Financial Audit: Special Counsel Expenditures for the Six Months 
Ended September 30, 2007 (31-MAR-08, GAO-08-541).		 
                                                                 
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 September 30, 2007. The independent	 
counsels were required under 28 U.S.C. 596 (c)(1) to prepare a	 
statement of expenditures on a semiannual basis. Under 28 U.S.C. 
596 (c)(2 ), we were required to conduct a financial review of a 
midyear statement and a financial audit of a year-end statement. 
We satisfied this requirement through semiannual financial audits
of the statement of expenditures. For the 6 months ended	 
September 30, 2007, there were no active independent counsels.	 
However, we are required to perform a semiannual financial review
of expenditures from the permanent indefinite appropriation used 
to pay special counsel Fitzgerald's expenses. While not required 
under the permanent indefinite appropriation to perform a	 
financial audit, we have done so for special counsel		 
Fitzgerald--as we previously performed for independent counsels  
approved under the expired law. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-541 					        
    ACCNO:   A81460						        
  TITLE:     Financial Audit: Special Counsel Expenditures for the Six
Months Ended September 30, 2007 				 
     DATE:   03/31/2008 
  SUBJECT:   Accounting standards				 
	     Auditing procedures				 
	     Auditing standards 				 
	     Cash basis accounting				 
	     Financial analysis 				 
	     Financial management				 
	     Financial records					 
	     Financial statement audits 			 
	     Financial statements				 
	     Internal audits					 
	     Internal controls					 
	     Strategic planning 				 
	     Voluntary compliance				 

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GAO-08-541

   

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Report to Congressional Committees: 

March 2008: 

Financial Audit: 

Special Counsel Expenditures for the Six Months Ended September 30, 
2007: 

GAO-08-541: 

Contents: 

Letter: 

Auditor's Report: 

Background: 

Opinion on Statement of Expenditures: 

Opinion on Internal Control: 

Compliance with Laws and Regulations: 

Objectives, Scope, and Methodology: 

Agency Comments: 

Appendix: 

Appendix I: Statement of Expenditures for Special Counsel Fitzgerald: 

Abbreviations: 

GAO: Government Accountability Office: 

FBI: Federal Bureau of Investigation: 

OSC: Office of Special Counsel: 

Letter: 

March 31, 2008: 

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 September 30, 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. In addition, the report is available at no cost on GAO's Web 
site at [hyperlink, 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 Judy Lee. 

Steven J. Sebastian: 

Director: 

Financial Management and Assurance: 

Auditor's Report Congressional Committees: 

This report presents the results of our audit of expenditures[Footnote 
1] reported by the Office of Special Counsel Patrick J. Fitzgerald for 
the 6 months ended September 30, 2007. The independent counsels were 
required under 28 U.S.C. 596 ï¿½(c)(1) to prepare a statement of 
expenditures on a semiannual basis. Under 28 U.S.C. 596 ï¿½(c)(2 ), we 
were required to conduct a financial review of a midyear statement and 
a financial audit of a year-end statement. We satisfied this 
requirement through semiannual financial audits of the statement of 
expenditures. 

For the 6 months ended September 30, 2007, there were no active 
independent counsels. However, we are required to perform a semiannual 
financial review of expenditures from the permanent indefinite 
appropriation[Footnote 2] used to pay special counsel Fitzgerald's 
expenses. While not required under the permanent indefinite 
appropriation to perform a financial audit, we have done so for special 
counsel Fitzgerald--as we previously performed for independent counsels 
approved under the expired law. 

In our audit covering the 6 months ended September 30, 2007, we found: 

* 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; 

* Special Counsel Fitzgerald had effective internal control over 
financial reporting (including safeguarding assets) and compliance with 
laws and regulations as of September 30, 2007; and: 

* 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 opinions and compliance with laws and 
regulations; and discuss the objectives, scope, and methodology of our 
audit and the disposition of agency comments. 

Background: 

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 
expired independent counsel law or other law. The Department of Justice 
determined that the appropriation established by Public Law 100-202 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.[Footnote 3] 

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 September 30, 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 
September 30, 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 in the Standards for Internal 
Control in the Federal Government.[Footnote 4] 

Compliance with Laws and Regulations: 

Our tests for compliance with selected provisions of laws and 
regulations disclosed no instances of noncompliance with respect to 
Special Counsel Fitzgerald 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: 

Though not required to do so, Special Counsel Fitzgerald 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: 

* 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. 

* 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 September 30, 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 Payment 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. 

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 
September 30, 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 a draft of this report to the office of Special Counsel and 
the Department of Justice for review and comment. The special counsel 
provided comments to clarify matters discussed in the notes to the 
statement of expenditures, which we have incorporated as appropriate. 
In commenting on our report, the entities agreed with the facts and 
conclusions in the report. 

Signed by: 

Steven J. Sebastian: 

Director: 

Financial Management and Assurance: 

March 31, 2008: 

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 Thomas 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: 

[End of section] 

Appendix I: Statement of Expenditures for Special Counsel Fitzgerald: 

PATRICK J. FITZGERALD: 
Office of Special Counsel: 
Statement of Expenditures: 
(Principally cash basis - see Note 1): 

Six Months Ended September 30, 2007: 

Personnel compensation and benefits: $96, 019; 

Witness expenses (note 2): $440; 

Travel (note 3): $68,550; 

Contractual services (note 4): $22,139

Supplies and materials (note 5): $272

Total expenditures: $187,420. 

The accompanying notes are an integral part of this statement.

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 
(OSCFitzgerald) for the 6 months ended September 30, 2007. 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. In March 
2007, an administration official was convicted of perjury, lying to the 
Federal Bureau of Investigation, and obstruction of justice in the 
investigation. Expenditures during this period principally relate to 
the sentencing and appeal of this official on perjury and obstruction 
of justice charges, as well as some expenses paid during this period 
which were reimbursements of travel and lodging expenses incurred 
during the trial. 

On July 2, 2007, the president of the United States commuted the prison 
term imposed by the sentencing judge upon the administration official 
who was convicted after a jury trial. On December 11, 2007 the 
administration official dropped his appeal of his convictions. This 
matter is now concluded for all practical purposes, but the office of 
special counsel will continue for limited purposes, such as responding 
to Congressional requests for information. 

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 - Witness expenses: 

Witness expenses consist of fact and expert witness fees and expenses 
which are required to be paid to witnesses who testify on behalf of the 
government. 

Note 3 - Travel: 

Travel primarily consists of expenditures for investigation and trial-
related travel for office of special counsel personnel. 

Note 4 - Contractual services: 

Contractual services primarily consist of expenditures for maintaining 
and servicing office equipment and for research and data transcription 
services in areas of interest to the investigation and trial. 

Note 5 - Supplies and materials: 

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

[End of section] 

Footnotes: 

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

[2] The permanent, indefinite appropriation was established by Pub. L. 
No. 100-202, ï¿½ 101(a), title II, 101 Stat. 1329, 1329-9 (Dec. 22, 
1987), 28 U.S.C. ï¿½ 591 note. 

[3] We 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 use was not an illegal, improper, or 
unauthorized use of the appropriation. B-302582 (Sept. 30, 2004). 

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

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