Report 2014-121 Recommendation 4 Responses

Report 2014-121: University of California, Davis: It Has Not Identified Future Financing for the Strawberry Breeding Program nor Collected All Available Revenues (Release Date: June 2015)

Recommendation #4 To: University of California, Davis

UC Davis should collect all late fees that its licensees owe.

Annual Follow-Up Agency Response From November 2019

UC Davis will not implement this recommendation as written.

In our 2015 draft report response we stated our position and provided an alternative action: "UC Davis' historical practice of waiving late fees appropriately fostered the development of positive working relationships with our strawberry industry partners. UC Davis will continue to maintain the contractual right to collect late fees and will retain its discretionary ability to waive that right. We will consider, on a case by case basis, whether to assess late fees so long as doing so will not jeopardize long term relationships with licensees. UC Davis will develop a process to document, on a case by case basis, these collection efforts and decisions."

As demonstrated to the auditors in 2016, UC Davis established a process to determine and document whether late fees may be appropriate in certain circumstances. We continue to operate under these late fee guidelines.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

We stand by our recommendation that UC Davis should collect all late fees that its licensees owe. We noted in the audit report that the university's existing funding mechanisms for the strawberry program did not adequately cover certain funding losses, which placed the viability of the strawberry program in jeopardy. Despite this funding loss at the time, UC Davis did not collect $157,000 in late fees from licensees that were late in making royalty payments in fiscal years 2010-11 through 2012-13. Thus, we believe that collecting all late fees could help ensure the strawberry program's viability.

Annual Follow-Up Agency Response From October 2019

The University of California, Davis makes individual determinations regarding the appropriateness of assessing late fees based on guidelines established in June 2016. These guidelines were provided to the California State Auditor in the 2017 annual update.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2018

UC Davis continues to operate under the late fee guidelines established in June 2016 to determine whether late fees may be appropriate in certain circumstances. These guidelines were provided to the California State Auditor in the November 2017 update.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

We continue to stand by our recommendation that UC Davis should collect all late fees that its licensees are contractually obligated to pay, as this funding could be used to support the strawberry program.

Annual Follow-Up Agency Response From November 2017

UC Davis strawberry agreements continue to contain a late fee assessment provision and UC Davis continues to have the right to invoke or waive such provision. We agree with the CSA that the assessment of late fees may be appropriate in certain circumstances and remain diligent in considering and enforcing late fees according to the structure established in the June 7, 2016 Late Fee Process document. In support of these efforts, we provide the 2016 strawberry licensee compliance spreadsheets documenting any late payments and the subsequent determinations regarding late fees.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

We stand by our recommendation that UC Davis should collect all late fees that its licensees are contractually obligated to pay, as this funding could be used to support the strawberry program.

1-Year Agency Response

UC Davis Innovation Access performed an analysis of the appropriateness of late fees, the process for determining whether to assess late fees, and the process by which late fees might be assessed as associated with payments from UC Davis strawberry program licensees. The analysis is based on the following considerations: (1) background; (2) process for determining late fee collection; and (3) implementation of late fees. Based on an on-balance assessment of the considerations listed above, the assessment of late fees may be appropriate in certain circumstances.

The full analysis is provided for your information.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

UC Davis provided a copy of its analysis of the appropriateness of late fees, which outlines its procedures for waiving late fees. However, we stand by our recommendation that UC Davis should collect all late fees that its licensees are contractually obligated to pay, as this funding could be used to support the strawberry program.

6-Month Agency Response

Progress to date for this recommendation is in the form of focused (ongoing) discussion at InnovationAccess in furtherance of the corresponding UC Davis Action (as set forth in our May 22, 2015 letter). We anticipate the process will be completed by June 30, 2016. Over the next several weeks we will continue to take steps toward such completion.

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

60-Day Agency Response

Progress to date for this recommendation is in the form of focused (ongoing) discussion at InnovationAccess in furtherance of the corresponding UC Davis Action (as set forth in our May 22, 2015 letter). We anticipate the process will be completed by June 30, 2016. Over the next several months we will continue to take steps toward such completion.

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

All Recommendations in 2014-121

Agency responses received are posted verbatim.