AGENDA TITLE:
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Receive City-Wide Internal Controls Review Report (CM)
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MEETING DATE:
June 10, 2025
PREPARED BY:
James Lindsay, Acting City Manager
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RECOMMENDED ACTION:
Receive City-Wide Internal Controls Review Report.
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BACKGROUND INFORMATION:
On September 17, 2024, the City entered into an Agreement for Professional Services with Moss Adams LLP (“Moss Adams”) to perform an evaluation of the City’s internal controls framework. This review took place between September 2024 and January 2025, and focused on assessing key controls for protecting the City’s assets and resources, as well as timely processing and reporting of financial information. Moss Adams completed its review and has now submitted its findings to the City in the “Final Report, City of Lodi, City-Wide Internal Controls Review” dated June 6, 2025 (“Final Report”), a copy of which is included as Attachment 1 to this item.
Moss Adams reviewed internal controls in General City Operations; Accounts Receivable; Cash Management; Financial Reporting, Close, and Reconciliations; Fixed Assets and Asset Management; Inventory; Payroll and Timekeeping; Purchasing and Accounts Payable; and Revenue and Billing. The Final Report concluded that the City has well designed internal controls in the following areas:
• Documented approvals in Munis for CAL-Card expenditures
• Time entry approvals, and
• Documentation and retention of purchase order approvals within the Munis workflow
Similar to most cities, the Final Report shows that Lodi has an opportunity to strengthen controls, policies, procedures, and systems. The evaluation discovered gaps in internal controls of varying degrees across multiple departments and the Final Report suggests the City adopt the following priorities to address over the next 6-12 months:
• Implement a fraud, waste, and abuse hotline
• Establish an internal audit function
• Establish a backup for the Management Analyst position within the Fire Department and develop comprehensive policies and procedures that outline the responsibilities associated with this role
• Implement a committee-based approach for investment management
• Assess current staffing levels
• Develop a process to ensure monthly accounts receivable aging reconciliation are performed and that both the preparer and reviewer sign off on the accounts receivable aging reconciliation as evidence of completion of their duties
• Set a threshold where a Utility Billing manager must review customer account adjustments prior to being posted
• Perform bank reconciliation for the past seven months (June 2024 to at least December2024)
• Assess the necessity of fleet vehicles and dispose of vehicles that are no longer needed
• Strengthen the review process over the pre-import data validation for Fire Department payroll
• Strengthen the CAL-Card use and review process
• Establish a centralized procurement function to oversee and streamline procurement activities across all departments
Staff is developing a plan to address the Final Report recommendations and will return to the City Council with an update no later than the August 6 City Council meeting.
STRATEGIC VISION:
3A. Fiscal Health: Promote City's transparency & fiscal fluency.
FISCAL IMPACT:
Not Applicable.
FUNDING AVAILABLE:
Not Applicable.