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Reason Foundation

DOE Bureaucrat Laments the Failures of Bureaucracy

Adam Peshek
November 2, 2011, 1:07pm

This morning, before the House Oversight and Government Reform Committee, Department of Energy Inspector General Gregory Friedman testified that Department stimulus money has been mismanaged, wasted, and subject to criminal investigation, with nearly half of the funds unspent two years after being awarded.

Based on our body of work, we found that the effort by the Department to use Recovery Act funds to stimulate the economy was more challenging than many had originally envisioned. The concept of "shovel ready" projects became a Recovery Act symbol of expeditiously stimulating the economy and creating jobs. In reality, few actual “shovel ready” projects existed…. As a result, despite a major effort in a high pressure environment, the Department struggled to obligate and expend Recovery Act funds on a timely basis. As noted, the expeditious creation of jobs was a prime goal of the program. The delay in expenditures was not helpful in this regard.

One thing is certain: DOE benefited from the stimulus. The Department received $35.2 billion in Recovery Act funding, significantly more than their entire $27 billion budget in 2011. This money was used for everything from expanding current programs – like a ten-fold increase in the Weatherization Program – to creating brand new programs, like the energy efficiency block grant program. Despite being allocated $3.2 billion in funds, a third of these efficiency grant funds have not been spent by recipients.

This is not uncommon, and may even be a success story when comparing it to other DOE loans. According to its own records, 45 percent of DOE stimulus funds have not been spent by recipients. This is completely contrary to what the IG himself says was the intent of the Recovery Act “to quickly stimulate the economy and create jobs.”

Among the failures listed include the previously mentioned Weatherization Program, which an audit found that 9 of the 17 weatherized homes visited did not pass inspection, improper documentation of risk mitigation (if any) of the assailed green energy loan guarantee program, and an approach at one of DOE’s radioactive waste processing sites that cost $25 million more than necessary.

Even worse, DOE allocation of funds created outright fraud:

The Office of Inspector General initiated over 100 investigations associated with the Recovery Act. These involve various schemes, including the submission of false information, claims for unallowable or unauthorized expenses, and other improper uses of Recovery Act funds.

To date, our Recovery Act-related investigations have resulted in over $2.3 million in monetary recoveries as well as five criminal prosecutions. This includes a series of cases involving fictitious claims for travel per diem resulting in the recovery of $1 million alone in Recovery Act funds.

His conclusion on the failures: bureaucratic breakdowns and overwhelming regulations. Discussing one state that has only spent 30 percent of its funds since awarded two years ago, the IG lamented: “We found that this was due to the time needed to comply with regulatory requirements of the National Environmental Policy Act, the Davis-Bacon Act and the National Historic Preservation Act-issues that affected other jurisdictions as well.” It appears some regulations really do hamper economic growth, even if it is artificial, government induced spending. He goes on:

The Federal, state and local government infrastructures were, simply put, overwhelmed. In several states, the very personnel who were charged with implementing the Recovery Act's provisions had been furloughed due to economic situations. Ironically, this delayed timely allocation and expenditures of funds intended to boost the U.S. economy and create jobs.

But it wasn’t just failures of recipients, it was failures stemming from the bureaucracy itself:

The challenges associated with the Department's program implementation and execution efforts were complicated by the nature of the bureaucracy in which it operates, specifically the diverse, complex, and often asymmetrical set of stakeholders which play an integral role in this process. This includes literally thousands of state and local jurisdictions, community action.

In summary, as the IG astutely observed, “a combination of massive funding, high expectations and inadequate infrastructure resulted, at times, in less than optimal performance.”

Adam Peshek is Research Associate

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