LOS ANGELES - University administrators released late last week the 22-page transcript of an illegal closed meeting held by University of California regents on Nov. 14, 1996, nearly three months after Student Regent Jess Bravin blew the whistle on the meeting.
In the secret session, regents and representatives from the auditing firm Deloitte & Touche met to discuss millions of dollars in accounting errors that may have distorted the financial livelihood of some UC medical centers.
According to university officials, the meeting violated the Bagley-Keene Open Meeting Act by discussing information which could have affected the vote on the UC San Francisco-Stanford medical school merger in private.
No criminal wrongdoing was alleged after the university admitted to the mistake. UC administrators said the errors were settled before closing the books for 1996.
But questions on the management of funds at the university's medical schools still linger.
Rich Fineberg, one of the auditors, said he feels there are very serious concerns about the accounting and financial controls at the University of California.
"These concerns arise principally from the $100 million of adjustments that were made to the financial statement, major processes like physician billings that just don't work well, and an (inefficient) organizational structure at the university," Fineberg said.
The largest bookkeeping error was a $70-million overstatement of physician billings to insurance companies.
Auditors also found a $7.5-million error in the calculation of interest on a lease, and an unbooked charge of approximately $13 million.
The bulk of the closed meeting focused on these adjustments and more specifically on the question of whether or not the medical centers' reserve funds were created intentionally to underreport their profit.
According to Ken Weixel, an auditor with Deloitte & Touche, three of the five medical centers had general reserves mostly in the area of Medicare reimbursement.
"Our concern is not that these reserves exist, but rather the attitude that management demonstrated when it came to defending the reserves," Weixel said.
"(The) management needs to be more disciplined about monitoring the level of these reserves, and more importantly, about not building them up just to avoid reporting larger bottom lines in these medical centers."
Many of the adjustments made could not be adequately justified by the medical centers' management, Weixel said. Some adjustments "...really just made no sense and were not appropriate," he added.
"The process was very inefficient and was clearly motivated by a strong desire on the part of management to not impact the previously reported bottom line," Weixel continued.
Critics of the merger between the UC San Francisco and Stanford University medical centers have accused the UC Regents of concealing this budgetary information to secure the vote which finalized the deal.
Such critics assert that withholding such information allowed the regents to present the UC San Francisco Medical Center as one in poor financial health, in need of the merger to secure its survival.
According to Bravin, 10 minutes into the secret session he quietly voiced his concern to Deputy General Council Lundberg that the meeting violated state open-meeting laws.
Lundberg did not take any action. Ten minutes later Bravin went back to Lundberg with the same complaint, but still no action was taken.
Later in the session, Bravin wrote a note to President Richard Atkinson about his concerns. Atkinson then passed the note to Lundberg, who finally intervened on the grounds that the meeting was straying from its intended subject of "matters related to personnel."
"It was not just 'a little bit away,' it was on a different continent," Bravin said.
According to the Bagley-Keene Act, public boards can hold sessions closed to the public if the meeting's purpose is to discuss appointments, employment, performance or other employee-related business.
UC spokesman Terry Colvin said Bravin's claim was correct, and the closed meeting was deemed an illegal violation of the Bagley-Keene Act, as determined by UC General Counsel James Holst.
Holst, who typically polices closed sessions, called the meeting "an honest mistake and misunderstanding." Lundberg attended in Holst's illness-related absence.
Holst was unavailable for comment.
If the act is breached, the criminal statute is a misdemeanor and a punishment of one year in jail and a fine. But more importantly, the penalty is in the spirit of keeping public information public, which Bravin felt was violated by the closed session.
"Realistically, I hope the board takes these laws seriously," Bravin said. "It didn't occur to anyone else in that room that it should have been a public meeting."
- Distributed by the University Wire.