The Social Development Commission recently made public a memo that criticizes the state’s efforts to monitor it, among other problems. (Photo by Jonathan Aguilar / Milwaukee Neighborhood News Service / CatchLight Local)
By Meredith Melland
This story was originally published by Milwaukee Neighborhood News Service, where you can find other stories reporting on fifteen city neighborhoods in Milwaukee. Visit milwaukeenns.org.
The Social Development Commission says it stopped operations in April 2024 because the Wisconsin Department of Administration refused to reimburse more than $400,000 in funds already spent on weatherization programs.
That allegation is one of several raised by SDC leaders in a memo to the federal government in early September and in an interview with NNS last week.
Together, they outline SDC’s argument that the agency was a victim of state government-monitoring problems, failures to reimburse and other issues that forced SDC to halt its services to low-income residents.
“I’m sure there were mismanagement issues to contend with, and I’ll be able to articulate that better when all the smoke clears,” said Jorge Franco, interim CEO and board chair of SDC. “But SDC is a victim of some wrongdoing, and, yes, that will come to roost.”
Representatives from the Wisconsin Department of Administration and the Wisconsin Department of Children and Families disagree.
The memo
The Wisconsin Department of Children and Families decided to de-designate SDC as a community action agency in May. That decision was paused because SDC requested a review by the U.S. Department of Health and Human Services.
On Sept. 1, William Sulton, SDC’s attorney, sent a memo to the interim director of the Division of Community Assistance in the Office of Community Services, an office within the Department of Health and Human Services that is working on the review.
The memo discussed findings from SDC’s internal analysis of its finances related to the Department of Administration, the Department of Children and Families and BMO bank.
Weatherization program shut down
When the Department of Administration failed to reimburse SDC in January 2024, SDC continued to run the weatherization program and built up operating and payroll expenses, according to Franco and Diane Robinson, executive director and chief operating officer of SDC.
SDC expected to eventually be reimbursed, Franco said.
The Department of Administration did not pay SDC’s invoice for $490,000 in January 2024 because it discovered a misallocation of weatherization funds by SDC in late 2023 and late payments to vendors, said Tatyana Warrick, a spokesperson for the department.
The Department of Administration then suspended SDC’s weatherization program in March 2024 and started an audit or review into the organization’s finances.
The memo from SDC states that it expects the department’s review to be complete by the end of September, and that it will show “that SDC is owed money.” The department did not confirm the timeline.
“When you can’t pay your people, you have no choice but to tell them you can’t continue to work,” Franco said.
In addition, SDC contends the Department of Administration published its decision to withhold payments and caused BMO bank to freeze SDC’s accounts.
“Never did SDC default on BMO – not before, not during, not after the pause in services. … The bottom line is, for months, they withheld that money,” Franco said.
The total withheld by the bank was nearly $800,000, according to Franco.
A spokesperson for BMO told NNS that the bank cannot comment on customer matters but strives to work with clients in difficult times.
DCF’s monitoring visit and decision process
Staff from the Department of Children and Families conducted a monitoring visit and full on-site review of practices at SDC in November 2023. The state is required to conduct a review at least every three years by federal regulations.
The department sent SDC reports based on findings from that visit on Dec. 5 and Dec. 6, 2023. They were attached in SDC’s memo.
The fiscal management section of the visit report mentions that SDC had not recently updated its fiscal policies and procedures and did not have a “disaster plan” in place, but said it “observed appropriate accounting practices and supporting documentation.”
Sulton wrote in the memo that this reflected that the department “reviewed SDC’s finances and management and had no concerns.”
However, the Department of Children and Families only randomly samples a few cost items to inspect during site visits, according to Gina Paige, communications director for the department.
“DCF observed appropriate accounting practices and supporting documentation of the four items reviewed during the 2023 visit,” Paige said.
Outstanding payments
In the memo, Sulton wrote that the Department of Children and Families “recklessly misrepresented to the public” that SDC had more than $3.8 million in outstanding payments and damaged the organization’s reputation.
In an April 2 letter responding to SDC’s request for additional block grant funding reimbursement, the Department of Children and Families mentioned its staff noticed that SDC reported $3.8 million in outstanding payments in its March 2024 bank reconciliation.
In the letter, the Department of Children and Families wrote that it was concerned that SDC may need to repay the department if it used reimbursement funding for outstanding payments that were never received by the intended recipients.
The department later shared this letter publicly and with the Department of Health and Human Services.
“They raised a question about whether it had ended up in cost reports for inappropriate reimbursement. The answer is: Absolutely not,” Franco said at the SDC board’s Sept. 4 meeting.
SDC said it had $700,000 in outstanding payments to weatherization vendors, but once the Department of Administration suspended SDC’s program, it reallocated the contracts and funding to other agencies and SDC no longer owed those funds.
“SDC has not provided (the Department of Children and Families) with any new expense documentation or financial information so we cannot speak to their current financial situation or the status of the outstanding payments,” Paige said.
As SDC waits for a response on the federal review, it is prepared to provide weekly updates on its financial and operational progress, according to the memo.
“We believe that by working together, we can ensure the uninterrupted delivery of essential services to the Milwaukee community and rebuild a stronger, more resilient SDC for the future,” the memo ends.
What’s coming up
SDC has a summary judgment hearing Wednesday, Sept. 24 regarding a lawsuit filed by three vendors who allege they are owed $180,000 for completed weatherization work.
That hearing will be held at Room 401 in the Milwaukee County Courthouse, 901 N. 9th St.
Meredith Melland is the neighborhoods reporter for the Milwaukee Neighborhood News Service and a corps member of Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues and communities. Report for America plays no role in editorial decisions in the NNS newsroom.
Jonathan Aguilar is a visual journalist at Milwaukee Neighborhood News Service who is supported through a partnership between CatchLight Local and Report for America.