Audit finds city wasted millions on online system

‘Conflict of interest’ allegations discovered as contract cancelled

Edmonton officials wasted up to $8.5 million in a failed attempt to put building permit applications online, only to discover “conflict of interest” allegations between city staff and contractors when they went to cancel the contract.

On top of that, officials swept those 2015 allegations under the rug, according to an audit released Thursday. City staff members did not report them to corporate security or the city auditor, choosing instead to move on and start the project again.

They ’ve since spend $5.3 million more to achieve the same thing.

“Any time there is an allegation of conflict of interest with a contractor, the city should take it very seriously,” city auditor David Wiun said in an interview. His team is now investigating further.

“Even perceived conflict of interest can harm the public trust.”

A three-year delay means evidence will be harder to find if police need to get involved, said Mayor Don Iveson: “That’s completely unacceptable.”

“If there is something that’s not working that is terminated, that should be reported immediately. It should be investigated immediately,” he said.

Wiun’s report, which goes to city council’s audit committee next Wednesday, initially set out to evaluate Edmonton’s planning reserve fund.

It was set up in 2010 to hold fees developers and homebuilders pay for permits. Developer fees would cover the cost to review and issue permits, plus build the fund during boom times. The reserve would ensure the city retained staff and services during inevitable downturns.

However, the fund hasn’t hit its target balance since 2012. It’s now dropped so low, council will add $4 million from general revenue to help stabilize the fund this year.

Wiun’s audit found a lack of oversight and clear policy.

“There were not appropriate controls over reserve spending,” he stated in the audit. “Reserve funds were used for expenses that were insufficiently documented, or did not provide appropriate value for money.”

That’s frustrating for developers, said Greg Nakatsui, president of the Edmonton chapter of the Canadian Home Builders’ Association. “It’s our money we put there for a specific purpose.”

But he’s satisfied city officials are sincerely trying to change that. They’ve been meeting since 2017 to improve how permits are evaluated and the fund managed.

“We’ve seen some good results,” Nakatsui said.

He’s also glad the city stopped work on the failed eServices contract and started again. Its new effort is appreciated within the industry and working well. Plus, he said, part of that $8.5 million from the first contract was for hardware, which wasn’t all wasted. Wiun said late Thursday that only $800,000 went to hardware and software.

The conflict of interest allegations are reminiscent of the 2016 sand contracting audit — a $74-million contract for recycling sand that couldn’t demonstrate it saved the city money. There, a city employee quit to form the recycling company and was immediately hired by former co-workers.

“I’m seeing some common issues around very loose oversight, very loose management of contracts and inadequate accountability and that’s deeply concerning to me,” said Iveson.

Council tasked the city manager with tightening oversight for the last two years, he said.

“I’m not yet satisfied that rigorous accountability is in place,” he said.