Department of Agriculture and Consumer...

Department of Agriculture and Consumer Services

Adam H. Putnam, Commissioner

Operational Audit Office of Energy

Report Number IA 1112-02

July 2012

Office of Inspector General Ron Russo, Inspector General

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TABLE OF CONTENTS

Executive Summary ............................................................................................ 1

Objectives, Scope and Methodology .................................................................. 7

Office of Energy ................................................................................................. 9

History ........................................................................................................... 9

Program Responsibility ............................................................................... 10

Energy Initiatives .............................................................................................. 11

State Funded Energy Initiatives ................................................................... 11

Federal Energy Initiatives (Non-ARRA Funded) ....................................... 13

ARRA Funded Energy Initiatives................................................................ 14

State Energy Program (SEP) ................................................................ 17 Energy Efficiency and Conservation Block Grant (EECBG) ............. 28 Energy Assurance Grant Program ....................................................... 33 Rebate Programs .................................................................................. 34

Results and Recommendations ......................................................................... 37

Appendix

A. ARRA Funding by State/Territory .............................................................. 53 B. ARRA Funding of Energy Initiatives by State/Territory ............................ 54 C. Management Response ................................................................................ 55

Office of Inspector General Page 1

Operational Audit of the Office of Energy

Executive Summary --------- On July 1, 2011, after the passage of House Bill 2156, the Office of Energy (OOE) was transferred from the Executive Office of the Governor to the Department of Agriculture and Consumer Services (Department). In an effort to thoroughly evaluate the various energy programs, Adam Putnam, Commissioner of Agriculture, requested that the Office of Inspector General (OIG) conduct an audit of the OOE. The purpose of this audit was to evaluate the overall effectiveness of the OOE in its implementation and oversight of the energy programs, grants, and activities under its purview.

Additionally, this review evaluated energy grants to determine if the contractually stated goals were reached, if the anticipated investment returns were realized, and if there were indicators of fraud or waste. This audit reviewed agreements executed or active between January 1, 2009 and March 31, 2012 and selected actions through May 16, 2012.

OVERVIEW The audit team examined the grant agreements of all five grant programs and the rebates in all four rebate programs, totaling $219,748,384. The five grant programs included 176 grants, the majority of which (129) are ongoing, with 32 terminated or in process of termination and 15 (10%) completed, as shown in the tables below. Additionally, the OIG conducted on-site visits at 15 grant recipient locations.

Department of Agriculture and Consumer Services

Office of Inspector General

July 2012 Report No. IA 1112-02

Overview of Grant Programs* As of March 31, 2012

PROGRAMS ONGOING COMPLETED TERMINATED** TOTAL

State Funded Energy Initiatives 7 7 12 26 Federal Non-ARRA Energy Initiatives 2 4 0 6

ARRA Funded Energy Initiatives: State Energy Program (SEP) 79 1 18 98 Energy Efficiency and Conservation Block Grant (EECBG) 39 3 2 44 Energy Assurance Grant Program 2 0 0 2

TOTAL 129 15 32 176

*This table does not include vendor contracts or the Energy Economic Zone Program. ** Terminated or in process of termination.


During the period audited, the OOE administered four rebate programs that issued a total of 129,333 rebates, amounting to $61,173,765, as shown in the table to the right.

Grant recipients1 were provided funding either through state or federal dollars, which included the American Recovery and Reinvestment Act (ARRA). The programs collectively have expended 60% of funding, as shown in the table below.

1 For purposes of this report, a recipient is any organization awarded grant funds from the OOE.

Overview of Awarded and Expended Amounts for Grants and Rebates*

PROGRAMS

NUMBER OF

GRANTS/REBATES

AMOUNT AWARDED

AMOUNT EXPENDED

AS OF 3/31/12 PERCENT

EXPENDED

State Funded Energy Initiative Grants 26 $44,768,368 $20,963,505 47%

Federal Non-ARRA Energy Initiative Grants 6 6,185,124 6,044,177 98%

ARRA Funded Energy Initiatives: ENERGY STAR Appliance Rebates (rebates and bonuses) 113,890 15,047,717 15,047,717 100%

ENERGY STAR HVAC Rebates** 4,268 6,402,000 6,402,000 100% State Energy Program (SEP)

Grants 98 78,184,588 32,689,970 42% Solar Rebates 11,109 39,394,048 39,394,048 100%

SEP TOTAL

117,578,636 72,084,018 61%

Energy Efficiency and Conservation Block Grant (EECBG)

Grants 44 28,106,968 10,143,288 36% Plug-In Hybrid Rebates 66 500,000 330,000 66%

EECBG TOTAL

28,606,968 10,473,288 37%

Energy Assurance Grant Program 2 1,159,571 387,906 33%

TOTAL

$219,748,384 $131,402,611 60% * This table reflects the amounts awarded and expended to recipients and excludes vendor payments and administrative cost. ** Approximately $3,993,756 of the State Energy Program funds was used for the ENERGY STAR HVAC Rebate Program.

Overview of Rebate Programs

REBATE PROGRAM NUMBER ISSUED

AMOUNT ISSUED

ENERGY STAR Appliance Rebate Program (rebates and bonuses) 113,890 $15,047,717 ENERGY STAR HVAC Rebate Program 4,268 6,402,000 Solar Rebate Program 11,109 39,394,048 Plug-In Hybrid Electric Vehicle Conversion Rebate Program 66 330,000

TOTAL 129,333 $61,173,765


COMPARISON OF FLORIDA’S OOE TO ENERGY OFFICES OF OTHER STATES

Florida received the 3rd largest federal ARRA energy award, behind California and Texas. According to the United States Department of Energy (DOE), out of the 56 states/territories, Florida ranks 49th in the percent of ARRA funds expended as of March 31, 2012.

The OIG compared the amount of ARRA funds expended by Florida’s OOE to amounts expended by nine other states receiving the highest award amount from the DOE. The states selected for comparison were California, Georgia, Illinois, Michigan, North Carolina, New York, Ohio, Pennsylvania and Texas.

As reported by the DOE, when compared to the nine other states, Florida ranked 8th in overall ARRA expenditures as a percent of the award amount, with a total of 60% of its ARRA dollars expended, as of March 31, 2012.

This comparison also determined that Florida’s 61% expenditure of the $126 million State Energy Program (SEP) funds, tied Texas for last. With respect to the Energy Assurance Grant Program, the OOE expended 42% of its $1.9 million2 of awarded funds, tying New York and placing 6th to the compared states. Florida also placed 8th just above Ohio and California, expending approximately 37% of its $30 million3 Energy Efficiency Conservation Block Grant (EECBG) funds. Finally, the OOE expended 100% of the $17.6 million4

ENERGY STAR Appliance Rebate funds. Our comparison concluded that all states,

2 Comparison data obtained from DOE’s website. There is a slight discrepancy between DOE and OOE data, including award amounts, due to timing differences.

3 Ibid. 4 Ibid.

with the exception of Michigan, California, and Ohio had expended their entire amount of rebate funds awarded within the anticipated timeframes.

AUDIT RESULTS

Our audit identified several issues specifically related to documentation and grant monitoring practices. There were several instances where grant agreement files did not contain required documentation. Some examples of these deficiencies include missing or incomplete monitoring checklists, insufficient reimbursement documentation, lack of correspondence between the grant manager and grant recipient, and missing conflict of interest forms by individuals involved in the application process. Several files were also found to be missing proof of the grant recipient’s liability insurance and evidence of the required registration in the U.S. Federal Government’s Central Contractor Registration database. Additionally, the OIG selected over $17 million worth of reimbursement requests and their corresponding invoices to ensure that adequate documentation was provided by the recipient to support each request. Of the payment requests reviewed, it was determined that invoices were missing, totaling over $800,000.

It was also determined that the OOE did not always adhere to the monitoring plan outlined in its Policies and Procedures. In many instances, risk assessments were not performed prior to entering into a contract with a grant recipient. In addition, on-site monitoring visits were not always performed within the appropriate frequency, as established by the risk assessment. There were several instances where monitoring reports were not issued timely by the grant manager. Finally, we found that in some instances, the recipients had not submitted


progress reports in accordance with the contract agreement terms, and that the grant manager did not document the receipt or review of the audit reports required by the Florida Single Audit Act and OMB Circular A-133.

Indicators of Fraud

One of the objectives of this audit was to determine if there were any indicators of fraud identified within the grants administered by the OOE. During the audit, we identified several recipients whose project progress and/or reporting documentation contained irregularities. These detections, after closer examination, resulted in the OOE’s immediate action to cease payments and/or terminate the grant agreements, resulting in cost avoidance in excess of $2.26 million and the initiation of criminal investigations. This audit also identified several grants totaling almost $198,000 that were involved in bankruptcy proceedings. Subsequent to the OIG’s determination of this status, the OOE initiated termination of the agreements due to the failure of the recipient to fulfill its obligations as outlined in the grant agreement. Finally, several grant recipient payments were identified that contained reimbursement for unallowable costs. This information was provided to the OOE for further review and appropriate action.

Rebate Programs

An analysis conducted on a sample of the ENERGY STAR Appliance rebates determined the existence of some duplicate payments and pricing errors, resulting in overpayments totaling approximately $4,400. These are small amounts when compared as a percent to the total dollar amount of the program. However, the OOE should evaluate its contract with the third-party vendor to determine whether

overpayments can be reimbursed to the OOE.

Return On Investment

This audit analyzed existing data in an effort to identify investment returns for each energy program and the grants that make up those programs. For the purposes of this report, return on investment (ROI) is comprised of emission reductions, energy cost savings, energy savings, job creation and project completion. It was determined that, with the exception of the ENERGY STAR Rebate Programs and the Solar Rebate Program, there was insufficient data available and/or insufficient progress made within these programs to determine their overall investment returns. The ENERGY STAR Appliance Rebate and ENERGY STAR Heating, Ventilation and Air Conditioning (HVAC) Rebate programs were successful in meeting their goals by encouraging consumers to purchase over 64,000 new ENERGY STAR appliances and over 4,200 ENERGY STAR HVAC systems. These programs stimulated Florida’s economy and resulted in a reduction in energy usage. Based on the total appliances purchased, it is estimated that $51 million was added to the Florida economy, generating over $3.6 million in tax revenues. Additionally, Florida consumers are estimated to collectively save over 7.5 million kWh off their electric bills and approximately 123 million gallons of water each year by replacing their dishwashers and clothes washers. With respect to the HVAC Rebate Program, the HVAC and geothermal systems purchased added $26 million to the Florida economy. As a result, Florida consumers who participated in the program are estimated to collectively save over 4.3 million kWh per year off their electric bills.


As it relates to individual energy grants, some recipients, such as local governments, reported progress in energy savings in areas that involved building retrofits, equipment upgrades, and the installation of more efficient lighting. These returns resulted in reductions in greenhouse gases and electric and natural gas consumption, as well as overall dollars saved through increased energy efficiency. The OIG was able to obtain ROI data from final reports submitted for two completed ARRA funded projects - a Compressed Natural Gas grant with the Okaloosa Gas District, and a Local Competitive Government grant with the City of Parkland. It should be noted that although these are completed projects, the ROI data submitted may only represent a partial reporting cycle. Based upon their final reports, the projected energy reductions and savings were not realized for the Okaloosa Gas District project, as they did not meet their goals related to reducing emissions and energy consumption. The City of Parkland’s final report indicated that they met their projected energy dollar savings of $11,043 per year, as compared to an estimate of $10,707, but fell short of their projected goals in the areas of reducing energy consumption and greenhouse gas reduction. Our audit also analyzed the results of several completed state funded projects which included a $2.5 million grant to the LYNX GREEN Bio-Fleet Project and a $2.5 million grant for a Photovoltaic and Research Facility and Family Learning Center. Our analysis indicated that both grants achieved or exceeded their investment goals. Specifically, LYNX became the first public transportation system in the United States to build, own and operate a biodiesel fueling facility, replacing 20% of its diesel fuel with

biofuel, and reducing emissions by 25%, which was 15% higher than projected. The Photovoltaic and Research Facility and Family Learning Center provided a location for visitors and residents to learn about solar technology and sustainability through research and education. The Center has produced over 2.7 million kWh of solar energy and reduced greenhouse gas emissions in Orange County, which prevented the release of over 6 million pounds of carbon dioxide.

CONCLUSIONS Since July 2011, several internal measures have been implemented to improve the OOE’s monitoring of grant recipients and records management. The OOE has indicated that on-site monitoring visits have now been conducted at every recipient location. The new leadership team has developed and implemented risk assessment tools that are being utilized for all new recipients, and has begun to provide staff members with grant monitoring training. In addition, the OOE has developed an “at-a-glance” process for ranking projects into three different categories: Red, Yellow and Green. Green identifies those grant projects that have been successfully completed and have met or exceeded the proposed accomplishments and objectives of the program; have complied with all applicable requirements and regulations relating to the program and maximized the use of public dollars. Yellow identifies those grant projects currently underway and being carried out in accordance with the program requirements and regulations. Red identifies projects that had to be terminated or are under scrutiny. These are the projects that failed to comply with the requirements applicable to the recipient’s grant agreement (noncompliance), or failed to comply with the program objectives and/or the laws, rules


and regulations applicable to the source of funding.

This “at-a-glance” process will track the progress of grant recipients and, if closely monitored, can be an effective tool in identifying issues early in the grant process. In addition to the above stated color-coded criterion, the OOE should consider enhancing their designation of projects as “Green” to include an analysis of projected versus actual investment returns. This will assist in their assurance that the use of public funds is being maximized. The OOE should also consider adding to the “Yellow” designation those projects that are generally meeting program requirements, but are behind schedule for completing the project. The OOE has made progress since moving to the Department, but the following opportunities exist to enhance its programs. All grant agreements must include clear and measurable goals to be achieved by the recipient so that progress can be closely tracked. Grant managers must have the appropriate level of training and ensure that all required documentation is collected and maintained in the grant files. It is essential that risk assessments be performed prior to the awarding of funds. This will help to identify potential issues that may require a higher level of oversight and allow program management the opportunity to judiciously reallocate funds to other recipients, if needed. On-site monitoring is essential and must be conducted at a frequency commensurate with the level of risk associated with each recipient. Both risk assessments and on-site monitoring not only serve to provide valuable information and to validate progress, but also serve as an early warning tool for potential indicators of fraud. Finally, the OOE must ensure compliance with all of its Policies and Procedures, and should identify, collect and measure data

associated with each individual grant and program investment returns. These enhancements will help to safeguard taxpayer dollars by ensuring the contractually stipulated goals are being reached, that potential issues will be identified early, and that fraud will be reduced through early detection.


Objectives, Scope and Methodology --------------------- The objectives of this audit were to evaluate the performance of the OOE in administering its programs and the effectiveness of those programs. This evaluation was accomplished by determining: • The level of oversight the OOE provided

grant recipients;

• Whether the grant funds were used in accordance with the recipient’s5 stated objectives;

• Whether there was any evidence of misuse, abuse or fraudulent activities;

• The “Return on Investment” derived from funding the energy initiatives; and

• How the State of Florida compared to other states for expending American Recovery and Reinvestment Act (ARRA) funds.

Grant Scope and Methodology This audit was conducted over an eight-month period and included a review of 176 agreements executed or active between January 1, 2009 and March 31, 2012, and selected actions through May 16, 2012. These agreements included both state and ARRA funded grant agreements, totaling $158,404,619.

5 For purposes of this report, a recipient is any organization awarded grant funds from the OOE.

Rebates Scope and Methodology The OIG reviewed the approved rebates for the following three ARRA funded rebate programs that occurred between July 1, 2008 and November 30, 2010: • ENERGY STAR Appliances - 113,890

rebates and bonuses; • ENERGY STAR HVACs - 4,268 rebates; and • Solar Energy System Incentives Program

(Solar Rebates) - 8,720 rebates6. We randomly selected 1,465 (1%) of the ENERGY STAR Appliance rebates and recycling bonuses, 220 (5%) of the ENERGY STAR HVAC rebates and 175 (2%) of the Solar rebates to determine: • Compliance with Florida Statutes and

Florida Administrative Code requirements; • Adequacy of the documentation maintained

by the OOE; • Accuracy of the rebate amount approved and

reimbursed; and • Adequacy of the review performed by the

OOE staff and documentation of that review.

Energy Savings and Efficiencies (Return on Investment)

Recipients provided estimated energy savings or efficiency data (i.e., return on investment) as part of the application process. The recipient was required to report all realized energy savings or efficiencies on each progress report submitted to the OOE. The OIG obtained the estimated return on investment reflected in the grant application and compared it to the actual return on investment reported by the recipient in the progress reports.

6 The 8,720 is representative of the population from

which the OIG selected rebates for testing.

Summary of Grants Reviewed

Program Number

of Grants Amount Awarded

Percent Expended

State Funded Energy Initiatives 26 $44,768,368 47% Federal Non- ARRA Energy Initiatives 6 6,185,124 98% State Energy Program 98 78,184,588 42% Energy Efficiency and Conservation Block Grants 44 28,106,968 36% Energy Assurance Grant Program 2 1,159,571 33%

TOTAL 176 $158,404,619 44%


COMPARISON OF FLORIDA’S OOE TO ENERGY OFFICES OF

OTHER STATES

The OIG compared the awarded and expended amounts for the State of Florida’s ARRA funded energy initiatives to nine other states:

California ~ Georgia ~ Illinois Michigan ~ New York ~ North Carolina

Ohio ~ Pennsylvania ~ Texas

The awarded and expended amount comparison included the State Energy Programs, Energy Efficiency and Conservation Block Grant Programs, ENERGY STAR Appliance Rebate Program, and the Energy Assurance Grant Program. To perform the comparison, the OIG contacted the nine states, the DOE, other governmental agencies, and obtained data from the state’s website.


Office of Energy --------------- HISTORY

The Florida Legislature originally created the OOE on July 1, 1975. Since 1975, the OOE has been housed in several state agencies, including the Department of Administration (currently known as the Department of Management Services), the Department of Community Affairs (currently known as the Department of Economic Opportunity), the Department of Environmental Protection and the Executive Office of the Governor. During 2005, the state began to focus on the following energy goals: • Increasing Florida’s energy independence; • Decreasing its dependence on fossil fuel; and • Creating a clean energy economy within the

state.

To accomplish these goals, the Legislature and the Executive Office of the Governor created two separate bodies, the Florida Energy Commission (FEC) and the

Governor’s Action Team on Energy and Climate Change, to advise them on the issues and develop a plan to implement the policy actions recommended. As a result of the FEC and the Governor’s Action Team recommendations, House Bill 7135 was passed unanimously in 2008 by the Florida Legislature. The bill created the Florida Energy and Climate Commission (FECC) and consolidated staff from three different offices to create the Governor’s Energy Office (GEO) housed in the Executive Office of the Governor.

On July 1, 2008, the GEO was formed and began working on policy and grants related to energy issues. The GEO’s responsibilities and functions increased over time from emphasizing energy conservation and reducing the demand for petroleum allocation, to advising on energy policy and administering both state and federal grant programs. On July 1, 2011, the GEO was transferred to the Department and was established as the OOE. The OOE’s organizational chart is shown below.


The OOE is the primary organization for state energy and climate change programs and policies. The OOE holds a variety of responsibilities, including administering financial incentive programs; administering the provisions of the Florida Energy and Climate Protection Act; representing Florida in the Southern States Energy Compact; performing or coordinating the functions of any federal energy programs delegated to the state; and consulting with the Commissioner of Agriculture to draft recommendations for submission to the Governor and the Legislature. The OOE also works with other state entities, including the Florida Public Service Commission and the Florida Energy Systems Consortium, to develop state energy and climate change policies and programs. The OOE has historically received funding from state appropriations or federal grants to promote renewable energy and energy efficiency technologies. As of May 16, 2012, ARRA funds are expected to expire on November 22, 2012, for the Energy Efficiency Conservation Block Grant Program, and September 30, 2013, for the State Energy Program (SEP).

PROGRAM RESPONSIBILITY The OOE is responsible for managing the day-to-day operations of all grant-supported activities to ensure compliance with applicable federal and state requirements. The OOE’s grant management objectives7 are:

• To ensure that funds are expended in a timely manner for the purpose for which they were made available;

7 Source: OOE’s Policy and Procedures for Grant Management, dated April 30, 2010.

• To determine if the recipient’s policies, processes and procedures for management, accounting, procurement and property control systems are in place;

• To determine if costs reimbursed are allowable, reasonable, traceable and allocable under grant terms and conditions, regulations and OMB Circulars;

• To identify administrative, programmatic, financial and technical problems that may have a negative impact on the project but when corrected will result in improved program management or efficiency;

• To determine if there is a need for training and technical assistance to strengthen and improve the recipient’s program operations;

• To assess the recipient’s monitoring of their sub-recipients for compliance with applicable regulations and policies; and

• To minimize opportunities for fraud, waste and mismanagement.

Throughout the grant management process, the OOE will inform recipients of any deficiencies identified and communicate with them via a written monitoring report, verbal discussion or through email. The OOE may require the recipient to perform and document any corrective actions taken.


Energy Initiatives-------------- Grants issued by the OOE are awarded for specific energy efficiency and conservation programs or projects. These grants may fulfill a wide variety of energy efficiency and conservation purposes, including but not limited to: • Demonstration, commercialization, research

and development projects relating to renewable energy technologies;

• Development and implementation of energy efficiency and conservation strategies; and

• Eligible building/facility improvements and equipment purchases and upgrades.

The current energy programs administered by the OOE include: • State Funded Energy Initiatives;

• Federal Energy Initiatives (Non-ARRA Funded); and

• American Recovery and Reinvestment Act (ARRA) Funded Energy Initiatives.

The OIG analyzed existing data in an effort to identify the return on investment (ROI) for the energy initiatives. Projected ROI was submitted by the recipient as part of the grant application process. Recipients of ARRA funds were required to submit progress reports that included ROI data to the OOE as stipulated in the recipient’s agreement and as mandated by the DOE.

The OIG used the applications and progress reports maintained by the OOE to obtain the projected and actual ROI, respectively. In some instances, actual ROI data was available even though the recipient had not received a reimbursement for expenditures. This could be due to several reasons, including the possibility that the recipient had not yet submitted a reimbursement request or the recipient was utilizing matching funds to proceed with the project.

For the purposes of this report, ROI is comprised of emission reductions, energy cost savings, energy savings, job creation and project completion. A description of the energy initiatives and the associated ROI is described in the following sections.

STATE FUNDED ENERGY INITIATIVES

During the OIG audit period, the OOE administered 26 state agreements, with awards totaling $44,768,368. As of May 16, 2012, the expenditures totaled $20,963,505 (47%), with 7 projects ongoing, 7 completed, and 12 terminated.

According to the OOE, the majority of these grants were funded under the Renewable Energy and Energy-Efficient Technologies Grant Program (REET). In accordance with Section 377.804, Florida Statutes, REET was designed to stimulate capital investment in the state and promote the utilization of renewable energy technologies. REET provided renewable energy matching grants for demonstration, commercialization, research and development projects relating to renewable energy technologies and renewable energy resources (e.g., hydrogen, biomass, solar energy, geothermal energy, wind energy, ocean energy, waste heat and hydroelectric power).

Funds were available to Florida municipalities and county governments, established for-profit companies licensed to do business in Florida, universities and colleges in Florida, utilities located and operating within Florida, not-for-profit organizations, and State of Florida agencies. Eligible proposals were evaluated based on a number of criteria, including cost share percentage, economic development


potential, energy efficiency and how the project fosters public awareness of renewable energy technologies.

According to the OOE, many of these grants were for research and development and therefore did not directly report emission reductions, energy savings, energy cost

savings or job creation and retention data. Returns for these types of initiatives are measured by the fulfillment of the stated contractual objectives (i.e., project deliverables). The following table lists the 26 state funded energy initiatives.

State Funded Energy Initiatives

Funding and Expenditures by Recipient

RECIPIENT AWARDED EXPENDED

AS OF 5/16/12 1 NPE Florida, LLC $2,500,000 $2,250,000 2 Mustang Vaccum Systems** 2,008,300 1,799,401 3 Highlands Ethanol LLC and Verenium Biofuels Corp. 2,500,000 1,282,039

4 Florida Thoroughbred Breeders & Owners Assoc (OEE) 2,500,000 1,187,170

5 Florida Crystals 195,000 82,422 6 Aquantis 1,069,336 787,426 7 Rivian Automative Inc 2,000,000 2,000,000 8 BPAmerica Production 1,290,963 105,456 9 FLSEREF 1,921,575 698,372 10 Allsolar Service 320,623 38,904 11 Orange County 2,500,000 402,548 12 Progress Energy 123,868 20,000 13 Lynx 2,500,000 2,496,885 14 Marc Rutenberg Homes 2,166,104 1,233,403 15 UF Power Module* 2,464,703 2,365,554 16 FIU Bagesee* 990,532 685,937 17 Citrus Energy* 2,500,000 84,621 18 FBEC* 2,500,000 281,564 19 Vecenergy* 2,500,000 0 20 Florida Power* 2,500,000 153,000 21 Exceed Corporation* 990,000 0 22 ARI Green Energy, Inc.*/** 2,500,000 738,401 23 USFBOT* 1,422,364 20,311 24 Willard & Kelsey* 0 0 25 Southeast Renewable Fuels, LLC* 2,500,000 2,250,091 26 Highlands EnviroFuels* 305,000 0

TOTAL $44,768,368 $20,963,505 * Terminated or in process of termination. **OIG conducted an on-site visit.


All 26 executed agreements contained defined objectives and desirable outcomes. The OIG reviewed two completed projects and determined that each recipient met the objectives and outcomes as outlined in their agreement. The OIG summarized the following two projects based on final reports submitted by the recipients to the OOE. The LYNX GREEN Bio-Fleet Project was awarded a $2.5 million State of Florida REET grant. The objectives of this project were to develop a regional biodiesel conversion program for alternate fuels and green strategies, reduce the Central Florida Regional Transportation Authority’s traditional diesel-based fossil fuels by 20% and enhance the state’s overall economic competitiveness. According to the LYNX’s final report, in March 2010, LYNX became the first public transportation system in the United States to build, own and operate a biodiesel fueling facility. LYNX replaced 20% of its Ultra Low Sulfur Diesel fuel with biofuel, reduced emissions by 25% and provided a framework for other government and transit agencies throughout the nation to provide similar, renewable fueling alternatives to the nation’s fossil fuel supply. The Photovoltaic Demonstration and Research Facility and Family Learning Center (Orange County) was awarded a $2.5 million State of Florida REET grant. The objective of the project was to provide a location for visitors and residents of Orange County to learn about solar technology and sustainability. The goals were to foster a better understanding of renewable energy technologies through demonstration, research, and education; and to stimulate market demand and economic development in Florida. In addition, the project was to: • Construct a 1-MW photovoltaic (PV)

demonstration facility located at the Orange County Convention Center (OCCC);

• Establish a Research and Development effort, augmenting the PV system with four smaller (10 kW) experimental PV systems, consisting of new innovative PV technologies to investigate electrical storage for peak demand saving;

• Design and manage a Climate Change Education Center (CCEC) inside the OCCC, to inform convention visitors, area businesses and the public of the environmental, health, and economic benefits of renewable energy and energy efficiency, as well as ways to reduce greenhouse gas emissions;

• Undertake a statewide marketing effort, using various medias, advertising the facility as a family attraction; and

• Create economic development programs focusing on job creation and attracting capital investment in Florida by renewable energy industries.

According to Orange County’s final report, as of February 2011, almost 2,700,000 kWh of solar energy has been produced from the entire system. The system has played an integral part in reducing greenhouse gas emissions in Orange County, preventing the release of over 6 million pounds of carbon dioxide, 1,300 pounds of nitrogen oxide and over 24,000 pounds of sulfur oxide into the air.

FEDERAL ENERGY INITIATIVES (NON-ARRA FUNDED)

During the OIG review period, the OOE administered six federal (non-ARRA funded) agreements with awards totaling $6,185,124. As of May 16, 2012, expenditures totaled $6,044,176 with 2 projects ongoing and 4 completed. The following table lists the six federal (non-ARRA) funded energy initiatives.


Funding for these initiatives was for a solar rebate and educational program, and research and development projects for renewable energy technologies in Florida. One of the projects is highlighted below. The Hydrogen Energy Station for Hydrogen-Powered Shuttle Buses (Chevron HZ Station) was a federal research and development grant. The Chevron HZ Station’s objective was to test supply and demand optimization and provide an opportunity to fuel internal combustion engines. All $2.3 million of the grant award was expended on the project, and according to the final report, the project resulted in a significant advancement toward the commercial readiness of a hydrogen infrastructure. The final report further stated that through the design, construction, operation, and decommissioning of the hydrogen station between 2006 and 2010, the following goals were achieved: • The operations team achieved its goal of

incident-free operations (no lost time accidents);

• The hydrogen program demonstrated the technical capability to support a U.S. car penetration portfolio that contains up to 10% hydrogen fuel cell vehicles; and

• 1,634 fills of 22,764 kilograms of hydrogen were conducted at the station.

ARRA FUNDED ENERGY INITIATIVES

In February of 2009, the Federal Government announced that through the American Recovery and Reinvestment Act of 2009 (ARRA), it would provide $275 billion8 in contracts, grants and loans to states and U.S. territories in order to: • Preserve and create jobs and promote

economic recovery;

• Assist those most impacted by the recession;

• Provide investments needed to increase economic efficiency by spurring technological advances in science and health;

• Invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits; and

• Stabilize state and local government budgets in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.

Approximately $11 billion9 was awarded to the State of Florida with $1 billion10 for energy and environmental initiatives. In

8 See Appendix A: ARRA Funding by

State/Territory. 9 Ibid. 10 Source: Recovery.gov website, May 15, 2012.

Federal Non ARRA Energy Initiatives Funding and Expenditures by Recipient


AS OF 5/16/12 1 Ford Shuttle Bus $2,000,000 $2,000,000 2 Chevron HZ Station 2,320,600 2,320,600

3 University of Central Florida (FSEC)* 55,495 55,495 University of Central Florida* 535,213 522,876

4 Florida Solar 552,000 552,000 5 University of Central Florida (FSEC) 226,108 214,108 6 University of Central Florida (FSEC) 495,708 379,098

TOTAL $6,185,124 $6,044,176 *Funding combined for same energy initiative.


February 2009, the Federal Government announced that through the ARRA, the State of Florida OOE would receive approximately $176 million11 in stimulus money. The DOE is responsible for overseeing and managing the allocation of ARRA funded energy initiatives with the core focus of: • Stimulating the creation or increased

retention of jobs;

• Saving energy (i.e., kWh, therms, gallons, BTUs);

• Increasing energy generation from renewable sources; and

• Reducing greenhouse gas emission. The DOE encouraged states to use their ARRA funding not only to support current energy efficiency and renewable energy projects, but also to seed sustainable programs and put in place long-term funding mechanisms such as revolving loans and energy savings performance contracting that will provide lasting benefits and lead to long-term market transformation. States were to expand existing programs, or to create new programs consistent with SEP regulations, and not to supplant or replace existing state programs or other funding.

Of the $1 billion awarded to the State of Florida for energy and environmental initiatives, the OOE administers approximately $176 million for the following energy programs: 12

• State Energy Program (SEP): $126 million was awarded to fund energy efficiency and renewable energy projects and rebates.

11 See Appendix B: ARRA Funding of Energy

Initiatives by State/Territory. 12 Program funding includes awards to grant

recipients, vendor payments and administrative cost.

• Energy Efficiency and Conservation Block Grant (EECBG): $30.4 million to be used for reduction of fossil fuel emissions; reduction of total energy use of eligible entities; and improvement of energy efficiency in the building, transportation, and other appropriate sectors.

• Energy Assurance Grant Program: $1.881 million to be used to strengthen and expand the State’s energy assurance planning and resiliency efforts by incorporating response actions for new energy portfolios and Smart Grid applications and to build in‐house energy assurance expertise.

• ENERGY STAR Appliance and HVAC Rebate Programs: $17.585 million13 to be used for establishing and administering state ENERGY STAR Rebate programs. The programs provided incentives to Florida residents to purchase ENERGY STAR appliances and HVACS.

The OOE has awarded 144 grants and reimbursed $43,221,164 (40%) of the $107,451,127 awarded to recipients. The OOE also issued 129,333 rebates, totaling $61,173,765, for the following programs:

• ENERGY STAR Appliance Rebates;

• ENERGY STAR HVAC Rebates;

• Solar Rebates; and

• Plug-in Hybrid Electric Vehicle Conversion Rebates.

13 $15,047,717 was used for ENERGY STAR

Appliance rebates and the remaining $2,537,283 million was reallocated to assist funding of the ENERGY STAR HVAC Rebate program.


The OOE began awarding grants in February 2010, awarding the last of the 144 original grants in June 2011. The chart above lists the number of grants awarded by month, with June 2011 representing the highest single month for awards. Based on reports received by the OOE, the State of Florida has benefited from the investment of ARRA funds. The reports, submitted by state agencies, local governments, profit and non-profit organizations, indicate that the rebates and grants awarded have led to emission reduction, energy savings, energy cost savings and job creation and retention. This was achieved through the development of energy efficient strategies and procurement of energy efficient systems, such as: • Retrofitting buildings with energy efficient

HVACs; • Installing energy efficient lighting; • Purchasing alternative fuel vehicles; • Using biofuels and compressed natural gas

to reduce fossil fuel consumption, and • Purchasing residential ENERGY STAR

appliances and HVACs.

As of May 11, 2012, four projects have been completed, 20 agreements were terminated, and 120 agreements are still in progress. In addition, recipients have begun to report return on investment (ROI) data for 50 projects (35%). The OIG obtained, where available, both projected and actual emission reductions, energy cost savings and energy savings for each ARRA project. However, the following challenges prevented the OIG from being able to attest to the accuracy of the projected and actual ROI data presented in this report. • The OOE did maintain the recipient’s

applications and progress reports which included ROI data. However, the system used by the OOE for summarizing data does not allow for a determination of ROI at the recipient level.

• The ROI estimates contained in the recipient’s application were not always clearly defined. As such, the OIG found it difficult to delineate some of the stated goals.

3 0 1

4 5 4 5 9

16 13 12 11

4 6 5 5

41

0

5

10

15

20

25

30

35

40

45

Grants Awarded by Month


• The OOE did not independently verify ROI data reported by recipients.

In addition, the OIG captured the actual ROI data in total because the number of months reported by recipients varied. It should also be noted that a low number of recipients reported actual ROI data. For those that did report, the reporting period was limited.

The following sections describe the various ARRA funded programs14 and the return on investment achieved.

STATE ENERGY PROGRAM GRANTS

The State Energy Program (SEP) was established to award $126 million for energy efficiency and renewable energy projects. The funding was divided15 among the following grant programs:

• Florida Clean Energy Grant $12,648,491

• Clean Energy – Florida Renewable Energy, Efficiency and Conservation Grant

$11,886,989

• Compressed Natural Gas Fleet Fueling Facilities Grant $1,506,250

• Florida Energy Opportunity Fund $36,089,000

• Solar for Schools and Shelters Grant $10,000,000

• E85/B2016 Public, Private Fueling Grant $957,933

• Shovel Ready Energy Project Grants $5,095,925

14 Source: ARRA program descriptions taken from

OOE documentation. 15 The funds listed only reflect the amount awarded to

recipients and does not include rebate payments, vendor contracts and administrative costs.

16 E85 is an abbreviation for Ethanol 85%, a mixture composed of 85% ethanol and 15% of gasoline. B20 is an abbreviation for Biodiesel 20% a mixture composed of 20% of biodiesel with 80% of diesel.

Florida Clean Energy Grant

The Florida Clean Energy Grant is a competitive grant intended to fund energy efficiency and renewable energy projects and activities. Eligible applicants are Florida based entities such as municipalities and county governments, school districts, licensed for-profit companies, universities and colleges, utility companies, not-for-profit organizations, and State of Florida agencies. Funds are awarded on a cost reimbursement basis. The purpose of the grant is: • To provide funding for energy efficiency

programs, equipment, and market transformation activities that increase the adoption of energy efficient technology and practices in Florida;

• To provide funding for renewable energy programs, equipment installations, and market transformation activities that increase the generation of energy from renewable resources and consumer demand for renewable energy technology in Florida; and

• To maximize annual energy savings, cost savings, and carbon emission reductions.

Under the Florida Clean Energy Grant, the OOE executed 33 of the 144 (23%) ARRA agreements (31 ongoing and 2 terminated).

The recipients were awarded $12,648,491, of which $1,248,354 (10%) was expended. Since the execution of the agreements, 10 recipients have reported ROI data to the OOE.

The following table lists the 33 executed ARRA agreements and their respective awarded and expended amounts. The table also identifies the 10 recipients that have reported partial ROI data to the OOE, while the remainder has not achieved sufficient progress to report ROI data.


Florida Clean Energy Grant Funding and Expenditures by Recipient and Reporting of ROI


AS OF 3/31/12 REPORTED ROI

AS OF 3/19/12 1 1000 Friends of Florida $150,000 $111,517 No 2 Boca Raton Museum of Art 386,894 7,695 Yes 3 Broward College 490,439 0 No 4 Broward County 500,000 0 No 5 Canaveral Port Authority 325,000 0 Yes 6 City of Freeport** 461,935 295,030 No 7 City of Palmetto 287,760 0 Yes 8 City of Seminole 316,000 0 No 9 City of Williston 231,650 14,159 No 10 City of Winter Park** 325,000 0 No 11 First Coast Tech. College 423,200 0 No

12 Florida Department of Agriculture and Consumer Services 499,738 0 Yes

13 Florida State College at Jacksonville 500,000 0 No 14 Florida Atlantic University 500,000 0 Yes 15 Greater Lake Worth Chamber of Commerce 341,000 0 No 16 H. Lee Moffitt Cancer Center** 355,000 0 No 17 Jewish Federation of South Palm Beach County 397,970 122,484 Yes 18 Lee County Port Authority 500,000 0 No 19 Leon County 481,517 0 Yes 20 Leon County School Board 209,820 1,232 No 21 Philharmonic Center for the Arts 500,000 226,324 No 22 Pioneer Growers Cooperative 500,000 450,000 No 23 School Board of Marion County 289,305 0 No 24 Seminole State College of Florida 500,000 0 No 25 St. Johns County 394,000 0 Yes 26 St. Johns County Housing 475,880 0 Yes 27 St. Lucie County 300,000 19,913 Yes 28 Town of Cutler Bay 152,800 0 No 29 University of Florida Board of Trustees 499,114 0 No 30 Utility Board of Key West 434,010 0 No 31 Village of Royal Palm Beach 248,445 0 No 32 USCJO, Inc.* 500,000 0 No 33 Girl Scouts of West Central Florida* 172,014 0 No

TOTAL $12,648,491 $1,248,354 * Terminated or in process of termination. The funding for terminated projects has been, or will be,

reallocated to other projects. **OIG conducted an on-site visit.


The table above shows the recipients’ projected and actual ROI reported, as well as the number of recipients reporting, as of March 19, 2012.

Florida Renewable Energy, Efficiency and Conservation Grants

The Florida Renewable Energy, Efficiency and Conservation Grant (FREEC) was established to accommodate the excess of qualified EECBG applications received by the OOE. This competitive grant was intended to provide supplemental funding to support local government energy efficiency and renewable energy projects and activities that met SEP criteria and were not funded under the EECBG program. The purpose of the program was: • To provide funding for energy efficiency

programs, equipment, and market transformation activities that increase the adoption of energy efficient technology and practices in Florida;

• To provide funding for renewable energy programs, equipment installations, and market transformation activities that increase the generation of energy from renewable resources and consumer demand for renewable energy technology in Florida; and

• To maximize annual energy savings, cost savings, and carbon emission reductions.

The FREEC Grant accounted for 35 of the 144 (24%) executed ARRA agreements, with awards totaling $11,886,989. As of March 31, 2012, expenditures totaled $1,072,603 (9%) with 34 projects ongoing and 1 terminated. Since the execution of the recipient’s agreement, 12 recipients have reported ROI data to the OOE. The following table lists the 35 executed agreements and their respective awarded and expended amounts. The table also identifies the 12 recipients that have reported partial ROI data to the OOE, while the remainder has not achieved sufficient progress to report ROI data.

Clean Energy Projected and Actual ROI Reported

As of March 19, 2012

Reported ROI # of Recipients Reporting ROI

Projected Actual Projected Actual Emissions Reductions

Criteria air pollutants reduced (tons) 1,744.69 0 2 0 Greenhouse gases reduced (CO2 equivalents) (metric tons) 911,245.18 37.91 18 1

Energy Cost Savings Dollars Saved $7,494,009 $0 21 0

Energy Savings Reduction in natural gas consumption (thousand cu ft) 47,642.11 0.37 11 1

Reduction in electricity consumption (btu's) 125,755,227.36 0 18 0 Reduction in electricity consumption (megawatt hours) 771,886.27 98.79 22 3 Reduction in electricity demand (megawatts) 20,173.43 0 4 0 Reduction in fuel oil consumption (gallons) 65,337.00 0 2 0 Reduction in gasoline consumption (gallons) 2,765,728.00 0 9 0

Jobs Number of Workers (total jobs) 1,147.78 372.00 25 11


Clean Energy – FREEC

Funding and Expenditures by Recipient and Reporting of ROI


AS OF 3/31/12 REPORTED ROI AS OF 3/19/12

1 City of Atlantic Beach $234,789 $6,593 No 2 City of Bunnell 99,235 0 No 3 City of Coleman 240,000 21,600 No 4 City of Deland** 1,240,000 34,863 Yes 5 City of Gretna 110,000 0 No 6 City of Lake Mary 235,000 0 Yes 7 City of Lake Wales** 200,000 178,494 Yes 8 City of Lighthouse Point 250,000 188,998 Yes 9 City of Marianna 242,000 0 No 10 City of Noma** 250,000 13,680 No 11 City of Palmetto 249,837 64,378 No 12 City of Satellite Beach 196,738 0 No 13 City of South Pasadena 211,800 17,730 No 14 City of St. Augustine 250,000 0 No 15 City of St. Pete Beach** 250,000 225,000 Yes 16 City of Sweetwater 250,000 0 No 17 City of Treasure Island 148,231 0 No 18 City of Venice 665,000 33,135 Yes 19 City of Vernon 250,000 11,520 No 20 City of Williston 250,000 24,750 No 21 City of Winter Park** 360,207 0 No 22 City of Zephyrhills 250,000 17,474 No 23 Franklin County 500,000 0 Yes 24 Lafayette County 250,000 0 No 25 Liberty County 250,000 0 No 26 Monroe County 2,687,288 43,650 Yes 27 Okeechobee County 94,880 0 Yes 28 Suwannee County 109,408 0 No 29 Town of Ebro 215,000 0 No 30 Town of Hypoluxo 245,000 0 Yes 31 Town of Ponce de Leon 250,000 69,693 No 32 Town of Wausau 250,000 22,995 No 33 Town of Welaka 102,576 11,450 Yes 34 Town of Westville** 250,000 86,600 Yes 35 Town of Eatonville*/ ** 250,000 0 No

TOTAL $11,886,989 $1,072,603 * Terminated or in process of termination. The funding for terminated projects has been, or will be,

reallocated to other projects. ** The OIG conducted an on-site visit.



Compressed Natural Gas Fleet Fueling Facilities

The Compressed Natural Gas Fleet (CNG) Fueling Facilities grant is a competitive match and cost reimbursement grant intended to increase the availability of CNG fueling facilities in Florida. The specific grant goals include: • Reducing the greenhouse gas emissions

through increased deployment of CNG vehicles and fueling infrastructure;

• Reducing petroleum use in the transportation sector; and

• Stimulating additional public/private sector investment in CNG vehicles and refueling infrastructure.

By pursuing the expansion of biofuels within the state, Florida could increase its energy security, decrease its dependence on foreign oil, protect the state’s environment and reduce greenhouse gas emissions. Grant funds may be used to purchase equipment associated with the installation, improvement, renovation, or replacement of CNG infrastructure. Specific examples of eligible equipment under this grant include compression systems, storage and dispensing equipment, and card payment systems. In accordance with the DOE guidance, applicants were specifically prohibited from using grant funds for permitting and construction. Eligible applicants under this grant include Florida municipalities and county governments, Florida school districts, established for-profit companies licensed to do business in Florida, universities and colleges in Florida, not-for-

Clean Energy - FREEC Projected and Actual ROI Reported




Greenhouse gases reduced (CO2 equivalents) (metric tons) 13,944.58 1,821.85 30 5 Energy Cost Savings

Dollars Saved $3,308,118 $1,800 30 1 Energy Savings

Reduction in natural gas consumption (thousand cu ft) 69,156.70 16,234.00 23 1 Reduction in electricity consumption (btu's) 507,671.14 0 31 0 Reduction in electricity consumption (megawatt hours) 102,315.22 6,842.56 28 6 Reduction in electricity demand (megawatts) 7,965.00 0 3 0 Reduction in fuel oil consumption (gallons) 9,476.00 0 1 0 Reduction in gasoline consumption (gallons) 25,545.00 0 6 0

Jobs Number of Workers (total jobs) 271.97 130.00 32 10


profit organizations, and State of Florida agencies. Public and non-profit entities are eligible for a grant of up to 50% of the cost of equipment associated with the installation of CNG fueling infrastructure up to a maximum of $500,000. For-profit entities are eligible for a matching grant of up to 25% of the cost of equipment associated with the installation of CNG fueling infrastructure up to a maximum of $500,000.

CNG Fleet Fueling Facilities accounted for 5 of the 144 (3%) executed ARRA agreements with awards totaling $1,506,250.

As of March 31, 2012, expenditures totaled $246,250 (16%), with 2 projects ongoing, 1 completed and 2 terminated. Since the execution of the recipient’s agreement, three recipients have reported ROI data to the OOE. The table below lists the five executed agreements and their respective awarded and expended amounts. The table also identifies the three recipients that have reported partial ROI data to the OOE, while the remainder has not achieved sufficient progress to report ROI data.

Compressed Natural Gas (CNG) Funding and Expenditures by Recipient and Reporting of ROI

RECIPIENT AWARDED

EXPENDED AS OF 3/31/12

ROI REPORTED AS OF 3/19/12

1 City of Clearwater $450,000 $0 Yes 2 Okaloosa Gas District 21,250 21,250 Yes 3 Wise Gas 500,000 225,000 Yes 4 Broward County* 500,000 0 No 5 City of Hollywood* 35,000 0 No

TOTAL $1,506,250 $246,250 *Terminated or in process of termination. The funding for terminated projects has been, or will be,

reallocated to other projects.



The one CNG project completed to date is the Okaloosa Gas District, which received an award amount of $21,250. The project objective was to: • Upgrade the compressed natural gas station

with new equipment from Wise Gas, Inc.;

• Reduce petroleum consumption, greenhouse gas emission and fuel cost;

• Create green jobs;

• Stimulate additional public/private sector investment in CNG vehicles and refueling infrastructure; and

• Reduce overall fleet fuel cost by 20%.

According to the Okaloosa Gas District’s final report, a slow-fill compressed natural gas compressor was installed, tested and is operational. Two CNG Honda Civics were purchased and displaced two gasoline powered vehicles. These CNG vehicles will reduce over 1,500 gallons of gasoline per year, and are on pace to reduce greenhouse gases by seven metric tons per year. Okaloosa Gas plans to add more vehicles in the future. The company also retained two jobs, and contributed to six indirect jobs.

Compressed Natural Gas (CNG) Grant Projected and Actual ROI Reported




Greenhouse gases reduced (CO2 equivalents) (metric tons) 3,866.00 8.70 4 1 Energy Cost Savings

Dollars Saved $8,588 $0 1 0 Energy Savings

Reduction in electricity consumption (btu's) 49,765.00 0 2 0 Reduction in gasoline consumption (gallons) 984,720.00 3,000.00 4 1

Jobs Number of Workers (total jobs) 18.00 18.00 4 3


The table above shows the projected and actual ROI for the Okaloosa Gas District. The OIG captured ROI data in total (i.e., did not determine the number of months being reported). Based upon their final reports, the projected energy reductions and savings were not realized for the Okaloosa Gas District project, as they did not meet their goals related to reducing emissions and energy consumption. For example, the projected goals for reducing gasoline consumption and greenhouse gases were 7,040 gallons and 21 metric tons, respectively. The actual reported reduction in gasoline was 3,000 gallons with greenhouse gases being reduced by 8.7 metric tons.

Florida Energy Opportunity Fund

The Florida Energy Opportunity Fund (Fund) is a direct investment grant created to promote the adoption of energy efficient and renewable energy products and technologies in Florida. The recipient, Florida Opportunity Fund, Inc. (FOF), is a not-for-profit corporation who administers the Fund. The FOF contracts with an investment firm, Florida First Partners, to manage the

investments17. The FOF is governed and staffed by Enterprise Florida, Inc. The primary purposes of the Fund are to increase the availability of capital in Florida through both loan and equity investment instruments, help Florida businesses, and promote the adoption of commercialized clean energy technology. Fund investments must comport to the State Energy Program statute, which requires that funds be used primarily for: • Improvement of facility and equipment,

with energy efficient and renewable energy products;

• Acquisition or demonstration of renewable energy products; and

• Improvement of existing production, manufacturing, assembly or distribution processes to reduce consumption or increase the efficient use of energy in such processes.

The Fund was awarded $36,089,000, and as of March 31, 2012, has expended $26,099,234 (72%). The FOF has entered into investment agreements with four companies totaling $14,290,000, but the companies have not achieved sufficient progress to report a return on investment.

17 The OIG conducted an on-site visit to Florida First

Partners.

Okaloosa Gas District Projected and Actual ROI Reported


Projected Actual

Emissions Reductions Greenhouse gases reduced (CO2 equivalents) (metric tons) 21.00 8.70

Energy Cost Savings Dollars Saved $8,588.00 $0

Energy Savings Reduction in gasoline consumption (gallons) 7,040.00 3,000.00

Jobs Number of Workers (total jobs) 3.00 2 direct/6 indirect


The table above lists the executed investment agreements and the amount invested.

The FOF and First Florida Partners are in discussions with various companies to invest the remaining $22,400,000. The OIG conducted an on-site visit at one of the perspective companies.

Solar for Schools and Shelters

This grant was awarded to only one recipient, the Florida Solar Energy Center. The grant was awarded $10,000,000 and as of March 31, 2012, has expended $909,049 (9%). The grant supports the installation of photovoltaic systems with battery back-ups on strategically located schools and emergency shelters throughout the state. Approximately 90 co-located schools and emergency shelters will be selected, and the installation of 10 kW and larger solar systems with data loggers on each site will soon be underway. The grant will include operation and maintenance workshops for energy and facilities managers and administer education orientation workshops for teachers, along with achieving four primary objectives:

• Creating or saving green collar jobs by hiring solar contractors to install solar systems;

• Providing power for critical needs during power outages and times of disaster;

• Educating future generations about solar energy technologies; and

• Reducing greenhouse gas emissions.

As of March 16, 2012, the Florida Solar Energy Center has completed 19 projects and is in various stages of completion on the remaining 71 projects.

E85 and B20 Public, Private Fueling Facilities Grant

The objective of this grant is to increase the availability of E85 and B20 fuels to consumers at retail stations throughout Florida by providing a grant to fuel station owners to install E85 or B20 tanks and pumps at their facilities. By pursuing the expansion of biofuels within the state, Florida will increase energy security, decrease dependence on foreign oil, protect the state’s environment and reduce greenhouse gas emissions.

Florida Energy Opportunity Fund Recipients of Investment Funds

As of May 9, 2012

COMPANY INITIAL INVESTMENT OPTION TO COMMIT*

TOTAL POSSIBLE

Mustang Vacuum Systems** $5,000,000 $0 $5,000,000 Fracture, LLC 530,000 470,000 1,000,000 LS9, Inc. 4,500,000 1,500,000 6,000,000 Florida Biofuels** 2,290,000 0 2,290,000

TOTAL $12,320,000 $1,970,000 $14,290,000 * FOF has an option to invest $1,970,000, of the $14,290,000. FOF is holding these funds until the option is

exercised. ** The OIG conducted an on-site visit.


The E85 and B20 Public, Private Fueling Facilities grant accounted for 20 of the 144 (14%) executed ARRA agreements with awards totaling $957,933. As of March 31, 2012, no funds have been expended, and 8 projects are ongoing and 12 have been terminated. Since the execution of the recipient agreements, none of the recipients have reported actual ROI data to the OOE, as shown in the table below.

E85 and B20 Public, Private Fueling Facilities Grant Funding and Expenditures by Recipient and Reporting of ROI


AS OF 3/31/12 ROI REPORTED AS OF 3/19/12

1 Benzena Capital Ent., Inc.* $39,978 $0 No 2 Benzena Capital Ent., Inc.* 49,996 0 No 3 BMAQ, LLC* 50,000 0 No 4 Dania Investment, Inc.* 50,000 0 No 5 Direct Fuel Management* 50,000 0 No 6 Fort Pierce Petroleum* 50,000 0 No 7 Greenwave Biodiesel 50,000 0 No 8 Johnson & Johnson (1) 45,000 0 No 9 Johnson & Johnson (2) 45,000 0 No

10 Mid State Energy (1) 45,000 0 No 11 Mid State Energy (2) 45,000 0 No 12 Petro-Walton, LLC* 50,000 0 No 13 Protec Fuel Management (1) 45,000 0 No 14 Protec Fuel Management (2) 45,000 0 No 15 Residuary Trust 49,986 0 No 16 South Point Petroleum* 50,000 0 No 17 Super Stop 101, Inc.* 47,973 0 No 18 Super Stop 407, Inc.* 50,000 0 No 19 Super Stop Petroleum, Inc. (1)* 50,000 0 No 20 Super Stop Petroleum, Inc. (2)* 50,000 0 No

TOTAL $957,933 $0 *Terminated or in process of termination. The funding for terminated projects has been, or will be, reallocated to other projects.


E85 and B20 Public, Private Fueling Facilities Grant

Projected ROI Reported As of March 19, 2012

ROI Reported # of Recipients Reporting

Projected ROI Emissions Reductions

Greenhouse gases reduced (CO2 equivalents) (metric tons) 1,252,237.30 8 Energy Savings

Reduction in electricity consumption (btu's) 35,643.56 1 Reduction in gasoline consumption (gallons) 7,493,106.00 8

Jobs Number of Workers (total jobs) 12.00 8

The table above shows the recipients’ projected ROI and the number of recipients that reported.

Shovel Ready Energy Project Grants

This grant leverages Florida’s state energy grant initiatives to identify projects that can be expeditiously implemented through available SEP funding. The goal is to provide matching grants for competitively-selected renewable energy and energy efficiency technology projects. The grant is designed to stimulate capital investment in the state and promote and enhance the statewide utilization of renewable energy technologies. The Shovel Ready Grants Program was established to fund applications that were

originally submitted for a REET grant. Due to the limited REET funding, the OOE obtained approval from the DOE to award these grant applications utilizing SEP funds. Shovel Ready Energy Projects accounted for 3 of the 144 (2%) executed ARRA agreements and was awarded $5,095,925. As of March 31, 2012, expenditures totaled $3,114,480 (61%) with 2 projects ongoing and 1 terminated. Since the execution of the recipient agreements, none of the recipients have reported actual ROI data to the OOE. The table below lists the three executed agreements and their respective awarded and expended amounts.

Shovel Ready Funding and Expenditures by Recipient and Reporting of ROI



1 Clean Fuel LLC $2,500,000 $2,232,000 No 2 Lamar Advertising 2,500,000 786,555 No 3 Perry Energy* 95,925 95,925 No

TOTAL $5,095,925 $3,114,480 *Terminated or in process of termination. The original award amount was $472,740.


The objective of the Clean Fuel LLC project is to install energy efficient retrofits and equipment upgrades to reduce the company’s dependence on the energy grid and natural gas by at least 30%. The company’s goal is to reduce energy costs by at least $500,000 per year. The company produces biodiesel fuel from waste vegetable oil, animal grease and brown grease. As of March 31, 2012, this project is ongoing. The objective of the Lamar Advertising project is to install solar and wind renewable energy systems on 500 separate billboard structures throughout the State of Florida. Each system will generate approximately 2000 watts of power for a total distributed system capacity of approximately 1MW. The excess electricity will be fed back into the grid. As of March 31, 2012, this project is ongoing. The Perry Energy grant was terminated by the OOE and, as of May 14, 2012, is being reviewed by the Department’s Office of General Counsel. The OIG was unable to obtain projected ROI data for the Shovel Ready grants. As mentioned above, the Shovel Ready Grants Program was established to fund applications that were originally submitted for a REET grant. Since REET grants did not have the same ROI reporting requirements as ARRA funded grants, the applications did not contain sufficient ROI data.

DOE Extension of SEP Program

The grant agreement between the DOE and the OOE for ARRA SEP funds was originally scheduled to expire April 30, 2012. The DOE approved the OOE’s request for a 17-month extension, and amended the expiration date to September

30, 2013. The OOE’s extension request was granted to allow a limited number of recipients to complete their projects, to create a revolving loan fund, and to expand the Department’s Better Building Initiative.

The revolving loan fund will provide loans for energy efficiency improvements for rural small businesses (non-farms) and local governments. The revolving loan fund will also allow funding for demonstration projects of commercially available technologies and techniques in rural communities. The Department’s Better Buildings Initiative is an expansion of the Department’s existing ARRA grant. The initiative is intended to enhance the energy monitoring and management of equipment and related infrastructure so the Department can collect, analyze and compare energy consumption in Department-owned buildings.

ENERGY EFFICIENCY AND CONSERVATION BLOCK GRANT

The Energy Efficiency and Conservation Block Grant program (EECBG) was established to award $30.4 million to local governments that were not eligible for direct funding from the DOE. Recipients would use funding to reduce fossil fuel emissions, reduce total energy use of eligible entities, and improve the energy efficiency in buildings, transportation, and other appropriate sectors. Funding was divided18 among the following grant programs: • Competitive Local Government

Grants $ 19,220,824

• State Data Center Energy Grant $ 367,870

18 The funds listed only reflect the amounts awarded

to recipients and does not include rebate payments, vendor contracts and administrative costs.


• Sunshine State Building Grant $7,624,674 • Energy Code Compliance and

Effectiveness Measurement Grant

$ 600,000

• Energy Code Training and Education Grant $ 293,600

Each of the programs is explained in detail below.

Competitive Local Government Grants

Competitive Local Government grants were energy efficiency and small scale renewable energy initiatives awarded to cities and counties. These local governments used the funds for establishing an energy efficiency and conservation strategy, upgrading outdoor sports lighting, installing solar powered LED street lighting, replacing inefficient indoor lighting with energy efficient lights, replacing old, inefficient HVAC systems with new, energy efficient models, installing solar thermal energy systems, and installing emergency back-up photovoltaic systems. The OOE made efforts to ensure that small, local

governments also received funding under this program.

The Competitive Local Government grants accounted for 39 of the 144 (27%) executed ARRA agreements with awards totaling $19,220,824. As of March 31, 2012, expenditures totaled $3,702,534 (19%), with 36 projects ongoing, 1 completed, and 2 terminated. Since the execution of the recipient agreements, 24 recipients have reported ROI data to the OOE. The following table lists the 39 executed agreements and their respective awarded and expended amounts. The table also identifies the 24 recipients that have reported partial ROI data to the OOE, while the remainder has not achieved sufficient progress to report ROI data.

Competitive Local Government Grants Funding and Expenditures by Recipient and Reporting of ROI



1 Broward County BOCC $1,236,129 $363,560 Yes 2 City of Avon Park 138,725 0 No 3 City of Bartow 645,000 199,330 Yes 4 City of Blountstown 1,200,000 0 Yes 5 City of Callaway 230,000 0 Yes 6 City of Cedar Key 245,740 79,036 No 7 City of Century 250,000 176,772 Yes 8 City of Chipley 250,000 0 No 9 City of Clewiston 250,000 176,086 Yes 10 City of Dania Beach* 250,000 0 No 11 City of Green Cove Springs 250,000 0 Yes 12 City of Inverness 107,000 0 Yes 13 City of Leesburg 1,240,000 0 No 14 City of Montverde 152,300 838 Yes 15 City of Mount Dora 249,900 148,083 Yes


Competitive Local Government Grants Funding and Expenditures by Recipient and Reporting of ROI

(Continued)



16 City of Mulberry 250,000 224,945 Yes 17 City of Naples 117,500 0 Yes 18 City of Newberry 128,830 50,260 No 19 City of Palatka 1,240,000 277,333 Yes 20 City of Parkland 164,588 164,588 No 21 City of Seminole 290,072 91,567 No 22 City of South Daytona 83,900 35,827 No 23 City of St. Augustine Beach 250,000 42,007 No 24 City of Starke 250,000 37,145 Yes 25 City of West Melbourne 250,000 0 Yes 26 Desoto County 250,000 0 No 27 Green Acres 76,594 18,665 Yes 28 Gulf County 250,000 179,550 No 29 Hardee County 250,000 196,529 Yes 30 Highlands County BOCC* 1,055,000 41 No 31 Leon County 1,172,009 744,435 Yes 32 Okeechobee County 782,125 0 Yes 33 Osceola County 2,362,710 135,007 Yes 34 St. Johns County 437,902 246,773 Yes 35 Town of Bay Harbor Island 33,000 0 No 36 Town of Juno Beach 143,500 92,663 Yes 37 Town of Lantana 1,238,300 0 No 38 Town of Palm Beach 250,000 21,494 Yes 39 Village of Palmetto Bay 1,200,000 0 Yes

TOTAL $19,220,824 $3,702,534 * Terminated or in process of termination. The funding for terminated projects has been, or will be, reallocated

to other projects.



One project was completed under the Competitive Local Government Grant, Terramar Park Relight (City of Parkland), for an award amount of $164,500. The objectives of the project were to reduce the annual energy

consumption and carbon dioxide emissions by procuring and installing energy efficient outdoor sports lighting. According to the City of Parkland’s final report, energy costs were reduced by an average of $11,043 per year, resulting in an energy savings of approximately 18,000 kWh per year, and the project created or retained five jobs. The table below shows the projected and actual ROI for the City of Parkland.

City of Parkland Projected and Actual ROI


Projected Actual

Emissions Reductions Greenhouse gases reduced (CO2 equivalents) 51.25 0

Energy Cost Savings Dollars Saved $10,707.00 $11,043.00

Energy Savings Reduction in electricity consumption (btu's) 243.60 0 Reduction in electricity consumption (megawatt hours) 71.40 18.40

Jobs Number of Workers (total jobs) 3.00 5.00

Competitive Local Governments Grants Projected and Actual ROI Reported


ROI Reported # of Recipients Reporting ROI


Greenhouse gases reduced (CO2 equivalents) (metric tons) 337,367 119,749 35 10 Energy Cost Savings

Dollars Saved $16,787,160 $179,557 37 3 Energy Savings

Reduction in natural gas consumption (thousand cu ft) 755,954 8,456 19 6 Reduction in electricity consumption (btu's) 27,941,820 678,175 36 1 Reduction in electricity consumption (megawatt hours) 60,084 2,928 25 9 Reduction in electricity demand (megawatts) 60,475 7 7 1 Reduction in gasoline consumption (gallons) 1,939,042 0 11 0

Jobs Number of Workers (total jobs) 520 313 35 19


State Data Center Energy Initiatives

The State of Florida data centers provide mission-critical computing functions essential to the daily operation of nearly every state agency. The data centers consume large amounts of energy to run and maintain their computer systems, servers, and associated high-performance components. Furthermore, to protect these systems and their vital functions, data centers also employ energy-intensive air conditioning systems, fire suppression systems, redundant and backup power supplies, redundant Internet connections, and high-security systems. ARRA funds were used to implement an action plan for enhancing data center energy efficiency, which included demonstration and implementation of specific technologies such as virtualization, power and cooling systems, and the use of energy efficient hardware devices.

All of the funding for the State Data Center grant has been expended and all projects completed. The grant accounted for 2 of the 144 executed agreements, totaling $367,870 in awards for the Northwood and Southwood Shared Resource Centers. The objectives of the two projects were to reduce annual power consumption within the data center by: • Replacing and installing servers;

• Eliminating hot exhaust recirculation, reducing hot spots, stabilizing equipment air-intake temperatures, and eliminating air leaks in the rack with the data center through the purchase and installation of blanking panels; and

• Purchasing and installing scalable thermal enclosures that will allow for easy reconfiguration of rack space to accommodate varying equipment loads.

The following table shows the projected and actual ROI reported by the two data centers for emissions reduction and energy savings, as of March 19, 2012.

State Data Center Grant

Projected and Actual ROI Reported As of March 19, 2012

ROI Reporting # of Recipients Reporting ROI


Greenhouse gases reduced (CO2 equivalents) (metric tons) 0 907 0 1 Energy Savings

Reduction in electricity consumption (megawatt hours) 4,300 0.14 2 1


Sunshine State Buildings Initiative

The Sunshine State Buildings Initiative was designed to leverage recent analyses of energy use in state facilities to prioritize deployment of energy efficient and renewable technologies in state buildings. Projects include building and mechanical system updates and optimization, energy management systems and equipment control automation, high-efficiency heating, ventilation and air conditioning systems, high-efficiency lighting fixtures and lamps, and improvements in insulation.

The Sunshine State Buildings Initiative accounted for 1 of the 144 executed agreements. The grant was awarded $7,624,674, and has expended $5,546,138 (73%), as of March 31, 2012. The grant is projected to reduce electricity consumption by 3,100-megawatt hours; however, no actual ROI has been reported for the Sunshine State Buildings Initiative.

Energy Code Compliance and Effectiveness Measurement

The Energy Code Compliance and Effectiveness Measurement grant is designed to strengthen Florida’s Energy Code Program by identifying measures that can be used to track code effectiveness with more affordable and sustainable methods. The analysis derived from this initiative could provide the basis for understanding the market, construction practices and the impact of available technologies. Additionally, this program will be used in planning future Energy Code stringency increases. This grant accounted for 1 of the 144 executed agreements. The grant was awarded $600,000 and has expended $273,333 (46%), as of March 31, 2012. The returns for this grant are measured by the

completion of the stated contractual objectives (i.e., project deliverables). The grant is ongoing.

Energy Code Training and Education

The Energy Code Training and Education grant is intended to leverage both state and federal funds for the Building Code Mitigation and Outreach Program to develop and implement a building energy conservation training program. This initiative will provide training to designers, contractors, code officials and other construction industry parties through existing programs at educational institutions throughout the state. It will also instruct trainers for the State Building Officials Association’s education program and for education programs of construction industry associations. This grant accounted for 1 of the 144 executed agreements with an award amount of $293,600. As of March 31, 2012, $253,413 (86%) was expended for this initiative. The returns for this initiative are measured by the fulfillment of the stated contractual objectives (i.e., project deliverables). The grant is ongoing.

ENERGY ASSURANCE GRANT PROGRAM

The intent of the Energy Assurance Grant Program is to procure consulting services that will examine and strengthen Florida’s energy assurance plans and policies. In addition, the funds will design an automated computer-based system to track the duration, response, restoration and recovery time of energy supply disruptions, and include the capability of mapping areas of the state experiencing outages. Funding will support the Florida Department of Law Enforcement and the Division of Emergency Management


in an effort to develop a detailed Critical Energy Infrastructure and Key Assets Survey that includes Smart Grid elements. The Energy Assurance Grant Program accounted for 2 of the 144 executed ARRA agreements with awards totaling $1,159,571. As of March 31, 2012, $387,906 (33%) had been expended for the grant. The returns for this grant are measured by the fulfillment of the stated contractual objectives (i.e., project deliverables). The grants are ongoing.

REBATE PROGRAMS

ENERGY STAR APPLIANCE AND HVAC REBATE PROGRAMS

ENERGY STAR is a joint program of the U.S. Environmental Protection Agency (EPA) and the DOE to help consumers save money and protect the environment through energy efficient products and practices. All appliances and products with the ENERGY STAR label meet strict energy-efficiency guidelines set by the EPA and the DOE. The OOE hired a third party vendor, American Express Travel Related Services, Inc. (American Express), who subcontracted with Ohana Companies LLC19 (Ohana) to process both the ENERGY STAR Appliance and HVAC rebates. American Express also subcontracted with a vendor, GiftTracker, Inc., to disburse the rebate debit cards to approved applicants.

ENERGY STAR Appliance Rebate Program

The ENERGY STAR Appliance Rebate Program was designed to encourage consumers to save energy and water, to 19 Ohana is a rebate processing company

subcontracted by American Express to process ENERGY STAR appliance and HVAC rebates.

lower their monthly bills using a more efficient appliance, and to stimulate Florida’s economy by encouraging consumers to purchase new ENERGY STAR appliances. The program offered rebates of a flat 20% of the retail, pretax price up to $1,500 per consumer for six major appliance categories purchased between April 16, 2010 and April 25, 2010: refrigerators, dishwashers, clothes washers, freezers, room air conditioners, and tank-less water heaters. In addition, as a stimulus for recycling the old appliances, Florida consumers were offered a $75 bonus, with proper recycling proof required.

According to Ohana’s report,20 the total number of ENERGY STAR Appliance rebates and recycling bonuses issued was 64,224 and 49,666, respectively.21 The total amount paid to Florida consumers for the rebates and recycling bonuses was $11,323,092 and $3,724,625, respectively. The program has expended all funding.

The following table shows the percentage of appliances purchased by type:

Percentage of Appliances Purchased by Type

Refrigerators 39% Dishwashers 30% Clothes Washers 26% Freezers, Room A/C, Tank-less Water Heaters

5%

Of the appliances that were purchased, 49,522 (77%) of the replaced appliances were recycled. Refrigerators were recycled in the greatest numbers at 38% of the total appliances recycled, followed by 20 Ohana Report, Florida ENERGY STAR Appliance

Rebate. 21 There is a discrepancy of 177 rebates and 144

bonuses between the number approved by the OOE and the reports provided by Ohana.


dishwashers (32%) and clothes washers (26%). The remaining appliances accounted for the remaining 4%.

Based on the appliances purchased, a conservative estimate of the amount of economic stimulus to the Florida economy is $51 million, which generated at least $3.6 million in tax revenues. Based on the energy and water savings calculator provided by the DOE, through participation in the ENERGY STAR Appliance Rebate program, Florida consumers are estimated to save 7,635,670 kWh per year off their electric bills. In addition, Florida consumers will save approximately 123 million gallons of water each year by replacing their dishwashers and clothes washers.

ENERGY STAR HVAC Rebate Program

The Florida ENERGY STAR HVAC Rebate program was designed to provide an incentive for Florida homeowners to upgrade their air conditioning systems to more energy efficient models, and raise the awareness of energy efficient air conditioning systems and duct leakage issues with older homes. The homeowner would receive a rebate from the State of Florida for $1,500 on HVACs purchased between August 30, 2010 and September 14, 2010. As an added incentive, because the HVAC system meets the Federal Energy Tax Credits criteria, the homeowner would also qualify for a tax credit off their 2010 income taxes. The total number of ENERGY STAR HVAC rebates issued to Florida consumers was 4,268, totaling $6,402,000. The program has expended all funding.

According to Ohana’s report,22 the most frequent system purchased was central air conditioners (57%), followed by air source heat pumps (42%), and geothermal heat pumps at just under 1%. Based on the application receipt price of the 4,268 HVAC and geothermal systems purchased, the economic stimulus to the Florida economy was $26,745,889. In addition, assuming each Floridian only paid $300 per required duct test, $1.28 million was invested in green jobs through energy efficiency testing. According to Ohana’s report, for every one dollar spent by the State of Florida on this rebate program, consumers invested approximately five dollars into the economy. Furthermore, based on the energy savings calculator provided by the DOE, through participation in the ENERGY STAR HVAC Rebate program, Florida consumers are estimated to save 4,312,367 kWh per year off their electric bills.

22 Ohana Report, Florida ENERGY STAR HVAC

Rebate.


SOLAR REBATE PROGRAM

The Legislature established the Solar Energy Systems Incentives Program in 2006 through the REET program. The program was designed to encourage residents and businesses to invest in solar energy technologies by providing rebates for the purchase and installation of solar energy systems in homes and businesses. The Legislature approved a total of $11 million in state dollars to fund the solar rebate program. The OOE received more qualified rebate requests than annual appropriated funding. To address the shortage, the Legislature approved the use of $39,394,048 in ARRA funds, which resulted in over 11,000 rebates issued. The rebate applied to solar photovoltaic systems and solar thermal systems for residential or commercial users. The photovoltaic rebates paid $4/watt, up to $20,000 for residential users, and up to $100,000 for commercial users (both profit and not-for-profit). The solar thermal rebates paid $500 per residential user, and $15/1,000 Btu, up to a maximum of $5,000, per commercial user.

According to the 2011 OOE Annual Report, since July 1, 2011, the Department has completed its review of approximately 12,000 solar rebate applications and made payments to all the eligible applicants in less than 4 months time. Checks were mailed to all eligible applicants on October 7, 2011. Each eligible applicant received a payment for approximately 52 percent of their requested rebate amount, as directed by House Bill 15A. Since the inception of the program in 2006, 792 jobs were created or retained, and energy savings in excess of $58 million were realized.

PLUG-IN HYBRID ELECTRIC VEHICLE CONVERSION REBATE PROGRAM

This program was intended to increase the affordability of hybrid plug-in electric conversion kits within the state by creating the Electric Car Conversion Rebate. Both residential vehicle owners and commercial fleet owners who purchase a qualifying conversion kit, that converts the highway-capable hybrid to a highway-capable plug-in hybrid, are eligible to apply for a one-time rebate. This application must be submitted within 12 months of the date of conversion. Cars with the conversion kits will be six times more fuel-efficient than standard gasoline cars; achieving roughly 100 miles per gallon (mpg). Conversion vehicles will also reduce oil consumption by up to 70 percent over conventional, gas-powered vehicles.23 This rebate program, which began on May 21, 2010, and will end on November 30, 2012, was awarded $500,000. As of May 14, 2012, the OOE has expended $330,000 and issued 66 rebates.

23 Source: OOE website.


Results and Recommendations-----------

GRANT REVIEW We tested a sample of 176 grant agreements, totaling $158,404,619, executed or active between January 1, 2009 and March 31, 2012. This was accomplished by determining: • The level of oversight the OOE provided

grant recipients; • Whether the grant funds were used in

accordance with the recipient’s24 stated objectives; and

• Whether there was any evidence of misuse, abuse or fraudulent activities.

Our testing included an evaluation of whether administration of the grant and related activities were in compliance with applicable Florida Statutes, federal regulations and the OOE’s Policies and Procedures. The agreements tested included both State of Florida and ARRA funded grants, and were selected based upon the highest award and expenditure amounts. For each grant agreement tested, the OIG evaluated one or more of the following areas: • Risk Assessments • Progress and Financial Reports • Reimbursement Documentation • Monitoring Tools and Activities • Monitoring Visits and Reports • Davis-Bacon • Buy American • Correspondence (e-mails and letters)

The results of our testing are summarized in the following sections.

24 For purposes of this report, a recipient is any

organization awarded grant funds from the OOE.

GENERATION OF DOCUMENTS AND

GRANT AGREEMENT FILES

The OOE’s Policies and Procedures contain the requirements and provide instructions for the establishment of a grant management file. The file is chronological and holds pertinent information related to the contract, and serves as the official file of the OOE’s grant administration and oversight activities. The file should include, though it is not limited to, the following:

• All pertinent information related to the contract during the preparatory stages;

• A copy of the solicitation and related documents;

• Opening bids/proposals, evaluation and tabulation; and

• Determination and notice of award. The file should also contain: • All correspondence; • Documentation of activities; • Invoices and supporting documentation; • Project deliverables; • Required reports; and • Monitoring results.

During the OIG’s review of grant agreement files, we identified the following areas in which documentation required in accordance with the OOE’s Policies and Procedures or federal regulations was either missing or inadequate.

Proof of Liability Insurance and Central

Contractor Registration

In accordance with the OOE’s Policies and Procedures, recipients are required to provide proof of adequate liability insurance (not applicable for state agencies). Should an insurance policy expire or renew during the grant period, recipients are required to


provide an updated certificate to the grant manager assigned to their project. Part 10, Section 600.10(f), Code of Federal Regulations, requires all applicants for financial assistance projects or programs to register in the Central Contractor Registration (CCR). The CCR is the official on-line database for the U.S. Federal Government. Prospective vendors must be registered in the CCR prior to the award or contract, and recipients must update information periodically and provide the OOE with proof of compliance. For the 69 grant agreement files reviewed,25 the OIG determined that 56 (81%) did not contain current insurance certificates and/or proof of Central Contractor Registration. Recommendation: The grant managers should ensure that current insurance certificates and CCR documents are obtained and maintained in the grant agreement file.

E-mail Correspondence

In accordance with the OOE’s Policies and Procedures, the grant agreement file should contain all correspondence regarding the grant. Significant communications between the grant manager and recipient can occur through use of e-mails. For the 77 grant agreement files reviewed,26 the OIG determined that 42 (55%) did not contain sufficient documentation of e-mail correspondence between the grant manager and the recipient.

25 Reviewed 69 (48%) of 144 ARRA funded grant

agreement files. State funded agreements do not require proof of CCR.

26 Reviewed 77 (44%) of 176 State and ARRA funded grant agreement files.

Recommendation: The grant manager should ensure that sufficient e-mail correspondence is maintained in the grant agreement file to adequately document his or her grant administration activities.

Monitoring Tools

In accordance with the OOE’s Policies and Procedures, the grant managers utilize various monitoring tools, which consist of a series of checklists designed to assess the recipient’s compliance with program requirements. For the 60 grant agreement files reviewed,27 the OIG determined that 35 (58%) did not contain sufficient documentation to support the grant manager’s completion of the monitoring tools. Recommendation: The grant manager should ensure that completed monitoring tools are maintained in the grant agreement file to adequately support his or her assessment of the recipient’s compliance with program requirements.

EXECUTION OF GRANT MONITORING PLAN AND RELATED ACTIVITIES

Monitoring is the means by which the OOE carries out its program management responsibilities, which includes ensuring funds are expended in a timely manner for the purpose for which they were made available; ensuring programs are carried out in accordance with applicable laws, rules and regulations; and minimizing opportunities for fraud, waste and mismanagement.

According to the OOE’s Policies and Procedures, the OOE’s monitoring plan

27 Reviewed 60 (34%) of 176 state and ARRA funded

grant agreement files.


includes the performance of risk assessments for grant recipients; the performance of desk and on-site monitoring; and the issuance of monitoring reports to recipients after on-site monitoring visits. The OIG’s testing of grant agreement files identified the following areas in which the OOE did not adhere to its Policies and Procedures related to the monitoring plan.

Risk Assessments

In accordance with the OOE’s Policies and Procedures, the grant managers must complete a risk assessment worksheet for each recipient of funds, prior to contracting. The purpose of the risk assessment is to: • Identify recipients and activities that

represent the greatest vulnerability to fraud, waste and mismanagement of public funds;

• Determine recipients that may pose the highest risk to the state;

• Identify recipients to be selected for on-site monitoring; and

• Determine the most effective means to identify and carry out actions to increase recipient effectiveness.

Based on the risk assessment results, the recipient may be classified as low, medium or high risk. This will determine how often the grant manager will make phone contact with the recipient, how often desk monitoring28 for the recipient will be conducted, and the appropriate number of on-site monitoring visits performed. The OIG reviewed 70 grant agreement files29 and determined that in 63 instances (90%), the grant manager did not perform

28 Desk Monitoring is a grant review of a recipient usually

accomplished in the OOE office. 29 Reviewed 70 (49%) of 144 ARRA funded grant

agreement files.

the risk assessment prior to the OOE entering a contract with the recipient.

Recommendation: The OOE should ensure grant managers perform risk assessments in accordance with the OOE’s Policies and Procedures. A risk assessment is essential to identifying potential issues that may require a higher level of oversight.

Desk and On-site Monitoring

In accordance with the OOE’s Policies and Procedures, the grant managers utilize both desk and on-site monitoring to provide oversight of recipients. Desk monitoring includes on-going programmatic reviews and is conducted via the recipients submission of required reports (e.g. monthly progress reports), as well as through telephone and e-mail communications. Desk monitoring may be used by the grant manager if it has been determined through the risk assessment that the recipient is low risk. On-site monitoring may be a comprehensive program evaluation or may focus on specific areas of a program. At the conclusion of the on-site monitoring visit, the grant manager will conduct an exit interview with the recipient’s program staff, elected officials, and other interested parties in order to discuss findings or problematic issues. As mentioned above, the required frequency of on-site monitoring visits is established based on the results of the risk assessment. The OIG reviewed 59 ARRA funded grant agreement files30 and determined that in 8 instances (14%), the grant manager did not perform an on-site monitoring visit at the

30 Reviewed 59 (41%) of 144 ARRA funded grant

agreement files.


frequency dictated by risk assessment results.

Recommendation: The OOE should ensure that grant managers perform on-site monitoring at the frequency established by risk assessment results.

Monitoring Reports

In accordance with the OOE’s Policies and Procedures, upon completion of on-site monitoring, the grant manager shall generate a report to the recipient within 30 days of the final date of on-site monitoring. The report shall summarize the recipient’s compliance with agreement terms and conditions. If the grant manager detects deficiencies in the program, the monitoring report will outline both the findings and the actions needed to correct the deficiencies. The report may also contain concerns or general comments on areas which require action, but are not a violation of law or regulations. The OIG reviewed 44 grant agreement files31 and determined that in 20 instances (45%), the grant manager did not issue the monitoring report within the 30 day timeframe established by the OOE’s Policies and Procedures. A similar finding was contained in the Auditor General’s Statewide Federal Awards audit for Fiscal Year 2010-2011. On April 27, 2012, the OOE provided an update to the Auditor General regarding corrective action taken to address the finding. The OOE indicated that a grant management spreadsheet had been developed and is being utilized by the OOE to track grant monitoring activities, including the date of the grant manager’s on-site monitoring visit and the issuance of the monitoring report. The process also

31 Reviewed 44 (25%) of 176 state and ARRA funded grant

agreement files.

includes a notification alert to the grant manager for upcoming reports. Recommendation: The OOE should continue to utilize the tracking spreadsheet to ensure monitoring reports are completed and provided to the recipient within the established timeframe. The OIG will evaluate the effectiveness of the tracking system during our six-month follow-up activities.

RECIPIENT REPORTING AND AUDIT REQUIREMENTS

Recipients of state and federal funds must comply with certain reporting and audit requirements in accordance with Florida Statutes and federal regulations. These requirements are outlined in the following section.

Reporting Requirement

The grant agreement requires recipients to provide monthly progress reports to the OOE. The grant agreement further specifies that the monthly progress report describes the project progress, work performed, problems encountered, problem resolution, schedule updates and proposed work for the next reporting period. For the 76 grant agreement files32 reviewed, the OIG determined that 41 (56%) recipients did not submit progress reports to the OOE in accordance with the grant agreement. The agreement files did not contain sufficient correspondence to assess the adequacy of actions taken by the grant manager to obtain the progress reports.

Recommendations: The grant manager should increase efforts to obtain progress reports in accordance with the terms of the 32 Reviewed 76 (43%) of 176 state and ARRA funded grant

agreement files.


grant agreement. In addition, all correspondence between the grant manager and recipient should be maintained in the grant agreement file to document activities performed by the grant manager to obtain the reports.

Audit Requirements

OMB Circular A-133, §_.400(d), Pass-through entity responsibilities, states pass-through entities (i.e., the OOE) are responsible for ensuring that recipients expending $500,000 or more in federal awards during the recipient’s fiscal year have met the OMB Circular A-133 audit requirements. The OOE’s Policies and Procedures specify that the grant manager is responsible for receiving and reviewing the required audits of recipients. Florida Statutes, Section 215.97, Florida Single Audit Act, states “each non state entity that expends a total amount of state financial assistance equal to or in excess of $500,000 in any fiscal year of such non state entity shall be required to have a state single audit.” The OIG’s review of grant agreement files determined that the grant manager did not document the receipt and review of audit reports required from recipients. A similar finding was contained in the Auditor General’s Statewide Federal Awards audit for Fiscal Year 2010-2011. On April 27, 2012, the OOE provided an update to the Auditor General regarding corrective action taken to address the finding. The OOE indicated an audit letter had been developed to request the required audits from the recipients as well as a spreadsheet to track the receipt of audit reports. In addition, the OOE is currently developing forms and a checklist that will be used by grant managers to complete their review of audit reports. Training of grant managers is also

planned to address the audit review process and procedures. Recommendation: The OOE should continue to utilize the tracking tool and conduct training for grant managers to ensure all required audits of recipients are requested, received and reviewed by the grant manager. The OIG will evaluate the effectiveness of the tracking system and training during our six-month follow-up activities.

FINANCIAL MANAGEMENT

The OOE’s Policies and Procedures outline in detail the procedures grant managers should follow to ensure the accuracy of reimbursement requests submitted by the recipient, and the documentation required from the recipient to support matching fund expenditures. The OOE’s Policies and Procedures also specify information that should be clearly reflected on each invoice. The OIG selected invoices totaling $17,607,163 for 51 recipients33 to ensure the documentation submitted by the recipient was sufficient to support the cost reimbursement request, and to determine whether the expenditures submitted for reimbursement were in compliance with applicable Florida Statutes and federal regulations. The OIG determined that invoices were not maintained to support expenditures for 7 (14%) recipients totaling $821,313 (5%).

In addition, the OOE reimbursed one state funded grant recipient for multiple unallowable expenditures (i.e. late fees on invoices). The OIG requested that the OOE review the reimbursements made to the recipient to quantify the amount reimbursed

33 Reviewed 51 (29%) of 176 state and ARRA funded

grant agreement files.


for late fees, and to adjust future reimbursements made to the recipient accordingly.

Recommendations: The grant managers must ensure that sufficient documentation is obtained from the recipient to support all amounts reimbursed, and that the documentation is maintained in the agreement file. Furthermore, the grant managers must ensure all amounts reimbursed are allowable in accordance with state and federal laws.

TRAINING OF STAFF

The OOE is responsible for developing, administering and managing state and federally funded energy programs. This

responsibility requires that the OOE’s management remain diligent in its efforts to provide guidance to staff to ensure they are knowledgeable of all applicable laws, rules and regulations. Training is essential to prepare the grant managers and other administrative staff to perform their respective duties and responsibilities. Based on documentation obtained from the OOE, we determined that training, as outlined in the table below, was provided to grant managers and administrative staff. In addition, as part of training, the compliance officers accompanied the grant managers during on-site monitoring visits.

Grant Manager Training

As of May 16, 2012

DATE ATTENDEE TRAINING COURSE TRAINING

FACILITATOR 7/26/2010 Grant Managers Grant Management Basics and Invoice Review OOE 9/13/2010 Grant Managers Subrecipient Monitoring Training OOE

11/10/2010 Grant Managers OPS Grant Assistant Duties and Procedures OOE 12/20/2011 Grant Managers Procurement Training OOE 12/20/2011 Grant Managers Grant Management Monitoring OOE

1/9/2012 Grant Managers Financial Training OOE 1/24/2012 Grant Managers Invoice/Payment Training OOE 2/14/2012 Grant Managers Davis Bacon Training OOE

3/7/2012 Grant Manager* Advancing Accountability DFS 3/14/2012 Grant Managers Audit Training OOE 4/11/2012 Grant Manager* Advancing Accountability DFS 4/13/2012 Grant Manager* Steps for Success Contract/Grant Monitoring DFS 4/13/2012 Grant Manager* Steps for Success Contract/Grant Monitoring DFS

5/8/2012 Grant Managers Close-out Training OOE 5/9/2012 Grant Manager* Advancing Accountability DFS

5/11/2012 Grant Manager* Steps for Success Contract/Grant Monitoring DFS

Training of Other OOE Staff 3/9/2012 Management** Steps for Success Contract/Grant Monitoring DFS 3/9/2012 Grant Assistant* Steps for Success Contract/Grant Monitoring DFS

4/11/2012 Grant Assistant* Advancing Accountability DFS 4/13/2012 Grant Assistant* Steps for Success Contract/Grant Monitoring DFS

* Training attended by a single grant manager or grant assistant. ** Training attended by a single member of management.


Members of the OIG attended several training sessions and found them to be informative. During training, the grant managers asked several questions to clarify the activities they were to perform. Recommendations: The OOE should continue its training program to ensure grant managers have the necessary knowledge to administer grants. The training should also include fraud awareness and the “red flags” that may signal fraud on the part of the recipient.

GRANT MANAGEMENT ENHANCEMENT OPPORTUNITIES

Based on the OIG’s review of the grant agreement files and interviews with the OOE staff, we have identified the following areas where the OOE’s grant administration activities could be enhanced.

Conflict of Interest Forms

All competitive grant applications were ranked based on their score, as determined by independent evaluators, with the final decision to award grant funding being based on the highest averaged final ranking and the availability of funds. In order to establish an evaluator’s independence, grant evaluators were required to sign a conflict of interest form for each market title (e.g., CNG) in which they participated. According to the OOE, all conflict of interest forms are maintained in the application file. However, the OIG could only locate the conflict of interest forms for two of the three evaluators of the EECBG applications. For the SEP, conflict of interest forms could only be located for the Clean Energy applications. In addition, we determined that the OOE does not require all employees engaged in

the administration of grants to sign conflict of interest forms. Recommendations: The OOE should ensure that all conflict of interest forms are signed and maintained. In addition, the OOE should consider revising its Policies and Procedures to require any staff engaged in the administration of grants to sign a conflict of interest form. The Policies and Procedures should also specify the standard of conduct that is expected, and indicate disciplinary actions to be applied for violating those standards.

Policies and Procedures for State Funded Grants

In April 2010, the OOE developed written Policies and Procedures for Grant Management that focus primarily on the administration of ARRA funded grants. Even though some of the procedures in the policy are applicable to state funded grants, the requirements for risk assessments and the monitoring of state funded grants are not clearly established. Recommendation: The OOE should develop written policies and procedures to assist in the administration of state funded grants. ADMINISTRATION OF INVESTMENT FUNDS

The OOE has oversight responsibility and has established a process to ensure both the FOF and Florida First Partners adhere to the federal requirements governing the funds. A general description of the process for approving an investment is: 1. The FOF and Florida First Partners identify

potential investment opportunities, perform due diligence on prospective companies, and prepare and present an Opportunity Summary to the OOE. Due diligence may consist of


the following areas (as stipulated in the grant agreement between the OOE and FOF): a. Management b. Technology c. Market and Sales Analysis d. Competition/Competitive Advantage e. Financial f. Legal/General/Regulatory Company’s

legal structure and history g. Operations and Manufacturing Plan h. Demonstration Projects (if applicable)

The Opportunity Summary provides an overview of the prospective company, the proposed objectives the investment could yield, location of project and an assessment of SEP and National Environmental Policy Act (NEPA) requirements. The Opportunity Summary will also provide some of the results from the due diligence review performed by Florida First Partners. In addition, the FOF and Florida First Partners may notify the OOE of investment opportunities that are being considered but are not ready for submission.

2. The OOE will approve or deny the investment, which is based, in part, on the review of the Opportunity Summary to determine if the investment will meet the NEPA and SEP eligibility requirements. Denied investments can be resubmitted if reasons for denial are resolved. According to the OOE grant manager, approval of investment opportunities usually occur via e-mail or phone conversations with the FOF and Florida First Partners.

3. Florida First Partners and the FOF prepare and present an Investment Memorandum to the OOE, after receiving approval of the Opportunity Summary. The Investment Memorandum provides more detail of the company and structure of the proposed investment.

4. The OOE will review and approve the Investment Memorandum and draft a Sideletter. The Sideletter informs companies of the federal requirements for accepting the ARRA funds.

5. The FOF and Florida First Partners will prepare and execute the investment agreement with the company receiving the funds.

The OIG identified the following areas in which the OOE could enhance its oversight responsibility for the Fund investments.

Formalize Investment Approval Procedures

Although the OOE was able to communicate to the OIG the steps followed during the approval process, the OOE does not have written policies and procedures to document the approval process requirements. In addition, the OOE could not readily provide documents utilized and reviewed during the approval process or the communications with FOF and Florida First Partners staff. Recommendation: The OOE should document written policies and procedures to be followed for the review and approval of proposed Fund investments. The policies and procedures should outline the responsibilities of the grant manager, the documents the grant manager is required to review and for what purpose, the individuals who are required to sign-off on the grant manager’s approval decision, and the documentation retention requirements.

Maintain Adequate Documentation

The OOE did not consistently maintain documentation to support the approval of investments. • The grant manager stated that the OOE

approved investments via e-mails to the Florida Opportunity Fund, Inc., and Florida First Partners. The OOE could not produce the emails showing approval of the Opportunity Summaries or the Investment Memorandums for any of the three approved investments.


• The Investment Memorandum for one of the approved investments was not maintained by the OOE.

In addition, inadequate documentation was observed for three investments: • Two of the three Opportunity Summary

Checklists (used to document the OOE’s approval of the Opportunity Summary) were not signed or dated by the grant manager.

• All three of the Investment Memorandum Checklists (used to document approval of the Investment Memorandum) were not signed or dated by the grant manager. Also, two of the three Investment Memorandum Checklists were not completed.

Recommendations: The OOE should maintain all pertinent investment documentation. Pertinent documents include, but are not limited to, Opportunity Summaries, Investment Memorandums and e-mail correspondence. Documents approving the investment opportunities, including sufficient justification of approval, should be maintained along with communication of approval to the appropriate entities. The OOE should also ensure all required approval signatures are obtained.

Enhancement of Monitoring Activities

The OOE indicated that reviews are conducted of the Opportunity Summaries and Investment Memorandums to determine whether to approve or deny an investment opportunity proposed by Florida First Partners. While these documents are important to present the investment opportunity, they only summarize the results of the due diligence activities, and the grant manager does not review the source documents or other data used by Florida First Partners.

The OIG reviewed the due diligence process and supporting documentation maintained by Florida First Partners and determined that the process may not be as thorough as the OOE should require or expect. Based upon our observations, the Florida First Partners due diligence process relies heavily on information provided by the perspective company, with limited independent verification or review by Florida First Partners. Recommendation: The OOE should consider amending its oversight activities to include a review of the supporting documents and data utilized by Florida First Partners in performing their due diligence activities. This will ensure the due diligence performed is sufficient to support Florida First Partner’s investment recommendation. This review should be performed prior to the grant manager’s approval of the investment.

ADMINISTRATION OF REBATE PROGRAMS

Prior to release of payment, the OOE audited 11,717 (10%) of the 113,890 appliance rebates and recycling bonuses, and 4,268 (100%) of the HVAC rebates approved for payment by Ohana for processing errors. Any errors identified by the OOE were communicated to Ohana for resolution. As part of the OIG audit, we selected 1,465 (2%) of the ENERGY STAR Appliance rebates and bonuses, 220 (5%) of the ENERGY STAR HVAC rebates and 175 (2%) of the Solar rebates to assess: • Compliance with Florida Statutes, Florida

Administrative Code and ARRA requirements;

• The adequacy of the documentation maintained by the OOE;


• The accuracy of the rebate amount approved and reimbursed; and

• The adequacy of the review performed by the OOE and documentation of that review.

The results of our review are summarized below. ENERGY STAR Appliance Rebate Program

In accordance with Rule 5O-1.007, Florida Administrative Code, an applicant is eligible for a 20% rebate if they purchase a new ENERGY STAR certified appliance or product during the designated period and submit proof of purchase of the qualified appliance to the program administrator postmarked no later than May 10, 2010. The OIG identified the following issues in the ENERGY STAR Appliance rebate payments: • Duplicate rebates were issued for 23 of the

64,224 (0.04%) rebates processed, resulting in an overpayment of $2,504 out of a total of $11,323,092 (0.02%) rebate payments.

As a result of the duplicate rebates issued, duplicate recycling bonuses were issued for 11 of the 49,666 (0.02%) bonuses processed, resulting in an overpayment of $825, out of a total of $3,724,625 (0.02%) recycling bonus payments.

Additionally, 3 duplicate recycling bonuses were issued that were not directly related to a duplicate rebate, resulting in an overpayment of $225.

• Due to pricing errors for 45 rebates, overpayments totaling $908 were found.

Recommendations: The ENERGY STAR Appliance Rebate program has been completed; however, should additional funds become available, the OOE should evaluate its audit procedures to determine if changes are required to detect processing errors. In addition, the OOE should evaluate

its contract with American Express to determine whether overpayments for the ENERGY STAR Appliance Rebate program can be reimbursed to the OOE.

ENERGY STAR HVAC Rebate Program

In accordance with Section 377.806, Florida Statutes, each consumer who submits a complete application on or before November 30, 2010, is eligible for a $1,500 rebate if:34

• The central air conditioner, air source heat pump, or geothermal heat pump system replacement for which the applicant is seeking a rebate was purchased from or contracted for purchase with a Florida-licensed contractor after August 29, 2010, but before September 15, 2010, and fully installed prior to submission of the application for a rebate; and

• The Department determines that the application is in compliance with applicable statutes and any existing agreement with the DOE governing the Florida ENERGY STAR HVAC Rebate program.

The applicant provides the following information to the Department on or before November 30, 2010: • A copy of the sales receipt indicating a date

of purchase after August 29, 2010, but before September 15, 2010, with the make and model number identified and circled along with the name and address of the Florida-licensed contractor who installed the system; or

• A copy of the contract for the purchase and installation of the system indicating a contract date after August 29, 2010, but before September 15, 2010, and a copy of the sales receipt indicating a date of purchase after August 29, 2010, but on or before November 30, 2010, with the make and model number identified and circled along with the name and address of the

34 Only the portions of 377.806, Florida Statutes, that

are relevant to the findings are reflected.


Florida-licensed contractor who installed the system; and

• The system is installed by a state-licensed solar or plumbing contractor, or for the installation of standing seam hybrid thermal roofs, a roofing contractor.

The OIG identified the following issues in the ENERGY STAR HVAC rebate payments and the OOE audit process: • Proof of purchase date documentation was

outside of the statutory period for 55 of the 220 (25%) rebates sampled;

• Proof of installation documentation was missing from the application for 76 of the 220 (35%) rebates sampled;

• The mailing date was outside of the statutory period for 6 of the rebates sampled; and

• The OOE determined during their audit that the HVACs may not have been purchased and/or installed within the timeframe required by statute. However, documentation was not maintained to support final resolution.

Recommendations: The ENERGY STAR HVAC Rebate program has been completed; however, should additional funds become available, the OOE should ensure that rebates are processed and paid in accordance with Florida Statutes. In addition, the OOE should maintain all documentation justifying their approval of rebates.

Solar Rebate Program

In accordance with Section 377.806, Florida Statutes, and Rule 5O-1.004, Florida Administrative Code, an applicant who purchased a solar photovoltaic system or solar thermal system is eligible for a rebate of $4 per watt provided:

• The application must have been submitted from July 1, 2006, through June 30, 2010, and within 120 days of the purchase date;

• The system complies with all applicable building codes as defined by the Florida Building Code; and

• The system complies with state interconnection standards as provided by the Florida Public Service Commission.

The OIG reviewed 175 (2%) of 8,720 solar rebate applications and the corresponding payments. No issues were identified.

In June 2010, the Office of the Chief Inspector General audited the OOE’s administration process related to the programs funded through ARRA, including the solar rebate program. This audit covered expenditures made during the period July 1, 2009 through December 31, 2009, and selected transactions through March 31, 2010. The audit report contained the following findings:

• The OOE staff did not require residents or businesses applying for a rebate to provide documentation evidencing compliance with applicable building codes as defined by the Florida Building Code or the state interconnection standards as provided by the Florida Public Service Commission; and

• Internal controls were not sufficiently in place to ensure that staff were not able to perform multiple rebate processing duties.

The Office of the Chief Inspector General performed a follow-up review for the audit. The follow-up report dated June 30, 2011, indicated the following corrective actions were taken by the OOE to address the audit findings:

• The licensed contractor who installed the system was required to certify that the “system is in compliance with all applicable local building codes”, via his or her signature on the rebate application. As a result, OOE staff determined that it was not necessary to take any additional actions to verify compliance with applicable building codes. The OOE sent requests for


confirmation of interconnection agreements to all applicable utility companies for all unpaid rebate claims submitted to the OOE.

• The recent addition of staff enabled the OOE to segregate duties, strengthen internal controls and significantly minimize opportunities for fraud, waste and/or abuse.

RETURN ON INVESTMENT CONCLUSION

The OIG analyzed existing data in an effort to identify investment returns for each energy program and the grants that make up those programs. Our audit determined that there was insufficient data available, and/or insufficient progress made within the energy programs to determine their overall investment returns. With respect to our review of the individual grants, some reported progress had been indicated in areas that involve the retrofitting of energy systems. These returns were realized as a result of reductions in greenhouse gases and electric and natural gas consumption as well as overall dollars saved through increased energy efficiency. The ENERGY STAR Appliance Rebate and ENERGY STAR HVAC programs were successful in meeting their goals by encouraging consumers to purchase 64,224 new ENERGY STAR appliances and 4,268 ENERGY STAR HVAC systems, which stimulated Florida’s economy and produced a reduction in energy usage. Recommendations: The OOE should ensure all new grant agreements contain clear and measureable ROI reporting requirements. Additionally, the OOE should consider modifying existing grant agreements to

include ROI reporting requirements not currently mandated. These reporting requirements should be in effect for a period of time sufficient to evaluate the success of both state and federal programs. Finally, the OOE should consider developing a system for collecting, summarizing, analyzing and reporting the projected and actual ROI data at the recipient level.

GRANTS OF CONCERN During the course of this audit, we identified several recipients whose project progress and/or reporting documentation contained irregularities. Examples of this often involved incomplete, misleading or false documentation. These detections resulted in the OOE’s immediate action to cease payments and/or terminate the grant agreements, resulting in cost avoidance in excess of $2.26 million, and the initiation of criminal investigations.

BANKRUPTCY DETERMINATION

During the preliminary stages of the audit, we determined a recipient awarded four ARRA grants totaling $197,973, had filed for bankruptcy.

Subsequent to the OIG’s determination of the bankrupt status, the OOE initiated termination of the four agreements for failure of the recipient to fulfill its obligations as outlined in the agreement.


COMPARISON OF FLORIDA’S OOE TO ENERGY OFFICES OF

OTHER STATES The OIG compared the amount of ARRA funds expended by Florida’s OOE to amounts expended by the energy offices for the nine states reflected in the table below. The OIG selected these nine states, focusing on the states with the highest awarded amount from the DOE. The OIG collected the comparative data from multiple sources including the DOE, the nine state agencies, and their respective websites.

States Used for Comparison

STATE AGENCY / OFFICE / DIVISION

California Energy Commission

Georgia Environmental Finance Authority

Illinois Department of Commerce and Economic Opportunity

Michigan Michigan Economic Development Corporation - The Michigan Energy Office

New York Energy Research and Development Authority

North Carolina Department of Commerce - Division of Energy

Ohio Department of Development Recovery

Pennsylvania Department of Environmental Protection - Office of Pollution Prevention and Energy Assistance, Energy and Technology Deployment

Texas Department of Housing and Community Affairs - Energy Assistance Office


Compared to the nine states, Florida’s OOE ranked 8th in overall expenditure of ARRA funds, as of March 31, 2012, as shown in the table above. The following tables show the amount awarded, amount expended and percentage expended for the selected states’ energy offices for the ENERGY STAR Appliance Rebate Program, SEP, EECBG and Energy Assurance Grant Program according to the DOE website. Slight discrepancies between the DOE and the OOE data, including award amounts, are due to timing differences.

ENERGY STAR APPLIANCE REBATE PROGRAM

Florida has expended 100% of the $17.6 million ENERGY STAR Appliance rebate funds awarded. Also, almost every remaining state has expended the entire amount of rebate funds awarded.

The following table shows a comparison of ENERGY STAR Appliance rebate funds awarded and expended by each of the states, as well as the percentage expended.

ENERGY STAR Appliance Rebate Program Awarded and Expended Funds by State


States Amount Awarded

Amount Expended

Percentage Expended

Texas $23,341,000 $23,341,000 100%

New York 18,700,000 18,691,281 100%

Florida 17,585,000* 17,585,000* 100%

Pennsylvania 11,944,000 11,921,338 100%

Illinois 11,674,264 11,674,264 100%

Georgia 9,293,000 9,293,000 100% North Carolina 8,800,000 8,800,000 100%

California 35,267,000 34,884,785 99%

Michigan 9,598,000 9,506,390 99%

Ohio 11,020,000 10,258,881 93% *$2,473,383 was used for ENERGY STAR HVAC rebates.

Percent of ARRA Funds Expended by State As of March 31, 2012

PERCENTAGES EXPENDED

RANK STATES TOTAL

AWARDED OVERALL

ENERGY STAR

APPLIANCE SEP EECBG

ENERGY ASSURANCE

GRANT PROGRAM

1 Georgia $114,507,394 91% 100% 94% 83% 85% 2 Pennsylvania 136,544,964 85% 100% 94% 92% 53% 3 Illinois 136,213,618 81% 100% 84% 75% 64% 4 Michigan 112,350,442 81% 99% 82% 88% 54% 5 North Carolina 106,760,482 74% 100% 83% 81% 33% 6 Texas 290,193,168 68% 100% 61% 45% 67% 7 New York 173,558,889 67% 100% 79% 45% 42% 8 Florida 175,957,276 60% 100% 61% 37% 42% 9 California 314,535,926 59% 99% 82% 34% 21%

10 Ohio 133,336,464 55% 93% 64% 33% 28% Source: DOE website. Note: Slight discrepancies between DOE and OOE data are due to timing differences.


ENERGY EFFICIENCY AND CONSERVATION BLOCK GRANT

Florida has expended approximately 37% of its $30 million EECBG funds awarded. This places Florida 8th, above Ohio and California.

The following table shows a comparison of EECBG funds awarded and expended by each of the states, as well as the percentage expended.

EECBG Awarded and Expended Funds by State



Amount Expended

Percentage Expended

Pennsylvania $23,574,800 $21,665,136 92%

Michigan 19,599,600 17,332,183 88%

Georgia 21,630,700 18,009,905 83% North Carolina 20,925,300 16,917,962 81%

Illinois 21,834,600 16,335,934 75%

Texas 45,638,100 20,440,629 45%

New York 29,760,600 13,336,393 45%

Florida 30,401,600 11,163,610 37%

California 49,603,400 16,702,101 34%

Ohio 24,979,600 8,263,474 33%

STATE ENERGY PROGRAM

Florida has expended approximately 61% of the $126 million SEP funds awarded from the DOE. Florida placed last, tied with Texas, for expending the SEP funds awarded. The following table shows a comparison of ARRA funded State Energy Program funds awarded and expended by each of the states, as well as the percentage expended.

SEP Awarded and Expended Funds by State



Amount Expended

Percentage Expended

Pennsylvania $99,684,000 $93,894,211 94%

Georgia 82,495,000 77,345,912 94%

Illinois 101,321,000 85,277,677 84% North Carolina 75,989,000 63,134,165 83%

California 226,093,000 185,211,847 82%

Michigan 82,035,000 67,435,476 82%

New York 123,110,000 97,796,966 79%

Ohio 96,083,000 61,962,216 64%

Texas 218,782,000 133,217,118 61%

Florida 126,089,000 76,574,876 61%

ENERGY ASSURANCE GRANT PROGRAM

Florida has expended approximately 42% of the $1.9 million Energy Assurance Grant Program funds awarded. Compared to the other states, Florida tied with New York, placing 6th. The following table shows a comparison of ARRA funded Energy Assurance Grant Program funds awarded and expended by each of the states, as well as the percentage expended.

Energy Assurance Grant Program Awarded and Expended Funds by State



Amount Expended

Percentage Expended

Georgia $1,088,694 $926,243 85%

Texas 2,432,068 1,637,860 67%

Illinois 1,383,754 883,959 64%

Michigan 1,117,842 600,669 54%

Pennsylvania 1,342,164 711,643 53%

New York 1,988,289 837,561 42%

Florida 1,881,676 796,569 42%

North Carolina 1,046,182 350,202 33%

Ohio 1,253,864 350,385 28%

California 3,572,526 736,509 21%


This review was conducted in conformance with the applicable

standards for the General Principles and Standards for Offices of Inspector General, the International Standards for the Professional Practice of Internal Auditing, and Information Systems Auditing

Standards as published by the Association of Inspectors General, the Institute of Internal Auditors and the Information Systems Audit and

Control Association, respectively.

Arthur Hamilton, Internal Auditor Justin Evans, Internal Auditor Paul Lowery, Internal Auditor Vasili Efimov, Internal Auditor

Lisa Zullo, Administrative Assistant Nedra Harrington, CIA, CISA, CPA - Director of Auditing

(850) 245-1360 http://www.freshfromflorida.com/oig

[email protected]

http://www.freshfromflorida.com/oig

mailto:[email protected]

Appendix A: ARRA Funding by State/Territory

STATE/TERRITORY AWARDED STATE/TERRITORY AWARDED Alabama $3,683,495,183 New Jersey $5,450,028,906 Alaska 2,315,464,415 New Mexico 2,706,419,176 Arizona 7,729,489,639 New York 17,092,996,655 Arkansas 2,324,983,687 North Carolina 7,610,783,061 California 34,634,851,091 North Dakota 1,093,640,582 Colorado 5,596,427,618 Ohio 8,834,531,096 Connecticut 2,558,571,509 Oklahoma 3,060,414,747 Delaware 974,945,596 Oregon 3,280,359,094 District Of Columbia 5,989,273,982 Pennsylvania 9,362,652,543 Florida 11,056,763,738 Rhode Island 1,219,769,914 Georgia 7,020,175,012 South Carolina 4,617,615,597 Hawaii 1,592,122,443 South Dakota 1,434,038,061 Idaho 1,702,690,848 Tennessee 5,955,014,323 Illinois 11,944,595,240 Texas 16,696,513,233 Indiana 4,489,729,492 Utah 2,263,446,267 Iowa 2,270,382,810 Vermont 1,034,506,847 Kansas 2,587,508,070 Virginia 6,319,743,528 Kentucky 3,667,640,865 Washington 8,416,845,587 Louisiana 3,318,276,314 West Virginia 1,837,851,058 Maine 1,452,604,861 Wisconsin 4,072,740,568 Maryland 6,695,657,806 Wyoming 661,801,721 Massachusetts 7,728,858,508 American Samoa 207,246,642 Michigan 8,569,956,079 Federated States of Micronesia 444,656 Minnesota 4,031,212,302 Guam 284,658,767 Mississippi 2,856,408,211 Marshall Islands 1,447,242 Missouri 4,907,917,725 Northern Mariana Islands 119,099,588 Montana 1,554,572,516 Palau 2,183,586 Nebraska 1,344,586,835 Puerto Rico 2,621,227,197 Nevada 2,906,791,095 U.S. Virgin Islands 284,315,004 New Hampshire 975,450,886 Not Assigned1 54,210,091

TOTAL2 $275,077,949,711 Source: DOE - www.recovery.gov, as of March 30, 2012.

1 Includes Minor and Outlying Islands, as well as the DOE payroll, training, travel, transfers, purchase cards,

reimbursable work, etc., that is not associated with a specific State/Territory. 2 Funding includes contracts, grants and loans.

Appendix B: ARRA Funding of Energy Initiatives by State/Territory

RANK STATE/TERRITORY AWARDED EXPENDED PERCENT

EXPENDED 1 Indiana $89,576,488 $87,433,605 98% 2 Wisconsin 73,347,382 70,206,606 96% 3 Pennsylvania 136,544,964 128,192,329 94% 4 Nevada 47,241,069 43,982,941 93% 5 Mississippi 53,301,126 49,529,862 93% 6 Georgia 114,507,394 105,575,059 92% 7 Idaho 39,881,295 36,725,105 92% 8 Alabama 71,020,942 65,135,290 92% 9 Kentucky 67,647,715 60,914,428 90% 10 Montana 36,665,265 32,978,594 90% 11 Colorado 64,207,709 56,015,821 87% 12 Arkansas 52,211,490 45,270,909 87% 13 Washington 78,674,810 67,955,682 86% 14 Utah 48,032,575 41,386,931 86% 15 West Virginia 44,446,980 38,276,773 86% 16 South Dakota 34,072,528 28,931,812 85% 17 Arizona 72,073,910 61,061,308 85% 18 Michigan 112,350,442 94,874,718 84% 19 New Mexico 43,700,570 36,827,939 84% 20 Illinois 136,918,354 114,876,570 84% 21 North Carolina 106,809,482 89,251,330 84% 22 Missouri 76,375,506 63,621,839 83% 23 Delaware 34,942,578 29,103,102 83% 24 Oregon 55,959,249 46,556,270 83% 25 Tennessee 83,033,433 68,645,210 83% 26 Maryland 67,461,398 55,208,506 82% 27 Vermont 32,445,503 26,503,871 82% 28 Hawaii 37,077,503 30,055,522 81% 29 Massachusetts 76,694,307 61,211,524 80% 30 Maine 38,482,289 30,637,842 80% 31 Virginia 94,513,136 74,682,280 79% 32 New Jersey 97,371,358 76,789,417 79% 33 Oklahoma 60,326,697 47,383,445 79% 34 South Carolina 65,052,534 49,986,113 77% 35 Virgin Islands 30,375,500 23,137,102 76% 36 Nebraska 42,578,135 32,293,357 76% 37 California 314,535,926 237,535,242 76% 38 New York 173,558,889 130,662,201 75% 39 Puerto Rico 51,036,294 38,184,333 75% 40 Minnesota 70,497,813 52,576,022 75% 41 Iowa 53,495,993 39,073,437 73% 42 District Of Columbia 32,437,802 23,478,243 72% 43 New Hampshire 37,003,229 25,541,668 69% 44 North Dakota 35,052,358 23,421,626 67% 45 American Samoa 28,448,757 18,255,462 64% 46 Wyoming 35,294,359 21,791,707 62% 47 Texas 290,193,167 178,636,606 62% 48 Ohio 133,336,464 80,834,955 61% 49 Florida 175,951,297 106,114,077 60% 50 Louisiana 90,336,324 54,463,236 60% 51 Rhode Island 34,857,913 20,882,910 60% 52 Connecticut 52,015,750 30,881,536 59% 53 Kansas 50,696,500 25,820,153 51% 54 Guam 28,857,500 13,152,784 46% 55 Alaska 41,172,400 17,949,323 44% 56 Northern Mariana Islands 28,344,500 12,186,072 43%

TOTAL $4,173,044,851 $3,222,660,606 77% Source: DOE - www.recovery.gov, as of March 30, 2012. Page 54

MEMORANDUM

DATE: July 23, 2012

TO: Ron Russo, Inspector General

FROM: Patrick Sheehan, Director, Office of Energy

RE: Operational Audit Report Number IA 1112-02

Thank you for the opportunity to review and respond to the findings and recommendations

provided as a result of the Florida Department of Agriculture and Consumer Services’ (FDACS)

Office of Inspector General (OIG) Operational Audit Report Number IA 1112-02.

Upon assuming responsibility for the Office of Energy (OOE) on July 1, 2011, Commissioner of

Agriculture Adam Putnam requested an audit of the OOE in order to:

1) Evaluate energy grants to determine if the contractually stated goals were reached and

anticipated returns on investment realized;

2) Investigate indicators of fraud or waste; and

3) Assess the overall effectiveness of the OOE in its implementation and oversight of

energy programs, grants and initiatives.

Quality public service and excellence in stewardship of public resources remains a paramount

objective for the Commissioner and the findings of the audit will enable OOE to carry out this

mission.

The OIG conducted a comprehensive review of the OOE and the programs and grants the office

manages. The Operational Audit revealed some completed grant projects that resulted in jobs

created, cost savings, emissions reductions and energy savings. It also revealed some completed

grant projects that did not meet their projected goals in these areas. Further, many ongoing

projects have yet to reach stages of completion that would enable them to receive their awarded

grant dollars or fully demonstrate returns on investment. Importantly, the audit uncovered

indications of suspected fraud by grant recipients.

Page 55

While there were no violations of federal regulations or state statutes, the Operational Audit

reveals significant failures in the management of these grant programs by the OOE staff. The

Inspector General offers recommendations for improvements to the OOE’s policies and

procedures, some of which have already been implemented since the transfer of OOE to FDACS

and some of which the OOE is currently working to implement.

Grant Programs and Grant Projects

According to the findings of the audit, some of the completed programs administered by the

OOE were proven successful in meeting their desired objectives. As part of the Solar Energy

Systems Incentives Program, for example, the OOE carefully reviewed 12,000 solar rebate

applications and awarded $24,986,048 million within the first 100 days after the office was

transferred to FDACS. This program garnered significant participation, had a meaningful impact

on the state’s economy by creating or retaining 792 jobs and resulted in $58 million in energy

savings by consumers. In another example, the ENERGY STAR/HVAC programs, which

encouraged consumers to purchase ENERGY STAR appliances, saved Floridians more than 7.5

million kWH and approximately 123 million gallons of water and generated $51 million in

economic impact and $3.6 million in tax revenues.

State-funded projects such as the LYNX GREEN Bio-Fleet Project, which replaced 20% of its

diesel fuel with biofuel and reduced emissions by 25%, and the Orange County Photovoltaic and

Research Facility and Learning Center, which has produced more than 2.7 million kWh of solar

energy and prevented the release of more than 6 million pounds of carbon dioxide, met or

exceeded their projected objectives.

Additionally, since the audit review period ended in March 2012, many more projects have come

to completion and examples of success have continued to grow. For instance, Gulf County

installed 86 solar security lights and reports saving $3,200 monthly on utility bills. Leon County

retrofitted four buildings with energy efficient lighting and reduced their electricity demand by

1.39 MW. The City of Seminole replaced an aging and inefficient heating, ventilating and air

conditioning (HVAC) system in the Magnum Recreation Center and reports it is saving 76,700

kWh per month and anticipates saving 900,000 kWh per year with a $72,000 reduction in

electrical costs each year.

Unfortunately, this audit also reveals that some completed projects, such as the Okaloosa Gas

District did not meet all of their projected conservation goals, though over time, some of the

expected energy savings and cost savings may be realized.

The audit examines some grant programs that experienced low levels of participation, have been

slow to expend funds and provided little evidence of meaningful impact. The E85 and B20

Public, Private Fueling Facilities Grant, for example, was intended to increase the availability of

E85 and B20 fuels to consumers at retail stations throughout Florida. Prior to the transfer of

OOE to FDACS, the grant program awarded nearly $1 million to 20 facilities, yet as of March

31, not one facility had submitted for reimbursement or reported return on investment (ROI). Of

the 20 grant recipients, 12 have already been terminated and only eight remain ongoing. The

Shovel Ready Energy Project Grant provides another example of a program that has not made

significant measurable impact. Intended to support “shovel-ready” projects and stimulate capital

investment in Florida, the grant program awarded nearly $5.5 million to only three recipients,

one of which was terminated and none have reported ROI.

Though the audit can help identify some successes and failures of the grant programs managed

by the OOE, there remain a significant number of grants and funds expended which are too early

in the process to measure. The OOE will continue to evaluate the outcome of grant projects that

were completed this year or are near completion to determine the full impact of these programs

on Floridians and the effectiveness of these programs in meeting their objectives.

As April 30, 2012, marks the contracted end date for a significant majority of the federally

funded grants managed by the OOE, a considerable number of final progress reports are

currently being reviewed by the OOE. A full analysis of grant successes will be made publicly

available on the FDACS website as well as in the next OOE Annual Energy Report.

Rate of Expenditure of Funds

The past rate of OOE fund expenditure is extremely disappointing. The audit notes that the U.S.

Department of Energy ranked Florida nearly dead last (49 of 56 states and territories) in percent

of federal energy stimulus funds (ARRA funds) expended. While it is important to be strategic

in awarding grants and expending funds, the slow rate at which OOE has awarded and expended

these stimulus funds failed to generate immediate impact on a state facing difficult economic

times.

However, under the leadership of Commissioner Putnam, the OOE has demonstrated great

progress in accelerating the funds expended since the OOE was transferred to FDACS on July 1,

2011. In the past year, July 1, 2011, to July 1, 2012, under FDACS, the OOE doubled

expenditure of overall federal stimulus dollars from 36% to 73% expended. Further, the OOE

has more than tripled the expenditure of Energy Efficiency Block Grant funds in the past year

from 14.5% expended to 52% expended. Though the OOE, under FDACS, has made great

progress in accelerating the rate of expenditure, the new leadership was not able to influence how

the ARRA funds were awarded (contractually obligated to grant recipients), given that all

remaining funds were awarded just before the transfer of the OOE to FDACS, as demonstrated

by the table in this Audit Report on page 16.

It should also be stated that of the original $44.8 million in state funds the OOE awarded, $16

million of that was reverted back to State General Revenue prior to transfer of the OOE to

FDACS, leaving OOE to expend about $9.7 million on state energy grants, as of July 1, 2011.

Since joining FDACS, OOE has expended half that remaining amount, leaving just $4.3 million

still to expend on five active state-funded energy grants.

Therefore, it would be useful to look at an updated set of charts that reflects the current status of

grants and funds expended, as of July 1, 2012 (updating the Audit Report’s grant overview charts

on pages 1 and 2).

Overview of Grant Programs*


Programs Ongoing Completed Terminated** Total

State Funded Energy Initiatives 7 7 12 26

Federal Non-ARRA Energy

Initiatives 12 4 0 6

ARRA Funded Energy Initiatives:

State Energy Program (SEP) 79 1 18 98

Energy Efficiency and Conservation

Block Grant (EECBG) 39 3 2 44

Energy Assurance Grant Program 2 0 0 2

Total 129 15 32 176 *This table does not include vendor contracts or the Energy Economic Zone Program.

** Terminated or in process of termination.

Overview of Grant Programs*

As of July 1, 2012

Programs Ongoing Completed*** Terminated** Total

State Funded Energy Initiatives 1 15 10 26

Federal Non-ARRA Energy Initiatives 1 5 0 6


State Energy Program (SEP) 10 66 22 98


Block Grant (EECBG) 16 26 2 44

Energy Assurance Grant Program 2 0 0 2

Total 30 112 34 176 *This table does not include vendor contracts or the Energy Economic Zone Program. ** Terminated or in process of termination. ***Work period on grant completed - some invoices may still be under review for payment.

Overview of Awarded and Expended Amounts for Grants and Rebates* As of March 31, 2012

Programs

Number of Grants/ Rebates

Amount Awarded

Amount Expended Percent

Expended As of 3/31/12 State Funded Energy Initiative Grants** 26 $44,768,368 $20,963,505 47%

Federal Non-ARRA Energy Initiative Grants 6 6,185,124 6,044,177 98% ARRA Funded Energy Initiatives: ENERGY STAR Appliance Rebates 113,890 15,047,717 15,047,717 100%

ENERGY STAR HVAC Rebates** 4,268 6,402,000 6,402,000 100% State Energy Program (SEP) Grants 98 78,184,588 32,689,970 42% Solar Rebates 11,109 39,394,048 39,394,048 100%

SEP Total 117,578,636 72,084,018 61% Energy Efficiency and Conservation

Block Grant (EECBG) Grants 44 28,106,968 10,143,288 36% Plug-In Hybrid Rebates 66 500,000 330,000 66%

EECBG Total 28,606,968 10,473,288 37% Energy Assurance Grant Program 2 1,159,571 387,906 33%

Total $219,748,384 $131,402,611 60% * This table reflects the amounts awarded and expended to recipients and excludes vendor payments and administrative cost. ** Approximately $3,993,756 of the State Energy Program funds was used for the ENERGY STAR HVAC Rebate Program.

Overview of Awarded and Expended Amounts for Grants and Rebates*

As of July 1, 2012

Programs

Number of

Grants/Re

bates

Amount

Awarded

Amount

Expended

Percent

Expended***

As of

7/1/12***

State Funded Energy Initiative

Grants 26 $44,768,368 $24,438,096 55%

Federal Non-ARRA Energy

Initiative Grants 6 5,728,921 5,545,047 97%


ENERGY STAR Appliance Rebates 113,890 15,047,717 15,047,717 100%

ENERGY STAR HVAC Rebates** 4,268 6,402,000 6,402,000 100%

State Energy Program (SEP)

Grants 98 78,184,588 48,112,693 62%

Solar Rebates 12,515 39,394,048 39,394,048 100%

SEP Total 117,578,636 87,506,741 74%


Block Grant (EECBG)

Grants 44 28,106,968 14,440,760 51%

Plug-In Hybrid Rebates 66 500,000 330,000 66%

EECBG Total 28,606,968 14,770,760 52%

Energy Assurance Grant Program 2 1,159,571 780,736 67%

Total $219,292,181 $154,491,097 70%

* This table reflects the amounts awarded and expended to recipients and excludes vendor payments and administrative cost.

** Approximately $3,934,756 of the State Energy Program funds was used for the ENERGY STAR HVAC Rebate Program.

***For State Funded Energy Initiatives these figures do not include an additional $16 million reverted to State General Treasury prior to 7/1/11.

Close Out of Grants and Reported ROI

Given that a significant majority of the federal ARRA grants the OOE manages expired

contractually on April 30, 2012, the OOE has entered a critical phase of reviewing final progress

reports and invoices for payments from its grantees. Typically, grant agreements between the

OOE and grantee lay out a phased timetable for completion of tasks. The tasks may include, but

are not limited to: 1) grantee’s proof of meeting any financial match requirement; 2) grantee’s

public solicitation of vendors to conduct energy efficient retrofits or installations; 3) public

award of vendor subcontract; and 4) installation or contracted work is conducted. Once work is

conducted at these latter stages, invoices are provided by the grantee to the OOE and, after a

thorough compliance review, the OOE expends funds to the grantee. Thus, typical OOE grants

are back-loaded in terms of the expected time period for payments (expenditures) on invoices by

OOE. The period from April 30, 2012, through August 30, 2012, will see a vast number of the

OOE ARRA grants finalized and payments made.

More specifically, at the time of this memo, the OOE is processing final reports on 47 ARRA

grants that expired on April 30, 2012 (17 were previously processed and closed out and a further

20 terminated). While the Audit Report may show no expenditures for many grants as of March

2012, part of the explanation can be found in the back-loaded nature of the original grant

agreements as noted above. Furthermore, the lack of reported ROI in grantee’s early progress

reports also can be better understood in the context of this phased approach to contracts. Much

work was conducted on these grants throughout the early and mid phases of the contract period

in securing match dollars, vendors and arranging subcontracts for specific tasks. Yet, it is to be

expected that ROI would begin to be realized in most cases at full completion of the grant and

thereafter.

By August 30, 2012, another 56 grants (largely Energy Efficiency Community Block Grants)

will expire and work will have been fully completed on all but 2 of the 144 ARRA funded

energy grants managed by the OOE over the past three years. (The two remaining grants have

September 30, 2012, contract expiration dates). This last group of block grants will submit their

final reports to the OOE in the fall and the OOE will then be in a position to expend all

remaining federal ARRA funds.

Investigation of Fraud

One of the most important objectives of this audit was to investigate indicators of fraud or waste

across the more than $200 million worth of grant programs. The OIG was successful in

identifying some irregularities in reporting by grantees, which upon further investigation,

indicated fraud or bankruptcy. As a result, grants were terminated and taxpayer dollars saved.

Fraud was detected in two grant agreements, saving $2.26 million in taxpayer dollars. FDACS is

working in coordination with federal and state law enforcement to conduct criminal

investigations on these organizations.

In addition, the audit identified four grants awarded to one organization that subsequently

entered bankruptcy proceedings. The immediate termination of these grants saved $198,000 in

taxpayer dollars.

Effectiveness of OOE

This audit revealed significant failures in OOE management of grant programs, many of which

have been addressed since the transfer of OOE to FDACS.

Audit findings reveal several concerns related to documentation and grant monitoring practices

by OOE staff, including missing required documentation, insufficient reimbursement

documentation and lack of correspondence between the grant manager and the grant recipient. Of

the grant invoices reviewed, more than $800,000 worth of reimbursements paid were missing

invoices.

These findings are unacceptable, though not unexpected from an office that has been housed in

five different state agencies since it was created in 1975. Furthermore, while the OOE was under

the leadership of the Executive Office of the Governor during Governor Crist’s administration,

the staff was not permitted to travel, disabling OOE staff from conducting federally-required

onsite monitoring to verify grantee progress and address issues related to progress reports,

documentation collection and invoices.

Under the leadership of FDACS, significant steps have been taken over the past year to address

each of these areas of concern. Significantly, Commissioner Putnam lifted the travel ban on

OOE staff and over 120 on-site grant monitoring visits have taken place this past year, reaching

every recipient location at least once. As the audit details on page 42, FDACS has exponentially

increased training opportunities required of staff and, as evidenced on page 9, the new OOE

organizational structure features increased compliance staff to help ensure grant recipients are in

compliance with their agreements. Additionally, the migration of all grant management reporting

and paperwork to the FDACS’ AIMS computer database is helping to ensure added oversight

and controls in tracking and maintaining invoices.

Commissioner Putnam called on the OOE to establish a red, yellow and green risk assessment

standard to rank grant recipients according to their compliance with grant agreements and

progress in meeting their proposed objectives. This ranking system, which exceeds federal or

state standards, enables OOE to more closely monitor grant projects at risk.

Based on the findings of the audit and the recommendations outlined by the Inspector General,

the OOE is undertaking further enhancements to its policies and procedures. The OOE will add

a section outlining policies for state-funded grants to be used in the future should state revenues

be allocated towards new energy grant programs. In addition, OOE staff will be required to

participate in additional training programs in the coming months, specifically in regard to fraud

identification and file management. The OOE is also undertaking a complete and comprehensive

review of all active grant files to ensure that all checklists, worksheets, invoices and

documentation are properly labeled and filed. Closed out grant files are similarly being

reviewed, especially to ensure all invoices are properly filed and were fully transferred to

FDACS.

Conclusion

Thank you for the work your team has put in on this thorough audit review. This audit has

served its intended purposes in that it fully evaluated OOE grant programs and initiatives,

uncovered fraud or fiscal irregularities and offered significant recommendations to enhance and

improve the policies and procedures of the OOE.

While the OOE has made significant progress in increasing the rate of expenditures and

improving its policies and procedures to avoid the mismanagement of grants that has riddled its

past, there remain some thoughtful recommendations offered by the audit report that will be

incorporated into an update of OOE policies and procedures.

The OOE expects to complete all current grant programs by the end of 2012 and will publicly

issue a comprehensive, update on the completion of grants and their benefit to Florida’s

economy and energy savings.

Upon completion of grant programs, the OOE will complete the transition of its mission from

grant management toward policy development, as outlined by Commissioner Putnam and

directed by the State Legislature. Moving forward, its mission is to analyze proposed federal and

state energy legislation and, most importantly, support the Legislature and Governor in

developing energy policy for Florida’s future.

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