oversight

Financial Audit: Independent Counsel Expenditures for the Six Months Ended September 30, 1996

Published by the Government Accountability Office on 1997-03-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Committees




March 1997
                 FINANCIAL AUDIT
                 Independent Counsel
                 Expenditures for the
                 Six Months Ended
                 September 30, 1996




GAO/AIMD-97-64
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Accounting and Information
      Management Division

      B-275388

      March 31, 1997

      Congressional Committees

      Enclosed is our opinion on the statements of expenditures of six offices of
      independent counsel for the 6 months ended September 30, 1996. This
      audit was required by 28 U.S.C. 596(c)(2) (1994) and Public Law 100-202.

      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 will be made
      available to others upon request.




      David L. Clark
      Director, Audit Oversight and Liaison




      Page 1                                     GAO/AIMD-97-64 Independent Counsels
Contents



Letter                                                          1


Opinion Letter                                                  4


Appendix I                                                     10

Statement of
Expenditures for
Independent Counsel
Adams/Thompson
Appendix II                                                    13

Statement of
Expenditures for
Independent Counsel
Barrett
Appendix III                                                   16

Statement of
Expenditures for
Independent Counsel
diGenova/Zeldin
Appendix IV                                                    18

Statement of
Expenditures for
Independent Counsel
Pearson




                      Page 2   GAO/AIMD-97-64 Independent Counsels
                      Contents




Appendix V                                                                                      21

Statement of
Expenditures for
Independent Counsel
Smaltz
Appendix VI                                                                                     24

Statement of
Expenditures for
Independent Counsel
Starr




                      Abbreviations

                      AOUSC      Administrative Office of the U.S. Courts
                      FBI        Federal Bureau of Investigation
                      IRS        Internal Revenue Service
                      OIC        Office of Independent Counsel


                      Page 3                                    GAO/AIMD-97-64 Independent Counsels
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             Accounting and Information
             Management Division

             B-275388

             Congressional Committees

             This report presents the results of our audits of expenditures1 reported by
             six offices of independent counsel for the 6 months ended September 30,
             1996. The Department of Justice and the independent counsels are
             required under 28 U.S.C. 594(d)(2),(h), and 596(c)(1) (1994) to report on
             expenditures from a permanent, indefinite appropriation established
             within Justice to fund independent counsel activities. To satisfy the
             requirements of 28 U.S.C. 596(c)(2) and Public Law 100-202, we audit the
             statements of expenditures prepared by the independent counsels.

             We found that the statements of expenditures presented in appendixes I
             through VI, respectively, for the offices of independent counsel Arlin M.
             Adams/Larry D. Thompson, David M. Barrett, Joseph E. diGenova/Michael
             F. Zeldin, Daniel S. Pearson, Donald C. Smaltz, and Kenneth W. Starr were
             reliable in all material respects. Our consideration of internal controls,
             which was limited for the purpose of determining our procedures for
             auditing the statements of expenditures, disclosed no material
             weaknesses. Further, our audits included limited tests of compliance with
             laws and regulations that disclosed no reportable instances of
             noncompliance with the laws and regulations we tested.

             The following sections provide background information, outline each
             conclusion in more detail, and discuss the scope of our audits.


             The Ethics in Government Act of 1978 amended title 28 of the United
Background   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
             (1994)) is intended to preserve and promote the accountability and
             integrity of public officials and of the institutions of the federal
             government. The Independent Counsel Reauthorization Act of 1994 further
             amended title 28 of the United States Code to establish certain procedural
             requirements and extend the law’s expiration date to June 30, 1999.

             The independent counsel law directs the Department of Justice to pay all
             costs relating to the establishment and operation of independent counsel
             offices and designates specific responsibilities to the Administrative Office
             of the U.S. Courts (AOUSC) for independent counsels’ administrative

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



             Page 4                                                    GAO/AIMD-97-64 Independent Counsels
                B-275388




                support. Justice periodically disburses lump-sum payments to AOUSC for
                this purpose.

                In 1987, Public Law 100-202 established a permanent, indefinite
                appropriation within Justice to fund expenditures by independent
                counsels. Independent counsels are required to report their expenditures
                from the appropriation for each 6-month period in which they have
                operations. We are required to audit expenditures from the permanent,
                indefinite appropriation and to report our findings to appropriate
                congressional committees.

                During any 6-month period, other significant costs incurred in support of
                the work of independent counsels are paid from appropriations other than
                the permanent, indefinite appropriation established to fund independent
                counsel activities. These costs arise, for example, from the use of detailees
                from other federal agencies, such as the Federal Bureau of Investigation
                (FBI). Independent counsels are not required to and do not include such
                costs in their statements of expenditures. However, these unaudited costs
                are identified and discussed in the notes to the statements presented in the
                appendixes to this report.

                Also, these statements and related notes do not include certain
                expenditures related to the investigation by former independent counsel
                Lawrence E. Walsh. Mr. Walsh’s office officially closed in March 1994, and
                accordingly, no longer prepares financial statements. However, in
                December 1995 and January 1996, a special division of the U.S. Court of
                Appeals for the D.C. Circuit awarded reimbursements of $62,474 for
                attorneys’ fees and expenses to individuals who had been investigated by
                Mr. Walsh but not indicted. The reimbursements were made in April 1996
                from the permanent fund established for the payment of judgments.


                The statements of expenditures, including the accompanying notes, for the
Opinion on      offices of independent counsel Arlin M. Adams/Larry D. Thompson, David
Statements of   M. Barrett, Joseph E. diGenova/Michael F. Zeldin, Daniel S. Pearson,
Expenditures    Donald C. Smaltz, and Kenneth W. Starr present fairly, in all material
                respects, in conformity with a comprehensive basis of accounting other
                than generally accepted accounting principles, as described in note 1 to
                each office’s statement, the respective expenditures of each office for the
                6 months ended September 30, 1996. The statements of expenditures and
                related notes regarding the basis of accounting and additional pertinent
                information are in appendixes I through VI.



                Page 5                                     GAO/AIMD-97-64 Independent Counsels
                           B-275388




                           We gained an understanding of internal controls designed to
Consideration of
Internal Control       •   safeguard assets against loss from unauthorized acquisition, use, or
Structure                  disposition;
                       •   assure the execution of transactions in accordance with laws governing
                           the use of budget authority and with other laws and regulations that have a
                           direct and material effect on the statements of expenditures; and
                       •   properly record, process, and summarize transactions to permit the
                           preparation of reliable statements of expenditures and to maintain
                           accountability for assets.

                           The purpose of our consideration of internal controls was to determine
                           our procedures for auditing the statements of expenditures, and
                           accordingly, we do not express an opinion on internal controls. However,
                           for the controls we tested, we found no material weaknesses in the
                           internal control structure and its operations for the 6-month period ended
                           September 30, 1996. A material weakness is a condition in which the
                           design or operation of one or more of the internal control structure
                           elements does not reduce to a relatively low level the risk that errors or
                           irregularities 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.


                           Our audit tests for compliance with selected provisions of laws and
Compliance With            regulations disclosed no instances of noncompliance that would be
Laws and Regulations       reportable under 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.


                           In order to carry out their financial operations and to ensure
Objectives, Scope,         accountability, independent counsels are responsible for
and Methodology
                       •   preparing statements of expenditures in conformity with the basis of
                           accounting described in the accompanying notes,
                       •   establishing and maintaining an internal control structure to provide
                           reasonable assurance that the internal control objectives previously
                           mentioned are met, and
                       •   complying with applicable laws and regulations.



                           Page 6                                     GAO/AIMD-97-64 Independent Counsels
    B-275388




    We are responsible for obtaining reasonable assurance about whether the
    statements of expenditures reported by independent counsels are reliable
    (free of material misstatement and presented fairly, in all material
    respects, in conformity with the basis of accounting described in the
    accompanying notes). Also, we are responsible for obtaining a sufficient
    understanding of internal controls to plan the audits, and for testing
    compliance with selected provisions of laws and regulations.

    In order to fulfill these responsibilities, for each independent counsel, we

•   examined, on a test basis, evidence supporting the amounts and
    disclosures in the statement of expenditures and notes thereto, except
    items indicated as unaudited;
•   assessed the accounting principles used by management;
•   evaluated the overall presentation of the statement of expenditures;
•   obtained an understanding of the internal control structure related to
    safeguarding assets, compliance with laws and regulations, including
    execution of transactions in accordance with budget authority, and
    financial reporting;
•   tested relevant internal controls over safeguarding assets, compliance, and
    financial reporting; and
•   tested compliance with certain aspects of selected provisions of the
    independent counsel provisions of 28 U.S.C. 591-599 (1994), 5 U.S.C.
    Chapter 55, and implementing regulations relating to pay administration.

    We limited our internal control testing to those controls necessary to
    achieve the objectives outlined in our statement on internal controls.
    Because of inherent limitations in any internal control structure, losses,
    noncompliance, or misstatements 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 obtained, but did not audit, information on costs that were not paid
    from the permanent, indefinite appropriation established to fund
    independent counsel activities. We obtained information on these costs
    from the independent counsel offices; Justice, including the FBI; the
    Internal Revenue Service; the Office of Inspector General of the
    Department of Housing and Urban Development; the Office of Inspector
    General for the Department of Agriculture; the Office of Investigations of




    Page 7                                      GAO/AIMD-97-64 Independent Counsels
B-275388




the U.S. Customs Service; and the Office of Inspector General of the
Federal Deposit Insurance Corporation.

We discussed the results of our work with representatives of the six
offices of independent counsel and representatives of AOUSC and Justice,
and incorporated their comments where appropriate.

We performed our audits in accordance with generally accepted
government auditing standards.




David L. Clark
Director, Audit Oversight and Liaison

March 14, 1997




Page 8                                    GAO/AIMD-97-64 Independent Counsels
B-275388




List of Committees

The Honorable Ted Stevens
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

The Honorable Fred Thompson
Chairman
The Honorable John Glenn
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 Bob Livingston
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Dan Burton
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform and Oversight
House of Representatives

The Honorable Henry J. Hyde
Chairman
The Honorable John Conyers, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives


Page 9                               GAO/AIMD-97-64 Independent Counsels
Appendix I

Statement of Expenditures for Independent
Counsel Adams/Thompson




              Page 10          GAO/AIMD-97-64 Independent Counsels
Appendix I
Statement of Expenditures for Independent
Counsel Adams/Thompson




Page 11                                     GAO/AIMD-97-64 Independent Counsels
Appendix I
Statement of Expenditures for Independent
Counsel Adams/Thompson




Page 12                                     GAO/AIMD-97-64 Independent Counsels
Appendix II

Statement of Expenditures for Independent
Counsel Barrett




              Page 13          GAO/AIMD-97-64 Independent Counsels
Appendix II
Statement of Expenditures for Independent
Counsel Barrett




Page 14                                     GAO/AIMD-97-64 Independent Counsels
Appendix II
Statement of Expenditures for Independent
Counsel Barrett




Page 15                                     GAO/AIMD-97-64 Independent Counsels
Appendix III

Statement of Expenditures for Independent
Counsel diGenova/Zeldin




               Page 16         GAO/AIMD-97-64 Independent Counsels
Appendix III
Statement of Expenditures for Independent
Counsel diGenova/Zeldin




Page 17                                     GAO/AIMD-97-64 Independent Counsels
Appendix IV

Statement of Expenditures for Independent
Counsel Pearson




              Page 18          GAO/AIMD-97-64 Independent Counsels
Appendix IV
Statement of Expenditures for Independent
Counsel Pearson




Page 19                                     GAO/AIMD-97-64 Independent Counsels
Appendix IV
Statement of Expenditures for Independent
Counsel Pearson




Page 20                                     GAO/AIMD-97-64 Independent Counsels
Appendix V

Statement of Expenditures for Independent
Counsel Smaltz




              Page 21          GAO/AIMD-97-64 Independent Counsels
Appendix V
Statement of Expenditures for Independent
Counsel Smaltz




Page 22                                     GAO/AIMD-97-64 Independent Counsels
Appendix V
Statement of Expenditures for Independent
Counsel Smaltz




Page 23                                     GAO/AIMD-97-64 Independent Counsels
Appendix VI

Statement of Expenditures for Independent
Counsel Starr




              Page 24          GAO/AIMD-97-64 Independent Counsels
Appendix VI
Statement of Expenditures for Independent
Counsel Starr




Page 25                                     GAO/AIMD-97-64 Independent Counsels
           Appendix VI
           Statement of Expenditures for Independent
           Counsel Starr




(911734)   Page 26                                     GAO/AIMD-97-64 Independent Counsels
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