Audit of Michigan Economic Development Corporation uncovers deficiency in grant payment system

LANSING, Mich. (FOX 2) - An audit of the quasi-governmental agency that helps fund private development projects in Michigan was cited for not having enough safeguards in place to ensure grants are spent appropriately.

The Michigan Economic Development Corporation had already distributed a $10 million grant to someone with a promise of distributing millions more after the first allocation was fully spent.

Instead, the MEDC sent another $10 million payment, despite the grantee having not spent about $2.9 million from the first grant, an audit of the agency found.

The Office of the Auditor General recommended the MEDC improve its grant payment approval process. 

The MEDC is a public-private partnership agency that helps funnel tens of millions of dollars around Michigan to support major projects that create jobs in the state. The grants are designed to assist companies with the upfront cost of building large scale facilities and getting their businesses up and running.

To ensure those receiving state funds are spending them appropriately, the MEDC is tasked with making sure grantees reach specific milestones before they receive additional funds. 

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In its audit of the MEDC, the OAG took a sample of grants that had been approved and found at least one instance where money was distributed despite the grantee not meeting the first milestone. 

According to its report, the MEDC had verbal communication with the grantee and "thought its payment approval was sufficient to revise contract terms", believing it didn't require a written acknowledgment. 

The error has been corrected.