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Have Shown Long-Term Growth, While Size, Restrictions, and 
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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

February 2010: 

Postsecondary Education: 

College and University Endowments Have Shown Long-Term Growth, While 
Size, Restrictions, and Distributions Vary: 

GAO-10-393: 

GAO Highlights: 

Highlights of GAO-10-393, a report to congressional committees. 

Why GAO Did This Study: 

The nation’s 4-year not-for-profit colleges and universities 
collectively held more than $400 billion in endowments in 2008. Some 
institutions’ large endowments coupled with the high and growing cost 
of college have led to questions about institutions’ use of 
endowments. This mandated report describes (1) the size and change in 
value of endowments over the last 20 years, (2) the extent and manner 
to which endowment funds are restricted for financial aid and other 
purposes, and (3) institutions’ distribution of endowment assets. GAO 
obtained and analyzed data on college and university endowments from 
the Department of Education and other sources. Because industry-wide 
data were not available on endowment restrictions and distributions, 
GAO selected 10 colleges and universities for case studies. The case-
study institutions were selected to include a mix of public, private, 
large, small, and minority-serving institutions. Information from 
these schools cannot be generalized to all U.S. colleges and 
universities. 

What GAO Found: 

As of 2008, most 4-year postsecondary schools in the United States had 
endowments of less than $100 million, while only 70 had endowments of 
$1 billion or more, as shown in the figure below. Among types of 
institutions, private schools tended to have larger endowments than 
public schools, while schools with high minority enrollment tended to 
have smaller endowments than other schools. Total inflation-adjusted 
endowments held by U.S. colleges and universities grew from just over 
$100 billion in 1989 to more than $400 billion in 2008, the most 
recent year for which national data were available. Case-study schools’
 endowments declined by an average of more than 27 percent from 2007 
to 2009, adjusted for inflation. Despite these recent losses, 
endowments at case-study schools showed average, inflation-adjusted 
long-term growth of 6.2 percent per year since 1989. Most endowment 
growth at case-study schools was from investment earnings. 

Figure: U.S. Postsecondary Institution Endowment Assets, 2008: 

[Refer to PDF for image: horizontal bar graph] 

End-of-year endowment market value, 2009 dollars: 

Less than 1 million: 163; 
1 million to less than 10 million: 485; 
10 million to less than 100 million: 889; 
100 million to less than 500 million: 267; 
500 million to less than 1 billion: 60; 
1 billion to less than 5 billion: 54; 
5 billion or more: 16. 

Source: GAO analysis of Department of Education data. 

[End of figure] 

Most endowment assets at case-study schools were restricted by donors. 
Some restrictions are broadly-worded, designating funds to be used for 
financial aid, for example, while others are very specific, such as 
funding for a scholarship for students from a particular area. Schools 
have some ability to modify restrictions when a restriction outlives 
its purpose. At case-study schools, funds specifically restricted for 
financial aid ranged from about 12 percent to nearly 70 percent of 
endowment assets in 2009. Officials noted that other funds may also be 
used for financial aid. 

Case-study institutions had mechanisms to smooth the effects of market 
fluctuations and ensure a reliable stream of funding for operations, 
such as basing distribution targets on the endowment’s market values 
for multiple years instead of just the most recent year. Over the past 
20 years, inflation-adjusted distributions from these schools have 
shown steady growth. 

What GAO Recommends: 

GAO is not making any recommendations in this report. Officials at the 
schools GAO selected as case studies were asked to review information 
in this report concerning their institutions. The Department of 
Education also provided technical comments on GAO’s characterization 
of Department of Education data. GAO incorporated these technical 
comments as appropriate. 

View [hyperlink, http://www.gao.gov/products/GAO-10-393] or key 
components. For more information, contact Michael Brostek at (202) 512-
9110 or brostekm@gao.gov. 

[End of section] 

Contents: 

Letter; 

Background: 

Endowments Vary Greatly in Size and Grew during the Past 20 Years 
despite Occasional Declines: 

Distributions from Endowment Funds Are Typically Subject to 
Restrictions: 

Colleges and Universities Establish Their Own Policies Governing 
Annual Endowment Distributions: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Berea College Case Study: 

Appendix III: Harvard University Case Study: 

Appendix IV: Howard University Case Study: 

Appendix V: Smith College Case Study: 

Appendix VI: St. Mary's University Case Study: 

Appendix VII: Stanford University Case Study: 

Appendix VIII: University of Colorado Case Study: 

Appendix IX: University of Kentucky Case Study: 

Appendix X: University of Texas System Case Study: 

Appendix XI: University of Virginia Case Study: 

Appendix XIIGAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Berea College--Endowment Facts, 2009: 

Table 2: Berea College--Endowment Restrictions by Purpose, 2009: 

Table 3: Harvard University--Endowment Facts, 2009: 

Table 4: Harvard University--Endowment Restrictions by Purpose, 2009: 

Table 5: Howard University--Endowment Facts, 2007 and 2008: 

Table 6: Smith College--Endowment Facts, 2009: 

Table 7: Smith College--Endowment Restrictions by Purpose, 2009: 

Table 8: St. Mary's University--Endowment Facts, 2009: 

Table 9: St. Mary's University--Endowment Restrictions by Purpose, 
2009: 

Table 10: Stanford University--Endowment Facts, 2009: 

Table 11: Stanford University--Endowment Restrictions by Purpose, 2009: 

Table 12: CU and CUF--Endowment Facts, 2009: 

Table 13: University of Colorado Foundation--Endowment Restrictions by 
Purpose, 2009: 

Table 14: University of Kentucky--Endowment Facts, 2009: 

Table 15: University of Kentucky--Endowment Restrictions by Purpose, 
2009: 

Table 16: University of Texas System--Endowment Facts, 2009: 

Table 17: University of Texas System--LTF and SIF Restrictions by 
Purpose, 2009: 

Table 18: University of Virginia--Endowment Facts, 2009: 

Table 19: University of Virginia--Endowment Restrictions by Purpose, 
2009: 

Figures: 

Figure 1: Notional Depiction of Endowment Inflows and Outflows: 

Figure 2: Number of U.S. Institutions of Higher Education by Total 
Endowment Assets, 2008: 

Figure 3: Number of U.S. Institutions of Higher Education by Endowment 
Assets per Student, 2008: 

Figure 4: Total Endowment Assets at U.S. Institutions of Higher 
Education, 1989 through 2008: 

Figure 5: Percent Change in Endowments at Eight Case-Study 
Institutions, 1989 through 2009: 

Figure 6: Endowment Market Values in 2009 Dollars and Distribution 
Rates, 1990 through 2009: 

Figure 7: Percent Change in Endowment Distributions at Seven Case 
Study Institutions, 1990 through 2009: 

Figure 8: Berea College Endowment Market Value in 2009 Dollars, 1989 
through 2009: 

Figure 9: Berea College Endowment Distributions in 2009 Dollars, 1990 
through 2009: 

Figure 10: Harvard University Endowment Market Value in 2009 Dollars, 
1989 through 2009: 

Figure 11: Harvard University Endowment Distributions in 2009 Dollars, 
1990 through 2009: 

Figure 12: Howard University Endowment Market Value in 2009 Dollars, 
1989 through 2008: 

Figure 13: Howard University Endowment Distributions in 2009 Dollars, 
1998 through 2007: 

Figure 14: Smith College Endowment Market Value in 2009 Dollars, 1989 
through 2009: 

Figure 15: Smith College Endowment Distributions in 2009 Dollars, 1990 
through 2009: 

Figure 16: St. Mary's University Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

Figure 17: St. Mary's University Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

Figure 18: Stanford University Endowment Market Value in 2009 Dollars, 
1989 through 2009: 

Figure 19: Stanford University Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

Figure 20: University of Colorado and University of Colorado 
Foundation Endowment Market Value in 2009 Dollars, 2000 through 09: 

Figure 21: University of Colorado Foundation Endowment Distributions 
in 2009 Dollars, 1998 through 2009: 

Figure 22: University of Kentucky, Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

Figure 23: University of Kentucky Endowment Distributions in 2009 
Dollars, 1993 through 2009: 

Figure 24: University of Texas System Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

Figure 25: University of Texas System Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

Figure 26: University of Virginia Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

Figure 27: University of Virginia Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

Abbreviations: 

CPI: Consumer Price Index: 

CU: University of Colorado: 

CUF: University of Colorado Foundation: 

FASB: Financial Accounting Standards Board: 

FTE: full-time equivalent: 

GASB: Governmental Accounting Standards Board: 

HMC: Harvard Management Company: 

IPEDS: Integrated Postsecondary Education Data System: 

LTF: Long-Term Fund: 

PHF: Permanent Health Fund: 

PUF: Permanent University Fund: 

SIF: Separately Invested Funds: 

UK: University of Kentucky: 

UPMIFA: Uniform Prudent Management of Institutional Funds Act: 

UT: University of Texas: 

UVA: University of Virginia: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 23, 2010: 

The Honorable Tom Harkin: 
Chairman: 
The Honorable Michael B. Enzi: 
Ranking Member: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable George Miller: 
Chairman: 
The Honorable John P. Kline: 
Ranking Member: 
Committee on Education and Labor: 
House of Representatives: 

U.S. colleges and universities hold hundreds of billions of dollars in 
endowments. In congressional hearings and in academic literature, some 
have argued that some college and university endowments have grown 
very large without a concurrent increase in the use of endowment 
proceeds to reduce the cost of attending those schools. Others have 
argued that it is the duty of institutions with endowments of any size 
to balance the needs of students today with the need to preserve 
endowments for students in the future, so schools should be prudent in 
making decisions about endowment distributions, even in years that 
endowment investments performed very well. The topic of college 
affordability continues to be an issue of great concern and many are 
concerned that increases in the cost of college may be discouraging 
large numbers of individuals, particularly minority and low income 
individuals, from pursuing higher education. This mandated report 
provides information about endowments that will help inform 
policymakers and others as they consider college and university 
endowment issues. 

The Higher Education Opportunity Act[Footnote 1] requires us to 
describe university endowments. The objectives of this report are to 
describe: (1) what available data show about the size and change in 
the value of endowments over the last 20 years; (2) the extent and 
manner in which the funds in such endowments are restricted at 
selected institutions, including restrictions for financial aid; and 
(3) selected postsecondary education institutions' policies and 
practices for distributing endowment assets. 

To obtain this information, we analyzed information collected from not-
for-profit private and public 4-year postsecondary educational 
institutions by the Department of Education[Footnote 2] and reviewed 
documents and interviewed officials at 10 selected colleges and 
universities. We used a case-study methodology because information 
needed to address our second and third objectives was only available 
from records kept by individual colleges and universities. Throughout 
this report, when we refer to years, we are referring to schools' 
fiscal years, as reported in their annual financial statements and in 
their responses to Department of Education surveys.[Footnote 3] When 
we discuss private institutions, we are referring to nonprofit private 
colleges and universities. Dollar amounts for years prior to 2009 are 
adjusted for inflation and presented in 2009 dollars using the 
Consumer Price Index (CPI). Detailed information about our methodology 
can be found in appendix I. We conducted our work from June 2009 
through February 2010 in accordance with all sections of GAO's Quality 
Assurance Framework that are relevant to our objectives. The framework 
requires that we plan and perform the engagement to obtain sufficient 
and appropriate evidence to meet our stated objectives and to discuss 
any limitations in our work. We believe that the information and data 
obtained, and the analysis conducted, provide a reasonable basis for 
the findings and conclusions in this product. 

Background: 

Endowments are defined as institutional funds that, under the terms of 
a gift agreement, can not be entirely spent by the institution on a 
current basis. Typically, donors establish endowments to create a 
stable source of income for an institution, which invests the 
principal or original amount of the endowment gift and spends the 
earnings to support its operations. Donors can establish an endowment 
as either a true endowment--a fund whose principal cannot be spent by 
the institution, or as a term endowment--a fund whose principal may be 
spent after the passage of a certain amount of time or the occurrence 
of a certain event. True and term endowments are collectively referred 
to as donor-restricted endowments. 

In addition, institutions can establish quasi-endowments, also known 
as board-designated endowments.[Footnote 4] Institutions may create 
quasi-endowments when officials (such as the institution's board of 
directors) decide to move nonendowment funds, such as a gift or a 
bequest to the institution, into the institution's endowment for 
investment and spending purposes. The institution can reverse the 
decision to create quasi-endowments and spend those funds in their 
entirety at any point in time. Institutions can include quasi- 
endowments with true and term endowment funds when reporting their 
total endowment, and the Department of Education and the National 
Association of College and University Business Officers both ask that 
colleges and universities include quasi-endowment funds in the 
endowment totals they report in response to their surveys.[Footnote 5] 

When donors establish an endowment, they can either restrict the 
earnings to be spent on a specific purpose--scholarships or faculty 
compensation, for example--or they can allow the institution to spend 
endowment earnings for any purpose. When an institution establishes a 
quasi-endowment, it may also include a designation that the fund be 
restricted for a particular purpose, or the fund may have been 
originally given to the institution with a purpose restriction, which 
would remain in effect after its designation as an endowment. In 
addition to purpose restrictions, endowments can be restricted in 
other ways, such as requirements to reinvest the earnings back into 
the endowment until it reaches a certain size, or requirements to 
delay the spending of earnings for some period of time. 

Individual funds established by donors, as well as funds an 
institution designates as endowments, are typically pooled for 
investment and management purposes, and are referred to collectively 
as an institution's endowment.[Footnote 6] Institutions may manage the 
investment of endowment funds internally through an appointed 
investment committee, for example, or externally through an investment 
management company, or through a combination of internal and external 
managers. Regardless of the party managing endowment investments, 
institutions pay management fees for this service. Pooled endowment 
funds each own a number of shares in the pool in proportion with their 
size, and receive a periodic distribution per share, based on the 
distribution rate set by the institution. These distributions are paid 
to the holder of the endowment fund--such as the department or program 
for which the fund is restricted--for spending in accordance with the 
terms of the gift agreement. Administrators track the fund holder's 
spending of these distributions to ensure they are being spent in a 
timely manner and within any donor-imposed restrictions. 

Endowments change in value over time through several inflows and 
outflows of assets, generally as shown in figure 1. 

Figure 1: Notional Depiction of Endowment Inflows and Outflows: 

[Refer to PDF for image: listing] 

Market value, beginning-of-year: 
+ New gifts; 
+ Interest and dividend income (part of Investment earnings); 
+ Appreciation (part of Investment earnings); 
- Management fees; 
- Distributions; 
Market value, end-of-year. 

Source: GAO. 

[End of figure] 

Under federal law, colleges and universities are generally exempt from 
taxes on endowment earnings, and donors may deduct gifts to endowments 
for tax purposes.[Footnote 7] State laws set guidelines for how 
colleges and universities must invest and distribute endowment funds. 
Finally, in accounting for and reporting on endowments, schools must 
follow generally accepted accounting standards as a requirement of 
their annual financial audits. 

When reporting on their endowments, accounting standards require 
schools to classify endowment assets according to how they are 
restricted. Private schools classify the original gift amount that 
must be held in perpetuity by the school as permanently restricted, 
and public schools report such assets as restricted nonexpendable 
assets. Endowment assets that the institution can spend but that are 
subject to restrictions on how or when they may be used are classified 
as temporarily restricted assets by private schools and restricted 
expendable assets by public schools. Endowment assets that are not 
subject to restrictions for how and when they may be used are 
classified as unrestricted assets by both private and public schools. 

Endowments Vary Greatly in Size and Grew during the Past 20 Years 
despite Occasional Declines: 

Endowment Size Varies among Institutions, with Many Small and a Few 
Very Large Ones: 

U.S. institutions of higher education held a total of more than $400 
billion in endowment assets in 2008, the most recent year for which 
national data were available.[Footnote 8] Endowments for these 
institutions ranged in size from several thousand dollars to tens of 
billions of dollars, with a median endowment size of just over $21 
million. Within this range, the large majority of institutions had 
endowments of less than $100 million, while 70 of the nearly 2,000 
U.S. colleges and universities had endowments worth $1 billion or 
more, as shown in figure 2.[Footnote 9] 

Figure 2: Number of U.S. Institutions of Higher Education by Total 
Endowment Assets, 2008: 

[Refer to PDF for image: vertical bar graph] 

End-of-year endowment market value, 2009 dollars: 

Less than 1 million: 163 institutions; 
1 million to less than 10 million: 485 institutions; 
10 million to less than 100 million: 889 institutions; 
100 million to less than 500 million: 267 institutions; 
500 million to less than 1 billion: 60 institutions; 
1 billion to less than 5 billion: 54 institutions; 
5 billion or more: 16 institutions. 

Source: GAO analysis of Department of Education data. 

[End of figure] 

In most cases, schools with relatively large total endowments also 
have relatively large endowments per student. As seen below in figure 
3, most schools have relatively smaller endowments per student, and a 
few have much larger endowments per student. However, some schools 
with large total endowments may have much smaller endowments per 
student relative to other schools, and vice versa. For instance, the 
University of Central Florida's total endowment of $113 million was in 
the top 15 percent in the country in 2008, while its endowment per 
student of $2,780 was in the bottom 25 percent. Similarly, the total 
endowment for University of Texas system was the 4th largest in the 
country in 2008, but was the 118th largest per student. In contrast, 
Berea College's total endowment was ranked 63rd in the country by 
total size, but 17th by assets per student in 2008. 

Figure 3: Number of U.S. Institutions of Higher Education by Endowment 
Assets per Student, 2008: 

[Refer to PDF for image: vertical bar graph] 

End-of-year market value per full-time equivalent student, 2009 
dollars: 

Less than 1 thousand: 201 institutions; 
1 thousand to less than 10 thousand: 718 institutions; 
10 thousand to less than 100 thousand: 745 institutions; 
100 thousand to less than 500 thousand: 207 institutions; 
500 thousand to less than 1 million: 36 institutions; 
1 million to less than 5 million: 25 institutions; 
5 million or more: 2 institutions. 

Source: GAO analysis of Department of Education data. 

[End of figure] 

Among different types of institutions, private colleges and 
universities tend to have larger endowments than public ones. For 
instance, private institutions made up about two-thirds of U.S. higher 
education institutions in 2008, but accounted for more than three- 
quarters of total endowment assets at all U.S. institutions. Per 
student, the difference between private and public institution 
endowments is even more pronounced; the median endowment per full-time-
equivalent (FTE) student was $19,072 at private colleges and 
universities and $3,105 at public institutions in 2008.[Footnote 10] 

Research universities tend to have much larger total endowments than 
liberal arts colleges, although on a per-student basis median 
endowment sizes are more similar. In 2008, for example, the median 
endowment size for research universities--$219 million--was more than 
10 times the size of the median endowment value of $20 million for 
liberal arts colleges.[Footnote 11] However, the median endowment per 
student at research universities of $16,024 was smaller than that of 
liberal arts colleges, which was $17,955. 

Institutions with high minority enrollment also show a difference in 
endowment size when compared to other schools. The endowments of 
schools with at least 50 percent minority enrollment, both in total 
and per-student, are about one-third of the size of endowments at 
schools with less than 50 percent minority enrollment. For instance, 
the median endowment for schools with at least 50 percent minority 
enrollment is approximately $9 million, while at schools with less 
than 50 percent minority enrollment, the median is nearly $27 million. 

Endowments Have Grown since 1989 despite Declines in Some Years: 

Endowments at U.S. institutions of higher education have shown 
substantial growth since 1989, despite some periods when endowment 
values declined. Nationally, total inflation-adjusted endowment assets 
held by U.S. colleges and universities grew from just over $100 
billion in 1989 to about $432 billion in 2007, with a decrease to 
about $418 billion in 2008,[Footnote 12] the most recent year for 
which national data were available, as shown in figure 4. 

Figure 4: Total Endowment Assets at U.S. Institutions of Higher 
Education, 1989 through 2008: 

[Refer to PDF for image: line graph] 

Fiscal year: 1989; 
End-of-year market value, 2009 dollars in billions: $102.9. 

Fiscal year: 1991; 
End-of-year market value, 2009 dollars in billions: $108.2. 

Fiscal year: 1992; 
End-of-year market value, 2009 dollars in billions: $121.0. 

Fiscal year: 1993; 
End-of-year market value, 2009 dollars in billions: $131.8. 

Fiscal year: 1994; 
End-of-year market value, 2009 dollars in billions: $135.2. 

Fiscal year: 1995; 
End-of-year market value, 2009 dollars in billions: $150.7. 

Fiscal year: 1996; 
End-of-year market value, 2009 dollars in billions: $151.1. 

Fiscal year: 2003; 
End-of-year market value, 2009 dollars in billions: $220.1. 

Fiscal year: 2004; 
End-of-year market value, 2009 dollars in billions: $300.2. 

Fiscal year: 2005; 
End-of-year market value, 2009 dollars in billions: $332.5. 

Fiscal year: 2006; 
End-of-year market value, 2009 dollars in billions: $364.4. 

Fiscal year: 2007; 
End-of-year market value, 2009 dollars in billions: $431.9. 

Fiscal year: 2008; 
End-of-year market value, 2009 dollars in billions: $418.5. 

Source: GAO analysis of Department of Education data. 

Notes: The Department of Education did not have endowment data for any 
schools in 1990 and 1997-1999 and for private schools from 2000-2002. 

[End of figure] 

Although this graph presents 20 data points for total endowment assets 
(including 7 missing years), it captures only 19 years of growth. This 
is because the first value--total endowment assets as of the end of 
1989--is equivalent to the beginning-of-year value for 1990. 
Therefore, the growth represented in the graph is from the beginning 
of 1990 through the end of 2008. 

Although data on college and university endowments in 2009 are not 
available nationally, data from our case-study schools show that the 
recession has meant substantial endowment losses in 2009. Eight of our 
case-study schools had data on market values for the 1989-2009 period. 
Data from those schools show that, despite recent losses, endowments 
at those eight schools showed substantial overall growth from 1989 to 
2009. The eight schools had combined endowment market values in 2009 
dollars of $18.7 billion in 1989, $77.7 billion in 2007, and $56.0 
billion in 2009.[Footnote 13] Although the real values of the 
endowments at these schools declined by an average of more than 27 
percent from 2007 to 2009, they showed an average rate of growth of 
6.2 percent per year over the 1989-2009 period, after accounting for 
inflation. Figure 5 shows the inflation-adjusted percent growth of 
endowments over their 1989 market values for the eight case-study 
institutions for which complete data were available. 

Figure 5: Percent Change in Endowments at Eight Case-Study 
Institutions, 1989 through 2009: 

[Refer to PDF for image: multiple line graph] 

Percent real growth over 1989 market value: 

Fiscal year: 1989; 
School 1: 0%; 
School 2: 0%; 
School 3: 0%; 
School 4: 0%; 
School 5: 0%; 
School 6: 0%; 
School 7: 0%; 
School 8: 0%. 

Fiscal year: 1990; 
School 1: 2.7%; 
School 2: 1.4%; 
School 3: 0.6%; 
School 4: 8.8%; 
School 5: -6.1%; 
School 6: 4.4%; 
School 7: 2.4%; 
School 7: 4.1%. 

Fiscal year: 1991; 
School 1: 2.8%; 
School 2: -4.9%; 
School 3: -4%; 
School 4: 15.5%; 
School 5: 0.2%; 
School 6: 10.3%; 
School 7: 1.2%; 
School 8: 2.8%. 

Fiscal year: 1992; 
School 1: 8.6%; 
School 3: 3.3%; 
School 4: 24.5%; 
School 5: 2.4%; 
School 6: 15%; 
School 7: 6.2%; 
School 7: 9.5%, 

Fiscal year: 1993; 
School 1: 20.9%; 
School 2: 9.7%; 
School 3: 15.4%; 
School 4: 31.2%; 
School 5: 16.4%; 
School 6: 28.4%; 
School 7: 14.7%; 
School 7: 21.1%. 

Fiscal year: 1994; 
School 1: 16%; 
School 2: 14.8%; 
School 3: 14.1%; 
School 4: 37.4%; 
School 5: 20.7%; 
School 6: 40.8%; 
School 7: 18.9%; 
School 7: 18.7%. 

Fiscal year: 1995; 
School 1: 24.8%; 
School 2: 33%; 
School 3: 26%; 
School 4: 53.6%; 
School 5: 24.7%; 
School 6: 55.1%; 
School 7: 21%; 
School 7: 31.2%. 

Fiscal year: 1996; 
School 1: 38.7%; 
School 2: 58.6%; 
School 3: 42.5%; 
School 4: 70.5%; 
School 5: 42.3%; 
School 6: 75.2%; 
School 7: 25.8%; 
School 7: 44.9%. 

Fiscal year: 1997; 
School 1: 57.9%; 
School 2: 90.1%; 
School 3: 62.3%; 
School 4: 91.6%; 
School 5: 70.8%; 
School 6: 123.2%; 
School 7: 32.5%; 
School 7: 64.6%. 

Fiscal year: 1998; 
School 1: 72%; 
School 2: 122.1%; 
School 3: 85.1%; 
School 4: 132.4%; 
School 5: 70.6%; 
School 6: 147%; 
School 7: 82.3%; 
School 7: 82.8%. 

Fiscal year: 1999; 
School 1: 84.1%; 
School 2: 142.6%; 
School 3: 103%; 
School 4: 159.4%; 
School 5: 120.1%; 
School 6: 264.2%; 
School 7: 127%; 
School 7: 106.8%. 

Fiscal year: 2000; 
School 1: 144.6%; 
School 2: 206%; 
School 3: 102.2%; 
School 4: 177.9%; 
School 5: 205.3%; 
School 6: 298.9%; 
School 7: 157.8%; 
School 7: 179.1%. 

Fiscal year: 2001; 
School 1: 116.5%; 
School 2: 182.2%; 
School 3: 97.8%; 
School 4: 179.5%; 
School 5: 174%; 
School 6: 337%; 
School 7: 120.1%; 
School 7: 165.3%. 

Fiscal year: 2002; 
School 1: 93.3%; 
School 2: 166%; 
School 3: 80.3%; 
School 4: 166.9%; 
School 5: 148.5%; 
School 6: 307.2%; 
School 7: 98.6%; 
School 7: 158.1%. 

Fiscal year: 2003; 
School 1: 83.7%; 
School 2: 186.7%; 
School 3: 70.8%; 
School 4: 172.3%; 
School 5: 175.1%; 
School 6: 313.7%; 
School 7: 115.4%; 
School 7: 168.8%. 

Fiscal year: 2004; 
School 1: 105.4%; 
School 2: 228.4%; 
School 3: 87.5%; 
School 4: 198.2%; 
School 5: 210.1%; 
School 6: 379.8%; 
School 7: 135.9%; 
School 7: 184.6%. 

Fiscal year: 2005; 
School 1: 116.1%; 
School 2: 264.9%; 
School 3: 103.9%; 
School 4: 218.3%; 
School 5: 270.3%; 
School 6: 410.7%; 
School 7: 168.4%; 
School 7: 206.2%. 

Fiscal year: 2006; 
School 1: 129.2%; 
School 2: 297.3%; 
School 3: 119.4%; 
School 4: 302.6%; 
School 5: 311.6%; 
School 6: 581.7%; 
School 7: 182.3%; 
School 8: 233.6%. 

Fiscal year: 2007; 
School 1: 159.6%; 
School 2: 362.7%; 
School 3: 151.7%; 
School 4: 345.7%; 
School 5: 389%; 
School 6: 716.4%; 
School 7: 214.5%; 
School 7: 299.8%. 

Fiscal year: 2008; 
School 1: 132.4%; 
School 2: 372%; 
School 3: 143.5%; 
School 4: 309.5%; 
School 5: 372.9%; 
School 6: 648.8%; 
School 7: 192.7%; 
School 7: 306.9%. 

Fiscal year: 2009; 
School 1: 77.2%; 
School 2: 228.2%; 
School 3: 92.8%; 
School 4: 219.9%; 
School 5: 241.9%; 
School 6: 465.8%; 
School 7: 140.1%; 
School 7: 210.6%. 

Source: GAO analysis of case-study institution data. 

Notes: Percent growth was calculated using endowment market values in 
2009 dollars. 

[End of figure] 

Although this graph presents 21 data points, it captures only 20 years 
of growth. This is because the first value--percent growth as of the 
end of 1989--is equivalent to the beginning-of-year value for 1990. 
Therefore, the growth represented in the graph is from the beginning 
of 1990 through the end of 2009. 

Only six of our case-study schools had data that permitted an analysis 
of what went into the change in endowment market value. Those data 
show that, since 1989, the largest contributing factor to the growth 
of endowments at the six schools was investment earnings. The change 
in value for these endowments--which includes investment earnings or 
losses,[Footnote 14] new contributions, distributions, and any other 
additions to or subtractions from the endowments such as management 
fees--totaled $29.6 billion from 1989 through 2009 (in 2009 dollars). 
Available data from these institutions showed that the large majority 
of this growth came from investment earnings; over the period, in 2009 
dollars these endowments received less than $9.4 billion in new gifts, 
but had investment earnings of $64.8 billion, despite some years of 
substantial investment losses.[Footnote 15] 

Finally, data from our case-study institutions suggest that the 
institutions have not only preserved, but increased, the purchasing 
power of their endowment funds since 1989. Officials at case-study 
institutions, as well as the schools' investment policies, indicated 
that a major consideration in investing their endowment funds is 
protecting the purchasing power of endowment gifts by achieving rates 
of investment earnings that are greater than endowments' distribution 
rates plus inflation. For example, officials at one case-study 
institution said that they generally target a rate of return for their 
endowment of 8.1 percent per year, which is calculated by adding a 
planned distribution rate of 4.75 percent plus 3 percentage points for 
inflation and .35 percentage points for management fees. From 1989 
through 2009, the average annual inflation rate for consumer prices 
generally was 2.9 percent per year,[Footnote 16] while the average 
rate of inflation in the costs of higher education was 3.8 percent per 
year.[Footnote 17] Available data from our case-study schools showed 
that long-term rates of return (after management fees) were greater 
than distribution rates plus inflation for the seven institutions for 
which we had data going back to 1989, using either inflation in 
consumer prices overall or inflation in the costs of higher education 
specifically. For example, at one school, the average annual 
distribution rate from 1989 through 2009 was 4.9 percent per year, 
while during this time the school's endowment earned an average annual 
rate of return on its investments of 10.1 percent per year. 

Distributions from Endowment Funds Are Typically Subject to 
Restrictions: 

When donors establish an endowment at a college or university, they 
have the choice of leaving decisions about how to distribute the 
earnings generated by their gift up to the institution or designating 
how the funds may be used. The Department of Education does not 
collect information from all schools about endowment restrictions, so 
we developed information on endowment restrictions from our case-study 
schools. Data from case-study schools show that the distribution of 
most of their endowment assets is restricted for a particular purpose 
by the terms the donors stipulated when they made their donations. 
Officials at the schools we visited told us that it is unusual to 
receive an endowment without some sort of designation from the donor 
about how the endowment earnings are to be used. 

Some restrictions are broadly worded, designating funds to be used for 
financial aid, for example. Another sort of broad restriction would be 
an endowment for a department within a college to use in any way it 
sees fit. This is a restriction in that only the specific department 
can use the proceeds from the endowment, but how to use those funds is 
up to the school to decide. Other restrictions are quite specific, 
such as funding for a scholarship for students from a particular 
community. In an example from our case studies, a donor in Texas gave 
funds specifically to plant and maintain trees on a school campus. 

Regardless of restrictions for how the earnings on an endowment can be 
spent, the original gift amount of all endowments is typically subject 
to the restriction that it be held and not spent by the institution. 
[Footnote 18] Data from our case-study institutions show that, of 
total endowment assets, a minority of endowment dollars is restricted 
in this way. For instance, on average, 39.4 percent of the endowment 
assets at our case-study schools in 2009 were subject to the 
restriction that they be held in perpetuity. 

State policies governing public colleges and universities can 
influence endowment restrictions. For example, the University of Texas 
system is restricted by state law in how it may spend endowment money. 
The largest of its four major endowment funds--the Permanent 
University Fund--was established by the Texas Constitution, which 
restricts distributions from the fund to paying the debt for capital 
projects such as building construction or land acquisition.[Footnote 
19] Another of the institution's major endowment funds--the Permanent 
Health Fund--is restricted by the Texas Education Code to be used for 
purposes that benefit public health, such as medical research, 
treatment programs, or health education. The state of Kentucky has a 
program to strengthen the research capabilities of its universities by 
adding state funds to endowments for faculty positions. University of 
Kentucky officials told us that this has encouraged donors to 
designate their endowments for faculty positions, which has meant that 
a large portion of the institution's endowment is dedicated to chairs 
and professorships. 

Prior to accepting an endowment, officials at some of the schools we 
visited told us that they work with potential donors to revise 
restrictions the officials believe would be difficult to abide by. 
Officials from one school also said that their institution would turn 
down a gift that came with restrictions that they believe would be too 
restrictive or would not contribute to the mission of the institution. 

Once an institution accepts an endowment, officials we spoke to said 
that they are careful to abide by donors' wishes, but that they also 
have some ability to negotiate or modify restrictions when a 
restriction outlives its purpose and the university needs to revise 
the terms of the endowment. Nine of the ten schools we visited utilize 
gift agreements that include standard terms giving the schools 
flexibility to modify restrictions when the endowed funds become 
unusable under the original restrictions. Schools can also negotiate 
restrictions with donors or their descendants after the gift has been 
made. On rare occasions schools may go to court to ask for changes to 
endowment restrictions. The following are examples of endowment 
revisions from some of our case-study schools: 

* Howard University had an endowment that was restricted to providing 
aid to high-school students from Birmingham, Alabama. Officials told 
us that because the university does not always receive applications 
from qualified students from Birmingham, the endowment would sometimes 
go unused. Howard officials asked the donor to broaden the restriction 
to include all Alabama students, and the donor agreed. 

* At Smith College, school officials told us that a donor established 
a fund to pay for books, newspapers, and magazines for students in one 
of the college's dormitories. However, the fund eventually earned more 
than could possibly be distributed for this purpose, so the school 
took legal action to loosen the restriction so that income from the 
fund could be used for students in all of its dormitories. 

Not all restrictions are the result of donor intent. As noted 
previously, when institutions turn nonendowment funds into quasi- 
endowment funds, they may also restrict the funds to a particular 
purpose, though the institution is not legally bound by such a self- 
designated restriction. For example, Berea College has a policy of 
designating all bequests to the college as quasi-endowment funds 
restricted for financial aid. 

Officials we spoke to said that the way that endowment funds are 
restricted governs how those funds are used once they are distributed 
from the endowment. School officials said that they generally consider 
all spending to be education-related because it furthers the 
educational mission of the institution. To the extent that endowment 
funds are distributed for purposes that are not directly related to 
financial aid, those funds may still provide benefits to students by 
improving education quality for a given cost of attendance. An 
endowment made for a faculty position, for example, means that 
students receive the teaching and other benefits that the new faculty 
member provides, but a portion of their tuition and fees does not have 
to go to pay additional tuition and fees for that person. 

Among the schools we visited where data were available, the percentage 
of funds specifically restricted for financial aid--and the 
distributions for financial aid from those funds--varied 
substantially. For example, funds restricted for financial aid ranged 
from about 12 percent to about 68 percent of endowment assets at case-
study schools in 2009. The distributions from such funds were as high 
as about 73 percent of endowment distributions at one school and about 
51 percent of distributions at another school in 2009. At several of 
the other schools we visited, distributions from funds restricted to 
financial aid were a smaller component of endowment distributions--
between 10 and 23 percent at five of our case-study schools in 2009. 
Officials at the schools we visited noted that distributions from 
funds not restricted to financial aid may still be used for financial 
aid, such as when funds may be used for any purpose by a particular 
department of the school. However, they also said that their 
accounting systems did not precisely identify such distributions 
[Footnote 20]. 

Colleges and Universities Establish Their Own Policies Governing 
Annual Endowment Distributions: 

Although the use of endowment funds is generally restricted, 
institutions have to decide how much to distribute from the endowment 
each year. The Department of Education does not collect information 
from all schools about endowment distributions, so we developed 
information on such distributions from our case-study schools. 
Officials at the schools we visited told us that two important 
considerations went into their policies governing endowment 
distributions. First, they said that they need to protect the 
purchasing power of the endowments so that both students today and 
students in the future can benefit from the endowment. They said that 
they are careful not to distribute more from the endowment, over time, 
than the investment returns they realize, minus inflation and 
management fees. Second, officials said that they need to avoid large 
fluctuations in distributions from year to year. Officials at several 
schools said that, even though investment returns can vary greatly 
from year to year, institutions of higher education need reasonably 
stable budgets to fulfill their missions, so it would be unreasonable 
to let a single year's investment gains or losses be the only factor 
influencing endowment distributions. One official said, for example, 
that the school could not tell academic departments to lay off 
personnel one year and hire them back the next, or tell the financial 
aid office to reduce scholarship funds for students partway through 
their undergraduate years. 

At the schools we visited, officials created mechanisms to smooth the 
effects of market fluctuations and ensure a reliable stream of funding 
for the units within the institution that use endowment funds. These 
sometimes involved basing distribution policies on the endowment's 
market values for multiple years instead of just the most recent year. 
For example, one school's policy is that the distribution rate for the 
coming year should be 5 percent of the endowment's average market 
value over 3 years. At another school, the policy averages market 
values for each quarter of the prior 3 years to further smooth market 
fluctuations. At another school, officials calculate a percentage 
increase in endowment distributions based on the higher education 
inflation rate over the prior 10 years. Officials at the schools we 
visited noted that these policies and formulas can be revised by the 
school when necessary. For example, in response to the decline in 
endowment market values that came with the current economic downturn, 
several schools have increased their endowment distribution rate. 
Another school has changed its smoothing formula to include a slightly 
lower distribution rate and a 60-month average of market values 
instead of a 36-month average. 

For budgeting purposes, schools determine their target distribution 
rate and the distribution amounts that their distribution formula or 
policy dictates for the coming year, but officials told us that they 
may not accurately predict how the market value of the endowment will 
change during the year. The market value of the endowment is 
influenced by investment gains or losses during that year, as well as 
new endowment gifts. Unless the target distribution percentage 
determined by the school before the year begins precisely predicts the 
changes in market value for the year, the actual percentage 
distributed will be larger or smaller than what was planned before the 
year began. In years of greater-than-expected returns, distribution 
percentages will be smaller than planned, and in years with smaller-
than-predicted gains (or losses), the distribution percentage will be 
higher. Figure 6 shows how actual distribution rates and market values 
fluctuate in opposite directions at one of our case-study schools. 

Figure 6: Endowment Market Values in 2009 Dollars and Distribution 
Rates, 1990 through 2009: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1990; 
End-of-year market value: $572.2; 
Distribution as a percentage of market value: 5.4%. 

Fiscal year: 1991; 
End-of-year market value: $545.7; 
Distribution as a percentage of market value: 5.5%. 

Fiscal year: 1992; 
End-of-year market value: $587.7; 
Distribution as a percentage of market value: 5.6%. 

Fiscal year: 1993; 
End-of-year market value: $656; 
Distribution as a percentage of market value: 5.4%. 

Fiscal year: 1994; 
End-of-year market value: $649; 
Distribution as a percentage of market value: 4.9%. 

Fiscal year: 1995; 
End-of-year market value: $716.7; 
Distribution as a percentage of market value: 5.2%. 

Fiscal year: 1996; 
End-of-year market value: $810.2; 
Distribution as a percentage of market value: 4.8%. 

Fiscal year: 1997; 
End-of-year market value: $923.2; 
Distribution as a percentage of market value: 4.5%. 

Fiscal year: 1998; 
End-of-year market value: $1052.8; 
Distribution as a percentage of market value: 4.2%. 

Fiscal year: 1999; 
End-of-year market value: $1154.3; 
Distribution as a percentage of market value: 4.3%. 

Fiscal year: 2000; 
End-of-year market value: $1150; 
Distribution as a percentage of market value: 4.9%. 

Fiscal year: 2001; 
End-of-year market value: $1124.6; 
Distribution as a percentage of market value: 5.1%. 

Fiscal year: 2002; 
End-of-year market value: $1025.5; 
Distribution as a percentage of market value: 5.7%. 

Fiscal year: 2003; 
End-of-year market value: $971.2; 
Distribution as a percentage of market value: 5.6v 

Fiscal year: 2004; 
End-of-year market value: $1066.4; 
Distribution as a percentage of market value: 5%. 

Fiscal year: 2005; 
End-of-year market value: $1159.6; 
Distribution as a percentage of market value: 4.6%. 

Fiscal year: 2006; 
End-of-year market value: $1247.4; 
Distribution as a percentage of market value: 4.3%. 

Fiscal year: 2007; 
End-of-year market value: $1431.1; 
Distribution as a percentage of market value: 4.4%. 

Fiscal year: 2008; 
End-of-year market value: $1384.9; 
Distribution as a percentage of market value: 5%. 

Fiscal year: 2009; 
End-of-year market value: $1096.3. 

Source: GAO analysis of case-study institution data. 

[End of figure] 

For the years in which our case-study schools had data available, 
actual distribution rates fluctuated. We received distribution data 
from 1990 through 2009 from seven schools, which reported distribution 
rates between 3.0 and 7.5 percent of year-end endowment market values, 
with most schools in most years falling between 4.0 and 6.0 percent. 
During this period, the inflation-adjusted dollar value of 
distributions from the endowments increased steadily. Percentage 
change in endowment distributions for seven case-study schools is 
shown in figure 7. 

Figure 7: Percent Change in Endowment Distributions at Seven Case 
Study Institutions, 1990 through 2009: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1990; 
School 1: 0%; 
School 2: 0%; 
School 3: 0%; 
School 4: 0%; 
School 5: 0%; 
School 6: 0%; 
School 7: 0%. 

Fiscal year: 1991; 
School 1: -2%; 
School 2: 1%; 
School 3: 1%; 
School 4: 43%; 
School 5: -3%; 
School 6: -5%; 
School 7: 2%. 

Fiscal year: 1992; 
School 1: 4%; 
School 2: 7%; 
School 3: 1%; 
School 4: 22%; 
School 5: -6%; 
School 6: -6%; 
School 7: 2%. 

Fiscal year: 1993; 
School 1: 10%; 
School 2: 20%; 
School 3: 5%; 
School 4: 9%; 
School 5: 30%; 
School 6: -8%; 
School 7: 5%. 

Fiscal year: 1994; 
School 1: 9%; 
School 2: 27%; 
School 3: 8%; 
School 4: 29%; 
School 5: 42%; 
School 6: -7%; 
School 7: 21%. 

Fiscal year: 1995; 
School 1: 11%; 
School 2: 34%; 
School 3: 12%; 
School 4: 35%; 
School 5: 35%; 
School 6: -4%; 
School 7: 24%. 

Fiscal year: 1996; 
School 1: 15%; 
School 2: 32%; 
School 3: 14%; 
School 4: 39%; 
School 5: 37%; 
School 6: -4%; 
School 7: 29%. 

Fiscal year: 1997; 
School 1: 25%; 
School 2: 37%; 
School 3: 21%; 
School 4: 54%; 
School 5: 58%; 
School 6: 10%; 
School 7: 61%. 

Fiscal year: 1998; 
School 1: 47%; 
School 2: 60%; 
School 3: 31%; 
School 4: 40%; 
School 5: 86%; 
School 6: -3%; 
School 7: 76%. 

Fiscal year: 1999; 
School 1: 61%; 
School 2: 72%; 
School 3: 51%; 
School 4: 137%; 
School 5: 108%; 
School 6: 0%; 
School 7: 108%. 

Fiscal year: 2000; 
School 1: 61%; 
School 2: 120%; 
School 3: 66%; 
School 4: 111%; 
School 5: 143%; 
School 6: 20%; 
School 7: 116%. 

Fiscal year: 2001; 
School 1: 82%; 
School 2: 147%; 
School 3: 85%; 
School 4: 162%; 
School 5: 165%; 
School 6: 25%; 
School 7: 174%. 

Fiscal year: 2002; 
School 1: 104%; 
School 2: 218%; 
School 3: 94%; 
School 4: 149%; 
School 5: 177%; 
School 6: 29%; 
School 7: 187%. 

Fiscal year: 2003; 
School 1: 114%; 
School 2: 220%; 
School 3: 95%; 
School 4: 179%; 
School 5: 181%; 
School 6: 35%; 
School 7: 194%. 

Fiscal year: 2004; 
School 1: 98%; 
School 2: 223%; 
School 3: 83%; 
School 4: 174%; 
School 5: 181%; 
School 6: 35%; 
School 7: 207%. 

Fiscal year: 2005; 
School 1: 88%; 
School 2: 238%; 
School 3: 76%; 
School 4: 161%; 
School 5: 208%; 
School 6: 34%; 
School 7: 198%. 

Fiscal year: 2006; 
School 1: 90%; 
School 2: 251%; 
School 3: 76%; 
School 4: 145%; 
School 5: 252%; 
School 6: 37%; 
School 7: 192%. 

Fiscal year: 2007; 
School 1: 107%; 
School 2: 321%; 
School 3: 80%; 
School 4: 202%; 
School 5: 290%; 
School 6: 48%; 
School 7: 216%. 

Fiscal year: 2008; 
School 1: 120%; 
School 2: 405%; 
School 3: 108%; 
School 4: 257%; 
School 5: 445%; 
School 6: 57%; 
School 7: 324%. 

Fiscal year: 2009; 
School 1: 135%; 
School 2: 407%; 
School 3: 132%; 
School 4: 283%; 
School 5: 483%; 
School 6: 76%; 
School 7: 406%. 

Source: GAO analysis of case-study institution data. 

[End of figure] 

Distribution in a given year is not necessarily the same as spending 
because the money is not always spent in the same year it is taken 
from the endowment and distributed to a department of the school. 
University officials told us that departments sometimes put off 
spending endowment distributions for several years, until they have 
sufficient funds to fulfill the donors' intended purpose. For example, 
a department may "save" its endowment distributions for several years 
until it accumulates enough to purchase an expensive piece of 
equipment. 

Appendixes II-XI provide details on endowment distributions and other 
information about our 10 case-study colleges and universities. 

We will send copies of this report to the Secretary of Education and 
other interested parties. This report will also be available at no 
charge on GAO's Web site at [hyperlink, http://www.gao.gov]. If you or 
your staffs have any questions about this report, please contact me at 
(202) 512-9110 or brostekm@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. Key contributors to this report are listed in 
appendix XII. 

Signed by: 

Michael Brostek: 
Director, Tax Issues: 
Strategic Issues Team: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This appendix provides information on the scope of work and the 
methodology used to examine (1) what available data show about the 
size and change in the value of endowments over the last 20 years; (2) 
the extent and manner in which the funds in such endowments are 
restricted at selected institutions, including restrictions for 
financial aid; and (3) selected postsecondary education institutions' 
policies and practices for distributing endowment assets. 

We used a case-study methodology in combination with analysis of 
national data because some of the information needed to address our 
study objectives was only available from records kept by individual 
colleges and universities. In particular, information on endowment 
restrictions and distributions was not available nationally. The 
primary selection criteria for our 10 case-study institutions were 
endowment size and endowment size per full-time-equivalent student. 
Secondary criteria included institutional characteristics such as 
whether the institution was public or private, a national university 
or liberal arts college, or added geographical diversity. We also 
considered if the institution had a unique educational mission such as 
serving a minority population. We selected institutions with a range 
of endowment sizes and the other criteria discussed above. The 
institutions are not representative of postsecondary institutions in 
general or of any particular type or size of institution. 

We gathered case-study data from publicly available sources such as 
the institutions' annual financial reports and the National 
Association of College and University Business Officers Endowment 
Study, which is a voluntary survey of member institutions. Where 
available, we also used schools' answers to the Common Data Set--
standardized questions developed by the higher education community and 
publishers such as the College Board, Peterson's, and U.S. News & 
World Report. In addition, we analyzed data requested directly from 
the institutions. Finally, we asked officials at case-study 
institutions to verify these data and obtained other information from 
them through structured interviews. 

To determine the size and change in the value of endowments since 
1989, we computed the annual median and range of total endowment 
assets, assets per full-time-equivalent student,[Footnote 21] and the 
annual change in endowment value for postsecondary institutions for 
fiscal years 1989 through 2008 using data from the Integrated 
Postsecondary Education Data System (IPEDS) sponsored by the 
Department of Education.[Footnote 22] IPEDS gathers information from 
the postsecondary institutions that participate in federal student 
financial aid programs. We limited our analysis to not-for-profit 
private and public 4-year postsecondary educational institutions; we 
did not include 2-year institutions or for-profit institutions 
because, in the IPEDS data, for-profit schools are not asked to 
provide endowment information and relatively few 2-year schools had 
endowments as compared to 4-year schools. In addition, for those 2-
year schools that had endowments, the values of the endowments were 
very small and not comparable to those of 4-year institutions. We also 
analyzed data from IPEDS to report on endowment size by type of 
institution, such as public and private schools, research universities 
and liberal arts colleges, and institutions with at least 50 percent 
minority enrollment.[Footnote 23] To include 2009 in our analysis of 
endowment size and change since 1989 and to provide details on various 
components of changes in value such as investment earnings and new 
contributions, we analyzed data from our 10 case-study institutions. 
[Footnote 24] 

Except where noted, all dollar values have been adjusted for inflation 
to constant 2009 dollars using the Consumer Price Index (CPI). We 
adjusted dollar values using CPI instead of the Higher Education Price 
Index, an alternative inflation adjustment specific to postsecondary 
education. In making this choice, we calculated dollar values using 
both indexes and found that the choice of index did not affect our 
conclusions. We therefore chose to use CPI as it may be more familiar 
to readers than the industry-specific index. 

To determine the extent and manner in which the funds in endowments 
are restricted at selected institutions, including restrictions for 
financial aid, and to determine institutions' policies and practices 
for distributing endowment assets, including distributions for 
financial aid and education, we obtained and analyzed data from the 10 
institutions' financial documents, other publicly-available 
institutional publications, and other data we requested from the 
institutions. In addition, we conducted structured interviews with 
officials at the case-study institutions to verify previously 
collected data and to obtain further information on endowment 
restrictions and distributions. 

For all three objectives, we reviewed state law regarding the 
management and use of endowments and federal law regarding the 
taxation of endowments. We also reviewed accounting standards 
established by the Financial Accounting Standards Board (FASB) and the 
Governmental Accounting Standards Board (GASB) that provide guidance 
on accounting for and reporting on the size, growth, restrictions, and 
uses of endowments. 

Our use of IPEDS data in this review is subject to some limitations. 
First, data for some years are not publicly available from IPEDS, and 
the Department of Education made changes to IPEDS reporting standards 
during the period we reviewed. Also, although institutions are 
requested to provide data for all related foundations and other 
affiliated organizations, IPEDS may not contain data for endowments 
held in related foundations for the benefit of some schools, such as 
the University of Colorado Foundation. Also, in regards to both IPEDS 
and case-study institution financial data, some accounting standards 
changed over the period of our review, and there were differences in 
accounting standards between private institutions, which follow FASB 
standards, and public institutions, which typically follow GASB 
standards. The data we report generally reflect these differences in 
accounting standards. For instance, schools and their auditors 
determine and agree on what entities' funds--including endowment funds--
should be included in their financial reports in accordance with FASB 
and GASB standards. Except where noted, we included the endowment 
funds of those entities that the schools and their auditors determined 
should be included for purposes of their financial reports. Officials 
from the Department of Education said that differences in accounting 
standards would not materially affect our findings and officials at 
the schools we visited did not indicate that the differences would 
have a material effect on the reported size, distributions, or uses of 
endowments over the period of our review. With regard to endowment 
restrictions, differing accounting standards and state laws affect the 
restriction classification of schools' endowment assets, which is 
reflected in our reported data on restrictions. For instance, in 
Massachusetts--which has enacted a version of the Uniform Prudent 
Management of Institutional Funds Act (UPMIFA) governing the 
management and use of endowments at schools in the state--schools must 
classify all earnings on endowments as temporarily restricted assets 
until appropriated for expenditure by the school. In contrast, schools 
in Kentucky--which has not enacted a version of UPMIFA--may classify 
such earnings as unrestricted if there are no donor restrictions on 
the use of the earnings. We did not quantify the affect of these 
differences on our reported data regarding endowment restrictions. 

Case-study institution financial data were also not available from all 
of the schools for all of the years under review. Financial data at 
our case-study institutions also differed somewhat due to the varying 
structure and organization of their endowments. We reviewed these data 
to ensure that the data we used were as consistent as possible over 
time, that definitions were consistent between institutions, and that 
any differences did not materially affect our findings. The following 
are examples of reporting differences among our case-study 
institutions: 

* Institutions differ in whether they report endowment distributions 
net of reinvestments of unspent funds back into the endowment. Where 
possible we had institutions report distributions net of 
reinvestments, and where they did not, officials said that 
reinvestments were small enough to not substantially alter the size of 
the distributions. 

* Institutions differ in whether they include funds held in trust by 
others or life income funds in their endowment data. We included such 
assets based on the data that our case-study institutions were able to 
provide. At several of our case-study schools such funds are excluded, 
and for those schools where they are included, they are a small 
portion of the total endowment. 

In cases of inconsistencies beyond those discussed above, we have 
included explanatory notes. We did not independently verify IPEDS data 
or the information provided by our case-study institutions from their 
audited financial statements and accounting systems.[Footnote 25] We 
reviewed both IPEDS and case-study institution data for reasonableness 
and consistency and determined that the data were sufficiently 
reliable for our purposes. Where we have used data subject to 
limitations, we note them in the text of this report. 

We provided a draft version of our characterization of IPEDS data to 
the Department of Education. Department of Education officials 
provided technical comments which we incorporated as appropriate. We 
also asked officials at the 10 colleges and universities we selected 
for our case studies to review information in this report concerning 
their institutions. Officials from all 10 schools provided technical 
comments, which we incorporated as appropriate. 

We conducted our work from June 2009 through February 2010 in 
accordance with all sections of GAO's Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analysis conducted, provide a reasonable basis for the findings 
and conclusions in this product. 

[End of section] 

Appendix II: Berea College Case Study: 

Berea College is a private liberal arts institution admitting students 
with limited family financial resources who are primarily from the 
Southern Appalachian Mountain region. Berea only admits students who 
have significant economic need. The college was founded in 1855 and is 
located in Berea, Kentucky. Berea's total enrollment for the fall 2008 
semester was approximately 1,500 full-time-equivalent (FTE) students. 

The college provides every student a 4-year scholarship that, combined 
with other forms of financial aid, covers all of the school's tuition--
$24,500 in the 2008-09 school year. This scholarship includes a Labor 
Grant through the college's Labor Program, which has long been an 
integral component of Berea's educational program. Under the program, 
all full-time students are required to work at various jobs at the 
college for between 10 and 15 hours per week and receive a $4,000 
labor grant as part of their financial aid from the college. Students 
are also paid for their work (between $3.80 and $6.25 per hour in 2008-
09) and can request to work additional hours under the program. With 
fees and room and board, the total cost of attendance at Berea was 
$31,134 in 2008-09. All Berea students receive need-based financial 
aid; the average award in 2008-09 from all nonloan sources--including 
financial aid from Berea, federal and state grants, and other 
scholarships--was $27,903 for undergraduate students.[Footnote 26] 

At just over $1 billion in 2009 dollars, Berea's endowment placed the 
college in the top 4 percent of schools by total endowment size and in 
the top 2 percent by endowment per FTE student in 2008.[Footnote 27] 
Berea's endowment fell to $791 million in 2009. Further data on 
Berea's endowment are in table 1 below. 

Table 1: Berea College--Endowment Facts, 2009: 

Structure and management: 
Berea's endowment is managed by external investment managers and 
consists of approximately 4,500 individual funds of which 
approximately 2,500 are donor-restricted funds used to provide funding 
for cost of education, direct student aid, and various academic 
support programs. 

Market value as of June 30, 2009: $791,210,000[A]. 

Market value per FTE student: $521,562. 

Distribution: $50,548,000[A]. 

Distribution as a percentage of beginning-of-year market value: 4.9. 

Share of operating expenses funded by distribution (percent): 73.1[B]. 

Source: GAO analysis of Berea College data. 

[A] Rounded to the nearest thousand. 

[B] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Since 1989, the average annual inflation-adjusted change in the market 
value of Berea's endowment was a 3.6 percent increase.[Footnote 28] As 
seen in figure 8 below, after accounting for inflation, the real value 
of Berea's endowment has grown from $446 million to $791 million in 
2009 dollars over the period despite losses in some years. 

Figure 8: Berea College Endowment Market Value in 2009 Dollars, 1989 
through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1989; 
End-of-year market value, 2009 dollars (in millions): $446. 

Fiscal year ending June 30: 1990; 
End-of-year market value, 2009 dollars (in millions): $458. 

Fiscal year ending June 30: 1991; 
End-of-year market value, 2009 dollars (in millions): $458. 

Fiscal year ending June 30: 1992; 
End-of-year market value, 2009 dollars (in millions): $485. 

Fiscal year ending June 30: 1993; 
End-of-year market value, 2009 dollars (in millions): $540. 

Fiscal year ending June 30: 1994; 
End-of-year market value, 2009 dollars (in millions): $518. 

Fiscal year ending June 30: 1995; 
End-of-year market value, 2009 dollars (in millions): $557. 

Fiscal year ending June 30: 1996; 
End-of-year market value, 2009 dollars (in millions): $619. 

Fiscal year ending June 30: 1997; 
End-of-year market value, 2009 dollars (in millions): $705. 

Fiscal year ending June 30: 1998; 
End-of-year market value, 2009 dollars (in millions): $768. 

Fiscal year ending June 30: 1999; 
End-of-year market value, 2009 dollars (in millions): $822. 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in millions): $1092. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in millions): $966. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in millions): $863. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in millions): $820. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in millions): $917. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in millions): $965. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in millions): $1023. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in millions): $1159. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in millions): $1038. 

Fiscal year ending June 30: 2009; 
End-of-year market value, 2009 dollars (in millions): $791. 

Source: GAO analysis of Berea financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Slightly over one-quarter of Berea's endowment in 2009 was permanently 
restricted. This amount, made up of the original gift amount of donor- 
restricted funds, can never be spent. Twenty-nine percent of Berea's 
endowment assets was temporarily restricted or unrestricted earnings 
on donor-restricted endowment funds. The remainder of the endowment, 
about 44 percent, was quasi-endowment funds that have been created 
mostly by unrestricted bequests designated as quasi-endowment by the 
Board of Trustees and can be spent with Board approval. 

Berea uses a large portion of the proceeds from its quasi-endowment 
funds for tuition replacement. The college follows a Board policy of 
designating all unrestricted bequests as quasi-endowment funds. Berea 
financial data showed that assets restricted for this purpose 
constitute approximately $345.7 million of the endowment. Table 2 
details Berea's six most common purpose restrictions. 

Table 2: Berea College--Endowment Restrictions by Purpose, 2009: 

Purpose of restriction: Financial aid; 
Percent of endowment assets: 68. 

Purpose of restriction: Debt service and capital projects; 
Percent of endowment assets: 12. 

Purpose of restriction: Operating budget reserve and capital projects; 
Percent of endowment assets: 9. 

Purpose of restriction: Campus Christian Center and Convocations; 
Percent of endowment assets: 2. 

Purpose of restriction: Appalachian Outreach Program; 
Percent of endowment assets: 1. 

Purpose of restriction: Other purpose restriction; 
Percent of endowment assets: 9. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

Source: GAO analysis of Berea financial data. 

Note: Percentages do not sum because of rounding. 

[End of table] 

Berea calculates the annual target distribution for its long-term 
pooled investments as 5 percent of the moving average of market values 
over the prior 12 quarters. Over the past 20 years, Berea's actual 
distributions from its endowment have averaged 4.7 percent of the 
beginning-of-year endowment market value, ranging from a high of 5.4 
percent in 2003 to a low of 3.7 percent in 2001. As shown below in 
figure 9, annual distributions increased steadily over most of the 
period in real dollars, peaking at approximately $51 million in 2009. 

Figure 9: Berea College Endowment Distributions in 2009 Dollars, 1990 
through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1990; 
Distribution, 2009 dollars (in millions): $21. 

Fiscal year ending June 30: 1991; 
Distribution, 2009 dollars (in millions): $21. 

Fiscal year ending June 30: 1992; 
Distribution, 2009 dollars (in millions): $22. 

Fiscal year ending June 30: 1993; 
Distribution, 2009 dollars (in millions): $24. 

Fiscal year ending June 30: 1994; 
Distribution, 2009 dollars (in millions): $23. 

Fiscal year ending June 30: 1995; 
Distribution, 2009 dollars (in millions): $24. 

Fiscal year ending June 30: 1996; 
Distribution, 2009 dollars (in millions): $25. 

Fiscal year ending June 30: 1997; 
Distribution, 2009 dollars (in millions): $27. 

Fiscal year ending June 30: 1998; 
Distribution, 2009 dollars (in millions): $32. 

Fiscal year ending June 30: 1999; 
Distribution, 2009 dollars (in millions): $35. 

Fiscal year ending June 30: 2000; 
Distribution, 2009 dollars (in millions): $35. 

Fiscal year ending June 30: 2001; 
Distribution, 2009 dollars (in millions): $39. 

Fiscal year ending June 30: 2002; 
Distribution, 2009 dollars (in millions): $44. 

Fiscal year ending June 30: 2003; 
Distribution, 2009 dollars (in millions): $46. 

Fiscal year ending June 30: 2004; 
Distribution, 2009 dollars (in millions): $43. 

Fiscal year ending June 30: 2005; 
Distribution, 2009 dollars (in millions): $40. 

Fiscal year ending June 30: 2006; 
Distribution, 2009 dollars (in millions): $41. 

Fiscal year ending June 30: 2007; 
Distribution, 2009 dollars (in millions): $45. 

Fiscal year ending June 30: 2008; 
Distribution, 2009 dollars (in millions): $47. 

Fiscal year ending June 30: 2009; 
Distribution, 2009 dollars (in millions): $51. 

Source: GAO analysis of Berea financial data. 

[End of figure] 

Of Berea's 2009 endowment distribution of nearly $51 million, 
approximately $37 million--about 73 percent--was distributed from 
funds restricted or designated for financial aid. 

[End of section] 

Appendix III: Harvard University Case Study: 

Harvard University is a private research university, established in 
1636 and located in Cambridge, Massachusetts. Total enrollment at 
Harvard was approximately 19,348 full-time-equivalent (FTE) students 
for the 2008-09 school year. Harvard's total undergraduate cost of 
attendance for the 2008-09 school year was $47,215, and the average 
need-based financial aid award from all nonloan sources for those 
undergraduates receiving awards was $36,850.[Footnote 29] 

At over $37 billion in 2009 dollars, Harvard's endowment placed the 
school at the top of all U.S. higher education institutions by total 
endowment size and in the top 1 percent of schools by endowment per 
FTE student in 2008.[Footnote 30] Harvard's endowment fell to $26 
billion in 2009. Further data on Harvard's endowment are in table 3 
below. 

Table 3: Harvard University--Endowment Facts, 2009: 

Structure and management; 
Harvard's endowment is made up of approximately 11,600 individual 
funds that are pooled and invested in a General Investment Account 
managed by the Harvard Management Company (HMC), a wholly owned 
subsidiary of Harvard established to manage its investments. HMC uses 
a hybrid model of internal and external management teams.[A] 

Market value as of June 30, 2009: $26,035,389,000[B]. 

Market value per student: $1,345,637. 

Distribution: $1,655,910,000[B]. 

Distribution as a percentage of beginning-of-year market value: 4.5. 

Share of operating expenses funded by distribution (percent): 44.1[C] 

Source: GAO analysis of Harvard University data. 

[A] In addition to funds pooled in the General Investment Account, 
Harvard held approximately $612 million of pledge balances and 
interests in trusts held by others in 2009, which constituted around 2 
percent of total endowment assets. These amounts are included in our 
analyses. 

[B] Rounded to the nearest thousand. 

[C] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that constitute 
a significant portion of total operating expenses, while at other 
institutions operating expenses included only education-related 
expenses such as faculty compensation and building maintenance. 

[End of table] 

Over the past 20 years, the average annual inflation-adjusted change 
in the market value of Harvard's endowment was a 6.9 percent 
increase.[Footnote 31] As seen in figure 10 below, after accounting 
for inflation, the real value of Harvard's endowment has grown from 
approximately $8 billion to $26 billion over the period despite 
periodic losses, including losses in 2009. 

Figure 10: Harvard University Endowment Market Value in 2009 Dollars, 
1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1989; 
End-of-year market value, 2009 dollars (in billions): $7.9. 

Fiscal year ending June 30: 1990; 
End-of-year market value, 2009 dollars (in billions): $8.0. 

Fiscal year ending June 30: 1991; 
End-of-year market value, 2009 dollars (in billions): $7.5. 

Fiscal year ending June 30: 1992; 
End-of-year market value, 2009 dollars (in billions): $7.9. 

Fiscal year ending June 30: 1993; 
End-of-year market value, 2009 dollars (in billions): $8.7. 

Fiscal year ending June 30: 1994; 
End-of-year market value, 2009 dollars (in billions): $9.1. 

Fiscal year ending June 30: 1995; 
End-of-year market value, 2009 dollars (in billions): $10.5. 

Fiscal year ending June 30: 1996; 
End-of-year market value, 2009 dollars (in billions): $12.6. 

Fiscal year ending June 30: 1997; 
End-of-year market value, 2009 dollars (in billions): $15.1. 

Fiscal year ending June 30: 1998; 
End-of-year market value, 2009 dollars (in billions): $17.6. 

Fiscal year ending June 30: 1999; 
End-of-year market value, 2009 dollars (in billions): $19.3. 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in billions): $24.3. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in billions): $22.4. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in billions): $21.1. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in billions): $22.7. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in billions): $26.1. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in billions): $29. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in billions): $31.5. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in billions): $36.7. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in billions): $37.4. 

Fiscal year ending June 30: 2009; 
End-of-year market value, 2009 dollars (in billions): $26. 

Source: GAO analysis of Harvard University financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Eighteen percent of Harvard's endowment in 2009 was permanently 
restricted. This amount, made up of the original gift amount of donor- 
restricted funds, can never be spent. Fifty-seven percent of the 
endowment was earnings on donor-restricted endowment funds and was 
classified as temporarily restricted. The remaining 25 percent of the 
endowment was quasi-endowment funds that do not have to be permanently 
held and can be spent by the school in accordance with donor 
stipulations for spending purpose. 

Harvard officials said the large majority of endowment funds are 
restricted for a particular purpose by their donor, and data show that 
faculty support and financial aid are the most common purpose 
restrictions. Table 4 details the top seven categories of purpose 
restrictions. 

Table 4: Harvard University--Endowment Restrictions by Purpose, 2009: 

Purpose of restriction: Faculty support; 
Percent of endowment assets[A]: 28. 

Purpose of restriction: Financial aid; 
Percent of endowment assets[A]: 18. 

Purpose of restriction: Other; 
Percent of endowment assets[A]: 11. 

Purpose of restriction: Teaching and research; 
Percent of endowment assets[A]: 8. 

Purpose of restriction: Program initiatives; 
Percent of endowment assets[A]: 4. 

Purpose of restriction: Libraries and collections; 
Percent of endowment assets[A]: 3. 

Purpose of restriction: University, school and departmental funds 
otherwise unrestricted[B]; 
Percent of endowment assets[A]: 28. 

Purpose of restriction: Total; 
Percent of endowment assets[A]: 100. 

Source: GAO analysis of Harvard data. 

[A] For this table, endowment assets include true endowments and quasi-
endowments, but not pledge balances or interests in trusts held by 
others. 

[B] These funds are restricted generally to schools or departments 
within the university but are otherwise unrestricted for spending 
purpose, according to a Harvard official. 

[End of table] 

According to officials, Harvard targets an endowment distribution rate 
in the range of 5.0 to 5.5 percent of market value, while also 
factoring in the need to "smooth" annual investment gains and losses 
so that they can be distributed for operations over several years and 
allow for budgeting stability. Although Harvard officials said that 
they do not adhere to a strict distribution formula, they do consider 
what they referred to as a "70/30 formula" in planning their 
distributions. Under this formula, the distribution is calculated as 
70 percent of the prior year's distribution amount adjusted for 
inflation, and 30 percent of the targeted rate as a percentage of the 
projected end-of-year market value for the current year. Over the past 
20 years, Harvard's actual endowment distributions have averaged 4.3 
percent of the beginning-of-year endowment market value, ranging from 
a low of 3.2 percent in 1999 to a high of 5.1 percent in 2003. As 
shown below in figure 11, annual distributions increased steadily over 
most of the period in real dollars, peaking at nearly $1.7 billion in 
2009. 

Figure 11: Harvard University Endowment Distributions in 2009 Dollars, 
1990 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1990; 
Distribution, 2009 dollars (in millions): $327. 

Fiscal year ending June 30: 1991; 
Distribution, 2009 dollars (in millions): $332. 

Fiscal year ending June 30: 1992; 
Distribution, 2009 dollars (in millions): $349. 

Fiscal year ending June 30: 1993; 
Distribution, 2009 dollars (in millions): $392. 

Fiscal year ending June 30: 1994; 
Distribution, 2009 dollars (in millions): $415. 

Fiscal year ending June 30: 1995; 
Distribution, 2009 dollars (in millions): $438. 

Fiscal year ending June 30: 1996; 
Distribution, 2009 dollars (in millions): $432. 

Fiscal year ending June 30: 1997; 
Distribution, 2009 dollars (in millions): $448. 

Fiscal year ending June 30: 1998; 
Distribution, 2009 dollars (in millions): $523. 

Fiscal year ending June 30: 1999; 
Distribution, 2009 dollars (in millions): $561. 

Fiscal year ending June 30: 2000; 
Distribution, 2009 dollars (in millions): $719. 

Fiscal year ending June 30: 2001; 
Distribution, 2009 dollars (in millions): $807. 

Fiscal year ending June 30: 2002; 
Distribution, 2009 dollars (in millions): $1,038. 

Fiscal year ending June 30: 2003; 
Distribution, 2009 dollars (in millions): $1,047. 

Fiscal year ending June 30: 2004; 
Distribution, 2009 dollars (in millions): $1,054. 

Fiscal year ending June 30: 2005; 
Distribution, 2009 dollars (in millions): $1,106. 

Fiscal year ending June 30: 2006; 
Distribution, 2009 dollars (in millions): $1,147. 

Fiscal year ending June 30: 2007; 
Distribution, 2009 dollars (in millions): $1,376. 

Fiscal year ending June 30: 2008; 
Distribution, 2009 dollars (in millions): $1,651. 

Fiscal year ending June 30: 2009; 
Distribution, 2009 dollars (in millions): $1,656. 

Source: GAO analysis of Harvard University financial data. 

[End of figure] 

Of Harvard's 2009 endowment distribution, approximately $231 million, 
or 14 percent, was distributed from funds restricted for financial 
aid. In addition to this amount, a Harvard official said that other 
endowment distributions from unrestricted funds went toward financial 
aid, although they were unable to provide specific data on this. 

[End of section] 

Appendix IV: Howard University Case Study: 

Howard University is a private university founded in 1867 and located 
in Washington, D.C. As a historically African-American university, 
Howard places particular emphasis upon educational opportunities for 
black students. While the university is private, about 35 percent of 
the university's budget is financed through a federal appropriation. 
The total full-time-equivalent (FTE) student enrollment for the 2008-
09 school year was 9,501 students, and the cost of attendance for a 
full-time undergraduate for the 2009-10 school year was $28,972. 
[Footnote 32] Howard University reports that financial aid to 
undergraduate students averaged $16,990 in 2009. 

At nearly $484 million in 2009 dollars, Howard's endowment placed the 
university in the top 5 percent of schools by total endowment size and 
in the top 15 percent by endowment per student in 2008.[Footnote 33] 
Further data on Howard's endowment are in table 5 below. Information 
about Howard's operating expenses, endowment restrictions, and 
endowment distributions for 2009 was not available at the time of our 
study. 

Table 5: Howard University--Endowment Facts, 2007 and 2008: 

Structure and management; Howard University's endowment funds are 
pooled for investing purposes and externally managed by an investment 
company chosen by the Board of Trustees. Officials told us that these 
funds do not include any funds held by the Howard University Hospital, 
or any external foundations. 

Market value as of June 30, 2008 (in 2009 dollars): $483,834,000[A]. 

Market value per student, 2008 (in 2009 dollars): $50,924. 

Distribution, 2007 (in 2009 dollars): $9,222,000[A]. 

Distribution as a percentage of beginning-of-year market value, 2007: 
2.6. 

Share of operating expenses funded by endowment distribution, 2007 
(percent): 1.1. 

Source: GAO analysis of Howard data: 

[A] Rounded to the nearest thousand. 

Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

From 1989 to 2008, the average annual inflation-adjusted change in the 
market value of Howard's endowment was an 8.6 percent increase. 
[Footnote 34] As seen in figure 12 below, after accounting for 
inflation, the real value of Howard's endowment grew from $118 million 
to $484 million over the period despite losses in some years. 
Information about Howard's endowment market value for 2009 was not 
available at the time of our study. 

Figure 12: Howard University Endowment Market Value in 2009 Dollars, 
1989 through 2008: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1989; 
End-of-year market value, 2009 dollars (in millions): $118. 

Fiscal year ending June 30: 1990; 
End-of-year market value, 2009 dollars (in millions): $114. 

Fiscal year ending June 30: 1991; 
End-of-year market value, 2009 dollars (in millions): $109. 

Fiscal year ending June 30: 1992; 
End-of-year market value, 2009 dollars (in millions): $117. 

Fiscal year ending June 30: 1993; 
End-of-year market value, 2009 dollars (in millions): $128. 

Fiscal year ending June 30: 1994; 
End-of-year market value, 2009 dollars (in millions): $118. 

Fiscal year ending June 30: 1995; 
End-of-year market value, 2009 dollars (in millions): $145. 

Fiscal year ending June 30: 1996; 
End-of-year market value, 2009 dollars (in millions): $236. 

Fiscal year ending June 30: 1997; 
End-of-year market value, 2009 dollars (in millions): $295. 

Fiscal year ending June 30: 1998; 
End-of-year market value, 2009 dollars (in millions): $337. 

Fiscal year ending June 30: 1999; 
End-of-year market value, 2009 dollars (in millions): $387. 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in millions): $400. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in millions): $421. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in millions): $388. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in millions): $378. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in millions): $419. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in millions): $440. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in millions): $379. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in millions): $443. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in millions): $484. 

Source: GAO analysis Howard financial data. 

Note: Although this graph presents 20 data points, it captures only 19 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2008. 

[End of figure] 

Approximately 14 percent of Howard's endowment in 2007 was permanently 
restricted. This amount, consisting of the original gift amount of 
donor-restricted funds, can never be spent. 86 percent of the 
endowment was temporarily restricted or unrestricted earnings on donor-
restricted endowment funds. 

Howard officials said the large majority of funds are restricted for a 
particular purpose by their donor. In 2007, the most recent year of 
available data, the five major categories of restricted endowments 
were scholarships, professorships, fellowships, academic support, and 
lectures. Further information about these purpose restrictions was not 
available at the time of our study. 

According to its spending policy, Howard University sets a limit on 
the annual target distribution for its pooled endowment of 5 percent 
of the 3-year moving average of the endowment's total market value, 
with the most recent year removed. In the 10 years from 1998 to 2007, 
Howard's actual distributions from its endowment averaged 2 percent of 
the beginning-of-year endowment market value, ranging from a low of 
1.2 percent in 1999 to a high of 2.7 percent in 2003. As shown below 
in figure 13, annual distributions increased in real dollars from 
nearly $4 million in 1998 to just over $9 million in 2007. Information 
on Howard's endowment distributions for 1989 through 1997, 2008, and 
2009 was not available at the time of our study. 

Figure 13: Howard University Endowment Distributions in 2009 Dollars, 
1998 through 2007: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1998; 
Distribution, 2009 dollars (in millions): $3.9. 

Fiscal year ending June 30: 1999; 
Distribution, 2009 dollars (in millions): $4.0. 

Fiscal year ending June 30: 2000; 
Distribution, 2009 dollars (in millions): $4.7. 

Fiscal year ending June 30: 2001; 
Distribution, 2009 dollars (in millions): $8.7. 

Fiscal year ending June 30: 2002; 
Distribution, 2009 dollars (in millions): $8.5. 

Fiscal year ending June 30: 2003; 
Distribution, 2009 dollars (in millions): $10.2. 

Fiscal year ending June 30: 2004; 
Distribution, 2009 dollars (in millions): $8.9. 

Fiscal year ending June 30: 2005; 
Distribution, 2009 dollars (in millions): $9.0. 

Fiscal year ending June 30: 2006; 
Distribution, 2009 dollars (in millions): $8.7. 

Fiscal year ending June 30: 2007; 
Distribution, 2009 dollars (in millions): $9.2. 

Source: GAO analysis of Howard financial data. 

[End of figure] 

Of Howard's 2007 endowment distribution of $9.2 million in 2009 
dollars, approximately $6.4 million--about 70 percent--was distributed 
for spending on scholarships. The amount Howard distributed for 
scholarships in 2009 was not available at the time of our study. 

[End of section] 

Appendix V: Smith College Case Study: 

Smith College is a private liberal arts college, founded in 1871 and 
located in Northampton, Massachusetts. Total enrollment at Smith was 
approximately 3,000 full-time-equivalent (FTE) students for the 2008-
09 school year. Smith admits only women at the undergraduate level and 
admits men and women into its graduate programs. Smith's total 
undergraduate cost of attendance for the 2008-09 school year was 
$48,108, and the average need-based financial aid award from all 
nonloan sources for those undergraduates receiving awards was $29,403. 
[Footnote 35] 

At nearly $1.4 billion in 2009 dollars, Smith's endowment placed the 
college in the top 3 percent of schools by total endowment size and in 
the top 3 percent by endowment per FTE student in 2008.[Footnote 36] 
Smith's endowment fell to slightly under $1.1 billion in 2009. Further 
data on Smith's endowment are in table 6 below. 

Table 6: Smith College--Endowment Facts, 2009: 

Structure and management; Smith has a single, centralized endowment 
made up of approximately 1,900 individual funds. Nearly all of the 
funds are pooled for investing purposes and managed by an external 
investment company, according to officials.[A]. 

Market value as of June 30, 2009: $1,096,322,000[B]. 

Market value per FTE student: $353,766. 

Distribution: $67,900,000[B]. 

Distribution as a percentage of beginning-of-year market value: 5.0. 

Share of operating expenses funded by distribution (percent): 33.4[C]. 

Source: GAO analysis of Smith data. 

[A] In addition to Smith's pooled funds, officials said that the 
endowment in 2009 included approximately $13 million to $14 million in 
assets held in trusts by others and approximately $2 million in assets 
held by Smith that were separately invested due to a donor restriction 
on investment. According to officials, Smith did not include the 
assets held in trusts by others in its reported endowment amounts 
prior to 1996. 

[B] Rounded to the nearest thousand. 

[C] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Over the past 20 years, the average annual inflation-adjusted change 
in the market value of Smith's endowment was a 3.8 percent increase. 
[Footnote 37] As seen in figure 14 below, after accounting for 
inflation, the real value of Smith's endowment has grown from $672 
million to $1.1 billion over the period despite periodic losses, 
particularly in the most recent year. 

Figure 14: Smith College Endowment Market Value in 2009 Dollars, 1989 
through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1989; 
End-of-year market value, 2009 dollars (in millions): $569. 

Fiscal year ending June 30: 1990; 
End-of-year market value, 2009 dollars (in millions): $572. 

Fiscal year ending June 30: 1991; 
End-of-year market value, 2009 dollars (in millions): $546. 

Fiscal year ending June 30: 1992; 
End-of-year market value, 2009 dollars (in millions): $588. 

Fiscal year ending June 30: 1993; 
End-of-year market value, 2009 dollars (in millions): $656. 

Fiscal year ending June 30: 1994; 
End-of-year market value, 2009 dollars (in millions): $649. 

Fiscal year ending June 30: 1995; 
End-of-year market value, 2009 dollars (in millions): $717. 

Fiscal year ending June 30: 1996; 
End-of-year market value, 2009 dollars (in millions): $810. 

Fiscal year ending June 30: 1997; 
End-of-year market value, 2009 dollars (in millions): $923. 

Fiscal year ending June 30: 1998; 
End-of-year market value, 2009 dollars (in millions): $1,053. 

Fiscal year ending June 30: 1999; 
End-of-year market value, 2009 dollars (in millions): $1,154. 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in millions): $1,150. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in millions): $1,125. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in millions): $1,025. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in millions): $971. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in millions): $1,066. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in millions): $1,160. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in millions): $1,247. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in millions): $1,431. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in millions): $1,385. 

Fiscal year ending June 30: 2009; 
End-of-year market value, 2009 dollars (in millions): $1,096. 

Source: GAO analysis of Smith financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Around one-quarter of Smith's endowment in 2009 was permanently 
restricted. This amount, consisting of the original gift amount of 
donor-restricted funds, can never be spent. Forty-six percent of the 
endowment was temporarily restricted earnings on donor-restricted 
endowment funds. The remaining 28 percent of the endowment was quasi- 
endowment funds that can be spent at any time by the school. 

Smith officials said that scholarships and faculty compensation are 
the two most common restrictions on the use of endowment earnings. 
Smith financial data showed that funds restricted for these purposes 
constitute more than half of the endowment. Table 7 below details the 
top six categories of restrictions for spending purpose. 

Table 7: Smith College--Endowment Restrictions by Purpose, 2009: 

Purpose of restriction: Undergraduate grant aid; 
Percent of endowment assets: 33. 

Purpose of restriction: Faculty compensation; 
Percent of endowment assets: 20. 

Purpose of restriction: Operation and maintenance of facilities; 
Percent of endowment assets: 6. 

Purpose of restriction: Libraries; 
Percent of endowment assets: 3. 

Purpose of restriction: Faculty research support; 
Percent of endowment assets: 3. 

Purpose of restriction: Other purpose or no purpose restriction; 
Percent of endowment assets: 35. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

Source: GAO analysis of Smith data. 

[End of table] 

Smith determines the annual target distribution for its pooled 
endowment by adding 4 percent to the prior year's distribution, 
provided that the resulting amount is within 4 and 6 percent of the 
endowment market value as of December 31st of the prior year.[Footnote 
38] If the distribution falls outside of that range, Smith may decide 
to increase or decrease the 4 percent inflation factor. Over the past 
20 years, Smith's actual distributions from its endowment have 
averaged 4.9 percent of the beginning-of-year endowment market value, 
ranging from a low of 4.2 percent in 1998 to a high of 5.7 percent in 
2003. As shown below in figure 15, annual distributions increased 
steadily over most of the period in real dollars, peaking at 
approximately $68 million in 2009. 

Figure 15: Smith College Endowment Distributions in 2009 Dollars, 1990 
through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1990; 
Distribution, 2009 dollars (in millions): $29. 

Fiscal year ending June 30: 1991; 
Distribution, 2009 dollars (in millions): $30. 

Fiscal year ending June 30: 1992; 
Distribution, 2009 dollars (in millions): $30. 

Fiscal year ending June 30: 1993; 
Distribution, 2009 dollars (in millions): $31. 

Fiscal year ending June 30: 1994; 
Distribution, 2009 dollars (in millions): $32. 

Fiscal year ending June 30: 1995; 
Distribution, 2009 dollars (in millions): $33. 

Fiscal year ending June 30: 1996; 
Distribution, 2009 dollars (in millions): $33. 

Fiscal year ending June 30: 1997; 
Distribution, 2009 dollars (in millions): $35. 

Fiscal year ending June 30: 1998; 
Distribution, 2009 dollars (in millions): $38. 

Fiscal year ending June 30: 1999; 
Distribution, 2009 dollars (in millions): $44. 

Fiscal year ending June 30: 2000; 
Distribution, 2009 dollars (in millions): $49. 

Fiscal year ending June 30: 2001; 
Distribution, 2009 dollars (in millions): $54. 

Fiscal year ending June 30: 2002; 
Distribution, 2009 dollars (in millions): $57. 

Fiscal year ending June 30: 2003; 
Distribution, 2009 dollars (in millions): $57. 

Fiscal year ending June 30: 2004; 
Distribution, 2009 dollars (in millions): $54. 

Fiscal year ending June 30: 2005; 
Distribution, 2009 dollars (in millions): $52. 

Fiscal year ending June 30: 2006; 
Distribution, 2009 dollars (in millions): $51. 

Fiscal year ending June 30: 2007; 
Distribution, 2009 dollars (in millions): $53. 

Fiscal year ending June 30: 2008; 
Distribution, 2009 dollars (in millions): $61. 

Fiscal year ending June 30: 2009; 
Distribution, 2009 dollars (in millions): $68. 

Source: GAO analysis of Smith financial data. 

[End of figure] 

Of Smith's 2009 endowment distribution, approximately one-third--$22.5 
million--was distributed from funds restricted for undergraduate grant 
aid. In addition, officials said that endowment distributions directly 
assisted students through graduate scholarships, internships, student 
work, student prizes, and emergency financial assistance, but they did 
not provide specific data on this. 

[End of section] 

Appendix VI: St. Mary's University Case Study: 

St. Mary's University is a Catholic, Marianist, private liberal arts 
institution located in San Antonio, Texas. The school was founded in 
1852. The university's total enrollment for the 2008-09 school year 
was approximately 3,600 full-time-equivalent (FTE) students. The cost 
of attendance for a full-time undergraduate for the 2008-09 school 
year was $28,966 and the average need-based financial aid award from 
all nonloan sources for those undergraduates receiving awards was 
$12,451.[Footnote 39] 

At $149 million in 2009 dollars, the endowment of St. Mary's placed 
the university in the top 20 percent of schools by total endowment 
size and in the top 40 percent by endowment per FTE student in 2008. 
[Footnote 40] The endowment of St. Mary's fell to $116 million in 
2009. Further data on St. Mary's University's endowment are in table 8 
below. 

Table 8: St. Mary's University--Endowment Facts, 2009: 

Structure and management: St. Mary's has a single centralized 
endowment that is invested with several external fund managers, is 
overseen by an investment committee appointed by the Board of 
Trustees, and monitored by an external investment consultant. The 
endowment consists of approximately 270 individual funds established 
mainly for the use of scholarships, professorships, and endowed 
chairs, according to officials. 

Market value as of May 31, 2009: $116,475,000[A]. 

Market value per FTE student: $32,299. 

Distribution: $5,603,000[A]. 

Distribution as a percentage of beginning-of-year market value: 3.8. 

Share of operating expenses funded by distribution (percent): 7.0[B]. 

Source: GAO analysis of St. Mary's data. 

[A] Rounded to the nearest thousand. 

[B] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Over the past 20 years, the average annual inflation-adjusted change 
in the market value of the endowment of St. Mary's was a 6.5 percent 
increase.[Footnote 41] As seen in figure 16 below, after accounting 
for inflation, the real value of St. Mary's University's endowment has 
grown from $36 million to $116 million over the period, despite recent 
declines. 

Figure 16: St. Mary's University Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending May 31: 1989; 
End-of-year market value, 2009 dollars (in millions): $36. 

Fiscal year ending May 31: 1990; 
End-of-year market value, 2009 dollars (in millions): $40. 

Fiscal year ending May 31: 1991; 
End-of-year market value, 2009 dollars (in millions): $42. 

Fiscal year ending May 31: 1992; 
End-of-year market value, 2009 dollars (in millions): $45. 

Fiscal year ending May 31: 1993; 
End-of-year market value, 2009 dollars (in millions): $48. 

Fiscal year ending May 31: 1994; 
End-of-year market value, 2009 dollars (in millions): $50. 

Fiscal year ending May 31: 1995; 
End-of-year market value, 2009 dollars (in millions): $56. 

Fiscal year ending May 31: 1996; 
End-of-year market value, 2009 dollars (in millions): $62. 

Fiscal year ending May 31: 1997; 
End-of-year market value, 2009 dollars (in millions): $70. 

Fiscal year ending May 31: 1998; 
End-of-year market value, 2009 dollars (in millions): $85. 

Fiscal year ending May 31: 1999; 
End-of-year market value, 2009 dollars (in millions): $94. 

Fiscal year ending May 31: 2000; 
End-of-year market value, 2009 dollars (in millions): $101. 

Fiscal year ending May 31: 2001; 
End-of-year market value, 2009 dollars (in millions): $102. 

Fiscal year ending May 31: 2002; 
End-of-year market value, 2009 dollars (in millions): $97. 

Fiscal year ending May 31: 2003; 
End-of-year market value, 2009 dollars (in millions): $99. 

Fiscal year ending May 31: 2004; 
End-of-year market value, 2009 dollars (in millions): $109. 

Fiscal year ending May 31: 2005; 
End-of-year market value, 2009 dollars (in millions): $116. 

Fiscal year ending May 31: 2006; 
End-of-year market value, 2009 dollars (in millions): $147. 

Fiscal year ending May 31: 2007; 
End-of-year market value, 2009 dollars (in millions): $162. 

Fiscal year ending May 31: 2008; 
End-of-year market value, 2009 dollars (in millions): $149. 

Fiscal year ending May 31: 2009; 
End-of-year market value, 2009 dollars (in millions): $116. 

Source: GAO analysis of St. Mary’s financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Approximately half of the endowment of St. Mary's in 2009 was 
permanently restricted. This amount, consisting of the original gift 
amount of donor-restricted funds, can never be spent. Just over 16 
percent of the endowment was temporarily restricted or unrestricted 
earnings on donor-restricted endowment funds. The remaining one-third 
of the endowment was quasi-endowment funds that do not have to be 
permanently held and can be spent by the school at the discretion of 
the Board of Trustees. 

St. Mary's officials said that most endowment gifts are restricted for 
a specific purpose and data from the school show that scholarships are 
the most common purpose restriction. Table 9 below details the top 
five categories of these purpose restrictions. 

Table 9: St. Mary's University--Endowment Restrictions by Purpose, 
2009: 

Purpose of restriction: Scholarships; 
Percent of endowment assets: 45. 

Purpose of restriction: Professor compensation and supporting expenses; 
Percent of endowment assets: 21. 

Purpose of restriction: Bill Greehey School of Business programs; 
Percent of endowment assets: 19. 

Purpose of restriction: Institutional support - operating expenses; 
Percent of endowment assets: 7. 

Purpose of restriction: Other purpose restriction; 
Percent of endowment assets: 8. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

[End of table] 

Source: GAO analysis of St. Mary's data. 

The St. Mary's University endowment distribution policy is to target a 
distribution rate of up to 4.75 percent of the three-year moving 
average of total market value.[Footnote 42] Within this constraint, 
St. Mary's considers general factors such as its operating needs and 
preserving the purchasing power of the endowment when determining its 
annual distribution. Over the past 20 years, actual distributions by 
St. Mary's from its endowment have averaged 3.8 percent of the 
beginning-of-year endowment market value, ranging from a high of 5.6 
percent in 1991 to a low of 3.0 percent in 1998. As shown below in 
figure 17, annual distributions increased over most of the period in 
real dollars, peaking at approximately $5.5 million in 2009. 

Figure 17: St. Mary's University Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending May 31: 1990; 
Distribution, 2009 dollars (in millions): $1.5. 

Fiscal year ending May 31: 1991; 
Distribution, 2009 dollars (in millions): $2.1. 

Fiscal year ending May 31: 1992; 
Distribution, 2009 dollars (in millions): $1.8. 

Fiscal year ending May 31: 1993; 
Distribution, 2009 dollars (in millions): $1.6. 

Fiscal year ending May 31: 1994; 
Distribution, 2009 dollars (in millions): $1.9. 

Fiscal year ending May 31: 1995; 
Distribution, 2009 dollars (in millions): $2.0. 

Fiscal year ending May 31: 1996; 
Distribution, 2009 dollars (in millions): $2.0. 

Fiscal year ending May 31: 1997; 
Distribution, 2009 dollars (in millions): $2.3. 

Fiscal year ending May 31: 1998; 
Distribution, 2009 dollars (in millions): $2.0. 

Fiscal year ending May 31: 1999; 
Distribution, 2009 dollars (in millions): $3.5. 

Fiscal year ending May 31: 2000; 
Distribution, 2009 dollars (in millions): $3.1. 

Fiscal year ending May 31: 2001; 
Distribution, 2009 dollars (in millions): $3.8. 

Fiscal year ending May 31: 2002; 
Distribution, 2009 dollars (in millions): $3.6. 

Fiscal year ending May 31: 2003; 
Distribution, 2009 dollars (in millions): $4.1. 

Fiscal year ending May 31: 2004; 
Distribution, 2009 dollars (in millions): $4.0. 

Fiscal year ending May 31: 2005; 
Distribution, 2009 dollars (in millions): $3.8. 

Fiscal year ending May 31: 2006; 
Distribution, 2009 dollars (in millions): $3.6. 

Fiscal year ending May 31: 2007; 
Distribution, 2009 dollars (in millions): $4.4. 

Fiscal year ending May 31: 2008; 
Distribution, 2009 dollars (in millions): $5.2. 

Fiscal year ending May 31: 2009; 
Distribution, 2009 dollars (in millions): $5.6. 

Source: GAO analysis of St. Mary’s University financial data. 

[End of figure] 

Of St. Mary's University's total endowment distribution in 2009, just 
over half--$3.4 million--was distributed for spending on scholarships, 
the largest of any of the university's endowment spending categories. 
[Footnote 43] 

[End of section] 

Appendix VII: Stanford University Case Study: 

Stanford University is a private research university founded in 
California in 1885. Total enrollment at Stanford was approximately 
14,815 full-time-equivalent (FTE) students for the 2008-09 school 
year. Stanford's total undergraduate cost of attendance for the 2008-
09 school year was $49,344, and the average need-based financial aid 
award from all nonloan sources for those undergraduates receiving 
awards was $36,419.[Footnote 44] 

At nearly $17.5 billion in 2009 dollars, Stanford's endowment placed 
the university in the top 1 percent of schools by both total endowment 
size and endowment per FTE student in 2008.[Footnote 45] Stanford's 
endowment fell to $12.6 billion in 2009. Further data on Stanford's 
endowment are in table 10 below. 

Table 10: Stanford University--Endowment Facts, 2009: 

Structure and management: According to university officials, 
Stanford's endowment consists of approximately 6,500 individual funds. 
Nearly all of the funds are pooled for investment purposes. The 
Stanford Management Company was established in 1991, as a division of 
the University, to manage Stanford's investments. It determines 
overall asset allocation and selects third party managers within each 
asset class to make individual security investment decisions. 

Market value as of August 31, 2009: $12,619,094,000. 

Market value per FTE student; $851,778. 

Distribution: $956,518,000[A]. 

Distribution as a percentage of beginning-of-year market value: 5.6. 

Share of operating expenses funded by distribution (percent): 31[B]. 

Source: GAO analysis of Stanford data. 

[A] Rounded to the nearest thousand. 

[B] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Since 1989, the average annual inflation-adjusted change in the market 
value of Stanford's endowment was a 7.4 percent increase.[Footnote 46] 
As seen in figure 18 below, after accounting for inflation, the real 
value of Stanford's endowment has grown from $3.7 billion to $12.6 
billion over the period despite losses, particularly in the most 
recent year. 

Figure 18: Stanford University Endowment Market Value in 2009 Dollars, 
1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1989; 
End-of-year market value, 2009 dollars (in billions): $3.7. 

Fiscal year ending August 31: 1990; 
End-of-year market value, 2009 dollars (in billions): $3.5. 

Fiscal year ending August 31: 1991; 
End-of-year market value, 2009 dollars (in billions): $3.7. 

Fiscal year ending August 31: 1992; 
End-of-year market value, 2009 dollars (in billions): $3.8. 

Fiscal year ending August 31: 1993; 
End-of-year market value, 2009 dollars (in billions): $4.3. 

Fiscal year ending August 31: 1994; 
End-of-year market value, 2009 dollars (in billions): $4.5. 

Fiscal year ending August 31: 1995; 
End-of-year market value, 2009 dollars (in billions): $4.6. 

Fiscal year ending August 31: 1996; 
End-of-year market value, 2009 dollars (in billions): $5.3. 

Fiscal year ending August 31: 1997; 
End-of-year market value, 2009 dollars (in billions): $6.3. 

Fiscal year ending August 31: 1998; 
End-of-year market value, 2009 dollars (in billions): $6.3. 

Fiscal year ending August 31: 1999; 
End-of-year market value, 2009 dollars (in billions): $8.1. 

Fiscal year ending August 31: 2000; 
End-of-year market value, 2009 dollars (in billions): $11.3. 

Fiscal year ending August 31: 2001; 
End-of-year market value, 2009 dollars (in billions): $10.1. 

Fiscal year ending August 31: 2002; 
End-of-year market value, 2009 dollars (in billions): $9.2. 

Fiscal year ending August 31: 2003; 
End-of-year market value, 2009 dollars (in billions): $10.2. 

Fiscal year ending August 31: 2004; 
End-of-year market value, 2009 dollars (in billions): $11.4. 

Fiscal year ending August 31: 2005; 
End-of-year market value, 2009 dollars (in billions): $13.7. 

Fiscal year ending August 31: 2006; 
End-of-year market value, 2009 dollars (in billions): $15.2. 

Fiscal year ending August 31: 2007; 
End-of-year market value, 2009 dollars (in billions): $18. 

Fiscal year ending August 31: 2008; 
End-of-year market value, 2009 dollars (in billions): $17.5. 

Fiscal year ending August 31: 2009; 
End-of-year market value, 2009 dollars (in billions): $12.6. 

Source: GAO analysis of Stanford University financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

About one-third of Stanford's endowment in 2009 was permanently 
restricted. This amount, consisting of the original gift amount of 
donor-restricted funds, can never be spent. Almost 30 percent of the 
endowment was temporarily restricted or unrestricted earnings on donor-
restricted endowment funds. The remainder of the endowment, about 37 
percent of the endowment, was quasi-endowment funds that can be spent 
with the approval of the Board of Trustees in accordance with donor 
stipulations for spending purpose. 

Stanford officials said that the large majority of the gifts it 
receives are restricted for a particular purpose by the donor. Table 
11 details the top categories of these purpose restrictions for 
endowment funds. 

Table 11: Stanford University--Endowment Restrictions by Purpose, 2009: 

Purpose of restriction: Instruction and research; 
Percent of endowment assets: 28. 

Purpose of restriction: Faculty chair support; 
Percent of endowment assets: 17. 

Purpose of restriction: Graduate aid; 
Percent of endowment assets: 12. 

Purpose of restriction: Undergraduate aid; 
Percent of endowment assets: 10. 

Purpose of restriction: Other or miscellaneous; 
Percent of endowment assets: 11. 

Purpose of restriction: Not restricted for purpose; 
Percent of endowment assets: 23. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

Source: GAO analysis of Stanford data. 

Note: Percentages do not sum to 100 due to rounding. 

[End of table] 

Stanford officials told us that the school determines the annual 
distribution for its endowment in advance of each fiscal year (for 
budget purposes) by using a combination of the current year's 
distribution rate and a target rate. The distribution is reviewed and 
approved by the Board of Trustees. The university sets the 
disbursement rate by placing a 70% weight on the current year's 
distribution rate and a 30% weight on the target rate. Over the past 
20 years, Stanford's actual endowment distributions have averaged 4.9 
percent of the beginning-of-year endowment market value, ranging from 
a low of 4 percent in 2001 to a high of 5.8 percent in 1993. As shown 
below in figure 19, annual distributions increased steadily over most 
of the period in real dollars, peaking at approximately $957 million 
in 2009. 

Figure 19: Stanford University Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1990; 
Distribution, 2009 dollars (in millions): $164. 

Fiscal year ending August 31: 1991; 
Distribution, 2009 dollars (in millions): $159. 

Fiscal year ending August 31: 1992; 
Distribution, 2009 dollars (in millions): $155. 

Fiscal year ending August 31: 1993; 
Distribution, 2009 dollars (in millions): $213. 

Fiscal year ending August 31: 1994; 
Distribution, 2009 dollars (in millions): $234. 

Fiscal year ending August 31: 1995; 
Distribution, 2009 dollars (in millions): $221. 

Fiscal year ending August 31: 1996; 
Distribution, 2009 dollars (in millions): $224. 

Fiscal year ending August 31: 1997; 
Distribution, 2009 dollars (in millions): $259. 

Fiscal year ending August 31: 1998; 
Distribution, 2009 dollars (in millions): $305. 

Fiscal year ending August 31: 1999; 
Distribution, 2009 dollars (in millions): $341. 

Fiscal year ending August 31: 2000; 
Distribution, 2009 dollars (in millions): $399. 

Fiscal year ending August 31: 2001; 
Distribution, 2009 dollars (in millions): $435. 

Fiscal year ending August 31: 2002; 
Distribution, 2009 dollars (in millions): $455. 

Fiscal year ending August 31: 2003; 
Distribution, 2009 dollars (in millions): $461. 

Fiscal year ending August 31: 2004; 
Distribution, 2009 dollars (in millions): $461. 

Fiscal year ending August 31: 2005; 
Distribution, 2009 dollars (in millions): $506. 

Fiscal year ending August 31: 2006; 
Distribution, 2009 dollars (in millions): $577. 

Fiscal year ending August 31: 2007; 
Distribution, 2009 dollars (in millions): $640. 

Fiscal year ending August 31: 2008; 
Distribution, 2009 dollars (in millions): $894. 

Fiscal year ending August 31: 2009; 
Distribution, 2009 dollars (in millions): $957. 

Source: GAO analysis of Stanford University financial data. 

[End of figure] 

Of Stanford's 2009 endowment distribution of $957 million, 
approximately $224 million--about 23 percent--was distributed from 
funds restricted for undergraduate grant aid and for graduate and 
postdoctoral grants and stipends. In addition to this amount, 
officials said that some amount of endowment distributions from 
unrestricted funds and from restricted instructional and research 
support funds went toward financial aid, but they were unable to 
provide specific data on this. 

[End of section] 

Appendix VIII: University of Colorado Case Study: 

The University of Colorado (CU) is a public teaching and research 
institution founded in Boulder, Colorado, in 1876. CU has four 
campuses: the University of Colorado at Boulder, the University of 
Colorado at Denver, the University of Colorado Anschutz Medical 
Campus, and the University of Colorado at Colorado Springs. Total 
enrollment at CU was approximately 46,638 full-time-equivalent (FTE) 
students for the 2008-09 school year. For the 2008-09 school year at 
the University of Colorado at Boulder (the largest institution in the 
system), the total undergraduate cost of attendance was $36,625 for 
out-of-state students and $17,138 for in-state students, and the 
average need-based financial aid award from all nonloan sources for 
those undergraduates receiving awards was $6,729.[Footnote 47] 

CU has both an endowment that it owns directly as well as an 
associated foundation, the University of Colorado Foundation (CUF), 
which has a separate, much larger endowment that benefits CU. In 2008, 
the combined CU and CUF endowments were $784 million in 2009 dollars, 
placing CU in the top 4 percent of schools by total endowment size and 
in the top 40 percent by endowment per FTE student.[Footnote 48] The 
combined endowments declined to $635 million in 2009. Our analysis 
focuses mostly on the foundation's endowment because it accounts for 
over 90 percent of the combined endowment. Some data regarding CU 
endowment distributions were not available to us at the time of our 
study, nor were data on either the CU or CUF endowment values prior to 
2000. Available data on CU's and CUF's endowments are in table 12. 

Table 12: CU and CUF--Endowment Facts, 2009: 

Structure and management: CU manages a few endowments which primarily 
include externally managed trusts. CUF is responsible for managing 
endowment funds and other gifts that benefit CU. These include 
endowments given directly to the CUF as well as the majority of 
endowments owned by the university. 

Market Value as of June 30, 2009; 
CU: $41,968,000[A]; 
CUF: $593,304,000[A]. 

Market Value per FTE Student; 
CU: $900; 
CUF: $12,721. 

Distribution; 
CU: Not available; 
CUF: $23,042,000. 

Distribution as a Percentage of Beginning-of-Year Market Value; 
CU: Not available; 
CUF: 3.2. 

Share of operating expenses funded by distribution (percent); 
CU: Not available; 
CUF: 1.1[B] 

Source: GAO analysis of CU and CUF data. 

[A] Rounded to the nearest thousand. 

[B] This calculation uses the operating expenses of CU, since CU is 
the entity whose operations the distribution supports. Institutions 
with similar endowment distributions may differ substantially in the 
share of their operating expenses funded by those distributions when 
there are large differences in the types of operating expenses at an 
institution. At some institutions, for example, operating expenses 
included hospital services that constituted a significant portion of 
total operating expenses, while at other institutions operating 
expenses included only education-related expenses such as faculty 
compensation and building maintenance. 

[End of table] 

Since 2000, the average annual inflation-adjusted change in the market 
value of the combined CU and CUF endowments was a 2.5 percent 
increase.[Footnote 49] As seen in figure 20 below, after accounting 
for inflation, the real value of the combined endowments has grown 
from $540 million to $635 million over the past 10 years despite 
declines in some years, including 2008 and 2009. 

Figure 20: University of Colorado and University of Colorado 
Foundation Endowment Market Value in 2009 Dollars, 2000 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in millions): $540. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in millions): $515. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in millions): $489. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in millions): $492. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in millions): $578. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in millions): $622. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in millions): $689. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in millions): $810. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in millions): $784. 

Fiscal year ending June 30: 2009; 
End-of-year market value, 2009 dollars (in millions): $635. 

Source: GAO analysis of CU and CUF financial data. 

Notes: Data on endowment market value were not available for fiscal 
years 1989 through 1999. 

[End of figure] 

Although this graph presents 10 data points, it captures only 9 years 
of growth. This is because the first value--market value as of the end 
of 2000--is equivalent to the beginning-of-year value for 2001. 
Therefore, the growth represented in the graph is from the beginning 
of 2001 through the end of 2009. 

Almost 53 percent of CUF's endowment in 2009 was permanently 
restricted. This amount, consisting of the original gift amount of 
donor-restricted funds, can never be spent. Twelve percent of the 
endowment was temporarily restricted earnings on donor-restricted 
endowment funds. The remaining 35 percent of the endowment was quasi- 
endowment funds that do not have to be permanently held and can be 
spent by the school in accordance with donor stipulations for spending 
purpose. 

Faculty positions and financial aid are the two most common 
designations for donor restrictions, and CUF financial data showed 
that assets restricted for these purposes comprise about two-thirds of 
the endowment. Table 13 below details the top categories of 
restrictions for spending purpose. 

Table 13: University of Colorado Foundation--Endowment Restrictions by 
Purpose, 2009: 

Purpose of restriction: Professorships and Chairs; 
Percent of endowment assets: 32. 

Purpose of restriction: Financial Aid; 
Percent of endowment assets: 28. 

Purpose of restriction: Academic; 
Percent of endowment assets: 15. 

Purpose of restriction: Research; 
Percent of endowment assets: 11. 

Purpose of restriction: Other Purpose; 
Percent of endowment assets: 14. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

Source: GAO analysis of CUF data. 

[End of table] 

The CUF's policy is to set an annual target distribution rate as the 
greater of 4 percent of the current market value of the endowment, or 
4.5 percent of the endowment's trailing 36-month average fair market 
value. Over the past 9 years, CUF's actual distributions from its 
endowment have averaged 4.1 percent of the beginning-of-year endowment 
market value, ranging from a low of 3.2 percent in 2009 to a high of 
4.8 percent in 2003. As shown below in figure 21, annual distributions 
increased in real dollars in most years, peaking at approximately $29 
million in 2008. 

Figure 21: University of Colorado Foundation Endowment Distributions 
in 2009 Dollars, 1998 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1998; 
Distribution, 2009 dollars (in millions): $11. 

Fiscal year ending August 31: 1999; 
Distribution, 2009 dollars (in millions): $15. 

Fiscal year ending August 31: 2000; 
Distribution, 2009 dollars (in millions): $17. 

Fiscal year ending August 31: 2001; 
Distribution, 2009 dollars (in millions): $19. 

Fiscal year ending August 31: 2002; 
Distribution, 2009 dollars (in millions): $21. 

Fiscal year ending August 31: 2003; 
Distribution, 2009 dollars (in millions): $22. 

Fiscal year ending August 31: 2004; 
Distribution, 2009 dollars (in millions): $20. 

Fiscal year ending August 31: 2005; 
Distribution, 2009 dollars (in millions): $21. 

Fiscal year ending August 31: 2006; 
Distribution, 2009 dollars (in millions): $23. 

Fiscal year ending August 31: 2007; 
Distribution, 2009 dollars (in millions): $26. 

Fiscal year ending August 31: 2008; 
Distribution, 2009 dollars (in millions): $29. 

Fiscal year ending August 31: 2009; 
Distribution, 2009 dollars (in millions): $23. 

Source: GAO analysis of CU and CUF financial data. 

[End of figure] 

According to officials, spending from the endowment in 2009 was $26.8 
million, including the $23 million distributed from CUF in 2009 plus 
money from prior years. Of this, $8.7 million--or 33 percent--was from 
funds restricted for financial aid. In addition to this amount, 
officials said that some endowment distributions from unrestricted 
funds went toward financial aid, but they were unable to provide 
specific data on this. 

[End of section] 

Appendix IX: University of Kentucky Case Study: 

The University of Kentucky (UK) is a public university founded in 
1865. The university's total fall enrollment for the 2008-09 school 
year was approximately 24,500 full-time-equivalent (FTE) students. For 
the 2008-09 school year, the total undergraduate cost of attendance 
was $24,669 for out-of-state students and $16,521 for in-state 
students, and the average need-based financial aid award from all 
nonloan sources for those undergraduates receiving awards was $5,118. 
[Footnote 50] 

At more than $884 million in 2009 dollars, UK's endowment placed the 
institution in the top 4 percent of schools by total endowment size 
and in the top 40 percent by endowment per FTE student in 
2008.[Footnote 51] The UK endowment declined to about $668 million in 
2009. Since the late 1990s, over $200 million was added by the state 
of Kentucky to the UK endowment under an endowment match program. The 
program matches state money, up to the amount appropriated in each 
year's state budget, with private gifts to fund endowed chairs, 
professorships, fellowships, and scholarships. It was developed by the 
state of Kentucky to encourage private investment in public higher 
education and is used specifically by UK to expand its research 
agenda.[Footnote 52] Further data on the endowment are in table 14 
below. 

Table 14: University of Kentucky--Endowment Facts, 2009: 

Structure and management: UK has one centralized endowment, which is 
pooled for investment purposes and managed by an external investment 
company. According to officials, the UK endowment is made up of 1,950 
funds. 

Market value as of June 30, 2009: $668,008,000[A]. 

Market value per FTE student: $27,210. 

Distribution: $44,169,000[A]. 

Distribution as a percentage of beginning-of-year market value: 5.1. 

Share of operating expenses funded by distribution (percent): 2.2[B]. 

Source: GAO analysis of University of Kentucky data. 

[A] Rounded to the nearest thousand. 

[B] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Since 1989, the average annual inflation-adjusted change in the market 
value of UK's endowment was a 10.1 percent increase.[Footnote 53] As 
seen in figure 22 below, after accounting for inflation, the real 
value of the endowment has grown from $123 million in 1990 to $668 
million in 2009, despite recent losses. 

Figure 22: University of Kentucky, Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1989; 
End-of-year market value, 2009 dollars (in millions): $118. 

Fiscal year ending June 30: 1990; 
End-of-year market value, 2009 dollars (in millions): $123. 

Fiscal year ending June 30: 1991; 
End-of-year market value, 2009 dollars (in millions): $130. 

Fiscal year ending June 30: 1992; 
End-of-year market value, 2009 dollars (in millions): $136. 

Fiscal year ending June 30: 1993; 
End-of-year market value, 2009 dollars (in millions): $152. 

Fiscal year ending June 30: 1994; 
End-of-year market value, 2009 dollars (in millions): $166. 

Fiscal year ending June 30: 1995; 
End-of-year market value, 2009 dollars (in millions): $183. 

Fiscal year ending June 30: 1996; 
End-of-year market value, 2009 dollars (in millions): $207. 

Fiscal year ending June 30: 1997; 
End-of-year market value, 2009 dollars (in millions): $264. 

Fiscal year ending June 30: 1998; 
End-of-year market value, 2009 dollars (in millions): $292. 

Fiscal year ending June 30: 1999; 
End-of-year market value, 2009 dollars (in millions): $430. 

Fiscal year ending June 30: 2000; 
End-of-year market value, 2009 dollars (in millions): $471. 

Fiscal year ending June 30: 2001; 
End-of-year market value, 2009 dollars (in millions): $516. 

Fiscal year ending June 30: 2002; 
End-of-year market value, 2009 dollars (in millions): $481. 

Fiscal year ending June 30: 2003; 
End-of-year market value, 2009 dollars (in millions): $488. 

Fiscal year ending June 30: 2004; 
End-of-year market value, 2009 dollars (in millions): $566. 

Fiscal year ending June 30: 2005; 
End-of-year market value, 2009 dollars (in millions): $603. 

Fiscal year ending June 30: 2006; 
End-of-year market value, 2009 dollars (in millions): $805. 

Fiscal year ending June 30: 2007; 
End-of-year market value, 2009 dollars (in millions): $964. 

Fiscal year ending June 30: 2008; 
End-of-year market value, 2009 dollars (in millions): $884. 

Fiscal year ending June 30: 2009; 
End-of-year market value, 2009 dollars (in millions): $668. 

Source: GAO analysis of UK financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Nearly two-thirds of UK's endowment in 2009 was classified as 
restricted nonexpendable assets. This amount, consisting of the 
original gift amount of donor-restricted funds, can never be spent. 
Nearly 6 percent of the endowment was restricted expendable earnings 
on donor-restricted endowment funds. The remaining 30 percent of the 
endowment was quasi-endowment funds that do not have to be permanently 
held and can be spent by the school in accordance with donor 
stipulations for spending purpose. 

UK officials said that most of UK's endowment funds are restricted for 
a particular purpose by their donor. A common purpose restriction is 
for faculty positions such as endowed chairs. Table 15 below details 
the top categories of these purpose restrictions. 

Table 15: University of Kentucky--Endowment Restrictions by Purpose, 
2009: 

Purpose of restriction: Scholarships and fellowships; 
Percent of endowment assets: 19. 

Purpose of restriction: Chairs, professorships, lectureships; 
Percent of endowment assets: 28. 

Purpose of restriction: Enrichments; 
Percent of endowment assets: 13. 

Purpose of restriction: Other purpose or no purpose restriction; 
Percent of endowment assets: 40. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

[End of table] 

Source: GAO analysis of University of Kentucky data. 

UK currently calculates the annual target distribution for its long- 
term pooled investments as 4.5 percent of the average market value of 
the endowment over the preceding 36 months. Over the past 18 years, 
UK's actual distributions from its endowment have averaged 5.4 percent 
of the beginning-of-year endowment market value, ranging from a high 
of 6.7 percent in 1993 to a low of 4.0 percent in 1998. As shown below 
in figure 23, annual distributions increased steadily over most of the 
period in real dollars, peaking at approximately $44 million in 2009. 

Figure 23: University of Kentucky Endowment Distributions in 2009 
Dollars, 1993 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending June 30: 1993; 
Distribution, 2009 dollars (in millions): $8.8. 

Fiscal year ending June 30: 1994; 
Distribution, 2009 dollars (in millions): $88.9. 

Fiscal year ending June 30: 1995; 
Distribution, 2009 dollars (in millions): $9.4. 

Fiscal year ending June 30: 1996; 
Distribution, 2009 dollars (in millions): $9.4. 

Fiscal year ending June 30: 1997; 
Distribution, 2009 dollars (in millions): $9.3. 

Fiscal year ending June 30: 1998; 
Distribution, 2009 dollars (in millions): $10.4. 

Fiscal year ending June 30: 1999; 
Distribution, 2009 dollars (in millions): $16. 

Fiscal year ending June 30: 2000; 
Distribution, 2009 dollars (in millions): $20.1. 

Fiscal year ending June 30: 20011; 
Distribution, 2009 dollars (in millions): $24.3. 

Fiscal year ending June 30: 2002; 
Distribution, 2009 dollars (in millions): $27.9. 

Fiscal year ending June 30: 2003; 
Distribution, 2009 dollars (in millions): $31.2. 

Fiscal year ending June 30: 2004; 
Distribution, 2009 dollars (in millions): $31.2. 

Fiscal year ending June 30: 2005; 
Distribution, 2009 dollars (in millions): $30. 

Fiscal year ending June 30: 2006; 
Distribution, 2009 dollars (in millions): $30.1. 

Fiscal year ending June 30: 2007; 
Distribution, 2009 dollars (in millions): $35.3. 

Fiscal year ending June 30: 2008; 
Distribution, 2009 dollars (in millions): $41.2. 

Fiscal year ending June 30: 2009; 
Distribution, 2009 dollars (in millions): $44.2. 

Source: GAO analysis of UK financial data. 

Note: Data on endowment distributions were not available for fiscal 
years 1989 through 1992. 

[End of figure] 

About $5.4 million of UK's actual endowment spending in 2009 of about 
$27.7 million was from endowment funds restricted for scholarships and 
fellowships. In addition to this amount, officials said that some 
endowment distributions from unrestricted funds went toward financial 
aid, but they were unable to provide specific data on this. 

[End of section] 

Appendix X: University of Texas System Case Study: 

Established by the Texas Constitution in 1876, The University of Texas 
(UT) system is a public university system consisting of nine academic 
and six health institutions. Among these are major research 
universities such as UT Austin, the UT system's flagship institution 
founded in 1883, and newer and smaller universities such as UT Permian 
Basin and UT Tyler, and medical centers for research, education, and 
patient care. Total enrollment for the UT system during the 2008-09 
school year was more than 150,000 full-time-equivalent (FTE) students. 
For the 2008-09 school year at UT Austin, the total undergraduate cost 
of attendance was $37,312 for out-of-state students and $17,754 for in-
state students, and the average need-based financial aid award from 
all nonloan sources for those undergraduates receiving awards was 
$7,617.[Footnote 54] 

The UT system endowment is made up of several different groups of 
endowment funds, which vary in how they were established, how they are 
invested and distributed, and what restrictions govern their use. 
[Footnote 55] At nearly $15 billion in 2009 dollars in total, the 
endowment placed the UT system in the top 1 percent of schools by 
total endowment size and in the top 15 percent of schools by endowment 
per student in 2008.[Footnote 56] The UT system endowment fell to 
$12.2 billion in 2009. Further data on the endowment are in table 16. 

Table 16: University of Texas System--Endowment Facts, 2009: 

Structure and management: The following are the four major endowment 
funds held by the UT system[A]: 
Permanent University Fund (PUF): The largest of the UT system's four 
major funds, the PUF was established in the Texas Constitution, which 
dictates how the fund is to be managed and spent. PUF assets include 
both land and investments, and the fund provides income from its 
investments and from the leasing and mining of its land. PUF assets 
constitute 57 percent of the UT system's endowment; 
Permanent Health Fund (PHF): The PHF is a state-established fund that 
was created with proceeds from the state's litigation against the 
tobacco industry and is to be used for the benefit of public health. 
PHF assets constitute 6 percent of the UT system's endowment; 
Long-Term Fund (LTF): The LTF is an amalgamation of nearly 9,000 
individual donor funds, similar to pooled endowment funds at other 
schools. LTF assets constitute 35 percent of the UT system's endowment; 
Separately Invested Funds (SIF): The SIF is a group of donor funds 
that, due to donor restrictions or the nature of the underlying 
assets, cannot be pooled with other funds in the LTF. SIF assets 
constitute 3 percent of the UT system's endowment;
To improve the management of the UT system endowment, the system in 
1996 formed the University of Texas Investment Management Company as a 
separate, nonprofit corporation to manage and invest these four major 
funds. 

Market value as of August 31, 2009: $12,229,254,000[B]. 

Market value per FTE student: $80,910. 

Distribution: $638,400,000[B]. 

Distribution as a percentage of beginning-of-year market value: 4.3. 

Share of operating expenses funded by distribution (percent): 5.4[C]. 

Source: GAO analysis of University of Texas system data. 

[A] In addition to the four major endowment funds listed, the UT 
system held approximately $16 million of life income and annuity 
funds, comprising approximately 0.1 percent of its total endowment 
assets in 2009. These funds are included in the total market values 
reported here, although distributions from these funds are not 
included in the UT system's reported distribution amounts. Also, 
portions of both the PUF and PHF benefit the Texas A&M University 
system and other institutions outside of the UT system. We have 
excluded these portions of the PUF and PHF from all analyses. 

[B] Rounded to the nearest thousand. 

[C] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Over the past 20 years, the average annual inflation-adjusted change 
in the market value of the UT system's endowment was an 5.2 percent 
increase.[Footnote 57] As seen in figure 24 below, after accounting 
for inflation, the real value of the endowment has grown from $5.2 
billion to $12.2 billion over the period, despite periodic losses. 

Figure 24: University of Texas System Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1989; 
End-of-year market value, 2009 dollars (in billions): $5.1. 

Fiscal year ending August 31: 1990; 
End-of-year market value, 2009 dollars (in billions): $5.2. 

Fiscal year ending August 31: 1991; 
End-of-year market value, 2009 dollars (in billions): $5.2. 

Fiscal year ending August 31: 1992; 
End-of-year market value, 2009 dollars (in billions): $5.4. 

Fiscal year ending August 31: 1993; 
End-of-year market value, 2009 dollars (in billions): $5.8. 

Fiscal year ending August 31: 1994; 
End-of-year market value, 2009 dollars (in billions): $6.1. 

Fiscal year ending August 31: 1995; 
End-of-year market value, 2009 dollars (in billions): $6.2. 

Fiscal year ending August 31: 1996; 
End-of-year market value, 2009 dollars (in billions): $6.4. 

Fiscal year ending August 31: 1997; 
End-of-year market value, 2009 dollars (in billions): $6.7. 

Fiscal year ending August 31: 1998; 
End-of-year market value, 2009 dollars (in billions): $9.3. 

Fiscal year ending August 31: 1999; 
End-of-year market value, 2009 dollars (in billions): $11.6. 

Fiscal year ending August 31: 2000; 
End-of-year market value, 2009 dollars (in billions): $13.1. 

Fiscal year ending August 31: 2001; 
End-of-year market value, 2009 dollars (in billions): $11.2. 

Fiscal year ending August 31: 2002; 
End-of-year market value, 2009 dollars (in billions): $10.1. 

Fiscal year ending August 31: 2003; 
End-of-year market value, 2009 dollars (in billions): $11.0. 

Fiscal year ending August 31: 2004; 
End-of-year market value, 2009 dollars (in billions): $12.0. 

Fiscal year ending August 31: 2005; 
End-of-year market value, 2009 dollars (in billions): $13.7. 

Fiscal year ending August 31: 2006; 
End-of-year market value, 2009 dollars (in billions): $14.4. 

Fiscal year ending August 31: 2007; 
End-of-year market value, 2009 dollars (in billions): $16. 

Fiscal year ending August 31: 2008; 
End-of-year market value, 2009 dollars (in billions): $14.9. 

Fiscal year ending August 31: 2009; 
End-of-year market value, 2009 dollars (in billions): $12.2. 

Source: GAO analysis of University of Texas System financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Nearly two-thirds of the UT system endowment in 2009 was classified as 
restricted nonexpendable assets. This amount, consisting of the 
original gift amount of donor-restricted funds, can never be spent. 
One-third of the endowment was restricted expendable assets made up 
primarily of earnings on permanent endowment funds. The remaining 3 
percent of the endowment was quasi-endowment funds that do not have to 
be permanently held and can be spent by the school in accordance with 
donor stipulations for spending purpose.[Footnote 58] 

Two of the UT system's four major endowment funds--the LTF and SIF--
are subject to donor restrictions for spending purpose. These funds--
which constituted nearly 38 percent of total UT endowment assets in 
2009--were almost entirely restricted for spending purpose, as shown 
in table 17 below. 

Table 17: University of Texas System--LTF and SIF Restrictions by 
Purpose, 2009: 

Purpose of restriction: Miscellaneous[A]; 
Percent of LTF and SIF endowment assets: 48. 

Purpose of restriction: Professorship or chair; 
Percent of LTF and SIF endowment assets: 35. 

Purpose of restriction: Scholarship; 
Percent of LTF and SIF endowment assets: 12. 

Purpose of restriction: Faculty or graduate fellowship; 
Percent of LTF and SIF endowment assets: 5. 

Purpose of restriction: Lectureship; 
Percent of LTF and SIF endowment assets: 0.4. 

Purpose of restriction: Unrestricted use of chancellor; 
Percent of LTF and SIF endowment assets: 0.1. 

Purpose of restriction: Total; 
Percent of LTF and SIF endowment assets: 100. 

Source: GAO analysis of University of Texas system data. 

Notes: Percentages do not sum to 100 because of rounding. 

[A] According to a UT official, miscellaneous purpose restrictions 
include restrictions for research funds, book funds, program support, 
or endowments with multiple purposes, such as research funds and 
program support. 

[End of table] 

The other two major UT system endowment funds--the PUF and the PHF--
are restricted for spending purpose by state law, as follows: 

* Permanent University Fund: The Texas Constitution requires that two- 
thirds of the annual PUF distribution benefit UT system institutions, 
while the remaining third benefit the Texas A&M University system. The 
constitution also requires that these distributions be used to pay the 
debt for capital projects such as building construction or land 
acquisition at UT institutions, with the exception of UT Austin, which 
may use some of the distribution to fund its operating expenses. 

* Permanent Health Fund: The Texas Education Code restricts the 
spending of PHF distributions to purposes that benefit public health, 
such as medical research, treatment programs, or health education. The 
law also specifies which institutions--including several UT system 
institutions--may receive these distributions. 

The UT system determines annual target endowment distributions 
separately for each of its major funds. For both the LTF and the PHF, 
the UT system calculates the target distribution by increasing the 
prior year's distribution by the average inflation rate[Footnote 59] 
for the previous 12 quarters, and can adjust the distribution if it 
falls below 3.5 percent or above 5.5 percent of the average market 
value over the previous 12 quarters. For the PUF, the UT system 
distributes an amount equal to 4.75 percent of the average net asset 
value of the fund over 12 quarters. In years when PUF investment 
returns exceed the UT system's expectations by a certain threshold, 
distributions will increase to 5 percent of the average net asset 
value of the fund.[Footnote 60] Over the past 20 years, actual 
distributions from the UT system's endowment have averaged 5.1 percent 
of the beginning-of-year total endowment market value, ranging from a 
low of 3.6 percent in 2001 to a high of 7.5 percent in 1990. As shown 
below in figure 25, annual distributions increased over most of the 
period in real dollars, peaking at approximately $638 million in 2009. 

Figure 25: University of Texas System Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1990; 
Distribution, 2009 dollars (in millions): $364. 

Fiscal year ending August 31: 1991; 
Distribution, 2009 dollars (in millions): $345. 

Fiscal year ending August 31: 1992; 
Distribution, 2009 dollars (in millions): $343. 

Fiscal year ending August 31: 1993; 
Distribution, 2009 dollars (in millions): $336. 

Fiscal year ending August 31: 1994; 
Distribution, 2009 dollars (in millions): $340. 

Fiscal year ending August 31: 1995; 
Distribution, 2009 dollars (in millions): $349. 

Fiscal year ending August 31: 1996; 
Distribution, 2009 dollars (in millions): $351. 

Fiscal year ending August 31: 1997; 
Distribution, 2009 dollars (in millions): $398. 

Fiscal year ending August 31: 1998; 
Distribution, 2009 dollars (in millions): $352. 

Fiscal year ending August 31: 1999; 
Distribution, 2009 dollars (in millions): $362. 

Fiscal year ending August 31: 2000; 
Distribution, 2009 dollars (in millions): $436. 

Fiscal year ending August 31: 2001; 
Distribution, 2009 dollars (in millions): $453. 

Fiscal year ending August 31: 2002; 
Distribution, 2009 dollars (in millions): $471. 

Fiscal year ending August 31: 2003; 
Distribution, 2009 dollars (in millions): $491. 

Fiscal year ending August 31: 2004; 
Distribution, 2009 dollars (in millions): $491. 

Fiscal year ending August 31: 2005; 
Distribution, 2009 dollars (in millions): $487. 

Fiscal year ending August 31: 2006; 
Distribution, 2009 dollars (in millions): $497. 

Fiscal year ending August 31: 2007; 
Distribution, 2009 dollars (in millions): $537. 

Fiscal year ending August 31: 2008; 
Distribution, 2009 dollars (in millions): $572. 

Fiscal year ending August 31: 2009; 
Distribution, 2009 dollars (in millions): $638. 

Source: GAO analysis of University of Texas System data. 

[End of figure] 

Of the UT system's 2009 endowment distribution, approximately $66 
million--or just over 10 percent--was distributed from funds 
restricted for scholarships. This amount includes distributions from 
LTF and SIF funds restricted for scholarships, as well as PUF 
distributions restricted for scholarships at UT Austin. In addition to 
this amount, officials said that some amount of endowment 
distributions from PHF funds and from unrestricted funds went toward 
scholarships, but they were unable to provide specific data on this. 
[Footnote 61] 

[End of section] 

Appendix XI: University of Virginia Case Study: 

The University of Virginia (UVA) is a public research university, 
established in 1825 and located in Charlottesville, Virginia. The 
university consists of three divisions--the Academic Division, which 
is the core academic campus in Charlottesville; the College at Wise, a 
branch liberal arts college located in Wise, Virginia; and the Medical 
Center, which provides patient services through a hospital and 
clinics. Total enrollment at UVA was approximately 21,000 full-time-
equivalent (FTE) students for the 2008-09 school year. The total 
undergraduate cost of attendance was $37,420 for out-of-state students 
and $17,120 for in-state students, and the average need-based 
financial aid award from all nonloan sources for those undergraduates 
receiving awards was $14,486 for the 2008-09 school year.[Footnote 62] 

UVA's combined university system endowment--which includes endowments 
held by related foundations such as the Darden School Foundation and 
the Alumni Association Foundation--totaled nearly $3.6 billion as of 
June 30, 2009. The portion of this endowment held by UVA directly 
stood at nearly $2.5 billion.[Footnote 63] In 2008, this directly-held 
endowment--worth nearly $3.2 billion in 2009 dollars--placed UVA in 
the top 2 percent of schools by total endowment size and in the top 10 
percent by endowment per FTE student.[Footnote 64] Further data on 
UVA's endowment are in table 18. 

Table 18: University of Virginia--Endowment Facts, 2009: 

Structure and management: The major portion of UVA's endowment is made 
up of 1,862 individual funds that are pooled for investing purposes, 
and that support the university's three divisions. The endowment is 
managed by the University of Virginia Investment Management Company, a 
related foundation that maintains UVA's investment funds.[A] 

Market value as of June 30, 2009: $2,451,859,000[B]. 

Market value per student: $114,616. 

Distribution: $163,500,000[B]. 

Distribution as a percentage of beginning-of-year market value: 5.2. 

Share of operating expenses funded by distribution (percent): 7.6[C] 

Source: GAO analysis of University of Virginia data. 

[A] According to officials, the endowment held directly by UVA also 
included $50 million in trusts in 2009, which are managed by the 
University of Virginia Investment Management Company but are not 
pooled with the other funds. 

[B] Rounded to the nearest thousand. 

[C] Institutions with similar endowment distributions may differ 
substantially in the share of their operating expenses funded by those 
distributions when there are large differences in the types of 
operating expenses at an institution. At some institutions, for 
example, operating expenses included hospital services that 
constituted a significant portion of total operating expenses, while 
at other institutions operating expenses included only education-
related expenses such as faculty compensation and building maintenance. 

[End of table] 

Over the past 20 years, the average annual inflation-adjusted change 
in the market value of UVA's endowment was a 6.4 percent increase. 
[Footnote 65] As seen in figure 26, after accounting for inflation, 
the real value of UVA's endowment has grown from $800 million to $2.5 
billion over the period, despite recent losses. 

Figure 26: University of Virginia Endowment Market Value in 2009 
Dollars, 1989 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1989; 
End-of-year market value, 2009 dollars (in billions): $0.8. 

Fiscal year ending August 31: 1990; 
End-of-year market value, 2009 dollars (in billions): $0.8. 

Fiscal year ending August 31: 1991; 
End-of-year market value, 2009 dollars (in billions): $0.8. 

Fiscal year ending August 31: 1992; 
End-of-year market value, 2009 dollars (in billions): $0.9. 

Fiscal year ending August 31: 1993; 
End-of-year market value, 2009 dollars (in billions): $1.0. 

Fiscal year ending August 31: 1994; 
End-of-year market value, 2009 dollars (in billions): $0.9. 

Fiscal year ending August 31: 1995; 
End-of-year market value, 2009 dollars (in billions): $1.0. 

Fiscal year ending August 31: 1996; 
End-of-year market value, 2009 dollars (in billions): $1.1. 

Fiscal year ending August 31: 1997; 
End-of-year market value, 2009 dollars (in billions): $1.3. 

Fiscal year ending August 31: 1998; 
End-of-year market value, 2009 dollars (in billions): $1.4. 

Fiscal year ending August 31: 1999; 
End-of-year market value, 2009 dollars (in billions): $1.6. 

Fiscal year ending August 31: 2000; 
End-of-year market value, 2009 dollars (in billions): $2.2. 

Fiscal year ending August 31: 2001; 
End-of-year market value, 2009 dollars (in billions): $2.1. 

Fiscal year ending August 31: 2002; 
End-of-year market value, 2009 dollars (in billions): $2.0. 

Fiscal year ending August 31: 2003; 
End-of-year market value, 2009 dollars (in billions): $2.1. 

Fiscal year ending August 31: 2004; 
End-of-year market value, 2009 dollars (in billions): $2.2. 

Fiscal year ending August 31: 2005; 
End-of-year market value, 2009 dollars (in billions): $2.4. 

Fiscal year ending August 31: 2006; 
End-of-year market value, 2009 dollars (in billions): $2.6. 

Fiscal year ending August 31: 2007; 
End-of-year market value, 2009 dollars (in billions): $3.2. 

Fiscal year ending August 31: 2008; 
End-of-year market value, 2009 dollars (in billions): $3.2. 

Fiscal year ending August 31: 2009; 
End-of-year market value, 2009 dollars (in billions): $2.5. 

Source: GAO analysis of University of Virginia financial data. 

Note: Although this graph presents 21 data points, it captures only 20 
years of growth. This is because the first value--market value as of 
the end of 1989--is equivalent to the beginning-of-year value for 
1990. Therefore, the growth represented in the graph is from the 
beginning of 1990 through the end of 2009. 

[End of figure] 

Approximately nineteen percent of UVA's endowment in 2009 was 
classified as restricted nonexpendable assets. This amount, consisting 
of the original gift amount of donor-restricted funds, can never be 
spent. Nearly 30 percent of the endowment was restricted expendable or 
unrestricted earnings on donor-restricted endowment funds. The 
remaining 53 percent of the endowment consisted of quasi-endowment 
funds that do not have to be permanently held and can be spent by the 
school in accordance with donor stipulations for spending purpose. 
[Footnote 66] 

As shown in table 19, slightly more than two-thirds of UVA's 
endowment--including donor-restricted and quasi-endowment funds--is 
subject to restrictions for spending purpose. The most common of these 
restrictions is for instruction, while funds restricted for financial 
aid comprise the next largest group of funds. 

Table 19: University of Virginia--Endowment Restrictions by Purpose, 
2009: 

Purpose of restriction: Instruction; 
Percent of endowment assets: 36. 

Purpose of restriction: Financial aid; 
Percent of endowment assets: 15. 

Purpose of restriction: Academic support; 
Percent of endowment assets: 7. 

Purpose of restriction: Patient care; 
Percent of endowment assets: 5. 

Purpose of restriction: Research; 
Percent of endowment assets: 3. 

Purpose of restriction: Other purpose; 
Percent of endowment assets: 4. 

Purpose of restriction: Not subject to permanent purpose restrictions; 
Percent of endowment assets: 31. 

Purpose of restriction: Total; 
Percent of endowment assets: 100. 

Source: GAO analysis of University of Virginia data. 

Note: Percentages do not sum because of rounding. 

[End of table] 

According to officials, UVA currently determines the annual target 
distribution from its endowment by increasing the prior year's 
distribution by inflation,[Footnote 67] provided that the resulting 
amount is within 4 and 6 percent of the endowment market value. 
[Footnote 68] If the resulting distribution amount is above or below 
these limits, UVA will reset the target rate. For instance, in the 
face of large gains in the endowment in 2007 that would have caused 
the distribution to fall below 4 percent of the market value, UVA 
reset the target rate to 4 percent. Over the past 20 years, UVA's 
actual endowment distributions have averaged 4.4 percent of the 
beginning-of-year endowment market value, ranging from a low of 4.0 
percent in 1993 and 2007 to a high of 5.2 percent in 2009. As figure 
27 shows, annual distributions increased over most of the period in 
real dollars, peaking at approximately $164 million in 2009. 

Figure 27: University of Virginia Endowment Distributions in 2009 
Dollars, 1990 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year ending August 31: 1990; 
Distribution, 2009 dollars (in millions): $32. 

Fiscal year ending August 31: 1991; 
Distribution, 2009 dollars (in millions): $33. 

Fiscal year ending August 31: 1992; 
Distribution, 2009 dollars (in millions): $33. 

Fiscal year ending August 31: 1993; 
Distribution, 2009 dollars (in millions): $34. 

Fiscal year ending August 31: 1994; 
Distribution, 2009 dollars (in millions): $39. 

Fiscal year ending August 31: 1995; 
Distribution, 2009 dollars (in millions): $40. 

Fiscal year ending August 31: 1996; 
Distribution, 2009 dollars (in millions): $42. 

Fiscal year ending August 31: 1997; 
Distribution, 2009 dollars (in millions): $52. 

Fiscal year ending August 31: 1998; 
Distribution, 2009 dollars (in millions): $57. 

Fiscal year ending August 31: 1999; 
Distribution, 2009 dollars (in millions): $67. 

Fiscal year ending August 31: 2000; 
Distribution, 2009 dollars (in millions): $70. 

Fiscal year ending August 31: 2001; 
Distribution, 2009 dollars (in millions): $89. 

Fiscal year ending August 31: 2002; 
Distribution, 2009 dollars (in millions): $93. 

Fiscal year ending August 31: 2003; 
Distribution, 2009 dollars (in millions): $95. 

Fiscal year ending August 31: 2004; 
Distribution, 2009 dollars (in millions): $99. 

Fiscal year ending August 31: 2005; 
Distribution, 2009 dollars (in millions): $96. 

Fiscal year ending August 31: 2006; 
Distribution, 2009 dollars (in millions): $94. 

Fiscal year ending August 31: 2007; 
Distribution, 2009 dollars (in millions): $102. 

Fiscal year ending August 31: 2008; 
Distribution, 2009 dollars (in millions): $137. 

Fiscal year ending August 31: 2009; 
Distribution, 2009 dollars (in millions): $164. 

Source: GAO analysis of University of Virginia financial data. 

[End of figure] 

Of UVA's 2009 endowment distribution, $24.6 million--or approximately 
15 percent--was distributed from funds restricted for financial aid. 
This amount does not include distributions for financial aid from 
funds not restricted to financial aid. UVA officials provided data 
showing that in 2009, 26 percent of expenditures funded by endowment 
distributions, either from the current or prior years, were for 
financial aid. 

[End of section] 

Appendix XII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Michael Brostek, (202) 512-9110 or brostekm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, David Lewis, Assistant 
Director; LaKeshia Allen; Nina Chen; Amy Friedlander; Thomas Gilbert; 
Miles Ingram; John Mingus; Amrita Sen; Sabrina Streagle; Jessica 
Thomsen; William Trancucci; and Sarah Viranda made key contributions 
to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 110-315 (2008). 

[2] The Department of Education collects information on endowments and 
other matters from postsecondary educational institutions that 
participate in federal student aid programs. 

[3] The fiscal year for seven of our ten case-study schools runs from 
July 1 to June 30. The fiscal year for two other schools runs from 
September 1 to August 31, and for one other school from June 1 to May 
31. 

[4] In addition to true, term, and quasi-endowment funds, institutions 
may also include in their endowments funds held in trust by others, 
which are assets held and administered by external parties such as a 
foundation; and life income funds, which are assets donated to the 
institution with terms requiring that the institution pay a portion of 
the investment income to the donor until the donor dies, at which 
point the institution gains complete ownership of the assets. 

[5] The Uniform Prudent Management of Institutional Funds Act--the 
model law most states have enacted to govern the management and use of 
endowments--does not apply to quasi-endowment funds. However, because 
institutions invest and spend these funds alongside true and term 
endowments, and include them in their reported endowment amounts, we 
have included them in our analysis. 

[6] Endowments may also include assets that are not pooled, such as 
real estate or land, trusts held by others, life income funds, or 
other funds that are not pooled because of donor restrictions that 
they be separately invested or because of the nature of the underlying 
assets. See apps. II through XI for more detailed descriptions of 
different endowment structures. 

[7] Internal Revenue Code, Sec. 170. When making charitable 
contributions to qualified organizations, a tax deduction is generally 
available for those charitable contributions for taxpayers who itemize 
tax deductions on their tax return, provided, in most cases, the total 
tax deduction on the taxpayer's tax return does not exceed one half of 
the taxpayer's adjusted gross income. Excess tax deductions for 
charitable contributions may be carried forward to future tax returns 
for 5 tax years. 

[8] Throughout this report, when we refer to endowment values, we are 
referring to the fair market value as of fiscal year end. In 
accordance with FASB Statement 157 and GASB Statement 31, institutions 
report endowment assets at their fair value. The Statements say that 
the fair value of an investment is the price that would be paid in a 
current transaction between willing participants. 

[9] We limited our analysis of higher education institutions to not- 
for-profit private and public 4-year colleges and universities in the 
United States. 

[10] We calculated numbers of FTE students based on fall enrollment of 
full-time and part-time graduates and undergraduates. See appendix I 
for further information. 

[11] We based our classifications of research universities and liberal 
arts colleges on the Basic Carnegie Classification, developed by the 
Carnegie Commission on Higher Education in 1970 and updated in 2005. 
See appendix 1 for further information. 

[12] All market value figures are as reported by institutions to the 
Department of Education as of the end of their fiscal year. 

[13] All of these market value amounts are in inflation-adjusted 2009 
dollars based on what was reported in the institutions' accounting 
reports as of the end of their fiscal years. 

[14] Throughout this report, when we refer to investment earnings, we 
are including realized appreciation, unrealized appreciation, and 
investment yields such as dividends and rents. 

[15] Net growth in the endowments is less than investment earnings 
plus new gifts because of distributions, management fees, and other 
outflows of money from the endowments. 

[16] This rate is based on the Consumer Price Index. See appendix I. 

[17] This rate is based on the Higher Education Price Index, an 
inflation index designed for institutions of higher education by the 
Commonfund Institute, an investment management and research 
organization for nonprofit organizations. The Higher Education Price 
Index is based on a fixed basket of goods purchased by colleges and 
universities, including faculty and administrative salaries, supplies 
and materials, and utilities. 

[18] Endowments may be established so that the original gift amount is 
held in perpetuity, or the donor may stipulate that the original gift 
amount be held for a period of time or until an event occurs. When 
that period ends or the event occurs, the institution is free to spend 
the original gift. 

[19] This restriction applies to distributions at all University of 
Texas campuses except University of Texas-Austin, which may use 
Permanent University Fund distributions to pay for operating expenses 
as well. 

[20] Case-study schools used different terminology to describe 
financial aid. Some referred to such aid as "financial aid," while 
others used terms such as "scholarships" or "grant aid." 

[21] Some of our case-study institutions used different methods for 
calculating full-time enrollment numbers, and many of these methods 
are inconsistent from Integrated Postsecondary Education Data System 
(IPEDS) calculations for full-time enrollment. Where there were 
differences, they were not large enough to materially affect our 
findings. For IPEDS data, we calculated institutions' full-time 
enrollment numbers based on fall enrollment of full-time and part-time 
graduates and undergraduates, and for case study institutions, we used 
the full-time enrollment numbers they provided. For five institutions, 
these numbers were based on fall enrollment of graduates and 
undergraduates, and for the remaining institutions they were based on 
average enrollment of fall and spring semester graduates and 
undergraduates, with several institutions including summer students as 
well. 

[22] IPEDS data for 2009 were not available when we conducted our 
analysis. In addition, IPEDS did not have publicly available endowment 
data for any schools in 1990 and 1997-1999, and for private schools 
from 2000 through 2002. 

Fiscal years refer to schools' fiscal years, as reported in their 
annual financial statements and in their responses to IPEDS surveys. 
The fiscal year for seven of our ten case-study schools runs from July 
1 to June 30. The fiscal year for two other schools runs from 
September 1 to August 31 and for one other school from June 1 to May 
31. 

[23] In analyzing institutions by type, we used the 2005 IPEDS update 
of institutions' Basic Carnegie Classification, the traditional 
classification framework developed by the Carnegie Commission on 
Higher Education in 1970. For research universities, we included 
schools with the following classifications: Research Universities 
(very high research activity), Research Universities (high research 
activity), and Doctoral/Research Universities. For liberal arts 
colleges, we included schools with the following classifications: 
Baccalaureate Colleges--Arts & Sciences, Baccalaureate Colleges--
Diverse Fields, and Baccalaureate/Associate's Colleges (institutions 
offering both 2-and 4-year degrees). 

[24] Although the period from 1989 through 2009 includes 21 data 
points on endowment market values, it captures only 20 years of 
changes in value. This is because the first market value data point--
market value as of the end of 1989--is equivalent to the beginning-of-
year value for 1990. Therefore, the change in value captured in these 
data is the 20 years from the beginning of 1990 through the end of 
2009. 

[25] Where data were provided from institutions' accounting systems 
and were not available in public documents such as financial 
statements, we verified that data from these accounting systems were 
subject to the annual audits required to issue audited financial 
statements. 

[26] The average need-based financial aid award is an average for full-
time undergraduates. 

[27] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[28] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[29] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from Harvard, and outside 
scholarships. 

[30] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[31] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[32] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based grant award is an 
average for full-time undergraduates who applied for, qualified for, 
and received need-based aid from any source. Information about 
Howard's cost of attendance for a full-time undergraduate and average 
need-based financial aid award from all nonloan sources was not 
available for 2009. 

[33] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[34] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[35] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from Smith, and outside 
scholarships. 

[36] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[37] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[38] Prior to 2006, Smith calculated its target distribution as 5.25 
percent of a 12-quarter rolling average of market values. According to 
officials, Smith changed the formula to better balance the risk of 
real decline in endowment value and to smooth the effects of market 
volatility on the operating budget. 

[39] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from St. Mary's, and outside 
scholarships. 

[40] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[41] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[42] For gifts of $5 million or more, the donor may request a higher 
spending percentage or different market value average for calculating 
the distribution, or both, provided the use is within the mission of 
the university and the donor acknowledges the potential risks of loss 
of future purchasing power. 

[43] This percentage is based on the total distribution from the 
endowment, before accounting for any reinvestments of unspent funds. 
In 2009, this total distribution was $6.7 million, while the 
distribution net of these reinvestments was $5.6 million, as shown in 
table 8 above. 

[44] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from Stanford, and outside 
scholarships. 

[45] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[46] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[47] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from CU or CUF, and outside 
scholarships. 

[48] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[49] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[50] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from UK, and outside 
scholarships. 

[51] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[52] The Kentucky Postsecondary Education Improvement Act was passed 
in 1997 and created six trust funds, including the Research Challenge 
Trust Fund. The funds provide for strategic investment at the 
University of Kentucky, University of Louisville, and Kentucky's six 
regional universities. 

[53] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[54] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from UT, and outside 
scholarships. 

[55] Throughout this report, we refer to the UT System endowment in 
its entirety--that is, as the sum of the four major funds, as well as 
life income and annuity funds. See note a on table 16 below for 
further details. 

[56] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[57] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[58] These percentages are based on the endowment assets reported in 
the UT System Consolidated Annual Financial Reports, which include 
portions of the PUF and PHF that benefit non-UT institutions. 

[59] This calculation is based on Consumer Price Index inflation. 

[60] Because the SIF is a group of individual funds that are not 
pooled and are often of disparate asset classes, distributions are 
made based on the terms of each individual fund in the group, and not 
based on a uniform distribution policy, according to UT officials. 

[61] UT system officials also noted that this amount does not capture 
distributions for work study aid. 

[62] The total cost of attendance includes tuition, room, board, and 
required fees. In addition, the average need-based financial aid award 
is an average for full-time undergraduates who applied for, qualified 
for, and received need-based aid from any nonloan source, including 
federal and state grants, financial aid from UVA, and outside 
scholarships. 

[63] Throughout the report when we refer to UVA's endowment, including 
its market value, distribution, and rates of return, we are referring 
to the portion held and controlled directly by UVA. UVA includes 
related foundations' endowment assets, which total nearly $1.1 
billion, in its reported combined university endowment in accordance 
with GASB standards because they are for the benefit of the 
university. In addition, according to officials the endowment held 
directly by UVA included approximately $50 million in trusts in 2009. 
We excluded these trusts from our analyses because officials said they 
typically have binding distribution rates and different rates of 
return from the main endowment, since they are not pooled together. 

[64] Fiscal year 2008 was the most recent year for which national data 
were available. Except where noted, all dollar values have been 
adjusted for inflation to constant 2009 dollars using the Consumer 
Price Index. 

[65] As discussed previously, the change in endowment market value is 
a function of investment returns, new gifts, distributions, and any 
other inflows or outflows of money. 

[66] These percentages are based on the endowment amount in UVA's 2009 
financial report, which included trusts. 

[67] UVA uses a 10-year average of the Higher Education Price Index, 
an inflation index designed for institutions of higher education that 
is based on a fixed basket of goods purchased by colleges and 
universities, including faculty and administrative salaries, supplies 
and materials, and utilities. 

[68] Although UVA maintained this spending policy for several years, 
from 2003 to 2005 the university instead distributed a fixed 
percentage of a 12-quarter moving average of endowment market value. 
Additionally, after returning to the current policy of increasing the 
distribution by inflation, UVA has made further changes to the 
percentages between which the distribution must fall, most recently 
adjusting them from 3.5 and 5.5 percent to 4 and 6 percent in 2009. 

[End of section] 

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