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AC 01-22-20191.CALL TO ORDER City of Cupe11ino Audit Committee Special Meeting Minutes January 22, 2019 At 4: 12p.m., Chairman Eno Schmidt called the meeting to order at Cupe11ino City Hall Conference Room A, 10300 ToITe Avenue, Cupe11ino CA 95014. 2.ROLL CALL Committee Members Present: Chaiiman Eno Schmidt, Daisy Liang, Mayor Scharf, Councilmember Paul City Staff Present: Timm Borden, Kristina Alfaro, Zach Korach, and Mariela Rodriguez Absent: Jun Luther Guests: 3.APPROVAL OF MINUTES Councilmember Paul motioned to approve the December 11, 2018 minutes, Daisy seconded subject to changes suggested under approval of minutes, in reference to "washed through the income statement" and subject to committee receiving a copy of the revised Investment Policy. 4.ORAL COMMUNICATIONS 5.OLD BUSINESS 6.NEW BUSINESS A.Subject: Briefing on September 5, 2018 Press Release and proposed action plan in response to alleged embezzlement by City's former Senior Accountant. Finance Manager, Zach Korach, provided a recap and overview of staff report on alleged embezzlement involving f01mer city accountant, Jennifer Chang. Korach mentioned that city met with cunent external auditors and forensic auditors and it was verified that it was the deposit liability that got reduced and enabled the scheme to take place. Korach continued to explain that it was not the income statement but the balance sheet accounts that were affected. Korach mentions that upon fund restitution the city believes that the funds be issued to the State of California. Chaiiman Schmidt questioned whether the money be issued to the state and presented a scenaiio in which services could have been performed by City staff, but the deposit liability account was not reduced accordingly. Chaiiman Schmidt requested more info1mation on quality of control changes that were implanted in 2014 with new system. Korach explained that the city cmTently does not have record in the system of original deposit holders. Councilmember Paul motioned to accept staffs deb1ief on the alleged embezzlement by the former