Report 2016-130 Recommendation 8 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 #8 To: University of California Board of Regents

To ensure that the Office of the President's spending aligns with the needs of campuses and students, the regents should hold a public meeting to discuss the results of the Office of the President's review of its fund restrictions and funding commitments, as well as its proposal to reallocate funds to campuses.

Annual Follow-Up Agency Response From October 2018

The FY2018-19 UCOP budget, discussed and approved by the UC Regents in May 2018, includes the detail of fund balances as of June 30, 2017 and projected balances for June 30, 2018. All funds have been categorized according to the approved fund categories: restricted, unrestricted-designated, and unrestricted-undesignated.

Details of UCOP's review of fund balances, reserves and commitments are included in Part 2 of the posted budget item (pgs. 15-18). This section provides the specific amounts for the FY2018-19 budget related to forecasted fund balances, fund commitments and amounts available for systemwide use. Fund balances as of June 30, 2017 and projections are provided in Figures 14, 15 and 16. These tables provide key information related to balances, commitments and reserves held both at UCOP and in systemwide funds.

UCOP's approved budget begins to reallocate funds back to campuses, ahead of the stipulated timing in the CSA recommendation. Redirected funds include $10M for the UC Riverside School of Medicine and $30M ($3M per campus) to address housing strategies ($14.5M from the Housing Loan Program and $15.5M from GO Bonds).

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

The Office of the President presented its fiscal year 2018-19 budget to the Regents on May 24, 2018, which included the results of the Office of the President's review of its fund restrictions and funding commitments. Additionally, the Office of the President committed to review its undesignated, uncommitted balances and submit a plan to reallocate funds to campuses for the Regents consideration no later than the March 2019 Regents' meeting. The Regents approved the budget.

1-Year Agency Response

In March 2018, the Regents Finance and Capital Strategies Committee discussed the results of the Office of the President's review of its fund restrictions and funding commitments in a meeting open to the public. During this meeting, UCOP recommended that 68 funds with total balances of $74.7 million as of June 30, 2017 be reclassified as unrestricted and undesignated.

As this work continues next year, UCOP will focus on the additional recommendations from the State Auditor related to fund restrictions for 2019 and 2020. This work will include performing additional analysis of the funds by obtaining input from the Executive Budget Committee and other stakeholders on suggestions for future use of the funds, modifying the budget system to support reclassification of the funds, updating the budget presentation, and clearing and closing funds with small balances and limited or no activity.

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

This recommendation is partially implemented due to the meetings the Regents have held to discuss fund restrictions. Full implementation is pending additional Regents' meetings regarding Office of the President's fund restrictions and commitments. We confirmed with the systemwide deputy audit officer that the Regents believe prior meetings satisfy the commitments for a July 2018 meeting made in the 6-month status report. However, to date the Regents have not had a meeting to discuss fund commitments and how those commitments relate to the fund restrictions the Office of the President has identified.

6-Month Agency Response

The Regents will review the results of the Office of the President's review of its fund restrictions and commitments in a public meeting by July 2018.

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

The status of this recommendation is pending the regents' July 2018 meeting regarding Office of the President's fund restrictions and commitments.

60-Day Agency Response

The Regents will review the results of the Office of the President's review of its fund restrictions and commitments in a public meeting by July 2018.

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

The status of this recommendation is pending the regents' meeting regarding Office of the President's fund restrictions and commitments.

All Recommendations in 2016-130

Agency responses received are posted verbatim.