Summary

The California State University (CSU) is a system of 23 campuses throughout the State and is governed by a 25‑member Board of Trustees (board). The CSU’s executive officer is the chancellor. In addition to faculty members who teach students and conduct research, CSU employs executive and management personnel and nonfaculty support staff such as payroll technicians, cooks, parking officers, and student workers. For this audit, we reviewed CSU’s hiring and compensation of management personnel, its compensation of CSU executives, and its budget oversight. This report concludes the following:

From fiscal years 2007–08 through 2015–16, management personnel were added at a rate that exceeded the growth rate of other employee groups, including nonfaculty support staff, and the campuses we visited frequently could not adequately justify the number of new management personnel they hired. In addition, at one campus at least 70 management personnel received raises totaling more than $175,000 annually and were not supported by current written performance evaluations, and another campus improperly classified eight assistant coaches as management personnel to increase their salaries.

The CSU Office of the Chancellor (Chancellor’s Office) delegates near complete budget responsibility and authority to the CSU campuses. However, many campuses cannot demonstrate that they are adequately monitoring their budgets. Despite campus officials asserting that their central budget offices follow informal policies to review division and department budgets periodically, four of the six campuses we visited do not document the results of their reviews. Also, state law exempts CSU from many budget oversight mechanisms applicable to other state agencies and requires CSU to periodically submit certain reports to the Legislature regarding its performance. However, none of the reports we examined require CSU to specify how it used state appropriations to improve student success.

The board has followed its policies when setting executive compensation; generally, the executive salaries we reviewed changed only when a position turned over or when the board approved an increase to match increases given to most other CSU employees. However, CSU’s generous relocation policy does not cap the reimbursements available to CSU employees, and several newly appointed CSU executives and some campus nonexecutives received relatively large amounts for relocation and home sale expenses. Furthermore, although current board policy does not specifically authorize the use of campus foundation funds to augment the salaries of incoming campus presidents, it also does not prohibit such use. Foundation salary augmentations paid to campus presidents who sit on foundation boards could create the appearance of a conflict of interest. We also noted one campus whose relocation reimbursement practices do not comply with CSU policy and another campus whose practices did not meet its own policy.

In addition, we reviewed CSU’s practices contracting with an external auditor and found that its practices complied with applicable requirements. We also reviewed CSU’s implementation of recommendations from our 2007 audit report concerning employment compensation and found that CSU fully implemented only one of our six prior recommendations. We have made related recommendations in the Other Areas We Reviewed section of this report.

Summary of Recommendations

Legislature

The Legislature should require CSU to submit an annual report that provides information on specific activities that CSU engaged in during the previous year to meet the State’s goals for student success.

CSU Chancellor's Office

The Chancellor’s Office should require its own divisions and departments and the campuses to prepare and maintain written justifications for any proposed new management positions. In addition, it should ensure that its own divisions and departments and campuses create, implement, and adhere to a written merit evaluation plan for management personnel as state regulations require, and should work with relevant stakeholders to come to an agreement on the appropriate classification of assistant coaches. It should also require campuses to develop and implement budget oversight policies that define the minimum level of reviews that budget managers are required to perform, including the periodic comparison of budget to actual spending levels.

Finally, the Chancellor’s Office should work with the board to develop, approve, and implement an executive compensation policy that expressly prohibits the use of foundation funds to pay campus presidents. It should also establish caps on the relocation reimbursements it pays to CSU executives and require campuses to establish similar caps for their nonexecutive staff, and it should follow up with campuses to ensure that they sufficiently adhere to CSU policies addressing relocation reimbursements.

Agency Comments

The chancellor states that the CSU will take various actions in response to the recommendations we made. In many instances, however, those actions do not fully address our recommendations. Please see the Response to the Audit section for CSU’s response and our comments to its response.

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