Financial Audit: Congressional Award Foundation's Fiscal Years 2005 and 2004 Financial Statements
Released: 2006-05-15T00:00:00

Letter

Opinion on Financial Statements

The financial statements and accompanying notes present fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the Foundation’s financial position as of September 30, 2005, and 2004, and the results of its activities and its cash flows for the fiscal years then ended. However, material misstatements may nevertheless occur in other information reported by the Foundation on its financial status to its Board of Directors and others as a result of the material weakness in internal control over financial reporting described in this report.

As discussed in a later section of this report and in Note 12 to the financial statements, the Foundation continues to experience difficulties in meeting its financial obligations. The Foundation’s continuing financial difficulties raise substantial doubt, for the fourth consecutive year, about its ability to continue as a going concern. The financial statements have been prepared under the assumption that the Foundation would continue as a going concern, and do not include any adjustments that would need to be made if the Foundation were to cease operations.

Opinion on Internal Control

Because of the material weakness in internal control discussed below, the Foundation did not maintain effective internal control over financial reporting (including safeguarding assets) but did have effective control over compliance with laws and regulations. The Foundation’s controls did not provide reasonable assurance that losses and misstatements material in relation to the financial statements would be prevented or detected on a timely basis. Our opinion is based on criteria established in our Standards for Internal Control in the Federal Government.

In our report on the results of our audit of the Foundation’s fiscal year 2004 financial statements, we reported that the deteriorating financial condition of the Foundation led to further deterioration in controls over the financial reporting process, impeding its ability to prepare timely and accurate financial statements. At the conclusion of our audit of the Foundation’s fiscal year 2004 financial statements, we stressed to the Foundation’s management the importance of documenting the Foundation’s financial reporting policies and procedures, and further stressed that the policies and procedures should detail such functions as the monthly closing process, preparation of the financial statements, and review of financial data by management.

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

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

Foundation management asserted that, with the exception of the material weakness in financial reporting, its internal control during the period was effective based on criteria established under GAO’s Standards for Internal Control in the Federal Government. In making its assertion, Foundation management stated the need to improve control over financial reporting. Although the weakness did not materially affect the final fiscal year 2005 financial statements as adjusted for errors identified by the audit process, deficiencies in internal control may adversely affect any decision by management that is based, in whole or in part, on other information that is inaccurate because of the deficiencies. Unaudited financial information reported by the Foundation may also contain misstatements resulting from these deficiencies.

Compliance With Laws and Regulations

Our tests for compliance with relevant provisions of laws and regulations for fiscal year 2005 disclosed no instances of noncompliance that would be reportable under U.S. generally accepted government auditing standards. However, the objective of our audit was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion.

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

Specifically, section 104(c)(1) of the Congressional Award Act, as amended (2 U.S.C. § 804(c)(1)), requires the Director, in consultation with the Congressional Award Board, to “ensure that appropriate procedures for fiscal control and fund accounting are established for the financial operations of the Congressional Award Program, and that such operations are administered by personnel with expertise in accounting and financial management.” The Comptroller General is required by section 104(c)(2)(A) of the Congressional Award Act, as amended (2 U.S.C. § 804(c)(2)(A)), to (1) annually determine whether the Director has substantially complied with the requirement to have appropriate procedures for fiscal control and fund accounting for the financial operations of the Congressional Award Program and to have personnel with expertise in accounting and financial management to administer the financial operations, and (2) report the findings in the annual audit report.

For 2004, because the Foundation did not have appropriate fiscal procedures and did not have an individual with expertise in accounting and financial management to routinely administer the procedures and account for the financial operations of the Foundation, we determined that the Director did not substantially comply with the requirements in section 104(c)(1) of the Congressional Award Act, as amended (2 U.S.C. § 804(c)(1)).

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

The Foundation’s Ability to Continue as a Going Concern

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

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

During fiscal year 2002, the Foundation borrowed $100,000, the maximum amount allowable against its revolving line of credit, due to ongoing cash flow problems associated with its daily operations. This debt, partially secured by a $50,000 certificate of deposit, remained outstanding at September 30, 2005.

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

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

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

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

In an effort to further improve fundraising efforts, the Foundation stated that its Board created a Congressional Liaison Committee, Development Committee, and Program Committee during fiscal year 2005. The Foundation reported that these committees have raised the visibility of the Foundation. In addition, the Development Committee has increased the number of fundraisers from one in the first half of fiscal year 2005 to three in the first half of fiscal year 2006. The newly elected Development Chairperson is leading fundraising initiatives in the corporate community, including pursuing grant opportunities, and the Foundation continues to work with professional fundraisers to more actively involve congressional members. The Foundation is currently prohibited from receiving federal funds, but is permitted to receive certain in-kind and indirect resources, as explained in Note 5 to the financial statements.

Objectives, Scope, and Methodology

The Foundation’s management is responsible for preparing the annual financial statements in conformity with U.S. generally accepted accounting principles; establishing, maintaining, and assessing the Foundation’s internal control to provide reasonable assurance that the Foundation’s control objectives are met; and complying with applicable laws and regulations.

We are responsible for obtaining reasonable assurance about whether (1) the financial statements are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles; and (2) management maintained effective internal control, the objectives of which are the following.

Financial reporting–-transactions are properly recorded, processed, and summarized to permit the preparation of financial statements, in conformity with U.S. generally accepted accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition.

Compliance with laws and regulations–-transactions are executed in accordance with laws and regulations that could have a direct and material effect on the financial statements.

We are also responsible for testing compliance with selected provisions of laws and regulations that have a direct and material effect on the financial statements.

In order to fulfill these responsibilities, we examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made evaluated the overall presentation of the financial statements and notes; read unaudited financial information for the Foundation for the first 6 months of fiscal year 2006; obtained an understanding of the internal control related to financial reporting (including safeguarding assets) and compliance with laws and regulations; tested relevant internal control over financial reporting and compliance and evaluated the design and operating effectiveness of internal control; and tested compliance with selected provisions of the Congressional Award Act, as amended.

We did not evaluate internal control relevant to operating objectives, such as controls relevant to ensuring efficient operations. We limited our internal control testing to controls over financial reporting and compliance.

We did not test compliance with all laws and regulations applicable to the Foundation. We limited our tests of compliance to those provisions of laws and regulations that we deemed to have a direct and material effect on the financial statements for the fiscal year ended September 30, 2005. We caution that noncompliance may occur and not be detected by our tests and that such testing may not be sufficient for other purposes.

We performed our work in accordance with U.S. generally accepted government auditing standards.

Foundation’s Comments and Our Evaluation

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

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

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

Financial Statements

Contributions receivable (note 3)

Congressional Award Fellowship Trust (note 4)

Equipment, furniture, and fixtures, net Accounts payable (note 9)

Line of credit (note 8)

Accrued payroll, related taxes, and leave Temporarily restricted (note 6)

Total liabilities and net assets 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 (22,452) (18,548)

Unrealized investment gains not applied to current operations Realized investment (losses) applied to current operations (3,279) (1,669)

Increase (decrease) in unrestricted net assets (3,785)

Changes in temporarily restricted net assets: Net assets released from restrictions (note 6) (3,060) (164,171) (Decrease) in temporarily restricted net assets (3,060) (164,171)

Increase (decrease) in net assets (167,956)

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

Cash flows from operating activities: $10,016 ($167,956)

Adjustments to reconcile change in net assets to net cash (38,807) (16,432)

Realized loss on sale of investments Certificate of deposit interest not applied to current operations (1,401) (1,572)

Change in operating assets: (1,068)

Change in operating liabilities: (119,686) (14,840)

Accrued payroll, related taxes and leave (47,641) (462)

Net Cash (Used) in Operating Activities (172,420) (52,268)

Cash Flows from Investing Activities: Proceeds from sale of investments Net Cash Provided by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents (2,590)

Cash and Cash Equivalents, beginning of year Cash and Cash Equivalents, end of year The accompanying notes are an integral part of these financial statements.

For the Fiscal Years Ended September 30, 2005 and 2004 The Congressional Award Foundation (the Foundation) was formed in 1979 under Public Law 96-114 and is a private, nonprofit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Service Code established to promote initiative, achievement, and excellence among young people in the areas of public service, personal development, physical fitness, and expedition. New program participants totaled over 3,000 in fiscal year 2005. During fiscal year 2005, there were approximately 21,000 participants registered in the Foundation’s Award program. The Foundation’s previous authorization expired on October 1, 2004. On December 22, 2005, the President signed Public Law 109-143, which reauthorized the Congressional Award Foundation through September 30, 2009.

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

B. Cash Equivalents and Certificate of Deposit The Foundation considers funds held in its checking account and all highly liquid investments with an original maturity of 3 months or less to be cash equivalents. Money market funds held in the Foundation’s Congressional Award Fellowship Trust (the Trust) are not considered cash equivalents for financial statement reporting purposes.

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

Unconditional promises to give are recorded as revenue when the promises are made. Contributions receivable to be collected within less than one year are measured at net realizable value.

D. Equipment, Furniture and Fixtures, and Related Depreciation Equipment, furniture, and fixtures are stated at cost. Depreciation of furniture and equipment is computed using the straight-line method over estimated useful lives of 5 to 10 years. Expenditures for major additions and betterments are capitalized; expenditures for maintenance and repairs are charged to expense when incurred.

For the Fiscal Years Ended September 30, 2005 and 2004 Upon retirement or disposal of assets, the cost and accumulated depreciation are eliminated from the accounts and the resulting gain or loss is included in revenue or expense, as appropriate.

E. Congressional Award Fellowship Trust - Investments The Trust investments consist of equity securities and money market funds which are stated at market value.

F. Classification of Net Assets The net assets of the Foundation are reported as follows: Unrestricted net assets represent the portion of expendable funds that are available for the general support of the Foundation.

Temporarily restricted net assets represent amounts that are specifically restricted by donors or grantors for specific programs or future periods.

The Foundation has no permanently restricted net assets.

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.

For the Fiscal Years Ended September 30, 2005 and 2004 Certain reclassifications have been made to the fiscal year 2004 Statement of Cash Flows to conform to the fiscal year 2005 presentation. In fiscal year 2005, the Foundation changed the format of its Statement of Cash Flows from direct method to the indirect method for purposes of reporting cash flows from operating activities. Accordingly, the Statement of Cash Flows for 2004 contains certain reclassifications to conform to the Foundation’s current financial statement format. For fiscal years 2004 and 2005, the reconciliation of net income to net cash provided by operating activities is included in the Statement of Cash Flows.

Note 3. Contributions Receivable At September 30, 2005, and 2004, promises to give totaled $45,000 and $60,573, respectively, none of which was temporarily restricted by the donors. At September 30, 2005, and 2004, $45,000 and $60,573, respectively, were due within 1 year. At September 30, 2005, and 2004, net assets of $28,568 and $31,626, respectively, were temporarily restricted by donors for future periods.

Note 4. Congressional Award Fellowship Trust The Congressional Award Fellowship Trust (the Trust) was established in 1990 to benefit the charitable and educational purposes of the Foundation. The Trust Fund received $264,457 of contributions since 1990, which were designated as permanently restricted by the donors when the donations were originally made. During the fiscal year ended September 30, 2004, the trust conditions changed. The Declaration of Trust of the Congressional Award Trust was amended, with the consent of the original declarants of the Trust and the Trustees, effective December 2003. Among other changes, the Amended Trust Declaration removes the permanent restriction on the use of endowment donations. Trust Fund amounts may be distributed to the Foundation at the discretion of the Trustees. During the fiscal year ended September 30, 2005, the Trustees authorized the use of $178,563 of the Trust Fund to support fiscal year 2005 operations.

For the Fiscal Years Ended September 30, 2005 and 2004 Activity in the Trust Fund for the fiscal years ended September 30, 2005, and 2004 was as follows: Net realized gains (losses) (3,279) (1,669)

Net unrealized gains (losses)

Total investment gains (losses)

Investments transferred to current operations (178,563) (55,092)

Investment earnings applied to current operations Net change in Trust Fund investments (137,020) (34,915)

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

For the Fiscal Years Ended September 30, 2005 and 2004 In addition, Section 7(c) of Public Law 101-525, the Congressional Award Amendments of 1990, provided that "the Board may benefit from in-kind and indirect resources provided by the Offices of Members of Congress or the Congress." Resources so provided include use of office space, office furniture, and certain utilities. In addition, section 102 of the Congressional Award Act, as amended, provides that the United States Mint may charge the United States Mint Public Enterprise Fund for the cost of striking Congressional Award Medals. The costs of these resources cannot be readily determined and, thus, are not included in the financial statements.

Note 6. Temporarily Restricted Net Assets Temporarily restricted net assets at September 30, 2005, and 2004 were available for the following programs and future periods: Puerto Rico Council development 17,396 17,561 Nevada Council development 10,381 12,282 Oklahoma Council development ___791 1,783 Total net assets temporarily restricted for use: Net assets released from restrictions during the years ended September 30, 2005, and 2004 were as follows: 2005 2004 Contributions released from restriction for use in fiscal years 2005 and 2004, respectively Puerto Rico Council development 166 Nevada Council development 1,901 1,765 Oklahoma Council development 993 2,246 Total temporarily restricted net assets released for use: $ 3,060 $164,171 Note 7. Employee Retirement Plan For the benefit of its employees, the Foundation participates in a voluntary 403(b) tax- deferred annuity plan, which was activated on August 27, 1993. Under the plan, the Foundation may, but is not required to, make employer contributions to the plan. There was no contribution to the plan in fiscal years 2005 and 2004.

Note 8. Line of Credit The Foundation has a $100,000 revolving line of credit with its bank that bears interest at 7.75 percent per annum. The line of credit is partially secured by the Foundation’s investment in a $50,000 certificate of deposit held by the same bank. At September 30, 2005 and 2004, the outstanding balance on the line of credit was $100,000.

Note 9. Accounts Payable The accounts payable balance is $15,817 at September 30, 2005. The accounts payable balance at September 30, 2004 was $135,503. During fiscal year 2005, $63,262 in amounts owed to vendors for goods and services received primarily in fiscal year 2002 were forgiven by the vendors. These amounts are reflected as in-kind contributions on the Foundation’s Statements of Activities (see note 5).

Note 10. Related Party Activities During fiscal year 2005, an ex-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 former Board Member served as portfolio manager with the brokerage firm responsible for managing the Congressional Award Fellowship Trust account during fiscal years 2005 and 2004.

During March 2004, the Foundation entered into an agreement with a professional fundraiser. Also in 2004, the spouse of this professional fundraiser was elected to the Board of Directors of the Foundation. The professional fundraiser was retained on a 10 percent commission basis for fiscal year 2004. During fiscal year 2005, the commission basis was increased to 15 percent. Expenses incurred by the Foundation during fiscal year 2005 and 2004 to the related party totaled $12,891 and $9,756, respectively.

Note 11. Expenses by Functional Classification The Foundation has presented its operating expenses by natural classification in the accompanying Statements of Activities for the fiscal years ending September 30, 2005, and 2004. Presented below are the Foundation's expenses by functional classification for the fiscal years ended September 30, 2005, and 2004.

Note 12. The Foundation’s Ability to Continue as a Going Concern The Congressional Award Foundation is dependent on contributions to fund its operations and, to a far lesser extent, other revenues, interest, and dividends. The Foundation’s net assets increased by $10,016 in fiscal year 2005 and decreased by $167,956 in fiscal year 2004. The increase in net assets in fiscal year 2005 was due primarily to increases in unrealized investment gains. In fiscal year 2005, the Foundation released Trust funds to eliminate past due accounts payable and improve the Foundation’s fiscal position. As a result, the Foundation’s investments decreased $137,020 in fiscal year 2005 from $195,551 to $58,531. The Foundation has taken steps to substantially decrease administrative expenses, and has implemented numerous initiatives to increase fundraising revenue. The Foundation’s ability to continue as a going concern is dependent on increasing revenues. Unaudited financial data compiled by the Foundation as of March 31, 2006, show that the Foundation’s financial condition has not improved from September 30, 2005.

During fiscal year 2005, the Board elected several new Members and the Foundation hired an accountant, who was promoted to Controller in fiscal year 2006, to focus on improving financial management. Subsequent to fiscal year 2005, the newly elected Treasurer and Audit Committee Chair worked with the National Office staff to improve internal control over financial reporting by developing written fiscal policies and procedures, and financial reporting guidelines. These efforts are expected to provide more accurate and timely accounting and reporting.

To improve fundraising efforts, the Board created a Congressional Liaison Committee, Development Committee, and Program Committee during fiscal year 2005. The newly elected Development Chairperson is leading fundraising initiatives in the corporate community and continuing to work with professional fundraisers to more actively involve congressional members with monthly Capitol Hill fundraising events focused around key Members. These events are generating funds from new donors and providing opportunities to maintain relations with current Foundation supporters.

Note 13. Subsequent Events On December 22, 2005, the President signed Public Law 109-143, which reauthorized the Congressional Award Foundation for another five years, “as though no lapse or termination of the Board ever occurred.”

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

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

Appendix I