Table of Contents. Impact Fees Follow-up Assessment

Transcription

1 Table of Contents Impact Fees Follow-up Assessment June 17, 2014 Page Number BACKGROUND 2 OBJECTIVE, SCOPE AND METHODOLOGY 2 ASSESSMENT FINDINGS 3 RECOMMENDATIONS 3 1

2 BACKGROUND Impact Fees: An Inter-local Agreement between Orange County, Florida, and The School Board of Orange County dated December 15, 1992 states: Impact Fees established by the County Ordinance have been imposed throughout Orange County, including both the unincorporated area and within the boundaries of all municipalities. The following information shall be provided for residential construction permits for which impact fees were assessed: a) date paid; b) location of the property; c) name and address of the applicant; d) type of structure; e) amount of impact fee paid. Orange County Ordinance (the Ordinance), Section (a) states: Except to the extent exempted by general or special law, all residential construction occurring within the county, both within the unincorporated area and within the municipal boundaries of the cities, for which a building permit is issued subsequent to the effective date of this article, shall pay the school impact fee. Section (b) states in part: Any school impact fee collected by the county or by a city shall be transferred at least quarterly to the school board for deposit in the school impact fee trust account. The Inter-local Agreement allows the County and cities to retain 3% of the total impact fees collected to reimburse the County and cities for the costs incurred in the collection and assessment of the impact fee. An additional Inter-local Agreement with the City of Ocoee and City of Winter Park allows each of those cities to retain $102 of the school impact fee for each residential building permit issued instead of a flat 3%. The school impact fees in effect during the assessment period were as follows: Single-Family- $6,525; Multi-Family-$3,921 and Mobile Home-$4,345. Impact fee payments remitted to the School Board of Orange County from Orange County government and the various municipalities for the period from July 1, 2013, through March 31, 2014 totaled $21,159,009. Our Internal Audit Report issued in August 2011 indicated that $990, in impact fees was owed to the School Board of Orange County from various local jurisdictions. This Engagement: This engagement is a follow-up assessment of the impact fee area. It was performed as part of our recently-implemented Continuous Assessment Initiative. This initiative is designed to periodically review areas of potential risk or concern with short, focused reviews of key data. OBJECTIVE Our objective was to follow-up on the status of findings and recommendations from our prior audit and to determine whether school impact fees were properly remitted to the School Board and to determine if adequate documentation was submitted by Orange County and the various municipalities with the impact fee remittance. 2

3 SCOPE AND METHODOLOGY Our assessment period covered school impact fee activity that occurred from July 1, 2013, through March 31, We generated a report of the transactions posted to the Impact Fee General Ledger account 3496 from the SAP system. We reviewed building permits and other source documents from Orange County and the various municipalities that were on file in the Finance Department and the Treasury Department. ASSESSMENT FINDINGS Summary: Our current findings and recommendations are similar to the findings and recommendations noted in the 2011 audit. It appears that no significant improvement has been made in the monitoring of impact fee collections. In June of 2013 the leadership team of the district s Planning and Department was changed. Several local governments have failed to submit impact fees to The School Board of Orange County in a timely manner as called for in the Inter-local Agreement and Ordinance. Several local governments submitted inadequate or no supporting documentation with their remittances as required by the Inter-local Agreement and the Ordinance. As a result, when some customers request an impact fee refund, the district is unable to determine from its records whether and when the customer s impact fee was remitted to the School Board from the local government. In those cases, the customer is issued an impact fee credit rather than a refund. The processes used by the Planning and and Finance Departments are not effective for monitoring impact fee collections and following-up on discrepancies. From July 1, 2012 through June 16, 2014, the local government jurisdictions retained collection allowances totaling $2,175,727 for their services of collecting and remitting the impact fees to The School Board of Orange County. It is not clear whether the School Board is receiving services of a value commensurate with this amount of fees, especially considering the lack of timely remittance and the lack of appropriate supporting documentation provided by several of the jurisdictions. Detailed Findings: Four of the local governments (Belle Isle, Eatonville, Edgewood and Windermere) have not submitted a remittance to The School Board of Orange County for a more than a year, with one (Eatonville) not reporting anything since When long periods of time pass, it would be a good practice to confirm that no impact fee activity has occurred (see next finding). The City of Belle Isle s Comprehensive Annual Financial Report (CAFR) for 2012 and 2013 disclosed that $503,145 had not been remitted to The School Board of Orange County during any fiscal years since These findings were noted by the City s external auditor and the City s responses on March 19, 2013 and March 24, 2014 stated that the Impact Fees would be disbursed less a 5% administration, collection and handling fee. The City remitted a check totaling $527, to the district on June 3, 3

4 2014, but underpaid by $11, because the City deducted 5% for collecting the fees while the Inter-local Agreement provides for only 3%. The City of Apopka does not submit adequate supporting documentation with their quarterly payments as required in the Inter-local Agreement and Ordinance. A bank statement showing a wire transfer was the only documentation available for review. This causes problems when a customer requests a refund because the district is unable to determine whether that customer s original impact fee payment was ever remitted to the district. The City of Maitland does not retain any administrative collection fee. The Town of Oakland does not submit adequate supporting documentation as called for in the Inter-local Agreement and Ordinance. A copy of the check was the only documentation available for review. In addition, it appears that the Town did not retain any administrative collection fee. This causes problems when a customer requests a refund because the district is unable to determine whether that customer s original impact fee payment was ever remitted to the district. Orange County does not submit adequate supporting documentation as called for in the Inter-local Agreement and Ordinance with their quarterly payment. A copy of the check and remittance advice was the only documentation available for review. This causes problems when a customer requests a refund because the district is unable to determine whether that customer s original impact fee payment was ever remitted to the district. The City of Orlando s remittance documentation frequently differed from the transactions reports accompanying the remittance. We noted variances in 8 of 14 reports. No explanation for the overages or shortages was documented. The Cities of Winter Park, Winter Garden and Ocoee remitted impact fees in a timely manner, sent adequate supporting documentation with their remittances, and deducted the correct administrative fee. The following chart summarizes the issues associated with the local governments that are not following the provisions of the Inter-local Agreement and/or the Ordinance. Entity Name Payments do not agree with supporting doc. Inadequate supporting documentation Incorrect administrative fee deducted No reports since (date) Town of Eatonville March 2007 City of Edgewood April 2012 Town of Windermere March 2013 City of Apopka X City of Belle Isle X September 2010 City of Maitland X Town of Oakland X X Orange County X City of Orlando X 4

5 RECOMMENDATIONS We recommend that the Planning and and Finance Departments develop an effective process to monitor impact fee remittances to ensure collections are accurate, timely and in compliance with the Inter-local Agreement and Ordinance. The local governments should be informed that, to comply with the Inter-local Agreement and the Ordinance, they should provide adequate supporting documentation with their remittances. This documentation is necessary so district staff can identify individual impact fee payers should there be a future claim for a refund and to determine the accuracy of the amount remitted. We recommend that the Planning and Department reiterate to the local governments the correct collection allowance percentage that can be retained as specified in the Inter-local Agreement. We also recommend that the School Board consider collecting the fees itself and funding the necessary personnel and processes with the savings from not paying administrative fees to the local jurisdictions. We wish to thank the staff of Planning and, Budget and Treasury and Legal departments for their cooperation and assistance during the assessment. Vince Roberts, CIA, Auditor 5

6 AUDIT RESPONSE MATRIX FISCAL PERIOD: DEPARTMENT/SCHOOL: ADMINISTRATOR/PRINCIPAL: DEPARTMENT HEAD/AREA SUPERINTENDENT: Planning, and Pupil Assignment Sandra R. Simpson Scott Howat Exception Noted Management Response Responsible Person Outcome Timeline What is? What should be? What needs to be done? Who needs to do it? When will the action be completed? What is the evidence of completion? 1. Our current findings and recommendations are similar to the findings and recommendations noted in the 2011 audit. It appears that no significant improvement has been made in the monitoring of impact fee collections. Subsequent to the 2011 audit the leadership team of the district s Planning and Department was changed. 1. Since the change of leadership in 2013 there have been initiatives to address the findings of the 2011 audit including: Development of an online process to apply for a CEA or CMA which will lead to replacing the currently used Excel database with an Access database that will automatically generate all of the accompanying forms needed including the School Development Review Committee (SDRC) Report, any required correspondence and the board resolution. The currently used access data base for payments received has been brought up to date. This tracking 1. Planning and Governmental 1. The on line process should be completed by November The working on line process will provide evidence of completion. 1

7 tool is not currently connected to the Excel database. The CEA/CMA s will be completed through a standard Board approved template. Any modifications to the agreement will be completed through addendums. A Business Plan has been submitted requesting an additional planner. 2. Several local governments have failed to submit impact fees to The School Board of Orange County in a timely manner as called for in the Interlocal Agreement and Ordinance. 2. Staff will initiate a meeting with each local government to address the submission of fees, the reporting process as per the School Impact Fee Ordinance (SIFO) and the new method of notification. 2. Planning and 2. Spring Several local governments submitted inadequate or no supporting documentation with their remittances as required by the Inter-local Agreement and the Ordinance. As a result, when some customers 3. Staff is working with the local governments to improve the communication process. Each local government handles the payment of impact fees and submission of 3. Planning and 3. On going 2

8 request an impact fee refund, the district is unable to determine from its records whether and when the customer s impact fee was remitted to the School Board from the local government. In those cases, the customer is issued an impact fee credit rather than a refund. documentation differently. Planning and (PGR) has no control over the internal processes. For example, Orange County s submission of impact fees goes through the Comptroller s office which is a separate governmental entity. Staff will work with all local governments to continue to improve the payment documentation process. 4. The processes used by the Planning and and Finance Departments are not effective for monitoring impact fee collections and followingup on discrepancies. 4. Staff has worked with Fiscal Services to address discrepancies. PGR is implementing a new process that allows staff to verify that impact fee collections are in the correct account strip for CEA s and CMA s. 4. Planning and 4. September From July 1, 2012 through June 16, 2014, the local government 5. The impact fees collected by the local governments are determined in the 5. Planning and 5. Ongoing 3

9 jurisdictions retained collection allowances totaling $2,175,727 for their services of collecting and remitting the impact fees to The School Board of Orange County. It is not clear whether the School Board is receiving services of a value commensurate with this amount of fees, especially considering the lack of timely remittance and the lack of appropriate supporting documentation provided by several of the jurisdictions. SIFO. Based on the findings of the auditor, there is a lack of timely remittance and appropriate documentation by several local governments resulting in a level of service not commensurate with the value of the amount of administrative fees collected. Through the new payment and documentation process PGR will continue to stress to local governments the importance of proper documentation and timely payments. As previously stated staff will initiate a meeting with each local government to address the situations including the fees and the reporting process. 6. We recommend that the Planning and and Finance Departments develop an effective process to monitor impact fee remittances to ensure collections are accurate, timely and in compliance 6. Staff will develop a form for all local governments to use in the remittance of the impact fees. Staff will work with Fiscal Services to develop a joint communication plan to ensure that PGR is notified when a payment 6. Planning and 6. Spring 2015 and ongoing monitoring 4

10 with the Inter-local Agreement and Ordinance. The local governments should be informed that, to comply with the Inter-local Agreement and the Ordinance, they should provide adequate supporting documentation with their remittances. This documentation is necessary so district staff can identify individual impact fee payers should there be a future claim for a refund and to determine the accuracy of the amount remitted. for impact fees is received by Fiscal Services whether documented or undocumented. In the event OCPS receives unidentified payments, PGR will send a written notification that they are non-compliant with SIFO. PGR will coordinate with local government senior leadership to ensure compliance. 7. We recommend that the Planning and Department reiterate to the local governments the correct collection allowance percentage that can be retained as specified in the Inter-local Agreement. 7. The issue of administrative fee collections will be addressed in the meetings with the local governments and the upcoming School Impact Fee Study. 7. Planning and 7. Spring

11 8. We also recommend that the School Board consider collecting the fees itself and funding the necessary personnel and processes with the savings from not paying administrative fees to the local jurisdictions. 8. PGR and Fiscal Services will study the recommendation of collecting the impact fee. This would require a change in the School Impact Fee Ordinance and would require an increase in OCPS 6