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AC 03-28-2022Page 1 City of Cupertino Audit Committee Regular Meeting Minutes March 28, 2022 CALL TO ORDER At 4:00 p.m., Chair Moore called the regular meeting to order. This was a teleconference meeting with no physical location. ROLL CALL Committee Members Present: Chair Moore, Vice Chair Angela Chen, Mayor Darcy Paul City Staff Present: Jim Throop, Chris Jensen, Kristina Alfaro, Thomas Leung, Beth Viajar Absent: Committeemember Song, Committeemember Liang Guests: 1. APPROVAL OF MINUTES Vice Chair Chen noted minor corrections on pages 3 and 4. Mayor Paul noted corrections to his statement. Mayor Paul moved the changes suggested by Vice Chair Chen and himself. Vice Chair Chen seconded the motion. The motion carried unanimously by all members present. ORAL COMMUNICATIONS None. NEW BUSINESS 2. Appoint Budget Format Review Sub-Committee Members Leung provided an overview of the Budget Format Review Sub-committee and recommended that the Audit Committee appoint members to the sub-committee. No public comment. Chair Moore volunteered herself to the sub-committee. Mayor Paul nominated Vice Chair Chen. Vice Chair Chen nominated Committeemember Song and agreed that Chair Moore should serve on the sub-committee. Chair Moore concurred with Mayor Paul that Vice Chair Chen would do well to serve on the sub-committee and help her out. Mayor Paul made a motion to move the Chair and Vice Chair as sub-committee members, Vice Chair Chen seconded the motion. The motion carried unanimously by all members present. Committeemember Song and Committeemember Liang were absent. 3. Review Monthly Treasurer’s Report for January and February 2022 and recommend filing with City Council Leung provided an overview of the Receipts, Disbursements, and Fund Balances reports and noted that staff planned to submit monthly treasurer's reports, including an accounting of all receipts, disbursements, and fund balances. The staff's recommendation was for the Audit Committee to review the reports and recommend filing them with City Council. No public comment. Page 2 Mayor Paul asked for clarification on the total ending fund balance and whether it was the number represented in the bottom right-hand corner of the report. Leung confirmed. Mayor Paul inquired where committee members or residents could view the revenues versus expenditures of each of the funds. Leung recommended OpenGov, the City's financial transparency portal, for viewing that information. Mayor Paul requested that staff pick a fund in the next update and walk through how to navigate OpenGov and find that information. Leung noted that staff would do so at the next committee meeting. Chair Moore mentioned that she had researched other cities' treasurer's reports, noting that some disregarded the requirement and some provided a monthly update of their investments. Chair Moore thought we would include the Accounts Payable reports in this section so that the Audit Committee could ask questions. She then asked for other committee members' thoughts on including the accounts payable and investment balances in the Audit Committee's reports. She noted that Chandler would not have to show up, but their statements could be pasted into the report. Mayor Paul asked the City Attorney to speak to the requirements. Mayor Paul noted the utility of having Accounts Payable reports at the Audit Committee. He was unsure of the value of obtaining the fund balance reports quarterly. He asked for the staff's perspective on the cost- benefit ratio. City Manager Throop acknowledged that there were cities that ignored the report and cities that combined it into other types of reports. He was concerned that the AP part might muddy the reporting structure of what the treasurer's report was supposed. He noted that there was low staffing in the Administrative Services Department. City Attorney Jensen stated that the language in the Statute was to provide an accounting of receipts, disbursements, and fund balances. There was a range of practices different jurisdictions used; it reflected a considerable amount of discretion and leeway on how to interpret those reporting requirements to meet the needs of the City. Mayor Paul made a motion that the Audit Committee refer to staff on the feasibility of adding accounts payable to the monthly treasurer's report and report back to the Audit Committee. Chair Moore asked whether Mayor Paul recommended filing the January and February 2022 reports with City Council. Mayor Paul added that to his motion. Chair Moore seconded. The motion carried unanimously by all members present. Committeemember Song and Committeemember Liang were absent. 4. Review External/Internal Audit Process and Timing Viajar provided background on the external audit and timing. Leung provided background on the internal audit and timing. No public comment. Vice Chair Chen inquired about the sub-committee to be established by August 2022 for the audit RFP and the selection process. Alfaro noted that the Audit Committee would appoint members to sit on the committee. The previous committee also included City staff, Kristina, Zach, and the City Manager at the time. Chair Moore noted that this should go on the work plan and would like to see the work plan as a final item on the Audit Committee agenda. Mayor Paul said that if there was a sub-committee of the Audit Committee, it should comprise Audit Committee members. Page 3 Mayor Paul inquired when they could start seeing the Audit Committee reports and the timetable of these reports going to the committee and City Council. Leung noted the dates on the slides. Mayor Paul expected we would obtain more audit reports. Leung said that after the next year's audit plan was developed, the Audit Committee would receive those reports. Mayor Paul wanted to know how many years of auditing we would need to go through. Alfaro noted that there was no timetable. If the Committeemembers reached a certain place where they felt it performed what it was brought on for or felt they did not need it based on a risk assessment, then a recommendation could be made to Council. Funds are in the Finance Department’s base budget. Funds could be pulled out of the budget should the recommendation come forward. Mayor Paul wanted to get an overarching report of how long this would take, such as defining a set of work with expectations as to how long it would take. Leung noted that staff could provide that information as to where we stand in the long-term cycle of this internal audit. Vice Chair Chen asked about the procurement review, whether there was an implementation plan and whether the recommendations were tracked. Leung noted that the implementation of the recommendations would be discussed in the budget document. Alfaro said that we could update it on the City's website where the Audit plans were located. Vice Chair Chen inquired about reallocating resources and visualized a matrix with the steps to complete the process. Vice Chair Chen noted that there was follow-up regarding the implementation during the last meeting and wanted to know the schedule and how it would be tracked. Chair Moore asked Leung to bring up that website. Leung brought up the website. Chair Moore noted a request for a procurement officer and requested the City Manager to speak to it as the Audit Committee and Council did not have authority to implement the recommendations from Moss Adams. City Manager Throop replied that staff would bring it to Council to get their input and then create a schedule with a starting point to look for a procurement officer. Vice Chair Chen requested that staff look at citywide resources and reallocate resources before adding a procurement officer position. She then asked if Audit Committee's recommendation would be added to the procurement recommendation for City Council's consideration. Chair Moore noted that the committee should have made that recommendation when they reviewed procurement policy recommendations and asked the staff if it would be appropriate to bring the comments to Council. Leung confirmed that staff could. Mayor Paul noted that it would be good to have dedicated procurement staff and recommended that, if there would be a subcommittee, they go over the entirety of the procurement operational review document. Chair Moore asked for clarification on whether the Audit Committee should be creating a subcommittee. Mayor Paul noted that there were going to be individuals from the Audit Committee reviewing the procurement policy and recommendations. It would be good for them to review the analysis. Chair Moore noted that she had a question regarding amending contracts and conflict of interest and if the creation of the subcommittee should be a future agenda item or how to proceed. Alfaro noted that it would be a future agenda item and asked Jensen for direction. Jensen confirmed that it was not on the agenda for today and could be brought back as Page 4 a future agenda item. Chair Moore did not recall the procurement review being submitted to Council and asked if it was going in April. Leung confirmed. Throop noted that there was already a Council subcommittee with Councilmember Moore and Councilmember Willey for procurement. Chair Moore stated that it was for contracts, and they completed what they were reviewing. Chair Moore wondered if a subcommittee could be set up before the meeting in April to go through the procurement policy. Alfaro mentioned that she wasn’t sure if any of the questions or issues they had were brought up when the internal auditors were present. Chair Moore mentioned these were questions that came up after the consultants had presented. Mayor Paul noted that he had a meeting with the auditor about procurement after the last audit committee meeting and other members could do so as well. Mayor Paul continued to say that if a procurement subcommittee were ad hoc, it would be Chair Moore and Mayor Paul seeing the item on April 19th and suggested not making it a formally recorded motion. Leung clarified that staff wanted to bring the procurement report to the April 19th City Council meeting. Mayor Paul suggested that Committeemembers do their due diligence and reach out to staff on follow-up items. OLD BUSINESS None. STAFF AND COMMITTEE REPORTS 5. Staff report out on City Council Workshop on Commissions and Committees Workshop Alfaro noted that, at the 2/15 Council meeting, staff recommended City Council reorganize the Fiscal Strategic Committee, making it a Finance Committee and reorganizing some of the Audit Committee's duties to that committee, such as budget format, the quarterly investment report, and the monthly treasurer's report. Staff recommended making the Audit Committee's responsibility the Internal and External Audit functions to address workload issues. Council reviewed the recommendations but did not move them forward and wanted to report back to Audit Committee. Chair Moore asked about the Economic Development Committee. Alfaro noted that the Economic Development Manager and Deputy City Manager were working on that. Chair Moore said she would like to know the status of that committee and how far along they were in codifying it. No public comment. Mayor Paul stated that the Council's direction related to economic development and fiscal strategic was to fold them into a newly formed Economic Development Committee. He also said that it would be a good time to start identifying roles useful in the upcoming fiscal year. Chair Moore noted that in the Moss Adams report, three committees or commissions need to be codified. Chair Moore asked the staff when they were working with Moss Adams to let them know we had that issue. FUTURE AGENDA SETTING Chair Moore said she wanted to see the Audit Committee work plan and Orders of the Day added to the agenda. Vice Chair Chen proposed a review of the unrestricted ending fund balance policy. Alfaro noted that it was part of the budget document. Staff would provide the updated policy to committee members and the budget sub-committee could review it. Chair Moore would like to bring this back as an informational item. Mayor Paul agreed with that notion. Page 5 ADJOURNMENT The meeting adjourned at 5:25 p.m. Recording Secretary: Janet Liang, Administrative Assistant