Energy's IG: Goal of stimulus law unrealistic

The Obama administration’s goal of stimulating the economy with “shovel-ready” energy projects was unrealistic, the Energy Department’s internal watchdog said Wednesday.

In testimony before a panel of the House Oversight and Government Reform Committee, DOE Inspector General Gregory Friedman said the department faced a series of logistical hurdles as it worked to dole out $35.2 billion in Recovery Act money for projects ranging from home weatherization to environmental cleanup.

“The concept of ‘shovel-ready’ projects was not realized, nor, as we now have confirmed, was it a realistic expectation,” Friedman said in written testimony.

Republicans pounced on Friedman’s testimony Wednesday to bolster their longstanding argument that the stimulus was a failure. They pointed to the recent collapse of California solar firm Solyndra, which received a $535 million loan guarantee through a program funded under the stimulus law.

“We end up in a situation where we continue to throw good money after bad because we can’t stand to tell people it was bad policy, it was a bad program,” Rep. Mike Kelly (R-Pa.) said.

Friedman and the FBI have launched a criminal investigation into Solyndra. Citing the investigation, Friedman declined to comment Wednesday on the Solyndra loan guarantee. But he spoke about the loan guarantee program broadly.

Pointing to the recent bankruptcy of energy storage company Beacon Power, which received a $43 million DOE loan guarantee last year, lawmakers asked Friedman if he believed there would be other failures.

“I have not evaluated every loan guarantee in the portfolio, so I’m not in a position to evaluate what will or will not occur,” Friedman said.

Friedman stressed that the Energy Department’s loan guarantee program comes with some risk because it was designed to finance projects that are struggling to get private investment. He also said DOE has procedures in place to analyze the financial stability of the companies receiving loan guarantees.

“There was a system of due diligence that was exercised by the department. Was it adequate? That remains to be seen,” he said.

In his written testimony, Friedman offered a broad critique of DOE's loan program.

"The Loan Guarantee Program had not properly documented and as such could not always readily demonstrate how it resolved or mitigated relevant risks prior to granting loan guarantees," he said.

Friedman said just 55 percent of the money allotted to DOE under the stimulus law has been spent, despite the department’s “intense effort” to meet the goals of the 2009 law.

“Our reviews have identified a fairly consistent pattern of delays in the pace at which Recovery Act funds had been spent by grant and other financial assistance recipients,” he said.

Implementing the provisions of the stimulus law, "placed an enormous strain" on the Energy Department as it struggled to coordinate with the “the diverse, complex, and often asymmetrical set of stakeholders which play an integral role in this process,” which included state and local officials, contractors and businesses, Friedman said.

“It’s been equated to attaching a garden hose to a fire hydrant,” he said.

Federal and state officials were “overwhelmed” by the goals of the stimulus law. To make matters worse, some state officials tasked with implementing the law were furloughed because of the ailing economy.

“Ironically, this delayed timely allocation and expenditures of funds intended to boost the U.S. economy and create jobs,” Friedman said.

Friedman said Wednesday that his office has launched more than 100 stimulus investigations into “various schemes, including the submission of false information, claims for unallowable or unauthorized expenses, and other improper uses of Recovery Act funds.”

The investigations have recovered $2.3 million and resulted in five criminal prosecutions.

“The Secretary and the Department are committed to being responsible stewards of taxpayer's money,” said Energy Department spokesman Damien LaVera in a statement Wednesday.

“Under the Recovery Act, the Department has allocated more than $35.2 billion to support more than 15,000 projects around the country, supporting jobs in every state in the Union.  Despite this unprecedented commitment of resources to the Department's mission, fewer than one percent of those projects resulted in an IG investigation. While we are always striving to improve our oversight, we are proud of our record and committed to continuing to create clean energy jobs," LaVera added.

This story was updated on Nov. 3 at 8:05 a.m.

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