Report 2016-130 Recommendation 10 Responses

Report 2016-130: The University of California Office of the President: It Failed to Disclose Tens of Millions in Surplus Funds, and Its Budget Practices Are Misleading (Release Date: April 2017)

Recommendation #10 To: University of California

To ensure that its staffing costs align with the needs of campuses and other stakeholders, by April 2018 the Office of the President should develop a method for weighing comparable public and private sector pay data when establishing salaries for all positions.

6-Month Agency Response

Additional surveys are being reviewed to assess their underlying data management methodology, data viability, and survey participants.

The work group is reviewing practices at other public and private AAU institutions to determine how each define their competitive labor markets; the methodologies they use for including public, private and other data; and, the surveys they use for analyzing markets, among other considerations.

Systemwide data is being reviewed to identify the organizations that comprises UC's recruiting and retention activity.

Survey sources are being reviewed for analyzing and updating Market Reference Zones for Senior Management Group positions.

Analysis of UCOP salary ranges is being conducted.

  • Estimated Completion Date: April 2018
  • Response Date: October 2017

California State Auditor's Assessment of 6-Month Status: Pending

The status of this recommendation is pending the Office of the President's development of a method for weighing comparable public and private sector pay data. As of November 13, 2017, the Office of the President has not yet established survey sources, data sources, survey protocols, and survey methodologies. Moreover, it has made no changes to its current process for establishing salaries for executive staff. It claims that it will identify these items by the April due date.

However, we are concerned that the Office of the President does not intend to take genuine steps to implement this recommendation because it continues to contend that university employees are not comparable to state employees. Specifically, an Office of the President document analyzing its labor market concludes, "State positions are not comparable to UC positions, the State is not a competitor with the University, nor are their compensation practices and programs aligned with market practices..." It goes on to state, "CSU, often cited by CSA as a comparator to UC, is not comparable to UC." As we describe in our audit report, in the Budget Act of 2016, the Legislature required the regents to consider compensation for comparable state positions when evaluating the salaries of executives. The Legislature reissued this requirement in the Budget Act of 2017. In our report, we also acknowledge that while the Office of the President's assertion that the higher education environment necessitates higher pay for its staff for certain positions, this argument has less merit for administrative staff who perform similar duties no matter where they work.

The Legislature required the Office of the President to demonstrate a good faith effort to implement all of our recommendations; however, we do not believe that the Office of the President's response to this recommendation meets that requirement. The conclusions of the analysis above is in conflict with these directives and disregards our audit findings that the Office of the President—even when factoring in a cost-of-living adjustment—pays its staff significantly more than public employees as demonstrated in Figure 13 and Table 8 of our report. Furthermore, the Office of the President did not share adequate details with the regents Governance and Compensation committee regarding the work it has performed and its preliminary conclusions. When we shared this recommendation with the chief operating officer, she stated that this analysis was a preliminary look at the marketplace and that the regents and the president still need to weigh in on these conclusions. She also stated that the Office of the President is not necessarily going to align its salaries with the market and that it is taking this analysis very seriously. However, we recommend that the regents and their independent consultant invest additional efforts into holding the Office of the President accountable for implementing this recommendation.


60-Day Agency Response

A work group has been formed for the two projects related to staff salary ranges (OP and system). The work group members are compensation experts from OP and campuses/medical centers. Meetings occur weekly. A project plan has been finalized. A call with CalHR Compensation is scheduled for information collection regarding the State's approach to market pricing/data management processes and salary ranges. Possible additional survey sources focusing on public employers have been identified for the staff positions and the survey protocols and methodologies are being reviewed and data is being tested to determine integrity, adequate number of benchmark matches, etc. Once data sources are selected, a method for weighing comparable public/private pay data can be established.

An additional work group has been formed to address the project related to the review of leadership salary ranges (Market Reference Zones), systemwide. The work group members are compensation and Human Resource experts from OP and campuses/medical centers. Meetings occur twice monthly. A project plan has been finalized. Additional survey sources or alternate methods of data collection are being identified/reviewed that would support proper benchmark matching and data collection. A call with CalHR is scheduled for information collection regarding the State's approach to market pricing/data management processes and salary ranges. An advisory group comprised of Chief Human Resource Officers from campuses/medical centers has been created to review and provide input throughout the process. Once data sources are selected, a method for weighing comparable public/private pay data can be established.

Revised guidelines have been developed for the semi-annual equity/promotion process. At this time the semi-annual equity/promotion process scheduled for July 2017 has been suspended to continue to look at ranges and the weighting of market data.

  • Estimated Completion Date: April 2018
  • Response Date: June 2017

California State Auditor's Assessment of 60-Day Status: Pending

The status of this recommendation is pending the Office of the President's development of a method for weighing comparable public and private sector pay data. Because the Office of the President's response implies it has identified additional survey sources, data sources, survey protocols, and survey methodologies, we requested the Office of the President provide additional documentation to support these statements for its 6-month response.


All Recommendations in 2016-130

Agency responses received are posted verbatim.