1 CITY OF STOCKTON AUDIT COMMITTEE INVESTIGATIVE REPORT Dissolution of the Diversity, Equity & Inclusion (DEI) Office and Potential Misuse of Public Funds
Authorized by: Vice Mayor Jason Lee, Chair, Stockton City Council Audit Committee Date: January 4, 2026
CITY OF STOCKTON AUDIT COMMITTEE INVESTIGATIVE REPORT
Dissolution of the Diversity, Equity & Inclusion (DEI) Office and Potential Misuse of Public Funds
Authorized by: Vice Mayor Jason Lee, Chair, Stockton City Council Audit Committee Date: December 10, 2025
I. Executive Summary
This report presents the findings of the Audit Committee’s investigation, conducted pursuant to Section 406 of the Stockton City Charter, into the dissolution of the City’s Diversity, Equity & Inclusion (DEI) Office, the reassignment and demotion of the former DEI Manager, and potential unauthorized reallocation of public funds in violation of Charter Section 1907.
The Committee finds that although the 2022 Council Resolution Declaring Racism a Public Health Crisis outlined the City’s intent to advance equity and established a DEI Committee, the resolution did not direct the City Manager to create a DEI Manager position, nor did it contain any catch-all authority language empowering the City Manager to “take appropriate and necessary actions to carry out the purpose and intent of this resolution.” Despite this, in later administrative actions and budget cycles, the City Manager’s Office implemented and funded a DEI Manager position. The Committee concludes that the dismantling of this council approved DEI Program Director position and management of the city’s DEI efforts—including the reassignment of the position—occurred without Council communication, lacked transparency, and may have involved fiscal actions inconsistent with Charter requirements. Furthermore, after this activity was brought to the city manager’s attention, there was a concerted effort to evade the facts with unconfirmed research.
Further, the Mayor’s refusal to enforce a subpoena issued to the former Interim City Manager obstructed lawful oversight and impaired the Committee’s ability to conduct a complete, neutral fact-finding inquiry.
II. Historical and Policy Context
In 2022, the City Council unanimously adopted a resolution declaring racism a public health crisis. The resolution expressed a clear policy direction: establishing a DEI Committee to guide Attachment A
2 equity-related work. It did not mandate the establishment of an executive-level DEI Manager or DEI Office, nor did it delegate broad implementation authority to the City Manager.
In subsequent years, however, the City Manager’s Office independently created and budgeted a DEI Program Director role within its structure. This position carried both symbolic and functional significance, serving as the executive-level point of leadership for equity initiatives across City operations.
III. Legal Authority
A. Charter Section 406 – Investigatory Power
Provides City Council and its committees the authority to investigate City operations and to compel documents and witnesses through subpoena.
B. Charter Section 1907 – Budget Transfers and Appropriations Prohibits transfers between funds or departments without Council approval. Unauthorized reallocations may constitute misuse of public funds.
IV. Background on the Matter
A. Origins of Stockton’s DEI Efforts
The DEI Program Director role—while not explicitly authorized in the 2022 resolution—became an integral part of the City’s internal and community-facing equity strategies through Council- approved budget allocations in later years.
B. Administrative Dissolution of DEI Program Director
In mid-2025, former Interim City Manager Steve Colangelo dissolved the DEI Office and reassigned DEI Program Director Preya Nixon to a lower-level role in Human Resources.
While the Interim City Manager had the authority to reassign Ms. Nixon to Human Resources, the funding to cover the position required an appropriation by council and that did not occur.
This transfer occurred with the threat of termination of Ms. Nixon, without Council notification, without a written reorganization plan, and without supporting data or analysis.
A public explanation described the move as “data-driven,” but testimony and documentation confirmed that no such data existed and that the statement was drafted by the Public Information Office rather than policy staff or HR.
C. National Context
A January 2025 federal Executive Order dismantling federal DEI programs created significant national debate. While several California cities reaffirmed their DEI commitments, Stockton Attachment A
3 became the only known California municipality to dissolve its executive-level DEI structure during this period.
V. Witness Testimony and Analytical Summary
All testimony below follows the required standard:
• Direct quotes reflect verbatim statements from the witness. • Summaries are clearly labeled and not placed in quotation marks.
1. IT Oversight and Website Content
Witnesses: Jamil Niazi (IT Director); Connie Cochran (former PIO) Summary of testimony: Both witnesses stated that IT does not control City website content; the PIO maintains administrative authority. Ms. Cochran informed the committee of the vendor that manages administrative access to the city website. The vendor and its logs confirmed no DEI content was removed from the website.
2. Policy Rationale and Public Messaging
Witness: Chad Reed, Deputy City Manager
Summary of testimony: Reed explained that no data or analysis supported transferring DEI functions into HR. He stated that the PIO authored the public messaging characterizing the move as “data driven.”
3. Human Resources Oversight and Internal Controls
Witness: Rosemary Rivas, HR Director
Summary of testimony: Rivas stated HR did not recommend the DEI reassignment and was not involved in any organizational planning. She also reported that the Interim City Manager directed HR to waive minimum qualifications for an unrelated position, raising internal control concerns.
4. Fiscal Compliance
Summary of testimony: Several witnesses indicated budgeted DEI funds later appeared in HR accounts without required Council approval, suggesting potential Charter Section 1907 violations.
V-A. Testimony of Preya Nixon – Former DEI Program Director
1. Role and Mandate
Attachment A
4 “My role was to embed equity into every city department and ensure accountability to the Council’s resolution.”
2. Notice of Reassignment
“I was told the office was being absorbed into HR but there was no written plan, no budget memo, no data analysis.”
She testified she was offered a lower classification and informed that declining could result in separation.
3. Public Messaging
“The release said it was a ‘data-driven integration,’ but no one ever asked me for data.”
4. Workplace Treatment
“After I asked where the DEI funds went, I was removed from leadership meetings and email groups.”
5. Fiscal Observations
“Roughly $197,000 originally budgeted to the DEI Office later appeared under HR without Council action.”
6. Broader Impact
“Stockton was positioned to lead California in equity work. Removing DEI from executive leadership told our community inclusion is optional.”
7. Committee Assessment
Nixon’s testimony was consistent, specific, and corroborated by both HR Director Rivas and Deputy City Manager Reed.
8. Supporting Testimony Regarding Concerns Raised
Summary of testimony:
• HR Director Rivas confirmed Nixon felt she was being treated unfairly. • Deputy City Manager Reed testified: “She was upset and confused. She asked how her position could be dissolved without Council action. I didn’t have an answer.”
• HR staff confirmed Nixon sought guidance on her rights.
Attachment A
5 The Committee concludes Nixon raised concerns in good faith, and her reassignment proceeded despite warnings of potential procedural or ethical violations. Specifically, Ms. Nixon testified that the Interim City Manager referred to DEI as a “liability” which conflicted with council direction and a previously passed resolution.
VI. Oversight and Investigatory Non-Compliance
The Audit Committee issued a subpoena to former Interim City Manager Steve Colangelo pursuant to Charter §406. Mayor Christina Fugazi declined to enforce the subpoena. This was the mayor’s formal response to the request:
From: Christina Fugazi <[email protected]> Sent: Monday, November 17, 2025 1:14 PM
To: Katherine Roland <[email protected]>
Subject: Re: Audit Committee formal request to enforce subpoena - Steve Colangelo Hi Katherine,
Thank you for forwarding the Audit Committee’s request.
After reviewing the matter, and in consultation with legal counsel, I do not believe it is in the best interest of the City of Stockton to compel the former Interim City Manager to appear under the circumstances presented. While I have authority to enforce a subpoena, that authority must be exercised only when it clearly advances a legitimate, unbiased, and legally sound purpose for the City.
Over the past several months there have been significant public statements, accusations, and media activity surrounding this issue, much of which has originated from a member of the Audit Committee. These ongoing actions have created a perception of retaliation rather than a neutral fact-finding inquiry. Enforcing a subpoena in an environment already affected by personal conflict and public commentary could expose the City to unnecessary legal risk and could undermine the integrity of any findings.
It is my responsibility to protect the City, its employees, and the public trust. Compelling testimony where the potential for bias, reputational harm, and retaliatory motive has already been raised would not serve that duty. For these reasons, I must respectfully decline the request to enforce the subpoena at this time.
Feel free to share my decision with the Committee.
Thanks,
Fugazi
Following the notification of the Mayor denying the Audit Committees unanimous vote requesting that she issue the subpoena to Mr. Colangelo I noticed that she stated, “After reviewing the matter, and in consultation with legal counsel, I do not believe it is in the best Attachment A
6 interest of the City of Stockton to compel the former Interim City Manager to appear under the circumstances presented.” So, I sent an inquiry to the city attorney’s office on what her exact advice was. “The City Attorney confirmed that she was not consulted, leaving unclear who advised the mayor.
Committee Analysis:
The refusal to enforce a valid subpoena and soliciting outside counsel recommendations for official city business obstructed legitimate oversight, limited the Committee’s investigatory authority, and set a concerning precedent for transparency and accountability.
VII. Findings of Fact
1. The 2022 DEI Resolution intended to create a committee, not a DEI Program Director position, however the prior city manager created the DEI Program Director position, and it was presented to and adopted by the previous city council.
2. A DEI Program
Director role was later administratively established, funded, and staffed without explicit Council direction.
3. The DEI Program Director position was dissolved without Council authorization.
4. The “data-driven” justification was unsupported.
5. Fiscal transfers occurred without required Council approval, potentially violating Charter §1907.
6. The mayor’s refusal to enforce a lawful subpoena obstructed oversight.
7. Government Code 37106. If any person duly subpoenaed neglects or refuses to obey a subpoena, or, appearing, refuses to testify or answer any questions which most of the legislative body decide proper and pertinent, the mayor shall report the fact to the judge of the superior court of the county.
8. Vendor audit logs confirm no DEI content was deleted from the city website.
9. Failure to comply with GC 37106 to properly enforce the subpoena of Mr.
Colangelo.
10. Unauthorized Use of Outside Legal Counsel on Official City Business Stockton City Charter §1303 – Designates the City Attorney as the legal advisor for the City and all officers, boards, and departments in matters related to official duties.
Stockton City Charter §1306 – Prohibits the retention or employment of outside legal counsel for City matters without approval of the City Council.
Stockton City Charter §408 – Requires the Mayor and Councilmembers to conduct City business through Charter officers and prohibits individual members from independently directing or managing City operations outside the Charter structure.
VIII. Conclusions
The Committee finds substantial evidence of procedural irregularities, administrative overreach, inconsistent public communication, and misuse of public funds. While the 2022 Resolution did not authorize creation of a DEI Program Director, its dissolution—after being budgeted and Attachment A
7 Colangelo without council input or confirmation, made an independent decision to deconstruct the DEI oversight of the city and unilaterally used reallocated the funding to a vendor contract outside the city of Stockton.
Corrective action and structural reforms are warranted.
IX. Recommendations to Council
1. Rebuild and Strengthen DEI Governance
Create job description for DEI Project Director to work within the City Manager’s office.
2. Establish a Citywide citizen Commission on DEI to guide, monitor, and evaluate equity internal and external initiatives. The work of this commission will be managed by the DEI Program Director with council oversight.
3. Clarify Investigative Enforcement Authority
Amend the Charter to explicitly enable Council Majority authority to enforce subpoenas.
4. Include DEI Fund Transfers in the FY 2024–25 Independent Audit
5. Strengthen Fiscal Controls
Require written Council notice for fund transfers or expenditures under $100,000.
6. Ensure Accuracy of Public Statements
Require documentation and factual
verification for all public messaging on
organizational changes.
7. Require Council approval to modify, disband, or in any other way change the position
of the city council on Diversity, Equity, and Inclusion as a vision, policy, or program.
8. 60-Day Corrective Action Plan
Direct the City Manager and City Attorney to submit a corrective compliance plan within 60 days. This would include a complete
review of this matter and take any and
all administrative actions to align our city policies and practices with our written rules. Improve hiring and transfer policy language, employment ambiguity as it relates to honesty policy governance, and ensure proper employment practices.
9. Direct Legislation Committee to explore Policy to address failures to comply with GC 37106.
10. Refer the potential violation of Government Code 37106, charter sections 1303 and 1306, and any other violation of the same listed herein to the state controller’s office and
Attorney General as another inquiry for consideration in the current audit and ongoing investigation.
administratively established—it was presented for Council review and received approval. Mr.
Attachment A
8 Respectfully Submitted,
Jason Lee
Vice Mayor & Councilmember, District 6
Chair, City of Stockton Audit Committee
Attachment A
ATTACHMENTS
2022 Council Resolution Declaring Racism a Public Health Crisis – 2022-07-12-1504 Charter Section 406
Charter Section 1907
Press Release – 2025-06-19 StocktonDiversityJointStatement Email from Mayor Fugazi - Re_ Audit Committee formal request to enforce subpoena - Steve Colangelo
California Government Code 37106
Charter Section 1303
Charter Section 1306
Charter Section 408
Attachment A
Resolution No. 2022-07-12-1504
STOCKTON CITY COUNCIL
RESOLUTION DECLARING RACISM AND INEQUITY A HUMAN RIGHTS AND
PUBLIC HEAL TH CRISIS AND REAFFIRMING THE CITY COUNCIL'S COMMITMENT
TO ADVANCING DIVERSITY, EQUITY, AND INCLUSION IN THE CITY OF
STOCKTON
Racism and other inequities cause persistent discrimination and disproportionate outcomes in many areas of life, including: housing, education, employment, and criminal justice; and
There are disproportionately higher rates of chronic disease, mortality, poverty, economic distress, and the adverse effects of health outcomes for racial minorities which are widely recognized and documented, yet continue to persist throughout the United States; and
The City of Stockton has been recognized as the most racially diverse city in the United States, composed of 42.7% Latinx, 21.5% Asian, 20.6% White (not Latinx), 11.2% African American, 0.7% Native American or Alaskan Native, 0.6% Pacific Islander or Native Hawaiian, and 11.8% two or more races; and
The City Council of the City of Stockton ("City Council") acknowledges societal inequities related to race, gender, and age that have resulted in vastly different living and social conditions and access to opportunities; and
Inclusion is the value and practice of ensuring that people feel they belong and that their inputs are valued by the whole (group, organization, society, system, etc.) particularly regarding decisions that affect their lives; and The compounding effects of the COVID-19 pandemic and resulting economic disruption have exposed the gross inequities that exist in our society; and The City Council seeks to lead and.or join efforts to reverse the effects of the inequitabie policies, processes, and practices of the past, and recognizes it has a role to play in understanding and communicating the impacts that its decisions have on low income families, communities of color, and other disadvantaged communities and to engage the community in those decisions, now, therefore, II
II
II
II
Attachment A
Attachment A
Attachment A
Section 406. Investigations.
The Council or any committee thereof duly authorized by the Council to do so, may investigate the financial transactions, and the official acts and conduct of any office or department of the City government. In conducting such investigations, the Council or any committee thereof shall have the authority to subpoena witnesses, administer oaths and require the production of evidence. Subpoenas may be issued in the name of the City and be attested by the City Clerk. Disobedience of any such subpoena or order shall be deemed contempt and shall be punishable as provided by the general laws of this State.
City of Stockton, CA
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Section 1907. Appropriations.
At any public Council meeting after the adoption of The Annual Budget, the Council may take action to increase or decrease the operating budget by resolution amending the budget by a majority of affirmative votes of the members.
No part of any appropriation shall be transferred from one fund to another fund unless authorized by the City Council.
No member of the Council, officer, department or agency of the City, during any budget year, shall expend or incur any obligation to expend money not authorized by or in excess of the amounts appropriated in the budget.
Except as otherwise provided in this Charter or where the Council may have, by resolution, provided for the continuance of an appropriation beyond the end of the fiscal year, all appropriations approved by the City Council shall lapse at the end of the fiscal year to the extent they shall not have been expended or encumbered, except for appropriations for capital and grant projects which shall continue to their completion unless a different rule has been established by action of the Council. (Amended Election 11/8/16 effective 12/3/16)
City of Stockton, CA
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NEWS RELEASE
For Immediate Release: Contact: Tony Mannor
Thursday, June 19, 2025 City Manager’s Office
( 209) 937-8827 / (209) 868-0298
[email protected]
CITY OF STOCKTON ANNOUNCES STRATEGIC INTEGRATION OF
DIVERSITY, EQUITY AND INCLUSION INITIATIVES
Evidence-Based Approach Embeds Equity Principles Throughout City Operations
STOCKTON, CA – The City of Stockton today announced a strategic evolution of its diversity, equity, and inclusion efforts, integrating diversity, equity and inclusion functions directly into Human Resources operations to deliver measurable outcomes for residents through all City departments. The decision, developed through extensive collaboration between Vice Mayor Jason Lee and the Interim City Manager's office, reflects best practices showing that embedded diversity, equity and inclusion approaches produce superior results compared to standalone programs.
"After a thorough review of outcomes data and extensive conversations with the Interim City Manager, I'm energized about this evidence-based direction," said Vice Mayor Jason Lee. "Our historically marginalized communities deserve more than good intentions; they deserve measurable progress. This integration creates the accountability and transparency our residents expect, with clearly defined goals and concrete outcomes they can see in hiring data, compensation practices, and equitable opportunities."
The new approach embeds equity considerations into every hiring decision, promotion, compensation review, and workplace policy across all city departments. This model, used by 56% of successful local governments according to MissionSquare Research, ensures diversity, equity and inclusion principles become integral to daily operations rather than operating in isolation.
"This strategic integration represents our commitment to moving from symbolic gestures to systematic change," said Interim City Manager Steve Colangelo. "Research consistently shows that the most successful diversity, equity and inclusion implementations happen when these principles are woven throughout core business operations rather than treated as add-on programs. We're not reducing our commitment. We're making it more systematic, more sustainable, and more accountable."
Attachment A
City of Stockton
News Release – Joint Statement on Diversity, Inclusion and Equity Wednesday, June 19, 2025
The strategic shift positions Stockton's Human Resources department, which already maintains systems for tracking hiring patterns, analyzing pay equity, and managing performance evaluations, to implement equity initiatives with maximum operational impact.
Vice Mayor Lee continued, “The heart and soul of Stockton are the people who live and work here. Our commitment to diversity, equity, and inclusion must be more than words — it must live in our policies, our practices, and in how we show up for the community we serve. I want to thank Interim City Manager Colangelo for responding to my concerns, working to expand our diversity, equity and inclusion programs, and striving to honor the spirit of the 2022 Council resolution. This is how we ensure Stockton reflects the strength and richness of all its people.”
The city expects this integrated model to deliver enhanced recruitment of diverse candidates, improved retention rates, and more equitable advancement opportunities across all departments. This subject has been added to the June 24th, 2025, council agenda for further acknowledgement.
For more information about City of Stockton events, contact the City of Stockton Public Information Officer or visit the City of Stockton website www.stocktonca.gov/newsroom
Follow us:
facebook.com/CityofStockton
twitter.com/StocktonUpdates
youtube.com/StocktonUpdate
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Attachment A
Attachment A
From: Christina Fugazi
To: Katherine Roland
Subject: Re: Audit Committee formal request to enforce subpoena - Steve Colangelo Date: Monday, November 17, 2025 1:14:03 PM
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Hi Katherine,
Thank you for forwarding the Audit Committee’s request.
After reviewing the matter, and in consultation with legal counsel, I do not believe it is in the best interest of the City of Stockton to compel the former Interim City Manager to appear under the circumstances presented. While I have authority to enforce a subpoena, that authority must be exercised only when it clearly advances a legitimate, unbiased, and legally sound purpose for the City.
Over the past several months there have been significant public statements, accusations, and media activity surrounding this issue, much of which has originated from a member of the Audit Committee. These ongoing actions have created a perception of retaliation rather than a neutral fact finding inquiry.
Enforcing a subpoena in an environment already affected by personal conflict and public commentary could expose the City to unnecessary legal risk and could undermine the integrity of any findings.
It is my responsibility to protect the City, its employees, and the public trust.
Compelling testimony where the potential for bias, reputational harm, and retaliatory motive has already been raised would not serve that duty. For these reasons, I must respectfully decline the request to enforce the subpoena at this time.
Feel free to share my decision with the Committee.
Thanks,
Fugazi
Christina Fugazi
Mayor of Stockton
City of Stockton
425 N. El Dorado Street,
Stockton, Ca. 95202
[email protected]
Office 209.937.8499
From: Katherine Roland <[email protected]> Attachment A
Sent: Monday, November 17, 2025 9:56:00 AM
To: Christina Fugazi <[email protected]>
Subject: Audit Committee formal request to enforce subpoena - Steve Colangelo
Good Morning Mayor,
At the Audit Committee meeting on November 12th, the Committee requested I send you a formal request to enforce the subpoena for Steve Colangleo to appear.
They requested a
response from you within one week from the date of this email, November 24, 2025.
Respectfully,
Boards and
Commissions
Volunteer today!
Katherine D. Roland, CMC, CPMC
City Clerk
City of Stockton, Office of the City Clerk
425 N. El Dorado Street, Stockton CA 95202
Office: 209.937.7124
Attachment A
California Government Code 37106.
If any person duly subpoenaed neglects or refuses to obey a subpoena, or, appearing, refuses to testify or answer any questions which a majority of the legislative body decide proper and pertinent, the mayor shall report the fact to the judge of the superior court of the county. (Added by Stats. 1949, Ch. 79.)
Attachment A
Section 1303. Duties.
The City Attorney shall be the legal advisor of and attorney and counsel for the City and for all officers, boards and departments thereof in all matters relating to their official duties. The City Attorney shall conduct and carry on all suits, actions, and proceedings in behalf of or against the City, including prosecution on behalf of the people of all criminal cases arising from violations of the ordinances of the City; provided, however, that where there is a contractual duty on the part of an insurance carrier for the City to defend actions against the City, then the defense of said actions may be conducted as provided in said contract of insurance. The City Attorney shall prepare or approve as to form all contracts, bonds and other legal instruments to which the City is a party, and shall endorse on each the City Attorney's approval as to form and correctness thereof or evidence such approval as to form in separate writings to be filed and preserved with the records of the City Council.
(Amended Election 4/12/55 effective 5/12/55; Amended Election 10/12/71 effective 12/ 6/71; Amended Election 11/8/94 effective 5/22/95)
City of Stockton, CA
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Section 1306. Retention of Outside Counsel.
The City Attorney shall not retain or employ outside counsel, except as hereinabove provided, without the approval of the City Council.
(Added Election 10/12/71 effective 12/6/71)
City of Stockton, CA
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Section 408. Interference with City Manager.
Neither the Council nor any of its members nor the Mayor shall interfere with the execution by the City Manager of his or her powers and duties, nor in any manner dictate the appointment or removal of any City officers or employees whom the City Manager is empowered to appoint except as expressly provided in Charter Section 406.
However, the Mayor and Councilmembers may express their views and fully and freely discuss with the City Manager anything pertaining to the appointment and removal of such officers and employees. Except for the purpose of inquiries and investigations under Charter Section 406, the Council, its members and the Mayor shall deal with City officers and employees who are subject to the direction and supervision of the City Manager, City Attorney, City Clerk or City Auditor, solely through the City Manager, City Attorney, City Clerk or City Auditor, respectively, and neither the Council nor its members nor the Mayor shall give orders to any of the subordinates of those appointees, either publicly or privately, except as otherwise provided in this Charter.
City of Stockton, CA
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