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Harvard ends its fiscal year with operating surplus of $196m

Harvard University’s campus.Charles Krupa/Associated Press/File 2017

Facing pressures from a shifting higher education industry, Harvard University still ended the 2018 fiscal year with a $196 million operating surplus, $82 million more than last year, according to its annual financial report.

“The University’s financial performance in 2018 was solid,” wrote Thomas J. Hollister, Harvard’s vice president for finance, and Paul J. Finnegan, the university’s treasurer, in Thursday’s report.

Generating a surplus, the duo wrote, is helpful because it “will add a small cushion to reserves in preparation for an inevitable economic downturn, particularly in light of the current extended economic expansion.”

The school’s revenue rose to $5.2 billion, based on 4 percent growth, and the school posted endowment returns of 10 percent, according to the report.


The university’s net assets, which Hollister and Finnegan called “the most fundamental measure of resources,” increased to $47 billion from $44 billion.

That increase was “primarily driven by endowment returns and gifts, which enable the University to continue to advance in teaching and research,” according to the report.

The financial results “were achieved through considerable care in managing resources throughout the University as evidenced by an increase in operating expenses of less than 3 percent during the year.”

Revenues in higher education are under pressure, according to the two Harvard officials, “as the number of students has plateaued, tuition costs have reached limits of affordability, federal research support is uncertain, and expectations for returns in the investment markets are muted.”

During the past year, the credit rating agencies Moody’s and Standard & Poors have both issued a “negative outlook” for American higher education, according to the Harvard report.

“Harvard is well positioned to manage through this period due to a healthy balance sheet, modest recent operating surpluses, established financial discipline, and Harvard’s primary strength — faculty and staff — who create one of the world’s most exciting learning and research environments,” the report said.


Harvard’s endowment — the largest academic fund in the world — has posted its highest returns in four years, with assets climbing to $39.2 billion from $37.1 billion.

In a statement, N.P. “Narv” Narvekar, chief executive of Harvard Management Co., said of the endowment:

“While we are not pleased with this performance, we are mindful that ours is an organization and a portfolio in transition.”

The company, a subsidiary of the university, provides “investment management” of the endowment and “related financial assets,” according to its website.

“I often hear the opinion that HMC’s endowment is too large to generate attractive returns, but as peer endowments with similar assets under management have shown, the size of the endowment is no excuse for muted returns,” Narvekar said.

Danny McDonald can be reached at Follow him on Twitter @Danny__McDonald.