In Arkansas last July, reporters from the Arkansas Democrat -- with help from the Humane Society of the United States -- uncovered federally licensed kennels producing large numbers of puppies in dirty, cramped cages. The story prompted the chief federal veterinarian in the state to crack down on the so-called "puppy mills."

To Agriculture Department officials, it was a case of the federal government working with the Humane Society to solve a local animal-cruelty problem.

But to critics in the animal welfare community, the case merely demonstrates what they see as lax enforcement by the USDA. The criticism has been intensified by a Humane Society investigation that found that federal inspectors had overlooked major deficiencies in the operations of 285 dog dealers in seven states, by local media investigations and by a forthcoming General Accounting Office report that is critical of the USDA.

Since 1967, the department has been charged with enforcing the Animal Welfare Act, which sets minimum standards for animal care in zoos, research facilities, traveling exhibits and kennels.

Specifically, critics say the USDA inspectors are poorly trained and their inspections few and cursory. In 1984, according to the unreleased GAO report, the USDA diverted $700,000 from its animal welfare budget to buy a fleet of new cars for field inspectors in the Animal and Plant Health Inspection Service (APHIS).

The shift of funds was legal, but critics say it is indicative of the department's lack of commitment to animal welfare.

Some department officials in the field agree that they are not doing an adequate job. They cite budget cuts. "From the money standpoint, some increase in funds would allow us to increase the frequency of inspections," said Jim Ward, the chief USDA veterinarian in Arkansas. "There also hasn't been the formal training as would be desirable in the last few years and this would relate directly back to the funding."

For the past two years, Agriculture officials have lobbied in support of cuts in the program, but Congress has refused to go along. In this fiscal year, for example, the USDA requested $3.65 million for animal welfare, but Congress retained last year's $4.86 million.

James O. Lee Jr., acting administrator of APHIS, said, "Our position -- the administration position -- is that there should be more involvement by the industry."

Dr. Bill Stewart, senior USDA staff veterinarian for animal care, based in Hyattsville, said: "We, of course, depend on people out there to report instances where our standards are not being met. And we respond to complaints when we get them . . . . In fact, that's our Number One priority, responding to public complaints."

That attitude enrages critics, who say the USDA should be taking the lead. When the Animal Welfare Act "first came out, Agriculture did not want to enforce it, so they've been dragging their feet ever since," said Yvonne Eider, legislative director for the Friends of Animals. "They didn't want to do this in the first place, so it has a very low priority."

Critics often complain about what they view as the USDA's "old guard" of field inspectors, who they say are more comfortable teaching farmers how to control diseases than they are issuing citations to animal vendors.

Bob Baker, a Humane Society investigator, said, "USDA opposed the Animal Welfare Act since they were singled out for its enforcement. It's been 14 years and you'd think things would change, but unfortunately they haven't changed. If they took it seriously at the top, it would filter through to the bottom."

Ward, the USDA official from Little Rock, spoke of "a holdover from the days when our primary concern was domestic farm animals. Swine programs, cattle programs -- this was their primary field of interest. Then along comes the Animal Welfare Act, which is a different type of program. It's a bit alien to them. Maybe they have not been able to adjust to it."

"What this amounts to is like being a traffic cop," said Stewart in Hyattsville. "This is a tough job. If you stop a sweet little old lady doing 85 miles per hour on an interstate and she gives you a sob story, you may not give her a traffic ticket. It's the same with our inspectors."

But the officials also contend that the USDA has been adding younger investigators, specifically trained in animal welfare. "One of the complaints we've had nationally is that a lot of our guys came up through livestock, specializing in disease control," said Dr. James D. Roswurm, the chief USDA veterinarian in Sacramento. "But most of my people started in animal welfare. That kind of fellow they're talking about, I'm down to three or four."

"That's a general conception we hear bandied around. I'm not sure there's a basis for it," said Dr. Richard Rissler, assistant director of the animal health programs. "Up until 1966," he said, "our outfit was basically designated for disease control. So there's a conception that these guys' background doesn't render that, that they're not used to it. We feel that our people have been trained, although you can always use more training."

Still, most officials readily acknowledge that, in a time of limited funds, disease control often takes priority over animal welfare.

Rissler said the criticism is unfair, partly because the inspectors are charged only with enforcing standards that are considered minimal while the animal-welfare groups expect more. "Our authority is considered minimum standards," he said. "From the humanitarian point of view, the minimum standards are not enough."

Rissler cited the federal requirement that vendors use puppy cages having floors instead of cheaper wire-mesh bottoms through which small pups can topple. "Our job," he said, "is to see that that flooring is constructed in a way that the puppy can maneuver on it. But it doesn't have to be a tile floor. A lot of humanitarians would like to see a tile floor in there."

Meanwhile, the GAO is preparing a report on USDA enforcement of the Animal Welfare Act that is expected to be highly critical.

In a preliminary report, the auditors said they had found at least eight serious flaws. These included inadequate monitoring of field inspectors, poor record-keeping, inspectors who exaggerated the amount of time they spent on animal welfare matters, and inconsistencies among the states in defining violations.

In response to the reported diversion of animal-welfare funds to buy new cars, the USDA's Rissler said that no new cars had been purchased for the inspectors for the past three years, and that since at least part of their time was spent on animal welfare matters the division "had to do its share to pay for the transportation."