The Agriculture Department's Rural Utilities Service provides hundreds of rural electric cooperatives with billions of dollars in low-interest loans. The funds are supposed to be used for local development projects. But the department's inspector general has discovered that the cooperatives are using the money to buy stocks, bonds and other investments having nothing to do with rural development.

• Contrary to Congress's intent, some 787 borrowing organizations held nearly $11 billion worth of outside investments as of 1997.

• Only $61 million -- or about 0.5 percent -- was actually directed at local business ventures or rural infrastructure.

• The audit follows an inspector general's report in February that faulted the Rural Utilities Service for continuing to lend large sums of money at discount rates to rural telephone companies that no longer need government assistance.

• The audit comes just as Congress is considering giving the agency oversight for a third $1.25 billion loan-guarantee program to help companies that want to beam local television signals to rural and other underserved areas.

The biggest utility in the audit, Oglethorpe Power Corp., had $399 million worth of outside investments in 1997. But the Atlanta utility sank no money into rural development.

The much smaller Lea County Electric Cooperative on the Texas-New Mexico border had $43.4 million worth of investments in 1997 -- none of which went into business ventures in its sparsely populated area. In fact, $27 million was dedicated to a fund to decommission an unused electric power plant and tear down hundreds of miles of unneeded power lines.

Source: Kathy Chen and Bruce Ingersoll, "Rural Utilities Invest Funds in Markets Instead of Local Projects, Audit Says," Wall Street Journal, March 16, 2000.