Here's what you need to know about the state's audit of the University of California

Legislators have complained for years that the semi-independent UC system is not transparent with its finances.

April 25, 2017 8:15 PM PT

California State Auditor Elaine Howle on Tuesday released a scathing audit of the University of California’s Office of the President.

The examination had been requested by legislators who have complained for years that the semi-independent UC system is not transparent with its finances.

Here are some of the key findings of the audit:

Tens of millions of dollars in budget reserve funds weren’t disclosed

The state audit found that the UC Office of the President failed to disclose to the University of California Board of Regents, the Legislature and the public that it had $175 million in budget reserve funds. UC President Janet Napolitano disputes that the money was hidden, and said it was committed to programs to improve the UC system.

State officials including Lt. Gov. Gavin Newsom have called on UC to reverse its tuition hike.

$32 million that could’ve been spent on students wasn’t

The reserve included $32 million in unspent funds from an annual charge levied on the UC schools — money that the campuses could have spent on student services if they kept it, Howle said. The money comes from a fund that is used for programs including cybersecurity, food for poor students and making campuses carbon neutral. Howle and state legislators said the money should be sent back to campuses.

University of California students protest fee increases outside a regents meeting in San Francisco. (Karl Mondon / Bay Area News Group)

Pay in UC’s Office of the President is higher than comparable salaries

The UC Office of the President’s executive and administrative salaries are significantly higher than comparable state employee salaries. This is a longstanding complaint by legislators, union leaders and students.

Administrative salaries amounted to a combined $2.5 million more than the maximum annual salaries for comparable state employee positions, auditors found.

Some examples:

The UC system’s chief investment officer has a base salary of $615,000. The top investment officer with the state’s teachers’ retirement system is paid $568,000.
The UC system’s general counsel is paid $428,000 while the general counsel for the California Public Employees’ Retirement System is paid $414,000.
The chief financial officer for UC makes $412,000 while the counterpart in the California State University system makes $341,000.

University of California President Janet Napolitano has disputed a state audit's findings that tens of millions of dollars in budget reserve funds were hidden. (Marcio Jose Sanchez / Associated Press)

Millions were spent on benefits that public employees typically don’t receive

During a five-year period, the Office of the President spent at least $21.6 million on employee benefits, some of which are not typical for the public sector, such as supplemental retirement contributions, the audit found.

The UC system, like other state agencies, provides a standard retirement plan, but Napolitano’s office also offered its executives a retirement savings account, contributing up to 5% of the executives’ salaries. Those contributions have totaled about $2.5 million over the last five years, the audit found.

UC administrators weren’t able to justify how money was spent

The Office of the President failed to satisfactorily justify its spending on systemwide initiatives, the audit found, and did not evaluate the programs’ continued priority or cost. Auditors said the Office of the President was unable to provide a complete listing of the systemwide initiatives, their costs or how they benefit the university system.

Assembly Speaker Anthony Rendon (D-Paramount) compared the situation to the 2012 budget scandal with the State Parks Department and to issues with the California Public Utilities Commission.

Administrative spending is high compared to other university systems

Spending in the Office of the President has increased and annual budget and staffing levels for the Office of the President are higher than administrations at other comparable public universities, the report found.

Among the auditor’s findings:

The Office of the President’s administrative spending increased 28%, or $80 million, from fiscal years 2012–13 through 2015–16.
The Office of the President needs to develop new, clear policies for tracking its expenses, the audit said.
The Office of the President’s budget and staffing levels are higher than other central administration offices at similar university systems, including the University of Texas. UC officials said that this may be because it provides services to its campuses and employees that other universities do not, including the management costs associated with the university’s retirement program.

Wheeler Hall at UC Berkeley. (Francine Orr / Los Angeles Times)

Surveys on campus spending appeared to be doctored

The auditors submitted surveys to each campus to determine whether there was duplication of spending, and the Office of the President inappropriately screened the campuses’ survey responses before the surveys were submitted to auditors, the state report says. The audit said the Office of the President intentionally interfered with the audit process.

Survey forms filled out by campus managers that were initially critical of the Office of the President were later revised to be more positive. The auditors said the interference prevented them from drawing conclusions from some of their work.

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