CSA
Recommendations
Read the report at California State Auditor ↗
August 2017
The University of California
Office of the President
Increasing Costs and Scheduling Delays Have
Hampered the UCPath Project and Originally Anticipated
Savings Are Unlikely to Materialize
Report 2016-125.2
COMMITMENT
INTEGRITY
LEADERSHIP
CALIFORNIA STATE AUDITOR
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Elaine M. Howle State Auditor
Doug Cordiner Chief Deputy
August 24, 2017 2016-125.2
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit
report concerning the University of California’s (university) planned systemwide payroll and human
resources system known as the University of California Payroll, Academic Personnel, Timekeeping,
and Human Resources (UCPath). This report concludes that the University of California Office of the
President has failed to keep UCPath on budget and on schedule, and that originally anticipated cost
savings from UCPath’s implementation are unlikely to materialize.
In 2011 the Office of the President estimated that the cost to implement UCPath would total $306 million
and it would be completed by February 2014. The Office of the President also projected that UCPath’s
implementation would save the university $753 million, primarily from staff reductions. However,
the project’s cost has escalated and its schedule has slipped; the Office of the President’s current cost
projection is $504 million and its planned implementation date is June 2019. Further, the full cost to
the university to implement UCPath is much higher than the Office of the President has reported—
an estimated $942 million—when including the cost of the campuses’ development activities, project
financing, and a shared services center. Finally, because the planned staff reductions will not occur,
the $753 million in savings that the Office of the President anticipated would result from UCPath’s
implementation will not materialize.
Despite the significant departures from the originally estimated cost, schedule, and savings for
UCPath, the Office of the President has not consistently informed the University of California Board
of Regents (regents) of UCPath’s challenges. For example, in July 2014, the UCPath project director
told the regents that UCPath’s cost estimate was $220 million, yet the Office of the President’s internal
records from one month earlier show the project’s cost estimate was $345 million. In July 2017, the
Office of the President expanded its project governance approach to establish instances in which it
will update the regents. However, in our view, the governance does not go far enough in recognizing
the regents’ role as an oversight body. Moreover, weaknesses in the Office of the President’s project
management likely contributed to UCPath’s escalating cost and schedule delays. For example, the Office
of the President set aggressive schedules that were susceptible to delays caused by project scope changes
or staffing constraints.
Respectfully submitted,
ELAINE M. HOWLE, CPA
State Auditor
621 Capitol Mall, Suite 1200 Sacramento, CA 95814 916.445.0255 916.327.0019 fax www.auditor.ca.gov
iv California State Auditor Report 2016-125.2
August 2017
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California State Auditor Report 2016-125.2 v
August 2017
Contents
Summary 1
Introduction 5
Audit Results
UCPath’s Cost Has Soared, and Its Expected Savings Are Unlikely
to Materialize 15
The Office of the President Did Not Keep the Regents Apprised
of the Significant Cost Increases and Schedule Delays That Have
Plagued UCPath 18
Weaknesses in the Office of the President’s Project Management
Likely Contributed to UCPath’s Cost Increases and Schedule Delays 24
Although Invoice Approval Processes Were Followed, Some
Campuses Could Better Define IT Deliverables 27
Recommendations 29
Responses to the Audit
Regents of the University of California 33
University of California Office of the President 35
California State Auditor’s Comments on the Response From
the University of California Office of the President 41
vi California State Auditor Report 2016-125.2
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California State Auditor Report 2016-125.2 1
August 2017
Summary
Audit Highlights . . .
Results in Brief Our audit concerning the University of
California’s (university) planned systemwide
The University of California (university) Office of the President has payroll and human resources system, known as
failed to keep its planned systemwide payroll and human resources UCPath, and other information technology (IT)
system on budget and on schedule. The University of California systems revealed the following:
Payroll, Academic Personnel, Timekeeping, and Human Resources
» The Office of the President currently
(UCPath) system will replace the university’s existing legacy system,
projects UCPath’s implementation cost to be
which is several decades old and has been highly customized by
$504 million—$334 million over its original
campuses to the degree that the university is operating 11 different
estimate of $170 million—but the full
payroll and human resources systems. UCPath is the university’s
cost to the university is likely to be at least
attempt to integrate these functions into one system.
$942 million.
In its initial business case for UCPath in 2011, the Office of the » The Office of the President originally
President estimated that implementing the project itself would estimated that it would complete UCPath
cost $170 million, and with other related costs, it would total by August 2014, but it has delayed the
$306 million. It also estimated that the project would be completed implementation date by nearly five years, to
by August 2014. However, as the project’s cost has escalated and June 2019.
its schedule has slipped, the Office of the President has revised
» The $753 million in cost savings, primarily
these estimates. The Office of the President currently projects the
from staff reductions, that the Office of
implementation cost of UCPath to be $504 million—$334 million
the President anticipated would result
over its original estimate of $170 million—and it has delayed the
from UCPath’s implementation, will
date of UCPath’s implementation by nearly five years, to June 2019.
not materialize.
Moreover, the $504 million estimate does not represent the full
cost of the project because it includes just a fraction of the cost
» Despite the significant departures from
associated with the campuses’ implementation efforts and a shared
the original estimated cost, schedule,
services center, known as the UCPath Center. The full cost to the
and savings for UCPath, the Office of the
university of adopting UCPath is likely to be at least $942 million.
President has not consistently informed
the regents of UCPath’s challenges.
At the same time that UCPath’s cost has increased, the savings
that the Office of the President anticipated would result from » Weaknesses in the Office of the President’s
UCPath will not materialize. The Office of the President project management contributed to UCPath’s
conceived UCPath in 2009 and it later became part of its Working escalating cost and schedule delays.
Smarter initiative, an effort it led to achieve administrative
• It set aggressive schedules that are
efficiencies systemwide by reducing costs or increasing revenues.
susceptible to delays caused by project
The Office of the President’s initial business case in 2011 asserted
scope changes or staffing constraints.
that UCPath would result in $753 million in cost savings, primarily
from staffing reductions at the campuses. However, the UCPath • It did not establish rigorous change
project director told us that the Office of the President no longer management processes that would have
expects to realize those projected savings. Several campuses also allowed it to assess how changes to the
reported to us that they do not anticipate the staff reductions that project’s scope would impact its cost
the 2011 business case promised. In fact, in a status update to the and schedule.
University of California Board of Regents (regents) in July 2017, the
Office of the President did not discuss any offsetting savings but continued on next page . . .
rather discussed creating efficiencies and avoiding costs.
2 California State Auditor Report 2016-125.2
August 2017
» Of the three campuses we reviewed In addition to not keeping the regents apprised of the uncertainty
concerning their IT contract management, associated with the announced $753 million in savings, the Office
two of the campuses had vaguely worded of the President has only rarely apprised the regents of schedule
deliverables for milestones, hindering and budget changes. As a result, the regents have not had the
them from effectively measuring whether opportunity to participate in critical project decisions. This lack
the vendors had met their obligations of transparency is particularly troubling in light of UCPath’s
for payment. importance to the university system, its soaring cost, and its
delayed implementation. The reporting lapses occurred in part
because until recently, the Office of the President lacked criteria
defining the circumstances that warranted updates to the regents.
Although the Office of the President expanded the UCPath
governance structure in July 2017 to include updating the regents
when the project’s cost increases by more than $20 million or its
schedule is delayed by more than three months. However, the
planned communication is one‑way only: apprising the regents
of progress rather than engaging them in decision making. This
governance approach, although expanded, does not go far enough
in recognizing the regents’ role as an oversight body.
This sort of oversight is particularly important because we
identified weaknesses in the Office of the President’s project
management that likely contributed to UCPath’s escalating cost
and schedule delays. For example, our information technology
(IT) project management expert identified that the Office of the
President set aggressive schedules for the UCPath project that are
susceptible to delays caused by project scope changes or staffing
constraints. In addition, the Office of the President did not establish
rigorous change management processes that would have allowed
it to assess how changes to the project’s scope would impact its
cost and schedule. Notwithstanding its project management
weaknesses, the next important UCPath milestone is a multicampus
deployment the Office of the President currently has scheduled
for December 2017, and it will serve as an indicator of the project’s
ability to meet its current budget and schedule goals.
In addition to the UCPath project, we reviewed three campuses’
management of their contracts for campus‑specific IT systems.
Although we found that each campus reviewed and approved
vendor invoices before payment, two of the campuses had vaguely
worded deliverables for milestones, an approach that does not
align with industry best practices. Because the contracts provided
insufficient detail about the deliverables for milestones, the
campuses could not effectively measure whether the vendors had
met their obligations for payment.
California State Auditor Report 2016-125.2 3
August 2017
Selected Recommendations
Regents
To ensure that they can exercise necessary oversight, the regents
should develop by December 2017 status reporting standards
for the university’s significant IT projects that the Office of the
President and the university locations must follow.
Office of the President
To ensure that it fully reports the cost of IT projects, the Office
of the President should develop by December 2017 cost reporting
guidelines for UCPath and other significant IT projects. These
cost guidelines should identify cost categories at both the Office
of the President and university locations to ensure that the
Office of the President’s estimates capture and communicate all
development and implementation costs. In addition, the Office of
the President should produce cost reports to share at least quarterly
with stakeholders.
To ensure that it consistently follows best practices related to
project management, the Office of the President should develop and
implement guidelines for IT project development by June 2018. The
guidelines should apply to IT projects undertaken by any university
location with a cost estimate of $5 million or more. The guidelines
should include, but not be limited to, advising project managers
on ensuring that schedules are realistic and implementing rigorous
change management processes that establish a means of assessing
the implications of changes to a project’s scope, cost, and schedule.
The Office of the President should require by December 2017
that all university locations follow the best practice of including
well‑defined deliverables in contracts related to the development
of IT projects.
Agency Comments
In its response to the audit, the regents stated that they
welcomed the constructive input on IT project oversight and
agreed to implement the recommendation in the time frame
specified. Similarly, the Office of the President stated that our
recommendations are helpful and constructive and align with
its efforts to improve the university’s operations, policies, and
transparency. The Office of the President agreed with most of
the recommendations in the report and expressed its intent to
implement them.
4 California State Auditor Report 2016-125.2
August 2017
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California State Auditor Report 2016-125.2 5
August 2017
Introduction
Background
Founded by the Legislature in 1868 as a public, state‑supported,
land‑grant institution, the University of California (university) is
an extensive business enterprise. It has 10 campuses, five medical
centers, numerous auxiliary organizations, and more than 200,000
employees. It is also involved in the management of three national
laboratories and several research centers. Each year, it receives
more than $30 billion in revenues from a variety of public and
private sources, including $3 billion in state funding and $10 billion
generated from its medical centers.
The California Constitution established the university as a public
trust to be administered by the University of California Board of
Regents (regents). As a result, the Legislature’s oversight of the
university is limited to certain circumstances, such as specifying
provisions that the university must meet before it can spend state
appropriations. The head of the university is the president, to
whom the regents have granted full authority and responsibility
over the administration of all the university’s affairs and operations.
In 2010 the regents passed a policy directing the president to achieve
administrative efficiencies which included, among other initiatives,
designing and implementing new information technology (IT)
systems, such as student information systems, financial systems,
human resources systems, and payroll systems. The California
Department of Technology does not oversee development of the
university’s IT projects. Rather, the university follows its own policies.
The Office of the President Intended UCPath to Replace the
University’s Outdated Payroll System and Achieve Significant
Cost Efficiencies
The Office of the President intends for its Payroll, Academic
Personnel, Timekeeping, and Human Resources project, or UCPath,
to integrate numerous payroll and human resource functions into
one system. The Office of the President conceived UCPath in 2009,
and it became a part of its Working Smarter initiative, an effort led
by the Office of the President to achieve administrative efficiencies
systemwide by reducing costs or increasing revenues. As Figure 1
on the following page shows, the Office of the President anticipated
that when fully operational, UCPath would replace its existing
Payroll/Personnel System (legacy payroll system), which has evolved
into 11 variations in use across the campuses. In its 2011 business
case supporting the implementation of UCPath, which was created
two years before the current university leadership took office, the
Office of the President noted that the legacy payroll system was
6 California State Auditor Report 2016-125.2
August 2017
more than 30 years old and was at significant risk of breakdown
because of its aging technology. The legacy payroll system also
has serious limitations, including high maintenance costs, limited
reporting functions, reliance on manual processing, and inadequate
capability for the university’s current payroll environment. In 2011
the university awarded a contract to Oracle Corporation (Oracle) to
develop UCPath. At the time, the Office of the President estimated
that development of UCPath would take three years and would cost
$170 million to implement, and with other related costs, the project
would total $306 million.
Figure 1
The Office of the President Envisioned UCPath as a Systemwide Payroll and Human Resources IT Solution
PAYROLL PERSONNEL SYSTEM
oll
•
Academic Personnel
•
T
im
e
k
r e
11 a y UCPath e p
Variations P ni
g
Human Resources
• CAMPUSES 10 • MEDICAL CENTERS 5
• OTHER LOCATIONS*
Sources: California State Auditor’s analysis of the PPS Initiative: Final Report, dated August 2011, and other university publications.
* The other locations include the following: Lawrence Berkeley National Laboratory; Associated Students of University of California, Los Angeles;
Division of Agriculture and Natural Resources; Office of the President; and Hastings College of Law.
The Office of the President also envisioned that UCPath would
allow it to restructure the number of staff handling payroll and
human resources tasks systemwide. Specifically, the Office of
the President assumed that UCPath would allow it to reduce
California State Auditor Report 2016-125.2 7
August 2017
the number of employees performing those tasks from 2,743 to
1,224 full‑time employees, which would result in significant
savings for the university. In fact, 90 percent of UCPath’s projected
$753 million in savings was based on this staff reduction and on the
creation of a shared services center, known as the UCPath Center.
The Office of the President intended the UCPath Center to take over
payroll and human resources functions for all university employees
from all university locations.
The Office of the President Has Repeatedly Delayed Implementation of
UCPath, and the Project’s Estimated Cost Has Increased Significantly
The UCPath project has experienced several setbacks that have
delayed the system’s planned implementation and increased
its cost significantly. Figure 2 on the following page depicts a
timeline of some of the events and decisions related to UCPath’s
implementation. In early 2012, the Office of the President informed
the regents that the first phase of UCPath’s rollout would begin in
January 2013 with Wave 11—the system’s deployment to the Office
of the President, the Los Angeles campus and its medical center,
and the Merced and Santa Cruz campuses as well as the deployment
of the UCPath Center. Instead, in 2013 problems with UCPath’s
development led the Office of the President to extend the project’s
timeline by 12 months and to increase its budget to $221 million.
Later that same year, the initial project leader left for reasons
unrelated to the project. According to the UCPath’s current project
director, the Office of the President released Oracle from its role as
the implementation lead on the project in 2013 for failure to perform
under its implementation contract and the Office of the President
took over management of the project. Figure 2 also shows that once
the Office of the President took over leadership, it extended the
project implementation date three times.
Various Office of the President executives and staff, and
campus‑based leadership form a governance structure for the
UCPath project. As Figure 3 on page 9 shows, the Office of the President
maintains a project management office and under the leadership of
the project director, it oversees the day‑to‑day management of the
UCPath project. The UCPath steering committee is responsible for
making decisions on issues related to systemwide business processes.
The steering committee refers issues that materially impact UCPath’s
scope, cost, timeline, or deliverables to UCPath’s executive leadership
team, which includes the chief financial officer and chief operating
officer who are also the UCPath project sponsors, other Office of
1 The Office of the President refers to the four deployments of the project as Office of the President,
Pilot, Deployment 1, and Deployment 2. However, we use the term wave for clarity.
8 California State Auditor Report 2016-125.2
August 2017
Figure 2
The Office of the President’s Timeline for UCPath Has Been Affected by Leadership Changes and Schedule Slips
2019
June 2019
Full implementation: Post-deployment support ends for the
Wave 4 university locations and UCPath is fully deployed.
December 2018
Wave 4 planned deployment date: The five Wave 4
university locations are planned to begin using UCPath.
July 2018 2018
Wave 3 planned deployment date: The five Wave 3
university locations are planned to begin using UCPath.
December 2017
Wave 2 planned deployment date: The four Wave 2
university locations are planned to begin using UCPath.
2017
July 2016 2016
Fourth schedule extension: UCPath full implementation date November 2015
extended from December 2018 to June 2019.
Wave 1 deployed: The Office of the President begins using
UCPath, nearly three years behind schedule. The Los Angeles
campus and its medical center, and the Merced and Santa Cruz
November 2015
campuses are shifted to later waves.
UCPath Center begins operations.
2015 July 2015
Third schedule extension: UCPath full implementation
date extended from December 2017 to December 2018.
November 2014
Project leadership change: The Office of the President
terminates the contract for one of the UCPath project codirectors.
August 2014
2014 July 2014
Full implementation: This date marks the original
Second schedule extension: UCPath full implementation
target date for UCPath’s full implementation.
date extended from August 2015 to December 2017.
November 2013
Project leadership change: The Office of the
President releases Oracle as the implementation lead,
August 2013 assuming full project management responsibility itself.
2013
Project leadership change: The Office of the President’s
project director separates from the university and July 2013
two new UCPath project codirectors are named.
First schedule extension: UCPath full implementation
date extended from August 2014 to August 2015.
January 2013
New university president appointed and she assumes
Wave 1 first planned deployment date: Date of office in September 2013.
first planned deployment for Wave 1, included the
Office of the President; the Los Angeles campus and 2012
medical center; and the Merced and Santa Cruz
campuses; and the UCPath Center.
September 2011
August 2011
Contract signed: The Office of the President, under 2011 UCPath initiated: The Office of the President
initiates the UCPath project.
previous university leadership, enters into a
development contract with Oracle.
Sources: California State Auditor’s analysis of various UCPath ‑related documents, including the current deployment sequence as of June 2017 and
various Office of the President reports to the regents.
California State Auditor Report 2016-125.2 9
August 2017
the President staff, and representatives from each campus. In their
role as project sponsors, the chief financial officer and chief operating
officer are the executives with overall accountability for the project.
Figure 3
The Office of the President Has Established a Governance Structure for the UCPath Project
Regents
President
PROJECT GOVERNANCE
Executive Leadership Steering
Project Sponsors
Team Committee
Membership Membership Membership
• Executive vice president, chief financial officer • Each of the 10 campuses • Each of the 10 campuses
• Executive vice president, chief operating officer Vice chancellor, chief financial officer, or Controller, chief human resources officer,
equivalent role. Functions as the location’s academic personnel director, and
Responsible for the following:
executive sponsor. chief information officer.
• Making final decisions in executive leadership
• Office of the President • Office of the President
team when a 70 percent consensus cannot
Executive vice president, chief financial officer Associate vice president, systemwide controller
be reached.
Executive vice president, chief operating officer Systemwide deputy audit officer
• Updating the regents.
Chief information officer Executive director, academic personnel
Associate vice president, systemwide controller
Responsible for making final decisions
Executive director, UCPath Center
for the following systemwide
Project Director* Vice president, human resources business processes:
Vice provost, academic personnel • Payroll
• Other • Academic personnel
Chair of the steering committee • Human resources
Chair of the pilot [Wave 2] deployment subcommittee • Benefits administration
Project Management Responsible for making final decisions for
the following:
Office
• Cost, timeline, scope, and policy.
Sources: California State Auditor’s analysis of UCPath project governance documents and UCPath organization charts.
* In November 2014, leadership over the UCPath project management office changed from two codirectors to one director.
10 California State Auditor Report 2016-125.2
August 2017
The Office of the President has delayed UCPath’s deployment several
times. Although the Office of the President originally projected
that it would accomplish Wave 1 by 2013, it did not complete this
deployment until November 2015 and then only to the Office of the
President’s employees, as Figure 4 shows. The Office of the President
currently plans to deploy UCPath at four university locations by the
end of 2017 (Wave 2)—which our IT project management expert
indicates will be an important milestone in the project’s ability
to meet its cost and schedule goals. Currently, the Office of the
President anticipates that it will complete the UCPath project by
June 2019, after providing post‑deployment support for the university
locations. It estimates that the project’s implementation cost will be
$504 million, $334 million above its original cost estimate. We discuss
the reasons for the project’s cost increases and schedule delays
in the Audit Results.
As UCPath’s Cost Has Increased, the Office of the President’s Project
Funding Strategy Has Evolved
The Office of the President has employed a variety of funding
sources to pay for the UCPath project as its cost has grown over
time. Initially, the Office of the President borrowed $131 million
through an internal loan program called CapEquip, which
allows the university to finance capital projects; however, its
maximum repayment period is seven years because CapEquip is
a short‑term financing option. As UCPath’s cost escalated and its
implementation schedule was delayed, the Office of the President
required a longer repayment period and greater flexibility in
structuring the project’s financing. Consequently, in 2014 the
Office of the President received the regents’ approval to obtain
$221 million in external financing for the project through a bond
issuance in 2016. The Office of the President used a portion of
the bond proceeds to repay CapEquip for early UCPath project
costs and used the remainder to fund the ongoing project cost. As
Table 1 on page 12 shows, the university will pay bond interest and
principal from fiscal year 2019–20 through fiscal year 2035–36, for
a total of $331 million.
Although the Office of the President anticipated that the bond
financing would be adequate, UCPath’s cost has far exceeded
those available funds. To make up the funding shortfall, in fiscal
year 2015–16 the Office of the President created an assessment to
charge the campuses for project implementation funding and the
debt associated with the $221 million bond. Beginning in fiscal
year 2016–17, the Office of the President created a second assessment
on the campuses. The UCPath operations assessment is for the cost
to operate the UCPath Center and to maintain the legacy payroll
system as the various waves deploy UCPath. Previously, these
California State Auditor Report 2016-125.2 11
August 2017
Figure 4
The Office of the President Plans to Deploy UCPath in Waves
ORDER OF DEPLOYMENT
1 2 3 4
Wave 1* Wave 2* Wave 3* Wave 4*
Employee Count— 1,865 62,481 73,866 85,822
November December July December
2015 2017 2018 2018
4 Lawrence Berkeley National Laboratory
4 Berkeley
1 Office of the President
3 Davis†
4 Hastings College of Law
Division of
3
Agriculture 4 San Francisco†
and Natural
Resources
3 Santa Cruz
2 Merced
2 Los Angeles†
2 ASUCLA‡
2 Riverside
3 Santa Barbara UCPath
UCPath Center—
3 Irvine† located in Riverside§
4 San Diego†
Source: California State Auditor’s analysis of UCPath ‘s current deployment sequence, as of June 2017.
Note: The UCPath project refers to the remaining deployments as pilot, deployment 1, and deployment 2.
* Employee count represents the number of employees UCPath will serve in total for the university locations included in the various waves.
The employee count is current as of October 2016.
† Five medical centers are deploying with their campuses—University of California, Davis, Irvine, Los Angeles, San Diego, and San Francisco.
‡ Associated Students University of California, Los Angeles.
§ The UCPath Center began operating in fiscal year 2013–14 to provide services for the legacy payroll system to the Santa Cruz and Los Angeles locations.
In November 2015, the UCPath Center began providing the Office of the President with UCPath‑related services.
12 California State Auditor Report 2016-125.2
August 2017
costs were included in a general assessment the Office of the
President charged the campuses. As Table 1 shows, the Office of
the President had assessed the campuses a total of $174 million
to pay a variety of UCPath project‑related costs through fiscal
year 2016–17. Through June 2019, the Office of the President has
planned to assess the campuses an additional $252 million for
project costs, bond interest, and operations costs. If the Office of
the President moves forward with this plan, its current project
forecasts show that the assessment for implementation costs will
end in fiscal year 2018–19 with only bond principal and interest
payments remaining.
Table 1
The Office of the President Has Levied Assessments on the Campuses for UCPath’s Implementation
and Operations Cost
(In Millions)
ASSESSMENTS PROJECTED BOND REPAYMENT
ASSESSMENTS CHARGED THROUGH DEPLOYMENT AFTER DEPLOYMENT
THROUGH FISCAL YEAR (FISCAL YEARS (FISCAL YEARS
2016–17 2017–18 AND 2018–19) 2019–20 TO 2035–36) TOTAL
Assessment—Project Implementation $143 $122 — $265
Assessment—UCPath Center* 31 125 — 156
Bond Interest† — 5 $110 115
Bond Principal — — 221 221
Totals $174 $252 $331 $757
Sources: California State Auditor’s analysis of UCPath’s cost allocation 10‑year forecast from fiscal years 2015–16 through 2026–27, dated March 2017,
and a bond amortization schedule.
* Once UCPath is fully deployed, the cost to operate the UCPath Center becomes an ongoing operating cost that is not included in the Table.
† Total bond interest is $121 million; $6 million is included in the project implementation assessment.
For fiscal year 2019–20 and beyond, the Office of the President
has planned that the campuses will pay the UCPath Center’s
ongoing operations cost through an additional assessment. This
cost is estimated to start at a total of $74 million a year in fiscal
year 2019–20 and increase by approximately 3 percent annually.
However, the Legislature recently made changes to the way it
provides funding to the university that may affect the Office of
the President’s plans. Specifically, the State’s Budget Act of 2017
(Budget Act) directly appropriates funds to the Office of the
President, including an appropriation for UCPath of $52 million. That
appropriation was contingent on the university president certifying
in writing that the campuses would not be assessed to support
the Office of the President’s operations for fiscal year 2017–18 and
that overall campus revenues would be greater than the previous
fiscal year.2 The UCPath project’s 10‑year cost forecast shows that
2 In our report April 2017 titled The University of California Office of the President: It Failed to Disclose
Tens of Millions in Surplus Funds, and Its Budget Practices Are Misleading, Report 2016‑130, we
describe the Office of the President’s process for levying on campuses an annual financial
assessment to support its operations.
California State Auditor Report 2016-125.2 13
August 2017
the Office of the President estimates it will cost $52 million in
fiscal year 2017–18 to operate the UCPath Center, provide system
support, pay for software license and maintenance agreements,
and operate the legacy payroll system for those campuses that
have not yet deployed onto UCPath. The Budget Act provides an
appropriation for the UCPath Center operations, and according
to the UCPath financial analyst and the project director, the
Office of the President will continue to assess the campuses for
project implementation funding and the debt associated with the
$221 million bond.
Scope and Methodology
The Joint Legislative Audit Committee (Audit Committee) directed
the California State Auditor to conduct an audit of the university’s
contracting practices. The analysis the Audit Committee approved
contained eight separate objectives, one of which focused on the
university’s management of UCPath and IT contracts. This report
addresses that one objective. We list that objective and the methods
we used to address it in Table 2. This audit did not require a data
reliability assessment. We report on the other audit objectives
in our report The University of California Office of the President:
It Has Not Adequately Ensured Compliance With Its Employee
Displacement and Services Contract Policies, 2016‑125.1.
Table 2
Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE METHOD
1 Review and evaluate the laws, rules, and We identified and reviewed the relevant university policies and procedures, state guidelines, and
regulations significant to the audit objectives. industry best practices pertaining to IT project management.
2 Determine whether the university and its See The University of California Office of the President: It Has Not Adequately Ensured Compliance With
campuses’ contracting policies and procedures Its Employee Displacement and Services Contract Policies (Report 2016‑125.1).
are in compliance with applicable federal and
state laws and regulations as well as with best
practices for procurement.
3 For a selection of services contracts, determine See published report 2016‑125.1
the university’s compliance with applicable laws,
regulations, policies, and procedures.
4 For the past five years for the Office of the See published report 2016‑125.1
President—and to the extent possible for its
campuses—determine the types of contracts,
procurement methods, and types of goods and
services purchased via contracts.
continued on next page . . .
14 California State Auditor Report 2016-125.2
August 2017
AUDIT OBJECTIVE METHOD
5 For services contracts, to the extent possible, See published report 2016‑125.1
compare the compensation and benefits of
university employees to those of service workers
in comparable positions and identify trends.
Include an analysis of per‑employee cost based
on the total contract amount.
6 Analyze how the university is managing IT We obtained and reviewed a list of IT projects with costs of $10 million or more that each
contracts, including the contract for UCPath, by of the 10 university campuses and five medical centers had undertaken. We selected a total of
doing the following: three IT projects from the Berkeley, Irvine, and Riverside campuses. In making our selections,
we considered factors such as the projects’ location, the value of their contracts, and their
a. Determine what contract oversight exists to
current implementation phases.
ensure IT projects are delivered on time and
on budget. For the selection of the three IT projects, we did the following:
• Obtained and reviewed the related IT contracts and various project documents, including
b. For UCPath, assess the reasonableness of the
vendor milestones and vendor payment approval processes.
project’s increased cost and schedule delays.
• Selected five vendor payments for each IT project and assessed whether those payments
c. Determine if UCPath is adequately adhered to the projects’ established payment approval process.
communicating project risks, costs, and • In consultation with an IT project management expert, assessed whether the campuses had
delays to the regents. established adequate vendor milestones that aligned with industry best practices.
For UCPath, we did the following:
• Interviewed university officials, UCPath project leadership, and UCPath Center staff.
• Obtained and reviewed project budget and cost summaries and forecasts, as well as various
project planning documents, to determine the cost reasonableness of the UCPath project and
the UCPath Center.
• Used an IT project management expert to assess the Office of the President’s project
management practices related to UCPath’s schedules, planning, change management,
risk management, and adherence to industry best practices.
• Reviewed the minutes, videos, and discussion documents from the regents’ meetings as well
as UCPath’s budget, cost schedules, and deployment schedules to determine the frequency
with which the Office of the President updated the regents about the UCPath project’s cost and
schedule changes.
7 To the extent possible, assess actions the See published report 2016‑125.1
university is taking to overcome contracting
challenges and cost efficiencies.
8 Review and assess any other issues that are None noted.
significant to the audit.
Sources: California State Auditor’s analysis of the Audit Committee’s audit request number 2016‑125 and information and documentation identified in the table
column titled Method.
California State Auditor Report 2016-125.2 15
August 2017
Audit Results
UCPath’s Cost Has Soared, and Its Expected Savings Are Unlikely
to Materialize
Escalating cost estimates and eliminating a plan to reduce staff
have negated all the estimated savings the Office of the President
originally expected from implementing UCPath, resulting in
the original expected net savings of $447 million becoming an
estimated cost of $942 million. In its 2011 business case outlining
the cost and benefits of implementing the new system, the Office
of the President stated that the cost to implement UCPath would
be significantly less than the savings from it. As Figure 5 on the
following page shows, the Office of the President estimated
UCPath’s implementation cost at $170 million, including software
licenses, hardware and infrastructure, project staffing, vendor
services, and start‑up cost for the UCPath Center. It also forecasted
$48 million for software hosting and maintenance and for
technology cost, and $15 million for facility and equipment cost
for the shared service center. In addition, because of the expected
reductions in payroll, human resources, and IT staff, the Office
of the President included a cost of $73 million for staff severance
and job transition. Together, these costs totaled $306 million, a
significant investment of funds, particularly at a time when the
university was experiencing financial constraints. However, the
Office of the President assumed staff reductions would create
significant savings to more than offset these costs.
Nonetheless, as the UCPath project encountered delays and
other difficulties, its estimated implementation cost increased
significantly, more than doubling by April 2017. At that time, the
Office of the President reported that the estimated implementation
cost for UCPath had risen from $170 million to $504 million, an
increase of $334 million. Additionally, the Office of the President
purchased the UCPath Center building and improved it at a cost of
$53 million while its estimates show the cost to operate the UCPath
Center through Wave 4 deployment at another $130 million.
Although the university will no longer incur the staff severance cost
of $73 million because the Office of the President no longer foresees
a reduction in university staff, that savings is offset by the Office
of the President’s greatly underestimating the cost that each of
the 10 campuses will incur to implement UCPath. In its 2011
business case, the Office of the President estimated campus costs
at $56 million of the implementation cost of $170 million; however,
the 10 campuses reported to us that they expect to incur total costs
of $193 million, minus $53 million in reimbursements from the
Office of the President, as Table 3 on page 17 shows. The Office of
the President recently surveyed the campuses and other university
locations and arrived at implementation costs of about $217 million,
16 California State Auditor Report 2016-125.2
August 2017
excluding the $53 million in reimbursements. Even using the more
conservative cost total the campuses reported to us, the total
estimated cost of UCPath stands at $942 million as Figure 5 shows.
Should the UCPath project encounter further delays—which our
IT project management expert believes is a risk given the project
management weaknesses we discuss later in this report—the
project’s cost will most likely increase further.
Figure 5
The UCPath Project Will Not Realize Cost Savings From Staffing Reductions as the Office of the President’s
2011 Business Case Projected
(In Millions)
2011 BUSINESS CASE 2017 STATUS
Implementation $170 $504
COST
Implementation financing $0 $115*
Recurring technology $48 †
UCPath Center acquisition $0 $53
and financing
$183
UCPath Center facility and $15 $130
equipment, and operations‡
Staff severance $73 $0
Additional campus § $140
implementation
Estimated Cost $306 $942
BENEFITS
Reductions in staffing $753 $0
Efficiencies—Increased productivity,
functionality, and convenience
through standard business practices
IT stability—Replaces a more than
30-year-old legacy payroll system
Unified system—Centralizes
11 IT systems into one system
Estimated Cost Savings $753 $0
Net Savings Cost $447 $942
Sources: California State Auditor’s analysis of the university’s PPS Initiative: Final Report, dated August 2011; the Office of the President’s net present value
analysis supporting the PPS initiative; various cost reports; and the UCPath website. The 2017 status is as of April 2017.
* The Office of the President issued bonds and the total bond interest is $121 million. However, $6 million is accounted for in the $504 million
implementation cost estimate.
† The Office of the President asserted that recurring technology costs of $57 million are included in the $504 million implementation cost estimate.
‡ 2017 UCPath operations costs are through Wave 4 deployment planned for December 2018.
§ The Office of the President asserted that additional campus implementation costs of $56 million are included in the implementation cost estimate.
= The university did not monetize these benefits.
California State Auditor Report 2016-125.2 17
August 2017
Table 3
The Campuses Will Incur Significant Cost as a Result of UCPath’s Implementation
(In Thousands)
FORECAST
FY 2011–12 FY 2012–13 FY 2013–14 FY 2014–15 FY 2015–16 FY 2016–17* FY 2017–18 FY 2018–19 TOTAL
Wave 2 (December 2017)
Los Angeles $1,227 $4,363 $5,250 $4,961 $9,203 $9,726 $8,444 NA $43,174
Merced 408 640 2,239 1,784 1,339 1,843 1,227 NA 9,480
Riverside† 134 651 834 1,016 2,447 6,967 8,713 NA 20,762
Wave 3 (July 2018)
Davis $209 $1,139 $3,766 $3,405 $2,910 $3,923 $6,447 $2,995 $24,794
Irvine 423 616 1,327 1,769 1,849 3,186 5,117 2,408 16,695
Santa Barbara‡ 111 406 834 1,294 1,474 2,359 5,140 3,218 14,836
Santa Cruz 242 1,341 2,604 3,915 1,823 1,078 5,850 3,150 20,003
Wave 4 (December 2018)
Berkeley $260 $728 $833 $180 $0 $86 $8,742 $9,178 $20,007
San Diego 764 1,331 1,331 858 931 1,022 3,395 3,941 13,573
San Francisco 87 176 603 860 1,030 497 4,919 1,477 9,649
Totals $3,865 $11,391 $19,621 $20,042 $23,006 $30,687 $57,994 $26,367 $192,973
Less reimbursements $53,000
Net total $139,973
Sources: California State Auditor’s analysis of expenditure data and attestations provided by the 10 campuses.
Note: Costs include expenditures the Office of the President reimbursed. We excluded the Office of the President and auxilliary university locations
from our survey.
NA = Not applicable because UCPath is scheduled for implementation in the fiscal year stated.
* Amounts for fiscal year 2016–17 include actual and projected costs (Los Angeles, Merced, Davis, Irvine, San Diego, Santa Barbara),
incomplete cost (Santa Cruz), or budgeted cost (San Francisco).
† Riverside’s cost does not include cost related to existing staff working on UCPath.
‡ Santa Barbara’s forecast for fiscal year 2018–19 consists of only the first half of that fiscal year.
In its 2011 business case, the Office of the President asserted
that UCPath, as one of the projects under the Working Smarter
initiative, would achieve sustainable long‑term cost savings
including the $753 million saved from staff reductions. Additionally,
the 2011 business case indicated that UCPath would provide
significant benefits that were not monetized, including making the
university’s payroll process more efficient, improving its payroll
stability by replacing the legacy payroll system, and unifying its
payroll and human resources into one IT system. The Office of the
President viewed UCPath as part of a larger vision to improve
the university’s administrative and operational effectiveness
and as a platform for its campuses to adopt new and effective
business processes.
18 California State Auditor Report 2016-125.2
August 2017
Although the Office of the President Although the Office of the President still expects to achieve
still expects to achieve UCPath’s the nonquantifiable benefits, it no longer expects to realize the
nonquantifiable benefits, it no projected savings of $753 million from UCPath’s implementation.
longer expects to realize the The project director indicated that it was not clear whether
projected savings of $753 million campuses would make any staff reductions or if such reductions—if
from its implementation. they did occur—would be quantifiable. The three campuses we
visited confirmed that they would not make staff reductions when
implementing UCPath. For example, the former UCPath pilot
director at the Riverside campus said that his campus has no plans
for staffing reductions; rather, the campus plans to use any staff
reduction from UCPath to offset the need for additional staff as the
campus grows. Similarly, the Berkeley and Irvine campuses both
indicated that they had no immediate plans for staff reductions and
told us that they would better understand the impact of UCPath on
their current staffing levels as they neared deployment.
Without the staffing reductions the Office of the President’s 2011
business case outlined, UCPath is not likely to result in significant
savings in the near future, if at all. The failure of this $753 million
in savings to materialize is a major change in the economic impact
of the project on the university, since the Office of the President
projected UCPath would provide a net quantifiable benefit of
$447 million after its implementation cost as shown in Figure 5 on
page 16. Now UCPath will cost at least $942 million, placing further
strain on the university’s financial condition. In July 2017, the Office
of the President presented to the regents a UCPath project status
report that included a section titled “Validating the Business Case
for UCPath.” At present, the Office of the President is not generally
focused on UCPath resulting in savings but rather on it creating
efficiencies and avoiding unnecessary costs. In the status report, the
Office of the President indicated that the campuses could identify
efficiencies from centralizing and automating business practices.
However, as noted previously, the three campuses we visited do not
expect staff reductions that would drive the level of savings the 2011
business case envisioned.
The Office of the President Did Not Keep the Regents Apprised
of the Significant Cost Increases and Schedule Delays That Have
Plagued UCPath
Although the UCPath project has significantly exceeded its original
cost estimate and schedule goals, the Office of the President has
not provided timely or consistent updates of these changes to the
regents. With cost increases of $334 million—from $170 million to
$504 million—and four time extensions on completion—totaling
nearly five years, from August 2014 to June 2019—we expected the
Office of the President to have regularly updated the regents and
any other stakeholders. However, in most instances, the Office of
California State Auditor Report 2016-125.2 19
August 2017
the President did not communicate these changes to the regents The Office of the President has
either before or at the time it made them. As a result, the Office of not provided timely or consistent
the President has effectively limited the regents’ governance role updates of UCPath’s cost
and impeded their ability to critically evaluate UCPath and whether estimate and schedule changes
committing hundreds of millions of dollars to an IT system was in to the regents, thereby limiting
line with the university’s financial goals. the regents’ governance role and
impeding their ability to critically
The regents meet at least six times a year, in two‑day meetings evaluate UCPath.
every other month. These meetings have provided the Office
of the President ample opportunity to communicate with the
regents about UCPath. Although the Office of the President
provided us a list of 79 communications to the regents that
reference UCPath, we were able to find only five status updates
on UCPath among these 79 communications. In the remaining
74 communications, the Office of the President either mentioned
UCPath in relation to other issues or did not report any substantive
details about the project’s status, cost, and schedule. In addition,
the Office of the President updated the regents twice more after
it provided us the list of 79 communications. The Office of the
President provided a written update in April 2017, following our
inquiries into why it had not updated the regents on UCPath’s
cost increases and schedule delays. The Office of the President
also updated the regents at the July 2017 regents meeting. All
seven of these updates are reflected in Figure 6 on the following
page, along with a financing request the Office of the President
made in May 2013, which mentioned UCPath’s then‑current cost
estimate. The infrequency with which the Office of the President
provided the regents with updates is troubling given the complexity
of the UCPath project and its escalating cost.
Further, the Office of the President did not disclose in any of the
seven updates or in the financing request that it no longer believed
the cost savings of $753 million would materialize. The absence
of discussion on failed cost savings in the updates is a serious
omission given that the Office of the President directly aligned
UCPath with its Working Smarter initiative, through which it
sought administrative efficiencies systemwide by reducing costs
or increasing revenues.
20 California State Auditor Report 2016-125.2
August 2017
Figure 6
The Office of the President Did Not Consistently Inform the Regents of Changes to UCPath’s Implementation Cost and Schedule
REVISED
COMPLETION DATE
JUNE 2019*
DECEMBER 2018
Cost Estimates
for UCPath’s Implementation†
DECEMBER 2017
July 2017 Status Update: Cost estimate communicated to regents; reported $504.
April 2017 Status Update: Cost estimate communicated to regents; reported $504.
$503
$479
$446
January 2016 Status Update: No cost estimate communicated to regents.
$435
AUGUST 2015
July 2015 Status Update: Cost estimate communicated to regents; reported $375.‡
$382
AUGUST 2014 July 2014 Status Update: Cost estimate communicated to regents; reported $220.
Original $345
completion
date
May 2013 Financing Request: Cost estimate communicated to regents; reported $221.
$221
March 2013 Status Update: No cost estimate or schedule change communicated
to regents.
January 2012 Status Update: Cost estimate communicated to regents; reported $170.
SEPTEMBER 2011
Project start
$170
CHANGE COMMUNICATED
TO REGENTS ON OR BEFORE
IT WAS MADE
= YES $0 $100 $200 $300 $400 $500
= NO In Millions
9102
8102
7102
6102
5102
4102
3102
2102
1102
Sources: California State Auditor’s analysis of UCPath project financial statements and schedules, as well as documents and minutes from regents’ meetings.
* June 2019 is the date when post‑deployment support ends and UCPath is fully deployed.
† Cost estimates shown are related to budget increases of $10 million or more.
‡ For June 2015, the UCPath internal cost estimate was reduced to $375 million; thus, the cost estimate reported to the regents was consistent with the
project’s cost estimate.
California State Auditor Report 2016-125.2 21
August 2017
Moreover, our review of the Office of the President’s limited
communications with the regents found that the Office of
the President did not always clearly identify UCPath’s current
cost estimate or the timeline for completion. The Office of the
President’s March 2013 status update to the regents referred
to the UCPath project as “7 or 8 percent over budget” when
in actuality it was 30 percent over its cost estimate, or about
$51 million, at that time. Two months later, in May 2013, the
Office of the President sought the regents’ approval for financing to
fund the project’s escalating cost and revealed that UCPath’s cost
estimate had increased to $221 million. The Office of the President
discussed the status of UCPath three more times with the regents
between July 2014 and January 2016 but was not forthcoming in
two of these meetings. In July 2014, the UCPath project director In July 2014, the UCPath project
told the regents that UCPath’s cost estimate was $220 million, yet director told the regents that
the Office of the President’s internal records from one month earlier UCPath’s cost estimate was
show the project’s cost estimate was $345 million. The UCPath $220 million, yet the Office of
project director also told the regents that the Office of the President the President’s internal records
would propose a final budget in the regents’ January 2015 meeting, from one month earlier show
but it failed to do so. The Office of the President did not provide the the project’s cost estimate was
regents with the next status update until July 2015, when it reported $345 million.
the estimated cost of the project had increased to $375 million,
which was in line with the Office of the President’s then‑current
internal cost estimates.
In July 2015, the regents expressed concern about the rising cost of
UCPath and directed the Office of the President to keep it informed
about the project’s progress. Despite this specific direction from
the regents, the Office of the President did not make its next
status report until six months later, in January 2016. Further, in
this status report, the Office of the President made no mention of
the project’s cost estimate, which its internal records indicate had
increased by another $60 million, or 16 percent, to $435 million.
In fact, the Office of the President failed to inform the regents of
UCPath’s escalating cost estimate and schedule delays until after we
asked in February 2017 why it had not communicated this critical
information. In April 2017, it finally sent a status update to the
regents, its first substantive communication on UCPath’s status
since the regents’ directive in July 2015.
The Office of the President’s April 2017 update revealed its lack
of transparency on reporting UCPath’s true cost and schedule. In
this update, the Office of the President reported that the estimated
cost for UCPath had risen to $504 million, which it generally
attributed to the need for increased time for campus readiness
activities, additional staff for deployment activities, modest
software customizations, and a four‑month extension for the pilot
deployment. In a footnote to that update, the Office of the President
noted having not reported UCPath’s cost estimate to the regents for
22 California State Auditor Report 2016-125.2
August 2017
nearly two years, with its last update occurring in July 2015 when it
reported that UCPath would cost $375 million. The footnote offered
no explanation as to why the Office of the President failed to keep
the regents informed about the escalating cost of UCPath. Further,
although the April 2017 update discussed the timeline for deploying
UCPath at the campuses, it did not disclose that it had already
pushed back UCPath’s final completion date to June 2019, which is
when post‑deployment support ends and UCPath is fully deployed.
Figure 6 on page 20 shows that the Office of the President did
not regularly communicate its decisions to change UCPath’s
On four occasions, the Office of the implementation schedule. On four occasions, the Office of
President extended the UCPath the President extended the UCPath project schedule by six to
project schedule by six to 28 months, 28 months, but it did not apprise the regents of three of these
but it did not apprise the regents extensions or the reasons for the delays. In total, the Office of
of three of these extensions or the the President extended the length of the UCPath project from
reasons for the delays. three years to over seven years. Although its status updates did
provide estimated deployment dates for different campuses and
other university entities and included some general reasons for
extending the timeline, the updates were frequently vague about
the project’s final completion date, again limiting the regents’
opportunity to critically evaluate UCPath’s direction.
We believe the Office of the President’s lack of transparency with
the regents can largely be attributed to a weakness in the project’s
governance structure, which has not included a process to keep
the regents informed about UCPath’s progress. The project’s
governance structure invests a great deal of autonomy and
authority in the project’s executive leadership team (leadership
team), which consists of the project sponsors, representatives from
the Office of the President, and representatives of the campuses.
Figure 3 on page 9 shows the project governance structure. The
bylaws of the leadership team state that it is responsible for
final decisions regarding the UCPath project’s cost, schedule,
scope, and policy. However, the bylaws contain no mention of
communication with the regents: for example, they do not establish
how frequently the leadership team must update the regents or
what events should trigger updates about the project’s progress. In
addition, the communication plans that the project’s governance
and communications lead provided us lacked mention of periodic,
structured communication with the regents. We find the absence
of such a reporting relationship surprising, given the significant
impact of UCPath on the university. The project director and
the project sponsors confirmed that until recently the Office
of the President did not have guidelines for communicating
with the regents about the status of UCPath. While the project
director acknowledged that the project sponsors have primary
California State Auditor Report 2016-125.2 23
August 2017
responsibility for updating the regents at significant implementation
points, our findings show that they have not adequately fulfilled
this responsibility.
In July 2017, the Office of the President informed the regents of a
change in the UCPath project governance approach that it believes
will address its lack of communication. Specifically, the Office
of the President updated the UCPath Governance Materiality
and Escalation document (governance document) to include the
regents in the governance. The approach recognizes the regents
as providing institutional oversight and identifies three situations
that will require the project sponsors to update the regents about
UCPath’s status. At the July 2017 meeting with the regents, the
project director acknowledged that project governance decisions
about UCPath had previously stopped with the project sponsors.
He stated that in modifying the project’s governance document
and acknowledging the regents’ oversight role, the Office of the
President was responding to changes that the regents had made
in 2016 to the charter for the Finance and Capital Strategies
committee—a committee of the regents with oversight of the
university’s fiscal and financial affairs and business operations,
among other matters—to reflect that committee’s oversight of
UCPath as a large‑scale enterprise system. We note that the
timing of the governance change coincided with this audit and
the inquiries we made about the Office of the President’s infrequent
communications with the regents about the status of UCPath.
Although the Office of the President has now acknowledged the
regents as part of the governance for UCPath, this expanded
governance approach may not go far enough to ensure that the
regents can participate in critical decisions. The governance
document states that updates to the regents must occur when the
project meets significant implementation milestones, including
deployments; when the project experiences adverse cost impacts
of more than $20 million; or when the schedule is delayed by more
than three months. However, the governance document makes
clear that the regents will be informed or “kept apprised of progress
or changes via one‑way communication” rather than consulted. In
our view, this governance approach does not adequately recognize
the regents’ role as an oversight body. We believe the Office of the
President should address the need for the regents to have timely, Although the Office of the President
critical information in order for them to participate in decision has committed to informing
making and to provide the project with guidance. Although the the regents of certain project
Office of the President has committed to informing the regents of events, the planned approach
certain project events, which may cause it to report more frequently will not engage the regents on a
to the regents than in the past, the planned approach will not decision‑making level that would
engage the regents on a decision‑making level that would truly truly allow them to fulfill their
allow them to fulfill their oversight role. oversight role.
24 California State Auditor Report 2016-125.2
August 2017
Weaknesses in the Office of the President’s Project Management
Likely Contributed to UCPath’s Cost Increases and Schedule Delays
The Office of the President Our review found that the Office of the President could have
could have mitigated cost and mitigated cost and schedule increases to the UCPath project
schedule increases to the UCPath through better project management practices. Specifically, our IT
project through better project project management expert identified the following five weaknesses
management practices. in the Office of the President’s project management processes:
• Maintaining an overly aggressive project schedule.
• Not maintaining an integrated schedule and resource
management plan (integrated plan).
• Not assessing all budget and schedule implications resulting
from change management.
• Not establishing effective risk‑management processes.
• Not using independent verification and validation (IV&V).
The Office of the President maintained an overly aggressive
project schedule, which became susceptible to delays because
of project scope changes and staffing constraints. When our IT
project management expert reviewed the UCPath project’s risk
log, the project sponsors’ briefings to the president, and the project
director’s briefings to the project sponsors, he identified a pattern:
the UCPath project schedule became too aggressive and then
slipped. In fact, the project briefing materials demonstrate that the
Office of the President was aware that the schedule was aggressive:
mentions of it appear time and again in those materials. For
example, an August 2014 briefing prepared for the president stated,
“Allotted time to prepare for [the Office of the President] go‑live is
aggressive.” According to our expert, go‑live refers to the point in
time that a new IT system is put into use, or production; thus, this
briefing reveals that the Office of the President was aware that it
might not be able to deploy UCPath as planned. Similar concerns
show up in many briefings, yet the Office of the President continued
to set aggressive schedule goals.
Additionally, when the project director provided monthly briefings
to the project sponsors, he often indicated that there was no
schedule slack—a term that refers to the amount of time that
critical tasks can be delayed before the schedule is jeopardized.
For example, in August 2016, the project director reported that
the numerous changes that the campuses had requested could
cause schedule delays. And a January 2017 briefing indicated
that the project had no slack in the schedule and that significant
overlapping work might cause problems. Overlapping work in the
California State Auditor Report 2016-125.2 25
August 2017
UCPath schedule is a concern because it indicates that the Office
of the President has scheduled the same core staff to perform
two different tasks at the same time. These issues led our IT project
management expert to conclude that the project’s overly aggressive
schedule factored into the project’s repeated delays.
Further, our IT project management expert found that the Office of The Office of the President did not
the President did not maintain an integrated plan. According to our maintain an integrated plan, which
expert, building and maintaining an integrated plan is critical for a is critical for a project of UCPath’s
project of UCPath’s size and complexity. Such a plan captures the size and complexity.
timing of each project task and identifies which staff will perform
that task and helps identify and resolve instances where staff have
overlapping work before they impact the project’s schedule. When
our expert reviewed the project briefing materials, he found that
the Office of the President had acknowledged the risks associated
with overlapping schedules and had identified the lack of an
integrated plan as a risk to the UCPath project schedule. According
to the current project director, between 2013 and 2014 his former
codirector attempted to develop and maintain an integrated plan,
but the planning software that the Office of the President was
using, as implemented, could not support the level of detail the
plan required. Subsequently, the plan was abandoned. Our expert
found no evidence that the Office of the President attempted to
adopt a subsequent integrated plan. Further, he observed that many
other large IT projects have used integrated resource and schedule
planning without the technology problems that the Office of the
President encountered.
Our IT project management expert also observed that the Office
of the President lacked a rigorous process for assessing the budget
and schedule implications of proposed scope changes to the
UCPath project. Although the project has a defined process for
large changes, those changes that are believed to be smaller are
approved at the lowest project levels without assessment of higher
or global implications. Over time, small changes accumulate and
have more significant project impacts. Without a detailed analysis
of how changes may affect the broader project context, staff or
management may approve small changes without understanding
that those changes will have ramifications that threaten the
project’s larger goals. Changes to UCPath’s scope were likely to have
implications for its cost and schedule because it has operated with
aggressive schedules, without the necessary staff to accomplish all
planned work, and with a work plan that involves overlapping tasks.
The Office of the President also demonstrated weaknesses in its
risk‑management processes. The purpose of risk management is to
decrease the likelihood and impact of negative events threatening
project goals. Risk management is accomplished through processes
that identify, prioritize, and develop responses to threats to those
26 California State Auditor Report 2016-125.2
August 2017
goals. Although the Office of the President tracked risks, it did not
review or monitor all risks periodically. Specifically, our IT project
Although the Office of the President management expert found that the project risk logs identified many
tracked risks, it did not review medium‑severity risks to the project’s schedule, yet many of those
or monitor all risks periodically. risks sat for hundreds of days without evidence of reassessment—
Without regular monitoring of often at the same time that the project schedule was slipping.
identified risks, the Office of the For example, the risk manager logged in September 2016 that a
President may not detect which specific testing environment had not been fully evaluated before
risks have passed, which have been use and could result in defects during testing. However, this risk
mitigated or resolved, or which may went unmonitored for more than four months with no apparent
become more significant threats. actions or updates. Without regular monitoring of identified risks,
the Office of the President may not detect which risks have passed,
which have been mitigated or resolved, or which may become more
significant threats.
Finally, the Office of the President also failed to use IV&V as part of
its project oversight. IV&V helps to ensure that an IT system will
perform as intended and meet its users’ needs. As an IT system
is developed and implemented, IV&V can provide early warnings
of process and technical discrepancies, issues, and problems that
may otherwise go undetected or be detected too late. According
to our IT project management expert, UCPath’s size, complexity,
and risk warranted using IV&V for identifying and mitigating
technical and project management issues. For example, IV&V could
have detected the issues UCPath experienced with staff being over
allocated. One of the project sponsors asserted that the Office of the
President’s internal auditors and a consultant have been providing
oversight that is equivalent to IV&V. Specifically, she confirmed that
the internal auditor works with the consultant to create a report of
any significant risks to the UCPath project. However, our expert
concluded that neither of these entities provided oversight that was
equivalent to IV&V, as IV&V provides a more robust analysis of
technical activities and is embedded in the project as opposed to
occurring periodically.
In addition to the project management issues that our IT project
management expert identified, the Office of the President provided
several factors that it believes contributed to its exceeding its initial
UCPath cost estimate and schedule goals. Specifically, the UCPath
project director acknowledged that the Office of the President
greatly underestimated UCPath’s size and complexity, particularly in
terms of the changes required to adapt the system to each campus’s
business processes. Our expert concurs and indicates that the
significant challenges the project has encountered were indicative
of the Office of the President’s poor initial understanding of the
UCPath project’s scope. These challenges have not only included
missed schedules and a growing budget, but also an increase in
the predicted number of necessary system interfaces between
California State Auditor Report 2016-125.2 27
August 2017
UCPath and other IT systems from 75 to over 120. Each interface
requires analysis and software programming, which added to the
project’s complexity.
The Office of the President also did not fully understand the
amount of effort required to standardize business processes across
all campuses. One of the project sponsors, the chief financial officer, The chief financial officer asserted
told us that a main lesson the Office of the President has learned that the Office of the President
is that UCPath is a business transformation project—meaning the made the mistake of procuring
university has to change its business processes systemwide—as well a technological solution for the
as an IT implementation project. He indicated that the Office of the university’s payroll and human
President made the mistake of procuring a technological solution resources activities before it had
for the university’s payroll and human resources activities before standardized its business processes
it had standardized its business processes and developed a shared and developed a shared service
service center model for those activities. center model for those activities.
The project director also explained that schedule delays and cost
estimate increases are closely related because labor costs account
for the majority of UCPath’s implementation cost; thus, a delay in
the overall schedule results in an increase in UCPath’s cost estimate.
Further, he indicated that the Office of the President is constrained
by the university’s business calendar, which offers four optimal
dates to shift from one IT system to another. These dates coincide
with the end of each tax reporting quarter and the project director
stated that deploying UCPath at the end of a tax quarter minimizes
the need to convert employees’ tax balances. Thus, when the
schedule slips, it slips in three‑month increments, which means
the university incurs labor costs for three more months, resulting
in large increases in UCPath’s cost estimate. Ultimately, although
the Office of the President is aware of some of the factors that led
to the project’s cost increases and schedule delays, such awareness
has not prompted addressing the project management weaknesses
that our IT management expert identified. The Office of the
President needs to develop and implement IT project management
guidelines that will help ensure that IT projects are completed on
time and within approved budgets.
Although Invoice Approval Processes Were Followed, Some Campuses
Could Better Define IT Deliverables
To assess the university’s management of its IT contracts, we
reviewed one IT project at each of the Berkeley, Irvine, and
Riverside campuses. We found that while the campuses followed
their established vendor payment practices, the Berkeley and
Irvine campuses could improve their IT contracting practices.
The projects we reviewed included fixed price contracts
28 California State Auditor Report 2016-125.2
August 2017
with development vendors (Berkeley and Irvine campuses)
and a time‑and‑materials contract with a development
vendor (Riverside campus). The costs of the three projects
ranged from $11 million to $93 million. Our review of five project
invoices from each campus found that the campuses had required
The Berkeley and Irvine campuses that vendor invoices be reviewed and approved before payment.
had only vaguely worded However, the Berkeley and Irvine campuses had only vaguely
deliverables for project milestones, worded deliverables for project milestones. According to our
increasing the risk that the IT project management expert, these types of vaguely worded
campuses will inadvertently pay deliverables do not align with industry best practices and increase
for work that does not meet their the risk that the campuses will inadvertently pay for work that does
expectations or needs. not meet their expectations or needs.
The State has established guidance on IT contracting that helps
ensure that IT contracts contain well‑defined deliverables. For
example, the State Contracting Manual states that agencies
must develop a “clear, concise, and detailed description of the IT
services to be performed.” Further, the State’s Project Management
Framework (management framework) provides guidance for how
to define deliverables to ensure that the agency and the vendor
possess a mutual understanding of the content and scope of the
deliverables. This sort of clear definition helps to ensure that
the agency gets what it is paying for: an IT system that functions
as intended. The management framework recommends that the
agency develop a deliverable expectations document that defines
the scope, content, entrance criteria, acceptance criteria, and
development schedule for each deliverable. The entrance criteria
should define what the vendor must achieve before it begins work
on activities associated with the development of the deliverable, and
the acceptance criteria should define what the vendor must achieve
before the agency will accept the deliverable. Finally, the deliverable
schedule should document the key tasks and dates associated with
the deliverable.
Our review found that the deliverables for the Berkeley and
Irvine campus projects did not always align with the management
framework’s guidance. Although state law does not require the
university to comply with these guidelines, they represent best
practices that it would likely benefit from. We found that the
Berkeley and Irvine campuses paid their vendors on the completion
of milestones; however, they did not have deliverable expectation
documents, and the deliverables for milestones as described in
the vendor contracts did not provide enough detail to effectively
measure whether the vendors had met their obligations for
payment. For example, although the contracts had defined dates
for the completion of milestones, they did not include entrance
or acceptance criteria. Therefore, the Berkeley and Irvine projects
did not have sufficient criteria to determine if the milestones had
actually been completed.
California State Auditor Report 2016-125.2 29
August 2017
Absent sufficient criteria, it is difficult to determine whether the
vendor achieved a deliverable and whether that deliverable was
acceptable. For example, in January 2016, the Berkeley campus’s
vendor submitted an invoice of $593,000 for a milestone titled
Enrollment History Converted, and the Berkeley campus
subsequently paid that vendor for completing the milestone.
However, the Berkeley campus’s basis for making this payment
is unclear because the contract does not define the deliverables
that would satisfy the milestone. Further, the contract leaves
in question what level of data conversion is acceptable, such
as whether the campus will accept a certain percentage of
errors in the data or a certain percentage of data that are not
successfully converted.
The executive director of the Berkeley campus project responded
that the Berkley campus has a comprehensive process for accepting
milestones and is aware of what each milestone includes based
on what he stated is a highly detailed project plan and a readiness
assessment. Similarly, the director for the Irvine campus’s project
stated that the Irvine campus uses the project schedule and the
statement of work to determine whether to pay its vendor for
achieving milestones. Further, he told us that the Irvine campus had
not made payments for some of its vendor’s invoices because the
campus did not believe that the vendor had satisfactorily completed
certain milestones. Despite the processes that the Berkeley and
Irvine campuses assert that they follow, our IT project management
expert found that their contracts did not have defined milestones,
which puts them at risk for contractual disputes with their vendors.
The Berkeley campus’s opting not to employ best practice in its
process for deliverable review did not appear to affect the cost of
its project. In 2017 the Berkeley campus completed most of the The Irvine campus is in the early
project development activities within its budget of $93 million. In stages of developing its Student
contrast, the Irvine campus is in the early stages of developing its Information System and has
Student Information System and has struggled to keep the project struggled to keep the project
on track, which is projecting a $12 million overage from its initial on track and it could benefit
budget and a one‑year delay. Thus, it could benefit from improving from improving its deliverable
its deliverable review practices. review practices.
Recommendations
Regents
To ensure that they are able to exercise necessary oversight for
the university’s significant IT projects, the regents should develop
status reporting standards for the Office of the President and all
university locations to follow by December 2017. Such reporting
30 California State Auditor Report 2016-125.2
August 2017
standards should apply to all university IT projects with more
than a specified cost and, at a minimum, should establish
the following:
• The frequency with which the Office of the President and all
university locations must report to the regents. Such updates
should occur at least three times per calendar year and coincide
with regents’ meetings to allow for oral discussion.
• The types of disclosures the Office of the President and all
university locations must present about each IT project
including, but not limited to, changes in scope, projected cost,
and schedule.
• The types of significant project risks the Office of the President
and all university locations must disclose. The updates should
also describe the actions the Office of the President and all
university locations are taking to mitigate risks and the potential
effects of those risks on a project’s cost, schedule, and scope.
Office of the President
To ensure that it fully reports the cost of IT projects, the Office
of the President should develop cost reporting guidelines by
December 2017 for UCPath and other significant IT projects
across all university locations. These cost guidelines should identify
cost categories at both the Office of the President and university
locations to ensure that the estimates capture and communicate
all development and implementation costs. In addition, the
Office of the President should produce cost reports to share with
stakeholders at least quarterly.
To ensure that it consistently follows best practices related to
project management, the Office of the President should develop
and implement guidelines for IT project development by June 2018.
The guidelines should apply to all IT projects undertaken by any
university location with a cost estimate of at least $5 million or
more and should include the following elements:
• A means to assess schedules for reasonableness, and
requirements for the creation and maintenance of an
integrated schedule and resource plan for each project.
• Requirements for rigorous change management processes that
establish a means of assessing the implications of changes to a
project’s scope, cost, and schedule.
California State Auditor Report 2016-125.2 31
August 2017
• Procedurally sound requirements for identifying, reviewing, and
resolving risks to a project.
• IV&V to oversee the technical aspects of project development.
The Office of the President should require that all university
locations follow best practices by ensuring that each location
creates a deliverable expectations document for each IT contract
similar to the documents the State’s management framework
describes. The Office of the President should establish this
requirement by December 2017. The deliverable expectations
document should, at a minimum, identify the deliverables for
each milestone and define the scope, content, entrance criteria,
acceptance criteria, and development schedule for each deliverable.
We conducted this audit under the authority vested in the California State Auditor by Section 8543
et seq. of the California Government Code and according to generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives
specified in the Scope and Methodology section of the report. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
State Auditor
Date: August 24, 2017
Staff: John Baier, CPA, Audit Principal
Sharon L. Fuller, CPA
Idris H. Ahmed
IT Project Management Expert: Catalysis Group
Legal Counsel: Joseph L. Porche, Staff Counsel
For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.
32 California State Auditor Report 2016-125.2
August 2017
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California State Auditor Report 2016-125.2 33
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34 California State Auditor Report 2016-125.2
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California State Auditor Report 2016-125.2 35
August 2017
U NI VER SI TY O F CA LI FO R NI A
BERKELEY • DAVIS • IRVINE • LOS ANGELES • MERCED • RIVERSIDE • SAN DIEGO • SAN FRANCISCO SANTA BARBARA • SANTA CRUZ
Office of the President 1111 Franklin Street
Oakland, CA 94607-5200
Phone: (510) 987-9074
http://www.ucop.edu
August 7, 2017
Ms. Elaine M. Howle *
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, California 95814
State Auditor Howle:
I write in response to your draft audit report University of California Office of the
President — Contracted Employees and Contracting Practices, as it pertains to
UCPath and information technology projects. The recommendations are helpful and
constructive, and align with our proactive efforts to continually improve UC’s
operations, policies and transparency to the Legislature and the public at large.
Our responses to specific recommendations are in the attachment to this letter, but I
would like to take this opportunity to provide important information about UCPath,
one of the main projects discussed in the audit. The University launched UCPath in
2011 to modernize and standardize its payroll system for more than 190,000 UC
employees at 11 locations.
When I arrived at UC in September of 2013, UCPath was already well underway. At
that time and as I do now, I view it as a necessary project to standardize UC’s
business practices, improve accuracy and service quality, and create efficiencies
across our system – and not necessarily as a tool for generating immediate savings.
I would like to emphasize some important context that speaks to the implementation
and effectiveness of UC Path:
UCPath is a large-scale and complex undertaking that improves how
UC delivers key administrative services. Once implemented systemwide,
the upgrade will standardize over 100 processes for payroll, human resources,
and benefits through upgraded technology, a centralized database, and a
shared services center to serve employees. The challenges of managing a
project of this scale and complexity are reflected in the efforts of comparably-
* California State Auditor’s comments begin on page 41.
36 California State Auditor Report 2016-125.2
August 2017
State Auditor Howle
August 7, 2017
Page 2
sized institutions and organizations that have attempted similar massive-data
upgrades, which have resulted in major delays or failure.
An upgrade is not only prudent, but unavoidable. UC’s 11 current
systems are 35 years old and vary among locations. They’re disconnected,
outdated, expensive to maintain, and require manual calculations. It has
become increasingly challenging for UC to manage employee records and
ensure payroll accuracy. An estimated $100 million is spent annually on
1
manual rework and fixing errors. A systemwide upgrade will ensure that our
resource-constrained campuses will be able to avoid building their own
respective systems, at an estimated cost of more than double the current
projected costs of UCPath.
UC has become more effective at managing this project over time.
Significant changes were made to the management of UCPath in 2013, after
UC concluded that the IT consulting firm contracted to manage UCPath and
oversee the transformation of business processes had failed to perform as
expected and to achieve sufficient progress on implementing the project. UC
then conducted an exhaustive assessment of the project, instituted better
controls, and revamped the deployment approach. As a result, we revised the
original business case, cost estimates, and projected timelines. And as we
continue to move forward on our implementation, the accuracy of the
projections delivered by the reconstituted project team has and will continue to
improve. Many of the recommendations contained in the report will help us
further that progress.
UC has already made significant progress. Since November 2015,
UCPath has been providing payroll, human resources, and benefits services for
UCOP employees. Significantly, 70 percent of the functionality that will be
needed at our campuses and medical centers was achieved with this rollout.
This greatly reduces the implementation efforts that will be required on the
campuses. Finally, we are well on track to deploy the system later this year at
UCLA, UC Riverside, UC Merced, and the Associated Students of UCLA.
UCPath benefits from governance that is diversified and rigorous.
2 Various stakeholders oversee UCPath, including the UC Board of Regents,
California State Auditor Report 2016-125.2 37
August 2017
State Auditor Howle
August 7, 2017
Page 3
UCOP leadership and policy experts, and campus leaders – including vice
chancellors, controllers, chief human resource officers, chief information
officers, and academic personnel directors. The multiple governance bodies,
along with the UC Board of Regents, oversee project progress, scope, schedule,
and budget.
UC continually improves oversight and communication of UCPath.
Since the start of the UCPath project, the project leadership has made 79 2
presentations about and references to UCPath at public Regents’ meetings.
This number does not reflect additional discussions, briefings, and
consultations with individual board members and, in particular, committee
and board leaders, in between the formal meetings. Nor does it include the
public-facing website that we have created to provide important milestones
and updates on the project. As a result of the recent restructuring of the
committees of the UC Board of Regents, we have updated our practices for
briefing The Regents on the project, which receives oversight from the Finance
and Capital Strategies Committee.
I have complete confidence in UC’s ability to continue successful implementation of
UCPath, a necessary project with significant, expansive, and long-term benefits to
the University. As with any extremely complex undertaking, we are constantly
finding ways to improve and be more efficient. That is why we welcome your
recommendations and appreciate the time and diligence your staff spent in
identifying ways in which we might further our substantial progress.
Yours very truly,
Janet Napolitano
President
Attachment:
Response - CSA UCPath and IT Projects Recommendations
38 California State Auditor Report 2016-125.2
August 2017
Responses to CSA UCPath and IT Projects Recommendations
1. To ensure it fully reports the cost of IT projects, the Office of the
President should develop cost reporting guidelines by December
2017 for UCPath and other significant IT projects across all
university locations. These cost guidelines should identify cost
categories at both the university and campus levels to ensure that
estimates capture and communicate all development and
implementation costs. In addition the Office of the President should
produce cost reports to share with stakeholders on at least a
quarterly basis.
UCOP will provide project sponsors and managers with guidelines for reporting
standards and project risk management practices to formalize what is currently an
informal practice. By December 2017, UC will develop cost reporting guidelines for
UCPath and large systemwide projects/programs with budgets of $25M or greater.
The guidelines will include cost reporting direction.
2. To ensure it consistently follows best practices related to project
management, the Office of the President should develop and
implement guidelines for IT project development by June 2018. The
guidelines should apply to all IT projects undertaken by any
university location with a cost estimate of at least $5 million or more
and should include the following elements:
A means to assess schedules for reasonableness, and
requirements for the creation and maintenance of an
integrated schedule and resource plan for each project.
Requirements for a rigorous change management process that
establishes a means of assessing the implications of changes to
a project’s scope, cost and schedule.
Sound requirements for identifying, reviewing, and resolving
risks to a project.
IV&V to oversee the technical aspects of project development.
UCOP agrees that there are opportunities to strengthen and improve the project
management approach for systemwide projects over $25M and will develop
guidelines for IT project development by June 2018. All projects can benefit from
the discipline and rigor contained in best practices; however, best practice in one
context and at one moment in the process might not be applicable in another.
3 We disagree with statements made by CSA that IV&V practices should be run
throughout any and every systemwide program. This would create a parallel
management structure to the program, which would add cost and complexity while
California State Auditor Report 2016-125.2 39
August 2017
Page 2
diluting the effectiveness of such a function. It is our current and proposed
continued practice to use diligent governance as a way to identify and bring in
IV&V third-parties for specific topics and situations as appropriate or necessary.
3. The Office of the President should require that all university
locations follow best practices by ensuring the university creates a
deliverable expectations document for each IT contract similar to
the documents the State’s management framework describes. The
Office of the President should establish this requirement by
December 2017. The deliverable expectations document should, at a
minimum, identify the deliverables for each milestone and define the
scope, content, entrance criteria, acceptance criteria, and
development schedule for each deliverable.
UCOP agrees with CSA’s conclusion that our campuses follow established vendor
payment practices. By December 2017, we will build upon the current practice by
establishing a requirement for each large IT project of $25M or greater to produce a
“deliverable expectations document.” We will review the State’s management
framework to inform the development of this required document.
40 California State Auditor Report 2016-125.2
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California State Auditor Report 2016-125.2 41
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Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE UNIVERSITY OF CALIFORNIA
OFFICE OF THE PRESIDENT
To provide clarity and perspective, we are commenting on the
response from the Office of the President. The numbers below
correspond to the numbers we have placed in the margin of the
Office of the President’s response.
Although the university president asserts in her response that the 1
university spends $100 million annually for manual rework and
error corrections for the legacy payroll system, we were unable to
substantiate the Office of the President’s claim that UCPath will
result in savings. In August 2017 the Office of the President sent
us an email asserting that the elimination of manual rework would
result in annual savings of $100 million. It based this assertion on
a 2010 consultant study that formed the basis of its 2011 business
case for the UCPath project and its original estimate that UCPath
would result in savings of $753 million. In addition, the Office of
the President claims that the retirement of the university’s payroll
legacy system will result in savings of $13 million annually based on
its 2011 business case. The Office of the President requested that we
include these estimated savings in Figure 5 on page 16. However,
because the Office of the President stated that it no longer believed
that UCPath would achieve the savings of $753 million and because
it was unable to demonstrate that its new savings assertions would
result in an actual reduction of university staff, we were unable to
conclude that any savings would materialize.
Further, the Office of the President asserted that additional savings
would result from its reduction of the projected staffing of the
UCPath center from 568 positions to 440 positions, as well as its
expectation of lower than projected salary levels for the staff filling
the 440 positions. The Office of the President requested that we
also add this claimed savings to Figure 5. However, we did not do
so because the 2017 status cost of $130 million for “UCPath Center
facility, equipment, and operations” in Figure 5 is already based on
the projected staffing level of 440 positions at the lower staffing
cost, during fiscal year 2018–19, which is when the Office of the
President projects that the UCPath Center will be fully staffed.
Therefore, we stand by Figure 5 on page 16 as it is presented.
The Office of the President overstates the UCPath project’s level 2
of communication with the regents and the project’s governance.
As noted on page 19, our review of the Office of the President’s
79 communications to the regents determined that only five
status updates provided the regents with substantial information
42 California State Auditor Report 2016-125.2
August 2017
about UCPath’s status, cost, or schedule. We display those
five status updates, along with an additional two updates and a
financing request in Figure 6 on page 20. The remaining 74 of
the 79 communications either mentioned UCPath in relation to
another issue or did not provide any substantive information on
the project. Further, it was not until July 2017 that the Office of the
President recognized the regents’ role in governance and expanded
the project’s governance approach to include communicating
critical decisions to the regents as we describe on pages 22 and 23.
However, as we also note, the expanded governance approach does
not go far enough in engaging the regents in decision making to
truly allow them to fulfill their oversight role.
3 Although the Office of the President correctly acknowledges
that our recommendations, including the use of IV&V, are best
practices, it incorrectly concludes that IV&V would create a
parallel management structure and add complexity. IV&V, when
properly employed, helps to ensure that an IT system will perform
as intended and meet its users’ needs, as well as provide an early
warning of process and technical discrepancies, and problems that
may go undetected or be detected too late. Further, our IT project
management expert indicates the benefits that IV&V provides
generally outweigh its cost. Given UCPath’s size, complexity, and
risk, our IT project management expert believes that it would be
prudent for the university to employ IV&V to mitigate weaknesses
the Office of the President has already displayed in its project
management of UCPath. Moreover, according to our expert, the
Office of the President’s current and proposed continued practice
to employ “IV&V third parties for specific topics and situations”
does not represent the best practice definition of IV&V. As noted
on page 26, our IT project management expert concluded that
the Office of the President’s approach results in oversight that is
not equivalent to IV&V, which provides a more robust analysis of
technical activities, and is embedded in the project as opposed to
occurring periodically.