Six years after the COVID-19 pandemic unleashed trillions in emergency spending, nearly $1 billion in unemployment benefits is still sitting untouched — and federal watchdogs are sounding the alarm.
The Department of Labor’s Office of Inspector General has identified roughly $720 million in unemployment insurance funds lingering on prepaid debit cards issued during the pandemic. Another $192 million has already been transferred to state unclaimed property offices. Combined, the total approaches $1 billion in taxpayer money that officials warn could be vulnerable to fraud if swift action is not taken.
“My office has warned that, absent swift action, US taxpayers risk losing nearly a billion dollars in fraudulently obtained benefits,” Inspector General Anthony D’Esposito said in a statement last week.
“This is taxpayer money — and it demands immediate attention. We’ve done the investigative work. We’ve identified where the money is. There is no excuse for delay, and no acceptable outcome other than returning these dollars to the American people.”
One prepaid debit card account alone reportedly contains approximately $76,000, according to the inspector general’s office.
During the pandemic, most states allowed unemployment recipients to receive benefits through prepaid debit cards, eliminating the need for a bank account or direct deposit. Paper checks were also available in some states. The system helped distribute funds quickly during the economic shutdown — but investigators now say leftover balances pose a serious risk.
D’Esposito’s team is urging the Labor Department’s Employment and Training Administration, which oversees unemployment insurance programs, to issue guidance to states on how to recover the dormant funds.
The Labor Department’s Office of Inspector General (OIG) has determined that just under $1 billion in COVID-era unemployment benefits has not been used and could be subject to fraud. https://t.co/PUcnELanL9
— NEWSMAX (@NEWSMAX) February 17, 2026
“Fraud isn’t a victimless crime. Every dollar stolen is a dollar that families don’t have for groceries, rent, health care, or gas. When we root out fraud, we protect taxpayers and lower the real cost of living,” D’Esposito added.
The watchdog’s warning follows an extensive review of approximately 6.5 million prepaid debit cards used to distribute benefits during the height of the pandemic.
So far, the inspector general’s broader COVID-related investigations have led to 1,800 convictions, 2,300 criminal charges, and $2.2 billion in recovered funds. But those numbers also underscore the scale of abuse tied to pandemic relief programs.
Federal agencies and private analysts have uncovered hundreds of billions of dollars in suspected fraud across various COVID-era initiatives. The Small Business Administration revealed last year that up to $200 billion in potentially fraudulent loans were disbursed through its pandemic relief efforts.
The Labor Department’s Employment and Training Administration has not publicly responded to requests for comment regarding the unclaimed unemployment funds.
D’Esposito, a former NYPD detective and former Republican congressman from New York, has also faced political pressure back home. Long Island Republicans are encouraging him to challenge Democrat Laura Gillen for his former Nassau County seat, though he has remained noncommittal as Democrats aim to retake the House in the upcoming midterms.
For now, the nearly $1 billion in dormant unemployment funds remains in limbo — a lingering financial echo of the pandemic era and a new test of whether Washington can claw back taxpayer dollars before they disappear for good.
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