Financial Audit: Senate Restaurants Revolving Fund for Fiscal	 
Years 2007 and 2006 (07-MAR-08, GAO-08-463).			 
                                                                 
As requested, we provided for audits of the financial statements 
of the U.S. Senate Restaurants Revolving Fund (the Fund) for the 
fiscal years ended September 30, 2007, and 2006, by contracting  
with the independent public accounting firm of Clifton Gunderson 
LLP. The contract required that the audit be conducted in	 
accordance with U.S. generally accepted government auditing	 
standards and the joint GAO/President's Council on Integrity and 
Efficiency (PCIE) Financial Audit Manual.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-463 					        
    ACCNO:   A81229						        
  TITLE:     Financial Audit: Senate Restaurants Revolving Fund for   
Fiscal Years 2007 and 2006					 
     DATE:   03/07/2008 
  SUBJECT:   Accounting standards				 
	     Appropriated funds 				 
	     Auditing procedures				 
	     Budget allowances					 
	     Budgeting						 
	     Congressional budgets				 
	     Continuing budget resolutions			 
	     Financial management				 
	     Financial management systems			 
	     Financial statement audits 			 
	     Financial statements				 
	     Funds management					 
	     Internal controls					 
	     Strategic planning 				 
	     Senate Restaurant Revolving Fund			 

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GAO-08-463

   

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material separately. 

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

United States Government Accountability Office: 

GAO: 

March 2008: 

Financial Audit: 

Senate Restaurants Revolving Fund for Fiscal Years 2007 and 2006: 

Senate Restaurants: 

GAO-08-463: 

Contents: 

Letter: 

Appendix I: Report on Audit of the U.S. Senate Restaurants Revolving 
Fund: 

Independent Auditor's Report: 

Balance Sheets11: 

Statements of Operations and Changes in U.S. Government Equity: 

Statements of Cash Flows: 

Notes to Financial Statements14: 

United States Government Accountability Office: 

Washington, DC 20548: 

March 7, 2008: 

The Honorable Dianne Feinstein: 
Chairman: 
The Honorable Robert F. Bennett: 
Ranking Member: 
Committee on Rules and Administration: 
United States Senate: 

The Honorable Stephen T. Ayers: 
Acting Architect of the Capitol: 

As requested, we provided for audits of the financial statements of the 
U.S. Senate Restaurants Revolving Fund (the Fund) for the fiscal years 
ended September 30, 2007, and 2006, by contracting with the independent 
public accounting firm of Clifton Gunderson LLP. The contract required 
that the audit be conducted in accordance with U.S. generally accepted 
government auditing standards and the joint GAO/President's Council on 
Integrity and Efficiency (PCIE)[Footnote 1] Financial Audit Manual. 

In its audit of the Fund, Clifton Gunderson LLP reported that: 

* The financial statements were presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles. 

* Although internal controls should be improved, the Fund had effective 
internal control over financial reporting (including safeguarding 
assets) and compliance with laws and regulations as of September 30, 
2007. 

* There was no reportable noncompliance with selected provisions of 
laws and regulations it tested. 

Although Clifton Gunderson LLP reported that the Fund maintained 
effective internal control, it did identify certain deficiencies in 
internal control over financial reporting (including safeguarding 
assets) that it considers to be significant deficiencies[Footnote 2] 
which adversely affect the Fund's ability to meet internal control 
objectives described in U.S. Government Accountability Office (GAO) 
Standards for Internal Control in the Federal Government. Significant 
deficiencies Clifton Gunderson LLP noted are as follows: 

* The Fund has not maintained and fully implemented an effective entity-
wide security program. Clifton Gunderson LLP found deficiencies in the 
areas of security program management, including policy administration, 
and certification and accreditation. Such conditions may lead to 
insufficient protection of sensitive or critical resources and 
disproportionately high expenditures for controls over low-risk 
resources. 

* The Fund has not effectively implemented consistent controls to 
restrict access to its information systems. Clifton Gunderson LLP's 
tests of logical access controls relating to the Fund's general support 
systems and major applications identified access control weaknesses. 
Without adequate access controls, unauthorized parties may gain access 
to the Fund's computer system and network resources that could result 
in damage, deletion, or theft of computerized data. 

Clifton Gunderson LLP reported that it did not consider the significant 
deficiencies noted above to be material weaknesses.[Footnote 3] 
However, Clifton Gunderson LLP reported that misstatements may 
nevertheless occur in other financial information reported by the Fund 
as a result of these internal control deficiencies. 

As disclosed in Clifton Gunderson LLP'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 through 
the Architect of the Capitol (the Architect) and by the U.S. Senate. 
The financial statements present the financial position and the results 
of activities financed through the Fund and are not intended to present 
the financial position and results of operations of the Senate 
Restaurants as a whole. 

* The Fund's financial statements for fiscal years 2007 and 2006 
reflect direct financial support of $850,000 each year, received from 
the Architect and the United States Senate through transferred 
appropriations. 

* The Fund's financial statements for fiscal years 2007 and 2006 do not 
include other support that benefits the operation of the restaurants. 
Specifically, the Architect provided approximately $185,246 and 
$163,020 in fiscal years 2007 and 2006, respectively, for the purchase 
and maintenance of capital equipment, which remain the property of the 
Architect, and professional fees. In addition, during fiscal years 2007 
and 2006, the Architect and the Government Printing Office provided the 
Fund with other support services, such as space and utilities, the 
value of which cannot be readily determined. 

The Fund's financial statements for fiscal years 2007 and 2006 also do 
not include estimated future pension costs[Footnote 4] and estimated 
future postretirement health and life insurance[Footnote 5] costs of 
$821,786 and $796,180 in fiscal years 2007 and 2006, respectively. 
These costs are financed by the Office of Personnel Management on 
behalf of the Fund. 

As disclosed in Clifton Gunderson LLP's report and the Fund's financial 
statements, losses from operations totaled $1,340,637 and $1,019,380 in 
fiscal years 2007 and 2006, respectively. If such losses continue, the 
Fund will continue to require future support from the Architect to 
maintain operations. 

In connection with the audit of the Fund's financial statements 
performed by Clifton Gunderson LLP, we reviewed its report and related 
audit documentation and, as necessary, met with Clifton Gunderson LLP 
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 of its 
internal control or conclude on its compliance with laws and 
regulations. Clifton Gunderson LLP is responsible for the accompanying 
auditor's report and for the conclusions expressed in the report. 
However, our review did not disclose any instances in which Clifton 
Gunderson LLP did not comply, in all material respects, with U.S. 
generally accepted government auditing standards and the joint GAO/PCIE 
Financial Audit Manual. 

This report is a matter of public record and is intended for the use of 
the U.S. Senate, the Architect, the management of the Senate 
Restaurants, and other interested parties. We are sending copies of 
this report to the Chairman and Ranking Member, Subcommittee on 
Legislative Branch, Senate Committee on Appropriations, and the 
Majority Leader and Minority Leader of the Senate. In addition, this 
report is also available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-3406 or [email protected]. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Contributors to this report were Julie 
T. Phillips and Bethany Smith. 

Steven J. Sebastian: 

Director Financial Management and Assurance: 

[End of section] 

Appendix I: Report on Audit of the U.S. Senate Restaurants Revolving 
Funds: 

Clifton Gunderson, LLP: 

Independent Auditorï¿½s Report: 

11710 Beltsville Drive: 
Suite 300: 
Calverton, MD 20705-3106: 
tel: 301-931-2050: 
fax: 301-931-1710: 
[hyperlink, http://www.cliftoncpa.com]: 

Offices in 17 states and Washington, DC:  

Comptroller General United States: 
Government Accountability Office: 

In our audits of the United States Senate Restaurants Revolving Fund 
(the Fund) for fiscal years 2007 and 2006, we found: 

* The financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles. 

* Although internal controls should be improved, the Fund had effective 
internal control over financial reporting (including safeguarding 
assets) and compliance with laws and regulations as of September 30, 
2007. 

* No reportable noncompliance in fiscal year 2007 with laws and 
regulations we tested. The following sections discuss in more detail 
(1) these conclusions and (2) the scope of our audits. 

Opinion on Financial Statements: 

The financial statements, including the accompanying notes, present 
fairly, in all material respects, in conformity with U.S. generally 
accepted accounting principles, the financial position of the Fund as 
of September 30, 2007 and 2006, and the results of its operations and 
cash flows for the fiscal years then ended. 

As discussed in Note 1, the financial statements present the financial 
position and the results of operations of the Fund and are not intended 
to present the financial position and results of operations of the 
Senate Restaurants as a whole. Amounts for capital expenditures and 
related repairs and maintenance purchased by the Architect of the 
Capitol (the Architect) for the benefit of the Fund are not reflected 
in the Fundï¿½s financial statements. Also, the financial statements do 
not include such costs as space and utilities, which are not readily 
identifiable. 

As discussed in Note 1, the operations of the Fund are economically 
dependent on direct support provided through the Architect and by the 
United States Senate. In fiscal years 2007 and 2006, the Fund received 
$850,000 each year in direct financial support to cover losses from 
operations, which totaled $1,340,637 and $1,019,380, respectively, 
during the same period. If losses from operations continue, the Fund 
will continue to require financial support to maintain operations. 

Opinion on Internal Control: 

Although internal controls should be improved, the Fund maintained, in 
all material respects, effective internal control over financial 
reporting (including safeguarding assets) and compliance as of 
September 30, 2007, that provided reasonable assurance that 
misstatements, losses, or noncompliance material in relation to the 
financial statements would be prevented or detected on a timely basis. 
Our opinion is based on criteria established by the U.S. Government 
Accountability Office (GAO) Standards for Internal Control in the 
Federal Government. 

A control deficiency exists when the design or operation of a control 
does not allow management or employees, in the normal course of 
performing their assigned functions, to prevent or detect misstatements 
on a timely basis. A significant deficiency is a control deficiency, or 
combination of control deficiencies, that adversely affects the 
entity's ability to initiate, authorize, record, process, or report 
financial data reliably in accordance with generally accepted 
accounting principles such that there is more than a remote likelihood 
that a misstatement of the entityï¿½s financial statements that is more 
than inconsequential will not be prevented or detected by the entityï¿½s 
internal control. 

We identified certain deficiencies in internal control over financial 
reporting (including safeguarding assets) that we consider to be 
significant deficiencies which adversely affect the Fundï¿½s ability to 
meet the internal control objectives listed in the objectives, scope, 
and methodology section of this report, or meet the criteria under U.S. 
Government Accountability Office (GAO) Standards for Internal Control 
in the Federal Government. Significant deficiencies we noted are as 
follows: 

* The Fund has not maintained and implemented an effective entity-
widesecurity program. 

* The Fund has not effectively implemented consistent controls to 
restrict access to its information systems. A material weakness is a 
significant deficiency, or combination of significant deficiencies, 
that results in more than a remote likelihood that a material 
misstatement of the financial statements will not be prevented or 
detected by the entityï¿½s internal control. We believe that none of the 
significant deficiencies described in this report are material 
weaknesses. However, misstatements may nevertheless occur in other 
financial information reported by the Fund as a result of the internal 
control deficiencies described in this report. 

Significant Deficiencies: 

1. The Fund Has Not Maintained and Implemented an Effective Entity-Wide 
Security Program: 

The Fund has not maintained and fully implemented its security program. 
Our current year audit found deficiencies in the areas of security 
program management, including policy administration, and certification 
and accreditation. Such conditions may lead to insufficient protection 
of sensitive or critical resources and disproportionately high 
expenditures for controls over low risk resources. An entity-wide 
security program should be in place to establish a framework and 
continuing cycle of activity to manage security risk, develop security 
policies, assign responsibilities, and monitor the adequacy of computer 
security related controls. It should also represent the foundation for 
an entityï¿½s security control structure and a reflection of senior 
managementï¿½s commitment to addressing security risks. OMB Circular No. 
A-130, Appendix III, Security of Federal Automated Information 
Resources, requires agencies to implement and maintain a program to 
assure that adequate security is provided for all agency information 
collected, processed, transmitted, stored, or disseminated in general 
support systems and major applications. The Fundï¿½s information system 
infrastructure is serviced by the Architect, which is responsible for 
information security, disaster recovery, and information support. 

2. The Fund Has Not Effectively Implemented Consistent Controls to 
Restrict Access to its Information Systems: 

Our tests of logical access controls relating to the Fundï¿½s general 
support systems and major applications identified access control 
weaknesses. Without adequate access controls, unauthorized parties may 
gain access to the Fundï¿½s computer system and network resources that 
could result in damage, deletion, or theft of computerized data. Access 
controls should be in place to consistently limit, detect, or monitor 
access to computer programs, data, equipment, and facilities thereby 
protecting against unauthorized modification, disclosure, loss or 
impairment. Such controls include logical security controls to ensure 
that federal employees, contractors and staff will be given only the 
privileges necessary to perform business functions, i.e., access 
privileges. Federal Information Processing Standards Publication (FIPS 
PUB) 200, Minimum Security Requirements for Federal Information and 
Information Systems, specifies minimum access controls for federal 
systems. The Fundï¿½s information system owners must limit information 
system access to authorized users. 

Compliance with Laws and Regulations Our tests for compliance in fiscal 
year 2007 with selected provisions of laws and regulations disclosed no 
instances of noncompliance that would be 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 Methodology: 

The Fundï¿½s management is responsible for (1) preparing the financial 
statements in conformity with U.S. generally accepted accounting 
principles; (2) establishing, maintaining, and assessing internal 
control to provide reasonable assurance that control objectives are 
met; and (3) complying with applicable laws and regulations. 

We are responsible for obtaining reasonable assurance about whether(1) 
the financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles, and (2) management maintained effective internal control as 
of September 30, 2007, the objectives of which are the following: 

* Financial reporting: Transactions are properly recorded, processed, 
and summarized to permit the preparation of financial statements in 
conformity with U.S. generally accepted accounting principles, and 
assets are safeguarded against loss from unauthorized acquisition, use, 
or disposition. 

* Compliance with applicable laws and regulations: Transactions are 
executed in accordance with laws governing the use of budget authority 
and with other laws and regulations that could have a direct and 
material effect on the financial statements. We are also responsible 
for testing compliance with selected provisions of laws and regulations 
that have a direct and material effect on the financial statements. 

In order to fulfill these responsibilities, we (1) examined, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements; (2) assessed the accounting principles used and significant 
estimates made by management; (3) evaluated the overall presentation of 
the financial statements; (4) obtained an understanding of internal 
control related to financial reporting (including safeguarding assets) 
and compliance with laws and regulations (including execution of 
transactions in accordance with budget authority); (5) tested relevant 
internal control over financial reporting (including safeguarding 
assets) and compliance, and evaluated the design and operating 
effectiveness of internal control for the fiscal year ended September 
30, 2007; and (6) tested compliance in fiscal year 2007 with selected 
provisions of 2 U.S.C. 2042-2050, certain provisions of the Legislative 
Branch Appropriations Act, Department of the Treasury regulations on 
cash, Office of Personnel Management regulations on employee benefits 
and employer costs, and Internal Revenue Service regulations on federal 
income and Social Security tax withholdings. 

We limited our internal control testing to controls over financial 
reporting 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 compliance with controls may deteriorate. 

We did not test compliance with all laws and regulations applicable to 
the Fund. We limited our tests of compliance to those laws and 
regulations that we deemed applicable to the financial statements for 
the fiscal year ended September 30, 2007. We caution that noncompliance 
may occur and not be detected by these tests and that such testing may 
not be sufficient for other purposes. 

We performed our work in accordance with U.S. generally accepted 
government auditing standards and the joint GAO/President's Council on 
Integrity and Efficiency (PCIE) Financial Audit Manual. 

Agency Comments and Our Evaluation: 

In commenting on the draft of this report, the Fundï¿½s management 
concurred with the facts and conclusions in our report. 

Signed by: 

Clifton Gunderson LLP: 

Calverton, Maryland: 
February 29, 2008: 

[End of section] 

United States Senate Restaurants Revolving Fund: 
Balance Sheets: 
September 30, 2007 and 2006: 

Assets: 

Cash: Funds with Treasury; 
2007: $758,612; 
2006: $1,284,449. 

Cash: Petty cash and change funds; 
2007: $20,500; 
2006: $20,500. 

Total cash; 
2007: $779,112; 
2006: $1,304,949. 

Accounts Receivable, Senate customer accounts (note 3); 
2007: $50,914; 
2006: $68,357. 

Vendor commissions and other income receivables; 
2007: $32,888; 
2006: $26,079. 

Food, beverage, and merchandise inventory; 
2007: $160,464; 
2006: $141,450. 

China, glassware, silverware, and tableware; 
2007: $224,108; 
2006: $199,354. 

Prepaid expenses; 
2007: $19,977; 
2006: $2,745. 

Total Assets; 
2007: $1,267,463; 
2006: $1,742,934. 

Liabilities and U.S. Government: 

Accounts payable and accrued expense: Due to vendors and customers; 
2007: $348,423; 
2006: $344,561. 

Accounts payable and accrued expense: Payroll and related benefits; 
2007: $224,303; 
2006: $233,363. 

Accounts payable and accrued expense: Deferred income; 
2007: $34,998; 
2006: $19,455. 

Total accounts payable and accrued expenses; 
2007: $607,724; 
2006: 597,379. 

Other liabilities: Employees' accrued leave; 
2007: $303,297; 
2006: $298,476. 

Total liabilities; 
2007: $911,021; 
2006: 895,855. 

U.S. government equity: Appropriated capital (note 4); 
2007: $2,847,144; 
2006: $2,847,144. 

U.S. government equity: Cumulative results of operations (deficit); 
2007: ($2,490,702); 
2006: ($2,000,000). 

Total U.S. government equity; 
2007: $356,442; 
2006: 847,079. 

Total liabilities and U.S. government equity; 
2007: $1,267,463; 
2006: $1,742,934. 

The accompanying notes are an integral part of these statements. 

[End of table] 

United States Senate Restaurants Revolving Fund: 

Statements of Operations and Changes in U.S. Government Equity: 

Years Ended September 30, 2007 and 2006: 

Sales, Commissions, and Other Operating Income (Note 5): Food services; 
2007: $4,891,851; 
2006: $4,771,907. 

Sales, Commissions, and Other Operating Income (Note 5): Catering; 
2007: $4,141,505; 
2006: $4,288,333. 

Sales, Commissions, and Other Operating Income (Note 5): Sundry shop 
sales; 
2007: $688,013; 
2006: $727,694. 

Sales, Commissions, and Other Operating Income (Note 5): Vending 
machines and other commissions; 
2007: $306,123; 
2006: $312,722. 

Sales, Commissions, and Other Operating Income (Note 5): Total; 
2007: $10,027,492; 
2006: $10,100,656. 

Cost of Sales: Food and beverages; 
2007: $3,477,705; 
2006: $3,248,528. 

Cost of Sales: Sundry shop merchandise; 
2007: $484,589; 
2006: $516,454. 

Cost of Sales: Total; 
2007: $3,962,294; 
2006: $3,794,982. 

Cost of Sales: Gross income from sales, commissions, and other 
operating income; 
2007: $6,065,198; 
2006: $6,305,674. 

Operating Expenses: Personnel and benefits (note 6); 
2007: $6,808,654; 
2006: $6,766,264. 

Operating Expenses: Supplies and materials; 
2007: $561,001; 
2006: $521,598. 

Operating Expenses: Miscellaneous; 
2007: $36,180; 
2006: $37,192. 

Operating: Total operating expenses; 
2007: $7,405,835; 
2006: $7,325,054. 

Operating: Loss from operations; 
2007: ($1,304,637); 
2006: ($1,019,380). 

Other Funding; Direct financial support (notes 1 and 4); 
2007: $850,000; 
2006: $850,000. 

Other funding: Net loss; 
2007: ($490,637); 
2006: ($169,380). 

U.S. Government Equity, Beginning of Year; 
2007: $847,079; 
2006: $1,016,459. 

U.S. Government Equity, End of Year; 
2007: $356,442; 
2006: $847,079. 

The accompanying notes are an integral part of these statements. 

[End of table] 

United States Senate Restaurants Revolving Fund: 

Statements of Cash Flows: 

Years Ended September 30, 2007 and 2006: 

Cash flows from Operating Activities: Net loss; 
2007: ($490,637); 
2006: ($169,380). 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Accounts receivable; 
2007: $17,443; 
2006: $14,600. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Vendor commissions receivable; 
2007: ($6,809); 
2006: ($19,014). 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Food, beverage, and merchandise inventory; 
2007: ($24,754); 
2006: $537. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: China, glassware, and tableware; 
2007: ($17,232); 
2006: $1,573. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Prepaid expenses; 
2007: $3,862; 
2006: $26,031. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Due to vendors and customers; 
2007: ($9,060); 
2006: $5,550. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Payroll and related benefits; 
2007: $4,821; 
2006: $35,004. 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Employees' accrued leave; 
2007: $15,543; 
2006: ($6,544). 

Cash flows from Operating Activities: Adjustments to reconcile net 
income to net cash used in operating activities: Effects of changes and 
liabilities: Deferred income; 
2007: $15,543; 
2006: ($6,544). 

Cash flows from Operating Activities: Net cash used in operating 
activities; 
2007: ($525,837); 
2006: ($114,786). 

2007: $1,304,949; 
2006: 1,419,735. 

Cash, Beginning of Year; 
2007: $1,304,949; 
2006: $1,419,735. 

Cash, End of Year; 
2007: $779,112; 
2006: $1,304,949. 

The accompanying notes are an integral part of these statements. 

[End of table] 

[End of section] 

United States Senate Restaurants Revolving Fund: 

Notes to Financial Statements: 

For the Fiscal Years Ended September 30, 2007 and 2006:  

Note 1 ï¿½ Organization: 

The United States Senate Restaurants Revolving Fund (the Fund) operates 
facilities for senators, employees of the Senate, and (in certain 
locations) the general public. The Architect of the Capitol (the 
Architect), under the direction of the Senate Committee on Rules and 
Administration (the Committee), is responsible for managing the 
restaurants. The restaurant management recommends price changes, which 
are subject to the Committeeï¿½s approval. 

The financial statements present the financial position and the results 
of operations of the Fund and are not intended to present the financial 
position and results of operations of the Senate Restaurants as a 
whole. 

Economic Dependency: 

The Fundï¿½s operations are economically dependent on direct financial 
support provided through the Architect and by the United States Senate 
(the Senate). Under 2 U.S.C. 2050, the Architect is required to 
transfer appropriated funds to the Fund for use in paying certain 
management personnel and miscellaneous operating expenses of the 
restaurants. Support provided directly by the Senate consists of 
appropriations, loans, and transfers of appropriated capital (equity) 
to the Fund from the Senateï¿½s contingent fund used to finance the 
Fundï¿½s recurring operating losses. If losses from operations continue, 
the Fund will continue to require future support to maintain 
operations. 

The Architect also provides other financial support that is not 
included in the Fundï¿½s financial statements. The Architect uses 
appropriated funds among other things to purchase and maintain 
restaurant-related capital items, which remain the property of the 
Architect and are thus not reflected in the Fundï¿½s financial 
statements. 

In addition, the Architect and the Government Printing Office use 
appropriated funds ï¿½ the value of which cannot readily be determined ï¿½ 
to provide the Fund with space, utilities, garbage disposal, and 
printing in support of restaurant operations. These costs do not appear 
in the Fundï¿½s financial statements. 

Note 2 ï¿½ Summary Of Significant Accounting Policies: 

(a) Basis Of Accounting: 

The financial statements are prepared on the accrual basis of 
accounting in conformity with U.S. generally accepted accounting 
principles. 

This information is an integral part of the accompanying financial 
statements. 

(b) Use Of Estimates: 

The preparation of financial statements in conformity with U.S. 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets 
and liabilities and the disclosure of contingent assets and liabilities 
at the date of the financial statements. Estimates and assumptions may 
also affect the reported revenues and expenses during the reporting 
period. Actual results of those amounts could differ from managementï¿½s 
estimates and assumptions. 

(c) Funds With U.S. Treasury: 

Cash receipts from sales and commissions are deposited in the U.S. 
Treasury and credited to the Fund for use in operating the various 
restaurant facilities. 

(d) Accounts Receivable: 

Accounts receivable are uncollateralized customer obligations, which 
generally require payment within 30 days from the invoice date. 
Accounts receivable are stated at the invoice amount. Payments of 
accounts receivable are applied to the specific invoices identified on 
the customer's remittance advice or, if unspecified, to the earliest 
unpaid invoices. Interest accrues at 2 percent per month on balances 
over 60 days past due. 

Management has determined that there is no need for an allowance for 
doubtful accounts, which is based on managementï¿½s assessment of the 
collectability of specific customer accounts and the aging of the 
accounts receivable. If there is a deterioration of a major customerï¿½s 
credit worthiness or actual defaults are higher than the historical 
experience, managementï¿½s estimates of the recoverability of amounts due 
the Fund could be adversely affected. 

e) Vendor Commissions Receivable: 

Vendor commissions receivable represents vending machine commissions 
earned in the current fiscal year but not received until next fiscal 
year. 

(f) Inventory: 

Under its authority to use funds as necessary for restaurant 
operations, the Fund acquires various types of inventory items (food, 
beverage, merchandise, china, glassware, silverware, and tableware). 
These inventories are valued at lower of cost or market using the first-
in, first-out method. 

This information is an integral part of the accompanying financial 
statements. 

Charges for breakage and shortages of china, glassware, silverware, and 
tableware purchased by the Fund are based on periodic physical counts 
and are treated as current period expenses in the Fundï¿½s statements of 
operations. 

(g) Deferred Income: 

Deferred income represents catering deposits received as of September 
30 for events that will occur subsequent to year-end. 

(h) Employeesï¿½ Accrued Leave: 

Employees accrue annual leave on a biweekly basis. Full-time hourly and 
salaried workers accrue leave at rates ranging from 4 to 8 hours, 
depending on length of service. Part-time employees accrue leave at 
fluctuating biweekly rates, based on the amount of hours worked each 
pay period. Employees may carry over a maximum of 240 hours each 
calendar year. 

(i) Federal Employee Benefits: 

The Fund contributes to the costs of providing future pension benefits 
to eligible employees over the period of time they render services to 
the Fund. The costs recognized in the financial statements represent 
actual contributions made by the Fund. The Office of Personnel 
Management (OPM) supplies the Fund with factors to apply in calculating 
the estimated current year service cost. These factors are derived 
through actuarial cost methods and assumptions. The estimated future 
pension costs is the excess of the current year service costs less 
current agency and employee contributions and represents the amount 
being financed directly by OPM. This amount is disclosed in the 
financial statements (see Note 6). 

The Fund also discloses the current-period costs calculated for the 
estimated future costs of post retirement health benefits and life 
insurance for its employees while they are still working. The Fund 
discloses this cost in a manner similar to that used for pensions with 
the exception that employees and the Fund do not make current 
contributions to fund these future benefits (see Note 6). 

This information is an integral part of the accompanying financial 
statements. 

Note 3 ï¿½ Accounts Receivable, Senate Customer Accounts: 

The Committee allows senators, former senators, and certain Senate 
officials to have customer accounts. A comparison of the aged customer 
accounts receivable at September 30, 2007 and 2006 follows. 

Days outstanding: 0 to 30; 
2007 Amount: $48,340; 
2007 Percentage: $94.9; 
2006 Amount: $61,670; 
2006 Percentage: $90.2. 

Days outstanding: 31 to 60; 
2007 Amount: $2,286; 
2007 Percentage: $4.5; 
2006 Amount: $3,137; 
2006 Percentage: $4.6. 

Days outstanding: 61 to 90; 
2007 Amount: $288; 
2007 Percentage: $0.6; 
2006 Amount: $3,116; 
2006 Percentage: $4.6. 

Days outstanding: Over 90; 
2007 Amount: -; 
2007 Percentage: -; 
2006 Amount: $434; 
2006 Percentage: $0.6. 

Total; 
2007 Amount: $50,914; 
2007 Percentage: $100.0; 
2006 Amount: $68,357; 
2006 Percentage: $100.0. 

[End of table] 

Management actively pursues collection of all past due amounts. In 
accordance with policies established by the Committee, the Fund's 
accounting office mails monthly statements, which include the current 
charge (with supporting receipt) to all accounts with a balance. 
Customers whose accounts are delinquent over 30 days will receive a 
telephone reminder. Customers whose accounts are delinquent over 60 
days will receive an e-mail reminder. Additional collection procedures 
are pursued on all balances that are delinquent for over 120 days, or 
accounts that are over 60 days delinquent with balances over $10,000. 
The ultimate collection of all delinquent receivables is ensured 
through closeout procedures, which require payment of all past due 
balances at the time a senator leaves office. 

Note 4 ï¿½ Financing Activities: 

In managing the Fund, the Architect has access to three types of 
supplemental funding: (1) appropriations, (2) loans, and (3) transfers 
of appropriated capital (equity). Under 2 U.S.C. 2050, the Architect is 
required to transfer appropriated funds to the Fund for use in paying 
certain management personnel and miscellaneous operating expenses of 
the restaurants. For each of the fiscal years ended September 30, 2007 
and 2006, the Fundï¿½s financial statements include direct financial 
support received from the Architect and the Senate through transferred 
appropriations of $850,000. 

This information is an integral part of the accompanying financial 
statements. 

Also, 2 U.S.C. 2049 allows the 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 appropriation account of the Senateï¿½s contingent fund, 
and loan repayments are deposited to the same account. The last loan 
requested was received in fiscal year 1998 and repaid in fiscal year 
2002. 

Under 2 U.S.C. 2044, the Secretary of the Senate, at the request of the 
Architect and with the approval of the Committee, may transfer funds 
from the Senateï¿½s contingent expenses appropriation account to the Fund 
as appropriated capital. The Fundï¿½s total appropriated capital is 
$2,847,144 as of September 30, 2007 and 2006. No appropriated capital 
transfers have been received by the Fund since fiscal year 1999. 

Note 5 ï¿½ Sales, Commissions, And Other Operating Income: 

The following schedule provides a comparison of sales, commissions, and 
operating income for the various Fund activities during fiscal years 
2007 and 2006.

Regular food services: Catering; 
Fiscal Year 2007: Sales and Commissions: $4,141,505; 
Fiscal Year 2007: Operating Income (Loss): ($175,545); 
Fiscal Year 2006: Sales and Commissions: ($4,288,333);  
Fiscal Year 2006: Operating Income (Loss): ($106,169. 

Regular food services: Capitol dining rooms; 
Fiscal Year 2007: Sales and Commissions: $301,611; 
Fiscal Year 2007: Operating Income (Loss): ($420,667); 
Fiscal Year 2006: Sales and Commissions: $318,415;  
Fiscal Year 2006: Operating Income (Loss): ($427,988). 

Regular food services: North Servery Cafeteria; 
Fiscal Year 2007: Sales and Commissions: $2,910,818; 
Fiscal Year 2007: Operating Income (Loss): ($774,826); 
Fiscal Year 2006: Sales and Commissions: $2,860,435;  
Fiscal Year 2006: Operating Income (Loss): ($603,271). 

Regular food services: South Buffet; 
Fiscal Year 2007: Sales and Commissions: $502,758; 
Fiscal Year 2007: Operating Income (Loss): ($23,797); 
Fiscal Year 2006: Sales and Commissions: $478,357;  
Fiscal Year 2006: Operating Income (Loss): ($26,821). 

Regular food services: Snack bar; 
Fiscal Year 2007: Sales and Commissions: $267,736; 
Fiscal Year 2007: Operating Income (Loss): ($123,301); 
Fiscal Year 2006: Sales and Commissions: $271,543;  
Fiscal Year 2006: Operating Income (Loss): ($94,660). 

Regular food services: Senate chef; 
Fiscal Year 2007: Sales and Commissions: $908,928; 
Fiscal Year 2007: Operating Income (Loss): ($70,065); 
Fiscal Year 2006: Sales and Commissions: $843,157;  
Fiscal Year 2006: Operating Income (Loss): ($53,727). 

Regular food services: Total regular food services; 
Fiscal Year 2007: Sales and Commissions: $9,033,356; 
Fiscal Year 2007: Operating Income (Loss): ($1,588,201); 
Fiscal Year 2006: Sales and Commissions: $9,060,240;  
Fiscal Year 2006: Operating Income (Loss): ($1,312626). 

Sundry shop operations: Southside Deli; 
Fiscal Year 2007: Sales and Commissions: $323,428; 
Fiscal Year 2007: Operating Income (Loss): ($24,724); 
Fiscal Year 2006: Sales and Commissions: $344,352;  
Fiscal Year 2006: Operating Income (Loss): ($21,675). 

Sundry shop operations: Hart Office Building; 
Fiscal Year 2007: Sales and Commissions: $364,428; 
Fiscal Year 2007: Operating Income (Loss): ($24,724); 
Fiscal Year 2006: Sales and Commissions: $383,342;  
Fiscal Year 2006: Operating Income (Loss): 2,209. 

Total Sundry Shop operations; 
Fiscal Year 2007: Sales and Commissions: $688,013; 
Fiscal Year 2007: Operating Income (Loss): ($58,559); 
Fiscal Year 2006: Sales and Commissions: $727,694;  
Fiscal Year 2006: Operating Income (Loss): ($19,466). 

Vending machine and other commissions; 
Fiscal Year 2007: Sales and Commissions: $306,123; 
Fiscal Year 2007: Operating Income (Loss): $306,123; 
Fiscal Year 2006: Sales and Commissions: $312,722;  
Fiscal Year 2006: Operating Income (Loss): $312,722. 

Total; 
Fiscal Year 2007: Sales and Commissions: $10,027,492; 
Fiscal Year 2007: Operating Income (Loss): ($1,340,637); 
Fiscal Year 2006: Sales and Commissions: $10,100,656;  
Fiscal Year 2006: Operating Income (Loss): ($1,019,380). 

[End of table] 

This information is an integral part of the accompanying financial 
statements. 

Note 6 ï¿½ Personnel And Benefits: 

Personnel and benefits consist of salaries and wages for Fund 
employees; employee benefits for Fund employees; and contract labor, 
which includes on-call wait staff used for special functions and 
events. The following table presents a breakout of the amounts included 
in each category for the fiscal years ended September 30, 2007 and 
2006. 

Personnel and benefits: Salaries and wages; 
2007: $3,401,314; 
2006: $3,767,711. 

Personnel and benefits: Employee benefits; 
2007: $1,893,468; 
2006: $1,867,015. 

Personnel and benefits: Contract labor; 
2007: $1,213,872; 
2006: $1,131,538. 

Total; 
2007: $6,808,654; 
2006: $6,766,264. 

[End of table] 

This information is an integral part of the accompanying financial 
statements. 

Pension Benefits, Savings Plans and Postemployment Benefits: 

Fund employees are covered by the Civil Service Retirement System 
(CSRS) or the Federal Employeesï¿½ Retirement System (FERS). Although the 
Fund contributed a portion of pension benefits for eligible employees, 
it does not account for the assets of either retirement system. The 
fund also does not have actuarial data for accumulated plan benefits or 
the unfunded liability relative to eligible employees. These amounts 
are reported on and accounted for by the U.S. Office of Personnel 
Management (OPM). For employees covered by FERS, the Fund contributes 1 
percent of pay to the Thrift Savings Plan (TSP) and matches employee 
contributions to the TSP, up to an additional 4 percent of pay. While 
the Fund has no liability for benefit payments to its former employees 
under the pension programs, the federal government is liable for the 
benefit payments through OPM. Using the cost factors supplied by OPM, 
the Fund has calculated the estimated future pension costs and 
estimated future cost of postretirement health benefits and life 
insurance for its employees. These costs are financed by OPM on behalf 
of the Fund, and are not reflected in the Fundï¿½s financial statements. 

Federal employee retirement benefit costs paid by OPM on behalf of the 
Fund: Estimated future pension costs (CSRS/FERS); 
2007: $235,932; 
2006: $241,104. 
 
Federal employee retirement benefit costs paid by OPM on behalf of the 
Fund: Estimated future postretirement health and life insurance 
(FEHBP/FEGLIP); 
2007: $585,854; 
2006: $555,076. 

Total; 
2007: $821,786; 
2006: $796,180. 

[End of table] 

Employee Benefits Included in the Fundï¿½s Financial Statements: 

The Fund also contributes to other employee benefits, including health 
insurance (FEHBP), life insurance (FEGLI), Social Security (FICA), 
Medicare (HIT), leave expense, employee meals, local transportation 
assistance, and employee physicals. All of these payments are 
recognized as operating expenses in the Fundï¿½s financial statements. 

Contributions made by the Fund for employee benefits during fiscal 
years 2007 and 2006 are listed in the following table. 

Employee benefits: FEHBP; 
2007: $584,874; 
2006: $580,482. 

Employee benefits: FERS; 
2007: $458,566; 
2006: $458,748. 

Employee benefits: Leave expense; 
2007: $303,298; 
2006: $271,646. 

Employee benefits: FICA; 
2007: $188,178; 
2006: $192,128. 

Employee benefits: TSP; 
2007: $117,375; 
2006: $116,425. 

Employee benefits: Employee meals; 
2007: $88,847; 
2006: $89,313. 

Employee benefits: Transit subsidy; 
2007: $44,120; 
2006: $44,034. 

Employee benefits: HIT; 
2007: $54,492; 
2006: $60,065. 

Employee benefits: CSRS; 
2007: $47,221; 
2006: $47,188. 

Employee benefits: FEGLI; 
2007: $6,497; 
2006: $6,956. 

Total 
2007: $1,893,468; 
2006: $1,867,015. 

[End of table] 

Note 7 ï¿½ Other Funding Not In Financial Statements: 

Identifiable costs paid directly by the Architect for the benefit of 
the Fund that are not reflected in the Fund's financial statements 
include equipment maintenance, equipment purchases, and professional 
fees totaling $185,246 and $163,020 for fiscal years 2007 and 2006, 
respectively. 

Note 8 ï¿½ Subsequent Event: 

Subsequent to fiscal year-end, the Fund received $947,625 of 
appropriated funds from the Architect for fiscal year 2008 for the 
support of management personnel and other operating expenses of the 
restaurants.

This information is an integral part of the accompanying financial 
statements. 

[End of section] 

Footnotes: 

[1] CIE is an interagency council that is charged with promoting 
integrity and effectiveness in federal programs and primarily consists 
of the presidentially appointed inspectors general (IG) under the IG 
Act, as amended. 

[2] A significant deficiency is a control deficiency, or combination of 
control deficiencies, that adversely affects the entity's ability to 
initiate, authorize, record, process, or report financial data reliably 
in accordance with generally accepted accounting principles such that 
there is more than a remote likelihood that a misstatement of the 
entity's financial statements that is more than inconsequential will 
not be prevented or detected by the entity's internal control. A 
control deficiency exists when the design or operation of a control 
does not allow management or employees, in the normal course of 
performing their assigned functions, to prevent or detect misstatements 
on a timely basis. 

[3] A material weakness is a significant deficiency, or combination of 
significant deficiencies, that results in more than a remote likelihood 
that a material misstatement of the financial statements will not be 
prevented or detected by the entity's internal control. 

[4] Fund employees are covered by the Civil Service Retirement System 
(CSRS) or the Federal Employees' Retirement System (FERS). 

[5] Fund employees can elect to be covered by the Federal Employees 
Health Benefits Program (FEHBP) and/or the Federal Employees Group Life 
Insurance Program (FEGLIP). 

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