IRS Using Tax Dollars for Entertainment and Party Supplies

The Internal Revenue Service (IRS) is in the news again, and this time Thomas the Tank Engine is involved.

The Tax Inspector General for Tax Administration (TIGTA) released a report analyzing the IRS’s process for reviewing purchase card transactions. Federal employees are provided these government-issued credit cards to make authorized purchases. Under the General Services Administration’s (GSA) SmartPay purchase card program, there is a $3,000 single-transaction limit.

The benefits of purchase cards include “reducing administrative costs and simplifying the acquisition process,” but they can also lead to waste, fraud, and abuse.

And, indeed, the TIGTA report documents waste, fraud, and abuse in the IRS’s use of purchase cards. TIGTA found the lack of timely cancellation of cards when cardholders leave the IRS, the splitting of purchases to exceed the spending limit, a lack of consistency in the reporting of inappropriate use and in the oversight of card spending, and hundreds of improper and potentially fraudulent purchases.

TIGTA reports that 98 percent of purchase cards were not canceled “prior to employment departure.” The risks of ex-employees armed with an agency credit card are obvious.

While “the majority of IRS cardholders appear to use their purchase cards properly,” TIGTA found that more than 249 inappropriate transactions were identified during fiscal years 2011 and 2012. Improper purchase cards transactions, charged to taxpayers, include a popcorn machine rental, and the purchase of the world’s largest crossword puzzle and Thomas the Tank Engine wristbands.

Purchase card abuse is nothing new: other reviews uncovered the purchase of escort services, baseball tickets, and even breast enhancement surgery. The Project On Government Oversight documented several instances of abuse in our Federal Contractor Misconduct Database. In 2002, POGO’s Danielle Brian testified before the House Subcommittee on Government Efficiency about the abuse of purchase cards in the Department of Defense. A 2009 Congressional Research Service report found that abuses of another type of government credit card, the travel card, are costing the government and taxpayers “millions of dollars annually.” POGO has offered suggestions for fixing this problem.

The timing of the TIGTA report could not be worse for the IRS, which was recently accused of having targeted certain political organizations and having flagrantly overspent at a conference. The GSA recently released a memorandum on card compliance, and according to TIGTA, the IRS “plans to develop and implement corrective actions” with regard to purchase card use. The agency needs to do so before their employees buy any more kids’ toys using taxpayer dollars.