Financial Audit: Senate Restaurants Revolving Fund for Fiscal Years 2000
and 1999 (Letter Report, 03/23/2001, GAO/GAO-01-494).

GAO contracted with KPMG Peat Marwick LLP to audit the financial
statements of the Senate Restaurants Revolving Fund for fiscal years
2000 and 1999. KPMG found that the statements were fairly presented in
conformity with U.S. generally accepted accounting principles.
Management fairly stated that internal controls safely guarded assets
against loss from unauthorized acquisition, use, or disposition; ensured
material compliance with laws and regulations; and ensured that there
were no material misstatements in the financial statements. KPMG found
no reportable noncompliance with selected provisions of the laws and
regulations it tested.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-494
     TITLE:  Financial Audit: Senate Restaurants Revolving Fund for
	     Fiscal Years 2000 and 1999
      DATE:  03/23/2001
   SUBJECT:  Fund audits
	     Accounting procedures
	     Internal controls
	     Financial statement audits
	     Revolving funds
	     Auditing standards
	     Dining facilities
IDENTIFIER:  Senate Restaurant Revolving Fund

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GAO-01-494

A

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

March 2001 FINANCIAL AUDIT Senate Restaurants Revolving Fund for Fiscal
Years 2000 and 1999

GAO- 01- 494

Lett er

March 23, 2001 The Honorable Mitch McConnell Chairman, Committee on Rules

and Administration United States Senate

The Honorable Alan M. Hantman Architect of the Capitol

As you 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, 2000 and 1999, 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 U. S.

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 fairly presented in conformity with U. S. generally accepted
accounting principles. ? Management's assertion that internal control in
place on September 30,

2000, was effective in safeguarding assets against loss from 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 is fairly stated. ?
There was no reportable noncompliance with selected provisions of

laws and regulations it tested.

Although KPMG found that management fairly stated its assertion regarding
the effectiveness of the Fund's internal control, KPMG did identify certain
matters involving the Fund's internal control that were not significant
enough to be considered reportable conditions. 1 These matters

were reported to management in a separate letter. As disclosed in KPMG's
report and note 1 to the Fund's financial statements, the operation of the
Senate Restaurants is economically dependent on financial and other support
provided primarily by the Architect of the Capitol and the United States
Senate.

? The Fund's financial statements for fiscal years 2000 and 1999 include
direct financial support provided by the Architect and the Senate in the
form of transferred appropriations and/ or appropriated capital totaling

$0. 7 million and $1.1 million, respectively. ? The Fund's financial
statements for fiscal years 2000 and 1999 do not include other support that
benefits the operation of the restaurants. Specifically, the Architect of
the Capitol provided about $133,000 and $205,000, in fiscal years 2000 and
1999, respectively, for the purchase and maintenance of restaurant- related
capital items, which remain the property of the Architect. In addition,
during fiscal years 2000 and 1999,

the Architect and the Government Printing Office provided the Fund with
support services- the value of which cannot be readily determined. As
disclosed in KPMG's report and note 1 to the Fund's financial

statements, if operating trends continue, the Fund will continue to require
future support to maintain continuing 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,
met with KPMG representatives and the Fund's management. Our review, as
differentiated from an audit in accordance with U. S. 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 assertions about the effectiveness 1
Reportable conditions are matters coming to the auditor's attention that in
the auditor's judgement should be communicated because they represent
significant deficiencies in the design or operation of internal control,
which could adversely affect the entity's ability to meet the internal
control objectives described in the report.

of its internal control 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 in which KPMG did not comply, in all material respects, with U. S.

generally accepted government auditing standards. This report is a matter of
public record and is 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 J. Dodd, Ranking Member, Senate

Committee on Rules and Administration; Senator Robert F. Bennett, Chairman,
and Senator Richard Durbin, Ranking 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 staff have any
questions concerning our review of the audits, please contact me on (202)
512- 2600 or Jeanette M. Franzel, Acting Director, on (202) 512- 9406.

Jeffrey C. Steinhoff Managing Director Financial Management and Assurance

Appendi xes Report on the Audit of the United States

Appendi x I

Senate Restaurants Revolving Fund Independent Auditors' Report

Balance Sheets

UNITED STATES SENATE RESTAURANTS REVOLVING FUND

Balance Sheets September 30, 2000 and 1999

Assets 2000 1999

Cash: Funds with U. S. Treasury $ 874, 819 694, 404 Petty cash and change
funds 20, 500 20, 500 Prepaid expenses 11, 353 - Accounts receivable, Senate
customer accounts (note 3) 113, 489 197,489 Vendor commissions receivable
(note 2( d)) 15,123 15,018 Food, beverage, and merchandise inventory (note
2( b)) 143, 055 146, 264 China, glassware, silverware, and tableware (note
2( b)) 75,669 75,181 Total assets $ 1,254,008 1,148,856 Liabilities and U.
S. Government Equity (Deficit)

Accounts payable and accrued expenses: Due to vendors and customers $ 358,
064 532, 259 Payroll and related benefits 303, 842 315,394 Deferred income
(note 2( e)) 27,201 48, 667 Total accounts payable and accrued expenses
689,107 896,320 Other liabilities:

Employees' accrued leave (note 2( f)) 183, 019 182, 213 Loans from Senate
contingent fund (note 5) 400, 000 450, 000 Total other liabilities 583,019
632,213 Total liabilities 1,272,126 1,528,533 U. S. Government equity:
Appropriated capital (note 5) 2, 847,144 2, 847,144 Cumulative results of
operations (deficit) (2, 865,262) (3, 226, 821) Total U. S. Government
equity (deficit) (18,118) (379,677) Total liabilities and U. S. Government
equity $ 1,254,008 1,148,856 See accompanying notes to financial statements.

5

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

UNITED STATES SENATE RESTAURANTS REVOLVING FUND

Statements of Operations and Changes in U. S. Government Equity (Deficit)
Years ended September 30, 2000 and 1999

2000 1999

Sales and other operating income (note 6) Sales:

Regular food services $ 3, 653, 383 3, 660, 128 Catering 4, 217,783 3, 892,
926 Sundry shop sales 654, 605 636, 845 Vending machine commissions and
other operating income 176, 852 205,347 Total sales and other operating
income 8,702,623 8,395,246 Cost of sales Food and beverages 2, 470, 304 2,
526, 432 Sundry shop merchandise 502, 950 435,574 Vendor fees - 379 Total
cost of sales 2,973,254 2,962,385 Gross income from sales and other
operating income 5,729,369 5,432,861 Operating expenses (note 1): Personnel
and benefits (note 4) 5,021, 594 5,105,559 Supplies and materials 486, 775
535,552 Miscellaneous 609, 441 470, 289 Total operating expenses 6,117,810
6,111,400 Loss from sales and other operating income (388,441) (678,539)
Other sources (uses) of funds: Employee buy- out expense (note 7) - (57,731)
Appropriated funds (note 1) 750, 000 750, 000 Net income 361,559 13,730 U.
S. Government equity (deficit) – beginning of year (379,677)
(1,283,407) Increase in appropriated capital (note 5) - 890,000 U. S.
Government equity (deficit) – end of year $ (18,118) (379,677) See
accompanying notes to financial statements.

6

Statements of Cash Flows

UNITED STATES SENATE RESTAURANTS REVOLVING FUND

Statements of Cash Flows Years ended September 30, 2000 and 1999

2000 1999

Cash flow from operating activities: Net income (loss) $ 361, 559 13, 730
Adjustments to reconcile net income (loss) to net cash used in operating
activities:

(Increase)/ decrease in assets: Accounts receivable 83, 895 (89, 244) Food,
beverage, and merchandise inventory 3, 209 9, 893 China, glassware,
silverware, and tableware (488) (35,256) Prepaid expenses (11, 353) -
Increase/( decrease) in liabilities:

Due to vendors (173, 178) (64, 488) Payroll and related benefits (11, 552)
93, 953 Employees' accrued leave 806 (25,807) Deferred income (22, 483) 14,
457 Net cash used for operating activities 230,415 (82,762) Cash flows from
financing activities:

Net loan proceeds (payments) from (to) Senate contingent fund (50, 000)
(540, 000) Transfers from Senate contingent fund - 890, 000 Net increase in
cash 180,415 267,238 Funds with U. S. Treasury, beginning of year 694,404
427,166 Funds with U. S. Treasury, end of year $ 874,819 694,404 See
accompanying notes to financial statements. 7

Notes to Financial Statements

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UNITED STATES SENATE RESTAURANTS REVOLVING FUND

Notes to Financial Statements September 30, 2000 and 1999

Architect, with the approval of the Committee, to borrow from the Senate
contingent fund the amounts necessary to manage the Fund. The Committee
establishes the loan amounts and repayment periods. The loaned funds come
from the miscellaneous items appropriation account of the Senate's
contingent fund and loan repayments are deposited to the same account.

From October 1988 through September 1998, under the authority provided by 40
U. S. C. 174j- 9, the Architect of the Capitol requested and received
various loans from the Senate's contingent fund totaling $2,250,000. With
respect to these amounts, the Fund received a new loan in the amount of
$275,000 in FY 1998 and no new loans in FY 1999 and FY 2000.

Between October 1989 and September 1999, the Fund paid all but $450,000 of
these loans with transfers of appropriated funds, referred to as
“appropriated capital”, pursuant to 40 U. S. C. 174j- 4, from
the Senate's contingent expense appropriation account. During fiscal year
1999, the Fund received transfers of appropriated capital from the Senate's
contingent expense appropriations account totaling $890,000. The fund used
$540,000 of the $890,000 transfer received in fiscal year 1999 to repay
loans from the Senate's contingent fund. These loan repayments reduced the
outstanding balance of loans from the Senate's contingent fund at September
30, 1999 to $450,000. In fiscal year 2000, the Fund repaid $50,000 of the
outstanding loan balance with operating funds, reducing the outstanding
balance of loans at September 30, 2000 to $400,000. The transfer of
appropriated capital received during fiscal year 1999 increased the Fund's
appropriated capital to $2,847,144 at September 30, 1999. No appropriated
capital transfer was received by the Fund in fiscal year 2000.

The loan outstanding at September 30, 2000 and September 30, 1999 is as
follows:

2000 1999

Loan issued October 1996, due by September 30, 2003 $ 400,000 450,000 $
400,000 450,000

12 (Continued)

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

(917599) Lett er

GAO United States General Accounting Office

Page 1 GAO- 01- 494 Senate Restaurants

Contents Letter 3 Appendix Appendix I: Report on the Audit of the United
States Senate Restaurants Revolving Fund 6

Independent Auditors' Report 6 Balance Sheets 10 Statements of Operations
and Changes in U. S. Government

Equity (Deficit) 11 Statements of Cash Flows 12 Notes to Financial
Statements 13 Management's Report on Its Assertion About the Effectiveness

of Controls Over Financial Reporting 19

Abbreviation

KPMG KPMG Peat Marwick LLP

Page 2 GAO- 01- 494 Senate Restaurants

Page 3 GAO- 01- 494 Senate Restaurants United States General Accounting
Office

Washington, D. C. 20548 Page 3 GAO- 01- 494 Senate Restaurants

Page 4 GAO- 01- 494 Senate Restaurants

Page 5 GAO- 01- 494 Senate Restaurants

Page 6 GAO- 01- 494 Senate Restaurants

Appendix I

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 7 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 8 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 9 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 10 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 11 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 12 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 13 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 14 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 15 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 16 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 17 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 18 GAO- 01- 494 Senate Restaurants

Appendix I Report on the Audit of the United States Senate Restaurants
Revolving Fund

Page 19 GAO- 01- 494 Senate Restaurants

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