A UC Berkeley professor claimed to have found a $4 billion budget discrepancy in the UC budget, but has recently been refuted by the UC system.
Professor Charles Schwartz requested an explanation about his findings from the UC system. After two weeks of silence on behalf of UC, Schwartz posted his findings on his blog, UniversityProbe.org.
The UC system has since responded to his inquiry with a letter, which argues that Schwartz had been using incorrect data, and that his findings did not hold true with final budget reports. Furthermore, his understanding of the data seemed to be incorrect. Ricardo Vazquez, a spokesperson for UC, said that this fact, along with other calculation issues, led Schwartz to the incorrect conclusion.
“I don’t think there is a story there, it is just a miscalculation based on the incorrect data,” Vazquez said.
Schwartz believed there to be a $300 to $400 million per year difference between the UC reported budget and the amount of UC funds actually spent.
“The discrepancy amounts to several hundreds of millions of dollars, and it did not happen just once, it has been consistently happening for at least a dozen years,” Schwartz said in an e-mail interview.
After receiving UC’s letter of explanation from Patrick Lenz, UC vice president for Budget and Capital Resources, Schwartz took to his blog to explain what had gone wrong in his own calculations.
In summary, Schwartz made an incorrect conclusion that the UC “General Funds” did not include the UC “Special State Appropriations and Contracts,” so when he calculated the difference between the budget and the amount of money actually spent, there was a large discrepancy. When these two separate units of funds were combined and Schwartz recalculated, Schwartz said that “Mystery #1” had been solved.
However, Schwartz still has a big question about the UC budget. This question, which he refers to as “Mystery #2,” pertains to the use of “Instructional Funds” each year. He is confused as to why so much money is sent elsewhere from “Instructional Funds” each year.
Schwartz said the difference between the “Instructional Funds” budget and the amount actually spent is the biggest out of all of the budget units.
“Lenz tells us how the total discrepancy disappears. That solves Mystery #1. But we still have Mystery #2: Why has so much State funding that was intended for Instruction been diverted elsewhere?” Schwartz stated on his blog.
Lenz told Schwartz that he would provide an explanation “sometime,” Schwartz said.
Specific budget questions aside, some wonder why it took UC so long to get back to Schwartz.
“The budget Director wrote that he would get back to me quickly; but after that there was just complete silence from the President’s Office. That is not a sign of responsible management,” Schwartz said.
Some argue that UC should have responded to Schwartz’s inquiries in a timelier manner. Schwartz sent his first e-mail to the UC system on Jan. 25, and continued inquiries throughout February, until Feb. 22 when he finally received the letter of explanation.
Sen. Leland Yee, who has authored a large amount of legislation on public record transparency, supports the idea that the public should be given the right to view public records at any time.
“The UC is a public institution, the taxpayers fund the university, and therefore the tax payers and the students have a right to know how the university is being run. Those documents that the university possesses are the people’s documents, and therefore if they want to see them, they should be able to do that,” said Adam Keigwin, chief of staff for Yee. “Transparency results in accountability and it ensures that people are doing their jobs and that money is being wisely spent.”
Schwartz also highlighted the importance of transparency within the UC system, and said it was the UC official’s responsibility to provide the public with a full account and explanation of the UC budget.
“It is essential that the citizenry of California have respect for and confidence in their University. If those officials entrusted with UC’s management cannot give a credible accounting of where the money goes, then we are in a very bad situation,” Schwartz said.
On his blog, Schwartz also suggested that the confusing UC budget should be explained in a way that the public – the people who fund the UC – could understand.
“Transparency is not found by simply looking at documents on the University of California Office of the President (UCOP) web site; it comes through the good old fashioned student’s method of trial and error,” wrote Schwartz on his blog. “It would be nice if there were some handbook, some guidebook, some available reference that anyone might use to become versed in the arcane ways of university finance. I have previously made such inquiries and requests to top people at UCOP – to no avail.”
HANNAH STRUMWASSER can be reached at campus@theaggie.org.
Cal senior management team doesn’t know how to discover inefficiencies created by Chancellor Birgeneau over 8 year reign. UC Berkeley–one of the top universities in the nation, home to some of the finest professors, graduating some of the brightest students–can’t figure out how to save money. No joke. UC Berkeley spent $3 million plus expenses to hire an out-of-state auditing firm to help them find ways to reduce spending.
According to the Contra Costa Times, October 10, 2009, “When UC Berkeley Chancellor Robert Birgeneau ($500,000 salary) was confronted with the $150 million challenge, he gave the matter deep thought, turned his focus eastward to the Boston-based consulting firm Bain & Co. and agreed to pay $3 million over the next two years for someone else to solve the problem.
“We [the Times] never attended business school, but we’re pretty sure that one of the definitions of financial crisis is spending $3 million on consultants to tell you how to get by with $150 million less than you thought you had.â€
The rationale for hiring the consulting firm given by Vice Chancellor Frank Yeary: “I understand at one level, … if you don’t have enough money, why are you spending money on external consultants? Most people who are closer to it say it’s more sophisticated than that.
“If we spend $1.5 million this year and $1.5 million out of savings next year and we’re successful in delivering tens of millions of dollars in savings every year, I think that’s the goal against which we should be judged.â€
Incredible! Millions of dollars could have been saved just by using the expertise on UC campuses. The system has, for example, multiple senior administrators with Ph.D.s who are getting nice paychecks for their expertise, the Budget Office staff gets paid to solve budget problems, and the renowned Haas School of Business has a world class lineup of business experts and graduate programs in financial engineering, global management, accounting, financing, and operations management.
Moreover, the funds used to pay the high cost of hiring outside consultants could have been used to make up for state budget cuts, student fee increases, furloughs and layoffs.
But, according to Vice Chancellor Frank Yeary, “The reason for not relying on internal experts is that self-diagnosis is not always impartial.â€
If this is the reasoning by UC Berkeley decision makers, it is no wonder they are in a fiscal crisis. If the university system can’t trust its internal audits, maybe it is time for outside auditors to make all the university’s financial decisions. Those decisions might be based on more practical thinking than those made by the current university leadership.
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