Toronto overbilled by nearly $15 million by emergency shelter hotels: auditor

The City of Toronto was overbilled by hotel operators by nearly $15 million on its emergency program to shelter the homeless in hotels around the city over the past two years, the auditor general says in a new report.

Toronto Auditor General Beverly Romeo-Beehler says that as the city moved to rapidly expand its housing operations in hotels at the onset of the COVID-19 pandemic, it was charged by a hotel owner for things it specifically was not responsible for according to its contract but paid out the money anyway.

So far, no funds have been recovered.

Romeo-Beehler said the city was charged a three per cent "DMF" surcharge on rooms it leased in six hotels, known as a “destination marketing fee,” meant to support tourism promotion by the Greater Toronto Hotel Association.

Romeo-Beehler and her staff said they were given ever-shifting definitions of what this "DMF" charge was for, but in any event, it should not have been paid at all.

This fee paid by the city amounted to $2.4 million, plus HST between Aug. 2019 and Aug. 2021.

“When we asked SSHA staff why they paid these additional fees, they stated that the fee was a standard hotel charge in the industry,” the auditors wrote in their report.

“The contracts clearly state the price (i.e., the room rate) is all-inclusive except for taxes. "DMF" is not a tax and should not have been paid.”

Auditors found a hotel operator offered to refund the city $381,000 of the money it collected, but as of April 2022 no refund was received.

The city was also charged $5.3 million between Aug. 2019 and Aug. 2021 for “facility surcharges” relating to meal service for residents of the hotels.

But auditors found “the city is already separately charged on its room invoices for any dining facility used to provide meal service at rates established in the contract.”

In one hotel during a two-week period, auditors found the city paid $11,250 to rent space for catering staff to serve food to residents, but was also charged an additional $21,473.10 plus HST in the form of a “facility surcharge."

“Given that there is no express term in the contract to pay a ‘Facility Surcharge’, (Shelter, Support & Housing Administration) should assess what has been paid to date and take action to recover all amounts paid as far back as possible,” auditors wrote in their report.

The auditors also found a hotel operator charged the city $5.4 million plus HST for rooms in its hotels that were never occupied and the city was not responsible for according to its contract.

Altogether, the $13.2 million plus taxes spent could have housed 140 people in hotel rooms, including all of their meals and other support services for an entire year.

Toronto spent $320 million overall on hotel shelter operations in 2021.