USDA Cotton Subsidies Pay for Cars, Elephant Lamps, Artwork

Audit: $2.4 million in ‘questionable’ purchases meant to stimulate textile industry

2013 Ford Explorer / AP
August 7, 2014

U.S. Department of Agriculture (USDA) cotton subsidies meant to assist the textile industry are being spent on Ford Explorers, artwork, sound systems, and elephant lamps, according to a government watchdog.

The USDA’s Office of Inspector General (OIG) released an audit on Thursday detailing how the government has failed to properly oversee the Economic Adjustment Assistance to Users of Upland Cotton Program (EAAP), resulting in more than $2.4 million worth of "questionable" purchases.

The program, which was created in the 2008 Farm bill, pays textile mills 3 cents per pound of upland cotton they produce to be used on investments, equipment, and new property. However, the OIG found at least $900,000 in payments that went to manufacturer’s "personal use."

For instance, one recipient used government funds to buy two Ford Explorers, costing over $45,500. The recipient bought a Ford Explorer and then traded it in for a new one 11 months later, the day before a government deadline requiring the funds to be spent or paid back to the USDA’s Farm Service Agency (FSA).

"Altogether, we questioned 75 expenditures, totaling over $2.4 million," the OIG said. "This occurred because FSA has not implemented effective internal controls to determine which capital expenditures are eligible uses of EAAP funds."

A recipient also spent $6,500 worth of cotton subsidies to "to decorate executive offices with carpet and artwork."

"Another user spent EAAP funds on decor, such as artwork and an elephant lamp for the Chief Executive Officer’s office and for carpet at one of its operating plants for the managers’ offices," the audit said.

The $2.4 million in unallowable purchases also went towards unused equipment "covered in dust and cobwebs," and other items unrelated to the cotton industry.

"Twenty-one of the questionable expenditures OIG identified, totaling over $93,000, were not directly related to cotton production operations," the OIG said. "Examples of these include lawn mowers, a hearing booth, a portable sound system, a TV monitor for a guard station, computers and other IT equipment for corporate offices, grass seed, and road repairs."

Over $58,000 was spent on unused equipment and more than $675,000 was paid for replacement parts that "did not modernize the user’s operations." Other waste included more than $7,000 on "service warranties for two vehicles, a service contract for a computer, and internal labor."

"OIG concluded that these types of expenditures, which were allowed by FSA, represent waste and abuse of EAAP funds, as they do not have direct applicability to the manufacturing of upland cotton into eligible cotton products by the user that made them," the audit said.

Aside from funding being wasted on personal items, the audit also found that the government has no way of knowing whether the program as a whole, which has cost taxpayers more than $300 million, has benefited the textile industry.

The FSA failed to establish a "purpose or goal" for the program, or ways to evaluate its performance.

"Even though the agency anticipated payments would limit market losses, plant closures, and employment declines, FSA has not developed a way to measure this impact," the OIG said. "Instead, the agency views paying users in a timely manner and assuring that the users spend the money within required timeframes to be its only purpose in administering the program."

"Without established goals and related outcome measures, FSA cannot demonstrate that the $337 million spent between August 2008 and July 2013 has stimulated the United States textile industry, or determine to what extent the assistance actually improved the condition of users as they compete in a global market," the audit said.

The EAAP program is meant to boost the textile industry, and keep America competitive with other countries. Manufacturers received 4 cents per pound of cotton produced up until July 2012. They now receive 3 cents per pound.

The USDA has strict guidelines for how money from the program can be spent.

"The payments must be used to acquire new property, plant, and equipment or upgrade the existing capital facilities, and equipment, and the user agrees upon accepting program payments to open its records to audits by the Department of Agriculture (USDA)," the OIG explained. "Payments may only be used for capital investments to acquire, construct, install, modernize, develop, convert, or expand land, plant, equipment, facilities or machinery."

The OIG concluded that the FSA did not "sufficiently ensure that funds expended are not a waste or abuse of Government funds," and recommended that the agency prohibit purchases that are "wholly or partially for personal use by executives and employees."

While the FSA agreed that it would disallow purchases that are wholly for personal use, they disagreed that items sometimes used for personal reasons should be prohibited.