South Dakota Audit Questions $238,475 in Child-Care ARPA Grants

South Dakota put $11,583,775.61 in federal pandemic relief toward one of its plainest problems: too few child-care slots for working parents.▸ The Department of Legislative Audit's Single Audit Report for fiscal year 2025⧉ tested a sample of that spending -- 16 vouchers totaling $1,419,665.84 -- and questioned $238,475.38 of it, roughly one dollar in six the auditors actually checked. The money flowed through South Dakota's Community Based Child Care Grant Program⧉, a $4.9 million partnership between the Department of Social Services (DSS) and the Governor's Office of Economic Development (GOED) that funded planning grants to 28 communities and implementation grants to 13 more. The audit did not find the money missing. It found some of it spent on things the grant explicitly forbids, and some of it paid out against invoices too vague to check.

Federal rules for the Child Care and Development Fund (CCDF) -- the underlying federal money behind the ARPA grants -- bar the funds from paying for land purchases or building construction, aside from minor remodeling and health-and-safety upgrades.▸ Auditors' sample turned up two payments totaling $76,798.89 for architectural and engineering design services on a construction project -- exactly the category the rule excludes. A separate invoice for $152,080.99, billed by a contractor for "playground equipment" and "kitchen equipment" as part of a construction project, gave auditors no line-item costs, no quantities, and no way to tell whether it covered installation as well as materials. Two smaller items rounded out the sample: $3,458.70 to prepay eighteen months of water service and an unspecified amount of propane, and a $4,050 consulting fee billed to unrelated grants that wasn't allowable under this program's rules. A last invoice, for $842.80 in consulting services, listed no work performed and no dates.

A separate finding in the same audit, No. 2025-011, tested a different sample of 41 CCDF payments -- $2,035,066 total -- and found ten payments worth $350,235 obligated outside the deadline federal rules require.▸ Extrapolated across the audit's broader review, $641,489 of a $22,529,116 population of 468 payments fell outside that window. It is tempting to add the two findings' dollar figures together into one larger number. The audit itself says not to: its own text notes that the costs questioned under Finding No. 2025-012 are also questioned under Finding No. 2025-011, because both draw on overlapping payments from the same GOED-administered grants. These are two different compliance problems -- one about what the money bought, one about when it was committed -- found in overlapping slices of the same small sample, not two separate piles of misspent cash.

DSS's written response "partially concurs" with the documentation finding.▸ On the design and consulting fees, the department says the expenses were allowable under state policy and written federal guidance it received, approved before the award, at the award, and again in post-award expenditure reports. On the $152,080.99 equipment invoice -- the sample's single largest questioned item -- DSS's corrective action plan goes further: it states the program now has additional documentation, beyond what auditors reviewed, supporting a detailed inventory of the equipment and playground materials and the amounts actually delivered.

On the timing finding, DSS says it considers a collaborative agreement with a state component unit, signed within the obligation window, to itself count as an obligation of funds -- a reading it says the Administration for Children and Families, the federal oversight agency, confirmed in writing.▸ Both findings are marked as new, not repeats from the prior year's audit. Resolution of the $238,475.38 and $350,234.64 in questioned costs -- whether South Dakota keeps the money, repays it, or splits the difference -- is still pending between DSS and its federal awarding agency.