Financial Audit: U.S. Senate Stationery Room Revolving Fund's	 
Fiscal Year 2000 Financial Statement (21-DEC-01, GAO-02-130).	 
								 
GAO audited the financial statement for the Senate Stationary	 
Room Revolving Fund for fiscal year 2000. GAO found that (1) the 
statement is presented fairly in all material respects, (2)	 
although internal control should be improved, the Stationary Room
had effective internal controls over financial reporting and	 
compliance with laws and regulations, and (3) no reportable	 
noncompliance with selected provisions of laws and regulations	 
GAO tested.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-130 					        
    ACCNO:   A02600						        
  TITLE:     Financial Audit: U.S. Senate Stationery Room Revolving   
Fund's Fiscal Year 2000 Financial Statement			 
     DATE:   12/21/2001 
  SUBJECT:   Financial management				 
	     Financial statement audits 			 
	     Internal controls					 
	     Cash basis accounting				 
	     Stationery Room Revolving Fund			 

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GAO-02-130
     
A

Report to the Secretary of the Senate

December 2001 FINANCIAL AUDIT U. S. Senate Stationery Room Revolving Fund?s
Fiscal Year 2000 Financial Statement

GAO- 02- 130

Letter 1 Auditor?s Report 3

Opinion on the Financial Statement 3 Opinion on Internal Control 3
Compliance With Laws and Regulations 6 Objectives, Scope, and Methodology 6
Management?s Comments 8

Financial Statement 10 Statement of Receipts, Disbursements, and Fund
Balance 10

Notes to the Statement of Receipts, Disbursements, and Fund Balance 11

Lett er

December 21, 2001 The Honorable Jeri Thomson Secretary of the Senate Dear
Ms. Thomson: At the request of the former Secretary of the Senate, we
conducted a financial audit of the Senate Stationery Room Revolving Fund?s
Statement of Receipts, Disbursements, and Fund Balance for the fisal year
ended September 30, 2000. The enclosed report presents our opinion on the
financial statement, the effectiveness of the Stationery Room?s related
internal controls, and our conclusion on compliance with selected provisions
of laws and regulations we tested. We are sending copies of this report to
the Majority and Minority Leaders of the Senate and the Chairmen and Ranking
Minority Members of the Senate Committee on Rules and Administration and the
Subcommittee on Legislative Branch, Senate Committee on Appropriations. We
will send copies to other interested parties upon request. The report will
also be available on GAO?s home page at

http:// www. gao. gov.

This report was prepared under the direction of Jeanette M. Franzel, Acting
Director, Financial Management and Assurance, who can be reached at (202)
512- 9406. If I can be of further assistance, please call me at (202) 512-
2600.

Sincerely yours, Jeffrey C. Steinhoff Managing Director Financial Management
and Assurance

Audi Report t or? s To the Secretary of the Senate We have audited the
accompanying Statement of Receipts, Disbursements, and Fund Balance for the
Senate Stationery Room Revolving Fund for the fiscal year ended September
30, 2000. We found

 the statement is presented fairly in all material respects;

 although internal control should be improved, the Stationery Room had
effective internal controls over financial reporting (including safeguarding
assets) and compliance with laws and regulations; and

 no reportable noncompliance with selected provisions of laws and
regulations we tested.

The following sections present each conclusion in more detail and discuss
the scope of our audit.

Opinion on the The Statement of Receipts, Disbursements, and Fund Balance
and the

Financial Statement accompanying notes present fairly, in conformity with
the cash basis of accounting, the receipts, disbursements, and fund balance
of the Stationery

Room Revolving Fund for the fiscal year ended September 30, 2000. As
described in note 2 of the accompanying statement, the cash basis of
accounting is a comprehensive basis of accounting that recognizes
transactions when cash is received and disbursed. This basis of accounting

differs from U. S. generally accepted accounting principles, which recognize
revenue when earned and expenses when incurred. Opinion on Internal The
Stationery Room maintained in all material respects effective internal
Control

control over financial reporting (including safeguarding assets) and
compliance as of September 30, 2000, that provided reasonable assurance that
misstatements, losses, or noncompliance material in relation to the
financial statement would be prevented or detected promptly. Management
asserted that its internal control is effective based on the Comptroller
General?s Standards for Internal Control in the Federal Government. 1 1
Standards for Internal Control in the Federal Government (GAO/ AIMD- 00-
21.3.1, November 1999).

Our work did identify the need to improve certain internal controls. We
noted weaknesses related to the Stationery Room?s disbursements, cash
handling, and reconciliation of its transactions and fund balance with
records maintained by the Senate Disbursing Office.

 With respect to disbursement- related controls, the approval of purchase
orders and disbursement vouchers and the associated certification of the
receipt of goods were routinely documented with signature stamps.

However, access to the signature stamps was not tightly controlled. Also,
stamped copies of purchase orders were not retained as evidence of their
approval. In addition, individuals who received goods and recorded the
receipt of goods in the Stationery Room inventory records were not
identified in the receiving records.

 With respect to cash handling controls, the Stationery Room did not
adequately segregate cash counting and handling duties from the recording of
certain cash- related transactions. One way to compensate

for inadequate segregation of cash handling and recording duties is to
conduct meaningful reviews of cash- related activities by individuals not
directly involved in the activities. However, the Stationery Room?s records
of daily cash handling did not contain evidence (such as a dated signature)
that reviews of cash counting and recording were performed.

 With respect to the use of reconciliation as a control, the Stationery
Room did not perform timely reconciliations of its records of disbursements
and revolving fund balance with the records of the revolving fund?s
disbursements and fund balance maintained by the

Senate Disbursing Office. Managers for the Stationery Room told us that the
Stationery Room?s having not performed timely reconciliations for fiscal
year 2000 activity resulted in part from the Disbursing Office?s
installation of a new financial management system in fiscal year 1999.
Because of the volume of its disbursement transactions the Stationery Room
has utilized a process of electronically matching its transaction

records with records of transactions processed by the Senate Disbursing
Office to facilitate its reconciliation process. Implementation changes and
related priority issues associated with the new system reduced the
Stationery Room?s ability to efficiently match its disbursement transactions
to those recorded in the new system. In response, staff of the Stationery
Room and Senate Disbursing Office instituted alternative electronic matching
procedures to facilitate timely reconciliations of transactions. These
procedures enabled the

Stationery Room to complete its matching and reconciliation of fiscal year
2000 activity during our audit. The completed reconciliation did not
identify any material errors either individually or in total. 2 Based on the
results of the Stationery Room?s reconciliations and our overall tests of
disbursement and receipt processing, we found that these internal control
weaknesses did not result in a material misstatement in the Stationery
Room?s Statement of Receipts, Disbursements, and Fund Balance. Also, these
weaknesses taken together are not considered a material weakness. 3 They do,
however, represent a reportable condition. A reportable condition is a
significant deficiency in the design and/ or operation of internal control
that could adversely affect the Stationery Room?s ability to meet internal
control objectives. These weaknesses increase the Stationery Room?s
potential exposure to loss and errors or irregularities that may occur and
not be detected. In light of the internal control weaknesses identified
during our audit, we recommended that Stationery Room management strengthen
disbursement, cash handling, and reconciliation controls by ensuring that 
individuals responsible for approving purchase orders, vouchers, and

certifications of the receipt of goods and services either sign each
document to formally evidence their actions or ensure that the signature
stamps are adequately controlled;

 copies of authorized purchase orders are retained and the individuals who
received the goods are identified on the receiving records;

 its daily records of cash received and processed are independently
reviewed and those performing the review clearly document (with name and
date) their review; 2 The fact that the Stationery Room reconciliation of
fiscal year 2000 transactions did not identify material errors reflected, in
part, the fact that the Senate Gift Shop, which has fewer

transactions to reconcile, completed its reconciliations for fiscal year
2000 activity on a timely basis. In completing its reconciliations, the
Senate Gift Shop identified and corrected various posting errors that also
involved errors in the recording of Senate Stationery Room transactions.

3 A material weakness is a reportable condition that does not reduce to a
relatively low level the risk that errors, fraud, or noncompliance in
amounts that would be material to the financial statements may occur and not
be detected promptly by employees in the normal course of performing their
duties.

 reconciliations of Stationery Room disbursement transactions and fund
balance with amounts recorded by the Senate Disbursing Office are routinely
completed in a timely manner; and

 the Stationery Room?s financial and compliance activities are monitored
for compliance with internal controls.

During our audit, Stationery Room management acknowledged these internal
control weaknesses and has either completed or initiated actions to address
our recommendations. Specifically, Stationery Room management has
established controls over physical access to signature stamps to help ensure
that only persons acting within the scope of their

authority authorize transactions. In addition, those individuals who receive
goods are signing their initials on the receiving documents in addition to
documenting the date and quantities of goods received. Also, copies of
purchase orders with stamped signatures are being retained. To provide
compensating controls for the cash handling and recording duties,

Stationery Room management has implemented procedures for the independent
review of daily cash- related records. In addition, those performing the
independent reviews are required to document these records with their dated
initials. The Stationery Room is also in the process of reconciling its
fiscal year 2001 records with the Senate Disbursing Office?s records, and it
plans to continue this process quarterly as the Senate Disbursing Office
reports on the activity of the revolving fund.

Compliance With Laws Our tests for compliance with selected provisions of
laws and regulations

and Regulations disclosed no instances of noncompliance reportable under U.
S. 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 Management of the Stationery Room is responsible for

Methodology

 preparing the Statement of Receipts, Disbursements, and Fund Balance in
conformity with the cash basis of accounting;

 establishing, maintaining, and assessing internal control to provide

reasonable assurance that the objectives of internal control 4 are met; and

 complying with applicable laws and regulations. We are responsible for

 obtaining reasonable assurance about whether the Statement of Receipts,
Disbursements, and Fund Balance is presented fairly in all material
respects, in conformity with the cash basis of accounting;

 obtaining reasonable assurance about whether management maintained
effective internal control over financial reporting and compliance, the
objectives of which are the following:

 financial reporting: transactions are properly recorded, processed, and
summarized to permit the preparation of the Statement of Receipts,
Disbursements, and Fund Balance in conformity with the cash basis of
accounting, and assets are safeguarded against loss from unauthorized
acquisition, use, or disposition and

 compliance with laws and regulations: transactions are executed in
accordance with laws and regulations that could have a direct and material
effect on the financial statement; and

 testing compliance with selected provisions of laws and regulations that
were determined to have a direct and material effect on the Stationery
Room?s financial statement for the fiscal year ended September 30, 2000.

In order to fulfill these responsibilities, we (1) examined, on a test
basis, evidence supporting the amounts and disclosures in the Statement of
Receipts, Disbursements, and Fund Balance, (2) assessed the accounting
principles used and significant estimates made by management, (3) evaluated
the overall presentation of the Statement of Receipts,

Disbursements, and Fund Balance, (4) obtained an understanding of internal
control related to financial reporting (including safeguarding assets) and
compliance with laws and regulations, (5) tested relevant internal controls
over financial reporting (including safeguarding of assets)

and compliance and evaluated the design and operational effectiveness of 4
Management?s internal control responsibility encompasses controls related to
(1) the effectiveness and efficiency of operations, including the use of
resources, (2) the reliability of financial reporting, including internal
and external reports on the use of resources and financial statements, and
(3) compliance with laws and regulations. Within each of these categories,
management is responsible for establishing controls to prevent or promptly
detect unauthorized acquisition, use, or disposition of assets (safeguarding
assets).

internal control, and (6) tested compliance with selected provisions of the
following relevant laws and regulations:

 2 U. S. C. Sec. 46a- 1 relating to the establishment of the Stationery
Room Revolving Fund including deposit of sales receipts and disbursements
from the fund,

 2 U. S. C. Sec. 109 relating to preference to purchase American goods,

 2 U. S. C. Sec. 68 relating to the approval of disbursements, and

 the Antideficiency Act relating to the disbursement of revolving fund
assets.

We also reviewed evidence of actions taken by management in response to the
reportable condition identified during the audit. We did not evaluate
internal controls relevant to the effectiveness and

efficiency of the Stationery Room?s operations. We limited our internal
control testing to relevant controls over financial reporting (including
safeguarding of assets) and compliance. Because of inherent limitations in
internal control, misstatements due to error or fraud, losses, or
noncompliance 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 the compliance with controls may deteriorate. With
respect to our tests of selected provisions of laws and regulations, we

did not test compliance with all laws and regulations applicable to the
Stationery Room. We caution that noncompliance may have occurred and not
been detected by the tests we performed. Accordingly, the scope of our tests
of noncompliance may not be sufficient for other purposes.

We performed our audit in accordance with U. S. generally accepted
government auditing standards.

Management?s We provided copies of our draft report to the management of the
Stationery Comments

Room and representatives of the Office of the Secretary of the Senate for
review and comment and met with them to discuss the draft report. In
commenting on the draft, they agreed with the revised report?s findings,

conclusions, and recommendations. With respect to the need to improve
internal controls, they noted that the Stationery Room has initiated a
series of actions intended to strengthen controls including tighter controls
over

access to signature stamps, approval of purchase and receiving documents,

and cash handling procedures. In addition, new procedures have been
developed to facilitate more timely reconciliation of Stationery Room
transactions with transactions processed by the Senate Disbursing Office.
They also provided comments for clarification, which we have included in the
report where appropriate.

Jeffrey C. Steinhoff Managing Director Financial Management and Assurance

September 21, 2001

Financial Statement

Statement of Receipts, Disbursements, and Fund Balance

United States Senate Stationery Room Revolving Fund Statement of Receipts,
Disbursements, and Fund Balance

Fiscal year ended September 30,

2000

Receipts

Sales (note 3) $3,991,210

Total receipts 3,991,210 Disbursements (note 4)

Inventory and supplies 2,804,333 Professional and other services 639,633
Equipment 91,538

Total disbursements 3,535,504 Net receipts 455,706 Beginning fund balance
(note 5) 932,087 Ending fund balance (note 5) $ 1,387,793

The accompaning notes are an integral part of this financial statement.

Notes to the Statement of Receipts, Disbursements, and Fund Balance

Note 1. Description of Entity

The United States Senate Stationery Room was established to provide
stationery and office supplies to Members of the Senate, Senate Offices, and
other authorized legislative organizations. The Stationery Room revolving
fund was established within the contingent fund of the Senate to support the
activities of the Stationery Room. Any amounts received as proceeds from the
sales of the Stationery Room are to be deposited into the revolving fund and
are available until expended for the purpose for which the fund was
established. (2 U. S. C. Sec. 46a- 1)

Note 2. Basis of Accounting

Amounts received from and used for Stationery Room operations are accounted
for and reported by the fund on the cash basis. The cash basis of accounting
recognizes transactions when the cash is received and disbursed. The cash
basis is a comprehensive basis of accounting that differs from U. S.
generally accepted accounting principles, which recognize revenues when
earned and expenses when incurred.

All receipts from the sale of stationery items are deposited into the fund.
The fund balance is used to pay for purchases of (1) inventory items
available for resale to customers of the Stationery Room and (2) equipment
and related services that directly support Stationery Room operations. The
fund balance was not used to pay for salaries and benefits of Senate
employees who work in the Stationery Room, the costs of which are charged to
the ?Salaries, Officers, and Employee? appropriation account for the Senate.
The value of other expenses incidental to the Stationery Room operations,
including space and utilities, is not readily identifiable. Any costs
associated with these expenses are charged to other applicable
appropriations.

Note 3. Sales Receipts

Sales receipts consist of cash sales and collections for sales made on
account. The various Senate offices purchase their stationery and office
supplies from the Stationery Room on account. Monthly, following review and
approval of these transactions, the Senate Disbursing Office makes an
adjusting entry, which records the receipts in the revolving fund and the
disbursements in the various Senate Office accounts, thus paying each
account in full monthly.

Note 4. Disbursements

Disbursements represent amounts paid to purchase stock for resale, special
orders, and other goods and services needed to support Stationery Room
operations.

Note 5. Fund Balance

The Beginning Fund Balance represents the balance at October 1, 1999,
carried over from the prior period. The Ending Fund Balance represents the
balance at September 30, 2000, and is the amount of funds available for
disbursement in a subsequent period.

(194052) Lett er

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