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

Letter

Funding Increases Have Expanded or Created Programs with Varying Results

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.

DOE Programs Funded by the Recovery Act

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.

Advanced Research Projects Agency-Energy

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.

Loan Guarantee Program

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.

Weatherization Assistance Program

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.

Advanced Technology Vehicles Manufacturing Loan Program

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.

Renewable Energy Initiatives

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.

Opportunities May Exist to Achieve Savings and Enhance Revenue

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.

Contractor Support Costs

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.

Diesel Emissions

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.

Excess Uranium Inventories

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.

Contact and Acknowledgments

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.

Related GAO Products

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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