Illlllllllll~lllllllllllllllllllllllllllllllilllll LM090599 Audit Of T Calendar Year 197 B-133046 United States Senate BY THE GENERAL OF THE s COMPTROLLER GENE- OF THE UhlIT’ED STATES WASHINGTON. D.C. 20548 B-133Q46 I " ' \ Dear Mr. Dunphy: / The General Accounting Office has made an audit of the I i operations of the Senate Office Beauty Shop for calendar C:- 7 . : > j . year 1970, pursuant.toV your request dated December 22) 1978. Our audit included an examination of the financial statements, appropriate tests of the accounting recordF;*>and such other auditing procedures as we considered necessary. GENERAL COMMENTS The beauty shop was established to provide convenient, efficient, and economical services to employees of the Senate. It has been operated as a gratuitous concession; that is, the concessionaire pays no fee for the privilege of operating the shop. Mrs. Myrtle B. Olivier has operated the beauty shop since September 6, 1967. At December 31, 1970, the staff of the beauty shop con- sisted of the concessionaire, a receptionist, 3 part-time maids, a janitor, a part-time manicurist, and 9 beauticians. Six of the beauticians quit shortly after the close of the calendar year. Five new operators have been hired to replace them, but, because the new operators do not have an established clientele, sales have decreased. During the first 4 months of 1971, sales were approximately $14,000 less than during the same period in 1970. We note that low-cost items, such as ashtrays and plastic wastebaskets, are being charged to the equipment account and are being depreciated and that the equipment and depreciation accounts are not being adjusted when the items are no longer useful and are discarded. We suggest that the concessionaire adopt the practice of charging items costing less than $50 as an operating expense at the time of acquisition and thus avoid unnecessary accounting. In our last year’s report, we pointed out that the con- cessionaire was continuing to make payments from cash receipts for such expenses as laundry and insurance. This practice resulted in cash payments in 1970 of about $4,700 a 50 TH ANNIVERSARY 1921- 1971 B-133046 During our examination we noted that a number of minor errors had been made in posting these payments to the various accounts. In the interest of providing better financial control over these payments and of improving the accuracy of recording them, we suggest that in the future expenses of this nature be paid by check. We noted that prices for the shopls services had not been changed since 1969 and that only a few prices had been increased then. Costs for many of the supply items have gone up since the present concessionaire took over the shop in 1967. Also commissions paid to the beauticians were increased from 50 percent to 55 percent in 1968. These factors contributed to the decrease in the net income of the shop. The concessionaire, however, did not decrease the amount of her withdrawals to coincide with the decrease in the shop's net income. Her withdrawals increased from $7,778 in 1969 to $9,781 in 1970, although the net income decreased from $7,641 to $3,731 during the same period. This resulted in a negative balance of $4,915 in the concessionaire!s capital account at December 31, 1970. OPINION OF THE FINANCIAL STATEMENTS The accompanying financial statements are based on the statements furnished to us by the firm of certified public accountants employed by the concessionaire to maintain the accounting records of the shop. The accompanying statements include: 1. An increase in sales and in other deductions for unrecorded receipts lost in a robbery. 2. An adjustment of the amounts for equipment items discarded and for new items acquired. 3. An adjustment of the cash balance for errors disclosed in the bank reconciliation at December 31, 1970. 4. An increase in the concessionaire's withdrawals for personal insurance costs. 2 B-133046 These adjustments should be made in the accounting records. The statements-do not include the cost of certain bene- fits and services, such as space, telephone, utilities, paint- ing, and repairs, which had been furnished to the beauty shop without charge. In our opinion, the accompanying statements (schedules 1, 2, and 3), which were prepared on a basis consistent with that of the preceding period and in accordance with the accounting practice and financial arrangements described above, present fairly the financial position of the Senate Qffice Beauty Shop at December 31, 1970, the results of its operations, and the source and application of its funds for the year then ended. Sincerely yours, oller General of the United States The Honorable Robert G. Dunphy Sergeant at Arms , United States Senate i ,' :- . SCHEDULE 1 . SENATE OFFICE BEAUTY SHOP COMPARATIVE BALANCE SHEET DECEMBER 31, 1970 AND 1969 1970 -- 1969 ASSETS CURRENT ASSETS: Cash in bank and on Sand $ 479 $ 1,481 Inventory (note a1 859 2,218 prepaid expenses - 1 128 1,605 Total current assets $ 2,466 $ 5,304 FURNITURE AND EQUIPMENT: Furniture and equipment at cost 19,134 lS,130 Less depreciation to date - 8 947 6,101 Net furniture and equipment 10,187 13,029 OTHER ASSETS: Prepaid interest -- 450 TOTAL ASSETS -$12 653 $18,783 LIABILITIES CURRENT LIABILITIES: Note payable--American Security and Trust Company--current maturities $ 2,950 $5,900 Note payable--McLachlen Bank 419 Loan payable--Mrs. Mable Zimmenan Solomon 2,000 Accounts payable (note b) 7,730 6,152 Bank overdraft 937 Taxes collected, withheld, and accrued 3,336 2,025 Accrued salaries 196 621 Total current liabilities $17,568 $14,698 LONG-TERM OBLIGATIONS: Note payable--American Security and Trust Company 8,850 Less current maturities 5,900 - 2 950 TOTAL LIABILITIES 17,568 17,648 PROPRIETARY EQUITY PROPRIETARY EQUITY: Myrtle B. Olivier, capital: Balance--January 1 1,135 1,272 Net income for year ended December Jl--schedule 2 3,731 7.6J1 4,866 8,913 Less withdrawals * -4,915 7,778 1,135 TOTAL LIABILITIES AND PROPKIETARY EQUITY -$12 653 $18,783 a GAO notes: Inventory includes operating supplies, wigs, and supplies for resale. b Accounts payable (for both years) includes $2,396.66 due Mrs. Mable Zimmerman Solomon for equipment. SCHEDULE 2 SENATE OFFICE BEAUTY SHOP COMPARATIVE INCOME STATFMENT FOR THE YEARS ENDED DECEMBER 31, 1970 AND 1969 1970 1969 -- INCOME: Beauty shop operations $102,444 $102,369 Sale of supplies and wigs 2,067 4,940 Total income $104,511 $107,309 Less cost of goods sold and consumed in operations 12,921 13,693 Less operators' commissions and/or wages 56,312 69,233 56,951 70,644 GROSS PROFIT FROM OPERATIONS 35,278 36,665 OPERATING EXPENSES: Salaries and wages-- receptionist, manicurist, janitor, and maids 14,910 14,352 Taxes 4,773 4,032 Depreciation 2,865 3,446 Laundry 2,995 2,712 Insurance 1,735 1,794 Accounting 480 1,205 Interest and finance charges 979 903 Bank service charges 111 102 Miscellaneous 593 -- 515 . Total expenses 29,441 29,061 5,837 7,604 MISCELLANEOUS INCOME 37 OTHER DEDUCTIONS: Loss on disposal of equipment 22 Loss from robbery 2,084 2,106 -- NET INCOME FOR YEAR ENDED DECEMBER 31 $3,731 $7,641 . SCHEDULE 3 SENATE OFFICE EEAUTY SHOP COMPARATIVE STATEMENT OF SOURCE AND APPLICATION OF FUNDS FOR THE YEARS ENDED DECEMBER 31, 1970 AND 1969 1970 1969 FUNDS PROVIDED: Sales $104,511 $187,309 Miscellaneous 37 Decrease in working capital 5,708 1,691 Transfer of long-term prepaid interest to current assets 450 900 Total funds provided $110,669 $109,937 FUNDS APPLIED: Costs (Excluding depreciation) $ 95,809 $ 96,259 Equipment addition 45 Portion of long-term liability transferred to current liability 2,950 5,900 Robbery loss 2,084 Withdrawals by owner 9,781 7,778 Total funds applied $110,669 $109,937
Audit of the Senate Office Beauty Shop, Calendar Year 1970
Published by the Government Accountability Office on 1971-09-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)