City Auditor Matthew Grady has conducted an independent review of the Development Services Department’s developer fees collection process.
The objectives of the audit were to (1) assess the internal controls over Development Services’ developer fees collections process and (2) determine to the extent possible total developer fees not collected for the period under review. The scope of the audit focused on, but was not limited to, fees related to residential development projects approved for construction between fiscal year (FY) 2019 and FY 2022.
The City Auditor’s review of Development Services’ developer fees collections process identified several significant internal control weaknesses over the process, including the absence of standard operating procedures, lack of formal training, and operational silos, all of which were exacerbated by high turnover at the leadership level. Taken as a whole, these deficiencies contributed to a dysfunctional control environment that fostered pervasive inconsistencies in the documentation of project files and allowed for the non-collection of fees.
The City Auditor was not able to determine with certainty total fees not collected, due to the lack of documentation. However, Grady estimated approximately $30,000 in Construction Plan Review fees went uncollected based on his analysis of Land Disturbance Permit fees and Construction Plan Review fees collected during the review period. A land disturbance permit is required before land disturbance activity, and after approval of the preliminary plat. Land disturbance is defined as clearing, grading or excavating that disturbs one. A construction plan review fee is required for submission of construction plans for all proposed infrastructure to be constructed for the property once preliminary plat is approved and the land is cleared.
Furthermore, although prior management at the division and department level were alerted to the issue in FY 2020, there was no evidence management heeded the alert and took corrective action at that time.
Current management has already initiated corrective action to address the issue, some of it prior to the audit, including the consolidation of both Planning and Engineering Divisions under Development Services, the transfer of all developer fee collections to Building Inspections, implementing software to bring the permitting process online, development of standard operating procedures to ensure all developer fees are collected and properly recorded prior to final project approval, and creating a more robust onboarding curriculum for engineering staff.
Moving forward, the City Auditor also recommends the Development Services director ensures the internal controls over the collection and recording of developer fees are monitored on a regular basis and commission an updated independent cost recovery study to determine the cost recovery rate of the current fee structure
The full report can be viewed on our website at www.KilleenTexas.gov/Auditor.