The University of California’s Office of the President is under fire for findings in State Auditor Elaine Howle’s recent performance audit of that Office. Some of the key issues should sound familiar to those who follow our audit work, including:
- Policy for setting aside reserves
- Transparency of budget and financial reports
- Policies for travel, meal, and conference expenses
- Interference with the audit
Reserves and transparency: the audits
The State Auditor found that UC had no policy for how much to set aside in a reserve (a “rainy day fund”), the purpose of such a fund, and what authority is needed to spend it. Consequently, the UC President faced accusations of having a substantial “secret fund.”
The City of Berkeley also lacked a clear policy until we issued our 2016 performance audit titled: General Fund Reserve Policy Fails to Convey that Maintaining the Reserve is a Priority.
We explained that reserves are needed to protect our most vulnerable residents and programs from federal funding cuts and other emergencies; council and the city manager agreed. We also found that transparency in the budget documents could be improved. As a result of our audit, the city manager:
- Made and continues to make improvements to budget and financial reports
- Performed a risk assessment to determine the appropriate size of the reserves, and
- Presented Council with a comprehensive new policy.
The city manager’s proposed General Fund Reserve Policy set out:
- Amount to be reserved
- How it will be funded
- How it will be used
- Authority and circumstances needed for drawing down the reserve
Council voted to approve most, but not all, of that policy. The General Fund Reserve Policy Council adopted Jan. 24, 2017 deleted provisions for how Council will draw down the reserve, but council wisely agreed to revisit that language, and will do so Tuesday night, May 30 with Item #45 General Fund Stability Reserve Usage Criteria to further strengthen the city’s reserve policy, as recommended by the city manager last Nov. 29, in response to our audit.
Travel and expense reimbursement: a tale of two policies
Also on the May 30 council agenda (item #2) is the city attorney’s proposed amendment to the Expense Reimbursement Policy for Mayor and Council, with clarifications and updates based on the auditor’s office’s ongoing review of council expenses and requests for legal advice.
Council adopted the expense policy in response to State legislation in 2005. The high cost of meals and events for University Office of the President staff was a well-publicized issue in the state auditor’s performance audit. The city policies, for both city staff and councilmembers, are specific, mandatory, and frugal, while UC guidelines appear to be only suggestions. One eye-opening detail in the state auditor’s report was the UC guidance for lunch: a $47 suggested maximum, as opposed to the City’s $15 actual maximum.
Audit interference
The most troubling audit finding in the state auditor’s report, from the perspective of your independent performance auditor, was that UC’s Office of the President interfered with the auditors, even going so far as to modify the answers from leadership on the campuses to a survey about the effectiveness of service provided by the central office.
In 20 plus years as city auditor, working with five different city managers, I’ve never experienced interference with one of our audits. In fact, city management has been the source of some of our best audit ideas, and has championed implementation of recommendations resulting in substantial positive change over those years – including a stronger rainy day fund to protect us from the coming storms.
Maybe the University of California should think about being a little more like Berkeley.
