Lance, Soll & Lunghard Audit of Lodi City Government

Lodi
Written By Don Bradford

Overview of Audit and Investigation Activities

The City of Lodi underwent comprehensive financial reviews in FY 2023-24, including an independent audit by Lance, Soll & Lunghard, LLP (LSL) and a separate financial investigation by Kevin Harper, C.P.A. These reviews were conducted amid allegations of financial misconduct made by City Manager Scott Carney in April 2025[1][3].

Lance, Soll & Lunghard Audit Findings

Primary Audit Conclusions

Lance, Soll & Lunghard's audit of Lodi's FY 2023-24 Annual Comprehensive Financial Report (ACFR) reached the following key conclusions[1][2]:

No Fraud or Financial Misconduct:

  • No instances of fraud, waste, or abuse detected during the reporting period[1][2]

  • No material non-compliance with laws, regulations, or grant requirements[1]

  • Unmodified opinions issued for the City's General Fund and Streets Fund[1]

Specific Issues Identified

CalPERS Reporting Discrepancies:

The audit identified modified opinions on certain enterprise funds due to past underreporting to CalPERS regarding unused holiday cash-outs[1]. Specifically:

  • Reporting gap with CalPERS involving some employee groups that regularly work on holidays and can cash out unused holiday hours[4]

  • Incorrect reporting since 2021 of these cash-outs, potentially resulting in underpayment to CalPERS and/or inaccurate reporting of retirees' final salaries[4]

  • Impact on up to 11 former employees affecting the reliability of pension schedules under GASB Statement No. 68[4]

  • Minor financial impact expected with full resolution anticipated in the next reporting cycle[4]

Kevin Harper Financial Investigation

Investigation Scope and Findings

Financial assessor Kevin Harper, C.P.A. conducted an independent investigation focusing on specific areas of concern[1][2]:

Areas Examined:

  • Utility Deposit and Holding Account

  • City's use of procurement cards (CAL-Cards)

Key Findings:

  • No signs of fraud found in either the Utility Deposit and Holding Account or procurement card usage[1][2]

  • Further accounting review warranted to ensure customer amounts are correct[1]

  • Internal controls over procurement cards should be strengthened[1][2]

Context of Scott Carney's Allegations

Original Claims Made

City Manager Scott Carney made serious allegations during an April 1, 2025 city council meeting, including[6][7]:

Financial Misconduct Allegations:

  • Widespread misuse of public funds and city credit cards for personal expenses[6][7]

  • Unauthorized alteration of staff reports by City Attorney Katie Lucchesi and City Clerk Olivia Nashed after his approval[6][8]

  • Document tampering to protect certain employees and hide financial disclosures[6]

Consequences:

  • Carney was placed on paid administrative leave on April 9, 2025[6][3]

  • City hired Meyers Nave law firm to conduct independent investigation at a cost of $260,000[5][10]

Moss Adams Internal Controls Audit

Separate Review Findings

In addition to the Lance, Soll & Lunghard audit, the city also received findings from a Moss Adams internal controls review[10]:

Key Recommendations:

  • Establishment of fraud, waste, and abuse hotline for confidential reporting[10]

  • Creation of internal audit function for ongoing oversight[10]

  • Enhanced CAL-Card usage and review process[10]

  • Stronger procurement card controls[10]

Specific Issues Identified:

  • Some city employees had been using CAL-Cards for inappropriate personal purchases[12]

  • Need for pre-approval protocols and transaction caps for procurement cards[13]

  • Regular financial audits recommended[13]

Current Status and Ongoing Investigations

Investigation Timeline

Ongoing Personnel Investigation:

  • The Meyers Nave investigation remains ongoing as of July 2025[6]

  • No findings released yet from the city government regarding Carney's allegations[6]

  • Contract expanded multiple times with total cost reaching $260,000[5]

Administrative Actions:

  • Scott Carney remains on paid administrative leave[5]

  • James Lindsay appointed as interim city manager in May 2025[5]

Financial Health Assessment

Overall City Financial Standing

Despite the allegations and investigations, the audit findings indicate[1][14]:

Strong Financial Position:

  • Net position of $379.5 million (increase of $49.4 million year-over-year)[4]

  • Capital assets of $412.8 million[4]

  • Long-term debt reduced by $7.7 million (-4.4%)[4]

  • 30 consecutive years of Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting[1]

Recommendations for Policy and Procedural Changes

Internal Controls Enhancements

Based on the various audits and investigations, key recommendations include[10]:

Procurement Card Reforms:

  • Implementation of comprehensive purchasing card reforms to improve transparency[11]

  • Stronger internal controls over procurement card usage[1]

  • Pre-approval protocols and transaction caps for city purchases[13]

Fraud Prevention Measures:

  • Establishment of confidential reporting hotline for fraud, waste, and abuse[10]

  • Creation of internal audit function for ongoing oversight[10]

  • Enhanced monitoring and review processes[10]

Financial Reporting Improvements:

  • Corrective action with CalPERS to address holiday cash-out reporting gaps[4]

  • Strengthened financial reporting procedures to prevent future discrepancies[4]

Civil and Criminal Action Recommendations

No Criminal Referrals Identified

The available evidence indicates that no recommendations for criminal action have been made based on the Lance, Soll & Lunghard audit or Kevin Harper investigation findings[1][4]. Both reviews concluded that no fraud was detected in their respective areas of examination.

Potential Legal Implications

However, the broader context includes:

Ongoing Personnel Matter:

  • Potential litigation threatened by Scott Carney's attorney alleging retaliation for whistleblowing[15]

  • Litigation hold requested to preserve all relevant documents and communications[15]

The comprehensive financial reviews by Lance, Soll & Lunghard and Kevin Harper found no evidence of the widespread fraud and misconduct alleged by the former city manager, while identifying specific areas for procedural improvements in internal controls and financial reporting processes.

Sources

[1] News Flash • City of Lodi Publishes FY 2023-24 Annual Compre https://www.lodi.gov/CivicAlerts.aspx?AID=404

[2] News Flash • City of Lodi Publishes FY 2023-24 Annual Compre https://www.lodi.gov/CivicAlerts.asp?AID=404

[3] Lodi city manager put on leave after alleging misuse of public funds https://stocktonia.org/news/local-government/2025/04/14/lodi-city-manager-put-on-leave-after-alleging-misuse-of-public-funds/

[4] [PDF] City of Lodi Publishes FY 2023‑24 Annual Comprehensive Financial ... https://www.lodi.gov/DocumentCenter/View/8857/FINAL-Press-Release_FY-24-ACFR_Financial-Investigation

[5] Lodi financial reviews find 'no evidence of fraud, waste or abuse ... https://stocktonia.org/news/local-government/2025/07/29/lodi-financial-reviews-find-no-evidence-of-fraud-waste-or-abuse/

[6] Lodi City Manager Investigation - July Update — Lodi 411 https://lodi411.com/lodi-eye/lodi-city-manager-investigation-july-update

[7] Lodi city manager placed on leave after alleging misappropriation of ... https://www.cbsnews.com/sacramento/news/lodi-city-manager-placed-on-leave-whistleblower/

[8] Lodi Manager Placed On Leave After Alleging Misuse of Public Funds https://www.californiacitynews.org/2025/04/lodi-manager-placed-leave-after-alleging-misuse-public-funds.html

[9] Lodi appoints new acting city manager; investigation into claimed ... https://www.cbsnews.com/sacramento/news/lodi-new-acting-city-manager-misuse-of-city-funds-investigation/

[10] Will audit report serve as 'road map' for City of Lodi? - Yahoo https://www.yahoo.com/news/audit-report-serve-road-map-195300856.html

[11] Moss Adams Report - Recommendations — Lodi 411 https://lodi411.com/lodi-eye/moss-adams-report-on-lodi

[12] Lodi City Council to receive results of internal audit - Yahoo https://www.yahoo.com/news/lodi-city-council-receive-results-035900835.html

[13] City of Lodi releases new financial report - Yahoo https://www.yahoo.com/news/city-lodi-releases-financial-report-024513142.html

[14] Lodi's Annual Financial Report Showcases Fiscal Health ... - Hoodline https://hoodline.com/2025/07/lodi-s-annual-financial-report-showcases-fiscal-health-and-compliance-mayor-bregman-highlights-continuous-excellence/

[15] Lodi faces potential lawsuit as city manager alleges retaliation https://stocktonia.org/news/local-government/2025/05/28/lodi-faces-potential-lawsuit-as-city-manager-alleges-retaliation/

[16] Documents detail disputes in Lodi leadership - Stocktonia News https://stocktonia.org/news/local-government/2025/07/17/documents-detail-disputes-in-lodi-leadership/

[17] Investigation of claims made by Lodi's city manager underway https://www.youtube.com/watch?v=xbCB_bDA0vs

[18] Lodi official accuses city of misuse of funds, report released - YouTube https://www.youtube.com/watch?v=cAwYYMzl984

[19] [PDF] Audit of the Superior Court of California, County of San Joaquin https://courts.ca.gov/sites/default/files/courts/default/2024-12/sanjoaquinaudit1011.pdf

[20] [PDF] city of lodi transportation development act and measure k funds non ... https://www.sjcog.org/Archive/ViewFile/Item/838

[21] Lodi investigates 'widespread' misuse of public funds - ABC10 https://www.abc10.com/article/news/local/lodi/lodi-investigates-misuse-funds/103-5e2d3319-af3d-451f-b165-2d45a1e4ec23

[22] No fraud found in audit of city, report finds - Yahoo https://www.yahoo.com/news/no-fraud-found-audit-city-035900150.html

[23] The City of Lodi recently had the pleasure of hosting the ... - Instagram https://www.instagram.com/reel/DMeC1SIy00Y/

[24] [PDF] Appendix L: 2025 Biological Assessments and Biological Opinions https://www.spk.usace.army.mil/Portals/12/documents/civil_works/CommonFeatures/Documents/28%20Appendices%2014MAY25/ARCF%20Appendix%20L%202025%20Biological%20Assessments%20and%20Biological%20Opinions.pdf?ver=9XgxjCIoYlds-6y7_AKvgA%3D%3D

[25] City of Lodi Publishes FY 2023‑24 Annual Comprehensive Financial ... https://www.instagram.com/p/DMNzqwBs23y/

[26] Lodi city manager on leave after alleging misuse of public funds https://www.youtube.com/watch?v=ERn5UryUVX0

[27] Citations for COVID-19 Related Violations https://www.dir.ca.gov/dosh/covid19citations.asp

[28] San Joaquin County, CA Breaking News Headlines Today https://ground.news/interest/san-joaquin-county

[29] CalPERS Issues New Circular Letter Regarding Holiday Pay https://www.lcwlegal.com/news/calpers-issues-new-circular-letter-regarding-holiday-pay/

[30] Holiday Pay | CalPERS - CA.gov https://www.calpers.ca.gov/employers/policies-and-procedures/circular-letters/200-037-24

[31] [PDF] Alan M. Koahou Attachment A - CalPERS https://www.calpers.ca.gov/documents/202107-full-day3-10-pd-itemh-attacha-a/download?inline

[32] [PDF] Lodi City Council https://lodica.granicus.com/AgendaViewer.php?view_id=2&clip_id=2385

[33] Lodi investigates 'widespread' misuse of public funds - YouTube https://www.youtube.com/watch?v=tLpcU6bdMuQ

[34] [PDF] LODI CITY COUNCIL - SPECIAL https://www.lodi.gov/AgendaCenter/ViewFile/Agenda/_06102025-1845

[35] Compliance in Compensation Reporting - CalPERS - CA.gov https://www.calpers.ca.gov/employers/policies-and-procedures/compliance-in-compensation-reporting

[36] Moss Adams Peer Review and PCAOB Report https://www.mossadams.com/about/peer-review-and-pcaob-report

[37] Meyers Nave Investigates… - Lodi 411 https://lodi411.com/lodi-eye/meyers-nave-investigates

[38] Carney's Hire: Lodi Assistant City Manager Magee Paid ... - Instagram https://www.instagram.com/p/DLGV0Qtt7cG/

[39] [PDF] 9:00 AM Monterey Regional https://montereyairport.specialdistrict.org/files/edfe50619/20240424+Packet.pdf

[40] Lodi city manager placed on leave after contentious council meeting https://www.abc10.com/article/news/local/lodi-city-manager-placed-leave/103-ca0941fa-125f-4e94-b339-3ad456aea1d2

[41] [PDF] Audit Committee Meeting - Foster City https://www.fostercity.org/sites/default/files/fileattachments/audit_committee/page/371/001_-_agenda_packet.pdf

[42] [PDF] fdicia-guide-internal-controls.pdf - Moss Adams https://www.mossadams.com/getmedia/b3f3488e-0d3b-42a8-8d79-e4161d7ede41/fdicia-guide-internal-controls.pdf

[43] [PDF] 2023 Inspection Moss Adams LLP - PCAOB https://assets.pcaobus.org/pcaob-dev/docs/default-source/inspections/reports/documents/104-2024-103-moss-adams.pdf?sfvrsn=5593adbb_2

[44] [PDF] Meeting Agenda - Final - City of Stockton https://cms3.revize.com/revize/stockton/clerk/granicusagendas/citycouncil/20220621.pdf

[45] 5 Steps to Prevent Material Weaknesses Before an Independent Audit https://www.mossadams.com/articles/2021/07/5-steps-to-prevent-material-weaknesses

[46] [PDF] BOARD OF SUPERVISORS - Granicus https://alamedacounty.granicus.com/AgendaViewer.php?view_id=2&event_id=5597

[47] Lodi City Manager Scott Carney was placed on paid administrative ... https://www.instagram.com/p/DIhcJM2pgJf/

[48] Help Mitigate Risk with Effective Internal Controls - Moss Adams https://www.mossadams.com/articles/2024/02/how-internal-controls-can-help-mitigate-risk

Don Bradford
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