Payments To Firm Deemed Improper
Auditor Criticizes Over $2 Million In Consultant Fees

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.

For one worker, the firm billed $3.6 million in labor over five years, plus $199,000 in relocation compensation and $3,700 for apartment rental, as well as per diem food costs and travel. Combining the hourly cost and additional expenses, the District paid an annual average of $717,705 for that employee to work 41 weeks a year.

In another example, Accenture billed $513,000 for one worker in one year, plus $61,000 in rent, $10,000 in food and $32,000 in travel costs.

Other examples included someone who was paid $111,000 in relocation expenses, another who got $76,000 for relocation while getting $76,000 for rent, and a third who got $65,000 for relocation and $29,000 for rent.

Gandhi's office said all expenses were justified, but it agreed that future travel and related costs should be "rare and infrequent."

Nichols recommended that Gandhi work with the attorney general to try to recoup costs from Accenture for the expenses and other costs she deemed excessive. Gandhi disagreed. He wrote that the efforts would be met by fierce resistance by Accenture and not yield a large return.

Nichols ruled that expenses not directly related to work for the District totaled $635,000 in relocation compensation; $615,000 in apartment rentals; $7,200 in furniture rentals and related costs; and $63,000 for car rentals.

She also contested $289,000 in travel expenses, $113,000 in per diem food costs and $30,000 for supplies.

One employee's car rental was $11,570 in a single year.

The District paid parking fees for cars left in out-of-town airports, travel agency fees and plane tickets, including a one-way and three round-trip flights to Puerto Rico in a single month, followed by another round trip two months later. Accenture said that employee was traveling home.

Nichols said the tax office should not have paid for two retreats within a week in 2000 for Office of Tax and Revenue managers. Accenture was paid $14,436 in expenses for the two meetings, at Gallaudet University's Kellogg Conference Center.

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