Grants Gone Wild

DOE ignored guidelines in rush to award stimulus money

March 16, 2012

The Department of Energy did not follow its own review process when approving billions of dollars worth of stimulus grants and loans, according to a new Government Accountability Office report as well as the account of a former employee.

A GAO report issued Monday found that, although the DOE Loan Guarantee Program Office had a review process as stringent or more stringent than the private sector, it skipped applicable review steps for loans in some cases, while poor documentation made it impossible to determine if the steps had been completed in other cases. Dates and signatures were missing from review in some instances as well.

In its examination of 13 loan applications, the GAO found the process had at least an 85 percent failure rate on its process check.

There were more than 80 instances of deficiencies in documentation of reviews, such as missing signatures or dates. In 18 cases, the GAO did not receive sufficient information to even determine whether the program performed a given review step.

The GAO report noted "the absence of adequate documentation may make it difficult for DOE to defend its decisions on loan guarantees as sound and fair if it is questioned about the justification for and equity of those decisions."

The loan program began in 2005 but expanded significantly with the 2009 stimulus. In total, the Energy Department has guaranteed $15.1 billion in loans and has committed to another $15 billion.

The Energy Department noted that the GAO report examined none of the loans issued in 2011, which represent a majority of its portfolio, and that it has improved its review and tracking processes since 2009 and 2010.

"While we appreciate the GAO’s report, it is important to note that the GAO did not evaluate the quality of the LGP’s analyses or the merits and creditworthiness of any DOE loan guarantee," department spokesman Damien LaVera said in a statement. "Nor did the GAO include any of the 23 projects that received conditional commitments in 2011 as part of their review. The GAO does make clear, however, that commercial lenders consider the Loan Program Office’s underwriting and due diligence standards to be at least as rigorous as those in the private sector."

However, a contracted staffer at one of the department’s Office of Energy Efficiency and Renewable Energy (EERE) programs at its Golden Field office in Colorado, speaking on the condition of anonymity, confirmed similar practices.

The EERE oversees grant programs for solar, geothermal, weatherization, and other energy projects. The American Recovery and Reinvestment Act of 2009 awarded the EERE $16.8 billion.

The loan program and the EERE grant program, although both under the Energy Department, are entirely separate and have different review processes and staff. However, the GAO report and the sources’ accounts shed light on how federal programs dealt with the massive influx of stimulus funds.

The EERE had conditionally approved billions of dollars in stimulus grants in 2009 to geothermal, solar, biomass, and other energy projects, as well as weatherization programs. The source said the short-staffed Golden Field office, struggling to handle the volume of grant applications, was under significant pressure to get money out the door.

"By April [2010], there was a very strong directive that these grants must be finalized by May 1st from EERE front office," the source said. "My program, the people pushed back and said there wasn't enough staff. The evaluations simply can't be finished. The EERE office said 'I don't care how you do it, just do it.'"

Michael Grabell notes in his history of the stimulus, Money Well Spent?, that part of the problem was government agencies such as the EERE grant programs suddenly saw their budgets balloon by orders of magnitude. "Heightening the risk [of the stimulus] was the reality that the Recovery Act was pouring money into tiny government programs, whose skeleton crews had never dealt with so much money, which they now were being told to spend fast," Grabell wrote.

Most of the EERE grant programs saw their budgets expand by about tenfold over the course of one fiscal year, the source said.

According to the source, an envoy of extra staffers was sent in to help get the grants out the door. Some of them had no prior experience reviewing grants. To accomplish the goal, the source said, grants were finalized before reviews were complete.

"Because the Golden Field office staff weren't acting fast enough, what they had to do to get the money granted on time was take all the apps that were selected for awards, all of those got carte blanche across the board," the source said. "They were technically awarded before they were reviewed because there was simply not enough time to review them."

The Energy Department did not respond to questions regarding the EERE grant program, although it did defend its handling of stimulus funds in general.

"The entire administration has been crystal clear in noting that in 2009 and 2010 getting funds that could put people to work quickly was a priority," LaVera said in a statement to the Washington Free Beacon. "The Department's Recovery Act funds were allocated quickly and responsibly."