Desk ItemAC 11-25-2024
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Approve Minutes of
Special Meeting on
October 31, 2024
Desk Item
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City of Cupertino
Audit Committee Special Meeting
DRAFT Minutes
October 31, 2024
CALL TO ORDER
At 4:10 p.m., Chair Schmidt called the special meeting to order in the City of Cupertino Quinlan
Conference Room, 10185 North Stelling Road.
ROLL CALL
Committee Members Present: Chair Eno Schmidt, Mayor Sheila Mohan, Committee member
Hanyan Wu
City Staff Present: Kristina Alfaro, Janet Liang, Jonathan Orozco, Pamela Wu
Absent: Committee member Angela Chen, Councilmember Hung Wei
Guests: Ken Pun (The Pun Group), Sophia Kuo (The Pun Group), Chelsea Ritchie (Moss Adams),
Maria Stroth (Moss Adams), Colleen Rozillis (Moss Adams), Jennifer Meza (PARS), Dennis
Mullins (US Bank)
ORDERS OF THE DAY
1. APPROVE MINUTES OF REGULAR MEETING ON JUNE 24, 2024
Mayor Mohan motioned, Committee member Wu seconded. The motion passes with Committee
member Wu and Councilmember Wei absent.
POSTPONEMENTS
ORAL COMMUNICATIONS
OLD BUSINESS
NEW BUSINESS
2. Receive OPEB & Pension Section 115 Trust Performance Report for Quarter Ending
September 30, 2024
Mullins provided an overview. Chair Schmidt noted that we the City’s 115 Trusts have been
invested in the that fixed income high yield category sleeve for a number of years and asked what
might trigger a change in this investmentif they are watching the market carefully and whether
US Bank is it commonly to seeing this category now across other trusts which it helps manage.
Mullins noted it is a permanent asset class and the standard position is to hold an allocation to
high yield bonds. Chair Schmidt asked if thethat since the MSCI table AC World Free Index is
shown as the City Trusts’ benchmark for equities (page 9 of the US Bank report), could this index
components be added to the Common Stock Detail Holdings page (page 8 of the US Bank report)
replacing as we are not comparing to the S&P 500. Mullins noted that they would check to see if
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it could be possible to add it the detail to the index and yes the MSCI can be used as the
benchmark. Chair Schmidt suggested that in the future at most during one meeting out of the
Audit Committee’s yearly meetings, US Bank could describe to look more in depth to the general
market conditions but that otherwise and unless Committee members have questions, the US
Bank portion of future meetings focus ondetail as the index is the most important part and wants
to understand why or how the performance of each trust’s investments varies, if it does, from
that of the benchmark index.
Mayor Mohan inquired about the benchmark. Orozco noted that this benchmark was established
when the Section 115 trust was created, it may have evolved over the years and staff noted that
there can be more in‐depth discussions with US Bank to refind the presentation to the Audit
Committee. Mullins noted that they will run numbers on the benchmarks and the investments to
see how close they arethe investments are tracking, and to make sure that the benchmarks are
relevant and that they are subscribing tooUS Bank has relevant subscription data to populate the
reports. Chair Schmidt suggested asked that in the future that there could be an analysis
presented on each of the investment classes as to their performances vs. their index. Mullins noted
that they can add a separate chart that will include that information and see if we can identify if
its from timing or selection.
Committee member Wu asked why the equity part of the portfolio is added as an ETF. Mullins
noted that it is more cost‐effective, more diversification for less money.
No public comment.
3. Receive the Internal Audit and Fraud, Waste, and Abuse programs update
Orozco provided an overview. Chair Schmidt noted that there is a fraud item that was closed out
on the report and asked for Moss Adams to expand further on it next time. they received the
report. Chair Schmidt noted Audit Committee receiving the report.
No Public Comment.
4. Fiscal Year 2023‐24 ACFR Update
Kuo provided an overview. Mayor Mohan asked if the timelines to submit the final draft was in
November. Orozco confirmed that the timeline and asked if Audit Committee is available the
week of Thanksgiving to review the ACFR as it is a tight deadline as staff is looking to get the
ACFR to City Council as well before the end of the year.
No public comment.
5. Review and accept the City‐Wide Policy Inventory and Gap Analysis Report
Orozco provided an overview. Mayor Mohan inquried about the high‐risk item – CIP, do we have
a policy and what is being done with the policy. Orozco noted that staff is aware of the concerns
and is addressing it with a comment included when the report is sent to City Council. Mayor
Mohan asked what they mean when they define it as high risk. Wu noted that the analysis is part
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of the City Work Program to look at all the policies the City has and realized that the policys
policies were a hodgepodge collection of Administrative and Council approved policies
accumulated over the years. The City created a separation between the two categories and asked
Moss Adams to review the admin policies against industry standards to see if there are any risks
to the operation. Wu noted that in terms of CIP, our policies are not as robust in comparison to
other cities and CIP is an area that can be improved to be streamlined and is not a risk to anyone
but to the operation.
Chair Schmidt inquired about the identified Law Enforcement Gap as it this function is
outsourced. Wu noted that the regarding Law Enforcement it is hard to say as the policies are
more internal operations by the County Sheriff’s Office and because it is contracted, those policies
may not be shared with the City. Chair Schmidt suggested that even though it is outsourced, City
staff might contact the Sheriff’s Office to ascertain what their management might have obtained
in terms of reports that could be shared on this area.
No public comment.
6. Review and accept the OPEB and Pension Trust Investment Policies
Orozco provided an overview. Chair Schmidt noted that there is limitation to not go over 20% for
foreign investments and the portfolio is getting close to 20%. Mullins noted to remove the
limitation. Orozco confirmed that staff will remove that language.
No public comment.
7. Receive the Treasurerʹs Investment Report for the Quarter Ending September 30, 2024
Orozco provided an overview. Oblites provided an overview.
No public comment.
8. Receive the proposed Audit Committee 2024 Schedule and Workplan
Orozco provided an overview.
No public comment.
STAFF AND COMMITTEE REPORTS
COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS
FUTURE AGENDA SETTING
ADJOURNMENT
The meeting adjourned at 6:01 p.m.
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Recording Secretary:
Janet Liang, Management Analyst