The California State Auditor has issued its report alerting state officials that the California Energy Resources Conservation and Development Commission is not prepared to administer the $226 million awarded to it for the energy program through the federal American Recovery and Reinvestment Act of 2009. The Energy Commission has been slow in developing guidelines, issuing requests for proposals, and implementing the internal controls needed to administer the Energy Program. As a result, few funds have been spent or obligated--it has only entered into contracts totaling $40 million yet all funds must be obligated by Sept. 30, 2010. Further, as of Oct. 31, 2009, the Energy Commission had only spent $71,000, which it used for administrative costs.

California's Energy Program has grown astronomically with Recovery Act funds--from $3 million in 2008, to an expected $226 million from Recovery Act funds. Although it began applying for these funds in March 2009, the Energy Commission does not have adequate controls in place to ensure those funds are used appropriately.

"The Joint Legislative Audit Committee is concerned about California's ability to administer the large influx of federal Recovery Act funds that must be spent quickly--in particular for those departments, such as the Energy Commission, that don't typically receive such a significant amount of funds," said Elaine Howle, California's state auditor. "We want the state to be able to fully take advantage of these federal funds, yet ensure that they are spent wisely and appropriately." The Energy Commission needs better controls to detect fraud, waste, and abuse; develop better reporting processes; and establish adequate controls to administer the funds.

The state auditor plans on reporting the results of the reviews of federal funded programs early in the process to communicate the areas where the state can improve its administration of Recovery Act funds or to recognize instances where such funds were spent properly. In this initial report, the State Auditor's Office warns that the state is at risk of losing millions because the Energy Commission is not yet prepared to administer the Recovery Act funding.

The California state auditor will continue to examine ways in which the state can ensure it is maximizing federal stimulus funds. The State Auditor plans on issuing interim reports on other federal programs that are receiving Recovery Act funds in December 2009 and January 2010. Because of the State Auditor's proactive approach for overseeing Recovery Act funds, the State Auditor was asked to participate in a federal pilot project for early reporting on audits of federal programs that receive Recovery Act funds.