Audit Reveals Asset, Lease Issues - 2026-03-23 - Audit Committee Meeting

City council received audit findings revealing significant asset tracking and lease management problems. An inventory audit found 38% of technology assets worth approximately $53,000 unaccounted for, while a review of the city's real estate portfolio uncovered missing lease agreements and many expired leases with rents well below fair market value.

Topics Discussed

MISSING TECHNOLOGY ASSETS

An audit of high-value computer equipment in storage revealed that only 35% of assets were initially located during a physical count. After attempts to find missing items, 38% remain unaccounted for—12 missing laptops or computers and 166 other assets including monitors, printers, and docking stations, with an estimated total value of approximately $53,000. The auditor emphasized these items are "not necessarily stolen" and staff believe most are likely deployed in the field but the database wasn't properly updated. The audit also found that 250 people have access to technology storage rooms, including 35 people with no business need whose access has since been removed. The auditor stated: "The nature of this type of inventory is that they are desirable assets for individuals to steal for personal use. And while it may be difficult to walk out unnoticed with a large monitor or printer, taking laptops and docks would be fairly easy."

INVENTORY CONTROL IMPROVEMENTS

Staff will implement quarterly physical inventory counts until the database is properly updated. The auditor explained these frequent counts are necessary because "until such time as we're confident that the database is being updated correctly, these measures are necessary. Otherwise, we'll never be able to tell if theft has occurred or not." Other improvements include monthly reconciliation of purchase orders, management audits of deployment checklists, and modified access card forms requiring employees to opt-in for restricted room access. The next full inventory audit won't occur until 2028, approximately five years away.

LEASE MANAGEMENT PROBLEMS

A review of the city's real estate lease portfolio identified many missing lease agreements, inconsistent lease terms, and many expired leases with rents "well below fair market value." The city manages 82 agreements where it is the landlord and 7 where it is the tenant. The city has been operating under a decentralized lease management model due to capacity issues in the realty services team, with lease management scattered across multiple divisions. Staff recommended creating a centralized repository on SharePoint for all leases, implementing automatic renewal reminders, and establishing standardized naming conventions.

THIRD-PARTY PROPERTY MANAGEMENT

Staff recommended hiring a property management company to serve as "boots on the ground" and tenant first point of contact, handling inspections, insurance collection, access control, and tenant responsibilities. This recommendation was referred to the 2027 budget process and will require additional operating funds.

LEASE SUBSIDY TRANSPARENCY

Council debated whether the city should charge full market rent to organizations and then provide offsetting grants, rather than offering below-market or nominal rent arrangements. A councilor cited the Museum, which currently pays $1 in rent, arguing this arrangement lacks transparency as the public may not realize the full extent of the city's subsidy. The councilor suggested charging full market rent and adding that amount to the museum's grant to make the subsidy "clear and transparent for the public." Mr. Chapman responded that staff intends to bring forward a policy on lease management and acknowledged the transparency value of the proposal, but cautioned that many arrangements were entered into as long-term agreements where nominal rent was part of the "original operating model." He recommended a case-by-case review and expressed support for "council having a stronger policy position around subsidized rents and how those are accounted for."

Motions

No specific motions were recorded in the provided transcript excerpts.

Attendees

• Council Johnson
• Councilor Davey
• Mr. Chapman (staff member)

Note: The transcript excerpts provided did not include a complete attendance list.