Winnipeg Free Press - PRINT EDITION

Gloves off over city hall audit

Some doubt its credibility, others say it's insightful

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A war of words is swirling around the damning audit of city hall property transactions.

Critics on council are slamming the 192-page report from consulting firm EY (formerly known as Ernst and Young), questioning its credibility because the firm titled the document a review rather than an audit -- and for not interviewing former chief administrative officer Phil Sheegl.

Mayor Sam Katz and Coun. Justin Swandel questioned the reliability of the report, alleging it contains unsubstantiated "opinions and innuendo."

But city auditor Brian Whiteside and other councillors defended the EY audit.

"The (EY report) was conducted in accordance with the council motion requesting the audit and focused on processes and policies used for all major property acquisitions, sales, transfers, and external leasing transactions," Whiteside said.

Coun. Jenny Gerbasi, who originally moved the motion on the floor of council calling for the audit in 2012, accused Katz and Swandel (St. Norbert) of trying to undermine the EY report before Winnipeggers have a chance to evaluate it.

"There is a concerted effort here to discredit the audit process and that's really unfortunate," said Gerbasi (Fort Rouge-East Fort Garry).

The audit reviewed 33 property transactions, including the purchase of the Canada Post building, the Parker land swap, the sale of the Winnipeg Square Parkade and Canad Inns Stadium site, the proposed sale of Parcel Four and the expropriation of the Midtown Car Wash.

The forensic auditors are the same individuals from EY who produced last fall's scathing report on the fire-paramedic station replacement program. While the first report examined only the circumstances surrounding the construction of four fire halls, this report reviewed 33 property deals and reached similar damning conclusions about breaches of procedures and policies by unnamed senior city officials.

"Evidence supporting compliance with city policies, procedures, and industry practices was lacking in many instances, particularly in the significant transactions reviewed," the EY report states as its first finding.

The auditors concluded land valuations for the parkade and Parcel Four were kept from city council, the Parker land swap was a "rush job," the car-wash expropriation was unnecessary and the city failed to obtain an independent appraisal of the Canada Post building or seriously consider other places to create a new police headquarters.

The EY report was presented to councillors Wednesday at a closed-door session that was described by one councillor as "rowdy and raucous."

The closed-door session was set for 90 minutes but stretched to three hours as councillors peppered the EY team with questions about how they conducted the report and argued among themselves about the merits of the document.

The report was to have been debated at a special meeting of council today but that will now take place July 9.

The city later published the full 192-page report on the minutes portion of the digital EPC July 2 agenda.

Coun. Harvey Smith said he found the report troubling and confusing, adding he believes the mayor's office and several senior administrators deliberately stymied the EY team.

Smith (Daniel McIntyre) said he believes acting CAO Deepak Joshi should be fired as a result of the report's findings.

Gerbasi said she was concerned with the repeated breaches of policies and procedures by civic administrators, but added the report did not identify who committed the breaches.

River Heights-Fort Garry Coun. John Orlikow issued a statement claiming the audit shows "deceit, favouritism and incompetence" at the city.

Mynarski Coun. Ross Eadie said it's clear things occurred that should not have occurred, such as the apparent suppression of a $10-million land valuation for the Parcel Four surface parking lot in a report to council. Eadie said someone may deserve to be dismissed for that.

Coun. Paula Havixbeck (Charleswood-Tuxedo) said she expects the EY team and senior administrators will be at next week's council meeting to answer questions, adding she hoped Sheegl would be there, too.

Katz said later while he has not read the document in detail, he accepts many of its recommendations but has problems with the methodology.

Katz told reporters he was "astounded" EY chose not to interview Sheegl or officials with Shindico Realty, the firm that conducted due diligence on the Canada Post building, purchased the Canad Inns Stadium site along with Cadillac Fairview and handled other major transactions on behalf of the city.

Katz said he was disappointed the audit was titled a "real estate management review" and said genuine audits are based on facts, not opinions.

"There's a big difference between a management review and an audit," Katz said. "Council asked for an audit, this is not an audit."

But the mayor refused to directly criticize Whiteside, who presented the report to the city on June 19. Katz said he was not told of its content before Wednesday.


Does Mayor Sam Katz have legitmate concerns about the real estate audit's methodology — or is he trying to muddy the waters? Join the conversation in the comments below. 

Republished from the Winnipeg Free Press print edition July 3, 2014 A3


Updated on Thursday, July 3, 2014 at 12:57 PM CDT: adds all related stories to sidebar

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