Michigan – December 10, 2009

The content below was excerpted from the Michigan Appendix (PDF, 20 pages) of GAO's fourth bimonthly review of the Recovery Act.[1]

Contents

What We Did

We reviewed three program areas funded under the Recovery Act: Highway Infrastructure Investment, the Weatherization Assistance Program, and Education. We selected these program areas because they had a number of risk factors, including the receipt of significant amounts of Recovery Act funds or a substantial increase in funding from previous years’ levels. These programs also provided an opportunity for us to consider the design of internal controls over program activities. Our work focused on the status of the program areas’ funding, how funds are being used, safeguards and controls, and issues specific to each program. Our review of the Highway Infrastructure Investment program included a site visit to the largest Recovery Act-funded highway project in the state. As part of our review of the Weatherization Assistance Program, we visited two local agencies that had begun weatherization work—one in Jackson and another in Pontiac. Additionally, for Education, we surveyed a nationally representative sample of local educational agencies (LEA) to obtain information about their use of Recovery Act funds for three education programs. For descriptions and requirements of the programs we covered, see appendix XVIII of GAO-10-232SP.

To gain an understanding of the state’s experience in meeting Recovery Act reporting requirements, we discussed the reporting process with officials at Michigan’s Economic Recovery Office (ERO), Michigan’s Department of Transportation (MDOT), the state’s Department of Human Services (DHS), two transportation vendors, and two local agencies that conduct weatherization work.

We also monitored the state’s fiscal situation and visited three Michigan localities to assess the economic challenges they faced and the Recovery Act’s impact on these communities. We met with state budget officials and visited the cities of Flint and Royal Oak, as well as Allegan County, where we met with city and county officials. We selected these communities because they represented rural, urban, and suburban areas with a variety of unemployment rates and population sizes.

What We Found

Highway Infrastructure Investment Funds

The U.S. Department of Transportation’s Federal Highway Administration (FHWA) apportioned $847 million in Recovery Act funds to Michigan. As of October 31, 2009, the federal government had obligated $707 million to Michigan—most of which was for highway pavement improvement projects—and reimbursed $142 million. Michigan has adapted its existing internal controls to oversee and monitor Recovery Act-funded projects. State officials told us contracts generally have been awarded for less than the original official estimates, and that excess funds are being used to fund additional projects.

Weatherization Assistance Program

The U.S. Department of Energy (DOE) obligated $243.4 million to Michigan for weatherization activities under the Recovery Act but it has limited the state’s access to 50 percent of these funds. As of September 30, 2009, DHS had obligated $198.7 million to 32 local agencies with the goal of weatherizing approximately 33,000 units by March 31, 2012. DHS officials told us program expenditures and reimbursements to local agencies totaled $5.3 million through September 30, 2009. Michigan officials told us they use existing internal controls to oversee and monitor the weatherization program and have increased the number of monitors and other oversight staff to address the increased volume for this program. Officials from the two local agencies we visited told us they are also using existing safeguards and plan to increase the scope of their oversight activities for weatherization projects. DHS officials told us Michigan’s Recovery Act-funded weatherization work was delayed until the prevailing wage rates required under the Davis-Bacon Act[2] were established by the U.S. Department of Labor for weatherization work. According to state officials, as of October 29, 2009, 9 of Michigan’s 32 local agencies had begun conducting weatherization work, and they estimated that 287 units had been weatherized as of October 31, 2009.

Education

The U.S. Department of Education (Education) allocated $1.592 billion in State Fiscal Stabilization Fund (SFSF) monies to Michigan, of which $1.302 billion are education stabilization funds and $290 billion are government services funds. In addition, Michigan was allocated $390 million for Title I, Part A of the Elementary and Secondary Education Act of 1965 (ESEA), as amended, and $414 million for Parts B and C of the Individuals with Disabilities Education Act (IDEA), as amended. An estimated 87 percent of Michigan’s 97 LEAs that responded to the survey reported that they planned to use more than half of their SFSF allocation to retain staff; however, an estimated 45 percent of Michigan LEAs told us they anticipated job losses even with the SFSF allocation.

Recipient Reporting

State officials told us that the state met the October 10, 2009, deadline for reporting information to the federal government on the use of Recovery Act funds and on jobs created and retained through September 30, 2009. State officials and vendors said they experienced some challenges in preparing and submitting Recovery Act reports but did not identify any significant problems. State officials told us they used a centralized reporting process wherein each state agency receiving Recovery Act funds is required to report quarterly to the ERO on a number of measures—including the use of funds and estimates of the number of jobs created and retained—and in turn the ERO submits this information to the federal government.

State and Local Government’s Fiscal Condition and Use of Recovery Act Funds

Michigan continues to experience rising unemployment and declining tax revenues, and its fiscal year 2010 budget addresses projected shortfalls with a mix of spending cuts and Recovery Act funds. State officials expressed grave concern about the state’s long-term budget outlook, when the shortfalls are expected to continue and little or no Recovery Act funds will be available. According to local government officials, Recovery Act funds awarded through the Community Oriented Policing Services (COPS) Hiring Recovery Program and the Energy Efficiency Conservation Block Grant (EECBG) will be used to restore police officer positions and to increase the efficiency of city buildings. Local officials told us Recovery Act-funded programs are having minimal or no effect on local budgets. Local officials also told us they have experienced some challenges, such as identifying federal grant programs appropriate for their localities.

Full December ReportBack to top

Recovery Act: Status of States' and Localities' Use of Funds and Efforts to Ensure Accountability
GAO-10-231
Recovery Act: Status of States' and Localities' Use of Funds and Efforts to Ensure Accountability
(Appendixes)
GAO-10-232SP
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
  • [2] 40 U.S.C. �� 3141-3148.
GAO Contact
portrait of of Susan Ragland

Susan Ragland

Director, Financial Management and Assurance

raglands@gao.gov

(202) 512-9406