UC responds to state audit report on University of California Office of the President

UC’s Office of the President and its governing Board of Regents today (April 25) addressed issues and recommendations contained in the state audit report about the budget practices and administrative expenditures of the Office of the President, welcoming most as constructive while raising significant concerns about others.

In a six-page letter to California State Auditor Elaine Howle, President Janet Napolitano responded to recommendations in the report that dealt specifically with UCOP, agreeing with the vast majority of them. Much of what the audit report recommended was already underway at UCOP or is on track to be implemented soon.

The audit report made other recommendations directly to the UC Board of Regents and the state legislature. In a separate letter to the auditor, Board of Regents Chair Monica Lozano and Regent Charlene Zettel, chair of the Compliance and Audit Committee, formally requested the removal of audit recommendations that encroach on the constitutional autonomy of the university and are inconsistent with the constructive recommendations about improving processes, accountability and transparency.

“There is nothing that the Board of Regents takes more seriously than its fiduciary duty,” the regents wrote. “We seek to be fiscally prudent, to deploy University funds in a manner most consistent with (UC’s) mission, and above all else, maintain the public trust in this exceptional institution.”

While noting their agreement with most of the report’s recommendations — which they stressed did not diminish their great confidence in UCOP’s leadership — the regents expressed serious concerns about the recommendations to the state legislature.

“As written, we believe these recommendations threaten the University’s standing as a constitutionally autonomous entity, and the Board of Regents itself,” the letter said. “Since its inception, UC’s constitutional autonomy has ensured that the University’s mission, vision and values emanated from its students, faculty and staff, free from political or sectarian influence, in the words of Article IX, Section IX of our State Constitution. Along with the Master Plan for Higher Education, constitutional autonomy has allowed UC to grow into a world renowned system of 10 flagship quality research institutions. The scale and scope of this achievement distinguishes UC from other public university systems across the country.”

The regents’ letter, in its entirety, may be accessed here.

“The recommendations to UCOP are helpful,” Napolitano wrote in her separate letter. “We welcome this constructive input, which aligns with our proactive efforts to continually improve UCOP’s operations, and UCOP intends to implement the recommendations.”

To ensure these audit recommendations are implemented in a timely and thorough manner, Napolitano has assembled an internal UCOP task force led by Executive Vice President and Chief Operating Officer Rachael Nava.

In clarifying other critical points in the audit report, however, the UC president said, “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.”

The audit report also erroneously claimed that UCOP failed to publicly disclose “tens of millions in surplus funds,” and labeled UCOP’s budgeting practices as misleading. In fact, UCOP’s budget and financial approaches reflect strategic, deliberate and transparent spending and investment in UC and state priorities.

Just a week before the state audit report was released, three ratings agencies — Moody’s, Fitch and Standard and Poor’s — reaffirmed UC’s AA rating. Said S&P’s RatingsDirect report, “UC is sophisticated in many aspects of its financial operations, including debt and capital management, budgeting and forecasts, and centralizing expenses, which has helped maintain rating stability through the economic volatility of the past few years.”

The state audit report also wrongly stated that UCOP holds $175 million in reserves. The true amount is $38 million, which is roughly 10 percent of UCOP’s operating and administrative budget, a prudent and reasonable amount for unexpected expenses such as cybersecurity threat response and emerging issues like increased support for undocumented students and efforts to prevent sexual violence and sexual harassment.

The audit report went on to suggest reducing or eliminating many presidential and systemwide initiatives, among them:

• The Carbon Neutrality Initiative ($2.5 million), which supports investments in UC’s efforts to become carbon neutral and develop groundbreaking climate solutions

• The Undocumented Students Initiative ($25.2 million over three years), which offers a range of support services — from academic and personal counseling, to financial aid and legal advising — to help ensure the success of these students

• The Global Food Initiative ($5.2 million), which is a sustained effort to develop, demonstrate and export solutions — throughout California, the United States and the world — for food security, health and sustainability

• The Public Service Law Fellowships ($4.2 million), which support current law students and recent law school grads to pursue public service internships and careers

• Cybersecurity ($7.2 million), which is significantly bolstering UC’s readiness for increasingly sophisticated threats to its student, research, patient and alumni data

• UC Merced Wetlands ($4.6 million), a project that protected wetlands while ensuring the successful growth of UC’s newest campus in Merced

• UC Riverside Medical School ($2 million), which is increasing the number of physicians and addressing underserved patient communities in the Inland Empire

“UC’s initiatives advance several of the state’s highest priorities, including providing resources and support for undocumented students; developing groundbreaking climate solutions and mitigating the University’s carbon footprint; advancing health-related research and programs; and strengthening the state’s relationship with Mexico,” Napolitano wrote.

“The initiatives also address some of the regents’ most pressing priorities, including enhancing diversity of students, faculty and staff, improving the transfer process for community college students, ensuring increasingly comprehensive outreach to high schools and community colleges throughout the State, and serving the Central Valley through support of UC Merced’s ambitious campus expansion.”

Said Board Chair Lozano, “These projects advance UC’s core missions — ensuring students from all backgrounds and experiences have access to a top-flight education, developing research that helps address critical issues, and providing services to the people of California to help support the most pressing public policy challenges facing the state.”

The full text of President Napolitano’s letter to the state auditor may be accessed here

The full text of the regents’ letter may be accessed here

A chart that highlights the differences between UC’s systemwide headquarters and those of other state university systems may be accessed here

UCOP’s responses to assertions in the audit can be accessed here mid-day today. 

For information on selected UC systemwide and presidential initiatives, click here

For more information on UCOP and its budget click here.

Comments are closed.