Auditor raises concerns over implementation of recommendations
UC President Janet Napolitano recently faced inquiries from California State Auditor Elaine Howle regarding her office’s failure to disclose $175 million in reserve funds to the Board of Regents.
The aforementioned audit took place in 2017 and has since been a source of controversy regarding the UC Office of the President’s perceived lack of transparency in relation to funding matters.
“We are still concerned about the lack of sufficient transparency related to fund balance amounts,” Howle said in a progress report released in Feb. 2019.
UCOP Director of Media Relations Claire Doan stated in an email to The California Aggie, however, that the assumption the UC did not disclose the $175 million “is incorrect.”
“Regents policy requires that we annually present the operating budget for review and approval,” Doan said. “These funds were made up of fund balances and reserves; they were not hidden. They were used to fund temporary one-time projects and initiatives, among other priorities.”
An article published in the San Francisco Chronicle reported that Napolitano was supposed to implement the recommended policies, limiting reserves and returning money to campuses, by last April.
“The audit found that $32 million of the reserves came from fees paid by campuses that could have been spent on students and that much of it should go back to the campuses,” the article stated.
Zoanne Nelson, UCOP’s chief strategy officer, told the Chronicle that UCOP does not “accumulate money just to accumulate money” and is allocating more money to campuses in light of increased transparency.
Howle, however, identified the “absence of sufficient reserve policies” as an area of great concern. She stated in her report that this allows UCOP “to retain and maintain virtually an unlimited amount of fund balances and reserves.”
“UCOP is currently working with the State Auditor to address areas of disagreement on the other recommendations,” Doan said.
The sources of disagreement between the UCOP and the state auditor are both practical and time-related. According to the Chronicle article, UCOP does not believe that a standard number should be set for reserve funds, preferring to allocate different amounts for specific programs.
Howle wants the UC budget to be released this April so California legislators can incorporate it in processes related to the state budget. However, UCOP would prefer the budget be released this May, when the Regents meet.
According to documents sent to The California Aggie by Doan in October of last year, the California State Audit (CSA) was dissatisfied with the implementation of several other recommendations issued to UCOP.
A number of recommendations made by the CSA, which were supposed to be implemented in April of 2018, have been marked “pending.”
Recommendation #5 asks UCOP to combine the “disclosed and undisclosed budget into one budget presentation.” UCOP states that they “engaged in a project to simplify, clarify, and present a transparent annual operating budget to the Regents.” According to the CSA, however, this recommendation is one of the many that have been marked “pending.”
“[UCOP] did not implement the State Auditor’s recommendation for developing its budget by April 2018,” the CSA document stated. “The failure to do so may hinder the Department of Finance, the Legislature, and the Governor when making decisions regarding the UC’s portion of the fiscal year 2018-19 state budget. Moreover, the Office of the President was not forthcoming about its decision to delay providing us with its budget information.”
While UCOP considers Recommendation #11, which asks UCOP to determine how to “restructure salary ranges to make certain the ranges encourage employee development and ensure pay equity,” the CSA asserts that no action has been taken in this regard.
“It was unclear to us what actions the Office of the President planned to take to restructure its salary ranges because its response largely reiterates how its current salary setting system works,” the CSA stated.
The CSA also stated that UCOP’s executive director of human resources was “unable to provide any evidence of any action taken regarding a determination of how the Office of the President would restructure the salary ranges and confirmed that that analysis would begin next fiscal year.”
Timeliness appears to be a recurrent issue in the documents as well.
“Had the Office of the President started this process sooner, the results of the above analysis would be responsive to our recommendation,” the CSA stated.
Other recommendations marked as “pending” by CSA are Recommendation #20, asking UCOP to publish the “results of its review of fund restrictions and fund commitments and any funds it anticipates reallocating to campuses,” #21, which asks for the implementation of budgeting “best practices”, and #28, which was supposed to “[e]stablish spending targets for systemwide initiatives and administrative costs.”
Other pending items include Recommendations #29, which asks that UCOP publish its review of “systemwide and presidential initiatives,” including funds allocations to UC campuses, and #30, which asks that the budget and accounting tracking systems be “restructure[d].”
“Moving forward it will be important for the Office of the President to transparently share these challenges with its stakeholders and the impact that the need for a new system may have on its ability to complete our recommendations by their due dates,” the CSA added.
Despite the CSA’s commentary in the document, UCOP has listed all of the CSA’s recommendations as “fully implemented” as of October, 2018. And Doan stated that UCOP has dedicated “over 17,000 hours” to the state’s recommendations since the audit was released in 2017.
“By March, we will have presented 34 times to the Board of Regents on this issue, in an effort to significantly improve our budgeting and salary classification processes and budget presentation,” Doan said.
UCOP will finalize its reserve policies this year.
“We are also establishing a replicable annual process to evaluate fund balances, reserves and commitments within the context of the UCOP budget,” Doan said. “In the May 2018 presentation to the UC Board of Regents, then Lt. Gov. Newsom made supportive comments about the increased transparency of the UCOP budget and fund balances[…] The Department of Finance determined that UCOP’s budget, including the information about fund balances, sufficiently met the April 2018 CSA […] recommendations and chose to disburse $50M in 2018 – funding that had been withheld pending the outcome of this work.”
The Regents have also hired Sjoberg Evashenk, an independent firm, to aid in the implementation of adequate and transparent reserve fund policies, in accordance with the recommendations of Howle.
Written by: Rebecca Bihn-Wallace — campus@theaggie.org
