ATTACHMENT A
Staff Report Approving
Response to Civil
Grand Jury Report
CITY COUNCIL STAFF REPORT
DATE: S EPTEMBER 10, 2025 CONSENT CALENDAR
SUBJECT: APPROVE RESPONSE TO CIVIL GRAND JURY REPORT
FROM: Scott C. Stiles, City Manager
BY: City Attorney’s Office
SUMMARY:
On June 23, 2025, the City of Palm Springs received a Riverside County Civil Grand Jury report. The report entitled “City of Palm Springs Lacked Proper Procedures for Vetting and Monitoring of Grants” accompanies this staff report as Attachment A. The report was made available to the public after the close of business on June 26, 2025.
This agenda item provides the City Council with an opportunity to review the report and provide the City’s response, as provided for under California law.
RECOMMENDATION:
It is recommended the City Council review the accompanying civil grand jury report, approve the response, and author ize the City Manager to deliver the City’s written response to the Grand Jury Report.
BACKGROUND:
Every year, a group of citizens agree to voluntarily serve as civil grand jurors. The civil grand jury is separate and apart from a criminal grand jury, which investigates potential crimes. This agenda item involves the civil grand jury; not a criminal grand jury. In California, civil grand juries are authorized to “investigate and report upon the operations, accounts, and records of the officers, departments, functions, and the method or system of performing the duties of any such city or joint powers agency and make such recommendations as it may deem proper and fit.” (Cal. Penal Code §925(a) .) Each civil grand jury determines which officers, departments and agencies it will review.
Once a civil grand jury issues a report to a local public agency, a response is due from that agency within 90 days after issuance of the report. Most civil grand jury reports contain two sections: findings and recommendations. The City Council must address the findings (Cal. Penal Code § 933.05(a)) and recommendations (Cal. Penal Code § Item 1X - Page 1
933.05(
b)) to the Presiding Judge of the Superior Court, the Riverside County Grand Jury office, and the Riverside County Clerk-Recorder.
As to each grand jury finding, the City must indicate one of the following:
• The City agrees with the finding; or
• The City disagrees wholly or partially with the finding, in which case the response must specify the portion of the finding that is disputed and must include an explanation of the reasons therefor.
As to each grand jury recommendation, the City must respond with one of the following actions:
• The recommendation has been implemented, with a summary regarding the implemented action; or
• The recommendation has not yet been implemented, but will be implemented in the future, with a timeframe for implementation; or • The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis or study, and a timeframe for the matter to be prepared for discussion by the City Council. This timeframe must not exceed six (6) months from the date of publication of the grand jury report; or
• The recommendation will not be implemented because it is not warranted or is not reasonable, along with the City’s explanation.
STAFF ANALYSIS:
On June 23, 2025, the Riverside County Grand Jury issued its report entitled “City of Palm Springs Lacked Proper Procedures for Vetting and Monitoring of Grants” (“Report”). The Report focuses on the alleged lack of adequate policies and procedures for processing and monitoring grants and contracts to ensure public funds are used appropriately. This investigation was initiated at the request of the District Attorney after the indictment of the CEO of Queer Works. The City entered into a Memorandum of Understanding with Queer Works and Desert AIDS Project to provide financial support for the purpose of conducting due diligence in pursuing a State grant for a possible guaranteed income pilot program targeting transgender and/or non-binary individuals.
Below are the civil grand jury’s findings and recommendations, each of which is followed by City staff’s recommended responses. Per State statute, the City’s response is due no later than September 24, 2025.
FINDINGS
F1. The City of Palm Springs lacked comprehensive guidelines and procedures for processing and monitoring grants and contracts. This absence of clear rules or standards did lead to inefficiencies, mismanagement, and misuse of funds.
Item 1X - Page 2
F1 R
esponse: The City agrees with this finding. In response to the Queer Works matter, City staff developed a set of grant management and fund disbursement processes and protocols, which was approved by the City Council at its meeting of November 21, 2024. The new processes serve to increase accountability and create fiscal safeguards around the distribution of City funds for grants and sponsorships.
F2. There is no formal training in fraud prevention or detection for those responsible for reviewing grant claims in the City of Palm Springs.
F2 Response : The City agrees with this finding ; however, the City is currently working with the City Attorney’s office to schedule formal fraud prevention training to City staff, which will be implemented by December 31, 2025.
F3. The City Council of Palm Springs did not request the monthly reports and invoices as required by the Memorandum of Understanding contract with Queer Works and Desert Aids Project (DAP) Health of Palm Springs.
F3 Response: The City disagrees with this finding. The City requested invoices and progress reports and issued the first $200,000 in several payments with varying amounts.
F4. The Memorandum of Understanding contract allowed for two large lump sums payments.
F4 Response : The City disagrees with this finding. The City paid out the first $200,000 authorized by the City Council in several payments with varying amounts based on invoices and progress reports sent.
F5.
The City of Palm Springs lacked proper auditing procedures, reviews, and monthly updates from a Non-Governmental Organization.
F5 Response: The City disagrees with this finding. The City did and does possess proper auditing procedures and reviews. In response to concerns raised about Queer Works in late 2023, t he City requested the proper data to audit the program numerous times. However, despite repeated requests, Queer Works did not send the necessar y data for the City to conduct an audit.
F6.
The City of Palm Springs heavily relied upon the endorsement by Desert A IDS Project (DAP) Health of Palm Springs to approve the Queer Works grant.
F6 Response: The City agrees with this finding.
F7. A City Council Member informed the Palm Springs City Council of their suspicion regarding Queer Works’ possible wrongdoing.
Item 1X - Page 3
F7 R
esponse: The City disagrees with this finding. A City Council member informed City Staff of their suspicion of Queer Works possible wrongdoing . This information led City Staff to seek an audit of the Queer Works program.
F8. The receipts submitted by Queer Works revealed inconsistencies in their financial statements to the City of Palm Springs.
F8 Response: The City disagrees with this finding. The City never received financial statements from Queer Works.
F9. The City of Palm Springs’ inadequate oversight resulted in a loss of over $700,000.
F9 Response: The City disagrees with this finding. DAP Health was able to complete the pilot program, and the City is unable to reconcile a specific amount of loss.
RECOMMENDATIONS
R1. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council develop comprehensive guidelines and procedures for processing and monitoring grants and contracts, implemented no later than December 31, 2025.
R1 Response: This recommendation has been implemented. At the Palm Springs City Council meeting of November 21, 2024, the City Council approved a new set of grant management and fund disbursement processes and protocols to strengthen the City’s process related to grants and sponsorships, that would apply to any organization requesting funds directly from the City Council, either during the course of the budget process or raised at a City Council meeting. The new policy changes outlined seven areas of improvement and provided actionable recommendations to address them. See Attachment B.
R2. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council mandate annual fraud detection training for city employees who monitor grants and contracts, implemented no later than December 31, 2025.
R2 Response: This recommendation is in the process of being implemented by the City. The City is currently working with the City Attorney’s office to schedule formal fraud prevention training to City staff, which will be implemented by December 31, 2025.
R3. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council ensure all contract Non- Governmental Organizations receiving funding above $50,000 have the payments distributed in multiple installments, to be implemented no later than December 31, 2025.
R3 Response: This recommendation has been implemented. As outlined in the City’s Processes and Procedures for City Grant Management and Funds Item 1X - Page 4
Di
sbursement approved by City Council on November 2 1, 2024, the approved policy eliminates lump sum payments for any grant funding of $75,000 or greater.
The City used the threshold of $75,000 as that amount was the limit of the City Manager’s signature authority. Any payment of $75,000 or greater must be split into a minimum of two payments, with each payment distributed at least three months apart.
R4. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council establish clearly defined written vetting processes for city employees to use when evaluating Non-Governmental Organization program proposals, to be implemented no later than December 31, 2025.
R4 Response: This recommendation has been implemented. As outlined in the City’s Processes and Procedures for City Grant Management and Funds Disbursement approved by City Council on November 21, 2024, there is a vetting process for organizations seeking City grant funding. Funding recipients must meet minimum eligibility requirements which includes:
1. Be located in the City of Palm Springs or provide services to Palm Springs residents.
2. Meet the definition of a Nonprofit Organization and provide the organization’s IRS 501(c) tax designation letter.
3. Provide a list of board members ( required by the California Attorney General’s Registry of Charitable Trusts) to confirm legitimacy.
4. Have the ability to provide the organization’s 990 and 990- F federal tax returns and/or audited financial statements.
5. Include documentation on disbursement and check approval processes.
6. Possess a valid City of Palm Springs Business License, as applicable.
7. Be found in good financial standing with the City of Palm Springs.
8. Be found in good legal standing.
9. Provide a proposal that will benefit those living in the City of Palm Springs.
10. Meet all criteria outlined in the grant application.
11. Compliance with all applicable federal, state, and local laws, statutes and ordinances, and all lawful orders, rules and regulations when performing grant-funded services.
12. Grantee shall not discriminate against any employee or applicant per the provisions of the Palm Springs Municipal Code Section 7.09.040.
13. The City should not be the primary source of funding for the organization.
All nonprofit organizations, including those with whom the City has historically partnered, must meet minimum eligibility requirements, be in compliance with and in good standing with the following agencies:
• IRS Verified Nonprofit Status
• California Secretary of State
• California Department of Justice, Attorney General’s Registry of Charitable Trusts
• California Franchise Tax Board
Item 1X - Page 5
• C
ity Department of Finance
• City Code Enforcement
R5. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council review and redefine its policies and procedures related to making lump sum payments to the Non- Governmental Organization programs including assessing associated risks, to be implemented by December 31, 2025.
R5 Response: This recommendation has been implemented. As outlined in the City’s Processes and Procedures for City Grant Management and Funds Disbursement approved by City Council on November 2 1, 2024, the approved policy eliminates lump sum payments for any grant funding of $75,000 or greater.
The City used the threshold of $75,000 as that amount was the limit of the City Manager’s signature authority. Any payment of $75,000 or greater must be split into a minimum of two payments, with each payment distri buted at least three months apart.
R6. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council hire an independent auditing firm to conduct an internal operational audit (key processes, procedures, and internal controls) and provide improvement suggestions to the Palm Springs City Council by June 30, 2026.
R6 Response: The City agrees with this recommendation and will work to engage an auditing firm to initiate this engagement by the requested date.
R7. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council establish a policy that mandates an independent auditing firm to conduct an internal operational audit (key processes, procedures, and internal controls) every two fiscal years by June 30, 2026.
R7 Response: The City agrees with this recommendation and will prepare a policy for City Council approval by the requested date.
R8. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council review and update its policies, regulations, and procedures related to its fraud, waste, and misuse hotline (i.e., “Whistleblower Hotline”) by December 31, 2025.
R8 Response: The City agrees with this recommendation.
R9. The Riverside County Civil Grand Jury recommends that the Palm Springs City Council utilize various media channels to announce, at least quarterly, the purpose and availability of its city “Whistleblower Hotline” no later than December 31, 2025.
R9 Response: The City agrees with this recommendation.
Item 1X - Page 6
R10. T
he Riverside County Civil Grand Jury recommends that the Palm Springs City Council contract with an independent firm to conduct a forensic audit of all city departments vetting and monitoring contracts and grants no later than June 30, 2026.
R10 Response: The City will not implement this recommendation. The City feels this recommendation is not warranted or reasonable but instead is excessive due to the implementation of additional audit s that will cover internal controls for the monitoring and vetting of grants. (See Responses R6 and R7).
ENVIRONMENTAL ASSESSMENT:
There is no potential for any environmental impact associated with this report.
ALIGNMENT WITH STRATEGIC PLANNING:
The response to the civil grand jury aligns with the City Council’s major themes/principles of optimizing basic services and facilities and focusing on issues that most impact quality of life.
FISCAL IMPACT:
There is no direct fiscal impact associated with responding to the Grand Jury Report.
REVIEWED BY:
Director of Finance & Treasurer: Kristopher J. Mooney
City Attorney: Jeffrey S. Ballinger
City Manager: Scott Stiles
ATTACHMENTS:
A. Riverside County Civil Grand Jury 2024-2025 report: “City of Palm Springs Lacked Proper Procedures for Vetting and Monitoring of Grants,” dated June 16, 2025.
B. City of Palm Springs Staff Report of November 21, 2024, Updating Processes and Procedures for City Grant Management and Funds Disbursement.
Item 1X - Page 7
ATTACHMENT A
Item 1X - Page 8
Riverside County Civil Grand Jury 2024-2025
June 16, 2025
City of Palm Springs
Lacked Proper Procedures for Vetting
and Monitoring of Grants
Item 1X - Page 9
1 SUMMARY
Following the indictment of the CEO of Queer Works (QW), a nonprofit organization, on 53 criminal counts, the District Attorney requested that the Riverside County Civil Grand Jury (RCCGJ) investigate potential government malfeasance or misconduct in the administration of these contracts. The RCCGJ found evidence that the City of Palm Springs lacked adequate policies and procedures to safeguard taxpayer funds from fraudulent use by nonprofits.1
BACKGROUND
Mayors for a Guaranteed Income (MGIP) was founded in June, 2020 by Stockton, California Mayor Michael Tubbs. It is, generally, an anti-poverty program. Its purpose is for City Mayors to come together in a network to advocate for a Guaranteed Income “To lift all the communities and build a resilient, just America”.2
On March 24, 2022, in the City Council of Palm Springs considered and approved a request by Desert Aids Project (DAP) Health, a non-profit organization and Queer Works (QW), a non- profit corporation, to provide financial support for the purpose of pursuing a State grant for an income pilot program or Universal Basic Income (UBI) program.3 This UBI program was to support transgender and nonbinary individuals with support for employment, homelessness, assault and discrimination.4
The MGIP program provides a monthly cash payment given directly to individuals to help supplement their income or lack thereof. MGIP’s are a way to test the impact of these payments, while also providing a service to help financially stabilize community members and acquire information to help create future, evidence-based policies, and programs. The City Council of Palm Springs on March 24, 2022, initially approved $200,000 by signing a Memorandum of Understanding (MOU) between DAP and QW. It was also understood that an additional $500,000 would be issued if QW met the requirements of the initial MOU from the City.
In late 2023, a Palm Springs City Council member became concerned with the activities of QW and the lack of required financial information reporting to the City.
1 Grand jury indicts Queer Works CEO on multiple fraud charges ⋆ The Palm Springs Post 2 About — Mayors for a Guaranteed Income
3 City Council - Mar 24 2022 : City of Palm Springs, CA : Free Download, Borrow, and Streami ng : Internet Archive
4 Guaranteed Income Pilot Program
Item 1X - Page 10
2 WHAT IS DAP HEALTH & MISSION?
“For four decades, DAP Health has remained committed to its founding principles based on equitable access to health care. Guided by the voices and needs of the diverse communities it serves, the nonprofit has protected and expanded access to quality programs and services for people of all ages, genders, ethnicities, orientations, and socioeconomic statuses”.5
HISTORY OF QUEER WORKS AKA QUEERWORKS: MISSION STATEMENT “Queer Works was originally formed in 2018. Queer Works was founded and is led by Jacob Rostovsky, MA, LMFT. Jacob is a therapist and an out transgender man whose personal experiences facing rejection and discrimination in healthcare inspired the creation of the organization. We are based completely virtual throughout California.
In 2024, we have decided to move our mission completely towards mental health care and access for the TGI community.
Our primary focus is our free mental health program designed to promote health equity within the transgender and gender non-binary (TGI) community. We aim to provide accessible mental health services by connecting TGI individuals with licensed therapists who have expertise in working with the community's unique needs.
The therapy services we offer are available for free to those who are unable to afford them. Our program also includes support groups and workshops to promote mental wellness and community-building among TGI individuals.
At Queer Works, we understand the unique challenges that TGI individuals face when seeking mental health services. Our goal is to empower the community by providing the support and resources they need to take control of their mental health and advocate for their well-being”.6
Definition for the acronym TGI:
Transgender, Transsexual, Gender-Diverse, and Intersex (TGI): This term encompasses a range of identities, including male-to-female (MtF), female-to-male (FtM), and others, indicating that the assigned sex at birth may not accurately describe one's gender identity1.7
5 About Us - DAP Health
6 About Queer Works — Queer Works & The TransPower Project 7 TGI Network of RI - What is TGI?
Item 1X - Page 11
3 METHODOLOGY
The Civil Grand Jury obtained information for this report through the review of documents, testimony of officials, site visitations and websites.
Interviews-The Riverside County Civil Grand Jury conducted 14 interviews • 2022 Palm Springs City Council Members
• 2022 Palm Springs City Manager
• 2024 Palm Springs City Council Members
• 2024 Palm Springs City Manager
• 2024 Palm Springs Director of Finance & Treasurer
• 2024 Palm Springs Chief Deputy Clerk
• 2024 Palm Springs City Attorney
• CEO of Desert Aids Project (DAP) Health Palm Springs
• Staff Members County of Riverside - Housing and Workforce Solutions • Forensic Accountant
Documents
• March 24, 2022, Palm Springs City Council Meeting approves $200,000 in funding to Desert Aids Project and Queer Works to submit a proposal for State Funding of a Universal Basic Income program.
• May 12, 2022, Memorandum of Understanding Between the City of Palm Springs, Desert Aids Project and Queer Works was signed.
• July 28, 2022, Palm Springs City Council board meeting approved an additional $500,000 in funding to Desert Aids Project and Queer Works. • October 5, 2022, the First Amendment to the Memorandum of Understanding between the City of Palm Springs and Queer Works was signed.
• July 11, 2024, Agreement of Separation between Queer Works and the City of Palm Springs.
• July 11, 2024, Agreement Desert Aids Project to assume all obligations of Queer Works under Universal Basic Income program.
• 2022-2024, City of Palm Springs Invoices received from Queer Works for payment. • 2022-2024, Palm Springs City Council Staff Reports.
• 2022-2024, Multiple Palm Springs City documents.
• County of Riverside Department of Housing, Homelessness Prevention and Workforce Solutions (HHPWS). Queer Works Trans Power Project-Street Outreach ESC-CV2, HHPWSCoC-ESGCV2-13.
• Mayors for a Guaranteed Income (MGIP).
• Form 990 Return of Organization Exempt from Income Tax 2022 Queer Works.
Item 1X - Page 12
4 • Form 990 Returns of Organization Exempt from Income Tax 2022 and 2023 Desert Aids Project.
Palm Springs City Council Online Meetings
• City Council Meeting: March 24, 2022
• City Council Meeting: May 12, 2022
• City Council Meeting: July 28, 2022
• City Council Meeting: November 9, 2023
Visits
• Palm Springs City Hall
• Desert Aids Project (DAP) Palm Springs
Subpoena
• Two issued
Websites
• City of Palm Springs:
o Government | City of Palm Springs
• City of Palm Springs City Council Meetings:
o https://www.palmspringsca.gov/Home/Components/Calendar/Event/23820/1 464?npage=5
o https://www.palmspringsca.gov/Home/Components/Calendar/Event/24258/1 464?npage=4
• The Palm Springs Post Press release February 27, 2023- Queer Works and Dap Health join forces with the City of Palm Springs to launch Universal Basic Income Program:
o Applications for basic income pilot project opening in mid-March; members of transgender, non-binary community especially encouraged to apply ⋆ The Palm Springs Post
• Palm Springs seeks to tighten nonprofit grant controls after pilot program issues:
o Palm Springs seeks to tighten nonprofit grant controls after pilot program issues ⋆ The Palm Springs Post
• Public Announcement by District Attorney Office:
o CRIMINAL GRAND JURY INDICTS NONPROFIT CEO ON 53 FELONY
COUNTS IN FRAUD SCHEME INVOLVING THEFT OF MORE THAN
$940,000 IN PUBLIC FUNDS | Riverside County District Attorney Item 1X - Page 13
5 • Queer Works 990 form for 2022:
o Queer Works - Form 990, Schedule A - Nonprofit Explorer - ProPublica • DESERT AIDS PROJECT, INC. DBA DAP HEALTH INC 990 forms for 2023 and 2024:
o Dap Health Inc - Nonprofit Explorer - ProPublica
DISCUSSION
In March 2022 the Palm Springs City Council approved a request to allocate $200,000 in financial support to pursue a State grant for a potential Universal Basic Income Project.8 The program aimed to secure state funding from the $35 million allocated in 2021 for guaranteed income programs across California, with an expected launch between October 2022 and February 2023.9 Palm Springs residents could apply for the city's Universal Basic Income pilot program, which would provide 30 residents with a monthly cash payment of $800 for 18 months.
Additionally, the program would offer some transgender and nonbinary residents a monthly payment as part of a guaranteed basic income pilot initiative.
In May 2022 all parties entered a Memorandum of Understanding (MOU) in which the City of Palm Springs agreed to provide up to $200,000 for operational costs necessary for the startup of the project, on a reimbursement basis.10 On July 28, 2022, the Palm Springs City Council approved a request for a First Amendment to the existing MOU, adding an additional $500,000.11 Interviews revealed that both MOU contracts were approved and signed by the Palm Springs City Attorneys.
In late 2023, a Palm Springs Council member raised concerns about the activities of Queer Works and the lack of required reporting documents to the City, as agreed upon in the MOU by QW and DAP. The agreement included the following commitments:
1. Exercise good faith to remain within the estimated budget
2. Keep the City apprised of changes made to the program, state grant opportunities, fundraising and other information pertinent to execution of the scope of work
3. Provide the City Manager with monthly updates, unless otherwise indicated in writing by the City Manager, outlining activities and progress.
8 City Council - Mar 24 2022 : City of Palm Springs, CA : Free Download, Borrow, and Streaming : Internet Archive
9 2021 toward guaranteed income programs across California with an expected launch betw een October and February 2023. - Search
10 Palm Springs funds universal basic income effort for trans residents 11 City Council Regular Meeting | City Council Agenda Archive | City of Palm Springs Item 1X - Page 14
6 The RCCGJ discovered through multiple interviews that the Palm Springs City Council ceased receiving financial updates or progress reports from either QW or DAP after the specified date, as per the MOU agreement. Online correspondence was sent to both QW and the CEO of DAP, expressing concerns about the handling of funds and requesting updates on the progress of the pilot program. The City of Palm Springs received a total of six progress reports starting from 2022, with the last report dated April 12, 2023.
The RCCGJ discovered that a call took place on May 23, 2022, between a Palm Springs Council Member and a DAP staff member, regarding concerns about QW operations. The DAP member informed the council member that no evidence of wrongdoing was found. Subsequently, the RCCGJ's investigation discovered that the City of Palm Springs lacked proper vetting procedures, including detailed background checks, training in fraud recognition, the review of IRS 990 forms (Return of Organization Exempt from Federal Tax), and the omission of monthly updated progress reports.
The RCCGJ investigation revealed through the interviews that councilmembers were basing their decisions on staff reports containing information by QW and DAP, who was a partner. Without DAP’s endorsement for QW, the City of Palm Springs indicated it would not have supported the funding for QW.12
This case highlights the importance of stringent oversight and accountability when cities collaborate with nonprofits to ensure that public funds are used appropriately and effectively. In response the City of Palm Springs updated its current policy and procedures in September 2024, to include the following:13
• Requiring reimbursement-based payments or split payments for projects over $75,000 • Mandating regular progress reports and invoices
• Establishing minimum eligibility requirements for nonprofits • Requiring annual independent audit reports
• Designating specific city departments and staff to oversee each grant As a result of the alleged misappropriation of funds, by QW, DAP undertook full responsibility and control of the program on July 11, 2024.14
12 3662_3A_-_OCR.pdf
13 Palm Springs seeks to tighten nonprofit grant controls after pilot program issues ⋆ The Palm Springs Post 14 DAP Health: $30K of $700K meant for UBI program available when it assumed control this month ⋆ The Palm Springs Post
Item 1X - Page 15
7 It appeared the City didn’t receive any tangible results for its investment of $700,000 and the City could have their exercised right to review the accounts of QW and DAP as mandated by the MOU.
FINDINGS
F1. The City of Palm Springs lacked comprehensive guidelines and procedures for processing and monitoring grants and contracts. This absence of clear rules or standards did lead to inefficiencies, mismanagement, and misuse of funds.
F2. There is no formal training in fraud prevention or detection for those responsible for reviewing grant claims in the City of Palm Springs.
F3. The City Council of Palm Springs did not request the monthly reports and invoices as required by the Memorandum of Understanding contract with Queer Works and Desert Aids Project (DAP) Health of Palm Springs.
F4. The Memorandum of Understanding contract allowed for two large lump sums payments.
F5. The City of Palm Springs lacked proper auditing procedures, reviews, and monthly updates from a Non-Governmental Organization.
F6. The City of Palm Springs heavily relied upon the endorsement by Desert Aids Project (DAP) Health of Palm Springs to approve the Queer Works grant.
F7. A City Council Member informed the Palm Springs City Council of their suspicion regarding Queer Works' possible wrongdoing.
F8. The receipts submitted by Queer Works revealed inconsistencies in their financial statements to the City of Palm Springs.
F9. The City of Palm Springs' inadequate oversight resulted in a loss of over $700,000.
RECOMMENDATIONS
R1 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council develop comprehensive guidelines and procedures for processing and monitoring grants and contracts, implemented no later than December 31, 2025.
Based on Findings: F1 through F9
Financial Impact: Minimal
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8 R2 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council mandate annual fraud detection training for city employees who monitor grants and contracts, implemented no later than December 31, 2025.
Based on Findings: F2, F3, F4, and F8
Financial Impact: Minimal
R3 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council ensure all contract Non-Governmental Organizations receiving funding above $50,000 have the payments distributed in multiple installments, to be implemented no later than December 31, 2025.
Based on Findings: F1. F2, F3. and F4
Financial Impact: Minimal
R4 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council establish clearly defined written vetting processes for city employees to use when evaluating Non-Governmental Organization program proposals, to be implemented no later than December 31, 2025.
Based on Findings: F1, F3, F4 and F5
Financial Impact: Minimal
R5 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council review and redefine its policies and procedures related to making lump sum payments to the Non-Governmental Organization programs including assessing associated risks, to be implemented by December 31, 2025.
Based on Findings: F1, F3, F4 and F5
Financial Impact: Minimal
R6 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council hire an independent auditing firm to conduct an internal operational audit (key processes, procedures, and internal controls) and provide improvement suggestions to the Palm Springs City Council by June 30, 2026.
Based on Finding: F1 through F9
Financial Impact: Moderate-High
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9 R7 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council establish a policy that mandates an independent auditing firm to conduct an internal operational audit (key processes, procedures, and internal controls) every two fiscal years by June 30, 2026.
Based on Finding: F1 through F9
Financial Impact: Moderate-High
R8 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council review and update its policies, regulations, and procedures related to its fraud, waste, and misuse hotline (i.e., 'Whistleblower Hotline”) by December 31, 2025.
Based on Findings: F1 through F9
Financial Impact: Minimal
R9 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council utilize various media channels to announce, at least quarterly, the purpose and availability of its city 'Whistleblower Hotline” no later than December 31, 2025.
Based on Findings: F1 through F9
Financial Impact: Minimal
R10 The Riverside County Civil Grand Jury recommends that the Palm Springs City Council contract with an independent firm to conduct a forensic audit of all city departments vetting and monitoring contracts and grants no later than June 30, 2026.
Based on Findings: F1 through F9
Financial Impact: Moderate-High
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10 REQUIRED AND INVITED RESPONSES
Under California Penal Code §933, governing bodies are required to respond to grand jury report findings and recommendations within 90 days. California Penal Code §933.05 specifies how these governing bodies must respond.
Required Responses-Due in 90 Days
Location Findings Recommendations
Palm Springs City Council F1 - F9 R1 - R10
Invited Responses
Location Findings Recommendations
Palm Springs City Manager F1 - F9 R1 - R10
CEO Desert AIDS Project (DAP)
Health
F1 - F9 R1 - R10
County Counsel, County of Riverside F1 - F9 R1 - R10
DISCLAIMER
The Riverside County Civil Grand Jury has made no attempt to determine the guilt or innocence of any parties in any impending criminal cases. Our investigation was based solely into the policies and actions of the City of Palm Springs in their processing of contracts of Non- Governmental Organizations. This report is solely limited to the City of Palm Springs.
Report Issued Date:
Report Public Date:
Response Due Date:
6/23/2025
6/26/2025
9/26/2025
Item 1X - Page 19
ATTACHMENT B
Item 1X - Page 20
CITY COUNCIL STAFF REPORT
DAT
E: NOVEMBER 21, 2024 CONSENT CALENDAR
SUBJECT: UPDATING PROCESSES AND PROCEDURES FOR CITY GRANT
MANAGEMENT AND FUNDS DISBURSEMENT
FROM: Scott C. Stiles, City Manager
SUMMARY:
In a c
ontinuing effort for the City to be more transparent in its use of City funds, the City Manager and staff have developed a set of grant management and fund disbursement processes and protocols. Staff wishes to share their ongoing recommendations for City Council consideration.
RECOMMENDATION:
St
aff recommends Council approve the proposed updated procedures.
BACKGROUND:
Thr
oughout its history, the City of Palm Springs has provided small grants to nonprofit organizations providing services for the betterment of the community and large grants for marquee events. Upon review of current practices and at the request of Council members, the City Manager initiated a review of City policies and has proposed adjustments to the policies to better manage and safeguard taxpayer dollars while continuing to serve Palm Springs residents through community grants and funding.
STAFF ANALYSIS:
The pr
oposed policy changes (Attachment A) serve to increase accountability and create safeguards around the distribution of City funds. The changes do so without creating unnecessary burden on City Staff or applicant organizations. Changes include:
• Eliminating lump sum payments for any funding above $75,000, requiring contracts to either move to a reimbursement- based payment system or split payments up over time
• Requiring semi -annual submission of progress reports and invoices for funding above $75,000
• Strengthening the due diligence process for investigating organizations that have Item 1X - Page 21
not received funding from the City before
• Requiring organizations receiving over $75,000 to submit an annual independent audit
• Identifying a sponsoring City department and individual point person on City staff assigned to coordinate, oversee, and audit each program/contract. • Establishing training modules for City staff on policies and procedures for grant management and funds distribution
• Updating the City Council annually on how funds are spent and organizations’ impacts on the communities they serve.
These policy recommendations apply to organizations requesting funds directly from the City Council, either during the course of the budget process or raised at a City Council meeting. These policies do not apply to the Small Grants and Sponsorships program, which is administered by staff and has established its own rigorous policies.
ALIGNMENT WITH STRATEGIC PLANNING:
Updating City policies will empower the City Council to better serve residents through City-funded projects, while advancing Palm Springs’ mission to provide excellent, responsive public services that enhance the quality of life for current and future generations.
FISCAL IMPACT
:
Policies will change fiscal processes but will not incur any additional expense.
REVIEWED BY:
Assistant City Manager: Teresa Gallavan
City Manager: Scott Stiles
ATTACHMENTS:
A. Processes and Procedures for City Grant Management and Funds Disbursement.
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ATTACHMENT A
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MEMORANDUM
To: Palm Springs City Council Members
From: Scott Stiles, Palm Springs City Manager
Date: November 18, 2024
Subject: Processes and Procedures for City Grant Management and Funds Disbursement
In an effort for the City of Palm Springs to be more transparent in its use of City funds, my staff has developed a new set of grant management and fund disbursement processes and protocols for the City Council to review. This policy memo identifies seven areas for improvement and provides actionable recommendations to address them.
These policy recommendations apply to any organization requesting funds directly from the City Council, either during the course of the budget process or raised at a City Council meeting.
These policies do not apply to the Small Grants and Sponsorships program, which is administered by staff and has established its own rigorous policies, nor does this policy apply to standard City contracts for goods and services.
I am presenting this proposal and asking that the Council approve these policy changes so that we can collectively agree to strengthen our processes.
Funding Large Projects in Lump Sum
Current Policy: Most funding from the City Council has been distributed in a lump sum.
Proposed Policy: Eliminate lump sum payments for any funding above $75,000. Grants and funding will be paid through reimbursement. The applicant organization is required to prepare an invoice and progress report showing work completed.
If reimbursement will not work for a particular project, the City Manager is authorized to instead split funds into a minimum of 2 payments, with each payment distributed at least 3 months apart. For funds totaling more than $200,000, funds will be split into a minimum of four payments, with each payment distributed at least 3 months apart with the receipt of progress reports and financial documentation.
If cases occur where organizations need emergency funding and they make a request to appeal to funding protocols, the request will be reviewed by the City Manager, Finance Director, and City Attorney.
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Achieved through: Approval by the City Council. The Staff Report template and Grant Agreement will be updated to reflect changes.
Regular Reports and Invoices
Current Policy: Most City contracts reserve the right to ask for financials or progress reports at any time in the contract. However, it does not mandate them or establish a timeline for when and how many reports should be received.
Proposed Policy: The City will require progress reports and invoices consistent with the proposed policy regarding Funding Large Projects in Lump Sum. For contracts within the reimbursement program, regular reports and invoices are necessary to receive funding. For contracts in which funds are split over time, the City will not release funds until receipt of required documentation. This will be outlined in the organization’s contract with the City.
Additionally, City staff should maintain documentation on the organization’s disbursement and check approval processes and verify that the disbursement of funds aligns with the reports and invoices received from the organization.
In the event that any internal changes occur within the organization seeking grant funds from the City of Palm Springs, the City must be notified. This includes changes in the organization personnel responsible for grant management; changes to policies or violations, along with corrective actions taken; or any other event affecting the organization’s operations.
Achieved through: Approval by the City Council.
Vetting Process for New Organizations
Current Policy: There is a vetting process for organizations seeking funding through the Small Grants and Sponsorships Program. Grant funding outside the Small Grants and Sponsorship Program, above $75,000, requires City Council approval.
Proposed Policy: Funding recipients must meet minimum eligibility requirements to receive City grant funding. This includes:
1. Be located in the City of Palm Springs or provide services to Palm Springs residents.
2. Meet the definition of a Nonprofit Organization and can provide the organization’s IRS 501(c) tax designation letter.
3. Provide a list of board members (required by the Secretary of State and charitable trust) to confirm legitimacy.
4. Have the ability to provide the organization’s 990 and 990-F federal tax returns, and/or audited financial statements.
5. Include documentation on disbursement and check approval processes.
6. Possess a valid City of Palm Springs Business License, as applicable.
7. Be found in good financial standing with the City of Palm Springs.
8. Be found in good standing from a legal perspective by the City Attorney.
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9. Provide a proposal that will benefit those living in the City of Palm Springs.
10. Meet all criteria outlined in the grant application.
11. Compliance with all applicable federal, state, and local laws, statutes, and ordinances, and all lawful orders, rules, and regulations when performing grant-funded services.
12. Grantee shall not discriminate against any employee or applicant per the provisions of the Palm Springs Municipal Code Section 7.09.040.
13. The City should not be the primary source of funding for the organization.
All nonprofit organizations, including those with whom the City has historically partnered, must meet minimum eligibility requirements, be in compliance and in good standing with the following agencies:
● IRS Verified Non-Profit Status
● California Secretary of State Good Standing
● DOJ Registry of Charitable Trusts
● Franchise Tax Board Status
● City Department of Finance
● City Code Enforcement
Achieved through: City Council approval of policy revision.
Independent Audit
Current Policy: The current policy does not require organizations to submit audit documentation to the City.
Proposed Policy: Require organizations receiving over $75,000 to submit an independent audit every year. Most organizations should already be performing an annual audit, so the burden of this requirement is low.
To assist smaller organizations in meeting proper auditing standards, organizations may request to conduct a scaled-down audit focused on internal controls, which will be approved at the Finance Director’s discretion.
Achieved through: City Council approval of policy revision, which is included in the minimum eligibility requirements.
Identifying the Responsible Party on Staff
Current Policy: There has been ambiguity about designating the staff person responsible for overseeing a program or contract.
Proposed Policy: A sponsoring City department and individual point person on City staff will be assigned to coordinate and provide oversight of the grantee and audit the program/project expenses upon receipt. The point person is responsible for writing the staff report, overseeing the program and contract, auditing supporting documentation, and raising any issues with appropriate staff and/or Council Members.
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Achieved through: Policy directive from the City Manager to staff.
Staff Training
Current Policy: Training on grants and contracts among City staff is limited and informal.
Proposed Policy: All City staff who, as part of their normal duties, may oversee a program or contract related to grants or sponsorships must be trained on policies and procedures for approving funding and overseeing a contract. This includes best practices, review of the staff report template, due diligence, documentation, disbursement procedures, finance, internal controls, and fraud risk. The City’s Finance Department will be responsible for conducting this training, in coordination with the City Attorney’s office.
Achieved through: Policy directive from City Manager and/or Department Director to staff.
Current Funding Programs over $75,000
Name Funding Program Staff Assigned
Palm Springs
International Film
Festival
$350,000; current
Agreement in place,
expiring June 2028
Annual Film Festival Cindy Cairns
City Manager’s Office
Palm Springs Art
Museum
$300,000 budgeted
this FY
Free Thursday
Evenings Program
Cindy Cairns
City Manager’s Office
Greater Palm Springs
Pride
$125,000 in-kind City
support; current
Agreement in place,
expiring June 2027
Annual Pride Festival
and Parade
Jasmine Waits
Special Events Manager
Desert X $75,000 budgeted this
FY
Desert X Art
Exhibitions in Palm
Springs
Jay Virata
Community Development
Director
# # #
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