By Sam Morgen
The Palm Springs City Council plans to update how the city hands out grants in an apparent response to the alleged misappropriation of hundreds of thousands of dollars through a guaranteed income pilot program funded by the city.
The primary change under the new proposed rules would be the elimination of lump sum payments for all funding over $75,000. All organizations receiving over $75,000 would have to submit to an independent audit and may either receive their funding in split payments over time or on a reimbursement basis, under a proposal written by the city manager’s office that the council debated Thursday and plans to vote on at a future meeting.
The city would also strengthen the due diligence process for organizations who have not received city funding before and designate a city staff member to oversee each program or contract.
Although the scandal was never mentioned during Thursday’s meeting, the city has previously expressed a desire to update financial control measures after a nonprofit tasked with administering a guaranteed income pilot program could not account for $700,000 in city funding.
Under the existing rules, most city funding was distributed in lump sum payments. That is what occurred in 2022 when the city council approved payments of $200,000 and $500,000 to Queer Works and DAP Health for the guaranteed income pilot program.
DAP Health has not been accused of financial malfeasance and appears to have allowed Queer Works control of the program from its inception. Queer Works, a relatively unknown nonprofit focusing on mental health services for transgender and gender-diverse individuals, paid CEO Jacob Rostovsky $191,000 in 2023, the bulk of which appeared to come from city funding. In total 81.5% of all revenue received by Queer Works in 2023 went toward executive compensation and salaries, according to tax filings.
The city had intended the funding to allow Queer Works to apply for a state grant, which never materialized. Subsequently, financial reports filed with the city were found insufficient by city officials and the Riverside County District Attorney launched an investigation. No charges have been announced.
What specifically became of the city funding has not yet been revealed. However, the city’s action to update financial rules appear to be aimed at addressing some of the problems the guaranteed income pilot program revealed.
Under the new rules, funds of more than $200,000 would be split into a minimum of four payments, with each payment distributed at least three months apart. Progress reports and financial documentation would be required before each payment.
Funding recipients would also be required to:
- Be located in Palm Springs or provide services in the city
- Meet the definition of a nonprofit organization and provide the IRS 501(c) tax designation letter
- Have the ability to provide the organization’s federal tax return or audited financial statements
- Possess a valid business license, as applicable
- Be in good financial and legal standing with the city
- Provide a proposal that will benefit the residents of Palm Springs
- Meet all criteria of the grant application
- Comply with all federal, state and local laws while performing grant-funded services
- Not discriminate against any employee per the city’s municipal code
Council members requested several revisions to the proposal during Thursday’s discussion. The city manager’s office will incorporate the changes into a new proposal, which will be brought before the council at a later meeting.
