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State auditors say small but significant steps aid in putting program back on the right track.

PAMPLIN MEDIA GROUP FILE PHOTO - A new state audit reports that the tainted Oregon Energy Tax Credit program was cleaning up its act.SALEM — In the wake of a scandal over the state's handling of energy tax incentives, Oregon's Department of Energy has cleaned up its process, state auditors say.

PMG/EO MEDIA/SRIn a new report released Wednesday, Oct. 10, the state Audits Division assessed whether energy officials implemented recommendations made earlier by state and private auditors and state lawmakers. Auditors found the Energy Department had changed its operations to enact the recommendations.

The steps ranged from seemingly trivial — agency officials no longer use whiteout, as a precaution against document manipulation — to more significant. For example, the agency hired an internal auditor to keep tabs on agency activities.

Other state agencies can learn something from the Energy Department's trials, auditors wrote in their report. "Without reflection on how Oregon's various tax credit programs may be failing to operate as intended, the state runs the risk of continuing to pour millions of dollars into flawed projects or falling prey to fraud and bribery schemes," according to the report.

Auditors cited an example of a state tax credit gone awry: Business Oregon approved $12 million in state tax credits for a mill project in Cave Junction, despite red flags. The project shut down after 20 months.

The report lists what other agencies could do to safeguard tax incentive programs. These include setting up a compliance program, monitoring the work of accountants attesting to projects receiving incentive funds and performing annual internal audits.

At the Energy Department, the program offering tax incentives to business to use renewable energy started in 1979, expanded significantly in 2006, and then was shut down by the Legislature in 2014.

Two years later, auditors detected suspicious activity in several projects associated with the business energy tax credit. Seattle energy consultant Martin Shain and former energy department employee Joe Colello were convicted this year for a scheme to profit from buying and selling the tax credits.

Reporter Claire Withycombe: This email address is being protected from spambots. You need JavaScript enabled to view it. or 503-385-4903. Withycombe is a reporter for the East Oregonian working for the Oregon Capital Bureau, a collaboration of EO Media Group, Pamplin Media Group, and Salem Reporter.

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