The city's Office of Inspector General has found that the Revenue Department gave tax discounts to several hundred properties that likely did not qualify.

In a report released Wednesday, the office said the city might have lost nearly $683,000 in tax revenue from 558 properties that each received a $30,000 reduction in taxable property value through the homestead exemption program. The properties identified had active rental licenses, were vacant, or were used for something other than a primary residence, all of which would have disqualified the properties from a homestead exemption, the office found.

"As a result, the city is losing significant tax revenue," the report said. About 214,000 properties have a homestead exemption.

Inspector General Amy Kurland said the report describes the finding on loss of revenue as likely only because property owners can challenge a homestead exemption ruling.

"We feel pretty confident about our investigation," Kurland said Wednesday.

Revenue Commissioner Frank Breslin said the Revenue Department was conducting its own audit of a sample of 2,000 properties, some of which are different from the ones the Inspector General's Office examined.

"The review identified properties that may have been incorrectly awarded. The determination wasn't made," Breslin said. "They didn't dig any deeper. It's not necessarily incorrect."

So far, the Revenue Department has reviewed 111 properties with homestead exemptions and found 28 to have them improperly. The department has begun the process of recouping $27,287 in lost revenue, plus interest and 10 percent penalty fees, from those properties, Breslin said.

The homestead exemption was created in 2014 after the Actual Value Initiative (AVI) program reassessed all of the properties in the city. AVI led to some significant property-tax increases, so the homestead exemption was offered as  relief by reducing the taxable value of homeowners' primary residences by up to $30,000, which usually equals a $400 tax savings each year.

The requirements for the exemption are simply for the property to be owner-occupied and the owner's primary residence. Breslin said the application was kept simple and "straightforward" to encourage people to apply.

"This method of administering the homestead exemption resulted in a very liberal application of the $30,000 reduction in taxable property values," the inspector general's report said.

Kurland said her office is recommending that the Revenue Department ask applicants to show documentation such as a driver's license  that shows the primary residence.

"All we were trying to do was show there are holes in the programs," Kurland said. "Even if you are looking at 2 percent error rate, that's $1.6 million that the city possibly is losing."

Breslin said the city would not change its application process.

"Asking for more documentation will simply reduce enrollment," Breslin said. "These relief programs are really important."

Instead, the department will "step up post-enrollment auditing," Breslin said.

"We have great confidence in our compliance unit and our enforcement," he said.