Financial Audit: Congressional Award Foundation's 1995 and 1994 Financial
Statements (Letter Report, 09/24/96, GAO/AIMD-96-147).
The Congressional Award Foundation is a non-profit group formed in 1979
to promote achievement among youth in public service, personal
development, and physical fitness. GAO reviewed the Foundation's 1995
and 1994 financial statements and found them to be reliable in all
material respects. Internal controls effectively safeguarded assets from
material loss, ensured compliance with laws and regulations, and ensured
that no material misstatements appeared in the financial statements. GAO
also found no reportable noncompliance with laws and regulations. GAO
notes that although the Foundation's authority to run the Congressional
Award Program under the Congressional Award Act expired in October 1995,
the Foundation has continued to operate since then.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-96-147
TITLE: Financial Audit: Congressional Award Foundation's 1995 and
1994 Financial Statements
DATE: 09/24/96
SUBJECT: Financial statement audits
Internal controls
Financial management
Foundations (organizations)
Cash management
IDENTIFIER: Congressional Awards Program
South Bronx Project Fund
Congressional Award Fellowship Trust
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to the Congress
September 1996
FINANCIAL AUDIT - CONGRESSIONAL
AWARD FOUNDATION'S 1995 AND 1994
FINANCIAL STATEMENTS
GAO/AIMD-96-147
Congressional Award Foundation
(917770)
Abbreviations
=============================================================== ABBREV
Letter
=============================================================== LETTER
B-272944
September 24, 1996
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, 1995 and 1994. These financial statements are the responsibility
of the Congressional Award Foundation. This report also presents (1)
our opinion on the Foundation management's assertions regarding the
effectiveness of its system of internal controls as of September 30,
1995, and (2) our evaluation of the Foundation's compliance with laws
and regulations during fiscal year 1995. In addition, this report
discusses (1) the expiration of the Foundation's statutory authority
to carry out the Congressional Award Program after September 30,
1995, and (2) the Foundation's financial performance during fiscal
year 1995.
We conducted our audits pursuant to section 8 of the Congressional
Award Act, as amended (2 U.S.C. 807), and in accordance with
generally accepted government auditing standards.
We are sending copies of this report to the Chairman of the National
Board of Directors, Congressional Award Program; the National
Director, Congressional Award Foundation; the Chairman and Ranking
Minority Member of the Senate Committee on Governmental Affairs; the
Chairman and Ranking Minority Member of the House Committee on
Economic and Educational Opportunities; and other interested parties.
This report was prepared under the direction of Robert W. Gramling,
Director, Corporate Audits and Standards.
Charles A. Bowsher
Comptroller General
of the United States
Letter
=============================================================== LETTER
B-272944
To the President of the Senate and the
Speaker of the House of Representatives
We have audited the statements of financial position of the
Congressional Award Foundation as of September 30, 1995 and 1994, and
the related statements of revenues and expenses and changes in fund
balance, and statements of cash flows for the fiscal years then
ended. We found
-- the financial statements were reliable in all material respects;
-- the Congressional Award Foundation's management fairly stated
that internal controls in place on September 30, 1995, were
effective in safeguarding assets from material loss, assuring
material compliance with relevant laws and regulations, and
assuring that there were no material misstatements in the
financial statements; and
-- no reportable noncompliance with laws and regulations we tested
for the fiscal year ended September 30, 1995. As discussed
below, although the Foundation's authority to carry out the
Congressional Award Program under the Congressional Award Act
expired on October 1, 1995, the Foundation has continued to
operate since October 1, 1995.
The following sections discuss significant matters that we considered
in performing our audit and forming our conclusions, and provide
additional detail concerning our conclusions and the scope of our
audit.
SIGNIFICANT MATTERS
------------------------------------------------------------ Letter :1
Discussed below is (1) the expiration of the Foundation's statutory
authority to carry out the Congressional Award Program after
September 30, 1995, and (2) the Foundation's financial performance
during fiscal year 1995 and during the first 8 months of fiscal year
1996.
EXPIRATION OF THE
FOUNDATION'S STATUTORY
AUTHORITY
---------------------------------------------------------- Letter :1.1
The Congressional Award Act, as amended, established the
Congressional Award Board and provided for the Board to establish and
administer the Congressional Award Program. As discussed in note 9
to the Congressional Award Foundation's financial statements, section
7 of the Act (2 U.S.C. 806(i)) states that the Board shall provide
for the establishment of a private nonprofit corporation for the sole
purpose of assisting the Board to carry out the Congressional Award
Program. Section 7 also states that the articles of incorporation of
the corporation shall provide that the extent of the authority of the
corporation shall be the same as that of the Board. The Board
established the Congressional Award Foundation in 1979, consistent
with section 7. The Foundation's articles of incorporation specify
that its purpose is to assist in carrying out the purposes and
functions of the Congressional Award Program established by the
Congressional Award Act. The Board's authority to carry out the
Program expired on October 1, 1995, under section 9 of the Act (2
U.S.C. 808), which states that the Board shall terminate on October
1, 1995. The Board and the Foundation have nevertheless continued to
operate after October 1, 1995. The extent of the Board's and the
Foundation's operations included holding meetings, engaging in
fundraising, presenting awards, and paying employees.
On October 13, 1995, the Senate passed a bill entitled the
Congressional Award Act Amendments of 1995 (S.1267), to extend the
termination date of the Board to October 1, 1998. An identical bill,
the Congressional Award Act Amendments of 1995 (H.R. 2396), was
referred to the Committee on Economic and Educational Opportunities
of the House of Representatives on September 25, 1995. However, as
of September 17, 1996, the Committee had not acted on the bill.
THE FOUNDATION'S FINANCIAL
PERFORMANCE
---------------------------------------------------------- Letter :1.2
As reflected in the Foundation's fiscal year 1995 financial
statements, the Foundation reported an excess of expenses over
revenues after other income (net loss) of over $61,000 for the fiscal
year ended September 30, 1995. This was the second consecutive year
the Foundation reported a net loss, and represents a significant
increase over the net loss of about $19,000 reported for the fiscal
year ended September 30, 1994. These net losses were primarily
attributable to losses incurred by the South Bronx Project Fund\1 and
significant increases in the expenses incurred by the Foundation as a
whole, accompanied by a small decrease in revenues.
Of the $61,000 net loss incurred by the Foundation in fiscal year
1995, about $30,000 (49 percent) was incurred by the South Bronx
Project Fund. During fiscal year 1994, the Foundation's $19,000
reported net loss included a net loss of over $35,000 incurred by the
South Bronx Project Fund.
In addition, during fiscal year 1995, the Foundation's total expenses
increased over $64,000 (16 percent) from fiscal year 1994. The
increase in total expenses was due to significant increases in
fundraising, program services, and salary expenses during fiscal year
1995. Fundraising expenses increased about $45,000 from the prior
fiscal year, which was primarily due to the Foundation sponsoring a
golf tournament, its first major fundraising event, in September
1995. Program service expenses increased about $31,000 in fiscal
year 1995, which was principally the result of costs incurred in the
design and purchase of new program materials for the Foundation.
Salary expenses increased about $26,000 during fiscal year 1995,
which was primarily attributable to a Board decision to increase the
compensation of Foundation personnel as part of the Foundation's
annual personnel assessment process.
These increases were partially offset by significant declines in
promotion and professional fee expenses during fiscal year 1995.
Promotion expenses decreased about $24,000 from its fiscal year 1994
level. This was due to approximately $27,000 in costs the Foundation
incurred in fiscal year 1994 to produce a promotional video about the
Congressional Award Program. Professional fees decreased about
$12,000 in fiscal year 1995, as a result of lower fees for accounting
services.
During the same period, as total expenses increased, total revenues
decreased by about $12,000 (3 percent), due principally to decreases
in contributions. This resulted in a net operating loss for fiscal
year 1995 of over $80,000. A significant increase in the market
value of the Congressional Award Fellowship Trust (Trust) (see note 4
to the Foundation's financial statements) helped reduce the
Foundation's fiscal year 1995 net loss. The Foundation reported a
market value gain of over $18,000 for the Trust in fiscal year 1995,
compared to a market value loss of over $15,000 in fiscal year 1994.
The Foundation's financial records indicate that, for the first 8
months of fiscal year 1996,\2 the Foundation experienced a net
operating loss of about $21,000, exclusive of the effects of any
change in the market value of the Trust.
In addition to incurring a net loss in fiscal year 1995, the
Foundation reported a negative cash flow from operations totaling
over $111,000 during fiscal year 1995. In comparison, the Foundation
experienced a positive cash flow from operations of about $33,000 in
fiscal year 1994. The decline in the Foundation's cash position was
primarily due to the net operating loss of over $80,000 incurred
during fiscal year 1995. In addition, over $23,000 in contribution
revenues recognized during fiscal year 1995 were not collected until
fiscal year 1996, although cash was disbursed on fundraising expenses
during fiscal year 1995 to earn these contributions.
During the first 8 months of fiscal year 1996, the Foundation's cash
balance increased nearly $10,000 despite the continued operating
losses. This was primarily attributable to significant collections
on the contributions that had been earned but not collected during
fiscal year 1995.
--------------------
\1 The South Bronx Project Fund was created in 1990 to extend the
Foundation's fundraising activities into the New York area.
Effective August 9, 1996, the Foundation ceased funding for the South
Bronx Project.
\2 The Foundation's fiscal year 1996 financial records have not been
audited.
OPINION ON FINANCIAL STATEMENTS
------------------------------------------------------------ Letter :2
In our opinion, the financial statements and accompanying notes
present fairly, in all material respects, in conformity with
generally accepted accounting principles, the Congressional Award
Foundation's financial position as of September 30, 1995 and 1994,
and the results of its operations and its cash flows for the fiscal
years then ended.
OPINION ON MANAGEMENT'S
ASSERTIONS ABOUT THE
EFFECTIVENESS OF THE
FOUNDATION'S INTERNAL CONTROLS
------------------------------------------------------------ Letter :3
We evaluated the Foundation management's assertions about the
effectiveness of its internal controls designed to:
-- safeguard assets against loss from unauthorized acquisition,
use, or disposition;
-- assure the execution of transactions in accordance with
management's authority and with selected provisions of those
laws and regulations that have a direct and material effect on
the financial statements of the Foundation; and
-- properly record, process, and summarize transactions to permit
the preparation of reliable financial statements and to maintain
accountability for assets.
Management of the Congressional Award Foundation fairly stated that
those controls in place on September 30, 1995, provided reasonable
assurance that losses, noncompliance, or misstatements material in
relation to the financial statements would be prevented or detected
on a timely basis. Management made this assertion based on criteria
in the Office of Management and Budget's Circular A-123 and
consistent with the requirements of the Federal Managers' Financial
Integrity Act of 1982.
Although management's assertion regarding the effectiveness of
internal controls is fairly stated in all material respects based on
the control criteria cited above, we noted certain matters involving
the Foundation's internal accounting controls and its operations.
These matters, while not significant, nevertheless warrant
management's attention. We will be reporting these matters
separately to them.
COMPLIANCE WITH LAWS AND
REGULATIONS
------------------------------------------------------------ Letter :4
Our current year audit tests for compliance with selected provisions
of laws and regulations disclosed no instances of noncompliance that
would be reportable under 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.
As discussed above, the Foundation's authority to carry out the
Congressional Award Program under the Congressional Award Act expired
on October 1, 1995. The Foundation has continued to operate after
October 1, 1995.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :5
The Foundation's management is responsible for
-- preparing the Foundation's annual financial statements in
conformity with generally accepted accounting principles;
-- establishing, maintaining, and assessing the Foundation's
internal control structure to provide reasonable assurance that
the internal control objectives mentioned above are met; and
-- complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether
(1) the financial statements are free of material misstatement and
presented fairly, in all material respects, in conformity with
generally accepted accounting principles and (2) management's
assertion about the effectiveness of internal controls is fairly
stated in all material respects based upon the control criteria used
by the Foundation's management in making the assertion. We are also
responsible for testing compliance with selected provisions of laws
and regulations.
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 the Foundation's management;
-- evaluated the overall presentation of the financial statements;
-- obtained an understanding of the internal control structure
related to safeguarding assets, compliance with laws and
regulations, and financial reporting;
-- tested relevant internal controls over safeguarding, compliance,
and financial reporting and evaluated management's assertion
about the effectiveness of internal controls; and
-- tested compliance with selected provisions of the Congressional
Award Act, as amended.
We did not evaluate all internal controls relevant to operating
objectives such as controls relevant to ensuring efficient
operations. We limited our internal control testing to those
controls necessary to achieve the objectives outlined in our opinion
on management's assertion about the effectiveness of internal
controls. Because of inherent limitations in any internal control
structure, losses, noncompliance, or misstatements may nevertheless
occur and not be detected. We also caution that projecting our
evaluation to future periods is subject to the risk that controls may
become inadequate because of changes in conditions or that the degree
of compliance with controls may deteriorate.
We conducted our audits from April 25, 1996, to July 19, 1996. Our
audits were conducted in accordance with generally accepted
government auditing standards.
FOUNDATION COMMENTS
------------------------------------------------------------ Letter :6
We provided a draft of our report to Congressional Award Foundation
officials for their review and comment. The Foundation officials
agreed with the contents of our report.
Charles A. Bowsher
Comptroller General
of the United States
July 19, 1996
FINANCIAL STATEMENTS
=========================================================== Appendix 0
Statements of Financial
Position
(See figure in printed
edition.)
Statements of Revenue and
Expenses and Changes in Fund
Balance
(See figure in printed
edition.)
Statements of Cash Flows
(See figure in printed
edition.)
Notes to the Financial
Statements
(See figure in printed
edition.)
(See figure in printed
edition.)
*** End of document. ***