REPORT DIGEST

OFFICE OF THE STATE TREASURER

NONFISCAL OFFICER RESPONSIBILITIES

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2005

Summary of Findings:

Total this audit 2

Total last audit 2

Repeated from last audit 1

Release Date:

March 30, 2006

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

SYNOPSIS

¨ The Office of the State Treasurer did not comply with Office policies and procedures regarding performance appraisals and compensatory time.

¨ The Office of the State Treasurer did not publish the Investment Policy covering the investment of moneys in the College Savings Pool in either a Springfield or Chicago newspaper.

{Expenditures and Activity Measures are summarized on the reverse page

OFFICE OF THE STATE TREASURER - NONFISCAL OFFICER RESPONSIBILITIES

COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2005

EXPENDITURE INFORMATION AND STATISTICS	FY 2005	FY 2004	FY 2003
TOTAL EXPENDITURES (All Funds)........................................... APPROPRIATED EXPENDITURES.............................................. % of Total Expenditures............................................................. General Revenue Fund – 001 & State Pension Fund – 054 Personal Services........................................................................ Employee Retirement - Contributions Paid by Employer........ State Contribution to State Employees' Retirement System... System............................................................................... State Contribution to Social Security....................................... Group Insurance.......................................................................... Contractual Services................................................................... Travel............................................................................................ Commodities................................................................................ Printing......................................................................................... Equipment.................................................................................... Electronic Data Processing........................................................ Telecommunications................................................................... Operation of Auto Equipment................................................... Inspector General........................................................................ Refunds of Estate Tax & Accrued Interest thereon.............. Refunds of Accrued Interest on Protested Taxes.................. Total Expenditures – General Revenue & State Pension General Obligation Bond Fund – 101 Payment of Principal................................................................... Payment of Interest..................................................................... Payments to Refund General Obligation Bonds..................... Total Expenditures – General Obligation Bond Fund... General Obligation Bond Rebate Fund – 107 Total Payments for Arbitrage Rebate....................................... Bank Service Trust Fund – 373 Total Payments for Banking Services...................................... Capital Litigation Trust Fund – 614 Total Payments of Capital Litigation ....................................... Matured Bond and Coupon Fund – 625 Total Payments of Matured Bonds and Interest.................... Estate Tax Collections Distributive Fund – 815 Total Payments to Counties......................................................	$3,355,308,047 $3,283,980,477 98% $6,808,896 261,558 1,094,573 593,859 602,363 3,718,533 134,364 80,574 18,739 70,701 1,930,677 177,602 10,873 196,081 8,998,967 666,309 $25,364,669 $2,153,260,524 1,071,877,490 0 $3,225,138,014 $0 $6,389,251 $8,292,752 $603,775 $18,192,016	$3,758,592,527 $3,673,930,496 98% $6,670,688 263,074 716,331 571,612 478,853 3,818,126 136,869 69,445 35,380 70,833 2,059,818 198,753 15,597 0 6,987,762 1,711,827 $23,804,968 $1,923,668,657 1,019,833,688 78,667,844 $3,622,170,189 $0 $5,946,784 $9,000,041 $172,313 $12,836,201	$2,759,584,518 $2,672,463,288 97% $7,508,329 284,839 775,178 655,871 469,804 3,804,648 245,434 139,428 33,841 70,691 1,950,463 247,498 15,572 0 6,551,784 1,522,328 $24,275,708 $1,520,218,501 474,937,865 618,978,974 $2,614,135,340 $444,893 $6,294,686 $13,317,061 $148,781 $13,846,819
UNAPPROPRIATED EXPENDITURES......................................... % of Total Expenditures............................................................. IPTIP Administrative Trust Fund - 195........................................... Protest Fund - 401............................................................................... Unclaimed Property Trust Fund - 482.............................................. Municipal Economic Development Fund – 650............................. College Savings Plan Administration Fund – 668......................... Cost of Property and Equipment......................................................	$71,327,570 2% $2,660,128 $19,137,402 $48,789,699 $214,559 $525,782 $3,694,505	$84,662,031 2% $2,693,963 $28,409,628 $52,699,682 $356,489 $502,269 $3,478,883	$87,121,230 3% $3,236,625 $29,422,930 $53,822,436 $298,066 $341,173 $3,428,432
SELECTED ACTIVITY MEASURERS (Not examined)	FY 2005	FY 2004	FY 2003
Number of Warrants Issued.............................................................. Number of Warrants Paid.................................................................. Amount of Unclaimed Property Remittances Received................ Number of Unclaimed Property Claims Paid................................... Amount of Unclaimed Property Claims Paid..................................	8,460,917 8,399,938 $160,372,123 40,138 $68,337,495	9,108,478 8,966,741 $184,861,872 26,490 $55,670,636	10,106,416 10,035,458 $127,562,367 25,387 $53,829,481
STATE TREASURER
During Audit Period: Honorable Judy Baar Topinka Currently: Honorable Judy Baar Topinka

Office policies and procedures governing performance appraisals and use of overtime and compensatory were not followed

Investment policy not published in newspaper as required by law

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NONCOMPLIANCE WITH OFFICE POLICIES AND PROCEDURES

The Office did not conduct performance appraisals and did not comply with compensatory time policies and procedures as required by the Treasurer’s Office Employee Handbook.

We noted no performance appraisals were on file for 56 of 100 (56%) employees tested. We also noted performance appraisals were not performed timely for 14 of 100 (14%) employees. The appraisals ranged from 103 to 360 days late. Lastly, we noted 11 of 50 (22%) employees tested exceeded the time allowed for using compensatory time earned by not using time in excess of 21 hours within 60 days of the end of the month in which it was accrued. Excess compensatory time ranged between 3.42 and 73.15 hours for those employees. (Finding 1, pages 9-10)

We recommended the Office ensure performance appraisals are conducted on a timely basis and that its employees comply with its compensation time policies and procedures. We also recommended the Office revise its policies and procedures if the Office determines these policies and procedures are not longer feasible or efficient.

The Treasurer accepted the recommendation and stated managers will be instructed to catch up on all past due performance appraisals and complete all future performance appraisals on time. In addition, the Treasurer stated employees with compensatory time in excess of 21 hours will be either paid for the excess time or instructed to use it by January 31, 2006, and after that date, employees who fail to follow the policy will lose the excess time.

FAILURE TO COMPLY WITH THE STATE TREASURER ACT

The Office did not publish the Investment Policy Statement covering the investment of moneys in the College Savings Pool in either a Springfield or Chicago newspaper since 2002. The State Treasurer Act (15 ILCS 505/16.5) requires the Investment Policy Statement to be published at least once each year in at least one newspaper of general circulation in both Springfield and Chicago. (Finding 2, page 11)

We recommended the Office publish the College Savings Pool Investment Policy Statement on an annual basis as required by statute.

The Treasurer accepted the recommendation and stated that due to increasing costs of newspaper publication and the expansion of the internet, it is the Treasurer’s intention to amend the legislation to remove the annual publication requirement. However, the Treasurer’s Office will comply with the requirement pending the amendment of the legislation.

Ms. Barbara Ringler, Chief Internal Auditor provided the responses to our recommendations.

AUDITORS' OPINION

Our special assistant auditors conducted a compliance examination of the Treasurer’s Nonfiscal Officer Responsibilities as required by the Illinois State Auditing Act. We have not audited any financial statements of the Treasurer’s Nonfiscal Officer Responsibilities for the purpose of expressing an opinion on financial statements.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JSC:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors on this examination were Crowe Chizek and Company LLC.