Building Mechanical Electrical and Plumbing Permit Fees(9 MJAMIBEACH
BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
TO:
VIA:
FROM:
DATE:
AUDIT:
PERIOD:
Jimmy L. Morales, City Manager trb.IJ. -tlJJ ~
John Woodruff, Budget and Performan9e I_Tprovement Director v~v
James J. Sutter, Internal Auditor;:',/~
January 24, 2014
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
October 1, 2011 through September 30, 2013
This report reflects the results of a regularly scheduled audit of fees charged by the City's
Building Department and collected for Mechanical, Electrical, and Plumbing Permits (M.E.P.)
between October 1, 2011 and September 30, 2013.
INTRODUCTION
A permit is the document that issues consent to move forward on a building project. Qualified
professionals examine the impact a project is likely to have on available resources and
infrastructure, while ensuring compliance to established construction standards. The permitting
process begins with the review of plans. Then a number of inspections are performed by City
Inspectors to ensure compliance to the scope of work approved through the plan review, as well
as to ensure that work is performed in accordance to Building Code requirements. The process
then finalizes with the issuance of a Certificate of Occupancy (C.O.) or a Certificate of
Completion (C.C.) once all work is completed and all inspections are passed and approved.
The Building Department records all permit and certificate information (inspection results, fees,
violations, etc.) in the Permits Plus System, which is expected to be upgraded during the
2013/14 fiscal year to Accela Automation. Once customers have obtained all final inspections
on its permits and sub-permits attached to their master permit or as stand alone permits, they
are to submit a completed Certificate of Occupancy/Completion Request Form to the Building
Department. When approved and all fees paid, the certificate's status in the Permits Plus
System is changed from "approved" to "final" for temporary certificates, and from "applied" to
"approved" for C.O. (s) and C.C.(s) signifying that the project is finished and the permitting
process is complete.
The corresponding customer payments can be received by one of the Finance Department's
cashiers located on the first floor of 1700 Meridian Avenue or City Hall, at one of the designated
kiosks in City Hall or via the internet through Velocity Hall. The payments are recorded in the
Permits Plus System and are independently reconciled to the monies received before the
entries are posted to the applicable general ledger accounts in the City's Financial System.
This audit focuses on Trade or sub-permits, also commonly known as M.E.P.s, which stands for
Mechanical, Electrical, and Plumbing permits; and their corresponding fees assessed by the
Building Department. Fees associated to these permits are found on sections 14-63, 14-64,
and 14-65 of Appendix A of the City Code. Such reasonable permit fees are authorized under
Section 553.80 of the Florida Statutes (F.S.), as well as in section 109 of the Florida Building
We are committed to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community.
Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
Code. These fees are established to cover incurred costs by the City for carrying out its
responsibilities in enforcing the Florida Building Code.
In 2009, the City utilized a consultant, MAXIMUS Consulting Services, Inc. (Maximus), to
analyze the City's costs of providing the services associated with the different permit types, and
compare them to similar fees charged by other municipalities and Miami-Dade County. As a
result, a different fee structure was recommended across the board subjected to additional
increases or decreases where necessary, to better reflect the level of effort associated with the
permitting aspect of the Building Development process. Such changes were approved January
13, 2010 through the approval of Ordinance No. 2010-3670 with an effective date of February 1,
2010.
Subsequent to implementation, a series of refinements to such fee structure were identified in
trying to clarify and bring equity to certain types of permit applications. Such refinements were
approved and implemented with the passage of Ordinance No. 2011-3732 on September 14,
2011, with an effective date of October 1, 2011. Not all fees established under Ordinance No.
2010-3670 were affected by these refinements.
Additional refinements were identified in the course of daily operations that were implemented
later on September 2ih, 2012 by the adoption of Ordinance No. 2012-3776, with an effective
date of October 151h, 2012. Once again, not all fees and/or provisions established in Ordinance
No. 2010-3670 were affected by the new refinements. No additional changes or refinements
have been made effective since.
OVERALL OPINION
Enforcing the building code in reference to building trade permits or sub-permits, also known as
M.E.P. permits are part of the responsibilities of the Building Department. Although fees
assessed for these permits are significantly smaller than those assessed for construction
projects, they may vary depending on the scope of work and project size. Responsibilities of
the Building Department not only include plan reviews, approvals, and corresponding
inspections, but also the calculation and assessment of the applicable fees. The focus of our
audit is compliance to rules and regulations and the accuracy of assessed fees.
Results from testing to our randomly selected sample of electrical, mechanical, and plumbing
permits helped to verify the existence of adequate controls and segregation of duties with
respect to the billing and payment of permit fees, as it involves two departments, the Building
Department and the Finance Department. It also helped to verify that amounts paid for the
sampled permits were correctly recorded on the City's financial system, as intended. However,
there were areas identified in need of attention and/or corrective action that have been listed as
follows:
1. Multiple changes to fee structure in short periods of time provided little time for proper
implementation, testing, and personnel training resulting in incorrect and/or inconsistent
fee calculations and assessments.
2. Having different fee structure changes with different effective dates and applicability has
contributed to increased complexity and added challenges to software scripting.
3. Permit application formatting has not been updated to reflect required system field
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
information for proper permit fee calculation and assessment under current fee
structures.
4. Mechanical permit fees assessed to permit number BM120064 were posted to the wrong
account.
5. Descriptive narratives entered to Permits Plus by department personnel were often
incomplete and/or insufficient making them difficult to understand as well as verify.
6. Refunds due to permit holders have not been processed in a timely manner.
7. Software limitations continue to contribute to inefficiencies resulting in an adverse impact
on operations as well as the administration of the same.
Additional information and details regarding these areas can be found in the "Findings,
Recommendations, and Management Responses" section on this report.
To conclude, we want to express our appreciation to the Building Department administration
and staff for their assistance and cooperation throughout the course of the audit. Also, we want
to thank them for facilitating all requested information promptly allowing for a smooth audit
process.
PURPOSE
The purpose of this audit is to verify the Building Department's compliance with the relevant City
Code, State Statutes and Florida Building Code sections; whether proper internal controls have
been implemented and sufficient documentation maintained; whether correct fees were charged
based on the corresponding permit application information and consistent Permits Plus System
entries; and whether all tested payments received were accurately recorded in the City's
financial system.
SCOPE
A total of seventy-one (28 electrical, 22 mechanical, and 21 plumbing) permits were randomly
selected from a report generated by the Building Permit Information Analyst II, which was relied
upon as being complete and accurate. The analysis performed on these sampled permits and
their corresponding payments were designed to satisfy the following audit scope:
1. Confirm that comprehensive policies and procedures exist, are known and are followed by
staff.
2. Confirm that the money receives is correctly recorded in the in the City's financial system.
3. Confirmed that scope of work is correctly approved by the building department.
4. Confirm that all permit requirements are met per the City Code.
5. Confirm that the correct amount is being calculated for the permit fees, in accordance with
building code.
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
6. Confirm that the internal control process is adequate and that a proper segregation of
duties exists.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding: Multiple changes to the fee structure in short periods of time provided little time
for proper implementation, testing, and personnel training resulting in incorrect and/or
inconsistent fee calculations and assessments.
As stated in the introduction section of this report, the building permit fee structure,
including fees assessed for Mechanical, Electrical, and Plumbing Permits, underwent a
major overhaul in 2010, with additional refinements in 2011 and 2012. Meanwhile, the
time allowed between the approval of the changes and their effective dates was
significantly short. Therefore, proper system testing and employee training did not take
place to ensure a smooth transition to the new fee structure.
Changing the fee structure requires software scripting, as well as training for employees
to get familiar with new requirements and information needed to properly calculate and
assess the applicable fees for every permit type and scope of work. Both of these steps
require time prior to live implementation. Information Technology personnel need time to
follow control procedures established by their department prior to getting authorized to
initiate any change to the software system. Then time is needed to make those changes
through software scripting. Once done, adequate time should be taken to significantly
test the accuracy and effectiveness of the software to properly accommodate and
compute the new changes prior to a final production implementation. Concurrently,
proper employee training should take place, which could require multiple scheduling
times, to minimize any impact on service level and daily department operations.
Not having the time to properly prepare for and test the new fee structure, the different
components, and the effective dates of the changes made prior to implementation
resulted in erroneously charging permit fees. Amount of undercharged fees observed in
our sample of 71 permits totaled $3,347.
Recommendation(s):
Considering that permit fee structures and/or rates are reviewed at least annually,
adequate planning and consideration should be given to allow sufficient time for
implementing, testing, and provide sufficient training to employees before changes
become effective and are placed into production. Proposed changes should be brought
to the Mayor and Commission with sufficient time in advance to allow a smooth transition
and implementation of the new changes, once approved. This will help to reduce
confusion, system glitches, loopholes etc. that ultimately adversely affect the
departments operations, as well as the customers.
Management Response(s):
Any proposed fee changes will be brought to the Mayor and Commission with sufficient
time in advance to allow a smooth transition and implementation of the new changes,
once approved.
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
2. Finding: Having different fee structure changes with different effective dates and
applicability has contributed to increased complexity and added challenges to software
scripting.
Multiple fields have been created on Permits Plus making the screens look crowded and
confusing to users. Those different fields have been added in order to accommodate
multiple fee amounts and fee structures in effect concurrently depending on permit
application date, master building permit application date, and scope of work. As a result,
different color scheme fields were added to the software screens to differentiate
applicable fees. Blue font was used for new fee items required to calculate applicable
permit fees, green was used to identify old fee items that may still be applicable
depending on the master permit application date, while black was used for those fee
items not affected by the different fee structure changes.
In addition, anyone including, but not limited to, permit clerks would have to refer to at
least three different ordinances in order to verify the accuracy of the fees being
assessed, as well as the required information to be inputted into the system for proper
calculation depending on the date of application. This provides opportunities for
confusion and inadvertent mistakes that can result in miscalculations and inaccurate
charges.
Recommendation(s):
In order to prevent similar scenarios from reoccurring, the Building Department should
recommend to the Mayor and Commission to make any changes and/or updates to
permit fees applicable to all permits applied for after the effective date without regard to
application date of prior permits still open. This way all new permits would be bound by
only one fee rate and structure. This will also help to maintain fees in line with the
current level of effort exercised by the department in enforcing the Building Code.
Management Response(s):
The Building Department is currently preparing to recommend to the Mayor and City
Commission the implementation of a new fee ordinance in which all permits applied for
after the effective date be evaluated and fees assessed accordingly as prescribed in
Appendix A of the City Code or the minimum permit fee, whichever is greater. All new
permits will be bound to the new proposed fee rate and structure as stated in the
recommendation. It is anticipated that the new fee ordinance will be considered by the
City Commission either in February or March, 2014.
3. Finding: Permit application formatting has not been updated to reflect required system
field information for proper permit fee calculation and assessment under current fee
structures.
Despite changes to fee structures and enhancements, permit applications have not been
reformatted to better correlate to the applicable fee structure to ensure that
corresponding information needed for the accurate calculation of permit fees is provided.
Properly formatting permit applications will further reduce ambiguities and incomplete
information often provided, not by architects or contractors, but by third party contracted
individuals in charge of the project's permitting process.
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
Recommendation(s):
Permit applications should be revised to ensure correlation and inclusion of all required
information to accurately and consistently calculate and assess corresponding fees.
Such revision should consider the different fee structures and scope of work for the
different sub-permits.
Management Response(s):
We are in agreement with this recommendation. The Building Department is currently
preparing to recommend to the Mayor and City Commission the implementation of a new
fee ordinance. The revised fee structure will simplify the fee calculations to provide for a
uniform calculation for the different sub-permits.
4. Finding: Mechanical permit fees assessed to permit number BM120064 were posted to
the wrong account.
Due to the distinctive State regulation exercised on Elevator Permits delegated to the
City through Resolution No. 2000-23986, the Building Department has been recording
revenues generated from the assessment of elevator permit fees to a different account
(Acct. # 011-8000-32260) separate from the regular building permit fees account used
for all other permits. However, during our testing we observed that a total of $610.00
corresponding to elevator fees had not been posted to the correct account. Upon
notification to the Building Department's Quality Assurance Coordinator of our finding, a
journal entry was prepared to reclassify the revenues to the proper account. No further
action is needed regarding this finding.
Recommendation(s):
Although no additional action is required, and this error was not frequently or widely
found during out testing, the Building Department should consider establishing a review
process in their daily or monthly reconciliations to ensure that revenues are posted to the
proper accounts.
Management Response(s):
The Building Department currently makes corrections on a monthly basis through journal
entries when errors are discovered when reconciling GL accounts at the end of each
month or quarter. We will continue to conduct reconciliations to ensure that revenues
are posted to the proper accounts.
5. Finding: Descriptive narratives entered into Permits Plus by department personnel were
often incomplete and/or insufficient making them hard to understand as well as verify.
Reviewed system notes entered by staff were often observed to be incomplete. Uses of
acronyms and abbreviations were also observed. No detailed explanations were
observed in instances where system entries deviated or were different from information
provided on permit applications. Not providing sufficient narratives and references on
the system diminishes the verifiability and audit trails of actions and fee assessments in
relation to the permit, particularly when entries on the system differ from information
provided on the permit application.
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
Recommendation(s):
It should be required from all Building Department personnel to properly and sufficiently
document actions, objections, references, etc. on the system software. Such notes
should be legible and sufficiently complete for anyone to be able to read and understand
them. This should provide operational efficiencies by not requiring employees accessing
permit information to perform additional research and inquiries to try to understand
actions and notations taken in relation to the permit. In addition it will enhance audit
trails.
Correcting application information by plan reviewers, as they find differences between
information provided on the permit applications and the plans examined, is not unusual.
However, such changes should be sufficiently documented and substantiated in the
system and recommended by the plan reviewers. Then such recommended changes
should be reviewed and approved by supervisors prior to effectuating them. Providing
references to plan reviews and additional actions or communications as needed, should
be required for better verifiability and audit trails.
Management Response:
Building Department personnel will be instructed to continue providing relevant detailed
notes in the Permits Plus System.
6. Finding: Refunds due to permit holders have not been processed timely.
Refunds pending for relatively small amounts ranging in the hundreds were observed for
Electrical Permits in which fire fees had been assessed for low voltage equipment in
error. Upon correcting the error and updating the permits, a refund (negative balance)
was created in those permits that were updated after the correction. However, no efforts
have been done to process and expedite those refunds. As a result, negative balances
continue to be displayed on the Permit Plus system.
Recommendation(s):
The Building Department should establish and document a process that includes a
review of any permit for which a credit or refund is owed. Once the permit is review and
the refund confirmed as valid, pertinent steps should be taken to process the refund as
soon as possible. In addition, if a system glitch or for any other reason is found resulting
in overcharges or refunds owed to permit holders, an update should be performed for all
applicable permits affected and any refunds should be processed as soon as possible.
For example, this should be done for those applicable electrical permits for low voltage
equipment installed to which fire fees were assessed in error. A report listing all the
affected permits and corresponding refunds should be created in order to further
document and better assess the extent and magnitude of corrective actions needed.
Management Response(s):
We are in agreement with this recommendation. The Building Department's staff will
develop a report for credit balances on permit records. In addition, we will develop a
review process and refund process if the review deems one is warranted. If the review
reveals that a correction is required to the permitting system, an update will be
performed as soon as possible.
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Internal Audit Report
Building Mechanical, Electrical, and Plumbing (M.E.P.) Permit Fees
January 24, 2014
7. Finding: Software limitations continue to contribute to inefficiencies resulting in an
adverse impact on the operations as well as the administration of the same.
Software limitations that have been identified over time through different means continue
to pose operational and administrative challenges for the Department. Some of the
challenges include, but are not limited to:
• Inability to generate reports from the system, requiring additional software and
report customization and writing to extract information.
• Inability to synchronize with the City's financial system, thus requiring additional
reconciliations using reports generated from different sources as referenced
above.
• Poor controls and audit trails
• Poor detail lists and fee itemizations
Although The Building Department is in the process of changing and implementing the
use of a new software system, no definitive date has been assigned for the complete
and full implementation of the software. It is the Department's expectation that the new
software would appropriately address the current system's shortcomings.
Recommendation(s):
Sufficient testing and parallel implementation should be considered to ensure the
efficient and effective operability of the new software system. In addition, customized
case testing should be exercised to verify the effectiveness in addressing prior system
shortcomings. Lastly, the implementation process should be expedited as much as
possible in order to mitigate possible inefficiencies and risks that continue to be present
by prolonging, whether directly or indirectly, the use of the current system.
Management Response:
We are in agreement with this recommendation. However, the City administration is
currently reassessing the implementation of the new software system due to existing
challenges with current operations and users.
EXIT CONFERENCE
An exit meeting was held on January 22, 2014 to discuss the audit report and to solicit
management responses noted above. Attendees included Building Department Director
Mariano Fernandez, Deputy Director Stephen Scott, Administrative Services Manager Raquel
Aieta, Quality Control Coordinator Linda Blanco, Internal Auditor James Sutter, and Auditor
Fidel Miranda. Management responses were received prior to this meeting and were included
therein. All parties were in agreement with the contents of this report.
(Audit performed by Fidel Miranda, Auditor)
F:\OBPI\$AUD\INTERNAL AUDIT FILES\DOC12-13\REPORTS-FINAL\BUILDING DEPT M.E.P. PERMIT FEES.docx
cc: Joe Jimenez, Assistant City Manager
Mariano Fernandez, Building Department Director
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