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
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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
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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.
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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.
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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.
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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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Address Correction Requested
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)