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.
So that everybody remembers and I hope others re-post, this all happened under a Bush appointee. The media keeps forgetting to state that fact in their long diatribes of excesses. Let's call him in front of Issa. Oh no, Issa doesn't want to embarrass a Repbulibagger.
Am I correct that the head of the IRS until a few weeks ago was a Bush appointee? Because that would explain a lot.."
Yes it does explain a lot. He is a democrat and his was is a major player for Democratic polices. What!!??? You didn't know?
Until we fix the system where budgets in the federal government are allocated based on the previous years spending, this kind of crap will continue. THey have EVERY incentive to spend all their budget, and NO incentive to have anything left at the end of the year. Creates a system that encourages waste in order to get more budget the next year. Managers who frugally say underneath their budgets are punished for "overestimating" their budget. Welcome to a 'functioning" beaucracy.
@Cavaliere Yeah because you're forced to be a stockholder just like you're forced to pay taxes. Right?
Corporations and governments reward their employees with trips to conventions ... at least for the past 50-100 years.
Those of you who are not janitors and house painters are well aware of how the corporate and government worlds operate.
Unbelievable. That could have knocked the ceiling a little. I think it is shameful. Why should I pay taxes if all there gonna use it for is wastefulness. Should keep our tax money and use it for what some of us is doing without.
Once again, for the media who are sanctimonious about their rights but forget their duty for reporting, this all occurred under a Bush appointee. How about Issa calling the Bush appointed director before his committee? Of course he won't, he doesn't want to embarrass a Republibagger.
Hard to know who to take sides with ; Tea-baggers who use their wealth and positions of power to virtually enslave the workforce, who so obviously hate paying taxes that they rightly should bear scrutiny in their most likely fraudulent returns, OR the IRS, a bloated beaurocracy that existsonly to perpetuate itself by leeching off others through the most extensive tax code on earth.
Property tax, Income Tax, Sales Tax, Vehicle Registration (obviously a tax if it is based off the value of your vehicle), we are taxed to death with NO accountability of government. Taxation without representation? Isn't that why this country was founded, to get AWAY from excessive leeches.
THE ENEMY OF MY ENEMY IS MY FRIEND. But what if they are BOTH my enemies? What then?
Stand back, make popcorn, and watch them tear each other apart.
let me get this straight, the same ruthless and vicious agency that is tasked with collecting tax from the people. in spite of the fact many are ruined by the heavy handed actions of their agency is spending those funds for parties? i have been audited and spent 3 full days with one of those vicious animals who called me a liar more than once and wound up paying $122.00 with fines and without an apology for their behavior. and they are having parties? i would be stunned if any of them was fired.
Before you all go blaming Obama on this, let me ask you. How long has this activity been going on? This has been a problem for as long as I can remember. If you also look at State run agencies, you'll find this is an issue there as well.
How on earth did they manage that??? Since the GSA scandal a couple of years ago, we in DoE have had incredibly tight restrictions and limitations on conference attendance in particular, plus general cutbacks on travel. It's actually made it hard to do our jobs sometimes because some of these meetings are essential, and we've NEVER been allowed to exceed the federal per diem rates – and no parties are ever thrown for us, and if there is a reception it's a no-host bar. Similar tightfistedness has been the rule for Interior and DoD (civilian employees anyway) as well. How does IRS get around this, especially in the past couple of years????
I'm an event planner, and this is totally out of control. Who needs NINETEEN FREE NIGHTS at a hotel to plan an event? Those must be really awful planners.
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."
Oh yeah. Let's beat the war drums and go into Syria. We can use them there.
Cavaliere: "Does everyone understand how common these "team building activities"" are in the private sector?"....
Cavaliere: You are so right. I am actually surprised they did not spend more. We always hear that we need to elect business people to national offices. Well, private enterprises spend enormous dollars on team building, education, recognition events, travel,..... Cavaliere, tax payers are paying huge parts of those expenditures – they are tax deductible. As a former sales/marketing rep and consultant for large and medium organizations for over 40 years, I can attest to the incredible waste – far less in the government agencies than in the private enterprises.
You think the IRS is spending money foolishly. Wait till Obamacare is fully implemented.
I'm all for taxes to help run this country but I'm totally against letting these guys manage our money. this is just ridiculous.
Fair is Fair
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.
FIFY Dan Quayle!
Just when you thought life in America under barry could not possibly become even more shameful......
Let's eliminate the IRS and mandatory taxes all together and replace it with "donations"... kind-a like they do in most churches.....pass the collection plate or have donation jars at businesses......then.....if we need a little extra money....say.....to invade a country, we could have a telethon to pay the troops.....just saying...
Gee, what a surprise. Government employees wasting money?
The IRS has always been "out of control". They've been targeting special groups since the 80', that I know of. Everyone that worked there knew this. This isn't a dem VS rep problem. This is government problem. Happens all the time, in most if not all government agencies.
Those that got reimbursement for attending the conference should repay out of their pocket (plus interest and penalty). Similar to what one gets for filing incorrect tax return.
Yep. A bush appointee. Lets see how far back they go looking at the IRS sending.
who is going to jail?
"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."
Oh yeah. Let's beat the war drums and go into Syria. We can use them there."
Or hey, maybe private sales to individuals! "The gubmint dun has them and the second amennmint to the constimatooshun says I has a rite to arm myself enuff to fight the gubmint!"