Endowment Funds
Endowment funds are monetary and asset donations that charities receive to be held and invested to maintain their principal value and earn investment income. The charities can use the investment returns for specific purposes set during the time of donation (restricted endowments) or for charitable purposes at their discretion (unrestricted endowments).
Among the 642 Institutions of Public Characters (IPCs) in Singapore, only 62 of them (9.7%) have endowment funds. The average endowment fund size of the 62 charities are $219.9 million and the total endowment fund size is $13.6 billion.
Endowment funds are more commonly found among charities in the education sector, specifically the universities. Endowment funds from the education sector make up 93.9 % of the total endowment fund value and specifically the 6 autonomous universities in Singapore hold 89.3% of the total endowment funds.
Singapore Universities and Endowment Funds
The autonomous universities (AUs) in Singapore set up their endowment funds with the support of the Singapore Government who generously provided the seed monies as well as varying amounts of matching grants to public donations into the endowment funds of the AUs. Currently the established universities such as NUS, NTU and SMU received $1.5 matching government grant for every dollar of donations to their endowment funds while the newer universities such as SUTD, SIT and SUSS received matching government grant of $3 for every $1 donation. The motivation is to enable the AUs to build their financial sustainability so that they can rely less on government support by having a separate stream of income that they can use for the programmes and activities.
The biggest use of endowment income goes towards the operating expenditure for the delivery of subsidised education. Other major uses include bursaries, scholarships, as well as learning enrichment programmes/ activities, research and professorships. Based on the amount of endowment funds that they have as well as their annual expenditure, the investment return generated can support up to 120% of the annual expenditure. However it is important to note that investment returns fluctuate based on market conditions and universities may draw down their endowment funds in years where the investment returns are not enough to support the specific usage of the endowment funds.
Note – The above universities financial data are taken from the latest available financial year, April 2020 – March 2021 with the exception of data from Singapore University of Social Science that adheres to the calendar year of 2020 (Jan 2020 – Dec 2020)
Case Study - Harvard University's Endowment Fund and Return
Note – Harvard university’s financial data is taken from the latest available financial year, July 2020 – Jun 2021
Endowment funds are more common among universities. However only the top universities around the world are able to attract and amass substantial endowment funds. Globally, Harvard University in the USA has the largest endowment among universities.
For the fiscal year ended 2021, Harvard university reported an endowment size of USD$53.2B. The majority of the endowment funds are restricted with only less than 20% of total endowment funds being unrestricted, the endowment investment returns are mainly used to support expenses in specific programs, departments, purposes (e.g. scholarships) or by the conditions set by the donors while the remaining endowment returns can be used to support operating expenses such as structural or strategic initiatives.
Investment returns for the endowment for 2021 was reported at USD$12.8B which covers an estimated 257.7% of the university’s total operating expenditure for the fiscal year.
References
Harvard (2021). Harvard’s Endowment. Retrieved March 10, 2021 from link_here
Harvard (2021). FY21 Harvard Financial Report. Retrieved March 10, 2021 from link_here
Virginia L. Ma & Kevin A. Simauchi (2021). Harvard Ended Fiscal Year 2021 with $283 Million Surplus, Despite Losing $124 Million in Revenue. The Harvard Crimson. Retrieved March 10, 2022, from link_here
Michael T. Nietzel (2021). Elite University Endowments Soar as Higher Ed Divide Grows. Forbes. Retrieved March 10 2022, from link_here
NUS (2021). NUS Financial Report 2021. Issuu. Retrieved February 21, 2022, from link_here
NUS (2021). National University of Singapore. Charity Portal. Retrieved February 21, 2022, from link_here
NTU (2021). NTU Annual Report 2021. Retrieved February 21, 2022, from link_here
NTU (2021). Nanyang Technological University Financial Information 2021. Charity Portal. Retrieved February 21, 2022, from link_here
SMU (2021). SMU Annual Report 2020-21. Retrieved February 21, 2022, from link_here
SMU (2021). Singapore Management University. Charity Portal. Retrieved February 21, 2022, from link_here
SUTD (2021). Singapore University of Technology and Design Annual Report 2020. Retrieved February 21, 2022, from link_here
SUTD (2021). Singapore University of Technology and Design. Charity Portal. Retrieved February 21, 2022, from link_here
SIT (2021). SIT Annual Report 2021. Retrieved February 21, 2022, from link_here
SIT (2021). Singapore Institute of Technology. Charity Portal. Retrieved February 21, 2022, from link_here
SUSS (2020). SUSS Annual Report 2020. Retrieved February 21, 2022, from link_here
SUSS (2021). Singapore University of Social Sciences. Charity Portal. Retrieved February 21, 2022, from link_here