Endowment reporting distorted

The Jan. 27 edition of P&I Daily reported, in the first paragraph of an article on educational endowments, that “Aggregate assets of U.S. educational endowment portfolios grew 19.1% in the fiscal year ended June 30 to $346.5 billion from $291 billion the prior year, according to the 2010 NACUBO-Commonfund Study of Endowments released Jan. 26.”

The article does not indicate that the universe of schools that reported in the previous year was substantially smaller. Using the endowment values reported in 2009 as a denominator grossly inflates the percentage increase for the fiscal year 2010. Most educational endowments saw an increase of between 4% and 10% for the year (with an expected average increase of 8%), not 19%.  NACUBO and P&I should accurately reflect endowment growth by reporting values of only those institutions submitting values in both years, and explain this methodology.

Here is why this is so important. Let us suppose we live in a neighborhood with 100 homes. Each of the homeowners agree to appraise their homes annually and report the results to the community association. Last year 80 homeowners reported their values (at $200,000/home), for a total of $16 million. The following year the appraisals were conducted again, the value per home remained at $200,000. This time, however, all 100 homeowners reported their values, for a total of $20 million. The difference in value, $4 million does not represent a 25% ($4 million divided by $16 million) “growth in value.” It represents a decision by 20 homeowners to join the survey.

Three years ago the largest educational endowments were the subject of an inquiry by the Senate Finance Committee over how these funds were used toward their mission.

The inquiry was a reminder to those with responsibility for management of educational endowments that misinformation, such as appears in the Jan. 27 article, must be corrected.

Doug Phillips

Senior vice president for institutional


University of Rochester,

Rochester, N.Y.

EDITOR'S NOTE: The story was amended to reflect both growth figures.