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AC 08-22-2022Page 1 City of Cupertino Audit Committee Regular Meeting Minutes August 22, 2022 CALL TO ORDER At 4:00 p.m., Chair Moore called the regular meeting to order. This was a teleconference meeting with no physical location. ROLL CALL Committee Members Present: Chair Kitty Moore, Vice Chair Angela Chen, Mayor Darcy Paul, Committeemember Sophie Song, Committeemember Laura Hammer City Staff Present: Kristina Alfaro, Thomas Leung, Beth Viajar, Lizz Cook, Dianne Thompson Absent: Guests: Carlos Oblites (Chandler), Kara Raynor-Sanchez (Chandler), Annie Rose Favreau (Moss Adams) ORDERS OF THE DAY 1. APPROVAL OF MINUTES OF JUNE 27, 2022 Mayor Paul motioned and Vice Chair Chen seconded. The motion carried unanimously by all members present. 2. APPROVAL OF MINUTES OF JULY 1, 2022 Vice Chair Chen motioned and Mayor Paul seconded. The motion carried unanimously by all members present. 3. APPROVAL OF MINUTES OF JULY 25, 2022 Mayor Paul motioned and Committeemember Hammer seconded. The motion carried unanimously by all members present. ORAL COMMUNICATIONS NEW BUSINESS 4. Consider the Monthly Treasurer's Investment Report for July 2022 Leung provided an overview of the report. Oblites and Raynor-Sanchez provided an update on the City’s investments. Vice Chair Chen inquired about the analysis of the employment numbers. Oblites noted that in July, the employment numbers doubled, which was why the Federal Reserve continued to raise rates. Mayor Paul asked if Cupertino invested a lot of money in the petroleum industry, how would that connect with a green economy and clean energy? Oblites noted that there were no structural deficits in the economy that would need to be fixed. Oblites noted that the purpose of the investment policy was to put fences around the investment program because Page 2 the program is about managing risk. Oblites added that the City had a robust listing of asset classes as allowed by code. He added that staff was on top of the policy, and the City was taking advantage of everything it could. Chair Moore inquired about food scarcity and if it would be an issue. Oblites noted that they were following the law and not investing in Russian-related corporations. Oblites added that there were not a lot of food agro-businesses that met the credit requirements imposed by California Government Code. Oblites noted that none of the government-sponsored enterprises were related to farm, but they had the ability to buy federal farm credit. No public comment. Vice Chair Chen motioned, and Committeemember Hammer seconded. The motion carried unanimously by all members present. 5. Consider the Monthly Treasurer's Report for July 2022 Leung provided an overview of the report. No public comment. Vice Chair Chen asked about the Environmental Management Clean Creek Storm Drain Fund and the billing of the fee. Leung noted that staff would follow up on the request. Vice Chair Chen also inquired if resource recovery was 100% reimbursable. Leung confirmed that it was reimbursable and an enterprise fund. Chair Moore requested a more detailed discussion of the funds on a future agenda date and more description of special revenue funds and which category they fell into. Chair Moore noted her concern about the three overlapping special revenue funds and inquired as to whether or not it would be wise to have a SB1/2016 Measure B fund. Mayor Paul motioned, and Vice Chair Chen seconded. The motion carried unanimously by all members present. 6. Consider the Internal Audit Status Report Favreau provided an update of the report. No public comment. Committeemember Hammer asked if the policy drafting was prioritized by the highest risk areas and if so, were there a lot of comments and feedback on them. Favreau noted that it was prioritized around high needs for the City and noted good conversation around the policies. Mayor Paul asked if a subcommittee of Audit could see how the process was going along. Favreau noted that it was not typical to have a subcommittee look at this type of operational policy and procedure but they could think about what points could be brought. Chair Moore requested a brief memo of the policies being reviewed and what they were working on. Favreau noted the policies were cash handling, credit cards, purchasing, accounts payable, budget, and capital assets and they would work with staff on short summaries. Committeemember Hammer noted that they can mention if they are on schedule or not. Vice Chair Chen requested for the report to be in table format. Favreau noted that staff can. Committeemembers are in favor of a table format. 7. Consider appointing External Auditor Selection Subcommittee Members and Request for Proposal (RFP) Kickoff Leung provided an overview. Chair Moore asked why we would change from a partner within Crowe. Leung noted that the City could not have the same audit partner for more than six years in a row. The City could switch to another firm or work with another audit partner within the same firm. No public comment. Chair Moore requested that we add term dates for the Committeemembers as Mayor Paul is terming out. Leung noted that the information would be added to the website. Mayor Paul noted that the services from Crowe were getting better and that he should not be selected for the subcommittee as he will term out. Mayor Paul moved that the Page 3 subcommittee be comprised of Chair Moore and Committeemember Hammer. Vice Chair Chen seconded. The motion carried unanimously by all members present. 8. Consider an overview of the Unassigned Fund Balance and Use of One Time Funds Policy Leung provided an overview. No public comment. Vice Chair Chen questioned how the fund balance is applied to the City's current situation and noted the difference in fund balance amounts in the proposed budget and the ACFR. Leung noted unassigned fund balance was larger than the $500k in the policy. The City will review fund balance at mid-year and may make transfers to capital reserves or increase balances for pension reserves. Alfaro noted that mid-year is selected as we would have closed out the fiscal year, knowing what our actuals look like from the prior year. We would also be six months into the fiscal year, allowing for better decisions to be made around moving funds. She added that if we transfer funds within the first six months of the fiscal year, it could have a major impact. Vice Chair Chen asked if we would recommend adjustments to policy, policy review, or just the allocation of funds at mid-year. Leung confirmed it was both and cited the capital budget reserves and economic uncertainty as examples. Regarding using unassigned fund balance, Mayor Paul recommended that staff meet with councilmembers earlier for one-on-ones. Chair Moore requested dates on when the policy was implemented/revised and to add revision dates. Chair Moore asked if Audit Committee's role includes reviewing the unassigned fund balance policy. Leung noted that it is not the Audit Committee's responsibility. The policy was most recently revised in April 2022 and developed in FY13-14 or FY14-15. Alfaro added that there was a policy before. It did not have all of the components GFOA recommended, and updates were made in either of the fiscal years Leung mentioned. Committeemember Hammer asked if there should be a threshold on unassigned fund balance. Chair Moore requested a deeper dive into this item and would like to add this to the September 26 meeting and move item 9 to September. Chair Moore continued items 8 and 9 to the September 26, 2022, meeting. Mayor Paul Seconded. The motion carried unanimously by all members present. 9. Consider an overview of data sources for the City's interactive financial transparency portal OpenGov Chair Moore continued items 8 and 9 to the September 26, 2022 meeting. Mayor Paul Seconded. The motion carried unanimously by all members present. 10. Consider the Audit Committee 2022 Schedule and Work Plan Leung shared the workplan. No public comment. OLD BUSINESS STAFF AND COMMITTEE REPORTS Mayor Paul requested for bookmarks on the agenda packet to have the item number listed. FUTURE AGENDA SETTING ADJOURNMENT Page 4 The meeting adjourned at 6:04 p.m. Recording Secretary: Janet Liang, Administrative Assistant