"We're now in a very different environment" with new IRS spending curbs, Faris Fink, a top deputy in the agency's small business division at the time, told the House Oversight and Government Reform Committee. Fink, who now heads that 24,000-employee division, said he believes many of the expenditures "should have been more closely scrutinized or not incurred at all and were not the best use of taxpayer dollars."
The mea culpa was echoed by new acting IRS chief Danny Werfel as the embattled agency struggled to contain public and congressional ire over its targeting of conservative groups seeking tax-exempt status and its spending of $49 million on 225 employee conferences over the past three years.
Werfel called the 2010 gathering in Anaheim, Calif., "an unfortunate vestige from a prior era" and said IRS spending on travel and training has fallen 80 percent since then.
"Our work in this area is one part of a much larger effort to chart a path forward in the IRS. This is obviously a very challenging time for the agency," Werfel said.
Werfel, who testified after Fink had left the committee room, became acting commissioner last month after President Barack Obama forced Steven Miller out of the job. Werfel appeared a day after putting two IRS officials on administrative leave for accepting free food at a party in a private suite at the Anaheim conference.
Behind the scenes, committee investigators have interviewed at least four IRS employees about the targeting of conservative groups for additional scrutiny when they applied for tax-exempt status during the 2010 and 2012 elections. The Associated Press viewed transcripts of interviews with two employees who work in the Cincinnati office where agents screened the applications.
The transcripts show that the employees believed that officials in Washington were directing their work. But they don't show any direct evidence that officials in Washington ordered the agents to target tea party groups, or why they may have done so.
Elizabeth Hofacre, an agent in the Cincinnati office, said she was in charge of processing applications from tea party groups, once they were selected by other agents, from April to October 2010, according to the transcript. She said an IRS lawyer in Washington, Carter Hull, micromanaged her work and ultimately delayed the processing of applications by tea party groups.
She said Hull's interest in the cases was highly unusual. "It was demeaning," she said. "One of the criteria is to work independently and do research and make decisions based on your experience and education, whereas on this case, I had no autonomy at all through the process."
Neither Hofacre nor Hull responded to requests for comment.
IRS regulations say tax-exempt social welfare organizations can engage in political activity, but not as their primary activity. It is up to the agency to make that determination.
Fink insisted that the IRS followed federal guidelines in planning the Anaheim gathering for 2,600 IRS workers. He said the conference was justified because at the time, around 30 percent of its managers were new and the agency was facing increased security threats.
Sitting at the same witness table was J. Russell George, the Treasury inspector general whose scathing reports on the IRS' targeting of conservatives and conference spending have rocked the agency. George said he uncovered no criminal violations involving the conference.
Those comments didn't shield Fink from a three-hour tongue-lashing from the panel.
Committee Chairman Darrell Issa, R-Calif., called the spending for the California conference "at best maliciously self-indulgent."
Rep. Trey Gowdy, R-S.C., reprised a major GOP theme of the IRS controversy: that the agency will help implement a favorite Republican target, Obama's health care overhaul.
"It will soon have access to our health information," Gowdy said of the IRS. "Those are details that we don't share with people that we do trust, and we're going to be asked to share it with people who are so disconnected as to spend this amount of money."
Top panel Democrat Elijah Cummings of Maryland said he viewed the "Star Trek" video at 3 a.m. Thursday and said, "I tried to get to the redeeming value. Can't get there." Rep. Carolyn Maloney, D-N.Y., called the video "an insult to the memory of 'Star Trek.'"
Fink sat stoically as TV screens in the hearing room showed excerpts of that nearly six-minute video, in which he and other IRS employees wore "Star Trek" uniforms on a set resembling the bridge of the series' Starship Enterprise and Fink sported pointy ears and a black wig.
"It's embarrassing and I apologize," he told the lawmakers. He called the video "a well-intentioned way to use humor to open the conference."
George's report concluded that rather than saving money by negotiating lower room rates with the three Anaheim hotels, the IRS paid a standard government rate of $135 per room but accepted perks in return.
Asked why the IRS didn't negotiate for lower room rates, Fink said, "I was not aware we had the ability to do that."
The perks included some tickets to Los Angeles Angels baseball games and free upgrades for some executives to fancy suites that normally cost up to $3,500 per night and included wet bars and billiard tables. The report said 132 IRS employees got room upgrades.
The report found the IRS used two private event planners whose commissions were based on the hotel bills and therefore had no incentive to save money; spent $50,000 on the "Star Trek" video and another showing IRS employees line dancing; and paid $135,000 to 15 outside speakers.
It also spent $35,800 for IRS workers to make three planning trips to the conference site; paid $30,000 for 45 IRS workers in local offices to stay in hotels and collect per diem expenses from the government; and spent more than $64,000 for gifts including bags and journals with the conference logo.
The conference included two dozen workshops, including one led by IRS officials entitled, "Political Savvy: How Not to Shoot Yourself in the Foot."
Fink left the hearing with companions and ignored reporters' questions as the group walked briskly away from the hearing room.