Faulty Internal Controls: A Case Study

Since I started following the agenda items for the Beaumont City Council meetings and their Planning Commission, I've seen references to City Resolution No. 1990-44. Here are the two references I found in the Hidden Canyon agenda item from the July 2, 2013 council meeting.

Applicant shall pay to the City of Beaumont all applicable fees based on the requirements of City Resolution No. 1990-44.

The applicant shall provide to the City a cash deposit based on the requirements of City Resolution No. 1990-44.

I was curious as to what are the actual requirements of City Resolution No. 1990-44. I searched the City's website and reviewed agenda items for the past few years. I found references to this resolution in every agenda item I reviewed that referenced fees or cash deposits. I was never able to find the actual document.

Not having any luck finding the resolution, I followed the council members' advice to use the City's "ask Beaumont" link on the home page of the City's website. I learned from askBeaumont this document was outdated and had been rescinded. I was instructed to refer to the schedule of fees at the following link: http://www.ci.beaumont.ca.us/documentcenter/view/2313. I was also told I could have a copy of 1990-44 emailed to me if I requested. I replied that I wanted a copy of the resolution and I wanted to know the date the document had been rescinded. I received a copy of Resolution 1990-44 and was told it had been rescinded and replaced by Resolution 2004-21. This indicates to me that 1990-44 has been invalid since 2004, nine years.

Since this document is still being referenced in City legal documents, the City Council members and the Planning Commissioners have never been interested enough in the fees the City assesses to ask to review 1990-44. They have been approving or recommending contracts referencing invalid fee schedules for years. It also means the Planning Department and Urban Logics' principal responsible for the City's Planning operations, Ernest Eggers, have been referencing out dated fee schedules in contracts they've presented for council authorization for nine years.

Even more troubling are the possible legal ramifications. I compared 1990-44 to the current schedule of fees and discovered the current fees are significantly higher. This means the City has been either contracting for fees lower than what the business and developers are being assessed or they have been charging fees much lower than they determined in 2004 were necessary. Either the City of Beaumont hasn't been fulfilling their contractual obligations and exposing the City to liability, or they have been under-charging businesses and developers resulting in lost revenue. Either way, the controls in the planning department that would have prevented this from happening are suspect and need to be reviewed.

This is one real life example of inefficient Internal Controls or controls that are not being followed. This example makes it clear that poor internal controls can have serious consequences. If I can find this by just reviewing agenda items, what could a third party audit reveal? We can't afford not to find out.