Financial Audit: Independent Counsel Expenditures for the Six
Months Ended March 31, 2003 (30-SEP-03, GAO-03-1098).
Pursuant to a legislative requirement, GAO audited the
expenditures of two offices of independent counsel for 6 months
ended March 31, 2003.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-1098
ACCNO: A08538
TITLE: Financial Audit: Independent Counsel Expenditures for the
Six Months Ended March 31, 2003
DATE: 09/30/2003
SUBJECT: Financial statement audits
Internal controls
Reporting requirements
Administrative costs
Financial records
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GAO-03-1098
Report to Congressional Committees
September 2003
FINANCIAL AUDIT
Independent Counsel Expenditures for the Six Months Ended March 31, 2003
Contents
Abbreviations
September 30, 2003Letter
Congressional Committees
Enclosed is our report on the statements of expenditures of two offices of
independent counsel for the 6 months ended March 31, 2003. 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 of this report
will be made available to others upon request. This report will also be
available at no charge on GAO's Web site at www.gao.gov.
If you or your staffs have any questions concerning this report, please
contact me at (202) 512-6906 or Hodge Herry, Assistant Director, at (202)
512-9469. You can also reach us by E-mail at [email protected] or
[email protected]. Key contributors to this report were Carol Keightley,
Kwabena Ansong, and Heather Dunahoo.
McCoy Williams Director Financial Management and Assurance
Congressional CommitteesAuditor's Report
This report presents the results of our audits of expenditures1 reported
by two offices of independent counsel for the 6 months ended March 31,
2003. The Department of Justice and the independent counsels are required
under 28 U.S.C. 594 (d)(2), (h) and 596 (c)(1) (2000) to report on
expenditures from a permanent, indefinite appropriation established within
the Department of Justice to fund independent counsel activities. We are
required under 28 U.S.C. 596 (c)(2) to audit the statements of
expenditures prepared by the independent counsels.
In our audits covering the 6 months ended March 31, 2003, we found
o the statements of expenditures presented in appendixes I and II, for the
offices of independent counsel (OIC) David M. Barrett and Julie F. Thomas,
respectively, are presented fairly, in all material respects, in
conformity with the basis of accounting described in note 1 of each
counsel's statement, which is principally the cash basis, a comprehensive
basis of accounting other than U.S. generally accepted accounting
principles;
o no material weaknesses in internal control over financial reporting
(including safeguarding assets) and compliance with laws and regulations;
and
o no reportable noncompliance with 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 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 (2000)) 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 from the permanent, indefinite appropriation established to fund
independent counsel activities. The independent counsel law also
designates specific responsibilities to the Administrative Office of the
U.S. Courts (AOUSC) for independent counsels' administrative support. The
Department of Justice periodically disburses lump-sum payments to AOUSC
for this purpose.
During any 6-month reporting period, there may be other significant costs
incurred in support of the work of the counsels. These costs are paid from
appropriations other than the permanent, indefinite appropriation
established to fund independent counsel activities. These costs arise when
a counsel uses detailees from other federal agencies, such as the Federal
Bureau of Investigation (FBI). Independent counsels are not required to
reflect such costs in their statements of expenditures nor do they do so.
For the 6 months ended March 31, 2003, there were no costs reported by
other agencies in support of independent counsel activities.
Also, these statements and related notes do not include certain
expenditures related to the investigation by former independent counsel
Daniel M. Pearson. Mr. Pearson's office officially closed in April 2002,
and accordingly, no longer prepares financial statements. However, OIC
Pearson had $2,585 in expenditures this period for payment of late
contractor billings. Further, a lump-sum leave payment is expected to be
made from the independent counsel permanent, indefinite appropriation at
some future point pending the satisfactory completion of administrative
responsibilities by a former OIC Pearson employee.
In addition, these statements and related notes do not include certain
expenditures related to the investigation by Special Counsel John C.
Danforth. The investigation by Special Counsel Danforth was officially
terminated when Mr. Danforth closed his office in March 2001. Accordingly,
Special Counsel Danforth no longer prepares financial statements. However,
the Department of Justice paid $22,612 from the permanent, indefinite
appropriation during this period for delayed billings for rental of
copying equipment and a correction to the account for background
investigation services provided by the Office of Personnel Management for
the Office of Special Counsel Danforth. Justice originally mistakenly
charged the latter to another unit within the Department of Justice.
The office of independent counsel Ralph I. Lancaster is also officially
closed and no longer prepares financial statements. However, the U.S.
Court of Appeals for the D.C. Circuit awarded reimbursement of $32,437 for
attorneys' fees and expenses of individuals who had been investigated by
Mr. Lancaster but not indicted, as authorized by 28 U.S.C. 593(f)(1). The
reimbursement was made from the permanent fund established for the payment
of judgments.
Opinion on Statements of Expenditures
The statements of expenditures, including the accompanying notes for the
offices of independent counsel David M. Barrett and Julie F. Thomas,
present fairly, in all material respects, the expenditures of these
counsels for the 6 months ended March 31, 2003, on the basis of accounting
described in note 1 of each office's statement.
The counsels prepared their statements of expenditures principally on a
cash basis of accounting, which is a comprehensive basis of accounting
other than U.S. generally accepted accounting principles. The basis of
accounting is described in note 1 of each counsel's statement.
Consideration of Internal Control
In planning and performing our audits, we considered internal control over
financial reporting and compliance.2 We did this to determine our
procedures for auditing the statements of expenditures, not to express an
opinion on internal control. Accordingly, we do not express an opinion on
internal control over financial reporting and compliance. However, for the
controls we tested, we found no material weaknesses in internal control
over financial reporting (including safeguarding assets) and compliance
for the 6-month period ended March 31, 2003. 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
errors, fraud, or noncompliance 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
Our tests for compliance with selected provisions of laws and regulations
disclosed no instances of noncompliance that would be reportable under
U.S. 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
The independent counsels are responsible for preparing statements of
expenditures in conformity with the basis of accounting described in the
accompanying notes. The counsels are also responsible for establishing,
maintaining, and assessing internal control to provide reasonable
assurance that the following internal control objectives are met and for
complying with applicable laws and regulations.
o Financial reporting: Transactions are properly recorded, processed, and
summarized to permit the preparation of the statements of expenditures in
conformity with the basis of accounting described in the notes to the
statements, and assets are safeguarded against loss from unauthorized
acquisition, use, or disposition.
o Compliance with laws and regulations: Transactions are executed in
accordance with laws and regulations that could have a direct and material
effect on the counsels' statements of expenditures.
We are responsible for (1) obtaining reasonable assurance about whether
the counsels' statements of expenditures are presented fairly, in all
material respects, in conformity with the basis of accounting described in
the notes accompanying their statements of expenditures, (2) obtaining a
sufficient understanding of internal control over financial reporting and
compliance to plan the audits, and (3) testing compliance with selected
provisions of laws and regulations that have a direct and material effect
on the statements.
In order to fulfill these responsibilities, for each counsel, we (1)
examined, on a test basis, evidence supporting the amounts and disclosures
in the statement of expenditures, (2) assessed the accounting principles
used by management, (3) evaluated the overall presentation of the
statement of expenditures, (4) obtained an understanding of internal
control related to financial reporting (including safeguarding assets) and
compliance with laws and regulations, and (5) tested compliance with
selected provisions of 28 U.S.C. 591-599 (2000), 5 U.S.C. Chapter 55, and
regulations relating to pay administration.
We limited our internal control testing to controls over financial
reporting and compliance. Because of inherent limitations in internal
control, misstatements due to error, fraud, losses, or noncompliance 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. In addition, we caution that our
internal control testing may not be sufficient for other purposes.
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 laws and regulations that 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 performed our audits in accordance with U.S. generally
accepted government auditing standards.
Agency Comments
We provided drafts of this report to the offices of independent counsel,
the Department of Justice, and AOUSC for review and comment. These
entities agreed with the facts and conclusions in our report.
McCoy Williams Director Financial Management and Assurance
September 15, 2003
List of Committees
The Honorable Ted Stevens Chairman The Honorable Robert C. Byrd Ranking
Minority Member Committee on Appropriations United States Senate
The Honorable Susan M. Collins 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 Tom Davis Chairman The Honorable Henry A. Waxman Ranking
Minority Member Committee on Government Reform House of Representatives
The Honorable F. James Sensenbrenner, Jr. Chairman The Honorable John
Conyers, Jr. Ranking Minority Member Committee on the Judiciary House of
Representatives
Statement of Expenditures for Independent Counsel BarrettAppendix I
Statement of Expenditures for Independent Counsel ThomasAppendix II
(195013)
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