Financial Audit: House Beauty Shop Revolving Fund for the Year Ended
9/30/93 and 9 Months Ended 9/30/92 (Letter Report, 04/14/95,
GAO/AIMD-95-82).
GAO audited the House of Representatives Beauty Shop revolving fund
statements for the year ended September 30, 1993, and for the nine
months ended September 30 1992, and the related statements of operations
and cash flows. GAO found that the financial statements were reliable
in all materials respects. Although internal controls needed to be
improved, those controls in effect reasonably ensured that losses,
noncompliance with laws and regulations, and misstatements affecting the
financial statements would be prevented or detected. GAO found one
issue of noncompliance with laws and regulations.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-95-82
TITLE: Financial Audit: House Beauty Shop Revolving Fund for the
Year Ended 9/30/93 and 9 Months Ended 9/30/92
DATE: 04/14/95
SUBJECT: Accounting procedures
Reporting requirements
Financial management
Internal controls
Auditing standards
Financial records
Noncompliance
Accounting systems
Revolving funds
Financial statement audits
IDENTIFIER: House Beauty Shop Revolving Fund
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Cover
================================================================ COVER
Report to the Chief Administrative Officer of the House of
Representatives
April 1995
FINANCIAL AUDIT - HOUSE BEAUTY
SHOP REVOLVING FUND FOR THE YEAR
ENDED 9-30-93 AND 9 MONTHS ENDED
9-30-92
GAO/AIMD-95-82
House Beauty Shop
Abbreviations
=============================================================== ABBREV
Letter
=============================================================== LETTER
B-259472
April 14, 1995
Mr. Scot M. Faulkner
Chief Administrative Officer
House of Representatives
Dear Mr. Faulkner:
As required by the Legislative Branch Appropriations Act, 1970,
Public Law 91-145, 83 Stat. 347, and as requested by the Acting
Director of the former office of Non-Legislative and Financial
Services, we audited the House of Representatives Beauty Shop
Revolving Fund statements of financial position for the year ended
September 30, 1993, and for the 9 months ended September 30, 1992,
and the related statements of operations and cash flows for the
periods then ended. We found
the financial statements were reliable in all material respects;
internal controls need to be improved; however, those controls in
effect on September 30, 1993, provided reasonable assurance that
losses, noncompliance with laws and regulations, and misstatements
material to the financial statements would be prevented or detected;
and
one issue of noncompliance with laws and regulations we tested for
fiscal year ended September 30, 1993, and the 9 months ended
September 30, 1992.
The following sections outline each conclusion in more detail and
discuss the scope of our audits.
OPINION ON FINANCIAL STATEMENTS
------------------------------------------------------------ Letter :1
The financial statements and accompanying notes present fairly, in
conformity with generally accepted accounting principles, the Beauty
Shop's
assets, liabilities, and government equity;
revenues and expenses; and
cash flows.
However, misstatements may nevertheless occur in other financial
information reported by the Beauty Shop as a result of the internal
control weaknesses described in the following section.
As discussed in note 1, the financial statements present only the
House Beauty Shop Revolving Fund and do not present the financial
position and results of operations of the House Beauty Shop
operations as a whole. The statements do not include such costs as
space occupancy and utilities, which are not readily identifiable,
and certain costs which are identifiable and disclosed in note 1,
such as telephone service.
OPINION ON INTERNAL CONTROLS
------------------------------------------------------------ Letter :2
The internal controls we evaluated were those designed to
safeguard assets against loss from unauthorized use or disposition;
assure the execution of transactions in accordance with laws and
regulations; and
properly record, process, and summarize transactions to permit the
preparation of financial statements and to maintain accountability
for assets.
In our last report,\1 we identified the need to improve certain
internal controls. Although we noted internal control improvements
in our current audit, two issues remain outstanding. First, we
continued to find it difficult to substantiate the summary retail
sales revenue balances because the Beauty Shop did not maintain
adequate supporting documentation for individual retail sales
transactions. Second, there continued to be no reconciliation of
cash between the Beauty Shop and the House Finance Office records,
which are the official receipt and disbursement records for the House
of Representatives.
House Beauty Shop management acknowledged the need to strengthen
documentation requirements for retail sales and perform
reconciliations, and consequently, in 1994, implemented an automated
system. The system is designed to record individual retail sales and
to provide data for periodic reconciliations with the House Finance
Office records.
Until the automated system corrects these weaknesses in internal
controls, they will continue to adversely affect the Beauty Shop's
ability to meet the internal control objectives previously listed.
These weaknesses could also result in misstatements in other
financial information reported by the Beauty Shop. However, controls
in effect on September 30, 1993, provided reasonable assurance that
losses, noncompliance, or misstatements material to the financial
statements would be prevented or detected.\2
--------------------
\1 Financial Audit: House Beauty Shop Revolving Fund for Periods
Ended 9/30/92, 12/31/91, 12/31/90 (GAO/AIMD-93-42, September 13,
1993).
\2 Our report on the Beauty Shop's internal control structure and
compliance with laws and regulations for 1992, 1991, and 1990 are
presented in GAO/AIMD-93-42, dated September 13, 1993.
COMPLIANCE WITH LAWS AND
REGULATIONS
------------------------------------------------------------ Letter :3
Other than the matter described below, nothing came to our attention
in the course of our work to indicate that noncompliance with
selected provisions of laws and regulations occurred.
In our previous report dated September 13, 1993, we disclosed that
the Beauty Shop Revolving Fund was required to transfer $16,531
($4,928 and $11,603, respectively) to Treasury for the 9 months ended
September 30, 1992, and the year ended December 31, 1991. Public Law
91-145, 83 Stat. 347 (1970) mandates that "the net profit
established by the General Accounting Office audit, after restoring
any impairment of capital and providing for replacement of equipment,
shall be transferred to the general fund of the Treasury." As
discussed in note 2, these funds were not transferred and remain a
liability because of insufficient cash.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :4
Management is responsible for
preparing financial statements in conformity with generally accepted
accounting principles,
establishing and maintaining 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
(1) the financial statements are reliable (free of material
misstatement and presented fairly in conformity with generally
accepted accounting principles) and (2) relevant internal controls
are in place and operating effectively. We are also responsible for
testing compliance with selected provisions of laws and regulations.
In order to fulfill these responsibilities, we
examined, on a test basis, evidence supporting the amounts and
disclosures in the financial statements;
assessed the accounting principles used and significant estimates
made by management;
evaluated the overall presentation of the financial statements;
evaluated and tested relevant internal controls which encompassed the
areas of treasury, inventory, equipment, revenues, expenditures,
payroll, and financial reporting; and
tested compliance with selected provisions of the following laws and
regulations:
the Legislative Branch Appropriations Act, 1970, Public Law 91-145,
83 Stat. 347, which prescribes the operating, accounting, and
auditing requirements of the Fund, and
the U.S. House of Representatives Congressional Handbook, which
provides the regulations and accounting procedures for members,
committees, and employees of the House of Representatives.
We limited our work to accounting and other controls necessary to
achieve the objectives outlined in our opinion on internal controls.
Because of inherent limitations in any system of internal control,
losses, noncompliance, or misstatements may nevertheless occur and
not be detected. We also caution that projecting our evaluation to
future periods is subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of
compliance with controls may deteriorate.
We performed our audit in accordance with generally accepted
government auditing standards. We completed our audit work on
January 4, 1995.
As adopted in the Rules of the House of Representatives for the 104th
Congress, the Office of Inspector General was directed to coordinate
and contract with an independent accounting firm, or firms, for a
series of audits that will result in a consolidated report of the
financial operations of the House, including the House Beauty Shop.
Such a consolidated report should provide valuable information on the
overall results of operations and current financial position of the
House of
We continue to strongly encourage all federal entities to prepare and
have audited comprehensive financial statements as an integral facet
of their financial management program.
Sincerely yours,
Charles A. Bowsher
Comptroller General
of the United States
FINANCIAL STATEMENTS
=========================================================== Appendix 0
Statements of Financial
Position
(See figure in printed
edition.)
Statements of Operations
(See figure in printed
edition.)
Statements of Cash Flows
(See figure in printed
edition.)
Notes to Financial Statements
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)