The California State Auditor issued a scathing report last week alleging that University of California President and former Obama Secretary of Homeland Security Janet Napolitano raised tuitions while her office hid $175 million.
The cover page for State Auditor Elaine Howle’s 167-page audit report states bluntly that the UC president’s office “Failed to Disclose Tens of Millions in Surplus Funds, and Its Budget Practices Are Misleading.”
The audit found that the UC spent $32.5 billion on expenses during the 2015-16 school year to fund 10 campuses, five medical centers, and its Office of the President headquarters. Although the UC states that its “fundamental missions are teaching, research and public service,” the UC only spent “$6.7 billion (21 percent) on teaching, “$4.6 billion (14 percent) on research” and “$630 million (2 percent) on public service.” The other $20.6 billion (63 percent) was spent on non-fundamental activities.
The audit highlighted criticism in January from students and lawmakers after the UC regents approved President Napolitano’s 2.7 percent tuition increase for the 2017-18 year, given that UC tuition nearly doubled from $6,141 in 2006–07 to the current $12,192 this school year.
In addition, State Auditor Howle’s audit found 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.”
Howle ominously added that the “Office of the President intentionally interfered with our audit process. Auditing standards require that we disclose this interference and prohibit us from drawing valid conclusions from this portion of our work.” Specific concerns, outlined in a cover letter to Governor Jerry Brown, include:
- The Office of the President has accumulated more than $175 million in undisclosed restricted and discretionary reserves; as of fiscal year 2015–16, it had $83 million in its restricted reserve and $92 million in its discretionary reserve.
- More than one-third of its discretionary reserve, or $32 million, came from unspent funds from the campus assessment— an annual charge that the Office of the President levies on campuses to fund the majority of its discretionary operations.
- In certain years, the Office of the President requested and received approval from the Board of Regents (regents) to increase the campus assessment even though it had not spent all of the funds it received from campuses in prior years.
- The Office of the President did not disclose the reserves it had accumulated, nor did it inform the regents of the annual undisclosed budget that it created to spend some of those funds. The undisclosed budget ranged from $77 million to $114 million during the four years we reviewed.
- The Office of the President was unable to provide a complete listing of the systemwide initiatives, their costs, or an assessment of their continued benefit to the university.
- While it appears that the Office of the President’s administrative spending increased by 28 percent, or $80 million, from fiscal years 2012–13 through 2015–16, the Office of the President continues to lack consistent definitions of and methods for tracking the university’s administrative expenses.