HomeMy WebLinkAbout1516-1 CDD Review of selected business software processes (final 1-5-17)(web format)Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Community Development Department
– Review of Selected Business Software Processes
To request this information in an alternate format, please call (541) 330-4674 or send email to David.Givans@Deschutes.org
Deschutes County,
Oregon
David Givans, CPA, CIA, CGMA
Deschutes County Internal Auditor
PO Box 6005
1300 NW Wall St, Suite 200
Bend, OR 97708-6005
(541) 330-4674
David.Givans@Deschutes.org
Audit committee:
Lindsey Lombard, Chair - Public member
John Barnett - Public member
Tom Linhares - Public member
Daryl Parrish - Public member
Michael Shadrach - Public member
Wayne Yeatman - Public member
Anthony DeBone, County Commissioner
Nancy Blankenship, County Clerk
Dan Despotopulos, Fair & Expo Director
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
TABLE OF
CONTENTS:
EXECUTIVE SUMMARY
1. INTRODUCTION
1.1. Objectives and Scope ………………….……………………………...…… 1-2
1.2. Methodology …………………………………….…………………...……...… 2
2. BACKGROUND ………………………………………………………………… 3-5
3. FINDINGS
3.1. Prior recommendations follow-up ……..……………………………..……… 6
3.2. Compliance with state regulations ………………………………………... 6-8
3.3. Fiscal observations ……………………………………………………….. 9-15
3.4. Performance measures …..……………………………………………... 15-16
3.5. Software application controls ……………………………………..……. 16-17
4. MANAGEMENT RESPONSES
4.1. Community Development Department …………………………..… 18-22
4.2. Road Department ………………………………………..…………... 22-23
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
EXECUTIVE SUMMARY
Recommendations
include:
developing written
procedures for
application of indirects
and overhead;
improving upcoming
reserve policy;
establishing review for
updating fees in the
permit system;
working to address
issues brought about by
deferred collection of
SDCs;
passing through SDC
credit card costs to the
other organization;
reviewing the accounting
mapped to permits;
adding data for
presented performance
measures;
establishing and
maintaining audit log
management activities;
and
creating and deploying
password policies in
alignment with County
policy.
CDD–Review of Selected Business Software Processes
This audit reviews selected areas of the Community Development Department’s (CDD) new
software systems for permitting.
What was found
The lack of segment/divisional accounting hampers effective management of department and
provides insufficient information on use of reserves during the last economic downturn. The
department has some accounting segregated for building and electrical segments but is not able
to determine the full cost of providing those services, since they have not developed a process to
accumulate and allocate actual administrative overhead and coordinated service overhead to
those segments.
The department has not established sufficient written operating and accounting policies and
procedures over permit software system. This is especially true of areas where the department
has developed the configuration (planning and code enforcement). Application of CDD permit
fees and system development charges should receive additional oversight as it affected the
quality of permit fee calculations in the permit processing system.
County SDC collection could be improved. The permit software system does not currently allow
the County to enter the anticipated County SDC on permit application, as it will result in a hold on
necessary inspections. This makes the process inefficient and difficult to provide visibility to the
anticipated SDC with contractors and property owners (especially if they change during the
period). Credit card fees incurred on SDC’s collected are an impact to department and CDD has
not had a way to offset the costs incurred.
The accounting setup for the fee schedule in the software system requires additional review.
These are established by staff and are not routinely reviewed by someone not involved with the
permit process.
CDD has substantially improved the nature and number of performance measures, but could
include more actual data, trends, and anticipated benchmarks.
Within the permit software system, password policies can be strengthened as well monitoring
and oversight of audit logs.
Deschutes County Internal Audit
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1. INTRODUCTION
Audit Authority:
The Deschutes County Audit Committee authorized the review of the Community Development Department’s
(CDD) new software systems for permitting. The system is hosted by the State for those jurisdictions that
would like to make use of it. The internal audit was identified in the Internal Audit Program Work Plan for FY
16.
1.1 OBJECTIVES and SCOPE
Audit
objectives
limit and specify the
audit work to be
performed.
Objectives:
The audit objectives include a selective review of business systems on implementation of new permit software
system (Accela) with the following identified areas:
1) Assess and evaluate implemented systems, workflows, internal controls, accounting and reporting.
2) Review for opportunities to improve and make more efficient. Include review of operation of e-
permitting system, which provides customers online access to apply for permits.
a) Review of selected general and application controls for new software. These would include:
i) reviewing user security and access settings;
ii) reviewing for potential impacts to fiscal controls; and
iii) reviewing audit trail within software system, if applicable.
3) Test the systems application of current fee schedule and use by permit technicians and e -permitting
process
4) Be aware of any issues with compliance with federal and state regulations or requirements; and County
Code and/or policies, as may be applicable.
5) Be aware of any issues with compliance with federal and state regulations and requirements, as may be
applicable.
Scope:
This audit work is focused on Community Development county operations (not contracted services performed
for Sisters and Redmond) as of July 2015. The internal audit was started in July 2015 and was carried out
intermittently through October 2016. Historical information was utilized as necessary, however, additional
historical information was reviewed where it was necessary to provide c ontext. The new permitting system
(Accela) was implemented 10/1/2013. Internal audit looked at permit fee calculations underlying permit fees
from July 2015 through March 2016.
The significant laws, regulations and guidance identified for these audit objectives included ORS 294, 455, and
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
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479 as well as OAR 918. The review did not address or inquire about all business operations.
1.2 METHODOLOGY
Audit
procedures
outline the steps
taken to address the
audit objectives
Audit procedures included:
Interviews and observation of employees, assistance from staff, and other procedures as deemed
necessary.
Analyze trends in fiscal operations.
System review and analyses including:
o inquiry and walkthroughs for operation of system;
o data validity testing of selected system attributes;
o review of implementation, controls and reports;
o tracing of accounting activity (revenues and expenditures);
o analyses of user security;
o inquiry of operation of system;
o selected data collection and analyses; and
o recalculation of selected permit amounts with current fee schedule.
Review of statutory requirements relevant to objectives.
Address status of any outstanding recommendations from prior internal audits.
Fees selected for recalculation were randomly selected from those generated for the period July 2015 to
March 2016. The audit chose to employ a random sample approach to gain an understanding of whether the
permits system was effectively calculating permit costs. The attribute sampling methodology used a random
sample of sixty-four permits designed to yield 95% confidence and 10% precision ( with an anticipated error
rate of 3% we could have 2 errors and think the system was operating as designed). There were 3,868
permits in the total population. As such, not all permits fees were tested. The testing did not asses s whether
all fees were assessed.
We conducted this performance audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
(2011 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.)
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
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2. BACKGROUND
TABLE I
Permit software
costs
GRAPH 1
Trend in CDD
Revenues
(in millions) and
Count of total
building permits
(in thousands)
PERMITTING SOFTWARE (Accela)
CDD, in FY 2013, agreed to purchase and move to the State’s permitting software (developed by Accela). The
system is hosted by the State and configured for building and electrical permits. The software allows
customers to purchase permits electronically. The State also has other Counties across the state using this
software platform and receives a portion of permit fees to partially support the system . Deschutes County was
also able to configure the system to address planning and code enforcement divisions.
Description Amount
Initial purchase:
License
$ 63,891
Implementation and training 139,675
Total initial purchase costs $ 203,566
Initial annual maintenance*:
Maintenance and support $ 14,198
Hosting 8,874
Total annual costs $ 23,072
* Escalates at 5% per year
REVENUES, EXPENDITURES AND PERMIT ACTIVITY
CDD revenues and permit activity experienced a significant decline starting in 2007. Starting in 2015, the
department was starting to see the permit activity improve.
Source: County financial system (HTE)(excludes beginning working capital and general fund transfers)
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GRAPH 2
CDD revenues
over(under)
expenditures
(estimated)
compared to
transfers of funds
DIAGRAM 1
CDD positive /
negative revenues to
expenditures
(estimated) by
segment
and building permits information provided by CDD
As indicated in Graph 1, the revenues and permit activities are recovering from the 2011 -2012 lows.
In Graph 2, there was nearly twelve million dollars infused from reserves and the general fund to sustain the
department during the downturn. Fifty-seven percent of these transfers were from the general fund. In 2015,
the department was able to transfer some monies to back to reserves. In FY 2017’s budget, there are no
general fund transfers being proposed.
Note: includes estimated overhead allocations.
Net revenues to expenditures are measured by the revenues less expenditures less an estimated overhead
allocation. This kind of analysis is described further in the report. The Department is looking at fee increases
and modification to contracts to help make sure that overall activity is positive. The Department’s reserve
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GRAPH 3
Trend in budgeted
FTE by fiscal year
funds were depleted during the downturn and are now being rebuilt. Their recent three years through 201 5
have put them in the position of start rebuilding reserves.
CDD in 2015 is a much different department in terms of headcount. A lower level of FTE has resulted, partly,
from permit processes utilizing new technology and hiring practices. That is why the 2015 permit count levels,
which are similar to the level of 2008, are actually starting to yield positive results.
3. FINDINGS
No significant deficiencies were found in this audit. A significant deficiency is defined as an internal control
deficiency that could adversely affect the entity’s ability to initiate, record, process, and report financial data
consistent with the assertions of management in the financial statements. The findings noted were primarily
compliance and efficiency matters.
Audit findings result from incidents of non-compliance with stated procedures and/or departures from prudent
operation. The findings are, by nature, subjective. The audit disclosed certain policies, procedures and
practices that could be improved. The audit was neither designed nor intended to be a detailed study of every
relevant system, procedure or transaction. Accordingly, the opportunities for improvement presented in the
report may not be all-inclusive of areas where improvement may be needed and does not replace efforts
needed to design an effective system of internal control.
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3.1 Prior recommendations follow-up
One of the two outstanding recommendations addressed during audit.
Two recommendations from an internal audit issued in 2008 (#06/07-7 Community Development Department –
Review of Business Practices Over Revenue) were followed up on. The status of work these
recommendations and managements comments are indicated below.
Completed - It is recommended the department document the host of assumptions and financial records and
commitments so that there is a clear path of what will happen on into the future. It is recommended the
Department consider involving Finance and Property management earlier on the process as they develop and
structure financial arrangements for real property.
Department comments: CDD researched and documented past and current financial transactions
related to the Newberry Neighborhood transactions.
Underway - It is recommended the department consider developing a policy on the creation and use of
reserves.
Department comments: The department’s management analyst is researching industry standards and
reviewing past practices and has started development of a policy regarding the creation and use of
reserves.
Internal Auditor comments: In a recent meeting with the department, it is clear the department is
working on addressing this recommendation and has made progress. As noted below in the findings,
additional information and recommendations are presented on reserves to assist the department in this
work.
3.2 Compliance with state regulations
Discreet accounting and segregation of building, electrical and enforcement segments
is required.
The County has some accounting segregated for building and electrical segments but is not able to determine
the full cost of providing those services, since they have not developed a process to accumulate and allocate
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TABLE II
Summary of
estimated building
and electrical
segment revenues
under expenditures
and estimated use
of transferred funds
(fiscal years 2008-
2015)
actual administrative overhead and coordinated service overhead to those segments.
By state statute and administrative rule (ORS 455, ORS 479, OAR 918), the County must separately account
for building, electrical and associated enforcement activity. The regulations also call for the establishment of
policies and procedures governing how overhead costs are allocated to these segments. Any net positive
activity is supposed to be sustained or reserved in these areas to assure the continued provision of services
and in support of the fees being charged to customers.
As noted previously in Graph 2, from 2008 through 2014 (it is estimated) the department could not cover all of
its costs. There has been insufficient accounting performed to identify the extent of net positive or net negative
activity for the building and electrical segments. Table II (below) estimates the extent building and electrical
segments have not restored monies transferred from department reserves and the general fund as of June
2015. The estimates are derived from assumptions to allocate costs from administrative overhead,
coordinated services and code enforcement using Department information.
Building and electrical segments estimated net cost
for fiscal years 2008-2015:
Building segment* $( 1,830,000)
Electrical segment* ( 650,000)
Code enforcement division** ( 220,000)
Total estimated cost for building and electrical
segments for fiscal years 2008-2015
$( 2,700,000)
Estimated transfers of funds for FY 2008-2015 to sustain
these segments
2,320,000
Net estimated unrecovered reserves at 6/2015
for building and electrical
$ (380,000)
* Segment net activity reduced for estimated overhead (administrative).
** Code enforcement allocated to building and electrical segments based on department’s estimated
composition of code complaints.
These estimates indicate the building and electrical segments have nearly recovered from the funds utilized
during the recession. These numbers are shown for illustrative purposes based upon departmental
information. Once reserves have been recovered, the segments should be in the position to start rebuilding
reserve/contingency funds.
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In the absence
of additional
accounting, it
is difficult to assess
the cost of these
segments and how to
effectively manage
those segments in a
climate where there
could be economic
downturns/upturns.
The department has not established sufficient accounting systems and structure to apply actual overhead
allocations as it does for budgetary purposes. The department has not established how the code enforcement
division should be allocated to building and electrical activities. The County has not required the department
restore any general fund resources provided during the recession.
The County may not be in a position to sustain these segments to the level it did in the last economic
downturn. This accounting information is critical in informing the department on segment and division
performance.
It is recommended that CDD develop an accounting system and written procedures to provide actual
segment/division accounting after application of indirects and overhead. This should include
documentation that addresses overhead allocation procedures for administrative, coordinated service and
code compliance costs, as applicable.
Department status:
Effective 10/1/16, CDD is allocating administrative overhead to the various direct service divisions within
CDD. It is the intent for a written procedure to be completed by the end of December 2016. The draft
overhead methodology policy will be prepared for January 2017 discussion.
It is further recommended for the Department to consider within their upcoming reserve policy (see
prior recommendation section) a process to identify the extent of carryover funds from the building,
electrical segments that should be reserved or held in contingency for the next year.
It is recommended the department develop written accounting procedures to identify to what
extent there are reserve/contingency funds for the building and electrical segments as required
by statute.
It is recommended the reserve/contingency funds might be distinguished between amounts
needed to fulfill outstanding permits and those amounts that might cushion divisional
operations in future economic downturns.
It is recommended the reserve policy include language indicating the triggers for evaluating how
much reserves are needed, when to access and coordination with fee setting.
Department status:
These items will be noted in our draft reserve policies for discussion in January 2017.
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3.3 Fiscal observations
A number of
County
departments
allocate overhead
among their divisions
and programs to
understand what
those divisions cost
to operate.
The lack of segment/divisional accounting hampers effective management of
department.
As previously discussed, the Community Development Department has discreet segments and divisions with
unique fiscal requirements that do not receive a full accounting of costs. Their budgetary cost allocations are
not also being used to address actual operational results.
CDD’s building and electrical segments require separate accounting so their results can be dedicated to those
efforts (OAR 918). Federal guidance through the “Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards” provides requirements for applying indirect costs. Referred to as the
“Super Circular”, this guidance is referenced in federal, state and grant requirements and provides some
meaningful criteria for allocating costs.
The department provides budgetary analyses with anticipated allocations to segments/divisions but does not
carry those through to actual results. The allocation methodology has not been reviewed in some time and it is
not clear why the department has not established methodology to allocate actual expenses.
During the recent recession, the Department exhausted $5 million of established reserves and $6.8 million of
general fund monies. The lack of divisional accounting makes it unclear the level and extent of
segment/divisional use of transferred funds.
As previously discussed, in the absence of accounting for fiscal activity by segment/division, the department
may not be able to effectively comply with state statute for building and electrical segments. It also has
inadequate information to understand the net contribution or cost from its segments/divisions. This could
affect their ability to assess appropriate fees to recover costs and establish appropriate contingency and
reserves.
As previously recommended, it is recommended for CDD to review and further develop their allocation
method for overhead costs so it can be applied and develop and assess segment/divisional financial
activity.
It is recommended CDD develop a written cost allocation plan for their system for allocating
overhead costs. They should consider having this allocation plan follow the “super circular”
guidance.
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Department status:
Agreed – draft to be ready for discussion January 2017.
Department has not established sufficient operating policies and procedures over
permit software system and accounting.
Department has certain software documentation , provided by the state for operation of the software, but has
not developed documentation of their own policies and procedures. This is especially true of areas where the
department has developed the configuration (planning and code enforcement). The department has not
developed training aides specific to department operations.
Some accounting areas noted that appear to be needing additional development include:
Permit activity periodically posts to deferred liability accounts for prepaid hearing fees and for monies
received in error for disbursement. Staff do not reconcile these clearing accounts and assure that these
accounts are clearing in a timely manner.
Transfers of permit dollars between permits are not documented in the system to be able to track where
the money has flowed.
Staff frequently utilize permit fees from prior period schedules based on the date of permit application.
The nature of the procedures and variances to these vary by permit and can be complicated.
Documentation is important to train, develop appropriate controls, and maintain adequate oversight of the
systems. Any shortcomings in the system can be identified and workarounds should be developed. Clearing
accounts created by activity should be periodically reconciled. There should be sufficient controls over monies
moved between permits to make sure monies are not used for another customer or party. How permit fee
schedules are utilized can vary based on circumstances and should be documented, including when to use
prior fee schedules and when more than one fee schedule can be used on a permit.
It has been noted by Finance, that the department routinely has some issues balancing activity due to
reversals and adjustments made by staff. These difficulties are symptomatic of a system that is not fully
understood.
Having written procedures will provide for more consistent training and oversight of the application of fees.
Staff did appear to be properly trained and the lack of written procedures did not appear to be a cause for
incorrect permit fee calculations. The new permit system has some limitations that require manually selecting
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Those
procedures
should
identify how to
appropriately close
out the accounting for
a given period and
known reconciliations
required.
the fees.
It is recommended for the department to establish written accounting policies and procedures that
include those specific to operation of the permit software systems (which would include application of
the permit fee schedule).
Department status:
CDD indicates the State is trying to come up with a software fix when fees need to be applied from
different year fee schedules.
It is recommended that CDD develop procedures to monitor and reconcile activity in their clearing
accounts.
Department status:
Deferred liability accounts and clearing accounts are reconciled on a weekly basis by management
analyst.
It is recommended for the department to develop come controls over permit dollars moved from one
permit to another.
Department status:
CDD indicates the State has provided a new report that traces the movement of dollars between
permits.
Application of CDD permit fees and system development charges should receive
additional oversight.
The audit assessed the extent the fee schedule adopted was properly applied to permits in amount for the
associated permits identified. There were errors identified in permit calculations that systematically increased
the risk of incorrect permit calculations. Overall, the permit processing system was impacted by systematic
errors from issues in setting up and administering fees and SDC charges. The non-SDC errors identified were
not large dollar amounts.
A testing of a random sample of permits applied for indicated identified twelve (12) miscalculated permits from
the sample resulting in an estimated upper error limit for the permit population of 23%. This significantly
exceeds the audit’s expectations. The identified errors were with SDC’s, the fee schedule and application of
the fee schedule. The error rate would have been in an acceptable range had these SDC and fee schedule
errors not occurred.
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The nature
and types of
errors are
highlighted so that
they may be
addressed.
The findings resulted from some minor issues with the software’s fee schedule that touched a number of
permits as well as the setup of County transportation SDC charges that touched nearly every new house
permit reviewed. These systematic errors resulted in a greater error rate. The SDC error resulted in
overbillings to customers and on average increased those permits by 2%. The remaining errors were caused
by a misapplication of fees to the wrong party. If these issues had not occurred, the error rate would have
been within the sampling error rate of 10% and nominal in amount.
The following are the significant types of errors that were observed:
Road Department Transportation SDC was incorrectly used - The Road Transportation SDC was not
communicated effectively, which resulted in the entry of an incorrect amount and resulted in a 23%
overpayment of fees for the SDC. New construction is assessed SDC's for their impacts to the
transportation system and helps to defray costs for the added use of the road system. The County
transportation SDC’s are approved by the Board. Staff at CDD and the Road Department became
aware of this issue in March 2016 and took measures to fix the overpayments. The error affected over
a hundred accounts and resulted in over $75 thousand in refunds. The cause of the error was that
Road’s SDC methodology and letter had changed slightly from the prior year. Staff entering the fee did
not notice the change and pulled the wrong rate from the rate sheet. There was no subsequent process
for review of the established SDC fee in the system.
SDC administration fees inappropriately charged to customers - The fee schedule properly includes a
County fee to be charged for administration of non-County SDCs. However, staff inappropriately
charged such fees to customers when these fees were to be assessed to Bend Park & Recreation (the
District). The fee collected on permits from the current period was nearly $2,000. This should have
been paid by the District as indicated in the contract.
Approved fees varied from amounts charged - CDD establishes nearly all fees in the annual budget
process for indicating fees to be charged. These fees are coded into the permit software system and
individual fees are selected based upon the permit. A couple of small dollar variances in a common
permit fee resulted in the greatest number of errors. The impact for the incorrect fee setting was limited
in dollar amount. Those errors occurred in about 2% of the items.
Plan documentation questions – Many of the assessed permit fees rely on careful consideration of
building plans and associated square footages. Documentation maintained by the department for their
calculations does not indicate how they arrived at such figures. This makes it problematic in reviewing
the fees calculated. The software records do not provide a record on the extent of supervisory review.
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The
department
should consider
whether additional
documented
supervision should
occur (and at what
level of frequency).
The department might want to consider whether additional supervisory reviews are warranted on permit
calculations given that numerous department employees see the calculated permit amounts.
The state establishes some of the permit fees and CDD staff had not identified the errors for the fees being
used in the system. Additional training and oversight of the fee schedule and its application may have caught
these issues.
It is recommended the department establish a secondary review for updating fees in the Accela permit
system.
It is recommended for CDD and Road to double check the SDC fee setup to the fee schedule and SDC
rate sheets.
It is recommended for the department to keep sufficient documentation to allow a supervisor or other
knowledgeable person to follow the calculation of permit fees.
{It is not clear the program currently supports a supervisory workflow for permits so department should
consider how to document.}
Department status:
During plan review, staff will now record square footage measures on the plans for documentation and
in support of fee calculations.
County SDC collection could be improved.
The County collects a County transportation SDC which is payable on issuance of the certificate of occupancy.
The permit software system used to manage permits does not allow the County to enter an unpaid County
SDC on permit application, as it will result in a hold on necessary inspections. This makes it difficult to provide
visibility for the SDC with contractors and property owners of these unpaid costs (especially if they change). It
was noted that County and non-County SDC's are not currently shown in the current fee schedule, since they
are passed by separate resolution.
The point of collection for the County SDC fee is connected to the increased usage that is anticipated to occur
at occupancy. In the absence of an upfront payment of the SDC, the department often ends up
communicating with a different party than that involved in the original permit application. CDD has a manual
process to communicate and manage these unpaid SDC fees.
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For the period reviewed through March 2016, nearly 52% of the County residential permit applications
requiring County SDCs (valued at nearly $346 thousand dollars) had not been entered and will require
subsequent follow-up and collection.
Finding the approved SDC’s fee amount for a given year can be difficult since the amounts are increased by
CPI each year and are not included with other fees being assessed by the County. County Legal Counsel
indicated that including these SDC fees in the County fee schedule would be appropriate.
It is recommended the County work with the permit software developer or State agent to address
issues brought about by entering SDCs payable prior to issuance of certificate of occupancy and bring
changes needed to manage these SDCs until collected.
If not, the Department should establish consistent and effective business processes to assure
communication and subsequent entry of these unpaid SDC’s. This might include incentivizing upfront
payment of Transportation SDCs.
It is recommended the County place in the County fee schedule the current SDC’s (County and non-
County) being collected.
It appears
reasonable
that, as an
agent collecting the
SDC, the department
should be
compensated for the
costs of collecting the
SDC’s.
Credit card fees incurred on SDC’s collected are an impact to department.
CDD has not had a way to offset the costs incurred when customers pay for SDCs by credit card. The
department receives a nominal administration fee for the collection of these SDCs (see finding above on
incorrect assessment of these fees to the wrong party) but nothing based on how they are paid. This occurs
for the following collected SDC’s:
County Road Transportation
Bend Park & Recreation District
LaPine Sewer
The credit card charge impact is estimated to be around 2.1% of the collected SDC. As an example for the
period reviewed, there were some 42 Bend Park & Recreation SDCs totaling $271 thousand transacted.
Credit card fees for those transacted are estimated at $136 per SDC.
It is recommended CDD consider passing through the associated SDC credit card costs through to the
other organization.
As of 4/2016, Bend Park and Recreation has agreed to pay a proportionate share of the credit card fees
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on their SDCs.
Accounting setup for fee schedule in software system requires additional review.
Some of the accounting aligned with specific permits could require some additional review. The system allows
you to identify specific accounting line items for each permit. These are established by staff and are not
routinely reviewed by someone not involved with the permit process.
CDD had an established permit fee collected on lots that indicated that a portion of the fee was being used to
support long range planning. The fee schedule indicated that $35 of the $55 per lot fee was to go to long
range planning. The department did not credit long range planning for these fees collected.
For the period sampled (7/2015 to March 2016), there was over $2 thousand that belonged to long range
planning. The anticipated impacts to divisional accounting could not be estimated.
Noticed some other relatively minor permits that could be belong to different areas or accounting line items.
The County’s fee schedule from year to year changes the fee identification, which makes it harder to compare
and monitor for permit changes from year to year. These codes are established by Finance instead of the
department.
It is recommended CDD review the accounting line items mapped to permits and consider whether it
should be periodically reviewed by a separate person once established.
It was noted the FY 2017 fee schedule no longer includes a notation to split specific permit fee revenue
with long range planning.
It is recommended for CDD to take a more active role in defining the fee codes set in the County fee
schedule.
3.4 Performance measures
Performance measure data reported in the budget could be improved.
CDD has substantially improved the nature and number of performance measures indicated in the proposed
FY 1617 performance budget. Some of these measures are quantifiable but the reporting does not include
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 16 of 23
Through
reporting on
actual
performance, the
department will see
whether using those
measures is providing
the input needed to
manage and improve
operations.
data, trends, and anticipated benchmarks.
The department has some reasonable performance measures proposed specifically for
Code Enforcement
Customer service standards
The department has also been working to develop and analyze other internal performance measures not
included in the performance budget document.
The published measures in the budget are a good start in addressing the overall goals of the department.
However, the department has not reported on how they are performing against those measures.
Without information presented on the results of performance measures, it can be difficult for government to
demonstrate accountability and that they achieved their intended goals/objectives. It is also difficult for policy
makers to assess where best to allocate and direct public funds.
The County continues to work on how it presents measures in the County budget process.
It is recommended for CDD to consider adding data for their performance measures in the budget
presentation to demonstrate the quality, cost and effectiveness of the services they provide to the
public.
3.5 Software application controls
Department oversight of the permit software system (Accela) and password policies can
be strengthened.
The review indicated that some of the anticipated software controls could be stronger. Department staff
responsible for the permit software system do not routinely monitor and analyze audit logs to see if the system
is operating as intended. This would include whether users are using the system as intended. Mos t users are
established with similar access privileges. In addition, the users have been setup with passwords expired
greater than 90 days, the current County policy. The use of 999 and 9999 days for expirations occurred with
over 65% of the department users. This is consistent with how the State administrative software users were
setup in the system.
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 17 of 23
CDD staff have not utilized the audit trails in the system, consequently, audit logs and tracking user activity are
important for the ensuring the integrity and reliability of data in the system. System logging should include
appropriate information to facilitate monitoring of access to business process applications and related actions
taken by application users. Considerations include:
identification and logging of appropriate operating activity as well as unauthorized or unusual activity;
consideration of costs, benefits, and risk;
controlling access to audit logs to appropriate personnel;
periodic review by management; and
retention of logs for an appropriate period of time.
The monitoring of logs can indicate how users are using their rights to modify or change information. This can
reflect on the provided user security roles and can indicate if users have been given too many rights. The
monitoring function also helps assure integrity of data through the processing.
Passwords should be changed periodically. The more sensitive the data or the function, the more frequently
passwords should be changed. The County’s IT policy is to “frequently change” passwords, which is usually 90
days. This conforms to Federal best practices.
Without effective and timely procedures for monitoring and analyzing logs, the value of the log information is
significantly reduced. Without effective password controls, user accounts might be compromised.
As part of the post implementation practices, department staff have not established associated policies and
practices to manage the operation of the software. This includes the absence of policies for reviewing au dit
logs to see what is being changed and by whom. In addition, the department has not established password
expiration limits that conform to County policy. This might partly have occurred since the state has set
passwords for their users using much longer timeframes.
It is recommended for the Department to establish and maintain successful log management activities
including critical areas to be logged, frequency of log review, incident identification and resolution
procedures.
It is recommended for the Department in coordination with IT create and deploy a password policy for
use with Accela that is more in alignment with County policy.
This would be limited to the County as the State is responsible for their own password administration.
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 18 of 23
4. MANAGEMENT RESPONSES
4.1 Nick Lelack,
Community
Development
Director
Deschutes County
Community
Development
MEMORANDUM
To: David Givans, Internal Auditor
From: Nick Lelack
Date: 1/5/2017
Re: Management’s response to audit report CDD 15/16-1
1. Recommendation: It is recommended that CDD develop an accounting system and written procedures to
provide actual segment/division accounting after application of indirects and overhead.
a) Management position concerning recommendation: Concurs
b) Comments: Effective 10/1/16 CDD is allocating administrative overhead to the various direct service
divisions within CDD on our internal revenue and expenditure reports. CDD intends to have a draft
overhead methodology policy for a January 2017 discussion.
c) Estimated date of corrective action: February 2017 for policy and date completed: 10/1/16 internal allocation
of administrative overhead.
d) Estimated cost to implement recommendation, if significant N/A.
2. Recommendation: It is further recommended for the Department to consider within their upcoming reserve
policy (see prior recommendation section) a process to identify the extent of carryover funds from the
building, electrical segments that should be reserved or held in contingency for the next year.
It is recommended the department develop written accounting procedures to identify to what
extent there are reserve/contingency funds for the building and electrical segments as required by
statute.
It is recommended the reserve/contingency funds might be distinguished between amounts
needed to fulfill outstanding permits and those amounts that might cushion divisional operations
in future economic downturns.
It is recommended the reserve policy include language indicating the triggers for evaluating how
much reserves are needed, when to access and coordination with fee setting.
a) Management position concerning recommendation: Concurs
b) Comments: CDD intends to have the above recommended draft policies and procedures for a January 2017
discussion
c) Estimated date of corrective action: February 2017
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 19 of 23
CDD response -
continued
d) Estimated cost to implement recommendation, if significant: To be determined based on Board approval of
the amount, timeline to cover operations, and timeline to build reserves to the established levels.
3. Recommendation: As previously recommended, it is recommended for CDD to review and further develop
their allocation method for overhead costs so it can be applied and develop and assess segment/divisional
financial activity.
It is recommended CDD develop a written cost allocation plan for their system for allocating overhead costs.
They should consider having this allocation plan follow the “super circular”
a) Management position concerning recommendation: Concurs
b) Comments: CDD intends to have a draft policy for allocation of overhead costs for a January 2017
discussion.
c) Estimated date of corrective action: February 2017
d) Estimated cost to implement recommendation, if significant N/A.
4. Recommendation: It is recommended for the department to establish written accounting policies and
procedures that include those specific to operation of the permit software systems (which would include
application of the permit fee schedule).
a) Management position concerning recommendation: Concurs
b) Comments: Our permit software is maintained by the State of Oregon. Procedures specific to operation of
the permit software exists and will be provided.
c) Estimated date completed: July 2016.
d) Estimated cost to implement recommendation, if significant N/A.
5. Recommendation: It is recommended that CDD develop procedures to monitor and reconcile activity in
their clearing accounts.
a) Management position concerning recommendation: Concurs
b) Comments: Effective July 2016. CDD began a weekly reconciliation of activity in our clearing accounts.
c) Estimated date completed: July 2016.
d) Estimated cost to implement recommendation, if significant N/A.
6. Recommendation: It is recommended for the department to develop some controls over permit dollars
moved from one permit to another.
a) Management position concerning recommendation: Concurs
b) Comments: ACCELA, CDD’s permit software, has a report detailing the transfer of permit funds from one
permit to another. A copy of this report will be provided. All transactional data is stored at the State Data
Warehouse in Salem, by ACCELA in Salt Lake City, and in the County’s data warehouse.
c) Estimated date completed July 2016.
d) Estimated cost to implement recommendation, if significant N/A.
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 20 of 23
CDD response -
continued
7. Recommendation: It is recommended the department establish a secondary review for updating fees in the
Accela permit system.
a) Management position concerning recommendation: Concurs
b) Comments: The current process of updating fees already includes a secondary review and test of fees for
each new fiscal year. The State of Oregon makes the initial changes to our fees and CDD’s coordinated
services manager performs a secondary review and calculation tests.
c) Estimated date of corrective action: June 2016.
d) Estimated cost to implement recommendation, if significant N/A.
8. Recommendation: It is recommended for CDD and Road to double check the SDC fee setup to the fee
schedule and SDC rate sheets.
a) Management position concerning recommendation: Concurs
b) Comments: CDD will verify SDC fees during the same process as updating fees in Recommendation 7.
above.
c) Estimated date completed July 2017.
d) Estimated cost to implement recommendation, if significant N/A.
9. Recommendation: It is recommended for the department to keep sufficient documentation to allow a
supervisor or other knowledgeable person to follow the calculation of permit fees.
a) Management position concerning recommendation: Concurs
b) Comments: Currently, CDD calculates the square footage in accordance with State of Oregon Division 50
rules and record it on the floorplan scan copy, when needed.
c) Estimated date completed October 2016.
d) Estimated cost to implement recommendation, if significant N/A.
10. Recommendation: It is recommended the County work with the permit software developer or State agent
to address issues brought about by entering SDCs payable prior to issuance of certificate of occupancy and
bring changes needed to manage these SDCs until collected.
a) Management position concerning recommendation: Concurs and seeking a solution.
b) Comments: Currently, creating an SDC payable through ACCELA is not an option for the County. The
permit software is used by agencies statewide and software developers cannot create a solution solely for
Deschutes County at this time. CDD will work with the Road Dept. to develop a process to manage and track
SDCs until collected through concepts such as incentivizing payment at permit issuance, establishing a
"collection point agreement" (signed by contractor and/or owner) to ensure that builders and/or property
owners are fully aware that SDCs will be collected at occupancy, etc.
c) Estimated date of corrective action June 2017.
d) Estimated cost to implement recommendation, if significant N/A.
11. Recommendation: It is recommended the County place in the County fee schedule the current SDC’s
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 21 of 23
CDD response -
continued
(County and non-County) being collected.
a) Management position concerning recommendation: Concurs
b) Comments: CDD will include a note in the fee schedule stating that CDD collects fees for the County Road
Dept., City of La Pine, and Bend Parks and Recreation rather than the specific amounts as the amounts may
change out of sync with the County’s fee schedule (i.e., cities may change their fees more frequently than
once per year).
c) Estimated date of corrective action: by the due date for FY 18 fee schedule submission.
d) Estimated cost to implement recommendation, if significant N/A.
12. Recommendation: It is recommended CDD consider passing through the associated SDC credit card costs
through to the other organization.
a) Management position concerning recommendation: Concurs
b) Comments: Currently, Bend Parks and Recreation is charged a fee for each SDC paid with a credit card.
CDD will initiate agreements with the City of La Pine and County Road Dept. passing through the credit card
costs and administrative fees.
c) Estimated date of corrective action June 2017 or date completed: Bend Parks and Rec began paying a fee
for credit card costs in July 2016.
d) Estimated cost to implement recommendation, if significant N/A.
13. Recommendation: It is recommended CDD review the accounting line items mapped to permits and
consider whether it should be periodically reviewed by a separate person once established.
a) Management position concerning recommendation: Concurs
b) Comments: CDD management analyst will perform this review shortly after the beginning of each fiscal year,
after fee schedule update and review occurs.
c) Estimated date of corrective action: By October of each fiscal year
d) Estimated cost to implement recommendation, if significant N/A.
14. Recommendation: It is recommended for CDD to take a more active role in defining the fee codes set in
the County fee schedule.
a) Management position concerning recommendation: Concurs
b) Comments: CDD and Finance have agreed to a process in which CDD’s County fee schedule will include a
master reference number, which will be in numerical order, and an internal reference number to be
maintained by CDD. It is intended the internal reference number will be constant throughout the use of the
applicable fee.
c) Estimated date of corrective action: by the due date for FY 18 fee schedule submission.
d) Estimated cost to implement recommendation, if significant N/A.
15. Recommendation: It is recommended for CDD to consider adding data for their performance measures in
the budget presentation to demonstrate the quality, cost and effectiveness of the services they provide to the
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 22 of 23
CDD response -
continued
4.2 Chris Doty,
PE/PTOE, Director,
Deschutes County
Road Department
public.
a) Management position concerning recommendation: Concurs
b) Comments: CDD intends to add additional data for our performance measures with our submission of FY 18
budget documents.
c) Estimated date of corrective action: March-June 2017
d) Estimated cost to implement recommendation, if significant N/A
16. Recommendation: It is recommended for the Department to establish and maintain successful log
management activities including critical areas to be logged, frequency of log review, incident identification and
resolution procedures.
a) Management position concerning recommendation: Concurs
b) Comments: ACCELA permit software features include an audit log of all permit activity. All transactional
data is stored at the State Data Warehouse in Salem, by ACCELA in Salt Lake City and in the County’s data
warehouse. The current user interface for the log files being used is what the software developer currently
has available.
c) Estimated date completed October 2016.
d) Estimated cost to implement recommendation, if significant N/A.
17. Recommendation: It is recommended for the Department in coordination with IT create and deploy a
password policy for use with Accela that is more in alignment with County policy.
a) Management position concerning recommendation: Concurs
b) Comments: Completed
c) Estimated date completed: October 2016.
d) Estimated cost to implement recommendation, if significant N/A.
See below (numbers aligned with CDD response numbering) pertaining to the Road Department related elements of
the audit:
8. It is recommended for CDD and Road to double check the SDC fee setup to the fee schedule and SDC rate
sheets.
Response: Agreed.
10. It is recommended the County work with the permit software developer or State agent to address issues
brought about by entering SDCs payable prior to issuance of certificate of occupancy and bring changes
needed to manage these SDCs until collected. If not, the Department should establish consistent and
effective business processes to assure communication and subsequent entry of these unpaid SDC’s. This
Community Development Department – Review of Selected Business Software Processes report #15/16-1 January 2017
Page 23 of 23
Road response -
continued
might include incentivizing upfront payment of Transportation SDCs.
Response:
In addition to, or as an alternative to an incentivization concept, a "collection point agreement" (signed by
contractor and/or owner) could be utilized to ensure that builders and/or property owners are fully aware that
SDCs will be collected at occupancy. It is my understanding that permittees are given the option (with explanation)
to pay upfront with the building permit or pay at the conclusion of the project with the occupancy permit. I think
many times the non-routine builder or owner acting-as-general contractor do not understand the implication of
their selection and are therefore caught off guard at the tail end of the project. A simple signed agreement
acknowledging that they are selecting to pay the SDC at occupancy may go a long way in addressing some of the
communication issues surrounding SDC collection at occupancy.
11. It is recommended the County place in the County fee schedule the current SDC’s (County and non-
County) being collected.
Response: Agreed.
12. It is recommended CDD consider passing through the associated SDC credit card costs through to the
other organization.
Response: Agreed.
{End of Report}
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