SALEM The Oregon Secretary of States office plans to investigate whether poor record keeping at the state Department of Energy could have hidden fraud in the controversial business energy tax credit program.
Secretary of State Jeanne Atkins said the agency will hire a contractor with forensic audit experience to conduct the inquiry, after energy agency director Michael Kaplan acknowledged the lack of records in a meeting with Atkins, her top staffers and advisers to Gov. Kate Brown in early January. The state Audits Division is housed at the Oregon Secretary of States Office.
The business energy tax credit existed for more than three decades and drew little attention, until the Legislature and former Gov. Ted Kulongoski greatly expanded the program in 2007. The state issued tax credits worth nearly $1 billion between 2007 and 2014, when lawmakers ended the program.
Browns administration is conducting a performance review of the Department of Energy following news reports about problems last year, and the governors staff set out specifically to resolve remaining problems with the business energy tax credits. Democratic leaders in the Legislature also formed a committee this year to explore whether to overhaul or eliminate the Department of Energy.
Atkins said in an interview Wednesday morning that the Department of Energy might not have the documents necessary to justify the tax credits it issued, which companies and wealthy individuals have used to reduce their Oregon tax bills.
During the course of that conversation, the director (Michael Kaplan) was very straightforward about concerns that the record keeping around the (business energy tax) credits was in many instances flawed, that the files that record all of the different processes that led to the tax deductions are not necessarily in great shape, Atkins said of the Jan. 7 meeting with Kaplan and the governors staff. What that might mean for whether there are problems with any of these (tax credits) is an unknown ... The question for us was, was it worth looking behind that bad record keeping and see if there are indications of something else that needs to be investigated.
Atkins and her staff decided they should investigate. Atkins chose to hire a contractor in large part because state auditors already have a full slate of audits scheduled for 2016.
The state was supposed to issue tax credits to companies and government agencies only after those entities provided documentation they completed the promised investments in renewable energy and efficiency projects. But The Oregonian reported last year that paperwork for tax credits issued for solar projects at the Oregon Institute of Technology and Oregon State University appeared to be fraudulent.
Emails released by the Department of Energy Wednesday afternoon showed that after The Oregonians story, Kaplan presented Browns staff with a request for additional energy staffers to review business energy tax credit files for errors and potential fraud.
Chris Pair, a press secretary for Brown, wrote in an email Wednesday afternoon that Governor Brown looks forward to this forensic review as a way to learn as much as we can to ensure any problems are addressed responsibly and carefully.
Rachel Wray, a spokeswoman for the Department of Energy, said agency officials appreciated the Secretary of States decision to proceed with a review.
We appreciate the Governor convening the meeting with the Secretary of State, Wray said. We have long believed a more comprehensive review is the best thing for the agency and for the state of Oregon.
There were other problems, too. The EO Media Group/Pamplin Media Group Capital Bureau reported last year that the Department of Energy struggled to track deals in which the tax credits were sold to investors.
The agency also never verified the prices at which the tax credits were sold, which would determine how much capital gains tax the buyers owed the government. In September, a top administrator at the Department of Energy who was involved in both the university solar project tax credits and the tax credit sales issues resigned.
The forensic investigatory audit will cover a sample of business energy tax credits, also known as BETCs, issued between 2007 and 2014. The Department of Energy continues to issue tax credits to incentivize renewable energy and efficiency projects, through a smaller program that replaced the BETCs.
The secretary of states office would like to have the audit complete by Aug. 15.