07/22/2021 | Press release | Distributed by Public on 07/22/2021 08:52
CONTACT: Douglas Jones, City Auditor, (816) 513-3300
The City Auditor's Office released an audit evaluating whether the city is receiving all rent payments due for leased properties managed by the General Services Department and whether the city has a below-market rate lease policy. General Services manages 41 of 50 city property leases. In fiscal year 2020, the city received about $1 million in rent.
Auditors concluded General Services is not actively managing leases. The city is owed nearly $443,000 in unpaid rents between 2016 and 2020. The city also missed out on about $164,500 in rent revenue because rent rates were not increased as outlined in leases. Additionally, seven lessees with expired leases occupied the properties between 6 to 56 months without a contract; all seven ultimately renewed their leases.
The audit also found the city has still not developed a policy to ensure the public benefit of below-market rate leases. In our 2015 audit, Leasing City-Owned Property, we recommended General Services develop a below-market lease policy to evaluate and report on these types of leases. In 2019, the City Council passed Resolution 190858 directing the city manager to develop this type of policy. A below-market lease policy can help ensure the city consistently and transparently evaluates organizations' qualifications and whether they provide enough public benefit to justify the rent subsidy.
To improve the city's lease management program, we recommended the director of general services invoice lessees for unpaid rent, increase rent amounts as specified in leases, develop a process to identify leases nearing the end of the lease term, and develop documented leasing procedures. We also recommended the city manager develop for City Council consideration a policy for evaluating and reporting on below-market rent leases.
View the Full Report or Highlights online on our Recent Reports page. The audit is scheduled to be presented at the Council Business Session at 2 p.m. on Thursday, July 22, 2021.
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