Financial Audit: Special Counsel Expenditures for the Six Months 
Ended March 31, 2007 (28-SEP-07, GAO-07-1205).			 
                                                                 
This report presents the results of our audit of expenditures	 
reported by the Office of Special Counsel Patrick J. Fitzgerald  
for the 6 months ended March 31, 2007. The Department of Justice 
and the independent counsels are required under 28 U.S.C. 594	 
(d)(2), (h) and 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. 596 (c)(2), we are required  
to audit the statement of expenditures prepared by any active	 
independent counsels. For the 6 months ended March 31, 2007,	 
there were no active independent counsels. However, we audited	 
the statement of expenditures of Special Counsel Fitzgerald, who 
is authorized by the Department of Justice to fund his operation 
from the permanent, indefinite appropriation. 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, 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. As ordered by the Special Division, the Office of	 
Independent Counsel Barrett, the last independent counsel to	 
serve under the law, was terminated on May 3, 2006, and 	 
accordingly, no longer prepares a statement of expenditures.	 
However, after that date, the Administrative Office of the United
States Courts (AOUSC) continued to perform administrative	 
responsibilities and maintain the administrative records for the 
terminated office. During the 6 months ended March 31, 2007,	 
several payments on that counsel's behalf were made, including	 
$26,922 primarily for severance pay, $6,991 for printing of the  
final report, and $1,113 for support services rendered by AOUSC.4
However, we are not expressing an opinion on these amounts.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1205					        
    ACCNO:   A76809						        
  TITLE:     Financial Audit: Special Counsel Expenditures for the Six
Months Ended March 31, 2007					 
     DATE:   09/28/2007 
  SUBJECT:   Accounting procedures				 
	     Accounting standards				 
	     Appropriations					 
	     Audit reports					 
	     Cash basis accounting				 
	     Federal regulations				 
	     Financial analysis 				 
	     Financial management				 
	     Financial statement audits 			 
	     Financial statements				 
	     Independent counsels				 
	     Internal controls					 
	     Reporting requirements				 

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GAO-07-1205

   

     * [1]Auditor's Report
     * [2]Background
     * [3]Opinion on Statement of Expenditures
     * [4]Opinion on Internal Control
     * [5]Compliance with Laws and Regulations
     * [6]Objectives, Scope, and Methodology
     * [7]Agency Comments
     * [8]GAO's Mission
     * [9]Obtaining Copies of GAO Reports and Testimony

          * [10]Order by Mail or Phone

     * [11]To Report Fraud, Waste, and Abuse in Federal Programs
     * [12]Congressional Relations
     * [13]Public Affairs

                 United States Government Accountability Office

Report to Congressional Committees

GAO

September 2007

FINANCIAL AUDIT

      Special Counsel Expenditures for the Six Months Ended March 31, 2007

GAO-07-1205

Contents

Letter                                                                   1 
Auditor's Report [14]BackgroundOpinion on Statement of Expenditures  2 3 4 
                    Opinion on Internal Control Compliance with Laws    4 4 5 
                    and Regulations Objectives, Scope, and Methodology  6     
                    Agency Comments                                           
Appendix I       [15]Statement of Expenditures for Special Counsel         
                    Fitzgerald                                              9 

                                 Abbreviations

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

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United States Government Accountability Office
Washington, DC 20548

September 28, 2007

Congressional Committees

Enclosed is our report on our audit of the statement of expenditures for
the Office of Special Counsel Patrick J. Fitzgerald for the 6 months ended
March 31, 2007. Our audit was designed to determine whether the statement
of expenditures was 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 Special Counsel, and
other interested parties. Copies of this report will be made available to
others upon request. In addition, the report will be available at no
charge on GAO's Web site at http://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. GAO staff who made major contributions to this
report are Julie Phillips, Assistant Director; Kwabena Ansong; and Alyson
Mahan.

Steven J. Sebastian
Director
Financial Management and Assurance

United States Government Accountability Office
Washington, DC 20548

Congressional Committees

This report presents the results of our audit of expenditures ^[16]1
reported by the Office of Special Counsel Patrick J. Fitzgerald for the 6
months ended March 31, 2007. 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 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 statement of expenditures prepared by any active
independent counsels. For the 6 months ended March 31, 2007, there were no
active independent counsels. However, we audited the statement of
expenditures of Special Counsel Fitzgerald, who is authorized by the
Department of Justice to fund his operation from the permanent, indefinite
appropriation.

In our audit covering the 6 months ended March 31, 2007, we found

     o the statement of expenditures presented in appendix I for the Office
       of Special Counsel Patrick J. Fitzgerald, is presented fairly, in all
       material respects, in conformity with the basis of accounting
       described in note 1 of the counsel's statement, which is principally
       the cash basis, a comprehensive basis of accounting other than U.S.
       generally accepted accounting principles;
     o Special Counsel Fitzgerald had effective internal control over
       financial reporting (including safeguarding assets) and compliance
       with laws and regulations as of March 31, 2007; and
     o no reportable noncompliance with laws and regulations we tested.

Our audit was designed to determine whether the statement of expenditures
is 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 our
conclusions with respect to our opinion and compliance with laws and
regulations; discuss the objectives, scope, methodology of our audit; and
contain agency comments.

^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. SS 591599), 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 directed 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. The Department of Justice
determined that the appropriation established by Public Law 100202 ^[17]2
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. ^[18]3

As ordered by the Special Division, the Office of Independent Counsel
Barrett, the last independent counsel to serve under the law, was
terminated on May 3, 2006, and accordingly, no longer prepares a statement
of expenditures. However, after that date, the Administrative Office of
the United States Courts (AOUSC) continued to perform administrative
responsibilities and maintain the administrative records for the
terminated office. During the 6 months ended March 31, 2007, several
payments on that counsel's behalf were made, including $26,922 primarily
for severance pay, $6,991 for printing of the final report, and $1,113 for
support services rendered by AOUSC. ^[19]4 However, we are not  expressing
an opinion on these amounts.

^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).

  Opinion on Statement of Expenditures
  
The statement of expenditures, including the accompanying notes, for the
Office of Special Counsel Patrick J. Fitzgerald presents fairly, in all
material respects, the expenditures of the counsel for the 6 months ended
March 31, 2007, on the basis of accounting described in note 1 of the
counsel's statement.

The counsel prepared the statement 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 the counsel's statement. The
counsel's statement includes only expenditures made from the permanent,
indefinite appropriation.

Opinion on Internal Control

Special Counsel Fitzgerald maintained, in all material respects, effective
internal control over financial reporting (including safeguarding assets)
and compliance with laws and regulations as of March 31, 2007, that
provided reasonable assurance that misstatements, losses, or noncompliance
material in relation to the statement 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
[20]5 Federal Government.

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
Laws  and  Regulations   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.

^4The Independent Counsel Law designated specific responsibilities to AOUSC
for the administrative support of independent counsels. The Department of
Justice periodically disburses lump-sum payments to AOUSC for this
purpose.

^5GAO, 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.

  Objectives, Scope, and Methodology

Though not required to do so, the special counsel elected to prepare a
statement of expenditures in conformity with the basis of accounting
described in the accompanying notes. Additionally, the counsel is
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 statement of
       expenditures in conformity with the basis of accounting described in
       the notes to the statement, 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 counsel's statement of expenditures.

We are responsible for obtaining reasonable assurance about whether

        (1)     the counsel's statement of expenditures is presented fairly,
                in all material respects, in conformity with the basis of
                accounting described in the notes accompanying the statement
                of expenditures; and (2) the special counsel maintained
                effective internal control over financial reporting and
                compliance as of March 31, 2007. We are also responsible for
                testing compliance with selected provisions of laws and
                regulations that could have a direct and material effect on
                the counsel's statement of expenditures. In order to fulfill
                these responsibilities, 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
           Title 5 of the United States Code, the Prompt Pay Act, and
           selected provisions related to pay administration and travel
           regulations.

Our audit was designed to determine whether the statement of expenditures
was 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.

                                Agency Comments

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
Office of the Special Counsel. We limited our tests of compliance to those
laws and regulations that could have a direct and material effect on the
statement of expenditures for the 6 months ended March 31, 2007. 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 audit in accordance with U.S. generally accepted
government auditing standards.

Agency Comments

We provided drafts of this report to 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.

Steven J. Sebastian
Director
Financial Management and Assurance

September 20, 2007

List of Committees

The Honorable Robert C. Byrd
Chairman
The Honorable Thad Cochran
Ranking Member
Committee on Appropriations
United States Senate

The Honorable Joseph I. Lieberman
Chairman
The Honorable Susan M. Collins
Ranking Member
Committee on Homeland Security
and Governmental Affairs United States Senate

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

The Honorable David R. Obey
Chairman
The Honorable Jerry Lewis
Ranking Member
Committee on Appropriations
House of Representatives

The Honorable Henry A. Waxman
Chairman
The Honorable Tom M. Davis
Ranking Member
Committee on Oversight and Government Reform
House of Representatives

The Honorable John Conyers, Jr.
Chairman
The Honorable Lamar S. Smith
Ranking Member
Committee on the Judiciary
House of Representatives

Appendix I: Statement of Expenditures for Special Counsel Fitzgerald

(196164)

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