Nonprofit CEO under scrutiny for alleged misuse of $700,000 in taxpayer funds; officials vow further safeguards

Two years after the head of a relatively unknown nonprofit walked into Palm Springs City Hall and walked out with a promise of $700,000 in taxpayer funds, the project he was supposed to deliver has been handed off to another organization and he could face criminal charges.

In the meantime, city officials are not only working to prevent what transpired from happening again but find themselves in the unenviable position of trying to explain how he could bill far more for his work than elected officials believed he would receive. 

Backed by current councilmembers Christy Holstege and Grace Garner, and then-Councilmember Geoff Kors, the plan presented by Jacob Rostovsky – founder and CEO of Queer Works – called for a guaranteed income pilot program in the city that would primarily aid transgender residents.

As designed in its final form, the program would have provided $800 cash payments for 18 months to help 180 individuals on the path to economic security. Members of the transgender and non-binary community were especially encouraged to apply. 

To qualify, applicants needed to have been clients of either Queer Works or DAP Health – which was partnering on the project – earn less than $16,600 per year, and live, work, or spend a majority of their day in the city.

But first, Rostovsky needed help securing a portion of $35 million in state grant money set aside for basic income pilot projects.

Funds awarded, billing starts

The City Council gave him that help – unanimously approving an initial $200,000 for the project in March 2022 and splitting on a vote four months later to commit an additional $500,000 for a program estimated to cost $3 million.

The council-approved agreements allocated an initial $200,000 to Queer Works to secure state funds and an additional $500,000 as either matching funds for a larger state-funded program or to support a smaller program if state funding wasn’t awarded. 

If the $3 million project proceeded, city documents show $2.59 million – or 86% of the money – would go towards income payments, and $420,000 would be used for staffing and operational costs.

If the same ratio were applied to the smaller $1 million initiative, that would translate to $860,000 for payments to program participants and $140,000 for administrative expenses.

In November 2022, the state announced that the Palm Springs program would not receive any grant money. Four months after that announcement, Rostovsky opened applications for the smaller program.

By that time, however, Queer Works had already billed for and received nearly all of the $700,000 approved by the city council, using the majority of the funds for staffing costs – far more than city leaders were led to believe would occur. The $500,000 that was supposed to help fund direct payments to program participants had evaporated.

Invoices and progress reports sent to the city from Queer Work, obtained by The Post, show Rostovsky submitted bills to the city for more than 1,200 hours of work on the project over 11 months, billing a total of $699,414. His tasks included research, completing the application for state money, community engagement, and overall project management. The city check register shows the invoices were approved for payment.

Queer Works tax filings for the year in which the city was cutting it checks show the nonprofit received $723,000 in contributions and grants and had $594,000 in expenses. The organization reported $175,500 in revenue and expenses in the prior tax year.

Among the expenses in 2022 were $484,000 in salaries, employee benefits, and other compensation. The tax documents show that Rostovsky was paid $191,000 in compensation, and his husband received $73,000.

City’s response

Today, more than a year after failing to secure state funds for a large program and opening applications for the smaller program, the entire project has been handed off to DAP Health, and information about it has been removed from the Queer Works website. DAP Health said Friday that it took over the project on July 12, just seven days ago.

“The UBI program began in March 2023, and currently provides a monthly assistance payment of $800 to 14 low-income individuals and/or families,” a DAP spokesperson wrote. “The program will conclude on April 15, 2025.”

In a statement released to the media Friday afternoon following questions from The Post, the city acknowledged it is investigating an alleged misappropriation of funds by Rostovsky and Queer Works, has demanded the return of any remaining funds, and is implementing stricter financial oversight measures to prevent future issues, while DAP Health will now manage the program without additional taxpayer costs.

“When the City of Palm Springs learned that Mr. Rostovsky allegedly misappropriated funds allocated for the Queer Works program, the city manager directed the city attorney and senior staff to aggressively investigate the funding and perform a full audit of how it was distributed and if the funds were fulfilling the intent of the program as promised,” wrote communications director Amy Blaisdell in an email to The Post. “When preliminary reports revealed that the CEO of Queer Works could not provide sufficient evidence of where the funding went, the city manager immediately directed the city attorney to reach out and demand that any remaining funding be returned to the city.”

“The City of Palm Springs recognizes that as stewards of taxpayer funds, it is of critical importance that steps are taken to ensure these dollars are spent responsibly and in alignment with the expectations of our community, Blaisdell continued, adding, “Review of this program has underscored the necessity for strengthened measures to enhance financial oversight and protocols related to these kinds of collaborations with nonprofit programs that provided much needed community assistance. The City has implemented updated measures to ensure something like this does not happen again.”

Blaisdell confirmed the city is cooperating with law enforcement and the Riverside County District Attorney’s Office in their investigations. The extent of those investigations — including what charges might be considered against Rostovsky — is unknown. The DA’s office does not comment on active investigations.

“As it relates to any criminal investigation regarding this matter,” she said, “please reach out to the Riverside County District Attorney’s Office.”

The city could not say why Rostovsky and Queer Works – which filed its first tax documents only a year before securing funds from the city – wasn’t more heavily vetted. However, in a report prepared for the initial discussion of the Queer Works proposal, city staff seemed to caution elected officials about simply taking Rostovsky’s word that his organization was worthy of the investment. 

To help show Queer Works was worthy of involvement in the proposed Palm Springs program, Rostovsky submitted a one-page document showing a half-dozen projects he had been involved with, from Illinois to Los Angeles, complete with contacts who could vouch for his work. It remains unclear whether the city approached any organization to vouch for Queer Works in 2022.

“I might be more amenable to this if the $500,000 was returned to the city if they didn’t get the state grant –  that would be more amenable to me. But it sounds like they’ve already got the votes to move forward.”

— Former City Councilmember Dennis Woods in July 2022

Records show one of those projects, the TransPower Project, received $433,000 in funding from Riverside County. Today, no information appears anywhere about the project, and its former website is listed as an expired domain.

“While staff has a basic understanding of guaranteed income projects and the grant opportunities provided by state funding, this staff report largely reflects information provided by DAP Health and Queer Works,” the staff report from 2022 states. “Staff has not conducted any further research but can do so at the request of Council.”

It appears that request never came, even though two council members who were in the minority after a 3-2 vote to approve the additional $500,000 – current Councilmember Lisa Middleton and former Councilmember Dennis Woods – expressed concerns about committing so much money to the program.

Woods went as far as to call for greater scrutiny of Queer Works and suggested a clawback agreement be included in the agreement before appearing to accept that wouldn’t happen.

“I might be more amenable to this if the $500,000 was returned to the city if they didn’t get the state grant –  that would be more amenable to me,” Woods said. “But it sounds like they’ve already got the votes to move forward.”

“I’m deeply disturbed by their alleged wrongdoing,” Middleton said in a statement sent Friday to The Post. “In December, I requested and recommended that the Palm Springs City Manager conduct an audit into troubling facts about this program that had come to light.

“As a former auditor — and as a public servant — I believe that we owe nothing less to the people we serve than transparency and accountability. I have full faith in the Riverside County District Attorney’s office and the Palm Springs Police Department to conduct a professional and rigorous investigation. Public funds can only be used for public purposes as authorized under law. There are no exceptions. Those who violate the public trust must pay the appropriate price.”

Community member warned council

While the calls for better vetting from Woods were disregarded, so were those coming from the public, including some from an influential member of the transgender community.

“The City Council is expected to do its due diligence with Queer Works to ensure that such funds will be used appropriately,” wrote Thomi Clinton, founder and CEO of the Transgender Health & Wellness Center, before listing standard requirements of nonprofits that she said she was unsure had been met by Queer Works. 

“These are standard requirements for any nonprofit,” she concluded after lamenting the fact DAP Health chose to work with Queer Works instead of her organization. “Queer Works has requested $200,000 and up to $1.2 Million from the people.”

Clinton said this week that Queer Works has gone on to address many of the concerns she raised and that “It shows they are improving themselves as an organization.” Still, she said, the situation could have been avoided had her organization been involved initially.

“The decision of DAP Health not to involve the Transgender Health & Wellness Center is based on favoritism,” she wrote in an email to The Post. “If we told those decision makers what they wanted to hear instead of addressing transphobia and lack of inclusion, we would have most likely been approached.”

Reached on Friday, Rostovsky said the program did start, and applicants were selected, but that Queer Works transferred responsibility for it, as well as funds, to DAP Health. He could not say how much money was transferred to the healthcare organization, adding that he could not provide documentation that the transfer occurred. 

“I’m unable to speak as I’m handling a family emergency,” he said. “But DAP Health should be able to answer all questions.”

While DAP Health addressed the future of the program, it did not say how much money, if any, had been transferred from Queer Works. The company did confirm, however, that Rostovsky was no longer employed there, as he had announced on social media in September 2023.

“Jacob was employed part time, 20 hours per week, from Sept. 25, 2023 until March 4,2024,” a DAP spokesperson said. “He did not do (universal basic income) work as a DAP Health employee. Jacob provided gender health and wellness program support through business planning, navigation models for patients, and advocacy with payors.”

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