AC 07-28-2020Page 1
City of Cupertino
Audit Committee Regular Meeting
Minutes
July 28, 2020
1. CALL TO ORDER
At 4:02 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: Chairman Eno Schmidt, Vice Mayor Paul,
Councilmember Sinks, Angela Chen
City Staff Present: Kristina Alfaro, Zach Korach, Mariela Vargas, Deborah Feng
Absent: Daisy Liang
Guests: Chris McCarry (Chandler via conference call), Rick Rosenthal, Carolyn Cox
(USBank via conference call), and Mitch Barker (PARS), Mark Steranka (Moss Adams via
conference call), Kathy Lai and Matt Geerdes (CROWE via conference call)
1. APPROVAL OF MINUTES
Councilmember Sinks moved to approve April 28, 2020, regular meeting
minutes and Angela Chen seconded; motion passed unanimously.
ORAL COMMUNICATIONS
OLD BUSINESS
NEW BUSINESS
2. Internal Audit Work Plan - Moss Adams - 30 minutes
The internal audit work plan moved from item 5 to item 2 on the Agenda.
Finance Manager, Zach Korach began by stating the impact COVID-19 has on current City
operations and mentioning the majority of employees are now working from home. Management
was considering deferring the Internal Audit function, staff recommended moving forward with
the internal risk assessment.
Mark Steranka from Moss Adams briefed the committee on the project process and mentioned
there is currently no work being done due to the shelter-in-place. Steranka noted that the
workplan is set to begin in August and through November with the risk assessment. Steranka
mentioned that there are currently no concerns with the remote work environment. The risk
assessment will have four phases; identifying people to interview, reviewing documents, fact
finding and management surveys to measure risk. Interviews will range from the Council level
down to management across the organization. Steranka explained Risk Assessment areas of
focus having three inputs of opportunity for using risk, strengthening control, and enhancing
performance.
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3. Treasurer's Investment Report for period ending June 30, 2020 – 30 minutes
Korach began the presentation by prefacing last quarter’s treasurer’s report that was prepared by
Chandler asset management to show on the more internal components of treasury reporting,
Liquidity, Cash Flow - Coverage, Cash Flow - Forecasting.
Chris McCarry from Chandler began the review of the economic update.
The labor markets are slower to recover, but seeing positive information as areas of the economy
start opening.
McCarry continued by reviewing the portfolio and mentioned that the report complies. McCarry
shared that the objective is to provide safety to ensure capital preservation in the overall
portfolio, provide sufficient liquidity for cash needs, and market a rate of return. McCarry
reviewed the portfolio statistics, sector, quality, duration distribution, and investment
performance.
Vice Mayor Paul motioned to approve the treasurer's report. Councilmember Sinks seconded.
The motion passed unanimously.
4. OPEB & Pension Section 115 Trust Performance Report - US Bank - 30 minutes
Carolyn Cox from USBank began by briefing the committee on the bank's status and invited
Rick Rosenthal to begin the presentation.
Rosenthal began reviewing the OPEB portfolio and period performance. Rosenthal mentioned
that the rate of return was 15.48%, and net of fees were 15.42%. Rosenthal began reviewing the
115 Pension trust portfolio and explained that it was decided not to invest immediately since the
market was in freefall, but at the beginning of April, it slowly began moving and ultimately
invested in entirety.
Korach mentioned that there were some relatively minor adjustments to decrease the risk and the
portfolio.
Vice mayor Paul requested that a comparison analysis be made to see how the City is doing
compared to neighboring cities.
Korach mentioned that staff is looking at reserve comparisons within the general fund that would
include economic uncertainty reserves as well as section 115 trust, and have presented
comparative data against neighboring jurisdictions to the City Council.
5. Interim report on CAFR and AUP by independent auditor - Crowe - 15 minutes
Kathy Lai from Crowe began with a presentation on the Financial Statement Audit.
Lai covered the Crowe LLP Audit Team for the City, Engagement Objectives, Planned Audit
Deliverable, Planned Audit Timeline.
Matt Geerdes continues with SAS 99 Communications reviewing auditors' responsibilities under
Generally Accepted Auditing Standards.
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Lai covered the COVID-19 Impact and Crowe’s response in conducting audits. Lai continued to
share that Crowe has invested in various technologies, CiRT project management platform, and
Crowe insight, which allows them to perform quality audits. Lai continued by sharing significant
new GASB Pronouncement.
Chairman Schmidt commented on the Cupertino engagement AUP Investment FY20 letter and
suggested changes.
6. Budget Format Review - Korach - 5 minutes
Korach provided a quick overview of the areas that received special attention, that resulted from
the audit committee subcommittee for the budget format review. Review GFOA and CSMFO
comments on enhancing operating impacts. Capital improvement program and enhance pension
obligation and forecast section.
Kristina Alfaro shared with the committee the CAPIO EPIC Award the City of Cupertino
received on Community Relations/Participation, 2020 Excellence in Public Communication
Award from the Budget and Bites Community Workshop. Thanked the City Council for the idea
to bring this workshop forward and to the Administrative Services team for their work in putting
the event together.
Vice mayor Paul motion to adjourn subject to the next meeting, scheduled October 27, 2020
meeting. Angela Chen seconded. The motion passed unanimously.
10. ADJOURNMENT
The meeting adjourned at 6:29 p.m.
Recording Secretary
Mariela Vargas