Clerk’s Office Owed Millions, Audit Finds

Millions of dollars in overdue business taxes and fees have not been collected because of poor management by the city clerk’s office, according to an audit released Monday by City Controller Rick Tuttle.

“There’s a lack of aggressiveness on the behalf of taxpayers,” Tuttle said. “Businesses (that don’t pay their taxes) are having their police, fire and other services subsidized by other taxpayers.”

Business taxes, which do not include sales taxes, account for about $262 million a year, or roughly 10% of the city’s overall budget.

Tuttle said lax accounting procedures also expose the city to fraud, although no specific cases were found.

Officials at the city clerk’s office, which handles $1.46 billion in revenue annually, were unavailable for comment.

The audit of the city clerk’s Tax and Permit Division found that because of “major weaknesses” in procedures, nearly $17 million in overdue business taxes remain uncollected. About $2.8 million has been written off as unrecoverable.

A previous controller’s report found that more than one-third of businesses are not on the city’s tax rolls at all, which costs an estimated $66 million a year.

The audit criticized the clerk’s office for not even knowing how much money was owed the city. The Tax and Permit Division had not compiled a report on its accounts receivable, and auditors had to estimate the $17 million through their own calculations, according to Deputy Controller Tim Lynch.

The city has moved so slowly to collect some back taxes that the statute of limitations has run out.

The city clerk’s office has failed to prioritize its work so that big accounts get collected first, the audit found. Overdue tax bills of a few thousand dollars were being pursued while bills of over a $100,000 were being ignored until it was too late to legally collect them.

The city clerk is also not effectively collecting items such as sewer fees, which make up 22% of the revenues the office handles. For example, at least 48 major sewer customers were not billed for periods as long as nine years, costing the city $4.8 million, the audit found.

Even if these customers are billed, about $1.9 million may not be collectible because the statute of limitation has run out, the audit said.