Unapproved Pay for U. of Calif. Officials

Audit finds that dozens of top administrators received benefits awarded without needed okay by regents.
April 25, 2006

The University of California's painfully public process of coming clean about its compensation practices continued to unfold on Monday, with the release of an outside audit showing that dozens of top university officials received pay or other benefits that were awarded over a decade without the required approval of the Board of Regents.

"It's very clear that there has been a total lack of compliance with the policies that the regents put in place in 1993," said Gerald L. Parsky, the board's current chairman.

In releasing the results of the audit by PriceWaterhouseCoopers, which the regents commissioned as part of a months-long inquiry into how the university pays its top administrators, Parsky noted repeatedly that none of the individual recipients had done anything wrong, and George M. Marcus, the board's vice chairman, said there was "no evidence that we are in any way violating principles of compensation."

But the audit, the first of three that will be released in the next few weeks, did make clear that many top administrators had been promised or received benefits that were "not approved by the regents as required by regental policies" or been granted “exceptions to university policies or standard practices [that] were not approved by the regents.”

The review by the auditing firm examined the pay and benefits given to 64 officials who have held 32 key positions in the California system over a decade, from 1996 through 2005. While top administrators of the university routinely asked regents to approve the base salaries and additional salary and bonuses for campus chancellors, lab directors and key executives of the university system, they did not seek approval for such items as automobile and housing allowances, relocation allowances, and participation in a little-known severance pay plan, among other benefits.

And for some employees, the audit found, those benefits amounted to hefty sums: Marye Anne Fox, chancellor of the University of California at San Diego, received $248,000 in 2005 in “incentives, awards and by agreement payments” that were not approved in advance by the regents, money the audit said was designed to compensate her for sabbatical benefits earned in her previous job (at North Carolina State University) and for work “performaced prior to employment.” That brought her total compensation for the year to $612,038, the audit found. At least 14 other officials received payments of more than $100,000, for either severance pay or relocation allowances, that had not been approved by the regents.

The release of the PriceWaterhouseCoopers audit follows by a week a set of recommendations made by an internal panel to reform the university system’s policies and procedures for paying its top officials. The university system has been taking a pounding from local newspapers and legislators over a series of revelations about perceived mismanagement, and while some regents said Monday that they believed the system, despite procedural flaws, actually underpays its employees, the board’s leaders say they know they must get their house in order.

“Public concerns about UC senior management compensation are among the most important issues facing the University of California,” said Parsky, the chairman. “Time is of absolute essence if we are to restore the public's trust in the university and its compensation policies and practices. It is crucial that we take these steps so we can return our focus from compensation to the fundamental teaching and research missions of this university.”

The drip-drip-drip of public revelations is expected to continue over the next several weeks, with the release of state and internal audits of executive pay and a board meeting at which the regents will consider steps to reform the system’s compensation practices.

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