PIERRE, S.D. — Less than 1% — or $4 million — of federal coronavirus relief fund dollars distributed through the state were awarded in error, says state officials on the heels of an internal audit of public dollars distributed to small businesses and nonprofits.

State officials say the error rate was lower than other federal assistance programs, such as SNAP benefits or FEMA grants. In total for the CARES Act program, $500 million of aid went to over 4,460 entities across South Dakota, said Colin Keeler, spokesperson for the Bureau of Finance & Management, in remarks before the Joint Appropriations Committee meeting on Tuesday, May 11.

Still, the state, said Keeler, has contracted regional accounting firm Eide Bailly to complete an external audit of taxpayer dollars awarded through the CRF program, with the slim, but real possibility that some small business owners may face criminal prosecution for fraudulently applying for — and receiving — payment for which they knew they were ineligible.

“Are you referring any of these cases to state’s attorneys or the attorney general’s office?” asked Rep. Steve Haugaard, a Sioux Falls Republican, on Tuesday.

“Not yet,” replied Liza Clark, BFM commissioner and chief financial officer for the state.

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When Haugaard, however, asked if Clark had seen any “red flags,” she responded “yes.”

The further audit process, said Clark, will give the state more information on how to proceed with ineligible recipients.

Congress and then-President Trump passed the $150 billion in federal coronavirus relief funds with the CARES Act in 2020 to help boost business and entities, from hardware shops to arts organizations, to weather the COVID-19 pandemic.

In sum, said officials, the state received 10,000 applications for coronavirus relief fund payments, but turned away thousands of applications who were ineligible for funding or whose economic loss due to the pandemic did not meet economic thresholds.

Eide Bailly will be paid less than $1 million for the audit, said state officials, and among their tasks will be determining whether coronavirus relief fund dollars met compliance, including that they were spent on expenses incurred between the beginning of March 2020 and this past Dec. 31 and are “necessary expenditures.”

Clark added that over 50 applicants had voluntarily returned $800,000, including one entity with a “very large amount” because “they simply decided that they didn’t want to get it.” She did not name the applicant.

Congress asked states to divvy up coronavirus relief fund dollars, but other federal programs — such as the Paycheck Protection Program — comprised loans distributed through the federal Small Business Administration.

State officials cautioned that entities who received more funding than needed aren’t necessarily guilty of a crime, as some may’ve mistakenly entered incorrect data.

“What is the process to get that money back? What if you can’t get that money back? What if it’s spent?” asked Rep. Liz May, R-Kyle.

Clark said the state is in talks with federal partners to determine a deadline for returning dollars.