Department of Energy: Budget Trends and Oversight
Published: 2012-04-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Understanding the impact of budget-related considerations has become particularly important as Congress and the administration seek to decrease the cost of government while improving its performance. In recent years, Congress has authorized large increases in funding for DOE. For example, the Recovery Act, which Congress enacted to, among other things, preserve and create jobs and promote economic recovery, provided DOE with more than $41.7 billion in areas such as energy efficiency, renewable energy, and environmental cleanup.
This testimony focuses on several key programs and related budget issues at DOE, including (1) the management of selected programs expanded or created by recent funding increases and (2) potential opportunities to achieve savings or enhance revenue. This testimony is based on prior GAO reports from February 2011 to March 2012, and updated with readily available data from DOE.
section_title: What GAO Found
paragraphs: Recent GAO work found that funding increases have expanded or created Department of Energy (DOE) programs with varying results. For example:
Advanced Research Projects Agency-Energy (ARPA-E) awards grants to projects that help develop high-risk energy technologies. Since fiscal year 2009 the program has received $855 million to fund energy projects that industry by itself was not likely to undertake. GAO found that ARPA-E uses several selection criteria in awarding funds, but its requirements for information on private funding could be improved.
The Loan Guarantee Program provides loan guarantees for innovative energy technologies. DOE has made about $15 billion in loan guarantees and is authorized to make up to $34 billion in additional loan guarantees. GAO found that the program does not have sufficient data to facilitate oversight, and its actual process for reviewing applications has differed from the established process.
The Weatherization Assistance Program helps low-income families reduce their energy bills by making long-term energy efficiency improvements to their homes. The American Recovery and Reinvestment Act of 2009 (Recovery Act) provided $5 billion to enhance the programs ability to make energy efficiency improvements to low-income family homes. GAO made recommendations to DOE to clarify the programs production targets (e.g., the number of homes weatherized) and guidance.
The Advanced Technology Vehicles Manufacturing Loan Program provides loans for projects to produce more fuel-efficient passenger vehicles and their components. DOE can make up to $25 billion in loans for fuel-efficient vehicles; at the time of GAOs review, DOE could not be assured that projects would be delivered as agreed.
GAO also reported that improvements at DOE may provide opportunities for increasing savings and enhancing revenue. For example:
Contractor support costs. DOEs management of contractors, who operate DOE sites and represent 90 percent of DOEs budget, has historically been decentralized, or fragmented. This adds to inefficiencies in support functions. Since 2007, DOE and contractors at some DOE sites have had efforts to streamline these functions. GAO recommended that DOE assess whether further opportunities could be taken to streamline such functions.
Diesel emissions. DOE, the Department of Transportation, and the Environmental Protection Agency receive federal funding to reduce diesel emissions from mobile sources14 programs in all, which also overlap on certain activities. DOE received $572 million for its 3 programs. GAO recommended that the three agencies establish a strategy for collaboration to reduce diesel emissions from mobile sources.
Excess uranium inventories. Uranium is used in fuel for nuclear power plants. GAO reported DOEs excess uranium inventories could be worth billions of dollars in additional revenue as fuel for commercial nuclear power plants.
section_title: What GAO Recommends
paragraphs: GAO is making no new recommendations in this testimony but continues to believe that implementing the recent recommendations made in the reports discussed should improve DOE program management, achieve savings, and enhance revenue. DOE has generally agreed with most of our recommendations, but disagreed on certain points related to the timing of implementing our recommendations.

section_title: Letter
paragraphs: I am pleased to be here today to discuss budget considerations at the  Department of Energy (DOE). These issues are particularly important as  Congress and the administration seek to decrease the cost of  government while improving its performance and accountability.
In recent years, Congress has authorized large increases in funding for  DOE. For example, the American Recovery and Reinvestment Act of  2009 (Recovery Act), which Congress enacted in response to the recent  economic crisis to, among other things, preserve and create jobs and  promote economic recovery, provided DOE with 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. Congress also passed the America Creating  Opportunities to Meaningfully Promote Excellence in Technology,  Education, and Science Act of 2007 (America COMPETES Act), with the  overall goal of increasing federal investment in scientific research. In this  context, the President’s fiscal year 2007 budget proposed doubling  funding for DOE’s Office of Science by fiscal year 2016, in part under the  goals of the America COMPETES Act. However, policy decisions made in  response to the current budget environment have since shifted the Office  of Science’s funding trajectory away from this target.
My testimony today draws on our recent work in which we made  recommendations intended to improve the management of DOE’s  programs. DOE has generally agreed with most of our recommendations,  but disagreed on certain points related to the timing of implementing our  recommendations. I will focus my remarks today on several key programs  and related budget issues at DOE concerning (1) the management of  selected programs that were expanded or created by recent funding  increases and (2) potential opportunities to achieve savings or enhance  revenue.
This statement is based largely on our prior work issued from February  2011 to March 2012, including our work on overlap and duplication of  federal programs that may result in inefficient use of taxpayer funds, and  updated with readily available data from DOE. Detailed information on our  scope and methodology for our prior work can be found in these reports.  (See our list of related GAO products at the end of this testimony.) We do  not provide budget summary data for all programs and initiatives  associated with the activities included in this testimony because many of  them (e.g., renewable energy initiatives, DOE contractor support costs,  diesel emissions, and excess uranium inventories) span a number of  DOE programs. We conducted the underlying performance audits in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform audits 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 statement  today.
subsections: section_title: Funding Increases Have Expanded or Created Programs with Varying Results
paragraphs: From fiscal years 2007 through 2012, DOE’s budget requests rose in  nominal terms from about $23.6 billion to $29.5 billion, and its  appropriations rose over that time from about $23.8 billion to $26.3 billion,  increasing to almost $33.9 billion in fiscal year 2009. DOE requested  approximately $27.2 billion for fiscal year 2013, as shown in table 1.
According to agency documents, in addition to aligning its fiscal year  2013 budget request with its strategic plan, DOE released a technology  review in September 2011 that provided a framework for preparing  budgets for some of its energy and science programs. Since then,  according to these documents, DOE has worked closely with the Office of  Management and Budget to develop, under its strategic plan, new priority  goals—including maximizing the benefits of investments in scientific  facilities—for fiscal year 2013.
subsections: section_title: DOE Programs Funded by the Recovery Act
paragraphs: Through the Recovery Act, Congress provided approximately $8 billion  for three existing DOE programs: (1) $0.4 billion in initial funding for the  Advanced Research Projects Agency-Energy to support advanced energy  research, (2) $2.5 billion for the Loan Guarantee Program to guarantee  loans for innovative energy projects, and (3) $5 billion for the  Weatherization Assistance Program to make energy efficiency  improvements to the homes of low-income families. Since these funding  increases were implemented, we reviewed the programs receiving the  funds and made several recommendations intended to improve their  management. In addition, under the Advanced Technology Vehicles  Manufacturing loan program, which received some Recovery Act funds,  DOE can provide up to $25 billion in loans for fuel-efficient vehicle  projects, but at the time of our review, it could not be assured that  projects would be delivered as agreed. We also recently reported that,  among the 92 renewable energy-related initiatives DOE implemented in  fiscal year 2010, the Recovery Act established 7 and increased funding  for 36.
section_title: Advanced Research Projects Agency-Energy
paragraphs: The America COMPETES Act of 2007 established the Advanced  Research Projects Agency-Energy (ARPA-E) within DOE to overcome the  long-term and high-risk technological barriers to the development of  energy technologies. However, ARPA-E did not receive an appropriation  until 2 years later, in 2009, in the Recovery Act. Including the Recovery  Act funds and subsequent appropriations, ARPA-E has received about  $855 million in appropriations. According to ARPA-E’s budget director, as  of March 1, 2012, the program has awarded no more than the $521.7  million that, as we reported in January 2012, was provided to universities,  public and private companies, and national laboratories to fund 181  projects that attempt to make transformational advances to a variety of  energy technologies, including high-energy batteries and renewable fuels.  This official told us that ARPA-E has not yet selected award recipients for  fiscal year 2012. Award winners must meet cost-share requirements,  through either in-kind contributions or outside nonfederal funding sources.  ARPA-E is required by statute to achieve its goals through energy  technology projects that, among other things, accelerate transformational  technological advances in areas that industry by itself is not likely to  undertake because of technical and financial uncertainty. At the same  time, the agency’s director is required to ensure, to the maximum extent  practicable, that its activities are coordinated with, and do not duplicate  the efforts of, programs and laboratories within DOE and other relevant  research agencies. Table 2 shows the program’s budget requests and  appropriations since receiving an appropriation through the Recovery Act  in fiscal year 2009.
In January 2012, we reported that ARPA-E uses several selection criteria  in making awards, although its requirements for information on private  sector funding could be improved. For example, we reported that ARPA- E’s program directors spent time and resources to determine the extent of  prior funding for proposed ARPA-E projects. Also, our review suggested  that most ARPA-E projects could not have been funded solely by the  private sector. Furthermore, according to ARPA-E officials and  documents, agency officials have taken steps to coordinate with other  DOE offices in advance of awarding ARPA-E funds to help avoid  duplication of efforts. We recommended that ARPA-E consider providing  applicants guidance with a sample response explaining prior sources of  funding, requiring applicants to provide letters from investors explaining  why they are not willing to fund proposed projects, and using third-party  venture capital data to identify applicants’ prior funding. DOE agreed with  our recommendations.
section_title: Loan Guarantee Program
paragraphs: Under the Energy Policy Act of 2005, the Loan Guarantee Program (LGP)  was created to provide loan guarantees for innovative energy  technologies. Until February 2009, the LGP was working exclusively  under section 1703 of the act, which authorized loan guarantees for new  or innovative energy technologies that had not yet been widely  commercialized in the United States. At that time, Congress had  authorized DOE to guarantee approximately $42.5 billion in section 1703  loans. Although Congress had provided funds to DOE to cover the  program’s administrative costs, it had not appropriated funds to pay the  “credit subsidy costs” of these guarantees. Credit subsidy costs are the  government’s estimated net long-term cost, in present value terms, of  direct or guaranteed loans over the entire period the loans are  outstanding (not including administrative costs). In February 2009, the  Recovery Act amended the Energy Policy Act of 2005, adding section  1705, which made certain commercial technologies eligible for loan  guarantees if they could start construction by September 30, 2011. The  Recovery Act also provided $6 billion in appropriations—later reduced by  transfer and rescission to about $2.5 billion—to cover DOE’s credit  subsidy costs for an estimated $18 billion in additional loan guarantees. In  fiscal year 2011, Congress appropriated about $170 million to cover  subsidy costs of section 1703 loan guarantees for the first time. Table 3  shows the program’s budget requests and appropriations since fiscal year  2008.
In March 2012, we reported that DOE had made $15 billion in loan  guarantees and conditionally committed to an additional $15 billion as of  September 30, 2011. However, we also reported that the program does  not have the consolidated data on application status needed to facilitate  efficient management and program oversight. In addition, the program  adhered to most of its established process for reviewing applications, but  we reported that its actual process differed from its established process at  least once on 11 of the 13 applications we reviewed. DOE agreed with  our recommendations to (1) ensure that its records management system  contains documents supporting past decisions, as well as those in the  future, and (2) regularly update program policies and procedures. DOE  disagreed with our recommendation to commit to a timetable to fully  implement a consolidated system to provide information on program  applications and measure overall program performance, stating that it did  not agree to a hard timetable for implementing the recommendation. We  continue to believe that DOE should commit to developing such a system  in a timely fashion.
section_title: Weatherization Assistance Program
paragraphs: The Recovery Act appropriated $5 billion for the Weatherization  Assistance Program to help low-income families reduce their energy bills  by making long-term energy efficiency improvements to their homes.  This appropriation represented a significant funding increase for a  program that had received about $225 million per year in recent years. As  of February 28, 2012, we found that DOE had awarded 58 state-level  grant recipients approximately $4.84 billion to implement the  Weatherization Assistance Program under the Recovery Act, and these  recipients reported spending about $4.22 billion and weatherizing  709,138 homes, exceeding the program’s production target of 607,000  homes. Table 4 shows the program’s budget requests and  appropriations since fiscal year 2007.
In December 2011, we reported that some grant recipients had been able  to exceed their production targets because of a lower average cost of  weatherizing homes and lower training and technical assistance  expenses than anticipated. In addition, most recipients reported  experiencing more implementation challenges in the first year of the  Recovery Act than in the third year. We also reported that a long-term  Weatherization Assistance Program goal is to increase energy efficiency  through cost-effective weatherization work and that March 2010 cost- benefit estimates from an Oak Ridge National Laboratory study indicate  that energy savings will likely exceed the program’s costs. That is, every  $1 spent on the weatherization program for 2009 through 2011 would  result in almost $2 in energy savings over the useful life of the  investment; the laboratory plans to issue more definitive estimates in  2013. Also in our December 2011 report, we discussed actions DOE  took in response to a recommendation we made in a May 2010 report,  that DOE clarify production targets and funding deadlines, among other  things; DOE officials provided documentation concerning targets but did  not provide clarification of the consequences for not meeting the targets.  In response to concerns about whether or not program requirements were  being met, our May 2010 report included recommendations to DOE to  clarify its guidance, production targets, funding deadlines, and associated  consequences. DOE’s program guidance stated that recipients could  spend Recovery Act funds until March 31, 2012. According to DOE,  several grant recipients had requested additional time to spend these  funds. Between the issuance of our two reports, in September 2011, the  Office of Management and Budget released a memorandum stating that  Recovery Act funds should be spent by September 2013. In our  December 2011 report, we found that, as of November 2011, DOE had  not determined if an extension would be available for grant recipients. In  January 2012, DOE issued guidance stating that it was offering grant  recipients an opportunity to modify the original March 31, 2012 funding  deadline.
section_title: Advanced Technology Vehicles Manufacturing Loan Program
paragraphs: In December 2007, Congress enacted the Energy Independence and  Security Act of 2007, which mandates more stringent average fuel  economy standards for newly manufactured passenger vehicles sold in  the United States by model year 2020 and established in DOE the  Advanced Technology Vehicles Manufacturing (ATVM) loan program, to  provide loans for projects to produce more fuel-efficient passenger  vehicles and their components. The ATVM loan program is to provide up  to $25 billion in loans for more fuel-efficient vehicles and components.  Congress also provided $7.5 billion to pay the required credit subsidy  costs of the loans, as shown in table 5.
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). had used 44 percent of the $7.5 billion allocated to pay credit subsidy  costs, which is more than was initially anticipated. These higher credit  subsidy costs were, in part, a reflection of the risky financial situation of  the automotive industry at the time the loans were made. As a result of  the higher credit subsidy costs, we reported that the program may be  unable to loan the full $25 billion allowed by statute. We also reported that  the ATVM loan program had set procedures for overseeing the financial  and technical performance of borrowers and had begun using the  procedures to oversee the loans; at the time of our report, however, it had  not yet engaged the engineering expertise needed for technical oversight,  as called for by its procedures. As a result, we reported that without  qualified oversight to analyze the information submitted by the borrowers  and to provide technical monitoring, DOE could not be adequately  assured that the borrowers are delivering the vehicle and component  projects as required by the loan agreements. In addition, we reported that  DOE had not developed sufficient performance measures that would  enable it to fully assess progress toward achieving its program goals.  DOE disagreed with our recommendations that the agency accelerate its  efforts to engage the expertise needed for effective oversight and develop  sufficient performance measures, although we continue to believe that the  agency should take these actions.
section_title: Renewable Energy Initiatives
paragraphs: In February 2012, we reported that DOE had implemented 92 renewable  energy-related initiatives in fiscal year 2010. These initiatives supported  every renewable energy source in our review, including bioenergy, solar,  and wind, and most initiatives supported more than a single energy  source. In addition, more than 70 percent of these initiatives supported  both the public and private sectors. These initiatives were distributed  across multiple federal responsibilities, with the largest percentage of  DOE’s initiatives supporting research and development. Approximately  one-third (36) of the 106 existing federal renewable energy-related  initiatives that received additional funding under the Recovery Act were  implemented by DOE, primarily involving research and development of  new renewable energy technologies. Overall, the Recovery Act affected  49 DOE initiatives: 7 were established, 36 received more funding, and 11  expanded or had their scope changed. Several of the renewable  energy-related initiatives we reviewed have expired or will expire, in full or  in part, because of the expiration of legislative authority, depletion of  available appropriations, or some other expiration under the law as  written as of fall of 2011.DOE.
section_title: Opportunities May Exist to Achieve Savings and Enhance Revenue
paragraphs: We have previously reported on several areas at DOE that may provide  opportunities for achieving increased savings and enhancing government  revenue. Areas that may provide opportunities for increased savings  include (1) contractor support costs and (2) potential overlap of effort  across certain activities for programs to reduce diesel emissions from  mobile sources. An area that may provide an opportunity for enhanced  government revenue concerns DOE’s uranium inventories, which are  worth potentially billions of dollars to commercial nuclear power plants  that can use the material as fuel in their reactors.
subsections: section_title: Contractor Support Costs
paragraphs: DOE spends 90 percent of its annual budget—which totaled $27 billion  for fiscal year 2011—on the contractors that carry out its diverse missions  and operate its sites nationwide. In January 2012, we reported that DOE  and contractors at some DOE sites, including the Office of Science, have  been carrying out a variety of efforts since 2007 to streamline and reduce  the costs of sites’ support functions. Such functions include procuring  needed goods and services; recruiting and hiring workers; managing  health and retirement benefits; maintaining facilities and infrastructure;  and providing day-to-day accounting, information technology, and  security. In addition, we found that contractors at sites have undertaken  their own streamlining and cost-reduction efforts, ranging from automating  hiring, training, or other human resources activities to reducing employee  health care and pension costs. Also in February 2012, in our annual  report on overlap and duplication of federal programs that may result in  inefficient use of taxpayer funds, we recommended that DOE assess  whether further opportunities could be taken to streamline support  functions, estimated to cost over $5 billion, at its contractor-managed  laboratories and other sites, including Office of Science sites, in light of  contractors’ historically fragmented approach to providing these  functions. DOE agreed with the recommendation.
section_title: Diesel Emissions
paragraphs: Diesel engines play a vital role in public transportation, construction,  agriculture, and shipping, largely because they are more durable and  reliable than gasoline-powered engines, as well as 25 to 35 percent more  energy efficient. However, exhaust from diesel engines is a pervasive and  harmful form of air pollution that affects public health and the  environment. Table 6 shows funding, by program, for DOE activities to  reduce diesel emissions from mobile sources.
In February 2012, we reported that federal grant and loan funding for  activities that reduce mobile source diesel emissions is fragmented  across 14 programs at DOE, the Department of Transportation (DOT),  and the Environmental Protection Agency (EPA). Moreover, we reported  that each of these programs overlaps with at least one other program in  the specific activities they fund, the program goals, or the eligible  recipients of funding. In addition, we found that these programs  generally do not collaborate. We previously reported that uncoordinated  program efforts can waste scarce funds, confuse and frustrate program  customers, and limit the overall effectiveness of the federal effort. To  help ensure the effectiveness and accountability of federal funding that  reduces diesel emissions, we recommended that DOE, DOT, and EPA  establish a strategy for collaboration in reducing mobile source diesel  emissions. DOE agreed with our recommendation.
section_title: Excess Uranium Inventories
paragraphs: Uranium is used in fuel for nuclear power plants. Twenty percent of our  nation’s electricity comes from nuclear power, and growing anxiety over  climate change generated by ever-growing demand for fossil fuels has  sparked interest in increasing the use of nuclear power, despite ongoing  concerns about the safety of such power in light of the March 2011  nuclear accident in Japan. In September 2011, we reported that a healthy  domestic uranium industry is considered essential to ensuring that  commercial nuclear power remains a reliable option for supporting the  nation’s energy needs. DOE maintains large inventories of uranium that  it no longer requires for nuclear weapons or as fuel for naval nuclear  propulsion reactors. A large portion of these inventories consists of  depleted uranium hexafluoride, otherwise known as “tails”—a byproduct  of the uranium enrichment process. Recent increases in uranium prices  could transform these tails into a lucrative source of revenue for the  government. In addition, DOE maintains thousands of tons of natural  uranium, which likewise could be sold to utilities or others for additional  revenue.
GAO, Nuclear Material: DOE Has Several Potential Options for Dealing with Depleted  Uranium Tails, Each of Which Could Benefit the Government, GAO-08-606R  (Washington, D.C.: Mar. 31, 2008). barter transactions. We reported that while DOE received no cash from  the transactions, our review found that the agency allowed a sales agent  to keep cash from the sales, which DOE would otherwise have owed to  the United States Treasury, thus violating the miscellaneous receipts  statute. We therefore reported that Congress should consider providing  DOE with explicit authority to barter excess uranium and to retain the  proceeds from barters, transfers, and sales. Likewise, Congress could  direct DOE to sell uranium for cash and make those proceeds available  by appropriation for decontamination and decommissioning expenses at  DOE’s uranium enrichment plants. Congress has taken some actions in  response to our work.
Chairman Stearns, Ranking Member DeGette, and Members of the  Subcommittee, this concludes my prepared statement. 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 Frank  Rusco 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 statement. Kim Gianopoulos, Chad M. Gorman, Carol  Herrnstadt Shulman, Kiki Theodoropoulos, Jeremy Williams, Michelle R.  Wong, and Arvin Wu made key contributions to this testimony.
section_title: Related GAO Products
paragraphs: Department of Energy: Advanced Research Projects Agency-Energy  Could Improve Its Collection of Information from Applications,  GAO-12-407T (Washington, D.C.: Jan. 24, 2012).  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP  (Washington, D.C.: Feb. 28, 2012).
Diesel Pollution: Fragmented Federal Programs that Reduce Mobile  Source Emissions Could be Improved, GAO-12-261 (Washington, D.C.:  Feb. 7, 2012).
Renewable Energy: Federal Agencies Implement Hundreds of Initiatives,  GAO-12-260 (Washington, D.C.: Feb. 27, 2012).
Department of Energy: Additional Opportunities Exist to Streamline  Support Functions at NNSA and Office of Science Sites, GAO-12-255  (Washington, D.C.: Jan. 31, 2012).
Department of Energy: Advanced Research Projects Agency-Energy  Could Benefit from Information on Applicants’ Prior Funding, GAO-12-112  (Washington, D.C.: Jan. 13, 2012).
Recovery Act: Progress and Challenges in Spending Weatherization  Funds, GAO-12-195 (Washington, D.C.: Dec. 16, 2011).
DOE Loan Guarantees: Further Actions Are Needed to Improve Tracking  and Review of Applications, GAO-12-157 (Washington, D.C.: Mar. 12,  2012).
Excess Uranium Inventories: Clarifying DOE’s Disposition Options Could  Help Avoid Further Legal Violations, GAO-11-846 (Washington, D.C.:  Sept. 26, 2011).
Nuclear Material: DOE’s Depleted Uranium Tails Could be a Source of  Revenue for the Government, GAO-11-752T (Washington, D.C.: June 13,  2011).
Department of Energy: Advanced Technology Vehicle Loan Program  Needs Enhanced Oversight and Performance Measures, GAO-11-745T  (Washington, D.C.: June 9, 2011).
Recovery Act: Status of Department of Energy’s Obligations and  Spending, GAO-11-483T (Washington, D.C.: Mar. 17, 2011).
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).
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