Auditor Looks In: Now that the audit is out, a money-losing hotel would not be advisable

Undoubtedly, the headline on the audit report for UC released today will be the generalized call for more “transparency.” The report produced a nasty back and forth between UCOP and the State Auditor as to whether what the report found was significant or not with UCOP effectively suggesting that the audit was a waste of money. The audit was the product of a request by state senator Leland Yee – now running for mayor of San Francisco – who has made something of a career out of criticizing the university.

That being said, there is material in the report about “auxiliary enterprises” and whether they are subsidized or not. The specific cases raised are 1) use of student fees for the Pauley renovation at UCLA (and another building, see pp. 57-58 of the report; these are report pages, not pdf pages) and 2) a subsidy UC-Berkeley provided to its money-losing athletics program.

On a listing of the number of “funds” (accounts) for such enterprises and functions, UCLA has more of these accounts than other campuses and they are concentrated in housing, hotel, conference services, etc. (See page 54.) The auditor notes that UCOP’s position is the campus auxiliary enterprises are the responsibility of the campuses and that it does not get much involved in them. (p. 53)

In the back and forth sniping between UCOP and the auditor (which begins on p. 79), there is an interesting statement in the auditor’s reply (page 90, item marked “15”).

The auditor says that UCOP’s critique of the audit overstates its (the auditor’s) concerns about auxiliary enterprises, assuming that there are no plans within UC to provide subsidies to such enterprises more frequently than is now the case. The auditor assumes that the Berkeley case is a rare occurrence. It disagrees with UCLA as to whether the Pauley diversion was/is legit but, again, seems to assume that the Pauley situation was a unique event. It would be a Bad Thing for UCLA and UC if – following such an audit – it turned out that there were more money-losing enterprises in the works that would need some kind of subsidy or diversion.

All of which takes me to the hotel/conference center UCLA has planned to replace the Faculty Center. As has been pointed out by the Academic Senate Committee on Planning and Budget, the hotel’s business plan is a money loser. If we commit to a money-losing enterprise after the state auditor raises concerns about subsidizing such enterprises or diverting funds to them – but seems to have been assured that such decisions were rare anomalies that are not expected to happen in the future – we are asking for trouble.

So maybe we shouldn’t ask for it. You think?

You can read the state auditor’s report at http://bsa.ca.gov/pdfs/reports/2010-105.pdf

You can find a media account of the report at http://blogs.sacbee.com/capitolalertlatest/2011/07/audit-says-university-of-california-should-be.html

Note: Ultimately, UCLA did not use the student fee for Pauley after complaints. But it defends its rights to have done so. See http://californiawatch.org/dailyreport/audit-finds-ucla-misused-23-million-student-fees-11813