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Staff flags $41 million reporting gap in business-license reconciliation; committee seeks narrowly scoped audit
Summary
City staff told the Isle of Palms Ways & Means committee it has identified four large accounts responsible for most of a roughly $41 million year-over-year reporting gap in business-license figures and recommended a tightly scoped 'revenue assurance' audit focused on Isle of Palms-only businesses.
City staff on Wednesday told the Isle of Palms Ways & Means committee they have identified a substantial discrepancy between ledger figures and reported business-license revenues and are pursuing a narrowly scoped audit to verify the city is receiving the revenue it is owed.
"We have identified, like, 4 companies that generate, or lack of generation of the revenues for those ... that generate that difference of $45,000,000," a staff member said in the meeting; staff later characterized the working figure as about $41 million year-over-year for 2024 to 2025. Committeemembers and staff repeatedly framed the exercise as "revenue assurance," not a broad compliance crackdown.
Staff said one large account accounted for roughly half of the discrepancy because the company had not reported any income for the license year and is now in collections. "One company makes up half of that because they did not report any income for the license," the staff member said.
The committee discussed scope and feasibility. Staff emphasized that audits are most practical for Isle of Palms-only brick-and-mortar businesses because countywide consolidated tax returns and businesses with multiple locations make local-only revenue difficult to isolate. "It would be difficult to audit them anyway," staff said of businesses operating throughout the county; the feasible sample would be local, single-location operations.
Members asked whether Charleston County could assist; staff said the county had offered to help but would take a portion of any collections. Committee members requested a clear audit program with agreed-upon procedures, a defined sample size and scope, selection criteria for auditors, and a public-disclosure plan for results and FOIA implications.
The committee directed staff to further scope the audit program and to bring detailed proposals, including a list of potential vendors, agreed-upon procedures for testing gross revenue, and potential budget estimates, to the next Ways & Means meeting.
