Ban Federal Grant Awards to Tax Delinquents

I introduced a common sense amendment this week to make sure federal grants don’t go to individuals or entities that are delinquent on their taxes.
            
My amendment to an economic development bill that’s pending in the Senate would ban government agencies from providing grants to any person or entity that is seriously delinquent with tax debt, including anyone with a lien from the federal government.  It also would require that at least 10 percent of federal grants be audited annually for compliance with program requirements.  And, it would ban for two years any grantee with an unresolved problem based on an audit.  The overall bill under consideration would increase the number of federal grants available for government infrastructure projects administered by state and local governments.

It’s an obvious wrong that someone with big unpaid tax bills would be given a federal grant, but that’s just what’s happened.  I was one of four senators who requested a government report that was released in May.  It found that 3,700 contractors and grantees owed $757 million in back taxes, but also received $24 billion in stimulus awards.  The study identified 15 cases of individual contractors or grantees involving “abusive or potentially criminal activity.”  One construction firm owed nearly $400,000 in back taxes but received a contract worth more than $1 million.  One non-profit organization owed more than $2 million from years of unpaid payroll taxes, but received more than $1 million in stimulus funds.

There also is a serious lack of due diligence by federal agencies in making sure that recipients of taxpayer-funded grant awards are meeting reporting requirements for how the money is spent.

For example, since last fall, I’ve worked to get the U.S. Department of Housing and Urban Development (HUD) to pay attention to the waste and abuse of tens of millions of tax dollars by the Philadelphia Housing Authority.  The Philadelphia Housing Authority received nearly $370 million in HUD money this year plus an additional $127 million in stimulus funds.  The mess in Philadelphia shows the worst that can happen when the federal government doles out money, but then doesn’t check to make sure that money is used for its intended purpose.

I’ve been fighting for accountability from recipients of federal contracts for several years.  Based on findings in previous reports that I requested from the Government Accountability Office (these reports were focused on Medicare and defense industry contractors), I was able to get passed a tax law that requires the government to withhold three percent of payments to federal contractors and remit these amounts to the Internal Revenue Service, similar to how employers withhold and remit taxes for their employees.  It’s a matter of fairness for honest taxpayers.

There’s no question that federal officials ought to be safeguarding tax dollars from tax-delinquent or otherwise irresponsible grant recipients.  My amendment would make sure it happens.

Friday, June 17, 2011