Auditor General findings highlight opportunity to improve process

HAMILTON, ON – The City of Hamilton’s Office of the Auditor General (OAG) released a report today with findings that illustrate significant opportunities to improve the governance and administration of the City of Hamilton’s leases and licenses. 

The Corporate Real Estate: Leasing and Licensing Audit assessed whether the City of Hamilton’s administration of leased and licensed City-owned properties is efficient and effective, and compliant with internal policies, guidelines and legislated requirements. The Audit also evaluated whether the systems, practices and procedures being followed are safeguarding City assets, and that revenues to the City are maximized, where possible.

“There are many opportunities for the City of Hamilton to strengthen the oversight and management of leases and licenses,” said Charles Brown, Auditor General. “Following through with the important work to address these audit recommendations will ensure residents and the municipal government are receiving the best value for money related to the City’s leases and licenses.”

The main issues the Office of the Auditor General identified include:

• Lease/licence administration systems that lack the complete functionality and reliability of fully integrated solutions.
• Administration that is inefficient and prone to error, suggesting a need to reorganize toward a more centralized approach.
• Processes for below market rental of City property that can be more transparent and accountable.
• The need for a comprehensive leasing policy supported by standard operating procedures and published delegated authority.
• Lease information that was not kept up to date.
• A large number of leases that had expired but were maintained on month-to-month status for a long period of time, including for many years which need to be dealt with more expeditiously.
• Processes for collection of rents with fees that are inherently weak and inadequate to ensure full collection and restoration of arrears on a timely basis.

The audit found approximately $1.2 million of accumulated arrears and rental losses that are unlikely to be fully collected.

The audit included 35 recommendations to address the key audit findings, with a focus on data collection and financial reporting, maximizing and collecting revenues, and related process improvements in the administration of leases and licenses.

Management has agreed with all 35 recommendations put forward and provided responses to each one. All recommendations and responses can be viewed in full here.

Quick Facts:

• The Office of the Auditor General (OAG) reviewed lease agreement data as available on December 23, 2022, from City-utilized IT software. According to the system, there were 366 lease agreements, including those active and expired, and leases where the City is the landlord or the tenant.
• The OAG also reviewed an extraction of licence data, showing 400 licence agreements with different types of status - active, recurring, expired, terminated, cancelled, among others.