A recently released audit of the $282 million in CARES Act funds that Alaska issued to small businesses as part of the massive Covid relief spending shows massive irregularities, errors and the awarding of numerous unallowable grants.

The state’s Legislative Budget and Audit Committee approved public release of the audit on September 6.

In response to Covid, the U.S. Congress passed the $2.2 trillion economic stimulus in March of 2020. This CARES Act money included $125 billion to the State of Alaska to help tribal and local governments. A total of $290 million of that money was appropriated to the Alaska Dept. of Commerce, Community and Economic Development (DCCED) for a Small Business Relief Program aimed at helping businesses that suffered during the Covid outbreak.

The program was administered by DCCED using the Alaska Industrial Development and Export Authority (AIDEA) as a conduit for providing grant funding to small businesses. This third part was deemed necessary because of insufficient staff and systems needed to process so many anticipated applications.

Federal funds were awarded for unallowable expenses such as property taxes, insurance costs, the same expenses claimed more than once, and unsupported expenses.

The audit was conducted to determine whether eligible businesses were fairly treated and whether program operators complied with state laws.

Overall, DCCED distributed 5,754 grants, but failed to process 669 grants by the deadline of June 30, 2021, which left $823,000 on the table.

In an attempt to disperse federal funds more quickly, the DCCED commissioner expanded eligibility requirements multiple times, the audit reports. This meant earlier applications were treated with greater scrutiny and restrictions than were later ones.

The audit found that grant application processing was “slower than expected,” partly due to the program design and partly due to the rate applications that were deemed incomplete or inaccurate.

Several of the program requirements were also “inconsistently considered and/or enforced,” and some of the inconsistencies were a direct result of the DCCED commissioners directives designed to speed up the approval process, the audit found.

“Results of testing found a high rate of unallowable grant awards,” the audit states.

Auditors tested 155 grants and found errors in 39% of these. Again, the program design was found to increase the risk of unallowable grants.

“In total, 13 percent of the grant amounts tested were unallowable,” the report states, adding that it “did not find evidence that grants were awarded in violation of the State’s ethics laws.”

In some cases, however, the federal funds were awarded for unallowable expenses such as property taxes, insurance costs, the same expenses claimed more than once, and unsupported expenses.

A slew of grants was given to commercial fishermen, many of whom did not meet eligibility requirements. Some applied twice using the same receipts. Others received more than one grant, which was not allowed.

The audit recommends that the state work toward recovering unallowable grant payments, and that AIDEA follow procurement procedures and maintain accurate documentation.

Click here to read the full report.

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