SAN FRANCISCO (CN) – The University of California regents have hired a law firm and tapped a former California Supreme Court justice to lead an investigation into a recent audit that found $175 million in surplus funds hidden by the UC president’s office.
Former California Supreme Court Justice Carlos Moreno will join with Hueston Hennigan LLP, a Los Angeles-based law firm, to provide an independent review regarding some of the California State Auditor’s findings last month, most notably that the office of UC President Janet Napolitano inappropriately interfered with the audit process.
“Justice Moreno will provide expertise in the areas of fact-finding and neutral evaluation, while Brian Hennigan will be the firm’s partner in charge of providing legal services,” UC Regents chair Monica Lozano said.
Fallout from the scathing audit continues, with state lawmakers circulating bills aimed at stripping Napolitano’s office of its budgeting autonomy and Napolitano and her cohorts scrambling to explain discrepancies and contain the political damage.
The audit, released in April by California State Auditor Elaine Howle, detailed how Napolitano’s office stashed $175 million in surplus funds, the majority from a campus assessment fee. The audit also revealed Napolitano has raised that fee twice in the last four years, despite not spending all of the collected funds.
“In effect, the Office of the President received more funds than it needed each year, and it amassed millions of dollars in reserves that it spent with little or no oversight from the regents or the public,” the audit states.
The audit comes at a time when the UC system is under increasingly scrutiny after UC Regents voted to raise tuition in January, the first increase in five years.
Among serious accounting errors and deceptive practices, the auditors found that executives in Napolitano’s office are paid significantly more than private-sector counterparts and receive benefits packages that are uncommon outside the office. In some cases, Napolitano’s executives are paid three times more than their private-sector counterparts.
The auditors also questioned $280,000 in expenses for Napolitano’s chief of staff and $120,000 in consultant fees.
Even more damning, Howle said Napolitano’s office intentionally interfered with the audit process by inappropriately screening campus responses to the audit before they were submitted. Howle said campus statements that were initially critical of Napolitano’s office had been revised and made more positive.
That critical information was withheld from auditors, including actual costs of initiatives. Budget presentations changed in each of the four years audited, making comparisons difficult, and Napolitano’s office erased some budget documents when auditors requested them, according to the audit.
The scathing audit has prompted several lawmakers to call for Napolitano’s ouster, with one state senator introducing a bill aimed at carving into the budgetary autonomy of the UC Office of the President.
State Sen. Ed Hernandez, D-West Covina, introduced an amendment to the state Constitution that if enacted will remove some of the vagueness surrounding the UC budget process and directly fund schools from state coffers.
“The recent report from the state auditor makes it clear that change is needed within the system,” Hernandez said in a statement. “We need more accountability from the Office of the President and new perspectives on the Board of Regents.”
For her part, Napolitano stridently rejected the conclusions of the state audit, writing a six-page letter to Howle that said “the report fundamentally and unfairly mischaracterizes UCOP’s budget processes and practices in a way that does not accurately capture our current operations.”
Napolitano said the $175 million surplus is exaggerated and is closer to $38 million, which she characterized as “a modest amount for an organization our size.”
Her letter did not address the accusations that members of her office staff doctored feedback profiles from UC campuses to make it appear as though her office was more popular. Regarding bloated executive salaries, Napolitano said they only appeared that way because the salaries were being compared with executives at a singular university rather than an entire system, which she characterized as unique to California.
Moreno began his judicial career at Los Angeles County Superior Court, and subsequently accepted a nomination by then-U.S. President Bill Clinton to serve as federal judge. He served in that post for three years before accepting the nomination from then-Gov. Gray Davis to serve on the California Supreme Court. He served on California’s highest court for about a decade before retiring in 2011.
President Barack Obama made Moreno the ambassador to Belize in 2013.