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U.S. Department of State

2003 - Fourth Quarter 

The CRonicle is a publication of the Office of Commissary and Recreation Affairs

In this Issue:

● 

Closing the Doors on After Hours Shopping

● 

Selecting an Auditor

● 

Assessment Payment Note

● 

Frequently Asked Questions

● 

New on the World Wide Web

● 

Excess Cash?

Closing the Doors on

AFTER HOURS SHOPPING
For retailers in the U.S., the push to extend hours of operation has meant greater convenience for consumers in many segments of the 

market. All things considered, it's all about convenience, right? Convenience is the driving force behind many successful employee 

association commissaries. Except that the convenience an employee association commissary brings is typically a matter of location rather 

than hours of operation. In fact, employee association commissaries are not known for extended hours. And, they shouldn't be. Any 

small business retailer will tell you that the most effective way to cut overhead is to review hourly sales over an extended period of time 

and adjust hours of operation accordingly. Employee association commissaries, on average, operate 3-4 days per week, 5-7 hours per 

day. Some larger facilities do open 5-6 days, 6-8 hours per day. While there is no one plan that will work for all employee associations, the 

key is to ensure profitability for all hours of operation. For smaller associations that may mean very limited hours of operation, which equates 

to less convenience for members. 

We are finding that in such instances, employee associations are experiencing what we call "after hours" shopping. We've defined "after 

hours" shopping as the practice of allowing association members to help themselves to commissary goods outside of posted business 

hours with or without management's approval to do so. Some individuals leave cash with a note detailing the item/items removed from 

the shelf. Some leave notes requesting to be billed. It is possible that some just leave. While the latter is most likely not the case, it can 

be impossible to pinpoint even with tightly controlled inventory management practices. The bottom line is that when goods are not secured 

and accounted for you open yourself up to a serious breach of internal controls. How often can you enter a local market after closing, remove 

a gallon of milk from the shelf and leave a note? Such a practice is unheard of and for good reason. It is poor management practice to do 

so. Employee associations must maintain the industry standard of adhering to posted hours of operation to ensure the integrity of 

internal controls. This is why CR does not allow "after hours" shopping to members. 

Employee associations experiencing "after hours" shopping must find ways to restrict access to the commissary during non-store hours. It is 

up to the Board of Directors to develop and implement a policy prohibiting the practice of "after hours" shopping. If you have any questions 

in doing so, please contact the CR Operations Team.

 

It's That Time

SELECTING AN AUDITOR

It is that time of year. Employee associations should be planning for the year 2003 audit. An audit is the process for testing the accuracy 

and completeness of information presented in an organization's financial statements. This process enables the auditor to issue an "opinion" 

on how fairly the organization's financial statements represent its financial position and compliance with Generally Accepted 

Accounting Principles (GAAP). 

Employee associations are required to submit an independent audit to CR each year. An audit for the period January 1, 2003 - December 

31, 2003 is due May 1, 2004. 

The responsibility for the selection of the auditor rests with the Board of Directors. Board members may choose to select an auditor on 

the basis of competitive bidding. If so, the request for proposals should be sent to potential auditors, clearly setting forth the scope of the 

audit and the kinds of services to be performed. Such aspects as the activities to be audited and the period to be covered should be 

clearly outlined in the request for proposals.

Also, you will want to ask that bidders provide the following information:

● 

 What qualifications and experience does the auditor possess? 
 

 What is the timeframe for conducting the audit (in other words, when can it commence and how much time is anticipated for it to be completed)? 

● 

Does the auditor know/understand U.S. Generally Accepted Accounting Principles (USGAAP) and U.S. Generally Accepted Auditing Standards 

(USGAAS) or International Financial Reporting Standards (IFRS)? 

● 

 How much is the fee and is the fee a flat cost or an hourly based fee? 

● 

 Have incidental expenses been budgeted?

A thorough review should be given to the submitted proposals and due recognition to both price and quality as far as can be determined. 

Once selected, the auditor's cost estimate or fee structure should be binding unless unforeseen circumstances arise necessitating that 

the estimate be exceeded. All the details of the audit should be specifically identified in a contract or engagement letter including the type 

of clerical assistance that will be provided to the auditor, if any.

 Each year, CR provides employee associations with audit guidelines and instructions for completing a physical inventory. For the year 

2003, you may refer to State cables 269582 and 262282 respectively. Please note, these guidelines should be provided to the 

association's potential auditors for review prior to accepting bids.

 If you need assistance in preparing a request for bids, analyzing proposals, and/or selecting an auditor, please contact the CR

Accounting Team. We will be happy to assist you.

Assessment Payment Note

Have you checked off that final year 2003 reporting requirement? You know, the assessment payment. Each year, 

employee associations are required to submit an assessment payment based on the gross revenue of the previous calendar year. 

Assessment notifications were provided employee associations via cable in September. Payments were due November 1. Some 

payments remain outstanding. If you have not received a confirmation from us acknowledging receipt of your payment, please contact the 

CR Accounting Team. 

FAQs

Each month, we receive many different questions from association managers, post management, Boards of Directors and 

sometimes members about employee association operations. Not every question is as unique as one might think. In fact, many 

of you have the same concerns, comments and/or questions. We thought we would share some of those with you along with 

our guidance.

 Q: Do we have to charge a fee to TDY employees? There is no requirement to charge TDYers a fee for utilizing employee 

association facilities. But, why wouldn't you? A nominal fee charged to TDYers can be a great source of income for the employee 
association. You'll need to determine what the market will bear. This will be different for each employee association and will depend upon 

what you have to offer and how captive your audience is. For example, a TDYer may not be inclined to pay a weekly fee for the privilege 

of purchasing a candy bar and logo mug for his one day trip to post. When I stayed in Athens as a TDYer a few years back, I paid a TDY fee 

of $5 for the week and had unlimited access to the commissary, gift shop and fitness center. What a bargain!

Q: Do we have to hire an eligible family member (EFM) as a manager? No. Employee associations are private, nongovernment organizations and are not subject to Federal recruitment and hiring regulations. The Board of Directors should welcome 

all qualified applicants and should hire the best qualified applicant based on his/her experience, education and qualifications. 

Q: Do we have to hire a manager at all? If operations are limited enough to be run by the volunteer Board and association members, you 

can save money by eliminating the position of general manager. However, internal control practices must be in place to ensure that 

the association's assets are adequately safeguarded. 

Q: Are there any guidelines concerning shelf life for food items in the commissary? CR maintains guidelines based on 

industry standards in the U.S. Management should adhere to these standards not only to ensure customer satisfaction but for liability 

purposes as well. If a member falls ill as a result of goods purchased in the commissary, the association could very well be held liable. 

Each week, management should inspect the sales floor and stockrooms to identify near-expired goods and progressively discount these 

until the stock is depleted. 

Q: What is the policy on employee association use of the diplomatic pouch? Employee associations' use of the diplomatic pouch 

is restricted to official letter mail with one exception. Employee associations at Category B posts (no APO or FPO) with a 15% or 

greater hardship allowance may order (through the pouch) up to 10 videocassettes or DVDs per month for rental to employee 

association members. Said videos/DVDs may not be sold or resold but strictly used for rental purposes. No other use of the diplomatic 

pouch by employee associations is authorized.

Do you have a question you believe would benefit your colleagues? Let us reprint your question and our response in a future edition 

of The CRonicle. Submissions may be sent to Senior Editor Annie Cocchario at foodandfun@state.gov. 

 New on the World Wide Web!

Check out our Internet Web site for the following additions:

● 

Updated Internal Revenue Service instructional

● 

Updated CR staff list (Operations Officer Christy Chesnutt recently married and changed her last name)

● 

Collective Cable 03-006 with Audit Guidelines for 2003

● 

Collective Cable 03-005 provides guidelines for conducting the year-end inventory
Excess Cash?

While "excess cash" is not altogether common to most employee associations, associations that do have extra 

money should be using that money wisely. One particularly wise way to use the money is to invest it.

With money market and T-Bill returns at unprecedented low levels, organizations are seeking higher returns on assets while 

maintaining essential liquidity and safety. This has led to the development of "Enhanced Cash" investments that provide a higher yield 

by extending the maturity beyond that of a money market fund. 

Enhanced Cash is a highly liquid cash vehicle with next day settlement. The portfolio invests in U.S. Government agency instruments, with 

a credit quality of AAA. The credit quality of this portfolio is especially attractive compared with the credit quality of a money market fund 

or certificates of deposit that derive credit quality from the issuing bank. While no rate of return is guaranteed, the return on the portfolio 

is typically 20-50 basis points above the conventional money market instrument.

Riggs Banks is now offering a special Enhanced Cash group program for employee associations with excess cash. Employee 

associations investing in enhanced cash portfolios earn interest on money that would otherwise be sitting idle in a bank account. 

Portfolios would be customized to meet individual employee association investments needs. 

While the AAA rating does provide safety, there is a potential downside. If rates rise, an individual instrument that has not been called and 

has more than a one-year maturity may decline in current market value. Realization of such a decline could be avoided by not liquidating 

the paper until it has less than one year to mature, although other factors might prevent holding the paper to avoid realizing the 

decline. Because of this risk, Riggs Investment Advisors is required to say that these instruments are not insured or guaranteed and loss 

of value is a possibility.

Riggs Investment Advisors normally requires investment funds at a minimum account size of one million USD. However, Riggs will 

manage smaller accounts for employee associations. 

The above article was provided by Phil Brown of Riggs Bank Investment Advisors. For more information, 

contact riggsinvestmentadvisors@riggsbank.com. General questions regarding investments may be directed to the CR Accountants 

at foodandfun@state.gov. Information on other banking institutions is available from the CR Supplier Director available from our web site. 

The next edition of The CRonicle will be published in January 2004.

See you next year! 
 

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