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Financial Audit: House Beauty Shop Revolving Fund Financial Statements for 1989 and 1988

Published by the Government Accountability Office on 1990-09-06.

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

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                                                                                                     FINANCIAL AUDIT
                                                                                                     House Beauty Shop
                                                                                                     Revolving Fund
                                                                                                     Financial Statements
                                                                                                     for 1989 and 1988




                                                                                                                          142146
      United States
GAO   General Accounting Office
      Washington, D.C. 20648

      Comptroller General
      of the United States

      B-202896

      September 6,199O

      The Honorable Frank Annunzio
      Chairman Committee on House Administration
      House of Representatives

      Dear Mr. Chairman:

      As required by the Legislative Branch Appropriation Act, 1970 (83 Stat.
      347), and in response to your December 12,1989, request, we have
      audited the accompanying balance sheets of the House of Representa-
      tives Beauty Shop 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 May 24,199O. These finan-
      cial statements are the responsibility of the House of Representatives
      Beauty Shop’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 Beauty Shop Revolving Fund as of December 31,1989 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 1983, is
      included in this report.




      Page 1                           GAO/APMD-90-99   House Beauty Shop 1989 and 1988
B-202896




As required by the Legislative Branch Appropriation Act, 1970, we are
sending copies of this report to the Speaker and the Clerk of the House
of Representatives. We are also sending a copy to the Chair, Subcom-
mittee on Personnel and Police, Committee on House Administration.
Copies will be sent to others upon request.

Sincerely yours,




Charles A. Bowsher ’      P
Comptroller General
of the United States




Page 2                          GAO/AF’MD9O-99   House Beauty Shop 1989 and 1988
Page 3   GAO/AFNLb99-99   House Beauty Shop 1989 and 1998
contents


Opinion Letter
Report on Internal                                                                                   6
Accounting Controls
and Compliance With
Laws and Regulations
Balance Sheets                                                                                       7

Statements of                                                                                        8
Operations
Statements of Cash                                                                                   9
Flows
Notes to Financial                                                                                  10
Statements
Table                  Table 1: Changes in Equity of the House of                                   10
                           Representatives




           Y




                       Page 4                          GAO/APMD-90-99   House Beauty Shop 1989 and 1988
Page 6   GAO/APMD-9949   Howe   Beauty Shop 1989 and 1988
Report on Interwl Accounting Controls and
ComplianceWith Laws and Regulations

               We have audited the financial statements of the House of Representa-
               tives Beauty Shop Revolving Fund for the years ended December 3 1,
               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 consid-
               ered necessary 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 year ended
               December 31, 1989. Our report on internal accounting controls and com-
               pliance with laws and regulations for the year ended December 3 1,
               1988, is presented in GAO/AFMD-89-81, dated July 10, 1989.

               We did not complete a study and evaluation of the Fund’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 Fund’s financial statements. Based on our preliminary
               review, we concluded that it was more efficient to expand our substan-
               tive audit tests in examining the financial statements for the year ended
               December 31, 1989.

               While we did not perform a complete study and evaluation of the Fund’s
               internal accounting control system, we did not become aware of any con-
               dition during our expanded substantive audit tests which we believe to
               be a material weakness. In audits where we do study and evaluate the
               internal accounting control system, material weaknesses in the system
               would not necessarily be disclosed. Accordingly, even in such cases, we
               would not be able to express an opinion on the system taken as a whole.

               As part of our audit, we also tested the Fund’s compliance with the
               terms and provisions of 83 Stat. 347 and regulations in the House of
               Representatives edition of the Congressional Handbook relating to leave
               policies for employees. In our opinion, the House of Representatives
               Beauty Shop Revolving Fund complied with the terms and provisions of
               83 Stat, 347 and the just mentioned 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 83 Stat. 347 and the previously stated regulations for
               those transactions not tested.




               Page 6                           GAO/AFMD-WB9   House Beauty Shop 1989 and 1988
BalanceSheets


                                                                                                                                             December 31,
l.-. I._--._                 _ . ._.---.-.-. ...----__                                                                                   1989                   1988
Assets
Current Assets
  Cash _.in US . .._ Treasurv
                       .__...-  ~... - .__...___
                                              -.__                                                                                    $23,721                 $31,302
  Petty
     _.. ._ .._. and change
           cash               .-.-.. funds                                                                                                800                     800
  Accounts
        .I..- - receivable
 ..*“..“_.             .. .. .-.-. ---                                                                                                     17                      23
  Inventory      of merchandise
       _. _ _..^.....                    and supplies
                           _ ._ .._I.--..-                                                                                             11,665                  11,153

       Total current arsets                                                                                                            36.203                 43.278

Fixed Assets                                                                                                                                                      -
   Equrpment
  _..,    ..^.”          .-_                                                                                                            17,031                 19,404
   Less accumulated depreciation                                                                                                        15,803                 17,352

       Total flxed assets                                                                                                               1,228                   2,052

Total Assets                                                                                                                          $37,431                $45,330

Llabilltles    and
                - Equity
  ._- . . -..___... __.-.-- ..~___- --_-- ._...-.
                                               -.-_..--...- .._-
Lrabillties
  _._ __...^..__.
               - .._. .-.-..-_.      . .._._.._.__..
   .Accounts
     .             payable
                        _ -. . . ..                                                                                                    $1,461                  $1,967
 . .Employees’-..- accrued
    --._- ^.....                   leave -.. .-_-_--.-
                      .._- .._....._.._..__                                                                                            12,765                  10,336
    Advance from House Finance Office                                                                                                     800                     800
   Operator’s commission payable
-~-__---.--___                                                                                                                          1,776                       0
   Taxes payable                                                                                                                          759                       0

       Total Ilabilitiea                                                                                                               17.581                 13.103

Equity
..___.....  of .^the
      II._..-..        House
                   “...__““I__...-of.-...Representatives
                                         -.. _--.-.--_..-   (notes 2 and 3)                                                            19,850                  32,227

Total Llabilitier and Equlty                                                                                                          $37,431                $45,330
                                                                    The accompanying notes are an integral part of these statements




                                                                    Page 7                                       GAO/AFMD-90-99       House Beauty Shop 1989 and 1988
Statementsof Operations


                                                                                                                          Years ended December 31,
                                      .-. ..-                                                                               1989                1988
Income
  Be&y
   _^._    services. . -...-.-----
      -.. .--.--.._~                                                                                                     $231,907              $234,382
  Retail sales                                                                                                             58.766                42,427
  Miscellaneous income                                                                                                        220                   111

    Total operating income                                                                                               290,893                276,920

Operating Expenses
Salaries ._ ._.               -__
  Admmistrative                                                                                                            29.239                27.881
  Beauticians-                                                                                                             93,780                961107
  Manrcunsts                                                                                                               25,611                23,557
  Ma&                                                                                                                      10,162                 8,544

  Total salaries                                                                                                          158,792                156,089

Commrssions                                                                                                                46,794                 40,678
Employees’ benefits-government
                           . .-.. -..~contributions                                                                        45,161                 42,037
Retarl merchandise                                                                                                         37,571                 29,720
Supplies
- .-_^ ._ ._ ..._ ..-_-                                                                                                    13,440                 11,933
Office                                                                                                                        273                    134
Deprecration                                                                                                                  824                    824
Bad debts                                                                                                                      93                    107
Repairs                                                                                                                         0                     59
Miscellaneous                                                                                                                 322                     77

    Total operating expenses                                                                                             303,270                281,658

Net Loss (note 2)                                                                                                        $(12,377)              $(4,738)
                                                      The accompanying notes are an integral part of these statements.




                                                      Page 8                                       GAO/AFMD-90-99        House Beauty Shop 1989 and 1988
Statementsof CashFlows


                                                                                                                           Years ended December 31,
    ,._         _     .--.--~-.-   -- ..__.---__--~.__                                                                       1989 -              1988
Cabh Flows From Operating Activities           .-.~~-..____.___.- ____.-
  Net loss                                          ..-._ .-~~-..-.___ -~__                                                $(12,377)               $(4,738)
  Adjustments to reconcile net loss to net cash provided by              (used in) operating activities
                                                                       .___-                                                                          --.
    Depreciation                                                                                                                824                     824
    Decrease (increase) in assets:                                .--.
      ‘Accountsreceivable                                                                                                         6                     12
       Inventory of merchandise and supplies                                                                                   (512)                   346
    lncreask (decrease)
                      ~~~ in .-..-
                             liabilities:
                                       --.- .---._----.--_-.----_-.-            ____-
       Accounts payable                 -_---                   _I__-                                                          (506)                (1,668)
       Employees’ accrued leave                          ----.-                                                               2,449                    350
       Salaries, commissions, and benefits payable                             __-..                                          1,776                      0
       Taxes payable .-                                                                                                         759                      0

Net cash used in operating activities                                                                                       (7,681)                 (4,874)

Cash at beginning of year                                       -.-.______--                                                32,102                  36,976

Cash Balance at End of Year                                                                                                $24.521                $32.102
                                                       The accompanying notes are an integral part of these statements




                                                       Page 9                                             GAO/AFMD-90-99   House Beauty Shop 1989 and 1988
Notesto F’inancialStakments


Note 1. Significant                       The House of Representatives Beauty Shop Revolving Fund was author-
Accounting Policies                        ized by the Legislative Branch Appropriation Act, 1970 (83 Stat. 347).
                                           The management and operation of the House Beauty Shop is under the
                                          jurisdiction of the Committee on House Administration, with direct over-
                                           sight provided by its Subcommittee on Personnel and Police.

                                          The Fund’s statements do not include the costs of certain benefits and
                                          services such as space, utilities, and ordinary building repairs and main-
                                          tenance, which are paid from appropriated funds without charge to the
                                          Fund and whose amounts cannot be readily determined.

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

                                          Bad debt expense is recognized at the time receivables are deemed
                                          uncollectible and written off.

                                          Equipment is depreciated over a lo-year life using the straight-line
                                          method.


Note 2. Equity of the                     A summary of the changes in the equity of the House of Representatives
House of Representatives                  for calendar years 1989 and 1988 follows.

Table 1: Changes in Equity of the House
of Representatives                                                                                       1989        1988
                                          Balance at beginning of year                                $32,227      $36,965
                                          Net loss (note 3)                                            (12,377)
                                                                                              -~~~_..~___.          (4,738)
                                          Balance at end of vear                                     $19,850       $32,227



Note 3. Income Transfer to                The Legislative Branch Appropriation Act, 1970, requires that the net
                                          profit of the House Beauty Shop established by GAO'S audit, after
U.S. Treasury                             restoring any impairment of capital and providing for replacement of
                                          equipment, shall be transferred to the general fund of the U.S. Treasury.
                                          Because a net loss was incurred for calendar years 1989 and 1988, no
                                          transfers were required. A total of $122,085 in prior years’ income has
                                          been transferred to the U.S. Treasury from the House Beauty Shop
                                          Revolving Fund.




(HIAIHI))                                 Page 10                          GAO/AFMD-90-99   House Beauty Shop 1989 and 1988
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