By: Sydney Umstead, News Editor
The Griffin has recently reported about the financial and labor issues on campus and one topic that keeps coming up is the endowment. This begs the question: what is a university endowment and how does it work?
An endowment is defined as “funds or assets donated to universities (or other institutions) to provide ongoing financial support,” according to Investopedia. To break this down, an endowment is a donation made to an institution that aims to provide institutional aid.
Canisius’s 990 tax form from 2023, under Part V Schedule D, states the end-of-year balance for the endowment funds was $142,787,397.
This money is then invested back into the university, and depending on the market, it either generates or loses money. For example, in Canisius’ 990 tax form from 2023, the university had an investment income of $662,831, which was 0.7% of the total revenue. Whereas in 2022, there was an investment of income of $265,134, according to the 990 form. However, in Part V of Schedule D, the net investments had a negative number of $2,228,220.
Dr. Gregory Wood, professor of marketing and information systems, stated, “Since the stock market has done extremely well in 2024, the total value of the endowment has probably gone up since the 2023 990 form was filed.”
The intention, however, is to secure “long-term gains,” according to Wood. This can be obtained through things like stocks or bonds. Typically, as Investopedia reports, “many private colleges and universities have substantial endowments, most public universities have very small endowments or none at all.” For public institutions, the money is granted by state funding.
Despite Canisius’s endowment, the current deficit is estimated to be $4.6 million, according to the 2023 990 form.
There are two types of endowments: restricted and unrestricted. The issue of paying off debt by using an endowment comes into question through those two areas, as some of the money is restricted which means that it was “money we received, but came with restrictions,” Wood told us. This in turn would also “throw off less income from investments,” he said. Essentially, someone “couldn’t buy groceries from an investment fund.” And, if they did, it would not be a sustainable practice.
The 990 form under Part V of Schedule D has three types of endowments which are “board designated or quasi-endowment,” “permanent endowment,” and “term endowment.” Wood asked CoPilot, a Microsoft AI software to explain these terms and found that a permanent endowment is one where “the principal amount is kept intact in perpetuity, and only the income generated from investments is used for the organization's purposes. The principal is not spent, ensuring long-term financial stability.” A quasi-endowment is “established by the organization's board rather than by a donor. The board can decide to use both the principal and income at its discretion, providing more flexibility.” Lastly, the term endowment is one that has “a specific time frame or event after which the principal can be spent. Until that time, the principal remains invested, and only the income is used.”
For the quasi-endowment, the 990 seems to suggest that 10.070% of this endowment can be used at the discretion of higher administration.
Wood noted how someone looking at the 990 may see a high number under faculty compensation and therefore feel that it is where cuts need to be made; however, cuts in programs “central to the mission and brand drives,” as Wood puts it, then decrease enrollment because those programs won’t exist to bring students in. In reference to the 2020 budget cuts, Wood acknowledged why the administration may be making some of these decisions; however, he also discussed how if some of these programs had not been cut, there would be “80 students we’d still have,” Wood said.
For example, net fundraising is “the net revenues from all events, projects, or initiatives, which are intended, in whole or in part, to generate revenues,” according to Law Insider. In 2022, net fundraising brought in a negative amount of $34,999. In 2023, however, net fundraising saw a profit of $30,340.
If anyone has more information about the agency accounts or information they would like to share, please contact The Griffin at thegrffn@my.canisius.edu.
Comments