Thousands of Local Governments Could Face Federal Clawbacks for COVID Funds After Missed Reporting Deadlines

Per a newly released report from the U.S. Government Accountability Office (GAO), the Department of the Treasury is being urged to strengthen its enforcement of reporting requirements tied to COVID-19 relief funds after thousands of state and local governments failed to meet federal deadlines. The report highlights widespread noncompliance in documenting how federal funds were used—potentially putting millions of dollars at risk of recoupment.

The funds in question stem from the $350 billion allocated through the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, which was established under the American Rescue Plan Act of 2021 to help governments offset the economic and public health impacts of the pandemic. Despite outreach efforts that included notices, webinars, and newsletters, more than 1,000 recipients—mostly smaller jurisdictions—never submitted required Project and Expenditure (P&E) reports. Many others submitted reports inconsistently between 2022 and 2024, raising concerns over accountability and proper use of taxpayer dollars.

To date, Treasury has initiated efforts to recoup funds from 988 noncompliant recipients, totaling approximately $139 million. However, thousands of other governments with reporting lapses have yet to face financial penalties. GAO concluded that while Treasury has mechanisms in place to reclaim funds, the absence of clear guidelines on when and how to initiate such actions has led to uneven enforcement. The agency is recommending that Treasury formalize procedures and clearly communicate to recipients when noncompliance will trigger recoupment. These steps could improve reporting compliance and ensure proper oversight of federal spending.

Article by multiple contributors, based upon information from U.S. Government Accountability Office (GAO) press release.

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