"The US organization Claims Conference... has not been able to show proper accounts of how the funds received from the Hungarian government were used," a statement on the government's website said.
It added it had "requested on several occasions that Claims Conference open its accounts but since it failed to do so, the government has requested that the disputed money be reimbursed with interest."
In December 2007, the previous Hungarian government had signed an agreement with the Public Fund for Jewish Heritage in Hungary (Mazsok) to pay $21 million (€16.7 million) over five years in damages to Hungarian Holocaust survivors.
Mazsok managed the payments to survivors in Hungary, while Claims Conference was to oversee damages to those living abroad.
"In line with the deal, the Hungarian government transferred $12.6 million to Mazsok between 2007 and 2009, two thirds of which went to Claims Conference," the government said Thursday.
The fourth-year payment had also been transferred to Mazsok, but had not been forwarded to the US organization as the Hungarian fund was still waiting for clear reports detailing the use of the earlier money, the statement added.
Documents received from Claims Conference did not detail who had received damages or whether they were really Holocaust survivors, Budapest also complained.
It added it wanted Mazsok to take over all damages to survivors from now on, both in Hungary and abroad.
Some 600,000 Hungarian Jews were killed during the Holocaust.