Staff in Atherton’s building department failed to charge at least $100,000 in fees due the town for building projects, a town official revealed last week — the latest development in a matter that has roiled the town in recent weeks.
Finance Director John Johns told the City Council at its July 19 meeting that an internal audit of building department files on major construction projects turned up uncharged fees, undervalued projects, and evidence that procedures and controls were not in place or not used by staff.
A full written report on what he has dubbed “phase 2” of the internal audit is to be released in time for the Thursday, July 27, finance committee meeting, Mr. Johns said.
“It’s very clear that the building department has not been collecting all the fees it should have,” Councilman Jerry Carlson said.
Citing a crisis in the town government’s credibility, the council authorized an extensive audit to investigate the building department’s books, and called for a special meeting in the first week of August.
“Our big business in Atherton is real estate,” said resident Jim Dobbie. “The council should be representing the residents. The perception is that the building department has been favoring the developers.”
A recent count showed that Atherton had about 110 residential construction projects going on in a town of about 2,400 households. Atherton’s building department collects about $2 million a year in various fees, according to Mr. Johns. The fees pay for building department operations as well as infrastructure projects, such as road pairs, related to construction. The building fees may also be used to reimburse other town staff, such as police officers who enforce construction rules.
Emergency resolution
The building department audit was not on the meeting’s agenda, but was added by an emergency resolution unanimously passed by the council.Ordinarily, the state’s open meeting law requires at least 72 hours’ public notice of any topic a city council is to discuss, but the courts give wide latitude when it comes to determining what constitutes an emergency situation, said Jim Ewert, legal counsel for the California Newspaper Publishers Association.
Rumors have been swirling around Atherton in the wake of last month’s sudden retirement of town building official Mike Hood, and the disclosure that an investigator hired by the town was wrapping up an eight-month investigation into possible wrongdoing by building department staff.
The town’s finance director, Mr. Johns, said the internal audit he oversaw was conducted independently of the personnel investigation.
The second phase of the audit reviewed 140 permit files, Mr. Johns told the council.
“I can’t tell you in how many files fees were improperly assessed,” Mr. Johns said. “The majority (of the 140 files) appeared to be processed correctly, but there are exceptions in the population that give us pause.”
He said about six cases were discovered in which excavation fees totaling $70,000 should have been charged by the building department, but weren’t.
Excavation fees of $22 per cubic foot are triggered by grading work, such as leveling a sloping lot, or by building a swimming pool or basement, and are intended to help pay for damage to Atherton roads caused by trucks loaded with dirt.
The problems in the building department went beyond failure to charge builders excavation fees, Mr. Johns said. He found some instances when fees on remodeling projects should have been calculated based on a standard valuation of $250 per square foot, but instead were based on the property owner’s declaration of value, which was significantly lower.
He gave the example of an owner declaring that a remodeling project was worth $40,000 when, calculated on the $250-per-square-foot standard, the project’s valuation should have been $120,000.
In an example of building department procedures not being followed, Mr. Johns said he found that an employee had been informally authorized by a superior to sign permits in place of other employees.
Evidence of wrongdoing
Mr. Johns was circumspect, but made comments indicating that he had found evidence of wrongdoing by staff. The audit was done solely to find out if fees had not been properly collected, he said.“Unfortunately, as a result, we identified exceptions that suggested a pattern of inappropriate conduct,” Mr. Johns told the council. “We have found evidence that we believe is useful to the personnel investigation.”
Mr. Johns also referred to documents compiled by the auditor that “could serve as evidentiary (material).”
“We provided it to management and we’re not at liberty to disclose it because it is privileged,” he said.
Jerry Carlson asked him if anything had impeded his investigation, and Mr. Johns replied: “Yes. That is subject to the personnel investigation, and I am not at liberty to disclose it.”
The third, more expansive audit should take eight to 12 weeks, and will be conducted by Eric Spivak, who conducted the previous two phases of the building department audit, Mr. Johns said. He also said the audit would require the services of a professional engineer, and told the council he would prepare a plan outlining the scope of work for the audit for council members to review at a special council meeting to be scheduled for the first week of August.
The council had previously canceled its regular August meeting in order to take its traditional summer recess. Councilman Alan Carlson said the matter couldn’t wait until September.
“My No. 1 goal is to move this thing quickly,” he said.
The council requested audit results be ready in time for their October 18 meeting. The vote was 5-0.
Preferential treatment?
Councilwoman Kathy McKeithen said the council and the city manager for years have been thwarting her efforts to look into complaints about the building department.
In September 2003, Ms. McKeithen questioned numerous building department practices that she said amounted to preferential treatment for some residents, and offered a list of “perceived irregularities.”
Town staff was given two months to investigate, and returned to the council that November saying that nothing improper had been discovered. The majority of the then-council concurred, and on a 4-1 vote, with Ms. McKeithen opposed, affirmed the conduct of the building department and the building official, Mr. Hood.
At last week’s council meeting, Councilman Alan Carlson tried to keep the focus on the audit and on what needed to be done to fix building department procedures and restore confidence in the town government.
“I once had a law professor who said, don’t let the sideshow take over the circus. The personnel matter is the sideshow,” said Alan Carlson. “Our focus should be on what went wrong and how do we now fix it.”
“When I tried to bring this to the council couple of years ago, you led the sideshow,” Ms. McKeithen reminded Mr. Carlson. “If you’d actually let the circus in then, how much grief might have been avoided for the town?”
MEETING
A report on the recently completed audit of the Atherton building department is set to be discussed at the Thursday, July 27, Audit Committee Meeting. The committee meets at 5:30 p.m. in the conference room in the town’s administrative offices, 91 Ashfield Road. Information is available at ci.Atherton.ca.us or by calling 752-0500. Check AlmanacNews.com for an update.Key developments
•June 23: The Almanac learns from Town Attorney Marc Hynes that an investigator hired by the town had conducted an eight-month-long investigation into possible wrongdoing by Atherton building department staff.•June 30: The head of the building department staff, building official Mike Hood, retires after giving two weeks’ notice.
•July 19: Town Finance Director John Johns tells the City Council that an internal audit of building department files on major construction projects turned up $100,000 in uncharged fees, and evidence that procedures and controls were not in place or not used by staff. His full audit report will be presented at the Audit Committee meeting on July 27.
•July 20: Atherton City Attorney Marc Hynes tells the Almanac that disciplinary action may be taken against some building department employees as a result of an investigation.
