Financial Audit: Independent and Special Counsel Expenditures for
the Six Months Ended September 30, 2006 (30-MAR-07, GAO-07-531).
This report presents the results of our audits of expenditures
reported by one office of independent counsel and one office of
special counsel for the 6 months ended September 30, 2006. 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 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.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-531
ACCNO: A67569
TITLE: Financial Audit: Independent and Special Counsel
Expenditures for the Six Months Ended September 30, 2006
DATE: 03/30/2007
SUBJECT: Audit reports
Auditing standards
Financial statement audits
Independent counsels
Internal controls
Lawyers
Reporting requirements
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GAO-07-531
* [1]Report to Congressional Committees
* [2]March 2007
* [3]financial audit
* [4]Independent and Special Counsel Expenditures for the Six
Months Ended September 30, 2006
* [5]Contents
* [6]Background
* [7]Opinions on Statements of Expenditures
* [8]Conclusion on Internal Control
* [9]Compliance with Laws and Regulations
* [10]Objectives, Scope, and Methodology
* [11]Agency Comments
* [12]Statement of Expenditures for Independent Counsel Barrett
* [13]Statement of Expenditures for Special Counsel Fitzgerald
Report to Congressional Committees
March 2007
FINANCIAL AUDIT
Independent and Special Counsel Expenditures for the Six Months Ended
September 30, 2006
Contents
March 30, 2007Letter
Congressional Committees
Enclosed is our report on our audits of the statements of expenditures for
the two counsels--one office of independent counsel and one office of
special counsel--for the 6 months ended September 30, 2006. 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, and Alyson Mahan.
Steven J. Sebastian
Director
Financial Management and Assurance
Congressional Committees
Auditor's Report
This report presents the results of our audits of expenditures^1 reported
by one office of independent counsel and one office of special counsel for
the 6 months ended September 30, 2006. 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 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, 2006, we found
othe 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;
oSpecial Counsel Fitzgerald had effective internal control over financial
reporting (including safeguarding assets) and compliance with laws and
regulations as of September 30, 2006;
ofor Independent Counsel Barrett, no material weaknesses in internal
control over financial reporting (including safeguarding assets) and
compliance with laws and regulations. Since the office of Independent
Counsel Barrett was terminated on May 3, 2006, we considered internal
control in planning and performing the audit of the statement of
expenditures and not as a basis for expressing an opinion on internal
control; and
ono 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. SS 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
100-202^2 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.^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.
As ordered by the Special Division, the Office of Independent Counsel
Barrett was terminated on May 3, 2006. After that date, the AOUSC
continued to perform its administrative responsibilities and also
maintained the administrative records.
During the 6 months ended September 30, 2006, the U.S. Court of Appeals
for the D.C. Circuit awarded reimbursements of approximately $132,404 for
attorney fees and expenses of individuals who had been investigated by the
office of Independent Counsel Barrett but not indicted, as authorized by
28 U.S.C. S 593(f)(1). Of this award, $22,391 was paid out in December
2006, and $110,013 was paid out in January 2007. 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, 2006, 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.
Conclusion on Internal Control
Special Counsel Fitzgerald maintained, in all material respects, effective
internal control over financial reporting (including safeguarding assets)
and compliance as of September 30, 2006, 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.^5
Since the office of Independent Counsel Barrett was terminated on May 3,
2006, we considered the office of Independent Counsel Barrett's internal
controls to the extent necessary to plan and perform our audit. We did
this to determine our procedures for auditing the statement of
expenditures, not to express an opinion on internal control. Accordingly,
we do not express an opinion on internal control with respect to the
office of Independent Counsel Barrett. However, based on our limited work
on internal controls, we found no material weaknesses in internal control
over financial reporting (including safeguarding assets) and compliance.
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:
oFinancial 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.
oCompliance 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) the
special counsel maintained effective internal control over financial
reporting and compliance as of September 30, 2006. 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, 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 for the special counsel; (5) tested relevant internal control
over financial reporting (including safeguarding assets) and compliance
for the special counsel; and (6) tested compliance with selected
provisions of 28 U.S.C. SS 591-599, Title 5 of the U.S.Code, 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.
For the special counsel, 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.
For the independent counsel, we considered internal controls in order to
plan and perform the audit, not to express an opinion on internal control.
Accordingly, we do not express an opinion on internal control.
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, 2006. 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 12, 2007
List of Committees
The Honorable Robert C. Byrd
Chairman
The Honorable Thad Cochran
Ranking Minority Member
Committee on Appropriations
United States Senate
The Honorable Joseph I. Lieberman
Chairman
The Honorable Susan M. Collins
Ranking Minority Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Patrick J. Leahy
Chairman
The Honorable Arlen Specter
Ranking Minority Member
Committee on the Judiciary
United States Senate
The Honorable David R. Obey
Chairman
The Honorable Jerry Lewis
Ranking Minority Member
Committee on Appropriations
House of Representatives
The Honorable Henry A. Waxman
Chairman
The Honorable Thomas M. Davis
Ranking Minority Member
Committee on Oversight and Government Reform
House of Representatives
The Honorable John Conyers, Jr.
Chairman
The Honorable Lamar S. Smith
Ranking Minority Member
Committee on the Judiciary
House of Representatives
Appendix I
Statement of Expenditures for Independent Counsel Barrett
Appendix II
Statement of Expenditures for Special Counsel Fitzgerald
(196126)
*** End of document. ***