Report 2015-107 Recommendation 13 Responses

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

Recommendation #13 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, by June 30, 2016, to the extent possible, implement a process to centrally direct these funds to ensure that campuses use them to support the core academic and research missions of the university.

Annual Follow-Up Agency Response From October 2021

As noted in the University's prior responses, cost savings and other benefits associated with these initiatives accrue directly to participating campuses, which provides an incentive for campuses to participate in applicable systemwide initiatives and to develop cost-saving initiatives of their own. UC does not attempt to "allocate savings to specific campuses to their budget allocations." Since the savings are realized at the campus level, describing how UCOP "is allocating these funds to campuses" is not applicable.

To achieve the recommendation's goal of ensuring "that campuses use [savings] to support the core academic and research missions of the university," the President directed Chancellors to do so in the President's annual budget letter. This directive appeared in the President's budget letters for 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22. That directive is responsive to the recommendation that UC "centrally direct these funds ... to support the core academic and research mission of the University."

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

This status is unchanged from the university's prior response. Although the President's allocation letters to the chancellors set some level of expectations for campuses, the university has not implemented a process to centrally direct Working Smarter initiative savings and new revenue, and to make this process an annual activity in its budget process. Further, the university should annually identify the amount of savings and new revenue that it has realized, as well as how it is allocating these funds to campuses.

Annual Follow-Up Agency Response From November 2020

As noted in the University's prior responses, cost savings and other benefits associated with these initiatives accrue directly to participating campuses, which provides an incentive for campuses to participate in applicable systemwide initiatives and to develop cost-saving initiatives of their own. UC does not attempt to "allocate savings to specific campuses to their budget allocations."

To achieve the recommendation's goal of ensuring "that campuses use [savings] to support the core academic and research missions of the university," the President directed Chancellors to do so in the President's annual budget letter. This directive appeared in the President's budget letters for 2017-18, 2018-19, 2019-20, and 2020-21. That directive is responsive to the recommendation that UC "centrally direct these funds ... to support the core academic and research mission of the University."

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

Although the President's allocation letters to the chancellors set some level of expectations for campuses, the university has not implemented a process to centrally direct Working Smarter initiative savings and new revenue, and make this process an annual activity in its budget process. Further, the university should annually identify the amount of savings and new revenue that it has realized, as well as how it is allocating these funds to campuses.

Annual Follow-Up Agency Response From November 2019

Cost savings and other benefits associated with these initiatives accrue directly to participating campuses, which provides an incentive for campuses to participate in applicable systemwide initiatives and to develop cost-saving initiatives of their own. UC does not attempt to "allocate savings to specific campuses to their budget allocations." To achieve the recommendation's goal of ensuring "that campuses use [savings] to support the core academic and research missions of the university," the President directed Chancellors to do so in the President's annual budget letter. This directive appeared in the President's budget letters for 2017-18, 2018-19, and 2019-20.

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

The Office of the President's budget letters do direct campuses to use savings from the Working Smarter initiative to education. However, this falls short of implementation of our recommendation because it does not centrally track those savings or indicate the specific savings that each campus has achieved. The Office of the President's budget letters indicate that its "information systems currently in place do not have the capacity to track savings from specific initiatives and then further track how they are used," but as we discuss in the audit report, the UC was able to determine and report in its overall budget that it achieved $664 million in savings from the Working Smarter initiative. Thus, it is unclear to us why the UC believes it is unable to track savings or to implement the recommendation to centrally direct those funds to ensure campuses use them to support core academic and research missions of the university.

Annual Follow-Up Agency Response From October 2018

The President's 2017-18 allocation letters to the chancellors included the following directive:

"[I]t is critical that campuses ensure that savings realized from core funds attributable to cost-saving initiatives are used in furtherance of the core academic mission of the University. As the University pointed out in its response to the Auditor, information systems currently in place do not have the capacity to track savings from specific initiatives and then further track how they are used. However, campuses are urged to ensure that departments are aware of the expectation that savings they generate from these initiatives are to be used for the core academic mission of the University."

It is anticipated that the President's 2018-19 will contain a similar directive. We believe this action reflects the intent of the CSA recommendation while acknowledging the limitations of the University's financial information systems.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

Our recommendation focused on the UC directing campuses to use the savings of $664 million that it claimed to have achieved from the Working Smarter initiative to fund its core academic and research missions of the university. Although the UC indicates that its "information systems currently in place do not have the capacity to track savings from specific initiatives and then further track how they are used," the UC was able to determine that it achieved savings from the Working Smarter initiative. Thus, it is unclear to us how the UC was able to determine the savings amount, but that it is unable to allocate those savings to specific campuses to their budget allocations

Annual Follow-Up Agency Response From November 2017

It is anticipated that the President's 2017-18 allocation letters to the chancellors will again direct chancellors to ensure that savings realized from core funds from initiatives formerly included in the Working Smarter portfolio are used in furtherance of the core academic mission of the University.

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

The university's response indicates that has not implemented a process to centrally direct Working Smarter initiative savings and new revenue. For example, the university should incorporate this process into its policies contained in the Systemwide Budget Manual to ensure that its direction of savings from core funds attributable to the Working Smarter initiative is an ongoing activity. Further, the university should annually identify the amount of savings and new revenue that it has realized, as well as how it is allocating these funds to campuses.

1-Year Agency Response

The 2017-18 Budget Plan includes additional contributions from systemwide contracts ($7.8 million) and Fiat Lux ($5.0 million) as part of its core funds budget, which supports the core academic, research, and public service elements of the University's mission. In addition, the President's 2016-17 allocation letter to the chancellors stated that "it is critical that campuses ensure that savings realized from core funds from initiatives included in the Working Smarter portfolio are used in furtherance of the core academic mission of the University" and directed chancellors "to ensure that departments are aware of the expectation that savings they generate from these initiatives are to be used for the core academic mission of the University." The University believes that this action addresses the recommendation as expressed in the audit report and considers this recommendation to be fully implemented.

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

Although the President's 2016-17 allocation letters to the chancellors set some level of expectations for campuses, the university has not implemented a process to centrally direct Working Smarter initiative savings and new revenue. For example, the university should incorporate this process into its policies contained in the Systemwide Budget Manual to ensure that its direction of savings from core funds attributable to the Working Smarter initiative is an ongoing activity. Further, the university should annually identify the amount of savings and new revenue that it has realized, as well as how it is allocating these funds to campuses.

6-Month Agency Response

The University will direct that savings from core funds attributable to the Working Smarter initiative be used for meeting core budget needs in its annual allocation letter to campuses, which is usually issued by September of each year.

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

The status of this recommendation is pending our review of the next issuance of allocation letters being sent to campuses, which according to the university will occur in November for fiscal year 2016-17. Additionally, the university should incorporate this process into its policies contained in Systemwide Budget Manual to ensure that its direction of savings from core funds attributable to the Working Smarter initiative is an ongoing activity.

60-Day Agency Response

The University already includes in its annual budget plan the use of savings from Working Smarter and other cost saving initiatives for meeting core fund needs. In fact, the University's budget plan assumes about one-third of its new funding needs will be met through sources generated through such cost-saving and revenue-generating initiatives. The University will also specifically direct that such savings from core funds be used for meeting core budget needs in its annual allocation letter to campuses, which is usually issued by September of each year.

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

The university's core funds can be used for purposes other than the academic and research missions. Additionally, the university's response does not address our recommendation to centrally direct these savings and new revenues to its core academic and research missions, to the extent possible. However, the university stated that it will begin to direct its campuses to spend these funds for core budget needs. Thus, we believe this recommendation is partially implemented. To fully satisfy this recommendation, the university will need to demonstrate that it is centrally directing the working smarter savings and new revenues to specific activities related to its academic and research missions.

All Recommendations in 2015-107

Agency responses received are posted verbatim.