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.
@Cavaliere Two big differences: 1) The corporation makes a profit and pays me dividends. The IRS confiscates my money. 2) I can choose to not own a stock. I cannot choose to not pay taxes.
You have the right to defend this if you'd like to; however, I think there are so many people that have given up trying to find work and no this is another example of Government wasting money.
Let me guess. This is Bush fault right?
Under the Bush Admin IRS went to their WH 1 once in 4 yrs.
Under Obama IRS head went to WH 157 times. 2/3rds more than the HHS Sec. the person responsbile for implementing Obamacare.
Should a Republican Admin do the same as this Admin?
Corruption is corruption. This is small potatoes compared to the dunning of political groups on the right.
Ploufe did not appear truthful in defending the administration on this issue.
Am I correct that the head of the IRS until a few weeks ago was a Bush appointee? Because that would explain a lot..
Do an audit of any government agency, federal or state, and you will see similar waste. The system is set up to encourage waste and abuse. It is sickening to see governments take the hard-earned money from hardworking middle class families that have to choose between buying food and medicine. We have no choice with paying taxes and this is what they do with the money.
You mean they spent more than congress to have a party no wonder they are after them
Sounds like normal fees tax payers are on the hook for at all tax deductable private confrences.
If tax dollars pay for them, why is it wrong to pay for the Irs too? At least the IRS works for us.
Don't invest in companies which you don't like or agree with their corporate policies. Private sector IS completely different from a government job, don't fool yourself. One organization only cares about profits and getting shareholders to invest in their company, the others tend to not have their focus on "making money.' I'm not forced to pay into my 401(k) or to buy stocks. However, I am forced to pay taxes. You're comparing apples and candles here. It's not a double standard. It's not some crazy conspiracy. A private company can do with its money what they want (within the confines of the law). The government doesn't have that luxury.
Who approved their Budgets–how did this get through the Budget committees in the HofR. Those that approved those budget in the House are the ones who should be blamed.
The IRS, DOJ, State Dept. And, White House are all full of liars, corruption, and cover ups. After hearing further victim testimony from the Congressional hearings today that the IRS tried to extort a pro life group to not protest at abortion clinics or they wouldn't get their exemption approval is a violation of their 1st amendment rights along with numerous other outrageous acts of criminal conduct makes watergate look like a boy scout event.
Obama/Clinton/Holder and company are by far the worst administration in the history of the US.
This goes way beyond poor administrative policies. This is pure criminal corruption and these criminals need to be impeached, fired, and thrown into prison....
The IRS is way out of control.
I want my money back.
For the last thirty years the conference situation has been abused in the government – but reality is usually somewhat different from the initial impression. Some conference centers throw-in conference rooms, coffe breaks, and audio-visual equipment for free if rooms are filled. Luxury hotels can be cheaper than those of lower quality if the business plan offers specials for large groups or government discounts. Still, the contracting process for conferences is fertile ground for those willing to cross the line and accept perks on the side – like Presidential Suites or hotel points as a sort of "finder's fee". Across the government the "use it or lose it" system of managing funds causes a good part of the problem. Conferences are held to burn-up funds rather than lose funding in subsequent funding cycles. Maybe just eliminating conferences would be a good idea – at least until the government has an actual budget. (Note: The budget might be a good thing for our Congress to work on rather than spending 100% of their time on political scandals.)
The IRS needs to be shut down and the 16th Amendment needs to be repealed—the federal government ought to be funded by whatever the state legislatures agree to give it, and not by extorting money from defenceless citizens.
No wonder they are pleading the 5th.
Yes the head of the irs was a bush appointee, and he was a democrat who gave cash to democratic cuases
To Cavalier – Are you serious? The obvious difference is, one can CHOOSE to invest in a company that may or may not be spending their money efficiently. One cannot choose whether or not to pay the IRS (try choosing not to and see what happens). And by the way, if private enterprises are profligate or unwise in where they invest, the market punishes them and people often lose their jobs. The same mechanisms don't exist in the public sector. Let's use some common sense next time we post a comment and not just a knee-jerk political whine.
Let's not politicize this, it's too important. Whoever wasted taxpayers money should be called to account.
but according to the democrats and obama the government isn't big enough, doesn't spend enough, is a lean mean government machine that only exists to make our life better! they can't cut one cent out of the spending or the whole government will shut down and the country will enter a depression.
how many of these stories will it take for the american people to wake up? i'm sure the left wing media will not publicize this so many will never even hear about it.
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.
Yeah, how about that?!
Have you noticed (at least according to all of those tv commercials) that if you owe the IRS 10's of thousands you only end up paying them back a small fraction, YET if you only owe them a couple of thousand they want it all back PLUS the penalty?
What do you think THAT is about, besides the system being more 1% friendly that is?
And no one will be held accountable and even if they did pick one or two to hang, the American Taxpayer would still be on the hook for their retirement costs. It's the American way. Big government and screw the common man/women. It's going to continue as it's too big for anyone to stop!
Democrats just look at that as stimulating the economy.
The best part of this story is anyone believing that all of the tens of thousands of wink, wink, 'non-profits" were legit and on the up and up. . .from either party. Too funny
the irs, the banking ceo's, politicians, school boards and administrators.....why is anyone surprised???? thieves.....