Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JULY 17, 2025
Subject
SUBJECT: CONSOLIDATED AUDIT FOR FISCAL YEAR 2024
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, 2024 (FY24).
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
• Prop 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. With the exception of the Cities of Compton, Huntington Park, and South Pasadena, 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). The three Cities’ Annual Comprehensive Financial Reporting (ACFR) audits were late, which delayed their bank reconciliations and closing processes for Local Return funds. However, the Cities are actively working to update their financial schedules. Although their FY24 closing processes were delayed, the Cities were able to meet other significant compliance requirements, e.g., they submitted all required budget and actual expenditure forms on time and obtained Metro’s project approval prior to incurring expenditures. Below is a more detailed summary of the consolidated audit results:
Propositions A and C
Vasquez and Simpson found that 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 FY24.
The auditors identified 33 instances of non-compliance for Propositions A and C, consisting of 17 findings that did not result in questioned costs. Sixteen findings with questioned costs totaling $280,000 for Proposition A and $1.2 million for Proposition C represent less than 1% of each total fund reviewed. There were 11 repeat findings from the prior fiscal year’s audit as follows:
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 5, 2025. A Public Hearing was also conducted on June 4, 2025, to receive public input.
The Reports on Compliance with Requirements Applicable to Proposition A and Proposition C Ordinances and Proposition A and Proposition C Local Return Guidelines for FY24 are included as Attachment A-B.
Measure R
Vasquez and Simpson found that 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 FY24.
The auditors found 10 instances of non-compliance for Measure R, consisting of four findings that did not result in questioned costs. Six findings with questioned costs totaling $4.5 million for Measure R represent less than 3% of the total amount reviewed. There were two repeat findings from the prior fiscal year’s audit as follows:
As required by the Ordinance, the Measure R Local Return audit results were presented to the MRITOC on March 5, 2025. A Public Hearing for MRITOC was also conducted on June 2, 2025, to receive public input. The Ordinance also requires the MRITOC to prepare an annual report for the Metro Board of Directors, presenting the results of the annual audit process and any findings made (Attachment C).
Measure M
Vasquez and Simpson found that 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 FY24.
The auditors found 12 instances of non-compliance for Measure M, consisting of four findings that did not result in questioned costs. Eight findings with questioned costs totaling $586,000 for Measure M represent less than 1% of the total amount reviewed. There was one repeat finding from the prior fiscal year’s audit for the City of Huntington Park related to their year-end closing process.
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 5, 2025. A Public Hearing was also conducted on June 4, 2025, to receive public input. The Ordinance also requires the MMITOC to prepare an annual report for the Metro Board of Directors, 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 FAME Assistant Corporation (FAC) for the LIFE program, the schedules/financial statements for the other various programs included in the Consolidated Audit present fairly, in all material respects. They also found that the entities complied, in all material respects, with the compliance requirements of their respective guidelines. However, the auditors noted several compliance findings, including 33 findings for the TDA Article 3 program and one finding for Metrolink. There were six repeat findings for the TDA program from the prior fiscal year’s audit related to unencumbered fund balances.
Simpson conducted agreed-upon procedures 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 2023 and January-June 2024. The engagements, conducted to assist Metro’s program manager in effectively managing the program, found that while all sampled documentation was properly maintained, only 42% of patrons confirmed eligibility, with 4% refusing to submit documents, 17% submitting incomplete information, and 37% unresponsive - often due to homelessness or outdated contact details. Following discussions between MAS, the auditors, and the program manager, improvements were made, including the implementation of reminders for patrons to update their contact information. These efforts resulted in increased confirmed eligibility (from 36% to 48%) and a decrease in unresponsiveness (from 42% to 32%) in the second half of FY24.
On May 1, 2024, FAC filed for Chapter 7 bankruptcy, resulting in the termination of its LIFE program operations, financial reporting activities, and administrative functions. Due to the lack of sufficient and appropriate audit evidence, the auditor issued a disclaimer of opinion on FAC’s financial statements and compliance. FAC’s LIFE program contract ended on June 30, 2024, and key staff transitioned to the remaining LIFE program administrator, IILA, to ensure continuity of services and program administration. As of July 1, 2024, IILA became the sole administrator of the LIFE program across all service areas.
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/FY24%20Consolidated%20Audit%20-%20Vasquez/>
The comprehensive financial and compliance audit reports issued by Simpson are accessible online at:
<https://libraryarchives.metro.net/DB_Attachments/FY24%20Consolidated%20Audit%20-%20Simpson/>
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 FY24 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 are related to late form submittals and process updates, the auditors will validate the resolution of the findings within 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 - FY24 Proposition A and Proposition C Local Return Reports (Vasquez)
Attachment B - FY24 Proposition A and Proposition C Reports Local Return (Simpson)
Attachment C - FY24 Measure R Annual Report
Attachment D - FY24 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
