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September 27, 2012

Financial statements detail cost of VERP

The University’s fiscal year 2012 financial statements show that a collective $11.1 million in separation payments and accumulated vacation and sick-day payments was paid to the 352 staff members who accepted the Voluntary Early Retirement Plan (VERP) earlier this year.

According to the audited consolidated financial statements approved Sept. 18 by the trustees audit committee, the University’s post-retirement benefit obligation includes $24.1 million related to accelerated vesting for the VERP.

Costs for VERP participants were taken in July budgets, but appeared on the FY12 balance sheets, noted Pitt Chief Financial Officer Arthur J. Ramicone.

Staff who had completed at least 10 years of service and had reached age 59 by April 1 were eligible for the VERP, which included a separation payment equal to six months’ pay plus medical and other benefits for the staffer and his or her spouse and dependent children. (See June 28 University Times.)

A total of 674 classified staff were eligible for the plan.

Revenues highlights

The University’s total operating revenues of nearly $1.96 billion held relatively steady from FY11, falling nearly $6.1 million, or 0.3 percent.

Ramicone characterized FY12 as “a pretty calm year,” adding that the University’s financial situation “held up pretty well under the circumstances” including a 25 percent cut in Pitt’s state appropriation, which fell to $137.65 million.

• Pitt’s sponsored research, the top generator of operating revenues, fell from just under $801.24 million in fiscal year 2011 to $780.4 million — a decrease of 2.6 percent.

Approximately 63 percent of the University’s research funding was awarded through the National Institutes of Health.

While Pitt’s research grants and contracts line item rose from $722.6 million to $730.1 million, the other component in the sponsored research total — research grants and contracts related to the American Recovery and Reinvestment Act of 2009 (ARRA) — fell from $78.64 million to $50.32 million.

Under the 2009 program, most of the stimulus dollars had to be spent within a two-year period, so research revenues attributable to ARRA funding are falling off quickly, Ramicone said.

• Net tuition and fees rose from $491.48 million to $525.08 million, an increase of 6.8 percent.

• Revenues from educational and other sales and services were up 7.7 percent to $136.13 million, while auxiliary sales and services rose 2.3 percent to $132.93 million.

Pitt garnered $79.04 million in gifts and contributions, an increase of more than 15 percent from last year’s $68.5 million. Endowment earnings rose slightly, up 3.3 percent to $25.3 million.

Expenses highlights

Compensation, Pitt’s largest operating expense, was up 3.9 percent, rising to nearly $1.14 billion. Salaries and wages, the larger component of compensation, rose 3.5 percent to $869.17 million, while benefits expenses were up 5.3 percent, rising to $266.11 million.

The University trimmed its utility expenses by more than 7 percent to nearly $47.54 million and its costs for supplies by 5.5 percent, to $114.14 million.

Ramicone said the lower utility costs were attributable mainly to lower natural gas prices. Boilers at the Carillo Street and Bellefield steam plants are fueled by natural gas. Lower natural gas prices also affect electricity costs, he noted.

Conservation efforts also played a role in Pitt’s utility bills, but those savings were offset by usage at new buildings on campus, Ramicone said.

Pension contributions

According to the financial statement, the University contributed $70.6 million to its contributory retirement plan (TIAA/CREF and Vanguard) in FY12.

The University’s other retirement option, the defined-benefit pension plan, saw University contributions of $2.73 million in FY12. However, that figure is expected to more than double due to a change in the government interest rates used in calculating pension benefit obligations, Ramicone said. Pitt expects to contribute $7.2 million to the noncontributory pension plan in FY13.

Endowment investments

Pitt’s total endowment investments rose to more than $2.62 billion, an increase of 4.5 percent over fiscal year 2011.

Ramicone said Pitt’s endowment returned 2.7 percent in an up-and-down market year in which many endowments struggled to break even.

Capital expenditures

The University spent $189.1 million for property, plant and equipment in fiscal year 2012, $38 million of which was funded by the state. In fiscal year 2011, Pitt spent $229.2 million for property, plant and equipment, $33.9 million of which was funded by the state.

Among the 2012 expenditures:

— $25.3 million for operating equipment.

— $15.1 million for freshman dorm construction.

— $14.8 million for Benedum Hall renovations.

— $11.6 million for mid-campus complex renovations.

— $10.9 million for Chevron Science Center renovations.

— $10.4 million for an addition to Parran and Crabtree halls.

— $10.2 million for Biomedical Science Tower 12th floor renovations.

— $10 million for library acquisitions.

— $7.1 million for the Salk Hall addition.

— $5.2 million for Thackeray Hall renovations.

— $5 million for construction of the Pitt-Greensburg sustainable office and classroom building.

— $4.7 million for the Langley Hall 5th floor BSL3 lab suite.

— $3.4 million for Pitt-Titusville dining services renovations.

— $2.9 million for Scaife Hall neurosurgery renovations.

— $2.9 million for Bouquet Gardens expansion.

— $2.8 million for Old Engineering Hall renovations.

The audited financial statement is posted at


In other business, the audit committee approved KPMG LLP as Pitt’s independent auditor and tax adviser for FY13. The firm has held that role at Pitt since 2010.

—Kimberly K. Barlow

Filed under: Feature,Volume 45 Issue 3

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