GAO: Agencies Awarded Hundreds of Contracts to Companies with Tax Issues

The Government Accountability Office found that some agencies have “inappropriately” awarded more than 1,800 contracts to companies with unreported tax debts. GAO said Wednesday that the Army, Navy and the departments of Energy, Health and Human Services and Veterans Affairs made potential violations of federal regulations between 2015 and 2016 when they worked with contractors with delinquent debts and penalties for noncompliance with tax laws. 

The Federal Acquisition Regulation requires all agencies to consider tax debts of each company before awarding a contract. GAO said the five agencies had ineffective control of the contracting process. Federal suspension and debarment officials said they did not get any notification of contractors reporting tax debt from the agencies prior to awarding of contracts. 

“Officials from the selected agencies were unable to explain why their control activities were potentially ineffective without reviewing each contract to determine whether FAR requirements were applicable and whether control activities were applied,” GAO said. 

The government watchdog recommends that the Internal Revenue Service seek ways to obtain comprehensive contract-payment information, while agencies enhance controls for considering contactors’ qualifying federal tax debt.