IRS braces for scathing report

WASHINGTON — The Internal Revenue Service spent an estimated $49 million on at least 220 conferences for employees over a three-year span beginning in fiscal 2010, according to a forthcoming report that will prompt fresh scrutiny of the already embattled agency.

The findings come as the Obama administration is overhauling the agency after officials admitted that dozens of groups were inappropriately scrutinized as they sought tax-exempt status. The admission forced the resignation of the agency’s acting commissioner and has sparked criminal and congressional investigations.

Seeking to get ahead of the fresh controversy, IRS Acting Commissioner Daniel Werfel acknowledged the report in a statement late Friday, but he didn’t share any of the findings. He called the spending “an unfortunate vestige from a prior era” and said that the agency has significantly curtailed conference spending in recent years.

The audit is set for release Tuesday and was prepared by the Treasury Inspector General for Tax Administration, the same entity that confirmed allegations against the agency’s tax-exempt unit. Details of the report were shared by several congressional aides, who were briefed on the report Friday.

The report is reminiscent of findings released last year after a similar investigation into lavish spending on conferences hosted by the General Services Administration, revelations that prompted other inspectors general to launch probes as the Obama administration ordered government-wide cutbacks in such meetings.

In its report, the Treasury’s inspector general provides detailed estimates on hundreds of IRS conferences, but investigators couldn’t independently verify the total costs because the agency failed to keep records of all expenses, according to the aides.

The report focuses especially on an August 2010 conference held in Anaheim, Calif., for roughly 2,600 agency employees in the IRS’ small business and self-employed division, a unit that assists small business owners with tax preparation and is based in Lanham.

The conference cost roughly $4.1 million and was paid for in part with about $3.2 million in unused funds from the IRS’ enforcement budget, a decision that didn’t violate IRS guidelines, according to aides briefed on the audit.

During the conference, employees watched two training videos starring division employees that cost at least $60,000 to produce, according to the audit’s estimates.

The first video is a parody of the “Star Trek” television and movie franchise and stars division employees discussing how they might identify and address allegations of tax fraud. Aides briefed on the audit said employees paid for Star Trek uniforms they wear in the video, but the agency paid for the construction of an elaborate mock-up of the bridge of the starship Enterprise, the vessel used to transport the show’s characters.

One employee, mocking the show’s Russian character, Pavel Chekov, is seen telling another colleague, “Back in Russia, I dreamed someday I’d be rich and famous.”

“Me, too,” the colleague responds. “That’s why I became a public servant.”

The second video stars some of the same employees learning how to dance the “Cupid Shuffle” from a 2007 song by the performer Cupid. As other employees learn the dance moves, one female employee comments, “They don’t pay me enough to do this.”

The IRS first released details on the “Star Trek” video in March at the request of Rep. Charles Boustany Jr., R-La., who had learned about it and a television production studio at the division’s offices in New Carrollton, Md. Boustany chairs a House Ways and Means Committee’s oversight subcommittee and also fielded some of the first allegations that tea-party-affiliated groups were being inappropriately targeted as they sought tax-exempt status.

“The outrage toward the IRS is only growing stronger,” Boustany said in a statement Friday. “Clearly this is an agency where abuse and waste is the norm and not the exception.”

Also during the Anaheim conference, employees heard from two keynote speakers, who together earned at least $44,000 in appearance fees. At least one of the speakers received more than $2,000 for first-class air travel, according to aides briefed on the report. The topic of one of the speeches focused on how art can influence leadership, and the speaker painted at least six paintings, two of which were given to employees in the audience, the aides said.

A spokeswoman for the inspector general’s office declined to comment until the report is publicly released Tuesday. The findings are expected to be the subject of a House Oversight and Government Reform Committee hearing scheduled for Thursday.

In his statement, Werfel said there were “legitimate reasons for holding the meeting” but added that many of its expenses “were inappropriate and should not have occurred.”

“Taxpayers should take comfort that a conference like this would not take place today,” he said. “Sweeping new spending restrictions have been put in place at the IRS, and travel and training expenses have dropped more than 80 percent since 2010 and similar large-scale meetings did not take place in 2011, 2012 or 2013.”

Werfel is scheduled to make his first public comments since becoming acting IRS commissioner on Monday at a House Appropriations subcommittee hearing on the IRS targeting scandal. He is a former White House budget official, who took over the IRS after President Barack Obama forced out the former acting commissioner last month.

In his previous role as a senior official at the Office of Management and Budget, Werfel helped implement government-wide cuts in administrative expenses for travel, conferences and the distribution of free “swag,” or promotional materials. Those changes were originally prompted by a White House push to eliminate excessive spending as it negotiated with lawmakers to trim the federal deficit.

The Treasury Department, of which the IRS is a part, said in a statement issued late Friday that it “places the highest priority on protecting taxpayer dollars” and that it plans to work with Werfel “as he conducts his systemic review of all IRS operations and works to restore public confidence in the IRS.”

The IRS revelations come as federal agencies continue making changes to policies on government-hosted conferences after the GSA’s spending on meetings drew widespread criticism from both parties in Congress and became a symbol of government excess at a time when Republicans are pressing for smaller government.

At GSA, the agency’s Public Buildings Service had held a four-day junket off the Las Vegas strip for 300 employees in the department’s western field offices. The $823,000 Western Region conference, held in 2010 at a lavish hotel, featured a mind reader, after-hour parties in loft suites, “awards” ceremonies that proved to be occasions for throwing parties and a “training” exercise involving building a bicycle.

The White House forced out top GSA officials and new leadership has moved quickly to slash spending on travel.

In another report released last fall, the inspector general for the Department of Veterans Affairs revealed that agency conference planners allowed up to $752,000 in questionable spending on two training conferences in Orlando, Fla. in 2011 and took gifts, including spa treatments and entertainment.

The tab for the VA conferences came to $6.1 million. Two top human resources officials resigned, and two other employees were placed on administrative leave after the inspector general’s report came out.

Last year, in response to the excesses, there was no increase in the daily government hotel rate, another sign that agencies were cutting back. Government travel has declined further under the budget cuts known as sequestration, which kicked in March 1. Almost every federal agency has slashed planned trips for employee training and conferences.

As part of the cutbacks, the IRS began producing training videos to show employees instead of flying them to training sessions in other cities. In one of the videos from 2011, employees star in a spoof of “Gilligan’s Island.”