oversight

Financial Audit: Capitol Preservation Fund's Fiscal Years 1998 and 1997 Financial Statements

Published by the Government Accountability Office on 1999-08-16.

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

                  United States General Accounting Office

GAO               Report to the Congress




August 1999       FINANCIAL AUDIT

                  Capitol Preservation
                  Fund's Fiscal Years
                  1998 and 1997
                  Financial Statements



                  lei G A




                           Accountability * Integrity * Reliability

GAO/AIMD-99-240
 = GAO   _Ancountablllty * Integrity * ReliabIlIty

United States General Accounting Office                                                             Accounting and Information
Washington, D.C. 20548                                                                                    Management Division



                                                     B-282548

                                                     August 16, 1999

                                                     To the President of the Senate and the
                                                     Speaker of the House of Representatives

                                                     This report presents our opinion on the financial statements of the Capitol
                                                     Preservation Fund for the fiscal years ended September 30, 1998 and 1997.
                                                     It also discusses our (1) consideration of internal controls in conducting
                                                     our audit and (2) evaluation of compliance with laws and regulations
                                                     during fiscal year 1998. We conducted our audit pursuant to 40 U.S.C.
                                                     188a-3 and in accordance with generally accepted government auditing
                                                     standards.

                                                     We are sending copies of this report to the members of the Capitol
                                                     Preservation Commission; the Honorable Alan M. Hantman, Architect of
                                                     the Capitol; the Honorable James H. Billington, Librarian of Congress; and
                                                     other interested parties.




                                                     Robert W. Gramling
                                                     Director, Corporate Audits
                                                      and Standards




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Contents



Letter                                                                                            1
Opinion Letter                                                                                    4

Financial Statements                                                                              8
                       Statements of Financial Position                                           8
                       Statements of Activities                                                   9
                       Statements of Cash Flows                                                  10
                       Notes to the Financial Statements                                         11




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 &...
                GAO
        Accountability * Integrity * Reliability

United States General Accounting Office                                                           Accounting and Information
Washington, D.C. 20548                                                                                  Management Division



                                                   B-282548

                                                   To the President of the Senate and the
                                                   Speaker of the House of Representatives

                                                   We have audited the statements of financial position of the Capitol
                                                   Preservation Fund as of September 30, 1998 and 1997, and the related
                                                   statements of activities and statements of cash flows for the fiscal years
                                                   then ended. We found

                                                   * the financial statements were fairly presented in all material respects,
                                                   * no material weaknesses in the internal controls we tested, and
                                                   * no reportable noncompliance with selected provisions of laws and
                                                     regulations we tested for the fiscal year ended September 30, 1998.

                                                   The following sections provide additional detail concerning our
                                                   conclusions and the scope of our audit.



Opinion on Financial                               The financial statements and accompanying notes present fairly, in all
                                                   material respects, in conformity with generally accepted accounting
Statements                                         principles, the Capitol Preservation Fund's financial position as of
                                                   September 30, 1998 and 1997, and the results of its activities and its cash
                                                   flows for the fiscal years then ended.



Consideration of                                   We gained an understanding of internal controls designed to
Internal Controls                                  * safeguard assets against loss from unauthorized acquisition, use, or
                                                     disposition;
                                                   * assure the execution of transactions in accordance with management's
                                                     authority and with laws and regulations that could have a direct and
                                                     material effect on the financial statements; and
                                                   * properly record, process, and summarize transactions to permit the
                                                     preparation of reliable financial statements and to maintain
                                                     accountability over assets.

                                                   The objective of our internal control work was to determine procedures for
                                                   auditing the financial statements, not to express an opinion on internal
                                                   controls. Accordingly, we do not express such an opinion. However, for
                                                   the controls we tested, we found no material weaknesses in the system of



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                         B-282548




                         internal control and its operations for the fiscal year ended September 30,
                         1998. A material weakness is a reportable condition' in which the design or
                         operation of the internal controls does not reduce to a relatively low level
                         the risk that losses, noncompliance, or misstatements in amounts that
                         would be material in relation to the financial statements may occur and not
                         be detected promptly by employees in the normal course of their assigned
                         duties. Our internal control work would not necessarily disclose all
                         material weaknesses.



Compliance With Laws     Our tests for compliance with selected provisions of laws and regulations
                         disclosed no instances of noncompliance that would be reportable under
                         generally accepted government auditing standards. However, the objective
                         of our audit was not to provide an opinion on overall compliance with laws
                         and regulations. Accordingly, we do not express such an opinion.



Objectives, Scope, and   The Fund's management is responsible for
Methodology              .   preparing the Fund's annual financial statements in conformity with
                           generally accepted accounting principles,
                         · establishing and maintaining the Fund's internal controls to provide
                           reasonable assurance that the internal control objectives mentioned
                           above are met, and
                         · complying with applicable laws and regulations.

                         We are responsible for obtaining reasonable assurance about whether the
                         financial statements are free of material misstatements and presented
                         fairly, in all material respects, in conformity with generally accepted
                         accounting principles. Also, we are responsible for obtaining a sufficient
                         understanding of internal controls to plan the audit and for testing
                         compliance with selected provisions of laws and regulations.

                         In order to fulfill these responsibilities, we



                         'Reportable conditions involve matters coming to the auditor's attention relating to significant
                         deficiencies in the design or operation of internal controls that, in the auditor's judgment, could
                         adversely affect an entity's ability to (1) safeguard assets against loss from unauthorized acquisition,
                         use, or disposition, (2) ensure the execution of transactions in accordance with management's
                         authority and with laws and regulations, and (3) properly record, process, and summarize transactions
                         to permit the preparation of financial statements and to maintain accountability for assets.




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                           B-282548




                           * examined evidence supporting the amounts and disclosures in the
                             financial statements and notes;
                           * assessed the accounting principles used by management;
                           * evaluated the overall presentation of the financial statements;
                           * obtained an understanding of the internal controls related to
                             safeguarding assets, compliance with laws and regulations, and
                             financial reporting; and
                           * tested compliance with selected provisions of laws and regulations.

                           We conducted our audit from April 1, 1999, through July 9, 1999, in
                           accordance with generally accepted government auditing standards.



Architect of the Capitol   We provided a draft of our report to the Architect of the Capitol and to the
                           Director of Financial Services for the Library of Congress for review and
and Library of             comment. The Office of the Architect of the Capitol provides project
Congress Comments          support and assistance to the Capitol Preservation Commission and the
                           Library of Congress provides financial management services for the Capitol
                           Preservation Fund, including preparing the Fund's financial statements.
                           The Architect and the Director agreed with the contents of our report.


                           We appreciate the cooperation and assistance the Architect of the Capitol
                           and the Library of Congress management and staff provided during our
                           audit of the Capitol Preservation Fund's fiscal years 1998 and 1997 financial
                           statements. If you have any questions regarding this report, please contact
                           me or John J. Reilly at (202) 512-9406. Key contributors to this assignment
                           were Patricia Blumenthal, Patricia Summers, and Greg Ziombra.




                           Robert W. Gramling
                           Director, Corporate Audits
                            and Standards

                           July 9, 1999


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Financial Statements


Statements of Financial Position




                                                CAPITOL PRESERVATION FUND
                                             STATEMENTS OF FINANCIAL POSITION

                                                        as of September 30


                                                                                    1998                  1997

                     Assets
                     Cash                                                      $    13,010         $       23,148
                     Investments, net (note 3)                                  26,358,601             25,019,755
                     Accrued interest receivable on investments                    283.875                264.635

                       Total assets                                            $26.5.i86           $25aZ0753


                     Liabilities and Net Assets

                       Total liabilities                                                   0                     0

                     Net Assets
                     Unrestricted net assets                                   $26.fi 46           $25,307.538

                        Total net assets                                       $26fi55486          $25.3075
                                                                                                          38

                     Total Liabilities and Net Assets                          $6                  $25.07538




                            The accompanying notes are an integral part of these financial statements.




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                                          Financial Statements




Statements of Activities




                                                  CAPITOL PRESERVATION FUND
                                                   STATEMENTS OF ACTIVITIES

                                              for the Fiscal Years Ended September 30


                                                                                  1998                 1997

                     Changes in Unrestricted Net Assets

                     Operating Revenues
                      Interest (note 4)                                     $ 1,350,848            $ 1,297,350

                     Total operating revenues                               $ 1,350,848            $ 1,297,350

                     Operating Expenses
                      Publications                                                 2.900                      0
                       Total operating expenses                             $      2,900           $          0

                       Increase in unrestricted net assets                  $ 1,347,948            $ 1,297,350

                     Increase in Net Assets                                 $ 1,347,948            $ 1,297,350

                     Net Assets at Beginning of Year                        $25.307.538            $24.010.188

                     Net Assets at Year-End                                 $26655.486             $25307.538




                             The accompanying notes are an integral part of these financial statements.




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                                            Financial Statements




Statements of Cash Flows




                                                   CAPITOL PRESERVATION FUND
                                                   STATEMENTS OF CASH FLOWS

                                                for the Fiscal Years Ended September 30

                                                                                   1998                     1997

                    Cash Flows From Operating Activities
                     Interest received                                         $1,331,608            $1,349,083
                     Coin surcharge received                                            0                12,145
                     Cash paid for expenses                                        (2.900)                    0
                      Net cash provided from operating activities              $1,328,708            $1,361,228

                    Cash Flows From Investing Activities
                     Purchases of Treasury securities                       $(53,997,219)          $(53,027,936)
                     Maturities of Treasury securities                        52.658.373             51.670.917
                     Net cash provided from investing activities            $ (1,338,846)          $ (1,357,019)

                    Net (Decrease) Increase in Cash                              $(10,138)                 $ 4,209

                    Cash at beginning of year                                      23.148                   18.939

                    Cash at end of year                                          $ 13.1                    $2

                    Reconciliation of Changes in Net Assets to
                    Net Cash From Operating Activities

                    Changes in Net Assets                                      $1,347,948           $1,297,350

                    Adjustments to reconcile changes in net assets to
                     net cash provided from operating activities

                     Decrease in accounts receivable - surcharges                       0                  12,145
                     Decrease (increase) in accrued interest                      (19.240)                 51.733

                    Total Adjustments                                             (19,240)                 63,878

                    Net Cash From Operating Activities                        $1.328708i            $



                              The accompanying notes are an integral part of these financial statements.




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                                            Financial Statements




Notes to the Financial Statements




                                              CAPITOL PRESERVATION FUND
                                           NOTES TO THE FINANCIAL STATEMENTS


                Note 1. Description of Entity

                The Capitol Preservation Commission (the Commission) was established under Title Vil of Public
                Law 100-696 in November 1988 for the purpose of providing for improvements in, preservation of,
                and acquisitions for the United States Capitol and providing works of fine art and other property for
                display in the United States Capitol and other locations under the control of the Congress.

                To finance improvement, preservation, and acquisition activities of the Commission, Title VIII of
                Public Law 100-696 established the Capitol Preservation Fund (the Fund) within the U.S.
                Treasury. The Fund consists of assets provided through deposits of charitable contributions,
                surcharges received by the Secretary of the Treasury from the sale of coins under the Bicentennial
                of the United States Congress Commemorative Coin Act and the Bicentennial of the United States
                Capitol Commemorative Coin Act, and interest on the invested portions of the Fund's assets.
                Fund assets not required to finance current improvement, preservation, and acquisition activities
                are invested in interest-bearing obligations of the United States.

                In accordance with its rules, the Commission may fund or assist in the funding of improvements to
                the Capitol Building and surrounding grounds if such improvements are authorized, undertaken,
                and completed under the procedures established by the Congress for such purposes. With
                respect to works of fine art and other property for display, the Commission is authorized to expend
                $400,000 ($200,000 for the House of Representatives and $200,000 for the Senate) for the
                purchase of art, furnishings, or items of historical interest provided that such expenses are
                approved by a majority of the members of the Commission from the House of Congress for which
                such purchases are made. However, the Commission may not maintain any collection of fine or
                decorative art, or other property, but may assist in the transfer of such items to a congressional
                entity (such as the Senate Commission on Art, the House Fine Arts Board, or the Joint Committee
                on the Library) or facilitate the disposal of items.

                The Architect of the Capitol, the Senate Commission on Art, and the House of Representatives
                Fine Arts Board are required by Public Law 100-696 (1988) to provide staff support and assistance
                to the Commission. As necessary, the Architect of the Capitol awards contracts and procures
                goods and services to complete projects established by the Commission, and ensures that goods
                and services purchased from vendors are received. Similarly, the Library of Congress, pursuant to
                Public Law 101-45 (1989), is required to provide financial management services for the
                Commission. These services include coordinating activities with the Department of the Treasury
                for the deposit, disbursement, investment, and management of the Capitol Preservation Fund. In
                addition to these congressional entities, the Secretary of the Senate and the Clerk of the House of
                Representatives, pursuant to Commission Rules, provide additional support and assistance.




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                             Financial Statements




NQte 2. Summary of Significant Accounting Policies
The Fund's financial statements have been prepared in accordance with generally accepted
accounting principles and reflect--on an accrual basis--the receipt and use of the Fund's assets to
finance the Commission's improvement, preservation, and acquisition activities.

Effective for fiscal year 1996, the Fund's financial statements became subject to accounting and
disclosure requirements applicable to not-for-profit organizations--specifically Statements of
Financial Accounting Standards Nos. 116, 117, and 124. These requirements include accounting
and disclosure guidelines for investments, contributions received and made, and the form and
content of financial statements. However, these requirements have had only limited impact on the
Fund's financial statements because (1) the Fund received no contributions during fiscal years
1998 and 1997 and no prior year contributions contained outstanding restrictions, (2) the Fund's
assets are unrestricted, and (3) the Fund's investments are invested in relatively short-term (3-
and 6-month) interest-bearing Treasury obligations.

The Architect of the Capitol, the Library of Congress, and other congressional entities are required
by law to provide support services to the Commission. The cost of these services are, by their
nature, indirect, difficult to quantify, and financed with appropriated funds of the other entities. To
the extent that these services are provided, they are not considered operating expenses of the
Fund.

Once approved and funded by the Commission, the improvements, preservation, and acquisitions
are transferred to the Architect of the Capitol and/or other congressional entities. Through their
transfer, these assets become the accounting responsibility of other congressional entities and are
not considered assets of the Fund.

Note 3. Investments. Net

Deposits to the Fund from contributions, coin surcharges, and interest on invested funds that are
not needed currently to finance improvement, preservation, and acquisition activities are invested
in interest-bearing obligations of the United States, which are purchased from the U. S. Treasury
at a discount. The Commission has directed the Library of Congress to invest funds derived from
contributions in 3-month Treasury securities and funds derived from coin surcharges in 6-month
Treasury securities. The values of investments outstanding as of September 30, 1998 and 1997,
net of discounts were $26,358,601 and $25,019,755, respectively. Annual effective yield ranged
from 4.58 percent to 5.46 percent in fiscal year 1998, and from 4.78 percent to 5.39 percent in
fiscal year 1997.




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                                    Financial Statements




                                                               Outstanding Investments as of September 30
                                                                     1998                1997

            Face value of investments                             $26,999,000         $25,665,000
            Less: discounts                                          (640.399)           (645,245)

            Investments, Net of Discounts                         $26358601            $25019.755


           Note 4. Revenues

           Earned revenues during fiscal year 1998 of $1,350,848 consisted only of interest on United States
           Treasury obligations. During fiscal year 1997, earned revenue consisted of $1,297,350 in interest
           on Treasury obligations.




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