Calls to audit Sacramento's embattled building office repeatedly rejected
rlillis@sacbee.com
Published Saturday, Oct. 24, 2009
Sacramento city auditors have proposed taking a look at the building department more than once in recent years.
And every time, they were told they couldn't.
The Community Development Department again has come under scrutiny this week after it was revealed that an employee had approved permits for new home construction in the Natomas flood zone – an apparent violation of a federally mandated building ban.
The employee – Dan Waters, a customer service supervisor and son of city Councilman Robbie Waters – deferred $61,000 in building fees and did not issue the permits until three months after construction had begun, according to a city attorney memo.
According to the City Attorney's Office, the construction could lead the federal government to downgrade the city's flood prevention rating and lead to higher flood insurance rates.
Investigations by both the city and federal flood regulators are under way, and questions over the development department's operations have resurfaced.
As recently as February, the City Manager's Office ordered the city auditor to remove what was formerly known as the Development Services Department from its list of targets, both the auditor and members of the City Council said.
In that case, the City Council placed the department back on the auditing list. The exam was delayed again when former City Auditor Marty Kolkin left for a job in Santa Monica in May. Kolkin has not been replaced.
In an interview from his new office Wednesday, Kolkin said he tried to audit the development department "two or three times," but the city manager never permitted him to do so.
"They generate a large amount of revenue, so the concern was that there were appropriate controls for that amount of revenue," Kolkin said. "We did a number of high priority audits. Would I have liked to do that one? In hindsight, absolutely. But there were resource limitations (in the auditing department)."
City Manager Ray Kerridge said other issues held higher priorities for audits, including Police and Fire Department overtime, and the Department of Utilities, which had been rocked by a missing water meter scandal.
"I have been very clear that I think every department should be on an audit cycle, including (the former Development Services Department)," Kerridge said. "There was no intention to not audit DSD. Now, I have a very acute interest in auditing DSD because circumstances have changed."
The permits scandal has led some members of the City Council to revive their complaints that the Community Development Department has not been thoroughly inspected. Those complaints stem from a series of issues:
• As the economy tanked, revenue flowing to the department plummeted. As a result, and despite cost-cutting measures, it went more than $2.9 million over budget last year and $4.5 million over the year before, according to budget figures.
• The department was the first in the city to lay off workers during last year's budget crisis. Labor officials criticized the city for laying off too many frontline workers and not enough managers.
• There were reports that employees had deferred developer fees. In the Westshore case, the builder's $61,000 in fees were deferred for five months, according to the city attorney.
• In April, the City Council was asked to "write off" $1.05 million in development fees that city staff said were "uncollectible."
"It certainly raised a lot of questions about efficiencies and operations," Councilman Rob Fong said. "And that led to a strong desire to place that department at the top of the audit list."
The city is now moving forward with hiring a firm to conduct an audit of the development department, as well as another firm to conduct an investigation into the questionable home permits in Natomas.
According to city officials, Dan Waters granted a request by builder K. Hovnanian in April to transfer 35 permits from one side of its Westshore development in Natomas to another, allowing for new home construction. That construction may have violated a federally mandated building ban in the area that went into effect in December.
Waters and development department head Bill Thomas have been placed on paid leave while the city investigates.
Kerridge is scheduled to update the council on the status of both the investigation and an audit of the development department at Tuesday evening's council meeting.
Asked if the situation in Natomas could have been prevented had the development department been audited, Councilwoman Sandy Sheedy said, "Maybe this wouldn't have happened."
"We definitely would have an audit of it and we could have seen if something was wrong," Sheedy said. "We didn't. That's where the system failed."
Sheedy and Fong have asked that City Attorney Eileen Teichert be involved in investigating the situation. They said it wasn't lack of confidence in Kerridge, whose office has authority over the development department, but Teichert would provide "a second set of eyes and ears," according to Sheedy.
Mayor Kevin Johnson said he doesn't want the audit removed from the city manager's purview; that it's "appropriate that department heads be examined" by Kerridge's office, which "has staff that have been trained to conduct these types of investigations."
That's a familiar stance for Johnson, who earlier this year was the lone council vote against placing the city's internal auditor under the authority of the council and away from the city manager.
The move to wrest control of the auditing department from the city manager was partly a result of the development department being absent from prior audit lists, Fong said.
"The overriding concern was nobody realized the city manager was modifying the auditor's work plans before they were presented to the council," Fong said. "It was at that point we didn't think we could have a truly objective audit department if they were working for the city manager."
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