What Is a University Endowment?

The university donation fund refers to the donations that universities receive from various parties in the society, including legal entities, natural persons, etc., which are public welfare donations. The characteristics of this kind of donation are: non-remunerative, non-transactional, non-administrative, independent decision-making, social benefit, and social purpose.

University Endowment Fund

The University Endowment Fund is a non-profit social organization initiated by donors and set up in universities to use donated funds or investment income for university education, thereby playing a role in teaching and aiding students. Donors include factories and mining enterprises, institutions, social groups and individuals, as well as compatriots from Hong Kong, Macao and Taiwan, overseas Chinese, and foreign groups. The donated funds can be currencies such as RMB, foreign exchange, marketable securities, premises or other physical objects, or intangible assets such as patents, trademarks, and copyrights.

The classification methods and types of university endowment funds are different. It can usually be classified according to its usage and management mode. According to its donation and use methods, it can be divided into three types: final type, sustainable type and growth type.

These three types of funds have specific meanings and characteristics:

(1) Concluding funds are set up by a single donation by a donor or a fixed amount within a certain period of time. The foundation runs out of the donation fund within a certain period of time and the fund terminates, which is very similar to a general closed-end fund.

(2) A perpetual fund is established by a single donation from a donor. The fund only uses the investment income of the fund, and the donated funds are permanently retained.

(3) The growth fund is initiated by the donor to establish a foundation. Donors continue to contribute to the fund. The foundation uses the investment income to reinvest, and the total amount of the fund continues to grow.

These types of endowment funds have their own characteristics. In summary, they can be summarized as follows: termination funds mainly use donated funds, no investment income or less investment income, and shorter fund duration. Although investment management is simple, Lack of stamina, unable to provide continuous financial support for the development of various science and education undertakings. Persistent funds use investment income. The funds can exist for a long time, which is suitable for setting up a university donation fund named after the donor. Growth funds mainly use investment income, can use a small amount of new donation funds, can maintain a reasonable and stable growth rate of the base amount and the growth rate of fund use, and are suitable for setting up large-scale comprehensive university donation funds.

According to the management model of endowment funds, it can be divided into five types:

1) Market operation type. (2) Administrative management. (3) Committee type. (4) Overseas expansion. (5) Industry dependence.

University endowment funds have a long history of development abroad.

In 387 BC, the great Greek philosopher Plato founded a famous college in Athens. He named the academy after the Greek legend Academus. This is the origin of the word Academy. Plato made a will before his death saying that he would use the proceeds from his estate to fund the college after his death. This is the first ever donation to education for human beings. It is also the first bequest and the first donation fund in history.

The foundation's organization originated in Britain in the 16th century, but it was the United States that really pushed the development of education foundations to the peak. Donations to higher education in the United States have a long history. When the university was founded, the resources needed by the school were mainly obtained through voluntary donations from church pastors or private individuals. In 1831, Stephen Gillard, a Philadelphia businessman and banker, made the most famous and legally influential donation of the early nineteenth century in the United States, donating a huge legacy of $ 7 million to the city for poor white orphans Build a school. He made detailed rules for the school: prohibiting pastors of various denominations from entering the school in order to enable faculty and staff to take better care of orphans, to avoid excitement easily caused by conflicts between doctrines and disputes between denominations, etc. Stephen Gillard's sideline heirs challenge the will: They believe that Philadelphia is not legally entitled to accept the bequest, that the terms of the commission are too vague to enforce, and that prohibiting clergy from entering the school violates his charity Purpose and common law and much more. However, in 1844, the Supreme Court unanimously supported Gillard's will and held that Philadelphia, as a legal entity, had the right to inherit and manage legal property. This was the institution for future donors to donate property to charitable organizations and university education, and accept donations Or organize the execution of the donor's will to lay the foundation.

In the second half of the 19th century, the rapid development of the American economy. The George Pipa Education Fund (1867), founded during this period, has donated US $ 2 million to promote education in the southern states of the United States. Especially in the 20th century, there was a fever of funds in the United States, and many foundations donated by big wealth and monopoly organizations. The most famous is the Carnegie Foundation, founded in 1911. Its power to sponsor higher education sometimes exceeds that of the government. For example, the total amount of higher education donated by the Carnegie Foundation in 1913 was $ 5.6 million, and the federal government s total investment in higher education that year Only $ 5 million. The industrialist Rockefeller also donated $ 600,000 to establish the University of Chicago. Others, such as the Sloan Foundation, also donated $ 64 million to MIT.

It is worth mentioning that the establishment of Yale University also originated from endowment funds. The initial preparations for Yale University were completed in the early 18th century by 10 priests gathered in Seebrook. They took some of the books from a library with few books and gave them to the school. At the same time, they developed a relatively complete curriculum plan, and Yale University was born. By 1718, thanks to the British businessman Elihue Yale for his generous donation to the school, it was decided to use his name as the school's name, called "Yale College." In 1732, Bishop Berkeley donated his farm in Rhode Island to Yale University as a learning base for graduate students. Industrialist Joseph Earl Sheffield provided a huge donation to Yale's Academy of Sciences for infrastructure, equipment purchases, and professorships. Based on his generous donations, the Yale Board of Directors named the College of Science the "Sheffield College of Science" in 1861. Similarly, the establishment of Harvard University is inseparable from the endowment fund. The founding of Harvard University in 1777 was initiated by a donation of 300 volumes of literature and an 800-pound donation by John Harvard.

In the 1990s, education funds developed more rapidly in the United States, and universities have shown a new trend for social donations: (1) Social groups and individuals actively donate or set up foundations to fund education. The amount of fundraising, the standard of fundraising methods, and the wide range of fundraising have reached an unprecedented climax. According to statistics from the Board of Educational Funding of the United States, from 1993 to 1994, private voluntary funding for higher education reached US $ 12.35 billion, alumni associations donated US $ 3.41 billion, other individuals donated US $ 2.8 billion, companies donated US $ 2.51 billion, and foundations donated US $ 2.54 billion. Religious organizations donated US $ 240 million and other organizations donated US $ 850 million. By 1977, there were more than 13,000 private foundations involved in the education sector and specializing in the education sector. Currently, there are 4,500 foundations in the United States engaged in donation activities to promote culture and education. (2) Diversity of donation methods: cash donation, value-added securities donation, real estate donation, real estate ownership donation, tangible asset donation, inheritance donation, life insurance donation, trust donation, etc.

According to the US Wall Street Journal reported on August 22, 2007, during the fiscal year ending June 2007, the Harvard Endowment Fund increased by another 23%, reaching a record $ 34.9 billion (Grants received from Harvard in 2006 (16.7 per cent increase, compared to 19.2 per cent in 2005), ranking first among US universities. It is reported that in the 2007 financial year, Harvard Endowment Fund invested 30% in real estate and stock market returns, of which the return on investment in stock markets of overseas market economies reached 44%. Yale University, another well-known American university, has a huge donation fund with assets of $ 22.5 billion. In the fiscal year ended June 2007, the fund achieved a return of 28%. Over the past 10 years, the fund has an annualized return of about 18%, making it the best performing university endowment fund in the United States. The annualized return on the S & P 500 Index during the same period was only 7%. In fact, the scale of these two well-known university endowment funds and their impressive investment returns are just a microcosm of the development of many American university endowment funds. The development of educational donations in the United States is inseparable from the importance that the federal and state governments attach to educational donations. The US federal and state governments attach great importance to the development of laws and supporting measures for education donations, including the positioning, protection, support and encouragement of education donations. These bills have been continuously revised and supplemented in recent years. They are exempt from income tax and inheritance tax on charitable donations, which is the most powerful factor to stimulate the richest people to make charitable donations. ^[1]