June 4th, 2013
12:06 PM ET
11 months ago

Report shows lavish spending at IRS conference

Updated 3:44 p.m. ET Tuesday 6/4

(CNN) – The Internal Revenue Service spent millions of taxpayer dollars on everything from event planners' commissions to speakers' fees to guest prizes to parody videos at a 2010 conference, an audit of the agency shows.

The beleaguered agency - already snared in controversy over its targeting of conservative groups seeking tax-exempt status - spent $4.1 million on a 2010 conference in Anaheim, California, with "questionable expenses" comprising much of the budget, according to the report released Tuesday by the Treasury Department's inspector general for tax administration.

The audit notes that a large chunk of that money - about $3.2 million - came from unused funds allocated for hiring. This was in the same year that the IRS began to single out conservative and tea party groups that sought tax-exempt office, in part because the agency said it did not have the personnel to handle the overwhelming amount of applications pouring in that year.

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

Read the audit report

The August 2010 conference, held by the Small Business/Self-Employed division, had 2,600 attendees at three hotels in Anaheim. The audit states that none of the guests were required to document their attendance at the training sessions.

While the division made 1,516 hires that year, not all of them were on board the full year, so the division used the unused money for the three-day conference. Managers also indicated the used additional training funds for the event.

The audit notes that the IRS–a stickler for record keeping–could only provide documentation for $4.1 million. The division estimated it actually spent $4,297,285, but could not source that additional amount, according to the report.

The IRS used event planners instead of IRS employees or contractors to set up the conference, giving no incentive to get lower rates and leaving the government to pay $135 per night for all rooms. Instead of working for favorable room rates, both event planners got $66,500 in commission from the hotels, according to the audit.

Other expenses included more than $135,000 on outside speakers–including a $17,000 fee for a speaker who created paintings on stage to make his point that one must free "the thought process to find creative solutions to challenges."

"The speaker created six paintings at these two keynote sessions (three at each session). These paintings consisted of the following portraits: Albert Einstein (one); Michael Jordan (one); Abraham Lincoln (one); U2 singer Bono (one); and the Statute of Liberty (two)," the audit states.

While two of the paintings were given away at the conference and three were donated, one was reported lost.

The IRS also paid $11,400 to a speaker who specializes in happiness and positive psychology. He led four 90-minute workshops.

Another speaker received $27,500 for two hour-long speeches. The speaker's fee included a $2,500 flight in first class.

The presentation was based on the speaker's published book and, according to the contract, the speaker was to "share how seemingly random combinations of ideas can drive radical innovations."

On a somewhat ironic note, one of the sessions in the programs lists a speech given by IRS speakers titled: "Political Savvy: How Not to Shoot Yourself in the Foot."

In other expenses, IRS employees doled out $35,800 on three planning trips before the conference.

Forty-five employees who lived in the local area got to stay in the hotels and received daily per diems, amounting to more than $30,000 total.

And attendees got numerous gifts and promotional items from conference organizers–totaling more than $64,000. This included imprinted bags, imprinted hard-covered journals, lanyards, travel mugs, picture frames, and various promotion items, according to the audit.

Some attendees were also given Los Angeles Angels baseball tickets as contest prizes, which the division said came as a donation from the hotels.

At the three hotels, 132 suite upgrades were provided each night of the conference, representing nearly 5% of the 2,830 rooms booked. The upgrades ranged from $299 to $1,000 per night.

The hotels provided 10 free rooms each night, which were used by paid speakers and non-IRS support staff, according to the audit. Two of the event planners were given free rooms for 19 nights.

While attendees received a daily $71 per diem, they were also given two free drink coupons, daily continental breakfasts, and beverages and snacks during breaks.

The SB/SE division spent more than $50,000 on videos for the conference. One of the videos, CNN has reported, had a Star-Trek theme, while the other was a parody on IRS employees learning how to do the Cupid Shuffle dance.

Because the IRS did not keep track of all expenses for the videos, the inspector general's office estimates that it took 62 staff hours to produce the piece at a minimum hourly rate of $50.

While the focus of the audit was on the 2010 conference, the inspector general looked at all IRS conferences between 2010 and 2012, finding that the agency held 225 conferences during that time at an estimated cost of $49 million. Nearly $38 million of that came in 2010 alone.

The inspector general's office said it made nine recommendations to the IRS for future conferences, and the agency agreed to all nine.

Responding to the report, the IRS maintained that the 2010 conference was needed to make sure managers had proper training for "significant new programs, major staff and manager turnover and a substantial increase in security threats."

The Small Business/Self-Employed division amounts to nearly one-third of the agency's total work force, and at the time of the 2010 conference, almost 30% of the division's managers had been hired in the prior two years.

However, acting IRS Commissioner Danny Werfel, who was appointed last month after his predecessor stepped down amid scandal, said in a statement that the 2010 conference was an "unfortunate vestige from a prior era" and such a conference would not take place today.

"I will continue my efforts and ensure tight spending protocols are in place to protect the use of taxpayer dollars," he said.

According to the official IRS response, written by IRS chief financial officer Pamela LaRue, the agency had already put in place an "extensive series of procedures" and has "dramatically cut" expenses for conferences since 2010. For example, LaRue notes, all conferences must now be approved centrally rather than by individual units at the IRS.

The number of large meetings decreased by 84% and the costs for those meetings decreased by 87% by 2012, LaRue writes. The IRS predicts costs for 2013 will be even lower.

Travel and training expenses are also down by more than 80%, according to the IRS. The agency now does 90% of its training hours online–nearly double the amount from 2010.

"The IRS takes seriously our obligations to be good stewards of government resources," LaRue writes, adding that the agency has reached $1 billion in savings since 2009.

As for the use of event planners and the receipt of room upgrades noted in the audit, LaRue says those items did not involve "any additional government resources."

IRS officials will continue to make their case this week when they appear Thursday before the House Oversight and Government Reform.


Filed under: IRS
soundoff (212 Responses)
  1. Lynn

    I've worked as a contractor for a Federal organization for several years and have noted quite a bit of unnecessary expenditure of money for items that are nice to have but are not required to the organization to perform their mission. I suspect that most Federal organizations would be found guilty of the type of lavish spending issues listed in the article if they underwent the same level of scrutiny that the IRS has recently gone through. With current technology most training/conferences can be conducted via video meetings.

    June 4, 2013 12:43 pm at 12:43 pm |
  2. Dan G

    CNN, how about some REAL reporting on the IRS/White House.

    June 4, 2013 12:44 pm at 12:44 pm |
  3. Another Tax Payer

    This sickens me; all those levies, wage garnishments, mail harassment and threats. All the stress this agency causes those who may owe a few bucks to Uncle Sam so that they can spend all that money. How about some tax forgiveness instead.

    June 4, 2013 12:44 pm at 12:44 pm |
  4. Rochester NY

    Proposed amendment to Form 1040:
    "If you would like to donate $1 to auditor boondoggles check box"

    June 4, 2013 12:45 pm at 12:45 pm |
  5. Sirned

    Am I correct that the head of the IRS until a few weeks ago was a Bush appointee? Because that would explain a lot..

    June 4, 2013 12:45 pm at 12:45 pm |
  6. Klaus

    That must be the hope and CHANGE they talked about....
    thank my you dear leader for thoughtful spending of my hard earned dollars. I guess it was to stimulate the economy , we got it all wrong ?

    Obama is great,Obama is great,Obama is great,

    June 4, 2013 12:45 pm at 12:45 pm |
  7. critical thinking

    Who is surprised by this? When the concept of "Spending Other Peoples Money, goes unchecked this will always happen. This has to stop! We must reduce the size of government and we must change our tax collecting approach. It needs to be uncomplicated, a straight tax flat tax of 20% for incomes from $35,000 to $150,000 and 25% for income regardless of how it is earned above $150,000. No exemptions, no deductions, simple and easy. We could then eliminate approx. 80% of the current IRS staffing.

    June 4, 2013 12:47 pm at 12:47 pm |
  8. Cavaliere

    Does everyone understand how common these "team building activities"" are in the private sector?

    If you own stock in a large corporation - and if you have a 401K, chances are you own stock in several - it's likely that corporate officers from there did, and probably still do, similar things. What do you bet that artist with the paintings has worked on stage for several Fortune 500 companies.?

    Before you go rushing to tell me "That's different!!", is it really? Not if you're a stockholder it isn't. It's still your money. And if you think you"re happy with the returns you've been getting, wouldn't this kind of activity mean your returns could have been even better? And if they COULD be, SHOULDN'T they be?

    Screw the double standard. Your money is your money.

    June 4, 2013 12:47 pm at 12:47 pm |
  9. Jim Hilt

    Great, the presidents gonna read this and find out about it. They're in real trouble now!

    June 4, 2013 12:47 pm at 12:47 pm |
  10. Sniffit

    "Just how many M1 Abrams tanks do we have that we don't need?"

    Haha...you will now no doubt be told that the concept of "not needing" is entirely inapplicable to military hardware. "We can always find a use for it."

    June 4, 2013 12:47 pm at 12:47 pm |
  11. Sniffit

    "How about some tax forgiveness instead."

    I'm sorry, but that's reserved for those making 7 figures or more.

    June 4, 2013 12:48 pm at 12:48 pm |
  12. dexter

    happened everywhere. i understand if it's a third world country, but here in the U.S.?? c'mon now. *facepalm*

    June 4, 2013 12:49 pm at 12:49 pm |
  13. beatstockpromotersdotcom

    They need to tar and feather these IRS workers

    June 4, 2013 12:49 pm at 12:49 pm |
  14. Matt F

    I, for one, want this money refunded to us. This was tax-payer money that was used for this travesty.

    I paid for part of this ridiculous behavior and want that money back! How do I claim a deduction on my 1040 form for this theft?

    June 4, 2013 12:50 pm at 12:50 pm |
  15. Melanie

    When are we going to get a president with a pair that will stand up and address this incompetent behavior??? This just makes me sick that these people "played" on my hard-earned money!!!

    June 4, 2013 12:50 pm at 12:50 pm |
  16. drc

    Wait, I thought Obama and all Government agencies said there is NO waste to be cut which is why we had to have the sequestor cuts? Oh right....the reality is any and ALL agencies have waste and can make cuts..they simply have no desire to cut spending

    June 4, 2013 12:50 pm at 12:50 pm |
  17. Kurt

    @ Jim, I just don't find that believable. I don't think the IRS should have spent this kind of money this way. But this is just the normal course in private industry. Corporate conferences spend like this a much more. Ask any professional meeting planner.

    Two things need to be done: #1 – stop such spending by government agencies; #2 – private industry can do what it wants, but these types of expenses shoudl no longer be a tax deducatable business expense. Sadly, the Republicans would never agree to #2.

    June 4, 2013 12:51 pm at 12:51 pm |
  18. John

    Sirned... You are correct, however, it is now known his wife was a member of the OWS DC crowd and involved with a liberal 504(C) 4's... Can't make this stuff up.... So, for me, that explains a lot.

    June 4, 2013 12:52 pm at 12:52 pm |
  19. Beth

    What!!! They got lanyards, travel mugs AND picture frames. OMG, I hope they had to pay taxes on those!

    June 4, 2013 12:52 pm at 12:52 pm |
  20. Bobby

    Did the IRS employees count the "freebies" as ordinary income...and pay their taxes owed....

    June 4, 2013 12:52 pm at 12:52 pm |
  21. Malory Archer

    Cavaliere

    Does everyone understand how common these "team building activities"" are in the private sector?

    If you own stock in a large corporation – and if you have a 401K, chances are you own stock in several – it's likely that corporate officers from there did, and probably still do, similar things. What do you bet that artist with the paintings has worked on stage for several Fortune 500 companies.?

    Before you go rushing to tell me "That's different!!", is it really? Not if you're a stockholder it isn't....

    +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    Or if you're a customer who has to pay a higher price for a product because SOMEBODY has to pay for the muckity-mucks' lavish lifestyles!

    June 4, 2013 12:53 pm at 12:53 pm |
  22. Martin Schroeter

    Did any of the attendees to the meeting in Anaheim, CA report any of the gifts received as income on their income tax declaration for year 2010 ? Obviously audits of the income tax for all of the attendees is called for !

    June 4, 2013 12:54 pm at 12:54 pm |
  23. Martin

    Did any of the attendees to the meeting in Anaheim, CA report any of the gifts received as income on their income tax declaration for year 2010 ?

    June 4, 2013 12:56 pm at 12:56 pm |
  24. real person

    Come on, America ! Suddenly we are so angry that someone finally enjoying lavish treats..... How about we ALL voted for sharing the Wealth ! Let those people to enjoy someone's money .. Who care about " tea baggers" money. They all reach. They will make money later. But poor people at least can enjoy some good life !
    Thet deserve this too!
    God bless Obama !
    Soon we all will be EQUAL !!!!
    Obama forever !! Obama forever !! Obama forever !! Obama forever !! Obama forever !! Obama forever !!
    Obama forever !! Obama forever !!

    June 4, 2013 12:56 pm at 12:56 pm |
  25. John

    California Gary – As a public accountant, i can tell you that the dumbest people are IRS employees... If they were smart, they would be a public or private accountant... They're at the IRS because they can't do real accounting work.

    June 4, 2013 12:57 pm at 12:57 pm |
1 2 3 4 5 6 7 8 9