FRAUD Act

Section 2(a) requires covered State officials to report fraud warnings involving covered Federal funds to the Director of the Federal Bureau of Investigation within 180 days. This ensures that allegations supported by documentary evidence regarding the misuse, theft, diversion, or improper expenditure of at least $250,000 are brought to federal attention.

Section 2(b) requires the chief executive of a State to certify that covered officials have substantially complied with the reporting requirement in order for the State to be eligible to receive Federal funds for a fiscal year. This holds elected and appointed leaders accountable for addressing fraud within their administration.

Section 2(c) establishes criminal penalties, including fines and up to 10 years imprisonment, for covered officials who knowingly violate reporting requirements or obstruct investigations into fraud. This provides a strong deterrent against hiding or ignoring the misuse of taxpayer money.

Section 2(c) creates a new criminal offense punishable by fines, imprisonment for not more than 10 years, or both, for covered officials who knowingly violate the reporting rule or obstruct an investigation. This could place a heavy legal burden on State officials who fail to meet the strict statutory timelines or requirements.

Section 2(b) makes the receipt of Federal funds for a fiscal year conditional upon the State chief executive certifying that covered officials have substantially complied with the reporting mandate. If officials fail to comply, the resulting loss of Federal funds could negatively impact individuals and groups in the State who rely on those programs.