Music Teachers National Association, Inc. Consolidated Statement of Financial Position June 30, 2006.

Indendent Auditor's Report

We have audited the accompanying consolidated statement of financial position of Music Teachers National Association, Inc. as of June 30, 2006, and the related consolidated statements of activities and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Music Teachers National Association, Inc. as of June 30, 2006, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Our audit was performed for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The accompanying schedules are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

  Assets:

Cash and cash equivalents           $1,125,035
Investments at fair value            1,942,332
Accounts receivable                     33,305
Inventory                                6,619
Prepaid expenses                        21,056
Property and equipment, net             55,435
Deposits                                   420
  Total assets                      $3,184,202
Liabilities and net assets:
  Liabilities:
Accounts payable                        $6,572
Due to state and local affiliates       87,736
Accrued expenses                        43,796
Deferred revenue                       859,013
Total liabilities                      997,117
Net Assets:
Unrestricted                         1,272,284
Unrestricted-Board designated          600,878
Temporarily restricted                 313,923
Total net assets                     2,187,085
Total liabilities and net assets    $3,184,202

Note 1--Summary of Significant Accounting Policies: The following accounting principles and practices of Music Teachers National Association, Inc. (the "Association"), are set forth to facilitate the understanding of data presented in the consolidated financial statements.

Nature of operations: The Association promotes the professional growth and development of its members, furthering the art of music by providing programs that encourage and support teaching, performance, composition and scholarly research.

Principles of consolidation: The accompanying consolidated financial statements present the consolidated financial position and changes in net assets of the Association and its former corporate entity which has been renamed MTNA Certification Program. All inter-organizational accounts and transactions have been eliminated.

Use of estimates: The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Financial statement presentation: The Association is required to report information regarding its financial position and activities in three classes of net assets: unrestricted net assets which have no donor-imposed restrictions, temporarily restricted net assets which have donor-imposed restrictions that will expire in the future, and permanently restricted net assets which have donor-imposed restrictions which do not expire. The Association has no permanently restricted net assets at June, 30, 2006. Temporarily restricted contributions and investment income are reported as restricted if the restriction is met during the same period.

Income taxes: For Federal tax purposes, the Association is an exempt organization under Section 501(c)(3) of the Internal Revenue Code but is subject to tax on its unrelated business income.

In addition, the Association was formerly organized under Section 501(c)(6) of the Internal Revenue Code. All of the assets except $50,000 were transferred from the now named MTNA Certification Program into the 501(c)(3) organization. The 501 (c)(6) organization is used strictly for certification and its financial position and results of operations have been consolidated with the 501(c)(3) organization in these financial statements.

Cash and cash equivalents: For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Concentration of credit risk: The Association maintains its cash in deposit accounts, which, at times, may exceed federally insured limits. The Association has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Allowance for doubtful accounts: The Association extends credit to various customers for use of mailing lists and advertising. All accounts receivable are deemed fully collectible by management. Therefore, no allowance for doubtful accounts is necessary.

Investments: Investments in marketable securities with readily determinable fair values and all investments in debt securities are valued at their fair values in the statement of financial position. Unrealized gains and losses are included in the statement of activities.

Inventory: Inventory, consisting principally of merchandise for resale to members and the general public, is stated at cost.

Property and depreciation: Property and equipment is recorded at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets.

Deferred revenue: Membership dues that have been collected for future periods have been recorded as deferred revenue.

Due to affiliates: Amounts due to affiliates represent membership dues collected by the Association on behalf of its 50 state and over 500 local affiliates.

Note 2--Investments: The Association's investments consisted of the following at June 30, 2006:

                                 Cost   Fair Value

Money market investments       $1,250        1,250
Mutual funds                  268,683      259,603
Bonds                         529,654      502,513
Equities                    1,131,342    1,178,966
                           $1,930,929    1,942,332

Note 3--Property and Equipment: Property and equipment at June 30, 2006, is summarized as follows:

Furniture and fixtures           $248,238
Less accumulated depreciation   (192,803)
                                  $55,435

Note 4--Retirement Plan: The Association offers a voluntary participation 401(k) retirement plan to its employees. All employees of the Association are eligible to participate in the plan upon meeting certain eligibility requirements. The Association matches a certain percentage of the employee contributions. Total matching retirement contributions were $16,351 for the year ended June 30, 2006.

Note 5--Leases: The Association is under agreement to lease certain office space through July 2008. Total rent expense including common area maintenance and utility charges for the year ended June 30, 2006, was $140,437. The future minimum lease payments for the office lease are as follows:

2007   $115,787
2008    115,787
2009      9,649
       $241,223

The Association is leasing certain office equipment under an operating lease that expires in April 2007. Total lease expense included in operations for the year ended June 30, 2006, was $4,188. Future minimum lease payments for the office equipment under this lease are $3,141 in the year ending June 30, 2007.

Note 6--Unrestricted: Board Designated Net Assets: As of June 30, 2006, the Board has designated $600,878 of net assets to be used for competition awards for students.

Note 7 -Temporarily Restricted Net Assets: Temporarily restricted net assets are available for the following purposes at June 30, 2006:

Teacher Enrichment Grants   $ 256,495
Local Association Grants       34,292
Other                          23,136
                            $ 313,923

Clark, Schaefer, Hackett & Co.

Cincinnati, Ohio

August 31, 2006