrative dispute resolution procedures; and that the
contractor's personnel will be available when necessary to authenticate
records or testify as to the recordkeeping procedures.

Steps to consider include: choosing outside parties with care,
clearly outlining responsibilities before initiating the relationship,
placing reliance on an outside party only gradually, closely monitoring
the outside party, regularly revisiting the nature and success of the
relationship, taking advantage of appropriate industry standards, and
developing backup plans. Agencies should especially consider the
regular use and re-use of auditing or certification procedures to
examine whether the outside party is following appropriate practices.
Other steps may be helpful as well in reducing particular risks
associated with the use of outside parties. 41

Moreover, the use of outside parties generally will not relieve an
agency of its responsibilities, such as those described in Section
II.D. Any contractual arrangement should contain terms that require
that the contractor meet the standards imposed by, for example, the
Privacy Act, the Rehabilitation Act, and the Federal Records Act. In
fact, the use of these outside parties may increase the possibility
that those kinds of duties will not be met, unless the outside parties
are managed with special care.

Agencies should recognize the potential problems that can arise when
private parties who submit information to the federal government are
required to retain originals or source documents relating to
transactions with an agency. Many such documents may not be available
to the agency in the future. Agencies should consider the potential
impact on their programs and enforcement activities if they are unable
to obtain such information.

12. Retain extrinsic information in important or sensitive contexts

Even if an agency decides to implement an electronic process,
prudence might still counsel for retaining paper instruments for
important or sensitive transactions, or at least for the core part of
transactions. For example, an agency might conduct substantial phases
of a process, such as negotiation, electronically, and then formalize
an agreement with a signed writing. Agencies might also consider
requiring written certifications or signatures for some of their claim
forms, if it would provide a helpful basis for a fraud claim years
later.

C. Specific Guidelines

The following are specific guidelines for designing electronic
processes to accommodate the concerns addressed in this Guide regarding
the protection of agency rights, particularly in litigation. These
guidelines are in addition to any recordkeeping requirements imposed by
statute or regulation. Sections 1 and 2 list some of the basic
information and the kinds of factual information that electronic
processes should be able to reliably produce, both in general and with
regard to particular types of agency functions. Section 3 suggests
procedures for retention and availability of information. But these are
only generally applicable suggestions, not all-inclusive lists.
Agencies should not assume that, if they merely do what these lists
suggest, their job is complete. Moreover, in some instances, the items
we suggest might not be necessary. Each agency must assess its own
transactions and programs to determine what characteristics should be
built into its electronic processes.

Throughout the sections that follow, we refer to processes that are
adequate to "prove" certain characteristics of the transactions
described. By the term "proof" we are not referring to absolute
certainty beyond all doubt. We instead are referring to evidence that
will be admissible in court and sufficient to demonstrate the point
under applicable law. Agency personnel with questions over what
information satisfies those standards should consult with their
agency§s general counsel or attorneys within the Department of Justice
who litigate the agency§s cases.

1. General information to gather, retain, and have available

Electronic processes should be designed so that at least the
following information can be proved with regard to sensitive or
significant communications and transactions by, with, or within an
agency:

. Date and time that the communication or transaction was sent or initiated.

. Identity and location of each particular person who transmitted
such items. This includes an identifier traceable to a particular
individual (e.g., digital or digitized signatures, or other
identifiers, depending on which is appropriate), and a means of
identifying the source of the transmission (e.g., mail server
identification, e-mail account name, time-stamped Internet Protocol
("IP") address). Identity of an individual can be established to
varying degrees of certainty by the individual's transmission or use of
any of the following:

- Something the individual knows (e.g., a password or secret number, personal information);

- Something the individual possesses (e.g., a token or magnetic card);

- Something the individual is (i.e., a physical or biometric attribute); or

- Combinations of the above. As we noted previously (at Section
  II.B.3), using a combination of techniques can substantially increase
  the security of an authentication system (e.g., requiring the use of a
  password and a token, or a unique user identification and a password).

For each process, an agency should define the roles to
be played by the electronic signature and adopt the electronic
signature technology or technologies that best serve those purposes. If
its primary function is to prove identity, other techniques or
information may provide better proof in an electronic environment than
a weak electronic signature. On the other hand, an electronic means
that may be unconvincing at proving identity may be adequate for other
functions, such as proving receipt or proving intent.

That the communication or transmission actually was received, by whom it was received, and the date and time it was received.

What the sender or originator of the communication or transmission
intended by it, and the date and time he or she signed it. For example,
certain electronic processes should be able to prove that a person who
submits a report certifies to the agency that his report is true,
accurate and correct at the time submitted. If the submitter of a
document is shown a banner on his computer screen on which he must
click "yes," the electronic process must be able to prove that the
banner (including its precise text) was in fact displayed and that he
clicked "yes."

The complete contents of the communication or transaction, including any attachments or exhibits.

This can include the terms unique to a given transaction and
"boilerplate" terms that, on paper, might have been printed on the back
of a form or in a set of instructions;

- If the communication contains answers or responses to questions on
  a form, include a means of proving the precise questions, instructions,
  or contents of the version of the form actually used; and

- For communication with attachments, there must be a means for
  preserving the attachments and permanently "binding" them to the
  electronic communications.

- Some means of proving that the information in the transmission was
  not altered. This includes proving that no one (e.g., neither the
  submitter nor the agency) altered the information after the submitter
  sent it, perhaps by proving that the electronic system allows no one
  the ability to alter such documents. Or the electronic process might be
  designed to provide an "audit trail" showing all alterations, the date
  and time they were made, identifying who made them, and so on.

- As appropriate, some means of showing all relevant communications and documents on a given subject or point.

- Some means of distinguishing final documents from drafts.

2. Information regarding particular types of transactions

In addition to the preceding guidelines, electronic processes generally
should be designed to provide additional or more specific information
with regard to particular types of interactions.

a. Contracts and related transactions

Agencies that enter into contracts (which may have follow-on
invoices or progress payment requests) or otherwise seek to enforce
rights in connection with liens, mortgages, insurance, or guarantees,
generally should design their electronic processes so as to be able to
establish at least the following:

Date and time of the contract or other instrument, any amendments
to it, and any claims for payment (including invoices or progress
payment requests) submitted under it;

Date and time that each party submitted its offer, acceptance, or
claim for payment, the date and time it was received (including proof
that it was in fact received), and proof of the identity and location
of each particular person who transmitted such items. This includes an
identifier traceable to a particular individual (see Section III.C.1,
above), and a means of identifying the source of the transmission
(e.g., mail server identification, e-mail account names);

Every term, provision and certification that applies to the
transaction. Such terms include standard or "boilerplate" terms, as
well as the terms unique to the particular transaction. Because
agencies might change the standard terms used in later contracts, the
system must be able to show what terms were in effect in each
particular transaction. If the contract involves filling out a form or
responding to a prior communication, then include the questions on the
form or the content of the prior communication;

That the text of all terms (specific terms and any boilerplate terms) was actually made available to each party;

That all required parties agreed to the contract or transaction. This includes at least three components:

- The identity of the specific individuals (see Section III.C.1,
  above) who entered into the contract or transaction on behalf of each
  party, and any appropriate identifying information about them (such as
  their titles, divisions, and so on);

- Proof that the transaction was an agreement (i.e., text stating that the party or parties "agree"); and

- Proof that each party intended to be legally bound (again, through
  use of, for example, an electronic signature traceable to a particular
  individual with authority to contract on behalf of the party, combined
  with proof that the "signature" was applied to that specific contract,
  and the date and time on which that occurred).

- Where applicable, proof that the individual has certified to the
  truth and accuracy of the information submitted on any claims or
  required certifications and has submitted the information under penalty
  of perjury;

- All amendments, if any, to the transaction, including each of the
  above items for each amendment, along with proof that no other changes,
  amendments, or alterations have been made by the submitter, the
  government, or anyone else.

b. Regulatory programs (and any programs that require reporting of information)

Agencies that accept in electronic form information that is required to
be collected under statutory or regulatory programs (or in connection
with contracting), and that rely on such information in the conduct of
agency business, generally should design their electronic processes so
as to be able to establish at least the following:

Date and time of transmission (either date and time of
transmission or date and time of receipt or both, depending on program
or agency requirements) and proof that the communication was actually
received by the agency;

The identity and location of each particular person who
transmitted the report or data. This includes an identifier traceable
to a particular individual (see Section III.C.1, above), and a means of
identifying the source of the transmission (e.g., mail server
identification, e-mail account names);
Proof that the submitting individual was authorized to report for the company or other entity (e.g., his position or title);

Complete contents of the communication, including any attachments
or exhibits. Complete contents include both data and information
submitted by the individual or company and the agency forms, questions
or certifications to which the information responded;

All amendments, if any, to the report, including each of the above
items for each amendment, along with proof that no other changes,
amendments, or alterations have been made by the submitter, the
government, or anyone else;

Where applicable, proof that the individual has certified to the
truth and accuracy of the information submitted and has submitted the
information under penalty of perjury. This might include, for example,
proof that a banner was displayed to the submitter, informing him that
by clicking "yes" he acknowledges those matters.

c. Benefit programs

Agencies that accept electronically submitted applications or
communications involving the receipt of government benefits of any kind
(e.g., loans, grants, or entitlements), generally should design their
electronic processes so as to be able to establish at least the
following:

Date and time of receipt of the application or communication
(either date and time of transmission or date and time of receipt or
both, depending on program or agency requirements) and proof that the
application or communication was actually received by the agency;

Proof of the identity and location of each particular person who
transmitted such items. This includes an identifier traceable to a
particular individual (see Section III.C.1, above), and a means of
identifying the source of the transmission (e.g., mail server
identification, e-mail account names);

Complete contents of the application or communication, including
any attachments or exhibits. Complete contents including all data and
information submitted by the individual corresponding to requests for
information or certifications on an application form, as well as the
substance of the requests or certifications themselves;

Where applicable, proof that the individual has certified to the
truth and accuracy of the information submitted on the application and
has submitted the information under penalty of perjury;

Where applicable, some means to prove that the confidentiality of
the applicant's submission or communication has not been compromised;

All amendments, if any, to the application, including each of the
above items for each amendment, along with proof that no other changes,
amendments, or alterations have been made by the submitter, the
government, or anyone else.

3. Retention and availability

Once an agency determines which electronically gathered information
must or should be gathered, retained and available in light of the
issues discussed in this Guide, the agency should establish policies to
fulfill those goals. Of course, various statutes and regulations impose
requirements for the retention and availability of official records in
electronic recordkeeping systems.42 But in addition to those
requirements, agencies generally should ensure that their electronic
records that are important in light of the issues discussed in this
Guide are:

Retrievable in a form that can be viewed or printed in a "user-friendly" form;43

Indexed in a manner sufficient to be able to retrieve needed data
(for example, by subject, by name of program participant, by date and
time, etc., in a manner that allows compilation of all relevant
documents into a usable "file");

Retained and retrievable in an electronic recordkeeping system for
the length of time required by law, agency policy, or records retention
schedules;

Fully retrievable, printable, and adequately indexed even if the
agency later modifies its electronic system (hardware or software), or
later changes the contractor who manages the electronic process for the
agency;

Accessible, even if the electronic document originally was encrypted or restricted by a password;

Capable of being promptly located, retrieved, printed, and
interpreted by staff or otherwise immediately available personnel.
(Where appropriate, promptly locating a record may include locating a
notation that the record itself has been disposed of in accordance with
an approved records schedule.)

Agencies may need to take specific measures to ensure the long-term
accessibility of data in light of changes over time in technology,
personnel turnover, or changes in contractors.

CONCLUSION

As agencies move forward in adopting electronic processes and making
judicious use of technology, they face many decisions. This Guide has
been provided to help agencies in considering the legal aspects of such
decisions and to help them design their processes in a way that will
reduce their legal risk and thus fully realize the benefits of
electronic processing. For further information, consultation, or to
provide feedback on this Guide, please contact any of the Department of
Justice lawyers listed in Appendix B of this Guide.

1. Conduct an analysis of the nature of a transaction
or process to determine the level of protection needed and the level of
risk that can be tolerated;
2. Consider potential costs, quantifiable and unquantifiable, direct and indirect, in performing a cost/benefit analysis;
3. Use available sources of expertise inside and outside your agency, including the OMB GPEA Guidance and other OMB guidance;
4. Consider developing a comprehensive plan when converting a
traditional process to an electronic one, especially if converting
means re-engineering existing process;
5. Consider the kinds of information relevant to the process; ensure that necessary information is gathered;
6. Consider using a "terms and conditions" agreement;
7. Incorporate a long-term retention and access policy for electronic processes where necessary;
8. Be aware of legal concerns that implicate effectiveness of or impose restrictions on electronic data or records;
9. Develop processes that can form the basis of persuasive evidence;
10. Analyze the full range of technological options and follow commercial trends where appropriate;
11. Consider using outside parties to manage information as well as
developing methods to manage the particular risks of doing so; and
12. Retain sufficient extrinsic records in important or sensitive contexts.

In addition, Appendix A provides issues for agencies to consider in adopting an electronic process.

APPENDIX A - KEY LEGAL ISSUES TO CONSIDER
IN ADOPTING AN ELECTRONIC PROCESS

This appendix is provided as a resource for agencies to identify the
legal issues to consider in adopting an electronic process. There are
two general ways of identifying the legal issues associated with
adopting electronic processes. One convenient approach is to consider
the features of an existing paper-based process, and decide how the
electronic process must be designed in order to provide the same
functions. In the alternative, one can turn to first principles and
seek to identify legal issues without reference to any existing
process. These two approaches may be complementary; concerns that might
be immediately apparent when one approach is used may not be under the
other approach. Accordingly, this appendix incorporates elements of
both approaches.

This appendix focuses on legal issues associated with adopting an
electronic process. (This analysis has many features of a requirements
analysis, which agencies might already be conducting as part of their
business process.) Although electronic processes can have many
significant advantages over paper processes, those benefits will not be
addressed in detail as they are outside the scope of this Guide. This
appendix also does not comprehensively address issues associated with
archiving of records; for a more detailed review of that topic, please
consult the guidance prepared by the National Archives and Records
Administration. Although this appendix is intended as a resource to
federal agencies, some agencies may conclude that other approaches are
more appropriate in addressing legal issues related to the development,
use, and maintenance of those agencies' electronic processes.

A. Comparison of paper and electronic processes

1. What is the type or purpose of the process B is it a benefits
application, a contract, a bid proposal, a legally required report, or
some other type of process?

2. What does each party to the communication need in order to
achieve that purpose? This may include dates, identities, intent,
signatures, the sources of particular information, and the
informational content of the transaction itself. Who uses the
information in your agency, and for what purpose? Are there types of
information that are needed only for certain narrow purposes or only
infrequently, but are very important for those purposes?

3. How will the electronic process collect this information?

4. What is it about the existing process that satisfies this need? A
signature may serve a range of purposes, including proving identity and
intent, and deterring abuse. Likewise, mailing of paper documents to a
known address both helps to complete a transaction and helps to confirm
the identity of the other party to the transaction. How will the
electronic process be designed to meet these needs?

5. How do you ensure that information, once obtained, continues to
be available when and where you need it? How is information organized,
stored, and retrieved? When is information likely to be needed again,
and for what purposes? How can appropriate availability of information
be assured in an electronic process?

6. What security procedures do you have, and why? Who has access to
information and who does not, and why? How can equivalent or better
security be obtained in an electronic process?

7. What elements of your program and process have historically been
susceptible to fraud or other abuse, and why? How do you deter these
activities? How will you ensure similar or greater deterrence in the
electronic process? Will evidence of abuse be as available and
persuasive in the new system as in the old one? Are there any features
of the electronic process that are likely to facilitate fraud, abuse or
disputes that did not occur before, or conversely, that are likely to
discourage such acts which have occurred in the past?

8. What do you do in your existing system to comply with applicable
laws and regulations, including any signature requirements, the Freedom
of Information Act, the Privacy Act, the Rehabilitation Act, discovery
procedures, and confidentiality laws? How will you ensure that you will
continue to comply with those laws and regulations in your electronic
system?

9. Have you adopted a plan to address the issues raised by moving to
an electronic system, and planned to consult relevant offices and
agencies (including general counsels, inspectors general, and relevant
components of the Justice Department)?

B. Legal issues raised by electronic processes

1. Have applicable legal and practical requirements been considered?

Is any information used in the process required by law or regulation to be in a particular form, paper or otherwise?
Is the transaction required by law or regulation to be "signed?" If so, how do you plan to satisfy that requirement?
Will your process comply with the Government Paperwork Elimination Act?
What steps in the plan are taken to ensure confidentiality if confidentiality is required?
Will the process comply with:

The Privacy Act?
The Rehabilitation Act?
The Freedom of Information Act?
The Federal Records Act?
Other requirements applicable to the agency's programs?

2. How necessary is the information?

Is there a legal requirement to maintain the information?
Is the information of importance to national security, public health or
safety, public welfare, the protection of the environment, or other
important public purposes?
How many people would be affected by the unavailability of this information?
What is the importance of the information to the agency's programs?
Could the information be used to collect money from the United States?
Used by the United States in collecting money? How much money is at
issue in each individual transaction? In the process as a whole?
Does the information otherwise reflect rights or obligations of the United States or of other parties?
Might the information be needed for use in criminal proceedings? In other legal proceedings?
Is the information needed for proper agency management or for maintenance of agency financial records?
Is the agency confident that the information will not be needed in the future for any important purpose?
Is the information needed for any other reason?

If the foregoing analysis reveals that the information will not be
necessary in the future and is not required to be retained under
applicable law, there is likely to be little need to consider the risks
associated with collection, use, and retention of the information
discussed below. If, however, the information is likely to be of legal
significance, the agency may wish to consider the following items in
addressing potential risks. If the information is a "record,"
applicable law may nevertheless require it to be preserved in some
form. Refer to guidance prepared by the National Archives and Records
Administration for more detail on this topic.

3. What are the risks that private parties will seek to commit fraud or otherwise misuse the process?

How much money or other benefits are at issue in each individual transaction? Can transactions be aggregated?
Is the transaction conducted with people with whom the agency has had a long-term relationship?
Is the program one with a history of fraud?
Are there any other reasons to anticipate fraud in this process?

4. What are the risks that information will be damaged or lost?

Will the information be stored in a way that is accessible in a timely fashion if it is needed?
Will the information be retrievable in a way that is easy to understand?
What steps will be taken to control, log, and audit modifications to stored information?
How long will the agency need to keep its records?
Is it appropriate to involve outside contractors in information management tasks?
If so, does the contract and oversight process protect the interests of the agency and the public?
What plans are in place for migration of information when system technology is upgraded?
What parts of the process are unusual, distinctive, or unique to the
agency? Do these steps give rise to unusual risks of harm to stored
information?
Are there other risks?

5. Will the information collected be complete?

Does an identity need to be associated with a transaction? How will identity be proved?
Does intent need to be associated with a transaction? Can the agency
prove that the person who transmitted the information understood its
significance and appreciated that his or her transmittal was legally
binding on him or her?
Does a signature need to be associated with a transaction? If so, what
is the function of the signature B identification, intent, evidentiary
use, or some other function? What is an appropriate electronic
equivalent? Is a digital signature required, or will some lesser form
of electronic signature suffice?
What information about the processing of the document (such as when a
document was sent or from where it was received) must be retained?
Are documents ever modified upon receipt? If so, how is information
(including context, identity and intent information) regarding the
modifications collected, retained, and made available? How is this
information segregated from information associated with the original
submission?
Is there some other necessary legal element required to conclude the transaction (delivery of a deed, for example)?
What contextual information is necessary (e.g., the questions to which
a set of stored answers correspond)? How will it be collected and
maintained?
Is there any information that is used only infrequently, or only for
one narrow purpose, but that is nevertheless critical to the success of
the system?
What other information needs to be collected by virtue of the distinctive features of the transaction?

6. Will the information be otherwise usable and credible for all necessary purposes, including possible legal proceedings?

Can the agency show that the information it received accurately reflects the information that was intended to be transmitted?
Can the agency show that the information it possesses accurately
reflects the information originally submitted to it? Is the original
information available as well as any subsequent edits?
Is a "terms and conditions" agreement appropriate? Is the information
retained sufficient to be persuasive to a judge, jury, or other third
party? Does it provide simple, straightforward and corroborated
evidence of what occurred?
Has the agency addressed any other potential obstacles to the use of the information in a legal proceeding?

7. Have all relevant offices and agencies been consulted? Potentially interested offices and entities may include:

Agency program offices
Agency information technology specialists
General Counsel's office
Inspector General's office (audit and investigative personnel)
Records management personnel
FOIA, Privacy Act, and civil rights officers
Agency enforcement personnel
Other agency personnel
Office of Management and Budget
The Department of Justice
National Archives and Records Administration
Other government offices or agencies (federal, state, local and tribal)
that are involved in the process, use the resulting information, or
otherwise have a stake in process design
Private and non-governmental organizations, including as appropriate
contractors, the regulated community, and representatives of the
general public

8. Have you developed a plan to address the foregoing issues?

Does the plan assign responsibility for particular tasks or problems to specific offices or individuals?
Does the plan provide for any auditing of the process, including
auditing of any outside contractor who manages information on behalf of
the agency?
Does the plan provide for periodic reassessment?
Have you consulted with interested parties on the development of this plan?
Have you shared the final plan with interested parties?

APPENDIX B - CONTACT INFORMATION

DEPARTMENT OF JUSTICE
ELECTRONIC COMMERCE WORKING GROUP
CO-CHAIRS

Footnotes:

1GPEA, Section 1710(2), refers to 5
U.S.C. 105, which provides: "For the purpose of this title, §Executive
agency§ means an Executive department, a Government corporation, and an
independent establishment."

2For example, even small transactions
that take place in great volume could expose the agency to a large
overall risk, even though each particular transaction does not.

3Further information on the topics
discussed in this Guide may be obtained by contacting the lawyers whose
names appear in Appendix B.

4The term "electronic process" is
intended to encompass all systems in which records may be created or
stored in electronic form as part of the agency§s overall electronic
process. These systems may or may not fall within the strict
definition of an "electronic recordkeeping system," as defined by the
National Archives and Records Administration. See 36 C.F.R. §§ 1234.2,
1234.22 (1999). Adherence to laws governing federal records is one of
the legal considerations involved when agencies convert to electronic
systems.

5By the same token, we do not mean to
imply that all existing paper systems are well designed (or indeed even
capable of being designed) to eliminate such risks, or that
well-designed paper systems are always properly implemented. That this
Guide does not elaborate at length on problems with some paper
transaction systems is due, in short, to its focus on electronic
systems rather than any belief that paper systems are always adequate
to satisfy agency needs or legal requirements.

6As electronic mail ("e-mail") becomes
a more common means of official communication and deliberation
concerning agency actions, an agency§s e-mail records will become a
more significant repository of significant information reflecting
agency deliberations, actions and decisions. Where an agency elects to
preserve e-mail records electronically, the agency should design its
electronic processes properly from the outset, to ensure that its
e-mail system has appropriate mechanisms for capturing and storing
those e-mail messages that ought to be a part of the official record.

7Equally important is the need for any
system -- paper or electronic -- to identify and authenticate the
government employees who acted on or approved the claim or transaction,
and to record all pertinent information about their actions.

8Paper systems, of course, have their
own retention and access control problems. Paper can be destroyed by
age or by fire, or the warehouse in which it is kept can be made
inaccessible. Moreover, paper records are expensive to store and can
be difficult to locate. Employees must remember to secure sensitive
records under lock and key to prevent unauthorized access. Federal
agencies are generally familiar with these concerns. Electronic record
systems properly implemented may provide many advantages over their
paper counterparts.

944 U.S.C. §§ 2101-2118, 2901-2910, 3101-3107, and 3301-3324

10See Jeff Rothenberg, Ensuring the Longevity of Digital Documents, Scientific American, January 1995, at 42-47.

11The term "writing" is defined by statute as any "reproduction of visual symbols." § 1 U.S.C. § 1 (1994).

12Technology can blur the line
between oral and written communications. For example, speech
recognition technology automatically (without a human intermediary)
converts oral statements (e.g., by phone) into text. Whether such a
transmission is oral or written is a perplexing issue, and might depend
upon the particular situation and statute involved.

13"Contracts" are simply legally
binding agreements between two or more parties. Government contracts
can involve activities as diverse as government procurement, making and
guaranteeing loans to students or farmers, and making payments to
providers under Medicare and other government contracted-for benefit
programs.

14Although the federal government§s
transactions generally are governed by federal law, in some instances,
state laws supply the applicable rule.

15The Uniform Commercial Code (UCC)
also incorporates a Statute of Frauds in several of its articles.
Whether and to what extent a state Statute of Frauds or the UCC applies
to federal government contracts can be a complex question that depends
upon the circumstances. See United States v. Kimbell Foods, Inc., 440
U.S. 715, 728-29 (1979); United States v. Kelley, 890 F.2d 220 (10th
Cir. 1989) (applying UCC § 9-504 to contract with SBA guaranty
contract). The UCC requires a "writing" -- defined as any "intentional
reduction to tangible form," UCC § 1-201(46) -- that is "signed." See
UCC §§ 2-201, 8-319, 9-203(1)(a). A "signature" includes "any symbol
executed or adopted by a party with present intention to authenticate a
writing." UCC § 1-201(39).

16See generally R.J. Robertson,
Jr., Electronic Commerce on the Internet and the Statute of Frauds, 49
S.C. L. Rev. 787, 808 (1998) ("[T]here is a substantial likelihood that
courts may balk at finding that electronic messages satisfy the Statute
of Frauds").

17National Institute of Standards
and Technology B Use of Electronic Data Interchange Technology to
Create Valid Obligations, 71 Comp. Gen. 109 (1991). Although opinions
of the Comptroller General are not binding upon the executive branch,
see Bowsher v. Synar, 478 U.S. 714, 727-32 (1986), or on the federal
courts, they may offer helpful or persuasive authority. That opinion
would not preclude a party in an action from asserting that an
electronically formed contract was unenforceable. Thus, there exists a
risk that courts would decline to enforce electronic federal contracts
that have not been reduced to a traditional writing. That risk may be
significantly reduced by procedures that ensure that electronically
recorded transactions fulfill the purposes for which the law requires a
"writing."

18Tape recordings of oral
agreements have failed to meet the requirements of the Statute of
Frauds. Sonders v. Roosevelt, 476 N.Y.S.2d 331, 331-32 (App. Div. 1984)
(not a writing), aff§d mem., 476 N.E.2d 996 (N.Y. 1985); Swink &
Co. v. Carroll McEntee & McGinley, 584 S.W. 2d 393, 399 (Ark. 1979)
(not "signed"). See also Parma Tile Mosaic & Marble Co. v. Estate
of Short, 663 N.E.2d 633, 635 (N.Y. 1996) (holding that sender§s name
at the top of a faxed page was not a "signature" for purposes of the
Statute of Frauds where the sender§s fax machine was programmed to
imprint the name automatically).

19By contrast, courts sometimes
refuse to find oral communications binding, and it will be important
for agencies to ensure that their electronic processes are not regarded
as so haphazard or informal that they are considered the equivalent of
an oral communication. For example, courts have construed 31 U.S.C. §
1501 (or its predecessor provision, 31 U.S.C. § 200(a)(1) (1976)) to
hold oral contracts unenforceable because they are not "in writing."
So, too, could we expect the courts to reject electronic documents that
are more conversation-like than formal. In In re Kaspar, 125 F.3d
1358, 1359 (10th Cir. 1997), the court refused to hold that one party§s
oral statement was a written one, even though the other party entered
the information into an electronic document. Similarly, oral contracts
alleged to have been entered into by the federal government have been
denied enforcement on state law Statute of Frauds grounds. See, e.g.,
American Int§l Enters., Inc. v. FDIC, 3 F.3d 1263, 1269 (9th Cir. 1993)
(applying California Statute of Frauds; citing other federal courts
applying Statutes of Frauds from Minnesota, Nevada, and Tennessee).

20Experience teaches that
signatures are important to connect the individual to the act, and in
some cases we have failed to prove our case where we have not had the
defendant§s signature. For example, in United States v. Larm, 824 F.2d
780 (9th Cir. 1987), an allergist was acquitted of Medicare fraud
concerning claim forms he did not personally sign. In United States v.
Brown, 763 F.2d 984 (8th Cir.), cert. denied, 474 U.S. 905 (1985), the
conviction of a pharmacist was reversed on some counts because the
government could not link him, through a signature or initials, to
claims submitted to the government for brand-name drugs when generic
drugs were dispensed.

21Thus, for example, courts
normally prohibit individuals from avoiding their obligations by
contending that they did not read what they signed, or that the
contents were not explained, or that they did not understand them. In
re Cajun Elec. Power Co., 791 F.2d 353, 359 (5th Cir. 1986); see Jones
v. New York Life & Annuity Corp., 985 F.2d 503, 508 (10th Cir.
1993); Hill v. A.O. Smith Corp., 801 F.2d 217, 221 (6th Cir. 1986);
O§Neel v. National Ass§n of Sec. Dealers, Inc., 667 F.2d 804, 806 (9th
Cir. 1982).

22A "digital signature" is
generated by using an algorithm that ensures the identity of the
signatory and the integrity of the data can be verified. Signature
generation makes use of a value (commonly referred to as the "private
key") to generate a digital signature. Signature verification makes
use of another value (commonly referred to as the "public key") which
corresponds to, but is not the same as, the private key. Each user
possesses a private and public key pair, and the private key is not
deducible from the public key. Public keys are permitted to be known
widely, and assumed to be known to the public in general. Private keys
should not be shared. Anyone can verify the "digital signature" of a
user by employing that user§s public key. However, signature
generation can only be performed by the possessor of the user§s private
key. SeeNational Inst. of Standards & Tech., Federal Information
Processing Standards Publication 186- 1, Digital Signature Standard, at
1 (1998).

23By "biometric," we mean
attributes arising from a person§s physical characteristics or actions
that are unique to that person. These include codes derived from
electronic analysis of fingerprints and retinal scans, among others.

24Exclusive reliance upon one
biometric identification without providing any alternatives, however,
may run afoul of the Rehabilitation Act, 29 U.S.C. § 794d (West Supp.
1999), which may require agencies to provide alternative means of
identification for those who do not possess the requisite physical
characteristics (e.g., persons with prosthetic hands cannot provide
fingerprints).

25National Inst. of Standards &
Tech., Federal Information Processing Standards Publication 190,
Guideline for the Use of Advanced Authentication Technology
Alternatives, at 39-40 (1994).

26On the other hand, paper
signatures are susceptible to forgery. Forgeries of traditional
signatures can often be detected by handwriting analysis and forensic
examination. Proving that someone else used an electronic signature
can be more difficult because the electronic signature has no
attributes that associate it with the individual unless a biometric
method is used. However, it may be difficult for an individual to
explain how and why someone else was able to obtain access to an
electronic signature that had been assigned to her with instructions to
safeguard it and keep it private.

27As with other technologies,
signatures in a biometric signature system that was not properly
implemented might be subject to challenge. If the method of recording
and preserving the signature is flawed, the signatures may not be
considered reliable and may not be legally adequate to establish
binding obligations.

28For a more detailed discussion of
various types of electronic signatures, and the advantages and
disadvantages of each, see the OMB GPEA Guidance, "Implementation of
the Government Paperwork Elimination Act," May 2, 2000, Part II,
Section 7, 65 FR at 25518.

29Other federal bills have been
introduced in Congress that may affect agencies§ use of electronic
processes. Agencies should monitor the enactment of any such bill into
law.

30GPEA§ 1703(a) requires the
Director of the Office of Management and Budget (OMB), in consultation
with others, to develop procedures for the use and acceptance of
electronic signatures by Executive agencies.

31The GPEA Section 1707 safe harbor
applies only to those records submitted, used, or maintained in accord
with the OMB procedures required by the GPEA. That raises the question
whether Section 1707 applies if an agency did not follow the
OMB-mandated procedures in implementing its electronic signatures.
Also, the GPEA defines "electronic signature" as: "a method of signing
an electronic message that (A) identifies and authenticates a
particular person as the source of the electronic message; and (B)
indicates such person§s approval of the information contained in the
electronic message." GPEA § 1710(1). A court might decline to give
effect to electronic signatures that do not technically meet this
definition (e.g., those that do not identify a specific person or that
do not indicate that person§s approval).

32For example, Illinois has enacted
the Electronic Commerce Security Act, 5 Ill. Comp. Stat. 175/10-120(b)
(West 1999), effective July 1, 1999, which provides that, subject to
certain exceptions, "[w]here a rule of law requires information to be
'written§ or 'in writing§ . . . an electronic record satisfies that
rule of law." Id. at 5-115(a). The statute does not apply to specified
documents such as wills, trusts, negotiable instruments, and
instruments of title.

33The Illinois statute (see
preceding note), for example, provides that, if the parties use certain
types of security procedures, then it "shall be rebuttably presumed
that the electronic record has not been altered." Id. at 10-120(a).

34Many may have the perception that
electronic data are easily fabricated or forged. People recognize that
digital data can be copied perfectly, and then edited without
difficulty. (Thanks to popular computer photo-processing programs,
there is even a growing awareness that digital photographs can be
created or modified with much greater ease than traditional
photographs.) Agency security procedures that prevent such
modification should be robust and well documented.

35For example, Rule 803(6) of the
Federal Rules of Evidence (FRE), generally allows records of regularly
conducted activity (commonly called "business records") to be admitted
into evidence. The government frequently relies upon that rule to
introduce agency records into evidence. But the rule also provides
that such record will not be admissible if "the source of information
or the method or circumstances of preparation indicate lack of
trustworthiness." Similar provisions are contained in, for example,
FRE 803(8) (pertaining to admissibility of public records and reports)
and 804(b)(3) (statements against interest).

36See Jay E. Grenig, Electronic
Discovery: Making Your Opponent§s Computer a Vital Part of Your Legal
Team, 21 Am. J. Trial Advoc. 293 (1997).

37See also Electronic Records Work
Group <http://www.nara.gov/records/grs/20/index.html> (viewed
Oct. 30, 2000) (collecting currently applicable guidance provided by
the National Archives and Records Administration governing federal
agency submission of records schedules covering the retention of
electronic versions of e-mail and word processing documents).

38For further information about
agency obligations and liabilities under Section 508, visit the
Department of Justice§s Section 508 home page. Section 508 Home Page
(viewed Jan. 20, 2000)
<http://www.usdoj.gov/crt/508/508home.html>. The General
Services Administration also maintains an inter-agency web site that
contains current information about Section 5008 at
<http://www.section508.gov>

39For example, even small
transactions that take place in great volume could expose the agency to
a large overall risk, even though each particular transaction does not.

40At the same time, an agency might
wish to consider establishing a system to cull from its files genuinely
extraneous and redundant information in order to prevent unnecessary
bloat in agency files. Unneeded duplicates of documents and e-mail
messages that the agency is not obligated to retain under its record
management systems can be difficult to manage and make retrieval of
relevant documents more difficult. A sensible record retention and
destruction policy should provide for routine purging of unnecessary
information in an orderly and regular manner. A sensible policy can
also ensure that information which may be useful for ongoing contract
administration or possible dispute resolution is not inadvertently
deleted.

41In one recent case where at least
43,000 electronic messages were "lost", there was a misunderstanding
between the agency, which believed that backups were being made both on
a daily basis and a periodic system-wide basis, and the agency§s
contractor, which had been doing neither. A contributing factor to the
loss of the messages may have been that the audit log features had been
turned off to improve system performance.

42See, e.g., 36 C.F.R. § 1234.2
(1999) (National Archives and Records Administration definition of
"electronic recordkeeping system"); see also 36 C.F.R. § 1234.22;
1234.24(b) (1999) (providing functional requirements for electronic
recordkeeping systems, including e- mail).

43To the extent that an electronic
transmission includes data that cannot practicably be printed in paper
form (e.g., an audio file attached to an e-mail), the agency should
have some means of storing and being able to retrieve the image or
sound of such items.

44For example, even small
transactions that take place in great volume could expose the agency to
a large overall risk, even though each particular transaction does not.

# # #

Attorney General Reno's Cover Memorandum

More information on: Electronic Commerce

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Isaac Bowman

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