oversight

Financial Audit: Senate Restaurants Revolving Fund for Fiscal Years 1998 and 1997

Published by the Government Accountability Office on 1999-06-15.

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

                  United States General Accounting Office

GAO               Report to the Chairman, Committee on
                  Rules and Administration, U.S. Senate,
                  and the Architect of the Capitol


June 1999
                  FINANCIAL AUDIT

                  Senate Restaurants
                  Revolving Fund for
                  Fiscal Years 1998 and
                  1997




GAO/AIMD-99-185
United States General Accounting Office                                                           Accounting and Information
Washington, D.C. 20548                                                                                 Management Division



                                    B-281568                                                                                      Letter

                                    June 15, 1999

                                    The Honorable Mitch McConnell
                                    Chairman, Committee on Rules
                                     and Administration
                                    United States Senate

                                    The Honorable Alan M. Hantman
                                    Architect of the Capitol

                                    As requested, we provided for an audit of the financial statements of the
                                    United States Senate Restaurants Revolving Fund (the Fund) for the fiscal
                                    years ended September 30, 1998 and 1997, by contracting with the
                                    independent public accounting firm of KPMG Peat Marwick LLP (KPMG).
                                    The contract required that the audit be done in accordance with generally
                                    accepted government auditing standards and GAO’s Financial Audit
                                    Manual.

                                    In its audit of the Fund, KPMG found the following.

                                    • The financial statements were reliable in all material respects.
                                    • Management fairly stated its assertion that internal controls in place on
                                      September 30, 1998, were effective in safeguarding assets against
                                      unauthorized acquisition, use, or disposition; assuring material
                                      compliance with laws and regulations; and assuring that there have been
                                      no material misstatements in the financial statements.
                                    • There was no reportable noncompliance with laws and regulations it
                                      tested.

                                    With respect to weaknesses in the Fund’s logical computer access controls
                                    reported by KPMG in its fiscal year 1997 audit report,1 the Fund’s
                                    management initiated actions designed to strengthen these important
                                    controls. Logical access controls involve the use of computer hardware,
                                    software, and related procedures to prevent or detect unauthorized access
                                    to computer software and data. While progress has been made in
                                    strengthening these important controls during fiscal year 1998, additional

                                    1
                                     The results of KPMG’s fiscal year 1997 financial audit can be found in our report entitled Financial
                                    Audit: Senate Restaurants Revolving Fund for Fiscal Years 1997 and 1996 (GAO/AIMD-98-193, June 23,
                                    1998).




                                    Page 1                                                     GAO/AIMD-99-185 Senate Restaurants
B-281568




actions need to be taken. The need for further action on logical access
controls along with other matters involving the Fund’s internal controls
identified by KPMG have been reported separately to the Fund’s
management. Also, the Fund’s management is currently in the process of
upgrading the Fund’s computer systems and applications in response to the
Year 2000 computing problem.2 Management expects that testing and
subsequent activation of Year 2000-compliant replacement software and
related applications will be completed by July 1999.

As disclosed in KPMG’s report and the Fund’s financial statements, the
Fund’s operations are economically dependent on financial support
provided--in various forms--by the Architect of the Capitol and the United
States Senate. Specifically, the Fund’s financial statements for the fiscal
years ended September 30, 1998 and 1997, reflect the fact that the Architect
and the Senate provided direct financial support in the form of transferred
appropriations, loans, and/or appropriated capital totaling about
$1.7 million and $2.1 million, respectively. In addition to direct financial
support, the Architect provided other financial support in fiscal years 1998
and 1997 by providing about $123,000 and $209,000, respectively, for the
purchase and maintenance of restaurant-related capital items. Finally, the
Architect and the Government Printing Office provided the Fund with other
support--the value of which cannot be readily determined--during fiscal
years 1998 and 1997. As KPMG noted in its report, if operating trends
continue, the Fund will continue to require future financial support to
maintain continuing operations.

As discussed in note 3(a) to the Fund’s financial statements, prior to fiscal
year 1998, the Architect’s use of appropriated funds to pay certain
management personnel and miscellaneous expenses of the Restaurants had
not been included in the Fund’s Statement of Operations and Changes in
U.S. Government Equity (Deficit). However, beginning with fiscal year
1998, the Architect, pursuant to Public Law 105-55, 111 stat. 1189, Title I, is
required to transfer the appropriated funds to the Fund, which the
Restaurants use to pay applicable management personnel and
miscellaneous expenses. To enhance the comparability of the Fund’s fiscal


2
  The Year 2000 problem is rooted in the way dates are recorded and calculated in many computer
systems. For the past several decades, systems have typically used two digits to represent the year in
order to conserve on electronic data storage and reduce operating costs. With this two-digit format,
however, the year 2000 is indistinguishable from the year 1900. As a result, system or application
programs that use dates to perform calculations, comparisons, or sorting may generate incorrect
results when working with years after 1999.




Page 2                                                      GAO/AIMD-99-185 Senate Restaurants
B-281568




year 1998 and 1997 financial statements, the Statement of Operations and
Changes in U.S. Government Equity (Deficit) for fiscal year 1997 have been
restated to show the use of appropriated funds to support Restaurant
operations.

In connection with the audit of the Fund’s financial statements performed
by KPMG, we reviewed its report and related working papers and, as
necessary, inquired with KPMG representatives and the Fund’s
management. Our review, as differentiated from an audit in accordance
with generally accepted government auditing standards, was not intended
to enable us to express, and we do not express, opinions on the Fund’s
financial statements and management’s assertion about the effectiveness of
its internal controls or conclude on compliance with laws and regulations.
KPMG is responsible for the attached Auditors’ Report and for the
conclusions expressed in the report. However, our review disclosed no
instances where KPMG did not comply, in all material respects, with
generally accepted government auditing standards.


This report is a matter of public record and intended for the use of the U.S.
Senate, the Architect of the Capitol, the management of the Senate
Restaurants and other interested parties. We are sending copies of this
report to Senator Christopher Dodd, Ranking Minority Member, Senate
Committee on Rules and Administration; Senator Robert F. Bennett,
Chairman, and Senator Dianne Feinstein, Ranking Minority Member,
Subcommittee on Legislative Branch, Senate Committee on
Appropriations; Senator Trent Lott, Majority Leader; and Senator Tom
Daschle, Minority Leader. Copies will be made available to others upon
request. Should you or your staffs have any questions concerning our
review of the audits, please contact me on (202) 512-9406 or John J. Reilly,
Assistant Director, on (202) 512-9517.




Robert W. Gramling
Director, Corporate Audits
 and Standards



Page 3                                       GAO/AIMD-99-185 Senate Restaurants
Contents



Letter                                                                                            1


Report on Audit of                                                                                6
                        Independent Auditors’ Report                                              6
United States Senate    Balance Sheets                                                           11
Restaurants Revolving   Statements of Operations and Changes in U.S. Government
                          Equity (Deficit)                                                       12
Fund                    Statements of Cash Flows                                                 13
                        Notes to Financial Statements                                            14
                        Management’s Report on Its Assertion About the Effectiveness of
                          Controls Over Financial Reporting                                      21




                        Page 4                                    GAO/AIMD-99-185 Senate Restaurants
Page 5   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund

Independent Auditors’ Report




                               Page 6   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 7                                    GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 8                                    GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 9                                    GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 10                                   GAO/AIMD-99-185 Senate Restaurants
                 Report on Audit of United States Senate
                 Restaurants Revolving Fund




Balance Sheets




                 Page 11                                   GAO/AIMD-99-185 Senate Restaurants
                                         Report on Audit of United States Senate
                                         Restaurants Revolving Fund




Statements of Operations and Changes in U.S. Government Equity (Deficit)




                                         Page 12                                   GAO/AIMD-99-185 Senate Restaurants
                           Report on Audit of United States Senate
                           Restaurants Revolving Fund




Statements of Cash Flows




                           Page 13                                   GAO/AIMD-99-185 Senate Restaurants
                                Report on Audit of United States Senate
                                Restaurants Revolving Fund




Notes to Financial Statements




                                Page 14                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 15                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 16                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 17                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 18                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 19                                   GAO/AIMD-99-185 Senate Restaurants
Report on Audit of United States Senate
Restaurants Revolving Fund




Page 20                                   GAO/AIMD-99-185 Senate Restaurants
                                          Report on Audit of United States Senate
                                          Restaurants Revolving Fund




Management’s Report on Its Assertion About the Effectiveness of Controls Over Financial Reporting




(917588)              Leter               Page 21                                        GAO/AIMD-99-185 Senate Restaurants
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