*- - PY =?-. .. - ,z -2. -z - -V v -- . pi. United Statee General Accounting Office Wa&ington, D.C. 20548 Comptroller General of the United States B-l 14864 February 7,199O To the Speaker and the Sergeantat Arms of the Houseof Representatives In accordancewith the act of July 26,1949 ‘fr.S.C. 81a), we have audited the balance sheetsof the Office oft i?e Sergeantat Arms, House of Representatives,as of June 30,1989, and December31,1988, and the related statements of operations and cash flows for each of the 6-month periods then ended.We completed our audit work on August 11,1989. These financial statements are the responsibility of the Office’s manage- ment. Our responsibility is to express an opinion on these financial statements basedon our audits. We conducted our audits in accordancewith generally acceptedgovern- ment auditing standards. Those standards require that we plan and per- form the audits to obtain reasonableassuranceabout whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, An audit also includes assessingthe accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of the Office of the Ser- geant at Arms as of June 30,1989, and December31,1988, and the results of its operations and its cash flows for the 6-month periods then ended, in conformity with generally acceptedaccounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Supporting information on finan- cial transactions of appropriated funds is presented for the purpose of additional analysis and is not a required part of the basic financial state- ments. Such information has been subjectedto the auditing procedures applied in the audits of the basic financial statements and, in our opin- ion, is fairly stated in all material respectsin relation to the basic finan- cial statements taken as a whole. Our report on internal accounting controls and compliance with laws and regulations, together with the Office’s financial statements, sched- ules of financial transactions, and accompanyingnotes for the 6-month Page 1 GAO/AFMD4@28 House Office of the Sergeant at Arms periods ended June 30, 1989, and December31,1988, is included in this report. %& SdK Charles A. Bowsher Comptroller General of the United States Page 2 GAO/AFMD-90-28 House Office of the Sergeant at Arma Page 3 GAO/AFMD-f)O-28 House Office of the Sergeant at Arms I I t$ontents I qpinion Letter 1 lleport on Internal 6 &counting ContPols Internal Controls 6 Compliance With Laws and Regulations 7 d ComplianceWith HouseSergeantat Arms’ Commentsand Our Evaluation 8 aws and Regulations q alanceSheets $ atementsof perations -&kements of Cash 12 ti/ ows schedulesof Financial $ransactions- Appropriated Funds Notesto Financial Statementsand Schedules Appendix I 18 CommentsFrom the HouseSergeantat Arms Table Table 1: Check-CashingTransactions Y Page 4 GAO/AF’MD-ftO-28 House Office of the Sergeant at Arms I Page 6 GAO/AF’MD4&28 House Office of the Sergeant at Arma I 1 I I t , / ” , I , @port on Intemal Accounting Controls and ; mpliance With Laws and Regulations ” We have audited the financial statements of the Office of the Sergeant at Arms, Houseof Representatives,for the 6-month periods ended June 30, 1989, and December31,1988. Our audits were made in accordancewith generally acceptedgovernment auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures,including tests of compliance with laws and regulations, as we considerednecessaryin the circumstances.This report pertains only to our preliminary review of the system of internal accounting controls and our review of compliance with laws and regulations for the 6-month periods ended June 30,1989, and December31,1988. ,I We did not complete a study and evaluation of the Office of the Sergeant Iqternal Controls at Arms’ system of internal accounting controls for the purpose of deter- mining thenature, timing, and extent of the auditing procedures neces- sary for expressing an opinion on the Office’s financial statements. Basedon our preliminary review, we concludedthat it was more effi- cient to expand our substantive audit tests in auditing the financial statements for the 6-month periods ended June 30, 1989, and Decem- ber 31,1988. Our preliminary review disclosedthe following internal accounting con- trol weakness. Check-CashingProcedures The Housebank is a private operation subject only to regulations estab- lished by the Houseof Representatives.Funds used to cash checks at the bank are provided from deposits made by Members.We found that there are no written check-cashingprocedures for the tellers at the Housebank to follow. Although our audit did not detect any significant loss of cash, we did find actions occurring which could lead to material lossesin the future. For example, during the 12 months covered by this report, we found that about 330 checks,totaling over $232,000, which were not written on Housebank accounts were returned to the House bank primarily becauseof insufficient funds. Of the 165 individuals or firms on whose accountsthe checkswere drawn, 24 had checks returned for this reason on 3 or more occasions.Individuals in this latter category include a Member of the House,the HouseSergeant at Arms, and a former teller at the bank. Y We found that if a check is written on a Housebank account which does not have sufficient funds to cover the check, the bank makes the check good and then notifies the account holder to deposit funds to cover the Page 6 GAO/AFMDQO-28 House Offlce of the Sergeant at Amu - check. We tested transactions for 12 days du’ring the i2-month period covered by our audit and found that a daily averageof 30 checkstotal- ing nearly $18,900 were being held due to insufficient funds. These checks had beenwritten by more than 90 Membersof the House. We also noted instanceswhere individuals who were not Members, officers, or staff of the Houseof Representativescashedchecks at the bank, although there was no authorization for them to use the bank’s facilities. In somecases,these checkswere returned due to insufficient funds and were difficult to collect on. Sincetellers do not have any writ- ten procedures to guide them in dealing with individuals who repeatedly have checks returned becauseof insufficient funds, they lack a clear basis for refusing to serve such individuals. Without guidelines to direct them, tellers are left to their own discretion or to the oral guidance of the bank’s director or the Sergeantat Arms regarding whether a partic- ular check should be cashed. We first brought the lack of check-cashingprocedures to the Sergeant at Arms’ attention in August 1988. At that time, we were assuredthat pro- cedureswould be established. Although procedures were drafted, they were not implemented. Sound internal accounting controls would require that written procedures be instituted which would instruct the bank’s tellers about matters such as who can cash checks at the bank, what limits are placed on those with check-cashingprivileges, and how to handle persons who repeatedly write checksreturned due to insufficient funds. As part of our audits, we also testedthe Office’s compliance with terms ComplianceWith and provisions of 2 U.S.C,.~l and,& and Department of the Treasury Laws and Regulations regulations on cash, Office of PersonnelManagementregulations on employee benefits and employer costs, and Internal RevenueService regulations on income tax withholdings. In our opinion, the Office of the Sergeantat Arms complied with the terms and provisions of the just mentioned laws and regulations for the transactions tested that could have materially affected its financial statements. Nothing cameto our attention, in connection with our audits, that causedus to believe that the Office was not in compliance with the terms and provisions of laws : and regulations for those transactions not tested. Page 7 GAO/AFMD-W28 Howe Office of the Sergeant at Arma In a December21,1989, letter, the HouseSergeantat Arms stated that he was committed to correcting the check-cashingdeficiencies cited in our draft report and was implementing corrective measures.He reported O$r t Evaluation that he is instituting interim written check-cashingprocedures which will be distributed to and discussedwith all bank employees.He also / plans to engagea banking professional to review the bank’s operations ,4/ and formulate permanent procedures that would be presented to the / Speaker of the Houseduring January 1990. The HouseSergeantat Arms also advised us that he would refrain from personal banking transac- tions at the Housebank. We believe that when written operating procedures for the bank are developed,implemented, and enforced by the Sergeant at Arms, they should improve operation of the House bank and reduce the frequency of checksbeing returned becauseof insufficient funds. The Sergeant at Arms’ letter is presented in appendix I. Page 8 GAO/AFMD-90-28 Howe Office of the Sergeant at Arms June 30,1989 Chcember 31,1988 I 7\ppripriated Funds I Fupds with U.S. Treasury $23,351,236 $47,800,327 0 1,200 -- Acbounts receivable-other Tobl appropriated funds 23,351,238 47,801,527 De&it Fund Ddposit fund cash - __-._ unds with U.S. Treasury 1,006,147 949,746 bash on hand 191,425 188,607 JChecks on hand (note 2) 332,166 84,072 1529,738 1,222,425 -A------ A counts -_- receivable e yIFrom Members (note 3) 155,949 250,946 jOther (note 4) 179 126,269 -7 That deposit fund 1,685,866 1,599,640 lot@1 Aeaets $25,037,102 $49,401,167 L&ilities and Qovernment Equity Apbropriated Funds __Liabilities Salaries payable $3,943,569 $4,036.963 Other 1,068 107 -Government _.-- equity Unobligated - .____ appropriations 19,406,599 43,764,457 Total appropriated fund8 23,351,238 47,601,527 Deposit Fund --i%iGir -y Accounts payable Members’ deposits 1,685,866 1,599,640 iota1 deposit fund 1,685,866 1,599,640 Tqtal Liabilities and Government Equity $25,037,102 $49,401 ,I 67 v The accompanying notes are an integral part of these statements. Page 9 GAO/~90-28 House Ofl’lce of the Sergeant at Anna I +atements of Operations I Appropristed Funds Fu idinn Sources ,$ppropriations expended $24,449,091 $23490,700 ok&ions and refunds 12,253 6,359 / I Fundlng Source8 $24,461,344 $23,497,067 1 Ekndlturee alaries of Members $19,638,903 $19570,287 djovernment contributions Retirement 2,481,681 2,404,538 Social Security 1,473,904 17,635 Health insurance 435,062 361,277 Life insurance 41,460 41,055 i Thrift savings plan 315,774 331,578 I ITotal government contributions 4,747.881 39156.083 Miieage of Members 64,617 37,223 Payments to widows, widowers, or heirs of deceased Members 0 358,000 Miscellaneous (note 5) 9,943 2,993 Unexpended appropriations returned to U.S. Treasury 0 372,481 T&al Expendlturer $249461,344 $23.497,067 Page 10 GAO/AF’MD-90-28 House Office of the Sergeant at Arms Statement* of Operatlonf4 Depopit Fund (I-month perlods ended June 30,1989 December 31,1988 Rece pts Trdnsfers from appropriated funds (Members’ salaries, mileage, and state $10,552,716 $11,100,455 -Xi~~~~osits 11,908,184 9,686,308 -__. - Sab of traveler’s checks 162,636 226,352 otal Receipta 22,823,535 21,013,115 birb Jrrementr Net payments to or for accounts of Members 21,690,260 20,029,330 -~ St te income tax withheld remitted to states 684,235 690,697 P&ment for traveler’s checks sold 162.636 226,352 --.-.-I MiBcellaneous 179 126,269 /f’otal Disburrementr 22,537,310 21,072,648 Exc&s receipts (disbursements) 86,226 (59,533) Depbsit fund balance, beginning of period 1,599,640 1,659,173 Deppalt Fund Balance, End of Period $1,685,866 $1,599,640 The accompanying notes are an integral part of these statements. Page 11 GAO/~SO-28 House OMce of the Sergeant at Arms ._ : Istatementsof CashFlows &month periods ended June 30,1989 December 31,1988 wonrioted Fund8 Ca #hFlow8 From Operatlng Activltier -7 oorooriations brovided $91,233 $50.574.075 ollections from Members and others 14,414 6,466 ash paid to Members’ beneficiaries and benefit providers (24,554,738) (22,880,768) nexpended appropriations returned to Treasury 0 (372,481) Nek cash provided by (wed In) operating activltiee (24,449,091) 27,327,292 I -Ca’ h at beginning of period 47,800,327 208473,035 Ca/rh balance at end of period $23,351,236 $47,800,327 D&o8it Fund I C&h Flow8 From Orxwatlna Actlvitieo Collections from appropriated funds $10,552,716 $11,100,455 Collections from Members and others 12,291,907 9,673,958 -Cash _-a paid, for Members, to taxing authorities and others (22537,310) (21,072,648) Net cabh provided by (used in) operating actlvltier 307,313 (298,235) Cash at beginning of period 1,222,425 1,520,660 Cash balance at end of Period $1.529.738 $1.222.425 The accompanying notes are an integral part of these statements. Page 12 GAO/AFMD-90.28 House OfYice of the Sergeant at Arms 1 / t &$xdUles of F’inmcid Tmnmctions- A$propriated Funds 6=month wrloda ended June 30,1989 December 31,1986 Apprvtlona -___ --. Salaries $0 $50.250.000 0 210,000 widowers, or heirs of deceased Members 0 358,000 T/Hal appropriations 0 60,818,000 / ColleCtiona and Refund8 * --Miscellaneous __--.. -__--..(note 5) 12,253 6,359 Total appropriations, collections, and refund8 12,253 50,824,359 Expe idituree ..- _._.._..---_--- 1 BY check 1,780,898 1897.889 j Transferred to Deposit Fund 9,812,513 10,376,135 Deductions ---L-.. from salaries / Federal income tax 3.960,962 4.013.271 I Social Security tax 1,473,904 17,635 State income tax - _. ,. .--I_-.--.----.-.-.--- 684,235 690,697 : Retirement 364,800 1,037,008 Life._... . ._.-. insurance - .- -...-_. 82,921 82,110 Optional life insurance 127,863 123,037 Health insurance 219,798 213,188 U.S. Savings Bonds _..__--..---__--__ 18,200 17,400 Transfers ..._-- ^----.--to other organizations 498,031 459,094 Thrift savings plan 614,778 642,823 Totil aalariea 19.838.903 19.570.287 Government contributions I I.Retirement * -_._-_-_.---.-.. -~ 2,481,681 2,404,538 Social Secunty ...~-- ~~~--. 1,473,904 17,635 Health insurance 435,062 361,277 7 - -. --- Life ..___ Insurance *--____-_..- 41,460 41,055 Thrift savings plan 315,774 331,578 T&al government contribution8 4,747,881 3,156,083 . (continued) Page 13 GAO/AFMD-SO-23 Hour Office of the Sergeant at Arms , - Schedules of Finandal Trdons- Appropriated Fundn - &month periods ended June 30.1989 December 31.1988 Gi taae of Members -7 ‘aid by check 8,776 3,600 -7 - ransferred to Deoosit Fund 55.841 33.623 btal mileage 64,617 37,223 Pa ‘men& to widows, widowers, or heirs of deceased Members 0 358,000 iii cellaneous (note 5) 9.943 2.993 G - jxoended appropriations returned to the U.S. Treasurv 0 372,481 MeI expendlturer 24,461,344 23,497,067 Ex ass of appropriations, collections, and refunds over expenditures t expenditures over appropriations, collections, and refunds) (24,449,091) 27,327,292 )ropriated funds balance, beginning of period 47,800,327 203473,035 woprlated Fund8 Balance, End of Period $23,351,236 $47,800,327 The accompanying notes are an integral part of these schedules. Page 14 GAO/AF’MD-90-28 House Office of the Sergeant at Arma Nhes to fiancial Statementsand Schedules 1. Significant The Sergeant at Arms, as a fiscal officer of the Houseof Representa- lunting Policies tives, disburses funds appropriated for (1) salaries of Members and related administrative expenses,(2) mileage of Membersto and from each sessionof the Congress,and (3) payments to widows, widowers, or heirs of deceasedMembers.The Sergeantat Arms also operates for Members a deposit and checking function, commonly referred to as the “House bank,” and is accountablefor Members’ funds on deposit in the bank. Operating costs of the Office of the Sergeantat Arms, including salaries and related administrative expenses,equipment, space,building repairs and maintenance, utilities, and certain miscellaneousexpenses,are paid from funds appropriated for salaries and expensesof the Houseof Representatives. Appropriated funds are disbursed on the basis of monthly payroll vouchers covering salaries, related administrative expenses,and mileage of Members.The amounts due Members are either paid by check or, if Membersrequest it, transferred to their credit in the Deposit Fund account established in the U.S. Treasury for this purpose. Members are paid on the first workday after the month in which the salary is earned. Accordingly, salaries payable represent Members’ salaries and related administrative expensesfor the last month of the period. The Deposit Fund consistsof the total of the individual accounts for the various Memberswho use the Housebank facility. Memberswithdraw money from their accountsby presenting written orders for payment either directly to the Sergeantat Arms or through regular banking chan- nels. Money in the Deposit Fund is used to cash checks for Members and employeesof the House.Checkscashedwhich were drawn on other banks are deposited in the U.S. Treasury through a local bank on the next businessday. Other Housebank operations consist of selling traveler’s checks and assisting Membersin making wire transfers and purchasing foreign cur- rency, savings bonds, and cashier’s checks. Note 2. Chec@ on Hand Checkson hand amounting to $332,166 at June 30,1989, and $84,072 at December31,1988, represent checks drawn on other banks and cashed for Members.andemployeesof the Houseon the last businessday of the 6-month period, but not yet deposited with the US. Treasury. The Page 16 GAO/AF’MD-90-28 House Office of the &rgeant at Arms Notea to Flnandal Statements and Schedules -1 check-cashingtransactions for the 6-month periods ended June 30, 1989, and December31,1988, are summarized below. table 1: Check-Caehlng Tranractionr , &month period8 ended /// , June 30,1989 December 31,1988 Ch%;;don hand at beginning of $84,072 $245,808 Checkscashed l&059,136 13,158,089 15,143,208 13,403,897 Checksdeposited with U.S. / Treasury 14,811,042 13,319,825 1 I Check8 on hand at end of period $332,166 $84,072 te 3. Accounts Amounts due from Membersrepresent checksdrawn on and cashedor From Members paid by the Sergeantat Arms but not charged to the Members’ accounts. Checksare held for reasonssuch as insufficient funds, missing signa- ture, incorrect date, or a stop-payment order. The Sergeantat Arms monitors all such items daily and no financial losseshave occurred under these procedures. Note 4. Accounts The other accountsreceivable at June 30, 1989, consistedof the cash- Receivable-Other iers’ net shortage of $179. At December31,1988, this account consisted of the cashiers’ net shortage of $278 and $125,991 due from the U.S. Treasury as a result of both a lost check and the replacement check being charged against the bank’s account. In March 1989, the U.S. Trea- sury credited the bank’s account for the overcharge. Note 5. Miscellaneous Miscellaneousreceipts and expenditures consist of two categories.The Receipts and Expenditures first category includes receipts from Membersfor their contributions to the retirement fund for military service after 1956 and the subsequent disbursement to the retirement fund. The secondcategory includes expenditures for amounts for the replacement of checksreported as lost or stolen and the subsequentreceipts for amounts credited by the U.S. Treasury when it has been determined that only one check will be cashedin each instance where a replacement check has been issued. Y Page 16 GAO/AF’MD-SO-28 House Office of the Sergeant at Arma Page 17 GAO/AFMD-f#O-28 HouseOfficeof the Sergeant at Arms ] Abpendix I 4 , mments From the HouseSergeantat Arms December 21, 1989 Hr. Donald H. Chapin Assistant Comptroller General U.S. General Accounting Office Acaounting and Financial Management Division Washington, D.C. 20548 Attention: Matthew Solomon D88r Mr. Chapin: I welcome your regular biannual report of the financial statement of the Office of the sergeant at Arms of the United States House of Representatives. While your report concludes that applicable statutes and regulations were complied with, several deficiencies existed with regard to check cashing procedures. I am fully committed to correcting the deficiencies which the General Accounting Office described. At the direction of the Speaker I am implementing several interim measures to address these problems. I have also in consultation with the Speaker arranged with an outeide banking profaaaional to conduct a complete procedural review of the bank's operation. This review will result in the formulation and implementation of permanent procedural safeguards. Th8 interim procedures that I am presently instituting inalude t 1.) No oheokrr will be ca6hed except for Member6 of Congraaa, Officara of the House, current amployeer of the House and formar Mambars of Congreaa. 2,) A limit of $75 will be impolred on non-aoaount holders’ p8rronal oh8okr. 3.) Non-aaaount holders lose cheak cashing ]7rivilegoa if two ahaoka arm returned for ineuffiaient fund$,w%$tkih, a calendar yaar . Staff ah8oka rrturned for inruffici8nt fund8 must be radaamed with oaah, 4.) No bank omployoe will be allowed to oaah a oheak in tha bank unless it has baen aignod by the bank manager.,, N.9 t8118r will be parmitted to cash his or her own ahaok. Furthermore, f, ar Sergmant at Arms, will refrain from all banking tranaaotionr in the bank. Page18 GAO/~90-28 Howe OfYlceof the Sergeantat Amw t . : 2. Copies of these intsrim procsdursa will be distributed to all smploysss of ths bank. The bank manager and I will psrsonally brisf all bank employees on these procedures. In addition, the bank manager and I , along with all employees of the bank, are prsparsd to render the fullest cooperation to the outaids banking consultant. We intend to present to the Speaker, prior to the convening of ths Second Session of the Congress, the proposed procedures reflecting the recommendations of the outside consultant. Again, I appreciate the work and advice provided by the General Accounting Office and believe that we will be able to correct all procedural deficiencies identified in this audit. Sincerely, >. -c,i i A. \?. Lc.1 C--d ,A- '9 . JACi RUSS Sergeant at Arms Y Page19 GAO/AFMD-S&28 HouseOJYlco of the Sergeantat Arm
Financial Audit: House Office of the Sergeant at Arms--Periods Ended 6-30-89 and 12-31-88
Published by the Government Accountability Office on 1990-02-07.
Below is a raw (and likely hideous) rendition of the original report. (PDF)