SAN DIEGO: AUDIT & MANAGEMENT ADVISORY SERVICES 0919 June 13, 2011 RON ESPIRITU Assistant Vice Chancellr f Administratin UCSD Schl f Medicine 0602 Subject: Health Sciences Cmpensatin Plan Management Academic Prgram Units AMAS Audit Prject 2011-21 Audit & Management Advisry Services (AMAS) has cmpleted a review f Health Sciences Cmpensatin Plan management, with a fcus n the assignment and management f Academic Prgram Units (APU). This reprt summarizes the results f ur review. Backgrund The University Califrnia Health Sciences Cmpensatin Plan (HSCP) was implemented t prvide a cmmn administrative framewrk within which a participating Health Sciences Prfessinal Schl can cmpensate its faculty accrding t the cmpetitive requirements f each discipline. 1 Health Sciences faculty members that hld a University funded appintment f greater than 50% are mandatry HSCP participants. Faculty members with an appintment f 50% r less may be allwed t participate upn the recmmendatin f the Department Chair and the apprval f the Vice Chancellr Health Services (VCHS). UC Office f the President (UCOP) issued general guidelines fr APU frmatin n Nvember 23, 1999 in Academic Persnnel Manual (APM) 670. Faculty members with similar administrative, teaching, clinical, r research respnsibilities are assigned t an APU by their hme department. Per UCOP guidelines, APUs cannt be created slely r primarily based n funding r earning levels, but must als include cnsideratin f prfessinal. When a new APU is created, it is assigned an APU salary scale, and an APU Prfile is prepared. The APU Prfile includes a five year salary scale prjectin. The same APU salary scale is typically assigned t all five years included in the prjectin. Faculty members f each APU grup shared the same grup APU salary scale. The APU Prfile Frm (Attachment A) is used t apprve the creatin r mdificatin f an APU, and dcument key aspects f an APU unit. Data cntained in this Frm represents the authrity fr cvered cmpensatin used t cmpute physician benefits, including retirement payments. Data required n this Frm includes: 1 University f Califrnia Academic Persnnel Manual Sectin 670: Health Sciences Cmpensatin Plan and Guidelines n Occasinal Outside Prfessinal Activities by Health Sciences Cmpensatin Plan Participants; Nvember 23, 1999. UNIVERSITY OF CALIFORNIA - (Letterhead fr Interdepartmental use)
Department APU Name APU Cde Descriptin, including criteria, f the APU APU salary scale fr the initial, and fur subsequent fiscal perids APU faculty member names, rank, step, cvered cmpensatin Apprvals f the Department Business Officer, Department Chair, and Vice Chancellr, Health Sciences (VCHS) The VCHS APU Guidelines require that the APU Prfile Frm be updated every five years. HSCP faculty members are eligible fr base and incremental salary increases assciated with their academic rank, step, and APU. Three salary cmpnents cmprise cvered cmpensatin which is cnsidered fr retirement benefits, including X, X (X Prime), and Y (Y Prime). These salary cmpnents are defined as fllws: X = Base salary (Scale 0). State generated funds (19900A) may be used t pay X X = Amunt f salary abve X applicable t Scales 1 thrugh 3. State generated funds may nt be used t pay X Y = Additinal cmpensatin abve Scale 3 (e.g. Scales 4 thrugh 9). State generated funds may nt be used t pay Y The APU salary scale assignment has a significant impact n benefits calculatins. A faculty member at an APU salary scale f 9 is allwed ttal cvered cmpensatin that is 225% f the cvered cmpensatin fr a faculty member with the same rank and step, at an APU salary scale f 0. The Health Sciences Faculty Salary Scales matrix (HSFS Matrix), last updated n Octber 1, 2007 includes the salary fr each rank, step, and APU salary scale. The fllwing table shws the effect f each APU salary scale fr an assumed base salary f $100,000 fr a faculty member with a cnstant rank and step. APU Salary Factr Cvered Cmpensatin Scale 0 1.00 $100,000 1 1.10 $110,000 2 1.20 $120,000 3 1.30 $130,000 4 1.40 $140,000 5 1.50 $150,000 6 1.65 $165,000 7 1.80 $180,000 8 2.00 $200,000 9 2.25 $225,000 Page 2
As f Octber 2010, there were 1,266 Schl f Medicine (SOM) and Skaggs Schl f Pharmacy and Pharmaceutical Sciences (SSPPS) faculty members assigned t the 99 existing APUs. Many APUs were assigned an APU salary scale f 3, which included apprximately 40% f the faculty. APU salary scale 8 was assigned least frequently, affecting less than 1% f the faculty. The fllwing table summarizes the APU salary scale distributin fr the 1,266 faculty members included in the HSCP. APU Scale # f Faculty % f Faculty 0 176 13.9% 1 73 5.8% 2 93 7.3% 3 513 40.6% 4 21 1.7% 5 158 12.5% 6 70 5.5% 7 98 7.7% 8 8 0.6% 9 56 4.4% Ttal 1,266 100.0% T allw time fr additinal clarificatin cncerning the effect f APUs, the VCHS issued a letter dated Nvember 9, 2007 stating that, effective with the Fiscal Year starting July 1, 2007, new APUs wuld nt be apprved until further ntice. As f March 31, 2011, the suspensin was still in effect. VCHS management plans t re-evaluate the need fr the APU suspensin n a peridic basis. Audit Objective, Scpe and Prcedures This bjective f ur review was t evaluate the prcess f assigning APUs t departments and/r divisins within the SOM, and the SSPPS, with a fcus n determining whether current practices cmplied with UC and VCHS guidance. We perfrmed the fllwing audit prcedures t achieve the prject bjective: Reviewed varius dcuments cntaining guidelines, plicies, and prcedures regulating the creatin f APUs, and the activity subsequent t their creatin; Interviewed key individuals respnsible fr the creatin, prcessing, and mnitring f APU activity; Examined related data included in standard reprts, databases and systems including the APU Prfile Reprt, the HSFS Matrix, the SOM SalPr budget tl 2 (SalPr), and the University Payrll and Persnnel system (PPS) (Attachment B); Evaluated APU management and audit prcess cntrls; and, 2 SalPr is a salary budgeting tl develped by VCHS administratin fr use by SOM and SSPPS Business Offices t prepare annual budgets fr faculty salaries. SalPr des nt interface with the UC PPS system t update faculty salaries. Page 3
Perfrmed analysis f a judgmental sample f APUs t verify adherence t the apprpriate guidelines, plicies, and prcedures. Cnclusin Based n ur review prcedures, we cncluded that in general, the APU assignments, mdificatins and mnitring prcesses were functining effectively, and in accrdance with the UCOP general guidelines. Hwever, we nted several areas where prcesses culd be imprved, including APU authrizatins, the methd and criteria fr assigning an APU Salary Scale, and the recnciliatin f cvered cmpensatin recrded n the APU Prfile, the HSFS Matrix, and in the PPS system. Opprtunities t further imprve the prcess are discussed in mre detail in the remainder f this reprt. Observatins and Management Crrective Actins A. Lcal Guidelines fr APU Creatin and Management Lcal guidelines fr APU assignment, mdificatin, and mnitring were nt frmalized. Dcumentatin was nt n file t identify the criteria used t assign APU salary scales. We nted that because UCSD supplemental APU guidance had nt been develped, in sme cases, departments had dissimilar criteria fr establishing and reviewing/updating APU assignments and salary scales. In additin, dcumentatin describing the criteria used t assign APU scales was nt retained by the departments. In ne instance, an APU Prfile Frm authrizing the creatin f the APU, including the assigned salary scale f 9, was nt n file. Department management described several cnsistent factrs that were cnsidered when assigning the salary scale t newly created APUs. Fr example, each department interviewed stated that the ability f an APU t financially supprt the salary scale assigned t its members was ne factr cnsidered in the assignment f the salary scale. Hwever, the ther criteria used by department management t assign APU salary scales were nt cnsistent. In additin, in sme cases, existing APU salary scales were nt peridically mnitred t determine whether a change shuld be cnsidered. Increased cllabratin between the Dean s Office and Department Administratrs when new APUs are created, and when the five year APU resubmissins are prepared, wuld help t ensure that cnsistency and transparency have been achieved. Faculty members within an APU culd realize additinal retirement benefits if prfessinal respnsibilities and financial perfrmance were t warrant assignment f the grup t a higher APU salary scale. On the ther hand, departments have a respnsibility t ensure that Page 4
grups are assigned t an APU scale that they can financially supprt t ensure that the salary and benefits paid can be cvered withut utilizing Department funds. It is imprtant t reach a balance that prtects the interests f bth faculty members and departments. The verall gal shuld be t ensure that the prcess fr assigning APU salary scales is transparent t grup members, and applied cnsistently. Develpment f UCSD guidelines t supplement UCOP prcedures prvided by UCOP shuld help t achieve that gal. Management Crrective Actins: Health Sciences management will: 1. Clarify and dcument guidelines fr APU scale assignment, mnitring and mdificatin. 2. Require that departments maintain dcumentatin t supprt existing and future APU salary scales, and/r mdificatins. B. Authrizatin t Apprve APUs The authrity t apprve a new APU r a mdificatin t an existing APU had nt been frmally re-delegated. The creatin f an APU is dcumented and apprved n the APU Prfile Frm (Attachment A). This Frm prvides a descriptin f the Department, APU Name, APU Cde, criteria used, APU Scale, and faculty members included. The Frm requires the apprvals f the Chief Accunting Officer/Department Business Officer, the Department Chair, and the Health Sciences Vice Chancellr/Dean. AMAS reviewed a judgmental sample f 29 f 99 cmpleted APU Prfile Frms and nted the fllwing exceptins: In 28 instances, VCHS apprval was granted by the Health Sciences Assistant Vice Chancellr f Administratin r the Health Sciences Assistant Dean f Administratin. A delegatin f authrity apprved by the Vice Chancellr was nt n file. Nine APUs that were nt assciated with new Department functins were apprved after the letter dated Nvember 9, 2007 that suspended the creatin f new APUs. In 7 instances, APUs cntaining fewer than five members were created, which was nt cnsistent with APM 670 guidelines. Page 5
Management Crrective Actin: The Assistant Vice Chancellr, Health Sciences Business and Fiscal Affairs will frmally request delegated authrity related t APUs frm the VCHS t the Assistant Vice Chancellr f Health Sciences and Fiscal Affairs and Assciate Dean f Business and Fiscal Affairs. C. Supprting Dcumentatin Incnsistencies Incnsistencies were nted amng varius dcuments related t APUs. A cmpleted APU Prfile Frm prvides the data and authrizatin necessary t create an APU. Data cntained in this dcument is the surce fr the cvered cmpensatin data entered int the PPS system. Cnsistency f data n the APU Prfile Frm and in PPS, and t a lesser extent SalPr, prvides assurance that benefits will be accurately calculated. A judgmental sample f 20 f 99 APU Prfile Frms was selected fr fcused review. The 20 APUs included in the test sample were assciated with 65 individual faculty members. Each faculty member s data included n the APU Prfile Frm was cmpared with cmpensatin data in the HSFS Matrix, SalPr and PPS. Attachment B prvides the details fr the exceptins nted during audit testing, which are summarized as fllws: The cvered cmpensatin per the APU Prfile, SalPr, and PPS were incrrect in 11 cases; The cvered cmpensatin per the APU Prfile and PPS were incrrect in tw cases; The cvered cmpensatin per the APU Prfile and SalPr were incrrect in ne case; and, The cvered cmpensatin per the APU Prfile was incrrect in fur cases. A mnthly audit f APU data was being cmpleted. Hwever, the audit prcedures did nt include a recnciliatin f the cvered cmpensatin dcumented n the APU Prfile Frm with supprting data including the HSFS Matrix, SalPr, and PPS. Data incnsistencies culd result in the inaccurate calculatin f faculty retirement benefits. Expanding the scpe f the mnthly APU audit culd identify incnsistencies and ensure that they wuld be crrected n a timely basis. Management Crrective Actins 1. The VCHS Directr f Faculty Cmpensatin has crrected the data incnsistencies identified in Attachment B. Cvered Cmpensatin fr faculty members per APU Prfiles is nw cnsistent with Cvered Cmpensatin per SalPr and PPS. Page 6
2. The Health Sciences Business Applicatins Develpment Grup is in the prcess f develping an audit tl that will link the varius database systems t ensure data accuracy. In the interim, a cmplete audit will be cnducted f the remaining APU Prfile frms as part f the annual budget prcess. A mnthly recnciliatin f the APU prfile frms with PPS data will be cmpleted acrss a sampling f faculty in the Health Sciences departments. Audit & Management Advisry Services appreciates the cperatin and assistance prvided during the review. Because we were able t reach agreement regarding crrective actins t be taken in respnse t the audit recmmendatins, a frmal respnse t the reprt is nt requested. The findings included in this reprt will be added t ur fllw-up system. We will cntact yu at the apprpriate time t evaluate the status f the crrective actins. At that time, we may need t perfrm additinal audit prcedures t validate that actins have been taken prir t clsing the audit findings. UC plicy requires that all draft audit reprts (cpied n tan paper fr ease f identificatin) be destryed after the final reprt is issued. Because draft reprts can cntain sensitive infrmatin, please either return these dcuments t AMAS persnnel r destry them at this time. If yu have any questins regarding this reprt, please call me at 534-3617. Stephanie Burke Assistant Vice Chancellr Audit & Management Advisry Services cc: D. Brenner L. Dnaldsn A. Mangindin G. Matthews T. Perez S. Vacca Page 7
Audit Management Advisry Services Physician Cmpensatin Plan Management - Academic Prgram Units, Prject #2011-21 ACADEMIC PROGRAM UNIT PROFILE TEMPLATE DEPARTMENT: Attachment A APU NAME: APU CODE: DATE SUBMITTED: Descriptin f APU: Please include criteria used. PROPOSED HEALTH SCIENCES SALARY SCALE: (Using Scale pay numbers: 1 thru 9. Insert Scale pay number assigned t APU fr each f 5 future years.) 07/01/11 07/01/12 07/01/13 07/01/14 07/01/15 APU Membership: (Use established Scale Pay rates as f July 1. DO NOT USE blended FY pay rates. Attach anther sheet if necessary.) [X +X'+Y'] Name Rank/Step Scale Salary Y Salary Prj Z APPROVALS: CAO/DBO Department Chair VCHS/Dean Other Date Date Date Date This frm is ruted t the Dean's Office, MC: 0742 prir t submissin t the Dean.
Audit Management Advisry Services Physician Cmpensatin Plan Management - Academic Prgram Units Recnciliatin f Cvered Cmpensatin Attachment B Name, Rank, Step Blue = Crrect cvered cmpensatin Green shaded = Crrectin required APU Prfile Effective Date APU Scale Cvered Cmpensatin per APU Prfile Cvered Cmpensatin per the Health Sciences Faculty Salary Scales Matrix (A) Cvered Cmpensatin in the SOM Salpr Budget Tl Cvered Cmpensatin in the Payrll Persnnel System (PPS) Ntes Orth Vice Chairs, etc. ORT004 Assciate Clinical Prfessr I 7/1/2008 6 $114,200 $126,600 $132,700 $144,400 (1,2) Pediatrics PHD Faculty PEDPHD Assistant Prfessr IV 7/1/2010 1 $84,400 $80,300 $84,400 $84,000 (1) Ped Pharm & Drug Disc PEDPPR Assciate Prfessr II 7/1/2010 3 $96,500 $104,500 $96,500 $96,500 (1) Prfessr IV 7/1/2010 3 $167,700 $145,300 $167,700 $167,700 (1) Ped Nenatlgy PEDNEO Prfessr VIII 7/1/2010 9 $407,800 $342,000 $342,000 $342,000 (3) Assciate Prfessr II 7/1/2010 9 $104,500 $180,900 $104,500 $180,900 (4) Assistant Prfessr II 7/1/2010 9 $85,000 $147,200 $85,000 $85,000 (1) Ped Gastr PEDGAS Assistant Prfessr III 7/1/2010 7 $122,400 $124,200 $122,400 $122,400 (1) Ped Allergy, Imm, Rheum (PEDALL) Prfessr VI 7/1/2010 3 $155,000 $168,600 $155,000 $155,000 (1) Ped Dermatlgy PEDDER (new) Prfessr V 7/1/2010 7 $187,700 $215,600 $187,700 $187,700 (1) Ped Emergency Med PEDEME Assciate Prfessr II 7/1/2010 5 $115,100 $120,600 $115,100 $115,100 (5) Assistant Prfessr I 7/1/2010 5 $80,200 $92,600 $92,600 $80,200 (1) Assistant Prfessr III 7/1/2010 5 $89,700 $103,500 $89,700 $89,700 (1) Assistant Prfessr II 7/1/2010 5 $85,000 $98,100 $85,000 $85,000 (1) Assciate Prfessr II 7/1/2010 5 $127,400 $120,600 $127,400 $127,400 (6) Assistant Prfessr III 7/1/2010 5 $152,028 $103,500 $103,500 $152,028 (1) Assistant Prfessr III 7/1/2010 5 $153,043 $103,500 $103,500 $103,500 (3) Assistant Prfessr IV 7/1/2010 5 $94,900 $109,500 $94,900 $94,900 (1) Ped Nephrlgy PEDNEP Prfessr II 7/1/2010 3 $117,300 $126,400 $117,300 $117,300 (1) (A) Cvered Cmpensatin equals the sum f X + X' + Y' and excludes Y and Z pay. These are the salary cmpnents prvide the basis fr benefits calculatins. (1) Cvered cmpensatin per the HS Faculty Salary Scales des nt agree with the cvered cmpensatin per PPS. Incrrect PPS amunts culd impact retirement benefits calculatins. (2) The crrect cmpensatin is $140,100 due t a prmtin effective 7/1/2010. (3) Cvered cmpensatin is incrrect n the APU Prfile nly, but PPS is accurate. (4) Cvered cmpensatin is incrrect n the APU Prfile and in Salpr, but PPS is accurate. (5) The APU Prfile listed this faculty member as an Assciate Prfessr II, and Assciate Prfessr I is crrect. (6) The APU Prfile listed this faculty member as an Assciate Prfessr II, and Assciate Prfessr III is crrect. 1