The Stockton City Council unanimously approved five internal audits Tuesday, launching a broad examination of city operations as council members renewed demands for answers about how the city has spent hundreds of millions of dollars in voter-approved sales tax revenue.
The 7-0 vote authorizes UHY Advisors, the accounting firm hired in April to serve as Stockton’s internal auditor, to examine contracting practices, employee hiring and payroll, grants management, municipal utilities and oversight of Measure A revenue.
But much of the Oct. 27 discussion centered on a question that has persisted through previous reviews and council inquiries: Will the audits provide the financial accountability officials have been seeking?
Jack Reagan, a managing director at UHY, told council members the firm intends to complete all five reviews by June 30, 2027, an ambitious timeline that could require multiple audits to proceed simultaneously.
The plan follows a citywide risk assessment that identified potential vulnerabilities across Stockton’s operations, with procurement emerging as the highest priority.
The assessment, developed through interviews with directors of all 19 city departments, two deputy city managers and City Manager Johnny Ford, raised concerns about lengthy contracting procedures, inconsistent documentation requirements and processes that rely heavily on manual work.
Although the assessment did not establish wrongdoing, it identified areas where further examination could reveal weaknesses in the city’s financial and operational controls.
Council demands accounting of Measure A revenue
The sharpest questions Tuesday concerned Measure A, the three-quarter-cent sales tax Stockton voters approved in 2013 to support public safety and other municipal services.
Councilmember Jason Lee pressed Reagan on whether the proposed audit would trace how the city has allocated the more than $400 million collected through the tax.
“We should find out where every penny of Measure A has been allocated,” Lee said.
Lee questioned whether the proposed review would deliver the comprehensive accounting council members have sought, expressing frustration that an earlier audit request had not produced the expected results.
He said city officials previously assured council members they were conducting the audit, but council members later discovered that the work had never taken place.
“We promised it almost two years ago and we don’t have it done,” Lee said.
The exchange highlighted a distinction between what council members want to know about Measure A spending and what UHY has proposed examining.
Reagan explained that the firm’s review would focus on the city’s procedures for recording, documenting and reporting revenue and expenditures, including the information provided to the Measure A Citizens’ Advisory Committee.
UHY also intends to avoid repeating work already performed by other auditors, he said.
It remains unclear whether UHY will trace individual expenditures as Lee requested because the firm has yet to develop the detailed audit procedures.
Reagan outlined a two-step process: Council members would first approve the five audit areas, after which UHY would develop the scope of each review and return for approval before proceeding.
The discussion also renewed attention to concerns raised by the Measure A Citizens’ Advisory Committee, whose members have questioned whether they receive sufficient financial information from city staff to fulfill their oversight responsibilities.
Councilmember Michele Padilla thanked Reagan for meeting with the committee’s leadership, but Reagan emphasized that responsibility for supplying the information would remain with the city.
“The city will provide them the information,” Reagan said. “I’m going to make sure that the process to gather that information to get over to them is good and that the numbers that go over there from the city are good.”
If the review identifies weaknesses in those procedures, UHY would recommend changes for city staff to implement, he said.
An ambitious deadline and new oversight measures
Beyond Measure A, the approved plan will examine how Stockton awards contracts, recruits employees, processes payroll, manages grants and handles municipal utility billing and collections.
Reagan highlighted concerns about grants management, saying the city’s decentralized approach could complicate financial reporting and reimbursement procedures.
He also warned that anticipated changes to federal grant requirements could affect how the city and organizations receiving grant funding manage their finances.
With approximately eight months remaining in the fiscal year, UHY expects to conduct two audits simultaneously to meet its June 30 deadline.
Mayor Christina Fugazi questioned whether that schedule would allow enough time for reviews that could uncover problems requiring additional examination.
“I think you’re going to hit a rabbit hole in some of these and you’re going to have to take a deeper dive than maybe you had originally anticipated,” Fugazi told Reagan.
Reagan said he was approaching the work with an understanding of those challenges and described city management and staff as cooperative during UHY’s transition into its new role.
The firm also plans to provide regular updates on audit progress and its oversight of Stockton’s fraud, waste and abuse hotline, including the number of complaints, how the firm handles them and the status of ongoing investigations.
Reagan proposed tracking additional compliance statistics, such as the number of contracts awarded through sole-source or emergency procedures, to give council members a clearer picture of the city’s contracting practices.
He said the firm hopes to begin providing those updates by December.
Questions extend beyond the approved audits
The discussion also revealed council members’ interest in examining city operations that fall outside the five approved reviews.
Padilla and Fugazi raised concerns about the Ask Stockton app, which residents use to report problems and request municipal services.
Fugazi questioned whether the city had actually resolved service requests that the system marked as closed, raising concerns about how staff track and respond to complaints.
Council members expressed interest in reviewing the app’s operations but did not add it to the five approved audits.
Another concern involved what happens after auditors identify deficiencies.
Reagan said UHY expects to begin reviewing outstanding findings and corrective actions during its second year, potentially incorporating results from annual financial audits, state investigations and civil grand jury reports.
The reviews would determine whether the city has addressed problems that previous audits uncovered.
Reagan also recommended reconsidering the composition of Stockton’s Audit Committee, suggesting that community members with accounting or financial management expertise could serve alongside elected officials.
Councilmember Michael Blower, who has served on the committee for four years, expressed interest in the proposal. No changes were approved Tuesday.
Audits move forward as state investigation continues
The newly approved reviews will proceed separately from an ongoing investigation by the California State Controller’s Office into Stockton’s financial controls.
Lee said during Tuesday’s meeting that he expects the state’s findings within approximately six weeks, potentially providing additional information about the city’s financial practices as UHY begins its work.
Meanwhile, the precise scope of each internal audit will still require council review.
Reagan said UHY intends to return with detailed procedures outlining what each examination will cover, allowing council members to determine whether the proposed work meets their expectations before it begins.
The firm now faces a June 30, 2027, deadline to complete five reviews spanning some of Stockton’s most scrutinized operations — including Measure A spending, where council members have made clear that they are still waiting for answers.