Ninety Percent of EPA Stimulus Funding for Diesel Reduction Program Misspent

IG: ‘Significant financial management issues’

Gilbert Coal Company, which plans to convert turn a into commercial plant converting waste coal, or culm, into low-emissions diesel fuel
Gilbert Coal Company, which plans to convert turn a into commercial plant converting waste coal, or culm, into low-emissions diesel fuel / AP
September 17, 2014

Over 90 percent of funding for a diesel reduction program paid for by the stimulus law was misspent, according to a report by the Environmental Protection Agency’s (EPA) Office of Inspector General (OIG).

An audit analyzing $26.3 million in funding to non-profit organizations and state governments meant to reduce truck emissions and create jobs found that the program had "significant financial management issues."

The OIG reviewed six projects under the Diesel Emissions Reduction Act (DERA) program, finding four "did not meet all the objectives of the award," or their requirements under the Recovery Act. Five of the six projects "did not have a financial management systems that met federal requirements that applied to the grant award."

"As a result, we questioned a total of $23.8 million of the $26.3 million claimed under the assistance agreements," the OIG said.

The OIG said the entirety of a $9 million grant given to Cascade Sierra Solutions was wasted after the non-profit failed to accomplish any of the project’s goals. The grant was intended for upgrading diesel trucks made before 2007 with emission control technologies.

"Recipient did not install verified emission control technologies on pre-2007 model year trucks; therefore, trucks did not meet emission requirements," the OIG said.

The company closed earlier this year, and was over $19 million in debt to banks and creditors. The company had received more than $60 million in grants from the federal government.

The EPA has only recovered $1.8 million from Cascade Sierra Solutions, according to the OIG report.

In 2010 alone Cascade Sierra Solutions received $28.5 million in grants from the EPA and the Department of Energy for projects that replaced trucks with "clean diesel and hybrid" vehicles and installed electric vehicle chargers at truck stops.

Though more than 5 years have passed since it was signed into law, auditors continue to release reports damaging to the stimulus package. A recent report released by the Department of Agriculture’s inspector general revealed $5 billion in misspent funds and found that most stimulus projects were "inherently not shovel ready."

The diesel reduction grants financed by the stimulus were also intended to "promote economic recovery and create or retain jobs."

However, of the projects reviewed by the OIG, two-thirds did not calculate the number of jobs created through the program correctly. Three out of six projects added labor hours that were not funded by the stimulus, and another project had no documentation for any jobs it claimed to create.

In addition, $1.6 million awarded to the Tennessee Department of Transportation was also misspent because the agency did not follow requirements to only use materials made in America.