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Audit: Problems cleaned up in Oregon Department of Energy

By Claire Withycombe

Capital Bureau

Published on October 10, 2018 10:11AM

SALEM — In the wake of a scandal over the state’s handling of energy tax incentives, the Oregon Department of Energy has cleaned up its process, state auditors say.

The state Audits Division report, released Wednesday, 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 said.

“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,” the state Audits Division said in its report.

Auditors cited an example of a state tax credit gone awry: Business Oregon approved $12 million in state tax credits for a wind 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 subsequently were convicted for a scheme to profit from buying and selling the tax credits.


Reporter Claire Withycombe: 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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