RICHMOND, Va. — Three years after the Richmond Inspector General's Office began investigating a complaint regarding the finance department's handling of tax credits and refunds, no formal report on the matter has been published.
However, CBS 6 obtained a draft report that outlined what investigators characterized as a confusing process for returning money to overpaying business owners and millions in excess taxes that were never credited back to taxpayers.
The Inspector General's Office, which is responsible for investigating waste, fraud, and abuse within City Hall, received a tip in April 2022 alleging that the finance department was "failing to notify taxpayers of credits on their accounts" for meals taxes and business license taxes and "after a statutory three-year period, writing the credits off the taxpayer accounts and converting them to city funds," according to the report.
Some Richmond business owners have previously reported to CBS 6 that they apparently had a credit on their account due to an accidental overpayment but were never told about it. They eventually discovered the credits while addressing separate, unrelated tax issues and were issued refunds years after the fact.
The finance employee who made the complaint to the Inspector General, who wished to remain anonymous, previously told CBS 6 the delays in producing investigation findings left him feeling frustrated and as though his concerns were "ignored."
Richmond City Councilmember Kenya Gibson said she had not laid eyes on the report but added she believes it is "critical that the public see it," especially in light of the finance department mistakenly sending duplicate real estate tax bills earlier this year.
“When you're sending duplicate bills, there's a very high likelihood that you will receive duplicate payments. So being in a place where the city might be overcharging folks, in the context where we have not been able to continue investigating and addressing the issues and how we handle payments of credits, is really concerning," Gibson said.
The undated draft report obtained by CBS 6 ultimately unsubstantiated allegations that the finance department incorrectly handled meals tax and business license tax credits and write-offs because the law did not require the city to inform taxpayers of credits.
However, the report did point to "confusion" in the process due to advice from the city attorney's office.
As an example, the report cited an email chain from November 2021 in which an executor of an estate contacted the finance department to inquire whether any outstanding taxes were due. But the finance employee found the opposite: the estate actually had a credit of $629. The employee asked a city attorney what to do, and the attorney advised "not to send a refund unless it was requested."
That advice was followed, and a manager reported to investigators that it "added to the confusion of how to handle credits and refunds," according to the report.
The report also highlighted conflicting advice from city attorneys as to whether taxpayers were required to submit an application in order to receive their refund.
While the city attorney's office provided the Inspector General an opinion stating city code requires the finance director to first receive an application before issuing a refund, investigators conferred with "several" other Virginia localities that reported they do not require an application for a refund.
Between 2017 and 2022, investigators found the finance department wrote off more than $3 million in credits that were then put into the city's general fund.
“If we want to build trust with residents, which we absolutely do, it starts here. If we have too much of their money, we have to give it back," Gibson said.
The draft report recommended that the finance department establish written procedures for the process of refunding excess taxes. It also recommended that the city attorney's office develop a policy that outlines the proper procedure to request an official legal opinion and clarify the difference between a legal opinion and legal advice "to prevent further confusion."
Former Richmond Inspector General James Osuna said last year during a committee meeting that the delays in releasing the report were due to advice from the city attorney's office that he was not authorized to investigate the matter.
City Attorney Laura Drewry told CBS 6, "No legal opinion was given by the City Attorney’s Office that the Inspector General did not have the authority to investigate the handling of tax overpayments."
"The matter was investigated. The city was in compliance with the law," Drewry said.
CBS 6 reached out to the Inspector General's Office, which is under new leadership following Osuna's unexplained departure in May, to inquire about the status of the investigation. We have not yet heard back.
In March 2024, in light of the Inspector General's investigation, the city council passed an ordinance requiring the finance department to notify taxpayers within 90 days of a meals tax or business license tax credit becoming available and invite the taxpayer to apply for a refund.
Since then, a city spokesperson said finance has communicated with 151 account holders regarding meals tax refunds.
But more than a year later, the city still does not know how many taxpayers have credits on their business license accounts. An external audit will identify any possible business license credits, and that audit is ongoing.
"Once that audit concludes and Finance has determined which accounts have credits, those account holders will be notified within 90 days," said city spokesperson Ross Catrow.
Gibson said, “Until I see proof that folks are being notified, that we are issuing those credits, there's no way for me to know that we are following the policies that we have in place."
CBS 6 also reached out to council leadership to inquire about the Inspector General's report and whether they have received information and data regarding the administration's compliance with the March 2024 ordinance.
Council Vice President Katherine Jordan's liaison said she was out of the office and unavailable for comment. CBS 6 did not hear back from Council President Cynthia Newbille.
CBS 6 is committed to sharing community voices on this important topic. Email your thoughts to the CBS 6 Newsroom.
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