Report 2015-107 Recommendation 14 Responses

Report 2015-107: The University of California: Its Admissions and Financial Decisions Have Disadvantaged California Resident Students (Release Date: March 2016)

Recommendation #14 To: University of California

To maximize the savings and new revenue from the Working Smarter initiative and ensure that the university uses them for its academic and research missions, the Office of the President should ensure that it substantiates that projects are actually generating savings and new revenue and that it can demonstrate how the university uses these funds.

Agency Response*

In order to improve and standardize the reporting of new revenue-generation or cost-reduction efforts, the Financial Planning and Analysis unit has developed a new reporting package for project owners to complete and submit in order to document and substantiate the financial impact of such efforts. The reporting package includes a standard template, instructions on how to use the template, a worksheet for estimating revenue increases and/or cost reductions, and a definition of terms so that project owners can present the impact of their programs in a more uniform manner. Program owners are also asked to provide supporting source documents for any realized actuals, including annual reports or details from the general ledger, and any analysis of prior year data that is used to estimate revenue generation or cost reductions.

The template will be reviewed by staff in the divisions of the Chief Financial Officer and the Chief Operating Officer for any revisions prior to its dissemination to relevant staff at the Office of the President and/or campuses.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: July 2018
  • Response Date: November 2017

California State Auditor's Assessment of Status: Pending


Agency Response*

The Working Smarter portfolio included many projects with readily quantifiable discounts or revenues. For example, over the course of four years, the University realized $130.4 million in revenue by optimizing the allocation of campus working capital between UC's Short Term Investment Pool (STIP) and its Total Return Investment Pool (TRIP). The University also reduced its employer costs for UC's health benefits by $35 million in a single year after conducting a full validation of every individual claimed as a dependent and covered by UC's health benefits. Other projects delivered benefits in the form of cost or risk avoidance, which by its nature is more difficult to quantify. The estimated fiscal impact of over $660 million generated by Working Smarter projects is well supported by documented revenues and savings, together with responsible estimates where those are not readily available due to the nature of the project.

It is not feasible to track the use of revenues and savings attributable to Working Smarter projects to the degree requested by the auditor. For example, UC Campus Connexions is a program that provides insurance coverage to faculty, staff, students, foundations, alumni associations, and other parties for events and activities held on campus. The program has reduced insurance costs for these individuals and organizations while at the same time protecting the University against property damage or lawsuits arising from these activities. UC is not in a position to track how savings to individuals or third-party organizations are ultimately used. UC has acknowledged that its data systems cannot track how all revenues and savings are ultimately used but has provided direction to chancellors as indicated in its response to #13.

Nevertheless, UC committed to having a new Financial Planning and Analysis unit (within Budget Analysis and Planning) undertake efforts to improve and standardized how savings are tracked.

  • Response Type†: 1-Year
  • Estimated Completion Date: July 2017
  • Response Date: March 2017

California State Auditor's Assessment of Status: No Action Taken

Contrary to the university's claim, during the course of our audit the university was unable to substantiate, with accounting records or other credible evidence, any of the $664 million of savings and new revenue it claimed to have generated under the Working Smarter initiative. In its post-audit responses, the university has not provide any new documentation to substantiate this savings and new revenue. That said, we look forward to reviewing the results of the Financial Planning and Analysis unit's efforts to improve and standardize the university's efforts in this area.


Agency Response*

The University has rigorous requirements for demonstrating savings that are achieved by Working Smarter and other cost-saving or revenue-generating initiatives. However, improvements to standardize and more consistently track these data can be made. The Financial Planning and Analysis unit within the Chief Financial Officer division will undertake this assignment and strengthen processes for tracking savings generated.

With regard to how savings and new revenue are used, no existing information system would allow tracking of these savings and new revenue across the highly decentralized UC system with any degree of specificity. However, the University develops a budget plan every year that assumes a certain level of savings will be achieved in order to meet the requirements of its expenditure plan. Departments are and will continue to be expected to generate these savings to ensure the budget plan priorities are met.

  • Response Type†: 6-Month
  • Estimated Completion Date: July 2017
  • Response Date: August 2016

California State Auditor's Assessment of Status: Pending

We look forward to reviewing the university's implementation of strengthened processes for tracking data for the Working Smarter initiative because, despite the university's claim that it has "rigorous requirements for demonstrating savings that are achieved by Working Smarter and other cost-saving or revenue-generating initiatives," our audit found that it was unable to substantiate any of the $664 million of claimed savings and new revenue generated.


Agency Response*

The University has rigorous requirements for demonstrating savings that are achieved by Working Smarter and other cost-saving or revenue-generating initiatives. However, improvements to standardize and more consistently track these data can be made. The Financial Planning and Analysis unit within the Chief Financial Officer division will undertake this assignment and strengthen processes for tracking savings generated.

With regard to how savings and new revenue are used, the University is a highly decentralized system, with responsibility for most expenditures residing at the departmental level. As a result, there is no existing information system that would allow tracking of these savings and new revenue across the system with any degree of specificity. However, the University develops a budget plan every year that assumes a certain level of savings will be achieved in order to meet the requirements of its expenditure plan. Departments are and will continue to be expected to generate these savings to ensure the budget plan priorities are met.

  • Response Type†: 60-Day
  • Estimated Completion Date: July 2017
  • Response Date: May 2016

California State Auditor's Assessment of Status: Pending

We followed up with the university and asked when the Financial Planning and Analysis unit within the Chief Financial Officer division will undertake this assignment. The university subsequently indicated that its 60-day response provided sufficient information on the status of its progress in implementing this recommendation.

The university stated that the Financial Planning and Analysis unit within the Chief Financial Officer division will strengthen processes for tracking savings generated at some unspecified point in the future. Thus, the status of this recommendation is pending.


All Recommendations in 2015-107

†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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