State Auditor's Report on CSU Operating Reserve

June 24, 2019

Yesterday, the California State Auditor released a report on the California State University’s operating reserve funds. I am pleased to report that the auditor found that the CSU has all the appropriate policies and practices in place to safeguard these accounts. Unfortunately, two of the audit’s conclusions mischaracterize the nature of these funds and our systemwide efforts to be fully transparent. Considering the commitment of our campus and the CSU to financial prudence and transparency, I want to correct these mischaracterizations.

First, the audit describes these funds as “surplus,” being held by the CSU and available for discretionary and ongoing purposes. This is incorrect. The reserve funds are set aside for one-time unexpected expenses, facilities and maintenance, and to ensure the success of our students regardless of the economic climate of the state. As part of a sensible fiscal policy, the CSU currently maintains enough reserves to cover approximately two and a half months of expenses. I’m sure many members of our campus community remember the impact of the Great Recession on higher education funding in California. This current approach allows the CSU to remain strong even in cases of economic downturn.

Second, the audit concluded that the CSU did not fully disclose the funds in these reserve accounts to students and other stakeholders. Inexplicably, the audit fails to acknowledge roughly 30 public reports published by the CSU during the timeframe of the audit that detailed the CSU’s investment balances and assets. Likewise, the information on these accounts is and has been widely available as part of independently audited financial statements, annual reports to the state controller and state treasurer, investment reports to the CSU Board of Trustees, and detailed letters to legislators.

I encourage you to read the Office of the Chancellor’s full statement. I also invite you to read a recent article from the Public Policy Institute of California that lauded CSU’s efforts to improve our financial position and increase transparency (link).