Audit 08-15-2013 City of Cupertino
Audit Committee
Special Meeting Minutes
August 1.5, 2013
1. CALL TO ORDER
At 4:08 p.m. Finance Director Woo called the meeting to order at Cupertino City Hall
Conference Room A, 10300 Torre Avenue, Cupertino, CA.
2. ROLL CALL
Community Members Present: Angela Chen, Eno Schmidt, Raymond Yin
Council Members Present: Rod Sinks
City Staff Present: David Woo
Absent: Mark Santoro
3. APPROVAL OF MINUTES
Community Member Yin moved to approve the minutes of the special meeting of May
8, 2013. Community Member Chen seconded and the motion passed 4-0 with Council
Member Santoro absent.
4. ORAL COMMUNICATIONS - NONE
5. WRITTEN COMMUNICATIONS - NONE
6. NEW BUSINESS
A. Discuss Other Post-Employment Benefits (OPEB) Actuarial Valuation as of
January 1, 2013
B. Accept Treasurer's Investment and Budget Report for March 2013
Woo recommended that both of these agenda items be heard at the same time since
the Treasurer's report includes OPEB trust investments that relate to the actuarial
valuation. There was no objection from _he committee members.
Woo drew a table that showed how the OPEB annual required contribution is broken
out into pay-as-you-go and long-term liability portions that are further broken out into
existing explicit cash payment and new implicit subsidy sections as required by new
actuarial and accounting reporting standards.
Graham Schmidt and Bethany Axtman, authors of the OPEB actuarial from Cheiron
EFI Actuaries, elaborated on the standards, and then went on to further talk about the
implicit subsidy and funding strategies of the subsidy for both the annual payment
and long-term liability. They answered questions about various assumptions used or
not used in the actuarial. They also exhibited and discussed a chart on the future cash
flow requirements out of the trust. Sinks excused himself from the meeting at 5:15pm.
City of Cupertino
Audit Committee
Special Meeting Minutes
August 15, 2013
Andrew Brown, trust investment manager from HighMark, discussed his
recommendations for trust investments and allocation based on this cash flow forecast.
Brown talked about HighMark's recommendations for allocations of the intermediate-
term bond, equity, and cash portions of the portfolio. He also talked about cost savings
and return comparisons for an exchange-traded fund (ETF) portfolio. Schmidt
requested that the return comparison of active portfolio management versus an ETF
portfolio be included in the quarterly report. Brown also discussed HighMark's
outlook on the markets and the resulting allocation adjustment.
Woo discussed the Investment Portfolio report of the Treasurer's Investment and
Budget Report. Brown talked about the investment returns from the OPEB trust. Jaqui
Guzman, the City's Senior Management Analyst discussed the General Fund Budget
Report, including 2012-13 preliminary results and the 2013-14 forecast.
Schmidt motioned to accept the Treasurer's Investment and Budget Report for June
2013. Yin seconded and the motion passed 3-0 with Santoro and Sinks absent.
C. Appropriations Limit Report
Woo discussed the calculation and reason for the Gann Appropriations Limit. Mark
Wong of Maze and Associates disclosed the results of Maze's report on the limit.
Schmidt motioned to accept the Appropriations Limit Report. Chen seconded and the
motion passed 3-0 with Santoro and Sinks absent.
D. Accept Interim Accounting Issues Memo,June 30, 2013
Woo and Wong highlighted the impact of upcoming GASB pronouncements on future
pension reporting. Woo summarized the interim audit findings as control changes that
needed to be implemented as a result of staff position changes. Woo and Wong
answered committee questions about the findings.
Yin motioned to accept the Interim Accounting Issues Memo, June 30, 2013. Schmidt
seconded and the motion passed 3-0 with Santoro and Sinks absent.
7. OLD BUSINESS -NONE
8. OTHER COMMITTEE UPDATES/REPORTS -NONE
City of Cupertino
Audit Committee
Special Meeiing Minutes
August 15, 2013
9. ADJOURNMENT
The meeting was adjourned at 6:15 p.m.
David Woo
Finance Director