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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: December 8, 2025
Report #:2511-5421
TITLE
Recommend City Council Approval of the CSD Equipment & Materials Inventory Management and Building Permit & Inspection Fees Audits as recommended by the Policy & Services Committee and Extension of the Deadline for several FY2025 Task Orders
RECOMMENDATION
The Policy & Services Committee and the Office of the City Auditor recommend City Council approve the results of two audits:
1. Community Services Department Equipment & Materials Inventory Management Audit (Attachment A, P&S Committee recommended approval on October 29, 2025), and
2. Building Permit and Inspection Fees Audit (Attachment B, P&S Committee recommended approval on November 19, 2025)
The City Auditor’s Office also seeks City Council approval to extend the deadlines for several FY2025 Task Orders through April 30, 2026 with a net zero impact, including:
1. Task 4.31: Junior Museum & Zoo
2. Task 4.33: Public Safety Staffing & Overtime
3. Task 4.34: Follow-Up Audit Activities
BACKGROUND
Baker Tilly Advisory, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that evaluated a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputational risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan.
During the FY2024 risk assessment, the OCA identified inventory management practices at CSD facilities and building permit and inspection fees assessed via the City’s Development Services
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Center as potential areas of risk and these audit topics were included in the FY2025 Annual Audit Plan approved by Council.
In accordance with our agreement with the City, Baker Tilly Advisory is required to execute the Annual Audit Plan each year which consists of specific, approved task orders. Task Orders approved by the Council are executed by the P& S Committee Chair as the Project Manager for the Baker Tilly Contract as stipulated in the contract terms.
ANALYSIS
CSD Equipment & Materials Inventory Management Audit
Policy & Services unanimously approved the results of the CSD Equipment & Materials Inventory Management Audit on October 29, 2025. Discussion centered on identifying resources for implementing recommendations with City management noting that existing inventory management systems in Information Technology and Public Works Departments would be leveraged to track and monitor items in CSD. Additionally, once implemented, the tracked inventory will enable the department to better forecast equipment replacement schedules and aid in budgeting for equipment replacement through the annual budget process rather than the currently used Capital Improvement Project (CIP) budget process. An overview of the audit findings is below.
The objective of the CSD Equipment and Materials Inventory Management audit was to determine if the department’s equipment and materials inventory management system is operating effectively and efficiently.
This audit evaluated CSD equipment and materials inventory management processes against recognized best practices. The audit found that while most tested items were accounted for, management of materials and equipment at CSD facilities needs improvement including formal processes related to receiving and inventorying materials and equipment.
CSD does not maintain a comprehensive or regularly updated inventory lists which could create conditions where it is easier for fraud to occur. OCA also noted that items could be better organized to facilitate shared and easier use of items within and across divisions of the department. Finally, OCA found that some items were not properly stored or secured leaving them vulnerable to weather and possible theft.
In addition to the audit findings, OCA observed that the department’s current practice of using the CIP Process to replace equipment is burdensome and recommends the department explore ways to plan needed repairs and replacement of items through the annual budget development process.
Management agreed with the audit findings. A more detailed discussion of the audit’s findings and recommendations can be found in the attached audit report. 8 5
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Building Permit & Inspection Fees Audit
Policy & Services unanimously approved the results of the Building Permit and Inspection Fees Audit on November 19, 2025. Committee members noted the relatively minimal nature of the errors found in assessing fees and City management efforts to continue making improvements to the permitting and inspection fee processes.
The objectives for the Building Permit and Inspection Fees Audit were to:
Determine if the City’s building permit and inspection fees are accurately and consistently applied.
Evaluate the administration of the Development Services Program for adequate internal controls to safeguard the City from fraud, waste, and abuse.
During the audit period covering fiscal years 2023 through 2024, the City issued 7,686 building permits spanning residential remodels, new commercial construction, and other project types.
The audit included a review of both plan check and inspection fee components, as well as related surcharges such as the SB 1473 state-mandated fee, technology fees, and record retention charges. In addition, the audit evaluated the processes and controls governing refunds, to ensure that all deviations from the standard fee schedule were properly documented, justified, and approved.
Audit findings and recommendations focused on the following areas for improvement:
Overall, fee assessments for most major fees were accurately assessed, but some smaller fees were not applied consistently across all transactions. OCA recommends the city evaluate any areas identified by the audit where fees were inappropriately charged to customers and resolve any issues. In addition, OCA recommends the City:
oreinstate periodic internal audits of the building permit function to ensure fees are consistently applied and training needs are identified and remediated, oexplore the feasibility of simplifying fees and making improvements to the City’s permitting platform to facilitate consistent and more efficient application of fees,
oevaluate current training process and consider updating and/or reimplementing the onboarding and training program for new employees, and oensure staff retain all documentation related to financial processing transactions for greater transparency and accountability.
Management agreed with OCA’s recommendations. Please see the attached report for a more detailed discussion of the findings, recommendations, and management action plan for implementing changes.
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Task Order Deadline Extension
The OCA is seeking for the City Council to extend the deadlines for task orders still underway from the FY2025 Annual Audit Plan. The recommended amendment would extend the term of the FY2025 task orders from October 31, 2025 to April 30, 2026. The following task orders are all in the reporting phase: Task Order 4.31 – Junior Museum & Zoo; Task 4.33 – Public Safety Staffing & Overtime; and Task 4.34 – Follow-Up Audit Activities. Additional time is needed to finalize reports, conduct reviews with stakeholders, and draft management responses while managing availability on Committee agendas.
FISCAL/RESOURCE IMPACT
The timelines and resources needed for implementation of management’s corrective action plans for each audit are identified by management within the attached report.
STAKEHOLDER ENGAGEMENT
The OCA worked with and would like to thank the Community Services and Planning & Development Services Departments for their assistance in conducting these audits. In addition, we appreciate the support of the Administrative Services Department in reviewing City-wide policies and procedures.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because contracting for auditing services is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5).
ATTACHMENTS
Attachment A: Community Services Department Equipment & Materials Inventory Management Audit
Attachment B: Building Permit & Inspection Fees Audit
Attachment C: FY25 Task Order Extension Amendments
APPROVED BY:
Kate Murdock, City Auditor