FY 2022-23 Local Transportation Fund

COUNTY OF LOS ANGELES, CALIFORNIA LOCAL TRANSPORTATION FUND Financial Statements and Supplementary Information (With Independent Auditor’s Reports Thereon) For the Year Ended June 30, 2023 COUNTY OF LOS ANGELES, CALIFORNIA LOCAL TRANSPORTATION FUND For the Year Ended June 30, 2023 Table of Contents Page Independent Auditor’s Report ................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) .............................................................................. 5 Financial Statements: Statement of Fiduciary Net Position ....................................................................................................... 7 Statement of Changes in Fiduciary Net Position .................................................................................... 8 Notes to Financial Statements .................................................................................................................... 9 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 ................................................... 11 Supplementary Information: Supplemental Schedule of Allocations and Disbursements ........................................................................ 13 Independent Auditor’s Report To the Honorable Board of Supervisors County of Los Angeles, California Report on the Audit of the Financial Statements Opinion We have audited the financial statements of the Local Transportation Fund, a custodial fund of the County of Los Angeles, California (County), as of and for the year ended June 30, 2023, and the related notes to the financial statements, as listed in the table of contents. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the fiduciary net position of the Local Transportation Fund of the County, as of June 30, 2023, and the changes in fiduciary net position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the County, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Emphasis of Matter As discussed in Note 2(a), the financial statements present only the Local Transportation Fund and do not purport to, and do not, present fairly the financial position of the County, as of June 30, 2023, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements The County’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Macias Gini & O’Connell LLP 700 South Flower Street, Suite 800 www.mgocpa.com Los Angeles, CA 90017 1 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 County’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the financial statements. Such information is the responsibility of management and, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, 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 financial statements, and other knowledge we obtained during our audit of the financial statements. 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. 2 Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Local Transportation Fund’s financial statements. The Schedule of Allocations and Disbursements is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Supplemental Schedule of Allocations and Disbursements is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 5 2024, on our consideration of the County’s internal control over financial reporting as it relates to the Local Transportation Fund, 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 solely 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 effectiveness of the County’s internal control over financial reporting or on compliance as it relates to the Local Transportation Fund. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control over financial reporting and compliance as it relates to the Local Transportation Fund. Los Angeles, California March 5, 2024 3 This page intentionally left blank. 4 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Management’s Discussion and Analysis (Unaudited) For the Year Ended June 30, 2023 Management’s discussion and analysis of the County of Los Angeles, California (County), Local Transportation Fund provides a narrative overview of the Local Transportation Fund’s financial activities for the year ended June 30, 2023. We encourage readers to consider this information in conjunction with the accompanying financial statements. Financial Highlights • During the current year, the Local Transportation Fund’s restricted net position held for claimants and unallocated amounts increased by $66.6 million to $431.5 million. • Sales taxes of $533.9 million were received from the State of California and $11.6 million was earned on investments. • Transportation subsidies totaling $466.6 million were paid to 65 different cities and jurisdictions and $12.9 million was distributed for administrative and planning purposes. • The Local Transportation Fund continues to have no short or long-term debt. Financial Statement Overview The Local Transportation Fund is accounted for as a custodial fund, a fiduciary type fund of the County. In its custodial capacity, the County holds the Local Transportation Fund assets in connection with its fiduciary responsibilities to other local governments, in this case, the Los Angeles County Metropolitan Transportation Authority (MTA). Custodial funds are recorded on an accrual basis of accounting. In addition to the financial statements, this report contains notes to the financial statements, which provide additional information that is essential for a full understanding of the data provided in the financial statements. The supplemental schedule of allocations and disbursements is presented for purposes of additional analysis and is not a required part of the financial statements. Financial Analysis Statements of Fiduciary Net Position (In thousands) June 30, 2023 2022 Assets Pooled cash and investments $ 365,532 $ 288,764 Sales tax receivable 73,602 75,263 Interest receivable 3,774 800 Total Assets 442,908 364,827 Liabilities Accounts Payable 11,433 - Total Liabilities 11,433 - Net Position Amounts allocated to claimants 268,362 189,625 Unallocated amounts 163,113 175,202 Total net position $ 431,475 $ 364,827 5 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Management’s Discussion and Analysis (Unaudited) – (Continued) For the Year Ended June 30, 2023 Total assets of the Local Transportation Fund increased by 21.4% from the prior year to $442.9 million, due to a $76.8 million increase in pooled cash and investments, a $1.7 million decrease in sales taxes receivable, and a $3.0 million increase in interest receivable. Pooled cash and investments increased as a result of significant increases in sales taxes contributing to total additions exceeding total deductions during the year. Statements of Changes in Fiduciary Net Position (In thousands) For the Year Ended June 30, 2023 2022 Additions: Sales taxes $ 533,941 $ 524,337 Reimbursement from claimants 606 993 Interest 11,591 1,801 Total additions 546,138 527,131 Deductions: Transportation subsidies 466,552 403,271 Administrative and planning 12,938 10,854 Total deductions 479,490 414,125 Change in net position 66,648 113,006 Net position: Beginning of year 364,827 251,821 End of year $ 431,475 $ 364,827 Total additions of the Local Transportation Fund increased by 3.6% from the prior year to $546.1 million. The primary source of additions was sales taxes and it increased by $9.6 million. Total deductions increased by 15.8% from the prior year to $479.5 million, due primarily to a $63.3 million increase in transportation subsidies which was the major source of deductions. Contacting the Local Transportation Fund’s Financial Management This financial report is designed to provide citizens and other interested parties with a general overview of the Local Transportation Fund’s finances and to demonstrate accountability for the money received. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the County of Los Angeles, Department of Auditor-Controller, 500 West Temple Street, Los Angeles, California, 90012. 6 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Statement of Fiduciary Net Position June 30, 2023 Assets: Pooled cash and investments (note 3) $ 365,532,530 Sales taxes receivable 73,601,657 Interest receivable 3,774,089 Total Assets 442,908,276 Liabilities: Accounts payable 11,433,282 Total Liabilities 11,433,282 Net Position: Restricted: Amounts allocated to claimants 268,362,037 Unallocated amounts 163,112,957 Total Net Position $ 431,474,994 See Accompanying Notes to Financial Statements. 7 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2023 Additions: Sales taxes $ 533,940,991 Reimbursement from claimants 605,810 Interest income 11,591,170 Total additions 546,137,971 Deductions: Transportation subsidies 466,552,138 Administrative and planning 12,937,942 Total deducitons 479,490,080 Change in Net Position 66,647,891 Net position: Beginning of Year 364,827,103 End of year $ 431,474,994 See Accompanying Notes to Financial Statements. 8 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Notes to Financial Statements For the Year Ended June 30, 2023 NOTE 1 – GENERAL The Local Transportation Fund (Fund), a custodial fund of the County of Los Angeles (County), was established in accordance with the provisions of the Transportation Development Act (the Act) as administered by the Department of Transportation, Division of Rail and Mass Transportation of the State of California. In accordance with provisions of the Act, sales tax distributions to the Fund are derived from ¼ cent of the general retail sales tax collected in the County by the State Board of Equalization for the period July 1, 2022 through June 30, 2023. Disbursements from the Fund are made by the County upon receipt of written allocation and disbursement instructions issued in accordance with the Act’s provisions by the Los Angeles County Metropolitan Transportation Authority (MTA). NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Accounting The Local Transportation Fund is accounted for as a custodial fund of the County, a fiduciary type fund. In this custodial capacity, the County holds Fund assets in connection with its fiduciary responsibilities to other local governments. Custodial funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. Additions are recorded when earned and deductions are recorded when liability is incurred, regardless of the timing of the related cash flows. The Fund’s financial statements are intended to present the fiduciary net position and changes in fiduciary net position of only those transactions attributable to the County’s Fund and are not intended to present fairly the financial position, the changes in financial position, or, where applicable, the cash flows of the County. Fiduciary Net Position The fiduciary net position reflected on the accompanying statement of fiduciary net position includes amounts received from the State Board of Equalization, but not allocated and amounts allocated for which the County is awaiting final instructions from MTA before distribution to the claimants. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that may affect certain reported assets and liabilities. Actual results could differ from those estimates. 9 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Notes to Financial Statements (Continued) For the Year Ended June 30, 2023 NOTE 3 – POOLED CASH AND INVESTMENTS California Government Code Sections 53601 and 53635 authorize the County Treasurer to invest the External Investment Pool (Pool) and Specific Purpose Investment funds in obligations of the United States Treasury, federal agencies, municipalities, asset-backed securities, bankers’ acceptances, commercial paper, negotiable certificates of deposit, medium-term notes, corporate notes, repurchase agreements, reverse repurchase agreements, forwards, futures, options, shares of beneficial interest of a Joint Powers Authority that invests in authorized securities, shares of beneficial interest issued by diversified management companies known as money market mutual funds registered with the Securities and Exchange Commission, securities lending agreements, the State of California’s Local Agency Investment Fund, and supranational institutions. California Government Code Section 53534 authorizes the County Treasurer to enter into interest rate swap agreements. However, these agreements should only be used in conjunction with the sale of the bonds approved by the Board. As permitted by the California Government Code, the County Treasurer developed, and the Board adopted, an Investment Policy that further defines and restricts the limits within which the County Treasurer may invest. The investments are managed by the County Treasurer, which reports investment activity to the Board on a monthly basis. In addition, the County Treasurer's investment activity is subject to an annual investment policy review, compliance oversight, quarterly financial review, and annual financial reporting. The County Treasurer also maintains Other Specific Investments, which are invested pursuant to Section 1300.76.1, Title 28, California Code of Regulations. The County has not provided nor obtained any legally binding guarantees during the year ended June 30, 2023, to support the value of shares in the Pool. The Fund’s share of the County Treasury’s total pooled cash and investments is included in the accompanying statement of fiduciary net position under “Pooled Cash and Investments,” which totaled $365,532,530 at June 30, 2023, and represents approximately 0.7% of the total Pool. The Pool is not rated as of June 30, 2023. The weighted average to maturity of the Pool as of June 30, 2023 is 1.86 years. Additional information regarding the interest rate, credit, concentration of credit risks and fair value hierarchy of the County’s cash and investments pool can be found in the notes to the County’s basic financial statements. 10 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 To the Honorable Board of Supervisors County of Los Angeles, California We have audited, 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 (Government Auditing Standards), the financial statements of the Local Transportation Fund, a custodial fund of the County of Los Angeles, California (County), as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated March 5, 2024. Our report includes an emphasis of matter paragraph indicating that the financial statements present only the Local Transportation Fund of the County. Report on Internal Control Over Financial Reporting In planning and performing our audit of the Local Transportation Fund’s financial statements, we considered the County’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the Local Transportation Fund’s financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control as it relates to the Local Transportation Fund. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control as it relates to the Local Transportation Fund. 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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements 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 was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Macias Gini & O’Connell LLP 700 South Flower Street, Suite 800 www.mgocpa.com Los Angeles, CA 90017 11 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Local Transportation Fund’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including applicable provisions of the Public Utilities Code (Sections 99230-99251), noncompliance with which could have a direct and material effect on the financial statements. 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. Los Angeles, California March 5, 2024 12 COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Supplemental Schedule of Allocations and Disbursements For the Year Ended June 30, 2022 Disbursements Administrative Total Total Total and Current Year Current Year Current Year Claimant Total Allocations Planning Article 3 Article 4 Article 8A Disbursements Reserves Reimbursements Arcadia $ 1 ,126,228 $ - $ 95,136 $ 1,031,092 $ - $ 1,126,228 $ - $ - Avalon 10,000 10,000 10,000 - - Azusa 66,341 66,341 66,341 - - Baldwin Park 135,963 135,963 135,963 - - Bell 34,198 34,198 34,198 - - Bellflower 56,000 56,000 56,000 - - Bell Gardens 39,765 39,765 39,765 - - Bradbury 5,000 5,000 5,000 - - Calabasas 7,455 7,455 7,455 - - Carson 36,045 36,045 36,045 - - Commerce 474,679 12,051 462,628 474,679 - - Compton 92,049 92,049 92,049 - - Cudahy 31,633 31,633 31,633 - - Culver City Muni Bus Lines 7,910,346 37,479 7,872,867 7,910,346 - - Diamond 38,689 38,689 38,689 - - El Monte 35,111 35,111 35,111 - - El Segundo 15,692 15,692 15,692 - - Foothill Transit 3 5,517,430 35,517,430 35,517,430 - - Gardena 7,101,530 78,112 7,023,418 7,101,530 - - Glendale 298,908 298,908 298,908 - - Glendora 55,993 55,993 55,993 - - Lakewood 134,061 134,061 134,061 - - Lancaster 7,221,513 201,185 7,020,328 7,221,513 - - Lomita 20,621 20,621 20,621 - - Long Beach 2 5,332,242 650,000 24,682,242 25,332,242 - - L. A. City Treasurer 4,123,542 4,123,542 4,123,542 - - LACMTA 306,555,454 8,945,692 297,609,762 306,555,454 - - LACO - ACCTG 123,000 123,000 123,000 - - LA Canada Flintridge 19,000 19,000 19,000 - - LA County Public Works 7,981,208 435,396 7,545,812 7,981,208 - - Hawiian Gardens 13,628 13,628 13,628 - - Hawthorne 66,000 66,000 66,000 - - Hermosa Beach 10,000 10,000 10,000 - - Inglewood 201,175 201,175 201,175 - - Irwindale 5,000 5,000 5,000 - - LA Mirada 1,072,581 45,788 1,026,793 1,072,581 - - LA Puente 110,000 110,000 110,000 - - Malibu 25,000 25,000 25,000 - - Montebello 1 1,724,734 46,968 11,677,766 11,724,734 - - Monrovia 54,120 54,120 54,120 - - Monterey Park 9,750 9,750 9,750 - - Norwalk 4,619,742 228,676 4,391,066 4,619,742 - - 13 (Continued) COUNTY OF LOS ANGELES, CALIFORNIA Local Transportation Fund Supplemental Schedule of Allocations and Disbursements For the Year Ended June 30, 2023 Disbursements Administrative Total Total Total and Current Year Current Year Current Year Claimant Total Allocations Planning Article 3 Article 4 Article 8A Disbursements Reserves Reimbursements Palmdale 8,658,196 8,658,196 8,658,196 - - Paramount 51,971 51,971 51,971 - - Pasadena 175,235 175,235 175,235 - - Pico Rivera 45,259 45,259 45,259 - - Pomona 100,076 99,712 99,712 - 364 Rancho Palos Verdes 29,106 29,106 29,106 - - Redondo Beach 1,028,033 1,028,033 1,028,033 - - Rolling Hills 5,000 5,000 5,000 - - Rolling Hills Estates 13,552 13,552 13,552 - - Rosemead 50,996 50,996 50,996 - - San Dimas 54,250 54,250 54,250 - - San Gabriel 34,830 34,830 34,830 - - San Fernando 3,292 3,292 3,292 - - San Marino 19,000 19,000 19,000 - - Santa Clarita 5,851,006 512,033 4,733,527 5,245,560 - 605,446 Santa Fe Springs 66,269 66,269 66,269 - - Santa Monica's Big Blue Bus 2 8,042,534 28,042,534 28,042,534 - - SCAG 3,869,250 3,869,250 3,869,250 - - Signal Hills 17,531 17,531 17,531 - - Temple City 48,850 48,850 48,850 - - Torrance 9,135,072 9,135,072 9,135,072 - - West Covina 75,945 75,945 75,945 - - West Hollywood 50,747 50,747 50,747 - - Westlake Village 13,736 13,736 13,736 - - Whittier 144,727 144,727 144,727 - - Total $ 480,095,890 $ 12,937,942 $ 9,093,572 $ 429,500,703 $ 27,957,863 $ 479,490,080 $ - $ 605,810 14