Report 2010-105 All Recommendation 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 #1 To: University of California

To address the variations in per student funding of its campuses, the university should complete its reexamination of the base budgets to the campuses and implement appropriate changes to its budget process. As part of its reexamination of the base budget, it should:
• Identify the amount of general funds and tuition budget revenues that each campus receives for specific types of students (such as undergraduate, graduate, and health sciences) and explain any differences in the amount provided per student among the campuses.
• Consider factors such as specific research and public service programs at each campus, the higher level of funding provided to health sciences students, historical funding methods that favored graduate students, historical and anticipated future variations in enrollment growth funding, and any other factors applied consistently across campuses.
• After accounting for the factors mentioned above, address any remaining variations in campus funding over a specified period of time.
• Make the results of its reexamination and any related implementation plan available to stakeholders, including the general public.

Agency Response*

The University has fully implemented this recommendation, effective with the 2016-17 campus allocations of State General Funds.

The formula and weights used by the University to determine campus allocations are described in the Systemwide Budget Manual, which is available at http://www.ucop.edu/operating-budget/budgets-and-reports/other-resources/index.html.

Final campus allocations showing equal funding on a weighted per-student budgeted enrollment basis are attached. The first page shows the incremental funding available for distribution in 2016-17. The second page shows the resulting total funding per campus, weighted budgeted enrollment at each campus, and the resulting (equal) funding level per student at each campus ($7,153).

  • Response Type†: Annual Follow Up
  • Completion Date: January 2017
  • Response Date: October 2017

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Since the University's previous annual response to this recommendation, the timeline for implementing the rebenching of State funds was accelerated. The University will complete the implementation phase-in in 2016-17. In subsequent years, State funds allocated to campuses on a per-student basis will be adjusted annually to reflect changes in budgeted levels of enrollment at each campus.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: January 2017
  • Response Date: October 2016

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The implementation of rebenching of State funds is in its fourth year and is continuing on track as planned. We estimate that it will take six years in total to complete the rebenching effort based on certain expectations of future funding levels from the State.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 6/30/2018
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The implementation of rebenching of State funds is in its third year and is continuing on track as planned. We estimate that it will take six years in total to complete the rebenching effort based on certain expectations of future funding levels from the State.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 6/30/2018
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As the University's July 26, 2012 response states, a systemwide work group consisting of Chancellors and other campus and Office of the President leadership, and faculty met for nearly a year to review the distribution of State funds across the system. It issued a set of recommendations that has been shared publicly; the basics of these recommendations were described in UC's response to BSA. These recommendations will be implemented over a multi-year period, the first phase of which was initiated in allocations associated with the 2012-13 fiscal year. It was the preference of the systemwide taskforce to use new and incremental State funding to achieve the rebenching of State funds. The length of time to complete this process depends entirely on the future of funding increases from the State.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: Indeterminate
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As the University's July 26, 2012 response states, a systemwide work group consisting of Chancellors and other campus and Office of the President leadership, and faculty met for nearly a year to review the distribution of State funds across the system. It issued a set of recommendations that has been shared publicly; the basics of these recommendations were described in UC's response to BSA. These recommendations will be implemented over a multi-year period, the first phase of which was initiated in allocations associated with the 2012-13 fiscal year. It was the preference of the systemwide taskforce to use new and incremental State funding to achieve the rebenching of State funds. The length of time to complete this process depends entirely on the future of funding increases from the State.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: Unknown
  • Response Date: October 2012

California State Auditor's Assessment of Status: Not Fully Implemented


Recommendation #2 To: University of California

To help improve accountability in the university's budget process, and to help minimize the risk of unfair damage to its reputation, the university should take additional steps to increase the transparency of its budget process. Specifically, the Office of the President should continue to implement the proposed revisions to its budget process.

Agency Response*

The university stated that it has implemented proposed revisions to its budget process for fiscal year 2011-12. Specifically, it stated that these changes resulted in individual campuses retaining all student tuition and fee revenue, all research indirect cost recovery funds, and all other campus-generated funds. (See 2013-406, p. 100)

  • Response Type†: 1-Year
  • Response Date: July 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #3 To: University of California

To help improve accountability in the university's budget process, and to help minimize the risk of unfair damage to its reputation, the university should take additional steps to increase the transparency of its budget process. Specifically, the Office of the President should update its budget manual to reflect current practices and make its revised budget manual, including relevant formulas and other methodologies for determining budget amounts, available on its Web site.

Agency Response*

The budget manual has been updated and posted at the following location: http://www.ucop.edu/operating-budget/_files/systemwide_budget_manual_07312015.pdf

  • Response Type†: Annual Follow Up
  • Completion Date: August 2015
  • Response Date: September 2015

California State Auditor's Assessment of Status: Fully Implemented

The UC's budget manual--dated July 31, 2015, and posted online--is a 23-page, five-chapter document that describes major budget components, including the following: key systemwide cost centers (e.g., compensation, health and retirement benefits, and nonsalary items like equipment); systemwide revenue sources (e.g., state funding, tuition, and student fees), the core principles for allocating State General Funds to campuses, the allocation of campus-generated revenues, calculations to cover the costs of the Office of the President, and calculating and allocating student financial aid funding.


Agency Response*

Work continues on the development of the new budget manual. While we have had ongoing communication to ensure our staff are following current process, formalizing this guidance in the updated budget manual has taken longer than expected. With the implementation of two new major processes for allocation of funds, the areas that need to be covered by the budget manual have expanded considerably. At the same time, the workload in the systemwide budget office has increased dramatically, in part due to ongoing requests from the State government. It is expected that a new budget manual will now be completed in time for the 2015-16 academic year.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 8/1/2015
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

See prior update plus the addition below:

We have been working to update the Budget Manual in a way that accurately reflects the major changes that have been made in the way money flows through the university and gets distributed. While we completed a first draft of the manual last spring, we realized it did not cover enough of the issues campuses would find useful. Therefore, we have found it necessary to solicit input from the campuses to help us craft a document that has pertinence and utility at this time when the relationship between campuses and OP has continued to evolve. To do this in a meaningful way, we found it necessary to form a workgroup with campus budget folks to help us work out what sort of manual would be suitable and useful given recent changes in university budgeting. We estimate this will take the full academic year to complete and hope to have a more useful manual in time for the 2014-15 academic year.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 7/1/2014
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The University regards this commitment as a high priority. However, many aspects of the University's budget process have changed recently and the University anticipates that more changes could occur depending on the outcome of Proposition 30 on the November 2012 ballot. Because of this uncertainty, and the understaffing of the office responsible for this function, completion of a new budget manual has been delayed. The University intends to complete a new budget manual during the 2013-14 fiscal year.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: FY13-14
  • Response Date: October 2012

California State Auditor's Assessment of Status: Not Fully Implemented


Recommendation #4 To: University of California

To help improve accountability in the university's budget process, and to help minimize the risk of unfair damage to its reputation, the university should take additional steps to increase the transparency of its budget process. Specifically, the Office of the President should continue its efforts to increase the transparency of its budget process beyond campus administrators to all stakeholders, including students, faculty, and the general public. For example, the Office of the President could make information related to its annual campus budget amounts, such as annual campus budget letters and related attachments, available on its Web site.

Agency Response*

The University has long provided extensive budgetary information that is accessible to students, faculty, and the general public. More recently, the University has expanded online links to ensure easy access to the wide variety of budgetary and other information that is available on the University.

The University has created a website accessed directly from the University's Office of the President home page that serves as a portal to extensive budgetary information. The site -- http://budget.universityofcalifornia.edu/ -- provides easy links to the Budget for Current Operations (http://budget.universityofcalifornia.edu/files/2011/11/2012-13_budget.pdf); a “Budget Basics” site that provides basic facts about the UC budget; sites with information on financial aid and tuition and fees; overview charts depicting UC's principal sources of funds and expenditures of core funds; and a “Myths and Facts” site that addresses a number of widely-held misconceptions about the UC budget. The portal also provides a direct link to the UC Office of Budget and Capital Resources website (http://budget.ucop.edu/). The Budget and Capital Resources site offers readily identifiable links to current and previous budgets for current operations and capital improvements. The operating and capital budget documents include a summary of each year's budget request to the State, as well as detailed information on every major area of the University's budget and appendices presenting UC's annual income and expenditures, historical information on expenditures by fund category, enrollments, and mandatory student charge levels (by category of student). The document includes a detailed Table of Contents and index for easy reference. The Budget and Capital Resources website also provides clearly labeled links to major budget presentations, including all budget-related presentations given to the Board of Regents, current and past reports submitted to the State legislature, and news updates on developments on the State and UC budgets.

The University's “Reporting Transparency” website represents another major easily-accessed portal to a great deal of additional budgetary and financial information that may be of interest to UC stakeholders and the general public. Among the 22 websites linked from this portal – at http://www.universityofcalifornia.edu/reportingtransparency/ -- are links to the University's actuarial audit reports, various sites related to operating and capital improvement budgets, compensation reports, and a number of financial reports (including the University's consolidated audited financial reports, reports on benefit plans, bonds, endowments, private support from campus foundations, revenue and expense trends, and the Treasurer's Office investments). The site also provides links to extensive statistical summaries on UC students and staff and student admissions.

The “Reporting Transparency” site also links to the University's annual Accountability Report (http://accountability.universityofcalifornia.edu/) . This expansive report presents detailed data on statistical indicators over time related to many facets of the University enterprise. These indicators track data related to enrollment and budget, undergraduate student admissions, graduate academic and professional degree students, affordability, faculty and other academic employees, staff, institutional diversity, research activity, health sciences and services, teaching and learning (metrics related to quality of the academic program), research, health sciences and services, private giving, the capital improvements program and sustainability, and UC rankings.

With respect to making information such as annual allocation letters publicly accessible on the web, the University regards this statement as a possible suggestion, rather than a strict recommendation, and does not intend to post allocation letters on the web. The allocation letters represent incremental changes to campus budgets for only those programs affected by change in that particular year. As such, the letters provide a thoroughly incomplete and misleading picture of the funding for any given program. Rather than advancing transparency, these letters would be highly misunderstood by the general public and create an enormous additional workload for budget offices throughout the system as they tried to explain what everything in the allocation letters means. So many materials are now available on the web and elsewhere that give a far more complete picture of how funds are expended and, we believe, provide a far more comprehensive and understandable view of the University's budget.

  • Response Type†: Annual Follow Up
  • Completion Date: October 2012
  • Response Date: October 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #5 To: University of California

To increase the transparency of university funds, the Office of the President should make available annually financial information regarding its funds, including beginning and ending balances; revenues, expenses, and transfers; and the impact of these transactions on the balances from year to year.

Agency Response*

Below is a link to the 2012-13 campus financial schedules. The last page of the consolidated schedules is a new report that was added this year to respond to the State Auditor's recommendation that reserve balances should be disclosed.

http://www.ucop.edu/financial-accounting/financial-reports/campus-financial-schedules/

  • Response Type†: Annual Follow Up
  • Completion Date: January 2014
  • Response Date: January 2014

California State Auditor's Assessment of Status: Fully Implemented

The financial data shown on the last page of the report at the link the university mentions in its response includes beginning and ending fund balances, revenues, expenditures, and net transfers for fiscal year 2012-13. Because FY 2012-13 is the first year for which the university presents this information, the impact of transactions on the balances from year to year can be determined when the university makes similar financial information available for future years.


Agency Response*

The status of implementation of this recommendation is "pending." The campus financial schedules for the year ending June 30, 2013 will contain this data. The June 30, 2013 reports will be published by January 2014.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 1/31/2014
  • Response Date: December 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The campus financial schedules for the year ending June 30, 2013 will contain this data. The June 30, 2013 reports will be published November 2013.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: November 2013
  • Response Date: October 2012

California State Auditor's Assessment of Status: Not Fully Implemented


Recommendation #6 To: University of California

To ensure that the campus financial information published by the Office of the President can be better evaluated by interested stakeholders, the university should disclose instances in which campuses subsidize auxiliary enterprises with revenues from other funding sources and should disclose the sources of that funding.

Agency Response*

This information is posted on the following website: http://www.ucop.edu/financial-accounting/financial-reports/university-auxiliary-support/index.html

  • Response Type†: Annual Follow Up
  • Completion Date: April 2013
  • Response Date: October 2013

California State Auditor's Assessment of Status: Fully Implemented

The university has posted to its website a report that shows, by campus, the different auxiliary enterprises that have been subsidized and what funding source was used to subsidize each auxiliary enterprise. Currently the website only presents information for fiscal year 2011-12, but we look forward to the university regularly updating this information to reflect subsequent fiscal years.


Agency Response*

We developed a model for collecting this data and will be collecting the data for the year ending June 30, 2012. We expect to publish the data by 12/31/2012.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: December 2012
  • Response Date: October 2012

California State Auditor's Assessment of Status: Not Fully Implemented


Recommendation #7 To: University of California

To improve the transparency of its expenses, the university should identify more specific categories for expenses that are recorded under the Miscellaneous Services accounting code and should implement object codes that account for these expenses in more detail.

Agency Response*

Please see attached letter to the Honorable Adam C. Gray, Member of the Assembly. (emailed to dalec@auditor.ca.gov on 10/15/13)

  • Response Type†: Annual Follow Up
  • Completion Date: August 2013
  • Response Date: October 2013

California State Auditor's Assessment of Status: Fully Implemented

The university notes that it examined expenses recorded under the Miscellaneous Services accounting code. It estimates that between 13 and 17 percent of the expenses recorded under Miscellaneous Services from fiscal year 2005-06 through 2011-12 were appropriately categorized. To more accurately account for the remaining expenses, the university has adjusted its accounting practices and created new accounting codes. According to the university, campuses were required to implement these new practices by June 30, 2013.


Agency Response*

The information systems changes were completed prior to 6/30/2012. Data is now being gathered in the correct accounts for fiscal year 2012-2013. We expect miscellaneous services to significantly decrease for fiscal year 2012-2013

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: June 2013
  • Response Date: October 2012

California State Auditor's Assessment of Status: Not Fully Implemented


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.

Agency Response*

See prior response (over character limit for this form)

  • Response Type†: Annual Follow Up
  • Response Date: October 2013

California State Auditor's Assessment of Status: Will Not Implement


Agency Response*

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.

  • Response Type†: Annual Follow Up
  • Response Date: October 2012

California State Auditor's Assessment of Status: Will Not Implement


All Recommendations in 2010-105

Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


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