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entitled 'Financial Audit: Congressional Award Foundation's Fiscal 
Years 2005 and 2004 Financial Statements' which was released on May 15, 
2006.

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United States Government Accountability Office: 

GAO: 

Report to the Congress:

May 2006:

Financial Audit:

Congressional Award Foundation's Fiscal Years 2005 and 2004 Financial 
Statements:

GAO-06-682: 

[End of section]

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 and Our Evaluation:

Financial Statement:

Statements of Financial Position:

Statements of Activities:

Statements of Cash Flows:

Notes to Financial Statements:

Appendix:

Appendix I: Comments from the Congressional Award Foundation: 

United States Government Accountability Office: 
Washington, DC 20548:

May 15, 2006:

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, 
2005, and 2004. 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, 2005, and (2) our conclusion on the 
Foundation's compliance in fiscal year 2005 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 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, Ryan Geach, Julie Phillips, Zakia 
Simpson, and Patricia Summers.

Signed By: 

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

May 15, 2006:

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, 
2005, and 2004, 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) but did have effective 
control over compliance with laws and regulations; and:

* no reportable noncompliance with the provisions of laws and 
regulations we tested during fiscal year 2005.

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, 2005, and 2004, and the results of its activities and its 
cash flows for the fiscal years then ended. However, material 
misstatements may nevertheless occur in other 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 
difficulties in meeting its financial obligations. The Foundation's 
continuing financial difficulties raise substantial doubt, for the 
fourth 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) but did have 
effective control over compliance with laws and regulations. The 
Foundation's controls did not provide reasonable assurance that losses 
and misstatements 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]

In our report on the results of our audit of the Foundation's fiscal 
year 2004 financial statements, we reported that the deteriorating 
financial condition of the Foundation led to further deterioration in 
controls over the financial reporting process, impeding its ability to 
prepare timely and accurate financial statements. At the conclusion of 
our audit of the Foundation's fiscal year 2004 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 process, preparation of the financial 
statements, and review of financial data by management.

During fiscal year 2005, the Foundation hired an accountant[Footnote 4] 
to help ensure that accurate and timely accounting and reporting of 
financial information occurred. This enabled the Foundation to provide 
us with a draft of the financial statements within 5 months after the 
fiscal year-end, something the Foundation had been unable to do in each 
of the preceding two financial statement audits. However, the 
Foundation continued to lack appropriate written procedures during 
fiscal year 2005 for making closing entries in its financial records 
and for preparing complete and accurate financial statements. The 
continued lack of written policies and procedures during fiscal year 
2005 contributed to errors we identified during our audit of the 
Foundation's fiscal year 2005 financial statements. For example, the 
Foundation did not adequately perform its year-end bank reconciliation 
and misclassified the forgiveness by vendors of some of its outstanding 
debt. Both of these issues resulted in audit adjustments to the 
financial statements. In addition, numerous errors in the financial 
statements were not detected by management's review. This resulted in 
the need for management to make material adjustments to correct errors 
we identified during our audit. The Foundation was ultimately able to 
produce financial statements that were fairly stated in all material 
respects for fiscal years 2005 and 2004, but not without substantial 
adjustments identified during our audit.

Subsequent to fiscal year 2005, the Foundation's Board of Directors' 
newly elected Treasurer worked with the National Office staff to 
improve internal control over financial reporting and develop written 
fiscal policies and procedures for financial operations and reporting. 
Since these procedures were not drafted until after fiscal year 2005, 
and the procedures related to financial reporting were not implemented 
in fiscal year 2005, they had no effect on the fiscal year 2005 
financial statements. However, if properly implemented, they should 
lead to improvements in financial management going forward. We will 
evaluate the effectiveness of these new policies and procedures during 
our audit of the Foundation's fiscal year 2006 financial statements.

Foundation management asserted that, with the exception of the material 
weakness in financial reporting, its internal control during the period 
was effective based on criteria established under GAO's Standards for 
Internal Control in the Federal Government. In making its assertion, 
Foundation management stated the need to improve control over financial 
reporting. Although the weakness did not materially affect the final 
fiscal year 2005 financial statements as adjusted for errors identified 
by the audit process, deficiencies in internal control may adversely 
affect any decision by management that is based, in whole or in part, 
on other 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 for fiscal year 2005 disclosed no instances of 
noncompliance that would be reportable under U.S. generally accepted 
government auditing standards. However, the objective of our audit was 
not to provide an opinion on overall compliance with laws and 
regulations. Accordingly, we do not express such an opinion.

For the fiscal year 2004 audit, our tests for compliance with relevant 
provisions of laws and regulations disclosed one area of material 
noncompliance that was reportable under U.S. generally accepted 
government auditing standards. This concerned the Foundation's ability 
to ensure that it had appropriate procedures for fiscal control and 
fund accounting and that its financial operations were 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.

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 comply with the requirements in 
section 104(c)(1) of the Congressional Award Act, as amended (2 U.S.C. 
 804(c)(1)).

As discussed earlier, during fiscal year 2005, the Foundation hired an 
accountant to focus on improving financial management. Subsequent to 
fiscal year 2005, the newly elected Treasurer and Audit Committee Chair 
worked with the National Office staff to improve internal control over 
financial reporting and develop written fiscal policies and procedures 
for financial operations and reporting. Due to these actions, we were 
able to conclude that for the year under audit, the Foundation was in 
compliance with the provisions of the Act.

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

The Foundation incurred a gain (increase in net assets) of about 
$10,000 in fiscal year 2005 as compared to a loss (decrease in net 
assets) of almost $168,000 in fiscal year 2004. This difference of 
approximately $178,000 was due primarily to a reduction in salary 
expenses in fiscal year 2005. Salary expenses were less in fiscal year 
2005 because the National Director, who retired at the end of fiscal 
year 2004, was not replaced during fiscal year 2005. The Program 
Director functioned in two positions, serving as the Acting National 
Director as well as the Program Director. As a result, the Foundation's 
salary costs were reduced by over $172,000 between fiscal years 2004 
and 2005.

Although the Foundation's overall expenses decreased by over $130,000 
between fiscal years 2004 and 2005, operating revenues and other 
support decreased by over $134,000, attributable in part to a nearly 
$64,000 decline in contributions. The Foundation attributed this 
decline in contributions to the fact that the Foundation was not 
reauthorized by the Congress for fiscal year 2005 which, it believes, 
discouraged some donors from contributing to the Foundation. The 
Foundation's previous authorization expired on October 1, 2004. On 
December 22, 2005, the President signed Public Law 109-143, which 
reauthorized the Congressional Award Foundation through September 30, 
2009.

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, 2005.

Note 12 to the financial statements acknowledges the Foundation's 
difficulties in meeting its financial obligations. The Foundation has 
taken steps to decrease its expenditures and liabilities. For example, 
accounts payable at September 30, 2005, were approximately $16,000, 
down from $135,500 in fiscal year 2004. This decrease in accounts 
payable was due to the Foundation using funds from the Congressional 
Award Fellowship Trust to pay off a substantial portion of its 
liabilities, and its ability to negotiate with certain of its vendors 
to cancel about $63,000 in liabilities to these vendors during fiscal 
year 2005. In addition, the Foundation showed considerable cost 
reductions as evidenced by the decrease in operating expenses 
(primarily salaries) from over $594,000 in fiscal year 2004 to about 
$464,000 in fiscal year 2005. However, these steps may not be 
sufficient to allow it to continue operations.

Unaudited financial data compiled by the Foundation as of March 31, 
2006, showed that its financial condition has not improved through the 
first half of fiscal year 2006. While the Foundation has $112,000 in 
contributions receivable as of March 31, 2006, $52,000 of this 
contribution is to be used to cover costs associated with its planned 
Congressional Award Golf Classic fundraising event in May, and $30,000 
is to be used to cover costs associated with the annual Gold Award 
ceremony in June. The golf fundraising event resulted in net revenues 
for the first time in fiscal year 2004, so its ability to raise funds 
annually cannot be assured, and the Gold Award ceremony is not a 
fundraising event. There are also indications that the Foundation is 
continuing to have difficulty meeting its obligations; according to the 
minutes of the January 31, 2006, Board of Directors' meeting, the 
Acting National Director and the Controller delayed cashing their pay 
checks for two pay periods in January 2006 due to cash flow problems at 
the Foundation.

In addition, the Foundation has a $100,000 line of credit that is 
payable upon demand. If this liability needed to be paid immediately, 
the Foundation would have to liquidate its $55,000 certificate of 
deposit, equity securities of about $36,000 (reported as outstanding at 
March 31, 2006), and its remaining cash balance of about $6,700.

In its plan to deal with its financial difficulties and increase its 
revenues, the Foundation modified its approach to fundraising during 
the past 2 years by holding more frequent but smaller and less 
expensive fundraising events than in the past. However, these smaller 
fundraisers did not increase contributions, which decreased by over 
$64,000, or 23 percent, from fiscal years 2004 to 2005.

In an effort 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 Foundation reported that these committees have raised the 
visibility of the Foundation. In addition, the Development Committee 
has increased the number of fundraisers from one in the first half of 
fiscal year 2005 to three in the first half of fiscal year 2006. 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. The 
Foundation is currently 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.

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 the first 
6 months of fiscal year 2006;

* 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, 2005. 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 and Our Evaluation:

In commenting on a draft of this report, the Foundation stressed its 
efforts to secure funds to adequately support the program. The 
Foundation noted that contributions and pledges received through April 
2006 showed significant increases over funding received in fiscal year 
2005. The Foundation attributed this to both the recent reauthorization 
of the program in December 2005, and the Congress reaffirming its 
commitment to the Foundation, resulting in donors being more willing to 
contribute financially. The Foundation also discussed its plans to hold 
more fundraising events with Members of Congress. Additionally, the 
Foundation noted its efforts to reduce its operating expenses in order 
to meet its financial obligations. The Foundation also discussed 
efforts it has made to improve its internal controls over accounting 
and financial reporting through its development of written policies and 
procedures for financial operations and reporting.

As we discuss in our report, these written policies and procedures were 
not drafted until after the period covered by our fiscal year 2005 
financial audit. Consequently, they had no impact on the preparation of 
the Foundation's fiscal year 2005 financial statements. If properly 
implemented, however, they should lead to improvements in the 
Foundation's financial management. We will evaluate the effectiveness 
of these new policies and procedures during our audit of the 
Foundation's fiscal year 2006 financial statements.

The complete text of the Foundation's comments is reprinted in appendix 
I.

Signed By: 

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

May 3, 2006:

Financial Statements:

Table: Statements of Financial Position:

The Congressional Award Foundation Statements of Financial Position As 
of September 30, 2005 and 2004:

Assets: Cash and cash equivalents;  
2005: $6,743;
2004: $6,616. 

Assets: Certificate of deposit;   
2005: $55,013;
2004: $53,611.

Assets: Contributions receivable (note 3);   
2005: $45,000;
2004: $60,573.

Assets: Prepaid expense;  
2005: $2,880;
2004: $3,545.

Assets: Congressional Award Fellowship Trust (note 4);   
2005: $58,531;
2004: $195,551.

Assets: Equipment, furniture, and fixtures, net;   
2005: $9,804;
2004: $15,848.

Assets: Total assets;   
2005: $177.971;
2004: $335.744.

Liabilities and net assets: Accounts payable (note 9);   
2005: $15,817;
2004: $135,503.

Liabilities and net assets: Line of credit (note 8);   
2005: $100,000;
2004: $100,000.

Liabilities and net assets: Accrued payroll, related taxes, and 
leave;   
2005: $9,972;
2004: $57,613.

Liabilities and net assets: Obligation under capital lease;   
2005: $0;
2004: $462.

Liabilities and net assets: Total liabilities;   
2005: $125,789;
2004: $293,578.

Net assets: Unrestricted;  
2005: $23,614;
2004: $10,540.

Net assets: Temporarily restricted (note 6);   
2005: $28,568;
2004: $31,626.

Net assets: Total net assets;   
2005: $52,182;
2004: $42,166.

Total liabilities and net assets;   
2005: $177.971;
2004: $335.744.

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

[End of table]

Table: Statements of Activities:

The Congressional Award Foundation Statements of Activities For the 
Fiscal Years Ended September 30, 2005 and 2004:

Changes in unrestricted net assets: Operating revenue and other 
support: Contributions;   
2005: $217,353;
2004: $281,528.

Changes in unrestricted net assets: Operating revenue and other 
support: Contributions - In-kind (note 5);   
2005: $131,114;
2004: $94,596.

Changes in unrestricted net assets: Operating revenue and other 
support: Program and other revenues;  
2005: $87,305;
2004: $31,870.

Changes in unrestricted net assets: Operating revenue and other 
support: Interest and dividends applied to current operations;  
2005: $2,736;
2004: $3,745.

Changes in unrestricted net assets: Operating revenue and other 
support: Net assets released from restrictions (note 6);   
2005: $3,060;
2004: $164,171.

Changes in unrestricted net assets: Operating revenue and other 
support: Total operating revenue and other support;   
2005: $441,568;
2004: $575,910.

Changes in unrestricted net assets: Operating expenses (note 11): 
Salaries, benefits, and payroll taxes;   
2005: $203,896;
2004: $375,931.

Changes in unrestricted net assets: Operating expenses (note 11): 
Program, promotion, and travel;   
2005: $24,028;
2004: $10,659.

Changes in unrestricted net assets: Operating expenses (note 11): Fund-
raising expense;   
2005: $42,820;
2004: $26,127.

Changes in unrestricted net assets: Operating expenses (note 11): Gold 
Award ceremony;   
2005: $51,522;
2004: $16,478.

Changes in unrestricted net assets: Operating expenses (note 11): 
Professional fees;   
2005: $71,234;
2004: $101,300.

Changes in unrestricted net assets: Operating expenses (note 11): 
Depreciation;   
2005: $6,044;
2004: $13,077.

Changes in unrestricted net assets: Operating expenses (note 11): Board 
of Directors expense;   
2005: $4,355;
2004: $6,879.

Changes in unrestricted net assets: Operating expenses (note 11): 
Administrative and other expense;   
2005: $60,121;
2004: $44,007.

Changes in unrestricted net assets: Operating expenses (note 11): Total 
operating expenses;   
2005: $464,020;
2004: $594,458.

Changes in unrestricted net assets: Subtotal;   
2005: $(22,452);
2004: $(18,548).

Changes in unrestricted net assets: Other changes: Unrealized 
investment gains not applied to current operations;  
2005: $38,807;
2004: $16,432.

Changes in unrestricted net assets: Other changes: Realized investment 
(losses) applied to current operations;  
2005: $(3,279);
2004: $(1,669).

Changes in unrestricted net assets: Other changes: Increase (decrease) 
in unrestricted net assets;   
2005: $13,076;
2004: $(3,785).

Changes in unrestricted net assets: Changes in temporarily restricted 
net assets: Net assets released from restrictions (note 6);   
2005: $(3,060);
2004: $(164,171).

Changes in unrestricted net assets: Changes in temporarily restricted 
net assets: (Decrease) in temporarily restricted net assets;   
2005: $(3,060);
2004: $(164,171).

Changes in unrestricted net assets: Increase (decrease) in net 
assets;   
2005: $10,016;
2004: $(167,956).

Changes in unrestricted net assets: Net assets at beginning of year;   
2005: $42,166;
2004: $210,122.

Changes in unrestricted net assets: Net assets at end of year;  
2005: $52,182;
2004: $42,166. 

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

[End of table]

Table: 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, 2005 and 2004:

Cash flows from operating activities: Change in net assets;   
2005: $10,016;
2004: $($167,956).

Cash flows from operating activities: Adjustments to reconcile change 
in net assets to net cash from operating activities: Depreciation;  
2005: $6,044;
2004: $13,077. 

Cash flows from operating activities: Adjustments to reconcile change 
in net assets to net cash from operating activities: Net unrealized 
gain;   
2005: $(38,807);
2004: $(16,432).

Cash flows from operating activities: Adjustments to reconcile change 
in net assets to net cash from operating activities: Realized loss on 
sale of investments;   
2005: $3,279;
2004: $1,669.

Cash flows from operating activities: Adjustments to reconcile change 
in net assets to net cash from operating activities: Certificate of 
deposit interest not applied to current operations; 
2005: $(1,401);
2004: $(1,572).

Cash flows from operating activities: Change in operating assets: 
Contributions receivable;   
2005: $15,573;
2004: $99,448.

Cash flows from operating activities: Change in operating assets: 
Prepaid expenses;   
2005: $665;
2004: $(1,068).

Cash flows from operating activities: Change in operating liabilities: 
Accounts payable;   
2005: $(119,686);
2004: $(14,840).

Cash flows from operating activities: Change in operating liabilities: 
Accrued payroll, related taxes and leave;   
2005: $(47,641);
2004: $35,404.

Cash flows from operating activities: Change in operating liabilities: 
Obligation under capital lease;   
2005: $462;
2004: $2.

Cash flows from operating activities: Net Cash (Used) in Operating 
Activities;   
2005: $(172,420);
2004: $(52,268).

Cash Flows from Investing Activities: Proceeds from sale of 
investments;  
2005: $172,547;
2004: $49,678.

Cash Flows from Investing Activities: Net Cash Provided by Investing 
Activities;  
2005: $172,547;
2004: $49,678.

Net Increase (Decrease) in Cash and Cash Equivalents;   
2005: $127;
2004: $(2,590).

Cash and Cash Equivalents, beginning of year;   
2005: $6,616;
2004: $9,206.

Cash and Cash Equivalents, end of year;  
2005: $6,743;
2004: $6,616. 

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

[End of table]

Notes to Financial Statements:

The Congressional Award Foundation: 

Notes to Financial Statements: 
For the Fiscal Years Ended September 30, 2005 and 2004: 

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 Service 
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 3,000 in fiscal year 2005. During fiscal year 2005, there 
were approximately 21,000 participants registered in the Foundation's 
Award program. The Foundation's previous authorization expired on 
October 1, 2004. On December 22, 2005, the President signed Public Law 
109-143, which reauthorized the Congressional Award Foundation through 
September 30, 2009.

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 and Certificate of Deposit:

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 Fellowship Trust (the Trust) are not considered 
cash equivalents for financial statement reporting purposes.

The Foundation has a $50,000 certificate of deposit which is pledged as 
collateral on the $100,000 line of credit (see note 8).

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. 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. Congressional Award Fellowship Trust - Investments:

The Trust investments consist of equity securities and money market 
funds which 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.

The Foundation has no permanently restricted net assets.

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.

J. Reclassifications:

Certain reclassifications have been made to the fiscal year 2004 
Statement of Cash Flows to conform to the fiscal year 2005 
presentation. In fiscal year 2005, the Foundation changed the format of 
its Statement of Cash Flows from direct method to the indirect method 
for purposes of reporting cash flows from operating activities. 
Accordingly, the Statement of Cash Flows for 2004 contains certain 
reclassifications to conform to the Foundation's current financial 
statement format. For fiscal years 2004 and 2005, the reconciliation of 
net income to net cash provided by operating activities is included in 
the Statement of Cash Flows.

Note 3. Contributions Receivable:

At September 30, 2005, and 2004, promises to give totaled $45,000 and 
$60,573, respectively, none of which was temporarily restricted by the 
donors. At September 30, 2005, and 2004, $45,000 and $60,573, 
respectively, were due within 1 year. At September 30, 2005, and 2004, 
net assets of $28,568 and $31,626, respectively, were temporarily 
restricted by donors for future periods.

Note 4. Congressional Award Fellowship Trust:

The Congressional Award Fellowship Trust (the Trust) was established in 
1990 to benefit the charitable and educational purposes of the 
Foundation. The Trust Fund received $264,457 of contributions since 
1990, which were designated as permanently restricted by the donors 
when the donations were originally made. During the fiscal year ended 
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. 
Trust Fund amounts may be distributed to the Foundation at the 
discretion of the Trustees. During the fiscal year ended September 30, 
2005, the Trustees authorized the use of $178,563 of the Trust Fund to 
support fiscal year 2005 operations.

Table: At September 30, 2005, and 2004, the Trust Fund's investments at 
fair value consisted of the following:

Description: Equity and debt securities;
At September 30: 2005: $58,524;
2004: $188,978:

Description: Money market funds;
At September 30: 2005: $7;
2004: $6,573.

Description: Total; 
At September 30: 2005: $58,531; 
2004: $195,551

Table: Activity in the Trust Fund for the fiscal years ended September 
30, 2005, and 2004 was as follows:

Description: Interest and dividends;
At September 30: 2005: $ 2,736;
2004: $3,745.

Description: Net realized gains (losses);
At September 30: 2005: $(3,279);
2004: $(1,669).

Description: Net unrealized gains (losses);
At September 30: 2005: $38,807;
2004: $16,432.

Description: Total investment gains(losses); 
At September 30: 2005: $38,264;
2004: $18,508.

Description: Investments transferred to current operations;
At September 30: 2005: $(178,563);
2004: $(55,092);

Description: Investment earnings applied to current operations;
At September 30: 2005: $3,279;
2004: $1,669.

Description: Net change in Trust Fund investments;
At September 30: 2005: $(137,020);
2004: $(34,915).

Description: Trust Fund investments, beginning of year;
At September 30: 2005: $195,551; 
2004: $230,466.

Description: Trust Fund investments, end of year;
At September 30: 2005: $ 58,531;
2004: $195,551.

[End of table]

Note 5. In-kind Contributions:

During fiscal year 2005, the Foundation received in-kind (non-cash) 
contributions from donors. Donated professional services are accounted 
for as contribution revenue and as current period operating expenses. 
In-kind contributions received also resulted from the forgiveness of 
debts which were accounted for as contribution revenue. During fiscal 
year 2005, the Foundation negotiated cancellation of $63,262 of its 
liabilities with vendors. The vendors offered these balances owed as 
in-kind contributions to the Foundation. The value of the in-kind 
contributions recognized was $131,114 for fiscal year 2005 and $94,596 
for fiscal year 2004. These non-cash contributions are as follows. 

Table: 

Professional services: Legal;   
2005: $ 63,202;
2004: $ 91,000.

Professional services: Web-hosting;   
2005: $4,650;
2004: $3,596.

Donations related to forgiveness of debt:  
2005: $63,262;
2004: $0.

Total in-kind contributions:  
2005: $131,114;
2004: $94,596. 

[End of table]

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, 2005, and 2004 were 
available for the following programs and future periods: 

Table: 

Puerto Rico Council development:   
2005: $17,396;
2004: $17,561.

Nevada Council development:  
2005: $10,381;
2004: $12,282.

Oklahoma Council development:   
2005: $791;
2004: $1,783.

Total net assets temporarily restricted for use:   
2005: $28,568;
2004: $31,626. 

[End of table]

Table: Net assets released from restrictions during the years ended 
September 30, 2005, and 2004 were as follows:

Contributions released from restriction for use in fiscal years 2005 
and 2004, respectively:   
2005: $0;
2004: $160,000.

Puerto Rico Council development 166 160 Nevada Council development: 
2005: $1,901; 
2004: $1,765.

Oklahoma Council development:   
2005: $993;
2004: $2,246.

Total temporarily restricted net assets released for use:  
2005: $3,060
2004: $164,171: 

[End of table]

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 fiscal years 2005 and 2004.

Note 8. Line of Credit:

The Foundation has a $100,000 revolving line of credit with its bank 
that bears interest at 7.75 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, 2005 and 
2004, the outstanding balance on the line of credit was $100,000.

Note 9. Accounts Payable:

The accounts payable balance is $15,817 at September 30, 2005. The 
accounts payable balance at September 30, 2004 was $135,503. During 
fiscal year 2005, $63,262 in amounts owed to vendors for goods and 
services received primarily in fiscal year 2002 were forgiven by the 
vendors. These amounts are reflected as in-kind contributions on the 
Foundation's Statements of Activities (see note 5).

Note 10. Related Party Activities:

During fiscal year 2005, an ex-official 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 former Board Member served as portfolio manager with the 
brokerage firm responsible for managing the Congressional Award 
Fellowship Trust account during fiscal years 2005 and 2004.

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 percent commission basis 
for fiscal year 2004. During fiscal year 2005, the commission basis was 
increased to 15 percent. Expenses incurred by the Foundation during 
fiscal year 2005 and 2004 to the related party totaled $12,891 and 
$9,756, respectively.

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, 2005, and 2004. Presented below are 
the Foundation's expenses by functional classification for the fiscal 
years ended September 30, 2005, and 2004. 

Table: 

Program activities:   
2005: $282,245;
2004: $335,529.

Fund-raising activities:   
2005: $60,375;
2004: $56,243.

Administrative activities:   
2005: $121,400;
2004: $202,686.

Total:  
2005: $464,020;
2004: $594,458. 

[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's net assets increased by 
$10,016 in fiscal year 2005 and decreased by $167,956 in fiscal year 
2004. The increase in net assets in fiscal year 2005 was due primarily 
to increases in unrealized investment gains. In fiscal year 2005, the 
Foundation released Trust funds to eliminate past due accounts payable 
and improve the Foundation's fiscal position. As a result, the 
Foundation's investments decreased $137,020 in fiscal year 2005 from 
$195,551 to $58,531. 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. 
Unaudited financial data compiled by the Foundation as of March 31, 
2006, show that the Foundation's financial condition has not improved 
from September 30, 2005.

During fiscal year 2005, the Board elected several new Members and the 
Foundation hired an accountant, who was promoted to Controller in 
fiscal year 2006, to focus on improving financial management. 
Subsequent to fiscal year 2005, the newly elected Treasurer and Audit 
Committee Chair worked with the National Office staff to improve 
internal control over financial reporting by developing written fiscal 
policies and procedures, and financial reporting guidelines. These 
efforts are expected to provide more 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 and continuing to 
work with professional fundraisers to more actively involve 
congressional members with monthly Capitol Hill fundraising events 
focused around key Members. These events are generating funds from new 
donors and providing opportunities to maintain relations with current 
Foundation supporters.

Note 13. Subsequent Events:

On December 22, 2005, the President signed Public Law 109-143, which 
reauthorized the Congressional Award Foundation for another five years, 
"as though no lapse or termination of the Board ever occurred."

Four Foundation Board Members were appointed by the Speaker of the 
House of Representatives to serve on the National Board on March 30, 
2006. One new Foundation Board Member was elected at the April 3, 2006, 
meeting of the Board of Directors.

The Spouse Executive Council, made up of spouses of Congressional 
members, was created and held its first meeting on February 6, 2006, to 
assist with fundraising and the overall mission of the Foundation.

[End of section]

Appendix I: Comments from the Congressional Award Foundation:

The Congressional Award:

Public Law 96-114: 
The Congressional Award Act:

May 8, 2006:

Mr. David M. Walker:
Comptroller General of the United States: 
U.S. Government Accountability Office: 
441 G Street NW:
Washington, DC 20548:

Dear Mr. Walker:

This letter is in response to your audit report of the Congressional 
Award Foundation's statements of financial position as of September 30, 
2005 and 2004. Specifically, this letter is to inform you of the 
positive changes that have occurred in regards to (1) the overall 
financial condition of the Foundation and (2) internal accounting 
controls.

The Congressional Award Foundation continues to work diligently to 
secure the proper funds to adequately support the growing program. As 
of April 30, 2006, the Foundation has received over $310,000 in 
contributions and pledges for fiscal year 2006 and recorded net income 
of over $80,000, demonstrating a significant improvement in funding 
over fiscal year 2005. In fact, projections show the Foundation will 
not only meet or exceed their budgeted revenue of $600,000 but will 
execute more fundraising events with Members of Congress than ever 
before. Senators Enzi, Kennedy, Baucus and Craig will all host 
fundraising events for the program in the coming months. Recent events 
hosted by Congressman Payne and Senator Lott helped to increase the 
Foundation's donor pool by over 43 percent - with five months still 
left in the fiscal year. In addition, the annual Congressional Award 
Golf Classic, an event widely attended by Members of Congress and 
Chiefs of Staff, raised a record of over $100,000 for the Foundation.

Our success is attributed both to the recent re-authorization of the 
program by the United States Congress, which was signed into law on 
December 22, 2005 by President Bush, and Congress reaffirming their 
commitment and dedication to the Congressional Award Foundation, 
resulting in donors more willing to contribute financially.

The Foundation has effectively reduced operating expenses in order to 
meet financial obligations, and still was able to continue serving the 
growing program enrollment. The small staff of five people and group of 
unpaid interns worked with reduced resources to increase program 
participation by nearly 20 percent.

In addition to the small program staff, the Foundation hired a 
Controller in 2005, who was able to provide financial statements to 
auditors within five months of year-end, and respond to all GAO 
inquiries in a timely and appropriate manner. This marks significant 
progress given our staff constraints and overall lack of resources.

Also in 2005, the newly elected Treasurer and Audit Committee Chair 
worked with the National Office staff to improve internal control over 
accounting and financial reporting by developing written policies and 
procedures for financial operations and reporting. The National Office 
also took measures to ensure full compliance with all laws and 
regulations.

Sincerely,

Signed By: 

Daniel Scherder: 
Treasurer:
Congressional Award National Board of Directors: 

Erica Wheelan Heyse:
Acting National Director:
Congressional Award Foundation: 

(196095): 

[End of section]

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), Financial Audit: Congressional Award Foundation's Fiscal 
Years 2003 and 2002 Financial Statements, GAO-05-132 (Washington, D.C.: 
Nov. 15, 2004), and Financial Audit: Congressional Award Foundation's 
Fiscal Years 2004 and 2003 Financial Statements, GAO-06-168 
(Washington, D.C.: Nov. 4, 2005).

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

[4] The accountant was given the title Controller during fiscal year 
2006.

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