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March 4, 2010

FY10 budget okayed after long delay

Because of a lengthy delay by the commonwealth in approving Pitt’s appropriation, the Board of Trustees didn’t approve the University’s fiscal year 2010 operating and capital budgets until last week — eight months into the fiscal year that began July 1.

Trustees okayed a $1.73 billion operating budget and a $179.16 million capital budget for FY10.

Michael Bryson, chair of the trustees budget committee, said his committee approved both budgets in December. (See Dec. 10 University Times.)

“A number of items in the budget, most notably the tuition rate increases, were already endorsed by the budget committee and approved by the executive committee last July,” Bryson pointed out.

The operating budget total includes revenue from student tuition and fees of $579 million, which is about a 3 percent increase from last year’s actual levels, Bryson reported at the Feb. 26 board meeting.

The commonwealth appropriation totals $185.4 million, which represents a combination of the $177.9 million received in FY09 plus $7.5 million of federal stimulus money. The appropriation also includes $17.4 million for the University’s medical line items, Bryson said.

Total employee compensation is budgeted at about $1.02 billion, which reflects the FY10 salary freeze. The FY10 budget includes $8.3 million in spending cuts made to balance increases in utility and other costs, Bryson said.

The capital budget totals $179 million; the commonwealth is funding $86.2 million of that, with the remainder coming from gifts, debt and existing reserves, Bryson said.

At the Feb. 26 meeting, trustees also approved a resolution from the audit committee. At a Feb. 19 meeting, the audit committee made revisions to its charter and approved KPMG as independent auditor and tax adviser for the current fiscal year. KPMG will replace Deloitte and Touche, which had held the role since 1992.

Audit committee chair Morgan O’Brien told the University Times the audit committee was following good business practice by putting the position out for bid and that members were pleased with KPMG’s qualifications and credentials. The firm had not served as Pitt’s external auditor previously.

The changes to the audit committee charter authorize the committee to act on behalf of the full board in accepting reports from the independent auditor and the commonwealth auditor.

Vice Chancellor for Public Affairs Robert Hill said the change enables the University to accept the reports in September, rather than at the October full Board of Trustees meeting.

The revised charter also updates the committee’s responsibility with regard to financial reporting and internal controls to reflect a change in the Financial Accounting Standards Board (FASB) statements on auditing standards (SAS) focused on audit committee communications.

The committee’s earlier charter required the committee to consider reports or communications by the independent auditor and management’s responses to them in accord with SAS 61, “Communication With Audit Committees.”

“Such reports or communications could provide information related to significant audit adjustments, the process used by management in formulating accounting estimates and the auditor’s judgments about the quality of the University’s accounting principles as applied in its financial reporting” and to review and discuss the independent auditor’s management letter issued in conjunction with the financial audit.

The revised charter holds the committee to SAS 114, “The Auditor’s Communication With Those Charged With Governance,” which was issued by the FASB in December 2006 and supersedes SAS 61.

With regard to financial reporting and internal controls, the charter now states that the reports or communications could provide information related to significant audit findings including the qualitative aspects of the University’s practices, such as “accounting practices, accounting estimates and financial statement disclosures; significant difficulties encountered during the audit; uncorrected misstatements, other than those the auditor considers trivial; disagreements with management, and any other significant issues relevant to those charged with governance.”

—Peter Hart & Kimberly K. Barlow

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