* In first testimony, Werfel takes conciliatory tone
* Pledges to 'uncover every fact' in review of IRS targeting
* Republicans say IRS funding hinges on inquiry (Adds quotes from hearing and details throughout)
By Kim Dixon and John Whitesides
WASHINGTON, June 3 (Reuters) - The new chief of the Internal Revenue Service told Congress on Monday the tax-collecting agency would fully investigate and repair the problems that led to the inappropriate targeting of conservative groups for extra scrutiny.
Acting IRS Commissioner Danny Werfel, appearing before Congress for the first time since moving into the top job two weeks ago, promised to restore the agency's tattered image with a public accounting of the practices that have led to multiple investigations and a political firestorm.
Werfel pledged to "uncover every fact" about who was involved in the targeting and said an ongoing review of the agency would evaluate whether "additional personnel actions" were needed.
"I am prepared to follow the facts wherever they take us. It is the only way to restore trust," Werfel told a sub-panel of the House of Representatives Appropriations Committee.
The IRS has been at the center of a political scandal over the practice after the head of the tax-exempt unit, Lois Lerner, apologized publicly on May 10 for the extra scrutiny given to applications for tax-exempt status by conservative political groups.
A report four days later by Treasury Inspector General for Tax Administration J. Russell George found ineffective management and bureaucratic confusion contributed to the inappropriate scrutiny.
Irate Republicans have accused President Barack Obama's administration of covering up responsibility for the practice but so far have not been able to identify who was responsible.
Three congressional committees and the Justice Department are looking into the practice, which led to the ouster of the agency's top executive Steven Miller and sparked a political backlash that has endangered Obama's second-term legislative agenda.
Werfel took a conciliatory approach with Republicans throughout Monday's hearing - a sharp contrast to Miller's recent appearances at other hearings - and said the agency had betrayed the trust of the American people.
Another inspector general's report by George will be released on Tuesday that will provide details of extravagant IRS spending on conferences. The House Government and Oversight Committee said on Sunday the IRS spent nearly $50 million on 220 conferences from 2010 to 2012, further putting the agency's practices in an unflattering light.
'MUSIC TO MY EARS'
Several House Republicans said on Monday that the IRS's future funding could depend on whether lawmakers get answers about the agency's controversial practices. Committee Chairman Hal Rogers of Kentucky said conditions could be placed on the agency's budget.
"We cannot in good conscience provide taxpayer dollars that are used to abuse the rights of American citizens," Republican Ander Crenshaw of Florida said, calling the IRS's targeting of conservative groups "an arrogant and absolute abuse of power."
Werfel did not argue, telling members of the panel that "the solution here is not more money" for the IRS. Rogers replied that was "music to my ears."
Werfel said a new team of leaders who have moved into top posts at the agency would focus on clearing the backlog of applications for tax-exempt status from political groups, concentrating on those that are more than 120 days old.
"We owe it to the American public to use this moment as an opportunity to take a hard look internally at the IRS and see where other deficiencies or risks may exist, and take action to address them," he said.
The House hearing on Monday, the fourth by a congressional panel, is the first of three scheduled for this week.
On Tuesday, the House Ways and Means Committee will hear from Tea Party groups targeted in the program, and on Thursday the House Government and Oversight Committee will examine the IRS spending on conferences.
Republican Darrell Issa, chairman of the Government and Oversight panel, released partial transcripts on Sunday from interviews with two Cincinnati, Ohio-based IRS employees who suggested that supervisors in Washington played a role in the program to target conservative groups.
One employee answered, "I believe so" when asked whether the additional scrutiny of conservative groups came from Washington. A more senior IRS worker said, "I was taking all my direction" from Washington on the practice.
"This is a problem that was coordinated in all likelihood right out of Washington headquarters and we're getting to proving it," Issa said on CNN on Sunday. He called White House spokesman Jay Carney a "paid liar."
The committee, however, did not release the full transcripts from the employee interviews and did not identify anyone in Washington involved in the process, drawing the ire of Democrats who said Issa was overstating his findings.
During his briefing on Monday, Carney refused to be drawn into a crossfire with Issa. (Editing by David Lindsey, Doina Chiacu and Cynthia Osterman)