Financial Audit: Independent Counsel Expenditures for the Six Months
Ended March 31, 1999 (Letter Report, 09/30/1999, GAO/AIMD-99-292).

Pursuant to a legislative requirement, GAO audited the expenditures of
eight independent counsels for the 6 months ended March 31, 1999.

GAO noted that: (1) 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.
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 March 31, 1999, on the basis of accounting described in each
office's statement; (2) for the controls that GAO tested, it found no
material weaknesses in the internal control structure and its operations
for the 6-month period ended March 31, 1999; and (3) GAO's 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.

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

 REPORTNUM:  AIMD-99-292
     TITLE:  Financial Audit: Independent Counsel Expenditures for the
	     Six Months Ended March 31, 1999
      DATE:  09/30/1999
   SUBJECT:  Internal controls
	     Reporting requirements
	     Independent counsels
	     Financial records
	     Administrative costs
	     Financial statement audits

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Report to Congressional Committees

September 1999

FINANCIAL AUDIT

Independent Counsel Expenditures for the Six Months Ended March 31,
1999
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GAO/AIMD-99-292

Letter                                                                     3

Opinion Letter                                                             5

Appendixes

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

                                                                         32

AOUSC   Administrative Office of the U.S. Courts

FBI     Federal Bureau of Investigation

IRS     Internal Revenue Service

OIC     Office of Independent Counsel

B-283592

September 30, 1999

Congressional Committees

Enclosed is our opinion on the statements of expenditures of eight offices
of independent counsel for the 6 months ended March 31, 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.

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*****************

David L. Clark
Director, Audit Oversight and Liaison

                                                 Accounting and Information
                                                        Management Division

B-283592

Congressional Committees

This report presents the results of our audits of expenditures/Footnote1/
reported by eight offices of independent counsel (OIC) for the 6 months
ended 
March 31, 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.

Background

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 determined 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 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, 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 to this report.

Opinion on Statements of Expenditures

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 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 
March 31, 1999, on the basis of accounting described in note 1 to each
office's statement.

Consideration of Internal Control Structure

We gained an understanding of internal controls whose objectives are to 

o safeguard assets against loss from unauthorized acquisition, use, or
  disposition;

o 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 

o 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, 1999. A material weakness is a 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. 

Compliance With Laws and Regulations

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

In order to carry out their financial operations and to ensure
accountability, independent counsels are responsible for

o preparing statements of expenditures in conformity with the basis of
  accounting described in the accompanying notes, 

o establishing and maintaining an internal control structure to provide
  reasonable assurance that the internal control objectives previously
  mentioned are met, and

o 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

o examined, on a test basis, evidence supporting the amounts and
  disclosures in the statement of expenditures and notes thereto, except
  items indicated as unaudited;

o assessed the accounting principles used by management;

o evaluated the overall presentation of the statement of expenditures;

o 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;

o tested relevant internal controls over safeguarding assets, compliance,
  and financial reporting; and

o 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 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. 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. 

We discussed the results of our work with representatives of the eight
offices of independent counsel 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

September 9, 1999

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

--------------------------------------
/Footnote1/-^The term expenditures as used in this report generally means
  cash disbursed.

STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL ADAMS/THOMPSON
================================================================

 

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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL BARRETT
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL BRUCE
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL LANCASTER
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL PEARSON
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL SMALTZ
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL STARR
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STATEMENT OF EXPENDITURES FOR INDEPENDENT COUNSEL VON KANN
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(911939)

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