UC audit reveals decreasing net assets

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Correction Appended

The UC Board of Regents' Compliance and Audit Committee met Thursday to discuss systemwide technology cost-saving efforts and to pinpoint accountability for campus transparency of finances and payroll in light of an annual systemwide audit that showed the UC's net assets have consistently decreased over the past two years.

In 2010, net assets for the UC totaled $19.4 billion, as opposed to $19.9 billion in 2009 and $22.1 billion in 2008. Though the UC's assets have grown by $4.6 billion since 2008, liabilities - such as debt, obligations to pension benefits and obligations to retiree health benefits - have increased $7.3 billion in the same amount of time, causing the decrease in net assets.

"This is a complex issue and a huge institution," said UC spokesperson Steve Montiel. "But financially, the university is pretty strong."

Factors contributing to the UC's total liabilities for 2010 include nearly $13 billion in debt, $1.6 billion in obligation to pension benefits through the UC Retirement Plan and $3.8 billion in retiree health benefits, according to the audit report. In 2010, the university's current liabilities - which must be paid off within one year - totalled $8.7 billion, while the current assets - which can be sold within one year for a profit - totalled $8.2 billion.

A major component discussed regarding cost-saving efforts to try to remedy the increasing debt was through technology consolidation efforts, particularly with software and data programs throughout the UC system.

According to Chief Information Officer David Ernst, the UC is temporarily using space at the San Diego Supercomputer Center to host 10 racks of servers - one for each campus - to test out how well software systems for things such as payroll and human resources could be monitored and developed as well as see how successful connectivity will be for the 10 UC campuses.

"Changes require money. There is not a lot of free cash at the moment, and we are stressed to find extra money needed to do the single things we have been doing," he said at the meeting. "There has to be a rationale to spend the money today and know when we are going to see some benefits from those expenditures."

The report also states that capital spending - funding that goes towards long-term assets that help in the production of future goods and services - throughout the UC continues at a "brisk pace" in order to provide the facilities necessary to support the university's teaching, research and public service mission and for patient care.

Facilities include academic buildings, libraries, student services, housing and auxiliary enterprises, health science centers, utility plants and infrastructure and remote centers for educational outreach, research and public service.

Part of the UC's total debt, which has increased by nearly $3 billion since 2008, comes from $408 million used to finance the use of commercial paper - a line of credit with large institutional investment groups - in 2010. This is down from 2009, when the UC used a total of $666 million worth of commercial paper utilization and from 2008, when the UC used a total of $550 million.

Additionally, in 2010, $2.8 billion of debt was issued to finance and refinance facilities and projects at various UC campuses, though the report did not specify those projects.

"We've got great ratings services. The university has really high ratings from many ratings services," Montiel said. "I don't know there is any need to reduce liability."

Tags: UNIVERSITY OF CALIFORNIA, UC BOARD OF REGENTS, SAN DIEGO SUPER COMPUTING CENTER, COMPLIANCE AND AUDIT COMMITTEE

Correction: Tuesday, May 10, 2011
A previous headline for this article incorrectly stated that the UC audit revealed decreasing assets. In fact, the audit revealed increasing assets and decreasing net assets.

The Daily Californian regrets the error.

Contact Allie Bidwell and Katie Nelson at [email protected]



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