Report 2016-130 Recommendation 28 Responses

Report 2016-130: The University of California Office of the President: It Failed to Disclose Tens of Millions in Surplus Funds, and Its Budget Practices Are Misleading (Release Date: April 2017)

Recommendation #28 To: University of California

To ensure that its spending aligns with the needs of its stakeholders, including campuses and students, by April 2019 the Office of the President should establish spending targets for systemwide initiatives and administrative costs.

Annual Follow-Up Agency Response From April 2019

The CSA's assessment of Recommendation #28 affirms the recommendation as stated is complete: "The Office of the President established spending targets for administrative costs and systemwide initiatives as part of its fiscal year 2018-19 budget presented to the Regents in May 2018." UCOP agrees with the CSA statement but does not agree with the additional point requiring another fiscal year comparison in the FY19-20 budget. All accounting and reporting changes were fully explained and presented during the May 2018 budget item that was approved by the UC Regents.

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

We have rated this recommendation as fully implemented because we were able to compare the Office of the President's budgeted amounts presented in its fiscal year 2018-19 budget to its fiscal year 2019-20 budget. At the time of our last assessment, we determined the Office of the President established spending targets for administrative costs and systemwide initiatives as part of its fiscal year 2018-19 budget presented to the Regents in May 2018. However, due to the significant accounting and reporting changes to the budget, we assessed this recommendation as partially implemented until we could compare the fiscal year 2018-19 budget to the fiscal year 2019-20 budget. We found that the Office of the President did not appear to make significant changes to its budget presentation this fiscal year. We note that in the fiscal year 2019-20 budget, the Office of the President is requesting a $20 million increase to its programs and initiatives and a $19 million increase to its central and administrative services. The budgeted amount for the strategic priority fund remains stable at $30 million.

Annual Follow-Up Agency Response From October 2018

As part of the UCOP FY2018-19 budget, spending targets were established for administrative costs as well as all five categories of Programs & Initiatives:

-Spending targets for administrative costs, comprising 43% of the UCOP budget, are detailed on pp. 12-14 and in Schedule D.

-Spending targets for State/Federal Programs, Campus Programs, Systemwide Programs, and Systemwide Initiatives, together comprising 45% of the UCOP budget, are detailed on pp. 10-11 and in Schedule C.

-Spending targets for Presidential Initiatives are provided on pg. 14 and in Schedule E, along with all commitments to be funded through the newly established Strategic Priorities Fund.

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

The Office of the President established spending targets for administrative costs and systemwide initiatives as part of its fiscal year 2018-19 budget presented to the Regents in May 2018. These targets resulted in a budget increase of $6 million for systemwide initiatives and a $58 million decrease in systemwide programs, mostly due to significant accounting and reporting changes the Office of the President stated it made to its budget presentation. Additionally, the Office of the President set a $30 million target for the newly established strategic priorities fund, which was created to fund short term programmatic needs, administrative projects, and emergent or urgent priorities. Due to the significant accounting and reporting changes the Office of the President stated it made to its budget presentation, we assess this recommendation as partially implemented. We believe our review of the targets will be more meaningful when we can compare the fiscal year 2018-19 budget to the fiscal year 2019-20 budget.

1-Year Agency Response

Spending targets are being set for programs, initiatives, and central administration as part of the FY18-19 UCOP budget process. The Office of the President will continue to develop and improve upon its efforts to establish spending targets and conduct program reviews, and will provide a status update on its progress at the next reporting milestone.

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

The status of this recommendation is pending the Office of the President's establishment of spending targets for systemwide initiatives and administrative costs due April 2019.

6-Month Agency Response

Implementation of this recommendation will be dependent on actions taken in response to the April 2018 recommendations and establishment of spending targets due April 2019.

The Executive Budget Committee has been consulted on AB97 and is expected to continue to review the list of systemwide initiatives and programs, including establishment of targets by 2019.

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

The status of this recommendation is pending the Office of the President's development of a clear definition for systemwide initiatives and administration due April 2018 and its establishment of spending targets for systemwide initiatives and administrative costs due April 2019.

60-Day Agency Response

Implementation of this recommendation is dependent on actions taken in response to the April 2018 recommendations.

The systemwide initiatives work group will work with the budget process work group to develop work flow, approvals and review of initiatives in the context of annual budgets. The budget process documentation will include methodology for establishment and communication of annual budget targets expected to include targets for systemwide and Presidential initiatives. The establishment of targets and the prioritization of alternatives will include key stakeholders such as the Executive Budget Committee who will serve in an advisory capacity to the President.

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

The status of this recommendation is pending the Office of the President's development of a clear definition for systemwide initiatives and administration due April 2018 and its establishment of spending targets for systemwide initiatives and administrative costs due April 2019.

All Recommendations in 2016-130

Agency responses received are posted verbatim.