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)

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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

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




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

$   atementsof
-&kements of Cash                                                                               12
ti/ ows
schedulesof Financial
Appropriated Funds
Notesto Financial
Appendix I                                                                                     18
CommentsFrom the
Table                   Table 1: Check-CashingTransactions


                        Page 4                     GAO/AF’MD-ftO-28
                                                            House Office   of the Sergeant at Arms

    Page 6   GAO/AF’MD4&28 House Office of the Sergeant at Arma
      1                                                                                                           I
      I                                                                                                           t
      ,                                                                                  /   ”                ,

@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.
                                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.
                                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

                       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
    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
7\ppripriated Funds
   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 counts
         -_- receivable
yIFrom      Members (note 3)                                                                         155,949                         250,946
      jOther (note 4)                                                                                    179                         126,269
     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
      Salaries payable                                                                            $3,943,569                     $4,036.963
      Other                                                                                            1,068                             107
_.--              equity
  - .____           appropriations                                                                19,406,599                     43,764,457

     Total appropriated fund8                                                                    23,351,238                      47,601,527

Deposit Fund
-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
                                          The accompanying notes are an integral part of these statements.

                                          Page 9                                   GAO/~90-28          House Ofl’lce of the Sergeant at Anna

+atements of Operations

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
    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

  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
       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

-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
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
_-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            /

&$xdUles of F’inmcid Tmnmctions-
A$propriated Funds

                                                                                     6=month wrloda ended
                                                                                  June 30,1989         December 31,1986
-___      --.
   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                      *
      __--.. -__--..(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
---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
     . ._.-.   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
    ..._--      ^----.--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 -   -.       ---

 ..___   Insurance
     *--____-_..-                                                                         41,460                      41,055
   Thrift savings plan                                                                   315,774                     331,578

  T&al government contribution8                                                       4,747,881                    3,156,083

                                                      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
- 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
- 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
                        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

                        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

                                      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
     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.

                                      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
.   :


                    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.
                                                        >. -c,i i A.
                                                                     \?.     Lc.1   C--d
                                                      '9 .
                                                      JACi RUSS
                                                      Sergeant at Arms


               Page19                         GAO/AFMD-S&28
                                                                   of the Sergeantat Arm