Report 2016-130 Recommendation 23 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 #23 To: University of California

To ensure that its staffing costs align with the needs of campuses and other stakeholders, by April 2019 the Office of the President should set targets for any needed reductions to salary amounts using the results from its public and private sector comparison and adjust its salaries accordingly.

Annual Follow-Up Agency Response From April 2019

Following the previously approved methodology to include public and private sector data, 66% of employees are at or below the midpoint for their respective positions. Of the 454 employees (34%) whose salaries were above the midpoint, placement within the salary range was appropriate in relation to the depth and breadth of their respective responsibilities. There were no needed reductions to salary amounts resulting from the comparison of the public and private sector data.

Independent consultant Sullivan Cotter reviewed these findings with the Regents' Working Group on UC Office of the President Salary Ranges on January 12, 2019, and the Regents Governance Committee on March 13, 2019. Sullivan Cotter also reviewed their identification of best salary administration practices at higher education comparators and confirmed UCOP practices are consistent with our peer institutions.

The link below provides the Regents item that was presented for discussion:

https://regents.universityofcalifornia.edu/regmeet/mar19/g5.pdf

  • Completion Date: March 2019

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

We are assessing this recommendation as partially implemented because policy choices the Office of the President made negated any savings it would have realized from implementing our recommendation and thus we believe the Office of the President's implementation falls short. In our 2017 report, we noted that opportunities existed for the Office of the President to reduce its salary costs for administrative staff by giving a greater weight to public sector positions when it set its salaries. At the time of the audit, the Office of the President asserted that the higher education environment necessitates higher pay for its staff. Although that assertion may have merit for certain executive employees, it has much less merit for administrative staff who perform similar duties whether they are in higher education or not.

In April 2019, the Office of the President implemented a new methodology that gives comparable state position salaries a particular weight (12.5 percent) in its calculations of the market rate for its salaries. It then conducted a market survey using this weighting methodology when applicable, and ultimately applied an 8 percent market adjustment to all of its salary ranges as a result of this survey. Because of the 8 percent salary range increase, the Office of the President asserts it did not realize any salary range reductions from implementing our recommendation.

If the Office of the President had not applied the full 8 percent increase to all positions, its new methodology for weighing private and public salaries may have resulted in salary savings. We performed an analysis on five administrative positions we reviewed as part of the audit and found that when we reduced the salary midpoints for the Office of the President positions by 8 percent and compared them to comparable state positions, the Office of the President's salary ranges were closer to the comparable state positions than they were when we conducted the audit.

However, with the 8 percent salary range increase, all five of these positions continue to make significantly more annually than their state employee counterparts. For example, the Office of the President will pay an executive assistant between $10,700 and $42,500 more than a state employee in an equivalent position. Similarly, although the State's accounting manager position has a higher salary minimum, the equivalent position at the Office of the President can ultimately make up to $70,200 more annually. For four of the five positions we reviewed, the difference between the Office of the President's new salary midpoint and the State's equivalent position was greater than the differences we found during the audit. Therefore, because of its choice to continue to pay administrative positions at levels much higher than comparable state positions, the Office of the President increased salary ranges and did not realize any savings that could be reallocated to campuses for the benefit of students.


1-Year Agency Response

The Office of the President has initiated efforts to implement this recommendation and will provide a status update on its progress at the next reporting milestone.

  • Estimated Completion Date: April 2019
  • Response Date: April 2018

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

The status of this recommendation is pending the Office of the President setting targets for any needed reductions to salary amounts and adjusting salaries accordingly.


6-Month Agency Response

Implementation of this recommendation will be dependent on actions taken in response to the April 2018 recommendations.

  • Estimated Completion Date: April 2019
  • Response Date: October 2017

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

The status of this recommendation is pending the Office of the President's development of a method for weighing comparable public and private sector pay data due April 2018.


60-Day Agency Response

Implementation of this recommendation is dependent on actions taken in response to the April 2018 recommendations.

A work group has been formed for the two projects related to staff salary ranges (OP and system). The work group members are compensation experts from OP and campuses/medical centers. Meetings occur weekly. An additional work group has been formed to address the project related to the review of leadership salary ranges (Market Reference Zones), systemwide. The work group members are compensation and Human Resource experts from OP and campuses/medical centers. Meetings occur twice monthly.

  • Estimated Completion Date: April 2019
  • Response Date: June 2017

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

The status of this recommendation is pending the Office of the President's development of a method for weighing comparable public and private sector pay data due April 2018.


All Recommendations in 2016-130

Agency responses received are posted verbatim.