State’s slow start puts federal stimulus funds at risk, audit finds

California could lose tens of millions of dollars in job-creating federal stimulus money for home weatherization projects because the state and several local agencies — including the Los Angeles Department of Water and Power — have failed to perform as promised, according to an audit released Monday.

Two years ago, California was awarded nearly $186 million to help low-income homeowners make their houses more energy-efficient. But as of April 30, the state had spent $68 million, the audit found.

California State Auditor Elaine Howle, whose office conducted the review, warned that California could be forced to forfeit more than $37 million early next year if it doesn’t quickly pick up the pace of distributing grants.

Howle blamed a host of factors for California’s sluggish spending of the federal money, part of a $5-billion economic recovery allocation approved in 2009 to put people to work insulating attics, weather-sealing windows and making other energy-saving improvements on nearly 590,000 homes nationwide.

The state agency charged with allocating the money to local governments and utilities was slow to award the contracts and establish standards for the type of improvements that were to be made, Howle said. That resulted in less work than intended being done on some homes, the audit found. Moreover, some cities given grant money fell behind in approving projects.

The audit pointed to a dismal record in several cities, including San Francisco, Oakland and Los Angeles. San Francisco spent about $87,000 as of April 30, but had not weatherized a single home. Neither had Oakland, which had spent $228,000.

In Los Angeles, the Department of Water and Power had planned to weatherize 806 homes by April 30, according to the audit. But despite spending $2 million, it had weatherized 78 homes.

A DWP spokesman said he did not believe the utility had promised to complete 800 homes in that period. He said starting any new program takes time, but that the utility had trained 67 employees — including 41 new hires — in weatherizing and expects to meet its goal of making 2,544 homes more energy efficient by March 31.

“This is a new program and it took us a while to ramp up, but we’re very excited about it,” said Joe Ramallo. “We’re going to meet our goals and believe strongly that this program will ultimately serve as a state and national model for others to follow.”

The agency in charge of the state’s program, the California Department of Community Services and Development, originally estimated that it would spend $2,500 to weatherize a home. But an average of $1,588 per home was actually spent, the audit said.

A recent inspection by federal officials of four weatherized homes found that three received minimal improvements, including fluorescent lighting, pipe insulation and low-flow showerheads. Only one of the homes had been outfitted with more extensive weatherization, including attic insulation and window and door sealing.

A state spokeswoman said officials are “working to address concerns raised in the report” and avoid any loss of federal funds.

Last week, the director of the agency running the program acknowledged in a letter to federal officials that the state had fallen behind and requested a one-year extension of the deadline to distribute the grant money. “California will not be able to spend all of the funds by the current grant deadline,” acting Director John Wagner said.

He cited difficulty in “taking on this large increase in funding over a very short period of time.” Before the $186-million stimulus windfall, he noted, the agency had received about $6 million a year for weatherization programs. And a federal government delay in deciding how much weatherization workers should be paid contributed to a slow start, he said.

Nationally, the program has struggled to get going. A 2010 report by the Department of Energy inspector general found that less than 8% of the allotted funds had been spent and few homes had actually been weatherized.

kate.linthicum@latimes.com