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AC 09-26-2022 Page 1 City of Cupertino Audit Committee Regular Meeting Minutes September 26, 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, Mayor Darcy Paul, Committeemember Laura Hammer, Committeemember Sophie Song City Staff Present: Kristina Alfaro, Thomas Leung, Beth Viajar, Lizz Cook, Pamela Wu Absent: Vice Chair Angela Chen Guests: Carlos Oblites (Chandler), Kathy Lai (Crowe), Matt Geerdes (Crowe) ORDERS OF THE DAY 1. APPROVAL OF MINUTES OF AUGUST 22, 2022 Committeemember Hammer motioned, and Mayor Paul seconded. The motion carried unanimously by all members present. ORAL COMMUNICATIONS NEW BUSINESS 2. Consider an update on the FY 2021-22 Audit and AUP Engagements Lai provided an update. Committeemember Hammer asked about the materiality of the one major program. Geerdes noted that there were certain numbers when it came to materiality that auditors could not communicate. He added that in determining whether a program is required to be audited, the type A threshold is $750k. Committeemember Hammer asked if the Coronavirus Local Fiscal Recovery Fund program was a reimbursable grant. Lai noted that the Coronavirus Local Fiscal Recovery Fund was a new federal program and was part of the American Rescue Plan Act. Lai added that the funds were advanced and received in tranches. Alfaro noted that we received the first tranche at end of 2021 and the second tranche early in Fiscal Year 2023. Committeemember Hammer asked if Crowe would come back in January with the update or the final audit results. Geerdes noted it was typically an update. Chair Moore asked what the leases were. Geerdes noted that they looked at it from both the lessor and lessee perspective, as the City does lease equipment and the City leases its property to third parties. Chair Moore asked in the past if we were leasing out our coffee shop, would it be included? Geerdes noted that it would not because it would not have met the definition of a lease by the old GASB definition. Page 2 Mayor Paul asked if there was a guide for the types of questions that would be asked under the categories. Lai noted that they just mentioned high-level broad topics relative to the auditing standards. Mayor Paul asked if there were any resources or references that Crowe recommended to look into the subject matter. Lai noted that there were audit committee training and auditing standards sources. Chair Moore noted that the conversation was too high level for the public and would like to make it more accessible. 3. Consider the Monthly Treasurer's Investment Report for August 2022 Leung provided an overview of the report. Oblites provided an update on the portfolio. No public comment. Oblites noted this report was more abbreviated and was focused on helping the committee understand what was driving the economy. Mayor Paul asked if we should look at any investment types that were different from our current portfolio. Oblites noted that they were comfortable with the current portfolio. They had worked with staff to expand the policies to take every advantage available. Mayor Paul motioned, and Committeemember Hammer seconded. The motion carried unanimously by all members present. 4. Consider the Monthly Treasurer's Report for August 2022 Leung provided an overview of the report. No public comment. Chair Moore asked about the payments for classes and how she would determine if it would cause a revenue or deficit. Alfaro noted that the revenues were in ActiveNet and imported as a journal in summary into the financial system. Alfaro added that Parks and Recreation might not track the expenditures for each class, ex: staff time. Most financial systems do not track to the class level. Chair Moore noted that Math Olympiad contracts came to Council, but contracts for other classes did not come to Council. She asked if some classes were hitting certain thresholds. Alfaro deferred to the City Manager. Chair Moore would like to understand why contracts for some classes came to Council, and some did not. City Manager Wu noted that staff would provide a follow-up. Mayor Paul asked about the payment to the County of Santa Clara. Alfaro noted that they were additional police services provided outside of their contract. The city acts as a pass-through in coordinating with the organization and the Sheriff’s Office, and the City receives a 15% administrative fee. Mayor Paul asked about the Torre Avenue Library Book Drop off. Alfaro noted that staff would check which program it was budgeted in. Mayor Paul asked what fund this came out of, what empowered the library book drop off, if it was a carryover, and what expenditures were for the Civic Center Parking project. Leung noted that the invoice was related to parking, and staff would follow up on the other questions. Chair Moore asked about the $21 million in the Park Dedication Fund and if that could be spent on parks. Leung confirmed and noted that staff would check to see if any of it had been appropriated. Alfaro said that although we have received the money, we need to receive approval from City Council to move forward with any projects. Chair Moore asked how the development impact fees were tracked. Alfaro noted that staff worked closely with the Community Page 3 Development Department (CDD) to find out when these fees come in, ensure they went into the appropriate accounts, and track and leave notes about what these projects are restricted for. Alfaro noted that it was tracked in Accela. Chair Moore asked if she could see an example. Alfaro recommended that CDD bring it as an item of interest to Council and committee members as it did not tie into Audit but could fall under Budget Review. Mayor Paul asked how the Civic Center Parking Analysis project changed to a book drop-off and how one could justify a project they had not heard about. Alfaro noted that there would be a supplemental report to Council addressing the questions asked. Committeemember Hammer motioned, and Mayor Paul seconded. The motion carried unanimously by all members present. 5. Consider an overview of the Unassigned Fund Balance and Use of One Time Funds Policy (Continued from August 22, 2022) Alfaro provided an overview of the policy. Chair Moore asked about other cities’ funding levels. Leung noted that the comparison included a reserve if a City had funds, even if it did not have a policy. Chair Moore asked staff to see if other cities had something similar to the City of Cupertino’s PERS. Leung noted that staff would follow up to see how other cities prioritized their reserves and could provide an updated analysis of what Cupertino had in PERS compared to other cities. Chair Moore noted that Mountain View had many reserves Cupertino did not have and should there be a discussion into creating those reserves. Mayor Paul requested to see how we were doing compared to other cities in our projected capitalization rates and to consider a strategic property acquisition fund. Alfaro noted that to access funds for strategic property acquisition, Council authority would be needed. 6. Consider an overview of data sources for the City's interactive financial transparency portal OpenGov (Continued from August 22, 2022) Leung provided an overview of OpenGov. Chair Moore asked about the timeline for moving forward with a new software system that would integrate with the ERP system. Alfaro noted that we were waiting for our new Finance Manager to move forward. Alfaro added that our current system did integrate with OpenGov. The new ERP would be a new financial system as Tyler bought New World and could eventually stop servicing New World. Leung added that moving to a new ERP system would not change what OpenGov would look like. It would just change the data source. 7. Consider the Audit Committee 2022 Schedule and Work Plan Cook recommended that the budget format review study session be moved to a special meeting in January in the interest of time. Chair Moore asked if she wanted to see Measure B funds broken out, would it throw a wrench in things. Alfaro noted that if the budget subcommittee provided examples of how they want it formatted, staff could work on it. OLD BUSINESS STAFF AND COMMITTEE REPORTS Page 4 FUTURE AGENDA SETTING ADJOURNMENT The meeting adjourned at 6:09 p.m. Recording Secretary: Janet Liang, Administrative Assistant