FINANCE DEPARTMENT
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
TELEPHONE: (408) 777-3220
CUPERTINO.GOV
CITY COUNCIL STAFF REPORT
Meeting: September 15, 2026
Subject
Acceptance of FY 2026-27 Internal Audit Work Program; Fourth Amendment to agreement with Baker Tilly; and, if approved, related budget modification
Recommended Action
1. Accept the FY 2026-27 Internal Audit Work Program;
2. If accepted, authorize the City Manager to execute a Fourth Amendment with Baker Tilly to extend the agreement through June 30, 2027; and
3. Adopt Resolution No. 26-XXX approving Budget Modification No. 2627-449, increasing appropriations, as necessary to fund the accepted FY 2026-27 Internal Audit Work Program, by an amount to be determined by the City Council.
Background
As of FY 2021 -22, Baker Tilly, formerly Moss Adams LLP (“Moss Adams”) , serves as the designated Internal Auditor for the City of Cupertino (the City) and conducts projects focusing on:
• Risks
• Internal controls
• Efficiency and effectiveness
• Best practices
• Compliance
As described in Resolution No. 20-091, establishing the City’s internal audit function, the Internal Auditor works under the direction of the Audit Committee and City Council and conducts internal audits in accordance with a schedule approved by both bodies . In practice, t he Audit Committee and City Council approve the annual audit work program, review audit report findings and recommendations, and monitor the implementation of recommendations. Audit findings are reported in writing to the City Manager, Audit Committee, and City Council.
Internal Audit Work Program
The internal audit work program, developed by Baker Tilly, outlines the projects to be undertaken in FY 2026-27 (Attachment A). The Audit Committee reviews and prioritizes projects for inclusion in the work program, which is then presented to the City Council for approval.
The internal audit work programs for prior years are listed below:
• FY 2021-22:
o Procurement Operational Review
o Policy Inventory (Fiscal) and Plan
o Capital Program Effectiveness Study Fraud, Waste, and Abuse (FWA) Program
• FY 2022-23:
o Budget Process Review
o Enterprise Leadership Effectiveness Study
o Library Construction Audit
• FY 2023-24:
o Enterprise Risk Assessment
o City Policy Inventory
• FY 2024-25:
o Grants Management Internal Controls Review
o Special Revenue Funds Process Review
o Recommendation Validation Process Establishment
• FY 2025-26:
o Council-Wide Policy Review Inventory
o City-Wide Internal Control Review
o Investment/Cash Flow Policy Review/Recommendation Review o Grants Management Review
For FY 2026-27, Baker Tilly recommended the following internal audit work program:
The FY 2026-27 Internal Audit Work Program was presented to the Audit Committee on July 28, 2026. The Audit Committee’s recommended priority list is below and broken down further into Tiers with Tier 1 as highest priority. Projects within the tiers are not listed in any specific order of priority.
• Tier 1:
o Code Enforcement – 311 Response Time Review - $45,000 o Permitting Efficiency Study - $50,000
o Recruitment and Retention Study - $45,000
• Tier 2:
o Grants Management Follow-Up - $30,000
o Investment/Cash Flow Review - $35,000
o Property Tax Review - $35,000
• Required (These items must be included in the Work Program):
o Program Management - $20,000
o Recommendation Validations - $10,000
The Audit Committee voted unanimously to receive the FY 2026-27 Internal Audit Work Program and forward them to the City Council for approval.
Agreement Amendment and Budget Modification
If the City Council accepts the FY 2026 -27 Internal Audit Work Program, a Fourth Amendment to the agreement (Attachment B) with Baker Tilly is necessary to perform the approved work program through June 30, 2027. The cost of the amendment will depend on the projects selected by the City Council. If the cost of the approved work program exceeds the $120,000 currently
budgeted for internal audit services, a related budget modification (Attachment C) will also be required.
Next Steps
Baker Tilly will complete the approved projects and present the audit reports to the Audit Committee for review and the City Council for acceptance. The audit reports will be available on the City’s website at cupertino. gov/finance under Internal Audit.
During the current fiscal year, staff will initiate a new Request for Proposals (RFP) process in the winter. The RFP will seek qualified internal audit firms to provide services for FY 2027-28.
Sustainability Impact
No sustainability impact.
Fiscal Impact
In the FY 2026-27 Adopted Budget, the City has budgeted $120,000 for the internal audit contract in the contracts category of the City Council program (GL 100-10 -100 700-702). Additional appropriations of $ 50,000 are requested if Council approves all items in Tier 1 . If Council approves all items in both Tier 1 and Tier 2, additional appropriations of $150,000 are requested.
The final fiscal impact will vary based on Council’s direction.
City Work Program (CWP) Item/Description
Financial, Investment, and Cashflow Policy Review.
Council Goal
Fiscal Strategy.
TBD Item
No.
California Environmental Quality Act
The proposed action does not constitute a “project” subject to CEQA.
_____________________________________
Prepared by: Richard Wong, Acting Finance Manager
Toni Oasay-Anderson, Budget Manager
Reviewed by: Jonathan Orozco, Finance Director
Kirsten Squarcia, Deputy City Manager
Approved for Submission by: Tina Kapoor, City Manager
Attachments:
A – FY 2026-27 Internal Audit Work Program
B – Draft Fourth Amendment
C – Draft Resolution