The federal loan guarantee program for innovative energy projects needs to be streamlined to be effective and provide more consistent control over its documentation processes, the Government Accountability Office (GAO) recommended and others in a report released Monday, March 12.
The Loan Guarantee Program made headlines when it committed stimulus funds over the past two years that led to some high-profile failures of renewable energy companies.
The program has made $15bn in loan guarantees and conditionally committed to an additional $15bn.
The program came under scrutiny when one of its guaranteed loan recipients defunct solar panel manufacturer Solyndra, failed, leaving taxpayers on the hook for $535m. Another recipient, Beacon Power, declared bankruptcy.
“The program does not have the consolidated data on application status needed to facilitate efficient management and program oversight,” the GAO said.
The GAO reviewed 13 applications that had closed or received conditional commitments by the end of 2010. The office said document retrieval took more than three months to determine the loan’s status as data was spread across several sources.
The report said that of the 460 applications to the loan guarantee program, DOE has made loan guarantees for 7% and committed to an additional 2%.
Private lenders who finance energy projects that GAO interviewed found that the program’s established review process was generally as stringent as or more stringent than their own.
But the GAO said the program’s document control was inadequate.
“The absence of adequate documentation may make it difficult for DOE to defend its decisions on loan guarantees as sound and fair if it is questioned about the justification for and equity of those decisions,” the GAO said.
One cause of the differences between established and actual processes was that, according to loan program staff, they were following procedures that had been revised but were not yet updated in the credit policies and procedures manual, which governs much of the loan program’s established review process, the report added.
GAO said the DOE needs to establish a timetable for, and fully implement, a consolidated system to provide information on loan program applications and reviews and regularly update program policies and procedures.
The DOE program was created by section 1703 of the Energy Policy Act of 2005 to guarantee loans for innovative energy projects. Currently, DOE is authorized to make up to $34bn in section 1703 loan guarantees.