Report 2006-103 Summary - May 2006

University of California:

Stricter Oversight and Greater Transparency Are Needed to Improve Its Compensation Practices


Our review of the compensation practices of the University of California (university) revealed the following:

  • The Corporate Personnel System (CPS) used by the university's Office of the President (president's office) to track the pay activity of university campuses contains inconsistencies and overly vague categories that did not allow us to determine the reliability of various compensation and funding source classifications contained within it and that limit its usefulness as an oversight tool.
  • Despite these problems, the CPS is the most detailed and complete centrally maintained source of information, and in fiscal year 2004-05 it reflects that university employees earned approximately $9.3 billion—comprised of $8.9 billion in regular pay and $334 million in additional compensation.
  • The president's office appears to regularly grant exceptions to university compensation policy. In a sample of 100 highly paid university employees, 17 benefited from an exception to compensation policy.
  • Appendix A presents the compensation, exceptions to policy, and additional employment inducements received by a sample of 100 highly compensated university employees.
  • Some university campuses circumvented or violated university policy, resulting in a $130,000 overpayment to an employee and improper increases to others' retirement-covered compensation.
  • The university did not consistently disclose its officers' nonsalary compensation, such as housing allowances, to the Board of Regents as required by policy.


The University of California (university) is a public, state-supported land grant institution with a mission to teach and conduct research in a wide range of disciplines and to provide public services. The university is administered by a 28-member Board of Regents (regents)1, which has delegated overall policy development, planning, and resource allocations to the Office of the President (president's office). Beginning in November 2005, numerous articles published in various media criticized the university for providing undisclosed additional compensation in the form of bonuses, administrative stipends, and relocation packages to faculty and administrators while at the same time increasing student fees. The university responded to the controversy created by the issues and allegations raised by the media by providing additional information and explanations to the public, by implementing fact-finding efforts, and by establishing new compensation-related policies.

We were asked to identify systemwide compensation totals for the university by type and funding source to the extent that data are centrally maintained and consistent among campuses. To accomplish this we used the university's Corporate Personnel System (CPS), which is a reporting system that provides management and staff in the president's office with demographic, personnel, and pay activity data on employees paid at the university's campuses and laboratories. Our review found that inconsistencies in how campuses classify compensation and funding sources limit the system's usefulness as an oversight tool for the president's office. Because of the data inconsistencies we found, we were unable to determine the reliability of various compensation and funding source classifications contained within it. Although we found inconsistencies, we provide data from the CPS in the Audit Results of this report because it is the most detailed and complete centrally maintained source of this information. According to the CPS, university employees received $9.3 billion in total compensation during fiscal year 2004-05. Regular compensation totaled over $8.9 billion, with the remaining $334 million going toward additional types of compensation. CPS data indicate that in fiscal year 2004-05 the 4,071 university employees earning $168,000 or more received 10 percent of the regular compensation total but about 26 percent of the additional compensation total.

We were also asked to identify the compensation of highly paid individuals receiving the most funds from state appropriations and student tuition. The compensation for 662 individuals receiving at least $168,000 in fiscal year 2004-05 from these sources totaled $158 million. Appendix A presents the compensation received by the top 100 of these employees. While reviewing the compensation of these 100 employees, we found that the president's office regularly granted these individuals exceptions to university compensation policy. University policy authorizes the president's office to approve policy exceptions that provide employees with benefits for which they otherwise would not be eligible. Seventeen of the 100 individuals in our sample benefited from an exception to policy.

For example, the president's office granted a dean at the University of California at Riverside (Riverside) a housing allowance of $187,500 at a time when policy limited such allowances to no more than $53,300. In addition, the president's office granted six executives in our sample who held academic appointments, including four chancellors and a campus provost, exceptions permitting them to participate in the university's senior management severance pay plan. By doing so, the university agreed to contribute the equivalent of 5 percent of the employee's salary into an interest bearing account that they receive when they leave the university.

We also found that some campuses circumvented and in some cases violated university policies, resulting in an overpayment to a university employee and inappropriate increases to other employees' retirement-covered compensation. In an instance involving an employee at the University of California at San Diego (San Diego), a president's office official proposed a pay arrangement that circumvented policy and, because of San Diego's faulty monitoring of the arrangement, resulted in an overpayment to the employee of $130,000 between November 2001 and January 2006. In a second case, the University of California at Los Angeles advanced a law professor $75,000 in future summer compensation and classified this payment as a housing allowance in the campus's payroll system. In a third instance, despite being on sabbatical for much of fiscal year 2004-05, a San Diego vice chancellor continued to receive a $68,100 administrative stipend for a position she had vacated and also an $8,900 auto allowance. University policy states that senior managers' sabbatical compensation shall be based solely on their administrative salary, which would not include a stipend or auto allowance.

Our review also revealed that some campuses violated the university's retirement plan policy by including inappropriate forms of compensation, such as housing and auto allowances, in individuals' retirement-covered compensation, a percentage of which they may receive when they retire. For instance, Riverside included housing allowances, each totaling $53,300, in two officials' retirement-covered compensation, and the University of California at Irvine included $4,800 in auto allowance payments and $42,373 in profit associated with basketball camps in a coach's retirement-covered compensation. The president's office indicated that it is looking into these and the other apparent violations of policy that we found.

The regents' policies require them to approve all forms of compensation for officers of the university. However, although the university consistently obtained regents' approval for the salaries of officers, it did not consistently disclose to the regents officers' nonsalary compensation, such as housing and auto allowances, as required by university policy. In a sample of 10 officers, the university violated its executive compensation policy by not disclosing to the regents eight auto allowances, four housing allowances (two related to one officer), two transfers of sabbatical credits, and an acceleration of health insurance contributions at the time the regents considered the individuals' appointment. For example, although the university agreed to provide an incoming provost with a $125,000 housing allowance, it did not disclose this allowance to the regents when they were deciding on the provost's salary. Consequently, the regents increased the new provost's salary to $380,000 without knowing she was receiving a $125,000 housing allowance.

Information about salary and nonsalary compensation to university officers was disclosed in the university's annual report on compensation for fiscal year 2004-05. However, the usefulness of this report is limited because it contained inaccuracies and because the president's office did not submit this report to the regents until eight months after the close of the fiscal year, March 2006, at which time it also submitted the report for fiscal year 2003-04. Finally, although university policy does not mandate disclosure of the compensation of employees who are not officers, five of the 10 employees in our sample who were not officers were provided significant housing and/or relocation allowances ranging from $100,000 to $270,000. Except for one relocation allowance, these allowances were not disclosed to the regents when they approved the five employees' salaries. Consequently, we question whether the regents' and university's policies provide the transparency necessary to ensure effective oversight of compensation by the regents.

Appendix B presents the results of our survey of compensation programs and disclosure policies of comparable universities. In this appendix we present the responses we received from the University of California and seven other universities in California and other states. Although the seven responding universities did not fully complete our survey, their responses show that they generally do not disclose more about the details of employee compensation to the public than the University of California.


To improve its ability to monitor campus compliance, the president's office needs to issue clear directives prescribing consistent use of the CPS. These directives should include a requirement that campuses consistently classify compensation into standard categories that best describe the compensation provided to employees. Also, the president's office should standardize the categories that can be included in retirement-covered compensation and restrict the use of classifications that are too vague to allow the president's office to ensure that the compensation complies with university policy.

To preserve the integrity of the compensation policies it issues, the president's office needs to limit the number of exceptions to policy it allows. This objective could be accomplished by the regents requiring the university to track and annually report exceptions to compensation policy that the president, provost, vice chancellor of academic affairs, campus chancellors, and other university officials grant during a fiscal year and provide justification for each exception.

To preserve the integrity of the compensation policies it issues, the president's office needs to improve its oversight of campuses' compliance with those policies. One mechanism it should use to improve oversight is to annually use CPS data to identify unauthorized exceptions to policy, such as housing and relocation allowances paid above allowable limits and auto allowances being granted to individuals who do not qualify.

The president's office should determine if it is appropriate to require repayment of university funds for the instances we identified in which a university employee received compensation in violation of university policy, and if so, develop a repayment plan with each employee.

To eliminate inappropriate compensation included in employees' retirement earnings, the president's office should remove the amounts we identified from the employees' retirement earnings and establish a mechanism to detect, on at least an annual basis, compensation that campuses have incorrectly classified as retirement covered.

To increase transparency as it relates to the compensation of highly paid university employees, the regents should require the president's office to disclose all forms of compensation for university officers and for all employees whose compensation exceeds an established threshold. This disclosure should occur when the regents approve the employees' salaries and at least annually in a report to the regents. If the president's office continues to submit its annual report on compensation to the regents, it should ensure that it is accurate and timely.


The university accepts the findings in our report and indicates that it will combine our recommendations with those of other efforts currently underway to make improvements to the university's compensation programs and disclosure practices.

1 This includes two nonvoting members from the university faculty.