our first communication is our overall responsibility in accordance to the extent to design our audit approach but not for the purpose of providing an opinion on the operating effectiveness of those internal controls as you would do with the public traded company. next we design the implement audit procedures for the actual materials in the statement and finance statement and performance materiality and we do sampling. our test work is done on samples in the transactions. we do not do a hundred percent cast of all our transactions. next there are certain compliance, law provisions and contracts that could only have a direct and material effect on the

financial statement. lastly we issue of course our opinions on the two reports that i previously mentioned earlier. in regards to significant accounting policies, the significant accounting policies start on page 15 after the financial statements. here we list the key accounting principals in the industry standards applicable to this entity. next i would jump to the third bullet to stay in line with the accounting policies of which we do have two new accounting standards that are effective for 2013 which are gas be62 and gas be63. you will see that on page 16 footnote 2e. 63 is with the now accompanied cosby and

guide 63 to net position rather than net assets. those are government wide standards that have been updated across the nation, all entities and state local government had to apply those two standards and also they did not have any significant financial reporting affect to the trust. next to back up to bullet 2, the requirement that management complete and analysis and document understanding the variances over the past 3 years. you will see that on page 3-9, and management did complete this analysis and it is in compliance with gas be34 criteria. in regards to other communications, we are required to communicate any significant

accounts or transactions that require management's judgment or estimates and required inherent risk related to the audit. the trust has one significant account. the reserve for claims that require an actuary specialist to perform a reserve. the actuarial is hewitt who projects the claims but not reported as of fiscal year end and the analysis is for final year-end to report a liability and expense. so what we have to do, we also have an actuary who independently performs an analysis of that same data and compares it to the analysis and we ensure that they are capable and confer that they

did appear adequate and did fall within the reasonable range of our actuary as well. audit adjustment, there were no proposed or past audit adjustments. that means there are very good records kept. and kept in line with other general communications. we did not have any disagreements or difficulty with our management. to our knowledge there were no consultations with not being able to agree on interpretation of principals. prior to services, we did not have discussions outside of the normal course of the audit and finally material written communications, first we get an engagement letter that documents the contracts and

county wide and finally we get a management representation letter in order to complete and finalize the audit. so that is the end of my comment and presentations. i guess it is probably worth noting one more thing that the audit was challenging and overall had some significant accounting changes in the year primarily due to the plan year change and the plans changing from the fully funded to the flex funded. this had a lot of accounting and audit transactions different from the prior years that we are used to. i would like to make note that pamela and lisa's team did a great job in assisting us and helpful with the information that we needed in order to get the audit completed timely for the city. i will stand for any

questions. >> mr. lynn? >> no question from me but i want to acknowledge the staff especially lisa and greg, the interim deputy for a clean audit. thank you. >> dr. dodd? >> would it have been easier if there was more transparency from our vendors? >> i probably couldn't say yes or no. but what i will tell you that it's difficult in any trust that changes from one plan year and to the fully funded to a flex fund. we had the same type of challenges we would have had doing the audit for any two of the significant transactions taking place. it is a learning experience not

only for management but the third party vendors in the plan. the challenges we had is somewhat known and expected in what we can work through in the year. >> any other comments? thank you very much. >> thank you. >> now, i would like to go over the actual financial statements. jamie mentioned several items, but i'm just going in a linear basis on building up from where we were in net assets at the beginning of the fiscal year 2012-2013 and where we ended the year. as you know and you just heard that the one of the goals of the audit is to look at our

financial statement, see if there is any weaknesses and look at for backup what we are stating what's in famous and what we have an actual explanation for what's happened. as she mentioned it was hard. primarily i think it was hard because we weren't able to anticipate exactly what we would need from blue shield in a soon enough to be able to work through all the non-disclosure agreement request and how to deal with private information. i think that we have had a great learning experience on both sides. we discussed this with blue shield on how this will occur and how we'll fix it next

year and that we have many steps that we are going to take during the year to make sure that it goes smoothly next time. i do want to take this opportunity to thank the finance staff, the contract staff, for all the hard work they did in trying to get this together because it was a little more difficult than in the past. and i would also like to thank blue shield and an on for helping us get through some of the issues. i keep going back, we keep going back to this fact, but remember the audit is on a fiscal year, our plans on a calendar year, we had a short plan year from july to december that blue shield was fully funded and we went back to flex funding in january. all of that at the

same time obviously would be difficult. the trust began the fiscal year 2013 with the balance of $53.2 million in assets and we ended up with a balance of $73 million. >> excuse me are we on item no. 6? >> we are still under the audit. yes. >> i'm sorry. do you need to call that item? >> yes. >> i apologize. >> item 6 discussion item for financial period 2013. pamela levine. >> i'm sorry for jumping the gun. i'm so excited. as i

mentioned we ended up with a balance of $77.3 in net assets. before anybody gets excited about that, we have in terms of reserves and obligations, we have $68.6 million. when you net those out, you are just looking at $8.7 million that is quasi free, but it's not, but, so that's our room if every obligation is realized and reserve is realized in the next fiscal year. so, that, you know, we are not a wash with money. let's put it that way. so the $24 million increase in net assets between 2011-2012 and 2013, consist of $20.5 million in a combination of

utilization in a city health plans reserve which we call -- what you may have heard before and the savings conversion from the pharmacy medicare benefits. there was $1.5 million in the flex plan for 2013. $3.1 million net decrease in the blue shield's fully in insured's plan from july through december by the 2 percent premium pledge and $1.6 million net increase in other benefits. so, that nets you -- us out to the $77.3 million. we have a net point 6 million.

that is a continue -- continue contingency in reserves. $9.1 million in initiatives to reduce cost and $3.8 million in early retirement in insurance program that we have to spend by the end of 14. $3.4 million in premium credits for those units that accepted the 90-83 in #5shgs 2015. what are the next steps? the controllers will public the annual financial report which you may have heard

kafrd. sometimes around the beginning of the month and that is contain a high level of dbi's funding and this is a separate audit we have to do and it is available on our website we posted it and we also have copies for anybody that is interested. and then as i mentioned, the reserve levels will be evaluated in february 2014. i am open to any questions. >> questions? >> thank you. i noted in the financials that we had a very large increase in the contributions receivable from

bodies employers and employees and that appears to have been because of timing issue. the way we can ensure it is timing issue is that it was resolved given the next pay period and we are on track with employer contributions and employee contribution. >> my top financial person is nodding his head. it was timing issue and that was the problem. yes, we are up on schedule for what we would expect to be. >> thank you. >> any other comments? >> any public? do you have another page? is that it? >> yes. >> thank you, good job. any public comment on this item? hearing none, seeing none. item no. 7?

>> avila. i don't think you are finished because you haven't reported yet the current years only financial report, the current year for starting july 1st and the administrative portion. >> they are together in item 6. >> i did it wrong twice. pamela levine. cfo health services. i need to read the agenda more carefully, sorry. yes, i do want to talk about the financial, the first quarter financial report for the trust and for the general fund. this, as we all know and i'm sure you've heard in the past, when, this is a 3-month report. when you project with only 3 months of data, you are apt to have

some inaccuracies. so right now we are projecting an increase in our net assets of $21 million but there are a lot of things that could occur between now and the end of june that could affect that. the $21 million includes $13 1/2 million in assets and this as we mentioned before they are reserves and an analysis of stables reserves and contingency reserves that will be done and incorporated into next year. $2.8 million in favorable claims experiences in blue shields and nor the reported. $2.4 million in the

shared dental plan and a reduction of $1 million estimated medical hmo premium revenues avenue application of the early retirement reassurance program. this is the federal money being used. one of the things that happens is a reduction in the estimated hmo insurance premiums. 700,000 increase to account for the time between the fsa contribution and filing of claims. 800,000 for interest assuming that we have no significant increases in those year-end value including investments. 200,000 reduction for transfers to the general fund. so what does this mean? when you take the $21 million you add it to the $71 million

that i was discussing before and you end up with $98.4 million. when you net out that $68.6 million for the obligations and reserves, you get a balance of $29.8 million, $30 million which is a more reasonable trusted size rather the 9.8 million. we are going to report to you as to how projections are coming into fruition and how that impacts our net year assets. we'll know more definitely by january or february timeframe. in terms of the general fund administrative budget, we are projecting a balance of $176,000 due to

delays in hiring. this is to recognize the fact that we have had, that hiring takes longer for some positions and then when you offer people positions, they don't immediately take them because they have lives to take care of, like for instance, our new wellness manager is moving from across the country. and she didn't come until after we made the offer. we are going to manage for the over the we have to do for the open enrollment which was discussed earlier. we are going to have to manage within getting that $176,000 in savings and make sure we don't over expend ourselves. we are

also monitoring our budget as you know we are, it's been delayed, but we are looking at in january having the completion of the moving of our offices to the first floor and that budget as you know with any kind of move and remodeling of anybody's house or office always cost more than we originally anticipate. we are going to have to manage with that carefully so we will. but i suspect that we will end the year after all of this is taken into account on budget or a little better. any questions on this part? >> any public comment on this item? seeing none, hearing none, item no. 7.

>> the clerk: item 7. action item reconciliation of kaiser medicare rate. >> good afternoon, neale kosher. nice to see everyone again. i'm going to walk you through the document labeled kaiser medicare rate final rate for 2014. when we met on june 13th of this year, we stated that the medicare advantage rates for kaiser were preliminary, that we needed to get additional information brought to kaiser. they cooked the final rates and they would let you know at that time. as soon as we knew what they were and then we can talk about how we decide what to do whether they would have to be higher, the rates or lower. we always hope because of the timing and everything comes in better and there is money to be

appropriated in some fashion for the cost of the rates. we finalized everything in the system. that is done to be clear on that part. so what happened was kaiser did their magic and got their final numbers and our number we posted at the 14th of june was $346.45. the final number is $344. that saves the city $2.8 million. which is a very good thing. they do their calculations. >> the city and three other employers. >> yes. all people that are part of the trust and there e other employers. there is a bit of an explanation on page four. they had one where they made it better and one if the medicare where they could have said we are not getting as much, but they said we are going to

credit you. it's a double win. where they could have made the prices different, it didn't happen. that being said, the question is on page 5. what do we do? this is the action of this discussion which is very brief. we have two things that we have written down, the first one says in 15, kaiser can do the final rate, hsf can choose the keep the amount. there is two statements here on page 5. and so we can refund the money or we can put the numbers into rates and with the point being if we put them into rates for 2015, that will make the rate low to the 330 range and when we get the number for 16, it

might go up a higher normal percentage. usually we are seeing the 3-5 percent increase to 7 percent increase. we need to be cognizant about that one aspect. with that, what we think we should do is, am i saying this correctly? i'm going to recommend and this is your decision, that we do nothing in terms of trying to figure out handout you to appropriate those numbers for 2014. we put the money aside and adjust the 2015 rates. we can even at the recommendation of hsf create a policy which i will bring to you in january that says since we'll always be in this position we'll go early, we are going to add or subtract every year and write a policy which you are very good at writing an appropriate and very sound policy so this is all understood. all of this

about the reserves and the fantastic audit report. i'm thrilled to that because you are well reserved. so we can say, in the years we are getting the money back from kaiser we can put it here and maybe pay the money back and then come up with a system for how to apply the rates. the bottom line is however we do this either through policy or actual liberal calculation, and reconciliation, i recommend you apply it to the calculation. you can do other approaches. are there any questions? >> so you are recommending option no. 2? >> yes, ma'am. >> any questions? >> dr. dodd? >> i apologize for not bringing this up on the call when we went through this. it occurs to me now, i forget the actuarial

term but we even out our uhc claims over a 3-year period, like a 3-year averaging. would that also be a consideration given the idea that we might get hit with 7 percent increase in 2017 that we'll put the money. >> that will smooth it out. that was the intent. yes. >> rather than do a full one in 2016. >> i would recommend we do a 3-year amortization when we have a cash applied to a rating structure so it will smooth it all out. so that the trim line stays at 3 percent a year which

is what we want our medicare rates to do, to never go up. >> just to be clear, we can see a decrease, a loss on this line item next year? >> going down because of the appropriation of $3 percent a year which is what we want our medicare rates to do, to never go up. >> just to be clear, we can see a decrease, a loss on this line item next year? >> going down because of the appropriation of the $2.8 million. it would be a decrease in the rate. >> the reconciliation could be a negative next year alone. i would fully support the smoothing out on an annual basis because we don't want to see these spikes. we want security and policy idea. i fully support that. >> can someone make the recommendation? >> i move we adopt option two with the following direction to our actuary that they draft policy recommendations that would include the concept of smoothing the rates over a 3-year period of time.

>> i second that. >> okay. is that a motion? >> it has been seconded. >> any comment. any public comment? all right. all in favor say, "aye". >> aye. >> all those opposed? it's unanimous. thank you. item no. 8. >> the clerk: item 8 discussion item regarding kaiser rates. elisa gatsby. >> good afternoon. i'm here to give you the kaiser negotiations. i'm here to remind everyone that we have a goal of completing these prenegotiations by descalso we can bring to you what we have

discussed at the meeting. this is evaluating the funding structures and alternatives to the i cm. integrated care management fee and the pledge cap for the fully insurance structure and looking at the performance guarantees and also looking to see if there is a possibility of in incentive programs and fee schedule. i'm going update our discussions since our last meeting and that will start on meeting no. 4 on september 12th. we did work looking at historical democratic reports from kaiser and i think i attached late, but it was an attachment and that was waiting for you when you arrived on the demographic reports. these demographic