Audit finds that purchasing laws were violated
State officials violated purchasing laws in the process of leasing warehouse space in the former Barney’s Furniture store building in Springfield, an audit of the transaction has found.
Among other things, the audit conducted by Auditor General Frank Mautino’s office found that specifications for the $2.4 million, 5-year lease were changed after a bidder was selected and other potential bidders weren’t given a chance to make an offer based on the new specifications.
The audit also found the state has never documented the lease would save the state money, one of the reasons given for leasing the property at 2410 South Grand Ave. E. in the first place.
At the same time, while allegations have been raised the lease was a sweetheart deal among political insiders, the auditors said “we found no evidence that relationships played a role in the warehouse lease.”
The audit was the result of a resolution adopted by the General Assembly calling for a review of what led to the warehouse space being leased on behalf of the Department of Human Services to store records.
Lawmakers demanded the audit after it was discovered the state could have purchased the building outright for about a third of the cost of the lease.
State Rep. David McSweeney, R-Barrington Hills, is the lead sponsor of the resolution in the House.
“It’s a devastating indictment of wasteful spending,” McSweeney said of the audit. “It’s very clear that procurement policies were violated. It’s very clear no cost benefit analysis was done. I think the contract should be terminated.”
In fact, the state hasn’t been making payments on the lease since last year, even though the Department of Central Management Services said the space is still being used. Comptroller Susana Mendoza halted those payments after questions were raised about the lease. Mendoza’s office said Wednesday the audit vindicates her decision to withhold payments.
“A decision about whether or when we release the hold on these payments will come after further review of these alarming audit findings,” Mendoza said in a statement.
State Sen. Andy Manar, D-Bunker Hill, who also demanded the audit, said the report proves the lease “doesn’t pass the smell test.”
“At various points in the process, people chose to ignore rules, guidelines and best practices that are there to eliminate questions about backroom deals and political favors,” he said in a statement.
“This was an unnecessary cost to taxpayers, and it seems to me the problems uncovered by this audit merit further scrutiny. Ultimately, I think the average Illinois taxpayer doesn’t believe we should be spending money on politically connected leases for storing paper.”
DHS wanted to lease warehouse space in Springfield to store records that previously were housed at the former Dwight Correctional Center in Dwight. DHS said that conditions at the Dwight facility were badly deteriorated, and the agency needed additional space to consolidate files from other offices.
The DHS files were originally destined for a smaller building on West Jefferson Street in Springfield while a communications support center for the Department of Innovation and Technology was to go to the leased Barney’s building.
However, CMS decided to switch the leases after they were awarded. Auditors said that violated the state purchasing code because leases were awarded to vendors who didn’t submit bids for the properties in question.
The audit said leases were awarded “based on the requirements set forth in the Request for Information. These requirements were then changed.”
State officials said they merely changed the state agencies using the leases. Auditors, though, said “the switch was not a simple substituting of using agencies. Not only were the agencies changed, the purposes of the leases were changed, the structural layouts were changed, the tenant space requirements were changed and the prices offered were changed.”
DHS also said the lease would end up saving the state a considerable amount of money. However, auditors said they weren’t given any documentation by DHS that showed any analysis had been done or that any cost savings would be realized.
The audit made 10 recommendations for correcting issues raised by the Barney’s lease process, including putting in place procedures “to ensure that leases are awarded only to qualified respondents who submitted bids meeting the original lease specifications.”
CMS, which is responsible for leasing properties for the state, said it is evaluating its procedures in light of the recommendation. The state’s Chief Procurement Office, though, disagreed with the recommendation and said procedures are already in place and that nothing illegal happened with the leases.
CMS spokesman Mike Deering said the agency “has taken steps to tighten up the leasing procurement process. We have made improvements that will ensure more comprehensive documentation, including revision of the agency space request form to clarify reasons for the choice of location.”
The South Grand Avenue warehouse was the home of Barney’s Furniture before the store moved to a new location on Wabash Avenue in 2016. Chicago-based Climate Controlled Holdings LLC bought the building from Barney’s. That sale closed at the beginning of 2017.
Climate Controlled then leased the building to the state for 5 years at a cost of $478,256 annually the first 2 years, $487,881 for years 3 and 4, and $497,507 for the final year.