Real estate audit raises questions about police HQ purchase

A long-awaited audit of the City of Winnipeg's real estate transactions raises questions about how officials handled several real estate transactions includingthe former Canada Post building downtown, which is being turned into the police service's new headquarters.

No appraisal was performed by the city on the building at 266 Graham Ave. and that fact wasn't disclosed in city reports recommending that council approve the purchase, according totheErnst & Young(EY)report's executive summary.

• Read the Ernst & Young report here
• Real estate audit a 'witch hunt,' says ex-CAO Phil Sheegl

"The Administrative Report presented to Council recommending the acquisition of 266 Graham for the purposes of housing the new police headquarters did not mention that a comprehensive procurement process had not been undertaken," the document, which was released on Wednesday, states in part.

"EY did not observe file documentation evidencing that a process was undertaken toidentify other potential properties, and a procurement process, such as an EOI [Expression of Interest], was not undertaken to determine the options available."

The city instead hired local developer Shindico to do the transactionand paid the company more than $800,000, which was 68 per cent more than an already agreed-upon commission.

The police headquarters deal is one of 33 city land transactions covered in the report, which councillors started reviewing in a closed-door seminar Wednesday morning.

In another example, the audit found that the city expropriated a Donald Street car wash property, subsequently losing $1.8 million after it bought then resold the property.

The audit also found evidence that the city only needed a small portion of that land to complete the work for the rapid transit corridor.

Councillors react

The documentwas supposed to be debated at a special council meeting Thursday, butit has been delayed by a week so councillors can have more time to review it.

While several councillors expressed concern that the audit doesn't specifically blame anyone, Mynarski Coun. Ross Eadie said some things in the report are very clear.

"We're not documenting things appropriately," he said. "There is no clear guidelines for the city to follow in terms of appraisals."

Daniel McIntyre Coun. Harvey Smith said changes are needed at city hall.

"I think some people should be fired. That's clear-cut in my mind, that this is a condemnation of city hall, of the mayor and his cabinet," Smith said.

Fort Rouge-East Fort GarryCoun.JennyGerbasisaid the authors of the EY report told council that no evidence of criminal wrongdoing was found in the course of the city land deals.

"There's definitely things that happened that should not have happened and are of great concern. Having said that, we can't change the past," she said.

Audit or review?

Councillors voted to order the audit in September 2012 in a bid to restore public confidence in city hallafter revelations surfaced about the fire hall land swap.

• TIMELINE | Fire hall land controversy
• Fire hall land swap killed by city committee

As Wednesday'sclosed-door seminar got underway, some councillors debatedwhether EYhadactually conducted an audit or just a review of procedures.

"It's not an audit. It's a review. And that's the whole question," Smith said.

"I would've liked to have seen an audit of all the different properties and then have them draw it all together in their prose. But, you know, it's not an audit. It's a review of procedures, and we'll have to wait to see what the final outcome is."

Smith said during the meeting, Mayor Sam Katz noted that council's motion in 2012 had called for an audit.

• Read the council motion calling for real estate audit

But Gerbasi, who hadpresented the original motion, said the EY auditors called their report an audit.

"This question went around and around, but the auditor, the company that was doing the audit was pretty clear that they considered it an audit," Gerbasi told reporters.

"It's just that because they also reviewed beyond in a broader scope, which was what my motion asked for, it was both auditing done as well as reviewing some other processes."

Gerbasi saidconcernsabout whether the report was really an audit were raised "by a couple of people in the room whose purpose there was really to try to say this audit isn't legitimate and trying to undermine the audit process itself.

"I'm more concerned about what the audit says," she added. "I don't have a reason to question the professionalism of the audit itself."

Questions were also raised about who was interviewed by EY. Smith said former chief administrative officer Phil Sheegl, who was implicated in many of the issues related to fire hall land deal, was not interviewed.

• AUDIO: Coun. Harvey Smith on questions regarding audit

Fire hall deal quashed

The fire hall dealcalled for the city to flip two abandoned fire halls and some land over to Shindico Realty in exchange for property on Taylor Avenue.

City council was never notified of the deal and ended up quashing it. But by then, construction on a new fire-paramedic station on the Taylor landwas almost complete.

The city is still working to acquire that landfrom Shindico.It has started an expropriation process after negotiations to purchase itcame to a stalemate.

An external review of the fire hall land swapfound that a number of city procedures had not been followed.

The last two years of Mayor SamKatz'sadministration have sparkedthree separate external audits, including theone into the cost overruns for the new police headquarters.

'Extremely disappointing,' says developer

Adrian Schulz of Imperial Properties, which had submitted an offer to manage the Canada Post building last February, says the latestreal estateauditshows that things aren't working properly at city hall.

The company'sbid was not awarded, said Schulz, who said no full explanation was provided.

"We get a report that basically tells us that they're incompetent, they waste money and they're unfair," he said.

"I think the first word that came to mind was disgusting, but it's extremely disappointing and really sad the state of affairs that our city real estate department is in, and it hurts being a taxpayer today in Winnipeg."

Schulz said since Katz is not seeking re-election as mayor, and Sheegl resigned last year, it's up to voters to hold city councillors to account.

"Surely they knew what was going on in their own ward," he said.

"You know, if a city councillor doesn't know what's going on in their own ward, then people in that ward, elect yourself a new city councillor."

Read the report

Read the Ernst & Young audit findings and recommendations reportbelow. The document was released by the City of Winnipeg on Wednesday afternoon.

• ON MOBILE?Read the report here.