Financial Audit
Independent and Special Counsel Expenditures for the Six Months Ended September 30, 2006 Gao ID: GAO-07-531 March 30, 2007This 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.
In our audits covering the 6 months ended September 30, 2006, we found 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; Special Counsel Fitzgerald had effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations as of September 30, 2006; for 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 no reportable noncompliance with laws and regulations we tested.
GAO-07-531, Financial Audit: Independent and Special Counsel Expenditures for the Six Months Ended September 30, 2006
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Report to Congressional Committees:
March 2007:
Financial Audit:
Independent and Special Counsel Expenditures for the Six Months Ended
September 30, 2006:
GAO-07-531:
Contents:
Letter:
Auditor's Report:
Background:
Opinions on Statements of Expenditures:
Conclusion 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:
Abbreviations:
AOUSC: Administrative Office of the U.S. Courts:
GAO: Government Accountability Office:
OIC: Office of Independent Counsel:
OSC: Office of Special Counsel:
March 30, 2007:
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 [Hyperlink, http://www.gao.gov].
Please contact me at (202) 512-3406 or s [Hyperlink,
sebastians@gao.gov] ebastians@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 Paul
Foderaro, Assistant Director; Kwabena Ansong, and Alyson Mahan.
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
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 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.
In our audits covering the 6 months ended September 30, 2006, 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;
* Special Counsel Fitzgerald had effective internal control over
financial reporting (including safeguarding assets) and compliance with
laws and regulations as of September 30, 2006;
* for 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:
* no 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. §§ 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.
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. § 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.[Footnote 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.[Footnote 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:
* 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) 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. §§ 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.
Signed by:
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:
[End of section]
Appendix I: Statement of Expenditures for Independent Counsel Barrett:
David M. Barrett:
Office of Independent Counsel:
Statement of Expenditures (Cash basis):
Six Months Ended September 30, 2006:
Personnel compensation and benefits: $202,159.
Travel (note 2): 437.
Rent, communications, and utilities (note 3): 58,558.
Contractual services (note 4): 88,322.
Supplies and materials (note 5): 1,399.
Administrative services (note 6): 15.565.
Total expenditures: $366,440.
The accompanying notes are an integral part of this statement.
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 September 30, 2006. The statement
of expenditures includes only expenditures made from the permanent,
indefinite appropriation for the OIC that are processed 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 then 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 noninvestigative and nonprosecutorial tasks
remaining of his statutory duties as required to conclude the functions
of his office. The OIC submitted the Final Report under seal to the
Special Division in August 2004. On January 19, 2006, the Final Report
was released to the public, pursuant to the Order of the Special
Division. As ordered by the Special Division, the Office of Independent
Counsel David M. Barrett was terminated on May 3, 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 includes expenditures for transit benefits paid for OIC-Barrett
personnel.
Note 3 - Rent, communications, and utilities:
Approximately $52,281 in office rent is included in rent,
communications, and utilities.
Note 4 - Contractual services:
Contractual services primarily consist of expenditures for the services
of legal consultants and secretaries relating to sealed matters in
front of the Special Division concerning the Final Report and the
closing of the office.
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 $727 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]
Appendix II: Statement of Expenditures for Special Counsel Fitzgerald:
Patrick J. Fitzgerald:
Office of Special Counsel:
Statement of Expenditures (Cash basis):
Six Months Ended September 30, 2006:
Personnel compensation and benefits: $268,198.
Travel (note 2): 50,586.
Contractual services (note 3): 5,964.
Acquisition of capital assets (note 4): 10,708.
Supplies and materials (note 5): 2,100.
Total expenditures: $337,556.
The accompanying notes are an integral part of this statement.
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 September 30, 2006. 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 - Travel:
Travel primarily consists of expenditures for investigation-related
travel for OSC Fitzgerald personnel.
Note 3 - 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.
Note 4 - Acquisition of capital assets:
The expenditures are for noncapitalized property, such as general
office equipment. This equipment will remain the property of the
federal government at the conclusion of the investigation.
Note 5 - Supplies and materials:
The supplies and materials expenditures are primarily for supplies for
office use.
[End of section]
(196126):
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] See, 31 U.S.C. 1304.
[5] 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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