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AC 03-28-2022 Searchable PacketCITY OF CUPERTINO AUDIT COMMITTEE AGENDA This is a teleconference meeting without a physical location. Monday, March 28, 2022 4:00 PM TELECONFERENCE / PUBLIC PARTICIPATION INFORMATION TO HELP STOP THE SPREAD OF COVID-19 In accordance with Government Code 54953(e), this will be a teleconference meeting without a physical location to help stop the spread of COVID-19. Members of the public wishing comment on an item on the agenda may do so in the following ways: 1) E-mail comments by 9:00 a.m. on Monday, March 28 to the Audit Committee at AuditCommittee@cupertino.org. These e-mail comments will be received by the Audit Committee members before the meeting and posted to the City’s website after the meeting. 2) E-mail comments during the times for public comment during the meeting to the Audit Committee at AuditCommittee@cupertino.org. The staff liaison will read the emails into the record, and display any attachments on the screen, for up to 3 minutes (subject to the Chair’s discretion to shorten time for public comments). Members of the public that wish to share a document must email AuditCommittee@cupertino.org prior to speaking. 3) Teleconferencing Instructions Members of the public may observe the teleconference meeting or provide oral public comments as follows: Oral public comments will be accepted during the teleconference meeting . Comments may be made during “oral communications” for matters not on the agenda, and during the public comment period for each agenda item . To address the Audit Committee, click on the link below to register in advance and access the meeting: Register in advance for this webinar: https://cityofcupertino.zoom.us/webinar/register/WN_q9vx_4gXT32UFcbbacOjSw Page 1 1 Audit Committee Agenda March 28, 2022 Phone Dial: 669-900-6833 and enter Webinar ID: 975 9493 5606 (Type *9 to raise hand to speak, *6 to unmute yourself). Unregistered participants will be called on by the last four digits of their phone number. Or an H.323/SIP room system: H.323: 162.255.37.11 (US West) Meeting ID: 975 9493 5606 SIP: 97594935606@zoomcrc.com After registering, you will receive a confirmation email containing information about joining the webinar. Please read the following instructions carefully: 1. You can directly download the teleconference software or connect to the meeting in your internet browser. If you are using your browser, make sure you are using a current and up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers, including Internet Explorer . 2. You will be asked to enter an email address and a name, followed by an email with instructions on how to connect to the meeting . Your email address will not be disclosed to the public. If you wish to make an oral public comment but do not wish to provide your name, you may enter “Cupertino Resident” or similar designation. 3. When the Chair calls for the item on which you wish to speak, click on “raise hand.” Speakers will be notified shortly before they are called to speak. 4. When called, please limit your remarks to the time allotted and the specific agenda topic . In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this teleconference meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 6 hours in advance of the meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability, meeting agendas and writings distributed for the meeting that are public records will be made available in the appropriate alternative format. ROLL CALL Page 2 2 Audit Committee Agenda March 28, 2022 APPROVAL OF MINUTES 1.Subject: Approve Minutes of Regular Meeting on February 24, 2022 Recommended Action: Approve Minutes of Regular Meeting on February 24, 2022 A - Draft Minutes 2.24.22 POSTPONEMENTS ORAL COMMUNICATIONS This portion of the meeting is reserved for persons wishing to address the Committee on any matter within the jurisdiction of the Committee and not on the agenda. Speakers are limited to three (3) minutes. In most cases, State law will prohibit the Commission from making any decisions with respect to a matter not on the agenda. PUBLIC HEARINGS OLD BUSINESS NEW BUSINESS 2.Subject: Appoint Budget Format Review Sub-committee Members Recommended Action: Appoint Budget Format Review Sub-committee Members Staff Report A - Sub-Committee Initial Comments on Budget Format Review B - Sub-Committee Formal Memorandum on Budget Format Review C - City staff's responses to the November 12, 2019 Memo D - Budget Format Review Update E - Questions Regarding the Current Budget Report F - Audit Committee Budget Format Comments and Requests 3.Subject: Review Monthly Treasurer’s Report for January and February 2022 and recommend filing with City Council Recommended Action: Review Monthly Treasurer’s Report for January and February 2022 and recommend filing with City Council Staff Report A - Monthly Cash Balances - Jan 2022 B - Monthly Fund Balances - Jan 2022 C - Monthly Cash Balances - Feb 2022 D - Monthly Fund Balances - Feb 2022 4.Subject: Review External/Internal Audit Process and Timing Page 3 3 Audit Committee Agenda March 28, 2022 Recommended Action: Review External/Internal Audit Process and Timing A - External-Internal Audit Process and Timing STAFF AND COMMITTEE REPORTS 5.Subject: Staff report out on City Council Workshop on Commissions and Committees Workshop Recommended Action: Staff report out on City Council Workshop on Commissions and Committees Workshop FUTURE AGENDA SETTING ADJOURNMENT In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this teleconference meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 6 hours in advance of the meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability, meeting agendas and writings distributed for the meeting that are public records will be made available in the appropriate alternative format. Any writings or documents provided to a majority of the members after publication of the agenda will be made available for public inspection. Please contact the City Clerk’s Office in City Hall located at 10300 Torre Avenue, Cupertino, California 95014, during normal business hours. IMPORTANT NOTICE: Please be advised that pursuant to Cupertino Municipal Code section 2.08.100 written communications sent to the Cupertino City Council, Commissioners or City staff concerning a matter on the agenda are included as supplemental material to the agendized item. These written communications are accessible to the public through the City’s website and kept in packet archives. Do not include any personal or private information in written communications to the City that you do not wish to make public, as written communications are considered public records and will be made publicly available on the City website. Members of the public are entitled to address the members concerning any item that is described in the notice or agenda for this meeting, before or during consideration of that item. If you wish to address the members on any other item not on the agenda, you may do so during the public comment . Page 4 4 CITY OF CUPERTINO Agenda Item 22-10642 Agenda Date: 3/28/2022 Agenda #: 1. Subject: Approve Minutes of Regular Meeting on February 24, 2022 Approve Minutes of Regular Meeting on February 24, 2022 CITY OF CUPERTINO Printed on 3/23/2022Page 1 of 1 powered by Legistar™5 Page 1 City of Cupertino Audit Committee Special Meeting Minutes February 24, 2022 CALL TO ORDER At 4:04 p.m., Vice Chair Chen called the special meeting to order. This was a teleconference meeting with no physical location. ROLL CALL Committee Members Present: Vice Chair Angela Chen, Mayor Darcy Paul, Councilmember Moore, Committee Member Song City Staff Present: Zach Korach, Jim Throop, Chris Jensen, Thomas Leung Absent: Chair Daisy Liang Guests: Matt Geerdes (Crowe), Kathy Lai (Crowe), Mark Steranka (Moss Adams), Colleen Rozillis (Moss Adams) 1. APPROVAL OF MINUTES Vice Chair Chen moved to approve the regular meeting minutes of January 24, 2022 and January 25, 2022. Mayor Paul seconded and the motion carried unanimously by all members present with Committee Member Song abstaining. ORAL COMMUNICATIONS None. NEW BUSINESS 2. Appointment of Audit Committee Chair and Vice Chair Mayor Paul nominated Councilmember Moore as Chair and Vice Chair Chen seconded the motion. The motion carried unanimously by all members present. Mayor Paul nominated Vice Chair Chen to continue as Vice Chair. Councilmember Moore seconded and the motion carried unanimously by all members present. Vice Chair Chen handed the meeting over to Chair Moore. 3. Audit Committee Regular Meeting Frequency Korach noted that pursuant to the California Government Code and Cupertino Municipal Code that the Treasurer’s Monthly report does fall under the Audit Committee to review, and staff recommends increasing the number of regular meetings from 8 to 12 meetings to accommodate the submission of the monthly report. Staff has amended three other proposed meeting dates referencing the Treasurer’s Quarterly report to pertain to the City’s Investment Report because they do not fall under the Audit Committee and recommends, as have been submitted in past practice, that it be submitted directly to City Council. Korach also notes that Section 115 trust 6 Page 2 performance reports will be provided on a quarterly basis and submitted directly to the City Council. Chair Moore asked that the OPEB and Section 115 reports stay at the Audit Committee even though it doesn’t fall under the Committee’s duties, powers, and responsibilities. Mayor Paul questions the recommendation and Korach clarifies that it is a revision to act in accordance with the City’s municipal code and California Government Code. The monthly Treasurer’s report refers to the receipts, disbursements, and fund balances and the investment reports do not fall under the purview of the Audit Committee. Mayor Paul disagrees with the interpretation of the municipal code from staff. Chair Moore maintains that we keep the quarterly reports under the Audit Committee. Mayor Paul acknowledged that there was an obligation in the code that was not met in the past, but Staff should have explained the new requirement as well as include it i n the staff report. Mayor Paul expressed that it was inappropriate not to include in the staff report that the requirement was a relatively new one when it was not and will work with staff on what can be feasibly delivered monthly. Chair Moore agreed noting that there was no change of recent time to the reporting requirements and OPEB and Section 115 Trust reports are done by outside consultants so it may not be a significant load on staff. City Attorney Jensen notes that we should look at the different authorizations and appropriate City Council delegation of authority. Mayor Paul asked for clarification. City Attorney Jensen wants to ensure there is appropriate delegation of authority as based on Audit Committee member comments the intent is for them to re tain authority. Mayor Paul asked if this is to make sure that there is a resolution to delegate authority for review and City Attorney Jensen confirms. Chair Moore identifies the fund balances would include the OPEB and Section 115 trust reports or the receipts being reported would be considered. Mayor Paul wants to understand what staff can deliver. Chair Moore clarifies that an action should be included in the recommendation. Councilmember Song inquired for preventive methods. Chair Moore notes that this may come from our whistleblowing item in the future from Moss Adams reports. Vice Chair Chen requests to move the March meeting to the last Monday in March. No comments from the public. Mayor Paul motioned to accept the item with the change of the March meeting. Vice Chair Chen seconded, and the motion carried unanimously by all members present. 4. Treasurer’s Report for Quarter Ending December 31, 2021 Chair Moore notes that the recommended action is to receive the Treasurer’s Report for Quarter Ending December 31, 2021. Korach notes that a modification was made on page 8 that references the Investment authority delegated to the City’s Treasurer. Korach notes that the $10 million the City received is still available and only at City Council’s direction to be classified or appropriated for a specific purpose within the restrictions of the City’s Special Revenue Fund Park Dedication. No comments from the public. 5. Review of FY 2020-21 ACFR and Supplemental Reports Lai notes that based on their testing, they intend to issue an unmodified opinion which is the highest level of assurance the City can receive. The opinion will state that the financial statements are fairly stated in accordance with Generally Accepted Accounting Principles (GAAP). Lai mentions that there is an emphasis of matter paragraph as it is very standard when you have a new accounting standard that has impact to the accounting and financial reporting. This year’s standard is the GASB Statement 84, fiduciary activities related to accounting and financial 7 Page 3 reporting for fiduciary activities such as investment trust funds, OPEB trust funds, and etc. Lai turns it over to Geerdes to discuss the Investment AUP, GANN AUP, and Storm Drain AUP. Geerdes notes that these AUPs are not designed to provide assurance of any form, it was done so at the request of management. Geerdes did not notice any exceptions or findings and upon receipt of the management representation letter they will finalize the AUP. Lai notes that the Single Audit or Uniform Guidance Audit is not included in the report as the Office of Management and Budget was overwhelmed and the audit guidance was released late. Lai confirms that the American Rescue Plan Act funds will be included in next year’s single audit; this year they are reviewing the Coronavirus Relief Funds and Highway Planning and Construction grants but are awaiting key materials from management. Once they receive the materials they will bring come back with the draft report. No comments from the public. Vice Chair Chen questions the transmittal letter and the $9.7M ARPA funding that was allocated to revenue losses, but the reports indicate a revenue surplus. Lai notes that the final rule allowed organizations to take advantage of a $10 million presumed revenue loss and clarified that under the federal guidance the City was given a standard allowance of $10 million but it wasn’t considered as expended in Fiscal Year 2021, so it is sitting in the financial statements as unearned revenue. Vice Chair Chen questions the unrestricted fund balance of $92 million. Geerdes clarifies that it is the total unrestricted net position between the governmental activities ($83 million) versus the business type activities ($9.3 million) which is the resource recovery. Geerdes notes that footnote #7 is the fund balances at the fund level of reporting and when totaled it is $167 million, $49 million of that is unassigned or unrestricted at modified accrual reporting. The $92 million is at a full accrual reporting and includes items that have a different basis of accounting reporting. He notes that the unrestricted fund balance is located in the General Fund because accounting rules state that unrestricted fund balances are not allowed to be in special revenue funds or capital funds because those funds are for a restricted, special assigned purpose. He further clarifies that on page 57 there is a description of the unassigned fund balances and that it is available for any purpose but that it is subject to appropriation and any expenditure needs to be in accordance with the budget and appropriation laws and regulations. Chair Moore questioned the appropriation amounts between two different departments and if they can be altered. Lai confirms that it is out of their scope. Chair Moore requests in the heading for Audit Committee items if it is an action or informational item. Chair Moore also requested for Attachment B to follow Huntington Beach’s calculation format as it was simple and explained to the public the background of GANN. Korach identifies this item as an informational item and City Attorney Jensen confirms there is no requirement that the committee take action on this item. 6. Internal Audit – Procurement Review Rozillis notes that the engagement began in September and was completed in January with the purpose to look at the City’s procurement structure, function, how well it served the City, analyze staffing, identify opportunities for performance improvement, compare pr ocurement principles with the City’s practice in terms of ethics and equity. Rozillis notes that the primary recommendation is the city having a decentralized procurement environment and they met with dozens of organizations to conduct interviews and focus groups with those involved in procurement. She notes that staff is looking forward to the results of the study and implementing improvements in procurement. Rozillis notes 10 recommendations with the primary being an 8 Page 4 increased level of centralization and oversight of procurement leadership. There are two categories for their observations and recommendations, the first is enterprise considerations. These are things that can be done citywide such a matrix to identify clarity in roles and responsibilities, updated policy and procedures, alignment of procurement practices with State law, and consistent training. The second is policies and procedures; being able to modernize processes, technology support, training, and self-service tool kits. No comments from the public. Vice Chair Chen questions the one time and ongoing resources for the recommendations and how the City can prioritize the workplan. She notes that there are no resources allocated to the procurement process but there is staff in each department working in procurement, is there a way to rearrange resources to save the City money? Rozillis recommends that the City decide what type of model they want to move forward with as well as what staffing would look like, then identifying the portions of FTEs, and finding how to maximize the use of systems and adjust the City’s policy and procedures. Vice Chair Chen asks where should the City start. City Manager Throop mentions that he can pull a department head meeting to discuss this report and bringing a recommendation forth to Council. City Manager Throop notes that it is odd that the City is decentralized and recommends centralization with including a procurement officer and a purchasing technician. Vice Chair Chen is concerned about the ongoing resource s that City has and wants to evaluate reallocating resources for procurement. Chair Moore requests that we bring the City of Campbell to the table to look at their procurement operation and have an implementation plan added to the agenda for Audit Committee before it goes to City Council. Mayor Paul requests clarity on the structure of the procurement process for the public and what are the potential issues are for a decentralized process. Rozillis clarifies that they did a risk assessment of decentralized, centralized, and shared services models. Committeemember Song recommends that management comes up with suggestions for procurement. Chair Moore requests for information related to credit cards and how they assigned to the budget and codes or policy that are associated with credit card use. Korach provides an overview of the Credit Card use policy and notes that Finance receives a master statement for all the credit cards and will reconcile department statements as well as transaction are tied to a GL account number. Councilmember Song requests for a public report for purchases made. Korach notes detailed accounts payable reports are submitted to the City Council. 7. Budget Format Review Continued to the 3/28/2022 meeting – with appointment of the subcommittee. 8. Treasurer’s Report Definition and Process Chair Moore requests for the City Attorney Jensen to review the code for the Committee to continue to have jurisdiction over the reports. No public comments. Chair Moore requests for the GANN reporting and calculation to be clearly defined and model it after Huntington Beach. City Manager Throop notes that staff will include it in the budget book. 9. External/Internal Audit Process and Timing Mayor Paul motioned for this to be continued to the 3/28/2022 meeting. Vice Chair Chen seconded. The motion carried unanimously by all members present. 9 Page 5 OLD BUSINESS None. STAFF AND COMMITTEE REPORTS 10. Staff report out on City Council Workshop on Commissions and Committees Workshop Mayor Paul motioned for this to be continued to the 3/28/2022 meeting. Vice Chair Chen seconded. The motion carried unanimously by all members present. FUTURE AGENDA SETTING None. ADJOURNMENT The meeting adjourned at 6:00 p.m. Recording Secretary: Janet Liang, Administrative Assistant 10 CITY OF CUPERTINO Agenda Item 22-10644 Agenda Date: 3/28/2022 Agenda #: 2. Subject: Appoint Budget Format Review Sub-committee Members Appoint Budget Format Review Sub-committee Members CITY OF CUPERTINO Printed on 3/23/2022Page 1 of 1 powered by Legistar™11 AUDIT COMMITTEE STAFF REPORT Meeting: March 28, 2022 Subject Budget Format Review Sub-committee Recommended Action Appoint Budget Format Review Sub-committee Members Discussion In Fiscal Year (FY) 2019-20, Audit Committee Chair Eno Schmidt and Vice Mayor Darcy Paul established a sub-committee to review the City’s budget format. The sub-committee submitted initial observations, suggestions, and questions to City staff. The initial comments and City staff’s responses are attached (see attachment A). On November 12, 2019, the sub-committee issued a formal memo (see attachment B) discussing the conclusions and recommendations from the review process. City staff’s responses to the memo are attached (see attachment C). On October 27, 2020, City staff presented an update on budget format (see attachment D) to the Audit Committee. In FY 2020-21, Vice Mayor Liang Chao appointed Vice Chair Daisy Liang and Councilmember Kitty Moore to the Budget Format Review subcommittee. The sub- committee submitted written questions to City staff. The questions and City staff’s responses are attached (see attachment E). On December 13, 2021, City staff provided training on navigating the City’s OpenGov interactive financial transparency portal. The Audit Committee then provided recommendations on improving the OpenGov portal. A summary of the Audit Committee’s comments and requests related to budget format since 2019 is included (see attachment F) for reference. Sustainability Impact No sustainability impact. Fiscal Impact No fiscal impact. _____________________________________ 12 Prepared by: Thomas Leung, Senior Management Analyst Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Jim Throop, City Manager Attachments: A – Sub-Committee Initial Comments on Budget Format Review B – Sub-Committee Formal Memorandum on Budget Format Review C – City Staff’s Responses to the November 19, 2019 Memo D – Budget Format Review Update E – Questions Regarding the Current Budget Report F – Summary of Audit Committee Budget Format Comments and Requests from January 22, 2019 to February 24, 2022 Meetings 13 1 AUDIT COMMITTEE SUBCOMMITTEE ON THE ANNUAL BUDGET REPORT November 12, 2019 CONCLUSIONS AND RECOMMENDATIONS 1. Awards from respected Associations for Budget Presentation highlight and support the outstanding work being accomplished by the City Staff of Cupertino in the budget process: a. Distinguished Budget Presentation Award by Government Finance Officers Association; and b. Excellence Award for Fiscal Year Operating Budget by California Society of Municipal Finance Officers. 2. Comparison of budget documents from other cities as presented in September 25, 2019 Staff Report to the Budget Book Subcommittee of the Audit Committee, shows the City of Cupertino meeting or exceeding its peers in a variety of budget presentation categories. Use of the Transparency Portal and communication of Budget At a Glance are clearly within the peer leadership. 3. In the spirit of continuous improvement and building on the strong budget formats already in-place in Cupertino, here are some areas the Subcommittee recommends further investigation and possible adjustment be considered by focus on possible enhancements to the a. Budget At a Glance i. Adding modules such as the Ten-Year Staffing and Population Growth chart to highlight and explain significant changes or elements of the current budget; and ii. Reference Transparency portal of OpenGov for supplemental key elements. b. Transparency portal of OpenGov i. Provide more context to major amounts and changes from year to year or budget to actual by 1. Linking to the context already available in other budget documents or 2. Creating new content if needed and posting. ii. Interconnect or make more obvious some of the key communication elements on the budget already underway in Cupertino and as listed by OpenGov as one of the transparency portal’s strengths. For example, OpenGov on its website states “Build Trust Through Effective Communication. Engaging with constituents and stakeholders is critical to every public agency’s success. With OpenGov, leaders can analyze and communicate complex topics and decisions in a simple manner anyone can understand. Agencies are able to build trust with colleagues and residents by gathering input on key initiatives and aligning budget and the strategic plan to both performance objectives and public expectations.” 1. Link into OpenGov those initiatives already underway; and 2. Explore other ways to implement and demonstrate through the portal. PLEASE SEE SEPARATE SUBCOMMITTEE QUESTIONS SUBMITTED TO CITY STAFF WITH RESPONSES FROM STAFF In particular the following City Staff responses warrant additional consideration and action based on responses provided: Questions 1b, 1c, 2b, 4a, 6ai, 6b, 6bii, 8, 9b and 10. 14 2 Additionally, the response by City staff to Question 9a which asked about the current stated policy of “Ensure that Enterprise activities remain self-supporting in the long-term” seems to us to indicate as a minimum the word “Ensure” might be replaced with “Monitor” or even better a policy defining “self-supporting in the long-term” be adopted so that the City indeed could ensure that said policy is being implemented. Respectively submitted Budget Subcommittee of Cupertino Audit Committee Councilman Darcy Paul Cupertino Audit Committee Chair Eno Schmidt 15 AUDIT COMMITTEE STAFF REPORT Meeting: April 28, 2020 Subject Budget Format Review. Recommended Action Accept staff report. Discussion Audit Committee Chair Eno Schmidt and Vice Mayor Paul established a sub-committee for the purpose of reviewing the City’s budget format. The scope of the review included the City’s FY 2019-20 Adopted Budget, FY 2019-20 Budget at a Glance, and OpenGov portal. Initial observations, suggestions, and questions were submitted to and responded by City staff (see attachment B2). On November 12, 2019, the sub-committee issued a formal memo (see attachment B3) to City staff discussing the conclusions and recommendations from the review process. City staff’s responses to the November 12, 2019 memo are noted below in italics: CONCLUSIONS AND RECOMMENDATIONS (attachment B3): 1. The City received budget document awards from Government Finance Officers Association (GFOA) and California Society of Municipal Finance Officers (CSMFO) No City staff response necessary. 2. Comparison of budget documents shows City of Cupertino meeting or exceeding its peers in a variety of budget presentation categories. No City staff response necessary. 3. Areas recommended for further investigation and possible adjustment: a. Budget at a Glance i. Adding modules such as the ten-year staffing and population growth chart to highlight and explain significant changes or elements of the current budget. The ten-year staffing and population growth chart is included in the Budget at a Glance document (pg 7). ii. Reference Transparency portal of OpenGov for supplemental key elements. Staff will ensure the transparency is referenced in the FY 2020- 16 21 Budget at a Glance. Additionally, staff will explore adding the ten-year staffing and population growth chart in OpenGov. b. Transparency portal of OpenGov i. Provide more context to major amounts and changes from year to year or budget to actual by 1. Adding modules such as the Ten-Year Staffing and Population Growth chart to highlight and explain significant changes or elements of the current budget. Staff will explore adding the ten-year staffing and population growth chart in OpenGov and include narrative for changes from one year to the next. 2. Creating new content if needed and posting. Staff will ensure that as new reports are generated for internal use, they are considered for publication as necessary and appropriate. ii. Interconnect or make more obvious some of the key communication elements on the budget already underway in Cupertino and as listed by OpenGov as one of the transparency portal’s strengths... 1. Link into OpenGov those initiatives already underway. Staff will ensure that as initiative are identified and adopted, not only will the transparency portal, but the budget document as well, will clearly report and track progress and/or success of said initiatives. The FY 2020-21 Adopted Budget is slated to include a more succinct communication of the City Council Work Program. Staff can create a specific “view” in OpenGov that illustrates the progress to date from a financial standpoint. Staff will consider adding narrative as necessary and appropriate. 2. Explore other ways to implement and demonstrate through the portal. Open Town Hall is a great tool that assists in the collaboration of community members, particularly on City initiatives. Although it has been used in the past, staff will continue to work towards increasing the utilization. The sub-committee referenced questions 1b, 1c, 2b, 4a, 6ai, 6b, 6bii, 8, 9b, and 10 from the initial communication in attachment B2 for further consideration and action. Please find additional responses below: 1b – City staff will ensure the “impact of capital investments on operating budget” is detailed in the FY 2020-21 Adopted Budget document. While the financial information is clearly stated, the document can certainly benefit from additional narrative on the short-term as well as long-term impacts of the capital improvement program budget. 1c – Based on City staff responses in attachment B2, staff will ensure these are carried out and reflected in the FY 2020-21 Adopted Budget. 17 2b – As mentioned in attachment B2, key performance indicators are first measured by the volume of external use. As City staff continue to enhance the portal and work to increase the collaboration with community members, staff will focus on ensuring key performance indicators are established in conjunction. Additionally, OpenGov has a “Contact Cupertino” link that allows community members to send a message to Cupertino. Utilization of these feature can significantly bridge the gap for areas that community members may have questions about. 4a – City staff will ensure additional narrative is included, specifically regarding to the evolution of the City’s budget (adopted  amended  actual). 6ai – City staff will work towards enhancing and increasing the use of Stories for purposes of informing City leaders. 6b – Though it’s difficult to anticipate specific questions, particularly when considering the amount of data in just one annual budget document, City staff can ensure additional narrative and context is included in the transparency portal. Additionally, OpenGov has a “Contact Cupertino” link that allows community members to send a message to Cupertino. Utilization of these feature can significantly bridge the gap for areas that community members may have questions about. 6bii – See response at 6b above. 8 – Bridging the contextual gap is a high priority within the use of multiple tools. City staff will continue to ensure referencing between the budget document, OpenGov, and Budget at a Glance. 9b – Staffing allocation will be include in a newly established category for “Audit Committee” in the FY 2020-21 Adopted Budget. 10 – See response in attachment B2. Sustainability Impact No sustainability impact. Fiscal Impact No fiscal impact. _____________________________________ Prepared by: Zach Korach, Finance Manager Reviewed by: Kristina Alfaro, Director of Administrative Services 18 Approved for Submission by: Deborah Feng, City Manager Attachments: B2 – Sub-Committee’s Initial Comments on Budget Format Review B3 – Sub-Committee’s Formal Memorandum on Budget Format Review 19 AUDIT COMMITTEE STAFF REPORT Meeting: October 27, 2020 Subject Budget Format Review Update. Recommended Action Accept staff report. Discussion In FY 2019-20, Audit Committee Chair Eno Schmidt and Vice Mayor Paul established a sub-committee to review the City’s budget format. Initial observations, suggestions, and questions were submitted to and responded by City staff (see attachment F2). On November 12, 2019, the sub-committee issued a formal memo (see attachment F3) to City staff discussing the conclusions and recommendations from the review process. City staff’s responses to the November 12, 2019 memo are attached (see attachment F4). City staff’s updates on budget format are provided below: Adopted Budget While the sub-committee concluded that the City’s budget document meets or exceeds its peers in a variety of categories, the City continues to improve the budget document each year to make the budget easier to understand for residents. For FY 2020-21, the City has added the following sections to the budget document:  Capital Improvement Program (Page 42) o Discussion of Capital Improvement Program funding and financial impacts  Revenue Comparisons (Page 118) o Per Capita comparisons of total revenues, property tax, sales tax, transient occupancy tax, franchise fees, and building permits with neighboring jurisdictions  Pension (Page 153) o Explanation of CalPERS pension plan, discount rate, and investment returns o Discussion on the impact of CalPERS discount rate and investment returns 20 o Discussion of the City’s strategies to reduce pension cost volatility, including the Section 115 Trust Budget at a Glance The City received feedback from the sub-committee to reference the Transparency Portal in the Budget at a Glance. The City is working on its first interactive Budget at a Glance, which will bridge the gap between the traditional Budget at a Glance and the Transparency Portal. OpenGov Transparency Portal The sub-committee recommended that the City enhance the Transparency Portal by:  Providing more context to major amount and changes and  Interconnecting key communication elements on the budget to the Transparency Portal. Based on the sub-committee’s feedback, the City is currently working to provide more context to financial data in the Transparency Portal through the following initiatives:  Interactive Budget at a Glance o Present the budget in a simple, visual, and interactive format o Provide more context to financial reports in the Transparency Portal  Interactive Capital Improvement Program Budget o Illustrate progress of capital projects from a financial standpoint o Connect project narratives to interactive maps and financial reports  Stories for important initiatives (e.g. CARES Act) o Provide updates on important initiatives o Connect initiatives to financial reports in the Transparency Portal o Gather feedback from the community  Budget Story o Explain important financial concepts including revenues, expenses, departments, and funds o Provide answers to frequently asked questions about the budget o Serve as a starting point to users unfamiliar with government finance or the Transparency Portal These initiatives will help the City improve its financial transparency and community engagement. In addition, the City will continue working to incorporate feedback from the sub-committee, City Council, and residents, into the format of its budget documents and reports. Sustainability Impact No sustainability impact. 21 Fiscal Impact No fiscal impact. _____________________________________ Prepared by: Thomas Leung, Senior Management Analyst Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Deborah Feng, City Manager Attachments: F2 – Sub-Committee’s Initial Comments on Budget Format Review F3 – Sub-Committee’s Formal Memorandum on Budget Format Review F4 – City staff’s responses to the November 12, 2019 Memo 22 Questions Regarding the Current Budget Report Audit Committee Chair Daisy Liang 1. Page 35 and 55 of the FY 21-22 Proposed Budget: Please add the Adopted Budget amounts for anywhere the FY18 and FY19 actuals are presented. This will allow a reader to understand where the actuals ended in respect to the amounts budgeted. RESPONSE: The format of showing two years of actuals, prior year adopted, and current year adopted follows the criteria set forth by the Government Finance Officers Association (GFOA). Additionally, changing the size of the charts would result in the charts being significantly reduced in size and could make is less legible. As an alternative, staff could issue a separate appendix showing the prior year budget and actuals at the detailed account line item level and post on the City’s website. 2. Page 42: The Non-Personnel Assumptions section discussed one-time special projects. Can we add links throughout the document for repeated information? Can we add onetime special projects as a saved “view” in OpenGov to allow the public to easily access the information? RESPONSE: We can add a reference on page 42 to note that special projects are further detailed in the respective department narrative sections. Each page of the budget document has a link back to the Table of Contents. From there, a user can easily move to any section of the document they desire. 3. Page 81: The Basis of Budgeting section discusses the budget being split into nine departments. Can the document include a pie chart to show the departments percentages? RESPONSE: General Fund expenditures by department is presented on page 36 of the Proposed Budget. 4. Page 93: What is the formula to calculate the $19,000,000 for Economic Uncertainty reserve? RESPONSE: The formula is noted on page 93 of the Proposed Budget document: “represents two months of General Fund (GF) expenditures excluding transfers out plus a two year drop in total general fund revenue of 13% or approximately 1.5 months, excluding the use of reserves.” This can be estimated by using the “Financial Overview by Fund” chart on page 103. 23 In recent years, unassigned fund balance in General Fund has maintained high levels. That, coupled with the establishment of the Section 115 Trust (pension), City staff have not recommended increases to the Economic Uncertainty Reserve. In the event of economic uncertainty, further recommendations would be brought before City Council (e.g., increasing the Economic Uncertainty Reserve, utilizing the Pension Section 115 Trust, budget reductions, etc.). 5. Page 138: Can General Fund fund balance be added to the 20-Year General Fund Financial Forecast chart? RESPONSE: Page 138 shows the revenues and expenditures and difference between the bars and the line represent changes in fund balance; these are emphasized on page 139. We could add a sentence nothing the beginning unassigned and total fund balance to provide additional context. That said, the General Fund fund balance forecast is discussed in detail beginning on page 155. Although having all of this information on one page would be ideal, it simply is not feasible. The forecast section is presented in a format consistent with the rest of the document and follows the flow/format of an income statement (revenue  expenditures  fund balance). 6. Page 148: What is “salary savings” as presented in the Five-year General Fund Expenditures Forecast chart? RESPONSE: Salary savings is a common line item in budgets, particularly in forecast models. The City budgets for 100% of the authorized employee head count; however, throughout the year, savings is realized through turnover and attrition. This amount represents the anticipated savings from vacant positions and attrition throughout the fiscal year (cost of approximately 5 full-time employees). 7. Page 541: Where are the capital projects for FY 21-22 as well as any previously funded projects that have yet to be completed? RESONSE: The Capital Improvement Program (CIP) was not included in the Proposed Budget. It was first introduced to City Council at a study session on May 4, 2021, subsequent to the publishing of the Proposed Budget on May 1, 2021. The Final Adopted Budget will incorporate all financial information pertaining to CIP. Additionally, Public Works and the CIP team will be issuing a separate CIP Budget document as well. Total GF Expenditures 88,138,778$ (less transfers out)(11,251,984)$ Subtotal 76,886,794$ Expenditures (2 months)12,814,466$ Revenues (1.5 months)9,372,611$ Hypothetical Reserve Amount in FY 21-22 22,187,077$ Actual Reserve Amount in FY 21-22 19,000,000$ Difference (3,187,077)$ 24 Councilmember Moore May 18, 2021 Format: 1. While Contingencies may not be an appropriate format issue to discuss, I think it should be removed and the reserve in the General Fund be appropriated as needed. The item has not been transparent from its inception in 2013 and looks like a slush fund with the largest share in the City Manager’s budget. The Staff Report to City Council in June of 2013 neglected to mention that a new contingency amount of $427k was even being appropriated and now the current format for the Budget shows $3,773 for contingencies for the City Manager on p. 221, yet on p. 245 of the current Proposed Budget, there is $593,250 appropriated in contingencies. Additionally, the City Manager is given authority to approve their spending on p. 244. This practice, and the whole contingency category, in my opinion, needs to end. RESPONSE: City Council directed staff to reduce the City Manager Discretionary Fund to $75,000 (a reduction of $518,250) at the June 4, 2021 study session. City Council ultimately adopted the FY 21-22 Budget with a City Manager Discretionary Fund budget amount of $75,000. 2. I do prefer the staffing tables used by Campbell and Sunnyvale for clarity. RESPONSE: Noted. It will be challenging to incorporate similar staffing tables throughout each of the respective Program narratives. However, staff can create an appendix report for all positions and present by Department and Program. 3. I prefer the more detailed accounting which the City did in 2013 and other cities continue to do, referred to as the Account Level Summary. RESPONSE: Noted. It will significantly increase the length of the document to show the account level detail throughout the document, but as an alternative, staff can create an appendix report for all budget and actuals at the account level detail. 4. I would like the previous comments from the last Budget Format Review Subcommittee (attached) added along with my comments and Daisy’s for next week’s City Council Budget Agenda item. RESPONSE: Noted. 25 Content: Proposed Budget is pretty easy to read and follow. Movement of money between funds along with department divisions and tasks moving between departments makes following the changes to department costs difficult to capture. Because some funding increased a great deal in 2020, it would help to have a comparison back to 2019 in some instances (City Manager Contingency, for example, Proposed Budget p. 245) 1. Community outreach improvements to get input regarding the Proposed Budget goals and process. a. Proposed Budget mentions input from the Audit and Fiscal Strategic Plan Committees, however neither has reviewed the Proposed Budget for input. Should these committees receive the Proposed Budget prior to coming to City Council in the future or is this process order better? The Fiscal Strategic Plan Committee is not codified and has no codified duty to review the Proposed Budget. RESPONSE: The Audit Committee is tasked with reviewing the Budget Format and the Fiscal Strategic Plan has historically reviewed the City’s financial forecast, which is an important component to the City’s budget document. While input on the actual budget document is only received from the Community via public meetings, the City’s budget team holds annual community engagement budget workshops and includes interactive budget reports throughout the year via OpenGov. 2. The organizational charts need to reflect the Cupertino Municipal Code (CMC) a. Add date of organizational chart b. Update the online chart c. Update CMC to reflect current organizational structure (e.g. add I.T. Department) d. This should probably not be a work plan item, but an ongoing process of CMC cleanup RESPONSE: The organizational charts in the budget document are correct. They will need to be updated online and in the CMC. The date of the organization chart in the budget corresponds to the budget document itself; thus the organization chart corresponds to FY 21-22. 3. CMC mentions a potential Public Safety Department should Police and Fire be administered by the City. The City contracts out both. How is the Fire Department paid for? RESPONSE: Santa Clara County Fire is funded via property taxes. Property tax revenues are generated from the 1% tax on property values. Of that 1%, the City receives 7% and Santa Clara County Fire receives 15%, with the majority of the 1% going to school districts. 26 4. City Manager discretionary spending was $743 for 2020 yet the 2022 Proposed Budget is $593,250. Additionally, the Program Overview states that the contingency budget for the City Manager requires the City Manager approval (Proposed Budget p. 244). I would recommend this amount be removed and a policy for oversight be put in place. The City Manager’s overall budget has increased from $786,535 in 2019 (expenditures plus contingencies) to $2,115,071 proposed for 2022. How is this increase accounted for? Review the City of Cupertino Purchasing Policy (2013) Code Sec. 3.22 and 3.23. RESPONSE: The City Manager Contingency program was established to meet citywide unexpected expenses that may occur during the year. In FY 2013-14, a Contingencies expenditures category was added to each General Fund program to serve as a contingency for any unexpected expenditures that might occur during the year. Prior to FY 2020-21, the contingency amount was derived by taking 5% of the General Fund’s base materials and contract services to account for unforeseen events and/or activities that were not included in the respective fiscal year’s budget. In FY 2020-21, and in response to COVID-19, the contingency amount was cut in half to 2.5% of the General Fund’s base materials and contract services. Additionally, in FY 2020-21 The City Manager’s contingency established an appropriation specifically for Public Works’ unforeseen maintenance and repairs in an amount of $280,000. The current 2.5% calculation is below GFOA’s best practice recommended range of 5-15%; however, once the Public Works unforeseen maintenance and repair contingency is factored, the contingency amount ends within the recommended range at 5%. In total, the City Manager’s contingency budget has remained relatively consistent year-over-year (YOY) as noted below: Fiscal Year FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 Budget $505,000 $593,661 $486,353 $551,827 $593,250 Actual $240,365 $127,480 $279,337 $283,384 $ - The City Manager budget unit within the Department of Administration (100-12-120) has increased from $993,118 (adopted) in FY 2018-19 to $1,521,821 (proposed) in FY 2021-22. This increase is due to 2.3 additional full-time employees being accounted for in this budget unit. City Council recommended and adopted a FY 21-22 budget with a City Manager Discretionary Fund of $75,000. 5. Economic Development has switched to a contract service and has more than doubled in cost. RESPONSE: The Economic Development budget is proposed to decrease from $430,494 in FY 2020-21 to $337,074. As the function becomes further defined, staff will bring forward budget recommendations to City Council for consideration. 27 6. Some committees use staff time (which seems to imply they have a budget amount) and are not codified: Economic Development Committee, Disaster Council, Fiscal Strategic Plan Committee. Needs clarification. RESPONSE: Staff time allocations less than 5% are generally not charged to specific budget units. In other words, the City would not create a budget unit for Fiscal Strategic Plan Committee because less than 5% of a respective employee’s annual time is required. 7. Multiple projects which are not approved in the City Council Work Plan show up in the Proposed Budget: New Logo, online store. Please remove these items from other headings such as “Contract Services” to a new heading which indicates they are Proposed Work Plan Items and not approved. RESPONSE: All City Work Program items will be budgeted and shown as “special projects” in the final adopted budget. Recording activities in a unique account requires the creation of a new general ledger account. This is completed once the City Work Program is adopted and the projects are finalized. 8. Communications costs seems to be a separate area, could this be shown as a group? RESPONSE: Combining these groups would decrease transparency and also sacrifice historical data comparisons. OpenGov’s Transparency Portal now has a saved “view” so that the Office of Communications and the Multimedia budget units can be seen in a combined fashion. OpenGov Saved View 9. It is unclear how much of the Cultural Events ($402,137) items will occur, such as the 4th of July celebration. (PB p. 335-336), a similar item, Neighborhood Events ($163,119) raises the same question (PB p. 350). Total events: $565,256. RESPONSE: Most of the 4th of July funds are spent the FY before the event, so the money in the FY 2021-2022 budget will go toward the July 4, 2022. The other events within this account are Memorial Park Summer Events and Shakespeare in the Park which we are planning for late summer/early Fall 2021, Tree Lighting which is in December 2021, Big Bunny 5K in March/April 2022, and other small events. The Festivals start in the Fall and continue to Spring. At this time, we are assuming those will happen. 10. Economic Development was $89,910 for the 2019 actual expenditure and is now proposed at FY 2022 $337,074 with a new contingency and materials amount of over $60K with no staffing. Additionally, there is no codified Economic Development Committee which uses staff time. This area needs attention. 28 RESPONSE: The Economic Development budget is proposed to decrease from $430,494 in FY 2020-21 to $337,074. With the function likely moving “in-house,” staff are recommending a reduction in this budget unit of $38,694. As the function becomes further defined, staff will bring forward budget recommendations to City Council for consideration. 11. Please explain the large increase in the BMR affordable housing fund PB p. 393 which shows an increase of revenue from 2019 actual of $159,179 in taxes to 2022 Proposed Budget taxes of $3,611,855. There is an allocation of $600,000 shown for Homelessness and other Special Projects which has not been approved and the City Resolution to support the county Task Force on Homelessness indicated that the City would participate in a county-wide program which the City would likely be asked to contribute financially to. RESPONSE: Estimated revenues increased due to one-time anticipated Housing Mitigation In- Lieu Fees for Cupertino Village and De Anza Hotel. The majority of this program’s budget increase is due to two (2) tentative City Work Program items: $300,000 for Affordable Housing Strategies and $300,000 for Homeless Services and Facilities. Although the Affordable Housing Strategies is slated for removal, a $200,000 item for Homeless Jobs Program is slated to be added. 12. Code Enforcement has increased from $508,167 in 2019 to $1,202,392 proposed 2022. PB p. 406. RESPONSE: Full-time employee (FTE) allocations have increased since FY 2018-19 which is contributing to the increase. Additionally, and because of these relatively large proportional staffing increases and changes in methodology, the amount of cost allocation charges increased from $22,478 in FY 2018-19 to $277,786 in the proposed budget year. 13. Facilities would be easier to track if grouped together, Facilities and Fleet next to Grounds, for example. Where are Stocklmeir, Byrne, Blech? RESPONSE: The Department’s budget units/programs are organized in order of Division (xxx- XX-xxx). Because the Fleet or “Fixed Assets Acquisition” program is numbered 630-90-985, it naturally comes at the end. Changing the accounting structure would be an administrative challenge and make it more difficult to identity fluctuations year over year. A saved “view” on OpenGov has been created to see Grounds and Facilities budget units together. OpenGov Saved View 29 Stocklmeir, Byrne and Blesch are not occupied buildings that are in use. The Facilities budgets are for maintenance of city buildings that are in use. Any budget allocations for these three properties would be considered a special project with a specific scope. Additionally, The City’s budget does not include a comprehensive list of the City’s capital assets for two primary reasons: 1) it is not a requirement or recommendation by the Government Finance Officer’s Association (GFOA) and 2) the City strives to keep the budget document as concise as possible. It is regularly recommended by GFOA to shorten the document as necessary and appropriate. 30 Audit Committee Budget Format Comments and Requests from January 22, 2019 to February 24, 2022 Meetings Agenda Date Requester What was requested Notes 7/30/2019 Councilmember Paul suggested looking at other cities, including city of campbell for comparison.Korach moved to the next meeting 7/30/2019 Councilmember Paul suggested creating a budget sub-committee or having more meetings and volunteered with Chair Schmidt to form the sub-committee Korach moved to the next meeting 4/28/2020 Vice Mayor Paul commented on the five primary budget documents for the public and suggested providing a FAQ section. 4/28/2020 Chair Schmidt inquired about the questions regarding the staff report and asked about question 9A, which referenced the current Policy, that stated: “ensure that enterprise activities remain self-supporting.” Korach explained the verbiage changed from “ensuring” to “monitor”, within the fiscal policy section in the proposed budget document, bringing more clarity and transparency. 4/28/2020 Zach Korach mentioned that staff will continue to address the challenge of bridging the intellectual gap and making sure that information can be found in one central location 7/28/2020 Zach Korach provided an overview of areas that received special attention (reviewed GFOA and CSMFO comments on enhancing operating impacts, CIP and ehance pension obligatoin and forecast section) 1/27/2021 Zach Korach recommended the Committee consider establishing a sub-committee to complete the budget format review for FY 20-21 budget Councilmember Moore volunteered to participate on the sub-committee. Committee deferred selection of sub-committee to a special meeting in Feb 2021 so incoming members have an opportunity to participate 2/22/2021 Vice Chair Liang expressed interest in joining the sub-committee. Vice Mayor Chao appointed Vice Chair Liang and Councilmember Moore to the sub-committee 8/30/2021 Councilmember Moore requested history of the budget and changes that have been made in recent years 8/30/2021 Councilmember Moore asked about public engagement and feedback on budget, specifically regarding how much money the City has to spend on future projects 8/30/2021 Vice Chair Chen suggested that fund balance and changes in accordance with the fund balance policy receive more attention. 8/30/2021 Councilmember Moore discussed the City of Sunnyvale breaking out their operating and CIP budgets, that the budget format review should only focus on the format rather than the content, and that the timing of process was a bit compressed for FY 21-22. She suggested having the organization charts updated more frequently and that budget amendment authority/process be expanded upon. 8/30/2021 Vice Chair Chen recommended that the budget message be addressed to both City Council as well as the Cupertino Residents 8/30/2021 Councilmember Moore requested additional text/narrative be included to accompany the data of amended budget 31 Audit Committee Budget Format Comments and Requests from January 22, 2019 to February 24, 2022 Meetings 8/30/2021 Vice Chair Chen suggested a budget calendar be created, wondered if budget calendar/cycle could be presented in a table format. Vice Mayor Chao referenced CUSD's budget calendar and their forecast 8/30/2021 Councilmember Moore suggested establishing a separate sub- committee that would be solely focused on Opengov 8/30/2021 Vice Mayor Chao recommended there be more community outreach/engagement in the budget format review. 8/30/2021 Councilmember Moore noted that there were few format review changes and that most of the comments made today are related to Opengov. She suggested continuing this item to summarize the points the Committee is interested in focusing on to provide further direction to staff. This item was continued to a future meeting. 10/27/2021 Mayor Paul inquired about a central location for all pertinent budget information 12/13/2021 Vice Mayor Chao and Chair Liang requested a “global search” function be added. 12/13/2021 Councilmember Moore requested consistent references to OpenGov be used and that more explanatory notes are included on the site 12/13/2021 Vice Mayor Chao asked about examples of how to find things a viewer might be looking for (guides/FAQs). 12/13/2021 Public Comment: Peggy Griffin spoke to various recommendations for improvement to Opengov (recommendations not listed in minutes) 2/24/2022 Chair Moore requested GANN reporting and calculation to be clearly defined and model it after Huntington Beach 32 CITY OF CUPERTINO Agenda Item 22-10645 Agenda Date: 3/28/2022 Agenda #: 3. Subject:Review Monthly Treasurer’s Report for January and February 2022 and recommend filing with City Council Review Monthly Treasurer’s Report for January and February 2022 and recommend filing with City Council CITY OF CUPERTINO Printed on 3/23/2022Page 1 of 1 powered by Legistar™33 AUDIT COMMITTEE STAFF REPORT Meeting: March 28, 2022 Subject Monthly Treasurer's Report for January and February 2022 Recommended Action Review Monthly Treasurer's Report for January and February 2022 and recommend filing with City Council Discussion Background California Government Code Section 41004 states, "Regularly, at least once each month, the city treasurer shall submit to the city clerk a written report and accounting of all receipts, disbursements, and fund balances. The city treasurer shall file a copy with the legislative body." The City's Municipal Code Section 2.24.030 Monthly Reports states, "the Treasurer shall make monthly reports which conform to the requirements of Government Code Section 41004. Said reports shall be delivered to the City Council, the City Manager and made available for review by such other persons who may so request." Lastly, the City's Municipal Code Section 2.88.100 Duties-Powers-Responsibilities outlines one of the powers and functions of the Audit Committee is "to review the monthly Treasurer's report." Per the referenced code provisions, a Treasurer's Report (report and accounting of all receipts, disbursements, and fund balances) shall be submitted to the Audit Committee for review and filed with the City Clerk every month. Cash vs. Accrual Basis Accounting Cash and accrual basis accounting differ in the timing when revenues and expenses are recognized and recorded. Cash basis accounting recognizes revenues when payment is received and expenses when payment is paid. Accrual basis accounting recognizes revenues when they are earned (but not necessarily received) and expenses when they are incurred (but not necessarily paid). Receipts, disbursements, and cash balance are measured on a cash basis. The cash balance shows the total cash and investments in the City's accounts. Cash balance is calculated by 34 taking the beginning balance and then adding the difference between receipts and disbursements to arrive at the ending balance. Adjustments to the ending balance account for transactions recorded in other systems and imported into New World. Revenues, expenditures, and fund balance are measured on an accrual basis. As a result, the amount in fund balance does not mean the City has that much cash on hand. Instead, fund balance is the difference between assets and liabilities. Fund balance is calculated by taking the beginning balance and then adding the difference between revenues and expenditures to arrive at the ending fund balance. Treasurer's Report The report provides cash and fund balances for the City of Cupertino for January and February 2022. January 2022 The City's General Fund ending cash and investment balance was $109.5 million, an increase of $4.7 million from the prior month. Receipts were $14.3 million, and disbursements were $(10.2) million for the month. The City's General Fund ending fund balance was $109.7 million, increasing $6.2 million from the prior month due to revenues of $9.7 million and expenditures of $3.5 million. February 2022 The City's General Fund ending cash and investment balance was $116.2 million, an increase of $6.8 million from the prior month. Receipts were $13.0 million, and disbursements were $(6.2) million for the month. The City's General Fund's ending fund balance was $105.6 million, decreasing $4.1 million from the prior month due to revenues of $1.7 million and expenditures of $5.8 million. Sustainability Impact No sustainability impact. Fiscal Impact No fiscal impact. _____________________________________ Prepared by: Thomas Leung, Senior Management Analyst Reviewed by: Kristina Alfaro, Director of Administrative Services and City Treasurer Approved for Submission by: Jim Throop, City Manager Attachments: A – January 2022 Report of City-wide Receipts, Disbursements, and Cash Balances B – January 2022 Report of City‐wide Fund Balances/Net Position C – February 2022 Report of City-wide Receipts, Disbursements, and Cash Balances 35 D – February 2022 Report of City‐wide Fund Balances/Net Position 36 January 2022 Report of City-wide Receipts, Disbursements, and Cash Balances Cash and Investments Beginning Balance Ending Balance Fund Type Fund Number/Name as of December 31, 2021 Receipts Disbursements Journal Adjustments as of January 31, 2022 General Fund 100 General Fund 104,778,714$ 14,343,624$ (10,231,890)$ 575,382$ 109,465,830$ General Fund 130 Investment Fund (1,200)$ -$ -$ -$ (1,200)$ Special Revenue Funds 210 Storm Drain Improvement 2,382,103$ -$ (3,652)$ -$ 2,378,451$ Special Revenue Funds 215 Storm Drain AB1600 1,821,170$ 8,260$ -$ -$ 1,829,430$ Special Revenue Funds 230 Env Mgmt Cln Crk Strm Drain 744,321$ 796,696$ (108,151)$ (621)$ 1,432,246$ Special Revenue Funds 260 CDBG 569,849$ 662$ (44,149)$ -$ 526,362$ Special Revenue Funds 261 HCD Loan Rehab 188,294$ 43,986$ -$ -$ 232,280$ Special Revenue Funds 265 BMR Housing 6,300,249$ 3,000$ (44,976)$ -$ 6,258,273$ Special Revenue Funds 270 Transportation Fund 13,696,172$ 455,105$ (121,732)$ -$ 14,029,545$ Special Revenue Funds 271 Traffic Impact 748,717$ -$ -$ -$ 748,717$ Special Revenue Funds 280 Park Dedication 22,547,001$ 15,000$ (7,501)$ -$ 22,554,500$ Special Revenue Funds 281 Tree Fund 137,364$ -$ -$ -$ 137,364$ Debt Service Funds 365 Public Facilities Corp 2,284,850$ -$ -$ -$ 2,284,850$ Capital Project Funds 420 Capital Improvement Fund 33,086,410$ 80,000$ (990,318)$ -$ 32,176,092$ Capital Project Funds 427 Stevens Creek Corridor Park 177,737$ -$ -$ -$ 177,737$ Capital Project Funds 429 Capital Reserve (453,432)$ -$ -$ -$ (453,432)$ Enterprise Funds 520 Resource Recovery 6,251,528$ 128,449$ (110,667)$ -$ 6,269,309$ Enterprise Funds 560 Blackberry Farm 1,226,260$ 552$ (36,202)$ 52,290$ 1,242,901$ Enterprise Funds 570 Sports Center 2,117,379$ -$ (95,887)$ 105,646$ 2,127,138$ Enterprise Funds 580 Recreation Program 3,070,881$ 17,690$ (51,153)$ 45,607$ 3,083,025$ Internal Service Funds 610 Innovation & Technology 2,380,001$ -$ (216,568)$ -$ 2,163,434$ Internal Service Funds 620 Workers' Compensation 3,978,358$ -$ (3,134)$ -$ 3,975,224$ Internal Service Funds 630 Vehicle/Equip Replacement 769,920$ -$ (56,566)$ -$ 713,354$ Internal Service Funds 641 Compensated Absence/LTD 696,340$ -$ 938$ -$ 697,278$ Internal Service Funds 642 Retiree Medical 566,906$ -$ (110,247)$ -$ 456,660$ Total 210,065,893$ 15,893,024$ (12,231,852)$ 778,305$ 214,505,369$ * For reporting purposes, this fund rolls up/combines with Fund 420 Printed March 18, 2022 37 January 2022 Report of City‐wide Fund Balances/Net Position Beginning Fund Balance Ending Fund Balance Fund Type Fund Number/Name as of December 31, 2021 Revenues Expenditures as of January 31, 2022 General Fund 100  General Fund 103,527,107$                            9,731,626$            3,534,253$            109,724,479$                             General Fund 130  Investment Fund (1,200)$                                       ‐$                        ‐$                       (1,200)$                                       Special Revenue Funds 210  Storm Drain Improvement 2,382,103$                                 ‐$                       3,652$                   2,378,451$                                 Special Revenue Funds 215  Storm Drain AB1600 1,821,170$                                8,260$                    ‐$                       1,829,430$                                 Special Revenue Funds 230  Env Mgmt Cln Crk Strm Drain 761,550$                                   795,655$               108,670$               1,448,534$                                 Special Revenue Funds 260  CDBG 1,102,172$                                181$                      44,149$                 1,058,204$                                 Special Revenue Funds 261  HCD Loan Rehab 188,294$                                   43,986$                  ‐$                       232,280$                                    Special Revenue Funds 265  BMR Housing 6,300,249$                                3,000$                   44,976$                 6,258,273$                                 Special Revenue Funds 270  Transportation Fund 14,054,548$                              96,552$                 127,357$               14,023,743$                               Special Revenue Funds 271  Traffic Impact 748,717$                                    ‐$                        ‐$                       748,717$                                    Special Revenue Funds 280  Park Dedication 22,547,001$                              15,000$                 7,501$                   22,554,500$                               Special Revenue Funds 281  Tree Fund 137,964$                                    ‐$                        ‐$                       137,964$                                    Debt Service Funds 365  Public Facilities Corp 2,284,850$                                 ‐$                        ‐$                       2,284,850$                                 Capital Project Funds 420  Capital Improvement Fund 30,583,112$                              80,000$                 1,002,369$            29,660,743$                               Capital Project Funds 427  Stevens Creek Corridor Park 177,737$                                    ‐$                        ‐$                       177,737$                                    Capital Project Funds 429  Capital Reserve* (453,432)$                                   ‐$                        ‐$                       (453,432)$                                   Enterprise Funds 520  Resource Recovery 5,319,985$                                197,412$               110,686$               5,406,712$                                 Enterprise Funds 560  Blackberry Farm 951,709$                                   45,434$                 37,703$                 959,439$                                    Enterprise Funds 570  Sports Center 2,573,415$                                168,237$               107,119$               2,634,532$                                 Enterprise Funds 580  Recreation Program 2,649,242$                                80,793$                 55,204$                 2,674,831$                                 Internal Service Funds 610  Innovation & Technology 1,155,284$                                 ‐$                       253,009$               902,275$                                    Internal Service Funds 620  Workersʹ Compensation 2,541,945$                                 ‐$                       3,134$                   2,538,811$                                 Internal Service Funds 630  Vehicle/Equip Replacement 2,026,258$                                 ‐$                       52,616$                 1,973,643$                                 Internal Service Funds 641  Compensated Absence/LTD 688,685$                                   8,736$                   7,798$                   689,623$                                    Internal Service Funds 642  Retiree Medical 566,906$                                    ‐$                       110,247$               456,660$                                    Total 204,635,371$                            11,274,872$          5,610,442$            210,299,801$                             * For reporting purposes, this fund rolls up/combines with Fund 420 Printed March 18, 2022 38 February 2022 Report of City-wide Receipts, Disbursements, and Cash Balances Cash and Investments Beginning Balance Ending Balance Fund Type Fund Number/Name as of January 31, 2021 Receipts Disbursements Journal Adjustments as of February 28, 2022 General Fund 100 General Fund 109,465,830$ 12,965,696$ (6,210,929)$ 21,586$ 116,242,184$ General Fund 130 Investment Fund (1,200)$ -$ -$ -$ (1,200)$ Special Revenue Funds 210 Storm Drain Improvement 2,378,451$ -$ -$ -$ 2,378,451$ Special Revenue Funds 215 Storm Drain AB1600 1,829,430$ 1,768$ -$ -$ 1,831,198$ Special Revenue Funds 230 Env Mgmt Cln Crk Strm Drain 1,432,246$ 19,395$ (75,261)$ -$ 1,376,381$ Special Revenue Funds 260 CDBG 526,362$ 116,085$ (86,172)$ -$ 556,275$ Special Revenue Funds 261 HCD Loan Rehab 232,280$ -$ -$ -$ 232,280$ Special Revenue Funds 265 BMR Housing 6,258,273$ 3,380$ (38,295)$ -$ 6,223,358$ Special Revenue Funds 270 Transportation Fund 14,029,545$ 282,074$ (197,959)$ -$ 14,113,661$ Special Revenue Funds 271 Traffic Impact 748,717$ -$ -$ -$ 748,717$ Special Revenue Funds 280 Park Dedication 22,554,500$ -$ (308,791)$ -$ 22,245,709$ Special Revenue Funds 281 Tree Fund 137,364$ -$ -$ -$ 137,364$ Debt Service Funds 365 Public Facilities Corp 2,284,850$ -$ -$ -$ 2,284,850$ Capital Project Funds 420 Capital Improvement Fund 32,176,092$ 36,051$ (957,860)$ -$ 31,254,282$ Capital Project Funds 427 Stevens Creek Corridor Park 177,737$ -$ (1,240)$ -$ 176,498$ Capital Project Funds 429 Capital Reserve (453,432)$ -$ -$ -$ (453,432)$ Enterprise Funds 520 Resource Recovery 6,269,309$ 116,344$ (109,992)$ -$ 6,275,660$ Enterprise Funds 560 Blackberry Farm 1,242,901$ 903$ (48,699)$ 43,031$ 1,238,136$ Enterprise Funds 570 Sports Center 2,127,138$ -$ (81,897)$ 427,913$ 2,473,155$ Enterprise Funds 580 Recreation Program 3,083,025$ 1,668$ (44,134)$ 150,255$ 3,190,813$ Internal Service Funds 610 Innovation & Technology 2,163,434$ -$ (232,336)$ -$ 1,931,097$ Internal Service Funds 620 Workers' Compensation 3,975,224$ -$ (3,134)$ (19,219)$ 3,952,872$ Internal Service Funds 630 Vehicle/Equip Replacement 713,354$ 84$ (53,582)$ -$ 659,856$ Internal Service Funds 641 Compensated Absence/LTD 697,278$ -$ 801$ -$ 698,079$ Internal Service Funds 642 Retiree Medical 456,660$ -$ (113,351)$ -$ 343,308$ Total 214,505,369$ 13,543,448$ (8,562,831)$ 623,566$ 220,109,552$ * For reporting purposes, this fund rolls up/combines with Fund 420 Printed March 18, 2022 39 February 2022 Report of City‐wide Fund Balances/Net Position Beginning Fund Balance Ending Fund Balance Fund Type Fund Number/Name as of January 31, 2022 Revenues Expenditures as of February 28, 2022 General Fund 100  General Fund 109,724,479$                            1,677,697$            5,835,670$            105,566,506$                             General Fund 130  Investment Fund (1,200)$                                       ‐$                        ‐$                       (1,200)$                                       Special Revenue Funds 210  Storm Drain Improvement 2,378,451$                                 ‐$                        ‐$                       2,378,451$                                 Special Revenue Funds 215  Storm Drain AB1600 1,829,430$                                1,768$                    ‐$                       1,831,198$                                 Special Revenue Funds 230  Env Mgmt Cln Crk Strm Drain 1,448,534$                                49,547$                 74,948$                 1,423,133$                                 Special Revenue Funds 260  CDBG 1,058,204$                                115,603$               86,172$                 1,087,635$                                 Special Revenue Funds 261  HCD Loan Rehab 232,280$                                    ‐$                        ‐$                       232,280$                                    Special Revenue Funds 265  BMR Housing 6,258,273$                                3,380$                   38,295$                 6,223,358$                                 Special Revenue Funds 270  Transportation Fund 14,023,743$                              282,074$               196,654$               14,109,163$                               Special Revenue Funds 271  Traffic Impact 748,717$                                    ‐$                        ‐$                       748,717$                                    Special Revenue Funds 280  Park Dedication 22,554,500$                              (240,000)$              68,800$                 22,245,700$                               Special Revenue Funds 281  Tree Fund 137,964$                                    ‐$                        ‐$                       137,964$                                    Debt Service Funds 365  Public Facilities Corp 2,284,850$                                 ‐$                        ‐$                       2,284,850$                                 Capital Project Funds 420  Capital Improvement Fund 29,660,743$                               ‐$                       968,169$               28,692,574$                               Capital Project Funds 427  Stevens Creek Corridor Park 177,737$                                    ‐$                       1,240$                   176,498$                                    Capital Project Funds 429  Capital Reserve* (453,432)$                                   ‐$                        ‐$                       (453,432)$                                   Enterprise Funds 520  Resource Recovery 5,406,712$                                116,344$               109,974$               5,413,082$                                 Enterprise Funds 560  Blackberry Farm 959,439$                                   41,946$                 60,117$                 941,268$                                    Enterprise Funds 570  Sports Center 2,634,532$                                216,885$               74,731$                 2,776,686$                                 Enterprise Funds 580  Recreation Program 2,674,831$                                60,652$                 42,569$                 2,692,915$                                 Internal Service Funds 610  Innovation & Technology 902,275$                                    ‐$                       192,681$               709,595$                                    Internal Service Funds 620  Workersʹ Compensation 2,538,811$                                 ‐$                       22,352$                 2,516,459$                                 Internal Service Funds 630  Vehicle/Equip Replacement 1,973,643$                                84$                        74,615$                 1,899,112$                                 Internal Service Funds 641  Compensated Absence/LTD 689,623$                                   8,748$                   7,947$                   690,424$                                    Internal Service Funds 642  Retiree Medical 456,660$                                    ‐$                       113,351$               343,308$                                    Total 210,299,801$                            2,334,729$            7,968,285$            204,666,245$                             * For reporting purposes, this fund rolls up/combines with Fund 420 Printed March 18, 2022 40 CITY OF CUPERTINO Agenda Item 22-10646 Agenda Date: 3/28/2022 Agenda #: 4. Subject: Review External/Internal Audit Process and Timing Review External/Internal Audit Process and Timing CITY OF CUPERTINO Printed on 3/23/2022Page 1 of 1 powered by Legistar™41 Audit Committee External/Internal Audit Process and Timing March 28, 2022 42 •2016-17 •Crowe LLP formally selected as external auditor •External auditor is responsible for auditing/performing/ preparing: •Annual Comprehensive Financial Report (ACFR) •Appropriation Limit Agreed-Upon Procedure (AUP) •Investment AUP •Storm Drain Fee AUP •Transportation Development Act (TDA) Audit •State Controller’s Financial Transactions Report •Single Audit Background – External Audit 43 •Audits/reports are completed on an annual basis •Interim Procedures (internal control and process focused) generally occur in the spring •Audit Committee provides input on procedures (April 25, 2022) •Final Procedures (substantive and year-end focused) generally occur between September and December •Audits are issued in winter and subsequent to fiscal year end Timing – External Audit 44 •Crowe to perform FY 21-22 Financial Statement Audit (and other supplemental reports) •Sub-committee established by August 2022 for RFP development and selection •FY 22-23 audit and other supplemental reports to commence in spring of 2023 Next Steps – External Audit 45 •2019-20 •Internal audit function formally established •Moss Adams selected as internal auditor •2020-21 •Enterprise Risk Assessment conducted and accepted by Audit Committee and City Council •2021-22 •Annual Internal Audit Work Plan accepted by Audit Committee and City Council Background – Internal Audit 46 •Internal Auditors report to Audit Committee and City Council •An annual work program is presented and accepted by the Audit Committee and City Council •Audit reports are submitted to Audit Committee and City Council for acceptance Process – Internal Audit 47 •Procurement Review – submitted to Audit Committee on 2.24.2022 City Council in March 2022 •Policy Inventory – slated for submission to Audit Committee on May 23, 2022 City Council in June 2022 •Capital Program Effectiveness Study – slated for submission to Audit Committee on May 23, 2022 – City Council in June 2022 •Fraud Waste and Abuse Program – slated for implementation before end of FY 21-22 •Regular Audit Committee Meeting on July 25, 2022 – Proposed FY 22-23 Internal Audit Work Plan Next Steps – Internal Audit 48 QUESTIONS? 49 CITY OF CUPERTINO Agenda Item 22-10647 Agenda Date: 3/28/2022 Agenda #: 5. Subject: Staff report out on City Council Workshop on Commissions and Committees Workshop Staff report out on City Council Workshop on Commissions and Committees Workshop CITY OF CUPERTINO Printed on 3/23/2022Page 1 of 1 powered by Legistar™50