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City resources outsourced

Council questions transfer of DWDD’s, DWHP’s fiscal responsibilities

By Mike Sandula
The Michigan Citizen

DETROIT — Financial and administrative duties previously handled by the Detroit Department of Workforce Development (DDWD) and the Department of Health and Wellness Promotion (DHWP) will now be carried out by nonprofit entities — a move City Council alleges is a power grab, as well as a violation of the City Charter.

City Council held a special closed session Aug. 14 with attorneys from the Research and Analysis Division (RAD) and the Law Department to discuss whether giving city funds — both general and grant — to nonprofit corporations without Council approval is a violation of the City Charter and, if so, what the appropriate remedies would be.

“It’s a violation of the charter if there’s an outside entity taking over city departments,” Lakish Barclift, legal policy analyst for RAD, said Aug. 7 at a special Council session.

The outcome of the Aug. 14 closed session was not immediately available.

Workforce development

A January review of DDWD by the state of Michigan found 10 years of inefficient internal operations, among other deficiencies. The Detroit Workforce Development Board therefore recommended that Mayor Dave Bing create an external agency to serve as fiscal and administrative agent. Detroit Employment Solutions Corporation (DESC), a nonprofit 501(C)3, was designated to serve that role, effective July 1.

“Since 2002 we’ve had poor audit reports,” Detroit Chief Operating Officer Chris Brown said. “We think this is the best solution.”

DESC officials said that unlike local governments, nonprofit agencies can receive private funding and therefore create public-private partnerships — an idea not all Council members were open to.

“I think this is a dangerous precedent that’s being set,” said Councilmember Kwame Kenyatta.

Pamela Moore, the former director of DWDD, was named president/CEO of DESC. The DESC Board will consist of 25 members — all representatives of the private sector, including 15 from the “largest businesses in the area” and one non-voting representative from Michigan Works! — appointed by the mayor.

Some Council members said DDWD was simply suffering from management issues, which could have been resolved without transferring duties to a new entity.

“It’s a system-wide problem, not a management problem,” countered Moore, who said being a nonprofit allows her to be “more nimble.”

Former Detroit General Counsel Sharon McPhail, who oversaw Workforce Development, agrees with Council. She says the departments’ problems resurfaced after her tenure under Interim Mayor Kenneth Cockrel, Jr. and continued under the Bing Administration.

“It started with Ken Cockrel. The nursing program I began was operating at peak performance. He closed (the program) down and gave it to a private industry,” she said. “These are things private people can’t do. Rich people don’t need government; poor people do. Rich people can’t do it because there’s no profit in it.”

“They’re saying they’re outsourcing because they’ve created the problem,” McPhail told the Michigan Citizen. “We fixed it. It went from 2 percent out of 100, getting a job and keeping it for 90 days or longer to 58 percent performance within 18 months.”

McPhail says service contractors must be monitored and the lack of oversight and poor mismanagement, under previous administrations, had returned recently because contractors must be held accountable.

McPhail says contractors and city workers must serve Detroiters and that was her goal when she was in charge of the department. She demanded reports and numbers from everyone.

“I did it with Detroit employees. They’re saying they can’t do it, but I did. … My new standard was ‘I want numbers on everybody.’ No one was keeping placement statistics.”

McPhail required contractors to turn in reports to the city of how many people they were servicing and how many were actually finding work. She found many of the contractors resisted the efforts to gather information until she began to make them ineligible for workforce development contracts.

According to McPhail, a mismanaged Workforce Development department means continued high and structural unemployment for Detroiters.

“Sixty-five to $100 million comes every year to help Detroit residents with joblessness and they get nothing.”

During her term, she found that most of the people being serviced by Detroit’s funds — over 90 percent — were not Detroiters. They were from Grosse Pointe, Warren and other surrounding cities.

“And every municipality gets their own funds,” she added.

“If people understood what could be done for them they’d be up in arms about opportunities available for them that are being wasted. Instead we have folks outsourcing because they don’t want to be bothered.”

McPhail also questioned the legality of transferring the management of federal funds designated for a federal benefit.

“There are actual regulations that have to do with workforce development. It’s federal money. You can’t just give to Joe Blow. It has to do with monitoring. You can’t have some private company saying it’s OK for them to get federal money … especially dealing with unemployment (a federal benefit).”

Moore said workforce development’s normal duties — policy planning, fiscal and administrative oversight, job training and evaluation, to name a few — would not see a disruption, though they will be going from 120 employees to 48.

The elimination of DWDD will not result in a savings to the city’s general fund, according to a summary report. The department was and the services under DESC will continue to be funded by a $50 million federal grant.

Health and wellness

Conflicts arising from the transfer of DWHP’s financial services to the Institute of Population Health were also discussed Aug. 7 by City Council. Unlike DWDD, the health department will continue to exist.

Council members said they were unhappy that this transfer occurred without their consent, which Brown acknowledged was a mistake.

“The citizens of Detroit continue to pay for every mistake that is made,” Councilmember Brenda Jones said. “I’m sick of hearing, ‘Oh well, it’s a mistake.’”

Jenkins said it was a “blatant disregard for laws that govern this city.”

In May, DHWP’s services were transferred to a private company, Institute for Population Health (IPH), which will begin operating Oct. 1 with a budget of $64.5 million, down from $71 million last year. Loretta Davis, chief executive officer of IPH, also said they might move medical records over to the Herman Kiefer building.

Brown said health and wellness is a non-essential service that the city does not necessarily need to handle directly.

Davis said the department’s functions will still be performed by city employees, but effective Sept. 28, all will be contract workers.

“Employees will report to me,” Davis said. “There will be 60-70 employees with (DWHP) in control of four federal grants.”

In addition to being president/CEO of IPH, Davis will retain her title as director/health officer of DWHP. Despite two titles, she said she will have only one paycheck and will not be paid by IPH.

Several Council members, as well as Lewis Smith of the city’s Law Department, felt this was a conflict of interest.

“I do believe it is a conflict of interest for Davis to occupy both of those directorships,” Smith said. “I have not consulted with corporation counsel, but in my opinion, I think it would be egregious for me to not state that to this body.”

Additional reporting by Zenobia Jeffries.

Contact Mike Sandula at

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