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Report to Congressional Committees: 

September 2005: 

Financial Audit: 

Independent and Special Counsel Expenditures for the Six Months Ended 
March 31, 2005: 

GAO-05-961: 

Contents: 

Letter: 

Auditor's Report: 

Background: 

Opinions on Statements of Expenditures: 

Opinions 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: 

Letter September 30, 2005: 

Congressional Committees: 

Enclosed is our report on the statements of expenditures for the two 
active counsels--one office of independent counsel and one office of 
special counsel--for the 6 months ended March 31, 2005. Our audit was 
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 thereof. 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 audit, 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 www.gao.gov. 

Please contact me at (202) 512-3406 or sebastians@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 Hodge Herry, Assistant Director; Kwabena Ansong; and Sunny T. 
Chang. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

Auditor's Report 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 March 31, 2005. The Department 
of Justice and the independent counsel 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 March 31, 2005, 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;

* each of the counsels had effective internal control over financial 
reporting (including safeguarding assets) and compliance with laws and 
regulations as of March 31, 2005; and: 

* no reportable noncompliance with laws and regulations we tested. 

Our audit was 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 
thereof. 

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. 

The statements of expenditures and related notes included in this 
report do not include expenditures related to the investigation by 
Independent Counsel Julie F. Thomas, which was officially closed 
effective March 23, 2004, and accordingly, no longer prepares a 
statement of expenditures. However, during the 6 months ended March 31, 
2005, several payments on that counsel's behalf were incurred, 
including $38,145 primarily for severance pay and $1,631 for support 
services rendered by AOUSC while the office was still open. 

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 March 31, 2005, 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. 

Opinions on Internal Control: 

Each of the counsels maintained, in all material respects, effective 
internal control over financial reporting (including safeguarding 
assets) and compliance as of March 31, 2005, 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 for each counsel is based on 
criteria we established in our Standards for Internal Control in the 
Federal Government.[Footnote 4]

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) each 
counsel maintained effective internal control over financial reporting 
and compliance as of March 31, 2005. 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, for each counsel, 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; (5) tested relevant internal control over financial 
reporting (including safeguarding assets) and compliance; and (6) 
tested compliance with selected provisions of 28 U.S.C.  591-599, 5 
U.S.C. Chapter 55, and regulations relating to pay administration. 

Our audit was 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. 

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. 

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 
March 31, 2005. 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 
and the office of special counsel, the Department of Justice, and AOUSC 
for review and comments. The agency officials agreed with the facts and 
conclusions in our report. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

September 15, 2005: 

List of Committees: 

The Honorable Thad Cochran: 
Chairman: 
The Honorable Robert C. Byrd: 
Ranking Minority Member: 
Committee on Appropriations: 
United States Senate: 

The Honorable Susan M. Collins: 
Chairman: 
The Honorable Joseph I. Lieberman: 
Ranking Minority Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Arlen Specter: 
Chairman: 
The Honorable Patrick J. Leahy: 
Ranking Minority Member: 
Committee on the Judiciary: 
United States Senate: 

The Honorable Jerry Lewis: 
Chairman: 
The Honorable David R. Obey: 
Ranking Minority Member: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Tom Davis: 
Chairman: 
The Honorable Henry A. Waxman: 
Ranking Minority Member: 
Committee on Government Reform: 
House of Representatives: 

The Honorable F. James Sensenbrenner, Jr.: 
Chairman: 
The Honorable John Conyers, Jr.: 
Ranking Minority Member: 
Committee on the Judiciary: 
House of Representatives: 

[End of section]

Appendixes: 

Appendix I: Statement of Expenditures for Independent Counsel Barrett: 

DAVID M. BARRETT: 

Office of Independent Counsel: 
Statement of Expenditures (Cash basis): 
Six Months Ended March 31, 2005: 

Personnel compensation and benefits: $464,009; 
Travel (note 2): $24,014; 
Rent, communications, and utilities (note 3): $263,316; 
Contractual services (note 4): $103,233; 
Supplies and materials (note 5): $1,992; 
Administrative services (note 6): $74,178; 
Total expenditures: $930,742. 

[End of table]

The accompanying notes are an integral part of this statement. 

DAVID M. BARRETT: 
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 March 31, 2005. The statement of 
expenditures includes only expenditures made from the permanent, 
indefinite appropriation for the OIC that are processed during the 
period 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 former 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 non investigative and nonprosecutorial tasks 
remaining as required to conclude the functions of his office. He 
submitted his final report under seal to the Special Division in August 
2004. OIC-Barrett is awaiting a determination by the Special Division 
whether to release the final report to the public. The independent 
counsel anticipates that, subject to the court's direction, his 
remaining statutory duties will be concluded by the end of this 
calendar year or the beginning of 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 primarily consists of expenditures for investigation-related 
travel paid for OIC-Barrett personnel and contractors. 

Note 3 -Rent, communications, and utilities: 

Approximately $232,486 in office rent is included in rent, 
communications, and utilities. 

Note 4 -Contractual services: 

Contractual services primarily consist of expenditures for the services 
of contractors relating to sealed matters in front of the Special 
Division concerning the final report. 

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 $46,656 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] 

Statement of Expenditures for Special Counsel Fitzgerald: 

PATRICK J. FITZGERALD: 
Office of Special Counsel: 
Statement of Expenditures (Cash basis): 
Six Months Ended March 31, 2005: 

Personnel compensation and benefits (note 2): $48,536; 
Travel (note 3): $18,101; 
Rent, communications, and utilities (note 4): $387; 
Contractual services (note 5): $45,137; 
Supplies and materials (note 6): $63; 
Acquisition of equipment (note 7): $326; 
Total expenditures: $112.550. 

[End of table]

The accompanying notes are an integral part of this statement. 

PATRICK J. FITZGERALD: 
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 March 31, 2005. 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 -Personnel costs: 

During this reporting period, an additional cost of approximately 
$35,195 for salaries and benefits associated with employees in the 
Criminal Division of the Department of Justice were reimbursed in June 
2005. These expenditures will appear on the expenditure report for the 
period ending September 30, 2005. 

Also, certain costs were incurred by detailees from the Federal Bureau 
of Investigation involved in the investigation but the associated costs 
were not readily identifiable. Such costs of detailees are not 
reflected in the statement of expenditures. 

Note 3 -Travel: 

Travel primarily consists of expenditures for investigation-related 
travel for OSC-Fitzgerald personnel. 

Note 4 -Rent, communications, and utilities: 

This category primarily consists of charges for express transportation 
of small packages using commercial courier services. 

Note 5 -Contractual services: 

Contractual services primarily consist of expenditures for research 
services in areas of interest to the investigation. 

Note 6 -Supplies and materials: 

The supplies and materials expenditures are primarily for supplies for 
office use. 

Note 7 -Acquisition of equipment: 

The expenditures are for noncapitalized personal property. This 
equipment will remain the property of the federal government at the 
conclusion of the investigation. 

[End of section] 

(196070): 

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] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 
http://www.gao.gov/special.pubs/ai00021p.pdf. 

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