oversight

Financial Audit: Northeast-Midwest Congressional Coalition Financial Statements for 1989 and 1988

Published by the Government Accountability Office on 1990-11-07.

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

      __^I~~
           ..__II.__”_-...__._
                           _ .I                                       _


             GA!!

                                                                                                    “.“,        I   I   .,   ._   _...   ..^......   I   .   .   ..-.   I~-^.-“-“-.“----l__   ---_
     .ll,“l,“,..ll   .,,.”   ,,,.,   _n,   ,^   .   I.   ““l.l l l.            ““l._-l”..l”   ..,




                                                                                                                        FINANCIAL AUDIT
                                                                                                                        Northeast-Midwest
                                                                                                                        Congressional
                                                                                                                        Coalition Financial
                                                                                                                        Statements for 1989
                                                                                                                        and 1988


                                                                                                                                                                                                     ill~lllllll~l~
                                                                                                                                                                                                      142606




                                                                      -1-.-_                               -~
--




 GAO,'AI;'MI)-!)I-2
    1
    !
    ?          ,,,,, .,,         ,,“,,,                                       ._                          _                    .,_.           _.-                . .. -...-._-...-__--------   --___    _________   --_--____




/
                                                                                    .“.“...“..   _...-”   -...   ._“-   ..^.   I”   ---__.-         I_____.~_”               ---.                 ~--                           --
        -“-.      “..._.-.--.-    .--..”   ..-.   ---“--   _...-..^^^...^..   I..
GAO
      United States
      General Accounting Office
      Washington, D.C. 20648

      Accounting and Financial
      Management Division

      B-233862

      November 7,lQQO

      The Honorable Frank Horton, Co-Chairman
      The Honorable Howard Wolpe, Co-Chairman
      Northeast-Midwest Congressional Coalition

      Pursuant to your request for an audit of the Northeast-Midwest Con-
      gressional Coalition, which was transmitted to us by a March 14, 1990,
      letter from the Chairman, Committee on House Administration, House of
      Representatives, we have audited the balance sheets of the Coalition as
      of December 31, 1989 and 1988, and the related statements of opera-
      tions and fund balance and of cash flows for the years then ended. We
      completed our audit work on August 10, 1990. These financial state-
      ments are the responsibility of the Coalition’s management. Our respon-
      sibility 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 Coalition as of
      December 31, 1989 and 1988, and the results of its operations and its
      cash flows for the years then ended in conformity with generally
      accepted accounting principles.

      As discussed in note 4 to the financial statements, the District of
      Columbia is re-examining its earlier position that certain Coalition
      employees’ salaries were exempt from the District’s unemployment com-
      pensation taxes. The Coalition does not believe that it is liable for these
      taxes. At present, the outcome of this dispute cannot be projected
      because the District has not made a final decision regarding the Coali-
      tion’s liability. Accordingly, no provision for any liability that may
      result upon settlement has been made in the accompanying financial
      statements.


      Page 1                      GAO/AFMD-91-2   Northeast-Midwest   Congressional   Coalition
R-222862




This report contains our report on internal control structure and compli-
ance with laws and regulations for the year ended December 31,1989. It
also includes the Coalition’s financial statements and accompanying
notes for the years ended December 3 1,1989 and 1988.




Donald H. Chapin
Assistant Comptroller General




Page 2                    GAO/AFMDBl-2   Northea&Midwemt   Chgremional   CoaWon
Page 3   GAO/AFMD-91-2   Northeast-Midwest   Congressional   Coalition
Cbntents


Opinion Letter
Report on Internal
Control Structure and
Compliance With
Laws and Regulations
Balance Sheets
Statements of                                                                                   8
Operations and Fund
Balance
Statements of Cash                                                                              9
Flows
Notes to Financial                                                                          10
Statements




                        Page 4   GAO/AFMD91-2   Northeast-Midwest   Congressional   Coalition
Page 5   GAO/~91-2   Northeast-Midwest   Cmgressional   Coalition
Report on Internal Control Structure ayld
ComplianceWith Laws aJndRegulation

                We have audited the financial statements of the Northeast-Midwest Con-
                gressional Coalition for the years ended December 3 1,1989 and 1988
                and have issued our opinion thereon. Our audits were made in accor-
                dance 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 preliminary review of the internal control
                structure and our review of compliance with laws and regulations for
                the year ended December 31,1989. Our report on internal accounting
                controls and compliance with laws and regulations for the year ended
                December 31, 1988, is presented in GAo/AFMn-90-q dated February 15,
                1990.

                We did not complete a study and evaluation of the Coalition’s internal
                control structure for the purpose of determining the nature, timing, and
                extent of the auditing procedures necessary for expressing an opinion
                on the Coalition’s financial statements. Based on our preliminary
                review, we concluded that it was more efficient to expand our substan-
                tive audit tests in auditing the financial statements for the year ended
                December 31, 1989.

                While we did not perform a complete study and evaluation of the Coali-
                tion’s internal control structure, we did not become aware of any condi-
                tion during our expanded substantive audit tests which we believe to be
                a material weakness.

                As part of our audit work, we also tested the Coalition’s compliance
                with terms and provisions of the regulations established by the Com-
                mittee on House Administration and the federal regulations on the with-
                holding and payment of income and social security taxes. In our opinion,
                the Northeast-Midwest Congressional Coalition complied with the terms
                and provisions of the 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
                Coalition was not in compliance with the terms and provisions of the
                regulations for those transactions not tested.




                Page 6                    GAO/AF’MD-91-Z   Northeast-Midwest   Qmgressional   Coalition
Balance Sheets



                                                                                                                     December 31,
                                                                                                                   1989                          1988
P&is
Cash           ,..
  Operating accounts                                                                                              $8,784                       $8,116
  Special assessment account (note 2)              _______                                                             0                        4,005
Prepaid publications                                                                                                 397                          358
Accounts receivable-dues                                                                                           2,000                                0-

Total Assets                                                                                                     $11,181                    $12,481

Liabilities and Fund Balance            _______---
Liabilities
   Accounts payable                                                                                               $6,191                       $4,763
   Accrued liabilities                                                                                             2.148                        3,041
   Special tax assessment payable (note 2)____--                                                                       0                        9,818
   Prepaid members’.-. dues
                        ~.._._.._~       _____~                                                                   11,500                       12,000

    Total liabilities                                                                                             19,839                      29,622

Fund balance (deficit)                                                                                            (8,658)                     (17,141)

Total Liabilities and Fund Balance                                                                               $11,181                    $12,481
                                              The accompanying notes are an integral part of these statements.




                                              Page 7                              GAO/AFMD-91-2     Northeast-Midwest       Ckmgressional   Coalition
Statementsof Operationsand Fund Balance


                                                                                                                                           Years ended December 31,
  ..-      ..-....-..                                                                                                                        1989                1988
Revenues
 .___      (note
               .-_- -.2)~-. . - _...
    __. .._.......
-“..Members’     dues
      .-.. .-.- ..^...
                   -. ..I-.. - ...------.                                                                                               $160,000                       $146,200
    Clerk-hire funds                                                                                                                      12,947                         21,825
    Special assessments-taxes                                                                                                                   0                        10,111
    Special assessments-expenses                                                                                                           6,996                          8,359
                                                                         -
    Tax refunds (note 5)                                                                                                                   6,910                               0

      Total revenues                                                                                                                       188,853                     188,495

Expenses       (notes 2 and 3)
 __-..-. ..--.-..-.
    Salaries and benefits                                                                                                                  145,585                      145,162
    Payroll taxes                                                                                                                           10,626                       12,695
._.”.._._ ..- .-. .__^.._.___.. ..--- ~
    Equipment rental                                                                                                                        12,193                       10,085
 .._____ -..- - -.-_-.- ..- -- ------
    Telephone                                                                                                                                1,293                        2,220
    Office supplies                                                                                                                          2,719                        1,410
    Subscriptions                                                                                                                            2,416                        1,376
 _.__-__. _.. ...__   - .._..
                           “.^. -- -.- .--. .~._.---------
    Printing                                                                                                                                 1,087                          926
                                 -..---___--            ---
    Meetings and official functions                                                                                                            506                          529
____._.--__ .- --.- -~.-~-.~------.-                               --
    Professional fees                                                                                                                            0                           80
._.___.
      ..“._l_.....
                -. .._...._...~. . ..^
    Miscellaneous                                                                                                                            1,945                          494

      Total exoenses                                                                                                                       178,370                      174,977

Income before extraordinary item                                                                                                             8,483                       11,518
               ___
                 .._ ~_-.-------                              -.
Extraordinary item:                                     .-
  Write-off of tax debt (note 4)                                                                                                                   0                       6,973
                                                                                                                                                                               -

Net income                                                                                                                                   8,483                       18,491

Fund balance, beginning of year (deficit)                                                                                                   (17,141)                     (35,632)

Fund Balance, End of Year (deficit)                                                                                                        $(8,858)                    $(17,141)
                                                                        The accompanying notes are an integral part of these statements.




                                                                        Page 8                              GAO/AFMD91-2       Northeast-Midwest       Ckmgressional   Coalition
Statements of Cash Flows



                                                                                                                      Years ended December 31,
                                                                                                                        1989                1988
Cash Flows From Operatlng Activities
  Income before extraordinarv    item                                                                                 $8.483                        $11.518

  Adjustments to reconcile income before extraordinary item to net cash
    orovided bv (used in) ooeratina activities:
    (Increase)
      ._..... --- Decrease
                   _.......
                         ..- in accounts receivable                                                                    WOO)                              862
    (Increase) Decrease in prepaid expenses
                                         -~-~                                                                              (39)                           22
    Increase (Decrease) in accounts payable                                                                             1,428                        (11,522)
    Increase    (Decrease)
                 --.___--.- in special tax assessment payable
     .- _^...._I._......                                                                                               (9,818)                       (39,221)
    (Decrease) Increase in prepaid members’ dues                                                                           (500)                      10,000
    (Decrease) Increase in accrued liabilities                                                                             (893)                       2,839

Net cash used in operating activities                                                                                 (3,339)                       (25,502)

Extraordinary income from write-off of tax debt                                                                               0                        6,973

Net decrease in cash                                                                                                  (3,339)                       (18,529)

Cash at beginning .._of year
                         - ..__._ -- ---._. -_-_-..-_-                                                                 12,123                         30,652

Cash Balance at End of Year                                                                                           58.784                       $12.123
                                                   The accompanying notes are an integral part of these statements.




                                                   Page 9                              GAO/AFMD-91-2     NortheahMidwest           Congressional   Coalition
Notes to F’inancial Staements


Note 1. Organization       The Northeast-Midwest Congressional Coalition is a legislative service
                           organization sponsored by a group of Members of Congress who pool
                           their resources to pursue a common legislative goal. It operates as an
                           extension of the participating Members’ individual offices and coordi-
                           nates their efforts for reasons of efficiency and effectiveness. Its pur-
                           poses are to (1) inform its members about regional implications of
                           national policies and proposals and (2) influence congressional decisions
                           regarding those issues of greatest importance to northeastern and mid-
                           western states.

                           On October 21, 1981, the Committee on House Administration adopted
                           regulations and rules pertaining to legislative service organizations.
                           These regulations provide the following.

                       9 Effective January 1, 1983, a legislative service organization may not use
                         funds received as dues or through assessments to generate additional
                         income, including income from interest-bearing accounts or time
                         deposits.
                       . Effective January 1, 1983, a legislative service organization may not
                         receive income or contributions from any source other than the Congress
                         or its Members.


Note 2. Accounting         There are three main sources of revenue from the Coalition’s members.
                           They are
Policies
                       l dues, which are recognized for the year to which they are applied;
                       . clerk-hire funds, which are recognized when staff members receive
                         salary payments from Coalition members; and
                       l special assessments -expenses, which are recognized when an expense
                         voucher is sent to a member for payment.

                           In 1988, another revenue source was a special member assessment for
                           pre-1987 payroll tax liabilities. This member assessment was authorized
                           in August 1987 by the Chairman of the Committee on House Adminis-
                           tration to be used exclusively for payroll tax obligations for prior years.
                           The liability was paid off in January 1989, which eliminated the need
                           for this revenue source. Separate cash and payable accounts were estab-
                           lished to record the special tax assessments.

                           Expenses are recognized when incurred during the year. At year-end,
                           expenses and revenues are accrued.



                           Page 10                    GAO/AFMD91-2   Northeast-Midwest   Congressional   Coalition
                            Notes to Pinan&   Statements




Note 3. Appropriated Fund   Costs for office space and utilities are paid from legislative branch
support                     appropriations. Since it is difficult to determine the Coalition’s share of
                            expenses for office space and utilities, these amounts are not shown in
                            the Coalition’s financial statements.


Note 4. Contingency-        In 1988, the Coalition wrote off a $6,973 debt for pre-1987 unemploy-
Taxes Payable to the        ment compensation taxes payable to the District of Columbia. The debt
                            was written off because District Department of Employment Services
District of Columbia        officials informed the Coalition that no tax liability remained after the
                            Coalition’s attorneys argued that certain Coalition employees’ salaries
                            were not subject to the District’s unemployment compensation tax.
                            These employees had been paid partially with Coalition funds and par-
                            tially with federal funds. In 1988, the District considered them to be fed-
                            eral employees, whose salaries are not subject to the District’s
                            unemployment compensation tax. Also, the District’s Department of
                            Employment Services refunded $1,166 to the Coalition in January 1989
                            for three prior quarterly unemployment compensation tax payments
                            made by the Coalition in July and October 1987 and April 1988.

                            In September 1989, the District’s Department of Employment Services
                            informed the Coalition that it was re-examining its earlier position that
                            certain Coalition employees’ salaries were exempt from the District’s
                            unemployment compensation tax. The District stated that for employee
                            salaries paid partially with Coalition funds and partially with federal
                            funds, unemployment taxes must be paid on that share of the salaries
                            funded by the Coalition. The Coalition does not agree with the District’s
                            claim that unemployment compensation taxes are due because it main-
                            tains that the employees in question are federal employees and, there-
                            fore, their salaries are not subject to the District’s unemployment
                            compensation tax. These differing views remain unresolved since the
                            District has not made a final decision regarding the Coalition’s liability.

                            At present, it is not known whether the Coalition will ultimately be
                            liable to the District for unemployment compensation taxes. If the Coali-
                            tion is deemed liable for unpaid District unemployment compensation
                            taxes, the estimated tax debt at December 31,1989, could amount to
                            $9,761. This estimate includes the estimated liability at December 31,
                            1988, of $7,287, the refund received in January 1989 of $1,166, and the
                            estimated taxes payable for 1989 of $1,298.




                            Page 11                        GAO/AFMD-91-2   NortheahMidwest   Coxupessional   Coalition
                      Notes to Financial   Statements




Note 5. Tax Refunds   In 1989, the Coalition received tax refunds totaling $6,910. The refunds
                      consisted of the $1,166 discussed in note 4 from the District of Columbia
                      and $5,744 from the Internal Revenue Service for payroll tax overpay-
                      ments and interest on the overpayments. The Internal Revenue Service
                      refund related to the Coalition’s pre-1987 payroll tax liability, which it
                      settled in January 1989. The refund resulted from the Service’s decision
                      to abate interest and penalties on the pre-1987 payroll tax liability.




(917490)              Page 12                           GAO/AFMD-91-2   Northeast-Midwest   Congressional   Coalition
,,““.   . I”~I ... .,__.”..-.. .-_“I-_- -...-.._--_ .-.. ..-._^^.
                                                              -_.-.--- ___.___
                                                                             -.-.
i