AC 01-27-2021Page 1
City of Cupertino
Audit Committee Special Meeting
Minutes
January 27, 2021
1. CALL TO ORDER
At 4:31 p.m., Chairman Eno Schmidt called the Audit Committee meeting to order. This was a
teleconference meeting with no physical location.
2. ROLL CALL
Committee Members Present: Chair Eno Schmidt, Vice Mayor Chao,
Councilmember Moore, Vice Chair Daisy Liang, Committee Member Angela Chen
City Staff Present: Deborah Feng, Kristina Alfaro, Zach Korach, Thomas Leung, Mariela Vargas
Absent:
Guests: Chris McCarry and Carlos Oblites (Chandler), Rick Rosenthal, Carolyn Cox (US Bank),
Mitch Barker (PARS), Mark Steranka, Emily Hayes, Tammy Lohr (Moss Adams), and Kathy
Lai and Matt Geerdes (Crowe)
1. APPROVAL OF MINUTES
Committee Member Angela Chen moved to approve October 27, 2020, regular meeting minutes
subject to changes and Committee Member Daisy Liang seconded; motion passed 3 in favor and
2 abstain.
2. POSTPONEMENTS
A. Budget Format Review
Zach Korach provided a summary of the budget format review and recommended the Committee
consider establishing a sub-committee to complete the budget format review for the FY 20-21
Budget. Councilmember Moore volunteered to participate on the sub-committee. The
Committee agreed to defer the further selection of the sub-committee to a Special Meeting in
February 2021 so that incoming members have an opportunity to participate.
ORAL COMMUNICATIONS
OLD BUSINESS
NEW BUSINESS
1. Audit Committee Work Plan 2021
Chair Schmidt provided a history of the Audit Committee over his nine (9) year tenure. From his
experiences, he provided recommendations for effectively managing the time, workload, and the
meetings themselves. Zach Korach provided an overview of the proposed work plan and
requested input from the Committee regarding additional projects the Committee would like to
see added and brought to City Council for consideration to include in the FY 21-22 City Work
Plan. Chair Schmidt, Vice Mayor Chao, and Councilmember Moore recommended the Audit
Committee Work Plan be reformatted and organized.
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2. Treasurer's Investment Report for period ending December 31, 2020
Carlos Oblites began reviewing the portfolio and mentioned that the report complies with code.
Carlos reviewed the portfolio statistics, sector, quality, duration distribution, and investment
performance. Zach Korach provided information regarding the City’s liquidity and cash flow
coverage. Councilmember Moore inquired about the portfolio’s duration and its changes since
the portfolio’s inception as well as the individual corporate issuances and whether the City
invests in international companies. Carlos Oblites explained the reason for the changing duration
since inception and that the portfolio currently does not hold corporate notes with international
companies. Vice Mayor Chao inquired about divestment from fossil fuels to which Zach Korach
provided a summary of the past efforts put forth to analyze a possible divestment in 2019.
3. OPEB & Pension Section 115 Trust Performance Report - US Bank
Rosenthal began reviewing the OPEB portfolio and period performance. Rosenthal provided an
overview on the OPEB account balance and its growth since inception. Chair Schmidt inquired
about the benchmark asset class ranges and recommended US Bank and City staff continue to
have discussions on the matter. Zach Korach provided comparative strategy and performance
information among jurisdictions also participating in PARS’ Section 115 Trusts. Councilmember
Moore inquired about the relationship between a “balanced” strategy and the various asset
classifications in the Pension and OPEB trust investment portfolios. Zach Korach mentioned that
both investment portfolios follow a “balanced” strategy and the asset classifications in the
portfolios align with the strategy.
4. Review of FY 2019-20 CAFR and Supplemental Reports – Lai and Geerdes
Kathy Lai provided an overview of the CAFR and supplemental reports stating that the audit was
conducted in accordance with Governmental Auditing Standards and that the City’s financials
were in accordance with Generally Accepted Accounting Principles (GGAP) CAFR is
anticipated to be issued with an “unmodified opinion.” The Committee recommended this item
be deferred to a Special Meeting in February 2021 to provide more opportunity for review and
input on the item.
5. Internal Audit Report - Moss Adams
Mark Steranka informed the Committee that if the item was deferred to a Special Meeting in
February 2021, a draft internal audit work plan could also be presented with the final risk
assessment report. The Committee elected to defer the item. Councilmember Moore requested
adding to the Special Meeting in April the formation of the subcommittee and election of Chair
and Vice Chair. Korach to add to the future special meeting agenda.
6. Embezzlement Debrief
This item was deferred to a Special Meeting in February 2021.
7. ADJOURNMENT
The meeting adjourned at 6:30 p.m.
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Mariela Vargas