Inspectors general are typically independently funded watchdogs attached to US agencies, who are tasked with rooting out waste, fraud and abuse at government agencies. The Trump administration earlier purged more than a dozen inspectors general.
On Monday, Inspector General Paul Martin's office issued a report warning that the Trump administration's freeze on funding and staff within USAID had left oversight of the humanitarian aid "largely nonoperational."
That includes the agency's greatly reduced ability to ensure none of the $8.2 billion in unspent unhumanitarian funds falls into the hands of violent extremist groups or goes astray in conflict zones, the watchdog said.
Separately, a lawsuit filed Tuesday alleged that the Trump administration's fast-paced dismantling of USAID is leaving American businesses with hundreds of millions of dollars in unpaid bills for work that has already been done.
"One cannot overstate the impact of that unlawful course of conduct: on businesses large and small forced to shut down their programs and let employees go; on hungry children across the globe who will go without; on populations around the world facing deadly disease; and on our constitutional order," the US businesses and organisations said in the lawsuit.
It was filed in the US District Court in Washington against President Donald Trump, Secretary of State Marco Rubio, acting USAID Deputy Administrator Peter Marocco, a Trump appointee who has been a central figure in hollowing out the agency, and Russell Vought, Trump's head of the Office of Management and Budget.
It is at least the third lawsuit over the administration's rapid unravelling of the US aid and development agency and its programs worldwide. Trump and ally Elon Musk have targeted USAID in particular, saying its work is out of line with Trump's agenda.
A lawsuit brought by federal employees associations has temporarily blocked the administration from pulling thousands of USAID staffers off the job. The funding freeze and other measures have persisted, including the agency losing the lease on its Washington headquarters.
The new administration terminated contracts without the required 30-day notice and without back payments for work that was already done, according to a US official, a businessperson with a USAID contract and an email seen by The Associated Press. They spoke on condition of anonymity for fear of reprisal by the Trump administration.
For Washington-based Chemonics International, one of the larger of the USAID partners, the funding freeze has meant $103 million in unpaid invoices and almost $500 million in USAID-ordered medication, food and other goods stalled in the supply chain or ports, the lawsuit says.
The filing asserts that the administration has no authority to block programs and funding mandated by Congress without approval.
Marocco defended the funding cutoff and push to put all but a fraction of USAID staff on leave in an affidavit filed late Monday in the lawsuit brought by the workers' groups.
"Insubordination" and "noncompliance" by USAID staffers made it necessary to stop funding and operations by the agency to allow the administration to carry out a program-by-program review to decide what US aid programs could resume overseas, Marocco wrote.
