By Derek Fleming, Courthouse News

SACRAMENTO (CN) – A bill to criminally charge and fine state employees who willfully mislead the California auditor unanimously passed the state Senate on Thursday and now awaits Gov. Jerry Brown’s signature.

Assembly Bill 562, by Assembly members Al Muratsuchi, D-Rolling Hills, Phil Ting, D-San Francisco and Kevin McCarty, D-Sacramento, is one of about a dozen introduced this year addressing the University of California system after the state auditor revealed the UC Office of the President had obstructed and tampered with a recent audit.

During the audit of the UC system, auditors found numerous instances of obstruction by the president’s office intentional deceptive budgeting practices that prevented the auditor from determining expenses year-to-year and identifying unspent funds. State auditors eventually found $175 million had been hidden from legislative oversight in a special slush fund under the discretion of UC President Janet Napolitano.

Existing law penalizes state agencies and organizations that fail or refuse to provide required documents with a misdemeanor charge. But AB 562 closes a loophole identified by State Auditor Elaine Howle in order to address intentional and deliberate deception and fraud.

Under the new legislation, state employees could face a $5,000 fine in addition to a misdemeanor charge for willful acts of deception.

“I am glad that the Senate passed this important bill. We want to give the state auditor the necessary tools to ensure transparency and accountability,” Muratsuchi said in a statement following the vote. “The University of California is a world-class university system, and as a proud Cal Bear and UCLA Bruin, I want the UC to continue to be a national and global leader in education and research. To do so, the Legislature should exercise proper legislative oversight to make sure that the UC is spending state dollars properly.”

State Sen. Ed Hernandez, D-West Covina, presented AB 562 to his colleagues Thursday.

“As we all know, in order to complete audits and improve California government, the auditors rely on the analysis of reliable, credible data and the cooperation of those being audited,” Hernandez said. “Any willful obstruction of an individual involved in that audit process delays the ability of the state auditor in ensuring the accountability and transparency of government that the people of California deserve.”

Hernandez added AB 562 is a good step to strengthen the state auditor’s authority.

During the same audit of Napolitano’s office, surveys were distributed to each of the 10 UC campuses seeking comment on usefulness of spending activities on university programs. Several surveys were found by auditors to have been altered after submission to the UC president’s office.

Howle determined the surveys had been changed to eliminate negative comments and improve the appearance of Napolitano’s office, in some cases without the campuses’ knowledge.

To further address this, Assemblyman Tim Grayson, D-Concord, wrote Assembly Bill 1655. Grayson’s bill would bar UC campuses from sharing information or asking for advice, counsel or coordination with the UC president’s office during specified portions of an audit. The UC president will also be prevented from using inaccurate accounting when making budget requests.

“The additional transparency required by this bill will ensure that the Legislature has accurate information upon which to make funding decisions,” state Sen. Cathleen Galgiani, D-Stockton, said from the Senate floor.

“Despite having issued two reports to comply with the cost-reporting requirements since 2014, UC does not clearly state what source of information it used as the basis for its cost estimates,” Galgani said. “In fact, the UC stated in both reports that its data should not be reliably used as a foundation on which the Legislature bases funding decisions.”

Grayson’s measure also passed the state Senate unanimously and awaits Brown’s signature.

Galgiani has introduced a constitutional amendment to tie tuition increases to wages earned by administrators of the system. Galgiani’s legislation would address a string of questionable financial decisions highlighted by the state auditor, including wages that are significantly higher for UC administrators than civil service counterparts, that are financed in part by raising tuition. The amendment is currently in committee in the Assembly and will not be heard until next year.

“Increasing salaries for top earners at the expense of students and other employees is a worn-out strategy by UC,” Galgiani said in an earlier statement. “In 2009, tuition was raised by 32 percent, yet lower-wage workers were furloughed and student admissions were cut. Nonetheless, two years later, UC handed out $100,000 pay raises to select administrators.”

The enacted state budget for 2017-18 made a significant change to Napolitano’s office by for the first time in the institution’s history eliminating the ability to set its own budget.

Legislators will now be responsible for determining the funding allocated to a UC president, with more control over how the money is spent and how the UC reports its progress and giving auditors better tools for ensuring compliance and accuracy of information.