Audit Results Add to UC Pay Concerns

For the last decade, University of California leaders systematically failed to disclose to UC’s governing board the details of pay packages and perquisites granted to senior executives, despite policies requiring such disclosure, according to an audit released Monday.

The independent audit by PricewaterhouseCoopers, which was requested by the regents following reports that the public university had spent millions in recent years on undisclosed or questionable compensation for executives, detailed a litany of such omissions and exceptions.

The audit found that, in more than half of the 64 cases detailed, UC provided extra pay or benefits to its top administrators as policy exceptions or without explicit approval from the regents. The issue is largely one of a lack of notification rather than all the perks.

The audit did not assign blame or responsibility for the decisions it outlined. But along with a highly critical task force report on the issue on April 13, it painted an increasingly detailed picture of a university leadership that has made policy exceptions seemingly at will and without regard for its responsibility to inform the regents or the public.

The compensation controversy has already prompted legislative hearings, and the audit is the first of three reports on the issue to be released by mid-May. In recent weeks, UC administrators and regents have said -- again and again -- that they would correct the problems and have begun to take steps to do so. On Monday they noted that they still need to do more.

“Time is of the absolute essence if we are to restore the public’s trust,” regents Chairman Gerald L. Parsky said during a special meeting of the governing board at UCLA. He said the regents could take action on the report, including possible disciplinary action, as soon as their next regular meeting in May, but said they must first take all the information, including the pending audits, into account.

“The regents take very seriously ... the inability of the administration over the last 10 years to consistently comply with regental policy,” Parsky said in comments to reporters after the meeting. For starters, he said, the regents would no longer rely on voluntary compliance from administrators; they plan to establish a staff position to monitor compliance.

The audit’s recommendations include creating a standard checklist for documenting all aspects of senior managers’ compensation.

Regent Joanne Kozberg said the 46-page audit, which cost the university $1.5 million, pointed to a “systemic breakdown on multiple levels.” Kozberg, who was the co-chairwoman of the task force, said, “We really have processes that have broken down, and we have not disclosed them properly to the public.”

But Regent Norman Pattiz said the findings, though serious, pointed to questionable processes and systems over a period of years, not to criminal wrongdoing. “This isn’t about people committing fraud or taking kickbacks,” he said.

The new report examined the pay packages of 64 current and former UC executives from 1996 to 2005. It targeted all aspects of their compensation, including base salaries, car and relocation allowances, stipends, and university-provided housing, among other benefits. It included decisions made during the administrations of current UC President Robert C. Dynes and former President Richard Atkinson, who left the post in September 2003.

In general, the audit found that UC leaders sought approval from the regents for administrators’ base salaries and additional stipends given for extra -- usually temporary -- responsibilities. But they often did not seek approval for such extras as relocation and car allowances, bonuses and severance pacts.

At UCLA on Monday, Dynes noted that the situation was especially troubling in light of a similar controversy more than a decade ago, when UC was criticized for excessive compensation to departing executives.

“The real tragedy of all this ... is that similar events occurred in the early 1990s, and 15 years later we are facing the same issues,” Dynes said. “Policies were put in place, but there was no system implemented to make the policies effective.”

But even for Dynes, the former UC San Diego chancellor who became president of the university system in 2003, there were extras not reported to regents.

The report noted about $23,000 in undisclosed expenses for Dynes, related to the cost of his wife, Frances Hellman, continuing to live in the UC San Diego chancellor’s residence for parts of two years after Dynes moved into the Bay Area residence for UC presidents.

UC spokesman Michael Reese said Hellman, then a physics professor at UC San Diego, needed to stay in that area while her new lab was being set up at UC Berkeley. Reese said the couple have since separated.

The report also noted that some compensation for a number of employees, including the extra income for Dynes, was not reported to the Internal Revenue Service. Officials said amended W-2 forms would be submitted.

In other examples of cases it said were exceptions to university policy or not approved by the regents, the audit found that several officials, including former UC Berkeley Chancellor Robert Berdahl, were provided university housing and low-interest home loans concurrently.

Berdahl’s successor, Robert Birgeneau, and UC Santa Cruz Chancellor Denice Denton were among employees for whom UC agreed to honor sabbatical agreements earned at their former universities.

In another policy exception, the former director of the Los Alamos National Laboratory, George Nanos, received a separation package in which UC agreed to continue to pay his $287,000 salary for up to two years and four months after his resignation in 2005. The university also agreed to reimburse Nanos up to $200,000 for any loss on the sale of his New Mexico home.

Parsky said Dynes would address the board at its May meeting about compensation decisions made on his watch. “And then, on a case-by-case basis, including at the highest level, we will determine what action should be taken,” Parsky said. He declined to speculate Monday about Dynes’ future.

Two state lawmakers who have been critical of UC’s awarding of perks and pay had more harsh words Monday.

“The PricewaterhouseCoopers audit confirmed many of our worst fears about how UC leaders reward their own. With evidence showing that they ignored their own procedures for two-thirds of the senior managers in this review, it’s apparent that policies alone are insufficient,” said Sen. Jack Scott (D-Pasadena).

Sen. Abel Maldonado (R-Santa Maria) said he was disappointed the report did not specify how or why the policy exceptions were made. “Without the answers to these very basic questions, how can the UC and the regents stop this from happening again?” Maldonado said.

Sheldon Steinbach, general counsel for the Washington-based American Council on Education, offered another perspective, saying that many of the perks listed in Monday’s report have become fairly common in the top rungs of academia nationwide as universities compete for executive talent.

The standard benefits, along with less frequently seen ones, he added, are the result of negotiations similar to those involving a star professional athlete.

“It’s no different than a baseball team or football team. It’s a negotiation. People don’t look at college presidents as individuals who negotiate contracts, although they look at baseball and football players this way,” said Steinbach, whose organization is an umbrella group for the nation’s colleges and universities, including the UC system.

The controversy over the lack of regents’ oversight may lead to some changes in policies but not necessarily in the contracts themselves, he said.

“In the future, these decisions may be elevated or more scrutinized,” he said. “But just because it wasn’t elevated or scrutinized does not mean the final agreement wasn’t fair and reasonable when considering the interests of the people of California.”

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Times staff writer Larry Gordon contributed to this report.