Financial Audit
Independent and Special Counsel Expenditures for the Six Months Ended March 31, 2005 Gao ID: GAO-05-961 September 30, 2005Pursuant 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 March 31, 2005.
In our audits covering the 6 months ended March 31, 2005, we found (1) the statements of expenditures, 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; (2) each of the counsels had effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations as of March 31, 2005; and (3) no reportable noncompliance with laws and regulations we tested.
GAO-05-961, Financial Audit: Independent and Special Counsel Expenditures for the Six Months Ended March 31, 2005
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Report to Congressional Committees:
September 2005:
Financial Audit:
Independent and Special Counsel Expenditures for the Six Months Ended
March 31, 2005:
GAO-05-961:
Contents:
Letter:
Auditor's Report:
Background:
Opinions on Statements of Expenditures:
Opinions on 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 Special Counsel Fitzgerald:
Letter September 30, 2005:
Congressional Committees:
Enclosed is our report on 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 March 31, 2005. Our audit was
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 thereof. 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 audit, 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 sebastians@gao.gov 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 Hodge Herry, Assistant Director; Kwabena Ansong; and Sunny T.
Chang.
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
Auditor's Report Congressional Committees:
This report presents the results of our audits of expenditures[Footnote
1] reported by one office of independent counsel and one office of
special counsel for the 6 months ended March 31, 2005. The Department
of Justice and the independent counsel 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.
In our audits covering the 6 months ended March 31, 2005, we found:
* 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;
* each of the counsels had effective internal control over financial
reporting (including safeguarding assets) and compliance with laws and
regulations as of March 31, 2005; and:
* no reportable noncompliance with laws and regulations we tested.
Our audit was 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
thereof.
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. §§ 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[Footnote 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.[Footnote 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 March 31,
2005, several payments on that counsel's behalf were incurred,
including $38,145 primarily for severance pay and $1,631 for support
services rendered by AOUSC while the office was still open.
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 March 31, 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 March 31, 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.[Footnote 4]
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.
* 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 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 March 31, 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. §§ 591-599, 5
U.S.C. Chapter 55, and regulations relating to pay administration.
Our audit was 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.
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
March 31, 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
and the office of special counsel, the Department of Justice, and AOUSC
for review and comments. The agency officials agreed with the facts and
conclusions in our report.
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
September 15, 2005:
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:
[End of section]
Appendixes:
Appendix I: Statement of Expenditures for Independent Counsel Barrett:
DAVID M. BARRETT:
Office of Independent Counsel:
Statement of Expenditures (Cash basis):
Six Months Ended March 31, 2005:
Personnel compensation and benefits: $464,009;
Travel (note 2): $24,014;
Rent, communications, and utilities (note 3): $263,316;
Contractual services (note 4): $103,233;
Supplies and materials (note 5): $1,992;
Administrative services (note 6): $74,178;
Total expenditures: $930,742.
[End of table]
The accompanying notes are an integral part of this statement.
DAVID M. BARRETT:
Office of Independent 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 Independent Counsel-David M. Barrett
(OIC-Barrett) for the 6 months ended March 31, 2005. The statement of
expenditures includes only expenditures made from the permanent,
indefinite appropriation for the OIC that are processed during the
period through the Administrative Office of the U.S. Courts (AOUSC) and
the OIC. Mr. Barrett was appointed on May 24, 1995, to investigate
certain allegations against the former Secretary of Housing and Urban
Development. On March 17, 2003, the Special Division of the U.S. Court
of Appeals for the D.C. Circuit (Special Division) ordered that the
independent counsel continue his office to the extent necessary or
appropriate to perform the non investigative and nonprosecutorial tasks
remaining as required to conclude the functions of his office. He
submitted his final report under seal to the Special Division in August
2004. OIC-Barrett is awaiting a determination by the Special Division
whether to release the final report to the public. The independent
counsel anticipates that, subject to the court's direction, his
remaining statutory duties will be concluded by the end of this
calendar year or the beginning of 2006.
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 AOUSC or, for noncash transfers, when charged by AOUSC.
Generally, personnel compensation and benefits are recorded at the end
of the pay period when earned.
Note 2 -Travel:
Travel primarily consists of expenditures for investigation-related
travel paid for OIC-Barrett personnel and contractors.
Note 3 -Rent, communications, and utilities:
Approximately $232,486 in office rent is included in rent,
communications, and utilities.
Note 4 -Contractual services:
Contractual services primarily consist of expenditures for the services
of contractors relating to sealed matters in front of the Special
Division concerning the final report.
Note 5 -Supplies and materials:
Supplies and materials expenditures are for supplies for office use,
including archiving records.
Note 6 -Administrative services:
AOUSC receives an administrative fee equal to 3 percent of OIC
expenditures for performing disbursement and accounting functions for
OIC-Barrett. Payment of these fees generally occurs in the month
following the services. Also included in administrative services are
other costs, amounting to $46,656 incurred by the Special Division in
providing administrative guidance and support with respect to
independent counsel offices. These costs were certified by AOUSC, paid
from the independent counsel appropriation, and allocated solely to OIC-
Barrett.
[End of section]
Statement of Expenditures for Special Counsel Fitzgerald:
PATRICK J. FITZGERALD:
Office of Special Counsel:
Statement of Expenditures (Cash basis):
Six Months Ended March 31, 2005:
Personnel compensation and benefits (note 2): $48,536;
Travel (note 3): $18,101;
Rent, communications, and utilities (note 4): $387;
Contractual services (note 5): $45,137;
Supplies and materials (note 6): $63;
Acquisition of equipment (note 7): $326;
Total expenditures: $112.550.
[End of table]
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
(OSC-Fitzgerald) for the 6 months ended March 31, 2005. 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.
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 -Personnel costs:
During this reporting period, an additional cost of approximately
$35,195 for salaries and benefits associated with employees in the
Criminal Division of the Department of Justice were reimbursed in June
2005. These expenditures will appear on the expenditure report for the
period ending September 30, 2005.
Also, certain costs were incurred by detailees from the Federal Bureau
of Investigation involved in the investigation but the associated costs
were not readily identifiable. Such costs of detailees are not
reflected in the statement of expenditures.
Note 3 -Travel:
Travel primarily consists of expenditures for investigation-related
travel for OSC-Fitzgerald personnel.
Note 4 -Rent, communications, and utilities:
This category primarily consists of charges for express transportation
of small packages using commercial courier services.
Note 5 -Contractual services:
Contractual services primarily consist of expenditures for research
services in areas of interest to the investigation.
Note 6 -Supplies and materials:
The supplies and materials expenditures are primarily for supplies for
office use.
Note 7 -Acquisition of equipment:
The expenditures are for noncapitalized personal property. This
equipment will remain the property of the federal government at the
conclusion of the investigation.
[End of section]
(196070):
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, § 101(a), title II, 101 Stat. 1329, 1329-9 (Dec. 22,
1987), 28 U.S.C. § 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 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).
http://www.gao.gov/special.pubs/ai00021p.pdf.
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