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CONTINUED DISCUSSION REGARDING POTENTIAL CHANGES TO CHAPTER 5.10 OF THE COUNCIL POLICY MANUAL
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RECOMMENDATION
It is recommended that the Legislation and Environmental Committee receive information regarding potential changes to Chapter 5.10 of the Council Policy Manual, “Mayor and Council Discretionary Funding,” provide staff with direction and consider forwarding a recommendation to the City Council to revise this policy.
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Summary
At its August 25, 2025, meeting, the Legislation and Environmental Committee considered the findings of the Moss Adams report regarding its review of the Council discretionary funds (Attachment A). In light of those findings, the Committee directed staff to make revisions to City Council Policy Manual Chapter 5.10.
This discussion has been agendized for the Committee to review those changes, to direct staff regarding desired revisions, if any, and to consider making a recommendation to the City Council to adopt the amendments to Chapter 5.10.
DISCUSSION
Background
Council Policy Manual Chapter 5.10 provides the expenditure guidelines for the discretionary funds allocated by the Mayor and Council to be expended by the Mayor and Council in fiscal years when discretionary funding is explicitly adopted in the annual operating budget.
In December 2023, the Legislation and Environmental Committee began its review of the full Council Policy Manual. On August 28, 2024, the Committee requested the review of the Council discretionary fund policy be expedited. However, on September 9, 2024, by Motion 2024-09-09-0303 the Council Audit Committee added the review of the Council discretionary funds procedures into the Auditor’s Fiscal Year 24-25 Internal Audit Program. Therefore, the review and potential update to the discretionary fund policy requested by the Legislation and Environmental Committee was deferred pending the outcome of Auditor’s best practice review. The Moss Adams final report was provided to the Council Audit Committee on May 12, 2025 (Attachment A).
At its August 25, 2025, meeting, the Legislation and Environmental Committee considered the findings of the Moss Adams report. In light of those findings, the Committee directed staff to make revisions to City Council Policy Manual Chapter 5.10.
Present Situation
Below is a breakdown of the revisions made to Chapter 5.10 following Committee direction. The redline changes to the policy are reflected in Attachment B to this report.
Definitions
The Moss Adams report recommended that the City “[d]efine and communicate specific criteria for what constitutes an appropriate use of discretionary funds, ensuring that all expenditures align with policy requirements.” For the Committee’s consideration, Staff added a definition as section 5.10.010(3) of the policy. This section defines the terms: “Community Benefit”; “Personal Benefit”; and “Sponsorship Event”.
Formal Application Process
The report concluded that “[b]est practices for managing Council discretionary funds include implementing a formal application process for entities seeking funding.” Considering this recommendation, the Committee directed staff to establish an application process for community events.
Section 5.10.010(4)(A) now titled “Community Applications” requires an application to be submitted by outside parties seeking the use of discretionary funds. The proposed application form is included as Attachment C for the Committee’s consideration.
Travel Related Approvals
For consistency, section 5.10.010(4)(B), now titled “Travel Reimbursements,” was revised to reference and incorporate Council Policy Manual Chapter 2.04, “City Council Travel and Expenses.”
Membership Reimbursement
Because discretionary funds could be “potentially misused for administrative costs, including cell phone bills, personal car, internet access fees, professional development, and membership dues,” the Moss Adams report recommended establishing “stipend system” (emphasis added).
At the August 25th meeting, staff pointed out that membership dues are currently an allowable expenditure under Chapter 5.10. The Committee directed staff to keep membership dues in the policy, but emphasized the responsibility of each member to clearly establish the “Community Benefit” and demonstrate that it is not a “Personal Benefit” as defined in the policy.
Sponsorship Events
The Moss Adams report suggests expenditures on sponsorships and other ticketed events, such as exclusive golf events which call for donations in exchange for event tickets, appear to benefit only select individuals rather than the broader community.
At its last meeting, the Committee was divided regarding what criteria or restrictions should be implemented for the use of discretionary funds on Sponsorship Events or whether it should be a permissible expenditure at all.
Staff has separated these events into a distinct category in section 5.10.010(4)(D). As written, the policy allows Councilmembers to use expend discretionary funds on Sponsorship Events if the following conditions are met:
“i) The event or the proceeds of the event have a Community Benefit.
ii) The event is not religious or political in nature.
iii) The expenditure does not have a Personal Benefit.
iv) Additional tickets may be purchased for participants other than the Councilmember expending their discretionary funds. If additional tickets are purchased, the Councilmember will include a list of all participants in their request for expenditure form.”
Staff looks for clarification on what, if any, additional restrictions or revisions the Committee would like made to this section.
Acknowledgement Form
The report further recommends that the City provide training for the Mayor, Council Members, and relevant staff. Following Committee direction, to ensure that the Councilmembers annually review Chapter 5.10, staff created an acknowledgment form (Attachment D). In accordance with section 5.10.020(2), this must be executed by all Councilmembers each year by the end of July or within 30 days of any updates to the policy. Without the signed form, Councilmembers cannot utilize their discretionary funds.
Section 5.10.010(4)(A) also requires that all applicants submit the form as part of the application for discretionary funds.
Audit Committee Review
The Moss Adams report also recommends that the City “[i]mplement regular audits of travel expenses to monitor adherence to the policy, with findings to be reported publicly to enhance transparency” and “[r]egularly audit and report on the use of discretionary funds, including the outcomes of funded activities, to the public to enhance transparency and accountability in fund management.”
The Committee indicated that it would like the Audit Committee to annually review the discretionary fund expenditures. The Committee further indicated that this should be done before or as part of the budget preparation. Therefore, section 5.10.020(2)(C) was added to read:
“Once a year, but no later than the last day of May, all discretionary expenditures from the preceding year will be presented to the City of Stockton Audit Committee in a public session for review. During this review the Committee will review the expenditures for compliance with this policy and may make appropriate recommendations to the City Council, if any, including any necessary enforcement needed under section 5.10.010(4) of this policy.”
Review Structure
Currently, under section 5.10.030, both the City Attorney's Office and the City Manager's Office responsibilities include “[r]eview requests for compliance with City policies and processes.” Moss Adams concluded: “The City should establish a clear hierarchy for reviewing discretionary fund expenditure requests to ensure the expenses are appropriate and compliant with the policy. The City Attorney’s Office should focus on ensuring legal compliance for expenditure requests, while the City Manager’s Office should evaluate alignment with the City’s strategic priorities and budget.” The report further suggests, “[i]mplementing a sequential review process, where the City Attorney’s Office reviews requests first and the City Manager’s Office gives final approval. . .”
Following Committee direction and consistent with current practice, sections 5.10.020(C) and 5.10.030 were updated to reflect that the City Attorney’s Office will focus its review on ensuring legal compliance for expenditure requests and then forward the approval to the City Manager and the City Manager’s Office will review for budgetary compliance.
Updated Form
In light of the potential updates to the policy, staff has also updated the Council’s “Request for Expenditure” form (Attachment E)
Next Steps
Staff seeks direction regarding desired revisions, if any, and recommends that the Committee consider making a recommendation to the City Council to adopt the amendments to Chapter 5.10.
FINANCIAL SUMMARY
Providing direction and clarification on changes to Council Policy Manual Chapter 5.10 will not impact the City’s General or Special Funds in any way.
Attachment A – Moss Adams Report
Attachment B – Redline Chapter 5.10
Attachment C – Discretionary Fund Application
Attachment D – Acknowledgement Form
Attachment E – Council Request for Expenditure Form