State Audits Challenge CSU, UC Spending

BY HANK REICHMAN

The California State University (CSU) system has hired new managers at more than double the rate of other employees over the past decade at salaries growing twice as fast as those of faculty members and support staff.  The administration of the University of California (UC) system pays salaries and benefits to top managers significantly higher than paid to similar state employees, and has failed to disclose to the Board of Regents and the public that it had $175 million in budget reserve funds while it was seeking to raise tuition.  These were some of the findings of two separate state audits requested by state legislators and released last week and yesterday respectively.

California State Auditor Elaine Howle called out CSU for failing to adequately explain the number of new management personnel, such as campus vice presidents, deans, supervisors and head coaches, as well as salary increases that far outstripped those provided to faculty and support staff. Howie’s report acknowledged that most managers appeared to be hired for legitimate reasons, but “campuses were often unable to justify the number of management personnel they hired and consequently could not demonstrate that they are providing these services in the most cost-effective manner.”

During the 2015-16 academic year there were approximately 4,000 managers in the CSU system, roughly 7.5 percent of all employees. But that total is almost 15 percent higher than in 2007-08, while the number of faculty and support staff grew by just 7 and 6 percent, respectively, during that time, with almost all the faculty growth in part-time non-tenure-track positions.  Total compensation for managers also grew by almost 25% over those nine years, the audit found, nearly double the rate of increase for other employees.

Howle criticized the CSU’s process of providing raises to management employees, which she said broadly lacks adequate evaluation of those employees. At Cal Poly, San Luis Obispo, for example, at least 70 managers received raises last year totaling $175,000 even though they had outdated or no written performance evaluations on file.  The university said it was unfair to penalize individuals who were not evaluated by their supervisor in a timely manner.  But, Howle wrote, “because they were not supported by current written performance evaluations, some may be undeserved.” Moreover, it was unclear whether supervisors who failed to complete evaluations were penalized for not doing so or whether they had also received significant salary increases nonetheless.

In a response letter included in the report, CSU Chancellor Timothy White wrote that management personnel comprise a broad range of employees, many of whom provide direct support to students.  “(I)t is important to recognize the CSU’s management staffing levels and administrative costs are lower than other similar higher education institutions both within California and nationally,” White wrote.

The audit charged that CSU campuses do not adequately oversee their budgets:

The CSU Office of the Chancellor (Chancellor’s Office) delegates near complete budget responsibility and authority to the CSU campuses. However, many campuses cannot demonstrate that they are adequately monitoring their budgets. Despite campus officials asserting that their central budget offices follow informal policies to review division and department budgets periodically, four of the six campuses we visited do not document the results of their reviews. Also, state law exempts CSU from many budget oversight mechanisms applicable to other state agencies and requires CSU to periodically submit certain reports to the Legislature regarding its performance. However, none of the reports we examined require CSU to specify how it used state appropriations to improve student success.

Howle recommended that CSU eliminate its policy of allowing campuses to augment the pay of their presidents with money from foundations because it “could create the appearance of a conflict of interest.” She also urged the university to put a cap on what it will reimburse for executive moving expenses, since more than a third of those relocations since 2008 had cost in excess of $25,000.

With respect to the UC, Howie wrote “that the Office of the President has amassed substantial reserve funds, used misleading budgeting practices, provided its employees with generous salaries and atypical benefits, and failed to satisfactorily justify its spending on systemwide initiatives.  Furthermore, when we sought independent perspective from campuses about the quality and cost of the services and programs the Office of the President provides to them, the Office of the President intentionally interfered with our audit process.”

The UC Office of the President amassed some $175 million in secret reserve funds in part by overestimating how much it needed to run the 10-campus university system — and then spending less than budgetead, the audit said. From 2012 to 2016, the office sought increased funding based on the inflated estimates, not actual spending, according to Howle. “The reserve included $32 million in unspent funds it received from an annual charge levied on the campuses—funds that campuses could have spent on students,” the audit said.

UC President Janet Napolitano denied the audit’s claims that her office improperly kept money stashed away, saying the money was set aside for unexpected expenses.  The audit also far overstated how much money was set aside, Napolitano’s office claimed. “The true amount is $38 million, which is roughly 10 percent of (the office’s) operating and administrative budget, a prudent and reasonable amount for unexpected expenses such as cybersecurity threat response and emerging issues like increased support for undocumented students and efforts to prevent sexual violence and sexual harassment.”

Auditors said salaries paid to those in the president’s office are much higher than the pay of comparable positions in other state government jobs.  Administrative salaries amounted to $2.5 million more than the maximum annual salary ranges for comparable state employees, auditors found.  An accounting manager’s maximum annual salary is $169,000 at UC compared to $156,000 for other state employees.  An information system manager can make $258,000 with UC, but $150,000 with other state agencies. The audit said: “10 executives in the Office of the President whose compensation we analyzed were paid a total of $3.7 million in fiscal year 2014-15 — over $700,000 more than the combined salaries of their highest paid state employee counterparts.”

On benefits, the Office of the President provided a regular retirement plan but also offered its executives a retirement savings account into which the office contributes up to 5% of the executives’ salaries—about $2.5 million over the past five years, the audit found. “The Office of the President also spent more than $2 million for its staff’s business meetings and entertainment expenses over the past five years—a benefit that the State does not offer to its employees except in limited circumstances,” the audit said..  The Office of the President reimbursed questionable travel expenses, including a ticket for a theater performance and limousine services. One person spent $350 per night on hotel rooms, which is above the allowable standard for other state agencies.  The audit concluded that the Office of the President has not managed its own budget — which amounted to $747 million in fiscal year 2015–16 — “in a fiscally prudent or transparent way.”

In preparing the report auditors sent confidential surveys to each campus. Howle said her office learned in February that the deputy chief of staff in Napolitano’s office had improperly screened responses before they were sent to auditors.  As a result, she charged, answers critical of the Office of the President were deleted or changed to put the office in a better light. “I’ve never had a situation like that in my 17 years as state auditor,” Howle said. “My attorneys are looking at whether any improper government activities occurred.”

“Significant reforms are necessary to strengthen the public’s trust in the Office of the President,” the audit concluded. Specifically, the state auditor recommended changing how the Office of the President is funded so that the Legislature has more oversight.  However, Board of Regents Chair Monica Lozano and Regent Charlene Zettel asked Howle to remove that recommendation, which they argue would encroach on the constitutional autonomy of the university system.

“As written, we believe these recommendations threaten the University’s standing as a constitutionally autonomous entity, and the Board of Regents itself,” the regents wrote.

That concern is certainly justified.  Californians will not be well-served if politicians gain greater power to meddle in university affairs. But the two audits will certainly strengthen arguments made by faculty members and students that even as state support has grown woefully inadequate, administrative bloat and misplaced managerial priorities are also to blame for declining quality, rising tuition, and decreased access. These blistering audit reports echo long-standing allegations of managerial malpractice at UC and CSU, and have already led to damning editorials in newspapers across the state (e.g. here and here).  And they come as both university systems are moving to raise student tuition for the first time in six years.  The patience of faculty and students in California and nationwide with the ineptitude and greed of the increasingly authoritarian managers who seek to run (ruin?) the universities as profit-centered enterprises and not for the common good is rapidly running out.

One thought on “State Audits Challenge CSU, UC Spending

  1. Pingback: Newfield/Meranze on the Audit Scandal at the University of California | ACADEME BLOG

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