[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]







        OVERSIGHT OF DEPARTMENT OF ENERGY RECOVERY ACT SPENDING

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2011

                               __________

                           Serial No. 112-24









      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov


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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan                ANNA G. ESHOO, California
SUE WILKINS MYRICK, North Carolina   ELIOT L. ENGEL, New York
  Vice Chair                         GENE GREEN, Texas
JOHN SULLIVAN, Oklahoma              DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky              Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

              Subcommittee on Oversight and Investigations

                         CLIFF STEARNS, Florida
                                 Chairman
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma                Ranking Member
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee          ANTHONY D. WEINER, New York
SUE WILKINS MYRICK, North Carolina   EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         GENE GREEN, Texas
PHIL GINGREY, Georgia                CHARLES A. GONZALEZ, Texas
STEVE SCALISE, Louisiana             JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado               DONNA M. CHRISTENSEN, Virgin 
H. MORGAN GRIFFITH, Virginia             Islands
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)













                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     1
    Prepared statement...........................................     4
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     8
    Prepared statement...........................................    75
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    78
    Prepared statement...........................................    81
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   204
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................   206

                               Witnesses

Franklin Rusco, Director, Natural Resources and Environment, 
  Government Accountability Office...............................    85
    Prepared statement...........................................    88
Gregory Friedman, Inspector General, Department of Energy........   106
    Prepared statement...........................................   108
Steve Isakowitz, Chief Financial Officer, Department of Energy...   124
    Prepared statement...........................................   126
    Answers to submitted questions...............................   208
Steve Chalk, Chief Financial Officer, Energy Efficiency and 
  Renewable Energy, Department of Energy \1\.....................
    Insert for the record........................................   231
Inez Triay, Assistant Secretary for Environmental Management, 
  Department of Energy \1\.......................................

                           Submitted Material

Letter of March 17, 2011, from Philip Giudice, Chair, National 
  Association of State Energy Officials, to Mr. Stearns and Ms. 
  DeGette, submitted by Ms. DeGette..............................    10
U.S. State Energy Program Briefing Book for 2011, National 
  Association of State Energy Officials, submitted by Ms. DeGette    17
Audit report of American Recovery and Reinvestment Act of 2009 
  funding for Weatherization Assistance for Low-Income Persons 
  program, Comptroller of the Treasury, State of Tennessee, 
  December 10, 2010, submitted by Mr. Stearns....................   150
``Audit Report: The State of Illinois Weatherization Assistance 
  Program,'' Office of Audit Services, Office of Inspector 
  General, Department of Energy, October 2010, submitted by Mr. 
  Stearns........................................................   170

----------
\1\ Mr. Chalk and Ms. Triay did not present opening statements.

 
        OVERSIGHT OF DEPARTMENT OF ENERGY RECOVERY ACT SPENDING

                              ----------                              


                        THURSDAY, MARCH 17, 2011

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:30 p.m., in 
room 2322, Rayburn House Office Building, Hon. Cliff Stearns 
(chairman of the subcommittee) presiding.
    Present: Representatives Stearns, Sullivan, Murphy, 
Burgess, Bilbray, Gardner, Upton (Ex Officio), DeGette, Green, 
Christensen, and Waxman.
    Staff Present: Todd Harrison, Chief Counsel; Alan Slobodin, 
Deputy Chief Counsel; Karen Christian, Counsel; John Stone, 
Associate Counsel; Peter Spencer, Professional Staff Member; 
Jim Barnette, General Counsel; Alex Yergin, Hearing Clerk; 
Kristin Amerling, Minority Chief Counsel and Oversight Staff 
Director; Tiffany Benjamin, Minority Investigative Counsel; 
Anne Tindall, Minority Counsel; Ali Neubauer, Minority 
Investigator; and Lindsay Vidal, Minority Press Secretary.
    Mr. Stearns. Good afternoon. The subcommittee will come to 
order on Oversight and Investigations. I will start with my 
opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ladies and gentlemen, we are convening this hearing of the 
Subcommittee on Oversight and Investigations to gather 
information concerning the Department of Energy's stimulus 
spending. This is the first oversight hearing focusing on DOE's 
role in the stimulus program since the American Recovery and 
Reinvestment Act of 2009 was signed into law by President Obama 
just over 2 years ago.
    We will hear today from the Department of Energy, and from 
the DOE Inspector General and the U.S. Government 
Accountability Office, the two chief overseers of the 
Department's spending, which have produced 50 reports on DOE 
stimulus between them. This happens to be the first time both 
the IG and the GAO have testified together on DOE's stimulus 
spending as well.
    In 2009, DOE was appropriated about $36 billion under the 
Recovery Act to increase taxpayer spending on energy 
efficiency, environmental cleanup, loan guarantees and various 
energy-related research, development and deployment projects 
and activities. The appropriation was in addition to the DOE's 
annual funding of about $28 billion and represented an 
unprecedented expansion of taxpayer spending by the Department 
of Energy.
    This unprecedented spending was accompanied by promises 
that the program would stimulate economic growth, create jobs, 
clean the environment, and transform our energy infrastructure. 
I, along with all of my Republican colleagues, were strongly 
against the Act's massive government spending. This was not the 
way to stimulate the economy and create jobs.
    So the question is, how are things going?
    Let's review some of the information to date:
    The agency hit its own targets generally for allocating 
funds, but today, over 2 years later, only about $12 billion of 
the $36 billion allocated has actually been spent. The whole 
point of the Democrats' stimulus bill was to spend billions of 
dollars in the hope that such spending would stimulate the 
economy and, of course, create jobs. It doesn't appear that 
this massive increase in spending has done either--most of the 
money still hasn't been spent and unemployment still stands at 
almost 9 percent.
    While the Department had existing weatherization and energy 
efficiency programs, there was nothing ``shovel ready'' about 
expanding this on the scale that was dreamed up by the 
administration. As the GAO has documented, efforts to safeguard 
taxpayers' funds, clear up wage requirements and State and 
local infrastructure issues slowed the promised $12 billion in 
spending considerably. Only recently, nearly 3 years after the 
financial crisis, has DOE even reached the halfway point of 
580,000 homes it promises to eventually weatherize under this 
program.
    In addition, questions of cost effectiveness and 
performance remain. For example, with regard to the 
weatherization program, the GAO informed staff of one case in 
which contractors were hired to install new windows on every 
house on a Houston neighborhood street, without any clear 
measure of whether this was the most cost-effective way to help 
the homes save energy.
    In an Illinois program, a DOE inspector general audit found 
12 of 15 weatherized homes visited failed inspections because 
of substandard workmanship. Tennessee conducted its own State 
audit and found in 45 percent of 84 weatherized homes that 
``contractors had not performed weatherization measures, had 
not properly completed weatherization measures of any kind, or 
had performed work that was not allowable under the program.''
    So clearly there is a need for close oversight scrutiny of 
these projects.
    The DOE stimulus funds awarded up to 10,000 jobs with the 
$6 billion allocated for environmental cleanup. But contractors 
are already finishing some of the work and announcing the end 
of some 2,000 of these jobs. It is good that the funds help 
keep some people working during the tough economic times. Yet 
when the spending ends, can the agency show that this work 
reduced environmental risk or future cleanup costs, or that 
these stimulus funds are doing any more than just creating 
short-term temporary jobs?
    Is DOE even tracking how the cleanup spending achieves 
long-term environmental cleanup goals? GAO has reported that 
this past summer, the DOE's alleged future savings from the 
Recovery Act's accelerated cleanup spending overestimated 
taxpayer savings by almost 80 percent.
    So this committee's oversight responsibility requires that 
we hold the DOE accountable for measuring its Recovery Act 
spending in a way that we can evaluate whether or not it was 
cost effective in terms of policy goals and just good fiduciary 
sense.
    [The prepared statement of Mr. Stearns follows:]



    
    Mr. Stearns. With that, I welcome the witnesses and yield 
to the distinguished lady from Colorado for the purposes of an 
opening statement.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you so much, Mr. Chairman. I think it is 
important that this committee do oversight. And I am glad that 
we are looking at the agencies under our jurisdiction.
    I don't think we are always going to agree on energy policy 
issues, but I do think we can do oversight in a productive 
bipartisan way. So I hope this hearing today on the DOE will 
look at ways to improve DOE programs that are promoting jobs 
and innovation and not simply just be an opportunity for people 
to rail against the Recovery Act.
    In the face of one of the worst economic crisis this 
country has ever seen, the American Recovery and Reinvestment 
Act was an unprecedented effort to create and save jobs, 
increase overall economic activity, spur long-term growth and 
promote innovation. It also contained a number of DOE-specific 
provisions to support the transition to a clean energy economy.
    The Recovery Act has already had a tremendous positive 
impact. It provided $288 million in tax cuts and benefits for 
millions of families and businesses. It increased funding for a 
number of programs, including extending unemployment benefits 
by $224 billion.
    In the weatherization assistance program, for example, 
which enables low-income families to reduce permanently their 
energy bills by making their homes more energy efficient, we 
have weatherized 330,000 homes. What this does, as well as 
giving jobs to the people involved, it saves those families an 
average of almost $5,000 on their energy bills over the next 
decade.
    Ultimately, Recovery Act funds will help pay to weatherize 
600,000 homes, saving those families billions of dollars in 
utility bills. So again, it is just not the short term jobs 
that were created, but it is the actual weatherization that 
will save the families billions of dollars.
    In Colorado, for example, the Recovery Act sponsored State 
energy program provided funds to schools and local businesses. 
These funds help the Calhan School, which is a rural public 
school northeast of Colorado Springs that was struggling with a 
worn out boiler and failing temperature controls. Recovery Act 
funds allowed the school to install a new, highly efficient 
heating and cooling system using a ground source system so 
students can focus on learning, not just keeping warm or cool.
    Success stories like this can be seen across the country. 
In Virginia, James Madison University Center For Wind Energy 
received $800,000 from the State energy program to build a wind 
testing and training center geared towards students and 
companies who want to break into the wind industry. Tennessee 
used Recovery Act funds to build up its solar installation 
grant program allowing for rapid expansion in the solar 
installation industry, keeping people employed when they needed 
it the most. And Mr. Chairman, in your own State, Recovery Act 
funds helped install solar and wind power on existing 
billboards which ended up saving the State $232,000 in energy 
costs.
    Mr. Chairman, I have got a letter from Philip Giudice, who 
is the Commissioner of the Massachusetts Department of Energy 
Resources and chair of the National Association of State Energy 
Officials, which talks about many of these accomplishments. And 
I would like to ask unanimous consent to enter it into the 
record at this time.
    Mr. Stearns. By unanimous consent.
    [The information follows:]



    
    Ms. DeGette. Thank you. The letter says that ``energy-
related ARRA funds being deployed by the States have been a 
resounding success in terms of economic development, technology 
innovation, efficiency and energy savings.''
    It also notes that the National Weatherization Assistance 
Program under ARRA has completed energy efficiency 
improvements, lowering energy bills for hundreds of thousands 
of elderly and other low-income citizens across the country.
    I'm disappointed that we didn't get to have our minority 
witness like Mr. Guidice here today because States have been 
heavily involved in administering Recovery Act funds through 
some of these initiatives. And they would have been able to 
provide us with a really important perspective on how the 
States are using this money.
    Beyond the goal of promoting economic recovery, the 
Recovery Act was also designed to promote oversight, and it 
provides for an unprecedented level of oversight to identify 
and prevent waste. And so I'm hoping we can hear today how 
those efforts have gone, and if we need to improve them exactly 
how we can improve those efforts. With that, Mr. Chairman, I 
yield back.
    [The prepared statement of Ms. DeGette follows:]



    
    Mr. Stearns. The gentlelady yields back.
    I just want to indicate we share your interest in the 
hearing, the perspective of the different States who did 
receive DOE stimulus funds and were responsible for 
administering them, and perhaps in a later hearing, we will 
perhaps bring in your State, my State and others. So I 
appreciate your bringing that to my attention.
    And we recognize the gentleman from Oklahoma, Mr. Sullivan, 
for 1 minute.
    Mr. Sullivan. Thank you, Chairman Stearns and thank you for 
holding this important hearing today on oversight of the 
Department of Energy stimulus spending.
    Democrats contended that the $787 billion stimulus was 
needed to jump-start the economy and add jobs. But as 
Republicans predicted, the stimulus has not worked. It has only 
added to our deficit, now at $14 trillion. And it has done 
little to help unemployment, which was 8.1 percent when the 
stimulus was signed in 2009 and rose to 10 percent at the end 
of that year, and now is at 8.9 percent.
    DOE received approximately $35 billion for programs and 
activities through the stimulus making the agency, as some have 
said, the largest venture capital organization in the world. 
This sum was dwarfed by the Department's annual budget of about 
$27 billion.
    This overnight infusion of a huge amount of taxpayer funds 
has caused a number of problems and concerns with wasteful 
spending. The risk of waste, fraud and abuse increases 
dramatically whenever there is pressure to spend large amounts 
of money quickly. Lack of controls and monitoring at the State 
level also increase the likelihood that stimulus dollars were 
wasted on the wrong projects.
    I look forward to the hearing from our independent panel of 
witnesses, from the GAO and from the Department of Energy 
Inspector General's office. And I yield back the balance of my 
time.
    Mr. Stearns. I thank the gentleman. And the gentleman from 
California, Mr. Bilbray, is recognized for 1 minute.
    Mr. Bilbray. Thank you, Mr. Chairman. I appreciate your 
holding this hearing. You know, Mr. Chairman, we were allotted 
1 day to mark up the bill that created this major funding and 
the old majority contended that the $787 billion was needed 
immediately for a jump-start. The fact is, at the time that we 
were confronting that, I think we were about 8 percent 
unemployment across the country. And the fact is that last I 
checked, I think there was only about 12 percent of this has 
been spent.
    I think the DOE has received $35 billion in this program 
and for the stimulus, and the sum that they are looking at 
really is one that I think we have got to be conscious of what 
are we getting for this investment.
    Mr. Chairman, we were at 8 percent, and we are, in 
California, we are now at 12 percent unemployment. I think that 
we have got to recognize that there is not necessarily a 
successful program when it comes to saving the economy or jobs. 
And I just have to say that a lot of people look to a lot of 
these strategies and conservation as being a way of maintaining 
good job development. I would just like to point out that 
California has led the fight on energy conservation and we are 
at 12 percent unemployment. It hasn't done us very well.
    Mr. Chairman, I would just like to point out, again, that 
this town doesn't make mistakes just by trying new things or by 
making mistakes. The biggest problem in this town is that when 
it tries to do things and makes mistakes, it won't admit it and 
go back and correct it. And that has been our greatest flaw. 
And I would just like to ask again that those who do not learn 
from history are damned to repeat it.
    Contrary to what people think, the great expense of the WPA 
project did not create a strong economy for the United States. 
In fact, it wasn't until we started producing products and 
exporting it out of this country that the American economy 
responded and that government funding for government jobs were 
not the stimulus that pulled this country into the greatest 
economic powerhouse it has become historically. It was 
investment by private sector for manufacturing, something that 
we ought to go back and visit and not try the failed policies 
that appear to have failed again. Yield back.
    Mr. Stearns. I thank the gentleman. At this point, I think 
on this side we have finished. And I recognize the gentleman 
from California, Mr. Waxman, ranking Member.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. Two years 
ago, President Obama took office in the middle of one of the 
most significant economic crises this country has faced. And 
after years of lax oversight, the financial industry had 
collapsed and the recession it caused resulted in a loss of 
over 8 million jobs. Within 60 days of his inauguration, the 
President signed into law the American Recovery and 
Reinvestment Act. This law was designed to create new jobs and 
save existing ones, spur economic growth and foster 
accountability in government spending.
    Since then, the Act has saved millions of jobs and 
supported projects around the country that conserve energy, 
promote innovation and save taxpayers' dollars. Today, the 
subcommittee is examining implementation of the Recovery Act 
within the Department of Energy. This is an important subject 
for oversight and I commend the chairman for holding this 
hearing. We need to ensure that the rigorous oversight 
mechanisms set in place by the law are operating consistent 
with the law's design and that the Recovery Act is implemented 
effectively.
    I'm concerned, however, about a pattern emerging from this 
committee. What we have seen in the past couple of months is a 
series of hearings in which my colleagues on the other side 
seem more focused on bluster than oversight. The committee has 
become proficient about leveling complaints about government 
programs that have no foundation in fact, and we never seem to 
find time to figure out how to make government work more 
effectively or how to save the taxpayers' money. And the 
committee has failed to move forward one single initiative to 
create jobs for the American people.
    At this point in the last Congress, we had passed, and the 
President had signed into law, both the Recovery Act and 
legislation to expand the State Child Health Insurance program. 
We were just months away from passing even more legislation, 
such as the Cash for Clunkers bill that boosted the American 
auto industry. Each of these initiatives provided critical 
economic support for families hard hit by the recession.
    What we have done so far in this Congress, this committee's 
top priority was a bill to restrict women's access to health 
insurance for abortion. Earlier this week we approved a bill to 
cut off EPA's authority to regulate greenhouse gas emissions 
that are contributing to climate change and threatening public 
health. Today we are voting on a bill on the House floor to 
defund National Public Radio. It won't save a cent of money. It 
is only punitive to punish NPR for not being FOX News.
    And the House passed a budget that would put hundreds of 
thousands of Americans out to work--out of work. If it only put 
them out to work, that would be good.
    Not one of these bills create jobs. In fact, with respect 
to DOE programs we are discussing at today's hearing, the 
Republican funding resolution H.R. 1 threatens over 40,000 
construction and permanent jobs as well as billions of dollars 
in investments in major solar, wind, geothermal and biofuels 
projects.
    My colleague from California a minute ago said the problem 
in this town is people never admit they were wrong. Well, I am 
waiting for a Republican to admit they were wrong about the 
American Recovery Act, because that bill saved jobs. No 
Republican voted for it. It saved jobs and has done a lot for 
our infrastructure. Can't they at least admit they were wrong? 
Republicans promised to govern by the cut-go rule but the 
impact of their legislation instead has followed the cut jobs 
principle. The major bills brought to the floor reduce 
employment and opportunity for growth.
    This committee has jurisdiction over many areas where we 
could be legislating to spur the economy. I would like to see 
the committee resume its position as a leader in promoting 
economic growth and jobs. Today's hearing could be a first step 
in that process, and I hope it will be, Mr. Chairman. The DOE 
Inspector General and the GAO have been conducting rigorous 
oversight to review implementation of the DOE Recovery Act.
    They are important witnesses, but we asked to invite a 
witness, a State official, who was implementing the 
legislation. We were told we couldn't have them. Ms. DeGette 
put into the record a statement from a State official who has 
many positive things to say about the program. That is in the 
committee record. But we were not allowed to have that witness 
testify today. That failure to include witnesses like this one 
makes me concerned that we are continuing down the same road we 
have been going down since this Congress began. We are not 
passing legislation that creates jobs and strengthens our 
economy.
    Instead, we are simply engaging in partisan sniping over 
programs that my Republican colleagues do not like. Why they 
don't like them I don't know. But they don't like them, I guess 
because it was a Democratic Congress and a Democratic 
administration. But that is not a good enough reason for me. I 
hope we can do better, and the American people need us to do 
better. We need to be to do better on a bipartisan basis and 
not just use our time here for partisan sniping.
    I'm glad I don't do things like that. I yield back my time.
    [The prepared statement of Mr. Waxman follows:]



    
    Mr. Stearns. I thank my colleagues. Mr. Waxman represents 
certainly a different point of view, and I appreciate his 
opening statement. But I would point out that we did take her 
suggestion about having a witness from Massachusetts, and we 
talked about it and perhaps having a witness from Florida in 
another hearing. And I would say to my colleague from 
California that perhaps we will have another hearing on this 
oversight. And I agree and am pleased that you support this 
oversight on the stimulus package. And I, in all deference to 
you, I don't recollect any oversight hearing when the Democrats 
were in control on the stimulus package. So I'm very glad we 
can do it today.
    And Mr. Green is recognized, from Texas, for 1 minute.
    Mr. Green. Thank you, Mr. Chairman. I appreciate the 1 
minute, and I appreciate our panel for being here.
    My concern is that if we hadn't spent that money what would 
our unemployment be now? And I will give you a great example. 
In the Houston area, the Department of Energy provided $200 
million for a smart metering program. Somebody had to make 
those meters and put those meters out there. Now I have to 
admit, I'm worried about hearing from my constituents because 
historically we have smart metering, we found out that their 
bills go up and nobody wants to hear that. But maybe the 
technology, but that will help people control their electricity 
and not only for their cost but also so we don't have to build 
more power plants. But $200 million, I think, was one of the 
biggest grants the Department of Energy gave to a local 
community.
    And like I said, there are people working now to install 
those meters. And I wish it had lowered the unemployment rate, 
but maybe our recession we had was much deeper and longer than 
most of us expected. With that Mr. Chairman I appreciate the 
opportunity to give a 1 minute.
    Mr. Stearns. I thank my colleague. Does anybody else 
request speech? The gentlelady from the Virgin Islands.
    Mrs. Christensen. Thank you, Mr. Chairman. I want to speak 
to the success of the program in my district as I'm sure it has 
been successful in many others. Our Energy Star appliance 
rebate infused $834,000 into the local economy through direct 
subsidies to 2,114 residents and small businesses, a sun power 
loan program afforded 389 families to receive a solar water 
heater at no cost through a special program, the hybrid and 
electric vehicles rebate program was so successful that the 
rebates exceeded what they had planned, 81 rebates worth 
$259,200.
    And in addition to the direct and indirect jobs, we trained 
about 40 people who been unemployed for a long time in solar 
water heater installation and repair. They are all going to 
work. And we are just really--this has been a great help to our 
economy both in reducing our electricity bills and in creating 
jobs and saving jobs. Thank you, Mr. Chairman.
    Mr. Stearns. I thank my colleague. Now we come to our 
witnesses. All of you are aware that the committee is holding 
an investigative hearing. And when doing so, has been the 
practice of taking testimony under oath.
    Do you have any objection to testifying under oath?
    The chair then advises you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do you desire to be advised by counsel 
during your testimony today? If not, if you would please rise 
and raise your right hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Stearns. You are now under oath and subject to the 
penalties set forth in title 18 section 1001 of the United 
States Code. Before you give your 5-minute summary, let me 
introduce each of our five witnesses today. Mr. Frank Rusco 
will testify on behalf of the Government Accountability Office. 
He is a director on GAO's natural resources and environmental 
team. Welcome. Mr. Gregory H. Friedman, Inspector General at 
the Department of Energy, will also testify. He was confirmed 
by the Senate as Inspector General of DOE in 1998. He has been 
with the DOE's Inspector General's office since 1982.
    Finally, testifying on behalf of DOE is Steve Isakowitz, 
DOE chief financial officer, and accompanying him will be 
several people that he might want to introduce.
    And so I welcome each of you, and before your opening 
statement, if you wanted to introduce some of your staff that 
you have with you, that would be helpful.
    We will start with you, Mr. Rusco, for your opening 
statement.

 STATEMENTS OF FRANKLIN RUSCO, DIRECTOR, NATURAL RESOURCES AND 
    ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE; GREGORY 
 FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY; AND STEVE 
   ISAKOWITZ, CHIEF FINANCIAL OFFICER, DEPARTMENT OF ENERGY, 
      ACCOMPANIED BY INES TRIAY, ASSISTANT SECRETARY FOR 
  ENVIRONMENTAL MANAGEMENT, AND STEVE CHALK, CHIEF FINANCIAL 
       OFFICER FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY

                  STATEMENT OF FRANKLIN RUSCO

    Mr. Rusco. Thank you, Mr. Chairman and members of the 
committee. I'm pleased to be here today to discuss GAO's 
oversight of DOE spending under the Recovery Act. The Recovery 
Act included almost $42 billion for the Department of Energy 
programs activities and borrowing authority.
    This Recovery Act money was spread over many DOE offices 
and programs, but the bulk of the money was concentrated in 
DOE's Offices of Energy Efficiency and Renewable Energy, 
Environmental Management, Electricity Delivery and Energy 
Reliability, Loan Guarantees, Fossil Energy and Science.
    My remarks today are focused on five programs that received 
approximately 56 percent of DOE's Recovery Act funding. The 
Office of Environmental Management has for years overseen the 
cleanup of DOE's contaminated nuclear weapons research, 
development and production facilities. This Office received 
almost $6 billion in Recovery Act funds, a substantial increase 
in funding levels to the office which has an annual budget of 
about $6 billion.
    The Weatherization Assistance Program has been providing 
home weatherization help to low-income households for over 30 
years. The program received $5 billion in Recovery Act funding, 
a large increase from an annual budget of about $225 million.
    The Energy Efficiency and Conservation Block Grants program 
provides grants to States, territories, tribes, and localities 
to improve energy efficiency. This program was authorized in 
2007, but the $3.2 billion it received in Recovery Act funding 
was the first funding ever for these block grants.
    The State Energy Program has, since 1996, provided grants 
to States, the District of Columbia, and territories to promote 
national energy goals such as increasing energy efficiency. 
This program, which typically has an annual budget of under $50 
million, received $3.1 billion in Recovery Act funds.
    Finally, the Loan Guarantee Program was established in 2005 
to provide Federally guaranteed loans to energy projects that 
are innovative and reduce greenhouse gas emissions. Until the 
Recovery Act, the Loan Guarantee Program had only been 
authorized to provide loans to companies who paid their own 
credit subsidy costs, an amount roughly equivalent to the 
expected loss to the government of the loan. In contrast, the 
Recovery Act provided $2.5 billion specifically to enable the 
program to pay the credit subsidy costs for the projects.
    Because the government, instead of a borrower, pays the 
credit subsidy costs for loans made under the Recovery Act, 
this increases the amount of taxpayer money that is at risk 
considerably.
    The extent to which Recovery Act funds provided to the five 
programs have been spent varies significantly. As of March 10, 
2011, DOE reported that 67 percent of Recovery Act funds for 
environmental management projects had been spent, 50 percent of 
funding for the Weatherization Assistance Program had been 
spent, 34 percent for the State Energy Program, 28 percent for 
Energy Efficiency and Conservation Block Grants and 5 percent 
for the Loan Guarantee Program.
    The number of full-time equivalent jobs reported by 
recipients also varies by program. For example, the recipients 
of Weatherization Assistance Program funding reported 15,400 
full-time equivalence jobs for the fourth quarter of 2010. 
Environmental management recipients reported 9,400 FTEs in the 
fourth quarter, and the Loan Guarantee Program reported 784 
FTEs.
    In the course of our work, we found a variety of concerns. 
Overall, it has been difficult for DOE to build in effective 
measures for program goals, such as improving energy 
efficiency, energy saved, costs saved, cost effectiveness or 
reduced environmental risk. In addition, DOE and funding 
recipients have struggled to accurately measure jobs funded by 
the Recovery Act. The Loan Guarantee Program has had difficulty 
reconciling the inherent tension between funding innovative 
projects that reduce greenhouse gases, funding projects that 
have a high likelihood of paying back the loan, and, in the 
case of Recovery Act funds, creating jobs in a timely fashion.
    GAO has made recommendations to DOE to improve the 
reporting and measurement of jobs funded by Recovery Act money, 
to improve oversight and monitoring of Recovery Act funds, and 
to improve the measurement and reporting of program outcomes. 
In most cases, DOE has generally agreed with our 
recommendations and has taken steps to implement them.
    Thank you. This concludes my oral statement. I will be 
happy to answer any questions the committee may have.
    [The prepared statement of Mr. Rusco follows:]



    
    Mr. Stearns. Thank you.
    Mr. Friedman, your opening statement.

                 STATEMENT OF GREGORY FRIEDMAN

    Mr. Friedman. Mr. Chairman and members of the subcommittee, 
I appreciate the opportunity to testify today on the work of 
the Office of Inspector General concerning the Department of 
Energy's implementation of the American Recovery and 
Reinvestment Act of 2009.
    I'm very pleased to be joined today by my colleague, my 
long-time colleague, Rick Hass, who is the Deputy Inspector 
General for Audits and Inspections.
    In March 2009, I testified before the Subcommittee on 
Investigations and Oversight, Committee on Science and 
Technology on issues relating to the Recovery Act. In that 
hearing, I laid out the Office of Inspector General's strategy 
for ensuring that the Recovery Act funds were used effectively 
and efficiently. Many of the findings I will discuss today 
parallel issues raised in my 2009 testimony.
    As you have heard, and as you know, the Department received 
a little over $35 billion under the Recovery Act for various 
science, energy and environmental programs and initiatives. As 
of March 4, according to the Department's own records, it had 
obligated just over $33 billion or approximately 93 percent of 
these funds. However, of this amount, $12.3 billion had 
actually been spent. These funds were used to provide financial 
assistance awards to a variety of recipients and to accelerate 
the work of certain existing facilities management contractors.
    The Recovery Act called for intensive Inspector General 
oversight. Consequently my office has pursued a strategy 
designed to prevent, hopefully, and to detect inefficient, 
ineffective and abuse of Recovery Act expenditures. Since 
passage of the Act, we have issued 47 audit, inspection, and 
investigative reports covering activities that received about 
$26 billion in Recovery Act funding. These efforts identified 
weaknesses in the management and administration of contracts 
and financial assistance awards.
    In the case of the Department's $5 billion weatherization 
program, our work also revealed the need to resolve health and 
safety issues some of which could have been dangerous to low-
income recipients of services.
    Further, we initiated over 80 Recovery Act-related criminal 
investigations. These investigations were predicated on alleged 
schemes such as fraudulent claims for rebates and mischarging 
for services. To date, they have resulted in two criminal 
prosecutions and over $1 million in recoveries.
    In addition, 20 percent of the remaining Recovery Act cases 
have thus far been accepted for prosecutorial action. And we 
provided 258 fraud awareness briefings for nearly 15,000 
Federal contractor, State and other officials. These briefings 
alerted responsible officials to possible fraud schemes, and in 
so doing, we hope serve to prevent abusive Recovery Act 
expenditures.
    Department officials have told us that these efforts have 
helped improve the management of Recovery Act programs. My full 
testimony provides additional details regarding our work 
including a listing of the relevant Inspector General reports.
    As you are no doubt aware, the Department of Energy was one 
of the largest recipients of Recovery Act funding in the 
Federal Government. This additional funding allowed the 
Department to expand longstanding programs such as the 
residential weatherization program and create new initiatives, 
including the energy efficiency and community block grant 
programs.
    The goals of the Recovery Act were to be accomplished 
expeditiously so as to stimulate the economy and create jobs, 
all in an atmosphere of transparency and accountability. The 
Department, in our view, responded with a robust, good faith 
effort to implement and execute the various aspects of the 
Recovery Act. Through our work, we have identified a number of 
overarching issues and lessons learned that should be 
considered if similar programs are proposed.
    First, the demanding nature of the Recovery Act's 
implementation placed an enormous strain on the Department's 
then-existing infrastructure. Secondly, dealing with a diverse 
and complex set of departmental stakeholders complicated 
Recovery Act startup and administration. Third, although 
shovel-ready projects were the symbolic goal of the Recovery 
Act, reflecting the desire to expeditiously create jobs, in 
most cases, execution was more challenging and time consuming 
than had been anticipated.
    Fourth, infrastructure at the State and local levels was 
overwhelmed. Ironically, in several States, those charged with 
implementing the act's provisions had been furloughed due to 
economic conditions in those very States.
    Fifth, the pace of actual expenditures was significantly 
slowed because of the time needed to understand and address 
specific requirements of the Recovery Act.
    And finally, in the initial phase, recipients of the 
Recovery Act funding expressed their frustration with what they 
described as overly complex, complicated and burdensome 
reporting requirements.
    In summary, massive funding, high expectations and 
inadequate infrastructure resulted at times--and I stress at 
times--in less than optimal performance. Large portions of the 
funds allocated through the Recovery Act have yet to have been 
spent. Accordingly, we continue to focus our attention on the 
Recovery Act programs, including currently an evaluation of 
contingency plans to address transitioning to a post Recovery 
Act funding posture. And our investigative efforts continue.
    Mr. Chairman, this concludes my formal statement. I would 
be pleased to answer any questions that you or other members of 
the subcommittee may have.
    [The prepared statement of Mr. Friedman follows:]



    Mr. Stearns. I thank the gentleman.
    Our next witness is Mr. Steve Isakowitz, and if you don't 
mind just introducing the people that are with you.

                  STATEMENT OF STEVE ISAKOWITZ

    Mr. Isakowitz. Chairman Stearns, Ranking Member DeGette and 
members of the subcommittee, thank you for the opportunity to 
appear before you today to discuss the Department of Energy's 
monitoring and oversight efforts to ensure the effective 
implementation of the American Recovery and Reinvestment Act.
    The Department has received $35.2 billion in appropriations 
and $6.5 billion in power market administration borrowing 
authority. These funds have gone to over 4,500 recipients who 
are developing an estimated 15,000 clean energy projects across 
the Nation. As of March 13, 2011, over $12.5 billion of the 
Department's Recovery Act appropriations had been executed on 
projects around the country.
    Let me give several examples of how the Recovery Act is 
playing a pivotal role in stimulating economic growth, creating 
jobs in long-term competitive sectors, reducing energy costs 
for Americans and supporting critical environmental cleanup 
goals. First, advance vehicle industry is beginning to take 
root in America. As a result of the Recovery Act, we will have 
the capacity to produce enough batteries for about 500,000 
plug-in hybrid electric vehicles a year at 2015.
    Second, the Department of Energy's weatherization program 
has made it possible for more than 330,000 families nationwide 
to reduce their energy use and cut their utility bills. We are 
on track to weatherize nearly 600,000.
    Third, as a result of the Recovery Act investments in clean 
energy, U.S. renewable energy generation is set to double by 
2012.
    Finally, for DOE's Office of Environmental Management, we 
estimate that by the end of 2011, the acceleration of cleanup 
of contaminated areas will reduce the Department's cleanup 
footprint by 40 percent, potentially freeing up land for local 
communities' reuse.
    Most at DOE's recovery-funded programs were new initiatives 
or significant increases to existing programs, presenting the 
challenge of quickly ramping up activities while ensuring that 
all taxpayer funds are well spent. Indeed, our mantra within 
the Department is to spend fast, spend well. We have initiated 
numerous efforts to identify and mitigate risks associated with 
implementation of these projects. Many of these efforts have 
become government wide best practices. We are working to extend 
to our base-funded activities.
    Before any Recovery Act awards were issued, the Department 
created over 140 individual project plans comprised of project 
descriptions, monthly obligation and payment plans, milestones 
and performance targets. We also ensure the development of 
detailed risk plans for nearly every project which are updated 
as necessary to assist with the identification and mitigation 
of program execution risks.
    The risk plans incorporated lessons learned from the IG and 
GAO reports including those focusing on similar programs at 
other agencies. And in order to ensure transparency and 
accountability of our funds and provide real-time financial 
execution, information to the Department's management, we 
developed a Web-based tool called I Portal to provide immediate 
access to financial and programmatic execution for our 
projects. Most of this information is made available to the 
public through DOE's Web site at recovery.gov.
    As part of our comprehensive risk management efforts, we 
have also worked hard to identify those----
    Mr. Stearns. I just wonder, is your mic turned on? It is? 
Maybe just bring it a little closer to you. Thanks.
    Mr. Isakowitz. As part of our comprehensive risk management 
effort, we have also worked hard to identify those recipients 
that might require heightened monitoring and oversight. We 
currently have risk scores for over 4,000 individual Recovery 
Act recipients, and over 12,000 sub recipients which we will 
use to prioritize oversight and monitoring efforts.
    Our risk scoring methodology was recognized by staff on the 
Recovery Accountability and Transparency Board which is made up 
of agency IGs as a best practice. In addition, the Department 
established special monitoring and oversight procedures with 
the largest energy efficiencies and renewable energy programs.
    To date, the Department has conducted over 700 monitoring 
visits for these programs.
    Audits and inspections conducted by the DOE, IG and GAO are 
an integral part of the Department's monitoring and oversight 
efforts. And we are committed to working with the IG and GAO to 
facilitate their work and address any issues they identify.
    For example, we have given IG and GAO staff direct access 
to all contents in our I portal and provided training on using 
the system. To date, the Inspector General has issued 47 
reports related to the Recovery Act implementation. For 16, the 
Inspector General did not identify any issue significant enough 
to warrant recommendations for management action.
    For the other reports, the IG issued 111 separate 
recommendations, and the Department has already resolved 50 
percent of these. Costs questioned by the Inspector General 
represent only 0.03 percent of the Department's Recovery Act 
spending authority. The GAO has issued 10 reports, three of 
which contain recommendations for management action which we 
are actively addressing.
    Mr. Chairman, I would like to thank you again for inviting 
me to testify about the Department's efforts under the Recovery 
Act. The Department was charged to ensure that the money is 
spent quickly and spent well. We take this responsibility 
seriously. I look forward to responding to your questions and I 
would like to introduce two of my colleagues who help me in 
doing so. Inez Triay is Assistant Secretary for Environmental 
Management, and Steve Chalk, the Chief Operating Officer for 
the Office of Energy Efficiency and Renewable Energy. Thank 
you.
    [The prepared statement of Mr. Isakowitz follows:]



    Mr. Stearns. I thank Mr. Isakowitz.
    You seem to be very high on the program and indicate that 
you have tried to implement most of the GAO Inspector General's 
recommendation. Is that what you are saying?
    Mr. Isakowitz. Yes, we have moved as expeditiously as we 
can.
    Mr. Stearns. I think when you look at the program, here we 
are 2 years after the program was signed, the stimulus package 
was signed, and if I would, pertaining to the weatherization 
program, it is still only about halfway to meeting its target, 
and I think Mr. Rusco and Mr. Friedman, isn't it fair to say 
that the States and the Department of Energy were not prepared 
to implement this plan in a way that satisfied what most of us 
thought the stimulus bill would do, provide immediate injection 
into the economy and jobs for the unemployed? Mr. Rusco?
    Mr. Rusco. Well, there were a number of issues early on 
that slowed the implementation of this program, and among them 
were the Davis-Bacon requirements that required the Department 
of Labor----
    Mr. Stearns. So the Davis-Bacon Act slowed down the actual 
implementation of the plan, particularly with weatherization, 
is that correct?
    Mr. Rusco. Yes, it did. It required the Department of Labor 
to establish rates for weatherization workers in localities. 
And they eventually did that in September of 2009.
    Mr. Stearns. Mr. Friedman.
    Mr. Friedman. I would agree with that, Mr. Chairman. If you 
would allow me a moment of personal privilege if you don't 
mind.
    Mr. Stearns. Sure.
    Mr. Friedman. Mr. Isakowitz is a good friend of mine, but I 
just want to point out for the record that it took the IG to 
show him how to turn on his microphone.
    Mr. Stearns. OK, that is good. That is good.
    Mr. Bilbray. We are glad to see the Energy Department knew 
how to flip a switch.
    Mr. Isakowitz. Saving energy.
    Mr. Stearns. I have here cases, particularly in Tennessee, 
dealing with weatherization which show some gross mismanagement 
where they came in to put insulation in, and all they did was 
put the bag of insulation. I will be glad to show this to you. 
Actually, they were supposed to weatherize a home through the 
windows and through the attic, and all they did was paint the 
house and I have numerous examples here.
    So I think the question is for you, Mr. Isakowitz. What 
measures did you take to ensure the quality of the 
weatherization was not sacrificed for deadlines? And actually, 
did you have some kind of measuring techniques, because I would 
be glad to show you these egregious examples where the work was 
not done.
    In fact, ``during our preliminary analysis of the 444 homes 
reviewed, we found deficiencies with 233'' of these, 52 
percent, and the work was not even performed in about 45 
percent of these homes, and I will be glad to give you this 
information.
    So I guess the question we have here is what kind of 
measuring techniques did you have? I think the GAO, Mr. Rusco, 
indicated earlier that--he mentioned in his opening statement 
they did not use new good measuring techniques for the jobs 
that were implemented.
    Mr. Isakowitz. I'm going to turn to Mr. Chalk to answer the 
specifics to your question, but let me just say generally the 
way we treated this program is the way we treated all the 
programs when we got started on the Recovery Act. As has been 
mentioned, a number of times this was significant funding and 
new funding for the Department. Particularly for the State 
programs, many times, this represented anywhere from 20 to 60 
times more funding than we get on an annual basis. In the case 
of a block grant, it was a brand new program.
    So one of the things we did up front for this program and 
the others is to, before we start spending money to make sure 
we had the necessary controls in place and work with the States 
who were going to be recipients of an unprecedented amount of 
funding up front, to make sure that they were able to handle 
it. As to the specifics of your question----
    Mr. Stearns. Before you do that, just based upon what you 
said, I think I would take on face value that you are saying 
that to create a stimulus package through the weatherization 
program, this is not the best way to do it, because you had to 
ramp up so much. And when I see what you were dealing with 
annually, the program I think was preparing about 100,000 
annually, but the stimulus increased it almost to 600,000 over 
a 3-year period.
    So I think you are implying that you had to ramp up and 
perhaps all that ramp up made it more difficult for you, maybe 
the stimulus through this weatherization ramp up is not the 
best way to create a stimulus. Would you agree with that?
    Mr. Isakowitz. No. We think it actually has been a very 
effective program. And we think the program impact we have 
received as a result has shown that it has been very effective 
in saving average Americans and low-income homes significant 
funds.
    Mr. Stearns. How would you measure that? What measurement 
were you using to determine and validate what you just said?
    Mr. Isakowitz. Well, just broadly speaking, for low-income 
homes, energy costs are usually 15 percent of oftentimes what 
they have to pay where an average American it may----
    Mr. Stearns. So you are just broadly speaking on your own.
    Mr. Isakowitz. Speaking just in terms of the value of this 
program back, and in terms of actual homes that we have touched 
we have already done for 300,000 homes----
    Mr. Stearns. Do you think this will create sustainable jobs 
after?
    Mr. Isakowitz. Well, in many cases, we are creating the 
kind of skills that as we move in our entire economy to a more 
energy efficient economy, many of the skills that are being 
applied for those homes are same kind of skills that can be 
applied elsewhere.
    Mr. Stearns. But if they are not creating more work 
afterwards, if there is not work afterwards, then they will 
suddenly stop and they will not have any more work. But anyway, 
Mr. Chalk, why don't you finish so I don't go too far.
    Mr. Chalk. If I may, I will address a couple of issues. One 
is the late start. The challenges that have been mentioned----
    Mr. Stearns. Through the Davis-Bacon Act?
    Mr. Chalk [continuing.] With new requirements on the 
program that weren't with the legacy program. It was an 
increase of about 25-fold in terms of the size of the program.
    The program was always structured to be done within 3 years 
of the Recovery Act. So even though we got a late start, we are 
on schedule, and we are scheduled for just about every State, 
every territory, every tribe to be completed in March of '12, 
March 2012, 3 years after the Recovery Act was initiated. So 
over the last year, we have been running at about 20-to-30,000 
homes per month, doing about 300,000 homes a year. So we have 
really accelerated the program.
    Initially, we had some workmanship problems, and there have 
been references to Tennessee and Illinois.
    Mr. Stearns. So you are familiar with the Tennessee, all 
the cases I have got.
    Mr. Chalk. I'm not personally familiar with Tennessee but 
we have had workmanship issues in the onset of the program.
    Mr. Stearns. I need you to wrap up because my time has 
expired.
    Mr. Chalk. Essentially, the way we are handling that is a 
significant 20 percent of the funding was for training and 
technical assistance. We have a massive training, about two 
dozen training centers, we are training the contractors, we are 
training the sub-recipients who are monitoring the work. Our 
State folks now are actually measuring 5 percent of the homes 
by sample, and the DOE has about two dozen monitors that go out 
regularly and oversee the work. So we have several layers of 
oversight to make sure that the improvement measures are being 
instituted, the right ones, and that usually is not windows. It 
is usually insulation, caulking and things like that.
    Mr. Stearns. I'm going to let you wrap up so the ranking 
Member----
    Mr. Chalk. And what we have now is working very well, and 
we are producing quality home weatherization.
    Mr. Stearns. All right. My time is expired.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Mr. Friedman, the Recovery Act contained quite a bit of 
money for oversight and investigation to try to eliminate fraud 
and other kinds of misuse of the funds, correct?
    Mr. Friedman. That's correct.
    Ms. DeGette. Can you explain to this committee very briefly 
what kinds of resources were available to the DOE Inspector 
General under the ARRA?
    Mr. Friedman. Yes. As I recall, the precise number, Ms. 
DeGette, it was $15 million. With those funds, we have taken 
the following approach: One is we hired temporary employees to 
augment our staff, specifically focused on areas where we 
thought the most vulnerabilities, the most vulnerable aspects 
of the program.
    Ms. DeGette. And you have done about 47 reports and audits 
on ARRA funding to date, correct?
    Mr. Friedman. That's correct, yes.
    Ms. DeGette. And Mr. Rusco, I wonder if you can tell us 
about the resources and responsibility given to GAO under the 
Recovery Act.
    Mr. Rusco. Yes, GAO received $25 million to oversee the 
Recovery Act. With that money, we hired largely retired 
annuitants back into the fold to help us with this work, but we 
also used a lot of our other resources in this. We focused on 
State programs primarily and we reported on a bimonthly basis 
typically.
    Ms. DeGette. And you issued 107 reports, correct?
    Mr. Rusco. I will take your word for it. It was a lot.
    Ms. DeGette. Now, Mr. Isakowitz, I would assume that you 
are not trying to imply when you say you had to ramp up 
quickly, that there is any view that we shouldn't have quickly 
tried to implement this program, correct?
    Mr. Isakowitz. No, we think this is a great program and it 
has great results and a lot of impacts.
    Ms. DeGette. And let me ask you this: Do you think that the 
fact that you had to ramp up quickly meant that there was a 
disproportionate amount of poor work or improper use of the 
funds or anything like that?
    Mr. Isakowitz. No. In fact, we have been very careful as we 
ramped up to make sure we had all the internal controls the 
accountability and transparency in place.
    Ms. DeGette. Now, what about situations like this shoddy 
work in Tennessee that the chairman was talking about?
    Mr. Isakowitz. Well, it is a vast undertaking and when you 
have as many homes as we have had to deal with, again, we had 
over 300,000 clearly you are going to have cases of issues that 
have come up. That is why it was very important up front before 
these dollars went out and that we went and visited all 50 
States to actually work with them to set up controls to make 
sure, in fact, they had appropriate mechanisms in place to take 
care. And we had a very exacting monitoring process where we 
track and look for issues. In fact, very often we will work 
closely with the States and the IG and GAO to try to identify 
these problems before they become big problems.
    Ms. DeGette. So what you are saying is you feel like where 
there are problems like this where certainly none of us would 
want to see problems like that, you are feeling that because of 
the programs you put in place, it is not endemic throughout the 
system?
    Mr. Isakowitz. That's correct. We would love to be perfect.
    Ms. DeGette. What about Mr. Rusco, Mr. Friedman, would you 
agree with that statement, that it is not these problems aren't 
endemic throughout the system?
    Mr. Friedman. First of all, one of the first things we did, 
Ms. DeGette, in early 2009 was issue a lessons learned report 
in which we looked back on the work that we had done the prior 
couple of years and determined whether there were lessons we 
could learn from what had been experienced in the past, 
including in weatherization.
    Ms. DeGette. And did you learn lessons?
    Mr. Friedman. Did we learn lessons? Yes, I think we did, 
and it was a teaching moment for us as how to use our resources 
to address the most pressing problems.
    Ms. DeGette. Mr. Rusco, anything to add?
    Mr. Rusco. I guess I would say it is a mixed bag. There are 
problems identified in our reports that DOE has begun to 
implement and respond to. We continue to do work and we 
continue to have findings where we will be reporting in a 
couple of months on the Energy Efficiency and Conservation 
Block Grants program.
    Ms. DeGette. I think, Mr. Chairman, that might be a good 
opportunity to have that other hearing you were talking about. 
They are coming up with another report in a couple of months.
    Let me ask you, Mr. Rusco, you said one of the reasons for 
the slow start to starting these programs was Davis-Bacon. That 
is a law says you have to pay prevailing wages in these areas, 
correct?
    Mr. Rusco. That is correct.
    Ms. DeGette. So, say in Tennessee, if you are going in and 
adopting weatherization programs or something, you can't 
undercut the local wages, right?
    Mr. Rusco. Right.
    Ms. DeGette. That would seem to me to make sense, given 
what we are trying to do with the ARRA money, which is to 
promote the job market. Thank you, very much Mr. Chairman.
    Mr. Stearns. I thank the gentlelady.
    The gentleman from Oklahoma is recognized for 5 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. Mr. Rusco, GAO has 
completed two reports on loan guarantee programs; is that 
correct?
    Mr. Rusco. I think it is three now, yes.
    Mr. Sullivan. So it is three programs.
    Mr. Rusco. Three reports. I am sorry.
    Mr. Sullivan. Three reports? OK. The most recent report was 
issued July 2010; is that correct?
    Mr. Rusco. Correct.
    Mr. Sullivan. As you know, the loan guarantee program is 
currently the subject of an investigation by this subcommittee, 
in particular, a loan guarantee to a California company named 
Solyndra. So I don't want to get into the particulars over 
certain guarantees at this point. Instead, I want to discuss 
the program generally. The first Recovery Act related guarantee 
was announced in March 2009; is that correct, sir?
    Mr. Rusco. I believe that is correct, yes.
    Mr. Sullivan. And that was to Solyndra, a California 
company; is that correct?
    Mr. Rusco. Yes.
    Mr. Sullivan. Was that a $535 million loan they got?
    Mr. Rusco. Yes, it was.
    Mr. Sullivan. Since then, DOE has announced 15 other loan 
guarantees for companies engaging or planning to engage and 
producing innovative energy technologies; is that correct, sir?
    Mr. Rusco. They have issued now 10 and they have another--I 
am not sure exactly how many are conditional loans.
    Mr. Sullivan. Aside from Solyndra, was is the status of the 
other 14 companies who received loan guarantees? Where are they 
in developing these projects?
    Mr. Rusco. Well, there are three other companies that have 
gotten loans that have identified and submitted job 
information. So there are a total of 4 out of the 10 loans that 
have actually been issued that were development----
    Mr. Sullivan. Have any of these companies under 
consideration by you even broken ground yet?
    Mr. Rusco. Four have. And Solyndra is far along, if not 
finished, with the plant that it was building.
    Mr. Sullivan. Of the 10 closed loans, only three have begun 
construction. And you say there may be some other activity?
    Mr. Rusco. That is what I believe, yes.
    Mr. Sullivan. Mr. Isakowitz, the purpose of the stimulus 
was to create jobs as everyone was saying, right? Is that 
right?
    Mr. Isakowitz. That is correct.
    Mr. Sullivan. And the loan program's Web site shows the 
number of jobs that each loan guarantee is supposedly creating; 
is that right, sir?
    Mr. Isakowitz. That is correct.
    Mr. Sullivan. So the jobs numbers shown on the Web site, 
can they be considered created before the facilities have 
broken ground?
    Mr. Isakowitz. Well, it is important to note how we go 
about collecting information. They put the numbers in, the 
recipients of those dollars based upon dollars by which we have 
obligated. In many cases, some of these applicants would, in 
fact, start to break ground and create some of the jobs prior 
to it. So what we receive and what we report is what the 
recipients give us based upon those that we close.
    Mr. Sullivan. But they were considered before they even 
broke ground, some of them were, right?
    Mr. Isakowitz. Yes. I cannot speak to--it happens usually 
when they are breaking ground.
    Mr. Sullivan. Also, Mr. Rusco, in the July 2010 report, you 
state that the DOE loan program's office had not developed 
sufficient performance goals to measure the actual results of 
the loan guarantees against the planned or desired results. Why 
is this significant?
    Mr. Rusco. Well, with any program, we would like to be able 
to go back over time and see how they are doing in achieving 
their goals. And among the goals for the Loan Guarantee Program 
was to create funding for innovative projects, energy projects 
that reduce greenhouse gas emissions that also have a high 
probability of paying back the loan. And under the Recovery Act 
funding, also one of the goals was to create jobs.
    Mr. Sullivan. Well, Mr. Rusco, is the Loan Guarantee 
Program office making any effort to determine whether loan 
guarantees and grants are actually resulting in greater energy 
efficiencies or infrastructure improvements? Yes or no?
    Mr. Rusco. They may be taking steps to do so. We are not 
satisfied with the steps and they have not agreed with most of 
our recommendations.
    Mr. Sullivan. That would be no? Kind of no? It sounds like 
no. Mr. Isakowitz, in the GAO report, DOE states that we will 
revisit the performance goals. Has DOE done so?
    Mr. Isakowitz. I would have to get back to you on that.
    Mr. Sullivan. Could you submit that for the record?
    Mr. Isakowitz. We will.
    Mr. Sullivan. What are the performance goals?
    Mr. Isakowitz. Some of the general I can speak of, and 
again, I would have to get you the details for the record. But 
generally, we have looked at the impact we have in terms of our 
focus on clean energy, in terms of CO2 sequestration 
and on issues on some of the jobs created.
    [The information appears at the conclusion of the hearing.]
    Mr. Sullivan. Does the loan program office plan to go back 
and determine the actual results of these loans?
    Mr. Isakowitz. Yes, we monitor it. In fact, when we close 
the loan, we don't step away from the loan. In fact, we are 
staying very close to the loans throughout the whole repayment 
of the loan itself.
    Mr. Sullivan. Mr. Isakowitz, if the DOE does not close a 
number of the loans soon, it would stand to lose its unspent 
stimulus money, or $2 billion right now, I believe; is that 
right?
    Mr. Isakowitz. We have $2 billion of unobligated funds.
    Mr. Sullivan. And you are going to try to get that out the 
door pretty quick?
    Mr. Isakowitz. We have the demand to get it out the door, 
yes.
    Mr. Sullivan. And the office would need to close these 
loans soon, right, in order for the companies to meet the 
construction deadlines; is that correct?
    Mr. Isakowitz. And we have cued it up just for that, yes.
    Mr. Sullivan. Does the loan program's office intend to 
spend all of this 2 billion? And if so, by what day would it 
need to do so?
    Mr. Isakowitz. Yes, we intend to and we need to do it by 
the statutory date, which is at the end of September.
    Mr. Sullivan. Mr. Rusco, are you concerned by this 
situation?
    Mr. Rusco. Well, we do have concerns about the internal 
controls of the program. We have in every report issued 
recommendations to improve controls and performance measures 
for the program. So there is some concern about--if the program 
were to ramp up the speed of issuing loans, we would like to 
see those controls in place.
    Mr. Sullivan. So, Mr. Rusco, you are still concerned about 
this, aren't you, this situation, how they are measuring it?
    Mr. Rusco. We are working on our fourth report right now.
    Mr. Stearns. The gentleman's time has expired.
    Mr. Rusco. And continuing to find issues that we are 
concerned about, yes.
    Mr. Sullivan. Thank you, sir.
    Mr. Stearns. The gentlelady is recognized from the Virgin 
Islands, Ms. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman. And welcome to 
all of the people on the panel. Today, we have heard from DOE 
that the funds provided by the Recovery Act helped the 
Department and its State, local and private grantees create 
tens of thousands of new jobs. In just the last quarter, those 
grantees reported supporting employment for 43,000 workers. And 
those numbers are quite laudable, but they may understate 
actually the impact of DOE's Recovery Act funding.
    For instance, I know that DOE has always relied heavily on 
both contractors and subcontractors to carry out its mission. 
Yet, as the DOE IG noted in an April 2010 audit report, many of 
the prime contractors reporting Recovery Act hiring to the 
department failed to report any of the job creation that 
occurred at the subcontractor level. So, Mr. Friedman, is that 
correct?
    Mr. Friedman. That is correct. If I may, Ms. Christensen, 
I-- not take exception to it, but your characterization may be 
a little different. According to the rules that have been 
established from the beginning, a subcontractor job creation 
was not to be included in the report. So in fairness, at some 
point, of course, they changed the rules, the rules did change, 
but that was the ``going in'' posture which we felt understated 
the job creation capability of the money that had been spent.
    Mrs. Christensen. So even though it wasn't absolutely 
required initially, the fact that subcontractors may not have 
reported may understate the number of jobs. Because it is my 
understanding from the same report that perhaps the 
subcontractors, the jobs created by them was nearly double that 
by the prime contractors.
    Mr. Friedman. That is one of the interesting aspects that 
we discovered, which was that job creation at the subcontractor 
level may have far exceeded that of the contractor level. So I 
agree with your fundamental point.
    Mrs. Christensen. So you agree that we may have 
significantly underestimated the impact of the Recovery Act 
spending on employment?
    Mr. Friedman. Certainly, as far as that category of 
spending is concerned at that time.
    Mrs. Christensen. And I know that calculating the exact 
number of jobs created by a Federal spending can be 
complicated. Some people suggest that this sort of spending 
might be crowding out private sector employment or bringing 
jobs into the present that would have been created in the 
future. So setting aside the validity of those concerns in a 
time of full employment, Mr. Rusco, are we worried that DOE job 
creation has been crowding out private sector hiring during the 
recession?
    Mr. Rusco. It varies depending on the economic conditions 
in any locality. But in a time when there is high unemployment 
and economic activity is very low, we are in a recession, there 
is much less concern for crowding out than there would be if we 
were at a point of full employment.
    Mrs. Christensen. So during recession, there is a benefit 
to turning potential future jobs into present jobs; is that 
right?
    Mr. Rusco. That is something I really can't comment on. 
That is a choice.
    Mrs. Christensen. And finally, Mr. Isakowitz, do the job 
numbers we have talked about capture all the economic benefits 
of the Department's Recovery Act spending or did that spending 
benefit Americans in other ways as well?
    Mr. Isakowitz. I think that is correct. As Mr. Friedman 
pointed out, in addition to the subcontracts, the way the 
numbers are collected is if there are two people working half-
time on it, it is treated as one person. It also doesn't 
include those that it would call the induced and the indirect, 
like for those who let us say might be a vendor carrying goods 
across country would not be counted and as well as the impact 
on the local economy to, let us say, local restaurants and so 
on, those are not counted. And then again, a lot of what we are 
investing in is, in fact, an investment in the long term.
    So, in fact, when our dollars stop from any of these 
activities, we hope it will stimulate local opportunities for 
small businesses to, in fact--in fact, we spent almost $10 
billion of Recovery Act on small businesses that we think would 
enable a more vibrant economy than had we not been there.
    Mrs. Christensen. Then you have the average savings for 
homes that have been weatherized and other benefits. And I 
remember Dr. Chu speaking just as he became Secretary about 
maybe the lack of a strong record of grand management and 
trained staff at the Department. But it sounds as though from 
what you have had to do to prepare for the spending and the 
monitoring, that the Department is probably in much better 
shape going forward. So there is an additional benefit to the 
Department of Energy, isn't there?
    Mr. Isakowitz. Yes. In fact, we have demonstrated a number 
of best practices, that one of my focuses now going forward is 
to make sure that our ongoing programs, in fact, benefit from 
exactly that.
    Mrs. Christensen. We have a situation in the Virgin Islands 
where perhaps one of the programs is oversubscribed and others 
where our government has passed legislation determining, for 
example, that solar water heaters must be in new homes for 70 
percent of the hot water and rebates should be allowable up to 
50 percent. Is there any flexibility or a possibility, say, for 
those programs that are oversubscribed from moving money from 
one area to another?
    Mr. Stearns. The gentlelady's time has expired. You are 
certainly welcome to answer her question.
    Mr. Chalk. Within the State Energy Program and within the 
Block Grant Program, we can revise activities, as long as there 
is money left and then do some of the things that have been 
oversubscribed and we would have to cut things that have been 
undersubscribed or you don't want to do any longer.
    Mrs. Christensen. Thank you. Thank you, Mr. Chairman.
    Mr. Stearns. The gentleman from Pennsylvania, Mr. Murphy, 
is recognized for 5 minutes.
    Mr. Murphy. This question is for Mr. Isakowitz and Mr. 
Chalk. As you review programs within the Department of Energy, 
how do you assess of a Federal program that is operating now, 
is working efficiently and effectively and it is worth keeping 
money in it versus one that you are going to reduce money in 
that? Can either one of you give me an idea?
    Mr. Isakowitz. Sure. I will just talk more broadly. On what 
we have done up front is we had identified these project plans 
where we identify specific metrics of what we wanted each 
program to achieve. In addition, we identified areas of risk. 
We also identified particular milestones in terms of when they 
would be delivering. And we had set up a system due to the 
unprecedented effort we had in transparency to actually collect 
this information. We have regular what we call deep dive 
reviews where we go over in great detail how we are doing, is 
the recipient delivering as promised. In areas that we see are 
running into issues, we work with the recipient to see how it 
is----
    Mr. Murphy. Recipients of the grants, for example?
    Mr. Isakowitz. Yes. Recipients of grants or contracts to 
make sure that they remain on track.
    Mr. Murphy. Of course, we have heard that some of the DOE 
monies, the 33 billion, are having trouble allocating that out 
or obligating or releasing it. Of course, one of the problems 
made by the administration is that they could rapidly disburse 
these funds. I want to see if we can look at a particular 
agency within the Department of Energy that executed its 
responsibilities from, what I understand in a timely and 
efficient manner which I think would meet those standards. 
Specifically to my understanding, that the National Energy 
Technology Laboratories, or NETL, obligated all of its stimulus 
dollars; is that correct?
    Mr. Isakowitz. Yes.
    Mr. Murphy. I understand they did that pretty effectively, 
on time, on budget, without fraud or any terrible thing. Am I 
correct on that too?
    Mr. Isakowitz. Yes. I want to give commendation not only to 
NETL, but a lot of the rest of the organizations, in fact, were 
able to obligate 99.9 percent at the prescribed deadline.
    Mr. Murphy. So they did a good job disbursing those funds?
    Mr. Chalk. Yes, they did.
    Mr. Murphy. Now, I am concerned about something and perhaps 
you can help me with this. I am concerned there seems to be an 
effort in the President's 2012 budget that is going to transfer 
operations or programs like having experts out in the field 
into Washington, D.C. And in particular, when I look at the 
EERE presidential request of 3.23 billion, it is a 37 percent 
increase over 2011, presidential request. And yet I see NETL is 
projected to receive 14.9 million. It is a $10.6 million 
reduction, which would be about a 50 percent reduction of the 
Federal staff within NETL.
    My concern is here is a program that has done its job, on 
time, on budget, without fraud or abuse and yet--correct me if 
I am wrong, maybe I am misreading this--but it looks like money 
is pulling away from there, expanding into another area. Does 
this indicate that this program is going to be reducing its 
funding and its mission?
    Mr. Chalk. The reduction in program direction, or FTEs of 
NETL, is really symbolic of the decrease of workload, Recovery 
Act. So it peaked over the last 2 years and then in FY 2012, 
when most of the procurements and so forth are completed, it is 
dropping back to the FTE level that it saw prior to the 
Recovery Act.
    Mr. Murphy. But we still have some funds that are yet to be 
disbursed? And where will those be?
    Mr. Chalk. All funds are disbursed.
    Mr. Murphy. Disbursed now? Are there other functions within 
NETL that you are looking to pull out and move to Washington, 
D.C.?
    Mr. Chalk. We are constantly looking at optimal program 
management, whether something should be done in the field or at 
headquarters. That is under constant evaluation every year that 
we prepare for the budget.
    Mr. Murphy. When the President gave his State of the Union 
address, he also talked about clean coal. And I commented to 
him as he is walking up the aisle, I am pleased about that, 
every inch of my district is over coal and natural gas. Do you 
see us moving forward on some programs like NETL which, in the 
past, played a good role in research, et cetera, in coal-
related research? Will those continue to be worked and funded 
and maintained?
    Mr. Isakowitz. Yes. We had in the President's 2011 request, 
and we will see where things come out. But we had important 
investments to make, in fact, in fossil energy and we are going 
to continue to make important R&D investments. When you heard 
the President and the Secretary speak about the need for a 
broad effort in clean energy, clearly coal, clean coal 
particularly and carbon capture sequestration is a key part of 
that. So we have maintained our investment. And, in fact, the 
Recovery Act has been very critical, in fact, to demonstrate 
the very technologies that are important for the future.
    Mr. Murphy. I would be glad to talk with you more and see 
how we can support this future too. I know it is important to 
have headquarters like that in the middle of coal country and I 
know that NETL is in both Pennsylvania, West Virginia. It is 
certainly the heart of everything there and a lot of great 
workers who have spent their careers and the long legacy of 
that across many administrations. And I hope that we can 
continue to look at programs that have been very efficient and 
effective in that and I will be glad to work with you and see 
how we can help on that together.
    Mr. Isakowitz. We would be happy to work with you.
    Mr. Murphy. Thank you, Mr. Chairman, I yield back.
    Mr. Stearns. I thank the gentleman. The gentleman from 
Texas, Mr. Green, is recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Let me briefly talk 
about prevailing wage or Davis-Bacon. In my part of the 
country, we call it prevailing wage. Part of the Recovery Act 
also required to hire local workers or local folks, that if you 
had the skills in the local area to do the work. And I know not 
only was it Davis-Bacon for prevailing wage and that has been 
part of Federal law in construction projects as long as I can 
remember, is that generally true of our witnesses? Prevailing 
wages?
    Mr. Rusco. I am sorry. I don't know the full scope of where 
the Davis-Bacon Act is----
    Mr. Green. Well, maybe it is new to the Department of 
Energy because in other construction projects, it is not new. 
It has been around, I think, since the 1930s. In fact, we have 
had some votes on the House floor in the last 50 years trying 
to remove it. And it typically always wins not to remove it on 
a bipartisan basis. I don't know if that got in the way as much 
because that is required on a lot of Federal projects that they 
do all over the country.
    Let me ask you about some of the concerns about the DOE 
program. H.R. 1 that we had and will continue since we have a 
3-week continuing resolution, cuts the budget of the Office of 
Energy Efficiency by 35 percent from over 2.2 billion to 1.5 
and prevents DOE from spending money for weatherization and 
State energy programs. Could you discuss the consequences of 
the cuts? What is it going to do to both State energy programs, 
but also to home weatherization? I know it has benefited in a 
lot of our districts.
    Mr. Chalk. Yes. Eliminating the weatherization program is 
going to be devastating. As I said earlier, it has been a 
tremendous effort to get the program back on schedule. We are 
supposed to be completed in March of '12. And without '11 
appropriations--and there is tremendous lead time that is 
required. We need FY '11 appropriations because this is kind of 
a cash business, weatherization, materials need to be bought 
prior to the production year that the States have, which is 
usually right in the middle of our fiscal year.
    So it is a little complicated. But if we don't get the FY 
'11 funding, we are in jeopardy of furloughing about 8,000 
people, about 34,000 homes that won't be weatherized and, 
again, the investment ratio here is for every dollar that the 
Federal Government puts in, there is about a $1.80 of savings 
out. And this has been well-founded over the years. So we will 
lose that savings for low-income people who, again, they pay a 
disproportionate amount of their income on energy bills, about 
five times what non-low-income people pay. This will be pretty 
devastating to the weatherization network, as well as the low-
income families. We jeopardize losing our training centers 
which--recognizing some of the startup in workmanship issues, 
most of those are behind us. Tennessee, for instance, is doing 
very well. We rate every State on how well they do in 
monitoring. Tennessee scored very well on our last site visit 
for monitoring.
    So we feel things are very much on track. And 42 out of our 
59 States and territories and Indian tribes, 42 out of 59 will 
be totally out of money in the middle of FY '12 with their 
annual money and their Recovery Act money. So if the FY '11 
money does not come, then we see significant consequences of 
essentially a cliff, where work just stops, we lose the 
infrastructure related to training, certifying inspectors and 
training the actual contractors to do the work.
    Mr. Green. It is my understanding about 300,000 homes thus 
far has been weatherized using Recovery Act funds.
    Mr. Chalk. Well, if you include the January numbers, it is 
about 350,000. So we are past the halfway point.
    Mr. Green. I am real familiar with the training centers. I 
have one in my district. Of course, my folks from up north 
wonder why would we weatherize in Texas. But come to Texas 
between May and September and you will know why we need to 
weatherize, because it gets pretty warm there.
    About the State efficiency programs. I know I only have a 
few seconds. State offices use DOE funds to leverage 
investments and for efficiency upgrades. I understand it is 
estimated for every 50 million in State energy program funding, 
it produces 333 million in annual energy savings costs and 
leverages another 585 million for energy related economic 
development. Is that number true?
    Mr. Chalk. I would have to get back to you on the record 
for that number. I would say that the State Energy Program, as 
well as the Energy Efficiency Block Grant Program really are 
reinvesting for the future. They are more long-term payoff than 
we typically think--the Recovery Act is immediate stimulus, 
like weatherization and the environmental restoration that we 
are doing. These programs that you are mentioning do have 
tremendous lifecycle savings and are really programs investing 
in the future.
    [The information appears at the conclusion of the hearing.]
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Stearns. The gentleman's time has expired. The 
gentleman from Texas, Dr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman. And, Mr. Rusco and 
Mr. Friedman. Again, I apologize also for being out of the room 
for part of your testimony today. And if I am asking you 
something that has already been asked, please indulge me and 
don't embarrass me by pointing it out. On the loan programs, 
the loan office program, it is not a huge sum of money by 
Washington standards, but it is still a big bunch of money, 
$2\1/2\ billion, is that about right?
    Mr. Rusco. That is correct.
    Mr. Burgess. So this office is currently the subject of 
some investigations within this committee and it is the object 
of some interest by yourselves; is that correct?
    Mr. Rusco. Yes. We are currently doing a review of the 
program.
    Mr. Burgess. Now, I think one of the things that has raised 
some concern is that the loan program's office issued a loan 
guarantee to one company prior to receiving a single report 
from the external reviewers whose job it was to evaluate the 
soundness of the loan guarantee.
    Mr. Rusco. I believe that they issued a conditional 
commitment prior to receiving a final financial or marketing 
report and then issued the loan before having completed--I am 
sorry--a legal report.
    Mr. Burgess. Now, there is a time commitment to money to be 
received under this program, that the construction on the 
projects must begin by September of this year; is that correct?
    Mr. Rusco. That is correct.
    Mr. Burgess. Are you concerned that any other loans might 
be fast-tracked in the same nature?
    Mr. Rusco. Our concerns are broadly about the way the 
program has been set up, both to follow a consistent and 
rigorous due diligence process to make sure that before they 
issue loans, they have fully gone through their process and 
have fully vetted all of the issues that they have that the 
program has identified as important, and we found in our last 
report that for a number of loans that went to conditional 
commitment, they had not finished all of the steps of their due 
diligence process.
    Mr. Burgess. Well, is there any pressure--pressure is not 
quite the right word. But if you have got to be submitted and 
constructing by September, that is a fairly condensed time 
line, 6 months from now. Is that condensation of the time line? 
Is that putting any additional pressure to bear on that?
    Mr. Rusco. I cannot speak to exactly where the program is 
in terms of the process of all of the existing loan 
applications. I can say that the pace at which they have been 
able to issue loans up to date would, if that pace were to 
continue today, would definitely not make it.
    Mr. Burgess. And then what would happen, those loans would 
just go away or be reclaimed by the Department of Energy or by 
the Federal Treasury?
    Mr. Rusco. I think they go back to the Federal Treasury.
    Mr. Burgess. Mr. Isakowitz, is it appropriate that this 
committee is concerned about the loan program's office putting 
taxpayer dollars at risk by guaranteeing loans without doing 
the due diligence first?
    Mr. Isakowitz. First, I want to be really clear. We have 
set up a very exacting process of due diligence as we go 
through it. I think the report that you are referring back to 
was from about 9 months ago. We did not agree with that 
particular finding. Just to be clear, there is a major 
difference between what we call a conditional commitment and a 
closing. A closing is the key milestone. That is when we are 
committing and obligating the funds for that particular 
project. At a conditional commitment, we have just identified 
the issues that we expect the applicant to address before we 
close. So I believe in that particular report what they raised 
were some issues that some of the reports were not fully in 
hand at the time of the conditional commitment. But we 
understood that at the time and we were able to address that 
risk sufficiently so that we had told the recipient that before 
we close on the loan, all the required reports needed to be in. 
So we are not cutting any corners to get to closing.
    Mr. Burgess. What about now? There is an abbreviated time 
line between now and September. Does that put additional 
pressure on the program?
    Mr. Isakowitz. We have had the opportunity to either close 
or get the condition of commitment on 16 projects. And we have 
greatly improved the time line without cutting any corners in 
terms of getting to it. We had actually staffed up accordingly 
2 years ago. We had maybe 10 or 15 people in the office. Today, 
we have over 100. In fact, we have put the processes in place 
to address the demand that we see in terms of getting to those 
funds by the end of the fiscal year.
    Mr. Burgess. Let me pose a question to the Inspector 
General. So we are told that this is kind of not a big deal, 
these are trivial. What is your response? Do you feel that this 
is a misplaced concern on the part of the committee?
    Mr. Friedman. Well, to put it in some perspective, Dr. 
Burgess, essentially the authority under the loan guarantee 
program is $71 billion. So there is a significant amount of 
money at risk. I cannot address the particular specific issues 
that you are raising, but it is obviously for that reason that 
both deserves the attention of the Department and the attention 
of all of the oversight bodies to make sure that the taxpayers' 
risks are protected to the extent possible. Obviously you 
wouldn't need a government guarantee if there was no risk. So 
there is some element of risk inherently in these programs. So 
I think your probing is appropriate and that is basically all, 
I guess, I can add.
    Mr. Burgess. All right. Thank you, Mr. Chairman.
    Mr. Stearns. I thank the gentleman. We are going to allow 
Mr. Gardner to finish up and then we are going to close the 
hearing. I think we have had good timing with the votes. I just 
would like to ask for a unanimous consent request to place an 
audit report from Tennessee and the Department of Energy IG 
report into the record. Hearing no objection, so ordered.
    [The information follows:]



    
    Mr. Stearns. Mr. Gardner, you are recognized for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman, and the witnesses 
here today. Just a couple of quick questions for Mr. Friedman. 
In one of your audit reports, you stated the State resources 
have been significantly strained due to the administration of 
DOE stimulus dollars; is that correct?
    Mr. Friedman. That is correct. And without meaning to be 
too clever, we have characterized this as attaching a garden 
hose to a fire hydrant. The money is extraordinarily large, in 
many cases.
    Mr. Gardner. And DOE also then had to ramp up as a result 
to manage the DOE stimulus portions; is that correct?
    Mr. Friedman. That is correct.
    Mr. Gardner. Is that the same hose to fire hose----
    Mr. Friedman. Absolutely.
    Mr. Gardner. Very good. In your testimony, you state that 
you are now in the process of--and I quote--evaluating 
contingency plans to address problems with transitioning to a 
post Recovery Act funding posture. The immediate concern you 
identify is how the Department will deal with the significant, 
again, in quotes, ``significant downsizing of the contractor 
workforce.'' Do you have any estimate of many contractors will 
lose their jobs at DOE after Recovery Act funding runs out?
    Mr. Friedman. I don't have that.
    Mr. Gardner. Mr. Isakowitz, as CFO, can you comment on that 
question?
    Mr. Isakowitz. Many of these activities we expect and hope 
would continue, that the economy would, as was the intent of 
the Recovery Act, to be targeted and temporary would allow 
activities to follow from that. To speak to some of the 
specific ones, I am going to turn to Inez who can speak most 
directly to your question.
    Ms. Triay. Our approach in the Environmental Management 
program was to create temporary jobs and to train those workers 
to work in the important field of nuclear and radioactive 
contamination areas. So what we did was to concentrate on 
footprint reduction, which then creates assets of now 
liabilities in the communities where we have installations in 
the Environmental Management complex so that the communities 
could enter into economic development efforts using the assets 
that the Environmental Management program through the Recovery 
Act was able to put at their disposal.
    We intend to reduce the active cleanup footprint by 40 
percent by the end of 2011. In addition to that, of course, we 
have the small business development that we have been able to 
accomplish. We have awarded $1.8 billion out of the $6 billion 
to small business in the Environmental Management Recovery Act. 
We have been able to create infrastructure in the small 
businesses to be able to compete in the national and 
international nuclear industry.
    Mr. Gardner. But in terms of estimates of how many 
contractors will lose their jobs at DOE, do you have any?
    Ms. Triay. In the Environmental Management program, we are 
talking about 2,000 jobs just like was stated at the beginning.
    Mr. Gardner. Thank you. Mr. Rusco, GAO has spent the last 2 
years evaluating how States and localities are implementing the 
stimulus. Now that we are nearing the end of its funding in 
2012, what impact will this have on the States? And will those 
workers that the States added through these programs be 
furloughed?
    Mr. Rusco. In some cases, we are going to see with the end 
of the Recovery Act, we are certainly going to see a cliff 
effect of jobs ending, and environmental management is one such 
case. Already we are seeing reductions in employment in the 
fourth quarter of last year over the third quarter and expected 
decreases in employment after that. So if we go back to the 
regular annual budget for that, then there will be a large 
drop-off in jobs at the sites.
    Mr. Gardner. Thank you. And, Mr. Isakowitz, I think in 
response to Mr. Sullivan's question, responded if the primary 
job, or the primary purpose of the stimulus was to create jobs. 
And I believe your answer was yes; is that correct? I think 
that was directed to you.
    Mr. Isakowitz. It is to create jobs and make long-term 
investments for our economy.
    Mr. Gardner. There was a grant that was awarded by the 
Department of Energy to a city in my district that was over $2 
million and it is less than 50 percent completed and it says 
zero jobs were created. This is according to the Web site that 
reveals information on grants awarded and how many jobs have 
been created. How many awards have been granted that have 
created zero jobs by the DOE?
    Mr. Isakowitz. I cannot speak to that specific one. But in 
every case, the recipient who we have worked with identifies 
back to us how many people have, in fact, been employed as a 
result of the dollars that they received. Anybody who receives 
a dollar from us clearly has created some kind of work that 
they should be reporting back to the system. But we would be 
happy to get back to the specific example for the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Gardner. Thank you very much. And in terms of--I yield 
back my time. Thanks.
    Mr. Stearns. I thank the gentleman. We just want to get to 
vote. I will just close. Mr. Friedman, I put into the record 
your letter of October 14th where you had indicated--and this 
is considering the State of Illinois' weatherization assistance 
program. You said, ``Our testing reveals substandard 
performance in weatherization workmanship, initial home 
assessments and contractor billing. These problems were of such 
significance, they put the integrity of the entire program at 
risk.''
    So that was put in. I want to the thank our witnesses for 
coming today, for the testimony and Members for their devotion 
to this hearing. The committee rules provide that Members have 
10 days to submit additional questions for the record to the 
witnesses. And with that, the subcommittee is adjourned.
    [Whereupon, at 3:03 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]





                                 
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