A recent survey by the National Association of College and University Business Officers shows that the value of college endowments grew 20.4 percent in fiscal year 1997 (ending June 30, 1997), up from 17.2 percent in the previous year. Figures collected by the Association of Theological Schools this year (see table at the end of this article) don't permit a comparison of the experience of theological schools, but do paint in broad strokes the nest eggs many schools have been able to acquire. The key numbers were made available by ATS to In Trust at our request in advance of the publication of this year's Fact Book on Theological Education. They are drawn from Line 9 of each school's Statement of Financial Position: "Investments Held for Long-Term Purposes." The figures reveal a range of rates of return, some as low as -69 percent (Associated Mennonite Biblical Seminary in Elkhart, Indiana) and one as high as 428 percent (St. Meinrad School of Theology in St. Meinrad, Indiana). Dina Malone, information systems manager at ATS, pointed out that the figures are not consistent, however, as schools sometimes change their method of reporting from one year to the next.

In Trust called five schools that reported notably large percentages of increase in their long-term investments between 1996 and 1997 and three schools where the change was significantly lower than most. The schools were chosen randomly, but they cannot be construed as "representative"--the experience of each is that school's own story.

Any figure 'as of' a certain date is like a snapshot: it carries no 'before' and 'after' and no explanations.

There are two generally applicable points to be made about these figures. First, all investment numbers increased between 1996 and 1997 because the reporting method changed. In 1996, investments were reported according to their "book value" (their value when acquired); in 1997 new accounting standards required they be entered at "fair market value," which includes unrealized capital gains (or losses) and is a much higher number for everyone, given the performance of the financial markets in recent years. Second, 1997 was a banner year for stocks, and the endowments responded according.

In eras when the capital value of investments changed little if at all, prudent investors were taught to spend only dividends and interest and "never invade principal." Now virtually all institutions with endowments regard capital increases as part of their income, and protect their endowments by limiting their draw to a fixed percentage of market value. For example, the board of St. Vladimir's Orthodox Theological Seminary, Crestwood, New York, limits the coming year's draw on long-term investment to 7 percent of the value as of March 1 of the current year, according to David Drillock, the school's provost. Drillock added, though, that the school has in fact drawn only 4.9 percent in each of the last two years, well below the board-imposed maximum. Yale University Divinity School, according to Judy Stebbins, director of administration and finance, spends up to 5 percent of an average based on a ten-year formula. The ten-year period means this number is slow to vary, so administrators always have a general idea of what will be available to them. Other schools use an average rate of return from the preceding three years to determine the next year's spending.

Lowered Figures
One lower rate of return on the ATS chart belongs to the Interdenominational Theological Center in Atlanta, Georgia. Elizabeth Littlejohn, vice president of financial services, pointed out that the section of the ATS form from which the figures come gives the amount invested at the beginning and end of the fiscal year. She explained that the school, along with several other historically black colleges, felt the endowment invested in the Patterson Plan was not doing what it should. Near the end of the fiscal year, ITC cashed out its investment of $900,000 held by that group. The funds had not yet been reinvested at the end of the fiscal year, so they were not included in the long-term investment figure and, as a consequence, ITC's "return" appears to be significantly lower than it really was.

According to the chart, Yale University Divinity School, New Haven, Connecticut, also experienced a dip in its rate of investment growth, which is listed at 5.2 percent. Stebbins said the apparent small growth in investments resulted from the inclusion of Berkeley Divinity School investments in the figure at the beginning of 1997 and their exclusion at its end. Despite the effective merger of the two schools, Berkeley's endowment has always been controlled by its own trustees, not by Yale, so the new method of reporting seemed more appropriate. Yale's actual beginning-of-the-year figure for 1997 was $71,695,745, making its growth rate 16.9 percent.

Dallas Theological Seminary in Dallas, Texas, is another school that, according to the ATS chart, posted lower long-term investment figures at the end of 1997--for a rate of reduction of -32.4 percent. John Reeves, director of accounting, explained that the figures for fiscal 1995-96 included funds of the Dallas Seminary Foundation. In 1997 the reporting method was changed and the figures given for the seminary did not include those of the foundation at the end of the year.

These stories are reminders that any figure "as of" a certain date is like a snapshot: it carries no "before" and "after" and no explanations. This is equally true when a school's endowment appears to increase at a high rate.

High Rates of Return
Asbury Theological Seminary's vice president for finance, Duane Kilty, attributes much of its apparent 40.1 percent increase in endowment value to the new accounting standard. He also noted that the Wilmore, Kentucky, school actually had investments of $107,127,614 at the end of 1997, with the difference between that and the ATS figure of $124,077,819 attributable to other endowment assets. The school's actual endowment performance was 24.26 percent, he said, historically its best year. Asbury was included, and ranked sixty-second, in the NACUBO survey of 495 colleges and universities.

Some high rates of increase are due to capital campaigns or special gifts. The Reverend William Morrell, president of Oblate School of Theology in San Antonio, Texas, confirmed the school's endowment figures, noting that it had received a $1 million gift in 1997. St. Vladimir's also is in the midst of a capital campaign. The school aimed to raise $20 million and has gone over that sum. It received $1.3 million in 1997. Work on the campaign actually began earlier, Drillock said, with the school spending five years on "silent lining up." "The last two years have been very good to us overall," he added. Construction on a new library will begin this summer.

Samuel Delcamp, executive director of the Fuller Foundation, which handles investments for Fuller Theological Seminary, said Fuller's figures include both increase in value and significant new gifts; after separating out the roughly $8 million in new gifts received, the true rate of return was 35 percent, itself impressive. The foundation is an affiliated 501(c)(3) organization with its own board, he explained, some of whose members also serve on the seminary's board. To add to the mix, the foundation has a wholly owned subsidiary, Mission Trust Company, N.A., a national bank with limited fiduciary services. (For more about such trust companies, see In Trust's New Year 1998 article in "Changing Scenes" about the new bank formed by the Presbyterian Church.)

A Popular Appeal
The Regis College increase of 90.8 percent is among the more spectacular on the chart, and the Toronto Jesuit school's comptroller Michael Moran has an unusual explanation. In recent years Canada's federal government began cutting back on financial support of higher education institutions, and the Ontario provincial government soon followed suit. Ontario said, however, that it would "give the schools a break" by matching, on a dollar-for-dollar basis, funds (including pledges) raised for the Ontario Student Opportunity Trust Fund over a three-year period. That period runs from 1996 through 1998, so the results would only begin to show in 1997. With the provincial match as an incentive, Regis made a series of special appeals, and the outpouring of support is reflected in the ATS figures.

The results of our conversations reveal that (1) figures do indeed have something to tell us about an institution, but (2) although they appear clear and unambiguous, the story behind them may be unexpected. Institutional stories gave us a range of possibilities and a new maxim: An increased or decreased rate of return may have a number of causes--and it may be unwise to compare them, make assumptions, or take them at face value.

To view the ATS chart, click here.

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