oversight

Financial Audit: Senate Restaurants Revolving Fund for Fiscal Years 1989 and 1988

Published by the Government Accountability Office on 1990-08-13.

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

Arr~llst   l!,!ii
                    FINANCIAL   AUDIT
                    Senate Restaurants
                    Revolving Fund for
                    Fiscal Years 1989 and
                    1988


                                     141998




 GAO,‘AFMI)-W-92
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Comptroller   General
      of the United States

      B-l 14871

      August 13,199O

      The Honorable George M. White
      Architect of the Capitol

      Dear Mr. White:

      Pursuant to your request of August 29, 1989, and section 5 of the act of
      July 6, 1961 (40 U.S.C. 174j-5), we have audited the balance sheets of
      the United States Senate Restaurants Revolving Fund as of
      September 30, 1989, and October 1, 1988, and the related statements of
      operations and cash flows for the years then ended. We completed our
      audit on March 20, 1990. These financial statements are the responsi-
      bility 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 Fund as of Sep-
      tember 30, 1989, and October 1, 1988, and the results of its operations
      and its cash flows for the fiscal years then ended in conformity with
      generally accepted accounting principles.

      As discussed in note 6 to the financial statements, the results of fiscal
      year 1988 operations have been restated to reflect the employer’s share
      of employee retirement benefits payments which were not made until
      fiscal years 1989 and 1990.




      Page 1                          GAO/AFMD40-92   Senate Restaurants   Revolving   Fund
 5114871                                                                          I’




 Our report on internal accounting controls and compliance with laws
 and regulations, together with the Fund’s financial statements and
 accompanying notes for fiscal years ended September 30,1989, and
 October 1, 1988, is included in this report.

 Sincerely yours,




%lQL/&
 Charles A. Bowsher
 Comptroller General
 of the United States




 Page 2                        GAO/AFMD-90-92   Senate Restaurants   Revolving   Fund
Y




    Page 3   GAO/AFMD9@92   Senate Restaurant8   Revolving   F’und
Contents                                                                                                  I



Opinion Letter                                                                                             1

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

Statements of                                                                                              9
Operations
Statements of Cash                                                                                        10
Flows
Notes to Financial
Statements
Tables                 Table 1: Costs Paid With Appropriated Funds                                        11
                       Table 2: Aging of Customer Accounts Receivable                                     12
                       Table 3: Sales and Operating Income (Loss) by Unit                                 13
                       Table 4: Effects of Restating Fiscal Year 1988 Financial                           14
                           Statements




                       Page 4                         GAO/AFMD-90-92   Senate Restaurants   Revolving   Fund
Page 6   GAO/AFMLM9-92   Senate Restaurants   Revolving   Fund
Report on InternaIl Accounting Controls
Compliance With Laws and Regulations

               We have audited the financial statements of the United States Senate
               Restaurants Revolving Fund for the fiscal years ended September 30,
                1989, and October 1, 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 September 30, 1989. Our report on internal accounting con-
               trols and compliance with laws and regulations for the year ended
               October 1, 1988, is presented in GAO/AFMD-89-67, dated June 2, 1989.

               The Fund is administered by the restaurants’ management under the
               jurisdiction of the Architect of the Capitol. As part of our audit, we
               made a study and evaluation of the system of internal accounting con-
               trols for the Fund to the extent we considered necessary to evaluate the
               system as required by generally accepted government auditing stan-
               dards. 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 in the categories of receipts, disbursements, receiv-
               ables, inventories, and payables. Our study and evaluation 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, estimates and judgments by management are 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.

               Because of inherent limitations in any system of internal accounting
               controls, errors or irregularities may nevertheless 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



               Page 6                          GAO/AFMD-90-92   Senate Restaurants   Revolving   Fund
Report on Internal Accounting Controls   and
Complinnce With Law6 and Regulations




because of changes in conditions or that the degree of compliance with
the procedures may deteriorate.

Our study and evaluation, made for the limited purpose described in the
second paragraph of this report, would not necessarily disclose all mate-
rial weaknesses in the system. Accordingly, we do not express an
opinion on the system of internal accounting controls of the Fund taken
as a whole or on any of the categories of controls identified in the third
paragraph of this report. However, our study and evaluation disclosed
no condition that we believed to be a material weakness.

As part of our audit, we also tested the Fund’s compliance with terms
and provisions of 40 U.S.C. 174j-1 through j-9, Department of the Trea-
sury regulations on cash, Office of Personnel Management regulations
on employee benefits and employer costs, and Internal Revenue Service
regulations on income tax withholdings. In our opinion, the United
States Senate Restaurants Revolving Fund complied with the terms and
provisions of 40 USC. 174j-1 through j-9 and the just-mentioned 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 Fund was not in compliance
with the terms and provisions of 40 U.S.C. 174j-1 through j-9 and the
previously stated regulations for those transactions not tested.




Page 7                                   GAO/APMD-99-92   Senate Restaurants   Revolving   Fund
Balance Sheets



                                                                                                 September 30,1989                               October 1,1988
Assets
“_l      (note
       .._^_...  1)
            - .._-_....__-
                         -
   Funds with US Treasury                   -                                                                  $624,214                                  $285,737
   Petty cash and change funds                                                                                   18,000                                    18,000
   Accounts receivable (note.-- 2)                                                                              373,348                                   356,486
   Food, beverages, and merchandise inventory                                                                   146,027                                   122,159
   China, glassware,  silverware,
                          -_-___. and tableware
              .._. ._.._..-                                                                                     130,599                                   159,574

Total Assets                                                                                                 $1,292,188                                 $941,958

Liabilities and Government Equity
Liabrlitres
   Accounts payable          -._ .---
   Due..__to ..^_.
              vendors ._._--.. .-._- -...-                                                                     $436,256                                  $391,214
   Net payroll and benefits                                                                                     155,146                                   145,746
   Supplemental
         I. ._. . _..-..---services
                                 -___---..-                                                                      13,886                                    10,835
   Federal
     .__ ...I^...and
                .-....---state ..____-
                                 taxes--.-withheld                                                               54,961                                    61,082
   Unclaimed
    ... .._..- .._.__ wages
                        -.._ __-..-_.__   -- ...__                                                                1,849                                     2,114
   Other (note         3)
               _..------__.-...--_--~_                                                                            4,728                                     4,994

         Total accounts
                   -.._ -- payable
          ._ -..“_-_.                                                                                           666,826                                   615,985

   Employees’ accrued leave                                          _--                                        243,587                                   255,658
   Advance from contingentfund-(note
                            --.. ..___. 7)                                                                      400,000                                         0

   Total liabilities                                                                                          1,310,413                                   871,843

Government Equity              ~-. .--.--____
 .- Capital                                   ~.______.                                             __
      Contributed                -...----.-~                                                                     51,200                                       51,200
      Capitalization of china, glassware, silverware, and tableware (note 4)                                     45,944                                       45,944

Revolving Fund Balance                                                      -.-
  Balance at beginning of year                                                                                   (26,831)                                     155,741
                                                     .-_
  Prior year’s adjustment (note 6)                   .__-                                                              0                                     (5,517)
  Net loss     -                                                                                                 (88,538)                                 (177,055)

      Balance at end of year.--~.. -.._~-.____I__.~-_                                                           (115,369)                                     (26,831)

   Total government equity                                                                                      (18,225)                                      70,313

Total Liabilities and Government Equity                                                                      $1,292,188                                 $941,958
                                                            The accompanying notes are an integral part of these statements.




                                                            Page 8                                       GAO/AFMD-99-92     Senate Restaurants    Revolving     Fund
f%atementsof Operations



                                                                                                       Fiscal years ended
                                                                                        September 30,1999                October 1,1988
                                                                                                        Percent                         Percent
                                                                                          Amount        of sales         Amount         of sales
Food and Beverage.~.Operations
                    ..__......
                           --_---_--_-
   Regular food services                                                                $3,862,130               62.0           $4,153,075           -___ 64.7
   Catering
       ._        .~..   .          ..~                                                   2,364,177               38.0            23267,498                35.3

     Total sales (note 5)                                                                6.226.307              100.0             6.420.573                    100.0
  Cost of food and beverages                                                             2,343,631               37.6             2,466,124                     38.4

  Gross income from sales of food and beverages                                          3,882,676               62.4             3,954,449                     61.6

Operating expenses
   Salaries and wages: 7.  .        .~.

     ” Straight time                          ..____.--.                                 2552,683                41 .o            2,677,558                     41.7
       Overtime                                                                            106,923                1.7               137,689                      2.1
   Employee
  .”             benefits (note
                             .-~ . 6)
                                   ..~~.                                                   746,531               12.0               717,933                     11.2
   Leaveexpense                                                                            192,983                3.1              -203,310                      3.2
,. Employee
     ^........   meals
                .~~.
                   .- ~. -~~ ..~                                                           121,816                1.9               136,466                      2.1
    Employee physicals                                                                      1,716                   ,l                4,067                          0.1
    Supplemenial”~ervices                                                                 290,584                  4.7              284,116                          4.4
    Chrna, glassware, silverware, and tableware                                            66,688                  1.1               65,503                          1 .o
   .Kitchen utensils .~ ..~~
                           . . ..-~.                                      ._____           13,217                   .2               17,405                          03
,, Miscellaneous                                                                           19,499-                  .3               28,836                          0.5

     Total operating expenses                                  ~..__                     4,112,640               66.1             4,272,883                     66.6

Loss From Food and Beveraae Ooerations                                                   (229.9641                (3.71           (318,434)                         (5.0)

Sundry
.I       Shop Operations                              -.__-.                                                                                                   --
    .
   Sales (note 5)                                                                         895,870..             100.0              888,388                     100.0
  Cost of sales                                        ._I_____.                          654,794                73:1              662,952                      74.6

  Gross Income from sales of sundry shop merchandise
                                             -_      and newspapers                       241,076                26.9               225,436               -.    25.4
  Operatrng expenses     _.---.___--                                                      138,247                15.4               140,610                     15.8

Income From Sundrv ShOD Ooerationa                                                        102.829                11.5               84.826                          9.6

Vending Machine Commissions                                                        --      38,597                                   56,553

Net (Loss)                                                                               $(88,538)                               $(177,055)
                             *
                                                  The accompanying     notes are an integral part of these statements.




                                                  Page 9                                             GAO/AFMD-90-92      Senate Restaurants   Revolving        Fund
Statements of Cash Flows



                                                                                                               Fiscal years ended
._.... ._    . .     .~ ..~.                                                                         September 30,1989          September 30,1988
Cash Flows From Operating
                  .-._- ..._.Activities
                             -. ___~-_-
  Net loss                       -.. _-.---                                                                        $(88,538)                       $( 177,055)
-. Adjustments
     __..             to reconcile
                     .~    .~    . ._net  loss
                                             _.. to net cash used in operating activities
                                       _. ~~..
-      Decrease     (Increase)   in  assets:                   ---.-
          Accounts.,. receivable                                                                                    (16,862)                             (95,602)
          China, glassware, silverware,
                                     ~- ~~._..and      tableware
                                                   _---.--.--                                                        28,975                                 VW
          Food, beverages, and merchandise                                                                          (23,868)                              57,963
       Increase (decrease) in liabilities:
          Due to vendors                                                                                             45,042                              161,270
          Net payroll and benefits                       -    -._...--_______                                         9,400                               30,654
          Supplemental services                                         _____-.                                       3,051                                4,426
          Fe&rat and state _..   taxes
                                  .-      withheld----.‘---                                                           (6,121)                             11,071
          Employees”accrued          leave                                                                          (12,071)                                (381)
          Unclaimed wages                                                                                              (265)                                 932
-..       Other -~                                                                                                     (266)                               1,068
       Increase (decrease) in government equity:                  .-            --_____
    .     Prior year’s adjustment to revolving fund balance                                                                 0                             (5,517)

  Net cash used In operating activities                                                                             (61,523)                             (11,947)

Cash Flows From Financing Activities
 ‘8orro&gs  from-the Secretary of the Senate
                                         -- (note 7)     ___..                                                      400,000                           150,000
  Payments onbor’rowings from~the~$~r~ary of the Senate (note 8)                                                          0                          (150,000)

  Net cash provided by financing activities                        -..~-.-                                          400,000                                    0

Net Increase (Decrease) in Cash                                                                                    338,477                           (11,947)

Cash at beginning of year                                            --                                             303,737                              315,684

Cash Balance at End of Year                                                                                       $842,214                         $303,737
                                                         The accompanying notes are an integral part of these statements.




                                                         Page 10                                    GAO/AFMD90-92       Senate Restaurante   Revolving     Fund
Notes to Financial Statements


Note 1. Significant                     The Fund’s fiscal year consists of thirteen 4-week accounting periods.
Accounting Policies                     Periodically, when determined by management, an adjustment is made
                                        so that the Fund’s fiscal year-end more nearly matches the federal
                                        government’s.

                                        The restaurant facilities are operated for Senators, employees of the
                                        Senate, and, in certain locations, the general public. The Architect of the
                                        Capitol, under the direction of the Senate Committee on Rules and
                                        Administration, is responsible for managing the restaurants.

                                        The financial statements do not include the costs of management per-
                                        sonnel salaries and benefits, other services, or supplies and materials,
                                        These costs, as provided for under Public Law 92-51, were paid from
                                        funds appropriated to the Architect of the Capitol for Senate office
                                        buildings’ operations, as follows.

Table 1: Carts Paid With Appropriated
Funds                                                                                              Supplies
                                                        Personnel    Personnel         Other             and
                                        Fiscal vear   comoensation    benefits      services       materials             Total
                                        1989              $723,766    $128,933      $174,063        $282,250       $1,309,012
                                        1988              $652,198     $90,233      $172,852        $262,999       $1,178,282


                                        The Fund’s statements also do not include costs for space, building
                                        repairs and maintenance, utilities, garbage disposal, or printing by the
                                        Government Printing Office, which are furnished without charge to the
                                        Fund and whose amounts cannot be readily determined.

                                        Cash receipts from sales and commissions are deposited in the U.S. Trea-
                                        sury to the credit of the Fund for use in operating the various restaurant
                                        facilities.

                                        Inventories are valued at cost and are charged to operations using the
                                        first-in, first-out method.

                                        Unclaimed wages remain on the Fund’s books as liabilities and may be
                                        claimed by former employees or their legal representatives for up to
                                        6 years. Afterward, such liabilities are removed from the Fund.


Note 2. Accounts                        The accounts receivable balance shown in the following aging table at
Receivable                              September 30, 1989, is not the same as the balance sheet amount primar-
                                        ily because the balance sheet amount was adjusted for refunds made to


                                        Page 11                         GAO/AFMD-90-92   Senate Restaurants    Revolvlng   Fund
                                                                                                                            *-
                                      Notes to Financial   Statementa




                                      customers for overpayment of accounts receivable, and the aging table
                                      was not adjusted until October 1989. Also, the balance sheet amount
                                      includes other receivables which are not part of the aging table. The
                                      accounts receivable balance shown in the aging table at September 30,
                                      1988, is not the same as the balance sheet amount because of the rea-
                                      sons just stated and because the balance sheet amount is as of October 1,
                                      1988. A comparison of the aged customer accounts receivable at Sep-
                                      tember 30, 1.989, and September 30, 1988, follows.

Table 2: Aging of Customer Accounts
Receivable                                                              September 30,1989            September 30,1988
                                      Days outstanding                    Amount    Percent           Amount       Percent
                                      oto30                               $270.318           73      $213.523                    60
                                      31to60
                                      -...-_-..                             16,650            5        30,360                     8
                                      61 to90      ---                      24,684            7        20,279                     6
                                      Over90      ~____                     56,389           15        91,312                    26

                                      Total                              $368,041          100      $355,474                 100


                                      At December 31, 1989,89 percent of the September 30, 1989, accounts
                                      receivable balance had been collected. The Fund’s acounting office
                                      prepares collection letters monthly for the signature of the Architect of
                                      the Capitol. In accordance with the policy direction established by the
                                      Senate Committee on Rules and Administration, the collection letters are
                                      mailed to customers whose accounts are delinquent over 90 days.


Note 3. Other Liabilities             Other liabilities include court ordered child support payments withheld
                                      and amounts for employees’ physicals.


Note 4. Capitalization of             Additional government equity was provided when inventories of
China, Glassware,                     (1) china, glassware, and silverware valued at $36,361, and (2) table-
                                      ware valued at $9,583, were established on July 1, 1967, and October 2,
Silverware, and Tableware             1976, respectively. The capitalization account balance of $45,944 will
                                      remain constant until adjusted to recognize additional like contributions
                                      or withdrawals.


Note 5. Sales J                       A comparison of sales, commissions, and operating results for the
                                      various restaurant units during fiscal years 1989 and 1988 follows.




                                      Page 12                           GAO/AFMLI-90-92   Senate Restaurants    Revolving   Fund
                                      Notes to Financial   Statements




Table 3: Sale8 and Operating Income
(Loea) by Unit                                                       Fiscal year 1989                           Fiscal year 1966
                                                                Sales and Operating profit or                Sales and         Operating
                                                              commissions             (loss)              commissions     profit or (loss)
                                      Food and
                                        beverage
                                        operations:
                                      Capitol dining
                                        rooms                    $1.429.367                $(488,865)         $1,514,364           $(605,012)
                                      Senators’ dining
                                        room                          73,779                 (51,555)             85,187                 (57,987)
                                      Cafeterias
                                       -_._...---                  3,432,978                 189,896           3,383,620                  72,201
                                      Coffee shoDa                   353,033                   3.904             480,571                  64.903
                                      Snack bar                      242,786                   2,814             246,355                  42,344
                                      Senate Chef                    694,364                 113,842             710,476                 165,117

                                                                  6,226,307                (229,964)          6,420,573             (318,434)

                                      Sundry shop
                                        operations:
                                      Capitol dining
                                          rooms                          60,633                 2,128             67,119                   4,050
                                      Dirksen Office
                                      --.-Building                      355,370               40,298             343,285                  38,341
                                      Russell Office
                                          Buildinga                      85,004                9,853             109,721                  (4,398)
                                      Hart Office Building              394,863               50,550             368,263                  46,833

                                                                    895,870                 102,829             668,388                  84,626

                                      Vending machine
                                        commissions
                                      ____I---                      36,597                    38,597              56,553             56,553
                                      Total                     $7,160,774                 $(88,538)         $7,365,514           $(177,055)
                                      aDuring fiscal year 1989, the coffee shop was closed about 4 months for renovations and the Russell
                                      Office Building sundry shop was closed about 5 months for renovations.




Note 6. Restatement of                The fiscal year 1988 financial statements have been restated from those
Fiscal Year 1988 Financial            previously presented to include the effect of (1) additional fiscal year
                                      1988 and 1987 costs of employer contributions paid to the Federal
Statements                            Employees’ Retirement System’s Thrift Savings Plan and (2) fiscal year
                                      1988 costs of employer contributions as required by the Federal Insur-
                                      ance Contributions Act applicable to supplemental employee payroll.
                                      These expenses were actually paid in 1989 and 1990. Key effects of the
                                      restatement follow.




                                      Page 13                                     GAO/AFMD-90-92        Senate Restaurants   Revolving     Fund
                                            Notes to Financial Statements




fable 4: Effects of Restating Flscal Year
1988 Financial Statements                                                             Previously
                                                                                        reported                                Adjusted
                                                                                         amount         Adjustment               amount
                                            Employee benefits expenses (food
                                               and beverage operations)’                $698,688            $+19,245             $717,933
                                            Operating expenses (sundry shop
                                               operations)a                              140,354                +256                  140,610
                                            Net lossa                                    157,554             +19.501                  177,055
                                            Prior year’s adjustment to fund
                                               balance                                                        -5,517               -5,517
                                            End of vear fund balanceb                     -1.813             -25.018              -26.831
                                            Total aovernment eauitvb                      95,331             -25,ol a               70,313
                                            BSee 1988 Statement of Operations.
                                            bSee 1988 Balance Sheet.



Note 7. Financi ng                          In order for the Architect of the Capitol to properly manage the Senate
Activities                                  Restaurants, Public Law 98-396 was passed on August 22, 1984, giving
                                            the Architect authority to borrow, subject to the approval of the Senate
                                            Committee on Rules and Administration, such amounts as he may deter-
                                            mine necessary to carry out his legal obligations in managing the restau-
                                            rants. The funds come from the miscellaneous items appropriation
                                            account of the contingent fund of the Senate, and all repayments are
                                            deposited into the same account. The loan amount and period are estab-
                                            lished by the Senate Committee on Rules and Administration, but the
                                            loan is made by the Secretary of the Senate to the Architect.

                                            During October 1988, the Architect borrowed $400,000, which was to be
                                            repaid by June 30, 1989. In a June 23, 1989, letter to the Chairman of
                                            the Senate Committee on Rules and Administration, the Architect
                                            requested a transfer of appropriated funds from the contingent
                                            expenses of the Senate to be used to repay the $400,000 loan. On
                                            July 10,1989, the Chairman approved the request, and on Septem-
                                            ber 13, 1989, the Senate Appropriation Subcommittee on the Legislative
                                            Branch approved a reprogramming of $400,000 from the miscellaneous
                                            items appropriation account to the Senate Restaurants Revolving Fund
                                            to increase the capitalization of the Fund.


Note 8. Subsequent Event                    In October 1989, the Senate Restaurants Revolving Fund received
                   Y                        $400,000. This money was then used to repay the $400,000 loan which
                                            the Fund had received in October 1988.



(916709)                                    Page 14                              GAO/~-90-92       Senate   Restaurants   Revolving     Fund
    ‘I’t~lt*pIwllt~ 202-275-63241




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