-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 ~- -- --.- - -.-__._--.....-____ -.-- .___.._ --..-. ._ I.” ._.. _ .._.._.“.. I “, II,,,, I” “, .,,,_*l,l” “, *II ._l”~,l_--“^__“.----------- Ilty~~t~sts I’or wpit*s of’ (;A() rt*port,s s1~0111t1 lw wnl to: ‘I’lwrt~ is a 25”0 tlisconnt~ tm orders for 100 or tnow col)it~s mailtd t,o w sin&h ;ttltlrcss. -
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)