Financial Audit
Independent Counsel Expenditures for the Six Months Ended September 30, 2003 Gao ID: GAO-04-525 March 31, 2004Pursuant to a legislative requirement, GAO audited the expenditures of two offices of independent counsel for the 6 months ended September 30, 2003.
In our audits covering the 6 months ended September 30, 2003, we found (1) the statements of expenditures presented for the offices of independent counsel (OIC) David M. Barrett and Julie F. Thomas, 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; (2) no material weaknesses in internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations; and (3) no reportable noncompliance with laws and regulations we tested.
GAO-04-525, Financial Audit: Independent Counsel Expenditures for the Six Months Ended September 30, 2003
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Report to Congressional Committees:
March 2004:
FINANCIAL AUDIT:
Independent Counsel Expenditures for the Six Months Ended September 30,
2003:
GAO-04-525:
Contents:
Letter:
Auditor's Report:
Background:
Opinion on Statements of Expenditures:
Consideration of Internal Control :
Compliance with Laws and Regulations:
Objectives, Scope, and Methodology:
Agency Comments:
Appendixes:
Appendix I: Statement of Expenditures for Independent Counsel Barrett :
Appendix II: Statement of Expenditures for Independent Counsel Thomas :
Letter March 31, 2004:
Congressional Committees:
Enclosed is our report on the statements of expenditures of two offices
of independent counsel for the 6 months ended September 30, 2003. We
are sending copies of this report to the Attorney General, the Director
of the Administrative Office of the U.S. Courts, the Independent
Counsels included in our audit, and other interested parties. Copies of
this report will be made available to others upon request. This report
will also be available at no charge on GAO's Web site at [Hyperlink,
http://www.gao.gov.].
If you or your staffs have any questions concerning this report, please
contact me at (202) 512-6906 or Hodge Herry, Assistant Director, at
(202) 512-9469. You can also reach us at [Hyperlink,
williamsM1@gao.gov] or [Hyperlink, herryh@gao.gov]. Key contributors
to this report were Kwabena Ansong and Carol Keightley.
Signed by:
McCoy Williams:
Director, Financial Management and Assurance:
Auditor's Report Congressional Committees:
This report presents the results of our audits of expenditures[Footnote
1] reported by two offices of independent counsel for the 6 months
ended September 30, 2003. The independent counsels are required under
28 U.S.C. § 596 (c)(1) (2000) to report on their expenditures on a
semiannual basis and we are required under 28 U.S.C. § 596 (c)(2) to
audit these statements.
In our audits covering the 6 months ended September 30, 2003, we found:
* the statements of expenditures presented in appendixes I and II, for
the offices of independent counsel (OIC) David M. Barrett and Julie F.
Thomas, 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;
* no material weaknesses in internal control over financial reporting
(including safeguarding assets) and compliance with laws and
regulations; and:
* no reportable noncompliance with laws and regulations we tested.
The following sections provide background information, outline each
conclusion in more detail, and discuss the scope 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. §§ 591-599 (2000)) was intended to preserve and promote the
accountability and integrity of public officials and of the
institutions of the federal government. The independent counsel law
expired on June 30, 1999. Provisions of that law allow the independent
counsels serving at the expiration date to continue investigating
pending matters until they determine 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 of investigation and prosecutions by independent counsels
appointed pursuant to the independent counsel law or other law. The
independent counsel law also designates specific responsibilities to
the Administrative Office of the U.S. Courts (AOUSC) for independent
counsels' administrative support. The Department of Justice
periodically disburses lump-sum payments to AOUSC for this purpose.
During any 6-month reporting period, there may be other significant
costs incurred in support of the work of the counsels. These costs are
paid from appropriations other than the permanent, indefinite
appropriation established to fund independent counsel activities. These
costs arise when a counsel uses detailees from other federal agencies,
such as the Federal Bureau of Investigation. Independent counsels are
not required to reflect such costs in their statements of expenditures
nor do they do so. For the 6 months ended September 30, 2003, there
were no costs reported by other agencies in support of independent
counsel activities.
The offices of independent counsel Ralph I. Lancaster and Donald C.
Smaltz are officially closed and no longer prepare financial
statements. However, the U.S. Court of Appeals for the District of
Columbia (D.C.) Circuit awarded reimbursements of $1,447 and $18,758,
respectively, for attorneys' fees and expenses of individuals who had
been investigated by Messrs. Lancaster and Smaltz but not indicted, as
authorized by 28 U.S.C. § 593(f)(1). The U.S. Court of Appeals for the
D.C. Circuit also awarded reimbursements of $85,312 for attorney fees
and expenses of individuals who had been investigated by the office of
independent counsel Thomas but not indicted. These reimbursements were
made from the permanent fund established for the payment of judgments.
Opinion on Statements of Expenditures:
The statements of expenditures, including the accompanying notes, for
the offices of independent counsel David M. Barrett and Julie F. Thomas
present fairly, in all material respects, the expenditures of these
counsels for the 6 months ended September 30, 2003, 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.
Consideration of Internal Control:
In planning and performing our audits, we considered internal control
over financial reporting and compliance.[Footnote 2] We did this to
determine our procedures for auditing the statements of expenditures,
not to express an opinion on internal control. Accordingly, we do not
express an opinion on internal control over financial reporting and
compliance. However, for the controls we tested, we found no material
weaknesses in internal control over financial reporting (including
safeguarding assets) and compliance for the 6-month period ended
September 30, 2003. A material weakness is a condition in which the
design or operation of one or more of the internal control components
does not reduce to a relatively low level the risk that errors, fraud,
or noncompliance in amounts that would be material to the statements of
expenditures may occur and not be detected promptly by employees in the
normal course of performing their duties. Our internal control work
would not necessarily disclose all material weaknesses.
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. The counsels are also responsible for
establishing, maintaining, and assessing internal control to provide
reasonable assurance that the following internal control objectives are
met and for complying with applicable laws and regulations.
* 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.
* 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 (1) obtaining reasonable assurance about whether
the counsels' statements of expenditures are presented fairly, in all
material respects, in conformity with the basis of accounting described
in the notes accompanying their statements of expenditures; (2)
obtaining a sufficient understanding of internal control over financial
reporting and compliance to plan the audits; and (3) testing compliance
with selected provisions of laws and regulations that have a direct and
material effect on the statements.
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; and (5) tested compliance with selected provisions of 28
U.S.C. §§ 591-599 (2000), 5 U.S.C. Chapter 55, and regulations relating
to pay administration.
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. In addition, we
caution that our internal control testing may not be sufficient for
other purposes.
We did not test compliance with all laws and regulations applicable to
the offices of independent counsel. We limited our tests of compliance
to those laws and regulations that we deemed applicable to the
statements of expenditures. 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 offices of independent
counsel, the Department of Justice, and AOUSC for review and comment.
These entities agreed with the facts and conclusions in our report.
Signed by:
McCoy Williams:
Director, Financial Management and Assurance:
March 15, 2004:
List of Committees:
The Honorable Ted Stevens:
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 Governmental Affairs:
United States Senate:
The Honorable Orrin G. Hatch:
Chairman:
The Honorable Patrick J. Leahy:
Ranking Minority Member:
Committee on the Judiciary:
United States Senate:
The Honorable C.W. Bill Young:
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:
[End of section]
Appendixes:
Appendix I: Statement of Expenditures for Independent Counsel Barrett:
[See PDF for image]
[End of figure]
Appendix II: Statement of Expenditures for Independent Counsel Thomas:
[See PDF for image]
[End of figure]
(195025):
FOOTNOTES
[1] The term expenditures as used in this report generally means cash
disbursed.
[2] The objectives of internal control are to provide reasonable
assurance that management maintained effective internal control over
financial reporting (including safeguarding assets) and compliance with
laws and regulations.
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