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entitled 'Financial Audit: Congressional Award Foundation's Fiscal 
Years 2004 and 2003 Financial Statements' which was released on 
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Report to the Congress: 

November 2005: 

Financial Audit: 

Congressional Award Foundation's Fiscal Years 2004 and 2003 Financial 
Statements: 

GAO-06-168: 

Contents: 

Letter: 

Auditor's Report: 

Opinion on Financial Statements: 

Opinion on Internal Control: 

Compliance With Laws and Regulations: 

The Foundation's Ability to Continue as a Going Concern: 

Objectives, Scope, and Methodology: 

Foundation's Comments: 

Financial Statements: 

Statements of Financial Position: 

Statements of Activities: 

Statements of Cash Flows: 

Notes to Financial Statements: 

Letter November 4, 2005: 

The President of the Senate: 
The Speaker of the House of Representatives: 

This report presents our opinion on the financial statements of the 
Congressional Award Foundation for the fiscal years ended September 30, 
2004, and 2003. These financial statements are the responsibility of 
the Congressional Award Foundation. This report also presents (1) our 
opinion on the effectiveness of the Foundation's related internal 
control as of September 30, 2004, and (2) our conclusion on the 
Foundation's compliance in fiscal year 2004 with selected provisions of 
laws and regulations we tested. We conducted our audit pursuant to 
section 107 of the Congressional Award Act, as amended (2 U.S.C.  
807), and in accordance with U.S. generally accepted government 
auditing standards. This report also includes our determination 
required under section 104 (c)(2)(A) of the Act (2 U.S.C.  
804(c)(2)(A)) relating to the Foundation's financial operations. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-3406 or by e-mail at [Hyperlink, 
sebastians@gao.gov]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
letter. Key contributors to this report were Amy Bowser, Erik Huff, 
Julie Phillips, and Patricia Summers. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

Auditor's Report November 4, 2005: 

The President of the Senate: 
The Speaker of the House of Representatives: 

We have audited the statements of financial position of the 
Congressional Award Foundation (the Foundation) as of September 30, 
2004, and 2003, and the related statements of activities and statements 
of cash flows for the fiscal years then ended. We found: 

* the financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles, although substantial doubt exists about the Foundation's 
ability to continue as a going concern; 

* the Foundation did not have effective internal control over financial 
reporting (including safeguarding assets) and compliance with laws and 
regulations; and: 

* a reportable noncompliance with one of the laws and regulations we 
tested. 

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

Opinion on Financial Statements: 

The financial statements and accompanying notes present fairly, in all 
material respects, in conformity with U.S. generally accepted 
accounting principles, the Foundation's financial position as of 
September 30, 2004, and 2003, and the results of its activities and its 
cash flows for the fiscal years then ended. However, material 
misstatements may nevertheless occur in information reported by the 
Foundation on its financial status to its Board of Directors and others 
as a result of the material weakness[Footnote 1] in internal control 
over financial reporting described in this report. 

As discussed in a later section of this report and in Note 12 to the 
financial statements, the Foundation continues to experience increasing 
difficulties in meeting its financial obligations. The Foundation's 
continuing financial difficulties and deteriorating financial condition 
raise substantial doubt, for the third consecutive year, about its 
ability to continue as a going concern.[Footnote 2] The financial 
statements have been prepared under the assumption that the Foundation 
would continue as a going concern, and do not include any adjustments 
that would need to be made if the Foundation were to cease operations. 

Opinion on Internal Control: 

Because of the material weakness in internal control discussed below, 
the Foundation did not maintain effective internal control over 
financial reporting (including safeguarding assets) or compliance with 
laws and regulations, and thus did not provide reasonable assurance 
that losses, misstatements, and noncompliance with laws material in 
relation to the financial statements would be prevented or detected on 
a timely basis. Our opinion is based on criteria established in our 
Standards for Internal Control in the Federal Government.[Footnote 3] 

The deteriorating financial condition of the Foundation led to further 
deterioration in its control over its financial reporting process 
during fiscal year 2004, impeding its ability to prepare timely and 
accurate financial statements. The lack of an individual with 
accounting and financial management expertise taking responsibility for 
the Foundation's financial operations during the period,brought about 
by the Foundation's lack of funds, prevented it from fulfilling this 
and other key financial operations, and contributed to its inability to 
maintain current and accurate financial records. We reported on this 
matter during our audit of the Foundation's fiscal year 2003 financial 
statements. 

The Foundation's Director of Finance and Administration resigned his 
paid position at the Foundation and became Treasurer of the 
Congressional Award Board of Directors, an unpaid position, during 
fiscal year 2003. He continued to perform, on a limited and voluntary 
basis, some of the duties associated with his former position during 
the first three quarters of fiscal year 2004, as the continued shortage 
of funds precluded the Foundation from hiring a replacement. This 
resulted in the Foundation continuing to be unable to fulfill its 
financial reporting responsibilities, particularly with respect to 
preparing timely and accurate financial statements. For example, 
because the Foundation did not always record transactions in its 
general ledger as they occurred during the year, numerous entries had 
to be made to the general ledger as late as 12 months after fiscal year-
end. These entries were ultimately prepared and recorded by a part-time 
bookkeeper hired 6 months after the end of the fiscal year. However, 
these entries were not adequately reviewed by Foundation management to 
ensure their completeness and accuracy. This resulted in the need for 
management to make material adjustments to correct errors we identified 
during our audit. 

Additionally, the Foundation continued to lack appropriate written 
procedures for making closing entries in its financial records and for 
preparing complete and accurate financial statements. At the conclusion 
of our audit of the Foundation's fiscal year 2003 financial statements, 
we stressed to the Foundation's management the importance of 
documenting the Foundation's financial reporting policies and 
procedures, and further stressed that the policies and procedures 
should detail such functions as the monthly closing procedures, 
preparation of the financial statements, and review of financial data 
by management. The continued lack of written policies and procedures 
contributed to the errors we identified during our audit of the 
Foundation's fiscal year 2004 financial statements. 

The Foundation was ultimately able to produce financial statements that 
were fairly stated in all material respects for fiscal years 2004 and 
2003. However, the process was long and laborious, due to the lack of 
1) appropriate written policies and procedures and 2) routine 
maintenance of the Foundation's financial books and records by 
personnel experienced in accounting and financial management. As a 
result, material corrections were required between the first draft of 
the financial statements and the final version. Additionally, the 
Foundation's continued lack of an effective financial reporting process 
forced us for the second consecutive year to notify its congressional 
oversight committees that we would be unable to meet our May 15, 2005, 
statutorily mandated audit reporting date. Consequently, the 
Foundation's weakness in internal control over its financial reporting 
process resulted in its inability to prepare reliable financial 
statements on time and to produce financial information to support 
management decision making. This is especially critical in light of the 
Foundation's precarious financial condition--when accurate and timely 
financial information is of utmost importance to make prudent and 
informed operational decisions. 

Foundation management asserted that its internal control during the 
period were not effective over financial reporting or compliance with 
laws and regulations based on criteria established under Standards for 
Internal Control in the Federal Government. In making its assertion, 
Foundation management stated the need to improve control over financial 
reporting and compliance with laws and regulations. Although the 
weakness did not materially affect the final fiscal year 2004 financial 
statements as adjusted for misstatements identified by the audit 
process, this deficiency in internal control may adversely affect any 
decision by management that is based, in whole or in part, on 
information that is inaccurate because of the deficiencies. Unaudited 
financial information reported by the Foundation may also contain 
misstatements resulting from these deficiencies. 

Compliance With Laws and Regulations: 

Our tests for compliance with relevant provisions of laws and 
regulations disclosed one area of material noncompliance that is 
reportable under U.S. generally accepted government auditing standards. 
This concerns the Foundation's ability to ensure that it has 
appropriate procedures for fiscal control and fund accounting and that 
its financial operations are administered by personnel with expertise 
in accounting and financial management. 

Specifically, section 104(c)(1) of the Congressional Award Act, as 
amended (2 U.S.C.  804(c)(1)), requires the Director, in consultation 
with the Congressional Award Board, to "ensure that appropriate 
procedures for fiscal control and fund accounting are established for 
the financial operations of the Congressional Award Program, and that 
such operations are administered by personnel with expertise in 
accounting and financial management." The Comptroller General is 
required by section 104(c)(2)(A) of the Congressional Award Act, as 
amended (2 U.S.C.  804(c)(2)(A)), to (1) annually determine whether 
the Director has substantially complied with the requirement to have 
appropriate procedures for fiscal control and fund accounting for the 
financial operations of the Congressional Award Program and to have 
personnel with expertise in accounting and financial management to 
administer the financial operations, and (2) report the findings in the 
annual audit report. 

We reported a material internal control weakness in financial 
reporting--due in part, to a lack of written policies and procedures-- 
in our audit report covering fiscal year 2003. For calendar year 2004, 
the Foundation still did not have appropriate written fiscal procedures 
for its financial operations. Additionally, the Foundation recorded 
entries for only half of the calendar year, leaving many of the 
financial transactions of the Foundation unrecorded during 2004. 

For 2004, because the Foundation did not have appropriate fiscal 
procedures and did not have an individual with expertise in accounting 
and financial management to routinely administer the procedures and 
account for the financial operations of the Foundation, we determined 
that the Director did not substantially complied with the requirements 
in section 104(c)(1) of the Congressional Award Act, as amended (2 
U.S.C.  804(c)(1)).[Footnote 4] Under the requirements of section 
104(c)(2)(B) of the Congressional Award Act, as amended (2 U.S.C.  
804(c)(2)(B)), if the Director fails to comply with the requirements of 
section 104(c)(1) of the Act, the Director is to prepare, pursuant to 
section 108 of the Act,[Footnote 5] for the orderly cessation of the 
activities of the Board. The Foundation's Board Chairman stated that 
during fiscal year 2005, its Board elected several new Board Members 
and the Foundation hired an accountant to focus on improving financial 
management. The newly elected Treasurer and Audit Committee Chair are 
working with the National Office staff to improve internal control over 
financial reporting and develop written fiscal policies and procedures 
for financial operations and reporting. Additionally, the accountant is 
to help ensure the accurate and timely accounting and reporting of 
financial information occurs. 

Except as noted above, our tests for compliance with selected 
provisions of laws and regulations for fiscal year 2004 disclosed no 
other instances of noncompliance that would be reportable under U.S. 
generally accepted government auditing standards. However, the 
objective of our audit was not to provide an opinion on overall 
compliance with laws and regulations. Accordingly, we do not express 
such an opinion. 

The Foundation's Ability to Continue as a Going Concern: 

The Foundation incurred losses (decreases in net assets) of almost 
$168,000 and $6,000 in fiscal years 2004 and 2003, respectively. 
Although the Foundation's expenses decreased by over $166,000 between 
fiscal years 2003 and 2004, revenues decreased even more--by about 
$290,000, largely attributable to a nearly $334,000 decline in 
contributions. Net assets as of September 30, 2004 were approximately 
$42,000. 

During fiscal year 2002, the Foundation borrowed $100,000, the maximum 
amount allowable against its revolving line of credit, due to ongoing 
cash flow problems associated with its daily operations. This debt, 
partially secured by a $50,000 certificate of deposit, remained 
outstanding at September 30, 2004. 

Note 12 to the financial statements acknowledges the Foundation's 
increasing difficulties in meeting its financial obligations. While the 
Foundation has taken steps to decrease its expenditures and 
liabilities, those steps may not be sufficient to allow it to continue 
operations. For example, accounts payable at September 30, 2004, were 
approximately $135,500, with 86 percent of that amount representing 
unpaid balances owed to vendors from expenses incurred in fiscal year 
2002. The Foundation was able to negotiate with certain of its vendors 
to cancel nearly $39,000 in liabilities to these vendors subsequent to 
the end of the fiscal year. However, unaudited financial data compiled 
by the Foundation as of September 30, 2005, showed that its financial 
condition has not improved. This raises substantial doubt about the 
Foundation's ability to continue as a going concern, absent a means of 
generating additional funding. 

As discussed earlier, during fiscal year 2003, the Director of Finance 
and Administration resigned his position at the Foundation and became 
Treasurer of the Congressional Award Board of Directors. This move was 
in part because of the Foundation's deteriorating financial condition. 
In another effort to keep expenses to a minimum, the Foundation reduced 
its staff by over one-half during fiscal year 2004. Additionally, 
during the second half of fiscal year 2004, the Foundation's Board 
directed the National Director to reduce his pay by 50 percent in order 
to further control Foundation expenses. The National Director retired 
as of September 30, 2004, and the Foundation promoted the Program 
Director to serve as the Acting National Director. 

In its plan to deal with its deteriorating financial condition and 
increase its revenues, the Foundation modified its approach to 
fundraising by holding more frequent but smaller and less expensive 
fundraising events than in the past. However, these smaller fundraisers 
did not increase contributions which, as noted above, decreased by 
$334,000 or 54 percent between fiscal years 2003 and 2004. To further 
improve fundraising efforts, the Foundation stated that its Board 
created a Congressional Liaison Committee, Development Committee, and 
Program Committee during fiscal year 2005. The newly elected 
Development Chairperson is leading fundraising initiatives in the 
corporate community, including pursuing grant opportunities, and the 
Foundation continues to work with professional fundraisers to more 
actively involve congressional members. At present, the Foundation is 
prohibited from receiving federal funds, but is permitted to receive 
certain in-kind and indirect resources, as explained in Note 5 to the 
financial statements. The Foundation has attempted, but has been 
unsuccessful, in securing federal funding through a direct 
appropriation. 

On July 14, 2005, the Senate passed S. 335 to reauthorize the 
Congressional Award Board, which terminated on October 1, 
2004,[Footnote 6] until October 1, 2009. The bill was received in the 
House of Representatives and was referred to the Committee on Education 
and the Workforce on July 19, 2005. Subsequently, on September 22, 
2005, H.R. 3867, which is identical to S. 335, was introduced in the 
House to reauthorize the Board and was also referred to the Committee 
on Education and the Workforce. The ultimate outcome of the 
reauthorization efforts was unknown at the date of our report. 

Objectives, Scope, and Methodology: 

The Foundation's management is responsible for: 

* preparing the annual financial statements in conformity with U.S. 
generally accepted accounting principles; 

* establishing, maintaining, and assessing the Foundation's internal 
control to provide reasonable assurance that the Foundation's control 
objectives are met; and: 

* complying with applicable laws and regulations. 

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

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

* Compliance with laws and regulations-transactions are executed in 
accordance with laws and regulations that could have a direct and 
material effect on the financial statements. 

We are also responsible for testing compliance with selected provisions 
of laws and regulations that have a direct and material effect on the 
financial statements. 

In order to fulfill these responsibilities, we: 

* examined, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements; 

* assessed the accounting principles used and significant estimates 
made by Foundation management; 

* evaluated the overall presentation of the financial statements and 
notes; 

* read unaudited financial information for the Foundation for fiscal 
year 2005; 

* obtained an understanding of the internal control related to 
financial reporting (including safeguarding assets) and compliance with 
laws and regulations; 

* tested relevant internal control over financial reporting and 
compliance and evaluated the design and operating effectiveness of 
internal control; and: 

* tested compliance with selected provisions of the Congressional Award 
Act, as amended. 

We did not evaluate internal control relevant to operating objectives, 
such as controls relevant to ensuring efficient operations. We limited 
our internal control testing to controls over financial reporting and 
compliance. 

We did not test compliance with all laws and regulations applicable to 
the Foundation. We limited our tests of compliance to those provisions 
of laws and regulations that we deemed to have a direct and material 
effect on the financial statements for the fiscal year ended September 
30, 2004. We caution that noncompliance may occur and not be detected 
by our tests and that such testing may not be sufficient for other 
purposes. 

We performed our work in accordance with U.S. generally accepted 
government auditing standards. 

Foundation's Comments: 

In commenting on a draft of this report, the Foundation discussed past 
and ongoing efforts to obtain reauthorization for the Foundation, as 
well as its efforts to improve its financial condition through 
increases in revenues and reductions in expenses to support the growth 
in the Congressional Award program. The Foundation also discussed its 
efforts to improve its financial management. 

The Foundation noted that in fiscal year 2004, a bill to reauthorize 
the Foundation and provide it authority to receive direct federal 
appropriations of $750,000 of matched funds annually through 2009 was 
passed unanimously by the Senate. However, the bill did not pass the 
House of Representatives. Since then, the Foundation has continued to 
seek reauthorization of the program, excluding the provision for 
federal appropriations. The Foundation noted that legislation 
reauthorizing the Foundation again passed the Senate in 2005, and is 
currently being considered by the House of Representatives. 

The Foundation also noted its efforts to increase revenues. With newly 
appointed Foundation Board Members and fundraising consultants, the 
Foundation stated it had developed ways to recruit new donors and keep 
current and former donors informed and engaged. In order to raise 
awareness and funding for the program, the Foundation holds events with 
members of Congress in Washington, D.C. Several events were held in 
fiscal year 2004 and similar fund-raising events continued in fiscal 
year 2005. In addition, the Foundation noted that it continued to hold 
its annual Congressional Award Golf Classic during 2005 as another 
fundraising event. 

At the same time, the Foundation noted that it continues to keep its 
expenses down. The Foundation noted that in fiscal year 2004, it had 
reduced operating expenses to less than $595,000 (down from about 
$760,000 in fiscal year 2003) and reduced its staff by 50 percent. The 
Foundation stated that it currently has only five full-time employees 
and four unpaid interns to oversee program activity in all 50 states. 
With the program continuing to grow, the Foundation stated that it is 
using new methods to operate the program at very little cost. By 
utilizing the Web site and online tools, the Foundation stated that it 
is able to communicate with new and current participants, parents, 
volunteers, congressional offices, and donors electronically, which 
minimizes printing, postal, and travel expenses. 

The Foundation also emphasized its efforts to improve its financial 
management, noting that the newly elected Treasurer and Audit Committee 
Chair are working with the Foundation's National Office staff to 
improve internal control over financial reporting and develop written 
fiscal policies and procedures for financial operations and reporting. 
The Foundation noted that the accountant it hired in 2005 will help 
ensure that accurate and timely accounting and reporting of financial 
information occurs. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

October 21, 2005: 

[End of section] 

Financial Statements: 

Statements of Financial Position: 

The Congressional Award Foundation Statements of Financial Position As 
of September 30, 2004 and 2003: 

Assets: 

Cash and cash equivalents; 
2004: $6,616; 
2003: $9,206. 

Investments; 
2004: $53,611; 
2003: $52,039. 

Contributions receivable, net (note 3); 
2004: $60,573; 
2003: $160,021. 

Prepaid expense; 
2004: $3,545; 
2003: $2,477. 

Congressional Award Fellowship Trust (note 4); 
2004: $195,551; 
2003: $230,466. 

Equipment, furniture, and fixtures, net; 
2004: $15,848; 
2003: $28,925. 

Total assets; 
2004: $335,744; 
2003: $483,134. 

Liabilities and net assets: 

Accounts payable (note 9); 
2004: $135,503; 
2003: $150,343. 

Line of credit (note 8); 
2004: $100,000; 
2003: $100,000. 

Accrued payroll, related taxes, and leave; 
2004: $57,613; 
2003: $22,209. 

Obligation under capital lease; 
2004: $462; 
2003: $460. 

Total liabilities; 
2004: $294; 
2003: $273. 

Net assets: 

Unrestricted (note 4); 
2004: $10,540; 
2003: -$250,133. 

Temporarily restricted (note 6); 
2004: $31,626; 
2003: $195,798. 

Permanently restricted (note 4); 
2004: $0; 
2003: $264,457. 

Total net assets; 
2004: $42,166; 
2003: $210,122. 

Total liabilities and net assets; 
2004: $335,744; 
2003: $483,134. 

[End of table] 

The accompanying notes are an integral part of these financial 
statements. 

Statements of Activities: 

The Congressional Award Foundation Statements of Activities For the 
Fiscal Years Ended September 30, 2004 and 2003: 

Changes in unrestricted net assets: 

Operating revenue and other support: 
Contributions; 
2004: $281,528; 
2003: $615,278. 

Contributions - In-kind (note 5); 
2004: $94,596; 
2003: $33,367. 

Program and other revenues; 
2004: $31,870; 
2003: $47,950. 

Interest and dividends applied to current operations; 
2004: $3,745; 
2003: $4,801. 

Net assets released from restrictions (note 6); 
2004: $164,171; 
2003: $164,394. 

Total operating revenue and other support; 
2004: $575,910; 
2003: $865,790. 

Operating expenses (note 11): 
Salaries, benefits, and payroll taxes; 
2004: $375,931; 
2003: $554,817. 

Program, promotion, and travel; 
2004: $10,659; 
2003: $9,516. 

Fund-raising expense; 
2004: $26,127; 
2003: $24,777. 

Gold Award ceremony; 
2004: $16,478; 
2003: $15,533. 

Professional fees; 
2004: $101,300; 
2003: $49,580. 

Depreciation; 
2004: $13,077; 
2003: $20,296. 

Board of Directors expense; 
2004: $6,879; 
2003: $2,259. 

Administrative and other expense; 
2004: $44,007; 
2003: $84,014. 

Total operating expenses; 
2004: $594,458; 
2003: $760,792. 

Subtotal; 
2004: -$18,548; 
2003: $104,998. 

Other changes 
Unrealized investment gains not applied to current operations; 
2004: $16,432; 
2003: $61,048. 

Realized investment (losses) not applied to current operations; 
2004: -$1,669; 
2003: -$7,642. 

(Decrease) increase in unrestricted net assets; 
2004: -$3,785; 
2003: $158,404. 

Changes in temporarily restricted net assets: 

Net assets released from restrictions (note 6); 
2004: -$164,171; 
2003: -$164,394. 

(Decrease) increase in temporarily restricted net assets; 
2004: -$164,171; 
2003: -$164,394. 

(Decrease) increase in net assets; 
2004: -$167,956; 
2003: -$5,990. 

Net assets at beginning of year; 
2004: $210,122; 
2003: $216,112. 

Net assets at end of year; 
2004: $42,166; 
2003: $210,122. 

[End of section] 

Statements of Cash Flows: 

The accompanying notes are an integral part of these financial 
statements. 

The Congressional Award Foundation Statements of Cash Flows For the 
Fiscal Years Ended September 30, 2004 and 2003: 

Cash flows from operating activities: 

Contributions received; 
2004: $381,528; 
2003: $815,278. 

Cash received from program activities; 
2004: $31,870; 
2003: $47,950. 

Interest and dividends received; 
2004: $2,173; 
2003: $2,762. 

Cash paid to employees; 
2004: -$340,527; 
2003: -$579,918. 

Cash paid to vendors; 
2004: -$88,017; 
2003: -$276,583. 

Net cash provided/(used) from operating activities; 
2004: -$12,973; 
2003: $9,489. 

Cash flows from investing activities: 
Purchase of Investments; 
2004: $0; 
2003: -$146,996. 

Proceeds from sale of investments; 
2004: $10,383; 
2003: $134,548. 

Net cash provided/(used) in investing activities; 
2004: $10,383; 
2003: -$12,448. 

Cash flows from financing activities: 
Payments on capital lease; 
2004: $0; 
2003: -$2,283. 

Net cash provided/(used) in financing activities; 
2004: $0; 
2003: -$2,283. 

Net (Decrease) increase in cash; 
2004: -$2,590; 
2003: -$5,242. 

Cash at beginning of the year; 
2004: $9,206; 
2003: $14,448. 

Cash at end of year; 
2004: $6,616; 
2003: $9,206. 

Reconciliation of change in net assets to net cash provided/(used) from 
operating activities: 

Change in net assets; 
2004: -$167,956; 
2003: -$5,990. 

Adjustments to reconcile change in net assets to net cash used/provided 
from operating activities: 

Investment (losses) not applied to operations; 
2004: -$5,388; 
2003: -$53,406. 

Depreciation expense; 
2004: $13,077; 
2003: $20,296. 

Decrease (increase) in contributions receivable; 
2004: $100,000; 
2003: $199,992. 

(Increase) decrease in accounts receivable; 
2004: -$242; 
2003: $0. 

(Increase) decrease in prepaid expenses; 
2004: -$1,068; 
2003: $57. 

(Increase) decrease in Board of Directors prepaid expense; 
2004: -$4,620; 
2003: $0. 

Decrease (increase) in investments (money funds/equity securities); 
2004: $34,915; 
2003: -$2,040. 

(Decrease) increase in accounts payable; 
2004: -$14,840; 
2003: -$124,318. 

Increase (Decrease) in accrued payroll, related taxes, and leave; 
2004: $34,867; 
2003: -$25,102. 

(Increase) decrease in Gold Award Ceremony; 
2004: -$945; 
2003: $0. 

(Increase) decrease in program, promotion, and travel; 
2004: -$1,393; 
2003: $0. 

Decrease (increase) in Plan 403(b); 
2004: $620; 
2003: $0. 

Net cash provided/(used) from operating activities; 
2004: -$12,973; 
2003: $9,489. 

[End of table] 

The accompanying notes are an integral part of these financial 
statements. 

Notes to Financial Statements: 

THE CONGRESSIONAL AWARD FOUNDATION: 

Notes to Financial Statements For the Fiscal Years Ended September 30, 
2004, and 2003: 

Note 1. Organization: 

The Congressional Award Foundation (the Foundation) was formed in 1979 
under Public Law 96-114 and is a private, nonprofit, tax-exempt 
organization under Section 501(c)(3) of the Internal Revenue code 
established to promote initiative, achievement, and excellence among 
young people in the areas of public service, personal development, 
physical fitness, and expedition. New program participants totaled over 
2,700 in fiscal year 2004. During fiscal year 2004, there were over 
17,000 participants registered in the Foundation Award's program. 
Certificates and medals were awarded to 2,205 participants during 
fiscal year 2004. In October 1999, the President signed Public Law 106- 
63, section 1(d) of which reauthorized the Congressional Award 
Foundation through September 30, 2004. 

Note 2. Summary of Significant Accounting Policies: 

A. Basis of Accounting: 

The financial statements are prepared on the accrual basis of 
accounting in conformity with U.S. generally accepted accounting 
principles applicable to not-for-profit organizations. 

B. Cash Equivalents: 

The Foundation considers funds held in its checking account and all 
highly liquid investments with an original maturity of 3 months or less 
to be cash equivalents. Money market funds held in the Foundation's 
Congressional Award Trust (the Trust) are not considered cash 
equivalents for financial statement reporting purposes. The Declaration 
of Trust of the Congressional Award Trust was amended, with the consent 
of the original declarants of the Trust and the Trustees, effective 
December 2003. Among other changes, the Amended Trust Declaration 
removes the restriction on the use of endowment donations. The Trustees 
may now apply any trust funds for the benefit of the Foundation. 

C. Contributions Receivable: 

Unconditional promises to give are recorded as revenue when the 
promises are made. Contributions receivable to be collected within less 
than one year are measured at net realizable value. 

D. Equipment, Furniture and Fixtures, and Related Depreciation: 

Equipment, furniture, and fixtures are stated at cost. Depreciation of 
furniture and equipment is computed using the straight-line method over 
estimated useful lives of 5 to 10 years. Leasehold improvements are 
amortized over the lesser of their estimated useful lives or the 
remaining life of the lease. Expenditures for major additions and 
betterments are capitalized; expenditures for maintenance and repairs 
are charged to expense when incurred. Upon retirement or disposal of 
assets, the cost and accumulated depreciation are eliminated from the 
accounts and the resulting gain or loss is included in revenue or 
expense, as appropriate. 

E. Investments: 

Investments consist of equity securities, money market funds, and a 
$50,000 certificate of deposit and are stated at market value. 

F. Classification of Net Assets: 

The net assets of the Foundation are reported as follows: 

* Unrestricted net assets represent the portion of expendable funds 
that are available for the general support of the Foundation. 

* Temporarily restricted net assets represent amounts that are 
specifically restricted by donors or grantors for specific programs or 
future periods. 

* Permanently restricted net assets result from donor-imposed 
restrictions stipulating that the resources donated are maintained 
permanently. 

G. Revenue Recognition: 

Contribution revenue is recognized when received or promised and 
recorded as temporarily restricted if the funds are received with donor 
or grantor stipulations that limit the use of the donated assets to a 
particular purpose or for specific periods. When a stipulated time 
restriction ends or purpose of the restriction is met, temporarily 
restricted net assets are reclassified to unrestricted net assets and 
reported in the statement of activities as net assets released from 
restrictions. 

H. Functional Allocation of Expenses: 

The costs of providing the various programs and other activities have 
been summarized on a functional basis as described in note 11. 
Accordingly, certain costs have been allocated among the programs and 
supporting services benefited. 

I. Estimates: 

The preparation of financial statements in conformity with U.S. 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect certain reported amounts and 
disclosures. Accordingly, actual results could differ from those 
estimates. 

Note 3. Contributions Receivable: 

At September 30, 2004, and 2003, promises to give totaled $60,573 and 
$160,021, respectively, of which $0 and $160,000, respectively, were 
due within 1 year. All amounts have subsequently been collected. At 
September 30, 2004, and 2003, $31,626 and $195,798, respectively, were 
temporarily restricted by donors for future periods. For fiscal year 
2003, the promises to give were a result of the "Charter for Youth" 
fundraising initiative. Charter for Youth benefactors are requested to 
contribute a minimum of $100,000 per year for 3 consecutive years for 
the direct support of The Congressional Award and its initiatives for 
participant recruitment and awardees recognition. Charter for Youth 
members have the opportunity to participate in Congressional Award 
events, and receive recognition as benefactors at the national and 
regional events and meetings. 

Note 4. Unrestricted and Permanently Restricted Net Assets: 

The Congressional Award Fellowship Trust (the Trust Fund) was 
established in 1990 to benefit the charitable and educational purposes 
of the Foundation. The Trust Fund has received $264,457 of 
contributions since 1990, which were designated as permanently 
restricted by the donors when the donations were originally made. In 
accordance with the terms of the 1990 Trust Agreement (the Agreement), 
the Foundation was permitted to use all Trust Fund income for the 
benefit of the charitable and educational purposes of the Foundation. 
Trust Fund income represents the value of the Trust Fund's assets 
(including interest and dividends earned and realized and unrealized 
gains and losses on Trust Fund investments) in excess of the aggregate 
amount received as endowment donations. Proceeds from investments can 
only be used in operations with approval of the Foundation's Board. The 
agreement describes endowment donations as the aggregate fair market 
value (as of the contribution date) of all donations to the Trust Fund. 
As defined by the agreement, this represents the amount of the Trust 
Fund's assets that the Foundation could not use or distribute. 

During the fiscal year ending September 30, 2004, the trust conditions 
changed. The Declaration of Trust of the Congressional Award Trust was 
amended, with the consent of the original declarants of the Trust and 
the Trustees, effective December 2003. Among other changes, the Amended 
Trust Declaration removes the permanent restriction on the use of 
endowment donations. The Trustees must approve any Trust Fund amounts 
for unrestricted use by the Foundation. Also, during the fiscal year 
ended September 30, 2004, the Trustee's authorized and the Foundation's 
Board approved the use of $34,915 of the Trust Fund to support 2004 
operations. 

At September 30, 2004, and 2003, the Trust Fund's investments at fair 
value consisted of the following: 

Notes to Financial Statements For the Fiscal Years Ended September 30, 
2004, and 2003 
Description At September 30, 

Equity and debt securities; 
2004: $188,978; 
2003: $184,612. 

Money market funds; 
2004: $6,573; 
2003: $45,854. 

Total; 
2004: $195,551; 
2003: $230,466. 

[End of table] 

Activity in the Trust Fund for the fiscal years ended September 30, 
2004, and 2003 was as follows: 

September 30, 

Interest and dividends; 
2004: $3,745; 
2003: $4,801. 

Net realized gains (losses); 
2004: -$1,669; 
2003: -$7,642. 

Net unrealized gains; 
2004: $16; 
2003: $61. 

Total investment gains; 
2004: $18,508; 
2003: $58,207. 

Investments transferred to current operations; 
2004: -$55,092; 
2003: $0. 

Investment earnings applied to current operations; 
2004: $1,669; 
2003: $7,647. 

Net change in Trust Fund investments; 
2004: -$34,915; 
2003: $65,854. 

Trust Fund investments, beginning of year; 
2004: $230; 
2003: $165. 

Trust Fund investments, end of year; 
2004: $195,551; 
2003: $230,466. 

[End of table] 

The value of the Trust Fund at September 30, 2003 dropped below the 
permanently restricted balance by $33,991. 

Note 5. In-kind Contributions: 

During fiscal year 2004, the Foundation received in-kind (non-cash) 
contributions from donors, which are accounted for as contribution 
revenue and as current period operating expenses. The in-kind 
contributions received were for professional services relating to 
support of activities of the Foundation. The value of the in-kind 
contributions was $94,596 for fiscal year 2004 and $33,367 for fiscal 
year 2003. In 2004, legal activities included several one-time matters 
including amendment of the Trust Agreement and securing a state ruling 
for Trust exemption. 

Professional services: 

Legal; 
2004: $91,000; 
2003: $30,000. 

Web-hosting; 
2004: $3,596; 
2003: $3,367. 

Total in-kind contributions; 
2004: $94,596; 
2003: $33,367. 

[End of section] 

In addition, Section 7(c) of Public Law 101-525, the Congressional 
Award Amendments of 1990, provided that "the Board may benefit from in- 
kind and indirect resources provided by the Offices of Members of 
Congress or the Congress." Resources so provided include use of office 
space, office furniture, and certain utilities. In addition, section 
102 of the Congressional Award Act, as amended, provides that the 
United States Mint may charge the United States Mint Public Enterprise 
Fund for the cost of striking Congressional Award Medals. The costs of 
these resources cannot be readily determined and, thus, are not 
included in the financial statements. 

Note 6. Temporarily Restricted Net Assets: 

Temporarily restricted net assets at September 30, 2004, and 2003 were 
available for the following programs and future periods: 

Contributions restricted for use in 2004; 
2004: $0; 
2003: $160,000. 

Puerto Rico Council development; 
2004: $17,561; 
2003: $17,722. 

Nevada Council development; 
2004: $12,282; 
2003: $14,047. 

Oklahoma Council development; 
2004: $1,783; 
2003: $4,029. 

Total; 
2004: $31,626; 
2003: $195,798. 

[End of section] 

Net assets released from restrictions during the years ended September 
30, 2004 and 2003 were as follows: 

Contributions restricted for use in fiscal 
years 2004 and 2003, respectively; 
2004: $160,000; 
2003: $160,000. 

Puerto Rico Council development; 
2004: $160; 
2003: $208. 

Nevada Council development; 
2004: $1,765; 
2003: $2,079. 

Oklahoma Council development; 
2004: $2,246; 
2003: $2,495. 

South Dakota Council development; 
2004: $0; 
2003: $388. 

Total; 
2004: $164,171; 
2003: $164,394. 

[End of section] 

Note 7. Employee Retirement Plan: 

For the benefit of its employees, the Foundation participates in a 
voluntary 403(b) tax-deferred annuity plan, which was activated on 
August 27, 1993. Under the plan, the Foundation may, but is not 
required to, make employer contributions to the plan. There was no 
contribution to the plan in 2004 or 2003. 

Note 8. Line of Credit: 

The Foundation has a $100,000 revolving line of credit with its bank 
that bears interest at 6 percent per annum. The line of credit is 
partially secured by the Foundation's investment in a $50,000 
certificate of deposit held by the same bank. At September 30, 2004 and 
2003, the outstanding balance on the line of credit was $100,000. 

Note 9. Accounts Payable: 

The accounts payable balance of $135,503 at September 30, 2004, is 
comprised of $116,635 attributable to goods and services received in 
fiscal year 2002, and the remainder attributable to goods and services 
received in fiscal years 2003 and 2004. The accounts payable balance at 
September 30, 2003, was $150,343. Subsequent to the end of fiscal year 
2004, there was approximately $39,000 in accounts payable that were 
cancelled and converted to an "in-kind" donation. See subsequent events 
note 13. 

Note 10. Related Party Activities: 

During fiscal year 2004, an ex-officio director of the Board provided 
pro bono legal services to the Foundation. The value of legal services 
has been included in the in-kind contributions and professional fees 
line items (see note 5). 

In addition, a director of the Board served as portfolio manager with 
the brokerage firm responsible for managing the Congressional Award 
Fellowship Trust account during fiscal years 2004 and 2003. 

During March 2004, the Foundation entered into an agreement with a 
professional fundraiser. Also in 2004, the spouse of this professional 
fundraiser was elected to the Board of Directors of the Foundation. The 
professional fundraiser was retained on a 10% commission basis. 
Expenses incurred by the Foundation during fiscal year 2004 to the 
related party totaled $9,756. 

Note 11. Expenses by Functional Classification: 

The Foundation has presented its operating expenses by natural 
classification in the accompanying Statements of Activities for the 
fiscal years ending September 30, 2004, and 2003. Presented below are 
the Foundation's expenses by functional classification for the fiscal 
years ended September 30, 2004, and 2003. 

Program activities; 
2004: $335,529; 
2003: $292,182. 

Fund-raising activities; 
2004: $56,243; 
2003: $168,336. 

Administrative activities; 
2004: $202,686; 
2003: $300,274. 

Total; 
2004: $594,458; 
2003: $760,792. 

[End of table] 

Note 12. The Foundation's Ability to Continue as a Going Concern: 

The Congressional Award Foundation is dependent on contributions to 
fund its operations and, to a far lesser extent, other revenues, 
interest, and dividends. The Foundation incurred decreases in net 
assets of $167,956 and $5,990 in fiscal years 2004 and 2003, 
respectively. As a result, the Foundation continues to experience 
difficulty in meeting its obligations. The Foundation has taken steps 
to substantially decrease administrative expenses, and has implemented 
numerous initiatives to increase fundraising revenue. The Foundation's 
ability to continue as a going concern is dependent on increasing 
revenues. Revenues have been impacted by the fact that the Foundation 
has not been reauthorized by the Congress. The Foundation has taken all 
actions necessary to seek reauthorization of the program. Legislation 
has passed the Senate and is being considered by the House of 
Representatives. 

While the Foundation has taken steps to decrease its expenses, those 
steps may not be sufficient to enable it to continue operations. 
Unaudited financial data compiled by the Foundation as of September 30, 
2005, showed that the Foundation's financial condition has not 
improved. The continuing deterioration in the Foundation's financial 
condition raises substantial doubt about its ability to continue as a 
going concern. 

During fiscal year 2005, the Board elected several new Members and the 
Foundation hired an accountant to focus on improving financial 
management. The newly elected Treasurer and Audit Committee Chair are 
working with the National Office staff to improve internal control over 
financial reporting and develop written fiscal policies and procedures 
for financial operations and reporting. The accountant is expected to 
provide accurate and timely accounting and reporting. 

To improve fundraising efforts, the Board created a Congressional 
Liaison Committee, Development Committee, and Program Committee during 
fiscal year 2005. The newly elected Development Chairperson is leading 
fundraising initiatives in the corporate community, including pursuing 
grant opportunities, and the Foundation continues to work with 
professional fundraisers to more actively involve congressional 
members. These events should generate funds from new donors and provide 
opportunities to maintain relations with current Foundation supporters. 

Note 13. Subsequent Events: 

On July 14, 2005, the Senate passed S. 335 to reauthorize the 
Congressional Award Board, which terminated on October 1, 2004, until 
October 1, 2009. The bill was received in the House of Representative 
and was referred to the Committee on Education and the Workforce on 
July 19, 2005. Subsequently, on September 22, 2005, H.R. 3867, which is 
identical to S. 335, was introduced in the House to reauthorize the 
Board and was also referred to the Committee on Education and the 
Workforce. 

Subsequent to fiscal year 2004, the Foundation negotiated cancellation 
of approximately $39,000 of its liabilities with vendors. The vendors 
offered these balances owed as "in-kind" contributions to the 
Foundation. 

On October 1, 2005, the Foundation appointed a new Treasurer and Audit 
Committee Chair. The new Treasurer is currently with the Willard Group 
and the new Audit Committee Chair is currently the Senior Director of 
Corporate Finance at McDonald's. Both positions are voluntary. 

[End of section] 

(196073): 

FOOTNOTES 

[1] A material weakness is a reportable condition that precludes the 
entity's internal control from providing reasonable assurance that 
material misstatements in the financial statements would be prevented 
or detected on a timely basis. Reportable conditions are matters coming 
to our attention that, in our judgment, should be communicated because 
they represent significant deficiencies in the design or operation of 
internal control that could adversely affect the Foundation's ability 
to meet the objectives described in this report. 

[2] GAO, Financial Audit: Congressional Award Foundation's Fiscal Years 
2002 and 2001 Financial Statements, GAO-03-737 (Washington, D.C.: May 
15, 2003) and GAO, Financial Audit: Congressional Award Foundation's 
Fiscal Years 2003 and 2002 Financial Statements, GAO-05-132 
(Washington, D.C.: Nov. 15, 2004). 

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

[4] As a result of our determination pursuant to section 104(c)(2)(A) 
of the Congressional Award Act, as amended (2 U.S.C.  804(c)(2)(A)), 
and the material weakness in internal control over the Foundation's 
financial reporting discussed above, which was attributable to the lack 
of written policies and procedures and the lack of appropriate 
administration of the Foundation's financial operations, the Foundation 
lacks effective control over its compliance with applicable laws. 

[5] Section 108 of the Congressional Award Act, as amended (2 U.S.C.  
808), states that the Congressional Award Board shall terminate on 
October 1, 2004. 

[6] Section 108 of the Congressional Award Act, as amended (2 U.S.C.  
808), provides that the Congressional Award Board shall terminate on 
October 1, 2004. Pursuant to section 106 of the Congressional Award 
Act, as amended (2 U.S.C.  806), the authority for the Foundation is 
derived from the authority of the Congressional Award Board. 

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