- The Washington Times - Thursday, May 1, 2014

The Broadcasting Board of Governors, the more than $700 million international media arm of the federal government, is facing an IRS audit over its longstanding policy of using purchase orders to hire hundreds of journalists, according to records.

The agency, which has been in settlement talks with the IRS, is considering several reform proposals. Board officials aren’t saying how much of a tax liability the agency faces, but one former board member said it could run in the millions of dollars.

According to records obtained by The Washington Times, the board has paid journalists as contractors rather than treating them as regular employees, allowing the board to avoid withholding income and Social Security taxes. The arrangement also leaves contractors without the generous benefits afforded to federal employees.

The board oversees Radio Free Europe, Voice of America and other government-funded international broadcasters.

Contractors account for more than one-third of the board’s workforce, and the purchase-order practice had been going on for years, according to a briefing paper sent to board members in December.

The outsourcing of journalists, operating as “purchase order vendors,” creates “significant liabilities for the agency and equity issues for the contractors,” the briefing paper stated.

IRS officials declined to comment on the board’s status.

Board officials say they haven’t made any decisions about how to fix the problem, but insist they’re working to improve contractor morale after an in-house survey revealed complaints of slow payments and “perceptions that contractors are ‘second class citizens.’”

“The agency is working to improve the structure of this vital part of our workforce in a way that both lets us execute our mission and promotes higher contractor morale,” board spokeswoman Letitia King said in an email.

Victor Ashe, a former board member and ambassador to Poland, said in a phone interview Thursday that the liability exposure to the government agency “is tremendous in terms of taxpayer dollars” ranging in the millions of dollars.

“My hope would be that they comply with the spirit and not just the letter of the law and treat contract employees fairly,” said Mr. Ashe, who added that he raised concerns about the practice when he was on the board.

He also said under the current arrangement, the board’s International Broadcasting Board and Voice of America have “shortchanged contract employees on pensions and health care for years.”

The board has several options on the table. It could bring all of the contact journalists on board as federal employees, but a board briefing paper called that approach “radical,” noting that employees cost “significantly” more than contractors.

The board could also ask Congress for permission to hire more personal services contractors, which is currently capped at 60 positions.

A third option, and perhaps the most likely one, would involving hiring select contractors under a single contract known as indefinite delivery, indefinite quantity. The contractors would essentially would work as staffing firms, supplying journalists and support staff while absorbing the tax liabilities.

However, that arrangement has drawbacks, too.

“Relying on external firms may not address the perception of a two tier system that currently exist among contractors and employees,” board members were told in a Jan. 16 briefing memo. “BBG may be seen as outsourcing the problem by formalizing the employment relationship between our contractors and a firm.”

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