macias gini & o'connell. she will have the report. we have no current management letter comments, but we have a couple of prior year comments that are partially implemented that she will speak to. and then results of the single audit. she will also present the audit for the 630-12 audit. and a member from kpmg llp will present the results of the segel audit for the airport, and she will also present the results of the audit planning for the next year. i would like to introduce cindy first. supervisor farrell: thank you very much. supervisor wiener? supervisor wiener: i just want to say that those people that are here for items one and two, thank you very much. we plan to get to those pretty quickly. >> good morning.

thank you for inviting us to discuss this city's audits. the deliverables issued by mgo included in your package include the fiscal year 2011 with the government bought it and oversight committee. the segel audit report and the audit plan for fiscal year 2012. the me first start with the report to the government audit and oversight committee. this report includes the communication we as auditors are required to present to the oversight body. in addition, the city does not have a current-year recommendation deemed to be control deficiencies pertaining to the financial statement audit. that is noted on page 5. the report also includes a summary status of prior year recommendations. the city fully implemented all of these recommendations except

the three related to the port of san francisco, which are on pages 5 and 6. the three include the disaster recovery plan, information systems, and business continuity. physical inventory of capital assets and means of capital asset records. and controls over materials and supplies. the comment that was not fully implemented as it relates to the generosity includes the capital asset data base. the second deliverable we have is the single audit report. this report was updated to the federal clearing house data base and includes the city's basic financial statements, along with the information related to the city's federal expenditures for fiscal year 2011. this city expended $560.5 million of federal awards in its fiscal year 2011, as noted on

page 165. of these awards, we performed tests on 21 of these programs that were deemed to be major federal programs, and that represented over 70% of the total federal expenditures. during our audit, we identified internal control findings related to the foster care program and a report on compliance was unqualified for all programs except for the subrecipient monitoring requirements of the foster care program. two findings related to the foster care program our findings number 2011-1, subrecipient monitoring, and the required monitoring was not performed. the department misinterpreted the monitoring requirements, and as such did not have these organizations identifying as being required to be monitored. and finding 2011-2, which

relates to allowable costs. the indirect cost rate used for the fiscal year 2011 claim was based on an outdated cost proposal from fiscal year 2002. the third report we included was the 2011-2012 audit plan. the scope of our engagement is found on page 3 of that audit plan, and it includes the general city's audit, the retirement system, the former redevelop the agency, two hospitals. we will have six teams augmented with professionals from two small local businesses assisting us with those audits. included in the audit plan are a summary of upcoming accounting decisions for the upcoming

years, and those are found on pages 17 through 19 of the report. fiscal year 2012 is a relatively quiet year for new accounting standard implementations. this will be helpful in that there will be submitted changes in accounting and disclosures related to the dissolution of the city's former rebel the agency and the creation of its successor agency. most of these new accounting standards are technical in nature. however, there two summarized on page 19 that will require time for the city to plan and to evaluate its potential impacts, and those are statement number 67, financial reporting for pension plans, and statement number 68, accounting and financial reporting for pensions. those standards will be required to be implemented during fiscal years 2014 and 2015. with that, i would like to turn the presentation over to --

supervisor farrell: thank you, appreciated. >> good morning. i am with kpmg llp. i will give you a brief overview of the results from the audits in 2012 and then in 2012. we are did the transportation agency, public utilities commission, international airport, and health services commission. two have single audits. one, mta, as $170 million in expenditures for 2011. there were no findings there, and we had an unqualified opinion noncompliance. the international airport as a little over $23 million in federal funds. we issued an unqualified opinion on compliance, but we did had -- have significant deficiencies in internal controls. there were four findings in the current year related to cash management, allowable costs, and

reporting. we believe the city is addressing those currently. there were four findings from the prior year, and our prior recommendations were implemented. any questions on the prior year? and our audit plan for 2012, we will again audit the mta, cuc, sfo, and health services. all the reports we are preparing for the current year are listed on page 15 of the handout that you have from kpmg of our audit plan. we are including all of our required to medications of our responsibilities and the city's responsibilities in our audit plan here. we are independent of the city for the year ending 2012. our detailed audit plans are the same. the timetable, our work began in may and will end in january 2013, with all the reports being issued by the end of october of this year. all the financial statement reports included in the capital.

any questions? supervisor farrell: colleagues, and questions for kpmg? >> thank you. supervisor farrell: thanks very much. >> good morning again. we also have department zero representatives available here from any department that had funding. if you like to hear from them. >> i know is briefed and my office was briefed. i think both the auditors for coming today. i am ok. colleagues -- i know we have a lot of people waiting for other things and we want to be efficient. do you have any questions? ok, thank you. >> thank you very much. supervisor farrell: ok. all right, with that, colleagues, this is a hearing -- we're going to entertain a motion to table the hearing before that, i would like to take any public comment.

any members of the public who wish to comment on item number four? ok, seeing none, public comment is closed. colleagues, can we take a motion to table this hearing? motion by president chiu. we can do that without objection. mr. clerk, can we call item number one, please? >> item number one, -- supervisor farrell: number one and two together. "saddam, ordinance amending the san francisco please go to elevate the permit requirements and other local regulation of second and dealers and antique dealers. item two, or in its amending the san francisco police code to exempt dogs on a leash from the prohibition against fastening an animal to a lamppost, hydrant, or growing tree. supervisor farrell: thank you. we have the sponsor of both items number one and number two, who is sitting on the committee today, supervisor wiener. supervisor wiener: thank you

very much. today we have two pieces of legislation before us. the first repeals a number of very antiquated provisions from the police code, including most of them from the 1930's, setting the rates for carrying luggage from different parts of the town to other parts of town usually 50 cents or $1. repealing the requirement of a travel agent who sells an airline ticket posting security bond with the city. that was obviously done in the days when we did not have our current way of buying airline tickets. a section making it a misdemeanor for a moving company to notify a property owner before moving -- before moving items for a tenant but also repeal the code section that makes it a misdemeanor for dip -- for business that serves food to and by someone other than the business owners to sell food on the policies, also known as the

-- finally, rippling and law that makes it a misdemeanor to tie the dog up to a light pole even if only for a few moments while the dog owner goes into a store. that kind of conduct is specifically allowed by the california health and safety code, but it is technically illegal in san francisco. the second piece of legislation is a repeal of the this city's second hand and dealer license in the police go. this legislation focuses on the lengthy and costly, and at times, abusive process license requirement for secondhand dealers such as antiques stores, used bookstores, and vendor clothing shops. the legislation supports the very type of unique businesses then make your neighborhood commercial corridors vibrant and interesting places. we have spent a lot of time

arguing about formula retail in the city and the need to have unique and interesting stores in our neighborhood commercial corridors. and a secondhand in vintage store is frequently exactly that. interesting and unique stores, the kind we need and want in our neighborhoods so that we do not get taken over completely by formula retail. this is pro-small business. like the previous legislation i mentioned, it has been supported unanimously and enthusiastically by the small business commission. this legislation removes the second-hand dealer provisions from the police code, allowing used furniture dealers, used book dealers, vintage clothing dealers to be considered and treated the same under our rules as businesses that are selling new furniture or boats or clothing, for example. currently, these vintage and keep -- antique stores are required to have a special permit from the police department which requires a

payment that can end up costing as much as $1,500 or even $2,000. it requires a small business owners get fingerprinted at the hall of justice and at a criminal background check is drawn. many liken this to being treated like a criminal. even like getting a mug shot. it requires the salesperson at each of these neighborhood stores to write down each and every sale, describing the item, describing the person by name, appearance, and other manners, and reporting that information to the chief of police every single day. and you imagine if you went into one of these stores as a customer, what you would say if you're asked this information from the shop owner when trying to buy a vintage. blue jeans or use book? this is and the many of our small business constituents asking for even before i took office. i was being asked about this, because the police department had started to enforce this.

in fact, business owners along valencia's street received letters threatening them with a conviction for a misdemeanor, but i never knew anything about it. we have heard from businesses all over the city, and the south of market area, the castro, mission, north beach, in the marina. in many cases, these businesses have been in operation for years not knowing that this requirement could have been flat to them when they originally got the shops. there is a letter talking about being charged with a misdemeanor. we met with the chief of police and others in the department several times. before i introduce the legislation, i sent a letter to the chief asking if he had any concerns. he indicated that it was fine to proceed. with that, colleagues, i want to ask that the committee support the legislation, and i also just

want to know that in talking to the police department, there has been in discussion about very specific kinds of theft that can result in something making its way to a second-hand store. i want to stress that there are other sections the cover these concerns. for example, metal theft is this again concern right now, but any business that deals with recycled metal as to receive a junk permit. this does not affect that. there is a pawn shop section. any concerns covered by the punch of regulation. there is a separate fire our license. of course, all the provisions of the penal code related to the merchandising of stolen goods is dealt with by the penal codes. colleagues, with that, i ask for your support.

are there introductory remarks are questions? none. i believe that the commanders here from the police department and we have the small business commission. i would like to hear from the small business commission first and then from the police department. >> good morning, supervisors. small business commission. i will be very brief. the commission heard this item and enthusiastically supported both items before you. regarding the antique shops, there was some discussion -- the requested that staff work with the supervisor's office regarding concerns. however, we understand, working with the supervisor's office, that significant outreach has taken place and those concerns have been well taken into consideration. again, the commission strongly supports this and urges your approval.

supervisor wiener: thank you very much. colleagues, any questions? commander dudley from the police department -- excuse me, medudley. >> i am deputy chief of the administration bureau of the police department on behalf of chief suhr. in reference to the letter you talked about, it did mention several sections but excluded the sections that we have concern with. i will go into that if i may. supervisor wiener: are you referring to the letter -- >> that chief suhr agreed to peer -- agreed to. supervisor wiener: it talked about that specifically. >> i understand that. the devil is in the details. when reviewed by our city attorney representative and myself, as well as experts from the investigations bureau, the chief at the same concerns. supervisor wiener: ok, but it

was in that letter. i do not know if i misheard you. it had a full paragraph saying we would be proposing the repeal of that entire section and please let us know if you have concerns. >> right, and then we did the investigation. a little bit of background. currently, there are 275 registered secondhand dealers in san francisco, including two authorized resellers of firearms. the cost of doing the background investigation is about $277,000 the goes back to the general fund. we have no problem at all with the textbook-related sections of 850, 851, and 852. the concern is with 1276 through 1282. that would lift -- state law will remain, but it is unclear who will do compliance checks

and investigations. in a conflict with business and professions code 21-300. our concerns light in some of the biggest crimes, the property crimes in san francisco, and personal crimes relating to burglary and robbery. most stolen property is the items that are changing hands 317 dealers to a small electronics, jewelry, laptops, even high end clothing and antiques. we need the ability to check locations, check questionable merchandized, a frequent off the street dealers. i brought some anecdotal cases that were investigated and resulted in a pretty significant hauls of merchandise, sometimes through non-permitted dealers, sometimes through other businesses. one was through a beauty shop that was taking in gold. right now, due to the economy,

galt -- secondhand gold is a highly exchanged by them. i will just give you a case from 2010 that resulted in three arrests of individuals, and there were convictions for burglary and receiving stolen property. from the team at number station. the investigation revealed eight truckloads of property stored at a location at polk and california. there were 49 victims. the main suspect in the case had a second-hand dealer license to sell at the lme flea market. most of the burglaries and property recovered came from a house parties, stage homes, realistic, businesses, and construction. there were primarily high end clothing, new clothing that was a result, art, electronics, furniture, coins, and equipment. we have had other similar cases.

those sort of touched some of our concerns about the 1200 sections. supervisor wiener: chief, thank you for that synopsis'. my understanding would second handle this that anyone who deals with recycled metal has to bget a junk dealer permit. >> recycled metals, yes. as far as gold the could be considered jewelry, i am nyjer that section would apply. supervisor wiener: ok. what is the department's position? >> we would be happy to work with you on the details. it could have unintended consequences that could make san francisco a thriving area for unpermitted second in merchandise with no known origin. supervisor wiener: what is the department proposing? i have to say this is frustrating, because my office

has had multiple meetings with the department and communications from the chief down. so i would like to know what is the department's position in terms of what would have to change? >> we express these concerns to your aide a week ago, and these were the sentiments from the department. i checked in with the chief, and he asked me to reiterate these concerns. supervisor wiener: i think the concern that was expressed was about businesses that were getting cash over the counter -- in other words, somebody walks in and says here is a jacket, give me cash for it, as opposed to people who are purchasing items through the stream of commerce. that was my recollection. >> i am not sure what your question is. supervisor wiener: that was the concern -- that was a concern that the department had expressed. but today, i am not hearing any

kind of specific thing other than we have a concern about this and are willing to work with you. my question is, what is the department, in terms of what changes would have to happen, what is the department saying? >> the meeting we had last week, i interested the concerns to be in the fees. we're willing to work on the fees. we recently raised fees to give us some cost recovery relief. to lower the fees will not be a problem for us. in other financial impact on the city as a whole, but we're willing to work with you on that. we could sit down and hammer out the language so that some of the things that you mentioned earlier that every transaction has to be documented, that everybody is turned into the police on a daily basis -- we could work on a different schedule where there is 30-day

reporting more 60-day reporting. we feel the need to have a hand in the business. the state regulations would still be apply and there would still be requirements by the state and there would still be fingerprinting, documentation of who the merchants would be as well as high frequent exchanges of merchandise in these places. supervisor wiener: where you are suggesting is these merchants would have to have the name of everyone who purchases from them? >> it is my understanding that the state provision that would remain in effect. supervisor wiener: that's a different thing. a requirements from the state law would remain in effect. i am talking about our local ordinance which requires the

keeping of the logs. say i am a clothing seller whose not purchasing over the counter but whatever the distribution system is for vintage clothing and someone comes and buys jeans, i need to keep a log of the name in the description and the other items i read during the introduction. it would be reported, maybe not every day but less frequently. >> on a different time basis. supervisor wiener: ended the fingerprinting and a mug shot? >> i think it is a photograph, not a mug shot. as we read from the code and the regulations, that would still be required. supervisor wiener: you are advocating it remain a lot under local law as well? >> yes. supervisor wiener: thank you. if there are no questions or comments, i would like to invite

public comment. supervisor farrell: you mentioned firearms. can you explain to me what your thoughts are on that and how this would relate to it? i believe the genesis behind this legislation is to ease restrictions, onerous restrictions on small businesses that really don't need what seems to be onerous provisions of local ordinances which i fully agree with. but islanders and unintended consequences. can you talk about the firearms issue? >> i couldn't tell you the differences between the state, federal, and local law except that it's my understanding with second-hand dealers that second- hand firearms, it seems to talk

more about antique guns that may still fire. second handguns, that could be any other gun previously owned. there are only two in san francisco. supervisor wiener: article 9 requires a license to sell firearms. there is a separate licensing for firearms sales, is that right? >> i don't know the provision. supervisor wiener: but you brought up firearms specifically that this were repealed, it would open the field for people to sell firearms without a permit. but there is another permit for firearms dealers. >> yes. >supervisor wiener: so if we repealed this, this would not

become the wild west for firearms. >> i would not assume that. supervisor wiener: me we call public comment? supervisor farrell: if there are any members of the public who wish to comment, please line up on the side and everyone will have two minutes to speak. >> good afternoon, supervisors. iona the zonal home interiors which i have operated for 22 years, selling primitive country american furniture and industrial steel ranging from the late 1800's through 1945 with a mixture of custom upholstered furniture and locally created artists and works by artists using recycled and reclaimed ingredients. i was targeted by police audit two years ago in july of 2010

and was shocked to received by a certified letter a demand to comply to a second-hand dealer permit for which i knew nothing about. i open my business in november 1990, went to city hall and asked for and complied with everything i needed to do to comply my business at, which i have that now successfully for 22 years. in 1997, i took a business partner and open the second business entity as a limited liability company, opening four other bay area locations which we have run for a number of years. in none of these past 22 years have the police and or any other entity other than for a second- hand dealer permit advise me this is something required to operate my business.