WASHINGTON — The Securities and Exchange Commission has asked the District of Columbia’s office of the chief financial officer to hand over nearly three years of internal audits, inspections, and investigations, following news reports that its process for tracking property taxes was faulty.

CFO Natwar Gandhi disclosed the SEC inquiry in a letter to Mayor Vincent Gray and District Council Chairman Phil Mendelson as well as in a disclosure supplement he proposed to add to bond documents for the district’s most recent debt issuance.

The SEC request stems from a recent controversy regarding the failure of Gandhi’s office to release a critical internal audit conducted by the Office of Integrity and Oversight, an office under the CFO. That audit, which was completed in March and publicized by the Washington Post in August, found there were serious questions about the integrity of the system the district uses to assess real property taxes. The audit said there was no audit trail tracking the changes that managers within Gandhi’s office made when rejecting or accepting assessment adjustments made by other managers.

Property tax revenue is key to the district because it is unable to tax federal government property, which makes up roughly 40% of the city’s commercial property.

The audit was signed by William J. DiVello, who served as executive director of the OIO until his resignation earlier this month.

“I don’t want to work there anymore,” DiVello told the Washington Post following his resignation. “I don’t like the direction the agency is going.”

On Oct. 16, 2012, the district city council passed legislation requiring Gandhi’s office to submit copies of all completed audits to the council and Gray within 15 days of completion, and to post the documents to its website.

Gandhi maintains there was an audit trail of changes made to property assessments, and that an amended report corrected the mistake.

However, the SEC enforcement division’s municipal securities and public pensions unit submitted an “informal inquiry request” Monday that Gandhi provide copies of all internal audits and investigations going back to Jan. 1 2010.

Gandhi said he intends to “fully comply with the request.”

Gandhi’s office has been the subject of repeated controversy in recent months, including questions about whether it adequately investigated the background of a newly-hired chief tax assessor who had been accused of improperly holding down property tax assessments while working in Georgia. Gandhi denied that his office has been too lax, and blasted those press reports as “erroneous” and based on “unproven allegations.”

The disclosure supplement will appear as an addendum to the Oct. 16 official statement for the district’s $675 million general obligation tax revenue anticipation notes, which came to market earlier this week.

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