Denver’s real estate management agency suffers from poor record keeping, the lack of a centralized real estate portfolio, and no formal communication procedures to the city’s financial reporting office, Denver Auditor Timothy O’Brien’s office found.
Executive Order 100 in 2010 established the Denver Finance Department’s Real Estate Division to manage the city’s properties — excluding several facilities such as Denver International Airport, the Denver Art Museum, Denver Botanic Gardens, zoo, and Museum of Nature and Science. The division advises city departments on real estate acquisitions or dispositions, reviews requests to modify physical spaces, and anticipates future real estate needs of the city.
O’Brien’s office reviewed 12 acquisitions in 2018 and 2019 and discovered that seven were over $500,000. The property file for one of those acquisitions did not contain any evidence that the city council approved the acquisition by ordinance or resolution per city policy.
Three of the acquisitions had no documentation of an appraisal, and in five cases, there was no list of fees and charges for the acquisition.
In addition, six out of nine disposition files reviewed did not contain required release forms.
“During our review of acquisition and disposition files, we found documentation was inconsistently retained,” the auditors wrote. The audit noted that the Real Estate division added explanatory memoranda to files only because of the audit, and that one land exchange for $10 included no justification. The division does not require a checklist nor does it require files “to contain documentation to support Real Estate’s decisions for acquiring or disposing of property.”
There is no records retention policy overall in the division and no central method of tracking property that the city owns and leases. The Real Estate Division failed to retain agendas and meeting notes from the Interdepartmental Real Estate Committee, which oversees moves, additions and changes to city facilities.
“Division management overwrites agendas rather than retaining them from each meeting,” auditors observed, adding that preserving documentation helps retain organizational knowledge.
O’Brien’s office discovered a lack of detail in the division’s eminent domain policy and in its communication with the Controller’s Office about transactions. In the case of eminent domain, which involves the compulsory acquisition of private property for public use, the auditors suggested that a detailed policy would “prevent liability to the city.”
“Controller's Office staff said they would benefit from having additional details about each transaction and each property to classify the transactions accurately,” the auditors wrote, describing an informal email system of informing Controller personnel, who are responsible for the city’s financial reporting. “They said they often must conduct further research, which takes additional time.”
One $75 million property transfer at the National Western Center in 2017 was not recorded until the following year, the report noted.
Finally, the audit requested that the Real Estate Division create a strategic plan, without which it “faces difficulty in justifying to the public or elected officials the reason for its decisions when there is no specified long-term goal.” The report cited the lease of space in the downtown Denver Post building in early 2020, in which some council members were worried about the lack of a long-term plan for real estate.
“I’m very concerned about this investment,” said Councilwoman Candi CdeBaca at the time. “I’m in a building that’s less than 25% utilized that belongs to the city … and I’ve found that several of our spaces are underutilized.”
While the division agreed with several recommendations from the audit, director of real estate Jeffrey Steinberg contended in his response that the division did, in fact, have a records retention policy — to which auditors countered that if such a policy existed, it lacked detail. Steinberg acknowledged that real estate information should be available to the public in a “user-friendly, accessible format,” but denied that the division needed a centralized collection mechanism.
Auditors rebutted that they had received lists, databases and spreadsheets from the division while doing their work. From those varied sources, “we found the property information did not contain fields for certain important details, such as occupied square footage, and that information across the spreadsheets from the different sources of information was difficult to reconcile because of different naming conventions.”
When the division provided auditors the “master list” of city-owned properties, they noticed that there was key information missing.
Steinberg concluded by stating that the Department of Finance was working on an updated strategic plan, of which the division will be a part.