The California Bureau of State Audits released its University of California Compensation practices audit report yesterday, showing $334 million in improper compensation – a significantly lower figure than reported in the media.

The San Francisco Chronicle’s articles alleging gross compensation improprieties in the UC system spurred the audit. The report comes on the heels of an April 24 PricewaterhouseCoopers audit commissioned by the UC that identified many compensation improprieties, and prescribed increased public disclosure of compensation data, as well as closer monitoring.

The 142-page audit states that the Corporate Personnel System, which is used by the UC Office of the President to track pay activity on UC campuses, contains “overly vague categories” that obscure the reliability of compensation data contained within it, and decrease its usefulness as an oversight tool in preventing further irregularities.

The report further underscores the finding that the president’s office regularly allows compensation policy exceptions. For example, the president’s office approved a housing allowance of $187,500 to be paid over five years for UC Riverside A. Gary Anderson Graduate School of Management Dean Rajiv D. Banker when official UC policy allowed a maximum of $53,300.

In a statement released yesterday, UC Regent Chairman Gerald L. Parsky lauded the bureau’s “valuable contribution to the process we have launched” in responding to the Chronicle’s allegations, and deferred further response to a later date.

“The Regents have asked President [Robert C.] Dynes to respond to these reports, including the Bureau of State Audits’ report, at the May [17-18] Regents’ meeting,” Parsky said. “We will review all of this information and begin taking appropriate actions at that time.”

State senator and UC watchdog Jackie Speier (D-San Francisco, San Mateo) issued a statement responding to the audit yesterday, saying it “clearly demonstrates a systematic failure of University of California administrators to be guardians of the public trust.”

Speier also took the opportunity to condemn increases in student fees and comparatively low salaries for employees in the UC-system, warning that changes would be necessary to avoid making the UC the “Wal-Mart of higher education.”

“A fundamental cultural shift, from the University Office of the President on down, must occur if UC is to remain the crown jewel of higher education in this state,” Speier said.

The state auditors used the CPS system’s data to evaluate system-wide compensation totals. The data showed that in the 2004-2005 fiscal year, UC employees received a total of $9.3 billion in compensation, of which $334 million went to non-salary types of compensation. This is a significantly lower total than the $871 million reported in the Chronicle article.

The audit attempts to reconcile the difference between its findings and those of the Chronicle by explaining that it reclassified $443 million in pay to the UC’s Health Compensation Plan as regular pay because it is used primarily to compensate medical employees’ teaching and clinical services.

In a letter responding to the report, Dynes expressed approval for the bureau audit’s clarification of the compensation amounts stated in the media.

“We also appreciate the Bureau’s efforts … to add clarity to amounts reported in the media,” the letter read. “We continue to be concerned about elements of compensation that have been mischaracterized in the media as bonuses, or hidden compensation, when in fact many of the elements are viewed within the University as regular pay for teaching and research.”

The audit included six suggestions for improvement, including the issuing of “clear directives prescribing consistent use of the CPS,” the imposition of limitations on the amount of exceptions to compensation policy, increased transparency in UC upper-management pay, reform of retirement compensation, and use of CPS to monitor improprieties on a regular basis. In addition, the report recommends the UC decide whether it is appropriate that employees who were improperly compensated be made to repay funds, and recommends that payment plans be made if so.

Dynes responded to the audit in a statement yesterday emphasizing the importance of changing the UC’s compensation practices.

“This report illustrates our need for stricter oversight and greater transparency in compensation matters at the University of California,” Dynes said. “The key findings reaffirm my own resolve and the changes I have already begun to implement.”

Speier also underscored the importance of acting expediently on the findings of the report.

“I call upon the University to move quickly and decisively in adopting all of the State Auditor’s recommendations,” Speier said.