Chancellor's Message to Employees

November 6, 2007

TO: All CSU Employees

FROM: CSU Chancellor Charles B. Reed

RE: CSU Update

I want to share information about a state audit report of the California State University that will be released today by the Bureau of State Audits.

The Bureau of State Audits initiated a review of the CSU's employee compensation policies last spring. The audit was conducted after the CSU's transition policy for executives was publicized last summer and was the subject of a joint legislative committee hearing. A team of auditors visited five CSU campuses (Fullerton, Long Beach, Sacramento, San Diego and San Francisco) and the Chancellor's Office to analyze data in three areas: monitoring of compensation policy and practices; the administration of executive transition and post-employment compensation; and the administration of moving, relocation and dual-employment policies.

This is the first half of the state audit report; the second half will focus on hiring practices and discrimination lawsuits and is scheduled for release in December. The first half of the report and the CSU's responses can be viewed here (.pdf).

Let me share with you some highlights of the report and how CSU approaches these types of reviews.

First, and most importantly, the CSU is open to having audits because I believe that audits give us the opportunity to examine our policies and our processes and improve them. This audit was conducted in a thorough and professional manner, and the findings and recommendations presented were fair and balanced.

Second, the findings show that no policies were violated, and concludes that none of the actions taken by the CSU were inappropriate.

Third, the audit provides helpful guidance that will allow the CSU to better define employee compensation policies, while maintaining the necessary flexibility that is needed to recruit the best administrators, faculty and staff in a highly competitive market.

One of the primary areas in the audit is the transition agreements for departing campus presidents and other CSU executives. The CSU Board of Trustees began close examination of this policy more than a year ago. The Trustees made changes in November 2006 to put limits on the program and increase the transparency of these agreements by reporting them at their meetings which are public forums. The state audit recommends that information on the status of the deliverables associated with these transition agreements be reported on annually. We agree that this is a good idea and one that will help us continue to be accountable and transparent.

The audit also recommends that the CSU consider total compensation received by comparable institutions, rather than just cash compensation, when deciding on salary increases for executives, faculty, and other employees. The CSU fully supports this recommendation and we plan to review more comprehensive methodologies than cash only for all employee groups.

Another area of focus throughout the audit report is the decision by the CSU administration to delegate most of the operational compliance responsibilities for compensation programs to the campus presidents and staff. We believe that in a system as large and complex as the CSU, with 46,000 employees throughout the state, that such delegation is the best administrative practice. While the state auditors found no policy violations, they did say that for a limited number of cases, a lack of clarity in certain policies led to "questionable" transition agreements with management and relocation agreements for executives. We plan to review these policies carefully and take steps to make sure we are applying them consistently throughout the organization.

The audit also looks at the CSU's dual-employment policy and recommends that the CSU continue to work with the California Faculty Association (CFA) during the collective bargaining process to strengthen its dual-employment policy by imposing disclosure and approval requirements for faculty. The CSU fully agrees with this recommendation and in fact has attempted to implement these recommendations in the past through the collective bargaining process and through legislation.

The state audit recommendations will be discussed by the Board of Trustees in detail in January. The board will consider several options to implement the recommendations including the clarification of existing policy, the establishment of new policy, changes in state law or negotiations as part of the collective bargaining process. You can stay informed on the Trustees' actions by subscribing to the CSU's weekly newsletter CSU Leader: http://www.calstate.edu/CSULeader/.

An audit process can involve a highly detailed level of scrutiny that can be challenging to an organization. But I believe that it is a necessary and vital part of doing good business. I want to thank all of our employees who participated in the state audit and I want to encourage all of you to work with your leadership on ways to improve processes that will lead to better programs and services for our students, our faculty, staff and administrators. Working together we can make the CSU a stronger university system.