Stricter Oversight & Penalties Ahead
On March 25, the U.S. Department of the Treasury issued a strong warning to those receiving Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The notice highlighted its strict adherence to compliance monitoring. Treasury detailed its strategy to enhance oversight, recover misused funds, and reclaim unallocated resources, marking an essential phase in managing the multibillion-dollar relief program created under the American Rescue Plan Act.
A Commitment To Accountability
The Treasury’s notice underscores its unwavering commitment to ensuring that SLFRF funds — that were designed to support state and local governments in recovering from the economic fallout of the COVID-19 pandemic — were used appropriately.
“Treasury is committed to recouping funds that recipients obligated or expended impermissibly, as well as to recapturing funds that they did not obligate by the deadline,” the notice states. This dual focus on compliance and timely obligation highlights the agency’s proactive stance as the program enters its final stages.
Enhanced Scrutiny & Recoupment Efforts
To enforce compliance, the Treasury said it is ramping up oversight mechanisms. Recipients can expect “enhanced compliance checks on the obligation data submitted” and may receive “Information Document Requests” requiring swift responses. “Recipients will be expected to promptly comply with such requests,” the notice warns, signaling a potential wave of audits and inquiries in the coming months.
For funds that remain unobligated past the deadline or are found to have been spent outside the program’s guidelines, the Treasury said it is prepared to take decisive action.
Beginning in 2025, recipients who fail to obligate their full awards will receive “Financial Instructions to Return Unobligated Funds.” These instructions will detail the amount owed — based on the most recent reports submitted — along with a repayment due date and directions to use pay.gov for remittance.
Consequences For Non-Compliance
The stakes are high for recipients who fall short of Treasury expectations. Failure to repay unobligated funds by the specified deadline will trigger severe repercussions.
“If a recipient does not repay the amount owed by the specified date, Treasury will establish a debt and follow standard debt collection policy and procedures in coordination with Treasury’s Bureau of the Fiscal Service,” the notice states.
Once a debt is established, “interest and penalties will accrue.” This step will add financial pressure on non-compliant entities.
The Treasury is leveraging existing reporting schedules to track progress, with quarterly reporters required to submit their latest data by Jan. 31, 2025, and annual reporters filing between April 1 and April 30, 2025. These reports will serve as the basis for determining compliance and identifying funds subject to recapture.
Implications For Recipients
The Treasury’s notice serves as a wake-up call for state and local governments still managing SLFRF allocations. With enhanced monitoring underway, recipients are advised to conduct internal reviews of their obligation and expenditure records to ensure alignment with program rules. Experts recommend maintaining meticulous documentation and preparing contingency plans to address potential Treasury inquiries.
For those with unobligated funds, the clock is ticking. The issuance of repayment instructions in 2025 will leave little wiggle room, and the threat of interest and penalties looms large for those who miss deadlines. Contact us today for additional insight and assistance.
By Jessica Weeks, CPA, director, Assurance & Business Advisory Services
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