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AC 08-22-2022 PresentationsAugust 22, 2022 Treasurer’s Investment Report Month ending July 31, 2022 Policies Cash and Investments Investments Compliance Agenda 2 Policies •California Government Code •Municipal Code •Audit Committee Charter •City Investment Policy •Pension Trust Investment Policy •OPEB Trust Investment Policy Policies 4 Cash and Investments General $121,083,844 53% Special Revenue $47,030,785 20% Debt Service $6,850 0% Capital Projects $40,288,485 18% Enterprise $12,850,909 6% Internal Service $7,230,145 3% Cash and Investments by Fund Type Cash $29,496,949 13% Cash Equivalents $21,059,752 9% Investments $157,443,313 69% Restricted for Pension $20,491,004 9% Cash and Investments by Account Type $228.5M $228.5M 6 Cash and Investments –General Ledger Balance by Fund As of July 31, 2022 Fund Type Beginning Balance Receipts Disbursements Journal Adjustments Ending Balance General Fund 123,618,119 6,296,718 (8,889,105)58,112 121,083,844 Special Revenue Funds 47,683,992 550,040 (703,247)(500,000)47,030,785 Debt Service Funds 6,850 ---6,850 Capital Projects Funds 39,585,744 529,854 (327,113)500,000 40,288,485 Enterprise Funds 12,874,527 130,027 (820,499)666,856 12,850,909 Internal Service Funds 7,923,077 -(687,120)(5,812)7,230,145 Total $ 231,692,309 $ 7,506,639 $ (11,427,085)$ 719,155 $ 228,491,018 7 Beginning Balance Ending Balance % of Portfolio Cash in banks and on hand Operating Checking (Wells Fargo)32,667,152 29,441,674 13% Workers' Compensation Checking (Wells Fargo)17,654 41,842 0% Payroll Checking (Wells Fargo)--0% Restricted for Bond Repayments1 (BNY Mellon)8,333 8,333 0% Petty Cash and Change 5,100 5,100 0% Cash Equivalents Local Agency Investment Fund 21,059,752 21,059,752 9% Investments Investments (Chandler)157,443,313 157,443,313 69% Restricted for Pension (PARS)20,491,004 20,491,004 9% Total Cash and Investments $ 231,692,309 $ 228,491,018 100% Cash and Investments –General Ledger Balance As of July 31, 2022 1 Cash held by fiscal agent for bond repayments 8 Beginning Balance Ending Balance % of Portfolio Cash in banks1 Operating Checking (Wells Fargo)32,249,699 29,788,907 14% Workers' Compensation Checking (Wells Fargo)19,738 43,517 0% Payroll Checking (Wells Fargo)--0% Restricted for Bond Repayments2 (BNY Mellon)8,333 8,333 0% Cash Equivalents Local Agency Investment Fund 21,059,752 21,099,180 10% Investments Investments (Chandler)148,744,657 149,849,867 68% Restricted for Pension (PARS)17,240,051 18,310,826 8% Total Cash and Investments $ 219,322,230 $ 219,100,630 100% Cash and Investments –Bank Balance As of July 31, 2022 1 Unadjusted balance from the bank statement. Does not reflect outstanding checks or deposits in transit. 2 Cash held by fiscal agent for bond repayments 9 Investments Section 115 Trust Equities 66% Fixed Income 28% Real Assets 5%Cash 1% Market Value by Asset Class Asset Class Range Target Equities 50%-70%63% Fixed Income 20%-40%29% Real Estate 0%-15%5% Commodities 0%-10%2% Cash 0%-10%1% 11 Section 115 Trust As of July 31, 2022 Beginning Balance Contributions Earnings/ Losses Expenses Distributions Ending Balance Pension 17,240,051 -1,075,662 (4,868) -18,310,826 OPEB 31,339,861 -1,965,702 (9,447)-33,296,116 Total $48,579,912 $-$3,041,364 $(14,333) $-$51,606,942 Rate of Return * 1-month 3-month 1-year 3-year 5-Year 10-Year City of Cupertino Pension 6.24%-0.99%-12.48%5.90%-- City of Cupertino OPEB 6.27% -0.99%-12.49%4.67%5.19%6.25% 12*Rate is annualized for periods longer than one year Local Agency Investment Fund (LAIF) As of July 31, 2022 Beginning Balance Deposits Interest Earnings* Withdrawals Ending Balance Annual Interest Rate LAIF $21,059,752 $-$39,428 $-$21,099,180 0.75% *Interest is deposited quarterly 13 Investments (Chandler) As of July 31, 2022 June 30, 2022 July 31, 2022 Market Value 148,744,657 149,849,867 Par Value 155,016,024 155,207,329 Book Value 155,117,380 155,242,781 Average Maturity 2.74 years 2.77 years Average Modified Duration 2.39 2.42 Average Purchase Yield-to-Market 1.41%1.49% Rate of Return* 1-month 3-month 1-year 3-year 5-year 10-year City of Cupertino 0.75%0.69%-4.33%0.56%N/A N/A ICE BofA 1-5 Yr US Treasury & Agency Index 0.66%0.69%-4.30%0.32%N/A N/A 14* Rate is annualized for periods longer than one year Compliance 1.All of the City’s investments are in compliance with state law and the City’s Investment Policy 2.In compliance with California Government Code 53646 (b)(3), the City has sufficient funds to meet its expenditure requirements for the next six months Compliance 16 Questions? August 22, 2022 Treasurer’s Report Month ending July 31, 2022 Policies Receipts, Disbursements, and Cash Balance Revenues, Expenses, and Fund Balance Agenda 2 •California Government Code •Municipal Code •Audit Committee Charter Policies 3 4 Receipts, Disbursements, and Cash Balance Beginning Balance Ending Balance Fund Type Fund Number/Name as of June 30, 2022 Receipts Disbursements Journal Adjustments as of July 31, 2022 General Fund 100 General Fund 123,658,748 6,296,718 (8,889,105) 58,112 121,124,472 General Fund 130 Investment Fund (40,628) - - - (40,628) Special Revenue Funds 210 Storm Drain Improvement 2,346,706 - - - 2,346,706 Special Revenue Funds 215 Storm Drain AB1600 1,867,676 2,618 - - 1,870,294 Special Revenue Funds 230 Env Mgmt Cln Crk Strm Drain 1,354,846 9,089 (106,867) - 1,257,068 Special Revenue Funds 260 CDBG 454,218 312,955 (142,031) - 625,143 Special Revenue Funds 261 HCD Loan Rehab 232,280 - - - 232,280 Special Revenue Funds 265 BMR Housing 5,986,907 3,350 (52,315) - 5,937,942 Special Revenue Funds 270 Transportation Fund 12,406,736 222,027 (385,645) - 12,243,118 Special Revenue Funds 271 Traffic Impact 752,839 - - - 752,839 Special Revenue Funds 280 Park Dedication 22,143,072 - (16,390) (500,000) 21,626,682 Special Revenue Funds 281 Tree Fund 138,713 - - - 138,713 Debt Service Funds 365 Public Facilities Corp 6,850 - - - 6,850 Capital Project Funds 420 Capital Improvement Fund 29,865,158 529,854 (327,113) 500,000 30,567,899 Capital Project Funds 427 Stevens Creek Corridor Park 174,018 - - - 174,018 Capital Project Funds 429 Capital Reserve*9,546,568 - - - 9,546,568 Enterprise Funds 520 Resource Recovery 6,199,161 119,834 (164,649) - 6,154,346 Enterprise Funds 560 Blackberry Farm 1,249,380 2,100 (65,414) 62,558 1,248,624 Enterprise Funds 570 Sports Center 2,066,764 - (269,416) 381,327 2,178,675 Enterprise Funds 580 Recreation Program 3,359,221 8,093 (321,020) 222,971 3,269,265 Internal Service Funds 610 Innovation & Technology 2,207,601 - (304,582) - 1,903,019 Internal Service Funds 620 Workers' Compensation 4,027,804 - (162,845) (5,812) 3,859,147 Internal Service Funds 630 Vehicle/Equip Replacement 1,117,855 - (118,060) - 999,795 Internal Service Funds 641 Compensated Absence/LTD 691,754 - 9,592 - 701,346 Internal Service Funds 642 Retiree Medical (121,938) - (111,224) - (233,163) Total 231,692,309$ 7,506,639$ (11,427,085)$ 719,155$ 228,491,018$ 5 Fund Balances/Net Position Beginning Fund Balance Ending Fund Balance Fund Type Fund Number/Name as of June 30, 2022 Revenues Expenditures as of July 31, 2022 General Fund 100 General Fund 113,913,711 1,635,460 4,619,276 110,929,894 General Fund 130 Investment Fund (1,200) - - (1,200) Special Revenue Funds 210 Storm Drain Improvement 2,346,706 - - 2,346,706 Special Revenue Funds 215 Storm Drain AB1600 1,867,676 2,618 - 1,870,294 Special Revenue Funds 230 Env Mgmt Cln Crk Strm Drain 1,367,438 302 86,346 1,281,394 Special Revenue Funds 260 CDBG 1,333,546 - 10,272 1,323,274 Special Revenue Funds 261 HCD Loan Rehab 232,280 - - 232,280 Special Revenue Funds 265 BMR Housing 5,945,187 3,350 10,595 5,937,942 Special Revenue Funds 270 Transportation Fund 12,367,186 - 131,623 12,235,563 Special Revenue Funds 271 Traffic Impact 752,839 - - 752,839 Special Revenue Funds 280 Park Dedication 22,122,166 - 500,000 21,622,166 Special Revenue Funds 281 Tree Fund 138,713 - - 138,713 Debt Service Funds 365 Public Facilities Corp 6,850 - - 6,850 Capital Project Funds 420 Capital Improvement Fund 27,058,626 500,000 124,558 27,434,068 Capital Project Funds 427 Stevens Creek Corridor Park 174,018 - - 174,018 Capital Project Funds 429 Capital Reserve*9,546,568 - - 9,546,568 Enterprise Funds 520 Resource Recovery 5,210,293 83,693 62,744 5,231,242 Enterprise Funds 560 Blackberry Farm 915,367 64,599 26,835 953,131 Enterprise Funds 570 Sports Center 2,265,800 345,451 254,350 2,356,901 Enterprise Funds 580 Recreation Program 2,474,718 311,602 107,705 2,678,615 Internal Service Funds 610 Innovation & Technology 767,524 - 236,908 530,616 Internal Service Funds 620 Workers' Compensation 2,591,391 - 168,657 2,422,734 Internal Service Funds 630 Vehicle/Equip Replacement 2,012,509 - 70,883 1,941,626 Internal Service Funds 641 Compensated Absence/LTD 691,754 17,626 8,034 701,346 Internal Service Funds 642 Retiree Medical (3,732) - 111,224 (114,957) Total 216,097,932$ 2,964,700$ 6,530,009$ 212,532,623$ Questions? August 22, 2022 External Auditor Selection Subcommittee History Roles Timeline Recommended Action Agenda 2 History •City is required to have an independent firm audit the City’s annual financial statements •City’s practice is to conduct RFP for independent audit services ever 5 years •Last RFP conducted in FY 2016-17 History •In FY 2016-17, the Auditor Procurement Subcommittee included: •Audit Committee Chair •Audit Committee Member •Finance Manager •Subcommittee selected Crowe •Since FY 2016-17, Crowe has been the City’s auditor History Roles •Appoint an External Auditor Selection Subcommittee •Consider the External Auditor Selection Subcommittee's recommendation •Recommend the appointment of an auditor to the City Council Audit Committee’s Role •Review the RFP •Review and evaluate submitted proposals •Interview prospective auditors •Recommend the appointment of an auditor to the Audit Committee Subcommittee’s Role •Manage the RFP process, following the City's procurement policy and procedures, on behalf of the Audit Committee and External Auditor Selection Subcommittee Staff’s Role Timeline Tentative Timeline Item Tentative Date RFP issued November 2022 Proposals due December 2022 Subcommittee reviews proposals December 2022 Subcommittee interviews finalists and recommends selection January 2023 Staff notifies selected auditor and begins contract negotiations January 2023 Audit Committee considers the subcommittee's recommendation January 2023 City Council considers the Audit Committee's recommendation and the contract with the selected auditor February 2023 Recommended Action Appoint External Auditor Selection Subcommittee members Recommended Action Questions? Thank you! August 22, 2022 Committed, Unassigned Fund Balance and Use of One Time Funds Policy Fund Balance and Reserves GFOA Recommendation City Policy Agenda 2 Fund Balance and Reserves •Difference between assets and liabilities •A measure of the financial resources available in a fund Fund Balance Revenues Expenditures Fund Balance Revenues Expenditures Year 2Year 1 Fund Balance •Portion of fund balance set aside for future use, such as capital improvement projects, emergencies, or unanticipated expenditures Reserve •Maintain fiscal stability •Ensure the continued operation of government and delivery of services to residents •Mitigate current and future risks (e.g., revenue shortfalls and unanticipated expenditures) Importance of Fund Balance and Reserves GFOA Recommendation •Formal policy on the level of unrestricted fund balance in the General Fund •Policies should include: •Purpose •Scope •Fund Balance Levels •Use and Replenishment of Funds Policy Recommendation •Maintain unrestricted fund balance in the General Fund of no less than two months of regular general fund operating revenues or regular general fund operating expenditures Fund Balance Recommendation City Policy •To establish assigned and unassigned fund balance and one-time use policies Purpose •General Fund and Capital Projects Funds Scope Reserve Reserve Level Use Notes General Fund Economic Uncertainty $24,000,000 To mitigate economic downturns and revenue volatility 2 months of General Fund expenditures plus 1.5 months of General Fund revenues PERS $20,491,004 To fund future pension costs Invested in Section 115 Pension Trust Capital Projects $10,000,000 To fund future capital projects Sustainability $127,491 To support future sustainability projects and programs Unassigned $500,000 Absorb unanticipated operating needs Capital Projects Funds Capital Improvement $5,000,000 To fund future capital projects Reserves Budgeted General Fund Fund Balance (pages 129-130 of FY 2022-23 Proposed Budget) Year-End Actual Note 7 –Net Position and Fund Balances (pages 57-58 of FY 2020-21 ACFR) Budgeted and Actual Fund Balance Questions? Thank you!