Former head of internal affairs for the Office of the Chief Financial Officer, William DiVello testified during a public oversight hearing on the matter of the office of the Chief Financial Officer, Office of Tax and Revenue, Real Property Tax Administration at the John A. Wilson Building October 10, 2012. Earlier this month DiVello resigned from his position. (Jared Soares/TWP)

D.C. Council members sharply criticized Chief Financial Officer Natwar M. Gandhi at an oversight hearing on Wednesday for failing to disclose internal audits that chronicled problems in his agency, with one council member saying she has “lost confidence in the operations of that office.”

Gandhi told council members that he would begin posting executive summaries of completed audits on the agency’s Web site — a reversal of the agency’s policy to not publicly circulate the reviews conducted by his internal-affairs unit. In recent years, the audits have uncovered weak controls and inadequate oversight in the city’s troubled Office of Tax and Revenue, where in 2007 a mid-level manager was caught after embezzling $48 million through fraudulent refunds.

Gandhi on Wednesday defended the tax office, where he said widespread reforms have strengthened controls. The audits, he said, are proof that “we are doing our work and living up to our commitment and responsibility to be constantly vigilant in safeguarding the District’s financial resources.”

The council’s finance and revenue committee called Wednesday’s hearing after a series of Washington Post reports about the tax office, including one that described a spate of settlements that knocked $2.6 billion off the proposed taxable value of more than 500 commercial properties. Gandhi on Wednesday again defended the settlements, saying they were necessary to correct assessment errors and avoid the risk of litigation.

The hearing took on added urgency when Gandhi’s former internal affairs chief, William J. DiVello, testified that he faced ongoing pressure by Gandhi’s aides to “quarantine” critical audits by leaving them in draft. DiVello abruptly resigned last week after he said Gandhi’s senior management told him that it would not make public an updated version of a draft audit his staff had produced. The audit showed that a handful of tax office managers could change property assessments without detection.

Gandhi’s office delivered the report to City Council members late Friday.

Plain-spoken and emotional, DiVello recommended that Gandhi’s office begin formally approving a number of draft audits and sharing them with the council.

“Get the reports to y’all,” said DiVello, a former assistant inspector general for the city.

“That helps keep everybody — not that everybody’s a crook — true.”

DiVello later told The Post that five reports were still in draft, which Gandhi’s agency has said are exempt from public disclosure. DiVello said three reports focus on the tax office and two on Gandhi’s Office of Finance and Treasury.

Gandhi disputed that reports are lingering in draft, telling the council that of 40 reports completed under DiVello over two years, only one is still incomplete.

Wednesday’s hearing began at 9 a.m. and, after nearly two hours of testimony from DiVello, adjourned at noon so council members could attend the Nationals-Cardinals National League playoff game, the first postseason baseball in the District in 79 years. The hearing resumed Wednesday night, with an appearance by Gandhi and several other officials from his office.

Besides the draft reports described by DiVello, about a dozen completed internal audits about the tax office in recent years were not publicized until The Post detailed the findings earlier this week.

On Wednesday, Gandhi said he had not previously disclosed those reports because “there is no benefit derived by sensationalizing that process” of auditing. Audit documents are not widely circulated because they would give those interested in exploiting our weaknesses a roadmap to do so.”

Some council members criticized Gandhi and his agency for what they described as poor management and a lack of transparency.

Vincent B. Orange (D-At Large) said that problems are “swept under the rug.” Council member Mary M. Cheh (D-Ward 3) said, “I believe that we have lost confidence in the operations of that office.”

Council members also pressed DiVello on a wide range of issues, including how the tax office decides to lower or raise property values and whether computer systems that contain assessment data and tax bills are adequate.

DiVello explained how he became frustrated with Gandhi’s senior management for delaying the approval of audits and, in one case, editing a report to the point where DiVello refused to sign it. “It was gutted. Therefore, I did not sign it,” he said.

He said he also did not sign the audit that council members received Friday, which describes how a handful of managers — or “superusers” — could change assessments without detection. The audit was delivered to Gandhi’s senior managers in March but not made public until The Post published its findings in August. Di­Vello said he was surprised that the CFO’s office told The Post that the audit had been “approved,” since he believed that the audit was still in draft.

Some council members suggested that Gandhi may not have wanted an audit critical of the tax office to become public in the spring, when Mayor Vincent C. Gray (D) was deciding whether to nominate him to another term. In 2007, Gandhi’s reputation took a hit when federal authorities discovered the $48 million embezzlement masterminded by tax manager Harriette Walters.

Gray nominated Gandhi in June, and the council confirmed him to a five-year term. “It would have been devastating to Dr. Gandhi’s confirmation,” council member David A. Catania (I-At Large) said.

Under D.C. law, the mayor — who has repeatedly voiced support for Gandhi — can terminate Gandhi only for cause and with a two-thirds vote of the council. “Questions have been raised [during the hearing], and hopefully the council will get answers,” Pedro Ribeiro, the mayor’s spokesman, said in an interview.

Former council member William Lightfoot told the council on Wednesday that Gandhi should be removed. “We have the right to know what’s going on with our money,” Lightfoot said.

Council member Muriel Bowser (D-Ward 4) focused on the audit that found that a small group of managers — the superusers — could change assessments undetected in the computer-assisted mass appraisal system used to calculate tax bills.

Gandhi disputed DiVello’s contention that the managers’ changes could not be tracked. DiVello explained that he had amended the initial audit to show that the system could, in fact, produce an audit trail.

However, he said that function was not being used.

Bowser asked whether the system was adequate. “No,” DiVello said. “The system is old.”

Gandhi and his staff testified that the agency is in the process of upgrading the system to its most up-to-date version and that another database will be replaced in its entirety by the end of the year.

Council member Jack Evans (D-Ward 2), a supporter of Gandhi’s, wrapped up the hearing by saying that Gandhi’s office had, in his mind, refuted some of the issues raised in recent articles by The Post.

Among witnesses were lawyers and representatives of commercial property owners who defended Tony L. George, Gandhi’s chief tax appraiser, who has faced criticism for his role in reducing proposed property values for commercial buildings. They said that George had the will to correct what they called inflated values.

But Evans said, “There is a series of drip, drip, drip that appear to be management problems. . . .It’s shaken the public’s confidence.”

The Post would like to learn more about the District’s Office of Tax and Revenue. If you’ve had a problem with bills, payments, tax sales or other areas, please call reporter Debbie Cenziper at 202-334-6107.