NASA Contractors Are Not Paying Taxes

Finanical Management: Thousands of Civilian Agency Contractors Abuse the Federal System with Little Consequence, GAO

"To demonstrate the effect of payments to contractors using the purchase card, we obtained the National Aeronautics and Space Administration's (NASA) fiscal year 2004 purchase card transactions and compared the contractors from which NASA purchased goods and services to the IRS unpaid taxes database."


[Page 42]: Without identifying the contractor doing business with the government, the federal government is unable to collect federal debts from payments to these contractors. To demonstrate the effect of payments to contractors using the purchase card, we obtained the National Aeronautics and Space Administration's (NASA) fiscal year 2004 purchase card transactions and compared the contractors from which NASA purchased goods and services to the IRS unpaid taxes database. During fiscal year 2004, NASA used purchase cards to pay about 12,000 contractors nearly $80 million.

According to IRS's data on unpaid tax debts, over 750 of those contractors had about $440 million in unpaid federal taxes. However, none of the purchase card payments made to these contractors could be levied to collect the unpaid federal taxes. In contrast, in analyzing the TOP database, we found that non-purchase card payments made during fiscal year 2004 to 49 of these same contractors were levied.

[Page 66]: To identify payments to contractors disbursed through the government purchase card, we obtained from the Bank of America the database of purchase card payments made by the National Aeronautics and Space Administration (NASA). We reconciled control totals for this data with Bank of America and the General Services Administration. We restricted purchase card data to one agency to demonstrate the magnitude and effect of issues surrounding levying purchase card payments.

To identify indications of abuse or potential criminal activity, we selected 50 civilian contractors for a detailed audit and investigation. The 50 contractors were chosen using a nonprobability selection approach based on our judgment, data mining, and a number of other criteria. Specifically, we narrowed the 33,000 contractors with unpaid taxes based on the amount of unpaid taxes, number of unpaid tax periods, amount of FMS payments, indications that owner(s) might be involved in multiple companies with tax debts, and representation of these contractors across government. We specifically included contractors from NASA4 and the Departments of Homeland Security (Transportation Security Administration), Justice, State,5 and Veterans Affairs. These agencies were selected based on a number of criteria: national security concerns; amount of payments to contractors, especially those with tax debts; amount of payments made without TINs, names, or both; amount of levy collected; and amount of payments made with blank pay types. The reliability of TINs and contractor names, and whether the agencies' payment systems are sufficiently integrated to maximize levy collection, will also be covered in later work.

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This page contains a single entry by Keith Cowing published on June 16, 2005 3:12 PM.

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