June 4th, 2013
12:06 PM ET
9 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. USMC8511

    Although this story does not surprise me it is important to remember that not one political party is to blame; but all of them!! This is a freaky travesty to say the least, employees who leave near by received periderm! I am a military retiree who has to take a reduced retirement package because the money is being used for this!?

    June 4, 2013 02:16 pm at 2:16 pm |
  2. Anonymous

    Maybe we should get a tax return/rebate with the estimated waste of tax payer dollars back to us. I'm seeing a pattern of stealing from the tax payers to fund stupid crap. Why should I keep paying taxes? Oh wait because they will throw my a** in jail if I don't.

    June 4, 2013 02:20 pm at 2:20 pm |
  3. notowar

    someone posted that companies do this also, but if a company wants to waste money that is fine, the IRS is wasting OUR money to keep an inflated budget.. big difference

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

    Isn't it obvious. The unaccounted for funds were used to purchase Disneyland tickets for the IRS conference attendees.

    June 4, 2013 02:24 pm at 2:24 pm |
  5. rep

    Most of this is about the 2010 conference, and while that was clearly wrong & over the top, that almost all of those types of abuses have long since been self-corrected and curtailed. Even the article (timidly) mentions that towards the end of it. But of course, that fact doesn't grab nearly as much attention as does, say, harping on the problems of the past as if they're still going on.

    June 4, 2013 02:26 pm at 2:26 pm |
  6. The REAL Truth...

    @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....
    It would appear that many are badly informed on the role of the IRS with ACA – no doubt deliberately so by that bastion of "fair and balanced" news organization. When are the dimwits going to get the message... ACA (or Obamacare if you prefer the derogatory term) if a REPUBLICAN HEALTHCARE plan, modeled on Mitten's MA plan, constructed using the SAME consultant's Romney used and APPROVED by Congress and the SCOTUS. Get over it.
    The IRS does not manage the ACA, it has oversight on the collection of penalties from those who chose not be insured. They will be doing the job Congress assigned them.
    Please get educated before proving what we already know.

    June 4, 2013 02:27 pm at 2:27 pm |
  7. jamison

    The arrogant IRS has harassed us terribly over the years. It's time THEY WERE AUDITED.

    June 4, 2013 02:28 pm at 2:28 pm |
  8. leah

    Remember: There have been federal hiring freezes on during most of the economic recovery....and the new-hire accounts kept building up. Too bad IRS management didn't realize they couldn't take from those accounts to splurge on other business related niceties.

    June 4, 2013 02:30 pm at 2:30 pm |
  9. Durundal

    There is a IRS employee that was uncomfortable with what he was doing to Conservative organizations. He kept detailed records and is about to come out with damning evidence that could reach the Whitehouse.

    Dafuq are you getting this from?!? GIve it up already, youre just looking foolish

    June 4, 2013 02:32 pm at 2:32 pm |
  10. truth hurts but realty bites

    Stop complaining all you lefties. This is what big, bloated, unaccountable government looks like. Next time you look at your paycheck and complain about all the taxes taken out, just be thankful the IRS isn't spending $200 million on conferences and dance videos. Now please get back to work, the IRS needs to be fed.

    June 4, 2013 02:34 pm at 2:34 pm |
  11. DavidV

    Agree with El Jefe.

    My numbers work out to $1,576 per person. This is exorbitant for travel, lodging and food in Anaheim, CA?

    June 4, 2013 02:34 pm at 2:34 pm |
  12. Vijay

    Republicans can delay an appointee upto three years then why not IRS can delay a conservative group for three years. You all know 4 US districts judges were empty for long. We dont have ATF leader, Consumer Protection Bureau and many more. At that time no one spark the outrage. If we had CPB, then many of the houses will not be foreclosed. Nobody is listening about 501 c 4 status clause in IRS code. That is the issue not the other way round. I still don't understand why nobody talks about Koch Brothers involved in providing money for their agenda.

    June 4, 2013 02:34 pm at 2:34 pm |
  13. Mike in Fairfax, VA

    @El Jefe.... $500/person/day does not sound outrageous to you? I can take my family to Bermuda for less than that! Even including flight, hotel, food drinks and per diem. Only then...I'd be paying for my family to go instead of me paying for a bunch of government workers to go. See the difference? Probably not.

    June 4, 2013 02:35 pm at 2:35 pm |
  14. Mike

    Less than the Obamas spend on 1 vacation, what's the big deal?

    June 4, 2013 02:37 pm at 2:37 pm |
  15. Dan

    Every agency does this to some extent not to mention big corporations and big labor unions.

    June 4, 2013 02:46 pm at 2:46 pm |
  16. Dark Knight

    I by no means am defending the IRS – yet let's be exceptional clear. Every large businesss and/or organization has funds allocated for leadership conventions from the Political Parties; IBM; Apple; and down to Military Units. So let's take a deep breathe and resume this conversation in the correct light. There's far greater wasteful spending within the medical field from billing to procedures get be truly excited over. Please let us cease chasing from "One" shiny object to the next.

    June 4, 2013 02:47 pm at 2:47 pm |
  17. kevin

    This is disheartening

    June 4, 2013 02:49 pm at 2:49 pm |
  18. leah

    Couple of points that the author should weigh in on:

    1 – The funds came from new-hire/development accounts.
    2 – There has a federal hiring freeze on since the economic collapse of '08. These accounts would have built up rapidly in this case.
    3- The IRS is a not-for-profit organization. In theory, they HAVE to allocate what they take in.
    4 – The expenditures are not outrageous compared to what other large businesses pay – per employee – for the same types of off-site development seminars.

    Don't get me wrong, it would be better with me for any governmental agency to run on a shoestring.

    BUT - seems like these stories are written with no frame of reference with the intention of generating buzz for ad clicks.

    June 4, 2013 02:51 pm at 2:51 pm |
  19. Right wing stench

    Less than the $5.5 trillion GWB and his republican war criminals spent on two illigitimate wars.

    June 4, 2013 02:52 pm at 2:52 pm |
  20. Buzz

    In every job I've held, I've always viewed my employers money as I would view my own, meaning, I did not order or buy things frivolously. In fact, in most instances, my spending choices were far more conservative than the company's. Sadly, in one eerily similar situation, a small company I worked for had a CEO who decided to spend a $2-3 MILLION on a management conference followed by a retreat for the execs. Just a few months later, the company was in receivership.

    June 4, 2013 02:53 pm at 2:53 pm |
  21. GI Joe

    It's been going on for decades - blame the black man.

    June 4, 2013 02:55 pm at 2:55 pm |
  22. jim

    The IRS is a joke and needs to be razed to the ground and re-built. Total POS, hypocritical service. They have no ground to say squat about my taxes. They've wasted more than I have ever earned. FU and FU some more IRS.

    June 4, 2013 02:55 pm at 2:55 pm |
  23. Right wing stench

    Less than the $700 Billion payout Wall Street banks gave to their partying CEOs while the middle class and the poor struggle to make ends meet.

    June 4, 2013 02:56 pm at 2:56 pm |
  24. phil_177

    So, this must be where the IRS has lost my 8-year levy from SSA – some $12,112 – and can't figure out what/where it is today ... they also tried the bank which housed my Retire pay, all $5.00 and chump change.

    need the robbers to give it back ... and yes, I've got all the paperwork ...

    June 4, 2013 02:57 pm at 2:57 pm |
  25. Bill D

    Time to overhaul the IRS from the top all the way to the bottom. It's an agency that's out of control.

    June 4, 2013 02:57 pm at 2:57 pm |
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