IRS Spending Sprees Send Some to the Woodshed | AccountingWEB

IRS Spending Sprees Send Some to the Woodshed

By Teresa Ambord
Work for the IRS and you might be able to get all kinds of free perks, including pornography and electronics, expensive meals, and more  all on the taxpayer's dime. These items aren't supposed to be free, and as the scrutiny tightens on the IRS, employees who misspent may soon find themselves taken to the woodshed. Maybe. With oversight at the IRS rated as "poor" and lots of IRS credit cards out there, it's no surprise that some employees have helped themselves to items they had no business charging to the IRS.
Here's what happened 
A report by IRS watchdog  the Treasury Inspector General for Tax Administration (TIGTA)  took a look at credit card purchases billed to the IRS for 2010 and 2011. The good news is almost all of the 273,000 purchases, costing the agency $108 million, were considered legitimate, says TIGTA.
In fact, far less than 1 percent were inappropriate. Some employees who wrongfully spent  including two who used IRS credit cards to buy pornography  maintained they weren't responsible for the purchases because their cards were "lost or stolen," a point which hasn't yet been verified, the Washington Post reported.

Shopping Spree!

According to a report in the SmokingGun, IRS employee Yetunde Oseni has been named in a criminal complaint for misuse of IRS funds. The thirty-seven-year-old secretary went to work in the IRS's Maryland office in 2000. As part of the job, she was issued a Citibank MasterCard to cover office expenses. But in June 2009 through March 2013, she went a bit beyond what she was permitted. Spending $8,515 of taxpayer money, she bought a long list of items for herself and her family. 
Her shopping list included such items as a chocolate fondue fountain, Harlequin romance novels, Bollywood movie videos, eye makeup, Omaha steaks, trench coats, dinnerware, children's books, Pampers, mango body wash, riding boots, and Apple Bottoms skinny jeans.
The shopping spree was uncovered during a routine audit by TIGTA last December. Prosecutors charge she altered receipts to back up her purchases and cause them to appear to be legitimate.   
Oseni, who is currently free on bond pending a hearing, could be looking at a maximum of ten years in prison.
Here's an example of the items purchased by one employee, Yetunde Oseni, totaling $2,655 (see sidebar): 
  • Diet pills
  • Romance novels
  • Steaks
  • Smartphone
  • Baby-related items 
Other unusual employee purchases, which appear to have been swag for meetings and parties, included thousands of dollars spent on such items as stuffed animals, sunglasses, funny hats, wristbands, decorations, Nerf footballs, and the rental of a popcorn machine. 
By itself, this might not seem like a big deal. But it's magnified when it comes on the heels of a report in early June showing lavish spending at employee conferences ($50 million from 2010 through 2012). 
The SmartPay system not so smart after all
The IRS uses what is known as the SmartPay purchase card system which is part of the General Services Administration. This program allows employees to buy work-related items, with a maximum purchase amount of $3,000. Items that exceed that amount must undergo competitive pricing policies.
But cardholders found ways around the limitation  they divided up their larger purchases to skirt the $3,000 limit. According to TIGTA's report, the IRS "Credit Card Services (CCS) Branch uncovered 361 transactions that were components of 123 split purchases from April 4, 2011, through October 3, 2011. The total value of the split purchases was more than $493,000 (2 percent) of the approximately $29 million spent during that period. Ninety-four cardholders were responsible for the split purchases identified, and twenty-two of those cardholders split purchases more than once within a six-month period. One cardholder split five purchases into thirteen transactions totaling almost $22,000." 
Enter the inspectors
The Washington Post quotes Treasury Inspector J.Russell George as saying, "Inadequate procedures to identify, report and address inappropriate use leaves the IRS purchase card program vulnerable to repeated violations of applicable laws and regulations."
Specific recommendations from TIGTA include:
  • Requiring that purchase card accounts be closed before an employee separates from IRS service.
  • Defining more clearly what constitutes a split purchase.
  • Developing an oversight process to identify personal use of IRS purchase cards and other inappropriate transactions.
  • Reporting all instances of inappropriate card use to Labor and Employee Relations for possible disciplinary action. 
The IRS agreed with all of the recommendations and plans to take corrective action.
IRS Principal Deputy Commissioner Danny Werfel is taking this issue very seriously. In response to the report he said, "Clearly, any inappropriate card use impacts our bottom line and is cause for concern. Wasteful spending cannot be tolerated, and any employees found to be abusing the system will be held accountable. In fact, we are following up on several inappropriate incidents mentioned in the report, ranging from internal actions to criminal charges." 
He added, "That said, more than 99.75 percent of IRS purchases adhered to the rules. The IRS has made important progress over the past two years in strengthening the controls in our purchase card program. We are committed to protecting taxpayer resources, and we will take quick action to implement all of TIGTA's recommendations."
To the woodshed?
Again, as of June 20, the date the report was released, none of the ninety-four employees who misused taxpayer funds had actually been disciplined, though efforts are in process. The Washington Post reported that, regarding the two employees whose cards were used to buy pornography, TIGTA's report didn't determine who made the purchases and whether their cards were actually stolen. One of the employees has left the agency. The inspector general is continuing the investigation. 
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