The California State University system was strongly criticized for questionable executive compensation policies in a detailed audit released last week by the state auditor.

The report, entitled “California State University: It Needs to Strengthen Its Oversight and Establish Stricter Policies for Compensating Current and Former Employees” revealed no legal breaches but urged the CSU system to modify its employee compensation procedures and to make future decisions more transparent.

The 115-page audit concluded that the CSU has not developed an adequate central monitoring system to review compensation policies or measure the impacts of such payments on the system’s finances.

Specifically, the report stated that the CSU system should include perks, such as housing allowances, when making decisions regarding pay raises and that policies on dual-employment as well as on moving and relocation expenses need to be modified.

California senators called for the audit in July 2006 after California newspapers reported that the CSU had paid over $4 million to outgoing administrators over the previous 10 years.

In many instances, it was unclear what those departing executives were doing in exchange for so-called “consulting fees.” Others were paid millions, often undisclosed publicly, for moving from administrative to faculty positions.

The CSU system has continually held that its executive salaries lag behind those of comparable institutions, and justified recent pay raises as a means of filling the gap.

The audit found, however, that the board of trustees only considered cash compensation when making its justification and ignored the sizeable housing allowances and other benefits that top executives often receive.

“This audit confirms that major changes are needed at the University,” Democratic State Sen. Leland Yee said in a statement.

Yee authored the Higher Education Governance Accountability Act, which was signed into law last month and will require all executive compensation packages to be voted on in an open session, as well as full disclosure of the package with accompanying rationale.

“Instead of supporting students, faculty and staff, the university for too long has catered to elite executives,” Yee’s statement continued.

“I hope the CSU administration swiftly makes the changes necessary for our public university system to succeed rather than be so tarnished by executive compensation scandals.”

The audit comes just two months after the CSU Board of Trustees approved an 11.8-percent salary increase for Cal Poly President Warren Baker and 27 other top CSU executives.

Baker’s new $328,209 salary continues to make him the highest paid university president in the CSU system, as well as the second-highest paid executive, trailing just CSU Chancellor Charles Reed, who earns $421,500 a year and is provided with a house.

“The CSU should use the audit to take a look at what they do in regards to their compensation practices” said Richard Saenz, physics department chair and the California Faculty Association (CFA) president for Cal Poly.

“The gist of what the faculty association thinks is that the audit has brought out and shown that a lot of things were done without full transparency. We hope that the report will result in better decision-making in the future,” Saenz said.

While the overall CSU payroll increased by $225.8 million – or 9.6 percent – in the period from July 1, 2002 to June 30, 2007, auditors went on to note that “average executive compensation increases varied significantly by employment classification.”

Executive compensation increased by an average of 25.1 percent over that time period, compared to 10.4 percent for management personnel, 5.6 percent for tenure-track faculty and 6.2 percent increases for other faculty.

“I think it’s a reflection of what goes on in society, where the higher you are up on the ladder, the bigger the pay raises. It seems that the CSU executive compensation raises have continually outpaced that of faculty and staff positions,” Saenz said.

John Travis, the CFA’s political action chair and Humboldt University professor, agreed in a statement by the association.

“The audit confirms everything CFA has been saying over the past several years about the California State University administration’s proclivity to mismanage, especially in regard to executive pay and perquisites,” he said.

“It’s not only a question of poor policies,” Travis continued. “The problems enumerated in the audit raise questions about the competency of the chancellor’s office and its methodology in decision-making.”

“We agree with all of the auditor’s recommendations in concept, and will be working with the board on the most feasible way to implement them,” Reed said in a press release from his office.

It also acknowledged several instances existed where exceptions were made to written CSU policies at the discretion of the chancellor or a campus president.

“Policies require that CSU administrators exercise their best judgment when faced with unique circumstances affecting personnel matters, and are held accountable by the board and other stakeholders for their outcome,” Reed said.

“We do plan, however, to review areas where the audit recommends greater clarity and consistency to improve our operations.”

In the same statement from the chancellor’s office, CSU Board Chair Roberta Achtenberg said, “The audit provides helpful guidelines to better define employee compensation policies and practices, while still maintaining the flexibility necessary to recruit among the best faculty and executives.”

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