President Obama has frequently touted energy-efficient technologies as a way of helping the environment and bolstering the economy. (Jewel Samad/Getty Images)

Goals set by the Obama White House to quickly stimulate the economy and help the environment are running up against economic realities and regulatory hurdles, according to a new watchdog report.


States receiving funds from a $2.5 billion Energy Department grant program established as part of the 2009 economic stimulus program still hadn’t spent as much as $879 million, or one-third of the money, as of March, according to a new report set for release today by the department’s inspector general.

Though Congress gave the Energy Department three years to distribute the block grants, the department vowed to do so within 18 months in hopes of spurring projects in economically depressed areas to retrofit old buildings, help cities buy environment-friendly traffic lights and find other ways to reduce energy consumption.

The department distributed all of the money within a year and a half, but the fact that recipients still haven’t spent it calls into question their ability “to effectively use all of the grant funds,” the report said.

In the report, Energy Department Inspector General Gregory H. Friedman said some of the delays are caused by a series of regulatory hurdles, including the National Historic Preservation Act and a series of environmental requirements. Several states also are ill-equipped to quickly review eligible programs that could receive the Energy Department money, the report said.

If recipients eventually fail to spend their stimulus funding within the program’s three-year time frame, the report said the department “should terminate the grants and return the funds to the U.S. Department of Treasury.”

Department officials defended the program Tuesday, saying that the vast majority of grant recipients are meeting goals and planning to spend the money within three years. Recipients have spent more than 50 percent of the funds as of this week, according to the department, up from just 9 percent in Aug. 2010.

The department “chose to set aggressive milestones for recipient spending and obligations that were more than two years ahead of the statutory deadlines,” spokesman Damien LaVera said in an e-mail. As a result, he said the vast majority of projects funded with the money are on track to be completed before next year’s deadline.

Kathleen Hogan, a deputy assistant secretary for energy efficiency, also told investigators that the department has contacted recipients in recent months and encouraged them to increase spending.

But the report warns that any such pressure could cause recipients to spend the funds unwisely or without proper consideration for taxpayer interests.

Overall, the $814 billion stimulus program allocated $34 billion to the Energy Department to spend on eco-friendly economic development programs.

Friedman’s new report is the 20th in a series of audits that track the department’s stimulus spending. An August 2010 investigation he conducted found that recipients of energy efficiency grants had spent just 8 percent of the program’s money. Another study found that a $5 billion weatherization program funded by the department had been slowed by requirements that workers be paid prevailing wages.

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