Forest Service Failed Byproducts Assistance, $86M Questioned

USDA OIG Reports

Filed February 11th, 2026

Detected March 28th, 2026

Summary

The USDA Office of Inspector General found that the Forest Service failed to provide financial assistance for ecosystem restoration byproducts as required by the IIJA. This resulted in $86 million in questioned costs and $94 million in unsupported costs. The report includes recommendations for improved controls and fund recovery.

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What changed

The USDA Office of Inspector General (OIG) issued a report detailing significant failures by the Forest Service in administering financial assistance under the IIJA for facilities that purchase and process byproducts from ecosystem restoration projects. The OIG determined that the Forest Service did not comply with IIJA requirements, leading to $86 million in questioned costs and an additional $94 million in unsupported costs, totaling over $180 million. The report identifies specific areas of non-compliance related to tracking funds, interagency coordination, and data support for award decisions.

Compliance officers should note the substantial financial implications and the OIG's recommendations for corrective actions. These include establishing controls for tracking expenditures, formalizing interagency agreements with the Department of the Interior, ensuring award decisions are data-supported and located near high-risk areas, and evaluating the necessity of previously awarded funds. The Forest Service is directed to document conclusions regarding cost reduction and proceed with fund recovery where applicable, indicating a potential need for internal reviews of similar grant programs and financial oversight processes.

What to do next

Establish controls to track IIJA Section 40804(b)(3) funds.
Implement best practices for interagency coordination with DOI.
Establish controls to ensure award decisions are data-supported and located near high-risk areas.

Penalties

The report identified $86 million in questioned costs and $94 million in unsupported costs, with a recommendation to recover funds as applicable.

Source document (simplified)

IIJA – Financial Assistance to Facilities that Purchase and Process Byproducts from Ecosystem Restoration Projects

Report Information

Date Issued

February 11, 2026

Report Number: 08801-0002-51 Report Type Inspection / Evaluation Component Forest Service Description We determined that the Forest Service did not provide financial assistance to facilities that purchase and process ecosystem restoration byproducts in accordance with IIJA requirements, resulting in $86 million in questioned costs and $94 million in unsupported costs. Joint Report No Agency Wide Yes (agency-wide) Questioned Costs $180,396,829 Funds for Better Use $0 View report on Oversight.gov

Recommendations

1 - Open

Establish and implement a control to track the amount of S&E and FS Ops funds expended for IIJA Section 40804(b)(3).

2 - Open

Implement best practices for interagency coordination including but not limited to entering into a written agreement with DOI to document the roles, responsibilities, and expected outcomes.

3 - Open

Establish and implement controls to ensure that remaining award decisions are fully supported by data to ensure facilities are in close proximity to high or very high risk areas.

4 - Open

Evaluate whether the 132 awards approved from FY 2022 to FY 2024, which total $94.2 million in financial assistance, substantially decrease the cost of conducting ecological health restoration projects. Document conclusion reached and proceed to recover funds, as applicable.

5 - Open

Develop and implement a quantifiable and properly supported process for determining how the funding awarded to facilities would substantially or does substantially decrease the cost of conducting ecological restoration projects.