Michigan's health department paid roughly $108 million to a nonprofit contractor before ever reviewing documentation proving the work was done, and nearly half of the payments approved for that same nonprofit came from staff affiliated with it. That's according to a state audit released Friday examining how the Michigan Department of Health and Human Services managed nearly $435 million in agreements with the Michigan Public Health Institute between October 2023 and September 2025.
The findings, first detailed by The Detroit News, describe a health department that has grown so entangled with the Okemos-based nonprofit that the lines separating state employees from contract staff have blurred. The Michigan Office of the Auditor General recommended significant improvement in how MDHHS monitors its agreements with MPHI, and reported that the oversight arrangements in place created a potential risk of conflicts of interest.
Nearly 70% of the financial status reports auditors reviewed lacked supporting cost documentation, according to the audit summary. In two of 20 sampled master agreements, MDHHS awarded MPHI $21 million for IT and strategic management consulting subcontracts without getting required sign-off from the Department of Technology, Management, and Budget, per the audit findings.
Nonprofit Staff Signing Off on Their Own Payments
Perhaps the most striking detail: financial status reports approving payments to MPHI totaling $199 million were signed off on by MPHI-affiliated staff and former institute employees, who approved almost half of those reports, per the seed reporting. In some cases, MPHI employees approved reports for payments while working on the very agreements they were signing off on, according to the audit.
As of October 2025, roughly 750 MPHI affiliate staff members were assigned to work on state projects and reported directly to MDHHS supervisors, according to the Michigan Office of the Auditor General. MPHI employees are also able to drive state-owned vehicles, per the same reporting, underscoring how deeply embedded the nonprofit's workforce has become within the department's day-to-day operations.
The auditor general's office said it could not substantiate the appropriateness of the approved payments, and found improper documentation for some MPHI project costs. MDHHS contracts with MPHI are primarily awarded and monitored through the state's Electronic Grants Administration and Management System, using monthly reimbursement requests and quarterly progress reports.
Health Department Says No Improper Payments Found
MDHHS maintains that program managers actively monitor MPHI activities and ensure proper oversight, and the department reported that no improper payments were identified during the audit. The health department reached its current round of agreements with MPHI in October 2023 and has contracted with the nonprofit for an array of services, including COVID-19 immunization support, nursing home infection control, mental health emergency preparedness, community violence intervention, and strategic support work for the department itself.
Michigan's annual appropriations acts for fiscal years 2024 and 2025 authorized MDHHS to use one-year master agreements with MPHI, provided the department submitted semiannual progress and deliverable reports to the Legislature, according to the auditor general's office. State budget boilerplate for that period also required MDHHS to file reports every March 1 and September 30 detailing MPHI project spending, subcontractor deliverables, and published studies to legislative subcommittees and fiscal agencies, per the Michigan House Fiscal Agency.
A Nonprofit Born From State Law, Now Under Scrutiny
MDHHS created MPHI in 1990, and the nonprofit was established that July under Sections 2611 and 2612 of Michigan's Public Health Code as an independent entity structured so the state appoints only a minority of its board members and holds no liability for its debts. That legal separation, designed to give the institute flexibility to support university and state health research, is also why direct public accountability mechanisms over its finances remain limited.
The institute's footprint has grown enormously since then. MPHI reported revenue of $67 million in 2014; by 2024, that figure had reached $202 million. Notably, former MDHHS Director Elizabeth Hertel was listed as president of MPHI in 2024, the same year she served as director of the state health department — a dual role that adds another layer to lawmakers' conflict-of-interest concerns. Hertel stepped down from her post as department director after five years in office in June, with Senior Deputy Director Amy Epkey stepping in as acting director.
Lawmakers Say Audit Confirms Long-Standing Concerns
State Rep. Matthew Bierlein, who chairs the House Oversight Subcommittee on Public Health and Food Security, originally requested the audit over concerns about whether MDHHS's master agreements had sufficient safeguards, according to Michigan House Republicans. Michigan House Republicans have scrutinized the relationship between MDHHS and MPHI more broadly, and Bierlein's request set the audit in motion during Gov. Gretchen Whitmer's tenure, which began in January 2019.
State Rep. Ann Bollin said the findings show that oversight procedures designed to protect taxpayers are not being followed. “Every dollar should be supported by proper documentation, appropriate review and clear accountability,” Bollin said. For Bierlein and Bollin, the audit validates years of questions about whether the state's financial relationship with MPHI has adequate guardrails.
The health department's partnership with MPHI has also produced tangible public programs, including the statewide Michigan Recovery Friendly Workplace initiative launched in May 2025 with federal SAMHSA funding, aimed at supporting employers in addressing substance use in the workplace. That kind of joint program administration is part of why lawmakers say the financial relationship deserves closer tracking rather than dismantling — even as the audit's findings raise new questions about how nearly half a billion dollars in state funds moved through the arrangement with limited independent verification.
