State Audit Says UCOP Mishandling Budget, Holding Excess Reserve Funding

UCOP denies several claims, but will implement suggestions

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The University of California Office of the President (UCOP) has accumulated a $175 million unreported surplus and conducted questionable budget practices, according to a state audit of UCOP released Tuesday. The audit also found that UCOP pays its top employees a much higher salary than those of comparable public positions.

“Our report concludes that the Office of the President has amassed substantial reserve funds, used misleading budgeting practices, provided its employees with generous salaries and atypical benefits and failed to satisfactorily justify its spending on systemwide initiatives,” state auditor Elaine Howle wrote in a letter to Gov. Jerry Brown and the California Legislature.

UCOP said the size of the accumulated reserve is actually $38 million — a “modest” size for the UC according to UCOP — that is uncommitted and available, not $175 million. It holds $137 million in preallocated funding that cannot be used. The surplus comes from years of conservative spending, since it’s in UCOP’s practice to “to underspend, as opposed to overspend, in any given year,” according to a statement. But in many students’ opinions, $38 million should go toward preventing further tuition hikes.

A systemwide tuition increase for the next academic year, the first hike in six years, was approved at the January regents meeting. Napolitano said the tuition hike was necessary to accommodate the 10,000 student increase approved in fall 2015. Annual tuition for in-state students will increase by 3 percent — or $282, with a $54 student services fee increase.

“It is outrageous and unjust to force tuition hikes on students while the UC hides secret funds, and I call for the tuition decision to come back before the Board of Regents for reconsideration and reversal,” said Lt. Gov. Gavin Newsom in a press release. Newsom also serves as a de facto UC regent.

The auditor said because of recent tuition hikes, she recommends the Office of the President refund available reserve funding to the individual campuses. But UC media spokesperson Claire Doan said neither the reserve fund being distributed among the campuses nor reversing tuition increases is a feasible solution.

“The president stated that UCOP will implement a number of recommendations in the audit report, but that report does not, to my knowledge, mention a reversal of tuition increase,” Doan said in an email.

Though both UCOP and UC President Janet Napolitano will implement the majority of the budgetary suggestions, they have maintained that several accusations in the audit are misleading or untrue.

“Beginning with its subtitle, the report fundamentally and unfairly mischaracterizes UCOP’s budget processes and practices in a way that does not accurately capture our current operations nor our efforts and plans for continued improvement,” Napolitano said.

Originally requested by assembly members Kevin McCarty, D-Sacramento, and Phil Ting, D-San Francisco, the audit results state the cumulative UC administrative annual salaries amount to $2.5 million more than the maximum salary ranges for comparable state employees. It also notes that UCOP interfered with the audit process.

“UCOP’s interference in the state auditor’s investigation is like trying to keep two sets of books — and reflects a continuing pattern of deception toward the Legislature in order to justify tuition hikes, skyrocketing executive pay and continued exploitation of low wage contractors,” said AFSCME Local 3299 President Kathryn Lybarger in a press release. AFSCME 3299 is the UC’s largest union, representing more than 24,000 Service and Patient Care Technical Workers across the campuses.

The state auditor is also reviewing contract policies and the report is expected to be released in June.

“We are grateful to the state auditor for exposing UCOP’s disgraceful conduct and financial mismanagement and join her in demanding real reform and increased legislative oversight. Our students, patients and colleagues deserve better,” Lybarger said.