hsf board and the staff to demand if there are providers that want a contract with hsf in san francisco to require a certain amount of transparency and open data. it's going to be a good thing for all of us. i want to bring this back to this body for sure and thank you for your support. >> commissioner lynn? >> i would like to acknowledge supervisor ferrel for his leadership and supervisor mar. i want to say thank you. >> dr. dodd? >> i just did one last announcement. on the tragedy in the philippines. if our

department has circulated that and contributing through the sfgovtv.org website. please pick up one of those press releases and go to our website and contribute at this time. >> other comments? i would like to suggest anybody who has had a chance to read through this document that was presented at the transparency hearing. there is some really interesting statistics. one that jumps out is the difference on the metabolic panel. $1700 in we are area and the lowest was $451 on another. a tylenol tab was no charge in one area and $7.06 in another.

one tylenol tab. this is a real statistic and shows you the cost of things. i don't know if there is a copy of this out there for the public or not. yeah. okay. very good. thank you. that's all i have to say. >> i just wanted to give another personal example of the importance of transparency and the work we are doing. i am being treated as many of you know at stanford hospital and last week they insisted on doing a pregnancy test on me. many of you know that i'm 57 years old and i'm a lesbian. although that's not entirely impossible. but i also had a hysterectomy in 1946. i said it's impossible for me to get

a pregnancy test. i said, did he get one? she said -- no. he's a man. and he can't get pregnant. i said neither can i. we are paying $250 for that pregnancy test. somewhere those things appear and those personal experiences maybe anecdotes but enough anecdotes make data and there are going to be changes in contracting and other things that i have experienced. good is coming out of my medical experience. i just wanted to share that. >> thank you. any public comment on this item? >> good afternoon commissioners. claire von'sky. retiree. i wanted to commend

supervisor ferrel. i wasn't able to understand that hearing but a lot of good things came out of it. there was transparency legislation sponsored by leno and vetoed by governor brown and usually we don't get involved in anything at the state level but supervisor ferrel might have an ability to do more than rest of us and commissioners of this board and members of the department. but i wondered if there is any thought to reintroducing transparency legislation and bumping that up to the state level because that would make a significant difference even in our process in what goes on here if that was a state level battle again. that's my question, thank you. >> so, thank you, claire. just to address your comments, i had the opportunity to speak with senator leno over the weekend at the veterans day parade and

disappointment in the veto necessary legislation transparency at the state level. he's wanting to introduce some form of that next year. i'm certainly a great fan of senator leno and what we should take in mind is he said make no mistake about it what we are doing in san francisco is going to have a huge impact at the state level and his ability to be able to drive that back. so it's not just confined to having an in packet here in san francisco but helping to push us at the state level in a very positive direction. so that dialogue continues. >> thank you. >> thank you. louis to the hotel workers union. you know, claire and supervisor ferrel said much of what i was going

to say. our union was a sponsor of sp 46 and introduced by senator leno. i want to express our appreciation on this extraordinarily great issue. i also want to highlight the exceptionally great work of the deputy director gabby has led in her efforts at communicating your position and advocating the cause of transparency around sb 746. she did a really remarkable job and in conversations with senator leno, other legislators as well as the executive bunch. it really has changed the character of the debate. in sacramento, i don't think many appreciate what we are facing right now. i think there is a

real determination not just to move a redo of sb 746 but perhaps take it much bigger and i hope that will play out in the future. thanks to all of you and thanks to the deputy director. >> thank you. commissioner fraser? >> i want to commend everyone for the work on transparency but also want to remind us all that that is not the solution to the health care crisis. lest we abandon all other efforts that the underlying disease on people is a major factor in driving health care cost and we should not let up in our efforts in that area as well, but thank you for the work on the transparency. >> any other comments? seeing none, item no. 4. >> the clerk: item 4 was covered in item 3.

>> okay. all right. then item no. 5. >> the clerk: presentation of audited information for 2012-2013 pamela laufgey. >> deputy director chief financial officer health care systems. we are going to review the results of the annual audit that is done of the trust fund by kp and g. we have a

representative jamie coven from kp and g that was the partner or principal and they have an interesting structure at kp and g. we'll go over the audit and what they look for and what they found and i will go over the financial statement and where we end the last fiscal year. >> thank you for having me. my name is jamie cabin. i am a senior manager with kp and g and i will be presenting the audit report for the fiscal year audit of the san francisco health and service trust fund. that's a mouth full of words. i will refer to it as a trust from this point. we have a powerpoint presentation to present here, but i believe you

do have copies as well. so we can get through. you also have a copy of the financial statements audit report. so we will walk through that. this presentation will be a high level summary of the 2013 audit and will address the required communications to the board and we'll do a walk through of the audit report that you have there. the scope of the audit we will perform an audit to the generally accepted auditing standards to make sure the information is free of mistakes and we audit to ensure the completeness and accuracy of the presentation with the financial information is also accurate and complete. so based

on our audit work we issue two reports. we issue and independent auditors report on the financial statement of which we issued a clean and unmodified opinion for fiscal year 2013. you will see this on page one and two of your financial report. next we also issue a report on the internal control of the financial reporting and compliance in accordance with government auditing standards. this is a clean opinion unmodified of which we reported no deficiencies and no non-compliance for the trust. you see this on page 20-21 of your report. in regards to audit results, based on our audit work we have identified three changes in the next fiscal year. you will see that management does an analysis

which is on page 3-9 that goes through the variances over the past three 3 years and the actual statements are on page 10-11 of your report. once again we identify three of the most significant changes in the year. the first is a reserve for claims. this increase by 173 percent which was probably went from $9 million to $26 million. the increase was the blue shield plan from a full plan to a flex plan in midyear. this plan incurred but not reported claims added $18.1 million to the account balance. next we have the premiums payable. it went from approximately $26 million down to $17 million. this is also due to the conversion of the blue shield plan to the flex funded plan.

then last we have noted the city health benefit which is on the income statement as an income statement line item. it increased from $62 million down to $45 million. this is due to the movement of enrollment from the city plan to the hmo. according to a statement of audioing standard of no. 114 we are required to make specific communication to this board. 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