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ADOPTION OF PROPOSED AMENDMENTS TO CHAPTER 5.10 OF THE COUNCIL POLICY MANUAL REGARDING DISCRETIONARY FUNDING
recommended action
RECOMMENDATION
It is recommended that the City Council adopt the proposed amendments to Chapter 5.10 of the Council Policy Manual, Mayor and Council Discretionary Funding.
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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. In light of those findings, the Committee directed staff to revise City Council Policy Manual Chapter 5.10. At its September 15, 2025, meeting, the Committee considered the proposed revisions and unanimously approved Motion 2025-09-15-0301 forwarding a recommendation to approve the proposed changes to Chapter 5.10 to the full City Council. Accordingly, the Committee’s recommended changes are presented for the full Council’s consideration.
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 meeting on August 25, 2025, the Legislation and Environmental Committee considered the findings of the Moss Adams report and directed staff to revise the policy. On September 15, 2025, staff returned with changes to reflect the Committee’s direction (Attachment B). Following review of the proposed changes, the Committee voted unanimously to approve Motion 2025-09-15-0301 forwarding a recommendation to approve the proposed changes to Chapter 5.10 to the full City Council.
Present Situation
Presented for the City Council’s consideration are the Committee’s recommended changes as reflected in Attachment C and addressed in more detail below.
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.” Accordingly, a definition section was added as section 5.10.010(3) and 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.” Section 5.10.010(4)(A) now titled “Community Applications” was added and requires an application to be submitted by outside parties seeking the use of discretionary funds. The proposed application form is included as Attachment D.
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 a “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. Section 5.10.010(4)(D) was updated to clearly require the Councilmembers to meet al of these requirements.
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. The proposed revisions retain these events as an allowable expenditure but separate them into a distinct category in section 5.10.010(4)(D) with the following requirements:
“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.”
The Committee recommended the incorporation of these revisions without further changes.
Acknowledgement Form
The report further recommends that the City provide training for the Mayor, Council Members, and relevant staff. As the general goal of training is to ensure familiarity and compliance with the policy regulation, the Committee directed staff to create an acknowledgment form consistent with other city-wide administrative polices. In accordance with Committee direction, staff created the acknowledgement form included as Attachment E. In accordance with section 5.10.020(2), this form 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 F).
Next Steps
It is recommended that the City Council adopt the proposed amendments to Chapter 5.10 of the Council Policy Manual, Mayor and Council Discretionary Funding.
FINANCIAL SUMMARY
The proposed 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 - September 15, 2025, PowerPoint Presentation
Attachment C - Redline Chapter 5.10
Attachment D - Discretionary Fund Application
Attachment E - Acknowledgement Form
Attachment F - Council Request for Expenditure Form