Three years ago, Congress asked 56 schools to provide more information on their endowments. Harvard published their response online.
The Harvard University endowment is not a single account, but rather is made up of more than 13,000 individual funds that are invested collectively. Most of these funds were given by donors with specific objectives in mind that take the form of legal restrictions on the use of gift funds. We are required by law to honor those restrictions and provide support for those donor objectives, through endowment returns, now and into the future. Donor restrictions encompass an array of activities aligned with Harvard’s educational mission, but must be carefully managed to meet the terms of the gift, whether they relate to purposes such as student financial aid, particular fields of research, fellowships, professorships, library collections, teaching in particular subject areas, or other discrete programs and activities. Of the $37.6 billion in the endowment, 84 percent — $31 billion — is restricted by the terms of original gifts. Sixteen percent of the endowment is considered unrestricted for financial reporting purposes.
What are those restrictions?
Outside of limitations by school, restrictions encompass an array of activities, which may, for example, limit the use of endowment funds to financial aid, particular lines of research, graduate fellowships, specific student activities, study abroad, acquisitions of books, or teaching in particular subject areas. All endowments are held in public trust, which means that Massachusetts, Harvard’s state of incorporation, exercises the authority for monitoring and enforcing endowment restrictions to ensure that Harvard administers and spends endowment funds in accordance with state law and gift terms.
Of the endowment that is restricted, the leading restrictions include (1) support for professorships and faculty salaries (32 percent), (2) financial aid (21 percent), (3) support for teaching and research programs (8 percent), (4) program initiatives (e.g., cross-faculty programs, global and international programs, and women’s studies) (5 percent), (5) support for libraries and museums (4 percent), and (6) maintenance of the physical plant (1 percent).
The endowment covers what tuition and research dollars do not.
Generations of philanthropy and investment exempt from taxation have produced the endowment, now “the University’s largest asset and our largest source of financial support,” through distributions of funds amounting to 35 percent of the operating budget in fiscal year 2015. Moreover, that role has grown: “Tuition alone does not cover the costs of educating a student, and research grants do not cover the full cost of the research enterprise. Increasingly, endowments play a significant role in bridging these gaps and making it possible for Harvard to pursue its mission. Reliance on endowment spending has grown substantially in recent years. Less than 20 years ago, one in five dollars spent was from the endowment; today, it is one in three.” And to underscore the point about libraries, laboratories, and professors, Faust noted, “A cost that is borne by the endowment is one that does not have to be paid with tuition dollars.”
Post by Marcelino Pantoja