This Is What The IRS Spends Your Money On

Moments ago, the Treasury inspector general for tax administration, the same source as the crushing report exposing the IRS persecution of conservative groups, released a report highlighting the spending and "questionable expensing" by IRS staff who blew through $49 million across 225 conferences between 2010 and 2012. The source of the money was largely unused cash meant to hire more enforcement agents. Instead it was spent on things like the previously mentioned Star Trek parody, ad hoc drawn paintings of Abraham Lincoln and "motivational speakers" whose primary requirement is to be flown in first class.

Before getting into the details of just how the IRS spent the tax money it itself collected, here is the summary of the report:

In April 2012, the Treasury Inspector General for Tax Administration received an allegation about an August 2010 Internal Revenue Service (IRS) conference held in Anaheim, California, (hereafter referred to as the Anaheim conference or the conference) that may have involved excessive spending. The Small Business/Self-Employed (SB/SE) Division held the conference, entitled "Leading into the Future," for its entire management staff. According to information provided by the IRS, this conference was provided to 2,609 employees at an estimated cost of approximately $4.1 million.

Where did the money come from:

According to SB/SE Division management, the SB/SE Division was allocated $132.7 million in the IRS's FY 2010 budget to hire 1,315 full-time employees.

Or roughly $100,000 per agent: one can see why the IRS is incentivized to collect as much as possible. After all, any leftover cash will be promptly spent on "conventions."

So what exactly was the cash used for?

First, here is the breakdown of all IRS conferences in the period 2010-2012. 225 conferences in 3 years (over 70 per year), costing $48.6 million, averaging $216,141 each. Morale at the IRS must truly have been abysmal if it needs this much "group-building" activity and entertainment.

Narrowing it down to the infamous Anaheim conference:

Drilling down some more, here is how much just the guest speakers were paid at the same conference:

The motivational level must have been at all time highs. But it gets better:

For the conference, SB/SE Division management contracted with 15 outside speakers for presentations at a total cost of $135,350.... One keynote speaker was contracted to perform two keynote speeches that lasted approximately one hour each, and the speaker was paid $17,000. According to the contract signed by the IRS, this speaker was "uniquely qualified to deliver this presentation because of the combination of his artistic abilities and his presentation skills. In each presentation, he will create a unique painting that reinforces his message of unlearning the rules, breaking the boundaries, and freeing the thought process to find creative solutions to challenges."

The speaker was Eric Wahl: "artist, author, performer." More importantly, he is an artist:

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).


At each session, one attendee was selected by the speaker and presented with one of the paintings. SB/SE Division management indicated that three paintings were donated to the Combined Federal Campaign as auction items (these paintings were sold for $75, $130, and $380). SB/SE Division management stated that the final painting prepared during these presentations was lost. Figure 2 shows an example of a painting prepared during the conference.



The second keynote speaker was paid $27,500 (including travel expenses) for two speeches lasting approximately one hour each. According to the contract signed by the IRS, this speaker was uniquely qualified because the presentation was based on a book published by the speaker, and the speaker "will share how seemingly random combinations of ideas can drive radical innovations. His concept of Intersectional Ideas illustrates how ideas from different fields can be combined to generate new solutions to existing challenges. According to the contract, this speaker's fee of $27,500 included a $2,500 flat fee for travel, which the contracting officer authorized to accommodate first-class travel. "

The speaker in question is this Frans Johannson. According to this twitter profile, he is "the author of The Medici Effect and The Click Moment, dragon slayer, innovation thought leader, speaker and CEO of The Medici Group."

This, ladies and gentlemen, is what is known as the public sector trickle-down effect, which keeps motivational speakers (and artists) among the 1%.


Next we get to the infamous Star Trek Video...

As previously stated, the IRS reported that it expended $50,187 on "videos" for the conference, but was unable to provide any details supporting this cost. We determined that SB/SE Division management showed several videos at the conference, including a Star Trek parody and another video entitled "SB/SE Shuffle."


The conference theme was "Leading into the Future," with a Star Trek parody video shown at the beginning of the conference. This video consisted of a scripted presentation featuring SB/SE Division executives portraying Star Trek characters in a tax-themed parody.


SB/SE Division management stated that the purpose of the video was to open the conference by highlighting "current issues facing the IRS and SB/SE [Division] in the leadership arena and set the stage for the many topics being covered at the conference." According to SB/SE Division management, the SB/SE Division Commissioner verbally approved the creation of the video.


Although SB/SE Division management did not track a specific cost associated with producing the Star Trek video, we determined the following:

  • The Star Trek video was approximately 5 minutes and 40 seconds long and featured SB/SE Division executives in Star Trek costumes on a mock set of the Starship Enterprise. Per the SB/SE Division, employees purchased the costumes using personal funds.
  • The IRS constructed a mock set at its television studio located in New Carrollton, Maryland, at a cost of $2,400. However, SB/SE Division  management  does not have any documentation supporting this amount.
  • IRS personnel located at its New Carrollton television studio worked on the video production. The average grade for these IRS employees was a General  Schedule-14.
  • The SB/SE Division estimated that it takes 11 hours of staff work to produce one minute of finished video. Based on the length of the Star Trek  video,  we estimate it took approximately 62 staff hours to produce the final video. At a minimum hourly rate of 50.00 for a General Schedule-14 employee, this converts to approximately $3,100 in staff time.
  • No documentation was maintained to track any costs associated with the development of the other production costs, such as the script development, makeup, lighting, and videotaping.

... Then on to lodgings:

As part of the Letters of Intent with the hotels, the IRS received a certain number of free rooms per night as well as suite upgrades that were used by IRS personnel. Federal employees traveling for work are paid for their lodging costs plus a fixed amount for meals (per diem). As part of the agreement, the hotels charged the IRS the Federal Government rate of $135 per night for all rooms (including suites) provided.


Specifically, the Letters of Intent indicate that 93 suite upgrades were provided by the Hilton, 33 by the Marriott, and six by the Sheraton each night of the conference. This represents 4.7 percent of the 2,830 rooms that the hotels agreed to reserve in the Letters of Intent.


Although the per diem rate of $135 was charged by the hotels, we determined the rack rates13 for the upgraded rooms provided ranged from $299 per night to $1,500 per night, depending on the room and the hotel. For example, the Commissioner, SB/SE Division, stayed five nights in a Presidential Suite at the Marriott. This room is described as having a private bedroom, living area, conference table, wet bar, and billiard table. We spoke with a Marriott representative who stated that this suite currently retails for $3,500 per night."

The IRS per diem...

Federal employees traveling for work are paid a fixed amount for meals (per diem). In Calendar Year 2010, the meal and incidental expenses allowance for Anaheim, California, was $71 per day. According to the Federal Travel Regulations, employees are not required to reduce their per diem reimbursement for complimentary meals provided by a hotel or motel.

And so on. Much more in the full report below.