This is Part Four of IFF’s investigation into Lava Hot Springs; please read Part One HERE, Part Two HERE, and Part Three HERE.

Idaho Freedom Foundation, back in August, reported on the City of Lava Hot Springs’ noncompliance with the State Controller’s Office (SCO), specifically regarding reporting and auditing requirements. The city confirmed to IFF its last annual audit was completed in Fiscal Year 2015. You can read that report HERE.

New documents obtained by IFF through a public records request show the SCO reached out to Lava Hot Springs in July 2026. Chief Deputy Controller Scott Smith inquired about connecting Mayor Vicky Lyon with State Controller Brandon Woolf, according to a July 23 email. Smith said the subject concerned “a discussion on financial reporting and audit requirements.”

IFF asked Governor Brad Little about the city’s noncompliance at the September “Capital for the Day” event in Lava Hot Springs. Little told IFF the SCO had sent him a letter concerning the city’s noncompliance. In the letter, which IFF obtained, Woolf wrote the SCO anticipates having a date when Lava Hot Springs should become compliant “based on an agreed upon roadmap no later than October 16.” 

The SCO eventually settled on a due date of October 18 — but the SCO told IFF that Lava Hot Springs missed the deadline. So, will the city finally be held accountable?

An August 3, 2026, email to City Clerk/Treasurer Amantha Sierra shows the SCO requesting the city submit a plan detailing its roadmap for compliance. “Compliance requires [Lava Hot Springs] to submit to the Controller’s office, for the years 2023, 2024, and 2025, the following financial documents…” Smith’s email read (emphasis not IFF’s).

It is unclear why the SCO started with the year 2023 when previous records obtained by IFF show the city was noncompliant from the 2017 to 2024 registry years, with the exception of 2021. (Most entities were deemed “compliant” in 2021, likely because of a data transfer from the Legislative Services Office to the SCO.)

It is possible the city has submitted data to the SCO for the years prior to 2023; however, the city still has no data on Transparent Idaho from 2021 to 2025 as of publication. Another document, however, states the city’s outstanding fiscal years span from 2020 to 2026.

Woolf sent a letter dated August 5, 2026 to Mayor Lyon, warning that continued noncompliance could result in daily fines. “This section of [Idaho Code § 67-1076 (7)] also provides the authority for the [SCO] to begin imposing a late fee (up to $500 per day) for each day a local government entity fails to provide the information required to become compliant,” Woolf wrote. 

The City of Lava Hot Springs submitted a compliance plan to the SCO, according to a letter dated September 10, 2026. The plan includes sections on historical bank reconciliations and an audit completion plan, a staffing and work plan, and a proposed 30-day progress review. The city indicated it is working with a CPA firm. 

But the SCO told the city the plan needs to be more specific on how it will complete the necessary audits and financial reports, according to a letter dated September 19 from Smith to Mayor Lyon and Sierra. 

“The plan describes current activity and staffing, but it does not identify firm, year-by-year milestones for completing the outstanding financial reports and audits,” the letter read.

It added that should the city not submit a sufficient roadmap by October 15, 2026, or fail to adhere to its proposed milestones, the city will face penalties — including a late fee of up to $500 per day. Earlier, the letter stated “a revised compliance plan” should be submitted by October 19, 2026. IFF reached out to the SCO on October 15 to clarify the correct date and inquire if the city has submitted a sufficient roadmap.

“We have been working through various conversations with the Lava Hot Springs team. There are several years of compliance to catch up on with their entity. The initial September response you referenced was insufficient, and we’ve asked them for more detail,” the SCO told IFF.

“Their revised roadmap plan is due to the Controller’s Office by October 18, and we have not received that plan yet. Our next steps will be determined by that deadline, what they submit, and we will assess appropriate actions at that time based on our options detailed in Idaho Code, if needed.”

The SCO confirmed to IFF on October 19 the city had not yet submitted a sufficient plan.

“Our office has not received a submission back from the City of Lava Hot Springs. Our team is engaging with them on a call today though and determining next steps towards compliance,” the SCO told IFF.

On September 21 — one day before Governor Little’s appearance in Lava Hot Springs — Sierra wrote to Smith, asking him to confirm he had received the city’s compliance plan.

“I’m writing to follow up and confirm that you received the City of Lava Hot Springs Compliance Plan that I emailed to you on September 11, 2026,” Sierra wrote. (The plan Sierra referenced appears to be the same one dated September 10; the SCO confirmed the city sent only one plan.)

“The plan provides for a progress update to the State Controller’s Office within 30 days regarding the status of the historical bank reconciliations, audit preparation, and our work with Deaton & Company,” she continued.

“I wanted to check directly with you to make sure there is not an additional document, letter, or other information you need from us beyond the compliance plan already submitted,” she added. 

A Thursday, September 10, email indicates Sierra and Smith had a call about the compliance plan. Sierra said she would submit a letter signed by the mayor the following day (presumably a reference to the “Audit Plan Letter” noted in the subject line).

As IFF previously reported, the Idaho State Tax Commission has been withholding sales tax distribution from Lava Hot Springs for noncompliance. In 2026 alone, the state has withheld $21,964.44 from the city, according to Tax Commission documents. But now, the SCO has indicated it may also step in and fine the city if the noncompliance continues with no resolution in sight. 

However, Smith told the city in an August 5 email: “While there is a late fee component, our goal is to avoid this scenario and work with you in a supportive manner.”

So, could accountability and transparency be on the horizon? 

It’s a positive sign the city and SCO are communicating and working toward compliance. Ultimately, this is an issue that concerns the taxpayer, who deserves to know whether his or her tax dollars are being stewarded effectively. 

It’s unclear if the SCO will fine Lava Hot Springs. But if the agency decides the fines are necessary to spur compliance, then it will be taxpayers who foot the bill.

IFF will continue investigating local governments and ensuring transparency. Idahoans may submit tips about their counties and cities HERE.