/sIn a previous post titled "Why can't a college be more like a for-profit firm?" I had mentioned a study of American universities that pointed out that colleges are donative-commercial non-profits, in the sense that part of their money comes from sales revenues - tuition and other fees, and the rest from charitable contributions, endowment income, gifts and government grants. I thought I'd dig a bit deeper to find out more about the expenditure heads and sources of revenue for some of the top universities in America. I picked two state universities (University of Michigan and UCLA) and two private universities (Cornell and Harvard) to be representative of the two types of universities. I've summarised what I found at the end of this post.
(Aside: I've been trying to locate annual reports of the various IITs, BHU, the Central Universities, BITS Pilani, the Manipal Education Group etc. to find out about the expenditure and income heads of Indian institutions, but haven't found anything online. If anyone has a copy of the annual reports of these or other such institutions, or knows where to find them, please do let me know.)
According to the Cornell University 2005-06 Financial Plan
(following data is from p5 of the Financial Plan)
Cornell University had an endowment of $3.3 billion at the end of the financial year 2003-04 (p67 of the Financial Plan)
According to the University of Michigan Annual Report 2004
Total Revenue: $3.952 Billion (p10 of the Annual report)
Total Expenses: $3.907 Billion (p41 of the Annual report)
The University of Michigan had an endowment of $4.3 billion as on June 30, 2004 (p43 of the Annual Report).
According to the Harvard University fiscal year 2003-04 financial report
(following data is from p11 of the financial report)
Total Revenue in 2004: $2.598 Billion (p12 of the Annual report)
Total Expenses in 2004: $2.561 Billion (p12 of the Annual report)
Harvard University had an endowment of a whopping $22.6 billion as on June 30, 2004 (p44 of the report).
(following data are from p14 of the report)
Sales and services revenue represent revenue from medical centers (offering services to patients), educational activities (primarily physicians' professional fees) and auxiliary enterprises (offering accommodation for a fee) , net of scholarship allowance. (p17 of the Annual Financial Report)
UCLA had net assets worth $3.6 billion as on June 30, 2004 (p30 of the Annual Financial Report)
To make a comparison, I've tabulated the various income and expenditure heads (in percentage terms) for each of the universities, based on data in their annual reports. I've also listed the total revenues, the total expenditure and the size of the endowment (all in billions of dollars) to provide perspective.
- Tuitions yield as little as 8-15% of the total revenues in the state universities and about 20-25% in the private universities. The rest comes from commercial income generated by providing various services as well as from donations and grants from government and non-government sources.
- Harvard has a huge endowment of $22.6 billion which yields 36% of its annual revenues. Other universities with much smaller endowments get only about 10% of their revenues from their endowments.
- For the state universities, a substantial part of their revenues (40-45%) comes from the medical services they provide by leveraging their medical college facilities and faculty. The share is far smaller in the region of 5% for the private uninversities
- State universities get about 25-40% from state, federal and non-government sources, whereas the private universities get only about 7% or so.
- Harvard and Cornell by virtue of being among the top research universities get about 20% of their revenues to support sponsored research.
- All universities aggressively try to raise funds from alumni, well-wishers and other donors every year and this yields about 2-4% of revenues in the case of the state universities and 6-7% for the private universities. The universities seem to be on perpetual fund-raising drives with a special push every few years to raise more than the average.
- Salaries and compensation to staff amount to 60-70% of the costs
- Since the state universities keep their tuitions low (resulting in lower tutition revenues), they tend to spend less (about 2% of expenses) on financial aid. But the private universities spend over 5% of their total expenses on offering financial aid. Harvard is able to spend as much as 10% of its expenses on offering far more financial aid to students than many other universities due to its huge endowment.