Audit Report

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City Real Estate Portfolio Practices

To determine whether the Finance Department’s Real Estate Division is providing proper oversight of the city’s real estate activities, such as acquisitions, dispositions, leases, and space planning.

The city’s Real Estate Division was established by Executive Order No. 100. The division — within the Department of Finance — is responsible for managing the city’s real estate portfolio through property acquisition and disposition, leases, and space planning.

Real Estate’s mission is “to be a consistently outstanding strategic, transparent, and accountable partner with the internal and external customers in the management, acquisition, and disposition of the city’s real estate assets.”

We identified controls and processes that need improvement to promote efficient project management of the city’s real estate activities, as well as consistency and clarity of policies and procedures. Real Estate also needs to develop its own strategic plan and performance measures to evaluate the division’s success in managing the city’s real estate portfolio.

The Real Estate Division Is Not Properly Overseeing the City’s Real Estate Portfolio

  • Real Estate does not provide adequate project management
    of real estate activities. Specifically, we found inconsistent documentation in files, no comprehensive real estate portfolio, inconsistencies with policies and procedures compared to the city’s Executive Order No. 100, and a lack of details in policies and procedures for the processes employees should perform.

  • Real Estate also lacks a documented strategic vision. The division does not have its own strategic plan or performance measures.

1.1 Centralize Project Monitoring – The Real Estate Division should develop and implement a centralized tool to monitor space planning projects, including tracking milestones and delays.

Agency Response: Agree, Implementation Date – Dec. 31, 2020

1.2 Document Project Delays – The Real Estate Division should coordinate with other agencies that provide additional services for space planning projects to monitor delays. Communication and resolution should be documented for follow-up purposes.

Agency Response: Disagree, Implementation Date – Dec. 31, 2020

1.3 Retain Meeting Agendas – The Real Estate Division should retain agendas for each Interdepartmental Real Estate Committee meeting to track and monitor projects, milestones, and delays.

Agency Response: Agree, Implementation Date – Jan. 1, 2020

 

1.4 Document Transaction Details and Justification – The Real Estate Division should include memoranda in property files to document transaction details and justification to ensure institutional knowledge is retained.

Agency Response: Agree, Implementation Date – Dec. 12, 2019

 

1.5 Standardize Property File Documentation – The Real Estate Division should standardize the retention requirements for property file documentation, and it should develop a property file checklist that includes all documents to be retained in each file. The checklist should also include comments to note exceptions to documentation retention requirements.

Agency Response: Agree, Implementation Date – Feb. 13, 2020

 

1.6 Standardize Data Entry – The Real Estate Division should establish a standardized data-entry and file-naming convention for real estate transactions across all methods of retaining documentation.

Agency Response: Agree, Implementation Date – Feb. 12, 2020

 

1.7 Establish Document Retention Policy – The Real Estate Division should establish and document a records retention policy to ensure compliance with the city’s records management policy and records retention schedule.

Agency Response: Disagree, Implementation Date – June 30, 2020

 

1.8 Develop and Maintain Comprehensive Real Estate Portfolio – The Real Estate Division should develop and maintain a comprehensive real estate portfolio. Information in the portfolio should include but not be limited to:

  • Date of acquisition or disposition
  • Leases
  • Managing agency
  • Acquisition or disposition price
  • Reason for acquisition or disposition
  • Total acreage or square footage
  • Occupied square footage
  • Approving ordinance or resolution

Agency Response: Disagree, Implementation Date – Aug. 31, 2020

 

1.9 Clarify Clearance and Release Policy – The Real Estate Division should review the clearance and release requirements in Executive Order No. 100’s Memorandum 100B and ensure division policies and procedures are consistent with the executive order — specifically that Memorandum 100B does not include a statement regarding an automatic approval after 15 days with no response.

Agency Response: Agree, Implementation Date – Feb. 20, 2020

 

1.10 Formalize Reporting with Controller’s Office – The Real Estate Division should work with the Controller’s Office to formalize and document reporting requirements — including the frequency of reporting and the method of communication. Requirements should specify the points of information for each property necessary for accurate reporting by the Controller’s Office.

Agency Response: Agree, Implementation Date – June 30, 2020

 

1.11 Regularly Review Policies and Procedures – The Real Estate Division should implement a formal process to regularly review and update the division’s policies and procedures. This should include ensuring policies and procedures are consistent with Executive Order No. 100 and include changes as Archibus is implemented for the space planning team. The policies and procedures should also contain adequate detail of the division’s role performed for various transactions, including those not initiated by the division.

 

Agency Response: Agree, Implementation Date – May 31, 2020

 

1.12 Develop and Implement Strategic Plan – The Real Estate Division should develop and implement a strategic plan to ensure the city’s real estate needs can be anticipated and addressed, in accordance with the division’s stated purpose under Executive Order No. 100. The division should consider using examples from other cities’ real estate organizations.

 

Agency Response: Agree, Implementation Date – Dec. 31, 2020

 

1.13 Implement and Monitor Performance Measures – The Real Estate Division should develop and track performance measures to evaluate the division’s success and ensure these performance measures align with the division’s strategic plan, as implemented under Recommendation 1.12. The Real Estate Division should consider using best practices and examples from other cities’ real estate organizations.

 

Agency Response: Agree, Implementation Date – Dec. 31, 2020

The objective of our audit of the city’s real estate process within the Finance Department’s Real Estate Division was to assess the division’s management of the city’s real estate portfolio. I am pleased to present the results of this audit.

The audit revealed Real Estate should strengthen its oversight of the city’s real estate portfolio. It needs to improve controls and processes over project management of the city’s real estate activities, and it needs to review and update division policies and procedures to provide clarity and establish consistency with city policies. In addition, the audit revealed Real Estate has no documented strategic vision and lacks performance measures.

Through consistent and detailed policies and procedures, stronger project management and oversight, and a documented strategic vision and performance measures, the division will be better equipped to manage the city’s real estate portfolio and plan for the city’s future real estate needs. Our report lists several related recommendations.

I am disappointed Real Estate has chosen to disagree with recommendations that would clearly enhance oversight activities of the city’s real estate portfolio. Further explanation is in the Auditor’s Addenda included in the Recommendations section of the report on pages 28-34.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor,” and was conducted in accordance with generally accepted government auditing standards. Those standards require we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We extend our appreciation to the Real Estate personnel who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Follow-up report

A follow-up report is forthcoming. 

Audit Team: Dawn Wiseman, Sonia Montano, Amy Barnes, Dave Hancock, Megan O’Brien