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

Published by the Government Accountability Office on 2003-05-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Congress




May 2003
             FINANCIAL AUDIT
             Congressional Award
             Foundation’s Fiscal
             Years 2002 and 2001
             Financial Statements




GAO-03-737
             a
Contents



Letter                                                                                                            1


Auditor’s Report                                                                                                  2
                       Opinion on Financial Statements                                                            2
                       Opinion on Internal Control                                                                3
                       Compliance With Laws and Regulations                                                       3
                       Foundation’s Ability to Continue as a Going Concern                                        3
                       Objectives, Scope, and Methodology                                                         4
                       Foundation’s Comments                                                                      6


Financial Statements                                                                                               7
                       Statements of Financial Position                                                            7
                       Statements of Activities                                                                    8
                       Statements of Cash Flows                                                                    9
                       Notes to Financial Statements                                                              10




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                       Page i                                                                         GAO-03-737
A
United States General Accounting Office
Washington, D.C. 20548



                                    May 15, 2003                                                                   Leter




                                    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




                                    Page 1                                                            GAO-03-737
A
United States General Accounting Office
Washington, D.C. 20548



                                    To the President of the Senate and the
                                    Speaker of the House of Representatives                                         Aud
                                                                                                                      tR
                                                                                                                       o
                                                                                                                       sir’eport




                                    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                The financial statements and accompanying notes present fairly, in all
                                    material respects, in conformity with U.S. generally accepted accounting
Statements                          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.




                                    Page 2                                                               GAO-03-737
Opinion on Internal       The Foundation maintained, in all material respects, effective internal
                          control over financial reporting (including safeguarding assets) and
Control                   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.1 We found matters involving internal
                          control that we do not consider to be reportable conditions.2 We will
                          communicate these matters separately to the Foundation’s management
                          along with our suggestions for improvement.



Compliance With Laws      Our tests for compliance with selected provisions of laws and regulations
                          for fiscal year 2002 disclosed no instances of noncompliance that would be
and Regulations           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   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
Continue as a Going       result of operating losses and unrealized losses in the value of the
Concern                   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




                          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.




                          Page 3                                                                              GAO-03-737
                         the Trust Declaration (agreement).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   The Foundation’s management is responsible for

Methodology              • 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



                         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.




                         Page 4                                                                       GAO-03-737
• 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.



Page 5                                                             GAO-03-737
               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   We provided a draft of our report to Congressional Award Foundation
               officials for their review and comment. Foundation officials agreed with
Comments       the contents of our report.




               Jeanette M. Franzel
               Director
               Financial Management and Assurance

               April 25, 2003




               Page 6                                                              GAO-03-737
Financial Statements


Statements of Financial Position


                                            The Congressional Award Foundation
                                              Statements of Financial Position
                                             As of September 30, 2002, and 2001



                                                                                                2002       2001
       Assets
       Cash and cash equivalents                                                             $14,448    ($7,629)
       Investments (note 8)                                                                   50,000
       Contributions receivable, net (note 3)                                                360,013     205,000
       Prepaid expense                                                                         2,534       4,441
       Congressional Award Fellowship Trust (note 4)                                         164,612     356,934
       Equipment, furniture, and fixtures, net                                                49,222      65,245

       Total assets                                                                         $640,829    $623,991

       Liabilities and net assets
       Accounts payable                                                                      274,661      39,068
       Line of credit (note 8)                                                               100,000
       Accrued payroll, related taxes, and leave                                              47,311      31,721
       Obligation under capital lease                                                          2,745       6,364

       Total liabilities                                                                     424,717      77,153

       Net assets
       Unrestricted                                                                         (408,537)     30,047
       Temporarily restricted                                                                 360,192    252,334
       Permanently restricted (note 4)                                                        264,457    264,457

       Total net assets                                                                      216,112     546,838

       Total liabilities and net assets                                                     $640,829    $623,991




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




                                                   Page 7                                                          GAO-03-737
                                               Financial Statements




Statements of Activities

                                                    The Congressional Award Foundation
                                                           Statements of Activities
                                          For the Fiscal Years Ended September 30, 2002, and 2001


                                                                                                       2002         2001
                  Changes in unrestricted net assets:

                  Operating revenue and other support
                  Contributions                                                                   $659,856      $519,041
                  Contributions - In-kind (note 5)                                                  325,585       74,642
                  Program and other revenues                                                        108,267       53,464
                  Interest and dividends applied to current operations                                4,070        7,778
                  Net assets released from restrictions (note 6)                                    241,592      125,939
                  Total operating revenue and other support                                       1,339,370      780,864

                  Operating expenses (note 10)
                  Salaries, benefits, and payroll taxes                                             643,186       482,485
                  Program, promotion, and travel                                                    457,366       163,525
                  Fund-raising expense                                                              354,034       131,761
                  Gold Award ceremony                                                                48,933        34,541
                  Professional fees                                                                  91,123       181,087
                  Depreciation                                                                       18,935        18,601
                  Board of Directors expense                                                            132        12,136
                  Administrative and other expense                                                  101,863        70,611
                  Total operating expenses                                                        1,715,572     1,094,747

                  Subtotal                                                                         (376,202)    (313,883)

                  Other changes
                  Unrealized investment losses not applied to current operations                    (66,523)    (304,889)
                  Realized investment gains (losses) not applied to current operations                4,141       (1,301)
                  Increase (decrease) in unrestricted net assets                                   (438,584)    (620,073)

                  Changes in temporarily restricted net assets:
                  Contributions                                                                     449,450      302,050
                  Bad debt loss on contributions receivable                                        (100,000)
                  Net assets released from restrictions (note 6)                                   (241,592)    (125,939)
                  Increase (decrease) in temporarily restricted net assets                          107,858      176,111

                  Increase (decrease) in net assets                                                (330,726)    (443,962)

                  Net assets at beginning of year                                                  546,838       990,800
                  Net assets at end of year                                                       $216,112      $546,838




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




                                               Page 8                                                                       GAO-03-737
                                                Financial Statements




Statements of Cash Flows

                                                The Congressional Award Foundation
                                                      Statements of Cash Flows
                                      For the Fiscal Years Ended September 30, 2002, and 2001


                                                                                                 2002           2001
              Cash flows from operating activities:
              Contributions received                                                        $854,293       $616,091
              Cash received from councils and independents                                   108,267         53,464
              Interest and dividends received                                                  4,070          7,778
              Cash paid to employees                                                        (491,813)      (373,359)
              Cash paid to vendors                                                          (624,843)      (582,411)
              Net cash provided/(used) from operating activities                            (150,026)      (278,437)

              Cash flows from investing activities:
              Purchase of equipment                                                            (4,278)       (14,337)
              Proceeds from sales of assets                                                                     (260)
              Purchase of Investments                                                        (50,000)
              Proceeds from sale of investments                                              130,000        _______
              Net cash provided/(used) in investing activities                                75,722        (14,597)

              Cash flows from financing activities:
              Draws on line of credit                                                        100,000
              Payments on capital lease                                                       (3,619)         (2,772)
              Net cash provided/(used) in financing activities                                96,381          (2,772)

              Net increase (decrease) in cash                                                 22,077        (295,806)
              Cash at beginning of the year                                                   (7,629)        288,177
              Cash at end of year                                                            $14,448         ($7,629)

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

              Change in net assets                                                         ($330,726)      ($443,962)

              Adjustments to reconcile change in net assets to
              net cash used/provided from operating activities:
                  Investment losses not applied to operations                                   62,321      306,190
                  Loss on disposal                                                               1,367
                  Depreciation expense                                                         18,935         18,601
                  (Increase) in contributions receivable                                     (155,013)      (205,000)
                  Decrease (increase) in prepaid expenses                                        1,907           (49)
                  Decrease in other assets                                                                       170
                  Increase in accounts payable                                               235,593          39,068
                  Increase in accrued payroll, related taxes, and leave                       15,590           6,545

              Net cash provided/(used) from operating activities                           ($150,026)      ($278,437)




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




                                                Page 9                                                                  GAO-03-737
                                           Financial Statements




Notes to Financial Statements


                                            THE CONGRESSIONAL AWARD FOUNDATION

                                                    Notes to Financial Statements
                                      For the Fiscal Years Ended September 30, 2002, and 2001

                       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 3,709 in fiscal year 2002,
                       an increase of about 50 percent over fiscal year 2001. As of September 30, 2002, there
                       were over 11,000 active participants in the program. In October 1999, the president signed
                       Public Law 106-63, Section 1(d) of which reauthorized the Congressional Award
                       Foundation through September 30, 2004.

                       Note 2.   Summary of Significant Accounting Policies

                       A.   Basis of Accounting

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

                       B.   Cash Equivalents

                            The Foundation considers funds held in savings accounts 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.

                       C.   Contributions Receivable

                            Unconditional promises to give are recorded as revenue when the promise is made.
                            Contributions receivable over multiple years are discounted to their present value
                            using the applicable interest rate.

                       D.   Equipment, Furniture and Fixtures, and Related Depreciation

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




                                           Page 10                                                                     GAO-03-737
                          Financial Statements




                     THE CONGRESSIONAL AWARD FOUNDATION

                             Notes to Financial Statements
               For the Fiscal Years Ended September 30, 2002, and 2001

E.   Investments

     Investments consist of a certificate of deposit and are carried at purchase price, which
     approximates 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.
        •   Permanently restricted net assets result from donor-imposed restrictions
            stipulating that the resources donated be maintained permanently. The
            Foundation's permanently restricted net assets consist of contributions to the
            Foundation's Congressional Award Fellowship Trust Fund (see note 4).

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.

     During the year ended September 30, 2001, the Foundation adopted the provisions of
     Statement of Position 98-2, “Accounting for Costs of Activities of Not-for-Profit
     Organizations and State and Local Governmental Entities that Include Fund
     Raising,” and allocated joint costs related to the annual gala between program and
     fundraising activities.

I.   Estimates

     The preparation of financial statements in conformity with U.S. generally accepted
     accounting principles requires management to make estimates and assumptions that




                          Page 11                                                                GAO-03-737
                       Financial Statements




                    THE CONGRESSIONAL AWARD FOUNDATION

                            Notes to Financial Statements
              For the Fiscal Years Ended September 30, 2002, and 2001

     affect certain reported amounts and disclosures. Accordingly, actual results could
     differ from those estimates.

Note 3.   Contributions Receivable

At September 30, 2002, and 2001, promises to give totaled $360,013 and $205,000,
respectively, of which $310,000 and $200,000, respectively, were temporarily restricted by
the donors for future periods. At September 30, 2002, and 2001, $200,000 and $105,000,
respectively, were due within 1 year and $160,000 and $100,000 were due within 2 years.
All amounts are considered fully collectible. The promises to give were a result of the new
“Charter for Youth” fundraising initiative. Charter for Youth benefactors are requested to
contribute a minimum of $100,000 per year for 3 consecutive years for the direct support of
The Congressional Award and its initiatives for participant recruitment and awardee
recognition.    Charter for Youth members have the opportunity to participate in
Congressional Award events, and receive recognition as benefactors at the international,
national, and regional events and meetings.

Note 4.   Congressional Award Fellowship Trust

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

During the fiscal year ended September 30, 2002, the Foundation’s Board approved the
use of $130,000 of the Trust Fund to support 2002 operations. As of September 30, 2002,
the value of the Trust Fund’s investments was below the permanently restricted amount of
$264,457 by $99,845. At the time the distributions were made, they were made from the
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.




                       Page 12                                                                GAO-03-737
                          Financial Statements




                      THE CONGRESSIONAL AWARD FOUNDATION

                              Notes to Financial Statements
                For the Fiscal Years Ended September 30, 2002, and 2001

At September 30, 2002, and 2001, the Trust Fund’s investments at fair value consisted of
the following:

                                                                    September 30,

       Description                                               2002            2001

       Equity and debt securities                              $157,670        300,924
       Money market funds                                         6,942         56,010

       Total                                                   $ 164,612       $356,934

Activity in the Trust Fund for the fiscal years ended September 30, 2002, and 2001 was as
follows:
                                                                     September 30,
                                                                   2002         2001
 Interest and dividends                                          $ 4,130      $ 4,779
 Net realized gains (losses)                                       4,141       (1,301)
 Net unrealized losses                                           (66,523)    (304,889)
   Total investment losses                                       (58,252)    (301,411)

 Transfer to operations                                         (130,000)
 Investment earnings applied to current operations                (4,070)     (4,519)

 Net change in Trust Fund investments                           (192,322)    (305,930)
 Trust Fund investments, beginning of year                        356,934     662,864

 Trust Fund investments, end of year                            $ 164,612    $ 356,934

 Value of Trust Fund (below) or above permanently restricted
 balance                                                         ($99,845)    $ 92,477




                          Page 13                                                           GAO-03-737
                          Financial Statements




                      THE CONGRESSIONAL AWARD FOUNDATION

                              Notes to Financial Statements
                For the Fiscal Years Ended September 30, 2002, and 2001

Note 5.    In-kind Contributions

During fiscal years 2002 and 2001, the Foundation received in-kind (noncash) contributions
from donors, which are accounted for as contribution revenue and either as current period
operating expenses or additions to capital assets. These noncash contributions are as
follows:
                                                             2002          2001

          Promotional support                             $ 281,221     $     630
          Professional services (legal and web hosting)      44,364        37,712
          Supplies for fund-raising gala                                   26,300
          Airline tickets                                                  10,000
                Total in-kind contributions               $325,585       $ 74,642

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 3 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, 2002, and 2001 were available for the
following programs and future periods:

                                                            2002             2001

          Contributions restricted for use in 2004        $ 160,000
          Contributions restricted for use in 2003          160,000      $100,000
          Contributions restricted for use in 2002                        100,000
          Puerto Rico Council development                   17,930         25,000
          Nevada Council development                         16,126        18,547
          Oklahoma Council development                        6,136         7,105
          Mississippi Council development                                   1,682

                      Total                                $360,192         $252,334




                          Page 14                                                            GAO-03-737
                        Financial Statements




                     THE CONGRESSIONAL AWARD FOUNDATION

                             Notes to Financial Statements
               For the Fiscal Years Ended September 30, 2002, and 2001

Net assets released from restrictions during the years ended September 30, 2002, and
2001 were as follows:

                                                                2002               2001

    Contributions restricted for use in fiscal
     years 2002 and 2001, respectively                        $225,000         $100,000
    Puerto Rico Council development                              7,070
    Nevada Council development                                    2,421            5,067
    Mississippi Council development                               1,682           15,708
    Oklahoma Council development                                    969            2,154
    DC Council development                                        2,000            2,631
    South Bronx/New York Project                                  2,450              379

          Total                                               $241,592          $125,939


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. For 2002
and 2001, the Board voted to make matching contributions to qualified employees of up to
6 percent, which amounted to $9,658 and $8,610 in 2002 and 2001, respectively.

Note 8. Line of Credit

The Foundation has a $100,000 line of credit with its bank that bears interest at 6 percent
per annum. The line of credit is partially secured by the Foundation’s investment in a
$50,000 certificate of deposit held by the same bank. At September 30, 2002, the
outstanding balance on the line of credit was $100,000. There was no outstanding line of
credit at September 30, 2001.

Note 9.   Related Party Activities

In June 2002, the CEO, Director of Finance, and the Director of Development of the
Foundation used their personal credit cards to advance deposits and other costs related to
the 2002 Gala in the amount of $39,077. Due to lower than expected Gala sponsorships,
funds were not available to reimburse these persons in a timely manner. As of September
30, 2002, the balance owed to these individuals was $38,111, which included finance
charges of $843.




                        Page 15                                                               GAO-03-737
                         Financial Statements




                     THE CONGRESSIONAL AWARD FOUNDATION

                             Notes to Financial Statements
               For the Fiscal Years Ended September 30, 2002, and 2001

On October 26, 2002, the CEO advanced the Foundation an additional $1,280 by paying
the answering service used to field program calls, thus avoiding cancellation of this service.
On November 2, 2002, the CEO attended a donor reception in London, England and
advanced the Foundation $4,041 to pay for a reception and dinner.

The balance due to the Director of Development of $1,945 was paid on October 16, 2002.
Various amounts due to the CEO and Director of Finance have been paid since September
30, 2002, leaving a balance of $13,396 still owed to those two individuals at March 31,
2003.

During fiscal year 2001, an ex-officio director of the Board provided pro bono legal services
to the Foundation. The value of legal services has been included in the in-kind
contributions and professional fees line items (see note 5).

In addition, a director of the Board served as portfolio manager with the brokerage firm
responsible for managing the Congressional Award Fellowship Trust account during fiscal
years 2002 and 2001. An investment committee of the Board establishes investment
guidelines and monitors the portfolio's performance.

Note 10. Expenses by Functional Classification

As permitted by SFAS No. 117, the Foundation has presented its operating expenses by
natural classification in the accompanying Statements of Activities for the fiscal years
ending September 30, 2002, and 2001. Presented below are the Foundation's expenses
by functional classification for the fiscal years ended September 30, 2002, and 2001.

                                                            2002                    2001

        Program activities                              $   852,375               $ 619,178
        Fund-raising activities                             616,018                 278,392
        Administrative activities                           247,179                 197,176
                 Total                                  $ 1,715,572              $1,094,746


For the year ended September 30, 2002, the Foundation incurred joint costs of $248,632
related to the annual gala, of which $108,260 and $140,372 were allocated to program and
fundraising, respectively.

In addition, total direct benefits provided to donors at the annual gala of $12,000 and
$29,945 are included in program expense for the years ended September 30, 2002, and
2001, respectively.




                         Page 16                                                                 GAO-03-737
                       Financial Statements




                     THE CONGRESSIONAL AWARD FOUNDATION

                             Notes to Financial Statements
               For the Fiscal Years Ended September 30, 2002, and 2001

Note 11. The Foundation’s Ability to Continue as a Going Concern

The Congressional Award Foundation is dependent on contributions to fund its operations
and, to a far lesser extent, other revenues, interest, and dividends. The Foundation
incurred decreases in net assets of $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. As a result, the
Foundation is experiencing increasing difficulty in meeting its obligations. While the
Foundation is taking some steps to decrease its expenses, those steps may not be
sufficient to enable it to continue operations.

Unaudited financial data compiled by the Foundation as of March 31, 2003, showed that
the Foundation’s financial condition has not improved. The continuing deterioration in the
Foundation’s financial condition raises substantial doubt about its ability to continue as a
going concern.




(194181)




                       Page 17                                                                 GAO-03-737
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