AC 01-23-2023 MinutesPage 1
City of Cupertino
Audit Committee Regular Meeting
Minutes
January 23, 2023
CALL TO ORDER
At 4:00 p.m., Vice Chair Chen called the regular meeting to order. This was a teleconference
meeting with no physical location.
ROLL CALL
Committee Members Present: Chair Angela Chen, Vice Chair Sheila Mohan (4:06 p.m.),
Committee member J.R. Fruen, Committee member Laura Hammer, Committee member Sophie
Song (4:06 p.m.)
City Staff Present: Kristina Alfaro, Pamela Wu, Matt Morley, Janet Liang
Absent:
Guests: Alayne Sampson (Chandler), Matt Geerdes (Crowe), Kathy Lai (Crowe), Rick Rosenthal
(US Bank), Jennifer Meza (PARS)
ORDERS OF THE DAY
1. APPROVAL OF MINUTES OF NOVEMBER 28, 2022
Committee member Fruen motioned, and Committee member Hammer seconded. The motion
carried 3-0 with Committee member Mohan and Committee member Song absent.
POSTPONEMENTS
ORAL COMMUNICATIONS
OLD BUSINESS
NEW BUSINESS
2. Appointment of Audit Committee Chair and Vice Chair
Alfaro provided an overview of the report. Committee member Fruen noted that the committee
should follow the traditional practice of rotating the vice chair into the chair’s position.
Committee member Mohan nominated Vice Chair Chen to become Chair, and Committee
member Fruen seconded. Chair Chen nominated Committee member Mohan to be Vice Chair,
and Committee member Hammer seconded. No public comment. Vice Chair Mohan and
Committee member Song joined the meeting. The motion carried unanimously by all members
present.
3. Appointment of External Auditor Selection Subcommittee
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Alfaro provided an overview of the report. Chair Chen nominated Vice Chair Mohan as
subcommittee chair. Committee member Fruen seconded. The motion carried unanimously by
all members present. Chair Chen nominated Committee member Fruen as subcommittee Vice
Chair. Vice Chair Mohan seconded. The motion carried unanimously by all members present.
4. Consider the report on Interim Audit and AUP Engagements
Lai and Geerdes provided an overview of the report. No public comment. Committee member
Hammer asked if this was the typical audit schedule or if there were any delays/efficiencies from
prior years. Geerdes responded that they are tracking the same timeline as last year, but that they
had to wait for third-party OPEB/PARS, GASB87 complex calculations, and the late release from
the Federal Government on Single Audit compliance supplement last year.
5. Consider receiving OPEB & Pension Section 115 Trust Performance Report for Quarter
Ending December 31, 2022
Rosenthal provided an overview of the report. Chair Chen asked how US Bank will adjust the
portfolio with interest rates going so high. Rosenthal noted that money markets have gone up
significantly, and it takes time for the mutual funds to catch up to the new rate because they are
holding legacy securities that were bought years ago at a much lower rate. To mitigate the impact
of rising interest rates on the portfolio, Rosenthal initiated a position in a short-term bond fund
to prevent further losses. He added that the value of existing bonds goes down as interest rates
go up.
Vice Chair Mohan asked if US Bank is nimble enough to make quick changes if the situation
continues as we are not meeting the target for commodities. Rosenthal noted that commodities
are not a part of the strategic framework and have not been for the past four years.
6 & 8. Consider the Monthly Treasurer's Investment Report for November 2022 & Consider the
Monthly Treasurer's Investment Report for December 2022
Chair Chen motioned to move item #8 up and combine it with item #6 and combine item #9 with
item #7. Vice Chair Mohan seconded. The motion carried unanimously by all members present.
Liang provided an overview of the report, and Sampson provided an overview of the Chandler
investment report.
Chair Chen asked for clarification on the unemployment rate. Sampson noted that California is
still seeing unemployment at 4.1% despite all the layoffs. She explained that due to severance
packages and other income people receive, they’re not yet able to receive unemployment checks.
Chair Chen then asked if the high-tech layoffs would lead to a recession as the unemployment
rate increases. Sampson noted that there is quite a bit of room for unemployment to go up.
Staff noted that the November Monthly Treasurer’s reports went on the January 17, 2023 City
Council meeting. Committee member Fruen motioned to receive the reports and recommend
filing them with City Council, and Vice Chair Mohan seconded. The motion carried unanimously
by all members present.
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7 & 9. Consider the Monthly Treasurer's Report for November 2022 & Consider the Monthly
Treasurer's Report for December 2022
Liang provided an overview of the report. Staff noted that the November Monthly Treasurer’s
reports went on the January 17, 2023 City Council meeting. Committee member Fruen motioned
to receive the reports and recommend filing them with City Council, and Vice Chair Mohan
seconded. The motion carried unanimously by all members present.
10. Clarifying language on Treasurer’s Report and Audit Committee 2023 Schedule and Work
Plan Meeting Frequency
Alfaro provided an overview of the report. Committee member Hammer asked for clarification
as there is confusion about the responsibility to review the disbursements, payment registers, and
treasurer’s report. Alfaro noted that the payment registers were not required by Government
Code Section 41004. Alfaro added that there was a subcommittee of Council that reviewed the
Treasurer's report and recommended that the reports be included.
The committee discussed recommendation one, which proposes that the reports no longer
include the payment registers, and the monthly treasurer's report will be provided via Council
memo to City Council. Committee member Hammer asked about the reason behind the
subcommittee's recommendation for this change. Alfaro explained that Councilmembers wanted
an additional set of eyes on accounts payable.
Vice Chair Mohan sought clarification that recommendation one did not entail reduced reporting,
but that the reports would no longer be reported to the Audit Committee. Reports that go to
Council would continue to be shared through a Council Memo. Alfaro confirmed that there
would be no reduction in reporting.
Committee member Fruen noted that the Audit Committee was relieved of a bottleneck
accidentally created by requiring all the reporting to come first to the Audit Committee.
Committee member Fruen added that the documents are accessible, allowing the Audit
Committee to use their time more effectively.
Vice Chair Mohan motioned with an amendment to recommendation two to change the Audit
Committee meeting frequency from monthly to 4 regular meetings and 2 special meetings
annually following the approval of recommendation one by City Council. Committee member
Fruen seconded. Griffin and Fry made public comments, and Chair Chen responded to their
concerns. Alfaro noted that the documents could go on items of interest. Committee member
Fruen noted that Councilmembers can still pull an item from the consent calendar, and the public
can still speak to items on the consent calendar. The motion carried unanimously by all members
present.
STAFF AND COMMITTEE REPORTS
COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS
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FUTURE AGENDA SETTING
ADJOURNMENT
The meeting adjourned at 6:20 p.m.
Recording Secretary:
Janet Liang, Acting Management Analyst