Brief

The Office of Finance has submitted the annual Communications Users Tax audit for fiscal year 2025-26, a routine review of tax revenue from communications services. The audit examines compliance and collection of the CUT, which is levied on phone, internet, and cable services in Los Angeles. The file was referred to the Budget and Finance Committee on May 21, 2026, where it remains under review.

Full summary

The Communications Users Tax is a municipal tax on communications services — including telephone, internet, and cable television — paid by Los Angeles residents and businesses. City ordinance requires an annual independent audit of whether the tax is properly collected, remitted, and deposited into the General Fund. For the fiscal year ended June 30, 2025, the Office of Finance engaged the accounting firm Turner, Warren, Hwang and Conrad to perform that audit under agreed-upon procedures consistent with Government Auditing Standards. The auditors sampled 107 remittance and journal entry transactions recorded in the city's LATAX tax collection system and tested three core questions: whether communications carriers accurately remitted the amounts owed, whether the Office of Finance's collection procedures complied with the city's CUT ordinance, and whether CUT revenue was properly deposited into the General Fund. On all three counts, the auditors found no exceptions. They also reviewed internal controls over the collection process and identified no material weaknesses, though they noted their review was not designed to catch every possible deficiency. City Treasurer and Director of Finance Diana Mangioglu signed a representation letter accompanying the audit affirming that the Office of Finance properly collected and recorded CUT through both the LATAX and FMS accounting systems, that no fraud or material unrecorded transactions occurred, and that the city complied with all applicable laws governing the tax. The auditors' testing scope included analysis of collections by provider and by month compared to the prior fiscal year, reconciliation of LATAX receipts against general ledger deposits, and review of quarterly remittances from the California Department of Tax and Fee Administration. The Office of Finance transmitted the completed audit to the City Council on May 21, 2026, and it was immediately referred to the Budget and Finance Committee, where it remains pending. No committee action has been recorded since the referral.

Activity (2)

• 2026-05-21 Office of Finance document(s) referred to Budget and Finance Committee.
• 2026-05-21 Document submitted by Office of Finance, dated May 21, 2026.

Documents (1)

• 2026-05-21 Report from Office of Finance · report