On Feb. 8, President Napolitano sent the following email to UCOP staff:

Dear Colleagues,

I recently announced the beginning of the UCOP restructuring effort which will change some of our organizational structures, processes, and operations to ensure we have an organization that supports the future and, most importantly, the mission of UC.

These changes will evolve through multiple stages of consultation, decision-making and implementation. I am writing to you today to announce the first set of decisions and the initiation of consultation efforts to further explore options from several internal and external initiatives.

Decisions

The decisions outlined below are focused on adjusting our accounting and budgeting practices, and do not affect our organizational structure. Clearly defining accounting and budgeting practices will ensure they are uniformly applied across our organization. We have a complex budget, complicated by the fact that we maintain the University’s systemwide and UCOP accounts in the same financial records. These improved practices will be applied to the FY18-19 budget, and while the budget may appear to change, this does not mean the underlying activity has changed.

Budgeting for UCOP Revenues and Expenses:  OP will reflect all planned revenues and expenses in the annual operating budget by adhering to a set of budgeting guidelines that stipulate which financial transactions count as revenue and expenses for OP. By these guidelines, the following will be included in OP’s operating budget next year:

• Anticipated one-time expenses and multi-year commitments from what is currently referred to as the “temporary” budget.
• Recharges between the campuses and OP. Changes to current budgeting practices will appear to increase certain department budgets, but the actual cash outlays will be in line with prior years’.

Excluding Systemwide Transactions from the UCOP Operating Budget: Per the above budgeting guidelines, OP will not include systemwide pass-through financial transactions in UCOP’s operating budget, including:

• Systemwide payments: Funds collected from the campuses to pay vendors for systemwide goods or services that all locations consume will be excluded. Current examples include our health and risk insurance plans. When applied consistently going forward, this may appear to decrease OP’s operating budget.
• Systemwide revenue distribution: Funds collected from external entities and distributed to other entities by OP will not be included. Current examples include state appropriations and investment payouts. When applied consistently going forward, this may appear to decrease OP’s operating budget.

Internal Budgeting Practices: OP will implement additional budgeting guidelines to reduce the administrative effort required to manage the operating budget and to ensure that expenses are funded by the appropriate revenue sources. These practices, which will not change the overall budget, include:

• Eliminate several internal recharges between OP departments. In most cases, departments will budget their own direct expenses, which will align budgetary ownership with the departments where the work is performed.
• Allocate allowable expenses to restricted funds to ensure OP is recovering direct expenses incurred from performing certain activities that should be funded by restricted sources.

Again, these decisions are focused on our accounting and budgeting practices. Detailed guidelines will be finalized in the coming weeks. In the meantime, I have asked the Budget & Finance Department within UCOP Operations, led by Thera Kalmijn and Dave Baltaxe, to reach out to individuals and departments that are impacted by or have questions about these changes.

Consultation Efforts

Many of the options in the recent Huron report will require extensive consultation with the UC community to determine feasibility, and I am initiating this process in a number of areas. Consultation does not mean decisions have been made, nor will every consultation process be identical. Some of the options I am considering, and would invite you to provide feedback on include:

• External Relations:  One of the options to consider sooner rather than later is resurrecting the External Relations Division. This division existed several years ago, but the groups have become more distributed over time. Having a strong external relations and advocacy function is essential for the University
• Innovation and Entrepreneurship (I&E):  This office was created two years ago to raise the profile and reputation of UC as a leader in innovation and entrepreneurship and to drive additional I&E investments and collaborations between outside parties and our University community. The consultation process will include evaluating different organizational structures and processes to achieve the greatest systemwide impact and soliciting feedback from across the UC community.
• Systemwide Programs:  Several Huron options focus on transitioning systemwide programs to campuses. More work needs to be done to fully understand the many implications of the options presented, especially on existing staff, and the possible advantages and disadvantages.
• Agriculture & Natural Resources:  I have already started hearing feedback on how best to position ANR to serve its statewide mission.  The options Huron presented, or possible variations of them, are worth exploring.
• UC Health:  Finally, Huron presented an option whereby the UCOP Health division would become a stand-alone entity, or “location.”  This option preserves the reporting relationship to the President as well as the campus-based authority with local Chancellors with no change to the structure of the academic medical centers and health systems on campuses.  This option, and its related pros and cons, should be evaluated by the entire UC community.

I am sharing the news of these consultation efforts to ensure you have the opportunity to provide input and feedback through your division / department leaders, or electronically through the mailbox janet@UCOP.edu. While each of these processes will operate on a different timeline depending on the complexity and the feedback we receive, I encourage you to provide your initial feedback during the month of February so that we have ample time to consider it.

The division leaders and I are aware that the uncertainty necessitated by such change is stressful. We want to assure you that we are working hard both to act promptly and engage our community with attention to careful and deliberative thought as we build our future organization.

I thank each of you for your dedication to OP and our university, and encourage you to stay engaged during these changes and share your thoughts with your division and department leaders. I am confident we will exit this transition better able to deliver our mission for the next 150 years.

Yours very truly,

Janet Napolitano

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