The city’s auditor general has found evidence of a “kickback scheme” that resulted in the city paying inflated rents through a housing allowance program.
The investigation, tabled at the city’s audit committee on Monday, looked into allegations that a city case worker “received kickback payments from a group of landlords in exchange for these landlords receiving more favourable rental rates under specific housing benefit programs administered by the City.”
Through the investigation, the auditor general’s office observed “multiple factors that indicate that these payments are consistent with a kickback scheme designed to provide a benefit” to both the landlords and the case worker.
The inflated rents were as high as 63 per cent above market rates. Through the investigation, the auditor general’s office found that the landlords paid more than $22,000 to the case worker from November 2023 through this October.
The audit also found the city case worker worked part-time for the landlords, but did not disclose that relationship to the city.
The investigation looked at banking records, as well as chat and messaging data from the case worker’s mobile device. The messages stated that the case worker’s “bonus” would be much larger if they could get “higher rent” for the landlord.
The auditor general’s report provided examples of the inflated rents: for a three-bedroom unit in the Heron Gate area, the negotiated rent was $4,050 per month compared to average market rents of $2,491.
For a two-bedroom in Beacon Hill South, the negotiated rent was $2,900Â while average market rent was $2,100.
Moving company also involved
Housing case workers are supposed to help clients with their search for housing, but are not responsible for negotiating rental agreements. But the investigation found evidence that the case worker did negotiate agreements, which appeared to be a breach of city policy and a conflict of interest, given the payments.
According to the investigation, the scheme involved a second city employee, a family member of the case worker. The investigation found that the second employee was “directly involved” in collecting payments from the landlord.
The second employee also began running a moving company with the group of landlords. The company moved the belongings of a client of the case worker, who submitted an invoice to the city.
Neither employee disclosed their relationship to the moving company, according to the investigation report
The investigation faulted city processes, including the lack of monitoring to ensure that rental payments are reasonable. Had such a system been in place, the investigation found, “management may have detected irregularities in these transactions sooner.”
The auditor general made six recommendations, including to ensure better monitoring and training.
Management accepted all six, has “halted” all business relationships with the landlords and is working to terminate all relationships having to do with housing allowances, according to the report.
The auditor’s office said it’s in touch with Ottawa police.