Financial Audit: Independent Counsel Expenditures for the Six Months
Ended September 30, 1995 (Letter Report, 03/29/96, GAO/AIMD-96-67).
GAO audited the statements of expenditures by eight independent counsel
offices--Arlin M. Adams/Larry D. Thompson; David M. Barrett; Joseph E.
diGenova; Robert B. Fiske, Jr.; Daniel S. Pearson; Donald C. Smaltz;
Kenneth W. Starr; and Lawrence E. Walsh--for the six months ended
September 30, 1995. Independent counsels may be appointed when the
Attorney General determines that reasonable grounds exist to warrant
further investigation of high-ranking government officials for alleged
crimes. The Justice Department is responsible for paying all costs
relating to establishment and operation of independent counsel offices.
GAO found the statements to be reliable in all material respects. GAO's
consideration of internal controls disclosed no material weaknesses.
Further, GAO's audit disclosed no reportable noncompliance with the laws
and regulations GAO tested.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-96-67
TITLE: Financial Audit: Independent Counsel Expenditures for the
Six Months Ended September 30, 1995
DATE: 03/29/96
SUBJECT: Financial statement audits
Administrative costs
Internal controls
Reporting requirements
Accounting errors
Financial records
Lawyers
Accounting procedures
Audit oversight
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Cover
================================================================ COVER
Report to Congressional Committees
March 1996
FINANCIAL AUDIT - INDEPENDENT
COUNSEL EXPENDITURES FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1995
GAO/AIMD-96-67
Independent Counsels
(911717)
Abbreviations
=============================================================== ABBREV
AOUSC - Administrative Office of the U.S. Courts
FBI - Federal Bureau of Investigation
Letter
=============================================================== LETTER
B-271128
March 29, 1996
Congressional Committees
Enclosed is our opinion on the statements of expenditures by eight
offices of independent counsel for the 6 months ended September 30,
1995. 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 eight
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
Letter
=============================================================== LETTER
B-271128
Congressional Committees
This report presents the results of our audits of expenditures\1
reported by eight offices of independent counsel for the 6 months
ended September 30, 1995. 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, respectively, for the offices of independent counsel
Arlin M. Adams/Larry D. Thompson, David M. Barrett, Joseph E.
diGenova, Robert B. Fiske, Jr., Daniel S. Pearson, Donald C.
Smaltz, Kenneth W. Starr, and Lawrence E. Walsh were reliable 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 audit included limited tests of compliance
with laws and regulations that disclosed no reportable 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.
--------------------
\1 The term expenditures as used in this report generally means cash
disbursed.
BACKGROUND
------------------------------------------------------------ Letter :1
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)) is intended to preserve and promote the
accountability and integrity of public officials and of the
institutions of the federal government. The Independent Counsel
Reauthorization Act of 1994 further amended title 28 of the United
States Code to establish certain procedural requirements and extend
the law's expiration date to June 30, 1999.
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 United States 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.
In January 1994, Justice determined that the permanent, indefinite
appropriation could also fund the expenditures of Robert B. Fiske,
Jr., who was appointed as a regulatory independent counsel\2 by the
Attorney General in January 1994. Mr. Fiske terminated his
appointment on
October 6, 1994, and Kenneth W. Starr continued the investigation.
Since we are required to audit all expenditures from the permanent,
indefinite appropriation, this report includes the expenditures of
Mr. Fiske's office during the audit period. Also, in March 1994,
Lawrence E. Walsh's independent counsel office closed; however,
certain costs incurred prior to the closing of his office and paid by
AOUSC after Mr. Walsh's operations ceased are included in this
report.
During this period, David M. Barrett and Daniel S. Pearson were
appointed to investigate allegations against two administration
officials. Independent counsel Arlin M. Adams resigned, and Larry
D. Thompson was appointed to continue that investigation.
Accordingly, six offices of independent counsel were active during
this period: Arlin M. Adams/Larry D. Thompson, David M. Barrett,
Joseph E. diGenova, Daniel S. Pearson, Donald C. Smaltz, and
Kenneth W. Starr.
During any 6-month period, independent counsels may also incur other
significant costs that are paid from appropriations other than the
permanent, indefinite appropriation established to fund independent
counsel activities. These costs arise, for example, from the use of
detailees from other federal agencies, such as the Federal Bureau of
Investigation (FBI). Independent counsels are not required to and do
not include such costs in their statements of expenditures. However,
these costs are identified and discussed in the notes to the
statements presented in the appendixes to this report.
--------------------
\2 Regulatory independent counsels are appointed pursuant to 5 U.S.C.
301 (1994); 28 U.S.C. 509, 510, and 543 (1994). See also 28 C.F.R.
Parts 601 and 603 (1994).
OPINION ON STATEMENTS OF
EXPENDITURES
------------------------------------------------------------ Letter :2
The statements of expenditures for the offices of independent counsel
Arlin M. Adams/Larry D. Thompson, David M. Barrett, Joseph E.
diGenova, Robert B. Fiske, Jr., Daniel S. Pearson, Donald C.
Smaltz, Kenneth W. Starr, and Lawrence E. Walsh present fairly, in
all material respects, in conformity with a comprehensive basis of
accounting other than generally accepted accounting principles, as
described in note 1 to each office's statement, the respective
expenditures of each office for the 6 months ended September 30,
1995. The statements of expenditures and related notes regarding the
basis of accounting and additional pertinent information are in
appendixes I through VIII.
CONSIDERATION OF INTERNAL
CONTROL STRUCTURE
------------------------------------------------------------ Letter :3
We gained an understanding of internal controls designed to
safeguard assets against loss from unauthorized acquisition, use,
or disposition;
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
properly record, process, and summarize transactions to permit the
preparation of reliable statements of expenditures and to
maintain accountability for assets.
We do not express an opinion on internal controls because the purpose
of our work was to determine our procedures for auditing the
statements of expenditures, not to express an opinion on internal
controls. However, for the controls we tested, we found no material
weaknesses in the internal control structure and its operations for
the 6-month period ended September 30, 1995. A material weakness is
a condition in which the design or operation of one or more of the
internal control structure elements does not reduce to a relatively
low level the risk that errors or irregularities in amounts that
would be material to the statements of expenditures may occur and not
be detected promptly by employees in the normal course of performing
their duties. Our internal control work would not necessarily
disclose all material weaknesses.
Our prior reports\3 on independent counsel statements of expenditures
discussed a material weakness in internal controls over the reporting
of expenditures. Specifically, these reports identified errors that
were caused by certain independent counsels submitting incorrect
information to AOUSC or by AOUSC incorrectly recording information
submitted by independent counsels. During the period audited, AOUSC
hired a senior staff member with accounting and financial reporting
expertise to review the financial activities and reports of the
offices of independent counsel. In addition, several offices of
independent counsel used a consultant who reviewed and analyzed their
financial transactions and coordinated reporting activities with
AOUSC.
--------------------
\3 Financial audits of expenditures by independent counsels
(GAO/AFMD-93-1, October 9, 1992; GAO/AFMD-93-60, April 21, 1993;
GAO/AIMD-94-76, April 15, 1994; GAO/AIMD-95-85, March 31, 1995;
GAO/AIMD-95-112, March 31, 1995; GAO/AIMD-113, March 31, 1995; and
GAO/AIMD-95-233, September 29, 1995).
COMPLIANCE WITH LAWS AND
REGULATIONS
------------------------------------------------------------ Letter :4
Our audit 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.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :5
In order to carry out their financial operations and to ensure
accountability, independent counsels are responsible for
preparing statements of expenditures,
establishing and maintaining an internal control structure to
provide reasonable assurance that the internal control
objectives previously mentioned are met, and
complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether
the statements of expenditures reported by independent counsels are
reliable (free of material misstatement and presented fairly in
accordance 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 audit, for testing
compliance with selected provisions of laws and regulations, and for
performing limited procedures with respect to certain other
information appearing in the statements of expenditures.
In order to fulfill these responsibilities, for each independent
counsel, we
examined, on a test basis, evidence supporting the amounts and
disclosures in the statement of expenditures and notes thereto,
except items indicated as unaudited;
assessed the accounting principles used and significant estimates
made by management;
evaluated the overall presentation of the statement of
expenditures;
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;
tested relevant internal controls over safeguarding assets,
compliance, and financial reporting; and
tested compliance with certain aspects of selected provisions of
the independent counsel provisions of 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 obtained, but did not audit, information on costs that were not
paid from the permanent, indefinite appropriation established to fund
independent counsel activities. We obtained information on these
costs from the independent counsel offices; Justice, including the
FBI; the Internal Revenue Service; the Office of Inspector General of
the Department of Housing and Urban Development; the Office of
Inspector General for the Department of Agriculture; the Office of
Investigations of the U.S. Customs Service; and the Postal
Inspection Service.
We discussed the results of our work with representatives of the
eight offices of independent counsel and representatives of AOUSC and
Justice, and 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 8, 1996
Committees
The Honorable Mark O. Hatfield
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate
The Honorable Ted Stevens
Chairman
The Honorable John Glenn
Ranking Minority Member
Committee on Governmental Affairs
United States Senate
The Honorable Orrin G. Hatch
Chairman
The Honorable Joseph R. Biden
Ranking Minority Member
Committee on the Judiciary
United States Senate
The Honorable Robert L. Livingston
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives
The Honorable William F. Clinger
Chairman
The Honorable Cardiss Collins
Ranking Minority Member
Committee on Government Reform and Oversight
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
=========================================================== Appendix I
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL BARRETT
========================================================== Appendix II
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL DIGENOVA
========================================================= Appendix III
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL FISKE
========================================================== Appendix IV
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL PEARSON
=========================================================== Appendix V
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL SMALTZ
========================================================== Appendix VI
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL STARR
========================================================= Appendix VII
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL WALSH
======================================================== Appendix VIII
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
*** End of document. ***