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UC President Janet Napolitano defends university finances against audit as chorus grows to cancel tuition increase

UC President Janet Napolitano defends university finances against audit as chorus grows to cancel tuition increase
University of California President Janet Napolitano is shown attending a UC Board of Regents meeting in January. She testified Tuesday at a hearing to address a scathing audit. (Marcio Jose Sanchez / Associated Press)

Summoned to a legislative hearing to explain the negative findings of a recent audit, University of California President Janet Napolitano on Tuesday disputed the report's allegations of excessive salaries and tens of millions of dollars in hidden reserves.

But Napolitano said the auditors' 33 recommendations, including calls for more transparency and accountability, were "helpful and constructive."

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The audit also accused her office of interfering with auditors' surveys of the UC system's 10 campuses. Assemblyman Al Muratsuchi (D-Torrance), who convened the hearing as chairman of the Legislature's audit panel, said Tuesday the allegations of interference with the audit are "deeply troubling."

Napolitano said her office sought to coordinate the delivery of the surveys to make sure they were accurate and the process streamlined.

"I am sorry that we did it this way because it has created the wrong impression and detracted from the important fact that we accept the recommendations in the audit report," Napolitano told the legislators during the four-hour hearing in a packed room at the state Capitol.

Board of Regents Chairwoman Monica Lozano announced she would ask the board to conduct a review of how the surveys were handled by the president's office to make sure actions were proper. In addition, Napolitano said consultants would be brought in to improve the way the budget is adopted.

Some legislators including Assemblyman Phil Ting (D-San Francisco), one of the Assembly members who ordered the audit, said it appears the board has failed to exercise proper oversight of the Office of the President, and they are interested in considering the audit recommendation that the Legislature take over budgeting for the office.

Meanwhile, UC Board of Regents member John A. Perez on Tuesday joined the growing chorus of officials calling for UC to cancel a 2.5% tuition increase set for this fall in light of the audit findings.

The report last month by State Auditor Elaine Howle concluded that the UC Office of the President did not disclose to the Board of Regents, the Legislature and the public about $175 million in budget reserve funds and paid salaries and benefits higher than the amounts received by comparable public sector workers.

Napolitano told legislators Tuesday that only $38 million of the $175 million identified in the audit is an actual reserve, which she said is a reasonable amount. The rest of the money is committed to various programs to improve the university system, including an effort to reduce its carbon footprint and develop a new medical school, she said.

"I do believe we have been transparent about these investments," she said.

Muratsuchi said he wants to make sure the UC system is spending its money correctly.

"It doesn't look right that the tuition is being increased while the auditor found that the president was sitting on $175 million in an undisclosed reserve fund," Muratsuchi told The Times in an interview before the hearing.

The tuition increase would generate about $74 million annually for the UC system, which some opponents note is less than half of the $175 million identified as a "reserve."

As a result, Lt. Gov. Gavin Newsom and Assembly Speaker Anthony Rendon, both ex officio members of the Board of Regents, have also called for cancellation of the 2.5% tuition increase scheduled to take effect in the fall.

"I opposed the tuition increases in the first place," Rendon said this week. "They make even less sense given recent events."

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Perez, a former Assembly speaker who voted against the tuition increases this year, said Tuesday that the audit "reinforces the questions" he has about the possibility that there are other options in the budget to raising fees.

"I support repealing the fee increase, but I don't think we should look at the amount found as reserves [by the audit] as a way to pay it down because that is one-time money that we've got to figure out the best policy for," Perez said.

Earlier Tuesday, a half-dozen Republican Assembly members sent a letter to legislative leadership, calling on lawmakers to issue subpoenas for records as part of an independent forensic audit to determine whether the handling of hidden reserve funds broke any laws.

"California students have faced rising tuition costs and unfair competition from out-of-state students for years," the letter said. "These students deserve better than $175 million in undisclosed funds, excessive administrative costs, increased tuition and fees and weak budget controls."

Twitter: @mcgreevy99

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