Federal officials squandered as much as $762,000 on two training conferences last year in Orlando, according to a scathing report issued today that resulted in the resignation of a top Department of Veterans Affairs executive, referral of a second case for possible prosecution, and the rebuke of additional VA employees.

The two conferences cost at least $6.1 million -- far more than the department previously reported to Congress, according to the VA's Inspector General.

The IG report said VA's accounting and spending controls are so lax that investigators couldn't determine the total cost of the events. But they did confirm numerous questionable purchases, including these:

• $16,500 for the production of "happy face" videos of conference attendees doing things like singing karaoke.

• $184,000 worth of breakfast sandwiches purchased even though attendees were getting reimbursed for meals.

• $97,906 in "wasteful costs associated with the purchase of unnecessary promotional items," including $20,000 worth of water bottles and notebooks.

• Other promotional items, the IG says, were bought even though the VA's lawyers warned beforehand that the purchases were inappropriate.

The departing VA official, Assistant Secretary John Sepulveda, resigned Sunday. The IG's investigation blasted him for failing to control the cost of the conferences. (Read the complete IG report below this story.) 

Sepulveda also made false statements to investigators when he denied knowing about a video parody of the movie Patton produced for the conference. That video cost taxpayers about $49,000, slightly less than initial estimates, according to the report.

Not all of the $762,000 in payments were illegal or improper, according to the report. But the expenditures were not sufficiently documented or justified, or were approved by VA officials who lacked authority to do so.

An unnamed VA employee received a $4,000 cash bonus for the now-infamous Patton video, the IG reported. More than two dozen VA workers collectively received $43,000 in "questionable" bonuses for their work on the conferences, the IG said - including five people who got bonuses for their "actions to minimize conference costs."

The U.S. Department of Justice declined to prosecute Sepulveda, according to agency officials.

A second VA employee involved in conference planning could face charges for allegedly soliciting a room upgrade for his family from the Marriott hotel where the conference was held.

The unidentified employee accepted the room and offered to make restitution when questioned by the IG. The report listed only one employee as having received a free room valued at $709 for seven nights.

That same employee also received two free massages with a combined value of $235, free limousine service, a helicopter tour, a $158 gift basket, a $50 gift card and tickets to the Rockettes stage show.

The case was referred to the Justice Department, but no charges have been filed, IG officials say. What makes that case unique is the employee asked for the gift, while others simply accepted free services when offered, said James O'Neill, assistant inspector general for investigations.

Seven VA employees took pre-conference scouting trips to Orlando, Dallas and Nashville. Several of those same people also took freebies including spa facials, manicures, pedicures, golf packages and free meals, according to the report. Eight apparently accepted the free helicopter tour and several took Rockettes tickets, gift baskets and limo rides, the report said. Total value of the comped items was almost $6,000. Most of the officials were not identified by name in the report.

There is no evidence that Veterans Secretary Eric Shinseki was aware of the misspending or improper behavior, O'Neill said. Shinseki admonished his chief of staff, John Gingrich, over the matter, the VA said in a statement.

The IG's investigation shows "a clear lack of leadership and accountability when it comes to VA senior leadership being good stewards of taxpayer dollars," said Rep. Jeff Miller, R-Fla., chairman of the House Committee on Veterans Affairs.

"Senior leaders took no action to stem excessive conference costs, and in fact, endorsed and approved costs without proper oversight," Miller said.

Estimates the VA delivered to the House committee fixed the cost of the Orlando conferences at roughly $5.3 million, about $800,000 less than what the inspector general found.

Agency officials also have struggled to give the committee a firm estimate on how much they spent on all conferences last year, with estimates ranging from $20 million to $100 million. Last month the VA's top financial official said at a committee hearing the true cost was $100 million if travel were included.

"This sort of funny money accounting must stop, and will no longer be tolerated," Miller said. "Without a doubt, this appears to be a systemic problem at VA."

The IG's investigation was launched after whistleblowers contacted the agency to report lavish spending on par with the notorious excesses of the General Services Administration conference in Las Vegas in 2010.

"Employees who have misused taxpayer dollars or violated VA standards of conduct will be held accountable," the agency statement said.

Mark Flatten is a member of the Washington Examiner's special reporting team and can be reached at mflatten@washingtonexaminer.com. Jennifer Peebles is also a member of the special reporting team and is The Examiner's data editor. She can be reached at jpeebles@washingtonexaminer.com.

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