IRS on How to Run a ‘Slush Fund’: Use It or Lose It
Policy + Politics

IRS on How to Run a ‘Slush Fund’: Use It or Lose It


The IRS had a perverse incentive to blow $4.1 million on luxury hotel suites, “plastic squirting fish,” and a “Star Trek” parody video at an August, 2010, conference.

It had excess funding to hire revenue agents and tax compliance officers – which, if unspent, would be returned at the end of the fiscal year. So IRS management shifted around $3.2 million from its hiring initiative, to go where too many bureaucratic conferences have gone before.

Rep. Michael Turner (R-OH) called the funds transfer – which was legal – evidence  of a “slush fund,” at a House Oversight and Government Reform Committee hearing Thursday morning.

J. Russell George, the Treasury Inspector General for Tax Administration, explained to the committee, “Some people consider it a perverse incentive – spend money before it goes back to the Treasury.”

Recent revelations about the IRS have confirmed the worst stereotypes about the federal bureaucracy. The IRS’s targeting of Tea Party groups and its inability to explain why that ethical breakdown occurred has stirred outrage about politics infringing on basic government functions. The $49 million spent on conferences between 2010 and 2012 serves as evidence of gratuitous waste.

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Both controversies stem from reports issued in the past few weeks by the inspector general. On Thursday, the House Ways and Means Committee got to direct its outrage at the excesses of the August, 2010, IRS conference in Anaheim, CA, for its small business division.

Besides the “Star Trek” video – which  featured IRS division commissioner and committee witness Faris Fink as Spock – members of Congress have condemned the conference for the use of private event planners, a separate line dancing video, and $135,350 for 15 outside speakers.

The hearing led to a series of awkward exchanges, such as Fink, now the commissioner of the small business division, saying of the $64,000 devoted to stocking the gift bags with novelty fish: “I honestly have no idea what the plastic squirting fish was.”

The majority of the funding for the conference came out of $132.7 million that Congress authorized for new hires in fiscal 2010. The IRS relied on that money to add 1,516 employees, but had leftover funds because the new hires had not worked for the agency for the full fiscal year.

Acting IRS Commissioner Danny Werfel has put two of the managers who received $1,162 in free food at the event on unpaid leave, reportedly including Fred Schindler an official involved in implementing Obamacare,.

House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) noted that local IRS employees also received hotel accommodations, which would have counted as additional income for them and required a W-2 tax form to be issued in compliance with IRS regulations. But W-2 forms were only issued as part of the inspector general’s inquiry.

“The IRS was effectively guilty of tax evasion,” said Issa, who later said this was his understanding as a “layman.”

Democrats were similarly upset by the more than $50,000 spent on producing videos for the conference. The videos were allegedly humorous, but ranking Democrat Elijah Cummings (D-MD) swore he saw no redeeming value in them.

“I was up at 3:00 this morning watching it,” Cummings said. “It is not only a parody of a television show, but a parody of what many people think unfairly about federal workers.”

As if the loose controls and problematic spending were not enough, Rep. Carolyn Maloney (D-NY) was appalled by the acting.

“I would say it is an insult to the memory of ‘Star Trek,’” she said. “I could do a better Kirk.”