An audit of the District’s computerized tax processing system found weaknesses, inefficiencies and a lack of internal controls that have cost the city at the very least tens of thousands of dollars — and probably much more.
D.C. Auditor Deborah Nichols’ review of the Integrated Tax System, sought by the D.C. Council, found the Office of Tax and Revenue was slow to deposit tax payments and often paid too much interest on delinquent refunds, resulting in losses of thousands of dollars at a time.
Council Member Kathy Patterson, one of the legislators to request the audit, said issues of lost revenue are “fairly serious” and demanded an oversight hearing, which she will request.
“No computer system is foolproof,” said Natalie Wilson, OTR spokeswoman. “Last year the city council made 19 changes to the tax law. It takes intensive programming to respond to those changes accordingly.”
Under D.C. law, interest is not to be calculated on delinquent refunds until the 91st day after a return was filed. But the auditor found, in many cases, OTR was calculating interest from the 90th day or earlier. Of 747 individual income and corporate franchise tax returns sampled, auditors discovered 31 instances of overpaid interest, totaling $46,560.
The financial impact of a “one-day discrepancy applied to multiple taxpayers can result in significant revenue loss,” according to the audit.
The review also revealed that tax payments were often not deposited within 48 hours, OTR’s policy, which “may result in less funds being timely available in the General Fund,” and a “loss of interest income that could have been generated from the investment of these funds.”
The Office of the Chief Financial Officer, which has oversight of OTR, said the issue of overpaid interest appeared to be a “system error,” Deputy Chief Financial Officer Sherryl Hobbs Newman wrote in her audit response.
