Tax Executives Institute, Inc. and TEI Education Fund: audited consolidated financial statements: June 30, 2004 and 2003: independent auditor's report on the consolidated financial statements.

• Position: 2004 Annual Report

To the Board of Directors Tax Executives Institute, Inc. and TEI Education Fund

We have audited the accompanying consolidated statements of financial position of Tax Executives Institute, Inc. and TEI Education Fund (the Organization) as of June 30, 2004 and 2003, and the related consolidated statements of activities and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tax Executives Institute, Inc. and TEI Education Fund as of June 30, 2004 and 2003, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Tate & Tryon Washington, DC July 14, 2004

Notes To Consolidated Financial Statements

NOTE A--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Tax Executives Institute, Inc. (TEI), incorporated in 1944 in New York, is a professional organization for corporate and business employees who are responsible for the tax affairs of their employers in an executive, managerial, or administrative capacity. TEl is exempt from the payment of income taxes on its exempt activities under Section 501(c)(6) of the Internal Revenue Code. However, TEl is subject to tax on its unrelated business activities such as advertising.

TEl Education Fund (the Fund) was formed in 1987 to sponsor or co-sponsor continuing education programs and otherwise to further TEI's educational objectives. The Fund is exempt from the payment of income taxes on its exempt activities under Section 501(c)(3) of the Internal Revenue Code and has been classified by the Internal Revenue Service as other than a private foundation under Section 509(a)(1).

Principles of consolidation

The consolidated financial statements include the accounts of TEl and its affiliate, the Fund (collectively referred to as the Organization). Significant inter-company accounts and transactions have been eliminated in consolidation.

Basis of accounting

The Organization prepares its financial statements on the accrual basis of accounting. Revenue is recognized when earned and expense when the obligation is incurred.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from estimates.

Cash and cash equivalents

For financial statement purposes, cash and cash equivalents consists of demand deposits and money market accounts.

Accounts receivable

Accounts receivable consists primarily of amounts owed from customers for advertising. Accounts receivable are presented at the gross amount due to the Organization. Balances deemed to be uncollectible are charged directly to bad debt expense. Management believes that the use of the direct write-off method approximates the results that would be presented iran allowance for bad debt was recorded.

Fixed assets

Acquisitions of fixed assets greater than $1,000 are recorded at cost and depreciated or amortized using the straight-line basis over the following useful lives: furniture and office equipment--3 to 10 years; leasehold improvements--10 years.

Deferred revenue

Revenue received in advance of the period in which it is earned is deferred to subsequent years.

Net assets--unrestricted

Unrestricted net assets include those net assets whose use is not restricted by donors, even though their use may be limited in other respects, such as by board designation.

 Undesignated: Undesignated net assets are used for the general operations of Organization. TEl has established a reserve policy, the goal of which is to maintain minimum reserves equivalent to at least 50 percent of annual operating

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