OK from what I can gather looking at a few articles, USOC gives funds to the sport organization to distribute. It tells the sport org where to allocate the funds- but perhaps, not super specifically. What the USOC gives an org is usually only a smallish fraction of the orgs overall budget, because orgs typically make far more money from sponsorships.
So I wonder if USAG, facing financial crisis from lost sponsorships, dipped into what was promised to athletes to cover other things? That may be what the article is implying.
Also as far as paying athletes- US athletes no longer need to be amateurs to compete in Olympics. Fully professional US athletes have been able to compete in Olympics since the 1980s. Athletes who have not "yet" won medals, or who compete in low profile sports, or who compete but never or rarely medal, (so, most Olympic level athletes) are not going to rake in the dough via sponsorships or otherwise be able to trade in on their fame in order to support themselves, nor will they ever be paid to play like athletes in money sports. So those athletes really need financial help and many do not get it and simply have to work a "day job" and that of couse makes it very hard to train enough to be competitive, especially in a sport like gymnastics. So some athletes recieve these stipends. The US government does not use tax money to fund Olympic athletics. Funds come from people who voluntarily give in order to support USA Olympic athletes and athletic programs.
The USOC bases its funding amounts allocated to each sport on previous medal count/likely future medal prospects for the sport. Athlete stipends are only a small portion of the overall budget and very modest.
So basically what is going on (if I have this all correct) is that a modest stipend given to a great athlete in a low profile (for men)/no future earnings sport, who is training to hopefully represent his country at the next Olympics, given to the USOC by private citizens precisely in order to support such dedicated athletes, is for some reason not getting to that athlete because of some screwup or misuse of funds perpetrated by USAG. So yeah. Bad news.