June 4th, 2013
12:06 PM ET
2 years 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. rad666

    Why is the IRS being singled out?

    Every government agency wastes taxpayer funds. It is part of the job description.

    June 4, 2013 01:55 pm at 1:55 pm |
  2. tiz

    The IRS certainly cannot be trusted with Obamacare..... if they can't handle their own business....what on earth do you think they'll do to the healthcare train wreck..... it's not going to be pretty....

    June 4, 2013 01:58 pm at 1:58 pm |
  3. t3chn0ph0b3

    This kind of money blowing is pretty standard for government organizations, and corporate America in general, too. You're given an annual budget, and if you don't use up all of the money and then some, your budget gets reduced by that amount for the next planning cycle. The only way to hold onto the funding for next year just in case you need it is to blow it this year on stuff you don't really need.

    June 4, 2013 01:59 pm at 1:59 pm |
  4. El Jefe

    If you do the math it only cost about $500/person/day which includes flight, hotel, food, drinks and per diem. All of a sudden it doesn't sound so outrageous.

    June 4, 2013 02:00 pm at 2:00 pm |
  5. jim

    I hope this snowballs and all goverment agencies get investigated. They should look in to all the groups asking for exempt status as well. I bet they will find a lot more money being wasted.

    June 4, 2013 02:00 pm at 2:00 pm |
  6. CherryMama

    4.1 million can buy an awful lot of school supplies, or fix roads, or keep convicts locked up, or preserve our national parks, or..... ( can think of a lot better ways to spend OUR money!)

    June 4, 2013 02:02 pm at 2:02 pm |
  7. jim

    The funny part is the folks complaining about the IRS sending crazy money do the same thing.(Congress /Goverment)

    June 4, 2013 02:02 pm at 2:02 pm |
  8. Nothing At All

    Last time anyone checked it was Congress that passed all the laws which the IRS operates under. No organization should receive tax exempt status if any of its operations are political in nature. All the outrage by these organizations leads to the fact by using such politically charged names it resulted in additional scrutiny. They chose these names to promote donations from a particular political bent not for social welfare purposes.

    Thank the SCOTUS for permitting these types of donations in the first place.

    June 4, 2013 02:04 pm at 2:04 pm |
  9. The REAL Truth...

    I'm far less concerned about the IRS targeting conservative groups applying for 501c4 status (they were all approved anyway and only one group was denied... it was Democrat org) than I am about the lavish spending.
    As mentioned before.. as is common in many private orgs... one has to spend the budget allocated for a given year, or lose it. There are all kinds of creative financing methods to decrease ones annual budget by x%, yet increase the dollar amount allocated. Common practice, as is spending it to justify ones existence.
    This is not a Repug or Dem issues, it's a Congressional funding issue and that Govt is run by civil servants whose "masters" can change frequently.
    How about Congress investigate REAL waste instead of spend budget dollars on useless political scandals.

    June 4, 2013 02:04 pm at 2:04 pm |
  10. bobo

    Now you what the Tea Party stands for...... NO Government waste! Why tax us as much as the Government does when there is so much waste???

    June 4, 2013 02:05 pm at 2:05 pm |
  11. sly

    Wait until folks find out how much Corporations spend to fly their CEO's to 1 hour business meetings.

    These 1 hour meetings typically cost over $50,000 with the flights, hotel bills, lunch bills.

    Welcome to reality Americans. A little surprising anyone is surprised.

    June 4, 2013 02:05 pm at 2:05 pm |
  12. J G

    Well, we all know that the Obama administration loves to spend money like it's other people's money.

    June 4, 2013 02:05 pm at 2:05 pm |
  13. sly

    why are attendees receiving $71/day to attend? are they not employees? didn't they already get their regular salary for these days? am I missing something?

    June 4, 2013 02:06 pm at 2:06 pm |
  14. FloydZepp

    This is just a case of the TeaCrazies weeping because the IRS won't give them a free socialist handout in the form of Tax Exempt Status.

    June 4, 2013 02:06 pm at 2:06 pm |
  15. Hamburger Jones

    "So the moral of the story is...." collecting taxes is and should be non-partisan, but good luck finding someone with no political affiliations at all. And that you actually fell for the childish notion that people who don't share your political views are "bad." What are you, twelve? Grow up.

    June 4, 2013 02:07 pm at 2:07 pm |
  16. NH Tax Payer

    We should all be really upset over this, just think of what could be done with this money.
    Help to a child in need, maybe with schooling. Money for the needy ect... How can these people do
    this when you don't have far to look to see people in need? We should demand an answer and they should
    be out of work, no excuses.

    June 4, 2013 02:07 pm at 2:07 pm |
  17. 94M

    I think all the people reading these and other articles about our government gone wild should stop trying to blame each other’s party and start writing their Congressmen and demand better service for our tax dollars. The common theme in all the recent issues is that our leaders are not leading, and the people they choose, Democrat or Republican are not doing their jobs. It’s easy to tell someone off on these message boards, try doing the right thing and tell your elected officials you demand better representation!

    June 4, 2013 02:08 pm at 2:08 pm |
  18. J G

    How many of the speakers invited to this conference were big donors to the Democratic party? How else do you justify paying an artist $17k to paint onstage or $25k for a 2 hour speaking engagement? The highest priced lawyers and speakers barely make $1k/hour.

    June 4, 2013 02:08 pm at 2:08 pm |
  19. jrm03063

    We need full disclosure – not just from the IRS – but from the hardest critics who really are just looking for another excuse to avoid/delay/ignore the health care problem in our country.

    June 4, 2013 02:08 pm at 2:08 pm |
  20. SaveABuck

    For a conference of about 2000 people to cost 4,000,000 over 4 days is not that outrageous. Really it's like $500 a day per person. And we're blaming them for trying to come up with creative videos and doing stuff in house? I think there are bigger stories out there.

    June 4, 2013 02:09 pm at 2:09 pm |
  21. Wake up People!

    I know this is a stupid question particularly with the new Fox-lite, but regarding Benghazi...... Have we located the guilty parties yet? Have we even identified them?? Has anyone claimed responsibility for their actions???

    Does anyone other than the families of the deceased want real answers???

    June 4, 2013 02:10 pm at 2:10 pm |
  22. hitman

    Corruption exists in the IRS, CIA and FBI! The buck stops with Obama!

    June 4, 2013 02:10 pm at 2:10 pm |
  23. BrianMemphis

    So many liberals trying to justify. Amazing. Have you no standards in your life (except your standard to hate republicans)?

    June 4, 2013 02:14 pm at 2:14 pm |
  24. Andrew

    Am I the only one that doesn't find these expenses appalling? $135 /night, $71 /day per diem while being given free snacks? This isn't a liberal or conservative story, there doesn't seem to be a story here whatsoever. The conference came in at a little over $1,500/employee after lodging, meals, classes, airfare, which really doesn't seem too out of the ordinary.

    June 4, 2013 02:14 pm at 2:14 pm |
  25. well

    hey, you are talking about my livelihood here. why, making and selling weapons for financial or military terrorism is all patriotic, passing propaganda as knowledge to kids is a noble calling, and selling lies and bigotry in the name of all gods is sacred, but i can't have a tax-dollar-paid conference on how to evade public scrutiny? what nerve!

    June 4, 2013 02:14 pm at 2:14 pm |
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