June21, 2005

SUBJECT: Transmittal of Development Services Program FY 2002/2003 Performance Audit Report

REPORT IN BRIEF

This report presents the Development Services program performance audit to Council. Development Services is a program that is primarily located in the Community Development Department with some activities operated by the Public Works and Public Safety Departments.  Primary activities performed by the Development Services Program include: providing development review and permitting services; supporting City Council, the Planning Commission, and Heritage Preservation Commission with respect to land use and development project reviews; and providing building inspections to ensure compliance with approved plans.  In FY 2002/2003, the Development Services Program had a budget of $3,301,650 and 54,269 work hours for achievement of its goals.

In summary, 67% of the Program’s reported results were verified, but with some significant exceptions.  In general, standard operating procedures need to be strengthened, results more rigorously tracked and documented, and records retained.  Through the course of auditing the Program’s performance measures, audit staff found some additional issues for management to address with regards to Program operations and recommended that a review of the Program’s internal controls and the calculation and collection of fees be conducted.  This review has been programmed as part of the Finance Department’s operational audit schedule in FY 2005/2006.

BACKGROUND

Fieldwork for the performance audit of the Development Services Program for FY 2002/2003 commenced on January 16, 2004 and was completed in FY 2004/2005. Audit staff completed a draft audit report, which the Development Services Program reviewed for corrections. The final report was released on May 10, 2005 for departmental review and formal response. The departmental response to the audit was issued on May 27, 2005.  The disposition of all Development Services audit recommendations was finalized in June, 2005.

The timeline for completion of this audit was adversely impacted by several significant factors.  The audit work plan for this audit was approved in May 2004.  In August of 2004, one staff member in Internal Audit left the City and in January 2005, the remaining staff also left.  Problems in the recruitment process prevented these positions from being filled, which significantly impacted our ability to complete the audits scheduled.  We have been performing audit duties using part-time and/or contract staff as available.  These problems have now been corrected and we anticipate being fully staffed in the Internal Audit Program by the end of July.

In addition to lack of staff, this audit presented several other challenges.  The nature of the work performed by the Program and the systems used to track the work are complex.  The auditors found it necessary to follow up on several operational issues in addition to assessing the Program’s performance results, which required coordinating data collection with both Program and Information Technology staff and resulted in delaying completion of the audit even further.  These problems have now been corrected and we anticipate being fully staffed in the Internal Audit Program by the end of July.

Following Council’s receipt of the audit report, the Departments of Community Development, Public Works and Public Safety as appropriate, will have 60 days to prepare a plan for implementation of the recommendations. Audit staff will monitor the department’s implementation progress on a quarterly basis during FY 2005/2006.

EXISTING POLICY

This report is issued to the Council and the public in accordance with the City of Sunnyvale Audit Charter and the FY 2004/2005 Performance Audit Work Plan, as adopted in May 2004.

DISCUSSION

The purpose of the audit was to review the program results as reported by the Development Services Program staff for FY 2002/2003. Below is a summary of the main findings:

• Audit staff verified 67% of the results reported for the measures and activities.  However, only 22% were verified with no exceptions.
• Audit staff found exceptions with the measure itself for 25% of the measures, typically because the wording did not accurately reflect what was being measured.
• 41% of the measures had SOP procedures that were inadequate, outdated, or missing.
• 67% of the measures lacked adequate supporting documentation, had data that was inconsistent with the reported result, or were missing documentation entirely.
• 20% of the measures’ calculated results were calculated incorrectly or the documentation submitted was inconsistent with the reported result.

A summary table of performance result verification ratings is included in the Audit Report, pages 9 – 13.

FISCAL IMPACT

Costs associated with preparation of the audit report were included in the operating budget.

Conclusion

The audit report provides a broad scope of recommendations, primarily related to improved statistical sampling procedures, documentation and measure clarification to ensure the accuracy of future results. The Department has already implemented some of the recommendations in the audit plan and will be restructuring the program in the next fiscal year.  Audit staff will follow-up on the Program’s implementation plan on a quarterly basis.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the Library and the City Clerk’s Office.

ALTERNATIVES

1. Receive the audit report and concur with management’s acceptance of recommendations.

2. Receive the audit report and direct staff to hold a study session to discuss the audit findings and recommendations.

3. Receive the audit report and give alternative direction regarding specific recommendations.

RECOMMENDATION

Staff recommends alternative #1.

Prepared by:

Kate Murdock

Contract Internal Auditor

Reviewed by:

Mary J. Bradley

Director of Finance

Approved by:

Amy Chan

City Manager

Attachments

1. Program Audit Results: Development Services Program 243 (.pdf format-7.4mb)