create the brown insurgency. the backlash here is not the same as it has been in other places across the country. >> attorney general eric holder testified on capitol hill about the screening of journalist e- mails and phone freckles -- phone records. we'll hear hear from the head of the irs small business division, and the inspector general. >> eric holder discussed reports that he approved the screening of e-mails of a fox news reporter in part of a investigation. he testified the surveillance was targeted at officials.

no journals would be prosecuted. this is one hour woman 10 minutes. >> the commerce and justice subcommittee will now come to order. we will take the testimony of the attorney general of the united states. the committee wishes to welcome the attorney general, and we know he will be testifying on the department of justice's budgets, its priorities for fiscal year 2014, and also the impact of sequester this year and next year in terms of the impact of the department of justice, its mission, because of its impact on its employees. we will be listening to the doj inspector general testifying for

the first time about oversight in terms of management issues. we are doing this -- every one of our hearings -- we invite the inspector general to come so we have a better sense of not only how this department spends money, but how we can be a more efficient and get value for our dollar. today we will discuss how the department of justice's 2014 budget strengthens national security and counterterrorism, protects the safety and security of the rights of citizens, and how the department ensures it uses taxpayer money wisely. the department of justice enforces and defends the interests of the united states, our safety against threats, foreign and domestic, and providing leadership in controlling crimes and assuring

fair administration of the justice of all americans. that is a lot that we ask a lot of the department of justice, employing more than 115,000 employees. 26,000 of them are federal agents, the fbi, dea, u.s. marshals, atf. they have roughly over 20,000 prison guards and nearly 10,000 prosecutors, investigators, and legal experts. we get a lot for what we do. the u.s. marshals have arrested over 12,000 sex offenders, sex predators being taken off the streets because of the aggressive work of our marshals. dea put 3000 drug trafficking organizations out of business. the fbi dismantled 409 criminal enterprises. the u.s. attorneys collected $13

billion in criminal and civil penalties after the bad guys. they are the guardians of our justice system, and we want to make sure we let them know we value them. mr. attorney general, when we get ready to turn to you, for all those people that work at justice, administering justice, we want to say thank you. in maryland we have many agencies with many wonderful accomplishments, and i will put those into the record. we ask a lot of the department of justice, and as we look at this year's budget, we know that the department of justice has got a request from the president of $27.6 billion. we also know that in fiscal 2013, we enacted $26.8 billion, but then we faced the sequester, we took the entire funding down by almost $1.5 billion.

those are numbers that must have had a tremendous impact, and we are going to look forward. we look for community security, national security, oversight, and accountability. we know your highlights we know there have been limited and targeted increases in gun violence, requesting $1.4 billion, $379 million over the 2013 request to keep home schools and community safe. i like that we want to help states improve the quality of criminal records and also mental health records.

allow schools to hire school safety personnel and train local police on how to respond to these threatening incidents. while we are looking out -- there is a growing nexus between organized crime and nation- states. our nation faces a digital pearl harbor. we know the justice department is requesting $668 million for fbi agents, computer scientists, federal prosecutors for the issue of cybersecurity, and we look forward to working with you about that. there are many issues facing the budget. one of the biggest stresses on the budget is federal prisons. the bureau of prisons request is close to $7 billion. we have added 32 new inmates for

a total of 224,000 people in our federal prisons. 224,000 people are in our federal prisons. that is a stunning number, and it requires a lot of protection. we are concerned about keeping the bad guys off the street. we need to deal with the present situation and also look out for the safety of our prison guards. we want to strengthen national security, and we will be talking about that as we move along, but we also know that for state and local law enforcement this is an area of great concern because we know the department of justice, the fbi [indiscernible] the way our u.s. attorneys work, it is through state and local. there is a request of $2.3 billion in grants.

we look forward to hearing more about that. we look forward to hearing from you in terms of how we can achieve both savings and we want to have a safer country, we need to have a smarter government in terms of how we use our resources, and yet at the same time, we want to protect all american people. i would like to turn now to senator shelby. >> thank you, madam chairman. today we will hear from the attorney general of the united states, attorney general holder, about the department of justice and its 2014 budget request. we will also hear from the inspector general michael horowitz, who has taken a very active oversight role within the department, as he should. first, i want to take a moment to recognize the men and women of the department of justice who protect this country from crime and terrorism.

they work hard to keep us safe in this country, and for that i think we all owe them a debt of gratitude. the 2014 budget request for the department of justice totals $28.4 billion. that increase comes largely in the form of funding for new gun control measures, while the majority of law enforcement accounts basically remain flat. the budget also proposes a number of gimmicks to find additional so-called savings within the department. i believe this approach is misguided and look forward to working with chairman mikulski to put the department boss is on the right track in the 2014 process. the budget also proposes to remove language that prohibits the transfer of gitmo detainees to u.s. soil.

this provision received broad a partisan support last year come, and i am troubled by the administration's recommendation it be removed. the proposal is particularly disconcerting in light of the president's renewed declaration on guantanamo bay. the president has made no specific proposal for dealing with the current detainees. the president has not even attempted to remove those detainees his own administration has determined can be returned to their own home country. the proposal leads me to believe that the president is planning to move the gitmo detainees here to the united states. why else would the budget delete the transfer language? either this is a real proposal or it is a political posturing.

in my view political posturing is unnecessary and detrimental to any real discussion about terrorist detainees. i am also adamantly opposed to moving any terrorist detainees to the u.s., and i believe many of my colleagues would agree with me. such a move would necessarily place americans in harm's way. they are dangerous individuals and need to be isolated. gitmo revived this isolation. having been chairman, i would be remiss if i did not mention the controversy that has engulfed the department and the attorney general in recent weeks. these issues have cast a shadow of doubt upon the attorney general. he is the chief law enforcement officer of the federal government. as head of the department of justice, it is his responsibility to ensure that the laws are enforced and the

interests of the united states are defended. the controversy that has embroiled the department has called into question its ability to fairly administer law and justice. further, the questionable actions of the attorney general have diminished the integrity, impartiality, and efficacy of the position of attorney general. i believe it is the responsibility of this committee to provide the resources necessary to ensure that the department of justice can efficiently and effectively enforce the laws, protect our citizens, and administer justice. similarly, it is the responsibility of the department of justice, headed by the attorney general, to ensure it carries out its duties and that it is responsible and responsive to the citizens of the united states and that it operates with and tolerates no less than the highest degree of honesty and integrity. unfortunately, i believe until

these issues are resolved and the controversy surrounding the justice department and the attorney general's office is laid to rest, a hue of distrust will hover over the department. it is my hope that you will move swiftly to address these issues that have been raised by me and others to put this controversy to rest in a full and open manner so that the department which is so important and get back to focusing on issues central to its mission. thank you, madam chairman. >> mr. attorney general? >> i appreciate the opportunity to discuss this and provide an overview. thanks to my colleagues, employees serving in offices around the world, the department

has made tremendous progress in protecting the safety and rights of the american people. nowhere is this clearer than in our work with regard to ensuring america's national security. since 2009, we have brought cases of security breaches and obtained sentences against scores of dangerous people are relying on our tested federal article 3 civilian court systems. we have identified, investigated, and disrupted plots of terrorist organizations as well as by homegrown terrorists. we will continue to remain vigilant to emerging threats and take these efforts to a new level, with the president's budget request for vital national security programs and to respond to events like the horrific terrorist attacks on the boston marathon. as we continue to investigate this matter, i want to assure

you and the american people that my colleagues and i are determined to hold accountable to the full extent of the law those who bore responsibility for this heinous act and all who threaten our people or who attempt to terrorize our cities. while the department of justice must not waiver in its determination, we must be just as physical in our protection of the sacred rights we are equally obligated to protect, including the freedom of the press. in order to ensure the appropriate balance, i have launched a review of existing justice department guidelines governing investigations that involve reporters. last week i convened the first of meetings with representatives of news organizations, agencies, and groups to discuss the need to strike this important balance, to ensure robust first amendment protections, and to foster a constructive dialogue. i appreciate the opportunity to engage members of the media and

national security professionals in this effort to improve our guidelines, policies, and processes, and will renew the important conversations that are as old as the republic itself about how to balance our security and our dearest civil liberties. as part of the conversation, let me make at least two things clear. first, the department's goal in investigating leak cases is to identify and prosecute government officials who jeopardize national security by violating their oaths, not to target members of the press or to discourage them from carrying out their vital work. second, the department has not prosecuted in as long as i have had the privilege of serving as attorney general and will not prosecute any reporter for doing his or her job. with these guiding principles in mind, we are updating our in general guidelines to ensure that in every case the department's actions are clear

and consistent with their most sacred values, and to the extent there's a problem, i think it is with our guidelines and with our regulations and not with the people of the justice department who have been involved in these matters. this conversation is not static, and it seldom results in easy consensus, and it is often difficult and emotionally charged, and it requires all parties to approach these delicate issues in good faith so that today's leaders and concerned citizens from all walks of life can come together as our predecessors have done to secure freedoms, ensure the safety of our citizens, and to update and refine key protections in a way that is commensurate with the challenges and technologies of a new century and consistent with our most treasured values. my colleagues and i remain committed to working with congress for preventing and reducing gun violence. the president's budget requests

supports these efforts and allows us to keep our promise to the families and communities of those senselessly murdered at sandy hook elementary school and in countless other acts of gun violence throughout the nation. we will continue to advocate for comprehensive immigration reform and strive to improve our broken immigration system in a way that is fair, that will guarantee all are playing by the same rules, and requires responsibility from everyone, including those who are here in an undocumented status and employers who would attempt to exploit them. i am encouraged by these principles that are reflected in proposals that are currently under consideration by the senate. i look forward to working with leaders of both chambers of congress to strengthen, pass, and implement as possible reform legislation. the justice department will continue to move aggressively and appropriately to enforce existing immigration law to safeguard the most vulnerable

members of our society, to ensure the fairness and integrity of our financial markets, protect the environment, and to invest in strategies for becoming both smarter and tougher on crime. i think we can be proud of the progress that the department has made in each of these areas in recent years, and i am encouraged to note the budget request includes the resources that we will need to continue this important work, including an additional $25 million for the office for immigration to augment staffing and to improve the efficiency of our immigration courts, $2.3 billion for state and local and tribal assistance grants with a focus on funding evidence-based programs to combat fraud, and an additional $92 million to address cyber security needs and to expand on the historic achievements of the civil rights division in addressing bias,

intimidation, and discrimination. our ability to continue this progress has been negatively impacted by sequestration which cut over $1.6 billion from the budget from the current fiscal year. earlier this year, the help of this subcommittee, i provided $150 million to the department of prisons to mitigate the effects of the untenable reductions and avoid furloughs of correctional staff each day from federal prisons around the country. in april, with your support and using similar authorities, i provided necessary funding to the fbi, u.s. marshal service, atf, and u.s. attorneys and other components to prevent furloughs and maintain adequate operations. i want to thank the subcommittee for your full and immediate support of these actions. it could not have occurred without your assistance. i must stress these and similar solutions will no longer be available to alleviate fiscal year 2014 shortfalls due to

joint committee reductions if they persist. i will work with the subcommittee and the congress to prevent this from occurring and to secure the timeliness of the budget request, which provides a total of $27.6 billion for the justice department. that level of support will be essential in ensuring my colleagues and i have the resources we need to fulfill our critical duties. i want to thank you again for the chance to discuss this work for you today, and i will be glad to answer any questions you might have. thank you. >> thank you. we will go to the 5-minute rule, and i will stick to it as well, and we will do it, senator shelby, with the arrival of everybody. there are many questions to be asked because justice has such scope and incredible mission. i want to ask my first question related to what i consider an explosive situation. that is the federal prisons.

i am concerned about the rising population, the fact that prison overcrowding, the fact that right now literally the federal prison budget is making up 25% of the entire department of justice budget, and that it keeps increasing year after year. the competency of the u.s. attorneys' offices, we are getting convictions of bad people. that is the good part. the other part is we have 224,000 people in prison. i worry about the safety of the guards and i know you do, too, mr. attorney general. we are in some ways a fiscally unsustainable path here, and i want to ask first of all, do you feel your request of $6.9 billion, which is again 25% of your budget request, adequate to

meet the needs of meeting the ethical standards in the care of prisoners and at the same time protecting our guards, and then do you have thoughts on how we can reduce the prison population without increasing risk to our american people? we worry about gitmo, and it is a big issue, but i have worried about what is going on in our federal prisons here. i have a top-notch one in maryland, in cumberland, as you know, which i visited. can we hear your thoughts, sir? >> i share your concerns. the money we requested will support and allow us to run the system in an appropriate way. it includes finalizing the activation of two new facilities, one in new hampshire, one in alabama, and bringing on the activation for three other institutions which

will increase our capacity. it also adds 2087 new positions, including 956 correctional officers. there we have a life-and-death issue. we have to have sufficient numbers of correctional officers to ensure that we have adequate numbers of people who can be deployed, not only to maintain order, but to protect their fellow officers. i'm confident at this level that we have a sufficient amount of money to bring on that additional capacity and the additional officers. >> that is heartening to hear because we have legal and ethical standards in the care of prisoners. of the population of 224,000 prisoners, how many of those are repeat offenders and the recidivism rate? >> the recidivism rates runs at about between 25% and 40%,

slightly lower in the federal system than in the state system. one of the things we need to do is focus resources on reentry programs and rehabilitation programs while we have people in prisons so we make more effective our efforts at reducing that recidivism rate. >> you have a lot on your plate, and now we are going to have the immigration bill, and we will have to implement. i want to come back to this because i want to keep america's streets safe. at the same time, the administration of justice is now going to be ever increasing. we cannot build our way out of prisons. again, i am for vigorous law enforcement and tough prosecution, but what i am asking you is, do you have within your establishment,

within your justice department, a management mechanism to look at how we can reduce recidivism? what are the other tools and techniques where we can begin looking at stabilizing or reducing the population without increasing risk to our american people on the streets? because it could go 25%, to 30%. we have other things to do with the justice department. >> the point you make is good. we not only have to focus on how we manage the existing system we have and those who are incarcerated, but need to focus on prevention activities as well so we reduce the number of people who are coming into the system. in that regard our office of juvenile justice and dealing with the office of justice programs, we have a variety of things we do -- >> i want a plan, and let's look at the prisoner as a prisoner,

that they have done bad things and so bad that they are in a federal prison. and i look at this continuum, which is really a vicious circle. what then do we need to be funding for the prevention programs, and then once they leave -- and what happens when they are in our care and custody and that begins to change them there for when they hit the streets again so they are not hitting up our people against back in the same prisons? what are those programs so when we do have funding, we are not only funding the prisons, but we are funding continuum of services to prevent people from becoming at this dead end and then what are some of the other programs you need to do? we need to look at this. the scope of the committee is such that we need your advice on what it should become a what those levels should be, so we

begin to tackle this. it is both a humanitarian concern, a public safety concern on our streets. a mutual dear friend of ours has spoken of not the cradle-to- grave, but the cradle-to-prison cycle. this committee wants to be a partner with you on a bipartisan basis to begin to break that, and you know you are in the neighborhoods like me, where we are now spending more to keep a person in prison than we are sending them to school or to higher education. let's look at that continuum and work together on it. >> i think the way in which you have stated it is right. we want to work on prevention, rehabilitation while people are in prison, and we want to deal with reentry. we also need to ask ourselves tough questions about the enforcement priorities that we have in the department and the way in which we have enforced our laws and the collateral consequences of some of those enforcement activities. i will make proposals later in

the year about rethinking the ways in which we are conducting our criminal justice system prosecutorial efforts. >> thank you, madam chairman. mr. attorney general, the department as we all know has been mired in a controversy of late. it began with reports of an overbroad collection of telephone collections of 20 a.p. reporters and editors, was followed by revelations of the department-led espionage investigation of a fox news reporter, and culminated with your testimony before the judiciary committee. these issues have led some members of congress and the public to question the department's adherence to the rule of law and your ability as the attorney general to lead. these controversies have become i believe a significant distraction for this department and have led to calls for an

investigation into your actions and the actions of your department. others have called for your resignation. i hope you would agree that leading the department of justice is a full-time job. i think you would also agree that these controversies have become a distraction for the department and for you as a leader. i hope you would agree that the american people deserve an attorney general who is completely focused on the fair and impartial administration of the justice and not distracted by controversies of his own making. i have observed over the years that effective leaders from time to time subject themselves to staff evaluation processes in hopes of improving their performance. how would you evaluate your performance to date and is there any room for improvement? have you or will you take actions to remove the department

beyond this controversy and ensure that similar missteps in the cloud will not continue there? >> i want to assure you and the american people that in spite of the recent controversies that you mentioned the department is fully engaged in the work of protecting the american people and all the ways that are unique to the department. i want to ensure the american people that i am engaged in that regard. i go through a self-evaluation process on a daily basis. i have not done a perfect job. i have done a good job, but i am trying to do better. some of the criticism that has been labeled or thrown at me and the department has caused us to rethink the way in which we will deal with these media inquiries, and we will make changes, and that is why we are engaged in a process with groups so we can formulate new policies, regulations, and hopefully that

is behind us. >> i believe and i hope you would agree with me that the american people need to know that the administration of justice, headed by the attorney general, is in the hands of a dispassionate and capable leader, and whether you will continue to be the chief law- enforcement officer of the federal government, the attorney general, is either a decision for you or the president to make. i understand that. i am interested to know what criteria you will use to determine whether you can continue to lead the department. what is the tipping point here? are you going to clear up this controversy, or is it going to hover over us in the justice department, which is very important to the american people? >> the tipping point might be fatigue. beyond that, the tipping point there are certain goals i set

for myself and for this department when i started back in 2009. when i get to a point when i think i have accomplished all the goals that i have set, i will sit down with the president and we will talk about a transition to a new attorney general. change is frequently a good thing for an organization, a new perspective. i am not a person -- this has been the honor of my professional life as attorney general, but i also have such respect for the department of justice and i want to make sure that it operates at peak efficiency and that new ideas are constantly being explored. i am proud of the work that i've done, the men and women of this department have done under this leadership, and when the time comes for me to step aside i will do so. >> but the belief in integrity of the attorney general and the justice department is central to

the well-being of this country, is it not? >> it certainly is. >> thank you. >> senator feinstein? >> thank you very much, madam chairman. i would like to sue police say that i believe in your integrity. i believe that you are a good attorney general. i think you have had undue problems that are hard to anticipate. you have responded the best way you possibly could, and i want to say that, because candidly i do not like to see this hearing used to berate you. let me ask you this question. i chair the senate caucus on international drug control, and we issue a series of reports, and we have just issued one on money laundering. and what has come to my

attention is that there is substantial failure of some united states banks to comply with anti-money-laundering laws, which fueled drug-related violence in mexico. hsbc allowed over $670 million in wire transfers, and over $9.4 billion in fiscal money to enter inbillion in fiscal money to enter the united states from mexico unmonitored. of that money we know at least $881 million in mexican drugfor tougher show you@you with $1.92 billion in fines. similarly in 2010, wachovia agreed to pay money which, after enabling at least $110 million

in mexican drug money to enter the united states. $1.9 billion in fines is a huge fine. the question i have of you is, do you believe these fines are going to change what has been current practice and, i suspect, that there are other banks doing this same thing? this is an enormous gap in our infrastructure. could you comment on that? >> the concern you raise is a good one. we are being aggressive in our efforts. we have come up with robust

financial penalties, but we can never get to a situation or this is seen as the cost of doing business, where a bank can simply pay a huge amount of money, and think that is the way it can absolve itself from wrongdoing. we have put in place as part of these agreements compliance measures, ensuring remediation, effect reform, imposing minor trades to make sure these kinds of things should not happen again. it is not to say he should not hold corporations criminally libel and i think wherever we possibly can old individuals liable for this kind of activity. >> this is the recommendation of our drug caucus, that individuals begin to be held responsible for money- laundering, when it is overt. i thank you for that response. there was an oig report on atf's

gun dealer inspection program that mr. horowitz is going to testify carried out, and i understand that report found that 50% of federal farms dealers had not been expected if in the last five years. you cited three reasons for this understaffing. a large geographic area some field divisions cover and an increase in gun dealers. it is my understanding the president has $51.1 million to ensure atf enforcement efforts and strengthen inspections. we hope now to get a director of that unit. the judiciary committee on which i served is coming before us this next week. they project that this allocation would fund 60 additional inspector positions.

your report concluded you would need an additional 199,000 hours to inspect all dealers within a five-year period, and the field divisions told atf headquarters in 2012 they needed 504 more investigators. the federal firearms dealer in my view is what makes any legal gun sales possible in the united states, because they require certain material. that 58% figure is really a distressing figure. what are you believe these additional inspectors could do to increase that 58%, and do you have any idea as to what level we could be confident that with these there would be inspections of federal firearms dealers within the five-year period?

>> i think we would be able to deal that. the atf is an organization that has been resource starved over the recent past. actually, for a great number of years, without senate-confirmed leadership it has also suffered. the concern you raised about doing these inventorying, having the ability to do inventories at the prescribed level will give us greater comfort and have an impact on our ability to monitor the gun trades so we make sure that the right people have access to weapons, and that is fully respecting peoples second amendment rights. we are talking about keeping guns out of the hands of people who should not have been. without controls there is no way to tell. i am confident if we get the

money that we have asked for, if todd jones is confirmed as the leader of the atf, that we can change that situation and make the american people more safe. >> i want to say this is important to me, and i appreciate it if an emphasis can be placed in that area. so thank you very much. my time is up. >> mr. attorney general, it troubles me that the president has virtually unreviewable, unfettered authority to order the killing of any american citizen overseas who is suspected of terrorist activity without any kind of charge or trial or judicial review.

we have all read this morning of the controversy over the nsa having access to phone records of american citizens. it seems to me that an american currently receives a greater degree of due process protections from the judicial branch if the government is seeking to listen in on his phone conversations or gets information about his phone conversations than if the president is seeking to take his life. that just does not make sense to me. why hasn't the administration proposed to congress a process that would provide some degree of independent judicial review for a targeted lethal strike against a u.s. person overseas,

either an expansion of the fisa court or a different kind of classified proceeding before a court, to ensure that there is some kind of judicial review rather than giving that authority to take an american life overseas only with the president? >> i would say that it is incorrect to say that it is only in that the president has unlimited authority with regard to the use of drones, and we are talking about being more transparent. i sent a letter to chairman leahy that the president gave a speech to get more transparency with disregard. we operate under the statute, and when we are dealing with these matters we try to focus on

capture or possible. we focus on whether or not the threat is imminent. we operate under the rules of law. as the president said in his speech, people cannot plot against the united states, people cannot kill american citizens and then use as a shield their american citizenship. these are steps that we take with great care. they are the most difficult of decisions that we have to make. the other things that keep me up at night and as a think about my role as part of the national security team in discussing these matters. the concerns you raise are legitimate, but we are working within the administration to make sure when we take these ultimate measures they are done in appropriate ways, legal ways, have done in a way that is consistent with our values. >> i would say to you that the drone strikes have occurred outside the battlefield.

we are not talking about countries that were engaged in hostilities ike iraq or afghanistan. i do not understand why you would not want the protection of some sort of judicial review of the target. i am not saying that the president is wrong to try to kill american terrorists overseas who are plotting to execute our citizens, but i am uncomfortable giving the president that authority without any kind of check. i am not comforted by the office of legal counsel opinions which i have read now for the legal basis. let me turn to a second point

that you just made about a preference for capture. i have not seen a preference for capture. if you compare the number of terror suspects who are captured in the previous administration versus this administration, there is a huge difference, as there is in the number of lethal strikes with drones that were undertaken. is the reason for the exceedingly low number of captures due to the change in the obama administration's position on detention and the fact that the administration does not want to send captives to guantanamo? isn't that really the reason? here we have a case of a terrorist who was convicted but who was driven around on a navy ship for two months because there was no place to put him.

>> it is not a function of not wanting to take people there. as you indicated, he was captured and brought to face justice in an article 3 court. the desire to capture is something that we take seriously because we gain intelligence. that person -- i am not sure how long he was on that boat -- it was not a joyride for him. we were gathering important intelligence from him in the intelligence community and then later on after he was read his rights and waived them from people in law enforcement. that was time well spent, and ultimately led to his plea in that case -- or the conviction in that case. it is not a function of us not trying to take prisoners to particular places. we try to gain intelligence and

then we try to bring them to justice. >> my time has expired. thank you. >> that was an excellent line of questioning, senator. >> i want to take you to the verizon scandal, which takes us to possibly monitoring up to 120 million calls. when bureaucrats are sloppy, they are really usually sloppy. i want to ask, could you share with us that no phones inside the capitol were monitored that would give a future executive branch, if they started pulling this thing up, would give them unique leverage over the legislature? >> with all due respect, this is not an appropriate setting for me to discuss that issue. i would be more than glad to come back in an appropriate setting to discuss the issues that you have raised.

in this open forum, i do not -- >> i would interrupt and say the correct answer is to say, no, we stay within our range and we did not listen on members of congress. >> i would like to suggest something. i read "the new york times" this morning, and it said not one more thing, not one more thing when we are looking like we are spying on america. i think the full senate needs to get a brief on this, and the attorney general, we need the national security agency and other appropriate people. this is no way to minimize your excellent question, but there are also certain answers that might have to be given in a classified environment. i am not going to determine who answers what questions. >> if i could, i would hope that

you as chairman would create the appropriate forum that is a classified hearing to get into this with the attorney general. what senator kirk is raising is very important. >> i agree that the question is >> i am sure you will. >> what i would like to suggest is that i will send a note to senators reid and mcconnell, because i think this cuts across committees and goes to judiciary, it goes to armed services, it goes to intel, and not only including the scope of appropriations. >> the oversight of justice, does it not? >> i would suggest for separation of powers that whoever was so sloppy writing

this for you to not segregate out the supreme court to make sure that when you are jumping out of your executive branch weighing in, you want to make sure you're not gaining new intel and leverage over separated powers under our constitution. >> senator shelby raises a great point. why don't we talk about how you would like to proceed when we do our due diligence as a committee, but also this does involve others in addition to the justice department. >> i would like to do that and i believe it is a relevant thing and we would probably be talking about -- >> and i would be more than glad in an appropriate setting. senator, please do not take my responses as being anything but respectful of the concerns you

have raised. there is no intention to do anything of that nature, to spy on members of congress, to spy on members of the supreme court. without getting into anything specific, i will say this, with regard to members of congress have been fully briefed as these issues, matters have been underway. i am not really comfortable in saying an awful lot more about that, but the concerns you have raised -- >> we are going to stop here, because this drives us up a wall. often, it means a group of eight leadership. it does not necessarily mean relevant committees. sitting right here now a senator shelby and i, a former chair of the intelligence committee, senator collins, who chaired the homeland security committee, and that is the new framework to

coordinate intelligence, with national leaders. senator graham's experience, and senator kirk himself was an intelligence officer in the u.s. navy. so we are kind of like an a- team, but we have also been in the fully briefed circle. that does not mean we know what is going on. and senator shelby says we have to know what is going on. and there are appropriate questions to ask. >> madam chairman, if i could, i think it falls within the jurisdiction of the appropriations committee that you chair and the subcommittee that you chair, and i am on both, to get into this. we fund the justice department, we fund the fbi, we fund the operations. and if we don't know and if we are not properly briefed as to what is going on, we are not doing our oversight. >> so what you are suggesting is a classified hearing for the

full appropriations committee. >> absolutely. >> that's fine. >> we will proceed in that direction and we look forward to working in a collaborative way. actually, we have senator feinstein tapping the full expertise of the full committee. senator kirk, did you have anything else? your work on the gang violence is really excellent. i do not know if you had a question. >> i wanted to announce i would be offering an amendment to the next markup of this bill for 30 million bucks to identify gangs of national significance, which i would hope would be the gangster disciples in illinois. i have talked about the possible need to arrest upwards of 18,000 people who are members of that gang. and to do this, especially because of my overwhelming concern for the baltimore gang situation, which is shameless sucking up to the chairwoman.

>> anything else, senator kirk? >> that is it. but because i rate this issue, whoever was running this program knows they really screwed up. i would just ask that you kind of seize the records and not allow the destruction of evidence that they have accidentally monitored other branches of the government. >> as i said, i would be more than glad to discuss this in an appropriate setting. >> we will. and i give my word to both committee members. senator grant? >> thank you. i'm very glad i came. this is been an interesting hearing. i washed you a question. pay close attention. >> i always do. >> i know you do. the purpose of the patriot act and the fisa court and the national security administration

is to make sure that we are aware of terrorist activities in disrupting plots against our interests abroad. is that true? >> i would agree with that. >> the purpose of the patriot act is not to allow the executive branch to gather political intelligence on the judicial branch or the legislative branch. would you agree with that? >> i would agree with that. >> this is exactly like trying to kill it people in a caf?. there is no other strategy to drone somebody who has done wrong anywhere. am i would agree with that. >> we are trying to capture and kill people who we believe our national security threat to our nation, right? >> also true. >> and one thing we are trying to do with the patriot act is find out about terrorist organizations and individual terrorists who they may be talking to. >> again, i would say that is

overall -- >> i hope the american people appreciate we are at war, and because i sure as hell do. i hope that the american people appreciate the way that you try to protect the homeland is try to figure out with the enemy is up to. i'm a verizon customer. it does not bother me one bit for the national security administration to have my phone number because what they are trying to do is find out what terrorist groups we know about and individuals and who the hell they are calling, and if my number pops up on a terrorist phone, i'm confident the pfizer court is not going to allow my phone calls to be monitored by my government unless you and others can prove to them that i am up to a terrorist activity through a probable cause standard. i may come out differently than my colleagues on this. is was created by the congress. if we made mistakes and we have gotten outside of the lane, we are going to get inside. but the consequences of taking these tools away from the

american people through the government would be catastrophic. so you keep up what you are doing, and if you have gone outside the lane, you fix it. president bush started it, president obama is continuing it, and we needed from my point of view. now, under the law of war, there are three branches of government. what branch of government is in charge of actually implementing annex a kidding the war? >> the executive branch. >> so we don't have 35 commanders in chief, we have one, right? >> that is true. >> can you tell me any other time in any other war where the judiciary took over the decision over who to target, who the many me was -- who the enemy was, and took that away from the executive branch? >> i am not aware of that. we operate within legal parameters, but within those legal parameters -- >> i will be astonished for america during this war to turn over from the commander-in-chief

the ability to use lethal force to a bunch of unelected judges. who have no expertise and no background as to who the enemy is and whether or not we should use lethal force. i think the worst possible thing we could do is to take away from this commander-in-chief and any other commander-in-chief the power to determine who the enemy is in a time of war and what kind of forced to use and give it to a bunch of judges. that would be the ultimate criminalization of the war. i support you for having transparency and for making the hard call, but you have, from my point of view, been more than reasonable when it comes to the drone program. into an american citizen, if you side with the enemy and we go through a laborious process to determine that you have, we will kill you or capture you. the best way to avoid that is to not help out qaeda. the citizen in yemen, any doubt in your mind that he was helping

al qaeda? >> none, and we laid out exactly why he was a target, that he was an appropriate target. >> and there are other american citizens who have associated with al qaeda. one is a spokesman. >> that is correct. >> if we find him, kill him, or capture him, don't go to the court because it is the executive branch's job. finally, she asked a very good question -- with this administration used wonton amo bay in the future to house a law of war capture? >> i think the president has been clear it is not our intention to add any additional prisoners to guantanmo. under the geneva convention, that is not a viable option. we are a nation without a jail. the reason we put the guy on the ship, we have no place to put

him. this will catch up with us. this nation has lost the ability to gather intelligence because we do not have a prison to put people. if we do not correct that, we will lose valuable intelligence. do you agree with me that the people we had at gitmo for years, the intelligence we have gathered humanely has made this country safer and was one of the big reasons we got bin laden? >> i think one of the reasons we got osama bin laden was the intelligence we gathered from a variety of -- >> would you agree one of the treasure trove of intelligence come from people at gitmo? >> at this point, you have people who a been there for 10 years in their intelligence value is close to zero. >> some people may be but the war is changing. there is no doubt in my mind that if we do not torture our way to getting bin laden, we put

the puzzle together and the key pieces of the puzzle people at gitmo. sequestration. youris it doing to ability to protect us as a nation? keep are struggling to resources at a level where we can do our job. since january 2011, i put a hiring freeze in place. we lost 2400 people. we lost about 600 prosecutors. >> when you say lost, what does that mean? did they quit? >> people who have left the department of justice and who have not been replaced. so we are a small department than we were before the hiring freeze. to furloughs we were able avoid because your assistance, those are furloughs we would have to assistance. prosecutors were not in the

courts, fbi agents were not on the streets. my guess would be that whoever the attorney general is a year or two from now, you will see reduced numbers with regard to prosecution. i think that will be a function of this sequestration we are trying to deal with. >> i have such a great committee. it is really talent of both sides of the aisle to get to protecting our citizens. if i could clarify. the people when you say they were lost, were they voluntary or involuntary departures? >> voluntary departures. normal attrition.

>> which you do not replace? , i saw along with that the economic clouds were forming and we needed to get ahead of this. it was as a result of the hiring freeze and other great work done by the jmg that we were able to with your cooperation avoid furloughs this year by having the hiring freeze, which kept our costs low, but at a price. we are paying a price for those that lack of capacity. >> i understand. senator murkowski? >> thank you, madam chairwoman. i wish i had been here for more of the discussion earlier. i understand it was quite animated. i will dial it back a little bit, perhaps, before alaskans this goes back to the misconduct that was found in the ted stevens prosecution some years ago.

clearly admitted procedural defects, and then after that the department has a disciplinary process. effectively, the judge throughout the discipline the department had imposed against the two assistant u.s. attorneys. that was extraordinarily troubling to many of us. we wrote a letter to suggest the department should appeal this decision as well as look at these disciplinary procedures in light of the board's decision. the question to you, mr. attorney general, is, do you think the decision to throw out the discipline that had been imposed on these two prosecutors was fair? are you going to be appealing that? where are we with this, because alaskans are left dangling wondering is there any justice out there, and they think not.

>> i have respect for the people at the board who made that decision. i disagree with it. my expectation is we will be appealing that decision. >> in light of that, do you envision any changes in the prosecutorial system as a consequence of what we have seen from this? >> i think we have a system in place, a disciplinary system that i think works, is adequate. i don't agree with the way the board looked at the way in which we conducted that disciplinary system. i think we follow the rules, came up with a disciplinary sanction that was appropriate given the misconduct that was found, and we will as i said be appealing that with the board's determination. >> well, i would encourage that. and unfortunately, it leaves the appearance that some of the folks who were not perhaps at the highest level of the decision-making process were held accountable, while others were given a pass.

and that just does not sit well. so i would again encourage that appeal and encourage you to look at how we might address clearly what some of the gaps in the discrepancies are. the second question, and again this is per agree oh, -- and again this is parochial, but we just pass the obama containment acthe reauthorization and in that we direct the justice department to consult with the state alaska, consult with our tribes, and present some recommendations to us in congress about reasserting the alaska rural justice law enforcement commission. those recommendations are due out in 2014. this is a commission that had been establish some time ago that allows for basically a venue for various officials to come together and improve law

enforcement, judiciary responses to crime, domestic violence, the whole gamut. the commission is no longer active because the your marked funding ran out. so we don't have any forum really need to move forward on the commission's initial work. so i would just ask that you have folks look into whether or not we have started to work on implementation of section 909 to see if we could make some progress. as you know, we have some considerable challenges that face particularly our native villages when it comes to public safety, domestic violence. we need to turn this around and we need your help. >> i agree with you, senator, and that is not a parochial concern. the mechanism is, but the concerns you raised go outside of your state and i think are worthy of your attention, my

intention, and i look forward to working with you. to come up with ways in which we can make effective that provision of the reauthorization. it is something we have tried to make a priority generally in the justice department, but the concerns you have raised about what is going on in your state are very legitimate concerns. they are not parochial. they are not. these are national issues that require national responses and national attention. >> i appreciate that. thank you madam chair. >> thank you, mr. attorney general. if there are no other questions for the committee, i would like to thank you, until we meet again, and the matter that we have discussed and called -- there are many questions we will want to talk about and work with your staff, but we would like to hear from the inspector general. we know the senators have other duties. mr. attorney general, i want to thank you for your flexibility in the schedule. you were originally scheduled

earlier today because of the votes. thank you for your cooperation in participating at the time that we requested, and we look forward to working with you and your staff. and we just have a lot to do here. >> ok, thank you very much. >> the senate intelligence committee held a classified meeting about the collecting of verizon phone records. senator dianne einstein talked about the program and its role in counterterrorism efforts. i really think that protecting the nation is important. protecting the nation within the principles of this great democracy in this great constitution is also important. metadata is not constitutionally karen t to be first amendment material. the supreme court has passed on that. having said that, we have to examine ways to be able to get

data. -- to and take diligence get intelligence that is operable and can prevent clots from hatching and americans are being killed. that's the goal. if they can do it in another way, we are looking to do it in another way. we would like to. if we can't, we can't. programs ported some specific attack? >> it has. but that's classified. we discussed it in there. there is a report on that. i'm going to look at that report. we just put this together. we put this quickly together as a briefing. on the floor, members can look to me and said we really need a briefing and what also happened is members who briefed made, and they were astonished.

they did not know this was happening. briefed made comment. were astonished. they do not know this was happening. i can you share some of the concerns the members have raised? >> this took place in a classified briefing. we don't talk about the substance of it. >> are you considering looking at changes to the program program?mark -- >> we are always open to changes. that does not mean there will be any. we do this on everything. >> tomorrow, the discussion wart syria's ongoing civil which has claimed the lives of more than 80,000 people. officialsear from

and the bbc reporter who is covered the water. live coverage begins at 10:30 am eastern. raise money, i filed an application with the irs in january 2011 seeking to gain -- to obtain 501(c)(3) status. as of today, i have been waiting for 29 months without that is. -- without status. >> many agencies do not understand their servants of the people. they think they are our masters and they are mistaken. i'm not interested in scoring political points. observeo protect and -- preserve the america i grew up in, the america that cross oceans and risk their lives to become a part of. i am terrified it is slipping away. >> the purpose of a c3 or c4

tax exemption is to enable easier promotion of public good, not lyrical work. it is the responsibility of the irs to determine which groups are choosing the correct exempt totus and which are trying minute later the system to avoid taxes and high political organizations and campaign donors. >> this weekend, house ways and means hears from tea party members on irs targeting of their groups. saturday at 5 a.m. eastern. also -- saturday at 10:00 a.m. eastern. on american history tv on c- span3 some of the life legacy of civil rights leader medgar evers. sunday at 5:00. >> when you put on the uniform for a job that is a maintenance job, this is true if you are a building janitor or senate

patient worker, you are subsumed by the role to the point where it's almost like you are just a part of the background. i'm going to say almost like a machine. you are a human being wherein i uniform. the general world gets to overlook you. and really not see you. it's like a cloaking device. or harry potter's cloak of invisibility which is frustrating and an interesting glitch -- interesting premise. when i'm wearing the uniform, i can observe people in ways they don't realize i'm observing them. -- nyu fester and professor robin ngale sunday at 8:00. >> the irs small business division posted a conference in

anaheim, california at a cost of $4 million. the money pay for luxury hotel rooms, training videos and outside speakers. the head of the everest the vision and the irs inspector and all took capitol hill about .hat - this committee is chaired by congressman darrell issa.

>> the committee will come to order. the oversight committee's mission statement is that we exist to secure two fundamental principles. first, americans have a right to know the money washington takes from them through the irs is well spent. second, americans deserve an efficient 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 is our job to work tirelessly in partnership with citizen 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 on money -- hard earned money than i can remember in history. i was shocked when the gsa, the body that was supposed to be about the entire federal bureaucracy having reasonable for dm's and spending within limits, doing things improperly, determining what would be on a schedule and what it would cost. i was shocked when i found out they threw themselves parties. but to find out that not only ,oes 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 indulgence, to spend more than you would have spent by normal negotiations for rooms is

unthinkable for any agency but when it is the irs and they give to their own employees benefits such as local employees in anaheim then failed to file w-2's for that income, the irs effectively was guilty of tax evasion. saying you don't know does not help you, does not give you an out as a taxpayer. it certainly should not give the irs and out when they are using taxpayers 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 of the long history of rulemaking in federal cases that determine what you do or don't pay, but you are allowed to do or not to do. they need to be trained to treat

the taxpayer as a customer and i debtor.- and not a that justifies when appropriate travel and business to the very companies and individuals from whom they receive the revenue that we in government spent. 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 to be no training, no travel, no interaction. just the opposite. we want to get this right. 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 tropical -- whose travel could have been meaningful but forcedpensive, they were out of meaningful training from the waist. the days when any of us could determine whether $50 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. that means the american people cannot not get a well-trained federal workforce. it means 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. as taxpayers, we should be appalled that there are two standards, one for us, and a different one for people that

work for the irs in some cases. wehink it's important understand that the reason we are holding this hearing, thanks to the inspector general's office, we have the study bet now on a had for a long time. but it concerns 2010-2012, so it's not a new occurrence. bey of these things may not happening today. certainly the it ministration and congress have acted to reduce the budgets for some of these -- 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 better trained workforce and in many cases, the best way is good for the lowest price for what you need, don't kick back perks. those are not what the rank and

file once. they want to be well-trained. i believe we are going to see a short video. these are once again for a reason. training videos are important. training material isn't worn. if you do training material, not only do you show it to your employees at conferences but you put it on the web. make sure they know about it. use it again and again. if what you have is entertainment, training through art, it's not reusable. it does not have that staying power. loudesto make sure the behavior you are to hear today does not happen again. i think every federal worker wants to know there is a single standard. they live up to it and expect those they don't know about to live up to it.

we often read that opening statement preamble about waste and whistleblowers. one of the problems we have in government is there aren't enough whistleblowers. this hearing is about specifically bending at these conferences and the waste. on everyone's mind is what the irs did out of cincinnati and dallas offices to taxpayers and organizations that want to comply and made application. those people should of been better trained to give answers quickly. i think women look at over $3.2 million taking 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

until you tighten the budget were you can. there's no question you will see outrage on both sides. this is outrage that needs to be tempered. but the fact that on the second panel, we will 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 he called me and we had a conversation. i don't normally share conversations with the conversation was important because it was the kind of a first step that i think is about the transparency of utility what you are doing, most of them will never be spoken, it does not need to be spoken in public. for mr. cummings and myself

from need to know know that the work is going the right way. that a culture that is gone wrong has been changed. in the culture that would see organizations accused for years without a whistleblower afford or that would see some of these and not be as outraged as we were is a culture that needs to change. for those who were outraged and those who are outraged today, i for everyone to understand the vast majority of federal workers, this is not the norm. and for the rest of the federal workforce if it's a norm, it's time to blow the whistle and get it changed. i recognize the wrecking member for his opening statement. click thank you very much. i'm glad we are holding this hearing this morning. it is a very important hearing. and givee must pause

credit where credit is due. you, mr. chairman, and this entire committee, to mr. mica. i also serve on the test patient committee and he is chairman of that committee. and we allarings work together because back when , wegsa kindle came up worked in a bipartisan manner -- up, we workedme in a bipartisan manner. we have been able to 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. to applaudis morning 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 held in anaheim, california in 2010. i understand this conference occurred three years ago. i know many examples we will discuss today like the ridiculous tartaric video. trek video. star

i swear, i do not see the redeeming value. i was about 3:00 this morning watching it. i was trying to get to the redeeming value. could not get there. however, these factor not lessen my frustration and anger. of this utterly wasteful spending. take the star trek video. perhaps you can help us .nderstand what it was a parody of a television show and what many people unfairly think about federal workers. let me pause here and thank the chairman for what you said about our federal workers. i'm a big defender of the workers.

i think a lot of times they are criticized when they should not be and they get a raw deal. so i want to make sure that they understand and we understand this is not what we think of federal workers. every time i would watch these videos, i said to myself i'm a -- myself, 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 the ones that go down to the sheraton hotel in downtown baltimore and clean the floors,

then. i thought about the man who came to me the other day because he just got a letter from the irs about an audit. he did not mind being audited him he was scared but he wanted to know he is in treated fairly and was to know -- the other day concentrated on truth and trust. today, i'm going to add to that take in the waste. what happens here and that when we have episodes like this, it has an impact on the average person. where most blog people do not make $50,000 a year yet we can produce a video and has no redeeming value spend tax payers hard earned dollars for that.

then there was that line dance. i say we can do better. --ss what question mark guess what? the money that was fed on that, that's my money. that's the lady who got that early bus this morning, that's her money. the one who $35,000, her. the streetan up from me that makes 45 hauling trash. so it was wasted. that $50,000 is a huge amount for families struggling to get by. that's more than many households making this country. this is only part of a broader problem.

the inspector general's report finds that the irs spent approximately $48 million on conferences over the past re- fiscal year's. but the irs spent far more than 2009.rom 2007 2 the irs at an astonishing $72 million on conferences. i know the scope of your inquiry was limited but it would be legislative malpractice if we do not bring mr. shulman and here to ask them to explain to us why from 2007 to 2008, the congress and that it is more than doubled when we are going into a recession -- was

$13 milion and that it is more than double the me are going into a recession. it would be malpractice if we don't figure out what happened there. if we are truly going to get the cause this, we have to understand what happened to cause something to double. i'm almost finished. according to the irs spending data, the single largest increase in conference spending occur between 2007, 2008 by more than $15 million in a single year. and is simply unacceptable unnecessary. it may be difficult to find any good news today but at least there are an indication that things are beginning to change. in 2011 after news broke about another wasteful conference held other general services and

ministration in las vegas, the president issued an executive order that reduce travel and other expenditures across all federal agencies. i give you credit. a lot of the things have to do with what we did in this committee. 2012, the office of management and budget directed agencies to reduce their travel expenditures by 30% below 2010 levels. it prohibited conferences over $550,000 without a waiver personally signed by the agency head. as a result, the inspector general's report explains the irs has now cut spending on 2010.ences by 87% since we did that. we should take credit for.

i'm also very encouraged by the actions of the new head of the irs who was here would've today. . mr. chairman, i agree with you. he is a breath of fresh air. ofcalled me within hours getting appointed and said one thing i will never forget. he said i will figure out what's going on among i will hold those responsible who are bad actors and he said i will restore trust in the irs. he is already taken significant action to begin restoring the integrity and the irs and holding people accountable.

he 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 and las vegas is that they hurt the reputation of all government workers who commit their lives to public service. it is a close, mr. chairman, i hope you will me in offering our committees the port -- committee's support. as a said at our last meeting on the irs, we must dedicate ourselves to truth and trust. both goals rt three based on his actions today, mr. warfel is working to achieve them. basedth goals are key and on his actions today, mr. warfel is working to achieve them. >> we now welcome our first ,ownship -- panel of witnesses

the honorable j russell george, the inspector general for tax ministration. mr. gregory kutz, assistant inspector general for exempt organizations. welcome back. we know you had a big part in this investigation. we also welcome mr. fink, commissioner of the small is this and self employed division at the irs. pursuant to the rules of the committee, but all three witnesses rise, raise your right hand to take the oath. or affirmemnly swear the testimony you are about to give will be the truth, the whole truth, and nothing but the truth? >> i do. like but the record reflect all witnesses -- >> let the record reflect all witnesses answered in the affirmative. there is one opening between the two of you, mr. george.

thank you again for being here. i know we will rely on you for a number of questions. 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 of transparency without redundancy by committees. i like to recognize -- george, do you want to make any comments ?irst question mark >> yes. today's testimony highlights the results of our audit, a virus confident running for 2010 audit of the--our irs from 2010-2012.

we received a specific allegation is excessive spending. overall, we found the irs spent an estimated $49 million for 225 conferences during this three- year period of our review. a conference in california was held at the marriott, hilton, anaheim intels in august of 2010 the cost of $4 million. the small business self employed division of the irs conducted this conference for an estimated 2600 executives and managers. is required at the time, the conference was a cute -- the conference was approved by the deputy commissioners of the irs. we cannot validate the accuracy of the 44 $.1 million conference cost because the irs did not have effective controls to track and report those costs.

the $.2 million of the conference costs were paid from unused funding originally intended for hiring enforcement employees. as that of using the required irs personnel whose job it is to search for the most cost effective location for the conference, the irs used to commercial plan is to identify a site for the conference. these planners were not on the contract -- with the irs and had no incentive to negotiate a favorable room rate. they were paid an estimated total of $133,000 in commissions based on the cost of the rooms paid by the rs. rather than negotiate a lower room rates, the planners requested 25 or more vip suite upgrades with amenities and the hotel along with the reception, consummate drinks and daily breakfast 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 stated multiple mites -- state multiple nights and presidential suites at the hotels. other examples of questionable spending for the conference include planning trips costing $35,000, to video productions 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 .ncurred for employees gifts and trinkets were given to irs employees costing $64,000. $135,000 were expended for out hot -- outside speakers. one of them was paid $17,000.

this speaker created 6 painting s at session. 2 were given away, 3 were auctioned off by charity and one was reported as lost. of the reviews were conducted of individuals related to the conference was focused on potential misconduct. although the details of our actions are confidential of thet to title 26 internal revenue code, we did refer an issue to the irs for consideration of the administrative action. a review of this conference do not uncover any criminal violations. in conclusion, it is worth noting the irs conference sending -- spending dropped over the three-year period from $38 million.o $59 -- to $5

due in large part to increased oversight and control instituted. we did make for the recommendation to tighten controls and the irises agreed to all of our recommendations. issa, ranking members, thank you for the invitation to appear. >> thank you. mr. fink. of the the commissioner small business self employed division at the irs. i appreciate the opportunity to appear here today. i worked for the irs for 32 years, starting as a grade seven worker in ohio. i became commissioner of this division inmate 2011. .'m proud to be a irs employee

24,000 employees and accounts for the majority of the 50 million dollars that the $50 billion the irs collects it enforcement each year. we train 26 hundred managers from across the country. we need to ensure they have the tools to lead employees and adapt a major changes occurring. at the time, this meeting, almost 30% of the managers were new or only have been managers within a two-year period. another focus was employee safety. there have been an increase increase in the number security threats an against employees. it is important to point out that we follow irs and government procedures that were in place at the time. the treasury inspector --we are office

now in a different environment and there are new procedures in place. in hindsight, many of the expenses occurred should have been more closely scrutinized or not incurred at all. ever not the best use of taxpayer dollars. given the new procedures, we would not hold this same type of meeting today. i would be happy to answer any questions. pre-k's any to announce for both the witnesses and folks that we expect both moan -- momentarily - i want to announce to both

the witnesses and folks that we expect to come back immediately after the last vote. or anyone myself gets to the chair, we will recommence so we can get the day underway. 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. but that i will recognize myself for first-round. >> as i show those, i want everyone to understand that these are suites that were upgrades. for largenot uncommon conventions. but we want to make clear is the allocation and how we pay for

them is a big part of what the ig is aware of. i've been honored it when i was chairman of associations to stay in one of those. comped by the hotel after a large bidding on taking that had taken virtually every room in the hotel. the room rates were below what the irs paid in that hotel. to be good to the video question for some who have not seen it, i want to get into the record. this is a short clip. .t sets a tone [laughter]

[video clip] >> a widespread case of infusion. uninformed taxpayers. no strategic vision. anarchy is cutting across the planet like a virus. shall i cover my ears, captain? i am sure many more will watch that and some will last. i will start with mr. think. what were you thinking? this but never be seen -- and that this would be seen or how will it

look when it is seen? asked mr. chairman, those videos at the time they were made were an attempt to use humor to open the conference. the dance video was used to close the conference. they will not occur today based upon all the guidelines that exist. there were not appropriate at that time either. the fact is, it's in their thing. i apologize. a clear delineation of the cost of both the videos but they are in a nursing --

they are embarrassing and i regret the fact that they were made. both inppears as though this and other cases, we cannot count on proper accounting of what money is bent on what. -- is spent on. travel simply bill it as and conference travel, then it will not be seen as conference travel. how are we to know and without receipts, how are we to know these kinds of changes have occurred to where there is and auditable chain of where money was spent? it is alreadyn, been spoken that there have been many changes of the irs.

one of the changes is around the tracking of expenses. for the particular conference in anaheim, we were only able to track 90% of the cost. there is a variety of reasons the other 10% were not tracked. because people do not use the tracking code in place. ,olks were on other travel doing things of that nature. to not use the conference tracking code -- did not use the conference tracking code. if i did it as a business and could not account for receipts, wouldn't your inspectors say disallowed question mark >> ? >> we take very seriously the

role that we occupy and ensuring people have the appropriate business records. this year, exactly provided, we only have 90% of the information as far as the expenditures. life -- >> if i have local folks get hotel rooms and meals and so on and not issue a w-2, i made a rly serious allegation. i could characterize it as tax evasion. fei company did not do it in the employees, the law did not do it. essentially no accountability for this revenue to be taxed. what would you do in that case question mark -- in that case? eachu have to look at

situation case-by-case. in that particular situation, we would look at the individual fax that existed -- facts that existed.w we now have issued the b-2's -- w-2's to local travelers. we had not appropriately accounted for all the local travelers. >> i guess i will characterize it to you. it was not in the tax year in which it was earned so that employees do not voluntarily file as far as we know. knowledgeable people about taxes do not take out to say i have to pay taxes on this. the employer did not issue the required tax statements to .tself i characterized it as tax evasion because they cannot just be swept under the rug.

these were knowledgeable parties on both sides. dide found 7 people they not identify that were local travelled.ly event planners -- i have worked with event planners. --re seems to be fed of hand a sleight-of-hand. the received a commission. more they spend, the more they receive. for got free rooms familiarization trips and rooms.loyees paid for what i understand, that increase their commission. >> mostly upgrade rooms they

paid the per diem rate for >> have you looked at comparables for other associations? i cannot find that there. i want to not cast any blame on various hotels. if somebody says this is what i want, it is not your job to make the dumb smart. like they couldn't potentiate -- negotiate the room rate down $135 -- could have negotiated the runway down $135. rate down $135. >> there was a mention of various food provided. irs employees received full per

diem. you have a substantial amount of per diem returned as a result of ?heir getting meals you're not entitled to keep the per diem if you do not have to use it? rex -- >> all the employees and versatile cupful per game of $71 per day even though they received the continental breakfast. -- all the employees received the per diem of $71 per day even though they received continental breakfast. >> it treated a situation in which they got overpaid, basically? rex not technicall >> not technically. but from a taxpayer perspective, the government pay them for breakfast and they got paid for breakfast at the same time. like to report to identify any

--the report raisesn concerns was how the irish shows anaheim as location for the conference. it questions the use of nongovernment event letters. --e vent planners. the report states the use of the planners in the process increased the possibility that the site selection do not result in the lowest cost to the government. is that right? if that is correct. fink, i'm pleased that you apologize. that is a major step. it's important to the american people, that they know somebody feels about this. but let me turn to this.

the committee obtained documents from the hotel that hosted a conference in anaheim. twoe-mail is between marriott hotel employees. i want to read it to you and get your response. --" orlando him a status -- orland and las vegas are out. this is fantastic news! orlando was $1 million lefess. the funding is there and they have been instructed to move forward." like thel sounds hotel employees were mocking you and maybe taking advantage of the irs. it says he could have saved $1 million by holding this conference in orlando.

i have no idea if these hotel employees knew what they were talking about or just theorizing. how did you choose anaheim for this conference? did you look at other locations? were any of those locations less expensive? >> first off, i am not familiar with e-mail. i will tell you what i know was done at the time. we use a travel estimator. them and planning the meetings. we looked at over 20 different locations. we came up with three locations that could handle this size of conference, that would be able to be logistically noncurrent additional costs, so we looked

at those types of things that were in addition to travel estimator. it was over 20 different locations. we had to look at and make sure that we were not going to occur -- incur more expenses. it was a matter of logistics we came up with the final city. >> you said during this hearing that this were to take place today, it will be different. how would it be different? >> it would be different because represented cummings -- it would not occur under the restrictions. 150 two were conferences. and 87% decrease thanks to the committee.

do you think that was a good thing? >> absolutely. >> by d.c. they? >> the reason i feel was a good thing is to show we had increased our scrutiny. that we were paying more attention to how we were using a taxpayer money, and that we were taking a harder look as to what was the necessary training individuals were receiving. >> did event planners give you a cost-benefit comparison of the various locations for the irs chose which to use? interactiond no with event planners. i do not know if they gave an assessment. we chose the cities as far as looking in which cities would be appropriate, and we may the final decision about where to hold the conference. >> i would like to ask you about the room upgrades. as i understand, 142 hotels were rented that week.

.hat is right your report is not saying that the irs paid $1500 a night for these rooms. i guess they would normally go for. your poor is saying that instead of accepting these room upgrades, the irs should've negotiated a lower prices for all the rooms, or for the whole conference. >> that is correct. >> my final question, why did you do that? >> i was not aware that we had the ability to do that. as of today, i'm not sure that we could have done that. i do believe that we did pay the $135 per diem rate. in paying that, there were additional items that were included by the hotels to use during the conference. >> thank you. ori wheeled myself

questions. we do have the vote going on. we probably have 4-5 minutes left. with mr.art out georgia. your report indicated that hundred 35 housing dollars -- $135,000 was spent on speakers for the event. was there any similar experience in spending the amount of money for a conference that you are aware of? course ofthe conducting this, we did not conduct previous conferences to this one. >> mr. cummings talked about .fforts to rein in gsa we had conducted reviews of operations and found that they spent, not even a million dollars on a conference. outrageous spending was the

determine. >> are you familiar with this guy? this is the gsa official in the hot tub. have you ever seen that picture? >> i have seen a picture. >> i wondered if that was any motivation for the dramatic change in your spending. held these hearings come a which we participated in. but they -- the famous guy and the hot tub gave more egregious spending under control. this effect to it all? >> the new guidelines that were put into place, the new restrictions on travel, and on spending for training and things of that nature, that was handled primarily by the operations support side.

lex did you approve expenditures f four -- did you approve expenditures approved for the $4 million conference in anaheim? yes or. >> afterwards, i understand you were promoted. >> i became a commission at the conference. >> i understand they got bonuses. is that correct? >> they were six bodices -- there were six bonuses that were paid. >> for performance, yes sir. >> did you -- are you where the money they spent on this particular enterprise that paid $17,000, with his individual that is some sort of art expert, and produced drawings,

paintings. >> i saw the in the report, i attended that session. >> you did. do you think that was a proper expenditure of taxpayer dollars? >> for what we're trying to do at that time, and based upon his expertise, the way he communicates, and the message he delivers through his --sentation, i was surprised >> i surprise they got less than $500 for charity. one is missing. maybe we should offer a reward. you do not know where the missing painting is, do you? >> absolutely not. lex -- >> these are the famous $20,000 drumsticks that were used in the las vegas conference.

taken to a new level, now i see in your report, you have sporting fish as part of $64,000. did you see anyone with a sporting fish? >> no, i did not. >> maybe i can offer a reward. i'm sure that some of the taxpayers, the people who went to work out of baltimore or my district in central florida would love to know that the federal government has spent $64,000 on sporting fish for federal employees. is that an them -- is an appropriate use of funds question >> there were expenses that were incurred at the conference for that conference that were absolutely inappropriate. that would be one of those. wastefuls has taken

spending to an absolutely incredible level. it has to be dismayed. the people who are spending hard earned dollars to give the irs , to findk, quarterly out their money is spent. all of the $135,000 was spent on speakers. is that correct question request that is my understanding. hold peopleis to accountable. i understand some people have been suspended. we understand some people have got bonuses like yourself. that the system has been corrected to a degree because of congress bringing these items to the attention of the congress of the american

people. with that, we will have to reassess. -- recess. we will return. the committee is in recess. >> thank you. >> the committee will come to order. we will recognize the gentleman from ohio for 10 minutes. >> i think you for your tenacity, and making sure that we have the information to go to the oversight. one thing that struck me in looking at the review of this conference, what i call a budgetary slush fund trick. when i served as mayor for the one way that we balance the budget was by finding those slush fund budgeting tricks.

this trick was something that we saw in the city. people were taking 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 being -- they had a budget proposal, it would never pass the scrutiny. but by keeping they can positions open, they can cannibalize the money and use it for purposes that have a lower level of scrutiny and accomplish things like this conference print could you speak to that for a moment? we prohibited this practice. if you had an open position, that fun can only be used for personnel. if they were not, they were recaptured on the federal side. i'm concerned that this must happen across the board in the federal level. there's probably hundreds of millions of dollars it could be recaptured if we recapture

vacant position funding. >> i may differ to my colleague to elaborate. we did look at this issue. the money that was spent by the irs in terms of the unused money that was otherwise invited for -- provided for hiring thatials, it was going -- money would have been returned to the general treasury. -- did have >> if this money is not being user personnel, the money goes back. this slusho not get

fund that they used to do this conference. there are instances when money is limited to the sole purpose for which it was first appropriated. in this instance, that was not the case. i think we're going going to request that my colleague -- >> real quickly, this money was essentially transferred within the appropriation, which was not a violation of law. >> i think i have seen on a local level how it makes a difference. we need to do it at a federal level. across all federal agencies, there has to be these slush fund pods that do not meet the scrutiny level. we have thetand swag bag from the event. this is in the future. we have a portfolio that says teamwork in action. these items were given to the

artistic. oversees $2000 of these trinkets. listen to the ranking member who was so eloquent about the taxpayers dollars that were taken out of pockets of people who work very hard for their money. , whate in the footnotes was in the swag bags is a fuse about i think saying this, a plastic scorching fish. i have been asked to take a look at this breed what purpose could the irs have in giving the participants a plastic fish? a ghost with the ranking member was saying about the party atmosphere. could you please tell me, what were these items for? what about the squirting fish

question mark >> i honestly have no idea what the plastic fish was. that is being honest about it. the items that you referred to when you look at the expenditures that were done for those items, we certainly as an organization should not have spent those funds. >> thank you great i hope you understand the irony. they would never be able to stand up in front of you and be able to say that. >> i now recognize the gentleman for new york. -- the gentlewoman from new york. >> the recent history of the irs is appalling. democrats and republicans are united at the wasteful spending, the inappropriate behavior, and mismanagement of one of our most

important agencies. the changes that have been put into place are dramatic, and .hey are having an effect i believe you would agree on that. three most expensive conferences outlined in the report all to place in 2010, correct? >> yes. >> since then, the meetings have decreased by 84%. the cost has decreased by 87%, and the number of large meetings has decreased by 84%. that is definitely will be in the right direction. the spending on the conferences with 50 or more participants was $4.9 million in 2012. all good movements. , would say that the presence

the initiative to cut waste, to target wasteful spending has been very useful and appropriate in getting results. i was concerned by the videos that the chairman showed us. not only was a monumental waste of well over $50,000 of taxpayer money, but i would say it is an insult to the memory of star trek. [laughter] i could do a better captain kirk. i recognize one of the panelist in the video. were you mr. spock in that video? >> yes, that is correct. >> how many government employees participate in that video? in acting, editing? >> i apologize, i do not know

the exact number. i'm not sure what the total number was that participated. >> to think this was a responsible use of money question mark >> no, i do not. >> did you approve this? >> no. >> you did not approve it. i would like to ask mr. george, you did come out with nine recommendations. is that correct? >> yes. >> of those recommendations, how many have the treasury , and aret accepted supporting? >> all of them. >> they are all supporting them. all nine. the president came out and supported the recommendations. >> that was actually related to the review we did on the 501(c) four reviews. i believe the president spokesperson may have addressed the incident audit.

i'm not completely certain. >> the treasury is now implementing all of the nine, or how many are the implement in? >> they are in the process of implementing all of the nine. i may differ to my colleague. >> they were not in the other report. there is not in this report. -- there were nine in the other report. the mostyou go over important nine in the 504 category? why the recommendations? ,> the most important, probably the backlog of organizations that have been there three years waiting for a decision am a yes, no. one of the issues was whether or not the irs had evidence at

looking at political campaigns. in some evidence that was no evidence that it was a campaign intervention. werecommend exit document -- recommend a document why they picked that case. those are examples of some of the most important ones from that report. ,> when using intervention what would you define is intervention? paying for campaign ads? >> the regulation definition is supporting or opposing a particular candidate running for office. >> i would think that would be pretty easy to do to see whether they bought time on campaigns, tv ads. have you look at that? >> i do not know. evidence of significant political campaign intervention.

31% did not read the recommendation was related to if you're going to pick a case, there is no evidence of heavy intervention, you should document why you did that. >> the gentlelady's time has expired. the gentleman from tennessee is recognize. >> thank you. first of all, i want to say that i very much appreciate the great opening statements that you and raking member comings , i agree withs everything was set in regard to this. i thought that several years ago, the mayor of philadelphia was having trouble with city employee unions. he later became governor of pennsylvania. he said that government does not work because it was not designed to, because there is no

incentive for people to save money. much is squandered, and there is no incentive for people to work hard. and they do not. the problem is that we do not have incentives to pressure people to save money. we end up with these ridiculousl expenditures. we need to make sure that in the ,uture, we put more incentives more pressures, and more doishments for people to not these types of things. exxon article yesterday about how it is also possible to whove a federal employee messes up in some big way. to commend you, mr. george brady have done great work for this committee, and i appreciate what you have done.

i feel the same way that all of these others low spoken before andnot just about star trek the line dancing, but a $133,000 just to look at hotel, or figure out the hotel. irs employees could've done these things. we need to make sure that this doesn't happen in the future. and what i see happen so often when we go through these times, two or three years later, we are back in two these things again. we need to stay on top of that. that is really all i have to say. i yield back. >> thank you. i just want to be clear, when hundred $33,000 was paid by the hotel, not by the irs. but they had no incentives to

,educe the cost to the irs because the more the irs pay, the more they got. >> thank you for that clarification. >> i think the gentleman. -- i think the gentleman. -- i thank the gentleman. >> this is a long-standing problem. forworst year of spending before the5 million president even came into office. or the take away from you learndes is that from your mother and father when you study -- you spend somebody

else's money, spend more carefully than your own. that would go especially for taxpayers money. ,ven if there wasn't as much it is an excessive amount of money. i would like to get to the root as to why this conference, or this training was going on. the first thing i would like to ask is that anaheim. why was anaheim chosen? where do these employees rich in question were >> -- where do these employees originate? >> it was based on the size of the conference, the number of individuals attending,. >> where did they come from? we had came from -- leaders in three-hitter 50 locations. they came across the united states. >> how many came from

washington? >> i do not have the exact number. >> most? >> no. most not come from washington. with a lessst -- effective to have in a central location? ,o have it in a place like this which is a vacation spot? suggesting st. louis. i'm not going to wish that on the irs. would you respond? >> from the information at this hearing, we understand that florida might have been less expensive than anaheim. whenspicion is aroused sunny skies are paid. you say they came around from the country. this was to be a training conference.

the irs employees deal with highly technical roles and work. .nyone could understand that i want to take exception to my friends, who sees no redeeming value in line dancing. as a spans of national dance -- >> i did not think he go as far as to disparage line dancing. just at this particular conference. admission ied the would have. i have no choice but to speak on his behalf. >> i just wanted to stand up for the line dancers. too bad they were doing it on their own dime. but, let me ask you about this

conference. here is a training conference. as i read today are poor, i would not find out what the focus of the conference. i could not put my finger on what the purpose of the conference in anaheim is. >> i'm going to do for to mr. fink to complete this response. there is no question as you noted earlier, there is a redeeming value for training. these are 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. anther or not that was aspect of this conference, i will defer to mr. fang. -- how muchajority of the conference was devoted to screening? >> if i may, one key aspect in

all the disclosure, my organization had a representative. >> this is important. i was going to ask you this. knowing whether irs employees there, there were employees of the inspector general there. >> we had one employee who was there. keep in mind, this was in the wake of the tragedy that occurred and -- in austin texas, when someone blew a plane into a building. one of our senior investigator spoke at a session on security and threats to irs as result of people who were disgruntled. >> the time is expired. does anyone need to answer that question? >> i could go on. >> complete your thought. i do not want to interrupt you. >> all my employees traveled one , and then departed.

-- vouchers that he followed filed were $1000. he apparently, when he arrived, dig in upgrade to a suite. there were no regular rooms available, which is what he requested when he first sought reservations at the hotel. the bottom line is, he was there to instruct irs employees on the threats being presented as result. >> most of the training was devoted to training. >> i do not have the agenda. >> the time is expired. thank you. doug shulman attend the conference? >> yes. did lois lerner attend the

conference? >> no. >> did sarah hall ingram attend? >> i do not have the information. i do not believe so. -- o any other >> there is no evidence anywhere in the the government was at the exhibit hall. >> you guys, your poor indicates -- did youoney spent look at any other conferences in detail other than the anaheim conference? >> no. >> there are two under 24 we do not know much about. >> -- >> 14 of those were solely for the tax exempt division. the division a targeted americans for three years for political believes.

you not look at those at all? >> no. those were $2 million and told him -- in total. >> washington times indicates it was one of the most expensive. is that accurate? >> i do not know. >> do you know of the 14 conferences of the tax exempt division was a part of read do you know if doug shulman attend any of those? >> i do not. >> to steve miller? >> no information. >> lois lerman? >> no information. >> is it fair to say that the ohs would run in -- is it fair to say that they would be there at at least one of those conferences? >> it is likely some or one of those would be there. >> potentially all could have been at the conferences?

>> they could, potentially. >> i did notice that this and conference there was a session entitled politically savvy training sessions. how to not shoot yourself in the foot. you have a note if that training session was held at the other conferences question my >> i only know it was mentioned at the one you mention. >> do you have any information on any of these other conferences that were done between 2010, 2012 that you can offer to the committee? >> nothing that is in-depth like the anaheim conference. >> due to the as an appropriate thing -- to you think as an appropriate thing to check out? if those individuals who headed the division were involved question are >> we would be willing. if you request first look at some of those conferences, there is something we would consider. >> i would just say this. out of an agency that is

control. you think about one conference of to where 25. ,e know what happens at this with not keeping receipts, and gifts, but what is more telling is at the same time that this agency was targeting individuals for their political believes, we had been headed of the agency attending the very conferences where this takes place. conclusion to reach of the people involved in the division that was targeted -- targeting people for their political believes were involved in conferences. what is most chilling, this is began targeting people for their political believes very much obamacare became law. march 2010. this is the agency that will be

involved in enforcing obamacare. we'll be in charge of enforcing the healthcare law. that is what is most troubling. i would go back. -- i would yield back. >> the gentleman made a request. your requesting additional information? >> i think it would be helpful. not phrasing that in terms of an official request. i will be checking with the chairman, two. as i said, i have considered legislative malpractice if we do not at some point look at why 2007-2008 conferences, the price of conferences doubled. it seems to me, we have to get

to the bottom of this. we need to understand that. >> i want to make one point. my only point was, we have looked at one conference and we uncovered this. there is 224 other conferences that were going on in the same timeframe. that is important. ,> for the entire committee this is a salient point that keeps coming back. it is the intention of the chair working with ranking members to do a current event study of where we stand with conference and travel post legislation, post the actions, and post the good work of this ig. -- i hope this we did last time we will be looking at anything that is forward-looking from 2012 on.

we want to look at how many reforms have been accomplished. mr. george, i certainly think that if you look at current ones and find any of these past activities are still occurring, that you inform the new commissioner and us as quickly as possible. i do believe that the gentleman is right. with that, i appreciate the opportunity to have the gentleman massachusetts the recognize. >> thank you. atore we give it and look 2013 and beyond, i want to look at the last decade. let me put a chart up showing just how cost increases. you already covered 2000 and 11 -- 2011. at 2005, according to the irs 2005.$9.8 million in

it nearly doubled to $90 million. do you know what causes a jump in 2005-2006? >> no, sir, i do not know. >> una deputy commissioner in 2008. >> yes, sir. ,> if you look at the chart 2007, 1340 $4 million. $29next year, 24 -- million. the biggest increase in any of those years. what caused the increase from 2007-2008? >> in the years that you are citing, the definition includes training. we had significant hiring. we were training a significant

number of individuals. you are having those individuals go off to training, and the training was done face to face. beould surely say that will a contributing factor to the increase in those costs. >> just to make sure i get this right, in that particular year, it was a definitional matter? was being usedon around conferences also including training. training forms. >> no way to distinguish which was which? >> actually, if you have a breakdown, you can take and look , you candividual years go through the individual courses listed. you can answer pick out what is the technical training for field employees and for campus employees.

you can spot it out. >> you are from $10 million in 2005 $37 million in 2010. all that is that the difference between the $10 million -- that was training at it in? >> part of it certainly had to be due to training for new hires. >> what was the other part? >> that, i do not know. >> you do not know. >> we did do significant hiring in those years. that of course would increase the cost. >> you have any information to increases?ese sharp >> only for the three years thee you all mentioned reforms. it had and if -- had a significant impact. >> those numbers drop to below

$5 million. i guess that is the case, information came to light. atthe reforms that started the internal revenue store -- service started in 2010. >> why was that? someone'sbrought to attention questioner was there an issue? >> i was not involved in that. it would be purely speculative. aree are looking like we spending less now than we were spending in 2005. is any of the we're spending now training? >> yes. we are still doing training. a are now doing training of significant amount of training virtually. the travel costs are reduced preview not have that activity going on. you people doing it virtually. with technology. one of my questions was why

do not the more technological. ,> including this conference there is the text for them, in which the irs gathers tax preparer's in various parts of the country to update them on policies. there is a tremendous benefit to the entire system of tax ministration for the irs to conduct the us, as these are literallyany individuals who prepared taxes, to make sure they are up to date on what the technicals are comment and what to be -- technicals are, and what to be aware of. leads of people abusing the tax system, learning

,hat is or is not permissible and coming forward with those leads. of a functioning irs is -- we've always seen countries they do not have tax collection. it is something we have to get on top of here. we're going to keep on that. >> quickly following up on the statement, is there a possibility -- the exhibit doesn't reflect conference pending at all. is there a pop -- possibility that you would provide to us a breakdown of what portion was billed as training? these two -- these true conferences. we want to make sure the record is correct.

conferences versus our issue the public versus travel to the public -- >> i'm happy to do so. we would have to rely on information provided by the irs itself. >> the next panel will probably ask that again. >> thank you. i think you for having the foresight to actually call for this, as we look at the gsa. mr. fink, how long have you been at the irs? what's 32 years -- >> 32 years. >> you been at conferences along the way. what yes, sir. tohow would you compare this past experiences? in myis certainly --

career, it is one of the largest that i have ever attended. it was not uncommon in the service in the past years i have been there that you would have large gatherings of your leadership team, bring all of your managers together in a function. >> what did you personally get when you went to that conference? what did you personally receive? >> for the anaheim conference? >> the bag it was shown is what i got. it has been mentioned, i paid the government rate and stay in a suite. i got the bag, and there was a notebook inside of the bag, and i believe i received an attachment to your lanyard that you wear for id purposes that is spring-loaded. turks,hing else? benefits?

, benefits? >> there was 25 baskets of fruit that were in each of the two primary hotels. how big was your room? >> i pay for them like that personally. , where mention to you there was -- where we had , aerved most of the hotels large conference, i was given a suite. >> when and where was that? >> that was the one that i have the most recent recall of, in chicago. >> when was that? >> i believe it was actually in

2009. ,> because of your rise in rank did you believe you were entitled to that? >> no, sir. >> why did you get it? >> my understanding is it was part of what was negotiated with the hotel is part of the arrangement for us taking a significant number of the rooms in the hotel for the conference. this wasid you think wrong? he conference in general? >> yes. >> we should have been paying closer watch for our expenditures and expenses. i do not think the conference itself was wrong, because of the time we were in. 30% of our managers were brand- new. we were going through difficult times and trying to get our leaders recognize. >> when did you think that something was wrong here?

did you ever think something was wrong here? i think now that in retrospect, looking back, you take a look at the expenses, we should've been more diligent in our responsibility to the american taxpayer. >> and you are in charge of this group? >> yes. >> when did it strike you that this was wrong? >> as i said -- >> when you got testified -- when you called to testify question mark >> i do not think 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 -- >> when did you become aware of the massive expense?

>> i do not become of the massive expense until much later. i did not know what the expense was. >> you are the number two person question mark >> yes. >> you are oblivious to the expenses. you are totally ignorant of the expensive? >> i was not involved in the planning or execution. it was put together by planning team. >> we have already heard. we with the planning committee is. authorizedcally this? when did you realize that it was wrong? >> if you look at the inspector general's report -- >> no, i want to hear from you. you are in charge. this is what is infuriating. you are in charge. you have a public trust. you are paid by the american taxpayer to be responsible, to

be respectful, to have knowledge, to have oversight. yet, you cannot even tell me if you think this was wrong. in fact, you are saying this is a pretty good conference. >> i would like to hear an answer to the question. i would say the documents we , it washe conference authorized by two deputy commissioners. this was an april 2010. >> clarify that for me question my >> mr. fink sign on this? that for me. mr. think signed on this? $4.3 millionted conference at that time. >> when did you realize this was wrong? you sign the authorization before it happened. two minutes for questioning.

know the collective we is. >> that will be noted for the record. you personally sign the document, with the dollars on it come up before the conference. would you agree? >> i signed -- i initialed the statements. >> what does that mean to you? >the of any responsibility? > -- >> that include the cost of the conference question mark likes conference question mark >> that included a discussion. you do not think that was wrong? >> because of a we were experiencing. >> what was that?

-- ahold the taxpayer base whole new taxpayer base. , you thought it was wrong when he be came -- when you became aware of the expenses. you participate in meetings understanding the cost before the conflict happen. are you here climbing no responsibility in this? >> absolutely not. >> the gentleman's time is expired. if i heard correctly, i could have a red back, you answered you were not aware of the cost of these, and then you made it -- attendedgned briefings in which a new cost. the july to revise your initial statement?

-- would you like to revise your initial statement? you want to be much more accurate. did you know about costs? when? i do not want to trap anyone. i can't square those two right now. >> i was aware of the cost when we did the estimated cost of $4.3 million. oft is when i became aware the estimated cost. there maybe additional questions. i think the gentleman for utah -- i think the gentleman from utah. lost a member, because he had to get out of here. can we have an additional five minutes? if you find a witness who is

a potential liability of perjury. the gentleman is recognized for five minutes. >> weight. wait a minute. i just asked for equal time. we have a member who had to leave. i did not object to -- i want to hear the answer to the question. add nothing to do with perjury. i'm asking for equal time. i think that is not unreasonable. >> it is not a role of the committee. >> thank you. the ig's report reference three trips that multiple irs employees took in november 2009.

june 2010, august 2010. can you elaborate on why three separate planning trips were needed for the anaheim conference? >> yes. i can elaborate. they were two separate trips pretty third trip was actually done the week before the conference to make sure that everything was set up and ready to go for the conference of that size. i think in retrospect, looking at those trips, and what occurred there, absolutely we should've used local individuals to conduct those planning trips. it was very easy to have done that by using local individuals, as opposed to traveling to anaheim. >> did you approve these trips? >> no sir. >> do you know who did? >> the then sitting commissioner. it is report says that

not identify any policy telling reasons why planning trips should be performed for conferences. the appropriate number of employees for approval in advance -- what his response? report, atng the that time, i believe that is accurate. there was no criteria or guidance at that time around those planning conferences. since then, we have made changes. stricter, tighter guidelines around those types. -- what level of approval is needed for these trips? >> i do not know. i can get that for you. thehe ig report concluded

costs associated with these planning trips may have been excessive based on a number of employees who were on file. how many people were on each of these planning trips? >> the november 2009 trip includes three staff, and cost $3500 of travel. when mr. fink described is a week before the conference, 16 staff costing $22,000 in travel. the majority were from washington. >> i'm astounded. it takes three trips to go and plan a conference. i do not understand it. why were so many people needed? isthe primary reason because of the size of the conference, the number of individuals attending, setting up the logistics of the conference.

in retrospect, when you look at it, it was unnecessary. >> it is almost like, how many people does it take to change a lightbulb? your report raises a concern that appropriate personnel did not sign letters of intent. the letters of intent are used by irs to secure hotel space for off-site. these orders are normally required to be signed by ized delivery services. however, in the case of the conference, a general schedule 14 officer in charge of planning assignment as a result. theou know who authorized

letters of intent? s> the gs 14 did sign contract saying he was ok for him to sign because it was not a binding agreement for the eternal revenue service. that is what the agreement was that was used. >> those were the concerns raised, i am sure. by the fact that this revenue officer was the one signing the letter of intent. is that correct? yes, congressman. >> why was a revenue officer permitted to sign that letter of intent? >> i believe that it is because he had been involved in planning activities on other conferences. he had some experience and knowledge, and he had corrugated this with the centralized unit.

>> who signed the of intent with the hotel to the outside conference letters who planned the conference you go is at the same person? >> to the best of my knowledge, yes. >> had he planned previous conferences with the same planners? >> that i do not know. >> my understanding is yes. >> ok. ynder what authority did the sign these justifications? >> i believe he was asked to do that by the sitting commissioner of the small business division. i believe he was instructed to do that in coordination with the planning committee.

george, do you know where he stayed during the conference? >> i do not have that information. in presidential suite for six nights. >> mr. george, your report states six employees were given awards totaling $6,000 for their work on the anaheim conference including $2000 for two are responsible for coordinating the conference planning. 14 revenue officer receive one of these awards? >> minder standing is that he did. he received $2000 for the conference. >> and who approved these awards? >> i am not sure. have they received any previous awards for work planning conferences? >> we are not aware of that.

>> i wonder how much work the gs 14 did when you had an outside firm to in the conference planning. how much sense does that make? -- aware.t amount i do not have specific knowledge. >> i'm going to yield. >> thank you for your courtesy. i appreciate it. i want to go back, the chairman and i were talking and i have a tremendous amount of respect for what to you said to me a moment ago, we are 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 clear on this. rogers a committee where clemens testified in the next thing you knew he found himself in some trouble. we want to be clear.

ofyou did have knowledge this anaheim conference and how much it would cost before it happened. >> yes. >> and so you sign some documents? did you look at the documents? the cost of this? -- how did that work for you? what happened? when i signed the routing slip i was given all of the documents in a binder and then i went through that binder and asked for what was indicated the estimated cost of the conference. and then i initialed off on it because we had wreaked the

deputy commissioners and forwarded that to the deputy commissioner. >> so you were aware. did you think that cost was high? did you ever say that to yourself? >> i did not. >> looking at it in richer spec, do you feel that way? >> yes, we said -- in retrospect, do you feel that way? >> yes, we could have saved money. ,> did you ever say to yourself maybe this is not right. if somebody sees this, taxpayers are not going to like this? >> absolutely. , as ii saw the production mentioned, i fully regretted it. ,> to this day, i have to ask do you see the redeeming value

in that video? >> no, sir. >> so you agree with me. thank you. >> i thank the gentleman. wahlberg. >> thank you for laboring on this oversight, not to just this particular issue, which is tough and ak at, as a taxpayer citizen and a representative. it reminds me of early morning ands in and my barn turning the lights on after sounds ofearing the scurrying things going to the corners because the light is being turned on. , i am not so concerned about how you feel about it now. how you felt about it back then. i can't confirm one way or another.

i certainly understand the embarrassment you must feel about this taking place. i appreciate the apology. but it is after-the-fact and i am certain that the biggest reason for the concern now is because it has come to light. you have made apologies, you have said there are measures being taken so this does not happen again. you type of confidence have that is truly echo that measures are in place to make ,ure this does not happen again that there are things we do in light of the fact why taxpayers are going through right now, that this has changed? >> the confidence i have is based upon looking at how significantly all of the cost have dropped based upon what the inspector general has reported. that gives me tremendous confidence. i also have confidence in the fact of looking at the changes

put in place and i have cannot -- confidence because the acting commissioner has come in and he has spelled out what his expectations are and when this came to his attention, and he spelled out he was appalled and he looked at the expenses and saw the videos and it troubled him. that gives me confidence it would never happen on his watch. , i would agreere with the chairman that the majority of employees are doing their job and are doing it to the best of their ability. but here is the culture, numerous people involved with the videos, understanding it and the culture said, who cares? we can do this because we can do this because we can. and it happened.

when i sit in the situation , are a 59-year-old lady single parent calls and says i have been told by my healthcare homeder, she was a healthcare worker, she's being cut back back because of obamacare. responds with administering major portions of obamacare. and we see the culture that allowed this to go on without respect for that 59-year-old mother, single-parent. concerned about losing her home because she does not have the hours she needs that she had before. and we hear what goes on in this culture. i am concerned. mr. george, you received notification of this problem from a whistleblower? that term generically.

it was an irs employee who did alert us to the fact of excessive spending. that waswas one person willing to step up to the plate to say we think there is a problem. mr. fink, i hope the culture in if it is justven because she got caught, is changing to say this will not continue, even after the light of day has been turned off. i have in my hands a copy of a letter that was written to the secretary by senator coburn. from aely responding letter he sent in april of 2012 to tim geithner asking for a listing of all conferences attended by employees during 2010 and 2012. attended by 50 or more treasury

staff. were only five conferences with a total cost under $500,000. subsequent to that, costs including the largest component of treasury, the irs, $50 million on hundreds of conferences over three years. why weren'testions, we given the information? i would ask mr. george and mr. the culture changed so that even from treasury we will get accurate information to congress? and we won't feel we have been given in accurate information. even truthful information. >> you may answer.

>> the environment has changed, mr. wahlberg. no question about that. 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 this is a major issue. it is something the administration has taken steps to address. there is something important i need to note. duringave pointed out this testimony, new policies have been put in place. the key is to make sure they are being followed. if they are not being implemented and open in terms of what my office does and what itagers within the irs do, could be for not. >> i think it was notable what he said, in the past it did not

seem that important. to the treasury secretary and others responsible for this that has to change. >> and i hope it will. >> we now go to the gentleman with more federal workers in his district, mr. connolly. >> that is probably true. mr. george, there was a time, as the ranking member pointed out, where the amount of money spent on these conferences doubled to in one fiscal year. what was going on that it would doubled? >> i do not have that information. we just looked at 2010-2012. >> you are out of the room when

we discovered these numbers are combined. conferences, travel, training, and others in the next witness will confirm that we have asked to have them broken down because a substantial amount of this was travel related to training of new employees. >> it could have been we were upping the training of new employees. i thank the chair. , the irs contacted with 15 outside speakers to prevent -- present for a total cost of $135,000. was paid $17,000 for two presentations. stated the contract signed by the irs said "in each presentation he will quot reinfe his message of on learning the

rules, breaking the boundaries, and finding creative solutions to challenges." the speaker purrs -- painted six paintings, including subjects like albert einstein and michael jordan. >> among others. believe paying a speaker $17,000 to paint appropriate use of taxpayer dollars? >> i do not. >> either of the two of you can weigh in. >> i would agree. the irs higher this speaker-painter? tothe individual had spoken numerous private sector companies and other government agencies and the way he presents his information, he picks the subjects to do a painting and

then talks about their leadership, their characteristics. what it ties to as far as doing things differently is the way he goes about doing the presentation. of course, you can't recognize the image. in some cases he will actually paint the image upside down and he talks about what their characteristics were or the challenges were they faced and how they had to overcome certain challenges. i believe it was mentioned michael jordan, he basically spoke about his drive, the fact he was committed to being the best and always trying to improve. that is how he does the painting and he relates that around what you would hope would be positive leadership characteristics.

i understand the principle and it is easy to dismiss it. but when we are trying to be good stewards of taxpayer investments, especially when our mission is to collect taxes, a less thane as judicious use of taxpayer money and this is the final question of all of you, it shows a tinure of arrogance and ear. those of us that run for elected life as we ask ourselves, how would this look on the front page of the morning paper? if the answer is not so good, smart politicians don't do it. it looks to me this question never got asked.

it was well-intentioned but one has to judge it on a range of insensitive and -- insensitive to stupid and not a wise use and their were other ways to do that without becoming an object of ridicule and enormous anger by taxpayers. thehe chairman would allow panelists to comment on what appears to me and others as a culture of arrogance to the concerns of the public. >> i agree with everything you have said. and i know this term is overused but the optics, there seems to have been a lack of regard in

terms of how this would be perceived by the american people and the times we find ourselves in. this is a case of people that lost a sign of the fact they were spending taxpayer money and not their own. >> i agree with you. it is not a matter of fraud or embezzlement. it is a matter of stupid judgment. ,> as i have said looking back a roger specht, this was not good use of taxpayer funds. it was inappropriate. should have went about this in a much more judicious and prudent manner than we did. >> i thank the gentleman. >> the chair recognizes the gentleman from tennessee. >> i think the panel for being here today and i would like to say we have had several hearings regarding the issues

surrounding the irs and when you started your testimony the one thing you did was you sincerely apologized. you showed remorse and i think you are genuinely embarrassed, unlike your predecessor who, when asked when he was sorry, i think we got a backhanded apology he was sorry it happened under his watch, which i is embarrassed because it makes him look bad. i appreciate the fact you seem to care and a lot of people do as well. let's look at what the taxpayers $4.3 million at this conference in anaheim. can you tell me the purpose your division was therefore at this conference? >> yes. if you don't mind, i do regret this. i really do. we had areason was significant turnover in the leadership in the organization.

were experiencing an entire new customer base in .mall business people that did not have tax problems before, were coming in to interact with the service $4n and were having difficulty remaining in compliance. , as thethird item wepector general mentioned, had an increase in security concerns out of the incidents in austin, texas. >> you have the term of the purpose for this, continuing education. it occurred at this $4.3 million conference? >> i apologize. not in the video, the dance video. their word learning lessons. >> you have methods of tracking

this. you said they are there for three days, eight hours a day, how did you keep track of these attendees? what did they do to get credit? >> they did not get credit. we were not keeping individual track of their attendance. they did not get credit. all they got was on our internal system, they received what would be characterized as leadership. >> was their video, sign in sheets? >> there was not. peopleave all of these with no accountability in terms of whether or not they actually gained any new knowledge on this particular trip. theyn't know whether crossed the street and went to disneyland during those eight hours. >> i can't sit here and say

they did not. >> did you know of people that did go to disneyland? >> i do not. >> did anybody talk about it? going other places? rather than being at this seminar? talked about going during the seminar but some people did go places in the evening. so we could not account for the 2700 people. this was probably an abysmal failure. we don't know if they were educated. so this was not a good conference. we have 224 more of these to look at. people don'tican listen to the irs, and they do not pay their taxes, they can go to jail, what do you tell the people the retribution might be when their money a did send is

wasted in this fashion? is there any way to recoup this money go >> not that i am aware of. other than apologizing. if they don't pay taxes, they can apologize but they can still go to jail. showmange, if mr. perjured themselves, should they go to jail? 10 -- depend. >> he said he never had a discussion about the targeting. lois lerner knew more about these agents. if they were not truthful for us, should they go to jail if they don't comply? >> they should be subjected to the criminal penalties. it is up to the department of justice. >> people get frustrated we never seemed to get accountability but it sounds

like we are getting some. i yield back. himselfhair recognizes for five minutes. i will say this, i prepared a list of questions for all three of you. but during the opening went away my mind from the questions and went and in south carolina the very same month, the very same year, the irs was conferencing in anaheim, we were furloughing law enforcement officers. we were furloughing teachers. officetors in my own were furloughed. secretaries in my office. are secretaries are struggling to make ends meet under the best of circumstances. and we are asking them to go two 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 struggling to make ends meet. one of myght secretaries came in after hours and asked if she could borrow the money to buy her child a birthday present. she kept apologizing for having to do it. she kept saying, i will pay you back. i will pay you back. at exactly the same time that young single mom was a darling money you a child's birthday present, other government aployees were staying in $3500 a night rooms.

employees weret spending more money on promotional materials than that young woman makes in a year. and other employees were spending more money on audience participation tools then that woman makes in a year. so i appreciate the work you have done. but this is not a training issue. this can be solved with another one more recommendation, if we could just get a recommendation implemented. just one recommendation form people asking responsibly. can adopt all of the recommendations you can conceive of. a cultural,e,

systemic, character, mauro, issue. has been exit -- in existence either since 1862 or 1918. they have had 100 years to figure out that while your fellow americans are losing their jobs and their health , youance and their homes do not spend $4 million at a conference for which there is no accountability. you don't hire people to make meaningless speeches were artists to paint paintings of bono, when your fellow citizens are struggling. that is a character issue, training cannot fix that. they sent 25 employees on a scouting trip.

to see whether or not the hotel was ok. that is not going to be fixed with training, mr. inspector general. have law enforcement officers being for load and you had one years how to figure out how to act appropriately, you don't need a report to tell you spending $27,000 to talk about how random combinations of ideas can drive innovation. there's not not a webinar in the world that will fix that. it strikes me we need one recommendation. start over. this entity has targeted supposed towas serve and allowed itself to be used as a political tool. not only doesn't have access to our financial information, it will have access to our health information.

those are details we don't share with people we trust. to be asked tog share it with people that are so disconnected as to spend this amount of money while our fellow citizens are struggling 2010.ly in the fall of i do not think training is going to fix it. i think replacing it might. i would recognize the gentleman from north carolina. >> thank you, mr. chairman. i want to follow up on that because it is hard to go back and talk to the people back home that have lost their homes, lost their jobs, and with any clear conscience at all, justify any part of this behavior. frankly i find your apology today hollow.

it is not enough. you are an honorable man. i am troubled by the lack of information provided to the inspector general's office. i look at this report and they can't draw a conclusion because you can't divide them with documentation. we don't even know what the total cost of this conference was. it has been reported that was four point $1 million but i have done the math. it is more than that. there is no way. what was the cost? do you know? isthe cost i am aware of $4.1 million. >> i think they would concur with me, there is no way that is accurate. because if you look at the basic numbers, we are at 4.1 million

dollars on the amount of documentation. if you take 2500 employees in travel vouchers, if you do the math, you are at 4.1 before we figure in anything else. can get to 4.5 almost immediately. your testimony said 90% was undocumented. you are only able to document 90% of the cost. how do you know that if you don't know the total cost? how do you know the testimony here today is accurate? if you don't know the total cost. did you make it up? -- the 90% is based upon >> i am asking year. it was your testimony. >> based upon the overall cost. have 90% of the documentation of the $4.1

million. >> that is correct. >> it could be $5 million? it looks like it probably was. could it be $5 million? >> yes. >> $6 million? >> there is no way i would know that. it could go higher. absolutely. >> what surprises me is a guy that has been paid 32 years to hold the american people accountable is not accountable to those same people when he is documenting his own costs. why is that he the american people want to know. why is that? orthere was no guideline forirement to track cost

that particular conference. we implemented the use of that code to track the conference expenses. senateerday you met with committee members. >> their staff. >> and in that time, the general consensus was you did not think the $4 million was a problem. your testimony today is you have had this path -- epiphany was a problem. but yesterday they did not think you saw it as a problem. when did it become an issue to you? >> it was an issue with me yesterday. if you look back in retrospect, we could have done better for we couldcan public and have been more effective. >> more accountable. , let meget to it finish, you also say all of this was done because you had 30% new

hires. of the assure us today 30% new hires? that is why you said it was large. >> that was one of the three reasons i stated. they have less than two years experience. the math.done one out of every two was a management higher? that is 800 new people if you take 30% of people that attended the conference. was at of every two hires management person? >> i apologize. 30% of the about managers having less than two years experience, that would not include the numbers of new hires for that particular year. the new hires were primarily front-line customer employees. 1516 employees.

they would not have been attending the conference. time.an see i am out of i appreciate the indulgence of the chair. i have one other question. yield back. >> the gentleman from michigan is recognized. george, after reading your investigations into what is going on at the irs, with the excess spending on conferences we are discussing today and the targeting of conservative groups, i can't help but sense the irs is out of touch with the average american citizen they were hired to serve. toing your investigations you ever come across anyone in the irs that felt disdain for the average american? contempta feeling of for the american people as if

they were somehow unworthy of the irs? i cannot say our reviews would lead to that exact conclusion. there was in this instance and in the instance of the 501(c), a lack of management, a lack of oversight by management of what was going on at the rank and file level. we are continuing our review of the 501(c) matter. i can't give you a definitive answer but in this instance, as acknowledged, there was a lack of sensitivity as to how it would be perceived by the american people and i would presume to add to the fact managers seem to have had a lack

of concern about how they would be perceived. circumstances have changed and the gsa revelations, the subsequent actions taken by the irs officials and i the administration of the highest levels have also affect did the behavior of government agencies at all levels on this issue. there are tens of millions of americans who would love to be paying taxes and can't because they are out of work. manyons of young people, with college degrees in student loans to pay and can't find jobs. are underemployed and barely getting by. i tried to ask this of most of the agencies before this committee, when the irs is looking at conferences or other

ways to spend our money, does it consider the current suffering experienced by its fellow citizens? >> at this particular time, part of this conference about the, was individuals that were having difficulty with complying with requirements. that is why we brought our leadership together so we could that we havessage to understand the taxpayer's perspective. we have to stand in their shoes so we can better understand what they are experiencing when they're interacting with the irs. that is what it is. it is difficult with is coming to light, it does tie to what you are talking about. our agency is going through a time where we are furloughing individuals for five days and

then you have this event come up and while you can use newses and say this was money, it is equally difficult to explain to our own workforce we are getting five days off being furloughed and not being paid. and you spend this in 2010. >> i understand. have you ever heard the saying it is better to ask for forgiveness than it is permission? in your circles? heard that before? >> yes. >> as for your apology, i will trust you but i will verify by watching the irs very carefully. >> will the gentleman yield?

, can i pick up, on page five of your report it talks about the transfer of the three point $2 million. is that a transfer or a reprogramming? >> it was a transfer. >> i think it was a reprogramming. >> and you check on that. can you check on that? so but ourdo understanding is it was permissible. >> it was a reprogramming. transfers require previous approval from the appropriations committee. >> we will confirm that. >> i yield back. >> we have heard a lot about the conference and what happened and how important it was for people to get together. i have no problem with

conferences but do you know the attendance, how many people actually attended the workshops? winterson there were eight hour days, is there a list somewhere of how many people attended? >> we do not. >> there was no headcount. each workshop they attended, how many people were in the workshop? >> there was no roll. >> as i go through the list, it of the workshops that were held at this event. a few of them, making telework work. we have all of these conferences in 2010 and all of these people together for this expensive conference and they have a meeting about telecommuting. ourral years later, expense is much less because we

are making that happen. 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 is ironic in the middle of this conference there is training about receiving other people and speaking out but you see a problem apparently no one spoke out and saw a problem. authentic conversations. someone in about authentic conversations with people and the amazing one to me is the $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 conservative groups. we are paying $11,000 to teach

people not to be intolerance. , as we walk to me through what occurred at the conference. you know this has to shift and it will. changes are in place but accountability is important in this process. thank you for your testimony. we need to be able to move on to our next panel. i would yield. we will be dismissing this panel in a minute but first of all, i think the gentleman for yielding. mr. fink, i wanted to say something to you. i know this has been difficult. you have a family? are you married? do have children? of people in my own district. but i have to tell you i am glad you came

with the attitude you came with. i think that was the gentleman you said he appreciated came with an apology. we watched ms. lerner come in plead the fifth. shulman came and basically broke a-doped and it was rather insulting what he did. and you took some tough lows -- blows and you are honest and you laid it out the best you could. to know i want you appreciate that. i appreciate you doing that. and i really mean this, the fact

you are remorseful means a lot to me. and i'm sure other members of the committee philly same way. i am just hoping that -- feel the same. i'm hoping that other people in your department will book, and others made mistakes, but i'm hoping there is a lesson in this. ,hen things don't look right somebody says, wait a minute. hold on. maybe we should not be doing this. i realize a lot of times when a person does that they might be criticized but when i look to that list of things the gentleman mentioned, half of them talk about leadership. speaking up, being a more effective leader. and i think what you have shown here, you have shown leadership and i believe this is a transformational moment and that is what you have said. i do not think the irs will ever

be the same. but he will be a better organization. will be a better organization. we will be looking at it through a microscope. thank you ray much. all madenk, we have mistakes in life and your attitude has been appropriate. we appreciate that. and i want to thank our witnesses. we are going to dismiss this panel. we will be in recess for a few minutes while the staff gets ready for the next panel. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

cracks the committee will come to order. we will welcome our second , the, mr. danny werfel acting commissioner of the irs and has been on the job almost two weeks. with that, pursuant to the committee rules, we would ask you raise his right hand. the testimony you're about to give will be the truth, the whole truth truth, and nothing but the truth? klees have a seat. -- please have a seat. the witness answered in the affirmative. the procedure we use today is not the ordinary procedure. we would normally put members of the administration first but i think it was agreed that this receipt or made a lot of sense.

and with that, you're recognized for your opening statement. >> thank you. chairman issa, and members of the committee, thank you for the opportunity to appear before you today 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 22 and manager meeting held by the small business division in anaheim, described in the inspector general's report, it is an unfortunate vestige from a prior era. all there were 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 lace today. -- place today.

new spending restrictions have been put in place at the irs. as a result, travel and training expenses have been dropped by more than 80%. we have limited employee travel and training to mission-critical projects. in fact, costs related to large meetings dropped 87% between 2010 and 2012. large scale meetings like the one in anaheim have not taken or 2013.2011, 2012, under the treasury department, steps toas taken ensure travel and conference spending is appropriate, limited, and undergoes a review and approval process. this is an ongoing effort and we continue to examine areas associated with training and travel costs. as the acting commissioner, i

will do everything possible to make sure tight spending protocols are in place to protect the use of taxpayer dollars and i look forward to working with the committee on these efforts. is onek in this area part of a larger effort to chart a path forward. this is a very challenging time for the agency. light of the inappropriate actions recently brought to light regarding the 501(c) application process. i look forward to discussing that issue with this committee as well. i intend to ensure we are putting in place the appropriate measures to hold individuals accountable, addressing processing of applications, and review the oversight mechanisms at the irs. full rangeing the of irs operations, processes, to focus on how we

deliver our mission today and how we can make improvements and future. that way we will develop a better understanding of organizational risks wherever they exist with an irs. for example, in line with the report on conference expenditures, we must make sure we have the right controls in place to prevent wasteful or in a per -- inappropriate spending. where we find management failures or breakdowns and controls, we will move to correct these problems quickly and in a robust manner. i took action against two employees after i learned of inappropriate behavior. ig forwarded information during a party during the 2010 conference where food was provided free of charge in violation of government ethics and standards. beenrs employees have 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 individuals.

hasbecause of the process personal implications, there is little else i can say publicly at this time about that process where the people involved. havel of these efforts, i 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 to correct the serious problems have occurred at the irs and to continue the important work of the agency on behalf of the taxpayers. in a few days i have been in the the irs, it has become clear the agency is populated by thousands of dedicated public servants that are committed to carrying out the mission. it is an honor for me to serve alongside them and i'm confident together with congress and other 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.

>> thank you. director denies myself. i recognize myself for a round of questioning. the two individuals that have been placed on administrative leave, in spite of leave standards, they are available to transcribe interviews? is that correct? you can give them things to do. >> i am aware of no prohibition that can be placed on this committee interviewing them or requesting interviews. >> it is the intention to request interviews of these persons of interest. you to also ate some point today 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 is one of the areas of interest. the majority of federal workers are great worker is to do a good job. that do a- workers

good job. it is vexing to all of us when when you get really bad actors, how long it can take, even when you know they are going to be terminated. we might be able to help you in shortening that process. ultimately we want to do process but my understanding is that can take up to three years to terminate somebody. >> i have heard of situations in which it can take that long but if you can move the process quickly, very often it is not quick enough. it is something that we should explore. >> we would like to work with you and other cabinet positions on that. we talked yesterday, i mentioned a question i was interested in and hopefully you have been able to ascertain we heard a lot about events planners and how much

anaheim cost. were you able to get an estimate of had your in-house people taking it fully, what they believe they could have saved the american taxpayers if it was done by the existing structure you had? >> i appreciate the question. as you mentioned, you start with 100 $33,000 spent on event planners. it is a lot of money. important to make sure we are saving that. as the inspector general pointed out, by not having irs people designated to do this, who would want to keep costs down, you're not pushing as hard in the negotiation. i asked my cfo to talk with the team and make sure we had an understanding of what the opportunity was and we think it could be up to about 10%. 10% on a $4 million conference, now you are at $400,000. that is why i take the findings very seriously and this is a

change that has to happen with respect to any activity going forward. that learned approximately 3.2 million dollars of the money spent on wase conferences redirected from accounts that should have been used to hire new employees. is that still a possible practice or has that been tightened so we can no longer think we are asking for more leftover money by not hiring these people get spent on a conference in next year people are saying we need more money for inspectors? a good question. it goes to how much flexibility there is to spend the money that has been appropriated. in this situation, there was this $137 million appropriation to there were an ability

take $18 million of that and spend it on training. you had this allowability to move certain amount of money into training that would supplement the enforcement actions. thisconference report, report raises questions whether it was done effectively or not and raises questions about spending our money effectively. and could the money been moved to enforcement activities and had a higher return on investment? in this case it is hard to argue against that. havehis is something we to talk about. how are we evaluating the way the irs is moving its money into proper places to ensure we are doing the best for the taxpayer? it raises important questions. lex there is going to be a lot of questions. thereat i'm sensitive to, 6103, weute, six --

receive personal information all the time. when it comes to the irs there are specific rules and they are there for a good reason and we want to respect that. youru know, in one of previous positions, this committee moved forward an agenda for something called the data act. we did so because we wanted government to have structured data so that no matter where data was, any particular information would be well defined so that if you wanted to extract it you would be able to do so. because you are in that previous job and you are now in this job, would this kind of improvement at the irs and other entities allow when an organization like ours says, we want to know everything but we cant want 6103 information, you send it to us with that

being redacted by computers rather than the laborious task of blackouts? from your many years, what do you think about that? >> i will tell you one thing. we want to know, the better tracking of conference expenditures, the issue we found, and in response to you proposing the data act, working groups got together to figure out what does standardization mean and what would it open up in terms of knowing where our money is going? what happens is when we obligate money, we don't necessarily capture all of the relevant information we need in terms of where the money is going. 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. conference report and i realize there is not good tracking for where the dollars are going. six is what address that and

you could have a much more comprehensive and systemic review of, here are the transactions, here is that money goes out in terms of what we spent on these the issue is, how do you get there? how can we have more transparency? that is a dialogue i have been having with this committee for quite some time. on the front lines of this type of financial management, i'm looking forward to working with you to provide insight. >> thank you. can be the greatest asset for us working together with the administration broadly in finding ways to implement that sooner. it is rather bipartisan. mr. cummings. .> i agree, mr. chairman definitely a bipartisan issue.

there is an organization in maryland whose philosophy i disagree with, but i will fight with everything i have got to protect them. it is called the national organization for marriage. they came into another hearing. their taxthat information had been released to the public. they found it on the computer. thate got to tell you disturbed me greatly. the american people have to know that information they are giving to the irs whether it is tax return or or whatever is kept private. you keep talking about truth and trust. has ana that the irs

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 wondering how you feel about that. do you have a plan in place? where are we on that? i'm sure this must have disturbed you. you heard about it, right? >> this goes right to your question. acannot speak to the issue of particular taxpayer. >> i understand. in general. the reason why i mentioned a name is because it is a maryland organization.

.t is not just the organization it is the idea that information consider to be confidential appears on the internet. that goes to trust, too. speak that generally. >> i will. i have been in the seat for two weeks. >> i understand. >> that has been enough time to make critical conclusions. one of them i have reached is -- that are the most important risks that we need to manage and keep it at a low risk level. the risk that taxpayers feel that their information is not protected, the risk of the irs ,cting with non-impartiality

and their tax dollars. that jumps out at you. we are having issues in each of those areas demonstrated by the recent ig reports. ist of our improvement plan to put in place stronger practices that we have today to make sure we are hitting it out of the park on those three issues. we have to make sure that information is protected. we have to make sure that the irs is acting impartially. i think it was clear that the concerns you raised are ones i agree with. we have to make sure we are spending taxpayer dollars wisely.

doingy is how is the irs on those three things? what i'm hoping to do is put in place new procedures and new disciplines and new checks and balances and make sure each of performree areas will better and there is a transparency to what is going on in each of those areas and there is a broader partnership that involves this committee and whether it ises gao are other local universities who can help us with these issues. we have to make these improvements collectively. everything you said. i appreciate you reaching out to the chairman and i within hours after your placing that he wanted to work with us. i appreciate that. i'm wondering if you realize the

moment you find yourself in. i'm not finished. this is a critical moment in the history of the irs. to anve been called extraordinary mission. i'm not finished. an extraordinary mission. restore the duty to of americanslions who work hard, blood, sweat, and tears. they managed to reach their families and they want a fair shot. they do not mind paying taxes unless the things you talked about are done.

thewondering if you realize significant moment that you are in and how we are depending on you. we know you cannot do it by yourself. we will have to work together to make this happen. are you comprehend that? >> i do. i understand the enormity of the moment and challenge. the way that i look at it in order to make sure i am keeping my eye on the ball -- you can get lost in how big this challenge is. i want to get to work and roll up my sleeves. i'm a civil servant. i have a deep appreciation for the work that the federal government does in a most every realm. i'm a champion for the work that civil servants do. when i was approached about this

and realized there is a group a civil servant at the irs that are struggling, we have an crisis -- ices, -- have had in my career a knack for solving government problem's and i was the right person to go to at this time given my understanding of how the government works us. i said, what are the things we need to do? there are tough decisions. most every day i'm confronted with a set of questions and challenges. we should take some of these to the harvard kennedy school and it would probably say this is an unrealistic problem. too much public policy tension going on. i get questions like that five- time today. -- five times a day.

each of these questions are solvable. the issue is making sure there is cooperation and .nderstanding, patience understanding the enormity of the moment and i kick myself down to how do you fix a problem in a federal government? who can i bring to the table to help me? with year andk give you all the support we possibly can. you andll work with give you all the support we possibly can. thank you. >> this is an agency in crisis. you came from omd. variety of different positions, but at the highest ranking position i had, i had roughly 120.

you'll have more under the enforcement of the affordable care act. is this agency that got too big and had too much responsibility? we are adding that responsibility to it. i think you're right that this is an agency in crisis. a couple of reactions if i could. one, i agree with the premise we need to evaluate the structure of the irs in its size and complexity. that is part of this movement forward. >> i have got to interrupt because ireland have a few minutes. i apologize. deal with an agency in crisis and start fresh, you have to get to the bottom of the current problem. hold people accountable for what is going on. let me ask you this -- have you

talked to lois lerner in your time as head of the irs? >> let me answer that in two ways. i have to be careful about revealing any elements. i have not talked to lois lerner. >> at all? >> none. >> is she still an employee? >> the position that she held is now held by -- >> is she still being paid by the taxpayers? >> if i could -- this has been brought up. >> i'm asking if you had any communication as the head of lerner who wasis in front of our committee two weeks ago. , i think ild answer

understand the question. the answer is my understanding of what is going on in the irs involves working closely with the ig and the justice department. i have been careful with interfering with -- we have an individual that is a very important person to get information from. >> you think she has important information to offer? >> absolutely. know the justice department and inspector general are working to get that information. >> how did she get to this page lead status if you have never talked to her? >> we have an audit report. conclusions of management failures going on in the irs. my first approach on theuntability -- one of things i'm charge do is make sure we are holding people

accountable. i have an audit report of concluded failure management. determine where those management failures were. that individual can no longer serve in the position of public trust. from that report along, i can make decisions. >> without communicating her. >> there is enough evidence. and shes on paid leave refused to answer questions. do you think it would be appropriate for you to talk to her bling in this context to encourage her -- to talk to her only in this context encourage her to get the trip so we can hold people accountable and make those altercations you outlined in your opening statement? i will. >> will you encourage her to

come in front of the committee and answer questions? want to restore trust, the central figure in this drama thus far is lois lerner. she is refusing to answer questions. will you her to reevaluate her question -- her decision not to answer questions question mark -- will you ask her to reevaluate her decision to not answer questions question mar -- questions? >> it is not -- it is consultative. >> -- it is complicated. >> it is not complicated. restore public trust in the internal revenue service. i would encourage her to come forward and give us the we wouldon and answers like to ask. >> that is a matter for her and

her attorney. >> i understand that. will you encourage her? you said, i get the gravity of the situation i find myself in. you are slated to hire a bunch of people to enforce the portable care act. -- the affordable care act. lois learninrner has refused to answer questions. will you encourage lois lerner to make a statement? i encourage lois lerner to come to the oversight committee and answer questions. >> two responses to that. yes, i incurred anyone who has information --

do come tos. lerner this committee to cooperate with .he justice department i apologize if i misunderstood your question. andve to work closely follow certain rules that have been laid out by the justice department and inspector .eneral you aret to be clear -- going to encourage lois lerner to come in front of of this committee and answer questions. >> absolutely. >> and anybody else? >> absolutely. anyone who has information about the situation needs to provide that information. .> my time is up the gentlelady from new york is recognized. >> welcome.

clearly the way that some groups seem to have been targeted is outrageous. what type of things would send up warning signs? i would like to ask about a series of that and whether congress should clarify what is meant by that and what is considered partisan political activity. if you could answer yes or no or don't know since i have limited time. is advocating for a particular bill considered partisan clinical activity? yes, no, you don't know? >> i'm not sure if i can apply the rule of law to that. >> how about advocating

advocate -- candidates? >> that is square. >> what about advocating to overturn a supreme court decision? >> that is a complexity i cannot speak to. >> how about advocating ft. worth control -- birth control or defeating access to birth control? should they enjoy tax-free status with funds raised from anonymous donors? >> i do not want to speak as an expert on these issues. ifis my key understanding you are advancing a candidate for office or otherwise. >> all of those decisions are rather whole lyrical -- political. .aybe we need to clarify a lack of clear guidance and how

groups are determined should be eligible. one key reason the problem exist is because original statute and regulation the treasury department subsequently issued. the original statute passed by congress provides organizations 501(4)(c)y under only if they engage in social welfare activities. if you're in social where fair, you have the tax status. -- welfare, you have tax status. you could qualify as long as you

engage primarily in social welfare activities. from very different requiring them to exclusively engage in social welfare. would you not agree? >> i would. another regulation is more than 50 years old. dana white treasury treasure from exclusive? -- do you know why treasury changed it from exclusive? >> i do not. i want to work with the treasury department and congress to explore. right now i have a regulation i have to abide by. one of the inspector general's -- >> i know that. he recommended it. the deputy treasury

secretary. do you think they should issue a new regulation that returns to said heusive -- and he wouldn't. would you work with him and others on the possibility of other find this and going back to the exclusive? >> i have initiated discussions with policy of updating the regulation of stuff i do not want to presuppose the interpretation of exclusivity. we want to get the right definition. >> would you set up meetings in a bipartisan way? >> yes. >> i think that is important. this is the government oversight and reform committee. if you get the reform part of it, we are likely to have the same situation in the future. the fact that the series of questions that are put before you which in my opinion are

political, but in your opinion are not, need to be verified that need to be well understood by the employees at the irs and general public. my time has expired. >> the gentleman from florida is recognized. >> i yield a minute to mr. jordan. >> thank you. >> will you commit to giving this committee every piece of information you possibly can? -- es as subject to >> i understand. an attorney sent us a letter on monday, june 3. in order to allow a more , the requestrview was denied. an e-mail the

following day from the irs staff. she says unfortunately we are unable to produce the requested documents in advance before the committee. who is an employee of yours wants to present documents so we can hold people accountable and we want to know why you will not give us the green light. >> it is not a question of not giving the documents, but a question of time. >> just a handful of e-mails. >> use of the interview is ongoing. i do not have specific information. when we get a document request from congress, we have to pull the entire data file down. we would go and take the entire e-mail down and have to review it. some of these individuals have been at the irs for years.

you're talking of housings of pages. -- thousands of pages. >> he has a document and wants to give them to you. it is not his whole computer. >> if he is willing to hand me the documents -- >> is willing to do it on monday. >> i do not have any facts about that. i have to look into it. >> mr. werfel, we have been trying to focus on conferences gone wild with the irs. i guess you put some people on ?uspension without pay >> we are doing the right procedures. >> i guess one person got a

promotion after that and a bonus. a couple of folks got bonuses. recoup some of those rewards for bad behavior? >> i do not know. >> we can change the law. the inspector general says no laws were broken. if none were broken, maybe we need to put some laws in. i heard mr. cummings, too. people are working their tail off in this country and feed their families and pay their taxes. plastic squirting fish that cost $4000? you are at the omd before here. >> i was. budget andoffice of

management. you oversee the budget, but someone needs to look at the management. we do that as a committee. we are getting our information. i wonder what is going on in the office of edge in management. you were there and now you are in the irs. we have got to make the changes. building thing to turn the spigot off is the hearing we did -- the only thing good to learn -- to turn -- the only thing we could do to turn the spigot off is the hearing we did. there was a guy in hot tub. $20,000 drumsticks. for --0 you can bring under control the cost of conferences, right? >> we can go deeper.

>> that is because of the scandal and investigation afterwards. nobody did a darn thing until mr. cummings and some buof us -- >> if i could. have you been to the white house yet? >> no. 160 times.man went >> i have heard that number. i have not been to the white house since i started at the irs. ,> finally, within your purview i think you have the ability to bring some of these costs under control and hold people accountable. omb.re at

somehow this slipped by omb. now you have the ability to hold people accountable. people misused their position to use taxpayer money. we look forward to working with you. the first thing i want out of view is to tell us what we need the law.change we look forward to your recommendation so people cannot be paid for these misdeeds with the public trust. i yield back. >> thank you. the gentleman from virginia is recognized. >> welcome, mr. werfel. aboutare some stories you. you are a frequent flyer.

thank you for your past service. in yourbe supportive new role. you arefy one thing, being careful in response to mr. jordan on ms. lerner. i think there are two aspects of that to be careful about. and senioressors officials in the irs made certain statements made in an ig report that were considered yielding a just very undesirable account that it was an employee that were dismissed with back pay. i assume you're being careful because you want to avoid that. >> if i could, there are a couple of reasons why i want to

be careful. i want to be as transparent as possible. when i arrived at the irs, i wanted people to make sure what i was seeing and the task i am taking. to hold peoples accountable and discipline people. it is long and complicated. we do not want to move too quickly without being fair and thorough. fairness is critical. thoroughness is critical because of what you said. if i do not have a strong record, i will lose my credit in dismissing them. i want to be fair and thorough as possible. >> that is correct. handle the long --

,> in my review in questions gaijin ig and the justice department have said they are asking these questions. ask these questions at the same time, it can be disruptive to our investigation. make sure we are on the same page with what questions need to be asked. we are professional investigators. we will keep you informed in real time. that will enable me to make sure there is a clean, fair, thorough investigation and that this committee has information it needs as quickly as possible. >> in response to mr. jordan it was exhorting you to encourage particular vigils to come back to the committee and testified, your answer was a broad answer

to encourage everyone to come. you should not be in the position of interfering with exercise of fifth amendment rights, including an employee matter matter what his or her status is at the irs. is that correct? >> that is absolutely correct. of fifth amendment is one the constitution rights. this individual has a right to exercise her fifth amendment right. >> that is correct. >> if the gentleman will yield briefly. >> if the chairman will indulge me, that is why i use the word encourage. one final question.

you have been given a 30 day review assignment by the president of the united states. what will be entailed in that review what you hope will come out of that review and trying to address management practices and morale? >> yes. three parts. the first part is accountability. my 30 day progress report to the president and the treasury secretary will detail the framework that we are using to make sure we're getting to the bottom of of it and holding people accountable. it will have concrete examples that we are all aware of aware i am in taking steps to hold people accountable. we'll make sure there is transparency in how the process will play out in the coming weeks. and fixing the problem with 501(4)(c) reviews.

it needs to be done fully and thoroughly. .here is an existing backlog it is an unacceptable backlog. hundreds of days of these taxpayers awaiting further -- for their answers. what is the right process going forward? process previously has not worked. in that report will be a framework for due process. the third part is a broad review of the irs. thatcutting and protection we want to make sure we're looking at to show the american people we are serious about transforming to improve the agency. >> thank you. mr.other thing -- i know werfel isn't aware of it, but we held hearings on identity theft

and the growing problem of it with the irs. i hope that gets reviewed as well. thank you. >> thank you. you have got your hands full. we wish you well. we need you to be successful. are you familiar with the internal reviews that are happening at the irs? >> yes. thatlishing and running with my leadership team. that mr. miller had initiated -- >> i'm familiar with it. i'm working with a team to make sure i understand it. >> have you seen it? >> i have talked to employees who were involved in that review. >> who did you speak with?

>> the primary person i spoke with was nancy who led the review. --what about [indiscernible] >> i have not spoken with her. you have not been given a document? >> that is correct. we have been requesting for a copy of the timeline. we have been assured that we would get and we still do not have it. -- whenl you divide it will you provide a timeline? >> i will check and get back to you with a specific timeframe. aboutt did you learn this review? they say there is a review and a document? >> it is frustrating. i'm arriving at the irs. >> how convenient no

documentation of internal review. no e-mails? >> i didn't say that. i thought you were referring to the forming -- the former acting commissioner mr. miller. i do not have the report. i appreciate that. will that include background information? 03,as long as there is no 61 yes. >> what is reasonable for me to expect that you will deliver it? >> i do not want to overpromise. >> when will you get back to me? >> i will get back to you by the end of the day tomorrow. >> i appreciate it. that is something we want to look at. had you met mr. shulman prior? >> yes. roughly five times over the

course of four years. >> at the white house? i think twoall meetings or seen him twice at the white house. >> what was the topic? and him being at that ceremony. the other was a meeting held in executive office building. and mr.e was that irs shulman representing the irs and expressing concern to the administration. the concern was the social security administration releases information about deceased people -- >> i look forward to hearing more about that. let's keep going. ?ow many criminal referrals

>> criminal referrals? i do not think there have been any yet. the justice department and ig actively reviewing those issues. they are getting to that question. the irs received money through the stimulus. comes the stimulus. hundreds of billions of dollars. i cannot figure out how to stimulate the economy the obama administration gave $80 million to the irs. thisou see where maybe abuse of money is that they were overflowing with cash? the infusion of $80 million. $4000 for a conference?

that is fine. my time is running out. last question. what does it take to get fired at one of these organizations? you keep saying accountable, accountable. i want to know what it takes to fire someone. >> it is an important question. this committee is asking for a recommendation on how to improve the irs. art of that is how to improve accountability -- part of that is how to improve accountability. are the rules sufficient to meet the country's needs in terms of when something goes wrong, we can hold them accountable? and looking forward to discussing that with this committee and others. >> for misdeeds and misspending the american people money. >> can you fire someone for

refusing to answer questions to the u.s. congress? >> i do not know. i might need legal counsel to advise me on that. >> the gentleman from california is recognized. -- the gentlelady from california is recognized. >> can you promise a more frugal and kinder irs? that i thinkoblems initiated the anaheim conference was the fact that you're coming andhe end of a fiscal year there's unused money. correct? >> yes. .here was extra money available clearly in this case that money was not deployed to its best use. >> no doubt about that. >> you have seen this phenomenon before.

various agencies come to the end of the fiscal year and have money the account and they want to spend it down. they fear if they do not spend it down, they will not be fully funded in the coming year. >> yes. >> what do you recommend we do ?overnment wide what isn example of going on in every agency in the country. they have money at the end of the fiscal year. they do not want to lose it so they use it. find some way to use it. in this case it wasn't anaheim conference -- in this case it was an anaheim conference or it is swag or whatever. i think it is a difficult

question to answer. what happens at a lot of there are chief financial officers and chief operating officers that are reviewing all expenditures that moneyto make sure that is not being deployed for unnecessary or inefficient purposes. the goal is to make sure that the resources available are targeting areas that will have a positive return for the tax payers. i do not expenditure, automatically think that may not be a good expenditure. >> right. there's a difference between doing a criminal investigation and having a conference.

>> absolutely. >> i have got limited time. give us some advice. you come from omb. what would you recommend we put in place that would reduce the likelihood of that kind of crazy spending and the shopping spree meant halliday? -- mentality? one idea that comes to mind is that there should be more transparency about what goes on with federal spending across the entire spectrum. twoould bring light and a appropriators. tolight and day appropriators. howhe anaheim conference --

has the irs address this concern? if you have a ready answer day, you do not have to enter it again. >> we have either implemented or in the process of implementing. we are upstanding -- updating manuals. make sure there is robust accounting. make sure we know where the money is going. -- ironing is that we have the irony is that we have knockdown in very significant ways the percentage of this activity. the put in new procedures to make sure when it does happen that it is tracked more appropriately. i have got a bugaboo about

the facts. i think that a government does not need to be in the business of buying anything that resembles swag, and i think we spend a fair manner money. i'm sure it's very expensive. what would you say about swag? >> i'm in complete agreement. ischoice to go to the irs that i have history of responsibility and cutting waste and reducing error. i was pretty central to the efforts at omb to cut down on swagrence spending and and put in an executive order. restriction on spending on swag.

of things he saw going on in 2010 -- you saw going on in 2010 are significantly that likely the happen now. it will not happen while i'm commissioner for sure. >> thank you. the gentleman from oklahoma. >> we have had numerous conversations. you have done an excellent job. there is much to be done. it is an interesting feeling to walk into the irs and wonder, where to start? might as well start here. you mentioned in an earlier lostment the record of trust. call me and tell me i have always suspected i was being targeted.

. was audited by the irs i have wondered about that. this has moved from nonprofit groups that we know now are targeted that asked for additional information to individuals who rise up and say i think i was as well. this farther.at questions questions will continue to rise. people will continue to contact our office. ihave never been audited and started getting involved politically and now i have. that is coming as well. >> i have a reaction to it. .e have to fix the process one of the process sixes that is vital best fixes that is vital is more checks and balances and how decisions are made.

there is an active oversight and checks and balances. there are controls in place to make sure fairness. >> right now there's not much comfort for it. you mentioned in your opening the formerhat director of collection policy is not the current director of the implementation oversight of the affordable care act. there is a reception held were 1800 people invited. track coming in from the hotel reads this a -- informing me.e this is to be kept confidential.

it is posted on the hospitality toward. this is only to be used for food. the beer and the wine will be paid via credit card paid at the end of the function. do not post this to the room. it cannot be shown as a charge. permissionons name to use a credit card. this confidential report was about 18 people that were there. of boost and $65 a person was dead as food. -- listed as food. one of those people are under administrative leave and review.

do you know who the remaining people were involved in that? >> we are working on that. were set aside for hospitality. do you know who 18 people were? >> i understand that is in the right range. we are still doing our review. >> are you familiar with any at thisnior ow level reception? >> it was held as part of this event in anaheim. we're still trying to determine who is invited. >> i'm not yet ready to , butulate the statistics we are looking into that issue

and will get you the answers. >> again, the confidential reception. thee were able to determine ,wo employees that may have but there is significant evidence of violation of ethical code of conduct. >> you understand the issues of this. this is the oversight office for the affordable care act. what was this and was there in an appropriate use of funds here? a lot of things we need to connect. you have a timeframe of when you have that together? >> i'm not going to commit to one. i will get back to you expediently.

>> i appreciate that. can you give us a ballpark? you have got enough facts and information because you puts on on administrative leave at this point. we started asking about this between two days. enough information has risen up quickly. return to figure out as you are gathering information -- we are trying to figure it out as you are gathering information. >> my team will update you as we in the process we are about to undergo. there are facts gathering before someone is dismissed. that is a 30 day initial process.

>> terrific. thank you. mr. chairman and mr. werfel, good afternoon. holds businesses and individuals to high standards when filing taxes. nonprofits must maintain certain standards for the tax exempt persons us -- purposes. the irs has a measured a .attern of management failures it is troubling and acceptable. you're one of the most powerful agencies in the united states. their serious consequences than any business or individual commits fraud or suspected of doing wrongdoing with regard to

taxes. what steps are being taken to reform the agency now make sure you hold your selves to the same standard you hold american people? >> that is a very important and good question. it is important to point out that if you look at the irs on the day the report was issued on the irs today, there has been a replacement of leadership at various levels. acting commissioner commissioner of tax-exempt organizations, if you're familiar with the irs archery -- arc, i'm working my way down. . have brought on other people is a high-ranking

official from the government accountability office. an expert in risk management and comes from gao. he is it chief risk officer of the irs. he is indispensable in these efforts to make sure we are changing the culture and the approach in the irs. other steps are accountability and continuing to review the information in the audit report. ofre are gross examples mismanagement. you can make determinations and i am doing it as thoroughly as i can. some individuals can no longer hold positions in the public trust at the irs. . can keep going i want to give you confidence that we have an action plan and things taking place to get it these issues.

it is hard. we are working diligently. >> i appreciate that. there's respect to the opening remarks by ranking members, i hope with your leadership we can take a step back and look at the whole of the agency and look at where we need to strategically reform and not just move players and actors within the agency, but fundamentally reform. that is one of the missions of this committee. i know that you touched on the importance of information being protected and impartiality, which is one of the reasons we are here today. i need to touch on one concern i have. being from nevada, i do not believe that anaheim or places like las vegas should be singled of theehow as because

place and the way the agency was involved, which was wrong, but somehow the place should be targeted and prohibited from having conferences held. aat is why we introduced committee to protect cities from discrimination to prevent federal agencies from blacklisting resorts and casinos as conference destinations. it is not the destination that is the problem. it is the internal failure to spend appropriately. it doesn't matter where that occurs. i want that noted. i want to follow-up in my concluding question to ms. maloney. you said that you have to follow this primary regulation. >> i do.

>> why do you have to follow the law? >> i have to follow the law and regulation. >> exclusively. >> that is part of the challenge. >> the regulation is not in compliance with federal law. correct? >> i do not know that can answer that question. it is said earlier that not the same as exclusive. >> it is not. >> therefore it is out of compliance with federal law. agencies must follow the law. congress, set the law. we have not change the law. it is important that you implement the regulations accordingly. you have agreed to some bipartisan precipitation

because the law is exclusive. >> the ambiguity it is one of the contributing -- unless congress changes the law, that is the standard. >> we are looking at those changes. >> thank you, mr. chairman. >> thank you, mr. chairman. thank you, mr. werfel. i want to follow-up on some of these. shee know exactly when her primary on responsibilities with the affordable care act? >> i do not have an exact answer, but i thit