RELEASE: Secretary Richardson Releases Audit Questioning Payments Made by the Small-Scale Energy Loan Program

SALEM, OR — The financial statements in a newly-completed audit by the Oregon Secretary of State’s office reveals possible mismanagement of the Oregon Department of Energy’s (ODOE) Small-Scale Energy Loan Program (SELP). Currently, the program shows a deficit of over $10 million when comparing assets to liabilities. The audit also revealed significant deficiencies within ODOE’s internal controls of financial reporting.

Auditors are questioning the appropriateness of a 2017 decision by ODOE management to cover lease payments totaling $641,835. These payments were on behalf of a borrower who did not show a viable business. It also had a history of delinquent payments. The lease payments were made through SELP after a loan for $10 million was “restructured” in 2013 due to the borrower’s delinquent payments. The borrower had not made any loan payments since September 2016. Despite this delinquency, ODOE management chose to make the lease payments.

According to ODOE representatives, ODOE management agreed to make the lease payments after receiving verbal assurance from the borrower and the borrower’s primary investor that SELP would be reimbursed out of a future capital investment by a third party. The primary investor, however, sits on the borrower’s board of directors and therefore was not in a position to provide independent assurance. The decision-makers at ODOE believed that assisting with lease payments could enable the borrower to repay the $8 million balance of the SELP loan in the future. 

These financial payments were authorized by ODOE management, and they have been unable to provide auditors with convincing documentation as to why this business decision was considered a reasonable and responsible use of funds. The decision resulted in additional losses to SELP that was already running million dollar deficits.

“ODOE’s business decision to involve taxpayer funds in what appears to be a failed bailout is unacceptable,” said Secretary of State Dennis Richardson. “Such decisions must be made based on sound business principles to minimize risks to Oregon taxpayers. ODOE’s current director has a heavy burden to restore trust in an agency that many believe has been plagued with mismanagement, incompetence, and corruption.”

The Secretary of State Audits team recommends that ODOE management institute procedures that ensure all SELP payments are responsible, appropriate, and adequately documented. ODOE agrees with this recommendation.

Read the full audit on the Secretary of State website.