Oakland audit finds troubling gaps it business tax collection system
OAKLAND, Calif. - Oakland finance officials have failed to collect millions in business taxes over the years, according to an audit of the city's Revenue Management Bureau that was released last week.
The bureau, which operates under the city's Finance Department, did not collect all revenue owed to the city, did not have sufficient systems in place to ensure accurate and timely billing and collection of taxes and fees, had not sufficiently collected taxes from businesses, and did not have sufficient processes in place for identifying businesses subject to business tax.
The audit reviewed city tax data from July 1, 2021, through June 30, 2024, and was requested by the City Council in 2024.
During the years in question, Oakland's annual business license revenue ranged from a low of $101 million in fiscal year 2021-2022 to $123 million in fiscal year 2023-2024.
To put that in perspective, the city's total two-year budget is currently about $4.3 billion.
"Given our ongoing budget constraints, the city needs to secure every dollar it can," Oakland City Auditor Michael Houston said in a news release Thursday. "I am glad this audit identified ways the city can bring in revenue that it is owed and desperately needs."
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While auditors point out that it's difficult to say exactly how much tax revenue the city lost out on, they estimate that about $9 million to $12 million would generally be referred to collections or liens annually.
Actual losses would be less given the city's ongoing efforts to recover at least some of that money.
Those efforts appear to have been spotty at best. However, with finance officials failing to send any delinquent accounts to the city's Collections Division in 2023, for example.
"Additionally, the vast majority of accounts forwarded to the Collections Division in 2024 had not been researched, contact attempts with businesses had not been made, and no notes or supporting documents were attached," according to the audit.
Auditors suggest several steps the city can take to improve its business tax collection process, including developing "policies and procedures to memorialize expectations," standardizing account status codes, revising system controls and instituting "best practices like developing, tracking and reporting on performance metrics to ensure business processes occur as intended."
The city's lackluster tax collection process was widely lambasted by city workers and union leaders in May of 2024.
At the time, the city was contemplating layoffs and service reductions to tackle a $177 million budget shortfall.
Union leaders claimed that the city's Finance Department failed to collect taxes from thousands of businesses and that as much as $34 million in unpaid business taxes from previous years might have been outstanding.
The city's Auditor Office says it hopes to present the findings, which were developed by an outside firm -- Sjoberg Evashenk Consulting Inc. of Sacramento -- to the City Council's Finance Committee on May 12 and the full City Council on May 19.