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University of California system didn't follow its own contracting rules, state audit finds

University of California President Janet Napolitano attends a UC Board of Regents meeting in January. (Marcio Jose Sanchez /  Associated Press)
University of California President Janet Napolitano attends a UC Board of Regents meeting in January. (Marcio Jose Sanchez / Associated Press)

The University of California broke the rules that govern when it is allowed to replace full time employees with contract workers, according to a state audit released on Tuesday.

The second audit of the university’s Office of the President this year also found some of its campuses cut corners in awarding some contracts.

Auditors said two contracts they reviewed that resulted in the replacement of full time employees with contract workers did not fully adhere to the employee replacement guidelines in either contract.

In one case, UC San Francisco entered into a contract to outsource some information technology services, which it estimated would save $30 million over five years by displacing 40 full-time employees and 12 contract workers.

The campus made the Office of the President aware of its plans, but did not provide the required paperwork with analysis justifying its decision. 

UC Davis also failed to get a review from the Office of the President for a housekeeping services contract that replaced 12 full-time employees with contract workers.

UC President Janet Napolitano noted in a letter to State Auditor Elaine Howle that auditors cited some contracts in which the UC complied with policy, but added that the university "will focus on your recommendations as we work diligently to further shore up our procedures." She also said work is underway to develop a better contract system and that responsible contracting is necessary to reduce costs.

Claire Doan, a spokeswoman for the UC president, noted that 30 other services contracts were looked at by auditors who found they “generally adhered to the Office of the President’s contracting policy.”

Napolitano has been under fire after an audit released four months ago found she failed to disclose tens of millions of dollars in unallocated funds and that her office provided excessive salaries and perks to managers. As a result, the Legislature recently voted to take more control of her budget.

The latest audit also found problems with the contracting itself. Auditors found that some campuses avoided competitive bidding on contracts by repeatedly extending the contract's expiration or increasing its value. For example, auditors said UC Davis amended its contract with a food service vendor 24 times, extending the contract’s term from seven years to 19 years, and increasing its value from $71 million to $237 million.

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