Energy Department watchdog says fraud could hit Inflation Reduction Act, blames Secretary Granholm

The government watchdog overseeing the Department of Energy sounded alarm bells to senators Thursday that the Inflation Reduction Act is ripe for fraud and could benefit America’s adversaries.

DOE Inspector General Teri L. Donaldson laid direct blame on Secretary Jennifer Granholm, testifying to the Senate Energy Committee that the Biden official is hampering her ability to conduct oversight of the massive clean energy spending law by withholding funding to her office.

“I am the poorest funded inspector general in the federal government, viewed proportionately,” Ms. Donaldson said. “As we sit here today, I do not have the support of the secretary in seeking to transfer some of those already appropriated funds over to the Office of the Inspector General.”

Ms. Donaldson continued: “That’s unfortunate, because at the end of the day, inspectors general don’t lose money — they make money. The more you audit, the more you recover.”

But the Energy Department told The Washington Times that its hands are tied by the appropriations authority laid out by Congress and that it is unable to the inspector general any funds that are meant to implement laws.

The testimony from Ms. Donaldson, who was appointed by former President Donald Trump, echoed concerns from Republicans and Senate Energy Committee Chairman Joe Manchin III, West Virginia Democrat.

They fear the $400 billion appropriated under the Inflation Reduction Act and the 2021 Bipartisan Infrastructure Act for loans to clean energy companies could increase U.S. dependence on countries like China for critical minerals.

“You have massive amounts of money moving quickly,” Ms. Donaldson said. “I cannot say enough that this is a very risky landscape.”

She said DOE has established a vetting center but that she’s “gravely concerned” about funding landing in the wrong hands because the center has only three employees after six months, no written procedures and no clear path or criteria for vetting projects.

“They have a very, very long way to go. That’s a huge concern,” Ms. Donaldson said.

Mr. Manchin said that Congress or Ms. Granholm needs to address the funding shortfall.

“I don’t know if [Congress] has to direct it for that,” Mr. Manchin told The Washington Times. “But you would think that you would have enough oversight — and as the bill has grown, the amount of money that went over there — that [there are] funds to basically make sure that we’re doing it right.”

Other DOE officials who testified, including Loan Programs Office Director Jigar Shah and Under Secretary for Infrastructure David Crane, tried to tamp down fears.

Mr. Crane backs more funding and noted that President Biden’s 2024 budget request calls for a 92% increase for the inspector general to $165 million from $86 million.

An Energy Department spokesperson said the agency supports Mr. Biden’s request. 

Mr. Shah said his department, which oversees and approves applications from private clean energy businesses for government loans, “has an ability to do due diligence on these projects that many private sector banks don’t have” because many of the technologies originated from prior DOE-funded ventures. He said the due diligence process takes an average of 12 months per applicant.

“We never take ‘will it work or won’t work’ risk,” Mr. Shah said. “We do take execution risks, scale-up risks, a lot of other risks that are real risks that we have to do due diligence on.”

Solyndra, the solar panel start-up that received more than $500 million in loans under the Obama administration before going belly-up, remains fresh on the minds of Inflation Reduction Act critics concerned about who receives taxpayer money.

The Loan Programs Office was created in 2005 with the intent of, as Mr. Shah stated, getting energy technology commercialized when the private sector doesn’t want to take the financial risk.

“Our remit is only on American soil,” Mr. Shah said. “We can only find projects that are scaling up technology here, and we have been active across the board … in nuclear power, advanced fossil projects, hydrogen, renewables and many other sectors.”