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U.S. Report on I.R.S. Audits Cites Failures in Management Management Flaws at I.R.S. Cited in Tea Party Scrutiny
(about 3 hours later)
WASHINGTON — An inspector general’s report on the investigation of the Internal Revenue Service’s effort to single out conservative groups for special scrutiny blamed ineffective management at the agency for failing to rein in the program for more than 18 months, even after it was flagged as inappropriate. WASHINGTON — An inspector general’s report issued Tuesday blamed ineffective Internal Revenue Service management in the failure to stop employees from singling out conservative groups for added scrutiny. Congressional aides, meanwhile, sought to determine whether the Obama administration’s knowledge of the effort extended beyond the I.R.S.
The report, by the Treasury inspector general for tax administration, was delivered to Congress on Tuesday evening after Attorney General Eric H. Holder Jr. announced that he had ordered a federal investigation into whether I.R.S. officials broke any criminal laws by focusing on conservative groups that included words like Tea Party or Patriot in their names. House and Senate aides said they were focusing on an Aug. 4, 2011, meeting in which the I.R.S.’s chief counsel appears to have conferred with agency officials to discuss the activities of a team in the Cincinnati field office that had been subjecting applications for tax-exempt status from Tea Party and other conservative groups to a greater degree of review than other organizations.
Senior I.R.S. officials told inspectors that no individual or organization outside the agency influenced the criteria used to single out Tea Party or other conservative groups. Under I.R.S. rules, the agency’s chief counsel, William J. Wilkins, reports to the Treasury Department’s general counsel, and investigators want to determine if Mr. Wilkins took the issue out of the independent I.R.S. to other parts of the Obama administration.
Amid an uproar over the practice — and ahead of the first hearings on the matter, scheduled for Friday — the inspector general’s report offered new details on the scope and duration of the I.R.S. targeting effort. If the inquiry determines any new link to the administration, it could change the political equation for the White House, which has stressed the I.R.S.’s independence, even as President Obama has castigated the agency over the allegations of political bias. A bipartisan investigation by the Senate Finance Committee built steam on Tuesday, and the House Ways and Means Committee prepared for the first hearing on the matter on Friday with an extensive request for documents from the I.R.S. The House Oversight Committee formally accused one I.R.S. official of misleading lawmakers on four occasions.
Mismanagement at the agency allowed “inappropriate criteria” for identifying conservative groups to be developed and stay in place for more than 18 months beginning in 2010, the report said. That resulted in “substantial delays” for groups applying for tax-exempt status, either as 501(c)(4) or 501(c)(3) organizations, and it allowed unnecessary and intrusive information, like donor lists, to be sought. “What we don’t know at this point is whether it jumped the fence from the I.R.S. to the White House,” said Senator Mitch McConnell of Kentucky, the Republican leader. “But we do know this: we can’t count on the administration to be forthcoming about the details of this scandal, because so far they’ve been anything but.”
Of the 296 total applications that the inspector general reviewed, 108 were approved, 28 were withdrawn by the applicants, and 160 were still open — some of those pending for up to 1,138 days. Late Tuesday, Mr. Obama said in a statement that “the report’s findings are intolerable and inexcusable.” 
The inspector general report concluded, “The I.R.S. should better document the reasons why applications potentially involving campaign intervention are chosen for review and develop and publish guidance.” “The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the I.R.S.,” he said, adding, “This report shows that some of its employees failed that test.”
Mr. Holder, speaking at a news conference called on Tuesday to discuss Medicare fraud, said that there were “a variety of statutes within the I.R.S. code” that could be the basis of a criminal violation. He said officials conducting the investigation would also look at “other things in Title 18” of the United States Code. Title 18 is the overall criminal code for the federal government. He said he was asking Jacob J. Lew, the Treasury secretary, “to hold those responsible for these failures accountable, and to make sure that each of the inspector general’s recommendations are implemented quickly.”
The White House press secretary, Jay Carney, said on Tuesday that he could not comment about the I.R.S. situation, citing the investigation by the inspector general. The Obama administration tried to stay ahead of the furor with an announcement by Attorney General Eric H. Holder Jr. that he had ordered a federal investigation into whether I.R.S. officials broke any criminal laws by singling out the conservative groups.
On Monday, President Obama said he would not tolerate such behavior by the I.R.S. and promised to “make sure that we find out exactly what happened on this.” “The F.B.I. is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the I.R.S.,” Mr. Holder told reporters. “Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable, but we are examining the facts to see if there were criminal violations.”
But a matter portrayed by the I.R.S. on Friday as a little-known operation conducted in Cincinnati, largely out of the sight of Washington officials, continued to sprawl. The report by the Treasury inspector general for tax administration offered new details on the scope and duration of the I.R.S. targeting effort.
Mismanagement at the agency allowed “inappropriate criteria” for the singling out of conservative groups to be developed and stay in place for more than 18 months, starting in 2010, the report said. That resulted in “substantial delays” for groups applying for tax-exempt status, either as 501(c)(4) or 501(c)(3) organizations, and it allowed unnecessary and intrusive information like donor lists to be gathered. I.R.S. officials told the inspector general that all donor information received was later destroyed.
Of the 296 applications the inspector general reviewed, 108 were approved, 28 were withdrawn by the applicants and 160 were still open, some pending for up to 1,138 days.
In a statement Tuesday night, the I.R.S. acknowledged that “inappropriate shortcuts were used to determine which cases may be engaging in political activities.” But it said the agency had a responsibility to make sure that such organizations did not engage in impermissible political actions, and that not just conservative groups were singled out. It also said that “there was no intent to hide this issue,” but that the agency had been awaiting the inspector general’s report.
The report said that senior I.R.S. officials told inspectors that no individual or organization outside the agency influenced the criteria used to single out Tea Party or other conservative groups.
But Congressional aides looking into the matter are not convinced. One notation in a 12-page timeline of events prepared by the inspector general stood out for exploration. On Aug. 4, 2011, officials at the I.R.S.’s rulings and agreement office met with the I.R.S.’s chief counsel “so that everyone would have the latest information on the issue,” according to the inspector general.
That was interpreted as an invitation to bring the matter up the chain of command, to the Treasury general counsel, George W. Madison, who left the department in June 2012. Treasury officials declined to comment Tuesday.
It is clear that the I.R.S. headquarters in Washington was far more involved in the effort than initially portrayed. A “sensitive case report” on Tea Party targeting was sent from Cincinnati to Lois Lerner, the head of the I.R.S.’s division for tax-exempt organizations, and another Washington official on April 19, 2010, more than a year before previously thought. Ms. Lerner told reporters on Friday that she learned of the effort in early 2012 through news media reports of Tea Party complaints.
Even before then, in mid-March 2010, 10 Tea Party cases appear to have been brought to the attention of another senior I.R.S. official in Washington, just two weeks after the Cincinnati effort began, according to the inspector general’s audit.
And Steven Miller, now the acting I.R.S. commissioner, was aware of the matter in March 2012, a month before he told Republican senators there was no special treatment for conservative applicants for tax exemption.
“They purposely misled me,” said Senator Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee.
Ahead of a public hearing on Friday with Mr. Miller, the bipartisan leadership of the House Ways and Means Committee requested all I.R.S. documents on the targeting of conservative organizations. Mr. Miller met privately with Senator Max Baucus of Montana, chairman of the Senate Finance Committee, as four Republican senators, including the top two leaders, demanded his resignation.
In a nine-page letter to Ms. Lerner, Representative Darrell Issa of California, the chairman of the House Committee on Oversight and Government Reform, and Representative Jim Jordan, Republican of Ohio, accused Ms. Lerner of providing false or misleading information to the committee four times in 2012, as the scope of the targeting effort became clear ahead of the presidential election.
The letter said 471 groups in all had now been targeted. Many were asked for complete lists of donors, an action Mr. Issa and Mr. Jordan called unprecedented. Yet, they concluded, no I.R.S. employee has been disciplined, and one in Cincinnati was promoted.
The inspector general did seem to back up the Obama administration’s portrayal of a roguelike operation in Cincinnati flouting the wishes of senior I.R.S. officials in Washington.
After being briefed on the screening criteria in June 2011, which included a search of case files for criticism of how the country was being run, Ms. Lerner immediately ordered them to be expanded to encompass applicants that would not necessarily be conservative. But in January 2012, the Cincinnati team had again changed the criteria “without executive approval because they believed the July 2011 criteria were too broad,” the report said.