FY 2024-25 The Los Angeles Regional Interoperable Communications System Authority

T H E L O S A N G E L E S R E G I O N A L I N T E R O P E R A B L E C O M M U N I C AT I O N S S Y S T E M A U T H O R I T Y FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT For the Year Ended June 30, 2025 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 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED JUNE 30, 2025 TABLE OF CONTENTS Page Independent Auditor’s Report .................................................................................................................. 1 Management’s Discussion and Analysis (Unaudited) ............................................................................. 4 Basic Financial Statements Governmental Activities Financial Statements: Statement of Net Position ............................................................................................................. 9 Statement of Activities ............................................................................................................... 10 Fund Financial Statements: Balance Sheet ............................................................................................................................. 11 Reconciliation of the Governmental Fund Balance Sheet to the Governmental Activities Statement of Net Position ..................................................................................... 12 Statement of Revenues, Expenditures, and Changes in Fund Balance ....................................... 13 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Governmental Statement of Activities ................................................................................................ ….…14 Notes to the Basic Financial Statements ......................................................................................... 15 Required Supplementary Information Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ...................................................................................................................... 25 Notes to the Required Supplementary Information ......................................................................... 26 Audit of Federal Awards Programs 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.......................................... 28 Independent Auditor’s Report on Compliance for Each Major Federal Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by Uniform Guidance ........................................ 30 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED JUNE 30, 2025 TABLE OF CONTENTS (Continued) Page Schedule of Expenditures of Federal Awards ........................................................................................ 34 Notes to the Schedule of Expenditures of Federal Awards .................................................................... 35 Schedule of Audit Findings and Questioned Costs ................................................................................ 37 2355 Crenshaw Blvd. Suite 150 Telephone: 310.792.4640 Torrance, CA 90501 F a c s i m il e: 310.792.4331 www.bcawr.com INDEPENDENT AUDITOR’S REPORT To the Board of Directors of The Los Angeles Regional Interoperable Communications System Authority Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the governmental activities of the Los Angeles Regional Interoperable Communications System Authority (Authority) as of and for the year ended June 30, 2025, and the related notes to the basic financial statements, which collectively comprise the Authority’s basic financial statements as listed in the Table of Contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of the Authority as of June 30, 2025, and the respective changes in financial 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 Authority 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. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 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 opinions. 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 generally accepted auditing standards 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 generally accepted auditing standards 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 Authority’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. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time. 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. 2 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 4-8 and 25-26 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements 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 financial statements, and other knowledge we obtained during our audit of the basic 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. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authority’s basic financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), are presented for purposes of additional analysis and are not a required part of the basic 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 basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic 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 23, 2026, on our consideration of the Authority’s internal control over financial reporting and 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 Authority’s internal control over the financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance. Torrance, California March 23, 2026 3 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) For the Year Ended June 30, 2025 The Management's Discussion and Analysis (MD&A) of the financial activities of the Los Angeles Regional Interoperable Communications System Authority (Authority or LA-RICS) provides a narrative overview of the Authority's financial activities for the fiscal year ended June 30, 2025. Please read it in conjunction with the accompanying basic financial statements, footnotes, and supplementary information. Financial Highlights • During the current year, the Authority’s assets totaled $211,839,850. Cash and Investments deposited in the County Treasury Pool totaled $30,339,496. • Program revenues totaled $19,189,867 and consisted mainly of $11,680,187 in federal grant funding and $7,509,680 communication services revenue. • The Authority has an outstanding $28,000,000 cash operating loan from the County of Los Angeles (County) to support the start-up and operational costs. The loan is non-interest-bearing and has no definite repayment schedule. • The Authority also entered into a $23,000,000 Funding Agreement with the County to finance the settlement of a contractor claim. The loan was issued at its original principal amount and bears variable interest. The loan is payable for fifteen (15) years; with interest-only payment from fiscal years 2026 through 2030 and $2,300,000 each year for ten (10) years plus the variable interest payment based on the County’s yearly treasury pool rate for the respective year. • The Authority’s Board of Directors has approved a settlement with the Authority’s contractor, who is responsible for the design, construction, implementation and maintenance of the Land Mobile Radio (LMR) system. The settlement was funded by a loan from the County in the amount of $23,000,000, as mentioned above. • As of June 30, 2025, the Authority had $175,480,898 in Capital Assets consisting of telecommunication equipment with a net book value of $174,081,591, building access control system at $1,382,348 and office furniture and fixtures at $16,959. Overview of Financial Statements This discussion and analysis are intended to serve as an introduction to the Authority’s basic financial statements, which are comprised of the following three components: • Government-wide financial statements • Fund financial statements • Notes to the basic financial statements This report also includes other supplementary information in addition to the basic financial statements. 4 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) For the Year Ended June 30, 2025 Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the Authority’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all Authority’s assets reduced by liabilities, which represent net position. Over time, increases and decreases in net position may serve as an indicator of whether the financial position of the Authority is improving or deteriorating. The Statement of Activities presents information that indicates how the Authority’s net position changed during the fiscal year. All changes in net position are reported as soon as the underlying events giving rise to the changes occur, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that affect cash flows in future periods, i.e., accrued but unpaid contract and professional fees. The government-wide financial statements report on the following different types of programs or activities: Governmental Activities – All of the Authority’s programs during fiscal year 2024-2025 are reported under this category. Business-type Activities – The Authority had no business-type activities during fiscal year 2024-2025. Fund Financial Statements The fund financial statements contain information regarding major individual funds. A fund is a fiscal and accounting entity with a balanced set of accounts. The Authority uses separate funds to ensure compliance with fiscal and legal requirements. The Authority's funds are all classified as governmental funds during fiscal year 2024-2025. Governmental Funds - These funds are used to account for essentially the same services that were previously described as governmental activities above. However, the fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the Authority’s near- term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Authority’s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Notes to the Basic Financial Statements The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and the fund financial statements. 5 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) For the Year Ended June 30, 2025 Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary schedules in the format of the basic financial statements, showing the activity for each fund. Financial Statement Analysis During fiscal year 2024-2025, operating revenues increased by $15.7 million and operating expenditures increased by $32.6 million. The overall increase in operating revenues was primarily driven by an additional $8.5 million in federal grant funding and a $7.5 million increase in communication services revenue. Capital expenditures for telecommunication equipment increased by $5.6 million, County department services increased by $3.1 million, and consultants’ services decreased by $1.0 million. Operating expenditures also increased due to a $23.0 million settlement of a claim brought by the Authority’s LMR system contractor, as well as $2.2 million in maintenance costs associated with the LMR system, which was placed into service during fiscal year 2025. Capital Assets During fiscal year 2024-2025, construction of the LMR System was completed and was put into service to support the radio subscribers. As of June 30, 2025, the Authority’s capital assets consisted of telecommunication equipment with a net book value of $174,081,591, a building access control system at $1,382,348 and office furniture and fixtures at $16,959. Debt Administration The County provided the Authority with a $28,000,000 cash operating loan for the funding of start-up and operational costs until a long-term funding plan is adopted by the Authority’s members. This loan bears no interest and has no definite repayment schedule. On June 21, 2025, the Authority entered into a Funding Agreement with the County for $23,000,000 to finance the settlement of a contractor claim. The loan was issued at its original principal amount and bears variable interest. As of June 30, 2025, the Authority’s loan payable balance was $51,000,000. 6 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) For the Year Ended June 30, 2025 Economic Factors The following Authority activity is anticipated for fiscal year 2025-2026 as well as all other grants funding: Status of Land Mobile Radio System The LMR System contract was executed in August 2013 with Motorola Solutions, Inc. (MSI) and work began in September 2013. The Final System Acceptance was successfully completed on November 17, 2023. The Final System Acceptance is an accumulation of various Provisional Subsystem Acceptances and other contractually required deliverables submitted by MSI, concluding that most of the work in Phases one (1) through four (4) of the LMR project has been completed. Subsequently, following Final System Acceptance, the project entered its one-year Warranty period, which concluded on November 17, 2024. After the successful completion of the Year 1 operation and maintenance on November 2025, the Authority continued to use the County Internal Services Department for facilities maintenance, and ancillary services for the LMR System as it entered Year 2. In addition, the Authority exercised the Unilateral Option and corresponding Option Term in connection with Year 2 of Phase 5 (LMR System Maintenance) which commenced on November 17, 2025, and will conclude on November 16, 2026. In addition, the authority exercised Year 2 of the System Upgrade Agreement (SUA) with MSI out of the six-year LMR System SUA. The permanent power project at LMR site Burnt Peak was completed in February 2026 and started commissioning activities in March 2026 targeting end of June 2026 for completion. The scope of work was defined to connect with Southern California Edison’s solar power grid. The power project at LMR site Green Mountain is progressing and the permits may be processed by March 2026. In addition, the Authority entered into various sole source agreements with: - DPS Telecom to install an access and control a video surveillance system for LMR System sites to, among other things, ensure sites are properly secured. - San Luis Aviation, Inc., dba SLA Corp for ESChat Push-to Talk (PTT) functionality for use on the LMR System. ESChat PTT functionality can allow ESChat Users to communicate with the LMR System from broadband devices such as smartphone, tablets, iOT devices to radios. - Gencore Candeo, Ltd to upgrade and enhance functionality on GenWatch3, the existing data management software utilized on the LMR System. - CompCom, LLC to provide Information Technology services, in the capacity of Information Technology Manager to the Authority. - PV Communication, Inc. to provide Public Safety Radio Communication Specialist consultant services to the Authority. The Authority is on track with successful spending of Urban Area Security Initiative (UASI) Grant Program UASI 23 ($3,311,662), UASI 24 ($3,400,000), and UASI 25 ($700,000), as well as appropriately spending in accordance with approved projects funded by the State Budget Act of 2022 Interest Earned. In addition, during the past year the project successfully closed out the grant spending of UASI 22 ($11,688,338), State Homeland Security (SHSGP) Program 22 ($3,520,000), SHSGP 23 ($1,760,000), SHSGP 24 ($1,120,000) and State Budget Act of 2022 Funds ($18,600,000). The Approval Authority voted to allocate $700,000 in UASI 26 for LA-RICS Operations and Maintenance. 7 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) For the Year Ended June 30, 2025 Economic Factors (Continued) Status of Land Mobile Radio System (continued) During fiscal year 2025-2026, the State of California Budget Act of 2022 interest earned is being utilized to pay for certain costs supporting and operating the LMR System, including but not limited to costs relating to capital outlay, optimization, and corresponding staff support. The Authority continued to collect revenue from different Subscribers who desired to utilize the LMR System for their primary radio communications. As of fiscal year 2025-2026, there are 38 executed Subscriber agreements, and 32,026 programmed radios. Subsequent Event After the fiscal year ended June 30, 2025, the grant administrator notified the Authority of a reduction in UASI 25 grant funding. The grant amount was reduced from a $1 million grant award to $700,000 and will decrease anticipated revenues in future periods. Contacting the Authority’s Financial Management This financial report is designed to provide our citizens and other interested parties with a general overview of the Authority’s finances and to demonstrate the Authority’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the County of Los Angeles, Department of Auditor-Controller, 500 West Temple Street, Room 525, Los Angeles, CA 90012. 8 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY STATEMENT OF NET POSITION June 30, 2025 ASSETS Current Assets: Cash and investments (Note 3) $ 30,339,496 Interest receivable 246,932 Accounts receivable 192,081 Grants receivable (Note 4) 3,688,336 Prepaid expenses 107,303 Total Current Assets 34,574,148 Noncurrent Assets: Right-to-use leased building, net of accumulated amortization 1,784,804 Capital assets, net of accumulated depreciation (Note 5) 175,480,898 Total Noncurrent Assets 177,265,702 TOTAL ASSETS 211,839,850 LIABILITIES Current Liabilities: Accounts payable (Note 6) 2,593,609 Interest payable 18,196 Refunds payable 61,068 Loans payable (Note 7) 28,000,000 Lease liability - due within one year (Note 9) 296,809 Total Current Liabilities 30,969,682 Noncurrent Liabilities Loans payable (Note 7) 23,000,000 Lease liability (Note 9) 1,536,293 Total Noncurrent Liabilities 24,536,293 TOTAL LIABILITIES DEFERRED INFLOW OF RESOURCES Deferred revenue (Note 8) 2,668,677 NET POSITION Net investment in capital assets 175,480,898 Unrestricted (21,815,700) TOTAL NET POSITION $ 153,665,198 See accompanying notes to the basic financial statements. 9 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY STATEMENT OF ACTIVITIES For the Year Ended June 30, 2025 Net (Expense) Revenue and Program Change in Revenues Net Position Capital Grants Governmental Expenses and Contributions Activities Functions/Programs Governmental activities - Interoperable communications and safety programs $ 45,957,684 $ 19,189,867 $ ( 26,767,817) Total $ 45,957,684 $ 19,189,867 $ (26,767,817) General revenues: Investment income 1,138,732 Others 26,538 Total general revenues 1,165,270 Change in net position (25,602,547) Net position, June 30, 2024 179,267,745 Net position, June 30, 2025 $ 153,665,198 See accompanying notes to the basic financial statements. 10 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY BALANCE SHEET June 30, 2025 ASSETS Cash and investments (Note 3) $ 30,339,496 Interest receivable 246,932 Accounts receivable 192,081 Grants receivable (Note 4) 3,688,336 Prepaid expense 107,303 Total Assets 34,574,148 LIABILITIES Accounts payable (Note 6) 2,593,609 Interest payable 18,196 Refunds payable 61,068 Loans payable (Note 7) 28,000,000 Total Liabilities 30,672,873 DEFERRED INFLOW OF RESOURCES Deferred revenue (Note 8) 2,668,677 FUND BALANCE Unassigned 1,232,598 Total fund balance 1,232,598 Total Liabilities, Deferred Inflow of Resources and Fund Balance $ 34,574,148 See accompanying notes to the basic financial statements. 11 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE GOVERNMENTAL ACTIVITIES STATEMENT OF NET POSITION June 30, 2025 Fund balance - Governmental Fund (page 11) $ 1 ,232,598 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet. 175,480,898 Right-to-use leased building in governmental activities is not current financial resources and therefore not reported in the governmental funds balance sheet. 1,784,804 Long‑term liabilities, including loans payable, are not due and payable in the current period and therefore are not reported in the funds balance sheet. (23,000,000) Lease liability is not due and payable in the current period and accordingly not reported as governmental funds liability. (1,833,102) Net Position of Governmental Activities (page 9) $ 1 53,665,198 See accompanying notes to the basic financial statements. 12 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Year Ended June 30, 2025 Revenues Federal grants $ 11,680,187 Communication services 7,509,680 Investment income 1,138,732 Others 26,538 Total revenues 20,355,137 Expenditures Settlement of claim (Note 10) 23,000,000 Capital outlay - telecommunication equipment 11,072,431 County department services 7,436,548 Consultants' services 3,273,799 Maintenance 2,150,516 Utilities 319,631 Rentals 309,619 Insurance 132,342 Professional fees 33,055 Interest 18,196 Travel and transportation 16,310 Miscellaneous 10,630 Other charges 7,930 Education and training 6,900 Permit and license fees 6,467 Electricity 4,558 Total expenditures 47,798,932 Deficiency of revenues over expenditures (27,443,795) Other financing sources Loan proceeds to finance settlement of claim (Note 10) 23,000,000 Net change in fund balance (4,443,795) Fund balance, July 1, 2024 5,676,393 Fund balance, June 30, 2025 $ 1,232,598 See accompanying notes to the basic financial statements. 13 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TO THE GOVERNMENTAL STATEMENT OF ACTIVITIES June 30, 2025 Net Change in Fund Balance (page 13) $ (4,443,795) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the governmental statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Additions to capital assets amounted to $11,072,431 in the current period. 11,072,431 Governmental funds report rental on building as expenditures. However, in the government-wide statement of activities, these expenditures is capitalized over the life of the rent. 298,832 Depreciation expenses on capital assets is reported in the government-wide statement of activities, but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in governmental funds. (9,187,695) Governmental funds report proceeds from noncurrent loans payable as other financing sources. However, in the government-wide statements, this amount is reported as noncurrent liabilities and does not affect net position but instead increases liabilities. (23,000,000) Interest expenses on lease liability is reported in the government-wide statement of activities, but does not require the use of current financial resources. Therefore, interest expense is not reported as expenditures in governmental funds. (38,128) Amortization on the right-to-use leased building is reported in the government-wide statement of activities, but does not require the use of current financial resources. Thus, amortization expense is not reported as expenditures in governmental funds. (304,192) Change in Net Position of Governmental Activities (page 10) $ (25,602,547) See accompanying notes to the basic financial statements. 14 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 1 – REPORTING ENTITY The Authority, a separate public entity, was created in May 2009 through a Joint Powers Agreement (JPA) between the County, the City of Los Angeles, and eighty-five (85) other public agencies located in the greater Los Angeles area. The Authority was created to exercise the powers shared in common by its members to engage in regional and cooperative planning and coordination of the governmental services to establish a wide-area interoperable public safety communications network. The composition of the JPA has changed since inception. During fiscal year 2024-2025, the Authority was governed by a ten (10) member Board of Directors (Board) which served without compensation. The 10 Board members consisted of the following: 1. County of Los Angeles, Chief Executive Officer 2. County of Los Angeles, Fire Chief 3. County of Los Angeles, Sheriff 4. County of Los Angeles, Department of Health Services Director 5. Los Angeles Area Fire Chief Association 6. Los Angeles County Police Chiefs Association 7. California Contract Cities Association 8. City of Inglewood, Police Chief (At Large) 9. City of Covina, Police Chief (At Large) 10. City of La Verne, Fire Chief (At Large) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basic Financial Statements In accordance with Governmental Accounting Standards Board (GASB) Statement No. 34, the basic financial statements consist of the following: • Government-wide financial statements; • Fund financial statements; and • Notes to the basic financial statements. Government-wide Financial Statements The statement of net position and statement of activities display the financial activities of the Authority. These statements present the governmental activities of the Authority. The statement of activities presents a comparison between direct expenses and program revenues for the Authority’s governmental activities. Direct expenses are those that are specifically associated with a program and, therefore, are clearly identifiable to a particular program. Program revenues include capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented instead as general revenues. 15 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government-wide Financial Statements (Continued) Net position is classified into the following three components: 1) net investment in capital assets; 2) restricted; and 3) unrestricted. At June 30, 2025, the net investment in capital assets balance was $175,480,898, and the unrestricted net position was $(21,815,700). There was no restricted net position balance at June 30, 2025. Fund Financial Statements The accounts of the Authority are organized on the basis of funds. A fund is defined as an independent fiscal and accounting entity wherein operations of each fund are accounted for in a separate set of self- balancing accounts that record resources, related liabilities, obligations, reserves and equity segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Government resources are allocated to and for individual funds based on the purpose for which they are spent and means by which spending activities are controlled. The Authority’s General Fund is available for any authorized purpose and is used to account for and report all financial resources not accounted for and reported in another fund. Funding comes primarily from federal grants through the Department of Homeland Security. Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. The General Fund is accounted for using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, revenues are available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. Capital Assets Capital assets, consisting primarily of telecommunication equipment, are defined as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost when purchased or constructed. Costs include labor, materials, interest during construction, retirement plan contribution and other fringe benefits. Donated assets are reported at acquisition value rather than estimated fair market value at the date of donation. 16 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets (Continued) The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Capital assets other than land are depreciated using the straight-line method over the estimated useful lives of the assets. Lease The Authority is a lessee of a non-cancellable lease of building office space. The Authority recognizes a lease liability and an intangible right-to-use lease asset in the government-wide financial statements. The Authority recognizes lease liabilities for leases with an initial value of $5,000 or more. At the commencement of a lease, the Authority initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain indirect costs. Subsequently, the lease asset is amortized on a straight-line basis over the shorter of the lease term or its useful life. Key estimates and judgments related to leases include how the Authority determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease terms, and (3) lease payments. The Authority uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the Authority generally uses its estimated incremental borrowing rate as the discount rate for leases. The lease term includes the non-cancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and the purchase option price that the Authority is reasonably certain to exercise. The Authority monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. Right-to-use leased building and lease liability are reported separately on the Statement of Net Position. Fund Balances In the fund financial statements, the governmental funds report the classification of fund balance in accordance with GASB Statement No. 54 “Fund Balance Reporting and Governmental Fund Type Definitions”. The reported fund balances are categorized as nonspendable, restricted, committed, assigned, or unassigned based on the extent to which the Authority is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Nonspendable Fund Balance – amounts that cannot be spent because they are either (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: inventories and long-term notes receivable. 17 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balances (Continued) Restricted Fund Balance – amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Restrictions may effectively be changed or lifted only by changing the condition of the constraint. Committed Fund Balance – amounts that can only be used for the specific purposes determined by a formal action of the Authority’s highest level of decision-making authority, the Authority’s Board. Commitments may be changed or lifted only by the Authority taking the same formal action that imposed the constraint originally. The underlying action that imposed the limitation needs to occur no later than the close of the fiscal year. Assigned Fund Balance – amounts intended to be used by the Authority for specific purposes that are neither restricted nor committed. The intent can be established at either the highest level of decision making, or by a body or an official designated for that purpose. Unassigned Fund Balance – the residual classification for the Authority’s General Fund that includes amounts not contained in other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. The Authority’s Board establishes, modifies, or rescinds fund balance commitments and assignments through the adoption of the budget and subsequent amendments that occur throughout the fiscal year. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. Revenue Recognition of revenues arising from non-exchange transactions, which include revenues from grants and contributions, is based on the primary characteristic from which the revenues are received by the Authority. Grant funds are considered earned to the extent of expenditures made under the provisions of the grants. Communication services revenues are billed monthly in arrears at a monthly rate per device, which includes radios, consoles, consolettes, modems, and other equipment (collectively “Radios”) under the User Agreement between the Authority and the mobile radio subscribers. 18 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue (continued) Deferred inflow of resources arises when potential revenues do not meet both the measurable and availability criteria for recognition in the current period. Deferred inflow of resources also arises when the Authority receives resources before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualified expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the Authority has a legal claim to the resources, the liability for deferred inflow of resources is removed from the balance sheet and revenue is recognized. Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates. New Pronouncements Issued and Implemented The following GASB Statements have been implemented in the current basic financial statements. GASB Statement No. 101 – Statement No. 101, “Compensated Absences”, provides an updated framework to meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. This statement is effective for reporting periods beginning after December 15, 2023. This statement did not have an impact on the Authority’s financial statements. GASB Statement No. 102 – Statement No. 102, “Certain Risk Disclosures” enhances financial reporting by requiring state and local governments to disclose risks stemming from certain concentrations and constraints that may make them vulnerable to substantial financial impacts. This statement is effective for reporting periods beginning after June 15, 2024. This statement did not have an impact on the Authority’s financial statements. NOTE 3 - CASH AND INVESTMENTS The Authority’s cash and investments are pooled and invested by the County Treasurer and Tax Collector (Treasurer) and are subject to withdrawal from the pool upon demand. The Authority’s share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds based on the fund’s average cash and investment balance, as provided by the California Government Code Section 53647. The Authority’s cash and investment balance as of June 30, 2025, is $30,339,496. 19 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 3 - CASH AND INVESTMENTS (CONTINUED) California Government Code Sections 53601 and 53635 authorize the 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 JPA 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 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 of Supervisors. As permitted by the California Government Code, the Treasurer developed, and the Board adopted, an investment Policy that further defines and restricts the limits within which the Treasurer may invest. The investments are managed by the Treasurer, which reports investment activity to the Board of Supervisors on a monthly basis. In addition, the Treasurer’s investment activity is subject to an annual investment policy review, compliance oversight, quarterly financial review, and annual financial reporting. The 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, 2025, to support the value of shares in the Pool. Investments are stated at fair value and are valued on a monthly basis. The Treasurer categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. Securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Securities classified in Level 2 of the fair value hierarchy are valued using other observable inputs such as matrix pricing techniques or based on quoted prices for assets in markets that are not active. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Level 3 inputs are significant unobservable inputs. Securities classified in Level 3 are valued using the income approach such as discounted cash flow techniques. Investment in an external government investment pool is not subject to reporting within the level hierarchy. Investment policies and associated risk factors applicable to the Authority are included in the County’s Annual Comprehensive Financial Report for the year ended June 30, 2025. Detailed deposit and investment risk disclosures are included in Note 4 of the County’s Annual Comprehensive Financial Report. NOTE 4 – GRANTS RECEIVABLE Grants receivable as of June 30, 2025, in the amount of $3,688,336, represent receivable from the City of Los Angeles and the County for allowable expenditures incurred under the UASI and SHGP programs. 20 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 5 – CAPITAL ASSETS Capital assets as of June 30, 2025, consist of the following: Balance at Balance at Governmental activities: June 30, 2024 Increases Decreases June 30, 2025 Capital assets, being depreciated: Telecommunication equipment $ 2,081,707 $ 183,243,780 $ - $ 185,325,487 Building access control system - 1,405,777 - 1,405,777 Office furniture and fixtures 214,450 - - 214,450 Total 2,296,157 184,649,557 - 186,945,714 Less, accumulated depreciation for: Telecommunication equipment (2,081,707) ( 9,162,189) - (11,243,896) Building access control system - (23,429) - (23,429) Office furniture and fixture ( 195,414) ( 2,077) - (197,491) ( 2,277,121) ( 9,187,695) - (11,464,816) Total capital assets, being depreciated 19,036 175,461,862 - 175,480,898 Capital assets, not being depreciated: Construction in progress-telecommunication equipment 173,577,126 - (173,577,126) - Total capital assets, not being depreciated 173,577,126 - (173,577,126) - Governmental activities capital assets, net $ 173,596,162 $ 175,461,862 $ (173,577,126) $ 175,480,898 Depreciation expense for the government activities during fiscal year 2024-2025 was $9,187,695. NOTE 6 – ACCOUNTS PAYABLE Accounts payable as of June 30, 2025, in the amount of $2,593,609 represent accruals of vendors’ invoices not yet paid as of that date. NOTE 7 – LOANS PAYABLE The initial funding for the Authority’s start-up and operational costs was provided through a cash operating loan from the County. This loan bears no interest and has no definite repayment schedule. The balance of this loan as of June 30, 2025, was $28,000,000. On June 5, 2025, the Authority’s Board of Directors has approved a settlement with the Authority’s contractor, who is responsible for the design, construction, implementation and maintenance of the LMR system, of which such settlement will be funded with a loan from the County in the amount of $23,000,000. Refer to Note 10. On June 21, 2025, the Authority entered into a Funding Agreement with the County. The loan was issued in the original principal amount of $23,000,000 and bears variable interest. For fiscal year 2026 through fiscal year 2030, the Authority will make a variable interest-only payment. The first payment for fiscal year 2026 will include any interest owed from the date the principal is paid to the Authority through June 30, 2025. 21 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 7 – LOANS PAYABLE (CONTINUED) The loan is payable for fifteen (15) years; with interest-only payment from fiscal years 2026 through 2030 and $2.3 million each year for ten (10) years plus the variable interest payment based on the County’s yearly treasury pool rate for the respective year. Future debt service requirements for the loan are as follows: Fiscal Year Principal Interest * Total 2026 $ - $ 9 20,000 $ 920,000 2027 - 9 20,000 920,000 2028 - 9 20,000 920,000 2029 - 9 20,000 920,000 2030 - 9 20,000 920,000 2031 and thereafter 23,000,000 5 ,060,000 28,060,000 $ 23,000,000 $ 9 ,660,000 $ 32,660,000 * Estimated interest payable using variable interest rate based on the County's yearly treasury pool rate. NOTE 8 – DEFERRED INFLOW OF RESOURCES The deferred inflow of resources as of June 30, 2025, in the amount of $2,668,677 represents UASI and SHSP program expenditures that were not yet reimbursed by the funding agencies. These amounts are recorded as deferred revenue until the related reimbursements are received. NOTE 9 – LEASE LIABILITY The Authority leases 8,335 square feet of office space in a building located in Monterey Park, California. The non-cancellable lease agreement was for seven (7) years commencing on October 15, 2014. The Authority renewed the term of the lease for a period of thirty-six (36) months, which ended on October 31, 2024. On October 12, 2024, the Authority renewed the term of the lease for a period of seventy-two (72) months, beginning November 16, 2024, and ending November 15, 2030. The non-cancelable lease agreement is accounted for under GASB Statement No 87, Leases. An initial lease liability was recorded in the amount of $2,007,905 for this lease. As of June 30, 2025, the total value of the lease liability was $1,833,102 and the total value of the right-to-use leased building was $1,784,804, net of accumulated amortization of $223,101. 22 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2025 NOTE 9 – LEASE LIABILITY (CONTINUED) As of June 30, 2025, future minimum payments of the lease are as follows: Year Ending June 30, Principal Interest Total 2026 $ 296,809 $ 49,610 $ 346,419 2027 316,127 40,687 356,814 2028 336,333 31,188 367,521 2029 357,460 21,087 378,547 2030 379,542 10,356 389,898 2031 146,831 9 94 147,825 $ 1,833,102 $ 153,922 $ 1,987,024 NOTE 10 – SETTLEMENT OF CLAIMS During fiscal year 2025, the Authority resolved a claim brought by its contractor responsible for the design, construction, implementation and maintenance of the LMR system. The contractor sought reimbursements for costs incurred due to delays in completing the project. Following negotiations and a formal mediation process, the Authority and the contractor reached a settlement agreement on June 5, 2025. Under the terms of the agreement, the Authority agreed to pay the contractor $23,000,000 in full and final settlement of all outstanding claims associated with the LMR system. The settlement does not constitute an admission of liability by the Authority and was executed to avoid the cost and uncertainty of continued litigation. The settlement payment was recorded as an expense within both the Governmental Activities in the Statement of Activities and in the Fund’s Statement of Revenues, Expenditures and Changes in the Fund Balance for the year ended June 30, 2025. No additional claims related to the LMR system is pending as of June 30, 2025. NOTE 11 – CONTINGENT LIABILITIES The Authority is also 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 the Authority. NOTE 12 – SUBSEQUENT EVENTS In preparing these financial statements, the Authority has evaluated events subsequent to June 30, 2025, to assess the need for potential recognition or disclosure in the financial statements. Such events were evaluated through March 23, 2026, the date the financial statements were available to be issued. It was determined that no subsequent events occurred that required recognition or additional disclosure in the financial statements. 23 REQUIRED SUPPLEMENTARY INFORMATION 24 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED JUNE 30, 2025 Budget Amounts Variance with Original Final Actual Final Budget Revenues: Federal grants $ 24,561,000 $ 2 4,561,000 $ 1 1,680,187 $ ( 12,880,813) Communication services 7,942,000 7 ,942,000 7 ,509,680 ( 432,320) Cost recovery fees 150,000 1 50,000 2 1,000 ( 129,000) Communication services (reimbursement from AT&T) 1,038,000 1 ,038,000 5 ,538 ( 1,032,462) Interest income - - 1,138,732 1,138,732 Others 1 0,856,000 1 0,856,000 - (10,856,000) Total revenue 44,547,000 4 4,547,000 2 0,355,137 ( 24,191,863) Expenditures: Consultant's services 33,534,000 3 3,534,000 1 6,496,746 1 7,037,254 County department services 8,193,000 8 ,193,000 7 ,438,647 7 54,353 Other charges 980,000 9 80,000 4 63,258 5 16,742 Cost recovery fee 150,000 1 50,000 4 ,287 145,713 AT&T Business Agreement Services 1,038,000 1 ,038,000 2 6,669 1 ,011,331 Settlement of claim (1) - - 23,000,000 ( 23,000,000) Interest on loan - - 1 8,196 ( 18,196) Miscellaneous 652,000 6 52,000 3 51,129 3 00,871 Total expenditures 44,547,000 4 4,547,000 47,798,932 ( 3,251,932) Excess of revenues over expenditures - - (27,443,795) ( 27,443,795) Other financing sources: Loan proceeds to finance settlement of claim - - 23,000,000 23,000,000 Net change in fund balance - - (4,443,795) ( 4,443,795) Fund balance, July 1, 2024 - - 5,676,393 5 ,676,393 Fund balance, June 30, 2025 $ - $ - $ 1,232,598 $ 1,232,598 (1) The $23,000,000 claim settlement was included in the fiscal year 2025-2026 adopted budget but was paid during fiscal year 2024-2025. The variance reflects a timing difference between the adopted budget and actual expenditures. See accompanying notes to the required supplementary information. 25 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2025 BUDGETARY DATA The Authority adopts an annual budget on a basis consistent with accounting principles generally accepted in the United States of America and utilizes an encumbrance system as a management control technique to assist in controlling expenditures and enforcing revenue provisions. Under this system, the current year’s expenditures are charged against appropriations. Accordingly, actual revenues and expenditures can be compared with related budget amounts without any significant reconciling items. 26 AUDIT OF FEDERAL AWARDS PROGRAMS 27 2355 Crenshaw Blvd. Suite 150 Telephone: 310.792.4640 Torrance, CA 90501 F a c s i m il e: 310.792.4331 www.bcawr.com 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 Board of Directors of The Los Angeles Regional Interoperable Communications System Authority 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, the financial statements of the Los Angeles Regional Interoperable Communications System Authority (Authority) as of and for the year ended June 30, 2025, and the related notes to the financial statements and have issued our report thereon dated March 23, 2026. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Authority’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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority’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 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 or significant deficiencies may exist that were not identified. 28 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from 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 financial statement amounts. 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 Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Torrance, California March 23, 2026 29 2355 Crenshaw Blvd. Suite 150 Telephone: 310.792.4640 Torrance, CA 90501 F a c s i m il e: 310.792.4331 www.bcawr.com INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE AND REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY UNIFORM GUIDANCE To the Board of Directors of The Los Angeles Regional Interoperable Communications System Authority Los Angeles, California Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the Los Angeles Regional Interoperable Communication System Authority’s (Authority) compliance with the types of compliance requirements described as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the Authority’s major federal program for the year ended June 30, 2025. The Authority’s major federal program is identified in the summary of auditor’s results section of the accompanying Schedule of Findings and Questioned Costs. In our opinion, the Authority complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2025. Other Matter – Restatement of Prior Year Schedule of Expenditures of Federal Awards We previously audited the Schedule of Expenditures of Federal Awards of the Authority for the years ended June 30, 2024 and 2023, and our reports dated March 13, 2025 and March 27, 2024, respectively, expressed an unmodified opinion on those schedules. As discussed in Note 5 to the Schedule of Expenditures and Federal Awards, the amounts presented for the years ended June 30, 2024 and 2023 have been restated to correct a misstatement. Our opinion is not modified with respect to this matter. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with 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 audit requirements of Title 2, U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. 30 We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for each major federal program. Our audit does not provide a legal determination of the Authority’s compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Authority’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the Authority’s compliance based on our audit. 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 generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the Authority’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, 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 Authority’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the Authority’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. 31 Other Matters The results of our auditing procedures disclosed an instance of noncompliance which is required to be reported in accordance with the Uniform Guidance and is described in the accompanying schedule of findings and questioned costs as Finding #2025-001. Our opinion on compliance for each major federal program is not modified with respect to this instance of noncompliance. Government Auditing Standards requires the auditor to perform limited procedures on the Authority’s response to the noncompliance finding identified in our compliance audit described in the accompanying Schedule of Findings and Questioned Costs. The County’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we did identify a deficiency in internal control over compliance that we consider to be a material weakness. 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 of a federal program 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, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program 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 a federal program 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 described in the accompanying Schedule of Findings and Questioned Costs as Finding #2025-001 to be a material weakness. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. Government Auditing Standards requires the auditor to perform limited procedures on the Authority’s response to the internal control over compliance findings identified in our compliance audit described in the accompanying Schedule of Findings and Questioned Costs. The Authority’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. 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 Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 32 Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the Authority for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements. We issued our report thereon dated March 23, 2026, which contained an unmodified opinion on those financial statements. Our audit was performed for the purpose of forming our opinion on the financial statements that collectively comprise the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Uniform Guidance 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 basic 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Torrance, CA March 23, 2026 33 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2025 (with Comparative Totals for June 30, 2024 and 2023 – as Restated) Award/Pass- 2024 2023 through 2025 Total Total Federal Grantor/Pass-Through Assistance Identification Total Expenditures Expenditures Grantor / Program Title Listing Number Number Expenditures (As Restated) (As Restated) FEDERAL U.S. Department of Homeland Security Passed through the Federal Emergency Management Agency (FEMA)/Grant Programs Directorate (GPD)/ City of Los Angeles Homeland Security Grant Program Urban Areas Security Initiative (UASI 2021) 97.067 C-141072 $ - $ 12,778 $ 1 ,524,697 Urban Areas Security Initiative (UASI 2022) 97.067 C-143439 499,750 5 ,734,128 5 ,454,460 Urban Areas Security Initiative (UASI 2023) 97.067 C-145698 548,677 - - Urban Areas Security Initiative (UASI 2024) 97.067 C-202444 1,000,000 - - Subtotal 2,048,427 5,746,906 6,979,157 Passed through the California Governor's Office of Emergency Services/County of Los Angeles Homeland Security Grant Program State Homeland Security Grant Program (SHSP 2022) 97.067 037-00000 - 3,520,000 - State Homeland Security Grant Program (SHSP 2023) 97.067 037-00000 921,955 838,045 - State Homeland Security Grant Program (SHSP 2024) 97.067 037-00000 1,120,000 - - Subtotal 2,041,955 4,358,045 - Total Federal Expenditures $ 4,090,382 $ 10,104,951 $ 6,979,157 See accompanying notes to the schedule of expenditures of federal awards 34 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2025 NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Los Angeles Regional Interoperable Communications System Authority and is presented using the modified accrual basis of accounting. The information in this schedule is presented in accordance with the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). NOTE 2 – INDIRECT COST RATE The Authority has elected not to use the 10% de minimis indirect cost rate as covered in §200.414 Indirect (F&A) costs. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. NOTE 3 – SUBRECIPIENTS The Authority has no subrecipients for the year ended June 30, 2025. NOTE 4 – RELATIONSHIP TO THE BASIC FINANCIAL STATEMENTS Amounts reported in the accompanying Schedule agree to amounts reported within the Authority’s basic financial statements. NOTE 5 – REVISION ON PRIOR YEAR SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS During the current fiscal year, the Schedule of Expenditures of Federal Awards (SEFA) was revised to reflect Federal awards expended rather than Federal grant reimbursements received. Uniform Guidance (2 CFR §200.510(b)) requires the SEFA to report Federal awards expended. Accordingly, the prior-year amounts presented for comparative purposes in the accompanying SEFA have been revised to properly reflect Federal awards expended. The revision had no effect on the Authority’s previously issued financial statements. The Authority administered only one Federal program during the current and prior two fiscal years; therefore, the revision did not affect major program determinations in the prior audit periods. The following table summarizes the revisions to federal expenditures previously reported in the SEFA. Description 2024 2023 Federal expenditures previously reported in the SEFA $ 3,196,722 $ 4 ,091,429 Adjustments 6,908,229 2 ,887,728 Restated federal expenditures reported in the SEFA $ 10,104,951 $ 6,979,157 35 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended June 30, 2025 NOTE 6 – CONTINGENCIES Under the terms of federal grants, additional audits may be requested by the grantor agencies and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to a request for reimbursement to the grantor agencies. 36 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2025 SECTION I – SUMMARY OF AUDITOR’S RESULTS A. Financial Statements 1) Type of auditor’s report issued: Unmodified 2) Internal control over financial reporting: a) Material weakness(es) identified? No b) Significant deficiency(ies) identified not considered to be material weaknesses? None reported 3) Noncompliance material to financial statements noted? No B. Federal Awards 1) Type of auditor’s report issued on compliance for major programs: Unmodified 2) Internal control over major programs: a) Material weakness(es) identified? Yes b) Significant deficiency(ies) identified not considered material weakness(es)? None reported 3) Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes 4) Identification of major program: Assistance Listing Number Name of Federal Program 97.067 Homeland Security Grant Program UASI 2021 UASI 2022 UASI 2023 UASI 2024 SHSP 2022 SHSP 2022 SHSP 2022 5) Dollar threshold used to distinguish between Type A and Type B programs: $750,000 6) Auditee qualified as low-risk auditee? Yes 37 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2025 SECTION II – FINANCIAL STATEMENT FINDINGS None reported. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Reference Number: 2025-001 Federal Program Title: Homeland Security Grant Program Federal Assistance Listing Number: 97.067 Federal Agency: U.S. Department of Homeland Security Pass-Through Agencies: California Governor's Office of Emergency Services (Cal OES)/County of Los Angeles Federal Emergency Management Agency (FEMA)/Grant Programs Directorate (GPD)/City of Los Angeles Federal Award Number and Year: 037-00000; Grant Years 2021, 2022, 2023 and 2024 Category of Finding: Reporting – SEFA (2 CFR §200.510(b)) Type of Finding: Material Weakness in Internal Control over Compliance Criteria In accordance with Uniform Guidance (2 CFR §200.510(b)), the auditee is required to prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the financial statements that includes the total Federal awards expended for each Federal program. Condition The Authority Fiscal Agent (County of Los Angeles Auditor-Controller) initially prepared the SEFA based on Federal grant reimbursements received during the fiscal year rather than Federal awards expended, as required by the Uniform Guidance (2 CFR §200.510(b)). As a result, the SEFA originally prepared by the County of Los Angeles Auditor-Controller management did not accurately report Federal awards expended for the fiscal year. The SEFA was subsequently revised to properly report Federal awards expended. The methodology used to prepare the SEFA had also been applied in prior years; therefore, the SEFA amounts for the two prior fiscal years presented for comparative purposes in the current report were revised to reflect Federal awards expended. Cause The Authority’s procedures for preparing and reviewing the SEFA did not fully address the requirement to report Federal awards expended in accordance with Uniform Guidance. The methodology used to compile the SEFA relied on Federal grant reimbursements received rather than Federal program expenditures recorded in the Authority’s accounting records. As a result, the review procedures performed over the SEFA did not identify that Federal awards expended were not being reported. 38 THE LOS ANGELES REGIONAL INTEROPERABLE COMMUNICATIONS SYSTEM AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2025 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Effect As a result of the methodology used to prepare the SEFA, the schedule required material revisions during the audit to properly report Federal awards expended. The same methodology had also been applied in prior years, resulting in revisions to the SEFA amounts for the two prior fiscal years presented for comparative purposes in the current report. The Authority administered only one Federal program during the current and prior two fiscal years; therefore, the revisions to the SEFA did not affect major program determinations. The revisions also did not affect the Authority’s previously issued financial statements. Questioned Costs None Recommendation Management should update its procedures for preparing the SEFA to ensure the schedule is compiled based on Federal awards expended recorded in the accounting records, rather than Federal reimbursements received, and that the review process verifies the SEFA accurately reports Federal awards expended. Management’s Response We agree. The Authority Fiscal Agent (County of Los Angeles Auditor-Controller) has reviewed our procedures to record expenditures in the SEFA to ensure amounts are correctly stated in the proper period when expensed rather than when the reimbursement is received. Corrective Action Plan During the fiscal year 2024-2025 audit, we implemented internal controls to properly record the expenditures in the SEFA. Implementation Date March 23, 2026 SECTION IV – PRIOR YEAR FINDINGS AND QUESTIONED COSTS None reported. 39