This is the accessible text file for GAO report number GAO-03-737 
entitled 'Financial Audit: Congressional Award Foundation's Fiscal 
Years 2002 and 2001 Financial Statements' which was released on May 15, 
2003.

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Report to the Congress:

May 2003:

Financial Audit:

Congressional Award Foundation's Fiscal Years 2002 and 2001 Financial 
Statements:

GAO-03-737:

Letter:

Auditor's Report:

Opinion on Financial Statements:

Opinion on Internal Control:

Compliance With Laws and Regulations:

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 May 15, 2003:

To the President of the Senate and 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, 
2002, and 2001. 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, 2002, and (2) our conclusion on the 
Foundation's compliance in fiscal year 2002 with selected provisions of 
laws and regulations we tested. We conducted our audit pursuant to 
section 8 of the Congressional Award Act, as amended (2 U.S.C. 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) 512-9406 or Julie Phillips, Assistant Director, at 
(202) 512-5121. You can also reach us by e-mail at franzelj@gao.gov or 
phillipsjt@gao.gov. Key contributors to this report were Greg Ziombra 
and Teressa Broadie-Gardner.

Jeanette M. Franzel
Director
Financial Management and Assurance:

Signed by Jeanette M. Franzel:

Auditor's Report To the President of the Senate and 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, 
2002, and 2001, 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 the provisions of 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, 2002, and 2001, and the results of its activities and its 
cash flows for the fiscal years then ended.

As discussed in a later section of this report and in Note 11 to the 
financial statements, the Foundation is experiencing increasing 
difficulties in meeting its financial obligations. The Foundation's 
continuing financial difficulties and deteriorating financial 
condition raise substantial doubt about its ability to continue as a 
going concern. The financial statements have been prepared under the 
assumption that the Foundation will continue as a going concern, and do 
not include any adjustments that might need to be made if the 
operations of the Foundation were to cease.

Opinion on Internal Control:

The Foundation maintained, in all material respects, effective internal 
control over financial reporting (including safeguarding assets) and 
compliance as of September 30, 2002, that 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 our Standards 
for Internal Control in the Federal Government.[Footnote 1] We found 
matters involving internal control that we do not consider to be 
reportable conditions.[Footnote 2] We will communicate these matters 
separately to the Foundation's management along with our suggestions 
for improvement.

Compliance With Laws and Regulations:

Our tests for compliance with selected provisions of laws and 
regulations for fiscal year 2002 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.

Foundation's Ability to Continue as a Going Concern:

The Foundation incurred losses (decreases in net assets) of $330,726 
and $443,962 in 2002 and 2001, respectively. The decreases in net 
assets were a result of operating losses and unrealized losses in the 
value of the Foundation's investments in the Congressional Award Trust.

Due to ongoing cash flow problems associated with its daily operations, 
Foundation management liquidated $130,000 of investments from the 
Foundation's permanently restricted trust assets and used the proceeds 
to cover operating expenses during fiscal year 2002. The market value 
of the Trust assets at September 30, 2002, was $164,612, which was 
$99,845 below the permanently restricted amount of $264,457 as defined 
by the terms of
the Trust Declaration (agreement).[Footnote 3] Also, as a result of its 
ongoing cash flow problems, the Foundation's accounts payable balance 
increased by approximately 600 percent from $39,068 at September 30, 
2001, to $274,661 at September 30, 2002. During fiscal year 2002, the 
Foundation also borrowed the maximum amount allowable of $100,000 
against its line of credit, which remained outstanding at September 30, 
2002.

At September 30, 2002, over half of the Foundation's assets, or 
$360,013, consisted of contributions receivable from donors. The 
majority of the contributions receivable was restricted for future 
periods. As a result of these restrictions on its contributions 
receivable, its decreases in assets, and increases in liabilities, the 
Foundation showed a deficit in its unrestricted operating assets of 
$408,537 at September 30, 2002.

Note 11 to the financial statements acknowledges the Foundation's 
increasing difficulties in meeting its financial obligations. While the 
Foundation is taking steps to decrease its expenditures, those steps 
may not be sufficient to allow it to continue operations. Unaudited 
financial data compiled by the Foundation as of March 31, 2003, showed 
that the Foundation's financial condition has not improved, thus 
raising substantial doubt about the Foundation's ability to continue as 
a going concern. The financial statements have been prepared under the 
assumption that the Foundation will continue as a going concern, and do 
not include any adjustments that might need to be made if the 
operations of the Foundation were to cease.

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; and:

* 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;

* 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 controls 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. Because of inherent limitations in internal control, 
misstatements due to error or fraud, losses, or noncompliance may 
nevertheless occur and not be detected. We also caution that projecting 
the results of our tests of internal control 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, 2002. 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:

We provided a draft of our report to Congressional Award Foundation 
officials for their review and comment. Foundation officials agreed 
with the contents of our report.

Jeanette M. Franzel
Director
Financial Management and Assurance:

Signed by Jeanette M. Franzel:

April 25, 2003:

Financial Statements:

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[End of section]

Statements of Financial Position:

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Statements of Activities:

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Statements of Cash Flows:

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Notes to Financial Statements:

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FOOTNOTES

[1] Standards for Internal Control in the Federal Government (GAO/AIMD-
00-21.3.1, November 1999).

[2] 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 an organization's ability to meet the objectives of 
reliable financial reporting and compliance with applicable laws and 
regulations.

[3] At the time the distributions were made, they were made from Trust 
Fund income as defined by the Trust agreement and did not use 
permanently restricted amounts. The balance of the Trust Fund dropped 
below the permanently restricted amount due to adverse market 
conditions.

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