According to an audit of the City’s Business Relation Bureau that spanned two years, $2.4 to $2.6 million in outstanding business license accounts have not been collected.
City Auditor Laura Doud pointed out in the report released yesterday that the business license tax—which averages about $383 per year—brought in a revenue of $11.7 million in 2012. However, the software used to process business licensing is “extremely old and has limited functionality,” which explains why the total account receivable outstanding balance wavers between $2.4 and $2.6 million. On top of this, she also pointed out a lack of “comprehensive policies and procedures for the collection process” and that there “does not appear adequate oversight is in place,” which is likely the reason for the missing funds.
Renewing a business license follows this gamut: after the one-year period of the license has expired, a ten-days-prior notice is mailed. If said account is not paid within 30 days, they are considered delinquent and additional penalty fees are applied. Inspectors then attempt collection via a call, a site visit, and then a Notice of Violation. After a certain period, the account then gets transfered to Billing and Collection Section (B&C), metaphorically washing the hands clean of the Bureau.
Of the 10% of accounts that the Office of the City Auditor (OCA) sampled for its report, it was revealed that a staggering 87% of the accounts were over 180 days old, with 39% of those being over a year old. In addition, 93% of the accounts over 180 days delinquent showed that none of the steps—a call, a site visit, or a notification—had been performed.
To further convolute the manner, the software system in place permits the creation of a duplicate account if said business had a prior year outstanding balance that was forwarded to B&C. 1 of 4 accounts sampled revealed a duplicate account, meaning a quarter of businesses have outstanding accounts.
John Gross, the Director of Financial Management, was highly defensive in his four-page response to the audit. He noted that the receivables amount should only total $655,000 since that the amount the Bureau is currently responsible for.
However, Doud was unrelenting in her succinct one-page correspondence, pointing out that the management’s response to the audit “needlessly defends flawed collection practices and procedures.” Also noting that if it were not for the audit, “it is doubtful the delinquent accounts would have received this level of attention,” she goes on to repeat her findings.
“The receivables balance for outstanding business licenses is between $2.4 and $2.6 million,” Doud reiterated. “It does not matter whether an account is under the control of the Business Relations Bureau or has been forwarded to the Billing and Collection Section. If the Bureau had performed more timely and thorough collections of delinquent business licenses, then B&C would not have received as many stale accounts.”
Read the full report below.
City of Long Beach Business License Revenue Collection Audit, February 2013 by The Office of the City Auditor