Facing the challenges of tomorrow
Jeremy R. Knowles, Dean of the Faculty of Arts and Sciences
The new chart of accounts allows me to report the budget of the Faculty of Arts and Sciences in detailed and consolidated form for the first time. While this means that a more complete and informative picture can now be presented, the financial tables this year have a slightly modified configuration. Restricted funds are now separated into those that are formally restricted by the donor, and those that are formally unrestricted but have by prior agreement or historical commitment been designated for a particular purpose (for example, royalty income designated for use in research, or revenues from the use of Harvard insignia designated for undergraduate financial aid). Other than this additional category, our revenues and expenditures are broken down into ‘unrestricted,’ ‘restricted,’ and ‘sponsored,’ as before. By a somewhat non-intuitive accounting principle, the income from gross tuition and fees is offset (on the revenue side) by expenditures on scholarships for undergraduates and fellowships for graduate students (but not graduate student stipends, which are treated as an expense). Otherwise, I trust that the Table is self-explanatory.
Overall, the Faculty ended the financial year with a $40 million increase in net assets deriving primarily from the unusual jump in the endowment pay-out (which is mostly located in unrestricted designated, and restricted accounts, committed for the facilities required to accommodate the growth of the Faculty in the coming years). Two years ago, the Corporation authorized an increase of twenty-eight percent in the endowment pay-out for FY00 (over that in FY99), and they have just authorized a second major increase of 21 percent, for FY02.
The Table summarizes the Faculty’s revenue and expense for FY00. Revenue from tuition, fees, and room and board totaled $247 million, offset (as mentioned above) by $78 million of student aid. The net amount, of $168 million, amounts to 27 percent of total revenue. Endowment income (which increased both from the higher pay-out and from accretions to the Faculty’s endowment principal from gifts) now represents 40 percent of our revenue. Grants and contracts provide 18 percent, and gifts for current use a further 6 percent.
On the expense side, instructional and departmental expenditures amounted to $175 million (at 34 percent of the total), research costs (both sponsored and other) were $98 million (19 percent), and academic support costs were $77 million (15 percent). University assessments totaled $20 million, with transfers to support the core services of the Central Administration of $13.7 million, and to the Academic Initiatives Fund of $6.3 million. Graduate student stipends totaled $17 million.
The new accounting systems make comparisons with prior years difficult. For example, endowment income from restricted funds was, in earlier years, only listed if it was actually spent (‘availed of’), whereas the new reporting system allows a clearer picture of the actual income distributed (whether spent or not). Analogously, revenue from grants and contracts used only to be reported as it was spent, rather than (as now) as revenue actually received. Finally, we have (at last!) been able to present the consolidated budget for the Faculty as a whole, rather than the somewhat arbitrary subset of the Faculty’s activities that used to be referred to as our ‘core’ budget. The new accounts include all the Faculty’s affiliates, such as the Division of Continuing Education, the Harvard College Library, and the Faculty’s Museums.
Recent market fluctuations and concerns about the near-term future make me cautious about authorizing expenditures beyond those that are part of our strategic plan. But a continuingly favorable performance by the endowment, as well as successful post-Campaign fund-raising, will surely allow us to make other programmatic investments in the coming years.
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Envoi. Nine and a half years ago, I walked into my office in University Hall at the same moment that President Rudenstine entered his, across the Yard in Massachusetts Hall. This is my last Annual Letter under Neil’s leadership, and it would be impossible for me not to say what a privilege it has been to serve, as Dean, this true intellectual. Many of you have witnessed Neil’s deep yet delicate probing of tenure cases, others have seen his rooted concern for the educational values of our institution, but we have all appreciated his fierce commitment to excellence, the gentle wisdom of his leadership, and all that he has done. Lord Chesterfield said: “Nobody should tamper with a University who does not love it well.” Neil has loved Harvard well, and we have all been the better for that.
With my best wishes and thanks,
1 I thank Professor Werner Sollors for pointing out to me that this version of the story (which comes from the redoubtable Samuel Eliot Morison) is not quite consonant with Adams’ own account: “After waiting ten or a dozen years for some one to show consciousness of his existence, even a Terebratula would be pleased and grateful for a compliment which implied that the new President of Harvard College wanted his help . . .” Adams says that he accepted only a year later, after the offer had been extended a second time.