What Was so Lavish About the IRS Employee Conference?

The conference was called “lavish” and “shameless.” Could it pass an IRS audit? Here’s what experts say.

The conference was called “lavish” and “shameless.” Could it pass an IRS audit? Here’s what experts say.
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A happiness expert. There was widespread criticism of the agency for including a "happiness expert" among the $135,000 it spread among 15 outside speakers at the event. Still, beyond the usual tedium and stress the unpopular agency's employees face, it was an unusually difficult year. A few months before the event, a suicide attacker slammed a plane into the IRS office in Austin, killing 68-year-old branch manager Vernon Hunter, a Vietnam veteran and father of six who had worked for the agency for 27 years. The inspector general knew of such issues: He had just done a report documenting more than 1,000 threats and assaults on the agency in recent years.

[Read: IRS Data Web Snares Mostly Low- and Middle-Income Taxpayers.]

Outside speakers. The IRS was a lightweight by corporate standards, with an average of about $9,000 paid to each outside speaker. By comparison, in the corporate world, the bar is high, and the costs are normally expensed as tax deductions. One of the top agencies that books corporate event speakers, Creative Talent International, lists Alan Greenspan, Condoleezza Rice, Tony Blair and Bill Clinton at $250,000 each per engagement. Or companies can get The Rolling Stones, Bruce Springsteen or Katy Perry for $1 million.

Swag. Freebies at the conference cost about $20 per person. The inspector general cited the agency for providing canvas carrying bags, spiral journals, pens, travel mugs, event planners and sticky notepads. He also faulted them for giving away 24 baseball tickets as randomly chosen prizes for conference participants, which came out to less than one for every 100 attendees. "I think the inspector was a bit picky when he went after sticky pads," Atkinson says.

Automated response tools. The inspector general did not like the fact that the agency spent about $10 per attendee for automated response devices used for interactive Q&A sessions on tax policy and rules. Some of the questions were "trivial," he said.

Bad accounting. The report said because of accounting errors, the true cost of the conference could not be "validated." But what sounded like a vast criticism turns out to be the opposite. A total of $245,000 was entered with wrong expense codes. And about 1 percent of the costs (including the "Star Trek" video) were based on estimates. "In a private audit, the expenses need to be reasonable, but not every single thing needs documentation," Atkinson says. "If you document 85 percent, you are usually OK. The IRS appears to have done much better than that."

[Read: New Target of IRS Robo-Audits: Small Business.]

Videos and paintings. In addition to the Trekkie parody, $27,000 worth of paintings were used as visuals, then given away to participants as prizes. Such expenses do not shock tax professionals who regularly see conference costs for everything from Elvis impersonators to $10,000-per-seat luxury boxes at sports events. "The IRS has a big training challenge, and you want to see them addressing it in a creative and out-of-the-box way," Atkinson says. "The 'Star Trek' video was dumb. But you can't fault them for trying."

Was the conference a boondoggle with no value? "We did not evaluate the appropriateness or relevance of the training provided at the Anaheim conference. It was beyond the scope of this review to assess the merits and effectiveness of the conference agenda," the inspector general wrote in his report. He cited only the agency's most embarrassing lapses. But he made no mention of the program's mostly dull content that dealt with leadership, major changes in use of technology, office security (following the Austin attack), training of thousands of new employees, the growing challenge of a global economy and changes and additions to the six-million-word tax code.

The new acting head of the IRS, Danny Werfel, was apologizing for the agency before he even spent a week on the job. Some wonder if he even knew what he was apologizing for. "This is obviously a very challenging time for the agency," Werfel told Congress. He would not have been on board yet for one of the Anaheim conference workshops: "Political Savvy: How Not to Shoot Yourself in the Foot."