june 5, 2019 - measure r oversigth committee annual report...

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Measure R Independent Taxpayers Oversight Committee of Metro

On November 4, 2008, Los Angeles County voters approved Measure R, a 1/2 of one percent transactions and use tax to fund transportation improvements in the County. An Independent Taxpayers Oversight Committee and an oversight process was also established to ensure that Metro is in compliance with Measure R requirements. The oversight process requires an annual audit be conducted and requires the Committee to produce an annual report on the audit(s).

Measure R Oversight Committee

Annual Report on FY 18

Audits

June 5, 2019

MEASURE R INDEPENDENT TAXPAYERS OVERSIGHT COMMITTEE OF METRO DRAFT ANNUAL REPORT ON FY18 MEASURE R AUDITS

INTRODUCTION On November 4, 2008, Los Angeles County voters approved Measure R that imposed an additional half-cent transactions and use tax to fund transportation improvements in the County. Measure R, also known as the Traffic Relief and Rail Expansion Ordinance establishes an Independent Taxpayers Oversight Committee and an oversight process to ensure that the Los Angeles County Metropolitan Transportation Authority (Metro) complies with the terms of the Ordinance. The oversight process requires that annual audits be conducted within six months after the end of the fiscal year to determine compliance with the provisions of the Ordinance related to the receipt and expenditure of sales tax revenues during the fiscal year. The audit reports must be provided to the Oversight Committee so that it can determine whether Metro and local subrecipients have complied with the Measure R requirements (see Exhibit 1). In compliance with the Ordinance, Metro contracted with BCA Watson Rice, LLP (BCA) to perform the independent audit of the Measure R Special Revenue Fund. Metro also contracted with two firms to conduct the audits of Measure R sales tax revenues used by 87 cities (Cities) as well as the County of Los Angeles (County). The report prepared by Vasquez & Company covers the audits of 38 of the Cities and the report prepared by Simpson & Simpson covers the audits of 49 of the Cities as well as the County. (These audit reports are attached as Exhibits 2, 3, and 4.) THE AUDITS The Independent Auditor’s report on the Measure R Special Revenue Fund found that Metro complied, in all material respects, with the requirements that are applicable to the Measure R revenues and expenditures for the fiscal year ending June 30, 2018. The audits of compliance with the Local Return Guidelines of the 87 Cities and the County found 23 local jurisdictions with compliance issues. All findings have been resolved, or are in process of being resolved. Audit findings were as follows: • Eleven cities failed to obtain approval before incurring expenditures. Cities are

required to obtain project approval prior to expending funds by submitting a Form One which lists the project name, amount of Measure R Local Return funds to be budgeted for the project, project description, and justification. This is necessary so that the project can be reviewed by Metro for Measure R Local Return eligibility per the Local Return Guidelines.

• Nine cities were found not to have submitted their forms on time. The forms, either a Form One or Form Two, are required to be submitted by cities to LACMTA for listing their budget and expenditures.

• Two cities had issues with salaries, record-keeping and unsupported documentation related to such charges.

• One city went over the direct administration 20% cap. • Three cities did not fully expend funds in a timely manner.

• One city lacked adequate evidence that procurement policies and procedures were followed.

• One city had the finding that no analysis was performed to support and substantiate reasonableness of general liability insurance costs.

MEASURE R OVERSIGHT COMMITTEE REVIEW The Measure R Oversight Committee received the three audit reports in March 2019. Each member of the Committee reviewed the reports, and the Committee met on March 6, 2019. At that meeting, the Committee received a formal presentation from each of the three auditors on their Audit Reports. The Committee asked questions and received satisfactory answers to questions regarding:

• Requesting more information on investment returns. • Clarification to understand which auditors audited which cities and how those

assignments were made. • What is being done with the findings of non-compliance.

The Committee also received and filed a Planning update on Measure R projects, as well as a comparative analysis report on audit findings over the last four years including a status update of the prior year’s finding from Metro’s Chief Auditor, a status update on Measure R Local Return Compliance Status from Metro’s Local Programming Department, and guidance from the Committee’s Advisory Panel Public Finance Expert, Lori Raineri. MEASURE R OVERSIGHT COMMITTEE FINDINGS The Committee finds that: 1) the audits were performed in accordance with the Ordinance that the voters approved in 2008; 2) Metro complied, in all material respects, with the requirements applicable to the Measure R revenues and expenditures for the fiscal year ending June 30, 2018; and 3) all Cities and the County complied, with the exception of City of Compton, in all material respects, with the Measure R Ordinance and guidelines that are applicable to the Measure R Local Return program for the fiscal year ending June 30, 2018; however, the audits found 28 instances of non-compliance in 23 local jurisdictions including 6 material weaknesses and 5 significant deficiencies in internal controls over compliance.

EXHIBIT 1

RESOLUTION OF THE INDEPENDENT TAXPAYERS OVERSIGHT COMMITTEE MAKING FINDINGS REGARDING THE ANNUAL AUDIT

PURSUANT TO THE MEASURE R ORDINANCE WHEREAS, On November 4, 2008, Los Angeles County voters approved Measure R that imposed an additional half-cent transactions and use tax to fund transportation improvements in the County; and

WHEREAS, Measure R, also known as the Traffic Relief and Rail Expansion Ordinance establishes an Independent Taxpayers Oversight Committee and an oversight process to ensure that the Los Angeles County Metropolitan Transportation Authority (Metro) complies with the terms of the Ordinance; and WHEREAS, the oversight process requires that an annual audit be conducted within six months after the end of the fiscal year to determine compliance with the provisions of the Ordinance related to the receipt and expenditure of sales tax revenues during the fiscal year; and WHEREAS, the audits must be provided to the Oversight Committee so that the Oversight Committee can determine whether Metro and local subrecipients have complied with the Measure R requirements; and

WHEREAS, under contract with Metro, Bazilio Cobb Associates (BCA Watson Rice LLP) performed the independent audit of the Measure R Special Revenue Fund, and Vasquez & Company, LLP and Simpson & Simpson audited the compliance of the 87 cities (Cities) and the County of Los Angeles (County);

NOW, THEREFORE, the Measure R Independent Taxpayers Oversight Committee of Metro finds that:

The audits were performed in accordance with the Ordinance that the voters approved in 2008;

Metro complied, in all material respects, with the requirements applicable to the Measure R revenues and expenditures for the year ended June 30, 2018;

All Cities and the County complied, with the exception of City of Compton, in all

material respects, with the Measure R Ordinance and guidelines that are applicable to the Measure R Local Return program for the fiscal year ending June 30, 2018; however, the audits found 28 instances of non-compliance in 23 local jurisdictions including 6 material weaknesses and 5 significant deficiencies in internal controls over compliance. All findings have been resolved, or are in process of being resolved. Prepared by: Ronald Stamm, Principal Deputy County Counsel

Independent Auditor’s Report On Schedule of Revenues and Expenditures

For Measure R Special Revenue Fund

M e t r o p o l i t a n T r a n s p o r t a t i o n A u t h o r i t y

2 3 5 5 C r e n s h a w B l v d . S u i t e 1 5 0 T o r r a n c e , C A 9 0 5 0 1 t : ( 3 1 0 ) 7 9 2 - 4 6 4 0 f : ( 3 1 0 ) 7 9 2 - 4 1 4 0

Los Angeles County

For the Fiscal Year Ended June 30, 2018 (With Comparative Totals For 2017)

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Text Box

Attachment A

Los Angeles County Metropolitan Transportation Authority

Independent Auditor’s Report on Schedule of Revenues and Expenditures

For Measure R Special Revenue Fund

For The Fiscal Year Ended June 30, 2018

(With Comparative Totals for 2017)

Table of Contents Page

Independent Auditor’s Report ....................................................................................................................... 1

Schedule of Revenues and Expenditures ..................................................................................................... 3 Schedule of Revenues and Expenditures - Budget and Actual

For the fiscal year ended June 30, 2018 ................................................................................................ 4 Notes to the Schedule of Revenues and Expenditures for

Measure R Special Revenue Fund .......................................................................................................... 5 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ........................................................... 9 Independent Auditor’s Report on Compliance with Requirements Applicable to

Measure R Revenues and Expenditures in Accordance with the Traffic Relief and Rail Expansion Ordinance ....................................................................................... 11 Summary of Current Year Audit Findings .................................................................................................. 13

Status of Prior Year Audit Findings ............................................................................................................ 14

2355 Crenshaw Blvd. Suite 150 Telephone: 310.792.4640

Torrance, CA 90501 Facsimile: 310.792.4140

www.bcawatsonrice.com

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Independent Auditor’s Report

Measure R Independent Taxpayer Oversight Committee Los Angeles County Metropolitan Transportation Authority Report on the Schedule of Measure R Revenues and Expenditures We have audited the accompanying Schedule of Measure R Revenues and Expenditures (the Schedule) of the Los Angeles County Metropolitan Transportation Authority (LACMTA) for the fiscal year ended June 30, 2018, and the related notes to the Schedule, which collectively comprise LACMTA’s basic Schedule as listed in the table of contents. Management’s Responsibility for the Schedule of Measure R Revenues and Expenditures LACMTA’s management is responsible for the preparation and fair presentation of the Schedule in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Schedule that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the Schedule based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Schedule is free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Schedule. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Schedule in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Schedule. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Schedule referred to above present fairly, in all material respects, the Measure R Revenues and Expenditures of LACMTA for the fiscal year ended June 30, 2018, in accordance with accounting principles generally accepted in the United States of America.

http://www.bcawatsonrice.com/

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Other Matter Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the budgetary comparison information on page 4 be presented to supplement the Schedule. Such information, although not a part of the basic Schedule, is required by the Governmental Accounting Standards Board who considers it to be an essential part of the financial reporting for placing the basic Schedule in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic Schedule, and other knowledge we obtained during our audit of the basic Schedule. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information

As discussed in Note 3 to the Schedule, the accompanying Schedule of the Measure R Fund is intended to present the revenues and expenditures attributable to the Fund. They do not purport to, and do not, present fairly the financial position of the LACMTA, as of June 30, 2018, and the changes in its financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Prior-Year Comparative Information

We have previously audited the Schedule of Measure R Revenues and Expenditures of LACMTA, and we expressed an unmodified audit opinion in our report dated November 13, 2017. In our opinion, the summarized comparative information presented herein for the fiscal year ended June 30, 2018, is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 5, 2018, on our consideration of LACMTA’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering LACMTA’s internal control over financial reporting and compliance.

Torrance, CA November 5, 2018


Measure R Special Revenue Fund Schedule of Revenues and Expenditures For the Fiscal Year Ended June 30, 2018

(With Comparative Totals for 2017) (Amounts expressed in thousands)

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2018 2017

Revenues Sales tax 836,721$ 787,891$ Intergovernmental 7,588 34,516 Investment income 5,965 5,911 Net decline in fair value of investments (1,858) (2,587)

Total revenues 848,416 825,731

Expenditures Administration and other 132,395 137,593 Transportation subsidies 372,929 316,004

Total expenditures 505,324 453,597

Excess of revenues over expenditures 343,092 372,134

Other financing sources (uses) Transfers in 30,720 4,380 Transfers out (321,893) (383,084)

Total other financing sources (uses) (291,173) (378,704)

Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses 51,919$ (6,570)$

The Notes to the Schedule of Revenues and Expenditures are an integral part of this Schedule.


Measure R Special Revenue Fund Schedule of Revenues and Expenditures – Budget and Actual

For the Fiscal Year Ended June 30, 2018 (Amounts expressed in thousands)

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Budgeted Amounts

Variance withOriginal Final Actual Final Budget

Revenues Sales tax 802,001$ 802,001$ 836,721$ 34,720$ Intergovernmental 7,776 7,776 7,588 (188) Investment income - - 5,965 5,965 Net appreciation in fair value of investments - - (1,858) (1,858)

Total revenues 809,777 809,777 848,416 38,639

Expenditures Administration and other 174,432 188,309 132,395 55,914 Transportation subsidies 349,580 336,084 372,929 (36,845)

Total expenditures 524,012 524,393 505,324 19,069

Excess of revenues over expenditures 285,765 285,384 343,092 57,708

Other financing sources (uses) Transfers in 40,343 40,343 30,720 (9,623) Transfers out (469,603) (469,603) (321,893) 147,710

Total other financing sources (uses) (429,260) (429,260) (291,173) 138,087

Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses (143,495)$ (143,876)$ 51,919$ 195,795$

The Notes to the Schedule of Revenues and Expenditures are an integral part of this Schedule.

Los Angeles County Metropolitan Transportation Authority Measure R Special Revenue Fund

Notes to the Schedule of Revenues and Expenditures June 30, 2018

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The Notes to the Schedule of Revenues and Expenditures are summaries of significant accounting policies and other disclosures considered necessary for a clear understanding of the accompanying schedule of revenues and expenditures. Unless otherwise stated, all dollar amounts are expressed in thousands.

1. Organization General

The Los Angeles County Metropolitan Transportation Authority (LACMTA) is governed by a Board of Directors composed of the five members of the County Board of Supervisors, the Mayor of the City of Los Angeles, three members appointed by the Mayor, and four members who are either mayors or members of a city council and have been appointed by the Los Angeles County City Selection Committee to represent the other cities in the County, and a non-voting member appointed by the Governor of the State of California.

LACMTA is unique among the nation's transportation agencies. It serves as transportation planner and coordinator, designer, builder and operator for one of the country's largest and most populous counties. More than 10 million people, about one third of California's residents, live, work, and play within its 1,433-square-mile service area.

Measure R

Measure R, also known as the Traffic Relief and Rail Expansion Ordinance is a special revenue fund used to account for the proceeds of the voter-approved one-half percent sales tax that became effective on July 1, 2009 and continuing on for the next 30 years. Revenues collected are required to be allocated in the following manner: 1) 2% for rail capital improvements; 2) 3% for Metrolink capital improvement projects within Los Angeles County; 3) 5% for rail operations for new transit project operations and maintenance; 4) 15% for local return; 5) 20% for county-wide bus service operations, maintenance, and expansion; 6) 20% for highway capital projects; and 7) 35% for transit capital specific projects.

2. Summary of Significant Accounting Policies

The Schedule of Revenues and Expenditures for the Measure R Special Revenue Fund have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) in the United States of America as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles for governments. The most significant of LACMTA’s accounting policies with regard to the special revenue fund type are described below:



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2. Summary of Significant Accounting Policies (Continued)

Fund Accounting LACMTA utilizes fund accounting to report its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary, and fiduciary. Governmental Funds are used to account for most of LACMTA’s governmental activities. The measurement focus is a determination of changes in financial position, rather than a net income determination. LACMTA uses governmental fund type Special Revenue Fund to account for Measure R sales tax revenues and expenditures. Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes.

Basis of Accounting

The modified accrual basis of accounting is used for the special revenue fund type. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, which means measurable (amount can be determined) and available (collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period).

Budgetary Accounting

The established legislation and adopted policies and procedures provide that the LACMTA’s Board approves an annual budget. Annual budgets are adopted on a basis consistent with Generally Accepted Accounting Principles in the United States of America for all governmental funds. Prior to the adoption of the budget, the Board conducts public hearings for discussion of the proposed annual budget and at the conclusion of the hearings, but no later than June 30, adopts the final budget. All appropriations lapse at fiscal year-end. The budget is prepared by fund, project, expense type, and department. The legal level of control is at the fund level and the Board must approve additional appropriations.

By policy, the Board has provided procedures for management to make revisions within operational or project budgets only when there is no net dollar impact to the total appropriations at the fund level. Budget amendments are made when needed.

Annual budgets are adopted by LACMTA on the modified accrual basis of accounting for the special revenue fund types, on a basis consistent with GAAP as reflected in the Schedule.



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2. Summary of Significant Accounting Policies (Continued)

Investment Income and Net Decline in Fair Value of Investments

Investment income and net decline in fair value of investments are shown on the Schedule of Revenues and Expenditures. LACMTA maintains a pooled cash and investments account that is available for use by all funds, except those restricted by state statutes. For the fiscal year ended June 30, 2018, the Measure R fund had investment income of $5,965 and net decline in fair value of investments of $1,858. The net decline in fair value of investments were mainly due to a decrease in fair market value of the investment portfolios mostly invested in bonds, which are sensitive to changes in interest rates. Use of Estimates

The preparation of the Schedule in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

Comparative Financial Data The amounts shown for 2017 in the accompanying Schedule are included only to provide a basis for comparison with 2018 and are not intended to present all information necessary for a fair presentation in accordance with Generally Accepted Accounting Principles.

3. Schedule of Revenues and Expenditures for Measure R Special Revenue Fund

The Schedule is intended to reflect the revenues and expenditures of the Measure R fund only. Accordingly, the Schedule does not purport to, and does not, present fairly the financial position of the LACMTA and changes in financial position thereof for the year then ended in conformity with Generally Accepted Accounting Principles in the United States of America.

4. Intergovernmental Transactions

Any transaction conducted with a governmental agency outside the complete jurisdiction of LACMTA will be recorded in an account designated as Intergovernmental.

5. Operating Transfers

Amounts reflected as operating transfers represent permanent, legally authorized transfers from a fund receiving revenue to the fund through which the resources are to be expended. All operating transfers in/out of the Measure R Special Revenue Fund have been made in accordance with all expenditure requirements of the Measure R Ordinance.



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6. Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and

Other Financing Uses The Measure R fund at June 30, 2018 had an excess of revenues and other financing sources over expenditures and other financing uses of $51,919, mainly due to changing of fund source billed to Measure R fund for Westside Subway Ext and Westside Subway Extension Section 2. The $51,919 positive change in fund balance during the current year resulted in an increase in Measure R fund balance from $362,645 to $414,564.

7. Audited Financial Statements

The audited financial statements for the Measure R Special Revenue Fund for the fiscal year ended June 30, 2018 are included in LACMTA’s Audited Comprehensive Annual Financial Report (CAFR).

8. Contingent Liabilities

LACMTA is aware of potential claims that may be filed against them. The outcome of these matters is not presently determinable, but the resolution of these matters is not expected to have a significant impact on the financial condition of LACMTA.

9. Subsequent Events In preparing the Schedule of Measure R Revenues and Expenditures, LACMTA has evaluated events and transactions for potential recognition or disclosure through November 5, 2018, the date the schedule was issued. No subsequent events occurred that require recognition or additional disclosure in the schedule.




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Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards

Measure R Independent Taxpayer Oversight Committee Los Angeles County Metropolitan Transportation Authority We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, the Schedule of Revenues and Expenditures (the Schedule) for Measure R Special Revenue Fund of the Los Angeles County Metropolitan Transportation Authority (LACMTA) for the fiscal year ended June 30, 2018, and the related notes to the Schedule, which collectively comprised LACMTA’s basic Schedule, and have issued our report thereon dated November 5, 2018. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the LACMTA’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the LACMTA’s internal control. Accordingly, we do not express an opinion on the effectiveness of the LACMTA’s s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the LACMTA’s Schedule will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.


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Compliance and Other Matters As part of obtaining reasonable assurance about whether the LACMTA’s Schedule is free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of the amounts on the Schedule. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Torrance, California November 5, 2018




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Independent Auditor’s Report on Compliance with Requirements Applicable to

Measure R Revenues and Expenditures in Accordance with the Traffic Relief and Rail Expansion Ordinance

Measure R Independent Taxpayer Oversight Committee Los Angeles County Metropolitan Transportation Authority Report on Compliance We have audited the Los Angeles County Metropolitan Transportation Authority (LACMTA) compliance of the Measure R Revenues and Expenditures with the types of compliance requirements described in the Traffic Relief and Rail Expansion Ordinance (the Ordinance) for the fiscal year ended June 30, 2018. Management’s Responsibility LACMTA’s management is responsible for compliance with the requirements of laws and regulations applicable to the Measure R Revenues and Expenditures. Auditor’s Responsibility Our responsibility is to express an opinion on LACMTA’s compliance with the Measure R Revenues and Expenditures based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on Measure R Revenues and Expenditures occurred. An audit includes examining, on a test basis, evidence about the LACMTA’s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on the Measure R Revenues and Expenditures. However, our audit does not provide a legal determination of LACMTA’s compliance. Opinion on Measure R Revenues and Expenditures In our opinion, LACMTA complied, in all material respects, with the requirements referred to above that could have a direct and material effect on the Measure R Revenues and Expenditures for the fiscal year ended June 30, 2018.


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Report on Internal Control over Compliance Management of the LACMTA is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the LACMTA’s internal control over compliance with the types of requirements that could have a direct and material effect on the Measure R Revenues and Expenditures as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Traffic Relief and Rail Expansion Ordinance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the LACMTA’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of the Measure R Revenues and Expenditures that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Guidelines. Accordingly, this report is not suitable for any other purpose.

Torrance, California November 5, 2018


Measure R Special Revenue Fund Summary of Current Year Audit Findings For the Fiscal Year Ended June 30, 2018

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None noted.


Status of Prior Year Audit Findings

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None noted.

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS

APPLICABLE TO MEASURE R ORDINANCE AND MEASURE R LOCAL RETURN GUIDELINES

TO THE LOS ANGELES COUNTY

METROPOLITAN TRANSPORTATION AUTHORITY

FOR THE FISCAL YEAR ENDED JUNE 30, 2018

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Attachment B

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS





Los Angeles County Metropolitan Transportation Authority Measure R Local Return Fund Consolidated Audit Report

Fiscal Year Ended June 30, 2018

TABLE OF CONTENTS

Page INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO MEASURE R ORDINANCE AND MEASURE R LOCAL RETURN GUIDELINES

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Summary of Compliance Findings 4 Schedule 1 – Summary of Audit Results 5 Schedule 2 – Schedule of Findings and Questioned Costs 18

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INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO MEASURE R ORDINANCE AND

MEASURE R LOCAL RETURN GUIDELINES To: Board of Directors of the Los Angeles County Metropolitan Transportation Authority and Measure R Oversight Committee Report on Compliance We have audited the compliance of the thirty-eight (38) Cities identified in Schedule 1, with the types of compliance requirements described in the Measure R Ordinance enacted through a Los Angeles County voter-approved law in November 2008; Measure R Local Return Guidelines, issued by the Los Angeles County Metropolitan Transportation Authority (LACMTA), approved by its Board of Directors on October 22, 2009 (collectively, the Guidelines); and the respective Assurances and Understandings Regarding Receipt and Use of Measure R Local Return Funds, executed by LACMTA and the respective Cities for the year ended June 30, 2018 (collectively, the Requirements). Compliance with the above-noted Guidelines and Requirements by the Cities are identified in the accompanying Summary of Compliance Findings, Schedule 1 and Schedule 2. Management’s Responsibility Compliance with the Guidelines and Requirements is the responsibility of the respective management of the Cities. Auditors’ Responsibility Our responsibility is to express opinions on the Cities’ compliance with the Guidelines and Requirements referred to above based on our audits. We conducted our audits of compliance in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether noncompliance with the types of requirements referred to above that could have a direct and material effect on the Measure R Local Return program occurred. An audit includes examining, on a test basis, evidence about each City’s compliance with the Guidelines and Requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our qualified and unqualified opinions on compliance. However, our audits do not provide a legal determination of each City’s compliance with the Guidelines and Requirements.

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Basis for Qualified Opinion on City of Compton As described in the accompanying Summary of Compliance Findings (Findings #2018-005 through #2018-007), we were unable to obtain sufficient appropriate audit evidence supporting the compliance of the City of Compton with the documentation requirements supporting allowability of certain costs charged to the Measure R Local Return Fund. Qualified Opinion on Compliance of City of Compton In our opinion, except for the possible effects of the matter discussed in the Basis for Qualified Opinion paragraph, the City of Compton complied, in all material respects, with the requirements of the Guidelines and Requirements referred to above that could have a direct and material effect on the Measure R Local Return program for the year ended June 30, 2018. Unmodified Opinions on Compliance of all Cities except City of Compton In our opinion, as described in Schedule 2, the Cities complied, in all material respects, with the Guidelines and Requirements referred to above that could have a direct and material effect on the Measure R Local Return program for the year ended June 30, 2018. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Guidelines and Requirements and which are described in the accompanying Summary of Measure R Audit Results (Schedule 1) and Schedule of Findings and Questioned Costs (Schedule 2) as Findings #2018-001 through #2018-016. Our opinion is not modified with respect to these matters. Responses by the Cities to the noncompliance findings identified in our audits are described in the accompanying Schedule 2 - Schedule of Findings and Questioned Costs. The Cities’ responses were not subjected to the auditing procedures applied in the audit of compliance, and accordingly, we express no opinion on the responses. Report on Internal Control over Compliance The management of each City is responsible for establishing and maintaining effective internal control over compliance with the Guidelines and Requirements referred to above. In planning and performing our audits of compliance, we considered each City’s internal control over compliance with the Guidelines and Requirements that could have a direct and material effect on the Measure R Local Return program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Guidelines and Requirements, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of each City’s internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and a significant deficiency.

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A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with the requirements, such that there is a reasonable possibility that material noncompliance under the Guidelines and Requirements will not be prevented, or detected and corrected, on a timely basis. We identified certain deficiencies in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs (Schedule 2) as Findings #2018-005, #2018-006, #2018-007, #2018-008 and #2018-012, that we consider to be material weaknesses. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with the requirements that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We identified deficiencies in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs as Findings #2018-002, #2018-003, #2018-009 and #2018-011, that we consider to be significant deficiencies. The City’s responses to the internal control over compliance findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. The City’s responses were not subjected to the auditing procedures applied in the audit of compliance, and accordingly, we express no opinion on the responses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing on internal control over compliance and the results of that testing based on the requirements of the Guidelines and Requirements. Accordingly, this report is not suitable for any other purpose.

Glendale, California December 31, 2018, except for the results of audits of the City of Lynwood, City of Compton and City of Huntington Park, as to which the dates are January 15, 2019, January 24, 2019 and January 29, 2019, respectively.

Los Angeles County Metropolitan Transportation Authority Measure R Local Return Fund

Summary of Compliance Findings Fiscal Year Ended June 30, 2018

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The audits of the 38 cities identified in Schedule 1 have resulted in 16 findings. The table below summarizes those findings:

(a) The excess amount of $130,720 was part of the questioned costs in Findings #2018-005 and #2018-006.

Details of the findings are in Schedule 2.

Finding

# of Findings

Responsible Cities/ Finding No. Reference

Questioned Costs

Resolved During the

AuditCompton (#2018-005) 92,210$ -$ Compton (#2018-006) 120,520 - Azusa (#2018-001) 1,090,438 1,090,438 Bell (#2018-002) 10,605 10,605 Calabasas (#2018-004) 306,113 306,113 Compton (#2018-007) 540,770 540,770 Huntington Park (#2018-010) 38,527 38,527 Maywood (#2018-011) 25,741 25,741 Pomona (#2018-014) 106,803 106,803 Bell (#2018-003) None - Culver City (#2018-009) None - Santa Fe Springs (#2018-015) None - Westlake Village (#2018-016) None -

Total Findings and Questioned Costs 16 2,641,406$ 2,118,997$

Maywood (#2018-012) 309,679 -

(a) -

None -

No adequate evidence that funds were expended for transportation purposes. 2

1No adequate evidence that procurement policies and procedures were followed.

Funds were expended without LACMTA's approval.

Expenditure Report (Form Two) was not submitted timely. 1

7

Expenditure Plan (Form One) was not submitted on time. 4

Administrative expenses exceeded the 20% cap. Compton (#2018-008)1

Pico Rivera (#2018-013)

SCHEDULE 1 Los Angeles County Metropolitan Transportation Authority

Measure R Local Return Fund Summary of Audit Results


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Compliance Area Tested Agoura Hills Azusa Baldwin Park

Funds were expended for transportation purposes. Compliant Compliant Compliant

Funds were used to augment, not supplant, existing local revenues being used for transportation purposes unless there is a funding shortfall.

Compliant Compliant Compliant

Signed Assurances and Understandings on file. Compliant Compliant Compliant

Separate Measure R Local Return Account was established. Compliant Compliant Compliant

Revenues received including allocations, project generated revenues and interest income was properly credited to the Measure R Local Return Account.


Funds were expended with LACMTA’s approval. Compliant See Finding #2018-001 Compliant

Expenditure Plan (Form One) was submitted timely. Compliant Compliant Compliant

Expenditure Report (Form Two) was submitted timely. Compliant Compliant Compliant

Timely use of funds. Compliant Compliant Compliant

Administrative expenses are within the 20% cap. Not Applicable Compliant Compliant

Fund exchanges were approved by LACMTA. Not Applicable Not applicable Not Applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Compliant Not Applicable

Recreational transit form was submitted timely. Not Applicable Not applicable Not Applicable




6

Compliance Area Tested Bell Bell Gardens Beverly Hills








Funds were expended with LACMTA’s approval. See Finding #2018-002 Compliant Compliant

Expenditure Plan (Form One) was submitted timely. See Finding #2018-003 Compliant Compliant



Administrative expenses are within the 20% cap. Compliant Not applicable Not applicable

Fund exchanges were approved by LACMTA. Compliant Not applicable Not applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not applicable Compliant

Recreational transit form was submitted timely. Not Applicable Not applicable Not applicable




7

Compliance Area Tested Calabasas Carson Commerce












Administrative expenses are within the 20% cap. Compliant Not applicable Not applicable

Fund exchanges were approved by LACMTA. Not applicable Not applicable Not applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not applicable Not applicable Not applicable

Recreational transit form was submitted timely. Not applicable Not applicable Not applicable




8

Compliance Area Tested Compton Cudahy Culver City

Funds were expended for transportation purposes.See Findings

#2018-005 and #2018-006

Compliant Compliant








Expenditure Plan (Form One) was submitted timely. Compliant Compliant See Finding #2018-009



Administrative expenses are within the 20% cap. See Finding #2018-008 Compliant Not applicable

Fund exchanges were approved by LACMTA. Not applicable Not applicable Not applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not applicable Not applicable Not applicable

Recreational transit form was submitted timely. Not applicable Not applicable Not applicable




9

Compliance Area Tested El Monte Gardena Hawthorne








Funds were expended with LACMTA’s approval. Compliant Compliant Compliant





Fund exchanges were approved by LACMTA. Not Applicable Not Applicable Not Applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not Applicable Not Applicable

Recreational transit form was submitted timely. Not Applicable Not Applicable Not Applicable




10

Compliance Area Tested Hidden HillsHuntington

Park Industry












Administrative expenses are within the 20% cap. Not Applicable Compliant Not Applicable







11

Compliance Area Tested Inglewood Irwindale La Puente












Administrative expenses are within the 20% cap. Compliant Not Applicable Not Applicable







12

Compliance Area Tested Lawndale Lynwood Malibu












Administrative expenses are within the 20% cap. Compliant Not Applicable Compliant







13

Compliance Area Tested Maywood Montebello Monterey Park












Administrative expenses are within the 20% cap. Compliant Compliant Compliant




Accounting procedures, record keeping and documentation are adequate.

See Finding #2018-012 Compliant Compliant




14

Compliance Area Tested Pico Rivera Pomona Rosemead










Expenditure Report (Form Two) was submitted timely. See Finding #2018-013 Compliant Compliant









15

Compliance Area Tested San FernandoSanta Fe Springs Santa Monica









Expenditure Plan (Form One) was submitted timely. Compliant See Finding #2018-015 Compliant



Administrative expenses are within the 20% cap. Compliant Compliant Compliant







16

Compliance Area Tested South El Monte South Gate Walnut












Administrative expenses are within the 20% cap. Compliant Compliant Not Applicable







17

Compliance Area TestedWest

HollywoodWestlake Village

Funds were expended for transportation purposes. Compliant Compliant


Compliant Compliant

Signed Assurances and Understandings on file. Compliant Compliant

Separate Measure R Local Return Account was established. Compliant Compliant


Compliant Compliant

Funds were expended with LACMTA’s approval. Compliant Compliant

Expenditure Plan (Form One) was submitted timely. Compliant See Finding #2018-016

Expenditure Report (Form Two) was submitted timely. Compliant Compliant

Timely use of funds. Compliant Compliant

Administrative expenses are within the 20% cap. Not Applicable Not Applicable

Fund exchanges were approved by LACMTA. Not Applicable Not Applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not Applicable

Recreational transit form was submitted timely. Not Applicable Not Applicable


Measure R Local Return Fund Schedule of Findings and Questioned Costs


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Finding #2018-001

City of Azusa

Compliance Reference Section B (II) of Measure R Local Return Program Guideline states that, “To maintain legal eligibility and meet Measure R LR program compliance requirements, Jurisdiction shall submit to LACMTA an Expenditure Plan (Form One), annually, by August 1st of each year. Expenditure Plan (Form One) provides a listing of projects funded with Measure R LR funds along with estimated expenditures for the year. For both operating and capital projects, Part I is to be filled out. For capital projects (projects over $250,000), Part II is required. Pursuant to AB2321, LACMTA will provide LR funds to a capital project or program sponsor who submits the required expenditure plan.

Condition The City claimed expenditures for the following MRLRF projects with no prior approval from LACMTA:

a. Project code 1.05, 1st Street Improvement, totaling $130,000b. Project code 1.05, Sierra Madre Street Improvement,

totaling $762,356; and c. Project code 2.26, Azusa Traffic Management Systems,

totaling $198,082. These projects were previously approved when the TRIP bonds were issued in 2016. However, the City is still required to submit Form One every year, carry over the budget, and have it approved by LACMTA. The City submitted a revised Expenditure Plan (Form One) to the LACMTA Program Manager and obtained a retroactive approval of the said project on December 20, 2018.

Cause The City concurs with the finding that the above projects should be included in the Expenditure Plan (Form One) submitted to LACMTA for the projects that will be funded with Measure R. The finding was caused by an oversight by City staff.

Effect The City claimed expenditures totaling $1,090,438 without prior approval from LACMTA. Lack of prior approval results in non-compliance which could impact future funding or result in questioned costs that require funding to be returned to LACMTA.

Recommendation We recommend for the City to establish procedures and controls to ensure that approval is obtained from LACMTA prior to spending on Measure R-funded projects.



Fiscal Year Ended June 30, 2018 (Continued)

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Finding #2018-001 (Continued)

City of Azusa

Management’s Response Capital projects in excess of $250,000 will be reported in Form One as soon as the project(s) have been defined and the estimated expenditure plan has been finalized.

Finding Corrected During the Audit

LACMTA Program Manager granted retroactive approval of the said project on December 20, 2018. No additional follow up is required.




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Finding #2018-002

City of Bell

Compliance Reference Section B (II) of Measure R Local Return Program Guideline states that, “To maintain legal eligibility and meet Measure R LR program compliance requirements, Jurisdiction shall submit to LACMTA an Expenditure Plan (Form One), annually, by August 1st of each year. Expenditure Plan (Form One) provides a listing of projects funded with Measure R LR funds along with estimated expenditures for the year. For both operating and capital projects, Part I is to be filled out. For capital projects (projects over $250,000), Part II is required. Pursuant to AB2321, LACMTA will provide LR funds to a capital project or program sponsor who submits the required expenditure plan.

Condition The City claimed expenditures for the MRLRF project code 8.10, Fund Administration, totaling $10,605, with no prior approval from LACMTA. The City submitted a revised Expenditure Plan (Form One) to the LACMTA Program Manager and obtained a retroactive approval of the said project on October 4, 2018. This is a repeat finding from prior year.

Cause The City concurs with the finding that a revised Expenditure Plan (Form One) should have been submitted for the project that will be funded with Measure R. The finding was caused by an oversight by City staff.

Effect The City claimed expenditures totaling $10,605 without prior approval from LACMTA. Lack of prior approval results in non-compliance which could impact future funding or result in questioned costs that require funding to be returned to LACMTA.


Management’s Response The City will correct procedures to ensure timely approval of project budgets.


LACMTA Program Manager granted retroactive approval of the said projects on October 4, 2018. No additional follow up is required.




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Finding #2018-003

City of Bell

Compliance Reference Section B (II) (I) of the Measure R Local Return Program Guidelines states that, “To maintain eligibility and meet Measure R LR program compliance requirements, jurisdictions shall submit to LACMTA an Expenditure Plan (Form One) annually by August 1st of each year”.

Condition The City submitted its Expenditure Plan (Form One) on April 30, 2018, which is 272 days beyond the due date set under the Guidelines. This is a repeat finding from prior year.

Cause The key employee responsible for the LACMTA funds resigned from his employment with the City of Bell.

Effect The City’s Expenditure Plan (Form One) was not submitted timely. The City was not in compliance with the Local Return Guidelines.

Recommendation We recommend for the City to establish procedures to ensure that all reporting deadlines are met.

Management’s Response Due to staff shortage, the annual filing of Form One was not done in a timely manner. The City recently hired a staff to handle all grant funds. A procedure has been in place to review projects and to ensure timely submission of forms/reports.


The City subsequently submitted the form. No follow up is required.




22

Finding #2018-004

City of Calabasas

Compliance Reference Section B (II) (1) of the Measure R Local Return Program Guidelines state that “To maintain eligibility and meet Measure R LR program compliance requirements, jurisdictions shall submit to LACMTA an Expenditure Plan (Form One) annually by August 1st of each year. Form One provides a listing of projects funded with Measure R LR funds along with estimated expenditures for the year.”

Condition The City claimed expenditures under the following MRLRF projects with no prior approval from LACMTA. a. Project code 1.05, Overlay, totaling $296,184; and b. Project code 8.10, Administration, totaling $9,929 Although we found the expenditures to be eligible for Local Return funding, these projects had no prior approval from LACMTA. LACMTA Program Manager granted a retroactive approval of the said projects on October 25, 2018.

Cause The annual overlay project manager was not aware of the proper procedure of utilizing Measure R Local Return funds.

Effect Measure R LR funds were expended towards project expenditures without prior approval by the LACMTA.

Recommendation We recommend for the City to establish procedures and controls to ensure that approval is obtained from LACMTA prior to spending on any local return-funded projects.

Management’s Response Management will establish controls to ensure that proper information is provided to the project manager and approval is obtained from LACMTA prior to spending on any local return-funded projects.


LACMTA Program Manager granted a retroactive approval of the said projects on October 25, 2018.




23

Finding #2018-005

City of Compton

Compliance Reference Measure R Local Return Guidelines Section (A) (I) states that “The Measure R Ordinance specifies that LR funds are to be used for transportation purposes. No net revenues distributed to Jurisdictions may be used for purposes other than transportation purposes”. Also, Section VII states that, “It is the jurisdictions’ responsibility to maintain proper accounting records and documentation to facilitate the performance of the audit as prescribed in these Guidelines”. On April 29, 2014, the LACMTA Local Return Program Manager issued a memo addressed to all Jurisdictions to provide clarification for adequate salary and related costs documentations for the audit of the Local Return funds. Below are recommendations to ensure that jurisdictions have adequate evidence to support its compliance with the Local Return Guidelines: 1. All hours are required to be documented. Develop and/or

maintain a system that will keep track of actual hours worked by employees whose salaries and benefits were charged to the LACMTA project. Expenditures claimed based solely on budgeted amounts is not considered adequate documentation because it does not reflect actual expenditures incurred on the LACMTA project and do not provide adequate evidence that labor hours charged has transit/transportation purpose. The record of hours worked must: a) identify the LACMTA project, b) be authenticated by the employee and approved by his/her immediate supervisor, and c) tie to hours reported in the payroll records.

2. Provide adequate support for indirect costs. For indirect

expenditures allocated to LACMTA projects, develop and/or maintain a system that distributes allowable expenditures to projects based on causal or beneficial relationships. Expenditures cannot be claimed on LACMTA project if the expenditures are not allowable (i.e., not transportation or transit related) or not allocable to the LACMTA project (i.e., LACMTA project did not cause the incurrence of the expenditure or LACMTA project did not benefit from the expenditure).




24


City of Compton

Condition The City claimed salaries and benefits expenditures under Project code 8.10, Fund Administration, totaling $92,210. Salaries and benefits expenditures allocated to MRLRF were not supported by actual time charges, documented time study, or overhead cost allocation plan. We were not able to verify the reasonableness and allowability of these expenditures under the Local Return Guidelines.

Cause There was lack of oversight by the City’s management on the compliance with the requirements of the Guidelines. Moreover, there were turnover in the key positions in the finance and accounting department during the past fiscal years.

Effect The City failed to put in place a time reporting system that documents actual time spent on Measure R Local Return projects. The salaries and benefits claimed under MRLRF are not supported by actual time charges and documented time study and therefore, we question the total amount of expenditures reported under MRLRF of $92,210.

Recommendation We recommend that the City reimburse its MRLRF account the amount of $92,210. In addition, we recommend that the City establish controls to ensure that the salaries and benefits charged to the Local Return funds are adequately supported by timesheets, payroll registers, personnel action forms with job descriptions, or similar documentation as required by the Guidelines.

Management’s Response City staff provided actual time charges and documented activity sheets for the sample employees requested from the auditor. City staff will provide the e-mailed documents previously provided to substantiate some of the expenditures incurred during this audit period. Staff will, however, develop a cost allocation plan and/or actual costs for transportation funds pursuant to the recommendation provided by the audit team. The City will also establish controls to ensure that all salaries and benefits charged to the Local Return funds are adequately supported in the future. The City considers this allocation to be an eligible expense under the local return guidelines.




25

Finding #2018-006

City of Compton

Compliance Reference Measure R Local Return Program Guidelines, Section B (VII. Audit Section) states that “Jurisdictions are required to expend their Measure R Local Return funds for transportation purposes, as defined by the Guidelines” and “It is the Jurisdictions’ responsibility to maintain proper accounting records and documentation.”

Condition The City charged general liability insurance costs amounting to $120,520 to Project code 8.10, Fund Administration, based on budget. An analysis to true-up the amount claimed was not performed at yearend to support and substantiate the reasonableness of the amount charged to this project.

Cause There was lack of oversight by the City’s management on the compliance with the requirements of the Guidelines. Moreover, there were turnover in the key positions in the finance and accounting department during the past fiscal years.

Effect The City did not perform a true-up analysis at year-end to ensure that general liability insurance costs charged to MRLRF approximate the actual cost incurred. The amount charged to MRLRF may not reflect the most reasonable cost relating to MRLRF.

Recommendation We recommend for the City to revisit its methodology for allocating the general liability insurance costs to all the funds and once it is established, the City does not necessarily have to update the methodology on an annual basis if the parameters did not change significantly from year to year. We recommend for the City to also reimburse its MRLRF account the amount of $120,520.

Management’s Response The City will revisit its methodology for allocating the general liability insurance costs to all the funds and if requested by Metro, would consider reimbursing its MRLRF account in the amount of $120,520.




26

Finding #2018-007

City of Compton

Compliance Reference Section B (II) of Measure R Local Return Program Guideline states that “To maintain legal eligibility and meet Measure R LR program compliance requirements, Jurisdiction shall submit to LACMTA an Expenditure Plan (Form One), annually, by August 1st of each year. Expenditure Plan (Form One) provides a listing of projects funded with Measure R LR funds along with estimated expenditures for the year. For both operating and capital projects, Part I is to be filled out. For capital projects (projects over $250,000), Part II is required. Pursuant to AB2321, LACMTA will provide LR funds to a capital project or program sponsor who submits the required expenditure plan.

Condition The City claimed expenditures for the following MRLRF projects with no prior approval from LACMTA:

a. Project code 1.05, Central Ave Rehabilitation Project, totaling $325,830;

b. Project code 3.20, Compton Creek Walking Path – ADA Compliance, totaling $2,210; and

c. Project code 8.10, Fund Administration, totaling $212,730. The City submitted a revised Expenditure Plan (Form One) to the LACMTA Program Manager and obtained a retroactive approval of the said project on December 4 and 2018 and December 27, 2018.

Cause The City concurs with the finding that an Expenditure Plan (Form One) should have been submitted by August 1 for the projects that will be funded with Measure R. The finding was caused by an oversight by City staff.






27


City of Compton

Management’s Response The City will establish procedures and controls to ensure that approval is obtained from LACMTA prior to spending Measure R funded projects. Specifically, in this instance, additional funding was needed from Measure R on a previously Metro approved Prop C project.


LACMTA Program Manager granted retroactive approval of the said project on December 4, 2018 and December 27, 2018. No additional follow up is required.




28

Finding #2018-008

City of Compton

Compliance Reference Measure R Local Return Program Guidelines Section A(II)(8) states that “Transportation Administration expenditures are those administrative costs associated with and incurred for the aforementioned eligible projects/program. Direct administration expenditures includes those fully burdened costs that are directly associated with administering LR program or projects, and includes salaries and benefits, office supplies and equipment, and other overhead costs. All costs must be associated with developing, maintaining, monitoring, and coordinating, reporting and budgeting specific LR project(s). Expenditures must be reasonable and appropriate to the activities undertaken by the locality. The administrative expenditures for any year shall not exceed twenty percent (20%) of the total LR annual expenditures”.

Condition The City’s administration expenditures exceeded more than 20 percent of its MRLRF total annual local return expenditures by $130,720.

Cause The City is aware of the 20% limit of actual expenditures on Direct Administration. However, budgeted project expenditures were lower than expected which reduced the threshold for allowable administrative costs.

Effect Administrative expenses that exceeded 20% of the total annual local return expenditures are not allowable expenditures under the Measure R Local Return Program Guidelines.

Recommendation We recommend for the City to establish procedures to ensure that administrative expenditures claimed under the local return funds be limited to 20 percent of the fund’s total annual expenditures. The excess amount of $130,720 was part of the questioned cost in CF Findings #2018-005 and #2018-006 which was recommended to be reimbursed to the MRLRF account.

Management’s Response The City will establish procedures that will ensure greater control of the administrative expenditures claimed under the Local Return funds to be limited to 20 percent of the fund’s total annual expenditures.




29

Finding #2018-009

City of Culver City

Compliance Reference Section B (II) (I) of the Measure R Local Return Program Guidelines states that “To maintain eligibility and meet Measure R LR program compliance requirements, jurisdictions shall submit to LACMTA an Expenditure Plan (Form One) annually by August 1st of each year”.

Condition The City submitted its Expenditure Plan (Form One) on August 9, 2018, eight days beyond the due date set under the Guidelines. This is a repeat finding from prior year audit.

Cause The condition was due to oversight by City Staff.

Effect The City’s Expenditure Plan (Form One) was not submitted timely. The City was not in compliance with the Local Return Guidelines.

Recommendation We recommend for the City to establish procedures to ensure that all reporting deadlines are met.

Management Response The City will establish clear program schedules and implement procedures to ensure that all reporting deadlines are met.




30

Finding #2018-010

City of Huntington Park


Condition The City claimed expenditures under the MRLRF Project code 3.20, Pacific Boulevard Improvements, totaling $38,527, with no prior approval from LACMTA. Although we found the expenditures for these projects to be eligible for Measure R Local Return funding, these projects had no prior approval from LACMTA. The City submitted a revised Expenditure Plan (Form One) to the LACMTA Program Manager and obtained a retroactive approval of the said project on December 20, 2018.

Cause The finding was due to oversight by City staff.

Effect Measure R Local Return funds were expended towards project expenditures without prior approval by the LACMTA.

Recommendation We recommend for the City to establish procedures and controls to ensure that approval is obtained from LACMTA prior to spending on any Local Return-funded projects.

Management Response City staff assigned to preparing the appropriate forms and meeting all of the LACMTA deadlines have been advised of the requirements to submit an expenditure Plan by August 1st of each year. In addition, a date has been set on the director’s calendar as a reminder of the August 1st deadline. Also, the Finance Department has also implemented procedures to verify LACMTA approval prior to expending any funds.


LACMTA Program Manager granted a retroactive approval of the project budget on December 20, 2018. No follow up is required.




31

Finding #2018-011

City of Maywood


Condition The City claimed expenditures for MRLRF project code 8.10, Administration Costs, for $25,741 with no prior approval from LACMTA. This is a repeat finding from FY 2016/17 audit.

Cause The former staff was not properly trained in Measure R Local Return Program Guidelines, including all the spending regulations, compliance requirements, eligibility and reporting deadlines.



Management’s Response We concur with the recommendation. Staff will be attending LACMTA workshops and trainings on all LACMTA programs. We believe with this required training, staff will better understand Measure R expenditure program eligibility, approval and deadline filings. In addition, City staff is establishing internal procedures to ensure that required LACMTA procedures are followed prior to spending on any local return funded projects.


The City submitted a revised Expenditure Plan (Form One) to the LACMTA Program Manager and obtained a retroactive approval of the said project on December 21, 2018.




32

Finding #2018-012

City of Maywood

Compliance Reference Section VII of Measure R Local Return Guidelines states that “It is the Jurisdictions’ responsibility to maintain proper accounting records and documentation to facilitate the performance of the audit prescribed in these guidelines...” Also, Section B of the Assurance and Understanding regarding receipt and use of Measure R Local Return Funds states that, “For projects to be funded in part or in whole with Measure R LR funds, the Jurisdiction will comply with all applicable federal, state, and local laws and regulations, including compliance with the procurement requirements”. Further, Section 3.4.10 (b) of the City’s procurement policy states that “Distribution of notice inviting formal bids or request for proposals. A notice inviting formal bids or a request for proposal or qualifications, as appropriate, shall be posted at least once and at least ten (10) calendar days before the date of opening the bids or proposals. The notice shall be published once at least ten (10) calendar days before the date of opening the bids in a newspaper of general circulation …”

Condition During the fiscal year 2018, the City made payments to V&M Iron Works under MRLRF project code 1.05 Local Street Improvement Project, totaling $309,679. Payments were supported by copies of canceled checks and approved invoices by authorized city officials. During our review of the City’s compliance with the procurement guidelines, we noted that the services provided by the above-mentioned vendor was not procured in accordance with the City’s procurement policy. The City was not able to provide documents to support that bids or proposals were requested or publicly advertised. In February 2018, Authorities searched and subjected the City to investigations for allegations of fraud and corruption. Documents, including the accounting records of the City, were confiscated by the LA County District Attorney’s Office. This vendor is included in the list of vendors that are currently investigated by the LA County District Attorney’s Office. As of the date of this report, investigations are still ongoing.

Cause The previous staff were not properly trained in Measure R Guidelines, including all the spending regulations, compliance requirements, eligibility and reporting deadlines.




33

Finding #2018-012 (continued)

City of Maywood

Effect For fiscal year 2018, the amount paid to the maintenance contract with V&M Iron without following the City’s procurement policy resulted in questioned costs of $309,679.

Recommendation We recommend for the City to fully reimburse its Measure R Local Return Fund account the amount of $309,679, including interest. We further recommend that the City establish controls and educate staff who reviews expenses, so they can spot fraudulent activity procedures to ensure that the City is in compliance with its procurement policies and procedures at all times.

Management’s Response We concur with the LACMTA Auditor’s recommendation to follow the City’s Procurement Policy, and this has been the City’s current practice since 2017, but we do not concur with the LACMTA Auditor’s recommendation to reimburse $309,679 of Measure R funds to LACMTA. Dispute: We dispute the audit finding that the City did not follow its procurement policy and ignored the RFP advertisement procedure for formal bidding. The fact that the City is unable to provide absolute proof of advertisement should not be the grounds for disqualification of eligible funds. We were unable to provide absolute proof requested but provided circumstantial proof (corroborated by staff and the City Attorney) that substantiates our claim that RFP advertising procedures were in accordance with our procurement policy. The City staff is always required to adhere to all adopted policies as established by ordinance. RFP timeline background: In February 2016, Council approved a notice inviting RFP for General Maintenance. Due to the lack of competitive responses from outside vendors, Council approved to post for a second RFP notice inviting RFP for General Maintenance on May 2016. On a September 14, 2016 staff report, the City Attorney indicated that although we posted this RFP twice, we only received a sole bidder (V&M Ironworks). Under the advice of the City Attorney, Council proceeded to approve the agreement with V&M Ironworks. V&M has been working for the City since 2010, and for any bid process, they provide all the document requirements under the RFP guidelines.




34


City of Maywood

Management’s Response (continued)

After interviewing staff during this RFP period, staff attested to the fact that the City went to bidding twice, with one sole bidder responsive to the City’s RFP posting. This further corroborates the September 14, 2016 staff report prepared by the City attorney indicating we posted this RFP twice, but only received one bid for the project. Financial and Staffing Struggles Since the City’s disbandment in June 2010, the City has been struggling to regain itself as a full-service City. We are dedicated to providing the residents of Maywood continued public work and infrastructure projects to improve the quality of life to our residents. The City relies on the availability of special revenue funds/resources (CDBG, LACMTA, Gas Tax, etc) to fund many of our public works projects. The reimbursement of Measure R Local return of $309,679 is significant to the City’s General Fund, that will financially impact our general operating fund and will reduce some services we provide to the residents. Facts to reconsider with the Audit Findings

All the parties involved in the advertising posting no longer work for the City.

o The City Attorney mentions the RFP has been posted twice in his Staff Report to Council.

o The Finance personnel has attested to having direct knowledge of seeing the RFP posting twice

Our City attorney, who submitted the Staff report to Council

indicating that the RFP invitation had been posted twice, passed recently and was unable to provide us further clarification or documentation of the RFP invitation in question.

All our original files (January 2015 to February 2018) are with the District Attorney’s Office.

The City hired a new Website company, who designed our current website at the end of 2017. We are able to see what has been published Online since December 2017, we have no access however to see what was published prior to that month.




35


City of Maywood


NOTE: In addition to what our auditor indicated in the compliance reference, Section 3.4.10 (b) of the City’s procurement policy allows -as part of the Formal Bidding procedure- the alternative to post a bidding invitation in at least three (3) public places in the City which have been designated as the places for posting public notices. This is the alternative that is currently used by the City to post agendas, minutes and biddings for events. Staff posts on:

In the City’s website Copies of the Invitation on Front Counter and

the board (outside City Hall) In the Library

Conclusion: Over the course of my tenure as the Finance Director, I have strived to build trusting working relationship with our vendors and independent auditors. As a representative of the City, I take professional pride on my ability to resolve audit discrepancies and improve transparency in our financial transactions. If we are in non-compliance of program requirements, we immediately implement policies and procedures to ensure we are in full compliance to avoid findings in the future. Due to lack of full-time personnel for several years, the City was unable to pursue capital and public works projects that would improve the City of Maywood. The finance department now has full-time professional accountants who are responsible for ensuring internal control policies and procedures are followed in accordance with ordinance. Since fiscal year 17/18, we now contract with an Engineering firm who oversees public works projects. They are experienced and understand the importance of contractors following our policies and procedures and in full compliance with grant agencies guidelines. Recommending the return of $309,679 to LACMTA is an excessive measure -considering the documentation and information provided- that will generate the stoppage of some of these projects while adding unnecessary financial burden to our City.




36


City of Maywood


In closing, while I appreciate our Auditor’s reservations (expressed during informal conversation) due to the open investigation by the D.A.’s office with the City, this case remains open. The City is working to resolve this investigation with the D.A.’s Office and working with outside agencies who have inquired about the results of this pending case. The City’s position is that we have followed all the accounting and auditing standards in our procurement process. We are requesting that you reconsider the facts based on what we are able to provide to substantiate our posting claim with the standard of reasonableness taking into consideration the limited resources and Staff available at the time of the posting claim.

Auditor’s Rejoinder Auditors recognize the fact that there are issues with respect to employee turnover and lack of resources within the City organization. Auditors also recognize that documents supporting transactions and contracts previously entered into by the City may no longer be available because of turnover. However, professional standards require auditors to not just rely on management representation but also to find corroborating evidence to support conclusions and to use professional judgment. Street maintenance is a very common type of service provided by a lot of vendors in the Los Angeles County area. Vendors information are available online or in the other City’s vendors list. The City should expand its request for RFP with the best intention to find the most reasonable cost of service that would result in the most economical way of spending public funds.




37

Finding #2018-013

City of Pico Rivera

Compliance Reference Section B(II) of the Measure R Local Return Program Guidelines states that “Jurisdictions shall submit to LACMTA an Expenditures Report (Form Two), annually, by October 15th (following the conclusion of the fiscal year) …”

Condition The City submitted its Form Two on October 25, 2018, ten days after the due date of October 15.

Cause In the past 12 months, the City realized that the prior consultant utilized to assist with LACMTA reporting and related capital projects had made several errors which made reporting difficult. In an effort to improve reporting, it was necessary to double-check prior year’s work, update schedules, and better utilize the City’s new ERP system to properly record transactions. The delay was directly related to the City’s commitment to ensuring all information reported was accurate.

Effect The City’s Expenditure Report (Form Two) was not submitted timely. The City was not in compliance with the Local Return Guidelines.

Recommendation We recommend for the City to establish procedures and controls to ensure that Expenditure Report (Form Two) is submitted by October 15 as required by the Guidelines.

Management’s Response The City will ensure timely submission of Form Two to LACMTA moving forward.




38

Finding #2018-014

City of Pomona


Condition The City claimed expenditures under the following MRLRF Projects, with no prior approval from LACMTA: a. Project code 1.05, Street Rehabilitation – Slurry Seal and

Overlay, totaling $16, 228; b. Project code 1.90, Plaza Park Improvements, totaling $49,000; c. Project code 2.29, Traffic Operations, Communication Upgrade,

totaling $22,870; and d. Project code 1.25, ADA Path of Travel – Citywide (CDBG),

totaling $18,705. Although we found the expenditures for these projects to be eligible for Measure R Local Return funding, these projects had no prior approval from LACMTA.

Cause The finding was caused by an oversight by City staff.


Recommendation We recommend for the City to establish procedures and controls to ensure that approval is obtained from LACMTA prior to spending on any Local Return-funded projects.




39


City of Pomona

Management’s Response The expenditures submitted by the City are eligible costs under Measure R LR Funds. The City, under the Measure R LR Guidelines, did submit an Expenditure Plan (Form One), provided a listing of the estimated projects for FY 2017/18 by the August 1 deadline. A total of four projects, were retroactively approved by LACMTA in December 2018. The City has been working with City staff members and providing training to ensure proper approvals are received from LACMTA for projects requesting LACMTA funds. The submittal process requires two members of Staff from the submitting Department as well as a Staff member from Finance to review documentation and submittals to LACMTA. A procedural check-off list has been established to ensure each procedure is followed and has received the approvals. The procedural check-off list will require a two department review process (Finance and Public Works). In addition, this document will be reviewed on a quarterly basis.


The City subsequently submitted a revised Expenditure Plan (Form One). The LACMTA Program Manager granted a retroactive approval of the budgets for the said projects on December 11, 2018 and December 20, 2018. No follow up is required.




40

Finding #2018-015

City of Santa Fe Springs

Compliance Reference Section B (II) (1) of the Measure R Local Return Program Guidelines states that “To maintain eligibility and meet Measure R LR program compliance requirements, jurisdictions shall submit to LACMTA an Expenditure Plan (Form One) annually by August 1st of each year”.

Condition The City submitted its Expenditure Plan (Form One) on August 3, 2017, two days after the due date set under the Guidelines.

Cause There was a recent change in City Manager position whose role includes working together with the Transportation Services Supervisor to ensure deadlines are met.

Effect The City missed its deadline of August 1 for the submission of Form One.

Recommendation We recommend for the City to establish and document procedures to ensure that all reporting deadlines are met.

Management’s Response The Transportation Services Supervisor has been instructed to calendar all reporting deadlines and to include an alert of no less than 30 days prior to such deadlines. He has also been instructed to alert the Director of Public Works when reports are submitted.


Schedule of Findings and Questioned Costs Fiscal Year Ended June 30, 2018

(Continued)

41

Finding #2018-016

City of Westlake Village

Compliance Reference Section B (II) (1) of the Measure R Local Return Program Guidelines states that “To maintain eligibility and meet Measure R LR program compliance requirements, jurisdictions shall submit to LACMTA an Expenditure Plan (Form One) annually by August 1st of each year”.

Condition The City submitted its Expenditure Plan (Form One) on August 4, 2017, three days after the due date set under the Guidelines.

Cause The person responsible for submitting the Form One for FY 2017-18 was administering the Local Return program for the first time and was unfamiliar with the August 1st submission deadline.

Effect The City missed its deadline of August 1 for the submission of Form One.

Recommendation We recommend for the City to establish and document procedures to ensure that all reporting deadlines are met.

Management’s Response The City concurs with the findings and has taken steps to ensure that all required forms will be submitted by the relevant deadlines. Specifically, the Finance Director is now responsible for submitting all Local Return program forms and documentation, which was not the case in FY 2017-18.

www.vasquezcpa.com Vasquez & Company LLP has over 45 years of experience in performing audit, accounting & consulting services for all types of nonprofit organizations, for-profit companies, governmental entities and publicly traded companies. Vasquez is a member of the RSM US Alliance. RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM™ logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS





Simpson & Simpson, LLP Certified Public Accountants

huynhn

Text Box

Attachment B


Consolidated Audit Report

TABLE OF CONTENTS

Page INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH

REQUIREMENTS APPLICABLE TO MEASURE R ORDINANCE AND MEASURE R LOCAL RETURN GUIDELINES 1

Summary of Compliance Findings 4

Schedule 1 – Summary of Audit Results 5

Schedule 2 - Schedule of Findings and Questioned Costs 22

1

SIMPSON & SIMPSON CERTIFIED PUBLIC ACCOUNTANTS

FOUNDING PARTNERS BRAINARD C. SIMPSON, CPA

MELBA W. SIMPSON, CPA

U.S. BANK TOWER 633 WEST 5TH STREET, SUITE 3320

LOS ANGELES, CA 90071 (213) 736-6664 TELEPHONE

(213) 736-6692 FAX www.simpsonandsimpsoncpas.com

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS


To: Board of Directors of the Los Angeles County Metropolitan Transportation Authority and Measure R Oversight Committee

Report on Compliance

We have audited the compliance of the forty-nine (49) Cities and the County of Los Angeles identified in Schedule 1, with the types of compliance requirements described in the Measure R Ordinance enacted through a Los Angeles County (the County) voter approved law in November 2008; Measure R Local Return Guidelines, issued by the Los Angeles County Metropolitan Transportation Authority (LACMTA), approved by its Board of Directors on October 22, 2009 (collectively, the Guidelines); and the respective Assurances and Understandings Regarding Receipt and Use of Measure R Local Return Funds, executed by LACMTA and the respective Cities and the County for the year ended June 30, 2018 (collectively, the Requirements). Compliance with the above noted Guidelines and Requirements by the Cities and the County are identified in the accompanying Summary of Compliance Findings, Schedule 1 and Schedule 2.

Management’s Responsibility

Compliance with the Guidelines and Requirements is the responsibility of the respective Cities' and the County’s management.

Auditor’s Responsibility

Our responsibility is to express opinions on the Cities' and the County’s compliance with the Guidelines and Requirements referred to above based on our audits. We conducted our audits of compliance in accordance with the auditing standards generally accepted in the United States of America; and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether noncompliance with the types of requirements referred to above that could have a direct and material effect on the Measure R Local Return program occurred. An audit includes examining, on a test basis, evidence about each City's and the County’s compliance with the Guidelines and Requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions on compliance. However, our audits do not provide a legal determination of each City's and the County’s compliance with the Guidelines and Requirements.

http://www.simpsonandsimpsoncpas.com/

2

Opinion

In our opinion, the Cities and the County complied, in all material respects, with the Guidelines and Requirements referred to above that could have a direct and material effect on the Measure R Local Return program for the year ended June 30, 2018.

Other Matters

The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Guidelines and Requirements and which are described in the accompanying Summary of Measure R Audit Results (Schedule 1) and Schedule of Findings and Questioned Costs (Schedule 2) as Findings #2018-001 through #2018-012. Our opinion is not modified with respect to these matters.

Responses by the Cities to the noncompliance findings identified in our audits are described in the accompanying Schedule 2 - Schedule of Findings and Questioned Costs. The Cities’ responses were not subjected to the auditing procedures applied in the audit of compliance, and accordingly, we express no opinion on the responses.

Report on Internal Control Over Compliance

The management of each City and the County is responsible for establishing and maintaining effective internal control over compliance with the Guidelines and Requirements referred to above. In planning and performing our audits of compliance, we considered each City’s and the County’s internal control over compliance with the Guidelines and Requirements that could have a direct and material effect on the Measure R Local Return program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Guidelines and Requirements, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of each City’s and the County’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance under the Guidelines will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with the Guidelines that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We identified a deficiency in internal control over compliance, described in the accompanying Schedule of Findings and Recommendations as Finding No. 2018-002 that we consider to be a material weakness.

3

A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with the Guidelines and Requirements that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs as Finding No. 2018-012 to be a significant deficiency.

The responses by the Cities to the internal control over compliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs (Schedule 2). The responses by the Cities were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing on internal control over compliance and the results of that testing based on the requirements of the Guidelines and Requirements. Accordingly, this report is not suitable for any other purpose.

Los Angeles, California December 31, 2018


Summary of Compliance Findings Fiscal Year Ended June 30, 2018

4

The audit of the 49 cities and the County identified in Schedule 1 have resulted in 12 findings. The table below shows a summary of the findings:

Finding # of

Findings Responsible Cities/ Finding Reference

Questioned Costs

Resolved During the

Audit

Funds were expended for transportation purposes 1 Downey (#2018-002) $ 21,431 $ -

Funds were expended prior to LACMTA’s approval 4

El Segundo (#2018-003) La Mirada (#2018-005) Monrovia (#2018-007) Redondo Beach (#2018-010)

15,700 663

220,990 34,375

15,700 663

220,990 34,375

Expenditure Report (Form One) was not submitted timely 4

La Verne (#2018-006) Palos Verdes Estate (#2018-008) San Dimas (#2018-011) San Marino (#2018-012)

None None

Timely Use of Funds 3 Bradbury (#2018-001) Glendale (#2018-004) Rancho Palos Verdes (#2018-009)

13,361 235,994 805,649

9,371 235,994 805,649

Total Findings and Questioned Costs

12 $ 1,348,163 $ 1,322,742

Details of the findings are in Schedule 2.




5

Compliance Area Tested Alhambra Arcadia Artesia Funds were expended for transportation purposes Compliant Compliant Compliant

Fund were used to augment, not supplant, existing local revenues being used for transportation purposes unless there is a funding shortfall.








Expenditure Report (Form Two) was submitted timely Compliant Compliant Compliant


Administrative expenditures are within the 20% cap. Not Applicable Compliant Not Applicable


A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Compliant Compliant Compliant

Recreational transit form was submitted timely. Not Applicable Not Applicable Compliant




6

Compliance Area Tested Avalon Bellflower Bradbury Funds were expended for transportation purposes Compliant Compliant Not Applicable


Compliant Compliant Not Applicable



Revenues received including allocations, project generated revenues and interest income was properly credited to the Measure R Local Return Account. Compliant Compliant Compliant

Funds were expended with LACMTA’s approval. Compliant Compliant Not Applicable



Timely use of funds. Compliant Compliant See Finding #2018-001

Administrative expenditures are within the 20% cap. Not Applicable Not Applicable Not Applicable


A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Compliant Not Applicable Not Applicable





7

Compliance Area Tested Burbank Cerritos Claremont Funds were expended for transportation purposes Compliant Compliant Compliant










Administrative expenditures are within the 20% cap. Compliant Not Applicable Not Applicable

Fund exchanges were approved by LACMTA. Compliant Not Applicable Not Applicable






8

Compliance Area Tested Covina Diamond

Bar Downey

Funds were expended for transportation purposes Compliant Compliant See Finding #2018-002










Administrative expenditures are within the 20% cap. Not Applicable Not Applicable Compliant







9

Compliance Area Tested Duarte El Segundo Glendale

Funds were expended for transportation purposes Compliant Compliant Compliant

















10

Compliance Area Tested Glendora Hawaiian Gardens

Hermosa Beach












Fund exchanges were approved by LACMTA. Not Applicable Not Applicable Compliant

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not Applicable Compliant





11

Compliance Area Tested La Cañada Flintridge

La Habra Heights La Mirada

Funds were expended for transportation purposes Compliant Not Applicable Compliant


Compliant Not Applicable Compliant





Funds were expended with LACMTA’s approval. Compliant Not Applicable See Finding #2018-005





Fund exchanges were approved by LACMTA. Not Applicable Compliant Not Applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Compliant Compliant Not Applicable

Recreational transit form was submitted timely. Not Applicable Compliant Not Applicable




12

Compliance Area Tested La Verne Lakewood Lancaster








Expenditure Plan (Form One) was submitted timely. See Finding #2018-006 Compliant Compliant



Administrative expenditures are within the 20% cap. Compliant Compliant Not Applicable


A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not Applicable Compliant





13

Compliance Area Tested Lomita Long Beach Los Angeles

City











Administrative expenditures are within the 20% cap. Compliant Compliant Compliant







14

Compliance Area Tested Los Angeles

County Manhattan

Beach Monrovia








Funds were expended with LACMTA’s approval. Compliant Compliant See Finding #2018-007











15

Compliance Area Tested Norwalk Palmdale Palos Verdes

Estates








Expenditure Plan (Form One) was submitted timely. Compliant Compliant See Finding #2018-008





A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Compliant Not Applicable Compliant

Recreational transit form was submitted timely. Compliant Not Applicable Not Applicable




16

Compliance Area Tested Paramount Pasadena Rancho

Palos Verdes













A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Compliant Compliant Not Applicable





17

Compliance Area Tested Redondo Beach Rolling Hills Rolling Hills

Estates

Funds were expended for transportation purposes Compliant Not Applicable Compliant


Compliant Not Applicable Compliant











A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Compliant Compliant





18

Compliance Area Tested San Dimas San Gabriel San Marino









Expenditure Plan (Form One) was submitted timely. See Finding #2018-011 Compliant See Finding

#2018-012










19

Compliance Area Tested Santa Clarita Sierra Madre Signal Hill


















20

Compliance Area Tested South

Pasadena Temple City Torrance

Funds were expended for transportation purposes Compliant

Compliant Compliant






Compliant

Compliant Compliant

Funds were expended with LACMTA’s approval. Compliant

Compliant Compliant

Expenditure Plan (Form One) was submitted timely. Compliant

Compliant Compliant

Expenditure Report (Form Two) was submitted timely. Compliant

Compliant Compliant




A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Compliant Compliant





21

Compliance Area Tested West Covina Whittier

Funds were expended for transportation purposes Compliant Compliant


Compliant Compliant

Signed Assurances and Understandings on file. Compliant Compliant

Separate Measure R Local Return Account was established. Compliant Compliant


Compliant Compliant

Funds were expended with LACMTA’s approval. Compliant Compliant

Expenditure Plan (Form One) was submitted timely. Compliant Compliant

Expenditure Report (Form Two) was submitted timely. Compliant Compliant

Timely use of funds. Compliant Compliant

Administrative expenditures are within the 20% cap. Compliant Compliant

Fund exchanges were approved by LACMTA. Compliant Not Applicable

A separate account was established for Capital reserve funds and Capital reserve was approved by LACMTA. Not Applicable Not Applicable

Recreational transit form was submitted timely. Not Applicable Not Applicable




22

Finding #2018-001 City of Bradbury

Compliance Reference According to Measure R Local Return Guidelines Section B III. Timely Use of Funds, “Funds must be expended within five years of the first day of the fiscal year in which funds were originally allocated or received.”

Condition The City’s fiscal year 2013 ending fund balance in the amount of $13,361 was not fully expended within 5 years as of June 30, 2018 nor reserved for capital projects as required by Measure R Local Return Guidelines.

On November 8, 2018, the City received LACMTA’s subsequent approval of an extension to use $9,371 by June 30, 2019. The remaining balance of $3,990 lapsed.

Cause The City is very small and has few roads that are eligible for funding. The major share of street work is the citywide slurry seal project that is only necessary every five years.

Effect Untimely review of the funding status from the prior year allocation could result in loss of funding.

Recommendation Based on the Measure R Local Return Guidelines, we recommend the City return the remaining lapsed fund balance of $3,990 to LACMTA. In order to avoid future lapsed funds, we also recommend the City establish. establish a policy and process where the City Manager and Finance Director discuss the availability of the Local Return funds in conjunction with any eligible MRLRF projects and submit Form One (Expenditure Plan) to LACMTA, if needed.

Management’s Response The City Manager and Finance Director constantly discuss the need to plan and implement street projects to spend funds in a timely manner. This process will continue.


On November 8, 2018, LACMTA subsequently approved an extension on the usage of lapsed funds balance of $9,371 until June 30, 2019.




23

Finding #2018-002 City of Downey

Compliance Reference According to Measure R Local Return Guidelines, Section A.I, “The Measure R Ordinance specifies that Local Return funds are to be used for transportation purposes. No net revenue distributed to Jurisdictions may be used for purposes other than transportation purposes.” and Section B.VII, “It is the Jurisdictions’ responsibility to maintain proper accounting records and documentation to facilitate the performance of audit prescribed in these guidelines.” In addition, LACMTA Local Return Program Manager issued a memo dated on April 29, 2014 to jurisdictions to provide recommendations to ensure that jurisdictions have adequate evidence to support its compliance with the Local Return Guidelines, those recommendations are “that an electronic system is acceptable as long as how much time is identified on the project (i.e. not just a clock-in-clock-out system) and this non-timesheet system, excel file or other, is authenticated by the employee and approved by one’s supervisor.” Also, “(4) Where employees work on multiple activities or cost objectives, a distribution or their salaries or wages will be supported by personnel activity reports or equivalent documentation which meets the standards in subsection (5) unless a statistical sampling system (see subsection (6)) or other substitute system has been approved by the cognizant Federal agency. Such documentary support will be required where employees work on: (b) A Federal award and non-Federal award.

(5) Personnel activity reports or equivalent documentation must meet thefollowing standards:(a) They must reflect an after the fact distribution of the actual activity ofeach employee,

(e) Budget estimates or other distribution percentages determined before theservices are performed do not qualify as support for charges to Federalawards but may be used for interim accounting purposes, provided that: (i)the governmental unit’s system for establishing the estimates producesreasonable approximations of the activity actually performed; (ii) at leastquarterly, comparisons of actual costs to budgeted distributions based onmonthly activity reports are made. Costs charged to Federal awards to reflectadjustments made as a result of the activity actually performed may berecorded annually if the quarterly comparisons show the differencesbetween budgeted and actual costs are less than ten percent; and (iii) thebudget estimates or other distribution percentages are revised as leastquarterly, if necessary, to reflect changed circumstances.”




24


City of Downey

Condition To support the propriety of expenditures being charged to Measure R Local Return Fund, payroll expenditures should be supported by properly executed payrolls, time records, activity reports, vouchers, or other official documentation evidencing in proper detail the nature of the charges. However, the salaries and benefits charged to Public Works Executive Management Salary Project Code 8.10 in the amount of $21,431 was based on an estimate of a percentage of time spent on MRLRF activity rather than the employee’s actual working hours spent on the project. Although the City provided a time study listing the employees charged to MRLRF, the payroll costs and benefits were based on estimated percentages of the time spent on the projects. Moreover, the hours were not adjusted to reflect the “true” hours worked on the projects at the end of the fiscal year 2017-18.

This is a repeat finding from the prior two fiscal years. Cause The City allocates administrative charges based on time study from 2011-

12. The same percentage allocation has been used in prior fiscal years inwhich the City believed is still relevant today as when the study wascompleted.

Effect The payroll costs claimed under the Measure R Local Return Fund project may include expenditures which may not be an allowable Measure R project expenditures. This resulted in questioned costs of $21,431.

Recommendation In accordance with the Guidelines, we recommend that the City reimburse its Measure R Local Return Fund account for $21,431. In addition, we recommend that the City revise its current labor costs reporting procedures to ensure that labor costs charged to Local Return Funds are adequately supported by time sheets or similar documentation which includes employees’ actual working hours.

Management’s Response The salary allocations to all City funds were estimates based on activity by position. Although the analysis has been carried forward, the City believed that allocations are still relevant today as when the study was completed. The City recently completed a cost allocation study which has been shared with the LACMTA and is still under review by the City management.




25

Finding #2018-003 City of El Segundo

Compliance Reference According to Measure R Local Return Guidelines, Section B.VII.A, Financial and Compliance Provisions, “The Measure R LR Audits shall include, but not limited to, verification of adherence to the following financial and compliance provisions of this guidelines: Verification that funds were expended with LACMTA’s approval.”

Condition During the fiscal year 2017-18, the City used Measure R Local Return funds for Park Place Roadway Extension Project in the amount of $15,700. However, Park Place Roadway Extension Project was not approved by LACMTA for fiscal year 2017-18.

Cause When the City prepared and submitted the budget to LACMTA, the capital projects were described in a general way such as “Streets & Roads – Grind and overlay commercial roads and slurry”. The specific location or street name was not listed, but when the funds are spent the City will open a project and name it specifically after the location or the street name where the work is being done (i.e. Park Place).

Effect The City was not in compliance with Measure R Guidelines because the City did not obtain approval from LACMTA to expend on Park Place Project.

Recommendation We recommend that the City implement internal control procedures to obtain approval from LACMTA on all projects that will be funded by Measure R Local Return funds.

Management’s Response In the future management will make sure the specific projects are listed in the budget documents submitted to LACMTA.


On December 18, 2018, the City received retroactive approval from LACMTA program manager to expend Measure R funds on Park Place Roadway Extension Project for fiscal year 2017-18. As such, no follow-up is necessary on this matter.




26

Finding #2018-004 City of Glendale


Condition A portion of the City’s fiscal year 2012-13 ending fund balance in the amount of $235,994 was not fully expended within 5 years as of June 30, 2018 and it was not reserved for capital projects as required by the Measure R Local Return Guidelines. However, on October 16, 2018, LACMTA granted the City an extension on the usage of lapsed funds until June 30, 2019.

Cause The subject funds are encumbered in a multimillion-dollar construction contract for the Beeline Maintenance Facility. The construction start date was delayed and staff underestimated the contractor’s actual expenditure draw before the end of the fiscal year.

Effect Untimely review of the funding status from the prior year allocation could result in losing the funding.

Recommendation In order to avoid future lapsed funds, we recommend that the City establish a procedure where the Finance staff review the estimated annual fund balance so that a capital reserve account can be established when warranted.

Management’s Response Staff agrees to implement a procedure to monitor the fund balance so that a capital reserve account can be established in a timely manner.


On October 16, 2018, LACMTA granted the City an extension on the usage of lapsed funds until June 30, 2019.




27

Finding #2018-005

City of La Mirada

Compliance Requirement According to Measure R Local Return Guidelines, Section B.VII.A, Financial and Compliance Provisions, “The Measure R LR Audits shall include, but not limited to, verification of adherence to the following financial and compliance provisions of this guidelines: Verification that funds were expended with LACMTA’s approval.”

Condition The expenditures for MRLRF’s Project Code 1.90, Traffic Signal - Valley View/Adoree project in the amount of $663 for Measure R were incurred prior to approval from LACMTA. However, the City subsequently received LACMTA’s approval on the MRLRF project on October 4, 2018.

Cause The City of La Mirada did have a Form One approval for the fiscal year 2016-17 projects and were anticipated to be fully completed in fiscal year 2016-17. However, the project expenditures continued into fiscal year 2017-18.

Effect The City did not comply with the Guidelines when expenditures for MRLRF projects are incurred prior to LACMTA’s approval.

Recommendation We recommend that the City establish procedures to ensure that it obtains approval from LACMTA prior to implementing any Measure R Local Return projects, and Form One (Annual Project Update Form) should be properly prepared and submitted before the due date of August 1st so that the City’s expenditures of Measure R Local Return Funds are in accordance with LACMTA’s approval and the Guidelines. In accordance with the Guidelines, the City should include all approved on-going and carryover Local Return projects on Form One.

Management’s Response

The City agrees with the finding. The projects funded with local return funds will be monitored on a quarterly/monthly basis to ensure that Form B and/or Form One are timely submitted to LACMTA.

Findings Corrected During the Audit

LACMTA Program Manager granted retroactive approval of the said expenditures on October 4, 2018. No follow-up is required.




28

Finding #2018-006

City of La Verne

Compliance Requirement According to Measure R Local Return Guidelines Section B (II), “To maintain legal eligibility and meet Measure R LR program compliance requirements, Jurisdictions shall submit to LACMTA an Expenditure Plan (Form One), annually, by August 1st of each year.”

Condition The City did not meet the August 1, 2017 deadline for submission of Form One. However, the City submitted the Form One on October 16, 2017.

Cause An incorrect email address was inadvertently used during the submission of Form One to LACMTA.

Effect The City did not comply with the Guidelines when Form One is not submitted on due date.

Recommendation

We recommend that the City establish procedures to ensure that the Form One (Expenditure Plan) is properly prepared and submitted before the due date of August 1st so that the City’s expenditures of the Measure R Local Return Funds will be in accordance with LACMTA’s approval and the guidelines. Furthermore, we recommend that the City retain a confirmation of receipt by LACMTA to indicate the form was submitted in a timely manner.

Management’s Response The City prepared and submitted the Form One on July 31, 2017; however, the email address used was incorrect resulting in the form not being received by LACMTA. City personnel followed up with LACMTA on September 21, 2017 prior to accepting bids for the project since no approval was received. The City has procedures in place to ensure timely filing; the delayed submission was caused by an inadvertent email error. The City also retains copies of all Form One approvals which contain the necessary information to determine that a submission took place. The City further keeps track of whether or not approval has been obtained prior to expending requested funds. To ensure compliance with reporting requirements, the City will promptly make a follow up with LACMTA if no acknowledgement is received after Form One submissions.

Findings Corrected During the Audit

The City subsequently submitted the Form One on October 16, 2017. No follow-up is required.




29

Finding #2018-007 City of Monrovia


Condition The expenditures for MRLRF’s GoMonrovia Program Project Code 2.19 in the amount of $220,990 were incurred prior to LACMTA’s approval. However, the City subsequently received LACMTA’s approval on the MRLRF project on August 28, 2018.

Cause The budget for the GoMonrovia Mobility Program was originally approved as an MMLRF project. The City reevaluated/reallocated funding to MRLRF for this project due to the shortfall in MMLRF revenue. Due to the revenue shortfall which was not identified until the close of the fiscal year, the City submitted a budget approval to LACMTA for MRLRF expenditures after the close of the fiscal year.

Effect The City did not comply with the Guidelines when expenditures for MRLRF projects are incurred prior to LACMTA’s approval.

Recommendation We recommend that the City establish procedures to ensure that it obtains approval from LACMTA prior to implementing any Measure R Local Return projects, and Form One (Expenditure Plan) should be properly prepared and submitted before the due date of August 1st so that the City’s expenditures of Measure R Local Return Funds are in accordance with LACMTA’s approval and the Guidelines. In accordance with the Guidelines, the City should include all approved on-going and carryover Local Return projects in Form One.

Management’s Response We agree with the finding. Going forward, the City will closely monitor the LACMTA program/project expenditures and revenues and submit project amendments/requests in a timely manner. We will continue to track all Local Return Funds to help identify projects that may require additional funding in the future, which will allow the City to amend the budget forms prior to incurring the additional expenditures.


LACMTA Program Manager granted retroactive approval of the said expenditures on August 28, 2018. No follow-up is required.




30

Finding #2018-008 City of Palos Verdes Estates

Compliance Reference According to Measure R Local Return Guidelines Section B (II), “To maintain legal eligibility and meet Measure R LR program compliance requirements, Jurisdictions shall submit to LACMTA an Expenditure Plan (Form One), annually, by August 1st of each year.”

Condition The City did not submit the Expenditure Plan (Form One) to LACMTA by August 1, 2017.

Cause The City’s Finance Department has experienced staff turnover; therefore, the Expenditure Plan (Form One) was not submitted timely.

Effect The City’s Expenditure Plan (Form One) was not submitted to LACMTA by August 1st as required by Measure R Local Return Guidelines.

Recommendation We recommend that the City establish internal control procedures to ensure that the Expenditure Plan (Form One) is properly prepared and submitted prior to the August 1st deadline, and that the City retain a confirmation of receipt by LACMTA to comply with the Measure R Local Return Guidelines.

Management’s Response The City’s Finance Department has experienced staff turnover; therefore, the fiscal year 2017-18 Form One was not submitted timely. Currently, the Finance Department is fully staffed and for fiscal year 2018-19 Form One was submitted timely on 7/31/18. With new management, we will ensure that the Form One is submitted timely going forward.


The City submitted the Form One on June 29, 2018. No follow up is required.




31

Finding #2018-009 City of Rancho Palos Verdes


Condition A portion of the City’s fiscal year June 30, 2013 ending fund balance in the amount of $805,649 was not fully expended within 5 years as of June 30, 2018 and was not reserved for capital projects as required by the Measure R Local Return Guidelines. However, the City received subsequent approval from LACMTA on November 8, 2018 to expend the lapsed funds by June 30, 2019.

Cause Projects funded by Measure R Local Return funds were delayed in the start of the implementation of the project and the timely expenditure of funds.

Effect Untimely review of the funding status from the prior year allocation could result in losing the funding.

Recommendation We recommend that the City establish a policy in place where the City Manager, City Engineer and Finance Department discuss the availability of Measure R Local Return funds in conjunction with eligible MRLRF projects and submit its Form B (Annual Project Update Form) on time. An alternative measure would include requesting a Capital Reserve Agreement with LACMTA.

Management’s Response The City has implemented the auditor’s recommendation.


On November 8, 2018, LACMTA subsequently approved an extension on the usage of lapsed funds until June 30, 2019. No follow-up is required.




32

Finding #2018-010 City of Redondo Beach


Condition The City incurred expenditures for Riviera Village Improvements – Bike/Ped, Construction & Amenities Project in the amount of $34,375 prior to LACMTA’s approval.

Cause It was due to an internal communication issue.

Effect The City did not comply with the Guidelines.

Recommendation We recommend that the City establish procedures to ensure all new projects are approved by LACMTA prior to expending the funds by submitting Expenditure Plan (Form One).

Management’s Response The Transit and Engineering staff will improve communication regarding Local Return funded projects to ensure that the appropriate forms are submitted.


On October 15, 2018, the City received approval from LACMTA to expend Measure R funds in the amount of $100,000 for Riviera Village Improvements – Bike/Ped, Construction & Amenities Project. No follow-up is required.




33

Finding #2018-011 City of San Dimas


Condition The City did not meet the August 1, 2017 deadline for submission of the Expenditure Plan (Form One). However, the City submitted the Form One on August 4, 2017.

Cause Staff member who completes report failed to submit the completed report before the due date. It was an oversight and the issue has been addressed.

Effect The City’s Expenditure Plan (Form One) was not submitted to LACMTA by August 1st as required by Measure R Local Return Guideline

Recommendation We recommend that the City establish procedures to ensure that the Form One is properly prepared and submitted before the due date of August 1st so that the City’s expenditures of the Measure R Local Return Funds will be in accordance with LACMTA’s approval and the Guidelines. Furthermore, we recommend the City to retain a confirmation of receipt by LACMTA to indicate the form was submitted in a timely manner.

Management’s Response The late submission was an unfortunate oversight by staff. Management is requiring that concerned personnel are carbon copied in correspondences with LACMTA to assure timely submission and shared task lists will be implemented to track progress.


The City subsequently submitted the Form One on August 4, 2017. No follow up is required.




34

Finding #2018-012 City of San Marino


Condition The City did not meet the August 1, 2017 deadline for submission of Form One. However, the City submitted the Form One on August 15, 2017. This is a repeat finding from the prior year.

Cause Due to City staff turnover and oversight, the form was not submitted by the deadline set by LACMTA.

Effect The City’s Form One was not submitted timely.

Recommendation We recommend that the City establish procedures to ensure that the Form One (Expenditure Plan) is properly prepared and submitted before the due date of August 1st so that the City’s expenditures of the Measure R Local Return Funds will be in accordance with LACMTA’s approval and the Guidelines. Furthermore, we recommend that the City retain a confirmation of receipt by LACMTA to indicate the form was submitted in a timely manner.

Management’s Response The City has established new controls in place to ensure budgets are submitted once the City-wide budget is approved. The City has also added multiple contacts to the LACMTA email list to ensure the City is aware of the deadlines as they approach.


The City subsequently submitted the Form One on August 15, 2017. No follow-up is required.