Michigan – July 8, 2009

The content below was excerpted from the Michigan Appendix (PDF, 37 pages) of GAO's second bimonthly review of the Recovery Act.[1]


Use of Funds

GAO’s work focused on nine selected federal programs, including some targeted for further disbursement to localities. Funds from some of these programs are being targeted to help Michigan stabilize its budget and support local governments, particularly school districts, and the state plans to use some of the funds to expand existing programs, as follows:

Funds Made Available as a Result of Increased Medicaid Federal Medical Assistance Percentage (FMAP)

As of June 29, 2009, Michigan had received about $728 million in increased FMAP grant awards, of which it had drawn down almost $716 million, or 98 percent. Michigan is using funds made available as a result of the increased FMAP to cover the state’s increased Medicaid caseload, maintain the program’s current populations and avoid cuts to eligibility, and maintain the program’s current benefits. Michigan officials reported they are also planning to use the state’s general fund dollars freed up by the increased FMAP to help offset the state budget deficits, pending state approval to do so.[2]

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

As of June 3, 2009, Michigan had received almost $1.1 billion (67 percent) of its total SFSF allocation of $1.6 billion. According to state officials, the state legislature passed a supplemental appropriations bill for SFSF funds on June 25, 2009, that if signed by the Governor will provide authority for obligation of SFSF funds to local education agencies (LEA); as of June 30, 2009, the Governor had not signed the legislation and no funds had been obligated. Michigan plans to use these funds to help fill its budget shortfalls. State education officials said LEAs plan to use SFSF monies to help reduce teacher layoffs and address cuts in state education programs resulting from budget shortfalls. For example, Detroit Public Schools officials said they planned to use their funds to retain teachers and staff and avoid layoffs.

Highway Infrastructure Investment Funds

The U.S. Department of Transportation’s Federal Highway Administration (FHWA) apportioned $847 million in Recovery Act funds to Michigan, of which 30 percent was suballocated to metropolitan and other areas. As of June 25, 2009, $421 million had been obligated for projects that could be started quickly involving pavement and bridge improvement. For example, on June 1, 2009, Michigan began a $22 million project on Interstate 196 in Allegan County that involves resurfacing about 7 miles of road. As of June 30, 2009, Michigan has awarded 35 contracts representing about $118.1 million. Two of these contracts have been completed, 28 are to be completed by November 2009, 2 by June 2010, 1 by May 2011, and 2 by June 2012.

Title I, Part A, of the Elementary and Secondary Education Act (ESEA) of 1965

The U.S. Department of Education (Education) awarded Michigan $195 million in Recovery Act ESEA Title I, Part A, funds on April 1, 2009—50 percent of its total allocation of $390 million. According to state education officials, they plan to allocate funds to the state’s local education agencies (LEA) on July 1, 2009. Officials in the five LEAs we visited—the public school districts in Detroit, Flint, Grand Rapids, Lansing, and Saginaw—told us they planned to use ESEA Title I Recovery Act funds for activities such as professional development, instructional technology, and tutoring in reading and math.

Individuals with Disabilities Education Act (IDEA), Parts B and C

Education allocated the first half of the states’ IDEA allocations on April 1, 2009, with Michigan receiving $213 million for all IDEA programs. The largest share of IDEA funding was for the Part B school-aged program for children and youth. The state’s initial allocation was $7 million for Part B preschool grants, $200 million for Part B grants to states for school-aged children and youth, and $6 million for Part C grants for infants and families for early intervention services. As of June 30, 2009, none of Michigan’s LEAs had begun drawing down Recovery Act IDEA funds. These funds will be used to support special education and related services for infants, toddlers, children, and youth with disabilities. For example, the Lansing School District plans to use these funds to enhance teacher’s professional development and purchase equipment, among other purposes.

Weatherization Assistance Program

The U.S. Department of Energy (DOE) allocated about $243.4 million in Recovery Act Weatherization funding to Michigan for a 3-year period. Based on information available on June 30, 2009, DOE provided $24 million to Michigan, and Michigan obligated $12.3 million to subgrantees. Michigan plans to begin disbursing funds in July 2009 for weatherizing low-income families’ homes and state and federal public housing, and developing an energy-related training center.

Workforce Investment Act Youth Program

The U.S. Department of Labor allotted $74 million to Michigan in Workforce Investment Act (WIA) Youth Program Recovery Act funds. As of June 30, 2009, the state had allocated $62.9 million of these funds to local workforce boards. Michigan plans to spend the majority of its allotment during summer 2009.

Edward Byrne Memorial Justice Assistance Grants

The Department of Justice’s Bureau of Justice Assistance awarded $41.2 million directly to Michigan in Recovery Act funding. Based on information available as of June 30, 2009, the Office of Drug Control Policy (ODCP), which administers these grants for the state, had obligated all of the funds of which it retained $1.2 million (3 percent) for administrative costs.[3] Michigan plans to use the grant funds it receives to continue with planned technology enhancements, add several courts that focus on particular areas of crime (such as domestic violence courts), and provide prescription drug abuse awareness programs.

Public Housing Capital Fund

The U.S. Department of Housing and Urban Development (HUD) allocated $53.5 million in Recovery Act funding to the 122 public housing agencies in Michigan. As of June 20, 2009, the public housing agencies had obligated $7.6 million of the funds and had expended $1.1 million. The four housing authorities we visited are using or planning to use this money, which flows directly to public housing authorities, for various capital improvements, including modifying bathrooms, replacing roofs and windows, and adding security features.

Safeguarding & TransparencyBack to top

Michigan’s State Budget Office (SBO) is responsible for the overall operation of the state’s central accounting system and establishing and maintaining the state’s internal control structure.[4] In order to prepare for using Recovery Act funds, Michigan enhanced its accounting system to track these funds, although challenges remain, such as capturing the number of jobs created and determining the formats needed for reporting information. In addition, the Governor established the Michigan Economic Recovery Oversight Board to help ensure proper use of Recovery Act funds and timely reporting. Michigan officials are still uncertain what the federal government expects from the state regarding tracking and reporting on funds to local entities when federal funds flow directly to these entities, rather than through the state. Within the SBO, the Office of Internal Audit Services (OIAS) conducts internal audit services by performing periodic financial, performance, and compliance audits of state departments and agency programs. As part of the Recovery Act planning process, the OIAS staff performed risk-based analyses of programs that will receive Recovery Act funds. Each state department is also required to biennially report to the Governor on the adequacy of its internal accounting and administrative control systems, and, if any material weaknesses exist, to provide corrective action plans and time schedules for addressing them. Further, the State Auditor General told us his office will include specific audit procedures to address Recovery Act funding as part of the planned procedures for its ongoing federal single audits of state departments.

Assessing the Effects of SpendingBack to top

Michigan departments continue to express concern about the lack of clear federal guidance on assessing and reporting on the results of Recovery Act spending. The state has several different initiatives to develop criteria to measure jobs created and retained as a result of Recovery Act spending. As part of preparing for Recovery Act reporting requirements, officials from Michigan’s Department of Information Technology are developing a Recovery Act database. State officials said they intend to use the database to track projects and reflect the impact of Recovery Act spending in the state. State officials indicated that additional federal guidance on assessing jobs created and saved as a result of Recovery Act spending would be helpful.

Full July ReportBack to top

Recovery Act: States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses
Recovery Act: States' and Localities' Current and Planned Uses of Funds While Facing Fiscal Stresses (Appendixes)
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
  • [2] The increased FMAP available under the Recovery Act is for state expenditures for Medicaid services. However, the receipt of this increased FMAP may reduce the funds that states would otherwise have to use for their Medicaid programs, and states have reported using these available funds for a variety of purposes.
  • [3] We did not review Edward Byrne Memorial Justice Assistance Grants awarded directly to local governments in this report because the Bureau of Justice Assistance’s solicitation for local governments closed on June 17; therefore, not all of these funds have been awarded.
  • [4] In addition to its central financial management system, some state departments use other accounting systems, but all systems are required to reconcile with the central financial management system.
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Susan Ragland

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