Report: Top UC officials meddled in audit
Officials in the University of California president’s office improperly interfered with a state audit of UC finances, instructed campuses not to “air dirty laundry” in an audit survey, and misled the regents about why they did it, according to an investigative report reviewed Tuesday by The Chronicle.
The independent investigation by former state Supreme Court Justice Carlos Moreno into audit tampering finds evidence that two top executives in UC President Janet Napolitano’s office — Chief of Staff Seth Grossman and Bernie Jones, his deputy — directed the interference and oversaw changes to confidential survey answers from three campuses to put UC headquarters in a better light. Grossman and Jones also sought to keep the matter secret, warning each other by text messages to keep communications “off of email.”
The report found that a third UC executive, Deputy General Counsel Karen Petrulakis, offered her own survey revi-
sions, but also recommended that UC officials inform the state auditor that they were changing survey answers that were supposed to be confidential responses from campuses. That didn’t happen. Petrulakis left UC in July, and Grossman and Jones resigned last week.
The report also raises questions about the role of UC General Counsel Charles Robinson, who investigators say had concerns about the involvement of the president’s office with the surveys. He called the legal risk “low but not zero,” according to the report, and warned of the “political risk” of interfering.
Moreno’s 65-page report, expected to be released Thursday, points no finger of blame at Napolitano. It says she “forthrightly acknowledged her role in approving a plan” that resulted in interference. The report also says she was present at a dinner meeting with her staff and some chancellors on Nov. 10, 2016, discussing the state audit.
However, the report contradicts statements Napolitano had made publicly to the regents and to state lawmakers, in which she assured them that campus officials were confused by the survey questions and asked her staff for help.
Moreno’s investigators say it was the other way around: Napolitano’s staff required the campuses to show them their survey responses, then changed or deleted some answers to make her office look better.
“While some (campus vice chancellors) contacted UC officials in Oakland to inform them they had received the surveys, there is no evidence that any (campus vice chancellors) expressed ‘confusion’ to UC senior leaders before” the president’s office began planning to review their survey answers, investigators said.
The audit survey was labeled confidential and not to be shared outside of the campuses. Its purpose was to let State Auditor Elaine Howle hear independently from campuses about the quality of services provided by Napolitano’s office, and whether they were useful or a waste of money.
But Grossman and Jones held a conference call with the campuses’ associate chancellors around the time of the November dinner meeting and told them that the survey was “not the time and place to air dirty laundry,” according to the report. The two executives also texted to each other: “Don’t want anything in email that could be problematic if made it [sic] way back to the auditor,” investigators found.
Through a spokesman, Grossman called his role in the matter “very limited.” He said UC’s internal audit staff had recommended that the president’s office review the survey responses and that UC’s attorneys had approved it.
“The university’s attorneys were directly involved in working with Bernie ( Jones) and the campuses’ responses to the surveys,” he said through the spokesman, Nathan Ballard.
But the investigators said they found “little support for the idea that the general counsel blessed the activity.”
Jones declined to comment on the audit, and Petrulakis could not be reached.
Dianne Klein, Napolitano’s spokeswoman, said earlier that the president “takes full responsibility for the fact that her office reviewed campus survey responses before they were sent to the state auditor. She has publicly apologized for this. As she has said previously, had she to do this over again, she would not have approved this approach.”
Klein added that Napolitano has established a system at UC headquarters to prevent future interference with state audits.
On Thursday in San Francisco, the regents are expected to privately grill Napolitano and Robinson, UC’s top lawyer, not only about why they allowed the tampering, but why they misled the regents about their involvement with assurances that the campus officials had asked their staff for help with the surveys.
A new California law, prompted by the UC controversy, goes into effect Jan. 1 and imposes a $5,000 fine on agencies that interfere with a state audit.
At UC, the survey of campuses was part of Howle’s 2016 audit of Napolitano’s Oakland office and its then-$686 million annual budget. The budget is now $813.5 million.
The overall audit found that the president’s office had accumulated $175 million in funds it hadn’t disclosed to the public, had paid its staff far higher than comparable state employees, and had relied on weak budget practices that kept the regents unclear about how money was spent.
Howle released the audit in April and said she had been forced to discard the campus survey results because UC headquarters had breached their confidentiality.
Emails obtained by The Chronicle in May showed that Howle learned of the interference when UC Santa Cruz sent her its survey — then took it back. When the campus resubmitted its survey to Howle, several answers had been changed: Technology help from the president’s office initially rated as “poor” had become “good.” Ratings for three other services had been changed from “fair” to “good,” and three more had changed from “good” to “exceptional.”
Howle’s inquiries revealed that answers had been deleted and changed at two other campuses.
UC San Diego’s rating of one service had flipped from “dissatisfied” to “satisfied.” And at UC Irvine, one rating had switched from “OK” to “satisfied,” and others from “satisfied” to “very satisfied.”
Additional emails between UC headquarters and campuses obtained by The Chronicle shed more light on the tampering and indicate that Napolitano had been briefed on her staff ’s reviews of campus responses.
Moreno’s report upholds these findings.
In June, amid the tangle of allegations, angry reactions from state lawmakers and Gov. Jerry Brown, and defensive statements from UC leadership, the regents hired Moreno and an Orange County law firm, Hueston Hennigan, to sort out what happened. The former state Supreme Court justice retired from the bench in 2011 and now works for a disputeresolution company called Jams.
Moreno was hired weeks after state lawmakers questioned Napolitano and thenregents Chairwoman Monica Lozano in Sacramento for 4½ hours on May 2.
“I deeply believe the trust that has existed between the Legislature and UC has been eroded and that much more transparency is needed,” Assemblyman Jose Medina, DRiverside, chairman of the Assembly Higher Education Committee, said during the hearing. “To say this is a black eye on the UC is an understatement.”
Howle told lawmakers: “I’ve never had a situation like that in my 17 years as state auditor.”
In her testimony, Napolitano said her office “did things appropriately,” but apologized for creating “the wrong impression.”
She said her staff became involved with the survey because the campuses asked them to. “Some on the campuses reached out to (headquarters) with questions and a request for help with coordinating the responses,” she testified.
Lozano defended Napolitano and her staff at the hearing, but promised that the regents would improve oversight of her office and its budget.
On May 11, Brown announced he was withholding $50 million from UC’s 2017-18 budget until UC made progress fixing the financial problems identified in the audit and met other conditions set by his office.
The regents will hear an update on those repairs on Wednesday, the first day of their two-day meeting in San Francisco. The regents are expected to discuss the Moreno report privately on Thursday morning before releasing it to the public.
Janet Napolitano, UC president, is not blamed for the survey tampering.
Online: The Chronicle’s coverage of the state audit and links to emails regarding the review of campus survey responses at www.sfchronicle.com/ucaudit