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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 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

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 

(III) 

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 

(1) 

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 

2 

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 

3 

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 comVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
4 

mittees 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— 

5 

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 

6 

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. 

7 

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. 

8 

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? 

17 

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 

18 

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 caseby-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, 

19 

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. 

20 

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? 

21 

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. 

22 

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 in- volved 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 

23 

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 hardearned 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 

24 

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 

25 

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 governmentwide 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. 

26 

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 

27 

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. 

28 

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 

29 

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. 

30 

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. 

31 

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 

32 

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. 

33 

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. 

34 

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 

35 

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 

36 

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. 

37 

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. 

38 

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 

39 

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 

40 

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? 

41 

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. 

42 

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-yearold 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 

43 

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? 

44 

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. 

45 

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 backVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
46 

handed 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. 

47 

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 

48 

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. 

49 

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 re- port were, the $4.1 million. 

Mr. MEADOWS. So you only have 90 percent of the documenta- tion, 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, 

50 

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? 

51 

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. 

52 

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. 

53 

‘‘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 

54 

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 approVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
55 

priate, 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 

68 

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 

69 

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 talkVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
70 

ing, 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 deVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
71 

pending 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 

72 

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? 

73 

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 

74 

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. 

75 

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 

76 

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. 

77 

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—— 

78 

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. 

79 

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. 

80 

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. 

81 

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. 

82 

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. 

83 

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 governmentwide 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 

84 

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 

85 

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. 

86 

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. 

87 

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. 

88 

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 

89 

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. 

90 

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, 

91 

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. 

92 

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—— 

93 

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 

94 

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 

95 

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. 

96 

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 perVerDate Aug 31 2005 11:16 Mar 05, 2014 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6633 C:\DOCS\86795.TXT APRIL
97 

petrated; 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 

98 

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 

99 

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.] 

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