UC Regents Debate Fallout From Audit : Education: Some board members say the state report criticizing executives’ spending has damaged system. Others say it was an unfair smear.

SAN FRANCISCO — A divided UC Board of Regents on Thursday debated the findings of a recent state audit critical of UC executives’ spending habits, with some regents contending that the reputation and financial health of the system have been badly damaged.

The auditor general’s questioning of UC executives’ first-class travel, entertainment and gift-giving with UC funds provoked widespread and appropriate resentment from students and faculty in the nine-campus system, some regents said.

“I’m tired of the perception people have of us and, by golly, I agree with them,” said Regent Roy T. Brophy. “We’ve got to change the perception. . . . We’ve got to win back respect.” Brophy and others said the audit prompted the Legislature to cut $30 million more than expected from UC’s budget earlier this month.

Regent Frank Clark said the audit showed “a complete breakdown” in financial controls and that, as a result, the regents have fallen into “a state of disrepute” among faculty and staff.

Other regents and administrators, however, stressed that the report found no major policy violations. They said UC was being unfairly smeared, perhaps for political purposes.

“One should not use this to indicate there is broad abuse or misuse of these funds,” said UCLA Chancellor Charles E. Young. “Perhaps some changes should be made but there is not rampant abuse.”

Paul Hall, an alumni representative on the regents’ board, agreed. “I think the report has been used in the Legislature as a rhetorical device to serve some people’s purposes,” Hall said.

The regents have been on the defensive since last March, when they held a closed-door session that awarded retiring UC President David P. Gardner $857,000 in extra severance benefits. The auditor general’s report last month focused its strongest criticism on the use of administrative funds from non-state sources for such things as a $2,628 wedding party for a UC employee.

Gardner, who will be succeeded Oct. 1 by UC Irvine Chancellor Jack W. Peltason, recently issued new rules on spending in response to the report. These include a ban on most first-class air travel and a requirement that entertainment paid with administrative funds serve “a clear university business purpose.”

In other matters, UC officials announced Thursday that they need two more months to negotiate renewing contracts to run two nuclear weapons laboratories and an energy research center for the federal government. Some faculty, students and activists strongly oppose the renewals.

For the past year, UC and the federal Department of Energy have argued over the government’s insistence that UC assume at least partial liability for toxic spills and nuclear accidents at the labs. On Thursday, Ronald W. Brady, UC senior vice president for administration, indicated that the government recently agreed to limit UC’s liability. Brady said he is “reasonably optimistic” that new five-year contracts will be signed. Current pacts were to expire Sept. 30 and have been extended until Nov. 29.

Contract opponents greeted news of the delayed negotiations with glee, saying it showed UC now understands the labs’ environmental risks. At the close of the regents’ discussion, several anti-lab activists popped open a champagne bottle and toasted what they said was a first step toward moving the labs away from weapons research.

The regents also approved acceptance of a $513,842 bequest from the estate of a San Francisco woman who donated the funds for “poor American Caucasian academic scholars.” Officials said the gift to UC Berkeley from Marguerite E. Hornbeck does not violate university or federal rules on racially restricted scholarships because there are sufficient funds that are not specifically earmarked for ethnic groups. Administrators said the gift was not the first accepted by the university for whites only.