Funds Under Energy Award Used for Alcohol, Spa Services

February 20, 2018 | By Jerry Ashworth | Post a Comment

liquor-sign-1441923Here we go again! If I had a nickel for all the articles I’ve written and read about the improper use of federal grant dollars, I’d be a rich man by now. Even with all the efforts now to ensure that recipients have internal controls to ensure federal funds are administered properly, you still have some instances of blatant mismanagement that simply prove irritating.

For example, consider a recently released Department of Energy (DoE) Office of Inspector General (OIG) audit report of the Texas Clean Energy Project. DoE’s Office of Fossil Energy awarded Summit Texas Clean Energy LLC a $1.7 billion cooperative agreement in January 2010 under the national Clean Coal Power Initiative. Along with finding that the Office of Fossil Energy had not effectively implemented ongoing invoice review controls it put in place the manage the risks associated with the project, OIG also noted more than $2.5 million – yes, $2.5 million – in questioned costs that Summit had charged to the project that the OIG deemed as potentially unallowable.

Here’s where it gets interesting. OIG identified more than $1.3 million in charges for questionable or prohibited travel-related expenses, including more than $650,000 in consultant charges for items such as a spa service, alcohol, first-class travel, limousine services, receipts in foreign currency and business meals that were prohibited or not fully substantiated. This is shameful and is clear neglect of proper oversight. The audit goes on to say that almost half of the $650,000 was for one consulting firm, “which was particularly concerning because we noted instances where travel expenses for Summit employees were included on this consultant’s invoices, creating the potential for double billing of costs.”

Still more from the OIG audit: “We also identified about $325,000 in costs that did not appear to be business-related expenses such as catering and banquet room rental expenses, catering on a private jet and travel expenses to attend a charity event. Under federal regulation, a cost is considered reasonable if it is necessary for the conduct of the contractor’s business or contract performance. Because these events appeared to be social in nature and were not necessary for contract performance, we consider them questionable.”

Needless to say, the OIG, among its other recommendations, simply urged DoE to resolve the questioned costs noted in the report. The Office of Fossil Energy agreed with the recommendation and stated that a contracting officer would look into these costs. If found that these prohibited charges were indeed made inappropriately, the recipient should be forced to repay them in full. Such flagrant abuses of federal funds should not be allowed to occur. Federal awards are not free money; they are intended to be used for a specific purpose – not alcohol, limos and spa services.

What is your reaction to the findings in this audit? We’d love to hear from you.


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