oversight

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)

                           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