Universities' billion-dollar reserves spark questions on how much in donations is enough

27 Jul 2019

Straits Times, 27 Jul 2019, Universities' billion-dollar reserves spark questions on how much in donations is enough
SINGAPORE - Universities here have billion dollar reserves, which generate millions in investment income a year, as they continue to top the class when it comes to raising funds.
Singapore's most successful fund-raiser, the National University of Singapore (NUS), collected $227 million in donations in its financial year that ended in March last year.
It had reserves of $9.5 billion and an investment income of $620 million for the year.
The Nanyang Technological University (NTU) had $3.7 billion in reserves and an investment income of $149 million in the same financial year. It raised $50 million in donations.
The Singapore University of Technology and Design (SUTD) had $27 million in donations, $1.2 billion in reserves and an investment income of $66 million for the same period.
The universities' reserves was in the spotlight after The Sunday Times (ST) published a story about the top 10 wealthiest charities by donations and their business subsidiaries last week. (July 21).

The NUS, NTU and SUTD made it to the top 10 in the list compiled by The Sunday Times. The others on the list included mega churches like New Creation Church, City Harvest Church and the Kwan Im Thong Hood Cho temple.
A reader of The Straits Times, social worker Gwee Chen Teck, 45, has written to the newspaper's Forum page asking why the universities were considered as charities given the nature of their work. He also wanted to know how their significant reserves were managed.
He told The Sunday Times: "Given that the universities have significant amount of reserves, why are they encouraging donors to give to them? The charity donation pie is only so big, if they get a significant amount of donations, it means other charities are left with less. So then how much donations or reserves is enough?"
When asked for its response, the NUS spokesman said it uses the investment income from its endowment and reserves to finance a variety of operational costs, including scholarships, support for research and to promote entrepreneurship.
She added: "To enhance the long-term financial sustainability of NUS, we have to continue to raise funds to maintain the health of our endowment and reserves."
Meanwhile, the NTU spokesman said it was essential to raise funds to reduce its reliance on public funding. He added that "multiple sources of funding are necessary for it to deliver quality education and research and build a culture of innovation and community engagement that translate into jobs and real benefits for society".
In its 2018 financial year, close to 830 NTU students from low-income backgrounds were given bursaries and scholarships funded by donors.
There is no easy answer to the age-old question of "how much is enough," say those in the charity field and finance experts.
Singapore Institute of Technology (SIT) accounting professor Ho Yew Kee noted that the "maxim of money is not enough" and the drive to build up strong reserves cuts deep into the Singapore psyche.
The Government also encourages universities to raise funds by providing matching grants for donations collected, he pointed out.
The Government gives universities like NUS and NTU a matching grant of $1.50 for every dollar raised. For newer varsities like SUTD and SIT, the matching grant is three to one to help them "start their endowment fund", said Senior Parliamentary Secretary for Education Muhammad Faishal Ibrahim in response to a question in Parliament by Nominated Member of Parliament Walter Theseira in January (2019).
The Education Ministry told The Sunday Times that the universities make their own decisions on fund-raising and investments, adding that their endowments play an important role in supplementing government funding for the universities' programmes and financial aid for needy students.
However, the reality is that smaller charities are up against the universities with their very well-staffed and trained fundraising departments, said Mr Willie Cheng, a board member in various charities.
The Sunday Times understands that the NUS Development Office, which is in charge of fund-raising, has at least 50 staff. The NUS did not say how many fund-raisers it has.
Mr Chew Kheng Chuan, an independent consultant in philanthropy who formerly led fund-raising efforts in both NUS and NTU, said: "Donations is not a zero sum game. It doesn't mean that if I don't give to one charity, I would give the sum to another."
Mr Chew pointed out that the amounts donated here have been on the rise. A check with the Commissioner of Charities annual reports found that some $2.3 billion were donated to charities in 2012, and this amount rose to $2.7 billion in 2017, which is the latest data available.
Fund-raising aside, those interviewed said the more important focus is on how the funds and reserves are managed and used.
While the three universities did very well in the past two years, making very substantial sums from their investments , the financial year that ended in March 2016 was one when all three lost millions.
The NUS lost $30 million, the NTU $98 million and SUTD $35 million.
A SUTD spokesman said: "The global stock markets performed poorly during that period. Consequently, our investment valuations were marked to market lower, as per financial reporting standard, reflecting an accounting loss."
The SUTD adopts a long-term investment approach and its reserves are managed by both professional fund managers and an in-house investment team, with close oversight by its Board of Trustees.
Its spokesman added that its funds are invested prudently in order to preserve capital and obtain reasonable returns to allow the SUTD to achieve its mission to advance knowledge and research.
The NTU said its investment portfolio includes fixed income instruments, private equity funds, hedge funds and limited partnerships.
The NUS has its own in-house teams to manage its investment portfolio and it invests its endowment and reserves in a diversified portfolio of assets and market instruments to generate long-term positive investment returns.
It said its net investment loss of $30m in the financial year that ended in March 2016 was mainly due to changes in the valuation of its equity exposure, as most equity markets did not perform well that year. The net investment loss was absorbed by past accumulated surpluses.
Financial consultant Richard Hartung said that one year of losses is not a concern. The important thing is to look at longer term returns and compare it against leading-edge benchmarks.
Associate Professor Theseira, an economist from the Singapore University of Social Sciences, noted that universities globally are building up their endowments.
The Harvard University's endowment, the world's largest, grew 10 per cent, to US$39.2 billion (S$53.6 billion) in the financial year which ended in June last year.
It was followed by Yale University, whose endowment grew 12.3 per cent in the most recent fiscal year to US$29.4 billion.
Referring to the larger endowments, Prof Theseira said: "They can spend more on all areas, from teaching to research, and are not limited by tuition income or Government grants. That's why top universities tend to be rich universities."
But he is concerned if the difference in the size of the endowments would translate to substantial differences when it comes to opportunities for students and staff in different universities.
"This could have the effect of widening inequality between universities," he said. "In the United States, it is well known that the quality of your educational experience will differ between universities and part of the reason is that some universities can spend more per student due to their investment income."