Financial Audit: Independent and Special Counsel Expenditures for
the Six Months Ended March 31, 2005 (30-SEP-05, GAO-05-961).	 
                                                                 
Pursuant to a legislative requirement, GAO audited the		 
expenditures of one office of independent counsel and one office 
of special counsel for the 6 months ended March 31, 2005.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-961 					        
    ACCNO:   A38797						        
  TITLE:     Financial Audit: Independent and Special Counsel	      
Expenditures for the Six Months Ended March 31, 2005		 
     DATE:   09/30/2005 
  SUBJECT:   Auditing standards 				 
	     Financial records					 
	     Financial statement audits 			 
	     Independent counsels				 
	     Internal controls					 
	     Reporting requirements				 

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GAO-05-961

     

     * Report to Congressional Committees
          * September 2005
     * FINANCIAL AUDIT
          * Independent and Special Counsel Expenditures for the Six Months
            Ended March 31, 2005
     * Contents
          * Background
          * Opinions on Statements of Expenditures
          * Opinions on Internal Control
          * Compliance with Laws and Regulations
          * Objectives, Scope, and Methodology
          * Agency Comments
     * Statement of Expenditures for Independent Counsel Barrett
     * Statement of Expenditures for Special Counsel Fitzgerald

                 United States Government Accountability Office

Report to Congressional Committees

GAO

September 2005

FINANCIAL AUDIT

Independent and Special Counsel Expenditures for the Six Months Ended March 31,
                                      2005

                                       a

Contents

  Letter

Auditor's Report                                                         2 
                    Background                                              3 
                    Opinions on Statements of Expenditures                  4 
                    Opinions on Internal Control                            4 
                    Compliance with Laws and Regulations                    4 
                    Objectives, Scope, and Methodology                      5 
                    Agency Comments                                         6 
Appendixes                                                              
        Appendix I: Statement of Expenditures for Independent Counsel      
                    Barrett                                                 9 
                    Statement of Expenditures for Special Counsel             
       Appendix II: Fitzgerald                                             12

                                 Abbreviations

AOUSC        Administrative Office of the U.S. Courts   
GAO          Government Accountability Office           
OIC          Office of Independent Counsel              
OSC          Office of Special Counsel                  

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A

United States Government Accountability Office Washington, D.C. 20548

September 30, 2005

Congressional Committees

Enclosed is our report on the statements of expenditures for the two
active counsels-one office of independent counsel and one office of
special counsel-for the 6 months ended March 31, 2005. Our audit was
designed to determine whether the statements of expenditures were fairly
stated in all material respects. We were not required to express an
opinion on the reasonableness or appropriateness of any related
expenditures and we are not expressing any opinion thereof. We are sending
copies of this report to the Attorney General, the Director of the
Administrative Office of the U.S. Courts, the Independent Counsel 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 is also available at no charge on GAO's Web site at www.gao.gov.

Please contact me at (202) 512-3406 or [email protected] if you or your
staff have any questions concerning this report. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. Key contributors to this report were Hodge
Herry, Assistant Director; Kwabena Ansong; and Sunny T. Chang.

Steven J. Sebastian Director Financial Management and Assurance

A

United States Government Accountability Office Washington, D.C. 20548

Congressional Committees

This report presents the results of our audits of expenditures1 reported
by one office of independent counsel and one office of special counsel for
the 6 months ended March 31, 2005. The Department of Justice and the
independent counsel are required under 28 U.S.C. S: 594 (d)(2), (h) and S:
596 (c)(1) to report on a semiannual basis the 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, 2005, we found

     o the statements of expenditures presented in appendixes I and II , for
       the office of the Independent Counsel David M. Barrett 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 each of the counsels had effective internal control over financial
       reporting (including safeguarding assets) and compliance with laws and
       regulations as of March 31, 2005; and
     o no reportable noncompliance with laws and regulations we tested.

Our audit was designed to determine whether the statements of expenditures
were fairly stated in all material respects. We were not required to
express an opinion on the reasonableness or appropriateness of any related
expenditures and we are not expressing any opinion thereof.

The following sections provide background information; outline each
conclusion in more detail; and discuss the objectives, scope, and
methodology of our audits.

1The term expenditures as used in this report generally means cash
disbursed.

  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 for
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 then Acting
Attorney General.3

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.

The statements of expenditures and related notes included in this report
do not include expenditures related to the investigation by Independent

2The permanent, indefinite appropriation was established by Pub. L. No.
100-202, S: 101(a), title II, 101 Stat. 1329, 1329-9 (Dec. 22, 1987), 28
U.S.C. S: 591 note.

3We reviewed the legal authority for the Department of Justice to use the
permanent, indefinite appropriation to fund the expenditures relating to
Special Counsel Fitzgerald's investigation and, in our opinion to the
Chairmen of the House and Senate Appropriations Committees, concluded that
such was not an illegal, improper, or unauthorized use of the
appropriation. B-302582 (Sept. 30, 2004).

  Opinions on Statements of Expenditures

Counsel Julie F. Thomas, which was officially closed effective March 23,
2004, and accordingly, no longer prepares a statement of expenditures.
However, during the 6 months ended March 31, 2005, several payments on
that counsel's behalf were incurred, including $38,145 primarily for
severance pay and $1,631 for support services rendered by AOUSC while the
office was still open.

The statements of expenditures, including the accompanying notes, for the
office of Independent Counsel David M. Barrett and the office of Special
Counsel Patrick J. Fitzgerald present fairly, in all material respects,
the expenditures of each of these counsels for the 6 months ended March
31, 2005, 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. Each of the
counsel's statements includes only expenditures made from the permanent,
indefinite appropriation.

Each of the counsels maintained, in all material respects, effective
internal

  Opinions on Internal

control over financial reporting (including safeguarding assets) and

compliance as of March 31, 2005, 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 for each counsel is based on criteria we established in
our Standards for Internal Control in the Federal Government.4

Our tests for compliance with selected provisions of laws and regulations

  Compliance with Laws

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.

4GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
http://www.gao.gov/special.pubs/ai00021p.pdf.

    Page 4 GAO-05-961 Independent and Special Counsel

  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 and maintaining internal control to provide
reasonable assurance that the following internal control objectives are
met.

     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)
each counsel's statement of expenditures is presented fairly, in all
material respects, in conformity with the basis of accounting described in
the notes accompanying their statements of expenditures and (2) each
counsel maintained effective internal control over financial reporting and
compliance as of March 31, 2005. We are also responsible for testing
compliance with selected provisions of laws and regulations that could
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 (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.

Our audit was designed to determine whether the statements of expenditures
were fairly stated in all material respects. We were not required to
express an opinion on the reasonableness or appropriateness of any related
expenditures.

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 the 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, 2005. 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.

We provided drafts of this report to the office of independent counsel and

  Agency Comments

the office of special counsel, the Department of Justice, and AOUSC for
review and comments. The agency officials agreed with the facts and

Steven J. Sebastian Director Financial Management and Assurance

September 15, 2005

List of Committees

The Honorable Thad Cochran 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 Homeland Security

and Governmental Affairs United States Senate

The Honorable Arlen Specter Chairman The Honorable Patrick J. Leahy
Ranking Minority Member Committee on the Judiciary United States Senate

The Honorable Jerry Lewis 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 Appendix I

Statement of Expenditures for Independent Counsel Barrett

    DAVID M. BARRETT Office of Independent Counsel Statement of Expenditures

(Cash basis) Six Months Ended March 31, 2005

Personnel compensation and benefits Travel (note 2) Rent, communications,
and utilities (note 3) Contractual services (note 4) Supplies and
materials (note 5) Administrative services (note 6)

  Total expenditures

The accompanying notes are an integral part of this statement.

$464,009

24,014

263,316

103,233

1,992

74,178 $930,742

Appendix I Statement of Expenditures for Independent Counsel Barrett

                                DAVID M. BARRETT

                         Office of Independent Counsel

                     Notes to the Statement of Expenditures

Note 1 - Accounting policies

Reporting entity: The accompanying statement of expenditures presents the
expenditures of the Office of Independent Counsel-David M. Barrett
(OIC-Barrett) for the 6 months ended March 31, 2005. The statement of
expenditures includes only expenditures made from the permanent,
indefinite appropriation for the OIC that are processed during the period
through the Administrative Office of the U.S. Courts (AOUSC) and the OIC.
Mr. Barrett was appointed on May 24, 1995, to investigate certain
allegations against the former Secretary of Housing and Urban Development.
On March 17, 2003, the Special Division of the U.S. Court of Appeals for
the D.C. Circuit (Special Division) ordered that the independent counsel
continue his office to the extent necessary or appropriate to perform the
noninvestigative and nonprosecutorial tasks remaining as required to
conclude the functions of his office. He submitted his final report under
seal to the Special Division in August 2004. OIC-Barrett is awaiting a
determination by the Special Division whether to release the final report
to the public. The independent counsel anticipates that, subject to the
court's direction, his remaining statutory duties will be concluded by the
end of this calendar year or the beginning of 2006.

Basis of accounting: The accompanying statement of expenditures was
prepared principally on the cash basis of accounting, which is a
comprehensive basis of accounting other than U.S. generally accepted
accounting principles. Under this method, except for personnel
compensation and benefits, expenditures are recorded when the funds are
disbursed by AOUSC or, for noncash transfers, when charged by AOUSC.
Generally, personnel compensation and benefits are recorded at the end of
the pay period when earned.

Note 2 - Travel

Travel primarily consists of expenditures for investigation-related travel
paid for OIC-Barrett personnel and contractors.

Note 3 - Rent, communications, and utilities

Approximately $232,486 in office rent is included in rent, communications,
and utilities.

Appendix I Statement of Expenditures for Independent Counsel Barrett

Note 4 - Contractual services

Contractual services primarily consist of expenditures for the services of
contractors relating to sealed matters in front of the Special Division
concerning the final report.

Note 5 - Supplies and materials

Supplies and materials expenditures are for supplies for office use,
including archiving records.

Note 6 - Administrative services

AOUSC receives an administrative fee equal to 3 percent of OIC
expenditures for performing disbursement and accounting functions for
OIC-Barrett. Payment of these fees generally occurs in the month following
the services. Also included in administrative services are other costs,
amounting to $46,656 incurred by the Special Division in providing
administrative guidance and support with respect to independent counsel
offices. These costs were certified by AOUSC, paid from the independent
counsel appropriation, and allocated solely to OIC-Barrett.

Appendix II

Statement of Expenditures for Special Counsel Fitzgerald

PATRICK J. FITZGERALD

Office of Special Counsel

Statement of Expenditures

(Cash basis) Six Months Ended March 31, 2005

Personnel compensation and benefits (note 2) $48,536 Travel (note 3)
18,101 Rent, communications, and utilities (note 4) 387 Contractual
services (note 5) 45,137 Supplies and materials (note 6) 63 Acquisition of
equipment (note 7) 326

                          Total expenditures $112,550

The accompanying notes are an integral part of this statement.

Appendix II Statement of Expenditures for Special Counsel Fitzgerald

PATRICK J. FITZGERALD

Office of Special Counsel

Notes to the Statement of Expenditures

Note 1 - Accounting policies

Reporting entity: The accompanying statement of expenditures presents the
expenditures of the Office of Special Counsel-Patrick J. Fitzgerald
(OSC-Fitzgerald) for the 6 months ended March 31, 2005. The statement of
expenditures includes only expenditures made from the permanent,
indefinite appropriation for OSC-Fitzgerald that are processed during the
period through the Department of Justice. On December 30, 2003, the then
Acting Attorney General appointed U.S. Attorney Patrick J. Fitzgerald as a
Special Counsel to investigate whether officials of the current
administration illegally disclosed the identity of an undercover Central
Intelligence Agency officer.

Basis of accounting: The accompanying statement of expenditures was
prepared principally on the cash basis of accounting, which is a
comprehensive basis of accounting other than U.S. generally accepted
accounting principles. Under this method, except for personnel
compensation and benefits, expenditures are recorded when the funds are
disbursed by the Department of Justice. Generally, personnel compensation
and benefits are recorded at the end of the pay period when earned.

Note 2 - Personnel costs

During this reporting period, an additional cost of approximately $35,195
for salaries and benefits associated with employees in the Criminal
Division of the Department of Justice were reimbursed in June 2005. These
expenditures will appear on the expenditure report for the period ending
September 30, 2005.

Also, certain costs were incurred by detailees from the Federal Bureau of
Investigation involved in the investigation but the associated costs were
not readily identifiable. Such costs of detailees are not reflected in the
statement of expenditures.

Note 3 - Travel

Travel primarily consists of expenditures for investigation-related travel
for OSC-Fitzgerald personnel.

Appendix II Statement of Expenditures for Special Counsel Fitzgerald

Note 4 - Rent, communications, and utilities

This category primarily consists of charges for express transportation of
small packages using commercial courier services.

Note 5 - Contractual services

Contractual services primarily consist of expenditures for research
services in areas of interest to the investigation.

Note 6 - Supplies and materials

The supplies and materials expenditures are primarily for supplies for
office use.

Note 7 - Acquisition of equipment

The expenditures are for noncapitalized personal property. This equipment
will remain the property of the federal government at the conclusion of
the investigation.

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