Report 2016-125.1 Recommendation 14 Responses

Report 2016-125.1: The University of California Office of the President: It Has Not Adequately Ensured Compliance With Its Employee Displacement and Services Contract Policies (Release Date: August 2017)

Recommendation #14 To: University of California

To maximize benefits from the systemwide procurement initiative and to ensure that the university uses those benefits for its teaching, research, and public service missions, the Office of the President should implement a process to centrally direct these benefits to ensure that university locations use them to support the university's core missions.

6-Month Agency Response

The benefits created through UC Procurement's involvement are used by campuses to support the core mission of teaching, research and public service.

As stated in the University's initial response, implementing a process as described in this recommendation would not only place a significant administrative burden on campus units to track savings and document expenditures from those savings, but also create a dynamic that would limit the incentive for units to generate savings in the face of UC either prescribing the use of those funds or ultimately shifting them to another unit or campus altogether. In addition to the disincentives, it is not in the best interests of a campus to have the Office of the President direct how it spends these savings, as that determination is properly and best left to the campus.

Any benefits created through UC Health initiatives are used by the medical centers to support their core mission of teaching and patient care. Benefits realized from system wide procurement contracting or cost saving initiatives have a direct impact on expenses. Each system wide initiative identifies the projected savings per medical center and this information is shared with the supply chain teams and executives from each of the medical centers. Improved cost saving dashboard and analytics are currently under review that will provide more detailed information regarding the savings impact and any potential loss opportunities.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

Our audit found that the Office of the President has not developed a policy or provided direction to university locations on how to reallocate savings from its procurement decisions. Also, that the Office of the President lacked supporting information to substantiate nine of the 10 benefits we reviewed for fiscal year 2015-16. Lacking measures of accountability over the accuracy and uses of its procurement benefits, the Office of the President's assertions of savings are questionable along with those savings serving the university's core missions.

60-Day Agency Response

The benefits created through UC Procurement's involvement are used by campuses to support the core mission of teaching, research and public service. As stated in the University's initial response, implementing a process as described in this recommendation would not only place a significant administrative burden on campus units to track savings and document expenditures from those savings, but also create a dynamic that would limit the incentive for units to generate savings in the face of UC either prescribing the use of those funds or ultimately shifting them to another unit or campus altogether. In addition to the disincentives, it is not in the best interests of a campus to have the Office of the President direct how it spends these savings, as that determination is properly and best left to the campus.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

The State Auditor's recommendation would achieve a measure of accountability that the Office of the President currently lacks in its systemwide procurement initiative. Specifically, our recommendation would ensure that university locations are using the benefits from the systemwide procurement initiative to further the university's core missions. Absent measures of accountability over the university locations' use of these benefits and its unwillingness to adopt our recommendation, the Office of the President's assertion that university locations have redirected these benefits to the university's core missions lacks credibility.

All Recommendations in 2016-125.1

Agency responses received are posted verbatim.