UC again ripped by state auditor
Payroll upgrade cost is close to $1 billion, latest report finds
A state audit released Thursday rips the University of California again — this time for bungling a plan to streamline its payroll systems.
The payroll overhaul will cost UC nearly $1 billion — triple the expected cost — and will take five years longer than planned, says the audit that is the third deep dive into UC finances this year.
The audit of the “UCPath” payroll system also faults the UC president’s office for failing to fully inform the governing Board of Regents about problems with the overhaul, which was supposed to save UC $753 million. Those savings — mainly from reduced staff — “will not materialize,” the audit says.
Independent State Auditor Elaine Howle agreed that the university has no choice but to replace its 11 aged, problem-plagued systems for dealing with payroll and human resources. Those systems were blamed for UC’s botched overtime payments to nearly 14,000 employees over three years, a problem that forced UC in May to agree to pay $1.3 million in back wages and damages.
The transformation to a new payroll system began in 2011 and was expected to be done in 2014. The announced price tag: $306 million. The audit determined it will take until mid-2019 and cost at least $942 million, although UC maintains it will be $504 million.
In April, a state audit found that the office of UC President Janet Napolitano failed to disclose millions of dollars in reserve funds before asking regents to raise tuition, and that her office interfered with the auditor’s survey of campuses and rendered it useless. A second audit, released Tuesday, found
that UC had not adequately justified its replacement of many employees with lower-paid contractors.
Even as the revelations have fueled the idea among some politicians, students, parents and others that UC is steering its ship badly, UC officials say the reports help them to better manage the $32 billion university system of 10 campuses, five medical centers and three national laboratories.
“We view the three audits primarily as constructive feedback,” said Claire Doan, a spokeswoman for Napolitano, whose office is headquarters for the university system. “That’s abundantly clear in our responses to the California state auditor and our demonstrated willingness to follow the reports’ recommendations.”
The latest audit found that the president’s office is off budget, off schedule and has done a poor job of informing the regents of those problems as it replaces the critical payroll system.
On four occasions, for example, the president’s office extended the project’s schedule by six months to more than two years, but told the regents about only one delay and its cause, the audit found.
“This lack of transparency is particularly troubling in light of UCPath’s importance to the university system, its soaring cost, and its delayed implementation,” the report said.
The audit also faulted recent efforts by the president’s office to improve communication about UCPath with the regents. The new approach merely informs the regents of “progress rather than engaging them in decision-making,” the report says, and “does not go far enough in recognizing the regents’ role as an oversight body.”
Among the recommendations included in the audit, Howle says the president’s office should develop guidelines by December to improve a range of processes, from reporting to the regents, to project management. Howle also recommended that the regents develop reporting standards that the president’s office must follow.
In her written response included in the audit, Napolitano did not dispute most of the audit’s findings, but pointed out that she arrived at UC in 2013, two years after the UCPath overhaul began. She said replacing the system — which is expected to standardize business practices, improve accuracy and enhance efficiency — is necessary even if it isn’t a “tool for generating immediate savings.”
The existing system, she said, costs about $100 million a year to maintain and correct errors.
Napolitano explained that a firm hired to manage the project early on had “failed to perform as expected.” She said UC’s revised approach in 2013 led to improvements, and that the audit’s recommendations “will help us further that process.”
As to communicating with the regents, Napolitano said that leaders of the payroll project have presented to the regents 79 times, not counting numerous other conversations with individual regents in between. A website devoted to UCPath is also easily available, she said.
“As with any extremely complex undertaking, we are constantly finding ways to improve,” Napolitano wrote.
But the latest audit of ballooning costs — on top of a report by The Chronicle in May showing the regents often billed UC for lavish parties — has frustrated lawmakers whose leverage over the autonomous public university rests only in their control of its purse strings.
State Sen. Ricardo Lara, D-Bell Gardens (Los Angeles County), called for the last two audits, but was unavailable for comment.
“Unfortunately, UC has a pattern of writing a blank check for administrative expenses and never seems to have enough money for California student enrollment,” said Assemblyman Phil Ting, D-San Francisco, who chairs the budget committee and requested the April audit with Assemblyman Kevin McCarty, D-Sacramento.
“We give them $25 million or $50 million for enrollment increases, but that’s a pittance compared to how much they’ve overspent on UCPath,” Ting said.
This year, the state is giving UC $18.5 million to enroll an additional 2,500 resident students. Last year, it offered $25 million for 5,000 more students, which UC exceeded, raising California enrollment by 7,400.
McCarty called the latest audit findings disappointing, and suggested that until UC gets its house in order, state lawmakers might withhold additional funding. After the first audit, Gov. Jerry Brown withheld $50 million in funding for UC until it fixes financial problems identified by the review.
“We’ll look into this throughout the budget process going forward,” McCarty said.