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 Ordering Information The first copy of each GAO report and testimony is free. 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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)