His agency under relentless fire, the new head of the Internal Revenue Service acknowledged to Congress on Monday that American taxpayers no longer trust the IRS amid a growing number of scandals — from the targeting of conservative political groups to lavish spending on employee conferences.
But Acting Commissioner Danny Werfel declared he was “committed to restoring that trust.” He said he has installed new leadership at the agency and is conducting a thorough review of what went wrong and how to fix it.
He promised the transparency that was lacking for several years as tea party groups complained about harassment by the IRS, only to be met with denials from the agency.
“We must have the trust of the American taxpayer. Unfortunately, that trust has been broken,” Werfel told a House Appropriations subcommittee in his first public appearance since taking over the agency nearly two weeks ago. “The agency stands ready to confront the problems that occurred, hold accountable those who acted inappropriately, be open about what happened, and permanently fix these problems so that such missteps do not occur again.”
“It has to start,” Werfel added, “with a recognition that a trust has been violated.”
Werfel testified at a difficult time for the agency. Criticized from inside and outside the government, Werfel went to Capitol Hill to ask for a big budget increase. President Barack Obama has requested a 9 percent increase in IRS spending for the budget year that starts in October, in part to help pay for the implementation of the new health care law.
House Republicans have voted 37 times to eliminate, defund or partly scale back the Affordable Care Act, and many are not eager to increase funding for an agency that will play a central role in enforcing compliance.
“We will have to think very carefully about how much money to provide to the IRS,” said Rep. Ander Crenshaw, R-Fla., chairman of the House Appropriations subcommittee on financial services and general government.
Werfel acknowledged that it would be a “mistake” to ask Congress for more money to address the agency's recently revealed problems. But, he added, the IRS is seeking additional money to enforce tax laws, improve taxpayer services and implement initiatives.
“I'm prepared to defend the increase that we're asking for,” he said.
An inspector general's report last month said IRS agents improperly targeted conservative political groups for additional scrutiny when they applied for tax-exempt status during the 2010 and 2012 election campaigns.
The revelations have prompted investigations by three congressional committees and the Justice Department. The inspector general, J. Russell George, is also continuing his review.
George, who testified at the same hearing as Werfel, hinted Monday that more revelations could be coming. George told lawmakers he is also looking into bonuses received by IRS employees, and expects to release a report in the fall. He did not elaborate, however.
The agency's previous acting commissioner was forced to resign, another official retired and a third was placed on paid administrative leave.
A new inspector general's report, to be released Tuesday, says the IRS spent $50 million to hold at least 220 conferences for employees between 2010 and 2012.
The conference spending included $4 million for an August 2010 gathering in Anaheim, Calif., for which the agency did not negotiate lower room rates, even though that is standard government practice, according to a statement by the House Oversight and Government Reform Committee.
Instead, some of the 2,600 attendees received benefits, including baseball tickets and stays in presidential suites that normally cost $1,500 to $3,500 per night. In addition, 15 outside speakers were paid a total of $135,000 in fees, with one paid $17,000 to talk about “leadership through art,” the committee said.
“I am absolutely appalled at the apparent waste of taxpayer dollars on frivolous conferences,” said Rep. Harold Rogers, R-Ky., chairman of the full Appropriations Committee. “It seems we have a new misstep every day at the IRS.”
Werfel has called the conference “an unfortunate vestige from a prior era.”
White House spokesman Jay Carney said the president had not seen the forthcoming report dealing with IRS spending, but he also said Obama believes the IRS conduct was not appropriate.
“He is concerned by, and has been, excessive spending by the IRS and other agencies when it comes to conferences and travel, and has taken action accordingly,” Carney said. “It's very important … that the American people have faith that the IRS, in particular, is applying our tax laws in a fair and responsible way.”
Obama appointed Werfel as acting head of the IRS and ordered him to conduct a 30-day review of the agency's operations.
“Wherever we find management failures or breakdowns in internal controls, we will move to correct these problems quickly and in a robust manner,” Werfel said. “As we move forward with our work, we will be transparent about what we learn, our specific plans for improvement, the actions we take and the results achieved.”
On Monday, Werfel named three top assistants to help him review IRS operations and make improvements.
Heather Maloy will become deputy commissioner for services and enforcement, W. Todd Grams will be chief of staff, and David Fisher will serve as a senior adviser to Werfel and chief risk officer. Maloy has been commissioner of the agency's large business and international division for three years. Grams is a senior official in the Veterans Affairs Department, and Fisher was a top official in the Government Accountability Office.