The abrupt closure of Newcap, a nonprofit organization in northeast Wisconsin, has sparked a potential statewide audit of similar agencies and the state entities that fund them.
On Tuesday, Wisconsin’s Joint Legislative Audit Committee will consider a proposed audit of community action agencies’ oversight, following Newcap’s sudden shutdown and subsequent bankruptcy filing. This organization, primarily funded by state and federal grants, supported ten counties before its demise.
Documents obtained via open records requests reveal that the state was in the process of reclaiming at least $944,207 from Newcap for “ineligible expenditures” across various grant programs. Additionally, approximately $3.6 million in funds remained unspent under active contracts.
Federal court records indicate ongoing efforts by the state to recover Newcap’s grant-funded assets, such as vehicles, through the bankruptcy process.
Prior to the closure, scrutiny from state and federal lawmakers arose concerning Newcap’s financial management, leading to the CEO being placed on leave amid a financial review.
The upcoming decision by state lawmakers will determine if an audit of Newcap and other agencies within the Wisconsin Community Action Program (WISCAP) network will proceed.
An August memo from the Legislative Audit Bureau outlines the audit’s potential focus on compliance with grant rules, program effectiveness, and the financial controls in place to prevent mismanagement.
The committee’s co-chairs, Sen. Eric Wimberger, R-Gillett, and Rep. Robert Wittke, R-Caledonia, have requested further information from the audit bureau to aid their decision-making process.
“When taxpayer funds are mishandled by government programs, it’s critical that we get to the bottom of it,” Wimberger stated, emphasizing the importance of the upcoming audit hearing.
The audit, if approved, will involve selected state and community action agencies, including the Department of Administration, Department of Children and Families, and Department of Health Services.
Concerns have been longstanding, as highlighted by a prior incident where a Milwaukee agency withdrew its WISCAP designation due to financial mismanagement issues in 2025, according to the audit bureau memo.
Beyond the state audit, Newcap faces investigations from the Oconto County Sheriff’s Office and the U.S. Department of Housing and Urban Development.
Newcap’s Chapter 11 bankruptcy filing in April aimed to liquidate assets and transition programs amidst debts exceeding $4 million. The nonprofit had assets totaling $5.9 million, with a significant portion in real estate.
Bankruptcy filings indicate that Newcap opened homeless shelters with Amazon grants but struggled with operational funding, leading to potential misuse of funds designated for other programs.
An April 4 letter from the DOA addressed to Newcap’s interim executive director demanded continued discussion on repaying $944,207 identified as “ineligible expenditures” in their programs.
If Newcap’s homeless shelters cease operations before a decade, the repayment amount could rise significantly due to the use of COVID-19 relief funds, states the letter.
A DOA report shows Newcap received around $15 million in grant awards for fiscal years 2024-25 and 2025-26, with $3.6 million unspent as of April 2.
An April 6 letter from DOA Secretary Kathy Blumenfeld to committee co-chairs indicated issues with Newcap’s weatherization funding use. The DOA is working with the Department of Justice on recoupment efforts.
The Department of Justice, representing several state agencies in Newcap’s bankruptcy, has moved to block the sale of vehicles purchased with weatherization grant funds, arguing state ownership if the nonprofit exits the program.
“Property acquired with grant funds — like the vehicles here — is not property of the estate,” the state’s court filing asserts, emphasizing government ownership.
In June, a judge ordered the vehicles be transferred to the DOA to hold in trust for Wisconsin state.
