Audit: State accrued $172 million in interest on unspent Covid dollars

During a routine annual audit of the state’s finances two years ago, the Legislative Audit Bureau discovered that the state had accumulated close to $100 million in interest on unspent federal Covid dollars — which has since grown to $172 million — and one state lawmaker has introduced a bill to compel the Evers administration to deposit it in the state’s general fund.

However, the administration is resisting, saying interest on unspent Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) dollars can stay within that fund, giving the governor the power to spend those dollars at his discretion, as he can with the unspent principal.

The bill by Sen. Eric Wimberger (R-Oconto) would force the administration to put the money in the state’s general fund, as the Legislative Audit Bureau (LAB) recommended in its 2022-23 financial statement, and, Wimberger adds, as current law requires.

At a hearing last week held by the Senate Committee on Government Operations, Labor, and Economic Development, Wimberger said existing state law is clear.

“The governor’s illegal $170 million slush fund must be returned to the state treasury,” Wimberger said. “For every week he refuses to hand over this money, the governor is committing a misdemeanor, and holds himself personally liable to repay the missing interest.”

Simply put, Wimberger said Evers and his administration cannot classify the interest as federal funds.

“[My bill] will uphold the power of the purse given to the Legislature under our state constitution, and do what the governor fails to do — follow the law,” he said. “These funds deserve proper legislative oversight, and should not be set aside so the governor can spend them any way he wishes.”

Administration officials refused to participate in the hearing, and Wimberger said that defiance alone demonstrated that they know their position is indefensible and runs counter to state law.

During the Covid pandemic, Wimberger said at the hearing, citing the LAB report, the federal government advanced the state of Wisconsin $3 billion through the CSLFRF program to assist in the state’s economic recovery. 

As of May 2025, collected interest on unspent funds totals $172 million. Wimberger cites state statutes, which require that “all moneys paid into the treasury are to be credited to the general purpose revenues of the General Fund unless otherwise specifically provided.” 

While CSLFRF funds were originally issued to state and local governments to “support their response to and recovery from the Covid-19 public health emergency,” Wimberger said no specific intent was provided for how the interest must be spent when collected by the state, meaning the funds must be returned to the treasury and incorporated into the state’s General Fund.

LAB report

In its 2022-23 financial report, the LAB observed that the $3 billion advance allocation remains invested in the State Investment Fund, the state’s short-term pool to invest excess cash balances, until such time as it is needed for expenditure.

At the time, the interest accrual was already robust.

“Through June 30, 2023, the state earned $68.3 million in interest earnings,” the report states. “In [fiscal year] 2023-24 and through November 30, 2023, the state earned an additional $28.9 million in interest earnings for a total of $97.2 million in interest earnings since the CSLFRF funding was advanced to the state.”

As Wimberger observed, as on May 2025, that has grown to $172 million.

In its report, the LAB also observed that, according to U.S. Treasury guidance, the interest earned on CSLFRF funding is not subject to federal regulations regarding cash management and is not subject to any program restrictions. 

“U.S. Treasury Office of the Inspector General (OIG) staff indicated that the interest earnings may be expended on CSLFRF activities, non-CSLFRF activities, or both,” the audit stated.

But, as Wimberger pointed out in his testimony, under Wisconsin law all moneys paid into the treasury are to be credited to the general purpose revenues of the General Fund unless otherwise specifically provided by law. 

“Under s. 20.001 (2) (a), Wis. Stats., general purpose revenues consist of general taxes, miscellaneous receipts, and revenue collected by state agencies that are paid into a specific fund, lose their identity, and are then available for appropriation by the Legislature,” the LAB report stated.

In this case, the report continued, the state Department of Administration (DOA) recorded the interest earnings in DOA’s federal aid program revenue appropriation.

“This appropriation was established to record all moneys received from the federal government to carry out the purposes for which the moneys were received,” the report stated. “However, the interest earnings on the CSLFRF funding were not received from the federal government and there are no program restrictions on its use. Therefore, these receipts should be reported as general purpose revenues in compliance with s. 20.906 (1) Wis. Stats.”

The LAB thus issued a set of recommendations for the administration, the first and foremost being that the state record the interest earnings on the CSLFRF funding as general purpose revenues subject to future appropriation. 

In addition, the LAB recommended reviewing how it records interest earnings for other federal programs with advanced funding and record the interest earnings as general purpose revenues subject to appropriation when there are no program restrictions; as well as “document procedures for evaluating interest earnings on advanced federal funding to ensure it is recorded in compliance with s. 20.906 (1), Wis. Stats.”

The LAB also called for the DOA to work with the state comptroller’s office to update the Wisconsin Accounting Manual to provide guidance regarding how to record interest earnings on federal grant programs.

DOA: Thanks but no thanks

In its report, the audit bureau observed that the administration disagreed with the LAB’s assessment that the interest funds should be deposited into the general fund, and provided its justification for refusing to implement corrective action.

“Pending further guidance from the U.S. Department of Treasury (Treasury), the Wisconsin Department of Administration (Department) will continue to record interest earnings in the same appropriation in which the advanced CSLFRF funds were received, as is consistent with its understanding of the Treasury’s direction that recipients may use earned income to defray the administrative expenses of the program and a Treasury Office of the Inspector General (OIG) statement that it would exercise oversight over ‘what conditions and limitations apply to such use’ of earned interest,” the DOA said in its response. “DOA has requested that Treasury provide further guidance regarding this issue and will re-evaluate its position upon receiving that guidance.”

It should be noted that the response was dated June 30, 2024. It’s not clear whether DOA ever received any such guidance, but it nonetheless continues to keep the interest in the CSLFRF fund.

“As the auditors noted, the Interim Final Rule (IFR) on CSLFRF published by the U.S. Treasury on May 17, 2021, provided that interest earned on advanced CSFLFRF funding is not subject to cash management requirements,” the DOA reiterated.

That guidance read: “With respect to federal financial assistance more generally, states are subject to the requirements of the Cash Management Improvement Act (CMIA), under which federal funds are drawn upon only on an as needed basis and states are required to remit interest on unused balances to Treasury. Given the statutory requirement for Treasury to make payments to states within a certain period, these requirements of the CMIA and Treasury’s implementing regulations at 31 CFR part 205 will not apply to payments from the Fiscal Recovery Funds . . .”

The DOA says that guidance was underscored in the following Treasury-authored Frequently Asked Questions (FAQs) that “SLFRF payments made by Treasury to states . . . are not subject to the requirement . . . to remit interest to Treasury.” 

Based upon the department’s evaluation of Treasury’s guidance, DOA wrote, and consistent with its historic practice, it established the necessary chartfield structure to have interest earnings on advanced CSLFRF funds recorded in the same federal appropriation in which the funds were received.

“The IFR guidance was subsequently updated to indicate that interest earned on advanced CSLFRF funds are not subject to ‘program restrictions,’ an undefined term, and that recipients may use the amounts to defray the administrative expenses of the program, the latter of which was advanced by Treasury as a method to provide necessary personnel resources for administration of the program following its December 31, 2024, obligation deadline,” the DOA stated. “This guidance therefore did not require the Department to deviate from its historic practice.”

Finally, the DOA asserted, consistent with previously provided guidance, Treasury codified in the IFR on CSLFRF published September 20, 2023, that “recipients may use earned income on SLFRF payments to defray administrative expenses of the program.”

In addition to that preceding, DOA continued, in an October 2022 letter to U.S. Senators, the Treasury OIG stated it was exercising oversight over interest earnings derived from SLFRF by investigating whether the state of Florida had improperly used such funds. 

“In particular, OIG stated it would review whether Florida used ‘interest earned on SLFRF funds’ for immigration activities, and if so, ‘what conditions and limitations apply to such use,’” the DOA wrote. “This statement from Treasury OIG indicates that while the FAQ indicates that interest earnings have been exempted from some subset of restrictions, the department must continue to record the interest earnings in the same appropriation in which the advanced CSLFRF funds were received in order to ensure their use can be evaluated for consistency with ARPA and associated Treasury guidance.”

Yeah, but …

The LAB followed with its own rebuttal to the DOA’s reasoning, observing that in its response, the DOA acknowledged its understanding of the U.S. Treasury regulations and guidance that has been in place since 2021. 

“DOA also stated that these documents indicate that interest earnings on Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) funding are not subject to federal cash management requirements, CSLFRF payments to states are not subject to requirements to submit interest earned to the Treasury, and recipients may use the interest earnings to defray administrative expenses of the program,” the LAB stated. “We agree with these statements.”

That said, the auditors disagreed with the DOA’s assessment of how to record the interest earnings in the state’s accounting records.

“DOA referenced an October 2022 letter to members of Congress from the Treasury Office of Inspector General,” the rebuttal states. “This letter responds to an inquiry related to a question about the use of CSLFRF funding and interest earnings by another state for a specific purpose. In the letter, Treasury officials indicate plans to review the specific use of funding.”

However, the auditors said they disagreed with he DOA’s conclusion that the letter required DOA to “continue to record the interest earnings in the same appropriation in which the advanced CSLFRF funds were received in order to ensure their use can be evaluated for consistency with ARPA and associated Treasury guidance.”

“We disagree with this statement as the letter does not address how a recipient would record the interest earnings in its accounting records,” the rebuttal stated. “In a November 2023 email, we confirmed with officials from the Treasury Office of Inspector General that the interest earned on CSLFRF funding may be used ‘for SLFRF purposes and/or non-SLFRF purposes.’”

That statement is consistent with the Treasury guidance that has been in place since 2021, the LAB stated. 

“As the interest earnings are not required to be used for CSLFRF purposes, and there are no requirements on how the funds should be recorded in the state’s accounting records, DOA should record these interest earnings as general purpose revenues as required by s. 20.906 (1), Wis. Stats,” the LAB concluded.

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.