2009 - 2010: Yale University Finance Annual Financial Report

The University closed the fiscal year with positive operating results while continuing to respond to the challenges arising from the financial crisis. While the University’s largest financial asset, the endowment, partially rebounded this year, it will take some time to return to pre-crisis levels. As such, adjustments to financial plans and operating budgets as well as the deferral of capital construction projects continue to be necessary to fully attain financial equilibrium. Departments and schools responded with appropriate expense reductions and have developed plans to manage through these challenging times. The University’s endowment investments increased by $401 million during the year to a total of $16.5 billion, the net of 8.9% endowment returns plus 0.5% endowment giving less endowment spending of 6.9%. Endowment spending represented 41% of the operating revenue in fiscal 2010 compared to 45% in fiscal 2009. The University’s capital spending for fiscal 2010 was budgeted at $625 million, with actual spending of $453 million. While conditions necessitate a slowdown, the University has prioritized spending within the capital program to complete projects already underway and to begin those with significant gift funding in hand, such as the renovation of the Yale Art Gallery and the new campus for the Yale School of Management. Though it is necessary to defer some exciting plans for a time, steady investment in capital maintenance of existing buildings remains a key priority and the use of capital replacement funds set aside in the operating budget for this purpose will continue. The University’s seven-year “Yale Tomorrow” fund raising campaign has now completed its sixth year and, as of June 30, 2010, has received $3.03 billion in gifts and documented commitments, reaching the 86.5% mark toward the campaign goal of $3.5 billion (surpassing a year ahead of schedule the original campaign goal of $3 billion, which was raised to $3.5 billion in June 2008). Because of continued financial turmoil and uncertainty, many donors have remained reluctant to make very large commitments, and so, not surprisingly, the $317.3 million in gifts and new pledges recorded during the fiscal year is the lowest of any year of the campaign. Nonetheless, having broken the $3 billion mark, the University remains confident the campaign is on track to reach $3.5 billion by June 2011. One very encouraging sign is the fact that despite donor skittishness about making large commitments, the $383.5 million received during FY10 in the form of new gifts and payments on commitments was an increase over the prior year and came close to equaling the average amount in new gifts and payments of the six completed years of the campaign. Although FY10 was not a record-breaking year, the continued strong support of Yale alumni and friends remains crucial for achieving the University’s strategic goals while mitigating the effects of the economic downturn on the endowment. Yale has continued to make progress with efforts to reorganize for efficiency and improved delivery of its financial and administrative services to students, faculty and staff. As an example, several previously decentralized information technology resources have been consolidated into the central Information Technology Division so system development efforts can be better coordinated and technology investments leveraged across multiple units. Additionally, desktop service has been made more efficient through deployment of managed desktop software that allows trouble shooting and remediation from remote locations. Efforts to standardize business practices and optimize processes and systems continue as well. In addition, Yale has begun deploying a shared service model to support various back office finance and procurement functions, with a goal of delivering improved services at significantly lower cost. Yale’s Shared Business Support Center has launched and is providing services to several units. Once a proven operating model can be demonstrated, the shared service model will be broadened to additional units. The University remains committed to introducing new processes and systems that can adapt to growth in a cost effective manner while providing high-quality support services and improved information and analysis for decision makers. President Levin recently announced a Sustainability Strategic Plan for 2010 to 2013 that assigns certain goals and responsibilities to various units within the University. The plan encourages involvement of the entire Yale community in initiatives aimed at doing our part to create a more sustainable environment, such as the reduction of paper consumption and printed materials. The University, as a result, has decided not to print the 2009–2010 Yale Annual Report, but we are pleased to make it available on the web at www.yale.edu/fr09-10. As always, we look for your support as we embark on this very important strategic plan. Though financial challenges remain, Yale University is financially strong and continues to compete in education and research with its accustomed distinction. We appreciate the commitment shown by students, faculty, staff, alumni, donors and all who support the University in maintaining the highest standards for delivering excellence in all aspects of our core mission: the creation, preservation and dissemination of knowledge. 

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