A health board has to repay £3.1m after failing to hit a target for cutting numbers waiting the longest for hospital treatment.
Health Secretary Vaughan Gething said patients waiting more than nine months in north Wales should halve by March.
Betsi Cadwaladr health board was awarded £11m to cut waiting times.
Although those waiting fell by 34% to 5,714 since the money was announced in August, it is still short of the 4,237 target.
It was part of a pot of £50m shared by health boards to improve waiting times.
All are subject to targets and potential claw-back.
Betsi Cadwaladr has been in the worst position for nine-month waiting times since spring 2017.
It is also still in special measures - the highest level of government intervention - and its budget deficit was £38.7m at the end of March, £2.7m over the forecast.
The cumulative deficit is running at £88.1m over three years.
The Welsh Government said a percentage of funding was recovered in line with the terms of the original £11m being allocated.
"It is important to note, despite not meeting the target, the management information from the health board has indicated a substantial reduction in the volume of patients waiting over 36 weeks during the last quarter of 2017-18 from their high point in December 2017," said a spokesman.
"We welcome the improvement but further work and focus is needed to ensure this continues into the first quarter in 2018-19 and beyond."
A Betsi Cadwaladr spokeswoman said the number of patients waiting more than 36 weeks for treatment was down from 10,365 in December, but was "still short of the target we were set".
The health board is Wales' largest, responsible for 670,000 people and with a budget of £1.3bn.
Plaid Cymru health spokesman and Ynys Mon AM Rhun ap Iorweth said: "Patients come to me hitting their heads against a wall - they're either with long waiting times ahead of them or having their operations cancelled.
"Either money has gone unspent or the health board has been fined. It tells us that Betsi Cadwaladr, which effectively is being run by Welsh Government, is failing to meet its very reasonable targets. Ultimately it's not a fine patients want but it's early treatment."