Journal of Accountancy Large Logo
ShareThis
|
TAX

TIGTA criticizes the IRS on conference overspending

 

By Sally P. Schreiber, J.D.
June 4, 2013

In the latest in a series of bad news days for the IRS, the Treasury Inspector General for Tax Administration (TIGTA) issued a report Tuesday on the IRS’s wasteful spending on conferences (TIGTA, Review of the August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California, Rep’t No. 2013-10-037). TIGTA focused its audit and report on the IRS Small Business/Self-Employed (SB/SE) Division’s conference in Anaheim in 2010 out of the many conferences held in the past three years  because it received a specific complaint alleging overspending at that conference and it was the most expensive IRS conference during that period. Overall, TIGTA found that the IRS spent $49 million on 225 conferences from 2010 through 2012.

In response to the TIGTA report, the House Committee on Oversight and Reform has announced that it will hold a hearing on the issue this Thursday. Acting IRS Commissioner Danny Werfel issued a statement in which he called the wasteful spending “an unfortunate vestige from a prior era” and said, “Taxpayers should take comfort that a conference like this would not take place today.”

The conference in Anaheim involved 2,609 SB/SE managers and executives at Sheraton, Marriott, and Hilton hotels and reportedly cost $4.1 million (the IRS was unable to establish exactly how much it cost). Despite the availability within the IRS of event planners, the SB/SE division used two outside event planners who received commissions from the hotels of $133,000, which were based on the number of rooms the IRS used.

TIGTA also found that the IRS could have negotiated lower rates had it not accepted other benefits from the hotels including suite upgrades, two of which were presidential suites that cost between $1,500 and $3,500 per night that were provided to SB/SE division executives for $135 per night. Other benefits included free cocktails and promotional gifts, such as logoed brief bags, engraved pens, picture frames, and clocks.

In its report, TIGTA made nine recommendations, all of which the IRS agreed with. A few of the details of the conference did not result in any specific recommendations, perhaps because they spoke for themselves. First, TIGTA mentioned that the conference paid $135,350 for 15 outside speakers, including two keynote speakers. One of the keynote speakers was paid $17,000 to paint portraits of various famous people and the Statue of Liberty and give them to audience members. Three of the paintings were later sold at auction for small amounts. The second speaker was paid $27,500 for two one-hour motivational speeches on radical innovation.

TIGTA recommendations

Recommendation 1 requires the IRS chief financial officer (CFO) to verify that the appropriate information was being tracked to ensure that the actual costs of conferences and the number of attendees could be established and audited. Although the IRS had a code employees were required to use when reporting expenses, TIGTA identified 188 employees who attended the Anaheim conference but did not use the correct code.             

When the Anaheim conference was held, there was no plan to track whether employees attended any of the training sessions, some of which may have qualified as continuing professional education (CPE) for IRS CPAs who attended the conference. The second recommendation was to implement a policy to determine whether specific training sessions held at conferences qualify for CPE credits for CPA employees.

The third recommendation addressed the process used to select the conference site. The IRS has a centralized delivery services (CDS) system in place to help choose conference space for IRS events, including off-site training when necessary. Instead of using the CDS, the SB/SE division used outside event planners (as noted above) and also paid a few SB/SE employees $6,000 extra to plan the conference. The event planners were not under contract with the IRS and therefore had no incentive to negotiate lower room rates with the hotels. Nongovernment facilities should be avoided except where it can be demonstrated that the anticipated benefits will more than offset any additional direct expenditures and will not appear to the general public as unnecessary spending.

When off-site facilities are used, CDS must document that government property was considered but was determined not available and explain why any available government space did not meet the conference’s business needs. TIGTA recommended that the IRS reemphasize the existing procedures to ensure that business units contact CDS when planning any future conference. Further, it recommended that new procedures require all documentation that supports how nongovernment facilities for future conferences were selected be maintained and available for management review. Recommendation 4 is related to No. 3: Implement procedures to identify the appropriate use of nongovernmental event planners when planning conferences, including how they should be selected and compensated.

The fifth recommendation involved three planning trips taken by SB/SE employees to plan and run the conference in Anaheim. The CFO should establish procedures to determine when these types of trips should be made and require local IRS employees, to the extent they are available, to perform these duties. 

The sixth recommendation was prompted by two videos that were created for the conference. A “Star Trek” parody video was created because the conference theme was “leading into the future”; it featured IRS executives in a tax-themed “Star Trek” skit. The second video involved managers and executives dancing on a stage. The costs to produce these videos could not be determined precisely because adequate records were not kept, but the IRS claimed it spent over $50,000 on them. As a result, TIGTA recommended procedures be established to outline the need for videos produced for future conferences. The videos’ purpose should be clearly detailed in any conference request, and their costs should be included in the request.

Seventh on the list was a requirement for the CFO to determine whether hotel room upgrades should be allowed and for the applicable business unit executive to approve any that occur. The eighth recommendation concerned the Anaheim conference organizers permitting local IRS employees to stay at the conference overnight and reimburse them for the costs. Because reimbursing these expenses may be taxable to the employee, the IRS should have, but did not always, issue Forms W-2 taxing the employees. 

The final recommendation was concerned with unnecessary costs, such as for setting up an exhibitors’ hall at the conference and paying for promotional items such as totes with imprinted logos. There was also a large expense for technology that was used minimally at the conference. TIGTA recommended that the CFO establish procedures to determine the need for any exhibitor halls and technology for future conferences. The purpose and use of any exhibitor hall or technology should be clearly detailed in any request for a conference and include the costs, including for giveaway items, in the approval request. 

IRS response

The IRS on Tuesday posted a “key facts” document in response to the TIGTA report. In that document, it said that the IRS “has dramatically cut the number of meetings involving travel since 2010. We did not hold any similar, large-scale nationwide meetings like these in 2011, 2012 or 2013, and we do not have any plans to do so going forward.” The IRS also acknowledged that, “While there were legitimate reasons for holding the meeting, many of the expenses associated with it were inappropriate and should not have been incurred.”

The IRS also noted that it has decreased travel and training expenses by 80% since 2010, and posted a chart showing its conference spending over that past three years.

Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

View CommentsView Comments   |  
Add CommentsAdd Comment   |   ShareThis

RELATED TOPICS

CPE Direct articles Web-exclusive content
AICPA Logo Copyright © 2013 American Institute of Certified Public Accountants. All rights reserved.
Reliable. Resourceful. Respected. (Tagline)