IRS Gets the Tab for $140 Meals, Porn and 'Decorative' Items

This story has been updated. 

The Internal Revenue Service inadequately polices its employees’ use of purchasing cards for transactions of up to $3,000, an audit found, and the agency needs new procedures for canceling the cards used by staffers who leave.

“Inadequate procedures to identify, report and address inappropriate use leave the IRS purchase card program vulnerable to repeated violations of applicable laws and regulations,” said J. Russell George, the Treasury Inspector General for Tax Administration, in a report released Tuesday. “While the majority of IRS cardholders appear to use their purchase cards properly, TIGTA’s audit identified some troubling instances of inappropriate usage.”

For fiscal 2010 and fiscal 2011, the IRS made more than 273,000 micro-purchases totaling $103.2 million with cards in 5,241 accounts.

IRS representatives used cards to purchase multiple lunches, dinners and related alcohol, the report noted. “For example, one dinner had an approximate cost of $140 per guest and another lunch cost $100 per guest,” the report said. “TIGTA did not find any Department of the Treasury or IRS criteria to assess the reasonableness of these charges.” The report also questioned some expenditures on “decorative or give-away items for managers’ meetings.”

Auditors identified two cardholders with charges from merchants affiliated with online pornography. “Each of these cardholders reported their card stolen or compromised, one on multiple occasions, and had the charge for pornography credited to the purchase card account,” the report said. “While we have not determined as part of this audit whether or not the employees actually purchased the pornography and falsely reported the cards stolen or compromised, we did discover that both of these former cardholders had multiple purchase card accounts during the time that they were cardholders, and one of these cardholders had a total of seven purchase card accounts, five of which were closed and reported by the employee as being lost, stolen, or counterfeit.”

Specifically, TIGTA recommended that IRS create a policy to promptly cancel purchase cards when an employee leaves, as previously recommended. It called for more guidance to employees on what qualifies as a split purchase for office supplies, to discourage cardholders from splitting purchases to avoid spending limits, and it recommended putting in place an overall process to review credit card purchases to detect personal use.

On reading a draft, IRS managers agreed with all recommendations, except they challenged the assertion that the purchase of give-away items was inappropriate.

Acting IRS chief Danny Werfel on Tuesday issued a statement calling the report “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.” 

Werfel said his team is following up on several incidents in the report, with potential for internal actions or criminal charges. “That said, 99 percent of IRS purchases adhered to the rules,” he added. “The IRS has made important progress over the past two years in strengthening the controls in our purchase card program.” He cited directives to IRS business units for closer reviews of spending and noted the selection of a new chief risk officer “who will help with the comprehensive review of IRS operations and make improvements.” 

(Image via Valerie Potapova/Shutterstock.com)