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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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