Councillors slam 'disturbing' management of city leases

City staff are alarminglylax in overseeing the leases for their own properties,according toan internal audit that councillors characterized as "very disturbing."

Among the problems?

There's no actual city policy for leasing municipal properties, which includevacant land, buildings and even parts of buildings.

Files are often missing required documents, including tenantinsurance certificates.

And 27 leases expired years ago, with the city taking payments month-to-month even though the rental rates have never been renegotiated.

Some councillors were aghast at the problems.

Coun. George Darouzefound the results "very disturbing," while Coun. Allan Hubley worried that the lack of insurance certificatesputs taxpayers at a high risk.

"I was really disheartened reading this," said Coun. Carol Anne Meehan.

She said she had written on the top of a report page: "Does anyone know what they're doing in this department?"

Clearly, Coun. Eli El-Chantiry didn't think so.

"I'd rather have a real estate company doing our rentalsthan have our staff doing it," said El-Chantiry.

"It looks like they have no experience in commercial leasing."

Unusual 30 recommendations

Ottawa's auditor general Ken Hughespresented his annual report this week, which included the shockingnews that the city treasurer was scammedonline into sending a fraudstermore than $100,000.

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But in some ways, the report on the lack of leasing oversight could be seen asmore alarming, as it appears to be ongoingand could be costing the city much more money.

The main reason that the auditor's office chose to delve into the city's leasing practices was because in 2016,it found significant issues with the way the ByWard and Parkdale market leases were managed.

As well, leasing had been audited in 2005and2009and still, major issues persisted.

The ongoing problems led the auditor to make 30 recommendations to staff on Monday to fix the issue.

"I should point out that isn't our practice to have this many recommendations," Hughes told councillors, "but as this area had been audited before and there were continuing deficiencies, it did require this."

27 leases expired for years

In 2017, there were 260 "active" leases of city properties to private businesses, community groups and residents, which generated $8.2 million in revenue.

One of the issues the auditor identified was that 27 leases had expired for an average of 32 months and two had expired 15 years ago.

Instead of being renegotiated, the leases went into "overhold," where the tenants continued to pay the original rent on a month-to-month basis, potentially costing the city hundreds of thousands of dollars in lost revenue.

The audit documents one such example, where theformer region bought 194 acres from the National Capital Commission in 1991.

In 2001, the city signeda new lease with a tenant for $170 per month$67 less than the NCC was charging back in 1990. The lease expired on 2003, and has been on "overhold" ever since.

"No effort was made to renegotiate the rent over a 20-year period," according to the audit, even though the city had tried to figure out a fair market value for the property.

"Based on the fair market value estimated found in the file the city lost an estimated amount between $30,000 and $180,000 of lease revenue."

And in 2017, the tenant stopped paying altogether, despite still using the land.

City staff didn't have much to say for themselves in the face of the scathing reportand city manager Steve Kanellakos accepted responsibility for the issues, saying the city would work on concrete solutions to the problems.

Access cards with no expiry date

The remaining reports were not nearly as negative, although the auditor did find some issues with the city's corporate security for which Hugheshad 17 recommendations.

"One area of significant risk," according to the report, "are the processes and controls over access card termination."

Of the contractors and volunteer access card looked at, none of them had an expiration date programmed into them.

Seasonal and student workers' cards continued to work for for months after their jobs had ended.

And secure file rooms that are supposed to require both an access card and a PIN in order to get in allowed access to unauthorized people.

The audit also found that the city had only performed security audits on 72 of its 836 buildings in the last nine years.