state energy program APRIL 2016

81.041 / state energy program
State Project/Program: / state energy program

US Department of Energy

Federal Authorization: / Energy Policy and Conservation Act, Public Law 94-163, 42 U.S.C. 6321-6326; Balanced Budget Down Payment Act II of 1996, Public Law 104-134; National Energy Conservation Policy Act of 1978, Public Law 95-619 and Public Law 101-440; American Recovery and Reinvestment Act of 2009; Department of Energy Organization Act of 1977, Public Law 95-91, 42 U.S.C. 6321-6326, 42 U.S.C. 7101, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Subparts D, E and F) 10 CFR 420, 10 CFR Part 600

NC Department of Environmental Quality

State Energy Program

Agency Contact Person – Program
Starlette Hodge
State Energy Program Manager
North Carolina Department of Environmental Quality
1612 Mail Service Center
Raleigh, NC 27699-1612
919-707-9240
Agency Contact Person – Financial
Amy Robinson
Accountant
North Carolina Department of Environmental Quality
1606 Mail Service Center
Raleigh, NC 27699-1606
919-707-9245 / Address Confirmation Letters To:
Jenny Kelvington
Director, Division of Office of Secretary
North Carolina Department of Environmental Quality
4345 Mail Service Center
Raleigh, NC 27699-4345
919-707-8481

The auditor should not consider the Supplement to be “safe harbor” for identifying audit procedures to apply in a particular engagement, but the auditor should be prepared to justify departures from the suggested procedures. The auditor can consider the supplement a “safe harbor” for identification of compliance requirements to be tested if the auditor performs reasonable procedures to ensure that the requirements in the Supplement are current. The grantor agency may elect to review audit working papers to determine that audit tests are adequate.

Auditors may request documentation of monitoring visits by the State Agencies.


I. PROGRAM OBJECTIVES

In accordance with 10 CFR 420.1, the purpose of the SEP is to promote the conservation of energy, to reduce the rate of growth of energy demand, and to reduce dependence on imported oil through the development and implementation of a comprehensive State Energy Program and the provision of Federal financial and technical assistance to States in support of the program.

DOE encourages states to develop strategies that align their goals and objectives to national goals. By aligning with national goals, increasing jobs, reducing US oil dependency through increases in energy efficiency and deployment of renewable energy technologies, promoting economic vitality through an increase in “green jobs,” and reducing greenhouse gas emissions States and DOE demonstrate SEP leadership in successfully addressing national needs at the State and local level. These national goals are included in the Energy Policy Act of 2005, the Energy Independence and Security Act and the American Recovery and Reinvestment Act of 2009.

The SEP Strategic Plan establishes four goals for SEP: to increase energy efficiency to reduce energy costs and consumption for consumers, businesses and government; reduce reliance on imported energy; improve the reliability of electricity and fuel supply and the delivery of energy services; and reduce the impacts of energy production and use on the environment.

The SEP grant program is funded with federal funds and Petroleum Violation Escrow (PVE) funds.

II. PROGRAM PROCEDURES

The SEP Program is administered by the North Carolina Department of Environmental Quality, 512 N. Salisbury Street, Raleigh, North Carolina 27604, (919) 707-9238.

In accordance with 10 CFR 420.13, the State must submit to the cognizant Regional Office Director an original and two copies of the annual application executed by the Governor, including an amended State plan or any amendments to the State plan needed to reflect changes in the activities the State is planning to undertake for the fiscal year concerned. The date for submission of the annual State application is set by the U.S. Department of Energy (DOE).

The State Plan consists of a Master File, covering items that generally do not change from year to year, which would need to be updated only when a change occurs, and an Annual File covering the activities the State intends to undertake during the year of the grant, which must be updated each year to reflect the current activities.

The Master File must include, wherever practicable, information on the State’s overall strategic energy plan and its key elements, its strategic goals and objectives, and how its SEP activities fit into the overall plan. The Master File explains how implementing the plan will conserve energy, how the State will measure progress toward attaining the goal, how the program activities represent a strategy to achieve these goals; an explanation of how the plan satisfies the minimum criteria for the required (mandatory) activities; and a plan for State monitoring that describes how the State conducts the administrative and programmatic oversight for programs implemented by other agencies within the State, contractors employed by the State, or subrecipients of financial assistance from the State. Additionally, the State can indicate any mandatory activities it has completed in the Master File.

Note: Pursuant to Energy Independence and Security Act of 2007 SEC.545c(2)a, states receiving Energy Efficiency and Conservation Block Grant funds shall modify the state energy conservation plan of the state under 42 U.S.C. 6322 to establish additional goals for increased energy efficiency and conservation in the state.

The Energy Policy Act of 2005 (EPACT), PL 109-58, Title I, Subtitle B, Section 123, made two revisions to the legislation governing SEP (See Section 81.B of the SEP grant guidance.)

The second EPACT revision amended the provisions to “include a goal consisting of an improvement of 25 percent or more in the efficiency of use of energy in the State concerned in calendar year 2012 as compared to calendar year 1990, and may contain interim goals.”

In accordance with this revision, the State must describe within the Master File of their 2010 State Plan how it intends to achieve the 25 percent (or more) goal along with any initial/preliminary progress toward achieving the improvement goal cited above.

The Annual File section of the State Plan describes each market area and program activity for which the State requests financial assistance for a given year, including budget information and milestones for each activity, and the intended scope and goals to be attained either qualitatively or quantitatively. The State is encouraged to structure the activities within the market areas broadly and inclusively. Consequently, it will streamline the reporting and approval process, afford the State additional flexibility and reduce the number of plan amendments required during the year.

In accordance with 10 CFR 420.14, after receipt of the application for financial assistance and for approval of an amendment, if any, to the State plan, the cognizant Regional Office Director may request the State to submit within a reasonable period of time any revisions necessary to make the application complete and to bring the application into compliance with the requirements of subparts A and B of 10 CFR 420. The cognizant Regional Office Director is required to assist with the resolution of any dispute over the application informally and to seek voluntary compliance. If the State fails to submit timely appropriate revisions to complete the application or to bring it into compliance, the cognizant Regional Office Director may reject the application in a written decision, including a statement of reasons, which shall be subject to administrative review under §420.19 of subparts A and B of 10 CFR 420.

Projects are proposed by Private Individuals, Commercial Organizations, and Government Agencies. The projects are evaluated by the SEO program staff, and based on their merit, submitted for approval by DOE as part of the SEP and SEP-R plan submittal.

A contractual agreement with an administering agency (the entity that is receiving the funds on a reimbursement basis from the State Energy Program) is used to execute each specific project. The contractual agreement describes the details of the program, applicable Federal Regulations, program administrative procedures and any appropriate restrictions imposed by the funding source. The administering agencies are reimbursed for actual expenditures in accordance with the terms specified in the contractual agreement. The contractual agreement consists of a section describing the applicable laws, rules and regulations, a section describing the detailed scope of work and deliverable items selected for these goals, how it will measure progress toward attaining the goals, and how the proposed activities will address its goals and achieve the energy savings identified.

The SEP Program is subject to Executive Order 12372 (Intergovernmental Review of Federal Programs) and the regulations at 10 CFR Part 1005.

One of the objectives of the Executive Order is to foster an intergovernmental partnership and a strengthened federalism. The Executive Order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance.

Applicants should contact the appropriate State Single Point of Contact (SPOC) to find out about, and to comply with, the State’s process under Executive Order 12372. The names and addresses of the SPOCs are listed on the Web site of the Office of Management and Budget at http://www.whitehouse.gov/omb/grants/spoc.html.

III. COMPLIANCE REQUIREMENTS

A. Activities Allowed or Unallowed

Per 10 CFR 420.18, no financial assistance provided to the State for the State Energy Program (SEP) shall be used:

1. For construction, such as construction of mass transit systems and exclusive bus lanes, or for construction or repair of buildings or structures;

2. To purchase land, a building or structure or any interest therein;

3. To subsidize fares for public transportation;

4. To subsidize utility rate demonstrations or State tax credits for energy conservation measures or renewable energy measures; or

5. To conduct, or purchase equipment to conduct, research, development or demonstration of energy efficiency or renewable energy techniques and technologies not commercially available.

No more than 20 percent of the financial assistance awarded to the State for the SEP shall be used to purchase office supplies, library materials, or other equipment whose purchase is not otherwise prohibited. This 20 percent limitation does not apply to petroleum violation escrow funds used for the SEP.

Demonstrations of commercially available energy efficiency or renewable energy techniques and technologies are permitted, and are not subject to the prohibitions of §420.18(a)(1), or to the limitation on equipment purchases of §420.18(b).

The State may use regular or revolving loan mechanisms to fund SEP services which are consistent with 10 CFR 420 Subpart B and which are included in the State's approved SEP plan. The State may use loan repayments and any interest on the loan funds only for activities which are consistent with 10 CFR 420 Subpart B and which are included in the State's approved SEP plan.

The State may use funds for the purchase and installation of equipment and materials for energy efficiency measures and renewable energy measures, including reasonable design costs, subject to the following terms and conditions:

1. Such use must be included in the State's approved plan and, if funded by Petroleum Violation Escrow (PVE) funds, must be consistent with any judicial or administrative terms and conditions imposed upon State use of such funds;

2. The State may use for these purposes no more than 50 percent of all funds allocated by the State to SEP in a given year, regardless of source, except that this limitation shall not include regular and revolving loan programs funded with petroleum violation escrow funds, and is subject to waiver by DOE for good cause. Loan documents shall ensure repayment of principal and interest within a reasonable period of time, and shall not include provisions of loan forgiveness.

3. Buildings owned or leased by the United States are not eligible for energy efficiency measures or renewable energy measures under paragraph (e) of this section;

4. Funds must be used to supplement and no funds may be used to supplant weatherization activities under the Weatherization Assistance Program for Low-Income Persons, under 10 CFR part 440;

5. Subject to the mechanisms below, the State may use a variety of financial incentives to fund purchases and installation of materials and equipment including, but not limited to, regular loans, revolving loans, loan buy-downs, performance contracting, rebates and grants.

The following mechanisms are not allowed for funding the purchase and installation of materials and equipment:

1. Rebates for more than 50 percent of the total cost of purchasing and installing materials and equipment (The State shall set appropriate restrictions and limits to insure the most efficient use of rebates); and

2. Loan guarantees.

All projects receiving financial assistance from DOE must be reviewed under the National Environmental Policy Act (NEPA) of 1969 – 42 U.S.C. Section 4321 et seq. The first step in DOE’s NEPA review process requires financial assistance recipients to submit information to DOE regarding the potential environmental impacts of the project receiving DOE funds. Applicants must complete the Environmental Checklist (DOE PMC EF-1) on-line at the following site: https://www.eere-pmc.energy.gov/NEPA.asp

In accordance with 10 CFR 600.230, grantees and subgrantees are permitted to rebudget within the approved direct cost budget to meet unanticipated requirements and may make limited program changes to the approved project. However, unless waived by the awarding agency (U. S. Department of Energy), certain types of post-award changes in budgets and projects shall require the prior written approval of the awarding agency. Additionally, unless waived by the awarding agency, cumulative transfers among direct cost categories, or, if applicable, among separately budgeted programs, projects, functions, or activities which exceed or are expected to exceed 10 percent of the current total approved budget, whenever the awarding agency's share exceeds $100,000 grantees or subgrantees shall obtain the prior approval from the awarding agency.

Audit Objective

1. Determine whether Federal awards were expended only for allowable activities.

Suggested Audit Procedures

1. Identify the types of activities which are either specifically allowed or prohibited by the laws, regulations, and the provisions of contract or grant agreements pertaining to SEP.

2. When allowability is determined based upon summary level data, perform procedures to verify that:

a. Activities were allowable.

b. Individual transactions were properly classified and accumulated into the activity total.