[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                COLLECTED AND WASTED: THE IRS SPENDING 
                     CULTURE AND CONFERENCE ABUSES

=======================================================================


                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT

                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 6, 2013

                               __________

                           Serial No. 113-79

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform




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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 6, 2013.....................................     1

                               WITNESSES

The Hon. J. Russell George, Inspector General, Treasury Inspector 
  General for Tax Administration
    Oral Statement...............................................     7
    Written Statement............................................     9
Mr. Faris Fink, Commissioner, Small Business and Self-Employed 
  Division, Internal Revenue Service
    Oral Statement...............................................    16
Mr. Daniel Werfel, Acting Commissioner, Internal Revenue Service
    Oral Statement...............................................    54
    Written Statement............................................    56

                                APPENDIX

The Hon. Elijah E. Cummings, Opening Statement...................   102
The Hon. Gerald E. Connolly, Opening Statement...................   104
The Hon. Michelle Lujan Grisham, Opening Statement...............   106
Questions for the Record to OGR Comm. through Chairman Issa and 
  Rep. Lankford..................................................   108
Questions for the Record from Wage & Investment from Rep. McHenry   110


  COLLECTED AND WASTED: THE IRS SPENDING CULTURE AND CONFERENCE ABUSES

                              ----------                              


                         Thursday, June 6, 2013

                  House of Representatives,
      Committee on Oversight and Government Reform,
                                           Washington, D.C.
    The committee met, pursuant to call, at 9:31 a.m., in Room 
2154, Rayburn House Office Building, Hon. Darrell E. Issa 
[chairman of the committee] presiding.
    Present: Representatives Issa, Mica, Turner, Duncan, 
Jordan, Chaffetz, Walberg, Lankford, Gosar, DesJarlais, Gowdy, 
Farenthold, Lummis, Woodall, Massie, Meadows, Bentivolio, 
DeSantis, Cummings, Maloney, Norton, Tierney, Clay, Connolly, 
Speier, Pocan, Duckworth, Kelly, Cardenas, Horsford, and Lujan 
Grisham.
    Staff Present: Ali Ahmad, Communications Advisor; Richard 
A. Beutel, Senior Counsel; Molly Boyl, Parliamentarian; 
Lawrence J. Brady, Staff Director; Ashley H. Callen, Senior 
Counsel; Caitlin Carroll, Deputy Press Secretary; Sharon Casey, 
Senior Assistant Clerk; Steve Castor, General Counsel; John 
Cuaderes, Deputy Staff Director; Carlton Davis, Senior Counsel; 
Kate Dunbar, Professional Staff Member; Adam P. Fromm, Director 
of Member Services and Committee Operations; Linda Good, Chief 
Clerk; Tyler Grimm, Senior Professional Staff Member; Frederick 
Hill, Director of Communications and Senior Policy Advisor; 
Christopher Hixon, Deputy Chief Counsel, Oversight; Mark D. 
Marin, Director of Oversight; Ashkok Pinto, Chief Counsel, 
Investigations; Laura Rush, Deputy Chief Clerk; Scott Schmidt, 
Deputy Director of Digital Strategy; Rebecca Watkins, Deputy 
Director of Communications; Krista Boyd, Minority Deputy 
Director of Legislation/Counsel; Kevin Corbin, Minority 
Professional Staff Member; Jennifer Hoffman, Minority Press 
Secretary; Carla Hultberg, Minority Chief Clerk; Elisa LaNier, 
Minority Deputy Clerk; Lucinda Lessley, Minority Policy 
Director; Dave Rapallo, Minority Staff Director; and Rory 
Sheehan, Minority New Media Press Secretary.
    Chairman Issa. The committee will come to order.
    The Oversight Committee's mission statement most 
appropriately is that we exist to secure two fundamental 
principles. First, Americans have a right to know that the 
money Washington takes from them through the IRS is well spent. 
And second, Americans deserve an efficient, effective 
government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold government accountable to taxpayers, because taxpayers 
have a right to know what they get from their government. It's 
our job to work tirelessly in partnership with citizen 
watchdogs, including our IGs, to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy.
    Today, more than any other hearing, we revisit the kind of 
waste and the kind of failure to secure taxpayers' hard-earned 
money than I can remember in history. I was shocked when the 
GSA, the body that was supposed to be concerned about the 
entire Federal bureaucracy having reasonable per diems and 
spending within limits, doing things properly, determining what 
would be on a schedule and what it would cost, I was shocked 
when I found out that they threw themselves parties. But to 
find out that not only does the IRS take your money, not give 
you proper answers, and then when it comes to tens of millions 
of dollars use it in a way that is, at best, maliciously self-
indulgent.
    To spend more than you would have spent by normal 
negotiations for rooms is unthinkable for any agency, but when 
it's the IRS and they give to their own employees benefits, 
such as local employees in Anaheim, and then fail to file W-2s 
for that income, the IRS effectively was guilty of tax evasion. 
And saying you don't know doesn't help you, doesn't give you an 
out as a taxpayer. It certainly shouldn't give the IRS an out 
when they're using taxpayer's money.
    Professional education is critical, and the IRS more than 
any other organization needs to be well trained, needs to 
understand not just the fundamental laws, but a long history of 
rulemaking and Federal cases that determine what you do or 
don't pay, what you're allowed to do or not allowed to do. And 
quite frankly, they need to be trained to treat the taxpayer as 
a customer and not a debtor.
    That and more justifies, when appropriate, travel, when 
appropriate, visits to the very companies and individuals from 
whom they receive the revenue that we in government spend. And 
I want to say here, and hopefully my ranking member will share 
this, we want the Federal workforce to feel that when they have 
justified travel, reasons to go and have meetings, reasons to 
use hotel rooms or conferences, that they do so. We don't want 
Washington think, or Cincinnati think to be no training, no 
travel, no interaction. Just the opposite. We want to get this 
right.
    Now, many will say $50 million over these many conferences 
is inherently wrong. I will say for the tens of thousands of 
workers who could have received great training, whose travel 
could have been meaningful but less expensive, that they were 
cheated out of additional education and meaningful training by 
this waste.
    I don't believe from the dais that any of us can determine 
whether $50 million, or $30 million, or $90 million was the 
right amount to spend, but with the help of the Inspector 
General we know that much of it was misspent. And that means 
the American people didn't get a well-trained Federal 
workforce. It means that many Federal workers who will look at 
this hearing, aghast, and say, I don't get those perks, as a 
matter of fact, I would get fired if I took one of those perks, 
that the Federal workers around the country should be appalled 
that there were two standards: one for some and one for the 
rest. And as taxpayers, we should be appalled that there were 
two standards: one for us and a different one for people that 
work for the IRS in some cases.
    I think it's important that we understand that the reason 
we are holding this hearing, and thanks to the Inspector 
General's office, we have the facts just now on a study we have 
had for a long time, but it concerns a period of 2010 to 2012. 
And so it's not a new occurrence, and many of these things may 
not be happening today. Certainly, both the administration and 
Congress have acted to reduce the budgets for some of this kind 
of effort. But I think that's the most important reason to have 
a hearing. We want the culture to be, spend it, and spend it 
wisely. We want the culture to be, how can we get better 
training and a better trained workforce. And in many cases the 
best way is, bid for the lowest price for what you need, don't 
kick back perks. Those are not what the rank and file wants. 
They want an opportunity to be well trained.
    I believe we are going to see a short video, or a couple of 
them today. These are, once again, for a reason. Training 
videos are important. Training material is important. And if 
you do training material, not only do you show it to your 
employees at conferences, but you put it on the Web. You make 
sure they know about it. You use it again and again. But if, in 
fact, what you have is entertainment, you know, if you will, 
training through art, it's not reusable. It doesn't have that 
staying power.
    I want to make sure that the lavish behavior that you are 
going to hear today doesn't happen again, and I think every 
Federal worker wants to know that there is a single standard. 
They live up to it and they expect those who they don't know 
about to live up to it.
    We often read that opening statement preamble about waste 
and about whistleblowers. I want to say today that one of the 
problems we have in government is there aren't enough 
whistleblowers. This hearing is about specifically spending at 
these conferences, and waste. But on everyone's mind is what 
the IRS did out of Cincinnati, and Washington, and Laguna, and 
Dallas offices to taxpayers and organizations that simply 
wanted to comply and made applications. Those people should 
have been better trained to be able to give answers quickly. 
There should have been the employees necessary for them not to 
wait 3 years.
    So I think when we look at over $3.2 million that was taken 
out of a fund to hire people, and instead was used for these 
lavish parties, it's pretty easy to see, don't talk about 
budget tightness until you tighten the budget where you can.
    I think that there's no question you are going to see 
outrage on both sides of the aisle here today. This is outrage 
that needs to be tempered with the fact that on the second 
panel we'll have a new Acting Commissioner. This committee and 
other committees of Congress need to work with the new 
Commissioner so that he has the opportunity to straighten this 
organization out. Yesterday Mr. Werfel called me and we had a 
conversation, and I say, I don't normally share conversations, 
but the conversation was important because it was the kind of a 
first step that I think is about the transparency of, you tell 
us what you're doing, most of it will never be spoken, it 
doesn't need to be spoken public. Mr. Cummings, and myself, Mr. 
Camp, Mr. Levin need to know, and the various committees in the 
Senate also, that the work is going the right way; that a 
culture that had gone wrong has been changed. And a culture 
that would see organizations abused for years without a 
whistleblower coming forward, or that would see some of these 
conferences and not be as outraged as we were is a culture that 
needs to change.
    And for those who were outraged, and those who are outraged 
today, I want everyone to understand, for the vast majority of 
Federal workers this is not the norm. And for the rest of the 
Federal workforce, if it's the norm, it's time to blow the 
whistle and get it changed. The American people deserve value 
for their hard-earned money.
    I recognize the ranking member for his opening statement.
    Mr. Cummings. Thank you very much, Mr. Chairman. I am glad 
that we are holding this hearing this morning. It is a very 
important hearing. I think that we must pause for one moment 
and give credit where credit is due, to you Mr. Chairman and to 
this entire committee. To Mr. Mica. You know, I also serve on 
the Transportation Committee, and Mr. Mica was the chairman of 
that committee. He called hearings and you called hearings, and 
we all worked together because back when the GSA scandal came 
up we worked in a bipartisan manner. And along with our 
actions, along with those of the President, we have been able 
to, I think, straighten out GSA.
    But we did more than that. I think we sent a powerful 
message throughout the Federal Government that you cannot take 
the money of American workers and waste it. And so I pause this 
morning to applaud what we have already done. But as I always 
say, we can do better. And we will.
    Today we are going to hold this hearing to examine 
excessive spending by the IRS at a conference out in Anaheim, 
California, in 2010. I understand this conference occurred 3 
years ago. I'm aware that many reforms were put in place, so 
something like this will not happen again. And I know many 
examples we will discuss today, like the ridiculous ``Star 
Trek'' video. And I swear to God, I have looked at that video 
over and over again, and I swear, I do not see the redeeming 
value. And I was up at 3 o'clock this morning watching it, 
because I was trying to get to the redeeming value. Couldn't 
get there. I worked hard at it now.
    However, these facts do not lessen my frustration and anger 
at this utterly wasteful spending. Take the ``Star Trek'' 
video, for example. Again, there's no--absolutely no redeeming 
value that I can identify in the video, and perhaps you, Mr. 
Fink, can help us understand what it was. It is not only a 
parody of a television show, but a parody of what many people 
unfairly think about Federal workers.
    And let me pause here and thank the chairman for what you 
said about our Federal workers. You know, I'm a big defender of 
Federal workers, because I think a lot of times they are 
criticized when they should not be, and they get a raw deal. 
Their wages get frozen, but yet and still the babysitter still 
costs $1,200 a month. And so I want to make sure that they 
understand that we understand that this is not--and I was glad 
you said it, Mr. Chairman--that this is not what we think of 
Federal workers, what's happened here.
    And, you know, I go back, and I could not--every time I 
would watch these videos at 3:00 o'clock this morning, you 
know, I said to myself, you know, this is appalling. But you 
know what really got me? When I walked out the door to come to 
Washington, and to see my constituents who get the early bus, 
the ones that go down to the Sheraton Hotel in downtown 
Baltimore and clean the floors, them. And I thought about the 
man who came to me the other day because he had just gotten a 
letter from the IRS about an audit. And I believe deep in my 
heart, he didn't mind being audited, he was scared as all get 
out, but he wants to know that he has been treated fairly. And 
he wants to know--and these are the words that I'm going to 
concentrate on today. The other day I concentrated on truth and 
trust. Today, I'm going to add on to that, take and waste. Take 
and waste.
    What happens here is that when we have episodes like this, 
it has an impact on the average person. I live in a block where 
most people don't even make $50,000 a year. But yet, still we 
can produce a video that has no redeeming value, none, and 
spend taxpayers' hard-earned dollars for that. And then there 
was that line dance. Couldn't see any there either. And so I 
say we can do better.
    But guess what? Mr. Fink, the money that was spent on that, 
that's my money. That's the lady who got the early bus this 
morning. That's her money, the one who makes $35,000, her. The 
gentleman up the street from me that makes $45,000 hauling 
trash. That's their money. And so it was wasted.
    In my district I can tell you that $50,000 is a huge amount 
for families who are struggling to get by. That's more than 
many households make in this country.
    Unfortunately, this was only part of a broader problem, 
which was the growth of IRS conference spending over the last 
decade. The Inspector General's report finds that the IRS spent 
approximately $48.6 million on conferences over the past 3 
fiscal years, from 2010 to 2012. But the IRS spent far more 
than that in the 3 prior fiscal years, from 2007 to 2009, when 
the IRS spent an astonishing $72 million on conferences. And I 
know, Mr. George, that the scope of your inquiry was limited.
    But let me say this, Mr. Chairman. It would be--it would be 
legislative malpractice, legislative malpractice if we did not 
bring Mr. Shulman in here to ask him to explain to us why from 
2007 to 2008, in 2007, the conference budget was $13.395 
million, and then it more than doubled when we are going into a 
recession, when President Bush is coming to us telling us that 
the sky is about the fall, that our economic situation is about 
to go over a cliff. We then double it. It would be legislative 
malpractice if we don't figure out what happened there, because 
if we are truly going to get to the cause of this, we have to 
understand what happened to cause something to double.
    I'm almost finished.
    Chairman Issa. No problem.
    Mr. Cummings. According to the IRS spending data, the 
single largest increase in conference spending occurred between 
2007 and 2008 when spending jumped by more than $15 million in 
a single year. This is simply unacceptable and absolutely 
unnecessary. It may be difficult to find any good news today, 
but at least there are some indications that things are 
beginning to change. In 2011, after news broke about another 
wasteful conference held by the General Services Administration 
in Las Vegas, the President issued an executive order that 
significantly reduced travel and other expenditures across all 
Federal agencies. And I go back, and I give you credit, Mr. 
Chairman. I give Mr. Mica credit. A lot of these things had to 
do with what we did in this committee.
    In 2012, the Office of Management & Budget directed all 
agencies to reduce their travel expenditures by 30 percent 
below the 2010 levels. OMB also required conferences costing 
more than $100,000 to be approved at the Deputy Secretary 
level, and it prohibited conferences over $500,000 without a 
waiver personally signed by the agency head.
    As a result, the Inspector General's report explains that 
the IRS has now cut spending on conferences by 87 percent since 
2010. We did that. We did that. And we ought to take credit for 
it, Mr. Chairman. Conference spending dropped to $6.2 million 
in 2011 and to less than $5 million in 2012.
    I'm also very encouraged by the actions of the new head of 
IRS, Mr. Werfel, who is here with us today. And, Mr. Chairman, 
I agree with you, he is a breath of fresh air. He, I know he 
called you right after he got appointed and called me literally 
within hours of after getting appointed. And he said one thing 
that I shall never forget. He said, I will, number one, figure 
out what is going on and meet with you, Mr. George. He said 
number two, I will hold those responsible, who are bad actors 
in the agency. And number three, which means something to that 
lady that I talked about in my block that got on the bus at 6 
o'clock this morning, he said, I will restore trust in the IRS.
    And so he has been in his position for only 2 weeks and he 
has already taken significant action to begin restoring the 
integrity of the IRS and holding people accountable. In fact, 
as news reports today highlight, he removed two IRS employees 
from their positions and placed them on administrative leave 
for their alleged actions at this 2010 conference.
    Mr. Werfel has a critical job ahead of him. One of the most 
damaging aspects of incidents like the IRS conference in 
Anaheim, or the GSA conference in Las Vegas, is that they hurt 
the reputation of all government workers who commit their lives 
to public service.
    And as I close, Mr. Chairman, I hope you will join me in 
offering our committee's support as he works in the weeks and 
months ahead--and I know you will, because you just said you 
would. And as I said at our last meeting with IRS, we must 
dedicate ourselves to two major goals, two goals: truth and 
trust. Both goals are key, and based on his actions today, Mr. 
Werfel is working to achieve them.
    And with that, Mr. Chairman, I thank you for your 
indulgence, and I yield back.
    Chairman Issa. I thank you, Mr. Cummings.
    Members will have 7 days to submit opening statements for 
the record.
    We now welcome our first panel of witnesses. Returning, 
actually, two out of three returning guests, The Honorable J. 
Russell George, he is the Inspector General for Tax 
Administration; Mr. Gregory Kutz, who is Assistant Inspector 
General for Management Services and Exempt Organizations.
    And welcome back. We know that you had a big part in this 
investigation.
    We also welcome Mr. Faris Fink. He is Commissioner of the 
Small Business and Self-Employed Division at the Internal 
Revenue Service.
    And pursuant to the rules of the committee, would all three 
witnesses please rise, raise your right hand to take the oath?
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    Let the record--please be seated--let the record reflect 
that all witnesses answered in the affirmative.
    Now, I understand, Mr. George, is there one opening 
statement between the two of you?
    Mr. George. That is correct, Mr. Chairman.
    Chairman Issa. And thank you again, Mr. George, for being 
here. I know we are going to rely on you for a number of 
questions, but I believe Mr. Kutz is going to take the lead, 
and we appreciate that. I also appreciate the fact that you 
created a relationship with the Acting Commissioner that I 
believe is going to provide a great deal to the transparency, 
without redundancy by committees, and I think that's important, 
too. So what I'd like to do is, I guess, recognize--Mr. George, 
do you want to make any comment before we go to Mr. Kutz?
    Mr. George. Yes.
    Chairman Issa. Please. The gentleman is recognized.

                 STATEMENT OF J. RUSSELL GEORGE

    Mr. George. Chairman Issa, Ranking Member Cummings, and 
members of the committee, thank you for the opportunity to 
discuss IRS conference spending. Today's testimony highlights 
the results of our audit of IRS conference spending for fiscal 
years 2010 through 2012. My own testimony will focus primarily 
on a conference held in Anaheim, California, in 2010. This 
conference was selected for review because we have received a 
specific allegation of excessive spending.
    Overall, we found that the IRS spent, as was pointed out, 
an estimated $49 million for 225 conferences during the 3-year 
period of our review. The conference in California was held at 
the Marriott, Hilton, and Sheraton Hotels in Anaheim in August 
of 2010 at a reported cost of $4.1 million. The Small Business/
Self-Employed Division of the IRS conducted this conference for 
an estimated 2,600 executives and managers. As required at the 
time, the conference was approved by the two Deputy 
Commissioners of the IRS. We could not validate the accuracy of 
the $4.1 million conference cost because the IRS did not have 
effective controls to track and report those costs; $3.2 
million dollars of the conference costs were paid from unused 
funding originally intended for hiring enforcement employees.
    Instead of using the required IRS personnel whose job it is 
to search for the most cost-effective location for the 
conference, the IRS used two commercial planners to identify a 
site for the conference. These two planners were not under 
contract with the IRS, and thus had no incentive to negotiate a 
favorable room rate. They were paid an estimated total of 
$133,000 in commissions based on the costs of the rooms paid by 
the IRS.
    Rather than negotiate a lower room rate, the planners 
specifically requested 25 or more VIP suite upgrades with 
amenities from the hotel, along with a reception with 
complimentary drinks and deli breakfasts and other 
refreshments. The agreement with the hotels indicated that a 
total of 132 suite upgrades were provided each night by the 
three hotels. For example, the Commissioner and Deputy 
Commissioner for the Small Business Division stayed multiple 
nights in presidential suites at the hotels.
    Other examples of questionable spending for the conference 
include planning trips costing $35,000, two video productions 
which were shown at the conference. Local employees were 
authorized to stay at the hotel at an expense of $30,000; 
$44,000 in travel costs were incurred for employees to staff 
booths in an exhibition hall; gifts and trinkets were given to 
IRS employees costing $64,000; and $135,000 were expended for 
outside speakers, one of whom was paid $17,000. This speaker 
created six paintings at two sessions. Two of the paintings 
were given away at the conference, three were auctioned off for 
charity, and one was reported by the IRS as lost.
    In addition to this audit, TIGTA conducted other reviews of 
individuals related to the conference which focused on 
potential misconduct. Although the details of our actions are 
confidential pursuant to Title 26, Section 6103, Subsection 
(b)(2)(A) and (f) of the Internal Revenue Code, we did refer an 
issue to the Internal Revenue Service for consideration of 
administrative action. Overall, our review of this conference 
did not uncover any criminal violations.
    In conclusion, it is worth noting that the IRS conference 
spending, as was pointed out, dropped over the 3-year period 
from a total of $38 million in 2010 to $5 million in 2012. This 
was due in large part to increased oversight and controls 
instituted at the IRS. We did make further recommendations to 
tighten controls and the IRS has agreed to all of our 
recommendations.
    Chairman Issa, Ranking Member Cummings, members of the 
committee, thank you for the invitation to appear.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. George follows:]

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    Chairman Issa. Mr. Kutz.
    Mr. Kutz. I have nothing. I look forward to your questions, 
Mr. Chairman.
    Chairman Issa. Thank you.
    Mr. Fink.

                    STATEMENT OF FARIS FINK

    Mr. Fink. Chairman Issa, Ranking Member Cummings, members 
of the committee, my name is Faris Fink. I am the Commissioner 
with the Small Business/Self-Employed Division of the Internal 
Revenue Service. I appreciate the opportunity to appear here 
today.
    I have worked for the Internal Revenue Service for 32 
years, starting as a grade 7 revenue officer in Ohio. I became 
the Commissioner of the Small Business/Self-Employed Operating 
Division in May of 2011. I am proud to be an IRS employee and 
serve alongside thousands of dedicated public servants who 
administer our tax laws. My division has 24,000 employees, and 
it accounts for the majority of the $50 billion that the IRS 
collects in enforcement revenue each year.
    The meeting we held in 2010 was to train 2,600 managers 
from 350 offices across the country. We needed to ensure that 
they had the tools to lead their employees and adapt to major 
changes that were occurring. At the time of this meeting, 
almost 30 percent of our managers were new or had only been 
managers within a 2-year period. Another focus of the meeting 
was employee safety. There had been a substantial increase in 
the number of security threats against employees of the 
Internal Revenue Service.
    I think it is important to point out that in carrying out 
this 2010 meeting we followed IRS and government procedures 
that were in place at the time. The Treasury Inspector 
General's office review found no instances of fraud. But we are 
now in a very different environment, and there are many new 
procedures in place at the IRS governing training and travel. 
In hindsight, many of the expenses that were incurred in this 
2010 conference should have been more closely scrutinized or 
not incurred at all, and were not the best use of taxpayer 
dollars. Given the new procedures and restrictions in 
spending--on spending--we would not hold this same type of 
meeting today.
    Mr. Chairman, that ends my statement, and I would be happy 
to answer any questions.
    Chairman Issa. Thank you, Mr. Fink.
    I need to announce for both the witnesses and the folks on 
the dais that we expect votes momentarily. It will be a long 
series of votes. We could be gone for up to an hour. So I would 
ask the witnesses, we will make room available back there for 
you. We will come back immediately, and I mean fast as a bunny, 
after the last vote. So as soon as myself, or actually anyone 
gets to the chair, we will recommence so that we can get the 
day underway. I have been advised these may be the only votes 
of the day. I would also advise that you please return if at 
all possible if you don't have travel plans.
    With that, I will recognize myself for a first round. Could 
we have the--those will be last votes of the day, yes. Could we 
have the suites, please?
    Now, as I show those, I want everyone to understand that 
these are suites that were upgrades. I think even Mr. Fink may 
have enjoyed one similar to this. There's--these are not 
uncommon for large conventions. What we want to make clear is 
the allocation and how we paid for them is, I think, a big part 
of what the IG is aware of. Is there another picture or is that 
the only one?
    Okay, well, let's just say that I have been honored when I 
was chairman of an association to stay in one of those. It was 
comped by the hotel after a large bidding on taking virtually 
every room in the hotel. And I assure you, the room rates for 
our guests were below what the IRS paid in that hotel.
    Having said that, could we go to the video? And then we 
will begin with the questioning. I think Mr. Cummings and I 
both have seen it enough, but for some who have not seen it, I 
want to get it into the record. And this is a short clip. It 
won't be the whole thing. But it sets a tone.
    Lacy, I know you haven't seen this.
    [video shown.]
    Chairman Issa. I'm sure many more will watch that and some 
will laugh. My questions are, you know, what a surprise, and I 
will start with Mr. Fink. What were you thinking? Were you 
thinking this will never be seen, or were you thinking, how 
will this look when it is seen?
    Mr. Fink. Mr. Chairman----
    Chairman Issa. Please speak close to the mic. We couldn't 
hear. You are not on.
    Mr. Fink. Mr. Chairman, those videos were, at the time they 
were made, were an attempt to, in a well-intentioned way, use 
humor, the ``Star Trek'' video to open the conference. The 
dance video was used to close the conference. They would not 
occur today based upon all of the guidelines that exist, and 
frankly, they were not appropriate at that time either, Mr. 
Chairman. And the fact of the matter is, is it's embarrassing, 
and I apologize. Those videos, I notice in the Inspector 
General's report there is not a clear delineation of the cost 
of both the videos, but they are embarrassing, and I regret the 
fact that they were made.
    Chairman Issa. Let me do a follow-up question, because one 
of the most concerning part of the IG's report is it appears as 
though at the IRS, both in this and other cases, we can't count 
on proper accounting of what money is spent on what. There were 
at least many cases in which people traveled for conferences 
during this entire period, and as far as I know, today, in 
which if they simply bill it as travel and not as conference 
travel, then it won't be seen as conference travel.
    How are we to know--and, obviously, without receipts and 
even a missing painting--how are we to know that these kinds of 
changes have occurred to where there is an auditable train of 
where money was spent?
    Mr. Fink. Mr. Chairman, to respond to that question, of 
course, it has already been spoken that there has been many 
changes at the IRS. One of the changes at the Internal Revenue 
Service is around the tracking of expenses around conferences, 
meetings, and training. For the particular conference in 
Anaheim, we were only able to track 90 percent of the cost. 
There's a variety of reasons that the other 10 percent were not 
accurately tracked. It's because people did not use the 
tracking code that was in place. It's also that folks were on 
other travel, visiting offices, doing things of that nature, 
did not use the conference tracking code, and may have charged 
their expenses to another code for another business purpose.
    Chairman Issa. Well, you know, the reason I ask that is 
twofold. First of all, if I did it as a business, and thus 
couldn't account for receipts, wouldn't your inspectors say 
disallowed?
    Mr. Fink. Mr. Chairman, yes. Our auditors would look at 
records. They do have some discretion, as far as the 
reasonableness of the records that are submitted. But we take 
very seriously the role that we occupy in ensuring that people 
have the appropriate business records. This year, an example 
that you have provided, we only did have 90 percent of the 
information as far as the expenditures.
    Chairman Issa. Now, if I were to have local folks get hotel 
rooms and meals and so on and not issue a W-2, I made a fairly 
serious allegation as a layman, I'm not saying that it's the 
law, exactly, but I could characterize it as tax evasion. If a 
company didn't do it and the employees, particularly let's just 
say that they are accountants and very knowledgeable of the 
law, didn't do it, there were no W-2s, no 1099s, essentially no 
accountability for this revenue that is supposed to be taxed, 
what would you do in that case?
    Mr. Fink. In that case, Mr. Chairman, as pointed out in the 
Inspector General's report, you have to look at each situation 
case-by-case. And in that particular situation, you would look 
at the individual facts that existed in that situation. In the 
matter that you are referring to here is we now have issued W-
2s to all of what we characterize as being local travellers 
after it was brought to our attention by the Inspector General 
and in their report that we had not appropriately accounted for 
all of the local travellers, sir.
    Chairman Issa. I appreciate that.
    Mr. Kutz, I guess I'll characterize it to you. It was not 
in the tax year in which it was earned, so the employees did 
not voluntarily file, as far as we know. I know that's not 
available to the public, but the employees didn't take it on 
themselves, knowledgeable people about taxes, to say, oh, I've 
got to pay taxes on this. The employer did not issue the 
required tax statement to itself, if you will. I characterized 
it as tax evasion because it can't just be swept under the rug. 
These were knowledgeable parties on both sides, weren't they?
    Mr. Kutz. Yes, the IRS did not issue W-2s. And in fact, we 
found seven people that they didn't identify that were local 
that actually traveled. So those would have been some of the 
ones that didn't get W-2s.
    Chairman Issa. Now, I'm going to just close with one quick 
question, because not only do we have votes, but I want to be 
sensitive to time. I've worked event planners, and whether it 
was an event planner inside the IRS, which it should have been, 
or the ones that were hired, there does seem to be a little 
sleight of hand. They received a commission based on the more 
that was spent, the more they received. And apparently, they, 
as I understand from your report, they got free rooms for FAM 
trips, for familiarization trips, while IRS employees paid for 
the rooms. Again, as far as I can tell, that increased their 
commissions while lowering their unreimbursable cost. Is that 
roughly right?
    Mr. Kutz. That would be right. The IRS also received, I 
think, 10 comp rooms per night, but most of the upgrade rooms 
IRS had they paid the $135 per diem rate for.
    Chairman Issa. And have you done any work to look at 
comparables from other associations? I headed the Consumer 
Electronics Association, puts on the CES, but I also was on 
smaller associations. Have you done any work to figure out what 
the comp would be? I couldn't find that there. And I want to 
not cast any blame on the various hotels, because if somebody 
comes and says, this is what I want, it's not your job to make 
the dumb smart if you're on the selling side.
    Mr. Kutz. No, what we looked at is that they could have 
actually potentially negotiated the room rate down from $135, 
as you mentioned, rather than solicit the 25-plus VIP suite 
upgrades per hotel. So they actually went out and said, we'll 
pay you full per diem, which is the most they could pay, and 
then they said we wanted to have various amenities, including 
the suite upgrades.
    Chairman Issa. And with the ranking member's indulgence, 
there was a mention of rooms, various rooms that--various food 
that was provided. IRS employees received full per diem, of 
course. Did you have a substantial amount of per diem returned 
as a result of their getting meals, which would be the law? In 
other words, you're not entitled to keep the per diem if you 
didn't have to use it because others provided you meals.
    Mr. Kutz. Actually, Federal Travel Regulations do not 
require employees to deduct that from their per diem, but we 
did do a statistical sample, and all the employees in our 
sample got full per diem of $71 per day, even though they 
received a continental breakfast. But there was nothing wrong 
with that according to Federal Travel Regulations.
    Chairman Issa. It just smells real bad.
    Mr. Kutz. Well, we essentially paid for breakfast twice 
probably, Mr. Chairman.
    Chairman Issa. But negotiating paying for breakfast and 
then paying full per diem created a situation in which they got 
overpaid, basically.
    Mr. Kutz. Not technically, according to Federal Travel 
Regulations. But again, from a taxpayer perspective, they got 
breakfast and the government paid them for breakfast at the 
same time.
    Chairman Issa. Thank you.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. George, according to your report, the IRS conference in 
Anaheim in 2010 cost more than $4 million. Is that correct?
    Mr. George. Yes, it is sir.
    Mr. Cummings. Although your report does not identify any 
legal violations, it raises concerns with the way taxpayer 
money was spent. For example, your report raises concerns with 
how the IRS chose Anaheim as the location for this conference. 
And it questions the use of nongovernment event planners to 
identify this location.
    Picking up where the chairman left off, specifically your 
report states, ``The use of the planners in this process 
increased the possibility that the site selection did not 
result in the lowest cost to the government.'' Is that right?
    Mr. George. That is correct, sir.
    Mr. Cummings. Now, let me go to you, Mr. Fink. I am--I must 
tell you that I'm pleased that you apologized. That's a major 
step, because I think it's important that the American people 
know that, that somebody feels bad about this, and remorseful. 
But Mr. Fink, let me turn to this. The committee obtained 
documents from the hotels that hosted the conference in 
Anaheim, and in one of those documents is an email between two 
Marriott hotel employees. I want to read it to you and get your 
response. Now, I want you to listen to this.
    It says, ``Orlando and Las Vegas are out!'' Exclamation 
marks. ``This is fantastic news as Orlando was $1 million 
less--less in travel spend. The funding is there, and they have 
been instructed to move forward.''
    Mr. Fink, this email sounds like the hotel employees were 
mocking you and maybe even making--taking advantage of the IRS. 
It says you could have saved a million dollars by holding this 
conference in Orlando.
    I have no idea if these hotel employees knew what they were 
talking about or just theorizing. So let me ask you, since you 
were the man in charge. How did you choose Anaheim for this 
conference? Did you look at other locations, like Orlando? And 
were any of those other locations less expensive?
    Mr. Fink. Representative Cummings, first off, I'm not 
familiar with the email, but I will tell you what I have been 
told was done at that time, was that we used a travel 
estimator. There is a travel estimator that is used by the 
Internal Revenue Service when planning training meetings. That 
travel estimator we looked at over 20 different locations. And 
in using the travel estimator, we came up with three locations 
that could handle this size of conference, that would be able 
to be logistically not incurring additional costs as far as 
traveling people long distances when they arrived.
    So we looked at those types of things that were--in 
addition to using the travel estimator to look at, I believe it 
was over 20 different locations. So that we had to incur--we 
had to look at and make sure that we were not going to incur 
additional local expenses, but along with that, it was just a 
matter of logistics when which came up with the final three 
cities, sir.
    Mr. Cummings. And so you've said several times during this 
hearing that if this were to take place today, it would be 
different. How would it be different?
    Mr. Fink. It would be different today because, 
Representative Cummings, the conference would not occur. Under 
the guidelines and the restrictions that exist today, a 
conference of this nature would not occur.
    Mr. Cummings. I note that back in 2010 there were 152 
conferences, and then in 2012, I think there was like 24, and 
an 87 percent decrease, and thanks to this committee, and 
Transportation of course, and President Obama. Do you think 
that was a good thing?
    Mr. Fink. Absolutely.
    Mr. Cummings. And why do you say that?
    Mr. Fink. The reason that I feel it was a good thing to see 
the decrease, it showed that we had increased our scrutiny, 
that we were paying more attention to how we are using the 
taxpayers' money, and that we were taking a harder look as to 
what was the necessary training that individuals were 
receiving.
    Mr. Cummings. Now, let me ask you this: Did the event 
planner give you a cost-benefit comparison of the various 
locations before the IRS chose which to use?
    Mr. Fink. Representative Cummings, I had no interaction 
with the event planners. I do not know if they gave us a cost 
estimate. I know that we chose the cities as far as looking at 
which cities would be appropriate, and we also made the final 
decision around where to hold the conference.
    Mr. Cummings. Mr. George, I'd like to ask you about the 
room upgrades. As I understand your report, 132 hotel rooms 
were upgraded to suites, but the government still paid its 
normal per diem rate of $135 for these rooms. That's right? I 
think you testified to that earlier. So your report is not 
saying that the IRS paid $1,500 a night for these rooms, which 
I guess they might normally go for, Mr. Kutz?
    Mr. Kutz. That's right.
    Mr. Cummings. Your report is saying, if I understand it 
correctly, that instead of accepting these room upgrades, the 
IRS should have negotiated lower prices for all the rooms or 
for the whole conference, is that right?
    Mr. George. That is correct, sir.
    Mr. Cummings. And, Mr. Fink, my final question, why didn't 
you do that?
    Mr. Fink. First off, I was not aware that we had the 
ability to do that. And as of today, I'm not sure that we could 
have done that, Representative Cummings. I do believe, though, 
that we did pay the $135 per diem rate, and in paying that $135 
per diem rate there were additional items that were included by 
the hotels to use during the conference.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Mica. [Presiding.] Thank the gentleman. And I'll yield 
to myself for questions. And we do have the vote going on, 
folks, so we probably have about 4 or 5 minutes left here, less 
than that.
    But let me start out with Mr. George. Your report indicated 
$135,000 was spent just on speakers for this event. Is there 
any similar experience in spending that amount of money for a 
conference that you're aware of?
    Mr. George. In the course of conducting this audit we did 
not compare previous conferences to this one in terms of that 
expense.
    Mr. Mica. Well, Mr. Cummings talked a little bit about our 
efforts to rein in GSA, and we conducted some reviews of GSA's 
operations and found out that they spent--it wasn't even a 
million dollars on a conference, but outrageous spending was 
determined. We couldn't get much attention on that.
    Mr. Fink, are you familiar with this guy? This is the GSA 
official in the hot tub. Have you ever seen that picture?
    Mr. Fink. I have seen that picture, yes, sir.
    Mr. Mica. Well, I just wondered if that was any motivation 
for the dramatic change in your spending. Spent $37 million in 
that year, and then Congress held these hearings, which we 
participated in, and the famous guy in the hot tub probably did 
more to bring egregious spending under control. Did this affect 
you at all?
    Mr. Fink. The new guidelines were put into place, 
Congressman, the new restrictions on travel and on spending 
funds for training and things of that nature. That was handled 
primarily by the--what would be the operations support side.
    Mr. Mica. Well, did you approve expenditures for the--or 
involved in the planning of the $4 million conference in 
Anaheim?
    Mr. Fink. No, sir, I did not.
    Mr. Mica. You attended?
    Mr. Fink. Yes, sir.
    Mr. Mica. And you did participate in the conference?
    Mr. Fink. Yes, sir.
    Mr. Mica. And then afterwards, I understand you were 
promoted. Is that correct?
    Mr. Fink. I became the Commissioner after the conference, 
yes, sir.
    Mr. Mica. I understand the planners and some of the others 
got bonuses. Is that correct?
    Mr. Fink. There were six bonuses that were paid, yes, sir, 
to individuals who----
    Mr. Mica. Did you get a bonus that year, 2010, 2011?
    Mr. Fink. For performance, yes, sir.
    Mr. Mica. Did you--are you aware of the money that they 
spent, of course on this particular enterprise, that paid 
$17,000, where this individual, who is I guess some sort of art 
expert, and produced six drawings, paintings?
    Mr. Fink. Yes, sir, I saw that in the Inspector General's 
report, and also I attended that session.
    Mr. Mica. You did. You did. And do you think that that was 
a proper expenditure of taxpayer dollars?
    Mr. Fink. For what we were trying to convey at that time, 
and based upon his expertise, the way he communicates and the 
message that he delivers through his presentation----
    Mr. Mica. I was surprised to hear you said that one of the 
paintings is--a couple were auctioned, I guess, and they got 
less than $500 for charity, but one is missing. Maybe we should 
offer a reward for the missing. You don't know where the 
missing painting is, do you, Mr. Fink?
    Mr. Fink. Absolutely not, sir.
    Mr. Mica. Okay. And then I understand, you know, we had 
these--these are the famous--these turned over to me by some 
whistleblowers--these are the famous $20,000 drumsticks that 
were used in the Las Vegas GSA conference. And I thought that 
wasteful spending had been taken to a new level.
    Now I see, Mr. George, in your report, you have squirting 
fish as part of $64,000. Has anyone--did you see--anyone seen a 
squirting fish? Did you see one at the conference?
    Mr. Fink. No, sir, I did not.
    Mr. Mica. Maybe I could offer a reward. I'd love to see one 
of the squirting fish. I'm sure that some of the taxpayers, the 
people that went to work on that early bus this morning out of 
Baltimore, or my district in central Florida, love to know that 
the Federal Government spent $64,000 on squirting fish for 
Federal employees at a conference. Is that an appropriate 
expenditure of funds, Mr. Fink?
    Mr. Fink. And I would answer, Congressman, that there were 
expenses that were incurred at that conference, for that 
conference, that were absolutely inappropriate. And that would 
be one of those expenditures.
    Mr. Mica. Well, I would say that IRS has taken government 
arrogance and wasteful spending to an absolutely incredible 
level. And it has to be dismaying to people who are sending 
their hard-earned dollars to IRS every week in their paycheck, 
every month, quarterly, or April 15th, to find out their money 
has been spent--some of these expenditures were no bid, too, 
sole source. I think all of the $135,000 on the conference 
speakers.
    Is that correct, Mr. George?
    Mr. George. That is my understanding sir, yes.
    Mr. Mica. Well, we're going to hear from Mr. Werfel in a 
short while. Our goal is to, one, hold people accountable, and 
I understand some people have been suspended. We understand 
some people have gotten bonuses like yourself, Mr. Fink, who 
were involved or there. And we understand that, again, that the 
system has been corrected to a degree, partly because of 
Congress bringing these items to the attention of the Congress 
and the American people.
    With that, we will have to recess, and we will return 
within 10 minutes of the last vote, so stay posted. The 
committee is in recess. Thank you.
    [Recess.]
    Mr. Chaffetz. [Presiding.] Committee will come to order. We 
will now recognize the gentleman from Ohio, Mr. Turner, for 5 
minutes.
    Mr. Turner. Mr. George, I've thanked you before for your 
tenacity in making certain that we have the information to be 
able to do the oversight. One thing that struck me in looking 
at this review of this conference is what I call a budgetary 
slush fund trick.
    When I served as mayor for the city of Dayton, I inherited 
a city that had not balanced its budget in 5 years and we had 
to immediately balance it. And one way that we did so was by 
finding those slush fund budgeting tricks. And this trick was 
actually something that we saw in the city. And that is that 
people were taking vacant positions and they were cannibalizing 
the money, and using it for items that did not have the same 
level of scrutiny. The money would not be--if they came forward 
sort of with a budget proposal that had what they were actually 
going to spend the money on, it would never pass the test of 
scrutiny but by keeping vacant positions open, they could 
cannibalize the money and use it for purposes that had a lower 
level of scrutiny and accomplish things like this outrageous 
conference.
    Could you speak to that for a moment? Because in the city, 
we prohibited this practice. What we did is we said if you have 
an open position that fund, those funds could only be used for 
personnel, and if they're not used for personnel, that they are 
recaptured and have to go back into essentially for us the 
Treasury on the Federal side. I'm concerned in seeing this that 
this must happen across the board in the Federal level, and 
there's probably hundreds of millions of dollars that could be 
recaptured if we recaptured vacant position funding.
    Can you speak to that, Mr. Gorge?
    Mr. George. Yes, Mr. Turner. And then I may defer to my 
colleague, Mr. Kutz, to elaborate.
    We did look at this issue. The money that was expended by 
the IRS in terms of the unused money that was otherwise 
provided for hiring of enforcement officials, it was going to 
lapse. If the IRS had not completed the hiring process by the 
end of the fiscal year, that money would have been returned to 
the general Treasury. And so they did have an incentive, and in 
some ways, some people consider it a perverse incentive, to 
spend money before it goes back to the Treasury.
    Mr. Turner. See, what we did in the city is we said you 
don't have that option. If you have not hired people, if these 
monies are not being used for personnel, the money goes back, 
period, so you don't get this slush fund that they used to do 
this conference.
    Mr. George. There are instances when money is limited to 
the sole purpose for which it was first appropriated. So, but 
in this instance that was not the case. And I think I'm going 
to now request that my colleague----
    Mr. Kutz. Real briefly this is part of the small business 
output; they're part of the enforcement appropriations account 
within the IRS. This money was essentially transferred within 
that appropriation which we've determined was not a violation 
of appropriations law.
    Mr. Turner. Well, I want to take this issue up because 
certainly, I've seen on the local level how it makes a 
difference, and we certainly need to do it on the Federal level 
because I'm certain across all Federal agencies there have to 
be these slush fund pots that don't meet the scrutiny level 
that if the funds had been requested for the purpose that it 
ultimately was spent would have been denied.
    Mr. Fink, we have what we understand is the swag bag from 
the event. This says leading into the future, and then we have 
a portfolio that says ``teamwork in action.'' These items like 
3,000 of them were given to all the participants over $60,000 
of these types of trinkets. And listening to the ranking member 
who was so eloquent about the issue of how these are taxpayer 
dollars that are taken out of the pockets of people who work 
very hard for their money. We note in the footnotes of what was 
in these swag bags is that it also included, I'm kind of 
confused by saying this, a plastic squirting fish. And I've 
been asked several times by the media who have taken a look at 
this, what purpose could the IRS have in giving the 
participants a plastic squirting fish?
    I think it goes to what the ranking member was saying part 
of the party atmosphere that this clearly was not for business 
and government purposes, that it was a party.
    Could you please tell me what were these items for? And why 
would people get a plastic squirting fish?
    Mr. Fink. Congressman, as I mentioned, I honestly have no 
idea what the plastic squirting fish was. That's just being 
honest about it. The items that you refer to, there in the bag, 
as I mentioned earlier, and in the Inspector General's report 
also, when you look at the expenditures that were done for 
these items, we certainly, as an organization, should not have 
spent those funds.
    Mr. Turner. Thank you. Mr. Fink, I hope you understand the 
irony of taxpayers who hear you saying that you can only 
account for 90 percent of the expenditures but they could never 
stand in front of you and be able to do that.
    I yield back.
    Mr. Chaffetz. Thank you. I now recognize the gentlewoman 
from New York, Mrs. Maloney, 5 minutes.
    Mrs. Maloney. Thank you. The recent history of the IRS is 
appalling. Democrats and Republicans are united in our outrage 
at the wasteful spending, the inappropriate behavior and 
mismanagement of one of our most important agencies. But the 
changes that have been put in place are dramatic, and they are 
having an effect. I believe you would all agree with that. Yes?
    Mr. Fink. Yes.
    Mr. Kutz. Yes.
    Mr. George. Yes.
    Mrs. Maloney. For example, the top three most expensive 
conferences outlined in the IG's report all took place in 2010, 
correct? Mr. George?
    Mr. George. That is correct.
    Mrs. Maloney. Since then, the number of large meetings has 
decreased by 84 percent. The cost of the meetings has decreased 
by 87 percent, and the number of large meetings has decreased 
by 84 percent. That is definitely moving in the right 
direction. And the spending on the conferences with 50 or more 
participants was reduced from 37 million to 4.9 million in 
2012, all good movement.
    And I would say that the President's initiative, the 
government-wide campaign to cut waste, to target ineffective 
and wasteful spending, has been very useful and appropriate and 
is getting results.
    But I was concerned by the video that the chairman showed 
us, and not only was it a monumental waste of well over $50,000 
of taxpayers' money, but I would say it is an insult to the 
memory of Star Trek. I could do a better Captain Kirk. But I 
think I recognized one of the panelists in the video. Mr. Fink, 
were you Mr. Spock in that video?
    Mr. Fink. Yes, that is correct.
    Mrs. Maloney. So how many government employees participated 
in that video in acting, editing, producing? How many employees 
were involved?
    Mr. Fink. I apologize, but I do not know the exact number 
of when you go to the editing and the things of that nature, I 
am not sure what that total number was, that participated.
    Mrs. Maloney. Well, do you think this was a responsible use 
of taxpayer money.
    Mr. Fink. As I said, no, I do not.
    Mrs. Maloney. And did you approve this?
    Mr. Fink. No.
    Mrs. Maloney. You did not approve it.
    Mr. Fink. No, sir--no, ma'am.
    Mrs. Maloney. You did not approve it. Well, I would like to 
ask Mr. George, you did come out I believe with nine 
recommendations, is that correct?
    Mr. George. Yes, that is correct.
    Mrs. Maloney. And of those nine recommendations, how many 
has the Treasury Department accepted and are supporting?
    Mr. George. All of them.
    Mrs. Maloney. They are all supporting them the Treasury 
Department all nine.
    Mr. George. That's correct.
    Mrs. Maloney. And the President of the United States I 
believe also came out in support of your recommendations.
    Mr. George. That was actually related to the review we did 
on 501(c)(4) reviews, but I believe the President's 
spokesperson may have addressed this instant audit, but I'm not 
completely certain about that.
    Mrs. Maloney. So Treasury is now implementing all of the 
nine or how many are they implementing?
    Mr. George. They are in the process of implementing all of 
the nine. I don't know I may again defer to my colleague, Mr. 
Kutz.
    Mr. Kutz. There were nine in the other report on exempt 
organizations, and there's nine in this report.
    Mrs. Maloney. And they are implementing all of them, is 
that correct?
    Mr. Kutz. That's correct. That's our understanding.
    Mrs. Maloney. And could you go over what are the most 
important nine in the 504(3)(c) category Mr. Kutz? What are the 
recommendations could you briefly go through the 
recommendations?
    Mr. Kutz. Well, let me touch on the most important 
probably, the one about the backlog. As you all know, there's a 
backlog of organizations that have been there, in some cases, 3 
years, waiting for a decision yes or no. One of our most 
important recommendations is to have those addressed quickly so 
those people can get an answer as to yes or no.
    Certainly one of the issues was whether or not the IRS had 
evidence of looking at political campaign intervention in 298 
cases we identified. In some instances, there was no evidence 
in the file that there was political campaign intervention. We 
recommended that they actually document, if you're going to 
have someone wait for several years to get a response, you 
better have a good answer as to why you picked that case, 
especially if there is no evidence in the file of any political 
campaign intervention. So those are examples of some of the 
most important ones from that report.
    Mrs. Maloney. And when you say ``intervention,'' what would 
you define as intervention? Paying for campaign ads? Or what is 
intervention? What do you define in IRS as the intervention?
    Mr. Kutz. Well, the regulation definition is supporting or 
opposing a particular candidate running for public office.
    Mrs. Maloney. Well, I would think that would be pretty easy 
to do, see whether or not they bought time on campaigns, bought 
TV ads. Have you looked at that?
    Has the Department looked at that area?
    Mr. Kutz. I don't know if they looked at that. With respect 
to the 298 cases we looked at, 69 percent had evidence of 
significant political campaign intervention, and 31 percent did 
not. And the recommendation was related to if you're going to 
pick a case that there's no evidence of campaign intervention, 
you should make sure and document why, in fact, you did that.
    Chairman Issa. [Presiding.] The gentlelady's time has 
expired. The gentleman from Tennessee, Mr. Duncan, is 
recognized.
    Mr. Duncan. Thank you very much, Mr. Chairman, and first of 
all, I want to say that I very much appreciate the great 
opening statements that you and Ranking Member Cummings have 
made, especially my friend, Mr. Cummings. I just, I agree with 
everything that both of you said in regard to this.
    I thought back though of several years ago, Edward Rendell, 
when he was mayor of Philadelphia, and having some trouble with 
some city employee unions, of course, he later became Governor 
of Pennsylvania, he said before the House Ways and Means 
Committee that government does not work because it was not 
designed to, he said there is no incentive for people to save 
money, so much of it is squandered. There's no incentive for 
people to work hard, so many do not. And the problem throughout 
government is that we don't have enough incentives or pressure 
for people to save money, and we end up with these ridiculous 
expenditures because it's not coming out of people's own 
pockets.
    We need to make sure that in the future, that we put more 
incentives and more pressures and more punishments for people 
to not to do these types of things. I saw an article yesterday 
about how it's almost impossible to remove a Federal employee 
who messes up in some big way.
    Mr. George, I also want to commend you. I think you've done 
great work not only on this, but on some others things for this 
committee and for the Ways and Means Committee, and I really 
appreciate what you've done. But I feel the same way that all 
these others who have spoken before me, not just about the Star 
Trek and the dance line and the line dancing and all that, but 
to pay $133,000 to a firm just to locate a hotel or figure out 
the hotel when the IRS employees themselves could have done 
these things.
    So we need to make sure that these things don't happen in 
the future. And what I have seen happen so often, when we go 
through these times where it gets a lot of publicity and a lot 
of attention but 2 or 3 years later, we are back into these 
things again. So we need to stay on top of that, and that's 
really all I have to say and I yield back.
    Mr. George. Mr. Duncan, if I may, I just want to be clear, 
the $133,000 paid to the event planners were paid by the hotel, 
not by the IRS. But they had, again, no incentive to reduce the 
cost to the IRS because the more the IRS paid, the more they 
got in commissions.
    Mr. Duncan. Thank you for that clarification.
    Chairman Issa. I thank the gentleman. We now go to the 
gentlelady from the District of Columbia, Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman, and I appreciate this 
hearing. This, of course, is a longstanding problem, Mr. Mica, 
the chairman himself, have witnessed our work with the GSA. 
Actually, the worst year of spending apparently for the IRS, 
$15 million, was the year before the President even came into 
office.
    By now, the, what the take-away from these episodes is one 
that you learn from your mother and father when you are 
spending someone else's money, spend it even more carefully 
than your own. Of course, that would go especially for 
taxpayers' money. Now this, no matter how you look at it, this 
$4 million, even if it wasn't this much as the $15 million is 
an excessive amount of money. I'd like to get to the root of 
why in the world this conference or this training was going on. 
And first, I would like to ask about Anaheim. Why, Mr. Fink, 
was Anaheim chosen, and where did these employees originate? 
Where did they come from?
    Mr. Fink. The Anaheim conference, the reason Anaheim was 
chosen is based upon the size of the conference, the number of 
individuals attending the----
    Ms. Norton. Where did they come from? Where were they 
based?
    Mr. Fink. The folks that attended the conference came from, 
we have leaders, we have managers in 350 different locations, 
so they came from across the entire United States to Anaheim.
    Ms. Norton. How many came from Washington?
    Mr. Fink. I don't have that exact number.
    Ms. Norton. Did most of them come from Washington?
    Mr. Fink. No. No. Most of them did not come from 
Washington.
    Ms. Norton. So was it less expensive to have it in some 
centrally located, assuming Anaheim could ever be found to be 
centrally located? Was it less expensive to have it, Mr. 
George, in a place like this, which is a vacation spot? And I'm 
not--Mr. Clay is suggesting St. Louis, I'm not going to wish 
that on the IRS--but would you respond, please?
    Mr. George. From the information actually that was elicited 
at today's hearing, we understand that Florida might have been 
less expensive than conducting it in Anaheim.
    Ms. Norton. Well you see suspicion is aroused whenever some 
sunny spot is picked and, but as you say, they came from all 
around the country.
    Now, this was to be a training conference. IRS employees 
deal with highly technical, rule bound, law bound work. So I 
think anyone who could understand that--by the way, I want to 
take exception to my good friend the ranking member who sees no 
redeeming value in line dancing as a sponsor of National Dance 
Day on the Mall----
    Chairman Issa. If the gentlelady would yield I don't think 
he went as far as to disparage line dancing. I think it was 
limited only to the Federal expenditure at this particular 
conference.
    Ms. Norton. You, of course, preempted the one admonition I 
would have, as a line dancer as the one who tries to do every 
kind of dance----
    Chairman Issa. Well, the ranking member is down there, and 
I'm afraid I had no chance but to speak on his behalf.
    Ms. Norton. I just wanted to stand up for the line dancers 
and say, hey, the IRS line dancers weren't bad at all. Too bad 
they weren't doing it on their own dime.
    Let me ask you about this training conference. Here is a 
training conference, and Mr. George, as I read through the 
report, I couldn't find what was the purpose of the conference? 
I couldn't put my finger on what is the purpose of this 
conference in Anaheim?
    Mr. George. While I'm going to defer eventually to Mr. Fink 
to complete this response, there is no question as you noted 
earlier, Ms. Norton, there is a redeeming value for training. 
These are very complicated matters. The IRS is about to engage 
in one of the most comprehensive and unprecedented aspects of 
its activities in terms of implementing the Affordable Care 
Act. So whether or not that was an aspect of this conference, 
again, I will defer to Mr. Fink.
    Ms. Norton. So was the majority or the great majority or 
how much of the conference was devoted for training and how 
much was devoted to fun?
    Mr. George. Well, if I may, one key aspect in all of 
disclosure, TIGTA, my organization had a representative----
    Ms. Norton. Now, this is very important. I was going to ask 
you this question. Not only were there IRS employees there, 
there were employees of the Inspector General there.
    Mr. George. We had one employee who was there. Keep in mind 
this was in the wake of the tragedy that occurred in Austin, 
Texas, when someone flew an airplane into a building housing 
IRS employees, and our, one of our senior investigators spoke 
at a session on security and threats to IRS as a result of 
people who are disgruntled as----
    Ms. Norton. Did he report back----
    Chairman Issa. The gentlelady's time is expired. Does 
anyone else need to answer that question? Are you finished?
    Mr. George. Well, I could go on.
    Chairman Issa. Well, complete your thought, please, I don't 
want to interrupt you.
    Mr. George. My employees traveled 1 day, arrived, spoke at 
two sessions and then departed. The vouchers that he filed were 
less than approximately $1,000, and he apparently, when he 
arrived, did get an upgrade to a suite, not a presidential 
suite or anything of the sort, but there were no regular rooms 
available which is what he requested when he first sought 
reservations at the hotel. But the bottom line is he was there 
to instruct IRS employees on the threats that are being 
presented as a result of----
    Ms. Norton. So most of the training conference was devoted 
to training then?
    Mr. George. I don't have the entire agenda but maybe Mr. 
Kutz----
    Chairman Issa. The gentlelady's time is expired, you can 
answer for the record. The gentleman from Ohio, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Kutz, did Doug Shulman attend the Anaheim conference?
    Mr. Kutz. Yes, he was a speaker, he was there for one day.
    Mr. Jordan. Did Steve Miller attend the Anaheim conference?
    Mr. Kutz. There was no travel vouchers. We have no evidence 
that he attended the conference.
    Mr. Jordan. Did Lois Lerner attend the Anaheim conference?
    Mr. Kutz. No.
    Mr. Jordan. Did Sarah Hall Ingram attend the Anaheim 
conference?
    Mr. Kutz. I don't have that information, but I don't 
believe so.
    Mr. Jordan. Did any other individuals from the tax exempt 
division of the Internal Revenue Service attend the Anaheim 
conference?
    Mr. Kutz. No. There's no evidence anyone from the tax 
exempt government was at the conference or in the exhibit hall.
    Mr. Jordan. You guys your report indicates that there was 
$50 million spent in fiscal years 2010, 2011, 2012, 225 
conferences took place in that time period that individuals 
from the IRS attended. Did you look at any other conferences in 
detail other than the Anaheim conference?
    Mr. Kutz. No.
    Mr. Jordan. So there's 224 we don't know much about.
    Mr. Kutz. We did a drill down on the largest and when we 
had allegations of excessive spending.
    Mr. Jordan. Well, 14 of those 224 remaining conferences 
that you did not audit, 14 of those were solely for the tax 
exempt division, the division that targeted Americans for 3 
years for their political beliefs, 14 of those you did not look 
at those at all?
    Mr. Kutz. No those are about $2 million in total.
    Mr. Jordan. According to The Washington Times, the per 
person spending, today's Washington Times indicates that it was 
one of the most expensive per individual. The Tax Exempt and 
Governmental Entities unit to go over procedures for auditing 
retirement plans was one of the most expensive training 
sessions. Is that accurate, what is reported in today's paper?
    Mr. Kutz. I don't know.
    Mr. Jordan. Do you know of the 14 conferences that the Tax 
Exempt division was a part of, do you know if Doug Shulman 
attended any of those?
    Mr. Kutz. I have no information on that Congressman.
    Mr. Jordan. Do you know if Steve Miller attended any of 
those?
    Mr. Kutz. No information on that.
    Mr. Jordan. Did Lois Lerner attend any of those? 
    Mr. Kutz. No information.
    Mr. Jordan. What about Sarah Hall Ingram? Do you know if 
she attended any of those?
    Is it fair to say that the people who run that division 
would most likely be at one of those 14 conferences held by the 
Tax Exempt division in the time period?
    Mr. Kutz. Given what I read through on the high level 
description of the conferences, it's likely some or one of 
those may have been there.
    Mr. Jordan. Potentially all of them could have been at 
those conferences?
    Mr. Kutz. They could have potentially been there.
    Mr. Jordan. I did notice that in this Anaheim conference, 
there was a session entitled politically savvy training 
session, ``how to not shoot yourself in the foot,'' do you 
happen to know if that training session was offered at any of 
the other 224 conferences in this time period?
    Mr. Kutz. I only know it was offered at the one you 
mentioned, the Anaheim conference.
    Mr. Jordan. Do you have any information on any of these 
other 224 conferences that were done in between 2010 and 2012 
that you can offer the committee today?
    Mr. Kutz. Nothing that is in depth like the Anaheim 
conference, no.
    Mr. Jordan. Do you think that would be an appropriate thing 
to check out the fact that the very people involved with the 
systematic targeting of individuals exercising their First 
Amendment rights, political beliefs that they have that it 
might be appropriate to know if those individuals who headed 
that division were involved in some of these conferences?
    Mr. Kutz. We would certain be willing and Mr. George can 
add to discuss with this committee, if you have a request for 
us to look at some of those conference, that's something we 
would consider.
    Mr. Jordan. Mr. Chairman, I would just say this, this is an 
agency that is just out of control. You think about one 
conference out of 225 and we know what happened at this 
conference with videos and with bags and gifts and not keeping 
receipts, but I think what's more telling is at the same time 
that this agency was targeting individuals for their political 
beliefs, we have the head of the agency attending the very 
conference where all this takes place. We are, it's a fair, I 
think, conclusion to reach that the people involved in the 
division that was targeting Americans for their political 
beliefs was involved in many of the other 224 conferences, and 
I think what is most chilling is this is the agency that began 
targeting people for their political beliefs the very month 
ObamaCare became law, March 2010, this is the very agency that 
will be charged with enforcing ObamaCare.
    And they are engaged in this kind of activity when they're 
also going to be in charge of enforcing the health care law. 
And to me, that's what's most troubling, and I think why we 
need to get to the bottom of this and with that I would yield 
back, Mr. Chairman.
    Mr. Cummings. Would the gentleman yield?
    Mr. Jordan. I'd be happy to yield.
    Mr. Cummings. The gentleman just made a request, well, 
you're requesting, I just want to make sure we're clear, you're 
requesting additional information, additional study?
    Mr. Jordan. I think that would be helpful. I'm not, I 
would, I guess, not phrase that in the term in the sense of an 
official request, that would be something I would want to check 
with the ranking member, and more importantly, the chairman of 
the committee.
    Mr. Cummings. And I'll be checking with the chairman too, 
because as I said from the very beginning, Mr. Chairman, and 
Mr. George, I consider it legislative malpractice that if we 
don't, at some point, look at why, from 2007 to 2008 
conferences, the price of conferences doubled, and it just 
seems to me if we're going to get to this bottom of this, and 
I'm not saying for one moment that President Bush knew about 
this or anything because I believe if he did, he probably would 
have done something but we do need to understand that. I yield 
back.
    Mr. Jordan. I was going to make one point. My only point 
was, we've looked at one conference and we uncovered this, by 
the very agency that's going to enforce ObamaCare, and there's 
224 other conferences that were going on in the same time 
frame. That's important.
    Chairman Issa. And for the entire committee, since this is 
a salient point that keeps coming back, it is the intention of 
the chair working with the ranking member to ask the GAO to do 
a current event study of where we stand with conference and 
travel post legislation, post the President's action, and 
obviously, post the good work of this IG and others. So I do 
think that this, I hope this will be the last time we're 
specifically looking at anything that isn't forward looking 
from 2012 on, because I do think that we really want to look at 
how many reforms have been accomplished.
    But, Mr. George, I certainly think that if you look at 
current ones and find that any of these past activities are 
still occurring, that you inform the new Commissioner and us as 
quickly as possible. But I do believe that the gentleman is 
right, but I believe GAO to look government-wide would probably 
be more appropriate.
    And with that I appreciate the opportunity to have the 
gentleman from Massachusetts be recognized.
    Mr. Tierney. Thank you, Mr. Chairman. So before we pivot 
and start looking at 2013 and beyond, I want to take a look at 
the last decade on that, and actually let me put a chart up 
that we have showing just how the costs have increased over 
that.
    Mr. George, you've already covered 2010, 11 and 12, and I 
appreciate your good work on that. But if we look back at 2005, 
according to the Internal Revenue Service data, the IRS spent 
about $9.8 million in 2005. Then in 2006 that nearly doubled to 
$19 million.
    So Mr. Fink, do you know what caused a sudden jump in 2005, 
2006?
    Mr. Fink. No, sir. I do not know what caused that jump for 
that particular period of time. I do not, sir.
    Mr. Tierney. Now you were named deputy commissioner in 
2008, is that right?
    Mr. Fink. Yes, sir.
    Mr. Tierney. So let me ask you about the increase that 
happened during that year. If you look at the chart in 2007, 
the IRS spend about $13.4 million on conferences. But the next 
year, 2008, the figure jumped to $29 million. So just a single 
biggest increase involved in any of those years, what caused 
that $15 million increase from 2007 to 2008, Mr. Fink?
    Mr. Fink. What I would say is the years which you are 
citing to, the definition of conference also includes training. 
In those years, we had significant hiring in those years, so we 
would have been training a significant number of individuals in 
those years. So when you're having those individuals go off to 
training because the training was done face to face primarily 
at that time, I would certainly say that that would be a 
contributing factor to the increase in those costs, sir.
    Mr. Tierney. So just to make sure I get this right you're 
saying at least in that particular year, whenever anybody got 
trained, you listed it as conference as a definitional matter?
    Mr. Fink. From what my understanding is, sir, is that the 
definition that is being used around conferences also includes 
training and training forums.
    Mr. Tierney. So no way to distinguish on your records as to 
which was which?
    Mr. Fink. Actually, if you have a breakout, you can take 
and you can look at the individual, as I believe the Inspector 
General has a breakout for the years that they looked at, you 
can go down through the individual courses that are listed 
there, the individual training sessions, you can actually pick 
out what is the technical training for field employees and for 
campus employees for the service. You can actually spot it out 
by the name.
    Mr. Tierney. So you went from $10 million in 2005 to $37 
million in 2010, and you're saying that basically, all of that 
distinction, the reason it went so high was that the difference 
between the $10 million and that was all in training added in 
and counted as part of a conference thing.
    Mr. Fink. And I'm saying a part of it certainly had to be 
due to training for new hires, sir.
    Mr. Tierney. What was the other part?
    Mr. Fink. That I do not know.
    Mr. Tierney. You don't know?
    Mr. Fink. No, because I do know that we did significant 
hiring in those years so that, of course, would increase the 
costs, sir.
    Mr. Tierney. Mr. Kutz and Mr. George, do you have any 
information to offer on these sharp increases in those given 
years?
    Mr. Kutz. Only for the 3 years where you've all mentioned 
that the controls that were spurred in part by the hearings 
this committee held and other government-wide and IRS and 
Treasury reforms had an impact it appears, a significant 
impact.
    Mr. Tierney. So I guess the good only news is that after 
the GSA debacle, that some reforms were put in place and the 
numbers dropped now to below $5 million, and I guess that's the 
case was to put these reforms in place after the GSA conference 
information came to light?
    Mr. Fink. Actually, sir, the reforms that started at the 
Internal Revenue Service started in late 2010 prior to the GSA 
conference.
    Mr. Tierney. Why was that? Was there somebody that called 
this to somebody's attention or was there an issue or?
    Mr. Fink. I was not involved in that so it would be purely 
speculative, sir.
    Mr. Tierney. So now we're spending less now than we were 
spending in 2005, so is any of what we're spending now training 
as opposed to conference, Mr. Fink?
    Mr. Fink. Yes. We are still doing training.
    Mr. Tierney. And that's included in that $4 million-plus 
number?
    Mr. Fink. I would believe that also training would be 
included in that, but if you want to know why there's such a 
sharp decrease, we're now doing a significant amount of 
training virtually as opposed to face to face, so the travel 
costs are reduced, you don't have that type of activity going 
on, so you have people presenting and doing it virtually, using 
technology.
    Mr. Tierney. You preempted one of my questions which is why 
don't we do more Webinars and technological so we don't have to 
have the conference on that. Mr. George.
    Mr. George. Mr. Tierney, I just want to add though included 
in this conference is what's called the tax forums in which the 
IRS gathers tax preparers in various parts of the country to 
update them on changes in tax law and IRS policies. There is a 
tremendous benefit to the entire system of tax administration 
for the IRS to conduct these, as these individuals, many of 
whom are tax accountants and literally individuals who prepare 
taxes, to make sure they're up-to-date on what the tax laws 
are, and many instances what to be aware of. And we receive at 
the Treasury Inspector General for Tax Administration sometimes 
many leads on people abusing the tax system as a result of 
these tax preparers learning what is or is not permissible and 
coming forward to us with those types of leads.
    Mr. Tierney. Thank you. I guess the idea of how important a 
functioning Internal Revenue Service is to this country, we 
have all seen countries that don't have good tax collection, 
and what that means a nation and everything like that, and so 
it's something we have to get on top of here that matter are 
trust that Mr. Cummings was talking about is essential and 
we're going to keep on that. Thank you, Mr. Chairman for having 
the hearing.
    Chairman Issa. Thank you. Just quickly following up on the 
gentleman's statement, Mr. George, Mr. Kutz, is there a 
possibility since the exhibit that was up there really doesn't 
reflect conference spending at all.
    Is there a possibility obviously with the acquiescence of 
your new Commissioner that you would provide to us a breakdown 
of what portion was billed as training, these true conferences, 
so on.
    I think it would be helpful for us because certainly, we 
want to make sure the record is complete, and I'd leave the 
record open to get that so we are comparing apples and apples 
in conferences versus outreach to the public versus travel for 
training, and I do appreciate the gentleman's fleshing out that 
we now are taking less people to college and taking more 
college to people.
    Mr. George. Happy to do so, again, with the, just note that 
if we would have to rely on information provided by the IRS 
itself and so----
    Chairman Issa. And the next panel will probably help us ask 
that again.
    Mr. George. Yes, I agree sir.
    Chairman Issa. Thank you. The gentleman from Utah Mr. 
Chaffetz.
    Mr. Chaffetz. Thanks, Mr. Chairman, and I thank you for 
having the foresight to actually call for this as we looked at 
the GSA, and now we are exposing this.
    Mr. Fink, how long have you been at the IRS?
    Mr. Fink. Thirty-two years, sir.
    Mr. Chaffetz. And I would suspect that through that time 
you've been to some conferences along the way?
    Mr. Fink. Yes, sir.
    Mr. Chaffetz. How would you compare this conference to past 
experiences?
    Mr. Fink. It is certainly in my career with the Internal 
Revenue Service, it is one of the largest I have ever attended 
but it was not uncommon in the service in past years that I've 
been there that you would have large gatherings of this, of 
your leadership team, bringing all your managers together in a 
function.
    Mr. Chaffetz. What did you personally get when you went to 
that conference? What did you personally receive?
    Mr. Fink. For the Anaheim conference, sir?
    Mr. Chaffetz. Yes.
    Mr. Fink. The bag that was shown is what I got. Of course, 
it's already been mentioned, I paid the government rate and 
stayed in a suite, paid the $135 for the suite, but I got the 
bag, and there was a notebook inside the bag, and also I 
believe I received what is a, it's an attachment to your 
lanyards that you wear for identification purposes that it is 
spring loaded-type lanyard.
    Mr. Chaffetz. Anything else? Any other perks or benefits, 
food?
    Mr. Fink. Oh, there was, I believe if you look at the 
record, and I believe it's in the Inspector General's report, 
there was 25 baskets of fruit that were in each of the two 
primary hotels.
    Mr. Chaffetz. And how big was your room? Did you ever stay 
in a room like that.
    Mr. Fink. Yes, I have, sir.
    Mr. Chaffetz. When was that?
    Mr. Fink. I paid for a room like that personally, sir, and 
also I would mention to you that in another conference, sir, 
where there was, we had reserved most of the hotel, it was a 
very, very large conference, I was given a suite not quite that 
large, but it was a suite.
    Mr. Chaffetz. When and where was that?
    Mr. Fink. That was in, the one that I have the most recent 
recall of in memory was in Chicago, sir.
    Mr. Chaffetz. And when was that?
    Mr. Fink. I believe it was actually in, I would be 
speculating, but I believe it was in 2009.
    Mr. Chaffetz. So is it because of your rise in rank, did 
you believe you were entitled to this?
    Mr. Fink. No, sir.
    Mr. Chaffetz. Why did you get it then?
    Mr. Fink. My understanding is it was part of what was 
negotiated with the hotel as part of the arrangement for us 
taking a significant number of the rooms in the hotel for the 
conference, sir.
    Mr. Chaffetz. When did you think this was wrong?
    Mr. Fink. The conference in general?
    Mr. Chaffetz. Yeah.
    Mr. Fink. I don't think the conference, I think now that we 
should have been, we should have been paying closer watch to 
our expenditures and the expenses. I don't think the conference 
itself was wrong because of the time that we ran at the 
Internal Revenue Service, 30 percent of our managers in small 
business were brand new, we were going through a very difficult 
time in trying to get our leaders to recognize----
    Mr. Chaffetz. So when did you think that the something was 
wrong here?
    Did you ever think something was wrong here? What do you 
think is wrong about this picture?
    Mr. Fink. I think now that in retrospect in looking back 
that you take a look at the expenses. We should have been more 
diligent in our responsibility to the American taxpayer and to 
the American public.
    Mr. Chaffetz. And you're in charge of this group, right?
    Mr. Fink. At this time I am, yes.
    Mr. Chaffetz. And you were the number two at the time of 
the conference?
    Mr. Fink. Yes, sir.
    Mr. Chaffetz. When did it strike you that this was wrong?
    Mr. Fink. As I said----
    Mr. Chaffetz. When you got called to testify before 
Congress?
    Mr. Fink. No, sir.
    Mr. Chaffetz. Well, when?
    Mr. Fink. As I said, I do not think that the conference 
itself, the premise it was based upon, was wrong because of the 
needs of our employees at that time. I do not think that the 
conference was wrong.
    Mr. Chaffetz. When did you become aware of the massive 
expense?
    Mr. Fink. I actually did not become aware of the massive 
expense until much later. I did not know what the expense was 
at the time of the conference that we were paying, I did not 
know what those expenses were.
    Mr. Chaffetz. And you're the number two person in that 
division?
    Mr. Fink. Yeah----
    Mr. Chaffetz. You're oblivious to the expenses? You're 
totally ignorant of the expenses?
    Mr. Fink. I was not involved in the planning or execution.
    Mr. Chaffetz. Who was?
    Mr. Fink. They put together a planning team that----
    Mr. Chaffetz. Yeah, we've all watched ``The Office,'' we 
know what the party planning committee is.
    But who specifically authorized this? And when did you 
realize that it was wrong?
    Mr. Fink. If you look at the Inspector General's report----
    Mr. Chaffetz. No, I want to know from you. You're in 
charge. This is what's so infuriating. You're in charge. You 
have a public trust. You're paid by the American taxpayer to be 
responsible, to be respectful, to have knowledge, to have 
oversight, and yet you can't even tell me when you thought this 
was wrong. In fact, you're saying that well it was a pretty 
good conference.
    Chairman Issa. The gentleman's time is expired, but I would 
like to hear an answer to the question.
    Mr. Kutz or anyone who wants to respond to the gentleman.
    Mr. Kutz. Well, I would say the documents we saw that 
authorized the conference, actually Mr. Fink signed requesting 
it for Mr. Wagner, the Commissioner, and then it was authorized 
by the two deputy commissioners. This was in April of 2010.
    Mr. Chaffetz. Clarify that for me. Mr. Fink, actually 
signed off on this?
    Mr. Kutz. On the request for approval by the two deputy 
commissioners that he had signed for Mr. Wagner, I believe, in 
April 2010 for estimated $4.3 million conference at that point 
in time.
    Mr. Chaffetz. And so when did you realize that this was 
wrong? You signed the authorization before it happened.
    Chairman Issa. I'd ask that the gentleman have an 
additional 2 minutes for this specific and limited line of 
questioning, please.
    Mr. Cardenas. Point of personal privilege, Mr. Chairman, I 
do not watch ``The Office'' so I don't know who the collective 
``we,'' is but it's not me.
    Chairman Issa. That will be noted for the record.
    Mr. Chaffetz. I appreciate the chairman.
    Mr. Kutz is saying you personally signed the documents, 
with the dollars on it, before the conference. Would you agree 
or disagree with that?
    Mr. Fink. I initialed the routing slip that went to----
    Mr. Chaffetz. What does that mean to you? Do you have any 
responsibility for that?
    Mr. Fink. I attended the briefing that was done for the two 
deputy commissioners.
    Mr. Chaffetz. Did that include the cost of the conference?
    Mr. Fink. If I remember correctly, the briefing that was 
done for the two deputy commissioners, yes, that included a 
discussion of the----
    Mr. Chaffetz. And that raised no warning flags? There was 
no bells that went off in your mind? And you didn't think that 
that was wrong?
    Mr. Fink. At that time because of what we were experiencing 
at the service----
    Mr. Chaffetz. What was that experience?
    Mr. Fink. We were experiencing a whole new taxpayer base 
that we were entering----
    Mr. Chaffetz. You testified--you testified that when you 
thought it was wrong is when you became aware of the expense, 
but we just heard from Mr. Kutz you signed off on a routing 
slip, you participated in meetings understanding the costs 
before the conference happened.
    Are you here claiming no responsibility at this point?
    Mr. Fink. Absolutely not. That's why I am here.
    Chairman Issa. The gentleman's time is expired. Mr. Fink, 
strictly for the purposes of we put you under oath, if I heard 
correctly, and maybe if necessary, we can have it read back, 
you had answered that you were not aware in some fashion of the 
cost of these, and then Mr. Kutz made it clear that you signed 
a routing slip. You made it clear that you attended briefings 
in which you knew cost.
    Would you like to revise your initial statement about not 
being aware of the cost? It's not about whether it's justified, 
but I think that the IG's investigation would say that you want 
to be much more accurate.
    Did you know about the cost, and if so, when, which is what 
I think the gentleman's line of question is. And I don't want 
to trap anyone, but I can't square those two right now.
    Mr. Fink. Okay, I was aware of the cost when we did, the 
estimated cost of $4.3 when we did the briefing for the two 
deputy commissioners of the Internal Revenue Service. That's 
when I became aware of the estimated cost.
    Chairman Issa. And that was $4.2 million?
    Mr. Fink. Four point three.
    Chairman Issa. Four point three million. There may be 
additional questions but I want to make sure for the record and 
I thank the gentleman for Utah because I think we now have a 
better understanding.
    Mr. Cummings. Mr. Chairman.
    Chairman Issa. Yes.
    Mr. Cummings. With all due respect, we just lost a member 
because he had to get out of here.
    Can we have an additional 5 minutes on our side? Do you 
follow me? In other words, he just----
    Chairman Issa. If you find a witness who is in potential 
liability of perjury and you want to clarify the record we will 
do so. The gentleman's is recognized for 5 minutes, more, if 
absolutely necessary.
    Mr. Cummings. Wait a minute. Whoa. Whoa. Whoa. Hold on. 
Wait a minute. I just asked for equal time. I just said that we 
had a member that had to leave, and I did not object to Mr. 
Chaffetz, I wanted to hear the answers to his questions. It has 
nothing to do with perjury. But I'm just asking for equal time. 
That's all I'm asking for. And I think that's not unreasonable.
    Chairman Issa. It's not a rule of the committee. I said Mr. 
Clay is recognized for 5 minutes or more if necessary.
    Mr. Clay.
    Mr. Cummings. Thank you.
    Mr. Clay. Thank you. All right. Thank you, Mr. Chairman. 
And the IG's report referenced three trips that multiple IRS 
employees and two event planners took in November, 2009, June 
2010 and August 2010.
    Mr. Fink, can you elaborate on why three separate planning 
trips were needed for the Anaheim conference?
    Mr. Fink. There were actually were, yeah, I can elaborate. 
There were two separate planning trips that were done. A third 
trip was actually done the week before the conference to make 
sure that everything was set up and ready to go for a 
conference of that size. I think that in retrospect, in looking 
at those trips and what occurred there, absolutely we should 
have used local individuals to conduct those planning trips, 
those visits, because it was very easy to have done that by 
using local individuals as opposed to traveling folks to 
Anaheim.
    Mr. Clay. Did you approve these planning trips?
    Mr. Fink. No, sir.
    Mr. Clay. Do you know who did?
    Mr. Fink. The then sitting Commissioner.
    Mr. Clay. The IG's report says that the audit, ``did not 
identify any policy or guidance that outlined the reasons when 
and why planning trips should be performed for conferences, the 
appropriate number of employees attending or whether approval 
is needed from senior management in advance.''
    And Mr. Fink, what is your response to that criticism?
    Mr. Fink. In reading the IG's report, at that time, I 
believe that is accurate, that is accurate that there was no 
criteria or guidance at that time around those planning 
conference. Since that time, of course, we have made changes 
that do put stricter and tighter guidelines around doing those 
types of visits and types of trips.
    Mr. Clay. And what level of approval is needed for these 
planning trips now?
    Mr. Fink. I do not know, sir, I can get that for you.
    Mr. Clay. The IG report concluded, ``the costs associated 
with these planning trips may have been excessive based on the 
number of employees who were involved.''
    Mr. Kutz, how many people went on each of these planning 
trips?
    Mr. Kutz. The November 2009 trip included three staff and 
cost $3,500 of travel, the June 2010 trip had eight staff that 
cost $10,300 for travel, and what Mr. Fink described as the 
week before the conference was 16 staff costing $22,000, and I 
believe the majority of these staff were from Washington, D.C.
    Mr. Clay. I'm astounded. I'm astounded it takes three trips 
to go and plan a conference. I don't understand it.
    Mr. Fink, why were so many people needed for the trips?
    Mr. Fink. The primary reason is because of the size of the 
conference, the number of individuals who were attending, 
setting up the logistics of the fact that the conference was 
over a 3-day period, 8 hours a day, that's why as I did state 
that absolutely now in retrospect when you look at it, it was 
unnecessary for people from Washington.
    Mr. Clay. It's almost like the joke, how many people does 
it take to change a light bulb?
    Mr. George, your report raised a concern that appropriate 
personnel did not sign the letters of intent with the hotels. 
Your report said this letters of intent are used by the IRS to 
secure hotel space for offsite events. Your report also states 
that these letters are normally required to be signed by 
centralized delivery services, the organization responsible for 
coordinating space for IRS events or procurement personnel. 
However, in the case of the Anaheim conference, a general 
schedule 14 revenue officer in charge of conference planning 
signed the letters of intent with the three hotels. Do you know 
who authorized the GS-14 to sign the letters of intent?
    Mr. George. I'm going to ask Mr. Kutz to respond to that, 
sir.
    Mr. Clay. Mr. Kutz.
    Mr. Kutz. The GS-14 did sign. The contracting officials 
told him it was okay to sign because the letter of intent was 
not a binding agreement for the Internal Revenue Service, so at 
the end of the day, that is, in fact, what the agreement was 
that was used.
    Mr. Clay. And those were the concerns raised I'm sure. And 
as a matter of fact, this revenue officer was the one signing 
the letter of intent, is that correct?
    Mr. Kutz. We certainly would have concern if a GS-14 
committing the Internal Revenue Service to several million 
dollars of spending yes, Congressman.
    Mr. Clay. And Mr. Fink why was a GS-14 revenue officer 
permitted to sign a letter of intent?
    Mr. Fink. I believe, sir, to the best of my recollection, 
it is because he had been involved in planning activities on 
other conferences that are listed in the Treasury Inspector 
General's report that he had some experience and knowledge, and 
that he had also coordinated this with the centralized services 
unit.
    Mr. Clay. And did the same GS-14 revenue officer who signed 
the letters of intent with the hotel choose the outside 
conference planners who planned the conference?
    Is that the same person?
    Mr. Fink. To the best of my knowledge, sir, yes.
    Mr. Clay. Had this revenue officer planned previous 
conferences with these same planners?
    Mr. Fink. That, sir, I do not know.
    Mr. Kutz. Congressman, my understanding is yes.
    Mr. Clay. And under what authority did the GS-14 prepare 
and sign these sole source justifications?
    Mr. Fink. I believe he was asked to do that by the then-
sitting Commissioner of the Small Business Division. I believe 
that is who asked him or instructed him to do that in 
coordination with the planning committee.
    Mr. Clay. And Mr. George, do you know where this revenue 
officer stayed during the conference?
    Mr. George. I don't have that information. Maybe Mr. Kutz.
    Mr. Kutz. He stayed in the presidential suite for 6 nights.
    Mr. Clay. Mr. George, your report states that six employees 
were given awards totaling $6,000 for their work on the Anaheim 
conference, including $2,000 each for two employees who were 
primarily responsible for coordinating the conference planning.
    Did the GS-14 revenue officer receive one of these awards?
    Mr. George. My understanding is that he did.
    Mr. Kutz. He received a $2,000 award for the conference 
work.
    Mr. Clay. And who approved these awards? 
    Mr. Kutz. I'm not sure who approved that award.
    Mr. Clay. Had the GS-14 in question received any previous 
awards for work planning conferences?
    Mr. Kutz. We're not aware of that.
    Mr. Clay. I wonder how much work the GS-14 did when you had 
an outside firm doing the conference planning. How much sense 
does that make, Mr. Fink?
    Mr. Fink. I'm not aware of how much work they did. I do not 
have specific knowledge.
    Mr. Clay. Mr. Chairman, I'm going to yield to----
    Chairman Issa. Yes, I think the gentleman would like a 
couple of minutes.
    Mr. Cummings. First of all, Mr. Chairman, thank you for 
your courtesy. I really appreciate it.
    Mr. Fink I just want to go back, and the chairman and I 
were just talking and I have a tremendous amount of respect for 
what he said to me just a moment ago, and that is that we're 
not trying to get anybody in any trouble with regard to 
perjury, but we want to make sure, that is why we want to be 
real clear on this. This is the committee where Roger Clemens 
testified, and next thing you knew, he found himself in some 
trouble. So we just want to be real clear so you can clear the 
record.
    So you knew, you did have knowledge of the, this Anaheim 
conference and how much it would cost before it went, it 
happened, is that right?
    Mr. Fink. Yes, sir, I did. Yes, sir.
    Mr. Cummings. And so you signed some documents, is that 
right?
    Mr. Fink. Yes, sir.
    Mr. Cummings. Like Mr. Kutz said. Did you look at the 
documents that you signed with regard to the cost of this? I 
mean, in other words sometimes people just sign documents and 
then pass them on. What was your, how did that work for you? 
What happened?
    Mr. Fink. When I signed the routing slip, Representative 
Cummings, I was given all the documents in a binder, a binder. 
Then I went through that binder, looked and saw in that binder 
what I said that previously being indicated as the estimated 
cost of the conference. And then I initialed off on that binder 
because we'd already previously had briefed the two deputy 
commissioners, and then forwarded that binder to the deputy 
commissioner.
    Mr. Cummings. So you were aware?
    Mr. Fink. Yes, sir.
    Mr. Cummings. Did you think that that cost was kind of 
high? Did you ever say that to yourself?
    Mr. Fink. No, sir. I did not.
    Mr. Cummings. Looking at it in retrospect, do you feel that 
way?
    Mr. Fink. Yes, in retrospect as I said we certainly could 
have saved money and done that conference_
    Mr. Cummings. And my last question, I watched your video. 
You were Dr. Spock?
    Mr. Fink. Yes, sir.
    Mr. Cummings. Did you ever sit there and say to yourself, 
well, maybe this isn't right, and if somebody sees this the 
taxpayers are not going to like this?
    Mr. Fink. Absolutely, sir.
    Mr. Cummings. While you were doing it?
    Mr. Fink. After I saw the production, as I mentioned, I 
fully regretted it.
    Mr. Cummings. And to this day, and thank you, Mr. Chairman, 
I got to ask this though, do you see the redeeming value in 
that video?
    Mr. Fink. No, sir.
    Mr. Cummings. So you agree with me?
    Mr. Fink. Yes, sir.
    Mr. Cummings. I feel better now that you agree. Thank you.
    Chairman Issa. I thank the gentleman. We now go to the 
gentleman from Michigan, Mr. Walberg.
    Mr. Walberg. Thank you, Mr. Chairman, and thank you for 
laboring on this oversight not just this particular issue which 
is tough to look at as a taxpayer, as a citizen, as a 
representative. It reminds me of an early morning walk in the 
feed room in my barn and turning the lights on after dark and 
hearing the sounds of scurrying things going for the corners, 
because the light is being turned on.
    And, Mr. Fink, you know, I'm not so concerned about how you 
feel about it now, or even back how you felt about it back 
then, I can't confirm one way or another. I certainly 
understand the embarrassment that you must feel about it, this 
all taking place now. I appreciate the apology. But it's after 
the fact, and I'm certain that probably the biggest reasons for 
the concern now is because it has all come to light.
    Let me ask you a question. You've made apologies, you've 
said that there are measures being taken, that this isn't going 
to happen again, this isn't happening now. What type of 
confidence do you have that that is true? That measures are in 
place to make sure that this does not happen again, that there 
are Webinars, that there are things that we do in light of the 
fact that what taxpayers are going through right now, that this 
has changed?
    Mr. Fink. The confidence I have is based upon if you take a 
look at how significantly all the costs have dropped based upon 
what the Inspector General has reported, I--that gives me 
tremendous confidence.
    I will tell you, also, I have confidence in the fact that 
looking at the changes that have been put into place, the 
guidance that is there, and the other reason I also have 
tremendous confidence is because the Acting Commissioner has 
come in and he has clearly spelled out what his expectations 
are. And when this came to his attention, he clearly spelled 
out that he was appalled at this, that he looked at the 
expenses, that he saw the video, and that it troubled him so 
that gives me tremendous confidence that it would never happen 
again on his watch.
    Mr. Walberg. Well, we're looking forward to hearing that 
from him, but in the culture and again, I would agree with the 
chairman that probably the overwhelming majority of Federal 
employees are doing the job that they've been asked to do or 
have been given to do and are doing it to the best of their 
ability, but here is a culture, there were numerous people 
involved in the videos and everything else, the planning, the 
costs, understanding it and yet the culture said, who cares? We 
can do this because we can do this because we can.
    And it happened. And when I sit in the situation where this 
week, in fact, a 59-year-old lady, single parent, calls and 
says I've been told by my home health care provider employer, 
she was a home health care worker, that she is being cut back 
to 28 hours because of ObamaCare, and the IRS is responsed with 
administering major portions of ObamaCare, and we see the 
culture that allowed this type of thing to go on without 
respect for that 59-year-old tax-paying mother, single parent, 
who is now concerned about losing her home because she doesn't 
have the hours that she needs, that she had before this 
implementation and we hear what goes on in this culture, I'm 
greatly concerned.
    Mr. George, I think I heard you say that you received 
notification of this problem from a whistle-blower was it?
    Mr. George. I use that term generically, it was an IRS 
employee who did alert us to the fact of excessive spending at 
this conference.
    Mr. Walberg. So there was one person that was willing at 
least to step up to the plate to say we think there is a 
problem?
    Mr. George. That is correct.
    Mr. Walberg. Mr. Fink, I hope, I hope that the culture in 
the IRS, even if it's just because you got caught, is changing 
to say that this will not continue on even after the light of 
day has been turned off to some degree on it.
    I have in my hands a copy of a letter that was written to 
Secretary Lew by Senator Coburn ultimately responding from a 
letter he had sent back in April of 2012 to then-Secretary Tim 
Geithner asking for a full listing of all conferences attended 
by department employees during fiscal years 2010, 2011, 2012, 
attended by, as the letter says, 50 or more Treasury staff and 
on that list there were only five conferences with a total cost 
under $500,000. Subsequent to that, this has all come out, with 
costs including the largest component of Treasury which is the 
IRS, of $50 million on hundreds of conferences over those 3 
years. So the request is being made to say, why weren't we 
given the information?
    So I would ask Mr. George and Mr. Kutz, why did that take 
place then? Has the culture changed now so that even from 
Treasury, we will get accurate information to Congress, and we 
won't feel we've been given inaccurate information, incomplete 
information, in fact, concerning, a concern about having even 
truthful information?
    Chairman Issa. The gentleman's time has expired.
    You may answer, please.
    Mr. George. The environment has changed entirely, Mr. 
Walberg. There is no question about that. And so that was not 
top priority for the administration in the wake of the GSA 
revelations. And then of course, with this report, it is 
obvious that this is a major issue, and it's something that the 
administration, to its credit, has taken steps to address.
    But there's something very important, sir, I need to note. 
As Mr. Fink pointed out, and as we have both in our audit 
report and during this testimony, new policies have been put in 
place. The key is to ensure that the policies are being 
followed. So they are there, but if they're not being 
implemented and oversighted in terms of what my office does, 
but more importantly, what managers within the Internal Revenue 
Service do, it could be for naught.
    Mr. Walberg. Absolutely.
    And, Mr. Chairman, I thank you for that. But I think it was 
notable what he said there, that in the past it didn't seem 
that important to the Treasury Secretary and others who were 
responsible for this. That has to change.
    Chairman Issa. And with our help, I hope it will.
    Mr. Walberg. Thank you.
    Chairman Issa. We now go to the gentleman who probably has 
more Federal workers in his district than anybody but possibly 
the ranking member, Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman, and that's probably 
true.
    Mr. George, there was a time, as the ranking member pointed 
out in his opening statement, where the amount of money spent 
on these conferences doubled in one fiscal year. What was going 
on in the IRS that it would double in one fiscal year?
    Mr. George. I do not have that information, sir.
    Mr. Connolly. Mr. Kutz, Mr. Fink, either of you?
    Mr. Kutz. We just looked at 2010 to 2012 as part of this.
    Chairman Issa. Would the gentleman yield?
    Mr. Connolly. Of course.
    Chairman Issa. You were out of the room at the point where 
we discovered that these numbers we have been looking at are 
combined. They are conferences, travel, training, and others. 
And the next witness will confirm. But we've asked to have them 
broken down so the committee would get the details because it's 
apparently a substantial amount of this was travel related to 
training specifically, training of new employees.
    Mr. Connolly. So it could have been just we were upping the 
training of a lot of new employees?
    Mr. George. That is a possibility, sir, yes.
    Mr. Connolly. Yeah. Okay. I thank the chair.
    Mr. George, your report found that the IRS contracted with 
15 outside speakers to present at a conference for a total cost 
of $135,350. Is that correct?
    Mr. George. Yes, it is, sir.
    Mr. Connolly. And one speaker was paid $17,000 for two 
presentations. Is that correct?
    Mr. George. That's correct.
    Mr. Connolly. And your report further stated that the 
contract signed by the IRS said ``In each presentation, he will 
create a unique painting that reinforces his message of 
unlearning the rules, breaking the boundaries, and training the 
thought process to find creative solutions to challenges.''The 
speaker then proceeded to paint six such paintings, including 
subjects such as Albert Einstein and Michael Jordan. Is that 
correct?
    Mr. George. Yes, among others.
    Mr. Connolly. Among others. Do you believe paying a speaker 
$17,000 to paint pictures for IRS employees was an appropriate 
use of taxpayer dollars?
    Mr. George. I do not, sir.
    Mr. Connolly. Either of the two of you can weigh in here.
    Mr. Kutz. I would agree with the Inspector General.
    Mr. Fink. I would agree.
    Mr. Connolly. Why did the IRS hire this speaker-painter?
    Mr. Fink. The individual that you are referring to had 
spoken to numerous private sector companies, as well as other 
government agencies. And the way that he presents his 
information is, is he picks subjects to do a painting on and 
then talks about their leadership attributes, their 
characteristics. What it ties to as far as viewing things 
differently and changing the way you think about things is the 
way he goes about doing the presentation is, is that, of 
course, is you cannot recognize the image. In some cases he 
will actually paint the image upside down. But then as he goes 
through it, he talks about what their leadership 
characteristics were or what the unique challenges were that 
they faced and how they had to overcome certain challenges.
    For example, you pointed out, I believe it was mentioned, 
Michael Jordan. He basically spoke about Michael Jordan's 
drive, you know, the fact that he was so committed to being the 
best and always trying to improve. So that's how he does the 
painting, and he relates the painting and his message are tied 
together around what you would hope would be positive 
leadership characteristics, sir.
    Mr. Connolly. I guess I understand the principle, and I 
suppose it's easy to dismiss it, but when we're trying to be 
good stewards and guardians of taxpayer investments, especially 
when our mission is to collect taxes, it strikes me as maybe--
no, not maybe, it strikes me as really a less than judicious 
use of taxpayer money. And this is the final question, I guess 
to ask all of you. It shows to me a culture of both arrogance 
and tin ear; tin ear as to how might this look.
    You know, the one thing about those of us who run for 
elective life is, we do ask ourselves the question, how would 
this look on the front page of the morning paper? And if the 
answer is not so good, smart politicians don't do it. It looks 
to me like this question never got asked in this--let's even 
concede well-meaning, well-intentioned set of activities, but 
it was, you know, one has to judge it on a range of insensitive 
to stupid, and not a wise use of taxpayer money. And there were 
other ways to make that point and to do that without being, in 
retrospect, becoming an object of ridicule and enormous anger 
by taxpayers who foot the bills.
    And I just, if the chairman would allow the three panelists 
just to comment on what appears to me and others as, frankly, a 
culture of arrogance and a real tin ear to the concerns of the 
public to pay the bills.
    Mr. George.
    Mr. George. I agree with everything you said, Congressman. 
And I know this term is somewhat overused, but the optics, 
there seems for some reason to have been just a lack of regard 
in terms of how this would be perceived by the American people 
in the times that we find ourselves in.
    Mr. Kutz. This is not a case today of fraud or criminal 
activity. This is a case of people that lost sight of the fact 
that they were spending taxpayer money and not their own.
    Mr. Connolly. And I agree with you, Mr. Kutz. I would 
certainly stipulate it's not a matter of fraud or embezzlement. 
It's a matter of very stupid judgment.
    Mr. Fink.
    Mr. Fink. And as I have said, in looking back in 
retrospect, and even at that time, this was not a good use of 
taxpayers' funds, it was an inappropriate use of taxpayers' 
funds, and we should have went about this in a much more 
judicious, much more prudent manner than we did.
    Mr. Connolly. I thank the gentleman.
    And I thank the chair for his indulgence.
    Mr. Gowdy. [Presiding.] Thank the gentleman from Virginia.
    The chair would now recognize the gentleman from Tennessee, 
Dr. DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman, and I do thank the 
panel for being here today.
    And I would like to say, Mr. Fink, we've had several 
hearings, as you know, on the Hill regarding issues surrounding 
the IRS, and when you started your testimony, the one thing you 
did that I appreciated was that you sincerely apologized, you 
showed remorse, and I think you are genuinely embarrassed, 
unlike your predecessor Commissioner Shulman, who when asked 
whether he was sorry or apologized, I think that what we got, 
at best, a backhanded apology that he was sorry that it 
happened under his watch, which I interpret that he is maybe 
embarrassed because it might make him look bad. So I do 
appreciate the fact that you do seem to care, and I think a lot 
of people do as well.
    But let's look at what the American people and the 
taxpayers got for their $4.3 million at this conference in 
Anaheim. Can you tell me what the main purpose that your 
division was there for at this conference?
    Mr. Fink. Yes, sir. And if you don't mind, I do truly 
regret this. I really do.
    The main reason there was because we had had a significant 
turnover in the leadership in the organization in Small 
Business. Also, at this time, we were experiencing an entire 
new customer base in Small Business, folks that had not had tax 
problems before, for whatever reason were coming in to interact 
with the Service. They were having difficulty remaining in 
compliance. Along with that, the third primary item was is 
that, as the Inspector General mentioned, is that we had an 
increase in security concerns out of the incident that occurred 
in Austin, Texas.
    Mr. DesJarlais. Because I have limited time, you have a 
term for the purpose of this, and that's continuing 
professional education. Is that correct?
    Mr. Fink. Yes, sir.
    Mr. DesJarlais. Okay. Do you believe that professional 
continuing education occurred at this $4.3 million conference?
    Mr. Fink. I apologize, but not in the videos, the dance 
videos, the ``Star Trek.''
    Mr. DesJarlais. Okay.
    Mr. Fink. There were learning lessons there, sir.
    Mr. DesJarlais. Now, you have methods of tracking this. You 
have 2,700 people to keep track of. You said they are there for 
a 3-day period, 8 hours a day. How did you keep track of these 
2,700 attendees? What did they do to get credit for these CPEs?
    Mr. Fink. They did not get CPE credit, sir, because we were 
not keeping individual track of their attendance at different 
parts of the event, so they did not get CPE credits. All they 
got was on our internal system, they received what would be 
characterized as leadership training.
    Mr. DesJarlais. How was their attendance determined? Was 
there videos? Was there head counts? Was there a sign-in sheet?
    Mr. Fink. No, sir, there was not.
    Mr. DesJarlais. Okay. So we have all these people, there 
really was no accountability in terms of whether or not they 
actually gained any new knowledge on this particular trip. I 
mean, we don't know whether they crossed the street and went to 
Disneyland during this 8 hours.
    Mr. Fink. We absolutely--I cannot sit here and say 
absolutely they did not, sir.
    Mr. DesJarlais. Do you know of people who did go to 
Disneyland when they were supposed to be in this 3-day, 8-hour 
a day?
    Mr. Fink. No, I do not, sir.
    Mr. DesJarlais. Did anybody talk about it? Has anyone 
talked about going other places rather than being at this $4.3 
million educational seminar?
    Mr. Fink. Not during--no one has talked about going during 
the seminar, but some people did, yes, absolutely talk about 
going places in the evening, sir.
    Mr. DesJarlais. So we really couldn't account for the 2,700 
people. So this conference was probably an abysmal failure when 
you look at the total number. We didn't have any way of 
tracking. We don't know if they were educated. So essentially 
this was not a good conference. We got 224 more of these to 
look at, so we'll kind of--we'll stop there.
    You know, when the American people don't listen to the IRS, 
and they don't pay their taxes, they actually can go to jail, 
get extreme penalties. What do you tell the people that their 
retribution may be when their taxpayer money that they did send 
in is wasted in this fashion? Is there any way that they can 
recoup this kind of money?
    Mr. Fink. Not that I'm aware of, sir, other than 
apologizing sincerely.
    Mr. DesJarlais. Okay. So I mean people, if they don't pay 
their taxes they can apologize sincerely, but they can still go 
to jail.
    Mr. George, if Mr. Shulman or Lois Lerner perjured 
themselves in a prior hearing here should they go to jail?
    Mr. George. It would depend upon the Department of Justice.
    Mr. DesJarlais. So if Mr. Shulman said he never had a 
discussion with the White House about the targeting or Lois 
Lerner turns out that she knew more about these alleged two 
rogue agents that we now know may be 80, if they weren't 
truthful with us should they go to jail like the American 
people go to jail if they don't comply with the IRS?
    Mr. George. They should be subjected to the criminal 
penalties associated with perjury.
    Mr. DesJarlais. Do you agree, Mr. Fink?
    Mr. Fink. I would say, as the Inspector General said, it is 
of course up to the Department of Justice.
    Mr. DesJarlais. Well, I know people get frustrated, we have 
these hearings, and we never seem to get accountability, but it 
sounds like we're getting somewhere. And I thank you all for 
your time and attention.
    I yield back.
    Mr. Gowdy. I thank the gentleman from Tennessee. The chair 
will now recognize himself for 5 minutes of questions.
    And I will say this to the witnesses. I prepared a list of 
questions for all three of you. But during the ranking member's 
opening statement--I shared with him on the floor--my mind went 
away from the questions, and it went back to South Carolina. In 
the very same month, the very same year that the IRS was 
conferencing in Anaheim, we were furloughing law enforcement 
officers. We were furloughing teachers. Prosecutors in my own 
office were furloughed, secretaries in my own office were 
furloughed. Those are secretaries who struggle to make ends 
meet under the best of circumstances. And here we're asking 
them to go 2 weeks without pay, and we canceled all out-of-town 
training. We brought our own food to our Thanksgiving and 
Christmas office socials. We started an anonymous fund to help 
our fellow employees who were struggling to make ends meet.
    And one night one of my secretaries came in after hours and 
asked if she could borrow the money to buy her child a birthday 
present. And she kept apologizing for having to do it. She kept 
saying, I'll pay you back, I'll pay you back.
    And at exactly the same time that young government 
employee, single mom, was borrowing money for a child's 
birthday present, other government employees were staying in 
$3,500-a-night rooms. Other government employees were spending 
more money on promotional materials than that young woman makes 
in a year. And other government employees were spending more 
money on audience participation tools than that young woman 
makes in a year.
    So, Mr. Inspector General, I appreciate the work that 
you've done, but with all due respect, this is not a training 
issue. This cannot be solved with another Webinar. This can't 
be solved with just one more recommendation. If we can just get 
that recommendation implemented. We're just one recommendation 
away from people acting responsibly.
    Mr. Inspector General, we can adopt all the recommendations 
you can possibly conceive of. I'd just say it strikes me, and 
maybe it's just me, but it strikes me as a cultural, systemic, 
character, moral issue.
    The IRS has been in existence, depending on how you want to 
count, either since 1862 or 1918. But in either event, they've 
had 100 years to figure out that while your fellow Americans 
are losing their jobs, and their health insurance, and their 
homes, you do not spend $4 million at a conference for which 
there is no accountability. You do not hire people to make 
meaningless speeches, or artists to paint paintings of Bono. 
When your fellow citizens, the ones who pay your salary are 
struggling, that is a character issue. Training cannot fix 
that.
    They sent more than 25 employees on a scouting trip to see 
whether or not the hotel was okay. That's not going to be fixed 
with training, Mr. Inspector General. When you've got law 
enforcement officers being furloughed and you've had 100 years 
to figure out how to act appropriately, you don't need an IG 
report to tell you that spending $27,000 for someone to talk 
about how random combinations of ideas can drive radical 
innovations, there's not a Webinar in the world that's going to 
fix that.
    So, Mr. Inspector General, in reality, it just strikes me 
that we just need one single recommendation. Start over. This 
entity has not only targeted citizens that it was supposed to 
serve, it's allowed itself to be used as a political tool. Not 
only does it have access to our financial information, it will 
soon have access to our health information. Those are details 
that we don't share with people that we do trust, and we are 
going to be asked to share it with people who are so 
disconnected as to spend this amount of money, while our fellow 
citizens are struggling mightily in the fall of 2010. I don't 
think training is going to fix it. I think replacement might.
    With that, I would recognize the gentleman from North 
Carolina, Mr. Meadows.
    Mr. Meadows. Thank you, Mr. Chairman. And I want to follow 
up on that, because it's hard to go back and talk to the people 
back home who have lost their homes, who have lost their jobs 
and with any clear conscience at all justify any part of this 
behavior. And quite frankly, I find your apology today hollow. 
It's not enough. You know, an honorable man would do more than 
that.
    And I am troubled by the lack of information that was 
provided to the Inspector General's office. You know, I look at 
this report and they can't draw a conclusion because you can't 
provide them, Mr. Fink, with documentation. We don't even know 
what the total cost of this conference was. You know, it's been 
reported that it was $4.1, but I've done the math. It's more 
than $4.1. There is no way. So what was the cost, Mr. Fink? Do 
you know?
    Mr. Fink. The costs that I'm aware of, sir, is the $4.1.
    Mr. Meadows. Well, I can do the number just based on what's 
in the IG's report, and I think they would concur with me, 
there is no way that that can be accurate. Because if you look 
just at the basic numbers, we are at $4.1, just on the amount 
of documentation. If you take 2,500 employees and travel 
vouchers at $3.8, if you just do the math, you're at $4.1 
before we figure in anything else. You can get to $4.5 almost 
immediately, and that's with 90 percent of what you said. Your 
testimony said 90 percent was undocumented, is that correct, 
that you were only able to document 90 percent of the costs?
    Mr. Fink. Yes, sir, that is correct.
    Mr. Meadows. Okay. So how do you know that if you don't 
know the total cost? How do you know that that 90 percent, how 
do you know that the testimony here today at 90 percent is 
accurate if you don't know the total cost? Did you just make it 
up?
    Mr. Fink. No, the--no, the 90 percent is based upon, if I'm 
not mistaken, and I think the Inspector General----
    Mr. Meadows. I'm asking you. It was your testimony.
    Mr. Fink. It's based upon what the overall costs shown in 
the report were, the $4.1 million.
    Mr. Meadows. So you only have 90 percent of the 
documentation, of the $4.1, not necessarily of the total cost?
    Mr. Fink. I believe that is correct, sir.
    Mr. Meadows. All right. So it could be $5 million? It looks 
like it probably was. Could it be $5 million, yes or no?
    Mr. Fink. Yes.
    Mr. Meadows. All right. Could it be $6 million? Think 
carefully, you're under oath.
    Mr. Fink. Yeah.
    Mr. Meadows. Could it be $6 million?
    Mr. Fink. There's no way that I'd know that, sir.
    Mr. Meadows. But we know that it could definitely be 5.
    Mr. Fink. It could go higher, yes, sir, absolutely to 5.
    Mr. Meadows. All right. What surprises me is a guy that's 
been paid for 32 years to hold the American people accountable 
is not accountable to those same people when he's documenting 
his own costs in his department. Why is that? The American 
people want to know? Why is that?
    Mr. Fink. At the time of the conference, there was no 
guidelines or requirement to track costs for that particular 
training event, that particular conference. We implemented the 
use of that code to track the conference expenses.
    Mr. Meadows. All right, so let me ask you a question. 
Yesterday I think you met with Senate committee members. Is 
that correct?
    Mr. Fink. Their staffs.
    Mr. Meadows. Their staffs, right.
    Mr. Fink. Yes, sir.
    Mr. Meadows. In that particular time, the general consensus 
was, is that you didn't think that the $4 million was really a 
problem. Did they mischaracterize that? Because your testimony 
today is that you have had this epiphany that it was a problem, 
but yesterday they didn't see that you saw that it was a 
problem. When did it become an issue to you, Mr. Fink?
    Mr. Fink. It was an issue with me yesterday, too, sir. As I 
stated is, is that if you look back in retrospect, we certainly 
could have done better for the American public and the 
taxpaying public. We certainly could have been more efficient 
and more effective.
    Mr. Meadows. Not more efficient, more accountable. You 
know, I mean, when we get to--and I'm running out of time, so 
let me finish. You also say that all of this was done because 
you had 30 percent new hires. Can you assure us today of the 30 
percent new hires in the Management Division? That's why you 
said it was such a large conference, your testimony.
    Mr. Fink. That was one of the three reasons that I stated, 
is that 30 percent of the managers had less than 2 years 
experience.
    Mr. Meadows. All right. And so we hired all these people, 
and so I've done the math. So you're saying one out of every 
two was a management hire? Because that's 800 new people in 
management if you take 30 percent of the people that attended 
the conference, so you're saying one out of every two hires was 
a management person?
    Mr. Fink. No, sir. I apologize. If that's a 
misunderstanding, that's my fault. When I talk about 30 percent 
of the managers having less than 2 years experience, that would 
not include the numbers of new hires for that particular year. 
The new hires were primarily frontline customer-facing 
employees. We hired 1,516 customer-facing employees. They 
wouldn't have been the managers attending that conference.
    Mr. Meadows. All right, I could see that I'm out of time. I 
appreciate the indulgence of the chair. I have one other 
question that hopefully I will get my colleagues to ask. Thank 
you. I yield back.
    Mr. Jordan. [Presiding.] The gentleman from Michigan, Mr. 
Bentivolio, is recognized.
    Mr. Bentivolio. Thank you, very much, Mr. Chairman.
    Mr. George, after reading your two investigations into 
what's going on at the IRS, both with the excess spending on 
conferences that we're discussing today, and about the 
targeting of conservative groups, I can't help but sense that 
the IRS is out of touch with the average American citizen that 
they were hired to serve.
    Mr. George, during your investigations, did you ever come 
across anyone in the IRS who felt disdain for the average 
American? Is there a culture that promotes a feeling of 
contempt for the American people as if they were somehow 
unworthy of the IRS work?
    Mr. George. I cannot say that our reviews would lead to 
that exact conclusion, Congressman. I can say that there was, 
both in this instance, as well as in the instance of the 
501(c)s, a lack of management, a lack of oversight by 
management of what was going on at the, quote/unquote, ``rank 
and file level'' at this stage. Now, we're continuing our 
review of the 501(c) matter, so I can't give you a definitive 
answer there.
    But in this instance, as Mr. Fink acknowledged, there was a 
lack of sensitivity as to how the expenditures would be 
perceived by the American people, and I would then presume to 
add to the fact that managers seemed to have had a lack of 
concern about how the expenditures would be perceived.
    Circumstances have changed. Again, with the GSA conference 
revelations, the subsequent actions taken by IRS officials, and 
then ultimately by the administration at the highest levels 
have also affected the behavior of government agencies at all 
levels on this issue.
    Mr. Bentivolio. Thank you.
    Mr. Fink, there are tens of millions of Americans who would 
love to be paying taxes to be collected by the IRS and can't 
because they're out of work. Millions of young people, for 
example, many with college degrees and student loans to pay, 
still can't find jobs. Millions more underemployed and barely 
getting by. I try to ask this of most of the agencies that come 
before this committee: When the IRS was looking at conferences, 
or other ways that it spends our money, does it ever consider 
the current economic suffering being experienced by its fellow 
citizens? And I echo the sentiments of Mr. Gowdy.
    Mr. Fink. At this particular time, part of this conference 
initiative, the one that we're speaking to, was about the 
individuals that were having difficulty with complying with 
their filing and paying requirements. That is why we brought 
our leadership together, so that they could convey the message 
out to the folks that do the face-to-face interaction that we 
have to understand the taxpayer's perspective, that we have to 
stand in the taxpayer's shoe so we can better understand what 
they are experiencing when they're interacting with the 
Internal Revenue Service. That is what it is.
    What is particularly difficult this time with this coming 
to light, and I think it does tie to what you're talking about, 
you know, our agency is going through a period of where we're 
furloughing individuals for 5 days, and then you have this 
event come up. And while you can use excuses and say, well, 
this was 1 year money and it couldn't have been carried over, 
it is equally difficult to explain to our own workforce that, 
wait a second, we're getting 5 days off being furloughed and 
not being paid, and you spent this in 2010 on this conference.
    Mr. Bentivolio. I understand. In your circles, have you 
ever heard this saying: It's better to ask for forgiveness than 
it is permission. Ask for forgiveness than it is for 
permission, in your circles heard that before?
    Mr. Fink. Yes, I have heard that before, yes, sir.
    Mr. Bentivolio. And as for your apology, Mr. Fink, I will 
trust you, but I will verify by watching the IRS very, very 
carefully.
    Thank you, and I yield back my time.
    Mr. Meadows. Will the gentleman yield?
    Mr. Jordan. Yes. The gentleman from North Carolina is 
recognized.
    Mr. Meadows. Mr. George, can I pick up on one note? On page 
5 of your report it talks about the transfer of $3.2 million. 
Is that a transfer or was that a reprogram?
    Mr. George. It was a transfer.
    Mr. Kutz. I think it was a reprogram within the enforcement 
appropriations.
    Mr. Meadows. Can you check on whether it was a transfer or 
a reprogramming because it requires different statutory 
approval.
    Mr. George. We will do so, but our understanding is, it was 
permissible, though. That is, we did take a look at that and 
they did not violate----
    Mr. Meadows. So it was a reprogramming, because transfers 
require previous approval from the Appropriations Committee.
    Mr. George. We will confirm that, sir.
    Mr. Meadows. All right, thank you.
    Yield back.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Oklahoma is recognized.
    Mr. Lankford. Mr. Fink, we have heard an awful lot about 
the conference and what happened with it and how important it 
was to be able to get together, and I have no problem with 
conferences and people getting together. There's appropriate 
moments for that. But do you know the attendance? We've talked 
about this before. Do we know how many people actually attended 
the workshops? We understand that it was a full 8-hour day of 
workshops. Do we have a list somewhere of how many people were 
in the workshops and actually attended it?
    Mr. Fink. No, sir, we do not.
    Mr. Lankford. So there is no roll that's taken at those and 
there's no head counts of each workshop as they attended it, 
here is how many people were in the workshops?
    Mr. Fink. That's correct, sir, there was no roll.
    Mr. Lankford. The irony to me, as I go through the list of 
actual workshops--I'm sure you've gone back and taken a look at 
it--it's unbelievably ironic as you go through the list of the 
workshops that were held at this event. A few of those: 
``Making Telework Work.'' That--this particular one was not 50 
minutes, but we've got all these conferences you're having in 
2010, and all these people gather together for this very 
expensive conference, and they have a meeting about 
telecommuting and teleworking. Now, several years later now, 
our conference expense is much less because we're actually 
making that happen.
    How about this one: ``Political Savvy: How Not to Shoot 
Yourself in the Foot.'' Or ``Unintentional Intolerance: Don't 
Be So Nice.'' This is the other one: ``Why Doesn't Somebody Do 
Something?'' With all that happened with the nonprofits, it's 
ironic to me that in the middle of this conference there is 
training actually about receiving other people and speaking out 
when you see a problem, and then later, apparently, no one 
spoke out and saw a problem with it.
    ``Talk Matters: Authentic Conversations.'' Spent $7,000 
bringing someone in to talk about how to have authentic 
conversations with people. And an amazing one to me is the over 
$10,000 to pay someone to talk about intolerance, when at the 
same exact moment the IRS is in another area isolating people 
that are Tea Party or conservative groups, but yet we're paying 
$11,000 to teach people not to be intolerant.
    It's completely ironic to me as we walk through what 
actually occurred at the conference. You know as well as I do, 
this has got to shift. It has to shift and it will. Changes 
have already been put in place and should be kept in place. But 
I would also concur that accountability is important in this 
process.
    Thank you for your testimony, for the investigation into 
what's happening. With that, I want to be able to yield back. 
We need to be able to move on to our next panel.
    Mr. Cummings. Does the gentleman yield?
    Mr. Lankford. Yes, sir, I would yield to you.
    Mr. Jordan. The ranking member is recognized.
    Mr. Cummings. I just--I know that we'll be dismissing this 
panel in a minute, but I just wanted--first of all, thank the 
gentleman for yielding.
    Mr. Fink, I just wanted to say something to you before you 
leave. I know this has been difficult. I know it. Do you have a 
family? Are you married?
    Mr. Fink. Yes, sir.
    Mr. Cummings. Do you have children?
    Mr. Fink. Yes, sir.
    Mr. Cummings. You remind me so much of people in my own 
district. But I got to tell you something. I'm glad you came 
with the attitude that you came with. I think it was the 
gentleman who said that he appreciated it--I think maybe it was 
DesJarlais--that you came with an apology. We watched Ms. 
Lerner come and plead the Fifth. Shulman came, and basically 
rope-a-doped. And it was really rather insulting to watch what 
Mr. Shulman did. But you came, and you took some tough blows, 
and you were honest, and you laid it out as best you could.
    And I just want you to know, I appreciate that. I 
appreciate you doing that. I appreciate--and I really mean 
this. The fact that you are remorseful means a lot to me, and 
I'm sure other members of the committee may feel the same way.
    I'm just hoping that other people in your department will 
look, and I know that there are other people that did--made a 
lot of mistakes, too, but I'm hoping that there is a lesson in 
this, is that, you know, when things don't look right that 
somebody says, wait a minute, hold on, maybe we should not be 
doing this. And I realize that a lot of times when a person 
stands up and does that, that they may be criticized, but when 
I looked at that list of things that I think the gentleman just 
mentioned, all that stuff, you know, half of those things talks 
about leadership. Leadership, speaking up, how to be a more 
effective leader, you know.
    And I think what you've shown here, and I know it's 
painful, but you've shown some leadership. And I do believe 
that this is a transformational moment--and I think that's 
basically what you've said--for the IRS. I don't think the IRS 
will ever be the same, but it'll be a better organization, we 
hope, and we are certainly going to, you know, be looking at it 
through a microscope. Thank you very much.
    Mr. Fink. Thank you.
    Mr. Jordan. I thank the gentleman.
    Mr. Fink, let me thank you, too, for coming forward. Look, 
we've all made mistakes in life and your attitude has been 
appropriate and we appreciate that. And I appreciate the 
ranking member's comments.
    Want to thank our other two witnesses. We're going to 
dismiss this panel and get ready for Mr. Werfel. So we'll be in 
recess for just a few minutes while the staff gets ready for 
the next panel.
    [Recess.]
    Chairman Issa. The committee will come to order. We now 
welcome our second panel. Mr. Danny Werfel is the Acting 
Commissioner of the Internal Revenue Service and has been on 
the job for nearly 2 weeks. And with that, pursuant to the 
committee rules, we'd ask the witness please rise, raise his 
right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    Mr. Werfel. I do.
    Chairman Issa. Please have a seat. Let the record reflect 
the witness answered in the affirmative. And the procedure that 
we use today is not the ordinary procedure. We would normally 
put members of the administration first, but I think it was 
mutually agreed that this procedure made a lot of sense. And 
with that, you're recognized for your opening statement.

   STATEMENT OF DANNY WERFEL, ACTING COMMISSIONER, INTERNAL 
                        REVENUE SERVICE

    Mr. Werfel. Thank you, Chairman Issa, Ranking Member 
Cummings, and members of the committee. Thank you very much for 
the opportunity to appear before you today to discuss the work 
we have already done and will continue to do to reduce travel 
and training expenses, and to ensure proper financial controls 
are in place over meetings and conference approval processes.
    The 2010 manager meeting held by the Small Business/Self-
Employed Division in Anaheim, which was described in a recent 
Inspector General's report, is an unfortunate vestige from a 
prior era. While there were legitimate reasons for holding the 
meeting, many of the expenses associated with it were 
inappropriate and should not have occurred. Taxpayers should 
take comfort in knowing that these kinds of expenses are no 
longer permitted, and such a conference would not take place 
today.
    Since 2010, sweeping new spending restrictions have been 
put in place at the IRS, with the result that travel and 
training expenses have been dropped by more than 80 percent. We 
have limited employee travel and training to mission-critical 
projects. In fact, as the TIGTA report notes, costs related to 
large meetings dropped 87 percent between fiscal 2010 and 2012. 
Large-scale meetings like the one in Anaheim have not taken 
place in 2011, 2012, or 2013.
    Under the Treasury Department's leadership, the IRS has 
taken bold steps to ensure that travel and conference spending 
is appropriate, limited, and undergoes a thorough review and 
approval process. This is an ongoing effort, and we continue to 
examine areas associated with training and travel costs.
    As the Acting IRS Commissioner, I will do everything 
possible to ensure that tight spending protocols are in place 
at the agency to protect the use of taxpayer dollars, and I 
look forward to working with the committee on these efforts.
    Our work in this area is one part of a much larger effort 
to chart a path forward in the IRS. This is obviously a very 
challenging time for the agency, especially in light of the 
inappropriate actions that were recently brought to light 
regarding the 501(c)(4) application process. I look forward to 
discussing that issue with this committee as well.
    I intend to ensure that we are putting in place the 
appropriate measures to hold individuals accountable, address 
the processing of such applications, and review the broader 
internal controls and oversight mechanisms at the IRS.
    More broadly, I am reviewing the full range of IRS 
operations, processes, and practices to focus on how we deliver 
our mission today and how we can make improvements in the 
future. In that way, we will develop a better understanding of 
organizational risks wherever they exist within IRS. For 
example, in line with the TIGTA report on conference 
expenditures, we must ensure that we have the right controls 
and oversight in place to prevent wasteful or inappropriate 
spending in this and other areas. Where we find management 
failures or breakdowns in internal controls, we will move to 
correct these problems quickly and in a robust manner.
    Yesterday, in fact, I took action against two IRS employees 
after I learned of alleged inappropriate behavior. The IG 
forwarded information to us about a party during the 2010 
conference where food was allegedly provided free of charge in 
violation of government ethics standards. Two IRS employees 
involved in the party have been placed on leave, and we have 
started the process to remove them pending further review.
    I would like to be as forthcoming as I can with the 
committee with respect to these--with respect to these 
individuals, but because the process I just referred to has 
personnel implications, there is very little else that I can 
say publicly at this time about that process or the people 
involved.
    On all of these efforts I have described above, we will 
report to the President, the Treasury Secretary, and the public 
by the end of the month and give a progress update. We have a 
great deal of work ahead of us to review and correct the 
serious problems that have occurred at the IRS, and to continue 
the important work of the agency on behalf of the taxpayers.
    In the few days I have been at the IRS, it has already 
become clear to me that this agency is populated by thousands 
of dedicated public servants who are strongly committed to 
caring out the agency's mission. It's an honor for me to serve 
alongside them. And I am confident that together with Congress 
and other external stakeholders, we will address the current 
challenges and move forward with the indispensable work of this 
agency. Thank you, and I look forward to your questions.
    Chairman Issa. Thank you.
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    Chairman Issa. And I'll recognize myself for a round of 
questioning.
    Picking up sort of in the order in which you mentioned it, 
the two individuals that have been placed on administrative 
leave, in spite of administrative leave standards, they are 
available for transcribed interviews by this committee. Is that 
correct? You can give them things to do?
    Mr. Werfel. I'm aware of no prohibition that can be placed 
on this committee interviewing them or at least requesting 
interviews.
    Chairman Issa. Okay. It's the intention to request 
interviews of these persons of interest. And I would like you 
to also at some point today kind of run us through some of the 
troubles and perils you have in trying to take people out of a 
position and ultimately terminate them, demote them, deal with 
them, because I think that's one of the areas of interest.
    The vast majority of Federal workers are great workers. 
They do a good job. They are protected by civil service and 
unions. But at the same time it is vexing, I think, to all of 
us sometimes when you get really bad actors, how long it can 
take even when you know ultimately they're going to be 
terminated. And we may be able to help you in shortening that 
process. Ultimately we want due process, but my understanding 
is it can take up to 3 years to terminate somebody unless 
they're criminally indicted. Is that right?
    Mr. Werfel. I think I've heard of situations in which it 
can take that long, but, you know, you can move the process 
quickly, but I think very often it's not quick enough and it's 
something that certainly we should explore.
    Chairman Issa. And we'd like to work with you and other 
principal Cabinet positions and sub-Cabinet positions on that.
    When we had talked yesterday, I mentioned a question that I 
was very interested, and hopefully you've been able to 
ascertain this. In the earlier panel, we heard a lot about 
using event planners and how much the Anaheim conference cost. 
Were you able to get an estimate of, had your in-house people 
taken it fully, obviously the event planner would have been 
locked out of the process, but what they believe they could 
have saved the American taxpayers if it was done by the 
existing structure you had at the IRS?
    Mr. Werfel. Yes, and I appreciate the question. And as you 
just mentioned, you start with the $133,000 that were spent on 
the event planners, and, you know, that's a lot of money, and 
that's important, to make sure that we're saving that. And I 
think as the Inspector General pointed out, by not having IRS 
people designated to do this, who would have no incentives to 
keep the costs up, only to keep the costs down, you're not 
pushing as hard in the negotiation. And I asked my CFO to talk 
with the team and make sure we had an understanding of what the 
opportunity that was lost, and we think it could be up to about 
10 percent, you know. And 10 percent on a $4 million 
conference, now you're at $400,000. This is real money. And 
that's why I take the findings in the IG report very seriously, 
and this is a change that has to happen with respect to any 
activity going forward.
    Chairman Issa. Thank you. Additional question. We learned 
that approximately $3.2 million of the money spent on these 
conferences was redirected from accounts that should have been 
used to hire new employees. Is that still a possible practice, 
or has that been tightened up so that we could no longer think 
that we're asking for more examiners, we're asking to free up 
backlogs, and leftover money by not hiring these people gets 
spent on a conference and then the next year, of course, people 
are saying we need more money for inspectors.
    Mr. Werfel. It's a good question. It goes to how much 
flexibility there is in the IRS to spend the money that's been 
appropriated to them. It's my understanding that in this 
situation there was this $137 million appropriation to hire a 
certain number of employees and that there were an ability to 
take $18 million of that and spend it on training. And so you 
had this allowability to move certain amounts of money into 
training that would in theory supplement the enforcement 
actions.
    You know, this conference report--I mean, this IG report--
raises questions in terms of whether that training was done 
effectively or not, and it raises questions about are we 
spending our money effectively and could the money, the $3 
million of that $18, been moved into enforcement activities and 
had a higher ROI for the taxpayer, return on investment for the 
taxpayer? In this case it's hard to argue against that.
    But here it's something that we have to talk about. How are 
we evaluating the way IRS is moving its money into proper 
places to ensure that we're doing the best for the taxpayer? 
Obviously, the IG report raises important questions.
    Chairman Issa. And there's going to be a lot of questions. 
One that I think I'm particularly sensitive to, there's a law, 
a statute, 6103. Obviously, it's a unique situation in that we 
receive personal information all the time in discovery from 
government. But when it comes to the IRS, there's specific 
rules. And they are there for a good reason, and we want to 
respect that.
    As you know, in one of your previous positions, this 
committee moved forward an agenda for something called the DATA 
Act. And we did so because we wanted government-wide to have 
structured data so that no matter where data was, any 
particular cell of information would be well defined so that if 
you wanted to extract it, but take the rest, you'd be able to 
do so.
    Because you were in that previous job and you're now in 
this job, would this kind of improvement at the IRS and other 
government entities allow, when an organization like ours says, 
well, we want to know everything but we don't want 6103 
information, Social Security numbers and the like, can you send 
it to us with that being redacted by computers rather than the 
laborious task of human beings putting blackouts? From your 2 
weeks here and your many years elsewhere, what do you think 
about that?
    Mr. Werfel. I'll tell you one thing. We want to know, for 
example, on the better tracking of conference expenditures, the 
issue that we found, and in response to you proposing the DATA 
Act, working groups got together throughout the Federal 
financial management community to figure out, what does 
standardization mean and what would it open up in terms of 
knowing where our money is going?
    And what happens is, is when we obligate money, we don't 
necessarily capture all the relevant information that we need 
in terms of where is that money going? So, for example, we 
might obligate a set of money, but we don't know which 
recipient to attach it to or which vendor is getting that 
money. And so I look at the conference report and I realize 
there is not good tracking for where the dollars are going, 
fixes to our underlying accounting would address that. And you 
could have a much more comprehensive and systemic review of, 
here are the transactions, and here is how that money flowed 
out in terms of what did we spend on these types of activities 
across the entire spectrum.
    You know, the issue here is, how do you get there? How do 
you fix our underlying financial management so that you have 
more transparency into where that money is going. And that is a 
dialogue that, obviously, I have been having with this 
committee for quite some time, and now that I'm in an agency 
and, you know, on the front lines of this type of financial 
management, I'm looking forward to working with you to give you 
insight, now complemented from my prior experience.
    Chairman Issa. Well, thank you. And I think that perhaps 
you could be the greatest asset for us working together with 
the administration broadly in finding ways to implement that 
sooner, something that rather oddly is extremely bipartisan 
here on the dais.
    Mr. Cummings.
    Mr. Cummings. I agree with you, Mr. Chairman, that is 
definitely a bipartisan issue.
    Mr. Werfel, there is an organization in Maryland whose 
philosophy I disagree with, but I will fight with everything I 
have got to protect them. And it's called the National 
Organization for Marriage. And as you know, they came into 
another hearing and they said that their tax information had 
been released to the public. They found it on a computer, you 
know, for the world.
    I've got to tell you that that disturbed me greatly because 
people, American, the American people have to know that the 
information they are giving to the IRS, whether it's an 
application, whether it's, you know, a tax return, or whatever, 
is kept private.
    And, you know, I keep talking about truth and trust. The 
idea that the IRS has an impact on every single family in 
America, and the idea that people are feeling more and more 
vulnerable with regard to their information being distributed 
all over the Internet, I'm just wondering, I mean--I mean, how 
you feel about that, and do you have a plan in place?
    And I'm not trying to get into any investigations, because 
that's the IG, I guess, but I'm just wondering where are we on 
that? And I'm sure that must have disturbed you. You did hear 
about it, right?
    Mr. Werfel. I did. Let me start by saying, you know, this 
goes right to your question, that I can't speak to the issue of 
a particular taxpayer because----
    Mr. Cummings. Right I understand. Okay, just talk 
generally.
    Mr. Werfel. I would like to broaden----
    Mr. Cummings. Yeah, but I wanted to give--the reason why I 
mentioned the name of it, because it's a Maryland organization. 
But more important than that, it's not just the organization, 
Mr. Werfel, it's the idea that information that taxpayers 
consider to be confidential then appears on the Internet. And 
that goes, I'm talking, I'm telling you that goes to trust, 
too, all right. So you can talk generally.
    Mr. Werfel. I will. And I would say, as the chairman 
mentioned, I have been in this seat for 2 weeks and----
    Mr. Cummings. I understand.
    Mr. Werfel. No, and that's been enough time to make some 
very critical conclusions. And one of the conclusions that I 
have reached is there are at least three, but the three that 
jump out the most to me, the three most important risks that I 
have learned so far in 2 weeks that we need to manage and keep 
at a very low risk level are the risk that the taxpayers would 
feel like their information is not well protected; the risk of 
IRS acting with partiality and not being impartial; and the 
risk that we're not keeping our costs down. And those jump out 
at you. And it's critical that--and we're having issues in each 
of those areas demonstrated by the recent IG reports.
    And part of our improvement plan, part of our efforts, as 
you said in your opening remark, to restore the trust are to 
put in place stronger practices than we have today to make sure 
that we're hitting it out of the park on those three issues. We 
have to make sure that information is protected under 6103. 
Citizens have to feel like when they're submitting personal 
information about their finances to the IRS that is protected. 
We have to make sure, and this is so critical, that the IRS is 
acting impartially. And third, and from the first panel I think 
it was clear the concerns that you raised, that I agree with, 
we have to make sure that we're spending the taxpayer dollars 
wisely.
    And so for any constituent that you have, I think the key 
is, how is the IRS doing on those three things? And what I'm 
hoping to do in my tenure is to put in place new procedures, 
new disciplines, new checks and balances, to make sure that in 
each of those three areas we're not only performing better, but 
there's a transparency to what's going on in each of those 
areas and there's a partnership, a broader partnership outside 
of IRS that involves this committee and other committees, that 
involves other stakeholders, whether it's GAO, or local 
universities, or think tanks who can help us think through 
these issues. And it can't just be the IRS operating alone at 
the IRS. We have to make these improvements collectively.
    Mr. Cummings. Now, Mr. Werfel, I, first of all, I 
appreciate everything that you have said. I also think I 
appreciate you reaching out to the chairman and I within hours 
after you were appointed saying that you wanted to work with 
us. And I really do appreciate that. But I'm wondering if you 
realize the moment that you find yourself in. I'm not finished. 
This is a very critical moment in the history of the IRS, and 
you've been called, I'm sure you're an ordinary man, but you've 
been called to an extraordinary mission. And it's--I'm not 
finished--an extraordinary mission.
    You have the duty now to restore trust for millions upon 
millions, hundreds of millions of Americans who work hard, 
blood, sweat, and tears, efforts to raise their families, and 
they just want a fair shake. They don't mind paying taxes as 
long as the things that you just talked about are done. And I'm 
just wondering if you realize the significant moment that 
you're in and how we are depending on you. And we know you 
can't do it by yourself. That's why all of us have to work with 
you to make this happen. Do you really comprehend that, sir?
    Mr. Werfel. I do. I understand the enormity of the moment 
and the enormity of the challenge. The way that I look at it, 
in order to make sure that I'm keeping my eye on the ball, 
because you can get lost in how big this challenge is, and I 
don't want to do that. I want to get to work and roll up my 
sleeves. You know, I'm a civil servant. I have been a civil 
servant in government for 16 years and I have a deep 
appreciation for the work that the Federal Government does in 
almost every realm. I'm a champion for the work that the civil 
servants do.
    And when I was approached about this, and I realized there 
is a group of civil servants at IRS that are struggling, that 
we have an agency in crisis, and I realized also, and I think 
one of the reasons why I was approached is because I have had 
in my career a knack for solving tough government problems, 
that I was the right person to go at this time, given my 
understanding of how the government works, and given my passion 
for improving government, to be there.
    And so I arrived and I said, what are the right things we 
need to do? And there are some very tough decisions, very 
tough. Almost every day I'm confronted with a set of questions 
and challenges that would--you know, I've joked a few times, we 
should take some of these to the Harvard Kennedy School of 
Public Policy and show how tough this is, and they would 
probably say, you know, this is an unrealistic problem. There 
is almost too much public policy tension going on.
    Mr. Werfel. I get questions like that five times a day. And 
I'm realizing, again, that each of these questions are 
solvable. The issue is making sure that there is cooperation 
and understanding, patience and input from a diverse set of 
stakeholders in solving them.
    So the answer to your question is, I understand the 
enormity of the moment, but then I take myself down to the 
level of, how do you fix a problem in the Federal Government? 
What can I bring to the table? Who can I bring around the table 
to help me? And then I can get down to the business of what 
needs to be done.
    Mr. Cummings. We're going to work with you and give you all 
the support that we possibly can. And thank you very much.
    Mr. Jordan. [presiding.] Mr. Werfel, I appreciate your 
attitude and the fact that you grasp the gravity of the 
situation. You just said in your last comments that this is an 
agency in crisis. You came from OMB. How many folks worked for 
you at Office of Management and Budget?
    Mr. Werfel. I held a variety of different positions, but 
the highest ranking position I held I would say about roughly 
115, 120.
    Mr. Jordan. And you're going to an agency now that has 
about 90,000 employees and slated to add several thousand more 
when it comes to the enforcement of the Affordable Care Act. Do 
you think maybe this is just an agency that's way too big, got 
way too much responsibility? And now that we're adding 
something as complex, something that Senator Baucus has called 
a train wreck, now that we're adding that responsibility to it, 
I think you're right when you say this is an agency in crisis, 
and it's headed for more in light of what's coming.
    Mr. Werfel. I think a couple of reactions, if I could. One, 
I agree with the premise that we need to evaluate the structure 
of the IRS going forward--its size, its complexity. That's part 
of this movement forward in terms of----
    Mr. Jordan. Let me interrupt, because I've got 5 and these 
guys have to catch planes, and I apologize. And I do appreciate 
the attitude that you have displayed and what I've heard from 
your public service. But in order to deal with an agency in 
crisis, in order to start fresh and reform that, you have to 
the bottom of the current problems. You have to hold, you said 
in your opening statement, hold people accountable for what's 
going on.
    So let me ask you this. Have you talked to Lois Lerner in 
your time as--in your short time as head of the IRS?
    Mr. Werfel. Let me answer that question two ways. I have to 
be careful about revealing any elements of a personnel issue.
    Mr. Jordan. I didn't say that. I just said, have you talked 
to her?
    Mr. Werfel. But I have not talked to Lois Lerner.
    Mr. Jordan. At all?
    Mr. Werfel. No, I have not talked to Ms. Lerner.
    Mr. Jordan. And is she still an employee of the IRS?
    Mr. Werfel. She--again, there's some Privacy Act issues. 
Let me just say that the position that she held is now being 
held by another employee.
    Mr. Jordan. Is she still being paid by the taxpayers?
    Mr. Werfel. Again, if I could, there's Privacy Act issues. 
But let me just--and this has been brought up--the personnel 
process for how we deal with----
    Mr. Jordan. No, I'm just asking if you've had any 
communication as the head of the IRS, if you've had any 
communication with Lois Lerner, who was in front of our 
committee 2 weeks ago and refused to answer questions.
    Mr. Werfel. And if I could, if I can answer, because I 
think I understand your question, and the answer to your 
question is, my review of what is going on in the IRS involves 
working very closely with the IG and the Justice Department. 
And I have to be very careful----
    Mr. Jordan. Got it.
    Mr. Werfel. --about interfering with their work.
    Mr. Jordan. Got it.
    Mr. Werfel. And so we have an individual that you named 
that's a very important person to get information from. She is 
central to the----
    Mr. Jordan. So you think she has important information to 
offer this committee.
    Mr. Werfel. Absolutely.
    Mr. Jordan. And offer the United States Congress. And more 
importantly, offer to the American people.
    Mr. Werfel. Absolutely. And I know the Justice Department 
and the Inspector General are working to get that information. 
And importantly----
    Mr. Jordan. So how did she get to this paid leave status if 
you've never talked to her and you're the acting head of the 
IRS?
    Mr. Werfel. I can explain that. So we have an audit report 
that the IG has completed, and I am looking at that audit 
report, and that audit report has conclusions of management 
failures that are going on--that went on in the IRS. And I, my 
first approach on accountability, because one of the things I'm 
charged to do is to make sure we're holding people accountable, 
and I have a completed audit report that has conclusions of 
mismanagement. And the first thing I'm doing is going through 
those findings and determine where were those management 
failures so critical that that individual no longer--can no 
longer serve a position of public trust in the IRS.
    Mr. Jordan. Okay.
    Mr. Werfel. So from the audit report alone I can make 
decisions.
    Mr. Jordan. Without communicating with her.
    Mr. Werfel. There is enough evidence in the record about 
the mismanagement, yes.
    Mr. Jordan. Have you, subsequent to her going on paid 
leave, subsequent to her coming in front of the committee and 
refusing to answer questions, have--do you think it would be 
appropriate for you to talk to her only in this context: to 
encourage her to come in front of the committee to get to the 
truth so we can hold people accountable and we can restore the 
trust and meet those qualifications you outlined in your 
opening statement, you outlined in your answer to Mr. Cummings.
    Mr. Werfel. I will.
    Mr. Jordan. You will go----
    Mr. Werfel. I will do two things. I will get to the bottom 
of this----
    Mr. Jordan. No, I'm asking will you encourage her to come 
in front of the committee and answer questions? You told us you 
want to hold people accountable, you want to get to the truth, 
you want to restore trust. The central figure in this drama 
thus far is Lois Lerner, and she has refused to answer 
questions. I'm asking, will you encourage her to reevaluate her 
decision not to answer questions and come in front of this 
committee?
    Mr. Werfel. And I'm going to answer your question. There's 
a complicated element to your question. But if I could--if you 
can indulge me. When I arrived at the IRS----
    Mr. Jordan. I think it's not complicated. I think it's real 
simple. I don't see how encouraging--you could make a public 
statement, you don't have to talk to her--you could say, I 
encourage Lois Lerner to come in front of the committee so we 
can, according to what you told Mr. Graves the other day, we 
can hold the proper people accountable, we can restore public 
trust in the Internal Revenue Service, we understand the 
gravity of the situation we are in, I would encourage her to 
come forward and give the committee the information and answer 
the questions we'd like to ask her. Will you do that?
    Mr. Werfel. Again, first of all, whether she comes and 
testifies is a matter for her and her attorney.
    Mr. Jordan. I understand that. She's exercising her Fifth--
I understand that. I'm asking will you encourage her? Mr. 
Cummings just outlined how the enormity of the situation you 
find yourselves in--yourself in--you said, I get the gravity of 
the situation I find myself in, a 90,000-employee IRS, slated 
to hire a bunch more people to enforce the Affordable Care Act, 
I get how serious this is. The central figure thus far in the 
investigation is Lois Lerner. She's refused to answer questions 
in front of this committee. I'm asking you as the guy who's 
charged with fixing this agency, which is out of control, an 
agency in crisis, to use your words, will you encourage Lois 
Lerner make a statement? You're running this agency. Make a 
statement. I encourage Lois Lerner to come in front of the 
Oversight Committee and answer the questions of the Members of 
the United States Congress.
    Mr. Werfel. Two responses to that. Yes, as a general matter 
I encourage anyone who has information----
    Mr. Jordan. I didn't ask as a general matter.
    Mr. Werfel. Including Lois. Including Ms. Lerner. I 
encourage anyone, including Ms. Lerner, to come in front of 
this committee, to cooperate with the Justice Department, to 
cooperate with the Inspector General. So I apologize if I 
misunderstood your question.
    Where I was going--and maybe I got confused by your 
question--was I have to work very closely and follow certain 
rules that have been laid out for me by the Justice Department 
and the Inspector General about me talking to individuals in 
any way that might interfere with their investigation, and 
that's what I was. I just didn't want to overcommit.
    Mr. Jordan. No, and I'm over time and I want to--I just 
want to be clear. So you're going to encourage Lois Lerner, 
you're saying today in front of this committee you encourage 
Lois Lerner to come in front of this committee and answer 
questions.
    Mr. Werfel. Absolutely.
    Mr. Cummings. And just with the chair's indulgence. And 
anybody else.
    Mr. Werfel. Yes, absolutely.
    Mr. Cummings. All right.
    Mr. Werfel. Anybody who has information about this 
situation needs to provide that information. It's too 
important.
    Mr. Jordan. Got it. My time is--I apologize. The gentlelady 
from New York is recognized.
    Mrs. Maloney. Welcome. Clearly the way that some groups 
seem to have been targeted is impermissible and absolutely 
outrageous. But what type of things should send up warning 
signs?
    I'd like to ask you about a series of activities and 
whether or not you think Congress should clarify what is meant 
by them and whether or not they would be considered partisan 
political activity. I only have a short number of time, so if 
you could just answer yes, no, or don't know.
    For example, is advocating for a particular bill to be 
defeated considered partisan political activity? Yes, no, or 
you don't know.
    Mr. Werfel. I'm not sure if I can apply the rule of law to 
that set of facts. The key--my understanding of political 
activity orients around trying to get an individual elected to 
office for the purpose of 501(c)(4) review.
    Mrs. Maloney. That's what we're talking about. Okay, how 
about advocating a candidate to be elected or defeated?
    Mr. Werfel. Yes. That is square.
    Mrs. Maloney. And how about advocating to overturn a 
Supreme Court decision?
    Mr. Werfel. Again, there's a complexity that I can't speak 
to. My understanding of primary political----
    Mrs. Maloney. Well, how about advocating for birth control 
or trying to defeat access to birth control, should that 
activity enjoy tax-free status with funds raised from anonymous 
donors?
    Mr. Werfel. Again, I don't want to speak as an expert on 
these issues. I think right now my key understanding of how you 
measure political activity is how you advance a candidate--if 
you're advancing a candidate for office or otherwise.
    Mrs. Maloney. Well, the report that the--but I would say 
all of those decisions are rather political, very political, in 
my opinion.
    Mr. Werfel. Let me offer----
    Mrs. Maloney. But maybe we need to clarify them. And the 
IG's report on this issue explained that a lack of clear 
guidance on how groups are determined to be eligible for tax-
exempt status was one factor that contributed to the decision 
made by the IRS personnel.
    But one key reason this problem exists is because of the 
difference between the original statute Congress passed and the 
regulation the Treasury Department subsequently issued. And the 
original statute passed by Congress provides that organizations 
may qualify under 501(4)(c) only if they engage exclusively in 
social welfare activities. And that seems to be very clear. If 
you're exclusively in social welfare, you have the tax-exempt 
status.
    But in 1959, a regulation was issued providing that 
entities could qualify under 501(c)(4) as long as they engaged 
primarily in social welfare activities. So would you--so 
requiring organizations to be primarily engaged in social 
welfare activities is very different, I'd say significantly 
different, from requiring them to exclusively engage in social 
welfare. Wouldn't you agree?
    Mr. Werfel. I would.
    Mrs. Maloney. Okay. And I know the regulation now is more 
than 50 years old, but do you know why Treasury changed it from 
exclusive to primary?
    Mr. Werfel. I do not.
    Mrs. Maloney. You do not. And is there any reason why you 
think we should not use the exclusive test today.
    Mr. Werfel. I think it's something that I don't--I want to 
work with the Treasury Department and committees in Congress to 
explore. Right now I have a regulation that I have to abide by 
that uses the word ``primary,'' and so that's what I'm working 
with. But one of the Inspector General recommendations----
    Mrs. Maloney. I know that he recommended, and also at the 
last hearing about the IRS we asked Neal Wolin who testified, 
he was the Deputy Secretary of Treasury, if he would consider 
the effort by the IRS and Treasury to issue a new regulation 
that returns to the exclusive test, and he said he would. And 
my question to you is, would you work with Mr. Wolin and others 
on the possibility of clarifying this and going back to the 
exclusive test?
    Mr. Werfel. I've already initiated discussions with 
Treasury Tax Policy around updating the regulation, but I don't 
want to presuppose what the interpretation of exclusivity is. I 
think that has to be a very broad process of seeking comment 
and input to make sure that we get the right definition.
    Mrs. Maloney. Would you welcome setting up a meeting with 
members in a bipartisan way of this committee and with Treasury 
on this specific issue?
    Mr. Werfel. Yes.
    Mrs. Maloney. I think that's very important because this is 
the Government Oversight and Reform Committee, and if we forget 
the reform part of it then we are likely to have the same 
situation in the future. And I think the fact that the series 
of questions that I put before you, which, in my opinion, are 
clearly political, but in your opinion are not, need to be 
clarified and need to be well understood by the employees at 
the IRS and the general public.
    My time has expired. Thank you.
    Mr. Jordan. The gentleman from Florida is recognized for 
his 5 minutes.
    Mr. Mica. Let me first yield a minute to our current chair, 
Mr. Jordan.
    Mr. Jordan. I thank the gentleman.
    Mr. Werfel, will you also commit to giving the committee 
every piece of information that you possibly can when you get 
the chance to review it and get it to the committee?
    Mr. Werfel. Yes, subject to 6103.
    Mr. Jordan. I understand 6103, I understand that. But right 
now the committee staff is interviewing an employee of the IRS, 
Mr. John Shafer. His attorney sent us a letter, to the 
committee staff, on Monday, June 3rd, and it says, ``In order 
to allow for a more complete interview of Mr. Shafer we sought 
permission from the IRS to provide the committee with limited 
documents in Mr. Shafer's possession. The request was also 
denied.'' I'll make sure that minority staff gets to see this--
or minority members get to see this as well.
    We then have an email from the following day from the IRS 
to committee staff, Ms. Kirsten Wielobob, where she says, 
``Unfortunately, we are unable to produce the requested 
documents in advance of Mr. Shafer's scheduled transcribed 
interview before the committee.''
    Here's an employee of yours being interviewed in front of 
the committee who wants to present documents to get to the 
truth so we can hold people accountable and do exactly what you 
described in your statement, and we want to know why you won't 
give us the documents.
    Mr. Werfel. It's not a question of won't give you the 
documents. It's a question of just having enough time to pull 
the documents----
    Mr. Jordan. My understanding is, it's a handful, it's just 
a handful of emails.
    Mr. Werfel. I don't know. I mean, you said the interview's 
ongoing, so I don't have specific information. But as a general 
matter, when we get a document request from Congress, we have 
to pull the entire data file down. So you named an individual, 
we would go and take their entire email down, and then we have 
to review it for 6103. And some of these individuals have been 
at IRS for years. So you're talking about thousands and 
thousands of pages. So the notion is not that we're withholding 
the documents, the notion is we're acting very quickly and 
effectively to try to get that information as quickly as 
possible.
    Mr. Jordan. And I know I'm over my time and I got to get 
back. But he has--he has the documents. He wants to give them 
to you and say review them so we can--I mean it's a handful in 
his possession, it's not his whole computer, it's not a whole 
file, it's a handful of documents.
    Mr. Werfel. If he's willing to hand me documents right now 
or expeditiously----
    Mr. Jordan. No, he was willing to do it on Monday so we 
could have it for today's hearing and you guys didn't do it.
    Mr. Werfel. Well, I have to look into that. I don't have 
any facts about that.
    Mr. Jordan. I thank the gentleman for his time and I yield 
back.
    Mr. Mica. Mr. Werfel, at today's hearing we have been 
trying to focus on conferences gone wild with IRS. I guess you 
have put some people on suspension. And that's with pay?
    Mr. Werfel. It is because of the process, but also we're 
making--doing the right procedures to move towards termination.
    Mr. Mica. The other thing, too, is I heard Mr. Fink, I 
guess he got a promotion after that and a bonus. And these--
several of these folks got bonuses, too. Is there any way to 
recoup some of the rewards for bad behavior?
    Mr. Werfel. I will look into that. I don't know the 
personnel rules in terms of whether we can recoup bonuses.
    Mr. Mica. Well, we can change the law. And the other thing, 
too, the Inspector General has said that no laws were broken. 
And if no laws are broken, maybe we need to put some laws in 
place. Maybe you could recommend back to us.
    Mr. Mica. And I heard Mr. Cummings, too, and I have seen 
the same thing, folks getting up, working their tail off in 
this country, trying to feed their families, make ends meet, 
pay their taxes. And then, what is it, the plastic squirting 
fish, $64,000. You were at OMB, weren't you, just before you 
came here?
    Mr. Werfel. I was, yes.
    Mr. Mica. Are they sleeping at OMB?
    Mr. Werfel. No. In fact----
    Mr. Mica. I mean, that's Office of Budget and Management. I 
know you oversee the budget, but somebody's got to be looking 
at the management and operations. We do that as a committee. 
We're getting our information, is a bit old here. But I really 
wonder what's going on in the Office of Budget and Management. 
And you were there, now you're in IRS. So somewhere we've got 
to make the changes.
    The only thing that turned this whole spigot off was the 
hearing that we did. And then, as I said, thank God for the guy 
in the hot tub. All the investigation I did preliminarily did 
nothing like inflaming the public that the guy in the hot tub 
did. And I said--you know, I showed today the $20,000 
drumsticks, $64,000 for trinket for IRS employees, $135,000.
    Now you can bring under control the cost of the 
conferences, right?
    Mr. Werfel. Yes. Even----
    Mr. Mica. You've done that.
    Mr. Werfel. They're brought significantly under control and 
we could go deeper.
    Mr. Mica. That's only because of the scandal and the 
investigation that we went after, period. Please don't tell 
me--nobody did a darn thing until Mr. Cummings and some of us. 
Come on.
    Mr. Werfel. Well, if I could, I'm not disputing your point.
    Mr. Mica. Well, I don't have--I don't have much--too much 
time. But have you been to the White House yet as----
    Mr. Werfel. No.
    Mr. Mica. Okay. How many times--I mean, Mr. Shulman went, 
was it 160 times?
    Mr. Werfel. I've heard that number. I don't have any 
evidence. But since I started at the IRS I have not been to the 
White House at all.
    Mr. Mica. Okay. And finally, again, within your purview I 
think you have the ability to bring some of these costs under 
control, and also holding people accountable. Granted, you were 
not there, you were at OMB in another watchdog position, and 
somehow this slipped by OMB and everybody else. But now you 
have the ability to hold people accountable.
    I think folks want people held accountable who have misused 
their position, cost the taxpayer money. We look forward to 
working with you.
    The first thing I want out of you as IRS Commissioner is to 
tell us what we need to do to change the law, and we'll look 
forward to your recommendation, so that people can't be paid 
who have done misdeeds with the public trust.
    Mr. Mica. Yield back.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Virginia is recognized.
    Mr. Connolly. Thank you, Mr. Chairman.
    And welcome, Mr. Werfel, welcome back to the Oversight and 
Government Reform Committee. While there were some stories when 
you were appointed about who is Dan Werfel, those of us here in 
the Oversight and Government Reform Committee knew the answer 
because you are a frequent flyer here at OGR and a very valued 
witness. And we thank you for your past service and certainly 
want to be as supportive as we can be in your new assignment, 
which as the ranking member indicated, is pretty awesome.
    Just to clarify one thing, you were being very careful in 
your response to Mr. Jordan on Ms. Lerner. I think there are 
two aspects of that to be careful about. One is there is 
precedent where predecessors, senior officials in IRS, made 
certain statements based on an IG report that then were 
considered by a judge to be prejudicial to an IRS employee, 
thus yielding a very undesirable outcome, which was the full 
reinstatement of an employee that people were trying to 
actually have dismissed, with back pay. And I assume you're 
being careful because obviously you want to avoid that pitfall.
    Mr. Werfel. Yeah. If I could, Congressman Connolly, there's 
a couple of reasons why I want to be careful. And also I want 
to be as transparent as possible in terms of how the process 
is.
    You know, when I arrived at IRS, I wanted to make sure 
people understood what I'm seeing, the path I'm taking, and a 
couple of things. One, the process to hold people accountable, 
to discipline people is long and complicated. And as you point 
out, you don't want to move too quickly without being fair and 
thorough. Fairness is critical, thoroughness is critical, 
because of what you just said. If I move someone forward for 
dismissal and I don't have a strong record, then I'm going to 
lose my case to try to dismiss them and they're going to get 
reinstated with back pay.
    Mr. Connolly. Right.
    Mr. Werfel. And I know people are going to lose patience, 
but I'm going to be as fair and thorough as possible.
    Mr. Connolly. That's correct. Sometimes up here we can 
afford the luxury of sort of cutting corners in due process. 
You cannot as a manager.
    Mr. Werfel. Yeah. And if I could clarify one other thing, 
the other important point is that in my review, and 
particularly in discussing or asking questions of the 
individuals that have knowledge about this situation, the 
Inspector General and the Justice Department have said to me, 
we are asking these questions, and if you come in and ask these 
questions at the same time as us, it could be disruptive to our 
very critical investigation.
    Mr. Connolly. Exactly.
    Mr. Werfel. So what they've said to me is, let's make sure 
we're all on the same page with what questions need to be 
asked, we are professional investigators, and we'll ask the 
questions, we're going to keep you informed, Acting 
Commissioner, in real time. And that's going to enable me to 
make sure there is a clean and fair and thorough investigation 
and get this committee the information it needs as quickly as 
possible.
    Mr. Connolly. And one other point, Mr. Werfel. Again in 
your response to Mr. Jordan, who was exhorting you to encourage 
this particular individual to come back to the committee and 
testify, and your answer was a broad answer, which didn't fully 
satisfy Mr. Jordan, which was, I'm going to encourage everybody 
to----
    Mr. Werfel. Absolutely.
    Mr. Connolly. But I want to be clear real clear. You can't 
be put in the position nor should you be put in the position of 
interfering with the exercise of the Fifth Amendment rights of 
anybody, including an employee, no matter what his or her 
status is at the IRS. Is that correct?
    Mr. Werfel. That's absolutely correct.
    Mr. Connolly. All right. Because I want to be real clear 
about that. A lot of people holding up the Constitution saying 
they believe in the Constitution, well, the Fifth Amendment, 
the last time I checked, is one piece of that Constitution. And 
it is a constitutional right, whether we like its exercise or 
not, and this individual has a right to exercise her Fifth 
Amendment right without interference by us or by you.
    Mr. Werfel. That is correct.
    Mr. Jordan. Would the gentleman yield briefly?
    Mr. Connolly. If the chairman will indulge me, because I--
--
    Mr. Jordan. That's why I was very careful to use the word 
``encourage.'' He can't compel her. I understand that.
    Mr. Connolly. And, Mr. Chairman, I think I understood you 
meant that. Thank you for clarifying.
    All right. Mr. Werfel, one final question. You've been 
given a 30-day review assignment by the President of the United 
States. Can you just describe what's going to be entailed in 
that review and what you hope will come out of that review in 
trying to address management practices, morale, and everything 
else in this huge, farflung enterprise known as the IRS?
    Mr. Werfel. Yes, I can. There's three parts to what the 30-
day review entails. First part is accountability, and my 30-day 
progress report to the President and to the Treasury Secretary 
will detail the framework that we're using to make sure that 
we're getting to the bottom of it and holding people 
accountable. It'll have concrete examples, that I think we're 
all now aware of, of where I am actively taking personnel steps 
to hold people accountable. And then it will have a forward-
looking view to make sure there's transparency in how this 
process is going to play out in the coming weeks.
    The second part of the report deals with fixing the problem 
with 501(c)(4) reviews. And there's a couple of pieces there. 
One, we've got to implement the nine IG recommendations fully 
and thoroughly. Second, we've got to get the backlog down. We 
still have an existing backlog of 501(c)(4) applications. It's 
an unacceptable backlog, and as has been widely reported, 
hundreds and hundreds of days that these taxpayers have been 
waiting for their answer, unacceptable. We have to move swiftly 
to knock that backlog down.
    And the third part of fixing the problem is, what is the 
right process going forward? The process that we've been using 
previously has not worked effectively. So in that report will 
be a framework for a new process.
    And then, very quickly, the third part is a broader review 
of IRS which includes some of these other things, cost cutting 
and 6103 protection and other things that we want to make sure 
we're looking at across the IRS to show the American people 
that we're serious about transformative change to improve this 
agency.
    Mr. Connolly. Thank you.
    And, Mr. Chairman, one other thing just consistent with our 
committee. I know Mr. Werfel is aware of it. But we held 
hearings very late, I think it was the last hearing our former 
colleague Todd Platts, chaired on identity theft and the 
growing problem of identity theft with the IRS. And I would 
hope that that gets sufficient review as well. Thank you.
    Mr. Jordan. Gentleman from Utah.
    Mr. Chaffetz. Thanks, Mr. Chairman.
    Thank you, Mr. Werfel. You've got your hands full and we 
wish you well. We need you to be successful.
    Are you familiar with the internal review that is happening 
at the IRS on this subject?
    Mr. Werfel. Yes. I'm essentially establishing and running 
the internal review with my leadership team.
    Mr. Chaffetz. Are you also aware of the internal review 
that Mr. Miller had initiated? This was done March through May 
of 2012.
    Mr. Werfel. I'm familiar with it and I'm at this point in 
time working with the team to make sure that I understand all 
the various----
    Mr. Chaffetz. Have you seen it?
    Mr. Werfel. It's a good question. I have talked to 
employees that were involved in that review.
    Mr. Chaffetz. Who did you speak with?
    Mr. Werfel. The primary person that I spoke with was Nancy 
Marks, who led that review.
    Mr. Chaffetz. What about Holly Paz?
    Mr. Werfel. I have not spoken to Ms. Paz yet.
    Mr. Chaffetz. You have not seen this document?
    Mr. Werfel. That's the thing. I'm not aware of a specific 
document that says----
    Mr. Chaffetz. So they did an internal review, but you 
haven't been given a document?
    Mr. Werfel. That is correct.
    Mr. Chaffetz. Is there a timeline for this review? We have 
been requesting since May to get a copy of the timeline. We've 
been assured by the IRS we'd get it. We still don't have it 
here today. We wanted to have it before this hearing. When will 
you provide us that timeline?
    Mr. Werfel. I was unaware of that specific request. Let me 
check and I will get back to you with a specific timeframe.
    Mr. Chaffetz. What did you learn about this document--this 
review? Are you telling me that there's a review and there's no 
document?
    Mr. Werfel. At this point. And this is frustrating. Look 
I'm arriving at the IRS and finding a lot of----
    Mr. Chaffetz. How convenient that there's no documentation 
of the internal review of this very--are you telling me there's 
no email?
    Mr. Werfel. I didn't say that. I thought what you were 
referring to is there kind of a former Acting Commissioner 
Miller asked for a review and here is the report to Mr. Miller. 
If there is a report I don't have it, and once I do it have it 
you will have it. That's the--that's my approach. But----
    Mr. Chaffetz. And I appreciate that. Would that include the 
background information or the other information? If there is no 
formal----
    Mr. Werfel. As long as there's no 6013 issues, yes.
    Mr. Chaffetz. And when would we--what's reasonable for me 
to expect that you would deliver that to the committee?
    Mr. Werfel. I don't want to overpromise. What I will 
promise----
    Mr. Chaffetz. But what's reasonable?
    Mr. Werfel. I will get back to you. It depends----
    Mr. Chaffetz. When would you get back to me by?
    Mr. Werfel. I will get back to you by the end of the day 
tomorrow with a reasonable timeframe for that request.
    Mr. Chaffetz. I think that's fair. I appreciate it. This is 
something that we obviously want to look at in this internal 
review.
    Had you met Mr. Shulman prior to your taking on this 
position?
    Mr. Werfel. Yes, roughly 5 times over the course of 4 
years.
    Mr. Chaffetz. At the White House?
    Mr. Werfel. I had----
    Mr. Chaffetz. I mean, you're at the White House, so----
    Mr. Werfel. Yes. I can recall, I think, two meetings or 
seeing him twice at the White House.
    Mr. Chaffetz. What were the topics of those meetings?
    Mr. Werfel. One of them was a signing ceremony for the 
signing of the Improper Payments Elimination and Recovery Act. 
I remember him being at that signing ceremony.
    The other was a meeting that was held in the Eisenhower 
Executive Office Building. The topic of that meeting was--the 
issue was this. The IRS--and Mr. Shulman was representing the 
IRS--was expressing concern to the Social Security 
Administration, and former Commissioner Astrue was in the room. 
The concern was that when the Social Security Administration 
releases information on deceased individuals through the Death 
Master File publicly----
    Mr. Chaffetz. Okay. I look forward to hearing more 
information about that. My time----
    Mr. Werfel. It was an improper payment issue. My primary 
responsibility at OMB was improper payments.
    Mr. Chaffetz. Okay. Mr. Werfel, I appreciate it. Let's keep 
going. How many criminal referrals have happened relating to 
the topics we have been discussing?
    Mr. Werfel. Criminal referrals? I don't think there's been 
any yet, but the Justice Department and the Inspector General 
are actively reviewing those issues. Interviews, documents, 
they're getting to that question.
    Mr. Chaffetz. Do you believe--you know, the IRS received 
some $80 million through the stimulus. My own personal purview 
here is that here comes the stimulus, they thrown in hundreds 
of billions of dollars, I for the life of me cannot figure out 
how to stimulate the economy the Obama administration gave $80 
million to the IRS. I don't understand how that stimulates the 
economy.
    But can you see where maybe--and I guess it's more of a 
statement than a question--that sort of this abuse of money is 
that they were just overflowing with cash? Suddenly had this 
infusion of $80 million--oh, $4 million for a conference, oh, 
that's fine. I just, at some point Mr. Werfel, my time is 
running out, I would hope you get back to that.
    Last question, what does it take to actually get fired at 
one of these organizations? I mean, you've got people who you 
say accountable, accountable, accountable, the Speaker wants to 
know when somebody is going to jail, I want to know what it 
takes to actually fire somebody.
    Mr. Werfel. It's an important question, and I think this 
committee is asking for recommendations on how we can improve 
the IRS. Part of that improvement is how do we improve 
timeliness of accountability. This is one of the questions that 
we can surface in terms of looking at our personnel rules and 
determining are they sufficient to meet the country's needs in 
terms of when something goes wrong who's held accountable. I am 
certainly open to discussing that with this committee and 
others.
    Mr. Chaffetz. Encouraging retirement is not holding 
somebody accountable for misdeeds and misspending the American 
people's money.
    Thank you. I yield back.
    Mr. Jordan. Could you fire somebody for refusing to answer 
questions of the United States Congress related to a matter at 
the IRS?
    Mr. Werfel. I don't know. I would have to ask. I would need 
legal counsel to advise me on that.
    Mr. Jordan. Okay. I think you probably can.
    The gentlelady from California is recognized.
    Ms. Speier. Mr. Werfel thank you. I'm hoping that under 
your leadership we're going to have a kinder and fairer and 
more frugal IRS. Can you promise us that?
    Mr. Werfel. I think those are three adjectives that I'm 
willing to support, certainly.
    Ms. Speier. All right. One of the problems that I think 
initiated the Anaheim conference was the fact that you were 
coming to the end of a fiscal year and there was unused money. 
Correct?
    Mr. Werfel. There was--yes, there was extra money 
available, and clearly in this case that money wasn't deployed 
to its highest and best use.
    Ms. Speier. Okay.
    Mr. Werfel. There's absolutely no doubt about that.
    Ms. Speier. But you worked at OMB before, so you've seen 
this phenomenon before, it's something I'm very concerned 
about, which is as various Federal agencies come to the end of 
the fiscal year and they have money left in accounts, they want 
to spend it down because there's fear that if they don't spend 
it down they will not be fully funded in the subsequent year. 
Is that correct?
    Mr. Werfel. That is a major problem.
    Ms. Speier. Okay. That's a major problem.
    Mr. Werfel. Yes.
    Ms. Speier. What would you recommend that we do government-
wide in terms of addressing what is--I think IRS is just one 
example of what's going on in every agency in the country in 
the Federal Government when they've got money at the end of a 
fiscal year and they don't want to lose it, so you use it, and 
you find some way to use it. And in this case it was an Anaheim 
conference and somewhere else it's, you know, some other form 
of training or it's swag or whatever.
    So how do we fix that? Do we just freeze any kind of 
purchases in the fourth quarter unless it goes through a 
different process?
    Mr. Werfel. I think it's a very difficult question to 
answer. I think what happens at a lot of agencies is because 
this is known as a classic financial risk that we face in the 
Federal budgeting process there are chief financial officers 
and chief operating officers that are closely reviewing all 
expenditures that occur at the end of the fiscal year to make 
sure that money isn't being deployed for unnecessary or 
inefficient purposes.
    Ultimately, the goal is to make sure that the resources 
that are available are targeting areas that are going to have 
positive return on investment for the taxpayer, positive 
programmatic impact. If I see an expenditure that goes on in 
September I don't automatically think that might not be a good 
expenditure because if it's doing something like, for example, 
helping the IRS, you know, track down a criminal, get to 
someone who's doing identity thefts, getting to someone who's 
defrauding the government----
    Ms. Speier. Right. I mean, there's a difference between 
doing an criminal investigation and having a conference.
    Mr. Werfel. Absolutely.
    Ms. Speier. So there's a way of distinguishing. I guess 
what I'm asking you, I've got limited time, is for you to give 
us some advice. I mean, you've come from OMB, you know this is 
a phenomenon, you know that we've got to address it. What would 
you recommend that we put in place that would at least reduce 
the likelihood that this kind of crazy spending, this shopping 
spree mentality, goes on in the fourth quarter of a fiscal 
year?
    Ms. Speier. Let me move on to----
    Mr. Werfel. Let me just--I think one idea that comes to 
mind very quickly, it's not an idea but it's a fundamental 
principle, transparency. There should be more transparency 
about what goes on with Federal spending across the entire 
spectrum. And I think if you have transparency in terms of the 
kind of purchases that are happening at the end of the fiscal 
year it would bring light of day to appropriators and to 
others. So let me just offer that.
    Ms. Speier. All right. Thank you.
    Now, the Inspector General's report indicated that the IRS 
did not adequately track or document money spent on the Anaheim 
conference. I guess I'd like to know how the IRS has addressed 
this concern. If you've already answered this question you 
don't have to answer it again. Okay.
    Mr. Werfel. No, I haven't. There is a variety of different 
recommendations in the IG report for IRS. We have either 
implemented or in process of implementing them. We are updating 
our financial management manuals to make sure that when 
conferences occur that they are tracked and that they meet 
robust accounting requirements to make sure we know where the 
money is going. So we basically updated the requirements for 
managers in terms of how they report information on 
conferences.
    The irony here is that we have very few big conferences 
anymore. We've really knocked down in very significant ways, 
more than 80 percent the nature of this activity. Nonetheless, 
we have still put in new procedures to make sure that when it 
does happen, even at this very reduced level, that it's tracked 
more appropriately.
    Ms. Speier. Okay. Finally, and this is more of a generic 
question I'd like to ask you from your experience at OMB, I 
have got a bugaboo about swag. I think the Federal Government 
does not need to be in the business of buying anything that 
resembles swag. And I think we spend a fair amount of money. I 
could look at all of those coins that Department of Defense 
prints out, and I'm sure it's very expensive.
    So what would you say about swag and how widespread is it?
    Mr. Werfel. I mean, I'm in complete agreement. One of the 
interesting parts about this, my choice to go over to IRS, is 
that I have a history of responsibility around cutting waste, 
reducing error. I was pretty central to efforts at OMB to cut 
down on conference spending, to cut down on swag. We put in, in 
an executive order, while I was at OMB restrictions on the 
spending of any money on swag. And as I think has been 
testified to, the types of things you saw going on in 2010 are 
significantly less likely to happen today. Are they zeroed out? 
I don't know. But I don't want any swag purchased at the IRS 
while I'm Commissioner for sure.
    Ms. Speier. Thank you. I yield back.
    Mr. Jordan. Thank you.
    The gentleman from Oklahoma.
    Mr. Lankford. Thank you.
    Mr. Werfel, it's good to see you again.
    Mr. Werfel. Yes.
    Mr. Lankford. On the Budget Committee and then on Oversight 
and Government Reform we've had numerous conversations before. 
In your previous role you've done an excellent job.
    Mr. Werfel. Thank you.
    Mr. Lankford. And I look forward to you taking this on, and 
there is much to be done. That had to be an interesting 
feeling, to walk in the first day into IRS and think where do 
you start. So might as well start here. So thanks for doing it, 
thanks for taking it on.
    You know very well and you mentioned it earlier, in your 
earlier statement, that Americans have lost trust. I've been 
overwhelmed with individuals that have contacted me when I've 
been in district or have contacted my office and said, I've 
always suspected I was being targeted, but I started giving 
politically, and that next year is when I was audited by the 
IRS and I've always wondered about that over the last 3 years.
    So this has moved from nonprofit groups that we now know 
were targeted to ask for additional information and giving a 
nonresponse to individuals that now rise up and say, I think I 
was, as well. So as this broadens, and as we begin to look at 
it farther, those questions will continue to rise, and we will 
continue to have people contact our office and say, why was it 
I've been in business 40 years, I've never been audited, I 
started given politically and now I have.
    So those are all questions that will have to be addressed, 
and obviously 2 weeks in the office you can't address that, but 
add it to your list because that's coming as well.
    Mr. Werfel. I will. I do have one reaction to it, which is, 
you know, this process, I said we have to fix the process, I'm 
going to give a 30-day report that provides an update. One of 
the process fixes that I think is vital is more checks and 
balances in how these decisions are being made. Again, I think 
one of the problems that you have is if the IRS is too insular 
in how it's carrying out its work and there isn't kind of 
active oversight and check and balances. And I think if we can 
structure the right sets of checks and balances it would give 
comfort to your constituents that there's change amidst and 
there are controls in place to make sure that fairness is being 
applied.
    Mr. Lankford. Right. There's not much comfort for them. I 
can assure you of that.
    You mentioned in your opening statement as well some 
personnel matters that are going on right now.
    Mr. Werfel. Yes.
    Mr. Lankford. That is known, it's out there. The former 
Director of Collection Policy is now the current Director of 
Implementation and Oversight of the IRS Affordable Care Act 
office. There was a reception that was held where 18 people 
were invited. We have access to it, I'm not going to list names 
as we talk through this. But the email track coming in from the 
hotel reads this way. ``While I'm out''--this is someone in the 
hotel informing someone else what to do--``While I'm out there, 
there will be some hospitality for 18 people in room 431. It is 
to be kept confidential. The only person to discuss with 
this,'' and I'll leave name out, ``is the contact for the 
event. It's posted on the hospitality board but the one I have 
attached is the credit card information for billing. This card 
is only to be used for the food and the bartender fee. The beer 
and the wine will be paid by a credit card given to you at the 
end of this function,'' and inserted this IRS employee's name. 
Underlined and in bold: ``Do not post this to the room. It 
can't be shown as a room charge. I have been,'' insert a 
person's name here, ``permission, and you should use that to 
close out the credit card. But this person knows he's buying 
the booze and you shouldn't have to.''
    So this confidential report that we now know was about 18 
people that were there, they had $44 a person in what they 
listed here as booze and had $65 a person listed as food on it. 
One of those individuals, or two of those individuals maybe, 
are now under administrative review and are on paid leave.
    You've got to start this investigation, if you're that 
familiar with it you bring it up in your opening statement. The 
question remains do you know right now who are the other 18--
the other 16 people that were involved in that?
    Mr. Werfel. I have asked that question, we are gathering 
that information, very important, and anything that we do that 
we make sure we have valid, reliable information. So we're 
working on that and that information will be made available.
    Mr. Lankford. Do you know, it was 18 people were set aside 
for hospitality, do you know if it's even 18 people that were 
there, was it more or was it less?
    Mr. Werfel. It's my understand that's in the right range, 
but again I don't want to commit to a particular number because 
we're still doing our review.
    Mr. Lankford. You're welcome to do your review. Are you 
familiar with any other senior-level or any of the management-
level IRS officials that were there at this reception? These 
are obviously management-level folks when it's a confidential 
reception that was held as a part of this event in Anaheim. We 
don't see any kind of tracking how the invitation was done, and 
we're still trying to determine who was invited and how were 
they invited to this. Are you aware how that happened?
    Mr. Werfel. Again, I'm not yet ready to articulate the 
specific, but my commitment is we are working through that 
issue and we will get you those answers.
    Mr. Lankford. How about the purpose of the reception? Are 
you able to identify it at this point? Again in a confidential 
reception we have yet to see anything in writing that actually 
dictates this reception is being held for this.
    Mr. Werfel. Not yet, not the purpose. But what--we were 
able to determine enough to determine that two employees may 
have, and we're looking into it, but we believe there's 
significant evidence of a violation of an ethical code of 
conduct.
    Mr. Lankford. You understand all the issues with this, not 
only just for IRS, but this is the Director of Implementation 
and Oversight for the IRS Affordable Care Act office. I mean, 
there's already a lack of trust there, then we're trying to 
figure out who was this gathered, what was this, we have 
inappropriate use of funds here. We're trying to figure out all 
the dynamics of it. So there's a lot of things we have to 
connect to get the facts. As you're gathering that, do you have 
a timeframe on when you'll have that together?
    Mr. Werfel. I'm not going to commit to one, but I will, 
like I offered to Congressman Chaffetz, I will get back to you 
expediently on a timeframe so you can of a notional sense how 
long this will take.
    Mr. Lankford. Great. I appreciate that. But can you give us 
a ballpark? Because you're in the process. Obviously you're 
walking into the middle of this. But you've got enough facts 
and information that you've put somebody on administrative 
leave already at this point.
    Mr. Werfel. That's correct. That's correct.
    Mr. Lankford. This report came out 3 months ago. Then 4 
days ago, basically, our committee staff started contacting and 
asking questions about this reception. Within 2 days we've got 
somebody that's on administrative leave and is gone 2 days 
after we start asking about it. So enough information has risen 
up quickly you've got serious concerns about this.
    Mr. Werfel. I do.
    Mr. Lankford. We're trying to figure out as you're 
gathering information the timeframe of gathering that 
information.
    Mr. Werfel. Let me just state this, and I might have to 
reach out to you more to kind of update you as we go. The 
process, the personnel process that we're about to undergo, and 
the reason why people get placed on administrative leave before 
they're eventually dismissed is because there's a fact 
gathering and a response. That's a 30-day initial process. So a 
lot is going to be able to be gleaned about that situation over 
the next 30 days.
    Mr. Lankford. Okay. Terrific. Thank you. Look forward to 
getting that timeline.
    Mr. Jordan. Mr. Horsford.
    Mr. Horsford. Thank you, Mr. Chairman.
    Mr. Werfel, good afternoon.
    The Internal Revenue Service holds the general public and 
businesses to high standards when filing their taxes. The same 
is true of nonprofits who must maintain certain standards for 
their tax-exempt purposes. The fact that the IRS is now 
demonstrating a pattern of, in your own words, management 
failures to meet the very standards that they hold the public, 
businesses, and nonprofits to is very troubling and, frankly, 
unacceptable. You are one of the most powerful agencies in the 
United States, and there are serious consequences when any 
citizen, business, or nonprofit commits fraud or is suspected 
of wrongdoing with regard to their taxes or tax filings.
    What steps are being taken to reform the agency now to make 
sure you hold yourselves to the same standard you hold the 
American people?
    Mr. Werfel. That's a very important and good question. Let 
me walk through the steps for you.
    First of all, I think it's important to point out, if you 
look at the IRS on the day the report was issued and the IRS 
today, there has been replacement of leadership at very 
critical levels. I am a believer that accountability is driven 
from the top down. The IRS today has different leadership: the 
Acting Commissioner slot, Deputy Commissioner for Services and 
Enforcement, Commissioner of Tax-Exempt Organizations, Director 
of Exempt Organizations unit. If you're familiar with the IRS 
org chart, I am working my way down and pointing out that from 
the time the IG report was issued to today, there is leadership 
replacement at every level. We've added new leadership. 
Obviously myself. I have also brought on other people.
    In particular, I want to point out a person by the name of 
David Fisher, who is a high-ranking official from the 
Government Accountability Office, an expert in risk management, 
coming from GAO. He is now the Chief Risk Officer of the IRS, 
and he is indispensable, I think, in these efforts to make sure 
that we are changing the culture and the approach at IRS.
    Other steps: accountability. I'm continuing to review the 
information in the audit report, as I mentioned earlier. Just 
based on that audit report there are gross examples--there are 
examples of gross mismanagement. And you can make 
determinations, and I am doing it as thoroughly and as fairly 
as I can, you can make determinations that there are 
individuals, because of their mismanagement practices in this 
case, can no longer hold positions of the public trust at the 
IRS. Those reviews are ongoing. Again, fair, thorough, but 
expedient.
    I can keep going, but I just want to give you confidence 
that we have an action plan, we have things taking place that 
are in immediate term to get at these issues. It's hard, but we 
are working very diligently to start to correct these problems.
    Mr. Horsford. And I appreciate that. And I want to say in 
respect to the opening remarks by our ranking member, as well 
as the chairman, I hope under your leadership we can take a 
step back, look at the whole of the agency, look where we need 
to strategically reform, and not just moving players and actors 
within the agency but fundamentally reform, which is one of the 
missions of this committee. And I know you touched on the 
importance of information being protected, the impartiality, 
and the issue of spending wisely, which is one of the reasons 
that we're here today.
    And I do just need to touch on one concern that I have as 
well, being from Nevada. I don't believe that Anaheim or places 
like Las Vegas should be singled out somehow as because of the 
place that the waste that the agency was involved with--which 
was wrong--that somehow these places should be targeted and 
prohibited from having conferences held, which is why my 
colleagues throughout our delegation and I introduced H.R. 
1880, the Protecting Resort Cities From Discrimination Act, to 
prevent Federal agencies from blacklisting resorts and casinos 
as conference destinations. It's not the destination that's the 
problem, it's the internal failure to spend appropriately, and 
it doesn't matter where that spending occurs. So I just want 
that noted.
    I do want to follow up in my concluding question to Ms. 
Maloney. You said that you have to follow this primary 
regulation.
    Mr. Werfel. I do.
    Mr. Horsford. The law is exclusively. Why don't you have to 
follow the law?
    Mr. Werfel. Actually I have to follow the law and 
regulation----
    Mr. Horsford. So the law is exclusively.
    Mr. Werfel. The law is exclusively, and the implementing 
regulation is primary, and that's part of the challenge.
    Mr. Horsford. So the regulation is not in compliance with 
Federal law, correct?
    Mr. Werfel. I don't know that I can answer that question. I 
think that's something that we have to review with----
    Mr. Horsford. Well, you said earlier that primary activity 
is not the same as exclusive.
    Mr. Werfel. It's not and----
    Mr. Horsford. So therefore it's out of compliance with 
Federal law.
    And I believe, Mr. Chairman, that agencies must follow the 
law. We, as Congress, set the law. We haven't changed the law 
from exclusively. And it's important that you implement your 
regulations accordingly. I'm glad to hear that you're reviewing 
that----
    Mr. Werfel. I am.
    Mr. Horsford. --with the Treasury and that you've agreed to 
some bipartisan participation, because the law is exclusively.
    Mr. Werfel. And I want to be clear, the ambiguity that's 
created between the law saying exclusive and the regulation 
saying primary is a problem, and it's, you know, it's one of 
the contributing----
    Mr. Horsford. So therefore the reg needs to be changed to 
be in compliance with Federal law. Unless Congress changes the 
law, that's the standard, and that's what the agency should be 
held to.
    Mr. Werfel. We're looking at those reg changes.
    Mr. Horsford. Thank you, Mr. Chairman.
    Mr. Jordan. The gentleman from North Carolina.
    Mr. Meadows. Thank you, Mr. Chairman.
    Thank you, Mr. Werfel, for your candid answers today. I 
want to follow up a little bit on some of these.
    Do we know exactly when Ms. Hall, Sarah Ingram Hall, left 
to go and take on her primary responsibilities with the 
Affordable Care Act?
    Mr. Werfel. I don't have an exact answer on that, but I 
think it's in the range of spring/summer 2010. It's in that 
range. We're still working through with Ms. Hall to make sure 
we have a better understanding of exactly when she left her 
role to go over to the ACA.
    Mr. Meadows. So you'll be able to get back to us----
    Mr. Werfel. Yes, we're working that issue very closely.
    Mr. Meadows. All right. The other day at the House 
Appropriations Committee you talked about--I guess the bonus 
was brought up and you said you would get back to them.
    Do you have an answer for us today on the bonus that was 
paid?
    Mr. Werfel. Can you remind me which question.
    Mr. Meadows. It was basically what kind of a bonus was paid 
to Sarah Ingram Hall. And you said you would get back to them. 
And I assume that you went back to your office or your staff 
did to check on it. Can you tell us today what that bonus was?
    Mr. Werfel. I will ask my staff if they can look into that. 
I don't have that information at my fingertips, but I can get 
that for you.
    Mr. Meadows. Did you go back and look into it after----
    Mr. Werfel. We had a session where we went through all of 
my commitments that I made in that hearing and made sure that 
we were getting to the answers to each of them. So I don't know 
yet----
    Mr. Meadows. So you have not had a discussion following 
that hearing about bonuses for Ms. Hall?
    Mr. Werfel. No, there were several issues raised in that 
hearing about bonuses and I just don't want to misspeak. There 
was a couple of questions that I had to go back to the office 
and make sure I was getting answers on. Again, this is--I'm 
going to get you the information, this is just about get you 
the right information.
    Mr. Meadows. Does your staff--does your staff know today? 
Do they know----
    Mr. Werfel. No. We're going to have to go back to the IRS 
and work through and get that information.
    Mr. Meadows. So they don't know?
    Mr. Werfel. I don't think I have the right staff here to 
answer that particular question. But again, this is not--this 
is--we'll get you that information.
    Mr. Meadows. All right. Let me go forward with a little bit 
of this.
    Mr. Meadows. Can you give us assurances here today that 
targeting outside of the 501(c)(4)s, did not happen with 
regards to auditing, with regards to penalty waivers, with 
regards to fees? Can you give us those assurances that that is 
not happening systemically across the service?
    Mr. Werfel. Here's what I can say. I'm not aware of it at 
this time, but I am----
    Mr. Meadows. Have you investigated it?
    Mr. Werfel. I am working through that. I have been here for 
2 weeks. There is a lot to cover. But I'm not ready to make 
those assurances because I have not yet completed the review.
    Mr. Meadows. So you cannot give us those assurances?
    Mr. Werfel. It would be a mistake for me to do it.
    Mr. Meadows. I agree with you. I'm not saying that you 
should, because I believe that we don't know.
    Mr. Werfel. But I also would clarify that I'm--at this 
point in time, I'm not aware of it. Because if I was, it would 
be stopped and you would be made aware.
    Mr. Meadows. Okay. You also talked about, you know, we need 
to have more people in the accountability, just previously in 
your testimony, when you said it was, you know, when you are 
singular, you need more layers of accountability. But yet, we 
saw with the 501(c)(4), that was not something that was unique 
to just Cincinnati. It involved a number of people in 
Washington, D.C., the technical advisors, and dozens of people 
knew about the problem. So how does more people actually fix 
the problem?
    Mr. Werfel. Well, I'm not sure--or I would say that more 
people fix the problem. We could end up with a solution, and I 
would be very open to that solution because I'm also interested 
in cost cutting, with the solution that has less overall 
people. What I meant by more people was that we have people 
that have different responsibilities, maybe an independent 
board like the IRS oversight board or something like that, who 
can look in and report more quickly whether it's through 
whistleblowing, or write to this committee or something like 
that, so again, the American people----
    Mr. Meadows. So we need an independent board to oversee----
    Mr. Werfel. We have one. We have one. We have the IRS 
oversight board. The question is, and this is something that 
I'm exploring, and I'm being very candid----
    Mr. Meadows. Right.
    Mr. Werfel. --about different ideas because at this point 
we are just at the idea phase, is maybe that board or other 
type of mechanism could be inserted to do ongoing reviews. 
Because if you go back in time and if you had a situation where 
there are ongoing reviews through 2010 and 2011, you might be 
in a situation where this was picked up more quickly. And 
that's what I want to look into.
    Mr. Meadows. All right, have you had conversations with 
Beth Tucker with regards to 501(c)(4)s, and what she felt like 
was the issue?
    Mr. Werfel. I have had many conversations with Beth. She is 
a critical part of the leadership team, yes.
    Mr. Meadows. Okay, and did she see it as targeting? Was she 
aware of it?
    Mr. Werfel. I think--well, she was not aware of it. I think 
we all have collectively looked at the situation, and agree 
that the singling out of applications for extra scrutiny based 
on political labels can fairly be described as targeting.
    Mr. Meadows. So she was never aware of it until the report 
from the IG came out?
    Mr. Werfel. At this point in time, I'm not aware that she 
was aware of it. I'm not going to speak concretely----
    Mr. Meadows. So she wasn't----
    Mr. Werfel. --but this is part of the process. Again, I go 
back to the guiding principles: Thorough, fair, and expedient. 
And before I come out here and make a conclusion, I have to be 
given the opportunity to do a thorough, and fair, expedient----
    Mr. Meadows. But I'm asking you about your personal 
conversations with her.
    Mr. Werfel. Okay, and based on those personal 
conversations, I'm not aware at this time of the exact timing 
that she knew of the situation.
    Mr. Meadows. Okay. And my last question is, is with regards 
to Nancy Marks.
    Mr. Werfel. Yeah.
    Mr. Meadows. She was the assistant to Sarah Ingram Hall, is 
that correct, technical senior advisor according to the flow 
chart under the IG's report, so she actually worked----
    Mr. Werfel. I actually think at some point because people 
moved around, but she was the technical advisor within----
    Mr. Meadows. When did she first go to Cincinnati to talk to 
them about that? Because obviously, she would have had to flown 
to get there, or paid mileage so we would have some 
documentation. When was the first time that she went to 
Cincinnati?
    Mr. Werfel. I'm going to qualify it by saying I would like 
to double confirm, but I think it's around March 2012.
    Mr. Meadows. Well, we have narrowed it down that far. When 
in March of 2012?
    Mr. Werfel. That I would have to get back to you. I don't 
have that----
    Mr. Meadows. Because we know within a time frame because 
that's critical. Because we had testimony that was given in 
Ways and Means on March the 22nd, 2012, and if she went before 
that, it would indicate that we have people that sent her to 
check on things while that testimony was being given in 
another. So that's critical, that time frame.
    Mr. Werfel. I will try to get you more precision on that.
    Mr. Meadows. All right. And so you have got a follow-up. 
Thank you, Mr. Chairman, for your indulgence.
    Mr. Jordan. I thank the gentleman. Real quick, Mr. Werfel, 
on Sunday, David Plouffe was on the Sunday shows, and they were 
discussing the targeting of conservative groups in the tax 
exempt division of the IRS, and he made the statement that this 
was not at all political. And I'm just curious, do you agree 
with Mr. Plouffe's assessment of what went on in the tax exempt 
division of your organization, of your agency?
    Mr. Werfel. I don't think I know the answer to the 
question. We have an audit report. The audit report doesn't 
find any evidence.
    Mr. Jordan. I'm asking, do you agree----
    Mr. Werfel. I'm going to try to answer. The audit report 
that I'm relying on, it is a very important document and fact 
pattern to review. It does not, at this time, find any evidence 
of political animus, or motivation with respect to this 
targeting.
    Mr. Jordan. To date, has any--has there been any group on 
the list who was targeted who is a left-leaning group? Have you 
identified one group as a left-leaning group, yes or no?
    Mr. Werfel. I have to--I can answer that question once I 
make sure that I have appropriate 6103 redactions, so I can get 
back to you on that question, but I have to do a 6103 
redaction.
    Mr. Jordan. Are you aware? Are you aware of any group that 
has come forward and said that they experienced the same kind 
of targeting several groups on the political right have 
experienced?
    Mr. Werfel. Here is how I answer that question. That we 
have started to produce documents to Congress, to Ways and 
Means, and Senate Finance. In those documents are additional 
helpful information that is coming to light that gives more 
information about the BOLO list, and different types of 
organizations that were on the BOLO list, and based on that, 
and the problem with that document is that there is a lot of 
6103 information over it. So----
    Mr. Jordan. Well, let me ask it this way, then. Is there 
anything on the BOLO list, any terms--I have yet to see one 
term on the BOLO list or the three terms initially used to 
target and develop the list, initial terms were Tea Party, 9/12 
and Patriot, and then the BOLO lists, I have yet to see any 
terms on that list that would frankly apply to left-leaning 
groups. They only seem to apply to right-leaning groups. We 
have only had right-leaning groups been identified and come 
forward.
    So I guess I'm back to the first question. Do you agree 
with Mr. Plouffe that it's--that this was not political? 
Because I don't see how you can reach any other conclusion but 
that it was political, but he says it's not.
    And I want to know what you, as the guy who is in here 
cleaning up an agency, and it seems to me, in order to solve 
the problems, get to the bottom, hold people accountable, you 
need to know the motivation. And right now the only logical 
conclusion is this was politically motivated. I want to know if 
you agree with that.
    Mr. Werfel. Here is how I would answer the question. If the 
audit report did not find it, it would be inappropriate for me 
to speculate that there was political motivation. It would be 
inappropriate for me to speculate----
    Mr. Jordan. Why is it inappropriate for you to speculate? 
I'm asking you to draw a conclusion based on the evidence, and 
the evidence is this: Not one group on the left has been 
identified for harassment. Hundreds, for years, have been 
identified on the right. So not one on the left, hundreds on 
the right, and yet you are still saying I don't believe this is 
politically driven?
    Mr. Werfel. I'm not--I'm saying I don't have enough 
evidence to make a conclusion at this time. And what I'm 
further saying is that there is data----
    Mr. Jordan. Do you think reasonable people, though, could 
look at the evidence and say, there is enough evidence to 
conclude that it was politically driven, because we have yet to 
find one group on the left, and we have got hundreds of groups 
on the right?
    Mr. Werfel. I think the problem is and there is a tension 
here, the tension is that there is more relevant documents and 
information that needs to be looked at before we can----
    Mr. Jordan. Okay, and any of that relevant documents that 
you--anything you have seen thus far that shows a people--
groups on the left were targeted. Have you seen anything that 
points to that yet? I'm just asking today.
    Mr. Werfel. There are--I am unable to answer that question 
because I would be legally unallowed to answer that question 
because I have to go through a 6103 process and make sure I 
give you an answer that I can legally give you. And I have not 
gone through that process yet. So...
    Mr. Jordan. 6103 says you can't give away personal tax and 
identify who they are. I'm not asking you that. I'm just 
asking, is there any group on the left? I'm not saying tell me 
the specific group. I'm saying, is there any group on the left 
who has been targeted? I mean, I don't know how anyone--I would 
think we have folks on the--my colleagues on the other side of 
the aisle who would say, this sure looks politically driven to 
me, because they don't know of any--no Democrats told me a 
group on the left has targeted.
    Mr. Cummings. Will the gentleman yield just for a second?
    Mr. Jordan. Absolutely.
    Mr. Cummings. Would you define what is left and what is 
right? No, I'm serious. What is left and what is right? I mean, 
that's a hell of a question. Well, I'm just curious, I mean, I 
just want to know. I want the benefit of your answer, but I 
want to know what's left and right.
    Mr. Jordan. Yeah, well, I mean, do we know any groups with 
the term progressive or liberal in their title that were 
targeted? We don't know of any. Do you know groups with Tea 
Party, Patriot, 9/12 government, reduce government spending who 
were targeted, hundreds. That's--that's what I'm--that's what 
I'm getting at.
    Mr. Werfel. And what I was saying is, I was brought to the 
IRS to make sure we are enforcing the rule of law. It would 
violate the law for me to answer your question directly, but 
what I will say----
    Mr. Jordan. I don't know how it violates the law because 
you are not giving any specific--I'm not telling you to say, 
oh, you know, the Hamilton County Progressive Institute was 
denied. I'm not telling you to give me a specific thing and 
talk about them specifically. All I'm saying is, have you 
discovered any, name one. That's all I'm saying, because Mr. 
Plouffe seems to think there are, and they are saying it is not 
political, and yet we have received no evidence that would 
validate Mr. Plouffe's statement.
    Mr. Werfel. All I can say is that that information is 
forthcoming. We are running a process. It's fair, it's 
thorough, it's expedient and it's legal and these answers will 
be available. But I cannot provide premature answers before I 
go through the appropriate processes. I just can't do it.
    Mr. Jordan. The gentleman from Maryland is recognized.
    Mr. Cummings. Thank you very much. First of all, I want to 
thank you, Mr. Werfel, and I'm reminded that you have only been 
there for 2 weeks. But this is a subject that's bugging the 
hell out of me, and I want you to help me with this.
    You know, I keep hearing this argument that because we had 
some bad players and people not doing their job properly, that 
there is going to be a problem with addressing the 
responsibilities under the Affordable Care Act. This is 
America. Everybody on this--in this committee has fired people. 
Everybody. And if they hadn't fired people, they just keep on 
living and keep on working. We don't, because we have a bad 
actor, we don't suddenly quit Congress. We don't suddenly go 
off our mission. We let them go, and then we try to find 
somebody else who can do the job.
    Probably everybody in this room has been through some kind 
of process like that. A lot people in this room have gotten the 
jobs they got because somebody didn't do the job properly. This 
is my point. I don't buy this Affordable Care Act because we 
had some bad players, we cannot do the job. This is America. 
And if we took that attitude, we would never get anything done.
    So I'm asking you, and from what you have seen, I know that 
you said you are going from the top to the bottom and you are 
going off--you are doing what you got to do. Tell me this: Do 
you feel confident that doing the things that you can do, that 
you can find the appropriate people and create--help create the 
climate whereby we can get the Affordable Act responsibilities 
done pursuant to the law, which is the law, by the way, no 
matter how many times people may want to do away with it, it is 
the law. And we are--we are charged with the constitutional 
duty of enforcing the law and making the law happen, and you 
now have a responsibility of dealing with the law. Can you find 
the people that can do it?
    Mr. Werfel. Yes.
    Mr. Cummings. And can you carry out the responsibilities?
    Mr. Werfel. Yes.
    Mr. Cummings. And the reason why I ask that, is that I 
swear to God, it just bothers me, this no-can-do attitude. Not 
from you, but Members, oh, God, we have some bad employees. We 
can't do this. No, it doesn't work that way. My father was a 
former sharecropper with a second grade education. And one of 
the things I love about my dad, God bless his soul, he used to 
always say to us, he would say, there is no such word as can't. 
And he said, you've got to, you can get things done. And he was 
able to raise his seven children, educate all of them well, and 
successfully build his church with my mom on a second-grade 
education.
    This is America. And as I said to you a little bit earlier, 
you have got a tremendous responsibility. But I hope, and I 
pray that you don't go in there with the attitude that because 
we have got some bad actors, and because the climate was not 
what we want it--wanted it to be, that we can not carry out the 
mission of this country. We are better than that. We are better 
than that.
    And if we take that kind of attitude, I don't know what we 
will be able to accomplish at any time. And there is no Member 
of this Congress, as I said before, who has not had to let 
somebody go, who has not to fire somebody. So you feel 
confident about it. And how will you go about that? Because I'm 
tired of that argument.
    Mr. Werfel. Well, you're absolutely right. We have a legal 
responsibility, a tough operational challenge. I have started 
to look through our ACA work very closely. We have hit all of 
our key milestones, and I think we are on a path to hit the 
rest of our key milestones. I think one of the first things 
that I have done is I have had to put in a new individual who 
is taking on the responsibilities of the Commissioner of 
Services and Enforcement, which oversees the Affordable Care 
Act work. She is one of the most talented civil servants in the 
IRS. She has an enormously effective track record at getting 
things done. She came over from part of IRS called Large 
Businesses and International.
    And for me, it is a lot about leadership. You get the right 
leadership in place, she is going to be able to recruit the 
right talent in place, hold individuals accountable, get us to 
our milestones, and get the job done. But I'm going to be very 
active in this area because it is one of our critical 
operational priorities, and I'm responsible ultimately to make 
sure that we hit all of our deadlines, and my commitment is to 
do everything we can to hit them.
    Mr. Cummings. Thank you very much.
    Chairman Issa. Well, they don't get any easier in this 
hearing. So the good news is, this one is nearly done. The bad 
news is, that you agreed to come back and work with us.
    Mr. Werfel. I will.
    Chairman Issa. So let me just--let me just get back to--put 
that back up. You are familiar with the congressional act that 
created the Taxpayer's Bill of Rights.
    Mr. Werfel. I won't say I'm an expert at it, but yes.
    Chairman Issa. Have you--when you look at it, if you would 
get back to us and talk to us about, essentially, I will get it 
back on the screen, 1996 Act, which amended the Code from 1986, 
and so on. But it established taxpayer advocates and so on.
    Mr. Werfel. Yes.
    Chairman Issa. And it is an area in which it is not the 
jurisdiction of this committee, but hopefully, you would look 
at that and say, aren't there some--some things that weren't 
upheld that you will fix by better management? And perhaps, 
some things that need to be put into that--the symbolism of 
that Act that would cause the Ways and Means Committee or 
whatever committee of jurisdiction, I presume it's them, to 
update it, because I think that part of the confidence that we 
are asking you to reestablish is literal. Some of it is 
symbolic. Some of it takes time, but some of it, like today's 
hearing, with your willingness to come forward, we have started 
that.
    Mr. Werfel. And I think the people of the IRS, and I have 
mentioned this before, they are shocked and appalled by what 
happened in the 501(c)(4) situation. They are embarrassed by 
some of the inappropriate spending in the Anaheim situation. 
There are institutions within IRS like the National Taxpayer 
Advocate who holds as their primary mission to help taxpayers 
navigate through the tax system in a way that is fair and 
understandable. And I have spoken to our National Taxpayer 
Advocate, and she is ready, as a lot of the other leaders in 
the IRS are, to take on the types of transformational change 
that is necessary to make a difference here.
    Chairman Issa. I appreciate that. I might suggest that the 
next time letters come from Members of Congress, both sides of 
the aisle as they did here, that perhaps that somebody who 
should see them as an ombudsman and begin asking is there a 
there there? Because I think one of the challenges is, in the 
opinion of the chair, you have had two former individuals, one 
acting, Mr. Shulman, who--they didn't do their job. They are 
not managers up to the task. So I can't go back through every 
Commissioner, although I have met a number of them, but I can 
say, look, your two predecessors, not so good, just not so 
good. And I think we have met them. We have seen them. The 
American people have watched them, and they are disappointed in 
what they saw in hearings, but I think they were disappointed, 
as you are, in what happened on their watch.
    A couple of things. You're aware by now of the 
investigation related to procurement, about a half billion 
dollars worth of open contracts originated within a HUBZone 
here in the District of Columbia, are you?
    Mr. Werfel. I have had very preliminary briefings on it, 
but I am familiar with the issue that you referring to.
    Chairman Issa. This, in the opinion of the chair, from what 
my investigators have gleaned, represents a--and again, only in 
the opinion of this chair, but I believe strongly that fraud 
was perpetrated; that it included misconduct both by personnel 
within the IRS, and obviously, by the applicant.
    Now, you both strongly disagree. But I certainly think that 
if it is within your power, to immediately, or as soon as 
possible terminate any further procurement on a contract that, 
from our estimation, regardless of how it was procured, is 
costing the taxpayers every time you buy off of it more money 
than a replacement contract would cost, that your willingness 
to attack that--it may only be a couple of million dollars in 
savings, but I think symbolically, it is a big difference if we 
can stop that one sooner if you have the power to do so.
    Mr. Werfel. I don't know enough yet to comment conclusively 
or concretely, but I will committee to work with you on this to 
see what I learn, share it with you, and make sure we have a 
good path forward.
    Chairman Issa. Well, and I will enlighten you with the time 
I have remaining with one small fact. When this applicant 
applied for a HUBZone, something that the ranking member and I 
believe that when you have historically underemploying business 
set systems which is what this was, Northeast Washington, D.C., 
the gentlelady, delegate isn't here, but this is an area that 
could use some job creation. The applicant in that case clearly 
said, yes, I'm going to create jobs in Northeast Washington. 
And then created only a few jobs with some college students 
whose parents were spending $30,000 or more to send them to 
Catholic University, not part of the underprivileged portion of 
Northeast Washington, D.C. Ultimately, they were making a few 
dollars looking at computers, providing no significant jobs, 
certainly, no job to the indigenous people of that region of 
the District of Columbia. They had no real presence there, and 
I think, you know, an abusive set-aside to people on both sides 
of the aisle, sometimes agreeing or not agreeing on some set-
asides, but the abuse of the set-aside means that Mr. Cummings 
in Baltimore and parts of his district that are HUBZones, those 
people didn't get an opportunity to bid on that lucrative 
contract. Other people in the District of Columbia in those 
areas didn't. So I'm beating a dead horse, I don't mean to do 
so, but I think we are very passionate about fixing that 
particular contract.
    Mr. Cummings. Would the chairman yield?
    Chairman Issa. Of course.
    Mr. Cummings. First of all, I--Mr. Chairman, I want to 
thank you for raising that issue. You are absolutely right. I 
think that whatever the law is with regard to HUBZones and what 
have you, Mr. Werfel, I, too, want to make sure that they have 
been properly addressed. I think people should play by the 
rules. The rules have been set up in a certain way, and if 
people are not going by the rules, I got a problem with that. 
And I would appreciate your response. I know you got to look 
into it, but----
    Mr. Werfel. I will. I absolutely will.
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Issa. One last point, and this is a discovery 
point and we have talked to your counsel for a few moments 
before I came back to the dais, who I understand has only been 
there about the same amount of time or a little less than you. 
So I don't want to be unfair to anyone.
    This committee would like to dispense with all of our 
discovery on the broader case as soon as possible. I know you 
would like to have as much of that behind us. In order to do 
so, we have a specific request, which is that documents have 
been requested by this committee, and, thank you--and even if 
they were not requested by the Ways and Means Committee, we 
would appreciate, essentially, as soon as possible, sending 
unredacted, all information requested by this committee to the 
Ways and Means Committee, because they have personnel who are 
cleared to look at 6103.
    Mr. Werfel. Yes.
    Chairman Issa. They can hold those documents. If we need a 
special quick, while you are going through redaction, look, we 
can ask them to analyze one, suggest redactions, work with your 
staff to say, can you please agree with this page.
    Mr. Werfel. Yeah.
    Chairman Issa. So we can expedite that. But more 
importantly, they can look through them for characters that 
they need, or characteristics they need, and ultimately in some 
cases, they may need to look at what you would give to us 
redacted. And we are working hand in hand with the Ways and 
Means Committee. So if you could consider that anything 
requested by this committee is, in fact, a carbon copy to the 
Ways and Means Committee, this wouldn't be subpoenas, of 
course, but voluntary stuff.
    Mr. Werfel. I understand. So in other words, you give us a 
data request, or an information request. We have to redact it 
from 6103. We get it to Chairman Camp, and potentially Senator 
Baucus earlier because they don't need the redacted versions.
    Chairman Issa. That's correct.
    Mr. Werfel. I understood the request.
    Chairman Issa. And I know that in some cases, they are not 
going to look at it immediately, but to the greatest extent 
possible, we would appreciate that. Go ahead, please.
    Mr. Werfel. I think--I understand the request. We are going 
to look into it, and then I will get back to you.
    Chairman Issa. Okay, and then, obviously, we would like to 
prioritize as much as possible, work with your staff to 
prioritize the documents we need sooner rather than later.
    Mr. Werfel. That's absolutely critical. That's really 
helpful to us, actually, to understand, for example, which 
people, what key search terms. The better clarity we have on 
that, the quicker the information starts flowing to you.
    Chairman Issa. I appreciate that, and I want to, once 
again, thank you, and Mr. Meadows is going to be recognized, 
but no, you are good? Okay. I'm not going to be--oh, you are 
good? Okay, then I'm closing subject to the ranking member. I 
want to thank you. This is a good start. It's a tough matter. I 
feel like you're, you know, coming in the day after we found 
tainted Tylenol and trying to bring back the reputation of a 
great pharmaceutical company.
    In a sense, you are in that same situation. No doubt 
something bad happened. It didn't happen on your watch. We are 
not blaming you, but you are the person we are looking to to 
take immediate and decisive action, and to the extent that you 
have so far, I want to personally thank you. Mr. Cummings.
    Mr. Cummings. I will be just extremely brief. I want to 
thank you, too. And as I tell my constituents, there are 
moments in life that are placed there to actually become a 
movement, a moment to a movement. And what I'm saying to you 
is, I think we have a moment here where we have seen so much 
that needs to be corrected, and now I'm just very pleased to 
see when you talked about those three points, the things that 
you are most concerned about, to turn that into a movement to 
make IRS a place where all Americans and their families can 
feel that trust. I mean, it's painful.
    I know writing from my constituents, a lot of them don't 
have bank accounts. They are writing more money orders, or 
whatever. But when they send that check into IRS, or they get 
that letter about an audit, or whatever, that the people on the 
other side are going to treat them fairly and with courtesy, 
and that they can feel a level of confidence which they 
mustn't, and I thank you, and I thank the President for 
appointing you.
    Chairman Issa. Well, I want to thank the President for 
appointing you to an acting position. I think the ranking 
member and I would all note that we just got an appointment 
request for the GSA position that's been acting for a long 
time. And this committee, both with IGs, and with cabinet and 
subcabinet heads, certainly would make for the record that we 
like confirmed individuals, and not acting. But we will 
continue working with you. Hopefully, that will soon be 
changed. We stand adjourned.
    [Whereupon, at 2:40 p.m., the committee was adjourned.]


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