The University's financial report for the 2003-2004 fiscal year revealed that Duke is financially healthy, thanks to strong investments and the concluding efforts of the Campaign for Duke in late 2003.
The University’s financial report for the 2003-2004 fiscal year revealed that Duke is financially healthy, thanks to strong investments and the concluding efforts of the Campaign for Duke in late 2003. The University’s net assets as of June 30 were valued at nearly $5.1 billion—more than $600 million more than the Duke possessed at the beginning of the fiscal year.
“I think the University is in a strong position financially right now,” Executive Vice President Tallman Trask said.
Duke accrued almost $1.38 billion in revenues and support during the fiscal year. The University’s operating expenses were $1.36 billion, leading to a budget surplus of $14.5 million.
The largest single expense was the University’s salaries and wages, which cost Duke just more than $682 million. Other significant operating costs included $142 million the University spent on employee benefits, as well as $111 million on depreciation and amortization.
The University’s investments earned a return of 18.8 percent this year, Trask said, marking the highest rate of return since 2000. The average rate of increase during the last 10 years has been approximately 15 percent. Duke’s performance in 2001 and 2002, however, yielded negative returns due in large part to a declining market.
Trask attributed the resurgent investments to stronger markets and new strategies undertaken by the Duke Management Company, which invests the University’s endowment and other funds.
“[DUMAC] has shifted its assets from classes that were doing well several years ago into classes of assets that are doing well right now,” Trask said.
The Campaign for Duke and other fundraising efforts contributed to the University’s financial status. Just more than $89 million came from contributions to Duke, predominantly in the last months of the $2.36 billion Campaign—the fifth-most successful in the history of American higher education.
The University also received many grants that contributed substantially to its budget surplus. The federal government granted Duke $412.7 million, which represented an 11.2 percent increase over the previous fiscal year and the University’s single largest source of revenue. Total grant revenue increased nearly 9 percent, to $6.46 million.
“Contributions from our friends and alumni through the final weeks of the Campaign, increases in research grants and contracts and prudent financial management of the University’s investments all helped the University reach a record level of net assets,” Trask wrote in the letter that opens the financial report. In his statement, Trask calls the University’s financial foundation “strong and growing.”
Like Trask, Joseph Schwartz, the University’s director of financial accounting and Generally Accepted Accounting Principles reporting, credits these three sources with the University’s ability to remain financially stable in spite of volatile markets.
“It’s those three things together that are the reason you see a surplus on the balance sheet,” Schwartz said.
The University kept its Aa1 Moody’s bond rating, the second-highest rating available from the international investment service. Bond ratings are determined by the projected ability of the party issuing the bond to pay it back, and these ratings govern bond prices.
Trask said Duke has no plans to seek a rating of Aaa, the premium rating offered.
“We are a strong Aa-plus, and we wouldn’t be the strongest Aaa,” Trask said. “And the worst outcome would be if we achieved the Aaa rating and lost it.”
Trask said the University’s financial situation is where he had hoped it would be. “I wish every year was like that one,” he said.
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