03/02/2012 08:57 pm ET

Detroit Department Of Human Services Faces Decertification, Loss Of Poverty Funds

After getting the blessing of Detroit Mayor Dave Bing, the Michigan Department of Human Services is going forward with a plan to remove control of funds for low-income residents from the city's Department of Human Services -- whether or not City Council approves the idea.

Michigan DHS Director Maura Corrigan spoke at a City Council meeting Friday afternoon to request that Council voluntarily allow the state agency to transfer control of Detroit's Community Service Block Grants and weatherization money to a new entity. CBS Detroit puts the amount in question at $15 million.

Community Service Block Grant funds, which come from the federal government, are administered by Detroit DHS and go to help low-income families with employment, education, housing and nutrition. The money is distributed to states, which then give control over it to Community Action Agencies run by boards consisting of elected officials, low-income community members and community leaders. There are 30 CAAs in Michigan; Detroit's is the only one run by a municipal government. Of the rest, 26 are run by non-profits and three by county governments.

The mismanagement of funds at DDHS has provoked an ongoing criminal investigation. Corrigan cited the scandal as the reason MDHS is trying to de-designate DDHS as operator of the funds.

"The goal is for every single penny to flow to Detroit residents in need," Corrigan said.

She gave several examples of funding misuse, including DDHS billing $600,000 for a workforce development program that was never implemented and granting money to applicants who didn't meet program eligibility requirements.

If MDHS had its way, City Council would concur with Bing and the six-month process of identifying a new or existing Detroit-based non-profit to manage the funds would begin. The state would appoint an existing agency in the interim to distribute funding to Detroiters. According to Corrigan, one of the contiguous CCAs in Oakland, Wayne or Macomb counties would serve as such an interim agency.

Council Member JoAnn Watson said she was told by the Wayne Metro CCA -- which is run by a non-profit, not the county government -- that the state had reached out to request it take over Detroit's Community Block Grant funds, an assertion Corrigan did not deny.

Legally, if Council won't accept the state's proposal, the MDHS will need to go forward with adversarial proceedings to de-designate DDHS. Corrigan said the state intends to do so if necessary. If the state and city move to litigation, the result could be a year-long process during which time the funds would be suspended and not distributed.

Council members' response to Corrigan's proposal was hesitant at best, with Council Member Kwame Kenyatta firmly opposed to voluntarily de-designating DDHS as the controller of the funds.

"If the issue is fraud and mismanagement ... then that is what this administration and this body should be dealing with instead of saying, 'Let someone handle it,'" Kenyatta said.

"I don't support any sort of takeover of this city and this government, but I definitely support a makeover of this government," he added.

Council members expressed concern with the possible ramifications moving funds would have on DHS and Detroit residents. Council members repeatedly expressed frustration that they weren't given more information in advance.

"We need to be driving the train on the process and controlling it," Council Member Ken Cockrel, Jr., said.

Watson questioned the legality of suspending funds while the process took place.

"It's like throwing them to the wolves if there's no Department of Human Services to send them to," she said of the city's neediest residents.

The Michigan Department of Energy is also looking to remove control of federal weatherization funds from DDHS. Unlike CSBG money, DDHS administers weatherization funding through a contract with the state. When the agreement expires on March 31, the state will seek another operator for the funds. In November Detroit was forced to return $9.2 million in weatherization funds to the state because it didn't spend the money quickly enough.