Colorado Energy Office has no idea how much its programs cost

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Greg Campbell Contributor
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A scathing audit of the Colorado Energy Office, a cornerstone of the state’s efforts to promote clean and renewable energy initiatives, shows that it’s been so poorly managed over the past six years that it can’t demonstrate that any of its 34 energy-related programs — which cost $252 million in state and federal funds — have been cost effective.

The Office of the State Auditor found that the Colorado Energy Office (CEO) doesn’t maintain annual budgets for any of its various programs and can’t say what they cost or what was spent on them.

In several cases, staff members don’t even know what some programs’ goals are.

The audit found that contractors aren’t properly monitored, paperwork is missing critical information and the staff has barely been trained.

It also found that the CEO’s directors and staff racked up more than $87,000 in questionable expenses, including $13,000 in travel by former directors that wasn’t properly approved, and one instance in which CEO paid $1,500 for a former employee to attend an energy-related certification training a month after he’d resigned.

“All together, the issues we identified lead us to question CEO’s ability to implement programs and projects successfully,” the audit states.

The CEO has been around since 1977, but shifted its focus to green energy initiatives, renewable energy and clean-energy jobs when Democratic Gov. Bill Ritter took office in 2007. One of Ritter’s priorities was what he called the “new energy economy,” which emphasized development of wind and solar industries.

The bulk of CEO’s revenue comes from the federal government, particularly over the past three years, when it received $144 million in Recovery Act funds from 2009-2012 to be spend on energy initiatives.

When he left office in 2011, Ritter was hired to head the privately-funded Center for the New Energy Economy — at a salary of $300,000 per year — at Colorado State University. Ritter has been widely reported as being among those considered for U.S. secretary of energy.

The audit, which was requested by state lawmakers last year after $9 million of CEO money couldn’t be accounted for, covers the period from 2007-2012. For the bulk of that time, from 2007-2010, the agency was headed by Ritter appointee Tom Plant, a former lawmaker who now runs a clean-energy consulting company.

The audit describes an agency in complete shambles that fails to adhere to even the most basic operational standards.

“We did find problems in all the areas that we looked at,” said auditor Michelle Colin.

Most glaring is that staff members didn’t know how much any of their 34 programs cost or how much had been spent on them. Many programs weren’t being properly monitored or their progress documented.

In speaking to staff members responsible for eight projects, auditors found the staffers poorly informed about their projects, to the point where some couldn’t even say what the projects were meant to do.

“For three of the eight programs, program managers could not identify the program goals and therefore could not say whether the goals had been achieved,” the audit states. “Additionally, the program managers could not identify when their programs had been established, or how or why each program was created. …”

“If a program manager does not have access to basic fiscal and performance information about his or her program, he or she will be unable to make well-informed program management decisions,” the audit states.

State Sen. Steve King, a member of the Legislative Audit Committee, said the audit shows that CEO acted as Ritter’s “slush fund” that gave him the ability to “move money wherever it needed to be moved.”

“It’s pretty apparent that that is true,” he said at Tuesday’s committee meeting. “The idea that you have eight program mangers and none of them could identify budget or spending, it’s apparent that there wasn’t best practices under our previous administration.”

Auditors also examined payments to contractors and found a similar laissez-faire approach to details, such as failing to require that contractors submit regular progress reports, a requirement for CEO to continue paying the contractor.

Of the 22 contracts examined during the audit, nearly all had missing or incomplete information, including dates, the purpose of the contract and the correct amount of the contract.

Thirteen of the contracts examined, with a total value of $42 million, were missing required paperwork, but CEO still made payments on some of them.

“(We) found that for 10 expenditures totaling $1.5 million, the contract monitor authorized payment without adequate supporting evidence of contractor progress,” according to the audit. “For two contractor payments totaling about $44,000, payment was made without any evidence of contractor reports for the period. For the remaining eight payments totaling about $1.45 million, the contract file did include some progress reports, but the reports were not dated and thus we could not determine whether the reports supported the payments.”

The shoddy record-keeping extended to expense reports meant to justify payments for staff training, travel and other costs. Paperwork for such expenses was often incomplete, such as a $25,000 expense that was listed only as being for “2008 Membership,” but with no further documentation as to who or what the membership was for.

An expense report for a $1,400 roundtrip flight on the state plane between Denver and Alamosa for a former director and a staffer — which would have cost $236 if they drove both ways— includes no information on why the state plane was needed or what the trip was for.

In four cases, approval for directors’ travel expenses was signed by subordinate employees when they should have been approved by the governor’s office.

The audit notes that while none of the transactions it examined were found to be fraudulent, “giving an employee the authority to approve his or her supervisor’s travel and other expenditures … places that employee in a difficult position and increases the risk of inappropriate expenditures.”

The audit places the blame for the office’s multiple shortcomings on myriad factors, including priorities that change according to new laws and directives from the governor’s office; heavy staff turnover; a lack of written policies and guidelines; and a lack of training for employees, who told auditors they learned their jobs through “trial by fire.”

“Ultimately, we were unable to conclude on whether, overall, CEO’s programmatic efforts have been effective or valuable because of the lack of data and data management systems noted throughout this report,” the audit states. “Without program data, data systems, or historical staff knowledge to inform the audit findings, we cannot say, and thus CEO cannot say, whether or to what extent the office has operated as an effective unit.”

CEO agreed with all of the recommended changes — which amount to a near revamping of everything from record-keeping to budgeting — but disagreed with the audit’s opinion that its programs haven’t been cost-effective.

“We do not feel it is an accurate categorization to say that there was no proof that $252 million was spent cost-effectively,” the agency wrote in response. “We submit that the issue is not one of cost-effectiveness, but more a result of the lack of documented program processes and a failure to connect specific program outcomes to dollars expended.”

Interim director Kevin Patterson told the Legislative Audit Committee that he has already begun to fix the problems identified in the audit and promised better performance in the future.

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Greg Campbell