[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
COLLECTED AND WASTED: THE IRS SPENDING
CULTURE AND CONFERENCE ABUSES
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 6, 2013
__________
Serial No. 113-79
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on June 6, 2013..................................... 1
WITNESSES
The Hon. J. Russell George, Inspector General, Treasury Inspector
General for Tax Administration
Oral Statement............................................... 7
Written Statement............................................ 9
Mr. Faris Fink, Commissioner, Small Business and Self-Employed
Division, Internal Revenue Service
Oral Statement............................................... 16
Mr. Daniel Werfel, Acting Commissioner, Internal Revenue Service
Oral Statement............................................... 54
Written Statement............................................ 56
APPENDIX
The Hon. Elijah E. Cummings, Opening Statement................... 102
The Hon. Gerald E. Connolly, Opening Statement................... 104
The Hon. Michelle Lujan Grisham, Opening Statement............... 106
Questions for the Record to OGR Comm. through Chairman Issa and
Rep. Lankford.................................................. 108
Questions for the Record from Wage & Investment from Rep. McHenry 110
COLLECTED AND WASTED: THE IRS SPENDING CULTURE AND CONFERENCE ABUSES
----------
Thursday, June 6, 2013
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 9:31 a.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Turner, Duncan,
Jordan, Chaffetz, Walberg, Lankford, Gosar, DesJarlais, Gowdy,
Farenthold, Lummis, Woodall, Massie, Meadows, Bentivolio,
DeSantis, Cummings, Maloney, Norton, Tierney, Clay, Connolly,
Speier, Pocan, Duckworth, Kelly, Cardenas, Horsford, and Lujan
Grisham.
Staff Present: Ali Ahmad, Communications Advisor; Richard
A. Beutel, Senior Counsel; Molly Boyl, Parliamentarian;
Lawrence J. Brady, Staff Director; Ashley H. Callen, Senior
Counsel; Caitlin Carroll, Deputy Press Secretary; Sharon Casey,
Senior Assistant Clerk; Steve Castor, General Counsel; John
Cuaderes, Deputy Staff Director; Carlton Davis, Senior Counsel;
Kate Dunbar, Professional Staff Member; Adam P. Fromm, Director
of Member Services and Committee Operations; Linda Good, Chief
Clerk; Tyler Grimm, Senior Professional Staff Member; Frederick
Hill, Director of Communications and Senior Policy Advisor;
Christopher Hixon, Deputy Chief Counsel, Oversight; Mark D.
Marin, Director of Oversight; Ashkok Pinto, Chief Counsel,
Investigations; Laura Rush, Deputy Chief Clerk; Scott Schmidt,
Deputy Director of Digital Strategy; Rebecca Watkins, Deputy
Director of Communications; Krista Boyd, Minority Deputy
Director of Legislation/Counsel; Kevin Corbin, Minority
Professional Staff Member; Jennifer Hoffman, Minority Press
Secretary; Carla Hultberg, Minority Chief Clerk; Elisa LaNier,
Minority Deputy Clerk; Lucinda Lessley, Minority Policy
Director; Dave Rapallo, Minority Staff Director; and Rory
Sheehan, Minority New Media Press Secretary.
Chairman Issa. The committee will come to order.
The Oversight Committee's mission statement most
appropriately is that we exist to secure two fundamental
principles. First, Americans have a right to know that the
money Washington takes from them through the IRS is well spent.
And second, Americans deserve an efficient, effective
government that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. It's
our job to work tirelessly in partnership with citizen
watchdogs, including our IGs, to deliver the facts to the
American people and bring genuine reform to the Federal
bureaucracy.
Today, more than any other hearing, we revisit the kind of
waste and the kind of failure to secure taxpayers' hard-earned
money than I can remember in history. I was shocked when the
GSA, the body that was supposed to be concerned about the
entire Federal bureaucracy having reasonable per diems and
spending within limits, doing things properly, determining what
would be on a schedule and what it would cost, I was shocked
when I found out that they threw themselves parties. But to
find out that not only does the IRS take your money, not give
you proper answers, and then when it comes to tens of millions
of dollars use it in a way that is, at best, maliciously self-
indulgent.
To spend more than you would have spent by normal
negotiations for rooms is unthinkable for any agency, but when
it's the IRS and they give to their own employees benefits,
such as local employees in Anaheim, and then fail to file W-2s
for that income, the IRS effectively was guilty of tax evasion.
And saying you don't know doesn't help you, doesn't give you an
out as a taxpayer. It certainly shouldn't give the IRS an out
when they're using taxpayer's money.
Professional education is critical, and the IRS more than
any other organization needs to be well trained, needs to
understand not just the fundamental laws, but a long history of
rulemaking and Federal cases that determine what you do or
don't pay, what you're allowed to do or not allowed to do. And
quite frankly, they need to be trained to treat the taxpayer as
a customer and not a debtor.
That and more justifies, when appropriate, travel, when
appropriate, visits to the very companies and individuals from
whom they receive the revenue that we in government spend. And
I want to say here, and hopefully my ranking member will share
this, we want the Federal workforce to feel that when they have
justified travel, reasons to go and have meetings, reasons to
use hotel rooms or conferences, that they do so. We don't want
Washington think, or Cincinnati think to be no training, no
travel, no interaction. Just the opposite. We want to get this
right.
Now, many will say $50 million over these many conferences
is inherently wrong. I will say for the tens of thousands of
workers who could have received great training, whose travel
could have been meaningful but less expensive, that they were
cheated out of additional education and meaningful training by
this waste.
I don't believe from the dais that any of us can determine
whether $50 million, or $30 million, or $90 million was the
right amount to spend, but with the help of the Inspector
General we know that much of it was misspent. And that means
the American people didn't get a well-trained Federal
workforce. It means that many Federal workers who will look at
this hearing, aghast, and say, I don't get those perks, as a
matter of fact, I would get fired if I took one of those perks,
that the Federal workers around the country should be appalled
that there were two standards: one for some and one for the
rest. And as taxpayers, we should be appalled that there were
two standards: one for us and a different one for people that
work for the IRS in some cases.
I think it's important that we understand that the reason
we are holding this hearing, and thanks to the Inspector
General's office, we have the facts just now on a study we have
had for a long time, but it concerns a period of 2010 to 2012.
And so it's not a new occurrence, and many of these things may
not be happening today. Certainly, both the administration and
Congress have acted to reduce the budgets for some of this kind
of effort. But I think that's the most important reason to have
a hearing. We want the culture to be, spend it, and spend it
wisely. We want the culture to be, how can we get better
training and a better trained workforce. And in many cases the
best way is, bid for the lowest price for what you need, don't
kick back perks. Those are not what the rank and file wants.
They want an opportunity to be well trained.
I believe we are going to see a short video, or a couple of
them today. These are, once again, for a reason. Training
videos are important. Training material is important. And if
you do training material, not only do you show it to your
employees at conferences, but you put it on the Web. You make
sure they know about it. You use it again and again. But if, in
fact, what you have is entertainment, you know, if you will,
training through art, it's not reusable. It doesn't have that
staying power.
I want to make sure that the lavish behavior that you are
going to hear today doesn't happen again, and I think every
Federal worker wants to know that there is a single standard.
They live up to it and they expect those who they don't know
about to live up to it.
We often read that opening statement preamble about waste
and about whistleblowers. I want to say today that one of the
problems we have in government is there aren't enough
whistleblowers. This hearing is about specifically spending at
these conferences, and waste. But on everyone's mind is what
the IRS did out of Cincinnati, and Washington, and Laguna, and
Dallas offices to taxpayers and organizations that simply
wanted to comply and made applications. Those people should
have been better trained to be able to give answers quickly.
There should have been the employees necessary for them not to
wait 3 years.
So I think when we look at over $3.2 million that was taken
out of a fund to hire people, and instead was used for these
lavish parties, it's pretty easy to see, don't talk about
budget tightness until you tighten the budget where you can.
I think that there's no question you are going to see
outrage on both sides of the aisle here today. This is outrage
that needs to be tempered with the fact that on the second
panel we'll have a new Acting Commissioner. This committee and
other committees of Congress need to work with the new
Commissioner so that he has the opportunity to straighten this
organization out. Yesterday Mr. Werfel called me and we had a
conversation, and I say, I don't normally share conversations,
but the conversation was important because it was the kind of a
first step that I think is about the transparency of, you tell
us what you're doing, most of it will never be spoken, it
doesn't need to be spoken public. Mr. Cummings, and myself, Mr.
Camp, Mr. Levin need to know, and the various committees in the
Senate also, that the work is going the right way; that a
culture that had gone wrong has been changed. And a culture
that would see organizations abused for years without a
whistleblower coming forward, or that would see some of these
conferences and not be as outraged as we were is a culture that
needs to change.
And for those who were outraged, and those who are outraged
today, I want everyone to understand, for the vast majority of
Federal workers this is not the norm. And for the rest of the
Federal workforce, if it's the norm, it's time to blow the
whistle and get it changed. The American people deserve value
for their hard-earned money.
I recognize the ranking member for his opening statement.
Mr. Cummings. Thank you very much, Mr. Chairman. I am glad
that we are holding this hearing this morning. It is a very
important hearing. I think that we must pause for one moment
and give credit where credit is due, to you Mr. Chairman and to
this entire committee. To Mr. Mica. You know, I also serve on
the Transportation Committee, and Mr. Mica was the chairman of
that committee. He called hearings and you called hearings, and
we all worked together because back when the GSA scandal came
up we worked in a bipartisan manner. And along with our
actions, along with those of the President, we have been able
to, I think, straighten out GSA.
But we did more than that. I think we sent a powerful
message throughout the Federal Government that you cannot take
the money of American workers and waste it. And so I pause this
morning to applaud what we have already done. But as I always
say, we can do better. And we will.
Today we are going to hold this hearing to examine
excessive spending by the IRS at a conference out in Anaheim,
California, in 2010. I understand this conference occurred 3
years ago. I'm aware that many reforms were put in place, so
something like this will not happen again. And I know many
examples we will discuss today, like the ridiculous ``Star
Trek'' video. And I swear to God, I have looked at that video
over and over again, and I swear, I do not see the redeeming
value. And I was up at 3 o'clock this morning watching it,
because I was trying to get to the redeeming value. Couldn't
get there. I worked hard at it now.
However, these facts do not lessen my frustration and anger
at this utterly wasteful spending. Take the ``Star Trek''
video, for example. Again, there's no--absolutely no redeeming
value that I can identify in the video, and perhaps you, Mr.
Fink, can help us understand what it was. It is not only a
parody of a television show, but a parody of what many people
unfairly think about Federal workers.
And let me pause here and thank the chairman for what you
said about our Federal workers. You know, I'm a big defender of
Federal workers, because I think a lot of times they are
criticized when they should not be, and they get a raw deal.
Their wages get frozen, but yet and still the babysitter still
costs $1,200 a month. And so I want to make sure that they
understand that we understand that this is not--and I was glad
you said it, Mr. Chairman--that this is not what we think of
Federal workers, what's happened here.
And, you know, I go back, and I could not--every time I
would watch these videos at 3:00 o'clock this morning, you
know, I said to myself, you know, this is appalling. But you
know what really got me? When I walked out the door to come to
Washington, and to see my constituents who get the early bus,
the ones that go down to the Sheraton Hotel in downtown
Baltimore and clean the floors, them. And I thought about the
man who came to me the other day because he had just gotten a
letter from the IRS about an audit. And I believe deep in my
heart, he didn't mind being audited, he was scared as all get
out, but he wants to know that he has been treated fairly. And
he wants to know--and these are the words that I'm going to
concentrate on today. The other day I concentrated on truth and
trust. Today, I'm going to add on to that, take and waste. Take
and waste.
What happens here is that when we have episodes like this,
it has an impact on the average person. I live in a block where
most people don't even make $50,000 a year. But yet, still we
can produce a video that has no redeeming value, none, and
spend taxpayers' hard-earned dollars for that. And then there
was that line dance. Couldn't see any there either. And so I
say we can do better.
But guess what? Mr. Fink, the money that was spent on that,
that's my money. That's the lady who got the early bus this
morning. That's her money, the one who makes $35,000, her. The
gentleman up the street from me that makes $45,000 hauling
trash. That's their money. And so it was wasted.
In my district I can tell you that $50,000 is a huge amount
for families who are struggling to get by. That's more than
many households make in this country.
Unfortunately, this was only part of a broader problem,
which was the growth of IRS conference spending over the last
decade. The Inspector General's report finds that the IRS spent
approximately $48.6 million on conferences over the past 3
fiscal years, from 2010 to 2012. But the IRS spent far more
than that in the 3 prior fiscal years, from 2007 to 2009, when
the IRS spent an astonishing $72 million on conferences. And I
know, Mr. George, that the scope of your inquiry was limited.
But let me say this, Mr. Chairman. It would be--it would be
legislative malpractice, legislative malpractice if we did not
bring Mr. Shulman in here to ask him to explain to us why from
2007 to 2008, in 2007, the conference budget was $13.395
million, and then it more than doubled when we are going into a
recession, when President Bush is coming to us telling us that
the sky is about the fall, that our economic situation is about
to go over a cliff. We then double it. It would be legislative
malpractice if we don't figure out what happened there, because
if we are truly going to get to the cause of this, we have to
understand what happened to cause something to double.
I'm almost finished.
Chairman Issa. No problem.
Mr. Cummings. According to the IRS spending data, the
single largest increase in conference spending occurred between
2007 and 2008 when spending jumped by more than $15 million in
a single year. This is simply unacceptable and absolutely
unnecessary. It may be difficult to find any good news today,
but at least there are some indications that things are
beginning to change. In 2011, after news broke about another
wasteful conference held by the General Services Administration
in Las Vegas, the President issued an executive order that
significantly reduced travel and other expenditures across all
Federal agencies. And I go back, and I give you credit, Mr.
Chairman. I give Mr. Mica credit. A lot of these things had to
do with what we did in this committee.
In 2012, the Office of Management & Budget directed all
agencies to reduce their travel expenditures by 30 percent
below the 2010 levels. OMB also required conferences costing
more than $100,000 to be approved at the Deputy Secretary
level, and it prohibited conferences over $500,000 without a
waiver personally signed by the agency head.
As a result, the Inspector General's report explains that
the IRS has now cut spending on conferences by 87 percent since
2010. We did that. We did that. And we ought to take credit for
it, Mr. Chairman. Conference spending dropped to $6.2 million
in 2011 and to less than $5 million in 2012.
I'm also very encouraged by the actions of the new head of
IRS, Mr. Werfel, who is here with us today. And, Mr. Chairman,
I agree with you, he is a breath of fresh air. He, I know he
called you right after he got appointed and called me literally
within hours of after getting appointed. And he said one thing
that I shall never forget. He said, I will, number one, figure
out what is going on and meet with you, Mr. George. He said
number two, I will hold those responsible, who are bad actors
in the agency. And number three, which means something to that
lady that I talked about in my block that got on the bus at 6
o'clock this morning, he said, I will restore trust in the IRS.
And so he has been in his position for only 2 weeks and he
has already taken significant action to begin restoring the
integrity of the IRS and holding people accountable. In fact,
as news reports today highlight, he removed two IRS employees
from their positions and placed them on administrative leave
for their alleged actions at this 2010 conference.
Mr. Werfel has a critical job ahead of him. One of the most
damaging aspects of incidents like the IRS conference in
Anaheim, or the GSA conference in Las Vegas, is that they hurt
the reputation of all government workers who commit their lives
to public service.
And as I close, Mr. Chairman, I hope you will join me in
offering our committee's support as he works in the weeks and
months ahead--and I know you will, because you just said you
would. And as I said at our last meeting with IRS, we must
dedicate ourselves to two major goals, two goals: truth and
trust. Both goals are key, and based on his actions today, Mr.
Werfel is working to achieve them.
And with that, Mr. Chairman, I thank you for your
indulgence, and I yield back.
Chairman Issa. I thank you, Mr. Cummings.
Members will have 7 days to submit opening statements for
the record.
We now welcome our first panel of witnesses. Returning,
actually, two out of three returning guests, The Honorable J.
Russell George, he is the Inspector General for Tax
Administration; Mr. Gregory Kutz, who is Assistant Inspector
General for Management Services and Exempt Organizations.
And welcome back. We know that you had a big part in this
investigation.
We also welcome Mr. Faris Fink. He is Commissioner of the
Small Business and Self-Employed Division at the Internal
Revenue Service.
And pursuant to the rules of the committee, would all three
witnesses please rise, raise your right hand to take the oath?
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Let the record--please be seated--let the record reflect
that all witnesses answered in the affirmative.
Now, I understand, Mr. George, is there one opening
statement between the two of you?
Mr. George. That is correct, Mr. Chairman.
Chairman Issa. And thank you again, Mr. George, for being
here. I know we are going to rely on you for a number of
questions, but I believe Mr. Kutz is going to take the lead,
and we appreciate that. I also appreciate the fact that you
created a relationship with the Acting Commissioner that I
believe is going to provide a great deal to the transparency,
without redundancy by committees, and I think that's important,
too. So what I'd like to do is, I guess, recognize--Mr. George,
do you want to make any comment before we go to Mr. Kutz?
Mr. George. Yes.
Chairman Issa. Please. The gentleman is recognized.
STATEMENT OF J. RUSSELL GEORGE
Mr. George. Chairman Issa, Ranking Member Cummings, and
members of the committee, thank you for the opportunity to
discuss IRS conference spending. Today's testimony highlights
the results of our audit of IRS conference spending for fiscal
years 2010 through 2012. My own testimony will focus primarily
on a conference held in Anaheim, California, in 2010. This
conference was selected for review because we have received a
specific allegation of excessive spending.
Overall, we found that the IRS spent, as was pointed out,
an estimated $49 million for 225 conferences during the 3-year
period of our review. The conference in California was held at
the Marriott, Hilton, and Sheraton Hotels in Anaheim in August
of 2010 at a reported cost of $4.1 million. The Small Business/
Self-Employed Division of the IRS conducted this conference for
an estimated 2,600 executives and managers. As required at the
time, the conference was approved by the two Deputy
Commissioners of the IRS. We could not validate the accuracy of
the $4.1 million conference cost because the IRS did not have
effective controls to track and report those costs; $3.2
million dollars of the conference costs were paid from unused
funding originally intended for hiring enforcement employees.
Instead of using the required IRS personnel whose job it is
to search for the most cost-effective location for the
conference, the IRS used two commercial planners to identify a
site for the conference. These two planners were not under
contract with the IRS, and thus had no incentive to negotiate a
favorable room rate. They were paid an estimated total of
$133,000 in commissions based on the costs of the rooms paid by
the IRS.
Rather than negotiate a lower room rate, the planners
specifically requested 25 or more VIP suite upgrades with
amenities from the hotel, along with a reception with
complimentary drinks and deli breakfasts and other
refreshments. The agreement with the hotels indicated that a
total of 132 suite upgrades were provided each night by the
three hotels. For example, the Commissioner and Deputy
Commissioner for the Small Business Division stayed multiple
nights in presidential suites at the hotels.
Other examples of questionable spending for the conference
include planning trips costing $35,000, two video productions
which were shown at the conference. Local employees were
authorized to stay at the hotel at an expense of $30,000;
$44,000 in travel costs were incurred for employees to staff
booths in an exhibition hall; gifts and trinkets were given to
IRS employees costing $64,000; and $135,000 were expended for
outside speakers, one of whom was paid $17,000. This speaker
created six paintings at two sessions. Two of the paintings
were given away at the conference, three were auctioned off for
charity, and one was reported by the IRS as lost.
In addition to this audit, TIGTA conducted other reviews of
individuals related to the conference which focused on
potential misconduct. Although the details of our actions are
confidential pursuant to Title 26, Section 6103, Subsection
(b)(2)(A) and (f) of the Internal Revenue Code, we did refer an
issue to the Internal Revenue Service for consideration of
administrative action. Overall, our review of this conference
did not uncover any criminal violations.
In conclusion, it is worth noting that the IRS conference
spending, as was pointed out, dropped over the 3-year period
from a total of $38 million in 2010 to $5 million in 2012. This
was due in large part to increased oversight and controls
instituted at the IRS. We did make further recommendations to
tighten controls and the IRS has agreed to all of our
recommendations.
Chairman Issa, Ranking Member Cummings, members of the
committee, thank you for the invitation to appear.
Chairman Issa. Thank you.
[Prepared statement of Mr. George follows:]
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Chairman Issa. Mr. Kutz.
Mr. Kutz. I have nothing. I look forward to your questions,
Mr. Chairman.
Chairman Issa. Thank you.
Mr. Fink.
STATEMENT OF FARIS FINK
Mr. Fink. Chairman Issa, Ranking Member Cummings, members
of the committee, my name is Faris Fink. I am the Commissioner
with the Small Business/Self-Employed Division of the Internal
Revenue Service. I appreciate the opportunity to appear here
today.
I have worked for the Internal Revenue Service for 32
years, starting as a grade 7 revenue officer in Ohio. I became
the Commissioner of the Small Business/Self-Employed Operating
Division in May of 2011. I am proud to be an IRS employee and
serve alongside thousands of dedicated public servants who
administer our tax laws. My division has 24,000 employees, and
it accounts for the majority of the $50 billion that the IRS
collects in enforcement revenue each year.
The meeting we held in 2010 was to train 2,600 managers
from 350 offices across the country. We needed to ensure that
they had the tools to lead their employees and adapt to major
changes that were occurring. At the time of this meeting,
almost 30 percent of our managers were new or had only been
managers within a 2-year period. Another focus of the meeting
was employee safety. There had been a substantial increase in
the number of security threats against employees of the
Internal Revenue Service.
I think it is important to point out that in carrying out
this 2010 meeting we followed IRS and government procedures
that were in place at the time. The Treasury Inspector
General's office review found no instances of fraud. But we are
now in a very different environment, and there are many new
procedures in place at the IRS governing training and travel.
In hindsight, many of the expenses that were incurred in this
2010 conference should have been more closely scrutinized or
not incurred at all, and were not the best use of taxpayer
dollars. Given the new procedures and restrictions in
spending--on spending--we would not hold this same type of
meeting today.
Mr. Chairman, that ends my statement, and I would be happy
to answer any questions.
Chairman Issa. Thank you, Mr. Fink.
I need to announce for both the witnesses and the folks on
the dais that we expect votes momentarily. It will be a long
series of votes. We could be gone for up to an hour. So I would
ask the witnesses, we will make room available back there for
you. We will come back immediately, and I mean fast as a bunny,
after the last vote. So as soon as myself, or actually anyone
gets to the chair, we will recommence so that we can get the
day underway. I have been advised these may be the only votes
of the day. I would also advise that you please return if at
all possible if you don't have travel plans.
With that, I will recognize myself for a first round. Could
we have the--those will be last votes of the day, yes. Could we
have the suites, please?
Now, as I show those, I want everyone to understand that
these are suites that were upgrades. I think even Mr. Fink may
have enjoyed one similar to this. There's--these are not
uncommon for large conventions. What we want to make clear is
the allocation and how we paid for them is, I think, a big part
of what the IG is aware of. Is there another picture or is that
the only one?
Okay, well, let's just say that I have been honored when I
was chairman of an association to stay in one of those. It was
comped by the hotel after a large bidding on taking virtually
every room in the hotel. And I assure you, the room rates for
our guests were below what the IRS paid in that hotel.
Having said that, could we go to the video? And then we
will begin with the questioning. I think Mr. Cummings and I
both have seen it enough, but for some who have not seen it, I
want to get it into the record. And this is a short clip. It
won't be the whole thing. But it sets a tone.
Lacy, I know you haven't seen this.
[video shown.]
Chairman Issa. I'm sure many more will watch that and some
will laugh. My questions are, you know, what a surprise, and I
will start with Mr. Fink. What were you thinking? Were you
thinking this will never be seen, or were you thinking, how
will this look when it is seen?
Mr. Fink. Mr. Chairman----
Chairman Issa. Please speak close to the mic. We couldn't
hear. You are not on.
Mr. Fink. Mr. Chairman, those videos were, at the time they
were made, were an attempt to, in a well-intentioned way, use
humor, the ``Star Trek'' video to open the conference. The
dance video was used to close the conference. They would not
occur today based upon all of the guidelines that exist, and
frankly, they were not appropriate at that time either, Mr.
Chairman. And the fact of the matter is, is it's embarrassing,
and I apologize. Those videos, I notice in the Inspector
General's report there is not a clear delineation of the cost
of both the videos, but they are embarrassing, and I regret the
fact that they were made.
Chairman Issa. Let me do a follow-up question, because one
of the most concerning part of the IG's report is it appears as
though at the IRS, both in this and other cases, we can't count
on proper accounting of what money is spent on what. There were
at least many cases in which people traveled for conferences
during this entire period, and as far as I know, today, in
which if they simply bill it as travel and not as conference
travel, then it won't be seen as conference travel.
How are we to know--and, obviously, without receipts and
even a missing painting--how are we to know that these kinds of
changes have occurred to where there is an auditable train of
where money was spent?
Mr. Fink. Mr. Chairman, to respond to that question, of
course, it has already been spoken that there has been many
changes at the IRS. One of the changes at the Internal Revenue
Service is around the tracking of expenses around conferences,
meetings, and training. For the particular conference in
Anaheim, we were only able to track 90 percent of the cost.
There's a variety of reasons that the other 10 percent were not
accurately tracked. It's because people did not use the
tracking code that was in place. It's also that folks were on
other travel, visiting offices, doing things of that nature,
did not use the conference tracking code, and may have charged
their expenses to another code for another business purpose.
Chairman Issa. Well, you know, the reason I ask that is
twofold. First of all, if I did it as a business, and thus
couldn't account for receipts, wouldn't your inspectors say
disallowed?
Mr. Fink. Mr. Chairman, yes. Our auditors would look at
records. They do have some discretion, as far as the
reasonableness of the records that are submitted. But we take
very seriously the role that we occupy in ensuring that people
have the appropriate business records. This year, an example
that you have provided, we only did have 90 percent of the
information as far as the expenditures.
Chairman Issa. Now, if I were to have local folks get hotel
rooms and meals and so on and not issue a W-2, I made a fairly
serious allegation as a layman, I'm not saying that it's the
law, exactly, but I could characterize it as tax evasion. If a
company didn't do it and the employees, particularly let's just
say that they are accountants and very knowledgeable of the
law, didn't do it, there were no W-2s, no 1099s, essentially no
accountability for this revenue that is supposed to be taxed,
what would you do in that case?
Mr. Fink. In that case, Mr. Chairman, as pointed out in the
Inspector General's report, you have to look at each situation
case-by-case. And in that particular situation, you would look
at the individual facts that existed in that situation. In the
matter that you are referring to here is we now have issued W-
2s to all of what we characterize as being local travellers
after it was brought to our attention by the Inspector General
and in their report that we had not appropriately accounted for
all of the local travellers, sir.
Chairman Issa. I appreciate that.
Mr. Kutz, I guess I'll characterize it to you. It was not
in the tax year in which it was earned, so the employees did
not voluntarily file, as far as we know. I know that's not
available to the public, but the employees didn't take it on
themselves, knowledgeable people about taxes, to say, oh, I've
got to pay taxes on this. The employer did not issue the
required tax statement to itself, if you will. I characterized
it as tax evasion because it can't just be swept under the rug.
These were knowledgeable parties on both sides, weren't they?
Mr. Kutz. Yes, the IRS did not issue W-2s. And in fact, we
found seven people that they didn't identify that were local
that actually traveled. So those would have been some of the
ones that didn't get W-2s.
Chairman Issa. Now, I'm going to just close with one quick
question, because not only do we have votes, but I want to be
sensitive to time. I've worked event planners, and whether it
was an event planner inside the IRS, which it should have been,
or the ones that were hired, there does seem to be a little
sleight of hand. They received a commission based on the more
that was spent, the more they received. And apparently, they,
as I understand from your report, they got free rooms for FAM
trips, for familiarization trips, while IRS employees paid for
the rooms. Again, as far as I can tell, that increased their
commissions while lowering their unreimbursable cost. Is that
roughly right?
Mr. Kutz. That would be right. The IRS also received, I
think, 10 comp rooms per night, but most of the upgrade rooms
IRS had they paid the $135 per diem rate for.
Chairman Issa. And have you done any work to look at
comparables from other associations? I headed the Consumer
Electronics Association, puts on the CES, but I also was on
smaller associations. Have you done any work to figure out what
the comp would be? I couldn't find that there. And I want to
not cast any blame on the various hotels, because if somebody
comes and says, this is what I want, it's not your job to make
the dumb smart if you're on the selling side.
Mr. Kutz. No, what we looked at is that they could have
actually potentially negotiated the room rate down from $135,
as you mentioned, rather than solicit the 25-plus VIP suite
upgrades per hotel. So they actually went out and said, we'll
pay you full per diem, which is the most they could pay, and
then they said we wanted to have various amenities, including
the suite upgrades.
Chairman Issa. And with the ranking member's indulgence,
there was a mention of rooms, various rooms that--various food
that was provided. IRS employees received full per diem, of
course. Did you have a substantial amount of per diem returned
as a result of their getting meals, which would be the law? In
other words, you're not entitled to keep the per diem if you
didn't have to use it because others provided you meals.
Mr. Kutz. Actually, Federal Travel Regulations do not
require employees to deduct that from their per diem, but we
did do a statistical sample, and all the employees in our
sample got full per diem of $71 per day, even though they
received a continental breakfast. But there was nothing wrong
with that according to Federal Travel Regulations.
Chairman Issa. It just smells real bad.
Mr. Kutz. Well, we essentially paid for breakfast twice
probably, Mr. Chairman.
Chairman Issa. But negotiating paying for breakfast and
then paying full per diem created a situation in which they got
overpaid, basically.
Mr. Kutz. Not technically, according to Federal Travel
Regulations. But again, from a taxpayer perspective, they got
breakfast and the government paid them for breakfast at the
same time.
Chairman Issa. Thank you.
Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. George, according to your report, the IRS conference in
Anaheim in 2010 cost more than $4 million. Is that correct?
Mr. George. Yes, it is sir.
Mr. Cummings. Although your report does not identify any
legal violations, it raises concerns with the way taxpayer
money was spent. For example, your report raises concerns with
how the IRS chose Anaheim as the location for this conference.
And it questions the use of nongovernment event planners to
identify this location.
Picking up where the chairman left off, specifically your
report states, ``The use of the planners in this process
increased the possibility that the site selection did not
result in the lowest cost to the government.'' Is that right?
Mr. George. That is correct, sir.
Mr. Cummings. Now, let me go to you, Mr. Fink. I am--I must
tell you that I'm pleased that you apologized. That's a major
step, because I think it's important that the American people
know that, that somebody feels bad about this, and remorseful.
But Mr. Fink, let me turn to this. The committee obtained
documents from the hotels that hosted the conference in
Anaheim, and in one of those documents is an email between two
Marriott hotel employees. I want to read it to you and get your
response. Now, I want you to listen to this.
It says, ``Orlando and Las Vegas are out!'' Exclamation
marks. ``This is fantastic news as Orlando was $1 million
less--less in travel spend. The funding is there, and they have
been instructed to move forward.''
Mr. Fink, this email sounds like the hotel employees were
mocking you and maybe even making--taking advantage of the IRS.
It says you could have saved a million dollars by holding this
conference in Orlando.
I have no idea if these hotel employees knew what they were
talking about or just theorizing. So let me ask you, since you
were the man in charge. How did you choose Anaheim for this
conference? Did you look at other locations, like Orlando? And
were any of those other locations less expensive?
Mr. Fink. Representative Cummings, first off, I'm not
familiar with the email, but I will tell you what I have been
told was done at that time, was that we used a travel
estimator. There is a travel estimator that is used by the
Internal Revenue Service when planning training meetings. That
travel estimator we looked at over 20 different locations. And
in using the travel estimator, we came up with three locations
that could handle this size of conference, that would be able
to be logistically not incurring additional costs as far as
traveling people long distances when they arrived.
So we looked at those types of things that were--in
addition to using the travel estimator to look at, I believe it
was over 20 different locations. So that we had to incur--we
had to look at and make sure that we were not going to incur
additional local expenses, but along with that, it was just a
matter of logistics when which came up with the final three
cities, sir.
Mr. Cummings. And so you've said several times during this
hearing that if this were to take place today, it would be
different. How would it be different?
Mr. Fink. It would be different today because,
Representative Cummings, the conference would not occur. Under
the guidelines and the restrictions that exist today, a
conference of this nature would not occur.
Mr. Cummings. I note that back in 2010 there were 152
conferences, and then in 2012, I think there was like 24, and
an 87 percent decrease, and thanks to this committee, and
Transportation of course, and President Obama. Do you think
that was a good thing?
Mr. Fink. Absolutely.
Mr. Cummings. And why do you say that?
Mr. Fink. The reason that I feel it was a good thing to see
the decrease, it showed that we had increased our scrutiny,
that we were paying more attention to how we are using the
taxpayers' money, and that we were taking a harder look as to
what was the necessary training that individuals were
receiving.
Mr. Cummings. Now, let me ask you this: Did the event
planner give you a cost-benefit comparison of the various
locations before the IRS chose which to use?
Mr. Fink. Representative Cummings, I had no interaction
with the event planners. I do not know if they gave us a cost
estimate. I know that we chose the cities as far as looking at
which cities would be appropriate, and we also made the final
decision around where to hold the conference.
Mr. Cummings. Mr. George, I'd like to ask you about the
room upgrades. As I understand your report, 132 hotel rooms
were upgraded to suites, but the government still paid its
normal per diem rate of $135 for these rooms. That's right? I
think you testified to that earlier. So your report is not
saying that the IRS paid $1,500 a night for these rooms, which
I guess they might normally go for, Mr. Kutz?
Mr. Kutz. That's right.
Mr. Cummings. Your report is saying, if I understand it
correctly, that instead of accepting these room upgrades, the
IRS should have negotiated lower prices for all the rooms or
for the whole conference, is that right?
Mr. George. That is correct, sir.
Mr. Cummings. And, Mr. Fink, my final question, why didn't
you do that?
Mr. Fink. First off, I was not aware that we had the
ability to do that. And as of today, I'm not sure that we could
have done that, Representative Cummings. I do believe, though,
that we did pay the $135 per diem rate, and in paying that $135
per diem rate there were additional items that were included by
the hotels to use during the conference.
Mr. Cummings. Thank you, Mr. Chairman.
Mr. Mica. [Presiding.] Thank the gentleman. And I'll yield
to myself for questions. And we do have the vote going on,
folks, so we probably have about 4 or 5 minutes left here, less
than that.
But let me start out with Mr. George. Your report indicated
$135,000 was spent just on speakers for this event. Is there
any similar experience in spending that amount of money for a
conference that you're aware of?
Mr. George. In the course of conducting this audit we did
not compare previous conferences to this one in terms of that
expense.
Mr. Mica. Well, Mr. Cummings talked a little bit about our
efforts to rein in GSA, and we conducted some reviews of GSA's
operations and found out that they spent--it wasn't even a
million dollars on a conference, but outrageous spending was
determined. We couldn't get much attention on that.
Mr. Fink, are you familiar with this guy? This is the GSA
official in the hot tub. Have you ever seen that picture?
Mr. Fink. I have seen that picture, yes, sir.
Mr. Mica. Well, I just wondered if that was any motivation
for the dramatic change in your spending. Spent $37 million in
that year, and then Congress held these hearings, which we
participated in, and the famous guy in the hot tub probably did
more to bring egregious spending under control. Did this affect
you at all?
Mr. Fink. The new guidelines were put into place,
Congressman, the new restrictions on travel and on spending
funds for training and things of that nature. That was handled
primarily by the--what would be the operations support side.
Mr. Mica. Well, did you approve expenditures for the--or
involved in the planning of the $4 million conference in
Anaheim?
Mr. Fink. No, sir, I did not.
Mr. Mica. You attended?
Mr. Fink. Yes, sir.
Mr. Mica. And you did participate in the conference?
Mr. Fink. Yes, sir.
Mr. Mica. And then afterwards, I understand you were
promoted. Is that correct?
Mr. Fink. I became the Commissioner after the conference,
yes, sir.
Mr. Mica. I understand the planners and some of the others
got bonuses. Is that correct?
Mr. Fink. There were six bonuses that were paid, yes, sir,
to individuals who----
Mr. Mica. Did you get a bonus that year, 2010, 2011?
Mr. Fink. For performance, yes, sir.
Mr. Mica. Did you--are you aware of the money that they
spent, of course on this particular enterprise, that paid
$17,000, where this individual, who is I guess some sort of art
expert, and produced six drawings, paintings?
Mr. Fink. Yes, sir, I saw that in the Inspector General's
report, and also I attended that session.
Mr. Mica. You did. You did. And do you think that that was
a proper expenditure of taxpayer dollars?
Mr. Fink. For what we were trying to convey at that time,
and based upon his expertise, the way he communicates and the
message that he delivers through his presentation----
Mr. Mica. I was surprised to hear you said that one of the
paintings is--a couple were auctioned, I guess, and they got
less than $500 for charity, but one is missing. Maybe we should
offer a reward for the missing. You don't know where the
missing painting is, do you, Mr. Fink?
Mr. Fink. Absolutely not, sir.
Mr. Mica. Okay. And then I understand, you know, we had
these--these are the famous--these turned over to me by some
whistleblowers--these are the famous $20,000 drumsticks that
were used in the Las Vegas GSA conference. And I thought that
wasteful spending had been taken to a new level.
Now I see, Mr. George, in your report, you have squirting
fish as part of $64,000. Has anyone--did you see--anyone seen a
squirting fish? Did you see one at the conference?
Mr. Fink. No, sir, I did not.
Mr. Mica. Maybe I could offer a reward. I'd love to see one
of the squirting fish. I'm sure that some of the taxpayers, the
people that went to work on that early bus this morning out of
Baltimore, or my district in central Florida, love to know that
the Federal Government spent $64,000 on squirting fish for
Federal employees at a conference. Is that an appropriate
expenditure of funds, Mr. Fink?
Mr. Fink. And I would answer, Congressman, that there were
expenses that were incurred at that conference, for that
conference, that were absolutely inappropriate. And that would
be one of those expenditures.
Mr. Mica. Well, I would say that IRS has taken government
arrogance and wasteful spending to an absolutely incredible
level. And it has to be dismaying to people who are sending
their hard-earned dollars to IRS every week in their paycheck,
every month, quarterly, or April 15th, to find out their money
has been spent--some of these expenditures were no bid, too,
sole source. I think all of the $135,000 on the conference
speakers.
Is that correct, Mr. George?
Mr. George. That is my understanding sir, yes.
Mr. Mica. Well, we're going to hear from Mr. Werfel in a
short while. Our goal is to, one, hold people accountable, and
I understand some people have been suspended. We understand
some people have gotten bonuses like yourself, Mr. Fink, who
were involved or there. And we understand that, again, that the
system has been corrected to a degree, partly because of
Congress bringing these items to the attention of the Congress
and the American people.
With that, we will have to recess, and we will return
within 10 minutes of the last vote, so stay posted. The
committee is in recess. Thank you.
[Recess.]
Mr. Chaffetz. [Presiding.] Committee will come to order. We
will now recognize the gentleman from Ohio, Mr. Turner, for 5
minutes.
Mr. Turner. Mr. George, I've thanked you before for your
tenacity in making certain that we have the information to be
able to do the oversight. One thing that struck me in looking
at this review of this conference is what I call a budgetary
slush fund trick.
When I served as mayor for the city of Dayton, I inherited
a city that had not balanced its budget in 5 years and we had
to immediately balance it. And one way that we did so was by
finding those slush fund budgeting tricks. And this trick was
actually something that we saw in the city. And that is that
people were taking vacant positions and they were cannibalizing
the money, and using it for items that did not have the same
level of scrutiny. The money would not be--if they came forward
sort of with a budget proposal that had what they were actually
going to spend the money on, it would never pass the test of
scrutiny but by keeping vacant positions open, they could
cannibalize the money and use it for purposes that had a lower
level of scrutiny and accomplish things like this outrageous
conference.
Could you speak to that for a moment? Because in the city,
we prohibited this practice. What we did is we said if you have
an open position that fund, those funds could only be used for
personnel, and if they're not used for personnel, that they are
recaptured and have to go back into essentially for us the
Treasury on the Federal side. I'm concerned in seeing this that
this must happen across the board in the Federal level, and
there's probably hundreds of millions of dollars that could be
recaptured if we recaptured vacant position funding.
Can you speak to that, Mr. Gorge?
Mr. George. Yes, Mr. Turner. And then I may defer to my
colleague, Mr. Kutz, to elaborate.
We did look at this issue. The money that was expended by
the IRS in terms of the unused money that was otherwise
provided for hiring of enforcement officials, it was going to
lapse. If the IRS had not completed the hiring process by the
end of the fiscal year, that money would have been returned to
the general Treasury. And so they did have an incentive, and in
some ways, some people consider it a perverse incentive, to
spend money before it goes back to the Treasury.
Mr. Turner. See, what we did in the city is we said you
don't have that option. If you have not hired people, if these
monies are not being used for personnel, the money goes back,
period, so you don't get this slush fund that they used to do
this conference.
Mr. George. There are instances when money is limited to
the sole purpose for which it was first appropriated. So, but
in this instance that was not the case. And I think I'm going
to now request that my colleague----
Mr. Kutz. Real briefly this is part of the small business
output; they're part of the enforcement appropriations account
within the IRS. This money was essentially transferred within
that appropriation which we've determined was not a violation
of appropriations law.
Mr. Turner. Well, I want to take this issue up because
certainly, I've seen on the local level how it makes a
difference, and we certainly need to do it on the Federal level
because I'm certain across all Federal agencies there have to
be these slush fund pots that don't meet the scrutiny level
that if the funds had been requested for the purpose that it
ultimately was spent would have been denied.
Mr. Fink, we have what we understand is the swag bag from
the event. This says leading into the future, and then we have
a portfolio that says ``teamwork in action.'' These items like
3,000 of them were given to all the participants over $60,000
of these types of trinkets. And listening to the ranking member
who was so eloquent about the issue of how these are taxpayer
dollars that are taken out of the pockets of people who work
very hard for their money. We note in the footnotes of what was
in these swag bags is that it also included, I'm kind of
confused by saying this, a plastic squirting fish. And I've
been asked several times by the media who have taken a look at
this, what purpose could the IRS have in giving the
participants a plastic squirting fish?
I think it goes to what the ranking member was saying part
of the party atmosphere that this clearly was not for business
and government purposes, that it was a party.
Could you please tell me what were these items for? And why
would people get a plastic squirting fish?
Mr. Fink. Congressman, as I mentioned, I honestly have no
idea what the plastic squirting fish was. That's just being
honest about it. The items that you refer to, there in the bag,
as I mentioned earlier, and in the Inspector General's report
also, when you look at the expenditures that were done for
these items, we certainly, as an organization, should not have
spent those funds.
Mr. Turner. Thank you. Mr. Fink, I hope you understand the
irony of taxpayers who hear you saying that you can only
account for 90 percent of the expenditures but they could never
stand in front of you and be able to do that.
I yield back.
Mr. Chaffetz. Thank you. I now recognize the gentlewoman
from New York, Mrs. Maloney, 5 minutes.
Mrs. Maloney. Thank you. The recent history of the IRS is
appalling. Democrats and Republicans are united in our outrage
at the wasteful spending, the inappropriate behavior and
mismanagement of one of our most important agencies. But the
changes that have been put in place are dramatic, and they are
having an effect. I believe you would all agree with that. Yes?
Mr. Fink. Yes.
Mr. Kutz. Yes.
Mr. George. Yes.
Mrs. Maloney. For example, the top three most expensive
conferences outlined in the IG's report all took place in 2010,
correct? Mr. George?
Mr. George. That is correct.
Mrs. Maloney. Since then, the number of large meetings has
decreased by 84 percent. The cost of the meetings has decreased
by 87 percent, and the number of large meetings has decreased
by 84 percent. That is definitely moving in the right
direction. And the spending on the conferences with 50 or more
participants was reduced from 37 million to 4.9 million in
2012, all good movement.
And I would say that the President's initiative, the
government-wide campaign to cut waste, to target ineffective
and wasteful spending, has been very useful and appropriate and
is getting results.
But I was concerned by the video that the chairman showed
us, and not only was it a monumental waste of well over $50,000
of taxpayers' money, but I would say it is an insult to the
memory of Star Trek. I could do a better Captain Kirk. But I
think I recognized one of the panelists in the video. Mr. Fink,
were you Mr. Spock in that video?
Mr. Fink. Yes, that is correct.
Mrs. Maloney. So how many government employees participated
in that video in acting, editing, producing? How many employees
were involved?
Mr. Fink. I apologize, but I do not know the exact number
of when you go to the editing and the things of that nature, I
am not sure what that total number was, that participated.
Mrs. Maloney. Well, do you think this was a responsible use
of taxpayer money.
Mr. Fink. As I said, no, I do not.
Mrs. Maloney. And did you approve this?
Mr. Fink. No.
Mrs. Maloney. You did not approve it.
Mr. Fink. No, sir--no, ma'am.
Mrs. Maloney. You did not approve it. Well, I would like to
ask Mr. George, you did come out I believe with nine
recommendations, is that correct?
Mr. George. Yes, that is correct.
Mrs. Maloney. And of those nine recommendations, how many
has the Treasury Department accepted and are supporting?
Mr. George. All of them.
Mrs. Maloney. They are all supporting them the Treasury
Department all nine.
Mr. George. That's correct.
Mrs. Maloney. And the President of the United States I
believe also came out in support of your recommendations.
Mr. George. That was actually related to the review we did
on 501(c)(4) reviews, but I believe the President's
spokesperson may have addressed this instant audit, but I'm not
completely certain about that.
Mrs. Maloney. So Treasury is now implementing all of the
nine or how many are they implementing?
Mr. George. They are in the process of implementing all of
the nine. I don't know I may again defer to my colleague, Mr.
Kutz.
Mr. Kutz. There were nine in the other report on exempt
organizations, and there's nine in this report.
Mrs. Maloney. And they are implementing all of them, is
that correct?
Mr. Kutz. That's correct. That's our understanding.
Mrs. Maloney. And could you go over what are the most
important nine in the 504(3)(c) category Mr. Kutz? What are the
recommendations could you briefly go through the
recommendations?
Mr. Kutz. Well, let me touch on the most important
probably, the one about the backlog. As you all know, there's a
backlog of organizations that have been there, in some cases, 3
years, waiting for a decision yes or no. One of our most
important recommendations is to have those addressed quickly so
those people can get an answer as to yes or no.
Certainly one of the issues was whether or not the IRS had
evidence of looking at political campaign intervention in 298
cases we identified. In some instances, there was no evidence
in the file that there was political campaign intervention. We
recommended that they actually document, if you're going to
have someone wait for several years to get a response, you
better have a good answer as to why you picked that case,
especially if there is no evidence in the file of any political
campaign intervention. So those are examples of some of the
most important ones from that report.
Mrs. Maloney. And when you say ``intervention,'' what would
you define as intervention? Paying for campaign ads? Or what is
intervention? What do you define in IRS as the intervention?
Mr. Kutz. Well, the regulation definition is supporting or
opposing a particular candidate running for public office.
Mrs. Maloney. Well, I would think that would be pretty easy
to do, see whether or not they bought time on campaigns, bought
TV ads. Have you looked at that?
Has the Department looked at that area?
Mr. Kutz. I don't know if they looked at that. With respect
to the 298 cases we looked at, 69 percent had evidence of
significant political campaign intervention, and 31 percent did
not. And the recommendation was related to if you're going to
pick a case that there's no evidence of campaign intervention,
you should make sure and document why, in fact, you did that.
Chairman Issa. [Presiding.] The gentlelady's time has
expired. The gentleman from Tennessee, Mr. Duncan, is
recognized.
Mr. Duncan. Thank you very much, Mr. Chairman, and first of
all, I want to say that I very much appreciate the great
opening statements that you and Ranking Member Cummings have
made, especially my friend, Mr. Cummings. I just, I agree with
everything that both of you said in regard to this.
I thought back though of several years ago, Edward Rendell,
when he was mayor of Philadelphia, and having some trouble with
some city employee unions, of course, he later became Governor
of Pennsylvania, he said before the House Ways and Means
Committee that government does not work because it was not
designed to, he said there is no incentive for people to save
money, so much of it is squandered. There's no incentive for
people to work hard, so many do not. And the problem throughout
government is that we don't have enough incentives or pressure
for people to save money, and we end up with these ridiculous
expenditures because it's not coming out of people's own
pockets.
We need to make sure that in the future, that we put more
incentives and more pressures and more punishments for people
to not to do these types of things. I saw an article yesterday
about how it's almost impossible to remove a Federal employee
who messes up in some big way.
Mr. George, I also want to commend you. I think you've done
great work not only on this, but on some others things for this
committee and for the Ways and Means Committee, and I really
appreciate what you've done. But I feel the same way that all
these others who have spoken before me, not just about the Star
Trek and the dance line and the line dancing and all that, but
to pay $133,000 to a firm just to locate a hotel or figure out
the hotel when the IRS employees themselves could have done
these things.
So we need to make sure that these things don't happen in
the future. And what I have seen happen so often, when we go
through these times where it gets a lot of publicity and a lot
of attention but 2 or 3 years later, we are back into these
things again. So we need to stay on top of that, and that's
really all I have to say and I yield back.
Mr. George. Mr. Duncan, if I may, I just want to be clear,
the $133,000 paid to the event planners were paid by the hotel,
not by the IRS. But they had, again, no incentive to reduce the
cost to the IRS because the more the IRS paid, the more they
got in commissions.
Mr. Duncan. Thank you for that clarification.
Chairman Issa. I thank the gentleman. We now go to the
gentlelady from the District of Columbia, Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman, and I appreciate this
hearing. This, of course, is a longstanding problem, Mr. Mica,
the chairman himself, have witnessed our work with the GSA.
Actually, the worst year of spending apparently for the IRS,
$15 million, was the year before the President even came into
office.
By now, the, what the take-away from these episodes is one
that you learn from your mother and father when you are
spending someone else's money, spend it even more carefully
than your own. Of course, that would go especially for
taxpayers' money. Now this, no matter how you look at it, this
$4 million, even if it wasn't this much as the $15 million is
an excessive amount of money. I'd like to get to the root of
why in the world this conference or this training was going on.
And first, I would like to ask about Anaheim. Why, Mr. Fink,
was Anaheim chosen, and where did these employees originate?
Where did they come from?
Mr. Fink. The Anaheim conference, the reason Anaheim was
chosen is based upon the size of the conference, the number of
individuals attending the----
Ms. Norton. Where did they come from? Where were they
based?
Mr. Fink. The folks that attended the conference came from,
we have leaders, we have managers in 350 different locations,
so they came from across the entire United States to Anaheim.
Ms. Norton. How many came from Washington?
Mr. Fink. I don't have that exact number.
Ms. Norton. Did most of them come from Washington?
Mr. Fink. No. No. Most of them did not come from
Washington.
Ms. Norton. So was it less expensive to have it in some
centrally located, assuming Anaheim could ever be found to be
centrally located? Was it less expensive to have it, Mr.
George, in a place like this, which is a vacation spot? And I'm
not--Mr. Clay is suggesting St. Louis, I'm not going to wish
that on the IRS--but would you respond, please?
Mr. George. From the information actually that was elicited
at today's hearing, we understand that Florida might have been
less expensive than conducting it in Anaheim.
Ms. Norton. Well you see suspicion is aroused whenever some
sunny spot is picked and, but as you say, they came from all
around the country.
Now, this was to be a training conference. IRS employees
deal with highly technical, rule bound, law bound work. So I
think anyone who could understand that--by the way, I want to
take exception to my good friend the ranking member who sees no
redeeming value in line dancing as a sponsor of National Dance
Day on the Mall----
Chairman Issa. If the gentlelady would yield I don't think
he went as far as to disparage line dancing. I think it was
limited only to the Federal expenditure at this particular
conference.
Ms. Norton. You, of course, preempted the one admonition I
would have, as a line dancer as the one who tries to do every
kind of dance----
Chairman Issa. Well, the ranking member is down there, and
I'm afraid I had no chance but to speak on his behalf.
Ms. Norton. I just wanted to stand up for the line dancers
and say, hey, the IRS line dancers weren't bad at all. Too bad
they weren't doing it on their own dime.
Let me ask you about this training conference. Here is a
training conference, and Mr. George, as I read through the
report, I couldn't find what was the purpose of the conference?
I couldn't put my finger on what is the purpose of this
conference in Anaheim?
Mr. George. While I'm going to defer eventually to Mr. Fink
to complete this response, there is no question as you noted
earlier, Ms. Norton, there is a redeeming value for training.
These are very complicated matters. The IRS is about to engage
in one of the most comprehensive and unprecedented aspects of
its activities in terms of implementing the Affordable Care
Act. So whether or not that was an aspect of this conference,
again, I will defer to Mr. Fink.
Ms. Norton. So was the majority or the great majority or
how much of the conference was devoted for training and how
much was devoted to fun?
Mr. George. Well, if I may, one key aspect in all of
disclosure, TIGTA, my organization had a representative----
Ms. Norton. Now, this is very important. I was going to ask
you this question. Not only were there IRS employees there,
there were employees of the Inspector General there.
Mr. George. We had one employee who was there. Keep in mind
this was in the wake of the tragedy that occurred in Austin,
Texas, when someone flew an airplane into a building housing
IRS employees, and our, one of our senior investigators spoke
at a session on security and threats to IRS as a result of
people who are disgruntled as----
Ms. Norton. Did he report back----
Chairman Issa. The gentlelady's time is expired. Does
anyone else need to answer that question? Are you finished?
Mr. George. Well, I could go on.
Chairman Issa. Well, complete your thought, please, I don't
want to interrupt you.
Mr. George. My employees traveled 1 day, arrived, spoke at
two sessions and then departed. The vouchers that he filed were
less than approximately $1,000, and he apparently, when he
arrived, did get an upgrade to a suite, not a presidential
suite or anything of the sort, but there were no regular rooms
available which is what he requested when he first sought
reservations at the hotel. But the bottom line is he was there
to instruct IRS employees on the threats that are being
presented as a result of----
Ms. Norton. So most of the training conference was devoted
to training then?
Mr. George. I don't have the entire agenda but maybe Mr.
Kutz----
Chairman Issa. The gentlelady's time is expired, you can
answer for the record. The gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Kutz, did Doug Shulman attend the Anaheim conference?
Mr. Kutz. Yes, he was a speaker, he was there for one day.
Mr. Jordan. Did Steve Miller attend the Anaheim conference?
Mr. Kutz. There was no travel vouchers. We have no evidence
that he attended the conference.
Mr. Jordan. Did Lois Lerner attend the Anaheim conference?
Mr. Kutz. No.
Mr. Jordan. Did Sarah Hall Ingram attend the Anaheim
conference?
Mr. Kutz. I don't have that information, but I don't
believe so.
Mr. Jordan. Did any other individuals from the tax exempt
division of the Internal Revenue Service attend the Anaheim
conference?
Mr. Kutz. No. There's no evidence anyone from the tax
exempt government was at the conference or in the exhibit hall.
Mr. Jordan. You guys your report indicates that there was
$50 million spent in fiscal years 2010, 2011, 2012, 225
conferences took place in that time period that individuals
from the IRS attended. Did you look at any other conferences in
detail other than the Anaheim conference?
Mr. Kutz. No.
Mr. Jordan. So there's 224 we don't know much about.
Mr. Kutz. We did a drill down on the largest and when we
had allegations of excessive spending.
Mr. Jordan. Well, 14 of those 224 remaining conferences
that you did not audit, 14 of those were solely for the tax
exempt division, the division that targeted Americans for 3
years for their political beliefs, 14 of those you did not look
at those at all?
Mr. Kutz. No those are about $2 million in total.
Mr. Jordan. According to The Washington Times, the per
person spending, today's Washington Times indicates that it was
one of the most expensive per individual. The Tax Exempt and
Governmental Entities unit to go over procedures for auditing
retirement plans was one of the most expensive training
sessions. Is that accurate, what is reported in today's paper?
Mr. Kutz. I don't know.
Mr. Jordan. Do you know of the 14 conferences that the Tax
Exempt division was a part of, do you know if Doug Shulman
attended any of those?
Mr. Kutz. I have no information on that Congressman.
Mr. Jordan. Do you know if Steve Miller attended any of
those?
Mr. Kutz. No information on that.
Mr. Jordan. Did Lois Lerner attend any of those?
Mr. Kutz. No information.
Mr. Jordan. What about Sarah Hall Ingram? Do you know if
she attended any of those?
Is it fair to say that the people who run that division
would most likely be at one of those 14 conferences held by the
Tax Exempt division in the time period?
Mr. Kutz. Given what I read through on the high level
description of the conferences, it's likely some or one of
those may have been there.
Mr. Jordan. Potentially all of them could have been at
those conferences?
Mr. Kutz. They could have potentially been there.
Mr. Jordan. I did notice that in this Anaheim conference,
there was a session entitled politically savvy training
session, ``how to not shoot yourself in the foot,'' do you
happen to know if that training session was offered at any of
the other 224 conferences in this time period?
Mr. Kutz. I only know it was offered at the one you
mentioned, the Anaheim conference.
Mr. Jordan. Do you have any information on any of these
other 224 conferences that were done in between 2010 and 2012
that you can offer the committee today?
Mr. Kutz. Nothing that is in depth like the Anaheim
conference, no.
Mr. Jordan. Do you think that would be an appropriate thing
to check out the fact that the very people involved with the
systematic targeting of individuals exercising their First
Amendment rights, political beliefs that they have that it
might be appropriate to know if those individuals who headed
that division were involved in some of these conferences?
Mr. Kutz. We would certain be willing and Mr. George can
add to discuss with this committee, if you have a request for
us to look at some of those conference, that's something we
would consider.
Mr. Jordan. Mr. Chairman, I would just say this, this is an
agency that is just out of control. You think about one
conference out of 225 and we know what happened at this
conference with videos and with bags and gifts and not keeping
receipts, but I think what's more telling is at the same time
that this agency was targeting individuals for their political
beliefs, we have the head of the agency attending the very
conference where all this takes place. We are, it's a fair, I
think, conclusion to reach that the people involved in the
division that was targeting Americans for their political
beliefs was involved in many of the other 224 conferences, and
I think what is most chilling is this is the agency that began
targeting people for their political beliefs the very month
ObamaCare became law, March 2010, this is the very agency that
will be charged with enforcing ObamaCare.
And they are engaged in this kind of activity when they're
also going to be in charge of enforcing the health care law.
And to me, that's what's most troubling, and I think why we
need to get to the bottom of this and with that I would yield
back, Mr. Chairman.
Mr. Cummings. Would the gentleman yield?
Mr. Jordan. I'd be happy to yield.
Mr. Cummings. The gentleman just made a request, well,
you're requesting, I just want to make sure we're clear, you're
requesting additional information, additional study?
Mr. Jordan. I think that would be helpful. I'm not, I
would, I guess, not phrase that in the term in the sense of an
official request, that would be something I would want to check
with the ranking member, and more importantly, the chairman of
the committee.
Mr. Cummings. And I'll be checking with the chairman too,
because as I said from the very beginning, Mr. Chairman, and
Mr. George, I consider it legislative malpractice that if we
don't, at some point, look at why, from 2007 to 2008
conferences, the price of conferences doubled, and it just
seems to me if we're going to get to this bottom of this, and
I'm not saying for one moment that President Bush knew about
this or anything because I believe if he did, he probably would
have done something but we do need to understand that. I yield
back.
Mr. Jordan. I was going to make one point. My only point
was, we've looked at one conference and we uncovered this, by
the very agency that's going to enforce ObamaCare, and there's
224 other conferences that were going on in the same time
frame. That's important.
Chairman Issa. And for the entire committee, since this is
a salient point that keeps coming back, it is the intention of
the chair working with the ranking member to ask the GAO to do
a current event study of where we stand with conference and
travel post legislation, post the President's action, and
obviously, post the good work of this IG and others. So I do
think that this, I hope this will be the last time we're
specifically looking at anything that isn't forward looking
from 2012 on, because I do think that we really want to look at
how many reforms have been accomplished.
But, Mr. George, I certainly think that if you look at
current ones and find that any of these past activities are
still occurring, that you inform the new Commissioner and us as
quickly as possible. But I do believe that the gentleman is
right, but I believe GAO to look government-wide would probably
be more appropriate.
And with that I appreciate the opportunity to have the
gentleman from Massachusetts be recognized.
Mr. Tierney. Thank you, Mr. Chairman. So before we pivot
and start looking at 2013 and beyond, I want to take a look at
the last decade on that, and actually let me put a chart up
that we have showing just how the costs have increased over
that.
Mr. George, you've already covered 2010, 11 and 12, and I
appreciate your good work on that. But if we look back at 2005,
according to the Internal Revenue Service data, the IRS spent
about $9.8 million in 2005. Then in 2006 that nearly doubled to
$19 million.
So Mr. Fink, do you know what caused a sudden jump in 2005,
2006?
Mr. Fink. No, sir. I do not know what caused that jump for
that particular period of time. I do not, sir.
Mr. Tierney. Now you were named deputy commissioner in
2008, is that right?
Mr. Fink. Yes, sir.
Mr. Tierney. So let me ask you about the increase that
happened during that year. If you look at the chart in 2007,
the IRS spend about $13.4 million on conferences. But the next
year, 2008, the figure jumped to $29 million. So just a single
biggest increase involved in any of those years, what caused
that $15 million increase from 2007 to 2008, Mr. Fink?
Mr. Fink. What I would say is the years which you are
citing to, the definition of conference also includes training.
In those years, we had significant hiring in those years, so we
would have been training a significant number of individuals in
those years. So when you're having those individuals go off to
training because the training was done face to face primarily
at that time, I would certainly say that that would be a
contributing factor to the increase in those costs, sir.
Mr. Tierney. So just to make sure I get this right you're
saying at least in that particular year, whenever anybody got
trained, you listed it as conference as a definitional matter?
Mr. Fink. From what my understanding is, sir, is that the
definition that is being used around conferences also includes
training and training forums.
Mr. Tierney. So no way to distinguish on your records as to
which was which?
Mr. Fink. Actually, if you have a breakout, you can take
and you can look at the individual, as I believe the Inspector
General has a breakout for the years that they looked at, you
can go down through the individual courses that are listed
there, the individual training sessions, you can actually pick
out what is the technical training for field employees and for
campus employees for the service. You can actually spot it out
by the name.
Mr. Tierney. So you went from $10 million in 2005 to $37
million in 2010, and you're saying that basically, all of that
distinction, the reason it went so high was that the difference
between the $10 million and that was all in training added in
and counted as part of a conference thing.
Mr. Fink. And I'm saying a part of it certainly had to be
due to training for new hires, sir.
Mr. Tierney. What was the other part?
Mr. Fink. That I do not know.
Mr. Tierney. You don't know?
Mr. Fink. No, because I do know that we did significant
hiring in those years so that, of course, would increase the
costs, sir.
Mr. Tierney. Mr. Kutz and Mr. George, do you have any
information to offer on these sharp increases in those given
years?
Mr. Kutz. Only for the 3 years where you've all mentioned
that the controls that were spurred in part by the hearings
this committee held and other government-wide and IRS and
Treasury reforms had an impact it appears, a significant
impact.
Mr. Tierney. So I guess the good only news is that after
the GSA debacle, that some reforms were put in place and the
numbers dropped now to below $5 million, and I guess that's the
case was to put these reforms in place after the GSA conference
information came to light?
Mr. Fink. Actually, sir, the reforms that started at the
Internal Revenue Service started in late 2010 prior to the GSA
conference.
Mr. Tierney. Why was that? Was there somebody that called
this to somebody's attention or was there an issue or?
Mr. Fink. I was not involved in that so it would be purely
speculative, sir.
Mr. Tierney. So now we're spending less now than we were
spending in 2005, so is any of what we're spending now training
as opposed to conference, Mr. Fink?
Mr. Fink. Yes. We are still doing training.
Mr. Tierney. And that's included in that $4 million-plus
number?
Mr. Fink. I would believe that also training would be
included in that, but if you want to know why there's such a
sharp decrease, we're now doing a significant amount of
training virtually as opposed to face to face, so the travel
costs are reduced, you don't have that type of activity going
on, so you have people presenting and doing it virtually, using
technology.
Mr. Tierney. You preempted one of my questions which is why
don't we do more Webinars and technological so we don't have to
have the conference on that. Mr. George.
Mr. George. Mr. Tierney, I just want to add though included
in this conference is what's called the tax forums in which the
IRS gathers tax preparers in various parts of the country to
update them on changes in tax law and IRS policies. There is a
tremendous benefit to the entire system of tax administration
for the IRS to conduct these, as these individuals, many of
whom are tax accountants and literally individuals who prepare
taxes, to make sure they're up-to-date on what the tax laws
are, and many instances what to be aware of. And we receive at
the Treasury Inspector General for Tax Administration sometimes
many leads on people abusing the tax system as a result of
these tax preparers learning what is or is not permissible and
coming forward to us with those types of leads.
Mr. Tierney. Thank you. I guess the idea of how important a
functioning Internal Revenue Service is to this country, we
have all seen countries that don't have good tax collection,
and what that means a nation and everything like that, and so
it's something we have to get on top of here that matter are
trust that Mr. Cummings was talking about is essential and
we're going to keep on that. Thank you, Mr. Chairman for having
the hearing.
Chairman Issa. Thank you. Just quickly following up on the
gentleman's statement, Mr. George, Mr. Kutz, is there a
possibility since the exhibit that was up there really doesn't
reflect conference spending at all.
Is there a possibility obviously with the acquiescence of
your new Commissioner that you would provide to us a breakdown
of what portion was billed as training, these true conferences,
so on.
I think it would be helpful for us because certainly, we
want to make sure the record is complete, and I'd leave the
record open to get that so we are comparing apples and apples
in conferences versus outreach to the public versus travel for
training, and I do appreciate the gentleman's fleshing out that
we now are taking less people to college and taking more
college to people.
Mr. George. Happy to do so, again, with the, just note that
if we would have to rely on information provided by the IRS
itself and so----
Chairman Issa. And the next panel will probably help us ask
that again.
Mr. George. Yes, I agree sir.
Chairman Issa. Thank you. The gentleman from Utah Mr.
Chaffetz.
Mr. Chaffetz. Thanks, Mr. Chairman, and I thank you for
having the foresight to actually call for this as we looked at
the GSA, and now we are exposing this.
Mr. Fink, how long have you been at the IRS?
Mr. Fink. Thirty-two years, sir.
Mr. Chaffetz. And I would suspect that through that time
you've been to some conferences along the way?
Mr. Fink. Yes, sir.
Mr. Chaffetz. How would you compare this conference to past
experiences?
Mr. Fink. It is certainly in my career with the Internal
Revenue Service, it is one of the largest I have ever attended
but it was not uncommon in the service in past years that I've
been there that you would have large gatherings of this, of
your leadership team, bringing all your managers together in a
function.
Mr. Chaffetz. What did you personally get when you went to
that conference? What did you personally receive?
Mr. Fink. For the Anaheim conference, sir?
Mr. Chaffetz. Yes.
Mr. Fink. The bag that was shown is what I got. Of course,
it's already been mentioned, I paid the government rate and
stayed in a suite, paid the $135 for the suite, but I got the
bag, and there was a notebook inside the bag, and also I
believe I received what is a, it's an attachment to your
lanyards that you wear for identification purposes that it is
spring loaded-type lanyard.
Mr. Chaffetz. Anything else? Any other perks or benefits,
food?
Mr. Fink. Oh, there was, I believe if you look at the
record, and I believe it's in the Inspector General's report,
there was 25 baskets of fruit that were in each of the two
primary hotels.
Mr. Chaffetz. And how big was your room? Did you ever stay
in a room like that.
Mr. Fink. Yes, I have, sir.
Mr. Chaffetz. When was that?
Mr. Fink. I paid for a room like that personally, sir, and
also I would mention to you that in another conference, sir,
where there was, we had reserved most of the hotel, it was a
very, very large conference, I was given a suite not quite that
large, but it was a suite.
Mr. Chaffetz. When and where was that?
Mr. Fink. That was in, the one that I have the most recent
recall of in memory was in Chicago, sir.
Mr. Chaffetz. And when was that?
Mr. Fink. I believe it was actually in, I would be
speculating, but I believe it was in 2009.
Mr. Chaffetz. So is it because of your rise in rank, did
you believe you were entitled to this?
Mr. Fink. No, sir.
Mr. Chaffetz. Why did you get it then?
Mr. Fink. My understanding is it was part of what was
negotiated with the hotel as part of the arrangement for us
taking a significant number of the rooms in the hotel for the
conference, sir.
Mr. Chaffetz. When did you think this was wrong?
Mr. Fink. The conference in general?
Mr. Chaffetz. Yeah.
Mr. Fink. I don't think the conference, I think now that we
should have been, we should have been paying closer watch to
our expenditures and the expenses. I don't think the conference
itself was wrong because of the time that we ran at the
Internal Revenue Service, 30 percent of our managers in small
business were brand new, we were going through a very difficult
time in trying to get our leaders to recognize----
Mr. Chaffetz. So when did you think that the something was
wrong here?
Did you ever think something was wrong here? What do you
think is wrong about this picture?
Mr. Fink. I think now that in retrospect in looking back
that you take a look at the expenses. We should have been more
diligent in our responsibility to the American taxpayer and to
the American public.
Mr. Chaffetz. And you're in charge of this group, right?
Mr. Fink. At this time I am, yes.
Mr. Chaffetz. And you were the number two at the time of
the conference?
Mr. Fink. Yes, sir.
Mr. Chaffetz. When did it strike you that this was wrong?
Mr. Fink. As I said----
Mr. Chaffetz. When you got called to testify before
Congress?
Mr. Fink. No, sir.
Mr. Chaffetz. Well, when?
Mr. Fink. As I said, I do not think that the conference
itself, the premise it was based upon, was wrong because of the
needs of our employees at that time. I do not think that the
conference was wrong.
Mr. Chaffetz. When did you become aware of the massive
expense?
Mr. Fink. I actually did not become aware of the massive
expense until much later. I did not know what the expense was
at the time of the conference that we were paying, I did not
know what those expenses were.
Mr. Chaffetz. And you're the number two person in that
division?
Mr. Fink. Yeah----
Mr. Chaffetz. You're oblivious to the expenses? You're
totally ignorant of the expenses?
Mr. Fink. I was not involved in the planning or execution.
Mr. Chaffetz. Who was?
Mr. Fink. They put together a planning team that----
Mr. Chaffetz. Yeah, we've all watched ``The Office,'' we
know what the party planning committee is.
But who specifically authorized this? And when did you
realize that it was wrong?
Mr. Fink. If you look at the Inspector General's report----
Mr. Chaffetz. No, I want to know from you. You're in
charge. This is what's so infuriating. You're in charge. You
have a public trust. You're paid by the American taxpayer to be
responsible, to be respectful, to have knowledge, to have
oversight, and yet you can't even tell me when you thought this
was wrong. In fact, you're saying that well it was a pretty
good conference.
Chairman Issa. The gentleman's time is expired, but I would
like to hear an answer to the question.
Mr. Kutz or anyone who wants to respond to the gentleman.
Mr. Kutz. Well, I would say the documents we saw that
authorized the conference, actually Mr. Fink signed requesting
it for Mr. Wagner, the Commissioner, and then it was authorized
by the two deputy commissioners. This was in April of 2010.
Mr. Chaffetz. Clarify that for me. Mr. Fink, actually
signed off on this?
Mr. Kutz. On the request for approval by the two deputy
commissioners that he had signed for Mr. Wagner, I believe, in
April 2010 for estimated $4.3 million conference at that point
in time.
Mr. Chaffetz. And so when did you realize that this was
wrong? You signed the authorization before it happened.
Chairman Issa. I'd ask that the gentleman have an
additional 2 minutes for this specific and limited line of
questioning, please.
Mr. Cardenas. Point of personal privilege, Mr. Chairman, I
do not watch ``The Office'' so I don't know who the collective
``we,'' is but it's not me.
Chairman Issa. That will be noted for the record.
Mr. Chaffetz. I appreciate the chairman.
Mr. Kutz is saying you personally signed the documents,
with the dollars on it, before the conference. Would you agree
or disagree with that?
Mr. Fink. I initialed the routing slip that went to----
Mr. Chaffetz. What does that mean to you? Do you have any
responsibility for that?
Mr. Fink. I attended the briefing that was done for the two
deputy commissioners.
Mr. Chaffetz. Did that include the cost of the conference?
Mr. Fink. If I remember correctly, the briefing that was
done for the two deputy commissioners, yes, that included a
discussion of the----
Mr. Chaffetz. And that raised no warning flags? There was
no bells that went off in your mind? And you didn't think that
that was wrong?
Mr. Fink. At that time because of what we were experiencing
at the service----
Mr. Chaffetz. What was that experience?
Mr. Fink. We were experiencing a whole new taxpayer base
that we were entering----
Mr. Chaffetz. You testified--you testified that when you
thought it was wrong is when you became aware of the expense,
but we just heard from Mr. Kutz you signed off on a routing
slip, you participated in meetings understanding the costs
before the conference happened.
Are you here claiming no responsibility at this point?
Mr. Fink. Absolutely not. That's why I am here.
Chairman Issa. The gentleman's time is expired. Mr. Fink,
strictly for the purposes of we put you under oath, if I heard
correctly, and maybe if necessary, we can have it read back,
you had answered that you were not aware in some fashion of the
cost of these, and then Mr. Kutz made it clear that you signed
a routing slip. You made it clear that you attended briefings
in which you knew cost.
Would you like to revise your initial statement about not
being aware of the cost? It's not about whether it's justified,
but I think that the IG's investigation would say that you want
to be much more accurate.
Did you know about the cost, and if so, when, which is what
I think the gentleman's line of question is. And I don't want
to trap anyone, but I can't square those two right now.
Mr. Fink. Okay, I was aware of the cost when we did, the
estimated cost of $4.3 when we did the briefing for the two
deputy commissioners of the Internal Revenue Service. That's
when I became aware of the estimated cost.
Chairman Issa. And that was $4.2 million?
Mr. Fink. Four point three.
Chairman Issa. Four point three million. There may be
additional questions but I want to make sure for the record and
I thank the gentleman for Utah because I think we now have a
better understanding.
Mr. Cummings. Mr. Chairman.
Chairman Issa. Yes.
Mr. Cummings. With all due respect, we just lost a member
because he had to get out of here.
Can we have an additional 5 minutes on our side? Do you
follow me? In other words, he just----
Chairman Issa. If you find a witness who is in potential
liability of perjury and you want to clarify the record we will
do so. The gentleman's is recognized for 5 minutes, more, if
absolutely necessary.
Mr. Cummings. Wait a minute. Whoa. Whoa. Whoa. Hold on.
Wait a minute. I just asked for equal time. I just said that we
had a member that had to leave, and I did not object to Mr.
Chaffetz, I wanted to hear the answers to his questions. It has
nothing to do with perjury. But I'm just asking for equal time.
That's all I'm asking for. And I think that's not unreasonable.
Chairman Issa. It's not a rule of the committee. I said Mr.
Clay is recognized for 5 minutes or more if necessary.
Mr. Clay.
Mr. Cummings. Thank you.
Mr. Clay. Thank you. All right. Thank you, Mr. Chairman.
And the IG's report referenced three trips that multiple IRS
employees and two event planners took in November, 2009, June
2010 and August 2010.
Mr. Fink, can you elaborate on why three separate planning
trips were needed for the Anaheim conference?
Mr. Fink. There were actually were, yeah, I can elaborate.
There were two separate planning trips that were done. A third
trip was actually done the week before the conference to make
sure that everything was set up and ready to go for a
conference of that size. I think that in retrospect, in looking
at those trips and what occurred there, absolutely we should
have used local individuals to conduct those planning trips,
those visits, because it was very easy to have done that by
using local individuals as opposed to traveling folks to
Anaheim.
Mr. Clay. Did you approve these planning trips?
Mr. Fink. No, sir.
Mr. Clay. Do you know who did?
Mr. Fink. The then sitting Commissioner.
Mr. Clay. The IG's report says that the audit, ``did not
identify any policy or guidance that outlined the reasons when
and why planning trips should be performed for conferences, the
appropriate number of employees attending or whether approval
is needed from senior management in advance.''
And Mr. Fink, what is your response to that criticism?
Mr. Fink. In reading the IG's report, at that time, I
believe that is accurate, that is accurate that there was no
criteria or guidance at that time around those planning
conference. Since that time, of course, we have made changes
that do put stricter and tighter guidelines around doing those
types of visits and types of trips.
Mr. Clay. And what level of approval is needed for these
planning trips now?
Mr. Fink. I do not know, sir, I can get that for you.
Mr. Clay. The IG report concluded, ``the costs associated
with these planning trips may have been excessive based on the
number of employees who were involved.''
Mr. Kutz, how many people went on each of these planning
trips?
Mr. Kutz. The November 2009 trip included three staff and
cost $3,500 of travel, the June 2010 trip had eight staff that
cost $10,300 for travel, and what Mr. Fink described as the
week before the conference was 16 staff costing $22,000, and I
believe the majority of these staff were from Washington, D.C.
Mr. Clay. I'm astounded. I'm astounded it takes three trips
to go and plan a conference. I don't understand it.
Mr. Fink, why were so many people needed for the trips?
Mr. Fink. The primary reason is because of the size of the
conference, the number of individuals who were attending,
setting up the logistics of the fact that the conference was
over a 3-day period, 8 hours a day, that's why as I did state
that absolutely now in retrospect when you look at it, it was
unnecessary for people from Washington.
Mr. Clay. It's almost like the joke, how many people does
it take to change a light bulb?
Mr. George, your report raised a concern that appropriate
personnel did not sign the letters of intent with the hotels.
Your report said this letters of intent are used by the IRS to
secure hotel space for offsite events. Your report also states
that these letters are normally required to be signed by
centralized delivery services, the organization responsible for
coordinating space for IRS events or procurement personnel.
However, in the case of the Anaheim conference, a general
schedule 14 revenue officer in charge of conference planning
signed the letters of intent with the three hotels. Do you know
who authorized the GS-14 to sign the letters of intent?
Mr. George. I'm going to ask Mr. Kutz to respond to that,
sir.
Mr. Clay. Mr. Kutz.
Mr. Kutz. The GS-14 did sign. The contracting officials
told him it was okay to sign because the letter of intent was
not a binding agreement for the Internal Revenue Service, so at
the end of the day, that is, in fact, what the agreement was
that was used.
Mr. Clay. And those were the concerns raised I'm sure. And
as a matter of fact, this revenue officer was the one signing
the letter of intent, is that correct?
Mr. Kutz. We certainly would have concern if a GS-14
committing the Internal Revenue Service to several million
dollars of spending yes, Congressman.
Mr. Clay. And Mr. Fink why was a GS-14 revenue officer
permitted to sign a letter of intent?
Mr. Fink. I believe, sir, to the best of my recollection,
it is because he had been involved in planning activities on
other conferences that are listed in the Treasury Inspector
General's report that he had some experience and knowledge, and
that he had also coordinated this with the centralized services
unit.
Mr. Clay. And did the same GS-14 revenue officer who signed
the letters of intent with the hotel choose the outside
conference planners who planned the conference?
Is that the same person?
Mr. Fink. To the best of my knowledge, sir, yes.
Mr. Clay. Had this revenue officer planned previous
conferences with these same planners?
Mr. Fink. That, sir, I do not know.
Mr. Kutz. Congressman, my understanding is yes.
Mr. Clay. And under what authority did the GS-14 prepare
and sign these sole source justifications?
Mr. Fink. I believe he was asked to do that by the then-
sitting Commissioner of the Small Business Division. I believe
that is who asked him or instructed him to do that in
coordination with the planning committee.
Mr. Clay. And Mr. George, do you know where this revenue
officer stayed during the conference?
Mr. George. I don't have that information. Maybe Mr. Kutz.
Mr. Kutz. He stayed in the presidential suite for 6 nights.
Mr. Clay. Mr. George, your report states that six employees
were given awards totaling $6,000 for their work on the Anaheim
conference, including $2,000 each for two employees who were
primarily responsible for coordinating the conference planning.
Did the GS-14 revenue officer receive one of these awards?
Mr. George. My understanding is that he did.
Mr. Kutz. He received a $2,000 award for the conference
work.
Mr. Clay. And who approved these awards?
Mr. Kutz. I'm not sure who approved that award.
Mr. Clay. Had the GS-14 in question received any previous
awards for work planning conferences?
Mr. Kutz. We're not aware of that.
Mr. Clay. I wonder how much work the GS-14 did when you had
an outside firm doing the conference planning. How much sense
does that make, Mr. Fink?
Mr. Fink. I'm not aware of how much work they did. I do not
have specific knowledge.
Mr. Clay. Mr. Chairman, I'm going to yield to----
Chairman Issa. Yes, I think the gentleman would like a
couple of minutes.
Mr. Cummings. First of all, Mr. Chairman, thank you for
your courtesy. I really appreciate it.
Mr. Fink I just want to go back, and the chairman and I
were just talking and I have a tremendous amount of respect for
what he said to me just a moment ago, and that is that we're
not trying to get anybody in any trouble with regard to
perjury, but we want to make sure, that is why we want to be
real clear on this. This is the committee where Roger Clemens
testified, and next thing you knew, he found himself in some
trouble. So we just want to be real clear so you can clear the
record.
So you knew, you did have knowledge of the, this Anaheim
conference and how much it would cost before it went, it
happened, is that right?
Mr. Fink. Yes, sir, I did. Yes, sir.
Mr. Cummings. And so you signed some documents, is that
right?
Mr. Fink. Yes, sir.
Mr. Cummings. Like Mr. Kutz said. Did you look at the
documents that you signed with regard to the cost of this? I
mean, in other words sometimes people just sign documents and
then pass them on. What was your, how did that work for you?
What happened?
Mr. Fink. When I signed the routing slip, Representative
Cummings, I was given all the documents in a binder, a binder.
Then I went through that binder, looked and saw in that binder
what I said that previously being indicated as the estimated
cost of the conference. And then I initialed off on that binder
because we'd already previously had briefed the two deputy
commissioners, and then forwarded that binder to the deputy
commissioner.
Mr. Cummings. So you were aware?
Mr. Fink. Yes, sir.
Mr. Cummings. Did you think that that cost was kind of
high? Did you ever say that to yourself?
Mr. Fink. No, sir. I did not.
Mr. Cummings. Looking at it in retrospect, do you feel that
way?
Mr. Fink. Yes, in retrospect as I said we certainly could
have saved money and done that conference_
Mr. Cummings. And my last question, I watched your video.
You were Dr. Spock?
Mr. Fink. Yes, sir.
Mr. Cummings. Did you ever sit there and say to yourself,
well, maybe this isn't right, and if somebody sees this the
taxpayers are not going to like this?
Mr. Fink. Absolutely, sir.
Mr. Cummings. While you were doing it?
Mr. Fink. After I saw the production, as I mentioned, I
fully regretted it.
Mr. Cummings. And to this day, and thank you, Mr. Chairman,
I got to ask this though, do you see the redeeming value in
that video?
Mr. Fink. No, sir.
Mr. Cummings. So you agree with me?
Mr. Fink. Yes, sir.
Mr. Cummings. I feel better now that you agree. Thank you.
Chairman Issa. I thank the gentleman. We now go to the
gentleman from Michigan, Mr. Walberg.
Mr. Walberg. Thank you, Mr. Chairman, and thank you for
laboring on this oversight not just this particular issue which
is tough to look at as a taxpayer, as a citizen, as a
representative. It reminds me of an early morning walk in the
feed room in my barn and turning the lights on after dark and
hearing the sounds of scurrying things going for the corners,
because the light is being turned on.
And, Mr. Fink, you know, I'm not so concerned about how you
feel about it now, or even back how you felt about it back
then, I can't confirm one way or another. I certainly
understand the embarrassment that you must feel about it, this
all taking place now. I appreciate the apology. But it's after
the fact, and I'm certain that probably the biggest reasons for
the concern now is because it has all come to light.
Let me ask you a question. You've made apologies, you've
said that there are measures being taken, that this isn't going
to happen again, this isn't happening now. What type of
confidence do you have that that is true? That measures are in
place to make sure that this does not happen again, that there
are Webinars, that there are things that we do in light of the
fact that what taxpayers are going through right now, that this
has changed?
Mr. Fink. The confidence I have is based upon if you take a
look at how significantly all the costs have dropped based upon
what the Inspector General has reported, I--that gives me
tremendous confidence.
I will tell you, also, I have confidence in the fact that
looking at the changes that have been put into place, the
guidance that is there, and the other reason I also have
tremendous confidence is because the Acting Commissioner has
come in and he has clearly spelled out what his expectations
are. And when this came to his attention, he clearly spelled
out that he was appalled at this, that he looked at the
expenses, that he saw the video, and that it troubled him so
that gives me tremendous confidence that it would never happen
again on his watch.
Mr. Walberg. Well, we're looking forward to hearing that
from him, but in the culture and again, I would agree with the
chairman that probably the overwhelming majority of Federal
employees are doing the job that they've been asked to do or
have been given to do and are doing it to the best of their
ability, but here is a culture, there were numerous people
involved in the videos and everything else, the planning, the
costs, understanding it and yet the culture said, who cares? We
can do this because we can do this because we can.
And it happened. And when I sit in the situation where this
week, in fact, a 59-year-old lady, single parent, calls and
says I've been told by my home health care provider employer,
she was a home health care worker, that she is being cut back
to 28 hours because of ObamaCare, and the IRS is responsed with
administering major portions of ObamaCare, and we see the
culture that allowed this type of thing to go on without
respect for that 59-year-old tax-paying mother, single parent,
who is now concerned about losing her home because she doesn't
have the hours that she needs, that she had before this
implementation and we hear what goes on in this culture, I'm
greatly concerned.
Mr. George, I think I heard you say that you received
notification of this problem from a whistle-blower was it?
Mr. George. I use that term generically, it was an IRS
employee who did alert us to the fact of excessive spending at
this conference.
Mr. Walberg. So there was one person that was willing at
least to step up to the plate to say we think there is a
problem?
Mr. George. That is correct.
Mr. Walberg. Mr. Fink, I hope, I hope that the culture in
the IRS, even if it's just because you got caught, is changing
to say that this will not continue on even after the light of
day has been turned off to some degree on it.
I have in my hands a copy of a letter that was written to
Secretary Lew by Senator Coburn ultimately responding from a
letter he had sent back in April of 2012 to then-Secretary Tim
Geithner asking for a full listing of all conferences attended
by department employees during fiscal years 2010, 2011, 2012,
attended by, as the letter says, 50 or more Treasury staff and
on that list there were only five conferences with a total cost
under $500,000. Subsequent to that, this has all come out, with
costs including the largest component of Treasury which is the
IRS, of $50 million on hundreds of conferences over those 3
years. So the request is being made to say, why weren't we
given the information?
So I would ask Mr. George and Mr. Kutz, why did that take
place then? Has the culture changed now so that even from
Treasury, we will get accurate information to Congress, and we
won't feel we've been given inaccurate information, incomplete
information, in fact, concerning, a concern about having even
truthful information?
Chairman Issa. The gentleman's time has expired.
You may answer, please.
Mr. George. The environment has changed entirely, Mr.
Walberg. There is no question about that. And so that was not
top priority for the administration in the wake of the GSA
revelations. And then of course, with this report, it is
obvious that this is a major issue, and it's something that the
administration, to its credit, has taken steps to address.
But there's something very important, sir, I need to note.
As Mr. Fink pointed out, and as we have both in our audit
report and during this testimony, new policies have been put in
place. The key is to ensure that the policies are being
followed. So they are there, but if they're not being
implemented and oversighted in terms of what my office does,
but more importantly, what managers within the Internal Revenue
Service do, it could be for naught.
Mr. Walberg. Absolutely.
And, Mr. Chairman, I thank you for that. But I think it was
notable what he said there, that in the past it didn't seem
that important to the Treasury Secretary and others who were
responsible for this. That has to change.
Chairman Issa. And with our help, I hope it will.
Mr. Walberg. Thank you.
Chairman Issa. We now go to the gentleman who probably has
more Federal workers in his district than anybody but possibly
the ranking member, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman, and that's probably
true.
Mr. George, there was a time, as the ranking member pointed
out in his opening statement, where the amount of money spent
on these conferences doubled in one fiscal year. What was going
on in the IRS that it would double in one fiscal year?
Mr. George. I do not have that information, sir.
Mr. Connolly. Mr. Kutz, Mr. Fink, either of you?
Mr. Kutz. We just looked at 2010 to 2012 as part of this.
Chairman Issa. Would the gentleman yield?
Mr. Connolly. Of course.
Chairman Issa. You were out of the room at the point where
we discovered that these numbers we have been looking at are
combined. They are conferences, travel, training, and others.
And the next witness will confirm. But we've asked to have them
broken down so the committee would get the details because it's
apparently a substantial amount of this was travel related to
training specifically, training of new employees.
Mr. Connolly. So it could have been just we were upping the
training of a lot of new employees?
Mr. George. That is a possibility, sir, yes.
Mr. Connolly. Yeah. Okay. I thank the chair.
Mr. George, your report found that the IRS contracted with
15 outside speakers to present at a conference for a total cost
of $135,350. Is that correct?
Mr. George. Yes, it is, sir.
Mr. Connolly. And one speaker was paid $17,000 for two
presentations. Is that correct?
Mr. George. That's correct.
Mr. Connolly. And your report further stated that the
contract signed by the IRS said ``In each presentation, he will
create a unique painting that reinforces his message of
unlearning the rules, breaking the boundaries, and training the
thought process to find creative solutions to challenges.''The
speaker then proceeded to paint six such paintings, including
subjects such as Albert Einstein and Michael Jordan. Is that
correct?
Mr. George. Yes, among others.
Mr. Connolly. Among others. Do you believe paying a speaker
$17,000 to paint pictures for IRS employees was an appropriate
use of taxpayer dollars?
Mr. George. I do not, sir.
Mr. Connolly. Either of the two of you can weigh in here.
Mr. Kutz. I would agree with the Inspector General.
Mr. Fink. I would agree.
Mr. Connolly. Why did the IRS hire this speaker-painter?
Mr. Fink. The individual that you are referring to had
spoken to numerous private sector companies, as well as other
government agencies. And the way that he presents his
information is, is he picks subjects to do a painting on and
then talks about their leadership attributes, their
characteristics. What it ties to as far as viewing things
differently and changing the way you think about things is the
way he goes about doing the presentation is, is that, of
course, is you cannot recognize the image. In some cases he
will actually paint the image upside down. But then as he goes
through it, he talks about what their leadership
characteristics were or what the unique challenges were that
they faced and how they had to overcome certain challenges.
For example, you pointed out, I believe it was mentioned,
Michael Jordan. He basically spoke about Michael Jordan's
drive, you know, the fact that he was so committed to being the
best and always trying to improve. So that's how he does the
painting, and he relates the painting and his message are tied
together around what you would hope would be positive
leadership characteristics, sir.
Mr. Connolly. I guess I understand the principle, and I
suppose it's easy to dismiss it, but when we're trying to be
good stewards and guardians of taxpayer investments, especially
when our mission is to collect taxes, it strikes me as maybe--
no, not maybe, it strikes me as really a less than judicious
use of taxpayer money. And this is the final question, I guess
to ask all of you. It shows to me a culture of both arrogance
and tin ear; tin ear as to how might this look.
You know, the one thing about those of us who run for
elective life is, we do ask ourselves the question, how would
this look on the front page of the morning paper? And if the
answer is not so good, smart politicians don't do it. It looks
to me like this question never got asked in this--let's even
concede well-meaning, well-intentioned set of activities, but
it was, you know, one has to judge it on a range of insensitive
to stupid, and not a wise use of taxpayer money. And there were
other ways to make that point and to do that without being, in
retrospect, becoming an object of ridicule and enormous anger
by taxpayers who foot the bills.
And I just, if the chairman would allow the three panelists
just to comment on what appears to me and others as, frankly, a
culture of arrogance and a real tin ear to the concerns of the
public to pay the bills.
Mr. George.
Mr. George. I agree with everything you said, Congressman.
And I know this term is somewhat overused, but the optics,
there seems for some reason to have been just a lack of regard
in terms of how this would be perceived by the American people
in the times that we find ourselves in.
Mr. Kutz. This is not a case today of fraud or criminal
activity. This is a case of people that lost sight of the fact
that they were spending taxpayer money and not their own.
Mr. Connolly. And I agree with you, Mr. Kutz. I would
certainly stipulate it's not a matter of fraud or embezzlement.
It's a matter of very stupid judgment.
Mr. Fink.
Mr. Fink. And as I have said, in looking back in
retrospect, and even at that time, this was not a good use of
taxpayers' funds, it was an inappropriate use of taxpayers'
funds, and we should have went about this in a much more
judicious, much more prudent manner than we did.
Mr. Connolly. I thank the gentleman.
And I thank the chair for his indulgence.
Mr. Gowdy. [Presiding.] Thank the gentleman from Virginia.
The chair would now recognize the gentleman from Tennessee,
Dr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman, and I do thank the
panel for being here today.
And I would like to say, Mr. Fink, we've had several
hearings, as you know, on the Hill regarding issues surrounding
the IRS, and when you started your testimony, the one thing you
did that I appreciated was that you sincerely apologized, you
showed remorse, and I think you are genuinely embarrassed,
unlike your predecessor Commissioner Shulman, who when asked
whether he was sorry or apologized, I think that what we got,
at best, a backhanded apology that he was sorry that it
happened under his watch, which I interpret that he is maybe
embarrassed because it might make him look bad. So I do
appreciate the fact that you do seem to care, and I think a lot
of people do as well.
But let's look at what the American people and the
taxpayers got for their $4.3 million at this conference in
Anaheim. Can you tell me what the main purpose that your
division was there for at this conference?
Mr. Fink. Yes, sir. And if you don't mind, I do truly
regret this. I really do.
The main reason there was because we had had a significant
turnover in the leadership in the organization in Small
Business. Also, at this time, we were experiencing an entire
new customer base in Small Business, folks that had not had tax
problems before, for whatever reason were coming in to interact
with the Service. They were having difficulty remaining in
compliance. Along with that, the third primary item was is
that, as the Inspector General mentioned, is that we had an
increase in security concerns out of the incident that occurred
in Austin, Texas.
Mr. DesJarlais. Because I have limited time, you have a
term for the purpose of this, and that's continuing
professional education. Is that correct?
Mr. Fink. Yes, sir.
Mr. DesJarlais. Okay. Do you believe that professional
continuing education occurred at this $4.3 million conference?
Mr. Fink. I apologize, but not in the videos, the dance
videos, the ``Star Trek.''
Mr. DesJarlais. Okay.
Mr. Fink. There were learning lessons there, sir.
Mr. DesJarlais. Now, you have methods of tracking this. You
have 2,700 people to keep track of. You said they are there for
a 3-day period, 8 hours a day. How did you keep track of these
2,700 attendees? What did they do to get credit for these CPEs?
Mr. Fink. They did not get CPE credit, sir, because we were
not keeping individual track of their attendance at different
parts of the event, so they did not get CPE credits. All they
got was on our internal system, they received what would be
characterized as leadership training.
Mr. DesJarlais. How was their attendance determined? Was
there videos? Was there head counts? Was there a sign-in sheet?
Mr. Fink. No, sir, there was not.
Mr. DesJarlais. Okay. So we have all these people, there
really was no accountability in terms of whether or not they
actually gained any new knowledge on this particular trip. I
mean, we don't know whether they crossed the street and went to
Disneyland during this 8 hours.
Mr. Fink. We absolutely--I cannot sit here and say
absolutely they did not, sir.
Mr. DesJarlais. Do you know of people who did go to
Disneyland when they were supposed to be in this 3-day, 8-hour
a day?
Mr. Fink. No, I do not, sir.
Mr. DesJarlais. Did anybody talk about it? Has anyone
talked about going other places rather than being at this $4.3
million educational seminar?
Mr. Fink. Not during--no one has talked about going during
the seminar, but some people did, yes, absolutely talk about
going places in the evening, sir.
Mr. DesJarlais. So we really couldn't account for the 2,700
people. So this conference was probably an abysmal failure when
you look at the total number. We didn't have any way of
tracking. We don't know if they were educated. So essentially
this was not a good conference. We got 224 more of these to
look at, so we'll kind of--we'll stop there.
You know, when the American people don't listen to the IRS,
and they don't pay their taxes, they actually can go to jail,
get extreme penalties. What do you tell the people that their
retribution may be when their taxpayer money that they did send
in is wasted in this fashion? Is there any way that they can
recoup this kind of money?
Mr. Fink. Not that I'm aware of, sir, other than
apologizing sincerely.
Mr. DesJarlais. Okay. So I mean people, if they don't pay
their taxes they can apologize sincerely, but they can still go
to jail.
Mr. George, if Mr. Shulman or Lois Lerner perjured
themselves in a prior hearing here should they go to jail?
Mr. George. It would depend upon the Department of Justice.
Mr. DesJarlais. So if Mr. Shulman said he never had a
discussion with the White House about the targeting or Lois
Lerner turns out that she knew more about these alleged two
rogue agents that we now know may be 80, if they weren't
truthful with us should they go to jail like the American
people go to jail if they don't comply with the IRS?
Mr. George. They should be subjected to the criminal
penalties associated with perjury.
Mr. DesJarlais. Do you agree, Mr. Fink?
Mr. Fink. I would say, as the Inspector General said, it is
of course up to the Department of Justice.
Mr. DesJarlais. Well, I know people get frustrated, we have
these hearings, and we never seem to get accountability, but it
sounds like we're getting somewhere. And I thank you all for
your time and attention.
I yield back.
Mr. Gowdy. I thank the gentleman from Tennessee. The chair
will now recognize himself for 5 minutes of questions.
And I will say this to the witnesses. I prepared a list of
questions for all three of you. But during the ranking member's
opening statement--I shared with him on the floor--my mind went
away from the questions, and it went back to South Carolina. In
the very same month, the very same year that the IRS was
conferencing in Anaheim, we were furloughing law enforcement
officers. We were furloughing teachers. Prosecutors in my own
office were furloughed, secretaries in my own office were
furloughed. Those are secretaries who struggle to make ends
meet under the best of circumstances. And here we're asking
them to go 2 weeks without pay, and we canceled all out-of-town
training. We brought our own food to our Thanksgiving and
Christmas office socials. We started an anonymous fund to help
our fellow employees who were struggling to make ends meet.
And one night one of my secretaries came in after hours and
asked if she could borrow the money to buy her child a birthday
present. And she kept apologizing for having to do it. She kept
saying, I'll pay you back, I'll pay you back.
And at exactly the same time that young government
employee, single mom, was borrowing money for a child's
birthday present, other government employees were staying in
$3,500-a-night rooms. Other government employees were spending
more money on promotional materials than that young woman makes
in a year. And other government employees were spending more
money on audience participation tools than that young woman
makes in a year.
So, Mr. Inspector General, I appreciate the work that
you've done, but with all due respect, this is not a training
issue. This cannot be solved with another Webinar. This can't
be solved with just one more recommendation. If we can just get
that recommendation implemented. We're just one recommendation
away from people acting responsibly.
Mr. Inspector General, we can adopt all the recommendations
you can possibly conceive of. I'd just say it strikes me, and
maybe it's just me, but it strikes me as a cultural, systemic,
character, moral issue.
The IRS has been in existence, depending on how you want to
count, either since 1862 or 1918. But in either event, they've
had 100 years to figure out that while your fellow Americans
are losing their jobs, and their health insurance, and their
homes, you do not spend $4 million at a conference for which
there is no accountability. You do not hire people to make
meaningless speeches, or artists to paint paintings of Bono.
When your fellow citizens, the ones who pay your salary are
struggling, that is a character issue. Training cannot fix
that.
They sent more than 25 employees on a scouting trip to see
whether or not the hotel was okay. That's not going to be fixed
with training, Mr. Inspector General. When you've got law
enforcement officers being furloughed and you've had 100 years
to figure out how to act appropriately, you don't need an IG
report to tell you that spending $27,000 for someone to talk
about how random combinations of ideas can drive radical
innovations, there's not a Webinar in the world that's going to
fix that.
So, Mr. Inspector General, in reality, it just strikes me
that we just need one single recommendation. Start over. This
entity has not only targeted citizens that it was supposed to
serve, it's allowed itself to be used as a political tool. Not
only does it have access to our financial information, it will
soon have access to our health information. Those are details
that we don't share with people that we do trust, and we are
going to be asked to share it with people who are so
disconnected as to spend this amount of money, while our fellow
citizens are struggling mightily in the fall of 2010. I don't
think training is going to fix it. I think replacement might.
With that, I would recognize the gentleman from North
Carolina, Mr. Meadows.
Mr. Meadows. Thank you, Mr. Chairman. And I want to follow
up on that, because it's hard to go back and talk to the people
back home who have lost their homes, who have lost their jobs
and with any clear conscience at all justify any part of this
behavior. And quite frankly, I find your apology today hollow.
It's not enough. You know, an honorable man would do more than
that.
And I am troubled by the lack of information that was
provided to the Inspector General's office. You know, I look at
this report and they can't draw a conclusion because you can't
provide them, Mr. Fink, with documentation. We don't even know
what the total cost of this conference was. You know, it's been
reported that it was $4.1, but I've done the math. It's more
than $4.1. There is no way. So what was the cost, Mr. Fink? Do
you know?
Mr. Fink. The costs that I'm aware of, sir, is the $4.1.
Mr. Meadows. Well, I can do the number just based on what's
in the IG's report, and I think they would concur with me,
there is no way that that can be accurate. Because if you look
just at the basic numbers, we are at $4.1, just on the amount
of documentation. If you take 2,500 employees and travel
vouchers at $3.8, if you just do the math, you're at $4.1
before we figure in anything else. You can get to $4.5 almost
immediately, and that's with 90 percent of what you said. Your
testimony said 90 percent was undocumented, is that correct,
that you were only able to document 90 percent of the costs?
Mr. Fink. Yes, sir, that is correct.
Mr. Meadows. Okay. So how do you know that if you don't
know the total cost? How do you know that that 90 percent, how
do you know that the testimony here today at 90 percent is
accurate if you don't know the total cost? Did you just make it
up?
Mr. Fink. No, the--no, the 90 percent is based upon, if I'm
not mistaken, and I think the Inspector General----
Mr. Meadows. I'm asking you. It was your testimony.
Mr. Fink. It's based upon what the overall costs shown in
the report were, the $4.1 million.
Mr. Meadows. So you only have 90 percent of the
documentation, of the $4.1, not necessarily of the total cost?
Mr. Fink. I believe that is correct, sir.
Mr. Meadows. All right. So it could be $5 million? It looks
like it probably was. Could it be $5 million, yes or no?
Mr. Fink. Yes.
Mr. Meadows. All right. Could it be $6 million? Think
carefully, you're under oath.
Mr. Fink. Yeah.
Mr. Meadows. Could it be $6 million?
Mr. Fink. There's no way that I'd know that, sir.
Mr. Meadows. But we know that it could definitely be 5.
Mr. Fink. It could go higher, yes, sir, absolutely to 5.
Mr. Meadows. All right. What surprises me is a guy that's
been paid for 32 years to hold the American people accountable
is not accountable to those same people when he's documenting
his own costs in his department. Why is that? The American
people want to know? Why is that?
Mr. Fink. At the time of the conference, there was no
guidelines or requirement to track costs for that particular
training event, that particular conference. We implemented the
use of that code to track the conference expenses.
Mr. Meadows. All right, so let me ask you a question.
Yesterday I think you met with Senate committee members. Is
that correct?
Mr. Fink. Their staffs.
Mr. Meadows. Their staffs, right.
Mr. Fink. Yes, sir.
Mr. Meadows. In that particular time, the general consensus
was, is that you didn't think that the $4 million was really a
problem. Did they mischaracterize that? Because your testimony
today is that you have had this epiphany that it was a problem,
but yesterday they didn't see that you saw that it was a
problem. When did it become an issue to you, Mr. Fink?
Mr. Fink. It was an issue with me yesterday, too, sir. As I
stated is, is that if you look back in retrospect, we certainly
could have done better for the American public and the
taxpaying public. We certainly could have been more efficient
and more effective.
Mr. Meadows. Not more efficient, more accountable. You
know, I mean, when we get to--and I'm running out of time, so
let me finish. You also say that all of this was done because
you had 30 percent new hires. Can you assure us today of the 30
percent new hires in the Management Division? That's why you
said it was such a large conference, your testimony.
Mr. Fink. That was one of the three reasons that I stated,
is that 30 percent of the managers had less than 2 years
experience.
Mr. Meadows. All right. And so we hired all these people,
and so I've done the math. So you're saying one out of every
two was a management hire? Because that's 800 new people in
management if you take 30 percent of the people that attended
the conference, so you're saying one out of every two hires was
a management person?
Mr. Fink. No, sir. I apologize. If that's a
misunderstanding, that's my fault. When I talk about 30 percent
of the managers having less than 2 years experience, that would
not include the numbers of new hires for that particular year.
The new hires were primarily frontline customer-facing
employees. We hired 1,516 customer-facing employees. They
wouldn't have been the managers attending that conference.
Mr. Meadows. All right, I could see that I'm out of time. I
appreciate the indulgence of the chair. I have one other
question that hopefully I will get my colleagues to ask. Thank
you. I yield back.
Mr. Jordan. [Presiding.] The gentleman from Michigan, Mr.
Bentivolio, is recognized.
Mr. Bentivolio. Thank you, very much, Mr. Chairman.
Mr. George, after reading your two investigations into
what's going on at the IRS, both with the excess spending on
conferences that we're discussing today, and about the
targeting of conservative groups, I can't help but sense that
the IRS is out of touch with the average American citizen that
they were hired to serve.
Mr. George, during your investigations, did you ever come
across anyone in the IRS who felt disdain for the average
American? Is there a culture that promotes a feeling of
contempt for the American people as if they were somehow
unworthy of the IRS work?
Mr. George. I cannot say that our reviews would lead to
that exact conclusion, Congressman. I can say that there was,
both in this instance, as well as in the instance of the
501(c)s, a lack of management, a lack of oversight by
management of what was going on at the, quote/unquote, ``rank
and file level'' at this stage. Now, we're continuing our
review of the 501(c) matter, so I can't give you a definitive
answer there.
But in this instance, as Mr. Fink acknowledged, there was a
lack of sensitivity as to how the expenditures would be
perceived by the American people, and I would then presume to
add to the fact that managers seemed to have had a lack of
concern about how the expenditures would be perceived.
Circumstances have changed. Again, with the GSA conference
revelations, the subsequent actions taken by IRS officials, and
then ultimately by the administration at the highest levels
have also affected the behavior of government agencies at all
levels on this issue.
Mr. Bentivolio. Thank you.
Mr. Fink, there are tens of millions of Americans who would
love to be paying taxes to be collected by the IRS and can't
because they're out of work. Millions of young people, for
example, many with college degrees and student loans to pay,
still can't find jobs. Millions more underemployed and barely
getting by. I try to ask this of most of the agencies that come
before this committee: When the IRS was looking at conferences,
or other ways that it spends our money, does it ever consider
the current economic suffering being experienced by its fellow
citizens? And I echo the sentiments of Mr. Gowdy.
Mr. Fink. At this particular time, part of this conference
initiative, the one that we're speaking to, was about the
individuals that were having difficulty with complying with
their filing and paying requirements. That is why we brought
our leadership together, so that they could convey the message
out to the folks that do the face-to-face interaction that we
have to understand the taxpayer's perspective, that we have to
stand in the taxpayer's shoe so we can better understand what
they are experiencing when they're interacting with the
Internal Revenue Service. That is what it is.
What is particularly difficult this time with this coming
to light, and I think it does tie to what you're talking about,
you know, our agency is going through a period of where we're
furloughing individuals for 5 days, and then you have this
event come up. And while you can use excuses and say, well,
this was 1 year money and it couldn't have been carried over,
it is equally difficult to explain to our own workforce that,
wait a second, we're getting 5 days off being furloughed and
not being paid, and you spent this in 2010 on this conference.
Mr. Bentivolio. I understand. In your circles, have you
ever heard this saying: It's better to ask for forgiveness than
it is permission. Ask for forgiveness than it is for
permission, in your circles heard that before?
Mr. Fink. Yes, I have heard that before, yes, sir.
Mr. Bentivolio. And as for your apology, Mr. Fink, I will
trust you, but I will verify by watching the IRS very, very
carefully.
Thank you, and I yield back my time.
Mr. Meadows. Will the gentleman yield?
Mr. Jordan. Yes. The gentleman from North Carolina is
recognized.
Mr. Meadows. Mr. George, can I pick up on one note? On page
5 of your report it talks about the transfer of $3.2 million.
Is that a transfer or was that a reprogram?
Mr. George. It was a transfer.
Mr. Kutz. I think it was a reprogram within the enforcement
appropriations.
Mr. Meadows. Can you check on whether it was a transfer or
a reprogramming because it requires different statutory
approval.
Mr. George. We will do so, but our understanding is, it was
permissible, though. That is, we did take a look at that and
they did not violate----
Mr. Meadows. So it was a reprogramming, because transfers
require previous approval from the Appropriations Committee.
Mr. George. We will confirm that, sir.
Mr. Meadows. All right, thank you.
Yield back.
Mr. Jordan. I thank the gentleman.
The gentleman from Oklahoma is recognized.
Mr. Lankford. Mr. Fink, we have heard an awful lot about
the conference and what happened with it and how important it
was to be able to get together, and I have no problem with
conferences and people getting together. There's appropriate
moments for that. But do you know the attendance? We've talked
about this before. Do we know how many people actually attended
the workshops? We understand that it was a full 8-hour day of
workshops. Do we have a list somewhere of how many people were
in the workshops and actually attended it?
Mr. Fink. No, sir, we do not.
Mr. Lankford. So there is no roll that's taken at those and
there's no head counts of each workshop as they attended it,
here is how many people were in the workshops?
Mr. Fink. That's correct, sir, there was no roll.
Mr. Lankford. The irony to me, as I go through the list of
actual workshops--I'm sure you've gone back and taken a look at
it--it's unbelievably ironic as you go through the list of the
workshops that were held at this event. A few of those:
``Making Telework Work.'' That--this particular one was not 50
minutes, but we've got all these conferences you're having in
2010, and all these people gather together for this very
expensive conference, and they have a meeting about
telecommuting and teleworking. Now, several years later now,
our conference expense is much less because we're actually
making that happen.
How about this one: ``Political Savvy: How Not to Shoot
Yourself in the Foot.'' Or ``Unintentional Intolerance: Don't
Be So Nice.'' This is the other one: ``Why Doesn't Somebody Do
Something?'' With all that happened with the nonprofits, it's
ironic to me that in the middle of this conference there is
training actually about receiving other people and speaking out
when you see a problem, and then later, apparently, no one
spoke out and saw a problem with it.
``Talk Matters: Authentic Conversations.'' Spent $7,000
bringing someone in to talk about how to have authentic
conversations with people. And an amazing one to me is the over
$10,000 to pay someone to talk about intolerance, when at the
same exact moment the IRS is in another area isolating people
that are Tea Party or conservative groups, but yet we're paying
$11,000 to teach people not to be intolerant.
It's completely ironic to me as we walk through what
actually occurred at the conference. You know as well as I do,
this has got to shift. It has to shift and it will. Changes
have already been put in place and should be kept in place. But
I would also concur that accountability is important in this
process.
Thank you for your testimony, for the investigation into
what's happening. With that, I want to be able to yield back.
We need to be able to move on to our next panel.
Mr. Cummings. Does the gentleman yield?
Mr. Lankford. Yes, sir, I would yield to you.
Mr. Jordan. The ranking member is recognized.
Mr. Cummings. I just--I know that we'll be dismissing this
panel in a minute, but I just wanted--first of all, thank the
gentleman for yielding.
Mr. Fink, I just wanted to say something to you before you
leave. I know this has been difficult. I know it. Do you have a
family? Are you married?
Mr. Fink. Yes, sir.
Mr. Cummings. Do you have children?
Mr. Fink. Yes, sir.
Mr. Cummings. You remind me so much of people in my own
district. But I got to tell you something. I'm glad you came
with the attitude that you came with. I think it was the
gentleman who said that he appreciated it--I think maybe it was
DesJarlais--that you came with an apology. We watched Ms.
Lerner come and plead the Fifth. Shulman came, and basically
rope-a-doped. And it was really rather insulting to watch what
Mr. Shulman did. But you came, and you took some tough blows,
and you were honest, and you laid it out as best you could.
And I just want you to know, I appreciate that. I
appreciate you doing that. I appreciate--and I really mean
this. The fact that you are remorseful means a lot to me, and
I'm sure other members of the committee may feel the same way.
I'm just hoping that other people in your department will
look, and I know that there are other people that did--made a
lot of mistakes, too, but I'm hoping that there is a lesson in
this, is that, you know, when things don't look right that
somebody says, wait a minute, hold on, maybe we should not be
doing this. And I realize that a lot of times when a person
stands up and does that, that they may be criticized, but when
I looked at that list of things that I think the gentleman just
mentioned, all that stuff, you know, half of those things talks
about leadership. Leadership, speaking up, how to be a more
effective leader, you know.
And I think what you've shown here, and I know it's
painful, but you've shown some leadership. And I do believe
that this is a transformational moment--and I think that's
basically what you've said--for the IRS. I don't think the IRS
will ever be the same, but it'll be a better organization, we
hope, and we are certainly going to, you know, be looking at it
through a microscope. Thank you very much.
Mr. Fink. Thank you.
Mr. Jordan. I thank the gentleman.
Mr. Fink, let me thank you, too, for coming forward. Look,
we've all made mistakes in life and your attitude has been
appropriate and we appreciate that. And I appreciate the
ranking member's comments.
Want to thank our other two witnesses. We're going to
dismiss this panel and get ready for Mr. Werfel. So we'll be in
recess for just a few minutes while the staff gets ready for
the next panel.
[Recess.]
Chairman Issa. The committee will come to order. We now
welcome our second panel. Mr. Danny Werfel is the Acting
Commissioner of the Internal Revenue Service and has been on
the job for nearly 2 weeks. And with that, pursuant to the
committee rules, we'd ask the witness please rise, raise his
right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Mr. Werfel. I do.
Chairman Issa. Please have a seat. Let the record reflect
the witness answered in the affirmative. And the procedure that
we use today is not the ordinary procedure. We would normally
put members of the administration first, but I think it was
mutually agreed that this procedure made a lot of sense. And
with that, you're recognized for your opening statement.
STATEMENT OF DANNY WERFEL, ACTING COMMISSIONER, INTERNAL
REVENUE SERVICE
Mr. Werfel. Thank you, Chairman Issa, Ranking Member
Cummings, and members of the committee. Thank you very much for
the opportunity to appear before you today to discuss the work
we have already done and will continue to do to reduce travel
and training expenses, and to ensure proper financial controls
are in place over meetings and conference approval processes.
The 2010 manager meeting held by the Small Business/Self-
Employed Division in Anaheim, which was described in a recent
Inspector General's report, is an unfortunate vestige from a
prior era. While there were legitimate reasons for holding the
meeting, many of the expenses associated with it were
inappropriate and should not have occurred. Taxpayers should
take comfort in knowing that these kinds of expenses are no
longer permitted, and such a conference would not take place
today.
Since 2010, sweeping new spending restrictions have been
put in place at the IRS, with the result that travel and
training expenses have been dropped by more than 80 percent. We
have limited employee travel and training to mission-critical
projects. In fact, as the TIGTA report notes, costs related to
large meetings dropped 87 percent between fiscal 2010 and 2012.
Large-scale meetings like the one in Anaheim have not taken
place in 2011, 2012, or 2013.
Under the Treasury Department's leadership, the IRS has
taken bold steps to ensure that travel and conference spending
is appropriate, limited, and undergoes a thorough review and
approval process. This is an ongoing effort, and we continue to
examine areas associated with training and travel costs.
As the Acting IRS Commissioner, I will do everything
possible to ensure that tight spending protocols are in place
at the agency to protect the use of taxpayer dollars, and I
look forward to working with the committee on these efforts.
Our work in this area is one part of a much larger effort
to chart a path forward in the IRS. This is obviously a very
challenging time for the agency, especially in light of the
inappropriate actions that were recently brought to light
regarding the 501(c)(4) application process. I look forward to
discussing that issue with this committee as well.
I intend to ensure that we are putting in place the
appropriate measures to hold individuals accountable, address
the processing of such applications, and review the broader
internal controls and oversight mechanisms at the IRS.
More broadly, I am reviewing the full range of IRS
operations, processes, and practices to focus on how we deliver
our mission today and how we can make improvements in the
future. In that way, we will develop a better understanding of
organizational risks wherever they exist within IRS. For
example, in line with the TIGTA report on conference
expenditures, we must ensure that we have the right controls
and oversight in place to prevent wasteful or inappropriate
spending in this and other areas. Where we find management
failures or breakdowns in internal controls, we will move to
correct these problems quickly and in a robust manner.
Yesterday, in fact, I took action against two IRS employees
after I learned of alleged inappropriate behavior. The IG
forwarded information to us about a party during the 2010
conference where food was allegedly provided free of charge in
violation of government ethics standards. Two IRS employees
involved in the party have been placed on leave, and we have
started the process to remove them pending further review.
I would like to be as forthcoming as I can with the
committee with respect to these--with respect to these
individuals, but because the process I just referred to has
personnel implications, there is very little else that I can
say publicly at this time about that process or the people
involved.
On all of these efforts I have described above, we will
report to the President, the Treasury Secretary, and the public
by the end of the month and give a progress update. We have a
great deal of work ahead of us to review and correct the
serious problems that have occurred at the IRS, and to continue
the important work of the agency on behalf of the taxpayers.
In the few days I have been at the IRS, it has already
become clear to me that this agency is populated by thousands
of dedicated public servants who are strongly committed to
caring out the agency's mission. It's an honor for me to serve
alongside them. And I am confident that together with Congress
and other external stakeholders, we will address the current
challenges and move forward with the indispensable work of this
agency. Thank you, and I look forward to your questions.
Chairman Issa. Thank you.
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Chairman Issa. And I'll recognize myself for a round of
questioning.
Picking up sort of in the order in which you mentioned it,
the two individuals that have been placed on administrative
leave, in spite of administrative leave standards, they are
available for transcribed interviews by this committee. Is that
correct? You can give them things to do?
Mr. Werfel. I'm aware of no prohibition that can be placed
on this committee interviewing them or at least requesting
interviews.
Chairman Issa. Okay. It's the intention to request
interviews of these persons of interest. And I would like you
to also at some point today kind of run us through some of the
troubles and perils you have in trying to take people out of a
position and ultimately terminate them, demote them, deal with
them, because I think that's one of the areas of interest.
The vast majority of Federal workers are great workers.
They do a good job. They are protected by civil service and
unions. But at the same time it is vexing, I think, to all of
us sometimes when you get really bad actors, how long it can
take even when you know ultimately they're going to be
terminated. And we may be able to help you in shortening that
process. Ultimately we want due process, but my understanding
is it can take up to 3 years to terminate somebody unless
they're criminally indicted. Is that right?
Mr. Werfel. I think I've heard of situations in which it
can take that long, but, you know, you can move the process
quickly, but I think very often it's not quick enough and it's
something that certainly we should explore.
Chairman Issa. And we'd like to work with you and other
principal Cabinet positions and sub-Cabinet positions on that.
When we had talked yesterday, I mentioned a question that I
was very interested, and hopefully you've been able to
ascertain this. In the earlier panel, we heard a lot about
using event planners and how much the Anaheim conference cost.
Were you able to get an estimate of, had your in-house people
taken it fully, obviously the event planner would have been
locked out of the process, but what they believe they could
have saved the American taxpayers if it was done by the
existing structure you had at the IRS?
Mr. Werfel. Yes, and I appreciate the question. And as you
just mentioned, you start with the $133,000 that were spent on
the event planners, and, you know, that's a lot of money, and
that's important, to make sure that we're saving that. And I
think as the Inspector General pointed out, by not having IRS
people designated to do this, who would have no incentives to
keep the costs up, only to keep the costs down, you're not
pushing as hard in the negotiation. And I asked my CFO to talk
with the team and make sure we had an understanding of what the
opportunity that was lost, and we think it could be up to about
10 percent, you know. And 10 percent on a $4 million
conference, now you're at $400,000. This is real money. And
that's why I take the findings in the IG report very seriously,
and this is a change that has to happen with respect to any
activity going forward.
Chairman Issa. Thank you. Additional question. We learned
that approximately $3.2 million of the money spent on these
conferences was redirected from accounts that should have been
used to hire new employees. Is that still a possible practice,
or has that been tightened up so that we could no longer think
that we're asking for more examiners, we're asking to free up
backlogs, and leftover money by not hiring these people gets
spent on a conference and then the next year, of course, people
are saying we need more money for inspectors.
Mr. Werfel. It's a good question. It goes to how much
flexibility there is in the IRS to spend the money that's been
appropriated to them. It's my understanding that in this
situation there was this $137 million appropriation to hire a
certain number of employees and that there were an ability to
take $18 million of that and spend it on training. And so you
had this allowability to move certain amounts of money into
training that would in theory supplement the enforcement
actions.
You know, this conference report--I mean, this IG report--
raises questions in terms of whether that training was done
effectively or not, and it raises questions about are we
spending our money effectively and could the money, the $3
million of that $18, been moved into enforcement activities and
had a higher ROI for the taxpayer, return on investment for the
taxpayer? In this case it's hard to argue against that.
But here it's something that we have to talk about. How are
we evaluating the way IRS is moving its money into proper
places to ensure that we're doing the best for the taxpayer?
Obviously, the IG report raises important questions.
Chairman Issa. And there's going to be a lot of questions.
One that I think I'm particularly sensitive to, there's a law,
a statute, 6103. Obviously, it's a unique situation in that we
receive personal information all the time in discovery from
government. But when it comes to the IRS, there's specific
rules. And they are there for a good reason, and we want to
respect that.
As you know, in one of your previous positions, this
committee moved forward an agenda for something called the DATA
Act. And we did so because we wanted government-wide to have
structured data so that no matter where data was, any
particular cell of information would be well defined so that if
you wanted to extract it, but take the rest, you'd be able to
do so.
Because you were in that previous job and you're now in
this job, would this kind of improvement at the IRS and other
government entities allow, when an organization like ours says,
well, we want to know everything but we don't want 6103
information, Social Security numbers and the like, can you send
it to us with that being redacted by computers rather than the
laborious task of human beings putting blackouts? From your 2
weeks here and your many years elsewhere, what do you think
about that?
Mr. Werfel. I'll tell you one thing. We want to know, for
example, on the better tracking of conference expenditures, the
issue that we found, and in response to you proposing the DATA
Act, working groups got together throughout the Federal
financial management community to figure out, what does
standardization mean and what would it open up in terms of
knowing where our money is going?
And what happens is, is when we obligate money, we don't
necessarily capture all the relevant information that we need
in terms of where is that money going? So, for example, we
might obligate a set of money, but we don't know which
recipient to attach it to or which vendor is getting that
money. And so I look at the conference report and I realize
there is not good tracking for where the dollars are going,
fixes to our underlying accounting would address that. And you
could have a much more comprehensive and systemic review of,
here are the transactions, and here is how that money flowed
out in terms of what did we spend on these types of activities
across the entire spectrum.
You know, the issue here is, how do you get there? How do
you fix our underlying financial management so that you have
more transparency into where that money is going. And that is a
dialogue that, obviously, I have been having with this
committee for quite some time, and now that I'm in an agency
and, you know, on the front lines of this type of financial
management, I'm looking forward to working with you to give you
insight, now complemented from my prior experience.
Chairman Issa. Well, thank you. And I think that perhaps
you could be the greatest asset for us working together with
the administration broadly in finding ways to implement that
sooner, something that rather oddly is extremely bipartisan
here on the dais.
Mr. Cummings.
Mr. Cummings. I agree with you, Mr. Chairman, that is
definitely a bipartisan issue.
Mr. Werfel, there is an organization in Maryland whose
philosophy I disagree with, but I will fight with everything I
have got to protect them. And it's called the National
Organization for Marriage. And as you know, they came into
another hearing and they said that their tax information had
been released to the public. They found it on a computer, you
know, for the world.
I've got to tell you that that disturbed me greatly because
people, American, the American people have to know that the
information they are giving to the IRS, whether it's an
application, whether it's, you know, a tax return, or whatever,
is kept private.
And, you know, I keep talking about truth and trust. The
idea that the IRS has an impact on every single family in
America, and the idea that people are feeling more and more
vulnerable with regard to their information being distributed
all over the Internet, I'm just wondering, I mean--I mean, how
you feel about that, and do you have a plan in place?
And I'm not trying to get into any investigations, because
that's the IG, I guess, but I'm just wondering where are we on
that? And I'm sure that must have disturbed you. You did hear
about it, right?
Mr. Werfel. I did. Let me start by saying, you know, this
goes right to your question, that I can't speak to the issue of
a particular taxpayer because----
Mr. Cummings. Right I understand. Okay, just talk
generally.
Mr. Werfel. I would like to broaden----
Mr. Cummings. Yeah, but I wanted to give--the reason why I
mentioned the name of it, because it's a Maryland organization.
But more important than that, it's not just the organization,
Mr. Werfel, it's the idea that information that taxpayers
consider to be confidential then appears on the Internet. And
that goes, I'm talking, I'm telling you that goes to trust,
too, all right. So you can talk generally.
Mr. Werfel. I will. And I would say, as the chairman
mentioned, I have been in this seat for 2 weeks and----
Mr. Cummings. I understand.
Mr. Werfel. No, and that's been enough time to make some
very critical conclusions. And one of the conclusions that I
have reached is there are at least three, but the three that
jump out the most to me, the three most important risks that I
have learned so far in 2 weeks that we need to manage and keep
at a very low risk level are the risk that the taxpayers would
feel like their information is not well protected; the risk of
IRS acting with partiality and not being impartial; and the
risk that we're not keeping our costs down. And those jump out
at you. And it's critical that--and we're having issues in each
of those areas demonstrated by the recent IG reports.
And part of our improvement plan, part of our efforts, as
you said in your opening remark, to restore the trust are to
put in place stronger practices than we have today to make sure
that we're hitting it out of the park on those three issues. We
have to make sure that information is protected under 6103.
Citizens have to feel like when they're submitting personal
information about their finances to the IRS that is protected.
We have to make sure, and this is so critical, that the IRS is
acting impartially. And third, and from the first panel I think
it was clear the concerns that you raised, that I agree with,
we have to make sure that we're spending the taxpayer dollars
wisely.
And so for any constituent that you have, I think the key
is, how is the IRS doing on those three things? And what I'm
hoping to do in my tenure is to put in place new procedures,
new disciplines, new checks and balances, to make sure that in
each of those three areas we're not only performing better, but
there's a transparency to what's going on in each of those
areas and there's a partnership, a broader partnership outside
of IRS that involves this committee and other committees, that
involves other stakeholders, whether it's GAO, or local
universities, or think tanks who can help us think through
these issues. And it can't just be the IRS operating alone at
the IRS. We have to make these improvements collectively.
Mr. Cummings. Now, Mr. Werfel, I, first of all, I
appreciate everything that you have said. I also think I
appreciate you reaching out to the chairman and I within hours
after you were appointed saying that you wanted to work with
us. And I really do appreciate that. But I'm wondering if you
realize the moment that you find yourself in. I'm not finished.
This is a very critical moment in the history of the IRS, and
you've been called, I'm sure you're an ordinary man, but you've
been called to an extraordinary mission. And it's--I'm not
finished--an extraordinary mission.
You have the duty now to restore trust for millions upon
millions, hundreds of millions of Americans who work hard,
blood, sweat, and tears, efforts to raise their families, and
they just want a fair shake. They don't mind paying taxes as
long as the things that you just talked about are done. And I'm
just wondering if you realize the significant moment that
you're in and how we are depending on you. And we know you
can't do it by yourself. That's why all of us have to work with
you to make this happen. Do you really comprehend that, sir?
Mr. Werfel. I do. I understand the enormity of the moment
and the enormity of the challenge. The way that I look at it,
in order to make sure that I'm keeping my eye on the ball,
because you can get lost in how big this challenge is, and I
don't want to do that. I want to get to work and roll up my
sleeves. You know, I'm a civil servant. I have been a civil
servant in government for 16 years and I have a deep
appreciation for the work that the Federal Government does in
almost every realm. I'm a champion for the work that the civil
servants do.
And when I was approached about this, and I realized there
is a group of civil servants at IRS that are struggling, that
we have an agency in crisis, and I realized also, and I think
one of the reasons why I was approached is because I have had
in my career a knack for solving tough government problems,
that I was the right person to go at this time, given my
understanding of how the government works, and given my passion
for improving government, to be there.
And so I arrived and I said, what are the right things we
need to do? And there are some very tough decisions, very
tough. Almost every day I'm confronted with a set of questions
and challenges that would--you know, I've joked a few times, we
should take some of these to the Harvard Kennedy School of
Public Policy and show how tough this is, and they would
probably say, you know, this is an unrealistic problem. There
is almost too much public policy tension going on.
Mr. Werfel. I get questions like that five times a day. And
I'm realizing, again, that each of these questions are
solvable. The issue is making sure that there is cooperation
and understanding, patience and input from a diverse set of
stakeholders in solving them.
So the answer to your question is, I understand the
enormity of the moment, but then I take myself down to the
level of, how do you fix a problem in the Federal Government?
What can I bring to the table? Who can I bring around the table
to help me? And then I can get down to the business of what
needs to be done.
Mr. Cummings. We're going to work with you and give you all
the support that we possibly can. And thank you very much.
Mr. Jordan. [presiding.] Mr. Werfel, I appreciate your
attitude and the fact that you grasp the gravity of the
situation. You just said in your last comments that this is an
agency in crisis. You came from OMB. How many folks worked for
you at Office of Management and Budget?
Mr. Werfel. I held a variety of different positions, but
the highest ranking position I held I would say about roughly
115, 120.
Mr. Jordan. And you're going to an agency now that has
about 90,000 employees and slated to add several thousand more
when it comes to the enforcement of the Affordable Care Act. Do
you think maybe this is just an agency that's way too big, got
way too much responsibility? And now that we're adding
something as complex, something that Senator Baucus has called
a train wreck, now that we're adding that responsibility to it,
I think you're right when you say this is an agency in crisis,
and it's headed for more in light of what's coming.
Mr. Werfel. I think a couple of reactions, if I could. One,
I agree with the premise that we need to evaluate the structure
of the IRS going forward--its size, its complexity. That's part
of this movement forward in terms of----
Mr. Jordan. Let me interrupt, because I've got 5 and these
guys have to catch planes, and I apologize. And I do appreciate
the attitude that you have displayed and what I've heard from
your public service. But in order to deal with an agency in
crisis, in order to start fresh and reform that, you have to
the bottom of the current problems. You have to hold, you said
in your opening statement, hold people accountable for what's
going on.
So let me ask you this. Have you talked to Lois Lerner in
your time as--in your short time as head of the IRS?
Mr. Werfel. Let me answer that question two ways. I have to
be careful about revealing any elements of a personnel issue.
Mr. Jordan. I didn't say that. I just said, have you talked
to her?
Mr. Werfel. But I have not talked to Lois Lerner.
Mr. Jordan. At all?
Mr. Werfel. No, I have not talked to Ms. Lerner.
Mr. Jordan. And is she still an employee of the IRS?
Mr. Werfel. She--again, there's some Privacy Act issues.
Let me just say that the position that she held is now being
held by another employee.
Mr. Jordan. Is she still being paid by the taxpayers?
Mr. Werfel. Again, if I could, there's Privacy Act issues.
But let me just--and this has been brought up--the personnel
process for how we deal with----
Mr. Jordan. No, I'm just asking if you've had any
communication as the head of the IRS, if you've had any
communication with Lois Lerner, who was in front of our
committee 2 weeks ago and refused to answer questions.
Mr. Werfel. And if I could, if I can answer, because I
think I understand your question, and the answer to your
question is, my review of what is going on in the IRS involves
working very closely with the IG and the Justice Department.
And I have to be very careful----
Mr. Jordan. Got it.
Mr. Werfel. --about interfering with their work.
Mr. Jordan. Got it.
Mr. Werfel. And so we have an individual that you named
that's a very important person to get information from. She is
central to the----
Mr. Jordan. So you think she has important information to
offer this committee.
Mr. Werfel. Absolutely.
Mr. Jordan. And offer the United States Congress. And more
importantly, offer to the American people.
Mr. Werfel. Absolutely. And I know the Justice Department
and the Inspector General are working to get that information.
And importantly----
Mr. Jordan. So how did she get to this paid leave status if
you've never talked to her and you're the acting head of the
IRS?
Mr. Werfel. I can explain that. So we have an audit report
that the IG has completed, and I am looking at that audit
report, and that audit report has conclusions of management
failures that are going on--that went on in the IRS. And I, my
first approach on accountability, because one of the things I'm
charged to do is to make sure we're holding people accountable,
and I have a completed audit report that has conclusions of
mismanagement. And the first thing I'm doing is going through
those findings and determine where were those management
failures so critical that that individual no longer--can no
longer serve a position of public trust in the IRS.
Mr. Jordan. Okay.
Mr. Werfel. So from the audit report alone I can make
decisions.
Mr. Jordan. Without communicating with her.
Mr. Werfel. There is enough evidence in the record about
the mismanagement, yes.
Mr. Jordan. Have you, subsequent to her going on paid
leave, subsequent to her coming in front of the committee and
refusing to answer questions, have--do you think it would be
appropriate for you to talk to her only in this context: to
encourage her to come in front of the committee to get to the
truth so we can hold people accountable and we can restore the
trust and meet those qualifications you outlined in your
opening statement, you outlined in your answer to Mr. Cummings.
Mr. Werfel. I will.
Mr. Jordan. You will go----
Mr. Werfel. I will do two things. I will get to the bottom
of this----
Mr. Jordan. No, I'm asking will you encourage her to come
in front of the committee and answer questions? You told us you
want to hold people accountable, you want to get to the truth,
you want to restore trust. The central figure in this drama
thus far is Lois Lerner, and she has refused to answer
questions. I'm asking, will you encourage her to reevaluate her
decision not to answer questions and come in front of this
committee?
Mr. Werfel. And I'm going to answer your question. There's
a complicated element to your question. But if I could--if you
can indulge me. When I arrived at the IRS----
Mr. Jordan. I think it's not complicated. I think it's real
simple. I don't see how encouraging--you could make a public
statement, you don't have to talk to her--you could say, I
encourage Lois Lerner to come in front of the committee so we
can, according to what you told Mr. Graves the other day, we
can hold the proper people accountable, we can restore public
trust in the Internal Revenue Service, we understand the
gravity of the situation we are in, I would encourage her to
come forward and give the committee the information and answer
the questions we'd like to ask her. Will you do that?
Mr. Werfel. Again, first of all, whether she comes and
testifies is a matter for her and her attorney.
Mr. Jordan. I understand that. She's exercising her Fifth--
I understand that. I'm asking will you encourage her? Mr.
Cummings just outlined how the enormity of the situation you
find yourselves in--yourself in--you said, I get the gravity of
the situation I find myself in, a 90,000-employee IRS, slated
to hire a bunch more people to enforce the Affordable Care Act,
I get how serious this is. The central figure thus far in the
investigation is Lois Lerner. She's refused to answer questions
in front of this committee. I'm asking you as the guy who's
charged with fixing this agency, which is out of control, an
agency in crisis, to use your words, will you encourage Lois
Lerner make a statement? You're running this agency. Make a
statement. I encourage Lois Lerner to come in front of the
Oversight Committee and answer the questions of the Members of
the United States Congress.
Mr. Werfel. Two responses to that. Yes, as a general matter
I encourage anyone who has information----
Mr. Jordan. I didn't ask as a general matter.
Mr. Werfel. Including Lois. Including Ms. Lerner. I
encourage anyone, including Ms. Lerner, to come in front of
this committee, to cooperate with the Justice Department, to
cooperate with the Inspector General. So I apologize if I
misunderstood your question.
Where I was going--and maybe I got confused by your
question--was I have to work very closely and follow certain
rules that have been laid out for me by the Justice Department
and the Inspector General about me talking to individuals in
any way that might interfere with their investigation, and
that's what I was. I just didn't want to overcommit.
Mr. Jordan. No, and I'm over time and I want to--I just
want to be clear. So you're going to encourage Lois Lerner,
you're saying today in front of this committee you encourage
Lois Lerner to come in front of this committee and answer
questions.
Mr. Werfel. Absolutely.
Mr. Cummings. And just with the chair's indulgence. And
anybody else.
Mr. Werfel. Yes, absolutely.
Mr. Cummings. All right.
Mr. Werfel. Anybody who has information about this
situation needs to provide that information. It's too
important.
Mr. Jordan. Got it. My time is--I apologize. The gentlelady
from New York is recognized.
Mrs. Maloney. Welcome. Clearly the way that some groups
seem to have been targeted is impermissible and absolutely
outrageous. But what type of things should send up warning
signs?
I'd like to ask you about a series of activities and
whether or not you think Congress should clarify what is meant
by them and whether or not they would be considered partisan
political activity. I only have a short number of time, so if
you could just answer yes, no, or don't know.
For example, is advocating for a particular bill to be
defeated considered partisan political activity? Yes, no, or
you don't know.
Mr. Werfel. I'm not sure if I can apply the rule of law to
that set of facts. The key--my understanding of political
activity orients around trying to get an individual elected to
office for the purpose of 501(c)(4) review.
Mrs. Maloney. That's what we're talking about. Okay, how
about advocating a candidate to be elected or defeated?
Mr. Werfel. Yes. That is square.
Mrs. Maloney. And how about advocating to overturn a
Supreme Court decision?
Mr. Werfel. Again, there's a complexity that I can't speak
to. My understanding of primary political----
Mrs. Maloney. Well, how about advocating for birth control
or trying to defeat access to birth control, should that
activity enjoy tax-free status with funds raised from anonymous
donors?
Mr. Werfel. Again, I don't want to speak as an expert on
these issues. I think right now my key understanding of how you
measure political activity is how you advance a candidate--if
you're advancing a candidate for office or otherwise.
Mrs. Maloney. Well, the report that the--but I would say
all of those decisions are rather political, very political, in
my opinion.
Mr. Werfel. Let me offer----
Mrs. Maloney. But maybe we need to clarify them. And the
IG's report on this issue explained that a lack of clear
guidance on how groups are determined to be eligible for tax-
exempt status was one factor that contributed to the decision
made by the IRS personnel.
But one key reason this problem exists is because of the
difference between the original statute Congress passed and the
regulation the Treasury Department subsequently issued. And the
original statute passed by Congress provides that organizations
may qualify under 501(4)(c) only if they engage exclusively in
social welfare activities. And that seems to be very clear. If
you're exclusively in social welfare, you have the tax-exempt
status.
But in 1959, a regulation was issued providing that
entities could qualify under 501(c)(4) as long as they engaged
primarily in social welfare activities. So would you--so
requiring organizations to be primarily engaged in social
welfare activities is very different, I'd say significantly
different, from requiring them to exclusively engage in social
welfare. Wouldn't you agree?
Mr. Werfel. I would.
Mrs. Maloney. Okay. And I know the regulation now is more
than 50 years old, but do you know why Treasury changed it from
exclusive to primary?
Mr. Werfel. I do not.
Mrs. Maloney. You do not. And is there any reason why you
think we should not use the exclusive test today.
Mr. Werfel. I think it's something that I don't--I want to
work with the Treasury Department and committees in Congress to
explore. Right now I have a regulation that I have to abide by
that uses the word ``primary,'' and so that's what I'm working
with. But one of the Inspector General recommendations----
Mrs. Maloney. I know that he recommended, and also at the
last hearing about the IRS we asked Neal Wolin who testified,
he was the Deputy Secretary of Treasury, if he would consider
the effort by the IRS and Treasury to issue a new regulation
that returns to the exclusive test, and he said he would. And
my question to you is, would you work with Mr. Wolin and others
on the possibility of clarifying this and going back to the
exclusive test?
Mr. Werfel. I've already initiated discussions with
Treasury Tax Policy around updating the regulation, but I don't
want to presuppose what the interpretation of exclusivity is. I
think that has to be a very broad process of seeking comment
and input to make sure that we get the right definition.
Mrs. Maloney. Would you welcome setting up a meeting with
members in a bipartisan way of this committee and with Treasury
on this specific issue?
Mr. Werfel. Yes.
Mrs. Maloney. I think that's very important because this is
the Government Oversight and Reform Committee, and if we forget
the reform part of it then we are likely to have the same
situation in the future. And I think the fact that the series
of questions that I put before you, which, in my opinion, are
clearly political, but in your opinion are not, need to be
clarified and need to be well understood by the employees at
the IRS and the general public.
My time has expired. Thank you.
Mr. Jordan. The gentleman from Florida is recognized for
his 5 minutes.
Mr. Mica. Let me first yield a minute to our current chair,
Mr. Jordan.
Mr. Jordan. I thank the gentleman.
Mr. Werfel, will you also commit to giving the committee
every piece of information that you possibly can when you get
the chance to review it and get it to the committee?
Mr. Werfel. Yes, subject to 6103.
Mr. Jordan. I understand 6103, I understand that. But right
now the committee staff is interviewing an employee of the IRS,
Mr. John Shafer. His attorney sent us a letter, to the
committee staff, on Monday, June 3rd, and it says, ``In order
to allow for a more complete interview of Mr. Shafer we sought
permission from the IRS to provide the committee with limited
documents in Mr. Shafer's possession. The request was also
denied.'' I'll make sure that minority staff gets to see this--
or minority members get to see this as well.
We then have an email from the following day from the IRS
to committee staff, Ms. Kirsten Wielobob, where she says,
``Unfortunately, we are unable to produce the requested
documents in advance of Mr. Shafer's scheduled transcribed
interview before the committee.''
Here's an employee of yours being interviewed in front of
the committee who wants to present documents to get to the
truth so we can hold people accountable and do exactly what you
described in your statement, and we want to know why you won't
give us the documents.
Mr. Werfel. It's not a question of won't give you the
documents. It's a question of just having enough time to pull
the documents----
Mr. Jordan. My understanding is, it's a handful, it's just
a handful of emails.
Mr. Werfel. I don't know. I mean, you said the interview's
ongoing, so I don't have specific information. But as a general
matter, when we get a document request from Congress, we have
to pull the entire data file down. So you named an individual,
we would go and take their entire email down, and then we have
to review it for 6103. And some of these individuals have been
at IRS for years. So you're talking about thousands and
thousands of pages. So the notion is not that we're withholding
the documents, the notion is we're acting very quickly and
effectively to try to get that information as quickly as
possible.
Mr. Jordan. And I know I'm over my time and I got to get
back. But he has--he has the documents. He wants to give them
to you and say review them so we can--I mean it's a handful in
his possession, it's not his whole computer, it's not a whole
file, it's a handful of documents.
Mr. Werfel. If he's willing to hand me documents right now
or expeditiously----
Mr. Jordan. No, he was willing to do it on Monday so we
could have it for today's hearing and you guys didn't do it.
Mr. Werfel. Well, I have to look into that. I don't have
any facts about that.
Mr. Jordan. I thank the gentleman for his time and I yield
back.
Mr. Mica. Mr. Werfel, at today's hearing we have been
trying to focus on conferences gone wild with IRS. I guess you
have put some people on suspension. And that's with pay?
Mr. Werfel. It is because of the process, but also we're
making--doing the right procedures to move towards termination.
Mr. Mica. The other thing, too, is I heard Mr. Fink, I
guess he got a promotion after that and a bonus. And these--
several of these folks got bonuses, too. Is there any way to
recoup some of the rewards for bad behavior?
Mr. Werfel. I will look into that. I don't know the
personnel rules in terms of whether we can recoup bonuses.
Mr. Mica. Well, we can change the law. And the other thing,
too, the Inspector General has said that no laws were broken.
And if no laws are broken, maybe we need to put some laws in
place. Maybe you could recommend back to us.
Mr. Mica. And I heard Mr. Cummings, too, and I have seen
the same thing, folks getting up, working their tail off in
this country, trying to feed their families, make ends meet,
pay their taxes. And then, what is it, the plastic squirting
fish, $64,000. You were at OMB, weren't you, just before you
came here?
Mr. Werfel. I was, yes.
Mr. Mica. Are they sleeping at OMB?
Mr. Werfel. No. In fact----
Mr. Mica. I mean, that's Office of Budget and Management. I
know you oversee the budget, but somebody's got to be looking
at the management and operations. We do that as a committee.
We're getting our information, is a bit old here. But I really
wonder what's going on in the Office of Budget and Management.
And you were there, now you're in IRS. So somewhere we've got
to make the changes.
The only thing that turned this whole spigot off was the
hearing that we did. And then, as I said, thank God for the guy
in the hot tub. All the investigation I did preliminarily did
nothing like inflaming the public that the guy in the hot tub
did. And I said--you know, I showed today the $20,000
drumsticks, $64,000 for trinket for IRS employees, $135,000.
Now you can bring under control the cost of the
conferences, right?
Mr. Werfel. Yes. Even----
Mr. Mica. You've done that.
Mr. Werfel. They're brought significantly under control and
we could go deeper.
Mr. Mica. That's only because of the scandal and the
investigation that we went after, period. Please don't tell
me--nobody did a darn thing until Mr. Cummings and some of us.
Come on.
Mr. Werfel. Well, if I could, I'm not disputing your point.
Mr. Mica. Well, I don't have--I don't have much--too much
time. But have you been to the White House yet as----
Mr. Werfel. No.
Mr. Mica. Okay. How many times--I mean, Mr. Shulman went,
was it 160 times?
Mr. Werfel. I've heard that number. I don't have any
evidence. But since I started at the IRS I have not been to the
White House at all.
Mr. Mica. Okay. And finally, again, within your purview I
think you have the ability to bring some of these costs under
control, and also holding people accountable. Granted, you were
not there, you were at OMB in another watchdog position, and
somehow this slipped by OMB and everybody else. But now you
have the ability to hold people accountable.
I think folks want people held accountable who have misused
their position, cost the taxpayer money. We look forward to
working with you.
The first thing I want out of you as IRS Commissioner is to
tell us what we need to do to change the law, and we'll look
forward to your recommendation, so that people can't be paid
who have done misdeeds with the public trust.
Mr. Mica. Yield back.
Mr. Jordan. I thank the gentleman.
The gentleman from Virginia is recognized.
Mr. Connolly. Thank you, Mr. Chairman.
And welcome, Mr. Werfel, welcome back to the Oversight and
Government Reform Committee. While there were some stories when
you were appointed about who is Dan Werfel, those of us here in
the Oversight and Government Reform Committee knew the answer
because you are a frequent flyer here at OGR and a very valued
witness. And we thank you for your past service and certainly
want to be as supportive as we can be in your new assignment,
which as the ranking member indicated, is pretty awesome.
Just to clarify one thing, you were being very careful in
your response to Mr. Jordan on Ms. Lerner. I think there are
two aspects of that to be careful about. One is there is
precedent where predecessors, senior officials in IRS, made
certain statements based on an IG report that then were
considered by a judge to be prejudicial to an IRS employee,
thus yielding a very undesirable outcome, which was the full
reinstatement of an employee that people were trying to
actually have dismissed, with back pay. And I assume you're
being careful because obviously you want to avoid that pitfall.
Mr. Werfel. Yeah. If I could, Congressman Connolly, there's
a couple of reasons why I want to be careful. And also I want
to be as transparent as possible in terms of how the process
is.
You know, when I arrived at IRS, I wanted to make sure
people understood what I'm seeing, the path I'm taking, and a
couple of things. One, the process to hold people accountable,
to discipline people is long and complicated. And as you point
out, you don't want to move too quickly without being fair and
thorough. Fairness is critical, thoroughness is critical,
because of what you just said. If I move someone forward for
dismissal and I don't have a strong record, then I'm going to
lose my case to try to dismiss them and they're going to get
reinstated with back pay.
Mr. Connolly. Right.
Mr. Werfel. And I know people are going to lose patience,
but I'm going to be as fair and thorough as possible.
Mr. Connolly. That's correct. Sometimes up here we can
afford the luxury of sort of cutting corners in due process.
You cannot as a manager.
Mr. Werfel. Yeah. And if I could clarify one other thing,
the other important point is that in my review, and
particularly in discussing or asking questions of the
individuals that have knowledge about this situation, the
Inspector General and the Justice Department have said to me,
we are asking these questions, and if you come in and ask these
questions at the same time as us, it could be disruptive to our
very critical investigation.
Mr. Connolly. Exactly.
Mr. Werfel. So what they've said to me is, let's make sure
we're all on the same page with what questions need to be
asked, we are professional investigators, and we'll ask the
questions, we're going to keep you informed, Acting
Commissioner, in real time. And that's going to enable me to
make sure there is a clean and fair and thorough investigation
and get this committee the information it needs as quickly as
possible.
Mr. Connolly. And one other point, Mr. Werfel. Again in
your response to Mr. Jordan, who was exhorting you to encourage
this particular individual to come back to the committee and
testify, and your answer was a broad answer, which didn't fully
satisfy Mr. Jordan, which was, I'm going to encourage everybody
to----
Mr. Werfel. Absolutely.
Mr. Connolly. But I want to be clear real clear. You can't
be put in the position nor should you be put in the position of
interfering with the exercise of the Fifth Amendment rights of
anybody, including an employee, no matter what his or her
status is at the IRS. Is that correct?
Mr. Werfel. That's absolutely correct.
Mr. Connolly. All right. Because I want to be real clear
about that. A lot of people holding up the Constitution saying
they believe in the Constitution, well, the Fifth Amendment,
the last time I checked, is one piece of that Constitution. And
it is a constitutional right, whether we like its exercise or
not, and this individual has a right to exercise her Fifth
Amendment right without interference by us or by you.
Mr. Werfel. That is correct.
Mr. Jordan. Would the gentleman yield briefly?
Mr. Connolly. If the chairman will indulge me, because I--
--
Mr. Jordan. That's why I was very careful to use the word
``encourage.'' He can't compel her. I understand that.
Mr. Connolly. And, Mr. Chairman, I think I understood you
meant that. Thank you for clarifying.
All right. Mr. Werfel, one final question. You've been
given a 30-day review assignment by the President of the United
States. Can you just describe what's going to be entailed in
that review and what you hope will come out of that review in
trying to address management practices, morale, and everything
else in this huge, farflung enterprise known as the IRS?
Mr. Werfel. Yes, I can. There's three parts to what the 30-
day review entails. First part is accountability, and my 30-day
progress report to the President and to the Treasury Secretary
will detail the framework that we're using to make sure that
we're getting to the bottom of it and holding people
accountable. It'll have concrete examples, that I think we're
all now aware of, of where I am actively taking personnel steps
to hold people accountable. And then it will have a forward-
looking view to make sure there's transparency in how this
process is going to play out in the coming weeks.
The second part of the report deals with fixing the problem
with 501(c)(4) reviews. And there's a couple of pieces there.
One, we've got to implement the nine IG recommendations fully
and thoroughly. Second, we've got to get the backlog down. We
still have an existing backlog of 501(c)(4) applications. It's
an unacceptable backlog, and as has been widely reported,
hundreds and hundreds of days that these taxpayers have been
waiting for their answer, unacceptable. We have to move swiftly
to knock that backlog down.
And the third part of fixing the problem is, what is the
right process going forward? The process that we've been using
previously has not worked effectively. So in that report will
be a framework for a new process.
And then, very quickly, the third part is a broader review
of IRS which includes some of these other things, cost cutting
and 6103 protection and other things that we want to make sure
we're looking at across the IRS to show the American people
that we're serious about transformative change to improve this
agency.
Mr. Connolly. Thank you.
And, Mr. Chairman, one other thing just consistent with our
committee. I know Mr. Werfel is aware of it. But we held
hearings very late, I think it was the last hearing our former
colleague Todd Platts, chaired on identity theft and the
growing problem of identity theft with the IRS. And I would
hope that that gets sufficient review as well. Thank you.
Mr. Jordan. Gentleman from Utah.
Mr. Chaffetz. Thanks, Mr. Chairman.
Thank you, Mr. Werfel. You've got your hands full and we
wish you well. We need you to be successful.
Are you familiar with the internal review that is happening
at the IRS on this subject?
Mr. Werfel. Yes. I'm essentially establishing and running
the internal review with my leadership team.
Mr. Chaffetz. Are you also aware of the internal review
that Mr. Miller had initiated? This was done March through May
of 2012.
Mr. Werfel. I'm familiar with it and I'm at this point in
time working with the team to make sure that I understand all
the various----
Mr. Chaffetz. Have you seen it?
Mr. Werfel. It's a good question. I have talked to
employees that were involved in that review.
Mr. Chaffetz. Who did you speak with?
Mr. Werfel. The primary person that I spoke with was Nancy
Marks, who led that review.
Mr. Chaffetz. What about Holly Paz?
Mr. Werfel. I have not spoken to Ms. Paz yet.
Mr. Chaffetz. You have not seen this document?
Mr. Werfel. That's the thing. I'm not aware of a specific
document that says----
Mr. Chaffetz. So they did an internal review, but you
haven't been given a document?
Mr. Werfel. That is correct.
Mr. Chaffetz. Is there a timeline for this review? We have
been requesting since May to get a copy of the timeline. We've
been assured by the IRS we'd get it. We still don't have it
here today. We wanted to have it before this hearing. When will
you provide us that timeline?
Mr. Werfel. I was unaware of that specific request. Let me
check and I will get back to you with a specific timeframe.
Mr. Chaffetz. What did you learn about this document--this
review? Are you telling me that there's a review and there's no
document?
Mr. Werfel. At this point. And this is frustrating. Look
I'm arriving at the IRS and finding a lot of----
Mr. Chaffetz. How convenient that there's no documentation
of the internal review of this very--are you telling me there's
no email?
Mr. Werfel. I didn't say that. I thought what you were
referring to is there kind of a former Acting Commissioner
Miller asked for a review and here is the report to Mr. Miller.
If there is a report I don't have it, and once I do it have it
you will have it. That's the--that's my approach. But----
Mr. Chaffetz. And I appreciate that. Would that include the
background information or the other information? If there is no
formal----
Mr. Werfel. As long as there's no 6013 issues, yes.
Mr. Chaffetz. And when would we--what's reasonable for me
to expect that you would deliver that to the committee?
Mr. Werfel. I don't want to overpromise. What I will
promise----
Mr. Chaffetz. But what's reasonable?
Mr. Werfel. I will get back to you. It depends----
Mr. Chaffetz. When would you get back to me by?
Mr. Werfel. I will get back to you by the end of the day
tomorrow with a reasonable timeframe for that request.
Mr. Chaffetz. I think that's fair. I appreciate it. This is
something that we obviously want to look at in this internal
review.
Had you met Mr. Shulman prior to your taking on this
position?
Mr. Werfel. Yes, roughly 5 times over the course of 4
years.
Mr. Chaffetz. At the White House?
Mr. Werfel. I had----
Mr. Chaffetz. I mean, you're at the White House, so----
Mr. Werfel. Yes. I can recall, I think, two meetings or
seeing him twice at the White House.
Mr. Chaffetz. What were the topics of those meetings?
Mr. Werfel. One of them was a signing ceremony for the
signing of the Improper Payments Elimination and Recovery Act.
I remember him being at that signing ceremony.
The other was a meeting that was held in the Eisenhower
Executive Office Building. The topic of that meeting was--the
issue was this. The IRS--and Mr. Shulman was representing the
IRS--was expressing concern to the Social Security
Administration, and former Commissioner Astrue was in the room.
The concern was that when the Social Security Administration
releases information on deceased individuals through the Death
Master File publicly----
Mr. Chaffetz. Okay. I look forward to hearing more
information about that. My time----
Mr. Werfel. It was an improper payment issue. My primary
responsibility at OMB was improper payments.
Mr. Chaffetz. Okay. Mr. Werfel, I appreciate it. Let's keep
going. How many criminal referrals have happened relating to
the topics we have been discussing?
Mr. Werfel. Criminal referrals? I don't think there's been
any yet, but the Justice Department and the Inspector General
are actively reviewing those issues. Interviews, documents,
they're getting to that question.
Mr. Chaffetz. Do you believe--you know, the IRS received
some $80 million through the stimulus. My own personal purview
here is that here comes the stimulus, they thrown in hundreds
of billions of dollars, I for the life of me cannot figure out
how to stimulate the economy the Obama administration gave $80
million to the IRS. I don't understand how that stimulates the
economy.
But can you see where maybe--and I guess it's more of a
statement than a question--that sort of this abuse of money is
that they were just overflowing with cash? Suddenly had this
infusion of $80 million--oh, $4 million for a conference, oh,
that's fine. I just, at some point Mr. Werfel, my time is
running out, I would hope you get back to that.
Last question, what does it take to actually get fired at
one of these organizations? I mean, you've got people who you
say accountable, accountable, accountable, the Speaker wants to
know when somebody is going to jail, I want to know what it
takes to actually fire somebody.
Mr. Werfel. It's an important question, and I think this
committee is asking for recommendations on how we can improve
the IRS. Part of that improvement is how do we improve
timeliness of accountability. This is one of the questions that
we can surface in terms of looking at our personnel rules and
determining are they sufficient to meet the country's needs in
terms of when something goes wrong who's held accountable. I am
certainly open to discussing that with this committee and
others.
Mr. Chaffetz. Encouraging retirement is not holding
somebody accountable for misdeeds and misspending the American
people's money.
Thank you. I yield back.
Mr. Jordan. Could you fire somebody for refusing to answer
questions of the United States Congress related to a matter at
the IRS?
Mr. Werfel. I don't know. I would have to ask. I would need
legal counsel to advise me on that.
Mr. Jordan. Okay. I think you probably can.
The gentlelady from California is recognized.
Ms. Speier. Mr. Werfel thank you. I'm hoping that under
your leadership we're going to have a kinder and fairer and
more frugal IRS. Can you promise us that?
Mr. Werfel. I think those are three adjectives that I'm
willing to support, certainly.
Ms. Speier. All right. One of the problems that I think
initiated the Anaheim conference was the fact that you were
coming to the end of a fiscal year and there was unused money.
Correct?
Mr. Werfel. There was--yes, there was extra money
available, and clearly in this case that money wasn't deployed
to its highest and best use.
Ms. Speier. Okay.
Mr. Werfel. There's absolutely no doubt about that.
Ms. Speier. But you worked at OMB before, so you've seen
this phenomenon before, it's something I'm very concerned
about, which is as various Federal agencies come to the end of
the fiscal year and they have money left in accounts, they want
to spend it down because there's fear that if they don't spend
it down they will not be fully funded in the subsequent year.
Is that correct?
Mr. Werfel. That is a major problem.
Ms. Speier. Okay. That's a major problem.
Mr. Werfel. Yes.
Ms. Speier. What would you recommend that we do government-
wide in terms of addressing what is--I think IRS is just one
example of what's going on in every agency in the country in
the Federal Government when they've got money at the end of a
fiscal year and they don't want to lose it, so you use it, and
you find some way to use it. And in this case it was an Anaheim
conference and somewhere else it's, you know, some other form
of training or it's swag or whatever.
So how do we fix that? Do we just freeze any kind of
purchases in the fourth quarter unless it goes through a
different process?
Mr. Werfel. I think it's a very difficult question to
answer. I think what happens at a lot of agencies is because
this is known as a classic financial risk that we face in the
Federal budgeting process there are chief financial officers
and chief operating officers that are closely reviewing all
expenditures that occur at the end of the fiscal year to make
sure that money isn't being deployed for unnecessary or
inefficient purposes.
Ultimately, the goal is to make sure that the resources
that are available are targeting areas that are going to have
positive return on investment for the taxpayer, positive
programmatic impact. If I see an expenditure that goes on in
September I don't automatically think that might not be a good
expenditure because if it's doing something like, for example,
helping the IRS, you know, track down a criminal, get to
someone who's doing identity thefts, getting to someone who's
defrauding the government----
Ms. Speier. Right. I mean, there's a difference between
doing an criminal investigation and having a conference.
Mr. Werfel. Absolutely.
Ms. Speier. So there's a way of distinguishing. I guess
what I'm asking you, I've got limited time, is for you to give
us some advice. I mean, you've come from OMB, you know this is
a phenomenon, you know that we've got to address it. What would
you recommend that we put in place that would at least reduce
the likelihood that this kind of crazy spending, this shopping
spree mentality, goes on in the fourth quarter of a fiscal
year?
Ms. Speier. Let me move on to----
Mr. Werfel. Let me just--I think one idea that comes to
mind very quickly, it's not an idea but it's a fundamental
principle, transparency. There should be more transparency
about what goes on with Federal spending across the entire
spectrum. And I think if you have transparency in terms of the
kind of purchases that are happening at the end of the fiscal
year it would bring light of day to appropriators and to
others. So let me just offer that.
Ms. Speier. All right. Thank you.
Now, the Inspector General's report indicated that the IRS
did not adequately track or document money spent on the Anaheim
conference. I guess I'd like to know how the IRS has addressed
this concern. If you've already answered this question you
don't have to answer it again. Okay.
Mr. Werfel. No, I haven't. There is a variety of different
recommendations in the IG report for IRS. We have either
implemented or in process of implementing them. We are updating
our financial management manuals to make sure that when
conferences occur that they are tracked and that they meet
robust accounting requirements to make sure we know where the
money is going. So we basically updated the requirements for
managers in terms of how they report information on
conferences.
The irony here is that we have very few big conferences
anymore. We've really knocked down in very significant ways,
more than 80 percent the nature of this activity. Nonetheless,
we have still put in new procedures to make sure that when it
does happen, even at this very reduced level, that it's tracked
more appropriately.
Ms. Speier. Okay. Finally, and this is more of a generic
question I'd like to ask you from your experience at OMB, I
have got a bugaboo about swag. I think the Federal Government
does not need to be in the business of buying anything that
resembles swag. And I think we spend a fair amount of money. I
could look at all of those coins that Department of Defense
prints out, and I'm sure it's very expensive.
So what would you say about swag and how widespread is it?
Mr. Werfel. I mean, I'm in complete agreement. One of the
interesting parts about this, my choice to go over to IRS, is
that I have a history of responsibility around cutting waste,
reducing error. I was pretty central to efforts at OMB to cut
down on conference spending, to cut down on swag. We put in, in
an executive order, while I was at OMB restrictions on the
spending of any money on swag. And as I think has been
testified to, the types of things you saw going on in 2010 are
significantly less likely to happen today. Are they zeroed out?
I don't know. But I don't want any swag purchased at the IRS
while I'm Commissioner for sure.
Ms. Speier. Thank you. I yield back.
Mr. Jordan. Thank you.
The gentleman from Oklahoma.
Mr. Lankford. Thank you.
Mr. Werfel, it's good to see you again.
Mr. Werfel. Yes.
Mr. Lankford. On the Budget Committee and then on Oversight
and Government Reform we've had numerous conversations before.
In your previous role you've done an excellent job.
Mr. Werfel. Thank you.
Mr. Lankford. And I look forward to you taking this on, and
there is much to be done. That had to be an interesting
feeling, to walk in the first day into IRS and think where do
you start. So might as well start here. So thanks for doing it,
thanks for taking it on.
You know very well and you mentioned it earlier, in your
earlier statement, that Americans have lost trust. I've been
overwhelmed with individuals that have contacted me when I've
been in district or have contacted my office and said, I've
always suspected I was being targeted, but I started giving
politically, and that next year is when I was audited by the
IRS and I've always wondered about that over the last 3 years.
So this has moved from nonprofit groups that we now know
were targeted to ask for additional information and giving a
nonresponse to individuals that now rise up and say, I think I
was, as well. So as this broadens, and as we begin to look at
it farther, those questions will continue to rise, and we will
continue to have people contact our office and say, why was it
I've been in business 40 years, I've never been audited, I
started given politically and now I have.
So those are all questions that will have to be addressed,
and obviously 2 weeks in the office you can't address that, but
add it to your list because that's coming as well.
Mr. Werfel. I will. I do have one reaction to it, which is,
you know, this process, I said we have to fix the process, I'm
going to give a 30-day report that provides an update. One of
the process fixes that I think is vital is more checks and
balances in how these decisions are being made. Again, I think
one of the problems that you have is if the IRS is too insular
in how it's carrying out its work and there isn't kind of
active oversight and check and balances. And I think if we can
structure the right sets of checks and balances it would give
comfort to your constituents that there's change amidst and
there are controls in place to make sure that fairness is being
applied.
Mr. Lankford. Right. There's not much comfort for them. I
can assure you of that.
You mentioned in your opening statement as well some
personnel matters that are going on right now.
Mr. Werfel. Yes.
Mr. Lankford. That is known, it's out there. The former
Director of Collection Policy is now the current Director of
Implementation and Oversight of the IRS Affordable Care Act
office. There was a reception that was held where 18 people
were invited. We have access to it, I'm not going to list names
as we talk through this. But the email track coming in from the
hotel reads this way. ``While I'm out''--this is someone in the
hotel informing someone else what to do--``While I'm out there,
there will be some hospitality for 18 people in room 431. It is
to be kept confidential. The only person to discuss with
this,'' and I'll leave name out, ``is the contact for the
event. It's posted on the hospitality board but the one I have
attached is the credit card information for billing. This card
is only to be used for the food and the bartender fee. The beer
and the wine will be paid by a credit card given to you at the
end of this function,'' and inserted this IRS employee's name.
Underlined and in bold: ``Do not post this to the room. It
can't be shown as a room charge. I have been,'' insert a
person's name here, ``permission, and you should use that to
close out the credit card. But this person knows he's buying
the booze and you shouldn't have to.''
So this confidential report that we now know was about 18
people that were there, they had $44 a person in what they
listed here as booze and had $65 a person listed as food on it.
One of those individuals, or two of those individuals maybe,
are now under administrative review and are on paid leave.
You've got to start this investigation, if you're that
familiar with it you bring it up in your opening statement. The
question remains do you know right now who are the other 18--
the other 16 people that were involved in that?
Mr. Werfel. I have asked that question, we are gathering
that information, very important, and anything that we do that
we make sure we have valid, reliable information. So we're
working on that and that information will be made available.
Mr. Lankford. Do you know, it was 18 people were set aside
for hospitality, do you know if it's even 18 people that were
there, was it more or was it less?
Mr. Werfel. It's my understand that's in the right range,
but again I don't want to commit to a particular number because
we're still doing our review.
Mr. Lankford. You're welcome to do your review. Are you
familiar with any other senior-level or any of the management-
level IRS officials that were there at this reception? These
are obviously management-level folks when it's a confidential
reception that was held as a part of this event in Anaheim. We
don't see any kind of tracking how the invitation was done, and
we're still trying to determine who was invited and how were
they invited to this. Are you aware how that happened?
Mr. Werfel. Again, I'm not yet ready to articulate the
specific, but my commitment is we are working through that
issue and we will get you those answers.
Mr. Lankford. How about the purpose of the reception? Are
you able to identify it at this point? Again in a confidential
reception we have yet to see anything in writing that actually
dictates this reception is being held for this.
Mr. Werfel. Not yet, not the purpose. But what--we were
able to determine enough to determine that two employees may
have, and we're looking into it, but we believe there's
significant evidence of a violation of an ethical code of
conduct.
Mr. Lankford. You understand all the issues with this, not
only just for IRS, but this is the Director of Implementation
and Oversight for the IRS Affordable Care Act office. I mean,
there's already a lack of trust there, then we're trying to
figure out who was this gathered, what was this, we have
inappropriate use of funds here. We're trying to figure out all
the dynamics of it. So there's a lot of things we have to
connect to get the facts. As you're gathering that, do you have
a timeframe on when you'll have that together?
Mr. Werfel. I'm not going to commit to one, but I will,
like I offered to Congressman Chaffetz, I will get back to you
expediently on a timeframe so you can of a notional sense how
long this will take.
Mr. Lankford. Great. I appreciate that. But can you give us
a ballpark? Because you're in the process. Obviously you're
walking into the middle of this. But you've got enough facts
and information that you've put somebody on administrative
leave already at this point.
Mr. Werfel. That's correct. That's correct.
Mr. Lankford. This report came out 3 months ago. Then 4
days ago, basically, our committee staff started contacting and
asking questions about this reception. Within 2 days we've got
somebody that's on administrative leave and is gone 2 days
after we start asking about it. So enough information has risen
up quickly you've got serious concerns about this.
Mr. Werfel. I do.
Mr. Lankford. We're trying to figure out as you're
gathering information the timeframe of gathering that
information.
Mr. Werfel. Let me just state this, and I might have to
reach out to you more to kind of update you as we go. The
process, the personnel process that we're about to undergo, and
the reason why people get placed on administrative leave before
they're eventually dismissed is because there's a fact
gathering and a response. That's a 30-day initial process. So a
lot is going to be able to be gleaned about that situation over
the next 30 days.
Mr. Lankford. Okay. Terrific. Thank you. Look forward to
getting that timeline.
Mr. Jordan. Mr. Horsford.
Mr. Horsford. Thank you, Mr. Chairman.
Mr. Werfel, good afternoon.
The Internal Revenue Service holds the general public and
businesses to high standards when filing their taxes. The same
is true of nonprofits who must maintain certain standards for
their tax-exempt purposes. The fact that the IRS is now
demonstrating a pattern of, in your own words, management
failures to meet the very standards that they hold the public,
businesses, and nonprofits to is very troubling and, frankly,
unacceptable. You are one of the most powerful agencies in the
United States, and there are serious consequences when any
citizen, business, or nonprofit commits fraud or is suspected
of wrongdoing with regard to their taxes or tax filings.
What steps are being taken to reform the agency now to make
sure you hold yourselves to the same standard you hold the
American people?
Mr. Werfel. That's a very important and good question. Let
me walk through the steps for you.
First of all, I think it's important to point out, if you
look at the IRS on the day the report was issued and the IRS
today, there has been replacement of leadership at very
critical levels. I am a believer that accountability is driven
from the top down. The IRS today has different leadership: the
Acting Commissioner slot, Deputy Commissioner for Services and
Enforcement, Commissioner of Tax-Exempt Organizations, Director
of Exempt Organizations unit. If you're familiar with the IRS
org chart, I am working my way down and pointing out that from
the time the IG report was issued to today, there is leadership
replacement at every level. We've added new leadership.
Obviously myself. I have also brought on other people.
In particular, I want to point out a person by the name of
David Fisher, who is a high-ranking official from the
Government Accountability Office, an expert in risk management,
coming from GAO. He is now the Chief Risk Officer of the IRS,
and he is indispensable, I think, in these efforts to make sure
that we are changing the culture and the approach at IRS.
Other steps: accountability. I'm continuing to review the
information in the audit report, as I mentioned earlier. Just
based on that audit report there are gross examples--there are
examples of gross mismanagement. And you can make
determinations, and I am doing it as thoroughly and as fairly
as I can, you can make determinations that there are
individuals, because of their mismanagement practices in this
case, can no longer hold positions of the public trust at the
IRS. Those reviews are ongoing. Again, fair, thorough, but
expedient.
I can keep going, but I just want to give you confidence
that we have an action plan, we have things taking place that
are in immediate term to get at these issues. It's hard, but we
are working very diligently to start to correct these problems.
Mr. Horsford. And I appreciate that. And I want to say in
respect to the opening remarks by our ranking member, as well
as the chairman, I hope under your leadership we can take a
step back, look at the whole of the agency, look where we need
to strategically reform, and not just moving players and actors
within the agency but fundamentally reform, which is one of the
missions of this committee. And I know you touched on the
importance of information being protected, the impartiality,
and the issue of spending wisely, which is one of the reasons
that we're here today.
And I do just need to touch on one concern that I have as
well, being from Nevada. I don't believe that Anaheim or places
like Las Vegas should be singled out somehow as because of the
place that the waste that the agency was involved with--which
was wrong--that somehow these places should be targeted and
prohibited from having conferences held, which is why my
colleagues throughout our delegation and I introduced H.R.
1880, the Protecting Resort Cities From Discrimination Act, to
prevent Federal agencies from blacklisting resorts and casinos
as conference destinations. It's not the destination that's the
problem, it's the internal failure to spend appropriately, and
it doesn't matter where that spending occurs. So I just want
that noted.
I do want to follow up in my concluding question to Ms.
Maloney. You said that you have to follow this primary
regulation.
Mr. Werfel. I do.
Mr. Horsford. The law is exclusively. Why don't you have to
follow the law?
Mr. Werfel. Actually I have to follow the law and
regulation----
Mr. Horsford. So the law is exclusively.
Mr. Werfel. The law is exclusively, and the implementing
regulation is primary, and that's part of the challenge.
Mr. Horsford. So the regulation is not in compliance with
Federal law, correct?
Mr. Werfel. I don't know that I can answer that question. I
think that's something that we have to review with----
Mr. Horsford. Well, you said earlier that primary activity
is not the same as exclusive.
Mr. Werfel. It's not and----
Mr. Horsford. So therefore it's out of compliance with
Federal law.
And I believe, Mr. Chairman, that agencies must follow the
law. We, as Congress, set the law. We haven't changed the law
from exclusively. And it's important that you implement your
regulations accordingly. I'm glad to hear that you're reviewing
that----
Mr. Werfel. I am.
Mr. Horsford. --with the Treasury and that you've agreed to
some bipartisan participation, because the law is exclusively.
Mr. Werfel. And I want to be clear, the ambiguity that's
created between the law saying exclusive and the regulation
saying primary is a problem, and it's, you know, it's one of
the contributing----
Mr. Horsford. So therefore the reg needs to be changed to
be in compliance with Federal law. Unless Congress changes the
law, that's the standard, and that's what the agency should be
held to.
Mr. Werfel. We're looking at those reg changes.
Mr. Horsford. Thank you, Mr. Chairman.
Mr. Jordan. The gentleman from North Carolina.
Mr. Meadows. Thank you, Mr. Chairman.
Thank you, Mr. Werfel, for your candid answers today. I
want to follow up a little bit on some of these.
Do we know exactly when Ms. Hall, Sarah Ingram Hall, left
to go and take on her primary responsibilities with the
Affordable Care Act?
Mr. Werfel. I don't have an exact answer on that, but I
think it's in the range of spring/summer 2010. It's in that
range. We're still working through with Ms. Hall to make sure
we have a better understanding of exactly when she left her
role to go over to the ACA.
Mr. Meadows. So you'll be able to get back to us----
Mr. Werfel. Yes, we're working that issue very closely.
Mr. Meadows. All right. The other day at the House
Appropriations Committee you talked about--I guess the bonus
was brought up and you said you would get back to them.
Do you have an answer for us today on the bonus that was
paid?
Mr. Werfel. Can you remind me which question.
Mr. Meadows. It was basically what kind of a bonus was paid
to Sarah Ingram Hall. And you said you would get back to them.
And I assume that you went back to your office or your staff
did to check on it. Can you tell us today what that bonus was?
Mr. Werfel. I will ask my staff if they can look into that.
I don't have that information at my fingertips, but I can get
that for you.
Mr. Meadows. Did you go back and look into it after----
Mr. Werfel. We had a session where we went through all of
my commitments that I made in that hearing and made sure that
we were getting to the answers to each of them. So I don't know
yet----
Mr. Meadows. So you have not had a discussion following
that hearing about bonuses for Ms. Hall?
Mr. Werfel. No, there were several issues raised in that
hearing about bonuses and I just don't want to misspeak. There
was a couple of questions that I had to go back to the office
and make sure I was getting answers on. Again, this is--I'm
going to get you the information, this is just about get you
the right information.
Mr. Meadows. Does your staff--does your staff know today?
Do they know----
Mr. Werfel. No. We're going to have to go back to the IRS
and work through and get that information.
Mr. Meadows. So they don't know?
Mr. Werfel. I don't think I have the right staff here to
answer that particular question. But again, this is not--this
is--we'll get you that information.
Mr. Meadows. All right. Let me go forward with a little bit
of this.
Mr. Meadows. Can you give us assurances here today that
targeting outside of the 501(c)(4)s, did not happen with
regards to auditing, with regards to penalty waivers, with
regards to fees? Can you give us those assurances that that is
not happening systemically across the service?
Mr. Werfel. Here's what I can say. I'm not aware of it at
this time, but I am----
Mr. Meadows. Have you investigated it?
Mr. Werfel. I am working through that. I have been here for
2 weeks. There is a lot to cover. But I'm not ready to make
those assurances because I have not yet completed the review.
Mr. Meadows. So you cannot give us those assurances?
Mr. Werfel. It would be a mistake for me to do it.
Mr. Meadows. I agree with you. I'm not saying that you
should, because I believe that we don't know.
Mr. Werfel. But I also would clarify that I'm--at this
point in time, I'm not aware of it. Because if I was, it would
be stopped and you would be made aware.
Mr. Meadows. Okay. You also talked about, you know, we need
to have more people in the accountability, just previously in
your testimony, when you said it was, you know, when you are
singular, you need more layers of accountability. But yet, we
saw with the 501(c)(4), that was not something that was unique
to just Cincinnati. It involved a number of people in
Washington, D.C., the technical advisors, and dozens of people
knew about the problem. So how does more people actually fix
the problem?
Mr. Werfel. Well, I'm not sure--or I would say that more
people fix the problem. We could end up with a solution, and I
would be very open to that solution because I'm also interested
in cost cutting, with the solution that has less overall
people. What I meant by more people was that we have people
that have different responsibilities, maybe an independent
board like the IRS oversight board or something like that, who
can look in and report more quickly whether it's through
whistleblowing, or write to this committee or something like
that, so again, the American people----
Mr. Meadows. So we need an independent board to oversee----
Mr. Werfel. We have one. We have one. We have the IRS
oversight board. The question is, and this is something that
I'm exploring, and I'm being very candid----
Mr. Meadows. Right.
Mr. Werfel. --about different ideas because at this point
we are just at the idea phase, is maybe that board or other
type of mechanism could be inserted to do ongoing reviews.
Because if you go back in time and if you had a situation where
there are ongoing reviews through 2010 and 2011, you might be
in a situation where this was picked up more quickly. And
that's what I want to look into.
Mr. Meadows. All right, have you had conversations with
Beth Tucker with regards to 501(c)(4)s, and what she felt like
was the issue?
Mr. Werfel. I have had many conversations with Beth. She is
a critical part of the leadership team, yes.
Mr. Meadows. Okay, and did she see it as targeting? Was she
aware of it?
Mr. Werfel. I think--well, she was not aware of it. I think
we all have collectively looked at the situation, and agree
that the singling out of applications for extra scrutiny based
on political labels can fairly be described as targeting.
Mr. Meadows. So she was never aware of it until the report
from the IG came out?
Mr. Werfel. At this point in time, I'm not aware that she
was aware of it. I'm not going to speak concretely----
Mr. Meadows. So she wasn't----
Mr. Werfel. --but this is part of the process. Again, I go
back to the guiding principles: Thorough, fair, and expedient.
And before I come out here and make a conclusion, I have to be
given the opportunity to do a thorough, and fair, expedient----
Mr. Meadows. But I'm asking you about your personal
conversations with her.
Mr. Werfel. Okay, and based on those personal
conversations, I'm not aware at this time of the exact timing
that she knew of the situation.
Mr. Meadows. Okay. And my last question is, is with regards
to Nancy Marks.
Mr. Werfel. Yeah.
Mr. Meadows. She was the assistant to Sarah Ingram Hall, is
that correct, technical senior advisor according to the flow
chart under the IG's report, so she actually worked----
Mr. Werfel. I actually think at some point because people
moved around, but she was the technical advisor within----
Mr. Meadows. When did she first go to Cincinnati to talk to
them about that? Because obviously, she would have had to flown
to get there, or paid mileage so we would have some
documentation. When was the first time that she went to
Cincinnati?
Mr. Werfel. I'm going to qualify it by saying I would like
to double confirm, but I think it's around March 2012.
Mr. Meadows. Well, we have narrowed it down that far. When
in March of 2012?
Mr. Werfel. That I would have to get back to you. I don't
have that----
Mr. Meadows. Because we know within a time frame because
that's critical. Because we had testimony that was given in
Ways and Means on March the 22nd, 2012, and if she went before
that, it would indicate that we have people that sent her to
check on things while that testimony was being given in
another. So that's critical, that time frame.
Mr. Werfel. I will try to get you more precision on that.
Mr. Meadows. All right. And so you have got a follow-up.
Thank you, Mr. Chairman, for your indulgence.
Mr. Jordan. I thank the gentleman. Real quick, Mr. Werfel,
on Sunday, David Plouffe was on the Sunday shows, and they were
discussing the targeting of conservative groups in the tax
exempt division of the IRS, and he made the statement that this
was not at all political. And I'm just curious, do you agree
with Mr. Plouffe's assessment of what went on in the tax exempt
division of your organization, of your agency?
Mr. Werfel. I don't think I know the answer to the
question. We have an audit report. The audit report doesn't
find any evidence.
Mr. Jordan. I'm asking, do you agree----
Mr. Werfel. I'm going to try to answer. The audit report
that I'm relying on, it is a very important document and fact
pattern to review. It does not, at this time, find any evidence
of political animus, or motivation with respect to this
targeting.
Mr. Jordan. To date, has any--has there been any group on
the list who was targeted who is a left-leaning group? Have you
identified one group as a left-leaning group, yes or no?
Mr. Werfel. I have to--I can answer that question once I
make sure that I have appropriate 6103 redactions, so I can get
back to you on that question, but I have to do a 6103
redaction.
Mr. Jordan. Are you aware? Are you aware of any group that
has come forward and said that they experienced the same kind
of targeting several groups on the political right have
experienced?
Mr. Werfel. Here is how I answer that question. That we
have started to produce documents to Congress, to Ways and
Means, and Senate Finance. In those documents are additional
helpful information that is coming to light that gives more
information about the BOLO list, and different types of
organizations that were on the BOLO list, and based on that,
and the problem with that document is that there is a lot of
6103 information over it. So----
Mr. Jordan. Well, let me ask it this way, then. Is there
anything on the BOLO list, any terms--I have yet to see one
term on the BOLO list or the three terms initially used to
target and develop the list, initial terms were Tea Party, 9/12
and Patriot, and then the BOLO lists, I have yet to see any
terms on that list that would frankly apply to left-leaning
groups. They only seem to apply to right-leaning groups. We
have only had right-leaning groups been identified and come
forward.
So I guess I'm back to the first question. Do you agree
with Mr. Plouffe that it's--that this was not political?
Because I don't see how you can reach any other conclusion but
that it was political, but he says it's not.
And I want to know what you, as the guy who is in here
cleaning up an agency, and it seems to me, in order to solve
the problems, get to the bottom, hold people accountable, you
need to know the motivation. And right now the only logical
conclusion is this was politically motivated. I want to know if
you agree with that.
Mr. Werfel. Here is how I would answer the question. If the
audit report did not find it, it would be inappropriate for me
to speculate that there was political motivation. It would be
inappropriate for me to speculate----
Mr. Jordan. Why is it inappropriate for you to speculate?
I'm asking you to draw a conclusion based on the evidence, and
the evidence is this: Not one group on the left has been
identified for harassment. Hundreds, for years, have been
identified on the right. So not one on the left, hundreds on
the right, and yet you are still saying I don't believe this is
politically driven?
Mr. Werfel. I'm not--I'm saying I don't have enough
evidence to make a conclusion at this time. And what I'm
further saying is that there is data----
Mr. Jordan. Do you think reasonable people, though, could
look at the evidence and say, there is enough evidence to
conclude that it was politically driven, because we have yet to
find one group on the left, and we have got hundreds of groups
on the right?
Mr. Werfel. I think the problem is and there is a tension
here, the tension is that there is more relevant documents and
information that needs to be looked at before we can----
Mr. Jordan. Okay, and any of that relevant documents that
you--anything you have seen thus far that shows a people--
groups on the left were targeted. Have you seen anything that
points to that yet? I'm just asking today.
Mr. Werfel. There are--I am unable to answer that question
because I would be legally unallowed to answer that question
because I have to go through a 6103 process and make sure I
give you an answer that I can legally give you. And I have not
gone through that process yet. So...
Mr. Jordan. 6103 says you can't give away personal tax and
identify who they are. I'm not asking you that. I'm just
asking, is there any group on the left? I'm not saying tell me
the specific group. I'm saying, is there any group on the left
who has been targeted? I mean, I don't know how anyone--I would
think we have folks on the--my colleagues on the other side of
the aisle who would say, this sure looks politically driven to
me, because they don't know of any--no Democrats told me a
group on the left has targeted.
Mr. Cummings. Will the gentleman yield just for a second?
Mr. Jordan. Absolutely.
Mr. Cummings. Would you define what is left and what is
right? No, I'm serious. What is left and what is right? I mean,
that's a hell of a question. Well, I'm just curious, I mean, I
just want to know. I want the benefit of your answer, but I
want to know what's left and right.
Mr. Jordan. Yeah, well, I mean, do we know any groups with
the term progressive or liberal in their title that were
targeted? We don't know of any. Do you know groups with Tea
Party, Patriot, 9/12 government, reduce government spending who
were targeted, hundreds. That's--that's what I'm--that's what
I'm getting at.
Mr. Werfel. And what I was saying is, I was brought to the
IRS to make sure we are enforcing the rule of law. It would
violate the law for me to answer your question directly, but
what I will say----
Mr. Jordan. I don't know how it violates the law because
you are not giving any specific--I'm not telling you to say,
oh, you know, the Hamilton County Progressive Institute was
denied. I'm not telling you to give me a specific thing and
talk about them specifically. All I'm saying is, have you
discovered any, name one. That's all I'm saying, because Mr.
Plouffe seems to think there are, and they are saying it is not
political, and yet we have received no evidence that would
validate Mr. Plouffe's statement.
Mr. Werfel. All I can say is that that information is
forthcoming. We are running a process. It's fair, it's
thorough, it's expedient and it's legal and these answers will
be available. But I cannot provide premature answers before I
go through the appropriate processes. I just can't do it.
Mr. Jordan. The gentleman from Maryland is recognized.
Mr. Cummings. Thank you very much. First of all, I want to
thank you, Mr. Werfel, and I'm reminded that you have only been
there for 2 weeks. But this is a subject that's bugging the
hell out of me, and I want you to help me with this.
You know, I keep hearing this argument that because we had
some bad players and people not doing their job properly, that
there is going to be a problem with addressing the
responsibilities under the Affordable Care Act. This is
America. Everybody on this--in this committee has fired people.
Everybody. And if they hadn't fired people, they just keep on
living and keep on working. We don't, because we have a bad
actor, we don't suddenly quit Congress. We don't suddenly go
off our mission. We let them go, and then we try to find
somebody else who can do the job.
Probably everybody in this room has been through some kind
of process like that. A lot people in this room have gotten the
jobs they got because somebody didn't do the job properly. This
is my point. I don't buy this Affordable Care Act because we
had some bad players, we cannot do the job. This is America.
And if we took that attitude, we would never get anything done.
So I'm asking you, and from what you have seen, I know that
you said you are going from the top to the bottom and you are
going off--you are doing what you got to do. Tell me this: Do
you feel confident that doing the things that you can do, that
you can find the appropriate people and create--help create the
climate whereby we can get the Affordable Act responsibilities
done pursuant to the law, which is the law, by the way, no
matter how many times people may want to do away with it, it is
the law. And we are--we are charged with the constitutional
duty of enforcing the law and making the law happen, and you
now have a responsibility of dealing with the law. Can you find
the people that can do it?
Mr. Werfel. Yes.
Mr. Cummings. And can you carry out the responsibilities?
Mr. Werfel. Yes.
Mr. Cummings. And the reason why I ask that, is that I
swear to God, it just bothers me, this no-can-do attitude. Not
from you, but Members, oh, God, we have some bad employees. We
can't do this. No, it doesn't work that way. My father was a
former sharecropper with a second grade education. And one of
the things I love about my dad, God bless his soul, he used to
always say to us, he would say, there is no such word as can't.
And he said, you've got to, you can get things done. And he was
able to raise his seven children, educate all of them well, and
successfully build his church with my mom on a second-grade
education.
This is America. And as I said to you a little bit earlier,
you have got a tremendous responsibility. But I hope, and I
pray that you don't go in there with the attitude that because
we have got some bad actors, and because the climate was not
what we want it--wanted it to be, that we can not carry out the
mission of this country. We are better than that. We are better
than that.
And if we take that kind of attitude, I don't know what we
will be able to accomplish at any time. And there is no Member
of this Congress, as I said before, who has not had to let
somebody go, who has not to fire somebody. So you feel
confident about it. And how will you go about that? Because I'm
tired of that argument.
Mr. Werfel. Well, you're absolutely right. We have a legal
responsibility, a tough operational challenge. I have started
to look through our ACA work very closely. We have hit all of
our key milestones, and I think we are on a path to hit the
rest of our key milestones. I think one of the first things
that I have done is I have had to put in a new individual who
is taking on the responsibilities of the Commissioner of
Services and Enforcement, which oversees the Affordable Care
Act work. She is one of the most talented civil servants in the
IRS. She has an enormously effective track record at getting
things done. She came over from part of IRS called Large
Businesses and International.
And for me, it is a lot about leadership. You get the right
leadership in place, she is going to be able to recruit the
right talent in place, hold individuals accountable, get us to
our milestones, and get the job done. But I'm going to be very
active in this area because it is one of our critical
operational priorities, and I'm responsible ultimately to make
sure that we hit all of our deadlines, and my commitment is to
do everything we can to hit them.
Mr. Cummings. Thank you very much.
Chairman Issa. Well, they don't get any easier in this
hearing. So the good news is, this one is nearly done. The bad
news is, that you agreed to come back and work with us.
Mr. Werfel. I will.
Chairman Issa. So let me just--let me just get back to--put
that back up. You are familiar with the congressional act that
created the Taxpayer's Bill of Rights.
Mr. Werfel. I won't say I'm an expert at it, but yes.
Chairman Issa. Have you--when you look at it, if you would
get back to us and talk to us about, essentially, I will get it
back on the screen, 1996 Act, which amended the Code from 1986,
and so on. But it established taxpayer advocates and so on.
Mr. Werfel. Yes.
Chairman Issa. And it is an area in which it is not the
jurisdiction of this committee, but hopefully, you would look
at that and say, aren't there some--some things that weren't
upheld that you will fix by better management? And perhaps,
some things that need to be put into that--the symbolism of
that Act that would cause the Ways and Means Committee or
whatever committee of jurisdiction, I presume it's them, to
update it, because I think that part of the confidence that we
are asking you to reestablish is literal. Some of it is
symbolic. Some of it takes time, but some of it, like today's
hearing, with your willingness to come forward, we have started
that.
Mr. Werfel. And I think the people of the IRS, and I have
mentioned this before, they are shocked and appalled by what
happened in the 501(c)(4) situation. They are embarrassed by
some of the inappropriate spending in the Anaheim situation.
There are institutions within IRS like the National Taxpayer
Advocate who holds as their primary mission to help taxpayers
navigate through the tax system in a way that is fair and
understandable. And I have spoken to our National Taxpayer
Advocate, and she is ready, as a lot of the other leaders in
the IRS are, to take on the types of transformational change
that is necessary to make a difference here.
Chairman Issa. I appreciate that. I might suggest that the
next time letters come from Members of Congress, both sides of
the aisle as they did here, that perhaps that somebody who
should see them as an ombudsman and begin asking is there a
there there? Because I think one of the challenges is, in the
opinion of the chair, you have had two former individuals, one
acting, Mr. Shulman, who--they didn't do their job. They are
not managers up to the task. So I can't go back through every
Commissioner, although I have met a number of them, but I can
say, look, your two predecessors, not so good, just not so
good. And I think we have met them. We have seen them. The
American people have watched them, and they are disappointed in
what they saw in hearings, but I think they were disappointed,
as you are, in what happened on their watch.
A couple of things. You're aware by now of the
investigation related to procurement, about a half billion
dollars worth of open contracts originated within a HUBZone
here in the District of Columbia, are you?
Mr. Werfel. I have had very preliminary briefings on it,
but I am familiar with the issue that you referring to.
Chairman Issa. This, in the opinion of the chair, from what
my investigators have gleaned, represents a--and again, only in
the opinion of this chair, but I believe strongly that fraud
was perpetrated; that it included misconduct both by personnel
within the IRS, and obviously, by the applicant.
Now, you both strongly disagree. But I certainly think that
if it is within your power, to immediately, or as soon as
possible terminate any further procurement on a contract that,
from our estimation, regardless of how it was procured, is
costing the taxpayers every time you buy off of it more money
than a replacement contract would cost, that your willingness
to attack that--it may only be a couple of million dollars in
savings, but I think symbolically, it is a big difference if we
can stop that one sooner if you have the power to do so.
Mr. Werfel. I don't know enough yet to comment conclusively
or concretely, but I will committee to work with you on this to
see what I learn, share it with you, and make sure we have a
good path forward.
Chairman Issa. Well, and I will enlighten you with the time
I have remaining with one small fact. When this applicant
applied for a HUBZone, something that the ranking member and I
believe that when you have historically underemploying business
set systems which is what this was, Northeast Washington, D.C.,
the gentlelady, delegate isn't here, but this is an area that
could use some job creation. The applicant in that case clearly
said, yes, I'm going to create jobs in Northeast Washington.
And then created only a few jobs with some college students
whose parents were spending $30,000 or more to send them to
Catholic University, not part of the underprivileged portion of
Northeast Washington, D.C. Ultimately, they were making a few
dollars looking at computers, providing no significant jobs,
certainly, no job to the indigenous people of that region of
the District of Columbia. They had no real presence there, and
I think, you know, an abusive set-aside to people on both sides
of the aisle, sometimes agreeing or not agreeing on some set-
asides, but the abuse of the set-aside means that Mr. Cummings
in Baltimore and parts of his district that are HUBZones, those
people didn't get an opportunity to bid on that lucrative
contract. Other people in the District of Columbia in those
areas didn't. So I'm beating a dead horse, I don't mean to do
so, but I think we are very passionate about fixing that
particular contract.
Mr. Cummings. Would the chairman yield?
Chairman Issa. Of course.
Mr. Cummings. First of all, I--Mr. Chairman, I want to
thank you for raising that issue. You are absolutely right. I
think that whatever the law is with regard to HUBZones and what
have you, Mr. Werfel, I, too, want to make sure that they have
been properly addressed. I think people should play by the
rules. The rules have been set up in a certain way, and if
people are not going by the rules, I got a problem with that.
And I would appreciate your response. I know you got to look
into it, but----
Mr. Werfel. I will. I absolutely will.
Mr. Cummings. Thank you, Mr. Chairman.
Chairman Issa. One last point, and this is a discovery
point and we have talked to your counsel for a few moments
before I came back to the dais, who I understand has only been
there about the same amount of time or a little less than you.
So I don't want to be unfair to anyone.
This committee would like to dispense with all of our
discovery on the broader case as soon as possible. I know you
would like to have as much of that behind us. In order to do
so, we have a specific request, which is that documents have
been requested by this committee, and, thank you--and even if
they were not requested by the Ways and Means Committee, we
would appreciate, essentially, as soon as possible, sending
unredacted, all information requested by this committee to the
Ways and Means Committee, because they have personnel who are
cleared to look at 6103.
Mr. Werfel. Yes.
Chairman Issa. They can hold those documents. If we need a
special quick, while you are going through redaction, look, we
can ask them to analyze one, suggest redactions, work with your
staff to say, can you please agree with this page.
Mr. Werfel. Yeah.
Chairman Issa. So we can expedite that. But more
importantly, they can look through them for characters that
they need, or characteristics they need, and ultimately in some
cases, they may need to look at what you would give to us
redacted. And we are working hand in hand with the Ways and
Means Committee. So if you could consider that anything
requested by this committee is, in fact, a carbon copy to the
Ways and Means Committee, this wouldn't be subpoenas, of
course, but voluntary stuff.
Mr. Werfel. I understand. So in other words, you give us a
data request, or an information request. We have to redact it
from 6103. We get it to Chairman Camp, and potentially Senator
Baucus earlier because they don't need the redacted versions.
Chairman Issa. That's correct.
Mr. Werfel. I understood the request.
Chairman Issa. And I know that in some cases, they are not
going to look at it immediately, but to the greatest extent
possible, we would appreciate that. Go ahead, please.
Mr. Werfel. I think--I understand the request. We are going
to look into it, and then I will get back to you.
Chairman Issa. Okay, and then, obviously, we would like to
prioritize as much as possible, work with your staff to
prioritize the documents we need sooner rather than later.
Mr. Werfel. That's absolutely critical. That's really
helpful to us, actually, to understand, for example, which
people, what key search terms. The better clarity we have on
that, the quicker the information starts flowing to you.
Chairman Issa. I appreciate that, and I want to, once
again, thank you, and Mr. Meadows is going to be recognized,
but no, you are good? Okay. I'm not going to be--oh, you are
good? Okay, then I'm closing subject to the ranking member. I
want to thank you. This is a good start. It's a tough matter. I
feel like you're, you know, coming in the day after we found
tainted Tylenol and trying to bring back the reputation of a
great pharmaceutical company.
In a sense, you are in that same situation. No doubt
something bad happened. It didn't happen on your watch. We are
not blaming you, but you are the person we are looking to to
take immediate and decisive action, and to the extent that you
have so far, I want to personally thank you. Mr. Cummings.
Mr. Cummings. I will be just extremely brief. I want to
thank you, too. And as I tell my constituents, there are
moments in life that are placed there to actually become a
movement, a moment to a movement. And what I'm saying to you
is, I think we have a moment here where we have seen so much
that needs to be corrected, and now I'm just very pleased to
see when you talked about those three points, the things that
you are most concerned about, to turn that into a movement to
make IRS a place where all Americans and their families can
feel that trust. I mean, it's painful.
I know writing from my constituents, a lot of them don't
have bank accounts. They are writing more money orders, or
whatever. But when they send that check into IRS, or they get
that letter about an audit, or whatever, that the people on the
other side are going to treat them fairly and with courtesy,
and that they can feel a level of confidence which they
mustn't, and I thank you, and I thank the President for
appointing you.
Chairman Issa. Well, I want to thank the President for
appointing you to an acting position. I think the ranking
member and I would all note that we just got an appointment
request for the GSA position that's been acting for a long
time. And this committee, both with IGs, and with cabinet and
subcabinet heads, certainly would make for the record that we
like confirmed individuals, and not acting. But we will
continue working with you. Hopefully, that will soon be
changed. We stand adjourned.
[Whereupon, at 2:40 p.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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