Report 2016-130 Recommendation 19 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 #19 To: University of California

To ensure that its spending aligns with the needs of its stakeholders, including campuses and students, by April 2018 the Office of the President should develop a comprehensive list of systemwide initiatives and presidential initiatives, including their purpose and actual cost that will be used in the regents' meeting previously recommended.

1-Year Agency Response

UCOP completed a comprehensive review of the set of UCOP-affiliated programs and initiatives. A listing by category of these programs and initiatives, and their associated budget allocations, is included in the materials submitted to CSA as part of this one year update. Additionally, a more detailed summary of each program, including its purpose, its stakeholders, and the funds used to support it, is also included in the submitted materials.

The finalized list of UCOP-affiliated programs and initiatives totals to $410.9 million. This is a variance of 0.5% from the budget approved by the Regents.

As requested by the CSA, UCOP reviewed the 6 month draft list of programs to address the identified variance of $32 million identified by the CSA. The reconciliation schedule is included in the documentation submitted to the CSA and includes explanation of the variances.

Finally, UCOP has provided a detailed description of the nine presidential initiatives in the materials submitted to the CSA. Each summary includes an overview of the origin, intent and activities of the initiative and includes funding commitments. UCOP will continue to use this category of programs as has been defined, but will be updating its process for funding these initiatives.

Past budgets included a President's Initiative Fund (PIF) funded at $9.8 million annually. This budget will be reduced $2 million in FY2018-19 from $9.8 million as part of the $15 million redirection to fund additional enrollment growth. As part of the presentation to the Regents in March 2018 on Reserves (see recommendation #4), UCOP is eliminating the Temporary (One-Time) budget practice, establishing a Strategic Priorities Fund (SPF) and absorbing the President's Initiative Fund (PIF). The SPF is intended to be used to support presidential initiatives as well as other initiatives, projects and emergent needs requiring short-term funds. The fiscal impact of establishing the SPF is expected to be a budget reduction of short-term/temporary expenditures by approximately half the amount of previous years.

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

We found the Office of the President's actions are sufficient to address this recommendation. The Office of the President presented a list of 70 Office of the President affiliated programs and initiatives including the programs and initiatives function, program summary, and budget to the Regents at the March 14, 2018 meeting. This list and the list it provided to us included:

-18 state/federal programs budgeted to cost $222.8 million that are either required by legislation or that the university operates by contract on behalf of the state or federal government.

-11 campus programs budgeted to cost $3.6 million that exist solely at one or two campuses and are not systemwide in reach or impact.

-31 systemwide programs budgeted to cost $169.6 million that benefit the State, multiple campuses, or the entire system and are funded with ongoing or permanent funds.

-1 systemwide initiative that benefits the State, multiple campuses, or the entire system and is funded solely with time-bound or single-occasion funding commitments. This systemwide initiative is using prior year funding amounts and is not currently supported through the Office of the President's budget.

-9 presidential initiatives budgeted to cost $9.8 million that were launched by a president to address university, statewide, national or global issues, which are solely funded with time-bound or single-occasion funding commitments

Moreover, we verified the Office of the President's $32 million reconciliation and found it was reasonable. We also found the Office of the President's approach to presidential initiatives is also reasonable.

6-Month Agency Response

The UCOP systemwide initiatives workgroup, supported by a team of subject-matter experts from the Academic Affairs division, has: (1) compiled a comprehensive data set of UCOP systemwide programs and initiatives, including individual purposes and costs, (2) formalized categories for these items along with their definitions, and (3) developed key attributes to assist with reporting . This documentation will be incorporated in future budgets.

To respond to the timing of AB97, UCOP's effort to identify savings to be put towards its share of $15M in funds for enrollment increases beginning in the 2018-19 academic year, the team used the data set of programs and initiatives. This documentation has been provided to key stakeholders (Executive Budget Committee, Council of Chancellors, Department of Finance and others) for consultation and evaluation to ensure UC will meet December 2017 deadlines for development of the State of California budget.

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

The Office of the President provided us with a working list of 90 statewide, systemwide, and campus programs. The list includes a summary of each program, its stakeholders, and the funds used to support it. According to this document—which the Office of the President highlighted as a work in progress—the total 2017-18 Office of the President budget for initiatives and programs equals $440 million. This total is $32 million more than the amount approved by the regents. Since this list is a work in progress, it is possible that this discrepancy represents data entry errors; the Office of the President stated it is still validating data internally and with its campuses. By April, we expect these amounts to tie back to the budget approved by the regents or to be otherwise explained.

Moreover, we also expect clarification on the status of presidential initiatives. The budget director informed us that through its review of statewide, systemwide, and campus programs UCOP has preliminarily determined that presidential initiatives generally fit into one of these categories. He stated that management had not determined how the Office of the President would define presidential initiatives or the status of the $10 million allocated each year to the presidential initiative fund.

60-Day Agency Response

A UCOP systemwide initiatives work group has been formed. This group includes representation from key stakeholders across a variety of functional areas within the Office of the President. The work group will complete a baseline review including development of a comprehensive list of systemwide and Presidential initiatives. The documentation will explain: purpose, commitment levels, and costs. This baseline will be used in the subsequent research phases to implement further recommendations. Consistent with recommendations related to budget process and presentation, these initiatives will be presented in the annual budget process.

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 comprehensive list of systemwide initiatives and presidential initiatives.

All Recommendations in 2016-130

Agency responses received are posted verbatim.