IG report finds broad, wasteful spending on IRS conferences

IRS officials spent $49 million across 225 conferences between 2010 and 2012, according to a government report released Tuesday.

One division of the Internal Revenue Service spent more than $4 million on a single 2010 conference in Anaheim, Calif., including on “Star Trek” parody video that has already caused the agency embarrassment.

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The report from the Treasury inspector general for tax administration points out a number of “questionable expenses” and adds to the agency’s problems. The IRS is already under fire for singling out conservative groups seeking tax-exempt status.

House Oversight Committee Chairman Darrell Issa (R-Calif.) said the spending is evidence of a “culture of excess” at the agency.

“Taxpayer money meant to pay for a core agency mission, the hiring of more enforcement personnel, was instead spent on a lavish party,” he said. “Perhaps most disturbingly, there appears to have been little or no effort by the IRS to hold those responsible for this wasteful spending accountable.”

The report said the $49 million included funds that had been unused and were meant to hire enforcement agents.

And the costs to taxpayers could even be higher. The inspector's office said it could not obtain “reasonable assurance” that the total is a "full and accurate accounting of the conference costs.”

“Effective cost management is especially important given the current economic environment and focus on Government efficiency,” said Inspector General J. Russell George wrote in a press release included with the report. “Certain of the IRS’s expenses associated with the Anaheim conference do not appear to be a good use of taxpayer funds.”

Issa's committee is holding a hearing on the new report Thursday that will feature George; Danny Werfel, the new acting IRS commissioner; and Faris Fink, an IRS commissioner who played Dr. Spock in the "Star Trek" parody. Gregory Kutz of the inspector general's office is also scheduled to testify.

The report focused in particular on the costliest conference the IG could identify, which was hosted by the division overseeing small businesses and the self-employed in Anaheim in August 2010.

The report found IRS officials paid thousands of dollars to pay motivational speakers, who were flown to the conference on the taxpayer dime, sometimes in first class. It also found the IRS doled out gifts and promotional items worth over $64,000. All told, 2,609 IRS executives and managers attended the conference, meaning the $4.1 million price tag works out to over $1,500 per attendee.

The funds came from a $132.7 million pool that division received to hire about 1,300 employees. About $18 million was set aside for training purposes.

Division managers told investigators that they actually made more than 1,500 hires during that fiscal year, the majority of which were frontline employees. But since the hires had not been on board for the full year, the division had unused funds that would have lapsed at the close of fiscal 2010.

Division management transferred $3.2 million from that hiring initiative to help cover conference costs, along with other training funds. The IG's office said it could not find any reason such a move would have been prohibited.

All told, the IRS spent $135,000 on 15 speakers. One keynote speaker was paid $17,000 to deliver two speeches, in which he painted portraits of famous figures throughout history – including Michael Jordan and Abraham Lincoln – as part of his message of “unlearning the rules, breaking the boundaries, and freeing the thought process to find creative solutions to challenges.”

The Anaheim conference was also the driving force behind one controversial parody videos made by IRS employees. The IRS apologized in March for using its video production unit to make "Star Trek" and "Gilligan's Island" parodies, which together cost around $60,000. Lawmakers have expressed outrage at the use of taxpayer funds for such a purpose, and have questioned why the IRS has a television production facility in the first place.

The new report found that the “Star Trek” parody was created for the Anaheim conference and included the building of a mock spaceship set that cost $2,400. Roughly $3,100 in staff time was spent creating the video. The IRS told the IG it spent $50,187 on videos for the conference but could not provide details supporting that number.

The IRS last week also provided the House Ways and Means Committee with another video produced for the conference, which showed staffers line dancing to the “Cupid Shuffle.” The inspector general said no documents were provided tied to production costs for that video, but it estimated nearly $1,600 in staff time was spent making it. IRS managers told the IG the video was meant to “engage managers and help facilitate a connection between executives and managers.”

The report also found that IRS officials planning the conference made little to no effort to control costs. IRS managers relied on outside event planners instead of internal resources to plan the conference, and those planners had no incentive to drive a hard bargain. In fact, the three hotels hosting conference attendees paid the planners roughly $133,000 in commissions based on the room costs paid by the IRS.

While much of the report focused on the Anaheim conference, the report also determined that the IRS hosted five other conferences from fiscal 2010 to fiscal 2012 that cost over $1 million.

Pamela LaRue, the IRS's chief financial officer, told the IG in the IRS's response to the report that the agency already has adopted heightened oversight and that a costly conference like the one in Anaheim would not occur today.

“The IRS has implemented comprehensive financial controls over meeting and conference approval process and dramatically cut expenditures,” she wrote in the response, which was included with the report. “The IRS takes seriously our obligations to be good stewards of government resources.”

The report did identify a significant downward trend in IRS conference spending. The IRS spent $37.5 million in fiscal 2010, and only $4.8 million in fiscal 2012. And LaRue added that over 90 percent of IRS training was completed virtually in fiscal 2012, meaning the amount of training has increased while costs have decreased.

LaRue said most of the costs in Anaheim were tied to IRS employee travel and per diems, but she acknowledged that other costs “were not the best use of government resources” and would likely not be authorized today.

— Published at 11:55 a.m. and updated at 1:31 p.m.