CC 06-06-2023 Item No. 10 FY 2021-22 (ACFR)_Written CommunicationsCC 06-06-2023
Item #10
Recieve the FY 2021-22
Annual Comprehensive
Financial Report (ACFR)
and related supplemental
reports
Written Communications
From:Rhoda Fry
To:City Clerk; City Council
Subject:June 6 City Council Agenda Item #10 AFCR
Date:Tuesday, June 6, 2023 2:46:32 PM
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Dear City Council,
SUMMARY FOR MINUTES: Rhoda Fry requested that staff fix errors in the AFCR.
This item first showed up as an information item. It is one of the City’s most important
documents and we were unable to comment on it. Now it is back on the consent
calendar, where we are also unable to comment on it unless a council member
removes it from consent calendar. This implies that our City’s leadership does not
want this important document to be discussed and that concerns me.
The AFCR is similar to a corporation’s annual report. It is an important financial
document. In order for it to be credible, it must be correct. There continue to be
serious errors in this document that reduce the credibility of this document. Please
direct staff to correct this document. I have already asked several times (including in
the audit committee).
Please also refer to my letter from May 16 2023 below.
Regards,
Rhoda Fry
City Council May 16 Agenda #21 AFCR must be an Action Item, not Informational Item
Dear City Council,
I am dismayed to see that Agenda #21 AFCR is an informational item. This item must be
discussed as an action item. It is important to note that the auditor, not City staff, found three
deficiencies, one of which could cause UNAUTHORIZED TRANSACTIONS.
How can we verify that there have been no unauthorized transactions?
As recommended by the report, please specify what the City has done to ensure the
segregation of duties as recommended in the report and that all issues raised have been
resolved. Please read the letter from Crowe llp.
I attended the Audit Committee wherein an earlier version of this document had been
presented. It contained information that was easily 50 years out of date. It had said that the
City Council appointed the City Treasurer and to my knowledge this has not happened in fifty
years. It is good to know that I was heard and this error was corrected. Does anyone actually
verify these reports?
Nevertheless, other errors remain and some were discussed in the meeting. There is no
mention that Target at Main Street has closed. Doppio Zero restaurant is listed as one of the
successful restaurants but it closed in 2020. The document also mentions Stein Mart as one of
our retailers, which also closed in 2020. Likewise, page 108 mentions Seagate as being the 8th
largest employer in Cupertino – to my knowledge, Seagate moved out around 2020. I am not
about to vet this entire document. What I do know is that it has errors and that worries me.
At the meeting, I also mentioned my concern about the CDTFA audit, which is lacking in this
otherwise rosy report. This statement in the cover letter dated March 31, 2023 simply does not
pass the straight face test: “Given these trends, the City’s sales tax revenue is projected to
show a more modest increase going forward.” The report covers the time period to June 30,
2022 and at that time the CDTFA issues were known. Page 59 of the report mentions the
probable reallocation of sales and use taxes – why was it omitted on the cover letter? As we
know, this is a really big deal.
One of my questions at the audit committee was that the cost of Administration more than
doubled from 2021 to 2022. Although the report makes some mention as to items that
contributed to the increase, I would like to know how we got to double. At the meeting,
Councilmember Mohan was kind enough to assure me that I would receive an answer to my
question. This question remains unanswered. Note also that recreation and community
services expenses quadrupled and I suppose that activities might still have been on hold in
2021.
I also asked about having greater transparency for other amenities that had enterprise funds in
the past. Currently the only recreational facilities that are split out as enterprise funds are golf
and sports center. Blackberry pool/picnic used to be combined with golf. But Blackberry
pool/picnic never got its own fund and capital improvements there have been swallowed up
under special projects, so we have no good visibility for its overall balance sheet. Similarly,
the Senior Center had also operated as an enterprise fund and we have little transparency as to
how much it is being subsidized. Especially now that we’re going to be tightening our
financial belts, we need to have greater transparency.
Question – motor vehicle license fees increased by over 50%. Could that be that there were
new vehicle purchases? If so, what happened to the old vehicles? Were they sold and where
would that show up as income?
Please also take a look at the attached chart that shows City employment. Some areas have
gotten quite fat over the years, especially Administration and Administrative services. This
chart is worth looking at in the context of the budget.
Lastly, here’s my ask. Given that the scope of this report is quite narrow, we really need is a
forensic auditor who can better organize our chart of accounts so that we have better
transparency in order to make sound financial decisions.
Concerned Citizen,
Rhoda Fry