Janet Napolitano Disputes Finding That Her Office Held $175 Million in Undisclosed Funds

The University of California’s Office of the President did not disclose $175 million in its reserve funds to the university’s Board of Regents or California’s Legislature, according to a state audit released on Tuesday. The audit’s findings were disputed by Janet Napolitano, the UC system’s president, who wrote that figures in the audit had mischaracterized the office.

The audit found that the Office of the President had spent less than it budgeted while asking for funding increases based on previous years’ overestimated budgets, according to a summary of the audit. In doing so the office created an undisclosed budget for spending the reserve funds, ranging from $77 million to $114 million in a four-year period.

Compared with other state employees in California, the Office of the President’s administrative and executive salaries were also “significantly higher,” the audit found. The office spent at least $21.6 million on employee benefits that are uncommon in the public sector – like supplemental retirement contributions – during a five-year period.

In a letter to Elaine M. Howle, California’s state auditor, Ms. Napolitano wrote that the audit report “unfairly mischaracterizes” her office’s budget processes and that the $175-million figure inaccurately represents money available in the reserve.

“The report falsely claims that UCOP failed to disclose ‘tens of millions in surplus funds’ and that UCOP’s ‘budget practices are misleading,’” the letter says. “To start, the $175-million figure mischaracterizes the true amount of UCOP’s available and uncommitted reserve, which is $38 million, a modest amount for an organization our size.”

The audit recommended, among other things, that by April 2018 the office develop a reserve policy to regulate how large its reserves can be and how the funds can be used, and should review its funding restrictions and commitments to discern whether the office can use the money for its discretionary budget and eventually reallocate the money to its campuses.

In a written statement, the president’s office wrote that plans for many of the audit’s recommendations are already underway or will be carried out soon. Ms. Napolitano has also assembled a task force to institute the audit recommendations, according to the statement.

The statement again emphasized that the audit report “erroneously” found that the president’s office had not disclosed its surplus funds. “The audit report also erroneously claimed that UCOP failed to publicly disclose ‘tens of millions in surplus funds,’ and labeled UCOP’s budgeting practices as misleading,” the statement says.

In a separate letter, the Board of Regents asked Ms. Howle to remove recommendations that “encroach” on the university’s autonomy, stating that the board takes its fiduciary duty seriously.

“One of your recommendations calls on the Legislature to directly appropriate funding for the UCOP’s budget, while limiting its ability to seek additional financial support from campuses,” the letter says. “This is deeply troubling for many reasons, key among them the undermining of the constitutional autonomy of the university.”

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