Agency mismanaged ‘smart grid’ money — IG report

Source: Hannah Northey, E&E reporter • Posted: Friday, January 25, 2013

The Department of Energy mismanaged millions of dollars last year when quickly doling out recovery funds for new “smart grid” projects, according to a new inspector general’s report.

The agency failed to secure proper documentation for reimbursements and allowed some recipients to falter on their cost-share responsibilities when approving 11 projects worth about $12 million, DOE Inspector General Gregory Friedman said in a report released this week.

“We found the department had not always managed the program effectively and efficiently,” Friedman wrote.

DOE has been tasked with disbursing large sums of money for new grid projects under the American Recovery and Reinvestment Act, with the aim of injecting money into the faltering economy.

The agency has distributed about $700 million to support 42 projects demonstrating new energy storage systems and advanced metering, 10 of which were only partially funded, according to the report.

After reviewing 11 smart grid projects, Friedman said, he uncovered about $12.3 million in “questionable spending.”

Specifically, DOE officials failed to provide documentation to show reimbursements were necessary or cost-effective, he said. In one case, the agency reimbursed two recipients based on estimates and not actual costs, resulting in overpayments of almost $10 million, he said. A third recipient received almost $2.4 million without showing the proper documentation, according to the report.

The agency also allowed one recipient to use $28 million worth of proceeds from a federally backed project to meet its cost-share requirement, Friedman said. Recipients cannot under federal law use federal funds or previous contributions to meet cost-share requirements, he said.

In another case, DOE awarded a recipient $14 million for a project that had already received $2 million under the Advanced Research Projects Agency-Energy program for similar work.

“In fact, the recipient, unknown to the department until our audit, had reported the same accomplishments under both awards,” Friedman said.

DOE has already recovered most of the money in question, and the agency agreed with many of Friedman’s findings in the report. But the department also rejected some of his concerns, including the assertion that the department approved $1.7 million for an energy storage project that hadn’t been built yet.

Instead, DOE said it “maintained frequent contact with the recipient and had been continually aware of the project’s progress.”