The Department recognizes the need for a comprehensive and strategic approach to setting fees and cost recovery for the Bureau of Fire Prevention. In November 2000 the Department initiated discussions with the Controller"s Office and the City Attorney"s Office to explore the possibility of expanding the fees within the confines of Fire Code Section 106.18 Fee-Setting Procedure. This section states, "the rates set shall be equal to, but not greater than, the rates necessary to support the costs of providing the service for which each fee is assessed." With the current methodology the Bureau of Fire Prevention recovers 70% of their expenditures and the fees and costs are monitored periodically and are adjusted per Fire Code regulations.

· Recommendation of Auditor"s report

The Fire Chief should direct BFP to:

3.1.1 Improve its data collection processes with regard to (1) actual revenue collected, and (2) actual volume of activity by valuation category or by actual hours of service provided, depending on the fee. BFP should, at a minimum, attempt to collect revenue data and volume of activity data with existing technology.

· Assessment of Department

The Department concurs with the recommendation of the audit.

The Bureau of Fire Prevention does track the type of inspections performed by Fire Inspectors in all districts. Volume of activity, by number of inspections, is tracked for types of inspections for inspectors assigned field inspection duties. These inspections include complaint, DBI permit, DPH referral, SFPD referral, and other limited inspections. The DBI permit inspections are not tracked through a computer MIS system due to the failure of the previously used system caused by the volume of inspections.

Based on the actual numbers of inspections, percentages are determined that are included in the calculation of the fee schedule. The activity volume information is collected into the categories shown in table 3.1.1:

Table 3.1.1: Activity volume in the Bureau of Fire Prevention

The tracking of revenue for each specific service would be available if additional "sub-object" numbers were available for the Bureau of Fire Prevention. The Department will be working with the Controller"s Office to discuss the creation of additional sub-object codes for revenues.

· Department Action plan and timeline

The Department agrees with the need to reevaluate the current fee structure. The Department intends to begin substantive discussion with the Controller"s Office to develop separate sub-object codes for revenues which will assist in tracking the activities. It is the Department"s intention to complete this project by the January 2003.

· Recommendation of Auditor"s report

The Fire Chief should direct BFP to:

3.1.2 Adopt a standardized cost allocation methodology that clearly identifies direct and indirect costs associated with proving fire prevention services and is consistent with cost accounting principles promulgated by State and Federal agencies with expertise in this area, such as the State Controller"s Office and the Federal Office of Management and Budget. The BFP should also improve the documentation of its cost allocation methodology and fee-setting methodology. Each category of the cost allocation plan should clearly identify which fire prevention services it covers. A clear explanation of how each fee was calculated should also be provided.

· Assessment of Department

The Department concurs with the recommendation of the audit.

The Budget Analyst has previously reviewed the methodology and has generally agreed with the process that the Department uses in determining the fee schedule. The report does not identify any areas that are inconsistent with cost accounting principles. The Department is still in the process of finalizing the fee schedule for 2002-2003. Part of that process requires the review by the Controller"s Office, which reviews the fees for the City with approval from the Board of Supervisors.

The model for establishing the fee schedule was developed in 1999. The Department will work towards more clearly documenting the methodology. While there are different ways to capture data, the Department agrees that it is critical that an accurate record of the time spent performing each type of service must be captured. The current process was developed utilizing the frail fifteen-year-old Wang computer management information system. It was the Department"s hope that the promised E911 Tiburon Record Management System would replace this system to allow for more accurate data capture. The Tiburon system proved to be unusable and the Department is currently researching alternative software applications.

· Department Action plan and timeline

The Department intends to clearly identify the fire prevention fee-setting methodology for the next fee schedule revision.

· Recommendation of Auditor"s report

3.1.3 Direct the CFO to prepare the cost allocation plan and the fee rates, based on data provided by BFP operational personnel. The final work product should then be jointly reviewed by the CFO and BFP management.

· Assessment of Department staff

The Department concurs with the recommendation of the audit.

The Bureau of Fire Prevention had the Finance Division apply the methodology to determine costs and set fees in 1999 and 2000. Numerous references are made regarding better coordination between the Finance Division and the Bureau of Fire Prevention. The Finance Division coordinated with the Bureau of Fire Prevention and prepared the methodology for the fee-setting process. This occurred when fees were set, along with the adoption of the 1998 San Francisco Fire Code, in 1999. The fees were again revised in 2000 in collaboration with the Finance Division.

· Department Action plan and timeline

The Department will continue to have the Finance Division work in collaboration with the Bureau of Fire Prevention to develop the methodology for the fee-setting process. The Department anticipates completion of a new methodology for fee setting by July 2002.

· Recommendation of Auditor"s report

3.1.4 Use actual productive hours, as opposed to total hours for which employees are paid, when determining hourly rates that form the basis for hourly fees.

· Assessment of Department

The Department will further analyze the recommendation of the audit.

The current fee schedule allocates the cost of an inspection based on the actual hourly or square foot cost of the service provided including direct and indirect costs. For example, in the high-rise section, there are five inspectors that complete all of the annual inspections. However, the fee includes their salary and fringe as well as a portion of the costs of the supervisors, support staff, and a percentage of the Bureau of Fire Prevention"s administrative costs including non-personnel costs for the Bureau. The administrative cost includes an estimated cost of training, uniforms, and supportive functions in the Fire Department not directly associated with the inspection. The high rise fee charged is then based on the cost to provide all high rise inspections including overhead divided by the total square feet inspected the prior year. The total number of square feet inspected is calculated from the Department"s database on inspections.

Other fees are charged based on an hourly rate. The Budget Analyst proposes that the Department calculate the hourly fee for service by using a lower number of annual hours per employee. The Department currently uses the standard of 2,080 hours per full-time employee (FTE) in the model. The Budget Analyst"s recommendation to use 1,650 hours instead would increase all fees by 26 percent, not including any changes in salary rates. Such an increase would require additional analysis and approval by the Board of Supervisors. However, in determining the fee for high rise inspections, the fee per square foot is more appropriate since it is based on actual field data. As per the San Francisco Fire Code, "the rates set shall be equal to, but not greater than, the rates necessary to support the costs of providing the services for which each fee is assessed."

Changes to the methodology and model used to determine these fees will have to be discussed with the City Attorney"s Office. The Bureau of Fire Prevention works closely with the City Attorney"s Office in the legislative code adoption process including the adjustment of fees. The issue of overcharging for services has been extensively discussed, however, the issue of not charging fully to recover costs has not been thoroughly explored. A legal opinion is necessary regarding possible liability exposure on the City"s behalf.

· Department Action plan and timeline

The Department efforts in this area are on going and will continue to work with the Controller"s and City Attorney"s Offices to develop the basis for calculating the hourly rates upon which to base fees. The Department intends to complete this process by the next fee schedule revision.

· Recommendation of Auditor"s report

3.1.5 Ensure that the hourly rates that form the basis for the fess are appropriately weighted to reflect time spent by given classifications of employees. Ensure that pre-and post-meeting time spent on inspections or meetings is accounted for in the fee setting.

· Assessment of Department

The Department concurs with the recommendation of the audit.

The percentages outlined in activity volume information table and the costs as detailed in the calculation of the fee schedule are inclusive of the pre- and post-meetings. This time is currently included in the calculation of the fee schedule as well as the overhead, which includes vehicles, uniforms, training and other administrative costs. In addition, the calculation of the fees includes allocations of portions of employee"s time by classification.

· Department Action plan and timeline

The Department"s efforts in this area are ongoing. The Department will continue to monitor the costs to provide the services rendered and will make adjustments as per Fire Code Section 106.18 Fee-Setting Procedure.

· Recommendation of Auditor"s report

3.1.6 Provide a written report annually to the Controller as specified in the San Francisco Fire Code. The BFP should review its costs, fees, and collections annually, as allowed by the Fire Code, and propose adjustments accordingly.

· Assessment of Department

The Department concurs with the recommendation of the audit.

Per the San Francisco Fire Code Section 106.18 Fee-Setting Procedure, the Department has worked with the Controller"s Office in the establishment of the fee schedule. As such, through existing procedures, the Department reports all revenues through the financial system. As part of the annual budget process, the Controller"s Office works with the Fire Department in determining projected revenue collection, which includes the permit fees. The Department will continue to work with the Controller"s Office on this issue.

· Department Action plan and timeline

The Department"s efforts in this area are ongoing. The Department will continue to work the Controller"s Office to establish the fee schedule and will provide a written report to the Controller as per San Francisco Fire Code.

· Recommendation of Auditor"s report

3.1.7 Review the categories of fire prevention service for which fees are not currently charged, and seek policy input from the Board of Supervisors to determine whether it might be appropriate and fiscally responsible to charge for some of the services which currently receive fee waivers.

· Assessment of Department

The Department disagrees with the recommendation of the audit.

In November 2000, the Department began discussions with the Controller"s Office and the City Attorney"s Office to review the ability of the Fire Department to expand the fees charged. The Department cannot waive fees for prevention services. The ability to waive fees is governed by the Board of Supervisors.

The Budget Analyst recommends that the Department charge for inspections to schools, residential occupancies, Treasure Island and residential care facilities. The Department feels it would be best to continue to promote public safety and encourage code compliance for those areas, and disagrees with the audit recommendation. The Department will continue to work with the Board and all parties that are impacted by any increases in fees.

· Department Action plan and timeline

The Department will continue to work with Controller"s Office, City Attorney"s Office, and the Board of Supervisors to determine whether it is appropriate and fiscally responsible to expand the fee schedule. This practice will be continuous as the services of the Bureau of Fire Prevention continue to expand.