The interaction between the State Auditor and UCOP has turned a boring problem of inadequate budgetary records into another political firefight. Together the parties have produced a new round of heightened denunciations from state officials that include calls to rescind the 2.5% tuition increase and to increase direct legislative oversight of UC. The report itself runs 169 pages and includes a 34 page, single-spaced UCOP response that rejects 72 separate passages in the audit. This is in turn followed by the auditor's blanket rejection of UCOP's rejections. The report also includes a 6 page letter from UC president Janet Napolitano that, in spite of the confrontation elsewhere, accepts nearly all of the auditor's technical recommendations for accounting improvements.
The angry stand-off in the full document massively overshoots the stated policy differences, and the mutual hostility becomes a problem in itself. Politicians and the press reacted as much to tone as content. Legislative hearings have been called for Tuesday. Long-time LA Times columnist George Skelton signaled renewed doubts about UC's ability to serve the state with a piece entitled, "Big Changes Needed at UC--Starting with the Kool-Aid-Drinking Board of Regents."
This fight is actually unnecessary, and marks another setback for public understanding of the deeper issues raised by the report: research costs, research benefits to undergraduates, and public-good management standards.
The problem seems to start with incomplete lists of programs, and continues with their being funded from two budgets, one of which the auditor calls "undisclosed." The auditor charges (summary here) that UCOP accumulated $175 million in surpluses that it did not disclose, and then spent them through a process that lacks adequate controls. The issue is summarized in the report's Figure 6.
Although UCOP spent some of these reserves, it spent less than it accrued in each year, so the reserve grew--and grew even in years when UCOP increased its tax to the campuses. The auditor agrees that reserves are legitimate, but doesn't understand why UC has no written policy governing their size. It repeatedly insists that UCOP could produce a simple unified budget of revenues and expenditures in which all outlays are visible and clearly tied to specific programs. It offers a one-page sample:
I'd add a couple of lines to this myself, but this is better than what the auditor seems to have gotten from UCOP, and UCOP agrees that it will consider adopting this kind of presentation.
At the same time, UCOP resents the auditor using the term "undisclosed," argues that these are little more than unspent funds carried forward from one year to the next, that its "reserves" are $38 million not $175 million, that all the money was spent on programs that benefit the campuses, its students, and the state, and that administrative growth merely reflects UCOP's enormously complicated set of jobs that are not duplicated in other university systems.
You'd think that this would be the end of it. UCOP could say yes, we're moving budget presentations from Figure 6 to Figure 11, thank you for your help, and by the way we regret any confusion, which was entirely innocent, plus you don't understand our inner workings, which is fine because that's our job as a constitutionally independent entity.
That isn't what happened. The best of UCOP's response is Janet Napolitano's letter to Elaine Howie. The letter accepts most of the auditor's recommendations, deals with the charges of incompetence by saying UCOP constantly strives for improvement, lists some systemwide programs with budgetary amounts that it says are of value, and rejects the recommendation of tighter legislative control of UCOP. The letter doesn't explain why these expenditures weren't present in the visible budget in the first place or why the initial list of programs wasn't complete.
I completely understand the auditor's core beef. Why can't UCOP automatically produce listings and expenditures for the systemwide programs? Why couldn't they have listed all those that are part of their response to the audit, organize them properly (for example, into the categories, "outside sponsors," "presidential initiatives," and "systemwide faculty research")?
I'm doubly mystified because, over ten years ago, I was personally involved in a two-year Senate inquiry into UCOP's systemwide research programs, where our planning and budget committee (UCPB) made iterative requests for full expenditure data for all programs. It was pulling teeth with pliers, but we made progress over time. Phase 1, a full list of all programs with UCOP outlays, should have been in place a decade ago with regular updates as programs and funding changed, which they certainly did. Phase 2, which apparently never happened, was to be tracking expenditures from UCOP to the campuses. Is the geospatial systems funding--to make up an example-- going directly to fund direct and indirect research costs on several campuses, or have two of the four campuses moved the funding into administrative discretionary funds or, as in one actual case, has a campus converted research money into a pseudo-permanent set of FTE lines in a local department? UCOP should have a handle both on how much is going out and how it is being spent. Apparently they don't.
In addition, why didn't UCOP have a unified budget both for the regents and the state? I'm also bewildered by the dual budgets, which is to say that I agree with the auditor that in its multiple lengthy retorts UCOP never really explains the "undisclosed" budget. Why do the books look like that? 169 pages later, I couldn't tell you.
In any case, the numbers fly. UCOP generates the gratuitous mud wrestling of Attachment 2, which apparently seeks victory through body count. That attachment is a masterwork of bureaucratic defensiveness. Naturally, it doesn't work.
The auditor's short final response begins,
The Office of the President’s 34-page Attachment 2 is demonstrative of the barriers we faced throughout the course of this audit. Ultimately, Attachment 2 contained no additional information that would cause us to change the conclusions reached in our report. Rather, the Office of the President goes to great lengths to describe its dissatisfaction with the context we included surrounding the conclusions and the underlying philosophy related to transparency and accountability upon which we based those conclusions. As a result, we are choosing not to comment on each of the 72 pointsIn the summary, the auditor writes,
that the Office of the President included in Attachment 2 because doing so would not ultimately change the overarching conclusion that we convey in this report: that the Office of the President needs to better serve its stakeholders by making decisions in a transparent and accountable manner. (165)
the Office of the President missed an opportunity to receive feedback from its key stakeholders, and it demonstrated an unwillingness to receive constructive feedback.Thus an official state review finds UCOP's accounting substandard and also unlikely to improve.
Not Biting the Bullet on Research
The report concludes that 1 (an undisclosed budgetary surplus) + 2 (unjustified staff growth) = 3 ("significant change is necessary to ensure that the Office of the President's actions along with the mission of the University of California"). This is a brutal conclusion: the State Auditor is saying that UCOP isn't running UC for the public benefit.
The immediate rationale for this claim is continuous administrative growth coupled with "poor tracking and monitoring of its systemwide initiatives" that leads to misused funds. The deeper rationale is what the funds are allegedly misused on--systemwide research. The audit's own list of UCOP initiatives (Table 11, pp 71-72) shows spending in a number of categories, but research seems to be the big problem. It concludes,
Although most of these initiatives provide academic or public benefits, we question the Office of the President's decision to prioritize them over other activities such as campus spending on students especially given it has not sufficiently evaluated these initiatives' purpose and intent. (69)On its face, the statement is ridiculous: the auditor lacks the credentials to question UCOP's judgment about academic priorities, and research, the main component of most of the programs, is part of undergraduate education at a research university, not a subtraction from it.
The underlying problem is that UCOP has failed over many decades to explain the centrality of research expenditures to all levels of students. Longtime VP for the budget Larry Hershman believed the legislature refused to grasp the research mission and always would, so the University had to act as though the state's whole allocation was going into student instruction and related services. I don't doubt he had empirical reasons to think this, but most legislators also thought the internal combustion engine had made train travel obsolete. At some point you have to roll up your sleeves and do the tireless teaching that reframes the debate.
The tragedy of this particular audit is that UCOP is so busy saying it did nothing wrong that it can't tell the more important story, which is that research is a vital public function that costs enormous amounts of money. UCOP has to subsidize a lot of it or it won't actually happen. It has to use state money to do this, as it always has. We could argue about how much should be funded by UCOP vs the campuses, which is what we were getting set to do in 2006. We could also argue about whether faculty have been pushed aside in too many of them, and whether the Senate has enough control. But the real issue here is that the state has to pay for research as well as instruction through enrollment-based general funds. UCOP's dual budgets may have been trying to downplay this, I don't know. The strategy stopped working years ago, and now the battle for the state's role in research has to be fought, and not like this.
Then there's the other huge issue, which is the auditor's claim that UCOP doctored the auditor's survey results. The auditor had sent two surveys directly to UC campus officials to find out whether there were redundant administrative services and how the campuses felt about what they were getting for their UCOP tax. Here's the auditor's statement on the subject:
Contrary to the Office of the President’s assertion that we failed to send our survey to those knowledgeable about specific subject areas, we determined that the campus audit coordinator was best positioned to facilitate the response to one survey and the campus chief financial officer, or an equivalent position, was best suited to respond to the other survey. After we sent the survey, the Office of the President’s systemwide deputy audit officer contacted us and followed-up on some technical questions posed by multiple campuses. This level of coordination was appropriate and we took no issue with it.
However, four days before the survey was due, the deputy chief of staff to the president organized a conference call with all of the campuses to discuss the survey. Subsequently, the emails he provided to us show campuses sent him completed surveys which he reviewed to determine, in part, whether the campus responses were within the scope of our audit. However, as we discuss on page 86, the surveys that campuses sent to the deputy chief of staff were much different than the final surveys submitted to us. As is clearly shown in Table 15 on page 87, significant changes and deletions were made to the original surveys sent to the deputy chief of staff for the Office of the President. (166)As we know, universities, in exchange for academic freedom, agree to conduct impartial and independent research whose findings can't be skewed by politics or money. And yet the audit claims that senior officials of a leading research university coached the subjects of a survey until they got the answers they wanted. UCOP thus blunders right into a culture war stereotype: academics cheat, just like everybody else. You can't trust them not to waste your tax money. Fake news, fake science, fake climate change, #fakeuniversity.
A depressing part of the coverage of this alleged survey tampering was the deference of the campus's top officials to Bernie Jones, Janet Napolitano's Deputy Chief of Staff, who was running the survey massage operation. For example:
Several changes were made to UC Santa Cruz’s initial survey.
Jones told UC Santa Cruz to consider “reframing” or deleting a suggestion for greater systemwide coordination to recruit low-income students, asking administrators there to take into account the central office’s efforts in coordinating disbursement of state funds for underserved schools.
“As you will see, I addressed 98% of your concerns and I made a number of additional changes as well (all in a direction you would not find problematic),” UC Santa Cruz Chancellor George Blumenthal wrote to Jones in a Nov. 23 email. Jones provided the email to The Times.
UC Santa Cruz’s initial survey raised issues about the UCPath system, which is aimed at centralizing personnel, payroll and academic processes.
“Some Office of the President initiatives, such as UCPath were at first very poorly and inefficiently run, but they seem to have figured it out and are on the way to bringing a huge and — often — failure prone project to a successful conclusion,” the initial response said. “The key issue is that the Office of the President provides the leadership, vision, and public relations acumen to keep the University on the best course.”
That paragraph was removed and the final survey response instead read: “The services and leadership provided by the Office of the President are crucial for the success of the system. Especially for a smaller campus like ours, it would be both expensive and inefficient to provide those services ourselves. In addition, there is a true public policy benefit to the role that the Office of the President plays in providing uniform standards….”
This part of the disaster seems to me to flow from UCOP's attempt to defend its executive sovereignty over the overall system. UCSC's revised comment-- a smaller campus needs central services-- tries to nail shut the whole can of worms about campuses' frequent duplication of of UCOP expertise. One example was the decentralizing of technology transfer, as over about 15 years one campus after another got their own office of technology licensing and industry alliances, even as UCOP's Office of Technology Transfer continued to preside. (Some of this decentralization is now being reversed.) My simplified history is that UCOP used to curate, develop, and strategically guide campuses. But in the twenty years, and especially in the last ten, perhaps from around the time that regent Richard Blum wrote a memo calling on UCOP to be "strategically dynamic," UCOP has become better known on the campuses for enforcing standardization and compliance. Disconnected from everyday academic life, it offers the public a series of middlebrow tactics. And as these tactics have failed to produce lasting solutions, it has also devoted itself to spin.
The budgeting and the survey meddling seem to me to have a common source, which is a closed managerial culture dedicated both to its image and its decision rights. Much if not most of UC has become a culture of silence, of conformity, of handpicked task forces replacing senate committees, of a small list of insiders deciding everything, of non-consultation, of divisional senates that provide no information much less active discussion with their supposed constituents, of shunning or quiet retaliation in response to dissent. Senior managers are not meaningfully accountable to their subordinates, including to the tenure-track faculty. Some performance reviews are on a cycle and some are discretionary, but in either case comments are generally by invitation only, and results are never publicized. If actions are ever taken, they are taken from above, and truthful explanations are not given. UC's response to in this case is a good example of this closed culture at work: the chair of the Board of Regents posted a video pep talk that closes ranks with UCOP. She didn't even mention the audit's criticisms, much less promise to deal with them. It's hard to imagine any regent confronting the cognitive and ethical failures that closed cultures create.