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COUNTY OF ALPINE ALPINE TRANSIT SERVICES Annual Financial Statements For the Year Ended June 30, 2015 ---PAGE BREAK--- Table of Contents Page Independent Auditor’s Report 1-2 Financial Statements: Statement of Net Position 3 Statement of Revenues, Expenses and Changes in Net Position 4 Statement of Cash Flows 5 Notes to the Basic Financial Statements 6-13 Other Reports: Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 14-15 Independent Auditor’s Report on Compliance Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with the Statutes, Rules and Regulations of the California Transportation Development Act, the Allocation Instructions and Resolutions of the Local Transportation Commission And the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) Guidelines 16-17 ---PAGE BREAK--- 1 INDEPENDENT AUDITOR’S REPORT To the Board of Supervisors County of Alpine Markleeville, California We have audited the accompanying financial statements of Alpine Transit Services of the County of Alpine, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, as listed in the table of contents. 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 an opinion 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. 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 Alpine Transit Services’ 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 Alpine Transit Services’ 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alpine Transit Services of the County of Alpine, as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. ---PAGE BREAK--- 2 Emphasis of Matter As discussed in Note 1-A, the financial statements present only Alpine Transit Services and do not purport to, and do not present fairly the financial position of the County of Alpine, as of June 30, 2015 and 2014, the changes in its financial position, or, where applicable, its cash flows for the years 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. Change in Accounting Principle As discussed in Note 9 in the financial statements, effective July 1, 2014, the County implemented the provisions of Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Management has omitted the management’s discussion and analysis and budgetary comparison schedules 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2016, on our consideration of Alpine Transit Services’ internal control over 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 on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Alpine Transit Services’ internal control over financial reporting and compliance. Clovis, California March 16, 2016 ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Statement of Net Position June 30, 2015 (With Comparative Information as of June 30, 2014) 2015 2014 ASSETS Current Assets: Cash and investments 32,054 $ 83,688 $ Accounts receivable 622 - Interest receivable 26 47 Total Current Assets 32,702 83,735 Noncurrent Assets: Equipment, net of accumulated depreciation 95,852 18,913 Total Assets 128,554 102,648 DEFFERED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date 3,104 - Proportionate share of collective pension related deferred outflows of resources 17 - Total deferred outflows of resources 3,121 - LIABILITIES Current Liabilities: Accounts payable 41 1,784 Accrued Salaries and benefits 661 1,014 Due to other funds 1,408 - Unearned revenues 70,526 121,050 Total Current Liabilities 72,636 123,848 Noncurrent Liabilities: Net pension liability 28,335 - Total Liabilities 100,971 123,848 DEFFERED INFLOWS OF RESOURCES Proportionate share of collective pension related deferred inflows of resources 8,571 - Difference in actual and proportionate share of pension contributions 49 - Total Deferred Inflows of Resources 8,620 - NET POSITION Net investment in capital assets 95,852 18,913 Unrestricted (73,768) (40,113) Total Net Position (Deficit) 22,084 $ (21,200) $ The accompanying notes are an integral part of these financial statements. 3 ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Statement of Revenues, Expenses and Changes in Net Position For the Year Ended June 30, 2015 (With Comparative Information for the Year Ended June 30, 2014) 2015 2014 OPERATING REVENUES Passenger fares 7,046 $ 7,100 $ OPERATING EXPENSES Salaries and benefits 42,192 37,312 Administrative 18,278 16,987 Fuel and vehicle maintenance 7,514 8,513 Insurance 1,131 3,582 Depreciation 14,065 7,565 Total Operating Expenses 83,180 73,959 Net Operating Income (Loss) (76,134) (66,859) NON-OPERATING REVENUES (EXPENSES) Federal transit administration grant 33,783 25,982 Local Transportation Fund allocation 28,184 33,000 Interest 105 312 Total Nonoperating Revenues (Expenses) 62,072 59,294 Income (Loss) Before Contributions (14,062) (7,565) CAPITAL CONTRIBUTIONS Federal transit administration capital grant 35,661 - Prop 1B proceeds 44,646 - State transit assistance funds 10,697 - Total Capital Contributions 91,004 - CHANGE IN NET POSITION 76,942 (7,565) Net Position (Deficit), Beginning of Year, as Restated (54,858) (13,635) NET POSITION (DEFICIT), END OF YEAR 22,084 $ (21,200) $ The accompanying notes are an integral part of these financial statements. 4 ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Statement of Cash Flows For the Year Ended June 30, 2015 (With Comparative Information for the Year Ended June 30, 2014) 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users 6,424 $ 7,100 $ Payments to employees (42,369) (37,155) Payments to suppliers (27,258) (28,181) Net Cash Used by Operating Activities (63,203) (58,236) CASH FLOWS FROM INVESTING ACTIVITIES Interest allocations from pooled investments 126 359 Net Cash Provided by Investing Activities 126 359 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES: Operating grants and other support 66,786 13,542 Net Cash Provided by Non-Capital Financing Activities 66,786 13,542 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital contribution 35,661 - Acquisition of capital assets (91,004) - Net Cash Used in Capital and Related Financing Activities (55,343) - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALANTS (51,634) (44,335) Cash and Cash Equivalents, Beginning of the Year 83,688 128,023 Cash and Cash Equivalents, End of the Year 32,054 $ 83,688 $ RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating loss (76,134) $ (66,859) $ activities: Depreciation 14,065 7,565 Change in assets and liabilities: Intrafund receivable (622) - Deferred Outflows (3,121) - Accounts payable (116) 901 Accrued salaries and benefits (353) - Intrafund payables (219) 157 Deferred Inflows 8,620 - Net Pension Liability (5,323) - Net Cash Used by Operating Activities (63,203) $ (58,236) $ The accompanying notes are an integral part of these financial statements. 5 ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 6 Note 1: Summary of Significant Accounting Policies The financial statements of the Alpine Transit Services Fund (Fund) are prepared in accordance with Generally Accepted Accounting Principles (GAAP) as applied to governmental agencies. The Fund applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. A. Reporting Entity The Fund receives allocations from the Alpine County Local Transportation Commission (Commission) to operate and provide public transit services to Alpine County (County). The Fund is an enterprise fund of the County and is included in their annual report. The financial statements of the Fund are intended to present the financial position, results of operations and cash flows of only the portion of the funds of the County that is attributable to Transportation Development Act Funds allocated for transit purposes and is not intended to present fairly the financial position and results of operations of the County in conformity with accounting principles generally accepted in the United States of America. B. Basis of Presentation The Fund’s resources are allocated to and accounted for in these financial statements as an enterprise fund type of the proprietary fund group. The enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered through user charges, or where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other policies. C. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The Fund is accounted for on a flow of economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which the Fund gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants, entitlements and donations. On an accrual basis, revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. An enterprise fund distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the Fund’s principal ongoing operations. The principal operating revenues of the Fund are charges to passengers for public transit services. Operating expenses for the Fund include the cost of ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 7 transit services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. D. Cash in County Treasury Cash is held by the Fund with the County in an investment pool in order to facilitate the management of cash. On a quarterly basis, the County Treasurer allocates interest to the various funds based upon the average cash balances. Information regarding categorization of investments, risk and fair value reporting can be found in the County’s financial statements. The Alpine County Treasury Oversight committee oversees the Treasurer’s investment policies and practices. The Fund adheres to the County’s deposit and investment policy that addresses specific types of risk. Required risk disclosures for the Fund’s investment in the County’s Investment Pool at June 30, 2015 and 2014, were as follows: 2015 2014 Credit risk Not rated Not rated Custodial risk Not applicable Not applicable Concentration of credit risk Not applicable Not applicable Interest rate risk (average maturity) 128 days 139 days Investments held in the County’s investment pool are available on demand and are stated at cost plus accrued interest, which approximates fair value. E. Cash and Cash Equivalents For the purpose of the statement of cash flows, all cash and investments with original maturities of three months or less and the Fund’s investment in the County’s investment pool are considered to be cash equivalents. F. Capital Assets Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed. The Fund defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives of the assets are as follows: Transit Vehicles and Equipment 7-10 Years ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 8 G. Net Position The financial statements utilize a net position presentation. Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources and are displayed in two components: Net Investment in Capital Assets – This category groups all capital assets into one component of net position. Accumulated depreciation and the outstanding balances of debt, if any, that are attributable to the acquisition, construction or improvement of these assets reduces the balance in this category. Unrestricted Net Position – This category represents net position of the Fund not restricted for any project or other purposes. Sometimes the Fund will expend outlays for a particular purpose from both restricted and unrestricted resources. To determine the amounts to report as restricted net position and unrestricted net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. The Fund considers restricted net position to have been depleted before unrestricted net position is applied. H. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from these estimates. I. Implementation of Governmental Accounting Standards Board (GASB) Statements In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27. The objective of this statement is to improve accounting and financial reporting by state and local governmental pensions. In November 2013, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date to address an issue in Statement No. 68 concerning provisions related to certain pension contributions made to defined benefit pension plans prior to the implementation of that Statement by employers and nonemployer contributing entities. As of July 1, 2014, the County implemented these Statements and restated the beginning net position of the Fund by $33,658 and recognized $2,906 of beginning deferred outflows of resources for its pension contributions to establish a beginning net pension liability of $36,564. The County has insufficient prior year data which makes it impractical to restate the amounts of all applicable deferred outflows of resources, net pension liability and deferred inflows of resources related to pensions. Therefore, the County has elected to report the implementation of these Statements as a cumulative effect of an accounting change in the financial statements for the year ended June 30, 2015. ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 9 J. Future Pronouncements The County is currently analyzing its accounting and financial reporting practices to determine the potential impact on the financial statements of the following recently issued GASB Statements: In February 2015, the GASB issued GASB Statement No. 72, Fair Value Measurement and Application. This Statement is intended to improve accounting and financial reporting for state and local governments’ investments by enhancing the comparability of financial statements among governments by requiring measurement of certain assets and liabilities at fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. The requirements of this Statement are effective for the County’s fiscal year ending June 30, 2016. In June 2014, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB), which improves the accounting and financial reporting by state and local governments for OPEB plans, similar to the accounting and reporting changes enacted with GASB Statement No. 68 for pension plans. This Statement replaces the requirements of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions and Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. GASB Statement No. 75 is effective for the County’s fiscal year ending June 30, 2018. In June 2014, the GASB issued GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, which clarifies the hierarchy of generally accepted accounting principles (GAAP), and reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within the scope of authoritative GAAP. GASB Statement No. 76 is effective for the County’s fiscal year ending June 30, 2016. Note 2: Capital Assets A summary of changes in capital assets during the year ended June 30, 2015, is as follows: Balance Balance July 1, 2014 Additions Retirements June 30, 2015 Vehicles and equipment 52,955 $ 91,004 $ - $ 143,959 $ Accumulated depreciation (34,042) (14,065) - (48,107) 18,913 $ 76,939 $ - $ 95,852 $ ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 10 Note 3: Long-term Liabilities The following is a summary of long-term liabilities activity for the fiscal year ended June 30, 2015: Balance Balance Amounts Due July 1, 2014 Additions Retirements June 30, 2015 Within One Year Net pension liability 36,564 $ 8,831 $ (17,060) $ 28,335 $ - $ 36,564 $ 8,831 $ (17,060) $ 28,335 $ - $ Payments toward the net pension liability are liquidated by annual required contributions generally based on a percentage of salaries which are paid to CalPERS. Note 4: Fare Revenue Ratio The Commission allocated funds for transit services within Alpine County. The County is required by the Transportation Development Act to maintain a minimum fare revenue ratio to operating expense of at least 10 percent. On May 4, 2010, the Commission adopted a resolution setting the minimum farebox ratio requirement to 1 percent as allowed by the Transportation Development Act, Section 6633(b) of the California Code of Regulations. The calculation of the fare revenue ratios for 2015 and 2014 are as follows: 2015 2014 Fare revenues 7,046 $ 7,100 $ Operating expenses 83,180 $ 73,959 $ Less: depreciation (14,065) (7,565) Net Operating expenses 69,115 $ 66,394 $ Fare revenue ratio 10.19% 10.69% ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 11 Note 5: Unearned Revenues A schedule of changes in unearned revenue for the year ended June 30, 2015 is as follows: LTF STA Operating Capital PTMISEA* Total Balance, June 30, 2014 27,473 $ 48,931 $ 44,646 $ 121,050 $ Allocations 33,000 - - 33,000 Return of funding - - - - Maximum eligibility (28,181) (10,697) (44,646) (83,524) Balance, June 30, 2015 32,292 $ 38,234 $ - $ 70,526 $ * Proposition 1B, Public Transportation Modernization, improvement, and Service Enhancement Account Program (PTMISEA) Local Transportation Fund Maximum Eligibility Allocations received from the Commission are recognized as revenues based on a formula provided in California Public Utilities Code of Regulations, Section 6634 which, in general, provides that no transit operator or claimant shall be eligible to receive funds that exceed its operating costs less certain adjustments. Allocations received in excess of this are subject to repayment to the Local Transportation Fund and are deferred and reported as unearned at June 30. It is the policy of the Commission to require carry-over of excess funding to a subsequent year to offset future transit expenses. At June 30, 2015, the Fund had deferred LTF allocations for operating purposes determined as follows: Maximum amount allowed: Operating expenses 83,180 $ Adjustments: Depreciation (14,065) Farebox revenues (7,046) FTA operating assistance (33,783) Interest revenues (105) Maximum amount allowed 28,181 $ Note 6: Insurance and Risk of Loss The Fund is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Fund is insured against these types of losses through various commercial insurance policies and participates in the County’s self-insured risk pool. ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 12 Note 7: Fund Employees Retirement Plan (Defined Benefit Plan) The Fund is included in the County’s reporting entity and as such the Fund’s employees are covered under the retirement plan of the County of Alpine. The County of Alpine contributes to the California Public Employees Retirement System (PERS), a cost- sharing multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. PERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members and beneficiaries. Benefit provisions and all other requirements are established by statute. Copies of PERS annual financial report may be obtained from their executive office – Lincoln Plaza North, 400 Q Street, Sacramento, CA 95811. Required disclosure information regarding employees’ retirement plan can be found in the County’s audited financial statements which may be obtained by contracting the County Finance Office at P.O. Box 266, Markleeville, CA 96120, or by calling [PHONE REDACTED]. Audited financial statements are also available at http://www.alpinecountyca.gov/DocumentCenter/Index/66. Note 8: Public Transportation Modernization Improvement and Service Enhancement Account In November 2006, California voters passed a bond measure enacting the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006. Of the $19.925 billion of State general obligation bonds authorized, $4 billion was set aside by the State as instructed by the statute as the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA). These funds are available to the California Department of Transportation for intercity rail projects and to transit operators in California for rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements, or for rolling stock procurement, rehabilitation, or replacement. During the fiscal year, the Commission carried over prior year funding of $44,646 from the State’s PTMISEA and used all of it for the purchase of a new transit vehicle. PTMISEA funds received and expended were as follows: Balance, beginning of year 44,646 $ FY 2015 Activity: Received - Expended (44,646) Balance, end of year - $ ---PAGE BREAK--- COUNTY OF ALPINE ALPINE TRANSIT SERVICES Notes to the Basic Financial Statements June 30, 2015 13 Note 9: Restatement of Beginning Net Position The accompanying financial statements reflect adjustments that resulted in the restatement of beginning net position. The adjustments occurred due to a change in an accounting principle resulting from the implementation of GASB No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB statement No. 27. The following schedule summarizes the effect of the restatement of the beginning net position as of July 1, 2014, resulting from implementation of GASB Statement No. 68: Net position (Deficit) July 1, 2014 (21,200) $ Cumulative effect of change in accounting principle (33,658) Net Position (Deficit) at July 1, 2014, restated (54,858) $ ---PAGE BREAK--- OTHER REPORTS ---PAGE BREAK--- 14 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Supervisors County of Alpine Markleeville, 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, the financial statements of Alpine Transit Services of the County of Alpine, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Alpine Transit Services’ basic financial statements, and have issued our report thereon dated March 16, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Alpine Transit Services’ internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Alpine Transit Services’ internal control. Accordingly, we do not express an opinion on the effectiveness of Alpine Transit Services’ internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of Alpine Transit Services’ financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Alpine Transit Services’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. ---PAGE BREAK--- 15 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 Alpine Transit Services’ internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Alpine Transit Services’ internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Clovis, California March 16, 2016 ---PAGE BREAK--- 16 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH THE STATUTES, RULES AND REGULATIONS OF THE CALIFORNIA TRANSPORTATION DEVELOPMENT ACT, THE ALLOCATION INSTRUCTIONS AND RESOLUTIONS OF THE LOCAL TRANSPORTATION COMMISSION AND THE PUBLIC TRANSPORTATION MODERNIZATION IMPROVEMENT AND SERVICE ENHANCEMENT ACCOUNT (PTMISEA) GUIDELINES To the Board of Supervisors County of Alpine Markleeville, California We have audited the compliance of the for Alpine Transit Services of the County of Alpine with the types of compliance requirements described in Section 6666 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) and the allocation instructions and resolutions of Alpine Transit Services’ compliance with the requirements of laws, regulations, contracts, and grants applicable to the Transportation Development Act (TDA) funds is the responsibility of Alpine Transit Services’ management. Our responsibility is to express an opinion on Alpine Transit Services’ compliance based on our audit. As part of the audit, we performed testing of the following program: Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) In November 2006, California Voters passed a bond measure enacting the Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act of 2006. Of the $19.925 billion of the State general obligation bonds authorized, $4 billion was set aside by the State as instructed by the statute as the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA). These funds are available to the California Department of Transportation for intercity rail projects and to transit operators in California for rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements or for rolling stock procurement, rehabilitation or replacement. During the fiscal year ended June 30, 2015, Alpine Transit Services carried over prior year funding of $44,646 from the State’s PTMISEA and used all of it for the purchase of a new transit vehicle. As of June 30, 2015, PTMISEA funds received and expended were verified in the course of our audit as follows: Balance, beginning of year $ 44,646 FY 2015 Activity: Received - Expended (44,646) Balance, end of year $ - ---PAGE BREAK--- 17 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. Those standards 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 direct and material effect on the TDA funds occurred. An audit includes examining, on a test basis, evidence about the Alpine Transit Services’ 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 of the Alpine Transit Services’ compliance with those requirements. In our opinion the TDA funds allocated to and received by Alpine Transit Services pursuant to the Act were expended in conformance with the applicable statues, rules and regulations of the Act and the allocation instructions and resolutions of the Alpine County Local Transportation Commission. This report is intended solely for the information and use of Alpine Transit Services, the Alpine County Local Transportation Commission, the California Department of Transportation, and the State Controller’s Office, and is not intended to be and should not be used by anyone other than these specified parties. Clovis, California March 16, 2016