Audit Objective
Did the Town of Lockport (Town) Building Inspector (Inspector) properly manage building permit fee collections?
Audit Period
January 1, 2023 – June 18, 2024
Understanding the Audit Area
A building permit is an official document issued by a local government − in this case a town − that authorizes a property owner to construct a new building, expand or remodel an existing one or make significant changes to an existing structure. Typically, in addition to State and federal building codes and regulations, the town board (board) adopts its own local rules and regulations and establishes building permit fee (permit fee) amounts which vary based on property type and the nature of the modifications planned for the property.
A board-appointed inspector oversees, administers and enforces building codes, land use regulations and safety standards by issuing building permits and certificates of completion or occupancy, and inspecting properties. The inspector, as the head of the building department (department), is responsible for managing compliance with building codes, rules and regulations and overseeing the collecting, recording and depositing of permit fees. Although an inspector may assign tasks to other department staff, the inspector is responsible for ensuring building permits, including the collection of associated permit fees, are managed properly.
The Town’s Building Department (Department) issued 840 permits totaling $404,544 from the period January 1, 2023 through June 18, 2024.
Audit Summary
The Inspector did not properly manage permit fee collections. The Inspector did not always apply the Board-approved permit fee and did not maintain accurate records. Because the Inspector did not always calculate and apply permit fees in accordance with the Board-adopted permit fee schedule and did not maintain sufficient records of the permit fees collected and deposited, the Town may not have received all revenues due to the Town, and permit fees collected may have been lost, misused or misappropriated.
We reviewed 34 building permits with related permit fees totaling $247,401 and determined that the Inspector made calculation errors totaling $11,127. He did not apply the correct permit fee amounts for 13 building permits with related permit fees totaling $146,180 as he overcharged a total of $7,629 for four building permits and he undercharged a total of $3,498 for nine building permits. This included two building permits that were not charged fees; each should have had a $50 permit fee assessed.
We also reviewed permit fees totaling $26,620 to determine whether permit fees were collected, recorded and deposited accurately and in a timely manner. The Inspector did not issue receipts or retain adequate records such as itemized deposit slips and detailed duplicate receipts to support deposits for the 116 building permits reviewed. As a result, we could not verify whether all permit fees were collected prior to building permits being issued or whether collections were deposited in a timely manner and intact (in the same form − such as cash, check or credit card − they were received) as follows:
- For 34 building permits with associated permit fees totaling $10,827, we could not determine whether the permit fees were collected before the building permits were issued because of insufficient documentation.
- For five collections totaling $1,092, the Inspector did not deposit checks in a timely manner, as they were deposited more than one week after collection.
- For five collections totaling $724, the Inspector did not record the collections in the permit tracking system. Of this amount, we verified that $674 was paid by check and deposited in a timely manner, but we could not verify whether the remaining $50 paid in cash was deposited.
- For 11 permit fees totaling $625, we could not determine whether the amounts recorded as collected were accurate or deposited in a timely manner and intact because the Inspector did not retain supporting documents for cash payments (e.g., itemized deposit slips, detailed duplicate receipts).
When adequate internal controls are not implemented over the collections process, the Board and Inspector run the risk that all collections may not be remitted. Additionally, without adequate procedures and accurate monthly reports, it makes it more difficult for the Board and the Inspector to monitor the Department operations.
The report includes 14 recommendations that, if implemented, will improve the Town’s process for collecting, recording and depositing permit fees. Town officials agreed with our recommendations and indicated they will take corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and Office of the New York State Comptroller’s (OSC) authority as set forth in Article 3 of the New York State General Municipal Law. Our methodology and standards are included in Appendix C.
The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of the New York State General Municipal Law. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in the Town Clerk’s office.