February 19, 2014

Allegations of Potential Fraud and Mismanagement of a Smart Grid Investment Grant Program Award

As part of the American Recovery and Reinvestment Act of 2009, the Office of Electricity Delivery and Energy Reliability received about $4.5 billion to modernize the electric grid, with about $3.5 billion allocated to the Smart Grid Investment Grant (SGIG) Program.  Under the SGIG Program, Progress Energy Service Company (Progress Energy) received a $200 million grant to accelerate deployment of technologies to increase efficiency and demand response across its enterprise.  As part of the award, Progress Energy partnered with International Business Machines (IBM) to manage the project and its associated tasks. 

The Office of Inspector General received an allegation that Progress Energy had mismanaged the SGIG award and submitted potential false claims to the Department of Energy.  Although other assertions were made regarding the award, we elected to address two areas of the allegation:  (1) that Progress Energy had fraudulently submitted reimbursement requests for costs incurred prior to the award, and (2) that contracted services with IBM contained no associated deliverables. 

The allegations we evaluated were not substantiated.  While we confirmed that Progress Energy had submitted reimbursement requests for costs incurred prior to the date of the award, we determined that this practice had been specifically allowed by the Department.  Additionally, we found that the task orders contained a number of deliverables, and nothing came to our attention to suggest that the specific deliverables contained in the task orders to IBM were inadequate or were not appropriately documented.  Based on these considerations and our review of information supplied by Progress Energy and the Department, we did not substantiate the allegations.

Topic: Financial Assistance