The Government Accountability Office said it took Energy Department staff more than three months to come up with data on the status of applications for loan guarantees, leading auditors to question whether oversight of the program is timely or fair to companies seeking federal subsidies.
“...Maintaining adequate and proper records of agency activities is essential to oversight of the management of public resources,” auditors wrote.
The weakness led auditors to conclude that companies applying for loans —primarily renewable energy and nuclear ventures —cannot always count on the government to fairly vet their projects. Or a project could be approved without adequate vetting, leaving taxpayers to shoulder the loss —the case, critics say, with the failed solar company Solyndra.
“Due diligence is the review process by which a lender identifies and mitigates potential problems or risks with a project before the lender makes a loan or loan guarantee,” auditors wrote. “... DOE may not be sufficiently identifying and mitigating the risk of a loan default.”
The loan program supports projects from solar panels to nuclear plants. It was criticized last year after Solyndra,, a California solar firm that received a $535 million loan guarantee in 2009, filed for bankruptcy. Republicans on Capitol Hill said the Energy Department did not properly vet the company’s application. The audit does not evaluate the creditworthiness or merit of the companies seeking or receiving loans.
Of 460 applicants, auditors found the Energy Department awarded loan guarantees to 7 percent and committed to 2 percent more. To date, $15 billion in guarantees have been awarded, and the agency has committed to $15 billion more.
The GAO scrutinized 13 winning applications in detail. Of those, Energy officials did not follow their written procedures at least once in 11 of the 13 cases.
The GAO called on Energy officials to set up a better system for overseeing loan applications and following the guidelines it sets up.
The agency said in a written response to the GAO that it has strengthened its management and recordkeeping, creating a “state-of-the-art” system.
“The Department managed to build and continuously improve an organization that has succeeded in making an unprecedented level of clean energy investments while maintaining standards that are as high or higher than major financial institutions in the United States,” wrote David G. Frantz, acting executive director of the Loan Programs Office.
But auditors said the system is still lagging behind, and Energy officials have not committed to a schedule for getting the system running.