Treasury Inspector General for Tax Administration The IRS disagreed that its spending of less than $4,000 on morale-boosting merchandise over two years was improper. 
 
 The IRS could do a better job of policing employees' spending with government credit cards, a Treasury Department watchdog said Tuesday in a report that found that lax oversight allowed a few bad apples to buy romance novels, diet pills and even porn on the taxpayer's dime. 
 
 The Treasury's inspector general for tax administration — the same agency that brought the hammer down on the IRS for singling out conservative groups for special scrutiny — found that IRS workers on the whole stick to the rules when they use government credit cards. 
 
 It identified improprieties in only about two-tenths of 1 percent of transactions in fiscal years 2010 and 2011, when IRS workers made 273,000 credit card purchases worth about $108 million. 
 
 "The majority of IRS cardholders appear to use their purchase cards properly," the report said, adding that "we did not find a significant amount of improper purchases in our limited testing." 
 
 But some of the improper purchases it did find were doozies. 
 
 Related: Read the full inspector general's report (.pdf) 
 
 One woman made 38 transactions totaling $2,655 for what appeared to be personal purchases covered up with fake receipts. Taxpayers paid for her purchases of diet pills, romance novels, steaks and a smartphone, which the report said were falsely categorized as "reference books and office supplies." 
 
 And the government credit cards of two other employees, one of them still with the IRS, bought pornography online, the inspector general said. 
 
 Both of them reported that their cards had been stolen or compromised, which the report said it hadn't been able to verify or discredit — although it noted that one of the cardholders had reported at least five cards as having been lost, stolen or counterfeited, something the report said the IRS might want to consider a red flag in the future. 
 
 In a separate case, the inspector general questioned the IRS' spending on a five-day international tax conference in Washington in 2010. It didn't allege that the IRS went over budget — in fact, it noted, the agency spent less on the conference than it was authorized to. 
 
 But "we did not find any Department of the Treasury or IRS criteria to assess the reasonableness" of what was spent, it said, leading it to consider "the cost of the expenses related to this conference to be high." 
 
 Among the questionable expenditures it highlighted were the purchase of 28 bottles of wine for just 41 guests and meal costs that were several times the federal per-diem rate of $18 for lunch and $36 for dinner in Washington. 
 
 It also questioned the IRS' spending of slightly less than $4,000 over the two years on team-building and morale-boosting merchandise like bandannas, Thomas the Tank Engine rubber wristbands, Nerf footballs and something described as "the world's largest jigsaw puzzle." 
 
 The IRS, in response, "did not concur with our assessment that these items were inappropriate," the report said. 
 
 The IRS did, however, agree with the report's complaints about what it said were two serious, systemic problems that leave the agency "vulnerable to repeated violations of applicable laws and regulations": 
 
 • IRS workers are adept at splitting up their credit card purchases into multiple transactions so each of them come in under the cards' $3,000 limits — a violation of federal regulations. And the IRS routinely neglects to refer confirmed cases of "split purchases" for investigation, a violation of its own policies. 
 
 The inspector general identified 123 purchases that were split up into 361 transactions in just six months last year, totaling almost half a million dollars. Twenty-two of the cardholders who carried out the improper transactions were repeat offenders, it said. None of them were referred for investigation. 
 
 "While the IRS may have had a valid business need to purchase these items, it should have used another procurement method," the report said. 
 
 • The IRS is also slow to cancel the cards of employees who leave the agency, lagging by an average of nine days. In one case, the agency waited eight months to cancel the card used by a former employee. During the two-year period it studied, the inspector general found 38 transactions worth about $9,000 that took place after the cardholder had left the IRS. 
 
 The report noted that IRS policy is to leave an account open until all transactions have cleared, and it said all 38 transactions were eventually found to represent a "legitimate business need." But by not have a clear cutoff date for such accounts, the IRS exposes itself to "risks of financial loss by the separated employee or another individual using the card," it said. 
 
 The inspector general recommended 11 changes in IRS oversight to tighten up the credit card program. While it had some quibbles, notably with the report's criticism of its morale spending, the IRS said it accepted all of them — a far less contentious response than it had to the same agency's report on its singling out of conservative groups seeking tax-exempt status. 
 
 Follow M. Alex Johnson on Twitter and Facebook. 
 
 Related: ||||| A government watchdog has found that the Internal Revenue Service spent about $50 million to hold at least 220 conferences for employees between 2010 and 2012, a House committee said Sunday. 
 
 FILE – In this Nov. 9, 2011, file photo then-Controller Danny Werfel of OMB Office of Federal Financial Management watches as President Barack Obama (not shown) signs an Executive Order to cut waste and... (Associated Press) 
 
 The chairman of that committee, Rep. Darrell Issa, R-Calif., also released excerpts of congressional investigators' interviews with employees of the IRS office in Cincinnati. Issa said the interviews indicated the employees were directed by Washington to subject tea party and other conservative groups seeking tax-exempt status to tough scrutiny. 
 
 The excerpts provided no direct evidence that Washington had ordered that screening. The top Democrat on that panel, Rep. Elijah Cummings of Maryland, contested Issa's claim, saying none of the employees interviewed have so far identified any IRS officials in Washington as ordering that targeting. 
 
 The conference spending included $4 million for an August 2010 gathering in Anaheim, Calif., for which the agency did not negotiate lower room rates, even though that is standard government practice, according to a statement by the House Oversight and Government Reform Committee. 
 
 Instead, some of the 2,600 attendees received benefits, including baseball tickets and stays in presidential suites that normally cost $1,500 to $3,500 per night. In addition, 15 outside speakers were paid a total of $135,000 in fees, with one paid $17,000 to talk about "leadership through art," the House committee said. 
 
 The report by the Treasury Department's inspector general, set to be released Tuesday, comes as the IRS already is facing bipartisan criticism after agency officials disclosed they had targeted tea party and other conservative groups. 
 
 Agency officials and the Obama administration have said that treatment was inappropriate, but the political tempest is showing no signs of ebbing and has put the White House on the defensive. 
 
 Three congressional committees are investigating, a Justice Department criminal investigation is under way, President Barack Obama has replaced the IRS' acting commissioner and two other top officials have stepped aside. 
 
 The Treasury Department released a statement Sunday saying the administration "has already taken aggressive and dramatic action to reduce conference spending." 
 
 IRS spokeswoman Michelle Eldridge said Sunday that spending on large agency conferences with 50 or more participants fell from $37.6 million in the 2010 budget year to $4.9 million in 2012. The government's fiscal year begins Oct. 1 the previous calendar year. 
 
 On Friday, the new acting commissioner, Danny Werfel, released a statement on the forthcoming report criticizing the Anaheim meeting. 
 
 "This conference is an unfortunate vestige from a prior era," Werfel said. "While there were legitimate reasons for holding the meeting, many of the expenses associated with it were inappropriate and should not have occurred." 
 
 Issa's committee also released excerpts from interviews congressional investigators conducted last week with two IRS employees from the agency's Cincinnati office. The excerpts omitted the names of those interviewed and provided no specifics about individuals in Washington who may have been involved. 
 
 One of the IRS employees said in an excerpt that they were told by a supervisor that the need to collect the reports came from Washington, and said that in early 2010 the Cincinnati office had sent copies of seven of the cases to Washington. 
 
 The other said "all my direction" came from an official the transcript said was in Washington. 
 
 One of the workers also expressed skepticism that the Cincinnati office originated the screening without direction from Washington, according to the excerpts. 
 
 Appearing Sunday on CNN's "State of the Union," Issa said this conflicted with White House comments that have referred to misconduct by IRS workers in Cincinnati. Without naming White House spokesman Jay Carney, Issa said the administration's "paid liar, their spokesperson" is "still making up things about what happens in calling this local rogue." 
 
 He added, "This is a problem that was coordinated in all likelihood right out of Washington headquarters and we're getting to proving it." 
 
 In briefings with reporters, Carney has not referred to the Cincinnati IRS office as "rogue." 
 
 "He's good at throwing out outlandish charges but it's unclear what he's saying he lied about," White House spokesman Eric Schultz said of Issa's remark. 
 
 Cummings said Issa's comments conflicted with a Treasury inspector general's report that provided no evidence that the Cincinnati office received orders on targeting from anyone else. 
 
 "Rather than lobbing unsubstantiated conclusions on national television for political reasons, we need to work in a bipartisan way to follow the facts where they lead," Cummings said. 
 
 The interviews with IRS employees were conducted by Republican and Democratic aides on Issa's committee and also involved aides from both parties from the House Ways and Means Committee. 
 
 One of the employees was a lower-level worker while the other was higher-ranked, said one congressional aide, but the committee did not release their names or titles. 
 
 The IRS Cincinnati office handles applications from around the country for tax-exempt status. A Treasury inspector general's report in May said employees there began searching for applications from tea party and conservative groups in their hunt for organizations that primarily do work related to election campaigns. 
 
 That May report blamed "ineffective management" for letting that screening occur for more than 18 months between 2010 and 2012. But that report _ and three hearings by congressional committees _ have produced no specific evidence that the Cincinnati workers were ordered by anyone in Washington to target conservatives. 
 
 The latest report on IRS conferences will be the subject of a hearing Thursday by the House Oversight and Government Reform Committee. 
 
 Karen Kraushaar, spokeswoman for the inspector general's office, said public discussion of a report before it is released "serves no purpose and should generally be avoided." 
 
 Werfel is scheduled to make his first congressional appearance as acting commissioner Monday when he appears before a subcommittee of the House Appropriations Committee. 
 
 According to congressional aides briefed by the inspector general's office, the IRS did not formally seek competitive bids for the city where the agency's 2010 conference was held, for the event planner who assisted the agency, or for the speakers. 
 
 The aides, who spoke on condition of anonymity to describe a confidential congressional briefing, said other benefits given to some attendees at the Anaheim IRS conference included vouchers for free drinks and some tickets to attend Angels baseball games. 
 
 Two videos produced by the IRS were shown at the Anaheim conference. In one, agency employees did a parody of "Star Trek" while dressed like the TV show's characters; the second shows more than a dozen IRS workers dancing on a stage. The two videos cost the agency more than $50,000 to make, aides said. 
 
 The lecturer who spoke about leadership through art produced six paintings of subjects that included Abraham Lincoln, Michael Jordan, the rock singer Bono and the Statue of Liberty, the aides said. 
 
 ___ 
 
 Eds: AP White House Correspondent Julie Pace contributed to this report.
– The IRS is under fire again (must be Wednesday), this time for allowing employees to expense items such as popcorn machines, Nerf footballs, and stove top hats on taxpayer-funded credit cards. A new report by the Treasury's inspector general for tax administration looking at spending over two financial years says that although "the majority of IRS cardholders appear to use their purchase cards properly," a small number of employees made "inappropriate" charges. "Inappropriate" as in the cards of two employees—one who is still with the IRS—were used to pay for online porn, reports NBC News. (In fairness, both employees reported their cards missing or compromised, though one reported five cards as lost.) One woman racked up $2,655 on things like diet pills, romance novels, steaks, and a smartphone, which were then filed as "reference books and office supplies." Other questionable spending identified in the report: a government luncheon where 41 guests drank 28 bottles of wine; and $4,000 in items intended for team-building and morale, such as Thomas the Tank Engine wristbands, kazoos, and the "world’s largest crossword puzzle." The inspector general has made 11 recommendations to increase oversight of the program.