If you received a 1099-MISC for this income in your name or your consulting company name, and the income appeared in Box 7, the IRS will most certainly be expecting to see that income reported on your return. You would need to file a Schedule C for the income, then use the Other expenses category to describe the payouts to the agency, in order to avoid a billing from the IRS for the income tax, Self-employment tax, plus interest and possibly penalties from the IRS in the not too distant future.
