The U.S. Department of Labor has returned $4.4 billion in unspent COVID-era unemployment funding to the Treasury’s General Fund, completing a years-long effort to reclaim money that states never used during the pandemic.
The funds were originally allocated under the Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week program, which was created by the CARES Act in March 2020. The program aimed to help states pay unemployment benefits to workers who lost jobs due to the pandemic without requiring them to wait a week for their first payment.
Secretary Lori Chavez-DeRemer announced the completion of the reconciliation process, which follows an earlier return of $1.4 billion in March. Combined, the department has now returned nearly $5.9 billion in unused pandemic unemployment funding to taxpayers.
“The pandemic is long behind us – it’s the federal government’s responsibility to return unusable COVID-era funding to the American people and ensure these dollars are being utilized effectively,” said Secretary Chavez-DeRemer. “Under President Trump’s leadership, the Department of Labor is delivering on its commitment to root out waste, fraud, and abuse, and we will continue to be responsible stewards of taxpayers’ hard-earned dollars.”
Audit revealed widespread unused funds
The return stems from a 2023 audit by the Department’s Office of Inspector General, which found that nearly $5 billion of the $12.5 billion allocated through the program remained unused more than 22 months after the benefit eligibility period expired in September 2021.
The audit revealed significant problems with the program’s oversight and implementation. Four states accessed $105.1 million in funding despite not meeting program requirements, and the Employment and Training Administration lacked sufficient controls to ensure states were eligible for reimbursements or that unused funds were returned to the federal government.
The inspector general’s report found that Oregon and Louisiana received reimbursements totaling $91.2 million during periods when they had not properly waived waiting week requirements, forcing claimants to wait for benefits contrary to the program’s intent. Delaware and Mississippi accessed $13.9 million for payments outside the allowable time period.
States struggled with program implementation
The audit highlighted the challenges states faced implementing the program during the pandemic’s early stages. Oregon, for example, was unable to waive its waiting week requirement until November 2020 due to outdated computer systems dating back to 1993, yet still received federal reimbursements for payments made before the waiver took effect.
Of the 53 state workforce agencies that participated in the program, seven states never accessed any of their allocated funds, leaving more than $1 billion untouched. The unused funds represent about 40% of the total program allocation.
The Employment and Training Administration acknowledged in its response to the audit that it prioritized getting relief funding to states quickly during the pandemic rather than implementing comprehensive oversight controls. The agency noted it received no additional funding to support program oversight until the American Rescue Plan Act in March 2021.
Recommendations for future programs
The inspector general made eight recommendations to improve oversight of similar programs, including establishing deadlines for states to reconcile accounts, developing procedures for timely return of unused funds, and capturing lessons learned for future emergency unemployment programs.
The audit serves as a case study in the challenges of rapidly deploying federal aid during emergencies while maintaining adequate oversight and accountability measures.
