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Vancouver's AG: city not effectively managing child care, cultural, social non-profit leases

Mike Macdonell: "Council and the public should receive better information concerning the value of non-profit leases."
Auditor General Mike Macdonell has found the City of Vancouver is not effectively managing its portfolio of child care, cultural and social non-profit leases.

Auditor General Mike Macdonell released a performance audit report Thursday that says the City of Vancouver has not effectively managed its portfolio of child care, cultural and social non-profit leases.

The city provides non-profit organizations with below-market and nominal leases of city-owned or leased land, buildings and spaces. The non-profits deliver a variety of services such as child-care centres, neighbourhood houses, theatres and art galleries.

An audit found that about 30 per cent of spaces didn’t have a current lease in place while the tenant continued to occupy the property, a situation called “overhold.” A large proportion had been in overhold for 10 years, or more.

“Long-term overholding — allowing a space to be occupied without a current lease agreement — in effect bypasses council authority to provide grants, and is a practice that should stop,” Macdonell said in a news release.

“Council and the public should receive better information concerning the value of non-profit leases, including leases in overhold.”

'Value is undoubtedly significant'

At the time of the audit, the city’s portfolio included 119 agreements with 86 non-profits. The audit covered the period from Jan. 1, 2022 to Aug. 31, 2023.

In his report, Macdonell said the total value of the non-profit lease portfolio was “not well understood, and as a result I cannot report the value of the lease grants the city provides in-kind each year.”

However, he added, in March 2023 council approved 10 leases with an estimated annual market value of $1.1 million. With 119 leases in the non-profit portfolio included in the scope of the audit, “the total value is undoubtedly significant,” he said.

Macdonell said spaces the city provides to the non-profit sector at low or almost no cost “strengthens the social fabric of our community.” But to obtain the best value for everyone, he said, leased properties need to be well managed, and the performance of lessees should be assessed.

In 2020, the city developed a “lease management framework” to improve administration of its non-profit leases. But there was no implementation plan and the audit found the framework was only partially implemented.

The city defined objectives and intended public benefits for providing space to non-profit operators, which were approved by council. The audit found that the city had not conducted and documented monitoring to determine if these benefits had been achieved.

“Competitive processes for selecting new operators were conducted, however, documentation supporting decisions was not consistently retained,” the news release said.

City accepts report's recommendations

The audit noted the need for the city to provide council and the public with better information to understand the full extent of financial support given to individual non-profit operators and the portfolio as a whole.

The audit also identified the opportunity for the city to develop a funding model to recover costs from senior levels of government for properties leased to childcare operators.

The report contains 10 recommendations, which the city has accepted, according to a separate release which quoted Margaret Wittgens, the city’s general manager of arts, culture and community services

“We have carefully reviewed the recommendations provided, agree with them, and have outlined how these recommendations will be addressed in our management response,” Wittgens said.

“Much of the work to implement these recommendations is already underway, and we are committed to completing the necessary actions to enhance the effectiveness and efficiency of our non-profit lease management practices.” 

'Consistent document retention'

Some of the recommendations include:

• The city should review its funding model supporting childcare initiatives to ensure better alignment with senior government initiatives.

• The city should ensure that adequate and consistent document retention practices are in place across all service groups involved in the selection of non-profit lease operators “to support the principles of open, transparent and accountable decision-making.”

• The city should reduce the number of leases in overhold for longer than one year and implement policies and procedures to limit the number of leases in overhold and the length of the overhold period.

• When renewing non-profit leases, the city should include in the renewal rationales the outcome of “formal operator performance monitoring, including an assessment of the delivery of intended public benefits and whether there is continued alignment between the use of the space with city strategies and priorities.”

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