Michigan – April 23, 2009

Use of Funds

An estimated 90 percent of fiscal year 2009 Recovery Act funding provided to states and localities nationwide will be for health, transportation, and education programs. The three largest programs in these categories are the Medicaid Federal Medical Assistance Percentage (FMAP) awards, the State Fiscal Stabilization Fund, and highways.

Medicaid Federal Medical Assistance Percentage (FMAP) Funds

  • As of April 3, 2009, the Centers for Medicare & Medicaid Services (CMS) had made about $701 million in increased FMAP grant awards to Michigan.
  • From January 2008 to January 2009, the state's Medicaid enrollment increased from 1,547,259 to 1,624,245 with the highest share of increased enrollment attributable to two population groups: (1) children and families and (2) disabled individuals.
  • As of April 1, 2009, Michigan has drawn down about $463 million—which represents funds drawn down for two quarters—or 66.1 percent of its initial increased FMAP grant awards.
  • Officials plan to use funds made available as a result of the increased FMAP to cover increased caseloads, offset general fund shortfalls, ensure compliance with prompt payment provisions, maintain existing populations of Medicaid recipients, avoid eligibility restrictions, increase provider payments, maintain current levels of benefits, and avoid benefit cuts.

Transportation—Highway Infrastructure Investment

  • Michigan was apportioned about $847 million for highway infrastructure investment on March 2, 2009, by the U.S. Department of Transportation.
  • As of April 16, 2009 the U.S. Department of Transportation had obligated $110.8 million for 27 Michigan projects.
  • As of April 13, 2009, the Michigan Department of Transportation had advertised 16 projects for competitive bid totaling more than $41 million. These projects included resurfacing I-196 in Grand Rapids and M-13 in Genesee County.

U.S. Department of Education State Fiscal Stabilization Fund (Initial Release)

  • Michigan was allocated about $1.1 billion from the U.S. Department of Education's initial release of these funds on April 2, 2009.
  • Before receiving the funds, states are required to submit an application that provides several assurances to the Department of Education. These include assurances that they will meet maintenance of effort requirements (or that they will be able to comply with waiver provisions) and that they will implement strategies to meet certain educational requirements, including increasing teacher effectiveness, addressing inequities in the distribution of highly qualified teachers, and improving the quality of state academic standards and assessments. Michigan plans to submit its application on or after May 15, 2009, once it completes its review of all program priorities for which it intends to use stabilization funds.
  • Michigan Department of Education officials told us they consulted with local education agencies to develop plans and establish priorities for the use of State Fiscal Stabilization Fund funds that were consistent with the state's priorities, policies and programs, such as increasing support for the lowest performing schools.

Michigan is receiving additional Recovery Act funds under other programs, such as programs under Title I, Part A of the Elementary and Secondary Education Act of 1965 (ESEA) (commonly known as No Child Left Behind); the Individuals with Disabilities Education Act (IDEA), Part B; Federal Transit Administration Transit Grants; and the Edward Byrne Justice Assistance Grants. These are described in this appendix.

Safeguarding & TransparencyBack to top

All of the state and local agency officials we interviewed indicated they plan to use existing systems to separately identify and track Recovery Act funding. State officials were confident that their existing processes, modified to incorporate specific Recovery Act codes, would be sufficient to allow them to separately account for funds as required by the act. However, officials were uncertain whether local entities have the capacity to similarly track federal funds that go directly to local entities rather than through the state.

Michigan also plans to continue using existing internal controls and processes to provide assurances over Recovery Act spending. Michigan has established a new Recovery Office to, among other things, provide oversight and enhance transparency over the availability and use of funds and maintain a Web site on Michigan's Recovery and Reinvestment Plan (www.michigan.gov/recovery). Michigan's existing processes also include ongoing risk-based self-assessments of controls by major state agencies that are next due on May 1, 2009. However, these assessments are limited to state agencies. In addition, the state Auditor General has identified material weaknesses in two key departments that have received Recovery Act funds—Michigan's Department of Human Services and Department of Community Health. The state Auditor General plans to continue working on a biennial basis, reviewing and reporting on about one-half of the state agencies each year. The state Auditor General's oversight responsibilities do not include efforts to ensure accountability over federal funds going directly to localities. For example, the U.S. Department of Education's Inspector General identified weak internal controls that resulted in problems in how the city of Detroit school district used federal funds for programs under Title I of ESEA.[1] Specifically, its July 2008 report found that Detroit Public Schools, among other things, did not always properly support compensation charges against ESEA Title I funds. Detroit Public Schools officials told us that in the spring of 2009 they hired new staff to develop corrective action plans for addressing existing internal control weaknesses.

Assessing the Effects of SpendingBack to top

Michigan officials have some experience in measuring the impact of funds in creating jobs and promoting economic growth. The state plans to rely on experts in economic modeling. The state's financial management system, however, is old and does not have the capability to track impacts, so the state will have to rely upon its agencies for this. State officials also told us that the state information technology group will implement a database system at the end of April 2009 that will support its financial management system in recording the impact of Recovery Act funds.

For More InformationBack to top

The above excerpts are taken from GAO's April 23, 2009 Bimonthly Review of the Recovery Act:

Recovery Act: As Initial Implementation Unfolds in States and Localities, Continued Attention to Accountability Issues Is Essential
GAO-09-580, April 23, 2009
For more information on Michigan within the report, please see the following pages:
Appendix XI: Michigan pages: 175 – 187
  • [1] U.S. Department of Education, Office of Inspector General, The School District of the City of Detroit's Use of Title I, Part A Funds Under the No Child Left Behind Act of 2001, ED-OIG/A05H0010 (July 2008).
GAO Contact
portrait of of Susan Ragland

Susan Ragland

Director, Financial Management and Assurance


(202) 512-9406