It’s been more than four years since President Obama signed the American Recovery and Reinvestment Act of 2009 (“Recovery Act”) into law February 17, 2009 (Public Law 111-5). Yet questions and issues regarding the spending of energy-related Recovery Act funding continue. The latest includes an audit from the Department of Energy Office of Inspector General that found problems with the use of Recovery Act funding in the Industrial Carbon Capture and Storage Program. In addition, the Vice Chair of the House Energy and Commerce Committee, Marsha Blackburn, has introduced legislation imposing additional restrictions on companies that receive federal funding from the Department of Energy, drafted in response to reports that at least one bankrupt recipient of Recovery Act funds is selling its assets to a Chinese auto manufacturer. Both of these events - along with the fact that millions in Recovery Act funding has still not been spent - indicate that both Congress and the Executive Branch will continue to pay attention to the spending of funds for renewable and energy-efficiency projects for some to come.
$575 million in funding awarded non-competitively. The Office of Inspector General (“OIG”) found that $575 million had been awarded improperly, by “non-competitively advancing existing projects” instead of awarding the funds to new ones (page 6). The Department of Energy (“DOE”) was attempting to obligate its funding under the Carbon Program by September 2010, as required under section 1603 of the Recovery Act. To do this, it decided to award additional money to existing projects, rather than identify new ones. Besides being a violation of its own policy, this hurried decision-making left auditors unable to determine if the projects funded merited the additional money.
$18.3 million in questionable, or unallowable, reimbursements. For the sample of awards it reviewed, the OIG found $18.3 million in reimbursements made by the Carbon Program that were either questionable or outright unallowable (page 8). For example, one recipient was reimbursed for pre-award costs of more than $1 million, despite this being expressly prohibited by the DOE. Another was reimbursed for “interest and penalties on underpaid taxes, legal fees associated with valuation of company stock, and other costs related to travel and employee meals that were specifically unallowable under Federal regulations” (Id).
More than $90 million awarded to projects with “technical” or “financial” issues. Also, the OIG found that the DOE awarded more than $90 million in funds to recipients “that had technical and/or financial issues identified during a merit review process – issues that resulted in schedule and/or scope changes that may impact the ability of the Carbon Program to meet intended goals.”
From money being awarded inappropriately to bankruptcy. Meanwhile, Congress continues to pay attention to recipients of grant funding who subsequently declare bankruptcy. A123 Systems, for example, received $133 million in grant funding to make electric car batteries and then declared bankruptcy. As part of bankruptcy proceedings, it is selling many of its assets to a Chinese auto manufacturer. This has prompted both criticism from Congress and at least one piece of legislation in response: H.R. 221, the Stop Mergers, Acquisitions, and Risky Takeovers Supplied by American Labor and Entrepreneurship Act of 2013 or the SMART SALE Act of 2013, sponsored by Congresswoman Marsha Blackburn (R-TN-7), the Vice Chair of the House Energy and Commerce Committee.
The SMART SALE Act requires companies that receive energy funding for innovative research to report if they are being acquired by a non-allied foreign nation, defined to include China, North Korea, and any state sponsor of terrorism. Further, it requires recipients of energy funding to agree to repay the federal government any grants or loans received from a company located in one of these countries. Finally, it also requires the DOE to report whether the acquisition represents a threat to the United States.
More still to come. The OIG Audit notes that $860 million in Carbon Program funds, received through the Recovery Act, have yet to be spent. Further bankruptcy issues may come to light as well, among the other recipients of energy-related Recovery Act funds who have yet to spend this money. All of this points to a busy period of oversight in the next two years.