FINANCE DEPARTMENT
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
TELEPHONE: (408) 777-3220
CUPERTINO.GOV
CITY COUNCIL STAFF REPORT
Meeting: September 1, 2026
Subject
Introduction of an ordinance amending Municipal Code Chapter 2.88 Audit Committee Duties, Powers, and Responsibilities and Related Municipal Code Updates Recommended Action
Introduce and conduct the first reading of Ordinance No. 26-XXXX "AN ORDINANCE
OF THE CITY COUNCIL OF THE CITY OF CUPERTINO AMENDING
MUNICIPAL CODE CHAPTER 2.88 TO RENAME THE AUDIT COMMITTEE
AS THE AUDIT AND FINANCE COMMITTEE, UPDATE ITS DUTIES,
POWERS, AND RESPONSIBILITIES, AND UPDATE THE DIRECTOR OF FINANCE TITLE" to:
1. Rename the Audit Committee as the "Audit and Finance Committee";
2. Modify Section 2.88.100(g) to read: “To review the City’s internal controls and internal audit reports.”
3. Add Section 2.88.100(i): “To review the use of artificial intelligence in the City’s financial reporting, internal controls over financial reporting, risk management, and compliance.”
4. Update Section 2.88 .110 referencing Director of Administrative Services to Director of Finance
Background
On May 20, 2025, the City Council directed the Audit Committee to consider amendments to its scope of duties and recommend changes for Council’s consideration. Following this directive, the Audit Committee engaged in a series of discussions, informed by Government Finance Officers Association (GFOA) best practices and input from the City’s internal auditors, Baker Tilly.
During the July 28 , 2025, meeting, the Audit Committee unanimously voted to recommend three specific changes to its duties, powers, and responsibilities: (1) renaming the committee as the “Audit and Finance Committee” to reflect its broader oversight role, (2) clarifying Section 2.88.100(g) to ensure clear oversight of the City’s internal controls and audit reports, and (3) adding a new provision related to the review of artificial intelligence as it relates to financial management, internal controls, risk, and compliance.
On October 7, 2025, the City Council conducted a study session on the proposed amendments and referred additional items back to the Audit Committee for further consideration, including potential expanded financial oversight responsibilities and meeting frequency. Specifically, Council requested the Audit Committee to consider:
- Increasing the regular meeting frequency from four to up to six meetings per year, with flexibility to cancel meetings if there is no business; - Expanding the Committee’s financial oversight role to include review of the City’s operating and capital budgets, long-term financial forecasts, reserve policies, and major financial transactions;
- Considering the establishment of a budget subcommittee; and - Providing direction that Treasurer’s Reports and Investment Reports will be placed on the City Council agenda Consent Calendar for receipt, rather than as informational memoranda. This change has been implemented.
On April 27, 2026, the Audit Committee considered the additional items referred by the City Council. Following discussion, the Committee unanimously recommended retaining the three previously proposed Municipal Code amendments and maintaining the existing quarterly meeting schedule rather than increasing the number of regular meetings. The Committee also recommended utilizing the City's Internal Audit Work Program as an alternative means of providing additional financial and operational oversight.
Separately, as part of the City's recent departmental reorganization, the Department of Administrative Services was renamed the Department of Finance and the Director of Administrative Services was retitled Director of Finance. Section 2.88.110 of the Municipal Code currently references the Director of Administrative Services and is therefore proposed to be updated to reflect the current position title. This is an administrative update and does not change the duties or responsibilities established by Chapter 2.88.
Consistent with that direction, additional internal audit projects were subsequently considered by the Audit Committee at its July 27, 2026 meeting. The proposed Internal Audit Work Program, including the associated request for additional funding, will be presented separately to the City Council on September 15, 2026.
Analysis
The originally proposed amendments are intended to modernize the Committee’s scope and align it with evolving best practices in public sector financial oversight. Specifically:
- Name change: Renaming the C ommittee as the “Audit and Finance Committee” signals its role in both financial and audit-related oversight. - Section 2.88.100(g): Clarifying this section strengthens accountability around the City’s system of internal controls while maintaining existing oversight of internal audit reports.
- Section 2.88.100(i): Adding this new duty recognizes the increasing use of artificial intelligence tools in financial reporting, internal controls, risk management, and compliance, and ensures the committee remains equipped to evaluate emerging risks and opportunities.
In response to the City Council's October 7, 2025 direction, the Audit Committee reconsidered its meeting frequency and potential expansion of its financial oversight responsibilities. After discussion, the Committee unanimously recommended maintaining its existing quarterly meeting schedule and did not recommend establishing a budget subcommittee or expanding the Committee's direct involvement in the City's annual budget process.
Instead, the Committee recommended utilizing the C ity's Internal Audit Work Program to provide additional independent review of financial and operational areas. This approach maintains the Committee's oversight role while leveraging the expertise of Baker Tilly, the City's contracted internal auditor, to conduct targeted reviews identified through the annual work program.
At its July 27, 2026 meeting, the Audit Committee considered additional projects for inclusion in the Internal Audit Work Program. The proposed work program and related funding request will be presented separately to the City Council on September 15, 2026.
Next Steps
If the proposed Municipal Code amendments are introduced, staff will return to the City Council for second reading and adoption of the ordinance. Separately, the Audit Committee's recommended Internal Audit Work Program and associated funding request will be presented to the City Council on September 15, 2026.
Sustainability Impact
No sustainability impacts.
Fiscal Impact
No fiscal impact.
City Work Program Item/Description
None
City Council Goal
Fiscal Strategy
California Environmental Quality Act
Not applicable.
_____________________________________
- Section 2.88.110: Currently references the Director of Administrative Services i n connection with staff support for the Committee. The proposed amendment updates the title to Director of Finance to reflect the City's current organizational structure. The amendment is administrative and does not modify the authority, duties, or responsibilities of the position.
Prepared by: Jonathan Orozco, Director of Finance
Reviewed by: Kirsten Squarcia, Deputy City Manager
Approved for Submission by: Tina Kapoor, City Manager
Attachments:
A – Draft Ordinance (Redline)
B – Draft Ordinance (Clean)