Recovery Act: Status of Department of Energy's Obligations and Spending
Published: 2011-03-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act) aims to promote economic recovery, make investments, and minimize or avoid reductions in state and local government services. As of February 2011, the Congressional Budget Office estimated the act will cost $821 billion in spending and tax provisions through 2019. The Recovery Act provided the Department of Energy (DOE) more than $41.7 billion--$35.2 billion for projects and activities and $6.5 billion in borrowing authority--in areas such as energy efficiency, renewable energy, and environmental cleanup. This included about $3.2 billion for the Energy Efficiency and Conservation Block Grant program, about $3.1 billion for the State Energy Program, and about $5 billion for the Weatherization Assistance Program. The act also provided about $6 billion to DOE's Office of Environmental Management for environmental cleanup activities and about $2.5 billion to its Loan Guarantee Program Office to support such guarantees for, among other things, renewable energy projects. This testimony focuses on DOE's obligations and spending of Recovery Act funds for these programs and information reported on jobs funded as a result of this spending. This testimony is based on prior GAO work updated with data from DOE and on preliminary results from ongoing GAO work on the Energy Efficiency and Conservation Block Grant program.
section_title: What GAO Found
paragraphs: As of March 10, 2011, DOE reported that it had obligated $33.1 billion (94 percent) and spent $12.5 billion (36 percent) of the $35.2 billion it received under the Recovery Act for projects and activities. This is an increase from December 31, 2009, when DOE reported that it had obligated $23.2 billion and spent $1.8 billion. DOE programs vary in the amount of Recovery Act funds they have obligated and spent and in the number of jobs funded through such spending, according to DOE and recipient reported data. Specifically: (1) Energy Efficiency and Conservation Block Grant Program. DOE has obligated the full $3.2 billion of Recovery Act funding provided for the program and, as of March 2011, some grant recipients reported spending about $860 million. GAO expects to issue a report in April 2011 with information on the quality of jobs data reported by recipients. (2) Office of Environmental Management Cleanup Activities. DOE has obligated virtually all of the $6 billion in Recovery Act funding for cleanup activities and, as of March 2011, had spent about two-thirds of the funds. Recovery Act-funded employment for DOE's cleanup activities peaked in the last quarter of 2010, when DOE reported that 10,977 full-time equivalents had been funded by the act. (3) Loan Guarantee Program. As of March 2011, DOE has obligated about 17 percent of the $2.5 billion provided for Loan Guarantee Program. For the last quarter of 2010, recipients reported 784 full-time equivalents had been funded from Loan Guarantee Program projects. (4) State Energy Program. As of January 2011, grant recipients reported obligating over $2.7 billion of Recovery Act funding and spending over $900 million of the $3.1 billion appropriated to the State Energy Program. (5) Weatherization Assistance Program. As of March 2011, DOE reported that half of the $5 billion of Recovery Act funding provided for the Weatherization Assistance Program had been spent. Recipients reported that about 15,391 full-time equivalents had been funded by the Recovery Act for the fourth quarter of 2010.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Energy’s  (DOE) spending on programs funded under the American Recovery and  Reinvestment Act of 2009 (Recovery Act). The Recovery Act is intended  to promote economic recovery, make investments, and minimize or avoid  reductions in state and local government services. Enacted on February  17, 2009, the act was a response to the economic recession at a time when  the jobless rate was approaching 8 percent. In early 2009, the  Congressional Budget Office estimated that the Recovery Act’s combined  spending and tax provisions would cost approximately $787 billion. As of  February 2011, it estimated that the Recovery Act would cost $34 billion  more than originally estimated—or a total of $821 billion from 2009  through 2019. That total includes more than $41.7 billion for DOE efforts  in areas such as energy efficiency and renewable energy, nuclear waste  cleanup, and innovative energy technologies.
The Recovery Act specified several roles for GAO, including conducting  ongoing reviews of selected states’ and localities’ use of funds made  available under the act. As part of those reviews, we examined several  DOE programs administered by states and localities, specifically the State  Energy Program and the Weatherization Assistance Program. We have also  completed separate reviews on other DOE activities funded under the  Recovery Act, including the department’s environmental cleanup projects  and its Loan Guarantee Program. Further, we are conducting ongoing  reviews of the Loan Guarantee Program as well as the Energy Efficiency  and Conservation Block Grant program, which was funded by the  Recovery Act and has an expected reporting date in April 2011.
My statement today is based largely on these prior reviews, updated with  data from DOE, and focuses on DOE’s obligations and spending of its  Recovery Act funds for these selected programs and the information  reported on jobs funded as a result of these programs’ Recovery Act  spending.
For this statement, we reviewed and summarized information from our  prior reports and preliminary results from our ongoing review of the  Energy Efficiency and Conservation Block Grant program. We developed  these preliminary results from September 2010 to March 2011 by, among  other things, reviewing relevant federal laws and regulations and DOE  guidance as well as financial and project data from DOE databases, which  we determined to be sufficiently reliable for our purposes; interviewing  grant program officials, including about 30 in the field offices responsible  for managing and monitoring grant awards; and reviewing responses from  a set of 49 of 91 purposefully selected city and county recipients that are  eligible to receive grant funding. We conducted all of our work in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to produce 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 statement today. Additional  information on our scope and methodology is available in each issued  product.
subsections: section_title: Background
paragraphs: The Recovery Act provided DOE with more than $41.7 billion, including  $35.2 billion for projects and activities and $6.5 billion in borrowing  authority. Of the $35.2 billion for projects and activities, almost half— $16.7 billion—was provided to the Office of Energy Efficiency and  Renewable Energy for projects intended to improve energy efficiency,  help build the domestic renewable energy industry, and help restructure  the transportation industry to increase global competitiveness. This  amount included about $5 billion for the Weatherization Assistance  Program, about $3.2 billion for the Energy Efficiency and Conservation  Block Grant program, and about $3.1 billion for the State Energy Program.  The Recovery Act also provided about $6 billion to the Office of  Environmental Management for environmental cleanup projects and about  $2.5 billion to the Loan Guarantee Program Office to support loan  guarantees for renewable energy and electric power transmission projects.
As of March 10, 2011, DOE reported that it had obligated $33.1 billion (94  percent) and spent $12.5 billion (36 percent) of the $35.2 billion it received  under the Recovery Act for projects and activities (see table 1). By  comparison, as of December 31, 2009, the department had obligated $23.2  billion (54 percent) and spent $1.8 billion (4 percent).
Nonfederal recipients of Recovery Act funds have reported on jobs funded  by the Recovery Act, and this effort is a solid first step in moving toward  more transparency and accountability for federal funds. Under the  Recovery Act, nonfederal recipients are to report for any quarter in which  they receive Recovery Act funds directly from the federal government, and  are to include in those reports information concerning the jobs created or  retained by their Recovery Act projects and activities. As reported by the  Recovery Accountability and Transparency Board, job calculations are  based on the number of hours worked in a quarter and funded under the  Recovery Act—expressed in full-time equivalents (FTE). In November  2009, we reported on our review and analysis of recipient data from  Recovery.gov, finding that there are reporting and quality issues with these  data. It is important to recognize that the FTEs in recipient reports alone  do not reflect the total employment effects of the Recovery Act. These  reports solely reflect direct employment arising from the expenditure of  less than one-third of Recovery Act funds. Therefore, both the data  reported by recipients and other macroeconomic data and methods are  necessary to gauge the overall employment effects of the stimulus. The  employment effects in any state will vary with labor market stress and  fiscal condition.
section_title: DOE Recovery Act Spending and Jobs Funded Vary by Program
paragraphs: DOE programs vary in the amount of Recovery Act funds they have  obligated and spent and in the number of jobs funded through such  spending, according to DOE and recipient reported data.
Table 2 shows Recovery Act funding, obligations, and spending for the  selected DOE programs.
As of March 10, 2011, the percentage of Recovery Act funding spent on  these selected programs ranged from a high of 67 percent for the Office of  Environmental Management’s cleanup activities to a low of 5 percent for  the Loan Guarantee Program Office. I will now briefly describe the status  of Recovery Act spending for each of these five programs.
subsections: section_title: Energy Efficiency and Conservation Block Grant Program
paragraphs: The Recovery Act provided about $3.2 billion for DOE’s Energy Efficiency  and Conservation Block Grant program (EECBG), funding the program for  the first time since it was authorized, in the Energy Independence and  Security Act (EISA) of 2007. The program—administered by the Office of  Energy Efficiency and Renewable Energy—provides formula and  competitive grants to states, territories, federally recognized Native  American tribes, and local communities to develop, promote, and manage  projects that improve energy efficiency and reduce energy use and fossil  fuel emissions in local communities.
Of the $3.2 billion provided for the EECBG program under the Recovery  Act, DOE awarded about $1.94 billion as formula grants to more than 2,000  local communities–including cities, counties, and tribal communities—and  about $767 million as formula grants to the states, five territories, and the  District of Columbia. In addition to the approximately $2.7 billion in  formula grants, DOE awarded about $453 million of the total EECBG  funds through competitive grants to local communities.
The Recovery Act required that DOE obligate about $2.7 billion in formula  funds by September 30, 2010. DOE has obligated all EECBG funds to  recipients, and recipients are beginning to obligate and spend these funds.  As of December 31, 2010, recipients reported obligating approximately  $1.7 billion and spending more than $655 million, approximately 24  percent of the EECBG budget. As of March 10, 2011, recipients reported  spending about $860 million. As we reported in September 2010, more than  60 percent of EECBG funds had been obligated for three purposes: energy- efficient retrofits, such as replacement of heating and cooling systems;  financial incentive programs, such as rebate programs to pay for energy- efficiency retrofits not already covered by existing incentives; and  improvements to buildings and facilities, such as the installation of  geothermal systems. Energy-efficiency improvements have varied and  include projects such as occupancy sensor lighting, solar-powered trash  compactors, and solar-powered parking meters.
In September 2010, we noted that some EECBG recipients were  experiencing challenges in reporting job-related outcome metrics. For  example, in one locality, officials said that they planned to estimate the  number of jobs created because they did not have hourly contracts. In  another locality, officials were not aware of how to calculate FTEs per  Office of Management and Budget guidance. Recipients also expressed  frustration with the process for reporting metrics and the volume of  contact from various DOE offices about reporting requirements or  changes in reporting requirements. DOE is beginning to take steps to  consolidate the amount of guidance and requirements being provided to  recipients. We expect to issue a report in April 2011 with greater detail  about the implementation of the EECBG program, including information  on the challenges that EECBG recipients have reported encountering in  using grant funds and the quality of jobs data reported by recipients.
section_title: Environmental Cleanup Projects
paragraphs: The Recovery Act provided about $6 billion for DOE to expand and  accelerate its efforts to clean up numerous contaminated sites across the  country, where decades of nuclear weapons research, development, and  production left a legacy of dangerously radioactive, chemical, and other  hazardous wastes. This funding substantially boosted the Office of  Environmental Management’s annual appropriation for cleanup, which has  generally been between $6 billion and $7 billion.
In all, DOE selected 93 projects at 17 DOE sites in 12 states for Recovery  Act funding. DOE designated the bulk of this new funding—almost 80  percent—to speed cleanup activities at four large sites: the Hanford Site in  Washington State, Idaho National Laboratory, the Oak Ridge Reservation  in Tennessee, and the Savannah River Site in South Carolina. DOE  generally chose to use Recovery Act funds for cleanup projects that could  be started and finished quickly. The majority of the projects selected also  had existing contracts, which allowed the department to update and  validate new cost and schedule targets within a short time frame. DOE  generally funded four types of projects: (1) decontaminating or  demolishing facilities, (2) removing contamination from soil and  groundwater, (3) packaging and disposing of transuranic and other  wastes, and (4) supporting the maintenance and treatment of liquid tank  wastes.
As of March 2011, DOE had obligated virtually all of the $6 billion in  Recovery Act funding for cleanup activities and had spent nearly $4  billion, or about two-thirds of the funds. Spending rates varied across  sites, from 50 percent of obligated funds spent at the Oak Ridge  Reservation to 96 percent at the Mound Site in Ohio, a former production  site for explosives and other weapons components. DOE officials said that  they plan to have 95 percent of the funds spent by the end of fiscal year  2011. As of March 10, 2011, 19 projects were complete. Officials told us  that some work may take until December 2012 to complete although they  are taking steps to try to move up the completion date.
Recovery Act-funded employment for DOE’s cleanup activities peaked in  the last quarter of fiscal year 2010. DOE reported for the last quarter of  fiscal year 2010 an estimated total of 10,977 FTEs funded by the Recovery  Act. The jobs were concentrated at the four sites that received the bulk  of the Recovery Act funding. By the following quarter, DOE reported 9,362  FTEs as being funded by the Recovery Act. Furthermore, DOE officials  said that workforce reductions have been approved and announced for  three sites. The Hanford Site will lose 1,600 positions, all funded by the  Recovery Act. The Idaho National Laboratory will lose 600 positions, of  which 400 were funded by the Recovery Act, and the Savannah River Site  will lose 1,400 positions, of which 800 were funded by the Recovery Act.  As a consequence of these reductions, it is likely that the reported count of  FTEs will continue to decline.
In July 2010, we reported that DOE has faced familiar challenges in both  managing Recovery Act projects and measuring how Recovery Act funding  has affected cleanup and other goals. At that time, we reported that one- third of Recovery Act funded projects did not meet cost and schedule  targets. DOE officials cited some of the same reasons that have plagued  DOE in the past: technical, regulatory, safety, and contracting issues. DOE  has taken steps aimed at strengthening project management and oversight  for Recovery Act projects, such as increasing project reporting  requirements and placing tighter controls on when funds are disbursed to  sites. By October 2010, both cost and schedule performance had  significantly improved.
Measuring the impact of Recovery Act funding has been a challenge for  DOE. It has had particular difficulty providing an accurate assessment of  the act’s impact on jobs, environmental risk reduction, and the life-cycle  costs of its cleanup program. First, it has used different methodologies to  assess and report jobs created, which provided very different and  potentially misleading pictures. Second, DOE had not yet developed a  clear means of measuring how cleanup work funded by the act would  affect environmental risk or reduce its footprint—the land and facilities  requiring DOE cleanup. Third, it is unclear to what extent Recovery Act  funding will reduce the costs of cleaning up the DOE complex over the  long term. DOE’s estimate of $4 billion in life-cycle cost savings resulting  from Recovery Act funding was not calculated in accordance with federal  guidance. Our analysis indicated that those savings could be 80 percent  less than DOE estimated. Without clear and consistent measures, it will be  difficult to say whether or how Recovery Act funding has affected DOE’s  cleanup goals.
In our July 2010 report, we recommended four actions for DOE to improve  project management and reporting: (1) determine whether project  management and oversight steps adopted for Recovery Act projects would  benefit other cleanup projects, (2) clarify the methodology used to  calculate jobs created, (3) develop clear and quantifiable measures for  determining the impact of Recovery Act funding, and (4) ensure that cost  savings are calculated according to federal guidance. DOE agreed with the  recommendations and is taking steps to implement them. For example,  some of the steps DOE implemented to improve management of Recovery  Act projects are being implemented for work funded through annual  appropriations. DOE also issued clarifying guidance to the sites on the  methodology for reporting footprint reduction, although the extent to  which this measures actual environmental risk reduction, if at all, is not  clear. Finally, according to DOE officials, the department is preparing a  report describing the methodologies used for cost savings achieved to date  through the Recovery Act and plans to submit a report to the Office of  Management and Budget and Congress by September 30, 2011.
section_title: Loan Guarantee Program for Innovative Technologies
paragraphs: Title XVII of the Energy Policy Act of 2005 established DOE’s Loan  Guarantee Program (LGP) to guarantee loans for projects that (1) use new  or significantly improved technologies as compared with commercial  technologies already in use in the United States and (2) avoid, reduce, or  sequester emissions of air pollutants or man-made greenhouse gases. In  February 2009, the Recovery Act amended the LGP, authorizing DOE to  also guarantee loans for some projects using commercial technologies.  Projects supported by the Recovery Act must employ renewable energy  systems, electric power transmission systems, or leading-edge biofuels  that meet certain criteria; begin construction by the end of fiscal year 2011;  and pay wages at or above market rates. The Recovery Act originally  provided nearly $6 billion to cover the credit subsidy costs for projects  meeting those criteria.
During the 2 years since providing Recovery Act funds to cover LGP credit  subsidy costs, Congress twice transferred funds from the LGP to other  programs, after we expressed concerns about DOE’s administration of the  program. In April and May 2009, as part of our mandate to annually review  DOE’s implementation of the LGP, we provided information on the  program’s status to House and Senate appropriators. Among other things,  we noted that DOE had received loan guarantee applications for at least 68  projects but had committed to guarantee a loan for only 1, even though a  number of the applications—including 6 that DOE deemed eligible for  Recovery Act funding—had been submitted in response to a solicitation  issued in 2006. In August 2009, Congress authorized the transfer of $2  billion of the nearly $6 billion to expand the “Cash for Clunkers”  program, leaving about $4 billion in Recovery Act funds to pay credit  subsidy costs for LGP projects. In July 2010, we reported that DOE  made an additional nine conditional commitments to issue loan guarantees  but had issued only one loan guarantee.
We also reported that DOE lacked appropriate tools for assessing the progress of the program an treated applicants inconsistently in the application review process,  favoring some applicants and disadvantaging others. In July 2010, our  report’s findings were cited in the Senate report for the fiscal year 2011  Energy and Water Development appropriation, which voiced continued  concerns about DOE’s ad hoc implementation of the program and slow  progress in making loan guarantees. Shortly thereafter, Congress  transferred an additional $1.5 billion in funds from the LGP to the  Education Jobs Fund.
GAO-10-627.
According to our analysis of DOE data, as of March 10, 2011, DOE’s LGP  had obligated only about 17 percent of the remaining $2.5 billion in  Recovery Act funds. DOE stands to lose about $2 billion of the Recovery  Act funds for LGP projects if it does not make final loan guarantees using  those funds soon; the Recovery Act requires that borrowers begin  construction of their projects by September 30, 2011.
One of the purposes of the Recovery Act is to create jobs, and DOE  established job creation as an agency goal when making loan guarantees.  However, it is not clear to what extent the LGP projects for which DOE  has used Recovery Act funds are supporting that goal. In our July 2010  report, we stated that DOE had not established measures for evaluating  agency progress in achieving that goal, as called for by principles of good  governance. For the fourth quarter of 2010, recipients reported funding  784 FTEs from LGP projects. DOE officials estimate that 8 projects were  under way by the end of 2010. As of March 2, 2011, according to agency  estimates derived from loan guarantee applications, 10,531 construction  and operations positions are expected to result from the 10 projects that  have received loan guarantees, and an additional 2,331 positions are  expected to result from the 4 additional projects to which DOE has  conditionally committed.
section_title: State Energy Program
paragraphs: The $3.1 billion that the Recovery Act appropriated to the State Energy  Program (SEP) was made available to 56 recipients, including all 50 states,  the District of Columbia, and U.S. territories. The SEP provides funds  through formula grants to achieve national energy goals such as increasing  energy efficiency and decreasing energy costs. Created in 1996, the SEP  has typically received less than $50 million per year. Thus, the Recovery  Act provided a substantial increase in funding for this program. As of  January 31, 2011, recipients reported obligating over $2.7 billion and  spending over $900 million of their available funds.
As we reported in September 2010, recipients obligated their SEP funds  for such items as buildings, including school and government  improvements and revolving loan programs; electric power and renewable  energy, including wind turbine deployment; and industry, including energy  audits and water conservation. We also noted that a lack of guidance and  other obstacles, such as the lack of state energy management staff,  hampered states from obligating and spending funds. As of September  2010, DOE was beginning to monitor recipient spending, and recipient  monitoring practices varied in scope and depth. DOE and recipients  reported challenges in meeting Recovery Act outcome reporting  requirements for a variety of reasons, including the need to coordinate  among numerous state agencies to fulfill reporting requirements and  difficulties with reporting information into DOE’s primary reporting  system.
section_title: Weatherization Assistance Program
paragraphs: The Recovery Act provided $5 billion for the Weatherization Assistance  Program, which DOE is distributing to each of the states, the District of  Columbia, five territories, and two Indian tribes. This program,  administered by DOE’s Office of Energy Efficiency and Renewable Energy,  is intended to enable low-income families to reduce their utility bills by  making long-term energy-efficiency improvements to their homes by, for  example, installing insulation, sealing leaks, and modernizing heating and  air conditioning equipment. The $5 billion in funding provided by the  Recovery Act represents a significant increase for a program that has  received about $225 million per year in recent years.
During 2009, DOE obligated about $4.73 billion of the $5 billion in  Recovery Act weatherization funding to recipients, while retaining the  remaining funds to cover the department’s expenses. Initially, DOE  provided each recipient with the first 10 percent of its allocated funds,  which could be used for start-up activities, such as hiring and training  staff, purchasing equipment, and performing energy audits of homes.  Before a recipient could receive the next 40 percent of its funds, DOE  required it to submit a plan for how it would use its Recovery Act  weatherization funds. By the end of 2009, DOE had approved the  weatherization plans of all 58 recipients and had provided all recipients  with half of their funds.
To release the remaining half of allocated funds, DOE requires that  recipients finish weatherizing 30 percent of the homes identified in their  weatherization plans. In addition, recipients must fulfill the monitoring  and inspection protocols established in their weatherization plans;  monitor each local agency at least once each year to determine  compliance with administrative, fiscal, and state policies and guidelines;  ensure that local quality controls are in place; inspect at least 5 percent of  completed units during the course of the year; and submit timely and  accurate progress reports and monitoring reviews to DOE so that the  department can confirm acceptable performance. As of February 2011,  DOE reported that it had released the remaining half of funds to the 44  recipients that had met these requirements. According to DOE, the  department is providing targeted communications and training to assist  the remaining 14 recipients meet the requirements to gain access to their  remaining funds. DOE has indicated that recipients are to spend their  Recovery Act weatherization funds by March 31, 2012.
DOE officials told us that as of December 2010, about 330,304 homes had  been weatherized nationwide, or about 56 percent of the approximately  590,000 homes currently planned for weatherization. All of the recipients  submitted their quarterly data to FederalReporting.gov and, for the fourth  quarter of 2010, reported approximately 15,391 FTEs had been funded by  the Recovery Act under this program.
In May 2010, we made eight recommendations for DOE to clarify its  weatherization guidance and production targets. DOE generally  concurred with the recommendations and has addressed them to varying  extents. We will continue to monitor DOE’s progress in implementing  these recommendations.
We have recently begun additional work on the Weatherization Assistance  Program looking at the use of Recovery Act funds and the extent to which  program recipients are meeting Recovery Act and program goals, such as  job creation and energy and cost savings, as well as the status of DOE’s  response to our May 2010 recommendations. We expect to complete this  work in fiscal year 2012.
Chairman Stearns, Ranking Member DeGette, and Members of the  Subcommittee, this completes my prepared statement. As noted, we are  continuing to monitor DOE’s use of Recovery Act funds and  implementation of programs. I would be happy to respond to any  questions you may have at this time.
section_title: Contact and Acknowledgments
paragraphs: For further information regarding this testimony, please contact me at  (202) 512-3841. Catherine Bombico, Swati Deo, Janet Frisch, Maria Gaona,  Kim Gianopoulos, Jonathan Kucskar, David Marroni, Kristen Massey,  Cynthia Norris, Emily Owens, John Scott, Benjamin Shouse, Karla  Springer, Kiki Theodoropoulos, Lisa Van Arsdale, Ginny Vanderlinde,  Jeremy Williams, and Arvin Wu made key contributions to this testimony.
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