Financial Audit: Independent Counsel Expenditures for the Six Months
Ended March 31, 1998 (Letter Report, 09/30/1998, GAO/AIMD-98-285).
The report presents the results of GAO's audit of independent counsel
expenditures for the six months ended March 31, 1998. 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, Donald
C. Smaltz, Kenneth W. Starr, and Curtis E. von Kann were reliable in all
material respects. GAO found no material weaknesses in internal
controls. Further, GAO found no reportable instances of noncompliance
with laws and regulations.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-98-285
TITLE: Financial Audit: Independent Counsel Expenditures for the
Six Months Ended March 31, 1998
DATE: 09/30/1998
SUBJECT: Independent counsels
Financial statement audits
Administrative costs
Internal controls
Reporting requirements
Financial records
Lawyers
Accounting procedures
Audit oversight
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GAO/AIMD-98-285
Cover
================================================================ COVER
Report to Congressional Committees
September 1998
FINANCIAL AUDIT - INDEPENDENT
COUNSEL EXPENDITURES FOR THE SIX
MONTHS ENDED MARCH 31, 1998
GAO/AIMD-98-285
Independent Counsels
(911848)
Abbreviations
=============================================================== ABBREV
AOUSC - Administrative Office of the U.S. Courts
FBI - Federal Bureau of Investigation
IRS - Internal Revenue Service
OIC - Office of Independent Counsel
Letter
=============================================================== LETTER
B-279972
September 30, 1998
Congressional Committees
Enclosed is our opinion on the statements of expenditures of six
offices of independent counsel for the 6 months ended March 31, 1998.
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
Letter
=============================================================== LETTER
B-279972
Congressional Committees
This report presents the results of our audits of expenditures\1
reported by six offices of independent counsel (OIC) for the 6 months
ended March 31, 1998. 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 VI, for the offices of independent counsel Arlin M.
Adams/Larry D. Thompson, David M. Barrett, Carol Elder Bruce,
Donald C. Smaltz, Kenneth W. Starr, and Curtis E. von Kann
(formerly Independent Counsel Sealed-1996), respectively, 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 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.
--------------------
\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 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, other significant costs incurred in
support of the work of independent counsels 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, these unaudited
costs are identified and discussed in the notes to the statements
presented in the appendixes or elsewhere in this report.
Also, these statements and related notes do not include certain
expenditures related to the investigation by former independent
counsel Lawrence E. Walsh. Mr. Walsh's office officially closed in
March 1994 and, accordingly, no longer prepares financial statements.
However, a special division of the U.S. Court of Appeals for the
D.C. Circuit awarded reimbursements of $8,400 for attorneys' fees
and expenses to an individual who had been investigated by Mr. Walsh
but not indicted. The reimbursement was made in December 1997 from
the permanent fund established for the payment of judgments.
Further, although he was not required to do so, OIC-Smaltz included
information in the notes to his statement regarding litigation and
referral actions he initiated. This information did not include
expenditures, and we did not audit it.
OPINION ON STATEMENTS OF
EXPENDITURES
------------------------------------------------------------ Letter :2
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, Donald C. Smaltz, Kenneth W.
Starr, and Curtis E. von Kann 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 March 31, 1998. The statements of
expenditures and related notes regarding the basis of accounting and
additional pertinent information are in appendixes I through VI.
CONSIDERATION OF INTERNAL
CONTROL STRUCTURE
------------------------------------------------------------ Letter :3
We gained an understanding of internal controls whose objectives are
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.
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
in the internal control structure and its operations for the 6-month
period ended March 31, 1998. 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.
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 in conformity with the
basis of accounting described in the accompanying notes,
-- 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 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
-- 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 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; the Department of
Justice, including the FBI; the Internal Revenue Service; the
Department of the Treasury; and the Office of Inspector General for
the Department of Agriculture. In addition, we obtained, but did not
audit information on amounts received by the federal government as a
result of court actions initiated by an OIC.
We discussed the results of our work with representatives of the six
offices of independent counsel and representatives of AOUSC and
Justice 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
September 11, 1998
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 John Glenn
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 Bob Livingston
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 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.)
(See figure in printed edition.)Appendix II
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL BARRETT
=========================================================== Appendix I
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL BRUCE
========================================================= Appendix III
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL SMALTZ
========================================================== Appendix IV
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL STARR
=========================================================== Appendix V
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
STATEMENT OF EXPENDITURES FOR
INDEPENDENT COUNSEL VON KANN
========================================================== Appendix VI
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
*** End of document. ***