Financial Audit: Independent and Special Counsel Expenditures for
the Six Months Ended September 30, 2005 (31-MAR-06, GAO-06-485). 
                                                                 
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 September 30, 2005.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-485 					        
    ACCNO:   A50562						        
  TITLE:     Financial Audit: Independent and Special Counsel	      
Expenditures for the Six Months Ended September 30, 2005	 
     DATE:   03/31/2006 
  SUBJECT:   Auditing standards 				 
	     Financial records					 
	     Financial statement audits 			 
	     Independent counsels				 
	     Internal controls					 
	     Reporting requirements				 

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GAO-06-485

     

     * Report to Congressional Committees
          * March 2006
     * financial audit
          * Independent and Special Counsel Expenditures for the Six Months
            Ended September 30, 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

Report to Congressional Committees

March 2006

FINANCIAL AUDIT

Independent and Special Counsel Expenditures for the Six Months Ended
September 30, 2005

Contents

March 31, 2006Letter

Congressional Committees

Enclosed is our report on our audits of 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 September 30, 2005. Our audits
were 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 thereon. 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 audits, 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 Paul
Foderaro, Assistant Director; Kwabena Ansong; Joel Rodriguez; and Bethany
Smith.

Steven J. Sebastian Director Financial Management and Assurance

Congressional CommitteesAuditor's Report

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 September 30, 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 September 30, 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 September 30, 2005; and

o no reportable noncompliance with laws and regulations we tested.

Our audits were 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 thereon.

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 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
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 September 30, 2005, the U.S. Court of
Appeals for the D.C. Circuit awarded reimbursements of approximately
$49,587 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). Of this award, $41,439 was paid
out as of September 30, 2005, $7,448 was paid out in November 2005, and
$700 has not yet been submitted for payment. The reimbursement was made
from the permanent indefinite appropriation for the payment of Judgments.4

Opinions on Statements of Expenditures

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
September 30, 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.

Opinions on Internal Control

Each of the counsels maintained, in all material respects, effective
internal control over financial reporting (including safeguarding assets)
and compliance as of September 30, 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.5

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 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 September 30, 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., the Prompt Pay Act, and selected provisions related to
pay administration and travel regulations.

Our audits were designed to determine whether the statements of
expenditures were fairly stated in all material respects. We were not
required to nor do we 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 September 30, 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.

Agency Comments

We provided drafts of this report to the office of independent counsel
Barrett, the office of special counsel Fitzgerald, the Department of
Justice, and AOUSC for review and comment. These entities agreed with the
facts and conclusions in our report.

Steven J. Sebastian Director Financial Management and Assurance

March 16, 2006

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

Statement of Expenditures for Independent Counsel Barrett Appendix I

Statement of Expenditures for Special Counsel Fitzgerald Appendix II

(196079)
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