AUGUSTA – State agencies should confirm that recipients of public grant money have adequate financial capacity and controls, the Legislature’s Government Oversight Committee has concluded.

New legal requirements could help prevent a repeat of problems attributed to the Maine Green Energy Alliance, which won a $3 million federal grant but was terminated for questionable performance last winter after six months and $500,000 in spending.

That proposal, and one to tighten disclosure laws for confidential documents, were among the few clear actions taken by lawmakers Tuesday after months of investigation into the procedures and practices of the now-defunct alliance.

What did become clear is that organizers, in their zeal to launch the alliance and meet ambitious goals, ignored obvious public-perception problems, such as hiring Democratic legislators and candidates.

“We ended up with a single mindset and we ended up appearing political,” said Tom Federle, who was Gov. John Baldacci’s legal counsel.

Federle helped start the alliance and later became a paid consultant and a board member. He testified before the committee Tuesday, saying that while he made mistakes and learned lessons, the intent was to find better ways to help Mainers heat their homes and keep $1 billion a year in petroleum costs from leaving the state.

His testimony, and questions from committee members, led to an acknowledgment of a philosophical split on government programs. In general, Democrats look more favorably on using public money to create incentives, while Republicans favor a private-sector, market approach.

In that regard, energy issues, Federle observed, are similar to the debate over health care.

“Energy issues, because they are important to the state of Maine, have taken on political overtones,” he said.

The alliance used federal stimulus money in a pilot program aimed at boosting the number of Maine homes getting weatherized. But media reports of the alliance’s subpar performance, and its connection to Democratic politics, led Republican activists to charge that the nonprofit group was misusing funds and helping Democratic candidates.

A report last month by the Office of Program Evaluation and Government Accountability showed no evidence of that. It did find weak financial controls, the appearance of wrongdoing and the risk of fraud, and it recommended steps to improve oversight in the future. The committee asked OPEGA to put suggestions in draft legislation.

OPEGA and an auditor also identified more than $272,000 in questionable spending, which still is being reviewed by the quasi-state agency that administered the grant, Efficiency Maine Trust.

The trust will report to the committee on its progress in December. But Michael Stoddard, the executive director, said that all of the alliance’s expenses were reimbursed by the trust after it reviewed receipts.

Questions focus on the process by which the alliance approved expenses, and time sheets for salaried employees.

Republicans on the committee sought to discover why and how certain people — all Democrats — were hired by the alliance. They also wanted to understand how eight towns, including Old Town, Hampden, Yarmouth and Cumberland, were chosen to kick off the program.

In general, the people best skilled and interested in community outreach and communicating about energy efficiency turned out to be Democrats, Federle said. And the communities were selected based on their interest in adopting ordinances to allow the use of a new federal loan program.

“We were blind to the appearance problem,” he said.

Behind the questions was a sense, articulated most clearly by Sen. David Trahan, R-Waldoboro, that the alliance was an unneeded duplication that wasted taxpayers’ money.

“There was a better way to do it,” he said.

But Stoddard and Federle noted that the grant money was won on a competitive bid that was open to all 50 states. It was part of a $30 million package that Mainers now are using for loans to insulate their homes.

Federle also defended the alliance’s record and clarified past media reports that the group weatherized only 50 homes before it was shut down. The outreach program had begun working, he said, but it typically takes as long as four months for each home to move through a process of energy audits to hiring contractors and getting the job done.

While only 50 homes were insulated, the alliance had signed up more than 1,000 homeowners, more than 200 of whom had hired professional auditors. More than 1,500 homes have since been weatherized.

In a related matter, the committee followed up on a leak of OPEGA’s general findings last month to The Portland Press Herald. Some Republicans on the committee had wanted the attorney general to investigate, but on Tuesday they turned their attention to preventing future disclosures of confidential material.

The committee asked Beth Ashcroft, the office’s director, to confer with the attorney general about ways to ensure that lawmakers and agency heads who view draft reports are accountable for keeping them from public view until they are finalized.

Staff Writer Tux Turkel can be contacted at 791-6462 or at tturkel@pressherald.com