Auditor says UC missed deadline to fix problems

A year after a scathing state audit found that the University of California president’s office squirreled away $175 million for preferred projects rather than disclosing the money to the public, a new report concludes that the office missed the April 30 deadline for complying with the recommended fixes.

At stake is whether students will see their tuition rise next fall. Failure to comply with the audit deadline places at risk not only UC’s request from the state for a $140 million budget boost, which the university says would eliminate the need for a tuition increase, but also $50 million the governor withheld last year on condition that UC comply with the auditor’s recommenda-

tions and other requirements.

“This is real money,” said Assemblyman Phil Ting, D-San Francisco, who requested the audit two years ago with Assemblyman Kevin McCarty, D-Sacramento. “Clearly, it’s important that we have confidence in their financials before we can augment it.”

The report comes days after the UC regents announced that they would not raise tuition this fall if state lawmakers allocate the $140 million they have requested. A growing number of state lawmakers — who don’t want to see a 3 percent tuition hike — have supported giving UC the money it has requested. California residents currently pay $13,887 in tuition and mandatory fees at UC.

For its part, UC says the president’s office met its deadline and fully complied with all 10 audit recommendations — and has a consultant’s report to prove it.

State Auditor Elaine Howle disagrees, saying the office completed just six of the 10 tasks. The new report calls that a “significant deficiency.”

“We recognize that the Office of the President has invested significant resources and made progress in implementing our recommendations by improving its fiscal, staffing, and systemwide initiative processes,” the report says. “We expected the Office of the President would have prioritized” meeting deadline because of the money at stake in its 2018-19

budget. “But it failed to do so.”

The UC president’s office in Oakland is the $813.5 million brain that oversees the university’s 10 campuses, five medical centers, three national laboratories, and other endeavors.

Last year’s audit studied the president’s office from 2012 to 2016 when its budget was $686 million and it employed nearly 1,700 people. Under President Janet Napolitano, the office paid employees significantly more than state workers in comparable jobs and amassed $175 million in reserve funds it didn’t disclose in its budget presentations to its governing Board of Regents, Howle’s audit found. It did so in part by overestimating how much it needed to run the UC system, then spending less than budgeted, the audit said.

The audit included 33 recommended repairs, including 10 to be completed by April 30, and the remainder over the next two years. Napolitano and the regents have called the fixes constructive and said they would

complete them “thoroughly, on time, and in a transparent manner.”

To oversee its process, UC hired a consultant — former state auditor Kurt Sjoberg — who, on April 18, issued a report detailing the ways in which UC has satisfied or exceeded all 10 expectations.

Yet Howle’s report says Napolitano’s office has failed in four areas:

⏩ It has taken “no action” to align staff costs with the needs of campuses “to encourage employee development and ensure pay equity.”

⏩ Campuses pay dues to the president’s office, and can pay too much, the audit had found. The office has taken only partial steps to understand how it can determine whether the money it collects from campuses is too much and how it can be returned. The office also has only partially developed a reserve policy to better understand how much should be set aside and why.

⏩ An effort to overhaul its budget presentation to the regents — in which disclosed and undisclosed funds would be combined into one — is pending.

UC spokeswoman Dianne Klein said the president’s office believes that two of the areas, aligning staff costs and steps for returning money to campuses, are not due until 2019.

She said the president’s office has developed several reserve policies for its various funds, and called the auditor’s criticism “puzzling.”

As for the budget presentation, Klein said the office has shared its budget templates with the auditor, though not its actual numbers, which will be presented to the regents next month. She said the auditor had recommended this approach.

“There appears to be a disagreement about dates here, and we will be discussing this further with the state auditor’s

office,” regents Chairman George Kieffer told The Chronicle. “I expect we’ll work it out.”

Ting said he’ll meet with Howle’s audit team Friday to determine how egregious the missed steps are.

“There has been improvement,” he said. “They have been working very hard and taken this very seriously — which is what we were hoping to see.

“Ultimately, the Department of Finance will be the umpire. They get to make the call — and they have always said they are following the auditor’s lead on this issue.”

That office said Wednesday that it’s keeping mum on the subject until Gov. Jerry Brown releases his revised budget proposal for the 2018-19 fiscal year, sometime before May 14.