Financial Audit: Independent and Special Counsel Expenditures for
the Six Months Ended March 31, 2004 (30-SEP-04, GAO-04-1014).
Pursuant to a legislative requirement, GAO audited the
expenditures of two offices of independent counsel and one office
of special counsel for the 6 months ended March 31, 2004.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-1014
ACCNO: A12571
TITLE: Financial Audit: Independent and Special Counsel
Expenditures for the Six Months Ended March 31, 2004
DATE: 09/30/2004
SUBJECT: Auditing standards
Financial records
Financial statement audits
Independent counsels
Internal controls
Reporting requirements
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GAO-04-1014
Report to Congressional Committees
September 2004
FINANCIAL AUDIT
Independent and Special Counsel Expenditures for the Six Months Ended
March 31, 2004
Contents
September 30, 2004Letter
Congressional Committees
Enclosed is our report on the statements of expenditures of two offices of
independent counsel and one office of special counsel for the 6 months
ended March 31, 2004. 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 and Special Counsel 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 at williamsM1@gao.gov or herryh@gao.gov.
Key contributors to this report were Kwabena Ansong, Erik Huff, and Donell
Ries.
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 and one office of special counsel
for the 6 months ended March 31, 2004. The Department of Justice and the
independent counsels are required under 28 U.S.C. S: 594 (d)(2), (h) and
S: 596 (c)(1) to report on a semiannual basis expenditures from a
permanent, indefinite appropriation established within the Department of
Justice to fund independent counsel activities. Under 28 U.S.C. S: 596
(c)(2), we are required to audit the statements of expenditures prepared
by the independent counsels. We also audited the statement of expenditures
of Special Counsel Patrick J. Fitzgerald, who is authorized by the
Department of Justice to fund his operation from the permanent, indefinite
appropriation.
In our audits covering the 6 months ended March 31, 2004, we found
o the statements of expenditures presented in appendixes I through III,
for the offices of Independent Counsel David M. Barrett and Independent
Counsel Julie F. Thomas and for the office of Special Counsel Patrick J.
Fitzgerald, 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 the counsels had effective internal control over financial reporting
(including safeguarding assets) and compliance with laws and regulations
for the 6 months ended March 31, 2004; 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 objectives, scope, and
methodology 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. S:S: 591-599),
which expired on June 30, 1999, was intended to preserve and promote the
accountability and integrity of public officials and of the institutions
of the federal government. Provisions of the law allowed the independent
counsels serving at the expiration date to continue investigating pending
matters until they determined 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 any office of
independent counsel. A permanent, indefinite appropriation was established
within the Department of Justice to pay all necessary expenses of
investigations and prosecutions by independent counsels appointed pursuant
to the independent counsel law or other law. Also, the Department of
Justice determined that the appropriation established by Public Law
100-2022 to fund expenditures by independent counsels appointed pursuant
to the independent counsel law or other law is available to fund the
expenditures of U.S. Attorney Patrick J. Fitzgerald, who was appointed as
a Special Counsel within the Department of Justice by the Acting Attorney
General.
The independent counsel law also designates specific responsibilities to
the Administrative Office of the U.S. Courts (AOUSC) for the
administrative support of independent counsels. 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. Independent counsels are not required to reflect
such costs in their statements of expenditures and neither the independent
counsels nor special counsel does so. For the 6 months ended March 31,
2004, there were no costs reported by the independent counsels for other
agencies' support activities. However, for Special Counsel Fitzgerald,
detailees from the Federal Bureau of Investigation were involved with the
investigation, but the associated costs were not readily identifiable.
These statements and related notes do not include certain expenditures
related to the investigation by Special Counsel John C. Danforth's office,
which was officially closed effective March 2001, and accordingly, no
longer prepares financial statements. However, during this audit period,
$41,000 was paid for telecommunication services used while the office was
still open.
The U.S. Court of Appeals for the D.C. Circuit also awarded reimbursements
of approximately $27,992 for attorney fees and expenses of individuals who
had been investigated by the office of Independent Counsel Thomas but not
indicted, as authorized by 28 U.S.C. S: 593(f)(1). This 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 Independent Counsel
Julie F. Thomas and for the office of Special Counsel Patrick J.
Fitzgerald present fairly, in all material respects, the expenditures of
these counsels for the 6 months ended March 31, 2004, 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.
Opinion on Internal Control
The counsels maintained, in all material respects, effective internal
control over financial reporting (including safeguarding assets) and
compliance as of March 31, 2004, that provided reasonable assurance that
misstatements, losses, or noncompliance material in relation to the
statements of expenditures would be prevented or detected on a timely
basis. Our opinion is based on criteria we established in our Standards
for Internal Control in the Federal Government.3
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. Though not required to do so, the special counsel also
elected to prepare a statement of expenditures. 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 obtaining reasonable assurance about whether (1)
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 and (2) the
counsels maintained effective internal control over financial reporting
and compliance as of March 31, 2004.
We are also responsible for testing compliance with selected provisions of
laws and regulations that have a direct and material effect on the
statements of expenditures.
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; (5) tested relevant internal control
over financial reporting (including safeguarding assets) and compliance,
and evaluated the design and operating effectiveness of internal control
for the 6 months ended March 31, 2004; and (6) tested compliance with
selected provisions of 28 U.S.C. S:S: 591-599, 5 U.S.C. Chapter 55, and
regulations relating to pay administration.
We did not evaluate controls relevant to operating objectives, such as
controls relevant to ensuring efficient operations. 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.
We did not test compliance with all laws and regulations applicable to the
offices of independent and special counsel. We limited our tests of
compliance to those laws and regulations that we deemed applicable to the
statements of expenditures for the 6 months ended March 31, 2004. 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 office of special 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, 2004
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
Statement of Expenditures for Special Counsel FitzgeraldAppendix III
(195039)
*** End of document. ***