the Los Angeles County Metropolitan

One Gateway Plaza Los Angeles, CA 90012-2952

213.922.2000 Te l metro. net

18

FINANCE, BUDGET AND AUDIT COMMITTEE MARCH 20,2013

SUBJECT: BASIC FINANCIAL STATEMENTS AND COMPONENT AUDITS

ACTION: RECEIVE AND FILE

RECOMMENDATION

Receive and file the Los Angeles County Metropolitan Transportation Authority's basic financial statements and component financial statement audits completed by KPMG LLP for the fiscal year ended June 30, 2012.

ISSUE

We are required to be audited annually by independent certified public accountants. The resulting reports include Metro's basic financial statements and following component audits for the year ended June 30, 2012:

• Independent Auditors' Report on the Los Angeles County Metropolitan Transportation Authority's basic financial statements which include the financial statements of the governmental activities, business-type activities, each major fund and the aggregate remaining fund information of Metro as of and for the year ended June 30, 2012;

• Independent auditors' SAS 114 letter covering required communications; • Los Angeles County Metropolitan Transportation Authority Single Audit Reports

for the fiscal year ended June 30, 2012 which include: o 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; and

o Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133;

• Independent Accountants' Report on Applying Agreed-Upon Procedures on the Los Angeles County Metropolitan Transportation Authority's Federal Funding Allocation Data, Transportation Operating Agency (ID# 9154) for the fiscal year ended June 30, 2012;

• Management letter on the Los Angeles County Metropolitan Transportation Authority's Federal Funding Allocation Data, Transportation Operating Agency (ID# 9154) for the fiscal year ended June 30, 2012;

• Independent Accountants' Report on Applying Agreed-Upon Procedures on the Los Angeles County Metropolitan Transportation Authority 's Federal Funding Allocation Data, L.A. County Small Operators (ID# 9166) for the fiscal year ended June 30, 2012;

• Management letters on the Los Angeles County Metropolitan Transportation Authority's Federal Funding Allocation Data , L.A. County Small Operators (ID# 9166) for the fiscal year ended June 30, 2012 (not attached, link will available online);

• Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Section 6667) and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards for the Los Angeles County Metropolitan Transportation Authority Transportation Development Act Operations Agency for the year ended June 30, 2012;

• Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Section 6640-6662) and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards for the Los Angeles County Metropolitan Transportation Authority Transportation Development Act & Prop 1 B PTMISEA Planning Agency for the year ended June 30, 2012;

• Independent Auditors' Report on the Los Angeles County Metropolitan Transportation Authority State Transit Assistance Special Revenue Fund's basic financial statements as of and for the years ending June 30, 2012 and 2011 ; and

• Independent Auditors' Report on the Service Authority for Freeway Emergencies' (A Component Unit of the Los Angeles County Metropolitan Transportation Authority) financial statements and other supplementary information as of and for the years ending June 30, 2012 and 2011.

DISCUSSION

Metro's basic financial statements include our audited financial statements, supplemental information and unqualified opinion from KPMG, the independent auditor. KPMG representatives will provide a presentation on the results of their audit.

KPMG issued unqualified opinions in all audit reports. However, KPMG did issue management letter comments in connection with three audit reports. Three internal control issues were noted in the management letter for the Federal Funding Allocation Data Transportation Operating Agency (9154) report. In addition , they found one instance of non-compliance in the State Transit Assistance Special Revenue Fund's basic financial statements and three significant deficiencies in the Single Audit Report. Management is currently working to resolve all these issues. Management Audit will follow-up to ensure they are being addressed .

Basic Financia l Statements Page 2

Due to the considerable size of the document, we have not attached Metro's basic financial statements. Instead, as a savings measure a hard copy of the Basic Financial Statements is on file with the Board Secretary and is also available on the Metro website.

http://www.metro.neUmedia/uploads/FY12 Financial Statements.pdf

ATTACHMENT(S)

A. Los Angeles County Metropolitan Transportation Authority Single Audit Reports for the fiscal year ended June 30, 2012 ;

B. Los Angeles County Metropolitan Transportation Authority Management Letter for Federal Funding Allocation Data Transportation Operating Agency (ID# 9154) for the fiscal year ended June 30, 2012 (With Independent Accountants' Report on Applying Agreed-Upon Procedures Thereon);

C. Los Angeles County Metropolitan Transportation Authority Federal Funding Allocation Data L.A. County Small Operators (ID# 9166) for the fiscal year ended June 30, 2012 (With Independent Accountants' Report on Applying Agreed-Upon Procedures Thereon);

D. Los Angeles County Metropolitan Transportation Authority Transportation Development Act Operations Agency Year ended June 30, 2012;

E. Los Angeles County Metropolitan Transportation Authority Transportation Development Act & Prop 1 B PTMISEA Planning Agency Schedule of Revenues, Expenditures, and Changes in Fund Balances Year ended June 30, 2012;

F. Los Angeles County Metropolitan Transportation Authority State Transit Assistance Special Revenue Fund Basic Financial Statements June 30, 2012 and 2011 (With Independent Auditors' Report Thereon);

G. Service Authority for Freeway Emergencies (A Component Unit of the Los Angeles County Metropolitan Transportation Authority) Financial Statements and Other Supplementary Information June 30, 2012 and 2011 (With Independent Auditors' Report Thereon);

H. SAS 114 communications report.

Prepared by:

Basic Financ ial Statements

Ruthe Holden, Chief Auditor (213) 922-1031

Page 3

~he Holden Chief Auditor

Arthur T. Leahy Chief Executive Officer

Basic Financial Statements Page 4

Attachment A

LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY

Single Audit Reports

Fiscal year ended June 30, 2012

(With Independent Auditors' Reports Thereon)

LOS ANGELES COUNTY METRO PO LIT AN TRANSPORTATION AUTHORITY

Table of Contents

Independent Auditors' 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

Independent Auditors' Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133

Schedule ofExpenditures of Federal and State Awards

Notes to Schedule of Expenditures of Federal and State Awards

Schedule of Findings and Questioned Costs

Page

3

6

8

10

KPMG LLP Suite 2000 355 South Grand Avenue Los Angeles, CA 90071-1568

Independent Auditors' 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

The Board of Directors Los Angeles County Metropolitan Transportation Authority Los Angeles, California:

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Los Angeles County Metropolitan Transportation Authority (LACMTA) as of and for the year ended June 30, 2012, which collectively comprise LACMTA's basic financial statements and have issued our report thereon dated January 8, 2013. Our report was modified to include a reference to other auditors who audited the defined benefit pension plan financial statements, which are reported in LACMTA's Employee Retirement Trust Funds. 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. This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters in accordance with Government Auditing Standards that are reported on separately by those auditors.

Internal Control over Financial Reporting

Management of LACMT A is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered LACMTA's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness ofLACMTA's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofLACMTA's internal control over financial reporting.

A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

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 deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over fmancial reporting that we consider to be material weaknesses, as defined above.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International"), a Swiss entity.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether LACMTA's financial statements are free of 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.

This report is intended solely for the information and use of management, the Board of Directors, others within the entity, federal awarding agencies, and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

January 8, 2013

2


Independent Auditors' Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on

Internal Control over Compliance in Accordance with OMB Circular A-133


Compliance

We have audited Los Angeles County Metropolitan Transportation Authority's (LACMTA's) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget ( 0 MB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of LACMTA's major federal programs for the year ended June 30, 2012. LACMTA's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of LACMTA's management. Our responsibility is to express an opinion on LACMTA'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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 major federal program occurred. An audit includes examining, on a test basis, evidence about LACMTA'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. Our audit does not provide a legal determination ofLACMTA's compliance with those requirements.

In our opinion, LACMT A complied, in all material respects, with the 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, 2012. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items 2012-01 through 2012-03.

Internal Control over Compliance

Management of LACMT A is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered LACMTA's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the

3 KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International"), a Swiss entity.

purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofLACMTA's internal control over compliance.

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 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.

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 internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies as described in the accompanying schedule of findings and questioned costs as items 2012-01 through 2012-03. A significant deficiency in internal control over compliance is a deficiency, or 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.

Schedule of Expenditures of Federal and State Awards

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of LACMT A as of and for the year ended June 30, 2012, and have issued our report thereon dated January 8, 2013, which contained unqualified opinions on those financial statements. Our audit was conducted for the purpose of forming our opinion on the fmancial statements that collectively comprise LACMTA's basic financial statements. We have not performed any procedures with respect to the audited financial statements subsequent to January 8, 2013. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is 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 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 expenditure of federal and state awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

LACMTA's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit LACMTA's responses and, accordingly, we express no opinion on the responses.

4

.11!1101 L~~~

This report is intended solely for the information and use of management, Board of Directors, others within the entity, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

January 8, 2013

5

Federal grants:

Federal erantor/ pass~through erantor/ program or duster title/ pro jed title

U.S. Department ofTransportat ion· Highw·ay Planning and Construction Passed through State of Cal ifornia-

Department ofTransportati on· 1-405 CAR Pool Lane Burbank Airport Extension of Transit way on 1~110 to Oo\\ntonn LA 1·71 0 M~or Corridors Study

CFDA Subtotal

Federal Transit Cluster: Federal Transit Capital Improvement Grants:

Metro Gold Line Eastside Extension New Start Playa Vista Compton Acquisitions, Playa Vista Bus Passenger Shelters ,

and El Segundo lntennodal Bus Terminal South Pasadena Bus Acquisition and

San Fernando Valley East/Ventura Park-&·Ride Palmdale lntennodal Transportation Center Parking Lot &

Monterey Park Collegian Bus Transfer Improvements Sierra Madre Villa Station Pedestrian Access Metro Rapid System Gap Closure Transit Center/Stop ImprO\·ements Bus Purchase and Passenger/Pedestrian lmprowments Shelters, Buses, Engineering and Tools Planning Engineering of Transit Centers Paratransit Vehicles Exposition Light Rail Transit Traffic Congestion Relief Program Bus Layover- La Cienega Expo Station Transit Centers & Expansion Buses Patsaouras Plaza Busway Station Preventi \'e Maintenance-Rail Preventive Maintenance-Rail ARRA - Traction Power Substations Congestion Reduction Demonstrations Pr~ject

CFDA Subtotal

Federal Transit Fonnula Grants . ARRA - Metro Red Line Subway Escalator Canopy Project Capital and Operating Assistance Operating FYO I -Capital Assistance Capital and Operating Assistance Universal Fare System Clearinghouse. Light Rail Transi t,

Orange Line Operating Assistance & Buses Metro Rapid Bus Program Trw1Sit Enhancement FY2005 Funds El Monte Busway, Harbor Transitway, and Bus Acquisitions Pre\-·enti\-·e Maintenance -Operating Preventi,·e Maintenance -Capital FYI0-1 I Growing States- Preventive Maintenance Rail Metro Gold Line Eastside Extensions Operating...CMAQ Expo Phase I Operating assistance ARRA- Bus replacement (141), Overhaul (290), Metro Blue Line Transit Provider ARRA- Bus Stations/Stops Transit Enhancement ImprO\·ements Exposition Light Rail Transit Traffic Congestion Relief Program

CFOA Subtotal

Federal Transit Cluster Subtotal

LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTIIORITY

Schedule of Expenditures of federal and State Awards

F1scal year ended June 30, 2012

CFDAnumber GRANT# Award

20.205 07-4826 $ I ,02 I ,000,000 20.205 07-4U4524 4.387,000 20.205 EA 07-278008 6,272.631 20.205 07249908L 27,000,000

I ,058,659,63 I

20.500 CA030508 43 I ,900,000

20.500 CA030594 5,298,185

20.500 CA030725 639,391

20.500 CA030764 874,147 20.500 CA030771 1,554.303 20.500 CA030796 16,700,000 20.500 CA040037 1,601 ,429 20.500 CA040085 1,907,535 20.500 CA040088 5,070,560 20.500 CA040094 5.831 ,578 20.500 CA040109 936,064 20.500 CA040I36 1,433,250 20.500 CA040150 475,000 20.500 CA040161 2,819,500 20.500 CA040233 9,679,000 20.500 CA050243 II 1,857,162 20.500 CA050273 2t ,315,907 20.500 CA560001 8.185. 197 20.500 EA 07-278008 67,4 16.460

695,494,668

20.507 CA66X005 6,770.224 20.507 CA90X970 73 I ,065,604 20.507 CA900970 245,893,786 20.507 CA90Y050 32,588,497 20.507 CA90Y307 7,895,000

20.507 CA90Y380 25,261.000 20.507 CA90Y457 I 1,081.700 20.507 CA90Y685 854,520 20.507 CA90Y716 69,792,000 20.507 CA90Y717 458,036, I 66 20.507 CA90Y717 17,247,740 20.507 CA90Y778 14,818,247 20.507 CA95XIIO 34,100.000 20.507 CA95XI76 32,307,000 20.507 CA96XOI2 225, 154,824 20.507 CA96X057 1,030,644 20.507 TCR07A0034-6/STIP/FY08 PROP IB 597,019,750

2.510,9 I 6, 702

3,206,411,370

Total

I 95,296,23 I 236.00 1 434.359

5,303,155

201,269,746

3,424.737

1,089,81 I

69,409

288.065 3,340.747

997,782 128,973 23,305

9,900 187.155 I t3 .398

1,433,250 208,484 114,346 794,488

55,995,920 23,099,751

728.955 58,814,152

I 50,862,628

1,914.756 1,167,475 3,938.360

109,696 1,068,992

(90,365) 1,136.050

90,805 30,689,002

23 7,579,905 1,794,776 9,281,559

19,861596 9,554.345

50,885,877 211,475

65,750,102

434,944,406

585,807,034

Total expended under federal/ state! local for the fiscal year ended June 30,2012

Federal share State share Local share

3,029,820 236,001 347,487

1,258,140

~448

2 I .552,73 I

1,089,81 I

55,528

288,065 798,85 I 648,559 103,178

18,644 7,920

149,724 94,121

1, 146,600 166,787 94,907

266,379 44,796,736 18.479.801

728,955 25.290,085

I I 5 777,382

1,9 14.756 1,210,188 3,150,688

87,757 804,775

(80.000) 1.136.050

72,644 24,551,201

I 90,063,924 1,435,821 7,425,247

15,889.277 7,643,476

50,885,877 211,475 828,469

307.23 I ,625

423,009,007

192,266,41 I

838,637

I 93, I 05 ,048

16,467.963

I 6,467,963

29,918,204

29,918.204

46,386,167

86.872 3,206,377

3,293,249

(18,127,994)

13,882

2,54 I ,896 349,224

25,795 4,66 1 1,980

37.431 19.278

286,650 41 ,697 19.439

528,110 t 1,199,184 4,6 19,950

17,056,104

I 8,6 I 7,287

(42,713) 787,672

21 ,939 264,217

(10.365)

18.161 6, 13 7,800

47,5 15,981 358,955

1,856,3 12 3.972.319 1,910,869

35,003,429

97,794,576

116,411,863

(Continued)


Schedule of Expenditures of Federal and State Awards

Ftscal year ended June 30,2012

Total upended under federal/ state/ Federal grantor/ pass~through grantor/ local for the fiscal1:ear ended June 30, 2012

program or duster title/ pro jed title CFDA number GRANT# Award Total Federal share State share

Public Transportation Research Program: Climate Change Adaptation Project 20.514 CA266005 $ 175,000 12,564 Transit Economic Requirement Model Lite Development 20.514 CA266009 50,000 7,284 7,284 -Metro Uni,·ersity- Workforce Development 20.514 CA267100 480,000 345 771 151,466

CFDA Subtotal 705,000 365,619 158,750

Transit Services CJ uster: Job Access - Reverse Commute

Los Angeles County Program Administration. FY06..09 20.516 CA-37X071 4,428,979 199,881 199,88 1 Los Angeles County Program Project 20.516 CA-37XIOO 10,343,88 1 142,860 112,043 Capital/Operating Assistance 20.51 6 CA-37XI23 11,368 008 5,739 5,739

CFDA Subtotal 26,140,868 348_480 ______212,663

New Freedom Programs FY06 New Freedom 20.521 CA57X003 1,889,530 13.500 13,500 New Freedom- Capital & Operating. Assistance 20.521 CA57X009 289,917 92,059 73,647 New Freedom- Capital & Operating. Assistance 20.521 CA57X048 1,755,553 78,056 39,028 New Freedom - Capital & Operating. Assistance 20.521 CA57XIOO 7,332,574 2,200,017 1,703,394 -

CFDA Subtotal 11,267,574 2,383,632 1,829,569

Transit Services Cluster Subtotal 37,408,442 2,732,112 2,147,232

Alternatives Analysis Programs· Los Angeles 00\\·nton-n Streetcar- Altemati\"es Analysis Program 20.522 CA39-0003 348,000 664.577 348,000 FY2010 Alternative Analysis 20.522 CA39-0006 2,000,000 1,546,029 1,127,953

CFDA Subtotal 2,348,000 2,210,606 1,475,953

ARRA- Wayside Energy Storage System 20.523 CA770002 4,466,000 40,627 40,627

Total U.S. Department of Transportation 4,309,998,443 792,425,744 431,703,017 239,491,215

U.S. Department of Homeland Security: Passed through California Emergency Management Agency:

Transit Security Grant Program 97.075 (fSGP) 2007-RL-T7-0001 4,464,264 468,879 468,879 OES 1D #037-95009 (Bus) 97.075 2006-RL-TG-000 I OHS 1,184,000 (15 ,105) (15,105) Transit Security Grant Program 97.075 2008-RL-T8-KO 18 5,021,209 2,277,517 2,183,734 Transit Security Grant Program 97.075 DHS-09-GPD-075-1961 8,458,478 1,111 ,174 1,081.595 Transit Security Grant Program 97.075 DHS-2010-RA-TO-KOOI 3,584,180 4,343 -

Total U.S. Homeland Security 22,712,131 3,846,808 3.719,103 -Total federal grants 4,332,710,574 796,272,552 435.422,120 239,491,215

State grants: Light Rail Vehicle Acquisition 07A0034-IO 32,571,000 708,740 - 311,362 Crenshaw Transit Corridor 74A0531 226,800 202,759 182,010 Crenshaw/LEX Crenshaw/LAX 2,200,000 19,688,132 - 2,200,000 Prop I B PTMISEA Crenshaw/LAX 57,900,000 6,476,841 6,476,841 ITS Implementation Plan for Gateway Cities EA 07-933748 2,120,000 1,547,698 - 1,238,158 Orange line High Speed Magnetic Levitation trains EA 07-4U4454L 251 ,972 17,276 17.276 Gateway Cities Council of Governments Diesel Emission Reduction Program EA 07-4U4474 2,230.000 1,33 1.521 1.065.217 Prop 1 B Securi ty FY 08-09 6 161-002, FIPS#037-911 70 16,103,000 1,837.679 1,837,679 Prop I B Securi ty FY 09-10 6261-002, FIPS#037-91170 16,103,043 2,947,894 2,947,894 STIP PPM (State Transportation ImproYement Program- Planning, Programming & Monitoring Program) PPM 11-6065(1 60) 7,618,000 3,939,917 3,181,756 STJP PPM (State Transportation Improvement Progran1- Planning, Programming & Monitoring Program) PPM 12-6065(1 69) 7500,000 2,797,703 - 2,411,904 Prop I B CNG Bus Procurement Prop 18 SLPP 07a0034-ll 38,550,000 4,782,0 10 2.391,005 Prop I B PTMISEA PTMISEA 252,827,984 115,063,469 13,065,847 State Resolution 2 Southern Freeway Tem1inus SR2 S.FWY Terminus 1,700,000 2,830 - 559,999 San Fernando Valley North South BRT (Bus Rapid Transit) TCR07 A0034-5 73,680,000 65,639,366 32,005,273

Total state grants 511,581,799 226,983,835 69,892,221

Grand tota1 $ 4,844,292,373 1,023,256,387 435,422,120 309,383,436

See accompanying notes to schedule of expenditures of federal and state awards and independent auditors' report on compliance with requirements that could have a direct and material effect on each ma:ior program and on internal control over compliance in accordance '"ith OMB Circular A-133.

Local share

12,564 -

194 305

~869

30,817

30,817

18.412 39,028

496,624

554,064

~881

316.577 418,077

~654

----~516

93,783 29,579

4,343

127,705

~221

397,378 20,749

17,488, 132

309,540 -

266.304

758,161 385,798

2,391 ,005 101 ,997,622

(557,169) 33,634,093

157,091,613

278,450,834


(1) General



The accompanying schedule of expenditures of federal and state awards (the Schedule) presents the grant activity of all expenditures of federal and state award programs of the Los Angeles County Metropolitan Transportation Authority (LACMTA). All federal awards received directly from federal agencies, as well as federal awards passed through other government agencies, are included in the Schedule. The Schedule also includes state grants that do not participate in the federal awards. LACMT A is the reporting entity as defmed in note 1 to the financial statements ofLACMTA's basic financial statements.

(2) Basis of Presentation

The Schedule includes the federal grant activity of LACMT A and is presented on the accrual basis of accounting. The information in this Schedule is presented in accordance with the requirements of U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.

(3) Subrecipients

Of the federal expenditures presented in the Schedule, LACMT A provided federal awards to subrecipients as follows:

Program title

Highway Planning and Construction Grants Federal Transit Capital Investment Grants Job Access- Reverse Commute Program New Freedom Program

(4) State and Local Funds Reimbursement

CFDA number

20.205 $ 20.500 20.516 20.521

Amount provided to

subrecipients

236,001 2,645,221

117,782 1,816,068

LACMT A utilizes state and local funds when federal funds are not received in a timely manner. Upon receipt of federal funds, LACMT A reimburses state and local funds that were utilized for expenditures for federal programs. Reimbursements are shown as credit balances in the Schedule.

(5) Federal Financial Assistance

Pursuant to the Single Audit Act and the OMB Circular A-133 Compliance Supplement, the federal financial assistance is defined as assistance provided by a federal agency, either directly or indirectly, in the form of grants, contracts, cooperative agreements, loans, loan guarantees, property, interest subsidies, insurance, or direct appropriations. Accordingly, nonmonetary federal assistance is included in federal financial assistance and, therefore, is reported on the Schedule, if applicable. Federal financial assistance does not include direct federal cash assistance to individuals. Solicited contracts between the state and federal government for which the federal government procures tangible goods or services are not considered to be federal financial assistance.

8 (Continued)


(6) Major Programs



The Single Audit Act and OMB Circular A-133 establish criteria to be used in defining major federal financial assistance programs. Major programs for LACMT A are those programs selected for testing by the auditor using a risk assessment model, as well as certain minimum expenditure requirements, as outlined in OMB Circular A-133. Programs with similar requirements may be grouped into a cluster for testing purposes.

(7) Commingled Assistance

The LACMTA receives federal and state funding as a subrecipient through the State of California's Department of Transportation (Caltrans). The expenditures reported in the accompanying Schedule for CFDA 20.205, U.S. Department of Transportation- Highway Planning and Construction (grant #07-4826), represent commingled federal and state funding received from Caltrans. The sources of funding passed through Caltrans include state funding from the Traffic Congestion Relief Program (TCRP) and the State Transportation Program-Local (STPL) and Federal funding from the Federal Regional Surface Transportation Program (RSTP) and the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU). The program also includes Local Proposition C-25% funding provided by LACMT A. Because the sources of funding from Cal trans are not separately identifiable, LACMTA's policy is to report amounts expended under the program first as federal expenditures up to the approved budgeted amount and then the remaining expenditures will be reported as state expenditures.

9




(1) Summary of Auditors' Results

Financial Statements

Type of auditors' report issued on the basic financial statements: Unqualified opinions

Internal control over financial reporting:

• Material weakness( es) identified __ yes ___x__ no

• Significant deficiency(ies) identified that are not considered to be material weakness

Noncompliance material to the financial statements:

yes

yes

___x__ none reported

___x__ no

Federal Awards

Internal control over major programs:

• Material weakness( es) identified yes _X_ no

• Significant deficiency(ies) identified that are not considered to be material weaknesses _X_ yes

Type of auditors' report issued on compliance for major programs: Unqualified opinions

Any audit findings disclosed that are required to be reported under Section 510(a) ofOMB Circular A-133: _X_ yes

Identification of major programs:

U.S. Department of Transportation- Federal Transit Cluster: Federal Transit- Capital Investments Grants - CFDA No. 20.500 Federal Transit- Formula Grants- CFDA No. 20.507

U.S . Department of Transportation- Highway Planning and Construction - CFDA No. 20.205

Dollar threshold used to distinguish between Type A and Type B programs: $3,000,000

Auditee qualified as low-risk auditee? ___x__ yes

none reported

no

no

(2) Findings Relating to the Basic Financial Statements Reported in Accordance with Government Auditing Standards

None noted.

10 (Continued)




(3) Findings and Questioned Costs Relating to Federal Awards

2012-01 -Davis-Bacon Act- Submission of Certified Payrolls

Federal Program Information

Federal Catalog Numbers:

Federal Program Names:

Federal Agency:

Pass-Through Entity:

Federal Award Number and Award Year:

Criteria or Requirement

20.500, 20.507 and 20.205

Federal Transit Cluster-- Federal Transit Formula Grants Federal Transit Cluster-- Federal Transit Capital

Improvement Grants Highway Planning and Construction- I-405 Carpool

Lane

U.S. Department of Transportation

State of California- Department of Transportation for CFDA 20.205

07-4826 (2008), CA90Y050 (2001), CA90Y716 (2007), CA90Y717 (20 1 0), and CA030796 (20 1 0)

TITLE 29 - LABOR, PART 5 - LABOR STANDARDS PROVISIONS APPLICABLE TO CONTRACTS COVERING FEDERALLY FINANCED AND ASSISTED CONSTRUCTION, SECTION 5.5 CONTRACT PROVISIONS AND RELATED MAITERS.

"(ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead, the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH-347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and current address of each covered worker, and shall provide them upon request to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit them to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency), the contractor, or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the sponsoring government agency (or the applicant, sponsor, or owner)."

11 (Continued)

----------·-----




Condition Found and Context

Management is required to obtain, on a weekly basis, certified payrolls and statements of compliance from each contractor for each week in which contracted work is performed under the Davis-Bacon Act. For all major programs cited below, we noted that management did not have adequate controls in place to ensure that certified payrolls and compliance statements are received on a weekly basis as required by the Davis-Bacon Act (29 CFR Sections 5.5 and 5.6).

Federal Transit Cluster

In our sample of 40 certified payrolls and compliance statements, we noted 32 were not received on a weekly basis. We noted that 3 of the exceptions were received on a biweekly basis, 1 of the exceptions were received on a monthly basis, 12 of the exceptions were received on a greater than monthly basis, and 16 of the exceptions did not present evidence of the submission date.

Highway Planning and Construction

In our sample of 40 certified payrolls and compliance statements, we noted 33 were not received on a weekly basis. We noted that 7 of the exceptions were received on a biweekly basis, 5 of the exceptions were received on a monthly basis, 14 of the exceptions were received on a greater than monthly basis, and 7 of the exceptions did not present evidence of the submission date.

Possible Asserted Cause and Effect

Adequate monitoring controls do not appear to be in place to ensure that management complies with the provisions under the Davis-Bacon Act. As a result, compliance statements and certified payrolls may not be obtained and reviewed for compliance with the Davis-Bacon Act, on a weekly basis, as required.

Questioned Costs

None noted.

Recommendation

We recommend that management strengthen their policies and procedures to obtain and review compliance statements and certified payrolls from each contractor and subcontractor on a weekly basis and ensure compliance with the provisions under the Davis-Bacon Act.

Views of Responsible Officials and Planned Corrective Action

The requirement for contractors to submit payroll records on a weekly basis is already included as a component ofLACMTA's Labor Compliance Manual. However, LACMTA's Labor Compliance Unit will issue a notice to all prime contractor's reminding them of the requirement to submit certified payrolls on a weekly basis. LACMTA's Diversity & Economic Opportunity Department is additionally issuing task orders to the existing labor compliance bench consultants to assist in monitoring and enforcing prevailing wage requirements, including monitoring and enforcing the weekly submittal of payroll records.

12 (Continued)




2012-02- Procurement, Suspension, and Debarment


Federal Catalog Numbers: 20.500, 20.507 and 20.205

Federal Program Names: Federal Transit Cluster-- Federal Transit Formula Grants Federal Transit Cluster-- Federal Transit Capital

Federal Agency:




Improvement Grants Highway Planning and Construction- I-405

Carpool Lane


State of California- Department of Transportation for CFDA 20.205

07-4826 (2008), CA96X012-ARRA (2009), CA96X057-ARRA (2009), CA90Y307 (2005), CA030508 (2001), and CA90Y717 (2010)

TITLE 49 - TRANSPORTATION, SUBTITLE A - OFFICE OF THE SECRETARY OF TRANSPORTATION, PART 29 - GOVERNMENT WIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT), SUBPART B- COVERED TRANSACTIONS, Section 29.220.

"(a) Covered transactions under this part:

(1) Do not include any procurement contracts awarded directly by a federal agency; but

(2) Do include some procurement contracts awarded by nonfederal participants in nonprocurement covered transactions.

(b) Specifically, a contract for goods or services is a covered transaction if any of the following applies:

(1) The contract is awarded by a participant in a non procurement transaction that is covered under Section 29.210, and the amount of the contract is expected to equal or exceed $25,000.

(2) The contract requires the consent of a Department of Transportation (DOT) official. In that case, the contract, regardless of the amount, always is a covered transaction, and it does not matter who awarded it. For example, it could be a subcontract awarded by a contractor at a tier below a nonprocurement transaction, as shown in the appendix to this part.

(3) The contract is for federally required audit services.

(c) The contract is awarded by any contractor, subcontractor, supplier, consultant or its agent, or representative in any transaction, regardless of tier, to be funded or provided by the DOT under a nonprocurement transaction that is expected to equal or exceed $25,000."

13 (Continued)





Management is required to document the significant history of procurements, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract type. Management is also required to perform verification for all covered transactions by checking the Excluded Party List System (EPLS) to ensure covered transactions are not awarded to suspended or debarred parties. For all major programs cited below, we noted that management did not have adequate controls in place to ensure compliance with procurement requirements.

Federal Transit Cluster

In our sample of 40 contracts and purchase orders with values over $25,000 that had expenditures incurred during the fiscal year ended June 30, 2012, we noted four contract files did not have certification of nonsuspension and debarment or EPLS verification within the documentation prior to federal funds being expended. Additionally, there were two contract files for which the competitive bid process and contractor selection process were not evidenced.

The federal share of expenditures associated with the six contracts and purchase orders that are not in compliance with the procurement requirements amounted to $2,220,711 of the $423,009,006 of total federal program expenditures for the Federal Transit Cluster.

Highway Planning and Construction

In our sample of 34 expenditures associated with contracts and purchase orders with values over $25,000 that had expenditures incurred during the fiscal year ended June 30, 2012, we noted one contract file did not have certification of nonsuspension and debarment or EPLS verification within its documentation prior to federal funds being expended. Additionally, there were five contract files for which the competitive bid process and contractor selection process were not evidenced.

The federal share of expenditures associated with the six contract and purchase orders that are not in compliance with the procurement requirements amounted to $674,490 of the $4,879,441 of total federal program expenditures for the Highway Planning Grants.


We noted two factors that possibly contributed to LACMTA not complying with the procurement requirements.

a. LACMT A has a procurement policy that specifies the requirement guidance for contract above $25,000; however, the procedures were not followed diligently by the contract administrators.

b. Based on discussion with the contract administrators, LACMT A does not have a central file tracking system that track the physical contract files. LACMT A does have document retention policy by keeping contract files on-site for three years from the execution date and relocate them to an off-site secure vendor. However, as LACMT A was unable to find the contracts we selected, it appears the LACMT A does not appear to have met the procurement requirements.

Noncompliance with procurement requirements could result in disbursement of federal funds to suspended or debarred vendors or contracts awarded to vendors that are not the lowest competitive bidder.

14 (Continued)


Questioned Costs

None noted.

Recommendation



We recommend LACMTA enforce its current policies and procedures that include periodic reviews of its vendor files to ensure the applicable compliance requirements were met and it is not contracting with suspended or debarred vendors in its federally funded contracts. In addition, LACMT A should consider establishing a central file tracking system to prevent loss of documents and maintenance of contract files.


The Procurement Department has recently completed a reorganization which will provide additional management oversight and ensure that files are reviewed periodically. In addition, staff has been reprimanded accordingly with performance evaluations and terminations. Further, a training session was held on September 18, 2012 for employees which addressed the EPLS and the Procurement Checklist to ensure compliance requirements are being met on all contracts. Management will continue to enforce current policies and procedures. LACMT A is currently developing an automated Contract Information Management System (CIMS) with an anticipated roll-out date of 2014. The new system will achieve the following:

• Create a central repository for all contract documents

• Automate the checklist process so each step will be completed for every contract

• Eliminate paper files

• Improve process cycle time

• Improve management oversight

2012-03- Reporting- Semiannual Disadvantaged Business Enterprises Reporting


Federal Catalog Number: 20.507

Federal Program Name:

Federal Agency:

Federal Transit Cluster-- Federal Transit Formula Grants




N/A

CA90Y716 (2007), CA90Y307 (2005), and CA90Y380 (2008)

15 (Continued)





TITLE 49 - TRANSPORTATION, SUBTITLE A - OFFICE OF THE SECRETARY OF TRANSPORTATION, PART 26 - PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES (DBE) IN DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS, SUBPART A- GENERAL, Section 26.11- What records do recipients keep and report?

"(a) [Reserved]

(b) You must continue to provide data about your DBE program to the Department as directed by DOT operating administrations.

(c) You must create and maintain a bidders list.

(1) The purpose of this list is to provide you as accurate data as possible about the universe of DBE and non-DBE contractors and subcontractors who seek to work on your federally assisted contracts for use in helping you set your overall goals.

(2) You must obtain the following information about DBE and non-DBE contractors and subcontractors who seek to work on your federally assisted contracts: (i) Firm name; (ii) Firm address; (iii) Firm's status as a DBE or non-DBE; (iv) Age of the firm; and (v) The annual gross receipts of the firm. You may obtain this information by asking each firm to indicate into what gross receipts bracket they fit (e.g., less than $500,000; $500,000; $1 million; $12 million; $25 million; etc.) rather than requesting an exact figure from the firm.

(3) You may acquire the information for your bidders list in a variety of ways. For example, you can collect the data from all bidders, before or after the bid due date. You can conduct a survey that will result in statistically sound estimate of the universe of DBE and non-DBE contractors and subcontractors who seek to work on your federally assisted contracts. You may combine different data collection approaches (e.g., collect name and address information from all bidders, while conducting a survey with respect to age and gross receipts information)."


LACMTA is required to submit on a semi-annual basis, DBE reports for contracts that were opened or closed during the period.

In our sample of DBE contracts obtained from the semiannual DBE Report for the period October 1, 2011 to March 31, 2012, we noted 3 out of 23 of the contracts selected did not report accurate information as follows:

• The total amount for contract #PS21307700C was reported as $500,000; however, that actually represented an amount not to exceed and was incorrectly presented. The actual expenditure under this contract was $66,729 for the reporting period. After applying the federal share percentage of 90% for this contract, an overstatement of $346,977 was included in the report.

16 (Continued)




• The total amount for contract #OP39602795A was reported as $3,124,995, whereas the actual expenditure was $4,178,596. The error occurred because documentation of obtained late in the reporting period was not properly considered. Further, payments to subcontractors presented in the report for three subcontractors totaling $1,144,256 actually should actually have been $1,652,043 based on the latest support available. After applying the federal share percentage of 89% for this contract, an understatement of$937,705 was included in the report.

• The total amount awarded to subcontractors for contract #OP39602795B was presented as $2,207,836, as compared to the actual amount of $2,148,605 presented on relevant support. The differential of $59,231 is a result of renegotiations that occurred late in the reporting period but prior to the report submission and therefore should have been appropriately reflected in the submitted report. After applying the federal share percentage of 89% for this contract, an overstatement of $52,716 was included in the report.


A sufficiently detailed review over the semiannual DBE Report (inclusive of review of latest available supporting documentation) was not performed, which could have likely uncovered the errors on the report prior to submission to the Federal Transit Agency.

Noncompliance could result in retraction of federal funds by the awarding agency.

Questioned Costs

None noted.

Recommendation

We recommend LACMTA to enhance its reviews over the semiannual DBE Report prior to submission to the Federal Transit Agency.


Agreed. LACMT A will enhance reviews over the semiannual DBE report prior to submission to the FT A.

17


Attachment B

Management Letter for Federal Funding Allocation Data

Transportation Operating Agency (ID# 9154)

Fiscal Year Ended June 30, 2012

(With Independent Accountants' Report on Applying Agreed-Upon Procedures Thereon)



Table of Contents

Management Letter to the Board of Directors

Attachments:

A Independent Accountants' Report on Applying Agreed-Upon Procedures

B Schedule of Ridership, Operating Data, Operating Expenditures, and Farebox Revenues (Unaudited)

C Schedule of Comments and Recommendations

Page

3

9

14

November 30, 2012

The Board of Directors

KPMG LLP Suite 700 20 Pacifica Irvine, CA 92618-3391

Los Angeles County Metropolitan Transportation Authority

Ladies and Gentlemen:

We have performed agreed-upon procedures for the Los Angeles County Metropolitan Transportation Authority (the Authority)- Transportation Operating Agency (ID# 9154) described in Attachment A to this letter for the year ended June 30, 2012, and have issued our independent accountants' report on applying agreed-upon procedures thereon dated November 30, 2012.

The procedures were applied separately to each of the Authority's and purchased transportation contractor's information systems used to develop the reported actual vehicle revenue miles (VRM), passenger miles traveled (PMT), and operating expenses (OE) for each of the following modes:

• Heavy Rail (Directly Operated)

• Light Rail (Directly Operated)

• Motor Bus (Directly Operated)

• Motor Bus (Purchased Transportation)

• Vanpool (Purchased Transportation)

As summarized in Attachment B, the Authority's ridership, operating data, operating expenditures, and farebox revenues were subjected to the procedures performed. These schedules have been included for information purposes only and were not audited by us, and accordingly, we do not express an opinion on it.

In planning and performing our agreed-upon procedures covering the Authority's modes of transportation, which were agreed to and specified by the Federal Transportation Administration (FT A) in the Declarations section of the 2012 Reporting Manual and agreed to by the Authority in accordance with attestation standards established by the American Institute of Certified Public Accountants, we considered the Authority's internal controls in place to ensure the accuracy of the data collection process in conjunction but not for the purpose of expressing an opinion of the effectiveness of the Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG lnternationar), a Swiss entity.

The Board of Directors Los Angeles County Metropolitan Transportation Authority November 30, 2012 Page 2 of2

During our agreed-upon procedures project, we noted certain matters involving internal control and other operating matters that are presented in Attachment C for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of management, are intended to improve internal control or result in other operating efficiencies.

Our agreed-upon procedures were applied to assist the Authority's Board of Directors in evaluating whether the Authority complied with the standards described in the second paragraph of Attachment A and that the information included in the National Transit Database (NTD) Federal Funding Allocation Data related to total vehicle revenue miles, passenger miles, and operating expenses (herein referred to as Federal Funding Allocation Data or FFAD) for the fiscal year ended June 30, 2012 is presented in conformity with the requirements of the Uniform System of Accounts (USOA) and Reports and Reporting System; Final Rule, as specified in 49 CFR Part 630, Federal Register, January 15, 1993, and as presented in the 2012 Reporting Manual. These procedures, therefore, may not bring to light all weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge of the Authority gained during our work to make comments and suggestions that we hope will be useful to you.

The Authority's written response to our comments and recommendations has not been subjected to the procedures applied in the agreed-upon procedures engagement and, accordingly, we express no opinion on it.

*******

This communication is intended solely for the information and use of the Los Angeles County Metropolitan Transportation Authority's Board of Directors, and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,



Independent Accountants' Report on Applying Agreed-Upon Procedures

Los Angeles County Metropolitan Transportation Authority:

Attachment A

The Federal Transportation Administration (FTA) has established the following standards with regard to the data reported for the Federal Funding Allocation Data (FF AD) (Total Operating Expense data on F-30, line 15, column e, Form S-10, lines 12, 15, 18, 20, column d, Total Actual Vehicle Revenue Mile, Total Actual Vehicle Revenue Hour, Total Unlinked Passenger Trip data, and Passenger Mile Traveled data and Fixed Guideway when applicable) in the Los Angeles County Metropolitan Transportation Authority's (the Authority) annual National Transit Database (NTD) report:

• A system is in place and maintained for recording data in accordance with NTD definitions. The correct data are being measured and no systematic errors exist.

• A system is in place to record data on a continuing basis and the data gathering is an ongoing effort.

• Source documents are available to support the reported data and are maintained for FT A review and audit for a minimum of three years following the FTA's receipt ofthe NTD report. The data are fully documented and securely stored.

• A system of internal controls is in place to ensure the accuracy of the data collection process and that the recording system and reported comments are not altered. Documents are reviewed and signed by a supervisor, as required.

• The data collection methods are those suggested by the FT A to meet FT A requirements.

• The deadhead miles, computed as the difference between the reported total actual vehicle miles data and the reported total actual vehicle revenue miles data, appear to be accurate.

• Data are consistent with prior reporting periods and other facts known about transit agency's operations.

We have applied the procedures, as described in Attachment I to this report, to the Total Operating Expense data on F-30, line 15, column e, Form S-10, lines 12,15,18,20, column d, Total Actual Vehicle Revenue Mile, Total Actual vehicle Revenue Hour, Total Unlinked Passenger Trip data, and Passenger Mile Traveled data and Fixed Guideway when applicable for the Authority's Transportation Operating Agency (ID# 9154) for the fiscal year ended June 30, 2012. Such procedures, which were agreed to and specified by the FTA in the Declarations section of the 2012 Reporting Manual and agreed to by the Authority, were applied to assist you in evaluating whether the Authority complied with the standards described in the first paragraph of this report and whether the FF AD for the fiscal year ended June 30, 2012 is presented in conformity with the requirements of the Uniform System of Accounts and Records and

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (·KPMG International"), a Swiss entity.

Attachment A

Reporting System; Final Rule, as specified in 49 CFR Part 630, Federal Register, January 15, 1993, and as presented in the 2012 Reporting Manual.

This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of this report. Consequently, we make no representation regarding the sufficiency of the procedures described above either for the purpose for which this report has been requested or for any other purpose.

The procedures described in Attachment I to this report were applied separately to each of the information systems used to develop the reported actual Vehicle Revenue Miles (VRM), fixed guideway directional route miles (FG DRM), Passenger Miles Traveled (PMT), and operating expenses (OE) of the Authority for the fiscal year ended June 30, 2012 for each of the following modes:

• Motor Buses (Directly Operated)

• Motor Buses (Purchased Transportation)

• Heavy Rail (Directly Operated)

• Light Rail (Directly Operated)

• Vanpool (Purchased Transportation)

In performing the procedures, except for the information and fmdings referenced in Attachment I, no matters came to our attention that caused us to believe that the FF AD for the fiscal year ended June 30, 2012 is not presented in conformity with the requirements of the Uniform System of Accounts and Records and Reporting System; Final Rule, as specified in 49 CFR Part 630, Federal Register, January 15, 1993, and as presented in the 2012 Reporting Manual. We were not engaged to, and did not, perform an audit, the objective of which would be the expression of an opinion on the fairness of the Authority's ID# 9154 FFAD for the fiscal year ended June 30, 2012. Accordingly, we do not express such an opinion. Also, we do not express an opinion on the Authority's system of internal controls taken as a whole. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report relates only to the information described above and does not extend to the Authority's annual financial statements or the forms in the Authority's NTD report, other than the FFAD, for any date or period.

This report is intended solely for the information and use of the Authority' s management and the FTA, and is not intended to be and should not be used by anyone other than these specified parties.

November 30, 2012

4

Attachment I

1. We discussed the procedures related to the system for reporting and maintaining data in accordance with the National Transit Database (NTD) requirements and definitions set forth in 49 CFR Part 630, Federal Register, January 15, 1993, and as prescribed in the 2012 Reporting Manual, with the personnel assigned responsibility of supervising the preparation and maintenance of NTD data (2012 Reporting ManualExhibit 24, Procedure a).

2. We discussed with the personnel assigned responsibility of supervising the preparation and maintenance of NTD data the procedures to determine:

The extent to which the Los Angeles County Metropolitan Transportation Authority (the Authority) followed the procedures on a continuous basis and whether they believe such procedures result in accumulation and reporting of data consistent with the NTD definitions and requirements set forth in 49 CFR Part 630, Federal Register, January 15, 1993, and as prescribed in the 2012 Reporting Manual.

We were informed that, to the best of their knowledge, the procedures were followed on a continuous basis and that such procedures result in the accumulation and reporting of data consistent with the NTD definitions and requirements set forth in 49 CFR Part 630, Federal Register, January 15, 1993 (2012 Reporting Manual- Exhibit 24, Procedure b).

3. We inquired of the same personnel concerning the retention policy that is followed by the Authority with respect to source documents supporting the NTD data, Total Modal Operating Expenses data (F-30, line 15, column e), Actual Vehicle Revenue Miles, and Passenger Miles Traveled (S-10, lines 12 and 20, column d). We were informed that the Authority maintains source documents for a minimum of five years, which is in accordance with 40 CFR Part 630 (2012 Reporting Manual- Exhibit 24, Procedure c).

4. Based on a description of the Authority's procedures obtained in the preceding items 1 and 2, we identified and observed the source documents to be retained by the Authority for a minimum of three years (2012 Reporting Manual - Exhibit 24, Procedure d). For each source document selected for testing, we observed that the source documents existed for fiscal years 2009, 2010, and 2011.

5. We discussed the system of internal controls with the person responsible for supervising and maintaining the NTD data. We inquired as to whether individuals, independent of the individuals preparing the source documents and posting the data summaries, review the source documents and data summaries for completeness, accuracy, and reasonableness, and how often such reviews are performed (2012 Reporting Manual- Exhibit 24, Procedure e).

6. We haphazardly selected a sample of 280 source documents from fiscal year 2012 that support the Federal Funding Allocation Data (FF AD) to determine whether supervisors' signatures are present as required by the system of internal controls. If supervisors' signatures were not required, we inquired how the supervisors' reviews were documented. We noted the source documents that are not physically signed by a supervisor, reviews were evidenced by recalculations, notations, or for those that were generated and reviewed electronically, evidenced through e-mail communications (2012 Reporting Manual- Exhibit 24, Procedure f). No exceptions were noted as a result of performing this procedure.

7. We obtained the worksheets utilized by the Authority to prepare final data that is transcribed onto the Federal Funding Allocation Statistics form. We compared the periodic data included on the work sheets to periodic summaries prepared by the Authority. We tested the arithmetical accuracy of the summarizations (2012 Reporting Manual- Exhibit 24, Procedure g).

• We noted that Directly Operated Light Rail Actual Vehicle Miles (AVM), VRM, Actual Vehicle Hours (AVH), and Vehicle Revenue Hours (VRH) reported were not transcribed correctly from the annual summaries to the NTD form, which resulted in understatement of 548 AVM out of 5,015,913

5 (Continued)

Attachment I

total AVM, 547 VRM out of 4,915,409 total VRM, 36 AVH out of241,742 total AVH, and 36 VRH out of 226,661 total VRH. We discussed the exceptions with Authority personnel, who subsequently corrected the data reported to the NTD.

• We noted that Directly Operated Heavy Rail AVM, VRM, AVH, and VRH reported were not transcribed correctly from the annual summaries to the NTD form, which resulted in understatement of 124 AVM out of 1,496,484 total AVM, 123 VRM out of 1,450,314 total VRM, 5 AVH out of 71,940 total AVH, and 6 VRH out of65,944 total VRH. We discussed the exceptions with Authority personnel, who subsequently corrected the data reported to the NTD.

8. We discussed the Authority's procedures for accumulating and recording PMT data in accordance with NTD requirements with the Authority's staff, noting that for rail reporting, the Authority uses an estimate of passenger miles based on statistical sampling meeting the Federal Transportation Authority's (FTA's) 95% confidence and 10% precision requirements and in accordance with FTA Circular 2710.1A. For Van pool and Motor Bus, the Authority uses a combination of a 100% passenger trip count and an estimate of passenger miles based on statistical sampling, meeting the FTA's 95% confidence and 10% precision requirements, and in accordance with Circular 2710.2A (2012 Reporting Manual - Exhibit 24, Procedure h).

9. We discussed the Authority's eligibility to conduct statistical sampling for PMT data every third year with the Authority's staff. We determined the Authority did not meet one of the three criteria that allows transit agencies to conduct statistical samples for accumulating PMT data every third year rather than annually. Specifically:

• According to the 2000 Census, the Authority serves an urbanized area (UZA) of less than 500,000 population.

• The Authority directly operates fewer than 100 revenue vehicles in all modes in annual maximum revenue service (VOMS) (in any size urbanized area).

• The service is purchased from a seller operating fewer than 100 revenue vehicles in VOMS, and is included in the Authority's NTD report.

As such, we reviewed the NTD documentation for the most recent mandatory sampling year (2012) and observed that statistical sampling was conducted and met the 95% confidence and 10% precision level requirements (2012 Reporting Manual- Exhibit 24, Procedure i).

10. We obtained a description of the sampling procedures utilized for estimation of PMT data used by the Authority. We obtained a copy of the Authority's working papers and observed the methodology used to select the sample of runs for recording passenger mile data. We observed that the methodology used to select specific runs from the universe resulted in a random selection of runs. If a selected sample run was missed, we observed that a replacement sample run was randomly selected. We confirmed that the Authority followed the stated sampling procedure, noting that when a run was missed a similar route time and day of the week was selected to replace the missed trip (2012 Reporting Manual - Exhibit 24, Procedure j).

11. We selected a haphazard sample of 175 source documents for accumulating passenger mile data and observed that they appeared to be complete (i.e., all required data was recorded) and that the PMT computations were accurate. We then traced the source documents selected into the accumulation period selected and recomputed the accumulations within each of the selected periods and tested the arithmetical accuracy of the summarization (2012 Reporting Manual- Exhibit 24, Procedure k).

6 (Continued)

Attachment I

During our testing, we noted an overstatement of 0.8 PMT out of 48,111,970 PMT reported for Purchased Transportation Motor Bus due to transcriptions errors.

12. We discussed the procedures for systematic exclusion of charter, school bus, and other ineligible vehicle miles from the calculation of VRM with the Authority's staff and were informed, based on that interview, that stated procedures were followed (2012 Reporting Manual- Exhibit 24, Procedure l).

13. For actual VRM data, we read the documented collection and recording methodology and observed that deadhead miles were systematically excluded from the computation as enumerated in the following procedures (2012 Reporting Manual- Exhibit 24, Procedure m).

For nonfixed routes, the Authority uses vehicle logs to compute VRM data. For fixed route schedules, the Authority uses pink letters, daily loss service reports, and monthly additional service reports to record temporary changes. We haphazardly selected 280 samples of vehicle logs and disruption reports and recalculated VRM for the selected trip, excluding deadhead mileage. We noted that Purchased Transportation Motor Bus VRM reported was not consistent with the 7 of 120 individual trip sheets sampled, which resulted in the understatement of 3.9 VRM out of 5,593,434 VRM reported on the Service Form S-10.

14. For rail modes, we read the recording and accumulation sheets for actual VRMs and observed that locomotive miles were not included in the computation (2012 Reporting Manual - Exhibit 24, Procedure o ).

15. For fixed guideway directional route miles (FG-DRM) reported, we interviewed the person responsible for maintaining and reporting the NTD data and, based on that interview, were informed that operations met FTA's definition of fixed guideway (FG) (2012 Reporting Manual - Exhibit 24, Procedure p).

16. We discussed the measurement of FG-DRM with the person reporting the NTD data and were informed, based on that interview, that the mileage was computed in accordance with FTA's definitions of FG and DRM. We inquired with the Authority and were informed there were no service changes during the year that resulted in an increase or decrease in DRMs (2012 Reporting Manual- Exhibit 24, Procedure q) .

17. We inquired with the Authority and were informed there were no service interruptions during the year ended June 30, 2012 (2012 Reporting Manual- Exhibit 24, Procedure r).

18. We measured a sample of 36.96 miles ofFG-DRM reported in fiscal year 2012 from maps or by retracing route using Google maps and recalculating to within less than one mile of the miles reported as enumerated below (2012 Reporting Manual - Exhibit 24, Procedures). No exceptions greater than one mile were noted.

Miles Recomputation Route/Line Mode reeorted miles Difference

Metro Red Line (802) Heavy Rail 15.95 16.20 (0.25) Metro Gold Line (804) Light Rail 13.63 13.20 0.43 Expo Line Motor Bus 7.57 7.56 0.01

19. We discussed with the Authority's person reporting the NTD data whether other public transit agencies operate service over the same FG as the Authority's. We were informed the Authority is the approved operator of the FG standard with other transit agencies operating over the same FG, therefore, all DRM are only reported once under the Authority (2012 Reporting Manual- Exhibit 24, Procedure t) .

7 (Continued)

Attachment I

20. We read the S-20 form. We discussed the commencement date of revenue service for each FG segment with the person reporting the NTD data and were informed that the date reported was when revenue service began (2012 Reporting Manual- Exhibit 24, Procedure u).

21. We compared operating expenses on the FF AD with audited financial data after reconciling items were removed. No exceptions were noted (2012 Reporting Manual- Exhibit 24, Procedure v).

22. We inquired of Authority personnel responsible for reporting NTD data regarding the amount of purchased transportation generated fare revenues and were informed that the amount equaled the amount reported on the Contractual Relationship Form (B-30) (2012 Reporting Manual - Exhibit 24, Procedure w). We inquired with the Authority and obtained the total fare revenues of $287,615,490. We compared that total to the combined totals of the fare revenues for the directly operated motor bus reported on the B-30 forms of $264,167,015 and the totals of fare revenues for purchased transportation providers on the B-30 forms of$23,448,475. No exceptions were noted.

23. We inquired of Authority personnel responsible for reporting NTD data regarding purchased transportation services. Authority personnel stated that the Authority's NTD report contains data for the purchased transportation services and the purchased transportation data was subject to the procedures listed in our report and any exceptions noted have been included in this report. We also agreed the purchased transportation expenditures reported on the Contractual Relationship (B-30) Form by the Authority in the fiscal year ended June 30, 2012 to invoices provided by the aforementioned transit agencies for purchased transportation services for services without exception (2012 Reporting Manual- Exhibit 24, Procedure x).

24. We obtained a copy of all purchased transportation contracts to determine whether the contracts ( 1) specify the specific mass transportation services to be provided; (2) specify the monetary consideration obligated to by the Authority contracting for the service; (3) specify the period covered by the contract and that the period is the same as, or a portion of the period covered by the NTD report; and (4) are signed by a representative of both parties to the contracts. No exceptions were noted. We interviewed the person responsible for maintaining the NTD data regarding the retention of the executed contract and reviewed executed contracts and observed that copies of the contracts were retained for three years (2012 Reporting Manual- Exhibit 24, Procedure y).

25. Based on discussions with the Authority personnel, we were informed that the Authority provides services mostly in urbanized areas, and accordingly, it is not necessary for the Authority to perform an allocation between urbanized and nonurbanized areas (2012 Reporting Manual- Exhibit 24, Procedure z).

26. We compared VRM, PMT, and OE data reported on the FFAD to comparable data for the prior report year and calculated the percentage change from the prior year to the current year. We inquired of Authority personnel of changes in VRM, PMT, or OE, as compared to the prior year data, for changes that exceeded +/-10%. We interviewed Authority personnel regarding the specific operations that led to the increases and decreases in the data relative to the prior reporting period and documented the results of our inquiries (2012 Reporting Manual- Exhibit 24, Procedure aa).

8



Schedule of Ridership, Operating Data, Operating Expenditures, and Farebox Revenues (Unaudited)

Heavy rail (directly operated): Operating data:

Total trains in operation Total train miles Total train hours Total train revenue miles Total train revenue hours

Ridership data: Total passenger trips Total passenger miles

Operating expenditures: Total operating costs Total farebox revenues

Year ended June 30, 2012

9

Attachment B

70 1,496,484

71,940 1,450,314

65,944

47,735,749 231 ,683,864

$ 105,619,995 33,664,560

(Continued)




Light rail (directly operated): Operating data:

Total trains in operation Total train miles Total train hours Total train revenue miles Total train revenue hours



Year ended June 30,2012

10

Attachment B

140 5,015,913

241,742 4,915,409

226,661

53,780,784 366,232,501

$ 201,416,041 37,778,389

(Continued)




Motor bus (directly operated): Operating data:

Total vehicles in operation Total vehicle miles Total vehicle hours Total vehicle revenue miles Total vehicle revenue hours




11

Attachment B

1,775 84,958,550

6,986,500 70,796,915

6,350,003

346,437,480 1,471 '150,572

$ 888,193,783 264,167,015

(Continued)




Motor bus (purchased transportation): Operating data:





12

$

Attachment B

125 6,873,260

499,443 5,593,434

454,113

13,565,405 48,111,970

36,295,287 8,404,030

(Continued)




Vanpool (purchased transportation): Operating data:





13

$

Attachment B

1,162 26,283,468

580,785 26,283,468

580,785

3,355,746 152,186,416

21,161,359 15,044,445

Comment #12-01

Transportation Mode



Schedule of Comments and Recommendations


Light Rail (LR)/Heavy Rail (HR) (Directly Operated)

Criteria

Attachment C

CODE OF FEDERAL REGULATIONS- TITLE 49 - TRANSPORTATION CHAPTER VIFEDERAL TRANSIT ADMINISTRATION, DEPARTMENT OF TRANSPORTATION, PART 630- NATIONAL TRANSIT DATABASE, Section 630.8 Questionable data items.

• FTA may enter a zero, or adjust any questionable data item(s), in any reporting entity's NTD submission that is used in computing the Section 5307 apportionment. These adjustments may be made if any data appears to be inaccurate, have not been collected and reported in accordance with FT A reference documents, or if there is not adequate documentation and a reliable record-keeping system.

2011 National Transit Database Reporting Manual, Declarations Module, Exhibit 24- Federal Funding Allocation Data Review - Suggested Procedure G:

• Obtain the worksheets utilized by the transit agency to prepare the Federal Funding Allocation Data that will be included in the NTD's formula apportionment. Compare the periodic data included on the worksheets to the periodic summaries prepared by the transit agency. Test the arithmetical accuracy of the summarizations.

Condition and Context

In accordance with the suggested procedure contained in the 2012 NTD Reporting Manual, we inquired with Los Angeles County Metropolitan Transportation Authority (the Authority) as to how it reports its final data and noted the Authority utilizes annual summary reports. We obtained the monthly summaries and noted the following differences:

• Actual Vehicle Miles (AVM) was understated by 548 for LR, out of 5,015,913 AVM reported and understated by 124 for HR, out of 1,496,484 A VM reported. These understatements were a result of data transfer errors from the annual summary reports to the NTD form, and were subsequently corrected in the NTD system.

• Vehicle Revenue Miles (VRM) was understated by 547 for LR, out of 4,915,409 VRM reported and understated by 123 for HR, out of 1,450,314 VRM reported. These understatements were a result of data transfer errors from the annual summary reports to the NTD form, and were subsequently corrected in the NTD system.

14 (Continued)

------------------------------------~ -~-~~





Attachment C

• Actual Vehicle Hours (AVH) was understated by 36 for LR, out of 241,742 AVH reported and understated by 5 for HR, out of 71 ,940 A VH reported. These understatements were a result of data transfer errors from the annual summary reports to the NTD form, and were subsequently corrected in the NTD system.

• Vehicle Revenue Hours (VRH) was understated by 36 for LR, out of226,661 VRH reported and understated by 6 for HR, out of 65,944 VRH reported. These understatements were a result of data transfer errors from the annual summary reports to the NTD form, and were subsequently corrected in the NTD system.

Cause and Effect

These exceptions noted appear to have been caused by insufficient review by individuals independent of those preparing the NTD final reporting form, which resulted in the inaccurate reporting of A VM, VRM, A VH, and VRH on the NTD form.

Recommendation

We recommend the Authority enhance the controls over the review of the NTD data to ensure errors are indentified prior to the data being reported.

Management's Response

The Authority will consider increasing its existing review procedures to specifically address any transposition and arithmetical errors in the calculation used for FT A reporting.

Comment #12-02

Transportation Mode

Motor Bus (Purchased Transportation).

Criteria

CODE OF FEDERAL REGULATIONS - TITLE 49 - TRANSPORTATION, CHAPTER VIFEDERAL TRANSIT ADMINISTRATION, DEPARTMENT OF TRANSPORTATION, PART 630- NATIONAL TRANSIT DATABASE, Section 630.8 Questionable data items.


15 (Continued)





Attachment C

2012 National Transit Database Reporting Manual, Declarations Module, Exhibit 24 - Federal Funding Allocation Data Review- Suggested Procedure K:

• Select a random sample of the source documents for accumulating passenger miles traveled (PMT) data and determine that they are complete (all required data are recorded) and that the computations are accurate. Select a random sample of the accumulation periods and recompute the accumulations for each of the selected periods. List the accumulation periods that were tested. Test the arithmetical accuracy of the summarization.


In accordance with the suggested procedure contained in the 2012 NTD Reporting Manual, we obtained from the Authority a summary of PMT sampling. We then selected a sample of 25 for each mode/contractor. For each of the selected samples, we obtained the related trip log and ensured all required information is properly reflected in the computation ofPMT.

Motorbus (Purchased Transportation)

V eolia Transportation:

• For 2 out of 25 routes/vehicles tested, we noted that the data did not agree to the survey prepared by the drivers, which resulted in the over reporting of 0.8 PMT, which was less than 1% of the 2,867 sampled PMT. Upon further investigation, we noted the aforementioned overstatement was the result of transposition errors when transferring the PMT from the trip sheets to the consolidated sampling worksheet. This exception was not subsequently corrected by the Authority since the transposition error was deemed by management as immaterial; however, it had no impact on the average trip length and annual PMT reported on the NTD form.

Cause and Effect

The exceptions noted appear to be a result of insufficient review of the input function, which resulted in incorrect computation of PMT on selected runs.

Recommendation

We recommend the Authority consider expanding its current review procedures to specifically address potential transposition errors in the PMT data in the sampling worksheet.

Management's Response

The Authority will consider expanding its current review procedures to specifically address any potential transposition errors in the calculation used for FT A reporting.

16 (Continued)





Attachment C

Comment #12-03

Transportation Mode

Motor Bus (Purchased Transportation)

Criteria

CODE OF FEDERAL REGULATIONS- TITLE 49 - TRANSPORTATION CHAPTER VIFEDERAL TRANSIT ADMINISTRATION, DEPARTMENT OF TRANSPORTATION, PART 630- NATIONAL TRANSIT DATABASE, Section 630.8 Questionable data items.


2012 National Transit Database Reporting Manual, Declarations Module, Exhibit 24- Federal Funding Allocation Data Review- Suggestion Procedure M:

• For VRM data, document the collection and recording methodology and determine that deadhead miles are systematically excluded from the computation. This is accomplished as follows:

If actual VRM are calculated from schedules, document the procedures used to subtract missed trips. Select a random sample of the days that service is operated and recompute the daily total of missed trips and missed VRM. Test the arithmetical accuracy of the summarization.

If actual VRM are calculated from hubodometers, document the procedures used to calculate and subtract deadhead mileage. Select a random sample of the hubodometer readings and determine that the stated procedures for hubodometer deadhead mileage adjustments are applied as prescribed. Test the arithmetical accuracy of the summarization of intermediate accumulations.

If actual VRM are calculated from vehicle logs, select random samples of the vehicle logs and determine that the deadhead mileage has been correctly computed in accordance with FTA's definitions.

17 (Continued)






Attachment C

In accordance with the suggested procedure contained in the 2012 NTD Reporting Manual, we inquired with the Authority regarding how it calculates its VRM. We noted the Authority calculated its VRM by using a fixed schedule that is generated by MT A less any missed trips. We selected a sample of vehicle logs and performed recomputations to test the accuracy of VRM.

Motorbus (Purchased Transportation)

Southland Transit:

• In the 40 routes/vehicles tested that reported 39,403 VRM, we noted an over reporting of 3.2 VRM, which was less than 0.01% of sampled VRM. Upon further investigation, we noted the aforementioned overstatement was the result of an arithmetic error for missed miles and data transfer errors. This exception was not subsequently corrected by the Authority as it was deemed to be immaterial by management.

MV Transit:

• In the 40 routes/vehicles tested that reported 65,973 VRM, we noted an underreporting of 7.1 VRM, which was 0.01% of sampled VRM. Upon further investigation, we noted the aforementioned understatement was the result of an arithmetic error for missed miles. This exception was not subsequently corrected by the Authority as it was deemed to be immaterial by management.

Cause and Effect

The exceptions noted appear to be a result of insufficient review of trip sheet calculations that resulted in the inaccurate calculation of VRM.

Recommendation

We recommend the Authority consider expanding its current review procedures to specifically address potential arithmetical errors in the calculation of VRM used for FT A reporting.

Managemen 's Response

The Authority will consider expanding its current review procedures to specifically address any potential arithmetical errors in the calculation used for FT A reporting.

18


Federal Funding Allocation Data

LA County Small Operators (ID# 9166)


(With Independent Accountants' Report on Applying Agreed-Upon Procedures Thereon)

Attachment C



Independent Accountants' Report on Applying Agreed-Upon Procedures


The Federal Transportation Administration (FTA) has established the following standards with regard to the data reported for the Federal Funding Allocation Data (Total Operating Expense data on F-30, line 11, column e, Form S-10, lines 12, 15, 18, 20, column d, Total Actual Vehicle Revenue Mile, Total Actual Vehicle Revenue Hour, Total Unlinked Passenger Trip data, and Passenger Mile Traveled data and Fixed Guideway when applicable) in the Los Angeles County Metropolitan Transportation Authority's (Authority) annual National Transit Database (NTD) report:

• A system is in place and maintained for recording data in accordance with NTD definitions. The correct data are being measured and no systematic errors exist.

• A system is in place to record data on a continuing basis and the data gathering is an ongoing effort.

• Source documents are available to support the reported data and are maintained for FT A review and audit for a minimum of three years following the FTA's receipt of the NTD report. The data are fully documented and securely stored.

• A system of internal controls is in place to ensure the data collection process is accurate and that the recording system and reported comments are not altered. Documents are reviewed and signed by a supervisor, as required.

• The data collection methods are those suggested by the FT A or meet FT A requirements.

• The deadhead miles, computed as the difference between the reported total actual vehicle miles data and the reported total actual vehicle revenue miles (VRM) data, appear to be accurate.

• Data are consistent with prior reporting periods and other facts known about the transit agency's operations.

We have applied the procedures, as described in Attachment I to this report, to the Total Operating Expense data on F-30, line 11, column e, Form S-10, lines 12, 15, 18, 20, column d, Total Actual Vehicle Revenue Mile, Total Actual Vehicle Revenue Hour, Total Unlinked Passenger Trip data, and Passenger Mile Traveled data and Fixed Guideway when applicable for the Los Angeles County Metropolitan Transportation Authority - LA County Small Operators (ID# 9166) for the fiscal year ended June 30, 2012. Such procedures, which were agreed to and specified by the FT A in the Declarations section of the 2012 Reporting Manual and agreed to by the Authority, were applied to assist in evaluating whether the Authority complied with the standards described in the first paragraph of this report and that the information included in the NTD Report FFA-10 form for the fiscal year ended June 30, 2012 is presented in conformity with the requirements of the Uniform System of Accounts (USOA) and Records and Reporting System; Final Rule, as specified in 49 CFR Part 630, Federal Register, January 15, 1993 and as presented in the 2012 Reporting Manual.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG lnternationar), a Swiss entity.

This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of this report. Consequently, we make no representation regarding the sufficiency of the procedures described above either for the purpose for which this report has been requested or for any other purpose.

The procedures described in Attachment I to this report were applied separately to each of the information systems used to develop the reported actual VRM, passenger miles traveled (PMT), and operating expenses (OE) of the Authority for the fiscal year ended June 30, 2012 - for each of the following modes and jurisdictions (collectively referred to as the Authority):

• Modes:

Motor Bus (purchased transportation) (MB)

Demand Response (purchased transportation) (DR)

Demand Response Taxi (purchased transportation) (DT)

• Jurisdictions:

Agoura Hills

Alhambra

Artesia

Avalon

Azusa

Baldwin Park

Bell Gardens

Bellflower

Beverly Hills

Burbank

Calabasas

Carson

Cerritos

Compton

Covina

Cudahy

Downey

Duarte

El Monte

Glendale

Glendora

Huntington Park

2

Inglewood

Los Angeles County Department of Public Works (LACDPW)- Avocado Heights

LACDPW- East Los Angeles (LA)

LACDPW - East Valinda

LACDPW- King Medical Center

LACDPW- South Whittier

LACDPW- Whittier

LACDPW- Willowbrook

LACDPW- Willowbrook Shuttle

Lawndale

Lynwood

Malibu

Manhattan Beach

Maywood

Monrovia

Monterey Park

Palos Verdes Peninsula Transit Authority

Pasadena

Pico Rivera

Pomona Valley Transportation Authority

Rosemead

Santa Fe Springs

South Gate

South Pasadena

West Covina

West Hollywood

Whittier

In performing the procedures, except for the information and findings identified in Attachment I to this report, no matters came to our attention that caused us to believe that the Federal Funding Allocation Data for the fiscal year ended June 30, 2012 is not presented in conformity with the requirements of the Uniform System of Accounts and Records and Reporting System; Final Rule, as specified in 49 CFR Part 630, Federal Register, January 15, 1993 and as presented in the 2012 Reporting Manual. We were not engaged to, and did not, perform an audit, the objective of which would be the expression of an opinion on the fairness of the Authority's ID# 9166 Federal Funding Allocation Data for the fiscal year ended June 30, 2012. Accordingly, we do not express such an opinion. Also, we do not express an opinion on the Authority's system of internal controls taken as a whole. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report relates only to

3

the items tested in Attachment I and does not extend to the Authority's annual financial statements or the forms in the Authority's NTD report other than the FF AD for any date or period.

This report is intended solely for the information and use of the Authority's management and the FTA, and is not intended to be and should not be used by anyone other than these specified parties.

October 15, 2012

4



Attachment I

1. We discussed procedures related to the system for reporting and maintaining data in accordance with the National Transit Database (NTD) requirements and definitions set forth in 49 CFR Part 630, Federal Register, January 15, 1993 and as prescribed in the 2012 Reporting Manual, with the personnel assigned responsibility of supervising the NTD data preparation and maintenance at each jurisdiction (2012 Reporting Manual- Exhibit 24, Procedure a).

2. We discussed with the personnel assigned responsibility of supervising the preparation and maintenance of NTD data the procedures to determine:

• The extent to which each of the Los Angeles County Metropolitan Transportation Authority's service providers/jurisdictions (collectively referred to as the Authority) listed on pages 2 through 5 of the accompanying independent accountants' report on applying agreed-upon procedures followed the procedures on a continuous basis; and

• Whether they believe such procedures result in accumulation and reporting of data consistent with the NTD definitions and requirements set forth in 49 CFR Part 630, Federal Register, January 15, 1993, and as prescribed in the 2012 Reporting Manual.

We were informed that, to the best of each of their knowledge, the procedures were followed on a continuous basis and that such procedures result in the accumulation and reporting of data consistent with the NTD definitions and requirements set forth in 49 CFR Part 630, Federal Register, January 15, 1993 (2012 Reporting Manual- Exhibit 24, Procedure b).

3. We inquired from the same personnel concerning the retention policy that is followed by the Authority's service providers/jurisdictions with respect to source documents supporting the NTD data, Total Modal Operating Expenses data (F-30, line 11, column e), Actual Vehicle Revenue Mile, and Passenger Miles Traveled (S-10, lines 12 and 20, column d) (2012 Reporting Manual- Exhibit 24, Procedure c).

4. Based on a description of the Authority's service providers/jurisdictions' procedures obtained in items 1 and 2 above, we identified and observed the source documents to be retained by the service providers for a minimum of three years (201 2 Reporting Manual - Exhibit 24, Procedure d). For each type of source document, we observed that the source document exists for 2011, 2010, and 2009, with the exception of the following:

• Alhambra Demand Response and Motor Bus - During our testing, we noted the city was unable to provide annual summaries for fiscal year 2009.

• Avalon Demand Response Taxi and Motor Bus- During our testing, we noted the city was unable to provide monthly invoices for fiscal year 2009.

• Burbank Motor Bus - During our testing, we noted the city was unable to provide trip sheets for fiscal years 2009, 2010, or 2011.

• Inglewood Demand Response Taxi - During our testing, the city was unable to provide the trip sheet for May 13,2011.

5 (Continued)



Attachment I

• LACDPW- Avocado Heights- During our testing, the County was unable to provide the trip sheet for May 13,2011.

• LACDPW- East Valinda Shuttle- During our testing, the County was unable to provide the trip sheet for May 13, 2011.

• Monterey Park Motor Bus - During our testing, the city was unable to provide the trip sheets for October 2011.

5. We discussed the system of internal controls with the person responsible for supervising and maintaining the NTD data. We inquired as to whether individuals, independent of the individuals preparing the source documents and posting the data summaries, review the source documents and data summaries for completeness, accuracy, and reasonableness and how often such reviews are performed (2012 Reporting Manual- Exhibit 24, Procedure e).

6. We haphazardly selected a sample of 142 source documents that support the Federal Funding Allocation Data to determine whether supervisors' signatures are present as required by the system of internal controls. If supervisors' signatures are not required, we inquired how the supervisors' reviews are documented (2012 Reporting Manual- Exhibit 24, Procedure f).

We noted that 7 of the source documents sampled were not physically signed by a supervisor as those documents were either generated electronically, or a signature was not required at the following jurisdictions: Avalon Demand Response and Motor Bus; Baldwin Park Motor Bus; LACDPW - East Valinda Shuttle; and West Covina Motor Bus.

7. We obtained the work sheets utilized by the Authority to prepare the final data that is transcribed onto the Federal Funding Allocation Statistics form. We compared the periodic data included on the work sheets to the periodic summaries prepared by the Authority. We tested the arithmetical accuracy of the summarizations (2012 Reporting Manual- Exhibit 24, Procedure g).

During our testing, we noted the data transcribed was not consistent with the monthly details of VRM, AVM, AVH, vehicle revenue hours (VRH), and passenger miles traveled (PMT). We noted data errors for the following jurisdictions, which were subsequently corrected by the respective jurisdiction: Calabasas Demand Response and Motor Bus; Covina Demand Response; Cudahy Motor Bus; LACDPW- Avocado Heights Motor Bus; LACDPW - East Los Angeles Motor Bus; Maywood Demand Response; Monrovia Demand Response; and Pasadena Motor Bus.

8. We discussed the Authority's procedures for accumulating and recording PMT data in accordance with NTD requirements with the Authority's staff. We noted that for Motor Bus reporting, the Authority uses an estimate of PMT based on statistical sampling meeting the FTA's 95% confidence and 10% precision requirements and in accordance with FTA Circular 2710.1A. For Demand Response, we noted that the Authority uses a combination of a 100% count and an estimate of passenger miles based on statistical sampling, meeting the FTA's 95% confidence and 10% precision requirements, and in accordance with FTA Circular 2710.2A (2012 Reporting Manual- Exhibit 24, Procedure h).

6 (Continued)



Attachment I

9. Due to the size of the Authority, it does not qualify to conduct statistical sampling for passenger mile data every third year. As such, the Authority conducts sampling annually. We reviewed NTD documentation for the most recent sampling year (fiscal year 2012) and determined that it meets the requirements stated in FTA Circulars 2710.1A and 2710.2A for Motor Bus and Demand Response, respectively (2012 Reporting FTA Manual- Exhibit 24, Procedure i).

10. We obtained a description of the sampling procedures utilized for estimation of passenger mile data used by the Authority. We obtained a copy of the Authority's working papers and observed the methodology used to select the sample of runs for recording passenger mile data. We observed that the methodology used to select specific runs from the universe resulted in a random selection of runs. If a selected sample run was missed, we observed that a replacement sample run was randomly selected. We confirmed that the Authority followed the stated sampling procedure, noting that when a run was missed, a similar route, time, and day of the week are selected to replace the missed trip (2012 Reporting Manual - Exhibit 24, Procedure j).

11. We haphazardly selected a sample of 142 source documents used for accumulating passenger miles data and determined that they appeared complete (i.e., all required data was recorded) and that the PMT computations were mathematically accurate. We then traced the source documents selected into the accumulation period selected and recomputed the accumulations within each of the selected periods and tested the arithmetical accuracy of the summarization (2012 Reporting Manual- Exhibit 24, Procedure k).

During our testing, we noted an understatement of 1.2 PMT in our sample selected for Azusa Demand Response due to a calculation error. The error was not subsequently corrected.

During our testing, we noted an understatement of 12.23 PMT in our two samples selected for Calabasas Motor Bus due to transcription errors from the trip sheets to the daily summaries. The errors were not subsequently corrected.

During our testing, we noted a calculation error of 2.7 PMT on a sample trip sheet selected for Downey Motor Bus, however, the correct PMT was reported on the monthly summary. As such, there is no effect on the annual reported amount.

During our testing, we noted the City of Glendora Motor Bus does not keep original trip sheets, therefore, we were unable to verify the number of passengers on and off for our samples selected. The City of Glendora stated they will correct this going forward by retaining original trip sheets.

During our testing, we noted an overstatement of0.5 PMT for Huntington Park Demand Response due to a calculation error. The error was not subsequently corrected.

During our testing, we noted a difference between the hoardings per the schedule submitted to NTD and the daily trip sheet due to a manual input error, resulting in the number of passengers being underreported by 3 for LACDPW - East Los Angeles Motor Bus. The error was not subsequently corrected.

During our testing, we noted an understatement of 3 PMT for Maywood Demand Response due to a calculation error. The error was not subsequently corrected.

7 (Continued)



Attachment I

During our testing, we noted an overstatement of 1 PMT for West Covina Demand Response and an understatement of 1.2 PMT for West Covina Motor Bus, due to calculation errors. These errors were not subsequently corrected.

During our testing, we noted that Baldwin Park Motor Bus; Bellflower Demand Response; Compton Motor Bus; Glendora Demand Response; LACDPW - East Valinda Shuttle Motor Bus; LACDPW -Willowbrook Demand Response; LACDPW - Willowbrook Shuttle Motor Bus; Lynwood Motor Bus; Monrovia Demand Response; Palos Verdes Peninsula Motor Bus; Rosemead Demand Response; Santa Fe Springs Demand Response; South Pasadena Demand Response; and West Hollywood Demand Response and Motor Bus incorrectly calculated their PMT. The jurisdictions subsequently corrected the reporting errors.

12. We discussed the procedures for systematic exclusion of charter, school bus, and other ineligible vehicle miles from the calculation of VRM with the Authority's staff and noted, based on our discussion, that management represented the stated procedures are followed (2012 Reporting Manual - Exhibit 24, Procedure l).

13. For actual VRM data, we read the documented collection and recording methodology to determine whether deadhead miles are systematically excluded from the computation. The Authority uses vehicle logs to compute VRM data, and as such, we haphazardly selected a sample of 142 vehicle logs and recalculated VRM for the selected trip, excluding deadhead mileage (2012 Reporting Manual - Exhibit 24, Procedure m).

During our testing, we noted Carson Circuit Motor Bus; Glendora Demand Response; Inglewood Motor Bus; Malibu Demand Response Taxi; Monrovia Demand Response; Santa Fe Springs Demand Response; and West Hollywood Demand Response, calculated the VRM incorrectly. The jurisdictions subsequently corrected the errors.

During our testing, we noted Calabasas Demand Response and Motor Bus had a net overstatement of 14.1 VRM due to inaccurate calculations and formula errors. The errors were not subsequently corrected.

During our testing, we noted West Covina Demand Response had an overstatement of 2 VRM due to the inclusion of lunch miles for one of our samples selected. This error was not subsequently corrected due to immateriality.

14. We did not compare Operating Expenses (OE) with audited financial data for the individual jurisdictions as they did not have audited financial data available (2012 Reporting Manual- Exhibit 24, Procedure v).

15. We inquired with contract service providers' personnel responsible for reporting NTD data regarding the amount of purchased transportation (PT) generated fare revenues and agreed the total fare revenues for each jurisdiction to the amount reported on the Contractual Relationship Form (B-30) (2012 Reporting Manual- Exhibit 24, Procedure w).

During our testing, we noted net fare revenue was overstated by $10 for Carson Demand Response Taxi due to the exclusion of a refund payment received. As the city deemed this to be immaterial, this was not subsequently corrected.

8 (Continued)



Attachment I

During our testing, we noted net fare revenue was understated by $178 for El Monte Motor Bus, due to the exclusion of adjustments made subsequent to the annual financial statement audit. This was subsequently corrected.

16. We inquired of Authority personnel responsible for reporting NTD data regarding Purchased Transportation (PT) services. Authority personnel stated that the Authority's NTD report contains data for the PT services and that independent auditor statements for PT data were not obtained for PT. We agreed the expenditures reported by the Authority during the fiscal year ended June 30, 2012 to invoices provided by the aforementioned transit agencies for purchased transportation services for services and agreed the PT fare revenues to the amount reported on the Contractual Relationship form (B-30) (2012 Reporting Manual -Exhibit 24, Procedure x).

During our testing, we noted that net PT expense was understated by $4 for Bell Gardens Motor Bus due to a data input error. As the city deemed this to be immaterial, this was not subsequently corrected.

During our testing, we noted that net PT expense was overstated by $320 for West Covina Demand Response and overstated by $223 for West Covina Motor Bus due to mathematical errors on the invoices. These errors were not corrected as the invoices had already been processed. Additionally, we noted that net PT expense was overstated by $9,400 for West Covina Demand Response and $45,400 for West Covina Motor Bus due to the inclusion of fare box revenue. This error was subsequently corrected.

During our testing, we noted that the total PT expenses for fiscal year 2012 were initially both overstated and understated due to clerical and transcription errors, but were subsequently corrected, for the following jurisdictions: Bell Gardens Demand Response; Burbank Motor Bus; Calabasas Demand Response and Motor Bus; Carson Circuit Motor Bus; Compton Motor Bus; Cudahy Demand Response Taxi and Motor Bus; El Monte Motor Bus; Glendale Demand Response and Motor Bus; Glendora Demand Response and Motor Bus, Huntington Park Motor Bus; Inglewood Demand Response Taxi; Lynwood Motor Bus; Maywood Demand Response; Monterey Park Motor Bus; Palos Verdes Peninsula Transit Authority Motor Bus; Pasadena Motor Bus and Demand Response; South Gate Demand Response Taxi; and West Hollywood Demand Response, Demand Response Taxi, and Motor Bus.

17. We obtained copies of all of the PT contracts to determine whether the contracts 1) specify the specific mass transportation services to be provided; 2) specify the monetary consideration obligated to by the Authority contracting for the service; 3) specify the period covered by the contract and that the period is the same as, or a portion of, the period covered by the NTD report; and 4) are signed by a representative of both parties to the contracts. We interviewed the person responsible for maintaining the NTD data regarding the retention of the executed contract and reviewed executed contracts to determine whether copies of the contracts are retained for three years (2012 Reporting Manual - Exhibit 24, Procedure y).

During our testing, we noted that there were no executed contracts between the contractors and West Covina Demand Response and Motor Bus for the fiscal year ended June 30, 2012.

18. Based on discussions with Authority personnel, we were informed that the Authority provides services in urbanized areas only, and accordingly, it is not necessary for the Authority to perform an allocation between urbanized and nonurbanized areas (2012 Reporting Manual- Exhibit 24, Procedure z).

9 (Continued)



Attachment I

19. We compared the data reported on Total Modal Operating Expenses data (F-30, line 11, column e), Actual Vehicle Revenue Mile, and Passenger Miles Traveled (S-10, lines 12 and 20, column d) to comparable data for the prior report year and calculate the percentage change from the prior year to the current year. We inquired of Authority personnel of changes in VRM, PMT, or OE data, as compared to the prior year data, for changes that increased or decreased by more than 10%, or FG DRM data that have increased or decreased. We interviewed Authority personnel regarding the specifics of operations that led to the increases or decreases in the data relative to the prior reporting period and documented the results of our inquiries (2012 Reporting Manual- Exhibit 24, Procedure aa).

During our testing, we noted that Pasadena Demand Response incorrectly reported PMT and UPT on their NTD form due to a data input error when completing the form. This was subsequently corrected.

20. The following 2012 Reporting Manual, Exhibit 24 procedures were not applicable to the Authority's service providers/jurisdictions and, therefore, were not performed:

• Procedures "n", "o", "p", "q", "r", "s", "t", and "u".

10

Attachment D


TRANSPORTATION DEVELOPMENT ACT OPERATIONS AGENCY

50% Expenditure Limitation Schedule




Table of Contents

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Section 6667) and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards


Page

3

KPMG LLP KPMG Tower Suite 2000 355 S. Grand Avenue Los Angeles, CA 90071-1568

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Section 6667) and Other Matters Based on an Audit of

Financial Statements Performed in Accordance with Government Auditing Standards


We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Los Angeles County Metropolitan Transportation Authority (LACMTA) as of and for the year ended June 30, 2012, which collectively comprise LACMTA's basic financial statements and have issued our report thereon dated January 8, 2013. 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.


Management of LACMT A is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered LACMTA's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of LACMTA's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofLACMTA's internal control over financial reporting.

A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis.

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 deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.


As part of obtaining reasonable assurance about whether LACMTA's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including applicable provisions of the Transportation Development Act, including Public Utility Code Section 99245 as enacted and amended by statute through June 30, 2012, and the allocation instructions and resolutions of the Los Angeles County Metropolitan Transportation Planning Agency as required by Section 6667 of the California Government Code, noncompliance with

KPMG LLP, is Delaware limited liabil ity partnership, the U.S. member firm of KPMG International Cooperative (~KPMG International~). a Swiss entity.

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.


We have audited the financial statements of LACMTA as of and for the year ended June 30, 2012, and have issued our report thereon dated January 8, 2013 , which contained unqualified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise LACMTA's basic financial statements. We have not performed any procedures with respect to the audited financial statements subsequent to January 8, 2013. The accompanying 50% expenditure limitation schedule is presented for purposes of additional analysis and is 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 financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the 50% expenditure limitation schedule is fairly stated in all material respects in relation to the basic financial statements as a whole.

This report is intended solely for the information and use of management, the Board of Directors, and the State Controller's Office, and is not intended to be and should not be used by anyone other than these specified parties.

January 8, 2013

2

1) Total operating cost





(Amounts expressed in thousands)

2) Total capital requirements 3) Total debt service

4) Total oflines 1, 2, and 3

5) Less federal grant received 6) Less State Transit Assistance (STA) funds received

7)

8)

Total of lines 5 and 6

Total ofline 4 less line 7

9) 50% of line 8

Total permissible Local Transportation Fund expenditures

$ 1,244,537 766,067 426,146

2,436,750

431,726 129,765

561,491

$ 1,875,259

937,630

$ 937,630

See accompanying independent auditors' report on internal control over financial reporting and on compliance with the California Code of Regulations (Section 6667) and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards .

3

-------------------~----- ------

Attachment E


TRANSPORTATION DEVELOPMENT ACT AND

PROP lB PTMISEA PLANNING AGENCY

Schedule of Revenues, Expenditures and Changes in Fund Balances





Table of Contents

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Sections 6640 - 6662) and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards


Notes to Schedule of Revenue, Expenditures and Changes in Fund Balances

Page

1

3

4

KPMG LLP KPMG Tower Suite 2000 355 S. Grand Avenue Los Angeles, CA 90071-1568

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance with the California Code of Regulations (Sections 6640 - 6662) and Other

Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards

The Board of Directors Los Angeles County Metropolitan Transportation Authority

Los Angeles, California:

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Los Angeles County Metropolitan Transportation Authority (LACMTA) as of and for the year ended June 30, 2012, which collectively comprise LACMTA's basic financial statements and have issued our report thereon dated January 8, 2013. These financial statements include LACMTA's Transportation Development Act Special Revenue Fund (TDA Fund) and the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA Fund), which were audited as major governmental funds. 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.


Management of LACMT A is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered LACMTA's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of LACMTA's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofLACMTA's internal control over financial reporting.

A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis.


KPMG LLP. is Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (·KPMG International"), a Swiss entity.


As part of obtaining reasonable assurance about whether LACMT A's TDA Fund and PTMISEA Fund financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including applicable provisions of the California Code of Regulations (Section 6640 - 6662), 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.

Schedule of Revenues, Expenditures, and Changes in Fund Balances

We have audited the financial statements of LACMTA as of and for the year ended June 30, 2012, and have issued our report thereon dated January 8, 2013, which contained unqualified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise LACMTA's basic financial statements. We have not performed any procedures with respect to the audited financial statements subsequent to January 8, 2013. The accompanying schedule of revenues, expenditures, and changes in fund balances is presented for purposes of additional analysis and is 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 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 revenues, expenditures, and changes in fund balances is fairly stated in all material respects in relation to the basic financial statements as a whole.

This report is intended solely for the information and use of management, the Board of Directors, and the State Controller's Office, and is not intended to be and should not be used by anyone other than these specified parties.

January 8, 2013

2






Trans~ortation DeveloEment Act Planning Administration Total

Revenues: Local grants and contracts $ 4,219,125 4,280,875 8,500,000 Intergovernmental Investment income Net decline in fair value of investment

Total revenues 4,219,125 4,280,875 8,500,000

Expenditures 4,219,125 4,280,875 8,500,000

Total expenditures 4,219,125 4,280,875 8,500,000

Excess of revenues over expenditures

Other financing uses: Transfer out

Total other financing uses

Net change in fund balances

Fund balances - beginning of year

Fund balances - end of year $

PTMISEA

145,410,414 10,143 {2,291)

145,418,266

145,418,266

{103,861,7562

(103,861,756)

41,556,510

(9,3 75,0 16)

32,181,494

See accompanying notes to schedule of revenues, expenditures and changes in fund balances and independent auditors' report on internal control over financial reporting and on compliance with the California Code of Regulations (Sections 6640- 6662) and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards.

3




Notes to Schedule of Revenues, Expenditures, and Changes in Fund Balances


(1) Transportation Planning Agency

The Los Angeles County Metropolitan Transportation Authority (LACMT A) is the regional transportation planning agency responsible for long-range transportation planning and designated under the provisions of Section 65080 of the California Government Code (the Code) to prepare and adopt the Regional Transportation Plan and the Regional Transportation Improvement Program directed at the achievement of a coordinated and balanced regional transportation system for the counties in its jurisdiction. LACMT A is also the administrator of the Local Transportation Fund (LTF) under provisions of Section 9532 of the Code.

The LTF was created by the Transportation Development Act (TDA) to fund transit projects in each county within California. Revenues for the L TF are derived from retail sales taxes collected statewide by the State Board of Equalization and returned to individual counties according to the amount collected within that county. Los Angeles County receipts are deposited in the Los Angeles County Treasurer's Office. LACMT A, as administrator of the LTF, is authorized to distribute funds from the Treasurer's Office to claimants for transit projects that are in accordance with the Code.

Basis of Accounting

The TDA Fund uses the modified accrual basis of accounting as required by generally accepted accounting principles. Under this basis of accounting, revenues are recognized when they become measurable and available, and expenditures are recognized when the related fund liability is incurred.

(2) Prop lB PTMISEA

The Public Transportation Modernization, Improvement, and Service Enhancement Account (PTMISEA) was created by the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006. A total of $3.6 billion was allocated to PTMISEA to be available to transit operators over a 10-year period. PTMISEA funds may be used for transit rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements, or rolling stock (buses and rail cars) procurement, rehabilitation or replacement. Funds in this account are appropriated annually by the Legislature to the State of Controllers Office (SCO) for allocation in accordance with Public Utilities Code formula distributions: 50% allocated to Local Operators based on fare-box revenue and 50% to Regional Entities based on population.

Basis of Accounting

The PTMISEA Fund uses the modified accrual basis of accounting as required by generally accepted accounting principles. Under this basis of accounting, revenues are recognized when they become measurable and available, and expenditures are recognized when the related fund liability is incurred.

4

Attachment F


STATE TRANSIT ASSISTANCE SPECIAL REVENUE FUND

Financial Statements

June 30, 2012 and 2011

(With Independent Auditors' Report Thereon)



Table of Contents

Independent Auditors' Report

Financial Statements:

Balance Sheets

Statements of Revenues, Expenditures, and Changes in Fund Balances

Notes to Financial Statements

Supplemental Information

Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual

Supplemental Schedule of Allocations

Supplemental Schedule of Expenditures

Independent Auditors' Report on Compliance

Schedule of Findings and Responses

Page

3

4

5

8

9

10

11

12





We have audited the accompanying financial statements of the State Transit Assistance Fund (the Fund), a special revenue fund of the Los Angeles County Metropolitan Transportation Authority (LACMT A), as of and for the years ended June 30, 2012 and 2011, as listed in the table of contents. These financial statements are the responsibility of LACMTA's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in note 1, the financial statements present only the Fund and do not purport to, and do not, present fairly the financial position ofLACMTA as of June 30, 2012 and 2011, or the changes in financial position, or, where applicable, the cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Fund as of June 30, 2012 and 2011, and the respective changes in financial position, for the year then ended in conformity with U.S. generally accepted accounting principles.

Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, 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. Our opinion on the basic financial statements is not affected by this missing information.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International"), a Swiss entity.

Our audit was conducted for the purpose of forming an opinion on the Fund's financial statements. The accompanying budgetary comparison information on page 8 is presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The budgetary comparison 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 budgetary comparison information is fairly stated in all material respects in relation to the financial statements as a whole. The other supplementary information on pages 9 and 10 is presented for the purposes of additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

December 31, 2012

2



Balance Sheets

June 30, 2012 and 2011


Cash and cash equivalents Interest receivable Due from other funds Sales tax

Total assets

Due to other funds

Total liabilities

Fund balances: Restricted

Assets

Liabilities

Total Fund balances

Total liabilities and fund balances

See accompanying notes to financial statements.

3

$

2012

19,636 9

29,404

$ ===4=9=,0=49=

$ ___ 2_2-"-, 1_0_3 -

22,103

26,946

26,946

$ ===4=9=,0=49=

2011

5,373 10

44,331

49,714

49,714

49,714

49,714



Statement of Revenues, Expenditures, and Changes in Fund Balances

Years ended June 30, 2012 and 2011


Revenues: Sales tax Investment income

Total revenues

Expenditures: Transportation subsidies

Excess (deficit) of revenues over expenditures

Other financing sources (uses): Transfer in Transfer out

Total net other financing uses


Fund balances- beginning of the year

Fund balances - end of year

See accompanying notes to financial statements.

4

$

2012

117,062 118

117,180

10,437

106,743

254 (129,765)

(129,511)

(22,768)

49,714

$ ===2=6=,9=4=6 =

2011

825

825

19,038

(18,213)

(100,012)

(100,012)

(118,225)

167,939

49,714




June 30, 2012 and 2011

(1) Summary of Significant Accounting Policies

(a) General Description

The Los Angeles County Metropolitan Transportation Authority's State Transit Assistance Special Revenue Fund (the STA Fund) was created in accordance with the provisions of the Transportation Development Act (the Act) as administered by the Department of Transportation of the State of California (the State). Sales tax revenues of the STA Fund represent an allocation of retail sales tax on gasoline and diesel fuel collected by the State Board of Equalization in the State of California. Expenditures from the ST A Fund are made by Los Angeles County (the County) in accordance with written instructions issued by the Los Angeles County Metropolitan Transportation Authority (LACMT A) under the terms of the Act.

(b) Basis of Accounting

The ST A Fund is reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as they become both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, LACMTA considers revenues to be available if they are collected within 90 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred and a valid claim is presented. Transportation subsidies are recorded when all of the eligibility requirements have been met, including the receipt of the reimbursement request.

(c) Fund Accounting

LACMT A utilizes fund accounting to report its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. The ST A Fund is considered a governmental fund. The measurement focus is the determination of changes in financial position, rather than net income determination. Additionally, the STA Fund is considered a special revenue governmental fund. Special revenue funds are used to account for proceeds of specific revenue sources including sales tax that are legally restricted to expenditures for specified purposes.

In fiscal year 2011, LACMTA implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement establishes fund 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 government funds. As a result of implementing this statement, ST A fund balances were classified as restricted as they can only be spent in accordance with the provisions of the Transportation Development Act.

(d) Financial Statement Presentation

The accompanying financial statements present only the ST A Fund and do not purport to, and do not, present fairly the financial position of the Los Angeles County Metropolitan Transportation

5 (Continued)




June 30,2012 and 2011

Authority as of June 30, 2012 and 2011, the changes in its fmancial position, or, where applicable, its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

(e) Cash and Cash Equivalents

The STA Fund's cash and cash equivalents include investments in the Los Angeles County Investment Pool (LACIP) and are reported at fair value, which is the quoted market price. The ST A Fund is an involuntary participant in the LACIP.

(j) Sales Tax Receivables

Sales tax receivables represent uncollected amounts from the allocation of retail sales tax on gasoline and diesel fuel collected by the State Board of Equalization in the State of California. As of June 30, 2012, the STA Fund has a receivable of $29,404,000 due from the State for the fourth quarter allocation.

(2) Cash and Investments

Cash balances of the ST A Fund are pooled with other County funds and invested by the Los Angeles County Treasurer (the Treasurer). These funds are subject to withdrawal from the Treasurer's pool upon demand.

STA Fund's pooled cash and investments with the LACIP amounted to $19,636,000 at June 30, 2012 and $5,373,000 at June 30, 2011. The County Board of Supervisors provides regulatory oversight for the LACIP. The fair value of the position in the investment pool is the same as the value of the pool. The investment pool is not rated for purposes of evaluating credit risk as of June 30, 2012 and 2011.

Detailed information concerning the County's pooled cash and investments can be found in the County of Los Angeles Comprehensive Annual Financial Report (CAFR). A copy of the County's CAFR can be obtained by writing to the Los Angeles County Auditor-Controller, 500 West Temple Street, Room 525, Los Angeles, California 90012-2766.

(3) Due to /from Other Funds

Due to or from other funds represent payables owed to or receivables from a particular LACMT A fund for temporary loans, advances, goods delivered, or services rendered. As of June 30, 2012 and 2011, the STA Fund had a payable to the LACMTA's Enterprise Fund in the amount of $22,103,000 and a receivable from LACMT A's Enterprise Fund of $44,331,000, respectively.

(4) Interfund Transfers

Transfers represent permanent, legally authorized transfers from a fund receiving revenue to the fund through which resources are to be expended. These transfers represent operating and capital subsidies given out from one fund to another fund. For the years ended June 30, 2012 and 2011, the STA Fund transferred $129,765,000 and $100,012,000, respectively, to LACMTA's Enterprise Fund. For the year ended June 30, 2012, the STA Fund received $254,000 from Proposition C, as approved by the Board of

6 (Continued)




June 30, 2012 and 2011

Directors, to cover expenditures due to the over-allocation ofSTA funds as a result of unrealized projected revenues.

(5) Sales Tax Revenue

Sales tax revenue represents amounts from the allocation of retail sales tax on gasoline and diesel fuel collected by the California State Board of Equalization. For the year ended June 30, 2012, the STA Fund received an allocation of $117,062,000. There was no sales tax allocated during the year ended June 30, 2011.

7



Revenues, Expenditures and Changes in Fund Balances- Budget and Actual

June 30, 2012


Original & final budget Actual

Revenues: Sales tax $ 96,210 117,062 Investment income 118

Total revenues 96,210 117,180

Expenditures: Transportation subsidies 13,414 10,437

Total expenditures 13,414 10,437

Excess of revenues over expenditures 82,796 106,743

Other financing sources (uses): Transfer in 254 Transfers out (129,322) (129,765)

Total net financing (uses) (129,322) (129,511)

Net change in fund balances (46,526) (22,768)

Fund balances - beginning of the year 49,714 49,714

Fund balances- end of year $ 3,188 26,946

See accompanying independent auditors' report

8

Variance with final budget

20,852 118

20,970

(2,977)

(2,977)

23,947

254 (443)

(189)

23,758

23,758

PUC Code

Jurisdiction: Arcadia Claremont Commerce Culver City Foothill Transit Gardena La Mirada Montebello Long Beach LACMTA Norwalk Redondo Beach Santa Monica Torrance

Total ST A fund allocations


STATE TRANSIT ASSISTANCE

$

$

SPECIAL REVENUE FUND

Supplemental Schedule of Allocations

June 30, 2012 and 2011


Operating Capital 6730~a~ 6730(b)

41 24 38

709 3,296

707 17

1,148 3,207

38,759 461

96 2,792

878

52,173

Rail 6730(c)

45,288

45,288

See accompanying independent auditors ' report

9

2012 2011 Total Total

41 47 24 22 38 42

709 815 3,296 3,825

707 835 17 24

1,148 1,313 3,207 3,699

84,047 99,866 461 526

96 91 2,792 3,224

878 1,009

97,461 115,338

Operating PUC Code 6730(a!

Jurisdiction: Arcadia $ 31 Claremont 18 Commerce 28 Culver City 531 Foothill Transit 2,472 Gardena 530 La Mirada 24 Long Beach 2,404 LACMTA 46,785 Montebello 861 Norwalk 346 Redondo Beach 72 Santa Monica 2,094 Torrance 659

Total STA fund expenditures $ 56,855

See accompanying independent auditors' report



Supplemental Schedule of Expenditures

Years ended June 30,2012 and 2011


FY2012 Capital Ra.J Operating 6730(b! 6730(c! Total 6730(a!

- - 31 47 - - 18 22 61 - 89 110

(202) - 329 815 - - 2,472 5,327 - - 530 835 - - 24 - - 2,404 3,699 32 82,948 129,765 47,043

165 - 1,026 1,406 - - 346 631 - - 72 91 343 - 2,437 3,224 - 659 1,009

399 82,948 140,202 64,259

10

FY2011 Capital 6730(b!

954

852

3

16

1,825

Rail 6730(c!

52,966

52,966

Total

47 22

110 1,769 5,327 1,687

3,699 100,012

1,406 631

91 3,240 1,009

119,050



Independent Auditors' Report on Compliance


We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the State Transit Assistance Fund (the Fund), a special revenue fund of the Los Angeles County Metropolitan Transportation Authority (LACMT A), as of and for the year ended June 30, 2012.

In connection with our financial statement audit, except as noted in the accompany schedule of findings and responses, nothing came to our attention that caused us to believe that LACMT A failed to comply with the terms, covenants, provisions or conditions of the Section 6751 of the California Code of Regulations. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance.

LACMTA's response to the finding identified in our audit is described in the accompanying schedule of findings and responses. We did not audit LACMTA's response, and accordingly, we express no opinion on it.

This report is intended solely for the information and use of management, LACTMA's board of directors, other within the entity, and regulatory agencies, and is not intended to be and should not be used by anyone other than these specified parties.

December 31, 2012

11 KPMG LLP is a Delaware limited liability partnership, the U.S. member finn of KPMG International Cooperative rKPMG International·). a Swiss entity.



Schedule of Findings and Responses


Finding #12-01-Reallocation oflneligible Reserved Funds

Criteria

Public Utilities Code 99314.6 - Funds withheld from allocation to an operator due to ineligibility shall be retained by the transportation planning agency, for reallocation to that operator for two years following the year of ineligibility. In a year in which an operator's funds are allocated pursuant to eligibility requirements, funds withheld from allocation during a preceding year shall also be allocated. Funds not allocated before the commencement of the third year following the year of ineligibility shall be reallocated to cost effective high propriety regional transit activities, as determined by the transportation planning agency, as the case may be. If that agency determines that no cost effective high priority regional transit activity exists, the unallocated funds shall revert to the Controller for reallocation.


During our procedures performed over the compliance with Section 6750 of the Transportation Development Act (the Act) Statutes and California Codes of Regulations, we noted that for 3 of the 14 operators selected for testing, LACMT A retained the funds for reallocation to the ineligible operator for more than the allotted three-year restriction. A total of $182,506 has been held for greater than two years after the funds were required to be reallocated to a cost-effective high proprietary regional transit activity or remitted to the Controller for reallocation.

Cause

LACMTA staff has been working with the cities/operators in question prior to the end of the three-year eligibility requirement; however, extenuating circumstances caused delays in submitting ST A claims. At this point all funds are reserved for future capital expenditure as allowed by ST A regulations. LACMT A staff acknowledges that leniency in applying the lapsing policy contributed to violation of the above regulations.

Effect or Potential Effect

Noncompliance with the Act may result in potential rescission of transit fund allocations.

Recommendation

We recommend that management review and properly ensure the reallocation of reserved funds for ineligible operators before the commencement ofthe third year following the year of ineligibility.

View of Responsible Officials

LACMT A reviewed and cancelled the allocations of $182,506 to the Cities of Claremont, La Mirada and Norwalk on December 10, 2012. These funds will be reallocated in the FY14 Formula Allocation Process (FAP).

12

Attachment G

SERVICE AUTHORITY FOR FREEWAY EMERGENCIES (A Component Unit of the Los Angeles County

Metropolitan Transportation Authority)

Basic Financial Statements

June 30, 2012 and 2011

(With Independent Auditors' Report Thereon)



Table of Contents


Management's Discussion and Analysis

Basic Financial Statements:

Agency-wide Financial Statements:

Statements ofNet Position

Statements of Activities

Fund Financial Statements:

Balance Sheets


Notes to Basic Financial Statements

Other Supplementary Information

Statements of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

Page

3

6

7

8

9

10

13





We have audited the accompanying basic financial statements of the governmental activities and major fund of the Service Authority for Freeway Emergencies (SAFE), as of and for the years ended June 30, 2012 and 2011, as listed in the table of contents. These financial statements are the responsibility of SAFE's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of SAFE's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.

As discussed in note 1 to the basic financial statements, the financial statements present only the Service Authority for Freeway Emergencies and do not purport to, and do not, present fairly the financial position of the Los Angeles County Metropolitan Transportation Authority as of June 30, 2012 and 2011, or the changes in financial position, or, where applicable, the cash flows thereof for the years then ended in conformity with U.S. generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and major fund of the Service Authority for Freeway Emergencies as of June 30, 2012 and 2011, and the respective changes in financial position for the years then ended in conformity with U.S. generally accepted accounting principles.

U.S. generally accepted accounting principles require that the management's discussion and analysis and budgetary comparison information on pages 3 through 5 and page 13 be presented to supplement the basic financial statements. Such information, 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

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative rKPMG International~). a Swiss entity.

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.

January 8, 2013

2




June 30,2012 and 2011


Management's discussion and analysis of the financial performance of Service Authority for Freeway Emergencies (SAFE) presents an overview of SAFE's financial activities during the fiscal years ended June 30, 2012 and 2011. Management encourages readers to consider information presented here in conjunction with the financial statements (beginning on page 6). The financial statements, notes to the basic financial statements, and this discussion and analysis were prepared by management and are the responsibility of management.

Financial Highlights

• Fiscal year 2012 net assets decreased by $1,360 or 3.94% compared to fiscal year 2011 primarily due to increase in professional and technical services fees.

• Total revenues are comprised of licenses and fines, intergovernmental revenue and investment earnings. The decline in investment earnings in fiscal years 2012 and 2011 was due to the depressed market conditions.

• Expenses increased by $1,158 in fiscal year 2012, while it decreased by $1,972 in fiscal year 2011. The increase in cost for fiscal year 2012 was mainly due to higher professional and technical services fees for the operation and enhancement of the 511 system, which went live in the later part of fiscal year 2011. The decrease in 2011 was due to the decrease in upfront expenditures in congestion relief operations particularly related to the MATIS/511 system.

Overview of Financial Statements

This management's discussion and analysis serves as an introduction to SAFE's basic financial statements. SAFE's basic financial statements comprise three components: (1) the agency-wide financial statements; (2) the fund financial statements; and (3) the notes to the basic financial statements. This report also contains other supplemental information in addition to the basic fmancial statements themselves.

Agency-wide financial statements provide a broad overview of SAFE's finances in a manner similar to private sector entities. The agency-wide statements consist of: (1) the statements of net position, which present information on all of SAFE's assets and liabilities with the difference between the two being reported as net position, and (2) the statements of activities, which depict the changes in net position during the year. Trends of increasing or decreasing net position may serve as a useful indicator of financial health.

Fund financial statements represent the near-term inflows, outflows, and balances of spendable resources. The basic fund financial statements consist of: (1) the balance sheets, which present SAFE's assets and liabilities, the difference between the assets and liabilities being reported as fund balance; and (2) the statements of revenues, expenditures, and changes in fund balances for the fiscal years. This report presents the underlying events or activities of the fund that affected the balance sheets.

The notes to the basic financial statements are various disclosures that accompany the agency-wide and fund financial statements in order to provide a full understanding of SAFE's finances.

3 (Continued)

Analytical Overview




June 30,2012 and 2011


The table below shows the condensed schedule of net position for fiscal years 2012,2011 , and 2010:

Schedule of net position governmental activities

2012 2011

Total assets $ 35,885 36,264 Total liabilities 2,802 1,821

Restricted net position $ 33,083 34,443

2010

36,795 3,023

33,772

Total assets decreased by $379 or 1.05%% in fiscal year 2012 mainly attributed to the increase in the expenses incurred in implementing the 511 traveler Information system. In fiscal year 2011, total assets decreased by $531 or 1.44% principally due to decrease in cash associated with the decline in revenue related to valuation of short-term investment.

While total liabilities in fiscal year 2012 increased by $981 or 53.87% over fiscal year 2011 primarily due to unpaid Freeway Service Patrol (FSP) program expenditures reimbursement to the Los Angeles County Metropolitan Transportation Authority at year-end. In fiscal year 2011, total liabilities decreased by $1,202 or 39.76% primarily due to decrease in program expenditures and the timing of payment of program expenditures at year-end.

The following table is a condensed schedule of activities for the years ended June 30, 2012, 2011, and 2010:

Program expenses and revenue: Congestion relief operations net of revenue $ Operating subsidies to the Los Angeles

County Metropolitan Transportation Authority

Program expenses net of revenue

General revenues: Licenses and fmes Investment and earnings

Total general revenues

Summary schedule of activities governmental activities

2012 2011

7,998 6,205

1,240 1,263

9,238 7,468

7,553 7,548 325 591

7,878 8,139

Change in net assets (1,360) $ ================

671

4

iiho

8,839

1,301

10,140

7,516 1,170

8,686

(1,454)

(Continued)




June 30, 2012 and 2011


Factors Impacting Future Periods

For the foreseeable future, SAFE will continue to operate and manage the call box system (fixed roadside units and mobile #399) and the Southern California 511 traveler information system 511. In FY13, SAFE will be conducting an evaluation of the fixed roadside call box system and is anticipating changes to the overall size of the system and the cost in maintaining the system. The #399 mobile call box system will be integrated into 511. This integration will allow SAFE to streamline certain operations, while at the same time provide improved services to the public. The integration of #399 into 511 may increase costs to SAFE as 511 is more publicized and recognized service. SAFE will also be conducting a comprehensive review of the 511 program as more regional partners are becoming interested in joining the service. The increased use of 511 by partner agencies and the public will increase both developmental and operating costs for 511. Potential opportunities to offset costs through new revenue streams will be explored. SAFE will continue providing financial support to the Metro Freeway Service Patrol program. FY13 represents the completion of the two-year $4 million grant provided by SAFE in support of the Metro Express Lanes project.

Further Information

This report has been designed to provide all interested parties with a general overview of SAFE'S financial condition and related issues. Inquiries should be directed to the Accounting Department, One Gateway Plaza, Mail Stop 99-20-7, Los Angeles, CA 90012-2952.

5



Statements of Net Position

June 30, 2012 and 2011


Governmental activities

Assets: Cash and cash equivalent Intergovernmental receivable Interest receivable

Total assets

Liabilities: Accounts payable and accrued expenses Due to LACMT A

Total liabilities

Net position: Restricted

Total net position

See accompanying notes to basic financial statements.

6

2012 2011

$ 35,729 35,387 88 727 68 150

35,885 36,264

1,562 1,821 1,240

2,802 1,821

33,083 34,443

33,083 $ -===============

34,443



Statements of Activities

Years ended June 30, 2012 and 2011


Governmental activities 2012 2011

Program expenses and revenue: Transit operations:

Congestion relief operations $ 8,086 6,905 Less operating grants and contributions (88) (700~

Net congestion relief operations 7,998 6,205

Operating subsidies to the Los Angeles County Metropolitan Transportation Authority 1,240 1,263

Program expenses net of revenue 9,238 7,468

General revenues: Licenses and fines 7,553 7,548 Investment and other earnings 325 591

Total general revenues 7,878 8,139

Change in net position (1,360) 671

Net position- beginning of the year 34,443 33,772

Net position- end of year $ 33,083 34,443


7



Balance Sheets

June 30, 2012 and 2011


Assets: Cash and cash equivalent Intergovernmental receivable Interest receivable

Total assets

Liabilities: Accounts payable Due to LACMT A

Total liabilities

Fund balances: Restricted

Total fund balances

Total liabilities and fund balances


$

$

$

$

8

2012

35,729 88 68

35,885 ======-======-=

1,562 1,240

2,802

33,083

33,083

35,885 ==-==-========

2011

35,387 727 150

36,264

1,821

1,821

34,443

34,443

36,264




Years ended June 30,2012 and 2011


Revenues: Licenses and fines Intergovernmental Investment income Other

Total revenue

Expenditures: Current:

Administration and other transportation projects

Total expenditures

Excess (deficiency) of revenues over expenditures



Fund balances - beginning of the year



9

$

$

2012

7,553 88

325

7,966

8,086

8,086

(120)

1,240

(1,360)

34,443

33,083

2011

7,548 700 558

33

8,839

6,905

6,905

1,934

1,263

671

33,772

34,443




June 30,2012 and 2011


(1) Summary of Significant Accounting Policies

(a) Reporting Entity

The Service Authority for Freeway Emergencies (SAFE) was created in February 1988 pursuant to California Streets and Highway Code Section 2550 et seq., and is responsible for the operation, maintenance, and administration of the Los Angeles County Kenneth Hahn Call Box system. Under the authority of the above section, the Los Angeles County Metropolitan Transportation Authority (LACMT A) is the designated SAFE for Los Angeles County.

As LACMTA's board is SAFE's board, SAFE is a component unit ofLACMTA and is included in LACMTA's financial statements as a blended component unit.

(b) Operations

SAFE is responsible for the implementation, maintenance, operation, and administration of motorist aid on the network of freeways, highways, and unincorporated county roads within Los Angeles County. SAFE operates and maintains approximately 2,700 call boxes along 436 miles of freeways, state highways, and selected county roads in Los Angeles County. SAFE also funds, operates and manages the Southern California 511 traveler information system. This system provides real-time and planned traffic, transit and other related traveler information to the public via the phone, web and mobile application.

(c) Agency-Wide Financial Statements

SAFE's financial statements, prepared in accordance with Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, consist of agency-wide statements, including a statement of net position and a statement of activities, and fund financial statements, which provide a more detailed level of financial information.

The agency-wide financial statements report information on all of the nonfiduciary activities of the agency.

The statement of activities demonstrates the degree to which the direct expenses, including centralized expenses of a given function or segment, are offset by program revenues. Direct expenses are those tht are clearly identifiable with a specific function or segment. Licenses and fines and investment earnings not considered program revenues are reported as general revenues.

(d) Fund Accounting

SAFE utilizes fund accounting to report its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate

10 (Continued)




June 30, 2012 and 2011


accounting entity with a self-balancing set of accounts. Funds are classified into three categories: governmental, proprietary, and fiduciary.

Governmental funds are used to account for SAFE's acttvtttes. The measurement focus is a determination of changes in financial position, rather than net income determination. Additionally, SAFE fund is considered a special revenue governmental fund. Special revenue funds are used to account for specific revenue sources that are legally restricted to expenditures for specific purposes. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, SAFE considers revenues to be available if they are collected within 90 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred and a valid claim is presented.

(e) Financial Statement Presentation

The accompanying financial statements present only the SAFE fund and do not purport to, and do not, present fairly the financial position of the Los Angeles County Metropolitan Transportation Authority as of June 30, 2012 and 2011, the changes in its financial position, or, where applicable, its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

(/) Fund Balances

SAFE implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, effective July 1, 2010. This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which government is bound to observe constraints imposed on the use of the resources reported in the governmental funds. Restricted fund balances include amounts that can be spent only for specific purposes stipulated by enabling legislation, by grants, creditors, or by regulations of other governments. SAFE's fund balances were classified as restricted as they can only be used in accordance with the provisions of the California Streets and Highway Code Section 2550 et seq by which the fund was created.

(g) Budgetary Accounting

Enabling legislation and adopted policies and procedures provide that the SAFE Board of Directors approve an annual budget. The Board of Directors conducts a public hearing for discussion of the proposed annual budget prior to adoption of the final budget. Unexpended appropriations lapse at year-end. The legal level of control is at the fund level, and expenses may not exceed total appropriations without board approval. By policy, the board has provided procedures for management to make revisions within operational or project budgets when there is no net dollar impact to total appropriations.

11 (Continued)




June 30,2012 and 2011


(h) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash deposited with Los Angeles County Treasurer's external investment pool.

(2) Cash and Cash Equivalent

The following is a breakdown of SAFE's cash and cash equivalent as ofJune 30, 2012 and 2011:

Cash deposits Los Angeles County investment pool

Total fair value

(3) Significant Commitments

$

2012

35,055 674

$ ===3=5,7=2=9=

2011

34,725 662

35,387

SAFE has entered into a MOU with Public Transportation Services Corporation (PTSC), a blended component unit of LACMT A, for PTSC to provide cost reimbursable administrative support services to SAFE. The MOU will remain in effect until terminated by either party with a minimum of sixty (60) days written notice.

SAFE had $2,842 of contractual commitments as of June 30, 2012 that had not been claimed or disbursed.

12



Statements of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

June 30, 2012 and 2011

Revenues: Licenses and fines Intergovernmental Investment income Other

Total revenues

Expenditures: Current:

Administration and other transportation projects

Total expenditures

Excess (deficiency) of revenues over expenditures



Fund balances - beginning of the year


See accompanying independent auditors' report.


2012 Original Variance and final with final bud~ Actual budget

$ 7,000 7,553 553 88 88

500 325 (175) - - ---

7,500 7,966 466

11,133 8,086 3,047

11,133 8,086 3,047

(3,633) (120) 3,513

1,500 1,240 ~260~

(5,133) {1,360) 3,773

34,443 34,443 -

'JQ llO $ --·- 33,083 3,773

13

Original and final budget

7,500

500

8,000

11,147

11,147

(3,147)

2,000

(5,147)

33,772

28,625

2011 Variance with final

Actual budget

7,548 48 700 700 558 58

33 33

8,839 839

6,905 4,242

6,905 4,242

1,934 5,081

1,263 ~737~

671 5,818

33,772

34,443 5,818

February 11, 2013

The Board ofDirectors


Los Angeles County Metropolitan Transportation Authority

Los Angeles, California

Ladies and Gentlemen:

Attachment H

We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Los Angeles County Metropolitan Transportation Authority (the Authority), which collectively comprise the basic financial statements of the Authority as of and for the year ended June 30, 2012 and issued our report thereon dated January 8, 2013. Our report included a reference to other auditors who audited the defined benefit pension plan frnancial statements included in the Authority's basic financial statements. We also audited the following entities (collectively referred to herein as the Ancillary Entities) and issued separate reports for each entity as part of the Authority's annual audit:

• State Transit Assistance (STA)

• Service Authority for Freeway Emergencies (SAFE)

Under our professional standards, we are providing you with the accompanying information related to the conduct of our audits.

Our Responsibility under Professional Standards

We are responsible for forming and expressing an opm10n about whether the financial statements, that have been prepared by management with the oversight of the Board of Directors (the Board), are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles. We have a responsibility to perform our audit of the financial statements in accordance with professional standards. In carrying out this responsibility, we planned and performed the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Because of the nature of audit evidence and the characteristics of fraud, we are to obtain reasonable, not absolute, assurance that material misstatements are detected. We have no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by error or fraud, that are not material to the financial statements are detected. Our audit does not relieve management or the Board of their responsibilities.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International"). a Swiss entity.

The Board of Directors Los Angeles County Metropolitan

Transportation Authority February 11, 2013 Page 2 of5

In addition, in planning and performing our audit of the financial statements, we considered internal control over financial reporting (internal control) as a basis for designing our auditing procedures 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 Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control.

We also have a responsibility to communicate significant matters related to the financial statement audit that are, in our professional judgment, relevant to the responsibilities of the Board in overseeing the financial reporting process. We are not required to design procedures for the purpose of identifying other matters to communicate to you.

Other Information in Documents Containing Audited Financial Statements

Our responsibility for other information in documents containing the Authority's basic financial statements and our auditors' report thereon does not extend beyond the financial information identified in our auditors' report, and we have no obligation to perform any procedures to corroborate other information contained in these documents. We have, however, read the other information included in the Authority's basic financial statements, and no matters came to our attention that cause us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the basic financial statements.

Accounting Practices and Alternative Treatments

Significant Accounting Policies

The significant accounting policies used by the Authority are described in note l(B) through I(D) to the Authority's basic financial statements. As described in note l(F), in order to comply with the requirements of U.S. generally accepted accounting principles, the Authority adopted Governmental Accounting Standards Board (GASB) Statement No. 61, The Financial Reporting Entity: Omnibus - and amendment of GASB Statements No. 14 and No. 34.

Qualitative Aspects of Accounting Practices

We have discussed with the Board and management our judgments about the quality, not just the acceptability, of the Authority's accounting principles as applied in its financial reporting. The discussions generally included such matters as the consistency of the Authority's accounting policies and their application, and the understandability and completeness of the Authority's basic financial statements and the financial statements of the Ancillary Entities, which include related disclosures.

The Board ofDirectors Los Angeles County Metropolitan

Transportation Authority February 11,2013 Page 3 of5

Management Judgments and Accounting Estimates

The preparation of the Authority's basic financial statements and the financial statements of the Ancillary Entities requires management of the Authority to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the basic financial statements and the reported amounts of revenues and expenses during the reporting period, including the following:

• Management's estimate of the allowance for doubtful accounts is based on an analysis of past-due accounts and includes an analysis of the credit rating of the customer, the Authority's historical experience with the customer, and other relevant factors to arrive at an overall assessment of whether past-due accounts will be collected.

• Management's estimates for workers' compensation, pension obligation, other postemployment obligations, and general liability are based on historical data and other relevant factors to arrive at the actuarial determined estimated liabilities.

• Management's estimate of pollution remediation obligations is based on historical data over the cost of remediation activities.

• Management's estimate of derivative liabilities is based on expected payments and changes in future interest rates.

• Management's estimates for potential exposure related to lease-leaseback obligations are based on potential contractual penalties and the likelihood of whether they will be incurred.

• Management's estimates for the discount rates used in the actuarial studies for the Other Postemployment Benefits and Pension Plans are based on assumed availability of funding to meet estimated obligations.

We evaluated the key factors and assumptions used to develop the estimates, including possible management bias in developing the estimates, in determining that the estimates are reasonable in relation to the basic financial statements taken as a whole.

Uncorrected and Corrected Misstatements

In connection with our audit of the Authority's basic financial statements and the financial statements of the Ancillary Entities, we have discussed with management certain financial statement misstatements that have not been corrected in the Authority's and the Ancillary Entities' books and records as of and for the year ended June 30,2012. We have reported such misstatements to management on a Summary of Audit Differences and have received written representations from management that management believes that the effects of the uncorrected financial statement misstatements are immaterial, both individually and in the aggregate, to the


Transportation Authority February 11, 2013 Page4of5

financial statements for each respective opinion unit or Ancillary Entity. Attached is a copy of the summary that has been provided to, and discussed with, management.

In addition, during the course of our audit, we identified and discussed with management certain adjustments and reclassifications that were ultimately recorded by management. During the audit of the Authority's basic financial statements, we noted a reclassification entries that was necessary to properly classify certain amounts between cash and investments. During our audit of the SAFE ancillary, we also identified an adjustment to the financial statements which was necessary to properly reflect intergovernmental revenues relating to fiscal 2011. The reclassification entries and audit adjustment have been summarized in the attached schedules which have been provided to, and discussed with, management.

Disagreements with Management

There were no disagreements with management on financial accounting and reporting matters that, if not satisfactorily resolved, would have caused a modification of our auditors' reports on the Authority's basic financial statements or the financial statements of the Ancillary Entities.

Management's Consultation with Other Accountants

To the best of our knowledge, management has not consulted with or obtained opinions, written or oral, from other independent accountants during the year ended June 30, 2012.

Significant Issues Discussed, or Subject to Correspondence, with Management

Major Issues Discussed with Management prior to Retention

We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with you and management each year prior to our retention by you as the Authority's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Material Written Communications

Attached to this letter please find copies of the following material written communications between management and us:

Summary of uncorrected audit differences

2 Summary of corrected audit differences

3 Report on internal control over financial reporting and compliance and other matters based on an audit performed in accordance with Government Auditing Standards


Transportation Authority February 11,2013 Page 5 of5

Separate management representation letters were also obtained in conjunction with the audits of the Ancillary Entities, which were consistent with the representations included in the management representation letter attached. A copy of the engagement contract was also provided to management prior to inception of the audit.

* * * * * * *

This letter to the Board is intended solely for the information and use of the Board and management, and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,

lol AnptK Metropolltal Trantpartatlan AuthCM"ity

Summuy of Unam'Kted ~cUt M!Wate1unt1

Business· Type Activities/Eneterprise Fund

For Year EmMel 6/30/2012

ID

EF_AMl

(Enterprise)

Ef_AM_G IC {Enterprise)

(Enterprise)

Amounts in

Method US.d to Qwntify Audit Miutt~tements

Thousands; USD Rollover

}""> : .· ... '. :'~ . . . . <. . ·. · ,. . : i: . ." .·· ...

c.~ar 'ntrv ·~•'"~ at "'Wit fJIO*E•q lnsptM Sttttment 'riffed · Debi11fie.S1

Dacriptlon of misstatement

To adjust Depreciation Expense for assets placed into service during prior years but not ~et depreciated until FY'12.

Type of

miubttmtrU

Factual

To reclassify a lease/leaseback investment that Factual was not placed into irrevocable trust and Is under LACMTA's control . To record the estimated capitalized interest Factual related to construction activities

Accounts ""'"

Accumulated Depreciat ion 8,513

Depreciat ion Expense

Jnvestmenu:, Current 59,451

lease Accounts

Capital Assets 278,276

Interest Expense, Net Net Assets

(Crtdlt)

{8,513)

{59,451)

{24,707)

j253,569)

lntDIMefftctof t;Otttctlnltht

ballnce sltHt In prbptrlod

(e.rryforwardfrom

8,513

lntomettftct

lnc;ometfftrtofcotrtctln(laQ;Ordlnlto the current period baltntt RoUowr (Income

sh .. t St.lemtflt )

C-A (aNy Income Stahimtnt I«<UI'Itl)

{24,707)

rnttkod

C-1

{8,513)

{24,707)

Ac&rtJate of u_ncorrecttd audit dtfferences 346,240 {346,240) 8,513 {24,707) {33,220)

Flnandal statement amounts (per final flnilnclaf statements) Uncorrected audit differences after tax effect as a percenta1e of financial statement amounts;

Agrecate of uncorrec:tltd audit differences-total impact on revenues

Financial statement amounts (as per final finandal shltements)-- revenues ..-,d transfers

Uncorret;tcd audtt differences as a percentqe of ftn.ncql statement amounts

Agrepte of uncorrected audit dlfferenc.s· tmllmpact on expenditures Flnendal statement amounts ~u per finlll finandalltlltements)- eapens.s and tnnsfers

Uncorrmed audit differences as a perteotqe of flnandal stltement amounts

{154,925)

21.44%

(See further analysis below)

---{1,839,902)

0.0%

i33.i2oi {1,994,827)

1.7%

f:qldty

{24,707)

{253,569)

{278,276)

{4,962,516)

5.61%

ltlen51 SI!Mt rf$st • Dtl!ll fCt!dJtl

CUrrtntAIMts

59.451

59,451

1.475,441

4 .03%

NonCUrn~nt Aneta I Current Uabllltles Noncumnt Uablltlu

{59,451)

278,276

218,825

8,838,344 {686,386) {4,664,883)

2.48% 0.00% 0 .00%

CMh flgW IHtd · IP!CrtM.f - --~ ~ """'" .. ActMUes

trwadna ...... u

flnanclnc l tomprehanM Activities ve lnmrM

N/A ·no impact on cash flows



Los ~u Mnropolftal Tr~nsportatlon Authorftv

Summary of Uncorrected Audit Mlutlitements

For VNr End.ct 6/30/2012

Amounts in

Method Used to Qu.llntify Audit Misstatements

Governmental Activities

Thou.,.nds; USO Rollover

'*?«"'k'« ~OtrY ltetked. Q!aent Pet1pst lftd

'· . " .

ID D!Krtptlon of mbsta~mtnt ,...,

A<cou ... mlutatem~nt

ACTDA_STR1 To appropriately record sales taKes receivable Factual Receivables_Sales Ta)les (Prop A) as of the period-end Accounts Payable and Accrued Liabilities

Fund Ba lances· Restricted ACTDA_STR1 To appropriately record sales taxes receivable Factual Receivabh~s_Sales Ta>ces (TDA) as of the period-end. Fund Ba lances· Restricted ACTDA_STR1 To appropriately record sales taxes receivable Factual Recelvables_Sales Taxes (Prop C) as of the period -.end. Accounts Payable and Accrued Liabilities

Fund Balances ~ Restricted

Ac&rqate of uncorrected audit differences

D- (C.od~)

A

61,677

(14,648)

(47,029)

31,711

(31,711)

61,682

(12,151)

(49,531)

155,070 (155,070)

Financial statement amounts 'per final financial stiltements) Uncorrected audit differences after tax effect as a percentage of fmancial statement amounts

~Accumulation of AJE's noted for Prop A, Prop C, and STA. No AlE's were noted for General Fund, MeasureR, TOA. or Other Governmental.

! ~

'"somt "'ttment E!ftdi ~ Qtbltf"'P!t' ''''"S! Sbnt """. DtbJt (Q'ed!tl . $-lb fib 'lllil·llm•~t ~ ' lilllwlll ~

! ~

Income effKt of Income effect CGtri!Ctlncthe Income effect of c:orrectlnl ltCGrdil'lrltO

beienc:.e lhHt ln thewrrwrtperiodballnc:.e Rol&ovet (tncome Equity Assets U•blltcles Opera tine tnvutlrc FIMnclftl Comprehensl

priorp.riod sheet Stltuwnt) A<Uvltlel Activfd .. Activities velncome

(cenyforward from m......, • CaA (Only lnCOfnl

C-8 Statement ICCOI.lnts)

61,677

(14,648)

(47,029)

31,711

(31,711) N/A 61,682

(12,151)

(49,531)

(128,271) 155,070 (26,799)

(517,661) (2,901,298) 3,119,539 (218,241)

0.00% 4.42% 4.97% 12.28% --

Los Ar11eles MetropoUtal Transporbltlon Awthority

Summary of Uncorrected Audit Misstatements

For Ve•r Ended 6/30/2012 Amountsln

Method Used to Quantity Audit Mintatements

General


~"' Encri ftepylgd at c,.U•nt Putod End .

10

None Noted

Description of mlm•t..,.,. ,.,...,

mlatltem•nt Accounts Deb~ (Credit)

A

lncom1 St .. rntnt Cfftct • DlbfUCrJdltl

lneomt effect of

correctlnclhl bla.na sheet In

pr1or1Mriod (ctrryforward from

lncomt effect of c:orrtctinJ tht current period ~ce .._,

C-A (Only lnc<>rne Sutanent aa:ounts)

Income effect acc:ordlnc to

1\oHover (lnc:ome

Statement) metllod

C·l

Equity

"ltnce Shut Effect· Debit lradUJ

Curr.nt ....... Noncurrent

Assets Current

UabHitfn

Cash F!pw Cfftct ·•nm•u

;.mwwtl

~: ~ l!l.l!ls!iaiL ~

Nonc:WTent I Oper•tkt& ll•blltles Adlvld•

lnvatln1 ActiYIUe1

Flntnc:lne I Comprehen1l Adtvltle1 ve Income

------------------------------------------------------------------------------------------------------------------------------------------------ -

LOi An .. les ~r~:»polkal Tranq~ortation Authority

Summary of Uncorrected Audit MIMtlteanent.J

for Yur fnded 6/30/2012 Amounts in

Method UHd to Quantify Audit Misstatements

Governmental Activities


:. ':, ~- :· - >:: _::'/' : >. ::: . ~"t$f_D!I.'ittry.'"'"'w at ' .urrtn' ~eded rod

10

ACTDA_STR1

Dea:riptloft of misstatement

To appropr~tely record sales taxes receivable as of the perlod~nd

Typo of

rniutlterMnt

Factual

Accounts

Receivables_Sales Taxes

Accounts Payable and Accrued Liabilities Fund Balances · Restricted

A&Jreaate of uncorrected iiudlt differences

..... I

61,677

61,677

(Clod.)

(14,648) (47,029)

(61,677)

Financial statement amounts tper final financial statements) Unwrretted audit differem:es ilfter taK eftett as a perten~ce of financial statement amountJ

.• Stttemtnt IU.FI- P.bltfCf!dbl ltleng stwg lfftq • QtWt ICUdttl .

Income effo<t of I ,.,como efM<t eotn~cHnl the Income effect of corrtctlnc accorclnc to

1 balar'IUI sheet bt tM ament: period INII8nce RoUovtr (Income I Equity prior period sheet Statement)

(carryforward frora m~d

U.bllitiH .... ,. CaA {Only lncom•

I C-1 I I Statemelllt accounts)

61,677

(14,648)

(47,029)

(47,029) 61,677 (14,648)

(92,109) (161,158) 223,680 (62,522)

0.00% 29.18% 27.57% 23.43%

I

QdJ Vpw IUtct -lngua

ll!lmwl

IJillmtD1.QI.: -..........,.,_ li.UII..I!:!all

OperatlrwllnvesUna: I Flnancl"'l Compreh1nsl Atttvltla Anhlhlfl Actlvtdn velncomt

N/A

------------ -------· --·

los Anseles Metropolital Transportttlon Au1hority

SUmmary of Uncorreded Audit Misstatements

For Year Ended 6/30/2012 Amounts in

Method Used to Quantify Audit Misstatements

MeasureR

Thousands; USD

Rollover

eorrmtn• En£b,aulr..ilt!>~nnt Ptdod (nd .

ID

None Noted

Description of miJ5tttement Type of

misstatement Accounts Debit

A

(Credit)

IDSj91D15tJtemtnt !~ • DtblJlCredftl

Income effect of c:orrectJnathe

baltnu sheet In priorpe~ocl

(carryforward from

""'-

lncomteffect

Income effect of correctlnal accord ina to the current period Mince Rollovar (Income

sheet Statement)

C.A (Onty Income

Statement aecounU)

method

C-8

Equity

Btllnct Sbnt Efftsr- Dlbft fCCidltJ

CUrrent

Assets

Noncurrent

Assets CUrrent

Llabllldes

-----·

i Ctjb flgw Efftn •lncrgy

iWimiDLIII. ~

Noncurrent UabUitJes

' ll!mual

Oper1tfn1

Activities

lnvestlnc Actlvftles

J..bumL:. l!ll!ll..lQ!lll

Fblilnclna IComprehens&v Ac:ttvltles e Income

Los An&•l•s M.-ropolltal Tran1porudon Authl)rlty

SUmmary l)f Uncorrected Audit Miutatem~tl

for Year Ended 6/30/2012

Amounts in

Mett\od Used to Qu~ntlfy Audit Mis.stattmtnts

..

10 DeKn,tlon of rnlsstlll'ment

TDA

Thousand:s; USO Rollover

Ff'msllrp cj,srfS..e\\'rlct pt Currpnt ~lpd end

· . . ·.

Typo of mlsstmm.m """"'"' o.blt I Credit}

• ACTDA_STR1 To appropriately record sales taxes receivable Factual Receivables_Sales Taxes 31,711

as of the period-end. Fund Balances · Restricted (31,711)

Aareaate of uncorracted audit differences 31,711 (31,711)

Financial statement amot.H1ts (per final finilnclill statements) Uncorrected audit differences ilfter tax effect as a pertentace of financial statement ilmounts

DAIIIDIIIIJII.! !nspm• Stetsmpnt !Hsst- Qtb!tfCl!dftl II!Jng Sh11t Cfftst • Dtbft fCrMttJ

Qtb flow Etfttt·IDCC!UI ~! ~ .........,._,_ ~

Income effect of lncomeett.<1 atrnctlrc the Income effect of c:onKtlfll .ccon:llrcto

bellinc:esftntln the CYf'l'lnt period bllanca Rollover (Income Equity ....... U.bllltles Opera tint: , ........ Finane Ire CompreMnsl

priofperiod shoot Sutement) Activities Activities Actlvttiet ve lnUMnl

(tarr'Vforw•rd from ll'lethod I

• C-.A{Ottlylncorne C·B

Stlurntnt accounts)

31,711

(31,711)

N/A (31,711) 31,711

(82,412) (297,064) 303,031 (5,967)

0.00% 10.67% 10.46% 0.00%

Los Anples Metropolttal Transport1tJon Authority

Summary of Uncorrected Audit Misstatements

For Year Ended 6/30/2012 Amounts in

M ethod Used to Quanti fy Audit M isstatements

. .

STA

Thousands; USO Rollover

Cqaspln• EntiY· Rcaylred pt 9i~ Psj'!od End . '

10

None Noted

Oeteriptfon of mlssQtement Ty.,.of

miutatement Accounts Debit (Ctedij)

A

Income Stttcmrnt ftf!ct • D!bltfCrtdltl

Income eHe~ of

correctlns the balance sheet In

prior perkH1 (carryforward from

Income effect

mcome effect of corRCtinal KCOI'dlnc to the current period bllance Rollover I Income

shut St1tament)

C• A (Only Income SUitement aetOUnts)

method

C·B

Equity

ltiiDCjl 5h!!!t l!ffest ~ Debit (Crtdltl

Current Assets

Noncurrent

Assets Current

Liabilities

Noncurrent

Uabii!Ues Operatl"' Acttvkles

lnvestln&

Acth'!Ues

Jl.IWDia1.g! 'Pmprtbcn•ly:

I.IIWimt.:. .

l!lllllli!lslll

Fln~nQnc,Comprehenslv ActivitJH e Income

Los Anaales Metropolittl T1'11Mf10r1atlon Authority

Summ<~ry ot UrKOrncttd AY:llt MIH~temenU

Jot v ... f"ded 6/30/2012 Amounts In

Method Ustd to Quantifv Audit Misstatements

Proposition C


,~ riaja,P~·dptrrtnt ~dod lqd·

10 Dewtpdon of mlssutement T'n)t of mlutatement .......... """" (Cred•l

ACTOA_STRl Factual Receivables_Sales Taxes 61,682 To appropriately record sales taxes receivaWe as of the period-end.

Accounts Payable and Accrued Uablllttes Fund Balances- Restricted

Aa:reaate of uncorrected audit differences 61,682

(12,151)

(49,531)

(61,682)

Financial statement amounts (per final financial statements) Uncorrected audit differences after tax effect as a percentace of financial statement amounts

!nSgms State !!MD' Vftst. osb!tfCojltJ

lntornttfffttof

co"ectfncdw bamnc.sheet In

prlorperkld (anyfONard from

IIKOI'M effect Income tffKI of anrectlftl I atcordlf'll to tht tu"tnt ptrlod balaMt Rolklvt>r (Income

shnt Stattmtntl method

C.A (Only Income

Statsment .uountsl I C-1

(17.740) 0.00%

I

fe"DP Sf!ttt lf!tst -Qtb!t lCqdl»

Equity ...... UabiUt~

I 61,682

(12,15111 (49,531)

(49,531) 61,682 (12,151)

(134,652) 277,198 (142,546)

36.78% 22.25% 8.52%

Qth E1qw £tfsst -!nertta

lJ!muHl

DJllmiiU..ol. ~ ~ ~

Operatlnl Actlvltlft

lnvtstlrc ActiVItill

flnanc'-"11 Comprthtnsl ActMtlet ve lnc:ome

N/A

Los Anaeles Metropolital Trwmport.tian AuthOJity

SUmm..-y of UnGOfrected Audtt MIUU!tem~tl

For Year Ended 6/30/2012

Amounts in

Method Uud to Q,uantlfy Audtt Misstatements

Fiduciary Funds


CarrtetiM cnp'v !Stqylrld a(eua.cnt Pt.dpd &ul lnc;gnt Stft•mtm ftftst- ptbttfcmdhl

10 I

OPEB_AM1

Income effKt of

carrect~nc the lnc:ome ef'fKt of conKtlnc Description of mJutatement I

Type of I Accounts I Debit I (Clodlll I balance shftt In the current pertod bltlnc::e misstatement prlotpertod 5heet

(carryforward from .... A I • C•A (Only Income

StlterMnt ICCOYntS)

To record the appropriate fa1r value of Factual Investments 2.490 investments as 6/30/12 (actual balances were Net increase in fa ir (2.490) (2.490) recorded with a time lag). value of investments

Acgresate of uncorrected audit differences 2.490 )2.490) (2.4901

Financial statement amounts (per final financial statements) Uncorrected audtt differences after tax effect as a percentace of financial statement amounts

Accrqate of uncorrected audit differences-total impact on revenues

Flnanclllltatement amounts (as per final financial sutements)- revenues and tTansfers

Uncorrected audit differences as a pertentqe of financial statement amounts

Aurecate of uncorrected audit difference,.. totlllmpact on expendttures

Financial statement amounts (as per final financial statements)- expenses and transfers Uncorrected audit differences as a percentaae of financial statement amounts

!ncomeefftct accordlna;to

1 Rollover (Income

Statement) ....... C·l

(2,490)

(2,490)

(22,541)

11.05!6

(See further analysis below)

(2.4901

(131,6231

1.9%

109,082

O.O'K

l

... nq Sh111t Effrst- pjrblt lCrfdltJ Cub Bpw 1,J ·IDS".., IDcqttMI

l

''"'"' I Asseu I U1blttlts I Operotlr" I Invest Ina I finandnl Acttvttlu ActMt~s ActMtleJ

2,490

(2.490)

I N/A

(2,490) 2,490

(1,192,481) 1,263,657 )71,176

0.21!6 0.20!6 0.00l6

Employee Recap of Financial Statement Other Govt Retirement OPEB Trust

Amounts Funds Trust Funds Fund Change In net assets/fund balar (15,400) 1,705 (8,846)

Net assets/fund balance (74,7421 (918,247) (199,4921

Assets 95,176 968,780 199,701

Liabilities (20.434) (50,533) (2091

Total revenues/contributklns (42,719) (62,271) (26,6331

Total expenditures/deductions 27,319 63,976 17,787

~ comprtbtndye

~ JQ:dll

I Compr.henllve

"''""'"

Total

(22,541)

(1,192,481)

1,263,657 (71,176)

(131.623)

109,082

Metropollt.ln Tr~&port•lon Authtstftot

Sl.lmmary of corncud Audit Mtssttteme.-u POf Yrlr fnclrld 6/30/2012

AlnOIJIIU~

Mttl\od IJH.d to ~ntity Audit M>SSIIttm~U

G<noernmenta!Actlvlties

Orwripdon of mkstatt!Mr'lt I Type of mbl\atl'lfWnt

EF AM2 rop;operty preRf1t tl1e0aiin<:es oiTn'YeitnWnh to reflect Factual

(E~t.rprise Fund) amounts with m.turity d1tn in exc.HS of 90 d~. To property present balanus with maturttyd1tes of 90 dlys or leu as cash and Ca~ulvllents.

Gen AMl To properTy present tht MIJntfl or JnvestmentstO-rt----rtier (Gen-etz~l Fund) amounu with maturity dUH In exce.ssol90 days. To

properly present bahmces whft maturity dates of 90 dlys

or le$$ as Cash and Casll EQulvaienU. MeasureR AMl Tifpn)pert•f~Uheba~ncesorrnwumetunoren«t

(Measure RJ amoonts with maturity datH In l!xcess of 90 davs. To proper1y pr.sent billnces with maturity dates of 90 days

or less as a~h and cas_h_Equivalents. PropA_AMl To prop.rty prM.-.t tiM balances Offil~r'nents to ~fl-.ct (Proposition A) amounu with maturity dates in elltess ol90 days. To

property prMent balan~ with maturity date5 of 90 days or less as Cash and Cash ~ivalents.

Factual

flctual

Factual

Thounnds; USO Rolover

Identified 0\lrlr~~ I Accounu

flrul lnwstments Cuh and Cuh Equivalents

Final lnvestmenh Cuh and Cash Equivalents

Final lnvntmeots CAsh and Cuh Equivaleoh

Final Investments cash 1nd Cuh Equivalents

.... 211,141

13,780

43,941

8,770

277,632

tCrHit)

(211,141)

(13,780)

(43,941)

{8,770)

1277,632)

lli!IIMIII.OL CgmqrrbtN!yt Income •

2Ulillmlllll ~H':.'~:;:rz:) I """''':"· pcblt Ceah fJpw CU,ct- tngtm fDrqu")

lntCMM EffKl

OttlltiCredkl EIIIUtv I Ass.ets I U..,.itlet I Opem:lnt Actl'tttles l •nvutlfle ActMtiH I fln~ndnl AcltWIIH I Conlprel'leNivetncome

211,141 N/A (211,141) N/A.

13,180 N/A (13,780) N/A

43,941 N/A (43,941) N/A

8,770 N/A (8.770) N/A

Metropolh•n Transportadon Authority

Summ~ of Corrected Audll MIHtattrMnts

For Ve• Ended 6/30/ 2012 Amounts in

Method Used to Quantity Audit Miut.at1ments

10 Oeurlptlon of mlssQtement

Enterprise Fund

....... mlutatament

EF_AM2 ·o property present the balances of Inve-stments lo -~flect- Factual

amounts with maturity dates in excess of 90 days. To

properly present balances with maturity dates of 90 days or

less as Cash and cash Equivalents.


Identified Durinl

Final

Accounts

Investments Cuh and Cash Equivalents

Debit (Credit)

211,141 (211,141)

211,141 (211,141)

mms Stetsmtnt I bltnte Shnt Effect. Dsblt

Etfsct· Dtbtt!Crtdltl ID:ssiJ1l

lnco~neEffed

DebltiCtedlt Equity I AIMtJ ju.biMtles

211,141 (211,141)

Cash flow Effect . Inn sus !Dscrngl

Operatlnl Activities I ktvtsdnc Acdvftle•J Fln1nd,. ActJvltles

IW!m!nL2!. Comprebtnsfy! lnWfnt -

l1sllllliWI!I.I

Comprehensive Income

N/A N/A

Mftropollbn Tr~nsportetfon Authority

Summery of Corr.cted Audit Mllstatemenu

For Year Ended 6/30/2012

10

C,,.n AM1

Amounts in

Method Used to Quantity Audit Mintuements

OHalption of rnfutJitement

o properry present tne oa ances o nves men s o renee amounts; with maturity dates in e11cess of 90 days. To

properly present ba lances with maturity dates of 90 dlys or

less as Cash and Cash Equivalents.

General Fund

Type of mtutatement

~:.rtu:.l


Identified Accounts

Durlrc ~ln:ol lnlH><tmPntc

Cash and Cash Equivalents

118ml S1S1m1Dl lffa:S . Qllillt!l.alll

Debit (Cndh) ktcome EffKt

Debit Credit 117Rn

(13,780)

13,780 (13, 780)

BtltMI Sbcct Effect· Dcbtt Ceah flow Effsst -lncrua fQtmwl

i'wllll

Equity I Aueu I U•WIItl" Operatlna Activities llnwtdn1 AcUvitle•l An.ndna ActtvtUn

117Rfl

(13,780)

lliWnllol.2l. '21I!Iil!lb1DIId: IM11:m1 · ~

Comprchenl.lve Income ... 'f, N/A

MdropoiK.InTransportatJon Authority Sumngry of Corncted Audit Misstatements For Ye•r Ended 6/30/1012

ID

MeasureR_AMl

Amounts in

~thOd Used to Q~ntity Audit Misstatements

Oncrlptlon of mlntitecnent

o prol>@rly present the balances or Investments to renea. amounts with maturity dates In excess of 90 days . To properly present balances with maturity dates of 90 days or less as cash and Cash Equivalents.

MeasureR


Type or mbmtetMnt

Factual

ldent!fled ...,,. Final

AccOWitl

Investments Cash and Cash Equivalents

Dd>ll (Ctedlt)

43,941 {43,941)

43,941 {43,941)

!nspmt Stattmtnt I B;alanFt Shgt f.fftcS- Qtb!t

Eftcct-IJ!bit!Crtdltl ~

lncomeEffect Debtt(Cred•

Equity I Auet1 I U.biHtles

43,941 {43,941)

Cub flpw fftcct- lnsrs,us !pcsrcw)

Operatl"l AdMtln ,- lnvntlnJ Adl'lltle~ I FlnaMina Actlvttlu

ill1lluDI..!II. Cgmmbtnflye !Moms -

~

Comprehensive Income

N/A N/A

Mdropolltan Transportat~n Al.lthorlty Summ•ry of Corract1d Audit Mlutattmtnts

ForVur Ended 6/30/2012 Amounts in

Method U1ed to Quantity Audit Miut<it!lments

ID DucripUon of mlntatt!mmt

Propo5ition A


Type of

miKhltement PropA_AMl ·o properfi;'ptistlit lhe balances or Investments to reflect F<lctual

amounts with maturity dates in e11cess of 90 days. To properly present balances with maturity dates of 90 days 01"

less as Cash and cash EquivOJients.

ldt:ntffled

D11riD1

Final

Accounts

Investments cash and cash Equivalents

Debit (Crl:dlt)

8,770 (8,7701

8,770 (8,7701

ll!1t!!w!lRl. !nrpmrSlJtf!Mn1 I lfllngtShHfEfltd-Qtbll Effect. Qd;jt fCrtditl &OI.lJ Cfsb Flow Effut •IDF[IIH fQtqpel Cgmprtbtnslyt lncomt •

lnco!MEff•c:t Debk(Crtdlt Equity I

~

Asuti I LlabllltiH I OptratlnJ ActhttiUts r lnvHtlna Adl"ltles I Flmuu:l"l Actlvttles I Comprl:hMsive lnc:ome

8,770 N/A (8,7701 N/A

11 I i I l

1 f •

I f

r-j • • l -.i ! !i

f i ! J

1--

1 ~ . ~

l -

j

I -j i !

f--

!

-

I • t Iii i

i __ _J~

II

I i j !

J ~

) r-;--j J

~ .. I

I t-"j" I f I 'ii ~ • i J

1 i

I ~ • ~ ~

i I w I

f-; ;

I ~

£ z

il ~ I

l •

!

I

J

ll

if I'"

• z • • I • i "5 &

!i! ~

i

II j ~

f ~

~ ~ l

~ ~ .i

~ ...:.. ~ ]!

~ I

! :1

I ~

I--

I l l 0

i ~ ~

~ j

f-;;-~

~ :a ,;

~ !

~ J_

~ j

~ ! i ~ ~

i

h l~ B i ,!

li &

J

I.e ji!

• l • i l .. l ;!:

I • .. j

f &

g

Metropolhan Transportadon Authoritv

SUmmary of Corrected Audit Misstatements

For Yeilr Ended 6/30/2011 Amounts In

SAFE

Method Used to Quafltity Audit Misstatements


10 OescripUoo of mlss~tement TVPe of misstatement I Identified Durinc

To record lntera:overnmental )Factual Final revenues In the proper period when earned.

Accounts

Intergovernmental Receivable Operating Grants and Contributions

Debit (Credtt)

700 (700)

l lncome Statement fffed-

!l!l!!I.Jmlll!l

Income EffMt Debit ICrodlll

(7001

Bil'nct Sheet Effect - Deb!t fCrcdltl CJth Flow Eft!!ct • !nC[Jjlil C[)tqta11l

Equity ...... Lliibllltles I Opcriltinc Actl\llties I !ovestin& ActNitiH I Flnandnc Activities


Independent Auditors' 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


We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Los Angeles County Metropolitan Transportation Authority (LACMTA) as of and for the year ended June 30, 2012, which collectively comprise LACMTA's basic financial statements and have issued our report thereon dated January 8, 2013. Our report was modified to include a reference to other auditors who audited the defined benefit pension plan financial statements, which are reported in LACMTA's Employee Retirement Trust Funds. 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 Standard~, issued by the Comptroller General of the United States. This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters in accordance with Government Auditing Standarru that are reported on separately by those auditors.


Management of LACMT A is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered LACMTA's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness ofLACMTA's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of LACMT A's internal control over financial reporting.

A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.


KPMG UP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International'). a Swiss entHy.

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As part of obtaining reasonable assurance about whether LACMT A's financial statements are free of 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.

This report is intended solely for the information and use of management, the Board of Directors, others within the entity, federal awarding agencies, and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

January 8, 2013

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