Southern Illinois Physicians & Surgeons Inc. 2001 Audit

REPORT DIGEST

SOUTHERN ILLINOIS UNIVERSITY PHYSICIANS AND SURGEONS, INC.

COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 2001

AND
FINANCIAL AUDIT
For the Year Ended:
June 30, 2001

Summary of Findings:

Total this audit 1
Total last audit 0
Repeated from last audit 0

Release Date:
April 24, 2002

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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217)782-6046 or TDD (217) 524-4646
This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

Payroll taxes were not paid or withheld for a settlement with a participating physician.

SIU PHYSICIANS AND SURGEONS, INC. SOUTHERN ILLINOIS UNIVERSITY AT SPRINGFIELD
FINANCIAL AND COMPLIANCE AUDIT
For The Periods Ended June 30, 2001

FINANCIAL OPERATIONS (Current Funds - unrestricted)	FY 2001	FY 2000
Revenues: Net professional fees Interest income Other revenues Total revenues Expenditures: General and operating University overhead Academic development Total expenditures	$47,367,174 179,923 45,935 $47,593,032 $20,063,941 19,841,774 4,534,394 $44,440,109	$41,124,820 79,128 301,895 $41,505,843 $17,639,821 19,718,649 4,020,024 $41,378,494
SELECTED ASSETS BALANCES (All Funds)	At June 30, 2001	At June 30, 2000
Cash Accounts receivable Due from SIU Plant and equipment Other assets Total assets	$260,818 10,468,407 4,087,761 285,546 - $15,102,533	$119,548 10,673,676 1,404,872 215,999 6,123 $12,420,218

EXECUTIVE DIRECTOR

During the audit: Mrs. Elizabeth Collier
Currently: Mrs. Elizabeth Collier

Payroll taxes totaling $4,318 were not paid or withheld

FINDING, CONCLUSION, AND RECOMMENDATION

NEED TO FOLLOW PAYROLL REQUIREMENTS OF THE INTERNAL REVENUE CODE

Southern Illinois University Physicians and Surgeons, Inc. (the Corporation) did not pay payroll taxes on a termination settlement to a physician. The settlement was the result of a termination agreement with a member physician. The Corporation did not pay the employer's share of required payroll taxes in the amount of $2,159 as required by the Internal Revenue Code.

In addition, the payroll insurance taxes for the employee's portion that should have been withheld from the physician, an employee of the Corporation, were not withheld. Therefore, the Corporation may also be responsible for paying $2,159 on the employee's behalf.

Corporation personnel indicated they made the conscious decision not to pay payroll taxes on the termination settlement. Corporation opinion was the settlement was disbursed to an attorney and not directly to the former employee. Therefore, the settlement was not considered payroll. Underpayment of payroll taxes could result in a request for the unpaid tax plus additional penalty and interest charges by the Internal Revenue Service. (Finding 1, page 11)

We recommended Southern Illinois University Physicians and Surgeons, Inc. make the required payment due as required by Internal Revenue Service rules and regulations.

Corporation officials stated that there could be an exposure of $2,159 for employer taxes. The settlement check was written with full knowledge that the terminated physician was to report this as income. The Corporation reported the payment as a 1099 income item to the IRS. Should the IRS notify the Corporation that there is an outstanding liability, the Corporation will resolve it expeditiously.

Mr. Peter R. Cadwell, Chief Financial Officer provided the Corporation's response.

AUDITORS' OPINION

Our auditors stated the June 30, 2001 financial statements of the Corporation are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KMM:pp

SPECIAL ASSISTANT AUDITORS

Kerber, Eck & Braeckel LLP were our special assistant auditors for this audit.