Audit: USDA Stimulus Programs ‘Inherently Not Shovel Ready’

Five-year review of Recovery Act finds $5 billion misspent

August 29, 2014

More than five years after the stimulus was signed into law, a new audit reveals the U.S. Department of Agriculture (USDA) spent nearly $5 billion in questionable costs and funded programs that were "inherently not shovel ready."

The Office of Inspector General (OIG) published a "lessons learned" audit on Wednesday, reviewing how well the USDA oversaw $28 billion in stimulus funds from the Recovery Act. The audit compiled results of over 80 reports conducted by the OIG.

"As a result of these reviews, we also reported monetary exceptions of over $5.1 billion, including $4.9 billion related to questionable or unsupported costs," the audit said.

"Most programs that received Recovery Act funds were expected to quickly pump money into the economy by immediately executing infrastructure and labor intensive projects," the OIG said. "These were known as ‘shovel ready’ projects."

"However, our reviews discovered USDA encountered challenges because several of its programs were inherently not ‘shovel ready,’" they said.

For instance, zero projects from a watershed rehabilitation program that builds dams in local communities turned out to be "shovel ready." Additionally, none of the projects met the law’s goals.

"Specifically, none of the 27 selected projects expended half of their funding within the first 120 days, 2 did not complete the dam rehabilitation with Recovery Act funds, and 6 were withdrawn prior to rehabilitation construction," the audit said.

The USDA’s Natural Resources Conservation Service spent $943,000 on "projects that could not be completed."

The largest area of mismanagement of stimulus funds came from the Single Family Housing Loans and Grants program, which is meant to secure homeownership for low-income Americans in rural areas.

The stimulus provided loans for 17 borrowers who "had no history of stable and dependable income," and six loans were for properties that had aboveground swimming pools, which was strictly prohibited under the law.

"From our statistical sample, we project that 1,772 loans, worth $208 million (22 percent of the universe), may have similar noncompliance issues related to ineligible borrowers and properties," the audit said.

Overall, the Rural Housing Service that oversaw the program provided $4.16 billion from the stimulus to ineligible recipients.

"We concluded that the controls were not always adequate to safeguard Recovery Act funds and ensure that funds were expended in a manner that minimized the risk of improper use," the OIG said.

"Specifically, we identified ineligible borrowers who received loan guarantees, even though they did not demonstrate the ability to repay the loan, possessed incomes that exceeded program limits, possessed sufficient financial resources to obtain loans without a government guarantee, already owned adequate housing in their local commuting areas, or purchased homes that had swimming pools," they said.

The USDA also had problems monitoring the $19.8 million in increased benefits for food stamps provided by the stimulus. "Specifically, the audit concluded that four of six selected States did not fully comply with Recovery Act provisions for transparency and accountability," the audit said.

Of the nearly $5 billion in unsupported costs, the USDA has recovered only $11 million. The OIG still has seven open investigations for fraud and abuse of Recovery Act funds.