Report 2016-130 Recommendation 7 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 #7 To: University of California Board of Regents

To ensure the ongoing accountability of the Office of the President, the regents should require it to implement our recommendations and report periodically on its progress.

Annual Follow-Up Agency Response From April 2020

The Office of the President provided regular updates to the Regents on its progress towards implementing the audit recommendations during the three-year recommendation implementation timeline.

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

We are rating this recommendation as partially implemented because after three years, the Office of the President has not fully implemented key budget recommendations. As we discuss in our assessment of recommendations 5, 22, and 32, we continue to have concerns that the Office of the President still has not changed its budget process to align with the state budget process. The Regents will not approve the Office of the President's fiscal year 2020-21 budget until July 2020 after the Governor has already approved the state's budget. The failure to present the budget by April of each year may hinder the Department of Finance, the Legislature, and the Governor when making decisions regarding the UC's portion of the state budget. This is a critical recommendation that, if successfully implemented, will improve stakeholders' ability to hold the Office of the President accountable.

We recognize the investment the Regents have made thus far to oversee the Office of the President's efforts. Regardless, we believe ongoing oversight from the Regents is warranted since the Office of the President has not fully implemented key budget recommendations.

Annual Follow-Up Agency Response From October 2019

The Office of the President continues to provide regular updates to the Regents on its progress towards implementing the audit recommendations.

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

We assessed this recommendation as partially implemented based on the ongoing oversight the Regents provided since we released our audit. Full implementation is pending the Regents' ongoing oversight of the Office of the President's implementation of our recommendations.

Annual Follow-Up Agency Response From April 2019

The Office of the President continues to provide regular updates to the Regents on its progress implementing the audit recommendations.

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

This recommendation is partially implemented based on the ongoing oversight the Regents provided since we released our audit. Full implementation is pending the Regents' ongoing oversight of the Office of the President's implementation of our recommendations.

Annual Follow-Up Agency Response From October 2018

The Office of the President continues to provide regular updates to the Regents on its progress implementing the audit recommendations.

The following reports were provided by UCOP to the Regents since our one-year update:

At the May 2018 meeting:

-To the Full Board: Fiscal Year 2018-19 Budget for the Office of the President

-To the Compliance and Audit Committee: Update on One-Year Status Report on Implementation of Recommendations from State Audit of University of California Office of the President Administrative Expenditures

At the September 2018 meeting:

-To the Compliance and Audit Committee: Update on Implementation of Recommendations from State Audit of University of California Office of the President Administrative Expenditures

-To the Governance and Compensation Committee: Plan for Narrowing University of California Office of the President Non-Represented Staff Salary Ranges

Additionally, a Regents working group met in August 2018 to review the plan for narrowing UCOP non-represented staff salary ranges before the plan was presented to the Governance and Compensation Committee for endorsement in September.

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

This recommendation is partially implemented based on the ongoing oversight the Regents provided since we released our audit more than one year ago. Full implementation is pending the Regents' ongoing oversight of the Office of the President's implementation of our recommendations.

1-Year Agency Response

As reported previously, the Office of the President has confirmed to the Regents that it will implement all of the State Auditors recommendations from this audit. The Regents have identified the following reporting schedule and structure for updating the Board on the status of implementing the recommendations from this audit:

-Reports on status of implementation of recommendations at 60 days, 6 months, one year, and annually thereafter to the Compliance and Audit Committee. Work Plan oversight will be governed by a working group of the board composed of the Chair and Vice Chair of the Board and the Chairs of the Finance, Compliance and Audit, and Governance and Compensation Committees. The Chair of the Compliance and Audit Committee will report overall progress to the Board of Regents no less than every 6 months.

-To the Finance Committee: Reports of budget to actuals at the November, March and July meetings and biannual reports on Presidential Initiatives budgets.

-To the Governance and Compensation Committee: Reports on recommendations regarding staffing at the November, March and July meetings.

The following reports were provided by UCOP to the Regents since our six-month update in October 2017:

At the November 2017 meeting:

-To the Compliance And Audit Committee: Update on the status of implementation of recommendations at 6 months

-To the Finance and Capital Strategies Committee: Report of budget to actuals for the Office of the President

-To the Governance and Compensation Committee: Update on recommendations regarding staffing

At the January 2018 meeting:

-To the Full Board: Report on overall progress by the Chair of the Compliance and Audit Committee

-To the Finance and Capital Strategies Committee:

oAdoption of UCOP reserve policy (action) and discussion of related guidelines

o Update on the UCOP budget process

At the March 2018 meeting:

-To the Finance and Capital Strategies Committee:

oOffice of the President fund restrictions

oReport of budget to actuals for the Office of the President

oUpdate on the UCOP budget process and budget presentation prototype

oBudget categories and definitions: systemwide programs an initiatives

-To the Governance and Compensation Committee:

o Approval of Market Reference Zones for certain senior management group positions (action)

o Update on staff-related implementation workstreams

o Amendment and rescission of certain Regents' and other policies pertaining to senior management group compensation (action)

o Update on workforce planning

Additionally, a Regents working group charged with developing a comprehensive policy on executive compensation discussed salary setting methodology for leadership positions over a series of four meetings in January and February 2018.

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

This recommendation is partially implemented based on the ongoing oversight the Regents provided since we released our audit one year ago. Full implementation is pending the Regents' ongoing oversight of the Office of the President's implementation of our recommendations. During multiple meetings in January and March, the Regents received multiple reports on the Office of the President's progress towards implementing our recommendations including new policies related to its fund restrictions, reserve, budget, and salaries for senior managers that the Office of the President asked the Regents to approve. The Regents also requested additional information and action from the Office of the President. For example, during the January Regents' meeting, Regent Park requested that the Office of the President clarify the terms restricted because she was unclear as to whether it was restricted externally or by the Office of the President. In March, the Office of the President returned with more in-depth definitions of its restrictions.

6-Month Agency Response

The Office of the President has confirmed to the Regents that it will implement all of the State Auditors recommendations from this audit. The Regents have identified the following reporting schedule and structure for updating the Board on the status of implementing the recommendations from this audit:

-Reports on status of implementation of recommendations at 60 days, 6 months, one year, and annually thereafter to the Compliance and Audit Committee. Work Plan oversight will be governed by a working group of the board composed of the Chair and Vice Chair of the Board and the Chairs of the Finance, Compliance and Audit, and Governance and Compensation Committees. The Chair of the Compliance and Audit Committee will report overall progress to the Board of Regents no less than every 6 months.

-To the Finance Committee: Reports of budget to actuals at the November, March and July meetings and biannual reports on Presidential Initiatives budgets.

-To the Governance and Compensation Committee: Reports on recommendations regarding staffing at the November, March and July meetings.

At the July 2017 Regents meeting, the Regents received an update on the status of implementation of recommendations at 60 days.

At the November 2017 meeting, the following reports will be provided to the Regents:

-To the Compliance And Audit Committee: Update on the status of implementation of recommendations at 6 months

-To the Full Board: Report on overall progress by the Chair of the Compliance and Audit Committee

-To the Finance and Capital Strategies Committee: Report of budget to actuals for the Office of the President

-To the Governance and Compensation Committee: Update on recommendations regarding staffing

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

The status of this recommendation is pending the regents' ongoing oversight of the Office of the President's implementation of our recommendations. During the November meeting, the regents received multiple reports on the Office of the President's progress towards implementing our recommendations. The regents also requested additional information and action from the Office of the President. For example, Regent Perez was concerned regarding the board's oversight involvement in determining if funds are truly restricted. The chief operating officer responded to this concern by committing to bring the results of the Office of the President's analysis to the regents to ensure it aligns with their expectations.

60-Day Agency Response

The Office of the President has confirmed to the Regents that it will implement all of the State Auditors recommendations from this audit. The Regents have identified the following reporting schedule and structure for updating the Board on the status of implementing the recommendations from this audit:

- Reports on status of implementation of recommendations at 60 days, 6 months, one year, and annually thereafter to the Compliance and Audit Committee. Work Plan oversight will be governed by a working group of the board composed of the Chair and Vice Chair of the Board and the Chairs of the Finance, Compliance and Audit, and Governance and Compensation Committees. The Chair of the Compliance and Audit Committee will report overall progress to the Board of Regents no less than every 6 months.

- To the Finance Committee: Quarterly reports of budget to actuals and biannual reports on Presidential Initiatives budgets.

- To the Governance and Compensation Committee: Quarterly reports on recommendations regarding staffing.

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

The status of this recommendation is pending the regent's ongoing oversight of the Office of the President's implementation of our recommendations.

All Recommendations in 2016-130

Agency responses received are posted verbatim.