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City auditors issue largely clean FY25 opinion but flag pension reporting, repeat control deficiencies
Summary
Independent auditors gave Lodi City clean opinions for core funds but retained a modification tied to pension reporting and noted repeat internal control weaknesses and two federal reporting delays related to ARPA activity; auditors said no going-concern doubts or evidence of fraud were found.
Lodi City received its fiscal year 2025 financial report from auditors LSL LLP, who delivered mostly positive findings while flagging several technical and control issues.
Christian Towns and Jamie Lambert of LSL told the City Council that they issued unmodified (clean) opinions for the general fund and streets fund, indicating those statements are fairly presented without material misstatement. The auditors issued a modified opinion for some other major funds because of delayed or incomplete pension information previously posted into the pension system; that modification carried forward from fiscal year 2024 and is expected to resolve as pension reporting timing normalizes.
The auditors reported repeat deficiencies in internal controls and compliance testing. Towns said those repeat items were not unusual given turnover and the timing of the FY24 issuance, and that city staff are actively working on remedies expected to reduce those findings in FY26. On federal compliance, auditors issued an unmodified opinion for major federal programs but noted two instances of noncompliance tied to delays in required federal reporting and an incomplete schedule of federal expenditures related primarily to ARPA activity; those items are expected to be remedied in the coming year.
Auditors said they found no going-concern doubts about the city's ability to continue operations and reported no evidence of fraud, waste or abuse within the scope of their risk-based sampling. Major accounting changes disclosed to the council included the required implementation of GASB Statement 101 on compensated absences and an adjustment identifying capital projects incorrectly capitalized in prior periods; together the restatements affected opening net position.
Council members asked for follow-up materials, including the forensic-audit report referenced in prior reviews and additional detail on business license (now a fee) revenue and construction-in-progress balances. Auditors and staff agreed to provide the supplemental documents and hard copies to council members.
The audit packet will be received and filed as part of the city's official financial record and staff said corrective actions and process improvements are underway ahead of the FY26 audit.
