oversight

Financial Audit: House Recording Studio Revolving Fund for 1989 and 1988

Published by the Government Accountability Office on 1990-07-19.

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

                                                                                  -__
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                                FINANCIAL AUDIT
                                House Recording
                                Studio Revolving Fund
                                for 1989 and 1988


                                                                                     141834




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         United States
GAO      General Accounting  Office
         Washington, D.C. 20548

         Comptroller   General
         of the United States

         B-l 14842

         July 19, 1990           s

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

         Dear Mr. Anderson:

         As requested in your letter of November 10, 1989, we have audited the
         accompanying balance sheets of the House of Representatives Recording
         Studio Revolving Fund as of December 31., 1989 and 1988, and the
         related statements of operations and cash flows for the years then
         ended. We completed our audit work on March 30, 1990. These financial
         statements are the responsibility of the Fund’s management. Our
         responsibility is to express an opinion on these financial statements
         based on our audits.

         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 the 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 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 House of Represen-
         tatives Recording Studio Revolving Fund as of December 3 1, 1989 and
         1988, and the results of its operations and cash flows for the years then
         ended in conformity with generally accepted accounting principles.

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




         Page 1                       GAO/AFMD-90-88   House Recording   Studio Revolving   Fund
We are sending a copy of this report to the Chairman of the Committee
on House Administration.

Sincerely yours,




Charles A, Bowsher
Comptroller General
of the United States




Page 2                    GAO/~-SO-88   House Recording   Studio RevoMng   Fund
Page 3   GAO/AFMD80-St?   House Recording   Studio Revolving   Fund
contents


Opinion Letter                                                                                              1

Report on Internal                                                                                          6
Accounting Controls
and Compliance With
Laws and Regulations
Balance Sheets                                                                                              8

Statements of
Operations
Statements of Cash                                                                                         10
Flows

Notes to Financial                                                                                         11
Statements
Tables                 Table 1: Identifiable Studio Operating Costs Paid From                              12
                           Appropriated Funds
                       Table 2: Changes in Equipment                                                       12




                       Page 4                     GAO/AF’MD-90-88   House Recording   Studio Revolving   Fund
Page 5   GAO/AFMD-90-88   House Recording   Studio Revolving   Fund
Report on Internal Accounting Controls and
Compliance With Laws and Regulations

               We have audited the financial statements of the House of Representa-
               tives Recording Studio Revolving Fund for the years ended
               December 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 necessary in the circumstances. This report pertains only
               to our study and evaluation of the system of internal accounting con-
               trols and our review of compliance with laws and regulations for the
               year ended December 31,1989. Our report on internal accounting con-
               trols and compliance with laws and regulations for the year ended
               December 31, 1988, is presented in GAO/AFMD-89-77, dated June 29, 1989.

               As part of our audit, we made a study and evaluation of the Fund’s
               system of internal accounting controls to the extent we considered nec-
               essary to evaluate the system as required by generally accepted govern-
               ment auditing standards. The purpose of our study and evaluation was
               to determine the nature, timing, and extent of the auditing procedures
               necessary for expressing an opinion on the Fund’s financial statements.

               For the purpose of this report, we have classified the significant internal
               accounting controls into the categories of receipts, disbursements, equip-
               ment, inventory, and receivables. Our study included all of these control
               categories.

               The management of the Fund is responsible for establishing and main-
               taining a system of internal accounting controls. In fulfilling this respon-
               sibility, management makes estimates and judgments required to assess
               the expected benefits and related costs of control procedures. The objec-
               tives of a system are to provide management with reasonable, but not
               absolute, assurance that (1) assets are safeguarded against loss from
               unauthorized use or disposition and (2) transactions are executed in
               accordance with management’s authorization and are recorded properly
               to permit the preparation of financial statements in accordance with
               generally accepted accounting principles and with the financial
               accounting policies described in note 1 to the statements.

               Because of inherent limitations in any system of internal accounting
               controls, errors or irregularities may occur and not be detected. Also,
               projection of any evaluation of the system to future periods is subject to
               the risk that procedures may become inadequate because of changes in
               conditions or that the degree of compliance with the procedures may
               deteriorate.


               Page 6                       GAO/AFMLMOH)-88 House Recording   Studio Revolving   Fund
Report on Internal Accounting Controls   and
Compliance With Laws and Regulations




Our study and evaluation, which was made for the limited purpose
described in the second paragraph, would not necessarily disclose all
material weaknesses in the system. Accordingly, we do not express an
opinion on the system of internal accounting controls taken as a whole
or on any of the categories of controls identified. However, our study
and evaluation disclosed no condition that we believed to be a material
weakness that would affect our expressing an opinion on the Fund’s
financial statements.

As part of our audit, we also tested the Fund’s compliance with the
terms and provisions of 2 U.S.C. 123b and with rules and regulations of
the Special Committee on the House Recording Studio. In our opinion,
the House Recording Studio Revolving Fund complied with the terms
and provisions of the just-mentioned law and rules and regulations 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 Fund was not in compliance with the
terms and provisions of the above-mentioned law and rules and regula-
tions for those transactions not tested.




Page 7                              GAO/AF’MD-SO-88   House Recording   Studio Revolving   Fund
Balance Sheets



                                                                                                                       December 31,
                                                                                                                        1989                          1988
Assets
Current
. . . I__..Assets
           ._.-...-_-_-.--._--
    Revolving fund cash (note 1)                                                                                     $871,224                 $658,161
                                                                                                                                            ___---
    Petty cash                                                                                                            200                            200
    Accounts receivable                                                                                                20,332                        27,943
                                                                                                                                                      -.-
    Inventory of materials and supplies, at cost (note 1)                                                              15,923                        15,615
                                                                                                                                                     I_-

     Total current assets                                                                                            907,679                    701,919

Fixed  Assets
  - ..._.__
         -___--_.--..-
   Equipment (note 3)                                                                                            2,086,167                     11874,637
   Less accumulated depreciation    (note 1)                                                                     1,157,972                      985,431
                                                                                                                                                      -
     Total flxed absetr                                                                                              928,195                    889,206

Total Assets                                                                                                   $1,835,874                   $1,591,125

Liabilities and Government Equity
Liabilities
   Accounts payable                                                                                                  $161,488                        $2,108

Government
_..              Equity -..
       ..-- .~- -__.-..
    Contributed capital                                                                                               183,410                       183,410

   Revolving fund:
                                                                                                                                          --__~
     Balance at beginning of year                                                                                    1,405,607                1,384,956
     Net income                                                                                                         85,369                   20,651
                                                                                                                                              ___.~
   Balance at end of year                                                                                            1,490,976                 1,405,607
                                                                                                                                            -___.___
     Total government equity                                                                                     1,674,386                    1,589,017

Total Liablllties and Government Equity                                                                        $1,835,874                   $1,591,125
                                                  The accompanying notes are an integral part of these statements.




                                                  Page 8                                GAO/AFMD-90-88      House Recording      Studio Revolving     F’und
katernents of Operations



                                                                                                                                           Photographic
                                               Total                          Radio                       Television                        laboratory
                                           1989                 1988        1989         1988             1989               1988           1989        1988
                                         ..--.___--

                                     $464,697            $351,629-~     $67,707       $57,991        $300,204            $194,570        $96,786      $99,088

Exaenses
    r------
Mamtenake and le&irs            ..        37,825            26,032         2,026         1,848          32,320              21,884          3,479           2,300
                                          .-..---.
Giiill equipment expense                  11,401             13,215        1,667           918           6,714              11,179          3,020           1,118
Supplies                                  58,004            66,444        18,629         7,571          12,298              26,410         27,077          32,463
                                        . __._____ -...-.-
bfiice supplies and expenses                6,132             6,093        2,044         2,031           2,044               2,031          2,044           2,031
M.&ellaneous expenses                       9,766             7,812        3,256         2,604           3,256               2,604          3,256           2,604
dutslde processing                   -.   75,575            31,501             0             0          75,164              30,865            411             636
                                                           --
Depreciation of equipment                182,623           177,408        16,748        21,401         126,939             122,549         38,936          33,458

    Total expense8 (note 2)           381,328              328,505        44,370       36,373         258,735             217,522         78,223           74,810

Income (Los@ From
  Operations                            83,369              23,124        23,337       21,618           41,469            (22,952)        18,563           24,458

Other Income (Expenses)
Gain (loss) on disposal of
  equipment                               2,000              (1,816)              0     (1,194                  0             (622)         2,000               0
Loss on disposal of inventory                 0                (657)              0       (657)                 0                   0           0               0

    Total other income
     (expenses)                           2,000              (2,473)              0     (1,851)                 0             (622)         2,000               0

Net Income (Loss)                      $85,369             $20,651      $23,337       $19,767         $41,469            $(23,574)       $20.563       $24,458
                                                       The accompanying notes are an integral part of these statements




                                                       Page 9                                GAO/AFMD-99-99         House Recording     Studio Revolving     Fund
Statements of Cash Flows



                                                                                                                                Years ended December 31 I
                                                                               -                                                        1989       1988
Cash Flows From Operating Activities
  Net   inoomeirom
   ~. _.~. .-- _“.--..-__-. operations                                                                                                  $83,369         $23,124
  Adjustments to reconcile net income to net cash
   provided
      ..~~. by        (used _-.--.-.-----_--_
                 . .~~...~~     in) operating activities
                                                      ---_____
         Depreciation
                 “... --...                                    -                                                                        182,623             177,408
         Gain (loss) on disposal --.-__- of equipment                                                                                     2,000              (1,816)
         Loss on disposal of inventory                                                                                                        0                (657)
         Decrease._ .._(increase)      in assets:
                                _.___~..__
   _. -.    Accounts
                ..__-.      receivable
                               .--._-_-...__ --                                                                                            7,611          34,628
            Inventory of materials and supplies                                                                                             (308)            701
            Equipment purchased (note 3)                                                                                                (221,612)       (147,957)
         Increase (decrease) in liabilities: -.-__
            Accounts payable                                       -                                                                    159,380              (3,073)

Net cash provided by operating activities                                                                                               213,083             82,358

Cash
 _ at beginning
        __      of year
                    .~ -..~_-.......
                                  -._.---___-                                                                                           658,361             576,003

Cash Balance at End of Year                                                                                                         $871,424          $858,351
                                                            The accompanying notes are an integral part of these statements




                                                            Page 10                               GAO/AFMD-90-88      House Recording    Studio Revolving     Fund
Notes to F’inancial Statements


Note 1. Significant       The House Recording Studio was established pursuant to section 106 of
Accounting Policies       the Legislative Branch Appropriation Act, 1957 (2 USC. 123b). The
                          Studio, managed by a director under the jurisdiction of the Clerk of the
                          House of Representatives and subject to the direction and control of the
                          Special Committee on the House Recording Studio, makes photographic
                          prints, as well as radio and television tape recordings, for Members and
                          committees of the House. The prices charged for services are set by the
                          Clerk of the House, subject to the approval of the Special Committee.
                          The House of Representatives edition of the Congressional Handbook
                          provides a detailed description of the Studio’s activities.

                          Studio operations are financed from the House Recording Studio
                          Revolving Fund and from funds appropriated to the Clerk of the House
                          and the Architect of the Capitol. All moneys received from operations
                          are deposited into the Revolving Fund and are available for the Studio’s
                          operations.

                          Each Member is authorized an allowance for the conduct of the official
                          and representational duties of his or her office. Charges for Studio ser-
                          vices provided to Members may be paid (1) by the House Finance Office
                          from a Member’s allowance account, (2) directly by a Member, or (3) by
                          a media organization through a Member. Charges for Studio services
                          provided to committees may be paid by the House Finance Office from
                          committee funds or by a media organization through a committee.

                          All inventory items are valued on a weighted-average cost basis. Various
                          items such as light bulbs and photo paper are charged directly to an
                          expense account.

                          Equipment is depreciated over a lo-year or a 5-year period using the
                          straight-line method. The equipment capitalization minimum is $1,000.


Note 2. Other Operating   Certain costs of operating the House Recording Studio are not paid from
costs                     the Revolving Fund. The costs related to space occupancy, building
                          maintenance, and utilities cannot be readily determined. During 1989,
                          the Architect of the Capitol made extensive renovations to various
                          Studio areas. Identifiable costs paid from appropriated funds of the
                          Clerk of the House or the Architect of the Capitol for the years ended
                          December 31, 1989 and 1988, follow.




                          Page 11                     GAO/AFMD-90-88   House Recording   Studio Revolving   Fund
                                         Notes to Financial   Statements




Table 1: Identifiable Studio Operating
Coat8 Paid From Appropriated Fund8       Costs Paid                                                                    1989                  1988
                                         Salaries and benefits                                                 $1,096,459               $962,425
                                         Eq;;p;;;t   expenses paid to House Office Equipment
                                                                                                                       7.024               22.965
                                         Reimbursement to House information Systems                                   77,779               72,802
                                         Telephone                                                                    16,727               14,224
                                         Travel                                                                        5,852                2,034
                                         Studio renovations                                                          218.700                    0

                                                                                                              $1,422,541             $1,074,450



Note 3. Equipment                        A summary of the changes in the equipment account for the years ended
                                         December 31,1989 and 1988, follows.

Table 2: Change8 in Equipment
                                                                                                  Photographic
                                                                       Radio      Television         laboratory        Office               Total
                                         Balance-
                                           December 31,
                                           1987                     $214,268      $1,446,214            $208,259         $351          $1,869,092
                                         Additions                     6,200         116,147               52,326           0        .---.. 174,673a
                                         Reductions                    (3,200)      (137,179)             (28,749)          0              (169,128)

                                         Balance-
                                            December 31,
                                            1988                     217,268        l&425,182            231,836          351           1.874.637
                                         Additions                         0          191,932              29,680           0--___        221,612
                                         --._
                                         Reductions                        0                0             (10,082)          0              (10,082)
                                                                                                                                             __.

                                         Balance-
                                           December 31,
                                           1989                    $217,288      $1,817,114            $251,434          $351        $2,088,187
                                         aThis figure represents the value of equipment purchased during 1988. When reduced by the
                                         undepreciated value of equipment traded in ($26,716), it corresponds with the cash used for purchases
                                         of equipment ($147,957), as shown in the statement of cash flows for 1968.




                    Y




@1668@)                                  Page 12                                 GAO/AFMD-90-88     House Recording     Studio Revolving     Fund
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