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Home My Public Portal About10) 7F Audit Reports for Proposition A, C and Measure RAGENDA ITEM 7.F. ADMINISTRATIVE SERVICES DEPARTMENT MEMORANDUM DATE: May 2, 2017 TO: The Honorable City Council FROM: Bryan Cook, City Manager Via: Tracey L. Hause, Administrative Services Director By: Lee Ma, Accountant SUBJECT: AUDIT REPORTS FOR PROPOSITION A, PROPOSITION C, MEASURE R AND TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FOR FISCAL YEAR (FY) 2015-16 RECOMMENDATION: The City Council is requested to receive and file FY 2015-16 Proposition A, Proposition C, Measure R and Transportation Development Act Article 3 Audit Reports. BACKGROUND: 1. Effective July 1, 1982, Proposition A, passed by the electorate, increased the County Sales Tax by one-half cent to provide for public transportation projects. Twenty-five percent of these funds are allocated to municipal iti es based on population. C it ies have the year of receipt plus three additional years to expend t he funds. 2. Effective November 6, 1990, Proposition C, again passed by the electorate, increased the County Sales Tax by one-half cent to provide funds for publi c transportation projects . Twenty percent of these funds are allocated to municipalities based on population . Cities have the year of receipt plus three additional years to expend the funds. 3. Effective November 4, 2008, Measure R, approved by the electorate, increased the County Sales Tax by one-half cent to provide for pub l ic transportation projects. Fifteen percent of these funds are allocated to municipal it ies based on a per capita basis. Cities have the year of receipt plus three additional years to expend the funds. 4 . In December 2016, the firm of Simpson & Simpson LLP conducted field work for the annual audits of Proposition A, Proposition C, Measure R and Transportation Development Act Article 3. A separate audit of the City of Templ e City's Proposition A, P rop os ition C, Measure R and Tra nsportation Funds is requi re d o n a n annual City Council May 2, 2017 Page 2 of 3 basis by an independent audit firm (Simpson & Simpson LLP) contracted and hired by the Los Angeles County Metropolitan Transportation Authority" 50 On April12, 2017, the City received the final audit from Simpson & Simpson LLPO ANALYSIS: The City is in compliance with all requirements of the Los Angeles County Metropolitan Transportation Authority's Funding and Allocation Guidelines" The following reports are presented for your review" Proposition A During the FY 2015-16, the City received a total of $750,029 in revenues for Proposition A funds which includes bus pass sales revenue of $97,366 and interest income of $4350 The total expenditures for FY 2015-16 were $708,8060 The City of Temple City utilized Proposition A funds for the following items: • Special Service Paratransit; e Recreation Transit; • Bus Shelter Maintenance; e Bus Pass Subsidy; • Portion of San Gabriel Valley Council of Governments Membership (60%); and • Direct Administration" Proposition C During the FY 2015-16, the City received $539,727 revenues for Proposition C which also includes interest income of $1520 The expenditures for Proposition C were $181,618 for the Las Tunas Drive Improvement Project and Temple City Boulevard Upgrades and Safety Improvements in FY 2015-16" MeasureR The City received a total of $407,924 in revenues for MeasureR funds which also includes interest income of $1,9240 There were no expenditures during FY 2015-160 Transportation Development Act Article 3 Transportation Development Act Article 3 provides for construction of pedestrian and bicycle facilities including ADA wheelchair ramps" Transportation Development Act Article 3 funds are placed on reserve in the Local Transportation Fund Account with the County Auditor-Controller and are drawn down whenever the funds become eligible for a specific project City Council May 2, 2017 Page 3 of 3 There were no expenditures during CITY STRATEGIC GOAlS: 2015-16. The City Council is requested to receive and file the Proposition A, Proposition C, Measure R and Transportation Development Act Article 3 Audit Reports for the year ending June 30, 6 to further City's Strategic Goal to promote Good Governance. FISCAl IMPACT: This agenda item does not have a fiscal impact on the FY 2016-17 City Budget ATTACHMENT: A. Annual Financial Report of Proposition A, Proposition C, Measure R and Transportation Development Act Article 3 Funds CITY OF TEMPLE CITY ANNUAL FINANCIAL REPORT OF THE PROPOSITION A LOCAL RETURN FUND PROPOSITION C LOCAL RETURN FUND MEASURER LOCAL RETURN FUND TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FUND FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 etro Simpson & Simpson, LLP Certified Public Accountants ATTACHME A FINANCIAL SECTION Independent Auditor's Report Proposition A Local Return Fund: Basic Financial Statements: Balance Sheets CITY OF TEMPLE CITY TABLE OF CONTENTS Statements of Revenues, Expenditures and Changes in Fund Balance Supplementary Information: Schedule of Expenditures-Actual and Metro Approved Project Budget Schedule of Capital Assets Proposition C Local Return Fund: Basic Financial Statements: Balance Sheets Statements of Revenues) Expenditures and Changes in Fund Balance Supplementary Information: Schedule of Expenditures-Actual and Metro Approved Project Budget Schedule of Capital Assets MeasureR Local Return Fund: Basic Financial Statements: Balance Sheets Statements of Revenues, Expenditures and Changes in Fund Balance Supplementary Information: Schedule of Expenditures-Actual aud Metro Approved Project Budget Schedule of Capital Assets Transportation Development Act Article 3 Fund: Basic Financial Statements: Balance Sheets Statements of Revenues, Expenditures and Changes in Fund Balance Supplementary Information: Schedule ofTranspmtation Development Act Allocation for Specific Projects PAGE 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Notes to Financial Statements 19 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements 23 Performed in Accordance With Government Auditing Standards COMPLIANCE SECTION Independent Auditor's Report on Compliance Compliance Matrix Schedule of Findings and Recommendations EXIT CONFERENCE 25 27 30 32 FINANCIAL SECTION SIMPSON & SIMPSON CERTIFIED PUBLIC ACCOUNT ANTS FOUNDING PARTNERS BRAINARD C. SIMPSON. CPA MELBA W. SIMPSON, CPA Independent Auditor's Report To the Honorable Members of the City Council ofthe City of Temple City, California and the Los Angeles County Metropolitan Transportation Authority Report on the Financial Statements U.S. BANK TOWER 633 WEST 5TH STREET, SUITE 3320 LOS ANGELES, CA 90071 (213) 736-6664 TElEPHONE (213) 736"6692 FAX www.simpsonandsimpsoncpas.com We have audited the accompanying financial statements of the Proposition A Local Return Fund (PALRF), Proposition C Local Return Fund (PCLRF), MeasureR Local Return Fund (MRLRF), and Transpmtation Development Act Atticle 3 Fund (TDAA3F) ofthe City of Temple City, California (City) as of and for the year ended June 30, 2016, and the related notes to the financial statements, as listed in the table of contents. Managemenrs Responsibility 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; this includes 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. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the pmpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. The CPA. Never Underestimate The Value.'" Opinions ln our opinion, the fmancial statements referred to above present fairly, in all material respects, the respective t!nancial position of the PALRF, PCLRF, MRLRF, and TDAA3F of the City ofTemplc City, California, as of June 30, 2016, and the respective changes in their financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter The financial statements of the PALRF, PCLRF, MRLRF, and TDAA3F as of and for the year ended June 30, 2015, before the financial statements ofProposition·A Local Return Fund were restated for the matter discussed in Note 8, were audited by other auditors, whose report, dated December 8, 2015, expressed an unmodified opinion on those statements. Emphasis ofMaller As discussed in Note 2, the financial statements present only the PALRF, PCLRF, MRLRF, and TDAA3F and do not purport to, and do not, present fairly !he financial position of the City of Temple City, California, as of June 30,2016 and 2015, and the changes in financial position thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Supplementwy Information Our audit was conducted fOr the purpose of forming opinions on the financial statements that collectively comprise the City of Temple City, California's PALRF, PCLRF, MRLRF, and TDAA3F Fund t!nancial statements as a whole. The accompanying supplementmy infOrmation as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the financial statements. The supplementary 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 supplementary 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 auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects, in relation to the financial statements as a whole. 2 O!her Reporting Required by Governmental Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated December 6, 2016, on our consideration of the City of Temple City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreernents and other matters. The puqJose of that repmi is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and in considering the City's internal control over financial reporting and con1p!iance. Los Angeles, California December 6, 2016 3 ASSETS TEMPLE CITY PROPOSITION A LOCAL RETURN FUND BALANCE SHEETS JUNE30 2016 2015 as restated Cash and investments $ $ 850,260 $ __ 8::.:6c:0:;:,3.:.;59:_ Total assets 850,260 $ 860,359 LIAB.ILHIES AND FUND BALANCE Liabilities Accounts payable Tota11iabilities Fund Balance Restricted Total fund balance Total liabilities and fund balance $ $ 54,056 $ 54,056 796,204 796,204 850,260 $ The accompanying notes are an integral part of the financial statements. 4 l 05,378 l 05,378 754,981 754,981 860,359 TEMPLE CITY PROPOSITION A LOCAL RETURN FUND STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Fiscal Years Ended June 30 REVENUES Proposition A Project generated revenue (Note 7) Interest income Total revenues EXPENDITURES Various projects Total expenditures Excess of revenues over expenditures Fund balance at beginning of year Fund balance at end of year $ $ 2016 652,228 $ 97,366 435 750,029 708,806 708,806 41,223 754,981 796,204 $ The accompanying notes are an integral part of the financial statements. 5 2015 as restated 635,821 123,290 1,047 760,158 728,783 728,783 31,375 723,606 754,981 Project Code 130-01 140-02 170-04 250-03 270-02 480-05 TEMPLE CITY PROPOSITiON A LOCAL RETURN FUND SUPPLEMENTARY !NFORMA T!ON SCHEDULE OF EXPENDITURES ACTUAL AND METRO APPROVED PROJECT BUDGET For the Fiscal Year Ended June 30, 2016 (With Comparative Actual Amount for the Fiscal Year Ended June 30, 2015) 2016 Metro Project Name Budget Actual Special Service Paratransit $ 441,020 $ 429,072 Recreational Transit 65,000 54,230 Bus Shelter Maintenance 10,600 7,752 User-Side Subsidy 158,000 136,808 San Gabriel Valley Council of 9,500 9,938 Governments Membership Direct Administration 77,765 71,006 Total expenditures $ 761,885 $ 708,806 See accompanying independent auditor's report. 6 Variance Favorable (Unfavorable) $ 11,948 10,770 2,848 21,192 (438) 6,759 $ 53,079 2015 Actual as restated $ 413,602 41,134 7,752 153,874 9,500 102,921 $ 728,783 TEMPLE CITY PROPOSITION A LOCAL RETURN FUND SUPPLEMENTARY INFORMATION SCHEDULE OF CAPITAL ASSETS June 30,2016 Date Acquired Description Balance 7/l/2015 Additions 08/05/08 Ford E350 Van $ 25,799 $ ____ $ Total $ 25,799 $ $ See accompanying independent auditor's report. 7 Deletions Balance 6/30/2016 25,799 $ ___ _ 25,799 $==== TEMPLE CITY PROPOSITION C LOCAL RETURN FUND ASSETS Cash and investments Total assets BALANCE SHEETS JUNE 30 UABIUHES AND FUND BALANCE Liabilities Accounts payable Total liabilities Fund Balance Restricted Total fund balance $ $ $ 2016 459,414 $ 459,414 $ $ ----- 459,414 459,414 2015 JOi,305 101,305 101,305 101,305 Total liabilities and fund balance $ 4 59,414 $ ==;.;I 0;,;,1;;,3;;,;0 5~ The accompanying notes arc an integral part of the financial statements. 8 TEMPLE CITY PROPOSITION C LOCAL RETURN FUND STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Fiscal Years Ended June 30 2016 REVENUES Proposition C Interest income $ 539,575 $ 152 Total revenues EXPENmTURES Various projects Total expenditures Excess of revenues over expenditures Fund balance at beginning of year Fund balance at end of year $ 539,727 181,618 181,618 358, I 09 101,305 459,414 $ The accompanying notes are an integral part of the financial statements. 9 2015 526,265 41 526,306 88,604 88,604 437,702 (336,397) 101,305 Project Code 270-01 440-0 [ TEMPLE CITY PROPOSITION C LOCAL RETURN FUND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES ACTUAL AND METRO APPROVED PROJECT BUDGET For the Fiscal Year Ended June 30,2016 (With Comparative Actual Amount for the Fiscal Year Ended June 30, 20 15) 2016 Metro Project Name Budget Actual Las Tunas Drive Improvement Project $ 84,000 $ 83,518 Temple City Boulevard Upgrades and 108,100 98,100 Safety Improvements Total expenditures $ 192,100 $ 181,618 See accompanying independent auditor1s report. 10 Variance Favorable (Unfavorable) $ 482 10,000 $ 10,482 2015 Actual $ 88,604 $ 88,604 Date Acquired None TEMPLE CITY PROPOSIT!ON C LOCAL RETURN FUND SUPPLEMENTARY INFORMATION SCHEDULE OF CAPITAL ASSETS Description June 30, 2016 Balance 711/2015 Additions Deletions Balance 6/30/2016 $ ______ $ ______ $ ______ $ ____ __ Total $ $ $ $ ===== ===== See accompanying independent auditor 1S report. II ASSETS TEMPLE CITY MEASURER LOCAL RETURN FUND BALANCE SHEETS JUNE 30 2016 2015 Cash and investments Total assets $ $ 1,325,736 $ ---'9'-'1-'-7"-.8,;.:12=- 1 ,325, 736 $ ==9~1~7;,;,8~12;, UAiliUHES AND FUND BALANCE Liabilities Accounts payable Total liabilities Fund Balance Restricted Total fund balance Total liabilities and fund balance $ ___ _ $ I ,325,736 1,325,736 $ 1,325,736 $ The accompanying notes arc an integral part of the financial statements. 12 917,812 917,812 917,812 REVENUES MeasureR Interest income Total revenues EXPENDITURES None Total expenditures TEMPLE CITY MEASURER LOCAL RETURN FUND STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Fiscal Years Ended June 30 $ 2016 406,000 $ 1,924 407,924 Excess of revenues over expenditures 407,924 Fund balance at beginning of year 917,812 2015 395,637 914 396,551 396,551 521,261 Fund balance at end of year $ 1,325,736 $ ==9=1=7,=8=12= The accompanying notes are an integral part of the financial statements 13 Project Code None TEMPLE CITY MEASURER LOCAL RETURN FUND SUPPLEMENTARY !NFORMA TlON SCHEDULE OF EXPENDITURES ACTUAL AND METRO APPROVED PROJECT BUDGET For the Fiscal Year Ended June 30, 2016 (With Comparative Actual Amount for the Fiscal Year Ended June 30, 20 15) 2016 Variance Metro Favorable Project Name Budget Actual (Unfavorable) $ $ $ Total expenditures $ $ $ See accompanying independent auditor's report. 14 2015 Actual $ $ Date Acquired None TEMPLE CITY MEASURER LOCAL RETURN FUND SUPPLEMENTARY INFORMATION SCHEDULE OF CAPITAL ASSETS Description June 30, 2016 Balance 7/1/2015 Additions Deletions Balance 6/30/2016 $ ______ $ _______ $ ______ $ ______ _ Total $===$ $ $==== See accompanying independent auditor's report. 15 TEMPLE CITY TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FUND (PURSUANT TO PUBLIC UTILITIES CODE SECTION 99234) BALANCE SHEETS ASSETS Due ti·01n LACMT A Total assets LIABILITIES AND FUND BALANCE Liabilities Cash overdraft Total liabilities Fund Balance Unassigned Total fund balance JUNE 30 $ $ 2016 $ ___ _ $ $ $ Total liabilities and fund balance $ ---=$ The accompanying notes are an integral part of the financial statements. 16 2015 705 705 705 705 705 TEMPLE CITY TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FUND STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Fiscal Years Ended June 30 REVENUES Intergovernment allocations: Article 3 Total revenues EXPENDITURES Construction/Maintenance Total expenditures Excess of revenues over expenditures Fund balance at begilliling of year Fund balance at end of year 2016 $ ___ _ $ 2015 $ __ 9::_:4c::, 8_:_4 7'- 94,847 6,165 6,165 88,682 (88,682) $ The accompanying notes are an integral part of the financial statements. 17 Project Description Local allocations None TEMPLE CITY TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FUND SUPPLEMENTARY !NFORMA TION SCHEDULE OF TRANSPORTATION DEVELOPMENT ACT ALLOCATION FOR SPECIFIC PROJECTS Total For the Fiscal Year Ended June 30, 2016 Program Year Allocations Expenditures 2015-16 $ $ $ Unexpended Allocations ----------------------- $ $ === Fund balance at beginning of the year Fund balance at beginning of year See accompanying independent auditor's report. 18 $==== Project Status CITY OF TEMPLE CITY NOTES TO FINANCIAL STATEMENTS For the Fiscal Years Ended June 30, 2016 and 2015 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING l'OUCIES Fund Accounting The operations of the Proposition A Local Return Fund (PALRF) and Proposition C Local Return Funds (PCLRF), MeasureR Local Return Fund (MRLRF), and Transportation Development Act Article 3 Fund (TDAA3F) are accounted for in separate sets of self-balancing accounts that comprise their assets, liabilities, fund balance, revenues and expenditures. PALRF and PCLRF represent 25% and 20% respectively, of the Y, cent Proposition A and y, cent Proposition C sales taxes which are distributed to the jurisdictions within Los Angeles County based on population and must be used exclusively for transpmiation related programs and projects. MRLRF represents 15% of they, cent sales tax which is distributed to the jurisdictions within Los Angeles County based on a per capita basis and must be used exclusively for transportation purposes. Transportation Development Act Article 3 Fund (TDAA3F) is a Special Revenue Fund that accounts lor the City's share of the Transportation Development Act Article 3 allocations which are legally restricted for speci fie purposes. Basis of Accounting and Measurement Focus PALRF, PCLRF, MRLRF, and TDAA3F are accounted for using the modified accrual basis of accounting whereby revenues are 1·ecognized when they become both measurable and available to finance expenditures of the current period and expenditures are generally recognized when the related fund liabilities are incurred. Special Revenue funds are reported on a spending or "financial flow" measurement focus. This means that generally only current assets, current liabilities and deferred inflows and outflows of resources are included on their balance sheets. Statements of revenues, expenditures and changes in fund balances for Special Revenue Funds generally present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Budgets and Budgetary Accounting The budgeted amounts presented in this report for comparison to the actual amounts are presented in accordance with accounting principles generally accepted in the United States of America. 19 CITY OF TEMPLE CITY NOTES TO FINANCIAL STATEMENTS For the Fiscal Years Ended June 30, 2016 and 2015 (Continued) NOTE l-SUMMARY OF SIGNIFICANT ACCOUNTiNG POLICIES (Continued) Fair Value j\1easurement Tn accordance with GASB Statement No. 72, Fair Value Measurernent and Application, which became effective for the fiscal year ended June 30, 2016, the City categorizes its fair value measurement within the fair value hierarchy that is based on the valuation inputs used to measure the fair value of the investment. Level I inputs are quoted prices in active markets for identical investments; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Accordingly, the City reports its investments at fair value and recognizes unrealized gain (loss) on investments. Refer to the City's 2016 Comprehensive Annual Financial Report for detailed disclosures regarding the City's investments policy and fair value measurements. Fund Balance Reporting Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Govemmental Fund Type Definitions, establishes the !tmd balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The PALRF, PCLRF, MRLRF, and TDAA3F report the following fund balance classification as of June 30,2016: • Restricted-Amounts that are constrained for specific purposes, which are externally imposed by providers, such as creditors, or amounts constrained due to constitutional provisions or enabling legislation, The use of the Funds' remaining fund balances are restricted for projects approved by LACMTk Information regarding the fund balance reporting policy adopted by the City is described in Note 1 to the City's Comprehensive Annual Financial Report NOTE 2-ANNUAL FINANCIAL STATEMENTS The financial statements reflect only the financial position and results of operations of the PALRF, PCLRF, MRLRF, and TDAA3F and their compliance with the Proposition A and Proposition C Local Return Program Guidelines, Measure R Local Return Program Guidelines, Transportation Development Act Article 3, and the Los Angeles County Metropolitan Transportation Authority Funding and Allocation Guidelines for Transpmiation Development Act Article 3 Bicycle and Pedestrian Funds, 20 CITY OF TEMPLE CITY NOTES TO FINANCIAL STATEMENTS for the Fiscal Years Ended June 30, 2016 and 2015 (Continued) NOTE 3 -PROPOSITION A AND PROPOSITION C LOCAL RETURN COMPLIANCE REQUIREMENTS In accordance with Proposition A and Proposition C Local Return Program Guidelines, funds received pursuant to these guidelines may only be used for Proposition A and Proposition C Local Return approved programs. NOTE 4-MEASURER LOCAL RETURN COMPLIANCE REQUIREMENTS ln accordance with Measure R Local Return Program Guidelines, funds received pursuant to these guidelines may only be used for _Measure R Local Return approved progrmns. NOTE 5-TRANSPORTATION DEVELOPMENT ACT COMPLIANCE REQUIREMENTS In accordance with Public Utilities Code Section 99234, funds received pursuant to this Code's section may only be used for activities relating to pedestrians and bicycle facilities. NOTE 6-CASH AND INVESTMENTS The PALRF, PCLRF, MRLRF, and TDAA3F cash balances were pooled with various other City funds for deposit and investment purposes. The share of each fund in the pooled cash account was separately maintained and interest income was apportioned to the participating funds based on the relationship of their average balances to the total of the pooled cash and investments. NOTE 7-PROJECT GENERATED REVENUE-PALRF Project generated revenue for the years ended June 30, 2016 and 2015 consisted of the following: Bus Pass Sales Total $ $ 2016 2015 97,366 $ 123,290 --==--='-''-- 97,366 $ 123,290 ~~~~ NOTE 8-RESTATEMENT OF PALRF'S 2015 FINANCIAL STATEMENTS The 2015 financial statements of PALRF were restated to report certain expenditures for the City's Project Code 480-05, Direct Administration, related to prior fiscal years that were not previously recorded. Accounts Fund Payable Expenditures Balance Balance, as previously reported $ 68,832 $ 692,237 $ 791,527 Adjustment 36,546 36,546 (36,546) Balance, as restated $ 105,378 $ 728,783 $ 754,981 21 CITY OF TEMPLE CITY NOTES TO FINANCIAL STATEMENTS For the Fiscal Years Ended June 30,2016 and 2015 (Continued) NOTE 9-TRANSPORTATION DEVELOPMENT ACT FUND REVENUE ALLOCATION The revenue allocation for the years ended June 30, 2016 and 2015 consisted of the following: FY 20 I 0-11 allocation FY 2011-12 allocation FY 2012-13 allocation FY 2013-14 allocation FY 20 14-15 allocation FY 2015-16 allocation Total $ $ 2016 $ $ 2015 14,394 17,306 25,547 29,140 8,463 94,847 NOTE I 0-TRANSPORTATION DEVELOPMENT ACT FUNDS RESERVED In accordance with TDA Article 3 (SB821) Guidelines, funds not spent during the fiscal year have been placed on reserve in the Local Transportation Fund (LTF) account with the County Auditor-Controller to be drawn down whenever the funds become eligible for a specific project and an approved drawdown request is received by Metro. As ofJune 30,2016 and 2015, the City has funds on reserve as follows: FY 2014-15 allocation FY 2015-16 allocation Available reserve balance NOTE H-SUBSEQUENT EVENTS $ $ 2016 15,273 $ 23,034 38,307 $ 2015 15,273 15,273 The City has evaluated events or transactions that occurred subsequent to June 30, 20!6 through December 6, 2016, the date the accompanying 'financial statements were available to be issued, for potential recognition or disclosure in the financial statements and determined no subsequent matters require disclosure or adjustment to the accompanying financial statements. 22 SIMPSON & SIMPSON CERTifiED PUBLIC ACCOUNTANTS FOUNDING PARTNERS BRAINARD C. SIMPSON, CPA MELBA W_ SIMPSON, CPA U.S. BANK TOWER 633 WEST 5TH STREET, SUITE 3320 LOS ANGELES, CA 90071 (213) 736-6664 TELEPHONE (213) 736-6692 FAX \Wfw.simpsonandsimpsoncpas.com Independent Auditor's Report on Intcmal Control Over Financial Reporting and on Compliance ami Other Matters Rased on an Audit of Financial Statements l'erformed in Accordance with Government Auditing Standards To the Honorable Members of the City Council of the City of Temple City, California and the Los Angeles County Metropolitan Transit Authority 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 Proposition A Local Return Fund (PALRF), Proposition C Local Return Fund (PCLRF), Measure R Local Return Fund (MRLRF), and Transportation Development Act Article 3 (TDAA3F) Fund of the City of Temple City, California (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, and have issued our report thereon dated December 6, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness ofthe City'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 City's local return funds and TDAA3F 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 ITierit attention by those charged with govetnance. Our consideration of intemal 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 may exist that have not been identified. 23 The CPA. Never Underestimale The Value.'" Compliance and Other Matters As part of obtaining reasonable assurance about whether the Cit~/s financial statements are free frorn 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 llnancial statement amounts. However, providing an opinion on con1pliance 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 is required to be reported under Government Auditing Standards. l'urpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result 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 paTt of an audit performed in accordance with Government Audjting Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Los Angeles, California December 6, 2016 24 COMPLIANCE SECTION SIMPSON & SIMPSON CERTIFIED PUBLIC ACCOUNTANTS FOVNDII~G PARTNERS BRAINARD C. SIMPSON, CPA MELBA W. SIMPSON, CPA Independent Auditor's Report on Compliance To the Honorable Members of the City Council of the City of Temple City, California and the Los Angeles County Metropolitan Transit Authority Report on Compliance U.S. BANK TOWER 633\fJEST 5TH STREET, SUITE 3320 LOS ANGELES, CA 90071 (213) 736-6664 TELEPHONE (213) 736-6592 FAX www.simpsonandsimpsoncpas.com We have audited the compliance of the City of Temple City, California (City) with the Proposition A and Proposition C Local Return Guidelines, MeasureR Local Return Guidelines, Transpmtation Development Act Article 3, and the Los Angeles County Metropolitan Transportation Authority's Funding and Allocation Guidelines for the Transportation Development Act Article 3 Bicycle and Pedestrian Funds (collectively, the Guidelines) for the year ended June 30,2016. Management's Responsibility Management is responsible for the City's compliance with those guidelines. Auditor's Responsibility Our responsibility is to express an opinion on the City's compliance based on our audit. 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 Guidelines referred to in the preceding paragraph. Those standards and the Guidelines require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a local return program occurred. An audit includes examining, qn a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance. Our audit does not provide a legal detetmination of the City's compliance with those requirements. Opinion on Each Local Return Program and Transportation Development Act Article 3 In om opinion, the City of Temple City complied, in all material respects, with the compliance requirements referred to above that apply to Proposition A Local Return Fund, Proposition C Local Return Fund, Measure R Local Return Fund, and Transportation Development Act Article 3 Fund (TDAA3F) for the year ended June 30,2016. 25 The CPA. Never Underestimate The Value'" Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Guidelines and which is described in the accompanying Schedule of Findings and Recommendations as Finding Nos. 2016-00 I and 2016-002. Our opinion on each local return program is not modified with respect to these matters. The City's responses to the noncompliance findings identified in our audit are described in the accompanying Schedule of Findings and Recommendations. The City's responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. Report onlntemal Control Over Compliance Management of the City of Temple City is responsible for establishing and maintaining effective internal control over compliance with the Requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the Requirements that could have a direct and material effect on the Local Retum programs and the TDAA3F to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with the Requirements, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Cit)/s internal control over compliance. A dejlciency 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 under the Requirements on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance nnder the Requirements will not be prevented, or detected and cmrected, 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 Requirements that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in intemal control over compliance that we consider to be material weaknesses or significant deficiencies. We did not identifY any deficiencies in internal control over cotnpliancc that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 requirement of the Guidelines. Accordingly, this report is not suitable for any other purpose. Los Angeles, California December 6, 2016 26 CmnpHance Requirement CITY OF TEMPLE CITY COMPLIANCE MATRIX Year Ended June 30,2016 In Compliance Yes No Questioned Costs If no, provide details and management response. A. Proposition A and Proposition C Local Return Funds l. ,; Timely use of funds, None 2. jExpendltures were approved I be tore being incurred. None 3. --; iFunds were used on approved I projects only and expenditures X None were supported and allowable I i per Guidelines. . . I . . 4. j Expenditures did not exceed 125% of Metro's approved [budget. ... 5. ;Administrative expenses were I I within the 20% cap. --.. -----.--·------·--··-----------"' 6. !All on-going and carryover iprojects were reported in Form I !B. --.. --1--(" 7. [Annual Project Summmy • i Report (Form B) was submitted X None i I . I I _1on time. .L 8. !Annual Expenditure Report i' iCForm C) and listing of jsee Finding No. 2016-001 on the I Recreational Transit Services, X None I Schedule of Findings and I applicable, were submitted on !Recommendations. I. I jttme. I 9. "j'C~-sh or cash equivalents were None !i [_maintained. 1-10. l Accounting procedures, record I See Finding No. 2016-002 on the !keeping and documentation None I Schedule of Findings and lwere adequate. i Recommendations. ~-M-l M,l• 11. I Revenues received including [allocations, project generated i, revenues, and interest income X None I were properly credited to the iP ALRF and PCLRF accounts. 27 Compliance Requirement MeasureR Local Return Fund I. !Timely use of funds. !Expenditures were approved ! before being incurred. 3. 'Funds were used on approved !projects only and expenditures I were supported and allowable I per Guidelines. 4. • property tax . 5. . -(Ad~;i-~i~trative expenses were jwithin the 20% cap. . l 6. !Expenditure Plan (Form One) I was submitted on time. 7. !Expenditure Report (Form !Two) was submitted on time. • 8 . lc~~h ~~: ~~sh ~q~i~~l~r~t~ "-'ere ! I • . d j--- jmamtame . 9. lA~counting proced~ues, record !keeping and documentation ' !were adequate. !i !R_~~~~~~~~-~~~~~-~-i~ed including l"' 10. !allocations, project generated !revenues, and interest income :were properly credited to the !MeasureR account. i 11. JF~;;d~ "-'~re not used to supplant I existing local revenues being i used for transportation purpose. CITY OF TEMPLE CITY COMPLIANCE MA TRlX Year Ended June 30,2016 (Continued) In Compliance Yes No N/A X X X X X Questioned Costs None None None None None None N/A-Not applicable as the City did not expend funds 28 If no, provide details and management response. Com.pHance Requirement CITY OF TEMPLE CITY COMPLIANCE MATRIX Year Ended June 30, 20 16 (Continued) Questioned Costs Tronsportation Development Act Article 3 Fund Timely use of funds. Expenditures were incurred for activities relating to pedestrian and bicycle facilities and amenities. X N/A-Not applicable as the City did not expend funds 29 None None If no, provide details and management response. CITY OF TEMPLE CITY SCHEDULE OF FINDINGS AND RECOMMENDATIONS June 30, 2016 PALRF: Finding No. 2016-001 Compliance Reference According to Proposition A & C Guidelines, Section II, !.3, Recreational Transit Service: "Jurisdictions shall submit a Listing of Recreational Transit Services no later than October 15the after the fiscal year." Condition The City did not meet the October 15, 2016 deadline for submission of the Listing of Recreational Transit Services. However, the City submitted the listing on November 4, 2016. Cause The City employee who is responsible for the submission of the form missed the deadline set by LACMTA. Effect The City's Listing of Recreational Transit Services was not submitted timely. Recommendation We recommend that the City establish procedures to ensure that the Recreational Transit Services listing is properly prepared and submitted before the due date of October 15'h so that the City's expenditures of the Proposition A Local Return fund will be in accordance with LACMTA's approval and the guidelines. Furthermore, we recommend that the City retain a confirmation of receipt by LACMT A to indicate the form was submitted on a timely manner. Management's Response The staff will ensure the timely submission of the Listing of Recreational Transit Services in the future and follow-up with LACMTA for confirmation. 30 CITY OF TEMPLE CITY SCHEDULE OF FINDINGS AND RECOMMENDATIONS June 30,2016 (Continued) I'ALRF: Finding No. 2016-002 Compliance Reference According to Proposition A Local Return Guidelines, Section I (C), "It is the jurisdictions' responsibility to maintaitl proper accounting records and documentation to facilitate the performance of the audit prescribed Ill these guidelines.') Condition The City had a debit balance on its employee benefits payable that relates to prior years' administration costs and was not adjusted to properly account for them. The debit balance was created due to the change of the payroll system in tiscal year 2012-13. This unadjusted balance resulted to a total of $36,546 at June 30, 2016. Cause The City did not make a timely adjustment to correct the debit balance of the liability for prior fiscal years after terminating outside payroll services during the conversion of the payroll system. Effect PALRF tinancials do not reflect the proper financial condition of the local return fund and may lead to weak internal accounting controls. Recommendation We recommend that the City establish procedures to ensure that the financial records reflect the true and accurate condition of the local return funds in order to provide a more meaningful presentation to the users in compliance with the guidelines. Management's Response The amount of$36,546 is a result ofthe conversion from an outside payroll service to an in-house payroll process which occurred in tiscal year 2012-13. The City made changes to the Accounts Payable process so that the liabilities are paid out of the corresponding fund and clears out the proper liability amount on a monthly basis. The City has made the necessary adjustments to reconcile the debit balance related to prior years. 31 EXIT CONFERENCE CITY OF TEMPLE CITY PROPOSITION A, PROPOSITION C, MEASURER LOCAL RETURN FUNDS, AND TRANSPORTATION DEVELOPMENT ACT ARTICLE 3 FUND EXIT CONFERENCE June 30, 2016 An exit conference was held on December 21, 2016 via telephone conference. Those in attendance vvere: Sil:np;wn & Simpson Representative: Yung Dang) Semi-Senior Auditor Ci(y's Representative: Lee Ma, Senior Accountant Matters Discussed: Results of the audit disclosed two (2) non-compliance issues with LACMTA's Guidelines, A copy of this repmt was forwarded to the following City representative(s) for their comments prior to the issuance of the final report: Lee Ma, Senior Accountant 32