Tax Compliance: Some Hurricanes Katrina and Rita Disaster Assistance Recipients Have Unpaid Federal Taxes

GAO-08-101R Published: Nov 16, 2007. Publicly Released: Dec 17, 2007.
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Since February 2004, we have issued a series of reports detailing how some organizations and individuals, including defense, civilian agency, and General Services Administration (GSA) contractors; tax-exempt (not-for-profit) organizations; and Medicare physicians, abused the federal tax system at the same time they were doing business with or receiving benefits from the federal government. While we performed this work it came to our attention that some organizations and individuals that were recipients of federal grants and other direct assistance were also abusing the tax system. Thus, Congress asked us to perform additional work and report specifically on organizations and individuals that abuse the federal tax system at the same time they receive federal grants or other similar types of federal assistance, known as direct payments for specified use (direct assistance) programs. Based on Congressional request, we completed a forensic audit and related investigations of unpaid federal taxes owed by recipients of the Federal Emergency Management Agency's (FEMA) Individuals and Households Program (IHP) following hurricanes Katrina and Rita. IHP is a federal direct assistance program authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as amended by the Disaster Mitigation Act of 2000. We conducted our audit of IHP concurrently with our broader audit of federal grant and direct assistance recipients that have unpaid federal taxes, which Congress also requested. We will be reporting the results of that work separately. The specific objectives of our work were to (1) determine, to the extent practical, the estimated magnitude of federal taxes owed by individuals receiving IHP disaster assistance benefit payments following hurricanes Katrina and Rita and (2) provide illustrative examples of abusive or criminal activity related to the federal tax system by IHP recipients with unpaid federal taxes.

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