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Forensic audit finds accounting errors in Lodi utility-deposit figures, recommends monthly reconciliation
Summary
An independent forensic audit found methodological errors in prior calculations of Lodi City’s utility-deposit balances, narrowing an apparent $1.2 million discrepancy to about $67,000 and recommending monthly reconciliations and tighter controls; the auditor also reported limited procedural issues with city CalCard/Amazon purchases.
Steve Hoslett, a forensic consultant contracted by the city, told the Lodi City Council on April 15 that earlier calculations overstated a discrepancy in the utility-deposit account because they excluded long-standing deposits and compared mismatched reporting dates.
Hoslett said a consultant’s earlier method compared a June 30, 2024 general ledger balance with a March 2025 deposits report that excluded deposits from 2018 and earlier, creating an erroneous gap. “They excluded $488,000 worth of deposits that should have been included,” he said, adding that timing differences accounted for roughly $200,000 more. After detailed testing and reconciliation work, Hoslett said the remaining unreconciled difference is about $67,000 and that the account had not been fully reconciled since the 2018 system conversion.
Why it matters: Utility deposits are customer funds held by the city until refund eligibility; errors in reporting these balances raise public concern about stewardship and require corrected financial controls to prevent future confusion. Hoslett recommended implementing monthly reconciliations, validation rules for date fields, and research of 142 closed accounts that still show deposits (about $32,000) so legitimate refunds can be issued.
The audit also reviewed city CalCard and Amazon Business transactions. Hoslett said his team found no evidence of fraudulent charges but identified approximately $8,600 in unapproved or policy‑noncompliant transactions over multiple years, primarily modest travel and meal variances. “We did not detect fraudulent transactions,” Hoslett said, and praised existing corrective steps: the city has adopted a standard per-diem for meals and narrowed cardholder lists.
Council response and next steps: Council members pressed for explanation of why prior reconciliations had lapsed; Hoslett replied controls were not consistently applied after the 2018 system conversion. Council members and the city manager expressed support for his recommendations. Staff were asked to return with an implementation plan, and Hoslett recommended considering an internal-audit function—either by hiring an internal auditor or contracting recurring external internal-audit services—to provide ongoing checks and reduce risk.
Public questions: Members of the public asked how investment income on long-stored deposits is used; finance staff said excess balances are invested and investment earnings are budgeted for operating or capital needs rather than distributed to prior depositors unless specifically required.
What’s next: City staff will produce a reconciliation and corrective-action plan based on Hoslett’s recommendations and report back to council on both the remaining deposit discrepancies and proposals for routine internal-audit oversight.
