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He can be called for a periodic accounting by SSA, so he better be able to prove that money was spent for the child. You can report him to SSA for not spending the money properly and they will do an audit.
As far as grandparents taking over, this is going to be an unpleasant task and it is going to require you obtaining an attorney. The US Supreme Court has declared that the rights of the biological parents to make decisions for their child are fundamental rights (basic civil rights) which will not be interfered with unless the parent is proven by clear and convincing evidence to be unfit. See: Troxel v. Granville, 530 U.S. 57 (2000). So you can go in to seek to be named payee for your grandchild and also guardian over her property, but it will require you proving in court your son is unfit and it requires you to have an attorney.