Energy Star Program: Covert Testing Shows the Energy Star Program Certification Process Is Vulnerable to Fraud and Abuse
Published: 2010-03-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: American consumers, businesses, and federal agencies rely on the Energy Star program to identify products that decrease greenhouse emissions and lower energy costs. In addition, the federal government and various states offer tax credits and other incentives to encourage the use of energy-efficient products including Energy Star products. Specifically, approximately $300 million from the American Recovery and Reinvestment Act will be used for state rebate programs on energy-efficient products. The Energy Star program, which began in 1992, is overseen jointly by the U.S. Department of Energy (DOE) and the U.S. Environmental Protection Agency (EPA). Given the millions of dollars allocated to encourage use of Energy Star products and concerns that the Energy Star program is vulnerable to fraud and abuse, GAO was asked to conduct proactive testing to (1) obtain Energy Star partnership status for bogus companies and (2) submit fictitious products for Energy Star certification. To perform this investigation, GAO used four bogus manufacturing firms and fictitious individuals to apply for Energy Star partnership and submitted 20 fictitious products with fake energy-savings claims for Energy Star certification. GAO also reviewed program documents and interviewed agency officials and officials from agency Inspector General (IG) offices.
section_title: What GAO Found
paragraphs: GAO's investigation shows that Energy Star is for the most part a self-certification program vulnerable to fraud and abuse. GAO obtained Energy Star certifications for 15 bogus products, including a gas-powered alarm clock. Two bogus products were rejected by the program and 3 did not receive a response. In addition, two of the bogus Energy Star firms developed by GAO received requests from real companies to purchase products because the bogus firms were listed as Energy Star partners. This clearly shows how heavily American consumers rely on the Energy Star brand. The program is promoted through tax credits and appliance rebates, and federal agencies are required to purchase certain Energy Star certified products. In addition, companies use the Energy Star certification to market their products and consumers buy products relying on the certification by the government of reduced energy consumption and costs. For example, in 2008 Energy Star reported saving consumers $19 billion dollars on utility costs. The table below details several fictitious GAO products certified by Energy Star. GAO found that for our bogus products, certification controls were ineffective primarily because Energy Star does not verify energy-savings data reported by manufacturers. Energy Star required only 4 of the 20 products GAO submitted for certification to be verified by an independent third party. For 2 of these cases GAO found that controls were effective because the program required an independent verification by a specific firm chosen by Energy Star. However, in another case because Energy Star failed to verify information provided, GAO was able to circumvent this control by certifying that a product met a specific safety standard for ozone emission. At briefings on GAO's investigation, DOE and EPA officials agreed that the program is currently based on self-certifications by manufacturers. However, officials stated there are after-market tests and self-policing that ensure standards are maintained. GAO did not test or evaluate controls related to products that were already certified and available to the public. In addition, prior DOE IG, EPA IG, and GAO reports have found that current Energy Star controls do not ensure products meet efficiency guidelines.

section_title: Letter
paragraphs: American consumers, businesses, and federal agencies rely on the Energy  Star program to identify products that decrease greenhouse emissions and  lower their energy costs. Energy Star, which is jointly managed by the U.S.  Environmental Protection Agency (EPA) and U.S. Department of Energy  (DOE), is a voluntary labeling program designed to promote energy- efficient products. It touts itself as a trustworthy means for letting  consumers know which products deliver the same or better performance  as comparable models while using less energy and saving money. The  Energy Star program reported in 2008 that it helped Americans prevent 43  million metric tons of greenhouse gas emissions and save more than $19  billion in utility costs. Consumer interest in making households and  buildings more energy efficient has become heightened given the increase  in energy prices and expansion of federal tax credit and state rebate  programs.
Energy Star was created in response to the Clean Air Act amendments of  1990 and the Energy Policy Act of 1992. In general, the program is  designed to identify models for 60 categories of household and  commercial products that are the most energy efficient (efficiency of up to  10 to 25 percent over the minimum federal standards). Energy Star  reported that in 2008 there were more than 40,000 qualified product  models that are produced by more than 2,400 manufacturers. These  products claim to offer consumers savings of as much as 75 percent  relative to standard models.
This report responds to your request that we proactively test the  effectiveness of the current Energy Star partnership and product  certification process to determine whether manufacturers could obtain  Energy Star partnership and product certification for products not meeting  Energy Star efficiency requirements. To perform this investigation, we  developed four bogus manufacturing companies, meaning that we  conducted our work with fictitious names and contact information that  could not be traced back to GAO. We also established a Web site related to  each bogus company and rented domestic commercial mailboxes to use as  the company addresses. We designed these proactive tests using publicly  available information to assess the fraud-prevention controls in place for  partnership and product certification. We submitted Energy Star  Partnership Agreements for each company and submitted fictitious  products with energy-efficiency specifications to the Energy Star program  for product certification. We developed these fictitious products to ensure  that they met Energy Star requirements and to ensure that most qualified  under the Department of Energy’s Federal Energy Management Program  (FEMP). Federal buyers are required by the Energy Policy Act of 2005 to  purchase products that are Energy Star-qualified or FEMP-designated for  energy efficiency.
We submitted products under selected categories such as appliances,  building products, computers and electronics, heating and cooling  products, and lighting. The products varied in levels of sophistication and  energy efficiency to test the level of scrutiny throughout the Energy Star  product certification process. Our investigation was designed to test  controls over the process for becoming an Energy Star partner and  controls over the product certification process. Our work was not  designed to test other controls potentially in place over monitoring of  Energy Star label use on retail shelves or industry self-enforcement efforts  including energy-efficiency tests performed on products selected from  actual retail locations.
We conducted the work for this investigation from June 2009 through  March 2010 in accordance with the standards prescribed by the Council of  Inspectors General on Integrity and Efficiency (CIGIE). Additional details  on our scope and methodology are included in appendix I.
subsections: section_title: Background
paragraphs: The Energy Star program was introduced by the U.S. Environmental  Protection Agency (EPA) in 1992, under the authority of the Clean Air  Act, as a voluntary labeling program designed to promote—and a llow  consumers to identify—energy-efficient computers and monitors. Through  1995, EPA expanded the label to additional office equipment and  residential heating, ventilation, and cooling (HVAC) equipment, and  partnered with the U.S. Department of Energy (DOE) in 1996. The Energy  Star label is now found on over 60 product categories, including major  appliances, office equipment, lighting, home electronics, new homes, and  commercial and industrial buildings, with a reported energy-efficiency  savings of up to 10 to 25 percent over the minimum federal standards. As  of 2009, over 40,000 individual product models were Energy Star-qualified  by over 2,400 manufacturers.
Manufacturers who wish to use the Energy Star logo must enter into a  Partnership Agreement with either the EPA or DOE, under which the  manufacturer agrees to comply with Energy Star eligibility criteria and  identity guidelines. Manufacturers apply to be a partner of the Energy  Star program by identifying which product category or categories under  which the company seeks to qualify products, completing a partne rship  agreement packet, certifying their agreement to the general program  requirements, and submitting the packet to EPA or DOE contractors either  online or via mail. The Energy Star program provides approved partners  with usernames and passwords so that they may access logos and other  marketing materials directly from the Energy Star Web site. The use of the  logo on products and promotional materials must be consistent with the  Energy Star identity guidelines. Figure 1 below shows the Energy Star  partnership and product certification logos.
Manufacturers who make products that meet Energy Star specifications  must then report each product’s specifications by submitting Qualified  Product Information (QPI), using either the QPI forms available on the  Energy Star site, or for certain products (home electronics and office  equipment) by using the Online Product Submittal (OPS) Tool. Certain  product categories require third-party independent testing results to be  submitted in addition to the QPI forms. The criteria for Energy Star  product qualification vary depending on the specific product category and  whether the product is for residential or commercial use. Generally,  qualified Energy Star products are 10 to 25 percent more efficient than  required by the federal minimum standard while providing top  performance and innovative features. For example, the Compact  Fluorescent Light (CFL) bulb requires manufacturers to provide third- party test results from an accredited independent laboratory. In contrast, a  refrigerator requires manufacturers to submit a QPI form stating minimal  energy efficiency specifications without any third-party test results.  Energy Star requires manufacturers to certify in their application that the  product meets energy-efficiency specifications for the product type.  Energy Star, according to officials, largely relies on manufacturers or  others to identify and report products claiming to meet Energy Star  criteria that are violating the rules. In that regard, Energy Star officials  stated that some companies test products of competitors.
The federal government has placed significant emphasis and allocated tax  dollars to encourage the use of energy-efficient products. Specifically,  federal agencies must procure Energy Star-qualified or DOE Federal  Energy Management Program (FEMP)-designated products, unless the  head of the agency determines in writing that a statutory exemption  applies. The General Services Administration (GSA) and Defense Logistics  Agency (DLA) are also required, except in narrow circumstances, to  supply only Energy Star or FEMP-designated products for all product  categories covered by either program. In addition, the American Recovery  and Reinvestment Act (ARRA) of 2009 increased and extended the  energy tax credits for homeowners who make energy-efficient  improvements to their existing homes. The new law extended the tax  credits in place for 2009 to 2010, and increased the tax credit rate to 30  percent of the cost of all qualifying products placed in service in 2 2010, up to a maximum aggregate credit limit of $1,500. removed the cap on the tax credit, currently in place through 2016, of 30  al  percent of the cost of materials and installation for installing geotherm te  heat pumps and other renewable technologies. DOE also created a sta RA,  rebate grant program, with nearly $300 million in funding from the AR for the purchase of new Energy Star-qualified appliances. Under the  program, eligible consumers can receive rebates to purchase new energy- efficient appliances and are encouraged to replace used, less efficient  appliances. Each state and U.S. territory was allowed to design its own  rebate program and all 56 plans have been app roved by DOE.
While not part of the Energy Star program, manufacturers may also  receive federal tax credits for producing energy-efficient clothes washers,  dishwashers, or refrigerators. Efficiency requirements for each particular  product are statutorily defined and not reliant on Energy Star standards.
26 U.S.C. §§ 25C – 25D.
However, products meeting Energy Star efficiency requirements frequently  meet federal tax credit requirements. The Energy Improvement and  Extension Act of 2008 modified and extended the manufacturer’s tax  credit to eligible models produced in the United States during calendar  years 2008, 2009, and 2010. The amount of the credit per unit produced  varies according to the energy efficiency of the appliance, with higher  energy-efficient models being eligible for larger credits. The aggregate  amount of credit allowed with respect to a manufacturer for any taxable  year shall not exceed $75 million reduced by the amount of the credit  allowed to the taxpayer (or any predecessor) for all prior taxable years  beginning January 2008. Exempt from the $75 million limit are the highest  energy-efficient categories of refrigerators and clothes washers eligible for  the highest per unit tax credits. Based on the Joint Committee on Taxation  projections, billions of dollars in energy-efficiency tax credits will be  claimed by individuals and corporations between 2009 and 2013.
Numerous investigations and reports have recently identified Energy Star  program successes and weaknesses. As noted by the Consortium for  Energy Efficiency, the EPA Office of the Inspector General (OIG),  Consumer Reports, DOE OIG, and a prior GAO report there is  currently no requirement for independent third-party verification of energy  performance reporting for most product categories prior to gaining access  to Energy Star logos and promotional materials. Specifically, in 2007 the  EPA OIG stated that there was no evidence that the self-certification  process was effective and noted that the Energy Star program lacked in  both quality assurance and sufficient oversight. Moreover, the EPA OIG  identified that there was no methodology in place to verify manufacturers’  claims of energy efficiency and that products may be labeled with the  Energy Star logo and sold prior to submitting certification results to the  agency. In addition, an October 2008 issue of Consumer Reports detailed  further problems, including lax qualifying standards, federal testing  procedures that were outpaced by current technology, and reliance on  industry self-policing—manufacturers testing competitors’ appliances and  reporting misconduct—without evidence of the effectiveness of that  approach. The GAO report mentioned above found that products may  qualify for Energy Star status based on criteria other than the estimated  total energy consumption. In addition, Consumer Reports and DOE OIG  officials found that manufacturers may use computer controls to  manipulate energy consumption testing results, and for some categories  Energy Star no longer highlighted only the most energy-efficient products  in those categories.
A recent settlement between DOE and an Energy Star partner has  highlighted the potential for noncompliance of products in the program. In  January 2010, DOE and Haier America entered into a Consent Decree over  an investigation into whether Haier violated DOE’s energy-efficiency  standards and Energy Star program requirements for certain freezers.  DOE’s investigation led Haier to determine that a parts defect might have  caused four standalone upright freezer models to consume more energy  than the manufacturer had reported. Additionally, following complaints  raised by competitors, LG Electronics and DOE entered into an agreement  in 2008 to clarify appropriate energy-efficiency testing methods for certain  LG refrigerators. The agreement has led to litigation in federal district  court over whether both parties are complying with its terms regarding  testing methods.
section_title: Undercover Tests Result in 15 Products Gaining Bogus Energy Star Certification
paragraphs: Our investigation found that companies can easily submit fictitious energy- efficiency claims in order to obtain Energy Star qualification for a broad  range of consumer products. Based on our investigative results, we found  that the current process for becoming an Energy Star partner and  certifying specific products as Energy Star compliant provides little  assurance that products with the Energy Star label are some of the most  efficient on the market. Control weaknesses associated with the general  lack of upfront validation of manufacturer self reported data allowed all of  our bogus firms to become Energy Star partners, and allowed most of our  products to be certified as Energy Star compliant.
Using four bogus manufacturing companies and fictitious identities, we  obtained Energy Star partnership, facilitating the submission of bogus  products for qualification. We conducted tests of the program by  submitting qualified product information (QPI) forms and efficiency  information via the Online Product Submittal (OPS) tool for 20 bogus  products. Of the products submitted, 15 were approved, 2 were denied  Energy Star qualification, and 3 products were voluntarily removed by  GAO because we had not received an official qualification determination  by the time our investigation was completed. Our proactive testing  revealed that the Energy Star program is primarily a self-certification  program relying on corporate honesty and industry self-policing to protect  the integrity of the Energy Star label. Table 1 below summarizes the  certification details of bogus products submitted for Energy Star  qualification during the course of our investigation.
subsections: section_title: Energy Star Partnership Agreements
paragraphs: We found that companies can easily become an Energy Star  manufacturing partner, and subsequently have unlimited access to Energy  Star logos and other promotional resources. Using fictitious information,  we were able to attain Energy Star partnership for four bogus  manufacturing firms, using only Web sites, commercial mailboxes, and cell  phones to serve as a backstop corporate presence. To become an Energy  Star partner, we submitted an Energy Star partnership commitment form  for each bogus company listing basic contact information, a fictitious  point of contact, and pertinent manufacturing categories. All four bogus  companies were granted Energy Star partnership by EPA and/or DOE  within 2 weeks. The bogus companies were granted access to digital logo  templates and other marketing materials, without first having any  qualifying products. For two of the companies, Energy Star administrators  did not review the Web site prior to granting Energy Star manufacturing  partner status. For all cases, Energy Star did not call our bogus firms or  visit our firm’s addresses. Further, our bogus manufacturing companies  received product and service solicitations stemming from partner listing  on the Energy Star Web site. For example, one company received requests  for large recurring orders of an external power supply adapter, based on  the company being listed on the Energy Star Web site. These solicitations  are an example of the value placed on being an Energy Star partner, and  emphasize why rigorous screening is necessary.
section_title: Energy Star Product Certifications
paragraphs: We successfully obtained Energy Star qualification for 15 bogus products,  including a gas-powered alarm clock and a room cleaner represented by a  photograph of a feather duster adhered to a space heater on our  manufacturer’s Web site. Twenty products were created for proactive  testing. Each product submitted met Energy Star guidelines and was  selected based on FEMP designation, tax credit eligibility, and the  presence of potential preventative controls. The EPA was the overseeing  entity for 16 of the products submitted for Energy Star qualification, and  the DOE was the overseeing agency for the other 4 products. Of the  products submitted to the EPA, 12 were approved, 1 was rejected, and 3  never received a final determination from Energy Star. DOE qualified 3  bogus appliances and rejected a (CFL) bulb due to failure to provide third- party test results from an accredited independent laboratory. Figure 2  below is a photograph displayed on one of our bogus company’s Web site  depicting the air room cleaner certified by the energy star program.
We found that the level and depth of administrative oversight varied by  product category. Qualification response time, scrutiny of product  information, and mode of submission of qualifying data varied across  products. The product qualification response time from Energy Star varied  from minutes to months. For example, a computer monitor submitted for  qualification was approved within 30 minutes of submission, whereas the  bogus battery charging system and end-use product did not receive a  response from officials by the conclusion of our investigative work, a  period of over 3 months. Several other products, including a refrigerator,  dishwasher, and clothes washer received Energy Star certification within 1  day of submission. We also attained qualification for products with  exaggerated efficiency claims submitted via the QPI form with little  scrutiny. For example, Energy Star officials approved a dehumidifier,  geothermal heat pump, and room air cleaner that were each at least 20  percent of more efficient than all other similar products listed on the  Energy Star Web site. We received a request for confirmation that the  reported Energy Factor (EF) for our dehumidifier was accurate because it  seemed excessive. However, after confirming the EF factor via e-mail  without providing additional support, the dehumidifier was qualified. In  addition, we were not contacted by Energy Star with questions regarding  efficiency performance of the geothermal heat pump and the room air  cleaner.
Our fictitious products were submitted two ways, via the OPS tool and e- mailed QPI forms to Energy Star administrative contractors. We found that  the Energy Star OPS tool expedited the certification of bogus products.  EPA officials confirmed that the OPS tool is an automated system  designed to reduce administrative costs and a specific review only occurs  if outlier data triggers programmed flags in the system. For example, we  submitted and qualified a gas-powered alarm clock under the newly  formed audio-video product category via the OPS tool. Although the  efficiency information met Energy Star criteria, the product description  section on the form clearly indicated that the clock radio was gas- powered, the dimensions were similar to those of a small portable  generator, and the product model name was “Black-Gold”. EPA officials  confirmed that because the energy-efficiency information was plausible, it  was likely that no one read the product description information. Figure 3  below shows the information we submitted via the OPS tool.
Our investigation determined that when officials required independent  third-party testing of products prior to certification, that control  sometimes prevented our fictitious products from becoming certified.  Specifically, for our ventilation fan, when submitting our product for  certification, we indicated that we had tested our product with the specific  third-party testing company designated by Energy Star. However, when  officials reviewing the application attempted to validate that information  with the third party, they found that the Home Ventilating Institute (HVI)  had not tested our product. This control resulted in the fan being rejected.  A similar control prevented our bogus firm from having its CFL bulb  certified. However, our investigation found that Energy Star officials did  not always verify testing results with third parties. Specifically, on the  product application for our room air cleaner, we stated that we met the  specific safety standard for ozone emission set forth by Underwriters  Laboratories, an actual independent third-party laboratory designated by  Energy Star. However, while Energy Star officials asked if we met this  standard, they never verified our certification with the Underwriters  Laboratories or requested the specific testing file as required on the QPI  form.
section_title: Undercover Tests Expose Weaknesses in Fraud Prevention Controls
paragraphs: We found that for most of the bogus products we submitted, the Energy  Star program preventive controls were ineffective, rendering the program  vulnerable to fraud and abuse. Our work was not designed to  systematically test all controls within the Energy Star program, but  approval of 15 fictitious products submitted with bogus energy-efficiency  data shows weaknesses in the programs preventative controls. A lack of  controls over the access to Energy Star product certification labels  exposes the program to unauthorized use. Ineffective and nonexistent  controls over validation of claimed energy efficiencies could also allow  firms to fraudulently overstate product efficiencies. In addition, the  overreliance on manufacturer integrity, industry self-policing, and after- market product testing ignores the potential for products to be put on the  market and sold to consumers before fraudulent activity is identified.  Despite the lack of up-front controls, there have been a few recent  examples of successful identifications of fraudulent or inaccurate energy- efficiency claims by manufacturer’s competitors that resulted in action  from DOE.
subsections: section_title: Controls over Access to Energy Star Labels
paragraphs: Preventing unauthorized access to promotional material for the Energy  Star program is the first step in maintaining consumer confidence in the  label. However, our undercover tests showed that ineffective controls  could allow firms to utilize Energy Star logo without ever having a product  certified. Specifically, all four bogus manufacturing companies received  user account information soon after achieving partnership. Account  information is needed to access My Energy Star Account (MESA), a secure  section of the Energy Star site containing all of the program labels,  including product certification labels, for download and application by  approved partners. Program protocols state that account information  granting access to MESA should be restricted until a partner has  successfully qualified a product designated in the Partnership Agreement  package by submitting energy use data. However, we gained access to  MESA prior to having any products approved by Energy Star. Additionally,  we found that some Energy Star labels were publicly accessible. For  example, the Energy Star linking label was found unrestricted on the QPI  forms for three appliance products—the clothes washer, dishwasher, and  refrigerator models—we submitted. Consequently, label access, a  cornerstone in protecting the integrity of the Energy Star label, was found  susceptible to fraud and misuse.
section_title: Product Certification Controls
paragraphs: The primary purpose of the Energy Star program is to help consumers  identify the most energy-efficient products on the shelf. Therefore,  controls that verify product energy-efficiency claims are key to the  integrity of the overall program. However, we found that controls over  specific product certifications were not effective in preventing firms from  submitting bogus energy-efficiency data. We found that Energy Star is for  the most part an online self-certification program. Only 4 of 20 products  we tested required independent verification of energy use and other  industry standards by a third party. This control was effective in two cases  because Energy Star officials verified our test results with the third party  instead of trusting our self-certification. For example, the ventilating fan  product category required registry listing by the Home Ventilating Institute  (HVI)—the industry-recognized independent laboratory for residential  ventilating products sold in North America, and the CFL product category  required certification by a designated laboratory accredited under the  Department of Commerce National Institute of Standards and Technology  (NIST) National Voluntary Laboratory Accreditation Program (NVLAP).  The result was that both the fictitious ventilating fan and CFL bulb were  effectively rejected due to follow-up on designated third-party verification  requirements. However, for a third product, a room air cleaner, Energy  Star officials failed to verify that our product met specific industry  standards. We left the section requiring a UL file number blank on the QPI  form, and when questioned by Energy Star officials we confirmed by e- mail that we met the standard, which was accepted as sufficient evidence  and the product was approved. We did not receive a response from Energy  Star by the end of our investigation for the fourth product, a decorative  light string, and were unable to make any determination as to the  effectiveness of the third-party verification related to this specific product.
section_title: Recent Examples of Self- Policing
paragraphs: A recent case of inaccurate energy-efficiency claims being identified by  competitors shows that there is potential for noncompliance within the  program. DOE recently entered into a Consent Decree with Haier America  on January 7, 2010, resolving an investigation into Haier’s adherence to  DOE’s energy-efficiency standards and Energy Star program requirements  for four freezer models. Among other obligations outlined in the decree,  Haier agreed to conduct on-site unit repairs at no cost to consumers and  submit a report to DOE by July 9, 2010, summarizing efforts made toward  fulfilling its obligations. The Haier Decree was the first entered into by  DOE to enforce federal efficiency standards. LG Electronics and DOE  entered into an agreement in November 2008 to resolve matters arising  from DOE concerns regarding testing procedures for measuring energy  consumption levels for purposes of LG’s certification with the Energy Star  program. Subsequently, DOE ordered LG to remove the “Energy Star”  energy-efficiency label from some of its refrigerators by January 20, 2010.  DOE is currently involved in litigation in federal district court with LG  Electronics over a dispute as to the methods that may be employed in  testing for energy efficiency of some of its LG refrigerators.
section_title: Corrective Action Briefing
paragraphs: We briefed officials from DOE and EPA on the results of our investigation  and control weaknesses identified based on our testing. Officials  acknowledged that currently the Energy Star program relies on self- policing, manufacturer integrity, and after-market testing for high volume  products in cases where there is not a third-party testing requirement for  certification. Our ability to obtain product certifications with unverified  test results illustrates the need for, at a minimum, some level of third-party  testing for the program to be one of certification versus self-certification.  Officials stated that based on a new Memorandum of Understanding  between DOE and EPA, the program will be shifting toward a more  rigorous up-front screening process. Specifically, according to EPA’s  Enhanced Program Plan for Energy Star Products issued in December  2009, Energy Star is in the process of identifying and certifying testing labs  and industry trade organizations that will begin to independently test  products in most product categories prior to certification. It is important  to note that the Energy Star program has been in place certifying products  such as computer monitors since 1992. However, 18 years later we were  able to obtain product certification for a computer monitor since third- party verification of manufacturer efficiency data had not been  implemented by Energy Star. We support DOE and EPA plans to enhance  testing prior to certification.
Officials also stated during our briefings that the program has a variety of  other controls in place to prevent and detect fraudulent energy-efficiency  claims and label misuse after a product is put onto retail shelves and Web  sites. Specifically, officials cited recent cases of industry self-policing,  annual after-market product verification testing, and semiannual product  shelf inventory of label guideline compliance as substantive controls.  Because all of these controls occur after a product has been certified by  Energy Star and placed on the market, we were not able to test their  effectiveness and did not validate agency representations. However, in our  briefing, we reiterated the importance of preventing fraud before a  product is on the shelf and before consumers are placed at risk. In  addition, recent IG reports have found that there is not a robust process in  place at either DOE or EPA to proactively test Energy Star products on  the market. In our briefings, EPA officials acknowledged that after-market  product verification testing was not conducted for all product categories,  but rather was limited to “high-volume” products. EPA officials stated that  limited resources and other EPA priorities necessitated a select review of  products for compliance. Furthermore, while EPA officials discussed their  Web site follow-up as part of their efforts to ensure Energy Star labels are  used appropriately, the officials agreed that in at least one case—the room  air cleaner model depicted by a feather duster attached to a space heater  on the manufacturer’s Web site—the Web site review was either  ineffective or not performed.
Finally, during our briefings, EPA and DOE officials stated that they felt  there was some deterrent value to their citation of United States Code  Title 18, Section 1001—False Statement Act—listed on Energy Star QPI  forms and the OPS tools. Officials stated that the potential legal costs  associated with violations of the Act would deter manufacturers from  submitting false energy-efficiency claims. However, in our corrective  action briefing we noted the exact text on the certification documents  during our investigation read “I understand that intentionally submitting  false information to the U.S. government is a criminal violation of the  False Statements Act, Title 19 U.S.C. section 1001.” We pointed out that  the citation to Title 19, as noted, is inaccurate, is not found on Partnership  Agreement forms, and is only found on some QPI forms. We suggested that  the citation be updated to reflect the appropriate legal authority and  consistently applied to all partnership documentation. Officials  acknowledged the above issues associated with use of the incorrect  citation, and agreed that documentation be updated to reflect the proper  legal citation.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  date of this letter. We will then send copies of this report to interested  congressional committees, the Administrator of EPA, the Secretary of  DOE, the Chairman of FTC, and other interested parties. The report will  also be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-6722 or kutzg@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 major contributions to this  report are listed in appendix II.
section_title: Appendix I: Scope and Methodology
paragraphs: To perform the undercover test of attaining Energy Star partnership and  earning Energy Star qualification for fictitious products, we consulted  publicly available audit reports by federal agencies and consumer  advocacy publications to identify program vulnerabilities to inform our  methodology. Using publicly available information, we designed proactive  tests to assess the partnership and product certification controls in place  to prevent fraud and ensure the integrity of the Energy Star label. The  Energy Policy Act of 2005 mandates that federal buyers purchase products  that are Energy Star qualified or otherwise designated by the Federal  Energy Management Program (FEMP) as energy efficient. We used FEMP  guidelines and the General Services Administration (GSA) schedule of  federally designated products to select 20 Energy Star products for testing.  Our investigation was designed to test controls over the process for  becoming an Energy Star partner to certify products and acquire access to  Energy Star product certification labels. Our work was not designed to  test other potential controls in place for monitoring use of the Energy Star  label on retail products or verifying energy efficiency through shelf tests of  products selected from retail locations.
We used bogus front companies, using rented domestic personal  mailboxes for business listings, and fictitious identities when submitting  documentation to Energy Star, meaning that we conducted our work with  fictitious names and contact information that could not be traced back to  GAO. We developed Web sites for each of the four bogus manufacturing  firms to establish an internet presence. Undercover cell phones used as  company telephone numbers and out-of-service numbers used as fax  numbers were listed as contact information on each of the four bogus  manufacturer Web sites and Energy Star program documentation.
We submitted Energy Star Partnership Agreements for each of the four  bogus manufacturing firms and fictitious product energy-efficiency  specifications via e-mail to the Energy Star program to obtain partnership  and certify products. After attaining Energy Star partnership status, we  submitted a total of 20 products under selected categories, including  appliances, home envelope products, computers and electronics, heating  and cooling products, and lighting. The product specifications varied in  sophistication and energy efficiency to test the level of scrutiny at each  stage of the Energy Star product certification process. For example, at the  beginning of testing, products mirroring efficiency standards of listed  Energy Star products were submitted, whereas in the later stages of the  proactive testing phase of this investigation, we submitted an implausible  product for Energy Star certification. We briefed program officials with  the Department of Energy, Environmental Protection Agency (EPA) and  EPA OIG as well as attorneys with the Consumer Protection division of the  Federal Trade Commission (FTC) on the results of our work, and  incorporated their comments concerning controls in place to protect the  Energy Star label from fraud and abuse.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the individual named above, the following individuals made  major contributions to this report: Julia DiPonio, Robert Fletcher, John  Ledford, Barbara Lewis, Vicki McClure, Jonathan Meyer, James Murphy,  Andrew O’Connell, Timothy Persons, April Van Cleef, Abby Volk, and John  Wilbur.