Newcap’s Financial Collapse Could Prompt State Audit of Anti-Poverty Agencies

The Wisconsin State Capitol on Tuesday, Nov. 4, 2025, in downtown Madison, Wis. Angela Major/WPR

The financial collapse of a northeast Wisconsin anti-poverty nonprofit earlier this year could lead to an audit of similar agencies across the state along with the state agencies that help fund them.

Wisconsin’s Joint Legislative Audit Committee is set to meet Tuesday to discuss a proposed audit looking at state oversight of certain community action agencies. It comes months after Newcap, a nonprofit that was funded primarily through state and federal grants and served 10 counties, abruptly closed and then filed for bankruptcy.

When Newcap closed, the state was trying to recover at least $944,207 for “ineligible expenditures” from several grant programs. The nonprofit also had about $3.6 million that remained “unexpended” under active state and federal contracts. That’s according to documents obtained through an open records request.

Federal court records show the state has been working to recover assets from Newcap, including grant-funded vehicles, through the nonprofit’s bankruptcy proceeding.

Before the nonprofit’s closure, some state and federal lawmakers called for investigations into the nonprofit’s handling of taxpayer dollars after it placed its former CEO on leave amid a state financial review.

Now, state lawmakers will decide whether to conduct an audit of Newcap and other anti-poverty agencies in the Wisconsin Community Action Program, or WISCAP, network.

An Aug. 19 memo from the nonpartisan Legislative Audit Bureau said the audit could look at whether the nonprofit agencies are following government grant rules, examine the effectiveness of programs receiving taxpayer funds and whether financial controls among those nonprofits are “sufficient” to avoid financial mismanagement.

The committee’s co-chairs — state Sen. Eric Wimberger, R-Gillett, and Rep. Robert Wittke, R-Caledonia — requested background information from the audit bureau to assist the committee in its decision-making.

“When taxpayer funds are mishandled by government programs, it’s critical that we get to the bottom of it,” Wimberger said in a statement. “I look forward to leading next week’s Audit Committee hearing and ordering an audit of Newcap’s financial mismanagement, and identifying other potential compliance and oversight concerns within similar agencies across the state.”

An attorney representing Newcap in its bankruptcy case and the nonprofit’s former interim executive director did not immediately respond to requests for comment.

If the audit is approved, the bureau would select state agencies and community action agencies for review, the memo states. At minimum, the state agencies reviewed would include the Department of Administration, the Department of Children and Families and the Department of Health Services.

While Newcap’s financial controversy is the latest, the nonpartisan Legislative Audit Bureau’s memo said concerns have been raised about oversight of funds awarded to WISCAP agencies in recent years.

For example, the nonprofit agency that had administered WISCAP programming in Milwaukee withdrew its designation as the local anti-poverty agency over “concerns about financial mismanagement” in 2025, according to the memo.

In addition to the potential state audit, WLUK-TV reports that Newcap is also under investigation by the Oconto County Sheriff’s Office and the U.S. Department of Housing and Urban Development. The Oconto County Sheriff’s Office and U.S. Rep. Tony Wied’s office, both cited by the TV station, did not immediately respond to requests for comment.

Newcap filed for Chapter 11 bankruptcy in mid-April to liquidate its assets, pay its debts and transition housing programs to other agencies. Records show Newcap owed more than $4 million to more than 200 creditors when it sought Chapter 11 protection. At the time, the nonprofit had $5.9 million in assets, with $4.8 million of that tied up in properties it owned.

Court documents filed in the bankruptcy proceedings state that Newcap opened a pair of homeless shelters with grant funding from Amazon, but failed to secure funding for ongoing operations.

“The Amazon grant funding eventually ran out, money became tight, and it is more than likely that funds earmarked for other programs were used to cover expenses for the operation of the homeless shelters,” the filing states.

On April 4, just days after Newcap closed, the DOA sent a letter to the nonprofit’s then-interim executive director to “continue our previous discussions regarding Newcap’s plans for the repayment of at least $944,207.”

The letter says the state identified “ineligible expenditures” in the nonprofit’s weatherization, homebuyer and rehabilitation, recovery housing voucher and home cost reduction programs.

But the amount the nonprofit owed could “increase substantially” as funds used to establish homeless shelters through certain COVID-19 relief programs may be subject to repayment if the shelters stop operating before 10 years, the letter reads.

According to a DOA spreadsheet, Newcap was awarded about $15 million across state and federal housing, weatherization, homelessness and energy-assistance programs in fiscal years 2024-25 and 2025-26. The report showed roughly  $3.6 million remained unexpended as of April 2.

In an April 6 letter to Wimberger and Wittke, state DOA Secretary Kathy Blumenfeld said the agency’s review of Newcap’s programs and financial documentation found “issues” with how the nonprofit was using weatherization program funding.

Blumenfeld also said the DOA had “sought representation from the Department of Justice to assist with any recoupment efforts” related to Newcap breaching contracts with the DOA.

Wisconsin Department of Administration Secretary-designee Kathy Blumenfeld talks about state programs that help businesses hardest hit by the pandemic. Danielle Kaeding/WPR

The state Department of Justice did not immediately respond to a request for comment.

But the DOJ is listed in online court records as representing several state agencies in Newcap’s bankruptcy case, including the DOA, Department of Children and Families, Department of Health Services and Department of Corrections.

In the bankruptcy proceeding, the DOJ asked that the court block Newcap from selling vehicles that it purchased using funding from its weatherization program grant, saying the grant agreement between the DOA and Newcap gave property rights to the state if the nonprofit stops participating in the program.

“Property acquired with grant funds — like the vehicles here — is not property of the estate,” the state’s court filing reads. “Rather, that property belongs to the government.”

In June, a judge ordered Newcap to turn the vehicles over to DOA to be held in a trust for the state of Wisconsin.

Newcap’s financial collapse could prompt audit into other anti-poverty agencies was originally published by Wisconsin Public Radio.