Deeley, the former chief deputy sheriff who replaced longtime Sheriff John Green in January and axed the division's management team, said an outside accounting firm found the money after an eight-month analysis.
The $56 million includes fees and proceeds associated with about 170,000 properties and a million transactions, Deeley said. An audit released last year by City Controller Alan Butkovitz said the office's finances under Green were a disaster.
Correcting the books has been a nightmare for office staff and accountants. Literally.
"I've worked with these numbers so long, I see them in my sleep. I get nightmares," said Chief Deputy Sheriff Joseph Vignola.
Deeley said the office would transfer nearly $40 million to the city and state. But the majority of that money could be reclaimed by the school district and former homeowners who are owed the excess proceeds from the sales after all other parties have been paid. The city will likely wind up receiving less than $10 million - perhaps substantially less.
The city Finance Department is seeking roughly 2 percent cuts from all departments- with the exception of police, fire and prisons - to deal with a drop off in tax revenues. Mayoral spokesman Mark McDonald said the funds coming to the city from the Sheriff's Office will not change those plans.
So why did the Sheriff's Office allow $56 million to accumulate over more than a decade?
Deeley said a federal grand jury might have to answer that one.
"That's a question that the federal, state and local agencies are now looking into," Deeley said. "Today is not the day to put blame with anyone. Today is the day to move the Sheriff's Office forward, and that's what we're trying desperately to do."
- Staff writer Catherine Lucey
contributed to this report.