Colorado

Colorado Energy Office Can’t Account for $252 Million In Last Six Years

Policy

A 2012 performance review of the The Colorado Energy Office (CEO) revealed several disturbing findings by the State Auditor last month, which included a non-existent accounting system for CEO’s 34 programs, a runaway budget, and staff who had no knowledge of program goals or standards. The forty-eight page report was was dated December 18, 2012 and included background information on the CEO, key facts and findings, the State Auditor concerns, and recommendations for the CEO moving forward.

The CEO was established via executive order in 1977 as the Office of Energy Conservation. Last year, House Bill 12-1315 changed CEO’s overall mission from promoting renewable energy and energy efficiency to promoting all sources of energy development and earmarked state funding for CEO through Fiscal Year 2017. The CEO now administers various federal and state energy programs, advises stakeholders on energy-related policy and legislation, and promotes energy market development.

Since 2007, CEO’s expenditure numbers grew exponentially from $22.1 million to $84.6 million in 2011. The CEO was awarded $144 million in Recovery Act funds in Fiscal Years 2009 through 2012, an almost 250 percent increase over CEO’s previous funding levels.

The CEO is comprised of a Director, who reports to the Governor’s Deputy Chief of Staff, as well as 33 to 46 full-time-equivalent (FTE) employees in the last three years. The State Auditor’s report reflects mismanagement and lack of accountability between the CEO and the Governor’s Office, which is ultimately responsible for the performance of the Energy Office.

The CEO audit’s key findings showed the entire Office operating without a budget or accounting system for any of its programs in current operation as well as staff members who had no knowledge of the purpose or expectations of their respective programs. Twenty of twenty-two contracts reviewed had incorrect or missing information and dozens of expenditures lacked the proper justification or reporting.

With regard to the accounting, budgets, and funds, the audit report found that, “To date, [Colorado Energy Office] has not utilized an international accounting system to manage its funding streas and program funding allocations.”

The audit expressed serious concern about the size and scope of the issues the CEO faces under the satus quo. In the report, under a section entitled “Why Does This Problem Matter?” the State Auditor office concluded that the CEO spent over $250 million of state and federal taxpayer dollars as well as private funds over the past six years.

The State Auditor went on to note that, “There is ultimately no assurance the collective funds CEO received were spent cost-effectively.”

Even the most basic financial management and allocation plans of the CEO’s budget were found to be dismal at best. The report confirmed that, “by focusing only on revenue opportunities and not accounting for total spending by program—or establishing and utilizing budget information to guide what and to what extent office resources should be allocated to a program—CEO cannot determine whether the cost of administering a program is justified.”

Suggestions and other directives handed down by the State Auditor including obvious first steps such as the development of a functional accounting system, an operating program for planning and management, and staff training that highlights proper expectations, goals, and standards for each program.  The audit notes that the CEO has stated its agreement with all of the report’s findings and directives. However, a timeline has not been set for compliance or correction.

State legislators reacted strongly to the release of the audit report and many more demanded action be taken. Owen Hill, the freshman Republican Senator from Colorado Springs, was one of the legislators taken aback by the State Auditor’s facts and findings.

Hill, who holds an advanced degree in Economics and has a background as a non-profit CFO and financial executive, remarked, “I would be in jail if I did this as a CFO. This makes Enron look like good accounting.”

It has yet to be decided by Governor Hickenlooper’s Office or the state legislative body if any additional immediate action should be taken against the CEO or any of its programs or staff.

Follow Kyle Forti on Twitter: @kyleforti