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entitled 'Energy Star Program: Covert Testing Shows the Energy Star 
Program Certification Process Is Vulnerable to Fraud and Abuse' which 
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Report to the Ranking Member, Committee on Homeland Security and 
Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

March 2010: 

Energy Star Program: 

Covert Testing Shows the Energy Star Program Certification Process Is 
Vulnerable to Fraud and Abuse: 

GAO-10-470: 

GAO Highlights: 

Highlights of GAO-10-470, a report to the Ranking Member, Committee on 
Homeland Security and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

American consumers, businesses, and federal agencies rely on the 
Energy Star program to identify products that decrease greenhouse 
emissions and lower energy costs. In addition, the federal government 
and various states offer tax credits and other incentives to encourage 
the use of energy-efficient products including Energy Star products. 
Specifically, approximately $300 million from the American Recovery 
and Reinvestment Act will be used for state rebate programs on energy-
efficient products. The Energy Star program, which began in 1992, is 
overseen jointly by the U.S. Department of Energy (DOE) and the U.S. 
Environmental Protection Agency (EPA). Given the millions of dollars 
allocated to encourage use of Energy Star products and concerns that 
the Energy Star program is vulnerable to fraud and abuse, GAO was 
asked to conduct proactive testing to (1) obtain Energy Star 
partnership status for bogus companies and (2) submit fictitious 
products for Energy Star certification. 

To perform this investigation, GAO used four bogus manufacturing firms 
and fictitious individuals to apply for Energy Star partnership and 
submitted 20 fictitious products with fake energy-savings claims for 
Energy Star certification. GAO also reviewed program documents and 
interviewed agency officials and officials from agency Inspector 
General (IG) offices. 

What GAO Found: 

GAO’s investigation shows that Energy Star is for the most part a self-
certification program vulnerable to fraud and abuse. GAO obtained 
Energy Star certifications for 15 bogus products, including a gas-
powered alarm clock. Two bogus products were rejected by the program 
and 3 did not receive a response. In addition, two of the bogus Energy 
Star firms developed by GAO received requests from real companies to 
purchase products because the bogus firms were listed as Energy Star 
partners. This clearly shows how heavily American consumers rely on 
the Energy Star brand. The program is promoted through tax credits and 
appliance rebates, and federal agencies are required to purchase 
certain Energy Star certified products. In addition, companies use the 
Energy Star certification to market their products and consumers buy 
products relying on the certification by the government of reduced 
energy consumption and costs. For example, in 2008 Energy Star 
reported saving consumers $19 billion dollars on utility costs. The 
table below details several fictitious GAO products certified by 
Energy Star. 

Table: 

Fictitious product: Gas-Powered Alarm Clock; Product and certification 
details: 
* Product description indicated the clock is the size of a small 
generator and is powered by gasoline; 
* Product was approved by Energy Star without a review of the company 
Web site or questions of the claimed efficiencies. 

Fictitious product: Geothermal Heat Pump; Product and certification 
details: 
* Energy use data reported was more efficient than any product listed 
as certified on the Energy Star Web site at the time of submission; 
* High-energy efficiency data was not questioned by Energy Star; 
* Product is eligible for federal tax credits and state rebate 
programs. 

Fictitious product: Computer Monitor; Product and certification 
details: 
* Product was approved by Energy Star within 30 minutes of submission; 
* Private firms contacted GAO’s fictitious firm to purchase products 
based on participation in the Energy Star program. 

Fictitious product: Refrigerator; 
Product and certification details: 
* Self-certified product was submitted, qualified, and listed on the 
Energy Star Web site within 24 hours; 
* Product is eligible for federal tax credits and state rebates. 

Source: GAO. 

[End of table] 

GAO found that for our bogus products, certification controls were 
ineffective primarily because Energy Star does not verify energy-
savings data reported by manufacturers. Energy Star required only 4 of 
the 20 products GAO submitted for certification to be verified by an 
independent third party. For 2 of these cases GAO found that controls 
were effective because the program required an independent 
verification by a specific firm chosen by Energy Star. However, in 
another case because Energy Star failed to verify information 
provided, GAO was able to circumvent this control by certifying that a 
product met a specific safety standard for ozone emission. 

At briefings on GAO’s investigation, DOE and EPA officials agreed that 
the program is currently based on self-certifications by 
manufacturers. However, officials stated there are after-market tests 
and self-policing that ensure standards are maintained. GAO did not 
test or evaluate controls related to products that were already 
certified and available to the public. In addition, prior DOE IG, EPA 
IG, and GAO reports have found that current Energy Star controls do 
not ensure products meet efficiency guidelines. 

View [hyperlink, http://www.gao.gov/products/GAO-10-470] or key 
components. For more information, contact Greg Kutz at (202) 512-6722 
or kutzg@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Undercover Tests Result in 15 Products Gaining Bogus Energy Star 
Certification: 

Undercover Tests Expose Weaknesses in Fraud Prevention Controls: 

Corrective Action Briefing: 

Appendix I: Scope and Methodology: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Bogus Products Submitted for Energy Star Qualification: 

Figures: 

Figure 1: Energy Star Partnership and Product Certification Logos: 

Figure 2: Air Room Cleaner Certified by Energy Star: 

Figure 3: Request for Certification of Gas-Powered Alarm Clock: 

Abbreviations: 

ARRA: American Recovery and Reinvestment Act: 

CFL: Compact Fluorescent Light: 

CIGIE: Council of Inspectors General on Integrity and Efficiency: 

DLA: Defense Logistics Agency: 

DOE: Department of Energy: 

EF: Energy Factor: 

EPA: Environmental Protection Agency: 

FEMP: Federal Energy Management Program: 

FTC: Federal Trade Commission: 

GSA: General Services Administration: 

HVAC: Heating, Ventilation and Air Conditioning: 

HVI: Home Ventilating Institute: 

MESA: My Energy Star Account: 

NIST: National Institute of Standards and Technology: 

NVLAP: National Voluntary Laboratory Accreditation Program: 

OIG: Office of Inspector General: 

OPS: Online Product Submittal: 

QPI: Qualified Product Information: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 5, 2010: 

The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

Dear Senator Collins: 

American consumers, businesses, and federal agencies rely on the 
Energy Star program to identify products that decrease greenhouse 
emissions and lower their energy costs. Energy Star, which is jointly 
managed by the U.S. Environmental Protection Agency (EPA) and U.S. 
Department of Energy (DOE), is a voluntary labeling program designed 
to promote energy-efficient products. It touts itself as a trustworthy 
means for letting consumers know which products deliver the same or 
better performance as comparable models while using less energy 
[Footnote 1] and saving money. The Energy Star program reported in 
2008 that it helped Americans prevent 43 million metric tons of 
greenhouse gas emissions and save more than $19 billion in utility 
costs. Consumer interest in making households and buildings more 
energy efficient has become heightened given the increase in energy 
prices and expansion of federal tax credit and state rebate programs. 

Energy Star was created in response to the Clean Air Act amendments of 
1990[Footnote 2] and the Energy Policy Act of 1992.[Footnote 3] In 
general, the program is designed to identify models for 60 categories 
of household and commercial products that are the most energy 
efficient (efficiency of up to 10 to 25 percent over the minimum 
federal standards[Footnote 4]). Energy Star reported that in 2008 
there were more than 40,000 qualified product models that are produced 
by more than 2,400 manufacturers. These products claim to offer 
consumers savings of as much as 75 percent relative to standard models. 

This report responds to your request that we proactively test the 
effectiveness of the current Energy Star partnership and product 
certification process to determine whether manufacturers could obtain 
Energy Star partnership and product certification for products not 
meeting Energy Star efficiency requirements. To perform this 
investigation, we developed four bogus manufacturing companies, 
meaning that we conducted our work with fictitious names and contact 
information that could not be traced back to GAO. We also established 
a Web site related to each bogus company and rented domestic 
commercial mailboxes to use as the company addresses. We designed 
these proactive tests using publicly available information to assess 
the fraud-prevention controls in place for partnership and product 
certification. We submitted Energy Star Partnership Agreements for 
each company and submitted fictitious products with energy-efficiency 
specifications to the Energy Star program for product certification. 
We developed these fictitious products to ensure that they met Energy 
Star requirements and to ensure that most qualified under the 
Department of Energy's Federal Energy Management Program[Footnote 5] 
(FEMP). Federal buyers are required by the Energy Policy Act of 2005 
[Footnote 6] to purchase products that are Energy Star-qualified or 
FEMP-designated for energy efficiency. 

We submitted products under selected categories such as appliances, 
building products, computers and electronics, heating and cooling 
products, and lighting. The products varied in levels of 
sophistication and energy efficiency to test the level of scrutiny 
throughout the Energy Star product certification process. Our 
investigation was designed to test controls over the process for 
becoming an Energy Star partner and controls over the product 
certification process. Our work was not designed to test other 
controls potentially in place over monitoring of Energy Star label use 
on retail shelves or industry self-enforcement efforts including 
energy-efficiency tests performed on products selected from actual 
retail locations. 

We conducted the work for this investigation from June 2009 through 
March 2010 in accordance with the standards prescribed by the Council 
of Inspectors General on Integrity and Efficiency (CIGIE). Additional 
details on our scope and methodology are included in appendix I. 

Background: 

The Energy Star program was introduced by the U.S. Environmental 
Protection Agency (EPA) in 1992, under the authority of the Clean Air 
Act,[Footnote 7] as a voluntary labeling program designed to promote-- 
and allow consumers to identify--energy-efficient computers and 
monitors. Through 1995, EPA expanded the label to additional office 
equipment and residential heating, ventilation, and cooling (HVAC) 
equipment, and partnered with the U.S. Department of Energy (DOE) in 
1996. The Energy Star label is now found on over 60 product 
categories, including major appliances, office equipment, lighting, 
home electronics, new homes, and commercial and industrial buildings, 
with a reported energy-efficiency savings of up to 10 to 25 percent 
over the minimum federal standards. As of 2009, over 40,000 individual 
product models were Energy Star-qualified by over 2,400 manufacturers. 

Manufacturers who wish to use the Energy Star logo must enter into a 
Partnership Agreement[Footnote 8] with either the EPA or DOE, under 
which the manufacturer agrees to comply with Energy Star eligibility 
criteria and identity guidelines.[Footnote 9] Manufacturers apply to 
be a partner of the Energy Star program by identifying which product 
category or categories under which the company seeks to qualify 
products, completing a partnership agreement packet, certifying their 
agreement to the general program requirements, and submitting the 
packet to EPA or DOE contractors either online or via mail. The Energy 
Star program provides approved partners with usernames and passwords 
so that they may access logos and other marketing materials directly 
from the Energy Star Web site. The use of the logo on products and 
promotional materials must be consistent with the Energy Star identity 
guidelines. Figure 1 below shows the Energy Star partnership and 
product certification logos. 

Figure 1: Energy Star Partnership and Product Certification Logos: 

[Refer to PDF for image: illustration] 

Source: Energy Star. 

[End of figure] 

Manufacturers who make products that meet Energy Star specifications 
must then report each product's specifications by submitting Qualified 
Product Information (QPI),[Footnote 10] using either the QPI forms 
available on the Energy Star site, or for certain products (home 
electronics and office equipment) by using the Online Product 
Submittal (OPS) Tool. Certain product categories require third-party 
independent testing results to be submitted in addition to the QPI 
forms. The criteria for Energy Star product qualification vary 
depending on the specific product category and whether the product is 
for residential or commercial use. Generally, qualified Energy Star 
products are 10 to 25 percent more efficient than required by the 
federal minimum standard while providing top performance and 
innovative features. For example, the Compact Fluorescent Light (CFL) 
bulb requires manufacturers to provide third-party test results from 
an accredited independent laboratory. In contrast, a refrigerator 
requires manufacturers to submit a QPI form stating minimal energy 
efficiency specifications without any third-party test results. Energy 
Star requires manufacturers to certify in their application that the 
product meets energy-efficiency specifications for the product type. 
Energy Star, according to officials, largely relies on manufacturers 
or others to identify and report products claiming to meet Energy Star 
criteria that are violating the rules. In that regard, Energy Star 
officials stated that some companies test products of competitors. 

The federal government has placed significant emphasis and allocated 
tax dollars to encourage the use of energy-efficient products. 
Specifically, federal agencies must procure Energy Star-qualified or 
DOE Federal Energy Management Program (FEMP)-designated products, 
unless the head of the agency determines in writing that a statutory 
exemption[Footnote 11] applies. The General Services Administration 
(GSA) and Defense Logistics Agency (DLA) are also required, except in 
narrow circumstances, to supply only Energy Star or FEMP-designated 
products for all product categories covered by either program. In 
addition, the American Recovery and Reinvestment Act (ARRA) of 2009 
[Footnote 12] increased and extended the energy tax credits for 
homeowners who make energy-efficient improvements to their existing 
homes. The new law extended the tax credits in place for 2009 to 2010, 
and increased the tax credit rate to 30 percent of the cost of all 
qualifying products placed in service in 2009 and 2010, up to a 
maximum aggregate credit limit of $1,500.[Footnote 13] The Act also 
removed the cap on the tax credit, currently in place through 2016, of 
30 percent of the cost of materials and installation for installing 
geothermal heat pumps and other renewable technologies. DOE also 
created a state rebate grant program, with nearly $300 million in 
funding from the ARRA, for the purchase of new Energy Star-qualified 
appliances. Under the program, eligible consumers can receive rebates 
to purchase new energy-efficient appliances and are encouraged to 
replace used, less efficient appliances. Each state and U.S. territory 
was allowed to design its own rebate program and all 56 plans have 
been approved by DOE. 

While not part of the Energy Star program, manufacturers may also 
receive federal tax credits for producing energy-efficient clothes 
washers, dishwashers, or refrigerators. Efficiency requirements for 
each particular product are statutorily defined and not reliant on 
Energy Star standards.[Footnote 14] However, products meeting Energy 
Star efficiency requirements frequently meet federal tax credit 
requirements. The Energy Improvement and Extension Act of 2008 
[Footnote 15] modified and extended the manufacturer's tax credit to 
eligible models produced in the United States during calendar years 
2008, 2009, and 2010. The amount of the credit per unit produced 
varies according to the energy efficiency of the appliance, with 
higher energy-efficient models being eligible for larger credits. The 
aggregate amount of credit allowed with respect to a manufacturer for 
any taxable year shall not exceed $75 million reduced by the amount of 
the credit allowed to the taxpayer (or any predecessor) for all prior 
taxable years beginning January 2008. Exempt from the $75 million 
limit are the highest energy-efficient categories of refrigerators and 
clothes washers eligible for the highest per unit tax credits. Based 
on the Joint Committee on Taxation projections, billions of dollars in 
energy-efficiency tax credits will be claimed by individuals and 
corporations between 2009 and 2013. 

Numerous investigations and reports have recently identified Energy 
Star program successes and weaknesses. As noted by the Consortium for 
Energy Efficiency,[Footnote 16] the EPA Office of the Inspector 
General (OIG)[Footnote 17], Consumer Reports,[Footnote 18] DOE OIG, 
[Footnote 19] and a prior GAO report[Footnote 20] there is currently 
no requirement for independent third-party verification of energy 
performance reporting for most product categories prior to gaining 
access to Energy Star logos and promotional materials. Specifically, 
in 2007 the EPA OIG stated that there was no evidence that the self- 
certification process was effective and noted that the Energy Star 
program lacked in both quality assurance and sufficient oversight. 
Moreover, the EPA OIG identified that there was no methodology in 
place to verify manufacturers' claims of energy efficiency and that 
products may be labeled with the Energy Star logo and sold prior to 
submitting certification results to the agency. In addition, an 
October 2008 issue of Consumer Reports detailed further problems, 
including lax qualifying standards, federal testing procedures that 
were outpaced by current technology, and reliance on industry self-
policing--manufacturers testing competitors' appliances and reporting 
misconduct--without evidence of the effectiveness of that approach. 
The GAO report mentioned above found that products may qualify for 
Energy Star status based on criteria other than the estimated total 
energy consumption. In addition, Consumer Reports and DOE OIG 
officials found that manufacturers may use computer controls to 
manipulate energy consumption testing results, and for some categories 
Energy Star no longer highlighted only the most energy-efficient 
products in those categories. 

A recent settlement between DOE and an Energy Star partner has 
highlighted the potential for noncompliance of products in the 
program. In January 2010, DOE and Haier America entered into a Consent 
Decree over an investigation into whether Haier violated DOE's energy- 
efficiency standards and Energy Star program requirements for certain 
freezers. DOE's investigation led Haier to determine that a parts 
defect might have caused four standalone upright freezer models to 
consume more energy than the manufacturer had reported. Additionally, 
following complaints raised by competitors, LG Electronics and DOE 
entered into an agreement in 2008 to clarify appropriate energy- 
efficiency testing methods for certain LG refrigerators. The agreement 
has led to litigation in federal district court over whether both 
parties are complying with its terms regarding testing methods. 

Undercover Tests Result in 15 Products Gaining Bogus Energy Star 
Certification: 

Our investigation found that companies can easily submit fictitious 
energy-efficiency claims in order to obtain Energy Star qualification 
for a broad range of consumer products. Based on our investigative 
results, we found that the current process for becoming an Energy Star 
partner and certifying specific products as Energy Star compliant 
provides little assurance that products with the Energy Star label are 
some of the most efficient on the market. Control weaknesses 
associated with the general lack of upfront validation of manufacturer 
self reported data allowed all of our bogus firms to become Energy 
Star partners, and allowed most of our products to be certified as 
Energy Star compliant. 

Using four bogus manufacturing companies and fictitious identities, we 
obtained Energy Star partnership, facilitating the submission of bogus 
products for qualification. We conducted tests of the program by 
submitting qualified product information (QPI) forms and efficiency 
information via the Online Product Submittal (OPS) tool for 20 bogus 
products. Of the products submitted, 15 were approved, 2 were denied 
Energy Star qualification, and 3 products were voluntarily removed by 
GAO because we had not received an official qualification 
determination by the time our investigation was completed. Our 
proactive testing revealed that the Energy Star program is primarily a 
self-certification program relying on corporate honesty and industry 
self-policing to protect the integrity of the Energy Star label. Table 
1 below summarizes the certification details of bogus products 
submitted for Energy Star qualification during the course of our 
investigation. 

Table 1: Bogus Products Submitted for Energy Star Qualification: 

Approved: 

Product type--overseeing agency: Boiler--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for federal tax 
credit and some state rebate programs; 
* Product qualified by Energy Star within 1 business day of 
submission. Product was also listed on Energy Star Web site. 

Product type--overseeing agency: Clothes Washer--DOE; 
Product and certification details: 
* Consumers who purchase product would be eligible for some state 
rebate programs; 
* Product would be eligible for manufacturer federal tax credits for 
production of energy-efficient models; 
* Qualified by Energy Star the same day as submission of QPI form and 
listed on the Energy Star Web site. 

Product type--overseeing agency: Computer Monitor--EPA; 
Product and certification details: 
* Energy Star requested expedited submission of product information if 
product was to appear on Qualified Product list before 2009 holiday 
season; 
* Product was approved within 30 minutes of submission of QPI form and 
was listed on Energy Star Web site. 

Product type--overseeing agency: Dehumidifier--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for some state 
rebate programs; 
* Product energy-efficiency data exceeded the most efficient similar 
product approved by Energy Star by 20 percent; 
* Energy Star approved product accepting a follow-up e-mail 
confirmation from bogus manufacturer confirming efficiency data were 
correct and listed product on the Energy Star Web site. 

Product type--overseeing agency: Dishwasher--DOE; 
Product and certification details: 
* Consumers who purchase product would be eligible for some state 
rebate programs; 
* Product would be eligible for manufacturer federal tax credits for 
production of energy-efficient models; 
* Qualified by Energy Star within 1 day of QPI submission and listed 
on the Energy Star Web site. 

Product type--overseeing agency: External Power Supply Adapter--EPA; 
Product and certification details: 
* Product listed on Energy Star Web site and the bogus company 
received purchase inquiries from private firms stating they located 
the firm on the Energy Star Web site. 

Product type--overseeing agency: Furnace--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for federal tax 
credit and some state rebate programs; 
* Product approved within week of QPI submission after five submission 
attempts and listed on the Energy Star Web site. 

Product type--overseeing agency: Gas-Powered Alarm Clock--EPA; 
Product and certification details: 
* Product description indicated that item is the size of a small 
generator and is powered by gasoline; 
* Product approved by Energy Star without questioning product 
description. 

Product type--overseeing agency: Geothermal Heat Pump--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for federal tax 
credit and some state rebate programs; 
* QPI form indicated that product was at least 20 percent more 
efficient than similar qualified products and high energy-efficiency 
data were not questioned by Energy Star. 

Product type--overseeing agency: Light Commercial HVAC--EPA; 
Product and certification details: 
* Product approved within approximately 1 week of submission and 
listed on the Energy Star Web site. 

Product type--overseeing agency: Metal Roof Panel--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for federal tax 
credit; 
* Bogus manufacturer test results submitted were accepted by Energy 
Star; 
* Product was approved in about a month and listed on the Energy Star 
Web site. 

Product type--overseeing agency: Printer--EPA; 
Product and certification details: 
* Product information submitted via the OPS tool without Energy Star 
required product literature; 
* Product approved by Energy Star 1 month after submission. 

Product type--overseeing agency: Refrigerator--DOE; 
Product and certification details: 
* Consumers who purchase product would be eligible for some state 
rebate programs; 
* Product would be eligible for manufacturer federal tax credits for 
production of energy-efficient models; 
* Product submitted, qualified, and listed on Energy Star Web site 
within 24 hours. 

Product type--overseeing agency: Room Air Cleaner--EPA; 
Product and certification details: 
* Consumers who purchase product would be eligible for some state 
rebate programs; 
* Product was not submitted with required UL safety standard file 
number; 
* Web site did not include required product disclaimer; 
* Product image on Web site was a space heater with a feather duster 
and fly strips attached; 
* Product was approved in 11 days and listed on the Energy Star Web 
site. 

Product type--overseeing agency: Water Cooler--EPA; 
Product and certification details: 
* Manufacturer Web site made no reference to product line during 
Energy Star qualification process; 
* Product was approved by Energy Star within 4 days and listed on the 
Energy Star Web site. 

Rejected: 

Product type--overseeing agency: Compact Fluorescent Light Bulb--DOE; 
Product and certification details: 
* Product rejected due to third-party verification process requiring 
certification by designated laboratory. 

Product type--overseeing agency: Ventilating Fan--EPA; 
Product and certification details: 
* Product rejected because it did not appear on trade association 
registry assuring compliance with Energy Star standards. 

No Determination Made: 

Product type--overseeing agency: Battery Charging System--EPA; 
Product and certification details: 
* Submitted bogus manufacturing testing results; 
* Did not receive a response from Energy Star during investigation. 

Product type--overseeing agency: Decorative Light String --EPA; 
Product and certification details: 
* Submitted fictitious test results from a bogus accredited laboratory; 
* Did not receive a response from Energy Star during investigation. 

Product type--overseeing agency: End-Use Product--EPA; 
Product and certification details: Product was described as "electric 
office hammer"; 
Did not receive a response from Energy Star during investigation. 

Source: GAO. 

[End of table] 

Energy Star Partnership Agreements: 

We found that companies can easily become an Energy Star manufacturing 
partner, and subsequently have unlimited access to Energy Star logos 
and other promotional resources. Using fictitious information, we were 
able to attain Energy Star partnership for four bogus manufacturing 
firms, using only Web sites, commercial mailboxes, and cell phones to 
serve as a backstop corporate presence. To become an Energy Star 
partner, we submitted an Energy Star partnership commitment form for 
each bogus company listing basic contact information, a fictitious 
point of contact, and pertinent manufacturing categories. All four 
bogus companies were granted Energy Star partnership by EPA and/or DOE 
within 2 weeks. The bogus companies were granted access to digital 
logo templates and other marketing materials, without first having any 
qualifying products. For two of the companies, Energy Star 
administrators did not review the Web site prior to granting Energy 
Star manufacturing partner status. For all cases, Energy Star did not 
call our bogus firms or visit our firm's addresses. Further, our bogus 
manufacturing companies received product and service solicitations 
stemming from partner listing on the Energy Star Web site. For 
example, one company received requests for large recurring orders of 
an external power supply adapter, based on the company being listed on 
the Energy Star Web site. These solicitations are an example of the 
value placed on being an Energy Star partner, and emphasize why 
rigorous screening is necessary. 

Energy Star Product Certifications: 

We successfully obtained Energy Star qualification for 15 bogus 
products, including a gas-powered alarm clock and a room cleaner 
represented by a photograph of a feather duster adhered to a space 
heater on our manufacturer's Web site. Twenty products were created 
for proactive testing. Each product submitted met Energy Star 
guidelines and was selected based on FEMP designation, tax credit 
eligibility, and the presence of potential preventative controls. The 
EPA was the overseeing entity for 16 of the products submitted for 
Energy Star qualification, and the DOE was the overseeing agency for 
the other 4 products. Of the products submitted to the EPA, 12 were 
approved, 1 was rejected, and 3 never received a final determination 
from Energy Star. DOE qualified 3 bogus appliances and rejected a 
(CFL) bulb due to failure to provide third-party test results from an 
accredited independent laboratory. Figure 2 below is a photograph 
displayed on one of our bogus company's Web site depicting the air 
room cleaner certified by the energy star program. 

Figure 2: Air Room Cleaner Certified by Energy Star: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

We found that the level and depth of administrative oversight varied 
by product category. Qualification response time, scrutiny of product 
information, and mode of submission of qualifying data varied across 
products. The product qualification response time from Energy Star 
varied from minutes to months. For example, a computer monitor 
submitted for qualification was approved within 30 minutes of 
submission, whereas the bogus battery charging system and end-use 
product did not receive a response from officials by the conclusion of 
our investigative work, a period of over 3 months. Several other 
products, including a refrigerator, dishwasher, and clothes washer 
received Energy Star certification within 1 day of submission. We also 
attained qualification for products with exaggerated efficiency claims 
submitted via the QPI form with little scrutiny. For example, Energy 
Star officials approved a dehumidifier, geothermal heat pump, and room 
air cleaner that were each at least 20 percent of more efficient than 
all other similar products listed on the Energy Star Web site. We 
received a request for confirmation that the reported Energy Factor 
(EF) for our dehumidifier was accurate because it seemed excessive. 
However, after confirming the EF factor via e-mail without providing 
additional support, the dehumidifier was qualified. In addition, we 
were not contacted by Energy Star with questions regarding efficiency 
performance of the geothermal heat pump and the room air cleaner. 

Our fictitious products were submitted two ways, via the OPS tool and 
e-mailed QPI forms to Energy Star administrative contractors. We found 
that the Energy Star OPS tool expedited the certification of bogus 
products. EPA officials confirmed that the OPS tool is an automated 
system designed to reduce administrative costs and a specific review 
only occurs if outlier data triggers programmed flags in the system. 
For example, we submitted and qualified a gas-powered alarm clock 
under the newly formed audio-video product category via the OPS tool. 
Although the efficiency information met Energy Star criteria, the 
product description section on the form clearly indicated that the 
clock radio was gas-powered, the dimensions were similar to those of a 
small portable generator, and the product model name was "Black-Gold". 
EPA officials confirmed that because the energy-efficiency information 
was plausible, it was likely that no one read the product description 
information. Figure 3 below shows the information we submitted via the 
OPS tool. 

Figure 3: Request for Certification of Gas-Powered Alarm Clock: 

[Refer to PDF for image: illustration] 

Product: Clock Radio. 

Model Number: Black Gold. 

Spec Version: Audio Video Version 2.0 (Current). 

Effective Dates: 11/16/2008 through Present. 

Product Eligible for Qualification? Yes. 

Spec Details: Product meets all requirements. 

Product Type: Clock Radio. 

Product Marketing Description: Gas-powered clock radio is 
sleek,durable, easy on your electric bill, and surprisingly quiet. 

Height: 18.00 inches. 

Width: 15.00 inches. 

Depth: 10.00 inches. 

Source: Energy Star OPS Tool. 

[End of figure] 

Our investigation determined that when officials required independent 
third-party testing of products prior to certification, that control 
sometimes prevented our fictitious products from becoming certified. 
Specifically, for our ventilation fan, when submitting our product for 
certification, we indicated that we had tested our product with the 
specific third-party testing company designated by Energy Star. 
However, when officials reviewing the application attempted to 
validate that information with the third party, they found that the 
Home Ventilating Institute (HVI) had not tested our product. This 
control resulted in the fan being rejected. A similar control 
prevented our bogus firm from having its CFL bulb certified. However, 
our investigation found that Energy Star officials did not always 
verify testing results with third parties. Specifically, on the 
product application for our room air cleaner, we stated that we met 
the specific safety standard for ozone emission set forth by 
Underwriters Laboratories, an actual independent third-party 
laboratory designated by Energy Star. However, while Energy Star 
officials asked if we met this standard, they never verified our 
certification with the Underwriters Laboratories or requested the 
specific testing file as required on the QPI form. 

Undercover Tests Expose Weaknesses in Fraud Prevention Controls: 

We found that for most of the bogus products we submitted, the Energy 
Star program preventive controls were ineffective, rendering the 
program vulnerable to fraud and abuse. Our work was not designed to 
systematically test all controls within the Energy Star program, but 
approval of 15 fictitious products submitted with bogus energy- 
efficiency data shows weaknesses in the programs preventative 
controls. A lack of controls over the access to Energy Star product 
certification labels exposes the program to unauthorized use. 
Ineffective and nonexistent controls over validation of claimed energy 
efficiencies could also allow firms to fraudulently overstate product 
efficiencies. In addition, the overreliance on manufacturer integrity, 
industry self-policing, and after-market product testing ignores the 
potential for products to be put on the market and sold to consumers 
before fraudulent activity is identified. Despite the lack of up-front 
controls, there have been a few recent examples of successful 
identifications of fraudulent or inaccurate energy-efficiency claims 
by manufacturer's competitors that resulted in action from DOE. 

Controls over Access to Energy Star Labels: 

Preventing unauthorized access to promotional material for the Energy 
Star program is the first step in maintaining consumer confidence in 
the label. However, our undercover tests showed that ineffective 
controls could allow firms to utilize Energy Star logo without ever 
having a product certified. Specifically, all four bogus manufacturing 
companies received user account information soon after achieving 
partnership. Account information is needed to access My Energy Star 
Account (MESA), a secure section of the Energy Star site containing 
all of the program labels, including product certification labels, for 
download and application by approved partners. Program protocols state 
that account information granting access to MESA should be restricted 
until a partner has successfully qualified a product designated in the 
Partnership Agreement package by submitting energy use data. However, 
we gained access to MESA prior to having any products approved by 
Energy Star. Additionally, we found that some Energy Star labels were 
publicly accessible. For example, the Energy Star linking label was 
found unrestricted on the QPI forms for three appliance products--the 
clothes washer, dishwasher, and refrigerator models--we submitted. 
Consequently, label access, a cornerstone in protecting the integrity 
of the Energy Star label, was found susceptible to fraud and misuse. 

Product Certification Controls: 

The primary purpose of the Energy Star program is to help consumers 
identify the most energy-efficient products on the shelf. Therefore, 
controls that verify product energy-efficiency claims are key to the 
integrity of the overall program. However, we found that controls over 
specific product certifications were not effective in preventing firms 
from submitting bogus energy-efficiency data. We found that Energy 
Star is for the most part an online self-certification program. Only 4 
of 20 products we tested required independent verification of energy 
use and other industry standards by a third party. This control was 
effective in two cases because Energy Star officials verified our test 
results with the third party instead of trusting our self-
certification. For example, the ventilating fan product category 
required registry listing by the Home Ventilating Institute (HVI)--the 
industry-recognized independent laboratory for residential ventilating 
products sold in North America, and the CFL product category required 
certification by a designated laboratory accredited under the 
Department of Commerce National Institute of Standards and Technology 
(NIST) National Voluntary Laboratory Accreditation Program (NVLAP). 
The result was that both the fictitious ventilating fan and CFL bulb 
were effectively rejected due to follow-up on designated third-party 
verification requirements. However, for a third product, a room air 
cleaner, Energy Star officials failed to verify that our product met 
specific industry standards. We left the section requiring a UL file 
number blank on the QPI form, and when questioned by Energy Star 
officials we confirmed by e-mail that we met the standard, which was 
accepted as sufficient evidence and the product was approved. We did 
not receive a response from Energy Star by the end of our 
investigation for the fourth product, a decorative light string, and 
were unable to make any determination as to the effectiveness of the 
third-party verification related to this specific product. 

Recent Examples of Self-Policing: 

A recent case of inaccurate energy-efficiency claims being identified 
by competitors shows that there is potential for noncompliance within 
the program. DOE recently entered into a Consent Decree with Haier 
America on January 7, 2010, resolving an investigation into Haier's 
adherence to DOE's energy-efficiency standards and Energy Star program 
requirements for four freezer models. Among other obligations outlined 
in the decree, Haier agreed to conduct on-site unit repairs at no cost 
to consumers and submit a report to DOE by July 9, 2010, summarizing 
efforts made toward fulfilling its obligations. The Haier Decree was 
the first entered into by DOE to enforce federal efficiency standards. 
LG Electronics and DOE entered into an agreement in November 2008 to 
resolve matters arising from DOE concerns regarding testing procedures 
for measuring energy consumption levels for purposes of LG's 
certification with the Energy Star program. Subsequently, DOE ordered 
LG to remove the "Energy Star" energy-efficiency label from some of 
its refrigerators by January 20, 2010. DOE is currently involved in 
litigation in federal district court with LG Electronics over a 
dispute as to the methods that may be employed in testing for energy 
efficiency of some of its LG refrigerators. 

Corrective Action Briefing: 

We briefed officials from DOE and EPA on the results of our 
investigation and control weaknesses identified based on our testing. 
Officials acknowledged that currently the Energy Star program relies 
on self-policing, manufacturer integrity, and after-market testing for 
high volume products in cases where there is not a third-party testing 
requirement for certification. Our ability to obtain product 
certifications with unverified test results illustrates the need for, 
at a minimum, some level of third-party testing for the program to be 
one of certification versus self-certification. Officials stated that 
based on a new Memorandum of Understanding between DOE and EPA, the 
program will be shifting toward a more rigorous up-front screening 
process. Specifically, according to EPA's Enhanced Program Plan for 
Energy Star Products issued in December 2009, Energy Star is in the 
process of identifying and certifying testing labs and industry trade 
organizations that will begin to independently test products in most 
product categories prior to certification. It is important to note 
that the Energy Star program has been in place certifying products 
such as computer monitors since 1992. However, 18 years later we were 
able to obtain product certification for a computer monitor since 
third-party verification of manufacturer efficiency data had not been 
implemented by Energy Star. We support DOE and EPA plans to enhance 
testing prior to certification. 

Officials also stated during our briefings that the program has a 
variety of other controls in place to prevent and detect fraudulent 
energy-efficiency claims and label misuse after a product is put onto 
retail shelves and Web sites. Specifically, officials cited recent 
cases of industry self-policing, annual after-market product 
verification testing, and semiannual product shelf inventory of label 
guideline compliance as substantive controls. Because all of these 
controls occur after a product has been certified by Energy Star and 
placed on the market, we were not able to test their effectiveness and 
did not validate agency representations. However, in our briefing, we 
reiterated the importance of preventing fraud before a product is on 
the shelf and before consumers are placed at risk. In addition, recent 
IG reports have found that there is not a robust process in place at 
either DOE[Footnote 21] or EPA[Footnote 22] to proactively test Energy 
Star products on the market. In our briefings, EPA officials 
acknowledged that after-market product verification testing was not 
conducted for all product categories, but rather was limited to "high- 
volume" products. EPA officials stated that limited resources and 
other EPA priorities necessitated a select review of products for 
compliance. Furthermore, while EPA officials discussed their Web site 
follow-up as part of their efforts to ensure Energy Star labels are 
used appropriately, the officials agreed that in at least one case--
the room air cleaner model depicted by a feather duster attached to a 
space heater on the manufacturer's Web site--the Web site review was 
either ineffective or not performed. 

Finally, during our briefings, EPA and DOE officials stated that they 
felt there was some deterrent value to their citation of United States 
Code Title 18, Section 1001--False Statement Act[Footnote 23]--listed 
on Energy Star QPI forms and the OPS tools. Officials stated that the 
potential legal costs associated with violations of the Act would 
deter manufacturers from submitting false energy-efficiency claims. 
However, in our corrective action briefing we noted the exact text on 
the certification documents during our investigation read "I 
understand that intentionally submitting false information to the U.S. 
government is a criminal violation of the False Statements Act, Title 
19 U.S.C. section 1001." We pointed out that the citation to Title 19, 
as noted, is inaccurate, is not found on Partnership Agreement forms, 
and is only found on some QPI forms. We suggested that the citation be 
updated to reflect the appropriate legal authority and consistently 
applied to all partnership documentation. Officials acknowledged the 
above issues associated with use of the incorrect citation, and agreed 
that documentation be updated to reflect the proper legal citation. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the date of this letter. We will then send copies of this report 
to interested congressional committees, the Administrator of EPA, the 
Secretary of DOE, the Chairman of FTC, and other interested parties. 
The report will also be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-6722 or kutzg@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix II. 

Sincerely yours, 

Signed by: 

Gregory D. Kutz: 
Managing Director: 
Forensic Audits and Special Investigations: 

[End of section] 

Appendix I: Scope and Methodology: 

To perform the undercover test of attaining Energy Star partnership 
and earning Energy Star qualification for fictitious products, we 
consulted publicly available audit reports by federal agencies and 
consumer advocacy publications to identify program vulnerabilities to 
inform our methodology. Using publicly available information, we 
designed proactive tests to assess the partnership and product 
certification controls in place to prevent fraud and ensure the 
integrity of the Energy Star label. The Energy Policy Act of 2005 
mandates that federal buyers purchase products that are Energy Star 
qualified or otherwise designated by the Federal Energy Management 
Program (FEMP) as energy efficient. We used FEMP guidelines and the 
General Services Administration (GSA) schedule of federally designated 
products to select 20 Energy Star products for testing. Our 
investigation was designed to test controls over the process for 
becoming an Energy Star partner to certify products and acquire access 
to Energy Star product certification labels. Our work was not designed 
to test other potential controls in place for monitoring use of the 
Energy Star label on retail products or verifying energy efficiency 
through shelf tests of products selected from retail locations. 

We used bogus front companies, using rented domestic personal 
mailboxes for business listings, and fictitious identities when 
submitting documentation to Energy Star, meaning that we conducted our 
work with fictitious names and contact information that could not be 
traced back to GAO. We developed Web sites for each of the four bogus 
manufacturing firms to establish an internet presence. Undercover cell 
phones used as company telephone numbers and out-of-service numbers 
used as fax numbers were listed as contact information on each of the 
four bogus manufacturer Web sites and Energy Star program 
documentation. 

We submitted Energy Star Partnership Agreements for each of the four 
bogus manufacturing firms and fictitious product energy-efficiency 
specifications via e-mail to the Energy Star program to obtain 
partnership and certify products. After attaining Energy Star 
partnership status, we submitted a total of 20 products under selected 
categories, including appliances, home envelope products, computers 
and electronics, heating and cooling products, and lighting. The 
product specifications varied in sophistication and energy efficiency 
to test the level of scrutiny at each stage of the Energy Star product 
certification process. For example, at the beginning of testing, 
products mirroring efficiency standards of listed Energy Star products 
were submitted, whereas in the later stages of the proactive testing 
phase of this investigation, we submitted an implausible product for 
Energy Star certification. We briefed program officials with the 
Department of Energy, Environmental Protection Agency (EPA) and EPA 
OIG as well as attorneys with the Consumer Protection division of the 
Federal Trade Commission (FTC) on the results of our work, and 
incorporated their comments concerning controls in place to protect 
the Energy Star label from fraud and abuse. 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Gregory D. Kutz, Managing Director, 202-512-6722, kutzg@gao.gov: 

Acknowledgments: 

In addition to the individual named above, the following individuals 
made major contributions to this report: Julia DiPonio, Robert 
Fletcher, John Ledford, Barbara Lewis, Vicki McClure, Jonathan Meyer, 
James Murphy, Andrew O'Connell, Timothy Persons, April Van Cleef, Abby 
Volk, and John Wilbur. 

[End of section] 

Footnotes: 

[1] The energy savings obtained from Energy Star products vary 
depending on the specific product's energy efficiency specifications 
in comparison to a non-Energy Star qualified product with similar 
performance. 

[2] Clean Air Act Amendments of 1990, Pub. L. No. 101-549, 104 Stat. 
2399 (1990). 

[3] Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776 
(1992). 

[4] Minimum federal standards for energy efficiency were established 
by Congress in the Energy Policy and Conservation Act (EPCA) Pub. L. 
94-163 (1975). The standards have been updated many times since being 
established, most recently by the Energy Policy Act of 2005 Pub. L. 
109-58 (2005). These laws establish schedules for DOE to review and 
revise these minimum federal standards. 

[5] The FEMP provides energy-efficiency requirements, guidance, and 
cost calculators that help federal agencies offset energy consumption 
costs through energy-efficient product implementations. Federal buyers 
are required to purchase products that are Energy Star qualified or 
FEMP designated for energy efficiency and low standby power. These 
products are in the upper 25 percent of energy efficiency in their 
category. 

[6] Energy Policy Act of 2005, Pub. L. No. 109-58, § 104(a), 119 Stat. 
594, 609 (2005) (codified as amended at 42 U.S.C. § 8295b). 

[7] Clean Air Act Amendments of 1990, Pub. L. No. 101-549, § 901(c), 
104 Stat. 2399, 2703 (1990) (codified as amended at 42 U.S.C. § 
7403(g)). 

[8] The Partnership Agreement is a voluntary agreement between 
businesses and organizations and the federal government. As part of 
this partnership, businesses, and organizations can use the Energy 
Star name and marks, registered marks owned by the U.S. government, as 
part of their energy efficiency and environmental activities. 

[9] The Energy Star guidelines outline how to use the Energy Star 
marks across a wide range of activities and applications. The 
guidelines provide specific information on the use of the mark in each 
category and recommendations for what words to use when writing or 
talking about the Energy Star program including how to reference the 
government source of authority. 

[10] QPI information is specific energy-efficiency specifications 
related to a product based on the product design and operation. 

[11] 42 U.S.C. § 8259b. 

[12] American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-
5, 123 Stat. 115 (2009) (codified at 26 U.S.C. § 25C). 

[13] 26 U.S.C. §§ 25C - 25D. 

[14] 26 U.S.C. § 45M. 

[15] Energy Improvement and Extension Act of 2008, Pub. L. No. 110-
343, Division B § 305 (2008). 

[16] The Consortium for Energy Efficiency (CEE) is a nonprofit public 
benefits corporation that develops initiatives for its North American 
members to promote the manufacture and purchase of energy-efficient 
products and services. CEE members include utilities, statewide and 
regional market transformation administrators, environmental groups, 
research organizations, and state energy offices in the United States 
and Canada. Also contributing to the process are CEE partners-- 
manufacturers, retailers and government agencies. DOE and EPA both 
provide support through active participation as well as funding. 

[17] EPA OIG Report No. 2007-P-00028 (Aug. 1, 2007), 09-P-0061 (Dec. 
17, 2008), and 10-P-0040 (Nov. 30, 2009). 

[18] Consumer Reports Magazine (Oct. 2008). 

[19] DOE OIG Report No. DOE/IG-0827 (Oct. 14, 2009). 

[20] See GAO, Energy Efficiency: Opportunities Exist for Federal 
Agencies to Better Inform Household Consumers, [hyperlink, 
http://www.gao.gov/products/GAO-07-1162] (Washington, D.C.: Sept. 26, 
2007). 

[21] DOE OIG, Report No. DOE/IG-0827 (Oct. 14, 2009). 

[22] EPA OIG, Report No. 10-P-0040 (Nov. 30, 2009). 

[23] 18 U.S.C. § 1001. 

[End of section] 

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