KPMG Report goes public, declares no conflict of interest by the Town

The final KPMG Forensic Inc. report, reviewing the process of three property sales in Greater Napanee (one of which was between a former Napanee Mayor and the Town), has been released to the public.

According to the report, KPMG “did not find evidence to suggest any conflict of interest or any improper conduct or activity” in regard to the three land sales in question: 313 Belleville Road, 32 Oke Road, and Heritage Park (401 Angila Street).  

“All interviewed personnel believe the land sale process was conducted in an arm’s length manner for all three reviewed properties,” the KPMG report states in its key findings.

In the methodology portion of the report, KPMG explains how the investigation was completed. This included reviewing “over 1,000 emails relating to the properties in question,” conducting six interviews, and reviewing three written responses from three individuals who chose to answer by written communications “instead of participating in an interview.” The report declares that “one individual declined to be interviewed.”

KPMG provided details relating to each of the three lands. Full details can be viewed in the report – here is a summary:

313 Bellville Road: a four-acre lot that is landlocked vacant industrial land. It went through the tax sales process and was not sold. It was vested to the Town on Jan. 21, 2013 and declared surplus on Aug. 7, 2013. It was listed for sale in December 2013. An appraisal was required but could not be found. No evidenced of council approval for the listing price or reserve bid on file. No evidence of council ratification on file.

According to the report, “There is no formalized timeframe for a) when the property is brought forward to council to be declared surplus once it is vested and b) when it is actually listed for sale after it has been declared surplus.”  

The property was advertised in January of 2014; however, the civic address was not included in the advertisement. Sale funds were received by the solicitor on Jan. 29, 2014; but the funds were not provided to the Town until January 2016.

It was purchased by 1829911 Ontario Ltd. – the lone bid offer received. The credit valuation adjustment (CVA) was $113,000 and the property sold for $6,500.

32 Oke Road: Purchased by “the former Mayor,” Gordon Schermerhorn, under a numbered company: 5006616 Ontario Ltd. for $10,100.

The lot was 30,056 sq. ft. and was declared surplus in September 2018. Two letters of interest were received for the property. The second bid was four minutes late and therefore disqualified. It was advertised in April 2019 for tender.

There was no third party appraisal done for the property. The CVA was $176,000. According to the report, “Council was verbally informed of the property sale in a closed session” and it “was not formally documented in meeting minutes.” Additionally, one of the advertisements did not comply with the Notice Policy By-law. Additionally, the land “should [have] been exempt from the Town’s Sale of Land Bylaw” due to the fact that it was partially zoned industrial and partially rural.

According to the report, “The former Mayor believed he was acting in the interest of the Town by taking care of a vacant property to regenerate property tax revenue.”

Heritage Park: 16 acres purchased by James Selkirk and sold via tender in April 2019.

The land was first tendered and cancelled a day before closing since the Town “could not timely inform all bidders with clarifications on questions asked by a local developer.” In June 2019, realtor Rogers and Trainor conducted a market appraisal of the land for $1.1 million and it was listed with the agent in July 2019. It was conditionally sold in August 2019 and the deal closed in April 2020 for $1.15 million.

“Based on review of closed meeting minutes, it was validated that the reasoning for the delay in sale closing was justified with council direction and approval,” the report states.

In response to the KPMG report, the Town of Greater Napanee released a statement on Tuesday, Jul. 27, 2021 acknowledging improvements to the process need to happen.

“The Town recognizes that its property sale process for land sales is not a perfect system and there is room for improvement,” the Town declared in a press release.

KPMG did suggested that the Town of Greater Napanee provide training to all staff and Council regarding “key by-laws,” through training new staff and providing “refresher” courses to existing staff and Council.

The Town stated it “will strongly take into consideration” the recommendation provided by KPMG to rectify the land sale procedures.

According to the KPMG report, those considerations are:

• A Procure Guide, which includes a checklist to support the details of the surplus by-law
• Update the bylaw – in order to reflect recommendations made by KPMG in the report as well as other recommendations management deems appropriate
• Pilot project – the Town is encouraged to implement a pilot program of utilizing a real estate agent for “disposition of Town properties”
• Align with the Town’s strategic priorities – KPMG indicated that “a clear direction should be provided as to the use of funds following the sale that is aligned with the Town’s strategic priorities.”

KPMG also provided a list of factors leading to non-compliance with the Land Sale By-Law, which were: “insufficient oversight and governance” regarding the land sale process; “ambiguity in the by-law in terms of roles and responsibilities, timelines, etc.;” and “insufficient checks and balances in the by-law leading to lack of accountability and ownership of tasks,” the release reads.

The properties in question were sold between January 2010 and October 2020 and weresubmitted in a report to Greater Napanee council on Jan. 26, 2021. The report “obtained additional factual information in order to better understand the circumstances that may have led to the control breakdowns relating to each of the three investigated property transactions,” the release reads.

In the overview of the report, KPMG declares that it “has not audited nor otherwise attempted to independently verify the information provided unless otherwise indicated.”

The complete KPMG Review of the Property Sales Process – Specific Properties Final Summary Report is available here.