DOE LOAN 

PROGRAMS

DOE Should Fully 

Develop Its Loan 

Monitoring Function 

and Evaluate Its 

Effectiveness

Report to Congressional Committees

May 2014

GAO-14-367

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-367, a report to 

congressional committees

May 2014

DOE LOAN PROGRAMS

DOE Should Fully Develop Its Loan Monitoring 

Function and Evaluate Its Effectiveness

Why GAO Did This Study

DOE’s Loan Programs Office 

administers the Loan Guarantee 

Program (LGP) for certain renewable 

or innovative energy projects and the 

Advanced Technology Vehicles 

Manufacturing (ATVM) loan program 

for projects to produce more fuelefficient vehicles and components. As 

of March 2014, the programs had 

made more than $30 billion in loans 

and guarantees: approximately $21.9

billion for 33 loan guarantees under the 

LGP and $8.4 billion for 5 loans under 

the ATVM loan program. Both 

programs can expose the government 

and taxpayers to substantial financial 

risks should borrowers default. 

GAO assessed the extent to which 

DOE has developed and adhered to 

loan monitoring policies for its loan 

programs for 2009 to 2013. GAO 

analyzed relevant regulations and 

guidance; prior audits; DOE policies; 

and DOE data, documents, and 

monitoring reports for a nonprobability

sample of 10 loans and guarantees. 

Findings from the sample are not 

generalizable, but the sample covered 

a range of technologies and loan 

statuses. GAO also interviewed DOE 

officials.

What GAO Recommends

GAO recommends that DOE (1) staff 

key positions, (2) update management 

and reporting software, (3) complete 

policies for loan monitoring, and (4) 

evaluate the effectiveness of its loan 

monitoring. DOE generally agreed with 

the recommendations.

What GAO Found

The Department of Energy (DOE) has not fully developed or consistently 

adhered to loan monitoring policies for its loan programs. In particular, DOE has 

established policies for most loan monitoring activities, but policies for evaluating 

and mitigating program-wide risk remain incomplete and outdated. These 

activities are generally the responsibility of the Risk Management Division in 

DOE’s Loan Programs Office. This division, established in February 2012, has 

been operating since its inception under incomplete or outdated policies. DOE 

has missed several internal deadlines for updating its loan monitoring policies. 

DOE officials told GAO that updated policies were delayed in part because the 

Loan Programs Office did not have a Director of Risk Management until 

November 2012. Additionally, the Risk Management Division had not staffed 11 

of its 16 planned positions until late 2013, when it staffed 6 of the 11 vacancies. 

Under federal guidance, credit programs should have robust management and 

oversight frameworks for monitoring the programs’ progress toward achieving 

policy goals within acceptable risk thresholds, and taking action where 

appropriate to increase efficiency and effectiveness. It is difficult to determine 

whether DOE is adequately managing risk if policies are outdated or incomplete

and key monitoring positions are not fully staffed. 

In some cases GAO examined, DOE generally adhered to the loan monitoring 

policies that it had in place. For example, DOE generally adhered to its policies 

for authorizing disbursement of funds to borrowers. But, in other cases, DOE 

adhered to the policies inconsistently or not at all because the Loan Programs 

Office had staff vacancies and was still developing management and reporting 

software and procedures for implementing policies. For example:

• DOE inconsistently adhered to its policies for monitoring and reporting on 

credit risk, particularly for preparing credit reports—periodic reviews of 

project progress and factors that may affect the borrower’s ability to meet the 

terms of the loan. DOE did not prepare dozens of credit reports, mostly in 

2011, because according to officials it had not filled positions or fully 

developed the software needed for producing these reports.

• DOE inconsistently adhered to its policies for managing troubled loans 

requiring that it prepare and approve plans for handling loans to borrowers in 

danger of defaulting on their loan repayments. For two troubled loans, 

officials said DOE did not prepare a formal plan, as called for in its policy, in 

part because implementing procedures were incomplete. 

• DOE did not adhere to its policy requiring it to evaluate the effectiveness of 

its loan monitoring because of continuing staff vacancies. Without conducting 

these evaluations, DOE management cannot assess the adequacy of its 

monitoring efforts and thus be reasonably assured that it is effectively 

managing risks associated with its loan programs. 

As a result, DOE was making loans and disbursing funds from 2009 through 

2013 without a fully developed loan monitoring function. During this time, 

inconsistent adherence to policies limited assurance that DOE was completing 

activities important to monitoring the loans and protecting the government’s 

interest.

View GAO-14-367. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov.
Page i GAO-14-367 DOE Loan Programs

Letter 1

Background 4

DOE Has Not Fully Developed or Consistently Adhered to Loan 

Monitoring Policies 5

Conclusions 10

Recommendations for Executive Action 11

Agency Comments and Our Evaluation 11

Appendix I Objectives, Scope, and Methodology 13

Appendix II Summary of Monitoring Activities Identified in DOE Loan Programs 

Office Policies and Procedures 16

Appendix III DOE Loan Guarantees and Loans as of March 2014 18

Appendix IV Established DOE Loan Monitoring Policies Generally Align with 

Those of Private Lenders 21

Appendix V Comments from the Department of Energy 22

Appendix VI GAO Contact and Staff Acknowledgments 29

Related GAO Products 30

Table

Table 1: Monitoring Activities for Loans and Loan Guarantees 

Made by the DOE Loan Programs Office 17

Contents
Page ii GAO-14-367 DOE Loan Programs

Abbreviations

ATVM Advanced Technology Vehicles Manufacturing

DOE Department of Energy

EISA Energy Independence and Security Act

FIPP Financial Institution Partnership Program

LGP Loan Guarantee Program

OMB Office of Management and Budget

Recovery Act American Recovery and Reinvestment Act

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-14-367 DOE Loan Programs

441 G St. N.W.

Washington, DC 20548

May 1, 2014

The Honorable Dianne Feinstein

Chairman

The Honorable Lamar Alexander

Ranking Member

Subcommittee on Energy and Water Development

Committee on Appropriations

United States Senate

The Honorable Mike Simpson

Chairman

The Honorable Marcy Kaptur

Ranking Member

Subcommittee on Energy and Water Development,

and Related Agencies

Committee on Appropriations

House of Representatives

The Department of Energy’s (DOE) loan programs have made more than 

$30 billion in loans and loan guarantees. These include approximately 

$21.9 billion for 33 loan guarantees under the Loan Guarantee Program 

(LGP) and $8.4 billion for 5 loans under the Advanced Technology 

Vehicles Manufacturing (ATVM) loan program. Under the LGP, to 

encourage certain types of renewable or innovative energy projects, the 

federal government agrees to reimburse lenders for the guaranteed 

amount of loans if the borrowers default. The ATVM loan program 

provides direct loans to manufacturers to produce more fuel-efficient 

vehicles and components. Both programs expose the federal government 

to financial risks should those borrowers default.

DOE’s management of these risks is an important aspect of the loan 

programs, not only because of the tens of billions of dollars currently at 

stake but also because of the programs’ authority to make or guarantee 

more loans. As of March 2014, DOE had about $45 billion in loan and 

loan guarantee authority remaining for both programs, about $3.8 billion 

of which the department had conditionally committed for two guarantees. 

In addition, because loan tenure periods may last up to 30 years, DOE’s 

Loan Programs Office, which administers both programs, must monitor 

and manage the agency’s portfolio of loans and guarantees over 

decades. DOE’s policy manuals for the Loan Programs Office state that, 

in monitoring the performance of the loans made and guaranteed, DOE 
Page 2 GAO-14-367 DOE Loan Programs

seeks to protect the financial interests of the federal government, and 

thus the taxpayer, by “proactively managing risks associated with 

projects” receiving support from the LGP or the ATVM loan program.

Our previous reviews of DOE’s loan programs focused on how DOE 

established the programs and selected loan and guarantee recipients, as 

well as the status of DOE’s efforts to use remaining authorities and 

appropriations for the programs. Among our past findings have been that 

DOE implemented the LGP in a way that treated loan guarantee 

applicants inconsistently; that the LGP did not have the consolidated data 

on the status of applications that the department needed to facilitate 

efficient program management and oversight;1 and that, for the ATVM 

loan program, DOE had not engaged the engineering expertise needed 

for technical oversight of loans or developed sufficient performance 

measures.2

Under the 2007 Revised Continuing Appropriations Resolution, GAO is 

mandated to review DOE’s execution of the LGP and to report our 

findings to the House and Senate Committees on Appropriations. 

Because DOE is administering the LGP and ATVM loan program through 

one Loan Programs Office, we included both programs in this review. For 

this report, we assessed the extent to which DOE has developed and 

adhered to loan monitoring policies for its loan programs.

To address this objective, we acquired and reviewed DOE’s policy 

manuals and documents detailing procedures for implementing those 

policies, and we identified 10 loan monitoring activities described in those 

manuals or by DOE officials in the Loan Programs Office. We interviewed 

DOE officials to ensure that our understanding of these policies and 

procedures was thorough and accurate. To determine the extent of 

DOE’s adherence to its loan monitoring policies, we acquired and 

 1

GAO, Department of Energy: New Loan Guarantee Program Should Complete Activities 

Necessary for Effective and Accountable Program Management, GAO-08-750 

(Washington, D.C.: July 7, 2008); GAO, Department of Energy: Further Actions Are 

Needed to Improve DOE’s Ability to Evaluate and Implement the Loan Guarantee 

Program, GAO-10-627 (Washington, D.C.: July 12, 2010); and GAO, DOE Loan 

Guarantees: Further Actions are Needed to Improve Tracking and Review of Applications, 

GAO-12-157 (Washington, D.C.: Mar. 12, 2012).

2

GAO, Department of Energy: Advanced Technology Vehicle Loan Program 

Implementation Is Under Way, but Enhanced Technical Oversight and Performance 

Measures Are Needed, GAO-11-145 (Washington, D.C.: Feb. 28, 2011).
Page 3 GAO-14-367 DOE Loan Programs

analyzed documentation from a nonprobability sample of 10 of the 36 

loans and loan guarantees that had been made under DOE’s loan 

programs, as of March 2013.3 The loans and loan guarantees were 

chosen to cover projects involving a range of technologies, construction 

statuses, credit watch list statuses, loan or guarantee amounts, dates of 

loan finalization, and amounts disbursed. We examined project files 

pertaining to the 10 monitoring activities we identified in order to 

determine the extent to which those files—and thus, DOE’s monitoring of 

the loans for those projects—adhered to the department’s monitoring 

policies, as well as the level of consistency in monitoring across projects. 

We did not review adherence to all DOE policies for the programs, rather 

only those most directly associated with the 10 activities we identified. In 

addition, to provide context, we compared DOE’s monitoring policies with 

those of private lenders who finance large energy projects. To do so, we 

interviewed a nonprobablility sample of eight experts (four private lenders, 

three academic experts, and one industry expert) about private lenders’

monitoring policies4

We conducted this performance audit from March 2013 to April 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

and compared the results with DOE’s policies and the 

10 activities we identified (see app. IV). A more detailed description of the 

objectives, scope, and methodology of our review is provided in appendix 

I.

 3 At the time we finalized our sample, in March 2013, DOE had issued 31 loan guarantees 

and 5 loans, respectively. This was prior to the recent issuance of 2 loan guarantees in 

February 2014. In instances where we use a nonprobability sample, it means that we are 

unable to generalize our findings to the general population. However, in regards to this 

sample, we are able to make observations about DOE’s monitoring activities for the 

diverse set of 10 loans and guarantees, respectively.

4 We identified four private lenders financing similar projects to those in the LGP and 

ATVM loan program, using additional criteria such as the value of loans issued and 

number of loans issued. We identified three academic experts through a literature search 

of relevant academic articles on project finance loan monitoring practices and the 

financing of innovative energy technologies, contacting the most frequently cited. We also 

interviewed the author of an industry study compiling leading monitoring practices from 

institutions across a number of sectors, including 10 private lenders, as well as several 

export credit and government agencies. For more details, see appendix I.
Page 4 GAO-14-367 DOE Loan Programs

DOE’s LGP was originally designed to address a fundamental 

impediment for investors and lenders that stems from the risks of 

innovative and advanced energy projects, including technology risk—the 

risk that the new technology will not perform as expected—and execution 

risk—the risk that the borrower or project will not perform as expected. 

Companies can face obstacles in securing enough affordable financing 

from lenders to survive the gap between developing innovative 

technologies and commercializing them. Because the risks that lenders 

must assume to support new technologies can put private financing out of 

reach, companies may not be able to commercialize innovative 

technologies without the federal government’s financial support.

The LGP was established in Title XVII of the Energy Policy Act of 2005 to 

encourage early commercial use of new or significantly improved 

technologies in energy projects. The act—specifically section 1703—

originally authorized DOE to guarantee loans for energy projects that (1) 

use new or significantly improved technologies as compared with 

commercial technologies already in service in the United States and (2) 

avoid, reduce, or sequester emissions of air pollutants or man-made 

greenhouse gases. In February 2009, Congress expanded the scope of 

the LGP in the American Recovery and Reinvestment Act (Recovery Act) 

by adding section 1705 to the Energy Policy Act, which extended the 

program and provided funding to include projects that use commercial 

energy technology that employs renewable energy systems, electric 

power transmission systems, or leading-edge biofuels that meet certain 

criteria. As of March 2014, DOE had made 31 loan guarantees for 

approximately $15.7 billion under section 1705, which expired on 

September 30, 2011, and 2 loan guarantees for approximately $6.2 billion 

under section 1703. These guarantees have been for biomass, 

geothermal, nuclear, solar, and wind generation; energy storage; solar 

manufacturing; and electricity transmission projects (see app. III). Two 

borrowers withdrew in 2012 before starting to draw funds from their loans. 

Additionally, in September and October 2013, DOE deobligated 2 loan 

guarantees because they did not seem likely to meet the loan conditions 

required to begin drawing on their loans. Three other loan guarantee 

borrowers have defaulted and filed for bankruptcy—one borrower and its 

loan guarantee have been restructured, and the guarantee remains 

active; the other two borrowers are in liquidation proceedings. In addition, 

Background
Page 5 GAO-14-367 DOE Loan Programs

DOE has conditional commitments,5

The ATVM loan program was established in December 2007 by the 

Energy Independence and Security Act (EISA), and the fiscal year 2009 

Continuing Resolution appropriated funding for the program. DOE’s five 

loans for $8.4 billion under this program went to both established 

automakers and start-up manufacturers. These loans are for the 

manufacture of fuel-saving enhancements of conventional vehicle 

technology, plug-in hybrids, and all-electric vehicles. In May 2013, one 

borrower paid back its loan. Two ATVM borrowers have defaulted on their 

loans. In 2013, DOE sold the defaulted loan notes in auction proceedings. 

In 2010, DOE consolidated the previously separate LGP and ATVM 

program under the Loan Programs Office. Monitoring for both LGP and 

ATVM is conducted out of one division: the Portfolio Management 

Division, with support coming from several other divisions throughout the 

Loan Programs Office.

issued in 2010, for approximately 

$3.8 billion in section 1703 loan guarantees for two nuclear projects. In 

December 2013, DOE announced a new solicitation for applications for 

up to $8 billion in loan guarantees for advanced fossil energy projects.

DOE has not fully developed or consistently adhered to loan monitoring 

policies for its loan programs. In particular, DOE has established policies 

for most loan monitoring activities, but policies for some of these activities 

remain incomplete or outdated. Further, in some cases we examined, 

DOE generally adhered to its loan monitoring policies but, in others, DOE 

adhered to those policies inconsistently or not at all because the Loan 

Programs Office was still developing its staffing, management and 

reporting software, and policies.

 5 A conditional commitment is a commitment by DOE to issue a loan guarantee if the 

applicant satisfies specific requirements. The Secretary of Energy has the discretion to 

cancel a conditional commitment at any time for any reason prior to the issuance of a loan 

guarantee.

DOE Has Not Fully 

Developed or 

Consistently Adhered 

to Loan Monitoring 

Policies
Page 6 GAO-14-367 DOE Loan Programs

DOE has established policies for most loan monitoring activities, but 

policies for some of these activities remain incomplete or outdated. More 

specifically, DOE has established policies for loan monitoring activities 

including disbursing funds, monitoring and reporting on credit risk, and 

managing troubled loans. (For more details about DOE loan monitoring 

policies and activities, see app. II.) However, loan monitoring policies for 

evaluating and mitigating program-wide risk remain incomplete or 

outdated, and several dates DOE set for completing or updating these 

policies passed during the course of our work.

Evaluating and mitigating program-wide risk is generally the responsibility 

of the Risk Management Division within DOE’s Loan Programs Office. 

This division was established in February 2012 and has been operating 

since its inception under incomplete or outdated policies. For example, 

the policies do not address how the new structure of the Risk 

Management Division fits into existing policies, thus not providing clear 

guidance on the organizational roles of the division. DOE officials told us 

that policy revisions were delayed in part because the Loan Programs 

Office did not have a Director of Risk Management until November 2012 

and that a planned revision was put on hold to await the arrival of a new 

Executive Director in May 2013. Additionally, the Risk Management 

Division had not staffed 11 of its 16 planned positions until late 2013, 

when it staffed 6 of 11 vacancies.

As highlighted by an independent White House review of DOE’s loan 

programs,6

 6 Herbert Allison, Report of the Independent Consultant’s Review with Respect to the 

Department of Energy Loan and Loan Guarantee Portfolio (Washington, D.C.: Jan. 31, 

2012).

as well as our discussions with private lenders, a risk 

management division is essential for mitigating risk. Similarly, Office of 

Management and Budget (OMB) guidance specifies that credit programs 

should have robust management and oversight frameworks for monitoring 

the programs’ progress toward achieving policy goals within acceptable 

risk thresholds, and taking action where appropriate to increase efficiency 

and effectiveness. It is difficult to determine whether DOE is adequately 

managing risk if policies against which to compare its actions are 

outdated or incomplete. Also, without fully staffing key monitoring 

positions, the Risk Management Division is limited in its ability to revise 

and complete policies, as well as perform its other monitoring 

responsibilities.

DOE Has Policies for Most 

Loan Monitoring Activities, 

but Some Remain 

Incomplete or Are 

Outdated
Page 7 GAO-14-367 DOE Loan Programs

In some cases we examined, DOE generally adhered to its loan 

monitoring policies but, in other cases, DOE adhered to its monitoring 

policies inconsistently or not at all because DOE was still developing the 

Loan Programs Office’s organizational structure, including staffing, 

management and reporting software, and implementing procedures for 

policies. As a consequence, DOE was making loans and disbursing funds 

from 2009 through 2013 without a fully developed loan monitoring 

function. DOE generally adhered to its monitoring policies for activities 

such as disbursing funds and reviewing borrower requests for changes to 

loan agreement provisions. For example, for the 10 loans in our sample, 

we found that, in disbursing funds, DOE generally documented its 

analysis of the financial health of the project and recorded supervisory 

approvals, as required in its policy. Similarly, we found that in nearly all of 

the 30 requests for amendments and waivers to loan agreements for the 

10 loans in our sample, DOE officials properly recorded their review of the 

requested changes.

In some other cases, DOE inconsistently adhered to its monitoring 

policies. For example, in regard to monitoring and reporting on credit risk, 

DOE was inconsistent in its preparation of credit reports which, according 

to DOE’s policy manuals, provide early warning signs of potential credit 

problems and can guide project and loan restructuring efforts should the 

need arise. In total, DOE was missing 24 of 88 periodic credit reports due 

through May 2013 across the 10 sample loans. Twenty of the missing 

reports were not completed because DOE did not begin producing 

periodic credit reports until August 2011. DOE officials told us that such 

reports were not produced before then because the Portfolio 

Management Division had not filled the staff positions needed for 

producing these reports, and its management and reporting software was 

under development. As a result, DOE disbursed more than $4.7 billion for 

the 10 loans in our sample before it began producing periodic credit 

reports as required in its policy manuals.7

 7 This disbursement amount represents disbursements for the 10 loans in our sample. 

Additional disbursements would have been made for some of the remaining loans.

According to DOE officials, 

although DOE was not producing credit reports during this time, DOE

staff were taking other measures to monitor the loans, such as keeping in 

regular contact with the borrowers.

DOE Did Not Consistently 

Adhere to Its Loan 

Monitoring Policies 

Because Its Loan 

Programs Office 

Organizational Structure 

Was Still under 

Development
Page 8 GAO-14-367 DOE Loan Programs

In addition, after DOE began producing credit reports, DOE officials 

inconsistently recorded credit risk ratings on multiple credit reports. For 

example, of the 64 reports we reviewed as part of our sample, 11 had one 

or more credit risk rating fields left blank, and other credit rating fields 

contained errors. According to DOE officials, the reasons for the blank 

and incorrect fields included human error and a system design error that 

occurs in its management and reporting software.

8

In another example, DOE inconsistently adhered to policies for managing 

troubled loans. DOE’s policy manuals require that DOE prepare and 

approve plans for handling troubled loans to borrowers who are in danger 

Further, there was a 

wide range between when credit reports were completed and when they 

were reviewed; more specifically, the time it took to review reports 

completed on a quarterly basis ranged from as little as a week to over 3 

months. DOE officials told us that the reporting and review period 

inconsistencies were a result of inadequate staffing and incomplete 

implementing procedures that did not provide clear guidance on reporting 

dates. Also, some reports were submitted and approved outside of DOE’s 

management and reporting software, for which the system design was 

still being worked out, and training was being provided. DOE’s policy 

manuals specify that one purpose of these credit reports is to serve as an 

information source for inquiries by government oversight authorities

seeking to understand the loans’ structures and decisions. Incomplete or 

inconsistent credit reporting can make it difficult for these authorities to 

understand and assess the status of the loans and determine if corrective 

actions are needed. According to DOE officials, as of February 2014, its 

staffing levels and its management and reporting software were sufficient 

to support full and timely credit reporting. After we found inconsistencies 

in DOE’s credit reports, DOE established a draft implementing procedure 

to guide the development of future credit reports that clarified reporting 

dates and preparation periods for new and existing staff in June 2013. 

Furthermore, DOE officials stated, in January 2014, that the department 

has taken steps to address human error in the credit risk rating fields by 

requiring that the fields representing previous credit ratings are populated 

automatically. DOE officials also stated that they are addressing the 

system design issue in the next generation of its management and

reporting software, planned for release in late fall 2014.

 8 DOE officials also noted that DOE does not manage its portfolio based solely on a loan’s 

credit rating.
Page 9 GAO-14-367 DOE Loan Programs

of defaulting on their loan repayments. Once it becomes clear that a loan 

is in danger of default, DOE policy calls for the preparation, approval, and 

implementation of a workout action plan, which identifies potential 

problems and lays out decisive remedial actions to help minimize 

potential losses. However, for two troubled loans in our sample, DOE 

officials told us they had not prepared a formal workout action plan in a 

single document but instead specified problems and remedial actions in

many documents over a period of time. For example, in one case, in 

2011, where DOE officials were aware for at least 10 months that the 

borrower would likely default on its payments, DOE provided us with 

about 20 such documents including analyses of collateral, draft 

memoranda, and slideshow presentations, which showed that DOE had 

taken or considered some of the options described by its policy. However, 

these documents did not conform to DOE’s policy for these plans, 

particularly its policy that DOE prepare a workout plan document and 

seek formal approval from its management. DOE officials told us that 

“operational matters had evolved beyond the steps outlined in their policy 

manuals.” DOE officials noted that they were revising the manuals to 

better comport with best practices in the finance industry and that DOE 

has been operating under draft implementing procedures since June 

2012. These officials also noted that DOE’s 2009 and 2011 policy 

manuals were inadequate and were completed without the benefit of

experts in the field of workout plans due to limited staffing in the Portfolio 

Management Division at the time. Officials noted that managers with such 

expertise are now on staff in the division, but the branch within the 

division that is tasked with managing troubled loans, including the 

development and implementation of workout action plans, had not staffed 

four of five positions as of February 2014. DOE officials told us that, given 

the availability of third-party financial advisors and the limited number of 

assets that fall within that category, they may not need to fill all of the 

positions. However, inconsistent adherence to policies and incomplete 

staffing limit DOE’s assurance that it has been effectively managing 

troubled loans during a period when there have been five defaults and 

bankruptcies among DOE loan program borrowers or that it can 

effectively manage such loans in the future.

Further, DOE did not adhere to some existing policies for program-wide 

evaluation and mitigation of portfolio-wide risk, in particular policies for 

evaluating the effectiveness of its loan monitoring. DOE’s 2011 policy 

manual states that certain functions are critical to management’s ability to 

assess the adequacy and quality of the agency’s monitoring. The manual 

further states that failure to maintain these functions is an unsound 

practice that could expose DOE to loss or criticism. These functions—
Page 10 GAO-14-367 DOE Loan Programs

which are referred to as credit review, compliance, and reporting 

functions—include internal assessment of documentation, portfolio-wide 

reporting on risks, and evaluation of the effectiveness of DOE’s loan 

monitoring. The Loan Programs Office’s Portfolio Management Division 

has conducted some internal assessments of the quality of DOE 

documentation and, in May 2013, started some portfolio-wide reporting on 

the overall risk posed by DOE’s loan obligations. However, DOE officials 

told us that the division has not evaluated the effectiveness of the 

agency’s loan monitoring efforts or produced the required reports. DOE 

officials told us that these responsibilities have been transferred to the 

Risk Management Division, which, as noted earlier, was operating under 

incomplete or outdated policies and had staff vacancies. Without 

conducting these evaluations, DOE management cannot assess the 

adequacy of its monitoring efforts and thus be reasonably assured that it 

is effectively managing risks associated with its loan programs.

DOE’s loan programs began making loans and guarantees in 2009, and 

by March 2014 DOE had made or guaranteed over $30 billion in loans 

that required monitoring. In its policy manuals, DOE recognizes the 

importance of monitoring loans and guarantees to proactively manage 

their risks and protect the financial interests of the federal government 

and the taxpayer. OMB guidance specifies that credit programs should 

have robust management and oversight frameworks. However, DOE has 

been monitoring its loans since 2009 without the benefit of a fullydeveloped organizational structure because staffing, management and 

reporting software, and monitoring policies and procedures are still works 

in progress. The absence of a fully-developed organizational structure

has resulted in inconsistent adherence to policies during a period of 

significant program events, including loan disbursements, borrower 

bankruptcies, and loan repayments involving billions of dollars. Because 

DOE inconsistently adhered to the policies it had in place, DOE’s 

assurance that it was completing activities critical to monitoring the loans 

has been limited. DOE has made progress since 2011 in developing its 

monitoring functions, but it has repeatedly missed internal deadlines for 

completing its loan monitoring policies and procedures. In the meantime, 

DOE has recently announced a new solicitation for up to $8 billion in loan 

guarantees for advanced fossil energy projects and issued two new loan 

guarantees for nuclear generation, adding $6.2 billion in loans to be 

overseen.

In addition to a fully developed loan monitoring organization, evaluating 

the effectiveness of ongoing monitoring efforts is important to ensuring 

Conclusions
Page 11 GAO-14-367 DOE Loan Programs

risks are being adequately managed in DOE’s loan programs. However, 

since the first loans were made, DOE has not conducted evaluations of its 

loan monitoring by performing the credit review, compliance, and 

reporting functions outlined in its 2011 policy manual. Such evaluations 

might have identified and addressed the inconsistent adherence to its 

policies that we identified. As DOE’s manual states, a failure to maintain a 

reliable and effective evaluation function is unsound and could expose 

DOE to loss or criticism. Given the high profile and large sums of money 

involved in DOE’s loan programs—more than $30 billion in loans and 

guarantees already made and approximately $45 billion in remaining loan 

and loan guarantee authority—this exposure is significant.

To provide greater assurance that DOE is effectively monitoring its loans, 

we recommend that the Secretary of Energy direct the Executive Director 

of the Loan Programs Office to take the following four actions:

• Fully develop its organizational structure by

• staffing key monitoring positions,

• updating management and reporting software, and

• completing policies and procedures for loan monitoring and risk 

management.

• Evaluate the effectiveness of DOE’s monitoring by performing the 

credit review, compliance, and reporting functions outlined in the 2011 

policy manual for DOE’s loan programs.

We provided a draft of this report to DOE for review and comment. In its 

written comments, DOE generally agreed with our recommendations. 

DOE also said it disagreed with some statements in the draft report. It 

was difficult, however, for us to determine which statements DOE 

disagreed with because the comments focused on highlighting DOE’s 

monitoring efforts in four areas rather than specifying areas of 

disagreement. DOE’s written comments and our detailed responses can 

be found in appendix V of this report. DOE also provided technical 

comments that we incorporated, as appropriate.

DOE noted several actions it is undertaking in response to our 

recommendations. Regarding its organizational structure, DOE stated it 

would continue to recruit and hire qualified managers and staff for its

Portfolio Management and Risk Management Divisions; implement a 

second generation of its software by the end of the first quarter of 2015,

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 12 GAO-14-367 DOE Loan Programs

as well as a new information and reporting system by the end of the third 

quarter of 2014; and continue to prepare and issue portfolio monitoring 

and risk management procedures and guidelines. However, DOE did not 

provide information on any plans for updating and completing its overall 

policy manual for the programs. We believe this action is needed 

because it would provide guidance on the organizational roles of the new 

Risk Management Division and address inconsistencies we found 

between the current manual and current DOE practices, such as those for 

troubled loans. Regarding evaluation of the effectiveness of DOE’s 

monitoring, DOE described several efforts for reviewing and monitoring 

the Loan Programs Office’s portfolio. However, DOE did not indicate that 

it plans to prepare the required reports to evaluate the effectiveness of its 

loan monitoring.

We are sending copies of this report to the Secretary of Energy, the 

appropriate congressional committees, and other interested parties. In 

addition, the report is available at no charge on the GAO website at 

http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix VI.

Frank Rusco

Director, Natural Resources and Environment
Appendix I: Objectives, Scope, and 

Methodology

Page 13 GAO-14-367 DOE Loan Programs

This appendix details the methods we used to examine the Department of 

Energy’s (DOE) Loan Programs Office. The 2007 Revised Continuing 

Appropriations Resolution1

To assess the extent to which DOE has developed loan monitoring 

policies for its loan programs, we acquired and reviewed DOE’s policy 

manuals and detailed procedures documents for implementing those 

policies, and we created a summary of 10 activities in DOE’s monitoring 

process based on those manuals and procedures. DOE’s manuals date 

from October 2011 for the LGP,

mandates that GAO review DOE’s execution 

of the Loan Guarantee Program (LGP) and report its findings to the 

House and Senate Committees on Appropriations. Because DOE is 

administering the LGP and Advanced Technology Vehicles Manufacturing 

(ATVM) loan program through one Loan Programs Office, we included 

both programs in this review. For this report, we assessed the extent to 

which DOE has developed and adhered to loan monitoring policies for its 

loan programs.

2 and November 2009 for the ATVM loan 

program.3 In addition, as of April 2013, DOE had implemented 24 detailed 

procedures that provide more specific guidance for the monitoring 

activities we identified.4 Functionally, DOE’s monitoring activities for the 

LGP and ATVM loan program are substantially the same because their 

policy manuals require similar activities, use the same reports, and 

document results in the same management and reporting software.5

 1

Pub. L. No. 110-5 §20320(c) (Feb. 15, 2007).

As of 

2

U.S. Department of Energy Loan Programs Office, Credit Policies and Procedures, Title 

XVII of the Energy Policy Act of 2005 (Washington, D.C.: Oct. 6, 2011).

3

U.S. Department of Energy Advanced Technology Vehicles Manufacturing Program 

Office, Credit Policies and Procedures (Washington, D.C.: Nov. 23, 2009).

4

For the purposes of this report, we distinguish between “policies” and “implementing 

procedures.” In this report, “policies’ refer to requirements in DOE’s policy manuals for its 

LGP and ATVM loan program cited above. “Implementing procedures” refer to DOE’s 

“work process documents,” which provide requirements for the implementation of 

individual monitoring activities. As of August 2013, DOE had proposed 37 procedures 

describing its monitoring activities; of these, 25 have been written, approved, and 

implemented.

5

DOE uses a web-based document management, content management, and reporting 

tool to manage its loan portfolio called “Quicksilver.” DOE developed Quicksilver to help its 

monitoring staff ensure loan compliance and report on the progress of loans. DOE created 

and implemented Quicksilver in about October 2011. Because many of the loans 

guaranteed by DOE originated prior to this time, DOE staff worked to backfill information 

about these loans.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 14 GAO-14-367 DOE Loan Programs

January 2014, DOE is drafting a new policy manual in order to reflect 

current practices and supersede the separate manuals for both programs. 

Moreover, we conducted semistructured interviews with DOE staff to 

ensure that our understanding of these policies and procedures was 

complete and accurate.

To assess the extent to which DOE adhered to its monitoring policies, we 

acquired and analyzed documentation from a nonprobability sample of 10 

of the 36 loans and loan guarantees that had been made by March 2013, 

therefore, requiring monitoring.6

In addition, to provide context, we compared DOE’s monitoring policies 

with those of private lenders. We conducted semistructured interviews 

with eight experts (four private lenders, three academic experts, and one 

industry expert) about private lender monitoring policies and compared 

the information they provided with DOE’s policies and the 10 activities we 

identified. We selected a nonprobability sample of four private lenders 

financing similar projects to those in the LGP and ATVM loan program, 

The use of a nonprobability sample 

means that we are unable to generalize our findings to the loans and loan 

guarantees not in our sample, but we are able to make observations 

about DOE’s monitoring activities for the diverse set of 10 loans and 

guarantees. The loans and loan guarantees were chosen to cover 

projects involving a range of technologies, construction statuses, credit 

watch list statuses, loan or guarantee amounts, dates of loan finalization, 

and amounts disbursed. We examined relevant project files, including 

disbursement records, plans for troubled loans, and credit reports. We 

requested all disbursement records and plans for managing troubled 

loans for the 10 sample loans. DOE began producing credit reports in 

August 2011, so we examined all credit reports for the 10 sample loans 

that were produced between August 2011, and May 2013, when we 

completed our data collection. We compared these files with selected 

DOE policies to determine where the guidance was followed and where it 

was not, as well as the level of consistency in monitoring across projects. 

We did not review all DOE policies, rather only those most directly 

associated with the 10 activities identified in our summary. In some 

cases, our review of documentation was limited by the fact that DOE’s 

detailed procedures remained under development.

 6 At the time we finalized our sample in March 2013, DOE had issued 31 loan guarantees 

and 5 loans, respectively. This was prior to the recent issuance of 2 loan guarantees in 

February 2014.
Appendix I: Objectives, Scope, and 

Methodology

Page 15 GAO-14-367 DOE Loan Programs

using additional criteria such as the value of loans issued and number of 

loans issued. The use of a nonprobability sample in this case means that 

we are unable to generalize the information they provided to the private 

lenders not in our sample, but we are able to make observations about 

how DOE’s polices compare with those lenders’ descriptions of their own 

and industry-wide practices. Our primary source in identifying lenders was 

a search of the lenders most active in financing large innovative energy 

and advanced vehicle projects in the Bloomberg New Energy Finance 

database. We discussed general policies and practices with these private 

lenders because they were unable to share specific written policies and 

procedures. We identified academic experts through a literature search of 

relevant academic articles on project finance loan monitoring practices 

and the financing of innovative energy technologies, and we then 

contacted the most frequently cited academics. In addition, we reviewed a 

study conducted by KPMG on behalf of the Export-Import Bank of the 

United States, which compiled leading monitoring practices from 

institutions across a number of sectors, including 10 private lenders, as 

well as several export credit and government agencies. We then 

interviewed the study’s author.

We conducted this performance audit from March 2013 to April 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Summary of Monitoring Activities 

Identified in DOE Loan Programs Office 

Policies and Procedures

Page 16 GAO-14-367 DOE Loan Programs

In order for us to compare the Department of Energy’s (DOE) monitoring 

efforts to those of private lenders, we summarized and categorized DOE’s 

monitoring into 10 activities based on DOE policy and discussions with 

DOE officials (see table 1). Taken together, the 10 activities cover the full 

duration of the loan, from the time loans have been made, through 

disbursement of funds, construction of the project, and the operation of 

the project, until final repayment, which can be up to 3 decades in the 

future. Some of the monitoring activities we identified are to be done for 

every loan. For example, prior to disbursing loan payments, DOE policies 

require that staff perform several steps to review the financial health of 

the project and the borrower, such as checking borrower documentation, 

performing technical reviews of the health of the project, and obtaining 

supervisory approval prior to processing payment. During construction, 

DOE policy directs loan monitoring and technical staff to review project 

financial and technical documents to ensure that the project is 

progressing toward its construction goals. DOE policy for another activity 

we identified directs DOE staff to monitor and report on the financial 

health of the project and prepare reports about the project’s financial 

information, among other things. Other monitoring activities are applied 

only if the internal or external risk to the financed project increases. Two 

of these 10 activities address this possibility: (1) assessing potential 

actions for loans with increasing risks and (2) managing troubled loans.1

To develop this summary of DOE’s monitoring activities, we examined 

high-level DOE policy guidance—specifically DOE’s October 2011 policy 

manual for its Loan Guarantee Program, its 2009 policy manual for its 

Advanced Technology Vehicles Manufacturing (ATVM) loan program, 

DOE’s approved implementing procedure documents, and DOE loan 

monitoring documentation. In addition, we reviewed a draft policy manual 

intended to unify guidance for both loan programs (more detailed 

information about how we summarized these activities is available in app. 

As part of managing troubled loans, DOE officials are to determine 

whether it is preferable to make changes in a troubled loan’s structure, 

such as restructuring the project in a way that might reduce risk, or to 

seek an outside entity to purchase the loan and take on the risk, among 

other options.

 1

For the purposes of this report, troubled loans are loans or guarantees that are at risk of 

defaulting on the terms of their loan agreement or loans or guarantees that have already 

defaulted.

Appendix II: Summary of Monitoring 

Activities Identified in DOE Loan Programs 

Office Policies and Procedures
Appendix II: Summary of Monitoring Activities 

Identified in DOE Loan Programs Office 

Policies and Procedures

Page 17 GAO-14-367 DOE Loan Programs

I). Table 1 summarizes the 10 monitoring activities we identified that are 

described by DOE Loan Programs Office policies and procedures.

Table 1: Monitoring Activities for Loans and Loan Guarantees Made by the DOE Loan Programs Office

Monitoring activity Description

Providing input at loan closing At the time of loan negotiation and closing, staff from DOE’s future monitoring team can 

provide review and input to the team that originates the loan to help establish the proper 

monitoring conditions in the loan agreement.

Transferring loan files from origination 

staff to monitoring staff

Official change of primary responsibility of loans and hand-off of documentation.

Monitoring loan disbursement during 

project construction

As funding is disbursed for project construction, DOE reviews whether the borrower has met 

the conditions in the loan agreement. Independent engineers and DOE staff engineers advise 

DOE’s loan portfolio managers. 

Monitoring and reporting on credit risk As funds are disbursed, and throughout project construction and operation, DOE monitoring 

staff conduct a number of activities to monitor credit risk, such as reviewing project financial 

information and the collateral value of the project, preparing periodic credit risk reports, and 

evaluating the health of the project’s current and future cash flows. These activities are 

documented over time.

Reviewing borrower requests for 

changes to the loan agreement and 

the need for administrative or material 

credit actions 

DOE staff evaluate routine requests from the borrower to make changes to the loan 

agreement, such as changing reporting requirements, or changing project cost and schedule 

estimates. If there are changes in project risk, DOE may take certain actions, including credit 

watch actions, such as placing a company on a “watch list” of borrowers for which DOE upper 

management receives weekly status updates; administrative credit actions, defined as routine 

actions (e.g., consents to certain actions by a project company); and material credit actions, 

such as seeking additional collateral to offset loan risk.

Monitoring construction progress DOE staff monitors construction activities against specific benchmarks established in the 

financing and project documents. Monitoring staff use the services of an independent 

engineer, as well as an in-house DOE technical review group, for monitoring cost and 

schedule performance during the project’s construction phase.

Monitoring project operations After construction is completed, DOE’s monitoring activities shift to monitoring project 

operations. Operations monitoring largely includes the review of reports and other financial 

information submitted by the borrower.

Assessing potential actions for loans 

with increasing risks

If operating or financial difficulties are significant enough for the monitoring staff to consider 

that the project may become impaired, the DOE monitoring staff will decide whether the 

project remains viable but requires a modification of terms in order to continue to be 

performing. Under these circumstances, monitoring staff develop a restructuring or workout 

plan with the assistance of internal advisors (including industry experts), as well as external 

financial and legal advisors. 

Managing troubled loans A DOE function separate from the loan monitoring staff (Special Assets and Loan 

Administration) manages troubled assets and monitors transaction risk.

Evaluating and mitigating programwide risk Two separate DOE groups—the Risk Management Division and the Portfolio Management 

Division’s Portfolio Review, Compliance, and Reporting Branch—review the DOE monitoring 

program’s portfolio-level performance and risk, the adequacy of DOE’s allocated credit 

subsidy, and the Loan Programs Office’s effectiveness and compliance with its own 

procedures, among other things. This includes credit review, compliance, and reporting 

functions that were originally part of the Portfolio Management Division but were transferred 

to the Risk Management Division.

Source: GAO analysis of DOE data.
Appendix III: DOE Loan Guarantees and Loans 

as of March 2014

Page 18 GAO-14-367 DOE Loan Programs

Dollars in millions

Program/borrower Sector

Loan guarantee/

loan amount 

at closing

Closing 

date Notes/status

LGP - Title XVII Section 1705

1366 Technologies Inc. Solar manufacturing $143 9/8/11

Abengoa Bioenergy Biomass of Kansas, LLC Biomass 127 9/29/11

Abound Manufacturing Solar, LLC Solar manufacturing 370 12/9/10 Defaulted/bankrupt

AES ES Westover, LLC Transmission 17 12/22/10 Withdrew prior to 

drawing funds

Agua Caliente Solar, LLC Solar generation 967 8/5/11

Arizona Solar One, LLC (aka Abengoa Solar, 

Inc; Solana)

Solar generation 1,359 12/20/10

AV Solar Ranch 1, LLC Solar generation 646 9/30/11

Caithness Shepherds Flata Wind generation 1,314 12/16/10

Cogentrix of Alamosa, LLC Solar generation 89 9/9/11

Desert Sunlight 250, LLCa Solar generation 660 9/29/11 Part of overall Desert 

Sunlight project

Desert Sunlight 300, LLCa Solar generation 801 9/29/11 Part of overall Desert 

Sunlight project

Genesis Solar, LLCa Solar generation 852 8/26/11

Granite Reliable Power, LLCa Wind generation 169 9/23/11

Great Basin Transmission South, LLC (aka 

SWIP/On Line)

Transmission 324 2/11/11

High Plains Ranch II, LLC (aka Sunpower Corp 

CA Valley Solar Ranch)

Solar generation 1,189 9/30/11

Kahuku Wind Power, LLC Wind generation 117 7/26/10

Mesquite Solar 1, LLC Solar generation 330 9/28/11

Mojave Solar LLC (aka Abengoa Solar Mojave) Solar generation 1,124 9/23/11

NGP Blue Mountain I, LLCa Geothermal 99 9/3/10

OFC 2, LLC (aka Ormat)a Geothermal 350 9/23/11

Poet Project Liberty, LLC Biomass 103 9/23/11 Withdrew prior to 

drawing funds

Prosun Project Company, LLC (aka Project 

Amp/Photon)a Solar generation 1,400 9/30/11 Deobligated prior to drawing funds

Record Hill Wind, LLC Wind generation 102 8/15/11

Solar Partners I (aka Brightsource Ivanpah II) Solar generation 514 4/5/11 Part of overall Ivanpah 

project

Solar Partners II (aka Brightsource Ivanpah I) Solar generation 486 4/2/11 Part of overall Ivanpah 

project

Appendix III: DOE Loan Guarantees and 

Loans as of March 2014
Appendix III: DOE Loan Guarantees and Loans 

as of March 2014

Page 19 GAO-14-367 DOE Loan Programs

Dollars in millions

Program/borrower Sector

Loan guarantee/

loan amount 

at closing

Closing 

date Notes/status

Solar Partners VIII (aka Brightsource 

Ivanpah III)

Solar generation 510 4/5/11 Part of overall Ivanpah

project

Solopower, Inc. Solar manufacturing 185 8/19/11 Deobligated prior to 

drawing funds

Solyndra, Inc. Solar manufacturing 535 9/4/09 Defaulted/bankrupt

Stephentown Regulation Services, LLC (aka 

Beacon Power Corporation)

Energy storage 43 8/6/10 Defaulted/restructured -

restructured guarantee 

is called Stephentown 

Spindle, LLC

Tonopah Solar Energy (aka Solar Reserve,

LLC)

Solar generation 692 9/28/11

USG Oregon, LLC Geothermal 94 2/23/11

Section 1705 subtotal $15,711 

LGP - Title XVII Section 1703

Georgia Power Company Nuclear generation $3,462 2/20/14 Part of overall Vogtle 

project

Oglethorpe Power Corporation Nuclear generation 2,722 2/20/14 Part of overall Vogtle 

project

Section 1703 subtotal $ 6,184 

LGP subtotal $ 21,895 

Advanced Technology Vehicles Manufacturing (ATVM) loan program

Fisker Automotive, Inc. Automotive 

manufacturing

$ 529 4/22/10 Defaulted/auctioned 

(subsequently 

bankrupt)

Ford Motor Company Automotive 

manufacturing

5,937 9/16/09

Nissan North America, Inc. Automotive 

manufacturing

1,448 1/28/10

Tesla Motors, Inc. Automotive 

manufacturing

465 1/20/10 Repaid in full

The Vehicle Production Group, LLC Automotive 

manufacturing

50 3/10/11 Defaulted/auctioned 

(subsequently 

restructured by the 

purchaser)

ATVM subtotal $8,429 

Total $30,323 

Source: GAO analysis of DOE data.
Appendix III: DOE Loan Guarantees and Loans 

as of March 2014

Page 20 GAO-14-367 DOE Loan Programs

Note: The loan amounts reflected above are those that appear in the Department of Energy’s (DOE) 

accounting system. They include the full amount of the loans partially guaranteed through the 

Financial Institution Partnership Program (FIPP) and do not include capitalized interest. As such, the 

amounts and total for LGP Section 1705 above vary from those presented in GAO-12-157, table 9, 

which did not count the full loan amount for FIPP guarantees and did include capitalized interest.

a

FIPP transaction. Under FIPP, project developers partnered with private lenders to apply to DOE for 

partial guarantees. In a FIPP financing DOE provided a guarantee for up to 80 percent of a loan. The 

lender applicants were required to hold at least 20 percent of the credit exposure for the project. The 

loan amount in the above table represents the full loan amount rather than the partial guarantee, per 

DOE’s accounting system.
Appendix IV: Established DOE Loan 

Monitoring Policies Generally Align with Those 

of Private Lenders

Page 21 GAO-14-367 DOE Loan Programs

In order to provide context and better understand the Department of 

Energy’s (DOE) loan monitoring, we compared DOE policies with those of 

private lenders that finance large energy projects. We conducted 

semistructured interviews with eight experts about private lenders’

monitoring policies and compared the results with DOE’s policies and the 

10 activities we identified. For more information on our methodology see 

appendix I.

For the activities in which DOE has established policies, those policies 

generally align with those of private lenders. More specifically, our 

discussions with experts and our review of DOE’s policies indicate that 

DOE’s general monitoring activities, frequency of monitoring, actions 

taken when risk appears to be increasing, and organizational structures 

were all generally similar to those of private lenders. For example, both 

DOE policies and private lenders described various monitoring activities 

to oversee borrowers including periodic reviews of borrower information, 

independent engineering reviews of projects’ progress and expenditures, 

site visits to projects to monitor construction, and the tracking of 

borrowers’ compliance with loan agreements. In one instance, DOE’s 

monitoring policies appear more rigorous than many private lenders’. 

Specifically, both DOE’s and private lenders’ policies call for independent 

engineers for technical expertise and oversight, but DOE also has 

engineers on staff who oversee the independent engineers and advise 

DOE’s loan portfolio managers.

While both DOE and private lenders were similar in having separate risk 

management functions, we could not directly compare DOE’s reporting 

relationship for its Risk Management Division with that of the private 

sector because of the incomplete policies and evolving nature of the Risk 

Management Division, as well as differences between a private lender 

and a government agency—such as the structure of overall management 

and the greater diversity of missions assigned to DOE than to a bank.

Appendix IV: Established DOE Loan 

Monitoring Policies Generally Align with 

Those of Private Lenders
Appendix V: Comments from the Department 

of Energy

Page 22 GAO-14-367 DOE Loan Programs

Appendix V: Comments from the Department

of Energy

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix.
Appendix V: Comments from the Department 

of Energy

Page 23 GAO-14-367 DOE Loan Programs

See comment 4.

See comment 3.

See comment 2.

See comment 1.
Appendix V: Comments from the Department 

of Energy

Page 24 GAO-14-367 DOE Loan Programs
Appendix V: Comments from the Department 

of Energy

Page 25 GAO-14-367 DOE Loan Programs
Appendix V: Comments from the Department 

of Energy

Page 26 GAO-14-367 DOE Loan Programs
Appendix V: Comments from the Department 

of Energy

Page 27 GAO-14-367 DOE Loan Programs

The following are GAO’s comments on the letter from the Department of 

Energy dated April 18, 2014.

1. DOE states that its disbursement monitoring is fully developed and 

that DOE has not made disbursements without confirming that all 

required conditions have been satisfied and obtaining all necessary 

internal approvals. We found that DOE generally adhered to its 

policies related to disbursements, documenting analyses, and 

recording approvals, as we report on page 10. However, as we point 

out in the report, other aspects of DOE’s loan monitoring were still 

under development while DOE was disbursing funds.

2. DOE states that its 2011 policy manual requires the agency to 

prepare loan review reports for each project, at least annually, and 

that the agency has prepared quarterly, semiannual, and annual 

reports for all projects since the 2011 manual was issued. The 

manual in effect prior to 2011 also required periodic credit reports, so 

we looked for all reports prepared for the 10 loans in our sample. As 

we report, DOE did not start preparing any periodic credit reports until 

2011, and 24 of 88 required periodic credit reports were missing for 

the 10 loans. Of these missing reports, 4 were due after the 2011 

policy manual was issued. 

DOE also states that credit reports are not the only tool in determining 

borrower health and capacity to repay the DOE-supported loan. We 

agree that credit reports are not the only tool, but DOE’s policy 

manual indicates their importance. Specifically, it states that reports 

will enhance the credit monitoring process by providing (1) an early 

warning signal of potential credit issues, (2) a basis for potential loan 

restructuring, (3) a basis for reassessing credit risk, and (4) an 

information source for inquiries.

3. DOE states that it prepared comprehensive analyses and 

presentations that served as workout plans for the two loans 

mentioned by GAO and that consolidation of these analyses and 

presentations into a single document would not have changed the 

overall effectiveness of the workout plans. We did not evaluate 

whether this approach was more or less effective than the stated 

approach in DOE’s policies, which call for a formal workout action 

plan that must be approved by management. As we note in our report, 

DOE did not follow its policies in that area. We also note DOE’s 

statements that they are revising the policy manual to better comport 

with best practices in this field and that DOE has been operating 

under draft implementing procedures since June 2012. The mismatch 

GAO Comments
Appendix V: Comments from the Department 

of Energy

Page 28 GAO-14-367 DOE Loan Programs

between DOE’s written policies and its actual practices highlights the 

importance of our recommendation for DOE to complete its policies 

and procedures.

4. DOE describes several actions it has taken and has under way for 

reviewing and monitoring the Loan Programs Office’s portfolio. We 

note in the report that DOE has conducted some internal 

assessments and begun portfolio-wide reporting on risks, but that 

DOE was not adhering to its policies for evaluating the effectiveness 

of its loan monitoring. Specifically, DOE’s 2011 policy manual 

requires “a formal Credit Review and Compliance report” to be issued 

quarterly, but DOE officials told us that none had been produced, 

again underscoring the importance of our recommendation in this 

area. 
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 29 GAO-14-367 DOE Loan Programs

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Karla Springer, Assistant 

Director; Marcia Carlsen; Lee Carroll; Cindy Gilbert; Ryan Gottschall; 

Armetha Liles; Eric Miller; Cynthia Norris; Madhav Panwar; Lindsay Read; 

Barbara Timmerman; Jarrod West; and Steve Westley made key 

contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 30 GAO-14-367 DOE Loan Programs

Federal Support for Renewable and Advanced Energy Technologies. 

GAO-13-514T. Washington, D.C.: April 16, 2013.

Department of Energy: Status of Loan Programs. GAO-13-331R. 

Washington, D.C.: March 15, 2013.

DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking 

and Review of Applications. GAO-12-157. Washington, D.C.: March 12, 

2012.

Department of Energy: Advanced Technology Vehicle Loan Program 

Implementation Is Under Way, but Enhanced Technical Oversight and 

Performance Measures Are Needed. GAO-11-145. Washington, D.C.: 

February 28, 2011.

Department of Energy: Further Actions Are Needed to Improve DOE’s 

Ability to Evaluate and Implement the Loan Guarantee Program. 

GAO-10-627. Washington, D.C.: July 12, 2010.

Department of Energy: New Loan Guarantee Program Should Complete 

Activities Necessary for Effective and Accountable Program 

Management. GAO-08-750. Washington, D.C.: July 7, 2008.

Department of Energy: Observations on Actions to Implement the New 

Loan Guarantee Program for Innovative Technologies. GAO-07-798T. 

Washington, D.C.: April 24, 2007.

The Department of Energy: Key Steps Needed to Help Ensure the 

Success of the New Loan Guarantee Program for Innovative 

Technologies by Better Managing Its Financial Risk. GAO-07-339R. 

Washington, D.C.: February 28, 2007.

Related GAO Products

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