DOE asks for more information on $2 million CROET grant

The U.S. Department of Energy has requested additional information as it tries to close out a $2 million grant awarded 16 years ago to a nonprofit organization that owns, develops, and manages former DOE property.

The grant was issued in 1997 as part of a larger grant that the Community Reuse Organization of East Tennessee requested from DOE, said Lawrence Young, CROET president and chief executive officer. Most of the money was used for a high-risk loan program for small businesses. The purpose was to create jobs and promote economic development in East Tennessee, said Mike Koentop, spokesman for the DOE Oak Ridge Office.

CROET ran the program for a few years but then turned it over to Tech 20/20, an organization that helps entrepreneurs, as a subgrantee. Tech 20/20 established a variety of loan programs, trying to provide funding to small businesses that couldn’t get bank loans, Young said. Officials acknowledged that there were going to be some losses and some successes, he said.

“It was understood (by) everybody involved that some of these loans are going to go to high-risk companies,” Koentop said.

Among the successes, Young said, are Sword and Shield in Knoxville; Pro2Serve, which received a loan early on and now has about 400 employees; and Protomet, which recently announced a $6 million expansion in Bethel Valley Industrial Park.

“We’ve had quite a few companies throughout the history of the loan that have been quite successful,” Young said.

CROET determined in 2005 that the grant program was over, and the grant was closed. But that turned out to be an error, Young said.

A DOE audit a few years ago resulted in questions about how the grant was managed, including questions about how the funds flowed to Tech 20/20, where the money was used, and whether it was used appropriately to loan money to small companies, Young said. There were also questions related to the relationship between CROET, Tech 20/20, and Pathway Lending, which is affiliated with Tech 20/20. CROET has provided that information and researched a question on whether the private sector had contributed $500,000 to one loan program, which a provision in one agreement called for, Young said.

He said CROET met with DOE about three weeks ago.

“We are now working to close out that grant,” Young said Friday. “We are hoping to be able to provide DOE with final information about how to close the grant in the next few weeks.”

CROET received what is known as a non-compliance letter from DOE. Officials said those letters aren’t unusual. Koentop said it is a routine business matter to verify existing information or request additional information when closing out a grant.

“It is important to note that the letter we sent to CROET is not uncommon,” Koentop said. “We send out similar letters to grantees anytime there is a gap in information needed, or questions that must be answered, to properly administer a grant. We expect to receive more information from CROET soon, and then we can decide how best to proceed with the closeout of the grant.”

It’s the first letter of its type that CROET has received from DOE. Young said he is confident that the issue will be resolved successfully.

CROET and DOE both declined to provide a copy of the letter. Koentop said it is premature to discuss details, but DOE will be able to answer specific questions once the grant is closed.

Young said the grant officially ends Sept. 30, so it either needs to be extended or closed by then.

CROET has received about $58 million in DOE grants during a 20-year period. Young said the last substantive grant was awarded in the late 1990s. Among other things, CROET built Horizon Center, planned the Roane County regional business park, provided grant money to Knox County for the National Transportation Research Center, provided money for underground utilities at a Knoxville business park, and provided money for industrial planning in Oak Ridge, Anderson, Loudon, and Roane counties, Young said.