Michigan – September 23, 2009

The content below was excerpted from the Michigan Appendix (PDF, 44 pages) of GAO's third bimonthly review of the Recovery Act.[1]

Contents

Use of Funds

This appendix focuses on how Michigan used Recovery Act funds; how it had implemented safeguards, such as controls over the procurement of goods and services; and how recipients were assessing results of the Recovery Act funding, such as the number of jobs created. In Michigan, we reviewed six Recovery Act programs. We selected these programs 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. Consistent with the purposes of the Recovery Act, funds from the programs we reviewed are being directed to help Michigan and local governments stabilize their budgets and to stimulate infrastructure development and expand existing programs—thereby providing needed services and jobs. Specifically, work on contracts for highway projects using Highway Infrastructure Investment funds had been under way in Michigan for several months, and provided an opportunity for us to review the use of the funds and the financial controls, including oversight of the contracts. Similarly, the three U.S. Department of Education (Education) programs we reviewed had also been under way in Michigan for several months and provided an opportunity to review the use of the additional Recovery Act funds and consider internal controls at the state and locality level, including controls and financial management reforms under way at the Detroit Public Schools (DPS). We also reviewed Michigan’s weatherization program because it experienced significant growth due to Recovery Act funds. Finally, the WIA Youth Program in Michigan also experienced significant growth due to Recovery Act funds and was largely directed toward a summer employment program which was in full operation at the time of our review. Highlights of these programs are:

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 September 1, 2009, the federal government had obligated $575 million to Michigan and $41 million had been reimbursed by the federal government.
  • As of September 1, 2009, Michigan had awarded 153 contracts for highway projects. Of these 153 contracts, work had begun on 94 contracts and 1 had been completed. The majority of funds obligated in Michigan are for highway pavement projects.
  • According to transportation officials, because the contracts generally have been awarded for less than the original estimates, the state will be able to fund additional projects. The additional projects will primarily be pavement and bridge improvements in economically distressed areas.
  • We reviewed two transportation contracts and spoke with officials who stated that the Michigan Department of Transportation (MDOT) has contracting procedures and internal controls in place for awarding and overseeing highway infrastructure investment Recovery Act contracts.

Weatherization Assistance Program

  • The U.S. Department of Energy (DOE) allocated about $243 million in Recovery Act Weatherization funding to Michigan for a 3-year period ending in March 2012. Based on information available on August 31, 2009, DOE provided about $121.7 million to Michigan representing 50 percent of the amount allocated by DOE, and the state had obligated about $198.7 million to subrecipients, subject to limitation based on the availability of federal funds.
  • According to state officials, as of August 31, 2009, Michigan had awarded 32 weatherization contracts and had expended about $2 million.
  • The state’s goal is to weatherize at least 33,000 units, a large increase over the 14,346 units weatherized during program years 2005 through 2007.
  • To help monitor whether these funds are used appropriately, Michigan’s Department of Human Services (DHS) hired additional staff to monitor the program and plans to hire several more.

State Fiscal Stabilization Fund

  • The U.S. Department of Education (Education) allocated $1.592 billion in State Fiscal Stabilization Fund (SFSF) moneys to Michigan, with $1.302 billion for education stabilization and $290 million to fund government services.
  • As of September 1, 2009, Education had made two-thirds of the total education stabilization funds available to the Michigan Department of Education (MDE)—$873 million. MDE officials told us that they allocated $600 million of these funds to local educational agencies (LEA).
  • As of September 1, 2009, MDE had approved LEAs’ applications for $599 million of the education stabilization funds and LEAs had drawn down $584 million. MDE officials told us that LEAs plan to use most of the funding for teacher salaries.
  • State officials told us they planned to use the government services portion of the SFSF to replace state general fund revenues and pay for other state services; none of the funds will be provided to MDE.

Title I, Part A, of the Elementary and Secondary Education Act of 1965, as Amended

  • As of August 18, 2009, Education made 50 percent of Michigan’s total Title I, Elementary and Secondary Education Act of 1965 (ESEA) Recovery Act funds available to MDE—$195 million of the state’s total allocation of $390 million.
  • According to MDE officials, they made a preliminary allocation of all of these funds to the LEAs and planned to make final allocations to the LEAs later in the fall of 2009 after reviewing their applications.
  • MDE officials said they have encouraged LEAs to use their ESEA Title I Recovery Act funds for programs such as professional development for teachers and professional staff and for supplemental reading programs.

Individuals with Disabilities Education Act, Parts B and C

  • On April 1, 2009, Education made the first half of Michigan’s total $213 million in Individuals with Disabilities Education Act (IDEA) Recovery Act funds available to the state—$207 million for the Part B grants and about $6 million for Part C grants.
  • As of August 14, 2009, MDE had allocated all of the IDEA Part B funds for grants for school-aged children and youth, but it had not provided any of the funds because it had not yet approved the grant applications.
  • According to MDE officials, LEAs intend to use the Part B grants to, among other things, retain special education teachers; acquire new technologies, including automated data systems and electronic smart boards for use in classrooms; enhance professional development for teachers; and provide additional bus transportation services to students with disabilities.
  • The MDE officials also said the Part C grant funds will be used for early intervention services and, as of August 14, 2009, they had approved 42 applications for almost $5 million of these funds.

Workforce Investment Act Youth Program

  • The U.S. Department of Labor (Labor) allotted about $74 million in Workforce Investment Act (WIA) Youth Recovery Act funds to Michigan and, as of August 31, 2009, Michigan had drawn down about $20.2 million. The state allocated $63 million to 25 Michigan Works! Agencies (MWA).
  • As of July 31, 2009, Michigan had enrolled 12,166 youth in summer jobs through its Recovery Act-funded WIA summer employment programs. The state Department of Energy, Labor and Economic Growth (DELEG) provides overall program guidance to the MWAs, but the design, implementation, monitoring, and reporting on the use of and accounting for WIA Recovery Act funds is the responsibility of the MWAs.
  • Although DELEG and MWA officials in Detroit initially said they did not foresee any difficulties, they later cited several challenges in running the program. Our work identified significant internal control issues with payroll preparation and distribution; the process for making eligibility determinations; and a lack of documentation supporting such decisions in the Detroit summer youth program. Progress is under way by state and local officials to address each of these issues, although more work remains.

Michigan officials continue to work towards developing a state-level centralized system that the state will use to report to the Office of Management and Budget (OMB) and satisfy Recovery Act reporting requirements. The Director of Michigan’s Economic Recovery Office (Recovery Office) believes the state will be able to report centrally, but said that state agencies could report directly to the federal government if needed.

Full September ReportBack to top

Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed
GAO-09-1016
Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed (Appendixes)
GAO-09-1017SP
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
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