Loading...
AC 3.21.24Page 1 City of Cupertino Audit Committee Special Meeting Minutes March 21, 2024 CALL TO ORDER At 4:00 p.m., Chair Chen called the special meeting to order in the City of Cupertino Conference Room A, 10300 Torre Avenue. ROLL CALL Committee Members Present: Chair Eno Schmidt, Vice Chair Sheila Mohan, Committee member Angela Chen, Committee member Hung Wei, Committee member Hanyan Wu City Staff Present: Kristina Alfaro, Thomas Leung, Janet Liang, Matt Morley, Jonathan Orozco Absent: Guests: Carlos Oblites (Chandler), Colleen Rozillis (Moss Adams), Chelsea Ritchie (Moss Adams), Sophia Kuo (The Pun Group), Kenneth Pun (The Pun Group), Ryan Maxey (U.S. Bank), Jennifer Meza (PARS), Dennis Mullins (U.S. Bank) ORDERS OF THE DAY 1. APPROVE MINUTES OF REGULAR MEETING ON OCTOBER 23, 2023 Vice Chair Mohan motioned; Chair Chen seconded. No public comment. The motion passes unanimously. POSTPONEMENTS ORAL COMMUNICATIONS Peggy Griffin provided comments. NEW BUSINESS 2. Appointment of Audit Committee Chair and Vice Chair Chair Chen nominated Committee member Schmidt as Chair and Vice Chair Mohan to continue as Vice Chair. Committee member Wei seconded. The motion passes unanimously. No public comment. 3. Receive the Committee’s Roles and Responsibilities (CMC 2.88.100) Orozco provided an overview of the report. No Public Comment. Page 2 4. Receive PARS Presentation Meza provided an overview of PARS. Mullins provided an overview of PFM Asset Management. Chair Schmidt asked when the change was effective. Mullins confirmed that it was effective July 1, 2023. Chair Schmidt asked if they follow the city’s procedures and policy. Mullins confirmed that PFM Management is a wholly owned subsidiary of U.S. Bank and allowed them to keep all existing paperwork. No public comment. 5. Receive Chandler Investments Presentation Oblites provided an overview of Chandler. Chair Schmidt asked how often are cash needs updated. Oblites noted that they communicate with the city no less than a quarterly basis and the analysis is revisited every year as they are long-term decisions. Chair Schmidt noted that relative to the benchmark the duration is much shorter, and is it related to the cash needs. Oblites confirmed and one of the communications with staff is that there may be an increased need for available cash for financial reasons and as a result the strategy was revisited to generate cash and lowering the duration target to make sure there is cash available. Committee member Wu asked about the fee structure with Chandler and PFM. Orozco noted that it is negotiated within the contract. Oblites added that it is a fixed fee based on assets that they manage and averages around 5 (0.05%) or 6 (0.06%) basis points, less than a tenth of the percentage per year. Committee member Wei asked if the investments they do for the city has rules to follow with CA government codes. Oblites confirmed. Committee member Wei asked about the cash flow and if it is done once a year with the City. Oblites noted that Chandler is in communication with staff and the city is focused on building up cash due to a tax event that the city is facing resulting in a need to build up cash. Committee member Chen asked with all the changes in the market, how does Chandler plan to adjust the investment strategy. Oblites noted that reports are provided monthly and quarterly, and they anticipate that the Federal Reserve will be lowering interest rates later in the year. Peggy Griffin provided public comment. Rhonda Fry provided public comment. Orozco noted that the fees from Chandler are remitted to the custodian, which is paid directly to them, the City does not directly pay them. He added that the City is working on looking into the BMR transactions. Vice Chair Mohan asked if the investments follow a benchmark and what is included in the benchmarks. Oblites noted that the biggest driver of risk and return in this portfolio is the duration and measures the sensitivity of the market value of the portfolio to a given interest rate shift. As a result, a benchmark is selected with a similar duration and is shifting to a 1-3 year treasury and agency benchmark. Page 3 6. Receive The Pun Group Presentation Pun provided an overview of The Pun Group. Chair Schmidt asked if they are getting cooperation from the previous auditor in terms of getting the necessary documents. Pun noted that they have a good relationship and are getting the necessary information. Committee member Wu asked if the external audit has identified issues and how does the oversight work. Pun noted that if there are any findings there is always a follow-up in the next audit and every 3 years a CPA firm goes through peer review. Vice Chair Mohan asked when will the first draft be expected. Orozco noted that it will come at the next Audit Committee meeting. No public comment. 7. Receive Moss Adams Presentation Rozillis provided an overview on Moss Adams. Ritchie provided an overview. Chair Schmidt asked what the volume for FWA is. Rozillis noted that the hotline activity is consistent, a couple of reports a month. Committee member Chen asked if they can include how many of the issues get addressed and how long it takes to get addressed into the report. Rozillis noted that the report identifies closed reports. Peggy Griffin provided public comment. 8. Receive Budget Feedback on the City’s current recommended Service Level Reductions (SLRs) Alfaro provided an overview. Rhoda Fry provided public comment. 9. Budget Format Review Alfaro provided an overview. Committee member Wei asked how often is it best practice to look at the budget format. Alfaro noted that it is reviewed every year and is submitted for budget awards. Peggy Griffin provided public comment. 10. Receive the proposed Audit Committee 2024 Schedule and Workplan Orozco presented the committee's work plan. Peggy Griffin provided public comment. STAFF AND COMMITTEE REPORTS COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS FUTURE AGENDA SETTING Page 4 ADJOURNMENT The meeting adjourned at 6:15 p.m. Recording Secretary: Janet Liang, Management Analyst