Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JULY 16, 2026
Subject
SUBJECT: CONSOLIDATED AUDIT FOR FISCAL YEAR 2025
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE the Consolidated Audit Financial and Compliance Reports completed by Vasquez and Company (Vasquez) and Simpson and Simpson (Simpson), certified public accountants, for the fiscal year ended June 30, 2025 (FY25).
Issue
ISSUE
As the Regional Transportation Planner for Los Angeles County, the Los Angeles County Metropolitan Transportation Authority (Metro) is responsible for planning, programming, and allocating transportation funding to Los Angeles County jurisdictions, transit operators, and other transportation programs. Metro has the fiduciary responsibility to provide assurance that recipients of funds included in the Consolidated Audit and Compliance Reports (Consolidated Audit) are adhering to the statutes, program guidelines, and/or agreements of each applicable funding source and that operations data used to allocate funds is fair and in accordance with Federal Transit Administration (FTA) guidelines.
The consolidated audit process includes financial and compliance audits of the following programs:
• Local Funding Program to 88 cities and Unincorporated Los Angeles County
o Proposition A Local Return
o Proposition C Local Return
o Measure R Local Return
o Measure M Local Return
o Transportation Development Act (TDA) Article 3, and Article 8 Programs
o Proposition A Discretionary Incentive Program
• Proposition A Discretionary Incentive Grant
o Antelope Valley Transit Authority
o Pomona Valley Transportation Authority
• Transit System Operators of Commerce, Redondo Beach, and Torrance
o Transit System Funds
o Measure M 20%
o Measure R 20%
• Proposition A Growth Over Inflation (GOI) Fund to Burbank, Glendale, LADOT and Pasadena
• Low-Income Fare is Easy (LIFE) Program
• Metrolink Program
• EZ Transit Pass Program
• Access Services
• LADOT.
Background
BACKGROUND
Metro allocates over $1.2 billion annually to the stated programs and distributes them to the County of Los Angeles (the County), the 88 cities in Los Angeles County (the Cities), and other agencies. Annual audits of the programs ensure that the agencies comply with the applicable rules, regulations, policies, guidelines, and executed Memoranda of Understanding (MOU). The audits also serve as a program management tool for effectively managing and administering the programs.
Management Audit Services (MAS) contracted with the certified public accountant firms of Vasquez and Simpson to perform the financial and compliance audits and provide reasonable assurance to management that recipients of subsidies included in the Consolidated Audit are adhering to the statutes of each applicable funding source. The audits were conducted in accordance with the auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the program guidelines.
Discussion
DISCUSSION
The consolidated audit process includes financial and compliance audits of Local Return programs. The County and Cities’ financial statements were found to present fairly, in all material respects, in accordance with U.S. generally accepted accounting principles (GAAP). Below is a more detailed summary of the consolidated audit results:
Propositions A and C
Vasquez and Simpson found that, except for the Cities of Compton, Glendora, Huntington Park, Redondo Beach, and Santa Fe Springs, the County and Cities complied, in all material respects, with the Ordinances and Guidelines requirements applicable to the Proposition A and Proposition C Local Return programs for FY25.
The auditors identified 37 instances of non-compliance for Propositions A and C, consisting of 24 findings that did not result in questioned costs. Thirteen findings with questioned costs totaling $1.2 million for Proposition A and $3.6 million for Proposition C represent less than 1% and less than 2%, respectively, of each total fund reviewed. There were 18 repeat findings across 11 cities that were repeats from FY24, except for the City of Huntington Park, whose findings repeated for three consecutive years. Those findings are as follows:
To help the County and Cities comply with the requirements, the Consolidated Audit Workshop was conducted on May 13, 2026, and Local Return Program Managers are working closely with the Cities to address the findings. Auditors will verify implementation of the Cities’ corrective actions during the FY26 audit.
As required by the Los Angeles County Metropolitan Transportation Authority (LACMTA) Reform and Accountability Act of 1998, the Proposition A and Proposition C Local Return audit results were presented to the Independent Citizens’ Advisory and Oversight Committee (ICAOC) on March 4, 2026. A Public Hearing was also conducted on June 3, 2026, to receive public input. The Committee inquired whether penalties exist for non-compliance and noted that, while not wanting to be overly punitive, Cities should be informed that non-compliance is not acceptable.
The Reports on Compliance with Requirements Applicable to Proposition A and Proposition C Ordinances and Proposition A and Proposition C Local Return Guidelines for FY25 are included as Attachment A-B.
Measure R
Vasquez and Simpson found that, except for the Cities of Compton, Glendora, Huntington Park, and Redondo Beach, the County and Cities complied, in all material respects, with the requirements in the Ordinance and Guidelines that are applicable to the Measure R Local Return program for FY25.
The auditors found 18 instances of non-compliance for Measure R, consisting of 7 findings that did not result in questioned costs. Eleven findings with questioned costs totaling $3 million for Measure R represent less than 2% of the total amount reviewed. There were 8 repeat findings that were repeats from FY24, except for the City of Huntington Park, whose findings repeated for three consecutive years as follows:
To help the County and Cities comply with the requirements, the Consolidated Audit Workshop was conducted on May 13, 2026 and Local Return Program Managers are working closely with the Cities to address the findings. Auditors will verify implementation of the Cities’ corrective actions during the FY26 audit.
As required by the Ordinance, the Measure R Local Return audit results were presented to the Measure R Independent Taxpayers Oversight Committee (MRITOC) on March 9, 2026. A Public Hearing for MRITOC was also conducted on July 8, 2026, to receive public input. The Committee inquired into the follow-up process for findings and expressed concern regarding repeat findings. The Committee also discussed encouraging compliance among Cities by having them attend future meetings to discuss their compliance action plan. The Ordinance also requires the MRITOC to prepare an annual report for the Metro Board, presenting the results of the annual audit process and any findings made (Attachment C).
Measure M
Vasquez and Simpson found that, except for the Cities of Compton, Glendora, Huntington Park, Redondo Beach, and Santa Fe Springs, the County and Cities complied, in all material respects, with the requirements in the Ordinance and Guidelines that are applicable to the Measure M Local Return program for FY25.
The auditors found 18 instances of non-compliance for Measure M, consisting of 8 findings that did not result in questioned costs. Ten findings with questioned costs totaling $3 million for Measure M represent less than 2% of the total amount reviewed. There were 10 repeat findings that were repeats from FY24, except for the City of Huntington Park, whose findings were repeated for three consecutive years as follows:
To help the County and Cities comply with the requirements, the Consolidated Audit Workshop was conducted on May 13, 2026 and Local Return Program Managers are working closely with the Cities to address the findings. Auditors will verify implementation of the Cities’ corrective actions during the FY26 audit.
As required by the Ordinance, the Measure M Local Return audit results were presented to the Measure M Independent Taxpayer Oversight Committee (MMITOC) on March 4, 2026. A Public Hearing was also conducted on June 3, 2026, to receive public input. The Committee raised questions regarding the decline in fund balances, the materiality and recurrence of findings, and strategies to best support the Cities going forward. The Ordinance also requires the MMITOC to prepare an annual report for the Metro Board, presenting the results of the annual audit process and any findings made (Attachment D).
Non-Local Return
The consolidated audit process includes financial and compliance audits of Non-Local Return programs. The following is a summary of consolidated audit results:
The auditors found that, except for the TDA Article 3 program of the Cities of Compton, Glendora, Huntington Park, and Redondo Beach, the schedules/financial statements for the various programs included in the Consolidated Audit presented fairly, in all material respects. They also found that the entities complied, in all material respects, with the compliance requirements of their respective guidelines. The auditors noted several compliance findings, including 19 for the TDA Article 3 program, 1 for invoice approval for the High Desert Corridor JPA, 1 for unsupported balancing entry of $697,841 for Access Services, and 1 for late invoices for Metrolink. There were nine repeat findings for the TDA program from the prior fiscal year’s audit related to lapsed or unencumbered fund balances and the timeliness of the closing process.
With the removal of the annual re-enrollment requirement in Spring 2023, Simpson was engaged to conduct semiannual Agreed-Upon Procedures (AUP) engagements for the LIFE program administrators, FAC and the International Institute of Los Angeles (IILA) to assess compliance with eligibility verification requirements for two periods: July-December 2024 and January-June 2025. The engagements are conducted to provide assurance of continued compliance with the program’s eligibility criteria, ensuring that patrons continue to meet the eligibility. The engagement covering the period from July 1, 2024 through December 31, 2024 and January 1, 2025 through June 30, 2025, found that while all sampled documentation was properly maintained, only 52% of patrons confirmed eligibility across both periods, with 6% submitting incomplete information, and 42% unresponsive - often due to the transient lifestyle of some walk-in patrons, including those experiencing homelessness, which often leads to outdated or inaccurate contact details. To improve responsiveness, Simpson recommended strengthening outreach through periodic contact verification and multiple communication channels, while prioritizing accurate contact information throughout program participation.
Cities with repeat findings demonstrated accountability by appearing before the ITOCs to address their findings and mitigating action plans. Culver City failed to appear was sent a formal letter from the MRITOC Chair regarding its non-compliance. They subsequently attended the Measure R Public Hearing on July 8, 2026.
Metro Program Managers continue to work with fund recipients to resolve the remaining open findings. The independent auditors will validate the resolution of all findings within next year’s annual Consolidated Audit Financial and Compliance Report process.
Due to the considerable size of the documents, additional Consolidated Audit reports are accessible online.
The comprehensive financial and compliance audit reports issued by Vasquez are accessible online at:
<https://libraryarchives.metro.net/DB_Attachments/Vasquez%20FY25/>
The comprehensive financial and compliance audit reports issued by Simpson are accessible online at:
<https://libraryarchives.metro.net/DB_Attachments/Simpson%20FY25/>
*In May 2024, FAC filed for Chapter 7 bankruptcy, resulting in the termination of its LIFE program contract by June of that year. Key staff transitioned to the remaining LIFE program administrator, IILA, to ensure continuity of services and program administration. Although IILA is the sole administrator, the audit period July-Dec 2024 includes patrons who were originally enrolled under both FAC and IILA.
Equity_Platform
EQUITY PLATFORM
The Consolidated Audit, Financial, and Compliance Reports in this report support compliance with applicable ordinances and guidelines, as well as assist program managers in effectively managing and administering programs that serve all communities throughout the County. There are no known equity impacts or concerns associated with the audit services conducted to complete the FY25 Consolidated Audit.
Vehicle_Miles_Traveled _Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it provides information on audits in support of Metro’s various projects and programs. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item generally supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Approval of this item supports Metro Vision 2028 Goal #5: Provide responsive, accountable, and trustworthy governance within the Metro organization. The projects/programs developed with these funds directly or indirectly support all five Vision 2028 goals identified in Metro’s Strategic Plan.
Next_Steps
NEXT STEPS
Staff will continue to work with the respective jurisdictions to resolve the findings. As many of the findings relate to late-form submittals and process updates, the auditors will validate the resolution of the findings during next year’s annual Consolidated Audit process. Findings that are not resolved will be identified as repeat findings and will escalate in terms of materiality.
Attachments
ATTACHMENTS
Attachment A - FY25 Proposition A and Proposition C Local Return Reports (Vasquez)
Attachment B - FY25 Proposition A and Proposition C Local Return Reports (Simpson)
Attachment C - FY25 Measure R Annual Report
Attachment D - FY25 Measure M Annual Report
Prepared_by
Prepared by: Monica Del Toro, Senior Manager, Audit, (213) 922-7494
Lauren Choi, Senior Director, Audit, (213) 922-3926
Kimberly Houston, Deputy Chief Auditor, (213) 922-4720
Reviewed_By
Reviewed by: Sharon Gookin, Deputy Chief Executive Officer, (213) 418-3101
