An East Riding Council spokesperson said the unidentified Beverley and Driffield businesses, who claimed £10,000 each in Coronavirus Business Grants, paid them back after their applications were probed.
The spokesperson added the “vast majority” of the 40,352 applications for grants were valid but any business which attempted to fraudulently claim them would be prosecuted.
It comes as a report submitted to East Riding Council’s Audit Committee showed fraud officers investigated a total of 27 applications for Coronavirus Business Grants since March 2020.
The report stated five of the applications investigated were denied and two were withdrawn, carrying a total value of £70,000, with no fraud found in a further 18.
But it added two businesses were investigated and found not to be entitled to the £20,000 they had claimed which was later recovered.
The council’s spokesperson said the money was paid back without the need for police involvement or going to court.
The spokesperson said: “The businesses repaid the £10,000 grants they wrongfully received once it was established that they were not entitled.
“Post payment assurance work, including data matching with government data, is ongoing to ensure that businesses are entitled to the coronavirus business support grants which they have received.
“The vast majority are fully entitled to this grant support which has been critical to ensuring the survival of many businesses during the pandemic, but the government requires all councils to undertake this work to identify any instances of fraud or error.
“Any business found to be falsifying their records to gain grant money will face prosecution and any funding issued will be subject to our recovery processes.”
It comes as fraud officer Andy Hardy told the committee his team had had one of its busiest years during the pandemic.
The officer said staff were drafted in to check the 40,352 applications made for business grants, with a total of £154m paid out during the pandemic.
Mr Hardy added that fraud referrals fell from 2019 to 2020 in part because people were in lockdown and unable to spot possible cases.
Figures from the council report showed the council launched a total of 944 fraud investigations during the 2020-21 financial year, down from 1,166 in 2019-20.
Almost half of the probes, 413, related to council tax support discounts incorrectly applied totalling £129,439 and £47,342 in back payments.
A total of 220 council tax single person discount cases were investigated involving £104,527.
Officers probed 144 Right to Buy applications, resulting in 26 either being withdrawn or denied, meaning the council kept year rent takings of £97,344.
Council house renting fraud investigations numbered 132, with 35 renters’ tenancies cancelled as a result.
Seven investigations were launched into the fraudulent use of Blue Badges for disabled parking, with two people issued with formal warnings.
A council review into 1,892 homes left empty long term, carried out from June to September last year, found 797 were either occupied, second homes or uninhabitable.
Mr Hardy told the committee the public could report suspected fraud to the council and remain anonymous if they wished.
Anyone who suspects fraud can report it to the council’s hotline on 01482 394949.