PIERRE, S.D. (KELO) — The $7,500 payment that the South Dakota Department of Transportation made in March 2020 to Verity Jet Group was to estimate how much state government’s three King Air turboprop aircraft could bring if they were offered for sale.
The department didn’t file a service contract, according to State Auditor Rich Sattgast. He said a state accounting guide suggests that was an acceptable decision. A department official on Wednesday cited a state law that sets the threshold at $25,000 for a service contract.
The situation became less clear one year later, when Verity Jet aced out two competitors and won a $195,000 consulting contract to help sell two of the King Airs and assist in buying a replacement.
Governor Kristi Noem announced in December she wanted $5 million from the Legislature to modernize state government’s executive aircraft. The money was added to the department’s budget in March. Transportation Secretary Joel Jundt signed the consulting contract the next day.
KELOLAND News has requested the 2020 appraisals from the department. The department’s Julie Stevenson cited a state law that she said exempted them from public disclosure. “We do not want to disclose the appraisal amounts as it could impact future sales,” she said.
Sattgast said the question of whether a contract was needed for the $7,500 payment “can go either way as this is a ‘one time service’. An appraisal can be considered under the rules of either a consulting contract or under the rules governing service contracts.”
Another chapter of state law says state agencies must file all consulting contracts with nongovernmental parties. But that chapter doesn’t define ‘consulting,’ according to Sattgast.
“Ultimately, the Legislature has left it up to the agencies to follow IRS guidelines and to determine whether they are required to follow the guidelines of either a consulting contract or a service contract,” he said.
“The IRS routinely audits state agencies for compliance, and to my knowledge DOT passed their audits that encompassed all state agencies in 2015-2017,” he continued. “Now in this situation it appears to be a gray area depending on how it is used — if the company is advising on the sale of the planes or simply providing a work product like an appraisal.”
KELOLAND News hasn’t received answers to requests emailed to Verity and its competitors.