GAO Reports  
GAO-04-414T February 12, 2004

Financial Management: Some DOD Contractors
Abuse the Federal Tax System with Little Consequence.

The federal government will continue to miss opportunities to collect on hundreds of millions of dollars in unpaid federal taxes owed by DOD contractors until DOD begins to fulfill its responsibilities under the Debt Collection Improvement Act of 1996 (DCIA) by fully assisting IRS in its attempts to levy DOD contractor payments, and IRS fully utilizes its authority under FPLP. Based on DOD and IRS records, over 27,000 contractors registered in DODís automated registration system had nearly $3 billion in unpaid federal taxes as of September 30, 2002. DOD contractors receiving fiscal year 2002 payments from five of the largest Defense Finance and Accounting Service (DFAS) contract and vendor payment systems owed at least $1.7 billion of this nearly $3 billion.

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