Audit Questions L.A. Building Permit Fees

The Los Angeles Department of Building and Safety appears to have overcharged the public by millions of dollars for permits because of questionable financial practices, City Controller Laura Chick alleged in an audit released Thursday.

The report is the second critical audit of the agency issued by Chick this week; the earlier review found lax enforcement of building codes and a backlog of thousands of required inspections. The two audits came after months of complaints about the department by residents and employees.

In her latest audit, Chick looked at the finances of the department, which has an annual budget of $68 million and more than 800 employees.

Chick, in a letter to Mayor Antonio Villaraigosa, accused the department of using “tricks and games in how it oversees some of its funds.”

The controller said the department’s permit and plan-check fees appear to exceed state limits. Because of booming property values, which are the basis for fees, the department recovered 116% of its construction permit costs and 113% of its plan-check costs, the audit said.

In addition, the department was given permission by the City Council in 1991 to levy a 6% surcharge on development permits to pay for a new computer system, but the fee continued to be charged after the system began operation in 1997 -- taking in $5 million annually in extra funds.

“There was a clear intention that the surcharge would be discontinued when the system was fully implemented,” Chick said.

Department officials were reviewing the audit Thursday and did not provide a detailed response.

“We are committed to working with the controller’s office to address the issues discussed in the audit to further improve the department,” said Dave Keim, a department spokesman.

In addition to the possible overcharges, the audit concluded that the department failed to provide proper oversight of cash bonds that are held to ensure proper grading work on hillside areas.

“The audit identifies several fiscal and management issues within the department that warrant immediate attention,” Villaraigosa said in a letter to City Administrative Officer Bill Fujioka.