June 4th, 2013
12:06 PM ET
10 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. Jim

    I work for one of the largest companies in the world. WE rarely, if ever go to conferences – or if we do, a skeleton staff goes and reports back to the rest of us. How 'bout the IRS tightens their belt a little?

    June 4, 2013 12:34 pm at 12:34 pm |
  2. doregroj

    Where is President Obama when you need him? .. He should have just gotten irate the first minute he heard about this. And why did CNN post this article in a way that limit commentors interactivity. Also what is the name of the speaker that charged $ 27,500 plus $2700.00 for first class tickets, and what was the name of his book. We need to know that so we can at least make sure we dont every buy his book, and if we did, we burn it.

    June 4, 2013 12:34 pm at 12:34 pm |
  3. Tampa Tim

    In order for republicans to completely destroy America, they need to shut down the IRS. They were almost successful at bringing America to its knees under Bush, and want so desperately to finish the job. Fortunately for us,they are using a GOP criminal to try to do it.

    June 4, 2013 12:35 pm at 12:35 pm |
  4. Government Seismologist

    Please don't think that all government agencies behave like this. At USGS, for internal meetings we stay in cut-rate motels, can't bill any food or drink to the public, and attendance is strictly limited. Scientific meetings are pure geek from dawn to dusk; we go to communicate information and then we leave. Attendance is also limited usually to just 14 people per meeting. Field work is more spartan. The rules for government travel are strict (as they should be), if we so much as drink one of those bottles of water in motel rooms, it triggers an audit (no joke). I have no idea how IRS or GSA could justify their behavior, nor how the rules didn't apply to them. It makes me sick.

    June 4, 2013 12:36 pm at 12:36 pm |
  5. Bob Dobalina

    Web-based video conferencing FTW!

    June 4, 2013 12:37 pm at 12:37 pm |
  6. Jay

    So with training/seminar costs going down, can our Federal Income Tax rates go down? It would help me afford the gas to drive back and forth to work, since that is not tax deductable because I work for a company at it's location.

    June 4, 2013 12:37 pm at 12:37 pm |
  7. California Brian

    And the IRS is asking for a billion dollars more for their budget this year. Makes sense...I suppose future conferences in Dabai can be quite expensive and perhaps George Lucas can direct their next line dancing video.

    June 4, 2013 12:37 pm at 12:37 pm |
  8. Anthony

    Are Republicans investigating the IRS because it is the only government agency that spends lavishly on conferences, or are Republicans targeting the IRS because they don't like the IRS?

    If Republicans are using the investigation to go after people they don't like, aren't they doing the same thing that they accuse the IRS of doing?

    June 4, 2013 12:38 pm at 12:38 pm |
  9. Rudy NYC

    from the article:

    The audit noted 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.
    Misleading as misleading can get. I do believe that there was federal hiring freeze in place at that time.

    June 4, 2013 12:38 pm at 12:38 pm |
  10. YouMadBr0

    I have every bit of confidence that these guys will oversee Obamacare with complete competence!

    Wait, nevermind. We're screwed.

    June 4, 2013 12:38 pm at 12:38 pm |
  11. john

    This is not a left or right issue. We should all be appalled at this misuse of our tax dollars and recognize that the IRS has become too large and too lax. It may not be able to be policed. Simplify the tax code and reduce the size of the IRS significantly.

    June 4, 2013 12:38 pm at 12:38 pm |
  12. advocatusdiaboli

    Obama admin is corrupt: they are now using secret emails to avoid disclosures which is patently illegal:

    "The AP today lowered the boom on the widespread use of secret email accounts by federal officials. There are not secure inboxes for national security officials, but unlisted addresses for civilian officials - shadow accounts created so that official inboxes can fill up with spam and unread citizen complaints while officials go about their business.

    Since addresses are unknown, their contents are unknowable by reporters. One cannot file a Freedom of Information Act request for what one does not know exists."

    June 4, 2013 12:38 pm at 12:38 pm |
  13. PaulCat

    What's the different in IRS's lavish spending of tax payers dollars at their conference and Darrell Issa's lavish spending of tax payers dollars on over twenty unnecessary hearings, over and over again. At least until election time in 2014. This way they can make sure nothing esle gets done.

    June 4, 2013 12:38 pm at 12:38 pm |
  14. Sniffit

    "So. Do I get upset that the IRS had a problem .... or do I acknowledge that the IRS is trying to overcome by putting in place checkpoints to correct the problem?"

    Actually, Lynda, you're supposed to entirely ignore that significant progress has been made in correcting the problem, light your hair on fire with Aqua Net, throw an inconsolable tantrum while screaming "FREEEDUMB!!!!!" Braveheart-style, and then try to claim that it's all Obama's fault. Optional additions to the requisite mindless conniption fit include: pretending that the IRS can be closed down tomorrow and that doing so will magically solve unspecified problems instead of creating massive new ones, demanding that we repeal the constitutional amendments that touch on taxation (as if the original text doesn't give Congress the power to tax), and spewing complete non-sequiturs about socialism. You may now begin.

    June 4, 2013 12:39 pm at 12:39 pm |
  15. Dutch/Bad Newz, VA -aka- Take Back The House -aka- No Redemption Votes

    If you really want to talk about a waste of money, look no further than the DEFENSE BUDGET!!! Just how many M1 Abrams tanks do we have that we don't need?

    June 4, 2013 12:39 pm at 12:39 pm |
  16. Jimh77

    The IRS should be shut down. Why should us tax payers ever give them another dime? They are no better than Enron. All should be behind bars. And what is Washington going to do about it? Washington is just a load of crap anyways. Ruthless liars and warmongers.

    June 4, 2013 12:39 pm at 12:39 pm |
  17. sky

    This is what happens when no one monitors the people who are monitoring everyone else.

    June 4, 2013 12:39 pm at 12:39 pm |
  18. Sane in Maine

    So this is just a little peak under the IRS's rug – just for a short period of time – and they found a lot of dirt under there didn't they? If you were to look under other governmental rugs – what do you think you'd see? Mountains of dirt no doubt.

    June 4, 2013 12:40 pm at 12:40 pm |
  19. Voice of Reason

    @Everyone who isn't spitting mad about this.
    Do you pay taxes. Do you not feel the pinch. Comments like "such and such government body is worse" makes no sense to me. If I come and steal money from you are you going to point to someone else and say, "Well at least that guy stole more".

    June 4, 2013 12:40 pm at 12:40 pm |
  20. bjjschecter

    Big government = big spending. It's very hard to keep tabs on everything. Plus it's not their money, so hey, spend away.

    June 4, 2013 12:40 pm at 12:40 pm |
  21. jim

    they didn't keep track of some expenses???? That is what the article actually says! As a business owner the IRS forces me to track every friggin dime.. WTF

    June 4, 2013 12:41 pm at 12:41 pm |
  22. B

    pay your fair share fat cats.

    June 4, 2013 12:41 pm at 12:41 pm |
  23. Klaus

    you voted for the Chicago style politicians ... and not just once .... now you are surprised ... really?
    That's what happens when gangsters are in power.......

    vote them out!

    June 4, 2013 12:41 pm at 12:41 pm |
  24. Dean Ford

    Our so called GOVT, What a joke........let me clear this up the IRS is showing pics of Employees who get paid very little and using them as the pawns, Its the WHITE HOUSE/Presednt and Leaders of the IRS who are banking the 50 Mil, on trips party's and meetings............and soon it will be all hush hush. Our founder fathers would be rolling in the grave knowing what this Govt has turned into FOR THE PEOPLE.

    June 4, 2013 12:42 pm at 12:42 pm |
  25. Dan G

    Wish CNN would spend at least this amount of time on the REAL IRS story rather than the side stories. How about something on the testimony today. How about some question like why the new head of the IRS hasn't even asked the question who directed the crackdown on Conservative groups or why the White House has yet to provide the documents on why the enforcement Head of the IRS visited the White House 157 times. How about some real reporting from CNN rather than stories about actresses having surgery or the lastes GLBT story being pushed by CNN.

    June 4, 2013 12:42 pm at 12:42 pm |
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