Financial Audit: Congressional Award Foundation's Fiscal Years 2004 and 2003 Financial Statements
Published: 2005-11-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This report presents our opinion on the financial statements of the Congressional Award Foundation for the fiscal years ended September 30, 2004, and 2003. These financial statements are the responsibility of the Congressional Award Foundation. This report also presents (1) our opinion on the effectiveness of the Foundation's related internal control as of September 30, 2004, and (2) our conclusion on the Foundation's compliance in fiscal year 2004 with selected provisions of laws and regulations we tested. We conducted our audit pursuant to section 107 of the Congressional Award Act, as amended (2 U.S.C. 807), and in accordance with U.S. generally accepted government auditing standards.
section_title: What GAO Found
paragraphs: We have audited the statements of financial position of the Congressional Award Foundation (the Foundation) as of September 30, 2004, and 2003, and the related statements of activities and statements of cash flows for the fiscal years then ended. We found (1) 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; (2) the Foundation did not have effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations; and (3) a reportable noncompliance with one of the laws and regulations we tested.

section_title: Letter
paragraphs: This report presents our opinion on the financial statements of the  Congressional Award Foundation for the fiscal years ended September 30,  2004, and 2003.  These financial statements are the responsibility of the  Congressional Award Foundation.  This report also presents (1) our  opinion on the effectiveness of the Foundation’s related internal control as  of September 30, 2004, and (2) our conclusion on the Foundation’s  compliance in fiscal year 2004 with selected provisions of laws and  regulations we tested.  We conducted our audit pursuant to section 107 of  the Congressional Award Act, as amended (2 U.S.C. § 807), and in  accordance with U.S. generally accepted government auditing standards.   This report also includes our determination required under section 104  (c)(2)(A) of the Act (2 U.S.C. § 804(c)(2)(A)) relating to the Foundation's  financial operations.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-3406 or by e-mail at sebastians@gao.gov.  Contact  points for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this letter.  Key contributors to this report were  Amy Bowser, Erik Huff, Julie Phillips, and Patricia Summers.
The President of the Senate  The Speaker of the House of Representatives We have audited the statements of financial position of the Congressional  Award Foundation (the Foundation) as of September 30, 2004, and 2003,  and the related statements of activities and statements of cash flows for the  fiscal years then ended.  We found  the financial statements are presented fairly, in all material respects, in  conformity with U.S. generally accepted accounting principles, although  substantial doubt exists about the Foundation’s ability to continue as a  going concern;  the Foundation did not have effective internal control over financial  reporting (including safeguarding assets) and compliance with laws and  regulations; and  a reportable noncompliance with one of the laws and regulations we  tested.
The following sections provide additional detail about our conclusions and  the scope of our audit.
subsections: section_title: Opinion on Financial Statements
paragraphs: The financial statements and accompanying notes present fairly, in all  material respects, in conformity with U.S. generally accepted accounting  principles, the Foundation’s financial position as of September 30, 2004,  and 2003, and the results of its activities and its cash flows for the fiscal  years then ended.  However, material misstatements may nevertheless  occur in information reported by the Foundation on its financial status to  its Board of Directors and others as a result of the material weakness in  internal control over financial reporting described in this report.
As discussed in a later section of this report and in Note 12 to the financial  statements, the Foundation continues to experience increasing difficulties  in meeting its financial obligations.  The Foundation’s continuing financial  difficulties and deteriorating financial condition raise substantial doubt, for  the third consecutive year, about its ability to continue as a going concern.   The financial statements have been prepared under the assumption that the  Foundation would continue as a going concern, and do not include any  adjustments that would need to be made if the Foundation were to cease  operations.
section_title: Opinion on Internal Control
paragraphs: Because of the material weakness in internal control discussed below, the  Foundation did not maintain effective internal control over financial  reporting (including safeguarding assets) or compliance with laws and  regulations, and thus did not provide reasonable assurance that losses,  misstatements, and noncompliance with laws material in relation to the  financial statements would be prevented or detected on a timely basis.  Our  opinion is based on criteria established in our Standards for Internal  Control in the Federal Government.
The deteriorating financial condition of the Foundation led to further  deterioration in its control over its financial reporting process during fiscal  year 2004, impeding its ability to prepare timely and accurate financial  statements.  The lack of an individual with accounting and financial  management expertise taking responsibility for the Foundation’s financial  operations during the period, brought about by the Foundation’s lack of  funds, prevented it from fulfilling this and other key financial operations,  and contributed to its inability to maintain current and accurate financial  records.    We reported on this matter during our audit of the Foundation’s  fiscal year 2003 financial statements.
The Foundation’s Director of Finance and Administration resigned his paid  position at the Foundation and became Treasurer of the Congressional  Award Board of Directors, an unpaid position, during fiscal year 2003.  He  continued to perform, on a limited and voluntary basis, some of the duties  associated with his former position during the first three quarters of fiscal  year 2004, as the continued shortage of funds precluded the Foundation  from hiring a replacement.  This resulted in the Foundation continuing to  be unable to fulfill its financial reporting responsibilities, particularly with  respect to preparing timely and accurate financial statements.  For  example, because the Foundation did not always record transactions in its  general ledger as they occurred during the year, numerous entries had to be  made to the general ledger as late as 12 months after fiscal year-end.  These  entries were ultimately prepared and recorded by a part-time bookkeeper  hired 6 months after the end of the fiscal year.  However, these entries were  not adequately reviewed by Foundation management to ensure their  completeness and accuracy.  This resulted in the need for management to  make material adjustments to correct errors we identified during our audit.
Additionally, the Foundation continued to lack appropriate written  procedures for making closing entries in its financial records and for  preparing complete and accurate financial statements.  At the conclusion  of our audit of the Foundation’s fiscal year 2003 financial statements, we  stressed to the Foundation’s management the importance of documenting  the Foundation’s financial reporting policies and procedures, and further  stressed that the policies and procedures should detail such functions as  the monthly closing procedures, preparation of the financial statements,  and review of financial data by management.  The continued lack of written  policies and procedures contributed to the errors we identified during our  audit of the Foundation’s fiscal year 2004 financial statements.
The Foundation was ultimately able to produce financial statements that  were fairly stated in all material respects for fiscal years 2004 and 2003.   However, the process was long and laborious, due to the lack of 1)  appropriate written policies and procedures and 2) routine maintenance of  the Foundation’s financial books and records by personnel experienced in  accounting and financial management.  As a result, material corrections  were required between the first draft of the financial statements and the  final version.  Additionally, the Foundation’s continued lack of an effective  financial reporting process forced us for the second consecutive year to  notify its congressional oversight committees that we would be unable to  meet our May 15, 2005, statutorily mandated audit reporting date.   Consequently, the Foundation’s weakness in internal control over its  financial reporting process resulted in its inability to prepare reliable  financial statements on time and to produce financial information to  support management decision making.  This is especially critical in light of  the Foundation’s precarious financial condition—when accurate and timely  financial information is of utmost importance to make prudent and  informed operational decisions.
Foundation management asserted that its internal control during the period  were not effective over financial reporting or compliance with laws and  regulations based on criteria established under Standards for Internal  Control in the Federal Government.  In making its assertion, Foundation  management stated the need to improve control over financial reporting  and compliance with laws and regulations.  Although the weakness did not  materially affect the final fiscal year 2004 financial statements as adjusted  for misstatements identified by the audit process, this deficiency in internal  control may adversely affect any decision by management that is based, in  whole or in part, on information that is inaccurate because of the  deficiencies.  Unaudited financial information reported by the Foundation  may also contain misstatements resulting from these deficiencies.
section_title: Compliance With Laws and Regulations
paragraphs: Our tests for compliance with relevant provisions of laws and regulations  disclosed one area of material noncompliance that is reportable under U.S.  generally accepted government auditing standards.  This concerns the  Foundation’s ability to ensure that it has appropriate procedures for fiscal  control and fund accounting and that its financial operations are  administered by personnel with expertise in accounting and financial  management.
Specifically, section 104(c)(1) of the Congressional Award Act, as amended  (2 U.S.C. § 804(c)(1)), requires the Director, in consultation with the  Congressional Award Board, to “ensure that appropriate procedures for  fiscal control and fund accounting are established for the financial  operations of the Congressional Award Program, and that such operations  are administered by personnel with expertise in accounting and financial  management.”   The Comptroller General is required by section  104(c)(2)(A) of the Congressional Award Act, as amended (2 U.S.C. §  804(c)(2)(A)), to (1) annually determine whether the Director has  substantially complied with the requirement to have appropriate  procedures for fiscal control and fund accounting for the financial  operations of the Congressional Award Program and to have personnel  with expertise in accounting and financial management to administer the  financial operations, and (2) report the findings in the annual audit report.
We reported a material internal control weakness in financial reporting-- due in part, to a lack of written policies and procedures--in our audit report  covering fiscal year 2003.  For calendar year 2004, the Foundation still did  not have appropriate written fiscal procedures for its financial operations.   Additionally, the Foundation recorded entries for only half of the calendar  year, leaving many of the financial transactions of the Foundation  unrecorded during 2004.
For 2004, because the Foundation did not have appropriate fiscal  procedures and did not have an individual with expertise in accounting and  financial management to routinely administer the procedures and account  for the financial operations of the Foundation, we determined that the  Director did not substantially complied with the requirements in section  104(c)(1) of the Congressional Award Act, as amended (2 U.S.C. §  804(c)(1)).  Under the requirements of section 104(c)(2)(B) of the  Congressional Award Act, as amended (2 U.S.C. § 804(c)(2)(B)), if the  Director fails to comply with the requirements of section 104(c)(1) of the  Act, the Director is to prepare, pursuant to section 108 of the Act, for the  orderly cessation of the activities of the Board.   The Foundation’s Board  Chairman stated that during fiscal year 2005, its Board elected several new  Board Members and the Foundation hired an accountant to focus on  improving financial management.  The newly elected Treasurer and Audit  Committee Chair are working with the National Office staff to improve  internal control over financial reporting and develop written fiscal policies  and procedures for financial operations and reporting.  Additionally, the  accountant is to help ensure the accurate and timely accounting and  reporting of financial information occurs.
Except as noted above, our tests for compliance with selected provisions  of laws and regulations for fiscal year 2004 disclosed no other instances of  noncompliance that would be reportable under U.S. generally accepted  government auditing standards.  However, the objective of our audit was  not to provide an opinion on overall compliance with laws and regulations.   Accordingly, we do not express such an opinion.
section_title: The Foundation’s Ability to Continue as a Going Concern
paragraphs: The Foundation incurred losses (decreases in net assets) of almost  $168,000 and $6,000 in fiscal years 2004 and 2003, respectively.  Although  the Foundation’s expenses decreased by over $166,000 between fiscal years  2003 and 2004, revenues decreased even more--by about $290,000, largely  attributable to a nearly $334,000 decline in contributions.  Net assets as of  September 30, 2004 were approximately $42,000.
During fiscal year 2002, the Foundation borrowed $100,000, the maximum  amount allowable against its revolving line of credit, due to ongoing cash  flow problems associated with its daily operations.  This debt, partially  secured by a $50,000 certificate of deposit, remained outstanding at  September 30, 2004.
Note 12 to the financial statements acknowledges the Foundation’s  increasing difficulties in meeting its financial obligations.  While the  Foundation has taken steps to decrease its expenditures and liabilities,  those steps may not be sufficient to allow it to continue operations.  For  example, accounts payable at September 30, 2004, were approximately  $135,500, with 86 percent of that amount representing unpaid balances  owed to vendors from expenses incurred in fiscal year 2002.  The  Foundation was able to negotiate with certain of its vendors to cancel  nearly $39,000 in liabilities to these vendors subsequent to the end of the  fiscal year.  However, unaudited financial data compiled by the Foundation  as of September 30, 2005, showed that its financial condition has not  improved.  This raises substantial doubt about the Foundation’s ability to  continue as a going concern, absent a means of generating additional  funding.
As discussed earlier, during fiscal year 2003, the Director of Finance and  Administration resigned his position at the Foundation and became  Treasurer of the Congressional Award Board of Directors.  This move was  in part because of the Foundation’s deteriorating financial condition.  In  another effort to keep expenses to a minimum, the Foundation reduced its  staff by over one-half during fiscal year 2004.   Additionally, during the  second half of fiscal year 2004, the Foundation’s Board directed the  National Director to reduce his pay by 50 percent in order to further control  Foundation expenses.  The National Director retired as of September 30,  2004, and the Foundation promoted the Program Director to serve as the  Acting National Director.
In its plan to deal with its deteriorating financial condition and increase its  revenues, the Foundation modified its approach to fundraising by holding  more frequent but smaller and less expensive fundraising events than in the  past.  However, these smaller fundraisers did not increase contributions  which, as noted above, decreased by $334,000 or 54 percent between fiscal  years 2003 and 2004.  To further improve fundraising efforts, the  Foundation stated that its Board created a Congressional Liaison  Committee, Development Committee, and Program Committee during  fiscal year 2005.  The newly elected Development Chairperson is leading  fundraising initiatives in the corporate community, including pursuing  grant opportunities, and the Foundation continues to work with  professional fundraisers to more actively involve congressional members.   At present, the Foundation is prohibited from receiving federal funds, but is  permitted to receive certain in-kind and indirect resources, as explained in  Note 5 to the financial statements.  The Foundation has attempted, but has  been unsuccessful, in securing federal funding through a direct  appropriation.
On July 14, 2005, the Senate passed S. 335 to reauthorize the Congressional  Award Board, which terminated on October 1, 2004, until October 1, 2009.   The bill was received in the House of Representatives and was referred to  the Committee on Education and the Workforce on July 19, 2005.   Subsequently, on September 22, 2005, H.R. 3867, which is identical to S.  335, was introduced in the House to reauthorize the Board and was also  referred to the Committee on Education and the Workforce.  The ultimate  outcome of the reauthorization efforts was unknown at the date of our  report.
section_title: Objectives, Scope, and Methodology
paragraphs: 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   evaluated the overall presentation of the financial statements and notes;  read unaudited financial information for the Foundation for fiscal year   obtained an understanding of the internal control related to financial  reporting (including safeguarding assets) and compliance with laws and  regulations;   tested relevant internal control over financial reporting and compliance  and evaluated the design and operating effectiveness of internal control;  and  tested compliance with selected provisions of the Congressional Award  Act, as amended.
We did not evaluate internal control relevant to operating objectives, such  as controls relevant to ensuring efficient operations.  We limited our  internal control testing to controls over financial reporting and compliance.
We did not test compliance with all laws and regulations applicable to the  Foundation. We limited our tests of compliance to those provisions of laws  and regulations that we deemed to have a direct and material effect on the  financial statements for the fiscal year ended September 30, 2004.  We  caution that noncompliance may occur and not be detected by our tests  and that such testing may not be sufficient for other purposes.
We performed our work in accordance with U.S. generally accepted  government auditing standards.
section_title: Foundation’s Comments
paragraphs: In commenting on a draft of this report, the Foundation discussed past and  ongoing efforts to obtain reauthorization for the Foundation, as well as its  efforts to improve its financial condition through increases in revenues and  reductions in expenses to support the growth in the Congressional Award  program.  The Foundation also discussed its efforts to improve its financial  management.
The Foundation noted that in fiscal year 2004, a bill to reauthorize the  Foundation and provide it authority to receive direct federal appropriations  of $750,000 of matched funds annually through 2009 was passed  unanimously by the Senate.  However, the bill did not pass the House of  Representatives.  Since then, the Foundation has continued to seek  reauthorization of the program, excluding the provision for federal  appropriations.  The Foundation noted that legislation reauthorizing the  Foundation again passed the Senate in 2005, and is currently being  considered by the House of Representatives.
The Foundation also noted its efforts to increase revenues.  With newly  appointed Foundation Board Members and fundraising consultants, the  Foundation stated it had developed ways to recruit new donors and keep  current and former donors informed and engaged.  In order to raise  awareness and funding for the program, the Foundation holds events with  members of Congress in Washington, D.C.  Several events were held in  fiscal year 2004 and similar fund-raising events continued in fiscal year  2005.  In addition, the Foundation noted that it continued to hold its annual  Congressional Award Golf Classic during 2005 as another fundraising  event.
At the same time, the Foundation noted that it continues to keep its  expenses down.  The Foundation noted that in fiscal year 2004, it had  reduced operating expenses to less than $595,000 (down from about  $760,000 in fiscal year 2003) and reduced its staff by 50 percent. The  Foundation stated that it currently has only five full-time employees and  four unpaid interns to oversee program activity in all 50 states. With the  program continuing to grow, the Foundation stated that it is using new  methods to operate the program at very little cost.  By utilizing the Web site  and online tools, the Foundation stated that it is able to communicate with  new and current participants, parents, volunteers, congressional offices,  and donors electronically, which minimizes printing, postal, and travel  expenses.
The Foundation also emphasized its efforts to improve its financial  management, noting that the newly elected Treasurer and Audit Committee  Chair are working with the Foundation’s National Office staff to improve  internal control over financial reporting and develop written fiscal policies  and procedures for financial operations and reporting.  The Foundation  noted that the accountant it hired in 2005 will help ensure that accurate and  timely accounting and reporting of financial information occurs.
section_title: Financial Statements
subsections: section_title: Contributions receivable, net (note 3)
paragraphs: Congressional Award Fellowship Trust (note 4)
Equipment, furniture, and fixtures, net  Accounts payable (note 9)
Accrued payroll, related taxes, and leave  (250,133)
Temporarily restricted (note 6)
Permanently restricted (note 4)
The accompanying notes are an integral part of these financial statements.
Changes in unrestricted net assets: Operating revenue and other support Contributions - In-kind (note 5)
Interest and dividends applied to current operations Net assets released from restrictions (note 6)
Total operating revenue and other support Operating expenses (note 11)
Salaries, benefits, and payroll taxes  Program, promotion, and travel (18,548)
Unrealized investment gains not applied to current operations Realized investment (losses) not applied to current operations (1,669) (7,642) (Decrease) increase in unrestricted net assets (3,785)
Changes in temporarily restricted net assets: Net assets released from restrictions (note 6) (164,171) (164,394) (Decrease) increase in temporarily restricted net assets (164,171) (164,394) (Decrease) increase in net assets (167,956) (5,990)
The accompanying notes are an integral part of these financial statements.
Cash flows from operating activities: Cash received from program activities  (340,527) (579,918) (88,017) (276,583)
Net cash provided/(used) from operating activities (12,973)
Cash flows from investing activities: (146,996)
Proceeds from sale of investments Net cash provided/(used) in investing activities (12,448)
Cash flows from financing activities: (2,283)
Net cash provided/(used) in financing activities (2,283)
Net (Decrease) increase in cash (2,590) (5,242)
Reconciliation of change in net assets to net cash provided/(used) from operating activities ($167,956) ($5,990)
Adjustments to reconcile change in net assets to net cash used/provided from operating activities:       Investment (losses) not applied to operations (5,388) (53,406)
Decrease (increase) in contributions receivable       (Increase) decrease in accounts receivable (242) (Increase) decrease in prepaid expenses (1,068) (Increase) decrease in Board of Directors prepaid expense (4,620)
Decrease (increase) in investments (money funds/equity securities) (2,040) (Decrease) increase in accounts payable (14,840) (124,318)
Increase (Decrease) in accrued payroll, related taxes, and leave (25,102) (Increase) decrease in Gold Award Ceremony (945) (Increase) decrease in program, promotion, and travel (1,393)
Decrease (increase) in Plan 403(b)
Net cash provided/(used) from operating activities ($12,973)
The accompanying notes are an integral part of these financial statements.
For the Fiscal Years Ended September 30, 2004, and 2003  The  Congressional  Award  Foundation  (the  Foundation)  was  formed  in  1979  under  Public  Law  96-114  and  is  a  private,  nonprofit,  tax-exempt  organization  under  Section  501(c)(3) of the Internal Revenue code established to promote initiative, achievement,  and  excellence  among  young  people  in  the  areas  of  public  service,  personal  development,  physical  fitness,  and  expedition.  New  program  participants  totaled  over  2,700 in fiscal year 2004. During fiscal year 2004, there were over 17,000 participants  registered in the Foundation Award’s program.  Certificates and medals were awarded  to  2,205  participants  during  fiscal  year  2004.    In  October  1999,  the  President  signed  Public  Law  106-63,  section  1(d)  of  which  reauthorized  the  Congressional  Award  Foundation through September 30, 2004.
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.
The Foundation considers funds held in its checking account and all highly liquid  investments with an original maturity of 3 months or less to be cash equivalents.   Money  market  funds  held  in  the  Foundation’s  Congressional  Award  Trust  (the  Trust)  are  not  considered  cash  equivalents  for  financial  statement  reporting  purposes.  The  Declaration  of  Trust  of  the  Congressional  Award  Trust  was  amended, with the consent of the original declarants of the Trust and the Trustees,  effective December 2003.  Among other changes, the Amended Trust Declaration  removes  the  restriction  on  the  use  of  endowment  donations.    The  Trustees  may  now apply any trust funds for the benefit of the Foundation.
Unconditional  promises  to  give  are  recorded  as  revenue  when  the  promises  are  made.    Contributions  receivable  to  be  collected  within  less  than  one  year  are  measured at net realizable value.
D.  Equipment, Furniture and Fixtures, and Related Depreciation   Equipment, furniture, and fixtures are stated at cost.  Depreciation of furniture and equipment is computed using the straight-line method over estimated useful lives of 5 to 10 years. Leasehold improvements are amortized over the lesser of their For the Fiscal Years Ended September 30, 2004, and 2003  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.
Investments consist of equity securities, money market funds, and a $50,000  certificate of deposit and are stated at market value.
F.  Classification of Net Assets  The net assets of the Foundation are reported as follows:   Unrestricted net assets represent the portion of expendable funds that are  available for the general support of the Foundation.
Temporarily  restricted  net  assets  represent  amounts  that  are  specifically  restricted by donors or grantors for specific programs or future periods.
Permanently  restricted  net  assets  result  from  donor-imposed  restrictions  stipulating that the resources donated are maintained permanently.
Contribution  revenue  is  recognized  when  received  or  promised  and  recorded  as  temporarily  restricted  if  the  funds  are  received  with  donor  or  grantor  stipulations  that  limit  the  use  of  the  donated  assets  to  a  particular  purpose  or  for  specific  periods.    When  a  stipulated  time  restriction  ends  or  purpose  of  the  restriction  is  met,  temporarily  restricted  net  assets  are  reclassified  to  unrestricted  net  assets  and reported in the statement of activities as net assets released from restrictions.
H.  Functional Allocation of Expenses  The  costs  of  providing  the  various  programs  and  other  activities  have  been  summarized  on  a  functional  basis  as  described  in  note  11.    Accordingly,  certain  costs have been allocated among the programs and supporting services benefitedThe preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results   could differ from those estimates.
Note 3.  Contributions Receivable At  September  30,  2004,  and  2003,  promises  to  give  totaled  $60,573  and  $160,021,  respectively,  of  which  $0  and  $160,000,  respectively,  were  due  within  1  year.    All  amounts  have  subsequently  been  collected.    At  September  30,  2004,  and  2003,  $31,626  and  $195,798,  respectively,  were  temporarily  restricted  by  donors  for  future  periods.    For  fiscal  year  2003,  the  promises  to  give  were  a  result  of  the  “Charter  for  Youth” fundraising initiative. Charter for Youth benefactors are requested to contribute a  minimum  of  $100,000  per  year  for  3  consecutive  years  for  the  direct  support  of  The  Congressional  Award and  its  initiatives  for  participant  recruitment  and  awardees  recognition.    Charter  for  Youth  members  have  the  opportunity  to  participate  in  Congressional Award events, and receive recognition as benefactors at the national and  regional events and meetings.
Note 4.  Unrestricted and Permanently Restricted Net Assets The Congressional Award Fellowship Trust (the Trust Fund) was established in 1990 to  benefit the charitable and educational purposes of the Foundation.  The Trust Fund has  received $264,457 of contributions since 1990, which were designated as permanently  restricted by the donors when the donations were originally made.  In accordance with  the terms of the 1990 Trust Agreement (the Agreement), the Foundation was permitted  to use all Trust Fund income for the benefit of the charitable and educational purposes  of the Foundation.  Trust Fund income represents the value of the Trust Fund’s assets  (including interest and dividends earned and realized and unrealized gains and losses  on Trust Fund investments) in excess of the aggregate amount received as endowment  donations.  Proceeds from investments can only be used in operations with approval of  the  Foundation’s  Board.    The  agreement  describes  endowment  donations  as  the  aggregate  fair  market  value  (as  of  the  contribution  date)  of  all  donations  to  the  Trust  Fund.      As  defined  by  the  agreement,  this  represents  the  amount  of  the  Trust  Fund’s  assets that the Foundation could not use or distribute.
During  the  fiscal  year  ending  September  30,  2004,  the  trust  conditions  changed.  The  Declaration of Trust of the Congressional Award Trust was amended, with the consent  of  the  original  declarants  of  the  Trust  and  the  Trustees,  effective  December  2003.   Among  other  changes,  the  Amended  Trust  Declaration  removes  the  permanent  restriction on the use of endowment donations.  The Trustees must approve any Trust  Fund  amounts  for  unrestricted  use  by  the  Foundation.    Also,  during  the  fiscal  year  ended  September  30,  2004,  the  Trustee’s  authorized  and  the  Foundation’s  Board  approved the use of $34,915 of the Trust Fund to support 2004 operations.
At September 30, 2004, and 2003, the Trust Fund’s investments at fair value consisted  of the following: For the Fiscal Years Ended September 30, 2004, and 2003  Activity in the Trust Fund for the fiscal years ended September 30, 2004, and 2003 was  as follows: Net realized gains (losses) (1,669) (7,642)
Investments transferred to current operations  (55,092)
Investment earnings applied to current operations  Net change in Trust Fund investments      (34,915)
Trust Fund investments, beginning of year  Trust Fund investments, end of year  The value of the Trust Fund at September 30, 2003 dropped below the permanently restricted  balance by $33,991.
During fiscal year 2004, the Foundation received in-kind (non-cash) contributions from   donors,  which  are  accounted  for  as  contribution  revenue  and  as  current  period  operating  expenses.  The  in-kind  contributions  received  were  for  professional  services  relating to support of activities of the Foundation.  The value of the in-kind contributions  was  $94,596  for  fiscal  year  2004  and  $33,367  for  fiscal  year  2003.    In  2004,  legal  activities  included  several  one-time  matters  including  amendment  of  the  Trust  Agreement and securing a state ruling for Trust exemption.
Professional services:        Legal       Web-hosting In addition, Section 7(c) of Public Law 101-525, the Congressional Award Amendments  of  1990,  provided  that  "the  Board  may  benefit  from  in-kind  and  indirect  resources  provided  by  the  Offices  of  Members  of  Congress  or  the  Congress."    Resources  so  provided  include  use  of  office  space,  office  furniture,  and  certain  utilities.    In  addition,  section  102  of  the  Congressional  Award  Act,  as  amended,  provides  that  the  United  States  Mint  may  charge  the  United  States  Mint  Public  Enterprise  Fund  for  the  cost  of  striking Congressional Award Medals.  The costs of these resources cannot be readily  determined and, thus, are not included in the financial statements.
Note 7.   Employee Retirement Plan For the benefit of its employees, the Foundation participates in a voluntary 403(b) tax- For the Fiscal Years Ended September 30, 2004, and 2003  deferred  annuity  plan,  which  was  activated  on  August  27,  1993.    Under  the  plan,  the  Foundation may, but is not required to, make employer contributions to the plan. There  was no contribution to the plan in 2004 or 2003.
Note 8.   Line of Credit The Foundation has a $100,000 revolving line of credit with its bank that bears interest  at 6 percent per annum.  The line of credit is partially secured by the Foundation’s  investment in a $50,000 certificate of deposit held by the same bank.  At September 30,  2004 and 2003, the outstanding balance on the line of credit was $100,000.
Note 9.  Accounts Payable The  accounts  payable  balance  of  $135,503  at  September  30,  2004,  is  comprised  of  $116,635  attributable  to  goods  and  services  received  in  fiscal  year  2002,  and  the  remainder  attributable  to  goods  and  services  received  in  fiscal  years  2003  and  2004.   The accounts payable balance at September 30, 2003, was $150,343.  Subsequent to  the end of fiscal year 2004, there was approximately $39,000 in accounts payable that  were cancelled and converted to an “in-kind” donation.  See subsequent events note 13.
Note 10.  Related Party Activities During  fiscal  year  2004,  an  ex-officio  director  of  the  Board  provided  pro  bono  legal  services to the Foundation.  The value of legal services has been included in the in-kind contributions and professional fees line items (see note 5).
In addition, a director of the Board served as portfolio manager with the brokerage firm responsible  for  managing  the  Congressional  Award  Fellowship  Trust  account  during  fiscal years 2004 and 2003.
During  March  2004,  the  Foundation  entered  into  an  agreement  with  a  professional  fundraiser.  Also in 2004, the spouse of this professional fundraiser was elected to the  Board  of  Directors  of  the  Foundation.    The  professional  fundraiser  was  retained  on  a  10% commission basis.  Expenses incurred by the Foundation during fiscal year 2004  to the related party totaled $ 9,756.
Note 11.  Expenses by Functional Classification The Foundation has presented its operating expenses by natural classification in the accompanying Statements of Activities for the fiscal years ending September 30, 2004,   For the Fiscal Years Ended September 30, 2004, and 2003  and 2003.  Presented below are the Foundation's expenses by functional classification  for the fiscal years ended September 30, 2004, and 2003.
Note 12.   The Foundation’s Ability to Continue as a Going Concern  The  Congressional  Award  Foundation  is  dependent  on  contributions  to  fund  its  operations  and,  to  a  far  lesser  extent,  other  revenues,  interest,  and  dividends.    The  Foundation  incurred  decreases  in  net  assets  of  $167,956  and  $5,990  in  fiscal  years  2004  and  2003,  respectively. As  a  result,  the  Foundation  continues  to  experience  difficulty  in  meeting  its  obligations.    The  Foundation  has  taken  steps  to  substantially  decrease  administrative  expenses,  and  has  implemented  numerous  initiatives  to  increase fundraising revenue.  The Foundation’s ability to continue as a going concern  is dependent on increasing revenues.  Revenues have been impacted by the fact that  the Foundation has not been reauthorized by the Congress.  The Foundation has taken  all  actions  necessary  to  seek  reauthorization  of  the  program. Legislation  has  passed  the Senate and is being considered by the House of Representatives.
While the Foundation has taken steps to decrease its expenses, those steps may not be  sufficient to enable it to continue operations.  Unaudited financial data compiled by the  Foundation as of September 30, 2005, showed that the Foundation’s financial condition  has not improved.  The continuing deterioration in the Foundation’s financial condition  raises substantial doubt about its ability to continue as a going concern.
During  fiscal  year  2005,  the  Board  elected  several  new  Members  and  the  Foundation  hired  an  accountant  to  focus  on  improving  financial  management.    The  newly  elected  Treasurer  and  Audit  Committee  Chair  are  working  with  the  National  Office  staff  to  improve internal control over financial reporting and develop written fiscal policies and  procedures  for  financial  operations  and  reporting.    The  accountant  is  expected  to  provide accurate and timely accounting and reporting.
To improve fundraising efforts, the Board created a Congressional Liaison Committee,  Development Committee, and Program Committee during fiscal year 2005.  The newly  elected  Development  Chairperson  is  leading  fundraising  initiatives  in  the  corporate  community,  including  pursuing  grant  opportunities,  and  the  Foundation  continues  to  work  with  professional  fundraisers  to  more  actively  involve  congressional  members.   These  events  should  generate  funds  from  new  donors  and  provide  opportunities  to  maintain relations with current Foundation supporters.
Note 13.  Subsequent Events On  July  14,  2005,  the  Senate  passed  S.  335  to  reauthorize  the  Congressional  Award  Board,  which  terminated  on  October  1,  2004,  until  October  1,  2009.   The  bill  was  received  in  the  House  of  Representative  and  was  referred  to  the  Committee  on  Education and the Workforce on July 19, 2005.  Subsequently, on September 22, 2005,  H.R. 3867, which is identical to S. 335, was introduced in the House to reauthorize the  Board and was also referred to the Committee on Education and the Workforce. the  Foundation  negotiated  cancellation  of  Subsequent  approximately  $39,000  of  its  liabilities  with  vendors.    The  vendors  offered  these  balances owed as “in-kind” contributions to the Foundation.
On October 1, 2005, the Foundation appointed a new Treasurer and Audit Committee  Chair.    The  new  Treasurer  is  currently  with  the  Willard  Group  and  the  new  Audit  Committee Chair is currently the Senior Director of Corporate Finance at McDonald’s.   Both positions are voluntary.