Management Report:

Opportunities for Improvements in the Congressional Award Foundation's Internal Controls and Accounting Procedures

GAO-11-825R: Published: Sep 9, 2011. Publicly Released: Sep 9, 2011.

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In May 2011, we issued our opinion on the fiscal years 2010 and 2009 financial statements of the Congressional Award Foundation (the Foundation). We also reported on our evaluation of the Foundation's compliance with provisions of selected laws and regulations for the fiscal year ended September 30, 2010, and our consideration of the Foundation's internal control over financial reporting. The Foundation was formed in 1979 under the Congressional Award Act and is a private, not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code. It was established to promote initiative, achievement, and excellence among young people in the areas of public service, personal development, physical fitness, and expedition. During fiscal year 2010, there were approximately 28,700 participants registered in the Foundation's award program. Although the organization does not receive federal funding, we are responsible for conducting audits of the Foundation's financial statements annually in accordance with section 107 of the Congressional Award Act, as amended (2 U.S.C. 807). In our previous year's audit of the Foundation's fiscal years 2009 and 2008 financial statements, we reported a material weakness in the Foundation's internal control over financial reporting. This resulted in the need for material adjustments in finalizing the Foundation's fiscal year 2009 financial statements to achieve a fair presentation. In a September 9, 2010, report to the Foundation, we provided further details on the control deficiencies that constituted this material weakness, as well as recommendations for corrective action. In response to our recommendations, during fiscal year 2010, the Foundation took a number of actions to address the material weakness. However, certain control deficiencies over the Foundation's financial reporting process remained in fiscal year 2010 and, while no longer constituting a material weakness, represented a significant deficiency in internal control that continued to place the Foundation at increased risk of errors or omissions in its financial statements.5 Further actions, as presented in our September 9, 2010, report, are needed toaddress these remaining control deficiencies. During our audit of the Foundation's fiscal years 2010 and 2009 financial statements, we identified additional deficiencies in the Foundation's internal control that we do not consider to be material weaknesses or significant deficiencies, either individually or in the aggregate, but that nonetheless merit Foundation management's attention and correction. The purpose of this report is to present additional information on the internal control and accounting procedures issues we identified during our audit of the Foundation's fiscal years 2010 and 2009 financial statements and to provide our recommended actions to address those issues..

During our audit of the Foundation's fiscal years 2010 and 2009 financial statements, we identified three internal control issues that could adversely affect the Foundation's ability to meet its internal control objectives. These issues concern the Foundation's lack of documented policies and procedures for (1) year-end accrual of expenses, (2) reconciliations and supervisory reviews of schedules supporting certain transactions to ensure that these transactions are recorded appropriately, and (3) recording of silent auction revenue. These issues increase the risk of the Foundation not preventing or timely detecting and correcting errors in its financial reporting. We are making four recommendations for strengthening the Foundation's internal controls and accounting procedures.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Foundation should modify its documented accounting policies and procedures to address the year-end accrual of expenses. Such modifications should stipulate that expenses be recognized and a liability incurred when goods or services have been received.

    Agency Affected: Congressional Award Foundation

    Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation modified its accounting policies and procedures to address the year-end accrual of expenses.

    Recommendation: The Foundation should modify its documented accounting policies and procedures to require routine reconciliation and supervisory review of the prepaid insurance amortization schedule supporting transactional activity to be recorded in the general ledger to ensure that transactions are recorded appropriately.

    Agency Affected: Congressional Award Foundation

    Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation modified its documented accounting policies and procedures to require routine reconciliation and supervisory review of the prepaid insurance amortization schedule supporting transactional activity to ensure that transactions are recorded appropriately.

    Recommendation: The Foundation should modify its documented accounting policies and procedures to require that supervisory review of the depreciation and amortization and costs of direct benefits to donors schedules supporting transactional activity be recorded in the general ledger to ensure that transactions are recorded appropriately.

    Agency Affected: Congressional Award Foundation

    Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation modified its documented accounting policies and procedures to require that supervisory review of the depreciation and amortization and costs of direct benefits to donors schedules supporting transactional activity to ensure that transactions are recorded appropriately.

    Recommendation: The Foundation should modify its existing accounting policies and procedures to include guidance and requirements for the recording of silent auction revenue. The modified policies and procedures should require that the revenue be recorded at fair value when items are donated and subsequently adjusted to the amount received when the silent auction is held and donors have purchased the items.

    Agency Affected: Congressional Award Foundation

    Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation modified its existing accounting policies and procedures to include guidance for the recording of silent auction revenue.

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