In a move that clarified why administrators have tamed fiscal messages of late after months of stressing the Faculty of Arts and Sciences’ impending financial deficit, FAS Dean Michael D. Smith delivered the news Friday that the school had posted a $58.6 million surplus in its unrestricted funds for the fiscal year that ended June 2009.

The figure, released Friday in Smith’s Dean’s Annual Report, was balanced by a consistent emphasis that most of the gains were “the result of one-time events,” and that, as expected, much still has to be done to close a remaining $110 million deficit.

Still, Smith noted that FAS received about $33 million in unrestricted gifts from two anonymous donors this past year, while also making a one-time withdrawal of $20 million in cash from its endowment to help offset the increased costs of the middle-income financial aid initiative.

Both funding sources represent isolated influxes into the annual budget, and will not be reported in subsequent years, meaning that the long-term deficit that Smith has emphasized in a series of faculty meetings and community gatherings remains a concern.

But Smith wrote in the report Friday that the “positive results from [Fiscal Year] 09 allow us more time to implement...strategies so that we can bring our finances back into balance.”

In the meantime, it appeared from the report that Smith’s calls for cost-cutting measures last spring, when deficit estimates ran as high as $220 million over a two-year period, had paid some dividends.

In addition to the one-time injections of cash in the last fiscal year, FAS achieved a small unrestricted surplus from various savings measures—allowing FAS to grow its reserves by $58.6 million.

These savings included reductions in unrestricted sums, known as subventions, distributed to major FAS units, as well as lower costs associated with faculty recruitment and relocation, which appeared to follow from a Smith letter last December that announced a sudden, severe slowdown in searches for new faculty.

The additional savings also included reductions in utility rates and consumption in buildings that were aided when reduced hiring led to lower occupancy rates in the Laboratory for Integrated Science and Engineering and the Northwest Science Building.

FAS also pocketed about $12 million in additional revenues from various funding sources such as Extension School tuition—more than budgeted for the last fiscal year.

At an open forum in September, Smith first informed faculty and staff that progress had been made on a financial situation that led him to declare “all is not rosy” in correspondence to the Faculty last October. Speaking before an audience in the Science Center, Smith mentioned the anonymous gifts and told forum attendees that, thanks to a combination of windfalls and budget trimming, the current fiscal year had seen its deficit already slashed by over $100 million from projections. Today’s report brought more details.

In the report, Smith wrote that the administration should avoid spending all of the surplus accrued over the last fiscal year, stressing the importance of aggressive fundraising, especially for unrestricted current-use funds. He also repeated what has become a continuing note of caution—adding that FAS should be careful to hire faculty and staff only with the assurance of long-term funding.

FAS must whittle down its expenses after the endowment lost $11 billion—30 percent of its value—this past year. The Harvard Corporation slashed its endowment distribution to FAS by 8 percent for the fiscal year ending July 2010, and is planning to cut another 12 percent the year after, University President Drew G. Faust said at an October Faculty meeting.

“I am reminded daily of how enviable our intellectual resources are. These resources demand an intensified commitment to...a better understanding of our academic identity,” Smith wrote in the report. “Like a bridle for Pegasus, the result of such commitment will help us harness our financial and administrative resources to better serve our academic mission.”

The Dean’s Annual Report completes FAS’ official financial records from Feb. 2008—the endpoint of the last report—through June 2009. Instead of releasing the Annual Report nine months or more after the end of a fiscal year, Smith said he will now publish the report every October to detail the most recently closed fiscal year.

—Staff writer Bonnie J. Kavoussi can be reached at kavoussi@fas.harvard.edu.

—Staff writer Esther I. Yi can be reached at estheryi@fas.harvard.edu.