AC 3.21.24Page 1
City of Cupertino
Audit Committee Special Meeting
Minutes
March 21, 2024
CALL TO ORDER
At 4:00 p.m., Chair Chen called the special meeting to order in the City of Cupertino Conference
Room A, 10300 Torre Avenue.
ROLL CALL
Committee Members Present: Chair Eno Schmidt, Vice Chair Sheila Mohan, Committee member
Angela Chen, Committee member Hung Wei, Committee member Hanyan Wu
City Staff Present: Kristina Alfaro, Thomas Leung, Janet Liang, Matt Morley, Jonathan Orozco
Absent:
Guests: Carlos Oblites (Chandler), Colleen Rozillis (Moss Adams), Chelsea Ritchie (Moss Adams),
Sophia Kuo (The Pun Group), Kenneth Pun (The Pun Group), Ryan Maxey (U.S. Bank), Jennifer
Meza (PARS), Dennis Mullins (U.S. Bank)
ORDERS OF THE DAY
1. APPROVE MINUTES OF REGULAR MEETING ON OCTOBER 23, 2023
Vice Chair Mohan motioned; Chair Chen seconded. No public comment. The motion passes
unanimously.
POSTPONEMENTS
ORAL COMMUNICATIONS
Peggy Griffin provided comments.
NEW BUSINESS
2. Appointment of Audit Committee Chair and Vice Chair
Chair Chen nominated Committee member Schmidt as Chair and Vice Chair Mohan to continue
as Vice Chair. Committee member Wei seconded. The motion passes unanimously.
No public comment.
3. Receive the Committee’s Roles and Responsibilities (CMC 2.88.100)
Orozco provided an overview of the report.
No Public Comment.
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4. Receive PARS Presentation
Meza provided an overview of PARS. Mullins provided an overview of PFM Asset Management.
Chair Schmidt asked when the change was effective. Mullins confirmed that it was effective July
1, 2023. Chair Schmidt asked if they follow the city’s procedures and policy. Mullins confirmed
that PFM Management is a wholly owned subsidiary of U.S. Bank and allowed them to keep all
existing paperwork.
No public comment.
5. Receive Chandler Investments Presentation
Oblites provided an overview of Chandler. Chair Schmidt asked how often are cash needs
updated. Oblites noted that they communicate with the city no less than a quarterly basis and the
analysis is revisited every year as they are long-term decisions. Chair Schmidt noted that relative
to the benchmark the duration is much shorter, and is it related to the cash needs. Oblites
confirmed and one of the communications with staff is that there may be an increased need for
available cash for financial reasons and as a result the strategy was revisited to generate cash and
lowering the duration target to make sure there is cash available.
Committee member Wu asked about the fee structure with Chandler and PFM. Orozco noted that
it is negotiated within the contract. Oblites added that it is a fixed fee based on assets that they
manage and averages around 5 (0.05%) or 6 (0.06%) basis points, less than a tenth of the
percentage per year.
Committee member Wei asked if the investments they do for the city has rules to follow with CA
government codes. Oblites confirmed. Committee member Wei asked about the cash flow and if
it is done once a year with the City. Oblites noted that Chandler is in communication with staff
and the city is focused on building up cash due to a tax event that the city is facing resulting in a
need to build up cash.
Committee member Chen asked with all the changes in the market, how does Chandler plan to
adjust the investment strategy. Oblites noted that reports are provided monthly and quarterly,
and they anticipate that the Federal Reserve will be lowering interest rates later in the year.
Peggy Griffin provided public comment. Rhonda Fry provided public comment. Orozco noted
that the fees from Chandler are remitted to the custodian, which is paid directly to them, the City
does not directly pay them. He added that the City is working on looking into the BMR
transactions.
Vice Chair Mohan asked if the investments follow a benchmark and what is included in the
benchmarks. Oblites noted that the biggest driver of risk and return in this portfolio is the
duration and measures the sensitivity of the market value of the portfolio to a given interest rate
shift. As a result, a benchmark is selected with a similar duration and is shifting to a 1-3 year
treasury and agency benchmark.
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6. Receive The Pun Group Presentation
Pun provided an overview of The Pun Group. Chair Schmidt asked if they are getting cooperation
from the previous auditor in terms of getting the necessary documents. Pun noted that they have
a good relationship and are getting the necessary information. Committee member Wu asked if
the external audit has identified issues and how does the oversight work. Pun noted that if there
are any findings there is always a follow-up in the next audit and every 3 years a CPA firm goes
through peer review. Vice Chair Mohan asked when will the first draft be expected. Orozco noted
that it will come at the next Audit Committee meeting.
No public comment.
7. Receive Moss Adams Presentation
Rozillis provided an overview on Moss Adams. Ritchie provided an overview. Chair Schmidt
asked what the volume for FWA is. Rozillis noted that the hotline activity is consistent, a couple
of reports a month. Committee member Chen asked if they can include how many of the issues
get addressed and how long it takes to get addressed into the report. Rozillis noted that the report
identifies closed reports.
Peggy Griffin provided public comment.
8. Receive Budget Feedback on the City’s current recommended Service Level Reductions
(SLRs)
Alfaro provided an overview.
Rhoda Fry provided public comment.
9. Budget Format Review
Alfaro provided an overview. Committee member Wei asked how often is it best practice to look
at the budget format. Alfaro noted that it is reviewed every year and is submitted for budget
awards.
Peggy Griffin provided public comment.
10. Receive the proposed Audit Committee 2024 Schedule and Workplan
Orozco presented the committee's work plan.
Peggy Griffin provided public comment.
STAFF AND COMMITTEE REPORTS
COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS
FUTURE AGENDA SETTING
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ADJOURNMENT
The meeting adjourned at 6:15 p.m.
Recording Secretary:
Janet Liang, Management Analyst