DENVER – The Division of Real Estate says it is improving how it tracks and reports on leases of city-owned property throughout the year, but during a follow-up audit of the division’s practices, Denver Auditor Timothy M. O’Brien and his team were unable to find proof in several instances that the division was following its recent additions to lease policies and procedures.
“I am disappointed to see Real Estate implementing so few of our office’s recommendations,” Auditor O’Brien said. “Audit recommendations are meant to help the city’s divisions and agencies improve the work they do on behalf of the people.”
According to the recent follow-up report, the Division of Real Estate has implemented only one of six recommendations from the original audit. Three recommendations were not adequately implemented, and two were only partially implemented.
The audit examined Real Estate’s monitoring of city-owned property leases. The audit evaluated the monitoring of lease agreements to ensure that revenue was received, and lessees were held accountable for compliance with lease terms. We also evaluated whether there was proper justification and documentation for below-market and nominal leases granted to businesses.
The audit found that lease reporting requirements were not tracked or monitored. Auditors made several recommendations for how the division should improve its practices.
The first recommendation the division didn’t implement was related to accounting entries for lease payments. Auditors called for better standardization of descriptions for entries. Based on review during follow-up work, auditors found different ways of recording transaction information for different accounting entries all for the same lessee. There was no evidence of policies and procedures to ensure standardization and consistency, which is essential for efficiency and effectiveness in an organization.
The next recommendation not implemented dealt with how the division monitors lessee reporting requirements. Real Estate created written policies to address problems identified in the audit. However, there was no evidence administrators were implementing and following through with those policies and procedures.
The third and final recommendation the division didn’t implement was related to ensuring lessees provide the required current certificates of insurance. Real Estate implemented new policies and procedures to keep appropriate records on file; however, auditors found some certificates of insurance were still missing from the files.
“Real Estate told us it would fix these problems, but now we aren’t seeing the evidence that administrators are following through,” Auditor O’Brien said. “It’s not enough to put good intentions on paper. They have to apply those policies and procedures in their daily work.”
Auditors found similar problems with the two partially implemented recommendations. While new policies and procedures were adequately written to address our recommendations, the successful implementation of those defined procedures is incomplete.