REPORT DIGEST
ILLINOIS MEDICAL DISTRICT COMMISSION
Financial Audit and Compliance Examination
For the Year Ended June 30, 2010
Summary of Findings:
Total this audit: 2
Total last audit: 2
Repeated from last audit: 1
Release Date: March 17, 2011
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 and Full Report are also available on the worldwide web at www.auditor.illinois.gov
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SYNOPSIS
• The Commission did not remit unexpended proceeds from the
sale of Commission property into the Income Fund held in the State Treasury.
• The Commission did not comply with the Illinois
Procurement Code.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
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 (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 had 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. As of June 30, 2007, funds in
the amount of $4,000,000 were pledged as collateral for a $40 million bond
offering and pursuant to a Commission Resolution dated May 23, 2006, the
remainder of the funds were pledged as collateral for a $4,000,000 line of
credit with a bank. There were no
changes noted to the status of these funds in fiscal years 2008 through 2010.
(Finding 1, pages 11-13)
This finding was first reported in 2005.
We recommended the Commission remit the excess moneys to the
State Treasury for deposit into the Income Fund or seek statutory remedy.
The Commission’s response to this finding remains as stated
in prior responses, that the Commission did not remit unexpended proceeds from
the sale of Commission property to the State Treasury because the proceeds have
been expended. As the Commission has
noted in prior responses, $4,025,000 of the amounts that the Auditor General maintains
must be deposited were expended upon the cash equity portion of bonds issued by
the Illinois Finance Authority and the remainder was expended as collateral for
a line of credit that was used in the acquisition of parcels of land by eminent
domain.
The Commission acknowledges that both the Auditor General
and Attorney General disagree with measures taken by the Commission but states
these disagreements do not change the facts that the measures taken were within
the authority of the Commission. The
Commission agrees with the Attorney General that legislative action is required
to resolve this matter and the Commission continues to pursue that course. (For
previous Commission response, see Digest Footnote #1)
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
five audits. We noted that under the
statute, by October 10th of each year money is either expended or 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 do not believe the
statute allows the Commission to hold for an indefinite period of time an
unlimited accumulation of money that has been “set aside” or “pledged as
collateral” or “committed” but not paid out.
Not only, according to the Attorney General, were the monies
at issue “on hand” and not properly remitted to the State Treasurer but they
were used by the Commission as security for an unauthorized line of
credit. The auditors continue to believe
these monies should be remitted to the State Treasury.
Furthermore, in the Commission’s response to the finding
last year and in response to a suggestion by the Attorney General, the
Commission stated that they were going to diligently pursue legislative action
to resolve this matter. The Commission has
made no attempt at such legislative action since providing that response last
year.
NONCOMPLIANCE WITH THE ILLINOIS PROCUREMENT CODE
The Illinois Medical District Commission (Commission) did
not comply with the Illinois Procurement Code.
During the year, the Commission made two emergency purchases
for legal services. One of the contracts was for legal services relating to
various administrative, zoning and other legal matters, while the other
contract was for legal services relating to the defense of the Chicago
Technology Park Corporation (Corporation) (a component unit of the Commission),
voluntarily dissolved on June 26, 2009.
These emergency purchases were renewals of emergency contracts entered
into the previous fiscal year.
Some of the issues noted follow:
• Contracts from fiscal year 2009 did not include renewal
options in succeeding year(s);
• Legal services were for the Corporation, which is no
longer in existence, and according to the Commission, any liability which may
arise in relation to the Corporation would presumably be paid out of the
liquidating trust, which in and of itself, is not a component unit of the
Commission;
• Emergency purchase affidavits were not filed with the
Office of the Auditor General nor was this information posted in the Illinois
Procurement Bulletin (Finding 2, pages 14-15)
We recommended that the Commission comply with the Illinois
Procurement Code.
Commission officials agreed with the recommendation.
AUDITOR’S OPINION
Our auditors stated that the financial statements present
fairly, in all material respects, the respective financial position of the
business-type activities of the Commission, as of June 30, 2010, and the
respective changes in net assets and cash flows, thereof for the year then
ended.
WILLIAM G. HOLLAND
Auditor General
WGH:TLK:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were E.C.
Ortiz & Co., LLP.
DIGEST FOOTNOTES
#1 –Failure to remit
Unexpended Proceeds from the Sale of Commission Property into the Income Fund
Held in the State Treasury – Previous Commission Response
The response of the Illinois Medical District Commission
(“Commission”) to the finding of the Auditor General regarding unexpended
funds, remains, as stated in prior responses, that the Commission did not remit
unexpended proceeds from the sale of Commission property to the State Treasury
because the proceeds have been expended.
As the Commission has noted in prior responses to the Auditor General,
$4,025,000 of the amounts that the Auditor General maintains must be deposited
were expended upon the cash equity portion of bonds issued by the Illinois
Finance Authority pursuant to an intergovernmental agreement between the State
of Illinois, by and through its Office of Management and Budget, and the
Commission. The remainder was expended
as collateral for a line of credit that was used in the acquisition of parcels
of land by eminent domain. Condemnation
can be a protracted process. The line of
credit has been used to avoid having to dismiss and refile cases, a process
that would have provided sellers with the opportunity to reappraise their
properties and increase their demands.
The net effect of the line of credit has been to save taxpayers money in
acquisitions that were authorized by the General Assembly and the Governor.
The Commission acknowledges ad understands that both the
Auditor General and Attorney General disagree with measures taken by the
Commission in furtherance of its legislatively-mandated purposes. These disagreements do not change the facts
that the measures taken were within the authority of the Commission, they were
undertaken in good faith and that, as a result of these steps, there are no unexpended
funds available for deposit into the State Treasury. The Attorney General has suggested that
legislative action is required to resolve this matter. The Commission agrees with the Attorney
General on this point, and is now diligently pursuing that course. More specifically, the Commission is seeking
the following revisions to the Illinois Medical District Act (changes in
italics):
“Sec. 2.1. Grants; loans; contracts. The Commission may apply for and accept
grants, loans (including lines of credit), or appropriations from the State of
Illinois…”
“Sec 10. Disposition
of money; income fund. All money
received by the Commission from the sale or lease of any property, in excess of
such amount expended by the Commission for authorized purposes under the Act or
as may be necessary to satisfy the obligation of any revenue bond issued
pursuant to Section 5, or other instrument of credit undertaken by the
Commission pursuant to Section 2.1, including obligations of collateral, shall
be paid into the State Treasury for deposit into the Medical Center Commission
Income Fund…”
The Commission will fully disclose the reasons for its past
actions and the bases for its requested revisions to the General Assembly. We believe that the legislature will support
these revisions, and enact legislation that will resolve this matter to the
satisfaction of all involved.