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entitled 'Financial Audit: Congressional Award Foundationís Fiscal 
Years 2006 and 2005 Financial Statements' which was released on May 15, 
2007.

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United States Government Accountability Office: GAO: 

Report to the Congress: 

Financial Audit: 

Congressional Award Foundationís Fiscal Years 2006 and 2005 Financial 
Statements: 

GAO-07-768: 

Contents: 
Letter: 

Auditorís Report: 

Opinion on Financial Statements: 

Opinion on Internal Control: 

Compliance with Laws and Regulations: 

Significant Matters: 

Objectives, Scope, and Methodology: 

Foundationís Comments: 

Financial Statements: 

Statements of Financial Position: 

Statements of Activities: 

Statements of Cash Flows: 

Notes to Financial Statements: 

Appendix: 

Appendix I: Comments from the Congressional Award Foundation: 

[End of section]

May 15, 2007:

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, 
2006 and 2005. These financial statements are the responsibility of the 
Congressional Award Foundation. This report also presents (1) our 
opinion on the effectiveness of the Foundationís related internal 
control as of September 30, 2006, and (2) our conclusion on the 
Foundationís compliance in fiscal year 2006 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. ß 
807), and in accordance with U.S. generally accepted government 
auditing standards. 

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 report. Key contributors 
to this report were Amy Bowser, Jennifer Henderson, Julie Phillips, 
Bethany Smith, and Peggy Smith.

Signed by: 

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

[End of section]

May 15, 2007:

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, 
2006 and 2005, 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 had effective internal control over financial 
reporting (including safeguarding assets) and compliance with laws and 
regulations; and:

* no reportable noncompliance with laws and regulations we tested 
during fiscal year 2006.

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, 2006 and 2005, and the results of its activities and its 
cash flows for the fiscal years then ended.

As discussed in the Significant Matters section of this report and in 
note 13 to the financial statements, the Foundation continued to 
experience difficulties in meeting its financial obligations during 
fiscal year 2006. The Foundation's financial difficulties raise 
substantial doubt, for the fifth consecutive year, about its ability to 
continue as a going concern.[Footnote 1] The financial statements have 
been prepared under the assumption that the Foundation would continue 
as a going concern, and do not include any adjustments necessary if the 
Foundation were to cease operations.

Opinion on Internal Control:

The Foundation maintained, in all material respects, effective internal 
control over financial reporting (including safeguarding assets) and 
compliance with laws and regulations as of September 30, 2006. As such, 
the Foundation's internal control provided reasonable assurance that 
misstatements, losses, or noncompliance material in relation to the 
financial statements would be prevented or detected on a timely basis. 
Our opinion is based on criteria established in GAO's Standards for 
Internal Control in the Federal Government.[Footnote 2]

In our previous report on the results of our audit of the Foundation's 
fiscal year 2005 financial statements, we discussed the continued 
presence of a material weakness in the Foundation's internal control 
over its financial reporting process. This weakness was primarily 
caused by the Foundation's lack of appropriate written procedures for 
making closing entries in its financial records and for preparing 
complete and accurate financial statements, as well as a lack of 
adequate review of the financial records by management. The lack of 
policies and procedures resulted in substantial adjustments to the 
fiscal year 2005 financial statements prior to their issuance. During 
fiscal year 2006, the Foundation improved its internal control over 
financial reporting by developing written policies and procedures for 
financial operations and reporting, and by implementing a review of 
financial records by management. Consequently, we no longer consider 
this issue to be a material internal control weakness.

Compliance with Laws and Regulations:

Our tests for compliance with selected provisions of laws and 
regulations for fiscal year 2006 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.

Significant Matters:

During our audit of the Foundation's fiscal years 2006 and 2005 
financial statements, we identified two significant matters that we 
believe are relevant to users and readers of the Foundation's financial 
statements. These matters concern (1) the Foundation's ability to 
continue as a going concern and (2) inconsistency between functional 
expenses reported in the Foundation's annual information return filed 
with the Internal Revenue Service (IRS) and the audited financial 
statements for fiscal year 2005.

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

As discussed in note 13 to the financial statements, the Foundation 
continued to experience difficulties in meeting its financial 
obligations during fiscal year 2006, raising substantial doubt about 
the Foundation's ability to continue as a going concern. The Foundation 
incurred a loss (decrease in net assets) of almost $44,000 in fiscal 
year 2006 as compared to a gain (increase in net assets) of about 
$10,000 in fiscal year 2005. While operating revenue and other support 
increased in fiscal year 2006 by $214,000, from approximately $442,000 
to $656,000, or almost 49 percent, operating expenses also increased by 
49 percent, largely because of an increase in salaries, benefits, and 
payroll taxes of almost $109,000. This increase was in large part 
caused by the Foundation's hiring of two additional staff during fiscal 
year 2006, as well as a salary increase for the acting National 
Director. In addition, fund-raising expenses increased from 
approximately $43,000 to over $148,000 from fiscal year 2005 to fiscal 
year 2006.

During fiscal year 2006, two employees of the Foundation loaned funds 
to the organization to cover operating costs and payroll needs. To fund 
operating expenses during fiscal year 2006, the Foundation also sold 
$15,000 worth of equity securities in January 2006. The Foundation sold 
an additional $20,000 in equity securities in November 2006 to cover 
operating costs.

In its plan to address its financial difficulties and increase its 
revenues, the Foundation modified its approach to fund-raising during 
the past 3 years to emphasize more frequent but smaller and less 
expensive fund-raising events than in the past. While this initiative 
resulted in increased revenues for fiscal year 2006, expenses increased 
by an even greater amount, resulting in a net operating loss for the 
fiscal year.

As discussed in note 13 to the financial statements, financial data 
compiled by the Foundation as of February 28, 2007, indicate that the 
Foundation's financial condition showed some improvement during the 
first 5 months of fiscal year 2007. However, we have not audited these 
financial data. It is uncertain at this time whether this improvement 
can be sustained throughout the remainder of the fiscal year so that 
the Foundation can continue as a going concern.

Inconsistency between Information Return Filed with IRS and Audited 
Financial Statements:

The Foundation reported a statement of functional expenses in its 
annual Form 990, Return of Organization Exempt from Income 
Tax,[Footnote 3] filed with IRS for fiscal year 2005 that differed 
significantly from functional expenses as reported in its audited 
financial statements for the same year.[Footnote 4] The Form 990 
reported total program-related expenses of $392,605, while the audited 
financial statements for the same period reported total program 
expenses of $282,245--a difference of $110,360.

Financial Accounting Standards Board Statement No. 117, Financial 
Statements of Not-for-Profit Organizations, specifies that a statement 
of activities or notes to the financial statements should provide 
information about expenses reported by their functional classification, 
such as major classes of program services and supporting activities. 
Information about expenses by function is necessary to understand the 
not-for-profit organization's service efforts.

IRS requires not-for-profit organizations to show expenses by 
functional classification on the Form 990 information return. The 
instructions for Form 990 state that functional expenses should be 
reported using the organization's normal accounting method. 
Organizations should report the same functional expenses on the Form 
990 as they report in their audited financial statements.

The inconsistency in the presentation of functional expenses could 
confuse readers of the audited financial statements and Form 990 as to 
the Foundation's program expenses. Readers of the audited financial 
statements and Form 990 may view program expenses more favorably than 
administrative and fund-raising expenses when making decisions 
regarding charitable contributions. Hence, the accuracy of the 
functional allocation of expenses may be an important factor to readers 
of both the financial statements and the Form 990 information return. 
The Controller informed us that the Foundation intends to file an 
amended Form 990 for fiscal year 2005.

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 and made inquiries regarding unaudited financial information for 
the Foundation for the first 5 months of fiscal year 2007;

* 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 with laws and regulations. Because of inherent limitations 
in internal control, misstatements caused by error or fraud, losses, or 
noncompliance may nevertheless occur and not be detected. We also 
caution that projecting our evaluation to future periods is subject to 
the risk that controls may become inadequate because of changes in 
conditions or that the degree of compliance with controls may 
deteriorate.

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, 2006. 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 stated that its 
overall financial condition has improved and it continues to work 
diligently to secure proper funding to adequately support the program. 
As of April 30, 2007, the Foundation reported it had received over 
$494,000 in contributions and pledges for fiscal year 2007 and it 
expects to exceed budgeted revenue of $600,000 for the fiscal year.

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

Signed by: 

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

May 7, 2007:

[End of section] 

Financial Statements: 

Statements of Financial Position: 

The Congressional Award Foundation: 
Statements of Financial Position: 
As of September 30, 2006 and 2005: 

Assets: Cash and cash equivalents;
2006: $8,561;
2005: $6,743. 

Assets: Certificate of deposit;
2006: $56,952;
2005: $55,013. 

Assets: Contributions receivable (note 3);
2006: $51,300;
2005: $45,000. 

Assets: Prepaid expense;
2006: $2,972;
2005: $2,880. 

Assets: Congressional Award Fellowship Trust (note 4);
2006: $38,852;
2005: $58,531. 

Assets: Equipment, furniture, and fixtures, net;
2006: $5,981;
2005: $9,804. 

Total assets: 
2006: $164,618; 
2005: $177,971. 

Liabilities and net assets: Accounts payable;
2006: $11,242; 
2005: $15,817. 

Liabilities and net assets: Line of credit (note 5);
2006: $100,000; 
2005: $100,000. 

Liabilities and net assets: Accrued payroll, related taxes, and leave;
2006: $17,778; 
2005: $9,972. 

Liabilities and net assets: Loan from National Director (note 6);
2006: $23,321; 
2005: [Empty]. 

Liabilities and net assets: Contingent liability for tax penalty and 
interest (note 7);
2006: $3,800; 
2005: [Empty]. 

Total liabilities: 
2006: $156,141; 
2005: $125,789. 

Net assets: Unrestricted; 
2006: $(16,985); 
2005: $23,614. 

Net assets: Temporarily restricted (note 8); 
2006: $25,462; 
2005: $28,568. 

Total net assets:
2006: $8,477; 
2005: $52,182. 

Total liabilities and net assets: 
2006: $164,618; 
2005: $177,971. 

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

[End of section]

Statements of Activities: 

The Congressional Award Foundation:
Statements of Activities: 
For the Fiscal Years Ended September 30, 2006 and 2005: 

Changes in unrestricted net assets: 
Operating revenue and other support: Contributions; 
2006: $359,520; 
2005: $217,353. 

Changes in unrestricted net assets: 
Operating revenue and other support: Contributions-in-kind (note 9); 
2006: $128,660; 
2005: $131,114. 

Changes in unrestricted net assets: 
Operating revenue and other support: Program and other revenues; 
2006: $162,410; 
2005: $87,305. 

Changes in unrestricted net assets: 
Operating revenue and other support: Interest and dividends; 
2006: $2,568; 
2005: $2,736. 

Changes in unrestricted net assets: 
Operating revenue and other support: Net assets released from 
restrictions (note 8); 
2006: $3,106; 
2005: $3,060. 

Changes in unrestricted net assets: Total operating revenue and other 
support; 
2006: $656,264; 
2005: $441,568. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Salaries, benefits, and payroll taxes; 
2006: $312,654; 
2005: $203,896. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Program, promotion, and travel; 
2006: $14,164; 
2005: $24,028. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Fund-raising expense; 
2006: $148,535; 
2005: $42,820. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Gold Award ceremony; 
2006: $100,083; 
2005: $51,522. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Professional fees; 
2006: $47,354; 
2005: $71,234. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Depreciation; 
2006: $3,823; 
2005: $6,044. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Board of Directors expense; 
2006: $630; 
2005: $4,355. 

Changes in unrestricted net assets: 
Operating expenses (note 10): Administrative and other expense; 
2006: $64,100; 
2005: $60,121. 

Total operating expenses; 
2006: $691,343; 
2005: $464,020. 

Changes in unrestricted net assets: Subtotal;
2006: $(35,079); 
2005: $(22,452). 

Other changes: Net unrealized investment gains (losses); 
2006: $(14,343); 
2005: $38,807. 

Other changes: Net realized investment gains (losses); 
2006: $8,823; 
2005: $(3,279). 

Other changes: Increase (decrease) in unrestricted net assets; 
2006: $(40,599); 
2005: $13,076. 

Changes in temporarily restricted net assets: Net assets released from 
restrictions (note 8); 
2006: $(3,106); 
2005: $(3,060). 

Decrease in temporarily restricted net assets: 
2006: $(3,106); 
2005: $(3,060). 

Increase (decrease) in net assets:
2006: $(43,705); 
2005: $10,016. 

Net assets at beginning of year:
2006: $52,182; 
2005: $42,166. 

Net assets at end of year: 
2006: $8,477; 
2005: $52,182. 

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

[End of section]

Statements of Cash Flows: 

The Congressional Award Foundation: 
Statements of Cash Flows: 
For the Fiscal Years Ended September 30, 2006 and 2005: 

Cash Flows from Operating Activities: Increase (decrease) in net 
assets; 
2006: $(43,705); 
2005: $10,016. 

Cash Flows from Operating Activities: 
Adjustments to reconcile change in net assets to net cash
from operating activities: Depreciation; 
2006: $3,823; 
2005: $6,044. 

Cash Flows from Operating Activities: 
Adjustments to reconcile change in net assets to net cash
from operating activities: Net unrealized loss (gain) on investments; 
2006: $14,343; 
2005: $(38,807). 

Cash Flows from Operating Activities: 
Adjustments to reconcile change in net assets to net cash
from operating activities: Net realized (gain) loss on sale of 
investments; 
2006: $(8,823); 
2005: $3,279. 

Cash Flows from Operating Activities: 
Adjustments to reconcile change in net assets to net cash
from operating activities: Certificate of deposit interest; 
2006: $(1,939); 
2005: $(1,401). 

Cash Flows from Operating Activities: 
Change in operating assets: Contributions receivable; 
2006: $(6,300); 
2005: $15,573. 

Cash Flows from Operating Activities: 
Change in operating assets: Prepaid expenses; 
2006: $(92); 
2005: $665. 

Cash Flows from Operating Activities: 
Change in operating liabilities: Accounts payable; 
2006: $(4,575); 
2005: $(119,686).  

Cash Flows from Operating Activities: 
Change in operating liabilities: Accrued payroll, related taxes, and 
leave; 
2006: $7,806; 
2005: $(47,641). 

Cash Flows from Operating Activities: 
Change in operating liabilities: Contingent liability for tax penalty 
and interest; 
2006: $3,800; 
2005: [Empty]. 

Cash Flows from Operating Activities: 
Change in operating liabilities: Obligation under capital leases; 
2006: [Empty]; 
2005: $(462). 

Net Cash Used by Operating Activities:
2006: $(35,662); 
2005: $(172,420). 

Cash Flows from Investing Activities: Proceeds from sale of 
investments; 
2006: $14,159; 
2005: $172,547. 

Net Cash Provided by Investing Activities: 
2006: $14,159; 
2005: $172,547. 

Cash Flows from Financing Activities: Proceeds from loans; 
2006: $27,821; 
2005: [Empty]. 

Cash Flows from Financing Activities: Repayment of loans; 
2006: $(4,500); 
2005: [Empty]. 

Net Cash Provided by Financing Activities:
2006: $23,321; 
2005: [Empty]. 

Net Increase in Cash and Cash Equivalents:
2006: $1,818; 
2005: $127. 

Cash and Cash Equivalents, beginning of year: 
2006: $6,743; 
2005: $6,616. 

Cash and Cash Equivalents, end of year: 
2006: $8,561; 
2005: $6,743. 

Supplemental Data: Cash paid during the year for interest; 
2006: $8,727; 
2005: $6,619. 

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

[End of section]

Notes to Financial Statements: 

The Congressional Award Foundation: 
Notes to Financial Statements: 
For the Fiscal Years Ended September 30, 2006 and 2005: 

Note 1. Organization: 

The Congressional Award Foundation (the Foundation) was formed in 1979 
under Public Law No. 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 
3,400 in fiscal year 2006. During fiscal year 2006, there were 
approximately 22,000 participants registered in the Foundationís Award 
program. On December 22, 2005, the President signed Public Law No. 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 Foundationís 
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 5). 

C. Contributions Receivable: 

Unconditional promises to give are recorded as revenue when the 
promises are made. Contributions receivable to be collected within less 
than 1 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 fair 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 10. 
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, 2006 and 2005, promises to give totaled $51,300 and 
$45,000, respectively, none of which was temporarily restricted by the 
donors. All amounts were due within 1 year. 

Note 4. Congressional Award Fellowship Trust: 

The Trust was established in 1990 to benefit the charitable and 
educational purposes of the Foundation. During the fiscal year ended 
September 30, 2006, the Trustees authorized the use of $15,788 of the 
Trust to support fiscal year 2006 operations. 

At September 30, 2006, and 2005, the Trustís investments at fair value 
consisted of the following: 

Description: Equity in securities Ė energy sector; 
September 30, 2006: $36,947; 
September 30, 2005: $58,524.

Description: Money market funds; 
September 30, 2006: $1,905; 
September 30, 2005: $7.

Total: 
September 30, 2006: $38,852; 
September 30, 2005: $58,531.

Activity in the Trust for the fiscal years ended September 30, 2006 and 
2005, was as follows: 

Interest and dividends:
September 30, 2006: $629; 
September 30, 2005: $2,736.

Net realized gains (losses): 
September 30, 2006: $8,823; 
September 30, 2005: $(3,279).

Net unrealized gains (losses):
September 30, 2006: $(14,343); 
September 30, 2005: $38,807.

Total investment (losses) gains:
September 30, 2006: $(4,891); 
September 30, 2005: $38,264.

New contributions to investment fund: 
September 30, 2006: $1,000; 
September 30, 2005: $0.

Investments and earnings transferred to current operations: 
September 30, 2006: $(15,788); 
September 30, 2005: $(175,284).

Net change in Trust Fund investments: 
September 30, 2006: $(19,679); 
September 30, 2005: $(137,020).

Trust Fund investments, beginning of year: 
September 30, 2006: $58,531; 
September 30, 2005: $195,551.

Trust Fund investments, end of year: 
September 30, 2006: $38,852; 
September 30, 2005: $58,531.

Note 5. Line of Credit: 

The Foundation has a $100,000 revolving line of credit with its bank 
that bears interest at 9.25 percent per annum. Interest paid on this 
line of credit during fiscal years 2006 and 2005 was $8,727 and $6,619, 
respectively. The line of credit is partially secured by the 
Foundationís investment in a $50,000 certificate of deposit held by the 
same bank. 

At September 30, 2006, and 2005, the outstanding balance on the line of 
credit was $100,000. 

Note 6. Loan from National Director: 

During fiscal year 2006, the National Director provided a loan to the 
Foundation in the amount of $23,321, which was still owed as of 
September 30, 2006. By December 31, 2006, the amount had been repaid. 

Note 7. Contingent Liability for Tax Penalty and Interest: 

The Foundation filed its annual Internal Revenue Service Form 990 
information return for fiscal year 2005 in July, 2006. The Internal 
Revenue Service issued a letter in December, 2006, advising that the 
information return was filed late and that penalties and interest had 
accrued in the amount of $3,580 as of January 8, 2007. On January 24, 
2007, the Foundation appealed this decision. On February 23, 2007, the 
Internal Revenue Service advised it had not yet made a determination 
and was still reviewing the appeal. A contingent liability of $3,800, 
including additional accrued interest, is recorded in the financial 
statements. 

Note 8. Temporarily Restricted Net Assets: 

Temporarily restricted net assets at September 30, 2006 and 2005 were 
available for the following programs and future periods: 

Puerto Rico Council development:
2006: $17,396; 
2005: $17,396. 

Nevada Council development: 
2006: $8,066; 
2005: $10,381. 

Oklahoma Council development:
2006: $0; 
2005: $791. 

Total net assets temporarily restricted for use: 
2006: $25,462; 
2005: $28,568. 

Net assets released from restrictions during the fiscal years ended 
September 30, 2006 and 2005 were as follows: 

Puerto Rico Council development: 
2006: $0; 
2005: $166. 

Nevada Council development: 
2006: $2,315; 
2005: $1,901. 

Oklahoma Council development: 
2006: $791; 
2005: $993. 

Total temporarily restricted net assets released for use: 
2006: $3,106; 
2005: $3,060. 

Note 9. In-kind Contributions: 

During fiscal year 2006, the Foundation received in-kind (noncash) 
contributions from donors. Donated professional services are accounted 
for as contribution revenue and as current period operating expenses. 
During fiscal years 2006 and 2005, the Foundation employed the services 
of unpaid interns. However, amounts for the intern services are not 
included in these financial statements because the value of the 
services is not readily determinable. 

For fiscal year 2005, 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 $128,660 and 
$131,114 for fiscal years 2006 and 2005, respectively. These noncash 
contributions are as follows. 

Professional services: Legal; 
2006: $33,354; 
2005: $63,202. 

Professional services: Web-hosting; 
2006: $8,680; 
2005: $4,650. 

Donations related to forgiveness of debt:
2006: $0; 
2005: $63,262. 

Donations related to fund-raising: 
2006: $86,626; 
2005: $0. 

Total in-kind contributions: 
2006: $128,660; 
2005: $131,114. 

In addition, Section 106(e) of the Congressional Award Act, as amended, 
provides that "the Board may benefit from in-kind and indirect 
resources provided by the Offices of Members of Congress or the 
Congress.Ē Resources so provided include use of office space, office 
furniture, and certain utilities. 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 10. 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, 2006 and 2005. Presented below are 
the Foundation's expenses by functional classification for the fiscal 
years ended September 30, 2006 and 2005.

Program activities: 
2006: $391,296; 
2005: $282,245. 

Fund-raising activities: 
2006: $169,276; 
2005: $60,375. 

Administrative activities: 
2006: $130,771; 
2005: $121,400. 

Total:
2006: $691,343; 
2005: $464,020. 

Note 11. 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 were no 
contributions to the plan in fiscal years 2006 and 2005. 

Note 12. Related Party Activities: 

The Foundation engaged in numerous transactions with related parties 
during fiscal years 2006 and 2005. 

The Controller provided a loan of $4,500 during fiscal year 2006. This 
amount was repaid during the fiscal year. 

The Controller, through his professional tax business, prepared the 
Foundationís annual Internal Revenue Service Form 990 information 
return. His firm was compensated $750 and $2,000 during fiscal years 
2006 and 2005, respectively. 

During fiscal years 2006 and 2005, the Foundation had an agreement with 
a professional fund-raiser. The professional fund-raiserís spouse is on 
the Board of Directors of the Foundation. During fiscal year 2005, the 
fund-raising commission basis was increased from 10 percent to 15 
percent and remained at this rate until May 2006. At that time, the 
fund-raising commission was changed to a monthly retainer of $1,500.
Disbursements by the Foundation during fiscal years 2006 and 2005 to 
the related party totaled $9,000 and $12,891, respectively. 

During fiscal years 2006 and 2005, a former board member served as 
portfolio manager with the brokerage firm responsible for managing the 
Congressional Award Fellowship Trust account. 

During fiscal years 2006 and 2005, 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 9. The following transactions 
with board members, all of which were also included in the value of in-
kind contributions in note 9, took place during fiscal year 2006:

* The Board Chairman did not request reimbursement of airfare for his 
attendance at statewide ceremonies, the value of which was $578. 

* A board member, through his company, provided press releases at no 
cost, the value of which was $2,500. 

* A board member provided for the expenses for participants to attend 
Mississippi ceremonies, the value of which was $2,370. 

* A board member, through his company, provided filming of the Gold 
Award Ceremony, the value of which was $10,000. 

* A board member, through his company, paid for a breakfast for the New 
Jersey delegation, the value of which was $1,049. 

Note 13. The Foundationís Ability to Continue as a Going Concern: 

The Congressional Award Foundation depends on contributions to fund its 
operations and, to a far lesser extent, other revenues, interest, and 
dividends. The Foundationís net assets decreased from $52,182 in fiscal 
year 2005 to $8,477 in fiscal year 2006. The decrease in net assets in 
fiscal year 2006 was in part caused by a donor unexpectedly withdrawing 
its commitment to sponsor the Gold Award Ceremony and associated 5-day 
long program. Since the Foundation had made financial commitments for 
the program, trust investments had to be sold to pay for the program 
activities. As a result, the Foundationís investments decreased $19,679 
in fiscal year 2006 from $58,531 to $38,852. 

The Foundation implemented numerous initiatives to increase corporate 
fund-raising revenues during fiscal year 2005. As a result, the 
Foundationís corporate contributions increased by 65 percent and total 
income increased by 49 percent, about $215,000, from fiscal year 2005 
to 2006. However, total expenses also increased by 49 percent, about 
$227,000, from fiscal year 2005 to fiscal year 2006. The Foundationís 
ability to continue as a going concern depends on increasing revenues 
and decreasing expenses. 

The Foundationís financial condition has improved, as shown in 
unaudited financial statements through February 28, 2007. The financial 
data show approximately $318,000 in total revenue and $77,000 in net 
income for the 5 months ended February 28, 2007. 

Note 14. Subsequent Events: 

The Foundation sold approximately $20,000 in equity securities (part of 
the Congressional Award Fellowship Trust) in November 2006 in order to 
support fiscal year 2007 operations. 

[End of Section]

Appendix I: 

Appendixes Comments from the Congressional Award Foundation: 

Public Law 96-114. The Congressional Award Act:

Congressional Award:

379 Ford House Office Building: 
Washington, DC 20515: 
(202) 226-0130: 
FAX: (202) 226-0131: 
Mailing Address: 
Post Office Box 77440: 
Washington, DC 20013: 

May 7, 2007: 

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, 
2006 and 2005. Specifically, this letter is to inform you of the 
positive changes that have occurred in regards to the overall financial 
condition of the Foundation.

The Congressional Award Foundation continues to work diligently to 
secure the proper funds to adequately support the growing program. As 
of April 30, 2007, the Foundation has received over $494,000 in 
contributions and pledges for fiscal year 2007 and recorded a net 
income of over $89,000, demonstrating significant improvement in 
funding over fiscal year 2006. Projections show the Foundation will not 
only meet, but exceed our budgeted revenue of $600,000 for the year.

Sincerely,

Signed by:

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

Erica Wheelan Hey: 
Acting National Director: 
The Congressional Award: 

[End of section]

Footnotes:

[1] 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); Financial Audit: Congressional Award Foundation's 
Fiscal Years 2004 and 2003 Financial Statements, GAO-06-168 
(Washington, D.C.: Nov. 4, 2005); and Financial Audit: Congressional 
Award Foundation's Fiscal Years 2005 and 2004 Financial Statements, GAO-
06-682 (Washington, D.C.: May 15, 2006).

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

[3] IRS Form 990 is used by tax-exempt organizations to provide IRS 
with the information required by section 6033 of the Internal Revenue 
Code (I.R.C.). An organization's completed Form 990 is available for 
public inspection as required by section 6104 of the I.R.C. Some 
members of the public rely on the Form 990 as the primary or sole 
source of information about a particular organization. How the public 
perceives an organization in such cases may be determined by the 
information presented on its return. Therefore, the return should be 
complete and accurate and should fully describe the organization's 
programs and accomplishments. Form 990 is due by the 15th day of the 
5th month after the organization's fiscal year ends. An automatic 3- 
month extension of time to file can be requested.

[4] The Foundation filed its Form 990 for fiscal year 2005 on July 31, 
2006--approximately 2-1/2 months after our report on the results of our 
audit of the Foundation's fiscal year 2005 and 2004 financial 
statements was released.

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