Audit probes "questionable" CSU executive compensation practices

By: Ben Roffee

Posted: 11/13/07

The recent debate over the Cal State University executive compensation controversy received its first official governmental examination on Nov. 9, 2007. The California Bureau of State Audits weighed in last week, releasing its findings of an audit on the executive compensation practices of the CSU.

The report, titled California State University: It Needs to Strengthen Its Oversight and Establish Stricter Policies for Compensating Current and Former Employees, comes at the request of the Assembly Speaker Fabian Nuñez, Assemblyman Anthony Portantino, State Senator Leland Yee, and the Joint Legislative Audit Committee. At a weighty 115 pages, the audit reveals various "questionable" practices in CSU executive compensation policy.

The official wording of the audit states of the overall condition of CSU compensation policy, "the university has not developed a central system enabling it to adequately monitor adherence to its compensation policies or measure their impact on university finances."

More specifically, the audit claims "some management personnel received questionable compensation after they were no longer providing services to the university," and "the discretionary nature of the university's relocation policy can result in questionable reimbursements of costs for moving."

According to the audit, the overall payroll of the CSU has increased by 9.6 percent since 2002, although "increases varied significantly by employment classification." While executive salaries increased by 25.1 percent, management and technical staff salaries increased by 10.4 percent. The disparity between faculty and executive salary growth was even more disproportionate, with tenure-track faculty salaries growing by 5.6 percent and other faculty positions growing by 6.2 percent.

Speaker Nuñez, released a statement saying, "The [audit] report reinforces the concerns I had when I requested the audit in the first place. CSU clearly needs to establish vigorous standards and be more transparent when it comes to its hiring and retention practices."

"This is public money we're talking about and the CSU needs to ensure that it's used appropriately. I expect the legislature will keep a close watch to make sure the increased accountability called for in this report actually happens," added Nuñez.

Assemblyman Anthony Portantino, who has been one of the central figures in protesting CSU executive compensation practices, echoed Speaker Nunez' remarks on Nov. 9 in a similar release.

"The deliberate and thorough report released today by the State Auditor confirms what many of us have long suspected: the CSU Board of Trustees, by approving exorbitant executive compensation expenditures during a statewide budget crisis, is not focusing on it's core mission: educating our children," he said.

Another vocal advocate of CSU compensation reform, Senator Leland Yee warned "The Trustees and the Chancellor…to take this audit seriously and begin investing in instruction rather than creating a get rich factory for executives."

The government officials opposed to the CSU executive compensation practices have also been early authors of legislation directed at regulating the very practices addressed in the report. Senator Yee's SB 190 passed through Governor Schwarzenegger's office with a signature of approval last month, requiring all executive compensation packages to be voted in open session.

On Nov. 12, the California Faculty Association released its analysis of the findings in a report titled, Weak Oversight & Poor CSU Policies Favor Executive Perks: An analysis of the state audit of CSU compensation policies and practices. CFA President Lillian Taiz cites a "large expenditure of foundation funds to further compensate already well-paid executives" as yet another faulty executive compensation practice.

Despite these proclamations, CSU officials rendered a much more optimistic analysis of the findings of the audit.

In a message to all CSU employees issued Nov. 6, Chancellor Reed maintains "the findings show that no policies were violated, and concludes that none of the actions taken by the CSU were inappropriate." According to the Chancellor, "the CSU is open to having audits because I believe that audits give us the opportunity to examine our policies and our processes and improve them.

The CSU's official response to the report states, "the CSU agrees in nearly all cases with the auditor's recommendations."

The marked polarity of these responses suggests the debate over executive compensation practices in the CSU system will endure for some time to come. Given criticism of growing executive salaries amidst gaping budget shortfalls, this issue could very well prove to be a point of contention at the upcoming CSU Board of Trustees Meeting.

The Trustees will meet this week to discuss and vote on the CSU's budget request. Among their considerations, the Trustees will be forced to reckon with Governor Schwarzenegger's recent warning that the State budget shortfall will increase by $2 billion. He also cautioned all State departments to anticipate budget cuts upwards of 10 percent.

Although the CSU indicated they "will be acting on some recommendations immediately and on the others as soon as feasible," the meeting schedule released on the CSU website does not indicate the Trustees will address the findings and recommendations of the audit report at the meeting this week. However, the Trustees have made official plans to discuss the matter when they meet again in January.