A Joint Legislative Audit Committee voted 10-0 this week to have the state auditor examine the University of California’s financial practices following complaints and questions by many asking why student fees have gone up consistently while at the same time UC Executives have received lucrative raises and bonuses.
Among the requests of the state auditor will be to: identify the sources of UC’s public funding; review and evaluate the policies and practices UC uses to track and allocate public funds; determine how the UC has spent its state appropriation, student fees, and funds from the federal government; evaluate UC’s practices for non-salary expenditures including travel, consultants, and entertainment; assess expenditures for instruction and identify the average amount per student UC spends on instruction; determine what funds are restricted and how; and examine auxiliary organizations, including expenditures.
“This audit is long overdue. UC has never had this kind of an audit, and it’s just high time.”
However, UC officials say they have nothing to hide and welcome the chance to show that their practices are above board.
Nathan Brostrom, executive vice president for business operations said:
“We have nothing to hide. … In fact, that cooperation has already begun in earnest. We shared with the State Auditor today the past five years of reports, audits and financial statements produced by the university, and they address virtually all of the questions raised in the audit request.”
In statement, Senator Yee said:
“Unfortunately, not even one month can pass without another scandal plaguing our university. A comprehensive state audit will help further uncover the extent of the waste, fraud, and abuse within the UC, and finally hold university executives accountable.”
He continued:
“The UC administration expects taxpayers and students to foot the bill without asking any questions. It is long overdue for the UC administration to start acting like a public institution and not a private country club.”
Will the audit solve the problems?
The Daily Californian, the newspaper of the UC Berkeley campus, suggests the answer is a maybe, “a state audit of UC finances, though potentially a costly affair, could encourage greater transparency and efficiency.”
They make an interesting point that both sides should heartily agree with: the fact is that allegations of scandal keep coming, largely unabated. They are inevitable during times of downturn when resources, limited to begin with, become strained and there needs to be a determination as to how one allocated those scarce resources.
The editorial writes:
“Whether or not those allegations are true is not for us to say. But undoubtedly, there is misinformation out there-on both sides-which hinders our ability to maintain UC quality and tackle the current budget crisis. And we’re hoping that a recently-approved state audit of UC finances will be just the tool to clear up some of the most pressing controversies.”
This would certainly be a good start. The editorial continues:
“The university has characterized the effort as unfeasible, given the sprawling size of the budget. Officials are partially correct-attempting to examine every nook and cranny of UC finances would be unreasonable and difficult.
And while the cost and projected time requirements of the effort haven’t been disclosed yet, it’s likely to be an expensive and long-term project. But if the audit is conducted properly with targeted goals in mind, the pay-off will be worthwhile.
An audit could reveal inefficiencies and waste within university management, prompting a shift toward greater cost-effectiveness and better budgeting. By targeting hot-button issues, like whether senior administrators receive egregious perks or if fee money goes completely back to fund instruction, the effort could give the public a more realistic picture of the university’s financial health.
This would make the public better informed, while challenging the university to live up to its PR message of transparency and accountability. And if it lives up to the challenge, maybe activists will be less reluctant to trust and work with the administration.”
In short, I too am skeptical that the audit will reveal some big scandal. Most of the spending will show tough decisions because retaining quality executives and raising fees during times of decreasing resources. We may disagree with some of those decisions, we might if in their place think we would make different decisions, but none of them are the sign of unfettered corruption.
However, this move does send a strong message that people are watching and that there will be increased transparency and calls for accountability and that will likely be a positive move.
—David M. Greenwald reporting
Until I read the Article in the Enterprise, I had no idea that audits were a special occurrence and not a routine, ongoing process. So, here we have a giant public-sector business filled with employees owning a worldview that private industry requires greater and greater government oversight… meanwhile they feel entitled to spend our hard earned tax dollars with minimal oversight and transparency. Can we say “hypocrites”?
I run a small, private, non-profit business. I require an extensive financial audit every year. In addition, I face a comprehensive regulatory audit of my complete operation every two years. All UC and CSU campuses should require similar routine audits of their finances and operations. I am dumbfounded that this is not the case already.
Assuming an honest, competent and comprehensive audit report delivered with complete transparency, I expect we will be stunned and amazed at the waste uncovered. Then maybe we will start demanding routine audits for ALL of our tax-payer funded businesses.
Thank you Senator Lee. Keep up the good work.
[i]In short, I too am skeptical that the audit will reveal some big scandal. Most of the spending will show tough decisions because retaining quality executives and raising fees during times of decreasing resources. We may disagree with some of those decisions, we might if in their place think we would make different decisions, but none of them are the sign of unfettered corruption.[/i]
This paragraph, at least, acknowledges the truth. Here are some additional points:
Yes, an audit is unlikely to reveal any genuine scandal. That’s because public universities, certainly including UC, are already more transparent than most state agencies. On the web, UC is an open book compared to institutions such as the prison system or the DMV. It’s very common for demagogues to call for transparency when they already have it. You can lead them to knowledge, but you can’t make them think.
On the other hand, if Leland Yee wants to claim that an audit did reveal a scandal, nothing will keep him from claiming that. It is true that accusations of scandal keep coming unabated, but they keep coming from the same handful of people. That’s just the way that these people operate.
Yes, the student fee increase was a tough decision and you don’t need an audit to understand it. UC is charging students about half of what the state no longer pays for their education. That’s the simple truth of the matter. Not only does fee money go completely to fund instruction and student services, a lot of other money also funds instruction and student services. That includes not only the state compact but also a slice of grant money. The state does not need an audit to know that in-state students are educated at a financial loss. UC’s already-open books show unfunded enrollment numbering in the tens of thousands.
Finally, UC’s executive compensation isn’t about retaining quality executives, it’s about hiring competent executives. The hard fact is that executives have a lot of mobility these days. Universities have to compete with each other to hire them. Most of UC’s executive salaries are below the median for public research universities. So it’s a question of whether UC should hire its executives after many other but not all other universities; or whether UC should be outright last in line.
If some of UC’s managers actually are high quality and not just fully competent, then they are lucky strikes for the university. At the other end, UC does have its share of barely competent administrators. Many of them are paid well below the market rate and yet they would not be able to get a better job if they tried. Yes, they are paid six figures and I don’t feel sorry for them, but that’s really not the point.
[i]I had no idea that audits were a special occurrence and not a routine, ongoing process.[/i]
They are, Jeff. You can read some of them here ([url]http://www.universityofcalifornia.edu/finreports/[/url]). Yee wants a new type of audit on top of all of the other audits. As I said, you can lead a crocodile to knowledge, but you can’t make him think.
My concern is with the term “waste”. One man’s “necessity” is another man’s “waste”. I personally think some of the UC’s expenditures have been “wasteful”, e.g. a brand new stadium. However, I assume the decision was made in the appropriate way by vote of the UC Board of Regents (my understanding is the students were allowed to weigh in as well).
The problem is many taxpayers have differing views of how the UC system should operate – what money should be spent where. For instance, some think the executive salaries are too high in light of the current economic situation, while others believe high salaries are necessary for administration to obtain the most qualified people for the job.
I don’t see how an audit is going to resolve the basic issue of “waste” as Yee sees it – a difference in spending priorities – unless I am missing something… I assume an audit would uncover actual fraud or mismanagement, so would be useful for that purpose, and perhaps to dispel complaints of scandalous behavior by UC Regents.
[i]others believe high salaries are necessary for administration to obtain the most qualified people for the job.[/i]
No, Elaine, no one believes that UC has obtained the most qualified people for these jobs. On one side, some people Know Better how to run UC. Since they Know Better, they are also sure that UC administrators aren’t very good and should be paid less, and they also don’t know and don’t care how administrators might choose which university to serve. On the other side, some people know that most executive salaries at UC are below the median, and that the question is to get fully competent people, not the most qualified people. This second group seems outnumbered among voters by the first group, but they have the truth on their side.
[i]I personally think some of the UC’s expenditures have been “wasteful”, e.g. a brand new stadium.[/i]
That was the work of Vanderhoef and Hinshaw. Katehi won’t be tearing down the stadium of course, but she has rather different things to say about varsity athletics than Vanderhoef did.
What concerns me is the grand-standing, accusatory aspect of this endeavor. If a legislator really supports higher education, there are ways to ask for deeper or more thorough audits without raising public ire against higher education.
These are very perilous times for California higher education. True friends of higher education do not say: “Unfortunately, not even one month can pass without another scandal plaguing our university. A comprehensive state audit will help further uncover the extent of the waste, fraud, and abuse within the UC, and finally hold university executives accountable”, or “The UC administration expects taxpayers and students to foot the bill without asking any questions. It is long overdue for the UC administration to start acting like a public institution and not a private country club.”
That kind of inflammatory rhetoric is designed to undermine public support for the University of California, and hence is destructive. It is possible to examine or to question some aspects of the University’s use of public funds while being truly supportive of the University and its funding. That’s not what I see going on.
[i]What concerns me is the grand-standing, accusatory aspect of this endeavor. If a legislator really supports higher education, there are ways to ask for deeper or more thorough audits without raising public ire against higher education.[/i]
I totally agree. I would have been happy to have my name on your entire post. For Leland Yee, “transparency” equals scandal-mongering. Instead of supporting UC’s funding request, he questions whether we deserve it. If he’s supposed to be a friend of higher education, he’s as false as any friend ever.
Operational audits sound like a great idea. It is not so much the level of salaries as it is the number of administrators – focus more on teaching and research and less on administration
“Operational audits sound like a great idea. It is not so much the level of salaries as it is the number of administrators – focus more on teaching and research and less on administration”
Would an “operational audit” show there are too many administrators? Or is that just a policy matter, that is up to the UC Adminstrators/Bd of Regents to decide?
“That kind of inflammatory rhetoric is designed to undermine public support for the University of California, and hence is destructive. It is possible to examine or to question some aspects of the University’s use of public funds while being truly supportive of the University and its funding.”
“That kind of inflammatory rhetoric is designed” to make political hay for Leland Yee. I very much doubt his motives are purely altruistic here. I would argue Leland Yee is attempting to draw attention away from the very real budget crisis the legislature cannot seem to grapple with – a huge deficit growing ever larger because the state will not come to grips with its own pentient for overspending and waste, e.g. prison system.
Sue Greenwald ,
“””That kind of inflammatory rhetoric is designed to undermine public support for the University of California, and hence is destructive. “”””
Isn’t that the same thing you do at council meetings , when you degrade the city employees , and delve into negative comments about the budgeting process ?
That kind of inflammatory rhetoric is designed to undermine public support for the University of California, and hence is destructive.
I agree with your point, but this too is inflammatory rhetoric. It infers that the public is too stupid to develop an informed opinion of any problems uncovered by the audit, and therefore we should… what… have the university audit itself?
Sue, forgive me if I digress to the bigger picture here, but this is the exact type of opinion coming from the mouths of politicians these days that are responsible for some much distrust and anger from the voters. It infers that we should protect the (insert program, cause or agency) from robust scrutiny and criticism because it provides a valuable public service. This type of thinking is exactly why we should have routine and thorough audits of public-sector business… it keeps them in check so they can continue. Otherwise, our love of these services and programs causes a destructive decline… similar to how a parent can destroy the life of a child with too little oversight and too lenient application of discipline.
Frankly, I think the UC system would be better served and eventually stronger by shedding any and all reliance on public money. However, given that, it would be likely that the UC businesses would face much more difficult audits from government. That is completely ass-backwards and one of the main reasons that people like me distrusts larger government anything. The government watches private entities… who watches the government?
Politicians that platform on certain government entities have short-term vested interest in protecting them. Remember Barney Frank, Chris Dodd and Fanny Mae/Freddie Mac. Thinking long-term, we should welcome as much transparency as possible (and I disagree with Greg that UC’s business is transparent enough) so that the business model stays sound and viable and the entity can continue.
If UC has nothing to hide, then this political move from Lee should end up a big nothing. However, I suspect it will uncover quite a bit of waste and finding it and removing it will be good for all.
[i]Isn’t that the same thing you do at council meetings, when you degrade the city employees, and delve into negative comments about the budgeting process?[/i]
Yes and no, Avatar. I definitely think that Sue takes very much the wrong approach on the city council. Unlike David, I also don’t think that it’s so easy to separate policy from politeness. I think that the intended policy is inherently negative and confrontational. I also think that Lamar Heystek is part of the problem even if he is a nice, calm guy.
But now that I’ve actually met Sue Greenwald, I feel more charitable about her underlying thinking. I don’t think that she is the same type of person as Leland Yee. I’d rather have her than him on the city council.
I was also a graduate student at Berkeley, as both Sue and Leland Yee were. There was and still is a very strong attitude there that the right approach to politics is always to fight the system; every question becomes a big struggle for justice. Now, sometimes that’s the right philosophy. For instance, the more I hear about acts of torture in the war on terrorism, the more I’d like to see zero-compromise opposition to them. But for a less one-sided question like the city budget or the UC budget, zealous confrontation is not the right philosophy. Not only does it wear down people’s patience, it also just plain won’t work. It might well worsen the problems that it is intended to solve.
I think that Sue is way too partial to Berkeley radicalism as the way to solve problems. On the surface, so is Leland Yee. But Sue is at least sincere in her politics. My impression is that Leland Yee is an insincere radical, and that is rather worse. One clear cut moment was when Yee promised David Greenwald that Cal Grants was the way for UC to help poor students, on the very day that UC executives begged the state to restore Cal Grants and Yee was tearing them down as crooks.
“Would an “operational audit” show there are too many administrators?”
Sure, the focus of an operational audit is efficiency. A finding might be that for certain activities one administrator should manage the activity for the entire UC systems rather than having separate administrators at each campus.
UC’s house is “out of order” when it is offering tens of thousands of dollar raises to administrators (as it just did recently) while it claims it has financial shortfalls. Even in good economic times these overgenerous and grandiose spending sprees were inappropriate, and here they are doing it in the worst of economic times!
UC has been needing an audit for a long time and the public is entitled to know how UC is spending our tax dollars. Kudos to Leland Yee for having the backbone to ask for the audit. The unanimous vote for this audit was the first thing I have heard that our legislators have gotten right in a long time.