AC 08-30-2021 Searchable PacketCITY OF CUPERTINO
AUDIT COMMITTEE
AGENDA
10300 Torre Avenue, City Hall Conference Room A
Monday, August 30, 2021
4:00 PM
TELECONFERENCE / PUBLIC PARTICIPATION INFORMATION TO HELP STOP THE
SPREAD OF COVID-19
In accordance with Governor Newsom’s Executive Order No-29-20, this will be a
teleconference meeting without a physical location to help stop the spread of COVID-19.
Members of the public wishing comment on an item on the agenda may do so in the
following ways:
1) E-mail comments by 2:00 p.m. on Monday, August 30 to the Audit Committee at
AuditCommittee@cupertino.org. These e-mail comments will be received by the Audit
Committee members before the meeting and posted to the City’s website after the meeting.
2) E-mail comments during the times for public comment during the meeting to the Audit
Committee at AuditCommittee@cupertino.org. The staff liaison will read the emails into
the record, and display any attachments on the screen, for up to 3 minutes (subject to the
Chair’s discretion to shorten time for public comments). Members of the public that wish to
share a document must email AuditCommittee@cupertino.org prior to speaking.
3) Teleconferencing Instructions
Members of the public may observe the teleconference meeting or provide oral public
comments as follows:
Oral public comments will be accepted during the teleconference meeting . Comments may
be made during “oral communications” for matters not on the agenda, and during the
public comment period for each agenda item .
To address the Audit Committee, click on the link below to register in advance and access
the meeting:
Online
Please click the link below to join the webinar :
You are invited to a Zoom webinar.
When: Aug 30, 2021 04:00 PM Pacific Time (US and Canada)
Topic: Cupertino Special Audit Committee Teleconference Meeting - August 30, 2021
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Audit Committee Agenda August 30, 2021
(Meeting Begins at 4:00 p.m.)
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Speakers will be notified shortly before they are called to speak.
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In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to
attend this teleconference meeting who is visually or hearing impaired or has any disability
that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 48
hours in advance of the meeting to arrange for assistance. In addition, upon request, in
advance, by a person with a disability, meeting agendas and writings distributed for the
meeting that are public records will be made available in the appropriate alternative
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Audit Committee Agenda August 30, 2021
format.
ROLL CALL
APPROVAL OF MINUTES
1.Subject: Considering approving minutes of the Regular Audit Committee meeting on
July 26, 2021
Recommended Action: Considering approving minutes of the Regular Audit
Committee meeting on July 26, 2021
0 - Minutes 07.26.21
POSTPONEMENTS
ORAL COMMUNICATIONS
This portion of the meeting is reserved for persons wishing to address the Committee on any matter
within the jurisdiction of the Committee and not on the agenda. Speakers are limited to three (3)
minutes. In most cases, State law will prohibit the Commission from making any decisions with respect
to a matter not on the agenda.
NEW BUSINESS
2.Subject: HdL Contract and Refund Error
Recommended Action: Receive HdL Contract and Refund Error
E - HdL Contract and Refund Error Staff Report (3)
3.Subject: Budget Format Review
Recommended Action: Receive Budget Format Review
G1 - Budget Format Review Update
G2 - Sub-Committee Initial Comments on Budget Format Review
G3 - Sub-Committee Formal Memorandum on Budget Format Review
G4 - Budget Format Review Update PPT
G5 - Questions Regarding the Current Budget Report
4.Subject: Follow-up on Previous FY Management Letter Items and Management
Response
Recommended Action: Receive Follow-up on Previous FY Management Letter Items
and Management Response
5.Subject: Embezzlement Update
Recommended Action: Receive Embezzlement Update
OLD BUSINESS
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Audit Committee Agenda August 30, 2021
FUTURE AGENDA SETTING
ADJOURNMENT
In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this
teleconference meeting who is visually or hearing impaired or has any disability that needs special
assistance should call the City Clerk's Office at 408-777-3223, at least 48 hours in advance of the
meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability,
meeting agendas and writings distributed for the meeting that are public records will be made available
in the appropriate alternative format.
Any writings or documents provided to a majority of the members after publication of the agenda will
be made available for public inspection. Please contact the City Clerk’s Office in City Hall located at
10300 Torre Avenue, Cupertino, California 95014, during normal business hours.
IMPORTANT NOTICE: Please be advised that pursuant to Cupertino Municipal Code section
2.08.100 written communications sent to the Cupertino City Council, Commissioners or City staff
concerning a matter on the agenda are included as supplemental material to the agendized item. These
written communications are accessible to the public through the City’s website and kept in packet
archives. Do not include any personal or private information in written communications to the City
that you do not wish to make public, as written communications are considered public records and will
be made publicly available on the City website.
Members of the public are entitled to address the members concerning any item that is described in the
notice or agenda for this meeting, before or during consideration of that item. If you wish to address the
members on any other item not on the agenda, you may do so during the public comment .
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CITY OF CUPERTINO
Agenda Item
21-9763 Agenda Date: 8/30/2021
Agenda #: 1.
Subject: Considering approving minutes of the Regular Audit Committee meeting on July 26, 2021
Considering approving minutes of the Regular Audit Committee meeting on July 26, 2021
CITY OF CUPERTINO Printed on 8/26/2021Page 1 of 1
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City of Cupertino
Audit Committee Regular Meeting
Minutes
July 26, 2021
1. CALL TO ORDER
At 4:00 p.m., Daisy Liang called the regular meeting to order. This was a teleconference meeting
with no physical location.
2. ROLL CALL
Committee Members Present: Vice Mayor Chao, Councilmember Moore, Chair Daisy Liang,
Vice Chair Angela Chen, Committee Member Song (arrived 10 minutes late)
City Staff Present: Greg Larson, Kristina Alfaro, Zach Korach
Absent: None
Guests: Carlos Oblites and Chris McCarry (Chandler), Rick Rosenthal and Carolyn Cox (US
Bank), Mitch Barker and Jennifer Meza (PARS), Kathy Lai and Matt Geerdes (Crowe),
3. APPROVAL OF MINUTES
Councilmember Moore inquired about the Committee titles mentioned in the roll and that
Chair Liang and Vice Chair Chen’s titles should be updated. Korach confirmed this was an
error and would be corrected. Chair Liang moved to approve the May 24, 2021 minutes with the
amended edits and Councilmember Moore seconded. The motion carried unanimously with
Committee Member Song absent.
ORAL COMMUNICATIONS
Peggy Griffin expressed her thanks for the work the Committee is doing and encouraged the
Committee to investigate the cause of issues that are brought to the Committee’s attention. She
encouraged that these instances be documented and used as test cases in the future.
5 - NEW BUSINESS
5A - Multi-Factor Authorization Training from City’s Infrastructure Division - 10 minutes
Iqraam Nabi provided the training for the Committee.
5B – Quarterly Review of Treasurer’s Report as of June 30, 2021 – Chandler and Korach – 75
minutes
Korach discussed the City’s cash flow over the previous quarter and throughout the fiscal year
ending June 30, 2021. He discussed the 4th quarter $20 million transfer from the City’s operating
cash to the investment portfolio for purposes of reducing the liquidity ratio to desired levels.
Councilmember Moore asked about the $20 million transfer and the policy in place that
authorized it. Korach noted there is no policy in place primarily because there is no budgetary
impact when dollars are transferred from the City’s operating account to the City’s investment
account. Councilmember requested further information be included in the staff report
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discussing the process. Vice Chair Chen inquired about the 10% liquidity mark discussed in the
staff report and that current liquidity exceeds the 10% level. Korach discussed the liquidity ratio
of “1” and the 10% level being estimates based on the City’s operating expenditures. They were
established to ensure short-term as well as long-term obligations (cash outflows) are able to be
met. He mentioned that although the City’s cash and cash equivalent balance exceeds 10%, the
City is anticipating a decline in revenues in the upcoming year that may have an impact on the
City’s cash and cash equivalent balance. Vice Chair Chen inquired about the June expenditures
being significantly higher than the previous fiscal year. Korach noted this was due to the $20
million transfer (outflows) from the operating account to the investment portfolio. Vice Chair
Chen asked if encumbrances and land acquisitions were included. Korach noted that the recent
property acquisition would be captured as an outflow, but encumbrances would not be as they
do not represent an outflow of cash. Chair Liang requested that a bank reconciliation be
included to better identify the $20 million transfer. Vice Mayor Chao asked about the frequency
of these transfers. Korach noted these are typically completed on an annual basis as sufficient
time is needed to accumulate cash and cash equivalents. Vice Mayor Chao wondered if we
could transfer these dollars more frequently. Korach noted that since the onset of the pandemic
and the unprecedented increase in sales tax was one of the primary drivers for this
accumulation of cash and that we would not expect it every year. Korach noted that the
quarterly audit committee meetings and the review of the treasurer’s report serves as the
assessment and monitoring of the City’s cash and cash equivalent balance. Councilmember
Moore inquired about the amount of sales tax actuals in excess of budget. Korach confirmed
approximately $15 million in actual sales tax revenues are estimated above the FY21 adopted
budget amount of $20.9 million. Chair Liang asked how fast the City could get money from the
investment portfolio (liquidate). Carlos Oblites discussed the liquidity of the portfolio and the
various options the City has. Oblites reminded the Committee that liquidating investments
results in potential realized gains and/or losses. Oblites also noted that staff are in constant
communication with he and Chris regarding cash and investments activities. Oblites also
provided a presentation on the City’s portfolio. Councilmember Moore confirmed the purpose
of the LAIF state pool for the City and asked if other agencies solely rely on LAIF. Oblites
discussed the varying resources, knowledge, and staffing levels between agencies.
5C – OPEB & Pension Section 115 Performance Report – 10 minutes
Mitch Barker provided a presentation on the Section 115 Trusts. Councilmember Moore
requested the slides be sent to the Committee and posted online. Rick Rosenthal provided a
presentation on the Section 115 Trusts and their respective performance. Councilmember Moore
asked about the dip in 2018 and what occurred. Rosenthal explained the political climate in 2017
and its impact on 2018 investment performance. Korach reminded the Committee of the time
and the remaining agenda items.
5D – Interim Report on CAFR and AUP by Independent Auditor – Kathy Lai and Matt
Geerdes provided a report on the interim phase of the audit and the next steps leading up to
final issuance. Councilmember Moore requested the slides be sent and posted.
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5E – HdL Contract and Refund Error – Korach provided a briefing of the staff report. Peggy
Griffin spoke on this item thanking the Committee and staff for the report and explanations. She
emphasized the issue of invoice date versus date of payment. She also questioned the existence
and effectiveness of internal controls regarding the candidate refund error. Vice Chair Chen
asked about the outstanding balance yet to paid to HdL and how that will be resolved. Korach
noted that a contract amendment was brought to City Council but not approved and that staff
were directed to bring back more information on the item for further consideration. Vice Chair
Chen asked if there was sufficient budget to make the payments. Korach explained the issue of
invoices not being entered into the financial statement and as a result, no budget issue existed.
City Manager Larson expressed his desire to have an opportunity to look into the matter
further. Vice Mayor Chao asked who has the responsibility of alerting the City of the excess in
rendered services. Korach noted this matter was not the sole fault of any one department or
individual, but rather it is a collective responsibility of the contractor as well as the department
responsible for managing the contract and/or function. Chair Liang asked about the tracking of
the contracts as it relates to the accounts payable process. Korach explained that contracts are
generally not included in the backup for invoice processing, but that encumbrance and budget
controls are in place to ensure invoice payments do not exceed the contract. In this matter, the
invoices were not being entered into the financial system timely and that is a contributing factor
to how services rendered exceeded the contracted amount. Councilmember Moore asked about
the FY19 and FY20 adopted budget amounts for contract services being less than the contracted
amounts and what the significance of the budgeted amounts is. Councilmember Moore
expressed concern about the purchasing policy and the authority of the City Manager to amend
the contracts. She noted GFOA’s best practice for setting up a formal process for maintaining
records of complaints/concerns of this nature. City Manager Larson reflected on his previous
employer experiences, noting that instances of overbilling, although rare, do occur. He
discussed his desire to reach a resolution regarding the HdL matter. Korach added an
explanation on the budgeted contract services amounts and their correlation to executed
contract amounts, but would need additional time to review the details in order to provide a
complete and accurate response. He also reminded the Audit Committee of the internal audit
work plan and the fraud waste and abuse program that is slated to be completed during FY21-
22 that will surely assist in the independent maintenance and record keeping of audit related
observations, concerns, and complaints. Councilmember Moore motioned to move items 5E, 5G,
5H, and 5I to a special meeting to be scheduled. Vice Mayor Chao seconded. Motion carried
unanimously with Vice Chair Chen absent.
5F – Audit Committee Meeting Frequency
Larson and Korach provided a briefing on the staff report. Vice Mayor Chao recommended
having eight (8) regular meetings for purposes of predictability. Councilmember Moore noted
that City Council provided direction for the Committee to meet monthly. She preferred having
eight (8) predictable/regular meetings. Vice Chair Chen noted she was fine with having eight
(8) meetings, but to have four (4) of them to be reserved as special for purposes of attendance.
Vice Mayor Chao expressed concern about establishing special meetings due to the lack of
attendance requirements. Councilmember Moore echoed the Vice Mayor’s comments. Vice
Chair Chen assured her intention is not to miss any meetings. Vice Mayor Chao proposed
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scheduling special meetings for the remainder of the calendar year and revisit this discussion at
the Committee’s next regularly scheduled meeting with proposed changes to the frequency
effective for the next appointment of Committee members. Committee Member Song stated she
was flexible with the various proposals made by Committee Members. Peggy Griffin agreed
with Vice Mayor Chao’s recommendation, but also expressed concerns about being able to miss
special meetings and recommended that the special meetings be pre-scheduled and agreed
upon. Vice Mayor Chao motioned to direct staff to bring this item back at the next regularly
scheduled meeting. Councilmember Moore noted that a motion is not required if the Chair
desires to have it added to the agenda. Councilmember Moore motioned to move items 5E, 5G,
5H, and 5I to a special meeting to be scheduled. Vice Mayor Chao seconded. Motion carried
unanimously with Vice Chair Chen absent.
5G – Budget Format Review
Councilmember Moore motioned to move items 5E, 5G, 5H, and 5I to a special meeting to be
scheduled. Vice Mayor Chao seconded. Motion carried unanimously with Vice Chair Chen
absent.
5H – Follow-up on Previous FY Management Letter Items and Management Response
Councilmember Moore motioned to move items 5E, 5G, 5H, and 5I to a special meeting to be
scheduled. Vice Mayor Chao seconded. Motion carried unanimously with Vice Chair Chen
absent.
5I - Embezzlement Debrief – Councilmember Moore motioned to move items 5E, 5G, 5H, and
5I to a special meeting to be scheduled. Vice Mayor Chao seconded. Motion carried
unanimously with Vice Chair Chen absent.
6 - OLD BUSINESS
7 – STAFF AND COMMITTEE REPORTS
8 - ADJOURNMENT
The meeting adjourned at 6:45 p.m.
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CITY OF CUPERTINO
Agenda Item
21-9722 Agenda Date: 8/30/2021
Agenda #: 2.
Subject: HdL Contract and Refund Error
Receive HdL Contract and Refund Error
CITY OF CUPERTINO Printed on 8/26/2021Page 1 of 1
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AUDIT COMMITTEE STAFF REPORT
Meeting: August 30, 2021
Subject
HdL Contract and Refund Error Debrief
Recommended Action
Receive HdL Contract and Refund Error Debrief
Discussion
HdL Contract
Economic Development is a City function that has had a history of moving back and
forth between the Community Development and Administration Department. During
the first quarter of FY 2020-21, a decision to move this function from the City Manager’s
Division to the Community Development Department was approved by the City
Manager based on the alignment of the function with the Department’s operational
goals and objectives. While this operational change was made, it was decided the
budgetary changes would not be incorporated until the FY 2021-22 Adopted Budget.
Prior to and during FY 2019-20, the City’s Economic Development function was
managed in-house by a part-time Economic Development Manager. Subsequently, the
employee left City service to work with HdL, an economic development service
provider. In FY 2020-21, the City had an effective contract with HdL in the amount of
$170,000 per year.
These factors and the transition period created a challenge for both Administration and
Community Development Departments to effectively manage the contract, services
being rendered, and budget simultaneously throughout the year. Invoices received were
routed to various departments and were not entered into the system timely which made
it difficult for the departments to monitor the budgetary performance throughout the
year. FY 2020-21 required additional services related to COVID-19 and the property
acquisition of 10455 Torre Avenue and it was not until the second half of FY 2020-21 that
staff became aware of services rendered exceeding the contract amount ($170,000). A
contract amendment was brought before City Council, but was not approved and
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additional information was requested. To date, the City has not remitted payments in
excess of the contract amount.
The functional transfer, both from an operational as well as a budgetary standpoint, is
an irregular occurrence and resulted from management turnover in recent years.
Contract management remains an essential responsibility for departments. As the City
moves forward with the proposed internal audit work program, procurement, including
contract management, will be reviewed and the findings and observations for
improvement will be communicated to the Audit Committee upon completion.
Refund Error
In FY 2020-21, candidates running for City Council were required to pay $2,860 in
estimated candidate costs. Actual costs amounted to $2,576, resulting in a candidate
refund amount of $284 subsequent to the 2020 election. Responsible Administration
Department staff entered the invoice entry amounts in error. Rather than entering $284,
the actual cost of $2,576 was mistakenly entered. This was then routed to the
Department staff responsible for invoice approval and finally to Finance for review,
processing, and payment. The essential internal controls and checks and balances were
in place and operating effectively; however, this appeared to be an issue of human error,
an inherent limitation to internal controls. A candidate received the incorrect refund
and promptly notified the City. City staff took the matter seriously and corrected the
error timely.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: Zach Korach, Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services
Approved for Submission by: Greg Larson, Interim City Manager
Attachments:
None.
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CITY OF CUPERTINO
Agenda Item
21-9723 Agenda Date: 8/30/2021
Agenda #: 3.
Subject: Budget Format Review
Receive Budget Format Review
CITY OF CUPERTINO Printed on 8/26/2021Page 1 of 1
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AUDIT COMMITTEE STAFF REPORT
Meeting: October 27, 2020
Subject
Budget Format Review Update.
Recommended Action
Accept staff report.
Discussion
In FY 2019-20, Audit Committee Chair Eno Schmidt and Vice Mayor Paul established a
sub-committee to review the City’s budget format. Initial observations, suggestions, and
questions were submitted to and responded by City staff (see attachment F2). On
November 12, 2019, the sub-committee issued a formal memo (see attachment F3) to
City staff discussing the conclusions and recommendations from the review process.
City staff’s responses to the November 12, 2019 memo are attached (see attachment F4).
City staff’s updates on budget format are provided below:
Adopted Budget
While the sub-committee concluded that the City’s budget document meets or exceeds
its peers in a variety of categories, the City continues to improve the budget document
each year to make the budget easier to understand for residents. For FY 2020-21, the City
has added the following sections to the budget document:
Capital Improvement Program (Page 42)
o Discussion of Capital Improvement Program funding and financial
impacts
Revenue Comparisons (Page 118)
o Per Capita comparisons of total revenues, property tax, sales tax,
transient occupancy tax, franchise fees, and building permits with
neighboring jurisdictions
Pension (Page 153)
o Explanation of CalPERS pension plan, discount rate, and investment
returns
o Discussion on the impact of CalPERS discount rate and investment
returns
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o Discussion of the City’s strategies to reduce pension cost volatility,
including the Section 115 Trust
Budget at a Glance
The City received feedback from the sub-committee to reference the Transparency Portal
in the Budget at a Glance. The City is working on its first interactive Budget at a Glance,
which will bridge the gap between the traditional Budget at a Glance and the
Transparency Portal.
OpenGov Transparency Portal
The sub-committee recommended that the City enhance the Transparency Portal by:
Providing more context to major amount and changes and
Interconnecting key communication elements on the budget to the Transparency
Portal.
Based on the sub-committee’s feedback, the City is currently working to provide more
context to financial data in the Transparency Portal through the following initiatives:
Interactive Budget at a Glance
o Present the budget in a simple, visual, and interactive format
o Provide more context to financial reports in the Transparency Portal
Interactive Capital Improvement Program Budget
o Illustrate progress of capital projects from a financial standpoint
o Connect project narratives to interactive maps and financial reports
Stories for important initiatives (e.g. CARES Act)
o Provide updates on important initiatives
o Connect initiatives to financial reports in the Transparency Portal
o Gather feedback from the community
Budget Story
o Explain important financial concepts including revenues, expenses,
departments, and funds
o Provide answers to frequently asked questions about the budget
o Serve as a starting point to users unfamiliar with government finance or
the Transparency Portal
These initiatives will help the City improve its financial transparency and community
engagement. In addition, the City will continue working to incorporate feedback from
the sub-committee, City Council, and residents, into the format of its budget documents
and reports.
Sustainability Impact
No sustainability impact.
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Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services
Approved for Submission by: Deborah Feng, City Manager
Attachments:
F2 – Sub-Committee’s Initial Comments on Budget Format Review
F3 – Sub-Committee’s Formal Memorandum on Budget Format Review
F4 – City staff’s responses to the November 12, 2019 Memo
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CITY OF CUPERTINO
AUDIT COMMITTEE
SUBCOMMITTEE ON THE ANNUAL BUDGET REPORT
Questions Regarding the Current Budget Report (Please provide written responses
within two weeks):
1. Three Budget Reviewers for the GFOA Award evaluation had suggestions for
improvement. Please describe how, if at all, each of the suggestions for
improvement were addressed in the budget for the fiscal year beginning July
2019. Please provide evaluation at least on the below-listed two items.
Responses with respect to all of the suggestions by the GFOA Budget Reviewers
would be appreciated.
a. Reviewer ID S411 suggests under “Document -Wide Criteria” that the City
“Try to reduce the document size to around 400 pages.”
RESPONSE: The Budget Team continues to take this comment into consideration each
year; however, it is a challenge to identify which specific sections can afford to be
reduced by 100+ pages. This comment is not marked with an asterisk (*) and as a result,
does not require implementation to ensure the budget award is received in subsequent
years. If the Sub-Committee has specific recommendations as to which sections they
would like to see reduced, and so long as all of the GFOA and CSMFO award criteria
are not compromised, the Budget Team will be glad to accommodate.
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CITY OF CUPERTINO
AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
2
b. All three reviewers rated the presentation for category F9 “Impact of
capital investments on operating budget” as being “Information Not
Present” or “Does Not Satisfy”.
RESPONSE: Typically, operating, or General Fund, impacts are quantified via
operating transfers; however, there were no budgeted operating transfers in FY 18 -19 or
FY 19-20 for Capital Improvement Program projects. The City’s General Fund will
transfer excess fund balance at fiscal year-end (FYE) to the Capital Reserve (Fund 429)
in accordance with its Use of One Time Funds Policy (page 85). FY 2019-20 was the first
year the City’s budget document included a Capital Improvement Program (CIP)
project summary (page 493). The Fund Balance Report (page 96) discusses the impact of
revenues and expenditures/expenses on each particular fund’s fund balance, including
the capital projects from the CIP budget. The Budget Team agrees that a more
expansive narrative/discussion may be beneficial; perhaps in the forecast section near
the end of the Financial Policies and Schedules section.
c. How were the other suggestions for improvement by GFOA Budget
Reviewers were addressed.
RESPONSE:
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CITY OF CUPERTINO
AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
3
- Financial Structure, Policy and Process: Department org charts have experienced
changes in recent years. Enhancing the aesthetics and understandability will be
an area to address in FY 2020-21.
- Financial Summaries: Categorized and forecasted summaries for all of the City’s
funds were included beginning on page 146. Additional information and charts
can be included (similar to the General Fund); however, and as mentioned above,
the Budget Team does keep the document’s length in mind when determining
what and what not to include.
- Capital and Debt: See response to 1.b. above
- Departmental Information: Total FTEs are included in each of the Department
Budgets. This is also reiterated/duplicated/summarized on page 491 and
presented historically as well. Performance measures are included as well as
workload indicators (FY 2019-20 was the first year for presenting workload
indicators)
- Document-Wide Criteria: The Budget Team will add the state to the cover so
long as it complies with branding requirements as established by the
Communications Office.
- Other Comments/Suggestions: No specific comments or suggestions noted for
implementation.
2. With respect to the Transparency Portal and the use by Cupertino of OpenGov:
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CITY OF CUPERTINO
AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
4
a. What are the goals of having the Transparency Portal?
RESPONSE:
- The Transparency Portal provides an accessible platform so that members of the
public have access to the City’s financial data in real time.
- This tool fosters communication and trust not only with the public, but amongst
City staff.
- OpenGov’s Budget Builder provides an effective tool for departments to compile,
submit, review, and approve budget requests. It also serves as an important
archive for the thousands of communications that occur during the budget
process from one year to the next.
b. What key performance indicators (KPIs) for the Transparency Portal have
been established by the City?
RESPONSE: The City does not have KPIs for the Transparency Portal. The Budget
Team is open to establishing KPIs; however, success is measured by volume of external
use
c. How has the City been doing relative to these KPIs?
RESPONSE: See response 2.b. above.
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CITY OF CUPERTINO
AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
5
3. With regard to the City’s link provided to OpenGov as to the Transparency
Portal, in examining on non-departmental expenditures for the budget in 2019-
2020, why is the actual for 2019-2020 equal to the budget for 2019-2020 (as of Sep
28, 2019)? See screenshot taken from this link:
https://cupertino.opengov.com/transparency#/28185/accountType=expenses&em
bed=n&breakdown=28459e6a-563e-4695-97d4-
8a0d97d881e1¤tYearAmount=cumulative¤tYearPeriod=years&gra
ph=bar&legendSort=desc&proration=true&saved_view=83847&selection=081626
7C08601EE8C423B11CADCC4989&projections=null&projectionType=null&highli
ghting=null&highlightingVariance=null&year=NaN&selectedDataSetIndex=null
&fiscal_start=earliest&fiscal_end=latest
RESPONSE: The City implemented a change in methodology for recording its
operating transfers (non-departmental expenditures). Rather than
recording/recognizing them on a quarterly/monthly basis, the City records/recognizes
them all at once as soon as the budget is adopted by Council. Purpose: increased
efficiency determining the amount and reason for each interfund transfer when
preparing the Interfund Transfers footnote in the Comprehensive Annual Financial
Report (CAFR) at year-end. In other words, rather than having hundreds of
transactions/line items to tie to and from each of the funds, the gross transfer amounts
can more easily be tied to the adopted budget, Council resolutions, etc.
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6
a. This raises the question, separate from the format of the data presented,
how, if at all, is the data presented to the public on OpenGov reviewed for
accuracy and completeness?
RESPONSE: The information presented in OpenGov is imported straight from the
City’s enterprise resource planning (ERP) system, New World System (NWS). All of
the financial data is reviewed and reconciled on a weekly and monthly basis to ensure
accuracy, completeness, cutoff, and existence.
b. What process is followed? If there is a process, is the process
memorialized in a written medium?
RESPONSE: Other than what has been discussed in the previous response, there is no
formal process memorialized in a written medium. The Budget Team is open to
recommendations and suggestions.
c. What documentation is reviewed in the process of evaluating OpenGov
information, and what management approvals are required prior to
publication of the information?
RESPONSE: The information that is imported into OpenGov from NWS is subject to
numerous controls and reviews, namely within the payroll, accounts payable, and
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
7
revenue collection process. These are processed and reviewed by multiple employees,
signed off and authorized by management, on a weekly, bi-weekly, and monthly basis.
4. For Budget versus Actual in the OpenGov transparency portal (see above link in
question 2), Non-departmental drops from 2018-19 Actual of $19,376,088 to 2019-
20 (Amended Budget) and Actual of $10,539,557?
RESPONSE: Non-departmental revenues and expenditures/expenses include the City’s
operating transfers from one fund to the other. Prior year actuals are typically higher
than subsequent year budget amounts for the following reason; the Adopted Budget
does not include excess General Fund fund balance that is transferred to the Capital
Reserve in accordance with the City’s Use of One Time Funds Policy (page 85)
a. Can we link to the “Department Operating Budgets” then to the Non-
departmental section to help explain?
RESPONSE: That is certainly an option. We can also have a more expansive
explanation in the non-department section to explain the purpose of each of the
transfers.
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
8
b. An explanation in the Budget message document for this particular
question does not seem to be present. If it is, please indicate the location.
If such an explanation is not present, please suggest a location for it.
RESPONSE: Correct, other than including the non-departmental amounts within the
fund’s total budgeted amounts (page 31 for example), there is no expanded discussion
on the transfers in the Budget Message section.
5. Can the subcommittee see the questions submitted by the public to the City
related to the Transparency Portal/budget for the past year?
RESPONSE: The City has been frequently asked how much has been spent on the
Regnart Creek Trail project. To the Budget Team’s knowledge, no addit ional questions
have been raised.
6. Since Opengov is being used as Cupertino’s Transparency Portal, see these
selected comments at the Opengov link:
a. “Build Trust Through Effective Communication – Engaging with
constituents and stakeholders is critical to every public agency’s success.
With OpenGov, leaders can analyze and communicate complex topics and
decisions in a simple manner anyone can understand. Agencies are able to
build trust with colleagues and residents by gathering input on key
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
9
initiatives and aligning budget and the strategic plan to both performance
objectives and public expectations.”
i. Question: What are the key complex topics and decisions made in
Cupertino that (the City’s leaders) through OpenGov are
communicating?
RESPONSE: The Budget Team has primarily utilized OpenGov’s Transparency Portal
and Budget Builder software. We’ve also used this platform to present budget and
prior year actual data at City Council Meetings. Additionally, we’ve used this tool to
provide information to City Council on various subject like Capital Projects, salary and
benefit costs. Moving forward, the Budget Team is excited to further complement the
budget tools with the use of stories, an interactive platform to present and inform
audiences on specific projects and initiatives.
ii. How is the City using OpenGov (the transparency portal) by
“aligning budget and the strategic plan to both performance
objectives and public expectations”?
RESPONSE: The budget process establishes a public expectation and the Transparency
Portal allows the public to view, in real-time, the City’s financial data.
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
10
b. One possible idea is to (cross)link the “context” in the Budget message (for
example the June 2019 Budget message) and other “context” in the
Department Operating Budgets to some of the OpenGov Transparency
portal modules, for major line items or major changes from previous
years. The OpenGov transparency portal currently is filled with data and
ability to compare but could benefit from adding convenient context. Is
this something that Staff could do?
RESPONSE: Adding “notes” is definitely one way to increase context. The use of
“stories” is also another tool available to the City that can obviously tell a story about a
project, initiative, etc. Based on requests from Council, Commissions, Committees, the
public, management, etc., staff can create and publish stories as necessary.
i. Could Staff then introduce some of the OpenGov communication
elements (see above questions and Opengov website for more)?
RESPONSE: Open Town Hall is a survey tool the City is looking into utilizing more
consistently and frequently.
ii. Palo Alto is using the “note” function (although only one posted) of
the OpenGov. What does Staff think about using this functionality
as a starting point for communications? See link here to Palo Alto:
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
11
https://paloalto.opengov.com/transparency#/18215/accountType=re
venues&embed=n&breakdown=types¤tYearAmount=cumul
ative¤tYearPeriod=years&graph=bar&legendSort=coa&pror
ation=true&saved_view=51273&selection=E7F4AA9C788A9B9A3D
41A6865E3D305B&projections=null&projectionType=null&highligh
ting=null&highlightingVariance=null&year=NaN&selectedDataSetI
ndex=null&fiscal_start=2013&fiscal_end=latest
RESPONSE: Yes, we can add these notes to various saved “views” to provide context
to the reader/audience.
7. The order in which one accesses the below Budget documents a. – e., can result in
an entirely different set of questions. What is the intended order that key Budget
documents should be examined by the public?:
a. Budget (500+ pages)
b. OpenGov (transparency portal)
c. Budget at a Glance
d. Budget message
e. Department Operating Budgets
RESPONSE: While the Budget Team’s preference would be the Adopted Budget (which
contains the Budget Message and Department Operating Budgets), followed by the
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12
Budget at a Glance, and then finally OpenGov, one of the advantages to having these
multiple tools is that the order of preference can be determined by any reader/audience
depending on their needs, interests, and desires. For example, a reader that isn’t
interested in getting lost in 500+ pages of details might prefer to a high level glad at the
Budget at a Glance – and vice a versa. The moment a budget becomes adopted and
printed, it’s already outdated. That is what is great about OpenGov; it is a living
constantly updating platform that addresses the common question, “I know how much
was budgeted…how much have we spent?”
8. Following-up on Question 7., above, there are also Financial Policies and
Schedules. Assuming that the above-listed Budget documents of 7.a. – 7.e. are
not envisioned as being examined in any particular order (and if they are, we
should make that clear to the public), please consider using items 7.d. and 7.e. as
a contextual “bridge” between the Budget at a Glance and the Budget? Or
perhaps there should be another intermediate step to the Transparency Portal
which provides both context/bridge and the data? Should all of the above-
mentioned budget items (7.a. – 7.e. and the Financial Policies and Schedules) be
linked together in some way in the Transparency Portal?
RESPONSE: Agreed. Each of the tools discussed have pros and cons and
readers/audiences may not be aware of them (e.g., one is detailed, one is high-level, one
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
13
is current, etc.). One of the ways we’ve tried to tackle this challenge is through events
such as Budget & Bites and through social media engagement. The Budget Team is
open to recommendations and idea to building this contextual “bridge.”
9. In Financial Policies and Schedules:
a. On p75 (p9 of 94 PDF) of the Fiscal Policies – Revenue Policies, the final
policy listed states “Ensure that Enterprise activities remain self-
supporting in the long-term.” How does the City analyze compliance with
this policy? Please provide examples?
RESPONSE: Governmental Accounting Standards Board and various interpretations of
the standards do not appear to have a specific threshold for how “self-supporting” is
defined. For example, there is not an exact threshold of 50% which would qualify a
fund or activity to be reported as an enterprise fund. Compliance is continually
monitored based on historical and/or current subsidized (General Fund assistance)
activities.
b. On p92 (p26 of 94 PDF), the Audit Committee is neither listed nor has a
budgeted expenditure allocated. Can this be corrected? If so, please
describe the process for including the Audit Committee here.
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AUDIT COMMITTEE – SUBCOMMITTEE QUESTIONS
14
RESPONSE: We will ensure the Audit Committee and related staff time is added in the
FY 2020-21 Proposed and Adopted Budget.
10. Is there anywhere within the Budget documents where a member of the public
can easily determine how much of Cupertino’s annual budget is spent on
compensation, benefits, and pension obligations for the City’s employees? If not,
please provide in table format, broken down by departments, the number of
FTEs, and the absolute amounts spent on each department for compensation,
benefits, and pension obligations. Please include City Council compensation.
RESPONSE: The resolution on page 12 provides a financial overview by fund showing
the City-wide account classification amounts (employee compensation and employee
benefits are included). Page 40 and 41 of the Budget Message discuss the ongoing
challenges of retirement benefits. Page 111 discussed the General Fund expenditures,
specifically the majority of the City’s employee compensation and employee benefits.
The pages to follow within the All Fund Summary beginning on page 117, show the
employee compensation and employee benefits totals aggregated at the fund-type level.
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15
The second (2nd) page of each of the Department budget sections shows a total FTE
allocation. Shortly thereafter and near the front of each of the Department budgets, a
total revenues and expenditures by account classification is reported. For example,
Council and Commissions’ Department budget on page 165 reports the total employee
compensation and employee benefits totals for the year. Lastly, there is a saved view in
the transparency portal titled “Employee Compensation and Benefits” that breaks out
by department salary and benefits costs by department.
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1
AUDIT COMMITTEE
SUBCOMMITTEE ON THE ANNUAL BUDGET REPORT
November 12, 2019
CONCLUSIONS AND RECOMMENDATIONS
1. Awards from respected Associations for Budget Presentation highlight and support the outstanding
work being accomplished by the City Staff of Cupertino in the budget process:
a. Distinguished Budget Presentation Award by Government Finance Officers Association; and
b. Excellence Award for Fiscal Year Operating Budget by California Society of Municipal Finance
Officers.
2. Comparison of budget documents from other cities as presented in September 25, 2019 Staff Report to
the Budget Book Subcommittee of the Audit Committee, shows the City of Cupertino meeting or
exceeding its peers in a variety of budget presentation categories. Use of the Transparency Portal and
communication of Budget At a Glance are clearly within the peer leadership.
3. In the spirit of continuous improvement and building on the strong budget formats already in-place in
Cupertino, here are some areas the Subcommittee recommends further investigation and possible
adjustment be considered by focus on possible enhancements to the
a. Budget At a Glance
i. Adding modules such as the Ten-Year Staffing and Population Growth chart to highlight
and explain significant changes or elements of the current budget; and
ii. Reference Transparency portal of OpenGov for supplemental key elements.
b. Transparency portal of OpenGov
i. Provide more context to major amounts and changes from year to year or budget to
actual by
1. Linking to the context already available in other budget documents or
2. Creating new content if needed and posting.
ii. Interconnect or make more obvious some of the key communication elements on the
budget already underway in Cupertino and as listed by OpenGov as one of the
transparency portal’s strengths. For example, OpenGov on its website states “Build
Trust Through Effective Communication. Engaging with constituents and stakeholders is
critical to every public agency’s success. With OpenGov, leaders can analyze and
communicate complex topics and decisions in a simple manner anyone can understand.
Agencies are able to build trust with colleagues and residents by gathering input on key
initiatives and aligning budget and the strategic plan to both performance objectives and
public expectations.”
1. Link into OpenGov those initiatives already underway; and
2. Explore other ways to implement and demonstrate through the portal.
PLEASE SEE SEPARATE SUBCOMMITTEE QUESTIONS SUBMITTED TO CITY STAFF WITH
RESPONSES FROM STAFF
In particular the following City Staff responses warrant additional consideration and action based on
responses provided: Questions 1b, 1c, 2b, 4a, 6ai, 6b, 6bii, 8, 9b and 10.
32
2
Additionally, the response by City staff to Question 9a which asked about the current stated
policy of “Ensure that Enterprise activities remain self-supporting in the long-term” seems to us to
indicate as a minimum the word “Ensure” might be replaced with “Monitor” or even better a policy
defining “self-supporting in the long-term” be adopted so that the City indeed could ensure that said
policy is being implemented.
Respectively submitted
Budget Subcommittee of Cupertino Audit Committee
Councilman Darcy Paul
Cupertino Audit Committee Chair Eno Schmidt
33
Audit Committee Regular Meeting
October 27, 2020
Budget Format Review Update
34
1.Adopted Budget
2.Recommendations
3.Solutions
4.Next Steps
Topics
35
•Added CIP Financial Impacts Discussion
•Added Revenue Comparisons
•Expanded Pension Discussion
Adopted Budget
36
Transparency Portal
Historical Data
Budget
Budget vs. Actuals
Budget Documents
Adopted Budget
Budget at a Glance
Recommendations: Bridging the Gap
37
How We Bridge the Gap
Transparency
Portal
OpenGov
Stories
Open Town
Hall
38
The Goal
Transparency Engagement
Education
39
Interactive Budget at a Glance
40
Resident Tax Contribution Calculator
41
Interactive CIP Budget
42
Important Initiatives
43
Budget Landing Page
44
Timeline
Interactive Budget at a
Glance
Resident Tax Contribution
Calculator
Interactive CIP Budget
Important Initiatives
Budget Landing Page
45
•Budget Format Review Subcommittee
Next Steps
46
Questions?
Thank you!
47
Questions Regarding the Current Budget Report
Audit Committee Chair Daisy Liang
1. Page 35 and 55 of the FY 21-22 Proposed Budget: Please add the Adopted Budget
amounts for anywhere the FY18 and FY19 actuals are presented. This will allow a reader
to understand where the actuals ended in respect to the amounts budgeted.
RESPONSE: The format of showing two years of actuals, prior year adopted, and current year adopted
follows the criteria set forth by the Government Finance Officers Association (GFOA). Additionally,
changing the size of the charts would result in the charts being significantly reduced in size and could
make is less legible. As an alternative, staff could issue a separate appendix showing the prior year
budget and actuals at the detailed account line item level and post on the City’s website.
2. Page 42: The Non-Personnel Assumptions section discussed one-time special projects.
Can we add links throughout the document for repeated information? Can we add onetime
special projects as a saved “view” in OpenGov to allow the public to easily access
the information?
RESPONSE: We can add a reference on page 42 to note that special projects are further detailed in the
respective department narrative sections. Each page of the budget document has a link back to the Table of
Contents. From there, a user can easily move to any section of the document they desire.
3. Page 81: The Basis of Budgeting section discusses the budget being split into nine
departments. Can the document include a pie chart to show the departments
percentages?
RESPONSE: General Fund expenditures by department is presented on page 36 of the Proposed Budget.
4. Page 93: What is the formula to calculate the $19,000,000 for Economic Uncertainty
reserve?
RESPONSE: The formula is noted on page 93 of the Proposed Budget document: “represents two months
of General Fund (GF) expenditures excluding transfers out plus a two year drop in total general fund
revenue of 13% or approximately 1.5 months, excluding the use of reserves.” This can be estimated by
using the “Financial Overview by Fund” chart on page 103.
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In recent years, unassigned fund balance in General Fund has maintained high levels. That, coupled with
the establishment of the Section 115 Trust (pension), City staff have not recommended increases to the
Economic Uncertainty Reserve. In the event of economic uncertainty, further recommendations would be
brought before City Council (e.g., increasing the Economic Uncertainty Reserve, utilizing the Pension
Section 115 Trust, budget reductions, etc.).
5. Page 138: Can General Fund fund balance be added to the 20-Year General Fund
Financial Forecast chart?
RESPONSE: Page 138 shows the revenues and expenditures and difference between the bars and the line
represent changes in fund balance; these are emphasized on page 139. We could add a sentence nothing
the beginning unassigned and total fund balance to provide additional context. That said, the General
Fund fund balance forecast is discussed in detail beginning on page 155. Although having all of this
information on one page would be ideal, it simply is not feasible. The forecast section is presented in a
format consistent with the rest of the document and follows the flow/format of an income statement
(revenue expenditures fund balance).
6. Page 148: What is “salary savings” as presented in the Five-year General Fund
Expenditures Forecast chart?
RESPONSE: Salary savings is a common line item in budgets, particularly in forecast models. The City
budgets for 100% of the authorized employee head count; however, throughout the year, savings is
realized through turnover and attrition. This amount represents the anticipated savings from vacant
positions and attrition throughout the fiscal year (cost of approximately 5 full-time employees).
7. Page 541: Where are the capital projects for FY 21-22 as well as any previously funded
projects that have yet to be completed?
RESONSE: The Capital Improvement Program (CIP) was not included in the Proposed Budget. It was
first introduced to City Council at a study session on May 4, 2021, subsequent to the publishing of the
Proposed Budget on May 1, 2021. The Final Adopted Budget will incorporate all financial information
pertaining to CIP. Additionally, Public Works and the CIP team will be issuing a separate CIP Budget
document as well.
Total GF Expenditures 88,138,778$
(less transfers out)(11,251,984)$
Subtotal 76,886,794$
Expenditures (2 months)12,814,466$
Revenues (1.5 months)9,372,611$
Hypothetical Reserve Amount in FY 21-22 22,187,077$
Actual Reserve Amount in FY 21-22 19,000,000$
Difference (3,187,077)$
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Councilmember Moore
May 18, 2021
Format:
1. While Contingencies may not be an appropriate format issue to discuss, I think it should
be removed and the reserve in the General Fund be appropriated as needed. The item has
not been transparent from its inception in 2013 and looks like a slush fund with the
largest share in the City Manager’s budget. The Staff Report to City Council in June of
2013 neglected to mention that a new contingency amount of $427k was even being
appropriated and now the current format for the Budget shows $3,773 for contingencies
for the City Manager on p. 221, yet on p. 245 of the current Proposed Budget, there is
$593,250 appropriated in contingencies. Additionally, the City Manager is given
authority to approve their spending on p. 244. This practice, and the whole contingency
category, in my opinion, needs to end.
RESPONSE: City Council directed staff to reduce the City Manager Discretionary Fund to $75,000 (a
reduction of $518,250) at the June 4, 2021 study session. City Council ultimately adopted the FY 21-22
Budget with a City Manager Discretionary Fund budget amount of $75,000.
2. I do prefer the staffing tables used by Campbell and Sunnyvale for clarity.
RESPONSE: Noted. It will be challenging to incorporate similar staffing tables throughout each of the
respective Program narratives. However, staff can create an appendix report for all positions and present
by Department and Program.
3. I prefer the more detailed accounting which the City did in 2013 and other cities continue
to do, referred to as the Account Level Summary.
RESPONSE: Noted. It will significantly increase the length of the document to show the account level
detail throughout the document, but as an alternative, staff can create an appendix report for all budget
and actuals at the account level detail.
4. I would like the previous comments from the last Budget Format Review Subcommittee
(attached) added along with my comments and Daisy’s for next week’s City Council
Budget Agenda item.
RESPONSE: Noted.
50
Content:
Proposed Budget is pretty easy to read and follow. Movement of money between funds along
with department divisions and tasks moving between departments makes following the
changes to department costs difficult to capture. Because some funding increased a great deal
in 2020, it
would help to have a comparison back to 2019 in some instances (City Manager Contingency,
for example, Proposed Budget p. 245)
1. Community outreach improvements to get input regarding the Proposed Budget goals and
process.
a. Proposed Budget mentions input from the Audit and Fiscal Strategic Plan
Committees, however neither has reviewed the Proposed Budget for input. Should
these committees receive the Proposed Budget prior to coming to City Council in
the future or is this process order better? The Fiscal Strategic Plan Committee is
not codified and has no codified duty to review the Proposed Budget.
RESPONSE: The Audit Committee is tasked with reviewing the Budget Format and the Fiscal Strategic
Plan has historically reviewed the City’s financial forecast, which is an important component to the City’s
budget document. While input on the actual budget document is only received from the Community via
public meetings, the City’s budget team holds annual community engagement budget workshops and
includes interactive budget reports throughout the year via OpenGov.
2. The organizational charts need to reflect the Cupertino Municipal Code (CMC)
a. Add date of organizational chart
b. Update the online chart
c. Update CMC to reflect current organizational structure (e.g. add I.T. Department)
d. This should probably not be a work plan item, but an ongoing process of CMC
cleanup
RESPONSE: The organizational charts in the budget document are correct. They will need to be updated
online and in the CMC. The date of the organization chart in the budget corresponds to the budget
document itself; thus the organization chart corresponds to FY 21-22.
3. CMC mentions a potential Public Safety Department should Police and Fire be
administered by the City. The City contracts out both. How is the Fire Department paid
for?
RESPONSE: Santa Clara County Fire is funded via property taxes. Property tax revenues are
generated from the 1% tax on property values. Of that 1%, the City receives 7% and Santa Clara
County Fire receives 15%, with the majority of the 1% going to school districts.
51
4. City Manager discretionary spending was $743 for 2020 yet the 2022 Proposed Budget is
$593,250. Additionally, the Program Overview states that the contingency budget for the
City Manager requires the City Manager approval (Proposed Budget p. 244). I would
recommend this amount be removed and a policy for oversight be put in place. The City
Manager’s overall budget has increased from $786,535 in 2019 (expenditures plus
contingencies) to $2,115,071 proposed for 2022. How is this increase accounted for?
Review the City of Cupertino Purchasing Policy (2013) Code Sec. 3.22 and 3.23.
RESPONSE: The City Manager Contingency program was established to meet citywide
unexpected expenses that may occur during the year. In FY 2013-14, a Contingencies
expenditures category was added to each General Fund program to serve as a contingency for
any unexpected expenditures that might occur during the year. Prior to FY 2020-21, the
contingency amount was derived by taking 5% of the General Fund’s base materials and
contract services to account for unforeseen events and/or activities that were not included in the
respective fiscal year’s budget. In FY 2020-21, and in response to COVID-19, the contingency
amount was cut in half to 2.5% of the General Fund’s base materials and contract services.
Additionally, in FY 2020-21 The City Manager’s contingency established an appropriation
specifically for Public Works’ unforeseen maintenance and repairs in an amount of $280,000.
The current 2.5% calculation is below GFOA’s best practice recommended range of 5-15%;
however, once the Public Works unforeseen maintenance and repair contingency is factored,
the contingency amount ends within the recommended range at 5%. In total, the City
Manager’s contingency budget has remained relatively consistent year-over-year (YOY) as
noted below:
Fiscal Year FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
Budget $505,000 $593,661 $486,353 $551,827 $593,250
Actual $240,365 $127,480 $279,337 $283,384 $ -
The City Manager budget unit within the Department of Administration (100-12-120) has
increased from $993,118 (adopted) in FY 2018-19 to $1,521,821 (proposed) in FY 2021-22. This
increase is due to 2.3 additional full-time employees being accounted for in this budget unit.
City Council recommended and adopted a FY 21-22 budget with a City Manager Discretionary
Fund of $75,000.
5. Economic Development has switched to a contract service and has more than doubled in
cost.
RESPONSE: The Economic Development budget is proposed to decrease from $430,494 in FY
2020-21 to $337,074. As the function becomes further defined, staff will bring forward budget
recommendations to City Council for consideration.
52
6. Some committees use staff time (which seems to imply they have a budget amount) and
are not codified: Economic Development Committee, Disaster Council, Fiscal Strategic
Plan Committee. Needs clarification.
RESPONSE: Staff time allocations less than 5% are generally not charged to specific budget
units. In other words, the City would not create a budget unit for Fiscal Strategic Plan
Committee because less than 5% of a respective employee’s annual time is required.
7. Multiple projects which are not approved in the City Council Work Plan show up in the
Proposed Budget: New Logo, online store. Please remove these items from other
headings such as “Contract Services” to a new heading which indicates they are Proposed
Work Plan Items and not approved.
RESPONSE: All City Work Program items will be budgeted and shown as “special projects” in
the final adopted budget. Recording activities in a unique account requires the creation of a
new general ledger account. This is completed once the City Work Program is adopted and the
projects are finalized.
8. Communications costs seems to be a separate area, could this be shown as a group?
RESPONSE: Combining these groups would decrease transparency and also sacrifice historical
data comparisons. OpenGov’s Transparency Portal now has a saved “view” so that the Office of
Communications and the Multimedia budget units can be seen in a combined fashion.
OpenGov Saved View
9. It is unclear how much of the Cultural Events ($402,137) items will occur, such as the 4th
of July celebration. (PB p. 335-336), a similar item, Neighborhood Events ($163,119)
raises the same question (PB p. 350). Total events: $565,256.
RESPONSE: Most of the 4th of July funds are spent the FY before the event, so the money in the
FY 2021-2022 budget will go toward the July 4, 2022. The other events within this account are
Memorial Park Summer Events and Shakespeare in the Park which we are planning for late
summer/early Fall 2021, Tree Lighting which is in December 2021, Big Bunny 5K in March/April
2022, and other small events. The Festivals start in the Fall and continue to Spring. At this time,
we are assuming those will happen.
10. Economic Development was $89,910 for the 2019 actual expenditure and is now
proposed at FY 2022 $337,074 with a new contingency and materials amount of over
$60K with no staffing. Additionally, there is no codified Economic Development
Committee which uses staff time. This area needs attention.
53
RESPONSE: The Economic Development budget is proposed to decrease from $430,494 in FY
2020-21 to $337,074. With the function likely moving “in-house,” staff are recommending a
reduction in this budget unit of $38,694. As the function becomes further defined, staff will
bring forward budget recommendations to City Council for consideration.
11. Please explain the large increase in the BMR affordable housing fund PB p. 393 which
shows an increase of revenue from 2019 actual of $159,179 in taxes to 2022 Proposed
Budget taxes of $3,611,855. There is an allocation of $600,000 shown for Homelessness
and other Special Projects which has not been approved and the City Resolution to
support the county Task Force on Homelessness indicated that the City would participate
in a county-wide program which the City would likely be asked to contribute financially
to.
RESPONSE: Estimated revenues increased due to one-time anticipated Housing Mitigation In-
Lieu Fees for Cupertino Village and De Anza Hotel. The majority of this program’s budget
increase is due to two (2) tentative City Work Program items: $300,000 for Affordable Housing
Strategies and $300,000 for Homeless Services and Facilities. Although the Affordable Housing
Strategies is slated for removal, a $200,000 item for Homeless Jobs Program is slated to be
added.
12. Code Enforcement has increased from $508,167 in 2019 to $1,202,392 proposed 2022.
PB p. 406.
RESPONSE: Full-time employee (FTE) allocations have increased since FY 2018-19 which is
contributing to the increase. Additionally, and because of these relatively large proportional
staffing increases and changes in methodology, the amount of cost allocation charges increased
from $22,478 in FY 2018-19 to $277,786 in the proposed budget year.
13. Facilities would be easier to track if grouped together, Facilities and Fleet next to
Grounds, for example. Where are Stocklmeir, Byrne, Blech?
RESPONSE: The Department’s budget units/programs are organized in order of Division (xxx-
XX-xxx). Because the Fleet or “Fixed Assets Acquisition” program is numbered 630-90-985, it
naturally comes at the end. Changing the accounting structure would be an administrative
challenge and make it more difficult to identity fluctuations year over year. A saved “view” on
OpenGov has been created to see Grounds and Facilities budget units together.
OpenGov Saved View
54
Stocklmeir, Byrne and Blesch are not occupied buildings that are in use. The Facilities budgets
are for maintenance of city buildings that are in use. Any budget allocations for these three
properties would be considered a special project with a specific scope. Additionally, The City’s
budget does not include a comprehensive list of the City’s capital assets for two primary
reasons: 1) it is not a requirement or recommendation by the Government Finance Officer’s
Association (GFOA) and 2) the City strives to keep the budget document as concise as possible.
It is regularly recommended by GFOA to shorten the document as necessary and appropriate.
55
CITY OF CUPERTINO
Agenda Item
21-9724 Agenda Date: 8/30/2021
Agenda #: 4.
Subject: Follow-up on Previous FY Management Letter Items and Management Response
Receive Follow-up on Previous FY Management Letter Items and Management Response
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CITY OF CUPERTINO
Agenda Item
21-9725 Agenda Date: 8/30/2021
Agenda #: 5.
Subject: Embezzlement Update
Receive Embezzlement Update
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