The US Agriculture Department gave out more than $9 million in loans to ineligible applicants during a six-year period, according to an investigation by the department's inspector general released late Thursday.
The 22-page report said internal controls at USDA's Farm Service Agency failed to prevent 98 ineligible applicants from receiving 127 loans under its Farm Loan Programs from 1999 to 2004.
The FSA's Farm Loan Programs provide financial assistance in the form of loans to farmers and ranchers unable to obtain commercial credit from other sources. Borrowers who do not pay back the loan in full are declared "ineligible."
"These errors occurred because...loan officials did not follow established procedures for determining applicants' eligibility prior to issuing additional loans, and because FSA has not established an independent review process to ensure the accuracy of loan officials' eligibility determinations," the report said.
The FSA Farm Loan Programs dole out several thousand loans each year. In 2004, FSA approved 2,685 loans to borrowers for more than $323 million.
Among its recommendations, the Inspector General said USDA should start collection proceedings on the ineligible loans and develop a better automated system to cross-check and flag potentially ineligible bowers. The report said programs relied on by FSA officials to determine eligibility requirements had been incomplete or not used.
USDA said a review of its records show 74 of the 127 loans now remain ineligible and it is in the process of seeking to collect the funds.