GAO-07-1205, Financial Audit: Special Counsel Expenditures for the Six Months Ended March 31, 2007


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United States Government Accountability Office: GAO: 

Report to Congressional Committees: 

September 2007: 

Financial Audit: 
Special Counsel Expenditures for the Six Months Ended March 31, 2007: 

GAO-07-1205:

Contents: 

Letter: 

Auditor's Report: 

Background: 

Opinion on Statement of Expenditures: 

Opinion on Internal Control: 

Compliance with Laws and Regulations: 

Objectives, Scope, and Methodology: 

Agency Comments: 

Appendix I: Statement of Expenditures for Special Counsel Fitzgerald: 

Abbreviations: 

AOUSC: Administrative Office of the U.S. Courts: GAO: Government 
Accountability Office: FBI: Federal Bureau of Investigation: OIC: 
Office of Independent Counsel: OSC: Office of Special Counsel: 

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

September 28, 2007: 

Congressional Committees: 

Enclosed is our report on our audit of the statement of expenditures 
for the Office of Special Counsel Patrick J. Fitzgerald for the 6 
months ended March 31, 2007. Our audit was designed to determine 
whether the statement of expenditures was 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 Special Counsel, and other interested 
parties. Copies of this report will be made available to others upon 
request. In addition, the report will be available at no charge on 
GAO's Web site at [hyperlink, http://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. GAO staff who made major 
contributions to this report are Julie Phillips, Assistant Director; 
Kwabena Ansong; and Alyson Mahan. 

Signed by: 

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

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

Congressional Committees: 

This report presents the results of our audit of expenditures[Footnote 
1] reported by the Office of Special Counsel Patrick J. Fitzgerald for 
the 6 months ended March 31, 2007. The Department of Justice and the 
independent counsels are required under 28 U.S.C. з 594 (d)(2), (h) and 
з 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. з 
596 (c)(2), we are required to audit the statement of expenditures 
prepared by any active independent counsels. For the 6 months ended 
March 31, 2007, there were no active independent counsels. However, we 
audited the statement of expenditures of Special Counsel Fitzgerald, 
who is authorized by the Department of Justice to fund his operation 
from the permanent, indefinite appropriation. 

In our audit covering the 6 months ended March 31, 2007, we found: 

* the statement of expenditures presented in appendix I for the Office 
of Special Counsel Patrick J. Fitzgerald, is presented fairly, in all 
material respects, in conformity with the basis of accounting described 
in note 1 of the 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 March 31, 2007; and: 

* no reportable noncompliance with laws and regulations we tested. 

Our audit was designed to determine whether the statement of 
expenditures is 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 our 
conclusions with respect to our opinion and compliance with laws and 
regulations; discuss the objectives, scope, methodology of our audit; 
and contain agency comments. 

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. зз 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 directed 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. 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] 

As ordered by the Special Division, the Office of Independent Counsel 
Barrett, the last independent counsel to serve under the law, was 
terminated on May 3, 2006, and accordingly, no longer prepares a 
statement of expenditures. However, after that date, the Administrative 
Office of the United States Courts (AOUSC) continued to perform 
administrative responsibilities and maintain the administrative records 
for the terminated office. During the 6 months ended March 31, 2007, 
several payments on that counsel's behalf were made, including $26,922 
primarily for severance pay, $6,991 for printing of the final report, 
and $1,113 for support services rendered by AOUSC.[Footnote 4] However, 
we are not expressing an opinion on these amounts. 

Opinion on Statement of Expenditures: 

The statement of expenditures, including the accompanying notes, for 
the Office of Special Counsel Patrick J. Fitzgerald presents fairly, in 
all material respects, the expenditures of the counsel for the 6 months 
ended March 31, 2007, on the basis of accounting described in note 1 of 
the counsel's statement. 

The counsel prepared the statement 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 the counsel's statement. The 
counsel's statement includes only expenditures made from the permanent, 
indefinite appropriation. 

Opinion on Internal Control: 

Special Counsel Fitzgerald maintained, in all material respects, 
effective internal control over financial reporting (including 
safeguarding assets) and compliance with laws and regulations as of 
March 31, 2007, that provided reasonable assurance that misstatements, 
losses, or noncompliance material in relation to the statement 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] 

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: 

Though not required to do so, the special counsel elected to prepare a 
statement of expenditures in conformity with the basis of accounting 
described in the accompanying notes. Additionally, the counsel is 
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 statement of 
expenditures in conformity with the basis of accounting described in 
the notes to the statement, 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 counsel's statement of expenditures. 

We are responsible for obtaining reasonable assurance about whether (1) 
the counsel's statement of expenditures is presented fairly, in all 
material respects, in conformity with the basis of accounting described 
in the notes accompanying the statement of expenditures; and (2) the 
special counsel maintained effective internal control over financial 
reporting and compliance as of March 31, 2007. We are also responsible 
for testing compliance with selected provisions of laws and regulations 
that could have a direct and material effect on the counsel's statement 
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; (5) tested relevant internal control over 
financial reporting (including safeguarding assets) and compliance; and 
(6) tested compliance with selected provisions of Title 5 of the United 
States Code, the Prompt Pay Act, and selected provisions related to pay 
administration and travel regulations. 

Our audit was designed to determine whether the statement of 
expenditures was 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. 

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 Office of the Special Counsel. We limited our tests of compliance 
to those laws and regulations that could have a direct and material 
effect on the statement of expenditures for the 6 months ended March 
31, 2007. 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 audit in accordance with U.S. generally accepted 
government auditing standards. 

Agency Comments: 

We provided drafts of this report to the Office of Special Counsel, 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: 

September 20, 2007: 

List of Committees: 

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

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

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

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

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

The Honorable John Conyers, Jr.: 
Chairman: 
The Honorable Lamar S. Smith: 
Ranking Member: 
Committee on the Judiciary: 
House of Representatives: 

[End of section] 

Appendix I: Statement of Expenditures for Special Counsel Fitzgerald: 

PATRICK J. FITZGERALD: 
Office of Special Counsel: 

Statement of Expenditures:  
(Principally cash basis - see Note 1): 

Six Months Ended March 31, 2007: 

Personnel compensation and benefits: $592,837; Witness expenses (note 
2): 25,932; Travel (note 3): 112,025;
Contractual services (note 4): 11,438; Acquisition of equipment (note 
5): 23,479; Supplies and materials (note 6): 5,127; Total expenditures: 
$770,838. 

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, 2007. 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 (CIA) officer. In March 2007, an 
administration official was convicted of perjury, lying to the Federal 
Bureau of Investigation (FBI), and obstruction of justice in the 
investigation. Expenditures during this period principally relate to 
the investigation and trial of this official on perjury and obstruction 
of justice charges. 

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 - Witness expenses: 

Witness expenses consist of fact and expert witness fees and expenses 
which are required to be paid to witnesses who testify on behalf of the 
government. 

Note 3 - Travel: 

Travel primarily consists of expenditures for investigation and trial-
related travel for Office of Special Counsel personnel. 

Note 4 - 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 and trial. 

Note 5 - Acquisition of equipment: 

The expenditures are for noncapitalized personal property, such as 
general office equipment and computer equipment used for copying, 
maintenance, and destruction of documents. This equipment will remain 
the property of the federal government at the conclusion of the 
investigation. 

Note 6 - Supplies and materials: 

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

[End of section] 

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, з 101(a), title II, 101 Stat. 1329, 1329-9 (Dec. 22, 
1987), 28 U.S.C. з 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] The Independent Counsel Law designated specific responsibilities to 
AOUSC for the administrative support of independent counsels. The 
Department of Justice periodically disburses lump-sum payments to AOUSC 
for this purpose. 

[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]. 

[End of section} 

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