Green Energy Program Lost $6.6 Million in Questionable Reimbursements

IG report finds failure to properly supervise project

October 2, 2013

A government green energy program paid more than $6.6 million in questionable reimbursements to project recipients who violated conflict of interest rules and improperly expensed meal and alcohol purchases, according to the Department of Energy’s (DOE) inspector general.

A Sept. 27 audit of the DOE’s Hydrogen and Fuel Cells program questioned $6,638,409 in reimbursements through the program, which supports research and projects to promote alternative energy like fuel cell vehicles and hydrogen buses.

The program, which has spent more than $1 billion over the past 5 years, is designed to "promote the widespread use of hydrogen and fuel cells, the stated purpose being to help build a competitive, secure and sustainable clean energy economy."

The IG reviewed 10 project recipients, finding nine had potentially unallowable costs.

"We found the Department had not always effectively managed the financial aspects of the Hydrogen and Fuel Cells Program," the IG said.

"We identified questionable costs related to unsupported recipient and subcontractor expenditures, travel and meal expenses and an inaccurate indirect rate calculation," they said.

For example, one recipient broke conflict of interest rules by subcontracting a $1 million project to two companies owned by their family.

"The recipient charged over $211,000 to the project for labor hours worked under a service agreement with a company owned by the recipient's family," the report said.  "In addition, the recipient provided over $800,000 for design and fabrication work under another service agreement with a different company that was also owned by the recipient's owner and his family."

The IG questioned "a number of procurement practices involving potential conflicts of interest and lack of competition that, as demonstrated by the actual or potential impact on cost, were not in the Government's best interest."

Eight of the recipients reviewed got reimbursed a total of $43,000 for improper expenses unrelated to their projects, including alcohol purchases.

"Included in these costs were lodging and meal expenses that exceeded prescribed limits, local meals and refreshments for recipient employees, Department representatives and other visiting guests, unnecessary car rental insurance, alcohol purchases, and other travel and meal expenses that lacked sufficient supporting documentation," the IG said.

Another recipient billed the government $700,000 in "indirect costs" for a personal legal battle.

"Specifically, between 2007 and 2009, the recipient included over $528,000 of legal and professional expenses that supported a legal challenge to the ownership of the company, nearly $30,000 of what the recipient identified as business meals and entertainment costs, and bad debt expenses of over $140,000—costs that were either potentially or specifically unallowable," the IG said.

The audit also found many instances where invoices were not properly documented, with no hours, labor rates, or number of employees listed.

The IG recommended that the DOE more closely monitor projects to ensure taxpayer dollars are not wasted.

"Funds spent on questionable and/or unallowable costs may reduce the amount available to complete project objectives and represents wasted and misused taxpayer dollars," they said.