Audit finds city overbilled by over $13M more by hotels than shelter contracts required

Thestar.com
June 1, 2022

The City of Toronto paid owners of hotels that were turned into homeless shelters $13.2 million more than was required under contracts between the city and the shelter hotels during the pandemic.

The overpayments over two years are “enough to pay for about 52,000 room nights, meals and wraparound support services for an entire year” for homeless Torontonians, according to a new report for the city’s audit committee.

Homeless people, not just taxpayers, were impacted by lax contract oversight by senior city staff, according to the report from city auditor general Beverly Romeo-Beehler.

City-booked rooms routinely did not show in the tracking system as available and sat empty for periods including extreme cold weather conditions.

The audit acknowledges that COVID-19 and the risk of potentially deadly outbreaks in stand-alone city shelters posed unprecedented challenges for senior managers in the city’s shelter, support and housing division.

But overpayments predate the pandemic and every dollar is needed to safely house as many marginalized Torontonians as possible, concludes the report that includes a dozen recommendations including trying to recoup money from hotel operators.

“The dollars add up, and any savings by implementing these recommendations can be used towards providing more shelter beds, when needed, and to building more permanent and longer-term housing solutions that lead to better outcomes for those experiencing homelessness,” the report concludes.

Facilities were expanded or opened throughout the pandemic to carve out more space in the shelter system, which was facing a lawsuit about infection prevention, and to create single-occupancy rooms for people living in encampments.

The city and community partners opened 42 temporary sites -- 31 of them in the first three months of the pandemic -- and created almost 2,300 spaces in community centres and hotels.

On March 9, more than 3,900 people were staying in 2,900 rooms across 29 hotel locations.

Audit findings include:

• Last year the city spent about $320 million on shelter operations at hotels, including roughly $118 million for hotel rooms, $29 million for meals, and other costs including “community agency wraparound services” for clients.
• Some city staff who process invoice payments to hotel owners were “not familiar with the contracts or whether a particular charge should apply.”
• The city was wrongly charged, and paid, 3-per-cent “destination marketing fees” on rooms totalling $2.4 million, plus $5.3 million in “facility surcharges,” or a 15-per-cent cost tacked onto meal invoices. Those surcharges suggest an extra cost to use hotel facilities, though the city was already being charged separately on its room invoices for use of dining facilities to provide meals.
• The city spent between $2 million and $3 million for “rooms that went unused at the start of leases while new programs were ramping up, as well as for a variety of other operational reasons.” During the last week of January, “about 325 of the rooms that were leased were not made available for clients to sleep in.”
• The city paid about $840,000 for storage space at one hotel over two years and about $68,000 for agency use of “between two and four hotel-provided printers” -- services the auditor said should have cost much less.
• Since city staff were alerted of the findings, one hotel operator offered to repay $381,000 but as of April there was no record of that repayment.

 

The auditor general recommends a host of stricter controls and the transfer of responsibility for hotel contracting to the city’s corporate real estate management division so shelter, support and housing “can focus on core service delivery.”

The audit does not identify which hoteliers overcharged the city.

While the city has said it is winding down use of shelter hotels as the pandemic ends, the audit says the city will continue needing hotel rooms as extra capacity for the stand-alone shelter system.

Deepak Ruparell, president of Silver Hotel Group which owns the Bond Hotel and some others contracted by the city, told the Star on Tuesday “I don’t believe this is related to any of our hotels.”

Asked if any of his hotels overcharged the city, Ruparell said: “None. We have contracts.”

Toronto Mayor John Tory, who has praised city shelter staff for moving quickly to protect vulnerable residents from COVID-19, said in a statement to the Star: “This is why we have an Auditor General to look at these things and make sure there is constant improvement.”

The city will act on the auditor general’s recommendations, Tory said, and as the report goes to audit committee and city council “I will be making sure that out of those discussions we ensure we are doing everything we can to recoup any costs that shouldn’t have been charged to the City.”