oversight

Financial Audit: House Child Care Center Financial Statements for the Years Ending 8-31-89 and 8-31-88

Published by the Government Accountability Office on 1990-04-23.

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

-AW....‘..   IJnited   States   General   Accounting   Office   B

GAO          Report to the Cl.erk of the House of
             Representatives




             FINANCIAL AUDIT
             House Child Care
             Center Financial
             Statements for the
             Years Ending
             g-31-89 and g-31-88
unitedstates
General Accounting Off’ice
Washington, D.C. 20648

Comptroller General
of the United States

B-234468

April 23,199O

The Honorable Donnald K. Anderson
Clerk of the House of Representatives

Dear Mr. Anderson:

As required by section 2(d) of House Resolution 21, dated December 11,
1985, we have audited the accompanying balance sheets of the House of
Representatives Child Care Center, Inc., as of August 31, 1989 and 1988,
and the related statements of revenue, expenses, and fund balance for
the fiscal years then ended. We have also audited the statement of cash
flows for the fiscal year ended August 31,1989. We completed our audit
on November 17, 1989. These financial statements are the responsibility
of the Center’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.

We conducted our audits in accordance with generally accepted govern-
ment auditing standards. Those standards require that we plan and per-
form the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing both the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Center as of
August 31, 1989 and 1988, and the results of its operations for the fiscal
years ended August 31,1989 and 1988, and cash flows for the fiscal
year ended August 3 1,1989, in conformity with generally accepted
accounting principles.




Page 1                                  GAO/~9086      House Child Care Center
B-284468




Our report on internal accounting controls and compliance with laws
and regulations for the year ended August 31,1989, together with the
Center’s financial statements and accompanying notes for the fiscal
years ended August 31,1989 and 1988, is included in this report.

Sincerely yours,




Charles A. Ebwsher
Comptroller General
of the United States




Page 2                                GAO/AFMD-SO-66   House Child Care Center
Page 8   GA0/AFMJb90-66   House Child Cam Center
Contents


Opinion Letter
Report on Internal                                                                                   6
Accounting Controls
and Compliance With
Laws and Regulations
Balance Sheets
Statements of
Revenue, Expenses,
and Fund Balance
Statement of Cash                                                                                        9
Flows
Notes to Financial                                                                                  10
Statements
Table                  Table 1: Schedule of Purchased and Donated Assets                            11




                       Page 4                               GAO/AFMD-90-6!5   Howe   Child Care Center
Page 5   GAO/AF’MD-9085   House Child Care Center
1 Report on Internal Accounting Controls and
  Compliance With Laws and Regulations

                 We have audited the financial statements of the House of Representa-
                 tives Child Care Center, Inc., for the fiscal years ended August 31, 1989
                 and 1988. Our audits were made in accordance with generally accepted
                 government 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 neces-
                 sary in 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 fiscal year ended
                 August 31, 1989. Our report on internal accounting controls and compli-
                 ance with laws and regulations for the fiscal year ended August 31,
                 1988, is presented in GAO/AFMD-89431, dated March 29, 1989.

                 We did not complete a study and evaluation of the Center’s internal
                 accounting control system for the purpose of determining the nature,
                 timing, and extent of the auditing procedures necessary for expressing
                 an opinion on the Center’s financial statements. Based on our prelimi-
                 nary review, we concluded that it was more efficient to expand our sub-
                 stantive tests in auditing the financial statements for the fiscal year
                 ended August 31,1989.

                 While we did not perform a complete study and evaluation of the
                 Center’s internal accounting control system, we did not become aware of
                 any condition during our expanded substantive audit tests which we
                 believe to be a material weakness.

                 As part of our audit, we also tested the Center’s compliance with the
                 terms and provisions of H. Res. 21 and Internal Revenue Service regula-
                 tions on income tax withholdings. In our opinion, the House of Repre-
                 sentatives Child Care Center, Inc., complied with the terms and
                 provisions of H. Res. 21 and applicable Internal Revenue Service regula-
                 tions for the transactions tested that could have materially affected its
                 financial statements. Nothing came to our attention, in connection with
                 our audit, that caused us to believe that the Center was not in compli-
                 ance with the terms and provisions of H. Res. 21 and the Internal Reve-
                 nue Service regulations for those transactions not tested.




                 Page 6                                  GAO/AFMD@O&   Howe   Child Care Center
               .



Balance Sheets



                                                                                                                                             August 31,
~--_---                                                                                                                                  1989                        1988
Assets
__-~-_-__-
-Current      Assets
   .----.-___---__-
     Cash
-“--.----.                                                                                                                             $51,307                   $100,758
     Restricted cash (note 2)                    --__-                                                                                  12,120                     10,605
     Investment in marketable securities-at                    lower of cost or market value                                            52,823                           0
     Prepaid
 .._.._          insurance
      _.._- I. . -_-. .--.--- expense
                                -.......-.-.----__---.__                                                                                 4,190                      6,401
     Accrued
.-___.-  _._.. .-__.- -__-__investments
                  interest   on          -__-...                                                                                           780                          0
      Total current assets                                                                                                             121,220                    117,784

Fixed._.........
---     Assets .. . .._. --.. .- _-....-_ -...-.-.-..-.-.-.-
    Equipment (note 3)                                                                                                                  27,109                     14,056
    Less accumulated depreciation                                                                                                        4,896                        977
      Total tlxed assets                                                                                                                22,213                     13,079

Total Assets                                                                                                                       $143.433                     $130,843

Llabllltles and Fund Balance
Current Liabilities
  Accounts payable                                                                                                                         $89                       $174
   Payroll taxes payable                                                                                                                   423                      1,592
   Deferred revenue (note 4)                                                                                                                 0                      1,486
      Total current Ilabllitlor                                                                                                           512                       3,252

Long-Term Liabilities
  Deposits held for parents (note 2)                                                                                                     8,850                      7,200
  Payroll held for employees (note 2)                                                                                                    3,270                      3,405
   Loan Pavable (note 5)                                                                                                               100.000                    100.000
      Total long-term liabilities                                                                                                      112,120                   110,805

      Total Ilabilitles                                                                                                                112,832                   113,857
Fund Balance
  Net investment in donated assets (note 3)                                                                                             14,732                      4,325
  Fund balance-general    operating                                                                                                     16,069                     12,661
      Total fund balance                                                                                                               30.801                      18,988

Total Liabilities and Fund Balance                                                                                                 $143,433                     $130,843
                                                                    The accompanying notes are an integral part of these statements.




                                                                    Page 7                                                 GAO/AF’MD-9085        Howe   Child Care Center
Statements of Revenue, Expenses, and
Fbnd Balance



Revenue
Otwatino
  Tuition                                                                                                         $313,919                   $215.436
  Application fees                                                                                                   1,950                      1,475
  Miscellaneous                                                                                                      3,776                      4,891

                                                                                                                   319,645                    221,802
Nonoperating
  Donations (note 1)                                                                                                17.795                     85.064
  interest (note 6)                                                                                                  9,001                      7,138

                                                                                                                    26,796                     92.202

    Total Revenue

Expenwr
Salaries                                                                                                           274,483                    237999
Employment taxes                                                                                                    20,580                     17,703
Employee benefits (note 7)                                                                                          10,180                      6,520
Classroom supplies                                                                                                  17,329                     12,778
Office supplies                                                                                                        861                        743
Class activities                                                                                                       840                        698
Utilities - telephone                                                                                                  362                      4,363
Child care eauipment - small                                                                                         3.993                     12.720
Printina and advertisina                                                                                               860                      2,996
Insurance                                                                                                            6,400                      6,114
Staff development                                                                                                    2,609                        867
Depreciation                                                                                                         1.901                        302
Miscellaneous                                                                                                        2,635                      8,904

    Total Expenses                                                                                                343,033                    312,707

Excess of revenue over expenses                                                                                      3,408                       1,297

Fund balance, beginning of period (note 8)                                                                          12,661                     11,364

Fund Balance, End of Period                                                                                       $18,069                    $12,861
                                             The accompanying   notes are an integral part of these statements.




                                             Page 8                                                   GAO/AFMB9O86           Howe   Child Care Center
Statement of Cash Flows



                                                                                                                              Fiscal year ended
                                                                                                                                August 31,196s
Carh Flow8 From Operating Actlvltler
Net income                                                                                                                                 $3,408
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
     Depreciation                                                                                                                           1.901
  Decrease (increase) in assets:
     Prepaid insurance expense                                                                                                              2,211
     Accrued interest on investments                                                                                                         1780)
     Investments in marketable securities                                                                                                 (52,823)
     Purchased equipment                                                                                                                     (627)
  Increase (decrease) in liabilities:
     Accounts payable - vendors                                                                                                                86
     Payroll taxes payable                                                                                                                 (1,169)
     Payroll held for employees                                                                                                              (135)
     Deoosits held for parents                                                                                                              1.650
     Deferred revenue                                                                                                                      (1,486)

Net cash used in oberatina activities                                                                                                    (47.9361
Cash at beqinning of year                                                                                                                111.363

Cash Balance at End of Year                                                                                                              863.427

                                                The accompanying notes are an integral part of this statement.




                                                Page   9                                                 GAO/AFMD-9085   House Child Care Center
Notes to fiancid                            Statements


Note 1. Significant
Accounting Policies
Organization                       The House of Representatives Child Care Center, Inc., was established
                                   by H. Res. 21, December 11,1986. The Center is an independent, non-
                                   profit, nongovernmental corporation, incorporated under the laws of the
                                   District of Columbia for the sole purpose of providing child care. The
                                   Center provides its services for children of Members, officers, their
                                   staffs, and other support personnel of the House of Representatives. It
                                   is exempt from income tax under section 601(c)(3) of the Internal Reve-
                                   nue Code. The Center began operations on September 1,1987.

Depreciation Policy                Equipment is depreciated over a S-year or lo-year period using the
                                   straight-line method.

Donated Facilities iznd Services   The financial statements do not include the costs of space, utilities
                                   (except telephone), and ordinary repairs and maintenance, which are
                                   provided to the Center without charge.

Administration and Fund Raisii     Administration and fund raising expenses are about 2 percent of total
Expenses                           revenue and include office supplies, printing and advertising, staff
                                   development, and miscellaneous costs. Administration and fund raising
                                   services are performed by officers, directors, parents, and others at no
                                   expense to the Center.

DOnations                          The Center solicits and receives donations from corporations and indi-
                                   viduals. The donations received were in the form of cash, equipment,
                                   and services. For financial statement purposes, no value was assigned to
                                   the donated services.


Note 2. Restricted Cash            The Center is holding $8,860 from the children’s parents as initial depos-
                                   its which are refundable if proper notice of withdrawal is given. The
and Related Liability              Center is also holding $3,270 from employees’ first week’s pay which is
                                   due the employees upon proper notice of termination of their employ-
                                   ment and payment of any existing debts to the Center. The total cash
                                   held and related liability at August 3 1,1989, was $12,120.




                                   Page10
Note 3. Equipment                    The Center purchased or received by donation the following items of
                                     equipment.
Table 1: Schedule of Purchased and
Donated Asrets                                                               Cost~wfa~~
                                                               Estimated                   Accumulated
                                                               useful life        value    deDreclation      Net value
                                     Purchased
                                     Playground equipment         5 years        $9,684           $2,203         $7,461
                                     Donated
                                     Office equipment            10 years        11,425            1,143         10.282
                                     Kitchen equipment           10 years         3,250             .650          2,600
                                     Educational equipment        5 years         1,850             540           1,310
                                     Cleanina eaubment            5 years           900             360             540

                                         Total donated                           17,425            2,693         14,732
                                     Total                                     $27,109           $4,898        $22,213



Note 4. Deferred Revenue             Fiscal year 1988 deferred revenue consisted of tuition payments
                                     received for fiscal year 1989.


Note 6. Loan Payable                 The $100,000 loan provided for in H. Res. 21 for equipment and other
                                     expenses of starting the Center was received in January 1987. It
                                     remained a Center liability as of August 31, 1989. The Legislative
                                     Branch Appropriations Act, 1990 (Public Law lOl-163), dated Novem-
                                     ber 21,1989, amended H. Res. 21 and omitted the requirement for the
                                     Center to repay the loan.


Note 6. Interest                     Cash consists of the checking, savings, and share accounts which earn
                                     interest. Interest also includes income earned from marketable securities
                                     that the Center purchased during fiscal year 1989. All interest is
                                     reported under nonoperating revenue because its source is other than
                                     child care operations.


Note 7. Employee Benefits            The Center contributes to the cost of health and benefit plans selected
                                     by employees. All employees are covered by the Social Security Act. The
                                     Center has no retirement plan to supplement Social Security. The Center
                       ”
                                     has no future benefits liability since it does not administer the plans.




                                     Page 11                                   GA0/AFMB90-66   House Child Care Center
                                                                                                .
                       Noten to Pinandal Statanente




Note 8. Fund Balance   The fund balance at the beginning of fiscal year 1988 represents the net
                       assets remaining from the $100,000 loan after start-up costs were paid
                       for the period January through August 1987, No detailed financial
                       records were kept for this period.




           Y




(918729)               Page 12                                GAO/AFMD-9046   House Child Care Center
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