NHS contractor CSC delays results after tax accounting errors

NHS IT contractor CSC has delayed filing its annual report with the US Securities and Exchange Commission because it has found "significant" accounting errors over several years.

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NHS IT contractor CSC has delayed filing its annual report with the US Securities and Exchange Commission because it has found "significant" accounting errors over several years.

The US-based firm, which is the lead contractor for the NHS’s £12.4bn National Programme for IT (NPfIT) in three out of five regions, has uncovered mistakes in its accounting for tax liabilities in financial years 2000 to 2006, which is causing it to delay filing its 2007 “10-K” report to the regulator, the company said.

Correcting these errors will result in a cumulative charge estimated at between $300m and $400m (£150m to £200m) for the period to 31 March 2006. That charge is unrelated to a previously disclosed one of about $60m (£30m) related to a stock option investigation.

CSC will restate its results for the periods affected by the accounting errors when it files its returns for the financial year ending 30 March 2007, which it expects to do on or before 13 June.

Signs of possible accounting irregularities at CSC surfaced last Tuesday, when the company was supposed to announce its 2007 fourth quarter and year-end results. Instead, CSC said it was delaying reporting the results because it needed additional time "to finalise the accounting for income taxes related to certain prior-period transactions".

CSC’s accounting errors will have an ironic resonance for NHS software supplier iSoft. The troubled software firm is contracted to supply its Lorenzo care records system as a key element of NPfIT. But iSoft has been struggling to deliver and was put up for sale last year after posting a series of losses – and admitting to accounting irregularities.

An internal investigation led to the sacking of commercial director Steve Graham and iSoft is also under investigation by the Financial Services Authority after irregularities were found in its 2004 and 2005 accounts.

But a rescue for iSoft was scuppered this week when CSC stepped in to block the company’s £140m sale to Australian software firm IBA.

CSC said the move would not support successful delivery of NPfIT and is instead sending more of its own staff into iSoft to work on the much-delayed Lorenzo system. Under an agreement between the two firms signed last year, CSC has the right to take over management of the development team if iSoft is unable to fulfil its obligations. But the extent of CSC's control over iSoft's affairs has been described by analysts as "extraordinary".

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