An independent audit of federal loan guarantees that backed such alternative energy projects as now-failed solar equipment maker Solyndra failed to turn up the waste and incompetence that critics said riddled the programs.
But the audit showed that laws establishing the Energy Department programs lacked adequate provisions for thorough monitoring and oversight of the loan guarantees once they were approved.
One program created in 2007 did not “provide any requirements regarding governance and monitoring of loans after closing,” the report said. “Neither the statutes nor the regulations governing the programs specify internal or external oversight or reporting requirements.”
The Obama administration, under fire for approving guarantees for loans to troubled Solyndra, seized on findings that the Energy Department needed to hold $2.7 billion in reserve for possible losses on the programs, not the $10 billion that Congress previously had allocated for a reserve.
“The report confirms that the overall loan portfolio as a whole is expected to perform well and holds less than the amount of risk envisioned by Congress when they designed and funded the program,” White House spokesman Eric Schultz said.
Administration critics, however, dismissed the audit as a whitewash.
“This is less a report than an umbrella to deflect the criticism that’s pouring down on the administration,” Rep. F. James Sensenbrenner Jr. (R-Wis.) said. “The consultants didn’t even evaluate” the Solyndra loan and another company’s controversial loan. “How can an evaluation be ‘independent’ if the administration controls its content?”
The report said the administration did not exercise control over the audit team’s work.
The audit, managed by Herb Allison, the former Treasury official who oversaw the federal bailout program, came in response to mounting criticism over the bankruptcy of Solyndra, the Fremont, Calif., firm that received a $535-million loan guarantee in 2009. The company filed for bankruptcy in September 2011.
Solyndra’s bankruptcy gave rise to allegations that the Obama administration had wasted hundreds of millions of dollars in public money to advance what Republicans said was a failing clean-energy agenda.
The report’s assessment of the loan programs was in some ways more optimistic than the Energy Department and Congress had expected. The loan guarantee programs have allocated about $24 billion, but the 30 projects that have won guarantees have only drawn down a third of that sum as they continue to ramp up.
The report recommended clearer oversight guidelines and new mechanisms so that if a company begins to crumble after getting its loan guarantee, as Solyndra did, there would be “early warning systems” in place.
The audit called for the creation of a chief risk officer and a risk management unit at the Energy Department independent of the loan programs to monitor them and the guarantee recipients.