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FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
INADEQUATE CONTROLS OVER
FINANCIAL REPORTING
The Illinois Medical District Commission
(Commission) did not have adequate knowledge of governmental generally
accepted accounting principles (GAAP) in order to prepare financial
statements.
During Fiscal Year
2006, the Commission issued $40 million in revenue bonds to finance
acquisitions, construction and operations of certain properties within the
Medical District. The financial
statements initially prepared by the Commission for the Fiscal Year 2006
included these revenue bond funded activities as a governmental activity
instead of in an enterprise fund (business-type activity) as required by
GAAP. (Finding 1, page 13) GAAP findings were first reported in
2002.
We recommended the
Commission improve its procedures to ensure that accounting records are
appropriately maintained in accordance with applicable accounting standards.
Commission officials agreed with
the recommendation and will report activities related to the $40 million in
revenue bonds in an enterprise fund in future fiscal years. (For previous
Commission response, see Digest Footnote #1)
FAILURE TO REMIT
UNEXPENDED PROCEEDS FROM THE SALE OF COMMISSION PROPERTY INTO THE INCOME FUND
HELD IN THE STATE TREASURY
The Illinois Medical
District Commission did not remit unexpended proceeds from the sale of
Commission property to the State Treasury for deposit into the Medical Center
Commission Income Fund.
The Illinois Medical District Act requires the
Commission to remit to the State Treasury all moneys on hand (originating from
the sale of Commission property) as of June 30 in excess of $350,000.
During Fiscal Year 2004, the Commission sold
real property to the Federal Bureau of Investigation. The proceeds from the sale totaled
$10,688,767. As of June 30, 2005, an
estimated $8,152,049 of those proceeds has not been expended or obligated and
the Commission did not remit these excess funds to the State Treasury. As of June 30, 2006, the unexpended
portion of these proceeds totaled $7,877,969, and the Commission had not yet
remitted any excess funds to the State Treasury. At the conclusion of our
fieldwork on January 29, 2007, the Commission had not received a response
from the Illinois Attorney General’s Office to their October 26, 2006 request
for a legal interpretation of the statute.
(Finding 2, pages 13-14)
We recommended the Commission remit the excess
moneys to the State Treasury for deposit into the Income Fund.
Commission officials did not agree with the
finding. They stated the Commission has received a legal opinion contrary to
the opinion of the Auditor General and have sought clarification from the
Attorney General’s office.
In an Auditor
Comment, we stated that the auditors continue to stand by the finding based
on the same criteria that was cited in the prior audit. We noted that under the statute, by
October 10th of each year money is either expended or it is on
hand. Under common everyday usage,
the term “expended” means paid out.
This definition is also consistent with usage in State
government. Under the plain meaning
of the law, money on hand in excess of $350,000 must be remitted to the State
Treasury in the time frame set forth in Section 10. The auditors did not believe the statute allows the District to
hold for an indefinite period of time an unlimited accumulation of money that
has been “set aside” or “committed” but not paid out.
INADEQUATE CONTRACTING CONTROLS
The Commission did not have
adequate controls over its contracting procedures.
During our previous
examination, we noted 21 of 25 contracts examined had not been filed with the
State Comptroller’s Office. During
our current examination, we noted two (13%) of 15 contracts were not on file
with the State Comptroller. We also
noted the following:
·
Three
(20%) of 15 contracts did not include all the required certifications or
clauses.
·
One
(7%) of 15 tested where a written contract was not prepared when required.
·
Six
(40%) of 15 contracts tested where the Commission did not comply with the
competitive procurement requirements of the Illinois Procurement Code and
were not published on the Illinois Procurement Bulletin. (Finding 3, pages
15-16)
We
recommended the Commission implement procedures to improve internal controls
over contracting procedures and ensure all procurements are made in
accordance with State statutes.
Commission
officials stated they have implemented procedures to improve internal
controls to ensure all procurements are in accordance with State statues, the
inclusion of all certifications and clauses in contracts, and the filing of
contracts with the State Comptroller’s Office.
OTHER FINDING
The
other finding dealt with noncompliance with State publication laws. We will review the Commission’s progress
toward implementation of all our recommendations in our next audit.
AUDITORS' OPINION
Our auditors stated
that the financial statements present fairly, in all material respects, the
respective financial position of the Commission, as of June 30, 2006 and the
respective changes in net assets and cash flows, thereof for the year then
ended.
___________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:KMC:drh
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this
audit were
Nykiel-Carlin & Co.
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