For the Two Years Ended

June 30, 2002

Total this audit 6
Total last audit 3
Repeated from last audit 1

Release Date:
March 13, 2003

State of Illinois

Office of the Auditor General

AUDITOR GENERAL

This Report Digest is also available on
the worldwide web at http://www.state.il.us/auditor

• The Illinois Medical District Commission’s property control records and its reporting of state property were inaccurate.
• The Commission failed to record and report certain capital expenditures on its property records, its Agency Report of State Property, and on its year-end accounting reports.
• The Commission did not have adequate controls to ensure that accounts payable and accounts receivable were properly recorded and whether a related entity should be included in its financial report.

FY 2002

FY 2001

$5,019,412
100%
$ 298,080
5.9%
$63,699
1.3%
$279,982
5.6%

$116,719
2.3%
$4,260,932
84.9%
$30,095,996
28

$6,168,392
100%
$245,436
4.0%
$51,446
0.8%
$252,658
4.1%

$116,899
1.9%
$5,501,953
89.2%
$25,319,662
22

$4,969,046
100%
$259,685
5.2%
$54,419
1.1%
$263,449
5.3%

$107,755
2.2%
$4,283,738
86.2%
$21,810,253
25

FY 2002

FY 2001

FY 2000

• Revenues
• Expenditures
• Fund Balance as of June 30‘

Five of 23 payments reviewed (22%) totaling $34,556 were determined to be liabilities of Fiscal Year 2001 that were not included as accounts payable

The Illinois Medical District Commission’s property control records and its reporting of state property were inaccurate. We tested 35 of 132 equipment items and noted that: a) nine items (26%) were in a location different from the location listed on property control records; b) one item (3%), a laser jet printer with a cost of $3,286, did not have an Agency tag; and c) two items (6%) were recorded with the wrong tag number in the property control records.

In addition, two of ten equipment additions tested for Fiscal Years 2001 and 2002 were incorrectly recorded; seven of eight Reports of State Property to the Comptroller did not report capital lease assets; and the Agency did not maintain an inventory of equipment items with a cost of less than $500. (Finding 3, pages 15-16).

We recommended the Agency implement procedures to ensure that property and equipment records be properly maintained. The Agency’s response stated the Commission has added the capital lease assets to its quarterly reports; that an additional tag sequence has been developed to mark equipment with a value of less than $500; and that a sub-ledger has been established to record each asset acquisition on an ongoing basis.

The Medical District Commission failed to record and report certain capital expenditures on its property records, its Agency Report of State Property, and on its year-end accounting reports (GAAP package) to the State Comptroller.

We examined 27 equipment and permanent improvement expenditures totaling $958,346 to determine if purchased items were recorded on the Agency’s property control records. We noted five expenditures for site or building improvements totaling $220,909 were not recorded on the property control records or its Agency Report of State Property. Three of the expenditures (two payments for parking lot improvements and one for a granite gateway) were being tracked by the Agency for future additions to the property control records, but were not reported on the Agency’s GAAP package as construction-in-progress. Two expenditures for building improvements (electrical rewiring of a basement and renovations of a maintenance center) were omitted from both the property control records and the Agency Report of State Property. (Finding 5, page 18)

We recommended the Agency develop procedures to ensure that all acquisitions of capital assets are promptly recorded and properly reported. The Commission responded that it had added the $220,909 to its Agency Report of State Property and had established an asset detail notebook and ongoing procedures for maintaining it.

The Medical District Commission did not have adequate controls to ensure that accounts payable and accounts receivable were properly recorded, and whether a related entity should be included in its financial reporting entity.

Five of 23 payments reviewed (22%), totaling $34,556, were determined to be liabilities of Fiscal Year 2001 that were not included as accounts payable at year end. Three of 36 (8%), totaling $28,601, were determined to be liabilities for Fiscal Year 2002 but not included as accounts payable at June 30, 2002. In addition, we noted that a $38,139 liability of Fiscal Year 2000 was recorded as an expense of Fiscal Year 2001. We also noted the Agency did not record a $332,059 grant awarded June 1, 2002 as a Fiscal Year 2002 receivable.

In addition, we also discovered a related entity (Chicago Technology Park Corporation) with expenditures of $5,484 and revenues of $3,153 in Fiscal Year 2002, which had never been included in the Agency’s financial activities even though the Agency substantially controls its board. Governmental accounting standards require entities whose governing body has board membership sufficient to control another entity’s activities to report the financial activities of the latter. (Finding 6, pages 19-20)

We recommended the Agency implement procedures to ensure accounting records are appropriately maintained. The Commission responded it had developed a plan for reporting the Chicago Technology Park Corporation; that a review was underway to establish internal protocols for recording grants; and that a year-end and month-end checklist had been established for recording accounts payable and receivable.

Other findings dealt with lack of documentation in personnel files, inadequate controls over travel expenditures, and inadequate evaluation of internal controls. We will review progress toward implementation of all our recommendations in our next audit.

On August 23, 2002 the Agency returned a large investment it was holding (totaling $4,351,690 as of June 30, 2002) to the Department of Children and Family Services (DCFS). The investment was to be used to fund a capital project that DCFS intended to construct within the Medical District.

Our auditors state that the financial statements present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Commission as of June 30, 2002 and the respective changes in financial position thereof for the year then ended, and that the Fiscal Year 2001 financial statements present fairly, in all material respects, the financial position of the Illinois Medical District Commission and the results of its operations of its locally held funds and nonshared fund for the year then ended.