Payments To Firm Deemed Improper

Auditor Deborah K. Nichols says city finance managers failed to properly oversee the work of consultant Accenture.
Auditor Deborah K. Nichols says city finance managers failed to properly oversee the work of consultant Accenture. (2007 Photo By Nikki Kahn -- The Washington Post)
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By Dan Keating
Washington Post Staff Writer
Thursday, May 22, 2008

A consultant for the District Office of Tax and Revenue has been paid more than $2 million in improper charges, including airfare to Puerto Rico, cable television bills, $3,000 apartment rentals and management retreats, Auditor Deborah K. Nichols said yesterday.

The auditor also said that hourly labor rates were too high, annual increases were too large, millions of dollars worth of additional work was tacked on and managers under Chief Financial Officer Natwar M. Gandhi failed to properly oversee consultant Accenture's work for the tax office.

Accenture has been paid about $135 million since 1998 to create the Integrated Tax System and run the computers, including ongoing fees of $5 million per year.

The Office of Tax and Revenue has been embroiled since November in a scandal concerning the embezzlement of $20 million to $50 million by employees who wrote bogus real estate tax refund checks, which were not detected by Accenture's tax management system. The scam was discovered in a federal investigation after a bank employee questioned a woman cashing a check.

Gandhi and the previous tax office manager agreed with Nichols that the contract was not properly managed and that District employees had Accenture buy items improperly under the agreement, according to their written responses to the report.

But the tax manager denied that Accenture was paid excessive rates or questionable expenses. Everything was either allowable under the contract or the costs were rejected, Sherryl Hobbs Newman wrote. She wrote the response to the audit when she was head of the tax office before being fired in the scandal. Newman was not accused of any involvement in the scandal.

Accenture's Integrated Tax System has been a great success for the District and was not at fault in the embezzlement, said David Umansky, a spokesman for Gandhi.

"The system did not fail," he said. "The system was not set up to track those things. That was a result of a decision made by people not to include it."

Gandhi has recused himself from direct oversight of the contract because his son worked at Accenture, although not on this project, for much of the time of this contract.

The bulk of expenses that Nichols deemed "questionable and excessive" involved employees who came from elsewhere to work on the project. The contract said outside workers might be necessary for specific technical tasks. Nichols found that some people were paid as out-of-town workers for years.

Accenture's hourly labor rates of $107 to $368 are high enough to cover the firm's travel and related expenses, Nichols wrote. She criticized Accenture's additional bills for travel, housing, daily food expenses, car rentals, amenities such as cable television bills and a relocation fee that served as a bonus for out-of-town workers. Some employees collected those fees for years.

The report listed how those costs could add up in seven examples that gave specific amounts but not the names of the Accenture employees.

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