DENVER – The city’s Division of Real Estate isn’t taking a comprehensive approach to tracking city property or to long-term planning, however division officials say they are starting to make changes, according to a new audit report this month from Denver Auditor Timothy M. O’Brien, CPA and statements made at this month’s Audit Committee.
“Real Estate needs to work more effectively and strategically” Auditor O’Brien said. “The city needs to make the most of every resource it has right now, and without good project and portfolio management aligned with a strategic plan, we could be wasting taxpayer resources.”
The Division of Real Estate is part of the Department of Finance. The team of 11 employees is responsible for managing the city’s real estate portfolio through property acquisition and disposition, leases and space planning.
Our audit found the Real Estate Division is not properly overseeing the city’s portfolio. Specifically, the division has not yet developed and maintained a comprehensive database of city-owned and leased property, even stating on its website at the time of our audit that no list was available of city-owned or surplus property. The Real Estate division announced during the Audit Committee meeting that their website had been updated the day before, in response to our audit recommendations.
We found during our audit that Real Estate kept relevant information in several lists, databases, reports, and a hand-written historical card catalog. Until recently, division leaders continued to insist this was enough. However, we found that because this information is in multiple systems, staff may need to spend extra time and resources to track what property the city has and what’s available and to plan for what the city needs. This scattershot approach creates a risk of errors.
We recommended Real Estate establish a comprehensive portfolio that tracks important information such as: the date of acquisition or disposition of a property, leases, managing agencies for properties, total acreage or square footage, occupied square footage, and approving ordinances or resolutions. This information should also be more publicly available.
“The city is buying, selling and leasing without having the full picture of needs and availability,” Auditor O’Brien said. “The city’s needs for space are going to change dramatically as we recover from the COVID-19 pandemic. Some agencies will need more space to allow for social distancing, and others might need less due to increased teleworking. Real Estate needs to know what’s available and have a clear strategy to accommodate the city’s changing needs.”
Division officials said during the May Audit Committee meeting that they no longer disagree with our recommendation and said during the meeting they have already updated their website to keep a comprehensive portfolio. We will review and confirm this work when we follow up in the future.
“I’m encouraged by this change of heart. The city shouldn’t be going on a scavenger hunt every time it needs to do a space-planning project,” Auditor O’Brien said. “If the city doesn’t know what it has to start with, readily available space could get missed or the city could end up making a purchase it doesn’t need.”
After receiving a draft of our audit, the Real Estate Division provided us what they consider a “master list” of city-owned properties in Excel. This document has a creation date of Jan. 15, 2020, well after our audit fieldwork concluded, and it was not provided when we discussed with them the need for a comprehensive portfolio on Jan. 21.
Our audit covered property management processes in 2018 and 2019. Due to the late creation and sharing of this file, we were not able to verify its accuracy or completeness. However, we were able to see the list had conflicting information compared to what we were given before.
Meanwhile, Real Estate continues to refuse to track delays in projects, because it believes other agencies it works with to complete projects are the ones responsible. Real Estate is responsible for working with city agencies on new projects to develop a scope of work and to plan space needs, but city agencies look to Real Estate for updates on the progress of such projects.
Real Estate received approval in January 2020 for a system called Archibus to help track space planning. This will allow for better project management and the opportunity to track delays and to keep a comprehensive portfolio. However, Real Estate still disagrees with our recommendations to take these important steps.
Our audit also found weaknesses in document retention, including records justifying decisions. An example we found was a record showing the city exchanged a parcel of land for only $10. The records did not note why this happened. Upon further investigation, we were able to find out the city traded one property for another, but officials could not list the property value as “zero,” so they used $10 instead.
According to the report, without documented justification for transactions and without a documented, comprehensive real estate portfolio, the City Council may lack assurance that Real Estate’s actions are in the best interest of the city. City Council can — and has — rejected proposals because of Real Estate’s lack of information.
We also recommended Real Estate create its own strategic vision. Currently Real Estate relies on other agencies’ plans and does not have its own long-term plan. Although we recognize Real Estate’s staff members are qualified and knowledgeable, the division lacks an overall strategic vision and oversight, which may affect the division’s ability to provide a long-term perspective for delivering services and budgeting.
Without strategic planning, Real Estate faces difficulty in justifying to the public or elected officials the reasons for its decisions when there is no specified long-term goal. Real Estate agreed to develop a long-term strategic vision.
“While the city faces severe budget shortfalls and a changing work environment due to COVID-19, It is imperative Real Estate take action now to develop a clear strategy and a comprehensive understanding of the city’s true real estate needs,” Auditor O’Brien said. “We need to make every taxpayer dollar count and use every resource wisely.”