Ultimately, however, that money is useless until it is spent. To the student or researcher at Harvard, the fact that the University controls a $19.2 billion endowment is insignificant—it is the yearly income provided by that endowment that makes the day-to-day difference.

The yearly income is what enables FAS to hire new faculty, the Medical School to build new laboratories and the Law School Library to buy new books.

The endowment income plays a different role in the budget of each school—at the Divinity School it accounted for 56 percent of the 2000 budget. But across the river at the School of Public Health, the endowment provided a mere 13 percent.

No Strings Attached?

Restrictions placed by donors on their gifts significantly limit the flexibility enjoyed by the various schools in spending endowment income.

“We are legally obligated to meet donors’ requirements,” says Elizabeth C. “Beppie” Huidekoper, the University’s vice president for finance.

Three quarters of Harvard’s assets are subject to such restrictions, which some administrators say are a hindrance to setting their own financial priorities.

“We’d love it for donors to say their gifts are simply for the benefit of FAS,” says David L. Murphy, assistant dean for finance in FAS. In fact, few donors are willing to give such broad instructions.

Huidekoper says that recently donors have been asked to include stipulations in their gifts allowing Harvard to use their money for other purposes if the administration deems the original no longer relevant. But for alumni who are committed to specific causes, this can prove a tough sell.

Restricted funds can thus be difficult to spend if their stated purpose does not match the University’s needs. While some University programs are devoid of funding, these unspent funds sit idle, lining the University’s coffers.

In recent years, the University has run significant budget surpluses—$120 million in fiscal 2000—that in large part are produced by the inability to use these funds for their prescribed purposes.

At the same time, administrators recognize that these restricted funds have their purpose, creating an incentive for the University to initiate programs it might not otherwise consider.