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Audit discovers serious issues with city’s real estate functions

Shortfall of $82,000 found; some leases found to be incomplete, billed incorrectly or not billed at all

By Joel Wittnebel/The Oshawa Express

An audit of the city’s real estate practices has found miscommunications, a lack of information and poorly updated records that could be costing Oshawa money.

While it praises the city for its systems of land management and the tracking of land management processes, the real estate audit, completed by KPMG, came with 12 recommendations to fix a series of issues discovered during the audit.

Most concerning for the auditors was staff not being fully aware of their roles and responsibilities, including some not being aware of a need to invoice for leases and not updating the holdings inventory book – something that hadn’t been done since the early 2000s. According to numbers from 2015, the city holds 59 leases for facilities to the value of $925,000. In that year, the audit found only $843,000 of that was recorded in the general ledger, a shortfall of $82,000.

As well, when KPMG attempted to obtain a full list of clients and tenants from staffers, the list could not be generated, and among those leases that were checked, numerous issues were identified.

“In some cases, we noted they were either not billed, incorrectly billed, or we could not determine who handled the billing function, and for others, we could not perform testing as the agreement did not indicate values to be billed or the agreement number,” the report reads.

The audit also found that renewal terms identified in only seven of the 25 leases analyzed, and 14 of 25 had the expiration date captured.

The finger was pointed at a lack of knowledge among staff members regarding rent payments, where leases go in the city and who performs annual rent increases.

This lack of shared knowledge around lease agreements and responsibilities has been on full display in the council chambers recently after council was surprised to learn that they would need to fork out $20,000 to repair the aging Visitor’s Centre building. On Dec. 12, council discovered staff knew about the repairs when the lease was signed, but did not share the information with council.

Councillor Amy McQuaid-England slammed staff members for having council approve the signing of a lease without knowing all the information.

“It wasn’t included in the original report when we signed the agreement and then there’s an additional $20,000 cost that we’re on the hook for,” she said.

“The communication can be improved definitely,” said Jag Sharma, the city manager. “It should have been potentially reported in a different manner and it will be going forward.”

However, Councillor Nancy Diamond said that regardless of the lease agreement, the costs would be the city’s responsibility as they own the building.

“Obviously the city is responsible for the maintenance of its own building,” she said.

Now, while the audit concluded that the position of a real estate manager is not required (the position was eliminated in 2014), a staff member has taken over the lead of the real estate function within the planning services department.

Along with creating specific roles and responsibilities for employees, as well as a policy and procedures manual to assist staff with real estate functions, the city is reestablishing the corporate real estate strategy team (CREST) in 2017. The team will be made up of staff from key departments, and will meet on a regular basis to discuss potential acquisitions and dispositions.

Staff are also working to update their systems with the correct lease information, values and agreement numbers, with a target completion date of June 2018.

According to Nick Rolfe of KPMG, the key is centralizing the real estate functions of the city.

“(It’s) really trying to provide the whole corporation with a real central point to coordinate the real estate function from,” he said. “Having that central coordination and just better oversight within one area will really help to move you forward.”

Diamond admits the audit has pointed out “what might have slipped by in the day to day.” She adds that the two-part, internal and external audit gives the city a chance to find real areas for improvement and become more efficient. It also shows courage on behalf of the city, she says.

“I would say that we have the courage to look at what we do…and we’re showing that we have the courage to implement and I think that’s very positive for the corporation.”

Councillor Rick Kerr agreed, saying it was good to see the city “steering a tighter ship.”

“All of that is good for the taxpayers of Oshawa,” he says.