CITY OF BANNING
STAFF REPORT

Adopt Resolution 2026-137

The Budget and Finance Committee was formed in January 2014, when the City Council approved its annual committee assignments. The committee did not appear on the 2013 assignment list. It was established as one of the Council's "2x2 Council Working Groups," with initial appointments of two Council Members and the City Treasurer. At that meeting, the Council also discussed that committees would meet quarterly unless otherwise stated and that staff would develop a meeting calendar so the public would know when committees meet. No focus, scope, or membership rules were adopted for the committee at that time.

In January 2023, the City Council directed the City Manager to develop policies for its standing committees. On April 25, 2023, Mayor Pro Tem Wallace requested policies specific to the Budget and Finance Committee. On May 9, 2023, staff presented proposed Resolution 2023-81, which would have approved City Council Standing Committee Policies for the Council's six standing committees (Attachment 1). The City Council did not adopt Resolution 2023-81. As a result, the City has not adopted policies governing the focus, responsibilities, procedures, or membership of the Budget and Finance Committee or its other standing committees.

The May 9, 2023 staff report noted that the Budget and Finance Committee was the most active committee, and that the lack of written guidance had led to requests that departed from the committee's original intent, including an attempt to direct the Administrative Services Director. The proposed policies would have addressed this by establishing that committees are advisory, work only on matters assigned by the City Council, and have no authority to direct staff, adopt policy, or obligate the City. They would also have defined the Budget and Finance Committee's focus and responsibilities in five areas: Budget, Compliance, External Audit, Asset Management, and Oversight.

The 2023 draft also did not address committee membership, qualifications, terms of service, or participation by members of the public. The committee continues to be made up only of two Council Members and the City Treasurer, and it still operates without written guidance on its scope or procedures.

The City's circumstances have changed significantly since 2023. On February 24, 2026, the City Council adopted a Strategic Plan that makes Banning's Workout Plan to Fiscal Sustainability a top priority. On June 9, 2026, the City Council adopted continuing Resolution 2026-89 to authorize expenditures while the budget was completed, and on June 23, 2026, the City Council declared a fiscal emergency through Resolution 2026-102. The City held public budget workshops on August 18, August 20, August 26, and September 10, 2026, and the City Council adopted the FY 2026-27 budget on September 21, 2026.

During the same period, the Riverside County Civil Grand Jury issued its report, "Banning: A City Alarmingly Mismanaged," and the City submitted its formal response. The FY 2025 audit is nearing completion, and the FY 2026 audit is expected to begin before the end of calendar year 2026.

At the September 22, 2026, City Council meeting, Mayor Royce requested that the City Council consider expanding the Budget and Finance Committee to include members of the public. This report responds to that request. Because the 2023 policies were never adopted, it uses the 2023 draft as a starting point for Budget and Finance Committee policies, and adds provisions for public members.

The City is asking residents to understand and support difficult financial decisions under a declared fiscal emergency. Adding qualified members of the public to the Budget and Finance Committee would give residents a direct, ongoing role in reviewing the City's finances in furtherance of direct public oversight. Staff has identified the following reasons to support the change:

1. Transparency and public trust - Following a fiscal emergency declaration and the Grand Jury report, residents have reason to want independent eyes on the City's finances. Public members who are not elected and not employed by the City provide that independent perspective in a public, Brown Act-noticed setting.
2. Added expertise at no cost - Banning residents with backgrounds in accounting, auditing, public finance, banking, or utility rates can add technical capacity while the Finance Department continues to rebuild and clean up the City's books.
3. Continuity through a multi-year recovery - Council committee assignments can change every year. Public members serving staggered two-year terms would provide continuity across the multi-year Workout Plan, the audits, and future budget cycles.
4. Stronger audit oversight - Under the proposed policies, the committee would review audit results. The Government Finance Officers Association (GFOA) recommends that governments maintain an audit committee whose members, collectively, have expertise in accounting, auditing, and financial reporting and are independent of management. Qualified public members help the committee meet that standard.
5. Puts written guardrails in place for the first time - Because Resolution 2023-81 was not adopted, the committee has no written scope or procedures today. The proposed policies would establish that the committee is advisory, works only on matters assigned by the City Council, and may not direct staff. This gives public members clear rules from their first meeting.
6. Timing - If the City Council provides direction now, public members could be appointed in December 2026 and participate in the FY 2027-28 budget and FY 2026 audit process.

Staff proposes the following framework for the committee:

1. Number of committee members - Two Council Members appointed annually by the Mayor; City Treasurer; and two at large residents of the city of Banning.
2. Eligibility - Banning residents, 18 years or older. NOT eligible - City employees; family members of Council; the City Manager or Finance Department staff; owners, officers, or employees of businesses with active City contracts; employees of the City's external audit firm; and members or family members of another City board, commission, or committee.
3. Desired qualifications - experience in accounting, auditing, public or municipal finance, budgeting, banking, investments, or utility finance. A CPA, CPFO, CIA, or similar credentials is preferred but not required.
4. Appointment process - City Clerk posts vacancies for at least 30 days. Applications are presented to City Council at a workshop. Interviews of the applicants are held in a publicly noticed meeting. City Council appoints the two residents at the regular meeting following the workshop.
5. Terms - Two-year staggered terms, with a limit of two consecutive full terms. For the first appointments, one seat is a one-year term, chosen by the Council.
6. Chair and Vice Chair - Chair is a Council Member of the committee. Vice Chair is elected annually by the committee from among its members.
7. Compensation - None.
8. Attendance and removal - Members serve at the pleasure of the City Council and may be removed by majority vote of the City Council. Three consecutive unexcused absences, or missing one-third of meetings in a 12-month period, creates an immediate vacancy.
9. Training - Brown Act and ethics training, and an orientation on the City's budget and finances by the Finance Director, within 60 days of appointment.

Proposed Implementation Timeline

October 13, 2026 - Council adopts resolution

October 14, 2026 - City Clerk posts notice of vacancies; application period open for at least 30 days

December 8, 2026 - Council interviews and appointments

December 15, 2026 - first Budget and Finance Committee meeting

There is no direct fiscal impact from providing direction. Under the staff proposal, public members would serve without compensation. Costs would be limited to staff time for recruitment, public noticing, agenda preparation, minutes, Form 700 administration (if required), and member orientation. These costs would be absorbed within the adopted FY 2027 budget.