Transportation Development Act Funds
The Transit Enterprise Fund
of the City of Morro Bay
Morro Bay, California
Independent Auditors’ Report
and Financial Statements
For the Years Ended June 30, 2015 and 2014
The Transit Enterprise Fund
of the City of Morro Bay
For the Years Ended June 30, 2015 and 2014
Table of Contents
Page
Independent Auditors’ Reports:
Report on Financial Statements ............................................................................................................................ 1
Report on Internal Control over Financial Reporting
and on Compliance (Including Those Contained in the TDA
Statutes and California Code of Regulations) and Other Matters
Based on an Audit of the Financial Statements Performed in
Accordance with Government Auditing Standards ........................................................................................ 5
Report on Compliance for the Transit Fund and
Report on Internal Control over Compliance
Required by Transportation Development Act ............................................................................................. 7
Financial Statements:
Statements of Net Position ..................................................................................................................................... 13
Statements of Revenues, Expenses and Changes in Net Position .......................................................................... 14
Statements of Cash Flows....................................................................................................................................... 15
Notes to the Financial Statements .......................................................................................................................... 19
Supplementary Information:
Schedule of Farebox Recovery Ratio Calculation .................................................................................................. 27
Schedule of Findings and Responses ......................................................................................................................... 28
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INDEPENDENT AUDITOR'S REPORT
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Transit Enterprise Fund (the “Transit Fund”) of the
City of Morro Bay, California (the “City”), which comprise of the Statement of Net Position as of June 30, 2015, and
the related Statement of Revenues, Expenses and Changes in Net Position, and Cash Flows for the year then ended,
and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable
to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the Transit Fund as of June 30, 2015, and the results of its operations and cash flows thereof for
the year then ended in accordance with accounting principles generally accepted in the United States of America.
1655 N. Main Street, Suite 355,Walnut Creek, California 94596
Tel: 925-954-3300 • Fax: 925-954-3350
www.pungroup.com
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Page 2
Emphasis of Matter
Prior Period Adjustments
As part of our audit of the 2015 financial statements, we also audited the adjustments described in Note 9 that were
applied to restate the 2014 financial statements. In our opinion, such adjustments are appropriate and have been
properly applied. We were not engaged to audit, review, or apply any procedures to the 2014 financial statements of
the Transit Fund other than with respect to the adjustments and, accordingly, we do not express an opinion or any
other form of assurance on the 2014 financial statements as a whole.
Reporting Entity
As discussed in Note 1, these financial statements present only the Transit Enterprise Fund and do not purport to, and
do not, present fairly the financial position of the City of Morro Bay as of June 30, 2015, and the changes in its
financial position, and where applicable, its cash flows for the year then ended in accordance with accounting
principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted Management’s Discussion and Analysis (“MD&A) information that accounting principles
generally accepted in the United States of America require to be presented to supplement the financial statements.
Such missing information, although not a part of the financial statements, is required by the Governmental
Accounting Standards Board (“GASB”) who considers it to be an essential part of the financial reporting for placing
the financial statements in an appropriate operational, economic, or historical context. Our opinion on the financial
statements is not affected by this missing information.
2014 Financial Information
The Transit Fund’s financial statements for the year ended June 30, 2014 were audited by other auditors whose report
thereon dated January 29, 2015, expressed unmodified opinion on the Transit Fund’s financial statements.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the Transit Fund’s financial statements. The
Schedule of Farebox Recovery Ratio Calculation is presented for purposes of additional analysis and is not a
required part of the financial statements. Such information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to prepare the Transit Fund’s financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the Transit Fund’s
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 Schedule of Farebox Recovery Ratio Calculation is fairly stated, in
all material respects, in relation to the Transit Fund’s financial statements as a whole.
2
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Page 3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 4, 2016 on our
consideration of the City's internal control over the Transit Fund’s financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion of internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering City's internal control over the Transit Fund’s financial reporting and compliance.
Walnut Creek, California
March 4, 2016
3
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4
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
(INCLUDING THOSE CONTAINED IN THE TDA STATUTES AND CALIFORNIA CODE OF
REGULATIONS) AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARD
Independent Auditor's Report
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
We have audited, in accordance with the 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, and the standards for financial statements and compliance audit contained in the TDA
Statutes and California Code of Regulations issued by the California Department of Transportation, the financial
statements of the Transit Enterprise Fund (the “Transit Fund”) of the City of Morro Bay, California (the “City”) as of
and for the year ended June 30, 2015, and the related notes to the financial statements and have issued our report
thereon dated March 4, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered City's internal control over the
Transit Fund’s financial reporting (“internal control”) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of City's internal control. Accordingly, we do not express an opinion on
the effectiveness of City's internal control.
A deficiency in internal control exists when the design or operation of control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will
not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to
merit attention by those charged with governance.
Our consideration of internal control 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 that might be
deficiencies, significant deficiencies, or material weaknesses. Given these limitations, during our audit, we did not
identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. We
did identify certain deficiencies in internal control described in the accompanying schedule of findings and responses
that we consider to be significant deficiencies as item 2015-001. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to
merit attention by those charged with governance.
1655 N. Main Street, Suite 355,Walnut Creek, California 94596
Tel: 925-954-3300 • Fax: 925-954-3350
www.pungroup.com
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City's Transit Fund’s financial statements are free from
material misstatement, we performed tests of the City’s 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 the Transit Fund’s 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 Standard.
City’s Response to the Finding
The City’s response to the findings identified in our audit is described in the accompanying schedule of findings and
responses. We did not audit the City’s response and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any
other purpose.
Walnut Creek, California
March 4, 2016
6
REPORT ON COMPLIANCE FOR THE TRANSIT FUND
AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE
REQUIRED BY TRANSPORTATION DEVELOPMENT ACT
Independent Auditors’ Report
To the Honorable Mayor and Members of City Council
of the Morro Bay
Morro Bay, California
Report on Compliance for the Transit Fund
We have audited the City of Morro Bay, California’s (the “City”) compliance with the compliance requirements
described in §6666 of the California Code of Regulation, Title 21, Division 3, Chapter 3, Article 5.5 that could have
a direct and material effect on the Transit Enterprise Fund (the “Transit Fund”) of the City for the year ended June
30, 2015.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants
applicable to the Transit Fund.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for the City’s Transit Fund based on our audit of the
compliance requirements referred to above. 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 Transportation
Development Act Guidebook – Statutes and California Codes of Regulations, April, 2013, issued by the California
Department of Transportation Division of Mass Transportation. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to
above that could have a direct and material effect on the Transit Fund occurred. An audit includes examining, on a
test basis, evidence about the City’s compliance with those requirements and performing such other procedures as
we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the Transit Fund. However,
our audit does not provide a legal determination of the City’s compliance.
Opinion on the Transit Fund
In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that
could have a direct and material effect on the Transit Fund for the year ended June 30, 2015.
1655 N. Main Street, Suite 355,Walnut Creek, California 94596
Tel: 925-954-3300 • Fax: 925-954-3350
www.pungroup.com
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Page 2
Other Matters
The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in
accordance with Transportation Development Act Guidebook – Statutes and California Codes of Regulations, April,
2013, issued by the California Department of Transportation Division of Mass Transportation and which are
described in the accompanying schedule of findings and responses as item 2015-001. Our opinion on the City’s
Transit Fund is not modified with respect to this matter.
City’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of
findings and responses. City’s response was not subjected to the auditing procedures applied in the audit of
compliance and, accordingly, we express no opinion on the response.
Report on Internal Control over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over compliance
with the compliance requirements referred to above. In planning and performing our audit of compliance, we
considered the City’s internal control over compliance with the requirements that could have a direct and material
effect on the Transit Fund to determine the auditing procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on compliance for the Transit Fund and to test and report on internal control over
compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the City’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 compliance requirement 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 compliance requirement will not be
prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance
is a deficiency, or a combination of deficiencies, in internal control over compliance with a compliance requirement
that is less severe than a material weakness in internal control over compliance, yet important enough to merit
attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control over compliance that might be
material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may
exist that were not identified. We did not identify any deficiencies in internal control over compliance that we
consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance,
as described in the accompanying schedule of findings and responses as item 2015-001 that we consider to be
significant deficiencies.
City’s response to the internal control over compliance finding identified in our audit is described in the
accompanying schedule of findings and responses. City’s response was not subjected to the auditing procedures
applied in the audit of compliance and, accordingly, we express no opinion on the response.
8
To the Honorable Mayor and Members of
the City Council of the City of Morro Bay
Morro Bay, California
Page 3
The purpose of this report on internal control over compliance is solely to describe the scope of our testing on
internal control over compliance and the results of that testing based on the requirements of §6667 of the California
Codes of Regulation, Title 21, Division 3, Chapter 3, Article 5.5. Accordingly this report is not suitable for any other
purpose.
Walnut Creek, California
March 4, 2016
9
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10
FINANCIAL STATEMENTS
11
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12
The Transit Enterprise Fund
of the City of Morro Bay
Statements of Net Position
June 30, 2015 and 2014
2015
2014
ASSETS
Currents Assets:
Cash and cash equivalents
Accounts receivables
Due from other government
Due from the City of Morro Bay
Prepaid items
Total Current Assets
$
Noncurrent Assets:
Nondepreciable capital assets
Depreciable capital assets
Accumulated depreciation
Total Capital Assets
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities:
Accounts payable
Unearned revenue
Total Current Liabilities
NET POSITION
Investment in capital assets
Restricted for:
PTMISEA
LTF
Unrestricted
Total Net Positions
$
See accompanying Notes to the Financial Statements.
13
343,942
5,870
2,018
351,830
$
135,298
85,589
43,320
79
264,286
40,000
741,580
(597,982)
40,000
741,580
(559,051)
183,598
222,529
183,598
222,529
535,428
486,815
38,265
131,955
170,220
48,214
75,232
123,446
183,598
222,529
13,185
33,000
135,425
13,108
127,732
365,208
$
363,369
The Transit Enterprise Fund
of the City of Morro Bay
Statements of Revenues and Expenses and Changes in Net Position
For the Years Ended June 30, 2015 and 2014
2015
OPERATING REVENUES:
Fares
Advertising revenues
Other
$
Total Operating Revenue
OPERATING EXPENSES:
Purchases transportation
Vehicle maintenance
General and administrative
Capital outlay
Depreciation
Total Operating Expenses
OPERATING LOSS
NONOPERATING REVENUES:
Local Transportation Fund
State Transit Assistance Fund
Interest income
Total Non-Operating Revenues
Changes in Net Position
2014
34,062
5,870
2,228
$
31,391
5,915
2,685
42,160
39,991
180,690
43,331
87,020
38,932
172,290
53,770
84,530
2,866
47,997
349,973
361,453
(307,813)
(321,462)
288,973
18,778
1,901
261,809
17,571
936
309,652
280,316
1,839
(41,146)
NET POSITION
Beginnning of year, as restated (Note 9)
363,369
$
End of the year
See accompanying Notes to the Financial Statements.
14
365,208
404,515
$
363,369
The Transit Enterprise Fund
of the City of Morro Bay
Statements of Cash Flows
For the Years Ended June 30, 2015 and 2014
2015
Cash Flows from Operating Activities
Cash receipts from services provided
Cash paid to suppliers and others
$
Net Cash (Used In) Operating Activities
Cash Flows from Non-Capital Financing Activities
Intergovernmental revenues
Net Cash Provided by Non-Capital Financing Activities
Cash Flows from Investing Activities
Interest income
Net Cash Provided by Investing Activities
2014
36,290
(320,912)
$
41,173
(288,203)
(284,622)
(247,030)
491,365
210,564
491,365
210,564
1,901
936
1,901
936
Net Increase (Decrease) in Cash and Cash Equivalents
208,644
(35,530)
Cash and Cash Equivalents, beginning of year
135,298
170,828
Cash and Cash Equivalents, end of year
$
343,942
$
135,298
Reconcile of Operating Loss to Net Cash (Used In) Operating Activities
Operating (loss)
$
(307,813)
$
(321,462)
Adjustment to reconcile operating loss to net cash used in
operating activities:
Depreciation
Changes in assets and liabilities:
(Increase) decrease in accounts receivables
(Increase) decrease in prepaid items
Increase (decrease) in accounts payable
Net Cash (Used In) Operating Activities
$
See accompanying Notes to the Financial Statements.
15
38,932
47,997
(5,870)
79
(9,950)
1,182
(31)
25,284
(284,622)
$
(247,030)
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16
NOTES TO THE FINANCIAL STATEMENTS
17
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18
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements
For the Years Ended June 30, 2015 and 2014
Note 1 – Summary of Significant Accounting Policies
A. Reporting Entity
The financial statements of the Transit Enterprise Fund (the “Transit Fund”) of the City of Morro Bay,
California (the “City”) are intended to reflect the financial position, results of operation of the transit services.
As an operator of a public transportation system, the City is eligible for Transportation Development Act
(“TDA”) Public Utilities Code Section 99260 (“TDA Section 99260”) funds. These funds were allocated by
the San Luis Obispo Council of Governments (“SLOCOG”) to supplement the City’s transit operations.
The City operates a year round deviated fixed route service that is a fixed route with the ability to flex off the
route for pre-arranged demand response curb to curb trips. The City also operates a seasonal, fixed route
trolley service. The City of Morro Bay has contracted with a private service provider, MV Transportation,
Inc., to manage and operate the Monday through Saturday deviated fixed route transit system in the City, as
well as the seasonal, Friday through Monday trolley service.
B. Financial Statements Presentation and Measurement Focus
The accompanying financial statements present only the Transit Fund and are not intended to present the
financial position, changes in financial position, or cash flows of the City in conformity with accounting
principles generally accepted in the United States of America (“U.S. GAAP”).
The accounting policies of the Transit Fund are in conformity with U.S. GAAP applicable to governmental
units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for
establishing accounting and financial reporting principles.
The financial statements are prepared using the “economic resources” measurement focus and the accrual
basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the
Statements of Net Position. The Statements of Revenues, Expenses, and Changes in Net Position presents
increases (revenues) and decreases (expenses) in total net position.
C. Basis of Accounting
The Transit Fund is maintained on the accrual basis of accounting. Under this basis of accounting, revenues
are recognized in the accounting period in which they are earned and expenses are recognized in the period
when a liability is incurred.
Operating revenues are those revenues that are generated from the primary operations of the Transit Fund.
All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are
essential to the primary operations of the Transit Fund. All other expenses are reported as nonoperating
expenses.
19
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2015 and 2014
Note 1 – Summary of Significant Accounting Policies (Continued)
D. Cash and Cash Equivalents
The Transit Fund’s cash is pooled with the City’s internal investment pool, which is considered to be cash on
hand, demand deposits, and short-term investments with original maturity of three months or less from the
date of acquisition.
E. Prepaid items
Certain payments to vendors applicable to future accounting periods are recorded as prepaid items.
F. Grants
Grant revenues and receivables are recorded when earned on grants that have been approved and funded by
the grantor. Grant sources include Transportation Development Act Local Transportation Fund and State
Transit Assistance Fund.
G. Unearned revenue
Unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical
transactions recorded as unearned revenues are prepaid charges for services, grants received but not yet
earned, and prepaid charges for services.
H. Capital assets
Capital assets are recorded at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from three to fifteen years.
I.
Net Position
Net position is classified as follows:
Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated
depreciation.
Restricted – This component of net position consists of restricted assets reduced by liabilities and
deferred outflows and inflows of resources related to those assets.
Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources,
liabilities, and related inflows of resources that are not included in the determination of investment in
capital assets or the restricted component of net position.
20
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2015 and 2014
Note 1 – Summary of Significant Accounting Policies (Continued)
J.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions. These estimates and assumptions affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates and assumptions.
Note 2 – Cash and Cash Equivalents
The Transit Fund’s share of the City’s cash and cash equivalent at June 30, 2015 and 2014 were $343,942 and
$135,298, respectively.
Cash is deposited in the City’s internal investment pool, which is reported at fair value. The Transit Fund
does not own specifically identifiable securities in the City’s pool. Interest income is allocated based on
average cash balances. Investment policies and associated risk factors applicable to the Transit Fund are
those of the City and are included in the City’s basic financial statements.
Note 3 – Allocations from Local Transportation Fund and State Transit Assistance Funds
The City was allocated the following funds for the years ended June 30, 2015 and 2014:
Article
Agency
Sections
2015
2014
Local Transporation Fund
4
Transit Fund
99260
$
345,696
$ 293,826
4
RTA
99260(a)
111,157
102,462
8
Sr Bus
99400(a)
-
-
8
Sr Bus
99400(c)
-
23,000
456,853
419,288
Total Local Transportation Fund
State Transit Assistance Fund
6.5
Transit Fund
99313
16,568
16,920
6.5
Transit Fund
99314
2,210
651
18,778
17,571
475,631
$ 436,859
Total State Transit Assistance Fund
Total Transportation Development Act Fund
$
The table above contains allocations to San Luis Obispo Regional Transit Authority (the “RTA”) that are a
component of the LTF/STA claim, but are not received by the Transit Fund. The funds are retained by
SLOCOG and passed through to RTA. The allocation of Transit Fund also does not reflect adjustments to
unearned revenue.
21
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2015 and 2014
Note 4 – Capital Assets
The changes in capital assets, and the related accumulated depreciation for the years ended June 30, 2015 and
2014, are as follows:
Balance
July 1, 2014
Nondepreciable capital assets:
Land
$
40,000
Depreciable capital assets:
Buildings
Vehicles
190,879
550,701
Total depreciable assets
Accumulated depreciation
741,580
(559,051)
182,529
Total depreciable capital assets
Total capital assets, net
$
222,529
Additions
$
Balance
July 1, 2013
Nondepreciable capital assets:
Land
$
40,000
Depreciable capital assets:
Buildings
Vehicles
190,879
550,701
Total depreciable assets
Accumulated depreciation
741,580
(511,054)
230,526
Total depreciable capital assets
Total capital assets, net
$
270,526
-
$
-
-
$
40,000
190,879
550,701
(38,932)
-
741,580
(597,983)
(38,932)
-
143,597
(38,932)
$
-
-
$
$
183,597
Balance
June 30, 2014
Deletions
-
$
$
-
Additions
$
Balance
June 30, 2015
Deletions
-
$
40,000
-
190,879
550,701
(47,997)
-
741,580
(559,051)
(47,997)
-
182,529
(47,997)
$
-
$
222,529
Note 5 – Unearned revenue
Pursuant to Section 6634, money received from the local transportation fund and the state transit assistance fund for
operating cost exceeded its actual operating cost (including payments for disposition of claims arising out of the
operator's liability) in the fiscal year less the sum of the actual amount of fare revenues received during the fiscal year.
These amounts were reported as unearned revenue for the fiscal year ended June 30, 2015 and 2014.
22
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2015 and 2014
Note 5 – Unearned revenue (Continued)
The computation of unearned revenue for the year ended June 30, 2015 and 2014 are as follows:
2015
Beginning balance, July 1,
Gross receipts
Local Transportation Fund
State Transit Assistance Fund
Fares
Others
Gross receipts
Operating expenses, less depreciation
Amount received in excess of net operating
costs as of June 30
Unearned revenue total
Minus: funds restricted
Unearned revenue at June 30,
$
2014
75,232
$
20,214
345,696
18,778
34,062
2,228
400,764
(311,041)
316,826
17,571
31,391
2,686
368,474
(313,456)
89,723
164,955
(33,000)
131,955
55,018
75,232
75,232
$
$
Note 6 – Jointly Governed Organization
The City is a member of the San Luis Obispo Regional Transit Authority (the “RTA”), which is a joint powers
agency comprised of the City of San Luis Obispo, the City of Morro Bay, the City of Atascadero, the City of
Arroyo Grande, the City of El Paso de Robles, the City of Grover Beach, the City of Pismo Beach, and the
County of San Luis Obispo. The RTA operates a fixed route public transportation system, linking San Luis
Obispo to the outlying communities of Morro Bay, Los Osos, Arroyo Grande, El Paso de Robles, Grover Beach,
Pismo Beach and Atascadero along with Cuesta College and the California Mens’ Colony, and into Santa Maria
in Santa Barbara County. The RTA also manages and operates the complementary Americans with Disabilities
Act (“ADA”) service, provided within ¾ mile corridors along all fixed route bus services; those include the City’s
Morro Bay Transit bus and trolleys. The RTA is funded through Transportation Development Act Funds that are
allocated to each member, state and federal grants, and fare revenues. Vehicle operations and vehicle
maintenance for the RTA are provided by the RTA. Separate audited financial statements are issued by the RTA.
Total assets
Total deferred outflows of resources
Total liabilities
Total deferred inflows of resources
Total operating revenues
Total operating expenses
Total non-operating revenues (expenses)
Total capital contribution
Net position beginning balance, restated
June 30, 2015
$ 20,423,658
74,414
6,071,416
106,962
$ 14,319,694
$
$
23
1,528,831
10,153,537
6,948,821
4,563,212
11,432,367
14,319,694
The Transit Enterprise Fund
of the City of Morro Bay
Notes to the Financial Statements (Continued)
For the Year Ended June 30, 2015 and 2014
Note 7 – Commitments and Contingencies
A. Lawsuits
The Transit Fund is often involved in certain matters of litigation that have arisen in the normal course of
conducting the Transit Fund’s business. The Transit Fund is currently not involved in any litigation that may
result in a material adverse financial impact. Additionally, the Transit Fund’s management believes that the
Transit Fund’s insurance programs are sufficient to cover any potential losses should an unfavorable outcome
materialize.
B. Federal and State Grant Programs
The City participates in State grant programs for the Transit Fund, the principal of which are subject to program
compliance audits pursuant to applicable State requirements. Accordingly, the City’s compliance with applicable
grant requirements will be established at a future date. The amount of expenditures which may be disallowed by
the granting agencies cannot be determined at this time, although the Transit Fund management anticipates such
amounts, if any, will be immaterial.
Note 8 – Related Party Transactions
Certain general and administrative costs are allocated to the Transit Fund by the City based upon an approved
cost allocation plan. The amount of allocation during the fiscal year ended June 30, 2015 and 2014 were $79,775
in both years.
Note 9 – Prior Period Adjustment
Amount reported for the year ended June 30, 2014 and 2013 in unearned revenue was understated by $75,232 and
$20,214, respectively, due to amounts subject to maximum funding allowance pursuant to Section 6634 (See Note
5).
Accordingly, the City’s net position at July 1, 2014 and 2013 were restated as follows:
Beginning Net Position, as previously reported
Prior period adjustments:
Unearned revenue
Beginning Net Position, as restated
24
$
July 1, 2014
438,601
$
(75,232)
363,369
July 1, 2013
$ 424,729
$
(20,214)
404,515
SUPPLEMENTARY INFORMATION
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The Transit Enterprise Fund
of the City of Morro Bay
Supplementary Information
For the Year Ended June 30, 2015 and 2014
Schedule of Farebox Recovery Ratio Calculation
The Transit Fund is subject to the provisions of TDA Section 99268.3 and must maintain a minimum fare ratio of
10%.
For the years ended June 30, 2015 and 2014, the Transit Fund’s farebox recovery ratio of operating revenues to
operating expenses was as follows:
2015
(a) Operating fare and allowable non-fare revenues
(b) Operating expenses, net of depreciation
$
39,932
2014
$
37,306
311,041
310,590
(c) Fare revenue ratio [ (a)/(b) ]
12.84%
12.01%
Minimum ratio required
10.00%
10.00%
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The Transit Enterprise Fund
of the City of Morro Bay
Schedule of Findings and Responses
Finding 2015-001-Maximum Funding Allowance
Criteria:
Section 6634 (a) states, “No operator or Transit Service Claimant shall be eligible to receive moneys during the
fiscal year from the local transportation fund and the state transit assistance fund for operating costs in an amount
that exceeds its actual operating cost (including payments for disposition of claims arising out of the operator's
liability) in the fiscal year less the sum of the actual amount of fare revenues received during the fiscal year.”
Condition:
Amount claimed and received from the local transportation fund and the state transit assistance fund for operating
cost exceeded its actual operating cost (including payments for disposition of claims arising out of the operator's
liability) in the fiscal year less the sum of the actual amount of fare revenues received during the fiscal year. The
management discovered the error and corrected the reporting of local transportation fund in excess of net operating
costs are unearned revenues during the year ended June 30, 2015.
Cause:
Communication process was not sufficient to provide management and staff adequate knowledge on Transportation
Development Act regulations and compliance requirements.
Recommendation:
We recommend that the City implement procedures to ensure that funds received from the local transportation fund
and the state transit assistance fund for operating cost does not exceeded its actual operating cost (including payments
for disposition of claims arising out of the operator's liability) in the fiscal year less the sum of the actual amount of
fare revenues received during the fiscal year.
Management’s Response
Management agrees with the finding as noted, and beginning with the 2015/16 fiscal year, will ensure compliance
with TDA Section 6634(a) by adding a required reconciliation of the Transit fund to our year-end checklist.
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