This is the accessible text file for GAO report number GAO-03-410 
entitled 'Financial Audit: Senate Restaurants Revolving Fund for Fiscal 
Years 2002 and 2001' which was released on March 14, 2003.



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Report to the Chairman and Ranking Minority Member, Committee on Rules 

and Administration, U.S. Senate, and the Architect of the Capitol:



March 2003:



Financial Audit:



Senate Restaurants Revolving Fund for Fiscal Years 2002 and 2001:



GAO-03-410:



Contents:



Letter:



Appendix:



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



Independent Auditor’s Report:



Balance Sheets:



Statements of Operations and Changes in U.S. Government 

Equity:



Statements of Cash Flows:



Notes to Financial Statements:



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Letter:



March 14, 2003:



The Honorable Trent Lott

Chairman

The Honorable Christopher J. Dodd

Ranking Minority Member

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 U.S. Senate Restaurants Revolving Fund (the Fund) for the fiscal 

years ended September 30, 2002, and 2001, by contracting with the 

independent public accounting firm of Clifton Gunderson LLP. The 

contract required that the audit be done in accordance with U.S. 

generally accepted government auditing standards and the joint GAO/

PCIE[Footnote 1] Financial Audit Manual.



In its audit of the Fund, Clifton Gunderson LLP found the following:



* The financial statements were presented fairly, in all material 

respects, in conformity with U.S. generally accepted accounting 

principles.



* The Fund maintained effective internal control over financial 

reporting (including safeguarding assets) and compliance with laws and 

regulations.



* There was no reportable noncompliance with selected provisions of 

laws and regulations it tested.



Although Clifton Gunderson LLP found that the Fund maintained effective 

internal control, it did identify certain matters involving the Fund’s 

internal control that, while not significant enough to be considered 

reportable conditions,[Footnote 2] deserve management attention. 

Clifton Gunderson LLP reported these matters to management in a 

separate letter.



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 

primarily by the Architect of the Capitol and the U.S. Senate. The 

financial statements present the financial positions 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 

Restaurant as a whole.



* The Fund’s financial statements for fiscal years 2002 and 2001 

include direct financial support provided by the Architect, which, 

after deducting repayment of loans to the Senate contingent fund, 

totaled $850,000 and $700,000, respectively from transferred 

appropriations.



* The Fund’s financial statements for fiscal years 2002 and 2001 do not 

include other support that benefits the operation of the restaurants. 

Specifically, the Architect of the Capitol provided approximately 

$200,000 and $110,000 in fiscal years 2002 and 2001, respectively, for 

the purchase and maintenance of restaurant-related capital items, which 

remain the property of the Architect. In addition, during fiscal years 

2002 and 2001, the Architect and the Government Printing Office 

provided the Fund with support services--the value of which cannot be 

readily determined.



As disclosed in Clifton Gunderson LLP’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 Clifton Gunderson LLP, we reviewed its report and related 

working papers 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 about the effectiveness of its internal control or 

conclude on 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 disclosed no 

instances in which Clifton Gunderson LLP 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 the Chairman and Ranking Minority Member, 

Subcommittee on Legislative Branch, Senate Committee on Appropriations; 

and the Majority Leader and Minority Leader of the Senate. Copies of 

this report will be made available to others upon request. This report 

will also be available at no charge on GAO’s Web site at www.gao.gov. 

Should you or your staff have any questions concerning our review of 

the audits, please contact me on (202) 512-6906 or Hodge Herry, 

Assistant Director, on (202) 512-9469. You can also reach us by E-mail 

at WilliamsM1@gao.gov or herryh@gao.gov.



McCoy Williams

Director

Financial Management and Assurance:



Signed by McCoy Williams:



[End of section]



Appendixes:



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

Fund:



Independent Auditor’s Report:



Clifton Gunderson:



Independent Auditor’s Report:



Comptroller General:



United States General Accounting Office:



In our audits of the United States Senate Restaurants Revolving Fund 

(the Fund) for fiscal years 2002 and 2001, we found:



*the financial statements are presented fairly, in all material 

respects, in conformity with U. S. generally accepted accounting 

principles,



* the Fund had effective internal control over financial reporting 

(including safeguarding assets) and compliance with laws and 

regulations for the fiscal year ended September 30, 2002, and:



*no reportable noncompliance in fiscal year 2002 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, 2002 and 2001 and the results of operations and cash 

flows for the years then ended.



As discussed in note 1, the financial statements present the financial 

positions 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. Amounts for capital 

expenditures and related repairs and maintenance purchased by the 

Architect of the Capitol (Architect) for the benefit of the Fund are 

not reflected in the :Fund’s financial statements. Also, the financial 

statements do not include such costs as space and utilities, which are 

not readily identifiable.



Centerpark I:



4041 Powder Mill Road, Sxile 410 Calverton, Maryland 20705-3106 ,Tel: 

301-931-2050:



fax: 301-931-1710:



www.cfiftoncpa.com:



Offices in 13 states and Washington, DC:



As discussed in note 1, the operations of the Fund are economically 

dependent on direct support provided through the United States Senate 

and the Architect. If operating trends continue, the Fund will continue 

to require financial suppor: to maintain operations.



Opinion on Internal Control:



The Fund maintained, in all material respects, effective internal 

control over financial reporting (including safeguarding assets) and 

compliance as of September 30, 2002 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 General 

Accounting Office (GAO) Standards for Internal Control in the Federal 

Government.



We found certain matters involving the control environment that we do 

not consider reportable conditions. We will communicate these matters 

to the Fund’s management, along with our recommendations for 

improvement, in a separate letter to be issued at a later date.



Compliance with Laws and Regulations:



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. However, our tests for compliance in fiscal year 2002 

with selected provisions of laws and regulations disclosed no instances 

of noncompliance that would be reportable under U. S. generally 

accepted government auditing standards. This conclusion is intended 

solely for the information of the General Accounting Office, the 

Architect of the Capitol, management of the Senate Restaurants and the 

United States Senate, and is not intended to be and should not be used 

by anyone other than these specified parties.



Objectives, Scope, and Methodology:



The Fund’s 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 assu:-ante 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, 2002, 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 be 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, 2002; and (6) tested compliance in fiscal year 2002 with selected 

provisions of 2 U.S.C. 2042-2050 (formerly 40 U.S.C. 174j-1 through j-

10), certain provisions of the Legislative Branch Appropriation 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 

conrol, 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, 2002. 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 audits in accordance with U. S. generally accepted 

auditing standards and Government Auditing Standards as issued by the 

Comptroller General of the United States.



Agency Comments and Our Evaluation:



In commenting on a draft of this report, the Fund management concurred 

with the facts and conclusions in our report.



Signed by Clifton Gunderson, LLP:



Calverton, Maryland December 13, 2002:



Balance Sheets:



[See PDF for image] 



[End of figure] 



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



[See PDF for image] 



[End of figure] 



Statements of Cash Flows:



[See PDF for image] 



[End of figure] 



Notes to Financial Statements:



UNITED STATES SENATE RESTAURANTS REVOLVING FUND NOTES TO FINANCIAL 

STATEMENTS September 30, 2002 and 2001:



NOTE 1-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, whic:a 

are subject to the Committee’s approval.



The financial statements present the financial positions and the 

results of activities 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 Fund’s operations are economically dependent on direct financial 

support provided by the Architect of the Capitol (the Architect) and 

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 loans and transfers of appropriated capital (equity) to the 

Fund from the Senate’s contingent fund. Loan proceeds and increases in 

appropriated capital provided by the Senate are used to finance the 

Fund’s recurring operating losses. If operating trends continue, the 

Fund will continue to require future support to maintain operations. 

Subsequent to September 30, 2002, the Fund has received $545,000 

appropriated funds to date from the Architect for fiscal year 2003 for 

the support of management personnel and other operating expenses of the 

Restaurants. The total amount to be received by the Fund will be 

determined upon approval of the 2003 budget.



For the fiscal years ended September 30, 2002 and 2001, the Fund’s 

financial statements include direct financial support received from the 

Architect and the Senate through transferred appropriations in each 
year 

as follows:



[See PDF for image]



[End of figure]



The AOC transferred $550,000 of its emergency supplemental 

appropriations it received pursuant to the Legislative Branch Emergency 

Response Fund, established “for emergency expenses to respond to the 

terrorist attacks on the United States...” to the Fund.



The Architect also provides other financial support that is not 

included in the Fund’s financial statements. The Architect uses 

appropriated funds to purchase and maintain Restaurant-related capital 

items, which remain the property of the Architect. For the fiscal year 

ended September 30, 2002 and 2001, this support totaled $200,092 and 

$109,584, respectively. Identifiable costs paid directly by the 

Architect on behalf of the Fund for these items in fiscal years 2002 

and 2001, are as follows:



[See PDF for image] 



[End of figure] 



In addition, the Architect and the Government Printing Office use 

appropriated funds-the value of which cannot readily be determined-to 

;provide the Fund with space, utilities, garbage disposal, and printing 

in support of Restaurant operations. If operating trends for the 

Restaurants continue, the Fund will require future support, as 

described above, to maintain continuing operations.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



(a)USE OF ESTIMATES:



The preparation of financial statements in conformity with accounting 

principles generally accepted in the United States of America 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 could differ from 

management’s estimates.



(b) 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.



(c) 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.



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 Fund’s statements of 

operations.



Additionally, the Architect of the Capitol may use Senate Office 

Building and Capitol Building appropriations to purchase china, 

glassware, silverware, and tableware for restaurant operations. Because 

these assets are owned by the Architect of the Capitol and not the 

Fund, they are not recorded in the Fund’s financial statements. Charges 

for the breakage and normal wear and tear of assets owned by the 

Architect of Capitol are based upon past replacement costs. Management 

has estimated that these assets should be depreciated over life of five 

years.



(d) VENDOR COMMISSIONS RECEIVABLE:



Vendor commissions receivable represents vending machine commissions 

earned in the current fiscal year but not received until next fiscal 

year.



(e) DEFERRED INCOME:



Deferred income represents catering deposits received as of September 

30, for events that will occur subsequent to year end.



EMPLOYEES’ 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 carryover a maximum of 240 hours each 

calendar year.



NOTE 3 - 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, 2002 and 2001 follows:



[See PDF for image]



[End of figure]



In accordance with policies established by the Committee, the Fund’s 

accounting office mails monthly delinquent notice letters to customers 

whose accounts are delinquent over 30 days.



NOTE 4 - PERSONNEL AND BENEFITS:



Fund employees are covered by the Civil Service Retirement System 

(CSRS) or the newer Federal Employees’ Retirement System (FERS), to 

which the Fund contributes. For employees covered by FERS, the Fund 

also contributes one percent of pay to the Thrift Savings Plan (TSP) 

and matches employee contributions to the TSP, up to an additional four 

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 the Office of Personnel 

Management.



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.



NOTE 4 - PERSONNEL AND BENEFITS (CONTINUED):



Contributions made by the Fund during fiscal years 2002 and 2001 are 

listed in the following table:



[See PDF for image]



[End of figure]



NOTE 5 - FINANCING ACTIVITIES:



In managing the Fund, the Architect has access to two types of 

supplemental funding:(1) appropriations, and (2) loans. Under 2 U.S.C. 

2044 (formerly 40 U.S.C. 174j-4), the Secretary of the Senate, at the 

request of the Architect and with the approval of the Committee, may 

transfer funds from the Senate’s contingent expenses appropriation 

account to the Fund as appropriated capital. The Fund’s total 

appropriated capital is $2,847,144 at September 30, 2002 and 2001. No 

appropriated capital transfer was received by the Fund since fiscal 

year 1999.



Also, 2 U.S.C. 2049 (formerly 40 U.S.C. 174j-9) 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 Senate’s 

contingent fund, and loan repayments are deposited to the same account.



From October 1988 through September 1998, under the authority provided 

by 2 U.S.C. 2049 (formerly 40 U.S.C. 174j-9), the Architect of the 

Capitol requested and received various loans on behalf of the Fund from 

the Senate’s contingent fund totaling $2,250,000. Since FY 1998, the 

Fund has not received any new loans. The Fund paid off the loans 

completely with a final payment of $350,000 in fiscal year 2002.



NOTE 5 - FINANCING ACTIVITIES (CONTINUED):



The loan outstanding a1: September 30, 2002 and September 30, 2001 is 

as follows:



[See PDF for image]



[End of figure]



NOTE 6-SALES, COMMISSIONS AND OPERATING INCOME:



The following schedule provides a comparison of sales, commissions and 

operating income for the various Fund activities during fiscal years 

2002 and 2001.



[See PDF for image]



[End of figure]





This information is an integral part of the accompanying financial 

statements. 



FOOTNOTES



[1] President’s Council on Integrity and Efficiency (PCIE).



[2] Reportable conditions are matters coming to the auditor’s attention 

that in the auditor’s judgment 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.



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