Palm Springs City Council approves response to grand jury report on $700,000 grant oversight failure

The Palm Springs City Council on Wednesday approved its response to a civil grand jury report that found the city lacked proper oversight procedures, resulting in the loss of more than $700,000 in taxpayer funds, but not before facing sharp criticism from residents and engaging in heated debate over the city’s accountability.

The Riverside County Civil Grand Jury issued the report in June following the indictment of Queer Works CEO Jacob Rostovsky on 53 criminal counts related to a fraudulent scheme involving public funds. The indictment followed reporting by The Post, which began to look into allegations against Rostovsky in the spring of 2023 and first reported the story in the summer of 2024.

The report, titled “City of Palm Springs Lacked Proper Procedures for Vetting and Monitoring of Grants,” concluded the city had inadequate policies for processing and monitoring grants and contracts.

The controversy stems from a Universal Basic Income pilot program approved by the council in March 2022. The city provided $700,000 to Queer Works to pursue state funding for a program targeting transgender and non-binary individuals. However, Queer Works allegedly failed to provide required monthly reports and financial documentation as specified in the memorandum of understanding.

During Wednesday’s council meeting, several members expressed concerns about the city’s response, particularly regarding a key finding about financial losses. The grand jury found that “inadequate oversight resulted in a loss of over $700,000,” but the city disagreed, stating “DAP Health was able to complete the pilot program, and the city is unable to reconcile a specific amount of loss.”

The item passed with a 4-1 vote, with Mayor Ron deHarte casting the lone no vote.

The discussion intensified when one councilmember questioned staff about the distinction between “financial statements” and the invoices and progress reports the city did receive. Finance Director Kristopher Mooney explained the city received invoices and progress reports for the initial $200,000 but never received formal financial statements from Queer Works despite repeated requests.

Pressing further on the actual financial impact, Mooney revealed that approximately $30,000 remained when Desert AIDS Project took over the program, though the city couldn’t confirm that figure. “We weren’t able to get sufficient information to conduct an audit,” he said, explaining that Queer Works essentially shut down communication with the city.

The council’s deliberations were preceded by sharp criticism from public speakers who called the city’s response insufficiently transparent.

“We lost track of $700,000, but since we can’t count it, it doesn’t count,” said speaker Philip Hodges, calling the position “absurd.” Another speaker, former councilmember Ginny Foat, said the response made the city “look foolish and dishonest” by appearing to deny that taxpayer money was wasted.

Building on these concerns about accountability, Councilmember David Ready shifted the discussion toward broader systemic reforms, proposing establishment of a formal policy review committee similar to the city’s investment committee to regularly examine city policies.

Ready framed the issue in broader terms, saying “This is more than just a cancelation, it’s a cultural wound,” referencing the impact on community trust.

Mayor Pro Tem Naomi Soto embraced Ready’s policy review concept while adding important caveats about implementation. She emphasized the need to respect the expertise of department heads and maintain clear boundaries between the council’s policy role and staff’s implementation responsibilities.

City Manager Scott Stiles agreed to work with department directors to develop a proposal for systematic policy review, acknowledging the council’s desire for more proactive oversight.

The city has implemented most of the grand jury’s 10 recommendations, including eliminating lump sum payments for grants over $75,000, requiring fraud prevention training for staff, establishing vetting procedures for nonprofit organizations, and mandating independent audits. The city agreed to hire an independent auditing firm for internal operational audits but rejected a recommendation for a forensic audit of all departments, calling it “excessive.”

Desert AIDS Project assumed full control of the Universal Basic Income program in July 2024, using private donations to complete the pilot after Queer Works’ alleged misappropriation of funds.

The city’s response was due by Sept. 24 under state law requiring agencies to respond to civil grand jury reports within 90 days.

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