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Audit of Financial Statements Government Services Inc. Year Ended December 31, 1970

Published by the Government Accountability Office on 1971-04-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Audit Of Financial Statements
Government Services, Inc.
Year Ended December 31, 1970
                          B-7   14820




 BY THE CmOMPTROLLERGENERAL
 OF THE UNITED STATES

                  APRIL 1~197 1,
                                        ,’
                      COMPTROLLER       GENERAL       OF      THE   UNITED   STATES
                                      WASHINGTON.      D.C.     20548




B-114820




To
The Board      of Trustees
Government       Services,     Inc.

         The General     Accounting    Office has made an audit,                           pursuant    to your
request,    of GOVERNMENT           SERVICES,    INC.--a     private,                      domestic,     non-
stock, non-profit-sharing         membership    corporation--for                           the year    ended
December      31, 1970.

        The audit included         an examination      of the corporation’s    statement
of assets, liabilities,      and accumulated        income as of December         31, 1970,
and related     statements      of income     and of ‘source and application       of funds
for the year then ended.           The examination       was made in accordance         with
generally     accepted    auditing    standards    and included     such tests of the ac-
counting    records     and other auditing      procedures     as we considered       neces-
sary in the circumstances.

                    OPINION         OF FINANCIAL                    STATEMENTS

        In our opinion,       the accompanying        financial     statements   (schs. 1
through     4) present    fairly    the financial    position     of Government    Services,
Inc., at December        31, 1970, and the results            of its operations   and the
source     and application       of its funds for the year then ended, in confor-
mity with generally         accepted     accounting      principles     applied on a basis
consistent     with that of the preceding          year.




                                                               Comptroller            General
                                                               of the United          States




                  50TH ANNIVERSARY                  1921- 1971
                           Contents
                                                                Page
FINANCIAL STATEXEXt'S

Schedule

    1      Comparative statement of assets, liabilities,
             and accumulated income,  December 31, 1970
             and 1969                                             3
    2      Comparative statement of income,      years ended
             December 31, 1970 and 1969                           4
    3      Statement of source and application      of funds,
             year ended December 31, 1970                         5
    4      Comparative statement of income and expenses
             by division,  years ended December 31, 1970
             and 1969                                             7
           Notes to financial   statements                        8
CIAL STATEKEXCS




  1
                       GOVERNMENT                         SERVICES,                 I N C.

                         COi4i'MtATIVE STATEMENT OF ASSETS, LIABILITIES,

                                         AND ACCUPXJLATEDINCOME
                                      DECMBER 31, 1970 AND 1969

                                                      ASSETS
                                                                                          1970                1969

CURRENT ASSETS:
    Cash                                                                            $     815,525       $     536,938

    Accounts    receivable                                                                264,037             233,537

    Inventories    (at     standard      cost,        which   approximates
       cost):
         Merchandise                                                                      697,872           1,066,828
         Supplies                                                                         265,512              343,215
                                                                                          963,384       '1,410,043

    Prepaid    expenses      and other        current     assets                           82,124             141,497
               Total     current   assets                                               2,125,070           2,324,015
INVESTMENTS:
    U.S. Government bonds at cost less amortized premiums
       (market value $94.190 in 197qand $68,320 in 1969)                                100.723                80.437
    Certificates   of deposit                                                        1,350;000
    U.S. Treasury bills                                                                                       388,338
                                                                                     1,450,723                468,775

SPECIAL FUND FOR REPLACEMENT OF GOVERNMENT-OWNED  EQUIPMENT
  (note 1):
    U.S. Government bonds at cost less amortized premiums
       (market value $94,190 in 1970 and $102,480 in 1969)                                100,000             120,655

LAND                                                                                      371,503             371,503
BUILDTRGS AND EQUIPMENT:
    Buildings                                                                        1,198,643           1,198,643
    Operating equipment                                                              4,127,764           4,261,801
    Leasehold improvements            (note      2)                                  2,202,896           2,204,785
                                                                                     7,529,323           7,685,229

    Less accumulated         depreciation         and amortization                   5,320,711           5,195,012
                                                                                     2,208,612           2,490,217

DEFERRED EXPENSES                                                                         52,597               57,148

               Total     assets                                                     $6,308,505          $5
                                                                                                         -II- 832 313

       The notes        on pages 8 and 9 are an integral                part   of this     statement.
                                                                                                               SCHEDULE1




     LIABILITIES                               AND         ACCUMULATED                    INCOME
                                                                                        1970            1969
CURREhT LIABILITIES:
   Accounts payable                                                               $     632,177    $    361,578
   Accrued franchise      fees (note             3)                                     203,017         646,998
   Accrued taxes                                                                        107,858         155,294
    Payroll  deductions    withheld                                                      76,624         209,998
    Fringe benefits    payable                                                           56,486          59,697
   Real estate mortgage--current                     installments                         5,500          11,000
    Other current liabilities                                                            55,189          49,352
         Total     current       liabilities                                          1,138,851    1,493,917




REAL ESTATE MORTGAGE                                                                                       5,500




RESERVES:
    For replacement    or         major repair of Government-owned
      equipment (note            1)                                                     333,271          100,000
    For replacement    of         National  Gallery equipment                             5,000            5,000
    Self-insurance                                                                       86,434           82,145
    Special retirement             benefits                                              31,263           32,352
                                                                                        455,968          219,497




ACCUWLATED INCOME:
    Balance at beginning    of year                                                   4,113,399        4,367,794
    Net income or loss(-)     for year (schedule 2)                                       77,824        -254,395
    Franchise  fees applicable    to 1969 and 1968 waived                    by
      GSA (note 3)                                                                      522,463            -

    Balance      at end of year                                                       4,713,686        4,113,399
         Total     liabilities          and accumulated         income            $6,308,505       $5,832,313




                                                                         3
SCHEDULE2


                                GOVERNMENT                            SERVICES,                          I N c.




                                               COIQARATIVE       STATEMENT OF INCOME

                                         YEARS ENDED DECEMBER 31,               1970 AND 1969



                                                                                     1970                                     1969

NET SALES AND OTHER OPERATlNG INCOME                                                   $23,353,330                              $22,863,¶64
    Less cost of goods sold                                                              8,562,329                                 8,132,167

                  Gross    profit       on sales                                          14,791,001                                14,731,797

OPERATING EXPENSES:
    Payroll        and related        expenses                       $10,776,400                              $11,221,359
    Employee         travel                                                 83,343                                   81,233
    Operating          supplies                                        1,043,769                                    995,115
    Utilities          and other      services     (note 4)                557,298                                  786,515
    Maintenance           and repairs                                      233,866                                  238,780
    Replacement           and major repair,of
        Government-owned             equipment     (note    1)            575,921                                    72,785
    Equipment          rental                                              48,687                                    56,315
    Depreciation            of buildings       and equip-
        ment and amortization               of leasehold
        improvements                                                      411,238                                  435,321
    Franchise          fees and rent:
            General       Services     Admin-
               istration                             $263,069                                                      260,724
            Less amount waived dur-
               ing the year (note             3)      263,069
            Tennessee         Valley   Author-
               ity (note 2) -                                             114,028                                   42,039
            Other Government           agencies                            89,453                                   84,444
    Taxes and licenses                                                    174,048                                  152,781
    Insurance                                                             161,174                                  134,920
    Professional            services                                      328,252                                  265,035
    Advertising           and promotion                                    95,029                                  136,622
    Donations                                                              33,476                                   31,733
    Other expenses                                                        128,896         14,854,878                83,803          15,074,524

                  Net   operating       loss                                                   63,877                                   347,727

OTHERINCOME                                                                                   141,701                                   119,210

                 Net income or loss    (-1           before
                    extraordinary item                                                         77,824                                 -228,517
EXTRAORDINARY ITEM--l968   payroll                 and re-
  lated expenses  (note 5)                                                                                                               25,878

                 Net income or loss (-1              after
                    extraordinary item                                                $        77,824                           $     -254,395


                 The notes          on pages   8 and    9 are    an integral          part     of      this   statement.




                                                                 4
                                                                                        SCHEDULE3



                                               STATEMENT OF

                                 SOURCEAKD K'FLICATION          @F FUNDS
                                   YEAR EnTIlED DECEMBER31, 1970


FUNDS WERE OBTAINED YROM:
    Net sales and operating   income                                                    $23,353,330
    Other income                                                                            141,701
    Waiver of franchise   fees for 1969
       and 1968                                                                               522,463
    Sale    of U.S.     Treasury       bills                                                  388,338     I,
           Total   funds     obtained                                                    24,405,832
FUNDS WERE APPLIED TO:
    cost of sales                                                        $ 8,562,329
    Operating  expenses                                                   14,854,878
           Total                                                          23,417,207
     Less expenses         not requiring  the
       expenditure         of funds (note a)                                  653,718
                                                                           22,763,489
     Purchase of equipment                                                    129,633
     Purchase of certificates    of deposit                                 1,350,000
     Reduction of long-term   mortgage                                          5,500
     Reduction  of Special Retirement
       Fund                                                                     1,089
           Total     funds   applied                                                        24,249,711         __)'
INCREASE IN WORKING CAPITAL                                                             $      156,121
                                                                                        Increase or
                                                               1970           1969      decrease(-)
Current assets                                         Sf,;;;,;;~          $2,324,015   $     -198,945
Less current   liabilities                                 .        t       1,493,917         -355,066
           Working     capital                         $       986,219     $ 830,098    $      156,121
a
 Expenses not requiring    the expenditure    of funds during                the cur-
 rent year consisted    of the following   items.
      Depreciation     of buildings    and equipment and amortization  of
         leasehold    improvements                                                            $411,238
      Amortization     of bond premiums                                                             369
      Provision    for self-insurance                                                             4,289
      Provision    for replacement     and major repair of Government-
         owned equipment                                                                       233,271
      Decrease in deferred       charges                                                         4,551
                                                                                              $653,718
                                                                                               --
           GOVERNMENT                          SERVICES,                     INC.          ,

    COMPAIUTIVE STATEMENT OF INCOME AND EXPENSESBY DIVISION

                 YEARS ENDED DECEMBER 31,             1970 AND 1969


                                                           Consolidated             Cafeteria
                                                              total                  Division

YEAR ENDED DECFBB~         31,     1970:
    Sales                                                  $23,353,330          $18,297,700

    Less    operating    expenses:
           Cost of goods sold                                   8,562,329            6,880,531
           Other operating     expenses                        14,854,878           11,685,500

                                                               23,417,207           18,566,031
    Income or loss(-)          from    operations                 -63,877             -268,331
    Other income                                                   141,701               38,930
                Net   income     or loss(-)                $        77,824      $     -229,401


YEAR ENDED DECEMBER 31,           1969:
    Sales                                                  $22,863,964          $17,334,888
    Less    operating    expenses:
           Cost of goods sold                                8,132,167               6,175,740
           Other operating     expenses                     15,079,524              11,866,759

                                                            23,211,691              18,042,499
   Income or loss(-)           from   operations                -347,727              -707,611
   Other income                                                   119,210                45,564
   Income or loss(-)        before         extraor-
      dinary     item                                           -228,517              -662,047
   Extraordinary      item--1968           payroll
      and related     expenses                                     25,878                23,718
               Net income        or loss(-)                $ -254,395           $     -685,765
                                                      SCHEDULE4




 Snack Bar             Park               Fontana
 Division            Division            Division       Other

$1,285,228       $1,471,439          $1,831,231       $467,732

      572,512          529,205              483,363     96,718
      717,314          811,624           1,340,943     299,497
    1,289,826     1,340,829              1,824,306     396,215
       -4,598          130,610               6,925      71,517
         4,647           5,152              31,500      61,472
$           49   $     135,762       $      38,425    $132,989


$1,909,176       $1,500,781          $1,679,405       $439,714

    840,776            553,552              478,239     83,860
 1,001,213             746,573           1,185,593     279,386
 1,841,989        1,300,125              1,663,832     363,246
       67,187          200,656              15,573      76,468
        9,909            3,009              27,455      33,273

       77,096          203,665              43,028     109,741
        2,160
$      74,936    $     203,665       $      43.028    $109,741




                                 7
                                                                          .

                  NOTES TO FINANCIAL STATEMENTS

1. Under a contract   with the General Services Administra-
   tion (GSA), Government Services,      Inc. (GSI) has estab-
   lished a reserve for the replacement or major repair of
   GSA-owned equipment used in its operations.         GST is re-
   quired to segregate from its cash and securities          an ag-
   gregate amount equal to the reserve.        This reserve is to
   be maintained at a level satisfactory       to GSA and shall
   not be less than $100,000.      At December 31, 1970, GSI
   had segregated bonds with a face value of $100,000 and a
   market value of $94,190.      On October 15, 1970, GSI and
   GSA agreed to eliminate    the requirement    for this funded
   reserve.    Under this agreement GSI is required       to credit
   $263,069 (which represents     the 1970 franchise    fee waived
   by GSA) to the reserve account.       Although the agreement
   has not been formalized,    GSI had voluntarily     credited
   this amount to the reserve account at December 31, 1970.

2. Under the terms of a 30-year lease, as amended, with the
   Tennessee Valley Authority       (TVA), GSI will acquire title
   to recreational     facilities  at Fontana Village,   North
   Carolina,    should it pay $742,925 to TVA during the 30-
   year period which ends in 1976. Excess receipts         from
   GSI's Fontana operations,      as defined by the terms of the
   lease, must be paid to TVA to be applied against this
   amount.    Also, under the terms of the lease, GSI may use
   its own funds to pay the $742,925.        Payment of excess
   receipts   to TVA from 1970 operations     will amount to
   $114,028, making a total of $324,075 that will have been
   paid to TVA for operations      through 1970. Excess re-
   ceipts have been expensed, rather than capitalized,         be-
   cause GSI's equity lapses at the end of the period
   covered by the lease unless the entire amount is paid.

3. This franchise      fee is in lieu of reimbursement for space,
   heating,  lighting,     air conditioning,    ventilation,     paint-
   ing, decorating,      and general structural     repairs,     At
   the request of GSI, GSA, in March 1970, released GSI
   from its obligation       to pay the 1969 and 1968 franchise
   fees of $260,724 and $261,739, respectively.              An adjust-
   ment to accumulated income was made for the waiver of
   these two franchise      fees.   Also in October 1970 GSA
.      *
            waived the franchise fee for 1970.    The franchise   fee
            for 1970 amounted to $263,069.

     4. The cost of $557,298 for utilities        and other services   in
        1970 did not include the cost of utilities         provided by
        GSA for food preparation.        GSA agreed, commencing with
        1970, to furnish   these utilities     to GSI without charge.
        In 1969, charges for these utilities        amounted to about
        $250,000.

     5. As a result    of a U.S. Department of Labor action against
        the corporation    for increased wage rates under the
        McNamara-O'Hara Act of 1965, the corporation     was required
        to make additional    wage payments of $25,878 covering the
        period from August 9 to September 20, 1968. The amount
        was paid in 1969.




                                                                                ‘I,:/,’
                                                                            !      .-




    U.S.   GAO   Wash.,   D.C.


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