Report 2016-130 Recommendation 15 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 #15 To: University of California Board of Regents

To ensure that the Office of the President is engaging in a thorough review of its systemwide and administrative costs and implementing our recommendations, the regents should develop a contract for an independent third party that can assist the regents in monitoring implementation of the three-year corrective action plan for the Office of the President. The independent third party should have expertise in higher education, public administration, and public finance. Moreover, the independent third party should have complete access to the Office of the President's documentation and its staff so that it has sufficient and appropriate information to verify the Office of the President's actions. The independent third party should report to the regents on the Office of the President's progress, challenges, and barriers to success at least quarterly.

Annual Follow-Up Agency Response From April 2020

Sjoberg Evashenk Consulting, Inc. (SEC) completed its engagement as the independent monitor as prescribed under Recommendation #15. Over the past three years, Sjoberg Evashenk has observed and assessed the Office of the President's efforts to fulfill the 33 recommendations prescribed in its April 25, 2017 report and provided the Regents quarterly reports. Sjoberg Evashenk's April 15, 2020 report is the twelfth and final report in the series and provides a capstone view of UCOP efforts over the entire audit recommendation implementation period--June 2017 through April 15, 2020. This report reflects that, in the view of Sjoberg Evashenk, UCOP authentically addressed and fully implemented each of the 33 recommendations as set forth in the CSA's April 2017 report.

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

We are rating this recommendation as fully implemented because the Regent's independent third party—Sjoberg Evashenk Consulting, Inc.—completed its final report regarding the Office of the President's implementation of our recommendations on April 15, 2020.

Annual Follow-Up Agency Response From October 2019

Sjoberg Evashenk Consulting, Inc. (SEC) has continued its work to assist the Regents in monitoring the Office of the President's progress in implementing the recommendations from this audit. Since the March 2019 report CSA previously reviewed, SEC has issued two additional quarterly Independent Consultant's Reports dated July 1 and October 22, 2019.

SEC's eighth quarterly report dated July 1, 2019, primarily assessed UCOP's efforts to address Year 2 recommendations. SEC viewed that UCOP adequately addressed Year 1 and 2 recommendations, but CSA determined only "partial" implementation on Recommendations 5, 22 and 23. SEC noted that these items may remain partial as the UC President and Regents may retain a different approach to fulfilling the recommendations.

The ninth quarterly report, submitted October 22, 2019, addressed all outstanding recommendations. SEC views that UCOP substantially fulfilled 7 of the 11 remaining Year 3 recommendations already—6 relating to funds reallocation and reporting of the reallocations, and 1 pertaining to public reporting of budget targets.

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

Full implementation of this recommendation is pending the quarterly reporting from the Regent's independent consultant, Sjoberg Evashenk Consulting, Inc.

Annual Follow-Up Agency Response From April 2019

Sjoberg Evashenk Consulting, Inc. (SEC) has continued its work to assist the Regents in monitoring the Office of the President's progress in implementing the recommendations from this audit. Since the October 2018 report CSA previously reviewed, SEC has issued one additional quarterly Independent Consultant's Report dated February 15, 2019.

SEC sent its sixth quarterly report to the Regents for review on October 8, 2018. This report described the interim efforts of the UCOP in fulfilling the Year 2 recommendations and noted that work is in progress for each of the Year 2 recommendations. There were eleven Year 2 recommendations in total and SEC found that five were substantially complete with the submission of the May 2018 Regents' approved budget for FY 2018-19. SEC also noted UCOP's continued efforts to address the two outstanding Year 1 recommendations.

The seventh quarterly report submitted and presented to the Regents at the March 13, 2019 Regent Compliance Committee meeting noted that it viewed all the recommendations for Year 2 to be substantially complete as well as Recommendation 4 from the prior year. CSA had previously determined that three of the eleven Year 2 recommendations as well as one Year 3 recommendation were complete. SEC also made positive comments relative to the effectiveness of the Executive Budget Committee.

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

Full implementation of this recommendation is pending the quarterly reporting from the Regent's independent consultant, Sjoberg Evashenk Consulting, Inc.

Annual Follow-Up Agency Response From October 2018

Sjoberg Evashenk Consulting, Inc. (SEC) has continued its work to assist the Regents in monitoring the Office of the President's progress in implementing the recommendations from this audit. Since the April 2018 report CSA previously reviewed, SEC has issued its fifth and sixth quarterly Independent Consultant's Reports dated July 2, 2018 and October 8, 2018.

The July report addressed the CSA's one-year response to the UCOP's Year One implementation of the April 2018 recommendations, and subsequent plans and actions taken by the Regents and UCOP to meet the eleven recommendations for Year Two - by April 25, 2019. In preparation of this report, SEC attended numerous UCOP workstream and project management team meetings, and monitored and reviewed all reports that were generated. SEC participated in two EBC meetings and reviewed all draft and final documents. Additionally, SEC met with the Regents to discuss Year One results, and met with staff members from the JLAC, Assembly Budget and Assembly Higher Education Committees, and the Speaker's office to discuss its efforts and findings.

SEC sent its sixth quarterly report to the Regents for review on October 8, 2018.

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

Full implementation of this recommendation is pending the quarterly reporting from the Regent's independent consultant, Sjoberg Evashenk Consulting, Inc.

1-Year Agency Response

Sjoberg Evashenk Consulting, Inc. (SEC) has continued its work to assist the Regents in monitoring the Office of the President's progress in implementing the recommendations from this audit. These efforts include attending workgroup meetings, meeting with the President, attending Executive Budget Committee meetings, reviewing documents prepared to support workgroup activities, reviewing benchmarks, and conducting numerous other conversations to understand UCOP efforts to meet the one year milestones set by the CSA. Additionally, SEC reviewed the materials provided to the CSA in the UC's 6 month and one year responses and the comments CSA made in response to that 6 month report.

Since the six month update, SEC has issued two additional quarterly reports to the Regents in January and April 2018. In developing the April 2018 report, in addition to the activities described above, SEC conducted an in-depth review of each workgroup's response to the CSA's one-year recommendations and the team presented their insights and observations on implementation progress to the Regent's Compliance and Audit Committee and to individual Regents, as requested.

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

Full implementation of this recommendation is pending the quarterly reporting from the Regent's independent consultant, Sjoberg Evashenk Inc (consultant). The consultant provided a more thorough review of the Office of the President's progress in implementing our recommendations in its January and April 2018 reports compared to the review it had performed at the time we conducted our 6-month response assessment. In its January report, the consultant indicated that it was most concerned about the Office of the President's ability to meet our due dates. In its April 2018 report the consultant summarized the Office of the President's progress for each of the 10 recommendations that were due and provided a conclusion as to their status. We disagree with the consultant's conclusions on multiple recommendations.

For example, we disagree with the consultant's perspective in relation to recommendation 5 which required that the Office of the President develop a more robust budget by April 2018. The consultant stated that our due date is a function of when we issued the report and that we should not expect the university system to move the Regents' time frame up a quarter in order to align with our audit report release. However, we believe the April due date is critical because the failure to complete its budget in April may hinder the Department of Finance, the Legislature, and the Governor when making decisions regarding the UC's portion of the fiscal year 2018-19 state budget. Additionally, our recommendation states that the Office of the President should move its budget approval by one month, from April to May, and not a quarter.

6-Month Agency Response

Sjoberg Evashenk Consulting, Inc. (SE) has been selected to serve as the independent third party to assist the Regents in monitoring the Office of the President's progress in implementing the recommendations from this audit. The contract with SE was executed on July 7, 2017. SE issued its initial report on its independent assessment of implementation plans in July 2017. Its second quarterly report was issued in October 2017.

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

At the July meeting, the regents announced that it hired Sjoberg Evashenk Consulting, Inc. (Sjoberg Evashenk) in response to this recommendation. The scope of work outlines requirements that align with our recommendation. Although the regents claim this recommendation is fully implemented, full implementation is pending the quarterly reporting from Sjoberg Evashenk to the regents.

Moreover, we are concerned because we found minimal evidence that Sjoberg Evashenk is independently verifying the Office of the President's implementation of our recommendations. In its formal reports and presentations to the regents, it has stated there are no potential issues at this time. However, we believe there were issues that Sjoberg Evashenk should have brought to the regents' attention such as the $12 million increase in multi-year commitment spending discussed in recommendation 5 and concerns with the employee benefit policies discussed in recommendation 12. Moving forward we hope that the regents clarify their expectations of its independent consultant to ensure the consultant is reviewing, verifying, and reporting on at-risk areas in the implementation of our recommendations.

60-Day Agency Response

The Regents conducted a request for proposal (RFP) process to identify an independent third party consultant that can assist in the planning and implementation of the recommendations from this audit. The RFP required that the consultant must have expertise in higher education, public administration, and public finance. A consultant has been selected and the contract is expected to be finalized shortly. The consultant will be supervised by and report directly to the Regents Compliance and Audit Committee. The consultant will report to the Compliance and Audit Committee on the Office of the President's progress, challenges, and barriers to success at least quarterly.

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

At the July meeting, the regents announced that it hired Sjoberg Evashenk Consulting, Inc. in response to this recommendation.The scope of work outlines requirements that align with our recommendation. Full implementation of this recommendation is pending the quarterly reporting from Sjoberg Evashenk Consulting, Inc. to the regents.

All Recommendations in 2016-130

Agency responses received are posted verbatim.