The sluggish national economy took its toll on Harvard last year, causing the endowment to shrink by approximately $50 million, according to the University's annual financial report.

Harvard's endowment--the largest of any American university--has not suffered a similar set back since fiscal year 1983-4.

The report, which will be released today, also states University expenses continued to exceed revenues during the past fiscal year, resulting in a deficit of nearly $42 million.

Vice President for Finance Robert H. Scott attributed the decrease in the endowment, which dipped to $4.71 billion from $4.76 billion, to writedowns in the value of Harvard's investments in oil and gas, real estate and venture capital.

Sources have said that the writedowns in private placement investments amounted to approximately $200 million.

Despite the endowment's poor performance last year, the report stated that it has rebounded in recent months, growing to $5.2 billion as of December 30, 1991.

Harvard's report described fiscal year 1990-91 as a "challenging" period for the University during which faculty salaries, financial aid, health care, facilities maintenance and research support costs continued to rise.

The weak national economy also resulted in a decline in the amount of gifts received by Harvard and increased pressure on the University to temper tuition hikes, the report said.

In addition to the University's financial challenges, Scott and University Treasurer D. Ronald Daniel said the year was marked by intense public scrutiny and pressure on American universities to contain costs.

"These difficult conditions can be expected to continue. Consequently, Harvard must plan its financial strategy carefully, manage its resources prudently, and make difficult choices," they wrote.

"Harvard is not in long term financial equilibrium," the report stated.

This Year's financial statement was prepared in a new format, and includes astatement summarizing the University 's operatingcash flow and expanded explanations of selectedtopics.

In addition, Harvard adopted a new policy ofincluding building and facilities depreciation asan operating expense on the University's balancesheet. Harvard accounted for $76.5 million in thebudget for facilities upkeep and replacement.

The University's total income grew 5.5 percentas total expenses in creased by 5.7 percent duringthe past year, the report said.

Financial aid cots grew by more than 11 percentand salaries and wages rose eight percent duringthe year. Employee benefits costs jumped 15.9percent, according to the report.

At the same time, donations to the Universityfell by 3.7 percent and in come from tuition andfees increased at a steady rate.

The Crimson reported earlier this semester thatseveral alumni donors have expressed concern aboutHarvard's endowment management.

In particular, alumni have complained about thegrowing share of the endowment that Universityofficials invest in high-risk, high-yield privateventures such as real estate, oil and gas, capitalventure and leveraged buyouts.

The strategy reaped substantial profit duringthe 1980s, but back-fired this year when privateplacements reported a 13 percent loss