Loading...
AC 3.27.23Page 1 City of Cupertino Audit Committee Regular Meeting Minutes March 27, 2023 CALL TO ORDER At 4:00 p.m., Vice Chair Mohan called the regular meeting to order in the City of Cupertino Conference Room A, 10300 Torre Avenue and via teleconference. ROLL CALL Committee Members Present: Vice Chair Sheila Mohan, Committee member J.R. Fruen, Committee member Laura Hammer, Committee member Sophie Song City Staff Present: Kristina Alfaro, Matt Morley, Thomas Leung, Janet Liang Absent: Chair Angela Chen Guests: Carlos Oblites (Chandler), Kathy Lai (Crowe), Matt Geerdes (Crowe) ORDERS OF THE DAY 1. APPROVE MINUTES OF REGULAR MEETING ON FEBRUARY 27, 2023 Committee member Fruen motioned to approve the minutes; Committee member Hammer seconded. The motion carried 4-0 with Chair Chen absent. POSTPONEMENTS ORAL COMMUNICATIONS Rhoda Fry and Peggy Griffin made comments. OLD BUSINESS NEW BUSINESS 2. Receive the FY 2021-22 Annual Comprehensive Financial Report (ACFR) and Supplemental Reports Lai provided an overview of the report. Rhoda Fry and Peggy Griffin made comments. Alfaro noted that updates will be made to the ACFR and in regards to the administration function there were several changes that occurred including City Attorney’s Office and City Manager’s Office functions that were moved from contracts to in-house. Vice Chair Mohan asked if this is regarding the difference in admin cost from last year to this year. Alfaro noted that staff will look into it to see if it was not due to any adjustments. Committee member Hammer noted that the bottom line in the report there is an indication of a reallocation of spending and that the allocations are probably the journal entries. Committee member Hammer asked if staff could look at it and report back to see if it is reasonable. Alfaro noted that staff will. Page 2 Committee member Song asked about the adjustments and asked if there was a way that the committee could be presented with the exceptions that were found. Lai noted that it is included in the attachments of the agenda packet. She added that there is a large write-up pertaining to the material weakness related to the American Rescue Plan Act and the management letter articulates the deficiency related to information technology control. Vice Chair Mohan asked staff to address the deficiencies. Alfaro noted that our ERP system is deficient in its reporting on changes to user access. When staff discovered that the ERP system did not have sufficient reporting, staff came up with a quarterly review process to review security in the system. A supervisor in a department would email finance and cc IT to review and approve the request to access a module. Once finance approved the access, IT would provide the access. Alfaro noted that it would be beneficial to have a new ERP system with security reporting. Alfaro addressed the deficiency in the single audit. Due to staff turnover, staff missed items that were sent to emails of staff that was no longer working at the City. Staff remedied this by including the accountant and finance team on the contact list to ensure email notifications are received. Committee member Song commented on the segregation of duty issue as the Treasurer/Director of Administrative Services oversees finance and HR. Lai noted that there are cross functions between finance and HR that should be segregated, and they could look into it. Alfaro noted that the function is separated appropriately in terms of payroll and human resources. She added that an audit of our internal controls showed no findings. Lai noted that Crowe was made aware of the CDTFA Audit. Lai noted that the City Attorney’s Office sent them an updated legal letter, but they have not had the opportunity to circle back and that it is a pending matter. Committee member Hammer asked about the clean water and storm water protection fee, which was a management request. Is it special for this year or is it covered every year? Alfaro noted that it is covered every year. Vice Chair Mohan noted that the city has always received the certificate of achievement and asked if we will receive it again. Alfaro noted that staff will provide the document to GFOA once Council approves it. Committee member Fruen motioned to receive the report and forward it to City Council, Committee member Hammer seconded. The motion carried unanimously by all members present. 3. Consider the Monthly Treasurer's Investment Report for February 2023 Leung provided an overview of the report. Oblites provided an overview of the report. Committee member Song asked if we sell the investments today, will we see a loss. Oblites notes that if the entire portfolio was sold, a loss would be realized as the value of the investments has been going down as interest rates have risen. It would be a sizeable loss. Oblites noted that if the entire $146 million portfolio was sold, the City would realize a loss of $9.4 million. Page 3 Committee member Hammer asked if Oblites could comment on the dispositions. Oblites noted that over 95% of the portfolio is held to maturity and that there are periodic sales before maturity to reposition the portfolio. Oblites added that Chandler conducts an analysis to identify if they should sit and collect income or if they should take a loss and reinvest in a higher-yielding security. Oblites noted that the auditors re-computed or obtained data for average yield, market value, purchase date, and duration by looking at Wells Fargo’s statements which is what the bank is currently holding, and Chandler’s statements. He addressed that there could be differences due to rounding. Also, the bond markets do not work like the stock markets. The value of a bond depends on whatever an individual is willing to pay for it. Different bond brokers will have different prices. The bond prices are different because Wells Fargo and Chandler use different pricing information providers. He added that it is normal that the market values will not match to the penny, but usually, they're within 3%. Committee member Fruen motioned to receive the report and recommend filing it with City Council, Vice Chair Mohan seconded. The motion passes unanimously by all members present. 4. Consider the Monthly Treasurer's Report for February 2023 Leung provided an overview of the report. Vice Chair Mohan asked if CDTFA provides an advance in anticipation of the revenue staying the same in the next quarter. Alfaro noted that they provide an advance based on the quarter last year instead of making cities wait until they receive the exact numbers. The advances happen in December and January and in February they review and if they over/underestimate they will conduct a true-up. No check is written to CDTFA. Rhoda Fry and Peggy Griffin made comments. Vice Chair Mohan asked if the revenues dropped since business started opening up. Leung confirmed as there was a spike in revenue during the pandemic due to online purchases. Alfaro noted that at the beginning of the pandemic, there was a rush for organizations to purchase equipment to go virtual. Vice Chair Mohan motioned to receive and forward the report to City Council, Committee member Fruen seconded. The motion passed unanimously by all members present. 5. Consider a Budget Format Review Update Leung provided an overview of the report. Vice Chair Mohan inquired about the survey. Morley noted that staff will conduct an RFP to conduct the satisfaction survey. Committee member Hammer asked what the action plan is for the performance goals. Leung noted that staff will work with each department to have at least one goal tied to a financial outcome. Committee member Hammer motioned to receive the update; Committee member Fruen seconded. The motion passed unanimously by all members present. Page 4 Rhoda Fry and Peggy Griffin made comments. 6. Consider the Audit Committee 2023 Schedule and Work Plan Leung presented the committee's work plan. Committee member Hammer noted her unavailability for the April meeting. Vice Chair Mohan noted that Chair Chen is also unavailable. Staff noted that they will confirm availability for the next meeting. STAFF AND COMMITTEE REPORTS COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS FUTURE AGENDA SETTING ADJOURNMENT The meeting adjourned at 6:12 p.m. Recording Secretary: Janet Liang, Administrative Assistant