another activity. that is the majority of it. supervisor farrell: and i know one of the things coming up this year is the drop program from the police department. absent that, it would be significantly higher than it is right now? >> absent the drop program? i do not think it would have an impact in the coming fiscal year because people are still able to sign up for the drop program even if it is canceled. so, if the life of the program goes for three years beyond the end date of sign up. supervisor farrell: right. let's think generically. if those officers were not there. >> yes. definitely fewer officers over time. we would want recruits. we would want new officers. it is not dropped for overtime.

it is really officers were overtime. -- it is not drop or overtime. it is really officers or overtime. supervisor campos: is in a follow-up on supervisor farrell 's question. the police department has a staffing mandate. and yet, not withstanding, you are reducing overtime. so, it would be interesting to find out exactly how it is that this trend is going in the right direction here, but not in the other departments? >> again, i think the requirements the chief was talking about earlier are the main difference. police are able to reallocate resources. and so, we have taken resources to cover the activities that had

been done with overtime previously. supervisor campos: going forward, what do you expect? i know the budget is not before us, but do you expect this trend to continue? reduce the overtime going? >> i believe the trend in ours is to keep the same staff we have now. we can continue at the level that exists. it is extremely, extremely low. whereas, approximately 2% of the hours worked overtime compared to our regular staffing, and so the ability to decrease more, i do not believe exists. if we can keep the same staffing yet now, i think we can continue with where we are. supervisor campos: one of the things we have to do with respect to the police department is there is an interest on the

part of a number of us to have more foot patrols and enhance community policing. at some point, we need to have a discussion about what that means in terms of overtime staffing. that is something we need to discuss down the road. colleagues, if any other questions for the police department? thank you very much. >> thank you. supervisor campos: if we now hear from the public health department? is he here? hello. >> good morning, supervisors. i did bring a couple of charts that might be helpful regarding what is happening in the health department. can we push a button or something? there we go. this chart -- this is a 10-year

history -- supervisor campos: if you could speak into the microphone. >> i am sorry. this is the 10-year history of our overtime expenditures. there is a dramatic decrease in recent years. there's a little this year for a projected $10.5 million. the increase this year i would attribute to a couple of things over the last two. overall is the impact of additional furlough days that we can negotiate with our employees and a 24/7 operation in a hospital when someone is not there, so we have to back fill a position. that is one of the issues that has had a bit of an effect on overtime. the other is, as we moved to the new facility in laguna honda, we had a transcendent -- transition budget that enabled us to manage the occupancy in the new

facility and the movement of patients and all the rest. it was a planned use of overtime to fund a portion of our transition costs. and the reason it has been lower over the last three years, what i would attribute that to, is we have worked out a very good, expedited relationship with the mayor's office and the comptroller's office to get our vacancies filled in our hospitals quickly. there are no barriers to getting approvals or requisitions. so that enables us to make sure we fill our vacancies and we are able to staff with regular salaries and not rely on overtime when vacancy rates get high. also, a little bit less of a problem, there was a shortage of nurses. no vacancies in nursing unable to address more effectively and

in recent -- we have had vacancies in nursing we have been able to address more effectively and in recent years. to put this in more perspective, the reason we are on the top 5 list is we are the biggest department in the city. we will have the most overtime dollars by the nature of our size. when you look at overtime spending as a percentage of our salaries, this chart here compares the lower line is our department spending on salaries. the top line is the citywide average on salaries. you can see we are way below the citywide average. there are many departments, smaller departments and larger departments whose rates are much higher than ours. so, i think we have actually been pretty effective in managing overtime overall. i do not think there are any health department names on the

list of people who had exceeded hours required. so, we are also managing the number of hours the individual can charge. happy to answer any questions. just one other thing -- we have a supplemental appropriation coming in the near future. there will be a hearing on that. we will be able to provide a full explanation of what those positions are. i do not think they are associated with overtime in this particular context. supervisor campos: how are you doing in the number of overtime hours budgeted? >> i believe we touched on this. we have always had a smaller budget for overtime and our actual overtime has run. there has always been a $3

million differential between budget and actual. that is not unusual for us. our feeling is we do not want to plan overtime. our desire is to plan to hire and fill and staff. i do not particularly subscribe to the theory that overtime is cheaper. i think there are times when it makes sense, if you have unscheduled absences and need to felony on a short-term basis. it may make sense to -- and need to fill a need on a short-term basis. it may make sense to do it if it is appropriate. you need to make sure that health care staff are alert and on the job and regular employees are doing the job they need today. supervisor campos: thank you. colleagues, any questions? finally, why don't we hear from

the sheriff's department? good morning. >> supervisors, i am sure if jan dempsey on behalf of the sheriff. in salaries, are spending is staying flat between fiscal years. this is partially due in fact that one of our jails has closed and we've been able to reassign staff. there are still a number of vacancies in the apartment, but because of the one jailed being closed, we were able to get by without the increase in overtime as a result. our overtime is driven by mandatory staffing levels. the minimum staffing levels in the jail is primarily where they are. we need them, definitely, as

minimum staffing levels. we also have the impacts of who comes in the front door and who comes in at any given time, which we have no control over. we do our best to get as many people out of jail and into alternative to incarceration so we can keep that jail closed as long as possible. i will be happy to answer any questions. supervisor campos: i do not think we have any questions. this is headed in the right direction. you are half of were to were in the fiscal year 2005. >> there were some beginnings at the beginning of the fiscal year. these are flat line projections. barring something unusual, there will be a lower projection.

supervisor campos: thank you very much. colleagues, any comments, questions, anything else from staff? why don't we open it up to public comment. any member of the public who would like to speak. francisco decosta. >> supervisors, my name is francisco decosta. we need to put this in perspective. we're facing difficulties one comes to our economy. new supervisors -- i was watching him before i came here. you were reviewing the fire

department from the year 2006 until now. you do not need to be a rocket scientist to see why the cost in certain areas has gone so high. i am here to state one thing. our budget is $6.6 billion. you all know what is happening with the pensions. but this is what has to happen. department by department, those who work for our city have to comprehend and ask themselves, do they really want to work for our city and have a good job with a good day, -- good pay, or

do we want to see our city down like vallejo? you supervisors have to bear in mind, are you doing right when you give our monies to the big developers like lennar -- [chime] supervisor campos: thank you. thank you. thank you. next speaker, please. >> [unintelligible] i have worked and in the department of public health for 20 years.

i feel the issues that were brought up were basically more -- [unintelligible] i think it was basically a problem where it was being, and a certain sense, mishandled, rather than having specific budgetary problems. i think the department of public health needs of full financial audit based on the last audit that was done on general hospital in 2003. the department is such a big user of general fund money, i think it is only reasonable and prudent to have the full financial audit, even though in my four years at city hall i

have not been able to convince any supervisor to sign up for it. in a certain sense, if the department doesn't need it, it should not be a problem putting it in writing that it is efficiently run. i have a feeling it is not efficiently run. maybe it is prudent given the budgetary problems the city has that we should go ahead with a financial audit. we have a lot of bond money going through on the recent revelations at laguna hospital. i think in terms of overtime, i think the department would be reducing its overtime in the last two years according to the chart, but i think there's plenty of room for improvement, especially when everyone knows everyone dollar, especially at general hospital and laguna honda, are valuable dollars and

we will save money and provide a direct benefit to the poorest people in san francisco. thank you. supervisor campos: thank you. ed is there any other member of the public who would like to speak? seeing none, public comment is closed. colleagues, any questions? why don't we continue this item to the call of the chair, noting we will have discussion including a follow-up presentation by d and c -- by the mta. ms. ausberry -- >> i want to remind you that the march report is ready to go. i will ensure that you get individual copies of that, and we will be prepared to discuss any of the changes that you have suggested and want to consider. president chiu: great.

we have a motion by supervisor farrell to continue this item to the call of the chair. thank you to the staff of these departments who spoke to us today. madam clerk, call item no. two. >> item number two, a hearing to present the comprehensive annual financial report. supervisor campos: thank you. under the charter, the sentence is the board of supervisors has the responsibility of -- the san francisco board of supervisors has the responsibility to provide an audit of the city and county of san francisco and repair -- report on that audit to the board of supervisors. it is one of the most important functions that we play. we will now turn it over to the department to hear from them and to hear from our auditors. >> thank you, supervisor.

my name is carmen le franc. i am with the comptroller's office. we do an audit each year to ensure the amounts in our financial statements are fairly stated. these are an external auditors from macias gini & o'connell and kpmg. they are here to present the comprehensive financial reports, the single audit, and the single letter. kpmg is here to present the single audit for the mta and the airports. my colleagues will be presenting today. we also have department representatives available to answer questions. supervisor campos: great.

thank you very much. >> thank you. >> good morning, a german -- chairman campos. supervisor campos: if you could speak into the microphone. >> how is that? no? ok. awkward. i am one of five partners who served the city and county of san francisco at macias gini & o'connell. i would like to give you the results of our audit services this year. i would like to go to the presentation we have here, because i cannot put pages and do slides at the same time. anyway. i think you may have the copy of the presentation? >> is on the computer.

-- it is on the computer. >> and if we cannot get that working, and think you have a hard copy of the presentation? maybe flip through it as i could through it. i wanted to give you an overview -- supervisor campos: do you have any copies for the members of the public? or was that the point of the overhead? >> this was to kind of look at what we were going to be covering today. so -- >>supervisor campos: you can put the papers on the projector. >> ok. supervisor campos: there you go. >> but you do not get to see the pretty purple. [laughter] ok. next slide, at any. i want to briefly go over our

auditor responsibilities to the city and county of san francisco. i will collectively referred to it as the city. our reports to management, the gao committee, and our single reports as it relates to the federal award programs administered by the city. as carmen mentioned, the purpose of our audit is to provide an opinion on the fair presentation of the city of financial statements. our opinion due to a reasonable level of assurance those amounts are fairly presented according to generally accepted accounting principles. we perform our work in accordance with our own internal standards, and also in accordance with government auditing standards issued by the gao, federal government. the standards build upon

professional standards and they address certain levels of reporting and control in financial reporting and compliance and other matters. so, mgo serves as your principal auditor. we provide the overall opinion. if a significant contribution is made -- a significant contribution is made by kpmg. what do we do? we audit the city governmental funds, the treasure island development authority, the retirement system, general hospital, and the laguna honda hospital, and the san francisco finance corp. kpmg audit the airport, hetch hetchy water and power, mta, the health services system, and

there are other auditors to audit a small component of the city's financial statements. an overview -- week issued an unqualified opinion on the city financial statements -- we issued an unqualified opinion on the city financial statements. we did not identify any control decisions that we deem to be material weaknesses in internal control over financial recording, nor do we identify any reportable matters as a relates to compliances with laws and regulations that could have a material effect on the city's financial statements. we have before you also our report to the government audit and oversight committee, which includes are required communications and the current year recommendations we have for management and also a follow-up on the status of prior year recommendations which made in

the prior year. we also have to present to you our single audit reports. these are the audits of your federal award programs. i should mention that the single audit report that mgo issues covers most of the city's award programs, however there are separate reports issued by kpmg for the airport and mta, and we issue a separate report for the redevelopment agency. that report we had on the single audit as it relates to your federal awards program, we have an unqualified opinion on all but one aspect of one grant program, were we had a qualification of compliance with the cost principles, and that will go into that a little bit as we go over the findings. so, on the next slide, we talk about our required communications to you as church with governance over the

financial reporting for the city. first, you will see the qualitative practices. we comment on whether or not the city adopted new principles, which they did this past year. they adopted governmental accounting standards for state bill 53, which includes reporting derivatives in financial statements. the entities affected by that or the airport and the retirement system from a disclosure perspective. inherent in your financial statements are significant testaments -- estimates. would any estimate, there are functions based on -- with any estimate, their functions based on circumstances that would impact the estimate. i would like to call your attention to more significant estimates. not as it relates to the

treasury people -- most of that is based unquoted -- on quoted market statements, but financial statements for the fair value is not determined by the market. we also feel the hospitals, there contractual allowances, their estimates for bad debts, there third-party payer liabilities are significant testaments in those financial statements. self assurance was a significant estimates and pension and other retiree medical benefits are significant estimates. we evaluate the key factors and assumptions in developing those estimates, and we make a determination whether they are reasonable in relationship to the information on the financial statements. also, we call your attention --

there are certain disclosures in the statements that are particularly sensitive. you certainly know the issues related to pension -- the funded status of pension plans. the cost of employee benefits. this particularly sensitive estimates and disclosures. as we look to the future, the accounting and reporting for those items is going to change our next several years. it is going to have heightened scrutiny by third parties. we did not encounter any significant difficulties in performing the audit. the timing of the audit was delayed somewhat by, primarily as we understand it, primarily due to constraints the city was having in the time that it was preparing for the audit. we were about a month delay in performing our work.

part of the audit, we also present, we may identify audit adjustments we present to management for consideration of recording or not reporting. none of the adjustments we proposed that were corrected by management were immaterial, either or individually aggregate. there were a few misstatements we identify that management decided not to record, and the summarized in the back of your presentation, in the management report. we had no significant disagreements with management on accounting or auditing and matters -- accounting or auditing matters. based on our understanding, management may, during the course of providing our

services, may consult with other third-party accountants or auditors on certain information. we're not aware that any such consultations occurred. during the course of our audit, we also discussed many items with the management about prospective accounting standards that may need to be implemented. and none of those discussions were contingent upon are being retained as the auditors. but also like to call your attention -- these may be included in debt offering documents. we are not associated with those documents, nor do we perform any procedures on those documents or read any of the information in this document. our responsibility is going to be looking at the other information included in your comprehensive financiare