$4 Billion Mystery at UCOP

What is the explanation for this apparent discrepancy?

$400 – $500 Million per year

by Charles Schwartz, UC Berkeley

General Funds = Unrestricted money from the State of California to the University of California (UC) for its operating budget.

Regents’ Budget = UC Budget for Current Operations; see table near the end, titled,  “Income and Funds Available”. FY 2010 data from budget for 2010-11, issued 11/2009.  These are budget numbers, originating from The Regents and eventually approved in Sacramento, which show how much of General Funds UC received each year. [Note: These are not the amounts requested by UC for the next fiscal year, they are the amounts for the current fiscal year that have been approved by the Legislature and the Governor.]

CFS = UC Campus Financial Schedules, Schedule 12-D.  These are accounting numbers, which show how much of General Funds has actually been spent each year as operating expenditures.

The gap between these two numbers is a mystery. How can it be that the amount of this money  actually paid by the State to The Regents for their annual budget should be so much larger than the amount of this same money actually spent by UC for its annual operating costs. Where did that difference go?  This is not just a one-time effect: over the ten year period described above the total discrepancy adds up to $4.8 Billion.

In a recent paper I looked at alternatives in the present budget crisis, focusing on the University’s Core Funds – General Funds plus Student Fees. Noted there was a discrepancy between budget data and expenditures data for General Funds in the last fiscal year 2009-10. The graph above shows that discrepancy occurring systematically each year over the last decade. What follows is the correspondence I have had with top officials at the University of California Office of the President (UCOP) seeking some explanation for this surprising situation.

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On January 25, 2011, I sent this graph of General Funds data by email to Patrick Lenz, UC’s Vice President for Budget, with a copy to Peter Taylor, Executive Vice President for Finance.

Dear Patrick;
I wonder if you can explain to me the apparent discrepancies in data about General Funds at UC, which are shown in the attached document.

Thanks,
Charlie

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February 1, 2011
Dear Patrick and Peter;

It is now one week since I sent you my inquiry, asking for some explanation of the large discrepancies shown in the attached data concerning General Funds at UC.
When may I expect your response?

Charlie
cc: President Mark Yudof

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February 1

Professor Schwartz – We’re working on your response and I’ll get you an
estimated time when I’m in Oakland tomorrow to meet with my staff.

Patrick
cc: President Yudof
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February 4
Dear Patrick and Peter;

While waiting for your response to my inquiry about apparent discrepancies in General Funds at UC, I have looked again at the data available to me and found one correction that reduces the discrepancies somewhat.  Taking account of the “Expense Capitalized” contribution to General Funds expenditures, as found in the Campus Financial Schedules, I now have the corrected data shown in the attached Table.

The Cumulative Discrepancy over the past 12 years now stands at just over $4 Billion. I look forward to your explanation of this matter.

Charlie
cc: President Yudof

General Funds at UC: Budgeted and Spent

Fiscal Year Budgeted * Spent ** Difference
$ Millions $ Millions $ Millions
1998-99 2,817 2,435 382
1999-00 3,050 2,717 333
2000-01 3,576 3,137 439
2001-02 3,786 3,422 364
2002-03 3,704 3,431 273
2003-04 3,442 3,094 348
2004-05 3,265 2,957 308
2005-06 3,399 3,081 318
2006-07 3,637 3,303 334
2007-08 3,851 3,539 312
2008-09 3,834 3,515 319
2009-10 3,263 2,891 372
2010-11 3,736
12 year Cumulative Discrepancy $4,102

* Budgeted figures from “UC Budget for Current Operations”, table of Income and Funds Available: State General Funds + UC General Funds + ARRA
** Spent figures from “UC Campus Financial Schedules”, Current Funds Expenditures: General Funds from Table 12-D or 12-H, including Expense Capitalized
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February 8, 2011
President Mark Yudof;

I have been waiting two weeks to hear UCOP’s explanation for this discrepancy in accounting for State Funds at UC.  Your silence suggests that there is something more than simple incompetence behind this. How much longer should I wait before making this information public?

Charlie
cc: Vice Presidents Lenz and Taylor

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February 10: Continued silence from UCOP.

When Mark Yudof became President of the University of California he announced a new dedication to accountability and transparency. Something is very wrong up there.

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This is a blog: that means that you, the reader, are invited to post your own comments:

What do you suggest I might do about this situation?

What do you suggest you might do about this situation?

11 Comments

  1. Karen Sklar said,

    February 10, 2011 @ 10:13 am

    I suggest that you encourage people to post something on facebook. This is so below the radar of most people who worry about the cost of education. I will pass this on to some people who might be very interested. It has been forever thus. I remember scandals from my days at UCLA.

  2. Andrew Dickson said,

    February 10, 2011 @ 10:36 am

    Another confusing aspect of the budget (which may be related to this discrepancy in part) is that 19900 funds include a significant portion of the indirect cost recovery (a historical aspect dating from before 1999-2000). However, in the campus financial schedules it is separated out and is together with the rest of the ICR as Unrestricted/Discretionary rather than as Unrestricted/General (where the state appropriation is credited).

  3. Charles Schwartz said,

    February 10, 2011 @ 10:48 am

    Regarding Indirect Cost Recovery: I understand that a portion of this is counted as “UC General Funds” and is included as a part of overall General Funds in both the budget and in the accounting reports. Other parts of ICR (“Off-The-Top” funds and also the “University Opportunity Fund”) are counted elsewhere in both the budget and in the accounting reports. So, as I understand it, this does not help to explain the discrepancy discussed above.

    If my understanding of these issues is incorrect, I would expect that UCOP officials would say so; but they have just clammed up.

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    February 10, 2011 @ 11:34 am

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  5. Chris Newfield said,

    February 10, 2011 @ 11:37 am

    I tweeted this post Charlie so I’m sure help will be coming soon!
    My main thought was the same as Andrew’s,but I think you’re right that the revenue and expenditure totals should match even if the money comes into a campus as 19900 (ICR folded into state GF) but gets spent as 19933 (ICR) or something else. In addition, this was supposed to be fixed by the late 1990s accounting changes, including the 19933 tracking number for ICR (see p 11 of the Funding Streams Proposal http://www.universityofcalifornia.edu/senate/underreview/fundingstreams.systemwidereview.12.21.10.pdf). I’d love to understand the explanation.

  6. cloud minder said,

    February 10, 2011 @ 12:54 pm

    recommend you send this post and comments to :

    Joint Legislative Audit Committee
    Contact the Committee
    Joint Legislative Audit Committee
    1020 N Street, Room 107
    Sacramento, CA 95814

    (916) 319-3300 telephone
    (916) 319-2352 facsimile
    maybe they can also address this in their scheduled report findings in April since you once again can’t get an answer in a reasonable time frame from UCOP.

  7. Bernard Minster said,

    February 10, 2011 @ 1:24 pm

    I expect that Andrew is correct, and that the difference arises from other budgetary fund sources (e.g. ICR, Lab fees, etc) that eventually become labelled as GF, even though they do not appear in the Regents-approved spreadsheets. Nonetheless the call for transparency is legitimate and should be answered, relatively easily I would think.

  8. Finance is Tricky... said,

    February 10, 2011 @ 1:32 pm

    Well, a better question might be why does schedule 12-D show expenditures at $21 Billion and the Regents budget shows approval at only $14 Billion…

    One source of difference between these figures is that one is an approved budget while the other is an actual financial statement of what really happened. These two will always vary to some degree (and hopefully not too much).

    Another point is that the Regents budget for general funds includes a footnote which states that only 81% of those funds are actual state funds while the other are UC general funds. If you multiply the Regents budget figure by 81% for 2009-10 you will find that the Regents budgeted $2.64 billion for STATE general funds and the University appears to have spent $2.75 Billion. Pretty close. I didn’t check the other years, but perhaps this is your answer.

    Whatever the real answer is, the difference is undoubtedly one of the definition of terms and the scope of the various budgets. Clearly the Regents budget at $14 Billion is leaving out some of their operations.

  9. Charles Schwartz said,

    February 10, 2011 @ 2:00 pm

    “Finance is Tricky” asks about the gap between $14 Billion in the Regents’ Budget and $21 Billion in total annual expenditures. The answer is: that difference is made up by the “Extramural Funds” – sponsored research and other such things – that are not discussed in the Budget because that budget document is meant for discussion between UC and the State of California.

    Also, regarding “UC General Funds”: I have previously noted that they are included in both the budget figures and also in the expenditures figures. So this is not an explanation for the discrepancy I have identified.

  10. Mark Yudof to Professor Charlie Schwartz: Mind your own Beeswax! | UC Movement for Efficient Privatization (UCMeP) said,

    February 10, 2011 @ 5:32 pm

    […] Read more here. […]

  11. justaguy said,

    February 22, 2011 @ 5:21 am

    Perhaps it would be good to fwd this to State Sen Yee, as he seems interested in investigating UC finances, and a letter from a State Senator would (hopefully) be harder to ignore.

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