REPORT DIGEST

OFFICE OF THE TREASURER

FISCAL OFFICER RESPONSIBILITIES

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2004

Summary of Findings:

Total this audit 0

Total last audit 0

Repeated from last audit 0

Release Date:

May 10, 2005

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

INTRODUCTION

This digest presents our financial audit and compliance examination for the Office of the Treasurer Fiscal Officer Responsibilities for the year ended June 30, 2004.

AUDITORS’ OPINION

The auditors stated the Office of the Treasurer, Fiscal Officer Responsibilities, as of and for the year ended June 30, 2004 present fairly, in all material respects the Statement of Assets, Liabilities and Accountabilities and the results of investment activity of the Treasurer, Fiscal Officer Responsibilities. The auditors noted the financial statements have been prepared on a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JSC:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors on this audit were Kerber, Eck & Braeckel LLP.

{Expenditures and Activity Measures are summarized on the reverse page.}

OFFICE OF THE TREASURER - STATE OF ILLINOIS

FISCAL OFFICER RESPONSIBILITIES

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

FOR THE YEAR ENDED JUNE 30, 2004

ASSETS, LIABILITIES AND ACCOUNTABILITIES			JUNE 30, 2004	JUNE 30, 2003
Assets
Cash - (Demand Deposits, Clearing Accounts).............			$59,437,041	$59,061,040
Revenue Producing Deposits and Investments, At Market................................................................			7,441,951,495	16,280,714,964
Other Assets..............................................................			184,310,468	191,901,550
Amount of Future General Revenues Obligated for Debt Service.............................................................			37,618,856,887	37,040,962,331
TOTAL ASSETS……………................................................			$45,304,555,891	$53,572,639,885

Liabilities and Accountabilities
Liabilities for Balances on Deposit................................			$7,070,150,814	$15,482,166,401
General Obligation Indebtedness..................................			38,229,810,491	38,078,500,221
Accountabilities...........................................................			4,594,586	11,973,263
TOTAL LIABILITIES AND ACCOUNTABILITIES.......			$45,304,555,891	$53,572,639,885
FINANCIAL HIGHLIGHTS			YEAR ENDED JUNE 30, 2004	YEAR ENDED JUNE 30, 2003
Investment Income Earned......................................................			$107,631,757	$129,605,929
Average Yield on Investments (unaudited)................................			1.69%	2.46%
Investment Base Increase/(Decrease) From Prior Year (unaudited).............................................................................			877,000,000	($22,000,000)
Total amount of estate tax collections (unaudited)......................			$235,506,548	$236,949,789
Total amount of estate tax distributions (unaudited)....................			$12,838,624	$13,846,819
Total amount of estate tax refunds (unaudited)..........................			$6,987,762	$6,533,028
# of warrants issued, countersigned and recorded (unaudited)....			9,108,478	10,106,416
# of warrants canceled, paid and recorded (unaudited)..............			8,966,741	10,035,458
$ of warrants issued, countersigned and recorded (unaudited)....			$63,818,005,734	$51,759,370,852
STATE TREASURER
During Audit Period: Honorable Judy Baar Topinka Currently: Honorable Judy Baar Topinka
	At June 30, 2004 two properties remain in the Illinois Insured Mortgage Pilot Program Trust Accrued interest receivable for nonperforming assets approximated $25,764,000 at June 30, 2004 Ongoing litigation	OTHER DISCLOSURES ILLINOIS INSURED MORTGAGE PILOT PROGRAM TRUST As of June 30, 2004 there were two properties in the Illinois Insured Mortgage Pilot Program Trust (Trust). The Trust held the mortgage loans on the properties as underlying collateral for the State’s investment in the program. The two properties are hotels, the Renaissance in Springfield and the Holiday Inn in Collinsville. The recorded value on the financial statements for these investments was $7,439,000 as of June 30, 2004 and the loan balance was $29,298,000. The mortgage loans on the two properties are considered nonperforming assets. Accrued interest receivable at June 30, 2004 for the nonperforming assets approximated $25,764,000. Interest on nonperforming assets is recognized when collected, and therefore has not been recorded on the financial statements. In 1995 the Treasurer authorized the Trustee to sell the mortgage notes to the hotel owners for $10 million. The Illinois Attorney General opined that his consent to the proposed sale in 1995 was required and he refused to give it. As a consequence, the Treasurer did not proceed with the transaction. Affiliates of the owners of the hotels filed a lawsuit against the Trustee and the Treasurer seeking specific performance of the buy-sell agreement on the terms agreed to. On March 13, 2000 the Circuit Court in Madison County entered a judgement order requiring the Trustee and the Treasurer to sell the mortgage loans on the hotel properties to the plaintiffs. The Court found that the plaintiffs were ready, willing and able to perform the buy-sell agreements at the time originally set for closing in 1995. The Trustee and the Treasurer appealed the order. Briefings on the appeal were completed in February 2001 and oral arguments followed. The Illinois Appellate Court, Fifth District, affirmed the Circuit Court’s decision in all material respects. An appeal of that ruling was petitioned by the Trustee to the Illinois Supreme Court and granted on October 7, 2003. At June 30, 2004, no ruling was yet issued on the appeal.