DOE’s LGP was originally designed to address a fundamental impediment for investors and lenders that stems from the risks of innovative and advanced energy projects, including technology risk—the risk that the new technology will not perform as expected—and execution risk—the risk that the borrower or project will not perform as expected. Companies can face obstacles in securing enough affordable financing from lenders to survive the gap between developing innovative technologies and commercializing them. Because the risks that lenders must assume to support new technologies can put private financing out of reach, companies may not be able to commercialize innovative technologies without the federal government’s financial support. The LGP was established in Title XVII of the Energy Policy Act of 2005 to encourage early commercial use of new or significantly improved technologies in energy projects. The act—specifically section 1703— originally authorized DOE to guarantee loans for energy projects that (1) use new or significantly improved technologies as compared with commercial technologies already in service in the United States and (2) avoid, reduce, or sequester emissions of air pollutants or man-made greenhouse gases. In February 2009, Congress expanded the scope of the LGP in the American Recovery and Reinvestment Act (Recovery Act) by adding section 1705 to the Energy Policy Act, which extended the program and provided funding to include projects that use commercial energy technology that employs renewable energy systems, electric power transmission systems, or leading-edge biofuels that meet certain criteria. As of March 2014, DOE had made 31 loan guarantees for approximately $15.7 billion under section 1705, which expired on September 30, 2011, and 2 loan guarantees for approximately $6.2 billion under section 1703. These guarantees have been for biomass, geothermal, nuclear, solar, and wind generation; energy storage; solar manufacturing; and electricity transmission projects (see app. III). Two borrowers withdrew in 2012 before starting to draw funds from their loans. Additionally, in September and October 2013, DOE deobligated 2 loan guarantees because they did not seem likely to meet the loan conditions required to begin drawing on their loans. Three other loan guarantee borrowers have defaulted and filed for bankruptcy—one borrower and its loan guarantee have been restructured, and the guarantee remains active; the other two borrowers are in liquidation proceedings. In addition, DOE has conditional commitments,$3.8 billion in section 1703 loan guarantees for two nuclear projects. In December 2013, DOE announced a new solicitation for applications for up to $8 billion in loan guarantees for advanced fossil energy projects. issued in 2010, for approximately The ATVM loan program was established in December 2007 by the Energy Independence and Security Act (EISA), and the fiscal year 2009 Continuing Resolution appropriated funding for the program. DOE’s five loans for $8.4 billion under this program went to both established automakers and start-up manufacturers. These loans are for the manufacture of fuel-saving enhancements of conventional vehicle technology, plug-in hybrids, and all-electric vehicles. In May 2013, one borrower paid back its loan. Two ATVM borrowers have defaulted on their loans. In 2013, DOE sold the defaulted loan notes in auction proceedings. In 2010, DOE consolidated the previously separate LGP and ATVM program under the Loan Programs Office. Monitoring for both LGP and ATVM is conducted out of one division: the Portfolio Management Division, with support coming from several other divisions throughout the Loan Programs Office. DOE has not fully developed or consistently adhered to loan monitoring policies for its loan programs. In particular, DOE has established policies for most loan monitoring activities, but policies for some of these activities remain incomplete or outdated. Further, in some cases we examined, DOE generally adhered to its loan monitoring policies but, in others, DOE adhered to those policies inconsistently or not at all because the Loan Programs Office was still developing its staffing, management and reporting software, and policies. DOE has established policies for most loan monitoring activities, but policies for some of these activities remain incomplete or outdated. More specifically, DOE has established policies for loan monitoring activities including disbursing funds, monitoring and reporting on credit risk, and managing troubled loans. (For more details about DOE loan monitoring policies and activities, see app. II.) However, loan monitoring policies for evaluating and mitigating program-wide risk remain incomplete or outdated, and several dates DOE set for completing or updating these policies passed during the course of our work. Evaluating and mitigating program-wide risk is generally the responsibility of the Risk Management Division within DOE’s Loan Programs Office. This division was established in February 2012 and has been operating since its inception under incomplete or outdated policies. For example, the policies do not address how the new structure of the Risk Management Division fits into existing policies, thus not providing clear guidance on the organizational roles of the division. DOE officials told us that policy revisions were delayed in part because the Loan Programs Office did not have a Director of Risk Management until November 2012 and that a planned revision was put on hold to await the arrival of a new Executive Director in May 2013. Additionally, the Risk Management Division had not staffed 11 of its 16 planned positions until late 2013, when it staffed 6 of 11 vacancies. As highlighted by an independent White House review of DOE’s loan programs, as well as our discussions with private lenders, a risk management division is essential for mitigating risk. Similarly, Office of Management and Budget (OMB) guidance specifies that credit programs should have robust management and oversight frameworks for monitoring the programs’ progress toward achieving policy goals within acceptable risk thresholds, and taking action where appropriate to increase efficiency and effectiveness. It is difficult to determine whether DOE is adequately managing risk if policies against which to compare its actions are outdated or incomplete. Also, without fully staffing key monitoring positions, the Risk Management Division is limited in its ability to revise and complete policies, as well as perform its other monitoring responsibilities. In some cases we examined, DOE generally adhered to its loan monitoring policies but, in other cases, DOE adhered to its monitoring policies inconsistently or not at all because DOE was still developing the Loan Programs Office’s organizational structure, including staffing, management and reporting software, and implementing procedures for policies. As a consequence, DOE was making loans and disbursing funds from 2009 through 2013 without a fully developed loan monitoring function. DOE generally adhered to its monitoring policies for activities such as disbursing funds and reviewing borrower requests for changes to loan agreement provisions. For example, for the 10 loans in our sample, we found that, in disbursing funds, DOE generally documented its analysis of the financial health of the project and recorded supervisory approvals, as required in its policy. Similarly, we found that in nearly all of the 30 requests for amendments and waivers to loan agreements for the 10 loans in our sample, DOE officials properly recorded their review of the requested changes. In some other cases, DOE inconsistently adhered to its monitoring policies. For example, in regard to monitoring and reporting on credit risk, DOE was inconsistent in its preparation of credit reports which, according to DOE’s policy manuals, provide early warning signs of potential credit problems and can guide project and loan restructuring efforts should the need arise. In total, DOE was missing 24 of 88 periodic credit reports due through May 2013 across the 10 sample loans. Twenty of the missing reports were not completed because DOE did not begin producing periodic credit reports until August 2011. DOE officials told us that such reports were not produced before then because the Portfolio Management Division had not filled the staff positions needed for producing these reports, and its management and reporting software was under development. As a result, DOE disbursed more than $4.7 billion for the 10 loans in our sample before it began producing periodic credit reports as required in its policy manuals. According to DOE officials, although DOE was not producing credit reports during this time, DOE staff were taking other measures to monitor the loans, such as keeping in regular contact with the borrowers. In addition, after DOE began producing credit reports, DOE officials inconsistently recorded credit risk ratings on multiple credit reports. For example, of the 64 reports we reviewed as part of our sample, 11 had one or more credit risk rating fields left blank, and other credit rating fields contained errors. According to DOE officials, the reasons for the blank and incorrect fields included human error and a system design error that occurs in its management and reporting software. Further, there was a wide range between when credit reports were completed and when they were reviewed; more specifically, the time it took to review reports completed on a quarterly basis ranged from as little as a week to over 3 months. DOE officials told us that the reporting and review period inconsistencies were a result of inadequate staffing and incomplete implementing procedures that did not provide clear guidance on reporting dates. Also, some reports were submitted and approved outside of DOE’s management and reporting software, for which the system design was still being worked out, and training was being provided. DOE’s policy manuals specify that one purpose of these credit reports is to serve as an information source for inquiries by government oversight authorities seeking to understand the loans’ structures and decisions. Incomplete or inconsistent credit reporting can make it difficult for these authorities to understand and assess the status of the loans and determine if corrective actions are needed. According to DOE officials, as of February 2014, its staffing levels and its management and reporting software were sufficient to support full and timely credit reporting. After we found inconsistencies in DOE’s credit reports, DOE established a draft implementing procedure to guide the development of future credit reports that clarified reporting dates and preparation periods for new and existing staff in June 2013.