._,._ _.._” .“I,*._“__ ,___... _-___._-- ~ I4hLlitry I!)!)0 FINANCIAL AUDIT Northeast-Midwest Congressional Coalition Financial Statements for 1988 United States GAO General Accounting Office Washington, D.C. 20648 Accounting and Financial Management Division B-233862 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 8233332 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 Contents O+nion Letter Report on Internal Accounting Controls ~ Compliance With q s and Regulations St&ement of 8 Operations and Fund Balance Statement of Cash Flows N&es to Financial Statements 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. Y Page 8 GAO/AFMD-30-33 Northeast-Midwest Congressional Coalition BzilanceSheet December 31.1988 Asset4 Opetating accounts $8,118 Spe+ial assessment account (note 3) 4,005 Preoaib publications 358 Total Assets Sl2.4m Liabilities and Fund Balance Liabilities 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 $146,200 Clekk-hire funds 21.825 Special assessments-taxes 10,111 Special assessments-expenses 8,359 I total revenues 186,495 Expkses (notes 2 and 4) Salaries and benefits 145,162 Pavroll taxes 12.695 Equipment . . rental --lo,085 Telephone - 21220 Office supplies 1,410 -’ Subscriotions ’ 1.376 Printina ‘926 Meetings and official functions 529 Professional fees 80 Mi$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 Fund --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 actiyities: --- 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 I Increase in accrued liabilities Cb8h aCtiVitie8 2,839 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 states. 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 deposits. 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 --- 1J.S. Gcwt~ral A<wmttt,itt~ Offiw Post. Of’fiw Box 6015 GaiLlttmbttrg, Maryland 208’77 ‘I’lw first. fiw copiw of each report are free, Addit.ional copies art’ t2.00 cvwh. ‘I’kre is a 25% discwunt~ ott ordw3 for IO0 or more copies mailed to a single acidrws. 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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)