Report 2010-105 Recommendation 8 Responses

Report 2010-105: University of California: Although the University Maintains Extensive Financial Records, It Should Provide Additional Information to Improve Public Understanding of Its Operations (Release Date: July 2011)

Recommendation #8 To: University of California

To ensure that campuses do not inappropriately use revenues generated from student fees imposed by referenda, the university should ensure that it, the regents, and the campuses do not expand the uses for such revenues beyond those stated in the referenda.

Annual Follow-Up Agency Response From October 2013

See prior response (over character limit for this form)

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2012

The University's position was clearly stated in its original response to the audit and has not changed. We disagree with this recommendation and strongly dispute BSA's conclusion that revenue generated by a campus-based student fee on the Los Angeles campus (the SPARC fee) was inappropriately identified to fund two capital projects on the Los Angeles campus.

The University's Policy on Compulsory Campus-Based Student Fees (Policy) describes “Compulsory campus-based student fees [which] may only be established, increased, or renewed following a referendum in which students vote in favor of the compulsory fees, except as provided in Section 83.00 of these Policies.” These fees and their terms are only effective after approval by The Regents or the President. Once a fee has been imposed by The Regents or the President, the terms of its collection and expenditure are binding throughout the life of the fee. Typically, these terms are the same as those contained in the referendum. However, the Board of Regents (and by delegated authority, the President) retains ultimate authority pursuant to its constitutional autonomy to impose or modify any and all student fees – including those established in response to campus-based referenda. Moreover, a referendum may contain errors, unworkable terms, unacceptable provisions, or ambiguities that The Regents (or the President) may correct when approving the fee. Although The Regents and the President do not take such actions lightly, modifications to fee terms are well within their authority.

After the SPARC fee was approved by The Regents for assessment on the Los Angeles campus, The Regents later approved the use of SPARC fee revenue for two capital projects not specifically named in the referendum passed by students. However, The Regents' approval of the SPARC fee stated that the revenue could be used for the facilities named in the referendum language “and similar needs of other student-fee supported activity and recreational facilities on the Los Angeles campus.” Because the Regental approval of the SPARC fee included this language, using SPARC fee revenue for the South Campus Student Center project and the intended use of SPARC fee revenue for the Pauley Pavilion project is consistent with the purpose of the fee as defined by The Regents' action. In addition, a student-majority advisory board created via the SPARC fee referendum, the Student Activities Center Board of Governors (SAC BOG), voted in favor of supporting the use of SPARC fee revenue to contribute towards the South Campus Student Center project.

The BSA also refers to a California court ruling as support for its finding that The Regents (and by delegated authority, the President) do not maintain authority to modify campus-based fees. For the purposes of this audit, the University assumes that the BSA refers to the California Court of Appeal ruling in Kashmiri v. Regents of the University of California.

That ruling, however, does not stand for the proposition that the BSA asserts. Rather the Kashimiri ruling is limited to its specific circumstances. The Court concluded that the University could not increase student fees (1) for a specific academic term once the University had issued student bills for that term and (2) if the University had explicitly advised students that certain professional degree fees would remain constant over a period of time. As such, the principles asserted in Kashmiri do not apply to the general terms of (including the use of funds generated by) the SPARC Fee or any other campus-based student fee.

Although the University disagrees with the BSA's recommendation and conclusion about the use of SPARC fee revenue on the Los Angeles campus, the University does plan to issue guidelines to further clarify that student referendum results are solely advisory to The Regents and the President.

In addition, UC's Office of the President (UCOP) and the campuses currently collaborate on efforts to avoid the need for changes from referenda language. When student referenda for campus-based fees are in the planning stages at the campus level, campuses frequently send draft referenda language to UCOP prior to printing final language on student ballots. The draft language is currently circulated among Budget and Capital Resources, General Counsel, and Student Affairs staff for review and comment. Staff work closely with the campuses to clarify any potentially confusing language in the referenda, including, in the case of capital project fees, ensuring that the financial planning for building projects has been sound.

UCOP staff work with the campuses to ensure that referendum language is specific to the capital project(s) in question and to avoid leaving the door open to funding unnamed capital projects in the future. UCOP may not want to restrict campus flexibility in the future, however. Campuses benefit from flexibility in their fund sources, future funding needs cannot always be anticipated, and it can be difficult to capture all potential uses of revenue generated by compulsory campus-based student fees.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

All Recommendations in 2010-105

Agency responses received after June 2013 are posted verbatim.