Financial Audit: Independent Counsel Expenditures for the Six Months
Ended September 30, 1999 (Letter Report, 03/31/2000, GAO/AIMD-00-120).

This report presents GAO's audit of expenditures reported by eight
offices of independent counsel for the six months ended September 30,
1999. GAO found that the statements of expenditures for the offices of
independent counsel Arlin M. Adams/Larry D. Thompson, David M. Barrett,
Carol Elder Bruce, Ralph I. Lancaster, Daniel S. Pearson, Donald C.
Smalz, Kenneth W. Starr, and Curtis E. von Kann were fairly presented in
all material respects. GAO's consideration of internal controls found no
material weaknesses. Furthermore, GAO found no reportable instances of
noncompliance with laws and regulations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-00-120
     TITLE:  Financial Audit: Independent Counsel Expenditures for the
	     Six Months Ended September 30, 1999
      DATE:  03/31/2000
   SUBJECT:  Financial statement audits
	     Internal controls
	     Cash basis accounting
	     Independent counsels
	     Financial records
	     Reporting requirements
	     Auditing standards

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GAO/AIMD-00-120

Appendix I: Statement of Expenditures for Independent
Counsel Adams/Thompson

12

Appendix II: Statement of Expenditures for Independent
Counsel Barrett

15

Appendix III: Statement of Expenditures for Independent
Counsel Bruce

18

Appendix IV: Statement of Expenditures for Independent
Counsel Lancaster

21

Appendix V: Statement of Expenditures for Independent
Counsel Pearson

24

Appendix VI: Statement of Expenditures for Independent
Counsel Smaltz

26

Appendix VII: Statement of Expenditures for Independent
Counsel Starr

29

Appendix VIII: Statement of Expenditures for Independent
Counsel von Kann

33

AOUSC Administrative Office of the U.S. Courts

FBI Federal Bureau of Investigation

IRS Internal Revenue Service

OIC Office of Independent Counsel

Accounting and Information
Management Division

B-284845

March 31, 2000

Congressional Committees

Enclosed is our opinion on the statements of expenditures of eight offices
of independent counsel for the 6 months ended September 30, 1999. This audit
was required by 28 U.S.C. 596(c)(2) (1994) and Public Law 100-202.

We are sending copies of this report to the Attorney General, the Director
of the Administrative Office of the U.S. Courts, the independent counsels
included in our audit, and other interested parties. Copies will be made
available to others upon request.

David L. Clark
Director, Audit Oversight and Liaison

Accounting and Information
Management Division

B-284845

Congressional Committees

This report presents the results of our audits of expenditures1 reported by
eight offices of independent counsel (OIC) for the 6 months ended September
30, 1999. The Department of Justice and the independent counsels are
required under 28 U.S.C. 594(d)(2),(h), and 596(c)(1) (1994) to report on
expenditures from a permanent, indefinite appropriation established within
Justice to fund independent counsel activities. To satisfy the requirements
of 28 U.S.C. 596(c)(2) and Public Law 100-202, we audit the statements of
expenditures prepared by the independent counsels.

We found that the statements of expenditures presented in appendixes I
through VIII, for the offices of independent counsel Arlin M. Adams/
Larry D. Thompson, David M. Barrett, Carol Elder Bruce, Ralph I. Lancaster,
Daniel S. Pearson, Donald C. Smaltz, Kenneth W. Starr, and Curtis E. von
Kann, respectively, were fairly presented in all material respects. Our
consideration of internal controls, which was limited for the purpose of
determining our procedures for auditing the statements of expenditures,
disclosed no material weaknesses. Further, our audits included limited tests
of compliance with laws and regulations that disclosed no reportable
instances of noncompliance with the laws and regulations we tested.

The following sections provide background information, outline each
conclusion in more detail, and discuss the scope of our audits.

The Ethics in Government Act of 1978 amended title 28 of the United States
Code to authorize the judicial appointment of independent counsels when the
Attorney General determines that reasonable grounds exist to warrant further
investigation of high-ranking government officials for certain alleged
crimes. The independent counsel law (28 U.S.C. 591-599 (1994)) was intended
to preserve and promote the accountability and integrity of public officials
and of the institutions of the federal government. The independent counsel
law expired on June 30, 1999. Provisions of the law allow the independent
counsels serving at the expiration date to continue investigating pending
matters until they determine that the investigations of such matters have
been completed.

The independent counsel law directs the Department of Justice to pay all
costs relating to the establishment and operation of independent counsel
offices and designates specific responsibilities to the Administrative
Office of the U.S. Courts (AOUSC) for independent counsels' administrative
support. Justice periodically disburses lump-sum payments to AOUSC for this
purpose.

In 1987, Public Law 100-202 established a permanent, indefinite
appropriation within Justice to fund expenditures by independent counsels.
Independent counsels are required to report their expenditures from the
appropriation for each 6-month period in which they have operations. We are
required to audit expenditures from the permanent, indefinite appropriation
and to report our findings to appropriate congressional committees.

During any 6-month period, there may be other significant costs incurred in
support of the work of independent counsels, which are paid from
appropriations other than the permanent, indefinite appropriation
established to fund independent counsel activities. These costs arise when
an independent counsel uses detailees from other federal agencies, such as
the Federal Bureau of Investigation (FBI). Independent counsels are not
required to and do not reflect such costs in their statements of
expenditures. However, to the extent practicable these unaudited costs are
identified and discussed in the notes to the statements presented in the
appendixes to this report.

On September 9, 1999, the Attorney General appointed John C. Danforth as a
Special Counsel to investigate the government conduct relative to certain
events in Waco, Texas. The Department of Justice determined that the
appropriation established by Public Law 100-202 to fund expenditures by
independent counsels appointed pursuant to 28 U.S.C. 591-599, also is
available to fund the expenditures of the Special Counsel. Public Law
100-202 requires us to audit all expenditures from that appropriation.
Mr. Danforth did not have any expenditures from that appropriation during
this period. However, the Department of Justice and U.S. Postal Service
incurred costs of approximately $5,698 and $10,540 respectively in
assistance for employees provided to Mr. Danforth. These costs were financed
through funds appropriated to these agencies. These agencies are not
reimbursed for these costs, and we did not audit the amounts.

Independent counsels prepare their statements of expenditures principally on
a cash basis of accounting, which is a comprehensive basis of accounting
other than generally accepted accounting principles. The bases of accounting
are described in note 1 of each counsel's statement.

In our opinion, the statements of expenditures including the accompanying
notes for the offices of independent counsel Arlin M. Adams/Larry D.
Thompson, David M. Barrett, Carol Elder Bruce, Ralph I. Lancaster,
Daniel S. Pearson, Donald C. Smaltz, Kenneth W. Starr, and Curtis E.
von Kann present fairly, in all material respects, the expenditures of these
counsels for the 6 months ended September 30, 1999, on the basis of
accounting described in note 1 to each office's statement.

We gained an understanding of internal controls whose objectives are to
(1) safeguard assets against loss from unauthorized acquisition, use, or
disposition; (2) assure the execution of transactions in accordance with
laws governing the use of budget authority and with other laws and
regulations that have a direct and material effect on the statements of
expenditures; and (3) properly record, process, and summarize transactions
to permit the preparation of reliable statements of expenditures and to
maintain accountability for assets.

The purpose of our consideration of internal controls was to determine our
procedures for auditing the statements of expenditures and, accordingly, we
do not express an opinion on internal controls. However, for the controls we
tested, we found no material weaknesses or other reportable conditions in
the internal control structure and its operations for the 6-month period
ended September 30, 1999. A material weakness is a reportable condition in
which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that
misstatements caused by error or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their duties. Our internal control work would not necessarily
disclose all material weaknesses.

Our tests for compliance with selected provisions of laws and regulations
disclosed no instances of noncompliance that would be reportable under
generally accepted government auditing standards. However, the objective of
our audit was not to provide an opinion on overall compliance with laws and
regulations. Accordingly, we do not express such an opinion.

In order to carry out their financial operations and to ensure
accountability, independent counsels are responsible for (1) preparing
statements of expenditures in conformity with the basis of accounting
described in the accompanying notes, (2) establishing and maintaining an
internal control structure to provide reasonable assurance that the internal
control objectives previously mentioned are met, and (3) complying with
applicable laws and regulations.

We are responsible for obtaining reasonable assurance about whether the
statements of expenditures reported by independent counsels are presented
fairly, in all material respects, in conformity with the basis of accounting
described in the accompanying notes. Also, we are responsible for obtaining
a sufficient understanding of internal controls to plan the audits and for
testing compliance with selected provisions of laws and regulations.

In order to fulfill these responsibilities, for each independent counsel, we
(1) examined, on a test basis, evidence supporting the amounts and
disclosures in the statement of expenditures and notes thereto, except items
indicated as unaudited; (2) assessed the accounting principles used by
management; (3) evaluated the overall presentation of the statement of
expenditures; (4) obtained an understanding of the internal control
structure related to safeguarding assets, compliance with laws and
regulations (including execution of transactions in accordance with budget
authority), and financial reporting; (5) tested relevant internal controls
over safeguarding assets, compliance, and financial reporting; and
(6) tested compliance with certain aspects of selected provisions of the
independent counsel law (28 U.S.C. 591-599 (1994)), 5 U.S.C. Chapter 55, and
implementing regulations relating to pay administration.

We limited our internal control testing to those controls necessary to
achieve the objectives outlined in our statement on internal controls.
Because of inherent limitations in any internal control structure, losses,
noncompliance, or misstatements may nevertheless occur and not be detected.
We also caution that projecting our evaluation to future periods is subject
to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with controls may deteriorate.

We did not test compliance with all laws and regulations applicable to the
offices of independent counsel. We limited our tests of compliance to those
which we deemed applicable to the statements of expenditures. We caution
that noncompliance may occur and not be detected by these tests and that
such testing may not be sufficient for other purposes.

We obtained, but did not audit, information on costs that were not paid from
the permanent, indefinite appropriation established to fund independent
counsel activities as well as information on receipts. We obtained
information on these costs from the independent counsel offices; the
Department of Justice, including the FBI; the Department of the Treasury,
including the Internal Revenue Service; the U.S. Postal Service; and the
Office of Inspector General for the Department of Agriculture.

We discussed the results of our work with representatives of the eight
offices of independent counsel, the Department of Justice, and AOUSC and
have incorporated their comments where appropriate.

We performed our audits in accordance with generally accepted government
auditing standards.

David L. Clark
Director, Audit Oversight and Liaison

March 10, 2000

List of Committees

The Honorable Ted Stevens
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

The Honorable Fred Thompson
Chairman
The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

The Honorable Orrin G. Hatch
Chairman
The Honorable Patrick J. Leahy
Ranking Minority Member
Committee on the Judiciary
United States Senate

The Honorable C. W. Bill Young
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Dan Burton
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives

The Honorable Henry J. Hyde
Chairman
The Honorable John Conyers, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives

Statement of Expenditures for Independent Counsel Adams/Thompson

Statement of Expenditures for Independent Counsel Barrett

Statement of Expenditures for Independent Counsel Bruce

Statement of Expenditures for Independent Counsel Lancaster

Statement of Expenditures for Independent Counsel Pearson

Statement of Expenditures for Independent Counsel Smaltz

Statement of Expenditures for Independent Counsel Starr

Statement of Expenditures for Independent Counsel von Kann

(911952)
  

1. The term expenditures as used in this report generally means cash
disbursed.
*** End of document. ***