Fossil Fuels

Ways to Strengthen Controls Over Clean Coal Technology Project Costs Gao ID: RCED-93-104 March 31, 1993

The Department of Energy's (DOE) program for clean coal technology, under way since 1986, has earmarked $2.75 billion to produce innovative technologies that use coal in a highly efficient, environmentally sound, and economically competitive way. DOE has adequate procedures and has made a good effort to review the reasonableness of industry sponsors' projected costs before projects began. In all but one case, project files contained information on how questionable cost estimates had been resolved. After projects were under way, however, incurred-cost audits were not done promptly to ensure that sponsors submitted only allowable costs for reimbursement. Options exist that could yield more timely audits. DOE could also better protect the government's interest by withholding part of federal project funds until necessary cost records are provided and incurred-cost audits are finished. DOE allows sponsors to include third-party contributions in the sponsors' share of project financing, rather than sharing such contributions with DOE, a practice that increases DOE's investment and financial risk in projects while decreasing the sponsors' investment and risk.

GAO found that: (1) DOE effectively assesses project cost estimates during preaward reviews; (2) DOE does not timely perform audits of incurred project costs because the Defense Contract Audit Agency (DCAA) has extensive audit backlogs and it is reluctant to use independent public accountants (IPA); (3) DOE does not obtain timely cost data needed for some audits; (4) DOE permits project sponsors to include third-party cash and in-kind contributions in their share of project financing, which significantly reduces their direct investment in projects; (5) DOE permitted one sponsor to claim an in-kind contribution for donated equipment used in a cost-sharing arrangement on another federally assisted project; and (6) DOE could reduce the government's expenditures and increase the sponsors' incentive to meet project costs and performance goals by sharing third-party contributions with project sponsors.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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