New audit finds more credit card trouble at IRS

By M.D. Kittle | Wisconsin Reporter

MADISON – Dogged by accusations of partisanship and lavish spending, the Internal Revenue Service is under fire again for questionable credit card expenses, including $140 per-guest dinners.

A new audit by the Treasury Inspector General for Tax Administration – the IRS’s auditor – found the tax agency does not have controls in place to prevent improper purchases on government-issued credit cards.

IRS staff made more than 273,000 “micro-purchases” (of up to $3,000) totaling nearly $108 million in the fiscal year ending Sept. 30, 2011, according to TIGTA. During that period, 98 percent of the 367 purchase cards of employees who left the IRS were not closed before the employees’ departure.

“TIGTA believes this could leave the IRS vulnerable to misuse,” the audit states. “Further, the controls the IRS currently has in place do not include a review specifically designed to detect personal use.”

More audit problems for the nation’s auditor. A new report finds the IRS’ employee credit card program is ‘vulnerable to misuse.’

The audit found 28 purchases on the credit cards, totaling $9,000, were made up to 18 days after the employee left the agency. Another 10 convenience check transactions totaling $800 posted between 21 days and 147 days following employee separation. Keeping credit card accounts open is common practice of the IRS’ Credit Card Services branch, when an account has an approved purchase pending, according to TIGTA.

While the majority of IRS cardholders appear to use their purchase cards properly, the audit found “some instances of inappropriate use.”

Questionable purchases include improper decorative and give-away items for managers’ meetings and Combined Federal Campaign fundraising events.

IRS reps who entertained foreign officials were found to have used purchase cards to pay for multiple lunches, dinners and related alcohol purchases, according to the audit.

“For example, one dinner had an approximate cost of $140 per guest and another lunch cost $100 per guest,” the report states.

“TIGTA did not find any Department of the Treasury or IRS criteria to assess the reasonableness of these charges, but TIGTA considers the costs related to this entertainment to be high,” the audit notes.

Auditors also found hundreds of potential cases of split purchases, or multiple purchases on one or more days totaling more than the $3,000 spending limit.

Splitting purchases is a violation of federal regulations and IRS policy which dictate “inappropriate use will be referred for review and recommendation on the appropriate disciplinary actions.

The CCS Branch confirmed 361 transactions were components of 123 split purchases from April 4, 2011, through October 3, 2011, according to the audit. The total value of the split purchases was more than $493,000, 2 percent of the approximately $29 million spent during that period. Ninety-four cardholders were responsible for the split purchases identified, and 22 of those cardholders split purchases more than once within a six-month period.

“One cardholder split five purchases into 13 transactions totaling almost $22,000,” the audit states. “However, the CCS Branch did not refer any of the cardholders who split the purchases, including the 22 cardholders who made split purchases more than once, to Labor Relations for a determination on the appropriate disciplinary action.”

In a statement released to Wisconsin Reporter, IRS Principal Deputy Commissioner Danny Werfel said the TIGTA report is another “reminder of the importance of ensuring that sound management practices are followed within the IRS.”

“Clearly, any inappropriate card use impacts our bottom line and is cause for concern. Wasteful spending cannot be tolerated, and any employees found to be abusing the system will be held accountable. In fact, we are following up on several inappropriate incidents mentioned in the report, ranging from internal actions to criminal charges,” Werfel noted in its statement.

Still, the agency pointed to the audit’s finding that 99 percent of IRS purchases adhered to the rules.

“The IRS has made important progress over the past two years in strengthening the controls in our purchase card program. We are committed to protecting taxpayer resources, and we will take quick action to implement all of TIGTA’s recommendations,” the deputy commissioner of the tax-collecting agency said.

Werfel said he is directing the IRS business units to “more closely review spending in advance for any similar events to ensure all spending is appropriate.”

The latest audit follows a TIGTA report pointed to a “lack of aggressive steps” taken by the IRS in dealing with misuse in the agency’s travel card program – with $121 million in related charges in fiscal year 2011.

A scathing audit earlier this month found the IRS spent nearly $50 million on questionable conferences between 2010 and 2012.

The total price tag: $49 million, including at least $4.1 million (the IRS didn’t keep complete records so auditors have no way of knowing the precise amount) on a 2010 conference in Anaheim, Calif. The Anaheim session, according to auditors, included a litany of “questionable expenses” – from cheesy training videos to high-priced keynote speakers, six-figure commissions for event planners and $64,000 in gifts and dodads for IRS employees.

Oh, and then there’s the matter of the IRS targeting political organizations, making the first half of 2013 a rough stretch for arguably the most despised agency in the federal government.

Contact Kittle at mkittle@wisconsinreporter.com

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