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entitled 'Financial Audit: U.S. Senate Gift Shop Revolving Fund's 
Fiscal Years 2002 and 2001 Financial Statements' which was released on 
September 28, 2004.

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Report to the Secretary of the Senate:

August 2004:

FINANCIAL AUDIT:

U.S. Senate Gift Shop Revolving Fund's Fiscal Years 2002 and 2001 
Financial Statements:

GAO-04-906:

Contents:

Letter:

Transmittal Letter: 

Opinion on the Financial Statement:

Opinion on Internal Control:

Compliance with Laws and Regulations:

Objectives, Scope, and Methodology:

Management's Comments and Our Evaluation:

Financial Statement:

Statement of Receipts, Disbursements, and Fund Balance:

Notes to the Statement:

Letter August 27, 2004:

The Honorable Emily J. Reynolds: 
Secretary of the Senate: 
United States Senate:

Dear Ms. Reynolds:

This report represents the results of our audit of the Senate Gift 
Shop's Statement of Receipts, Disbursements, and Fund Balance for the 
fiscal years ended September 30, 2002 and September 30, 2001. This 
report also contains our opinion on the effectiveness of the Fund's 
related internal control as of September 30, 2002, and our evaluation 
of its compliance with selected provision of laws and regulations we 
tested. We performed this audit at your request.

As arranged with your office, we plan no further distribution of this 
report until 30 days after the date of this letter. At that time, we 
will provide copies of this report to the Chairmen and Ranking Minority 
Members of the Senate Committee on Rules and Administration; the Senate 
Committee on Appropriations; and the Senate Subcommittee on Legislative 
Branch, Committee on Appropriations. This report will also be available 
on GAO's home page at [Hyperlink, http://www.gao.gov].

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-9471 or Keith Thompson, Assistant Director, at 
(202) 512-6328. You can also reach us by e-mail at [Hyperlink, 
franzelj@gao.gov] or [Hyperlink, thompsonk@gao.gov]. Key contributors 
to this report were Teressa Gardner, Chanetta Reed, and Lindsay Saylor.

Sincerely yours,

Signed by: 

Jeanette M. Franzel: 
Director Financial Management and Assurance:

To the Secretary of the Senate:

We have audited the accompanying Statement of Receipts, Disbursements, 
and Fund Balance for the Senate Gift Shop Revolving Fund for the fiscal 
years ended September 30, 2002 and September 30, 2001. In our audit, we 
found:

* the statements are presented fairly in all material respects, on a 
cash basis;

* the Gift Shop had effective internal controls over financial 
reporting (including safeguarding assets) and compliance with laws and 
regulations as of September 30, 2002; and:

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

The following sections provide additional detail about our conclusions 
and the scope of our audit.

Opinion on the Financial Statement:

The Statement of Receipts, Disbursements, and Fund Balance and the 
accompanying notes present fairly, in conformity with the cash basis of 
accounting, the receipts, disbursements, and fund balance of the Gift 
Shop Revolving Fund for the fiscal years ended September 30, 2002 and 
September 30, 2001. 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 Control:

The Gift Shop 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 statement would be prevented or detected promptly. Our 
opinion is based on criteria established in the Comptroller General's 
Standards for Internal Control in the Federal Government.[Footnote 1]

Compliance with Laws and Regulations:

Our tests for compliance 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 Gift Shop management is responsible for (1) preparing the Statement 
of Receipts, Disbursements, and Fund Balance in conformity with the 
cash basis of accounting; (2) establishing, maintaining, and assessing 
internal control to provide reasonable assurance that the objectives of 
internal control are met; and (3) complying with applicable laws and 
regulations.

We are responsible for obtaining reasonable assurance about whether (1) 
the Statement of Receipts, Disbursements, and Fund Balance is presented 
fairly in all material respects, in conformity with the cash basis of 
accounting and (2) whether management maintained effective internal 
control, 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.

* Compliance with laws and regulations: Transactions are executed in 
accordance with laws and regulations that could have a direct and 
material effect on the Statement of Receipts, Disbursements, and Fund 
Balance.

We are also responsible for testing compliance with selected provisions 
of laws and regulations that were determined to have a direct and 
material effect on the Gift Shop's Statement of Receipts, 
Disbursements, and Fund Balance for the fiscal years ended September 
30, 2002 and September 30, 2001.

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

* 2 U.S.C. § 121d, relating to the establishment of the Senate Gift 
Shop and Revolving Fund, including deposit of sales receipts and 
disbursements from the Fund,

* 2 U.S.C. § 109, relating to preference to purchase American goods,

* 2 U.S.C. § 68, relating to the approval of disbursements, and:

* the Antideficiency Act, relating to the disbursement of revolving 
fund assets.

We did not evaluate internal controls relevant to the effectiveness and 
efficiency of the Gift Shop's operations. We limited our internal 
control testing to relevant controls over financial reporting and 
compliance. Because of inherent limitations in any system of 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 Gift Shop, therefore, 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 Comments and Our Evaluation:

We provided drafts of this report to the management of the Gift Shop 
and representatives of the Office of the Secretary of the Senate for 
review and comment. They agreed with the contents of this report.

Signed by: 

Jeanette Franzel: 
Director Financial Management and Assurance:

August 17, 2004:

[End of section]

Financial Statement:

Statement of Receipts, Disbursements, and Fund Balance:

[See PDF for image]

[End of table]

[End of section]

Notes to the Statement:

United States Senate Gift Shop Revolving Fund: 
Notes to the Statement of Receipts, Disbursements, and Fund Balance:

Note 1. Description of Entity:

The United States Senate Gift Shop was established to provide for the 
sale of gift items to Members of the Senate, Senate staff, and the 
general public. To support the operation of the Senate Gift Shop, the 
Senate Gift Shop Revolving Fund (Fund) was established within the 
contingent fund of the Senate. All amounts collected or received from 
the sales and services of the Gift Shop are to be deposited into the 
Fund. The balance of the Fund is available, without fiscal year 
limitation, for disbursement by the Secretary of the Senate in 
connection with the operation of the Senate Gift Shop, including 
supplies, equipment, and other expenses (2 U.S.C. § 121d).

Note 2. Basis of Accounting:

Amounts received from and used for Gift Shop 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 gift items and related services by the 
Gift Shop are deposited in the Fund. The fund balance is used to pay 
for purchases of (1) inventory items available for resale to customers 
of the Gift Shop and (2) equipment and related services that directly 
support Gift Shop operations. The fund balance was not used to pay for 
salaries and benefits of Senate employees who work in the Gift Shop, 
the costs of which are charged to the "Salaries, Officers, and 
Employees" appropriation account for the Senate. Additional incidental 
costs for the Fund such as rent and utilities cannot be readily 
determined and are covered by other appropriated funds.

Note 3. Sales Receipts:

Sales receipts--consisting of proceeds from cash, checks, and credit 
card purchase transactions--are deposited into the Gift Shop revolving 
fund.

Note 4. Disbursements:

Disbursements represent amounts paid to purchase gift items for resale 
and acquire services and equipment needed to support Gift Shop 
operations.

Note 5. Fund Balance:

The beginning fund balances represents the balances at Treasury at 
October 1, 2000 and 2001, respectively, carried over from the prior 
period. The ending fund balances represents the balances at Treasury at 
September 30, 2001 and 2002, and are the amount of funds available for 
disbursement in a subsequent period.

[[End of section]

(194392):

FOOTNOTES

[1] GAO, Standards for Internal Control in the Federal Government, GAO/
AIMD-00-21.3.1, (Washington, D.C., November 1999).

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