Recovery Act: Factors Affecting the Department of Energy's Program Implementation
Published: 2010-03-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act)--initially estimated to cost $787 billion in spending and tax provisions--aims to promote economic recovery, make investments, and minimize or avoid reductions in state and local government services. The Recovery Act provided the Department of Energy (DOE) more than $43.2 billion, including $36.7 billion for projects and activities and $6.5 billion in borrowing authority, in areas such as energy efficiency and renewable energy, nuclear waste clean-up, and electric grid modernization. This testimony discusses (1) the extent to which DOE has obligated and spent its Recovery Act funds, and (2) the factors that have affected DOE's ability to select and start Recovery Act projects. In addition, GAO includes information on ongoing work related to DOE Recovery Act programs. This testimony is based on prior work and updated with data from DOE.
section_title: What GAO Found
paragraphs: As of February 28, 2010, DOE reported it had obligated $25.7 billion (70 percent) and reported expenditures of $2.5 billion (7 percent) of the $36.7 billion it received under the Recovery Act for projects and activities. For context, as of December 31, 2009, DOE reported that it had obligated $23.2 billion (54 percent) and reported expenditures of $1.8 billion (4 percent). The percentage of Recovery Act funds obligated varied widely across DOE program offices and ranged from a high of 98 percent in the Energy Information Administration to a low of 1 percent for the Loan Guarantee Program Office. None of DOE's program offices reported expenditures of more than a third of their Recovery Act funds as of February 28, 2010. Officials from DOE and states that received Recovery Act funding from DOE cited certain federal requirements that had affected their ability to implement some Recovery Act projects. For example: (1) Davis Bacon Requirements. Officials reported that Davis-Bacon requirements had affected the start of projects in the Weatherization Assistance Program because the program had previously been exempt from these requirements. (2) National Environmental Policy Act (NEPA). DOE officials told us that NEPA may affect certain projects that are likely to significantly impact the environment, thereby requiring environmental assessments or environmental impact statements. (3) National Historic Preservation Act (NHPA). Officials from the Michigan Department of Human Services told us that about 90 percent of the homes scheduled to be weatherized under the Weatherization Assistance Program would need a historic review. Additionally, DOE and state officials told us that (4) Newness of programs. In some cases, because some Recovery Act programs were newly created, officials needed time to establish procedures and provide guidance before implementing projects. (5) Staff capacity. DOE officials also told us that they experienced challenges in hiring new staff to carry out Recovery Act work. Also, District of Columbia officials told us they needed to hire 6 new staff members to oversee and manage the weatherization program. (6) State, local, or tribal issues. The economic recession affected some states' budgets, which also affected states' ability to use some Recovery Act funds, such as difficulty providing matching funds.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the status of the Department of  Energy’s (DOE) implementation of programs funded under the American  Recovery and Reinvestment Act of 2009 (Recovery Act). Congress and the  administration have fashioned a significant response to what is generally  considered to be the nation’s most serious economic crisis since the Great  Depression. 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. On January 26, 2010, CBO updated  its estimate of the cost of the Recovery Act. It now estimates that the  Recovery Act will cost $75 billion more than originally estimated—or a  total of $862 billion from 2009 through 2019. That amount includes more  than $43.2 billion for DOE efforts in areas such as energy efficiency and  renewable energy, nuclear waste cleanup, and electric grid modernization.
The Recovery Act specifies several roles for GAO, including conducting  ongoing reviews of selected states’ and localities’ use of funds made  available under the act. We recently completed our fifth review, issued  yesterday, which examined a core group of 16 states, the District of  Columbia, and selected localities. We also recently completed a review on  the impact of certain federal requirements and other factors on Recovery  Act project selection and starts.
My statement today is based largely on these two prior reviews and  updated with data from DOE and focuses on (1) the extent to which DOE  has obligated and spent its Recovery Act funds, and (2) the factors that  have affected DOE’s ability to select and start Recovery Act projects. In  addition, we include information on ongoing GAO work on DOE Recovery  Act programs. We obtained financial data from DOE on its obligations and  expenditures for Recovery Act projects and also asked DOE—and 26 other  federal agencies—which federal requirements, if any, affected the timing  of project selection and start dates, as well as whether any requirements at  the state and local levels, or any other factors, affected project selection  and start dates. To supplement the federal agencies’ responses, we spoke  with officials in 16 states and the District of Columbia who are responsible  for implementing Recovery Act projects. We are reviewing these 16 states  and the District of Columbia for our bi-monthly reviews on Recovery Act  implementation. The states selected contain about 65 percent of the U.S.  population and are estimated to receive collectively about two-thirds of  the intergovernmental federal assistance funds available through the  Recovery Act. We selected these states and the District of Columbia on the  basis of federal outlay projections; percentage of the U.S. population  represented; unemployment rates and changes; and a mix of states’  poverty levels, geographic coverage, and representation of both urban and  rural areas. We also spoke with representatives from the National  Governors Association; the National Association of State Auditors,  Comptrollers, and Treasurers; and the National Association of Counties.
Our prior work was conducted in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to provide a  reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Recovery Act provided DOE more than $43.2 billion, including $36.7  billion for projects and activities and $6.5 billion in borrowing authority.  Of the $36.7 billion for projects and activities, almost half—$16.8 billion— was provided to the Office of Energy Efficiency and Renewable Energy for  projects intended to improve energy efficiency, build the domestic  renewable energy industry, and restructure the transportation industry to  increase global competitiveness. The Recovery Act also provided $6 billion  to the Office of Environmental Management for nuclear waste cleanup  projects, $4.5 billion to the Office of Electricity Delivery and Energy  Reliability for electric grid modernization, $4 billion to the Loan Guarantee  Program Office to support loan guarantees for renewable energy and  electric power transmission projects, $3.4 billion to the Office of Fossil  Energy for carbon capture and sequestration efforts, and $2 billion to the  Office of Science and the Advanced Research Projects Agency-Energy for  advanced energy technology research.
section_title: DOE Obligated 70 Percent and Reported Expenditures of 7 Percent of its Recovery Act Funds as of February 28, 2010
paragraphs: As of February 28, 2010, DOE reported that it had obligated $25.7 billion  (70 percent) and reported expenditures of $2.5 billion (7 percent) of the  $36.7 billion it received under the Recovery Act for projects and activities  (see table 1). By comparison, as of December 31, 2009, the department  reported it had obligated $23.2 billion (54 percent) and reported  expenditures of $1.8 billion (4 percent).
The percentage of Recovery Act funds obligated varied widely across DOE  program offices. Several program offices—Energy Efficiency and  Renewable Energy, the Energy Information Administration,  Environmental Management, and Science—had obligated more than 85  percent of their Recovery Act funds by February 28, 2010, while other  program offices—Fossil Energy, the Loan Guarantee Program, and the  Western Area Power Administration—had obligated less than a third of  their Recovery Act funds by that time.
The percentage of Recovery Act funds spent also varied across DOE  program offices, though to a lesser degree than the percentage obligated.  None of the program offices reported expenditures of more than a third of  their Recovery Act funds as of February 28, 2010. The percentage of funds  spent ranged from a high of 31 percent for Departmental Administration to  a low of zero percent for the Electricity Delivery and Energy Reliability,  Energy Information Administration, and Fossil Energy offices.
section_title: Federal Requirements and Other Factors Affected the Timing of Project Selection and Starts
paragraphs: Officials from DOE and states that received Recovery Act funding from  DOE cited certain federal requirements and other factors that had affected  their ability to implement some Recovery Act projects. In particular, DOE  officials reported that Davis-Bacon requirements and the National  Environmental Policy Act affected the timing of some project selection and  starts, while state officials reported that the National Historic Preservation  Act affected their ability to select and start Recovery Act projects. Other  factors unrelated to federal requirements—including the newness of  programs, staff capacity, and state and local issues—also affected the timing  of some projects, according to federal and state officials.
subsections: section_title: DOE and State Officials Reported that Certain Federal Requirements Affected Project Selection and Starts
paragraphs: Officials from DOE and states that received DOE funding cited certain  federal requirements that had affected their ability to select or start some  Recovery Act projects. For example:    Davis-Bacon requirements. DOE’s Weatherization Assistance Program  became subject to the Davis-Bacon requirements for the first time under the  Recovery Act after having been previously exempt from those  requirements. Thus, the Department of Labor (Labor) had to determine the  prevailing wage rates for weatherization workers in each county in the  United States. In July 2009, DOE and Labor issued a joint memorandum to  Weatherization Assistance Program grantees authorizing them to begin  weatherizing homes using Recovery Act funds, provided they paid  construction workers at least Labor’s wage rates for residential  construction, or an appropriate alternative category, and compensated  workers for any differences if Labor established a higher local prevailing  wage rate for weatherization activities. On September 3, 2009, Labor  completed its determinations; later that month, we reported that Davis- Bacon requirements were a reason why some states had not started  weatherizing homes. Specifically, we reported that 7 out of 16 states and  the District of Columbia decided to wait to begin weatherizing homes until  Labor had determined county-by-county prevailing wage rates for their  state. Officials in these states explained that they wanted to avoid having to  pay back wages to weatherization workers who started working before the  prevailing wage rates were known. In general, the states we reviewed used  only a small percentage of their available funds in 2009, mostly because  state and local agencies needed time to develop the infrastructures required  for managing the significant increase in weatherization funding and for  ensuring compliance with Recovery Act requirements, including Davis- Bacon requirements. According to available DOE data, as of December 31,  2009, 30,252 homes had been weatherized with Recovery Act funds, or  about 5 percent of the approximately 593,000 total homes that DOE  originally planned to weatherize using Recovery Act funds.
National Environmental Policy Act (NEPA). DOE officials told us that  while NEPA is unlikely to impose a greater burden on Recovery Act projects  than on similar projects receiving federal funds, the timing of certain  projects may be slowed by these requirements. However, DOE officials  reported that the agency had taken steps to expedite the NEPA review  process and said that the agency’s funding opportunity announcements  specified that projects must be sufficiently developed to meet the Recovery  Act’s timetable for commitment of funds. Nevertheless, DOE officials also  told us that several program offices—including Loan Guarantee, Fossil  Energy, Electricity Delivery and Energy Reliability, and the Power  Marketing Administrations—will likely have projects that significantly  impact the environment and will therefore require environmental  assessments or environmental impact statements. DOE officials told us that  they plan to concurrently complete NEPA reviews with other aspects of the  project selection and start process. State officials in California and  Mississippi also told us that NEPA had caused delays in DOE Recovery Act  projects. For example, California officials said that the State Energy  Commission must submit some of its Recovery Act projects to DOE for  NEPA review because they are not covered by DOE’s existing categorical  exclusions. State officials said that such reviews can take up to six or more  weeks. Both California and Mississippi officials told us that activities that  are categorically excluded under NEPA (e.g., road repaving or energy- efficient upgrades to existing buildings) still require clearance before the  state can award funds. Staff must spend time filling out forms and supplying  information to DOE on projects that may qualify for a categorical exclusion.
National Historic Preservation Act (NHPA). State officials told us that  NHPA had also affected DOE Recovery Act project selection and starts.  Mississippi officials, in particular, cited NHPA’s clearance requirements as  one of the biggest potential delays to project selection in energy programs.  Many of the city- and county-owned facilities that could benefit from the  Energy Efficiency and Conservation Block Grant program could be subject  to historic preservation requirements, which mandate that projects must  be identified within 180 days of award. In part because of this  requirement, the state had to adjust program plans and limit the scope of  eligible recipients and projects to avoid historic preservation issues.  Likewise, officials from the Michigan Department of Human Services told  us that NHPA requires that weatherization projects receiving federal funds  undergo a state historic preservation review. According to Michigan  officials, this requirement means that the State Historic Preservation  Office may review every home over 50 years of age if any work is to be  conducted, regardless of whether the home is in a historic district or on a  national registry. These officials estimated that 90 percent of the homes  scheduled to be weatherized would need a historic review. These reviews  are a departure from Michigan’s previous experience; the State Historic  Preservation Office had never considered weatherization work to trigger a  review. Furthermore, Michigan officials told us that their State Historic  Preservation Office’s policy is to review weatherization applications for  these homes within 30 days after receiving the application and advise the  Michigan Department of Human Services on whether the work can  proceed. However, as of October 29, 2009, the State Historic Preservation  Office had only two employees, so state officials were concerned that this  process could cause a significant delay. To avoid further delays, Michigan  officials told us that in November 2009, they signed an agreement with the  State Historic Preservation Office that is designed to expedite the review  process. They also told us that with the agreement in place, they expect to  meet their weatherization goals.
Buy American provisions. DOE officials told us that Buy American  provisions could cause delays in implementing Recovery Act projects.  Officials from other federal agencies said those provisions have affected or  may affect their ability to select or start some Recovery Act projects. In some  cases, those agencies had to develop guidance for compliance with Buy  American provisions, including guidance on issuing waivers to recipients that  were unable to comply. For example, according to Environmental Protection  Agency officials, developing Buy American guidance was particularly  challenging because of the need to establish a waiver process for Recovery  Act projects. At the local level, officials from the Chicago Housing Authority  (CHA) reported that the only security cameras that are compatible with the  existing CHA system and City of Chicago police systems are not made in the  United States. CHA worked with the Department of Housing and Urban  Development to determine how to seek a waiver for this particular project.  Moreover, an industry representative told us that the Buy American  provisions could interrupt contractors’ supply chains, requiring them to find  alternate suppliers and sometimes change the design of their projects, which  could delay project starts.
section_title: DOE and State Officials Reported that Other Factors Have Also Affected the Timing of Project Selection and Starts
paragraphs: Officials from DOE and states also told us that factors other than federal  requirements have affected the timing of project selection or starts. For  example:    Newness of programs. Because some Recovery Act programs were newly  created, in some cases, officials needed time to establish procedures and  provide guidance before implementing projects. In particular, the DOE  Inspector General noted that the awards process for the Energy Efficiency  and Conservation Block Grant program, newly funded under the Recovery  Act, was challenging to implement because there was no existing  infrastructure. Hence, Recovery Act funds were not awarded and  distributed to recipients in a timely manner.
Staff capacity. Officials from DOE stated that they would need to hire a  total of 550 staff—both permanent and temporary—to carry out Recovery  Act-related work. However, several issues affected DOE’s ability to staff  these federal positions, including the temporary nature and funding of the  Recovery Act and limited resources for financial management and  oversight. To address those issues, DOE was granted a special direct hire  authority as part of the Recovery Act for certain areas and program  offices. The authority allowed DOE to expedite the hiring process for  various energy efficiency, renewable energy, electricity delivery, and  energy reliability programs and helped DOE fill longer term temporary  (more than 1 year, but not more than 4 years) and permanent positions.  However, according to DOE officials, government-wide temporary  appointment authority does not qualify an employee for health benefits,  and thus few candidates have been attracted to these temporary positions.  According to DOE officials, the Office of Management and Budget recently  approved direct-hire authority for DOE, which officials believe will  alleviate issues related to health care benefits.
Some state officials told us that they experienced heavy workloads as a  result of the Recovery Act, which impaired their ability to implement  programs. As we reported in December 2009, smaller localities, which are  often rural, told us that they faced challenges because of a lack of staff to  understand, apply for, and comply with requirements for federal Recovery  Act grants. For example, some local government officials reported that  they did not employ a staff person to handle grants and therefore did not  have the capacity to understand which grants they were eligible for and  how to apply for them. In the District of Columbia, Department of the  Environment officials explained that weatherization funds had not been  spent as quickly as anticipated because officials needed to develop the  infrastructure to administer the program. For example, the department  needed to hire six new staff members to oversee and manage the program.  Officials reported that, as of late January 2010, the department had still not  hired any of the six new staff required. Officials from the National  Association of Counties said that some localities had turned down  Recovery Act funding to avoid the administrative burdens associated with  the act’s numerous reporting requirements.
State, Local, or Tribal Issues. In our recently issued report on factors  affecting the implementation of Recovery Act projects, we noted that the  economic recession affected some states’ budgets, which, in turn, affected  states’ ability to use some Recovery Act funds. For example, according to  a recent report by DOE’s Office of Inspector General, implementation of  the Weatherization Assistance Program’s Recovery Act efforts was delayed  in part by state hiring freezes, problems resolving local budget shortfalls,  and state-wide furloughs. State-level budget challenges have affected the  implementation of other Recovery Act projects. For example, officials  from the Department of Defense told us that because states were  experiencing difficulties in passing their current-year budgets, some were  unable to provide matching funds for certain Army National Guard  programs. As a result, the Department of Defense had to revise its  Recovery Act project plan to cancel or reduce the number of Army  National Guard projects with state matching funds and replace them with  other projects that did not require matching funds. Officials from the  Department of Housing and Urban Development also told us that project  starts in some instances were affected by the need for state and local  governments to furlough employees as a result of the economic downturn.
section_title: GAO Has Ongoing Work on DOE Recovery Act Programs
paragraphs: In a report issued yesterday, we discussed recipient reporting in DOE’s  Weatherization Assistance Program.  Specifically, we noted that  reporting about impacts to energy savings and jobs created and retained at both the state and local agency level is still somewhat limited.  Although  many local officials that we interviewed for that review have collected  data about new hires, none could provide us with data on energy savings.   Some states told us they plan to use performance measures developed  by  DOE, while others have developed their own measures. For example,  Florida officials told us they plan to measure energy savings by tracking kilowatts used before and after weatherization, primarily with informatio from utility companies. In addition, local agencies in some states either  n  collect or plan to collect information about other aspects of program  operations. For example, local agencies in both California and Michigan  collect data about customer satisfaction. In addition, a local agency in  California plans to report about obstacles, while an agency in New York  will track and report the number of units on the waiting list.
As we reported, DOE made several outreach efforts to their program  recipients to ensure timely reporting. These efforts included e-mail  reminders for registration and Webinars that provided guidance on  reporting requirements. For the first round of reporting, DOE developed a  quality assurance plan to ensure all prime recipients filed quarterly  reports, while assisting in identifying errors in reports. The methodology  for the quality assurance review included several phases and provided  details on the role and responsibilities for DOE officials. According to  DOE officials, the data quality assurance plan was also designed to  emphasize the avoidance of material omissions and significant reporting  errors.
In addition to our reviews of states’ and localities’ use of Recovery Act  funds, GAO is also conducting ongoing work on several DOE efforts that  received Recovery Act funding, including the Loan Guarantee Program  and the Office of Environmental Management’s activities.
As I noted earlier, Congress made nearly $4 billion in Recovery Act  funding available to DOE to support what the agency has estimated will be  about $32 billion in new loan guarantees under its innovative technology  loan guarantee program. However, we reported in July 2008 that DOE was  not well positioned to manage the loan guarantee program effectively and  maintain accountability because it had not completed a number of key  management and internal control activities. To improve the  implementation of the loan guarantee program and to help mitigate risk to  the federal government and American taxpayers, we recommended that,  among other things, DOE complete internal loan selection policies and  procedures that lay out roles and responsibilities and criteria and  requirements for conducting and documenting analyses and decision  making, and develop and define performance measures and metrics to  monitor and evaluate program efficiency, effectiveness, and outcomes. We  are currently engaged in ongoing work to determine the current state of  the Loan Guarantee Program and what progress DOE has made since our  last report, and we expect to report on that work this summer.
Ongoing work also focuses on DOE’s Office of Environmental  Management, which also received Recovery Act funding. The Office of  Environmental Management oversees cleanup efforts related to decades of  nuclear weapons production. The Recovery Act provided DOE with $6  billion—in addition to annual appropriations of $6 billion—for cleanup  activities including packaging and disposing of wastes, decontaminating  and decommissioning facilities, and removing contamination from soil.  DOE has begun work on the majority of its more than 85 Recovery Act  projects at 17 sites in 12 states and has spent nearly $1.4 billion (about 23  percent of its total Recovery Act funding) on these projects. We are  currently conducting work to evaluate the implementation of these  projects, including the number of jobs that have been created and  retained, performance metrics being used to measure progress, DOE’s  oversight of the work, and any challenges that DOE may be facing. We  expect to report on that work this summer.
Mr. Chairman, this completes my prepared statement. We will continue to  monitor DOE’s use of Recovery Act funds and implementation of  programs. I would be happy to respond to any questions you or other  Members of the Committee may have at this time.
section_title: Contact and Acknowledgments
paragraphs: For further information regarding this testimony, please contact me or  Mark Gaffigan, Director, at (202) 512-3841. Kim Gianopoulos (Assistant  Director), Amanda Krause, Jonathan Kucskar, David Marroni, Alise  Nacson, and Alison O’Neill made key contributions to this testimony.
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