AC 7.24.23Page 1
City of Cupertino
Audit Committee Regular Meeting
Minutes
July 24, 2023
CALL TO ORDER
At 4:00 p.m., Chair Chen called the regular meeting to order in the City of Cupertino Conference
Room A, 10300 Torre Avenue.
ROLL CALL
Committee Members Present: Chair Angela Chen, Vice Chair Sheila Mohan, Committee member
J.R. Fruen, Committee member Laura Hammer, Committee member Sophie Song
City Staff Present: Thomas Leung, Janet Liang, Jonathan Orozco, Pamela Wu
Absent:
Guests: Carlos Oblites (Chandler), Annie Rose Favreau (Moss Adams), Colleen Rozillis (Moss
Adams), Ryan Maxey (U.S. Bank), Jennifer Meza (U.S. Bank), Rick Rosenthal (U.S. Bank)
ORDERS OF THE DAY
1. APPROVE MINUTES OF REGULAR MEETING ON APRIL 24, 2023
Vice Chair Mohan motion, Committee member Fruen seconded. No public comment. The motion
passes with Committee member Hammer abstaining.
2.. APPROVE MINUTES OF SPECIAL MEETING ON MAY 31, 2023
Vice Chair Mohan motion, Committee member Fruen seconded. No public comment. The motion
passes with Committee member Song abstaining.
POSTPONEMENTS
ORAL COMMUNICATIONS
OLD BUSINESS
NEW BUSINESS
3. Consider receiving the OPEB & Pension Section 115 Trust Performance Report for the
Quarter Ending June 30, 2023
Maxey noted that they are in early phases of combining resources at U.S. Bank with the first phase
being that Rick is becoming part of PFM asset management. Meza and Rosenthal provided an
overview of the report. Chair Chen asked if there was any major strategic change based on the
market situation. Rosenthal noted most of the changes were made in 2022, with a shift of moving
into index funds. Committee member Song asked if there were any changes made to the City’s
investment. Rosenthal noted that the specific securities and rebalancing is done at his discretion
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as they are hired as the discretionary asset manager. Committee member Song asked if the city
needs to withdraw money and send money to another account, who is authorized to do so and if
there is any verification. Meza noted that the Administrative Services director is and there is
paperwork that needs to be completed. Orozco noted that it would need to be tied to CalPERS or
the City’s general account and there must be discussions made in advance.
Committee member Song asked how U.S. Bank protects the City’s assets in case of fraud. Meza
noted that they constantly monitor, and they do contact the city by phone to see if the City is
requesting to move money. Maxey added that they have extra checks and balances, and the funds
are held in an exclusive trust to pay OPEB or pension liabilities. The places these monies can be
sent to is limited and if it was sent anywhere else it will raise red flags and escalate. Internally
they flag all disbursements, and if there is a change there is extra due diligence to get verbal
confirmation. Vice Chair Mohan asked staff to speak about checks and balances within the City.
Orozco noted that staff is working on getting a second confirmation on some of the transactions
and implementing controls, so our assets are safeguarded.
No Public Comment.
4. Consider the Treasurer's Investment Report for the Quarter Ending June 30, 2023
Leung provided an overview of the report. Oblites provided an overview of the report as well as
structure and set up. Committee member Song asked if the dollar difference between the cost
value and book value is an actual loss. Oblites noted that it is a paper loss because interest rates
rose dramatically. Orozco noted that our investments are held to maturity so that loss will be
irrelevant. Committee member Song asked if the City makes an $8.4 million gain, will the city
pay Chandler an extra fee. Oblites noted that they do not do a performance base fee.
Committee member Fruen motioned to receive the report and forward to City Council, Vice Chair
Mohan seconded. No public comment. The motion passes unanimously.
5. Consider the Quarterly Internal Audit Status Report
Rozillis provided an overview of the report. Committee member Song noted that she received a
report that someone made a report to the fraud waste and abuse hotline sometime last weekend
and asked why it was not included in the status report. Rozillis noted that it may not have fit in
the timeframe of last quarter. Chair Chen asked if it was fraud-related. Committee member Song
noted it is an allegation, but she does not know the status. Orozco noted that the details of the
reports would not be discussed here as it is confidential and that it is not the duties of the audit
committee. Committee member Song noted she was informed by a resident of Cupertino that an
allegation was filed and was waiting to be informed of the status. Rozillis noted that if it is an
active investigation, it must remain confidential. Rozillis added that their work is done under
very strict professional standards and their team assesses their independence when there is a new
engagement as well as rotating team members to ensure independence.
Committee member Hammer suggested if Moss Adams could add cumulative statistics to the
table. Moss Adams noted that they will.
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No public comment.
6. Consider the Enterprise Leadership Assessment Report
Rozillis and Favreau provided an overview of the report. Committee member Song asked how
Moss Adams quantifies the significant investment. Favreau noted that observation 11 includes
numbers on how much time staff liaisons commit to the groups. Vice Chair Mohan asked at which
point will staff get to respond to these recommendations and asked which recommendations have
been completed. Orozco noted that staff has reviewed, and this report will go to City Council for
their direction on some of the recommendations.
Committee member Fruen motioned to receive the report and recommend filing with City
Council; Committee member Hammer seconded. No public comment. The motion carried
unanimously.
7. Consider the FY 2023-24 Internal Audit Program
Rozillis provided an overview of the report. Committee member Hammer expressed concern
about the grant management audit not being included. Rozillis noted that it is due to budgetary
constraints. Committee member Hammer asked if some grants could be added. Rozillis noted the
amount of staff time it would take for the Enterprise Risk Assessment and there may not be
enough time. Chair Chen noted her support in including the grants management audit.
Vice Chair Mohan motioned to receive the report and recommend filing with City Council,
Committee member Fruen seconded with friendly amendment to include the grants management
audit if there is additional budget available. No public comment. The motion carried
unanimously.
8. Consider the Audit Committee 2023 Schedule and Work Plan
Orozco presented the committee's work plan.
STAFF AND COMMITTEE REPORTS
COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS
FUTURE AGENDA SETTING
ADJOURNMENT
The meeting adjourned at 6:03 p.m.
Recording Secretary:
Janet Liang, Management Analyst