Michigan's Arts Council Misreported 41% of Its Federal Grant Costs
Summary
A federal audit found $12.5 million of the $30.6 million Michigan's arts council reported on three NEA grants -- 41% -- was misreported or unsupported.
One employee, no second set of eyes
Nearly all of the $12.5 million traces to a single process failure. The Council's Operations Manager built each Federal Financial Report by pulling numbers from the grants-management software and typing them onto the form -- with, auditors found, "no secondary review prior to Arts Endowment submission"⧉. On the 2019 Award, that produced a $5,894,428 error: the Council reported $10,214,793 in subrecipient cost share as its own cost share, when its actual state-paid contribution was $4,320,365. On the 2020 and 2021 Awards, the same FY2022 subaward costs got reported twice -- once on each award's report -- adding another $6,566,008 in duplicate costs. Auditors attributed both errors to the same root cause: the Council had no documented FFR procedures and no controls to make sure procedures were followed.
View data as table
| Misreported subrecipient cost share | 5,894,428 | Reported as the Council's own cost share on the 2019 Award; actual state-paid share was $4,320,365 |
|---|---|---|
| Duplicate FFR costs | 6,566,008 | Same FY2022 subaward costs reported on both the 2020 and 2021 award financial reports |
| Unsupported subrecipient costs | 16,175 | Two subrecipients could not document three transactions |
| Unallowable Poetry Out Loud costs | 7,206 | Cash prizes and a reception paid with restricted program funds |
| Pre-award subrecipient cost | 3,154 | Payroll incurred before the award's performance period began |
| Unreasonable subrecipient cost | 503 | A late fee charged on a payment made on time |
No refund due -- because the cushion was big enough
The $12.5 million figure is not a finding that Michigan owes the money back. Auditors calculated the effect of disallowing every questioned dollar and determined the Council's remaining reported cost share still exceeded the minimum match required on all three awards -- so no refund is due to the Arts Endowment. What the audit documents instead is that a third of everything the Council told the federal government about $30.6 million in grant spending did not hold up to a first outside check in years: the notes neither its own office nor any other federal inspector general had audited the Council in the five years before this review⧉.
View data as table
| 2019 Award reported / questioned | $11.5M / $5.9M |
|---|---|
| 2020 Award reported / questioned | $12.4M / $5.7M |
| 2021 Award reported / questioned | $6.7M / $0.9M |
The pattern repeats in the small findings, too
The remaining $27,038 in questioned costs -- unsupported subrecipient documentation, unallowable Poetry Out Loud cash prizes and a reception, a pre-award payroll cost, an unreasonable late fee -- are individually minor, but auditors traced each to the same absence of a second reviewer. A separate finding shows the pattern extends outward: the Council's contract template for FY2022 grants was never updated to reflect the 2021 Award, so subrecipients were told their funding came from the wrong federal award and were never given the cumulative Arts Endowment totals that federal rules require pass-through entities to disclose⧉. The Council concurred with all six findings and their twelve recommendations, five directed at its own procedures and seven at the Arts Endowment's disallowance decisions.
- Auditors questioned or found unallowable $12,487,474 of the $30,613,360 the Council reported spending across three closed NEA Partnership awards (2020-2023) -- 41 percent.
- $12.46 million of that -- 99.8 percent -- traces to one finding: the Council misreported subrecipient cost share as its own on the 2019 Award ($5,894,428) and reported the same FY2022 subaward costs on two different awards' financial reports ($6,566,008), because no one reviewed the reports before they were submitted.
- No refund is due to the Arts Endowment -- the Council's actual cost share still exceeded the required match on every award even after every questioned dollar is removed.
- Neither the Arts Endowment nor any other federal inspector general had audited the Council in the prior five years; a separate finding shows subrecipients also weren't told which federal award funded their grants or how much they'd received in total.
None of the six findings alleges fraud, theft, or diversion of funds; the 's own criteria state that a cost is "questioned" if it is noncompliant, unsupported, or unreasonable, regardless of intent. The Michigan Economic Development Corporation, the Council's parent agency, is not named as a subject of any finding in this report. The audit names Council job functions ("Operations Manager," "POL program manager") and outside subrecipient organizations, but no individual employee.
Sources(2) ▾
- National Endowment for the Arts Office of Inspector General, Performance Audit of the Michigan Arts and Culture Council (OIG-25-02) (2025-08-18) — The Arts Endowment 's performance audit of the Michigan Arts and Culture Council covering three closed Partnership awards (2019-2021), audit period October 1, 2020 through September 30, 2023. Executive Summary states the Council 'met program requirements for each award and generally complied with award criteria' but that findings on federal financial reporting and subrecipient costs 'resulted in $12,487,474 in questioned and unallowable costs.' Findings 1-6 (pp.7-14) and Appendix B (cost-share reconciliation tables) supply every dollar figure used in this piece. Hosted on oversight.gov, 's official federal- portal. oversight.gov · original document
- National Endowment for the Arts, Office of Inspector General, Report Fraud, Waste or Abuse to the NEA OIG (2026-07-21) — The Arts Endowment 's own hotline-reporting page, re-fetched this iteration for the article's call-to-action: toll-free and local hotline numbers, oig@arts.gov, the online reporting portal, and the 's mailing address. On the issuer's own arts.gov domain. arts.gov · original document
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A performance audit by the National Endowment for the Arts' Office of Inspector General⧉ examined three federal grants the Michigan Arts and Culture Council closed between 2020 and 2023, worth $3,893,321 in NEA funds and $30,613,360 in total reported costs once the Council's required one-to-one match is included. Of that $30.6 million, auditors could not verify $12,487,474 -- 41 percent -- because the Council's own financial reports to Washington were wrong.