The FRAUD Act requires state officials to report suspected fraud involving federal funds to the FBI within 180 days of receiving a fraud warning, where fraud involves at least $250,000. The law applies to governors, heads of state agencies that oversee federal funds, and state inspectors general. States whose officials fail to comply substantially with this reporting requirement would lose eligibility to receive federal funds in the following fiscal year. The legislation creates criminal penalties of up to 10 years in prison and fines for state officials who knowingly violate the reporting requirement or obstruct related investigations, and allows federal agencies to bar convicted officials from overseeing federal fund distribution. The bill includes protections for state sovereignty, clarifying that it does not authorize the federal government to remove state officials from office.
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