DC Auditor questions tax project reimbursements

Accenture Ltd. may have overcharged the District of Columbia for contracting staff expenses associated with an integrated tax system project that was completed four years ago, according to a report issued this month by the city's auditor.

The May 21 report by D.C. Auditor Deborah Nichols also criticized the city's Office of Tax and Revenue, which managed the project, noting significant weaknesses in internal controls, deficiencies in contract management and inadequate project planning.

Among the report's findings is an allegation that Accenture billed the city for $1.7 million in expenses incurred by staff that the auditor deemed not allowable or clearly defined in the contract.

Peter Soh, a spokesman for Accenture, said the auditor's report doesn't reflect the client agency's opinion on the costs in question or its level of satisfaction with the project.

"The city has made it clear that all payments made to Accenture were appropriate and met the requirements of the contract," he said.

Nichols declined to comment for the story.

In a letter responding to a draft of the auditor's report circulated two years ago, Sherryl Hobbs, former deputy chief financial officer at the Office of Tax and Revenue, disagreed with the auditor's findings that the $1.7 million in reimbursements was inappropriate. "OTR believes the majority of the expenses noted by the auditor as questionable were allowable under the contract and that when certain expenses not covered by the contract were identified, were subsequently disallowed by the COTR," Newman wrote.

Although the system has been up and running for several years, Accenture continues to provide maintenance services under a separate contract, Soh said.

Accenture was paid $105 million to implement the city's integrated tax system during a seven-year period from 1998 to 2005, said David Umansky, an OTR spokesman. In addition to the initial implementation, Accenture was also paid for various additions and modifications, such as electronic filing and customer service software development, and hardware acquisitions necessary to support the system, he said.

Since the integrated tax system went online, it has produced collections that exceed its costs by $113 million ? a figure that will continue to rise each year, Umansky said.

"The Integrated Tax System is a highly reliable tax processing system which is up and running 99 percent of the time," he said.