Is Your Local Government Spending Fees Properly?

By Christopher H. Moran, CPA

“A look at seven local governments revealed that at  least $20 million needs to be re-designated for exclusive use to enforce the building code.”

Have you ever wondered what a local building department does with the building permit fees they collect? According to the Florida Statutes they are restricted to using those fees to enforce the building code. More specifically: Such fees shall be used solely for carrying out the local government's responsibilities in enforcing the Florida Building Code.” For years local governments applied their own interpretation of what “enforcing” the building code meant.

Understanding the interpretation of the Statute became a member service project of Florida Home Builders Association back in 2001–2002. FHBA and several of its local HBAs provided financial support and assistance in the engagement of a CPA firm to review many local governments compliance with the Statute.

The most basic problem encountered was that the city or county was commingling the fees and the expenditures of the entire “Growth Management Department.” These typically included: Planning and Zoning, all Code Enforcement, Development Review, Growth Management, Permitting and other land use issues.

Once the extent of the non-compliance became known, FHBA went to work on clarification legislation that ultimately resulted in the successful passage of Senate Bill 422 in the 2004 legislative session. The Bill was signed by the Governor and the Statutes have been updated.

The clarification language spelled out in very specific terms what were allowable uses of the fees collected, and what were not allowable uses. The new language also requires that recognized accounting systems be put in place to insure that the fees collected are used solely for the purposes outlined.

One local HBA recently decided to test its local government for compliance. After a fairly extensive examination and with the new clarification language, it was clear to everyone where the instances of non-compliance were found. The local government  acknowledged the problem and laid out a plan and a time table to get in compliance.

The updated statute offered an opportunity for local governments to achieve compliance, as well as a better definition of what they were going to have to do from an accounting standpoint. The clarification language also made it a much more affordable engagement for the CPA to complete a review.

With the updated Statute, the HBA started the task of reviewing an additional seven more local governments. The scope of the services was much reduced and the lower accounting fees allowed for more reviews. The HBA selected the local governments from a list provided by the members.

Overwhelmingly the local governments were clearly not in compliance; but all agreed that they weren’t and that they were taking the steps to set up the necessary accounting systems that would document compliance. It was noted that none of the ones reviewed had started the process until after they were notified of the compliance review.

The bottom line was these local governments were using building permit fees collected to pay for other services besides those allowed by Statute. The fees are only to be used for “enforcing the Florida Building Code” includes the direct costs and reasonable indirect costs associated with review of building plans, building inspections, reinspection, building permit processing; building code enforcement; and fire inspections associated with new construction.

The net result of those reviewed was that there was identified at least $20 million that needs to be designated to only be used to enforce the building code. The HBA stated at every meeting held with the local governments that one of the primary goals of the process is to have more money available for the building departments. The main emphasis is for the extra money to be used to encourage employee retention among the inspectors, with better pay and more long term career opportunities.

With the passage of the recent legislation regarding property tax relief, many local governments are looking to increase user fees in all areas in order to balance their budget.  If your local government is discussing fee increases or does not appear to be providing the level of services being paid for, your local HBA may want to consider performing their own review of compliance.

Christopher H. Moran is a Certified Public Accountant in Tallahassee and can be reached at chris@cmorancpa.com.

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