State paid health policy nonprofit $108 million before reviewing work plans, audit finds

Michigan’s Department of Health and Human Services awarded a $21 million contract without getting legally required approval, according to a new state audit.

That is one of several problems discovered by the Michigan Office of the Auditor General in an examination of the state health department’s relationship with a nonprofit that received nine high-level agreements and 857 project agreements totaling $435 million over a two-year period.

The department gave the Michigan Public Health Institute $21 million for services without getting approval from the Department of Technology, Management, and Budget, as required by law.

The auditor flagged these payments as a material condition – the most serious category of concern. The payments were for two out of 20 agreements auditors looked at in a probe of whether the health department took the necessary steps to follow state laws that govern contracts with the nonprofit.

Another objective of the audit was to discover whether the health department properly monitored the grants and contracts it gave to the health institute. Auditors concluded that the state health department must better document and monitor its agreements with the quasi-govermental health institute, which Michigan established by law in 1989.

The state health department paid $108 million, the audit said, for financial status reports before receiving or reviewing quarterly work plans needed to validate the work performed. That was flagged as another material condition.

Nearly 70% of the financial status reports auditors reviewed contained no supporting documents.

Though the health institute and health department are different entities, the two are intertwined. Nearly half of the financial status reports involved in paying the health institute were reviewed by individuals who were current or former employees of the institute, with a total value of $199 million.

A third objective auditors had was to look at how well the department fulfilled its obligation to give lawmakers information on what the research institute did.

Auditors concluded that health department officials routinely failed to report information on salary and wages associated with health institute projects and reports. Some semiannual reports, the auditors said, omitted project and funding information, and none of the projects they reviewed included all the reports, studies, and publications the Legislature requires from the department.

The audit also found that the health department improperly approved certain indirect costs at a higher reimbursement rate than authorized.

House Appropriations Chair Ann Bollin, R-Brighton, said the audit raised red flags.

“For years, I have raised concerns about the scope of the state’s relationship with MPHI and whether sufficient safeguards exist to ensure transparency and accountability,” Bollin said in a statement “This audit confirms that major weaknesses exist in the department’s oversight practices and raises important questions about how taxpayer dollars are being monitored.”

The Michigan Public Health Institute had $200 million in revenue in 2024, according to its 2025 annual report. It has more than 1,000 employees and its work touched each of Michigan’s 83 counties, according to the report.

The state health department budget encompasses about half of the entire state budget. In fiscal year 2027, its budget was more than $30 billion.