Financial Audit: Northeast-Midwest Congressional Coalition Financial Statements for 1988

Published by the Government Accountability Office on 1990-02-15.

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

                    _-___._--   ~
I4hLlitry         I!)!)0
                                    FINANCIAL AUDIT
                                    Coalition Financial
                                    Statements for 1988
      United States
GAO   General Accounting Office
      Washington, D.C. 20648

      Accounting and Financial
      Management Division

      February 16,199O

      The Honorable Frank Horton, Co-Chairman
      The Honorable Howard Wolpe, Co-Chairman
      Northeast-Midwest CongressionalCoalition
      Pursuant to your request for an audit of the Northeast-Midwest Con-
      gressional Coalition, which was transmitted to us by an April 12,1989,
      letter from the Chairman, Committee on HouseAdministration, Houseof
      Representatives,we have audited the balance sheet of the Coalition as
      of December31, 1988, and the related statements of operations and
      fund balance and of cash flows for the year then ended. We completed
      our audit work on September 22,1989. These financial statements are
      the responsibility of the Coalition’s management.Cur responsibility is to
      express an opinion on these financial statements basedon our audit.

      We conducted our audit in accordancewith generally acceptedgovern-
      ment auditing standards. Those standards require that we plan and per-
      form the audit 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 audit provides 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 Coalition as of
      December3 1, 1988, and the results of its operations and its cash flows
      for the year then ended in conformity with generally acceptedaccount-
      ing principles.

      As discussedin note 5 to the financial statements, the District of Colum-
      bia claims that the Coalition may owe it unemployment compensation
      taxes. The Coalition plans to contest this claim. At present, the outcome
      of this dispute cannot be projected. Accordingly, no provision for any
      liability that may result upon settlement has been made in the accompa-
      nying financial statements.

      Page 1                     GAO/AF%lD-90.38   Northea&Midwest   cOngremional   Coalition

Our report on internal accounting controls and compliance with laws
and regulations, together with the Coalition’s financial statements and
accompanying notes for the year ended December3 1, 1988, is included
in this report.

Donald H. Chapin
Assistant Comptroller General

Page 2                  GAO/AFWLMO-33   Northeast-Midwest   Ckmgressional   Coalition
Page 3   GAO/AFMIb9O-33   NortheastiMidwest   Cmgreseional   Coalition

O+nion Letter
Report on Internal
Accounting Controls
  ~ Compliance With
q s and Regulations

St&ement of                                                                                    8
Operations and Fund
Statement of Cash
N&es to Financial

                      Page 4   GAO/AFMD-9038   Northeast-Midwest   Congressional   Coalition
Page 5   GAO/AFlMDW   Northeast-Midwest   Ckmgremional   Coalition
Report on Internal Accounting Controls and
compliance With Laws and Regulations

               We have audited the financial statements of the Northeast-Midwest Con-
               gressional Coalition for the year ended December31,1988, and have
               issued our opinion thereon. Our audit was made in accordancewith gen-
               erally 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 considered necessaryin 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 year
               ended December3 1,1988.
               We did not complete a study and evaluation of the Coalition’s internal
               accounting control system for the purpose of determining the nature,
               timing, and extent of the auditing procedures necessaryfor expressing
               an opinion on the Coalition’s financial statements. Basedon our prelimi-
               nary review, we concluded that it was more efficient to expand our sub-
               stantive audit tests in auditing the financial statements for the year
               ended December31,1988.
               While we did not perform a complete study and evaluation of the Coali-
               tion’s internal accounting control system, we did not becomeaware of
               any condition during our expanded substantive audit tests which we
               believe to be a material weakness.
               As part of our audit work, we also tested the Coalition’s compliance
               with terms and provisions of the regulations established by the Commit-
               tee on House Administration and the Internal RevenueService regula-
               tions on income tax withholdings. In our opinion, the Northeast-Midwest
               CongressionalCoalition complied with the terms and provisions of the
               regulations for the transactions tested that could have materially
               affected its financial statements. Nothing cameto our attention in con-
               nection with our audit that causedus to believe that the Coalition was
               not in compliance with the terms and provisions of the regulations for
               those transactions not tested.


               Page 8                  GAO/AFMD-30-33   Northeast-Midwest   Congressional   Coalition

                                                                                                                        December 31.1988

  Opetating accounts                                                                                                                    $8,118
  Spe+ial assessment account (note 3)                                                                                                    4,005
Preoaib publications                                                                                                                       358

Total Assets                                                                                                                          Sl2.4m

Liabilities and Fund Balance
   Acctjwnts payable                                                                                                                    $4,783
   Acciued liabilities                                                                                                                   3.041
   Special tax assessment payable (note 3)                                                                                               9,818
   Prepaid members’ dues                                                                                                                12,ooo

      TOtal llabillties                                                                                                                 29,822

Fund balance (deficit)                                                                                                                 (17,141)

Total Llsbilltles and Fund Balance                                                                                                    812.481
                                             The accompanying notes are an integral part of this statement.

                                             Page 7                             GAO/AFMD-@O-38      Northea&Midwe&   Congressional   Coalition
Statementof Operationsand Fund Balance

                                                                                                                                 Year ended
                                                                                                                           December 31,1988
Revetwes (note 2)
  Members’ dues                                                                                                                         $146,200
  Clekk-hire funds                                                                                                                        21.825
  Special assessments-taxes                                                                                                               10,111
  Special assessments-expenses                                                                                                             8,359
     total revenues                                                                                                                      186,495

Expkses     (notes 2 and 4)
   Salaries and benefits                                                                                                                  145,162
   Pavroll taxes                                                                                                                            12.695
      . .       rental                                                                                                                    --lo,085
   Telephone -                                                                                                                                21220
   Office supplies                                                                                                                            1,410
   Printina                                                                                                                                    ‘926
   Meetings and official functions                                                                                                              529
   Professional fees                                                                                                                             80
Mi$cellaneous                                                                                                                                   494

    total expenses                                                                                                                       174,977

lncoine before extraordinary
--a                                item                                                                                                    11,518

Extraordinarv item:
  Write-off of tax debt (note 5)                                                                                                             6,973

Net income                                                                                                                                18,491

--4. balance, beginning of year (deficit)                                                                                                 (35,632)

FunSI Balance, End of Year (deficit)                                                                                                    $(17,141)
                                            The accompanying notes are an integral part of this statement.

                                            Page 8                              GAO/AFMD-90-38      Northeast-Midwest   Congressional   Coalition
Statementof CashFlows

       ,                                                                                                                                Year ended
                                                                                                                                  December 31,1@86
Cash ~IOWBFrom Operating Activities
  income before extraordinary     item                                                                                                         $11,518

   Adj$ments      to reconcile income before extraordinary    item to net cash provided by (used in) operating
--- Dbcrease in accounts receivable                                                                                                                  862
     D crease in prepaid expenses                                                                                                                    22
     Dbcrease in accounts payable                                                                                                               (11,522)
--   D    crease in special tax assessment payable                                                                                              (39,221)
     Increase in prepaid members’ dues                                                                                                           10.000
     Increase in accrued liabilities

      Cb8h aCtiVitie8

Net        used In operatlng                                                                                                                   (25,502)

Extraordinary   income from write-off of tax debt                                                                                                 6.973

Net dlscreare in cash                                                                                                                          (18,529)

Cash at beginning of year                                                                                                                        30,662

Carh Balance at End of Year                                                                                                                   $12,123
                                                    The accompanying notes are an integral part of this statement.

                                                    Page 9                             GAO/AFMDQO-38       Northeast-Midwest   C!mgmxdonal   Coalition
N&es to F’hnciall Statements

Not@1. Organization       The Northeast-Midwest CongressionalCoalition is a legislative service
                          organization sponsoredby a group of Membersof Congresswho pool
                          their resourcesto pursue a common legislative goal. It operates as an
                          extension of the participating Members’ individual offices and coordi-
                          nates their efforts for reasonsof efficiency and effectiveness. Its pur-
                          pose is to (1) inform its members about regional implications of nation.al
                          policies and proposals and (2) influence congressionaldecisionsregard-
                          ing those issuesof greatest importance to northeastern and midwestern
                          On October 21,198 1, the Committee on HouseAdministration adopted
                          regulations and rules pertaining to legislative service organizations,
                          These regulations provide the following.

                      . Effective January 1,1983, a legislative service organization may not use
                        funds received as dues or through assessmentsto generate additional
                        income, including income from interest-bearing accountsor time
                      l Effective January 1,1983, a legislative service organization may not
                        receive income or contributions from any source other than the Congress
                        or its Members.

Note 2. Accounting        There are four main sourcesof revenue from the Coalition’s members.
Policies                  They are
                      . dues, which are recognizedfor the year to which they are applied;
                      l clerk-hire funds, which are recognizedwhen staff membersreceive sal-
                        ary payments from Coalition members;
                      l special assessments-taxes, which are recognizedwhen received for
                        payment of the pre-1987 payroll tax liability from members’ prior-year
                        funds; and
                      . special assessments- expenses,which are recognizedwhen an expense
                        voucher is sent to a member for payment.
                          Expensesare recognizedwhen incurred during the year. At year-end,
                          expensesand revenues are accrued.

Note 3. Speci& Tax        In August 1987, the Chairman of the Committee on HouseAdministra-
Assessment                tion granted approval for the Co-Chairmenof the Coalition to collect
                          special assessmentfunds from the Coalition’s membership to be used
                          exclusively to pay off payroll tax obligations for prior years. Members

                          Page 10                  GAO/~9048      Northeast-Midwest   Congressional   Coalition
                                  Notes to F’inancial   Statements

                                  of the Coalition were authorized to use unobligated, unexpended prior-
                                  year funds from their “Allowance for Official Expenses” to pay the spe-
                                  cial assessments.The funds collected are deposited in the special assess-
                                  ment account and then transferred to the operating account for payment
                                  of the tax debt. The special tax assessmentpayable account discloses
                                  the tax debt balance at year end.

No& 4, Appropriated Fund Costs for office spaceand utilities are paid from legislative branch
support                  appropriations. Since it is difficult to determine the Coalition’s share of
                         expensesfor office spaceand utilities, these amounts are not shown in
                                  the Coalition’s financial statements.

Note 5. Write-Off of Taxes        In 1988, the Coalition wrote off a $6,973 debt for pre-198’7unemploy-
Payable                           ment compensationtaxes payable to the District of Columbia. The debt
                                  was written off becauseDistrict Department of Employment Services
                                  officials informed the Coalition that no tax liability remained after the
                                  Coalition’s attorneys argued that certain Coalition employees’ salaries
                                  were not subject to the District’s unemployment compensationtax.
                                  These employeeshad been paid partially with Coalition funds and par-
                                  tially with federal funds. In 1988, the District consideredthem to be fed-
                                  eral employees,whose salaries are not subject to the,District’s
                                  unemployment compensationtax. Also, the District’s Department of
                                  Employment Servicesrefunded $1,166 to the Coalition in January 1989
                                  for three prior quarterly unemployment compensationtax payments
                                  made by the Coalition in July and October 1987 and April 1988.

                                  In September 1989, the District’s Department of Employment Services
                                  informed the Coalition that it was reexamining its earlier position that
                                  certain Coalition employees’ salaries were exempt from the District’s
                                  unemployment compensationtax. The District stated that for employee
                                  salaries paid partially with Coalition funds and partially with federal
                                  funds, unemployment taxes must be paid on that share of the salaries
                                  funded by the Coalition. The Coalition plans to contest the District’s
                                  claim that unemployment compensation taxes are due by maintaining its
                                  position that the employeesin question are federal employeesand,
                                  therefore, their salaries are not subject to the District’s unemployment
                                  compensation tax. At present, it is not known whether the Coalition will
                                  ultimately be liable for the $6,973 tax debt previously written off in the
                                  1988 Statement of Operations and Fund Balance and/or the $314 in
                                  taxes for 1988 that would be payable on these sameemployees’ salaries.

                                  Page 11                            GAO/AF’MD-9M3   NortheastMidwest   Congressional   Caution
            Notes to FInancbl   Statementa

            If the Coalition is deemedliable for unpaid District unemployment com-
            pensation taxes, the estimated tax debt at December31,1988, could
 ,          amount to $7,287. In addition, the District could require that the $1,166
 I          that was refunded in January 1989 be returned.

(elltrae)   Page 12                          GAO/~90-38   NortheastMidwest   Congressional   Coalition

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