Recommendations for Executive Action

1. Status: Open

   Comments: Army provided us information on their review of the contracts that reported qualifying federal tax debt under FAR ? 52.209-11. We are assessing Army's review of these contracts and will provide updated information when we confirm whether the agency's review, and any subsequent actions stemming from its review, are consistent with our recommendation.

   Recommendation: The Senior Procurement Executive for the Department of the Army should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-11 and (1) determine whether the contracting officer was required to consider the contractor's reported tax debt; if so, (2) determine the reasons controls to identify and refer these contractors to the SDO before contract award did not operate effectively; and (3) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 1)

   Agency Affected: Department of Defense: Department of the Army

2. Status: Open

   Comments: HHS provided us information on their review of the contracts that reported qualifying federal tax debt under FAR ? 52.209-11. We are assessing HHS's review of these contracts and will provide updated information when we confirm whether the agency's review, and any subsequent actions stemming from its review, are consistent with our recommendation.

   Recommendation: The Senior Procurement Executive for the Department of Health and Human Services (HHS) should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-11 and (1) determine whether the contracting officer was required to consider the contractor's reported tax debt; if so, (2) determine the reasons controls to identify and refer these contractors to the SDO before contract award did not operate effectively; and (3) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 2)

   Agency Affected: Department of Health and Human Services

3. Status: Closed - Implemented

   Comments: In August 2019, the Navy completed the review of the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR ? 52.209-11. The information Navy provided us in response to its review indicates that contractors' representations & certifications were not always included in the files Navy reviewed, suggesting that COs did not always comply with FAR requirements to access, review, and document the prospective contractors' applicable representations and certifications, including qualifying federal tax debt reported under FAR ? 52.209-11. Further, Navy identified several cases where the contractor reported tax debt and no action was taken by Navy, indicating the contracting officer did not comply with the requirements of FAR ? 52.209-11. In response to these findings and our recommendation, Navy took several actions to help ensure compliance with applicable regulations. Specifically, in May 2019 the Deputy Assistant Secretary of the Navy (Procurement) (DASN(P)) provided a briefing to the Strategic Systems Programs contracting leadership related to awareness of contractors with reported tax debt. Further, in June 2020, DASN(P) issued a reminder of the FAR ? 52.209-11 requirements in a Policy Push. Finally, DASN(P) updated its procurement performance management assessment program check list to include verification of FAR ? 52.209-11, which teams use to perform contract file review in support of assessing regulatory compliance. By briefing key staff, issuing a reminder of the FAR requirements, and updating its checklist, Navy has taken important steps to ensure compliance with laws and regulations on federal contractors with tax debts.

   Recommendation: The Senior Procurement Executive for the Department of the Navy should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-11 and (1) determine whether the contracting officer was required to consider the contractor's reported tax debt; if so, (2) determine the reasons controls to identify and refer these contractors to the SDO before contract award did not operate effectively; and (3) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 3)

   Agency Affected: Department of Defense: Department of the Navy

4. Status: Closed - Implemented

   Comments: In November 2019, VA noted that it had completed the review of the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR ? 52.209-11. The information VA provided in response to its review indicates that the controls to identify contractors with tax debt and notify the SDO prior to award did not operate effectively. Specifically, contracting officers (CO) were not adequately reviewing and documenting their review of contractor representations and certifications, and COs were not aware of the Federal Acquisition Regulation ?9.104-11 regarding actions COs need to take when tax debt is identified. In response to these findings and our recommendation, VA took several actions to help ensure compliance with applicable regulations. Specifically, in the beginning of fiscal year 2020, VA began utilizing FedDataCheck service, which includes a reporting function and an email alert when a contract is awarded to a contractor with tax debt under FAR ? 52.209-11 to manage vendor tax delinquency. Further, in February 2020 the Deputy Senior Procurement Executive (SPE) issued an Acquisition Insider update regarding contracting officers' responsibilities related to contractors with reported tax debt FAR ? 52.209-11. Lastly, in February 2020, a notification on behalf of the SPE was sent to VA Heads of Contracting Activities (HCA) to raise awareness of the Acquisition Insider update and a new tool available to COs, and to direct HCAs to ensure compliance with FAR requirements. By issuing a reminder of the FAR requirements and making use of a new tool for COs, VA has taken important steps to ensure compliance with laws and regulations on federal contractors with tax debts.

   Recommendation: The Senior Procurement Executive for the Department of Veterans Affairs (VA) should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-11 and (1) determine whether the contracting officer was required to consider the contractor's reported tax debt; if so, (2) determine the reasons controls to identify and refer these contractors to the SDO before contract award did not operate effectively; and (3) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 4)

   Agency Affected: Department of Veterans Affairs

5. Status: Open

   Comments: Army provided us information on their review of the contracts that reported qualifying federal tax debt under FAR ? 52.209-5. We are assessing Army's review of these contracts and will provide updated information when we confirm whether the agency's review, and any subsequent actions stemming from its review, are consistent with our recommendation.

   Recommendation: The Senior Procurement Executive for the Department of the Army should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-5. Specifically, the Senior Procurement Executive should determine whether each contract value was expected to exceed the simplified acquisition threshold when the solicitation was issued and, if so, (1) determine the reasons controls to identify and notify the SDO of these contractors before contract award did not operate effectively and (2) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 5)

   Agency Affected: Department of Defense: Department of the Army

6. Status: Open

   Comments: The Department of Energy (DOE) provided us information on their review of the contracts that reported qualifying federal tax debt under FAR ? 52.209-5. We are assessing the DOE's review of these contracts and will provide updated information when we confirm whether the agency's review, and any subsequent actions stemming from its review, are consistent with our recommendation.

   Recommendation: The Senior Procurement Executive for the Department of Energy should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-5. Specifically, the Senior Procurement Executive should determine whether each contract value was expected to exceed the simplified acquisition threshold when the solicitation was issued and, if so, (1) determine the reasons controls to identify and notify the SDO of these contractors before contract award did not operate effectively and (2) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 6)

   Agency Affected: Department of Energy

7. Status: Open

   Comments: HHS provided us information on their review of the contracts that reported qualifying federal tax debt under FAR ? 52.209-5. We are assessing HHS's review of these contracts and will provide updated information when we confirm whether the agency's review, and any subsequent actions stemming from its review, are consistent with our recommendation.

   Recommendation: The Senior Procurement Executive for HHS should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-5. Specifically, the Senior Procurement Executive should determine whether each contract value was expected to exceed the simplified acquisition threshold when the solicitation was issued and, if so, (1) determine the reasons controls to identify and notify the SDO of these contractors before contract award did not operate effectively and (2) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 7)

   Agency Affected: Department of Health and Human Services

8. Status: Closed - Implemented

   Comments: In August 2019, the Navy completed the review of the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR ? 52.209-5. For the contractors Navy found to exceed the simplified acquisition threshold when the solicitation was issued, they noted several instances where contractors' representations & certifications were not always included in the files Navy reviewed, suggesting that contracting officers did not always comply with FAR requirements to access, review, and document the prospective contractors' applicable representations and certifications, including qualifying federal tax debt reported under FAR ? 52.209-5. Further, Navy identified several cases where the contractor reported tax debt and no action was taken by Navy, indicating the contracting officer did not comply with the requirements of FAR ? 52.209-5. In response to these findings and our recommendation, Navy took several actions to help ensure compliance with applicable regulations. Specifically, in May 2019 the Deputy Assistant Secretary of the Navy (Procurement) (DASN(P)) provided a briefing to the Strategic Systems Programs contracting leadership related to awareness of contractors with reported tax debt. Further, in June 2020, DASN(P) issued a reminder of the FAR ? 52.209-5 requirements in a Policy Push. Finally, DASN(P) updated its procurement performance management assessment program check list to include verification of FAR ? 52.209-5, which teams use to perform contract file review in support of assessing regulatory compliance. By briefing key staff, issuing a reminder of the FAR requirements, and updating its checklist, Navy has taken important steps to ensure compliance with laws and regulations on federal contractors with tax debts.

   Recommendation: The Senior Procurement Executive for the Department of the Navy should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-5. Specifically, the Senior Procurement Executive should determine whether each contract value was expected to exceed the simplified acquisition threshold when the solicitation was issued and, if so, (1) determine the reasons controls to identify and notify the SDO of these contractors before contract award did not operate effectively and (2) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 8)

   Agency Affected: Department of Defense: Department of the Navy

9. Status: Closed - Implemented

   Comments: In November 2019, VA noted that it had completed the review of a sample of the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR ? 52.209-5. The information VA provided in response to its review indicates that the controls to identify contractors with tax debt and notify the SDO prior to award did not operate effectively. Specifically, contracting officers (CO) were not adequately reviewing and documenting their review of contractor representations and certifications, and COs were not aware of the Federal Acquisition Regulation ?9.104-5 regarding actions COs need to take when tax debt is identified. In response to these findings and our recommendation, VA took several actions to help ensure compliance with applicable regulations. Specifically, in the beginning of fiscal year 2020, VA began utilizing FedDataCheck service, which includes a reporting function and an email alert when a contract is awarded to a contractor with tax debt under FAR ? 52.209-5, to manage vendor tax delinquency. Further, in February 2020 the Deputy Senior Procurement Executive (SPE) issued an Acquisition Insider update regarding contracting officers' responsibilities related to contractors with reported tax debt FAR ? 52.209-5. Lastly, in February 2020, a notification on behalf of the SPE was sent to VA Heads of Contracting Activities (HCA) to raise awareness of the Acquisition Insider update and a new tool available to COs, and to direct HCAs to ensure compliance with FAR requirements. By issuing a reminder of the FAR requirements and making use of a new tool for COs, VA has taken important steps to ensure compliance with laws and regulations on federal contractors with tax debts.

   Recommendation: The Senior Procurement Executive for VA should review the contracts we identified as being awarded to contractors that reported qualifying federal tax debt under FAR § 52.209-5. Specifically, the Senior Procurement Executive should determine whether each contract value was expected to exceed the simplified acquisition threshold when the solicitation was issued and, if so, (1) determine the reasons controls to identify and notify the SDO of these contractors before contract award did not operate effectively and (2) design or modify controls to help ensure compliance with applicable regulations. (Recommendation 9)

   Agency Affected: Department of Veterans Affairs

10. Status: Open

    Comments: GSA concurred with this recommendation and stated it would work with the procurement community to identify potential approaches to draw contracting officers' attention to qualifying federal tax debt information reported by contractors is the System for Award Management under the FAR ? 52.209-5 certification and ? 52.209-11 representation. We will assess these actions after they have been completed.

    Recommendation: The Administrator of the General Services Administration should coordinate with the appropriate System for Award Management users, such as agency procurement officials, to identify potential updates to facilitate contracting officers' identification of contractors that report qualifying federal tax debt under the § 52.209-11 representation and § 52.209-5 certification. (Recommendation 10)

    Agency Affected: General Services Administration

11. Status: Closed - Implemented

    Comments: In October 2019, GAO met with representatives from IRS and the Bureau of the Fiscal Service to facilitate an exchange of information on non-treasury disbursing offices, which include federal offices that do not process payments through the Fiscal Service. Further, while IRS told GAO it did not think amending the reporting requirements for Form 8596 would have an impact on the collection process, IRS also told GAO that it had worked with Fiscal Service to improve the process used to match federal tax debts against eligible payments via "enhanced matching logic." Specifically, IRS stated that in October 2019, Fiscal Service began using the enhanced matching algorithm to match all payments against the list of delinquent business master file taxpayers, prior to the release of any disbursements to payees. IRS anticipates that this will have a significant impact on the number of payments to federal contractors that are sent to the FPLP for potential levy. By using available data to improve its detection and collection of qualifying federal tax debts owed by federal contractors, IRS is better positioned to enhance revenue collection and compliance with relevant federal tax laws.

    Recommendation: The Commissioner of the IRS should evaluate options to identify which contract payments federal agencies expect to be processed by the Fiscal Service, including amending the reporting requirements for Form 8596 to require federal agencies to include information about whether contractor payments are expected to be processed by the Fiscal Service. If the IRS amends Form 8596 reporting requirements, the IRS should (1) systematically note this information on taxpayer accounts to help the IRS identify which payments may be available for levy through the FPLP and which payments may be available for other (i.e., manual) levies and (2) analyze these data to help identify agencies that do not participate in the FPLP and inform its efforts to expand the number of agencies participating in the FPLP. (Recommendation 11)

    Agency Affected: Department of the Treasury: Internal Revenue Service

12. Status: Open

    Comments: IRS concurred with this recommendation and stated that it is reviewing the potential benefits and costs that would result from implementing this recommendation. We will assess these actions after they have been completed.

    Recommendation: The Commissioner of the IRS should evaluate options to obtain comprehensive contract payment data above the existing Federal Procurement Data System–Next Generation (FPDS-NG) reporting threshold of $10,000, including assessing the costs and benefits of changing the current threshold for contracts that agencies are required to report to the IRS through Form 8596 information returns to be consistent with the existing reporting threshold for FPDS-NG, determine whether regulatory revisions are necessary, and change the reporting threshold, if appropriate. (Recommendation 12)

    Agency Affected: Department of the Treasury: Internal Revenue Service

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