Report 2014-121 Recommendation 6 Responses

Report 2014-121: University of California, Davis: It Has Not Identified Future Financing for the Strawberry Breeding Program nor Collected All Available Revenues (Release Date: June 2015)

Recommendation #6 To: University of California, Davis

UC Davis should develop a risk-based audit plan to begin periodically reviewing the financial records of master licensees and licensed nurseries to ensure that they are accurately reporting all of their sales of licensed strawberry varieties and paying the university all the royalties it is entitled to. To encourage compliance, UC Davis should notify all master licensees and licensed nurseries that it will begin auditing the sales records of selected licensees.

Annual Follow-Up Agency Response From November 2017

Consistent with UC Davis' commitment in response to the CSA's recommendation to audit a strawberry licensee beginning in fiscal year 2017, and in each of the following three fiscal years, an audit of a California strawberry licensee was completed in fiscal year 2017. UC engaged the services of an experienced outside intellectual property auditor to perform a royalty examination. Per the auditor's report, the results of the royalty examination established that "royalty accountings are complete and there were no underpayments". UC Davis plans to audit a second strawberry licensee in fiscal year 2018.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

UC Davis provided evidence that it engaged the services of an external auditor who completed an audit of a strawberry licensee in fiscal year 2017.

1-Year Agency Response

A cost-benefit analysis of implementing a licensee auditing program was completed by UC Davis Innovation Access February 12, 2016. (This analysis is provided to you separately.) The results of the cost-benefit analysis suggest that wholesale auditing of strawberry licensees would not be advantageous or an appropriate expenditure of funds at this time. However, for certainty and in response to CSA's recommendation for periodic auditing, UC Davis will conduct strawberry licensee audits as follows:

- Beginning in fiscal year 2017, and in each of the following three fiscal years, UC Davis will audit a strawberry licensee.

- The selection of licensee will be in view of licensee reporting, field representative input, input from others in the strawberry program, and cost-benefit considerations associated with auditing.

- After the 4th audit (conducted in fiscal year 2020), UC Davis will consider the benefits derived and any cost recoveries made from the audits and reassess this approach.

California State Auditor's Assessment of 1-Year Status: Pending

Although UC Davis provided its cost-benefit analysis of auditing its strawberry program licensees, the analysis did not provide any reliable evidence for its conclusion. However, UC Davis stated that it will conduct audits of the strawberry program beginning in fiscal year 2017. As a result, we look forward to the results of those future audits.

6-Month Agency Response

Progress to date for this recommendation is in the form of focused (ongoing) discussion at InnovationAccess in furtherance of the corresponding UC Davis Action (as set forth in our May 22, 2015 letter). We anticipate the process will be completed by June 30, 2016. Over the next several weeks we will continue to take steps toward such completion.

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

60-Day Agency Response

Progress to date for this recommendation is in the form of focused (ongoing) discussion at InnovationAccess in furtherance of the corresponding UC Davis Action (as set forth in our May 22, 2015 letter). We anticipate the process will be completed by June 30, 2016. Over the next several months we will continue to take steps toward such completion.

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

All Recommendations in 2014-121

Agency responses received are posted verbatim.