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April 2, 2009


To the editor:

I read with interest Vice Provost [Robert] Pack’s comments to the effect that the attribution model developed by members of the University Planning and Budgeting Committee (UPBC) doesn’t really reflect what is going on (March 5 University Times).

As a former member of the UPBC, I agree. However, when that model was developed, the University did not have a cost accounting system. So, the UPBC had no other basis for making some assessment of how much various programs actually cost and the degree to which their revenue streams covered those costs. Of course, there are good reasons why not all University programs should “stand on their own bottoms.” But no committee charged with oversight and recommendations to the chancellor can effectively exercise its responsibilities without a good understanding of the revenue and cost implications of various University programs.

The UPBC was created 17 years ago. The University still does not have a comprehensive cost accounting system upon which its administrators and the UPBC can rely to identify the cost of individual programs.

The University is not a typical enterprise. Its procedures are meant to be both open and participatory. This is reflected in the document describing the University’s Planning and Budgeting System. That document states: “The PBS process is intended to facilitate the academic, research, service and support activities of the University by both ensuring full access to relevant information and providing a rational, clear and consistent framework for planning and budgeting decisions. …  Planning and budgeting decisions are legitimate only if they are both based on full information and arrived at through an open, formal process”. Openness and sharing of full information was not meant to be restricted to the UPBC. It was to extend to the entire faculty.

The Senate budget policies committee asked for some budgetary information regarding the Athletics department. Vice Provost Pack could not see their need for such information. There is a sense in his remarks that the administration is moving away from a policy of openness. One should not forget that the adoption of the new PBS process was done some time after the faculty of the University expressed a vote of no confidence in the administration of a former chancellor. Part of that lack of confidence was, no doubt, due to the lack of openness by that administration and the consequent sense of a fundamental disconnect between faculty and the administration of the University. It would be tragic if this administration, which has done so much to improve the financial stability and quality of the University, and which has the support of the faculty, should begin to erode that support by suppressing information.

Jack Ochs
Department of Economics


Provost James Maher replies:

It is well known that cost accounting within a given organization is a much more difficult and less certain enterprise than the more standard and publicly available financial accounting. While this is true even for very focused corporations, it is far more true of a complex modern research university. The cost accounting document to which Professor Ochs refers is a working document of the University Planning and Budgeting Committee (which is itself a part of the University’s shared governance system and on which there are representatives of administration, faculty, staff and students). The UPBC has been willing to share this document with other groups within the University’s shared governance system for many years. In that same spirit, the document has been offered to the Senate budget policies committee, and to the extent that Professor Ochs’s letter implies that the document has not been offered to the budget policies committee, that implication is inaccurate.

Like many working documents of groups charged with serious responsibilities, the cost accounting document in question is not easily interpretable by someone who is not very knowledgeable about the University, its internal structure and the nuances of its mission. This means that for an outside group to interpret the document in any reasonable way, a very significant effort would have to be expended to explain the relevance to the goals of this University (or any university) of various of the staggering number of items in the document. Rather than deflect significant resources to such an explanation of the document, over the years the UPBC has asked most University of Pittsburgh groups that have been given access to the document to refrain from sharing it outside their part of the University’s system of shared governance. It is this request that was at the heart of Vice Provost Pack’s remarks and his discussion with the Senate budget policies committee.

Over the years, consideration has also been given to trying to improve the document so that it would be a more useful tool. After careful consideration, the best judgment (mainly on the basis of national corporate experience with cost accounting and the extra complexity of research universities) has always been that not only would great expense be required for such a project but also a truly useful system accounting for the costs in all units simultaneously would be unlikely to emerge.


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