Report: White House should share lessons on Detroit aid

Melissa Nann Burke
Detroit News Washington Bureau

Washington — The “diminished capacity” of Detroit amid its financial ruin compromised its ability to effectively manage government grants, requiring the city to forgo or pay back millions in promised funds and further hindering its fiscal stability, according to a report released Friday.

The Government Accountability Office, the investigative arm of Congress, found that Detroit, Flint and other cities in fiscal crisis were forced to drastically slash personnel levels, reducing the staff responsible for the management and oversight of federal grants and leading to violations of grant agreements and to grant funds remaining unspent in city accounts.

Detroit was forced to cut municipal employees 34 percent between 2009 and 2013, and Flint lost 44 percent of its personnel during the same period, according to the report, which also examined Camden, N.J., and Stockton, Calif.

“Detroit officials said they believed that limitations in the city’s ability to effectively manage and preserve existing knowledge and expertise regarding grant management contributed to the city’s history of poor audit findings” by federal grant overseers, the report says.

For instance, compliance auditors questioned costs totaling $31.6 million in 2011 and $14.8 million in 2012 after finding the city lacked sufficient documentation that the examined expenditures were eligible under the terms of grants.

In some cases, Detroit had to return part or all of the money questioned to the federal government, or the funds were withheld.

Flint officials told GAO investigators they struggled to generate local matching funds and resources required to compete for federal funds. Some programs are evaluated in part by the level of non-federal financial commitments.

Two years ago, U.S. Rep. John Conyers Jr., D-Detroit, and then-Rep. Gary Peters, D-Bloomfield Township, requested the investigation by the accountability office. They originally requested a probe of the handling of federal money in distressed cities under Michigan's old emergency manager law, but the focus later shifted to a broader investigation of the operation of federally funded grants in selected distressed cities.

“Cities under financial strain are more likely to risk losing out on critical federal resources that help support public services, including police and firefighters, education and health care, at the time when they need federal support the most,” Peters said Friday.

With the help and oversight of the White House’s team of advisers to Detroit, the city was able to continue receiving and investing federal funds, despite the loss of so many personnel, Peters said.

“Detroit’s emergence from the Chapter 9 (bankruptcy) process and the new and sometimes innovative relationships it has developed with its federal partners are a promising start,” the report says.

It warned that federal officials don’t have a mechanism for documenting the lessons learned from Detroit and, if not captured soon, “experiences from officials who have firsthand knowledge may be lost.”

Peters and Conyers agreed with the GAO that best practices should be developed based on Detroit’s experience and then passed to federal agencies and to other cities in financial distress.

“It is my hope that the administration will document good practices derived from these efforts, so other municipalities that encounter fiscal distress in the future will benefit from lessons learned,” Conyers said.