UNITED STATES 

HOUSE OF REPRESENTATIVES

AUDIT REPORT

Audit of the Financial Statements

For the Fiscal Year Ended September 30, 2009

Report No. 11-HSW-03

May 26, 2011

Table of Contents

Offi ce of Inspector General Audit Report Summary .......................................5

Management’s Discussion & Analysis ............................................................9

Independent Auditors’ Report .....................................................................17

Chief Administrati ve Offi cer’s Audit Report Response ..................................43

Fiscal Year 2009 Financial Statements ..........................................................47

Consolidated Balance Sheet ....................................................................... 50

Consolidated Statement of Net Cost .......................................................... 51

Consolidated Statement of Changes in Net Positi on .................................. 52

Statement of Budgetary Resources ............................................................ 53

Notes to the Financial Statements ...............................................................55

Required Supplementary Informati on..........................................................75
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Offi ce of Inspector General

 Audit Report Summary
6
Offi ce of Inspector General Audit Report Summary

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8

Offi ce of Inspector General Audit Report Summary
9

Management’s Discussion & Analysis
10
Management’s Discussion and Analysis

11

Management’s Discussion and Analysis

FY 2009

Introduction

Management’s Discussion and Analysis (MDA) is designed to provide a high level overview of the House

of Representatives: who we are, what we do, and how we accomplished our mission in fiscal year 2009.

Origin, History, and Mission

The United States House of Representatives (House) is one of two legislative chambers that comprise

the Congress of the United States, the other being the United States Senate.Congress was created by

Article I, Section I, of the Constitution, adopted by the Constitutional Convention on September 17,

1787.This article states that all legislative or lawmaking powers of the federal government are given to

Congress.

Congress consists of two chambers for two main reasons.First, the Constitution was framed after the

British Parliament, which was also bicameral.Second, the two chambers allow for equal representation

of the states: two representatives in the Senate from each state and a number of representatives, or

Members, based on population, in the House.

In addition to their constitutional duty to make laws, the House and the Senate are responsible for

submitting a jointly agreedͲupon budget for the Legislative Branch to the President of the United States.

The House also has a special role in tax legislation; it has the authority to initiate all revenue bills, as well

as spending bills, which sets the framework for questions of collecting taxes and raising money for the

U.S. Treasury.  Subsequently, the House and Senate are responsible for distributing these monies

through legislative appropriations.

Location, Size, and Organization

The official House of Representatives, where lawmaking takes place, is located in the Capitol Building in

Washington, DC.  Other administrative buildings in Washington, DC include the Cannon, Longworth,

Rayburn and Ford House Office Buildings.

The House consists of 435 Members, five delegates (one each from the District of Columbia, Guam,

Virgin Islands, American Samoa, and the Northern Mariana Islands), one Resident Commissioner (Puerto

Rico) and approximately 10,250 employees. House Members and delegates serve twoͲyear terms of

office.The Resident Commissioner serves a 4Ͳyear term.

HOUSE LEADERSHIP

Office of the Speaker of the House of Representatives

The Speaker of the House of Representatives is elected by his or her fellow Members to preside over the

House.The Speaker typically maintains three roles:as the Representative for his or her district, as a

leader of his or her party and as the leader of the House as a whole.The party that holds a majority of

the seats in the House will generally elect a Representative of their own party to serve as Speaker.

As specified in the rules and customs of the House, responsibilities of the Speaker include:

x Calling the House to order;

x Administering the oath of office to House Members;
Management’s Discussion and Analysis

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x Presiding over debate, recognizing Members to speak on the floor, and preserving order; or

delegating that power to another Member of Congress;

x Setting the legislative agenda;

x Leading the appointment process for the chairs of the various committees and subcommittees

in the House, including conference committees which negotiate final versions of legislation.

The Speaker is also second in the line of succession to the presidency after the Vice President under the

Presidential Succession Act of 1947.

Office of the Majority Leader

The Majority Leader is the secondͲranking official in the House of Representatives.The Majority Leader

is chosen by the majority party's membership prior to the launch of a new Congress.  While the

responsibilities of the Majority Leader are largely defined by little more than history and tradition, there

are certain duties that now customarily fall under the Leader's purview.These responsibilities include

the scheduling of legislation for Floor consideration and the planning of daily, weekly and annual

legislative agendas.

In addition to more formal obligations, the Majority Leader is also expected to consult with Members to

gauge attitudes and prevailing sentiment on the issues of the day, urge party colleagues to support or

defeat a particular piece of legislation and communicate the party's overarching policy messages to the

media and the public at large.

Office of the Minority Leader

The Minority Leader is one of the party leaders of the House of Representatives.The Minority Leader of

the House serves as Floor leader of the opposition party and is the minority counterpart to the Majority

Leader.Generally, the Minority Leader is on the ballot for Speaker of the House during the convening of

the Congress.The Minority Leader is usually the party's top choice for Speaker if party control flips after

an election.  The Minority Leader usually meets with the Majority Leader and the Speaker to discuss

agreements on controversial issues.

HOUSE COMMITTEES

The Members also elect other officers to administer both legislative and nonͲlegislative functions that

support the institution and the Members in carrying out their legislative duties.

To help carry out its constitutional duties, the House creates Member committees that are responsible

for gathering information, identifying policy problems, proposing solutions and reporting bills to the full

chamber for consideration.While the House can create select and special committees, the following are

standing House committees:

Committee on Agriculture Committee on Natural Resources

Committee on Appropriations Committee on Oversight and Government Reform

Committee on Armed Services Committee on Rules

Committee on the Budget Committee on Science and Technology

Committee on Education and Labor Committee on Small Business

Committee on Energy and Commerce Committee on Standards of Official Conduct

Committee on Financial Services Committee on Transportation and Infrastructure

Committee on Foreign Affairs Committee on Veterans’ Affairs

Committee on Homeland Security Committee on Ways and Means
Management’s Discussion and Analysis

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Committee on House Administration Permanent Select Committee on Intelligence

Committee on the Judiciary

Select Committee on Voting Irregularities

Select Committee on Energy Independence and Global Warming

The Committee on House Administration (CHA) is the committee charged with the oversight of federal

elections and the dayͲtoͲday functions of the House.CHA manages the daily operations that keep the

House of Representatives running smoothly.  The budget authorizations for expenses of House

committees and those for expenses of Members of Congress are set by CHA.  Additionally, CHA is

responsible for oversight of the House officers, including the administrative and technical functions of

the House.

HOUSE OFFICERS

The House Members elect three House Officers and appoint other administrative officers to provide

various services and oversight functions to the operations of the House.These officers include the Chief

Administrative Officer, the Clerk of the House of Representatives, the Sergeant at Arms, the Chaplain,

the Parliamentarian and the Inspector General.

Chief Administrative Officer

The Chief Administrative Officer (CAO) provides operations support services and business solutions to

the community of House Members, Officers and staff.The CAO organization comprises technical and

administrative staff working in a variety of areas, including information technology, finance, budget

management, human resources, payroll, childcare, food and vending, procurement, logistics and

administrative counsel.

The Office of the CAO was first created in the 104th Congress in 1995.The Chief Administrative Officer

is elected every two years when the House organizes for a new Congress.

Clerk of the House

The Clerk manages the legislative operations of the House and oversees nine departments.The Clerk is

required to:

x Prepare the roll of MembersͲelect; call the MembersͲelect to order at the commencement of

each Congress; call the roll of MembersͲelect and, pending the election of the Speaker, to

preserve order and decorum and to decide all questions of order;

x Prepare and print the House Journal after each session of Congress, and to distribute the Journal

to Members and to the executive and the legislature of each State;

x Attest and affix the seal of the House to all writs, warrants, subpoenas and formal documents

issued by the House;

x Certify the passage by the House of all bills and joint resolutions;

x Receive messages from the President and the Senate when the House is not in session;

x Prepare and deliver messages to the Senate and otherwise as requested by the House;

x Retain, in the official library, a permanent set of the books and documents generated by the

House;

x Manage the office and supervise the staff of any deceased, resigned or expelled Member until a

successor is elected;

x Act as custodian of all noncurrent records of the House, pursuant to Rule VII.

Sergeant at Arms

An officer of the House whose history extends back to the First Congress, the Sergeant at Arms is the

House’s principal law enforcement official, charged with maintaining security on the floor and for the
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House side of the Capitol complex.The modern Sergeant at Arms serves on the Capitol Police Board and

the Capitol Guide Board along with the Senate Sergeant at Arms and the Architect of the Capitol.A total

of 35 individuals have served as the House Sergeant at Arms since 1789.



Mandated under the current House Rule II, the Sergeant at Arms also enforces protocol and ensures

decorum during floor proceedings.  The Mace, which symbolizes the authority of the House, is

maintained by the Office of the Sergeant at Arms.On occasion, the Sergeant at Arms has presented the

Mace to restore order on the floor.  The Sergeant at Arms also is empowered to compel absent

Members onto the House floor to conduct business.Over time, the office’s duties have encompassed

administrative functions:  arranging Capitol funerals, managing parking facilities and issuing

identification to Members and staff.

Office of the Chaplain

In 1774, the Continental Congress chose Episcopal Rector Jacob Duché to open its legislative sessions

with prayer.In 1789, the First Congress chose Reverend William Lynn, a Presbyterian from Philadelphia,

as the official chaplain of the House of Representatives. Each succeeding Congress has named a

Chaplain, except between the years 1855–1861, when local clergy served as volunteer chaplains.In the

20th century, the average tenure of House Chaplains was 21 years.In recent Supreme Court decisions,

the constitutionality of the Chaplain’s role has been upheld based on precedent and tradition.

Parliamentarian

The Parliamentarian of the House is the authoritative source on legislative proceedings in the House.

Often referred to by the press as Congress' "coach," the Parliamentarian is an appointed officer who

serves as a nonpartisan adviser to Members.Positioned next to the Speaker's rostrum on the floor, the

Parliamentarian's chief duty is to rule on procedure and to advise the presiding officer.

Persons who have performed various aspects of the Parliamentarian's duties held a series of titles

throughout congressional history, including “Messenger to the Speaker," "Clerk to the Speaker," and

"Clerk at the Speaker's Table."  Beginning in the 70th Congress (1927Ͳ1929) the title became

"Parliamentarian."

Office of Inspector General

The U.S. House of Representatives established the Office of Inspector General (OIG) during the 103rd

Congress to conduct periodic audits of the financial and administrative functions of the House and of

joint entities.Over the past 16 years, the OIG has added value by working closely with the CHA and the

House Officers to improve the operations of the House, to reduce inefficiencies and to minimize costs.

In addition to providing traditional audit services, the OIG also provides proactive analysis and guidance

in the improvement of House operations through its management advisory services.  These advisory

services to the House have included work in the areas of emerging technology, systems development,

business process improvement and risk management.

Additionally, over the years, CHA has asked the OIG to perform various investigative inquiries in

response to events of concern to the House.Recognizing this broader mission, changes to the Standing

Rules of the House were approved at the beginning of the 111th Congress.  Changes to Rule II now

formally recognize the OIG’s advisory and investigative services, grant the OIG appropriate authority to

carry out its mission and allow the OIG to better implement guidance and standards in accordance with

the Government Accountability Office’s Government Auditing Standards.
Management’s Discussion and Analysis

15

FINANCIAL STATEMENT HIGHLIGHTS

Basis of Accounting and Presentation

The consolidated financial statements for fiscal year (FY) 2009 present the financial position, net cost of

operations, changes in net position and budgetary resources of the House.These statements have been

prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) issued by the Federal

Accounting Standards Advisory Board (FASAB) and the form and content requirements of the Office of

Management and Budget’s (OMB) Circular No. AͲ136, "Financial Reporting Requirements.”

The House has presented its FY 2009 financial statements and accompanying notes in a single year

presentation, in its initial year of transitioning into reporting in accordance with GAAP for Federal

entities and the formats prescribed by OMB.Prior to FY 2009, the House prepared financial statements

on an annual basis in accordance with GAAP similar to those used by commercial entities.The House

will begin reporting FY comparative financial statements in FY 2010 in accordance with GAAP for Federal

entities and the formats prescribed by OMB.

Budgetary Resources

The House receives most of its funding from appropriations received from Congress and administered by

the U.S. Department of the Treasury. Other sources of revenue include sales of goods to the public,

sales of services and other revenue earned through the Page School room and board and vendor

commissions.  The House reported total budgetary resources for FY 2009 of $1.5 billion.  The House

reported $112 million of total unpaid obligated balances as of fiscal year end (FYE) 2009.

Balance Sheet

Total Assets – The House reported total assets of $284 million as of FYE 2009.The Fund Balance with

Treasury of $213 million represents the primary asset on the Balance Sheet of the House, followed by

Property and Equipment with a net balance of $63 million.

Total Liabilities – The House reported total liabilities of $88 million as of FYE 2009.  The primary

categories include Accounts Payable of $44 million and Actuarial Federal Employees’ Compensation Act

Liabilities of $21 million.

Total Net Position – The Net Position as of FYE 2009 was $195 million.  The balance was primarily

comprised of Unexpended Appropriations of $155 million.

Statement of Net Cost

Net Cost of Operations – The Net Cost of Operations for FY 2009 was $1.6 billion, primarily comprised of

Legislative Activities.

Limitations of the Financial Statements

The principal financial statements have been prepared to report the financial position and results of

operations of the entity.

While the statements have been prepared from the books and records of the entity in accordance with

GAAP for federal entities and in the formats prescribed by OMB, the statements are in addition to the

financial reports used to monitor and control budgetary resources that are prepared from the same

books and records.
Management’s Discussion and Analysis

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The statements should be read with the realization that they are for a component of the U.S.

Government, a sovereign entity.

INTERNAL CONTROLS

The House considers internal controls to be an integral part of all systems and processes that the

organization utilizes in managing its daily operations and achieving its strategic goals and objectives. The

House holds its managers accountable for efficiently and effectively performing their duties in

compliance with applicable laws and regulations and for maintaining the integrity of their activities

through the use of internal controls.

The House fiscal year 2009 financial statement audit reported two material weaknesses and two

significant deficiencies.The material weaknesses related to the lack of an internal control over financial

reporting program and controls over information technology.  The significant deficiencies related to

financial reporting and payroll processes.

The Office of Management and Budget (OMB) Circular AͲ123, Management’s Responsibility for Internal

Controls emphasize management’s responsibility for establishing and maintaining effective internal

controls over financial reporting, which includes safeguarding of assets and complying with applicable

laws and regulations.  The House is committed to fully implementing a program to assess the

effectiveness of the organization’s internal controls over financial reporting.However, the House is in

the early stages of standingͲup an internal controls program that meets the intent of OMB Circular AͲ

123 and, thus, are unable to provide assurance that our internal controls over financial reporting are

operating effectively.

The House has initiated actions to implement an internal controls program that will substantially resolve

the reported weaknesses.These actions include the creation of a Senior Assessment Team responsible

for the oversight and implementation activities of the program.In addition, the House has designated

an Internal Control Manager to assist in the design, implementation, monitoring, and modification of a

House internal controls program.The internal controls program will be implemented during fiscal year

2011.
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Independent Auditors’ Report
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Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

To the Inspector General

U.S. House of Representatives

In accordance with Generally Accepted Auditing Standards (GAAS) in the United States of America and

standards applicable to financial statement audits contained in Government Auditing Standards (GAS),

issued by the Comptroller General of the United States, we are responsible for conducting audits of the

U.S. House of Representatives. The following summarize results of our audit of House Fiscal Year (FY)

2009 financial statements:

x The financial statements were presented fairly, in all material respects, in conformity with U.S.

generally accepted accounting principles (GAAP),

x The House did not have effective internal control over financial reporting as of September 30,

2009 (including safeguarding assets).

x We identified no reportable noncompliance with laws and regulations we tested.

This is the first year in which the House prepared its financial statements in accordance with GAAP for

federal agencies. The House received an unqualified opinion on these financial statements.

Although the House was able to produce financial statements that were fairly presented, it lacked a

management control program to ensure effective internal control over financial reporting. Specifically,

the House did not have a risk assessment program or a monitoring program to ensure effective internal

controls. We have identified the lack of a management control program as a material weakness.

Additionally, we have identified controls over information technology as a material weakness.

The following sections discuss in more detail these and other conclusions; objectives, scope, and

methodology; other matters related to internal control; and House comments and our evaluation.

OPINION ON THE FINANCIAL STATEMENTS

The financial statements including accompanying notes present fairly, in all material respects, in

conformity with U.S. generally accepted accounting principles, the House’s assets, liabilities, and net

position as of September 30, 2009; and net costs, changes in net position, and budgetary resources for

the fiscal year then ended.
Independent Auditors’ Report

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As discussed in financial statement Note 1, Significant Accounting Policies, Section C, Basis of Accounting

and Presentation, the House prepared financial statements in accordance with GAAP for federal entities

issued by the Federal Accounting Standards Advisory Board (FASAB) and form and content requirements

of Office of Management and Budget (OMB) Circular AͲ136, Financial Reporting Requirements. Before FY

2009, the House prepared financial statements similar to commercial entities following commercial U.S.

generally accepted accounting principles. For FY 2009, the House presented its financial statements and

accompanying notes in a singleͲyear presentation to reflect its initial year of transition to this basis of

reporting.

OPINION ON INTERNAL CONTROL

Because of the material weaknesses in internal control discussed below, the House did not maintain, in

all material respects, effective internal control over financial reporting as of September 30, 2009, and

thus did not provide reasonable assurance that losses, misstatements, or noncompliance material in

relation to the financial statements would be prevented or detected and corrected on a timely basis.

Our opinion is based on criteria established by U.S. Code, Chapter 35, Section 3512(c), known as the

Federal Managers’ Financial Integrity Act of 1982 (FMFIA) and the Committee of Sponsoring

Organizations of the Treadway Commission (COSO) framework for Internal Control. Additionally,

guidance provided by OMB Circular AͲ123, Management’s Responsibility for Internal Control, is based on

criteria established under FMFIA. The COSO framework and OMB Circular AͲ123 represent Industry best

practices for establishing a successful management control program. For the remainder of this report we

will refer to guidance prescribed by COSO and OMB Circular AͲ123 as industry best practices.

During our audit of the House’s FY 2009 financial statements, we identified four significant deficiencies.

The first two below represent material weaknesses in internal control over financial reporting. The third

and fourth deficiencies listed below were reported last year and in prior years. The four significant

deficiencies identified below are discussed in Appendix A of this report:

1. Lack of a Management Control Program (Material Weakness)

2. Ineffective Controls over Information Technology (Material Weakness)

3. Ineffective Financial Reporting Controls and General Ledger System Reporting Limitations

4. Weaknesses in Processing and Reporting Payroll Data

The two material weaknesses created significant management challenges that:

x Resulted in House management’s inability to provide reasonable assurance that its

financial statements are complete and accurate and prepared in a timely manner.

x Reduced assurance that data processed by the House’s information systems are reliable

and appropriately protected.

Despite its material weaknesses in internal control, the House was able to prepare financial statements

that were fairly stated in all material respects for FY 2009. Material weaknesses in the House’s internal

control over financial reporting noted above may, however, adversely affect any decision by House

management based in whole or in part on information that is inaccurate as the result of these

weaknesses. In addition, unaudited financial information reported by the House may also contain

misstatements resulting from these weaknesses. We considered the material weaknesses identified

above in determining the nature, timing, and extent of our audit procedures on the House’s FY 2009
Independent Auditors’ Report

21

financial statements. We caution that misstatements may occur and not be detected by our tests and

that such testing may not be sufficient for other purposes.

We also identified other deficiencies in the House’s system of internal control that we do not consider

material weaknesses or significant deficiencies, but which merit House management attention and

correction. We have communicated these matters to House management informally and, as

appropriate, will report them in writing to the House.

COMPLIANCE WITH LAWS AND REGULATIONS

Our tests of the House’s compliance with selected provisions of law and regulations for FY 2009

disclosed no instances of noncompliance that would be reportable under U.S. Generally Accepted

Government Auditing Standards (GAGAS) or OMB audit guidance. The objective of our audit was not,

however, to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not

express such an opinion.

CONSISTENCY OF OTHER INFORMATION

The House’s Management’s Discussion and Analysis and required supplementary information (including

stewardship information) contain a wide range of information, some of which is not directly related to

the financial statements. We do not express an opinion on this information. We did, however, compare

this information for consistency with the financial statements and discussed the methods of

measurement and presentation with House officials. On the basis of this limited work, we found no

material inconsistencies with the financial statements, U.S. generally accepted accounting principles, or

OMB guidance.

OBJECTIVES, SCOPE, AND METHODOLOGY

House management is responsible for:

1. Preparing financial statements in conformity with GAAP.

2. Establishing and maintaining effective internal control over financial reporting and assessing its

effectiveness.

3. Complying with applicable laws and regulations.

We are responsible for planning and performing the audit to obtain reasonable assurance and provide

our opinion about whether House financial statements are presented fairly, in all material respects, in

conformity with GAAP, and whether House management maintained, in all material respects, effective

internal control over financial reporting as of September 30, 2009, the objectives of which are as

follows:

x Financial reporting: Transactions are properly recorded, processed, and summarized to

permit 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.
Independent Auditors’ Report

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x Compliance with laws and regulations: Transactions are executed in accordance with

selected provision of laws and regulations that have a direct and material effect on the

financial statements and performing limited procedures with respect to certain other

information accompanying the financial statements.

To fulfill these responsibilities, we:

x Examined, on a test basis, evidence supporting amounts and disclosures in the financial

statements.

x Assessed accounting principles used and significant estimates made by management.

x Evaluated overall presentation of the financial statements.

x Obtained an understanding of the House and its operations, including its internal

control over financial reporting (including safeguarding assets), and compliance with

laws and regulations (including execution of transactions in accordance with budget

authority).

x Assessed the risk that a material misstatement exists in the financial statements and the

risk that a material weakness exists in internal control over financial reporting.

x Evaluated the design and operating effectiveness of internal control over financial

reporting based on assessed risk.

x Tested relevant internal controls over financial reporting and compliance and evaluated

design and operating effectiveness of internal control.

x Tested compliance with selected provisions of laws and regulations specific to the

House, which are contained in the Members’ Congressional Handbook and Committees’

Congressional Handbook.

An entity’s internal control over financial reporting is a process effected by those charged with

governance and management and by other personnel, the objectives of which are to provide reasonable

assurance that transactions are properly recorded, processed, and summarized to permit preparation of

financial statements in accordance with GAAP, and assets are safeguarded against loss from

unauthorized acquisition, use, or disposition; and transactions are executed in accordance with the laws

and regulations that could have a direct and material effect on the financial statements.

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, loss, or noncompliance may

nevertheless occur and not be detected. We caution that projecting our evaluation to future periods is

subject to the risk that controls may become inadequate as the result 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 House. We limited our tests

of compliance to selected provisions of laws and regulations that have a direct and material effect on

the financial statements and those required by OMB audit guidance that we deemed applicable to the

House’s financial statements for the fiscal year ended September 30, 2009. We caution that
Independent Auditors’ Report

23

noncompliance may occur and not be detected by these tests, and that such testing may not be

sufficient for other purposes.

We performed our audit in accordance with GAGAS and OMB audit guidance. We believe our audit

provides a reasonable basis for our opinions and other conclusions.

OTHER MATTERS RELATED TO INTERNAL CONTROL

In performing an examination of the effectiveness of the House’s internal control over financial

reporting for the period ended September 30, 2009, in accordance with attestation standards

established by the American Institute of Certified Public Accountants (AICPA), GAS, and Standards for

Internal Control in the Federal Government, issued by the Comptroller General of the United States, we

identified four deficiencies in internal control that we consider significant deficiencies under standards

established by AICPA, two of which are material weaknesses.

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 GAAP 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 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.

HOUSE COMMENTS AND OUR EVALUATION

In commenting on the draft of this report, House Management concurred with the facts and conclusions

in our report. Management’s comments are in Appendix B. We did not audit Management’s response,

and accordingly, we express no opinion on it.

COTTON & COMPANY LLP

Matthew H. Johnson, CPA

Partner

March 4, 2011

Alexandria, Virginia
Independent Auditors’ Report

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APPENDIX A

MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES

NOTED DURING FY 2009 FINANCIAL STATEMENT AUDIT
Independent Auditors’ Report

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APPENDIX A

MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES

NOTED DURING FY 2009 FINANCIAL STATEMENT AUDIT

During our audit of the House’s FY 2009 financial statements, we identified four significant deficiencies

in internal control over financial reporting, two of which we consider material weaknesses. These

material weaknesses give rise to significant challenges that have:

x Resulted in House management’s inability to provide reasonable assurance that its

financial statements are complete and accurate and prepared in a timely manner.

x Reduced assurance that data processed by the House’s information systems are reliable

and appropriately protected.

x Impaired management’s ability to prepare timely and accurate financial statements.

Weakness 1:  Lack of a Management Control Program

Summary Status: Material Weakness

New Condition

Open

House management lacked a management control program that ensured effective internal control over

financial reporting. Specifically, the House did not have a risk assessment program or monitoring

program to ensure effective internal controls. Although the House was able to produce financial

statements that were fairly presented in all material respects, it lacked a management control program

that ensured effective internal control over financial reporting.

OMB CircularAͲ123, Appendix A, Internal Control over Financial Reporting, addresses the assessment,

documentation, and reporting on the effectiveness of internal control over financial reporting to assure

Congress and the public that the federal government is committed to safeguarding its assets and

providing reliable financial information. Internal control is broadly defined as a process designed to

provide reasonable assurance regarding the achievement of objectives in the following categories:

x Effectiveness and efficiency of operations.

x Reliability of financial reporting.

x Compliance with applicable laws and regulations.

The only objectives relevant to internal control over financial reporting are those pertaining to reliability

of financial reporting.

Internal control consists of the following five interrelated components:

1. Control Environment. The control environment sets the tone of an organization and is the

foundation for all other components of internal control.

2. Risk Assessment. For an agency to exercise effective control, it must establish objectives and

understand the risks that could undermine achievement of those objectives. Risk assessment is the
Independent Auditors’ Report

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identification and analysis of relevant risks to achieving objectives, forming a basis for determining

how risks should be managed. For the purposes of assessing internal control over financial

reporting, management should identify the risks of a material misstatement in the financial

statements.

3. Control Activities. Control activities are the policies and procedures that help ensure that

management’s directives are carried out. Control activities occur throughout the organization, at all

levels and in all functions. They include the fundamentals of internal control, such as approvals,

authorizations, verifications, reconciliations, reviews of operating performance, and segregation of

duties.

4. Information and Communication. Pertinent information must be identified, captured, and

communicated in an effective manner to enable individuals to carry out their responsibilities.

Information systems produce reports containing operational, financial, and complianceͲrelated

information that make it possible to run and control the business. These systems not only deal with

internallyͲgenerated data, but also with information about external events necessary for informed

business decisionͲmaking and external reporting (e.g., industry, economic, and regulatory

information). Effective communication must also occur throughout and among all levels of the

organization.

5. Monitoring. Monitoring is the continuous process that management uses to assess the quality of

internal control over time. Ongoing monitoring occurs in the ordinary course of operations and

includes regular management and supervisory activities. Periodic monitoring involves less frequent

activities performed by senior management. Monitoring also encompasses a process for reporting

deficiencies and undertaking remediation efforts.

The illustration below depicts an effective management control program that includes all five

components of an internal control framework as it relates to financial reporting objectives.

While each component is important in establishing an effective internal control program, risk

assessment is the first critical step in the process to determine the extent of controls. Monitoring is the

strength behind an internal control program because it identifies poorly designed or ineffective controls

and measures the effectiveness of all internal control activities.
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27

Lack of Risk Assessment and Monitoring

The House has not identified both internal and external risks that may prevent the agency from meeting

its objectives. The process of identifying and analyzing risk is a critical component of an effective internal

control system that includes how management identifies risks relevant to preparation of financial

statements and information; assesses the likelihood of the manifestation of those risks; and decides

upon actions to manage and mitigate those risks. Additionally, these risks have not been analyzed for

their potential effect or impact on the agency.

Additionally, House management has not implemented a monitoring program to include periodic

reviews, reconciliations, or comparisons of data to determine if existing control activities are designed

and operating effectively. Furthermore, House management has not redesigned or improved its controls

found to be deficient or communicated internal control objectives to ensure the agency is committed to

sustaining an effective control environment. Specifically:

x In the FY 2008 financial statement audit report, we recommended that the Office of the

Chief Administrative Officer (CAO) establish a management control program to ensure

that internal controls over financial reporting are designed, implemented, and operating

effectively. Such a program would include processes for both assessing risk and

monitoring controls. Management concurred with this recommendation, but as of

September 30, 2009, had not taken sufficient actions to implement such a program.

x The lack of an effective management control program identifying risks and weaknesses

contributes to House Management’sfailure to take corrective actions on outstanding

priorͲyear deficiencies identified as part of past financial statement audits. Some

deficiencies have been reported for numerous years.

x The lack of an effective risk assessment precluded the House from identifying the

necessary procedures for ensuring the reasonableness of imputed rent costs.

Specifically, the House did not consider the risk associated with the accuracy of squareͲ

footage amounts or squareͲfootage rates provided by the Architect of the Capital (AOC)

necessary to calculate imputed rent costs. As a result, imputed costs and financing

sources were not properly reported.

These identified weaknesses give rise to significant management challenges that reduce assurance that

losses, misstatements, or noncompliance material in relation to the financial statements would be

prevented or detected and corrected in a timely manner. Successfully implementing a management

control program is critical to the House for achieving accountability and transparency.

Recommendation

We recommend that CAO:

1. Establish and implement an annual management controls evaluation program to ensure controls are

designed, implemented, and operating effectively. We recommend that the House consider

implementing a program consistent with that outlined by OMB Circular AͲ123, Appendix A. We

further recommend that the House use the Chief Financial Officer’s Council’s Implementation Guide

for OMB Circular AͲ123, published July 2005. This guide recommends the following steps for

establishing an effective management control program.
Independent Auditors’ Report

28

x Planning. Establish a Senior Assessment Team and determine the overall approach, to

include determining the scope (identify significant reports), determining materiality,

considering organizational structure, determining key processes, assessing risk,

integrating and coordinating review activities, planning monitoring and testing

approaches, and developing documentation standards.

x Evaluating Internal Control at the Entity Level. Document and assess entityͲwide

controls.

x Evaluating Internal Control at the Process Level. Gain an understanding of key financial

reporting processes, including general and application controls, identify key controls,

and assess the adequacy of control design.

x Testing Control Design and Operating Effectiveness at the Transaction Level. Test and

document the operating effectiveness of controls.

x Concluding, Reporting and Correcting. Determine if controls are operationally effective

based on test results, assessments of compensating controls, and identified material

weaknesses in internal control over financial reporting.

 
Independent Auditors’ Report

29

Weakness 2:  Ineffective Controls over Information Technology

Summary Status: Material Weakness

 PriorͲYear Condition

 Open

The House has not adopted an information technology (IT) controls framework or implemented an

overarching IT security program that ensures a strong general controls environment for information

systems and data processing. Management has not implemented, documented, or tested sufficient

internal controls over the general IT environment to ensure that financial data are complete, accurate,

and reliable. Specifically, we noted the following 11 conditions related to internal controls over

information systems that collectively represent a material weakness in the control environment.

a. A process or program has not been created to identify, document, and assess IT internal controls

to provide reasonable assurance regarding the accuracy and reliability of data processing for

financial reporting.

Management has not assigned responsibility for managing IT internal controls and developing a program

to assess IT internal controls over financial reporting. Management has not assessed IT internal controls

to provide assurance that IT internal controls are effective and operating as intended. This increases the

risk that the financial reporting process could produce incomplete, inaccurate, or even fraudulent data.

b. A process has not been implemented to ensure that all major systems within the House IT

environment have undergone a risk management process, such as the Certification and

Accreditation process defined by National Institute of Standards and Technology (NIST).

House Information Security Policy (HISPOL) for the Information Security Compliance Program 007.0

requires that all major systems, support systems, and applications undergo a Certification and

Accreditation (C&A) process prior to implementation and at least every 2 years thereafter. The House

did not, however, track progress or implementation status for HISPOL 007.0 and has not developed a

formal information systems inventory identifying all systems and applications operating within the

House environment. Without identification of all systems and applications, management cannot

effectively implement and ensure compliance with HISPOL 007.0.

Only seven systems have previously undergone any significant part of the C&A process, including

development of a system security plan, assessment of security controls, and issuance of a security

certification. Additionally, as of the end of the audit period, only one system had undergone the C&A

process within the past 2 years and was operating with a current security certification that granted the

system authority to operate.

Furthermore, the House network general support system, which provides significant security controls

for all financial systems, has never been granted an authority to operate as a result of the compliance

program. The lack of a C&A and authorization for the House network was first noted in the Calendar

Year (CY) 2005 financial statement audit report.
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30

c. System Security Plans (SSPs) for major financial systems have not been developed and maintained

in accordance with House policy and industry best practices.

SSPs were inadequate for the House network, Paylinks, Procurement Desktop (PD), Member Payroll

(MP), and Fixed Asset and Inventory Management System (FAIMS). Management has not enforced

policies ensuring that all systems have accurate and complete security control documentation. SSPs did

not enumerate and document minimum security controls based on system criticality and data.

Additionally, SSPs were not maintained and updated in accordance with HISPOL 007.0. SSPs for the

House Network, PD, MP, and FAIMS have not been updated on an annual basis (no updates during FY

2009). Because management did not enforce policies requiring accurate and complete SSP

documentation, the risk increases that all recommended system security controls, based on the

criticality of data processed, are not in place. Also, because minimum security controls are not identified

and enumerated, testing of individual controls is not possible.

d. Security control assessments were not conducted to test the design and operating effectiveness of

implemented controls for the House network and financial systems. Management relied on

system scans to substitute for control assessments.

Management has not identified and documented specific minimum security controls for the House

network and financial systems in respective SSPs and thus cannot conduct security control assessments.

Further, management cannot gain assurance that all required controls are in place and operating

effectively if it has not conducted security control assessments. This increases the risk that the

confidentiality, integrity, and availability of financial data within systems may be compromised. By

placing reliance on system scans alone, which test some technical controls, management cannot gain

assurance over management or operational controls.

e. The information systems change control process for financial systems and data did not include

adequate documentation to ensure that all changes were adequately managed, tested, and

approved.

Evidence of testing system changes prior to implementation was not retained. Evidence of testing,

including test plans, expected results, and actual results, was not developed and maintained for changes

made to the major financial system, Paylinks. We obtained change request forms from a sample of ten

system changes implemented during the reporting period. Additional supporting documentation, such

as detailed change specifications, test plans, and unit and user testing results, was not, however,

available.

Additionally, a data cleanͲup and conversion process was in progress for the major financial system,

Federal Financial System (FFS). Documentation was not being developed and maintained to record

changes made to production financial data and to assess the impact of those changes. The audit team

was unable to obtain a population of changes from this project for testing.

Without a thorough change control process, the risk increases that changes are not being managed

effectively and efficiently. Without documentation of testing, the risk increases that changes are being

implemented without sufficient testing, thereby introducing possible system errors or even malicious

code into the House production environment. Without change specifications, management cannot

review or manage the change process to ensure that the impact of changes has been fully addressed.
Independent Auditors’ Report

31

Furthermore, without a structured and documented change management process, management cannot

ensure the ongoing confidentiality, integrity, and availability of its systems and data.

f. A process has not been developed or implemented for identifying and tracking all known security

weaknesses and incidents across the agency and ensuring that appropriate corrective action is

taken.

Records of security incidents identified by Information Security were not maintained, and followͲup

investigations were not conducted. A process to document, track, and test corrective actions related to

audit recommendations and ensure that identified weaknesses are corrected was not in place. Also, a

Plan of Action and Milestones (POA&M) has not been developed or maintained for financial systems and

applications.

By not identifying and tracking all security weaknesses, management cannot ensure that appropriate

and timely corrective action is taken to address all known issues and weaknesses. This increases the risk

that a significant security weakness will remain vulnerable for an extended period of time.

g. Account management controls were not adequately managed and enforced throughout CAO.

Inactive accounts and accounts for terminated individuals at both the network (Active Directory)

level and financial application levels were not removed in a timely manner.

We noted the following exceptions for 1,200 CAO active directory accounts:

x 89 accounts previously logged in and inactive longer than 180 days (7.42% of total

accounts). Of these 89, only 3 were disabled.

x 259 accounts had never been logged in (21.58% of total accounts). Of these 259, 115

were disabled.

x 15 user accounts remained in the Active Directory for terminated users. Of these 15, we

noted the following:

 2 were related to CAO employees and were disabled.

 13 were related to CAO contractors; 5 of these 13 were disabled.

Paylinks accounts (both core users and MyPaylinks accounts) for terminated employees could remain

active for up to 2 months after termination, because the monthly Paylinks account review for

terminated employees only identifies accounts to be removed for employees terminated for more than

30 days. During this period, management places reliance on the timely removal of the employee’s Active

Directory access as a compensating control for MyPaylinks accounts. As noted above, however, Active

Directory controls for removing access in a timely manner are ineffective.

Additionally, the quarterly periodic recertification of all Paylinks accounts did not operate at a sufficient

level of precision, because the recertification did not include a review of the access level granted to core

users.
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32

h. Management has not conducted adequate oversight of the outsourced financial system, FFS.

In accordance with Statement on Auditing Standards (SAS) 70, Service Organizations, management

should review the Report on Controls Placed in Operation and Tests of Operating Effectiveness provided

by the service organization. Additionally, Management should complete an assessment of user controls

considerations identified by the service provider (National Business Center (NBC)) which are necessary

to achieve the service provider’s control objectives included in the SAS 70 report.Management did not

review this report nor did they assess the user controls considerations for FFS in FY 2009. Furthermore,

the House was not in compliance with the Interconnection Security Agreement (ISA), which was signed

by both the House and the FFS hosting entity, NBC in May 2008. The ISA requires that the House

perform a C&A over the House network in accordance with NIST. As previously mentioned, the House

network has not been through the C&A process, and significant weaknesses exist in the current

certification process.

Without reviewing and assessing FFS controls, the risk is increased that the confidentiality, integrity, and

availability of FFS data may be compromised, thus leading to the possibility of inaccurate or fraudulent

financial reporting.

i. Contingency planning and recovery policies and procedures have not been developed and

implemented to ensure a comprehensive approach that includes the House network, FFS, and all

critical financial systems.

Contingency plans to coordinate recovery activities between the House network and all critical financial

systems have not been developed. Without developed and tested contingency plans, the risk is

increased that House financial operations, data, or systems may become unavailable for an extended

period of time without sufficient alternate operating procedures in place to carry out core requirements.

j. Active Directory domain controllers were not adequately configured and monitored to ensure

compliance with House policy and industry best practices.

We reviewed settings deployed to production domain controllers and identified 49 settings that

deviated from the Center for Information Security (CIS) Windows Server 2003 Benchmark, which is

considered an industry best practice. Of these 49 deviations:

x 22 were also not in compliance with HISPOL 007.1.11, Windows 2003 Server Security Checklist,

developed by House Information Security.

x 14 resulted from configuration settings not covered in HISPOL 007.1.11.

x 13 were in compliance with HISPOL 007.1.11, but the HISPOL configurations did not match the

CIS benchmark.

k. Policies and procedures for segregation of duties within financial systems have not been

developed.

Policies and procedures have not been developed and implemented to ensure that principles of proper

segregation of incompatible duties are understood by key personnel and enforced by financial

applications. Specifically, policies and procedures have not been developed, documented, and

implemented to ensure that CAO financial systems identify incompatible duties and enforce
Independent Auditors’ Report

33

segregationͲofͲduty controls both at the endͲuser and administrative levels. Without proper

segregationͲofͲduties controls in place for financial applications, financial data may be manipulated by

unauthorized individuals. Subsequently, the risk increases that fraudulent acts may go undetected, and

financial data may become inaccurate and unreliable.

Recommendations

We recommend that CAO:

2a. Develop and implement a process to identify, document, and assess IT internal controls in

accordance with OMB Circular AͲ123.

2b. Implement and enforce a risk management framework to ensure that all systems are identified and

undergo a security assessment process in accordance with House policy and industry best practices

for federal information systems.

2c. Update SSPs for the House network and all financial systems to include enumerating minimum

security controls based on the criticality and environment of the system and documenting these

controls in accordance with industry best practices.

2d. Conduct and document security control assessments for the House network and financial systems to

test the design and operating effectiveness of all implemented controls. For each control tested,

documentation should include the description of the implemented control, test steps to be

conducted, expected test results, and actual test results.

2e. Develop and implement a change control process for all financial systems that ensures all changes

are tracked, tested, and approved. This includes developing and maintaining documentation for all

changes, including change specifications, approvals, test plans, and results of testing.

2f. Develop, document, and implement a process to identify and track all security weaknesses and

incidents identified throughout the environment and ensure that appropriate corrective action is

taken. This process should include the following:

x Developing a procedure to test security controls identified as corrected to ensure that actions

taken adequately mitigate or correct identified weaknesses.

x Developing and maintaining a POA&M, or equivalent documentation, for all House systems and

applications to track security weaknesses as well as issues noted as a result of audits.

x Maintaining documentation for all identified security incidents throughout the House and

ensuring that appropriate followͲup investigations are performed.

2g. Develop and implement an account management process to ensure that inactive accounts and

accounts for terminated personnel are disabled and removed in a timely manner. This process

should be enforced at network and financialͲapplication levels.

2h. Perform C&A testing to ensure that controls protecting FFS data are adequately implemented and

operating effectively. This includes performing a review of SAS 70 and ISA related to FFS to ensure

that adequate client controls are in place.
Independent Auditors’ Report

34

2i. Coordinate contingency planning and recovery policies and procedures to ensure a comprehensive

approach that includes the House network, FFS, PD, and all critical financial systems.

2j. Ensure that configuration settings documented in HISPOL 007.1.11 include industry best practices,

such as benchmarks approved by NIST, and document any deviations. Additionally, ensure that

configuration settings documented in HISPOL 007.1.11 are enforced for all domain controllers.

2k. Develop, document, and implement policies and procedures to ensure that:

x CAO financial systems identify incompatible duties and enforce segregationͲofͲduty

controls both at the endͲuser and administrative levels.

x SegregationͲofͲduty principles are understood by key personnel, such as system and

data owners and program managers.
Independent Auditors’ Report

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Weakness 3: Ineffective Financial Reporting Controls and General Ledger System Reporting

Limitations

Summary Status: Significant Deficiency

 PriorͲYear Condition

 Open

Weaknesses in procedures used to ensure the completeness and accuracy of yearend financial

statements and notes disclosures adversely affected the House’s ability to initiate, authorize, record,

process, or report financial data reliability in accordance with GAAP and guidance contained in OMB

Circular AͲ136.

During FY 2009, CAO management did not assign sufficient resources to compile, analyze, and prepare

the House’s annual financial statements. The House relied upon one key individual for much of the

financial reporting process. As a result, this individual had an excessive workload, and adequate

succession planning was not evidenced. In addition, the quality control review processes to ensure

accurate and complete financial reporting were inadequate. As stated in our audit report, the House

received an unqualified opinion on its FY 2009 financial statements. Financial statements were,

however, delivered months late, and went through multiple iterations and revisions.

OMB Circular AͲ123 states:

Internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting. Reliability of financial reporting

means that management can reasonably make the following assertions:

1. All reported transactions actually occurred during the reporting period and all assets

and liabilities exist as of the reporting date (existence and occurrence);

2. All assets, liabilities, and transactions that should be reported have been included

and no unauthorized transactions or balances are included (completeness);

3. All assets are legally owned by the agency and all liabilities are legal obligations of

the agency (rights and obligations);

4. All assets and liabilities have been properly valued, and where applicable, all costs

have been properly allocated (valuation);

5. The financial report is presented in the proper form and any required disclosures are

present (presentation and disclosure);

6. The transactions are in compliance with applicable laws and regulations

(compliance);

7. All assets have been safeguarded against fraud and abuse; and

8. Documentation for internal control, all transactions, and other significant events is

readily available for examination.
Independent Auditors’ Report

36

We identified weaknesses in four of the eight assertions identified above (Nos. 2, 4, 5, and 8). Our

findings and associated recommendations for corrective actions are provided below in order of

significance.

a. The House did not comply with OMB AͲ136 requirements (Assertion No. 5).

OMB Circular AͲ136, Section II.4, Instructions for the Annual Financial Statements, states that reporting

entities should ensure that information in the financial statement is presented in accordance with GAAP

for federal entities and requirements from FASAB standards and interpretations.

House presentation and disclosure of federal financial statements and note disclosures were not in full

compliance with OMB AͲ136 requirements. We noted the following presentation and disclosure

exceptions:

x Financial Statement(s) Statement of Net Cost: The House overstated gross costs and

earned revenues by $18,339,275, because eliminations of interoffice revenue and

expense were not properly recorded.

x Statement of Change in Net Position: The House improperly reported cancelled funds

returned to Treasury (Account 3106, Unexpended Appropriations – Adjustments) as a

transfer (Account 3103, Unexpended Appropriations – Transfer Out).

x Financial Statement Note Disclosure: The House did not initially present disclosures in

accordance with OMB Circular AͲ136 for the following:Significant Accounting Principles; Fund

Balance with Treasury; Cash and Other Monetary Assets; Inventory and Related Property, Net;

General PPE; Other Assets; Federal Employee and Veteran’s Benefits; Other Liabilities; and IntraͲ

governmental Costs and Exchange Revenue.

b. House financial statement crosswalks were not in full compliance with the United States Standard

General Ledger Crosswalk (Assertion No. 5).

The House uses Treasury’s Financial Management Service’s (FMS) crosswalk for preparing its annual

financial statements. This crosswalk, however, is based upon a federal entity that maintains its general

ledger consistent with the U.S. Standard General Ledger (USSGL). The House’s general ledger is not, in all

cases, consistent with the USSGL. As a result, the House must map its existing chart of accounts to the

USSGL prior to preparing its financial statements consistent with the crosswalk.

This contributed to delays in preparing financial statements and increased the risk of errors in the

financial statements when accounts are not properly mapped. For the House to report financial

statement line items correctly when preparing financial statements, it must incorporate use of adͲhoc

queries, extensive manual analyses, and worksheet adjustments.

c. Financial transactions were not recorded in FFS (Assertion No. 8).

Member’s Services tracked and recorded financial activity using QuickBooks; transactions were not

recorded in the House system of record, FFS. The Member Service’s financial activity related to payroll,

benefits, and administrative expenses, was reported on the financial statements based on summaryͲ

level Hyperion adjustments posted at yearend.
Independent Auditors’ Report

37

In accordance with GAO’s Standards for Internal Control in the Federal Government, transactions should

be promptly recorded in the system of record to maintain their relevance and value to management in

controlling operations and making decisions. Controls over the design and use of records do not provide

reasonable assurance that transactions and events are recorded accurately.

d. Manual worksheet adjustments were not recorded in FFS (Assertion No. 8).

Balances reported on the FY 2008 final adjusted trial balance did not agree to FY 2009 beginning

balances. Differences relating to yearend Hyperion adjustments and manual worksheet adjustments

were not recorded in FFS. Based on GAO’s Standards for Internal Control in the Federal Government,

Accurate and Timely recording of Transactions and Events, transactions should be promptly recorded to

maintain their relevance and value to management in controlling operations and making decisions. In

addition, control activities help to ensure that all transactions are completely and accurately recorded.

To prepare federal GAAP financial statements, the House prepared postͲclosing worksheet adjustments

to account for priorͲyear accounting events not recorded in budgetary accounts. These worksheet

adjustments were not recorded in FFS. The House must track adjustments manually to report financial

statement lines accurately.

e. A budgetary entry for offsetting collection transactions in FFS did not exist (Assertion No. 2).

Offsetting collection transactions included cash receipts from receivables, rejected automated clearing

house (ACH) disbursements, and stop payments. There is no budgetary entry to recognize and record

revenue related to offsetting collection accounting events in FFS. OMB Circular AͲ11, Preparation,

Submission and Execution of the Budget, Section 1, states that federal entities should record spending

authority from offsetting collections equal to cash collections received during the year and record the

cash collection as an offset to the budget authority.

FFS posting logic related to transaction code HV (standard voucher adjustment), and transaction types

RR (recognize direct collection) and RV (timing adjustment to recognize drawdown of an advance from

prior year) did not record revenue to the budgetary account, Reimbursements and other Income Earned

– Collected. As a result, the House must perform adͲhoc queries to account for HV, RR, and RV

transactions to identify offsetting collections and prepare a manual adjustment to account for such

transactions.

f. Revenue and expenses were improperly reported (Assertion No. 2).

Revenue earned and costs associated with concessionaire revenue sources were commingled. According

to Statements on Federal Financial Accounting Standards (SFFAS), No. 7, paragraph 18, operations of an

entity engaged in exchange transactions produce revenue earned as well as the associated cost

incurred. Financial accounting should relate the revenue to the cost for these transactions.

The House did not distinguish revenue earned from services provided by one of its concessionaire

contractors or expenses incurred related to expenses deducted (greening and miscellaneous contract

deductions). Expenses deducted totaled $478,381, of which $394,759 related to the greening initiative

and other costs. The House improperly recorded these expenses in FFS, resulting in improper reporting

of these expenses on the Statement of Net Cost.
Independent Auditors’ Report

38

g. The House overstated imputed costs and financial sources (Assertion No. 4).

House of Representatives overstated imputed costs. Estimates used in the calculation were not verified

independently and, consequently, imputed costs were not reasonable and contained errors in the data

provided by AOC.

The House did not have an adequate process in place to ensure imputed costs and financing sources

were properly reported. The Federal Accounting Standards Advisory Board’s Statement of Federal

Financial Accounting Standards 30, InterͲEntity Cost Implementation Amending SFFAS No. 4, requires

that:

Each entity’s full cost should incorporate the full cost of goods and services that it

receives from other entities. The entity providing the goods and services has the

responsibility to provide the receiving entity with information on the full cost of such

goods or services either through billing or other advice.

In accordance with GAAP, estimates should be reasonable and based on the best information available.

This requires accumulating sufficient relevant and reliable data on which to base reasonable

assumptions and resulting estimates.

Recommendations

We recommend that CAO:

3a.Develop and implement financial reporting procedures to ensure that information in the financial

statements is presented in accordance with OMB Circular AͲ136, Section II.4.

3b.Implement the USSGL to ensure the financial statements are presented in accordance with OMB

financial reporting requirements.

3c.Ensure Members’ Services payroll and benefits financial activity is recorded in the system of record

(FFS) as transactions occur (monthly).

3d.Ensure all budgetary yearend accounting transaction and events are accurately recorded in FFS to

establish proper postͲclosing balances.

3e.Update the posting logic in FFS to properly record revenue resulting from offsetting collections.

Ensure that proper posting logic is built in the new financial system, PeopleSoft (PS), to ensure that

proper revenue recognition exists for both proprietary and budgetary accounting events.

3f.Properly record sales from cafeteria and catering services that reflect both revenue earned and cost

incurred as they relate to the House’s “Greening the Capitol” initiative.

3g.Require management to develop a methodology for estimating imputed costs, to include:

x Obtaining and independently verifying formal documentation from AOC that supports

amounts and/or value of occupied space.
Independent Auditors’ Report

39

x Obtaining and documenting relevant information and assumptions used to determine

estimated squareͲfoot rental rates.

x Reviewing assumptions, estimates, and calculations for reasonableness and accuracy.

x Periodically reviewing the methodology to determine if changes are required.
Independent Auditors’ Report

40

Weakness 4:  Inaccurate Processing and Reporting of Payroll Data

Summary Status: Significant Deficiency

 PriorͲYear Condition

 Open

We identified several instances in which the House’s internal control over payroll processing did not

ensure accurate reporting of transactions and balances. Controls were inadequate in some cases, and,

although they existed in other cases, were not always adhered to due to the overall prevailing

weaknesses discussed in Weakness 1, above.

We made inquiries and observed controls in place to determine if policies and procedures were

adequately documented and implemented. We tested controls over the processing and reporting of

payroll data, which included processing Payroll Authorization Forms (PAFs). We performed substantive

tests of details to validate changes made in the payroll system through precertification and final

certification processes, and we performed tests of details related to the disbursement and reporting of

payroll and the reconciliation of payroll data.

During FY 2009, CAO authority and responsibility were not sufficient to ensure that all House offices

complied with documented controls related to payroll processing. As a result, key controls were not

operating effectively. CAO, which is responsible for ensuring compliance with these controls, did not

have the authority to enforce such controls. Therefore, controls were not always adhered to by all

offices, and payroll compliance processing errors continued to occur.

Internal control procedures to ensure completeness and accuracy of payroll transactions included in the

financial statements were not effective or did not exist in all cases. We identified three instances,

discussed below, in which payroll controls did not operate in an effective manner.

a. Payroll certifications were not performed before disbursements.

Employing offices were not required to perform payroll certifications to validate accuracy before payroll

disbursement. GAO’s Standards Internal Control in the Federal Government states that transactions and

other significant events, including payroll, should be authorized and executed only by an authorizing

official prior to the event.

Because payroll was not certified before disbursement, employing officials were unable to ensure that

separated employees were properly removed from their respective payroll registers. As a result,

employees may receive payments following termination. Also, additional errors may remain undetected,

such as underͲand overpayments to employees who received changes in their employment status.

b. PAFs were late or missing.

Timely submission of PAFs was complicated by an inconsistent due date policy within the House. In

accordance with CAO policy, PAFs are due on the 15th of the month. This date was selected to ensure

adequate time between PAF submission and preparation of the monthly payroll. The Members’

Congressional Handbook, however, requires PAF submission by the 18th of the month.

Timely submission of PAFs is further complicated by employing offices not adhering to either policy. Of

the 45 samples tested, 7 PAFs were submitted after the 18th day of the terminated month. The

Members’ Congressional Handbook, Pay Section:Appointment, states that subsequent adjustments to a
Independent Auditors’ Report

41

payroll appointment (pay adjustments, title changes, furlough status, terminations, etc.) must be made

on the appropriate form (PAF) and are due to the Human Resources office by the 18th day of each month

in which the adjustment is effective. Late submission of documentation creates the potential for

inaccurate payroll disbursement to terminated, temporary, and permanent employees.

Recommendations

We recommend that CAO:

4a.Require all employing offices to perform preͲcertifications and work with Payroll Operations and

Office of Payroll and Benefits, to ensure that payroll is certified by employing offices before

disbursements.

4b.Take actions to ensure consistent policy regarding the PAF due date, including timely PAF

submission, between CAO and the Members’ Congressional Handbook.
Independent Auditors’ Report

42

APPENDIX B

MANAGEMENT’S RESPONSE TO

FY 2009 FINANCIAL STATEMENT AUDIT REPORT
43

Chief Administrati ve Offi cer’s

Audit Report Response
44
Chief Administrati ve Offi cer’s Audit Report Response

45
Chief Administrati ve Offi cer’s Audit Report Response

46
47

Fiscal Year 2009 Financial Statements
48

This Page Intenti onally Left Blank
2009 Financial Statements

49

Financial Statements Included in This Report

The U.S. House of Representatives (House) has prepared financial statements for fiscal year (FY) 2009 in

accordance with U.S. Generally Accepted Accounting Principles (GAAP) issued by the Federal Accounting Standards

Advisory Board (FASAB) and the form and content requirements of the Office of Management and Budget’s (OMB)

Circular No. AͲ136, Financial Reporting Requirements. The responsibility for the integrity of the financial

information included in these statements rests with management of the House. The audit of the House’s financial

statements was performed by Cotton & Company LLP. The auditors’ report accompanies the financial statements.

The House’s financial statements for FY 2009 consisted of the following:

• The Balance Sheet, which presents as of September 30, 2009 those resources owned or managed by the House

that are available to provide future economic benefits (assets); amounts owed by the House that will require

payments from those resources or future resources (liabilities); and residual amounts retained by the House

comprising the difference (net position).

• The Statement of Net Cost, which presents the net cost of the House’s operations for the year ended September

30, 2009. The House’s net cost of operations includes the gross costs incurred by the House less any exchange

revenue earned from House activities.

• The Statement of Changes in Net Position, which presents the change in the House’s net position resulting from

the net cost of the House’s operations, budgetary financing sources other than exchange revenues, and other

financing sources for the year ended September 30, 2009.

• The Statement of Budgetary Resources, which presents the budgetary resources available to the House during

FY 2009, the status of these resources at September 30, 2009, the change in obligated balance during FY 2009, and

net outlays of budgetary resources for the year ended September 30, 2009.
2009 Financial Statements

50

U.S. HOUSE OF REPRESENTATIVES

Consolidated Balance Sheet

As of September 30, 2009

2009

ASSETS

 Intergovernmental:

 Fund Balance with U.S. Treasury (Note 2) $ 213,204,524 

 Accounts Receivable, Net (Note 3) 192,014 

 Total Intragovernmental 213,396,538 

 Cash and Other Monetary Assets (Note 2) 1,653 

 Accounts Receivable, Net (Note 3) 197,560 

 Inventory and Operati ng Materials and Supplies (Note 4) 1,368,211 

 Property and Equipment, Net (Note 5) 63,212,805 

 Advances and Prepayments (Note 7) 5,454,320 

Total Assets $ 283,631,087 

 

Stewardship Property and Equipment (Note 6)

 

LIABILITIES

 Intragovernmental:

 Accounts Payable $ 1,308,443 

 Advances from Others 641,483 

 Capital Lease Liabiliti es 877,417 

 Other Liabiliti es 2,478,995 

 Total Intragovernmental 5,306,338 

 Accounts Payable 43,104,203 

 Actuarial Federal Employees’ Compensati on Act Liabiliti es 21,458,664 

 Accrued Payroll and Benefi ts 9,170,015 

 Accrued Annual Leave 6,628,475 

 Capital Lease Liabiliti es 2,520,766 

 Other Liabiliti es 155,310 

Total Liabiliti es (Note 8) $ 88,343,771 

NET POSITION

 Unexpended Appropriati ons $ 155,434,854 

 Cumulati ve Results of Operati ons 39,852,462 

Total Net Positi on (Note 15) $ 195,287,316 

Total Liabiliti es and Net Positi on $ 283,631,087 
2009 Financial Statements

51

U.S. HOUSE OF REPRESENTATIVES

Consolidated Statement of Net Cost

For the Year Ended September 30, 2009

2009

NET COST OF OPERATIONS (Note 11)

Net Costs by Program Area

 Legislati ve Acti viti es

 Gross Costs $ 1,574,306,418 

 Less: Earned Revenue (10,419,254)

 Net Program Costs 1,563,887,164 

 Revolving Funds

 Gross Costs 3,300,414 

 Less: Earned Revenue (3,762,366)

 Net Program Costs (461,952)

Net Cost of Operati ons $ 1,563,425,212 
2009 Financial Statements

52

U.S. HOUSE OF REPRESENTATIVES

Consolidated Statement of Changes in Net Positi on

For the Year Ended September 30, 2009

2009

Unexpended Appropriati ons

Beginning Balance $ 101,638,132 

Budgetary Financing Sources

Appropriati ons Received 1,420,662,438 

Appropriati ons Used (1,361,899,910)

Other Adjustments (4,965,806)

Total Budgetary Financing Sources 53,796,722 

Total Unexpended Appropriati ons $ 155,434,854 

Cumulati ve Results of Operati ons

Beginning Balance $ 43,096,510 

Budgetary Financing Sources

Appropriati ons Used 1,361,899,910 

Other Adjustments (16,634,657)

Other Financing Sources

Imputed Financing from Costs Absorbed

 by Others (Note 16) 214,915,911 

Total Financing Sources 1,560,181,164 

Net Cost of Operati ons (1,563,425,212)

Net Change (3,244,048)

Total Cumulati ve Results of Operati ons $ 39,852,462 

Net Positi on $ 195,287,316 
53

2009 Financial Statements

U.S. HOUSE OF REPRESENTATIVES

Statement of Budgetary Resources

For the Year Ended September 30, 2009

2009

Budgetary Resources

Unobligated Balance, Brought Forward, October 1 $ 58,406,661 

Recoveries of Prior Year Unpaid Obligati ons 5,478,689 

Budget Authority:

Appropriati ons Received 1,420,662,438 

Borrowing Authority - 

Contract Authority - 

Spending Authority from Off setti ng Collecti ons:

Earned:

Collected 33,931,073 

Change in Receivable from Federal Sources - 

Change in Unfi lled Customer Orders:

Advances Received (3,990,085)

Without Advance from Federal Sources - 

Anti cipated for Rest of Year, Without Advances - 

Previously Unavailable - 

Expenditure Transfers from Trust Funds - 

Subtotal Budget Authority $ 1,450,603,426 

Nonexpenditure Transfers, Net, Anti cipated and Actual - 

Temporarily Not Available Pursuant to Public Law - 

Permanently Not Available (Cancelled) (13,349,739)

Total Budgetary Resources $ 1,501,139,037 

Status of Budgetary Resources

Obligati ons Incurred:

Direct $ 1,374,707,884 

Reimbursable 25,427,863 

Total Obligati ons Incurred 1,400,135,747 

Unobligated Balances - Available:

Apporti oned - 

Exempt from Apporti onment 41,529,592 

Total Unobligated Balance - Available 41,529,592

Unobligated Balance - Not Available 59,473,698 

Total Status of Budgetary Resources $ 1,501,139,037 

Change in Obligated Balance

Obligated Balance, Brought Forward, October 1

Unpaid Obligati ons $ 110,088,474 

Less: Uncollected Customer Payments from Federal Sources - 

Total Unpaid Obligated Balance, Brought Forward, October 1 110,088,474 

Obligati ons Incurred, Net 1,400,135,747 

Less: Gross Outlays (1,392,923,720)

Obligated Balance Transferred, Net:

Actual Transfers, Unpaid Obligati ons - 

Actual Transfers, Uncollected Customer Payments from Federal Sources - 

Total Unpaid Obligated Balance Transferred, Net - 

Less: Recoveries of Prior Year Unpaid Obligati ons, Actual (5,478,689)

Change in Uncollected Customer Payments from Federal Sources - 

Obligated Balance, Net, End of Period:

Unpaid Obligati ons 111,821,812

Less: Uncollected Payments from Federal Sources - 

Total Unpaid Obligated Balance, Net, End of Period $ 111,821,812 

Net Outlays

Gross Outlays $ 1,392,923,720 

Less: Off setti ng Collecti ons (29,940,988)

Total Net Outlays $ 1,362,982,732 
54

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55

Notes to the Financial Statements
Notes to the Financial Statements

56

NOTE 1ͲSIGNIFICANT ACCOUNTING POLICIES

A. Description of the Reporting Entity

The U.S. House of Representatives (House) is one of two separate legislative chambers that comprise the Congress of the

United States. The other is the U.S. Senate (Senate). All lawmaking powers of the Federal government are given to the

Congress under Article I of the Constitution of the United States. The House and Senate jointly agree on a budget for the

Legislative Branch and submit it to the President of the United States. The Members of the House serve twoͲyear terms of

office, which coincide with the sequential numbering of the entire Congress.

To help carry out its constitutional duties, the House creates committees of Members and assigns them responsibility for

gathering information, identifying policy problems, proposing solutions, and reporting bills to the full chamber for

consideration. The House appoints unelected Officers to administer both legislative and nonͲlegislative functions, which

support the institution and its Members in carrying out its legislative duties. The financial statements of the House

provide financial information on the activities of all entities, which are subject to the authority vested in the House by the

U.S. Constitution, public laws, and rules and regulations adopted by the membership of the House.

These financial statements reflect the organizational structure of the House under the 111th Congress. The fiscal year

2009 financial statements are comprised of two programs: Legislative Activities and Revolving Funds.

Legislative Activities

Legislative Activities consist of all financial activity related to the operations of all Member Offices, both in Washington,

D.C. and Congressional districts; all Committees both Standing and Special and Select; Leadership Offices; House Officers

and Offices and Joint Functions that the House shares with the U.S. Senate including the Attending Physician and Joint

Committee on Taxation.

House Members are elected from congressional districts of approximately equal population. The financial information

aggregates transactions of the Member districts and Washington, D.C. offices, and includes 435 Representatives; five

Delegates, one each, from the District of Columbia, Guam, Virgin Islands, American Samoa and Northern Mariana Islands;

and one Resident Commissioner from Puerto Rico.

The Committees financial information aggregates transactions of the Standing and Special and Select Committees of the

111th Congress. Committees are organized at the beginning of each Congress according to their jurisdictional boundaries

incorporated in the Rules of the House. The Committees of the House under the 111th Congress are:

Committee on Agriculture

Committee on Appropriations

Committee on Armed Services

Committee on the Budget

Committee on Education and Labor

Committee on Energy and Commerce

Committee on Financial Services

Committee on Foreign Affairs

Committee on Homeland Security

Committee on House Administration

Committee on the Judiciary

Committee on Natural Resources

Committee on Oversight and Government Reform

Committee on Rules

Committee on Science and Technology

Committee on Small Business

Committee on Standards of Official Conduct

Committee on Transportation and Infrastructure
Notes to the Financial Statements

57

Committee on Veterans’ Affairs

Committee on Ways and Means

Permanent Select Committee on Intelligence

Select Committee on Energy Independence and Global Warming

Select Committee on Voting Irregularities

The House Leadership Offices financial information aggregates transactions of:

Speaker of the House

Majority and Minority Leaders

Majority and Minority Whips

Party Steering Committees, Caucus or Conference, which consist of Representatives of the same political party

The Officers and Legislative Offices financial information aggregates transactions of all legislative support and

administrative functions provided to Members, Committees, and Leadership offices, including:

Chaplain

Chief Administrative Officer

Clerk of the House

Office of Congressional Ethics

Office of Emergency Planning, Preparedness and Operations

Office of the General Counsel

Office of the Historian

Office of Inspector General

Office of the Law Revision Counsel

Office of the Legislative Counsel

Parliamentarian

Sergeant at Arms

The Joint Functions financial information aggregates transactions of the joint activities of the House and the Senate to the

extent that the House funds these functions in whole or in part. House administrative management does not exert direct

control over the expenditures of these functions. The joint functions in these statements include:

Attending Physician

Joint Committee on Taxation, which has members from both the House and the Senate

Revolving Funds

Revolving Fund Activities consist of all financial activity related to the operations of all House revolving fund accounts.

The Revolving Funds financial information aggregates transactions of:

House Recording Studio

House Services

Net Expenses of Equipment

Net Expenses of Telecommunications

Page School

Stationery
Notes to the Financial Statements

58

B. Basis of Consolidation

The consolidated financial statements include the accounts and significant activities of the House. All significant

interoffice balances and transactions have been eliminated to arrive at consolidated financial information, except for the

Statement of Budgetary Resources which is presented on a combined basis in accordance with the Office of Management

and Budget’s (OMB) Circular No. AͲ136, Financial Reporting Requirements.

The financial statements do not include legislative agencies that support the House and that receive separate

appropriations. These agencies are:

Architect of the Capitol

Congressional Budget Office

Government Accountability Office

Government Printing Office

Library of Congress

U.S. Botanic Garden

U.S. Capitol Police

Functions jointly shared between the House and the Senate are included in the financial statements to the extent their

operations are funded by House appropriations. These consist of:

Attending Physician

Joint Committee on Taxation, which has members from both the House and the Senate

C. Basis of Accounting and Presentation

The financial statements present the financial position, net cost of operations, changes in net position and budgetary

resources of the House. These statements have been prepared in accordance with U.S. Generally Accepted Accounting

Principles (GAAP) issued by the Federal Accounting Standards Advisory Board (FASAB) and the form and content

requirements of the OMB Circular No. AͲ136, Financial Reporting Requirements.

Prior to fiscal year (FY) 2009, the House prepared financial statements on an annual basis in accordance with GAAP similar

to those used within commercial entities. This information was reported through the Balance Sheet, Income Statement

and Cash Flow Statement in a comparative year financial statement format.

The House has presented its financial statements and accompanying notes in a single year presentation for FY 2009 in its

initial year of transitioning into a new financial reporting format.

While the House is a Legislative Branch entity, it has elected to incorporate many of the Federal government Executive

Branch agency financial management and reporting standards that management deems necessary for the fair

presentation of financial statement information.

The House’s accounting structure, in accordance with GAAP, utilizes both accrual and budgetary accounting. Under

accrual accounting, events are recognized as they occur, as opposed to when cash is received or disbursed. Therefore,

revenues are recorded when earned and expenses are recorded when a liability is incurred, without regard to receipt or

payment of cash. The budgetary accounting, on the other hand, facilitates compliance with legal constraints on, and

controls over, the use of Federal funds.

Throughout these financial statements, assets, liabilities, revenues and costs have been classified according to the type of

entity with whom the transactions were made. Intragovernmental assets and liabilities are those from or to other Federal

entities. Intragovernmental earned revenues are collections or accruals of revenue from other Federal entities, and

intragovernmental costs are payments or accruals to other Federal entities.

While these statements have been prepared from the records of the House in accordance with GAAP and formats

prescribed in OMB Circular No. AͲ136, Financial Reporting Requirements, these statements are in addition to the financial

reports used to monitor and control the budgetary resources that are prepared from the same records. These statements

should be read with the realization that they are for a component of the U.S. government, a sovereign entity.
Notes to the Financial Statements

59

D. Fund Balance with the U.S. Treasury and Cash

The U.S. Treasury processes cash receipts and disbursements for the House through its cash management services. Fund

Balance with Treasury represents the aggregate amount of House fund accounts with the U.S. Treasury available to pay

current liabilities and finance authorized purchases. Fund Balance with Treasury consists of balances for general fund

expenditure accounts, revolving funds, and other fund types as of the end of the fiscal year. Fund Balance with Treasury

also includes the Congressional Use of Foreign Currency account, which is held at the U.S. Treasury and is maintained and

administered by the Department of State on behalf of the House. The House also maintains an account related to Special

Fund Receipts. Cash and other monetary assets include cash on hand that represents deposits in transit and amounts held

in a commercial bank account. (See Note 2)

The following describes the type of funds maintained by the House:

General Fund Expenditure Accounts are fund accounts used to record amounts appropriated by Congress for the general

support of the Federal government.

Revolving Funds are fund accounts used to record funds authorized by specific provisions of law to finance a continuing

cycle of business–type operations. Receipts are credited directly to the revolving fund as offsetting collections and are

available for expenditure without further action by Congress.

Special Fund Receipt Accounts are fund accounts used to record receipts from specific sources earmarked by law for

specific purposes.

Other Fund Types include General Fund Receipt and Deposit Fund accounts. General Fund Receipt accounts are used to

record all receipts not earmarked by law for a specific purpose. These receipts may include miscellaneous recoveries and

refunds and fines and penalties. The U.S. Treasury automatically transfers all cash balances in these receipt accounts to

the general fund of the Treasury at the end of each fiscal year. Deposit Fund accounts are used to record monies withheld

from Federal government payments for goods and services received pending payment; and receipts and disbursements

awaiting determination of the proper accounting classification.

E. Accounts Receivable, Net

Accounts Receivable represents amounts due to the House from Federal entities, Members, employees and/or vendors

for money, goods, and services less an Allowance for Doubtful Accounts. Accounts Receivable primarily arises from

provision of goods and services, commissions, and overpayments. Allowance for Doubtful Accounts is based on an

analysis of outstanding accounts, aging methodologies and historical collection experience. Intragovernmental accounts

receivable are generally considered to be fully collectible. (See Note 3)

F. Inventory and Related Property, Net

Inventory is tangible personal property that is held for sale. The Chief Administrative Office (CAO), Assets, Furnishings and

Logistics Office maintains an inventory of supplies and merchandise purchased by the Office Supply Service and Gift Shop

for resale to the public. Inventories for sale are valued at the moving weighted average method.

Operating Material and Supplies are tangible personal property to be consumed during normal operations. The CAO

Assets, Furnishings and Logistics Office maintains inventories of such items as hardwood, carpet, leather, fabric, furniture

components, and repair materials purchased by the House for use in its operations. The CAO House Information

Resources Office maintains inventories of such items as fiber jumpers to support network connectivity and patch cords to

support desktop computers. These items are not for sale and are reflected in the financial statements at an estimated

value based on the first in/first out inventory valuation method. (See Note 4)

G. General Property and Equipment, Net

General Property and Equipment consists of office and computer equipment, furniture, vehicles, software, assets

acquired under capital leases, leasehold improvements and work in process. The House capitalizes property and

equipment when the acquisition cost equals or exceeds an established threshold and has a useful life of greater than one

year. The costs of such items are recognized as assets when acquired.
Notes to the Financial Statements

60

Property and equipment are capitalized if the unit acquisition cost is equal to or greater than $25,000 and the item has a

useful life greater than one year with the exception of software. Software is capitalized if the unit acquisition cost is equal

to or greater than $10,000 and the item has a useful life greater than one year. Work in process consists of capitalized

costs associated with assets received, but not placed in service as of the end of the fiscal year. The change in work in

process is due to several projects not placed in service during the fiscal year.

An appropriate portion of an asset’s value is reduced and an expense for depreciation or amortization is recognized over

the accounting periods benefited by the asset’s use. The House calculates depreciation and amortization expense based

on the straightͲline method over an asset’s estimated useful life. Depreciation expense is applicable to tangible assets

such as equipment, furniture, and vehicles. Amortization expense is applicable to intangible assets such as software and

capital leases. Assets acquired under capital leases are generally amortized over the lease term. However, if a lease

agreement contains a bargain purchase option or otherwise transfers title of the asset to the House, the asset is

amortized on the same basis as similar categories of owned assets.

A loss is recognized when the net book value of the asset at the time of disposal exceeds any proceeds received. A gain is

recognized when the net book value of the asset at the time of disposal is less than any proceeds received. (See Note 5)

House office buildings and land occupied by Members and employees in Washington, D.C. are under the custody of the

Architect of the Capitol (AOC) and are excluded from the House’s property and equipment accounts. The House

recognizes an imputed cost and related imputed financing source in its financial statements for the costs associated with

House office buildings. (See Notes 1K and 16)

H. Stewardship Property and Equipment

Stewardship Property, Plant and Equipment (PP&E) includes heritage assets and stewardship land. Heritage assets are

unique due to their historical or natural significance; cultural, educational, or artistic importance; or significant

architectural characteristics. Heritage assets consist of collectionͲtype heritage assets, such as objects gathered and

maintained for exhibition, for example, museum collections, art collections, and library collections; and nonͲcollectionͲ

type heritage assets, such as parks, memorials, monuments, and buildings. These assets are expected to be preserved

indefinitely. The House’s heritage assets are considered collectionͲtype heritage assets and consist primarily of historical

artwork and artifacts.

Heritage assets can serve two purposes: a heritage function and a general government operational function. If a heritage

asset serves both purposes, but is predominantly used for general government operations, the heritage asset is

considered a multiͲuse heritage asset, which is included in general PP&E on the Balance Sheet. The House office buildings

and land occupied and used by Members and employees in Washington, D.C. meet the criteria of multiͲuse heritage

assets. Stewardship responsibility for these multiͲuse heritage assets is maintained by the AOC and disclosed on its

financial statements. The House does not possess multiͲuse heritage assets or stewardship land.

Heritage assets are disclosed on the Balance Sheet as a note reference with no asset amount shown, and are generally not

included in the general PP&E. The cost of improving, reconstructing, or renovating heritage assets is recognized as an

expense in the period incurred. Similarly, the cost to acquire or construct a heritage asset is recognized as an expense in

the period incurred. Due to their nature, matching costs with specific periods would not be meaningful. (See Note 6 and

Required Supplementary Information)

I. Advances and Prepayments

Advances and prepayments are transfers of cash to cover future expenses or the acquisition of assets. These goods

and/or services are delivered in increments that span several months. Advance payments are recorded as assets and

consist of payments to Federal government entities for contractual services and for mailings that require address

corrections or additional postage. As the goods and/or services are rendered, the Advance account is drawn down and

the appropriate asset or expense is recognized. Prepayments are payments made in advance of the receipt of goods and

services. Prepayments include payments for subscriptions and software licenses and are recorded as expenses. At yearͲ

end, all such payments made for the current year are analyzed to determine the proper expense and prepayment

amounts applicable to the current accounting period for financial statement purposes. (See Note 7)
Notes to the Financial Statements

61

J.Liabilities

Liabilities represent the probable future outflow or other sacrifice of resources as a result of past transactions or events.

Liabilities are amounts due to others as a result of items received, services rendered, expenses incurred, assets acquired

and construction or work in process regardless of whether invoices have been received. Liabilities also represent amounts

received that have not yet been earned. Liabilities covered by budgetary resources are liabilities incurred that will be

covered by available budgetary resources encompassing not only new budget authority but also other resources available

to cover liabilities for specified purposes in a given year. Liabilities not covered by budgetary resources include unfunded

liabilities incurred for which revenues or other sources of funds necessary to pay the liabilities have not been made

available through congressional appropriations or current earnings of the reporting entity. (See Note 8)

The House’s liabilities include:

Accounts Payable that represent amounts owed for the cost of goods and services received but not yet paid. The House

estimates certain accounts payable balances based on financial activity determined on a threeͲyear averaging

methodology.

Advances from Others that represent advance payments received from other Federal government entities for shared

services, in advance of the delivery of these services. As the services are rendered the Advances from Others account is

drawn down and the appropriate revenue is recognized. The House received payments in advance of receipt of shared

services from the Library of Congress.

Capital Lease Liability that represents the portion recorded at the net present value of the minimum lease payments at

lease inception.

Unfunded Workers’ Compensation Actuarial Liability that represents an estimate based on actuarial calculations using

historical payment patterns to predict what costs will be incurred in the future. The liability is adjusted annually by

applying actuarial procedures. Any upward or downward adjustment to the liability is recorded as an annual increase or

decrease to benefits expense. The House calculated the actuarial liability based on a model developed by the U.S.

Department of Labor (DOL). The Federal Employees’ Compensation Act (FECA) provides income and medical cost

protection to covered Federal civilian employees injured on the job, employees who have incurred a workͲrelated

occupational disease, and beneficiaries of employees whose death is attributable to a jobͲrelated injury or occupational

disease. Claims incurred for the benefit of House employees under FECA are administered by DOL, which pays the initial

claim and obtains reimbursement from the House.

Accrued Payroll and Benefits and Annual Leave that represent both a funded and unfunded liability. A funded liability has

a corresponding appropriation to liquidate it. An unfunded liability is a liability that is incurred during the current or prior

year but is not payable until a future fiscal year for which an appropriation has not yet been received.

Accrued payroll and benefits include salaries and associated benefits earned in the current fiscal year and paid in the

subsequent fiscal year.

Annual leave for the House Officers and their employees is accrued as earned, and the liability is reduced as leave is

taken. The accrued annual leave balances are calculated according to Public Law 104Ͳ53, November 19, 1995, Sec. 109

Stat. 522 (i.e., the lesser of the employee’s monthly pay or the monthly pay divided by 30 days and multiplied by the

number of days of accrued leave). Sick and other types of paid leave are expensed as they are taken. The Members’ and

Committees’ Congressional Handbooks allow offices to adopt personnel policies that provide for the accrual of annual

leave and use of such leave. Leadership offices have also adopted similar policies. While leave is tracked from one pay

period to the next, a consistent policy has not been formally adopted by these entities regarding the accrual and payment

of leave time. Therefore, an accrued leave liability for Members, Committees, and Leadership offices is estimated on the

financial statements. In 2009, the estimate was based on a threeͲyear average of actual annual leave paid.

Other Intragovernmental Liabilities that represent the Accrued workers’ compensation amount billed by DOL that will be

paid in subsequent fiscal years and Unemployment compensation amounts owed to DOL.
Notes to the Financial Statements

62

Other Public Liabilities that represent amounts primarily related to Page School Security Deposits, amounts held pending

proper accounting disposition or amounts withheld from payments for goods and services received pending payment.

K. Revenue and Other Financing Sources

Appropriations

The House finances most of its operations through congressional appropriations of budget authority. To the extent that

revenue generated by some House entities does not cover expenses, appropriations are required. The House receives

annual, multiͲyear and noͲyear appropriations that may be used, within statutory limits, for operating and capital

expenditures. A financing source is recognized for these appropriated funds received, less appropriations transferred or

not available through rescission or cancellation. The House usually receives the full amount of its appropriation at the

beginning of each fiscal year. (See Note 15)



Exchange and NonͲExchange Revenue

The House classifies revenues as either exchange revenue or nonͲexchange revenue. Exchange revenue is derived from

transactions in which both the government and the other party receive value; and is recognized when goods have been

delivered or services rendered. The House’s exchange revenue consists of (1) sales of goods to the public for Office Supply

Service and Gift Shop sales; (2) sales of services to the public for child care fees, photography sales, postal fees and

Attending Physician fees; (3) interoffice sales between House entities for graphic services, telecommunications, office

supplies, framing, recording, office equipment, photography, and tape duplication; and (4) other revenue for Page School

room and board and vendor commissions. NonͲexchange revenue is derived from the government’s sovereign right to

demand payment. The House did not have nonͲexchange revenue during the fiscal year.

Imputed Financing from Cost Absorbed by Others (and Related Imputed Costs)

The House must recognize the amount of cost incurred by a Federal entity for goods or services provided and paid for in

total, or in part, by other Federal entities. Since the cost is not actually reimbursed to these Federal entities, an imputed

financing source is also recognized to offset the costs financed by the entities. The imputed cost and imputed financing

source for costs are associated with the occupancy of the U.S. Capitol and House office buildings under the custody of the

AOC and the Federal Employee and Veterans’ Benefits. The imputed cost is recognized in the Statement of Net Cost and

the imputed financing source is recognized in the Statement of Changes in Net Position.

Occupancy Cost:

The House must recognize an occupancy cost for the U.S. Capitol and House office buildings under the custody of the AOC

that are occupied by Members and staff in Washington, D.C. The House office buildings are comprised of the Cannon,

Ford, Longworth, Rayburn, and other buildings and facilities. The AOC receives an appropriation for the maintenance, care

and operations of the House office buildings, facilities and grounds; and costs associated with the acquisition and

maintenance of the land and buildings is accounted for by the AOC.

The imputed occupancy cost for the U.S. Capitol and House office buildings is calculated by multiplying the gross square

footage of the buildings by the estimated per square foot value.

Federal Employee and Veterans’ Benefits Cost:

FederalͲemploying entities recognize their share of the cost of providing future pension benefits to eligible employees at

the time the employees’ services are rendered. The pension expense recognized in the Statement of Net Cost is the

current service cost for House employees less the amount contributed by the employee.

The measurement of the service cost requires the use of actuarial cost methods and assumptions, with the factors applied

by the House provided by the Office of Personnel Management (OPM), the Federal agency that administers the plan. The

excess of the recognized pension expense over the amount contributed by the House represents the amount being

financed directly through the Civil Service Retirement and Disability Fund administered by OPM.

The House does not receive an appropriation to fund this cost. Therefore, this portion of the pension cost is considered an

imputed financing source to the House, and is included in the Imputed Financing from Costs Absorbed by Others on the

Statement of Changes in Net Position.
Notes to the Financial Statements

63

FederalͲemploying entities also recognize a current period expense for the future cost of postͲretirement health benefits

and life insurance for its employees while they are still employed. This cost is included in the Statement of Net Cost.

Employees and the House do not currently make contributions to fund these future benefits, and the House does not

receive an appropriation to fund this expense. Therefore, this portion of the postͲretirement health benefits and life

insurance is considered an imputed financing source to the House, and is included in Imputed Financing from Costs

Absorbed by Others on the Statement of Changes in Net Position. (See Note 16)

L. Leases

The House enters into operating leases for temporary usage of office space, vehicles, software, computers and other

equipment. Leases that convey the benefits and risks of ownership, but do not meet House capitalization criteria are also

recognized as operating leases. Operating lease payments are recorded as expenses. Future operating lease payments are

not accrued as liabilities. Members may lease office space in their districts through the U.S. General Services

Administration or may directly lease space from the private sector. Members and Officers also enter into leases to rent

vehicles for official business purposes.

The House also enters into capital leases for building structures and hardware. Assets under capital leases are structured

such that their terms effectively finance the purchase of the item. Such leases convey the benefits and risks of ownership

and are classified as capital leases, if the net present value of the minimum lease payments due at lease inception meets

House capitalization criteria. Items acquired by capital leases are recorded as House assets. The asset and corresponding

liability are recorded at the net present value of the minimum lease payments at lease inception. The portion of capital

lease payments representing imputed interest is expensed as interest on capital leases. (See Note 9)

M. Personnel and Benefits Compensation

House Members and employees are covered by either the Civil Service Retirement System (CSRS) or the Federal

Employees Retirement System (FERS). Both Members and employees are eligible for retirement benefits under CSRS or

FERS. A CSRS basic annuity, unreduced for age, debts to the fund, or survivor’s benefits, is calculated by multiplying the

highest 3 consecutive years’ average salary by a percentage factor which is based on the length of Federal service.

However, Members’ benefits are different from those of employees. For example, a Member covered by CSRS is eligible

to receive unreduced retirement benefits at age 60 if he or she has 10 years of Member service. An employee is eligible to

receive reduced benefits at age 50 with 20 years of service or at any age with 25 years of service. The FERS basic benefit

plan provides the same benefits for either Members or employees.

CSRS employees contribute a portion of their earnings to the Civil Service Retirement Fund. The House also contributes an

amount to this fund. FERS employees, in addition to paying Social Security, contribute a portion of their base earnings to

the FERS retirement fund. The House also contributes an amount toward the FERS retirement and Social Security funds.

Both FERS and CSRS employees can contribute to the Thrift Savings Plan (TSP) up to the IRS limit. FERS employees also

receive an automatic one percent HouseͲpaid contribution, as well as an additional House matching TSP contribution up

to five percent of their basic pay. CSRS employee contributions to TSP do not receive matching House contributions. FERS

employees could receive benefits from FERS, the Social Security System, and TSP. CSRS employees could receive benefits

from CSRS and TSP. (See Note 12)

N. Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the

reported amount of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the

financial statements, and the amount of revenue and expense reported during the period. Actual results could differ from

those estimates.
Notes to the Financial Statements

64

NOTE 2ͲFUND BALANCE WITH THE U.S. TREASURY AND CASH

Fund Balance with Treasury as of September 30, 2009 was:

Fund Balance with Treasury 2009

General and Other Funds 

House maintained $ 158,804,843

Congressional Use of Foreign Currency 33,706,776

Total General and Other Funds $ 192,511,619

Revolving Funds 20,692,905

Total $ 213,204,524

Status of Fund Balance with Treasury as of September 30, 2009 was:

Status of Fund Balance with Treasury 2009

Unobligated Balance 

Available $  41,909,014

Unavailable 59,473,698

Obligated Balance not yet Disbursed 111,821,812

Total $ 213,204,524

Unobligated balances reported for the status of Fund Balance with Treasury may not agree with unobligated balances

reported in the Statement of Budgetary Resources because the budgetary balances included adjustments to status of

funds.

Cash and Other Monetary Assets as of September 30, 2009 were:

Cash and Other Monetary Assets 2009

Cash on Hand $ 1,653

Total $ 1,653

NOTE 3ͲACCOUNTS RECEIVABLE, NET

Accounts Receivable, Net as of September 30, 2009 was:

Accounts Receivable, Net 2009

Accounts Receivable, Gross $ 1,289,880

Less:Allowance for Doubtful Accounts  (900,306)

Total $ 389,574

NOTE 4ͲINVENTORY AND RELATED PROPERTY, NET

Inventory and Related Property, Net as of September 30, 2009 were:

Inventory and Related Property, Net 2009

Operating Materials and Supplies Held for Use $427,955

Inventory Purchased for Resale 940,256

Total $ 1,368,211
Notes to the Financial Statements

65

NOTE 5ͲGENERAL PROPERTY AND EQUIPMENT, NET

General Property and Equipment, Net as of September 30, 2009 and the related depreciation and amortization expense

were:

Classes of

Property and

Equipment

Service

Life

(Years)

Estimated

Acquisition

Value

Accumulated

Amortization/

Depreciation

Estimated

Net Book

Value

Amortization/

Depreciation

Expense

Work in Process N/A $24,763,874 $Ͳ $ 24,763,874 $Ͳ

Computer Software and Hardware 3 87,676,143 74,847,751 12,828,392 5,397,421

Assets Under Capital Lease 3 4,000,184 111,116 3,889,068 2,124,728

Computer Software and Hardware 5 514,368 514,368 Ͳ Ͳ

Equipment 5 54,241,493 38,343,134 15,898,359 5,526,155

Motor Vehicles 5 10,686,103 8,820,869 1,865,234 1,508,871

Furnishings and Other Equipment 10 1,519,035 1,389,234 129,801 18,289

Assets Under Capital Lease 10 1,354,473 778,822 575,651 135,447

Leasehold Improvements 10 9,085,375 5,822,949 3,262,426 908,538

Total $ 193,841,048 $ 130,628,243 $ 63,212,805 $ 15,619,449

NOTE 6ͲSTEWARDSHIP PROPERTY AND EQUIPMENT

CollectionͲtype heritage assets as of September 30, 2009 were:

Heritage Assets 2009

Artwork 305

Artifacts 3,124

Total 3,429

The House’s heritage assets are directly related to its mission to document and preserve the legislative integrity and

traditions of the institution. Permanent authority for the Clerk of the House originated in the opening days of the First

Congress, when John Beckley was elected Clerk on April 1, 1789, pursuant to Article I of the Constitution: “The House of

Representatives shall chuse their Speaker and other Officers....” The Clerk’s responsibilities to document and preserve the

activities of Congress have grown over the centuries, and are found in Rules VII and XI of the House, and by the Rules of

the House of Representatives Fine Arts Board, established via 40 USC Sec. 188c (Public Law 100Ͳ696 [Title X]).

The House’s stewardship responsibility for its heritage assets includes those in or associated with the House, its legislative

history, Members and institutional heritage. Under the provisions of the House of Representatives Fine Arts Board, the

Clerk is responsible for the administration, maintenance, and display of the works of fine art and other similar property of

the Congress for display or for other use in the House wing of the Capitol, the House Office Buildings, or any other

location under the control of the House in accordance with Public Law 100Ͳ696. The House’s heritage assets are curated

by the House Curator in the Clerk’s Office of History and Preservation. The House Curator maintains records, both paper

and electronic, for works of art and artifacts. Staff and resources are devoted to the conservation and preservation of

heritage assets, using professional standards established by the American Institute for Conservation and the National

Archives and Records Administration. These standards provide for cleaning, storing, displaying, handling and protecting

the House’s heritage assets.

The House acquires heritage assets by purchase, transfer from Federal entities, gift, or by provision of federal law. Prior to

acquiring these assets, the House Curator, on behalf of the Clerk and the House of Representatives Fine Art Board,

conducts a formal process to ensure they meet minimum standards as required by the American Association of Museum’s
Notes to the Financial Statements

66

ethics guidelines and standards and best practices for accessioning of objects into museum collections. The House’s

collections continue to increase as it acquires additional assets and few items have been retired or disposed of to date.

Deaccessioning of objects and related withdrawals or disposals will only occur if the House Curator, in accordance with

the American Association of Museum’s guidelines and best practices, determines the asset is in irretrievable condition;

does not meet the needs of the collection; or withdraws due to exchange or gift of unwanted or duplicate copies. Staff

ensure that heritage assets remain in good condition, carefully preserving and saving these treasures for present and

future generations.

The Required Supplementary Information section of this report provides additional information on the condition of

stewardship heritage assets.

Descriptions of the types of heritage assets are:

Artwork

The House’s artwork encompasses oil and acrylic paintings, works on paper, and sculpture in bronze, marble and other

media.

Artifacts

The House’s historical artifacts include objects in all media, including but not limited to paper, metal, plaster, wood,

textile and stone.

NOTE 7ͲADVANCES AND PREPAYMENTS

Advances and Prepayments as of September 30, 2009 were:

Advances and Prepayments 2009

Advances $ 18,641

Prepayments 5,435,679

Total $ 5,454,320
Notes to the Financial Statements

67

NOTE 8ͲLIABILITIES

Liabilities covered and not covered by budgetary resources as of September 30, 2009 were:

Liabilities

Liabilities Covered by

Budgetary Resources

Liabilities Not Covered by

Budgetary Resources 2009

Current NonͲCurrent Current NonͲCurrent

Intragovernmental Liabilities 

Accounts Payable $1,308,443 $ Ͳ  $ Ͳ  $Ͳ $ 1,308,443

Advances from Others 641,483 Ͳ Ͳ Ͳ 641,483

Capital Lease Liabilities ͲͲ 148,755 728,662 877,417

Other Liabilities

Accrued Workers’ Compensation Ͳ Ͳ Ͳ 2,248,334 2,248,334

Unemployment Compensation 230,661 Ͳ Ͳ Ͳ 230,661

Total Other Liabilities 230,661 Ͳ Ͳ 2,248,334 2,478,995

Total Intragovernmental Liabilities 2,180,587 Ͳ 148,755 2,976,996 5,306,338

Public Liabilities

Accounts Payable 43,104,203 Ͳ Ͳ Ͳ 43,104,203

Actuarial FECA Liability ͲͲ Ͳ 21,458,664 21,458,664

Accrued Payroll and Benefits 9,170,015 Ͳ Ͳ Ͳ 9,170,015

Unfunded Accrued Annual Leave ͲͲ Ͳ 6,628,475 6,628,475

Capital Lease Liabilities 2,520,766 Ͳ Ͳ Ͳ 2,520,766

Other Liabilities 155,310 Ͳ Ͳ Ͳ 155,310

Total Public Liabilities 54,950,294 Ͳ Ͳ28,087,139 83,037,433

Total $ 57,130,881 $Ͳ  $ 148,755 $ 31,064,135 $ 88,343,771

NOTE 9ͲLEASE COMMITMENTS

Capital Leases

Assets Under Capital Lease as of September 30, 2009 were:

Summary of Assets Under Capital Lease 2009

Buildings Structures $ 1,354,473

Hardware 4,000,184

Accumulated Amortization (889,938)

Total $ 4,464,719
Notes to the Financial Statements

68

Future Capital Lease Payments Due as of September 30, 2009 were:

Year

Building

Structures Hardware Total

2010 $423,000 $712,538 $ 1,135,538

2011 423,000 712,538 1,135,538

2012 423,000 712,538 1,135,538

2013 423,000 712,538 1,135,538

2014 105,750 Ͳ 105,750

Thereafter Ͳ Ͳ Ͳ

Total Future Capital Lease Payments 1,797,750 2,850,152 4,647,902

Less:Imputed Interest (403,651) (329,386) (733,037)

Less:Executory Costs (516,682) Ͳ (516,682)

Net Capital Lease Liability $877,417 $ 2,520,766 $ 3,398,183

The House maintains capital leases for building structures and hardware. The occupancy agreement for the building

structures lease includes multiͲyear funding obligations of the tenant that state the agreement is cancelable upon 30 days

written notice. Space relinquishment rights and obligations state the agreement is cancelable by providing 30 days

written notice to the U.S General Services Administration. The terms and conditions for the hardware lease indicate the

House’s agreement to pay for products for the full multiͲyear lease term with the option to renew for fiscal years beyond

the initial fiscal year. The House also agrees that its right to not renew the lease for a fiscal year is limited solely to the

House not obtaining an appropriation for the year in an amount equal to or in excess of lease payments for the year. The

House may terminate the agreement in whole or in part as prescribed in the agreed upon settlement methodology.

Operating Leases

Future Operating Lease Payments Due as of September 30, 2009 were:

Year Vehicles Office Space Parking Total

2010 $846,925 $ 22,466,519 $ 216,979 $ 23,530,423

2011 296,402 5,383,344 40,572 5,720,318



Total $ 1,143,327 $ 27,849,863 $ 257,551 $ 29,250,741

The House maintains operating leases for vehicles and district office space and parking. The lease agreements are in

accordance with House rules and regulations and agreed upon vendor terms and conditions. The House requires that

leases entered into by Members for space be no longer than the elected term of the Member. The Members’

Congressional Handbook states that a Member cannot enter into a lease for office space beyond his/her elected term.

Members and Officers also enter into leases to rent vehicles for official business purposes. A Member may lease a vehicle

for a period that exceeds the current congressional term, but the Member remains personally responsible for the lease

liability if service to the House concludes prior to lease termination.

NOTE 10ͲCOMMITMENTS AND CONTINGENCIES

The House is not currently involved in any lawsuit where the outcome is probable and the amount can be estimated.
Notes to the Financial Statements

69

NOTE 11ͲINTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE

Intragovernmental Costs and Exchange Revenue as of September 30, 2009 are:

Intragovernmental Costs and Exchange Revenue 2009

Legislative Activities 

Intragovernmental Costs $249,792,974

Public Costs 1,324,513,444

Total Costs 1,574,306,418

Intragovernmental Earned Revenue (3,905,893)

Public Earned Revenue (6,513,361)

Total Earned Revenue (10,419,254)

Net Program Costs 1,563,887,164

Revolving Funds 

Intragovernmental Costs 170,482

Public Costs 3,129,932

Total Costs 3,300,414

Intragovernmental Earned Revenue (2,037,361)

Public Earned Revenue (1,725,005)

Total Earned Revenue (3,762,366)

Net Program Costs (461,952)

Total

Intragovernmental Costs 249,963,456

Public Costs 1,327,643,376

Total Costs 1,577,606,832

Intragovernmental Earned Revenue (5,943,254)

Public Earned Revenue (8,238,366)

Total Earned Revenue (14,181,620)

Net Cost of Operations $ 1,563,425,212

Intragovernmental costs and exchange revenue represent transactions made between two reporting entities within the

Federal government and are disclosed separately from costs and exchange revenue with the public (exchange

transactions made between the reporting entity and a nonͲFederal entity). Intragovernmental expenses relate to the

source of goods and services purchased by the reporting entity and not to the classification of related revenue. The

purpose of this classification is to enable the Federal government to provide consolidated financial statements, and not to

match public and intragovernmental revenue with costs that are incurred to produce public and intragovernmental

revenue. The net cost of the House’s operations includes gross costs incurred by the House less any exchange revenue

earned from House activities.
Notes to the Financial Statements

70

NOTE 12ͲPERSONNEL AND BENEFITS COMPENSATION

Member and EmployeePersonnel and Benefits Compensation 2009

Personnel Compensation $785,018,829

Retirement Plan Contributions 144,764,684

Social Security 52,846,066

Health Insurance 46,594,336

Student Loan/Fitness Center Programs 12,613,054

Unemployment and Workers’ Compensation 3,473,080

Transit Benefits 2,406,554

Life Insurance 1,218,081

Death Benefits 1,032,411

Annual Leave 496,691

Workers' Compensation Actuarial Adjustment (933,772)

Total $ 1,049,530,014

NOTE 13ͲEMERGENCY PREPAREDNESS

The House continues to develop contingency plans to ensure the continuation of all House Operations in the event of an

emergency evacuation. Approximately $20 million was expended in 2009.

NOTE 14ͲEXCHANGE REVENUES

Reporting entities that provide goods and services to the public or another Government entity should disclose specific

information related to their pricing policies. In certain cases, the prices charged by the House for the sale of goods and

services are set by House rules and regulations, which for program and other reasons may not represent full cost. In other

cases, prices set for goods and services are intended to recover the full costs incurred by these activities (e.g., child care

fees, postal fees, and Gift Shop sales to the public).
Notes to the Financial Statements

71

NOTE 15ͲNET POSITION

The components of Net Position are:

• Unexpended Appropriations ͲAppropriations are not considered expended until goods have been received or

services have been rendered.  The House has single and multiͲyear appropriations.  For multiͲyear

appropriations the House alternates each fiscal year between 15Ͳmonth and 27Ͳmonth multiͲyear funding.

Funds cancel two years after expiration and are no longer available for obligation or expenditure for any purpose

and are returned to the U.S. Treasury.

• Total Cumulative Results of Operations:

Cumulative Results of Operations Ͳ The net difference between expenses and revenue and financing sources

including appropriations, revenues from operations and imputed financing sources.

Invested Capital Ͳ Funds used to finance capital assets such as computer hardware and software, vehicles,

equipment, and inventory.

Future Funding RequirementsͲKnown liabilities to be funded by future appropriations for accrued Annual Leave

and Workers’ Compensation.

Funds that were canceled and returned to the U.S. Treasury as of September 30, 2009 were:

Appropriations Total

2007 (single) $ 12,641,660

2006 (multi) 382,270

2005 (multi) 325,809

Total $ 13,349,739

Net Position as of September 30, 2009 for Appropriated Funds and Revolving Funds, including the House Recording

Studio, Net Expenses of Equipment, Page School, House Services, Net Expenses of Telecommunications, and Stationery

revolving funds are shown in the following table:

Net Position 

Unexpended Appropriations  $ 155,434,854

Cumulative Results of Operations: 

Cumulative Results of Operations $6,756,768

Invested Capital 61,182,833

Future Funding Requirements (28,087,139)

Total Cumulative Results of Operations  39,852,462

Total Net Position  $ 195,287,316

Changes in net position may include prior period adjustments, excesses or shortages of revenue and financing sources

over expenses, and nonͲoperating changes, such as investments in capital assets and inventory. Increases (or decreases)

in nonͲoperating changes result when amounts invested in capital assets and inventory exceed (or are less than) the

amounts of liabilities to be funded by future appropriations.

The Net Position table above reflects an additional cumulative results of operations line which further disaggregates

activity other than invested capital or future funding requirements.
Notes to the Financial Statements

72

NOTE 16ͲIMPUTED FINANCING FROM COST ABSORBED BY OTHERS

The House must recognize an imputed cost and imputed financing source for costs associated with the occupancy of the

U.S. Capitol and House office buildings and Federal Employee and Veterans’ Benefits. The imputed cost is recognized in

the Statement of Net Cost and the imputed financing source is recognized in the Statement of Changes in Net Position.

Imputed Cost and Financing Source 2009

Federal Employee and Veteran’s Benefits 

Current Service CostͲFederal Employees Health Benefits $ 50,740,579

Current Service CostͲFederal Pensions 13,439,610

Current Service CostͲFederal Employees Group Life Insurance 118,949

Total Federal Employee and Veteran’s Benefits 64,299,138

Occupancy Costs 150,616,773

Total $ 214,915,911

NOTE 17ͲPERMANENT INDEFINITE APPROPRIATIONS

A permanent and indefinite appropriation is a standing appropriation which, once made, is always available for specified

purposes and does not require repeated action by Congress to authorize its use. Legislation authorizing an agency to

retain and use offsetting receipts tends to be permanent; if so, it is a form of permanent appropriation. This appropriation

is for an unspecified amount of money; and may appropriate all or part of the receipts from certain sources, the specific

amount of which is determinable only at some future date, or it may appropriate “such sums as may be necessary” for a

given purpose.

The House has two permanent and indefinite appropriations. These appropriations include the Compensation of

Members and Related Administrative Expenses and Congressional Use of Foreign Currency.

x Compensation of Members and Related Administrative Expenses is maintained and administered by the House.

Public Law 97Ͳ51, Sec. 130(c), Oct. 1, 1981, 95 Stat. 966, “Appropriation of funds for Compensation of Members

of Congress and for Administrative Expenses at Levels Authorized by Law and Recommended by the President for

Federal Employees”. The appropriation funds the payroll and benefits compensation for Members of Congress

and related administrative expenses in support of administering the fund.

x Congressional Use of Foreign Currency is maintained and administered by the Department of State on behalf of

the House. This account, which was established in 1948 and made permanent in 1981, is authorized by legislation

codified in Title 22, Sec. 1754 of the United States Code. The funds are available to Congressional Committees

and delegations to cover local currency expenses incurred while traveling abroad. Use of the foreign currency

account for Congressional delegations and other official foreign travel of the House is authorized by either the

Speaker of the House or the chairman of a Standing, Special and Select, or Joint Committee.
Notes to the Financial Statements

73

NOTE 18ͲEXPLANATION OF DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES

AND THE BUDGET OF THE U.S. GOVERNMENT

Differences between the Statement of Budgetary Resources and the Budget of the U.S. Government as of September 30,

2009 were:

Differences between the Statement of Budgetary

Resources and the Budget of the U.S. Government

Budgetary

Resources

Net

Outlays

Statement of Budgetary Resources $ 1,420,662,438 $ 1,362,982,732

Difference (1,662,438) 1,017,268

Budget of the U.S. Government $ 1,419,000,000 $ 1,364,000,000

The House deems the variances between the amounts reported in the Statement of Budgetary Resources and the actual

amounts reported in the Budget of the U.S. Government for budgetary resources and net outlays to be immaterial and/or

insignificant. As such, reconciliation of this item is not necessary and therefore not included.

NOTE 19ͲUNDELIVERED ORDERS AT THE END OF THE PERIOD



Undelivered Orders as of September 30, 2009 were:

Undelivered Orders at the End of the Period 2009

Undelivered Orders, Unpaid $ 58,008,337

Undelivered Orders, Paid 5,454,320

Total $ 63,462,657

Undelivered Orders represent the amount of paid and unpaid orders for goods and/or services ordered which have not

been received.
Notes to the Financial Statements

74

NOTE 20ͲRECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS

2009

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations incurred $ 1,400,135,747

Less: Spending Authority from Offsetting Collections and Recoveries (35,419,677)

Obligations Net of Offsetting Collections and Recoveries 1,364,716,070

Less: Offsetting Receipts Ͳ

Net Obligations 1,364,716,070

 

Other Resources

Donations/Forfeited Property Ͳ

Transfers in/out Without Reimbursement Ͳ

Imputed Financing from Costs Absorbed by Others 214,915,911

Net Other Resources Used to Finance Activities 214,915,911

Total Resources Used to Finance Activities 1,579,631,981



Resources Used to Finance Items not Part of the Net Cost of

Operations:

Change in Budgetary Resources Obligated for Goods, Services, 

and Benefits Ordered but not Yet Provided 8,087,112

Resources that Fund Expenses Recognized in Prior Periods 2,567,117

Budgetary Receipts and Offsetting Collections that do not affect Statement of Net Cost 

Resources that Finance the Acquisition of Assets 29,616,181

Other Resources or Adjustments to Net Obligated Resources that do not Affect Net Cost 

Total Resources Used to Finance Items not Part of the Net Cost of Ops 40,270,410

 

Total Resources Used to Finance the Net Cost of Operations $ 1,539,361,571

 

Components of Net Cost of Operations That will not Require

or Generate Resources in the Current Period:



Components Requiring or Generating Resources in Future Periods:

  Increase in Annual Leave Liability $496,691

  (Increase)/Decrease in exchange revenue receivable 254,374

  Other 1,352,957

Total Components of Net Cost of Operations Requiring or

  Generating Resources in Future Periods 2,104,022

   

Components not Requiring or Generating Resources:

  Depreciation and Amortization 15,619,449

  Revaluation of Assets or Liabilities 1,757,092

  Other 4,583,078

Total Components of Net Cost of Operations not Requiring or

  Generating Resources 21,959,619



Total Components of Net Cost of Operations that will not

Require or Generate Resources in the Current Period 24,063,641

 

Net Cost of Operations $ 1,563,425,212
75

Required Supplementary Informati on
Required Supplementary Informati on

76

Required Supplementary Information

Stewardship Property and Equipment

The U.S. House of Representatives (House) collection of heritage assets includes historical artwork and artifacts

that reflect the rich heritage and evolving nature of the House. The institution mirrors the changing face and history

of the nation. These ideals and trials of our history are also expressed in the heritage assets whose subject matter

includes prominent Americans and other distinguished individuals, significant moments in history, and symbolic

representations of the nation’s rich and diverse history.

The House’s Curator manages and cares for the House’s collection of works of art and artifacts under its jurisdiction

which are located throughout the U.S. Capitol complex including House office buildings and other locations under

the control of the House. Since these locations are not in a museum setting, works of art and artifacts may be

subject to damage from contact and surface deposits. However, it is the House’s goal to preserve its heritage assets

and manage the condition in accordance with the intended usage of the collection. The House conducts periodic

assessments to monitor, inspect and evaluate the condition of the heritage assets to determine the current

condition for preservation or restoration efforts. These assessments are performed in accordance with House

established procedures and professional standards. General conditions are categorized as excellent, good, fair and

poor. The House has determined its heritage assets to be in good to excellent condition.

The following tables present the general condition of the House’s heritage assets and indicate an aggregate

condition of the collection as of September 30, 2009:

Heritage Asset

Collection Description 2009

General

Condition

Artwork The works of art include oil and acrylic paintings, works on

paper, and sculpture in bronze, marble and other media.These

items range from portraits and historical documents to statues

and other works of art.

305 Good to

Excellent

Examples of the House’s collection of works of art include:

Oil Paintings

The House’s collection of oil paintings primarily consists of the portraits of House of Representatives’ Speakers and

Committee Chairmen. Examples of the oils on canvas include that of Henry Clay by Guiseppe Fagnani in 1852. Henry Clay

was one of the most prominent Speakers to serve in the Old Hall of the House. His portrait was the first of what was to

become the series of Speaker’s portraits in the House Collection. This portrait series became official with House

Resolution 164 in 1910, which decreed that the service of every speaker be commemorated with an oil portrait. All

Speaker portraits hang in the Speaker’s Lobby and in the East and West Chamber stairways that adjoin. Other oil

paintings cared for by the House include a portrait of George Washington, painted by American artist George Vanderlyn;

and an oil on canvas of Sam Rayburn of Texas, the longest serving Speaker of the House, painted by Douglas Chandor in

1941. George Washington’s painting hung in the Old Hall of the House and was moved with the Congress to the new

Chamber in 1858, where it remains today.

Acrylic Paintings

The House’s collection of acrylic paintings includes items such as Committee portraits painted in acrylic on canvas. One

such example is the portrait of former Chairman of the Committee on Appropriations, George Mahon.
Required Supplementary Informati on

77

Works on Paper

The House’s collection of works on paper includes items such as an early 19th century sketch of Speaker Jonathan Dayton.

Sculptures

The House’s collection of sculptures includes items such as several marble busts of former Speakers of the House,

including Speakers Thomas B. Reed, Joseph G. Cannon, James Beauchamp Clark, and Nicholas Longworth.

Heritage Asset

Collection Description 2009

General

Condition

Artifacts The artifacts include items in various types of media, including

but not limited to paper, metal, plaster, wood, textile and stone.

These items range from photographs and other historical

images, literature (e.g., newspapers, magazines, and handbills),

and political campaign buttons to engravings, furniture, and

other types of historical artifacts.

3,124 Good to

Excellent

Examples of the House’s collection of artifacts include:

Paper

The House’s collection of paper artifacts include items such as photographs of the House of Representatives Chamber in

1937; Visitor’s Gallery passes from various Representatives from the early 1900’s; detail of a tally sheet of the February

9, 1825 Electoral College vote from the records of the U.S. House of Representatives with the names of Andrew Jackson

of Tennessee, John Quincy Adams of Massachusetts, William H. Crawford of Georgia, and Henry Clay of Kentucky

appearing written in longhand; and Campaign Cards and other memorabilia of various Representatives dating back to

the early 1900s. Also included in the collection are a New York Times photo spread of the Congressional Baseball Game

in 1912 and an artifact of the House Chamber of the Congressional Pugilists etching on woven paper in 1798. The

etching comically illustrated the event of the first known instance of the presentation of a mace that took place in

Congress Hall in Philadelphia, on January 30, 1798.

Metal

The House’s collection of metal artifacts includes items such as an artifact of the House Chamber, the Mace of the U.S.

House of Representatives. The Mace is among the oldest and most important symbols of our nation’s government. It is

composed of thirteen ebony rods, representing the original states in the union, bound together with silver bands,

symbolizing authority and the strength of unity. The shaft is topped by a silver globe with the continents etched into the

globe and North America facing front; and surmounted by an intricately cast solid silver eagle, the national bird, with its

wings spread. It is used to indicate the House is in session; the House is meeting as the Committee of the Whole House

on the State of the Union; or to maintain order on the House floor. Also included in the collection is the “The Ascent to

the Capitol”, a steel engraving by William Henry Bartlett in 1839; and the historic inkwell that sits on the Speakers desk

when the House is in session, which dates back to the 19th century. The inkwell is known to have been used as long ago

as 1821 in the Old Hall of the House before the Members moved to the present chamber.

Plaster

The House’s collection of plaster artifacts include items such as several small 1932 busts of George Washington,

presented to Members of Congress on the bicentennial of the first president’s birth.

Wood
Required Supplementary Informati on

78

The House’s collection of wood artifacts includes items such as the gavel used by Speaker Nancy Pelosi to open the

110th Congress as the first woman to serve as the House’s presiding officer; a Thomas Constantine Cabinet Shop, 1819

mahogany House Chamber Desk; and a Thomas Constantine Cabinet Shop, 1819 mahogany House Chamber Chair.

Textile

The House’s collection of textile artifacts includes items such as a recent vintage of a House Page uniform, donated to

the collection by a former Page.

Stone

The House’s collection of stone artifacts includes items such as a small piece of the U.S. Capitol East front stairs.