Three years ago, Congress asked 56 schools to provide more information on their endowments. One of those schools, MIT, published their response online.
As we describe in detail, our endowment is not a single account of ready cash. Instead, it consists of thousands of individual funds, usually subject to multiple restrictions from their donors. With very rare exceptions, these restrictions require that MIT hold a gift’s principal forever. In many instances, donors also restrict the income on these gifts to supporting a specific purpose, such as scholarships for students or faculty salaries. A smaller fraction of the endowment consists of funds that allow greater flexibility for us to use in a manner consistent with the Institute’s mission. In combination, such endowed funds from donors, and funds MIT endows itself — which comprise a much smaller portion of the endowment — give the Institute the stability to sustain our core commitments and the nimbleness to seize new opportunities.
What is an endowment?
As an initial matter, it is important to describe what MIT’s endowment is and what it is not. MIT’s endowment consists of assets that are invested to support the Institute’s mission – to advance knowledge and educate students in science, technology, and other areas of scholarship that will best serve the nation and the world – in perpetuity. A misperception by many is that an endowment is a significant amount of money currently available to a charitable institution to be spent today for all purposes. This is not so. Donors can attach multiple restrictions to the gifts they make to MIT. With very rare exceptions, an endowment donor restricts the gift’s principal to be held forever, and only income and gain are available for use. In addition, the donor can and usually does limit the educational purpose to which the income can be directed. Because donors designate how their gifts will serve MIT’s mission, the Institute does not have unfettered flexibility in how endowed funds may be spent.
Post by Marcelino Pantoja