Duplicitous developers, a “wholly inadequate” software system and sloppy procedures appear largely to blame for more than $130,000 in uncharged fees by the Atherton Building Department, an audit shows.
The failures revealed by the audit, however, were not widespread in the department; instead they pertained to the staff’s collection of the town’s new excavation fees, said Atherton Finance Director John Johns, who has been overseeing the internal audit.
Atherton’s new excavation surcharge is a fee triggered when dirt is trucked on or off site.
Mr. Johns detailed the audit’s most current findings in a report to the Atherton Audit Committee on July 27.
The town’s building department is facing inquiries on two fronts. There is a recently completed investigator’s report on allegations of misdeeds by building department staff, and an expanded internal audit reviewing the department’s books and operations.
The building department reviews plans, issues permits and does inspections, and collects about $2 million a year in various fees.
Shortly before a surcharge on excavation was put into place in May 2005, there was a flurry of applicants trying to get permits for basements, swimming pools and the like in order to avoid the new charge of $22 per cubic yard on off-haul. Mr. Johns said 11 projects representing $134,000 in excavation surcharge fees appear to have been improperly exempted from paying the fees.
“The department exceeded the discretion it had in letting people off the hook for the excavation surcharge,” he said.
The surcharge is used to fund road repair projects. Atherton charges all builders a road impact fee, but the City Council chose to impose an excavation surcharge after a study found that trucks loaded with dirt do exponentially more damage to the streets than do passenger vehicles.
However, town employees weren’t entirely to blame. Mr. Johns noted that in two cases, applicants appeared to have pulled a “bait and switch” on the town, applying for a simple excavation permit for a swimming pool, for example, then using the permit to build a much larger basement.
“There appeared to be some intent on the part of the property owner to get the permit and use it (for something else),” Mr. Johns said.
A real cause for concern was that four of the 11 permits were submitted by a single contractor, and represented half of the $134,000 in uncollected excavation fees, he said. Other applications were accepted even though they were incomplete, or were accepted on or after the date the surcharge became effective, he found.
The smallest amount that should have been paid was $2,904 for a swimming pool, Mr. Johns said. The largest was a basement project that should have been charged $30,932, he said.
The developers with the questionable permits eventually may find a bill in the mail. City Attorney Marc Hynes is going to determine whether the fees can still be collected, Mr. Johns said.
Remodeling
Another area initially of concern to auditors was remodeling projects that appeared to be undervalued. Some remodeling project fees that should have been based on the standard valuation of $250 per square foot instead relied on the property owner’s declaration of the project’s value, said Mr. Johns.“We thought we had a real issue here,” he said. As it turns out, having combed through half of the 105 files he targeted for review, he found that fees totaling only $9,900 were not charged, he said.
Councilwoman Kathy McKeithen, one of the two council members who sit on the Audit Committee, said the issue of project valuation has long been a concern to her. She advocates using either the standard basis of $250 per square foot, or receipts provided by the property owner showing the actual value of the work done.
“I’ve said for years, as far as valuation is concerned, that we need equity, we need a process that’s valid and equitable,” Ms. McKeithen said. “I was told that it doesn’t matter, that as long as the Building Department pays for itself, we don’t have to look at that. I’ve been disgusted by that.”
‘Inadequate’ system
Mr. Johns focused much of his discussion at the July 27 meeting on deficiencies in the Building Department’s financial controls and procedures, deficiencies that he blamed for the uncollected fees.Record-keeping is so inadequate that in reviewing 185 project files, auditors found that only 68 of them had enough information to verify the permit fees. All the others required a time-consuming examination of physical records, he said. He blamed the department’s antiquated record keeping system. “(Calling it) software would be a generous term,” he said.
The staff has been using printed tables to calculate fees rather than computer-based algorithms, and lower-level staff was informally authorized to sign off on plans in place of other staff members. Also, plan-checkers have not been independently recalculating fees tabulated by front-counter staff, a procedure that former Building Official Mike Hood had told him was in place and working efficiently, Mr. Johns said.
Mr. Hood retired June 30 after nearly 11 years with the town.
Mr. Johns came up with a number of recommendations that he said would improve accountability, such as a new database for tracking permits and monthly reconciliation of permits and fees collected.
Audit committee members expressed concerns about the security of building department files and their vulnerability to tampering. Ms. McKeithen said she was concerned that employees have unauthorized access to the building department on weekends and that currently, there is no way to prevent people from making entries into the records system who don’t have the authority to do so. She said she knew one employee came in on a Saturday after having been instructed not to enter outside of regular business hours.
Mr. Johns assured the committee that basic network security and physical security is in place.
