IG: Spending on geothermal technologies is riddled with improper payments

Audit of economic stimulus projects shows Energy paid companies for unauthorized expenses and travel.

An audit of six geothermal energy projects funded through the Recovery Act found that five of them had misspent money, the Energy Department's inspector general reported Monday.

The total that was misspent, $110,000, was not large compared to the total spent, $68 million. But the finding is troubling because the audit looked at only a handful of projects and found mispayments in nearly all of them, said Leslie Paige, spokeswoman for the watchdog organization Citizens Against Government Waste.

Energy improperly reimbursed the companies, which are not identified in the audit, for lodging and meal allowances that exceeded prescribed maximums, for unauthorized airline travel upgrades and for alcohol, which "is specifically prohibited," the audit report said.

"Payment of unallowable and questionable expenses reduces the amount of funds available for mission objectives and represents waste and abuse of taxpayer dollars," Inspector General Gregory Friedman wrote in the audit report.

The inappropriate payments "demonstrate that safeguards designed to prevent or promptly detect unallowable costs were not completely effective," he said.

That must be corrected, because almost $300 million in funding from the American Recovery and Reinvestment Act remains to be spent on geothermal energy projects, Friedman wrote.

In addition to paying for expenses that it should not have, the Energy Department failed to make its contractors comply with the Davis-Bacon Act, which requires contractors to pay prevailing wages for the geographic areas in which they work.

The Recovery Act imposes Davis-Bacon standards on the contracts it funds, even though that law might not have applied if the projects had been funded through other Energy Department accounts, the audit report said.

The 2009 Recovery Act pumped $862 billion into a variety of federally funded programs in an effort to stimulate the recession-stricken U.S. economy.

Of that sum, $400 million was allocated to spur the development of geothermal energy, which uses heat from deep in the Earth to generate electricity, or in some cases to heat and cool homes and buildings directly.

The Recovery Act boosted the department's spending on geothermal technologies from $44 million in 2009.

As of January, Energy had awarded $368 million to 135 geothermal technology projects, the audit report says. And of the $368 million, $68 million already has been spent.

The money is paying for projects in 39 states that are expected to create or save thousands of jobs in drilling, exploration, construction, operation of geothermal power facilities and manufacturing of ground source heat pump equipment, the audit report said.

The spending represents "a significant expansion of the U.S. geothermal industry," the report said.

As for the audited projects, some of the payments were so obviously improper that they never should have been made, Paige said: "Alcohol should be an automatic red flag." Department employees also should have caught unauthorized upgraded airline tickets before reimbursements were made, she said.

The improper payments by Energy Department are likely to prove part of a much broader pattern of abuse of stimulus funds, Paige said.

"Stimulus money was shoveled at such an incredible velocity that we never believed they would be able to keep track of it," she said. Department auditors and financial overseers "were outmanned and outgunned" by companies anxious to get some of the money and administration and congressional officials were eager to support pet projects, she said.