Audit: Department of Human Services misspent millions

Catherine Jun / The Detroit News

Lansing -- The state agency that oversees the care of Michigan's most vulnerable children is under fire again.

A report released by the state auditor general found the Michigan Department of Human Services may have improperly spent $163.8 million of federal dollars. The report projects that as much as $671 million could have been allocated in violation of federal regulations.

The biannual audit covers the two-year period ending on Sept. 30, 2008, and results are reported to the U.S. Department of Health and Human Services.

The agency is under a court order to fix its child welfare system after a child advocacy group sued the state, charging its system has failed too many children.

Critics say the audit's findings indicate a chronic inability by the department to spend federal dollars efficiently and account for its spending. At least two state representatives are calling upon the department to take remedial action.

"We're still trying to get our arms around the depth of the problem," said state Rep. John Proos, R-St. Joseph, on Wednesday. He and state Rep. Dave Agema, R-Grandville, oversaw fact-finding hearings on the audit twice this week.

"It's our responsibility now to understand what is happening today," Proos added.

The audit questioned the use of money in two programs that receive federal money: the Temporary Assistance to Needy Families program and the Child Care and Development Fund.

Josh Larsen, a director at the human services department, said the agency disputed a majority of the auditor's charges of incorrect federal spending. He also pointed out a majority of the dollars in question did go toward serving children and families.

"There's no allegations of fraud in here, there's no allegations of misuse," said Larsen, director of the office of monitoring and internal controls.

If the department doesn't take corrective action, it could face sanctions and lose future federal money, according to Scott Strong, deputy auditor general.

The audit, released last month, states previous audits had identified problems in the same two programs, as early as eight years ago.

Larsen noted the total amount in dispute is 2.5 percent of the department's federal allocations. The agency received about $6.5 billion in federal money within the two-year period.

Several other deficiencies found in the audit were being addressed, he said.

"We are taking serious actions to ensure that these dollars are being used appropriately and in accordance to federal and state regulations," Larsen said.

Sara Bartosz, a senior attorney for Children's Rights, said the audit further shows reforms within the state agency are necessary.

The New York-based group settled its lawsuit against the state last year. It is working with a federal court monitor to oversee the implementation of a five-year reform plan within the human services department.

"That's just further indication of the basic sort of structural improvement that needs to happen," Bartosz said.

"It's not a new problem but it's a lingering problem."

cjun@detnews.com (313) 222-2019