Pitt, CMU still waiting for distribution of Dietrich’s donation

Pitt has yet to receive any payout from the $125 million donation bequeathed to the University…Pitt has yet to receive any payout from the $125 million donation bequeathed to the University by William S. Dietrich II last September, but plans are already well underway for how the funds will be managed once they have been received.

Although Dietrich’s donation became operational upon his death in October 2011, funds from the endowment might not arrive at Pitt until early next year. But both financial representatives of Dietrich’s estate and Pitt officials say that the lag in fund dispersal is to be expected with such a sizable contribution.

Last fall, the late Pitt alumnus set the record for the largest monetary donation in Pitt’s history when he announced his gift on Sept. 22. The contribution came shortly after Dietrich’s announcement of a $225 million donation to Carnegie Mellon University, and both institutions quickly renamed their largest colleges in honor of the donor’s parents — Pitt christening the Kenneth L. Dietrich School of Arts and Sciences, and CMU announcing the Marianna Brown Dietrich College of Humanities and Social Sciences. However, neither university has received any actual money.

N. John Cooper, dean of the Dietrich School of Arts & Sciences, said the delay isn’t cause for concern.

“Any estate on this sort of scale takes some time to set up, and the appropriate foundation for that process is not yet complete,” he said.

CMU spokeswoman Teresa Thomas said in an email that the delay in payout from the operational funds also falls in line with her school’s expectations.

Edward J. Grefenstette, chief investment officer of the Dietrich Charitable Trusts, said in an email that while the vehicle for charitable fund dispersal — The Dietrich Foundation — is currently formed, it has yet to be funded. He said that there is, however, a timetable in place for the completion of the funding process.

“There are certain regulatory, tax and administrative requirements that must be satisfied before the Dietrich Charitable Trusts can fund The Dietrich Foundation,” Grefenstette said. “We are hopeful that the foundation’s funding can take place around year-end, meaning that the first of the annual distributions to the foundation’s supported organizations will likely begin in the first half of 2013.”

Pitt and CMU will receive the funds from the Dietrich Charitable Trusts, which was created from assets generated by the sale of Dietrich Industries in 1996 and will fund The Dietrich Foundation.

“It is expected that, in aggregate, approximately 3 percent of the foundation’s total assets will be distributed annually,” Grefenstette said. “The University of Pittsburgh is expected to receive 25 percent of the amount of each annual distribution made by the foundation.”

As University officials await payout from the largest gift in Pitt history, they face state and University regulations for the use of funds as endowed gifts. The amount of endowment “income” available for spending is determined by the Investment Committee of Pitt’s Board of Trustees and is governed by Pennsylvania law.

According to the University’s Endowed Fund Reports, which are published online, the University of Pittsburgh Endowment Fund, which consists of nearly 2,000 individual funds and has market value in excess of $2.5 billion as of June 30, 2011, is comprised of endowed gifts that provide financial support for scholarships, fellowships, faculty chairs, instruction and other important University programs and services.

By definition, an endowed gift is intended to provide the University with a permanent source of funding by investing the principal amount of the gift and making available a portion of the income it generates for use by the University.

Thomas said that Dietrich’s gift increases CMU’s endowment in a way that will support future academic initiatives across the university, including undergraduate and graduate programs, scholarship, artistic creation and research, but that it should be noted that the CMU endowment will not immediately increase by the amount of Dietrich’s donation.

“Rather, the Dietrich Foundation will oversee the Dietrich gift and will make annual distributions to the CMU endowment in perpetuity, which will increase the CMU endowment over time,” she said.

While a timeline for the reception of the money remains unclear, Pitt intends to move forward with plans for the donation. Cooper noted that under the terms of the gift, the money will be used to create endowments to support activities in the Dietrich school, at least for the first few years of its dispersal.

Cooper said he will present a plan over the next year to the provost for the use of the funds to be distributed to Pitt, and that the plan will focus on three key areas: undergraduate scholarships, endowed chairs and graduate fellowships.

“Using the funds in this way is an investment in excellence,” Cooper said. “We will use the resources to meet financial needs for undergraduates and to recruit the best students, who then often go on to receive Rhodes Scholarships, as well as other prestigious scholarships.”

The Endowed Fund Reports said a consolidated investment pool was established to manage and invest the University’s endowed funds, and operates under the goal of preserving the purchasing power of each endowed gift as well as distributing funds to the support of the University. Under this goal, the University is able to maintain the value of the donation against inflation or changes within the market and use the funds to meet current and future needs of the school or department, given the gift.

Cooper said that individual gifts are given with particular terms and for particular purposes or endowed chairs, and as each endowment grows, more distributable funds become available to be used according to the donor’s wishes.

Dietrich previously commented that his gift was to be an investment in the University to ensure Pitt’s ability to provide quality educational opportunities to undergraduate and graduate students, to secure the University’s future as an important institution in southwestern Pennsylvania and to recognize the University’s progress in higher education.

His donation brought the University’s Building Our Future Together capital campaign, a campaign by the University to raise funding outside of tuition and public funds, past the $1.85 billion mark, moving it closer to its $2 billion goal.

Cooper said that the campaign, which disperses funds for use by faculty and in scholarships and fellowships, has been extremely successful and is by far the largest capital campaign among public universities in western Pennsylvania’s history.

“The chancellor was strongly in the view that voluntary supports were really the key to providing financial strength to the University,” Cooper said. “So with the aim to strengthen the University, without being completely dependent on public aid and undergraduate tuition, we made the launch of the capital campaign.”

The Dietrich School of Arts and Sciences provides instruction in the natural sciences and humanities and includes more than 10,000 undergraduate students pursuing majors or certificates in the nearly 50 departments and programs. The school also offers the largest graduate program in Pittsburgh and includes Pitt’s College of General Studies, which is one of the region’s leading providers of adult education programs.

Grefenstette said that, in time, Dietrich’s donations could have far-reaching impacts.

“Because of the perpetual nature of the gift, it certainly has the power, over time, to be transformative for the foundation’s supported organizations, as well as for the city of Pittsburgh, in which almost all of them are situated,” he said.

Cooper said that individual donations like Dietrich’s impact Pitt’s future success and accessibility in important ways.

“The creation of endowments of this sort are really going to be the key to growing the excellence of our university and also in maintaining access to the University for undergraduate students in a time when tuition is such a financial burden on so many of our students,” he said.